UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10–Q

 

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

 

For the quarterly period ended September 30, 2018

 

or

 

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

 

For the transition period from [               ] to [                ]

 

Commission file number: 000-55768

 

HealthLynked Corp.
(Exact name of registrant as specified in its charter)
     
Nevada   47-1634127
(State or other jurisdiction of
incorporation or organization) 		  (I.R.S. Employer
Identification No.)
     
1726 Medical Blvd Suite 101, Naples, Florida 34110
(Address of principal executive offices)
 
239-513-1992
(Registrant’s telephone number, including area code)
 
 
(Former name, former address and former fiscal year, if changed since last report)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes ☒  No ☐

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes ☒  No ☐

 

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

 

Large accelerated filer ☐  Accelerated filer ☐ 
Non-accelerated filer ☐  Smaller reporting company ☒ 
    Emerging growth company ☒ 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

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

 

As of November 14, 2018, there were 84,865,951 shares of the issuer’s common stock, par value $0.0001, outstanding.

 

 

 

 

 

 

TABLE OF CONTENTS

 

    PAGE NO.
     
PART I FINANCIAL INFORMATION 1
Item 1 Financial Statements(Unaudited) 1
Item 2 Management’s Discussion and Analysis of Financial Condition and Results of Operations 41
Item 3 Quantitative and Qualitative Disclosures about Market Risk 54
Item 4 Controls and Procedures 54
     
Part II OTHER INFORMATION 55
Item 1 Legal Proceedings 55
Item 1A Risk Factors 55
Item 2 Unregistered Sales of Equity Securities and Use of Proceeds 55
Item 3 Defaults upon Senior Securities 56
Item 4 Mine Safety Disclosure 56
Item 5 Other Information 56
Item 6 Exhibits 56

 

 

 

 

PART I. FINANCIAL INFORMATION

 

Item 1. Financial Statements

 

HEALTHLYNKED CORP.

CONDENSED CONSOLIDATED BALANCE SHEETS

 

    September 30,     December 31,  
    2018     2017  
ASSETS   (unaudited)        
Current Assets            
Cash   $ 803,491     $ 50,006  
Accounts receivable, net     133,902       113,349  
Prepaid expenses     50,275       81,892  
Deferred offering costs     117,938       121,620  
Total Current Assets     1,105,606       366,867  
                 
Property, plant and equipment, net of accumulated depreciation of $746,193 and $728,391 as of September 30, 2018 and December 31, 2017, respectively     45,775       63,376  
Deposits     9,540       9,540  
                 
Total Assets   $ 1,160,921     $ 439,783  
                 
LIABILITIES AND SHAREHOLDERS’ DEFICIT                
                 
Current Liabilities                
Accounts payable and accrued expenses   $ 348,000     $ 253,514  
Capital lease, current portion     19,877       18,348  
Due to related party, current portion     415,507       363,845  
Notes payable to related party, current portion     ---       553,550  
Notes payable, net of original issue discount and debt discount of $9,120 and $26,881 as of September 30, 2018 and December 31, 2017, respectively     24,070       70,186  
Convertible notes payable, net of original issue discount and debt discount of $219,894 and $266,642 as of September 30, 2018 and December 31, 2017, respectively     318,606       811,858  
Derivative financial instruments     608,751       398,489  
Total Current Liabilities     1,734,811       2,469,790  
                 
Long-Term Liabilities                
Capital leases, long-term portion     7,645       21,406  
Notes payable to related party, long term portion     666,274       ---  
Convertible notes payable, long term portion     756,494       ---  
                 
Total Liabilities     3,165,224       2,491,196  
                 
Shareholders’ Deficit                
Common stock, par value $0.0001 per share, 500,000,000 shares authorized, 82,536,893 and 72,302,937 shares issued and outstanding as of September 30, 2018 and December 31, 2017, respectively     8,254       7,230  
Common stock issuable, $0.0001 par value; 52,523 and 122,101 shares as of September 30, 2018 and December 31, 2017, respectively     14,542       8,276  
Additional paid-in capital     7,279,226       2,638,311  
Accumulated deficit     (9,306,325 )     (4,705,230 )
Total Shareholders’ Deficit     (2,004,303 )     (2,051,413 )
                 
Total Liabilities and Shareholders’ Deficit   $ 1,160,921     $ 439,783  

 

See the accompanying notes to these Unaudited Condensed Consolidated Financial Statements

 

  1  

 

 

HEALTHLYNKED CORP.

CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

(UNAUDITED)

 

    Three Months Ended
September 30, 		    Nine Months Ended
September 30, 		 
    2018     2017     2018     2017  
Revenue                        
Patient service revenue, net   $ 539,625     $ 480,723     $ 1,751,584     $ 1,473,639  
                                 
Operating Expenses                                
Salaries and benefits     603,510       506,206       1,782,509       1,469,211  
General and administrative     896,754       480,614       2,024,165       1,369,018  
Depreciation and amortization     5,744       6,056       17,802       17,623  
Total Operating Expenses     1,506,008       992,876       3,824,476       2,855,852  
                                 
Loss from operations     (966,383 )     (512,153 )     (2,072,892 )     (1,382,213 )
                                 
Other Income (Expenses)                                
Loss on extinguishment of debt     (66,469 )     (290,581 )     (374,828 )     (290,581 )
Change in fair value of debt     (22,101 )     ---       (105,499 )     ---  
Financing cost     (623,216 )     (32,324 )     (1,063,721 )     (32,324 )
Amortization of original issue and debt discounts on notes payable and convertible notes     (234,584 )     (63,552 )     (633,982 )     (194,120 )
Change in fair value of derivative financial instrument     (238,330 )     5,412       (200,165 )     5,412  
Interest expense     (58,655 )     (27,124 )     (150,008 )     (64,921 )
Total other expenses     (1,243,355 )     (408,169 )     (2,528,203 )     (576,534 )
                                 
Net loss before provision for income taxes     (2,209,738 )     (920,322 )     (4,601,095 )     (1,958,747 )
                                 
Provision for income taxes     ---       ---       ---       ---  
                                 
Net loss   $ (2,209,738 )   $ (920,322 )   $ (4,601,095 )   $ (1,958,747 )
                                 
Net loss per share, basic and diluted:                                
Basic   $ (0.03 )   $ (0.01 )   $ (0.06 )   $ (0.03 )
Fully diluted   $ (0.03 )   $ (0.01 )   $ (0.06 )   $ (0.03 )
                                 
Weighted average number of common shares:                                
Basic     79,323,131       69,625,763       76,757,809       68,805,330  
Fully diluted     79,323,131       69,625,763       76,757,809       68,805,330  

 

See the accompanying notes to these Unaudited Condensed Consolidated Financial Statements

 

  2  

 

 

HEALTHLYNKED CORP.

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ DEFICIT

NINE MONTHS ENDED SEPTEMBER 30, 2018

(UNAUDITED)

 

    Number of Shares           Common     Additional           Total  
    Common     Common     Stock     Paid-in     Accumulated     Shareholders’  
    Stock     Stock     Issuable     Capital     Deficit     Deficit  
    (#)     ($)     ($)     ($)     ($)     ($)  
Balance at December 31, 2017     72,302,937       7,230       8,276       2,638,311       (4,705,230 )     (2,051,413 )
                                                 
Sale of common stock     9,291,371       930       ---       2,337,474       ---       2,338,404  
Sale of common stock initially allocated to derivative financial instruments     ---       ---       ---       (1,774,298 )     ---       (1,774,298 )
Fair value of warrants allocated to proceeds of common stock     ---       ---       ---       181,788       ---       181,788  
Fair value of warrants issued to extend related party notes payable     ---       ---       ---       337,467       ---       337,467  
Fair value of warrants issued to extend convertible notes payable     ---       ---       ---       203,617       ---       203,617  
Fair value of warrants issued to retire convertible notes payable     ---       ---       ---       143,014       ---       143,014  
Fair value of warrants issued for professional services     ---       ---       ---       260,986       ---       260,986  
Derivative liabilities transferred to additional paid-in capital     ---       ---       ---       2,783,372       ---       2,783,372  
Conversion of convertible notes payable to common stock     301,688       30       ---       48,470       ---       48,500  
Derivative liabilities reclassified into additional paid in capital for convertible notes payable conversion into shares     ---       ---       ---       36,056       ---       36,056  
Consultant fees payable with common shares and warrants     277,147       28       6,274       31,660       ---       37,962  
Shares and options issued pursuant to employee equity incentive plan     363,750       36       (8 )     51,309       ---       51,337  
Net loss     ---       ---       ---       ---       (4,601,095 )     (4,601,095 )
                                                 
Balance at September 30, 2018     82,536,893       8,254       14,542       7,279,226       (9,306,325 )     (2,004,303 )

 

See the accompanying notes to these Unaudited Condensed Consolidated Financial Statements

 

  3  

 

 

HEALTHLYNKED CORP.

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

(UNAUDITED)

 

    Nine Months Ended
September 30, 		 
    2018     2017  
Cash Flows from Operating Activities            
Net loss   $ (4,601,095 )   $ (1,958,747 )
Adjustments to reconcile net loss to net cash used in operating activities:                
Depreciation     17,802       17,622  
Stock based compensation, including amortization of prepaid fees     353,967       83,823  
Amortization of original issue discount and debt discount on convertible notes     633,982       194,120  
Financing cost     1,063,721       32,324  
Change in fair value of derivative financial instrument     200,165       (5,412 )
Loss on extinguishment of debt     374,828       290,581  
Change in fair value of debt     105,499       ---  
Changes in operating assets and liabilities:                
Accounts receivable     (20,553 )     28,293  
Prepaid expenses and deposits     31,617       19,832  
Accounts payable and accrued expenses     (121,693 )     138,613  
Due to related party, current portion     51,662       27,627  
Net cash used in operating activities     (1,910,098 )     (1,131,324 )
                 
Cash Flows from Investing Activities                
Acquisition of property and equipment     (201 )     (13,238 )
Net cash used in investing activities     (201 )     (13,238 )
                 
Cash Flows from Financing Activities                
Proceeds from sale of common stock     2,520,192       548,356  
Proceeds from issuance of convertible notes     805,500       229,500  
Repayment of convertible notes     (649,750 )     ---  
Proceeds from related party loans     101,450       308,470  
Repayment of related party loans     (9,000 )     (11,192 )
Proceeds from notes payable and bank loans     73,500       75,010  
Repayment of notes payable and bank loans     (165,876 )     (34,362 )
Payments on capital leases     (12,232 )     (13,761 )
Net cash provided by financing activities     2,663,784       1,102,021  
                 
Net decrease in cash     753,485       (42,541 )
Cash, beginning of period     50,006       58,716  
                 
Cash, end of period   $ 803,491     $ 16,175  
                 
Supplemental disclosure of cash flow information:                
Cash paid during the period for interest   $ 31,863     $ 1,002  
Cash paid during the period for income tax     ---       ---  
Schedule of non-cash investing and financing activities:                
Fair value of warrants issued to extend maturity date of convertible notes payable   $ 203,619     $ 7,506  
Fair value of beneficial conversion feature and original issue discount allocated to proceeds of convertible notes payable   $ 1,246,005     $ 66,190  
Common stock issuable issued during period   $ 64     $ 6,451  
Derivative liabilities written off with repayment of convertible notes payable   $ 795,863     $ ---  
Derivative liabilities written off with at end of warrant repricing period   $ 2,783,372     $ ---  
Fair value of warrants issued to extend related party notes payable   $ 337,466     $ ---  
Fair value of warrants issued to extinguish convertible notes payable   $ 143,014     $ ---  
Fair of warrants issued for professional service   $ 94,844     $ ---  
Fair value of warrants issued pursuant to Amended Investment Agreement   $ ---     $ 153,625  
Derivative liabilities reclassified into additional paid in capital for convertible notes payable conversion into shares   $ 36,056     $ ---  
Conversion of convertible notes payable to common stock   $ 48,500     $ --  

 

See the accompanying notes to these Unaudited Condensed Consolidated Financial Statements

 

  4  

 

 

HEALTHLYNKED CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2018 AND 2017

(UNAUDITED)

 

NOTE 1 - BUSINESS AND BUSINESS PRESENTATION

 

HealthLynked Corp., a Nevada corporation (the “Company” or “HLYK”) filed its Articles of Incorporation on August 4, 2014. On September 3, 2014 HLYK filed Amended Articles of Incorporation clarifying that the total authorized shares of 250,000,000 shares are broken up between 230,000,000 common shares and 20,000,000 preferred shares. On February 5, 2018, the Company filed the amendment with the Secretary of State of Nevada to increase the amount of authorized shares of common stock to 500,000,000 shares.

 

On September 5, 2014, HLYK entered into a share exchange agreement (the “Share Exchange Agreement”) with Naples Women’s Center LLC (“NWC”), a Florida Limited Liability Company (“LLC”), acquiring 100% of the LLC membership units of NWC through the issuance of 50,000,000 shares of HLYK common stock to the members of NWC (the “Restructuring”).

 

NWC is a multi-specialty medical group including OB/GYN (both Obstetrics and Gynecology), and General Practice located in Naples, Florida.

 

HLYK operates an online personal medical information and record archive system, the “HealthLynked Network”, which enables patients and doctors to keep track of medical information via the Internet in a cloud based system. Patients complete a detailed online personal medical history including past surgical history, medications, allergies, and family history. Once this information is entered patients and their treating physicians are able to update the information as needed to provide a comprehensive medical history.

 

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 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, 2017 and 2016, respectively, which are included in the Company’s Form 10-K filed with the United States Securities and Exchange Commission on April 2, 2018. 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 nine months ended September 30, 2018 are not necessarily indicative of results for the entire year ending December 31, 2018.

 

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 condensed consolidated financial statements follows:

 

Basis of Presentation

 

The accompanying unaudited condensed 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 condensed consolidated financial statements are in United States Dollars ($) unless stated otherwise.

 

Use of Estimates

 

The preparation of the condensed consolidated financial statements in conformity with generally accepted accounting principles 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 condensed 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 and useful life of fixed assets.

 

  5  

 

 

HEALTHLYNKED CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2018 AND 2017

(UNAUDITED)

 

NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

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:

 

● 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.

 

● Medicaid: Reimbursements for Medicaid services are generally paid at prospectively determined rates per discharge, per occasion of service, or per covered member.

 

● 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.

 

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.

 

  6  

 

 

HEALTHLYNKED CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2018 AND 2017

(UNAUDITED)

 

NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

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.

 

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 45% of total billings. Trade accounts receivable are recorded at this net amount. As of September 30, 2018 and December 31, 2017, the Company’s gross accounts receivable were $268,299 and $269,501, respectively, and net accounts receivable were $133,902 and $113,349, respectively, based upon net reporting of accounts receivable.

 

Capital Leases

 

Costs associated with capitalized leases are capitalized and depreciated ratably over the term of the related useful life of the asset and/or the capital lease term. The related depreciation was $4,587 and $4,587 for the three months ended September 30, 2018 and 2017, respectively, and $9,174 and $9,174 for the nine months ended September 30, 2018 and 2017, respectively. Accumulated depreciation of capitalized leases was $317,499 and $303,738 at September 30, 2018 and December 31, 2017, respectively.

 

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.

 

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 September 30, 2018 and December 31, 2017.  

 

  7  

 

 

HEALTHLYNKED CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2018 AND 2017

(UNAUDITED)

 

NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

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:

 

  ● Level 1 – Fair value based on quoted prices in active markets for identical assets or liabilities

 

  ● 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.

 

  ● 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

 

  8  

 

 

HEALTHLYNKED CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2018 AND 2017

(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.

 

Stock-Based Compensation

 

The Company accounts for stock based compensation 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 it 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.

 

The Company uses the fair value method for equity instruments granted to non-employees and use the Black-Scholes model for measuring the fair value of options. The stock based fair value compensation is determined as of the date of the grant or the date at which the performance of the services is completed (measurement date) and is recognized over the vesting periods.

 

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.

 

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.

 

Net Income (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 nine month periods ended September 30, 2018 and 2017, 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 September 30, 2018 and 2017, potentially dilutive securities were comprised of (i) 47,822,207 and 19,566,389 warrants outstanding, respectively, (ii) 3,707,996 and 2,349,996 stock options outstanding, respectively, (iii) 10,875,420 and 8,675,180 shares issuable upon conversion of convertible notes, respectively, and (iv) 340,000 and 528,750 unissued shares subject to future vesting requirements granted pursuant to the Company’s Employee Incentive Plan.  

 

  9  

 

 

HEALTHLYNKED CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2018 AND 2017

(UNAUDITED)

 

NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

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 option pricing model as of the measurement date. 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 11, 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 one operating segment due to business similarities and similar economic characteristics.

 

Recent Accounting Pronouncements

 

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers — Topic 606 , which supersedes the revenue recognition requirements in FASB ASC 605. The new guidance primarily states that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods and services. In January 2017 and September 2017, the FASB issued several amendments to ASU 2014-09, including updates stemming from SEC Accounting Staff Announcement in July 2017. The amendments and updates included clarification on accounting for principal versus agent considerations (i.e., reporting gross versus net), licenses of intellectual property and identification of performance obligations. These amendments and updates do not change the core principle of the standard, but provide clarity and implementation guidance. The Company adopted this standard on January 1, 2018 and selected the modified retrospective transition method. The Company has modified its accounting policies to reflect the requirements of this standard, however, the planned adoption did not materially impact the Company’s 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. Early adoption is permitted for the accounting guidance on financial liabilities under the fair value option. The Company is currently evaluating the impact of the new guidance on its financial statements.

 

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) and subsequently amended the guidance relating largely to transition considerations under the standard in January 2017. The objective of this update is to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. This ASU is effective for fiscal years beginning after December 15, 2018, including interim periods within those annual periods and is to be applied utilizing a modified retrospective approach. The Company is currently evaluating the new guidance to determine the impact it may have on its financial statements.

 

  10  

 

 

HEALTHLYNKED CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2018 AND 2017

(UNAUDITED)

 

NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

In August 2016, the FASB issued ASC Update No. 2016-15, (Topic 230) Classification of Certain Cash Receipts and Cash Payments. This ASC update provides specific guidance on the presentation of certain cash flow items where there is currently diversity in practice, including, but not limited to, debt prepayment or debt extinguishment costs, contingent consideration payments made after a business combination, proceeds from the settlement of insurance claims, and distributions received from equity method investees. The updated guidance is effective for interim and annual periods beginning after December 15, 2017, and should be applied retrospectively unless impracticable. The Company implemented this guidance effective January 1, 2018. The adoption of ASC Update No. 2016-15 did not have a significant impact on the Company’s statement of cash flows.

 

In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash . The objective of this ASU is to eliminate the diversity in practice related to the classification of restricted cash or restricted cash equivalents in the statement of cash flows. For public business entities, this ASU is effective for annual and interim reporting periods beginning after December 15, 2017, with early adoption permitted. The amendments in this update should be applied retrospectively to all periods presented. The Company will adopt this standard on January 1, 2018 and will not have a material impact on the Company’s financial statements.

 

In January 2017, the FASB issued ASC Update No. 2017-01, (Topic 805) Business Combinations – Clarifying the Definition of a Business. The amendments in this update provide a more robust framework to use in determining when a set of assets and activities constitute a business. This guidance narrows the definition of a business by providing specific requirements that contribute to the creation of outputs that must be present to be considered a business. The guidance further clarifies the appropriate accounting when substantially all of the fair value of the gross assets acquired (or disposed of) is concentrated in a single identifiable asset or a group of similar identifiable assets is that of an acquisition (disposition) of assets, not a business. This framework will reduce the number of transactions that an entity must further evaluate to determine whether transactions are business combinations or asset acquisitions. The updated guidance is effective for interim and annual periods beginning after December 15, 2017, and should be applied on a prospective basis. Early adoption is permitted only for transactions that have not been reported in financial statements that have been issued. The Company implemented this guidance effective January 1, 2018. The implementation of this guidance did not have an effect on the Company’s financial position or results of operations.

 

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. The Company is currently evaluating the requirements of this new guidance and has not yet determined its impact on the Company’s financial statements.

 

On December 22, 2017 the SEC staff issued Staff Accounting Bulletin 118 (SAB 118), which provides guidance on accounting for the tax effects of the Tax Cuts and Jobs Act (the TCJA).  SAB 118 provides a measurement period that should not extend beyond one year from the enactment date for companies to complete the accounting under ASC 740. In accordance with SAB 118, a company must reflect the income tax effects of those aspects of the TCJA for which the accounting under ASC 740 is complete. To the extent that a company’s accounting for certain income tax effects of the TCJA is incomplete but for which they are able to determine a reasonable estimate, it must record a provisional amount in the financial statements. Provisional treatment is proper in light of anticipated additional guidance from various taxing authorities, the SEC, the FASB, and even the Joint Committee on Taxation. If a company cannot determine a provisional amount to be included in the financial statements, it should continue to apply ASC 740 on the basis of the provisions of the tax laws that were in effect immediately before the enactment of the TCJA. The Company has applied this guidance to its financial statements.

 

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.  The Company is evaluating the impact ASU 2018-09 may have on its condensed consolidated financial statements.

 

  11  

 

 

HEALTHLYNKED CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2018 AND 2017

(UNAUDITED)

 

NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

In March 2018, the FASB issued ASU 2018-05, Income Taxes (Topic 740) - Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 118. This standard amends Accounting Standards Codification 740, Income Taxes (ASC 740) to provide guidance on accounting for the tax effects of the Tax Cuts and Jobs Act (the Tax Reform Act) pursuant to Staff Accounting Bulletin No. 118, which allows companies to complete the accounting under ASC 740 within a one-year measurement period from the Tax Act enactment date. This standard did not materially impact the Company’s 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. The Company is currently evaluating the impact of the new standard on the Company’s Condensed Consolidated Financial Statements.

 

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. The Company is evaluating the impact ASU 2018-09 may have on its condensed consolidated financial statements.

 

NOTE 3 – GOING CONCERN MATTERS AND LIQUIDITY

 

As of September 30, 2018, the Company had a working capital deficit of $629,205 and accumulated deficit $9,306,325. For the nine months ended September 30, 2018, the Company had a net loss of $4,601,095 and net cash used by operating activities of $1,910,098. Net cash used in investing activities was $201. Net cash provided by financing activities was $2,663,784, resulting principally from $2,520,192 proceeds from the sale of common stock, $805,500 net proceeds from the issuance of convertible notes, $101,450 net proceeds from related party loans and $73,500 net proceeds from the issuance of notes payable.

 

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.

 

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. 

 

During July 2016, HLYK entered into an Investment Agreement (the “Investment Agreement”) pursuant to which the investor has agreed to purchase up to $3,000,000 of HLYK common stock over a three-year period starting upon registration of the underlying shares, with such shares put to the investor by the Company pursuant to a specified formula that limits the number of shares able to be put to the investor to the number equal to the average trading volume of the Company’s common shares for the ten consecutive trading days prior to the put notice being issued. During the nine months ended September 30, 2018, the Company received $327,818 from the proceeds of the sale of 1,856,480 shares pursuant to the Investment Agreement.

 

  12  

 

 

HEALTHLYNKED CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2018 AND 2017

(UNAUDITED)

 

NOTE 3 – GOING CONCERN MATTERS AND LIQUIDITY (CONTINUED)

 

The Company intends that the cost of implementing its development and sales efforts related to the HealthLynked Network, as well as maintaining its existing and expanding overhead and administrative costs, will be funded principally by cash received by the Company from the put rights associated with the Investment Agreement and supplemented by other funding mechanisms, including sales of the Company’s common stock, loans from related parties and convertible notes. The Company expects to repay its outstanding convertible notes, which have an aggregate face value of $1,249,500 as of September 30, 2018, from outside funding sources, including but not limited to new convertible notes payable, amounts available upon the exercise of the put rights granted to the Company under the Investment Agreement, sales of equity, loans from related parties and others or through the conversion of the convertible notes into equity. 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 – DEFERRED OFFERING COSTS AND PREPAID EXPENSES

 

Deferred Offering Costs

 

On July 7, 2016, the Company entered into the Investment Agreement with an accredited investor, pursuant to which an accredited investor agreed to invest up to $3,000,000 to purchase the Company’s common stock, par value of $.0001 per share. The purchase price for such shares shall be 80% of the lowest volume weighted average price of the Company’s common stock during the five consecutive trading days prior to the date on which written notice is sent by the Company to the investor stating the number of shares that the Company is selling to the investor, subject to certain discounts and adjustments. Further, for each $50,000 that the investor tenders to the Company for the purchase of shares of common stock, the investor was to be granted warrants for the purchase of an equivalent number of shares of common stock. The warrants were to expire five (5) years from their respective grant dates and have an exercise price equal to 130% of the weighted average purchase price for the respective “$50,000 increment.”

 

On March 22, 2017, the Company and the investor entered into an Amended Investment Agreement (the “Amended Investment Agreement”) whereby the parties agreed to modify the terms of the Investment Agreement by providing that in lieu of granting the investor warrants for each $50,000 that the investor tenders to the Company, the Company granted to the investor warrants to purchase an aggregate of 7,000,000 shares of common stock. The warrants have the following fixed exercise prices: (i) 4,000,000 shares at $0.25 per share; (ii) 2,000,000 shares at $0.50 per share; and (iii) 1,000,000 shares at $1.00 per share. The warrants also contain a “cashless exercise” provision and the shares underlying the warrants will not be registered. The fair value of the warrants was calculated using the Black-Scholes pricing model at $56,635, with the following assumptions: risk-free interest rate of 1.95%, expected life of 5 years, volatility of 40%, and expected dividend yield of zero.

 

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 Amended Investment Agreement. The fair value of the warrants was calculated using the Black-Scholes pricing model at $96,990, with the following assumptions: risk-free interest rate of 1.74%, expected life of 5 years, volatility of 40%, and expected dividend yield of zero.

 

This fair value of the warrants described above was recorded as a deferred offering cost and will be amortized over the period during which the Company can access the financing, which begins the day after a registration statement registering shares underlying the Investment Agreement is declared effective by the United States Securities and Exchange Commission (the “SEC”), and ends 3 years from that date. On May 15, 2017, the SEC declared effective a registration statement registering shares underlying the Investment Agreement. During the three months ended September 30, 2018 and 2017, the Company recognized $12,802 and $12,802, respectively, in general and administrative expense related to the cost of the warrants. During the nine months ended September 30, 2018 and 2017, the Company recognized $38,406 and $19,203, respectively, in general and administrative expense related to the cost of the warrants.

 

Prepaid Expenses

 

On June 6, 2018, the Company granted three-year warrants to purchase 600,000 shares at an exercise price of $0.15 per share to two advisors for services to be provided over a six-month period. The fair value of the warrants was calculated using the Black-Scholes pricing model at $94,844, with the following assumptions: risk-free interest rate of 2.65%, expected life of 3 years, volatility of 286.98%, and expected dividend yield of zero. The Company recognized $47,681 in the three months ended September 30, 2018 and $60,120 in the nine months ended September 30, 2018 to general and administrative expense related to the cost of the warrants.

 

  13  

 

 

HEALTHLYNKED CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2018 AND 2017

(UNAUDITED)

 

NOTE 5 – PROPERTY, PLANT, AND EQUIPMENT

 

Property, plant and equipment at September 30, 2018 and December 31, 2017 are as follows:

 

    September 30,     December 31,  
    2018     2017  
             
Capital Lease equipment   $ 343,492     $ 343,492  
Telephone equipment     12,308       12,308  
Furniture, Transport and Office equipment     436,168       435,967  
                 
Total Property, plant and equipment     791,968       791,767  
Less: accumulated depreciation     (746,193 )     (728,391 )
                 
Property, plant and equipment, net   $ 45,775     $ 63,376  

 

Depreciation expense during the three months ended September 30, 2018 and 2017 was $5,744 and $6,055, respectively. Depreciation expense during the nine months ended September 30, 2018 and 2017 was $17,802 and $17,623, respectively.

 

NOTE 6 – NOTES PAYABLE AND OTHER AMOUNTS DUE TO RELATED PARTY

 

Amounts due to related parties as of September 30, 2018 and December 31, 2017 were comprised of the following:

 

    September 30,     December 31,  
    2018     2017  
Due to related party:            
Deferred compensation, Dr. Michael Dent   $ 300,600     $ 300,600  
Accrued interest payable to Dr. Michael Dent     114,907       63,245  
Total due to related party     415,507       363,845  
                 
Notes payable to related party:                
Notes payable to Dr. Michael Dent, current portion     ---       553,550  
Notes payable to Dr. Michael Dent, long term portion     666,274       ---  
Total notes payable to related party   $ 666,274     $ 553,550  

 

Notes Payable to Dr. Michael Dent

 

Prior to August 2014, NWC was owned and controlled by the Company’s Chief Executive Officer, Dr. Michael Dent (“DMD”). DMD first provided an up to $175,000 unsecured note payable to the Company with a 0% interest rate. During 2013 the limit on the unsecured Note Payable was increased up to $500,000 and during 2014 it was increased to $750,000 with a maturity date of December 31, 2017. During January 2017, the note was again amended to extend the maturity date until December 31, 2018, to accrue interest on outstanding balances after January 1, 2017 at a rate of 10% per annum, and to fix interest accrued on balances between January 1, 2015 and December 31, 2016 at an amount equal to $22,108 (the “$750k DMD Note”). All principal and interest is due at maturity of the $750k DMD Note. Interest accrued on the $750k DMD Note as of September 30, 2018 and December 31, 2017 was $61,262 and $43,963, respectively.

 

  14  

 

 

HEALTHLYNKED CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2018 AND 2017

(UNAUDITED)

 

NOTE 6 – NOTES PAYABLE AND OTHER AMOUNTS DUE TO RELATED PARTY (CONTINUED)

 

The carrying values of notes payable to Dr. Michael Dent as of September 30, 2018 were as follows:

 

Inception Date   Maturity Date   Borrower   Interest Rate     Amount  
January 12, 2017   December 31, 2019   HLYK     10 %   $ 39,351 *
January 18, 2017   December 31, 2019   HLYK     10 %     22,458 *
January 24, 2017   December 31, 2019   HLYK     10 %     56,074 *
February 9, 2017   December 31, 2019   HLYK     10 %     33,530 *
April 20, 2017   December 31, 2019   HLYK     10 %     11,010 *
June 15, 2017   December 31, 2019   HLYK     10 %     35,351 *
August 17, 2017   December 31, 2019   HLYK     10 %     20,000  
August 24, 2017   December 31, 2019   HLYK     10 %     37,500  
September 7, 2017   December 31, 2019   HLYK     10 %     35,000  
September 21, 2017   December 31, 2019   HLYK     10 %     26,500  
September 29, 2017   December 31, 2019   HLYK     10 %     12,000  
December 21, 2017   December 31, 2019   HLYK     10 %     14,000  
January 8, 2018   December 31, 2019   HLYK     10 %     75,000  
January 11, 2018   December 31, 2019   HLYK     10 %     9,000  
January 26, 2018   December 31, 2019   HLYK     10 %     17,450  
January 3, 2014   December 31, 2019   NWC     10 %     222,050  
                         
                    $ 666,274  

 

* - Denotes that note payable is carried at fair value

 

On July 18, 2018, in connection with a $2,000,000 private placement by a third party investor, Dr. Dent agreed to extend the maturity date on all of the above notes until December 31, 2019. Interest accrued on the above unsecured promissory notes as of September 30, 2018 and December 31, 2017 was $53,646 and $19,350, respectively.

 

On February 12, 2018, the Company issued a warrant to purchase 6,678,462 shares of common stock to DMD as an inducement to (i) extend the maturity dates of up to $439,450 loaned by Dr. Dent to the Company in 2017 and 2018 in the form of unsecured promissory notes, including $75,000 loaned from Dr. Dent to the Company in January 2018 to allow the Company to retire an existing convertible promissory note payable to Power-up Lending Group Ltd. before such convertible promissory note became eligible for conversion, and (ii) provide continued loans to the Company. The warrant is immediately exercisable at an exercise price of $0.065 per share, subject to adjustment, and expires five years after the date of issuance. The fair value of the warrants was calculated using the Black-Scholes pricing model at $337,466, with the following assumptions: risk-free interest rate of 2.56%, expected life of 5 years, volatility of 268.90%, and expected dividend yield of zero. On March 28, 2012, DMD agreed to extend the maturity dates of promissory notes with an aggregate face value of $177,500, which were originally scheduled to mature before September 30, 2018, by one year from the original maturity date. Because the fair value of the warrants was greater than 10% of the present value of the remaining cash flows under the modified promissory notes, the transaction was treated as a debt extinguishment and reissuance of new debt instruments pursuant to the guidance of ASC 470-50 “Debt – Modifications and Extinguishments” (“ASC 470-50”). A loss on debt extinguishment was recorded in the amount of $348,938, equal to the fair value of the warrants of $337,466, plus the excess of $11,472 of the fair value of the reissued debt instruments over the carrying value of the existing debt instruments. The change in fair value of the reissued debt instruments subsequent to the reissuance date was $821 in the three months ended September 30, 2018 and $8,802 in the nine months ended September 30, 2018, which is included in “Change in fair value of debt.”

 

  15  

 

 

HEALTHLYNKED CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2018 AND 2017

(UNAUDITED)

 

NOTE 6 – NOTES PAYABLE AND OTHER AMOUNTS DUE TO RELATED PARTY (CONTINUED)

 

MedOffice Direct

 

During 2017, the Company entered into an agreement with MedOffice Direct (“MOD”), a company majority-owned by the Company’s CEO and largest shareholder, Dr. Michael Dent, pursuant to which the Company will pay rent to MOD in the amount of $2,040 per month for office space in MOD’s facility used by the Company and its employees for the period from January 1, 2017 through July 31, 2018. During the three months ended September 30, 2018 and 2017, the Company recognized rent expense to MOD in the amount of $6,120 and $6,120, respectively. During the nine months ended September 30, 2018 and 2017, the Company recognized rent expense to MOD in the amount of $18,360 and $18,360, respectively. The Company had prepaid an additional $12,097 toward future rent as of September 30, 2018.

 

During 2017, the Company entered into a separate Marketing Agreement with MOD pursuant to which MOD agreed to market the HealthLynked Network to its physician practice clients, in exchange for a semi-annual fee of $25,000. This agreement was terminated effective April 1, 2018. During the three months ended September 30, 2018 and 2017, the Company recognized general and administrative expense in the amount of $-0- and $12,500, respectively, pursuant to this agreement. During the nine months ended September 30, 2018 and 2017, the Company recognized general and administrative expense in the amount of $12,500 and $29,167, respectively, pursuant to this agreement. On July 1, 2018 HLYK and MOD signed a marketing and service agreement where HLYK will include MOD offering as part of its product offering to Physicians and HLYK will receive 8% of revenue for new sales related to MOD products sold by the HLYK sales team. The revenue percentage will be split between HLYK and the HLYK sales representative.

 

NOTE 7 – CAPITAL LEASE

 

Capital lease obligations as of September 30, 2018 and December 31, 2017 are comprised of the following:

 

    September 30,     December 31,  
    2018     2017  
             
Note payable, New Everbank Lease   $ 27,522     $ 39,754  
Less: note payable, New Everbank Lease (Capital leases), current portion     (19,877 )     (18,348 )
                 
Notes payable, bank loans and capital leases, long-term portion   $ 7,645     $ 21,406  

 

In March 2015, the Company entered into a capital equipment finance lease for Ultra Sound equipment with Everbank. There was no interest on this lease. The monthly payment is $1,529 for 60 months ending in March 2020. As of September 30, 2018, the Company owed Everbank $27,522 pursuant to this capital lease. During the three months ended September 30, 2018 and 2017, the Company made payments on this capital lease of $4,587 and $4,587, respectively. During the nine months ended September 30, 2018 and 2017, the Company made payments on this capital lease of $12,232 and $13,761, respectively.

 

Future minimum payments to which the Company is obligated pursuant to the capital leases as of September 2018 are as follows:

 

2018 (October to December)   $ 6,116  
2019     18,348  
2020     3,058  
2021     ---  
2022     ---  
         
Total   $ 27,522  

 

  16  

 

 

HEALTHLYNKED CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2018 AND 2017

(UNAUDITED)

 

NOTE 8 – NOTES PAYABLE

 

On December 20, 2017, the Company entered into a Merchant Cash Advance Factoring Agreement (“MCA”) with Power Up Lending Group, Ltd. (the “PULG”) pursuant to which the Company received an advance of $75,000 before closing fees (the “December MCA”). The Company is required to repay the advance, which acts like an ordinary note payable, at the rate of $4,048 per week until the balance of $102,000, which was scheduled for June 2018. At inception, the Company recognized a note payable in the amount of $102,000 and a discount against the note payable of $28,500. The discount was being amortized over the life of the instrument. During the nine months ended September 30, 2018, the Company made installment payments of $89,048. The December MCA was repaid on June 1, 2018. During the nine months ended September 30, 2018, the Company recognized amortization of the discount in the amount of $26,881, including $2,267 recognized to amortize the remaining discount at retirement.

 

On June 1, 2018, the Company entered into a new MCA with PULG pursuant to which the Company received an advance of $75,000 before closing fees (the “December MCA”). The Company is required to repay the advance at the rate of $4,048 per week until the balance of $102,000 has been repaid in November 2018. At inception, the Company recognized a note payable in the amount of $102,000 and a discount against the note payable of $28,500. The discount is being amortized over the life of the instrument. During the three months ended September 30, 2018, the Company recognized amortization of the discount in the amount of $14,820. During the nine months ended September 30, 2018, the Company recognized amortization of the discount in the amount of $19,380. As of September 30, 2018, the net carrying value of the instrument was $24,070.

 

NOTE 9 –CONVERTIBLE NOTES PAYABLE

 

Convertible notes payable as of September 30, 2018 and December 31, 2017 are comprised of the following:

 

    September 30,     December 31,  
    2018     2017  
             
$550k Note - July 2016   $ 576,655 *   $ 550,000  
$50k Note - July 2016     58,471 *     50,000  
$111k Note - May 2017     121,368 *     111,000  
$53k Note - July 2017     ---       53,000  
$35k Note - September 2017     ---       35,000  
$55k Note - September 2017     ---       55,000  
$53k Note II - October 2017     ---       53,000  
$171.5k Note - October 2017     171,500       171,500  
$57.8k Note - January 2018     9,250       ---  
$57.8k Note - April 2018     57,750       ---  
$53k Note II - April 2018     53,000       ---  
$68.3k Note - May 2018     68,250       ---  
$37k Note May 2018     37,000       ---  
$63k Note II - May 2018     63,000       ---  
$78.8k Note - May 2018     78,750       ---  
      1,294,994       1,078,500  
Less: unamortized discount     (219,894 )     (266,642 )
Convertible notes payable, net of original issue discount and debt discount     1,075,100       811,858  
Less: convertible notes payable, long term portion     (756,494 )     ---  
Convertible notes payable, current portion   $ 318,606     $ 811,858  

 

* - Denotes that convertible note payable is carried at fair value

 

  17  

 

 

HEALTHLYNKED CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2018 AND 2017

(UNAUDITED)

 

NOTE 9 –CONVERTIBLE NOTES PAYABLE (CONTINUED)

 

Convertible Notes Payable ($550,000) – July 2016

 

On July 7, 2016, the Company entered into a 6% fixed convertible secured promissory note with an investor with a face value of $550,000 (the “$550k Note”). The $550k Note is convertible into shares of the Company’s common stock at the discretion of the note holder at a fixed price of $0.08 per share, and is secured by all of the Company’s assets. The Company received $500,000 net proceeds from the note after a $50,000 original issue discount. The $550k Note was originally scheduled to mature on April 11, 2017, but the maturity date was extended to July 7, 2018 during August 2017 and to December 31, 2019 during July 2018. The discount from the original issue discount, warrants and embedded conversion feature (“ECF”) associated with the $550k Note was amortized over the original life of the note. Amortization expense related to the discount in the three months ended September 30, 2018 and 2017 was $-0- and $3,061, respectively, and in the nine months ended September 30, 2018 and 2017 was $-0- and $104,137, respectively. As of September 30, 2018, the unamortized discount was $-0- and the $550k Note was convertible into 6,875,000 of the Company’s common shares.

 

The $550k Note is carried at fair value due to an extinguishment and reissuance recorded in 2017 and is revalued at each period end, with changes to fair value recorded to the statement of operations under “Change in Fair Value of Debt.” The fair value of this instrument as of September 30, 2018 was $576,655. During the three months ended September 30, 2018 and 2017, a change in fair value of debt related to this instrument was recorded in the amount of $16,221 and $-0-, respectively. During the nine months ended September 30, 2018 and 2017, a change in fair value of debt related to this instrument was recorded in the amount of $78,629 and $-0-, respectively.

 

During the nine months ended September 30, 2018 and 2017, the Company made no repayments on this instrument. During the three months ended September 30, 2018 and 2017, the Company recorded interest expense on this instrument totaling $8,318 and $8,318, respectively. During the nine months ended September 30, 2018 and 2017, the Company recorded interest expense on this instrument totaling $24,773 and $24,682, respectively.

 

On July 11, 2018, the Company and the issuer of the $550k Note, the $50k Note and the $111k Note entered into an Amendment agreement related to these notes (the “First Extension”), pursuant to which the holder agreed to extend the maturity date of the three notes until July 31, 2019 in exchange for (i) a three-year warrant to purchase 200,000 Company shares at an exercise price of $0.25, and (ii) a three-year warrant to purchase 300,000 Company shares at an exercise price of $0.50. The fair value of the warrants was $133,019, using the Black/Scholes pricing models with the following assumptions: risk-free interest rate of 2.67%, expected life of 3 years, volatility of 287.57%, and expected dividend yield of zero. In connection with the warrant issuance, the Company recognized a loss on extinguishment of debt in the amount of $90,624.

 

On July 13, 2018, the Company and the issuer entered into a second Amendment agreement, pursuant to which the holder agreed to further extend the maturity date of the Iconic Notes until December 31, 2019 in exchange for an additional (i) three-year warrant to purchase 175,000 Company shares at an exercise price of $0.25, and (ii) three-year warrant to purchase 75,000 Company shares at an exercise price of $0.50. The fair value of the warrants was $60,401, using the Black/Scholes pricing models with the following assumptions: risk-free interest rate of 2.66%, expected life of 3 years, volatility of 287,77%, and expected dividend yield of zero. In connection with the warrant issuance, the Company recognized a loss on extinguishment of debt in the amount of $42,777.

 

Convertible Notes Payable ($50,000) – July 2016

 

On July 7, 2016, the Company entered into a 10% fixed convertible commitment fee promissory note with an investor with a face value of $50,000 (the “$50k Note”). The $50k Note was originally scheduled to mature on April 11, 2017, but the maturity date was extended to July 11, 2018 during August 2017 and to December 31, 2019 during July 2018. The $50k note was issued as a commitment fee payable to the Investment Agreement investor in exchange for the investor’s commitment to enter into the Investment Agreement, subject to registration of the shares underlying the Investment Agreement. The $50k Note is convertible into shares of the Company’s common stock at the discretion of the note holder at a fixed price of $0.10 per share. As of September 30, 2018, the $50k Note was convertible into 500,000 of the Company’s common shares.

 

The $50k Note is carried at fair value due to an extinguishment and reissuance recorded in 2017 and is revalued at each period end, with changes to fair value recorded to the statement of operations under “Change in Fair Value of Debt.” The fair value of this instrument as of September 30, 2018 was $58,471. During the three months ended September 30, 2018 and 2017, a change in fair value of debt related to this instrument was recorded in the amount of $1,645 and $-0-, respectively. During the nine months ended September 30, 2018 and 2017, a change in fair value of debt related to this instrument was recorded in the amount of $11,416 and $-0, respectively.

 

  18  

 

 

HEALTHLYNKED CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2018 AND 2017

(UNAUDITED)

 

NOTE 9 –CONVERTIBLE NOTES PAYABLE (CONTINUED)

 

During the nine months ended September 30, 2018 and 2017, the Company made no repayments on this instrument. During the three months ended September 30, 2018 and 2017, the Company recorded interest expense on this instrument totaling $1,260 and $1,260, respectively. During the nine months ended September 30, 2018 and 2017, the Company recorded interest expense on this instrument totaling $3,753 and $3,740, respectively.

 

Convertible Notes 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”). 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 $0.35 per share, 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.

 

On March 28, 2018, in exchange for a five-year warrant to purchase 125,000 shares of HLYK common stock at an exercise price of $0.05 per share, the holder of the $111k Note agreed to extend the maturity date from the original date of January 22, 2018 until July 11, 2018. The fair value of the warrants using Black/Scholes was $10,199 with the following assumptions: risk-free interest rate of 2.59%, expected life of 5 years, volatility of 578.45%, and expected dividend yield of zero. The issuance of the warrants in exchange for the maturity extension was treated as an extinguishment and reissuance of existing debt pursuant to the guidance of ASC 470-50. Accordingly, the $111k Note is carried at fair value and is revalued at each period end, with changes to fair value recorded to the statement of operations under “Change in Fair Value of Debt.” The fair value of this instrument as of September 30, 2018 was $121,368. During the three months ended September 30, 2018 and 2017, a change in fair value of debt related to this instrument was recorded in the amount of $3,414 and $-0-, respectively. During the nine months ended September 30, 2018 and 2017, a change in fair value of debt related to this instrument was recorded in the amount of $6,652 and $-0, respectively. In July 2018, the maturity was further extended until December 31, 2019.

 

Amortization expense related to discounts on this instrument in the three months ended September 30, 2018 and 2017 was $-0- and $28,986, respectively. Amortization expense related to discounts in the nine months ended September 30, 2018 and 2017 was $6,931 and $41,273, respectively. As of September 30, 2018, the unamortized discount was $-0-. As of September 30, 2018, this instrument was convertible into 317,143 of the Company’s common shares.

 

During the nine months ended September 30, 2018 and 2017, the Company made no repayments on this instrument. During the three months ended September 30, 2018 and 2017, the Company recorded interest expense on this instrument totaling $8,291 and $4,168, respectively. During the nine months ended September 30, 2018 and 2017, the Company recorded interest expense on this instrument totaling $12,369 and $5,935, respectively.

 

Convertible Notes Payable ($53,000) – July 2017

 

On July 10, 2017, the Company entered into a securities purchase agreement for the sale of a $53,000 convertible note (the “$53k Note”) to PULG. The $53k Note included a $3,000 original issue discount, for net proceeds of $50,000. The $53k Note has an interest rate of 10% and a default interest rate of 22%. The $53k Note may be converted into common stock of the Company by the holder at any time following 180 days 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 average of the three (3) lowest closing bid prices 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 $53k Note, 150% of the outstanding principal and any interest due amount shall be immediately due.

 

  19  

 

 

HEALTHLYNKED CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2018 AND 2017

(UNAUDITED)

 

NOTE 9 – CONVERTIBLE NOTES PAYABLE (CONTINUED)

 

The discount resulting from the original issue discount and embedded conversion feature was being amortized over the life of the $53k Note, which was schedule to mature on April 15, 2018. Amortization expense related to the discount in the nine months ended September 30, 2018 and 2017 was $1,520 and $-0-. On January 8, 2018, the Company prepaid the balance on the $53k Note, including accrued interest, for a one-time cash payment of $74,922. The Company recognized a gain on debt extinguishment in the nine months ended September 30, 2018 in connection with the repayment, as follows:

 

Cash repayment   $ 74,922  
Less face value of convertible note payable retired     (53,000 )
Less carrying value of derivative financial instruments arising from ECF     (53,893 )
Less accrued interest     (2,644 )
Plus carrying value of discount at extinguishment     18,427  
         
Gain on extinguishment of debt   $ (16,188 )

 

Convertible Notes Payable ($35,000) – September 2017

 

On September 7, 2017, the Company entered into a securities purchase agreement for the sale of a $35,000 convertible note (the “$35k Note”) to PULG. The $35k Note included a $3,000 original issue discount, for net proceeds of $32,000. The $35k Note has an interest rate of 10% and a default interest rate of 20%. The $35k Note may be converted into common stock of the Company by the holder at any time following 180 days 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 average of the three (3) lowest closing bid prices 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 $35k 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 $35k Note, 150% of the outstanding principal and any interest due amount shall be immediately due.

 

The discount resulting from the original issue discount and embedded conversion feature was being amortized over the life of the $35k Note, which was schedule to mature on June 15, 2018. Amortization expense related to the discount in the three months ended September 30, 2018 and 2017 was $-0- and $2,865, respectively, and in the nine months ended September 30, 2018 and 2017 was $7,972 and $2,865, respectively. On March 5, 2018, the Company prepaid the balance on the $35k Note, including accrued interest, for a one-time cash payment of $49,502. The Company recognized a gain on debt extinguishment in the nine months ended September 30, 2018 in connection with the repayment, as follows:

 

Cash repayment   $ 49,502  
Less face value of convertible note payable retired     (35,000 )
Less carrying value of derivative financial instruments arising from ECF     (37,269 )
Less accrued interest     (1,716 )
Plus carrying value of discount at extinguishment     12,705  
         
Gain on extinguishment of debt   $ (11,778 )

 

Convertible Notes Payable ($55,000) – September 2017

 

On September 11, 2017, the Company entered into a securities purchase agreement for the sale of a $55,000 convertible note (the “$55k Note”) to Crown Bridge Partners LLC. The $55k Note included a $7,500 original issue discount, for net proceeds of $47,500. The 55k Note has an interest rate of 10% and a default interest rate of 12%. The $55k 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 60% multiplied by the lowest one (1) trading price for the Common Stock during the twenty (20) trading day period ending on the last complete trading day prior to the date of conversion. If, at any time while the $55k Note is outstanding, the conversion price pursuant to this formula is equal to or lower than $0.10, then an additional ten percent (10%) discount shall be factored into the conversion price until the $55k Note is no longer outstanding. In the event that shares of the Company’s Common Stock are not deliverable via DWAC following the conversion of any amount hereunder, an additional ten percent (10%) discount shall be factored into the Variable Conversion Price until the $55k Note is no longer outstanding.

 

  20  

 

 

HEALTHLYNKED CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2018 AND 2017

(UNAUDITED)

 

NOTE 9 – CONVERTIBLE NOTES PAYABLE (CONTINUED)

 

The discount resulting from the original issue discount and embedded conversion feature was being amortized over the life of the $55k Note, which was schedule to mature on September 11, 2018. Amortization expense related to the discount in the three months ended September 30, 2018 and 2017 was $-0- and $2,863, respectively, and in the nine months ended September 30, 2018 and 2017 was $10,849 and $2,863, respectively. On March 13, 2018, the Company prepaid the balance on the $55k Note, including accrued interest, for a one-time cash payment of $85,258. The Company recognized a gain on debt extinguishment in the nine months ended September 30, 2018 in connection with the repayment, as follows:

 

Cash repayment   $ 85,258  
Less face value of convertible note payable retired     (55,000 )
Less carrying value of derivative financial instruments arising from ECF     (69,687 )
Less accrued interest     (2,759 )
Plus carrying value of discount at extinguishment     27,425  
         
Gain on extinguishment of debt   $ (14,763 )

 

Convertible Notes Payable ($53,000) – October 2017

 

On October 23, 2017, the Company entered into a securities purchase agreement for the sale of a $53,000 convertible note (the “$53k Note II”) to PULG. The $53k Note II included a $3,000 original issue discount, for net proceeds of $50,000. The $53k Note II has an interest rate of 10% and a default interest rate of 20%. The $53k Note II 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 39% discount to the average of the three (3) lowest closing bid prices 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 discount resulting from the original issue discount and embedded conversion feature was being amortized over the life of the $53k Note II, which was schedule to mature on July 30, 2018. Amortization expense related to the discount in the three months ended September 30, 2018 and 2017 was $-0- and $-0-, respectively, and in the nine months ended September 30, 2018 and 2017 was $20,443 and $-0-, respectively. On April 18, 2018, the Company prepaid the balance on the $53k Note II, including accrued interest, for a one-time cash payment of $75,000. The Company recognized a gain on debt extinguishment in the nine months ended September 30, 2018 in connection with the repayment, as follows:

 

Cash repayment   $ 75,000  
Less face value of convertible note payable retired     (53,000 )
Less carrying value of derivative financial instruments arising from ECF     (55,790 )
Less accrued interest     (2,571 )
Plus carrying value of discount at extinguishment     19,496  
         
Gain on extinguishment of debt   $ (16,865 )

 

Convertible Notes Payable ($171,500) – October 2017

 

On October 27, 2017, the Company entered into a securities purchase agreement for the sale of a $171,500 convertible note (the “$171.5k Note”) to an individual lender. The $171.5k Note included a $21,500 original issue discount, for net proceeds of $150,000. The $171.5k Note has an interest rate of 10% and a default interest rate of 22% and matures on October 26, 2018. The $171.5k Note may be converted into common stock of the Company by the holder at any time following 180 days after the issuance date, subject to a 4.99% beneficial ownership limitation, at a conversion price per share equal to a 35% discount to the lowest closing bid price during the twenty (20) 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 $171.5k 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 $171.5k Note, 150% of the outstanding principal and any interest due amount shall be immediately due.

 

  21  

 

 

HEALTHLYNKED CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2018 AND 2017

(UNAUDITED)

 

NOTE 9 – CONVERTIBLE NOTES PAYABLE (CONTINUED)

 

Amortization expense related to discounts on this instrument in the three months ended September 30, 2018 and 2017 was $43,346 and $-0-, respectively. Amortization expense related to discounts in the nine months ended September 30, 2018 and 2017 was $128,625 and $-0-, respectively. As of September 30, 2018, the unamortized discount was $12,250.

 

During the nine months ended September 30, 2018 and 2017, the Company made no repayments on this instrument. During the three months ended September 30, 2018 and 2017, the Company recorded interest expense on this instrument totaling $4,323 and $-0-, respectively. During the nine months ended September 30, 2018 and 2017, the Company recorded interest expense on this instrument totaling $12,827 and $-0-, respectively.

 

Convertible Notes Payable ($57,750) – January 2018

 

On January 2, 2018, the Company entered into a securities purchase agreement for the sale of a $57,750 convertible note (the “$58k Note”). The transaction closed on January 3, 2018. The $58k Note included a $5,250 original issue discount and $2,500 fee for net proceeds of $50,000. The $58k Note has an interest rate of 10% and a default interest rate of 18% and matures on January 2, 2019. The $58k Note was convertible 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 40% discount to the lowest bid or trading price of the Company’s common stock during the twenty (20) trading days prior to the conversion date. On June 26, 2018, the holder agreed, without consideration, to reduce the discount to 28% of the volume weighted average price of the Company’s common stock for the 10 days prior to the conversion date. Because this the change in terms resulted in a decrease to the value of the ECF, no amounts were recorded to reflect the change in terms. Upon an event of default caused by the Company’s failure to deliver shares upon a conversion pursuant to the terms of the Note, 200% 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 of the $58k Note was calculated using the Black-Scholes pricing model at $82,652, with the following assumptions: risk-free interest rate of 1.83%, expected life of 1 year, volatility of 264.29%, and expected dividend yield of zero. Because the fair value of the ECF exceeded the net proceeds from the $58k Note, a charge was recorded to “Financing cost” for the excess of the fair value of the fair value of the ECF of $82,652 over the net proceeds from the note of $50,000, for a net charge of $32,652. 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   $ 82,652  
Original issue discount and fees     7,750  
Financing cost     (32,652 )
Convertible note     ---  
         
Notes payable and bank loans, long-term portion   $ 57,750  

 

During the three months ended September 2018, The holder of the $58k Note converted principal totaling $48,000, reducing the remaining principal to $9,250 as of September 30, 2018. Amortization expense related to discounts on this instrument in the three months ended September 30, 2018 and 2017 was $8,914 and $-0-, respectively. Amortization expense related to discounts in the nine months ended September 30, 2018 and 2017 was $37,235 and $-0-, respectively. During the three and nine months ended September 30, 2018, the discount was also reduced by $18,133 as a result of the conversions. As of September 30, 2018, the unamortized discount was $2,382.

 

During the three months ended September 30, 2018 and 2017, the Company recorded interest expense on this instrument totaling $895 and $-0-, respectively. During the nine months ended September 30, 2018 and 2017, the Company recorded interest expense on this instrument totaling $3,727 and $-0-, respectively.

 

  22  

 

 

HEALTHLYNKED CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2018 AND 2017

(UNAUDITED)

 

NOTE 9 – CONVERTIBLE NOTES PAYABLE (CONTINUED)

 

Convertible Notes Payable ($112,750) – February 2018

 

On February 2, 2018, the Company entered into a securities purchase agreement for the sale of a $112,750 convertible note (the “$113k Note”). The transaction closed on February 8, 2018. The $113k Note included $12,750 fees for net proceeds of $100,000. The $113k Note has an interest rate of 10% and a default interest rate of 24% and matures on February 2, 2019. The $113k 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 40% discount to the lowest bid or trading price of the Company’s common stock during the twenty (20) 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, 200% 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 discount resulting from the original issue discount and embedded conversion feature was being amortized over the life of the note, which was schedule to mature on February 2, 2019. Amortization expense related to the discount in the three months ended September 30, 2018 and 2017 was $11,738 and $-0-, respectively, and in the nine months ended September 30, 2018 and 2017 was $57,456 and $-0-, respectively. On August 7, 2018, the Company prepaid the balance on the $113k Note, including accrued interest, for a one-time cash payment of $151,536. In connection with the extinguishment, the Company also issued the holder a 3-year warrant to purchase 100,000 shares of Company common stock at an exercise price of $0.25. The fair value of the warrant was $50,614. The Company recognized a gain on debt extinguishment in the three and nine months ended September 30, 2018 in connection with the repayment, as follows:

 

Cash repayment   $ 151,536  
Less face value of convertible note payable retired     (112,750 )
Less carrying value of derivative financial instruments arising from ECF     (140,962 )
Less accrued interest     (5,746 )
Plus fair value of warrants issued in connection with extinguishment     50,614  
Plus carrying value of discount at extinguishment     55,294  
         
Gain on extinguishment of debt   $ (2,014 )

 

Convertible Notes Payable ($83,000) – February 2018

 

On February 13, 2018, the Company entered into a securities purchase agreement for the sale of a $83,000 convertible note (the “$83k Note”). The transaction closed on February 21, 2018. The $83k Note included $8,000 fees for net proceeds of $75,000. The $83k Note has an interest rate of 10% and a default interest rate of 24% and matures on February 13, 2019. The $113k 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 40% discount to the lowest bid or trading price of the Company’s common stock during the twenty (20) trading days prior to the conversion date. Upon an event of default, 200% of the outstanding principal and any interest due amount shall be immediately due.

 

  23  

 

 

HEALTHLYNKED CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2018 AND 2017

(UNAUDITED)

 

NOTE 9 – CONVERTIBLE NOTES PAYABLE (CONTINUED)

 

The discount resulting from the original issue discount and embedded conversion feature was being amortized over the life of the note, which was schedule to mature on February 13, 2019. Amortization expense related to the discount in the three months ended September 30, 2018 and 2017 was $10,688 and $-0-, respectively, and in the nine months ended September 30, 2018 and 2017 was $41,841 and $-0-, respectively. On August 16, 2018, the Company prepaid the balance on the $83k Note, including accrued interest, for a one-time cash payment of $111,596. In connection with the extinguishment, the Company also issued the holder a 5-year warrant to purchase 237,143 shares of Company common stock at an exercise price of $0.35. The fair value of the warrant was $92,400. The Company recognized a gain on debt extinguishment in the three and nine months ended September 30, 2018 in connection with the repayment, as follows:

 

Cash repayment   $ 111,596  
Less face value of convertible note payable retired     (83,000 )
Less carrying value of derivative financial instruments arising from ECF     (106,720 )
Less accrued interest     (4,184 )
Plus fair value of warrants issued in connection with extinguishment     92,400  
Plus carrying value of discount at extinguishment     41,159  
         
Gain on extinguishment of debt   $ 51,251  

 

Convertible Notes Payable ($105,000) – March 2018

 

On March 5, 2018, the Company entered into a securities purchase agreement for the sale of a $105,000 convertible note (the “$105k Note”). The transaction closed on March 12, 2018. The $105k Note included $5,000 fees for net proceeds of $100,000. The $105k Note has an interest rate of 10% and a default interest rate of 24% and matures on March 5, 2019. The $113k Note 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 9.9% beneficial ownership limitation, at a conversion price per share equal to 40% discount to the lowest bid or trading price of the Company’s common stock during the twenty (20) trading days prior to the conversion date. Upon an event of default, 110-150% of the outstanding principal and any interest due amount shall be immediately due, depending on the nature of the breach.

 

The discount resulting from the original issue discount and embedded conversion feature was being amortized over the life of the note, which was schedule to mature on March 5, 2019. Amortization expense related to the discount in the three months ended September 30, 2018 and 2017 was $17,548 and $-0-, respectively, and in the nine months ended September 30, 2018 and 2017 was $51,205 and $-0-, respectively. On August 30, 2018, the Company prepaid the balance on the $105k Note, including accrued interest, for a one-time cash payment of $140,697. The Company recognized a gain on debt extinguishment in the three and nine months ended September 30, 2018 in connection with the repayment, as follows:

 

Cash repayment   $ 140,697  
Less face value of convertible note payable retired     (105,000 )
Less carrying value of derivative financial instruments arising from ECF     (136,175 )
Less accrued interest     (5,121 )
Plus carrying value of discount at extinguishment     53,795  
         
Gain on extinguishment of debt   $ (51,804 )

 

Convertible Notes Payable ($63,000) – April 2018

 

On April 2, 2018, the Company entered into a securities purchase agreement for the sale of a $63,000 convertible note (the “$63k Note”). The transaction closed on April 3, 2018. The $63k Note included $3,000 fees for net proceeds of $60,000. The $63k Note has an interest rate of 10% and a default interest rate of 22% and matures on January 15, 2019. The $63k Note 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.

 

  24  

 

 

HEALTHLYNKED CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2018 AND 2017

(UNAUDITED)

 

NOTE 9 –CONVERTIBLE NOTES PAYABLE (CONTINUED)

 

The discount resulting from the original issue discount and embedded conversion feature was being amortized over the life of the note, which was schedule to mature on January 15, 2019. Amortization expense related to the discount in the three months ended September 30, 2018 and 2017 was $20,125 and $-0-, respectively, and in the nine months ended September 30, 2018 and 2017 was $29,594 and $-0-, respectively. On September 28, 2018, the Company prepaid the balance on the $63k Note, including accrued interest, for a one-time cash payment of $89,198. The Company recognized a gain on debt extinguishment in the three and nine months ended September 30, 2018 in connection with the repayment, as follows:

 

Cash repayment   $ 89,198  
Less face value of convertible note payable retired     (63,000 )
Less carrying value of derivative financial instruments arising from ECF     (72,336 )
Less accrued interest     (3,124 )
Plus carrying value of discount at extinguishment     23,406  
         
Gain on extinguishment of debt   $ (25,856 )

 

Convertible Notes Payable ($57,750) – April 2018

 

On April 16, 2018, the Company entered into a securities purchase agreement for the sale of a $57,750 convertible note (the “$57.8k Note II”). The transaction closed on April 17, 2018. The $57.8k Note II Note included $7,750 fees for net proceeds of $50,000. The $57.8k Note II Note has an interest rate of 10% and a default interest rate of 18% and matures on April 16, 2019. The $57.8k Note II 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 40% discount to the lowest bid or trading price of the Company’s common stock during the twenty (20) 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, 200% 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 of the $57.8k Note II was calculated using the Black-Scholes pricing model at $83,897, with the following assumptions: risk-free interest rate of 2.12%, expected life of 1 year, volatility of 270.41%, and expected dividend yield of zero. Because the fair value of the ECF exceeded the net proceeds, a charge was recorded to “Financing cost” for the excess of the fair value of the fair value of the ECF of $83,397 over the net proceeds from the note of $50,000, for a net charge of $33,397. 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   $ 83,397  
Original issue discount and fees     7,750  
Financing cost     (33,397 )
Convertible note     ---  
         
Notes payable and bank loans, long-term portion   $ 57,750  

 

Amortization expense related to discounts on this instrument in the three months ended September 30, 2018 and 2017 was $14,556 and $-0-, respectively. Amortization expense related to discounts in the nine months ended September 30, 2018 and 2017 was $23,423 and $-0-, respectively. As of September 30, 2018, the unamortized discount was $31,327.

 

During the nine months ended September 30, 2018 and 2017, the Company made no repayments on this instrument. During the three months ended September 30, 2018 and 2017, the Company recorded interest expense on this instrument totaling $1,456 and $-0-, respectively. During the nine months ended September 30, 2018 and 2017, the Company recorded interest expense on this instrument totaling $2,642 and $-0-, respectively.

 

  25  

 

 

HEALTHLYNKED CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2018 AND 2017

(UNAUDITED)

 

NOTE 9 –CONVERTIBLE NOTES PAYABLE (CONTINUED)

 

Convertible Notes Payable ($90,000) – April 2018

 

On April 18, 2018, the Company entered into a securities purchase agreement for the sale of a $90,000 convertible note (the “$90k Note”). The transaction closed on April 18, 2018. The $90k Note included $4,500 fees for net proceeds of $85,500. The $90k Note has an interest rate of 10% and a default interest rate of 24% and matures on April 18, 2019. The $90k 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 40% discount to the lowest bid or trading price of the Company’s common stock during the twenty (20) 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, the Company would incur a penalty of $250 per day beginning on the fourth day after the conversion notice, increasing to $500 per day beginning on the tenth day. 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.

 

The discount resulting from the original issue discount and embedded conversion feature was being amortized over the life of the note, which was schedule to mature on July 18, 2019. Amortization expense related to the discount in the three months ended September 30, 2018 and 2017 was $13,562 and $-0-, respectively, and in the nine months ended September 30, 2018 and 2017 was $31,562 and $-0-, respectively. On August 24, 2018, the Company prepaid the balance on the $90k Note, including accrued interest, for a one-time cash payment of $119,240. The Company recognized a gain on debt extinguishment in the three and nine months ended September 30, 2018 in connection with the repayment, as follows:

 

Cash repayment   $ 119,240  
Less face value of convertible note payable retired     (90,000 )
Less carrying value of derivative financial instruments arising from ECF     (123,030 )
Less accrued interest     (3,156 )
Plus carrying value of discount at extinguishment     58,438  
         
Gain on extinguishment of debt   $ (38,508 )

 

Convertible Notes Payable ($53,000) – April 2018

 

On April 18, 2018, the Company entered into a securities purchase agreement for the sale of a $53,000 convertible note (the “$53k Note III”). The transaction closed on April 23, 2018. The $53k Note III included $3,000 fees for net proceeds of $50,000. The $53k Note III has an interest rate of 10% and a default interest rate of 22% and matures on January 30, 2019. The $53k Note III 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 of the $53k Note III was calculated using the Black-Scholes pricing model at $71,679, with the following assumptions: risk-free interest rate of 2.17%, expected life of 0.79 years, volatility of 271.31%, and expected dividend yield of zero. Because the fair value of the ECF exceeded the net proceeds, a charge was recorded to “Financing cost” for the excess of the fair value of the fair value of the ECF of $71,679 over the net proceeds from the note of $50,000, for a net charge of $21,679. 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   $ 71,679  
Original issue discount and fees     3,000  
Financing cost     (21,679 )
Convertible note     ---  
         
Notes payable and bank loans, long-term portion   $ 53,000  

 

  26  

 

 

HEALTHLYNKED CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2018 AND 2017

(UNAUDITED)

 

NOTE 9 –CONVERTIBLE NOTES PAYABLE (CONTINUED)

 

Amortization expense related to discounts on this instrument in the three months ended September 30, 2018 and 2017 was $16,990 and $-0-, respectively. Amortization expense related to discounts in the nine months ended September 30, 2018 and 2017 was $30,470 and $-0-, respectively. As of September 30, 2018, the unamortized discount was $22,530.

 

During the nine months ended September 30, 2018 and 2017, the Company made no repayments on this instrument. During the three months ended September 30, 2018 and 2017, the Company recorded interest expense on this instrument totaling $1,336 and $-0-, respectively. During the nine months ended September 30, 2018 and 2017, the Company recorded interest expense on this instrument totaling $2,396 and $-0-, respectively.

 

Convertible Notes Payable ($68,250) – May 2018

 

On May 3, 2018, the Company entered into a securities purchase agreement for the sale of a $68,250 convertible note (the “$68.3k Note”). The transaction closed on May 4, 2018. The $68.3k Note included $3,250 fees for net proceeds of $60,000. The $68.3k Note has an interest rate of 10% and a default interest rate of 24% and matures on May 3, 2019. The $68.3k Note 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 40% discount to the lowest bid or trading price of the Company’s common stock during the twenty (20) 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, the Company would incur a penalty of $250 per day beginning on the fourth day after the conversion notice, increasing to $500 per day beginning on the tenth day. Upon an event of default caused by the Company’s failure to maintain a listing for its common stock, the outstanding principal shall increase by 50%. Upon an event of default caused by the Company’s failure to maintain a bid price for its common stock, the outstanding principal shall increase by 20%.

 

The fair value of the ECF of the $68.3k Note was calculated using the Black-Scholes pricing model at $99,422, with the following assumptions: risk-free interest rate of 2.24%, expected life of 1 year, volatility of 276.40%, and expected dividend yield of zero. Because the fair value of the ECF exceeded the net proceeds, a charge was recorded to “Financing cost” for the excess of the fair value of the fair value of the ECF of $99,422 over the net proceeds from the note of $65,000, for a net charge of $34,422. 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   $ 99,422  
Original issue discount and fees     3,250  
Financing cost     (34,422 )
Convertible note     ---  
         
Notes payable and bank loans, long-term portion   $ 68,250  

 

Amortization expense related to discounts on this instrument in the three months ended September 30, 2018 and 2017 was $17,156 and $-0-, respectively. Amortization expense related to discounts in the nine months ended September 30, 2018 and 2017 was $27,971 and $-0-, respectively. As of September 30, 2018, the unamortized discount was $40,279.

 

During the nine months ended September 30, 2018 and 2017, the Company made no repayments on this instrument. During the three months ended September 30, 2018 and 2017, the Company recorded interest expense on this instrument totaling $1,720 and $-0-, respectively. During the nine months ended September 30, 2018 and 2017, the Company recorded interest expense on this instrument totaling $2,805 and $-0-, respectively.

 

  27  

 

 

HEALTHLYNKED CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2018 AND 2017

(UNAUDITED)

 

NOTE 9 –CONVERTIBLE NOTES PAYABLE (CONTINUED)

 

Convertible Notes Payable ($37,000) – May 2018

 

On May 7, 2018, the Company entered into a securities purchase agreement for the sale of a $37,000 convertible note (the “$37k Note”). The transaction closed on May 9, 2018. The $37k Note included $2,000 fees for net proceeds of $35,000. The $37k Note has an interest rate of 10% and a default interest rate of 24% and matures on May 7, 2019. The $37k Note 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 40% discount to the lowest bid or trading price of the Company’s common stock during the twenty (20) 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, the Company would incur a penalty of $250 per day beginning on the fourth day after the conversion notice, increasing to $500 per day beginning on the tenth day. Upon an event of default caused by the Company’s failure to maintain a listing for its common stock, the outstanding principal shall increase by 50%. Upon an event of default caused by the Company’s failure to maintain a bid price for its common stock, the outstanding principal shall increase by 20%.

 

The fair value of the ECF of the $37k Note was calculated using the Black-Scholes pricing model at $54,086, with the following assumptions: risk-free interest rate of 2.25%, expected life of 1 year, volatility of 279.44%, and expected dividend yield of zero. Because the fair value of the ECF exceeded the net proceeds, a charge was recorded to “Financing cost” for the excess of the fair value of the fair value of the ECF of $54,086 over the net proceeds from the note of $35,000, for a net charge of $19,086. 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   $ 54,086  
Original issue discount and fees     2,000  
Financing cost     (19,086 )
Convertible note     ---  
         
Notes payable and bank loans, long-term portion   $ 37,000  

 

Amortization expense related to discounts on this instrument in the three months ended September 30, 2018 and 2017 was $9,326 and $-0-, respectively. Amortization expense related to discounts in the nine months ended September 30, 2018 and 2017 was $14,800 and $-0-, respectively. As of September 30, 2018, the unamortized discount was $22,200.

 

During the nine months ended September 30, 2018 and 2017, the Company made no repayments on this instrument. During the three months ended September 30, 2018 and 2017, the Company recorded interest expense on this instrument totaling $933 and $-0-, respectively. During the nine months ended September 30, 2018 and 2017, the Company recorded interest expense on this instrument totaling $1,480 and $-0-, respectively.

 

Convertible Notes Payable ($63,000) – May 2018

 

On May 9, 2018, the Company entered into a securities purchase agreement for the sale of a $63,000 convertible note (the “$63k Note II”). The transaction closed on May 12, 2018. The $63k Note II included $3,000 fees for net proceeds of $60,000. The $63k Note II has an interest rate of 10% and a default interest rate of 22% and matures on May 7, 2019. The $63k Note II 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.

 

  28  

 

 

HEALTHLYNKED CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2018 AND 2017

(UNAUDITED)

 

NOTE 9 –CONVERTIBLE NOTES PAYABLE (CONTINUED)

 

The fair value of the ECF of the $63k Note II was calculated using the Black-Scholes pricing model at $90,390, with the following assumptions: risk-free interest rate of 2.27%, expected life of 0.99 years, volatility of 279.53%, and expected dividend yield of zero. Because the fair value of the ECF exceeded the net proceeds, a charge was recorded to “Financing cost” for the excess of the fair value of the fair value of the ECF of $90,390 over the net proceeds from the note of $60,000, for a net charge of $30,390. 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   $ 90,390  
Original issue discount and fees     3,000  
Financing cost     (30,390 )
Convertible note     ---  
         
Notes payable and bank loans, long-term portion   $ 63,000  

 

Amortization expense related to discounts on this instrument in the three months ended September 30, 2018 and 2017 was $15,967 and $-0-, respectively. Amortization expense related to discounts in the nine months ended September 30, 2018 and 2017 was $24,992 and $-0-, respectively. As of September 30, 2018, the unamortized discount was $38,008.

 

During the nine months ended September 30, 2018 and 2017, the Company made no repayments on this instrument. During the three months ended September 30, 2018 and 2017, the Company recorded interest expense on this instrument totaling $1,588 and $-0-, respectively. During the nine months ended September 30, 2018 and 2017, the Company recorded interest expense on this instrument totaling $2,485 and $-0-, respectively.

 

Convertible Notes Payable ($78,750) – May 2018

 

On May 24, 2018, the Company entered into a securities purchase agreement for the sale of a $78,750 convertible note (the “$78.8k Note”). The $78.8k Note included $3,750 fees for net proceeds of $75,000. The $78.8k Note has an interest rate of 10% and a default interest rate of 24% and matures on May 24, 2019. The $78.8k Note 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 40% discount to the lowest bid or trading price of the Company’s common stock during the twenty (20) 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, the Company would incur a penalty of $250 per day beginning on the fourth day after the conversion notice, increasing to $500 per day beginning on the tenth day. Upon an event of default caused by the Company’s failure to maintain a listing for its common stock, the outstanding principal shall increase by 50%. Upon an event of default caused by the Company’s failure to maintain a bid price for its common stock, the outstanding principal shall increase by 20%. If nto paid at maturity, the amount due under the note increases by 10%.

 

The fair value of the ECF of the $63k Note II was calculated using the Black-Scholes pricing model at $116,027, with the following assumptions: risk-free interest rate of 2.28%, expected life of 1 year, volatility of 285.70%, and expected dividend yield of zero. Because the fair value of the ECF exceeded the net proceeds from the $63k Note II, a charge was recorded to “Financing cost” for the excess of the fair value of the fair value of the ECF of $116,027 over the net proceeds from the note of $75,000, for a net charge of $41,027. 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   $ 116,027  
Original issue discount and fees     3,750  
Financing cost     (41,027 )
Convertible note     ---  
         
Notes payable and bank loans, long-term portion   $ 78,750  

 

Amortization expense related to discounts on this instrument in the three months ended September 30, 2018 and 2017 was $19,849 and $-0-, respectively. Amortization expense related to discounts in the nine months ended September 30, 2018 and 2017 was $27,832 and $-0-, respectively. As of September 30, 2018, the unamortized discount was $50,918.

 

  29  

 

 

HEALTHLYNKED CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2018 AND 2017

(UNAUDITED)

 

NOTE 9 –CONVERTIBLE NOTES PAYABLE (CONTINUED)

 

During the nine months ended September 30, 2018 and 2017, the Company made no repayments on this instrument. During the three months ended September 30, 2018 and 2017, the Company recorded interest expense on this instrument totaling $798 and $-0-, respectively. During the nine months ended September 30, 2018 and 2017, the Company recorded interest expense on this instrument totaling $2,783 and $-0-, respectively.

 

NOTE 10 – DERIVATIVE FINANCIAL INSTRUMENTS

 

Derivative financial instruments are comprised of the fair value of conversion features 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. The fair market value of the derivative liabilities was calculated at inception of each convertible promissory notes 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 derivative financial instruments are then 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 nine months ended September 30, 2018 include the following:

 

    Fair Value
as of
December 31,
2017 		    Inception of
Derivative
Financial
Instruments 		    Change in
Fair Value
of Derivative
Financial
Instruments 		    Conversion /
Repayment of
Derivative
Financial
Instruments 		    Fair Value
as of
September 30,
2018 		 
                               
$53k Note - July 2017   $ 48,876     $ ---     $ 5,017     $ (53,893 )   $ ---  
$35k Note - September 2017     36,161       ---       1,108       (37,269 )     ---  
$55k Note - September 2017     64,656       ---       5,031       (69,687 )     ---  
$53k Note #2 - October 2017     58,216       ---       (2,426 )     (55,790 )     ---  
$171.5k Note - October 2017     190,580       ---       (67,629 )     ---       122,951  
$57.8k Note - January 2018     ---       82,651       (18,512 )     (54,189 )     9,950  
$112.8k Note - February 2018     ---       161,527       (20,565 )     (140,962 )     ---  
$83k Note - February 2018     ---       119,512       (12,792 )     (106,720 )     ---  
$105k Note - March 2018     ---       153,371       (17,196 )     (136,175 )     ---  
$63k Note - April 2018     ---       83,806       (11,470 )     (72,336 )     ---  
$57.8k Note - April 2018     ---       83,397       (6,774 )     ---       76,623  
$90k Note - April 2018     ---       130,136       (7,106 )     (123,030 )     ---  
$53k Note II - April 2018     ---       71,679       (9,085 )     ---       62,594  
$68.3k Note - May 2018     ---       99,422       (7,088 )     ---       92,334  
$37k Note May 2018     ---       54,086       (3,878 )     ---       50,208  
$63k Note II - May 2018     ---       90,390       (4,900 )     ---       85,490  
$78.8k Note - May 2018             116,027       (7,426 )     ---       108,601  
$2M PIPE - July 2018     ---       2,397,516       385,856       (2,783,372 )     ---  
                                         
    $ 398,489     $ 3,643,520     $ 200,165     $ (3,633,423 )   $ 608,751  

 

  30  

 

 

HEALTHLYNKED CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2018 AND 2017

(UNAUDITED)

 

NOTE 10 – DERIVATIVE FINANCIAL INSTRUMENTS (CONTINUED)

 

Derivative financial instruments and changes thereto recorded in the nine months ended September 30, 2017 include the following:

 

 
 
 
 
  		 
 
 
 
  		 
 
 
Fair Value at
Inception 		 
 
 
 
  		 
 
 
 
  		Change in
Fair Value of
Derivative
Financial
Instruments 		 
 
 
 
  		 
 
 
 
  		 
 
Fair Value at
September 30,
2017 		 
 
 
 
 
                   
$53k Note - July 2017   $ 58,154     $ (4,769 )   $ 53,385  
$35k Note - September 2017     38,338       (578 )     37,760  
$55k Note - September 2017     65,332       (65 )     65,267  
                         
    $ 161,824     $ (5,412 )   $ 156,412  

 

During the nine months ended September 30, 2018, nine convertible notes (the $53k Note, the $35k Note, the $55k Note, the $53k Note II, the $113k Note, the $83k Note, the $105k Note, the $63k Note and the $90k Note) were each repaid in full for 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.

 

Fair market value of the derivative financial instruments is measured using the Black-Scholes pricing model with the following assumptions: risk-free interest rate of 1.21% to 2.36%, expected life of 0.07-1.00 years, volatility of 172.67% to 303.06%, and expected dividend yield of zero. 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.

 

NOTE 11 – SHAREHOLDERS’ DEFICIT

 

July 2018 Private Placement

 

On July 16, 2018, the Company entered into a Securities Purchase Agreement with certain accredited investors pursuant to which the Company sold the following securities (the “July 2018 Private Placement”): (1) an aggregate of 3,900,000 shares of the Company’s common stock, par value $0.0001 per share, (2) Pre-Funded Warrants to purchase an aggregate of 4,100,000 shares of Company common stock with an exercise price of $0.0001 and a five-year life, (3) Series A Warrants to purchase 8,000,000 shares of Company common stock with an exercise price of $0.25 per share, subject to anti-dilution and other adjustment as described below, and a term of five years, and (4) Series B Warrants to purchase up to a maximum of 17,000,000 shares of Company common stock, subject to adjustment as described below, at a fixed exercise price of $0.0001. On July 18, 2018, the Company and the investors consummated the transaction. The Company received gross proceeds of $1,999,590. After investor legal fees of $15,000 and placement agent fees of $209,900, net proceeds to the Company were $1,774,690. The Company also issued to the placement agent 640,000 Series A Warrants with the same terms as the investor’s Series A Warrants and Series B Warrants to purchase up to a maximum of 1,360,000 shares of Company common stock at an exercise price of $0.0001.

 

The warrants issued in the transaction were treated as follows at inception: (1) because the Series A Warrants were not settled at a fixed price, these instruments did not qualify for equity classification and were recorded as derivative financial instruments with an inception date fair value of $1,984,722, (2) because the Series B Warrants were not settled into a fixed number of shares, these instruments did not qualify for equity classification and were recorded as derivative financial instruments with an inception date fair value of $412,794, (3) the Pre-Funded Warrants were settled into a fixed number of shares at a fixed price and were classified as equity with an inception date fair value of $942,988. The fair value of all warrants at inception was calculated using the Black-Scholes option pricing model with an assumed risk-free interest rate of 2.77%, expected life of 5 years, volatility of 288.0%, and expected dividend yield of zero. At inception, the net proceeds of $1,774,690 were classified first to common stock for the par value of common shares issued and second to derivative liabilities using the fair value of such instruments, with the excess amount of $623,216 recorded as “Financing cost” on the statement of operations.

 

  31  

 

 

HEALTHLYNKED CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2018 AND 2017

(UNAUDITED)

 

NOTE 11 – SHAREHOLDERS’ DEFICIT (CONTINUED)

 

In connection with the transaction, the Company also entered into a Registration Rights Agreement with the investors, pursuant to which the Company was required to (i) file a registration statement on Form S-1 covering the resale of the securities issued in the transaction with thirty (30) days of the closing, and (ii) use its best efforts to have the registration statement declared effective by the U.S. Securities and Exchange Commission (the “SEC”) as soon as practicable, but in no event later than the earlier of: (x) (i) in the event that the registration statement is not subject to a full review by the SEC, ninety (90) calendar days after the closing or (ii) in the event that the registration statement is subject to a full review by the SEC, one hundred twenty (120) calendar days after the closing; and (y) the fifth (5 th ) Business Day (as such term is defined in the Registration Rights Agreement) after the date the Company is notified (orally or in writing, whichever is earlier) by the SEC that such registration statement will not be reviewed or will not be subject to further review. If the Company fails to (i) file the registration statement when required, (ii) have the registration statement declared effective when required or (iii) maintain the effectiveness of the registration statement, the Company will be required to pay certain liquidated damages to the Investors.

 

The Company filed a registration statement on August 16, 2018 that was declared effective by the SEC on August 22, 2018. Based on the price of the Company’s common stock during the repricing period that began following the effectiveness of the registration statement and ended on September 21, 2018 (the “Repricing Date”), the following adjustments were made to the securities issued in the transaction: (1) the exercise price of the Series A Warrants issued to the investors and the placement agent was reduced from $0.25 to $0.2233, and (2) the number of Series B Warrants issuable was set at 2,745,757 for the investors and 219,660 for the placement agent. At the Repricing Date, the exercise price of the Series A Warrants and the number of shares issuable pursuant to the Series B Warrants was fixed. Accordingly, the derivative liabilities related to the Series A and Series B Warrants were revalued as of the Repricing Date at $2,071,680 and $711,692, respectively, using the Black-Scholes option pricing model with an assumed risk-free interest rate of 2.95%, expected life of 4.82 years, volatility of 298.82%, and expected dividend yield of zero, and reclassified to equity. The Company recognized a loss on change in fair value of derivative liabilities related to the Series A and Series B Warrants of $385,856 between the closing date and the Repricing Date.

 

Other Common Stock Issuances

 

During the nine months ended September 30, 2018, the Company sold 3,534,891 shares of common stock in six separate private placement transactions. The Company received $417,500 in proceeds from the sales, which were transacted at share prices between $0.085 and $0.35 per share. In connection with these stock sales, the Company also issued 2,649,798 five-year warrants to purchase shares of common stock at exercise prices between $0.15 and $0.45 per share.

 

During the nine months ended September 30, 2018, the Company issued 1,856,480 common shares pursuant to draws made by the Company under the Investment Agreement. The Company received an aggregate of $328,003 in net proceeds from the draws.

 

Common Stock Issuable

 

As of September 30, 2018 and December 31, 2017, the Company was obligated to issue 52,523 and 47,101 shares of common stock, respectively, in exchange for professional services provided by a third party consultant. During the three months ended September 30, 2018 and 2017, the Company recognized expense related to shares earned by the consultant of $10,605 and $17,705, respectively. During the nine months ended September 30, 2018 and 2017, the Company recognized expense related to shares earned by the consultant of $37,961 and $46,669, respectively.

 

As of September 30, 2018 and December 31, 2017, the Company was obligated to issue -0- and 75,000 shares, respectively, to an employee pursuant to the EIP.

 

  32  

 

 

HEALTHLYNKED CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2018 AND 2017

(UNAUDITED)

 

NOTE 11 – SHAREHOLDERS’ DEFICIT (CONTINUED)

 

Stock Warrants

 

Transactions involving our stock warrants during the nine months ended September 30, 2018 and 2017 are summarized as follows:

 

    2018     2017  
          Weighted           Weighted  
          Average           Average  
          Exercise           Exercise  
    Number     Price     Number     Price  
Outstanding at beginning of the period     20,526,387     $ 0.23       10,576,389     $ 0.08  
Granted during the period     27,295,820     $ 0.13       7,990,000     $ 0.40  
Exercised during the period     ---     $ ---       ---     $ ---  
Terminated during the period     ---     $ ---       ---     $ ---  
Outstanding at end of the period     47,822,207     $ 0.17       18,566,389     $ 0.23  
                                 
Exercisable at end of the period     47,822,207     $ 0.17       18,566,389     $ 0.23  
                                 
Weighted average remaining life     4.1 years             4.5 years        

 

The following table summarizes information about the Company’s stock warrants outstanding as of September 30, 2018:

 

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       22,257,768       4.2     $ 0.05       22,257,768     $ 0.05  
$ 0.10 to 0.24       14,280,441       4.3     $ 0.19       14,280,441     $ 0.19  
$ 0.25 to 0.49       7,618,998       3.7     $ 0.28       7,618,998     $ 0.28  
$ 0.50 to 1.00       3,665,000       3.4     $ 0.65       3,665,000     $ 0.65  
$ 0.05 to 1.00       47,822,207       4.1     $ 0.17       47,822,207     $ 0.17  

 

During the nine months ended September 30, 2018, the Company issued 27,537,107 warrants. The fair value of the warrants was calculated at inception using the Black-Scholes pricing model with the following assumptions: risk-free interest rate of 2.32% to 2.83%, expected life of 3-5 years, volatility of 261.18% to 308.60%, and expected dividend yield of zero. The aggregate grant date fair value of warrants issued during the nine months ended September 30, 2018 was $4,659,141.

 

In June 2018, the Company issued 600,000 five-year warrants with an exercise price of $0.15 to two individuals for consulting services to be performed between June 6 and December 6, 2018. The fair value of the warrants was $94,844, which is being recognized on a straight-line basis over the six-month service period. During the three and nine months ended September 30, 2018, the Company recognized general and administrative expense of $47,681 and $60,120, respectively, related to these warrants.

 

In August 2018, the Company issued 400,000 five-year warrants with an exercise price of $0.35 to a consultant for services performed. The fair value of the warrants was $145,861, which was recognized at issuance. During each of the three and nine months ended September 30, 2018, the Company recognized general and administrative expense of $145,861 related to these warrants.

 

  33  

 

 

HEALTHLYNKED CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2018 AND 2017

(UNAUDITED)

 

NOTE 11 – 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 nine months ended September 30, 2018 and 2017:

 

    2018     2017  
Outstanding at beginning of the period     1,498,750       1,552,500  
Granted during the period     400,000       ---  
Terminated during the period     ---       (228,750 )
Outstanding at end of the period     1,898,750       1,323,750  
                 
Shares vested at period-end     1,158,750       795,000  
Weighted average grant date fair value of shares granted during the period   $ 0.31     $ ---  
Aggregate grant date fair value of shares granted during the period   $ 122,196     $ ---  
Shares available for grant pursuant to EIP at period-end     9,896,934       11,829,934  

 

Total stock based compensation recognized for grants under the EIP was $11,369 and $2,435 during the three months ended September 30, 2018 and 2017, respectively. Total stock based compensation recognized for grants under the EIP was $17,814 and $8,215 during the nine months ended September 30, 2018 and 2017, respectively. Total unrecognized stock compensation related to these grants was $121,500 as of September 30, 2018.

 

A summary of the status of non-vested shares issued pursuant to the EIP as of and for the nine months ended September 30, 2018 and 2017 is presented below:

 

    2018     2017  
          Weighted           Weighted  
          Average           Average  
          Grant Date           Grant Date  
    Shares     Fair Value     Shares     Fair Value  
Nonvested at beginning of period     628,750     $ 0.05       940,000     $ 0.04  
Granted     ---     $ ---       ---     $ ---  
Vested     (288,750 )   $ 0.03       (182,500 )   $ 0.04  
Forfeited     ---     $ ---       (228,750 )   $ 0.04  
Nonvested at end of period     340,000     $ 0.03       528,750     $ 0.04  

 

  34  

 

 

HEALTHLYNKED CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2018 AND 2017

(UNAUDITED)

 

NOTE 11 – SHAREHOLDERS’ DEFICIT (CONTINUED)

 

Employee Stock Options

 

The following table summarizes the status of options outstanding as of and for the nine months ended September 30, 2018 and 2017:

 

    2018     2017  
          Weighted           Weighted  
          Average           Average  
          Exercise           Exercise  
    Number     Price     Number     Price  
Outstanding at beginning of the period     2,349,996     $ 0.12       2,349,996     $ 0.12  
Granted during the period     1,358,000     $ 0.29       ---     $ ---  
Exercised during the period     ---     $ ---       ---     $ ---  
Forfeited during the period     ---     $ ---       ---     $ ---  
Outstanding at end of the period     3,707,996     $ 0.18       2,349,996     $ 0.12  
                                 
Options exercisable at period-end     1,136,000               462,500          
Weighted average remaining life (in years)     8.3               8.9          
Weighted average grant date fair value of options granted during the period   $ 0.23             $ ---          
Options available for grant at period-end     9,896,934               11,829,934          

 

The following table summarizes information about the Company’s stock options outstanding as of September 30, 2018:

 

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       1,733,000       7.3     $ 0.08       1,083,000       0.08  
$ 0.11 to 0.20       774,996       8.2     $ 0.20       53,000       0.19  
$ 0.21 to 0.30       1,200,000       9.8       0.31       ---       ---  
$ 0.08 to 0.20       3,707,996       8.3     $ 0.18       1,136,000     $ 0.09  

 

Total stock based compensation recognized related to option grants was $28,362 and $2,235 during the three months ended September 30, 2018 and 2017, respectively, and $33,524 and $7,504 during the nine months ended September 30, 2018 and 2017.

 

A summary of the status of non-vested options issued pursuant to the EIP as of and for the nine months ended September 30, 2018 and 2017 is presented below:

 

    2018     2017  
          Weighted           Weighted  
          Average           Average  
          Grant Date           Grant Date  
    Shares     Fair Value     Shares     Fair Value  
Nonvested at beginning of period     1,774,996     $ 0.03       2,249,996     $ 0.03  
Granted     1,358,000     $ 0.23       ---     $ ---  
Vested     (561,000 )   $ 0.02       (362,500 )   $ 0.03  
Forfeited     ---     $ ---       ---     $ ---  
Nonvested at end of period     2,571,996     $ 0.13       1,887,496     $ 0.03  

 

  35  

 

 

HEALTHLYNKED CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2018 AND 2017

(UNAUDITED)

 

NOTE 12 – COMMITMENTS AND CONTINGENCIES

 

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. We are not aware of any such legal proceedings that we believe will have, individually or in the aggregate, a material adverse effect on our business, financial condition or operating results.

 

Leases

 

The Company has two real estate leases in Naples, Florida. The Company entered into an operating lease for its main office in Naples, Florida beginning on August 1, 2013 and expiring July 31, 2020. The lease is for a 6901 square-foot space. The base rent for the first full year of the lease term is $251,287 per annum with increases during the period. The Company entered into another operating lease in the same building for an additional 361 square feet space for use of the medical equipment for the same period. The base rent for the first full year of the lease term is $13,140 per annum.

 

During 2017, the Company entered into an agreement with MOD pursuant to which the Company will pay rent to MOD in the amount of $2,040 per month for office space in MOD’s facility used by the Company and its employees. The agreement is effective from January 1, 2017 through July 31, 2018. During the nine months ended September 30, 2018 and 2017, the Company recognized rent expense related to the marketing agreement in the amount of $14,280 and $18,360, respectively, pursuant to this agreement and had prepaid an additional $16,177 toward future rent and other expenses as of September 30, 2018.

 

Total lease expense for the three months ended September 30, 2018 and 2017 was $72,159 and $77,636, respectively. Total lease expense for the nine months ended September 2018 and 2017 was $218,580 and $217,926, respectively.

 

Future minimum lease payments (excluding real estate taxes and maintenance costs) as of September 30, 2018 are as follows:

 

2018 (October to December)   $ 67,758  
2019     273,856  
2020     162,055  
2021     ---  
2022     ---  
         
Total   $ 503,669  

 

Employment/Consulting Agreements

 

The Company has employment agreements with each of its four physicians. 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. The contracts expire at various times through 2019, with early termination available upon a notice period of 30-90 days during which compensation is paid to the physician but NWC has no further severance obligation.

 

On July 1, 2016, HLYK 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 HLYK. If Dr. Dent’s employment is terminated by HLYK (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.

 

  36  

 

 

HEALTHLYNKED CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2018 AND 2017

(UNAUDITED)

 

NOTE 12 – COMMITMENTS AND CONTINGENCIES (CONTINUED)

 

On July 1, 2016, HLYK 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 HLYK. If Mr. O’Leary employment is terminated by HLYK (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, HLYK 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.

 

NOTE 13 – SEGMENT REPORTING

 

The Company has two reportable segments: NWC and HLYK. NWC is a multi-specialty medical group including OB/GYN (both Obstetrics and Gynecology), and General Practice. The practice’s office is located in Naples, Florida. HLYK 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. Patients will complete a detailed online personal medical history including past surgical history, medications, allergies, and family history. Once this information is entered patients and their treating physicians will be able to update the information as needed to provide a comprehensive medical history. 

 

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 September 30, 2018 and 2017 was as follows:

 

    Three Months Ended September 30, 2018     Three Months Ended September 30, 2017  
    NWC     HLYK     Total     NWC     HLYK     Total  
Revenue                                    
Patient service revenue, net   $ 539,625     $ ---     $ 539,625     $ 480,723     $ ---     $ 480,723  
Medicare incentives     ---       ---       ---       ---       ---       ---  
Total revenue     539,625       ---       539,625       480,723       ---       480,723  
                                                 
Operating Expenses                                                
Salaries and benefits     347,346       256,164       603,510       345,895       160,311       506,206  
General and administrative     214,442       682,312       896,754       228,278       252,336       480,614  
Depreciation and amortization     5,289       455       5,744       5,601       455       6,056  
Total Operating Expenses     567,077       938,931       1,506,008       579,774       413,102       992,876  
                                                 
Loss from operations   $ (27,452 )   $ (938,931 )   $ (966,383 )   $ (99,051 )   $ (413,102 )   $ (512,153 )
                                                 
Other Segment Information                                                
Interest expense   $ 5,596     $ 53,059     $ 58,655     $ 5,723     $ 21,401     $ 27,124  
Loss on extinguishment of debt   $ ---     $ 66,469     $ 66,469     $ ---     $ 290,581     $ 290,581  
Financing cost   $ ---     $ 623,216     $ 623,216     $ ---     $ 32,324     $ 32,324  
Amortization of original issue and debt discounts on convertible notes   $ ---     $ 234,584     $ 234,584     $ ---     $ 63,552     $ 63,552  
Change in fair value of derivative financial instruments   $ ---     $ (238,330 )   $ (238,330 )   $ ---     $ 5,412     $ 5,412  

 

  37  

 

 

HEALTHLYNKED CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2018 AND 2017

(UNAUDITED)

 

NOTE 13 – SEGMENT REPORTING (CONTINUED)

 

Segment information for the nine months ended September 30, 2018 and 2017 was as follows:

 

    Nine Months Ended September 30, 2018     Nine Months Ended September 30, 2017  
    NWC     HLYK     Total     NWC     HLYK     Total  
Revenue                                    
Patient service revenue, net   $ 1,751,584     $ ---     $ 1,751,584     $ 1,473,639     $ ---     $ 1,473,639  
Medicare incentives     ---       ---       ---       ---       ---       ---  
Total revenue     1,751,584       ---       1,751,584       1,473,639       ---       1,473,639  
                                                 
Operating Expenses                                                
Salaries and benefits     1,099,356       683,153       1,782,509       1,025,333       443,878       1,469,211  
General and administrative     630,901       1,393,264       2,024,165       619,112       749,906       1,369,018  
Depreciation and amortization     16,438       1,364       17,802       16,858       765       17,623  
Total Operating Expenses     1,746,695       2,077,781       3,824,476       1,661,303       1,194,549       2,855,852  
                                                 
Loss from operations   $ 4,889     $ (2,077,781 )   $ (2,072,892 )   $ (187,664 )   $ (1,194,549 )   $ (1,382,213 )
                                                 
Other Segment Information                                                
Interest expense   $ 17,298     $ 132,710     $ 150,008     $ 17,086     $ 47,835     $ 64,921  
Loss on extinguishment of debt   $ ---     $ 374,828     $ 374,828     $ ---     $ 290,581     $ 290,581  
Financing cost   $ ---     $ 1,063,721     $ 1,063,721     $ ---     $ 32,324     $ 32,324  
Amortization of original issue and debt discounts on convertible notes   $ ---     $ 633,982     $ 633,982     $ ---     $ 194,120     $ 194,120  
Change in fair value of derivative financial instruments   $ ---     $ (200,165 )   $ (200,165 )   $ ---     $ 5,412     $ 5,412  

 

    As of September 30, 2018     As of December 31, 2017  
Identifiable assets   $ 210,582     $ 950,339     $ 1,160,921     $ 269,424     $ 170,359     $ 439,783  

 

During the three months ended September 30, 2018 and 2017, HLYK recognized revenue of $6,888 and $2,377, respectively, related to subscription revenue billed to and paid for by NWC physicians for access to the HealthLynked Network, which the Company test-launched starting in the third quarter of 2017. Such revenue during the nine months ended September 30, 2018 and 2017 was $13,776 and $2,377, respectively. The revenue for HLYK and related expense for NWC were eliminated on consolidation.

 

NOTE 14 – 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.

 

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HEALTHLYNKED CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2018 AND 2017

(UNAUDITED)

 

NOTE 14 – FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)

 

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 September 30, 2018 and December 31, 2017:

 

    As of September 30, 2018  
                      Total  
    Level 1     Level 2     Level 3     Fair Value  
Convertible notes payable   $ ---     $ ---     $ 756,494     $ 756,494  
Notes payable to related party     ---       ---       197,774       197,774  
Derivative financial instruments     ---       ---       608,751       608,751  
                                 
Total   $ ---     $ ---     $ 1,563,019     $ 1,563,019  

 

    As of December 31, 2017  
                      Total  
    Level 1     Level 2     Level 3     Fair Value  
Convertible notes payable   $ ---     $ ---     $ ---     $ ---  
Notes payable to related party     ---       ---       ---       ---  
Derivative financial instruments     ---       ---       398,489       398,489  
                                 
Total   $ ---     $ ---     $ 398,489     $ 398,489  

 

The changes in Level 3 financial instruments that are measured at fair value on a recurring basis during the three and nine months ended September 30, 2018 and 2017 were as follows:

 

    Three Months Ended
September 30, 		    Nine Months Ended
September 30, 		 
    2018     2017     2018     2017  
                         
Convertible notes payable   $ (21,280 )   $ ---     $ (96,698 )   $ ---  
Notes payable to related party     (821 )     ---       (8,801 )     ---  
Derivative financial instruments     (238,330 )     ---       (200,165 )     ---  
                                 
Total   $ (260,431 )   $ ---     $ (305,664 )   $ ---  

 

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HEALTHLYNKED CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2018 AND 2017

(UNAUDITED)

 

NOTE 15 – SUBSEQUENT EVENTS

 

On October 18, 2018, the Company entered into a securities purchase agreement for the sale of a $103,000 convertible note (the “$103k Note”). The transaction closed on October 23, 2018. The $103k Note included $3,000 fees for net proceeds of $100,000. The $103k Note has an interest rate of 10% and a default interest rate of 22% and matures on April 18, 2019. The $103k 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 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.

 

On October 16, 2018, the Company repaid the $57.8k Note II, including accrued interest, for a total payment of $81,850.

 

On October 18, 2018, the Company repaid the $53k Note III, including accrued interest, for a total payment of $75,039.

 

On October 31, 2018, the Company repaid the $68.3k Note, including accrued interest, for a total payment of $91,644.

 

On November 2, 2018, the Company repaid the $37k Note, including accrued interest, for a total payment of $49,144.

 

On November 5, 2018, the Company repaid the $63k Note II, including accrued interest, for a total payment of $89,198.

 

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

Forward-Looking Statements

 

This Quarterly Report on Form 10-Q contains forward-looking statements for the purposes of the safe harbor provisions under the Private Securities Litigation Reform Act of 1995 and other federal securities laws and are subject to substantial risks, uncertainties and assumptions. These statements relate to future events or our future financial performance. We have attempted to identify forward-looking statements by terminology including “anticipates,” “believes,” “expects,” “can,” “continue,” “could,” “estimates,” “expects,” “intends,” “may,” “plans,” “potential,” “predict,” “should” or “will” or the negative of these terms or other comparable terminology. These statements are only predictions; uncertainties and other factors may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels or activity, performance or achievements expressed or implied by these forward-looking statements. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Our expectations are as of the date this Quarterly Report on Form 10-Q is filed, and we do not intend to update any of the forward-looking statements after the date this Quarterly Report on Form 10-Q is filed to confirm these statements to actual results, unless required by law.

 

The following discussion and analysis should be read in conjunction with the Company’s financial statements and notes thereto included elsewhere in this Quarterly Report on Form 10-Q. Except for the historical information contained herein, the discussion in this prospectus contains certain forward-looking statements that involve risks and uncertainties, such as statements of the Company’s plans, objectives, expectations and intentions. The cautionary statements made in this prospectus should be read as being applicable to all related forward-looking statements wherever they appear in this prospectus. The Company’s actual results could differ materially from those discussed here.

 

Overview

 

HealthLynked Corp. (the “Company,” “we,” “our, “us” or “HLYK”) was incorporated in the State of Nevada on August 4, 2014. On September 2, 2014, the Company filed Amended and Restated Articles of Incorporation 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 also previously had 2,953,840 designated shares of Series A Preferred Stock in 2014, which were converted into the 2,953,840 shares of the Company’s common shares on July 30, 2016.

 

On September 5, 2014, the Company entered into the Share Exchange Agreement with Naples Women’s Center, LLC (“NWC”), a multi-specialty medical group including OB/GYN (both Obstetrics and Gynecology), and general practice located in Naples, Florida, acquiring 100% of the LLC membership interests of NWC in exchange for an aggregate of 50,000,000 shares of the Company’s common stock to the members of NWC.

  

The Company operates online personal medical information and record archive system, the “HealthLynked Network,” which enables patients and doctors to keep track of medical information via the Internet in a cloud based system. Patients complete a detailed online personal medical history including past surgical history, medications, allergies, and family history. Once this information is entered patients and their treating physicians are able to update the information as needed to provide a comprehensive medical history.

 

The Company was formed for the purpose of acquiring NWC, and eventually developing its own online medical information system business as described above. Prior to the share exchange, NWC was an ongoing operation that had been in existence since 1996. NWC has generated revenues since its inception.

 

Critical accounting policies and significant judgments and estimates

 

This management’s discussion and analysis of the Company’s financial condition and results of operations is based on the Company’s condensed consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States, or GAAP. The preparation of these condensed consolidated financial statements requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements, as well as the reported expenses incurred during the reporting periods. The Company’s estimates are based on historical experience and on various other factors that the Company believes are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. The Company believes that the accounting policies discussed below are critical to understanding the Company’s historical and future performance, as these policies relate to the more significant areas involving management’s judgments and estimates.

 

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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:

 

● 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.

 

● Medicaid: Reimbursements for Medicaid services are generally paid at prospectively determined rates per discharge, per occasion of service, or per covered member.

 

● 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.

 

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.

 

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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 45% of total billings. Trade accounts receivable are recorded at this net amount.

 

Capital Leases

 

Costs associated with capitalized leases are capitalized and depreciated ratably over the term of the related useful life of the asset and/or the capital lease term.

 

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.

 

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.

 

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.

 

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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:

 

  ● Level 1 – Fair value based on quoted prices in active markets for identical assets or liabilities

 

  ● 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.

 

  ● 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

 

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.

 

Stock-Based Compensation

 

The Company accounts for our stock based compensation 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 it 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.

 

The Company uses the fair value method for equity instruments granted to non-employees and use the Black-Scholes model for measuring the fair value of options. The stock based fair value compensation is determined as of the date of the grant or the date at which the performance of the services is completed (measurement date) and is recognized over the vesting periods.

 

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.

 

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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 and accrued liabilities approximated their fair value.

 

Net Income (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. Outstanding stock options, warrants and other dilutive securities are excluded from the calculation of diluted net loss per common share if inclusion of these securities would be anti-dilutive.

 

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 option pricing model as of the measurement date. 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 11, 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 one operating segment due to business similarities and similar economic characteristics.

 

Recent Accounting Pronouncements

 

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers — Topic 606 , which supersedes the revenue recognition requirements in FASB ASC 605. The new guidance primarily states that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods and services. In January 2017 and September 2017, the FASB issued several amendments to ASU 2014-09, including updates stemming from SEC Accounting Staff Announcement in July 2017. The amendments and updates included clarification on accounting for principal versus agent considerations (i.e., reporting gross versus net), licenses of intellectual property and identification of performance obligations. These amendments and updates do not change the core principle of the standard, but provide clarity and implementation guidance. The Company adopted this standard on January 1, 2018 and selected the modified retrospective transition method. The Company has modified its accounting policies to reflect the requirements of this standard, however, the planned adoption did not materially impact the Company’s 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. Early adoption is permitted for the accounting guidance on financial liabilities under the fair value option. The Company is currently evaluating the impact of the new guidance on its financial statements.

 

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In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) and subsequently amended the guidance relating largely to transition considerations under the standard in January 2017. The objective of this update is to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. This ASU is effective for fiscal years beginning after December 15, 2018, including interim periods within those annual periods and is to be applied utilizing a modified retrospective approach. The Company is currently evaluating the new guidance to determine the impact it may have on its financial statements.

 

In August 2016, the FASB issued ASC Update No. 2016-15, (Topic 230) Classification of Certain Cash Receipts and Cash Payments. This ASC update provides specific guidance on the presentation of certain cash flow items where there is currently diversity in practice, including, but not limited to, debt prepayment or debt extinguishment costs, contingent consideration payments made after a business combination, proceeds from the settlement of insurance claims, and distributions received from equity method investees. The updated guidance is effective for interim and annual periods beginning after December 15, 2017, and should be applied retrospectively unless impracticable. The Company implemented this guidance effective January 1, 2018. The adoption of ASC Update No. 2016-15 did not have a significant impact on the Company’s statement of cash flows.

 

In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash . The objective of this ASU is to eliminate the diversity in practice related to the classification of restricted cash or restricted cash equivalents in the statement of cash flows. For public business entities, this ASU is effective for annual and interim reporting periods beginning after December 15, 2017, with early adoption permitted. The amendments in this update should be applied retrospectively to all periods presented. The Company will adopt this standard on January 1, 2018 and will not have a material impact on the Company’s financial statements.

 

In January 2017, the FASB issued ASC Update No. 2017-01, (Topic 805) Business Combinations – Clarifying the Definition of a Business. The amendments in this update provide a more robust framework to use in determining when a set of assets and activities constitute a business. This guidance narrows the definition of a business by providing specific requirements that contribute to the creation of outputs that must be present to be considered a business. The guidance further clarifies the appropriate accounting when substantially all of the fair value of the gross assets acquired (or disposed of) is concentrated in a single identifiable asset or a group of similar identifiable assets is that of an acquisition (disposition) of assets, not a business. This framework will reduce the number of transactions that an entity must further evaluate to determine whether transactions are business combinations or asset acquisitions. The updated guidance is effective for interim and annual periods beginning after December 15, 2017, and should be applied on a prospective basis. Early adoption is permitted only for transactions that have not been reported in financial statements that have been issued. The Company implemented this guidance effective January 1, 2018. The implementation of this guidance did not have an effect on the Company’s financial position or results of operations.

 

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. The Company is currently evaluating the requirements of this new guidance and has not yet determined its impact on the Company’s financial statements.

 

On December 22, 2017 the SEC staff issued Staff Accounting Bulletin 118 (SAB 118), which provides guidance on accounting for the tax effects of the Tax Cuts and Jobs Act (the TCJA).  SAB 118 provides a measurement period that should not extend beyond one year from the enactment date for companies to complete the accounting under ASC 740. In accordance with SAB 118, a company must reflect the income tax effects of those aspects of the TCJA for which the accounting under ASC 740 is complete. To the extent that a company’s accounting for certain income tax effects of the TCJA is incomplete but for which they are able to determine a reasonable estimate, it must record a provisional amount in the financial statements. Provisional treatment is proper in light of anticipated additional guidance from various taxing authorities, the SEC, the FASB, and even the Joint Committee on Taxation. If a company cannot determine a provisional amount to be included in the financial statements, it should continue to apply ASC 740 on the basis of the provisions of the tax laws that were in effect immediately before the enactment of the TCJA. The Company has applied this guidance to its financial statements.

 

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.  The Company is evaluating the impact ASU 2018-09 may have on its condensed consolidated financial statements.

 

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In March 2018, the FASB issued ASU 2018-05, Income Taxes (Topic 740) - Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 118. This standard amends Accounting Standards Codification 740, Income Taxes (ASC 740) to provide guidance on accounting for the tax effects of the Tax Cuts and Jobs Act (the Tax Reform Act) pursuant to Staff Accounting Bulletin No. 118, which allows companies to complete the accounting under ASC 740 within a one-year measurement period from the Tax Act enactment date. This standard did not materially impact the Company’s 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. The Company is currently evaluating the impact of the new standard on the Company’s Condensed Consolidated Financial Statements.

 

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. The Company is evaluating the impact ASU 2018-09 may have on its condensed consolidated financial statements.

 

Results of Operations

 

Comparison of Three Months Ended September 30, 2018 and 2017

 

The following table summarizes the changes in our results of operations for the three months ended September 30, 2018 compared with the three months ended September 30, 2017:

 

    Three Months Ended September 30,     Change  
    2018     2017     Increase (Decrease) in $     Increase (Decrease) in %  
Patient service revenue, net   $ 539,625     $ 480,723     $ 58,902       12 %
                                 
Salaries and benefits     603,510       506,206       97,304       19 %
General and administrative     896,754       480,614       416,140       87 %
Depreciation and amortization     5,744       6,056       (312 )     5 %
Loss from operations     (966,383 )     (512,153 )     454,230       89 %
                                 
Loss on extinguishment of debt     (66,469 )     (290,581 )     (224,112 )     77 %
Change in fair value of debt     (22,101 )     ---       22,101       100 %
Financing cost     (623,216 )     (32,324 )     590,892       1,828 %
Amortization of original issue and debt discounts on notes payable and convertible notes     (234,584 )     (63,552 )     171,032       269 %
Change in fair value of derivative financial instruments     (238,330 )     5,412       243,742       4,504 %
Interest expense     (58,655 )     (27,124 )     31,531       116 %
Total other expenses     (1,243,355 )     (408,169 )     835,186       205 %
                                 
Net loss   $ (2,209,738 )   $ (920,322 )   $ 1,289,416       140 %

 

Patient service revenue increased by $58,902, or 12%, from three months ended September 30, 2017 to 2018, primarily as a result of a 14% increase in gross billing.

 

Salaries and benefits increased by $97,304, or 19%, in 2018 primarily as a result of increased salary expense associated with NWC production pay, HLYK’s overhead and formation of the HLYK sales team.

 

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General and administrative costs increased by $416,140, or 87%, in 2018 primarily due to higher stock-based consulting fees and professional costs in 2018, as well as higher information technology, sales and promotional costs associated with the rollout of the HealthLynked Network.

 

Depreciation and amortization decreased by $312, or 5%, in 2018 primarily as a result property and equipment that was fully depreciated during 2018.

 

Loss from operations increased by $454,230, or 89%, in 2018 primarily as a result of increased HLYK headcount, higher stock-based consulting fees and professional costs associated with the rollout of the HealthLynked Network, offset by higher revenue from the medical practice.

 

Loss on extinguishment of debt decreased by $224,112, or 77%, in 2018. Loss on extinguishment of debt in 2018 arose from the repayment of five convertible notes. Loss on extinguishment of debt in 2017 arose from warrants issued in connection with the extension of the maturity date of three convertible notes.

 

Change in fair value of debt of ($22,101) in 2018 arose from the treatment of the extensions of the $550k Note, the $50k Note, the $111k Note and certain notes issued to Dr. Michael Dent as extinguishment and reissuance transactions, resulting these notes being carried at fair value. The change in fair value at the end of each reporting period is recorded as “Change in fair value of debt.”

 

Financing cost in 2018 arose from the excess of fair value of derivative instruments over net proceeds received from the July 2018 Private Placement transaction. Financing cost in 2017 arose from the issuance of three convertible promissory notes with a floating conversion rate that gave rise to an ECF derivative instrument with a fair value greater than the face value of the notes.

 

Amortization of original issue and debt discounts increased by $171,032, or 269%, in 2018 as a result of the amortization of more convertible notes with larger discounts being amortized in 2018.

 

Change in fair value of derivative financial instruments increased by $243,742, or 4,504% as a result of (i) a loss on the change in fair value of derivative financial instruments in 2018 of $385,856 associated with the revaluation and reclassification to equity of derivatives assocaited with warrants issued in the July 2018 Private Placement, and (ii) changes in fair value of derivative financial instruments embedded in convertible promissory notes.

 

Interest expense increased by $31,531, or 116%, in 2018 as a result of increased interest on new convertible notes issued in 2018, as well as on new notes issued to Dr. Dent during the second half of 2017 and the first quarter of 2018.

 

Total other expenses increased by $835,186, or 205%, in 2018 primarily as a result of financing costs related to the July 2018 Private Placement and convertible notes issued in 2018, a loss on the change in fair value of derivative financial instruments in 2018 compared to a small gain in 2017 and higher amortization of discounts on outstanding convertible promissory notes in 2018.

 

Net loss increased by $1,289,416, or 140%, in 2018 primarily as a result of financing costs and higher amortization of debt discounts, as well as increased salaries, benefits and overhead costs associated with preparing for the HealthLynked Network product launch and public company costs. These increases were offset by an increase in revenue of $58,902, or 12%.

 

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Comparison of Nine Months Ended September 30, 2018 and 2017

 

The following table summarizes the changes in our results of operations for the nine months ended September 30, 2018 compared with the nine months ended September 30, 2017:

 

    Nine Months Ended September 30,     Change  
    2018     2017     Increase (Decrease) in $     Increase (Decrease) in %  
Patient service revenue, net   $ 1,751,584     $ 1,473,639     $ 277,945       19 %
                                 
Salaries and benefits     1,782,509       1,469,211       313,298       21 %
General and administrative     2,024,165       1,369,018       655,147       48 %
Depreciation and amortization     17,802       17,623       179       1 %
Loss from operations     (2,072,892 )     (1,382,213 )     690,679       50 %
                                 
Loss on extinguishment of debt     (374,828 )     (290,581 )     84,247       29 %
Change in fair value of debt     (105,499 )     ---       105,499       100 %
Financing cost     (1,063,721 )     (32,324 )     1,031,397       3,191 %
Amortization of original issue and debt discounts on notes payable and convertible notes     (633,982 )     (194,120 )     439,862       227 %
Change in fair value of derivative financial instruments     (200,165 )     5,412       205,577       3,799 %
Interest expense     (150,008 )     (64,921 )     85,087       131 %
Total other expenses     (2,528,203 )     (576,534 )     1,951,669       339 %
                                 
Net loss   $ (4,601,095 )   $ (1,958,747 )   $ 2,642,348       135 %

 

Patient service revenue increased by $277,945, or 19%, from nine months ended September 30, 2017 to 2018, primarily as a result of a 17% increase in gross billing from existing physicians.

 

Salaries and benefits increased by $313,298, or 21%, in 2018 primarily as a result of increased salary expense associated with medical practice production pay, HLYK’s overhead and formation of the HLYK sales team.

 

General and administrative costs increased by $655,147, or 48%, in 2018 primarily due to higher stock-based consulting fees and professional costs in 2018, as well as higher information technology, sales and promotional costs associated with the rollout of the HealthLynked Network.

 

Depreciation and amortization increased by $179, or 1%, in 2018 primarily as a result of new property and equipment acquisitions in 2017.

 

Loss from operations increased by $690,679, or 50%, in 2018 primarily as a result of increased HLYK headcount, higher stock-based consulting fees and professional costs associated with the rollout of the HealthLynked Network, offset by higher revenue from the medical practice.

 

Loss on extinguishment of debt in 2018 arose from an extinguishment loss in the amount of $348,938 related to the extension of debt issued to Dr. Michael Dent, as well as extinguishment losses totaling $152,415 related to the extension of convertible notes, and gains of $126,525 related to the write-off of derivative liabilities associated with nine convertible notes repaid during the period. Loss on extinguishment of debt in 2017 arose from warrants issued in connection with the extension of the maturity date of three convertible notes.

 

Change in fair value of debt of $105,499 in 2018 arose from the treatment of the extensions of the $550k Note, the $50k Note, the $111k Note and certain notes issued to Dr. Michael Dent as extinguishment and reissuance transactions, resulting these notes being carried at fair value. The change in fair value at the end of each reporting period is recorded as “Change in fair value of debt.”

 

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Financing cost in 2018 arose from the excess of fair value of derivative instruments over net proceeds received from the July 2018 Private Placement transaction, as well as from the issuance of 12 convertible promissory notes with a floating conversion rate that gave rise to an ECF derivative instrument with a fair value greater than the face value of the notes. Financing cost in 2017 arose from the issuance of three convertible promissory notes with a floating conversion rate that gave rise to an ECF derivative instrument with a fair value greater than the face value of the notes.

 

Amortization of original issue and debt discounts increased by $439,862, or 227%, in 2018 as a result of the amortization of more convertible notes with larger discounts being amortized in 2018.

 

Change in fair value of derivative financial instruments increased by $205,577, or 3,799%, as a result of (i) a loss on the change in fair value of derivative financial instruments in 2018 of $385,856 associated with the revaluation and reclassification to equity of derivatives associated with warrants issued in the July 2018 Private Placement, and (ii) changes in fair value of derivative financial instruments embedded in convertible promissory notes.

 

Interest expense increased by $85,087, or 131%, in 2018 as a result of increased interest on new convertible notes issued in 2018, as well as on new notes issued to Dr. Dent during the second half of 2017 and the first quarter of 2018.

 

Total other expenses increased by $1,951,669, or 339%, in 2018 primarily as a result of financing costs related to the July 2018 Private Placement and convertible notes issued in 2018, a loss on the change in fair value of derivative financial instruments in 2018 compared to a small gain in 2017 and higher amortization of discounts on outstanding convertible promissory notes in 2018.

 

Net loss increased by $2,642,348, or 135%, in 2018 primarily as a result of financing costs, amortization of debt discounts and changes in fair value of derivative financial instruments, as well as increased salaries, benefits and overhead costs associated with preparing for the HealthLynked Network product launch and public company costs. These increases were offset by an increase in revenue of $277,945, or 19%.

 

Liquidity and Capital Resources

 

Going Concern

 

As of September 30, 2018, we had a working capital deficit of $629,205 and accumulated deficit $9,306,325. For the nine months ended September 30, 2018, we had a net loss of $4,601,095 and net cash used by operating activities of $1,910,098. Net cash used in investing activities was $201. Net cash provided by financing activities was $2,663,784, resulting principally from $2,520,192 proceeds from the sale of common stock, $805,500 net proceeds from the issuance of convertible notes, $101,450 net proceeds from related party loans and $73,500 net proceeds from the issuance of notes payable.

 

Our cash balance and revenues generated are not currently sufficient and cannot be projected to cover our operating expenses for the next twelve months from the date of this report. These matters raise substantial doubt about our 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 our 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 our 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 us on satisfactory terms and conditions, if at all.

 

Our ability to continue as a going concern is dependent upon our 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 we be unable to continue as a going concern. 

 

As further discussed below in “Significant Liquidity Events,” in July 2018, we completed a Private Placement (the “July 2018 Private Placement”) and received net proceeds of $1,774,690. Moreover, in July 2016, we entered into an Investment Agreement (the “Investment Agreement”) pursuant to which the investor has agreed to purchase up to $3,000,000 of our common stock over a three-year period starting upon registration of the underlying shares, with such shares put to the investor by us pursuant to a specified formula that limits the number of shares able to be put to the investor to the number equal to the average trading volume of our common shares for the ten consecutive trading days prior to the put notice being issued. During the nine months ended September 30, 2018, we received $327,818 from the proceeds of the sale of 1,856,480 shares pursuant to the Investment Agreement.

 

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We intend that the cost of implementing our development and sales efforts related to the HealthLynked Network, as well as maintaining our existing and expanding overhead and administrative costs, will be funded principally by cash received from (i) the July 2018 Private Placement, (ii) the put rights associated with the Investment Agreement, and (iii) other funding mechanisms, including sales of our common stock, loans from related parties and convertible notes. We expect to repay our outstanding convertible notes, which have an aggregate face value of $1,249,500 as of September 30, 2018, from outside funding sources, including but not limited to new convertible notes payable, amounts available upon the exercise of the put rights granted to us under the Investment Agreement, sales of equity, loans from related parties and others or through the conversion of the convertible notes into equity. No assurances can be given that we 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, our business and operations would be materially adversely affected and in such event, we would attempt to reduce costs and adjust its business plan.

 

Significant Liquidity Events

 

Through September 30, 2018, we have funded our operations principally through a combination of convertible promissory notes, promissory notes, related party debt and private placements of our common stock, as described below.

 

July 2018 Private Placement

 

On July 17, 2018, we completed the July 2018 Private Placement pursuant to which we sold the following securities: (1) an aggregate of 3,900,000 shares of our common stock, par value $0.0001 per share, (2) Pre-Funded Warrants to purchase an aggregate of 4,100,000 shares of our common stock with an exercise price of $0.0001 and a term of five-years, (3) Series A Warrants to purchase up to an aggregate of 8,000,000 shares of our common stock with an exercise price of $0.25 per share (subsequently reset to $0.2233 on the Repricing Date) and a term of five years, and (4) Series B Warrants to purchase up to a maximum of 17,000,000 shares of our common stock (subsequently reset at 2,745,757 pursuant to the terms of such warrants) at an exercise price of $0.0001. Net proceeds to the Company were $1,774,690. The Company also issued to the placement agent 640,000 Series A Warrants with the same terms as the investor’s Series A Warrants and Series B Warrants to purchase up to a maximum of 219,661 shares of Company common stock at an exercise price of $0.0001.

 

Investment Agreement

 

On July 7, 2016, we entered into the Investment Agreement with an accredited investor pursuant to which an accredited investor agreed to invest up to $3,000,000 to purchase the Company’s common stock, par value of $.0001 per share. The purchase price for such shares shall be 80% of the lowest volume weighted average price of our common stock during the five consecutive trading days prior to the date on which written notice is sent by us to the investor stating the number of shares that the Company is selling to the investor, subject to certain discounts and adjustments. Further, pursuant to an Amended Investment Agreement dated March 22, 2017, we granted to the investor warrants to purchase an aggregate of seven (7) million shares of common stock with the following fixed exercise prices: (i) four million shares at $0.25 per share; (ii) two million shares at $0.50 per share; and (iii) one million shares at $1.00 per share. The warrants also contain a “cashless exercise” provision and the shares underlying the warrants will not be registered. During the nine months ended September 30, 2018, we received $327,818 from the proceeds of the sale of 1,856,480 shares pursuant to the Investment Agreement.

 

Other Sales of Common Stock

 

During 2017, we sold 5,873,609 shares of common stock in private placement transactions to 18 investors and received $821,000 in proceeds from the sales. The shares were issued at a share price between $0.10 and $0.30 per share.

 

During the nine months ended September 30, 2018, we sold 3,534,891 shares of common stock in six separate private placement transactions. We received $417,500 in proceeds from the sales, which were transacted at share prices between $0.085 and $0.35 per share. In connection with these stock sale, we also issued 2,649,798 five-year warrants to purchase shares of common stock at exercise prices between $0.15 and $0.45 per share.

 

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Convertible Notes Payable

 

As of September 30, 2018, we had outstanding convertible notes payable with aggregate face value of $1,249,500 maturing between October 2018 and December 2019, as follows:

 

          Interest     Conversion      
    Face Value     Rate     Discount     Term
                       
$550k Note - July 2016   $ 550,000       6 %   $ 0.08     December 31, 2019
$50k Note - July 2016     50,000       10 %   $ 0.10     December 31, 2019
$111k Note - May 2017     111,000       10 %   $ 0.35     December 31, 2019
$171.5k Note - October 2017     171,500       10 %     35 %   December 31, 2019
$57.8k Note - January 2018     9,250       10 %     40 %   *
$57.8k Note - April 2018     57,750       10 %     28 %   *
$53k Note II - April 2018     53,000       10 %     39 %   *
$68.3k Note - May 2018     68,250       10 %     40 %   *
$37k Note May 2018     37,000       10 %     40 %   *
$63k Note II - May 2018     63,000       10 %     39 %   *
$78.8k Note - May 2018     78,750       10 %     40 %   May 24, 2019
    $ 1,249,500                      

 

* - Note was fully repaid or converted subsequent to September 30, 2018.

 

During the nine months ended September 30, 2018, we repaid nine notes with aggregate face value of $649,750 and one holder converted principal in the amount of $48,500 on another note payable.

 

Plan of operation and future funding requirements

 

Our plan of operations is to operate NWC and continue to invest in our cloud-based online personal medical information and record archiving system, the “HealthLynked Network,” which enables patients and doctors to keep track of medical information via the Internet in a cloud based system.

 

We intend to market the HealthLynked Network via direct sales force targeting physicians’ offices, direct to patient marketing, affiliated marketing campaigns, co-marketing with online medical supplies retailer MedOffice Direct, and expanded southeast regional sales efforts. We intend that our initial primary sales strategy will be direct physician sales through the use of regional sales representatives whom we will hire as access to capital allows. In combination with our direct sales, we intend to also utilize Internet based marketing to increase penetration to targeted geographical areas. These campaigns will be focused on both physician providers and patient members.

 

If we fail to complete the development of, or successfully market, the HealthLynked Network, our ability to realize future increases in revenue and operating profits could be impacted, and our results of operations and financial position would be materially adversely affected.

 

The capital from the July 2018 Private Placement was raised for the purpose of technology enhancement, sales and marketing initiatives and for our planned acquisition strategy. Beginning in the fourth quarter of 2018 and first quarter of 2019, we plan to acquire health service businesses and offer physician owners cash, stock, and deferred compensation. We expect to initially target practices in Florida with at least $1 million in annual revenue and that demonstrate at least three current consecutive years of strong profitability.

 

We anticipate that approximately 50% of this amount will be used for sales and marketing related costs and the remainder for executive compensation, IT expenses and legal and accounting expenses related to being a public company. We plan on raising additional capital to fund our recently disclosed acquisition strategy. In addition, we have extended a significant portion of our outstanding debt until December 31, 2019. Specifically, all of Dr. Michael Dent’s notes payable with an aggregate face value of $646,000 and all of Iconic Holdings LLC convertible notes payable with an aggregate face value of $1,751,750 have been extended until December 31, 2019.

 

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We intend that the cost of implementing our development and sales efforts related to the HealthLynked Network, as well as maintaining our existing and expanding overhead and administrative costs, will be funded principally by the July 2018 Private Placement in addition to the cash received by us from the put rights associated with the Investment Agreement. We expect to repay outstanding convertible notes from outside funding sources, including but not limited to amounts available upon the exercise of the put rights granted to us under the Investment Agreement, sales of our equity, loans from outside parties and the conversion of such related party notes to equity. No assurances can be given that we will be able to access sufficient outside capital in a timely fashion in order to repay the convertible notes before they mature. In order to access cash available under the Investment Agreement, our common stock must be listed on a recognized stock exchange or market and the shares underlying the arrangement must be subject to an effective registration statement. On May 10, 2017, our stock began trading on the OTCQB, which qualifies as a recognized stock exchange or market pursuant to the terms of the Investment Agreement, under the symbol “HLYK.” Although we have met the requirements to utilize the funds available under the Investment Agreement, there can be no assurances that we will be able to continue to meet these requirements. Additionally, the amount available to us upon the exercise of the put rights granted to us under the Investment Agreement is dependent upon the trading volume of our stock. Between May 22, 2017 and September 30, 2018, our daily trading volume averaged approximately 93,000 shares per day. Based upon increases in our volume since the end of 2017, Iconic Holdings has increased our maximum amount to access on the equity line from $150,000 maximum to $300,000 maximum. We project that amounts available to us upon the exercise of the put rights granted to us under the Investment Agreement will be sufficient to meet our capital requirements.

 

Historical Cash Flows

    Nine Months Ended
September 30, 		 
    2018     2017  
Net cash (used in) provided by:            
Operating activities   $ (1,910,098 )   $ (1,131,324 )
Investing Activities     (201 )     (13,238 )
Financing activities     2,663,784       1,102,021  
Net increase (decrease) in cash   $ 753,485     $ (42,541 )

 

Operating Activities – During the nine months ended September 30, 2018, we used cash from operating activities of $1,910,098, as compared with $1,131,324 in the same period of 2017. The increased cash usage results from higher losses resulting primarily from increased salaries and benefits, as well an increase in professional and other overhead costs associated with preparing for product launch and operating as a public company in 2018.

 

Investing Activities – Our business is not capital intensive, and as such cash flows from investing activities are minimal in each period. Capital expenditures of $201 in the nine months ended September 30, 2018 and $13,238 in the nine months ended September 30, 2017 are comprised of computer equipment and furniture.

 

Financing Activities – During the nine months ended September 30, 2018, we realized $805,500 net proceeds from the issuance of convertible notes, $2,520,192 from the proceeds of the sale of shares of common stock to investors and pursuant to the Investment Agreement, $101,450 proceeds from related party loans, and $73,500 from notes payable. We also made repayments of $649,750 against convertible notes, $165,876 against notes payable, $9,000 against related party loans and $12,232 on capital lease obligations.

 

Exercise of Warrants and Options

 

There were no proceeds generated from the exercise of warrants or options during the nine months ended September 30, 2018.

 

Other Outstanding Obligations

 

Warrants

 

As of September 30, 2018, 47,822,207 shares of our Common Stock were issuable pursuant to the exercise of warrants with exercise prices ranging from $0.0001 to $1.00.

 

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Options

As of September 30, 2018, 3,707,996 shares of our Common Stock were issuable pursuant to the exercise of options with exercise prices ranging from $0.08 to $0.31.

 

Off Balance Sheet Arrangements

 

We did not have, during the periods presented, and we do not currently have, any off-balance sheet arrangements, as defined under applicable Securities and Exchange Commission rules.

 

Contractual Obligations

 

Our contractual obligations as of September 30, 2018 were as follows:

 

    Operating     Capital     Total  
    Leases     Leases     Commitments  
2018 (October to December)   $ 67,758     $ 6,116     $ 73,874  
2019     273,856       18,348       292,204  
2020     162,055       3,058       165,113  
2021     ---       ---       ---  
2022     ---       ---       ---  
                         
Total   $ 503,669     $ 27,522     $ 531,191  

 

Operating lease commitments relate to three leases in Naples, Florida. First, the Company entered into an operating lease for its main office in Naples, Florida. The lease commenced on August 1, 2013 and expires July 31, 2020. The lease is for a 6901 square-foot space. The base rent for the first full year of the lease term is $251,287 per annum with increases during the period. Second, the Company entered into another operating lease in the same building for an additional 361 square feet space for use of the medical equipment for the same period. The base rent for the first full year of the lease term is $13,140 per annum. Third, the Company entered into an agreement with MOD pursuant to which the Company will pay rent to MOD in the amount of $2,040 per month for office space in MOD’s facility used by the Company and its employees. The agreement was effective from January 1, 2017 through July 31, 2018.

 

Capital lease commitments are comprised of a capital equipment finance lease for Ultra Sound equipment with Everbank. There was no interest on this lease. The monthly payment is $1,529 for 60 months ending in March 2020. 

 

Item 3. Quantitative and qualitative disclosures about market risk

 

Pursuant to Item 305(e) of Regulation S-K (§229.305(e)), the Company is not required to provide the information required by this Item as it is a “smaller reporting company,” as defined by Rule 229.10(f)(1).

 

Item 4. Controls and Procedures

 

Evaluation of Disclosure Controls and Procedures

 

As of September 30, 2018, management assessed the effectiveness of our internal control over financial reporting based on the criteria for effective internal control over financial reporting established in Internal Control--Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) and SEC guidance on conducting such assessments. Based on that evaluation, they concluded that, during the period covered by this report, such internal controls and procedures were not effective to detect the inappropriate application of US GAAP rules as more fully described below. This was due to deficiencies that existed in the design or operation of our internal controls over financial reporting that adversely affected our internal controls and that may be considered to be material weaknesses.

 

The material weaknesses consist of controls associated with segregation of duties and a lack of written policies and procedures for internal controls, as well as understaffing in our accounting and reporting function. To address the material weaknesses, we hired a Controller in May 2018 and have engaged outside consultants and performed additional analyses and other post-closing procedures to ensure that our consolidated financial statements were prepared in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP).

 

Management believes that the material weaknesses set forth above did not have an effect on our financial results. However, management believes that the lack of a majority of outside directors on our board of directors results in ineffective oversight in the establishment and monitoring of required internal controls and procedures, which could result in a material misstatement in our financial statements in future periods.

 

Changes in Internal Control over Financial Reporting

 

There was no change in the Company’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Securities Exchange Act of 1934, as amended) during the fiscal quarter ended September 30, 2018 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

 

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PART II. OTHER INFORMATION

 

Item 1. Legal Proceedings

 

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. We are not aware of any such legal proceedings that we believe will have, individually or in the aggregate, a material adverse effect on our business, financial condition or operating results.

 

Item 1A. Risk Factors

 

The Company is not required to provide the information required by this Item as it is a “smaller reporting company,” as defined by Rule 229.10(f)(1).

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

 

Except as previously disclosed in a Current Report on Form 8-K, or as set forth below, the Company has not sold securities that were not registered under the Securities Act of 1933, as amended (the “Securities Act”), during the period covered by this report.

 

On May 10, 2018, the Company sold 100,000 shares of common stock in private placement transactions to an investor and received $15,500 in proceeds from the sale. The shares were issued at a share price of $0.155 per share. In connection with the stock sale, the Company also issued 50,000 five-year warrants to purchase shares of common stock at an exercise price of $0.25 per share.

 

On June 14, 2018, the Company sold 208,000 shares of common stock in private placement transactions to an investor and received $52,000 in proceeds from the sale. The shares were issued at a share price of $0.25 per share. In connection with the stock sale, the Company also issued 104,000 five-year warrants to purchase shares of common stock at an exercise price of $0.35 per share.

 

On June 6, 2018, the Company issued 600,000 five-year warrants with an exercise price of $0.15 to two individuals for consulting services to be performed between June 6 and December 6, 2018.

 

On July 11, 2018, the Company and the issuer of three previously-issued convertible promissory notes (dated July 7, 2016 with a face value of $550,000, July 7, 2016 with a face value of $50,000 and May 22, 2017 with a face value of $111,000 ) entered into an Amendment agreement related to these notes, pursuant to which the holder agreed to extend the maturity date of the three notes until July 31, 2019 in exchange for (i) a three-year warrant to purchase 200,000 Company shares at an exercise price of $0.25, and (ii) a three-year warrant to purchase 300,000 Company shares at an exercise price of $0.50.

 

On July 13, 2018, the Company and the issuer of three previously-issued convertible promissory notes (dated July 7, 2016 with a face value of $550,000, July 7, 2016 with a face value of $50,000 and May 22, 2017 with a face value of $111,000 ) entered into a second Amendment agreement, pursuant to which the holder agreed to further extend the maturity date of these notes until December 31, 2019 in exchange for (i) three-year warrant to purchase 175,000 Company shares at an exercise price of $0.25, and (ii) three-year warrant to purchase 75,000 Company shares at an exercise price of $0.50.

 

On July 18, 2018, we completed the July 2018 Private Placement pursuant to which we sold the following securities: (1) an aggregate of 3,900,000 shares of our common stock, par value $0.0001 per share, (2) Pre-Funded Warrants to purchase an aggregate of 4,100,000 shares of our common stock with an exercise price of $0.0001 and a five-year life, (3) Series A Warrants to purchase up to an aggregate of 8,000,000 shares of our common stock with an exercise price of $0.25 per share (subsequently reset to $0.2233 on the Repricing Date) and a term of five years, and (4) Series B Warrants to purchase up to a maximum of 17,000,000 shares of our common stock (subsequently set at 2,745,757 on the Repricing Date) at an exercise price of $0.0001. Net proceeds to the Company were $1,774,690. The Company also issued to the placement agent 640,000 Series A Warrants with the same terms as the investor’s Series A Warrants and Series B Warrants to purchase up to a maximum of 1,360,000 shares of Company common stock at an exercise price of $0.0001.

 

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On August 7, 2018, the Company prepaid the balance on a convertible promissory note dated February 2, 2018 with a face value of $112,750 and also issued the holder a 3-year warrant to purchase 100,000 shares of Company common stock at an exercise price of $0.25 in connection with the extinguishment.

 

On August 15, 2018, the Company sold 285,714 shares of common stock in private placement transactions to an investor and received $100,000 in proceeds from the sale. The shares were issued at a share price of $0.35 per share. In connection with the stock sale, the Company also issued 142,857 five-year warrants to purchase shares of common stock at an exercise price of $0.45 per share.

 

On August 16, 2018, the Company prepaid the balance on a convertible promissory note dated February 13, 2018with a face value of $83,000 and also issued the holder a 5-year warrant to purchase 237,143 shares of Company common stock at an exercise price of $0.35 in connection with the extinguishment.

 

On August 20, 2018, the Company issued 400,000 five-year warrants with an exercise price of $0.35 to a consultant for services performed. The fair value of the warrants was $145,861, which was recognized at issuance.

 

The sales of the above securities were exempt from registration under the Securities Act in reliance upon Section 4(a)(2) of the Securities Act and/or Regulation D promulgated thereunder, as transactions by an issuer not involving any public offering. The recipients of the securities in each of these transactions represented their intentions to acquire the securities for investment purposes only and not with a view to or for sale in connection with any distribution thereof, and appropriate restrictive legends were placed upon the stock certificates issued in these transactions.

 

Item 3. Defaults Upon Senior Securities

 

None.

 

Item 4. Mine Safety Disclosures

 

Not applicable.

 

Item 5. Other Information

 

None.

 

Item 6. Exhibits

 

Exhibit No.   Exhibit Description
10.1   Securities Purchase Agreement with Morningview Financial LLC dated January 2, 2018
10.2   Convertible Promissory Note with Morningview Financial LLC dated January 2, 2018
10.3   Securities Purchase Agreement with Auctus Fund LLC dated February 2, 2018
10.4   Convertible Promissory Note with Auctus Fund LLC dated February 2, 2018
10.5   Certificate of Amendment to Articles of Incorporation (Filed as Exhibit 3.1 to the Company’s Current Report on Form 8-K filed with the Commission on February 6, 2018)
10.6   Securities Purchase Agreement with EMA Financial LLC dated February 13, 2018
10.7   Convertible Promissory Note with EMA Financial LLC dated February 13, 2018
10.8   Form of Warrant Agreement issued to Dr. Michael Dent (Filed as Exhibit 4.1 to the Company’s Current Report on Form 8-K filed with the Commission on February 15, 2018)
10.9   Securities Purchase Agreement with LG Capital Funding LLC dated March 5, 2018 (Filed as Exhibit 10.9 to the Company’s Quarterly Report on Form 10-Q filed with the Commission on May 15, 2018)
10.10   Convertible Promissory Note with LG Capital Funding LLC dated March 5, 2018 (Filed as Exhibit 10.10 to the Company’s Quarterly Report on Form 10-Q filed with the Commission on May 15, 2018)
10.11   Form of Securities Purchase Agreement with Power Up Lending Group Ltd. dated April 2, 2018 (Filed as Exhibit 10.11 to the Company’s Quarterly Report on Form 10-Q filed with the Commission on May 15, 2018)
10.12   Form of Convertible Promissory Note with Power Up Lending Group Ltd. dated April 2, 2018 (Filed as Exhibit 10.12 to the Company’s Quarterly Report on Form 10-Q filed with the Commission on May 15, 2018)
10.13   Form of Securities Purchase Agreement with Morningview Financial LLC dated April 16, 2018 (Filed as Exhibit 10.13 to the Company’s Quarterly Report on Form 10-Q filed with the Commission on May 15, 2018)

 

  56  

 

 

Exhibit No.   Exhibit Description
10.14   Form of Convertible Promissory Note with Morningview Financial LLC dated April 16, 2018 (Filed as Exhibit 10.14 to the Company’s Quarterly Report on Form 10-Q filed with the Commission on May 15, 2018)
10.15   Form of Securities Purchase Agreement with One44 Capital LLC dated April 18, 2018 (Filed as Exhibit 10.15 to the Company’s Quarterly Report on Form 10-Q filed with the Commission on May 15, 2018)
10.16   Form of Convertible Promissory Note with One44 Capital LLC dated April 18, 2018 (Filed as Exhibit 10.16 to the Company’s Quarterly Report on Form 10-Q filed with the Commission on May 15, 2018)
10.17   Form of Securities Purchase Agreement with Power Up Lending Group Ltd. dated April 18, 2018 (Filed as Exhibit 10.17 to the Company’s Quarterly Report on Form 10-Q filed with the Commission on May 15, 2018)
10.18   Form of Convertible Promissory Note with Power Up Lending Group Ltd. dated April 18, 2018 (Filed as Exhibit 10.18 to the Company’s Quarterly Report on Form 10-Q filed with the Commission on May 15, 2018)
10.19   Form of Securities Purchase Agreement with LG Capital Funding LLC dated May 3, 2018 (Filed as Exhibit 10.19 to the Company’s Quarterly Report on Form 10-Q filed with the Commission on May 15, 2018)
10.20   Form of Convertible Promissory Note with LG Capital Funding LLC dated May 3, 2018 (Filed as Exhibit 10.20 to the Company’s Quarterly Report on Form 10-Q filed with the Commission on May 15, 2018)
10.21   Form of Securities Purchase Agreement with Cerberus Finance Group Ltd. dated May 7, 2018 (Filed as Exhibit 10.21 to the Company’s Quarterly Report on Form 10-Q filed with the Commission on May 15, 2018)
10.22   Form of Convertible Promissory Note with Cerberus Finance Group Ltd. dated May 7, 2018 (Filed as Exhibit 10.22 to the Company’s Quarterly Report on Form 10-Q filed with the Commission on May 15, 2018)
10.23   Form of Securities Purchase Agreement with Power Up Lending Group Ltd. dated May 9, 2018 (Filed as Exhibit 10.23 to the Company’s Quarterly Report on Form 10-Q filed with the Commission on May 15, 2018)
10.24   Form of Convertible Promissory Note with Power Up Lending Group Ltd. dated May 9, 2018 (Filed as Exhibit 10.24 to the Company’s Quarterly Report on Form 10-Q filed with the Commission on May 15, 2018)
10.25   Form of Securities Purchase Agreement with Adar Bays LLC dated May 24, 2018 (Filed as Exhibit 10.25 to the Company’s Quarterly Report on Form 10-Q filed with the Commission on August 14, 2018)
10.26   Form of Convertible Promissory Note with Adar Bays LLC dated May 24, 2018 (Filed as Exhibit 10.26 to the Company’s Quarterly Report on Form 10-Q filed with the Commission on August 14, 2018)
10.27   Extension Letter Agreement, dated July 1, 2018, by and among HealthLynked Corp. and the George O’Leary (Filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Commission on July 6, 2018)
10.28   Amendment #4 to Investment Agreement, dated June 19, 2018, by and among HealthLynked Corp. and the Buyers listed therein (Filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Commission on June 20, 2018)
10..29   Securities Purchase Agreement, dated July 16, 2018, by and among HealthLynked Corp. and the Buyers listed therein (Filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Commission on July 19, 2018)
10.30   Registration Rights Agreement, dated July 16, 2018, by and among HealthLynked Corp. and the Buyers listed therein (Filed as Exhibit 10.2 to the Company’s Current Report on Form 8-K filed with the Commission on July 19, 2018)
10.31   Form of Series A Warrant (Filed as Exhibit 10.3 to the Company’s Current Report on Form 8-K filed with the Commission on July 19, 2018)
10.32   Form of Series B Warrant (Filed as Exhibit 10.4 to the Company’s Current Report on Form 8-K filed with the Commission on July 19, 2018)
10.33   Form of Pre-Funded Warrants (Filed as Exhibit 10.5 to the Company’s Current Report on Form 8-K filed with the Commission on July 19, 2018)
10.34   Amendment to Notes, dated July 16, 2018 (Filed as Exhibit 10.6 to the Company’s Current Report on Form 8-K filed with the Commission on July 19, 2018)
10.35   Amendment to Note, dated July 16, 2018 (Filed as Exhibit 10.7 to the Company’s Current Report on Form 8-K filed with the Commission on July 19, 2018)
10.36   Press Release, dated July 19, 2018 (Filed as Exhibit 10.8 to the Company’s Current Report on Form 8-K filed with the Commission on July 19, 2018)
31.1*   Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 of the Principal Executive Officer.
31.2*   Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 of the Principal Financial Officer and Principal Accounting Officer.
32.1*   Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 of the Principal Executive Officer
32.2*   Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 of the Principal Financial Officer and Principal Accounting Officer
101   XBRL Instance Document
    XBRL Taxonomy Extension Schema Document
    XBRL Taxonomy Extension Calculation Linkbase Document
    XBRL Taxonomy Extension Definition Linkbase Document
    XBRL Taxonomy Extension Label Linkbase Document
    XBRL Taxonomy Extension Presentation Linkbase Document

 

* Filed herewith.

 

  57  

 

 

SIGNATURES

 

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

 

Dated: November 14, 2018

 

  HEALTHLYNKED CORP.
   
  By: /s/ Michael Dent
    Name:  Michael Dent
    Title:

Chief Executive Officer and Chairman

(Principal Executive Officer)

 

 

58

 

 

 

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