ECGI ECGI Holdings Inc (PK)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-K

 

(Mark One)

 

[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the fiscal year ended: August 31, 2015

 

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

 

For the transition period from --- to ---

 

Commission File Number: 0-52518

___________________________________

 

EVENT CARDIO GROUP INC.

(Exact name of registrant as specified in its charter)

___________________________________

 

Nevada		20-8051714
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)
7694 Colony Palm Drive Boynton Beach, Florida		33436
(Address of principal executive offices)		(Zip Code)

 

212-321-0091

(Registrant’s telephone number, including area code)

  

2798 Thamesgate Dr. Mississauga, Ontario, Canada L4T 4E8   

(Former address of principal executive offices)

 

Securities registered pursuant to Section 12(b) of the Act:	Name of each exchange on which registered
None	Not applicable
Securities registered pursuant to Section 12(g) of the Act:
Title of each class
Common Stock, Par Value $0.001 Per Share

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  Yes [  ]  No [X ]

 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act.  Yes [  ]  No [X]

 

Indicate by check mark whether the registrant (1) has 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 [ ]  No [X]

 

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K [ ]

 

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 the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

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

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).  Yes [  ]  No [X]    

 

As of February 27, 2015, the last business day of the registrant’s most recently completed second fiscal quarter, the aggregate market value of shares of common stock held by non-affiliates of the registrant was $1,576,032 based on the number of shares held by non-affiliates as of February 27, 2015 and the last reported sale price of the registrant’s common stock on February 27, 2015($0.10 per share).

 

As of December 1, 2015, there were 115,330,321 shares of the registrant's common stock outstanding.

 

Documents Incorporated By Reference: None

 

 

EVENT CARDIO GROUP INC.

TABLE OF CONTENTS

			Page
FORWARD-LOOKING STATEMENTS
PART I
ITEM 1.		Business	1
ITEM 1A.		Risk Factors	13
ITEM 2.		Properties	26
ITEM 3.		Legal Proceedings	26
ITEM 4.		Mine Safety Disclosures	26
PART II
ITEM 5.		Market for Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities	27
ITEM 6.		Selected Financial Data	29
ITEM 7.		Management’s Discussion and Analysis of Financial Condition and Results of Operations	29
ITEM 7A.		Quantitative and Qualitative Disclosures About Market Risk	33
ITEM 8.		Financial Statements and Supplementary Data	33
ITEM 9.		Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	33
ITEM 9A.		Controls and Procedures	34
ITEM 9B.		Other Information	35
PART III
ITEM 10.		Directors, Executive Officers and Corporate Governance	36
ITEM 11.		Executive Compensation	37
ITEM 12.		Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters	38
ITEM 13.		Certain Relationships and Related Transactions	40
ITEM 14.		Principal Accountant Fees and Services	41
PART IV
ITEM 15.		Exhibits, Financial Statement Schedules	42
SIGNATURES			44

 

FORWARD LOOKING STATEMENTS

 

Information included in this Form 10-K may contain forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). This information may involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of Event Cardio Group Inc. and its subsidiaries (collectively, “ECGI”, “We”, “Our” or the “Company”) to be materially different from future results, performance or achievements expressed or implied by any forward-looking statements. Forward-looking statements, which involve assumptions and describe ECGI’s future plans, strategies and expectations, are generally identifiable by use of words such as "may," "should," "expect," "anticipate," "estimate," "believe," "intend" or "project" or the negative of these words or other variations on these words or comparable terminology. Forward-looking statements are based on assumptions that may be incorrect, and there can be no assurance that any projections or other expectations included in any forward-looking statements will come to pass. ECGI’s actual results could differ materially from those expressed or implied by the forward-looking statements as a result of various factors. Except as required by applicable laws, ECGI undertakes no obligation to update publicly any forward-looking statements for any reason, even if new information becomes available or other events occur in the future.

 

PART I

 

ITEM 1. BUSINESS

 

Overview

 

We were organized under the name Sunrise Mining Corporation on October 26, 2005. We had no operations from December 2008, when we discontinued our previous business of mineral exploration, until the consummation on November 14, 2014, of the share exchange transaction described below. Most of our activities from January 2009 to November 2014 were centered on the acquisition of a new business.

 

On June 9, 2014 we experienced a change of control as a result of a transaction (the “Transaction”) in which 1,412,619 shares of our common stock, par value $0.001 and 10,000,000 shares of our preferred stock, par value $0.001, constituting approximately 97% of the cumulative voting power of our capital stock on that date, were acquired by Mr. John Bentivoglio, who is now our sole director and chief executive officer, as nominee for 2340960 Ontario Inc., a private company organized in Ontario, Canada, which we refer to as “ECG”. On September 8, 2014, we entered into a share exchange agreement (the “Exchange Agreement”) which we consummated on November 14, 2014, pursuant to which we acquired all of the issued and outstanding capital stock of “ECG” from ECG’s stockholders, The Nick Bozza Family Trust, The John Bentivoglio Family Trust and The Sgro (2010) Family Trust. In exchange for all of the outstanding capital stock of ECG, we issued to ECG’s stockholders an aggregate of 79,500,000 shares of our Common Stock (the “Share Exchange”). As a result of the consummation of the Share Exchange, (i) ECG became our wholly owned subsidiary and (ii) ECG’s former stockholders own an aggregate of 79,500,000 shares which constituted approximately 92.8% of the cumulative voting power of our common stock on the date the share exchange was consummated. The Exchange Agreement is accounted for as a reverse merger in which ECG is deemed to be the acquiring entity for accounting purposes.

 

Mr. John Bentivoglio, our sole director and chief executive officer, is one of three trustees of The John Bentivoglio Family Trust, the beneficiaries of which are members of his family.

 

On October 24, 2014, through a wholly owned subsidiary, we entered into a license agreement (the “License Agreement”) with Life Medical Technologies, Inc. (“Life Medical”) under which we were granted the exclusive right to distribute Life Medical’s “BreastCare DTS™” in the United States and certain other territories. The BreastCare DTS™ product is a patented, non-invasive device which has been cleared by the FDA as an adjunct to mammography and other established procedures for the detection of breast disease, including breast cancer. We are required to pay Life Medical royalties of 5% on net sales, as defined in the License Agreement, and minimum annual royalties of $100,000 in 2015 and $200,000 each year thereafter. The License Agreement recognizes that in order to protect our interests, we may have to spend monies dealing with creditors of and other claimants against Life Medical. Although we have no obligation to consummate arrangements with such creditors, we may reduce any amounts we pay to Life Medical’s creditors from future amounts payable to Life Medical.

 

On November 7, 2014, we changed our name from Sunrise Holdings Limited to Event Cardio Group Inc. and our trading symbol from “SUIP” to “ECGI”. On consummation of the Share Exchange, we changed our fiscal year to August 31.

 

Our principal executive offices are located at 7694 Colony Palm Drive, Boynton Beach, Florida 33436. Our telephone number at this address is 212-321-0091. You should direct all inquiries to us at this address and telephone number.

  

DESCRIPTION OF BUSINESS

 

The information presented in this Section of this Form 10-K relates to our business after the consummation of the Share Exchange on November 14, 2014. For the years immediately prior thereto, we were a shell company and had virtually no activities.

 

Through ECG, we operate in the cardiac medical device innovation, patient monitoring and cardiac event prediction industry. We are developing a cardiac monitoring solution based on a wireless and leadless advance cardiac monitor which offers the dual functionality of both a “holter” and “event” recording monitor simultaneously. Upon completion of the development of our device, we expect it to collect medical data regarding the functioning of the heart and transmit the data to physicians or to a control center for diagnostic evaluation. Our solution will rely upon standardized monitoring services through state-of-the-art call centers that we expect to establish to constantly read the data collected by our technologically advanced monitoring devices to enable physicians to have remote oversight of their patients 24 hours a day, seven days a week, 365 days a year. We expect that our services and cardiac monitors will primarily relate to ambulatory cardiac holter monitoring and event recording, and services related to the collection and transmission of monitoring data to the call centers through which we will also provide diagnostic testing. We hope to become a leading provider of ambulatory cardiac holter monitoring and event recording services among Independent Diagnostic Testing Facilities, or IDTFs, and a leading manufacturer and distributor of ambulatory cardiac monitoring devices in the United States. We emphasize that our cardiac monitor is currently being developed and that although the development of our cardiac monitor is nearly complete, other aspects of our cardiac monitoring business have not yet been implemented.

 

We will require substantial funding to implement our business plan and there can be no assurance that the financing we require will be available to us, that our cardiac monitor will be successfully developed or that the other aspects of our business plan will be successfully implemented.

 

Cardiac Monitoring

 

Cardiac monitoring systems, including holter and event monitors, are crucial to cardiovascular care. Clinicians use cardiac monitoring systems to assess the presence and severity of cardiac disease and to evaluate the efficacy and success of treatments such as drugs, interventions, operations, and device implants. Effective delivery of cardiovascular care requires that the entire process of recording, storing, analyzing, retrieving, and distributing cardio data be as rapid and cost effective as possible. The cardiac monitoring industry continues to principally rely upon older edvices , which we believe negatively impacts patient adherence which in turn negatively affect diagnostic yields. Most cardiologists continue to rely upon machines with cumbersome leads and large monitors negatively impacting patients’ willingness and ability to continue wearing the devices for the entire prescribed duration of time recommended by health care professionals. Diagnostic yields are significantly influenced by patients’ failure to wear the cardiac monitoring devices currently available and as a result, diagnostic yields available for interpretation are as low as 4% for holter monitors and 62% for event monitors. We believe an opportunity exists to significantly improve diagnostic yields to greater than expected 90% yields with the cardiac monitor we are developing.

 

Holter and Event Monitors

 

Holter and event monitors are medical devices that record the heart's electrical activity. Doctors most often use these monitors to diagnose arrhythmias which are problems with the rate or rhythm of the heartbeat. During an arrhythmia, the heart can beat too fast, too slow, or with an irregular rhythm. Holter and event monitors also are used to detect “silent” myocardial ischemia. In this condition, not enough oxygen-rich blood reaches the heart muscle. "Silent" means that no symptoms occur. Cardiac monitors also can check whether prescribed treatments for an arrhythmia or silent myocardial ischemia are working. Holter and event monitors are similar to an electrocardiogram (an “EKG”). An EKG is a simple test that detects and records the heart's electrical activity. It's a common test for diagnosing heart rhythm problems. However, a standard EKG only records the heartbeat for a few seconds. It doesn’t detect heart rhythm problems unless they occur during the test. Holter and event monitors are small, portable devices that can be worn during normal daily activities thereby allowing the monitor to record a heart‘s electrical activity for a longer period of time than an EKG. Although similar, holter and event monitors aren't the same. A holter monitor records the heart's electrical activity the entire time a patient is wearing it.

 

An event monitor records the heart's electrical activity only at certain times while being worn. Unlike holter monitors, event monitors don't continuously record the heart's electrical activity, they only record during symptoms. The cardiac monitor we are developing will contain the features of both a holter and event monitor in one device.

 

Cardiac Monitoring Market

 

The combined United States (“US”) cardiac equipment and services market in 2012 was estimated at $3.86 billion and is expected to grow to $4.19 billion in 2016. Globally, the cardiac monitoring market is estimated at three to five times the US market. We believe that the market for ambulatory cardiac holter monitoring and event recording services will grow over the foreseeable future as a result of an aging and growing population, the increase in a prevalence of health conditions such as obesity that increase the likelihood of heart related diseases and the increasing awareness of cardiac diseases. IDTFs provide monitoring services to the patient's hospital or physician when they outsource the service as opposed to providing it themselves. We believe that the portion of the overall ambulatory cardiac monitoring services market addressed by IDTFs will grow as physicians and hospitals increasingly outsource monitoring services to IDTFs, due to increased capital requirements and new technology, which may not be readily available to hospitals or physicians.

 

What are the Challenges Related to Cardiac Monitoring?

 

Despite technological and clinical advances in cardiology, healthcare providers face significant challenges in delivering consistent and high quality cardiovascular care. Healthcare reform and declining reimbursement rates continue to place increasing pressure on providers to treat more patients faster. Increasingly, healthcare is moving outside of the hospital setting into physician offices and other outpatient facilities. In addition, the need to control costs, increase efficiencies, and manage data introduces new factors into the decision making process for technology utilization.

 

These healthcare changes prompt a number of emerging critical needs and create opportunities for us. These include creating systems and services tailored to the clinician workflow, developing products that are intuitive and easy to use, using proven communication standards for connectivity, improving the management of healthcare delivery resources, and utilizing emerging technologies from multiple vendors — all within a security structure that meets Health Insurance Portability and Accountability Act of 1996 (“HIPAA”) requirements.

 

 OUR CARDIAC PRODUCT

 

Our initial cardiac monitor which we call “Now Cardio” is an advanced cardiac monitor with offers dual-functionality including both holter monitoring and event recording simultaneously. Now Cardio is an innovative medical device designed at our direction by CONTEX International Technologies (Canada) Inc. (“Contex”), a healthcare and aerospace engineering firm. Now Cardio has many unique features which differentiate it from our competition. We believe Now Cardio will be the first holter/event recorder of its kind featuring a wireless and leadless device with a wafer thin, water-resistant transmitter worn by the patient which receives both atrial and ventricular data from the patient’s heart which is transmitted wirelessly to a receiver which may not need to be held or worn by the patient. This process should allow data to stream distances of up to 1,000 feet (with the potential for much larger distances) to a local personal receiver which will transmit the data via cellular and or satellite, to a control center where the patient’s heart can be continuously monitored. Our proprietary software will assemble the data for the cardiologist in a simplified format significantly reducing the time required for a cardiologist to read and interpret the EKG data. In our opinion the process may also increase the quality of the cardiologist’s interpretation of the data which should in turn facilitate timely and appropriate medical treatments.

 

Our software will identify anomalies in the streaming data and will aid in the diagnosis, in real time, as the data is evaluated continually by the advanced software and, when an anomaly occurs, a supporting team of trained cardiac technicians and when appropriate, supervisory cardiologists which we will retain to provide services to the control center. Data will be analyzed at the control center where reports of findings are generated and relayed to physicians as necessary in the prescribed format. We expect that ambulatory patients will have the option to purchase additional cardiac monitoring services from us utilizing GPS tracking and heart monitoring for enhanced security while they are at risk. We believe that satellite technology will afford the ability to communicate with patients and healthcare professionals based on risk levels similar to “OnStar” technology in automobiles.

 

We believe our initial cardiac monitoring device will provide solutions for overcoming many of the challenges faced by users of cardiac monitors by offering the following key benefits:

 

•

Ease of use. Our user cardiac monitor is being designed with significant input from clinicians and technologists and will be intuitive and easy to use.

•

Effective data capture. Our solution will automate and assist in the collection, interpretation, and retrieval of data which should improve clinical productivity.

•

Improved diagnostic speed and accuracy. As a result of easy use and patient comfort, we believe persons who are prescribed our devices will be more likely to use them for the prescribed period, which we believe will allow for improved diagnostic accuracy. In addition, we believe that by enabling the review and assessment of test results remotely, our systems can speed the time of diagnosis.

•

Wireless and network compatibility. We expect our cardiac monitors to support a clinical network environment in that it will enable cardiologists to assimilate, collate, and interpret data and disseminate results to facilitate diagnosis, patient monitoring and patient management. Data may be stored in a local or network server database. We expect that our monitoring devises will also connect to larger enterprise networks that will allow data to be shared with other users, both within the facility and remotely via secure networks.

 

We expect to continue to improve the functionality of our cardiac monitors after our initial device is placed in service. For example, we are developing software which will have predictive capabilities for cardiac events such as heart failure. The impact of this technology is significant in that patients may be identified prior to a life threatening cardiac event and diverted to a hospital to receive care and potentially avoid a stroke or heart attack.

 

BREASTCARE

 

On October 24, 2014, through a wholly owned subsidiary, we entered into a License Agreement with Life Medical under which we were granted the exclusive right to distribute Life Medical’s “BreastCare DTS™” in the United States and certain other territories. The BreastCare DTS™ product is a patented, non-invasive device which has been cleared by the FDA as an adjunct to mammography and other established procedures for the detection of breast disease, including breast cancer. We are required to pay Life Medical royalties of 5% on net sales, as defined in the License Agreement, and minimum annual royalties of $100,000 in 2015 and $200,000 each year thereafter.

 

DTS stands for “Differential Temperature Sensor,” indicating the ability of the device to compare temperatures in one area of the breast with others in the same breast and the other breast. The BreastCare DTS™ device consists of two mirror image, lightweight and disposable foam pads with three wafer-thin foil sensors on each pad. Each of the three segments on each pad contains 18 rows of heat-sensitive chemical dots. The device is easy to use and requires no electricity or probes. The test is completely non-invasive. The pads are easily placed on a woman’s breasts inside the bra for 15 minutes. The device measures the deep heat energy that is transferred to the surface of the skin. Each heat-sensitive dot is calibrated to record the temperature of the surface of the breast. The dots themselves change color from blue to pink when exposed to specific temperatures. The results are clearly displayed and can be immediately evaluated. BreastCare DTS™ has received FDA 510K clearance for marketing in the United States to be used by physicians as an adjunct to routine physical examination including palpation, mammography and other established procedures for the detection of breast disease including breast cancer.

 

Breast Cancer DETECTION Market

 

The global Point of Care market in 2011 was approximately $18.7 billion, up from $10.3 billion in 2005. In the U.S. alone, the combined breast cancer detection/diagnostic market was valued at more than $2.2 billion in 2008, and is expected to continue in a stable growth pattern over the next several years, Analysts have suggested a conservative growth rate of approximately 5.4% per year.

 

The incidence of breast cancer detection is highest in the developed world, but by 2020, some estimates indicate as many as 70 percent of all cases will be found in the developing economies of the world. We believe that demand for effective cancer detection solutions rather than palliative care will rise, but at the same time, resources will remain limited. BreastCare DTS ™ is a relatively low-cost product that can capture early stage potential breast cancer data. While we are continuing to evaluate the market for this product, we believe it will be an attractive product, particularly in developing countries.

 

LICENSES TO AFFILIATES

 

Prior to the execution of the Exchange Agreement, ECG granted an exclusive license to promote, advertise, manufacture, distribute and sell its cardiac monitoring device in Canada, excluding the Province of Ontario, to a company beneficially owned by two stockholders who own a majority of our common stock, one of which is affiliated with our sole director and executive officer. Further, the rights with respect to Ontario were licensed to one of these stockholders. Pursuant to the related license agreement, we have agreed to use reasonable efforts to modify our cardiac monitoring device to comply with any regulatory or third party reimbursement requirements. Further, the licensees may purchase the devices from us at the lesser of (i) our manufacturing cost, plus 10%, (ii) our manufacturing cost, plus $50 or (iii) at the best price and best terms we offer to any person in any jurisdiction. If we are unable to manufacture or have the devices manufactured, we must provide the information to the licensees so they can do so and in such case the licensees are obligated to pay us a royalty on each cardiac monitoring device they manufacture at the lesser of 10% of their manufacturing costs or (ii) $50 per unit.

 

In connection with our license of BreastCare DTS™, we borrowed CAD $79,106 from an Ontario corporation owned equally by the three individuals who are trustees of trusts which collectively own substantially in excess of a majority of our common stock. A trustee of one of the trusts is our sole director and executive officer. In connection with this loan, we agreed to sublicense to the lender the exclusive rights to distribute the product in Canada with royalties payable to us at the rate of 5.5% of net sales, as to be defined in the sub-license agreement. For additional information concerning relationships with affiliates, see Item 13 of this report titled “Certain Relationships and Related Parties Transactions”.

 

STRATEGY

 

Our initial cardiac monitor is being developed for us by Contex, a health care and aerospace engineering firm. After the development of our initial cardiac monitor is completed and Health Canada and United States Food and Drug Administration (“FDA”) clearance is secured, we expect to initiate our business in either the New York City or Southern Florida area. In addition to developing a marketing approach for our initial device, we will also need to establish monitoring centers to read the data collected. These centers will operate 24 hours and day and 7 days a week and be manned by cardiac monitoring specialists who will analyze respond to anomalies in the data received detected by our computers and potentially respond to urgent events and report results to the prescribing physicians. Once we successfully launch our operations on a select regional basis, we expect to expand into other regions where we believe the demand for our cardiac monitor solution will be the greatest.

 

It is our belief that the key to successfully exploit BreastCare is to develop a cost effective and reliable method to manufacture the device. As part of our effort to finance our activities we sold a convertible note to a recently formed entity in Australia. We are in the process of developing a strategy with respect to BreastCare DTS™, which will depend in part on the results of our ongoing due diligence regarding the market for the product, the strength of the underlying patents, the status of required regulatory approvals and how the product can most efficiently be manufactured.

 

We will require additional financing to implement our strategy and there can be no assurance we will be able to secure the financing which is necessary to initiate operations.

 

In March 2015 we issued Medpac Asia Pacific Pty Limited (“Medpac”) our $500,000 convertible promissory note. In connection with the issuance of such note we entered into an agreement with Medpac wherein we agreed to enter into license agreements for the distribution of our cardiac monitoring device and BreastCare. In connection with such agreement, in accordance with our license agreement with Life Medical we advised it that we were exercising our right to be the exclusive distributor of BreastCare in Australia and certain other territories. We have received from Life Medical a letter dated November 30, 2015, wherein it alleges that we are in default of the License Agreement with it. The letter claims that the loan we received from Medpac is in fact an advance royalty payment of which it was entitled to receive 50%. Further, Life Medical alleges that the failure of Medpac or us to spend at least $100,000 marketing BreastCare in Australia and the other territories claimed by us entitles Life Medical to $100,000 per territory and causes such territories to revert to “open territories” as defined in the License.

 

We believe Life Medical’s claims have no merit or, to the extent we are obligated to pay certain amounts to Life Medical, they can be offset by amounts we have already paid on its behalf. In all events, we intend to contest these claims vigorously. We have been in discussions with representatives of Life Medical and are currently assessing whether and how to move forward with our plans to have a manufacturing line built for the BreastCare device. Completion of the manufacturing line will cost in excess of $2 million and there can be no assurance we will be able to secure the financing necessary to do so.

 

Manufacturing

 

Manufacturing of our monitors and sensors and other products will be provided by electronics manufacturing service providers which we will retain to provide manufacturing services to us. We believe that there are several capable suppliers available to us. In addition, there are a number of components and sub-assemblies in the monitors and sensors that comprise part of our cardiac monitoring device. The vendors for these materials and the manufacture of our device and other products will be qualified by us through the evaluation and testing of their performance. We believe that there are multiple capable vendors for each of the components of our heart monitors.

 

Research and Development

 

For the years ended August 31, 2015 and August 31, 2014, we spent $952,188, and $41,756, respectively, on research and development expenses with respect to our cardiac monitoring device, and $270,633 in the fiscal year ended August 31, 2015 with respect to the BreastCare DTS™ product. Since May 2014, research and development services have been provided to us by Contex, a health and aerospace engineering firm, pursuant to a contract which has a term of one year and automatically renews on an annual basis. Our three largest stockholders own 40% of the voting stock and 34% of all capital stock of Contex. We expect to incur significant research and development expenses in the future as we complete the development of our initial device and subsequently make improvements and modifications and introduce new models so that we will achieve technological superiority for our devices. We do not expect to incur significant research and development expenses in the future with respect to BreastCare DTS™. If we proceed with BreastCare DTS™ we would expect to spend significant amounts to develop a manufacturing line.

 

Sales and Marketing

 

Initially we expect to market our cardiac monitoring solution and medical devices primarily to cardiologists and electro physiologists, who are the physician specialists who most commonly diagnose and manage patients with arrhythmias. We expect to engage independent sales representatives with established relationships with physicians to act as our sales force. We are planning to establish what we refer to as sales partnerships which we believe will become a knowledgeable, highly motivated, ownership-based sales force. Our plan is for these sales representatives to acquire our cardiac monitoring devices and share in the revenue generated. We believe a sales-partnership business model will allow us to better control our operating costs. Although we believe we can establish a highly motivated sales force through this method, there can be no assurance we will be able to do so and we may be required to spend a significant amount to market our cardiac monitor solution. We also expect to attend trade shows and medical conferences to promote our cardiac monitoring solution and to meet medical professionals who may be able to prescribe our services to their patients. We have not determined our sales and marketing strategy in connection with BreastCare DTS™.

 

Competition

 

The market for the design and distribution of cardiac monitors is highly competitive and there are a number of larger well financed companies with significant histories in this market.

 

The markets in which we will operate in our cardiac monitoring business is fragmented and characterized by a large number of smaller regional service providers. We believe that the principal competitive factors that will impact the success of our cardiac monitoring solutions include some or all of the following:

 

•

Quality, accuracy and reliability;

•

quality of clinical data;

•

relative ease of use for patients and physicians;

•

technology performance, innovation, flexibility and range of application;

•

timeliness and clinical relevance of new product introductions;

•

quality and availability of customer support services;

•

size, experience, knowledge and training of sales and marketing staff;

•

brand recognition and reputation;

•

relationships with referring physicians, hospitals, managed care organizations and other third party payors;

•

availability of third-party reimbursement;

•

reporting capabilities; and

•

price.

 

The cardiac monitoring industry is evolving rapidly and is becoming increasingly competitive and the basis on which we will be required to compete may change over time.

 

The market for the detection of breast cancer is highly competitive and there are a variety of devices and tests in use and under development which patients and physicians can use to reach a diagnosis and determine a course of treatment. There can be no assurance that BreastCare will be able to gain acceptance in this market.

 

Virtually all of our competitors have greater technical, human, financial and other resources then we do and our financial resources are very limited when contrasted with those of our competitors. This inherent competitive limitation gives others a significant advantage over us, and we cannot assure that we will be able to successfully compete in this competitive market place.

 

Intellectual Property

 

To protect our proprietary rights, we expect to rely on a combination of trademark, copyright, patent, trade secret and other intellectual property laws, employment, confidentiality and invention assignment agreements with our employees and contractors, and confidentiality agreements and protective contractual provisions with our partners and other third parties. We will seek to maintain certain intellectual property and proprietary know-how confidential as trade secrets, and generally we expect to require our partners to execute non-disclosure agreements prior to any substantive discussions or disclosures of our technology or business plans. Our business and competitive positions are dependent in part upon our ability to protect our proprietary technology and our ability to avoid infringing the patents or proprietary rights of others.

 

Patents. As of December 1, 2015, we had filed one patent application in the United States relating to our cardiac monitoring device. We may file additional patent applications in the future.

 

Trademarks and Copyrights. As of December 1, 2015, we had no unregistered or copyright registrations.

 

Government Regulation

 

Health Care Fraud and Abuse. In the United States, there are state and federal anti-kickback laws that generally prohibit the payment or receipt of kickbacks, bribes or other remuneration in exchange for the referral of patients or other health care-related business. In addition, federal law (e.g., the "Stark" law) and some state laws prohibit the existence of certain financial relationships between referring physicians and healthcare providers and suppliers unless those relationships meet the requirements of specific exceptions to the law. Anti-kickback laws will constrain our sales, marketing and promotional activities by limiting the kinds of financial arrangements that we may have with physicians, medical centers, and others in a position to purchase, recommend or refer patients for our cardiac monitoring devices and other products or services we may develop and commercialize. Due to the breadth of some of these laws, it is possible that some of our future practices might be challenged under one or more of these laws.

 

Furthermore, federal and state false claims laws prohibit anyone from presenting, or causing to be presented, claims for payment to third party payors that are false or fraudulent. Violations may result in substantial civil penalties, including treble damages, and criminal penalties, including imprisonment, fines and exclusion from participation in federal health care programs. The federal False Claims Act also contains "whistleblower" or "qui tam" provisions that allow private individuals to bring actions on behalf of the government alleging that the defendant has defrauded the government. Various states have enacted laws modeled after the federal False Claims Act, including "qui tam" provisions, and some of these laws apply to claims filed with commercial insurers. Any violations of anti-kickback and false claims laws could have a material adverse effect on our business, financial condition and results of operations.

 

The Patient Protection and Affordable Care Act. On March 23, 2010, the Patient Protection and Affordable Care Act were signed into law and on March 30, 2010, the Health Care and Education Reconciliation Act of 2010 was signed into law. Together, the two measures make the most sweeping and fundamental changes to the United States health care system since the creation of Medicare and Medicaid. These health care reform laws include a large number of health-related provisions, including expanding Medicaid eligibility, requiring most individuals to have health insurance, establishing new regulations on health plans, establishing health insurance exchanges, requiring manufacturers to report payments or other transfers of value made to physicians and teaching hospitals, modifying certain payment systems to encourage more cost-effective care and a reduction of inefficiencies and waste, and by including new tools to address fraud and abuse. Section 6002 of the Patent Protection and Affordable Care Act requires manufacturers of medical devices and other products reimbursed by Medicare to report annually to the government certain payments to physicians and teaching hospitals.

 

Health Insurance Portability and Accountability Act of 1996 (HIPAA). HIPAA was enacted by the United States Congress in 1996. Numerous state and federal laws govern the collection, dissemination, use and confidentiality of patient and other health information, including the administrative simplification provisions of HIPAA. Historically, state law has governed confidentiality issues and HIPAA preserves these laws to the extent they are more protective of a patient's privacy or provide the patient with more access to his or her health information. As a result of the implementation of the HIPAA regulations, many states are considering revisions to their existing laws and regulations that may be more stringent or burdensome than the federal HIPAA provisions. HIPAA applies directly to covered entities, which include health plans, health care clearinghouses and many health care providers. These HIPAA rules are concerned primarily with the privacy of information when it is used and/or disclosed; confidentiality, integrity and availability of electronic health information; and the content and format of certain identified electronic health care transactions. The laws governing health care information impose civil and criminal penalties for their violation and can require substantial expenditures of financial and other resources for information technology system modifications and for implementation of operational compliance.

 

Medicare. Medicare is a federal program administered by the US Department of Health and Human Services Centers for Medicare and Medicaid Services (“CMS”) through Medicare administrative contractors. The Medicare program provides qualified persons with health care benefits that cover the major costs of medical care within prescribed limits, subject to certain deductibles and co-payments. The Medicare program has established guidelines for local and national coverage determinations and reimbursement of certain equipment, supplies and services. The methodology for determining coverage status and the amount of Medicare reimbursement varies based upon, among other factors, the setting in which a Medicare beneficiary received health care items and services.

 

The Medicare program is subject to statutory and regulatory changes, retroactive and prospective rate adjustments, administrative rulings, interpretations of policy, Medicare administrative contractor determinations, and government funding restrictions. All of these restrictions may materially increase or decrease the rate of program payments to health care facilities and other health care suppliers and practitioners, including those paid for our cardiac monitoring services. Any changes in federal legislation, regulations and policy affecting Medicare coverage and reimbursement relative to our cardiac monitoring services could have an adverse effect on our performance.  

The control centers that we establish will be required to enroll as Independent Diagnostic Testing Facilities ("IDTFs"), which is defined by CMS as an entity independent of a hospital or physician's office in which diagnostic tests are performed by licensed or certified non-physician personnel under appropriate physician supervision. Medicare has set certain performance standards that every IDTF must meet in order to obtain or maintain its billing privileges. Specifically, an IDTF is required to: (i) operate its business in compliance with all applicable federal and state licensure and regulatory requirements for the health and safety of patients; (ii) provide complete and accurate information on its enrollment application, and report certain changes, within 30 calendar days, to the designated fee-for-service contractor on the Medicare enrollment application; (iii) maintain a physical facility on an appropriate site, that is not an office box or a commercial mail box that contains space for equipment appropriate for the services designated on the enrollment application, and both business and current medical records storage within the office setting of the IDTF; (iv) have all applicable diagnostic testing equipment, with the physical site maintaining a catalog of portable diagnostic testing equipment, including the equipment's serial number; (v) maintain a primary business phone under the name of the designated business, which is located at the designated site of the business, or within the home office of mobile IDTF units; (vi) have a comprehensive liability insurance policy per location, covering both the place of business and all customers and employees of the IDTF, and be carried by a non-relative owned company; (vii) agree not to directly solicit patients and to accept only those patients referred for diagnostic testing by an attending physician, who is furnishing a consultation or treating a beneficiary for a specific medical problem and who uses the results in the management of the beneficiary's specific medical problem; (viii) answer beneficiaries' questions and respond to their complaints; (ix) openly post the Medicare standards for review by patients and the public; (x) disclose to the government any person having ownership, financial, or a control interest or any other legal interest in the supplier at the time of enrollment or within 30 days of a change; (xi) have its testing equipment calibrated and maintained per equipment instructions and in compliance with applicable manufacturers suggested maintenance and calibration standards; (xii) have technical staff on duty with the appropriate credentials to perform tests and produce the applicable federal or state licenses or certifications of the individuals performing these services; (xiii) have proper medical record storage and be able to retrieve medical records upon request from CMS or its fee-for-service contractor within two business days; and (xiv) permit CMS, including its agents, or its designated fee-for-service contractors, to conduct unannounced, on-site inspections to confirm the IDTFs compliance with these standards.

 

Government Regulation of Medical Devices

 

Our cardiac monitoring devices are medical devices subject to extensive regulation by the FDA and if we operate outside the United States other global regulatory agencies. FDA regulations govern, among other things, the following activities we expect to perform, directly or through third-parties, in connection with medical devices:

 

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product design and development;

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product testing;

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product manufacturing;

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product labeling and packaging;

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product handling, storage, and installation;

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pre-market clearance or approval;

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advertising and promotion;

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product sales, distribution, and servicing; and

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post-market surveillance.

 

FDA’s Pre-market Clearance and Approval Requirements. Each medical device and certain other products we seek to commercially distribute in the U.S. must first receive 510(k) clearance or pre-market approval from the FDA, unless specifically exempted by the agency. The FDA classifies all medical devices into one of three classes. Devices deemed to pose lower risk are categorized as either Class I or II, which requires the manufacturer to submit to the FDA a 510(k) pre-market notification requesting clearance of the device for commercial distribution in the U.S. Some low risk devices are exempted from this requirement. Devices deemed by the FDA to pose the greatest risk, such as life sustaining, life-supporting or implantable devices, or devices deemed not substantially equivalent to a previously 510(k) cleared device are categorized as Class III, requiring pre-market approval. In rare cases, devices are categorized as Class III and still cleared under the 510(k) pre-market notification process. Class III devices which can be marketed with a pre-market notification 510(k) are those that are post-amendment (i.e., introduced to the U.S. market after May 28, 1976) and Class III devices which are substantially equivalent to pre-amendment (i.e., introduced to the U.S. market before May 28, 1976) Class III devices and for which the regulation calling for the pre-market approval application has not been published in 21 CFR.

 

510(k) Clearance Process. The 510(k) clearance process is the process we expect to be applicable to our initial cardiac monitors. To obtain 510(k) clearance, we must submit a pre-market notification to the FDA demonstrating the proposed device to be substantially equivalent to a previously cleared 510(k) device, a device that was in commercial distribution before May 28, 1976 for which the FDA has not yet called for the submission of pre-market approval applications, or is a device that has been reclassified from Class III to either Class II or I. In rare cases, as described in the prior paragraph, Class III devices are cleared through the 510(k) process. The FDA’s 510(k) clearance process usually takes at least three months from the date the application is submitted and filed with the FDA, but may take significantly longer.

 

After a device receives 510(k) clearance, any subsequent modification of the device that could significantly affect its safety or effectiveness, or that would constitute a major change in its intended use, will require a new 510(k) clearance or could require pre-market approval. The FDA requires each manufacturer to make this determination initially, but the FDA can review any such decision and can disagree with a manufacturer’s determination. If the FDA disagrees with a manufacturer’s determination, the FDA may require the manufacturer to cease marketing and/or recall the modified device until 510(k) clearance or pre-market approval is obtained. After our initial cardiac monitor receives 510(k) clearance, we expect to modify and improve the device on a continuing basis. Some of those modifications we believe will not be significant, and therefore, new 510(k) clearances or pre-market approvals will not be required. Other modifications we believe will be significant and will require new 510(k) clearances from the FDA for these modifications. We note that the FDA may disagree with our determination and if the FDA requires us to seek 510(k) clearance or pre-market approval for any modifications to a previously cleared product, we may be required to cease marketing or recall the modified device until we obtain the required clearance or approval. Under these circumstances, we may also be subject to significant regulatory fines or other penalties.

 

Pre-market Approval Process. A pre-market approval application must be submitted if the medical device is in Class III (although the FDA has the discretion to continue to allow certain pre-amendment Class III devices to use the 510(k) process) or cannot be cleared through the 510(k) process. A pre-market approval application must be supported by, among other things, extensive technical, preclinical, clinical trials, manufacturing and labeling data to demonstrate to the FDA’s satisfaction the safety and effectiveness of the device.

 

After a pre-market approval application is submitted and filed, the FDA begins an in-depth review of the submitted information, which typically takes between one and three years, but may take significantly longer. During this review period, the FDA may request additional information or clarification of information already provided. Also during the review period, an advisory panel of experts from outside the FDA will usually be convened to review and evaluate the application and provide recommendations to the FDA as to the approvability of the device. In addition, the FDA will conduct a pre-approval inspection of the manufacturing facility to ensure compliance with Quality System regulations. New pre-market approval applications or pre-market approval application supplements are required for significant modifications to the manufacturing process, labeling of the product and design of a device that is approved through the pre-market approval process. Pre-market approval supplements often require submission of the same type of information as a pre-market approval application, except that the supplement is limited to information needed to support any changes from the device covered by the original pre-market approval application, and may not require as extensive clinical data or the convening of an advisory panel.

 

We believe our cardiac monitors will require 510(k) clearance and not be subject to the pre-market approval process. However, the FDA is the governing authority and may, in its discretion, request pre-market approval applications from us and all manufacturers of similar devices. If the FDA calls for pre-market approval applications, we will be required to submit and obtain approvals for such devices within a specified period of time. If we fail to do so, we will not be allowed to continue marketing our cardiac monitors. BreastCare DTS™ has received FDA 510(k) clearance for marketing in the United States to be used by physicians as an adjunct to routine physical examination, including palpation, mammography and other established procedures for the detection of breast disease including breast cancer.

 

Clinical or Market Trials. A clinical or market trial is typically required to support a pre-market approval application and is sometimes required for a 510(k) pre-market notification. Clinical and market trials generally require submission of an application for an Investigational Device Exemption (“IDE”) to the FDA. The IDE application must be supported by appropriate data, such as animal and laboratory testing results, showing that it is safe to test the device in humans and that the investigational protocol is scientifically sound. The IDE application must be approved in advance by the FDA for a specified number of patients, unless the product is deemed a non-significant risk device and eligible for more abbreviated investigational device exemption requirements. Clinical and market trials for a significant risk device may begin once the investigational device exemption application is approved by the FDA as well as the appropriate institutional review boards at the clinical or market trial sites, and the informed consent of the patients participating in the clinical trial is obtained. We do not expect this process to apply to us at this time, but there can be no assurance the FDA will agree with our views in this regard.

 

Pervasive and continuing FDA regulation. After a medical device is placed on the market, numerous FDA regulatory requirements apply, including, but not limited to the following:

 

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Quality System regulation, which requires manufacturers to follow design, testing, control, documentation and other quality assurance procedures during the manufacturing process;

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Establishment Registration, which requires establishments involved in the production and distribution of medical devices, intended for commercial distribution in the U.S., to register with the FDA;

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Medical Device Listing, which requires manufacturers to list the devices they have in commercial distribution with the FDA;

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Labeling regulations, which prohibit “misbranded” devices from entering the market, as well as prohibit the promotion of products for unapproved or “off-label” uses and impose other restrictions on labeling; and

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Post-market surveillance including Medical Device Reporting (MDR), which requires manufacturers report to the FDA if their device may have caused or contributed to a death ors erious injury, or malfunctioned in a way that would likely cause or contribute to a death or serious injury if it were to recur.

 

Failure to comply with applicable regulatory requirements may result in enforcement action by the FDA, which may include one or more of the following sanctions:

 

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fines, injunctions, and civil penalties;

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mandatory recall or seizure of our products;

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administrative detention or banning of our products;

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operating restrictions, partial suspension or total shutdown of production;

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refusing our request for 510(k) clearance or pre-market approval of new product versions;

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revocation of 510(k) clearance or pre-market approvals previously granted; and

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criminal penalties.

 

International Regulation. Sales of medical devices outside the United States are subject to foreign government regulations, which vary substantially from country to country. The time required to obtain approval by a foreign country may be longer or shorter than that required for FDA approval, and the requirements may differ significantly.

 

Environmental Regulation. We may use materials and products regulated under environmental laws, primarily in the manufacturing processes. We believe the ongoing cost of compliance with environmental protection laws and regulations will be borne by the manufactures we retain to manufacture our monitors and will not have a material impact on our business, financial position or results of operations.

 

Medical Device Tax. Effective January 1, 2013, as a result of the passage of the Patient Protection and Affordable Care Act, manufacturers of certain medical devices are subject to an excise tax on the sale of the devices. We expect our cardiac monitoring devices to be subject to these taxes. The tax is 2.3% of the sale price of the applicable medical device. The manufacturer is responsible for remitting these taxes to the Federal Government.

 

THIRD-PARTY REIMBURSEMENT

 

In the U.S., as well as in certain foreign countries, government-funded or private insurance programs, commonly known as third-party payers, pay a significant portion of the cost of a patient’s medical expenses. A uniform policy of reimbursement does not exist among all these payers. We believe that reimbursement is an important factor in the success of many medical devices and other medical products.

 

All U.S. and foreign third-party reimbursement programs, whether government funded or commercially insured, are developing increasingly sophisticated methods of controlling healthcare costs through prospective reimbursement and capitation programs, group purchasing, redesign of benefits, second opinions required prior to major surgery, careful review of bills, encouraging healthier lifestyles, and exploring more cost-effective methods of delivering healthcare. These types of programs can potentially limit the amount which healthcare providers may be willing to pay for medical devices. Reimbursement for the costs we will charge for our cardiac monitoring solutions is essential to successful operations and if we are unable to establish the relationships which are required to secure reimbursement, it is unlikely we will be able to operate profitably.

 

Product Liability and Insurance

 

The design, manufacture and marketing of medical devices and services of the types we expect to provide entail an inherent risk of product liability claims. In addition, we expect to provide information to health care providers and payors upon which determinations affecting medical care are made, and claims may be made against us resulting from adverse medical consequences to patients resulting from the information we provide. To protect ourselves from product liability claims, we expect to maintain professional liability and general liability insurance on a "claims made" basis. Insurance coverage under such policies is contingent upon a policy being in effect when a claim is made, regardless of when the events which caused the claim occurred. We believe will be able to secure insurance policies which will be adequate in amount and coverage for our operations. However, there can be no assurance that we will be able to obtain such insurance on commercially reasonable terms or that any coverage maintained by us is sufficient to cover future claims.

 

SEASONALITY

 

There are no material seasonal elements to our business.

 

Employees

 

As of the date of this report, John Bentivoglio is our only employee and he has deferred receipt of the salary due him to date.. Successful implementation of our business plan will require that we recruit and employ qualified personnel with various areas of expertise. We cannot engage such personnel unless and until adequate financing is available. There can be no assurance that when we want to engage such personnel we will be able to recruit and employ them.

 

ITEM 1A. RISK FACTORS

  

An investment in our common stock involves significant risks. You should consider carefully all of the information in this Report, including the risks and uncertainties described below and the financial statements and related notes included herein, before making an investment in our common stock. We have not commenced to generate any revenues and may not be able to do so. If any of the following risks occur, we may be unable to continue as a going concern. In that case, you would likely lose your entire investment. Once we have commenced business operations, the occurrence of the following risks could have a material adverse effect on our business, financial condition, results of operations, prospects or liquidity. In any such case, the market price of our common stock could decline, and you may lose all or part of your investment. Except for historical information, the information in this report contains "forward-looking" statements about our existing and future business and performance. Our actual operating results and financial performance may prove to be very different from what we have predicted as of the date of this report. The risks described below address some of the factors that may affect our future operating results and financial performance.

 

Risks Related To Our Status As An Early Stage Enterprise

 

We have not and we may not be able to commence active business operations.

 

We are developing a cardiac monitoring device and monitoring system and have not completed development of the device or generated any revenues to date. We may not be able to successfully develop our initial cardiac monitoring system. We may not be able to obtain the financing required to complete the development of our prototype monitor. Even if our initial monitor is successfully developed, we may not be able to secure the FDA and other governmental clearances required for us to manufacture and sell our initial monitors and place the monitors in service. We are parties to a License Agreement with Life Medical to distribute BreastCare DTS™ in the United States and in certain other territories. We may not be able to secure the financing required to launch this product. In addition, we believe may not be able to successfully commercially exploit this product even if we secure financing required to do so. In any of these cases, you may lose your entire investment in the Company.

 

We have received a letter from Life Medical alleging that we are in default of our License Agreement for its BreastCare DTS ™ product.

 

We have received from Life Medical a letter dated November 30, 2015, wherein it alleges that we are in default of the License Agreement with it. The letter claims that the loan we received from Medpac is in fact an advance royalty payment of which it was entitled to receive 50%. Further, Life Medical alleges that the failure of Medpac or us to spend at least $100,000 marketing BreastCare in Australia and the other territories claimed by us entitles Life Medical to $100,000 per territory and causes such territories to revert to “open territories” as defined in the License Agreement.

 

We have received a notice of default from Medpac in respect of the $500,000 principal amount of our 8% convertible notes due January 31, 2018, which if not withdrawn could require that we repay the principal and accrued interest on the notes, and we may not be able to do so unless we are able to obtain additional financing.

 

We have received a notice of default from Medpac in respect of the $500,000 principal amount of our 8% convertible notes due January 31, 2018 alleging that certain of the representations and warranties we made in the subscription agreement for the notes were not true or correct in a material respect when made, and demanding payment of the principal amount of the notes, together with accrued interest thereon, and threatening to commence legal proceedings for the payment of such amount if not received by December 30, 2015. Although we are in discussions with Medpac in an effort to persuade Medpac to withdraw its notice of default, we may not be able to make payment on the notes if Medpac fails to withdraw such notice of default unless we are able to obtain additional financing.

 

Our independent accountant has included an explanatory paragraph in its report on our consolidated combined financial statements expressing doubt as to our ability to continue as a going concern.

 

Our independent accountant has included an explanatory paragraph in its report on our consolidated financial statements for the year ended August 31, 2015, stating that there is substantial doubt about our ability to continue as a going concern due to our need to generate cash from operations or obtain additional financing. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Report of Independent Accountants” on our consolidated financial statements included in this Report.

 

We need to effectively manage our growth and the execution of our business plan. Any failure to do so would negatively impact our results.

 

To manage our operations effectively, we will need to create operational, financial and other management processes and systems. Other than our chief executive officer, we have no staff and our success will depend on our ability to hire and retain employees and/or independent contractors to manage our costs in general and administrative expenses in particular and otherwise to efficiently execute our business plan. There are no assurances that we will be able to effectively and efficiently manage our growth. Any inability to do so could increase our expenses and negatively impact the result of our operations. Moreover, because we are small and have limited working capital, we must limit our operations and carefully execute our business plan. Because we will have to limit our operations based on available working capital, we may not generate sufficient sales to make a profit. If we do not make a profit, we may have to suspend or cease operations.

 

Our Controlling Stockholders, who collectively own approximately 70% of our common stock, have pledged their shares to secure their guaranty of our obligations to a lender; if we default on the underlying loan, we could experience a change in control.

 

Our Controlling Stockholders have guaranteed our obligations under a loan agreement with an affiliated company which matures on June 1, 2016, which allows us to borrow CAD $583,000. Their guaranty is exclusively with recourse to their pledge of approximately 70% of our common stock. In the event we default on this loan, the lender may foreclose on the shares of our common stock subject to the pledge. In such case, we could experience a change of control.

 

The loss of key personnel would directly affect our efficiency and economic results.

 

We are dependent upon John Bentivoglio (our President and Chief Executive Officer). The loss of the services of Mr. Bentivoglio could have a material adverse effect on our business and operations, including our ability to execute our business plan.

 

Our strategy requires us to develop and maintain relationships with others.

 

Our strategy depends on our developing and maintaining relationships with other firms such as independent contractors and vendors. Of particular importance to us is our relationship with Contex, an engineering firm which is designing our initial cardiac monitoring device. We also will need to develop and maintain relationships with independent contractors which will market our products and vendors who will manufacture our cardiac monitoring devices. It is vital to our success that we develop relationships with key independent contractors and vendors. There can be no assurance, however, that we will be able to develop and maintain relationships which provide us the services we require. If we fail to develop and maintain such relationships, we may be forced to change our strategy, which could have a material adverse effect on our ability to initiate operations and/or the results of our operations. Further, if our relationship with a key independent contractor or vendor is terminated, it is likely our business will be disrupted until a replacement is identified and the relevant services are procured.

 

We will need to raise additional financing which will result in dilution to our stockholders’ ownership and voting rights in our company, we may be unable to raise such capital when needed, or at all, and the terms of such capital may be adverse to our stockholders.

 

We will require financing to provide the working capital necessary to complete development of our heart monitoring device and implement our strategy and expand our business. If we fail to arrange for such financing in the future, we will not be able to complete the development of our cardiac monitoring device until we can obtain adequate financing, which we may not be successful. We may not be able to obtain financing in sufficient amounts or on acceptable terms when needed, which will adversely affect our prospects. We will need to raise the financing necessary to meet our anticipated cash requirements for the foreseeable future. Our future funding requirements will depend on many factors, including:

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the results of our operations;

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the reimbursement rates associated with our cardiac monitors and other products and services;

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our ability to secure contracts with commercial payors providing for the reimbursement of our products and services;

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the costs associated with manufacturing and building our inventory of our initial and future generation monitors and other products;

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the costs of hiring personnel and investing in infrastructure to support future growth;

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the costs of undertaking future strategic initiatives, such as acquisitions or joint ventures;

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the emergence of competing technologies and products and other adverse market developments;

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the costs of preparing, filing, prosecuting, maintaining and enforcing patent claims and other intellectual property rights or defending against claims of infringement by others; and

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actions taken by the FDA, and other regulatory authorities affecting our products and competitive products.

 

The financing we require may not be available on reasonable terms, or at all. Debt financing must be repaid regardless of whether or not we generate profits or sufficient cash flow from our business activities to satisfy the obligations. Equity financing will result in dilution to existing stockholders and may involve securities that have rights, preferences, or privileges that are senior to our common stock. If additional sales of our capital stock occur, your ownership interest and voting power in us will be decreased and the market price of our common stock may decrease.

 

General economic conditions, which are largely out of our control, may adversely affect our financial condition and results of operations.

 

Our operations may be affected by changes in general economic conditions. Recessionary economic cycles, higher interest rates, inflation, higher levels of unemployment, changes in the laws or industry regulations or other economic factors may adversely affect the demand for our cardiac monitoring solutions. Additionally, these economic factors and changes in laws and regulations may adversely affect our financial condition and results of operations.

 

Risks Related To Our Business and Industry

 

Our business is dependent upon referrals from physicians; if we fail to develop and maintain relationships and obtain those referrals, our business will be adversely impacted.

 

The success of our business is dependent upon physicians prescribing our services. Our success in obtaining prescriptions will be directly influenced by a number of factors, including:

 

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The establishment of relationships with independent contractors which will sell our services to physicians;

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the ability of the physicians who wish to prescribe our monitoring solutions to obtain sufficient reimbursement and be paid in a timely manner for the professional services they provide in connection with the use of our cardiac monitoring solutions;

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establishing ourselves as a comprehensive cardiac monitoring services provider;

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our ability directly, or through others, to educate physicians regarding the benefits of our cardiac monitoring solutions over alternative diagnostic monitoring solutions and regarding the benefits of the BreastCare DTS™ product as a supplement to periodical mammogram screening; and

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the clinical efficacy of our cardiac monitoring solutions and the BreastCare DTS™ product.

 

If we are unable to educate physicians regarding the benefits of our cardiac monitors and related services and of the BreastCare DTS™ product and are unable to obtain sufficient prescriptions for our services, we may not generate sufficient revenue from the provision of our products to establish or maintain an active business.

We and the physicians who prescribe our services will be dependent upon reimbursement for the fees associated with our services; the absence or inadequacy of reimbursement may cause our revenue to be insufficient to meet our cash requirements.

 

We expect to receive reimbursement for our services from commercial payors, from Medicare administrative contractors with jurisdiction in the states where we provide cardiac monitors and services and from national health care programs in countries other than the United States.

 

Over the past few years reimbursement rates from many third party payors have declined, in some cases significantly. There can be no assurance that this trend will not continue or apply to more third party payors. In addition, there is no assurance that third party payors' reimbursement will continue to cover cardiac monitoring services at all, or the cost of the BreastCare DTS™ product or, if covered, will reimburse them at commercially viable rates. In addition, private third party payors may not reimburse patients for any services offered by us or reimburse our services at commercially viable rates. In this regard we will seek confirmations from third party payors and insurers that they will provide coverage for, and payment for our cardiac event monitoring services and for the cost of the BreastCare DTS™ product. We also will file applications with Medicare so that Medicare coverage will apply to our service. There can be no assurance that our efforts will be successful. The failure to receive reimbursement at adequate levels may adversely affect our revenues and our expected growth and our business, financial condition and results of operations.

 

In addition, we expect that our prescribing physicians will receive reimbursement for professional interpretation of the information provided by our products and services from commercial payors or Medicare. The efficacy, safety, performance and cost-effectiveness of our products and services, on a standalone basis and relative to competing services, will determine the availability and level of reimbursement we and our prescribing physicians receive. Our ability to successfully contract with payors is critical to our business because physicians and their patients will select cardiac monitoring solutions other than ours in the event that payors refuse to adequately reimburse our technical fees and physicians' professional fees and the absence of reimbursement would likely negatively affect sales of BreastCare DTS™ product.

 

We may experience difficulty in obtaining reimbursement for our services from commercial payors that consider our technology to be experimental and investigational, which would adversely affect our revenue and operating results.

 

Many commercial payors refuse to enter into contracts to reimburse the fees associated with medical devices, other products or services that such payors determine to be "experimental and investigational." Commercial payors typically label medical devices or services as "experimental and investigational" until such devices or services have demonstrated product superiority evidenced by a randomized clinical trial. As a result, these commercial payors may refuse to reimburse the technical and professional fees associated with our products and services. If commercial payors or Medicare decides not to reimburse our services or the related services provided by physicians, or the cost of the BreastCare DTS™ product or the rates of such reimbursement change, or if we fail to properly administer claims, our revenue could be insufficient to meet our cash requirements.

 

Reimbursement by Medicare is highly regulated and subject to change; our failure to comply with applicable regulations could decrease the revenue we would otherwise generate and may subject us to penalties or have an adverse impact on our business.

 

CMS imposes extensive and detailed requirements on medical services providers, including, but not limited to, rules that govern how we structure our relationships with physicians, how and when we submit reimbursement claims, how we operate our monitoring facilities and how and where we provide our cardiac monitoring solutions. Our failure to comply with applicable Medicare rules could result in our failure to qualify under the Medicare payment program, our being required to return any funds previously paid to us, civil monetary penalties, criminal penalties and/or exclusion from the Medicare program.

 

The operation of our call centers and monitoring facilities will be subject to rules and regulations governing IDTF and state licensure requirements; failure to comply with these rules could prevent us from receiving reimbursement from Medicare and some commercial payors.

 

We expect to have call centers and monitoring facilities in various states that analyze the data obtained from our cardiac monitors and report the results to physicians. In order for us to receive reimbursement from Medicare and some commercial payors, we must have a call center certified as an IDTF. An IDTF is defined by CMS as an entity independent of a hospital or physician’s office in which diagnostic tests are performed by licensed or certified non-physician personnel under appropriate physician supervision. Medicare has set certain performance standards that every IDTF must meet in order to obtain or maintain its billing privileges. Certification as an IDTF requires that we follow strict regulations governing how the center operates, such as requirements regarding the experience and certifications of the technicians who review data transmitted from our monitors. These rules and regulations vary from location to location and are subject to change. If they change, we may have to change the operating procedures that we previously developed at our call centers, which could increase our costs significantly. If we fail to obtain and maintain IDTF certification, our services may not be reimbursed by Medicare and some commercial payors, which could have a material adverse impact on our business.

 

Our inability to secure suppliers to manufacture our monitoring devices and the BreastCare DTS™ device on a timely basis, would likely harm our ability to ship products to our customers, decrease our revenues and increase our costs.

 

We will need to develop relationships with one or more qualified independent contractors to manufacture our cardiac monitors and the BreastCare DTS™ product at reasonable costs. If we are unable to do so, we will not be able to initiate our business. We expect to work closely with our suppliers to try to ensure continuity of supply while maintaining high quality and reliability; we cannot guarantee that our supplies will be uninterrupted. In addition, due to the stringent regulations and requirements of the FDA regarding the manufacture of our products, we may not be able to quickly establish additional or replacement sources. A reduction or interruption in supply, and an inability to develop alternative sources for such supply, could result in significant delays or cancellations of shipments of our products which would adversely affect our business.

 

Interruptions or delays in telecommunications systems or in network or related services could impair the delivery of our services and harm our business.

 

The success of our services and devices is dependent upon our ability to store, retrieve, process and manage data and to develop, maintain and upgrade data processing and communication capabilities. We expect to develop disaster recovery and business continuity plans which provide for redundant servers and call centers, hourly back-up and storage of our data. As we commence and expand our commercial activities, an increased burden will be placed upon the telecommunications and data processing systems that we develop and the equipment upon which they rely. Interruptions of telephone service for any extended length of time, loss of stored data or other computer problems could have a material adverse effect on our business, financial condition and results of operations. Any interruption in the availability of the network connections may adversely affect our business. Frequent or persistent interruptions in our services could cause permanent harm to our reputation and could cause potential users of our services to believe that our systems are unreliable, leading them to use our competitors. Such interruptions could result in liability, claims and litigation against us for damages or injuries resulting from the disruption in service.

 

Moreover, the communications and information technology industries are subject to rapid and significant changes, and our ability to operate and compete is dependent in significant part on our ability to develop, update and enhance the communication technologies used in our cardiac monitoring systems and services.

 

If our competitors are able to develop or market monitoring solutions that are more effective, or gain greater acceptance in the marketplace than the solutions that we develop, our commercial opportunities will be reduced or eliminated.

 

The market for cardiac monitoring solutions is evolving rapidly and becoming increasingly competitive. The monitoring industry is highly fragmented and characterized by a small number of large providers and a large number of smaller regional service providers. These parties will compete with us in marketing to payors and prescribing physicians, recruiting and retaining qualified personnel, acquiring technology and developing solutions complementary to our programs. In addition, these companies have substantially greater resources than we do. If our competitors are better able to develop and patent cardiac monitoring solutions than us, or develop more effective or less expensive cardiac monitoring solutions that render the solutions that we develop obsolete or non-competitive, or deploy larger or more effective marketing and sales resources than we are able to develop, our business will be harmed and our commercial opportunities will be reduced or eliminated.

 

The use of mammography systems and other methodologies for the detection of breast disease is well-established in many jurisdictions and we may not be able to successfully launch our BreastCare DTS™ product since there is no similar product in the marketplace to which we could compare our product.

 

The use of mammography systems for the detention of breast disease is well-established in most developing nations and it may prove difficult to initiate our activities for these products in these markets. While we believe that the BreastCare DTS™ product will be attractive in developing nations, we may be unable to successfully educate target audiences of the benefits of this product.

 

We operate in an intensely competitive industry, and our failure to respond quickly to technological developments and incorporate new features into our products could harm our ability to compete.

 

We operate in an intensely competitive industry that experiences rapid technological developments, changes in industry standards, changes in patient requirements, and frequent new product introductions and improvements. If we are unable to respond quickly and successfully to these developments, the products or technologies that we develop may become uncompetitive or obsolete. To compete successfully, we must maintain a successful research and development effort, develop new products, and improve our products at the same pace or ahead of our competitors. We expect our research and development efforts will initially be conducted by Contex. If our research and development efforts are unsuccessful, our future results of operations will be materially harmed.

 

Enforcement of federal and state laws regarding privacy and security of patient information may adversely affect our business, financial condition or operations.

 

The use and disclosure of certain health care information by health care providers and their business associates have come under increasing public scrutiny. Recent federal standards under the Health Insurance Portability and Accountability Act of 1996, or “HIPAA”, establish rules concerning how individually-identifiable health information may be used, disclosed and protected. Historically, state law has governed confidentiality issues, and HIPAA preserves these laws to the extent they are more protective of a patient's privacy or provide the patient with more access to his or her health information. As a result of the implementation of the HIPAA regulations, many states are considering revisions to their existing laws and regulations that may or may not be more stringent or burdensome than the federal HIPAA provisions. We must operate our business in a manner that complies with all applicable laws, both federal and state, and that does not jeopardize the ability of the physicians who prescribe our services and products to comply with all applicable laws. These laws and regulations present risks for health care providers and their business associates that provide services to patients in multiple states in the United States.

 

We may be subject, directly or indirectly, to federal and state health care fraud and abuse laws and regulations and if we are unable to fully comply with such laws, we could face substantial penalties.

 

Our operations may be directly or indirectly affected by various broad state and federal health care fraud and abuse laws, including the Federal Healthcare Programs' Anti-Kickback Statute and the Stark law. If our future operations are found to be in violation of these laws, we or our officers may be subject to civil or criminal penalties, including large monetary penalties, damages, fines, imprisonment and exclusion from Medicare and Medicaid program participation. If enforcement action were to occur, our business and results of operations could be adversely affected.

 

We may be subject to federal and state false claims laws which impose substantial penalties.

 

We expect that many of the physicians and patients who will use our services and products will file claims for reimbursement with government programs such as Medicare and Medicaid. As a result, we may be subject to the federal False Claims Act if we knowingly "cause" the filing of false claims. Violations may result in substantial civil penalties, including treble damages. The federal False Claims Act also contains "whistleblower" or "qui tam" provisions that allow private individuals to bring actions on behalf of the government alleging that the defendant has defrauded the government. In recent years, the number of suits brought in the medical industry by private individuals has increased dramatically. Various states have enacted laws modeled after the federal False Claims Act, including "qui tam" provisions, and some of these laws apply to claims filed with commercial insurers. We are unable to predict whether we could be subject to actions under the federal False Claims Act, or the impact of such actions. However, the costs of defending claims under the False Claims Act, as well as sanctions imposed under the False Claims Act, could adversely affect our results of operations.

 

Changes in the health care industry or tort reform could reduce the number of cardiac monitoring solutions ordered by physicians, which could result in a decline in the demand for our cardiac monitoring solutions, pricing pressure and decreased revenue.

 

Changes in the health care industry directed at controlling health care costs or perceived over-utilization of cardiac monitoring solutions could reduce the volume of solutions ordered by physicians. If more health care cost controls are broadly instituted throughout the health care industry, the volume of cardiac monitoring solutions prescribed by physicians could decrease, resulting in pricing pressure and declining demand for our services, which could harm our operating results. In addition, it has been suggested that some physicians order cardiac monitoring solutions, even when the services may have limited clinical utility, primarily to establish a record for defense in the event of a claim of medical malpractice against the physician. Legal changes increasing the difficulty of initiating medical malpractice cases, known as tort reform, could reduce the amount of our services prescribed as physicians respond to reduced risks of litigation, which could harm our operating results.

 

Legislation and policy changes reforming the United States healthcare system may have a material adverse effect on our operating results and financial condition.

 

On March 23, 2010, both the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act of 2010 were signed into law. Together, the two measures make the most sweeping and fundamental changes to the United States health care system since the creation of Medicare and Medicaid. The Health Care Reform laws include a large number of health-related provisions, including expanding Medicaid eligibility, requiring most individuals to have health insurance, establishing new regulations on health plans, establishing health insurance exchanges, requiring manufacturers to report payments or other transfers of value made to physicians and teaching hospitals, and modifying certain payment systems to encourage more cost-effective care.

 

In addition, various healthcare reform proposals have also emerged at the state level. We cannot predict the effect that newly enacted laws or any future legislation or regulation will have on us. However, the implementation of new legislation and regulation may lower reimbursements for our products, reduce medical procedure volumes and adversely affect our business.

 

If our suppliers fail to achieve or maintain regulatory approval of manufacturing facilities, our growth could be limited and our business could be harmed.

 

We expect to manufacture our cardiac monitors through third parties. In order to maintain compliance with FDA and other regulatory requirements, the manufacturing facilities where our monitors are manufactured must be periodically re-evaluated and qualified under a quality system to ensure they meet production and quality standards. Suppliers of components and products used to manufacture cardiac monitoring devices, and the manufacturers of the monitors must also comply with FDA regulatory requirements, which often require significant resources and subject our suppliers to potential regulatory inspections and stoppages. Similar rules may also apply to the manufactures of the BreastCare DTS™ product. If our suppliers do not maintain regulatory approval for our manufacturing operations, our business could be adversely affected.

 

We could be subject to medical liability or product liability claims, which may not be covered by insurance and which would adversely affect our business and results of operations.

 

The design, manufacture and marketing of services of the types we expect to provide entail an inherent risk of product liability claims. Any such claims against us may require us to incur significant defense costs, irrespective of whether such claims have merit. In addition, we expect to provide information to health care providers and payors upon which determinations affecting medical care are made, and claims may be made against us resulting from adverse medical consequences to patients resulting from the information we provide. In addition, we may become subject to liability in the event that the monitors and sensors we use fail to correctly record or transfer patient information or if we provide incorrect information to patients or health care providers using our services. If we incur one or more significant claims against us, or if we are required to undertake remedial actions in response to any such claims, such claims or actions would adversely affect our business and results of operations.

 

We expect to secure our liability insurance which will be subject to deductibles and coverage limitations. However, insurance may not be available to us on acceptable terms, if at all, and, if available, the coverage may not be adequate to protect us against any future claims. If we are unable to obtain insurance at an acceptable cost or on acceptable terms with adequate coverage or otherwise protect against any claims against us, we will be exposed to significant liabilities, which may adversely affect our business and results of operations.

 

If we do not obtain and maintain adequate protection for our intellectual property, the value of our technology and devices may be adversely affected.

 

Our business and competitive positions are dependent in part upon our ability to protect our proprietary technology. To protect our proprietary rights, we expect to rely on a combination of trademark, copyright, patent, trade secret and other intellectual property laws, employment, confidentiality and invention assignment agreements with our employees and contractors, and confidentiality agreements and protective contractual provisions with other third parties. We will attempt to protect our intellectual property position by filing trademark applications and U.S., foreign and international patent applications related to our proprietary technology, inventions and improvements that are important to the development of our business.

 

We do not believe that any single patent, trademark or other intellectual property right of ours, or combination of our intellectual property rights, is likely to prevent others from competing with us using a similar business model. There are many issued patents and patent applications held by others in our industry. Our competitors may independently develop technologies that are substantially similar or superior to our technologies, or design around our patents or other intellectual property to avoid infringement. In addition, we may not apply for a patent relating to products or processes that are patentable, we may fail to receive any patent for which we apply or have applied, and any patent owned by us or issued to us could be circumvented, challenged, invalidated, or held to be unenforceable, or rights granted thereunder may not adequately protect our technology or provide a competitive advantage to us. If a third-party challenges the validity of any patents or proprietary rights of ours, we may become involved in intellectual property disputes and litigation that would be costly and time-consuming.

 

Although third parties may infringe on our patents and other intellectual property rights, we may not be aware of any such infringement, or we may be aware of potential infringement but elect not to seek to prevent such infringement or pursue any claim of infringement, and the third party may continue its potentially infringing activities. Any decision whether or not to take further action in response to potential infringement of our patent or other intellectual property rights may be based on a variety of factors, such as the potential costs and benefits of taking such action, and business and legal issues and circumstances. Litigation of claims of infringement of a patent or other intellectual property rights may be costly and time-consuming, may divert the attention of our personnel, and may not be successful or result in any significant recovery of compensation for any infringement or enjoining of any infringing activity. Litigation or licensing discussions may also involve or lead to counterclaims that could be brought by a potential infringer to challenge the validity or enforceability of our patents and other intellectual property.

 

To protect our trade secrets and other proprietary information, we intend to require our employees, consultants, contractors and outside collaborators to enter into written nondisclosure agreements. These agreements, however, may not provide adequate protection to prevent any unauthorized use, misappropriation or disclosure of our trade secrets, know-how or other proprietary information. These agreements may be breached, and we may not become aware of, or have adequate remedies in the event of, any such breach. Also, others may independently develop the same or substantially equivalent proprietary information and techniques or otherwise gain access to our trade secrets.

 

Our ability to use our cardiac monitoring devices and distribute the BreastCare DTS™ product may be impaired by the intellectual property rights of third parties.

 

Our success is dependent in part upon our ability to avoid infringing the patents or proprietary rights of others. Our industry is characterized by a large number of patents, patent filings and frequent litigation based on allegations of patent infringement. Competitors may have filed applications for, or have been issued, patents, and may obtain additional patents and proprietary rights related to devices, products, services or processes that we compete with. We may not be aware of all of the patents or patent applications potentially adverse to our interests that may have been filed or issued to others.

 

U.S. patent applications may be kept confidential while pending in the U.S. Patent and Trademark Office. If other companies have or obtain patents relating to our monitors or services, we may be required to obtain licenses to those patents or to develop or obtain alternative technology. We may not be able to obtain any such licenses on acceptable terms, or at all. Any failure to obtain such licenses could impair or foreclose our ability to make, use, market or sell our products and services.

 

Based on the litigious nature of our industry and the electronics field in general and the fact that we may pose a competitive threat to some companies who own or control various patents, it is possible that one or more third parties may assert a patent infringement claim seeking damages and to enjoin the manufacture, use, sale and marketing of our monitors and services and the BreastCare DTS™ product. If a third-party asserts that we have infringed on its patent or proprietary rights, we may become involved in intellectual property disputes and litigation that would be costly and time-consuming and could impair or foreclose our ability to make, use, market or sell our products and services. Additionally, we may receive notices from other third parties suggesting or asserting that we are infringing their patents and inviting us to license such patents. We do not believe that we will infringe on any other party's patents or that a license to any such patents is necessary.

 

If we are found to infringe on the patent or intellectual property rights of others, we may be required to pay damages, stop the infringing activity or obtain licenses or rights to the patents or other intellectual property in order to use, manufacture, market or sell our products and services. Any required license may not be available to us on acceptable terms or at all. If we succeed in obtaining such licenses, payments under such licenses would reduce any earnings from our products. In addition, licenses may be non-exclusive and, accordingly, our competitors may have access to the same technology as that which may be licensed to us. If we fail to obtain a required license or are unable to alter the design of our monitors, or other products, to make a license unnecessary, we may be unable to manufacture, use, market or sell our monitors and services, or other products, which could significantly affect our ability to initiate, sustain or grow our commercial business.

 

If we fail to obtain and maintain necessary FDA clearances, our business will be adversely affected.

 

The monitors, sensors and bases that we will manufacture and use in our business are classified as medical devices and are subject to extensive regulation by the FDA. We expect to apply for required FDA clearances, but there can be no assurance that our applications will be approved. If we do not secure required FDA clearances we will not be able to initiate our cardiac monitoring business. Further, we will be required to establish registration with the FDA as a distributor of medical devices. FDA regulations govern manufacturing, labeling, promotion, distribution, importing, exporting, shipping and sale of monitoring devices. Our monitor will require "510(k) clearance" status from the FDA. Modifications to our monitors or our algorithms that could significantly affect safety or effectiveness, or that could constitute a significant change in intended use, would require a new clearance from the FDA. If in the future we make changes to our devices or our algorithms, the FDA could determine that such modifications require new FDA clearance, and we may not be able to obtain such FDA clearances timely, or at all.

 

We will be subject to or affected by continuing regulation by the FDA, including quality regulations applicable to the manufacture of our cardiac monitors and various reporting regulations, as well as regulations that govern the promotion and advertising of medical devices. The FDA could find that we have failed to comply with one of these requirements, which could result in a wide variety of enforcement actions, ranging from a warning letter to one or more severe sanctions. These sanctions could include fines, injunctions and civil penalties; recall or seizure of our monitors; operating restrictions, partial suspension or total shutdown of production; refusal to grant 510(k) clearance of new components or algorithms; withdrawing 510(k) clearance already granted to one or more of our existing components or algorithms; and criminal prosecution. Any of these enforcement actions could be costly and significantly harm our business, financial condition and results of operations.

 

We may be subject to federal reporting requirements involving payments we make to physicians.

 

Section 6002 of the Patient Protection and Affordable Care Act requires certain medical devices manufacturers that produce devices covered by the Medicare and state Medicaid programs to report annually to the government certain payments to physicians and teaching hospitals. If we fail to appropriately track and report such payments to the government, we could be subject to civil fines and penalties, which could adversely affect the results of our operations.

  

Certain Factors Related To Our Common Stock

 

The price of our common stock may be volatile, and a stockholder’s investment in our common stock could suffer a decline in value regardless of our operating performance.

 

A consistent active trading market has not existed for our common stock. There can be no assurance that our common stock will be actively traded in the future. Even if our common stock is actively traded, the market price for our common stock has been and is likely to be volatile, and may fluctuate significantly in response to a number of factors, most of which we cannot control, including:

 

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changes in reimbursement rates or policies by payors;

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adoption of our services by physicians;

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changes in Medicare rules or regulations;

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the development of increased competition for arrhythmia monitoring solutions;

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price and volume fluctuations in the overall stock market;

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changes in operating performance and stock market valuations of other early stage companies generally;

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changes in the competitive landscape of the market for our products and services, including technological innovations by our competitors and new entrants to the market;

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the financial projections we may provide to the public, any changes in these projections or our failure to meet these projections;

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changes in financial estimates by any securities analysts who follow our common stock, our failure to meet these estimates or failure of those analysts to initiate or maintain coverage of our common stock;

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ratings downgrades by any securities analysts who follow our common stock;

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the public's response to press releases or other public announcements by us or third parties, including our filings with the SEC, regulatory matters relating to governmental entities including Medicare, the FDA, and the U.S. Department of Justice, and announcements relating to payor reimbursement decisions, product development, litigation and intellectual property impacting us or our business;

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market conditions or trends in our industry or the economy as a whole;

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the development and sustainability of an active trading market for our common stock;

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future sales of our common stock by us or our officers, directors and significant stockholders;

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other events or factors, including those resulting from war, incidents of terrorism, natural disasters or responses to these events; and

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changes in accounting principles.

 

Our common stock is listed on the OTCQB and has historically been thinly traded, so you may be unable to sell at or near asking prices or at all if you need to sell your shares to raise money or otherwise desire to liquidate your shares.

 

The trading volume of our common stock has been and may continue to be limited and sporadic. As a result of such trading activity, the quoted price for our common stock on the OTCQB may not necessarily be a reliable indicator of its fair market value. A consistent established trading market for our common stock may never develop or be maintained. Active trading markets generally result in lower price volatility and more efficient execution of buy and sell orders. Absence of an active trading market reduces the liquidity of the shares traded there.

 

Currently our Common Stock is quoted in the OTCQB. The OTCQB is a significantly more limited market than the New York Stock Exchange or NASDAQ system. The quotation of our shares on the OTCQB may result in a less liquid market available for existing and potential stockholders to trade shares of our Common Stock, could depress the trading price of our Common Stock and could have a long-term adverse impact on our ability to raise capital in the future. In addition, the market and the trading volume we develop may be limited by the fact that many major institutional investment funds, including mutual funds, as well as individual investors follow a policy of not investing in OTCQB stocks and certain major brokerage firms restrict their brokers from recommending OTCQB stocks because they are considered speculative, volatile and thinly traded. The OTCQB market is an inter-dealer market much less regulated than the major exchanges and our Common Stock is subject to abuses, volatility and shorting.

 

Our common stock is subject to price volatility unrelated to our operations.

 

The market price of our common stock could fluctuate substantially due to a variety of factors, including market perception of our ability to achieve our planned growth, quarterly operating results of other companies in the same industry, trading volume in our common stock, changes in general conditions in the economy and the financial markets or other developments affecting our competitors or us. In addition, the stock market is generally subject to extreme price and volume fluctuations. This volatility has had a significant effect on the market price of securities issued by many companies for reasons unrelated to their operating performance and could have the same effect on our common stock.

 

If we fail to remain current on our reporting requirements, we could be removed from the OTCQB, which would limit the ability of broker-dealers to sell our securities and the ability of stockholders to sell their securities in the secondary market.

 

Companies trading on the OTCQB, such as the Company, must be reporting issuers under Section 12 of the Exchange Act, and must be current in their reports under Section 13 of the Exchange Act, in order to maintain price quotation privileges on the OTCQB. If we fail to remain current on our reporting requirements, we could be removed from the OTCQB. As a result, the market liquidity for our securities could be adversely affected by limiting the ability of broker-dealers to sell our securities and the ability of stockholders to sell their securities in the secondary market.

 

A large number of shares of common stock will be eligible for future sale and may depress our stock price.

 

Our shares that are eligible for future sale may have an adverse effect on the price of our stock. As of December 1, 2015, there were 113,597,702 shares of our Common Stock outstanding. Also, we expect to issue shares of our common stock, or other securities or instruments convertible into our common stock in the future to raise funds to satisfy our working capital requirements. The average daily trading volume for our stock on the OTCQB historically has been very low. Sales of substantial amounts of common stock, or a perception that such sales could occur, and the existence of options or warrants to purchase shares of common stock at prices that may be below the then current market price of the common stock, could adversely affect the market price of our common stock and could impair our ability to raise capital through the sale of our equity securities.

 

Provisions in our Articles of Incorporation provide for indemnification of officers and directors, which could require us to direct funds away from our business.

 

Our Articles of Incorporation provide for the indemnification of our officers and directors. We advance costs incurred by an officer or director and to pay judgments, fines and expenses incurred by an officer or director, including reasonable attorneys’ fees, as a result of actions or proceedings in which our officers and directors are involved by reason of being or having been an officer or director of our company. Funds paid in satisfaction of judgments, fines and expenses may be funds we need for the continued operation of our business, thereby affecting our ability to attain or maintain profitability.

 

The requirements of being a public company may strain our resources and distract our management.

 

As a public company, we are subject to the reporting requirements of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”). These requirements place a strain on our systems and resources. The Exchange Act requires that we file annual, quarterly and current reports with respect to our business and financial condition. The Sarbanes-Oxley Act requires that we maintain effective disclosure controls and procedures and internal controls for financial reporting. We are required to document and test our internal control procedures in order to satisfy the requirements of Section 404 of the Sarbanes-Oxley Act, which requires annual management assessments of the effectiveness of our internal controls over financial reporting and in the future may be required to file a report by our independent registered public accountants addressing these assessments. During the course of our testing, we may identify deficiencies which we may not be able to remediate in time to meet the deadlines imposed by the Sarbanes-Oxley Act. If we fail to achieve and maintain the adequacy of our internal controls, as such standards are modified, supplemented or amended from time to time, we may not be able to ensure that we can conclude on an ongoing basis that we have effective internal controls over financial reporting in accordance with the Sarbanes-Oxley Act.

 

In order to maintain and improve the effectiveness of our disclosure controls and procedures and internal control over financial reporting, significant resources and management oversight may be required. This may divert management’s attention from other business concerns, which could have a material adverse effect on our business, financial condition, results of operations and cash flows. In addition, we may need to hire accounting and financial staff with appropriate public company experience and technical accounting knowledge, and we cannot assure you that we will have the resources available to do so or that we will be able to do so in a timely fashion.

 

Our common stock is classified as a “penny stock” as that term is generally defined in the Securities Exchange Act of 1934 to mean equity securities with a price of less than $5.00. Our common stock will be subject to rules that impose sales practice and disclosure requirements on broker-dealers who engage in certain transactions involving a penny stock.

 

The SEC has adopted regulations which generally define so-called "penny stocks" to be an equity security that has a market price less than $5.00 per share, subject to certain exemptions. Under this definition our common stock is designated a "penny stock." As a "penny stock," our common stock is subject to Rule 15g-9 under the Exchange Act of 1934, or the "Penny Stock Rule." This rule imposes additional sales practice requirements on broker-dealers that sell such securities to persons other than established customers and "accredited investors" (generally, individuals with a net worth in excess of $1,000,000, exclusive of his residence, or annual incomes exceeding $200,000, or $300,000 together with their spouses).

 

For any transaction involving a penny stock, unless exempt, the penny stock rules require that a broker or dealer approve a person's account for transactions in penny stocks and the broker or dealer receive from the investor a written agreement to the transaction setting forth the identity and quantity of the penny stock to be purchased. In order to approve a person's account for transactions in penny stocks, the broker or dealer must obtain financial information and investment experience and objectives of the person and make a reasonable determination that the transactions in penny stocks are suitable for that person and that that person has sufficient knowledge and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks.

 

The broker or dealer must also deliver, prior to any transaction in a penny stock, a disclosure schedule prepared by the SEC relating to the penny stock market, which, in highlight form, sets forth the basis on which the broker or dealer made the suitability determination, and that the broker or dealer received a signed, written agreement from the investor prior to the transaction.

 

Disclosure also has to be made about the risks of investing in penny stocks in both public offerings and in secondary trading and commissions payable to both the broker-dealer and the registered representative, current quotations for the securities and the rights and remedies available to an investor in cases of fraud in penny stock transactions. Finally, monthly statements have to be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks.

 

Because of these regulations, broker-dealers may not wish to engage in the above-referenced necessary paperwork and disclosures and/or may encounter difficulties in their attempt to sell shares of our common stock, which may affect the ability of our stockholders to sell their shares and have the effect of reducing the level of trading activity. These additional sales practice and disclosure requirements could impede the sale of our common stock. Our common stock, in all probability, will be subject to such penny stock rules for the foreseeable future and our stockholders will, in all likelihood, find it difficult to sell their common stock.

 

There can be no assurance that our Common Stock will qualify for exemption from the Penny Stock Rule. In any event, even if our Common Stock were exempt from the Penny Stock Rule, we would remain subject to Section 15(b) (6) of the Exchange Act, which gives the SEC the authority to restrict any person from participating in a distribution of a penny stock if the SEC determines that such a restriction would be in the public interest.

 

We have no intention of paying dividends.

 

We have never declared or paid any cash dividends on our Common Stock. We currently intend to retain future earnings, if any, for growth of the business and, therefore, do not expect to pay any dividends in the foreseeable future.

 

The interests of our Controlling Stockholders, may conflict with the interests of our stockholders, and the concentration of voting power with our Controlling Stockholders will limit our other stockholders ability to influence corporate matters.

 

Our Common Stock has one vote per share on all matters to be voted on by stockholders. The Nick Bozza Family Trust, The John Bentivoglio Family Trust and The Sgro (2010) Family Trust (collectively, our “Controlling Stockholders”), have approximately 70% of the voting power of our capital stock. A Trustee of one of our Controlling Stockholders is our sole director and sole executive officer of the Company. Our Controlling Stockholders will have significant influence for the foreseeable future over management and affairs and over all matters requiring stockholder approval, including the election of directors and significant corporate transactions, such as mergers or other business combinations, the acquisition or disposition of assets, the incurrence of indebtedness, the issuance of any additional shares of common stock or other equity securities and the payment of dividends on our common stock. Collectively, they will also have the power to prevent or cause a change in control, and could take other actions that might be desirable to them but not to other stockholders. This concentrated control will limit our stockholders ability to influence corporate matters and, as a result, we may take actions that our stockholders do not view as beneficial. As a result, the market price of common stock could be adversely affected.

 

Our issuance of preferred stock could adversely affect the market value of our common stock, dilute the voting power of common stockholders and delay or prevent a change of control.

 

Our Articles of Incorporation authorizes the issuance of up to 10,000,000 shares of preferred stock. Therefore, our board of directors has the authority to cause us to issue, without any further vote or action by the stockholders, up to 10,000,000 shares of preferred stock. The issuance of these shares of preferred stock, if it were to occur, could adversely affect the market price for our common stock by making an investment in the common stock less attractive.

 

Since the voting rights of the preferred stock may adversely affect the voting power of the holders of our common stock either by diluting the voting power of our common stock or by giving the holders of any such preferred stock the right to block an action even if the action were approved by the holders of our common stock, the issuance of shares of preferred stock may also have the effect of delaying, deferring or preventing a change in control of our company without further action by the stockholders, even where stockholders are offered a premium for their shares.

 

Provisions in our charter documents and under Nevada law could discourage a takeover that stockholders may consider favorable.

 

Provisions in our Articles of Incorporation and by-laws may have the effect of delaying or preventing a change of control or changes in our management. These provisions include the following:

 

Our board of directors has the right to determine the authorized number of directors, and the right to elect directors to fill a vacancy created by the expansion of the board of directors or the resignation, death or removal of a director, which prevents stockholders from being able to control the size of or fill vacancies on our board of directors.

 

Our board of directors has the right to issue 10,000,000 shares of our Preferred Stock, each share of which has the voting power of 20 shares of our Common Stock.

 

ITEM 2. Properties

 

We presently operate out of offices provided to us without charge by Contex at 2798 Thamesgate Dr., Mississauga, Ontario, Canada. We expect to lease corporate and operational facilities in the future on an as-needed basis.

 

ITEM 3. LEGAL PROCEEDINGS.

 

We are not currently a party to any material legal or administrative proceedings. We may, however, from time to time become a party to various legal or administrative proceedings arising in the ordinary course of our business.

 

ITEM 4. MINE SAFETY DISCLOSURES.

 

Not applicable.

 

PART II

 

ITEM 5. MARKET FOR COMMON EQUITY, RELATED SHAREHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

 

MARKET FOR OUR COMMON STOCK

 

Quotations for the Company's common stock (the “Common Stock”) appear on the OTCQB. Since the Company obtained the ticker symbol (OTCBB: SUIP) on November 20, 2007 and until the closing of the Transactions on June 9, 2014, transactions in the Common Stock can only be described as sporadic. On November 9, 2014, the Company changed its name from Sunrise Holdings Limited to Event Cardio Group Inc. and its ticker symbol to ECGI.

 

The following table sets forth for the respective periods indicated the high and low closing prices of the Company's common stock on the OTCQB. Such prices are based on inter-dealer bid and asked prices, without markup, markdown, commissions, or adjustments and may not represent actual transactions.

 

Quarter Ended				High				Low
	November 30, 2013			$	0.03			$	0.014
	February 28, 2014			$	0.03			$	0.015
	May 31, 2014			$	0.04			$	0.02
	August 31, 2014			$	0.10			$	0.0233
	November 30, 2014			$	0.175			$	0.0525
	February 28, 2015			$	0.12			$	0.0757
	May 31, 2015			$	0.177			$	0.092
	August 31, 2015			$	0.072			$	0.039

 

Security Holders

 

At the close of business on December 1, 2015, our Common Stock was held of record by approximately 130 stockholders, not including persons or entities that hold the stock in nominee or "street" name through various brokerage firms.

  

DIVIDEND POLICY

 

We have not declared or paid any cash dividends on our common stock and do not intend to declare or pay any cash dividends in the foreseeable future. The payment of dividends, if any, is within the discretion of our Board and will depend on our earnings, if any, our capital requirements and financial condition and such other factors as our Board may consider.

 

RECENT SALES OF UNREGISTERED SECURITIES

 

During the fiscal year ended August 31, 2015, we issued the following unregistered equity securities not previously disclosed in our reports filed under the Exchange Act:

 

On February 2, 2015, the Company issued a total of 4,300,000 shares of common stock to Michael Swader (2,150,000 shares) and Lou Sitaras (2,150,000 shares) as consideration for services rendered or to be rendered pursuant to agreements, for a total fair value of $387,000, based on the market price of $0.09 per share as of the measurement date.

 

On April 27, 2015, we issued our 8% convertible notes due January 31, 2018 in the total principal amount of $525,000 to Medpac Asia Pacific Pty Ltd. (“Medpac”). The notes are convertible into shares of our common stock at an initial conversion price of $0.15 per share. We may prepay the notes at any time; however, if the volume weighted average price of our common stock for the ten trading days preceding the prepayment date is less than $0.15 per share, then Medpac is entitled to receive a number of warrants sufficient to purchase up to 1% of the then outstanding number of shares of common stock as to $500,000 principal amount of the notes and as to 0.0005% of the outstanding shares as to the remaining $25,000 principal amount of the notes. The warrants, when issued, would be exercisable for a period of three years at an exercise price of $0.15 per share, but may be exercised on a cashless basis.

 

On May 22, 2015, we issued a total of 6,250,000 shares of common stock to Richard Smith (3,000,000 shares), Tania Smith (500,000 sharers), Debra Ann Chaulk-Bates (250,000 shares), Ricardo Rodriguez (1,500,000 shares), David Michael Baird (250,000 shares), Cameron Chan (125,000 shares), Ryan Aldridge (125,000 shares) and Shellie Schoppe (500,000 shares) as consideration for services rendered or to be rendered pursuant to agreements for a total fair value of $500,000, based on the market price of $0.08 per share as of the measurement date.

 

On August 27, 2015, we issued 2,000,000 shares of common stock to Michael Swader for services rendered or to be rendered pursuant to a service agreement for a fair value of $190,000, based on the market price of $0.095 per share as of the measurement date.

 

On August 28, 2015, we issued 750,000 shares of common stock to Tactical Growth Partners LLC in exchange for a service agreement for a fair value of $71,250, based on the market price of $0.095 per share as of the measurement date.

 

On September 28, 2015, we issued a total of 4,300,000 shares of common stock and warrants to purchase an additional 4,300,000 shares of common stock to five accredited investors, three of whom were non-U.S. Persons, for a total purchase price of $210,000. The warrants may be exercised until September 28, 2019 at an exercise price of $0.10 per share. In connection with the issuances of these shares and warrants, we issued 320,000 shares of common stock to Medpac for arranging the financing.

 

On September 28, 2015, we issued a total of 250,000 shares of common stock, valued at $18,000, to Cameron Chan (125,000 shares) and Ryan Aldridge (125,000 shares), for services rendered during the year ended August 31, 2015.

 

On September 28, 2015, we issued a total of 1,000,000 shares of common stock to Cameron Chan (500,000 shares) and Ryan Aldridge (500,000 shares) in consideration for services rendered or to be rendered pursuant to a service agreement, for a fair value of $100,000, based on the market price of $0.10 per share as of the measurement date.

 

The securities issued in the foregoing transactions were exempt from registration under Section 4(2) of the Securities Act and/or Rule 506 promulgated thereunder as transactions by an issuer not involving a public offering or offshore transactions with non-US Persons pursuant to Regulation S promulgated under the Securities Act. The Company placed legends on the certificates stating that the securities were not registered under the Securities Act and set forth the restrictions on their transferability and sale. No general advertising or solicitation was used in selling the securities.

 

Except as set forth above, no commissions or underwriting fees were paid to any placement agents in connection with the sale or issuances of the securities.

 

SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS

 

The following table summarizes shares of our Common Stock to be issued upon exercise of options and warrants, the weighted-average exercise price of outstanding options and warrants and options available for future issuance pursuant to our equity compensation plans as of August 31, 2015:

 

Plan Category		Number of Securities to Be Issued Upon Exercise of Outstanding Options, Warrants and Rights				Weighted Average Exercise Price of Outstanding Options, Warrants and Rights				Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans
Equity compensation plans approved by security holders			None			$	—				None
Equity compensation plans not approved by security holders *			2,450,000			$	0.11				4,550,000
Total			2,450,000			$	0.11				4,550,000

__

* Consists of warrants to purchase 2,200,000 shares at an exercise price of $0.10 per share and warrants to purchase 250,000 shares at an exercise price of $0.20 per share.

 

Purchases of Our Equity Securities

 

No repurchases of our common stock were made during the fourth quarter of our fiscal year ended August 31, 2015.

 

ITEM 6. SELECTED FINANCIAL DATA

 

As a smaller reporting company we are not required to provide information with respect to this item.

 

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

This Annual Report on Form 10-K contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, including statements regarding our future results of operations and financial position, business strategy and plans and our objectives for future operations. Words such as “may,” “will,” “should,” “could,” “expect,” “anticipate,” “believe,” “estimate,” “intend,” “continue” and other similar expressions are intended to identify forward-looking statements. We have based these forward looking statements largely on current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy, short term and long-term business operations and objectives, and financial needs. These forward-looking statements involve risks and uncertainties that could cause our actual results to differ materially from those expressed or implied in our forward-looking statements. Such risks and uncertainties include, among others, those discussed in this Report under Item 1A “Risk Factors” and in our consolidated financial statements, related notes, and the other financial information appearing elsewhere in this report and our other filings with the Securities and Exchange Commission, or the SEC. Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. We do not intend, and undertake no obligation, to update any of our forward-looking statements after the date of this report to reflect actual results or future events or circumstances. Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements.

 

Our fiscal year ends on August 31 each year.

  

OVERVIEW

 

Event Cardio Group Inc. was organized on October 26, 2005 and had no operations since December, 2008, when we discontinued our previous business of mineral exploration. Most of our activities since January, 2009 have been centered on the acquisition of a new business.

 

On June 9, 2014 we experienced a change of control as a result of a transaction (the “Transaction”) in which 1,412,619 shares of our common stock, par value $0.001 and 10,000,000 shares of our preferred stock, par value $0.001, constituting approximately 97% of the cumulative voting power of our capital stock on that date, was acquired by Mr. John Bentivoglio, who is now our sole director and chief executive officer, as nominee for 2340960 Ontario Inc., a private company organized in Ontario, Canada, which we refer to herein as “ECG”. On September 8, 2014, we entered into a share exchange agreement (the “Exchange Agreement”), which we consummated on November 14, 2014, pursuant to which we acquired all of the issued and outstanding capital stock of ECG from ECG’s stockholders, The Nick Bozza Family Trust, The John Bentivoglio Family Trust and The Sgro (2010) Family Trust. In exchange for all of the outstanding capital stock of ECG, we issued to ECG’s stockholders an aggregate of 79,500,000 shares of our Common Stock (the “Share Exchange”). As a result of the consummation of the Share Exchange, (i) ECG became our wholly owned subsidiary and (ii) ECG’s former stockholders own an aggregate of 79,500,000 shares which constituted approximately 92.8% of the cumulative voting power of our common stock on the date the share exchange was consummated.

 

Mr. John Bentivoglio, our sole director and chief executive officer is one of three trustees of The John Bentivoglio Family Trust, the beneficiaries of which are members of his family.

 

On October 24, 2014, through a wholly owned subsidiary, we entered into a license agreement (the “License Agreement”) with Life Medical Technologies, Inc. (“Life Medical”) under which we were granted the exclusive right to distribute Life Medical’s “BreastCare DTS™” in the United States and certain other territories. The BreastCare DTS™ product is a patented, non-invasive device which has been cleared by the FDA as an adjunct to mammography and other established procedures for the detection of breast disease, including breast cancer.

 

GENERAL

 

The Exchange Agreement is accounted for as a reverse merger, in which ECG is deemed to be the acquiring entity for accounting purposes. The discussion and analysis of our financial condition and results of operations is based upon the financial statements of ECG which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of the Financial Statements requires the Company to make estimates and judgments that affect the reported amounts of assets and liabilities. On an on-going basis, the Company estimates on historical experience and on various other assumptions that, it believes to be reasonable under the circumstances, the results of which form the Company’s basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

 

Reference is made to the Notes to the financial statements of 2340960 Ontario Inc. (which we refer to in this Report as ECG) for the periods ended August 31, 2014 and August 31, 2013, which were filed as Exhibit 99.1 to the Company’s Current Report on Form 8-K/A filed with the SEC on November 26, 2014 (the “Financial Statements”), which should be read in conjunction with this Management Discussion below. The numbers and percentages contained in this Section are approximate.

 

The Company cannot predict what future laws and regulations might be passed that could have a material effect on its results of operations. The Company assesses the impact of significant changes in laws and regulations on a regular basis and updates the assumptions and estimates used to prepare its financial statements when it deems necessary.

 

The Company’s primary sources of funding to date have been capital contributions by its stockholders and cash provided by borrowings from affiliates. The Company’s primary uses of funds have been for capital expenditures, general and administrative expenses and research and development expenditures. If the Company cannot raise substantial additional amounts of cash in the form of equity or debt, it may not be able to realize its business objectives.

   

Results of Operations

 

Comparison of Years Ended August 31, 2015 and 2014

 

We have been in the developmental stage since inception. Since inception, our efforts have been principally devoted to designing and developing a wireless cordless cardio monitor and a device intended to detect breast disease. From inception to August 31, 2015, the Company has sustained losses and has an accumulated deficit of $2,980,587.

 

Our loss from operations for the year ended August 31, 2015 (“2015 Fiscal Year”) was $2,408,177, compared to a loss of $164,177 for the year ended August 31, 2014 (“2014 Fiscal Year”). General and administrative expenses were $1,185,356 for the 2015 Fiscal Year, compared to $122,421 for the 2014 Fiscal Year, an increase of $1,062,935. This increase is predominately due to the fact that we have had no revenues and incurred increased expenses related to the start-up of our business, the acquisition of the license from Life Medical and expenses related to operating as a public company.

 

Also, we incurred research and development expenses of $1,222,821 during the 2015 Fiscal Year, as compared to $41,756 during the 2014 Fiscal Year, an increase of $1,181,065. In the 2015 Fiscal Year, $952,188 in research and development expenses related to the development of our cardiac monitoring device and $270,633 related to the breast care device. All of the research and development expenses in the 2014 Fiscal Year related to the heart monitor device.

 

Total comprehensive loss for the 2015 Fiscal Year was $2,394,848, as compared to $342,372 for the 2014 Fiscal Year, an increase of $2,052,476. The increase in our loss resulted from the general and administrative and research development expenses described above which began in earnest as a result of the reverse merger and the efforts to develop our heart monitor.

 

Liquidity and Capital Resources

 

As of August 31, 2015, our total assets were $1,250,693, total liabilities were $1,729,201 and we had a stockholders’ deficit of $478,508, as compared to a stockholders’ deficit of $385,924 as of August 31, 2014. Current assets at August 31, 2015 were $706,963, consisting of cash of $32,427 and prepaid expenses of $568,837. In comparison, current assets at August 31, 2014 was $86,617, all of which was cash. Our stockholders’ deficit benefitted from sales of 3,950,000 shares of common stock and 2,450,000 warrants for total proceeds of $307,000, deposits received on equity instruments to be issued of $65,000, the issuance of shares valued at $1,450,250 for services rendered or to be rendered by various consultants and the issuance of equity instrument to be issued for services valued at $103,950..

 

As of August 31, 2015, our total current liabilities of $1,204,201 consisted of accounts payable of $598,835, notes payable to related parties in the amount of $549,502 and $55,864 due to related parties. In comparison, our current liabilities as of August 31, 2014 were $130,620, of which $74,423 was due to related parties. Our total liabilities as of August 31, 2015, included convertible notes payable in the amount of $525,000, as compared to $384,978 in notes payable to related parties as of August 31, 2014. The significant increase in our total liabilities as of August 31, 2015 compared to August 2014 resulted from the increase in our accounts payable, long-term borrowing from related parties to pay expenses related to our operational activities and the issuance of a convertible note in connection with the grant of rights to market our products in Australia.

 

The net cash used in our operating activities in the 2015 Fiscal Year was $1,034,342, an increase in use of $950,771 from that used in the 2014 Fiscal Year. The substantial increase in our use of cash reflects the increase in our development activities which commenced in earnest in the current fiscal year as reflected in the increase in our net loss which grew to $2,493,281 in the 2015 Fiscal Year, compared to $345,474 in the 2014 Fiscal Year.

 

Net cash used in investment activities in the 2015 Fiscal Year was $150,000, as compared to $181,297 in the 2014 Fiscal Year, a decrease of $31,297. Net cash provided by financing activities in the 2015 Fiscal Year was $1,130,491, as compared to $336,786 in the 2014 Fiscal Year, which increase reflects the $500,000 proceeds from the issuance of a convertible note, proceeds from long-term debt provided by related parties and proceeds from the issuance of our shares.

 

ECG has been in the developmental stage since inception. Since inception, ECG’s efforts have been principally devoted to designing and developing a wireless cordless cardio monitor and development of a product intended to detect breast disease. From inception to August 31, 2015, the Company has sustained losses and has an accumulated deficit of $2,980,587. The Company has funded its activities to date primarily through the issuance of a convertible note, contributions from its stockholders and loans from affiliates.

 

On April 27, 2015, ECG issued its 8% convertible notes due January 31, 2018 in the total principal amount of $525,000 to Medpac Asia Pacific Pty Ltd. (“Medpac”). The notes are convertible into shares of ECG common stock at an initial conversion price of $0.15 per share. ECG may prepay the notes at any time; however, if the volume weighted average price of ECG’s common stock for the ten trading days preceding the prepayment date is less than $0.15 per share, then Medpac is entitled to receive a number of warrants sufficient to purchase up to 1% of the then outstanding number of shares of ECG common stock as to $500,000 principal amount of the notes and as to 0.0005% of the outstanding shares as to the remaining $25,000 principal amount of the notes. The warrants, when issued, would be exercisable for a period of three years at an exercise price of $0.15 per share, but may be exercised on a cashless basis. In connection with the issuance of such notes we entered into an agreement with Medpac wherein we agreed to enter into license agreements for the distribution of our cardiac monitoring device and BreastCare. On November 24, 2015, Medpac delivered a notice of default to ECG in respect of the notes alleging that certain representations and warranties of ECG contained in the subscription agreement for the notes were not true or correct in a material respect when made, and demanding payment of the principal amount of the notes, together with accrued interest thereon, and threatening to commence legal proceedings for the payment of such amount if not received by December 30, 2015.

 

In May 2014, ECG entered into a loan agreement (the “May Loan Agreement”) with an affiliated company, pursuant to which the lender loaned the Company CAD $583,000. This loan bears interest at the rate of 12% per annum, compounded monthly, and matures on June 1, 2016. ECG’s shareholders guaranteed ECG’s obligations under the May Loan Agreement with recourse exclusively to the shares they owned of ECG. As a result of the Share Exchange, we have agreed to guaranty ECG’s obligations under the May Loan Agreement and pledge the shares of ECG that we acquired in the Share Exchange to the lender as security for our guaranty. Our guaranty is secured by a lien on all of our assets. In addition, our Controlling Stockholders guaranteed ECG’s obligations under the May Loan Agreement with recourse exclusively to the shares of our common stock that they acquired in the Share Exchange. Under the terms of the May Loan Agreement, 50% of the net proceeds we realize from the sale of our capital stock or from borrowings must be used to repay the amounts owned under this Loan. As of August 31, 2015, US$440,898 is outstanding under the May Loan Agreement.

 

On August 19, 2015, the Company and the party which loaned it the CAD $583,000 referred to above, confirmed their agreement to extend the maturity date of the CAD $583,000 Note to June 1, 2016 and the Company borrowed from the lender an additional CAD $63,855. Interest on the promissory note of the Company in the principal amount of CAD $63,855 evidencing its obligation to repay the additional loan accrues at the rate of 12% per annum compounded monthly until paid in full. The maturity date of the new loan is also June 1, 2016.

 

We are required to pay Life Medical royalties of 5% on net sales, as defined in the License Agreement, and minimum annual royalties of $100,000 in 2015 and $200,000 each year thereafter. In addition, we entered into release agreements (the “Releases”) with certain creditors (the “Life Medical Creditors”) of Life Medical which held judgments against Life Medical in the aggregate amount of approximately $501,000. Pursuant to the Release Agreements, we paid the Life Medical Creditors an aggregate of $501,000, of which $125,000 was paid in cash and the balance was satisfied by the issuance of shares of our common stock valued at $376,064, with the number of shares of common stock to be determined by dividing 376,064 by the volume weighted average price (“VWAP”) of our common stock for the five (5) consecutive trading days ending on the day before the 15th calendar day after consummation of the Share Exchange. On January 6, 2015, we issued 2,827,548 shares of our common stock in satisfaction of this obligation. The recipients of shares valued at $70,000 are also to be paid in cash or shares of common stock, at our option, an amount equal to the excess, if any, of $70,000 over the value of such shares as of December 12, 2015. The License Agreement recognizes that in order to protect our interests, we may have to spend monies dealing with creditors of and other claimants against Life Medical. Although we have no obligation to consummate arrangements with such creditors, we may reduce any amounts we pay to Life Medical’s creditors from future amounts payable to Life Medical. We are currently conducting due diligence for the product, the strength of underlying patents, the status of required regulatory approvals and how this product can most efficiently be manufactured.

 

In connection with the License Agreement with Life Medical, in October 2014 we borrowed CAD $79,106 (the “October Loan”) from an Ontario corporation owned in equal thirds by John Bentivoglio, Nicholas Bozza and Frank Sgro (the “Lender”), all of whom are affiliates of the Company. This loan bears interest at the rate of 12% per annum, compounded monthly and matures on December 1, 2015. Our obligations under this Loan are secured by a lien on all of our assets as well as pledge of the stock we own in our wholly owned subsidiary which entered into the License Agreement.

 

As of August 31, 2015, we owed related parties approximately $605,366.

 

We do not have substantial commitments for capital expenditures. However, we will require financing to complete the development of our cardiac monitor, to arrange for the development of manufacturing facilities or arrangements for both of our products and the working capital to support distribution efforts when our products are ready for sale. If we fail to arrange for such financing in the future, we will not be able to complete the development of our cardiac monitor or execute our business plan until we can obtain adequate financing, which we may not be successful in accomplishing. We may not be able to obtain financing in sufficient amounts or on acceptable terms when needed, which will adversely affect our prospects. We will need to raise the financing necessary to meet our anticipated cash requirements for the foreseeable future.

 

Off Balance Sheet Arrangements

 

We do not have any off-balance sheet arrangements, financings, or other relationships with consolidated entities or other persons, also known as “special purpose entities”.

 

Critical Accounting Policies

 

Our significant accounting policies are more fully described in Note 2 to the Financial Statements provided in Item 8 of this report. 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, liabilities, revenues and expenses, and the related disclosures of contingent assets and liabilities. Actual results could differ from those estimates under different assumptions or conditions.

 

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

 

We do not hold instruments that are sensitive to changes in interest rates, foreign currency exchange rates or commodity prices. Therefore, we believe that we are not materially exposed to market risks resulting from fluctuations from such rates or prices.

 

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

 

 The financial statements required by this item begin on page F-1 hereof. 

 

ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

 

a) On January 14, 2015 we dismissed M&K CPAS, PLLC (“M&K”) as our certified public accountants. The decision was approved by our Board of Directors.

 

The report of M&K on our financial statements for our fiscal years ended September 30, 2013 and 2014 indicated conditions which raised substantial doubt about our ability to continue as a going concern. Except as set forth in the preceding sentence, the report of M&K on our financial statements for its fiscal years ended September 30, 2013 and 2014 did not contain an adverse opinion or a disclaimer of opinion nor was it qualified or modified as to uncertainty, audit scope, or accounting principles. During our fiscal years ended September 30, 2013 and 2014, and the subsequent interim period through the dismissal date, there were no disagreements with M&K on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreement, if not resolved to the satisfaction of M&K would have caused M&K to make reference to the subject matter of the disagreements in connection with its report on the financial statements for such years or subsequent interim periods and there were no reportable events within the meaning set forth in Item 304(a)(1)(v) of Regulation S-K.

 

The Company requested that M&K furnish it with a letter addressed to the Securities and Exchange Commission (“SEC”) stating whether or not it agrees with the Company’s statements in this Item 4.01. A copy of the letter furnished by M&K in response to that request, dated January 14, 2015, was filed as Exhibit 16.1 to the Company’s Current Report on Form 8-K filed on January 14, 2015 and is incorporated by reference as an exhibit to this report.

 

(b) Effective January 14, 2015, we retained Paritz & Company, P.A. (“Paritz”), as our independent certified public accountants. Paritz previously served as the independent certified public accountants to our subsidiary, 2340960 Ontario Inc. (“ECG”), which we acquired on November 14, 2014 in exchange for 79,500,000 shares of our common stock (the “Share Exchange”). During the two most recent fiscal years and the interim periods preceding this engagement of Paritz, the Company has not consulted with Paritz regarding either: (i) the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on the Company’s financial statements; or (ii) any matter that was either the subject of a disagreement or event identified in paragraph (a)(1)(iv) of Item 304 of Regulation S-K.

 

ITEM 9A.   CONTROLS AND PROCEDURES

 

Evaluation of Disclosure Controls and Procedures

 

Our management has evaluated, under the supervision and with the participation of our chief executive officer and acting chief financial officer, the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report pursuant to Rule 13a-15(b) under the Securities Exchange Act of 1934, as amended (“the Exchange Act”).   Based on that evaluation, our chief executive officer and acting chief financial officer concluded that, as of the end of the period covered by this report, our disclosure controls and procedures are not effective in ensuring that information required to be disclosed in our Exchange Act reports filed under the Exchange Act,is (1) recorded, processed, and summarized and reported with the time periods specified in the Securities and Exchange Commission’s rules and forms and (2) accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding required disclosure.

 

Management’s Annual Report on Internal Control over Financial Reporting

 

Management is responsible for establishing and maintaining adequate internal control over financial reporting, as such terms are defined in Rules 13(a) – 15(f) promulgated under the Securities Exchange Act of 1934, as amended. The purpose of an internal control system is to provide reasonable assurance to the Company’s management and board of directors regarding the preparation and fair presentation of published financial statements.

 

An internal control material weakness is a significant deficiency, or aggregation of deficiencies, that does not reduce to a relatively low level the risk that material misstatements in financial statements will be prevented or detected on a timely basis by employees in the normal course of their work. An internal control significant deficiency, or aggregation of deficiencies, is one that could result in a misstatement of the financial statements that is more than consequential.

 

Management assessed the effectiveness of the Company’s internal control over financial reporting as of August 31, 2015 and this assessment identified the following material weaknesses in the company’s internal control over financial reporting:

 

-

A system of internal controls (including policies and procedures) has neither been designed nor implemented.

-

A formal, internal accounting system has not been implemented.

-

Segregation of duties in the handling of cash, cash receipts, and cash disbursements is not formalized.

         

It is Management’s opinion that the above weaknesses exist due to the small size of operating staff and the phase of operations as of August 31, 2015 (e.g., no current sales activity).

 

In making this assessment, Management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control – Integrated Framework.  Because of the material weaknesses described in the preceding paragraph, Management believes that, as of August 31, 2015 the Company’s internal control over financial reporting was not effective based on those criteria.

 

This annual report does not include an attestation report of the Company's registered public accounting firm regarding internal control over financial reporting. The rules of the Securities and Exchange Commission do not require an attestation of the Management’s report by our registered public accounting firm in this annual report.

 

Changes in Internal Control over Financial Reporting

 

There were no changes in the Company's internal control over financial reporting that occurred during the fiscal quarter ended August 31, 2015, that materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

 

Inherent Limitations of Internal Controls

 

A control system, no matter how well conceived and operated, can provide only reasonable, not absolute assurance that the objectives of the system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented if there exists in an individual a desire to do so. There can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

 

Furthermore, smaller reporting companies face additional limitations. Smaller reporting companies employ fewer individuals and find it difficult to properly segregate duties. Often, one or two individuals control every aspect of the Company's operation and are in a position to override any system of internal control. Additionally, smaller reporting companies tend to utilize general accounting software packages that lack a rigorous set of software controls.

 

ITEM 9B. OTHER INFORMATION

 

Not Applicable.

PART III

 

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE

  

The biography of our sole Director and sole Executive Officer as follows:

 

Name		Age				Positions and Offices
John Bentivoglio			54			Chief Executive Officer and Director

 

Mr. John Bentivoglio, has served as our sole director and sole executive officer since June 2014. For over 15 years, Mr. Bentivoglio has been a senior partner of Profit Consultants, Inc. an

international consulting firm with offices in Houston, Texas, Montreal, Canada and London, UK. Mr. Bentivoglio has experience in mergers and acquisitions of publicly traded companies, and has served in general management roles with global restaurant chains and has experience in financial restructuring. Mr. Bentivoglio has an education in Business Administration.

  

INFORMATION CONCERNING THE BOARD OF DIRECTORS, BOARD COMMITTEES AND CORPORATE GOVERNANCE

 

BOARD COMPOSITION

 

Our Board of Directors (the “Board”) consists of one (1) director. We are not a listed issuer whose securities are listed on a national securities exchange, or an inter-dealer quotation system which has requirements that a majority of the board of director be independent. Under NASDAQ Rule 5605(a)(2)(A), a director is not considered to be independent if he or she also is an executive officer or employee of the corporation. Under such definition, our director, John Bentivoglio would not be considered independent as he also serves as an executive officer of the Company. Our Board has no "independent directors" under the corporate governance rules and regulations of NASDAQ. Presently we are not required to comply with the director independence requirements of any national securities exchange.  Prior to having our securities listed on any national securities exchange, we would appoint directors that meet the independence requirements of the applicable exchange.

 

COMMITTEES OF THE BOARD

 

Since the Company's Common Stock is quoted on the OTCQB, the Board has no immediate plans or need to establish an audit committee with a financial expert or a compensation committee to determine guidelines for determining the compensation of its executive officers or directors. For similar reasons, the Company has not adopted a written policy for considering recommendations from stockholders for candidates to serve as directors or with respect to communications from stockholders.

 

BOARD MEETINGS AND STOCKHOLDER COMMUNICATIONS

 

The Board conducted all of its business and approved all corporate action during the fiscal year ended August31, 2015 by the unanimous written consent of its members, in the absence of formal board meetings.  We have not yet established a policy with respect to Board members’ attendance at the annual meetings.  A stockholder who wishes to communicate with our board of directors may do so by directing a written request addressed to our Chief Executive Officer at the address appearing on the first page of this report.

 

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

 

Section 16(a) of the Securities Exchange Act of 1934, as amended, requires the Company’s directors and executive officers, and persons who beneficially own more than 10 percent of a registered class of the Company’s equity securities, to file report of beneficial ownership and changes in beneficial ownership of the Company’s securities with the SEC on Forms 3 (initial Statement of Beneficial Ownership), 4 (Statement of Changes of Beneficial Ownership of Securities) and 5 (Annual Statement of Beneficial Ownership Securities).  Directors, executive officers and beneficial owners of more than 10 percent of the Company’s Common Stock are required by SEC regulations to provide the Company with copies of all Section 16(a) forms that they file.  Based solely on review of the copies of such forms furnished to the Company, or written representations that no reports were required, the Company believes that each current officer, director and beneficial owner of 10 percent or more of the Company’s securities filed a Form 3 with the SEC after the closing of the Share Exchange but failed to do after the closing of the Transaction.

 

CODE OF ETHICS

 

The Company has not adopted a written code of ethics that applies to the Company's principal executive officer, principal financial officer, principal accounting officer and any persons performing similar functions. The Company expects to adopt a code of ethics in the future.

 

ITEM 11. COMPENSATION OF EXECUTIVE OFFICERS

 

The following table shows the compensation awarded or paid to, or earned by, John Bentivoglio, our Chief Executive Officer (the "Named Executive Officer”) for fiscal years ended September 30, 2015 and August 31, 2014, respectively. We did not have any other executive officers during the year ended August 31, 2015 and no other individual employed by the Company earned more than $100,000 in salary and bonus for the year ended August 31, 2015. 

 

SUMMARY COMPENSATION TABLE

 

NAME AND PRINCIPAL POSITION		FISCAL YEAR				SALARY ($)				BONUS ($)				STOCK AWARDS ($)				ALL OTHER COMPENSATION ($)				TOTAL ($)
John Bentivoglio			2015				0				0				0				125,0000	(2)			125,000
President; Chief Executive Officer; and Director (1)			2014				0				0				0				0				0

  

(1)

John Bentivoglio became our sole executive officer and sole director on June 9, 2014.

(2)

Amount accrued for services pursuant to employment agreement.

 

EQUITY INCENTIVE PLANS

 

On January 25, 2015, our Board of Directors adopted the Event Cardio Group Inc. 2015 Equity Incentive Plan ("equity incentive plan") which allows for the granting of incentive stock options to employees of the Company, a parent or a subsidiary and the granting of awards other than incentive stock options to employees, directors and consultants. The maximum number of shares of common stock which may be issued pursuant to the equity incentive plan is 10,000,000 shares.

   

OPTION GRANTS IN LAST FISCAL YEAR

 

We did not grant to the Named Executive Officer options to purchase shares in fiscal 2015 or 2014.

 

AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES

 

None of our officers held options to purchase shares of our common stock during fiscal 2015 or 2014.

 

EMPLOYMENT AGREEMENTS

 

John Bentivoglio is employed as our CEO and President pursuant to an Employment Agreement dated August 27, 2015 for an initial term of three years (with successive automatic annual one renewal terms, unless the Company or Mr. Bentivoglio gives written notice to the other to terminate the agreement within 120 days before the expiration of the initial term or any renewal term) at a base salary of $225,000 per annum. He also is entitled to receive $125,000 for past services. Payment of the base salary for the initial term and the amount payable for past services is subject to the Company having sufficient cash to make such payment as determined by the Board of Directors in its sole discretion. To date, Mr. Bentivoglio has not received the amount due for past services or any salary due pursuant to his Employment Agreement.

 

Mr. Bentivoglio is subject to certain restrictive covenants which prohibit him during the term of his employment and for a period of 12 months following the termination of his employment from:

 

(i)

directly or indirectly, owning any interest in, participating or engaging in, assisting, rendering any services (including advisory services) to, becoming associated with, working for, serving (in any capacity whatsoever, including, without limitation, as an employee, consultant, advisor, agent, independent contractor, officer or director) or otherwise becoming in any way or manner connected with the ownership, management, operation, or control of, any business, firm, corporation, partnership or other entity (collectively referred to herein as a “Person”) that engages in, or assists others in engaging in or conducting a medical diagnostic business that provides products and/or services which are competitive with those provided by the Company; provided, however, the foregoing restriction shall not prohibit Mr. Bentivoglio from owning or acquiring securities issued by any corporation which neither directly nor indirectly competes with the Company and whose securities are listed with a national securities exchange or are traded in the over-the-counter market, provided that he at no time owns, directly or indirectly, beneficially or otherwise, five (5%) percent or more of any class of any such corporation ‘s outstanding capital stock.

(ii)

knowingly providing or soliciting to provide to any Person or individual medical diagnostic products/ and or services that are competitive with those provided by the Company, or (ii) any medical diagnostic products/ and or services to any customer of the Company.

(iii)

soliciting, hiring or seeking to solicit or hire any of the Company’s personnel in any capacity whatsoever or inducing or attempting to induce any of the Company’s personnel to leave the employ of the Company to work for Mr. Bentivoglio or anyone else.

 

In addition, Mr. Bentivoglio is subject to a non-disclosure covenants which prohibits him during the term of his employment and thereafter from divulging to others, or using to the detriment of the Company or in any business competitive with any business engaged in by the Company or any of its subsidiary or affiliated companies, any confidential or trade secret information obtained by him during the course of his employment with the Company relating to sales, salesmen, sales volume or strategy, customers, formulas, processes, methods, compositions, ideas, improvements or inventions belonging to or relating to the business of the Company, or its subsidiary or affiliated companies.

 

DIRECTOR COMPENSATION

 

Our sole director is John Bentivoglio, our CEO and President. We have not compensated Mr. Bentivoglio for his service on the Board apart from amounts due pursuant to his Employment Agreement.   We may issue shares of our common stock or options to acquire shares of our common stock to members of our Board in consideration for their services as members of our Board.  We do expect to reimburse Directors for expenses incurred in connection with their attendance at meetings of the Board.

 

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS, AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

 

The following table presents information regarding the beneficial ownership of the Company’s common stock and preferred stock by the following persons as of December 1, 2015:

 

•

each of the Company’s executive officers;

•

each of the Company’s directors;

•

all of the Company’s directors and executive officers as a group; and

•

each beneficial owner of more than 5 percent of any class of our voting securities.

  

Beneficial ownership is determined in accordance with the rules of the SEC and generally includes voting or investment power with respect to securities. Unless otherwise indicated below, to our knowledge, the persons and entities named in the table have sole voting and sole investment power with respect to all shares beneficially owned, subject to community property laws where applicable. Shares of the Company’s common stock subject to options or warrants that are currently exercisable or exercisable within 60 days of December 1, 2015 are deemed to be outstanding and to be beneficially owned by the person holding the options or warrants for the purpose of computing the percentage ownership of that person, but are not treated as outstanding for the purpose of computing the percentage ownership of any other person.

 

Applicable percentage voting power is based on 115,330,321 shares of common stock outstanding.

 

Shares Beneficially Owned 

 

		Common Stock
Name of Beneficial Owner		Shares				%
Officers and Directors
John Bentivoglio (1)(3)			29,812,500				25.85	%
All directors and Executive Officers as a group			29,812,500				25.85	%
The Nick Bozza Family Trust (2)			29,812,500				25.85	%
Nick Bozza, Trustee (1)(3)			29,812,500				25.85	%
Louise Bozza, Trustee (1)(3)			29,812,500				25.85	%
Lily Gascoigne, Trustee (1)(3)			29,812,500				25.85	%
The John Bentivoglio Family Trust (2)			29,812,500				25.85	%
John Bentivoglio, Trustee (1)(3)			29,812,500				25.85	%
Michael Bentivoglio, Trustee (1)(3)			29,812,500				25.85	%
Christina Cecchini, Trustee (1)(3)			29,812,500				25.85	%
The Sgro (2010) Family Trust (2)			19,875,000				17.23	%
Frank Sgro, Trustee (1)(3)(4)			19,875,000				17.23	%
Diane Sgro, Trustee (1)(3)			19,875,000				17.23	%
Gino Alberelli, Trustee (1)(3)			19,875,000				17.23	%

 

(1)

Represents shares beneficially owned by a family trust of which the listed beneficial owner is a co-trustee and as a result could be deemed to have shared voting and dispositive power and be the beneficial owner of the shares owned by the family trust.

(2)

Represents shares beneficially owned by the listed beneficial owner.  The shares owned by the listed trust is held of record by John Bentivoglio, Nick Bozza or Frank Sgro, as a nominee for the trust of which he is a trustee.

(3)

Each individual included in the table disclaims beneficial ownership of shares beneficially owned by the family trust of which he/she is a co-trustee.

(4)

Does not include 59,625,500 shares pledged to an entity controlled by Mr. Sgro as security for guarantees by the pledgees of loans made by such entity to the Company. The loan is not in default and lender does not currently have voting, dividend or any similar rights with respect to the shares subject to the pledge.

 

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

 

On June 5, 2014, Nick Bozza and John Bentivoglio assigned any and all rights they might have had in the design of our cardiac monitor to us and we granted an exclusive license to promote, advertise, manufacture, distribute and sell our cardiac monitoring device in Canada, excluding the Province of Ontario, to a company beneficially owned by The John Bentivoglio Family Trust and the Nick Bozza Family Trust which collectively own approximately 51.70% of our common stock. Such rights with respect to Ontario were licensed to The Nick Bozza Family Trust. For additional information with respect to this license agreement, See the discussion under the caption “Licenses to Affiliates” in Item 1. “Business” of this report.

 

ECG has purchased in the past, and will continue to purchase in the future, services with respect to the development of its cardiac monitors from Contex, a corporation partially owned (40% of the voting stock and 34% of all capital stock) by an entity owned by The Nick Bozza Family Trust, The John Bentivoglio Family Trust and The Sgro (2010) Family Trust which collectively own approximately 70% of our common stock (our “Controlling Stockholders”). In addition, our sole director and sole executive officer, Mr. John Bentivoglio, is a trustee of The John Bentivoglio Family Trust, the beneficiaries of which are members of his family. In this connection ECG paid Contex $41,756 during the 12-month period ended August 31, 2014. While the Company believes that it is currently purchasing services from Contex on comparable or better terms than those available from other sources for the same or equivalent services, there can be no assurance that the Company will, in the future, be able to do so. The existence of this relationship can create conflicts of interests between the significant stockholders of the Company and the Company and between our executive officer and the Company, given that our executive officer will be negotiating contracts and overseeing the delivery of services by Contex, an entity in which his affiliate has an interest.

 

In connection with the entry into the License Agreement, the Company borrowed CAD $79,106 (the “Loan”) from an Ontario corporation owned in equal thirds by John Bentivoglio, Nicholas Bozza and Frank Sgro, who are trustees of The John Bentivoglio Family Trust, The Nick Bozza Family Trust and The Sgro (2010) Family Trust, respectively (the “Lender”). The Loan is to be repaid on December 1, 2015, together with interest at the rate of 12 % per annum, compounded monthly. Our obligations under this Loan are secured by a lien on all of our assets as well as pledge of the stock we own in our wholly owned subsidiary which entered into the License Agreement. As additional consideration for the making of the Loan, the Company agreed, through its subsidiary, to enter into a sublicense agreement with the Lender whereby the Lender will be granted the exclusive rights to distribute the BreastCare DTS ™ product in Canada with royalty’s payable at the rate of 5.5% of net sales, as to be defined in the sublicense agreement.

 

During the fiscal year ended August 31, 2014, the Company borrowed $418,000 Canadian ($384,978 USD) from a company owned by Frank Sgro, a trustee of The Sgro (2010) Family Trust, which loan is payable on June 1, 2016, together with interest at a rate of 12% per annum, compounded monthly. ECG’s shareholders (who are now our Controlling Stockholders) guaranteed ECG’s obligations under the May Loan Agreement with recourse exclusively to the shares they owned of ECG. As a result of the Share Exchange, we have agreed to guaranty ECG’s obligations under the May Loan Agreement and pledge the shares of ECG that we acquired in the Shares Exchange to the lender as security for our guaranty. Our guaranty is secured by a lien on all of our assets. In addition, our Controlling Stockholders guaranteed ECG’s obligations under the May Loan Agreement with recourse exclusively to the shares of our common stock that they acquired in the Share Exchange.

 

On August 19, 2015, the Company and the party which loaned it the CAD $583,000 referred to above, confirmed their agreement to extend the maturity date of the CAD $583,000 Note to June

1, 2016 and the Company borrowed from the lender an additional CAD $63,855. Interest on the promissory note of the Company in the principal amount of CAD $63,855 evidencing its obligation to repay the additional loan accrues at the rate of 12% per annum compounded monthly until paid in full. The maturity date of the new loan is also June 1, 2016.

 

Except as otherwise indicated herein, there have been no related party transactions, or any other transactions or relationships required to be disclosed pursuant to Item 404 of Regulation S-K.

 

ITEM 14.  PRINCIPAL ACCOUNTANT FEES AND SERVICES

 

The following is a summary of the fees billed to Event Cardio Group, Inc. and its predecessor, 2340960 Ontario Inc., by Paritz & Co., P.A for professional services rendered for the fiscal years ended August 31, 2015 and 2014, and fees billed to the registrant, as a shell company for the fiscal year September 30, 2014 (prior to the reverse acquisition) by M&K CPAS, PLLC, respectively:

 

		Fiscal year ended
			August 31,							September 30,
			2015				2014			2014
Audit Fees		$	12,000			$	6,000		$	11,500
Audit Related Fees			—				—			6,060
Tax Fees			—				—			—
All Other Fees			—				—			—

 

Audit Fees. Consists of fees billed for professional services rendered for the audit of the Company’s consolidated financial statements and review of interim consolidated financial statements included in quarterly reports and services that are normally provided in connection with statutory and regulatory filings or engagements.

 

Audit Related Fees. Consists of fees billed for assurance and related services that are reasonably related to the performance of the audit or review of the Company’s consolidated financial statements and are not reported under "Audit Fees".  

 

Tax Fees. Consists of fees billed for professional services for tax compliance, tax advice and tax planning. These services include preparation of federal and state income tax returns.

 

All Other Fees. Consists of fees for product and services other than the services reported above.

 

Approval of Services

 

The Company does not have an audit committee. As a result, our board of directors performs the duties and functions of an audit committee. The Company's Board of Directors will evaluate and approve in advance, the scope and cost of the engagement of an auditor before the auditor renders audit and non-audit services. We do not rely on pre-approval policies and procedures.

 

PART IV

 

ITEM 15   EXHIBITS, FINANCIAL STATEMENT SCHEDULES

 

(a)

Financial Statements

 

Financial statements for our company are listed in the index under Item 8 of this report.

 

(b) Exhibits

Description

2.1

Form of Share Exchange Agreement made and entered into as of the 8th day of September, 2014 by and between (i) Sunrise Holdings Limited, a Nevada corporation and (ii) Nick Bozza, as nominee for Nick Bozza, Louise Bozza and Lilly Gascoigne as Trustees for the Nick Bozza Family Trust, (iii) John Bentivoglio, as nominee for Gianfranco Bentivoglio, Michael Bentivoglio and Christina Cecchini as Trustees for the John Bentivoglio Family Trust, (iv) Taunton Ravenscroft Inc. as nominee for Frank Sgro, Diane Sgro and Gino Alberelli as Trustees for the Sgro (2010) Family Trust, (v)The Nick Bozza Family Trust, (vi) The John Bentivoglio Family Trust and (vii) The Sgro (2010) Family Trust. Filed as an exhibit to the Company’s Current Report on Form 8-K, as filed with the SEC on September 9, 2014 and incorporated herein by this reference.

3.1

Articles of Incorporation filed on October 25, 2005 in the State of Nevada. Filed as an exhibit to the Company's Registration Statement on Form 10-SB filed with the SEC on March 22, 2007 and incorporated herein by this reference.

3.2

Certificate of Amendment to Articles of Incorporation filed on October 4, 2006. Filed as an exhibit to the Company's Registration Statement on Form 10-SB filed with the SEC on March 22, 2007 and incorporated herein by this reference.

3.3

Certificate of Amendment to the Company’s Articles of Incorporation filed on November 6, 2014 and effective on November 7, 2014. Filed as an exhibit to the Company’s Current Report on Form 8-K, as filed with the Securities and Exchange Commission on November 10, 2014 and incorporated herein by this reference.

3.4

Bylaws filed on Form 10-SB filed with the Securities and Exchange Commission on March 22, 2007. Filed as an exhibit to the Company's Registration Statement on Form 10-SB filed with the SEC on March 22, 2007 and incorporated herein by this reference.

10.1

Securities Purchase Agreement, dated as of May 14, 2014, by and among John Bentivoglio and each of Sunrise Lighting Holdings Limited, Shaojun Sun and Xuguang Sun. Filed as an exhibit to the Company’s Current Report on Form 8-K, as filed with the SEC on June 16, 2014 and incorporated herein by this reference.

10.2

Event Cardo Group Inc. 2015 Equity Incentive Plan. Filed as an exhibit to the Company’s Registration Statement on Form S-8 (File No. 333- 205794) filed with the SEC on January 30, 2015 and incorporated by reference herein.

10.3

Agreement dated as of May 22, 2014 between Contex International Technologies (Canada) Inc., 2340960 Ontario Inc., Richard Smith, Ricardo Alberto and Rodriguez Cornejo. Filed as an exhibit to the Company’s Current Report on Form 8-K/A, as filed with the SEC on November 26, 2014 and incorporated herein by this reference.

10.4

Assignment Agreement dated as of June 5, 2014 between 2340960 Ontario Inc., Event Cardio Group Inc., Nicholas D. Bozza and John Bentivoglio. Filed as an exhibit to the Company’s Current Report on Form 8-K/A, as filed with the SEC on November 26, 2014 and incorporated herein by this reference.

10.5

Loan Agreement dated as of May 20, 2014, by and between among, 2399371 Ontario Inc. , and Event Cardio Group, Inc., 2340960 Ontario Inc., Taunton Ravenscroft Inc., Gianfranco Bentivoglio and Nicholas Bozza. Filed as an exhibit to the Company’s Current Report on Form 8-K/A, as filed with the SEC on November 26, 2014 and incorporated herein by this reference.

10.6

Promissory Note dated as of the 20th day of May, 2014 issued by 2340960 Ontario Inc., and related guaranties of Taunton Ravenscroft Inc., John Bentivoglio and Nicholas Bozza and 2399371 Ontario Inc. Filed as an exhibit to the Company’s Current Report on Form 8-K/A, as filed with the SEC on November 26, 2014 and incorporated herein by this reference.

10.7

Share Pledge Agreement dated May 28, 2014 between Nicholas D. Bozza and Gianfranco Bentivoglio and Taunton Ravenscroft Inc. and 2399371 Ontario Inc. Filed as an exhibit to the Company’s Current Report on Form 8-K/A, as filed with the SEC on November 26, 2014 and incorporated herein by this reference.

10.8

Employment Agreement dated as of August 27, 2015 with John Bentivoglio.

10.9

8% Convertible Note due January 31, 2018 issued to Medpac.

16.1

Letter from Accountants. Filed as an exhibit to the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2014, as filed with the SEC on January14, 2015 and incorporated herein by this reference.

21

List of subsidiaries. Filed as an exhibit to the Company’s Current Report on Form 10-Q for the quarter ended November 30, 2014, as filed with the SEC on January 20, 2015 and incorporated herein by this reference.

31

Sec. 302 Certification of CEO/CFO

32

Sec. 906 Certification of CEO/CFO

 

 SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

	Event Cardio Group Inc.
Dated: December 14, 2015	By:	/s/ John Bentivoglio
	Name: Title:	John Bentivoglio Chief Executive Officer acting Chief Financial Officer (Principal Executive Officer and Principal Accounting Officer)

 

In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated on December 14, 2015.

 

Signature		Title
/s/ John Bentivoglio		Chief Executive Officer , Chief Financial Officer and a Director
John Bentivoglio		(Principal Executive Officer and Principal Accounting Officer)

 

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

To the Board of Directors and Stockholders of

Event Cardio Group, Inc.

 

We have audited the accompanying consolidated balance sheets of Event Cardio Group, Inc. (the “Company”), as of August 31, 2015 and 2014 and the related consolidated statements of comprehensive loss, changes in stockholders’ deficit and cash flows for the years ended August 31, 2015 and 2014. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit.

 

We have conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States of America). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.  Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

 

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Event Cardio Group, Inc. as of August 31, 2015 and 2014, and the results of their operations and their cash flows for the years ended August 31, 2015 and 2014, in conformity with accounting principles generally accepted in the United States of America.

 

The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note 1 to the accompanying financial statements, the Company has not generated any revenue since inception, has incurred losses, and has an accumulated deicit of $2,980,587 as of August 31, 2015. These factors, among others, raise substantial doubt about its ability to continue as a going concern. Management's plans in regard to this matter are described in Note 1. The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

 

/s/ Paritz & Company, P.A.

 

Hackensack, New Jersey

December 11, 2015

 

 EVENT CARDIO GROUP, INC.

 

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

 

 EVENT CARDIO GROUP INC.

CONSOLIDATED BALANCE SHEETS

 

		August 31, 2015				August 31, 2014
ASSETS:
Current Assets
Cash		$	32,427			$	86,617
Prepaid expenses			568,537				—
Financing costs, net			105,999				—
Total Current Assets			706,963				86,617
Prepaid expenses - non-current portion			392,516				—
Property and Equipment, net			1,214				2,960
Deposit on equipment purchase			150,000				—
Financing costs, net			—				40,097
TOTAL ASSETS		$	1,250,693			$	129,674
LIABILITIES AND STOCKHOLDERS' DEFICIT:
Current Liabilities
Accounts payable		$	598,835			$	56,197
Due to related parties			55,864				74,423
Notes payable - related parties			549,502				—
Total Current Liabilities			1,204,201				130,620
Convertible Notes Payable			525,000				—
Notes Payable - Related Parties			—				384,978
TOTAL LIABILITIES			1,729,201				515,598
Stockholders' Deficit
Preferred stock, $0.001 par value; 10,000,000 shares authorized, 10,000,000 shares issued and outstanding			10,000				10,000
Common stock,190,000,000 shares authorized at $0.001 par value, 79,500,000 shares issued and outstanding at August 31, 2014  and 109,460,321 at August 31, 2015			109,460				79,500
Additional paid in capital			2,110,237				—
Equity instruments to be issued			168,950				—
Accumulated other comprehensive income			103,432				4,999
Accumulated deficit			(2,980,587	)			(467,483	)
Total Event Cardio Group Inc. stockholders' equity (deficiency)			(478,508	)			(372,984	)
Non-controlling interest			—				(12,940	)
TOTAL STOCKHOLDERS' DEFICIT			(478,508	)			(385,924	)
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT		$	1,250,693			$	129,674

 

EVENT CARDIO GROUP INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

 

		Year ended August 31, 2015				Year ended August 31, 2014
Revenue		$	—			$	—
Operating Expenses
General and administrative			1,185,356				122,421
Research and development - related party			952,188				41,756
Research and development - other			270,633				—
Total Operating Expenses			2,408,177				164,177
Loss from Operations			(2,408,177	)			(164,177	)
Other Expenses
Interest expense - related parties			71,104				—
Interest expense - other			14,000				—
Impairment of goodwill			—				181,297
Loss before Income Taxes			(2,493,281	)			(345,474	)
Provision for Income Taxes			—				—
Net Loss			(2,493,281	)			(345,474	)
Net loss attributable to non-controlling interests			—				12,940
Net loss attributable to Event Cardio Group Inc. stockholders		$	(2,493,281	)		$	(332,534	)
Other Comprehensive Income
Foreign currency translation adjustment			98,433				3,102
Comprehensive Loss		$	(2,394,848	)		$	(342,372	)
Comprehensive loss attributable to non-controlling interests			—				—
Comprehensive loss attributable to  Event Cardio Group Inc. stockholders		$	(2,394,848	)		$	(342,372	)
Loss per Share:
Basic and Diluted loss per share		$	(0.03	)		$	(0.00	)
Weighted Average Number of Shares Outstanding Basic and Diluted			95,254,771				79,500,000

 

EVENT CARDIO GROUP INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT

FOR THE YEARS ENDED AUGUST 31, 2015 and 2014

 

		Common Stock								Preferred Stock
		Shares				Amount				Shares				Amount				Additional Paid in Capital				Equity Instruments to be issued				Accumulated Other Comprehensive Income				Accumulated Deficit				Non- Controlling Interest				Total Stockholders’ Equity
Balance August 31, 2013			2,680			$	263				—			$	—			$	—			$	—			$	1,897			$	(45,712	)		$	—			$	(43,552	)
Net comprehensive income (loss)			—				—				—				—				—				—				3,102				(345,474	)			—				(342,372	)
Effect of reverse merger			79,497,320				79,237				10,000,000				10,000				—				—				—				(89,237	)			—				—
Balance, August 31, 2014			79,500,000			$	79,500				10,000,000			$	10,000			$	—			$	—			$	4,999			$	(467,483	)		$	(12,940	)		$	(385,924	)
Effect of reverse merger			6,882,773				6,883				—				—				—				—				—				(19,823	)			12,940				—
Issued for cash			3,950,000				3,950				—				—				303,050				65,000				—				—				—				372,000
Issued as settlement of payable pursuant to license agreement			2,827,548				2,827				—				—				373,237				—				—				—				—				376,064
Issued for services			16,300,000				16,300				—				—				1,433,950				103,950				—				—				—				1,554,200
Net comprehensive			—				—				—				—				—				—				98,433				(2,493,281	)			—				(2,394,848	)
Balance, August 31, 2015			109,460,321				109,460				10,000,000			$	10,000			$	2,110,237			$	168,950			$	103,432				(2,980,587	)		$	—			$	(478,508	)

 

 EVENT CARDIO GROUP INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED AUGUST 31, 2015 and 2014

 

For the years ended August 31		2015				2014
Cash Flows from Operating Activities
Net loss		$	(2,493,281	)		$	(345,474	)
Adjustments to reconcile net loss to net cash used in operating activities:
Amortization of prepaid expenses			500,686				—
Depreciation of property and equipment			1,328				1,490
Amortization of financing costs			31,712				7,087
Stock based compensation			518,125				—
Impairment of goodwill			—				181,297
Changes in assets and liabilities:
Prepaid expenses			(135,550	)			23,994
Accounts payable			542,638				48,035
Net cash used in operating activities			(1,034,342	)			(83,571	)
Cash Flows from Investing Activities
Deposit on equipment purchase			(150,000	)			—
Acquisition of subsidiary			—				(181,297	)
Net cash used in investing activities			(150,000	)			(181,297	)
Cash Flows from Financing Activities
Repayments of due to related parties			(9,898	)			(13,744	)
Advances to related parties			—				12,736
Proceeds from notes payable - related parties			268,389				384,978
Proceeds from convertible notes payable			500,000				—
Proceeds from issuance of common shares			307,000				—
Proceeds received on equity instruments to be issued			65,000				—
Payment of financing costs			—				(47,184	)
Net cash provided by financing activities			1,130,491				336,786
Effect of exchange rate on cash			(339	)			3,218
Increase (Decrease) in Cash			(54,190	)			75,136
Cash, beginning of year			86,617				11,481
Cash, end of year		$	32,427			$	86,617
Supplemental Cash Flow Information:
Cash paid during the year for:
Interest		$	—			$	—
Taxes			—				—
Non-Cash Supplemental Cash Flow Information:
Issuance of common stock for services recorded as prepaid expense		$	955,125			$	—

 

EVENT CARDIO GROUP INC.

NOTES TO FINANCIAL STATEMENTS

August 31, 2015 and August 31, 2014

 

1. OVERVIEW

 

Description of Business

 

Event Cardio Group Inc. ("the Company") was incorporated under the name Sunrise Holdings Limited on October 26, 2005 under the laws of Nevada and changed its name to Event Cardio Group Inc. on November 7, 2014. The Company is developing a cardiac monitoring device based on a wireless and leadless advance cardiac monitor. Upon completion of the development the device will collect medical data and transmit it to physicians for diagnostic evaluation. The Company also has a license agreement to distribute a patented product in the use of breast disease detection.

 

On September 8, 2014, the Company entered into a share exchange agreement with 2340960 Ontario Inc.'s shareholders whereby the Company acquired all of the issued and outstanding common shares of 2340960 Ontario Inc. in exchange for 79,500,000 common shares of the Company. Upon completion of this transaction, the shareholders of 2340960 Ontario Inc. held approximately 93.6% of voting control of the Company. This transaction, has been accounted for as a reverse merger with 2340960 Ontario Inc. being the accounting acquirer and the Company being the acquiree. In connection with this transaction, the Company changed its fiscal year end from September 30th to August 31st.

  

Going Concern

 

The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The Company has not generated any revenue since inception, has incurred losses, and has an accumulated deficit of $2,980,587 as of August 31, 2015. These factors among others raise substantial doubt about the ability of the Company to continue as a going concern.

 

The continuation of the Company as a going concern is dependent upon financial support from its stockholders, the ability of the Company to obtain necessary equity financing to continue operations, successfully locating and negotiating with other business entities for potential acquisitions and/or acquiring new clients to generate revenues. There is no assurance that the Company will ever be profitable. These financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result should the Company be unable to continue as a going concern.

 

Basis of Presentation

 

These financial statements include the accounts of the Company and its wholly owned subsidiaries 2340960 Ontario Inc. and EFIL Sub of ECG Inc. All inter-company accounts and transactions have been eliminated.

 

The financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America ("GAAP") and are presented in United States Dollars.

 

The Company has elected to adopt early application of Accounting Standards Update No. 2014-10, Development Stage Entities (Topic 915): Elimination of Certain Financial Reporting Requirements and does not present or disclose inception-to-date information and other remaining disclosure requirements of Topic 915.

 

EVENT CARDIO GROUP INC.

NOTES TO FINANCIAL STATEMENTS

August 31, 2015 and August 31, 2014

 

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Use of Estimates

 

In preparing these financial statements in conformity with GAAP, management is required to make estimates and assumptions that may affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amount of revenues and expenses during the reporting years. Actual results could differ from those estimates.

 

Fair Value Measurements

 

ASC 820, “Fair Value Measurements”, requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. ASC 820 prioritizes the inputs into three levels that may be used to measure fair value: Level 1, defined as observable inputs such as quoted prices in active markets for identical assets or liabilities; Level 2, inputs other than level one that are either directly or indirectly observable such as quoted prices for identical or similar assets or liabilities on markets that are not active; and Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions. The Company had no assets or liabilities required to be recorded at fair value on a recurring basis as of August 31, 2015 or August 31, 2014.

 

The estimated fair value of certain financial instruments, including cash and cash equivalents, and accounts payable are carried at historical cost basis, which approximates their fair values because of the short-term nature of these instruments. The carrying amounts of our short and long term credit obligations approximate fair value because the effective yields on these obligations, which include contractual interest rates taken together with other features  are comparable to rates of returns for instruments of similar credit risk.

 

Share Based Compensation

 

The Company applies ASC 718 Share-Based Compensation and ASC 505 Equity to account for service provider share-based payments. In accordance with ASC 718 and ASC 505, the Company determines whether a share based payment should be classified and accounted for as a liability award or equity award.

 

All grants of share-based payments to service providers are classified as equity awards and are recognized in the financial statements over the period in which the services are received based on the fair value determined as of the measurement date.

 

Included in prepaid expenses on the accompanying balance sheet at August 31, 2015 is $521,105 of the unamortized portion of share based payments for services to be rendered.

 

Cash and Cash Equivalents

 

The Company considers all highly-liquid investments with maturities of three months or less when purchased to be cash equivalents. The Company had no cash equivalents as of August 31, 2015 or August 31, 2014.

 

Concentration of Credit Risk

 

Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and cash equivalents. The Company places its cash with high quality banking institutions.

 

EVENT CARDIO GROUP INC.

NOTES TO FINANCIAL STATEMENTS

August 31, 2015 and August 31, 2014

 

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

 

Income Taxes

 

Under ASC 740, "Income Taxes", deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Valuation allowances are established when it is more likely than not that some or all of the deferred tax assets will not be realized.

 

In assessing the realization of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. Based on the assessment, the Company has established a full valuation allowance against all of the deferred tax assets for every period because it is more likely than not that all of the deferred tax assets will not be realized.

 

The Company files income tax returns in Canada and the United States with varying statutes of limitations. The Company's policy is to recognize interest expense and penalties related to income tax matters as a component of our provision for income taxes.

 

Foreign Currency Translation

 

The Company's reporting and functional currency is the U.S. dollar. The Company's Canadian operation's functional currency is the Canadian dollar. The Company's U.S. subsidiary's functional currency is the U.S. dollar.

 

Transactions originating in Canadian dollars are translated to the functional currency of the US dollar as follows: using year end rates of exchange for assets and liabilities, average rates of exchange for the period of transactions for revenues and expenses and historical rates for equity.

 

The financial statements of the Company's Canadian operations are translated from the functional currency of the Canadian dollar into the reporting currency of the United States dollar in accordance with ASC 830, Foreign Currency Matters, using year end rates of exchange for assets and liabilities, average rates of exchange for the period for revenues and expenses and historical rates for equity.

 

Translation adjustments resulting from the process of translating the functional currency of Canadian dollar Canadian operation's financial statements into the reporting currency of U.S. dollar financial statements are included in determining comprehensive income. As of August 31, 2015 and August 31, 2014, the cumulative translation adjustment of $103,432 and $4,999 respectively was classified as accumulated other comprehensive income in the stockholders' equity section of the balance sheet. For the years ended August 31, 2015 and August 31, 2014, the foreign currency translation adjustment to accumulated other comprehensive income was $98,433 and $3,102 respectively.

 

EVENT CARDIO GROUP INC.

NOTES TO FINANCIAL STATEMENTS

August 31, 2015 and August 31, 2014

 

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

 

Net Income (Loss) per Common Share

 

The Company computes net income (loss) per share in accordance with ASC 260, "Earnings per Share". ASC 260 requires presentation of both basic and diluted earnings (loss) per share on the face of the income statement. Basic EPS is computed by dividing net income (loss) available to common shareholders by the weighted average number of common shares outstanding during the year. Diluted EPS gives effect to all dilutive potential common shares outstanding during the year including stock options, using the treasury stock method. In computing diluted EPS, the average stock price for the year is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential common shares if their effect is antidilutive.

 

Comprehensive Loss

 

Comprehensive loss is defined to include all changes in equity except those resulting from investments by owners and distributions to owners. Among other disclosures, Accounting Standards Codification (ASC) 200, Comprehensive Income, requires that all items that are required to be recognized under current accounting standards as components of comprehensive income be reported in a financial statement that is displayed with the same prominence as other financial statements. For the year presented, the Company's comprehensive loss includes net loss and foreign currency translation adjustments and is presented in the statement of comprehensive loss.

  

Property and Equipment

 

Property and equipment consists of computer equipment and is stated at cost. Computer equipment is depreciated using the straight-line method over the estimated service life of three years. Maintenance and repairs are expensed as incurred and improvements are capitalized. Gains or losses on the disposition of property and equipment are recorded upon disposal.

 

Research and Development Expenses

 

All research and development costs are expensed as incurred.

 

Impairment of Long-Lived Assets

 

Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset.

 

If the carrying amount of an asset exceeds its undiscounted estimated future cash flows, an impairment review is performed. An impairment charge is recognized in the amount by which the carrying amount of the asset exceeds the fair value of the asset. Assets to be disposed of would be separately presented in the balance sheet and reported at the lower of the carrying amount or fair value less costs to sell, and are no longer depreciated. The assets and liabilities of a disposed group classified as held for sale would be presented separately in the appropriate asset and liability sections of the balance sheet. For the years ended August 31, 2015 and August 31, 2014 there was an impairment charge of $nil and $nil, respectively with respect to license agreement and an impairment charge of $nil and $181,297, respectively with respect to goodwill.

 

EVENT CARDIO GROUP INC.

NOTES TO FINANCIAL STATEMENTS

August 31, 2015 and August 31, 2014

 

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

 

Convertible Instruments

 

The Company evaluates and accounts for conversion options embedded in convertible instruments in accordance with ASC 815 “Derivatives and Hedging Activities”. Applicable GAAP requires companies to bifurcate conversion options from their host instruments and account for them as free standing derivative financial instruments according to certain criteria. The criteria include circumstances in which (a) the economic characteristics and risks of the embedded derivative instrument are not clearly and closely related to the economic characteristics and risks of the host contract, (b) the hybrid instrument that embodies both the embedded derivative instrument and the host contract is not re-measured at fair value under other GAAP with changes in fair value reported in earnings as they occur and (c) a separate instrument with the same terms as the embedded derivative instrument would be considered a derivative instrument.

 

The Company accounts for convertible instruments (when we have determined that the embedded conversion options should not be bifurcated from their host instruments) as follows: To record when necessary, discounts to convertible notes for the intrinsic value of conversion options embedded in debt instruments based upon the differences between the fair value of the underlying common stock at the commitment date of the note transaction and the effective conversion price embedded in the note. Debt discounts under these arrangements are amortized over the term of the related debt to their stated date of redemption.

 

New Accounting Pronouncements

 

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (ASU 2014-09), which supersedes nearly all existing revenue recognition guidance under U.S. generally accepted accounting principles (GAAP). The core principle of ASU 2014-09 is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Additionally, the guidance requires improved disclosures to help users of financial statements better understand the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. In August 2015, the FASB issued ASU 2015-14 Revenue from Contracts with Customers Deferral of the Effective Date, which defers the effective date of the new revenue recognition standard by one year, as a result, public entities would apply the new revenue standard to annual reporting periods beginning after December 15, 2017 and interim periods therein, which is the Company's first quarter of fiscal 2019. Early adoption is permitted for all entities only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. The guidance allows for the amendment to be applied either retrospectively to each prior reporting period presented or retrospectively as a cumulative-effect adjustment as of the date of adoption. The Company is in the process of evaluating the impact of adoption on its consolidated financial statements.

 

In February 2015, the FASB issued ASU 2015-02, Amendments to the Consolidation Analysis (ASU 2015-02). ASU 2015-02 affects reporting entities that are required to evaluate whether they should consolidate certain legal entities. ASU 2015-02 modifies the evaluation of whether limited partnerships and similar legal entities are variable interest entities (VIEs) or voting interest entities, eliminates the presumption that a general partner should consolidate a limited partnership and affects the consolidation analysis of reporting entities that are involved with VIEs, particularly those that have fee arrangements and related party relationships. ASU 2015-02 is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2015. Early adoption is permitted. A reporting entity may apply the amendments in this guidance using a modified retrospective approach by recording a cumulative-effect adjustment to equity as of the beginning of the fiscal year of adoption. A reporting entity also may apply the amendments retrospectively. The adoption of ASU 2015-02 in the first quarter of fiscal 2017 is not expected to have a material impact on the Company’s financial condition or results of operations.

EVENT CARDIO GROUP INC.

NOTES TO FINANCIAL STATEMENTS

August 31, 2015 and August 31, 2014

 

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

 

New Accounting Pronouncements (Continued)

 

In June 2014, the FASB issued ASU 2014-12, Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period (ASU 2014-12), which requires that a performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition. ASU 2014-12 is effective for annual periods and interim periods within those annual periods beginning after December 15, 2015. Early adoption is permitted. The adoption of ASU 2014-12 in the first quarter of fiscal 2017 is not expected to have a material impact on the Company's financial condition or results of operations.

 

In August 2014, the FASB issued Accounting Standards Update 2014–15 (“ASU 2014-15), “Presentation of Financial Statements – Going Concern (Subtopic 205 – 40): Disclosure of Uncertainties About an Entity’s Ability to Continue as a Going Concern.” ASU 2014-15 requires management to evaluate whether there are conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern, and to provide certain disclosures when it is probable that the entity will be unable to meet its obligations as they become due within one year after the date that the financial statements are issued. Since this guidance is primarily around certain disclosures to the financial statements, we anticipate no impact on our financial position or results of operations from adopting this standard. We are currently assessing the additional disclosure requirements, if any, of ASU 2014-15. ASU 2014-15 is effective for the annual period ended December 31, 2016 and for annual periods and interim periods thereafter with early adoption permitted.

  

3. PROPERTY & EQUIPMENT

 

Property and equipment consists of the following as of August 31, 2015 and August 31, 2014:

 

										August 31, 2015				August 31, 2014
		Cost				Accumulated Depreciation				Net Book Value				Net Book Value
Computer equipment		$	3,645			$	2,431			$	1,214			$	2,960
		$	3,645			$	2,431			$	1,214			$	2,960

 

Depreciation expense included in the consolidated statement of comprehensive loss for the years ended August 31, 2015 and 2014 was $1,746 and $1,859 respectively.

 

4. DUE TO RELATED PARTIES

 

The amounts due to related parties are non-interest bearing, with no fixed terms of repayment, are payable on demand and are unsecured. As of August 31, 2015 and August 31, 2014, the amounts of due to related parties are $55,864 and $74,423 respectively.

  

EVENT CARDIO GROUP INC.

NOTES TO FINANCIAL STATEMENTS

August 31, 2015 and August 31, 2014

 

5. NOTES PAYABLE - RELATED PARTIES

 

As at August 31, 2015 and 2014, the Company has a promissory note to 2399371 Ontario Inc., a company owned by an affiliate, for $583,000 Canadian ($440,898 US$) and $418,000 Canadian ($384,978 US$), respectively. There have been no repayments to date on this note since its inception. The note bears interest at 12% per annum with principal and interest both payable on the maturity date of June 1, 2016, which has been extended from the original maturity date of December 1, 2015, in conjunction with the issuance of the additional promissory note described below and the commitment to issue equity instruments as described in Note 8. The note is secured by the common shares of 2340960 Ontario Inc. and a lien on all of the company's assets. This note has a provision whereby the company is restricted from issuing any shares of capital stock or borrowing any money unless one-half of the net proceeds of such issuance or borrowing, up to the amount of the outstanding principal and accrued interest on the note, are used to satisify the amounts due under the note.

 

As at August 31, 2015, the Company has an additional promissory note to 2399371 Ontario Inc., a company owned by an affiliate, for $64,500 Canadian ($48,779 US$) bearing interest at 12% per annum, principal and interest both payable on June 1, 2016. This note was issued in conjunction with the extension of the promissory note described above and the commitment to issue equity instruments as described in Note 8 The note is secured by the common shares of 2340960 Ontario Inc. and a lien on all of the company's assets.

 

In connection with the entry into the License Agreement described in Note 10, the Company borrowed CAD $79,106 ($59,825 US$) to be repaid on December 1, 2015, together with interest at the rate of 12% per annum from 9058583 Canada Inc., a corporation owned by affiliates. In conjunction with this loan, the Company entered into a Sublicense agreement with 9508583 Canada Inc. whereby 9508583 Canada Inc. will be granted the exclusive rights to distribute the BreastCare DTS™ product in Canada with royalties payable at the rate of 5.5% of net sales, as to be defined in the Sublicense Agreement, to the Company.

  

6. CONVERTIBLE NOTES PAYABLE

 

The company is offering, pursuant to a Regulation S Subscription Agreement and Investment Representation dated February 3, 2015, up to $2,000,000 of 8% convertible notes with interest payable annually on January 31st. The holder upon written notice to the company may elect to have accrued but unpaid interest added to the principal amount of the note in lieu of payment of interest. The principal amount of the note is payable on January 31, 2018. The note, or any part thereof and any unpaid interest is convertible into common shares of the company at any time at the option of the holder at a conversion price of $0.15 per common share. The note may be prepaid at any time in full by the company upon ten days notice to the holder. As at August 31, 2015, $525,000 of the convertible notes payable have been issued as follows.

 

Medpac Asia Pacific PTY Ltd. of Australia ("Medpac") for $500,000. In addition to the terms of the convertible note payable described above, if the note is prepaid by the company at any time prior to the maturity date, if the volume weighted average price of the common shares of the company for the ten trading days preceding the early repayment date is less than $0.15 per common share, then Medpac shall receive a number of common share purchase warrants sufficient to purchase up to 1% of the then outstanding number of common shares of the Company. Such common share purchase warrants once issued would be exercisable for a period of three years at an exercise price of $0.15 per common share, but may be exercised on a cashless basis in accordance with a specified formula.

 

Medpac has also received, for its services as part of the transaction noted above, a convertible note payable of $25,000 having the terms and conditions identical to Medpac's other convertible note payable described above, except that the number of common share purchase warrants potentially issuable upon early payment of the note would be sufficient to only purchase up to 0.0005% of the then outstanding common shares of the company.

 

EVENT CARDIO GROUP INC.

NOTES TO FINANCIAL STATEMENTS

August 31, 2015 and August 31, 2014

 

6. CONVERTIBLE NOTES PAYABLE (Continued)

 

In conjunction with Medpac's investment noted above, the Company has agreed to enter into an exclusive Distribution Agreement with Medpac for the Company's BreastCare DTS™ and Now Cardio devices in Australia, New Zealand, Singapore, Thailand, Malaysia, Indonesia, Philippines, Vietnam, Laos, Cambodia Myanmar and Bangladesh. The Distribution Agreement will have an initial term of five years and can be renewed for an additional five years provided that agreed upon sales targets are met. If the company does not establish a manufacturing facility for its BreastCare DTS™ device in Southeast Asia within eighteen months of this agreement, Medpac and the company will form a joint venture to establish such a facility in the Philippines.

  

7. INCOME TAXES

 

The reconciliation of income tax (expense) benefit at the U.S. statutory rate of 35% for the periods ended August 31, 2015 and August 31, 2014, to the Company's effective tax rate is as follows:

 

		August 31, 2015				August 31, 2014
U.S. statutory rate		$	872,648			$	120,916
Tax rate difference between Canada and U.S.			(48,231	)			(18,396	)
Other			(468	)			—
Change in valuation allowance			(823,949	)			(102,520	)
Effective tax rate		$	—			$	—

 

The tax effects of temporary differences that give rise to the Company's net deferred tax asset as of August 31, 2015 and August 31, 2014 are as follows:

 

		August 31, 2015				August 31, 2014
Net operating loss carryforwards		$	922,520			$	102,520
Temporary differences - intangible asset			3,949				—
Less: valuation allowance			(926,469	)			(102,520	)
Deferred tax assets		$	—			$	—

 

In assessing the realization of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. Based on the assessment, the Company has established a full valuation allowance against all of the deferred tax assets for every year because it is more likely than not that all of the deferred tax assets will not be realized.

 

The Company files income tax returns in Canada and the United States with varying statutes of limitations. The Company's policy is to recognize interest expense and penalties related to income tax matters as a component of our provision for income taxes. There were no accrued interest and penalties associated with uncertain tax positions as of August 31, 2015 or August 31, 2014.

 

The tax rates in Canada for the wholly owned subsidiary 2340960 Ontario Inc. are 26.5% for 2015 and 15.5% for 2014.

 

The wholly owned subsidiary 2340960 Ontario Inc. has non-capital losses as at August 31, 2015 expiring as follows: 2033 - $42,736 (Canadian $); 2034 - $94,339 (Canadian $) and 2035 - $619,389 (Canadian $).

 

EVENT CARDIO GROUP INC.

NOTES TO FINANCIAL STATEMENTS

August 31, 2015 and August 31, 2014

 

8. STOCKHOLDERS' DEFICIT

 

Common Shares and Common Share Purchase Warrant Issuance

 

On November 9, 2014, the Company issued 700,000 common shares for proceeds of $100,000.

 

On January 6, 2015, the Company issued 2,827,548 common shares valued at $376,064 in satisfaction of an obligation related to a license agreement as described in Note 10.

 

On January 30, 2015, the Company issued 250,000 common shares and 250,000 common share purchase warrants for total proceeds of $25,000.

 

On February 2, 2015, the Company issued 800,000 common shares for proceeds of $72,000.

 

On February 2, 2015, the Company issued 4,300,000 common shares in exchange for service agreements for a fair value of $387,000.

 

On March 4, 2015, the Company issued 2,900,000 common shares in exchange for service agreements for a fair value of $290,000.

 

On March 23, 2015, the Company issued 100,000 common shares in exchange for a service agreement for a fair value of $12,000.

 

On May 22, 2015, the Company issued 6,250,000 common shares in exchange for service agreements for a fair value of $500,000.

 

On August 27, 2015, the Company issued 2,200,000 common shares and 2,200,000 common share purchase warrants for total proceeds of $110,000.

 

On August 27, 2015, the Company issued 2,000,000 common shares in exchange for a service agreement for a fair value of $190,000.

 

On August 28, 2015, the Company issued 750,000 common shares in exchange for a service agreement for a fair value of $71,250.

 

Common Share Purchase Warrants

 

As of August 31, 2015 there are 2,450,000 common share purchase warrants issued and outstanding. 250,000 common share purchase warrants allow the holder to purchase 1 common share of the company at an exercise price of $0.20 per warrant up to the expiration date of January 31, 2016. 2,200,000 common share purchase warrants allow the holder to purchase 1 common share of the company at an exercise price of $0.10 per warrant up to the expiration date of August 27, 2019.

 

Equity Instruments to be issued

 

For services received for the year ended August 31, 2015 under a service agreement, the company is committed to issue 250,000 common shares, valued at $18,000 as of August 31, 2015.

 

EVENT CARDIO GROUP INC.

NOTES TO FINANCIAL STATEMENTS

August 31, 2015 and August 31, 2014

 

8. STOCKHOLDERS' DEFICIT (Continued)

 

Equity Instruments to be issued (Continued)

 

For the extension of a note payable - related party and issuance of a new note payable related party as described in Note 5, the company is committed to issue 600,000 common shares, valued at $43,200 as of August 31, 2015 and 600,000 common share purchase warrants, which allow the holder to purchase 1 common share of the company at an exercise price of $0.10 per warrant up to four years from the date of issuance, valued at $42,750 as of August 31, 2015.

 

The company has received $65,000 related to subscriptions for 1,300,000 common shares to be issued in the future.

 

Commitment to Issue Shares

 

In exchange for a service agreement, the Company is required to issue 750,000 common shares on September 30, 2015. In exchange for a service agreement, the Company is required to issue 250,000 common shares on each of October 5, 2015; January 5, 2016; April 5, 2016 and July 5, 2016.

 

Equity Incentive Plan

 

The Company has created the Event Cardio Group Inc. 2015 Equity Incentive Plan ("equity incentive plan") which allows for the granting of incentive stock options to employees of the company, a parent or a subsidiary and the granting of awards other than incentive stock options to employees, directors and consultants. The maximum number of common shares which may be issued pursuant to the equity incentive plan at August 31, 2015 is 10,000,000. No incentive stock options have been granted as of August 31, 2015. A total of 2,750,000 common shares have been issued as of August 31, 2015 under this plan to a consultant.

 

9. RELATED PARTY

 

The Company is related to Contex International Technologies (Canada) Inc. ("Contex") through the fact that affiliates of the Company hold a 34% interest in 2419596 Ontario Inc, which owns Contex.

 

The Company has entered into a service agreement with Contex, whereby Contex will provide services related to the design and development of a wireless and leadless ECG cardiac monitor. The agreement runs for a term of one year to May 22, 2016 and will automatically renew for subsequent terms of one year unless notice of termination is given by either party in writing.

 

For the year ended August 31, 2015 and August 31, 2014, $952,188 and $41,756 respectively, have been incurred related to this agreement and have been expensed in research and development expense.

 

See Note 5 regarding notes payable - related parties.

 

The Company is related to the Chief Execuitive Officer ("CEO"), who is also the company's president and sole board member. For the year ended August 31, 2015 and August 31, 2014, $125,000 and $nil respectively, have been expensed related to compensation to the CEO and is included in accounts payable and general and administrative expense.

 

The company has entered into an employment agreement with the CEO for $225,000 per year up to August 27, 2018.

 

EVENT CARDIO GROUP INC.

NOTES TO FINANCIAL STATEMENTS

August 31, 2015 and August 31, 2014

 

10. COMMITMENTS

 

In exchange for a service agreement, the Company is committed to pay $5,000 per month through August 5, 2016 and to issue 250,000 common shares on each of October 5, 2015; January 5, 2016; April 5, 2016 and July 5, 2016.

 

On October 24, 2014, the Company entered into a License Agreement with Life Medical Technologies, Inc. ('Life Medical") with respect to Life Medical’s “BreastCare DTS™” product and certain other technologies. The License Agreement grants the Company the exclusive right to distribute the BreastCare DTS™ in the United States, Canada and certain countries in Asia, including China. The Agreement calls for royalties of 5% on net sales, as defined in the License Agreement, and requires minimum annual royalties of $100,000 in 2015 and $200,000 each year thereafter.

 

As part of entering into the License Agreement, the Company entered into release agreements with certain creditors of Life Medical Technologies, Inc. which held judgments against Life Medical in the aggregate amount of approximately $501,000. Pursuant to the Release Agreements, the Company agreed to pay those Creditors an aggregate of $501,064, satisfied through the issuance of common shares, as described in Note 8, valued at $376,064 and payment of $125,000 cash. These amounts have been considered prepayments of the royalties commitment note above and are included in prepaid expenses on the accompanying balance sheet at August 31, 2015. For the year ended August 31, 2015, $66,667 of the above noted prepayment has been expensed. The recipients of 526,315 shares related to the royalties noted above, valued at $70,000, are also to be paid in cash or shares of common stock, at the company's option, an amount equal to the excess, if any, of $70,000 over the value of such shares as of December 12, 2015.

  

11. CONTINGENCIES

 

On November 24, 2015, the company received a notice of default from Medpac, the company who holds the $500,000 convertible note payable described in Note 6. Medpac contends that the company has defaulted under the provisions of this note payable and have thus demanded repayment of the full amount of the note payable and interest payable to date by December 30, 2015 (estimated to be a total of $526,667). In addition, Medpac contends that the company will be obligated to pay the costs of collection, including legal fees and expenses. It is management's contention that the company has not defaulted under the provisions of the note payable and thus is not required to repay the note payable or interest payable at this time. The outcome of this contingency is not determinable at this time.

 

On November 30, 2015, the company's subsidiary EFIL Sub of ECG Inc. received a breach of contract notice related to its license agreement with Life Medical as described in Note 10. Life Medical contends that the company has defaulted under the provisions of this agreement and have thus triggered penalty clauses in the agreement. Life Medical is now demanding payment of these penalties. As per the breach of contract notice details, it is estimated that the total penalty could be as high as $770,000 based on the formula: $1 per every 100 people in each designated country, up to a maximum of $150,000 per designated country, with a total of seven countries identified in the notice. In addition due to this breach, Life Medical also contends that the license rights to the seven countries identified now belongs exclusively to Life Medical. It is management's contention that the company has not defaulted under the provisions of the agreement and thus is not required to pay any such penalties, nor have the licensing rights reverted back to Life Medical in the seven countries identified. The outcome of this contingency is not determinable at this time.

EVENT CARDIO GROUP INC.

NOTES TO FINANCIAL STATEMENTS

August 31, 2015 and August 31, 2014

12. SUBSEQUENT EVENTS

 

On September 28, 2015, the Company issued 4,300,000 common shares and 4,300,000 common share purchase warrants, which allow the holder to purchase 1 common share of the company at an exercise price of $0.10 per warrant up to September 28, 2019, for total proceeds of $210,000. In conjunction with this common share issuance, the company issued 320,000 common shares to a company that arranged a portion of the financing.

 

On September 28, 2015, the Company issued 1,250,000 common shares in satisfaction of the obligation to issue 250,000 common shares as described in Note 8 under equity instruments to be issued and the commitment to issue 250,000 common shares on each of October 5, 2015; January 5, 2016; April 5, 2016 and July 5, 2016 as per a service agreement as described in Note 10.

 

On October 8, 2015, the Company cancelled 10,000,000 preferred shares which were owned by the company's subsidiary 2340960 Ontario Inc. for proceeds of $nil.

  

 EMPLOYMENT AGREEMENT

  

AGREEMENT dated as of the 27th day of August, 2015 between Event Cardio Group, Inc., a Nevada corporation (the “Company”), and John Bentivoglio (the “Executive”).

 

W I T N E S S E T H:

 

WHEREAS, the Executive is the Chief Executive Officer, President and a member of the Board of Directors of the Company; and

 

WHEREAS, the Company desires to to retain and make secure for itself the experience, abilities and services of the Executive for a period of not less than three (3) years from the effective date of this Agreement.

 

NOW, THEREFORE, in consideration of the premises and for other good and valuable consideration, the adequacy and receipt of which is hereby acknowledged, the Company and the Executive do hereby agree as follows:

 

1. Employment. The Company hereby employs the Executive as Chief Executive Officer and President of the Company, and the Executive hereby accepts such employment, upon the terms and conditions hereinafter set forth.

 

2. Term. Subject to the provisions of Paragraphs 9 and 10 hereof, the term of Executive’s employment shall begin on the date of this Agreement (the “Commencement Date”) and continue for an initial period of three (3) years from the Commencement Date (the “Initial Term”). The term of this Agreement shall be automatically extended for successive terms of one year, unless either party elects to terminate this agreement by written notice to the other to that effect at least 120 days prior to the expiration of the initial term or any renewal term.

 

3. Compensation and Certain Other Benefits. For services rendered by the Executive hereunder, the Company shall pay to the Executive the following compensation:

 

(a) Base Compensation. Base compensation, payable in accordance with the normal payroll practices of the Company during the term hereof, initially at the rate of Two Hundred Twenty Five Thousand ($225,000) Dollars per annum, subject to increase as may be determined by the Board of Directors from time to time (“Fixed Compensation”), it being understood that Base Compensation during the first twelve months of the Initial Term shall payable at such time or times as the Company has sufficient cash to make such payment as determined by the Board of Directors in its sole discretion.

 

(b) Incentive Compensation. Such incentive compensation (“Incentive Compensation”) in the form of a cash bonus, as shall be determined by the Board of Directors from time to time based upon the attainment of performance criteria specified by the Board.

 

(c) Payment for Past Services. In recognition of the Executive’s past services on behalf of the Company, the Company shall pay the Executive $125,000, payable at such time or times as the Company has sufficient cash to make such payment as determined by the Board of Directors in its sole discretion.

 

(d) Reimbursement of Expenses. The Company will reimburse the Executive for expenses reasonably incurred for promoting the business and affairs of the Company, including, without limitation by specification, expenses for entertainment, travel and similar items upon presentation from time to time of an itemized account of such expenditures.

 

(e) Enumeration of Benefits Not Intended as Limitation. The Company agrees that nothing contained herein is intended to or shall be deemed to be granted to the Executive in lieu of or as a limitation upon any rights and privileges which the Executive may otherwise be entitled to as an executive employee of the Company under any retirement, pension, insurance, hospitalization or other employee benefit plan of any type (including, without limitation by specification, any incentive, profit sharing, bonus or stock option plan), which may now be in effect or which may hereafter be adopted by the Company, it being understood that the Executive shall have the same rights and privileges to participate in such Company benefit plans as any other executive employee of the Company.

 

4. Duties; Time and Effort

 

(a) During the period of his employment hereunder, Executive, subject to the supervision and control of the Board of Directors of the Company, shall direct the operations of the Company. The Executive presently is Chairman of the Board of Directors of the Company, and the parties contemplate that Executive will continue to serve in such capacity throughout the period of his employment hereunder. The Company shall use its best efforts to cause the Board of Directors to nominate and recommend to stockholders that the Executive be elected as a member of the Board of Directors of the Company during the term of his employment with the Company.

 

(b) Executive agrees to devote his full time and effort to the business of the Company during the term of his employment hereunder and, if elected, to serve as a member of the Company’s Board of Directors. The Executive shall perform his duties faithfully, diligently and to the best of his ability. Executive, at all times shall use his best efforts to preserve, protect, enhance and maintain the trade, business and goodwill of the Company and shall not act or conduct himself at any time in a manner inimical or in any way contrary to the best interests of the Company.

 

5. Covenants and Restrictions. Subject to the provisions of Paragraph 9(e) hereof, Executive covenants that, except in carrying out his duties hereunder, during the term of his employment and for a period of twelve months following the date of termination of employment hereunder (unless such longer period of time is specifically set forth herein):

 

(a) Executive will not directly or indirectly, own any interest in, participate or engage in, assist, render any services (including advisory services) to, become associated with, work for, serve (in any capacity whatsoever, including, without limitation, as an employee, consultant, advisor, agent, independent contractor, officer or director) or otherwise become in any way or manner connected with the ownership, management, operation, or control of, any business, firm, corporation, partnership or other entity (collectively referred to herein as a “Person”) that engages in, or assists others in engaging in or conducting a medical diagnostic business that provides products and/or services which are competitive with those provided by the Company; provided, however, the foregoing restriction shall not be deemed to prohibit Executive from owning or acquiring securities issued by any corporation which neither directly nor indirectly competes with the Company and whose securities are listed with a national securities exchange or are traded in the over-the-counter market, provided that Executive at no time owns, directly or indirectly, beneficially or otherwise, five (5%) percent or more of any class of any such corporation’s outstanding capital stock.

 

(b) Executive will not knowingly provide or solicit to provide to any Person or individual medical diagnostic products and/or services that are competitive with those provided by the Company, or (ii) any medical diagnostic products/ and or services to any customer of the Company. The term “customer” shall mean any Person or individual to whom the Company has provided medical diagnostic products and/or services within the twelve (12) month period prior to the termination of Executive’s employment hereunder.

 

(c) Executive agrees that he shall not divulge to others, nor shall he use to the detriment of the Company or in any business competitive with any business engaged in by the Company or any of its subsidiary or affiliated companies, at any time during his employment with the Company or thereafter, any confidential or trade secret information obtained by him during the course of his employment with the Company relating to sales, salesmen, sales volume or strategy, customers, formulas, processes, methods, compositions, ideas, improvements or inventions belonging to or relating to the business of the Company, or its subsidiary or affiliated companies.

 

(d) Executive will neither solicit, hire or seek to solicit or hire any of the Company’s personnel in any capacity whatsoever nor shall Executive induce or attempt to induce any of the Company’s personnel to leave the employ of the Company to work for Executive or otherwise.

 

(e) Executive acknowledges that his breach of any of the restrictive covenants contained in this Paragraph 5 may cause irreparable damage to the Company for which remedies at law would be inadequate. Accordingly, if Executive breaches or threatens to breach any of the provisions of this Paragraph 5, the Company shall be entitled to appropriate injunctive relief, including, without limitation, preliminary and permanent injunctions, in the Supreme Court of the State of New York located in the County of New York or the United States District Court, Southern District of New York, restraining Executive from taking any action prohibited hereby. This remedy shall be in addition to all other remedies available to the Company at law or equity. If any portion of this Paragraph 5 is adjudicated to be invalid or unenforceable, this Paragraph 5 shall be deemed amended to delete therefrom the portion so adjudicated, such deletion to apply only with respect to the operation of this Paragraph 5 in the jurisdiction in which such adjudication is made.

 

6. Proprietary Property. Subject to the provisions of Paragraph 9(e) hereof:

 

(a) The Executive agrees that any and all inventions or improvements as well as any and all ideas, creations, know-how and methods of applying and putting into practice any inventions or improvements (all of the foregoing being hereinafter called “Proprietary Property” and being more fully defined in subparagraph (b) below) that are created, developed, conceived of or discovered either (i) by the Executive (solely or jointly with others) either in the course of his employment, on the Company’s time, with the Company’s materials or facilities, relating to any subject matter with which his work for the Company is or may be concerned, or relating to any business in which the Company or any of its subsidiaries or affiliated companies is involved, or (ii) by or for the Company, or (iii) by any independent individual or Person and thereafter acquired by the Company, and which are within the Executive’s knowledge or possession in the case of (i) above or that come into the Executive’s knowledge or possession during and in the course of the Executive’s employment hereunder in the case of (ii) or (iii) above, shall be, if created, developed, conceived of or discovered by the Executive, promptly disclosed to the Company, or shall be, if otherwise developed or acquired by the Company, received by the Executive as an employee of the Company and not in any way for his own benefit. Executive shall neither have nor obtain any right, title or interest in or to such Proprietary Property unless and until the Company shall expressly and in writing waive the rights that it has therein and thereto under the provisions of this sentence. With respect to any and all Proprietary Property that is invented, created, written, developed, furnished or produced by the Executive, or suggested by the Executive to the Company, during the term of the Executive’s employment under this Agreement, Executive does hereby agree that all such Proprietary Property shall be the exclusive property of the Company, and that the Executive shall neither have nor retain any right, title or interest, of any kind therein and thereto or in and to any results or proceeds therefrom. At any time, whether during or after the term of this Agreement, the Executive will, upon the request and at the expense of the Company, (A) obtain patents or copyrights on, or (B) permit the Company to patent or copyright, any such Proprietary Property, whichever (A) or (B) is appropriate, and/or (C) execute, acknowledge and deliver any and all assignments, instruments of transfer, or other documents, that the Company deems necessary or appropriate to transfer to and vest in the Company all right, title and interest in and to such Proprietary Property and to evidence the Company’s ownership of such Proprietary Property, including, without limitation, taking all steps necessary to enable the Company to publish or protect said Proprietary Property by patents or otherwise in any and all countries and to render all such assistance as the Company may require in any patent office proceeding or litigation involving said Proprietary Property. The Executive shall not, without limitation as to time or place, use any Proprietary Property except on Company business, during or after his period of employment, nor disclose the same to any other Person or individual except for disclosure on Company business or as may be required by law.

 

(b) As used in this Agreement, “Proprietary Property” means proprietary technical information not generally known in the Company’s industry and which is disclosed to Executive or known or developed by Executive as a consequence of or through his employment with the Company.

 

(c) During or subsequent to the Executive’s employment by Company, Executive will never, directly or indirectly, lecture upon, publish articles concerning, use, disseminate, disclose, sell or offer for sale any Proprietary Property without the Company’s prior written permission.

 

7. Disability

 

(a) Subject to the terms of subparagraph (b) hereof, in the event Executive becomes disabled during the term of this Agreement, he shall continue to receive one hundred (100%) percent of the Base Compensation to which he was entitled at the time he became disabled for any period of disability not in excess of twelve (12) consecutive calendar months. Immediately following the twelfth consecutive calendar month of disability, the term hereof shall end, and no further compensation shall be due hereunder. For the purpose of this subparagraph (a), the terms “disabled” and “disability” shall mean a disability which, in the opinion of a doctor reasonably satisfactory to the Company, renders the Executive unable to perform his duties hereunder. The date such disability commences shall be the date Executive first absents himself from work during a continuous period of disability as so determined by the doctor hereinabove set forth.

 

(b) Payments of disability compensation under subparagraph (a) above shall be reduced by the amounts actually received by the Executive under any policy or policies of disability, health, accident, or wage continuation insurance paid for by the Company as well as by all social security benefits actually received by Executive.

 

8. Severability of Provisions. In the event any court of competent jurisdiction determines that any term or provision of this Agreement shall be unenforceable, the invalidity of such term or provision shall not affect the validity of the remainder hereof.

 

9. Termination; Severance; Death

 

(a) The Executive’s employment shall terminate upon his death, and may be terminated, at the option of (i) the Executive, at any time for “Good Reason”, as defined in Paragraph 10 below, or (ii) the Company, upon proper written notice to the Executive (A) upon 12 consecutive months of disability, as defined in Paragraph 7(a) hereof, or (B) for cause. Termination “for cause” shall mean termination only for willful misconduct by Executive during the course of his employment which injures the Company, or the conviction of Executive for any felony offense.

 

(b) If Executive’s employment is terminated upon his death or by the Company for cause, the Company shall have no further obligation to pay compensation or benefits to Executive, other than those accrued through the date of termination.

 

10. Termination by Executive. This Agreement may be terminated by the Executive at any time for Good Reason. If the Executive terminates this Agreement for Good Reason, the executive will receive 2.0 times his Base Compensation as then in effect. “Good Reason” shall mean any one or more of the following (unless the Executive consents thereto in writing):

 

(a) The assignment of duties not comparable to his present duties, or any material reduction in responsibilities or status.

 

(b) Reduction in salary or the non-payment of an earned bonus.

 

(c) Failure of the company to obtain a satisfactory agreement from any successor to the Company to assume and agree to perform this Agreement.

 

(d) A “change of control” of the Company during Executive’s employment hereunder. A “change of control” shall be deemed to occur when any person, corporation, partnership, association or entity, directly or indirectly (through a subsidiary or otherwise) , (i) acquires or is granted the right to acquire, directly or through a merger or similar transaction, a majority of Company’s outstanding voting securities, or (ii) acquires all or substantially all of the Company’s assets; provided that a “change of control” is not deemed to exist if Executive agrees to the transaction as an officer, director or shareholder of the Company.

 

In the event that any of the above events takes place, then, if Executive elects to terminate his employment pursuant to this Paragraph 10, the Company shall promptly pay two (2) times his current Base Compensation within thirty (30) days of receipt of Executive’s resignation notice; provided further, however, this Paragraph 10 shall not apply to any change in control supported by the Executive either as an officer, a director or as a stockholder of the Company.

 

11. Arbitration. Except as specifically provided above, any dispute, controversy or claim arising out of or pursuant to this Agreement or the breach hereof shall be settled by arbitration in the City of New York, State of New York. Such arbitration shall be effected by arbitrators selected as hereinafter provided and shall be conducted in accordance with the Rules, existing at the date thereof, of the American Arbitration Association. The dispute, controversy or claim shall be submitted to three arbitrators, one arbitrator to be selected by the Company, one arbitrator to be selected by the Executive and the third arbitrator to be selected by the two so selected by the Company and Executive, or if they cannot agree on a third, by the American Arbitration Association. In the event that either the Company or Executive, within one month after notification of any demand for arbitration hereunder, shall not have selected its arbitrator and given notice thereof to the other party, the arbitrator for such party shall be selected by the American Arbitration Association. Meetings of the arbitrators shall be held in New York City, New York at such place or places as may be agreed upon by the arbitrators. The results of final determination of any such arbitration proceedings shall be binding on the parties hereto and a judgment may be entered in any court having jurisdiction. The Company shall pay all of the expenses of any arbitration proceeding under this Agreement, including legal fees and other expenses reasonably incurred by the Executive in connection with such proceeding.

 

12. Notices. Any notice required or permitted to be given pursuant to the provisions hereof shall be deemed given when personally delivered, on the third day after being sent by registered or certified mail, return receipt requested, or the day after being sent by overnight courier to the Company or Executive at their respective addresses set forth above or to such other address as may be given by similar notice by the Company or Executive.

 

13. Waiver of Breach. The waiver by the Company or Executive of a breach of any provision hereof by the other shall not operate or be construed to operate as a waiver by such party of any subsequent breach by the other of the same or any other provision hereof.

 

14. Benefits and Burdens. The rights and obligations hereunder shall inure to the benefit of and shall be binding upon the Company, the Executive and their respective legal or personal representatives, successors and assigns.

 

15. Entire Agreement, Modification and Construction. This Agreement contains the entire understanding between the Company and Executive with respect to the subject matter hereof. The terms and conditions hereof may be changed only by an agreement in writing signed by the Company and Executive. This Agreement shall be governed by and construed in accordance with the laws of the State of New York, applicable to contracts made and to be performed therein, without giving effect to the principles thereof relating to conflicts of law.

 

IN WITNESS WHEREOF, the Company has caused this Agreement to be signed and its seal affixed by a duly authorized officer and the Executive has signed this Agreement as of the day and year first above written.

 

		EVENT CARDIO GROUP, INC.
	By:	/s/ John Bentivoglio
	Name:	John Bentivoglio
	Title:	President and CEO
		EXECUTIVE:
		/s/ John Bentivoglio

“THE SECURITIES AND THE SECURITIES INTO WHICH THIS SECURITY MAY BE CONVERTED ARE BEING OFFERED TO INVESTORS WHO ARE NOT U.S. PERSONS (AS DEFINED IN REGULATION S UNDER THE SECURITIES ACT OF 1933, AS AMENDED (“THE SECURITIES ACT”)) AND WITHOUT REGISTRATION WITH THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION UNDER THE SECURITIES ACT IN RELIANCE UPON REGULATION S PROMULGATED UNDER THE SECURITIES ACT.”

 

“TRANSFER OF THESE SECURITIES AND THE SECURITIES INTO WHICH THIS SECURITY MAY BE CONVERTED IS PROHIBITED, EXCEPT IN ACCORDANCE WITH THE PROVISIONS OF REGULATION S, PURSUANT TO REGISTRATION UNDER THE SECURITIES ACT, OR PURSUANT TO AVAILABLE EXEMPTION FROM REGISTRATION. HEDGING TRANSACTIONS MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE WITH THE SECURITIES ACT.”

 

Original Issue Date: April 27, 2015

Original Conversion Price (subject to adjustment herein): $0.15

 

$500,000

  

8% CONVERTIBLE NOTE

DUE JANUARY 31, 2018

 

THIS NOTE is one of a series of duly authorized and validly issued 8% Convertible Notes of Event Cardio Group, Inc., a Nevada corporation, (the “Company”), having its principal office at 2798 Thamesgate Drive, Mississauga, Ontario, Canada L4T 4E8, designated as its 8% Convertible Notes due January 31, 2018, as the same may be supplemented, modified, amended, restated or replaced from time to time in the manner provided herein, this “Note” and, collectively with the other such series of notes, the “Notes”.

 

FOR VALUE RECEIVED, the Company promises to pay to MEDPAC ASIA PACIFIC PTY. LTD. (Australian Company Number 604 389 577) or its registered assigns (the “Holder”), or shall have paid pursuant to the terms hereunder, the principal sum of US$500,000 on January 31, 2018 (the “Maturity Date”) or such earlier date as this Note is required or permitted to be repaid as provided hereunder, and to pay interest to the Holder on the aggregate unconverted and then outstanding principal amount of this Note, all in accordance with the provisions hereof. This Note is subject to the following additional provisions:

 

Section 1. Definitions. For the purposes hereof, the following terms shall have the following meanings:

 

“Bankruptcy Event” means any of the following events: (a) the Company commences a case or other proceeding under any bankruptcy, reorganization, arrangement, adjustment of debt, relief of debtors, dissolution, insolvency or liquidation or similar law of any jurisdiction relating to the Company or any Significant Subsidiary thereof; (b) there is commenced against the Company any such case or proceeding that is not dismissed within 60 days after commencement; (c) the Company is adjudicated insolvent or bankrupt or any order of relief or other order approving any such case or proceeding is entered; (d) the Company suffers any appointment of any custodian or the like for it or any substantial part of its property that is not discharged or stayed within 60 calendar days after such appointment; (e) the Company makes a general assignment for the benefit of creditors; (f) the Company calls a general meeting of all or substantially all of its creditors for the stated purpose of arranging a composition, adjustment or restructuring of its debts; or (g) the Company, by any act or document, expressly indicates its consent to, approval of or acquiescence in any of the foregoing or takes any corporate or other action for the purpose of effecting any of the foregoing.

 

“Business Day” means any day except Saturday, Sunday, any day which shall be a federal legal holiday in the United States or any day on which banking institutions in the State of New York are authorized or required by law or other governmental action to close.

 

“Common Stock” means the common stock, par value $.001 per share, of the Company and stock of any other class of securities into which such securities may hereafter be reclassified or changed into.

 

“Conversion Shares” means, collectively, the shares of Common Stock issuable upon conversion of this Note in accordance with the terms hereof.

 

“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

 

“Original Issue Date” means the date of the first issuance of the Notes, regardless of any transfers of any Note and regardless of the number of instruments which may be issued to evidence such Notes.

 

“Person” means an individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind.

 

“Purchase Agreement” means the Regulation S Subscription Agreement and Investor Representation, dated as of February 3, 2015 among the Company and the original Holders, as amended, modified or supplemented from time to time in accordance with its terms.

 

“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

 

“Trading Day” means a day on which the principal Trading Market is open for business.

 

“Trading Market” means the following markets or exchanges on which the Common Stock is listed or quoted for trading on the date in question: the American Stock Exchange, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market, the New York Stock Exchange or the OTC Bulletin Board.

 

“VWAP” means, for any date, the price determined by the first of the following clauses that applies: (a) if the Common Stock is then listed or quoted on a Trading Market, the daily volume weighted average price of the Common Stock for such date (or the nearest preceding date) on the Trading Market on which the Common Stock is then listed or quoted for trading as reported by Bloomberg L.P. (based on a Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New York City time); (b) if the Common Stock is not then listed or quoted for trading on a Trading Market and if prices for the Common Stock are then reported in the “Pink Sheets” published by Pink Sheets, LLC (or a similar organization or agency succeeding to its functions of reporting prices), the most recent bid price per share of the Common Stock so reported; or (c) in all other cases, the fair market value of a share of Common Stock as determined by an independent appraiser selected in good faith by the Holder and reasonably acceptable to the Company.

 

Section 2. Interest.

 

a) Payment of Interest. The Company shall pay interest in cash to the Holder from the Date of Original Issuance on the aggregate unconverted and then outstanding principal amount of this Note at the rate of 8% per annum, payable annually on January 31 of each year commencing January 31, 2016, on each Conversion Date (as to that principal amount then being converted), on each Optional Redemption Date (as to that principal amount then being redeemed) and on the Maturity Date (each such date, an “Interest Payment Date”) (if any Interest Payment Date is not a Business Day, then the applicable payment shall be due on the next succeeding Business Day); provided, however, that the Holder upon written notice to the Company may elect to have accrued but unpaid interest added to the principal amount of this Note in lieu of any interest payment.

 

b) Interest Calculations. Interest shall be calculated on the basis of a 360-day year, consisting of twelve 30 calendar day periods, and shall accrue daily on the outstanding principal balance commencing on the Original Issue Date until payment in full of the principal sum, together with all accrued and unpaid interest, and other amounts which may become due hereunder, has been made. Interest shall cease to accrue with respect to any principal amount converted, provided that the Company actually delivers the Conversion Shares within the time period required by Section 4(d)(ii) herein. Interest hereunder will be paid to the Person in whose name this Note is registered on the records of the Company regarding registration and transfers of this Note (the “Note Register”).

 

a) Prepayment. The Company, at its option, may prepay all (but not less than all) of the principal amount of this Note, together with any interest accrued thereon to the date of redemption (the “Redemption Date”) upon ten (10) days prior written notice to the Holders (the “Notice of Redemption’); provided, however, the Holder may elect to convert the outstanding principal amount of this Note pursuant to Section 4 prior to actual payment in cash for such redemption by the delivery of a Notice of Conversion to the Company, and further provided, that if upon receipt of a Notice of Redemption the Holder does not elect to convert this Note, and the VWAP for the Ten Trading Days immediately preceding the date of the Notice of Redemption is less than $0.15, the Company shall issue to Holders of the Note on the Redemption Date warrants to purchase that number of shares of its Common Stock equal to 1% of the total number of shares of Common Stock outstanding on the Redemption Date (the “Total Warrant Shares”) in the form annexed hereto as Annex I (the “Warrants”). The Warrants shall be exercisable on or before the third anniversary of the Redemption Date at an exercise price of $0.15 per share, but provide for the exercise of the Warrants on a cashless basis.

 

Section 3. Registration of Transfers and Exchanges.

 

a) Different Denominations. This Note is exchangeable for an equal aggregate principal amount of Notes of different authorized denominations, as requested by the Holder surrendering the same. No service charge will be payable for such registration of transfer or exchange.

 

b)  Investment Representations. This Note has been issued (as one of the "Securities" identified thereunder) subject to certain investment representations of the original Holder set forth in the Purchase Agreement and may be transferred or exchanged only in compliance with the Purchase Agreement and applicable federal and state securities laws and regulations.

 

c)  Reliance on Note Register. Prior to due presentment for transfer to the Company of this Note, the Company may treat the Person in whose name this Note is duly registered on the Note Register as the owner hereof for the purpose of receiving payment as herein provided and for all other purposes, whether or not this Note is overdue, and the Company shall not be affected by notice to the contrary.

 

Section 4. Conversion.

 

a)  Voluntary Conversion. At any time after the Original Issue Date until this Note is no longer outstanding, this Note shall be convertible, in whole or in part, into shares of Common Stock at the option of the Holder, at any time and from time to time. The Holder shall effect conversions by delivering to the Company a Notice of Conversion, the form of which is attached hereto as Annex B (a “Notice of Conversion”), specifying therein the principal amount of this Note to be converted and the date on which such conversion shall be effected (such date, the “Conversion Date”). If no Conversion Date is specified in a Notice of Conversion, the Conversion Date shall be the date that such Notice of Conversion is deemed delivered hereunder. To effect conversions hereunder, the Holder shall not be required to physically surrender this Note to the Company unless the entire principal amount of this Note, plus all accrued and unpaid interest thereon, has been so converted. Conversions hereunder shall have the effect of lowering the outstanding principal amount of this Note in an amount equal to the applicable conversion. The Holder and the Company shall maintain records showing the principal amount(s) converted and the date of such conversion(s). The Company may deliver an objection to any Notice of Conversion within 1 Business Day of delivery of such Notice of Conversion. In the event of any dispute or discrepancy, the records of the Company shall be controlling and determinative in the absence of manifest error. The Holder, and any assignee by acceptance of this Note, acknowledge and agree that, by reason of the provisions of this paragraph, following conversion of a portion of this Note, the unpaid and unconverted principal amount of this Note may be less than the amount stated on the face hereof.

 

b) Conversion Price. The conversion price in effect on any Conversion Date shall be equal to $0.15, subject to adjustment herein (the “Conversion Price”).

 

c) Mechanics of Conversion.

 

i. Conversion Shares Issuable Upon Conversion of Principal Amount. The number of shares of Common Stock issuable upon a conversion hereunder shall be determined by the quotient obtained by dividing (x) the outstanding principal amount of this Note to be converted by (y) the Conversion Price.

 

ii. Delivery of Certificate Upon Conversion. Not later than three Trading Days after each Conversion Date (the “Share Delivery Date”), the Company shall deliver, or cause to be delivered, to the Holder (A) a certificate or certificates representing the Conversion Shares which, on or after the Effective Date, shall be free of restrictive legends and trading restrictions (other than those which may then be required by the Purchase Agreement) representing the number of shares of Common Stock being acquired upon the conversion of this Note and (B) a check in the amount of accrued and unpaid interest (unless the Holder by written notice to the Company has elected to add the amount of accrued interest otherwise payable to the principal amount of this Note to be converted).

 

iii. Obligation Absolute. The Company’s obligations to issue and deliver the Conversion Shares upon conversion of this Note in accordance with the terms hereof are absolute and unconditional, irrespective of any action or inaction by the Holder to enforce the same, any waiver or consent with respect to any provision hereof, the recovery of any judgment against any Person or any action to enforce the same, or any setoff, counterclaim, recoupment, limitation or termination, or any breach or alleged breach by the Holder or any other Person of any obligation to the Company or any violation or alleged violation of law by the Holder or any other Person, and irrespective of any other circumstance which might otherwise limit such obligation of the Company to the Holder in connection with the issuance of such Conversion Shares; provided, however, that such delivery shall not operate as a waiver by the Company of any such action the Company may have against the Holder. In the event the Holder of this Note shall elect to convert any or all of the outstanding principal amount hereof, the Company may not refuse conversion based on any claim that the Holder or anyone associated or affiliated with the Holder has been engaged in any violation of law, agreement or for any other reason, unless an injunction from a court, on notice to Holder, restraining and or enjoining conversion of all or part of this Note shall have been sought and obtained, and the Company posts a surety bond for the benefit of the Holder in the amount of 125% of the outstanding principal amount of this Note, which is subject to the injunction, which bond shall remain in effect until the completion of arbitration/litigation of the underlying dispute and the proceeds of which shall be payable to such Holder to the extent it obtains judgment. In the absence of such injunction, the Company shall issue Conversion Shares and, if applicable, cash in payment of accrued interest, upon a properly noticed conversion.

 

iv. Reservation of Shares Issuable Upon Conversion. The Company covenants that it will at all times reserve and keep available out of its authorized and unissued shares of Common Stock for the sole purpose of issuance upon conversion of this Note, free from preemptive rights or any other actual contingent purchase rights of Persons other than the Holder (and the other holders of the Notes), not less than such aggregate number of shares of the Common Stock as shall (subject to the terms and conditions set forth in the Purchase Agreement) be issuable (taking into account the adjustments and restrictions of Section 5) upon the conversion of the outstanding principal amount of this Note and payment of interest hereunder. The Company covenants that all shares of Common Stock that shall be so issuable shall, upon issue, be duly authorized, validly issued, fully paid and non-assessable.

 

v. Fractional Shares. Upon a conversion hereunder the Company shall not be required to issue stock certificates representing fractions of shares of Common Stock, but may if otherwise permitted, make a cash payment in respect of any final fraction of a share based on the VWAP at such time. If the Company elects not, or is unable, to make such a cash payment, the Holder shall be entitled to receive, in lieu of the final fraction of a share, one whole share of Common Stock.

 

vi. Transfer Taxes. The issuance of certificates for shares of the Common Stock on conversion of this Note shall be made without charge to the Holder hereof for any documentary stamp or similar taxes that may be payable in respect of the issue or delivery of such certificates, provided that the Company shall not be required to pay any tax that may be payable in respect of any transfer involved in the issuance and delivery of any such certificate upon conversion in a name other than that of the Holder of this Note so converted and the Company shall not be required to issue or deliver such certificates unless or until the person or persons requesting the issuance thereof shall have paid to the Company the amount of such tax or shall have established to the satisfaction of the Company that such tax has been paid.

 

Section 5. Certain Adjustments.

 

a) Stock Dividends and Stock Splits. If the Company, at any time while this Note is outstanding: (A) pays a stock dividend or otherwise makes a distribution or distributions payable in shares of Common Stock on shares of Common Stock; (B) subdivides outstanding shares of Common Stock into a larger number of shares; (C) combines (including by way of a reverse stock split) outstanding shares of Common Stock into a smaller number of shares; or (D) issues, in the event of a reclassification of shares of the Common Stock, any shares of capital stock of the Company, then the Conversion Price shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock (excluding any treasury shares of the Company) outstanding immediately before such event and of which the denominator shall be the number of shares of Common Stock outstanding immediately after such event. Any adjustment made pursuant to this Section shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or re-classification.

 

b) Fundamental Transaction. If, at any time while this Note is outstanding, (A) the Company effects any merger or consolidation of the Company with or into another Person, (B) the Company effects any sale of all or substantially all of its assets in one transaction or a series of related transactions, (C) any tender offer or exchange offer (whether by the Company or another Person) is completed pursuant to which holders of Common Stock are permitted to tender or exchange their shares for other securities, cash or property, or (D) the Company effects any reclassification of the Common Stock or any compulsory share exchange pursuant to which the Common Stock is effectively converted into or exchanged for other securities, cash or property (in any such case, a “Fundamental Transaction”), then, upon any subsequent conversion of this Note, the Holder shall have the right to receive, for each Conversion Share that would have been issuable upon such conversion immediately prior to the occurrence of such Fundamental Transaction, the same kind and amount of securities, cash or property as it would have been entitled to receive upon the occurrence of such Fundamental Transaction if it had been, immediately prior to such Fundamental Transaction, the holder of one share of Common Stock (the “Alternate Consideration”). For purposes of any such conversion, the determination of the Conversion Price shall be appropriately adjusted to apply to such Alternate Consideration based on the amount of Alternate Consideration issuable in respect of one share of Common Stock in such Fundamental Transaction, and the Company shall apportion the Conversion Price among the Alternate Consideration in a reasonable manner reflecting the relative value of any different components of the Alternate Consideration. If holders of Common Stock are given any choice as to the securities, cash or property to be received in a Fundamental Transaction, then the Holder shall be given the same choice as to the Alternate Consideration it receives upon any conversion of this Note following such Fundamental Transaction. To the extent necessary to effectuate the foregoing provisions, any successor to the Company or surviving entity in such Fundamental Transaction shall issue to the Holder a new promissory note consistent with the foregoing provisions and evidencing the Holder’s right to convert such debenture into Alternate Consideration. The terms of any agreement pursuant to which a Fundamental Transaction is effected shall include terms requiring any such successor or surviving entity to comply with the provisions of this Section 5(b) and insuring that this Note (or any such replacement security) will be similarly adjusted upon any subsequent transaction analogous to a Fundamental Transaction.

 

c)  Calculations. All calculations under this Section 5 shall be made to the nearest cent or the nearest 1/100th of a share, as the case may be. For purposes of this Section 5, the number of shares of Common Stock deemed to be issued and outstanding as of a given date shall be the sum of the number of shares of Common Stock (excluding any treasury shares of the Company) issued and outstanding.

 

d) Notice to the Holder.

 

i. Adjustment to Conversion Price. Whenever the Conversion Price is adjusted pursuant to any provision of this Section 5, the Company shall promptly mail to each Holder a notice setting forth the Conversion Price after such adjustment and setting forth a brief statement of the facts requiring such adjustment.

 

ii. Notice to Allow Conversion by Holder. If (A) the Company shall declare a dividend (or any other distribution in whatever form) on the Common Stock, (B) the Company shall declare a special nonrecurring cash dividend on or a redemption of the Common Stock, (C) the Company shall authorize the granting to all holders of the Common Stock of rights or warrants to subscribe for or purchase any shares of capital stock of any class or of any rights, (D) the approval of any stockholders of the Company shall be required in connection with any reclassification of the Common Stock, any consolidation or merger to which the Company is a party, any sale or transfer of all or substantially all of the assets of the Company, of any compulsory share exchange whereby the Common Stock is converted into other securities, cash or property or (E) the Company shall authorize the voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Company, then, in each case, the Company shall cause to be filed at each office or agency maintained for the purpose of conversion of this Note, and shall cause to be delivered to the Holder at its last address as it shall appear upon the Note Register, at least 20 calendar days prior to the applicable record or effective date hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose of such dividend, distribution, redemption, rights or warrants, or if a record is not to be taken, the date as of which the holders of the Common Stock of record to be entitled to such dividend, distributions, redemption, rights or warrants are to be determined or (y) the date on which such reclassification, consolidation, merger, sale, transfer or share exchange is expected to become effective or close, and the date as of which it is expected that holders of the Common Stock of record shall be entitled to exchange their shares of the Common Stock for securities, cash or other property deliverable upon such reclassification, consolidation, merger, sale, transfer or share exchange, provided that the failure to deliver such notice or any defect therein or in the delivery thereof shall not affect the validity of the corporate action required to be specified in such notice. The Holder is entitled to convert this Note during the 20-day period commencing on the date of such notice through the effective date of the event triggering such notice.

 

Section 6. Events of Default.

 

a)  “Event of Default” means, wherever used herein, any of the following events (whatever the reason for such event and whether such event shall be voluntary or involuntary or effected by operation of law or pursuant to any judgment, decree or order of any court, or any order, rule or regulation of any administrative or governmental body):

 

i. any default in the payment of (A) the principal amount of any Note or (B) interest and other amounts owing to a Holder on any Note, as and when the same shall become due and payable (whether on a Conversion Date or the Maturity Date or by acceleration or otherwise) which default, solely in the case of an interest payment or other default under clause (B) above, is not cured within five Trading Days;

 

ii. the Company shall fail to observe or perform any other covenant or agreement contained in the Notes which failure is not cured, if possible to cure, within the earlier to occur of (A) five Trading Days after notice of such failure sent by the Holder or by any other Holder and (B) ten Trading Days after the Company has become aware of such failure;

 

iii. any representation or warranty made in this Note or the Purchase Agreement, any written statement pursuant hereto or thereto or any other report, financial statement or certificate made or delivered to the Holder or any other Holder shall be untrue or incorrect in any material respect as of the date when made or deemed made; or

 

iv. the Company shall be subject to a Bankruptcy Event;

 

b)  Remedies Upon Event of Default. If any Event of Default occurs and is continuing without being waived by the Holder or cured by the Company, the outstanding principal amount of this Note, plus accrued but unpaid interest, and other amounts owing in respect thereof through the date of acceleration, shall become, at the Holder’s election, immediately due and payable in cash (the “Default Amount”). Upon the payment in full of the Default Amount, the Holder shall promptly surrender this Note to or as directed by the Company. In connection with such acceleration described herein, the Holder need not provide, and the Company hereby waives, any presentment, demand, protest or other notice of any kind, and the Holder may immediately and without expiration of any grace period enforce any and all of its rights and remedies hereunder and all other remedies available to it under applicable law. Such acceleration may be rescinded and annulled by Holder at any time prior to payment hereunder and the Holder shall have all rights as a holder of the Note until such time, if any, as the Holder receives full payment pursuant to this Section 7(b). No such rescission or annulment shall affect any subsequent Event of Default or impair any right consequent thereon.

 

Section 7. Miscellaneous.

 

a) Notices. Any and all notices or other communications or deliveries to be provided by the Holder hereunder, including, without limitation, any Notice of Conversion, shall be in writing and delivered personally, by electronic mail, or sent by a nationally recognized overnight courier service, addressed to the Company, at the address set forth above, Attention: John Bentivoglio, President and CEO, or by electronic mail to johnb@eventcardiogroup.ca or such other address as the Company may specify for such purpose by notice to the Holder delivered in accordance with this Section. Any and all notices or other communications or deliveries to be provided by the Company hereunder shall be in writing and delivered personally, by electronic mail, or sent by a nationally recognized overnight courier service addressed to the Holder at the electronic mail or other address of such Holder appearing on the signature page of the Purchase Agreement or in any transfer document delivered to the Company, as applicable, or such other address as such Holder may specify for such purpose by written notice to the Company delivered in accordance with this Section. Any notice or other communication or deliveries hereunder shall be deemed given and effective on the earliest of (i) the date of transmission, if such notice or communication is delivered via electronic mail at the address specified in this Section 8 prior to 5:30 p.m. (New York City time), (ii) the date immediately following the date of transmission, if such notice or communication is delivered via electronic mail at the address specified in this Section 8 between 5:30 p.m. (New York City time) and 11:59 p.m. (New York City time) on any date, (iii) the second Business Day following the date of timely delivered to a nationally recognized overnight courier service, or (iv) upon actual receipt by the party to whom such notice is required to be given. Refusal to accept delivery shall constitute delivery.

 

b) Absolute Obligation. Except as expressly provided herein, no provision of this Note shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of, and accrued interest, as applicable, on this Note at the time, place, and rate, and in the coin or currency, herein prescribed. This Note is a direct debt obligation of the Company. This Note ranks pari passu with all other Notes now or hereafter issued under the terms set forth herein.

 

c) Lost or Mutilated Debenture. If this Note shall be mutilated, lost, stolen or destroyed, the Company shall execute and deliver, in exchange and substitution for and upon cancellation of a mutilated Note, or in lieu of or in substitution for a lost, stolen or destroyed Note, a new Note for the principal amount of this Note so mutilated, lost, stolen or destroyed, but only upon receipt of evidence of such loss, theft or destruction of such Note, and of the ownership hereof, and a customary indemnity agreement reasonably satisfactory to the Company.

 

d) Governing Law. All questions concerning the construction, validity, enforcement and interpretation of this Note shall, to the greatest extent permitted by applicable law, be governed by and construed and enforced in accordance with the internal laws of the State of New York and federal laws of the United States of America, without regard to any principles of conflicts of law thereof that would defer to the substantive laws of any other jurisdiction. Each party agrees that all legal proceedings concerning the interpretation, enforcement and defense of the transactions contemplated by the Purchase Agreement (whether brought against a party hereto or its respective Affiliates, directors, officers, shareholders, employees or agents) shall be commenced in the state and federal courts sitting in the City of New York, Borough of Manhattan (the “New York Courts”). Each party hereto hereby irrevocably submits to the exclusive jurisdiction of the New York Courts for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein (including with respect to the enforcement of the Purchase Agreement), and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of such New York Courts, or such New York Courts are improper or inconvenient venue for such proceeding. The preceding consents to New York governing law and jurisdiction and venue in New York State's Supreme Court have been made by the parties in reliance (at least in part) on Sections 5-1401 and 5-1402 of the General Obligations Law of the State of New York, as amended (as and to the extent applicable), and other applicable law. Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Note and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by applicable law. In any action, suit or proceeding in any jurisdiction brought by any party against any other party, each party, knowingly and intentionally and to the fullest extent permitted by applicable law, hereby absolutely, unconditionally, irrevocably and expressly waives forever trial by jury. If either party shall commence an action or proceeding to enforce any provisions of this Note, then the prevailing party in such action or proceeding shall be reimbursed by the other party for its attorneys fees and other costs and expenses incurred in the investigation, preparation and prosecution of such action or proceeding.

 

e) Waiver. Any waiver by the Company or the Holder of a breach of any provision of this Note shall not operate as or be construed to be a waiver of any other breach of such provision or of any breach of any other provision of this Note. The failure of the Company or the Holder to insist upon strict adherence to any term of this Note on one or more occasions shall not be considered a waiver or deprive that party of the right thereafter to insist upon strict adherence to that term or any other term of this Note. Any waiver by the Company or the Holder must be in writing.

 

f)  Severability. If any provision of this Note is invalid, illegal or unenforceable, the balance of this Note shall remain in effect, and if any provision is inapplicable to any Person or circumstance, it shall nevertheless remain applicable to all other Persons and circumstances. If it shall be found that any interest or other amount deemed interest due hereunder violates the applicable law governing usury, the applicable rate of interest due hereunder shall automatically be lowered to equal the maximum rate of interest permitted under applicable law. The Company covenants (to the extent that it may lawfully do so) that it shall not at any time insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay, extension or usury law or other law which would prohibit or forgive the Company from paying all or any portion of the principal of or interest on this Note as contemplated herein, wherever enacted, now or at any time hereafter in force, or which may affect the covenants or the performance of this indenture, and the Company (to the extent it may lawfully do so) hereby expressly waives all benefits or advantage of any such law, and covenants that it will not, by resort to any such law, hinder, delay or impeded the execution of any power herein granted to the Holder, but will suffer and permit the execution of every such as though no such law has been enacted.

 

g)  Next Business Day. Whenever any payment or other obligation hereunder shall be due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day.

 

h)  Headings. The headings contained herein are for convenience only, do not constitute a part of this Note and shall not be deemed to limit or affect any of the provisions hereof.

 

i) Assumption.  Any successor to the Company or any surviving entity in a Fundamental Transaction shall (i) assume, prior to such Fundamental Transaction, all of the obligations of the Company under this Note and the other Transaction Documents pursuant to written agreements in form and substance satisfactory to the Holder (such approval not to be unreasonably withheld or delayed) and (ii) issue to the Holder a new promissory note of such successor entity evidenced by a written instrument substantially similar in form and substance to this Note, including, without limitation, having a principal amount and interest rate equal to the principal amount and the interest rate of this Note and having similar ranking to this Note, which shall be satisfactory to the Holder (any such approval not to be unreasonably withheld or delayed).  The provisions of this Section 8(i) shall apply similarly and equally to successive Fundamental Transactions and shall be applied without regard to any limitations of this Note.

 

j) Purchase Agreement. This Note is one of the Notes referred to in the Purchase Agreement. All of the applicable provisions of the Purchase Agreement are incorporated herein by reference and made a part hereof. In the event that any specific provision of this Note conflicts or is inconsistent with any specific term or provision contained in the Purchase Agreement, the specific term or provision of the Purchase Agreement shall control and be given effect. However, this Agreement contains provisions that are in addition to those contained in the Purchase Agreement, which each are cumulative with and not alternatives to each other, and which shall not be deemed or construed to be in conflict or inconsistent with the Purchase Agreement because they are not contained in it.

 

k) Amendment; Holder is a Party. This Note may not be supplemented, modified, amended, restated, waived, extended, discharged or terminated orally. This Note may only be (i) supplemented, modified, amended or restated in a writing signed by the Company and the Holder (or in the case of a restated or replacement Note, consented to in a separate writing by the Holder if the Holder elects not to sign such Debenture) and (ii) waived, extended, discharged or terminated in a writing signed by the party against whom such waiver, extension, discharge or termination would have to be enforced. By accepting this Note, the Holder acknowledges and agrees that the Holder (A) is a "party" and one of the "parties" for the purposes of this Note and (A) is contractually bound by the provisions hereof applicable to it as a party or one of the parties.

 

IN WITNESS WHEREOF, the Company has caused this Note to be duly executed by a duly authorized officer as of the date first above indicated.

  

		EVENT CARDIO GROUP, INC.
		By:/s/ John Bentivoglio
		John Bentivoglio
		President and CEO

 ANNEX A

 

NOTICE OF CONVERSION

 

The undersigned hereby elects to convert principal under the 8% Convertible Note due January 31, 2018 of Event Cardio Group, Inc., a Nevada corporation (the “Company”), into shares of common stock, par value $.001 per share (the “Common Stock”), of the Company according to the conditions hereof, as of the date written below. If shares of Common Stock are to be issued in the name of a person other than the undersigned, the undersigned will pay all transfer taxes payable with respect thereto and is delivering herewith such certificates and opinions as reasonably requested by the Company in accordance therewith. No fee will be charged to the holder for any conversion, except for such transfer taxes, if any.

  

Conversion calculations:

 

Date to Effect Conversion:

 

Principal Amount of Note to be Converted:

 

Payment of Interest in Common Stock __ yes __ no

If yes, $_____ of Interest Accrued on Account of Conversion at Issue.

 

Number of shares of Common Stock to be issued:

 

Signature:

 

Name:

 

Address:

 

Schedule 1

 

CONVERSION SCHEDULE

 

The 8% Convertible Note due on January 31, 2018 in the aggregate principal amount of $____________ are issued by Event Cardio Group, Inc. This Conversion Schedule reflects conversions made under Section 4 of the above referenced Note.

 

Dated:

 

 

Date of Conversion (or for first entry Original Issue Date)	Amount of Conversion	Aggregate Principal Amount Remaining Subsequent to Conversion (or original Principal Amount)	Company Attest

 

 

Annex I – Form of Warrant

 

Annex I – Form of Warrant

  

“THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT ARE BEING OFFERED TO INVESTORS WHO ARE NOT U.S. PERSONS (AS DEFINED IN REGULATION S UNDER THE SECURITIES ACT OF 1933, AS AMENDED (“THE SECURITIES ACT”)) AND WITHOUT REGISTRATION WITH THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION UNDER THE SECURITIES ACT IN RELIANCE UPON REGULATION S PROMULGATED UNDER THE SECURITIES ACT.”

 

“TRANSFER OF THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT IS PROHIBITED, EXCEPT IN ACCORDANCE WITH THE PROVISIONS OF REGULATION S, PURSUANT TO REGISTRATION UNDER THE SECURITIES ACT, OR PURSUANT TO AVAILABLE EXEMPTION FROM REGISTRATION. HEDGING TRANSACTIONS MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE WITH THE SECURITIES ACT.”

 

COMMON STOCK PURCHASE WARRANT

 

EVENT CARDIO GROUP, INC.

 

Warrant Shares: (Number to be inserted upon issuance)

 

Initial Exercise Date: ____ __, 20__

 

THIS COMMON STOCK PURCHASE WARRANT (the “Warrant”) certifies that, for value received, MEDPAC ASIA PACIFIC PTY. LTD. (Australian Company Number 604 389 577). (the “Holder”) is entitled, upon the terms and subject to the limitations on exercise and the conditions hereinafter set forth, at any time on or after the date hereof (the “Initial Exercise Date”) and on or prior to the close of business on the three year anniversary of the Initial Exercise Date (the “Termination Date”) but not thereafter, to subscribe for and purchase from Event Cardio Group, Inc., a Nevada corporation (the “Company”), up to ______ shares (the “Warrant Shares”) of common stock, par value $.001 per share, of the Company (the “Common Stock”). The purchase price of one share of Common Stock under this Warrant shall be equal to the Exercise Price, as defined in Section 2(b).

 

Section 1. Definitions. Capitalized terms used herein without definition shall have the following meaning:

 

“Business Day” means any day except Saturday, Sunday, any day which shall be a federal legal holiday in the United States or any day on which banking institutions in the State of New York are authorized or required by law or other governmental action to close.

 

“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

 

“Original Issue Date” means the date of the first issuance of the Notes, regardless of any transfers of any Note and regardless of the number of instruments which may be issued to evidence such Notes.

 

“Person” means an individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind.

 

“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

 

“Trading Day” means a day on which the principal Trading Market is open for business.

 

“Trading Market” means the following markets or exchanges on which the Common Stock is listed or quoted for trading on the date in question: the American Stock Exchange, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market, the New York Stock Exchange or the OTC Bulletin Board.

 

“VWAP” means, for any date, the price determined by the first of the following clauses that applies: (a) if the Common Stock is then listed or quoted on a Trading Market, the daily volume weighted average price of the Common Stock for such date (or the nearest preceding date) on the Trading Market on which the Common Stock is then listed or quoted for trading as reported by Bloomberg L.P. (based on a Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New York City time); (b) if the Common Stock is not then listed or quoted for trading on a Trading Market and if prices for the Common Stock are then reported in the “Pink Sheets” published by Pink Sheets, LLC (or a similar organization or agency succeeding to its functions of reporting prices), the most recent bid price per share of the Common Stock so reported; or (c) in all other cases, the fair market value of a share of Common Stock as determined by an independent appraiser selected in good faith by the Holder and reasonably acceptable to the Company.

 

Section 2. Exercise.

 

a)  Exercise of Warrant. Exercise of the purchase rights represented by this Warrant may be made, in whole or in part, at any time or times on or after the Initial Exercise Date and on or before the Termination Date by delivery to the Company of a duly executed facsimile copy of the Notice of Exercise Form annexed hereto (or such other office or agency of the Company as it may designate by notice in writing to the registered Holder at the address of such Holder appearing on the books of the Company); and, within three Trading Days of the date said Notice of Exercise is delivered to the Company, the Company shall have received payment of the aggregate Exercise Price of the shares thereby purchased by wire transfer or cashier’s check drawn on a United States bank. Notwithstanding anything herein to the contrary, the Holder shall not be required to physically surrender this Warrant to the Company until the Holder has purchased all of the Warrant Shares available hereunder and the Warrant has been exercised in full, in which case, the Holder shall surrender this Warrant to the Company for cancellation within three Trading Days of the date the final Notice of Exercise is delivered to the Company. Partial exercises of this Warrant resulting in purchases of a portion of the total number of Warrant Shares available hereunder shall have the effect of lowering the outstanding number of Warrant Shares purchasable hereunder in an amount equal to the applicable number of Warrant Shares purchased. The Holder and the Company shall maintain records showing the number of Warrant Shares purchased and the date of such purchases. The Company shall deliver any objection to any Notice of Exercise Form within three Business Days of receipt of such notice. In the event of any dispute or discrepancy, the records of the Company shall be controlling and determinative in the absence of manifest error. The Holder and any assignee, by acceptance of this Warrant, acknowledge and agree that, by reason of the provisions of this paragraph, following the purchase of a portion of the Warrant Shares hereunder, the number of Warrant Shares available for purchase hereunder at any given time may be less than the amount stated on the face hereof.

 

b)  Exercise Price. The exercise price per share of the Common Stock under this Warrant shall be $0.15, subject to adjustment hereunder (the “Exercise Price”).

 

c) Cashless Exercise. This Warrant also may be exercised by means of a “cashless exercise” in which the Holder shall be entitled to receive a certificate for the number of Warrant Shares equal to the quotient obtained by dividing [(A-B) (X)] by (A), where:

 

(A) = the VWAP on the Trading Day immediately preceding the date of such election;

 

(B) = the Exercise Price of this Warrant, as adjusted; and

 

(X) = the number of Warrant Shares issuable upon exercise of this Warrant in accordance with the terms of this Warrant by means of a cash exercise rather than a cashless exercise.

 

d)   Mechanics of Exercise.

 

i. Authorization of Warrant Shares. The Company covenants that all Warrant Shares which may be issued upon the exercise of the purchase rights represented by this Warrant will, upon exercise of the purchase rights represented by this Warrant, be duly authorized, validly issued, fully paid and nonassessable and free from all taxes, liens and charges created by the Company in respect of the issue thereof (other than taxes in respect of any transfer occurring contemporaneously with such issue).

 

ii. Delivery of Certificates Upon Exercise. Certificates for shares purchased hereunder shall be transmitted by the transfer agent of the Company to the Holder by crediting the account of the Holder’s prime broker with the Depository Trust Company through its Deposit Withdrawal Agent Commission (“DWAC”) system if the Company is a participant in such system, and otherwise by physical delivery to the address specified by the Holder in the Notice of Exercise within 3 Trading Days from the delivery to the Company of the Notice of Exercise Form, surrender of this Warrant (if required) and payment of the aggregate Exercise Price as set forth above (“Warrant Share Delivery Date”). This Warrant shall be deemed to have been exercised on the date the Exercise Price is received by the Company. The Warrant Shares shall be deemed to have been issued, and Holder or any other person so designated to be named therein shall be deemed to have become a holder of record of such shares for all purposes, as of the date the Warrant has been exercised by payment to the Company of the Exercise Price (or by cashless exercise, if permitted) and all taxes required to be paid by the Holder, if any, pursuant to Section 2(e)(vii) prior to the issuance of such shares, have been paid.

 

iii. Delivery of New Warrants Upon Exercise. If this Warrant shall have been exercised in part, the Company shall, at the request of a Holder and upon surrender of this Warrant certificate, at the time of delivery of the certificate or certificates representing Warrant Shares, deliver to Holder a new Warrant evidencing the rights of Holder to purchase the unpurchased Warrant Shares called for by this Warrant, which new Warrant shall in all other respects be identical with this Warrant.

                                                                                       

iv. No Fractional Shares or Scrip. No fractional shares or scrip representing fractional shares shall be issued upon the exercise of this Warrant. As to any fraction of a share which Holder would otherwise be entitled to purchase upon such exercise, the Company shall at its election, either pay a cash adjustment in respect of such final fraction in an amount equal to such fraction multiplied by the Exercise Price or round up to the next whole share.

                                                                                         

v. Charges, Taxes and Expenses. Issuance of certificates for Warrant Shares shall be made without charge to the Holder for any issue or transfer tax or other incidental expense in respect of the issuance of such certificate, all of which taxes and expenses shall be paid by the Company, and such certificates shall be issued in the name of the Holder or in such name or names as may be directed by the Holder; provided, however, that in the event certificates for Warrant Shares are to be issued in a name other than the name of the Holder, this Warrant when surrendered for exercise shall be accompanied by the Assignment Form attached hereto duly executed by the Holder; and the Company may require, as a condition thereto, the payment of a sum sufficient to reimburse it for any transfer tax incidental thereto.

                                                                                      

vi. Closing of Books. The Company will not close its stockholder books or records in any manner which prevents the timely exercise of this Warrant, pursuant to the terms hereof.

 

Section 3. Certain Adjustments.

 

a) Stock Dividends and Splits. If the Company, at any time while this Warrant is outstanding: (A) pays a stock dividend or otherwise make a distribution or distributions on shares of its Common Stock or any other equity or equity equivalent securities payable in shares of Common Stock (which, for avoidance of doubt, shall not include any shares of Common Stock issued by the Company upon exercise of this Warrant), (B) subdivides outstanding shares of Common Stock into a larger number of shares, (C) combines (including by way of reverse stock split) outstanding shares of Common Stock into a smaller number of shares, or (D) issues by reclassification of shares of the Common Stock any shares of capital stock of the Company, then in each case the Exercise Price shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock (excluding treasury shares, if any) outstanding immediately before such event and of which the denominator shall be the number of shares of Common Stock outstanding immediately after such event and the number of shares issuable upon exercise of this Warrant shall be proportionately adjusted. Any adjustment made pursuant to this Section 3(a) shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or re-classification.

 

b) Fundamental Transaction. If, at any time while this Warrant is outstanding, (A) the Company effects any merger or consolidation of the Company with or into another Person, (B) the Company effects any sale of all or substantially all of its assets in one or a series of related transactions, (C) any tender offer or exchange offer (whether by the Company or another Person) is completed pursuant to which holders of Common Stock are permitted to tender or exchange their shares for other securities, cash or property, or (D) the Company effects any reclassification of the Common Stock or any compulsory share exchange pursuant to which the Common Stock is effectively converted into or exchanged for other securities, cash or property (each “Fundamental Transaction”), then, upon any subsequent exercise of this Warrant, the Holder shall have the right to receive, for each Warrant Share that would have been issuable upon such exercise immediately prior to the occurrence of such Fundamental Transaction, the number of shares of Common Stock of the successor or acquiring corporation or of the Company, if it is the surviving corporation, and any additional consideration (the “Alternate Consideration”) receivable as a result of such merger, consolidation or disposition of assets by a Holder of the number of shares of Common Stock for which this Warrant is exercisable immediately prior to such event. For purposes of any such exercise, the determination of the Exercise Price shall be appropriately adjusted to apply to such Alternate Consideration based on the amount of Alternate Consideration issuable in respect of one share of Common Stock in such Fundamental Transaction, and the Company shall apportion the Exercise Price among the Alternate Consideration in a reasonable manner reflecting the relative value of any different components of the Alternate Consideration. If holders of Common Stock are given any choice as to the securities, cash or property to be received in a Fundamental Transaction, then the Holder shall be given the same choice as to the Alternate Consideration it receives upon any exercise of this Warrant following such Fundamental Transaction. To the extent necessary to effectuate the foregoing provisions, any successor to the Company or surviving entity in such Fundamental Transaction shall issue to the Holder a new warrant consistent with the foregoing provisions and evidencing the Holder’s right to exercise such warrant into Alternate Consideration. The terms of any agreement pursuant to which a Fundamental Transaction is effected shall include terms requiring any such successor or surviving entity to comply with the provisions of this Section 3(b) and insuring that this Warrant (or any such replacement security) will be similarly adjusted upon any subsequent transaction analogous to a Fundamental Transaction. Notwithstanding anything to the contrary, in the event of a Fundamental Transaction that is (1) an all cash transaction, (2) a “Rule 13e-3 transaction” as defined in Rule 13e-3 under the Securities Exchange Act of 1934, as amended, or (3) a Fundamental Transaction involving a person or entity not traded on a national securities exchange, the Nasdaq Global Select Market, the Nasdaq Global Market, the Nasdaq Capital Market, the Company or any successor entity shall pay at the Holder’s option, exercisable at any time concurrently with or within 30 days after the consummation of the Fundamental Transaction, an amount of cash equal to the value of this Warrant as determined in accordance with the Black-Scholes option pricing formula using an expected volatility equal to the 100 day historical price volatility obtained from the HVT function on Bloomberg L.P. as of the trading day immediately prior to the public announcement of the Fundamental Transaction. 

 

c) Calculations. All calculations under this Section 3 shall be made to the nearest cent or the nearest 1/100th of a share, as the case may be. For purposes of this Section 3, the number of shares of Common Stock deemed to be issued and outstanding as of a given date shall be the sum of the number of shares of Common Stock (excluding treasury shares, if any) issued and outstanding.

 

d) Voluntary Adjustment By Company. The Company may at any time during the term of this Warrant reduce the then current Exercise Price to any amount and for any period of time deemed appropriate by the Board of Directors of the Company.

 

e)  Notice to Holder.

                                                                                            

i. Adjustment to Exercise Price. Whenever the Exercise Price is adjusted pursuant to any provision of this Section 3, the Company shall promptly mail to the Holder a notice setting forth the Exercise Price after such adjustment and setting forth a brief statement of the facts requiring such adjustment. If the Company enters into a Variable Rate Transaction (as defined in the Purchase Agreement) despite the prohibition thereon in the Purchase Agreement, the Company shall be deemed to have issued Common Stock or Common Stock Equivalents at the lowest possible conversion or exercise price at which such securities may be converted or exercised.

                                                                                         

ii. Notice to Allow Exercise by Holder. If (A) the Company shall declare a dividend (or any other distribution in whatever form) on the Common Stock; (B) the Company shall declare a special nonrecurring cash dividend on or a redemption of the Common Stock; (C) the Company shall authorize the granting to all holders of the Common Stock rights or warrants to subscribe for or purchase any shares of capital stock of any class or of any rights; (D) the approval of any stockholders of the Company shall be required in connection with any reclassification of the Common Stock, any consolidation or merger to which the Company is a party, any sale or transfer of all or substantially all of the assets of the Company, of any compulsory share exchange whereby the Common Stock is converted into other securities, cash or property; (E) the Company shall authorize the voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Company; then, in each case, the Company shall cause to be mailed to the Holder at its last address as it shall appear upon the Warrant Register of the Company, at least 20 calendar days prior to the applicable record or effective date hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose of such dividend, distribution, redemption, rights or warrants, or if a record is not to be taken, the date as of which the holders of the Common Stock of record to be entitled to such dividend, distributions, redemption, rights or warrants are to be determined or (y) the date on which such reclassification, consolidation, merger, sale, transfer or share exchange is expected to become effective or close, and the date as of which it is expected that holders of the Common Stock of record shall be entitled to exchange their shares of the Common Stock for securities, cash or other property deliverable upon such reclassification, consolidation, merger, sale, transfer or share exchange; provided that the failure to mail such notice or any defect therein or in the mailing thereof shall not affect the validity of the corporate action required to be specified in such notice. The Holder is entitled to exercise this Warrant during the 20-day period commencing on the date of such notice to the effective date of the event triggering such notice.

 

Section 4. Transfer of Warrant.

 

a) Transferability. Subject to compliance with any applicable securities laws and the conditions set forth in Section 4(d) hereof and to the provisions of Section 4.1 of the Purchase Agreement, this Warrant and all rights hereunder (including, without limitation, any registration rights) are transferable, in whole or in part, upon surrender of this Warrant at the principal office of the Company or its designated agent, together with a written assignment of this Warrant substantially in the form attached hereto duly executed by the Holder or its agent or attorney and funds sufficient to pay any transfer taxes payable upon the making of such transfer. Upon such surrender and, if required, such payment, the Company shall execute and deliver a new Warrant or Warrants in the name of the assignee or assignees and in the denomination or denominations specified in such instrument of assignment, and shall issue to the assignor a new Warrant evidencing the portion of this Warrant not so assigned, and this Warrant shall promptly be cancelled. A Warrant, if properly assigned, may be exercised by a new holder for the purchase of Warrant Shares without having a new Warrant issued.

 

b) New Warrants. This Warrant may be divided or combined with other Warrants upon presentation hereof at the aforesaid office of the Company, together with a written notice specifying the names and denominations in which new Warrants are to be issued, signed by the Holder or its agent or attorney. Subject to compliance with Section 4(a), as to any transfer which may be involved in such division or combination, the Company shall execute and deliver a new Warrant or Warrants in exchange for the Warrant or Warrants to be divided or combined in accordance with such notice.

 

c) Warrant Register. The Company shall register this Warrant, upon records to be maintained by the Company for that purpose (the “Warrant Register”), in the name of the record Holder hereof from time to time. The Company may deem and treat the registered Holder of this Warrant as the absolute owner hereof for the purpose of any exercise hereof or any distribution to the Holder, and for all other purposes, absent actual notice to the contrary.

 

d) Transfer Restrictions. If, at the time of the surrender of this Warrant in connection with any transfer of this Warrant, the transfer of this Warrant shall not be registered pursuant to an effective registration statement under the Securities Act and under applicable state securities or blue sky laws, the Company may require, as a condition of allowing such transfer, that (i) the Holder or transferee of this Warrant, as the case may be, furnish to the Company a written opinion of counsel acceptable to the Company (which opinion shall be in form, substance and scope customary for opinions of counsel in comparable transactions) to the effect that such transfer may be made without registration under the Securities Act and under applicable state securities or blue sky laws, and (ii) the Holder or transferee execute and deliver to the Company an investment letter in form and substance acceptable to the Company, and (iii) the transferee be an “accredited investor” as defined in Rule 501(a)(1), (a)(2), (a)(3), (a)(7), or (a)(8) promulgated under the Securities Act or a “qualified institutional buyer” as defined in Rule 144A(a) promulgated under the Securities Act.

 

Section 5. Miscellaneous.

 

a) No Rights as Shareholder Until Exercise. This Warrant does not entitle the Holder to any voting rights or other rights as a shareholder of the Company prior to the exercise hereof as set forth in Section 2(e)(ii).

 

b) Loss, Theft, Destruction or Mutilation of Warrant. The Company covenants that upon receipt by the Company of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of this Warrant or any stock certificate relating to the Warrant Shares, and in case of loss, theft or destruction, of indemnity or security reasonably satisfactory to it (which, in the case of the Warrant, shall not include the posting of any bond), and upon surrender and cancellation of such Warrant or stock certificate, if mutilated, the Company will make and deliver a new Warrant or stock certificate of like tenor and dated as of such cancellation, in lieu of such Warrant or stock certificate.

 

c) Saturdays, Sundays, Holidays, etc. If the last or appointed day for the taking of any action or the expiration of any right required or granted herein shall not be a Business Day, then such action may be taken or such right may be exercised on the next succeeding Business Day.

 

d) Authorized Shares.

 

The Company covenants that during the period the Warrant is outstanding, it will reserve from its authorized and unissued Common Stock a sufficient number of shares to provide for the issuance of the Warrant Shares upon the exercise of any purchase rights under this Warrant. The Company further covenants that its issuance of this Warrant shall constitute full authority to its officers who are charged with the duty of executing stock certificates to execute and issue the necessary certificates for the Warrant Shares upon the exercise of the purchase rights under this Warrant. The Company will take all such reasonable action as may be necessary to assure that such Warrant Shares may be issued as provided herein without violation of any applicable law or regulation, or of any requirements of the Trading Market upon which the Common Stock may be listed.

 

Except and to the extent as waived or consented to by the Holder, the Company shall not by any action, including, without limitation, amending its certificate of incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such actions as may be necessary or appropriate to protect the rights of Holder as set forth in this Warrant against impairment. Without limiting the generality of the foregoing, the Company will (a) not increase the par value of any Warrant Shares above the amount payable therefor upon such exercise immediately prior to such increase in par value, (b) take all such action as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable Warrant Shares upon the exercise of this Warrant, and (c) use commercially reasonable efforts to obtain all such authorizations, exemptions or consents from any public regulatory body having jurisdiction thereof as may be necessary to enable the Company to perform its obligations under this Warrant.

 Before taking any action which would result in an adjustment in the number of Warrant Shares for which this Warrant is exercisable or in the Exercise Price, the Company shall obtain all such authorizations or exemptions thereof, or consents thereto, as may be necessary from any public regulatory body or bodies having jurisdiction thereof.

 

e) Jurisdiction. All questions concerning the construction, validity, enforcement and interpretation of this Warrant shall be determined in accordance with the provisions of the Purchase Agreement.

 

f) Restrictions. The Holder acknowledges that the Warrant Shares acquired upon the exercise of this Warrant, if not registered, will have restrictions upon resale imposed by state and federal securities laws.

 

g) Nonwaiver and Expenses. No course of dealing or any delay or failure to exercise any right hereunder on the part of Holder shall operate as a waiver of such right or otherwise prejudice Holder’s rights, powers or remedies, notwithstanding the fact that all rights hereunder terminate on the Termination Date. If the Company willfully and knowingly fails to comply with any provision of this Warrant, which results in any material damages to the Holder, the Company shall pay to Holder such amounts as shall be sufficient to cover any costs and expenses including, but not limited to, reasonable attorneys’ fees, including those of appellate proceedings, incurred by Holder in collecting any amounts due pursuant hereto or in otherwise enforcing any of its rights, powers or remedies hereunder.

 

h) Notices. Any notice, request or other document required or permitted to be given or delivered to the Holder by the Company shall be delivered in accordance with the notice provisions of the Purchase Agreement.

 

i) Limitation of Liability. No provision hereof, in the absence of any affirmative action by Holder to exercise this Warrant to purchase Warrant Shares, and no enumeration herein of the rights or privileges of Holder, shall give rise to any liability of Holder for the purchase price of any Common Stock or as a stockholder of the Company, whether such liability is asserted by the Company or by creditors of the Company.

 

j) Remedies. Holder, in addition to being entitled to exercise all rights granted by law, including recovery of damages, will be entitled to specific performance of its rights under this Warrant. The Company agrees that monetary damages would not be adequate compensation for any loss incurred by reason of a breach by it of the provisions of this Warrant and hereby agrees to waive and not to assert the defense in any action for specific performance that a remedy at law would be adequate.

 

k) Successors and Assigns. Subject to applicable securities laws, this Warrant and the rights and obligations evidenced hereby shall inure to the benefit of and be binding upon the successors of the Company and the successors and permitted assigns of Holder. The provisions of this Warrant are intended to be for the benefit of all Holders from time to time of this Warrant and shall be enforceable by any such Holder or holder of Warrant Shares.

 

l) Amendment. This Warrant may be modified or amended or the provisions hereof waived with the written consent of the Company and the Holder.

 

m) Severability. Wherever possible, each provision of this Warrant shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Warrant shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provisions or the remaining provisions of this Warrant.

 

n) Headings. The headings used in this Warrant are for the convenience of reference only and shall not, for any purpose, be deemed a part of this Warrant.

 

IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by its officer thereunto duly authorized as of the date first above indicated.

 

		EVENT CARDIO GROUP, INC.
		By:/s/ John Bentivoglio
		John Bentivoglio
		President and CEO

NOTICE OF EXERCISE

 

To: EVENT CARDIO GROUP, INC.

 

 (1) The undersigned hereby elects to purchase ________ Warrant Shares of the Company pursuant to the terms of the attached Warrant (only if exercised in full), and tenders herewith payment of the exercise price in full, together with all applicable transfer taxes, if any.

 

(2) Payment shall take the form of (check applicable box):

 

[ ] in lawful money of the United States; or

 

[ ] the cancellation of such number of Warrant Shares as is necessary, in accordance with the formula set forth in subsection 2(c), to exercise this Warrant with respect to the maximum number of Warrant Shares purchasable pursuant to the cashless exercise procedure set forth in subsection 2(c).

 

(3) Please issue a certificate or certificates representing said Warrant Shares in the name of the undersigned or in such other name as is specified below:

_______________________________

  

The Warrant Shares shall be delivered to the following DWAC Account Number or by physical delivery of a certificate to:

 

_______________________________

 

_______________________________

 

_______________________________

 

(4) Non-US_Person. The undersigned is an not a “US Person” as defined in Rule 902 (k) of Regulation S promulgated under the Securities Act of 1933, as amended.

 

[SIGNATURE OF HOLDER]

 

Name of Investing Entity:

Signature of Authorized Signatory of Investing Entity:

Name of Authorized Signatory:

Title of Authorized Signatory:

Date:

 

 ASSIGNMENT FORM

 

(To assign the foregoing warrant, execute
this form and supply required information.
Do not use this form to exercise the warrant.) 

 

FOR VALUE RECEIVED, [____] all of or [_______] shares of the foregoing Warrant and all rights evidenced thereby are hereby assigned to

 

		Whose address is
.
	Dated:		,
	Holder’s Signature:
	Holders Address:
Signature Guaranteed:

 

 

NOTE: The signature to this Assignment Form must correspond with the name as it appears on the face of the Warrant, without alteration or enlargement or any change whatsoever, and must be guaranteed by a bank or trust company. Officers of corporations and those acting in a fiduciary or other representative capacity should file proper evidence of authority to assign the foregoing Warrant.

 Exhibit 31

 

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

AND CHIEF FINANCIAL OFFICER

PURSUANT TO RULE 13a-14(a) UNDER THE EXCHANGE ACT

 

I, John Bentivoglio, Chief Executive Officer Acting Chief Financial Officer (Principal Executive Officer and Principal Accounting Officer) of the registrant, certify that:

 

1.

I have reviewed this annual report on Form 10-K of Event Cardio Group Inc.;

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, in light of the circumstances under which such statements were 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.

I am 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-15d-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 my supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, 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 my 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 my 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.

I have disclosed, based on my most recent evaluation of internal controls 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: December 14, 2015

John Bentivoglio

Chief Executive Officer

Acting Chief Financial Officer

(Principal Executive Officer and Principal Accounting Officer)

Exhibit 32

  

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 Annual Report on Form 10-K of Event Cardio Group Inc. (the "Registrant") for the year ended August 31, 2015 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, John Bentivoglio, Chief Executive Officer and acting Chief Financial Officer (Principal Executive Officer and Principal Accounting Officer) of the Registrant, certify, in accordance with 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 Registrant

 

Date: December 14, 2015

John Bentivoglio

Chief Executive Officer

Acting Chief Financial Officer

(Principal Executive Officer and Principal Accounting Officer)

v3.3.1.900

Document and Entity Information - USD ($)	12 Months Ended
	Aug. 31, 2015	Dec. 01, 2015	Feb. 27, 2015
Document And Entity Information
Entity Registrant Name	Event Cardio Group Inc.
Entity Central Index Key	0001394130
Document Type	10-K
Document Period End Date	Aug. 31, 2015
Amendment Flag	false
Current Fiscal Year End Date	--08-31
Is Entity a Well-known Seasoned Issuer?	No
Is Entity a Voluntary Filer?	No
Is Entity's Reporting Status Current?	Yes
Entity Filer Category	Smaller Reporting Company
Entity Public Float			$ 1,576,032
Entity Common Stock, Shares Outstanding		113,597,702
Document Fiscal Period Focus	FY
Document Fiscal Year Focus	2014

v3.3.1.900

Balance Sheets - USD ($)	Aug. 31, 2015	Aug. 31, 2014
Current Assets
Cash	$ 32,427	$ 86,617
Prepaid expenses	568,537
Financing costs, net	105,999
Total Current Assets	706,963	$ 86,617
Prepaid expenses - non-current portion	392,516
Property and Equipment, net	1,214	$ 2,960
Deposit on equipment purchase	$ 150,000
Financing costs, net		$ 40,097
TOTAL ASSETS	$ 1,250,693	129,674
Current Liabilities
Accounts payable	598,835	56,197
Due to related parties	55,864	$ 74,423
Notes payable - related parties	549,502
Total Current Liabilities	1,204,201	$ 130,620
Convertible Notes Payable	$ 525,000
Notes Payable - Related Parties		$ 384,978
TOTAL LIABILITIES	$ 1,729,201	515,598
Stockholders' Deficit
Preferred stock, $0.001 par value; 10,000,000 shares authorized, 10,000,000 shares issued and outstanding	10,000	10,000
Common stock,190,000,000 shares authorized at $0.001 par value, 79,500,000 shares issued and outstanding at August 31, 2014 and 109,460,321 at August 31, 2015	109,460	$ 79,500
Additional paid in capital	2,110,237
Equity instruments to be issued	168,950
Accumulated other comprehensive income	103,432	$ 4,999
Accumulated deficit	(2,980,587)	(467,483)
Total Event Cardio Group Inc. stockholders' equity (deficiency)	$ (478,508)	(372,984)
Non-controlling interest		(12,940)
TOTAL STOCKHOLDERS' DEFICIT	$ (478,508)	(385,924)
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT	$ 1,250,693	$ 129,674

v3.3.1.900

Balance Sheets (Parenthetical) - $ / shares	Aug. 31, 2015	Aug. 31, 2014
Statement of Financial Position [Abstract]
Preferred Stock Par Value	$ 0.001	$ 0.001
Preferred Stock Shares Authorized	10,000,000	10,000,000
Preferred Stock Shares Issued	10,000,000	10,000,000
Preferred Stock Shares Outstanding	10,000,000	10,000,000
Common Stock Par Value	$ 0.001	$ 0.001
Common Stock Shares Authorized	190,000,000	190,000,000
Common Stock Shares Issued	109,460,321	79,500,000
Common Stock Shares Outstanding	109,460,321	79,500,000

v3.3.1.900

Statements of Operations - USD ($)	12 Months Ended
	Aug. 31, 2015	Aug. 31, 2014
Income Statement [Abstract]
Revenue
Operating Expenses
General and administrative	$ 1,185,356	$ 122,421
Research and development - related party	952,188	$ 41,756
Research and development - other	270,633
Total Operating Expenses	2,408,177	$ 164,177
Loss from Operations	(2,408,177)	$ (164,177)
Other Expenses
Interest expense - related parties	71,104
Interest expense - other	$ 14,000
Impairment of goodwill		$ 181,297
Loss before Income Taxes	$ (2,493,281)	$ (345,474)
Provision for Income Taxes
Net Loss	$ (2,493,281)	$ (345,474)
Net loss attributable to non-controlling interests		12,940
Net loss attributable to Event Cardio Group Inc. stockholders	$ (2,493,281)	(332,534)
Other Comprehensive Income
Foreign currency translation adjustment	98,433	3,102
Comprehensive Loss	$ (2,394,848)	$ (342,372)
Comprehensive loss attributable to non-controlling interests
Comprehensive loss attributable to Event Cardio Group Inc. stockholders	$ (2,394,848)	$ (342,372)
Loss per Share:
Basic and Diluted loss per share	$ (0.03)	$ (0.00)
Weighted Average Number of Shares Outstanding Basic and Diluted	95,254,771	79,500,000

v3.3.1.900

Shareholders Equity - USD ($)	Common Stock	Preferred Stock	Additional Paid-In Capital	Equity Instruments to be Issued	Accumulated Other Comprehensive Income	Accumulated Deficit	Noncontrolling Interest	Total
Beginning Balance, Shares at Aug. 31, 2013	2,680
Beginning Balance, Value at Aug. 31, 2013	$ 263				$ 1,897	$ (45,712)		$ (43,552)
Net comprehensive income (loss)					$ 3,102	(345,474)		$ (342,372)
Effect of reverse merger, shares	79,497,320	10,000,000
Effect of reverse merger, value	$ 79,237	$ 10,000				(89,237)
Issued for services, Value
Ending Balance, Shares at Aug. 31, 2014	79,500,000	10,000,000
Ending Balance, Value at Aug. 31, 2014	$ 79,500	$ 10,000			$ 4,999	(467,483)	$ (12,940)	$ (385,924)
Net comprehensive income (loss)					$ 98,433	(2,493,281)		$ (2,394,848)
Effect of reverse merger, shares	6,882,773
Effect of reverse merger, value	$ 6,883					$ (19,823)	$ 12,940
Issued for cash, Shares	3,950,000
Issued for cash, Value	$ 3,950		$ 303,050	$ 65,000				$ 372,000
Issued as settlement of payable pursuant to license agreement, Shares	2,827,548
Issued as settlement of payable pursuant to license agreement, Value	$ 2,827		373,237					$ 376,064
Issued for services, Shares	16,300,000							12,430,000
Issued for services, Value	$ 16,300		1,433,950	$ 103,950				$ 1,450,250
Ending Balance, Shares at Aug. 31, 2015	109,460,321	10,000,000
Ending Balance, Value at Aug. 31, 2015	$ 109,460	$ 10,000	$ 2,110,237	$ 168,950	$ 103,432	$ (2,980,587)		$ (478,508)

v3.3.1.900

Statements of Cash Flows - USD ($)	12 Months Ended
	Aug. 31, 2015	Aug. 31, 2014
Cash Flows from Operating Activities
Net loss	$ (2,493,281)	$ (345,474)
Adjustments to reconcile net loss to net cash used in operating activities:
Amortization of prepaid expenses	500,686
Depreciation of property and equipment	1,328	$ 1,490
Amortization of financing costs	31,712	$ 7,087
Stock based compensation	$ 518,125
Impairment of goodwill		$ 181,297
Changes in assets and liabilities:
Prepaid expenses	$ (135,550)	23,994
Accounts payable	542,638	48,035
Net cash used in operating activities	(1,034,342)	$ (83,571)
Cash Flows from Investing Activities
Deposit on equipment purchase	$ (150,000)
Acquisition of subsidiary		$ (181,297)
Net cash used in investing activities	$ (150,000)	(181,297)
Cash Flows from Financing Activities
Repayments of due to related parties	$ (9,898)	(13,744)
Advances to related parties		12,736
Proceeds from notes payable - related parties	$ 268,389	$ 384,978
Proceeds from convertible notes payable	500,000
Proceeds from issuance of common shares	307,000
Proceeds received on equity instruments to be issued	$ 65,000
Payment of financing costs		$ (47,184)
Net cash provided by financing activities	$ 1,130,491	336,786
Effect of exchange rate on cash	(339)	3,218
Increase (Decrease) in Cash	(54,190)	75,136
Cash, beginning of year	86,617	11,481
Cash, end of year	$ 32,427	$ 86,617
Cash paid during the year for:
Interest
Taxes
Non-Cash Supplemental Cash Flow Information:
Issuance of common stock for services recorded as prepaid expense	$ 955,125

v3.3.1.900

1. OVERVIEW	12 Months Ended
	Aug. 31, 2015
Accounting Policies [Abstract]
1. OVERVIEW	1. OVERVIEW   Description of Business   Event Cardio Group Inc. ("the Company") was incorporated under the name Sunrise Holdings Limited on October 26, 2005 under the laws of Nevada and changed its name to Event Cardio Group Inc. on November 7, 2014. The Company is developing a cardiac monitoring device based on a wireless and leadless advance cardiac monitor. Upon completion of the development the device will collect medical data and transmit it to physicians for diagnostic evaluation. The Company also has a license agreement to distribute a patented product in the use of breast disease detection.   On September 8, 2014, the Company entered into a share exchange agreement with 2340960 Ontario Inc.'s shareholders whereby the Company acquired all of the issued and outstanding common shares of 2340960 Ontario Inc. in exchange for 79,500,000 common shares of the Company. Upon completion of this transaction, the shareholders of 2340960 Ontario Inc. held approximately 93.6% of voting control of the Company. This transaction, has been accounted for as a reverse merger with 2340960 Ontario Inc. being the accounting acquirer and the Company being the acquiree. In connection with this transaction, the Company changed its fiscal year end from September 30th to August 31st.    Going Concern   The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The Company has not generated any revenue since inception, has incurred losses, and has an accumulated deficit of $2,980,587 as of August 31, 2015. These factors among others raise substantial doubt about the ability of the Company to continue as a going concern.   The continuation of the Company as a going concern is dependent upon financial support from its stockholders, the ability of the Company to obtain necessary equity financing to continue operations, successfully locating and negotiating with other business entities for potential acquisitions and/or acquiring new clients to generate revenues. There is no assurance that the Company will ever be profitable. These financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result should the Company be unable to continue as a going concern.   Basis of Presentation   These financial statements include the accounts of the Company and its wholly owned subsidiaries 2340960 Ontario Inc. and EFIL Sub of ECG Inc. All inter-company accounts and transactions have been eliminated.   The financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America ("GAAP") and are presented in United States Dollars.   The Company has elected to adopt early application of Accounting Standards Update No. 2014-10, Development Stage Entities (Topic 915): Elimination of Certain Financial Reporting Requirements and does not present or disclose inception-to-date information and other remaining disclosure requirements of Topic 915.

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2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES	12 Months Ended
	Aug. 31, 2015
Accounting Policies [Abstract]
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES	2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES   Use of Estimates   In preparing these financial statements in conformity with GAAP, management is required to make estimates and assumptions that may affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amount of revenues and expenses during the reporting years. Actual results could differ from those estimates.   Fair Value Measurements   ASC 820, “Fair Value Measurements”, requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. ASC 820 prioritizes the inputs into three levels that may be used to measure fair value: Level 1, defined as observable inputs such as quoted prices in active markets for identical assets or liabilities; Level 2, inputs other than level one that are either directly or indirectly observable such as quoted prices for identical or similar assets or liabilities on markets that are not active; and Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions. The Company had no assets or liabilities required to be recorded at fair value on a recurring basis as of August 31, 2015 or August 31, 2014.   The estimated fair value of certain financial instruments, including cash and cash equivalents, and accounts payable are carried at historical cost basis, which approximates their fair values because of the short-term nature of these instruments. The carrying amounts of our short and long term credit obligations approximate fair value because the effective yields on these obligations, which include contractual interest rates taken together with other features  are comparable to rates of returns for instruments of similar credit risk.   Share Based Compensation   The Company applies ASC 718 Share-Based Compensation and ASC 505 Equity to account for service provider share-based payments. In accordance with ASC 718 and ASC 505, the Company determines whether a share based payment should be classified and accounted for as a liability award or equity award.   All grants of share-based payments to service providers are classified as equity awards and are recognized in the financial statements over the period in which the services are received based on the fair value determined as of the measurement date.   Included in prepaid expenses on the accompanying balance sheet at August 31, 2015 is $521,105 of the unamortized portion of share based payments for services to be rendered.   Cash and Cash Equivalents   The Company considers all highly-liquid investments with maturities of three months or less when purchased to be cash equivalents. The Company had no cash equivalents as of August 31, 2015 or August 31, 2014.   Concentration of Credit Risk   Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and cash equivalents. The Company places its cash with high quality banking institutions.   Income Taxes   Under ASC 740, "Income Taxes", deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Valuation allowances are established when it is more likely than not that some or all of the deferred tax assets will not be realized.   In assessing the realization of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. Based on the assessment, the Company has established a full valuation allowance against all of the deferred tax assets for every period because it is more likely than not that all of the deferred tax assets will not be realized.   The Company files income tax returns in Canada and the United States with varying statutes of limitations. The Company's policy is to recognize interest expense and penalties related to income tax matters as a component of our provision for income taxes.   Foreign Currency Translation   The Company's reporting and functional currency is the U.S. dollar. The Company's Canadian operation's functional currency is the Canadian dollar. The Company's U.S. subsidiary's functional currency is the U.S. dollar.   Transactions originating in Canadian dollars are translated to the functional currency of the US dollar as follows: using year end rates of exchange for assets and liabilities, average rates of exchange for the period of transactions for revenues and expenses and historical rates for equity.   The financial statements of the Company's Canadian operations are translated from the functional currency of the Canadian dollar into the reporting currency of the United States dollar in accordance with ASC 830, Foreign Currency Matters, using year end rates of exchange for assets and liabilities, average rates of exchange for the period for revenues and expenses and historical rates for equity.   Translation adjustments resulting from the process of translating the functional currency of Canadian dollar Canadian operation's financial statements into the reporting currency of U.S. dollar financial statements are included in determining comprehensive income. As of August 31, 2015 and August 31, 2014, the cumulative translation adjustment of $103,432 and $4,999 respectively was classified as accumulated other comprehensive income in the stockholders' equity section of the balance sheet. For the years ended August 31, 2015 and August 31, 2014, the foreign currency translation adjustment to accumulated other comprehensive income was $98,433 and $3,102 respectively.   Net Income (Loss) per Common Share   The Company computes net income (loss) per share in accordance with ASC 260, "Earnings per Share". ASC 260 requires presentation of both basic and diluted earnings (loss) per share on the face of the income statement. Basic EPS is computed by dividing net income (loss) available to common shareholders by the weighted average number of common shares outstanding during the year. Diluted EPS gives effect to all dilutive potential common shares outstanding during the year including stock options, using the treasury stock method. In computing diluted EPS, the average stock price for the year is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential common shares if their effect is antidilutive.   Comprehensive Loss   Comprehensive loss is defined to include all changes in equity except those resulting from investments by owners and distributions to owners. Among other disclosures, Accounting Standards Codification (ASC) 200, Comprehensive Income, requires that all items that are required to be recognized under current accounting standards as components of comprehensive income be reported in a financial statement that is displayed with the same prominence as other financial statements. For the year presented, the Company's comprehensive loss includes net loss and foreign currency translation adjustments and is presented in the statement of comprehensive loss.    Property and Equipment   Property and equipment consists of computer equipment and is stated at cost. Computer equipment is depreciated using the straight-line method over the estimated service life of three years. Maintenance and repairs are expensed as incurred and improvements are capitalized. Gains or losses on the disposition of property and equipment are recorded upon disposal.   Research and Development Expenses   All research and development costs are expensed as incurred.   Impairment of Long-Lived Assets   Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset.   If the carrying amount of an asset exceeds its undiscounted estimated future cash flows, an impairment review is performed. An impairment charge is recognized in the amount by which the carrying amount of the asset exceeds the fair value of the asset. Assets to be disposed of would be separately presented in the balance sheet and reported at the lower of the carrying amount or fair value less costs to sell, and are no longer depreciated. The assets and liabilities of a disposed group classified as held for sale would be presented separately in the appropriate asset and liability sections of the balance sheet. For the years ended August 31, 2015 and August 31, 2014 there was an impairment charge of $nil and $nil, respectively with respect to license agreement and an impairment charge of $nil and $181,297, respectively with respect to goodwill.   Convertible Instruments   The Company evaluates and accounts for conversion options embedded in convertible instruments in accordance with ASC 815 “Derivatives and Hedging Activities”. Applicable GAAP requires companies to bifurcate conversion options from their host instruments and account for them as free standing derivative financial instruments according to certain criteria. The criteria include circumstances in which (a) the economic characteristics and risks of the embedded derivative instrument are not clearly and closely related to the economic characteristics and risks of the host contract, (b) the hybrid instrument that embodies both the embedded derivative instrument and the host contract is not re-measured at fair value under other GAAP with changes in fair value reported in earnings as they occur and (c) a separate instrument with the same terms as the embedded derivative instrument would be considered a derivative instrument.   The Company accounts for convertible instruments (when we have determined that the embedded conversion options should not be bifurcated from their host instruments) as follows: To record when necessary, discounts to convertible notes for the intrinsic value of conversion options embedded in debt instruments based upon the differences between the fair value of the underlying common stock at the commitment date of the note transaction and the effective conversion price embedded in the note. Debt discounts under these arrangements are amortized over the term of the related debt to their stated date of redemption.   New Accounting Pronouncements   In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (ASU 2014-09), which supersedes nearly all existing revenue recognition guidance under U.S. generally accepted accounting principles (GAAP). The core principle of ASU 2014-09 is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Additionally, the guidance requires improved disclosures to help users of financial statements better understand the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. In August 2015, the FASB issued ASU 2015-14 Revenue from Contracts with Customers Deferral of the Effective Date, which defers the effective date of the new revenue recognition standard by one year, as a result, public entities would apply the new revenue standard to annual reporting periods beginning after December 15, 2017 and interim periods therein, which is the Company's first quarter of fiscal 2019. Early adoption is permitted for all entities only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. The guidance allows for the amendment to be applied either retrospectively to each prior reporting period presented or retrospectively as a cumulative-effect adjustment as of the date of adoption. The Company is in the process of evaluating the impact of adoption on its consolidated financial statements.   In February 2015, the FASB issued ASU 2015-02, Amendments to the Consolidation Analysis (ASU 2015-02). ASU 2015-02 affects reporting entities that are required to evaluate whether they should consolidate certain legal entities. ASU 2015-02 modifies the evaluation of whether limited partnerships and similar legal entities are variable interest entities (VIEs) or voting interest entities, eliminates the presumption that a general partner should consolidate a limited partnership and affects the consolidation analysis of reporting entities that are involved with VIEs, particularly those that have fee arrangements and related party relationships. ASU 2015-02 is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2015. Early adoption is permitted. A reporting entity may apply the amendments in this guidance using a modified retrospective approach by recording a cumulative-effect adjustment to equity as of the beginning of the fiscal year of adoption. A reporting entity also may apply the amendments retrospectively. The adoption of ASU 2015-02 in the first quarter of fiscal 2017 is not expected to have a material impact on the Company’s financial condition or results of operations.   In June 2014, the FASB issued ASU 2014-12, Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period (ASU 2014-12), which requires that a performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition. ASU 2014-12 is effective for annual periods and interim periods within those annual periods beginning after December 15, 2015. Early adoption is permitted. The adoption of ASU 2014-12 in the first quarter of fiscal 2017 is not expected to have a material impact on the Company's financial condition or results of operations.   In August 2014, the FASB issued Accounting Standards Update 2014–15 (“ASU 2014-15), “Presentation of Financial Statements – Going Concern (Subtopic 205 – 40): Disclosure of Uncertainties About an Entity’s Ability to Continue as a Going Concern.” ASU 2014-15 requires management to evaluate whether there are conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern, and to provide certain disclosures when it is probable that the entity will be unable to meet its obligations as they become due within one year after the date that the financial statements are issued. Since this guidance is primarily around certain disclosures to the financial statements, we anticipate no impact on our financial position or results of operations from adopting this standard. We are currently assessing the additional disclosure requirements, if any, of ASU 2014-15. ASU 2014-15 is effective for the annual period ended December 31, 2016 and for annual periods and interim periods thereafter with early adoption permitted.

v3.3.1.900

3. PROPERTY & EQUIPMENT	12 Months Ended
	Aug. 31, 2015
Property, Plant and Equipment [Abstract]
3. PROPERTY & EQUIPMENT	3. PROPERTY & EQUIPMENT   Property and equipment consists of the following as of August 31, 2015 and August 31, 2014:               August 31, 2015   August 31, 2014     Cost   Accumulated Depreciation   Net Book Value   Net Book Value Computer equipment   $ 3,645     $ 2,431     $ 1,214     $ 2,960       $ 3,645     $ 2,431     $ 1,214     $ 2,960     Depreciation expense included in the consolidated statement of comprehensive loss for the years ended August 31, 2015 and 2014 was $1,746 and $1,859 respectively.

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4. DUE TO RELATED PARTIES	12 Months Ended
	Aug. 31, 2015
Notes to Financial Statements
4. DUE TO RELATED PARTIES	4. DUE TO RELATED PARTIES   The amounts due to related parties are non-interest bearing, with no fixed terms of repayment, are payable on demand and are unsecured. As of August 31, 2015 and August 31, 2014, the amounts of due to related parties are $55,864 and $74,423 respectively.

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5. NOTES PAYABLE - RELATED PARTIES	12 Months Ended
	Aug. 31, 2015
Payables and Accruals [Abstract]
5. NOTES PAYABLE - RELATED PARTIES	5. NOTES PAYABLE - RELATED PARTIES   As at August 31, 2015 and 2014, the Company has a promissory note to 2399371 Ontario Inc., a company owned by an affiliate, for $583,000 Canadian ($440,898 US$) and $418,000 Canadian ($384,978 US$), respectively. There have been no repayments to date on this note since its inception. The note bears interest at 12% per annum with principal and interest both payable on the maturity date of June 1, 2016, which has been extended from the original maturity date of December 1, 2015, in conjunction with the issuance of the additional promissory note described below and the commitment to issue equity instruments as described in Note 8. The note is secured by the common shares of 2340960 Ontario Inc. and a lien on all of the company's assets. This note has a provision whereby the company is restricted from issuing any shares of capital stock or borrowing any money unless one-half of the net proceeds of such issuance or borrowing, up to the amount of the outstanding principal and accrued interest on the note, are used to satisify the amounts due under the note.   As at August 31, 2015, the Company has an additional promissory note to 2399371 Ontario Inc., a company owned by an affiliate, for $64,500 Canadian ($48,779 US$) bearing interest at 12% per annum, principal and interest both payable on June 1, 2016. This note was issued in conjunction with the extension of the promissory note described above and the commitment to issue equity instruments as described in Note 8 The note is secured by the common shares of 2340960 Ontario Inc. and a lien on all of the company's assets.   In connection with the entry into the License Agreement described in Note 10, the Company borrowed CAD $79,106 ($59,825 US$) to be repaid on December 1, 2015, together with interest at the rate of 12% per annum from 9058583 Canada Inc., a corporation owned by affiliates. In conjunction with this loan, the Company entered into a Sublicense agreement with 9508583 Canada Inc. whereby 9508583 Canada Inc. will be granted the exclusive rights to distribute the BreastCare DTS™ product in Canada with royalties payable at the rate of 5.5% of net sales, as to be defined in the Sublicense Agreement, to the Company.

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6. CONVERTIBLE NOTES PAYABLE	12 Months Ended
	Aug. 31, 2015
Debt Disclosure [Abstract]
6. CONVERTIBLE NOTES PAYABLE	6. CONVERTIBLE NOTES PAYABLE   The company is offering, pursuant to a Regulation S Subscription Agreement and Investment Representation dated February 3, 2015, up to $2,000,000 of 8% convertible notes with interest payable annually on January 31st. The holder upon written notice to the company may elect to have accrued but unpaid interest added to the principal amount of the note in lieu of payment of interest. The principal amount of the note is payable on January 31, 2018. The note, or any part thereof and any unpaid interest is convertible into common shares of the company at any time at the option of the holder at a conversion price of $0.15 per common share. The note may be prepaid at any time in full by the company upon ten days notice to the holder. As at August 31, 2015, $525,000 of the convertible notes payable have been issued as follows.   Medpac Asia Pacific PTY Ltd. of Australia ("Medpac") for $500,000. In addition to the terms of the convertible note payable described above, if the note is prepaid by the company at any time prior to the maturity date, if the volume weighted average price of the common shares of the company for the ten trading days preceding the early repayment date is less than $0.15 per common share, then Medpac shall receive a number of common share purchase warrants sufficient to purchase up to 1% of the then outstanding number of common shares of the Company. Such common share purchase warrants once issued would be exercisable for a period of three years at an exercise price of $0.15 per common share, but may be exercised on a cashless basis in accordance with a specified formula.   Medpac has also received, for its services as part of the transaction noted above, a convertible note payable of $25,000 having the terms and conditions identical to Medpac's other convertible note payable described above, except that the number of common share purchase warrants potentially issuable upon early payment of the note would be sufficient to only purchase up to 0.0005% of the then outstanding common shares of the company.   In conjunction with Medpac's investment noted above, the Company has agreed to enter into an exclusive Distribution Agreement with Medpac for the Company's BreastCare DTS™ and Now Cardio devices in Australia, New Zealand, Singapore, Thailand, Malaysia, Indonesia, Philippines, Vietnam, Laos, Cambodia Myanmar and Bangladesh. The Distribution Agreement will have an initial term of five years and can be renewed for an additional five years provided that agreed upon sales targets are met. If the company does not establish a manufacturing facility for its BreastCare DTS™ device in Southeast Asia within eighteen months of this agreement, Medpac and the company will form a joint venture to establish such a facility in the Philippines.

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7. INCOME TAXES	12 Months Ended
	Aug. 31, 2015
Income Tax Disclosure [Abstract]
7. INCOME TAXES	7. INCOME TAXES   The reconciliation of income tax (expense) benefit at the U.S. statutory rate of 35% for the periods ended August 31, 2015 and August 31, 2014, to the Company's effective tax rate is as follows:       August 31, 2015   August 31, 2014 U.S. statutory rate   $ 872,648     $ 120,916   Tax rate difference between Canada and U.S.     (48,231 )     (18,396 ) Other     (468 )     —     Change in valuation allowance     (823,949 )     (102,520 ) Effective tax rate   $ —       $ —       The tax effects of temporary differences that give rise to the Company's net deferred tax asset as of August 31, 2015 and August 31, 2014 are as follows:       August 31, 2015   August 31, 2014 Net operating loss carryforwards   $ 922,520     $ 102,520   Temporary differences - intangible asset     3,949       —     Less: valuation allowance     (926,469 )     (102,520 ) Deferred tax assets   $ —       $ —       In assessing the realization of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. Based on the assessment, the Company has established a full valuation allowance against all of the deferred tax assets for every year because it is more likely than not that all of the deferred tax assets will not be realized.   The Company files income tax returns in Canada and the United States with varying statutes of limitations. The Company's policy is to recognize interest expense and penalties related to income tax matters as a component of our provision for income taxes. There were no accrued interest and penalties associated with uncertain tax positions as of August 31, 2015 or August 31, 2014.   The tax rates in Canada for the wholly owned subsidiary 2340960 Ontario Inc. are 26.5% for 2015 and 15.5% for 2014.   The wholly owned subsidiary 2340960 Ontario Inc. has non-capital losses as at August 31, 2015 expiring as follows: 2033 - $42,736 (Canadian $); 2034 - $94,339 (Canadian $) and 2035 - $619,389 (Canadian $).

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8. STOCKHOLDERS' DEFICIT	12 Months Ended
	Aug. 31, 2015
Equity [Abstract]
8. STOCKHOLDERS' DEFICIT	8. STOCKHOLDERS' DEFICIT   Common Shares and Common Share Purchase Warrant Issuance   On November 9, 2014, the Company issued 700,000 common shares for proceeds of $100,000.   On January 6, 2015, the Company issued 2,827,548 common shares valued at $376,064 in satisfaction of an obligation related to a license agreement as described in Note 10.   On January 30, 2015, the Company issued 250,000 common shares and 250,000 common share purchase warrants for total proceeds of $25,000.   On February 2, 2015, the Company issued 800,000 common shares for proceeds of $72,000.   On February 2, 2015, the Company issued 4,300,000 common shares in exchange for service agreements for a fair value of $387,000.   On March 4, 2015, the Company issued 2,900,000 common shares in exchange for service agreements for a fair value of $290,000.   On March 23, 2015, the Company issued 100,000 common shares in exchange for a service agreement for a fair value of $12,000.   On May 22, 2015, the Company issued 6,250,000 common shares in exchange for service agreements for a fair value of $500,000.   On August 27, 2015, the Company issued 2,200,000 common shares and 2,200,000 common share purchase warrants for total proceeds of $110,000.   On August 27, 2015, the Company issued 2,000,000 common shares in exchange for a service agreement for a fair value of $190,000.   On August 28, 2015, the Company issued 750,000 common shares in exchange for a service agreement for a fair value of $71,250.   Common Share Purchase Warrants   As of August 31, 2015 there are 2,450,000 common share purchase warrants issued and outstanding. 250,000 common share purchase warrants allow the holder to purchase 1 common share of the company at an exercise price of $0.20 per warrant up to the expiration date of January 31, 2016. 2,200,000 common share purchase warrants allow the holder to purchase 1 common share of the company at an exercise price of $0.10 per warrant up to the expiration date of August 27, 2019.   Equity Instruments to be issued   For services received for the year ended August 31, 2015 under a service agreement, the company is committed to issue 250,000 common shares, valued at $18,000 as of August 31, 2015.   For the extension of a note payable - related party and issuance of a new note payable related party as described in Note 5, the company is committed to issue 600,000 common shares, valued at $43,200 as of August 31, 2015 and 600,000 common share purchase warrants, which allow the holder to purchase 1 common share of the company at an exercise price of $0.10 per warrant up to four years from the date of issuance, valued at $42,750 as of August 31, 2015.   The company has received $65,000 related to subscriptions for 1,300,000 common shares to be issued in the future.   Commitment to Issue Shares   In exchange for a service agreement, the Company is required to issue 750,000 common shares on September 30, 2015. In exchange for a service agreement, the Company is required to issue 250,000 common shares on each of October 5, 2015; January 5, 2016; April 5, 2016 and July 5, 2016.   Equity Incentive Plan   The Company has created the Event Cardio Group Inc. 2015 Equity Incentive Plan ("equity incentive plan") which allows for the granting of incentive stock options to employees of the company, a parent or a subsidiary and the granting of awards other than incentive stock options to employees, directors and consultants. The maximum number of common shares which may be issued pursuant to the equity incentive plan at August 31, 2015 is 10,000,000. No incentive stock options have been granted as of August 31, 2015. A total of 2,750,000 common shares have been issued as of August 31, 2015 under this plan to a consultant.

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9. RELATED PARTY	12 Months Ended
	Aug. 31, 2015
Related Party Transactions [Abstract]
9. RELATED PARTY	9. RELATED PARTY   The Company is related to Contex International Technologies (Canada) Inc. ("Contex") through the fact that affiliates of the Company hold a 34% interest in 2419596 Ontario Inc, which owns Contex.   The Company has entered into a service agreement with Contex, whereby Contex will provide services related to the design and development of a wireless and leadless ECG cardiac monitor. The agreement runs for a term of one year to May 22, 2016 and will automatically renew for subsequent terms of one year unless notice of termination is given by either party in writing.   For the year ended August 31, 2015 and August 31, 2014, $952,188 and $41,756 respectively, have been incurred related to this agreement and have been expensed in research and development expense.   See Note 5 regarding notes payable - related parties.   The Company is related to the Chief Execuitive Officer ("CEO"), who is also the company's president and sole board member. For the year ended August 31, 2015 and August 31, 2014, $125,000 and $nil respectively, have been expensed related to compensation to the CEO and is included in accounts payable and general and administrative expense.   The company has entered into an employment agreement with the CEO for $225,000 per year up to August 27, 2018.

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10. COMMITMENTS	12 Months Ended
	Aug. 31, 2015
Commitments and Contingencies Disclosure [Abstract]
10. COMMITMENTS	10. COMMITMENTS   In exchange for a service agreement, the Company is committed to pay $5,000 per month through August 5, 2016 and to issue 250,000 common shares on each of October 5, 2015; January 5, 2016; April 5, 2016 and July 5, 2016.   On October 24, 2014, the Company entered into a License Agreement with Life Medical Technologies, Inc. ('Life Medical") with respect to Life Medical’s “BreastCare DTS™” product and certain other technologies. The License Agreement grants the Company the exclusive right to distribute the BreastCare DTS™ in the United States, Canada and certain countries in Asia, including China. The Agreement calls for royalties of 5% on net sales, as defined in the License Agreement, and requires minimum annual royalties of $100,000 in 2015 and $200,000 each year thereafter.   As part of entering into the License Agreement, the Company entered into release agreements with certain creditors of Life Medical Technologies, Inc. which held judgments against Life Medical in the aggregate amount of approximately $501,000. Pursuant to the Release Agreements, the Company agreed to pay those Creditors an aggregate of $501,064, satisfied through the issuance of common shares, as described in Note 8, valued at $376,064 and payment of $125,000 cash. These amounts have been considered prepayments of the royalties commitment note above and are included in prepaid expenses on the accompanying balance sheet at August 31, 2015. For the year ended August 31, 2015, $66,667 of the above noted prepayment has been expensed. The recipients of 526,315 shares related to the royalties noted above, valued at $70,000, are also to be paid in cash or shares of common stock, at the company's option, an amount equal to the excess, if any, of $70,000 over the value of such shares as of December 12, 2015.

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11. CONTINGENCIES	12 Months Ended
	Aug. 31, 2015
Commitments and Contingencies Disclosure [Abstract]
11. CONTINGENCIES	11. CONTINGENCIES   On November 24, 2015, the company received a notice of default from Medpac, the company who holds the $500,000 convertible note payable described in Note 6. Medpac contends that the company has defaulted under the provisions of this note payable and have thus demanded repayment of the full amount of the note payable and interest payable to date by December 30, 2015 (estimated to be a total of $526,667). In addition, Medpac contends that the company will be obligated to pay the costs of collection, including legal fees and expenses. It is management's contention that the company has not defaulted under the provisions of the note payable and thus is not required to repay the note payable or interest payable at this time. The outcome of this contingency is not determinable at this time.   On November 30, 2015, the company's subsidiary EFIL Sub of ECG Inc. received a breach of contract notice related to its license agreement with Life Medical as described in Note 10. Life Medical contends that the company has defaulted under the provisions of this agreement and have thus triggered penalty clauses in the agreement. Life Medical is now demanding payment of these penalties. As per the breach of contract notice details, it is estimated that the total penalty could be as high as $770,000 based on the formula: $1 per every 100 people in each designated country, up to a maximum of $150,000 per designated country, with a total of seven countries identified in the notice. In addition due to this breach, Life Medical also contends that the license rights to the seven countries identified now belongs exclusively to Life Medical. It is management's contention that the company has not defaulted under the provisions of the agreement and thus is not required to pay any such penalties, nor have the licensing rights reverted back to Life Medical in the seven countries identified. The outcome of this contingency is not determinable at this time.

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12. SUBSEQUENT EVENTS	12 Months Ended
	Aug. 31, 2015
Subsequent Events [Abstract]
12. SUBSEQUENT EVENTS	12. SUBSEQUENT EVENTS   On September 28, 2015, the Company issued 4,300,000 common shares and 4,300,000 common share purchase warrants, which allow the holder to purchase 1 common share of the company at an exercise price of $0.10 per warrant up to September 28, 2019, for total proceeds of $210,000. In conjunction with this common share issuance, the company issued 320,000 common shares to a company that arranged a portion of the financing.   On September 28, 2015, the Company issued 1,250,000 common shares in satisfaction of the obligation to issue 250,000 common shares as described in Note 8 under equity instruments to be issued and the commitment to issue 250,000 common shares on each of October 5, 2015; January 5, 2016; April 5, 2016 and July 5, 2016 as per a service agreement as described in Note 10.   On October 8, 2015, the Company cancelled 10,000,000 preferred shares which were owned by the company's subsidiary 2340960 Ontario Inc. for proceeds of $nil.

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2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)	12 Months Ended
	Aug. 31, 2015
Accounting Policies [Abstract]
Use of Estimates	Use of Estimates   In preparing these financial statements in conformity with GAAP, management is required to make estimates and assumptions that may affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amount of revenues and expenses during the reporting years. Actual results could differ from those estimates.
Fair Value Measurements	Fair Value Measurements   ASC 820, “Fair Value Measurements”, requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. ASC 820 prioritizes the inputs into three levels that may be used to measure fair value: Level 1, defined as observable inputs such as quoted prices in active markets for identical assets or liabilities; Level 2, inputs other than level one that are either directly or indirectly observable such as quoted prices for identical or similar assets or liabilities on markets that are not active; and Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions. The Company had no assets or liabilities required to be recorded at fair value on a recurring basis as of August 31, 2015 or August 31, 2014.   The estimated fair value of certain financial instruments, including cash and cash equivalents, and accounts payable are carried at historical cost basis, which approximates their fair values because of the short-term nature of these instruments. The carrying amounts of our short and long term credit obligations approximate fair value because the effective yields on these obligations, which include contractual interest rates taken together with other features  are comparable to rates of returns for instruments of similar credit risk.
Share Based Compensation	Share Based Compensation   The Company applies ASC 718 Share-Based Compensation and ASC 505 Equity to account for service provider share-based payments. In accordance with ASC 718 and ASC 505, the Company determines whether a share based payment should be classified and accounted for as a liability award or equity award.   All grants of share-based payments to service providers are classified as equity awards and are recognized in the financial statements over the period in which the services are received based on the fair value determined as of the measurement date.   Included in prepaid expenses on the accompanying balance sheet at August 31, 2015 is $521,105 of the unamortized portion of share based payments for services to be rendered.
Cash and Cash Equivalents	Cash and Cash Equivalents   The Company considers all highly-liquid investments with maturities of three months or less when purchased to be cash equivalents. The Company had no cash equivalents as of August 31, 2015 or August 31, 2014.
Concentration of Credit Risk	Concentration of Credit Risk   Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and cash equivalents. The Company places its cash with high quality banking institutions.
Income Taxes	Income Taxes   Under ASC 740, "Income Taxes", deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Valuation allowances are established when it is more likely than not that some or all of the deferred tax assets will not be realized.   In assessing the realization of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. Based on the assessment, the Company has established a full valuation allowance against all of the deferred tax assets for every period because it is more likely than not that all of the deferred tax assets will not be realized.   The Company files income tax returns in Canada and the United States with varying statutes of limitations. The Company's policy is to recognize interest expense and penalties related to income tax matters as a component of our provision for income taxes.
Foreign Currency Translation	Foreign Currency Translation   The Company's reporting and functional currency is the U.S. dollar. The Company's Canadian operation's functional currency is the Canadian dollar. The Company's U.S. subsidiary's functional currency is the U.S. dollar.   Transactions originating in Canadian dollars are translated to the functional currency of the US dollar as follows: using year end rates of exchange for assets and liabilities, average rates of exchange for the period of transactions for revenues and expenses and historical rates for equity.   The financial statements of the Company's Canadian operations are translated from the functional currency of the Canadian dollar into the reporting currency of the United States dollar in accordance with ASC 830, Foreign Currency Matters, using year end rates of exchange for assets and liabilities, average rates of exchange for the period for revenues and expenses and historical rates for equity.   Translation adjustments resulting from the process of translating the functional currency of Canadian dollar Canadian operation's financial statements into the reporting currency of U.S. dollar financial statements are included in determining comprehensive income. As of August 31, 2015 and August 31, 2014, the cumulative translation adjustment of $103,432 and $4,999 respectively was classified as accumulated other comprehensive income in the stockholders' equity section of the balance sheet. For the years ended August 31, 2015 and August 31, 2014, the foreign currency translation adjustment to accumulated other comprehensive income was $98,433 and $3,102 respectively.
Net Income (Loss) per Common Share	Net Income (Loss) per Common Share   The Company computes net income (loss) per share in accordance with ASC 260, "Earnings per Share". ASC 260 requires presentation of both basic and diluted earnings (loss) per share on the face of the income statement. Basic EPS is computed by dividing net income (loss) available to common shareholders by the weighted average number of common shares outstanding during the year. Diluted EPS gives effect to all dilutive potential common shares outstanding during the year including stock options, using the treasury stock method. In computing diluted EPS, the average stock price for the year is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential common shares if their effect is antidilutive.
Comprehensive Loss	Comprehensive Loss   Comprehensive loss is defined to include all changes in equity except those resulting from investments by owners and distributions to owners. Among other disclosures, Accounting Standards Codification (ASC) 200, Comprehensive Income, requires that all items that are required to be recognized under current accounting standards as components of comprehensive income be reported in a financial statement that is displayed with the same prominence as other financial statements. For the year presented, the Company's comprehensive loss includes net loss and foreign currency translation adjustments and is presented in the statement of comprehensive loss.
Property and Equipment	Property and Equipment   Property and equipment consists of computer equipment and is stated at cost. Computer equipment is depreciated using the straight-line method over the estimated service life of three years. Maintenance and repairs are expensed as incurred and improvements are capitalized. Gains or losses on the disposition of property and equipment are recorded upon disposal.
Research and Development Expenses	Research and Development Expenses   All research and development costs are expensed as incurred.
Impairment of Long-Lived Assets	Impairment of Long-Lived Assets   Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset.   If the carrying amount of an asset exceeds its undiscounted estimated future cash flows, an impairment review is performed. An impairment charge is recognized in the amount by which the carrying amount of the asset exceeds the fair value of the asset. Assets to be disposed of would be separately presented in the balance sheet and reported at the lower of the carrying amount or fair value less costs to sell, and are no longer depreciated. The assets and liabilities of a disposed group classified as held for sale would be presented separately in the appropriate asset and liability sections of the balance sheet. For the years ended August 31, 2015 and August 31, 2014 there was an impairment charge of $nil and $nil, respectively with respect to license agreement and an impairment charge of $nil and $181,297, respectively with respect to goodwill.
Convertible Instruments	Convertible Instruments   The Company evaluates and accounts for conversion options embedded in convertible instruments in accordance with ASC 815 “Derivatives and Hedging Activities”. Applicable GAAP requires companies to bifurcate conversion options from their host instruments and account for them as free standing derivative financial instruments according to certain criteria. The criteria include circumstances in which (a) the economic characteristics and risks of the embedded derivative instrument are not clearly and closely related to the economic characteristics and risks of the host contract, (b) the hybrid instrument that embodies both the embedded derivative instrument and the host contract is not re-measured at fair value under other GAAP with changes in fair value reported in earnings as they occur and (c) a separate instrument with the same terms as the embedded derivative instrument would be considered a derivative instrument.   The Company accounts for convertible instruments (when we have determined that the embedded conversion options should not be bifurcated from their host instruments) as follows: To record when necessary, discounts to convertible notes for the intrinsic value of conversion options embedded in debt instruments based upon the differences between the fair value of the underlying common stock at the commitment date of the note transaction and the effective conversion price embedded in the note. Debt discounts under these arrangements are amortized over the term of the related debt to their stated date of redemption.
New Accounting Pronouncements	New Accounting Pronouncements   In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (ASU 2014-09), which supersedes nearly all existing revenue recognition guidance under U.S. generally accepted accounting principles (GAAP). The core principle of ASU 2014-09 is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Additionally, the guidance requires improved disclosures to help users of financial statements better understand the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. In August 2015, the FASB issued ASU 2015-14 Revenue from Contracts with Customers Deferral of the Effective Date, which defers the effective date of the new revenue recognition standard by one year, as a result, public entities would apply the new revenue standard to annual reporting periods beginning after December 15, 2017 and interim periods therein, which is the Company's first quarter of fiscal 2019. Early adoption is permitted for all entities only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. The guidance allows for the amendment to be applied either retrospectively to each prior reporting period presented or retrospectively as a cumulative-effect adjustment as of the date of adoption. The Company is in the process of evaluating the impact of adoption on its consolidated financial statements.   In February 2015, the FASB issued ASU 2015-02, Amendments to the Consolidation Analysis (ASU 2015-02). ASU 2015-02 affects reporting entities that are required to evaluate whether they should consolidate certain legal entities. ASU 2015-02 modifies the evaluation of whether limited partnerships and similar legal entities are variable interest entities (VIEs) or voting interest entities, eliminates the presumption that a general partner should consolidate a limited partnership and affects the consolidation analysis of reporting entities that are involved with VIEs, particularly those that have fee arrangements and related party relationships. ASU 2015-02 is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2015. Early adoption is permitted. A reporting entity may apply the amendments in this guidance using a modified retrospective approach by recording a cumulative-effect adjustment to equity as of the beginning of the fiscal year of adoption. A reporting entity also may apply the amendments retrospectively. The adoption of ASU 2015-02 in the first quarter of fiscal 2017 is not expected to have a material impact on the Company’s financial condition or results of operations.   In June 2014, the FASB issued ASU 2014-12, Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period (ASU 2014-12), which requires that a performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition. ASU 2014-12 is effective for annual periods and interim periods within those annual periods beginning after December 15, 2015. Early adoption is permitted. The adoption of ASU 2014-12 in the first quarter of fiscal 2017 is not expected to have a material impact on the Company's financial condition or results of operations.   In August 2014, the FASB issued Accounting Standards Update 2014–15 (“ASU 2014-15), “Presentation of Financial Statements – Going Concern (Subtopic 205 – 40): Disclosure of Uncertainties About an Entity’s Ability to Continue as a Going Concern.” ASU 2014-15 requires management to evaluate whether there are conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern, and to provide certain disclosures when it is probable that the entity will be unable to meet its obligations as they become due within one year after the date that the financial statements are issued. Since this guidance is primarily around certain disclosures to the financial statements, we anticipate no impact on our financial position or results of operations from adopting this standard. We are currently assessing the additional disclosure requirements, if any, of ASU 2014-15. ASU 2014-15 is effective for the annual period ended December 31, 2016 and for annual periods and interim periods thereafter with early adoption permitted.

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3. PROPERTY & EQUIPMENT (Tables)	12 Months Ended
	Aug. 31, 2015
Property, Plant and Equipment [Abstract]
Property & Equipment	August 31, 2015   August 31, 2014     Cost   Accumulated Depreciation   Net Book Value   Net Book Value Computer equipment   $ 3,645     $ 2,431     $ 1,214     $ 2,960       $ 3,645     $ 2,431     $ 1,214     $ 2,960

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7. INCOME TAXES (Tables)	12 Months Ended
	Aug. 31, 2015
Income Tax Disclosure [Abstract]
Reconciliation of Income Tax (Expense) Benefit	August 31, 2015   August 31, 2014 U.S. statutory rate   $ 872,648     $ 120,916   Tax rate difference between Canada and U.S.     (48,231 )     (18,396 ) Other     (468 )     —     Change in valuation allowance     (823,949 )     (102,520 ) Effective tax rate   $ —       $ —
Tax Effects of Temporary Differences	August 31, 2015   August 31, 2014 Net operating loss carryforwards   $ 922,520     $ 102,520   Temporary differences - intangible asset     3,949       —     Less: valuation allowance     (926,469 )     (102,520 ) Deferred tax assets   $ —       $ —

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1. OVERVIEW (Details Narrative) - USD ($)	Aug. 31, 2015	Aug. 31, 2014
Accounting Policies [Abstract]
Accumulated Deficit	$ (2,980,587)	$ (467,483)

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2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) - USD ($)	12 Months Ended
	Aug. 31, 2015	Aug. 31, 2014
Accounting Policies [Abstract]
Cumulative Translation Adjustment	$ 103,432	$ 4,999
Foreign Currency Translation Adjustment to Accumulated other Comprehensive Income	$ 98,433	3,102
Impairment of Long-Lived Assets		$ 181,297
Share based payments for services, Unamortized	$ 521,105

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3. PROPERTY & EQUIPMENT - Property & Equipment (Details) - USD ($)	Aug. 31, 2015	Aug. 31, 2014
Property Plant Equipment, Net	$ 1,214	$ 2,960
Computer Equipment
Property Plant Equipment	3,645	3,645
Accumulated depreciation	2,431	2,431
Property Plant Equipment, Net	$ 1,214	$ 2,960

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3. PROPERTY & EQUIPMENT (Details Narrative) - USD ($)	12 Months Ended
	Aug. 31, 2015	Aug. 31, 2014
Property, Plant and Equipment [Abstract]
Depreciation Expense	$ 1,328	$ 1,490

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4. DUE TO RELATED PARTIES (Details Narrative) - USD ($)	Aug. 31, 2015	Aug. 31, 2014
Notes to Financial Statements
Due to Related Parties	$ 55,864	$ 74,423

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5. NOTES PAYABLE - RELATED PARTIES (Details Narrative) - Canada, Dollars - USD ($)	Aug. 31, 2015	Aug. 31, 2014
2399371 Ontario Inc.
Promissory Note Balance	$ 583,000	$ 418,000
Note Interest Rate	12.00%	12.00%
9058583 Canada Inc.
Promissory Note Balance	$ 79,106
Note Interest Rate	12.00%
2399371 Ontario Inc. II
Promissory Note Balance	$ 64,500
Note Interest Rate	12.00%

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6. CONVERTIBLE NOTES PAYABLE (Details Narrative)	12 Months Ended
	Aug. 31, 2015 USD ($)
Regulation S Subscription Agreement Offering	$ 2,000,000
Regulation S Subscription Agreement, Issued	525,000
Medpac Asia Pacific PTY Ltd. of Austrailia
Regulation S Subscription Agreement, Issued	500,000
Main Street Capital Pty. Ltd.
Regulation S Subscription Agreement, Issued	$ 25,000

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7. INCOME TAXES - Reconciliation of Income Tax (Expense) Benefit (Details) - USD ($)	12 Months Ended
	Aug. 31, 2015	Aug. 31, 2014
Income Tax Disclosure [Abstract]
U.S. statutory rate	$ 872,648	$ 120,916
Tax rate difference between Canada and U.S.	(4823100.00%)	(1839600.00%)
Other	(46800.00%)
Change in valuation allowance	$ (823,949)	$ (102,520)
Effective tax rate

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7. INCOME TAXES - Tax Effects of Temporary Differences (Details) - USD ($)	Aug. 31, 2015	Aug. 31, 2014
Income Tax Disclosure [Abstract]
Net operating loss carryforwards	$ 922,520	$ 102,520
Temporary differences - intangible asset	3,949
Less: valuation allowance	$ (926,469)	$ (102,520)
Deferred tax assets

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7. INCOME TAXES (Details Narrative) - USD ($)	12 Months Ended
	Aug. 31, 2015	Aug. 31, 2014
US Statutory Rate	35.00%
Canadian Tax Rates	26.50%	15.50%
2340960 Ontario Inc. - Expiring 2033 | Canada, Dollars
Non-Capital Losses	$ 42,736
2340960 Ontario Inc. - Expiring 2034 | Canada, Dollars
Non-Capital Losses	94,339
2340960 Ontario Inc. - Expiring 2035 | Canada, Dollars
Non-Capital Losses	$ 619,389

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8. STOCKHOLDERS' DEFICIT (Details Narrative) - USD ($)	12 Months Ended
	Aug. 31, 2015	Aug. 31, 2014
Equity [Abstract]
Issued as settlement of payables pursuant to license agreement, Shares	2,827,548
Issued as settlement of payables pursuant to license agreement, Value	$ 376,064
Sale of Stock, Shares	1,500,000
Sale of Stock, Proceeds	$ 172,000
Fair Value, Warrants Issued	$ 135,000
Warrants Issued	4,900,000
Issuance of common stock for services, Shares	12,430,000
Issuance of common stock for services, Value	$ 1,450,250
Issuance of common stock for cash, Value	$ 372,000
Share Purchase Warrants Issued and Outstanding	2,450,000
Maximum Number of Shares Held under Equity Incentive Plan	10,000,000
Equity to be issued, Shares	1,450,000
Equity to be issued, Value	$ 103,950
Subscriptions, Shares	13,000,000
Subscriptions, Value	$ 65,000
Commitment to Issue Shares	In exchange for a service agreement, the Company is required to issue 750,000 common shares on September 30, 2015. In exchange for a service agreement, the Company is required to issue 250,000 common shares on each of October 5, 2015; January 5, 2016; April 5, 2016 and July 5, 2016.

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9. RELATED PARTY (Details Narrative) - USD ($)	12 Months Ended
	Aug. 31, 2015	Aug. 31, 2014
Research and Development Expense	$ 952,188	$ 41,756
Compensation to CEO	$ 125,000
2419596 Ontario Inc.
Ownership Percentage	34.00%

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10. COMMITMENTS (Details Narrative)	12 Months Ended
	Aug. 31, 2015 USD ($)
Commitments and Contingencies Disclosure [Abstract]
Service Agreement Commitment	In exchange for a service agreement, the Company is committed to pay $5,000 per month through August 5, 2016 and to issue 250,000 common shares on each of October 5, 2015; January 5, 2016; April 5, 2016 and July 5, 2016.
License Agreement	On October 24, 2014, the Company entered into a License Agreement with Life Medical Technologies, Inc. ('Life Medical") with respect to Life Medical’s “BreastCare DTS™” product and certain other technologies. The License Agreement grants the Company the exclusive right to distribute the BreastCare DTS™ in the United States, Canada and certain countries in Asia, including China. The Agreement calls for royalties of 5% on net sales, as defined in the License Agreement, and requires minimum annual royalties of $100,000 in 2015 and $200,000 each year thereafter.
Prepayment of Royalties	$ 66,667

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11. CONTINGENCIES (Details Narrative)	Aug. 31, 2015 USD ($)
Medpac
Loss Contingency	$ 526,667
Life Medical
Loss Contingency	$ 770,000

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12. SUBSEQUENT EVENTS (Details Narrative) - USD ($)	3 Months Ended	12 Months Ended
	Dec. 14, 2015	Aug. 31, 2015
Warrants Issued, Shares		2,450,000
Equity Issued, Value		$ 372,000
Subsequent Event [Member]
Stock Issued, Shares	4,300,000
Warrants Issued, Shares	4,300,000
Equity Issued, Value	$ 210,000
Stock Issued for Financing, Shares	320,000
Stock Issued for Royalties	1,250,000
Stock Cancelled, Shares	10,000,000