See the accompanying notes to these Unaudited
Condensed Consolidated Financial Statements
See the accompanying notes to these Unaudited
Condensed Consolidated Financial Statements
See the accompanying notes to these Unaudited
Condensed Consolidated Financial Statements
See the accompanying notes to these Unaudited
Condensed Consolidated Financial Statements
See the accompanying notes to these
Unaudited Condensed Consolidated Financial Statements
NOTES TO THE CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
JUNE 30, 2020
(UNAUDITED)
NOTE 1 - BUSINESS AND BUSINESS PRESENTATION
HealthLynked Corp. (the “Company”)
was incorporated in the State of Nevada on August 4, 2014. On September 2, 2014, the Company filed Amended and Restated Articles
of Incorporation with the Secretary of State of Nevada setting the total number of authorized shares at 250,000,000 shares, which
included up to 230,000,000 shares of common stock and 20,000,000 shares of “blank check” preferred stock. On February
5, 2018, the Company filed an Amendment to its Amended and Restated Articles of Incorporation with the Secretary of State of Nevada
to increase the number of authorized shares of common stock to 500,000,000 shares.
The Company operates in three distinct
divisions: the Health Services Division, the Digital Healthcare Division and, upon acquisition of Cura Health Management LLC (“CHM”)
along with its subsidiary ACO Health Partners LLC (“AHP”) on May 18, 2020, Accountable Care Organization (“ACO”)
and Managed Service Organization (“MSO”), referred to as the ACO/MSO Division. The Health Services division is comprised
of the operations of (i) Naples Women’s Center (“NWC”), a multi-specialty medical group including OB/GYN (both
Obstetrics and Gynecology) and General Practice, (ii) Naples Center for Functional Medicine (“NCFM”), a Functional
Medical Practice acquired in April 2019 that is engaged in improving the health of its patients through individualized and integrative
health care, and (iii) Bridging the Gap Physical Therapy (“BTG”), a physical therapy practice in Bonita Springs, FL
opened in January 2020 that provides hands-on functional manual therapy techniques to speed patients’ recovery and manage
pain without pain medication or surgery. The Digital Healthcare division develops and plans to operate an online personal medical
information and record archive system, the “HealthLynked Network,” which will enable patients and doctors to keep track
of medical information via the Internet in a cloud-based system. The ACO/MSO Division is comprised of the business acquired with
CHM, which assists physician practices in providing coordinated and more efficient care to patients via the Medicare Shared Savings
Program (“MSSP”) as administered by the Centers for Medicare and Medicaid Services (the “CMS”), which rewards
providers for efficiency in patient care.
These unaudited condensed consolidated
financial statements reflect all adjustments including normal recurring adjustments, which, in the opinion of management, are
necessary to present fairly the financial position, results of operations and cash flows for the periods presented in accordance
with the accounting principles generally accepted in the United States of America (“GAAP”). These unaudited condensed
consolidated financial statements should be read in conjunction with the Company’s consolidated financial statements and
notes thereto for the years ended December 31, 2019 and 2018, respectively, which are included in the Company’s Form 10-K,
filed with the United States Securities and Exchange Commission on March 30, 2020. The Company assumes that the users of the interim
financial information herein have read, or have access to, the audited consolidated financial statements for the preceding period,
and that the adequacy of additional disclosure needed for a fair presentation may be determined in that context. The results of
operations for the three and six months ended June 30, 2020 are not necessarily indicative of results for the entire year ending
December 31, 2020.
On a consolidated basis, the Company’s
operations are comprised of the parent company, HealthLynked Corp. and its four wholly owned subsidiaries: NWC, BTG, HYLK FL (doing
business as NCFM and CHM) and AHP. All significant intercompany transactions and balances have been eliminated upon consolidation.
In addition, certain amounts in the prior periods’ consolidated financial statements have been reclassified to conform to
the current period presentation.
NOTE 2 – SIGNIFICANT ACCOUNTING
POLICIES
A summary of the significant accounting
policies applied in the presentation of the accompanying consolidated financial statements follows:
Basis of Presentation
The accompanying consolidated financial
statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“US
GAAP”).
All amounts referred to in the notes to
the consolidated financial statements are in United States Dollars ($) unless stated otherwise.
Use of Estimates
The preparation of the consolidated financial
statements in conformity with GAAP requires management to make estimates and assumptions that affect certain reported amounts
of assets and liabilities and disclosures of contingent assets and liabilities at the date of the consolidated financial statements,
and the reported amounts of revenues and expenses during the reporting period. Accordingly, actual results could differ from those
estimates. Significant estimates include assumptions about collection of accounts receivable, the valuation and recognition of
stock-based compensation expense, valuation allowance for deferred tax assets, borrowing rate consideration for right-of-use (“ROU”)
lease assets including related lease liability and useful life of fixed assets.
HEALTHLYNKED CORP.
NOTES TO THE CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
JUNE 30, 2020
(UNAUDITED)
NOTE 2 – SIGNIFICANT ACCOUNTING
POLICIES (CONTINUED)
Adopted Accounting Pronouncements
Effective January 1, 2019, the
Company adopted Accounting Standards Update (“ASU”) No. 2016-02, Leases (“ASU 2016-02”)
using the required modified retrospective approach. ASU 2016-02 requires lessees to record most leases on their balance
sheets but recognize expenses on their income statements in a manner similar to current accounting. See discussion below
under the caption “Leases” in this Note 2 and in Note 8 for more detail on the Company’s accounting
policy with respect to lease accounting.
Effective January 1, 2019, the Company
adopted ASU 2018-07, Compensation - Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting.
ASU 2018-07 expands the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from nonemployees
and supersedes the guidance in Subtopic 505-50, Equity - Equity-Based Payments to Non-Employees. The adoption of this guidance
did not materially impact the Company’s financial statements and related disclosures.
Revenue Recognition
Patient service revenue
Patient service revenue is reported at
the amount that reflects the consideration to which the Company expects to be entitled in exchange for providing patient care.
These amounts are due from patients and third-party payors (including health insurers and government programs) and includes variable
consideration for retroactive revenue adjustments due to settlement of audits, reviews, and investigations. Generally, the Company
bills patients and third-party payors within days after the services are performed and/or the patient is discharged from the facility.
Revenue is recognized as performance obligations are satisfied.
Performance obligations are determined
based on the nature of the services provided by the Company. Revenue for performance obligations satisfied over time is recognized
based on actual charges incurred in relation to total expected charges. The Company believes that this method provides a faithful
depiction of the transfer of services over the term of the performance obligation based on the inputs needed to satisfy the obligation.
Revenue for performance obligations satisfied at a point in time is recognized when goods or services are provided and the Company
does not believe it is required to provide additional goods or services to the patient.
The Company determines the transaction
price based on standard charges for goods and services provided, reduced by contractual adjustments provided to third-party payors,
discounts provided to uninsured patients in accordance with the Company’s policy, and/or implicit price concessions provided
to uninsured patients. The Company determines its estimates of contractual adjustments and discounts based on contractual agreements,
its discount policies, and historical experience. The Company determines its estimate of implicit price concessions based on its
historical collection experience with this class of patients.
Agreements with third-party payors typically
provide for payments at amounts less than established charges. A summary of the payment arrangements with major third-party payors
follows:
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Medicare:
Certain inpatient acute care services are paid at prospectively determined rates
per discharge based on clinical, diagnostic and other factors. Certain services are paid
based on cost-reimbursement methodologies subject to certain limits. Physician services
are paid based upon established fee schedules. Outpatient services are paid using prospectively
determined rates.
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Medicaid:
Reimbursements for Medicaid services are generally paid at prospectively determined
rates per discharge, per occasion of service, or per covered member.
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Other:
Payment agreements with certain commercial insurance carriers, health maintenance
organizations, and preferred provider organizations provide for payment using prospectively
determined rates per discharge, discounts from established charges, and prospectively
determined daily rates.
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HEALTHLYNKED CORP.
NOTES TO THE CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
JUNE 30, 2020
(UNAUDITED)
NOTE 2 – SIGNIFICANT ACCOUNTING
POLICIES (CONTINUED)
Laws and regulations concerning government
programs, including Medicare and Medicaid, are complex and subject to varying interpretation. As a result of investigations by
governmental agencies, various health care organizations have received requests for information and notices regarding alleged
noncompliance with those laws and regulations, which, in some instances, have resulted in organizations entering into significant
settlement agreements. Compliance with such laws and regulations may also be subject to future government review and interpretation
as well as significant regulatory action, including fines, penalties, and potential exclusion from the related programs. There
can be no assurance that regulatory authorities will not challenge the Company’s compliance with these laws and regulations,
and it is not possible to determine the impact, if any, such claims or penalties would have upon the Company. In addition, the
contracts the Company has with commercial payors also provide for retroactive audit and review of claims.
Settlements with third-party payors for
retroactive adjustments due to audits, reviews or investigations are considered variable consideration and are included in the
determination of the estimated transaction price for providing patient care. These settlements are estimated based on the terms
of the payment agreement with the payor, correspondence from the payor and the Company’s historical settlement activity,
including an assessment to ensure that it is probable that a significant reversal in the amount of cumulative revenue recognized
will not occur when the uncertainty associated with the retroactive adjustment is subsequently resolved. Estimated settlements
are adjusted in future periods as adjustments become known, or as years are settled or are no longer subject to such audits, reviews,
and investigations.
The Company also provides services to
uninsured patients, and offers those uninsured patients a discount, either by policy or law, from standard charges. The Company
estimates the transaction price for patients with deductibles and coinsurance and from those who are uninsured based on historical
experience and current market conditions. The initial estimate of the transaction price is determined by reducing the standard
charge by any contractual adjustments, discounts, and implicit price concessions. Subsequent changes to the estimate of the transaction
price are generally recorded as adjustments to patient service revenue in the period of the change. Patient services provided
by NCFM are provided on a cash basis and not submitted through third party insurance providers.
Medicare Shared Savings Revenue
The Company earns Medicare shared savings
revenue based on performance of the population of patient lives for which it is accountable as an ACO against benchmarks established
by the MSSP. Because the MSSP, which was formed in 2012, is relatively new and has limited historical experience, the Company cannot
accurately predict the amount of shared savings that will be determined by CMS. Such amounts are determined annually when the Company
is notified by CMS of the amount of shared savings earned. Accordingly, the Company recognizes Medicare shared savings revenue
in the period in which the CMS notifies the Company of the exact amount of shared savings to be paid, which historically has occurred
during the three-month period ended September 30 for the program year ended December 31 of the previous year. The Company expects
that Medicare shared savings revenue, if any, for the program year ended December 31, 2019 will be reported in the three months
ended September 30, 2020 when the MSSP revenue is either known or able to be estimated with reasonable certainty. Based on the
ACO operating agreements, the Company bears all costs of the ACO operations until revenue is recognized. At that point, the Company
shares in up to 100% of the revenue to recover its costs incurred.
Consulting Revenue
Also pursuant to ASC 606, the Company recognizes
service revenue as services are provided, with any unearned but paid amounts recorded a deferred revenue liability at each balance
sheet date.
Deferred Revenue
The Company’s deferred revenue liability
balance was $106,281 and $-0- as of June 30, 2020 and December 31, 2019, respectively.
Provider shared savings expense
Provider shared savings expense represents
payments made to the ACO’s participating providers. The pool of provider shared savings expense paid to all participating
providers, as well as the amounts paid to each individual participating provider from the pool, is determined by ACO management.
Shared Savings expense is recognized in the period in which the size of the payment pool is determined, which typically corresponds
the period in which the shared saving payment is received from CMS and shared savings revenue is recognized. This typically occurs
in the second half of the year following the completion of the program year.
Cash and Cash Equivalents
For financial statement purposes, the
Company considers all highly liquid investments with original maturities of three months or less to be cash and cash equivalents.
Accounts Receivable
Trade receivables are carried at their estimated
collectible amounts. Trade credit is generally extended on a short-term basis; thus trade receivables do not bear interest. Trade
accounts receivable are periodically evaluated for collectability based on past collectability of the insurance companies, government
agencies, and customers’ accounts receivable during the related period which generally approximates 48% of total billings
for patient services. Trade accounts receivable are recorded at this net amount. As of June 30, 2020 and December 31, 2019, the
Company’s gross patient services accounts receivable were $185,307 and $174,531, respectively. As of June 30, 2020 and December
31, 2019, net patient services accounts receivable were $102,363 and $83,251, respectively, and accounts receivable from other
revenue were $55,727 and $-0-, respectively. As of June 30, 2020 and December 31, 2019, the Company’s allowance of doubtful
accounts was $13,972 and $13,972, respectively.
HEALTHLYNKED CORP.
NOTES TO THE CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
JUNE 30, 2020
(UNAUDITED)
NOTE 2 – SIGNIFICANT ACCOUNTING
POLICIES (CONTINUED)
Leases
Upon transition under ASU 2016-02, the
Company elected the suite of practical expedients as a package applied to all of its leases, including (i) not reassessing whether
any expired or existing contracts are or contain leases, (ii) not reassessing the lease classification for any expired or existing
leases, and (iii) not reassessing initial direct costs for any existing leases. For new leases, the Company will determine if
an arrangement is or contains a lease at inception. Leases are included as ROU assets within other assets and ROU liabilities
within accrued expenses and other liabilities and within other long-term liabilities on the Company’s consolidated balance
sheets.
ROU assets and liabilities are recognized
at commencement date based on the present value of lease payments over the lease term. The Company’s leases do not provide
an implicit rate. The Company uses its incremental borrowing rate based on the information available at commencement date in determining
the present value of lease payments. The ROU asset also includes any lease payments made and excludes lease incentives. Lease
expense for lease payments is recognized on a straight-line basis over the lease term. The Company adopted ASU 2016-02 in the
first quarter of 2019. See Note 8 for more complete details on balances as of the reporting periods presented herein. The adoption
had no material impact on cash provided by or used in operating, investing or financing activities on the Company’s unaudited
condensed consolidated statements of cash flows.
Inventory
Inventory consisting of supplements, is
stated at the lower of cost or net realizable value. Cost is determined by the first-in, first-out method. Outdated inventory
is directly charged to cost of goods sold.
Goodwill and Intangible Assets
Goodwill is recognized as the excess cost
of an acquired entity over the net amount assigned to assets acquired and liabilities assumed. Goodwill is not amortized, but
rather tested for impairment on an annual basis and more often if circumstances require. Impairment losses are recognized whenever
the implied fair value of goodwill is less than its carrying value.
The Company recognizes an acquired intangible
apart from goodwill whenever the intangible arises from contractual or other legal rights, or whenever it can be separated or
divided from the acquired entity and sold, transferred, licensed, rented or exchanged, either individually or in combination with
a related contract, asset or liability. Such intangibles are amortized over their estimated useful lives unless the estimated
useful life is determined to be indefinite. Amortizable intangible assets are being amortized primarily over useful lives of five
years. The straight-line method of amortization is used as it has been determined to approximate the use pattern of the assets.
Impairment losses are recognized if the carrying amount of an intangible that is subject to amortization is not recoverable from
expected future cash flows and its carrying amount exceeds its fair value.
The Company also maintains intangible
assets with indefinite lives, which are not amortized. These intangibles are tested for impairment on an annual basis and more
often if circumstances require. Impairment losses are recognized whenever the implied fair value of these assets is less than
their carrying value. No impairment charges were recognized in the three or six months ended June 30, 2020 or 2019.
Concentrations of Credit Risk
The Company’s financial instruments
that are exposed to a concentration of credit risk are cash and accounts receivable. There are no patients/customers that represent
10% or more of the Company’s revenue or accounts receivable. Generally, the Company’s cash and cash equivalents are
in checking accounts.
Property and Equipment
Property and equipment are stated at cost.
When retired or otherwise disposed, the related carrying value and accumulated depreciation are removed from the respective accounts
and the net difference less any amount realized from disposition, is reflected in earnings. For consolidated financial statement
purposes, property and equipment are recorded at cost and depreciated using the straight-line method over their estimated useful
lives of 5 to 7 years. The cost of repairs and maintenance is expensed as incurred; major replacements and improvements are capitalized.
HEALTHLYNKED CORP.
NOTES TO THE CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
JUNE 30, 2020
(UNAUDITED)
NOTE 2 – SIGNIFICANT ACCOUNTING
POLICIES (CONTINUED)
The Company examines the possibility of
decreases in the value of fixed assets when events or changes in circumstances reflect the fact that their recorded value may
not be recoverable. The Company recognizes an impairment loss when the sum of expected undiscounted future cash flows is less
than the carrying amount of the asset. The amount of impairment is measured as the difference between the asset’s estimated
fair value and its book value. There was no impairment as of or for the periods ended June 30, 2020 or 2019.
Convertible Notes
Convertible notes are regarded as compound
instruments, consisting of a liability component and an equity component. The component parts of compound instruments are classified
separately as financial liabilities and equity in accordance with the substance of the contractual arrangement. At the date of
issue, the fair value of the liability component is estimated using the prevailing market interest rate for a similar non-convertible
instrument. This amount is recorded as a liability on an amortized cost basis until extinguished upon conversion or at the instrument’s
maturity date. The equity component is determined by deducting the amount of the liability component from the fair value of the
compound instrument as a whole. This is recognized as additional paid-in capital and included in equity, net of income tax effects,
and is not subsequently remeasured. After initial measurement, they are carried at amortized cost using the effective interest
method. Convertible notes for which the maturity date has been extended and that qualify for debt extinguishment treatment are
recorded at fair value on the extinguishment date and then revalue at the end of each reporting period, with the change recorded
to the statement of operations under “Change in Fair Value of Debt.”
Derivative Financial Instruments
The Company reviews the terms of convertible
debt, equity instruments and other financing arrangements to determine whether there are embedded derivative instruments, including
embedded conversion options that are required to be bifurcated and accounted for separately as a derivative financial instrument.
Also, in connection with the issuance of financing instruments, the Company may issue freestanding options or warrants that may,
depending on their terms, be accounted for as derivative instrument liabilities, rather than as equity. Derivative financial instruments
are initially measured at their fair value. For derivative financial instruments that are accounted for as liabilities, the derivative
instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value
reported as charges or credits to income. To the extent that the initial fair values of the freestanding and/or bifurcated derivative
instrument liabilities exceed the total proceeds received, an immediate charge to income is recognized, in order to initially
record the derivative instrument liabilities at their fair value. The discount from the face value of convertible debt instruments
resulting from allocating some or all of the proceeds to the derivative instruments is amortized over the life of the instrument
through periodic charges to income.
The classification of derivative instruments,
including whether such instruments should be recorded as liabilities or as equity, is reassessed at the end of each reporting
period. If reclassification is required, the fair value of the derivative instrument, as of the determination date, is reclassified.
Any previous charges or credits to income for changes in the fair value of the derivative instrument are not reversed. Derivative
instrument liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement
of the derivative instrument could be required within twelve months of the balance sheet date. The Company does not use derivative
instruments to hedge exposures to cash flow, market, or foreign currency risks.
Fair Value of Assets and Liabilities
Fair value is the price that would be
received from the sale of an asset or paid to transfer a liability (i.e. an exit price) in the principal or most advantageous
market in an orderly transaction between market participants. In determining fair value, the accounting standards have established
a three-level hierarchy that distinguishes between (i) market data obtained or developed from independent sources (i.e., observable
data inputs) and (ii) a reporting entity’s own data and assumptions that market participants would use in pricing an asset
or liability (i.e., unobservable data inputs). Financial assets and financial liabilities measured and reported at fair value
are classified in one of the following categories, in order of priority of observability and objectivity of pricing inputs:
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Level
1 – Fair value based on quoted prices in active markets for identical assets
or liabilities;
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Level
2 – Fair value based on significant directly observable data (other than Level
1 quoted prices) or significant indirectly observable data through corroboration with
observable market data. Inputs would normally be (i) quoted prices in active markets
for similar assets or liabilities, (ii) quoted prices in inactive markets for identical
or similar assets or liabilities or (iii) information derived from or corroborated by
observable market data;
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Level
3 – Fair value based on prices or valuation techniques that require significant
unobservable data inputs. Inputs would normally be a reporting entity’s own data
and judgments about assumptions that market participants would use in pricing the asset
or liability.
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HEALTHLYNKED CORP.
NOTES TO THE CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
JUNE 30, 2020
(UNAUDITED)
NOTE 2 – SIGNIFICANT ACCOUNTING
POLICIES (CONTINUED)
The fair value measurement level for an
asset or liability is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques
should maximize the use of observable inputs and minimize the use of unobservable inputs.
Prior to January 1, 2020, the Company
utilized the closed-form Black-Scholes option pricing model to estimate the fair value of options, warrants, beneficial conversion
features and other Level 3 financial assets and liabilities. Effective January 1, 2020, the Company changed to a binomial lattice
option pricing model. The Company believes that the binomial lattice model results in a better estimate of fair value because
it embodies all of the requisite assumptions (including the underlying price, exercise price, term, volatility, and risk-free
interest-rate) necessary to fair value these instruments and, unlike the Black-Scholes model, also accommodates assumptions regarding
investor exercise behavior and other market conditions that market participants would likely consider in negotiating the transfer
of such an instruments.
Stock-Based Compensation
The Company accounts for stock-based compensation
to employees and nonemployees under ASC 718 “Compensation – Stock Compensation” using the fair value-based method.
Under this method, compensation cost is measured at the grant date based on the value of the award and is recognized over the
service period, which is usually the vesting period. This guidance establishes standards for the accounting for transactions in
which an entity exchanges its equity instruments for goods or services. It also addresses transactions in which an entity incurs
liabilities in exchange for goods or services that are based on the fair value of the entity’s equity instruments or that
may be settled by the issuance of those equity instruments. Effective January 1, 2020, the Company uses a binomial lattice pricing
model to estimate the fair value of options and warrants granted. In prior periods, the Company used the Black-Scholes pricing
model.
Income Taxes
The Company follows Accounting Standards
Codification subtopic 740-10, Income Taxes (“ASC 740-10”) for recording the provision for income taxes. Deferred tax
assets and liabilities are computed based upon the difference between the financial statement and income tax basis of assets and
liabilities using the enacted marginal tax rate applicable when the related asset or liability is expected to be realized or settled.
Deferred income tax expenses or benefits are based on the changes in the asset or liability during each period. If available evidence
suggests that it is more likely than not that some portion or all of the deferred tax assets will not be realized, a valuation
allowance is required to reduce the deferred tax assets to the amount that is more likely than not to be realized. Future changes
in such valuation allowance are included in the provision for deferred income taxes in the period of change. Deferred income taxes
may arise from temporary differences resulting from income and expense items reported for financial accounting and tax purposes
in different periods. Deferred taxes are classified as current or non-current, depending on the classification of assets and liabilities
to which they relate. Deferred taxes arising from temporary differences that are not related to an asset or liability are classified
as current or non-current depending on the periods in which the temporary differences are expected to reverse and are considered
immaterial. No Income Tax has been provided for the three and six months ended June 30, 2020 or 2019, since the Company has sustained
a loss for both periods. Due to the uncertainty of the utilization and recoverability of the loss carry-forwards and other deferred
tax assets, management has determined a full valuation allowance for the deferred tax assets, since it is more likely than not
that the deferred tax assets will not be realizable.
Recurring Fair Value Measurements
The carrying value of the Company’s
financial assets and financial liabilities is their cost, which may differ from fair value. The carrying value of cash held as
demand deposits, money market and certificates of deposit, marketable investments, accounts receivable, short-term borrowings,
accounts payable, accrued liabilities, and derivative financial instruments approximated their fair value.
HEALTHLYNKED CORP.
NOTES TO THE CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
JUNE 30, 2020
(UNAUDITED)
NOTE 2 – SIGNIFICANT ACCOUNTING
POLICIES (CONTINUED)
Net Loss per Share
Basic net income (loss) per common share
is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding during the period.
During the three and six months ended June 30, 2020 and 2019, the Company reported a net loss and excluded all outstanding stock
options, warrants and other dilutive securities from the calculation of diluted net loss per common share because inclusion of
these securities would have been anti-dilutive. As of June 30, 2020 and December 31, 2019, potentially dilutive securities were
comprised of (i) 49,208,018 and 47,056,293 warrants outstanding, respectively, (ii) 3,229,250 and 3,269,250 stock options outstanding,
respectively, (iii) 30,529,156 and 23,210,423 shares issuable upon conversion of convertible notes, respectively, and (iv) 300,000
and 332,500 unissued shares subject to future vesting requirements granted pursuant to the Company’s Employee Incentive
Plan.
Common stock awards
The Company grants common stock awards
to non-employees in exchange for services provided. The Company measures the fair value of these awards using the fair value of
the services provided or the fair value of the awards granted, whichever is more reliably measurable. The fair value measurement
date of these awards is generally the date the performance of services is complete. The fair value of the awards is recognized
on a straight-line basis as services are rendered. The share-based payments related to common stock awards for the settlement
of services provided by non-employees is recorded on the consolidated statement of comprehensive loss in the same manner and charged
to the same account as if such settlements had been made in cash.
Warrants
In connection with
certain financing, consulting and collaboration arrangements, the Company has issued warrants to purchase shares of its common
stock. The outstanding warrants are standalone instruments that are not puttable or mandatorily redeemable by the holder and are
classified as equity awards. The Company measures the fair value of the awards using the Black-Scholes pricing model as of the
measurement date. Effective January 1, 2020, the Company uses a binomial lattice pricing model to estimate the fair value of compensation
options and warrants. In prior periods, the Company used the Black-Scholes pricing model. Warrants issued in conjunction with the
issuance of common stock are initially recorded at fair value as a reduction in additional paid-in capital of the common stock
issued. All other warrants are recorded at fair value as expense over the requisite service period or at the date of issuance,
if there is not a service period. Warrants granted in connection with ongoing arrangements are more fully described in Note 14,
Shareholders’ Deficit.
Business Segments
The Company uses the “management
approach” to identify its reportable segments. The management approach designates the internal organization used by management
for making operating decisions and assessing performance as the basis for identifying the Company’s reportable segments.
Using the management approach, the Company determined that it has three operating segments: Health Services (multi-specialty medical
group including the NWC OB/GYN practice, the NCFM practice acquired in April 2019 and the BTG physical therapy practice launched
in 2020), Digital Healthcare (develops and markets the “HealthLynked Network,” an online personal medical information
and record archive system), and ACO/MSO (comprised of the ACO/MSO business acquired with CHM in May 2020, which assists physician
practices in providing coordinated and more efficient care to patients via the MSSP).
Recent Accounting Pronouncements
Effective January 1, 2019, the
Company adopted Accounting Standards Update (“ASU”) No. 2016-02, Leases (“ASU 2016-02”)
using the required modified retrospective approach. ASU 2016-02 requires lessees to record most leases on their balance
sheets but recognize expenses on their income statements in a manner similar to current accounting. See discussion below
under the caption “Leases” in this Note 2 and in Note 8 for more detail on the Company’s accounting
policy with respect to lease accounting.
Effective January 1, 2019, the Company
adopted ASU 2018-07, Compensation - Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting.
ASU 2018-07 expands the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from nonemployees
and supersedes the guidance in Subtopic 505-50, Equity - Equity-Based Payments to Non-Employees. The adoption of this guidance
did not materially impact the Company’s financial statements and related disclosures.
Accounting standards
recently adopted
In June 2016, the
FASB issued ASU No. 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.
The standard changes the accounting for recognizing impairments of financial assets. Under the new guidance, credit losses for
certain types of financial instruments are estimated based on expected losses. The new guidance also modifies the impairment models
for available-for-sale debt securities and for purchased financial assets with credit deterioration since their origination. The
new accounting guidance generally requires the modified retrospective transition method, with the cumulative effect of applying
the new accounting guidance recognized as an adjustment to opening retained earnings in the year of adoption, except for certain
financial assets where the prospective transition method is required, such as available-for-sale debt securities for which an other-than-temporary
impairment has been recorded. The ASUs became effective for us on January 1, 2020. The adoption of this guidance did not have a
material impact on the Company's consolidated financial statements and related disclosures.
In January 2017, the
FASB issued ASU 2017-04, Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. ASU 2017-04
simplifies the subsequent measurement of goodwill by eliminating Step 2 from the goodwill impairment test. Instead, the one step
quantitative impairment test calculates goodwill impairment as the excess of the carrying value of a reporting unit over its fair
value, up to the carrying value of the goodwill. The ASU should be applied on a prospective basis. ASU 2017-04 became effective
for us on January 1, 2020. The adoption of this update did not have a material impact on the Company's consolidated financial statements
and related disclosures.
HEALTHLYNKED CORP.
NOTES TO THE CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
JUNE 30, 2020
(UNAUDITED)
NOTE 2 – SIGNIFICANT ACCOUNTING
POLICIES (CONTINUED)
In August 2018, the
FASB issued ASU 2018-13, Fair Value measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for
Fair Value Measurement. ASU 2018-13 removes certain disclosure requirements, including the amount of and reasons for transfers
between Level 1 and Level 2 of the fair value hierarchy, the policy for timing of transfers between levels, and the valuation processes
for Level 3 fair value measurements. ASU 2018-13 also adds disclosure requirements, including changes in unrealized gains and losses
for the period included in other comprehensive income for recurring Level 3 fair value measurements, and the range and weighted
average of significant unobservable inputs used to develop Level 3 fair value measurements. The amendments on changes in unrealized
gains and losses, and the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements,
should be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption.
All other amendments should be applied retrospectively to all periods presented upon their effective date. ASU 2018-13 became effective
for us on January 1, 2020. The adoption of this update did not have a material impact on the Company's consolidated financial statements
and related disclosures.
In August 2018, the FASB issued ASU 2018-15, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Customer’s
Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract. ASU 2018-15 requires
a customer in a hosting arrangement that is a service contract to follow the guidance in Subtopic 350-40 to determine which implementation
costs to capitalize as an asset related to the service contract and which costs to expense. Therefore, a customer in a hosting
arrangement that is a service contract determines which project stage an implementation activity relates to. Costs for implementation
activities in the application development stage are capitalized depending on the nature of the costs, while costs incurred during
the preliminary project and post-implementation stages are expensed as the activities are performed. ASU 2018-15 also requires
the customer to expense the capitalized implementation costs over the term of the hosting arrangement, and to apply the existing
impairment guidance in Subtopic 350-40 to the capitalized implementation costs as if the costs were long-lived assets. ASU 2018-15
can be applied either retrospectively or prospectively and is effective for annual reporting periods beginning after December 15,
2019, and interim periods therein, with early adoption permitted. ASU 2018-15 became effective for us on January 1, 2020. We have
elected to apply the standard prospectively. The adoption of this update did not have a material impact on the Company's consolidated
financial statements and related disclosures.
In January 2016, the FASB issued ASU No. 2016-01,
Financial Instruments — Overall: Recognition and Measurement of Financial Assets and Financial Liabilities.
The guidance affects the accounting for equity investments, financial liabilities under the fair value option and the presentation
and disclosure requirements of financial instruments. The guidance is effective in the first quarter of fiscal 2019. We adopted
this guidance effective January 1, 2019. The adoption of this guidance did not materially impact our financial statements and
related disclosures.
In July 2017, the FASB issued ASU No.
2017-11, Earnings Per Share, Distinguishing Liabilities from Equity and Derivatives and Hedging, which changes the accounting
and earnings per share for certain instruments with down round features. The amendments in this ASU should be applied using a
cumulative-effect adjustment as of the beginning of the fiscal year or retrospective adjustment to each period presented and is
effective for annual periods beginning after December 15, 2018, and interim periods within those periods. We adopted this
guidance effective January 1, 2019. The adoption of this guidance did not materially impact our financial statements and related
disclosures.
In February 2018, the Financial Accounting
Standards Board (“FASB”) issued ASC Update No 2018-02 (Topic 220) Income Statement – Reporting Comprehensive
Income: Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. This ASC update allows for
a reclassification into retained earnings of the stranded tax effects in accumulated other comprehensive income (“AOCI”)
resulting from the enactment of the Tax Cuts and Jobs Act (“TCJA”). The updated guidance is effective for interim
and annual periods beginning after December 15, 2018. We adopted this guidance effective January 1, 2019. The adoption of
this guidance did not materially impact our financial statements and related disclosures.
In June 2018, the FASB issued ASU 2018-07,
Compensation - Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting, to expand the scope
of Topic 718 to include share-based payment transactions for acquiring goods and services from nonemployees and supersedes the
guidance in Subtopic 505-50, Equity - Equity-Based Payments to Non-Employees. Under ASU 2018-07, equity-classified nonemployee
share-based payment awards are measured at the grant date fair value on the grant date The probability of satisfying performance
conditions must be considered for equity-classified nonemployee share-based payment awards with such conditions. ASU 2018-07 is
effective for fiscal years beginning after December 15, 2018, with early adoption permitted. We adopted this guidance effective
January 1, 2019. The adoption of this guidance did not materially impact our financial statements and related disclosures.
In July 2018, the FASB issued ASU 2018-09 to provide clarification
and correction of errors to the Codification. The amendments in this update cover multiple Accounting Standards Updates. Some
topics in the update may require transition guidance with effective dates for annual periods beginning after December 15, 2018.
We adopted this guidance effective January 1, 2019. The adoption of this guidance did not materially impact our financial statements
and related disclosures.
No other new accounting
pronouncements were issued or became effective in the period that had, or are expected to have, a material impact on our unaudited
condensed consolidated Financial Statements.
NOTE 3 – GOING CONCERN MATTERS
AND LIQUIDITY
As of June 30, 2020, the Company had a working
capital deficit of $5,420,552 and accumulated deficit $18,127,718. For the six months ended June 30, 2020, the Company had a net
loss of $2,098,064 and net cash used by operating activities of $1,089,173. Net cash used in investing activities was $214,046.
Net cash provided by financing activities was $1,548,862, resulting principally from $827,500 net proceeds from the issuance of
convertible notes, $724,692 proceeds from the sale of common stock, $745,869 proceeds from loans issued by the federal government
under the Payroll Protection Act, and $149,000 proceeds from the issuance of related party loans.
The Company’s cash balance and revenues
generated are not currently sufficient and cannot be projected to cover its operating expenses for the next twelve months from
the date of this report. These matters raise substantial doubt about the Company’s ability to continue as a going concern.
Management’s plans include attempting to improve its business profitability and its ability to generate sufficient cash
flow from its operations to meet its needs on a timely basis, obtaining additional working capital funds through equity and debt
financing arrangements, and restructuring on-going operations to eliminate inefficiencies to raise cash balance in order to meet
its anticipated cash requirements for the next twelve months from the date of this report. However, there can be no assurance
that these plans and arrangements will be sufficient to fund the Company’s ongoing capital expenditures, working capital,
and other requirements. Management intends to make every effort to identify and develop sources of funds. The outcome of these
matters cannot be predicted at this time. There can be no assurance that any additional financings will be available to the Company
on satisfactory terms and conditions, if at all.
HEALTHLYNKED CORP.
NOTES TO THE CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
JUNE 30, 2020
(UNAUDITED)
NOTE 3 – GOING CONCERN MATTERS
AND LIQUIDITY (CONTINUED)
The ability of the Company to continue
as a going concern is dependent upon its ability to raise additional capital and achieve profitable operations. The accompanying
consolidated financial statements do not include any adjustments related to the recoverability or classification of asset-carrying
amounts or the amounts and classification of liabilities that may result should the Company be unable to continue as a going concern.
A novel strain of coronavirus, COVID-19,
that was first identified in China in December 2019, has surfaced in several regions across the world and resulted in travel restrictions
and business slowdowns or shutdowns in affected areas. The further spread of COVID-19, and the requirement to take action to limit
the spread of the illness, may impact our ability to carry out our business as usual and may materially adversely impact global
economic conditions, our business and financial condition, including our potential to conduct financings on terms acceptable to
us, if at all. The extent to which COVID-19 may impact our business will depend on future developments, which are highly uncertain
and cannot be predicted with confidence, such as the ultimate geographic spread of the disease, the duration of the outbreak,
travel restrictions and social distancing in the United States and other countries, business closures or business disruptions
and the effectiveness of actions taken in the United States and other countries to contain and treat the disease.
The Company intends that the cost of completing
intended acquisitions, implementing its development and sales efforts related to the HealthLynked Network, as well as maintaining
existing and expanding overhead and administrative costs, will be financed from (i) profits generated by NCFM and, upon completion
of the acquisition, from Cura and AHP, and (ii) outside funding sources, including the put rights associated with the Investment
Agreement, issuance of convertible notes, sales of common stock, and loans from related parties. The Company expects to repay
our outstanding convertible notes, which have an aggregate face value of $2,051,250 as of June 30, 2020, from outside funding
sources, including but not limited to new convertible notes payable, amounts available upon the exercise of the put rights granted
under the Investment Agreement, sales of equity, loans from related parties and others, or through the conversion of convertible
notes into equity. In May 2020, the Investment Agreement, which was scheduled to expire on May 15, 2020, was extended an additional
two years to May 15, 2022. No assurances can be given that the Company will be able to access sufficient outside capital in a
timely fashion in order to repay the convertible notes before they mature. If necessary funds are not available, the Company’s
business and operations would be materially adversely affected and in such event, the Company would attempt to reduce costs and
adjust its business plan.
NOTE 4 – ACQUISITIONS
Hughes Center for Functional Medicine
– April 2019
On April 12, 2019, the Company acquired
a 100% interest in Hughes Center for Functional Medicine (“HCFM”), a medical practice engaged in improving the health
of its patients through individualized and integrative health care. Under the terms of acquisition, the Company paid HCFM shareholders
$500,000 in cash, issued 3,968,254 shares of the Company’s common stock and agreed to an earn-out provision of $500,000
that may be earned based on the performance of HCFM in the years ended on the first, second and third anniversary dates of the
acquisition closing. The total consideration fair value represents a transaction value of $1,799,672. The Company accounted for
the transaction as an acquisition of a business pursuant to ASC 805, “Business Combinations” (“ASC 805”).
Following the acquisition, HCFM was rebranded
as NCFM and was combined with NWC to form the Company’s Health Services segment. As a result of the acquisition, the Company
is expected to be a leading provider of Functional Medicine in Southwest Florida. The Company also expects to reduce costs in
its Health Services segment through economies of scale.
The following table summarizes the fair
value of consideration paid for HCFM:
Cash
|
|
$
|
500,000
|
|
Common Stock (3,968,254 shares)
|
|
|
1,000,000
|
|
Contingent acquisition consideration subject to earn-out
|
|
|
299,672
|
|
|
|
|
|
|
Fair Value of Total Consideration
|
|
$
|
1,799,672
|
|
HEALTHLYNKED CORP.
NOTES TO THE CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
JUNE 30, 2020
(UNAUDITED)
NOTE 4 – ACQUISITIONS (CONTINUED)
The fair value of the 3,968,254 common
shares issued as part of the acquisition consideration was determined using the intraday volume weighted average price of the Company’s
common shares on the acquisition date. The terms of the earn out require the Company to pay the former owner of HCFM up to $100,000,
$200,000 and $200,000 on the first, second and third anniversary, respectively, based on achievement by NCFM of revenue of at least
$3,100,000 (50% weighting) and EBITDA of at least $550,000 (50% weighting) in the year preceding each anniversary date. The fair
value of the contingent acquisition consideration related to the future earn-out payments was calculated using a probability-weighted
discounted cash flow projection. The fair value of the contingent acquisition consideration is remeasured at the end of each reporting
period and changes are included in the statement of operations under the caption “Change in fair value of contingent acquisition
consideration.” During the three months ended June 30, 2020 and 2019, the Company recognized losses on the change in the
fair value of contingent acquisition consideration related to the HCFM acquisition of $4,706 and $-0-, respectively. During the
six months ended June 30, 2020 and 2019, the Company recognized losses on the change in the fair value of contingent acquisition
consideration of $11,327 and $-0-, respectively. During the six months ended June 30, 2020, the Company paid the seller $47,000
in satisfaction of the first year of earn-out.
The following table summarizes the estimated
fair values of the assets acquired at the acquisition date. There were no liabilities assumed in the acquisition of HCFM.
Cash
|
|
$
|
35,000
|
|
Hyperbaric Chambers
|
|
|
452,289
|
|
Medical Equipment
|
|
|
29,940
|
|
Computer Equipment/Software
|
|
|
19,739
|
|
Office Furniture & Equipment
|
|
|
23,052
|
|
Inventory
|
|
|
72,114
|
|
Leasehold Improvements
|
|
|
25,000
|
|
Website
|
|
|
41,000
|
|
Patient Management Platform Database
|
|
|
1,101,538
|
|
|
|
|
|
|
Fair Value of Identifiable Assets Acquired
|
|
$
|
1,799,672
|
|
The fair value of the website of $41,000
was determined based upon the cost to reconstruct and put into use applying current market rates. The fair value of the Patient
Management Platform Database of $1,101,538 was estimated by applying the income approach. Under the income approach, the expected
future cash flows generated by the Patient Management Platform Database are estimated and discounted to their net present value
at an appropriate risk-adjusted rate of return. Significant factors considered in the calculation of the rate of return are the
weighted average cost of capital and return on assets, as well as the risks inherent in the business. Cash flows were estimated
based on EBITDA using forecasted revenue and costs. The measure is based on significant inputs that are not observable in the
market (i.e. Level 3 inputs). Key assumptions include (i) a capitalization rate of 11.75% (ii) sustainable growth of 5% and (iii)
a benefit stream using EBITDA cash flow. The Company finalized the purchase price allocation in March 2020 and determined that
no goodwill was included in the acquisition.
Cura Health Management LLC –
May 2020
On May 18, 2020, the Company acquired
a 100% interest in Cura Health Management LLC (“CHM”) and its wholly owned subsidiary ACO Health Partners, LLC (“AHP”).
CHM and AHP assist physician practices in providing coordinated and more efficient care to patients via the MSSP. The Company
accounted for the transaction as an acquisition of a business pursuant to ASC 805, “Business Combinations” (“ASC
805”). Following the acquisition, the business of CHM will comprise the Company’s ACO/MSO Division.
Under the terms of acquisition, the Company
paid CHM shareholders the following consideration: (i) $214,000 in cash paid at closing, (ii) 2,240,838 shares of HealthLynked
common stock issued at closing, (iii) up to $223,500 additional cash and $660,000 in additional shares of HealthLynked common
payable at the time CHM receives the final assessment of the calculation of MSSP savings for the 2019 program year, with this
amount prorated based on a target MSSP payment (plus other ancillary revenue) of $1,725,000, and (iv) up to $437,500 based on
the business achieving annual revenue of $2,250,000 and annual profit of $500,000 in each of the four years following closing.
HEALTHLYNKED CORP.
NOTES TO THE CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
JUNE 30, 2020
(UNAUDITED)
NOTE 4 – ACQUISITIONS (CONTINUED)
The total consideration fair value represents
a transaction value of $1,473,460. The following table summarizes the fair value of consideration paid:
Cash paid at closing
|
|
$
|
214,000
|
|
Shares issued at closing
|
|
|
201,675
|
|
Cash and shares contingent upon 2019 program year MSSP payment target
|
|
|
778,192
|
|
Cash contingent upon four-year earn-out
|
|
|
279,593
|
|
|
|
|
|
|
|
|
$
|
1,473,460
|
|
The fair value of the 2,240,838 common
shares issued at closing was determined using the intraday average high and low trading price of the Company’s common shares
on the acquisition date. The terms of the earn out require the Company to pay the former owners of CHM up to $62,500, $125,000,
$125,000 and $125,000 on the first, second, third and fourth anniversary, respectively, based on achievement by the underlying
business of revenue of at least $2,250,000 (50% weighting) and profit of at least $500,000 (50% weighting) in the year preceding
each anniversary date. The fair value of the contingent acquisition consideration related to both the four-year earn-out and the
current year MSSP savings amount were calculated using a probability-weighted discounted cash flow projection. The fair value
of the contingent acquisition consideration is remeasured at the end of each reporting period and changes are included in the
statement of operations under the caption “Change in fair value of contingent acquisition consideration.” During the
three and six months ended June 30, 2020 and 2019, the Company recognized losses on the change in the fair value of contingent
acquisition consideration related to the CHM acquisition of $33,981 and $-0-, respectively.
The following table summarizes the estimated
fair values of the assets acquired and liabilities assumed at the acquisition date:
Cash
|
|
$
|
49,995
|
|
Accounts receivable
|
|
|
90,197
|
|
Prepayments
|
|
|
15,294
|
|
ACO physician contracts
|
|
|
1,073,000
|
|
Goodwill
|
|
|
381,856
|
|
Accounts payable
|
|
|
(32,846
|
)
|
Deferred revenue
|
|
|
(104,034
|
)
|
|
|
|
|
|
Fair Value of Identifiable Assets Acquired and Liabilities Assumed
|
|
$
|
1,473,460
|
|
The fair value of the ACO Physician Contracts
of $1,073,000 was estimated by applying the income approach. Under the income approach, the expected future cash flows generated
by the ACO Physician Contracts are estimated and discounted to their net present value at an appropriate risk-adjusted rate of
return. Significant factors considered in the calculation of the rate of return are the weighted average cost of capital and return
on assets, as well as the risks inherent in the business. Cash flows were estimated based on EBITDA using forecasted revenue and
costs. The measure is based on significant inputs that are not observable in the market (i.e. Level 3 inputs). Key assumptions
include (i) a capitalization rate of 24.24% (ii) sustainable growth of 5.00% and (iii) a benefit stream using EBITDA cash flow.
Goodwill of $381,856 arising from the acquisition consists of value associated with the legacy name. None of the goodwill recognized
is expected to be deductible for income tax purposes.
Pro Forma Financial Information
The following represents the pro forma
consolidated income statement as if HCFM and CHM had been included in the consolidated results of the Company for the entire six-month
period ending June 30, 2020 and 2019:
|
|
Six Months Ended
June 30,
|
|
|
|
2020
|
|
|
2019
|
|
Revenue
|
|
$
|
2,700,128
|
|
|
$
|
2,821,128
|
|
Net loss
|
|
$
|
(2,175,860
|
)
|
|
$
|
(1,991,173
|
)
|
HEALTHLYNKED CORP.
NOTES TO THE CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
JUNE 30, 2020
(UNAUDITED)
NOTE 4 – ACQUISITIONS (CONTINUED)
These amounts have been calculated after
applying the Company’s accounting policies and adjusting the results of HCFM and CHM to reflect the additional depreciation
and amortization that would have been charged assuming the fair value adjustments to property, plant and equipment and intangible
assets had been applied on January 1, 2020 and 2019, respectively.
NOTE 5 – DEFERRED OFFERING COSTS
AND PREPAID EXPENSES
On March 22, 2017, the Company the Company
granted to the investor in the Investment Agreement warrants to purchase 4,000,000 shares at $0.25 per share, 2,000,000 shares
at $0.50 per share and 1,000,000 shares at $1.00 per share. On June 7, 2017, the Company also granted warrants to purchase 200,000
shares at $0.25 per share, 100,000 shares at $0.50 per share and 50,000 shares at $1.00 per share to an advisor as a fee in connection
with the Investment Agreement. The aggregate fair value of these warrants totaling $153,625 was recorded as a deferred offering
cost and is being amortized over the initial period during which the Company was able access the financing, which began on May
15, 2017 and ended on May 15, 2020. The Company recognized general and administrative expense related to the cost of the warrants
of $6,401 and $12,802 in the three months ended June 30, 2020 and 2019, respectively, and $19,203 and $25,604 in the six months
ended June 30, 2020 and 2019, respectively.
On December 6, 2018, the Company granted three-year
warrants to purchase 240,000 shares at an exercise price of $0.20 per share to two advisors for services to be provided over a
three-month period. The fair value of the warrants of $35,462 was amortized over a three-month service period.. The Company recognized
general and administrative expense related to the warrants of $-0- and $-0- in the three months ended June 30, 2020 and 2019, respectively,
and $-0- and $25,611 in the six months ended June 30, 2020 and 2019, respectively.
NOTE 6 – PROPERTY, PLANT, AND
EQUIPMENT
Property, plant and equipment at June 30, 2020 and December
31, 2019 are as follows:
|
|
June 30,
|
|
|
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
Capital lease equipment
|
|
$
|
251,752
|
|
|
$
|
251,752
|
|
Medical equipment
|
|
|
484,126
|
|
|
|
482,229
|
|
Telephone equipment
|
|
|
12,308
|
|
|
|
12,308
|
|
Furniture, transport and office equipment
|
|
|
517,959
|
|
|
|
516,815
|
|
|
|
|
|
|
|
|
|
|
Total property, plant and equipment
|
|
|
1,266,145
|
|
|
|
1,263,104
|
|
Less: accumulated depreciation
|
|
|
(794,888
|
)
|
|
|
(749,316
|
)
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment, net
|
|
$
|
471,257
|
|
|
$
|
513,788
|
|
Depreciation expense during the three months
ended June 30, 2020 and 2019 was $22,830 and $21,710, respectively. Depreciation expense during the six months ended June 30, 2020
and 2019 was $45,572 and $21,590, respectively.
HEALTHLYNKED CORP.
NOTES TO THE CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
JUNE 30, 2020
(UNAUDITED)
NOTE 7 – INTANGIBLE ASSETS
Intangible assets at June 30, 2020 and December 31, 2019 are
as follows:
|
|
June 30,
|
|
|
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
NCFM: Medical database
|
|
$
|
1,101,538
|
|
|
$
|
1,230,000
|
|
NCFM: Website
|
|
|
41,000
|
|
|
|
41,000
|
|
CHM: ACO physician contracts
|
|
|
1,073,000
|
|
|
|
—
|
|
Goodwill
|
|
|
381,856
|
|
|
|
71,866
|
|
|
|
|
|
|
|
|
|
|
Total intangible assets
|
|
|
2,597,394
|
|
|
|
1,342,866
|
|
Less: accumulated amortization
|
|
|
(9,997
|
)
|
|
|
(5,908
|
)
|
|
|
|
|
|
|
|
|
|
Intangible assets, net
|
|
$
|
2,587,397
|
|
|
$
|
1,336,958
|
|
Goodwill and intangible assets arose from
the acquisitions of NCFM in April 2019 and CHM in May 2020. The NCFM medical database is assumed to have an indefinite life and
is not amortized and the website is being amortized on a straight-line basis over its estimated useful life of five years. The
CHM ACO physician contracts are assumed to have an indefinite life and are not amortized. Goodwill represents the excess of consideration
transferred over the fair value of the net identifiable assets acquired related to the acquisition of CHM.
Amortization expense in the three months
ended June 30, 2020 and 2019 was $2,045 and $1,775, respectively. Amortization expense in the six months ended June 30, 2020 and
2019 was $4,089 and $1,775, respectively. No impairment charges were recognized related to goodwill and intangible assets in the
three or six months ended June 30, 2020 or 2019.
NOTE 8 – LEASES
The Company has two operating leases for office
space and equipment that expire in July 2020, an operating lease for office space that expires in May 2022, and an operating lease
for office space that expires in March 2023. As of June 30, 2020, the Company’s weighted-average remaining lease term relating
to its operating leases was 1.9 years, with a weighted-average discount rate of 21.19%. The Company was also lessee
in a capital equipment finance lease for medical equipment entered into in March 2015 that expired in March 2020.
The table below summarizes the Company’s
lease-related assets and liabilities as of June 30, 2020:
|
|
As of June 30, 2020
|
|
|
As of December 31, 2019
|
|
|
|
Operating
|
|
|
Financing
|
|
|
Total
|
|
|
Operating
|
|
|
Financing
|
|
|
Total
|
|
|
|
Leases
|
|
|
Leases
|
|
|
Leases
|
|
|
Leases
|
|
|
Leases
|
|
|
Leases
|
|
Lease assets
|
|
$
|
161,467
|
|
|
$
|
—
|
|
|
$
|
161,467
|
|
|
$
|
273,196
|
|
|
$
|
4,482
|
|
|
$
|
277,678
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lease liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lease liabilities (short term)
|
|
$
|
82,745
|
|
|
$
|
—
|
|
|
$
|
82,745
|
|
|
$
|
197,041
|
|
|
$
|
4,482
|
|
|
$
|
201,523
|
|
Lease liabilities (long term)
|
|
|
86,503
|
|
|
|
—
|
|
|
|
86,503
|
|
|
|
80,510
|
|
|
|
—
|
|
|
|
80,510
|
|
Total lease liabilities
|
|
$
|
169,248
|
|
|
$
|
—
|
|
|
$
|
169,248
|
|
|
$
|
277,551
|
|
|
$
|
4,482
|
|
|
$
|
282,033
|
|
HEALTHLYNKED CORP.
NOTES TO THE CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
JUNE 30, 2020
(UNAUDITED)
NOTE 8 – LEASES (CONTINUED)
Lease expense in the three and six months
ended June 30, 2020 and 2019 was as follow:
|
|
Three Months Ended
June 30,
|
|
|
Six Months Ended
June 30,
|
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating leases
|
|
$
|
90,682
|
|
|
$
|
85,573
|
|
|
$
|
181,365
|
|
|
$
|
154,401
|
|
Financing leases
|
|
|
—
|
|
|
|
4,587
|
|
|
|
4,587
|
|
|
|
9,174
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total lease expense
|
|
$
|
90,682
|
|
|
$
|
90,160
|
|
|
$
|
185,952
|
|
|
$
|
163,575
|
|
Maturities of operating and capital lease
liabilities were as follows as of June 30, 2020:
|
|
Operating
|
|
|
Capital
|
|
|
Total
|
|
|
|
Leases
|
|
|
Leases
|
|
|
Commitments
|
|
2020
|
|
$
|
71,466
|
|
|
$
|
—
|
|
|
$
|
71,466
|
|
2021
|
|
|
98,531
|
|
|
|
—
|
|
|
|
98,531
|
|
2022
|
|
|
52,662
|
|
|
|
—
|
|
|
|
52,662
|
|
2023
|
|
|
6,099
|
|
|
|
—
|
|
|
|
6,099
|
|
Total lease payments
|
|
|
228,758
|
|
|
|
—
|
|
|
|
228,758
|
|
Less interest
|
|
|
(59,510
|
)
|
|
|
—
|
|
|
|
(59,510
|
)
|
Present value of lease liabilities
|
|
$
|
169,248
|
|
|
$
|
—
|
|
|
$
|
169,248
|
|
NOTE 9 – DEFERRED REVENUE
Amounts related to deferred contract revenue
in the three and six months ended June 30, 2020 and 2019 was as follow:
|
|
Three Months Ended June 30,
|
|
|
Six Months Ended June 30,
|
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, beginning of period
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Acquisition of CHM
|
|
|
104,034
|
|
|
|
—
|
|
|
|
104,034
|
|
|
|
—
|
|
Payments received for unearned revenue
|
|
|
52,667
|
|
|
|
—
|
|
|
|
52,667
|
|
|
|
—
|
|
Revenue earned
|
|
|
(50,420
|
)
|
|
|
—
|
|
|
|
(50,420
|
)
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, end of period
|
|
$
|
106,281
|
|
|
$
|
—
|
|
|
$
|
106,281
|
|
|
$
|
—
|
|
Deferred revenue relates to contracted
consulting services at CHM for which payment has been made but services have not yet been rendered as of the measurement date.
The Company typically satisfies its performance obligations related to such contracts upon completion of service. Payment is typically
made in the month prior to the services being provided.
NOTE 10 – NOTES PAYABLE AND OTHER
AMOUNTS DUE TO RELATED PARTY
Amounts due to related parties as of June
30, 2020 and December 31, 2019 were comprised of the following:
|
|
June 30,
|
|
|
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
Due to related party:
|
|
|
|
|
|
|
Deferred compensation, Dr. Michael Dent
|
|
$
|
300,600
|
|
|
$
|
300,600
|
|
Accrued interest payable to Dr. Michael Dent
|
|
|
225,069
|
|
|
|
192,857
|
|
Total due to related party
|
|
|
525,669
|
|
|
|
493,457
|
|
|
|
|
|
|
|
|
|
|
Notes payable to related party:
|
|
|
|
|
|
|
|
|
Notes payable to Dr. Michael Dent and family (all current)
|
|
$
|
827,981
|
|
|
$
|
743,955
|
|
HEALTHLYNKED CORP.
NOTES TO THE CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
JUNE 30, 2020
(UNAUDITED)
NOTE 10 – NOTES PAYABLE AND OTHER AMOUNTS DUE TO RELATED
PARTY (CONTINUED)
Notes Payable to Dr. Michael Dent
Our founder and CEO, Dr. Michael Dent,
has made loans to the Company from time to time in the form of unsecured promissory notes payable. The carrying values of notes
payable to Dr. Dent as of June 30, 2020 and December 31, 2019 were as follows:
|
|
|
|
Interest
|
|
|
June 30,
|
|
|
December 31,
|
|
Inception Date
|
|
Maturity Date
|
|
Rate
|
|
|
2020
|
|
|
2019
|
|
January 12, 2017
|
|
December 31, 2020
|
|
|
10
|
%
|
|
$
|
40,852
|
*
|
|
$
|
38,378
|
*
|
January 18, 2017
|
|
December 31, 2020
|
|
|
10
|
%
|
|
|
23,316
|
*
|
|
|
21,904
|
*
|
January 24, 2017
|
|
December 31, 2020
|
|
|
10
|
%
|
|
|
58,223
|
*
|
|
|
54,696
|
*
|
February 9, 2017
|
|
December 31, 2020
|
|
|
10
|
%
|
|
|
34,824
|
*
|
|
|
32,715
|
*
|
April 20, 2017
|
|
December 31, 2020
|
|
|
10
|
%
|
|
|
11,447
|
*
|
|
|
10,754
|
*
|
June 15, 2017
|
|
December 31, 2020
|
|
|
10
|
%
|
|
|
36,788
|
*
|
|
|
34,560
|
*
|
August 17, 2017
|
|
December 31, 2020
|
|
|
10
|
%
|
|
|
22,350
|
*
|
|
|
20,997
|
*
|
August 24, 2017
|
|
December 31, 2020
|
|
|
10
|
%
|
|
|
41,847
|
*
|
|
|
39,312
|
*
|
September 7, 2017
|
|
December 31, 2020
|
|
|
10
|
%
|
|
|
38,945
|
*
|
|
|
36,586
|
*
|
September 21, 2017
|
|
December 31, 2020
|
|
|
10
|
%
|
|
|
29,402
|
*
|
|
|
27,621
|
*
|
September 29, 2017
|
|
December 31, 2020
|
|
|
10
|
%
|
|
|
13,292
|
*
|
|
|
12,487
|
*
|
December 21, 2017
|
|
December 31, 2020
|
|
|
10
|
%
|
|
|
15,242
|
*
|
|
|
14,318
|
*
|
January 8, 2018
|
|
December 31, 2020
|
|
|
10
|
%
|
|
|
81,342
|
*
|
|
|
76,415
|
*
|
January 11, 2018
|
|
December 31, 2020
|
|
|
10
|
%
|
|
|
9,755
|
*
|
|
|
9,164
|
*
|
January 26, 2018
|
|
December 31, 2020
|
|
|
10
|
%
|
|
|
18,854
|
*
|
|
|
17,712
|
*
|
January 3, 2014
|
|
December 31, 2020
|
|
|
10
|
%
|
|
|
315,443
|
*
|
|
|
296,336
|
*
|
January 7, 2020
|
|
July 3, 2020
|
|
|
10
|
%
|
|
|
36,059
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
827,981
|
|
|
$
|
743,955
|
|
|
*
|
Denotes that note payable is reflected at fair value
|
As denoted in the table above, certain
of our notes payable to Dr. Dent are carried at fair value and revalued at each period end, with changes to fair value recorded
to the statement of operations under “Change in Fair Value of Debt.” The changes in fair value during the three months
ended June 30, 2020 and 2019 was $62,570 and $6,256, respectively. The changes in fair value during the six months ended June
30, 2020 and 2019 was $47,967 and $12,084, respectively. The fair value of these notes as of June 30, 2020 and December 31, 2019
was $791,922 and $743,955, respectively.
On January 7, 2020, the Company entered
into a Merchant Cash Advance Factoring Agreement (“MCA”) with a trust controlled by Dr. Dent, pursuant to which the
Company received an advance of $150,000 before closing fees (the “2020 MCA”). The Company is required to repay the
2020 MCA, which acts like an ordinary note payable, at the rate of $7,212 per week until the balance of $187,500 is repaid, which
was scheduled for July 2020. At inception, the Company recognized a note payable in the amount of $187,500 and a discount against
the note payable of $38,500. The discount is being amortized over the life of the instrument. The Company made installment payments
against the MCA of $72,114 and $-0-, respectively, during the three months ended June 30, 2020 and 2019, and $151,441 and $-0-,
respectively, during the six months ended June 30, 2020 and 2019. The Company recognized amortization of the discount in the amount
of $20,488 and $-0-, respectively, during the three months ended June 30, 2020 and 2019, and $38,500 and $-0-, respectively, during
the six months ended June 30, 2020 and 2019. As of June 30, 2020 and December 31, 2019, the carrying value of the MCA was $36,059
and $-0-, respectively. This note was repaid in full and retired during July 2020.
Interest accrued on the above notes payable
as of June 30, 2020 and December 31, 2019 was $225,069 and $192,888, respectively. Interest expense on the above unsecured promissory
notes was $36,594 and $16,417 for the three months ended June 30, 2020 and 2019, respectively, and $70,711 and $32,654 for the
six months ended June 30, 2020 and 2019, respectively.
HEALTHLYNKED CORP.
NOTES TO THE CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
JUNE 30, 2020
(UNAUDITED)
NOTE 11 – GOVERNMENT NOTES PAYABLE
During the six months ended June 30, 2020,
the Company and its subsidiaries received an aggregate of $745,869 in loans under the Paycheck Protection Program (the “PPP”).
The PPP loans, administered by the U.S. Small Business Administration and processed through Wells Fargo bank, were issued under
the recently enacted Coronavirus Aid, Relief, and Economic Security Act, also known as the CARES Act. The loans bear interest at
1% per annum in mature in May 2022. Principal and interest payments are deferred for the first six months of the loans. Pursuant
to the terms of the PPP, principal amounts may be forgiven if loan proceeds are used for qualifying expenses as described in the
CARES Act, including costs such as payroll, benefits, employer payroll taxes, rent and utilities.
Interest accrued on the PPP loans as of
June 30, 2020 and December 31, 2019 was $861 and $-0-, respectively. Interest expense on the PPP loans was $861 and $-0- for the
three months ended June 30, 2020 and 2019, respectively, and $861 and $-0- for the six months ended June 30, 2020 and 2019, respectively.
NOTE 12 – CONVERTIBLE NOTES PAYABLE
Convertible notes payable as of June 30, 2020 and December
31, 2019 were comprised of the following:
|
|
June 30,
|
|
|
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
$550k Note - July 2016
|
|
$
|
583,343
|
*
|
|
$
|
548,010
|
*
|
$50k Note - July 2016
|
|
|
60,533
|
*
|
|
|
56,866
|
*
|
$111k Note - May 2017
|
|
|
113,388
|
*
|
|
|
118,606
|
*
|
$357.5k Note - April 2019
|
|
|
349,922
|
*
|
|
|
328,728
|
*
|
$154k Note - June 2019
|
|
|
—
|
|
|
|
50,000
|
|
$136k Notes - July 2019
|
|
|
—
|
|
|
|
135,850
|
|
$78k Note III - July 2019
|
|
|
—
|
|
|
|
78,000
|
|
$230k Note - July 2019
|
|
|
—
|
|
|
|
230,000
|
|
$108.9k Note - August 2019
|
|
|
—
|
|
|
|
108,947
|
|
$142.5k Note - October 2019
|
|
|
142,500
|
|
|
|
142,500
|
|
$103k Note V - October 2019
|
|
|
—
|
|
|
|
103,000
|
|
$108.9k Note II - October 2019
|
|
|
—
|
|
|
|
108,947
|
|
$128.5k Note - October 2019
|
|
|
—
|
|
|
|
128,500
|
|
$103k Note VI - November 2019
|
|
|
—
|
|
|
|
103,000
|
|
$78.8k Note II - December 2019
|
|
|
—
|
|
|
|
78,750
|
|
$131.3k Note - January 2020
|
|
|
131,250
|
|
|
|
—
|
|
$78k Note IV - January 2020
|
|
|
78,000
|
|
|
|
—
|
|
$157.5k Note - March 2020
|
|
|
157,500
|
|
|
|
—
|
|
$157.5k Note II - April 2020
|
|
|
157,500
|
|
|
|
—
|
|
$135k Note - April 2020
|
|
|
135,000
|
|
|
|
—
|
|
$83k Note II - April 2020
|
|
|
83,000
|
|
|
|
—
|
|
$128k Note - April 2020
|
|
|
128,000
|
|
|
|
—
|
|
|
|
|
2,119,936
|
|
|
|
2,319,704
|
|
Less: unamortized discount
|
|
|
(212,246
|
)
|
|
|
(777,668
|
)
|
Convertible notes payable, net of original issue discount and debt discount
|
|
$
|
1,907,690
|
|
|
$
|
1,542,036
|
|
|
*
|
- Denotes that convertible note payable is carried at fair
value
|
HEALTHLYNKED
CORP.
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2020
(UNAUDITED)
NOTE
12 – CONVERTIBLE NOTES PAYABLE (CONTINUED)
Amortization
of debt discount recognized on each convertible note outstanding during the three and six months ended June 30, 2020 and 2019
were as follows:
|
|
Amortization of Debt Discount
|
|
|
|
Three Months Ended
June 30,
|
|
|
Six Months Ended
June 30,
|
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$103k Note I - October 2018
|
|
$
|
—
|
|
|
$
|
1,446
|
|
|
$
|
—
|
|
|
$
|
33,972
|
|
$103k Note II - November 2018
|
|
|
—
|
|
|
|
13,096
|
|
|
|
—
|
|
|
|
44,952
|
|
$153k Note - November 2018
|
|
|
—
|
|
|
|
39,276
|
|
|
|
—
|
|
|
|
89,718
|
|
$103k Note III - December 2018
|
|
|
—
|
|
|
|
17,214
|
|
|
|
—
|
|
|
|
42,611
|
|
$78k Note I - January 2019
|
|
|
—
|
|
|
|
26,000
|
|
|
|
—
|
|
|
|
47,714
|
|
$78k Note II - January 2019
|
|
|
—
|
|
|
|
24,061
|
|
|
|
—
|
|
|
|
41,512
|
|
$103k Note III - April 2019
|
|
|
—
|
|
|
|
27,384
|
|
|
|
—
|
|
|
|
27,384
|
|
$104.5k Note - April 2019
|
|
|
—
|
|
|
|
22,842
|
|
|
|
—
|
|
|
|
22,842
|
|
$104.5k Note II - April 2019
|
|
|
—
|
|
|
|
22,842
|
|
|
|
—
|
|
|
|
22,842
|
|
$357.5k Note - April 2019
|
|
|
—
|
|
|
|
75,364
|
|
|
|
—
|
|
|
|
75,362
|
|
$103k Note IV - May 2019
|
|
|
—
|
|
|
|
18,727
|
|
|
|
—
|
|
|
|
18,727
|
|
$154k Note - June 2019
|
|
|
—
|
|
|
|
11,361
|
|
|
|
1,093
|
|
|
|
11,361
|
|
$67.9k Note - July 2019
|
|
|
—
|
|
|
|
—
|
|
|
|
7,252
|
|
|
|
—
|
|
$67.9k Note II - July 2019
|
|
|
—
|
|
|
|
—
|
|
|
|
2,813
|
|
|
|
—
|
|
$78k Note III - July 2019
|
|
|
—
|
|
|
|
—
|
|
|
|
6,208
|
|
|
|
—
|
|
$230k Note - July 2019
|
|
|
—
|
|
|
|
—
|
|
|
|
58,527
|
|
|
|
—
|
|
$108.9k Note - August 2019
|
|
|
78
|
|
|
|
—
|
|
|
|
21,038
|
|
|
|
—
|
|
$142.5k Note - October 2019
|
|
|
35,430
|
|
|
|
—
|
|
|
|
70,861
|
|
|
|
—
|
|
$103k Note V - October 2019
|
|
|
930
|
|
|
|
—
|
|
|
|
29,143
|
|
|
|
—
|
|
$108.9k Note II - October 2019
|
|
|
11,475
|
|
|
|
—
|
|
|
|
33,205
|
|
|
|
—
|
|
$128.5k Note - October 2019
|
|
|
19,755
|
|
|
|
—
|
|
|
|
51,705
|
|
|
|
—
|
|
$103k Note VI - November 2019
|
|
|
10,730
|
|
|
|
—
|
|
|
|
39,450
|
|
|
|
—
|
|
$78.8k Note II - December 2019
|
|
|
11,194
|
|
|
|
—
|
|
|
|
27,111
|
|
|
|
—
|
|
$131.3k Note - January 2020
|
|
|
8,103
|
|
|
|
—
|
|
|
|
15,048
|
|
|
|
—
|
|
$78k Note IV - January 2020
|
|
|
7,317
|
|
|
|
—
|
|
|
|
13,347
|
|
|
|
—
|
|
$157.5k Note - March 2020
|
|
|
10,248
|
|
|
|
—
|
|
|
|
12,610
|
|
|
|
—
|
|
$157.5k Note II - April 2020
|
|
|
12,308
|
|
|
|
—
|
|
|
|
12,308
|
|
|
|
—
|
|
$135k Note - April 2020
|
|
|
9,974
|
|
|
|
—
|
|
|
|
9,974
|
|
|
|
—
|
|
$83k Note II - April 2020
|
|
|
7,092
|
|
|
|
—
|
|
|
|
7,092
|
|
|
|
—
|
|
$128k Note - April 2020
|
|
|
7,829
|
|
|
|
—
|
|
|
|
7,829
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
152,463
|
|
|
$
|
299,613
|
|
|
$
|
426,614
|
|
|
$
|
478,997
|
|
HEALTHLYNKED
CORP.
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2020
(UNAUDITED)
NOTE
12 – CONVERTIBLE NOTES PAYABLE (CONTINUED)
Unamortized
debt discount on outstanding convertible notes payable as of June 30, 2020 and December 31, 2019 were comprised of the following:
|
|
Unamortized Discount as of
|
|
|
|
June 30,
|
|
|
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
$154k Note - June 2019
|
|
$
|
—
|
|
|
$
|
21,175
|
|
$67.9k Note - July 2019
|
|
|
—
|
|
|
|
20,497
|
|
$67.9k Note II - July 2019
|
|
|
—
|
|
|
|
20,497
|
|
$78k Note III - July 2019
|
|
|
—
|
|
|
|
32,657
|
|
$230k Note - July 2019
|
|
|
—
|
|
|
|
125,684
|
|
$108.9k Note - August 2019
|
|
|
—
|
|
|
|
59,392
|
|
$142.5k Note - October 2019
|
|
|
36,209
|
|
|
|
107,070
|
|
$103k Note V - October 2019
|
|
|
—
|
|
|
|
70,686
|
|
$108.9k Note II - October 2019
|
|
|
—
|
|
|
|
72,592
|
|
$128.5k Note - October 2019
|
|
|
—
|
|
|
|
106,732
|
|
$103k Note VI - November 2019
|
|
|
—
|
|
|
|
81,740
|
|
$78.8k Note II - December 2019
|
|
|
—
|
|
|
|
58,946
|
|
$131.3k Note - January 2020
|
|
|
17,541
|
|
|
|
—
|
|
$78k Note IV - January 2020
|
|
|
8,603
|
|
|
|
—
|
|
$157.5k Note - March 2020
|
|
|
28,490
|
|
|
|
—
|
|
$157.5k Note II - April 2020
|
|
|
38,169
|
|
|
|
—
|
|
$135k Note - April 2020
|
|
|
32,855
|
|
|
|
—
|
|
$83k Note II - April 2020
|
|
|
19,191
|
|
|
|
—
|
|
$128k Note - April 2020
|
|
|
31,188
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
212,246
|
|
|
$
|
777,668
|
|
HEALTHLYNKED
CORP.
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2020
(UNAUDITED)
NOTE
12 – CONVERTIBLE NOTES PAYABLE (CONTINUED)
Interest
expense recognized on each convertible note outstanding during the three and six months ended June 30, 2020 and 2019 were as follows:
|
|
Interest Expense
|
|
|
|
Three Months Ended
June 30,
|
|
|
Six Months Ended
June 30,
|
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$550k Note - July 2016
|
|
$
|
8,227
|
|
|
$
|
8,227
|
|
|
$
|
16,455
|
|
|
$
|
16,364
|
|
$50k Note - July 2016
|
|
|
1,247
|
|
|
|
1,247
|
|
|
|
2,493
|
|
|
|
2,479
|
|
$111k Note - May 2017
|
|
|
2,019
|
|
|
|
4,123
|
|
|
|
6,714
|
|
|
|
8,200
|
|
$171.5k Note - October 2017
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,785
|
|
$103k Note I - October 2018
|
|
|
—
|
|
|
|
113
|
|
|
|
—
|
|
|
|
2,653
|
|
$103k Note II - November 2018
|
|
|
—
|
|
|
|
1,044
|
|
|
|
—
|
|
|
|
3,584
|
|
$153k Note - November 2018
|
|
|
—
|
|
|
|
2,938
|
|
|
|
—
|
|
|
|
6,710
|
|
$103k Note III - December 2018
|
|
|
—
|
|
|
|
1,721
|
|
|
|
—
|
|
|
|
4,261
|
|
$78k Note I - January 2019
|
|
|
—
|
|
|
|
1,945
|
|
|
|
—
|
|
|
|
3,569
|
|
$78k Note II - January 2019
|
|
|
—
|
|
|
|
1,945
|
|
|
|
—
|
|
|
|
3,355
|
|
$103k Note III - April 2019
|
|
|
—
|
|
|
|
2,483
|
|
|
|
—
|
|
|
|
2,483
|
|
$104.5k Note - April 2019
|
|
|
—
|
|
|
|
2,290
|
|
|
|
—
|
|
|
|
2,290
|
|
$104.5k Note II - April 2019
|
|
|
—
|
|
|
|
2,290
|
|
|
|
—
|
|
|
|
2,290
|
|
$357.5k Note - April 2019
|
|
|
8,913
|
|
|
|
10,450
|
|
|
|
9,742
|
|
|
|
10,453
|
|
$103k Note IV - May 2019
|
|
|
—
|
|
|
|
1,524
|
|
|
|
—
|
|
|
|
1,524
|
|
$154k Note - June 2019
|
|
|
—
|
|
|
|
1,139
|
|
|
|
46
|
|
|
|
1,139
|
|
$67.9k Note - July 2019
|
|
|
—
|
|
|
|
—
|
|
|
|
707
|
|
|
|
—
|
|
$67.9k Note II - July 2019
|
|
|
—
|
|
|
|
—
|
|
|
|
177
|
|
|
|
—
|
|
$78k Note III - July 2019
|
|
|
—
|
|
|
|
—
|
|
|
|
492
|
|
|
|
—
|
|
$230k Note - July 2019
|
|
|
—
|
|
|
|
—
|
|
|
|
3,041
|
|
|
|
—
|
|
$108.9k Note - August 2019
|
|
|
19
|
|
|
|
—
|
|
|
|
2,564
|
|
|
|
—
|
|
$142.5k Note - October 2019
|
|
|
3,553
|
|
|
|
—
|
|
|
|
9,291
|
|
|
|
—
|
|
$103k Note V - October 2019
|
|
|
85
|
|
|
|
—
|
|
|
|
2,653
|
|
|
|
—
|
|
$108.9k Note II - October 2019
|
|
|
1,254
|
|
|
|
—
|
|
|
|
3,970
|
|
|
|
—
|
|
$128.5k Note - October 2019
|
|
|
1,946
|
|
|
|
—
|
|
|
|
5,149
|
|
|
|
—
|
|
$103k Note VI - November 2019
|
|
|
959
|
|
|
|
—
|
|
|
|
3,527
|
|
|
|
—
|
|
$78.8k Note II - December 2019
|
|
|
1,381
|
|
|
|
—
|
|
|
|
3,344
|
|
|
|
—
|
|
$131.3k Note - January 2020
|
|
|
3,272
|
|
|
|
—
|
|
|
|
6,077
|
|
|
|
—
|
|
$78k Note IV - January 2020
|
|
|
1,945
|
|
|
|
—
|
|
|
|
3,547
|
|
|
|
—
|
|
$157.5k Note - March 2020
|
|
|
3,927
|
|
|
|
—
|
|
|
|
4,833
|
|
|
|
—
|
|
$157.5k Note II - April 2020
|
|
|
3,840
|
|
|
|
—
|
|
|
|
3,840
|
|
|
|
—
|
|
$135k Note - April 2020
|
|
|
3,144
|
|
|
|
—
|
|
|
|
3,144
|
|
|
|
—
|
|
$83k Note II - April 2020
|
|
|
1,933
|
|
|
|
—
|
|
|
|
1,933
|
|
|
|
—
|
|
$128k Note - April 2020
|
|
|
2,139
|
|
|
|
—
|
|
|
|
2,139
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
49,803
|
|
|
$
|
43,479
|
|
|
$
|
95,878
|
|
|
$
|
73,139
|
|
HEALTHLYNKED
CORP.
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2020
(UNAUDITED)
NOTE
12 – CONVERTIBLE NOTES PAYABLE (CONTINUED)
Certain
of our convertible notes payable are also carried at fair value and revalued at each period end, with changes to fair value recorded
to the statement of operations under “Change in Fair Value of Debt.” The changes in fair value during the three and
six months ended June 30, 2020 and 2019 and the fair value as of such instruments as of June 30, 2020 and December 31, 2019 were
as follows:
|
|
Change in Fair Value of Debt
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
|
Fair Value of Debt as of
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
June 30,
|
|
|
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$550k Note - July 2016
|
|
$
|
46,090
|
|
|
$
|
18,415
|
|
|
$
|
35,333
|
|
|
$
|
35,253
|
|
|
$
|
583,342
|
|
|
$
|
548,010
|
|
$50k Note - July 2016
|
|
|
4,783
|
|
|
|
1,865
|
|
|
|
3,667
|
|
|
|
3,573
|
|
|
|
60,533
|
|
|
|
56,866
|
|
$111k Note - May 2017
|
|
|
14,577
|
|
|
|
3,872
|
|
|
|
11,541
|
|
|
|
7,416
|
|
|
|
113,388
|
|
|
|
118,606
|
|
$171.5k Note - October 2017
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,781
|
|
|
|
—
|
|
|
|
—
|
|
$357.5k Note - April 2019
|
|
|
27,647
|
|
|
|
—
|
|
|
|
21,194
|
|
|
|
—
|
|
|
|
349,923
|
|
|
|
328,727
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
93,097
|
|
|
$
|
24,152
|
|
|
$
|
71,735
|
|
|
$
|
48,023
|
|
|
$
|
1,107,186
|
|
|
$
|
1,052,209
|
|
Convertible
Note Payable ($111,000) – May 2017
On
May 22, 2017, the Company entered into a 10% fixed convertible secured promissory note with an investor with a face value of $111,000.
The $111k Note is convertible into shares of the Company’s common stock at the discretion of the note holder at a fixed
price of $0.15 per share, or 740,000 of the Company’s common shares, and is secured by all of the Company’s assets.
The Company received $100,000 net proceeds from the note after an $11,000 original issue discount. At inception, the investors
were also granted a five-year warrant to purchase 133,333 shares of the Company’s common stock at an exercise price of $0.75
per share. The $111k Note matures on December 31, 2020. On February 6, 2020, the holder of the $111k Note converted $30,000 principal
on the note into 448,029 shares of Company common stock. In connection with the conversion, the Company recognized a loss on debt
extinguishment of $25,394, representing the excess of the fair value of the shares issued at conversion over the carrying value
of the portion of the host instrument and the bifurcated conversion feature converted.
Convertible
Notes Payable ($103,000) – October 2018
On
October 18, 2018, the Company issued a $103,000 convertible note (the “$103k Note I”). On April 4, 2019, the Company
prepaid the balance on the $103k Note I, including accrued interest, for a one-time cash payment of $134,500. In connection with
the repayment, the Company recognized a gain on debt extinguishment of $28,169 in the six months ended June 30, 2019, equal to
the excess of the payment amount over the carrying value of the note, derivative embedded conversion feature and accrued interest.
Convertible
Notes Payable ($103,000) – November 2018
On
November 12, 2018, the Company issued a $103,000 convertible note (the “$103k Note II”). On May 7, 2019, the Company
prepaid the balance on the $103k Note II, including accrued interest, for a one-time cash payment of $134,888. In connection with
the repayment, the Company recognized a gain on debt extinguishment of $23,821 in the six months ended June 30, 2019, equal to
the excess of the payment amount over the carrying value of the note, derivative embedded conversion feature and accrued interest.
Convertible
Notes Payable ($153,000) – November 2018
On
November 19, 2018, the Company issued a $153,000 convertible note (the “$153k Note”). During six months ended June
30, 2019, the holder of the $153k Note converted principal in the amount of $110,000 into 740,002 shares of Company common stock.
The remaining principal balance of $43,000 was converted in the second half of 2019.
HEALTHLYNKED
CORP.
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2020
(UNAUDITED)
NOTE
12 – CONVERTIBLE NOTES PAYABLE (CONTINUED)
Convertible
Notes Payable ($103,000) – December 2018
On
December 3, 2018, the Company issued a $103,000 convertible note (the “$103k Note III”). On May 31, 2019, the Company
prepaid the balance on the $103k Note III, including accrued interest, for a one-time cash payment of $135,029. In connection
with the repayment, the Company recognized a gain on debt extinguishment of $20,445 in the six months ended June 30, 2019, equal
to the excess of the payment amount over the carrying value of the note, derivative embedded conversion feature and accrued interest.
Convertible
Note Payable ($78,000) – January 2019
On
January 14, 2019, the Company issued a $78,000 convertible note (the “$78k Note”). The $78k Note, including accrued
interest, was repaid in July 2019 for a one-time cash payment of $102,321. In connection with the repayment, the Company recognized
a loss on debt extinguishment of $6,258 in the six months ended June 30, 2019, equal to the excess of the payment amount over
the carrying value of the note, derivative embedded conversion feature and accrued interest.
Convertible
Note Payable ($78,000) – January 2019
On
January 24, 2019, the Company issued a $78,000 convertible note (the “$78k Note II”). The $78k Note II, including
accrued interest, was repaid in July 2019 for a one-time cash payment of $102,255. In connection with the repayment, the Company
recognized a gain on debt extinguishment of $11,161 in the six months ended June 30, 2019, equal to the excess of the payment
amount over the carrying value of the note, derivative embedded conversion feature and accrued interest.
Convertible
Note Payable ($103,000) – April 2019
On
April 3, 2019, the Company entered into a securities purchase agreement for the sale of a $103,000 convertible note (the “$103k
Note III”). During the second half of 2019, the Company prepaid the balance on the $103k Note III, including accrued interest,
for a one-time cash payment of $135,099.
Convertible
Note Payable ($104,500) – April 2019
On
April 11, 2019, the Company entered into securities purchase agreements for the sale of a $104,500 convertible note (the “$104.5k
Note I”). During the second half of 2019, the holder of the $104.5k Note I converted the full principal in the amount of
$104,500 and $5,768 of accrued interest into 1,176,189 shares of Company common stock.
Convertible
Note Payable ($104,500) – April 2019
On
April 11, 2019, the Company entered into securities purchase agreements for the sale of a second $104,500 convertible note (the
“$104.5k Note II”). During the second half of 2019, the Company prepaid the balance on the $104.5k Note II, including
accrued interest, for a one-time cash payment of $142,500.
Convertible
Note Payable ($357,500) – April 2019
On
April 15, 2019, the Company issued a fixed convertible note with a face value of $357,500 (the “$357.5k Note”). The
$357.5k Note has an interest rate of 10%, matures on December 31, 2020, and may be converted into common stock of the Company
by the holder at any time, subject to a 9.99% beneficial ownership limitation, at a fixed conversion price per share of $0.15,
or 2,383,333 shares.
Convertible
Note Payable ($103,000) – May 2019
On
May 7, 2019, the Company issued a $103,000 convertible note (the “$103k Note IV”). During the second half of 2019,
the Company prepaid the balance on the $103k Note IV, including accrued interest, for a one-time cash payment of $133,900.
HEALTHLYNKED
CORP.
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2020
(UNAUDITED)
NOTE
12 – CONVERTIBLE NOTES PAYABLE (CONTINUED)
Convertible
Note Payable ($154,000) – June 2019
On
June 3, 2019, the Company issued a $154,000 convertible note (the “$154k Note”), of which $54,000 was converted in
the second half of 2019. During the six months ended June 30, 2020, the holder converted the remaining unpaid principal balance
of $50,000 and accrued interest of $8,572 into 968,390 shares of Company common stock. In connection with the conversion, the
Company recognized a loss on debt extinguishment of $125,865 in the six months ended June 30, 2020, representing the excess of
the fair value of the shares issued at conversion over the carrying value of the portion of the host instrument and the bifurcated
conversion feature converted.
Convertible
Note Payable ($67,925) – July 2019
On
July 11, 2019, the Company issued a $67,925 convertible note (the “$67.9k Note I”). During the six months ended June
30, 2020, the holder converted the full principal of $67,925 and accrued interest of $3,926 into 885,847 shares of Company common
stock. In connection with the conversion, the Company recognized a loss on debt extinguishment of $55,117 in the six months ended
June 30, 2020, representing the excess of the fair value of the shares issued at conversion over the carrying value of the portion
of the host instrument and the bifurcated conversion feature converted.
Convertible
Note Payable ($67,925) – July 2019
On
July 11, 2019, the Company issued a second $67,925 convertible note (the “$67.9k Note II”). During the six months
ended June 30, 2020, the Company prepaid the balance on the $67.9k Note II, including accrued interest, for a one-time cash payment
of $89,152. In connection with the repayment, the Company recognized a loss on debt extinguishment of $26,890 in the six months
ended June 30, 2020, equal to the excess of the payment amount over the carrying value of the note, derivative embedded conversion
feature and accrued interest.
Convertible
Note Payable ($78,000) – July 2019
On
July 16, 2019, the Company issued a $78,000 convertible note (the “$78k Note III”). During the three months ended
June 30, 2020, the Company prepaid the balance on the $78k Note III, including accrued interest, for a one-time cash payment of
$102,388. In connection with the repayment, the Company recognized a loss on debt extinguishment of $31,432 in the six months
ended June 30, 2020, equal to the excess of the payment amount over the carrying value of the note, derivative embedded conversion
feature and accrued interest.
Convertible
Note Payable ($230,000) – July 2019
On
July 18, 2019, the Company issued a convertible note with a face value of $230,000 (the “$230k Note”). During the
three months ended June 30, 2020, the holder converted $80,000 of principal and $4,373 of accrued interest on the note into 1,236,668
shares of Company common stock and the Company repaid principal of $150,000 and accrued interest of $9,128 for cash payments totaling
$181,554. The note was retired upon these conversions and repayments. In connection with the conversions and repayments, the Company
recognized a loss on debt extinguishment of $112,498 in the six months ended June 30, 2020 equal to the excess of the cash payment
amount and the fair value of the shares issued at conversion over the carrying value of the note, derivative embedded conversion
feature and accrued interest.
Convertible
Note Payable ($108,947) – August 2019
On
August 26, 2019, the Company issued a convertible note with a face value of $108,947 (the “$108.9k Note”). During
the six months ended June 30, 2020, the holder converted the full principal of $108,947 and accrued interest of $6,354 into 2,650,251
shares of Company common stock. In connection with the conversions, the Company recognized a loss on debt extinguishment of $161,617
in the six months ended June 30, 2020, representing the excess of the fair value of the shares issued at conversion over the carrying
value of the portion of the host instrument and the bifurcated conversion feature converted.
HEALTHLYNKED
CORP.
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2020
(UNAUDITED)
NOTE
12 – CONVERTIBLE NOTES PAYABLE (CONTINUED)
Convertible
Note Payable ($103,000) – October 2019
On
October 1, 2019, the Company issued a $103,000 convertible note (the “$103k Note V”). On April 3, 2020, 2020, the
Company prepaid the balance on the $103k Note V, including accrued interest, for a one-time cash payment of $135,205. In connection
with the repayment, the Company recognized a loss on debt extinguishment of $43,777 in the six months ended June 30, 2020, equal
to the excess of the payment amount over the carrying value of the note, derivative embedded conversion feature and accrued interest.
Convertible
Note Payable ($108,947) – October 2019
On
October 30, 2019, the Company issued a convertible note with a face value of $108,947 (the “$108.9k Note II”). During
the six months ended June 30, 2020, the holder converted the full principal of $108,947 and accrued interest of $5,821 into 1,954,870
shares of Company common stock. In connection with the conversions, the Company recognized a loss on debt extinguishment of $76,895
in the six months ended June 30, 2020, representing the excess of the fair value of the shares issued at conversion over the carrying
value of the portion of the host instrument and the bifurcated conversion feature converted.
Convertible
Note Payable ($128,500) – October 2019
On
October 30, 2019, the Company issued a $128,500 convertible note (the “$128.5k Note”). During the six months ended
June 30, 2020, the holder converted the full principal of $128,500 and accrued interest of $8,832 into 3,197,877 shares of Company
common stock. In connection with the conversion, the Company recognized a loss on debt extinguishment of $154,248 in the six months
ended June 30, 2020, representing the excess of the fair value of the shares issued at conversion over the carrying value of the
portion of the host instrument and the bifurcated conversion feature converted.
Convertible
Note Payable ($103,000) – November 2019
On
November 4, 2019, the Company issued a $103,000 convertible note (the “$103k Note VI”). On May 4, 2020, the Company
prepaid the balance on the $103k Note VI, including accrued interest, for a one-time cash payment of $135,099. In connection with
the repayment, the Company recognized a loss on debt extinguishment of $45,077 in the six months ended June 30, 2020, equal to
the excess of the payment amount over the carrying value of the note, derivative embedded conversion feature and accrued interest.
Convertible
Note Payable ($78,750) – December 2019
On
December 2, 2019, the Company issued a $78,750 convertible note (the “$78.8k Note”). On June 3, 2020, the Company
prepaid the balance on the $78.8k Note, including accrued interest, for a one-time cash payment of $103,359. In connection with
the repayment, the Company recognized a loss on debt extinguishment of $37,554 in the six months ended June 30, 2020, equal to
the excess of the payment amount over the carrying value of the note, derivative embedded conversion feature and accrued interest.
Convertible
Note Payable ($131,250) – January 2020
On
January 13, 2020, the Company issued a $131,250 convertible note (the “$131.3k Note”). The $131.3k Note included $8,750
fees and discounts for net proceeds of $122,500. The $131.3k Note has an interest rate of 10% and a default interest rate of 22%
and matures on January 13, 2021. The $131.3k Note may be converted into common stock of the Company by the holder at any time
after the issuance date, subject to a 4.99% beneficial ownership limitation, at a conversion price per share equal to a 25% discount
to the lowest bid or trading price of the Company’s common stock during the thirteen (13) trading days prior to the conversion
date. Upon an event of default caused by the Company’s failure to deliver shares upon a conversion pursuant to the terms
of the note, 300% of the outstanding principal and any interest due amount shall be immediately due. Upon an event of default
caused by the Company’s breach of any other events of default specified in the note, 150% of the outstanding principal and
any interest due amount shall be immediately due.
HEALTHLYNKED
CORP.
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2020
(UNAUDITED)
NOTE
12 – CONVERTIBLE NOTES PAYABLE (CONTINUED)
The
fair value of the embedded conversion feature (“ECF”) was calculated using a binomial lattice pricing model at $23,838.
The ECF qualifies for derivative accounting and bifurcation under ASC 815, “Derivatives and Hedging.” The final allocation
of the proceeds at inception was as follows:
Embedded conversion feature
|
|
$
|
23,838
|
|
Original issue discount and fees
|
|
|
8,750
|
|
Convertible note
|
|
|
98,662
|
|
|
|
|
|
|
Gross proceeds
|
|
$
|
131,250
|
|
Convertible
Note Payable ($78,000) – January 2020
On
January 16, 2020, the Company issued a $78,000 convertible note (the “$78k Note IV”). The $78k Note IV included $3,000
fees for net proceeds of $75,000. The $78k Note IV has an interest rate of 10% and a default interest rate of 22% and matures
on October 15, 2020. The $78k Note IV may be converted into common stock of the Company by the holder at any time after the 6-month
anniversary of the issuance date, subject to a 4.99% beneficial ownership limitation, at a conversion price per share equal to
a 39% discount to the lowest bid or trading price of the Company’s common stock during the fifteen (15) trading days prior
to the conversion date. Upon an event of default caused by the Company’s failure to deliver shares upon a conversion pursuant
to the terms of the note, 300% of the outstanding principal and any interest due amount shall be immediately due. Upon an event
of default caused by the Company’s breach of any other events of default specified in the note, 150% of the outstanding
principal and any interest due amount shall be immediately due.
The
fair value of the ECF was calculated using a binomial lattice pricing model at $18,950. The ECF qualifies for derivative accounting
and bifurcation under ASC 815, “Derivatives and Hedging.” The final allocation of the proceeds at inception was as
follows:
Embedded conversion feature
|
|
$
|
18,950
|
|
Original issue discount and fees
|
|
|
3,000
|
|
Convertible note
|
|
|
56,050
|
|
|
|
|
|
|
Gross proceeds
|
|
$
|
78,000
|
|
Convertible
Note Payable ($157,500) – March 2020
On
March 10, 2020, the Company issued a $157,500 convertible note (the “$157.5k Note”). The $157.5k Note included $11,000
fees for net proceeds of $146,500. The $157.5k Note has an interest rate of 10% and a default interest rate of 22% and matures
on March 10, 2021. The $157.5k Note may be converted into common stock of the Company by the holder at any time after the issuance
date, subject to a 4.99% beneficial ownership limitation, at a conversion price per share equal to a 25% discount to the lowest
bid or trading price of the Company’s common stock during the thirteen (13) trading days prior to the conversion date. Upon
an event of default caused by the Company’s failure to deliver shares upon a conversion pursuant to the terms of the note,
300% of the outstanding principal and any interest due amount shall be immediately due. Upon an event of default caused by the
Company’s breach of any other events of default specified in the note, 150% of the outstanding principal and any interest
due amount shall be immediately due.
The
fair value of the ECF was calculated using a binomial lattice pricing model at $30,102. The ECF qualifies for derivative accounting
and bifurcation under ASC 815, “Derivatives and Hedging.” The final allocation of the proceeds at inception was as
follows:
Embedded conversion feature
|
|
$
|
30,102
|
|
Original issue discount and fees
|
|
|
11,000
|
|
Convertible note
|
|
|
116,398
|
|
|
|
|
|
|
Gross proceeds
|
|
$
|
157,500
|
|
HEALTHLYNKED
CORP.
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2020
(UNAUDITED)
NOTE
12 – CONVERTIBLE NOTES PAYABLE (CONTINUED)
Convertible
Note Payable ($157,500) – April 2020
On
April 2, 2020, the Company issued a $157,500 convertible note (the “$157.5k Note”). The $157.5k Note included $10,500
fees and discounts for net proceeds of $147,000. The $157.5k Note has an interest rate of 10% and a default interest rate of 22%
and matures on April 2, 2021. The $157.5k Note may be converted into common stock of the Company by the holder at any time six
months after the issuance date, subject to a 4.99% beneficial ownership limitation, at a conversion price per share equal to a
29% discount to the lowest bid or trading price of the Company’s common stock during the thirteen (13) trading days prior
to the conversion date.
The
fair value of the ECF was calculated using a binomial lattice pricing model at $39,978. The ECF qualifies for derivative accounting
and bifurcation under ASC 815, “Derivatives and Hedging.” The final allocation of the proceeds at inception was as
follows:
Embedded conversion feature
|
|
$
|
39,978
|
|
Original issue discount and fees
|
|
|
10,500
|
|
Convertible note
|
|
|
107,022
|
|
|
|
|
|
|
Gross proceeds
|
|
$
|
157,500
|
|
Convertible
Note Payable ($135,000) – April 2020
On
April 6, 2020, the Company issued a $135,000 convertible note (the “$135k Note”). The $135k Note included $3,500 fees
and discounts for net proceeds of $131,500. The $135k Note has an interest rate of 10% and a default interest rate of 18% and
matures on April 6, 2021. The $135k Note may be converted into common stock of the Company by the holder at any time six months
after the issuance date, subject to a 4.99% beneficial ownership limitation, at a conversion price per share equal to a 39% discount
to the lowest bid or trading price of the Company’s common stock during the fifteen (15) trading days prior to the conversion
date.
The
fair value of the ECF was calculated using a binomial lattice pricing model at $39,329. The ECF qualifies for derivative accounting
and bifurcation under ASC 815, “Derivatives and Hedging.” The final allocation of the proceeds at inception was as
follows:
Embedded conversion feature
|
|
$
|
39,329
|
|
Original issue discount and fees
|
|
|
3,500
|
|
Convertible note
|
|
|
92,171
|
|
|
|
|
|
|
Gross proceeds
|
|
$
|
135,000
|
|
Convertible
Note Payable ($83,000) – April 2020
On
April 6, 2020, the Company issued an $83,000 convertible note (the “$83k Note”). The $83k Note included $3,000 fees
and discounts for net proceeds of $80,000. The $83k Note has an interest rate of 10% and a default interest rate of 22% and matures
on February 15, 2021. The $83k Note may be converted into common stock of the Company by the holder at any time six months after
the issuance date, subject to a 4.99% beneficial ownership limitation, at a conversion price per share equal to a 39% discount
to the lowest bid or trading price of the Company’s common stock during the fifteen (15) trading days prior to the conversion
date.
The
fair value of the ECF was calculated using a binomial lattice pricing model at $23,283. The ECF qualifies for derivative accounting
and bifurcation under ASC 815, “Derivatives and Hedging.” The final allocation of the proceeds at inception was as
follows:
Embedded conversion feature
|
|
$
|
23,283
|
|
Original issue discount and fees
|
|
|
3,000
|
|
Convertible note
|
|
|
56,717
|
|
|
|
|
|
|
Gross proceeds
|
|
$
|
83,000
|
|
HEALTHLYNKED
CORP.
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2020
(UNAUDITED)
NOTE
12 – CONVERTIBLE NOTES PAYABLE (CONTINUED)
Convertible
Note Payable ($128,000) – April 2020
On
April 30, 2020, the Company issued a $128,000 convertible note (the “$128k Note”). The $128k Note included $3,000
fees and discounts for net proceeds of $125,000. The $128k Note has an interest rate of 10% and a default interest rate of 2%
and matures on February 28, 2021. The $128k Note may be converted into common stock of the Company by the holder at any time six
months after the issuance date, subject to a 4.99% beneficial ownership limitation, at a conversion price per share equal to a
39% discount to the lowest bid or trading price of the Company’s common stock during the fifteen (15) trading days prior
to the conversion date.
The
fair value of the ECF was calculated using a binomial lattice pricing model at $36,018. The ECF qualifies for derivative accounting
and bifurcation under ASC 815, “Derivatives and Hedging.” The final allocation of the proceeds at inception was as
follows:
Embedded conversion feature
|
|
$
|
36,018
|
|
Original issue discount and fees
|
|
|
3,000
|
|
Convertible note
|
|
|
88,982
|
|
|
|
|
|
|
Gross proceeds
|
|
$
|
128,000
|
|
NOTE
13 – DERIVATIVE FINANCIAL INSTRUMENTS
Derivative
financial instruments are comprised of (i) the fair value of ECFs embedded in convertible promissory notes for which the conversion
rate is not fixed, but instead is adjusted based on a discount to the market price of the Company’s common stock, and (ii)
a conditional cash redemption feature included in certain outstanding warrant agreements. The fair market value of the ECF derivative
liabilities was calculated at inception of each convertible promissory note for which the conversion rate is not fixed and allocated
to the respective convertible notes, with any excess recorded as a charge to “Financing cost.” The fair market value
of the warrant feature derivative liabilities, which is only exercisable upon a change of control of the Company, was calculated
as of the time that the beneficial ownership of the Company’s management and board fell below 50% and therefore a change
of control a transaction, including a hostile takeover, was no longer within the Company’s control. Derivative financial
instruments are revalued at the end of each period, with the change in value recorded to “Change in fair value of on derivative
financial instruments.”
Derivative
financial instruments and changes thereto recorded in the three and six months ended June 30, 2020 and 2019 include the following:
|
|
Three Months Ended
June 30,
|
|
|
Six Months Ended
June 30,
|
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, beginning of period
|
|
$
|
219,938
|
|
|
$
|
580,855
|
|
|
$
|
991,288
|
|
|
$
|
800,440
|
|
Inception of derivative financial instruments
|
|
|
138,608
|
|
|
|
624,832
|
|
|
|
211,498
|
|
|
|
804,059
|
|
Change in fair value of derivative financial instruments
|
|
|
13,672
|
|
|
|
(223,881
|
)
|
|
|
(726,683
|
)
|
|
|
(415,514
|
)
|
Conversion or extinguishment of derivative financial instruments
|
|
|
(114,834
|
)
|
|
|
(349,201
|
)
|
|
|
(218,719
|
)
|
|
|
(556,380
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, end of period
|
|
$
|
257,384
|
|
|
$
|
632,605
|
|
|
$
|
257,384
|
|
|
$
|
632,605
|
|
HEALTHLYNKED
CORP.
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2020
(UNAUDITED)
NOTE
13 – DERIVATIVE FINANCIAL INSTRUMENTS (CONTINUED)
Fair
market value of the derivative financial instruments was measured using the following assumptions:
|
|
Six Months Ended
June 30,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
Pricing model utilized
|
|
Binomial Lattice
|
|
|
Black/Scholes
|
|
Risk free rate range
|
|
0.05% to 1.61%
|
|
|
1.92% to 2.73%
|
|
Expected life range (in years)
|
|
0.14 to 1.00
|
|
|
0.14 to 1.00
|
|
Volatility range
|
|
117.48% to 134.20%
|
|
|
141.63% to 293.37%
|
|
Dividend yield
|
|
0.00%
|
|
|
0.00%
|
|
In
addition, specific assumptions regarding investor exercise behavior were used in 2020, including probability assumptions related
to estimated exercise behavior. The entire amount of derivative instrument liabilities is classified as current due to the fact
that settlement of the derivative instruments could be required within twelve months of the balance sheet date.
During
the six months ended June 30, 2020 and 2019, eight and zero convertible notes, respectively, were converted in part or in full
into common shares by the holders, and six and zero convertible notes, respectively, were repaid in part or in full in cash. Accordingly,
the derivative financial instruments associated with the ECFs of these convertible notes were written off in connection with the
extinguishment of each convertible note.
NOTE
14 – SHAREHOLDERS’ DEFICIT
Private
Placements
During
the six months ended June 30, 2019, the Company sold 1,383,334 shares of common stock in three separate private placement transactions
and received $390,000 in proceeds from the sales. In connection with the stock sales, the Company also issued 125,000 five-year
warrants to purchase shares of common stock at an exercise price of $0.30 per share, 566,667 five-year warrants to purchase shares
of common stock at an exercise price of $0.40 per share and 250,000 three-year warrants to purchase shares of common stock at
an exercise price of $0.50 per share.
During the six months ended June 30, 2020,
the Company sold 4,303,427 shares of common stock in 12 separate private placement transactions and received $478,500 in proceeds
from the sales. The shares were issued at per share prices between $0.06 and $0.14. In connection with the stock sales, the Company
also issued 1,926,725 five-year warrants to purchase shares of common stock at exercise price between $0.16 and $0.24 per share.
Of these shares, 535,714 with respect to proceeds of $32,500 were issuable as of June 30, 2020.
Investment
Agreement Draws
During
six months ended June 30, 2020 and 2019, the Company issued 3,298,975 and 2,696,597 common shares, respectively, pursuant to draws
made by the Company under the Investment Agreement and received an aggregate of $266,190 and $604,272, respectively, in net proceeds
from the draws.
Common
Stock Issuable
As
of June 30, 2020 and December 31, 2019, the Company was obligated to issue the following shares:
|
|
June 30, 2020
|
|
|
December 31, 2019
|
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares issuable pursuant to consulting agreements
|
|
$
|
146,795
|
|
|
|
965,530
|
|
|
$
|
93,377
|
|
|
|
493,142
|
|
Shares issuable to consultants, employees and directors
|
|
|
41,500
|
|
|
|
424,595
|
|
|
|
7,161
|
|
|
|
75,000
|
|
Shares issuable pursuant to stock subscriptions received
|
|
|
24,650
|
|
|
|
535,714
|
|
|
|
59,000
|
|
|
|
479,762
|
|
|
|
$
|
212,945
|
|
|
|
1,925,839
|
|
|
$
|
159,538
|
|
|
|
1,047,904
|
|
HEALTHLYNKED
CORP.
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2020
(UNAUDITED)
NOTE
14 – SHAREHOLDERS’ DEFICIT (CONTINUED)
During
December 2019, the Company completed stock subscription agreements totaling $59,000 for the sale of 479,762 shares of common stock.
The funds were received and shares were issued in January and February 2020.
Stock
Warrants
Transactions
involving our stock warrants during the six months ended June 30, 2020 and 2019 are summarized as follows:
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
Exercise
|
|
|
|
|
|
Exercise
|
|
|
|
Number
|
|
|
Price
|
|
|
Number
|
|
|
Price
|
|
Outstanding at beginning of the period
|
|
|
47,056,293
|
|
|
$
|
0.18
|
|
|
|
46,161,463
|
|
|
$
|
0.18
|
|
Granted during the period
|
|
|
2,151,725
|
|
|
$
|
0.21
|
|
|
|
1,721,667
|
|
|
$
|
0.35
|
|
Exercised during the period
|
|
|
—
|
|
|
$
|
—
|
|
|
|
(4,099,256
|
)
|
|
$
|
(0.00
|
)
|
Terminated during the period
|
|
|
—
|
|
|
$
|
—
|
|
|
|
—
|
|
|
$
|
—
|
|
Outstanding at end of the period
|
|
|
49,208,018
|
|
|
$
|
0.18
|
|
|
|
43,783,874
|
|
|
$
|
0.20
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable at end of the period
|
|
|
49,208,018
|
|
|
$
|
0.18
|
|
|
|
43,783,874
|
|
|
$
|
0.20
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average remaining life
|
|
|
3.6 years
|
|
|
|
|
|
|
|
3.3 years
|
|
|
|
|
|
The
following table summarizes information about the Company’s stock warrants outstanding as of June 30, 2020:
Warrants Outstanding
|
|
|
Warrants Exercisable
|
|
|
|
|
|
|
|
Weighted-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
Weighted-
|
|
|
|
|
|
Weighted-
|
|
|
|
|
|
|
|
Remaining
|
|
|
Average
|
|
|
|
|
|
Average
|
|
Exercise
|
|
|
Number
|
|
|
Contractual
|
|
|
Exercise
|
|
|
Number
|
|
|
Exercise
|
|
Prices
|
|
|
Outstanding
|
|
|
Life (years)
|
|
|
Price
|
|
|
Exercisable
|
|
|
Price
|
|
$
|
0.0001 to 0.09
|
|
|
|
15,287,011
|
|
|
|
4.4
|
|
|
$
|
0.07
|
|
|
|
15,287,011
|
|
|
$
|
0.07
|
|
$
|
0.10
to 0.24
|
|
|
|
19,887,047
|
|
|
|
3.1
|
|
|
$
|
0.18
|
|
|
|
19,887,047
|
|
|
$
|
0.18
|
|
$
|
0.25 to 0.49
|
|
|
|
10,093,960
|
|
|
|
3.9
|
|
|
$
|
0.28
|
|
|
|
10,093,960
|
|
|
$
|
0.28
|
|
$
|
0.50 to 1.00
|
|
|
|
3,940,000
|
|
|
|
1.7
|
|
|
$
|
0.28
|
|
|
|
3,940,000
|
|
|
$
|
0.28
|
|
$
|
0.05 to 1.00
|
|
|
|
49,208,018
|
|
|
|
3.6
|
|
|
$
|
0.18
|
|
|
|
49,208,018
|
|
|
$
|
0.18
|
|
During
the six months ended June 30, 2020 and 2019, the Company issued 2,151,725 and 1,721,667 warrants, respectively, the aggregate
grant date fair value of which was $144,234 and $468,125, respectively. The fair value of the warrants was calculated using the
following range of assumptions:
|
|
Six Months Ended June 30,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
Pricing model utilized
|
|
Binomial Lattice
|
|
|
Black/Scholes
|
|
Risk free rate range
|
|
0.30% to 1.59%
|
|
|
2.44% to 2.52%
|
|
Expected life range (in years)
|
|
5.00 years
|
|
|
3.00 to 5.00
|
|
Volatility range
|
|
119.69% to 132.19%
|
|
|
212.96% to 216.35%
|
|
Dividend yield
|
|
0.00%
|
|
|
0.00%
|
|
In
addition, specific assumptions regarding investor exercise behavior were used in 2020, including probability assumptions related
to estimated exercise behavior.
HEALTHLYNKED
CORP.
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2020
(UNAUDITED)
NOTE
14 – SHAREHOLDERS’ DEFICIT (CONTINUED)
Employee
Equity Incentive Plan
On
January 1, 2016, the Company instituted the Employee Equity Incentive Plan (the “EIP”) for the purpose of having equity
awards available to allow for equity participation by its employees. The EIP allows for the issuance of up to 15,503,680 shares
of the Company’s common stock to employees, which may be issued in the form of stock options, stock appreciation rights,
or restricted shares. The EIP is governed by the Company’s board, or a committee that may be appointed by the board in the
future.
The
following table summarizes the status of shares issued and outstanding under the EIP outstanding as of and for the six months
ended June 30, 2020 and 2019:
|
|
2020
|
|
|
2019
|
|
Outstanding at beginning of the period
|
|
|
1,874,063
|
|
|
|
1,738,750
|
|
Granted during the period
|
|
|
232,500
|
|
|
|
135,313
|
|
Terminated during the period
|
|
|
(62,500
|
)
|
|
|
—
|
|
Outstanding at end of the period
|
|
|
2,044,063
|
|
|
|
1,874,063
|
|
|
|
|
|
|
|
|
|
|
Shares vested at period-end
|
|
|
1,744,063
|
|
|
|
1,410,313
|
|
Weighted average grant date fair value of shares granted during the period
|
|
$
|
0.10
|
|
|
$
|
0.26
|
|
Aggregate grant date fair value of shares granted during the period
|
|
$
|
18,760
|
|
|
$
|
12,805
|
|
Shares available for grant pursuant to EIP at period-end
|
|
|
10,230,368
|
|
|
|
9,592,868
|
|
Total
stock-based compensation recognized for grants under the EIP was $12,456 and $25,815 during the three months ended June 30, 2020
and 2019, respectively, and $30,153 and $58,594 during the six months ended June 30, 2020 and 2019, respectively. Total unrecognized
stock compensation related to these grants was $42,686 as of June 30, 2020.
A
summary of the status of nonvested shares issued pursuant to the EIP as of and for the six months ended June 30, 2020 and 2019
is presented below:
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
Grant Date
|
|
|
|
|
|
Grant Date
|
|
|
|
Shares
|
|
|
Fair Value
|
|
|
Shares
|
|
|
Fair Value
|
|
Nonvested at beginning of period
|
|
|
332,500
|
|
|
$
|
0.17
|
|
|
|
540,000
|
|
|
$
|
0.16
|
|
Granted
|
|
|
232,500
|
|
|
$
|
0.10
|
|
|
|
—
|
|
|
$
|
—
|
|
Vested
|
|
|
(177,500
|
)
|
|
$
|
0.08
|
|
|
|
(76,250
|
)
|
|
$
|
0.04
|
|
Forfeited
|
|
|
(87,500
|
)
|
|
$
|
0.06
|
|
|
|
—
|
|
|
$
|
—
|
|
Nonvested at end of period
|
|
|
300,000
|
|
|
$
|
0.20
|
|
|
|
463,750
|
|
|
$
|
0.18
|
|
HEALTHLYNKED
CORP.
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2020
(UNAUDITED)
NOTE
14 – SHAREHOLDERS’ DEFICIT (CONTINUED)
Employee
Stock Options
The
following table summarizes the status of options outstanding as of and for the six months ended June 30, 2020 and 2019:
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
Exercise
|
|
|
|
|
|
Exercise
|
|
|
|
Number
|
|
|
Price
|
|
|
Number
|
|
|
Price
|
|
Outstanding at beginning of the period
|
|
|
3,269,250
|
|
|
$
|
0.21
|
|
|
|
3,707,996
|
|
|
$
|
0.18
|
|
Granted during the period
|
|
|
40,000
|
|
|
$
|
0.10
|
|
|
|
1,078,750
|
|
|
$
|
0.26
|
|
Exercised during the period
|
|
|
—
|
|
|
$
|
—
|
|
|
|
(154,166
|
)
|
|
$
|
0.20
|
|
Forfeited during the period
|
|
|
(80,000
|
)
|
|
$
|
0.26
|
|
|
|
(595,830
|
)
|
|
$
|
0.20
|
|
Outstanding at end of the period
|
|
|
3,229,250
|
|
|
$
|
0.20
|
|
|
|
4,036,750
|
|
|
$
|
0.20
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options exercisable at period-end
|
|
|
1,974,875
|
|
|
|
|
|
|
|
1,273,500
|
|
|
|
|
|
Weighted average remaining life (in years)
|
|
|
7.2
|
|
|
|
|
|
|
|
8.4
|
|
|
|
|
|
Weighted average grant date fair value of options granted during the period
|
|
$
|
0.08
|
|
|
|
|
|
|
$
|
0.20
|
|
|
|
|
|
Options available for grant at period-end
|
|
|
10,255,368
|
|
|
|
|
|
|
|
9,592,868
|
|
|
|
|
|
The
following table summarizes information about the Company’s stock options outstanding as of June 30, 2020:
Options Outstanding
|
|
|
Options Exercisable
|
|
|
|
|
|
|
|
Weighted-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
|
|
Weighted-
|
|
|
|
|
|
Weighted-
|
|
|
|
|
|
|
|
Remaining
|
|
Average
|
|
|
|
|
|
Average
|
|
Exercise
|
|
|
Number
|
|
|
Contractual
|
|
Exercise
|
|
|
Number
|
|
|
Exercise
|
|
Prices
|
|
|
Outstanding
|
|
|
Life (years)
|
|
Price
|
|
|
Exercisable
|
|
|
Price
|
|
$
|
— to 0.10
|
|
|
|
1,283,000
|
|
|
5.5
|
|
$
|
0.08
|
|
|
|
1,283,000
|
|
|
|
0.08
|
|
$
|
0.11 to 0.31
|
|
|
|
1,946,250
|
|
|
8.4
|
|
$
|
0.28
|
|
|
|
691,875
|
|
|
|
0.29
|
|
$
|
0.08 to 0.31
|
|
|
|
3,229,250
|
|
|
7.2
|
|
$
|
0.20
|
|
|
|
1,974,875
|
|
|
$
|
0.16
|
|
Total
stock-based compensation recognized related to option grants was $20,971 and $33,581 during the three months ended June 30, 2020
and 2019, respectively, and $41,850 and $62,037 during the six months ended June 30, 2020 and 2019, respectively.
A
summary of the status of nonvested options issued pursuant to the EIP as of and for the six months ended June 30, 2020 and 2019
is presented below:
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
Grant Date
|
|
|
|
|
|
Grant Date
|
|
|
|
Shares
|
|
|
Fair Value
|
|
|
Shares
|
|
|
Fair Value
|
|
Nonvested at beginning of period
|
|
|
1,636,250
|
|
|
$
|
0.22
|
|
|
|
2,332,413
|
|
|
$
|
0.13
|
|
Granted
|
|
|
40,000
|
|
|
$
|
0.08
|
|
|
|
1,078,750
|
|
|
$
|
0.20
|
|
Vested
|
|
|
(341,875
|
)
|
|
$
|
0.20
|
|
|
|
(52,083
|
)
|
|
$
|
0.03
|
|
Forfeited
|
|
|
(80,000
|
)
|
|
$
|
0.21
|
|
|
|
(595,830
|
)
|
|
$
|
0.02
|
|
Nonvested at end of period
|
|
|
1,254,375
|
|
|
$
|
0.22
|
|
|
|
2,763,250
|
|
|
$
|
0.19
|
|
HEALTHLYNKED
CORP.
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2020
(UNAUDITED)
NOTE
15 – COMMITMENTS AND CONTINGENCIES
Contracts related to Medicare shared
savings revenue
The Company acquired CHM and its subsidiary
AHP on May 18, 2020. CHM and AHP combine to operate an ACO under the terms of the MSSP as administered by the CMS. The MSSP is
a program created under the Affordable Care Act (the “ACA,” also known as “Obamacare”) designed to enhance
the efficiency of healthcare provided to patients covered by Medicare. The program allows for the creation of ACOs, which are organizations
that agree to take responsibility for the efficiency of healthcare services provided by a group of participating healthcare providers
under Medicare. The ACO is held accountable for the efficiency of the healthcare services of its participating providers as measured
against benchmarks prescribed in the MSSP and earns shared savings payments if such benchmarks are met.
The Company, via AHP is party to a Medicare
Shared Savings Program Accountable Care Organization Participation Agreement with the CMS that establishes AHP as an ACO. The agreement
is effective through December 31, 2024. The Company must comply with the terms and conditions of the agreement in order to maintain
its status as an ACO and generate shared savings revenue.
The Company, via CHM, is party to 33 separate
participant agreements with participating providers that are members of the Company’s ACO with expiration dates between 2020
and 2024. These agreements include certain restrictions and requirements to which the participating providers must adhere in order
to maintain participation in the ACO.
Service
contracts
The
Company carries various service contracts on its office buildings & certain copier equipment for repairs, maintenance and
inspections. All contracts are short term and can be cancelled.
Litigation
From time to time, we may become involved in
various lawsuits and legal proceedings, which arise, in the ordinary course of business. However, litigation is subject to inherent
uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business.
On July 20, 2020, Empery Asset Master Ltd., Empery Tax Efficient,
LP and Empery Tax Efficient II, LP, (the “Complainants”) filed a complaint against the Company in the Supreme Court
of the State of New York. The Complaint alleges that the Company’s acquisition of CHM, in which the Company issued stock
consideration of 2,240,838 common shares, triggered a change of control clause in warrants held by the Complainants that would
allow the Complainants to demand cash value for their warrants. The Company believes that the asserted claims lack merit and intends
to defend against all of the claims vigorously. Due to the inherent uncertainties of litigation, the Company cannot predict the
outcome of the actions at this time and can give no assurance that the asserted claims will not have a material adverse effect
on its financial position or results of operations. The Company had not responded to the Complaint as of the date of this filing.
Leases
Maturities
of lease liabilities were as follows as of June 30, 2020:
|
|
Operating
|
|
|
Capital
|
|
|
Total
|
|
|
|
Leases
|
|
|
Leases
|
|
|
Commitments
|
|
2020
|
|
$
|
71,466
|
|
|
$
|
—
|
|
|
$
|
71,466
|
|
2021
|
|
|
98,531
|
|
|
|
—
|
|
|
|
98,531
|
|
2022
|
|
|
52,662
|
|
|
|
—
|
|
|
|
52,662
|
|
2023
|
|
|
6,099
|
|
|
|
—
|
|
|
|
6,099
|
|
Total lease payments
|
|
|
228,758
|
|
|
|
—
|
|
|
|
228,758
|
|
Less interest
|
|
|
(59,510
|
)
|
|
|
—
|
|
|
|
(59,510
|
)
|
Present value of lease liabilities
|
|
$
|
169,248
|
|
|
$
|
—
|
|
|
$
|
169,248
|
|
Our lease for office space for our NWC
practice expired in July 2020. The Company entered into a new three-year lease agreement for a different facility in Naples facility
comprised of 3,650 square feet commencing in July 2020.
Employment/Consulting
Agreements
The
Company has employment agreements with certain of its physicians, nurse practitioners and physical therapists in the Health Services
division. The agreements generally call for a fixed salary at the beginning of the contract with a transaction to performance-based
pay later in the contract.
On
July 1, 2016, the Company entered into an employment agreement with Dr. Michael Dent, Chief Executive Officer and a member of
the Board of Directors. Dr. Dent’s employment agreement continues until terminated by Dr. Dent or the Company. If Dr. Dent’s
employment is terminated by the Company (unless such termination is “For Cause” as defined in his employment agreement),
then upon signing a general waiver and release, Dr. Dent will be entitled to severance in an amount equal to 12 months of his
then-current annual base salary, as well as the pro-rata portion of any bonus that would be due and payable to him. In the event
that Dr. Dent terminates the employment agreement, he shall be entitled to any accrued but unpaid salary and other benefits up
to and including the date of termination, and the pro-rata portion of any unvested time-based options up until the date of termination.
On
July 1, 2016, the Company entered into an agreement with Mr. George O’Leary, the Company’s Chief Financial Officer
and a member of the Board of Directors, extending his prior agreement with the Company. Mr. O’Leary’s employment agreement
continues until terminated by Mr. O’Leary or the Company. If Mr. O’Leary employment is terminated by the Company
(unless such termination is “For Cause” as defined in his employment agreement), then upon signing a general waiver
and release, Mr. O’Leary will be entitled to receive his base salary and the Company shall maintain his employee benefits
for a period of twelve (12) months beginning on the date of termination. In the event that Mr. O’Leary terminates the agreement,
he shall be entitled to any accrued by unpaid salary and other benefits up to and including the date of termination. On July 1,
2018, the Company and Mr. O’Leary entered into an Extension Letter Agreement pursuant to which Mr. O’Leary
was increased to full time employment (previously half-time) and agreed to extend the term of his employment to September 30,
2022. In addition to a base salary, the extension provides Mr. O’Leary with certain performance-based cash bonuses, stock
grants, and stock option grants.
On May 18, 2020, the Company entered into
separate 4-year consulting services agreements with each of the two principals of the ACO/MSO business acquired in May 2020 that
call for each person to earn fixed annual consulting fees and a share of Medicare shared savings revenue, consulting revenue and
overall profits generated by the underlying business.
HEALTHLYNKED
CORP.
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2020
(UNAUDITED)
NOTE
16 – SEGMENT REPORTING
The
Company has three reportable segments: Health Services, Digital Healthcare and ACO/MCO. Health Services division is comprised
of the operations of (i) Naples Women’s Center (“NWC”), a multi-specialty medical group including OB/GYN (both
Obstetrics and Gynecology), and General Practice, (ii) Naples Center for Functional Medicine (“NCFM”), a Functional
Medical Practice acquired in April 2019 that is engaged in improving the health of its patients through individualized and integrative
health care, and (iii) Bridging the Gap Physical Therapy (“BTG”), a physical therapy practice in Bonita Springs, FL
that provides hands-on functional manual therapy techniques to speed patients’ recovery and manage pain without pain medication
or surgery. The Company’s Digital Healthcare segment develops and plans to operate an online personal medical information
and record archive system, the “HealthLynked Network,” which will enable patients and doctors to keep track of medical
information via the Internet in a cloud-based system. The ACO/MSO Division is comprised of the business acquired with CHM, which
assists physician practices in providing coordinated and more efficient care to patients via the MSSP as administered by the CMS,
which rewards providers for efficiency in patient care. The Company evaluates performance and allocates resources based on profit
or loss from operations before income taxes. The accounting policies of the reportable segments are the same as those described
in the summary of significant accounting policies.
Segment
information for the three months ended June 30, 2020 and 2019 was as follows:
|
|
Three Months Ended
June 30, 2020
|
|
|
Three Months Ended
June 30, 2019
|
|
|
|
Health
Services
|
|
|
Digital
Healthcare
|
|
|
ACO /
MSO
|
|
|
Total
|
|
|
Health
Services
|
|
|
Digital
Healthcare
|
|
|
ACO /
MSO
|
|
|
Total
|
|
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Patient service revenue, net
|
|
$
|
1,111,090
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,111,090
|
|
|
$
|
1,208,390
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,208,390
|
|
Medicare shared savings revenue
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Consulting revenue
|
|
|
|
|
|
|
|
|
|
|
50,420
|
|
|
|
50,420
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Total revenue
|
|
|
1,111,090
|
|
|
|
—
|
|
|
|
50,420
|
|
|
|
1,161,510
|
|
|
|
1,208,390
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,208,390
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Practice salaries and benefits
|
|
|
555,086
|
|
|
|
—
|
|
|
|
—
|
|
|
|
555,086
|
|
|
|
703,851
|
|
|
|
—
|
|
|
|
—
|
|
|
|
703,851
|
|
Other practice operating expenses
|
|
|
521,022
|
|
|
|
—
|
|
|
|
—
|
|
|
|
521,022
|
|
|
|
521,552
|
|
|
|
—
|
|
|
|
—
|
|
|
|
521,552
|
|
Medicare shared savings expenses
|
|
|
|
|
|
|
|
|
|
|
64,236
|
|
|
|
64,236
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
General and administrative
|
|
|
—
|
|
|
|
646,309
|
|
|
|
—
|
|
|
|
646,309
|
|
|
|
—
|
|
|
|
659,468
|
|
|
|
—
|
|
|
|
659,468
|
|
Depreciation and amortization
|
|
|
24,279
|
|
|
|
595
|
|
|
|
—
|
|
|
|
24,874
|
|
|
|
21,116
|
|
|
|
594
|
|
|
|
—
|
|
|
|
21,710
|
|
Total Operating Expenses
|
|
|
1,100,387
|
|
|
|
646,904
|
|
|
|
64,236
|
|
|
|
1,811,527
|
|
|
|
1,246,519
|
|
|
|
660,062
|
|
|
|
—
|
|
|
|
1,906,581
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from operations
|
|
$
|
10,703
|
|
|
$
|
(646,904
|
)
|
|
$
|
(13,816
|
)
|
|
$
|
(650,017
|
)
|
|
$
|
(38,129
|
)
|
|
$
|
(660,062
|
)
|
|
$
|
—
|
|
|
$
|
(698,191
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Segment Information
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
$
|
6,374
|
|
|
$
|
52,044
|
|
|
$
|
—
|
|
|
$
|
58,418
|
|
|
$
|
6,017
|
|
|
$
|
54,328
|
|
|
$
|
—
|
|
|
$
|
60,345
|
|
Loss on extinguishment of debt
|
|
$
|
—
|
|
|
$
|
428,435
|
|
|
$
|
—
|
|
|
$
|
428,435
|
|
|
$
|
—
|
|
|
$
|
(72,435
|
)
|
|
$
|
—
|
|
|
$
|
(72,435
|
)
|
Financing cost
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
87,332
|
|
|
$
|
—
|
|
|
$
|
87,332
|
|
Amortization of original issue and debt discounts on convertible notes
|
|
$
|
—
|
|
|
$
|
172,951
|
|
|
$
|
—
|
|
|
$
|
172,951
|
|
|
$
|
—
|
|
|
$
|
299,613
|
|
|
$
|
—
|
|
|
$
|
299,613
|
|
Change in fair value of debt
|
|
$
|
—
|
|
|
$
|
155,667
|
|
|
$
|
—
|
|
|
$
|
155,667
|
|
|
$
|
—
|
|
|
$
|
30,409
|
|
|
$
|
—
|
|
|
$
|
30,409
|
|
Change in fair value of derivative financial instruments
|
|
$
|
—
|
|
|
$
|
13,672
|
|
|
$
|
—
|
|
|
$
|
13,672
|
|
|
$
|
—
|
|
|
$
|
(223,881
|
)
|
|
$
|
—
|
|
|
$
|
(223,881
|
)
|
Change in fair value of contingent acquisition consideration
|
|
$
|
—
|
|
|
$
|
38,688
|
|
|
$
|
—
|
|
|
$
|
38,688
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
HEALTHLYNKED
CORP.
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2020
(UNAUDITED)
NOTE
16 – SEGMENT REPORTING (CONTINUED)
Segment
information for the six months ended June 30, 2020 and 2019 was as follows:
|
|
Six Months Ended
June 30, 2020
|
|
|
Six Months Ended
June 30, 2019
|
|
|
|
Health
Services
|
|
|
Digital
Healthcare
|
|
|
ACO /
MSO
|
|
|
Total
|
|
|
Health
Services
|
|
|
Digital
Healthcare
|
|
|
ACO /
MSO
|
|
|
Total
|
|
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Patient service revenue, net
|
|
$
|
2,448,030
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
2,448,030
|
|
|
$
|
1,673,380
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,673,380
|
|
Medicare shared savings revenue
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Consulting revenue
|
|
|
—
|
|
|
|
—
|
|
|
|
50,420
|
|
|
|
50,420
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Total revenue
|
|
|
2,448,030
|
|
|
|
—
|
|
|
|
50,420
|
|
|
|
2,498,450
|
|
|
|
1,673,380
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,673,380
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Practice salaries and benefits
|
|
|
1,320,207
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,320,207
|
|
|
|
1,054,091
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,054,091
|
|
Other practice operating expenses
|
|
|
1,084,713
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,084,713
|
|
|
|
766,091
|
|
|
|
—
|
|
|
|
—
|
|
|
|
766,091
|
|
Medicare shared savings expenses
|
|
|
—
|
|
|
|
—
|
|
|
|
64,236
|
|
|
|
64,236
|
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
|
—
|
|
General and administrative
|
|
|
—
|
|
|
|
1,157,285
|
|
|
|
—
|
|
|
|
1,157,285
|
|
|
|
—
|
|
|
|
1,351,270
|
|
|
|
—
|
|
|
|
1,351,270
|
|
Depreciation and amortization
|
|
|
48,470
|
|
|
|
1,190
|
|
|
|
—
|
|
|
|
49,660
|
|
|
|
22,176
|
|
|
|
1,189
|
|
|
|
—
|
|
|
|
23,365
|
|
Total Operating Expenses
|
|
|
2,453,390
|
|
|
|
1,158,475
|
|
|
|
64,236
|
|
|
|
3,676,101
|
|
|
|
1,842,358
|
|
|
|
1,352,459
|
|
|
|
—
|
|
|
|
3,194,817
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from operations
|
|
$
|
(5,360
|
)
|
|
$
|
(1,158,475
|
)
|
|
$
|
(13,816
|
)
|
|
$
|
(1,177,651
|
)
|
|
$
|
(168,978
|
)
|
|
$
|
(1,352,459
|
)
|
|
$
|
—
|
|
|
$
|
(1,521,437
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Segment Information
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
$
|
11,910
|
|
|
$
|
108,689
|
|
|
$
|
—
|
|
|
$
|
120,599
|
|
|
$
|
11,845
|
|
|
$
|
94,822
|
|
|
$
|
—
|
|
|
$
|
106,667
|
|
Loss on extinguishment of debt
|
|
$
|
—
|
|
|
$
|
896,372
|
|
|
$
|
—
|
|
|
$
|
896,372
|
|
|
$
|
—
|
|
|
$
|
67,363
|
|
|
$
|
—
|
|
|
$
|
67,363
|
|
Financing cost
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
121,235
|
|
|
$
|
—
|
|
|
$
|
121,235
|
|
Amortization of original issue and debt discounts on convertible notes
|
|
$
|
—
|
|
|
$
|
465,114
|
|
|
$
|
—
|
|
|
$
|
465,114
|
|
|
$
|
—
|
|
|
$
|
478,997
|
|
|
$
|
—
|
|
|
$
|
478,997
|
|
Change in fair value of debt
|
|
$
|
—
|
|
|
$
|
119,702
|
|
|
$
|
—
|
|
|
$
|
119,702
|
|
|
$
|
—
|
|
|
$
|
60,106
|
|
|
$
|
—
|
|
|
$
|
60,106
|
|
Change in fair value of derivative financial instruments
|
|
$
|
—
|
|
|
$
|
(726,683
|
)
|
|
$
|
—
|
|
|
$
|
(726,683
|
)
|
|
$
|
—
|
|
|
$
|
(415,514
|
)
|
|
$
|
—
|
|
|
$
|
(415,514
|
)
|
Change in fair value of contingent acquisition consideration
|
|
$
|
—
|
|
|
$
|
45,309
|
|
|
$
|
—
|
|
|
$
|
45,309
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2020
|
|
|
December 31, 2019
|
|
Identifiable assets
|
|
$
|
2,229,258
|
|
|
$
|
92,734
|
|
|
$
|
1,592,900
|
|
|
$
|
3,914,892
|
|
|
$
|
2,428,752
|
|
|
$
|
117,802
|
|
|
$
|
—
|
|
|
$
|
2,546,554
|
|
Goodwill
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
381,856
|
|
|
$
|
381,856
|
|
|
$
|
71,866
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
71,866
|
|
The
Digital Healthcare segment recognized revenue of $1,075 and $3,717 in the three months ended June 30, 2020 and 2019, respectively,
and $2,431 and $3,911 in the six months ended June 30, 2020 and 2019, respectively, related to subscription revenue billed to
and paid for by the Company’s physicians for access to the HealthLynked Network. The revenue for Digital Healthcare and
related expense for Health Services were eliminated on consolidation.
HEALTHLYNKED
CORP.
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2020
(UNAUDITED)
NOTE
17 – FAIR VALUE OF FINANCIAL INSTRUMENTS
The
carrying amounts of certain financial instruments, including cash and cash equivalents, accounts receivable and accounts payable,
approximate their respective fair values due to the short-term nature of such instruments. The Company measures certain financial
instruments at fair value on a recurring basis, including certain convertible notes payable and related party loans which were
extinguished and reissued and are therefore subject to fair value measurement, as well as derivative financial instruments arising
from conversion features embedded in convertible promissory notes for which the conversion rate is not fixed. All financial instruments
carried at fair value fall within Level 3 of the fair value hierarchy as their value is based on unobservable inputs. The Company
evaluates its financial assets and liabilities subject to fair value measurements on a recurring basis to determine the appropriate
level in which to classify them for each reporting period. This determination requires significant judgments to be made.
The
following table summarizes the conclusions reached regarding fair value measurements as of June 30, 2020 and December 31, 2019:
|
|
As of June 30, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Fair Value
|
|
Convertible notes payable
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
757,264
|
|
|
$
|
757,264
|
|
Notes payable to related party
|
|
|
—
|
|
|
|
—
|
|
|
|
205,450
|
|
|
|
205,450
|
|
Derivative financial instruments
|
|
|
—
|
|
|
|
—
|
|
|
|
257,384
|
|
|
|
257,384
|
|
Contingent acquisition consideration
|
|
|
—
|
|
|
|
—
|
|
|
|
1,355,765
|
|
|
|
1,355,765
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
2,575,863
|
|
|
$
|
2,575,863
|
|
|
|
As of December 31, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Fair Value
|
|
Convertible notes payable
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
723,482
|
|
|
$
|
723,482
|
|
Notes payable to related party
|
|
|
—
|
|
|
|
—
|
|
|
|
193,007
|
|
|
|
193,007
|
|
Derivative financial instruments
|
|
|
—
|
|
|
|
—
|
|
|
|
991,288
|
|
|
|
991,288
|
|
Contingent acquisition consideration
|
|
|
—
|
|
|
|
—
|
|
|
|
500,000
|
|
|
|
500,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
2,407,777
|
|
|
$
|
2,407,777
|
|
The changes in Level 3 financial instruments
that are measured at fair value on a recurring basis during the three and six months ended June 30, 2020 and 2019 were as follows:
|
|
Three Months Ended
June 30,
|
|
|
Six Months Ended
June 30,
|
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible notes payable
|
|
$
|
(93,097
|
)
|
|
$
|
(24,153
|
)
|
|
$
|
(71,735
|
)
|
|
$
|
(48,022
|
)
|
Notes payable to related party
|
|
|
(62,570
|
)
|
|
|
(6,256
|
)
|
|
|
(47,967
|
)
|
|
|
(12,084
|
)
|
Derivative financial instruments
|
|
|
(13,672
|
)
|
|
|
223,881
|
|
|
|
726,683
|
|
|
|
415,514
|
|
Contingent acquisition consideration
|
|
|
(38,688
|
)
|
|
|
—
|
|
|
|
(45,309
|
)
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
(208,027
|
)
|
|
$
|
193,472
|
|
|
$
|
561,672
|
|
|
$
|
355,408
|
|
NOTE
18 – SUBSEQUENT EVENTS
On
July 13, 2020, the Company prepaid the balance on the $131.3k Note, including accrued interest, for a one-time cash payment of
$172,108.
On
July 20, 2020, the Company prepaid the balance on the $78k Note IV, including accrued interest, for a one-time cash payment of
$102,308.
During July and August 2020, the Company sold
2,617,059 shares of common stock in three separate private placement transactions and received $213,500 in proceeds from the sales.
The shares were transacted at per share sales prices between $0.06 and $0.17. In connection with the stock sales, the Company also
issued 1,308,529 five-year warrants to purchase shares of common stock with exercise prices between $0.16 and $0.27.