As
filed with the Securities and Exchange Commission on June 17, 2019
Registration
No. 333-217309
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
Post-Effective
Amendment No. 2
FORM
S-1
REGISTRATION
STATEMENT
UNDER
THE SECURITIES ACT OF 1933
HealthLynked
Corp.
(Exact
Name of Registrant as specified in its charter)
Nevada
|
|
7373
|
|
47-1634127
|
(State
or other Jurisdiction of
Incorporation or Organization)
|
|
(Primary
Standard Industrial
Classification Code Number)
|
|
(I.R.S.
Employer
Identification No.)
|
1726
Medical Blvd Suite 101
Naples,
Florida 34110
Telephone:
(239) 513-1992
Facsimile:
(239) 513-9022
(Address,
including zip code, and telephone number, including area code, of Registrant’s principal executive offices)
Michael
Dent, M.D.
Chief
Executive Officer
1726
Medical Blvd Suite 101
Naples,
Florida 34110
Telephone:
(239) 513-1992
Facsimile:
(239) 513-9022)
(Name,
Address, Including Zip Code, and Telephone Number, Including Area Code, of Agent for Service)
With
copies to:
Andrea
Cataneo
Sheppard,
Mullin, Richter & Hampton LLP
30
Rockefeller Plaza
New
York, NY 10012
Telephone:
(212) 653-8700
Facsimile:
(212) 653-8701
Approximate
date of commencement of proposed sale to the public:
As
soon as practicable after the effective date of this registration statement.
If
any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under
the Securities Act of 1933, check the following box.
þ
If
this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please
check the following box and list the Securities Act of 1933 registration statement number of the earlier effective registration
statement for the same offering. ☐
If
this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list
the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
If
this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list
the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
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
|
þ
|
Smaller reporting company
|
þ
|
|
|
Emerging
growth company
|
þ
|
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 to Section 7(a)(2)(B) of the Securities Act. ☐
CALCULATION
OF REGISTRATION FEE
Title of Each Class of Securities to be Registered
|
|
Amount to be Registered (1)
|
|
|
Proposed Maximum Offering
Price per
Share
|
|
|
Proposed
Maximum
Aggregate
Offering
Price (2)
|
|
|
Amount of Registration Fee
|
|
Common Stock, par value $0.0001 per share
|
|
|
21,000,000
|
|
|
$
|
0.20
|
|
|
$
|
4,200,000
|
|
|
$
|
486.78
|
*
|
(1)
|
This
registration statement shall also cover any additional shares of common stock which become issuable by reason of any stock
dividend, stock split, recapitalization or any other similar transaction effected without the receipt of consideration which
results in an increase in the number of the registrant’s outstanding shares of common stock.
|
(2)
|
Estimated
solely for the purpose of calculating the registration fee pursuant to Rule 457(o) under the Securities Act of 1933, as amended.
|
|
|
*
|
Previously
paid
|
THE
REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL
THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME
EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE
ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
EXPLANATORY
NOTE
This Post-Effective Amendment
No. 2 (this “Post-Effective Amendment”) to the registration statement on
Form S-1
(File No. 333- 217309) (the “Registration Statement”), is being filed pursuant to Section 10(a)(3) of the Securities
Act of 1933, as amended (the “Securities Act”) to update the Registration Statement by, among other things, including
(i) the audited consolidated financial statements of HealthLynked Corp. (the “Registrant”) as at and for the year
ended December 31, 2018 which were filed with the Securities and Exchange Commission (the “Commission”) on April 1,
2019 as part of the Registrant’s Annual Report on
Form 10-K
, and (ii) the unaudited condensed consolidated financial statements
as at and for the three month period ended March 31, 2019.
This
Post-Effective Amendment covers only the resale, from time to time, of up to 21,000,000 shares of common stock issuable to the
Selling Stockholder listed herein under an Investment Agreement by and between the Company and the Selling Stockholder. The Registrant
previously paid to the Commission the entire registration fee relating to the shares of common stock that are the subject of this
Post-Effective Amendment. The Registrant paid a fee of $486.78 in connection with the registration of 21,000,000 shares of common
stock in connection with the Registration Statement.
CALCULATION
OF REGISTRATION FEE
Title of Each Class of Securities to be Registered
|
|
Amount to be Registered (1)
|
|
|
Proposed Maximum Offering
Price per
Share
|
|
|
Proposed
Maximum
Aggregate
Offering
Price (2)
|
|
|
Amount of Registration Fee
|
|
Common Stock, par value $0.0001 per share
|
|
|
21,000,000
|
|
|
$
|
0.20
|
|
|
$
|
4,200,000
|
|
|
$
|
486.78
|
*
|
(1)
|
This
registration statement shall also cover any additional shares of common stock which become issuable by reason of any stock
dividend, stock split, recapitalization or any other similar transaction effected without the receipt of consideration which
results in an increase in the number of the registrant’s outstanding shares of common stock.
|
(2)
|
Estimated
solely for the purpose of calculating the registration fee pursuant to Rule 457(o) under the Securities Act of 1933, as amended.
|
|
|
*
|
Previously
paid
|
THE
REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL
THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME
EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE
ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
The
information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement
filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and we
are not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.
PRELIMINARY
PROSPECTUS
Subject
To Completion, Dated June 17, 2019
21,000,000
Shares
HEALTHLYNKED
CORP.
Common
Stock
This
prospectus relates to shares of common stock of HealthLynked Corp. that may be sold by the selling stockholder identified in this
prospectus. The shares of common stock offered under this prospectus by the selling stockholder are issuable to Iconic Holdings
LLC, or Iconic, pursuant to an investment agreement between Iconic and ourselves entered into in July 2016 and amended in March
2017. We are registering the offer and sale of the shares to satisfy registration rights we have granted. We will not receive
any of the proceeds from the sale of shares by the selling stockholder.
The
selling stockholder may sell the shares of common stock described in this prospectus in a number of different ways and at varying
prices. We provide more information about how the selling stockholder may sell its shares of common stock in the section titled
“Plan of Distribution.” Iconic is an “underwriter” within the meaning of the Securities Act of 1933, as
amended, in connection with sales of shares offered pursuant to this prospectus. We will pay the expenses incurred in registering
the shares, including legal and accounting fees.
Our
common stock has been traded on the OTCQB under the symbol “HLYK” since May 10, 2017. The last reported sale price
of our common stock on the OTCQB on June 13, 2019 was $0.2499.
In
addition, we qualify as an “emerging growth company” as defined in Section 2(a)(19) of the Securities Act of 1933
and, as such, are allowed to provide in this prospectus more limited disclosures than an issuer that would not so qualify. Furthermore,
for so long as we remain an emerging growth company, we will qualify for certain limited exceptions from investor protection laws
such as the Sarbanes Oxley Act of 2002 and the Investor Protection and Securities Reform Act of 2010. Please read “Risk
Factors” and “Prospectus Summary—Emerging Growth Company Status.”
Investing
in our common stock is highly speculative and involves a high degree of risk. You should carefully consider the risks and uncertainties
described under the heading “Risk Factors” beginning on page 4 of this prospectus before making a decision to purchase
our common stock.
Neither
the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or
passed upon the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense.
The date of this prospectus is , 2019
TABLE
OF CONTENTS
You
should rely only on the information contained in this prospectus. We have not authorized any other person to provide you with
different information. If anyone provides you with different or inconsistent information, you should not rely on it. We are not
making an offer to sell these securities in any jurisdiction where an offer or sale is not permitted. You should assume that the
information appearing in this prospectus is accurate only as of the date on the front cover of this prospectus. Our business,
financial condition, results of operations and prospects may have changed since that date.
PROSPECTUS
SUMMARY
The following summary
highlights information contained elsewhere in this prospectus. This summary may not contain all of the information that may be
important to you. You should read this entire prospectus carefully, including the sections entitled “Risk Factors”
and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our historical
financial statements and related notes included elsewhere in this prospectus. In this prospectus, unless the context provides
otherwise, the terms “HealthLynked,” “HLKD,” “HLYK,” “the Company,” “we,”
“us,” and “our” refer to HealthLynked Corp.
Overview
HealthLynked Corp.
is a growth stage company incorporated in the state of Nevada on August 6, 2014. We operate a cloud-based Patient Information
Network (PIN) and record archiving system, referred to as the “HealthLynked Network”, which enables patients and doctors
to keep track of medical information via the Internet in a cloud based system. Through our website, www.HealthLynked.com and our
mobile apps, patients can complete a detailed online personal medical history including past surgical history, medications, allergies,
and family medical history. Once this information is entered, patients and their treating physicians are able to update the information
as needed, to provide a comprehensive and up to date medical history.
We believe that the
HealthLynked Network offers several advantages to patients and physicians not available in the market today. We provide a comprehensive
marketing solution allowing physicians to market to both active and inactive patients, and an easy to use connection at the point
of care through our patient access HUB. Patient members can access medical newsfeeds and groups. Our real-time appointment scheduling
application allows for patients to book appointments online with participating healthcare providers. Our database and record archives
allow for seamless sharing of medical records between healthcare providers and keeps patients in control of shared access. In
the HealthLynked Network, parents can create accounts for their children that are linked to their family account, allowing them
to provide access to healthcare providers, track vaccination records, allow hospitals and schools access to important medical
information in case of emergencies. The HealthLynked Network will be accessible 24 hours a day, 7 days a week, via the internet
and on mobile applications for both Android and iOS devices. We believe this type of accessibility is important for schools and
during office visits, but more important, in times of a medical emergency.
We anticipate that
our system will also provide for 24-hour access to medical specialist healthcare providers who can answer medical questions and
direct appropriate care to paying members. In addition to 24-hour access, patients may also schedule telemedicine consultations
at set times with participating healthcare providers who have expertise in various specialized areas of medicine. Participating
physicians can elect to allow patients to request online appointments either via our real-time app or by setting, in their administrator
dashboard panel, times and days of the week that patients may request appointments. Appointment requests are then sent by our
system to an email address specified by the physician’s office, who are then requested to follow up to confirm these appointment
requests or automatically accept the appointment request.
HealthLynked has created
880,000 physician base profiles for most physicians in the United States. Physicians’ HealthLynked profiles are searchable
on the Internet. Physicians claim their profiles confirming the accuracy of the information free of charge.
There are three type
of providers in the HealthLynked Network: in-network, out of network and participating providers. All physicians can claim their
profile and update basic information online and add videos and images of their profile. Once a provider has claimed their profile
they are considered in-network. Providers that opt pay a monthly fee for access to the full range of HealthLynked Network services,
which include online scheduling, marketing services and analytics about their practice performance.
HealthLynked provider
profiles enable participating providers to market directly to patients through our patient access HUB and online marketing services
to recruit new patients and reengage with former patients. Physician practices generate more income the more patients they treat,
so maximizing efficiency and patient turnover is critical to increasing total revenues and profitability. As such, we believe
that our system will enable physicians to reduce the amount of time required to process patient intake forms, as patients will
no longer be required to spend ten to thirty minutes filling out forms at each visit, and the practices’ staffs will not
need to input this information multiple times into their electronic medical records systems. Patients complete their online profiles
once, and thereafter, they and their physicians are able to update their profiles as needed. Physicians’ participating in
the HealthLynked Network are required to update the patient records within 24 hours of seeing the patient. The information is
organized in an easy to read format in order that a physician be able to review the necessary information quickly during, and
prior to, patient visits, which in turn facilitates a more comprehensive and effective patient encounter.
Patient data is stored
in conformity with the
Health Insurance Portability and Accountability Act
of 1996,
the Health Information
Technology for Economic and Clinical Health Act, and the regulations promulgated under each by the U.S. Department of Health and
Human Services, Office of Civil Rights
(collectively, “HIPAA”). The network utilizes Amazon AWS infrastructure
which uses Amazon “HIPPA” complaint servers along with Amazon RDS with LAMP, HTML5 and several JavaScript frameworks,
including Angular and React. Recommendations for end users are 512 kbps+ internet connection speed and a web browser such as Google
Chrome, Internet Explorer, Mozilla Firefox, Safari or handheld devices such as iOS devices, android phones or tablets. Our developers
utilize third party controls for functionality and user interface where the use of those controls adds value to the system beyond
custom creation of new tools. We intend to adjust forward compatibility for major browser version updates, new browsers, operating
system updates or new operating system as needed. The HealthLynked Network is EMR agnostic, and is compatible with all electronic
medical records systems, allowing for minimal barriers to participation and broader penetration of the market.
Emerging Growth Company Status
We are an “emerging
growth company” as defined in the Jumpstart Our Business Startups Act, or “JOBS Act.” For as long as we are
an emerging growth company, unlike other public companies, we will not be required to:
|
●
|
provide
an auditor’s attestation report on management’s assessment of the effectiveness
of our system of internal control over financial reporting pursuant to Section 404(b)
of the Sarbanes-Oxley Act of 2002;
|
|
●
|
comply with
any new requirements adopted by the Public Company Accounting Oversight Board, or the
PCAOB, requiring mandatory audit firm rotation or a supplement to the auditor’s
report in which the auditor would be required to provide additional information about
the audit and the financial statements of the issuer;
|
|
●
|
comply with
any new audit rules adopted by the PCAOB after April 5, 2012, unless the Securities and
Exchange Commission, or SEC, determines otherwise;
|
|
●
|
provide
certain disclosure regarding executive compensation required of larger public companies;
or
|
|
●
|
obtain shareholder
approval of any golden parachute payments not previously approved.
|
We will cease to be an “emerging
growth company” upon the earliest of:
|
●
|
when we
have $1.0 billion or more in annual revenues;
|
|
●
|
when we
have at least $700 million in market value of our common stock held by non-affiliates;
|
|
●
|
when we
issue more than $1.0 billion of non-convertible debt over a three-year period; or
|
|
●
|
the last
day of the fiscal year following the fifth anniversary of our initial public offering.
|
In addition, Section
107 of the JOBS Act also provides that an emerging growth company can take advantage of the extended transition period provided
in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an emerging
growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies.
We have elected to use the extended transition period for complying with new or revised accounting standards under Section 102(b)(1),
which will allow us to delay the adoption of new or revised accounting standards that have different effective dates for public
and private companies until those standards apply to private companies. As a result of this election, our financial statements
may not be comparable to companies that comply with public company effective dates.
Business Address and Telephone Number
Our address is 1726
Medical Blvd Suite 101, Naples, Florida 34110 and our telephone number is: 800-938-7144.
THE OFFERING
Common stock offered by selling security holder
|
|
21,000,000 shares of our common stock issuable to
Iconic under the Investment Agreement.
|
|
|
|
Offering price
|
|
The prices at which Iconic may sell shares will be determined
by the prevailing market price for the shares or in privately negotiated transactions.
|
|
|
|
Common stock outstanding before the offering
|
|
101,068,541 shares
(1)
|
|
|
|
Common stock outstanding after the offering
|
|
116,709,019 shares
(2)
|
|
|
|
Use of proceeds
|
|
We will not receive any proceeds from the sale of the common
stock by the selling stockholder. However, we expect to receive up to $3,000,000 upon the exercise of the Put Right
granted to us under the Investment Agreement, which we expect we would use primarily for working capital purposes such as
sales, marketing and product development costs related to the commercialization of the HealthLynked Network, to supplement
the operations of NWC, and for overhead costs. 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 and we must meet other requirements as described herein. If we are unable to meet these
requirements, we will not have access to funds under this arrangement. There can be no assurances that we will be able to
meet these requirements.
|
|
|
|
Trading Symbol
|
|
HLYK
|
|
|
|
Risk Factors
|
|
You should carefully consider the information set forth in this
prospectus and, in particular, the specific factors set forth in the “Risk Factors” section of this prospectus
before deciding whether or not to invest in our common stock.
|
(1)
|
Represents the number of shares of our common stock outstanding as of June 13, 2019. Excludes (i) all shares issuable under the Investment Agreement, (ii) 9,479,643 shares of common stock issuable upon conversion of fixed-rate convertible notes held by the Selling Shareholder (the “Convertible Notes”), (iii) 5,896,565 shares of common stock issuable upon conversion of other convertible notes issued by us, (iv) 4,036,750 shares of common stock issuable upon exercise of outstanding options, and (v) 43,658,874 shares of common stock issuable upon exercise of outstanding warrants.
|
|
|
(2)
|
Includes (i) 101,068,541 shares of common stock and (ii) 15,640,478 shares of common stock issuable under the Investment Agreement. Excludes (i) 9,479,643 shares of common stock issuable upon conversion of the Convertible Notes, (ii) 5,896,565 shares of common stock issuable upon conversion of other convertible notes issued by us, (iii) 4,036,750 shares of common stock issuable upon exercise of outstanding options, and (iv) 43,658,874 shares of common stock issuable upon exercise of outstanding warrants.
|
RISK
FACTORS
FINANCIAL
AND GENERAL BUSINESS RISKS
Our
subsidiary the Naples Women’s Center, currently our only source of income, has incurred losses in the past and may not be
able to achieve profitability in the future.
Even
though our NWC subsidiary was established in 1996, it is subject to many of the risks inherent in the practice of medicine. We
cannot give any assurance that NWC’s operations will continue as currently intended and no assurance can be given that we
can continue to receive reimbursement from third party payers. Further, changes in Healthcare regulations in the coming years
may negatively impact our operations. NWC realized segment loss from operations for the years ended December 31, 2017 and 2018
and the three months ended March 31, 2019. During the second half of 2018, we had one physician who did not renew her contract,
one leave due to an unexpected disability, and a third leave due to early retirement. Even with these losses, NWC experienced
7% revenue growth in 2018. By the second quarter of 2019, we expect to have all three physicians replaced and then we plan to
hire approximately two to five additional new physicians over the next two to five years, which will result in increased costs
and expenses, which may result in future operating losses.
We
may never be able to implement our proposed online personal medical information and archiving system and as such, an investment
in us at this stage of our business is extremely risky.
The
HealthLynked Network was launched in 2018 with positive early results. We have over 200 physicians “in network” and
over 475,000 patients. We continually develop additional functionality of the Network. However, we cannot predict the scale of
how many physicians and patients will adopt our technology, or even when they do, the timing of such large scale adoption. Further,
it is possible that other competitors with greater resources could enter the market and make it more difficult for us to attract
or keep customers. Consequently, at this phase of our development, our future is speculative and depends on the proper execution
of our business model, including our deployment of the Patient Access Hub.
No
assurance can be given that we will be able to timely repay the amounts due on convertible notes outstanding.
At
the present time, no assurance can be given that we will earn sufficient revenues or secure the necessary financing, if needed,
to timely pay the amounts owed under convertible notes outstanding. Our convertible notes outstanding issued in 2016 and 2017
with an aggregate face value of $711,000 are secured by substantially all of our assets, including, but not limited to, receivables
of NWC, machinery, equipment, contracts rights, and letters of credits. If we fail to timely repay the amounts owed under the
these convertible notes, which mature on December 31, 2019, a default may allow the lender under the relevant instruments to accelerate
the related debt and to exercise their remedies under these agreements, which will typically include the right to declare the
principal amount of that debt, together with accrued and unpaid interest and other related amounts, immediately due and payable,
to exercise any remedies the lender may have to foreclose on assets that are subject to liens securing that debt. As of December
31, 2018, we had convertible notes payable with an aggregate face value of $1,394,500 with maturities between July 30, 2019 and
December 31, 2019. We expect to repay these obligations from outside funding sources, including but not limited to amounts available
upon the exercise of the Put Right granted to us under the Investment Agreement, sales of our equity, loans from related parties
and others, or to satisfy convertible notes payable through the issuance of shares upon conversion pursuant to the terms of the
respective convertible notes payable. 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 payable before they mature. In order to access cash available under the
Investment Agreement or satisfy the convertible notes payable through the issuance of shares upon conversion, 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. If we are unable to meet these requirements, we will not have access to funds under this arrangement.
We
have substantial future capital needs and our ability to continue as a going concern depends upon our ability to raise additional
capital and achieve profitable operations.
We
currently anticipate that our available cash resources will be sufficient to meet our presently anticipated working capital requirements
through the third quarter of 2019. As of December 31, 2018, we had a working capital deficit of $2,983,926 and accumulated deficit
$10,501,055. For the year ended December 31, 2018, we had a net loss of $5,790,835 and net cash used by operating activities of
$2,356,186. As of March 31, 2019, we had a working capital deficit of $2,778,539 and accumulated deficit $11,561,772. For the
three months ended March 31, 2019, we had a net loss of $1,060,717 and net cash used by operating activities of $600,393. We anticipate
that we will need an additional $3,500,000 in 2019 to properly execute our business and acquisition plan and service debt maturing
in 2019 of which most matures December 31, 2019. We may also need to raise additional funds in order to support more rapid expansion,
develop new or enhanced services and products, make acquisitions, hire employees, respond to competitive pressures, acquire technologies
or respond to unanticipated requirements. Management’s plans include attempting to improve our profitability and our ability
to generate sufficient cash flow from operations to meet our operating 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 increase
our cash balances. 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 the Company on satisfactory terms and conditions, if at all. If adequate funds are not available
on acceptable terms, we may be unable to develop or enhance our services and products, take advantage of future opportunities
or respond to competitive pressures or unanticipated requirements, which could have a material adverse effect on our business,
financial condition and operating results. Further, we may seek to raise additional funds through the issuance of equity securities,
in which case, the percentage ownership of our shareholders will be reduced and holders may experience additional dilution in
net book value per share.
Our
future success depends on our ability to execute our business plan by fully developing our online medical records platform and
recruiting physicians and patients to adopt and use the system. However, there is no guarantee that we will be able to successfully
implement our business plan.
Our
operations to date have been limited to the medical services provided by the NWC. We have not yet demonstrated our ability to
successfully develop or market the online medical records platform we seek to provide through the HealthLynked Network. We have
not entered into any agreements with third party doctors or patients to use our system for their medical records and there is
no assurance that we will be able to enter into such agreements in the future.
We
may not be able to effectively control and manage our growth.
Our
strategy envisions a period of potentially rapid growth in our physician network over the next five years based on aggressively
increasing our marketing efforts. We currently maintain a small in house programming, IT, administrative and sales personnel.
The capacity to service the online medical records platform and our expected growth, including growth via acquisition, may impose
a significant burden on our future planned administrative and operational resources. The growth of our business may require significant
investments of capital and increased demands on our management, workforce and facilities. We will be required to substantially
expand our administrative and operational resources and attract, train, manage and retain qualified employees, management and
other personnel. Failure to do so, or to satisfy such increased demands would interrupt or have a material adverse effect on our
business and results of operations.
The
departure or loss of Dr. Michael Dent could disrupt our business.
During
2018, we depended heavily on the continued efforts of Dr. Michael Dent, Chief Executive Officer and Chairman of the Board, who
provided us with a total of $101,450 and $338,470 in working capital during the year ended December 31, 2018 and 2017, respectively.
Dr. Dent is also essential to our strategic vision and day-to-day operations and would be difficult to replace. While we have
entered into a four-year written employment contract with Dr. Dent effective July 1, 2016, we cannot be certain that Dr. Dent
will continue with us for any particular period of time. The departure or loss of Dr. Dent, or the inability to hire and retain
a qualified replacement, could negatively impact our ability to manage our business.
We
recently eliminated our direct sales force and moved to a telesales model, which may not be successful.
We
eliminated our entire sales force in the fourth quarter of 2018 and adopted a telesales model. Although this change reduced our
annual burn rate by an estimated $650,000 annually, there is no assurance that our more cost-efficient telesales model will be
effective, and this could have a negative effect on the business and its growth.
The
healthcare industry is highly regulated, and government authorities may determine that we have failed to comply with applicable
laws, rules or regulations.
The
healthcare industry, healthcare information technology, the online medical records platform services that we provide and the physicians’
medical practices we engage in through NWC are subject to extensive and complex federal, state and local laws, rules and regulations,
compliance with which imposes substantial costs on us. Of particular importance are the provisions summarized as follows:
|
●
|
federal
laws (including the federal False Claims Act) that prohibit entities and individuals
from knowingly or recklessly making claims to Medicaid, Medicare and other government-funded
programs that contain false or fraudulent information or from improperly retaining known
overpayments;
|
|
●
|
a
provision of the Social Security Act, commonly referred to as the “anti-kickback”
statute, that prohibits the knowing and willful offer, payment, solicitation or receipt
of any bribe, kickback, rebate or other remuneration, in cash or in kind, in return for
the referral or recommendation of patients for items and services covered, in whole or
in part, by federal healthcare programs, such as Medicaid and Medicare;
|
|
●
|
a
provision of the Social Security Act, commonly referred to as the Stark Law, that, subject
to limited exceptions, applies when physicians refer Medicare patients to an entity for
the provision of certain “designated health services” if the physician or
a member of such physician’s immediate family has a direct or indirect financial
relationship (including a compensation arrangement) with the entity;
|
|
●
|
similar
state law provisions pertaining to anti-kickback, fee splitting, self-referral and false
claims issues, which typically are not limited to relationships involving government-funded
programs;
|
|
●
|
provisions
of the federal Health Insurance Portability and Accountability Act of 1996, as amended
(“HIPAA”) that prohibit knowingly and willfully executing a scheme or
artifice to defraud a healthcare benefit program or falsifying, concealing or covering
up a material fact or making any material false, fictitious or fraudulent statement in
connection with the delivery of or payment for healthcare benefits, items or services;
|
|
●
|
state
laws that prohibit general business corporations from practicing medicine, controlling
physicians’ medical decisions or engaging in certain practices, such as splitting
fees with physicians;
|
|
●
|
federal
and state healthcare programs may deny our application to become a participating provider
that could in turn cause us to not be able to treat those patients or prohibit us from
billing for the treatment services provided to such patients;
|
|
●
|
federal
and state laws that prohibit providers from billing and receiving payment from Medicaid
or Medicare for services unless the services are medically necessary, adequately and
accurately documented and billed using codes that accurately reflect the type and level
of services rendered;
|
|
●
|
federal
and state laws pertaining to the provision of services by non-physician practitioners,
such as advanced nurse practitioners, physician assistants and other clinical professionals,
physician supervision of such services and reimbursement requirements that may be dependent
on the manner in which the services are provided and documented; and
|
|
●
|
federal
laws that impose civil administrative sanctions for, among other violations, inappropriate
billing of services to federally funded healthcare programs, inappropriately reducing
hospital care lengths of stay for such patients, or employing individuals who are excluded
from participation in federally funded healthcare programs.
|
In
addition, we believe that our business, including the business conducted through NWC, will continue to be subject to increasing
regulation, the scope and effect of which we cannot predict.
We
may in the future become the subject of regulatory or other investigations or proceedings, and our interpretations of applicable
laws, rules and regulations may be challenged. For example, regulatory authorities or other parties may assert that our arrangements
with the physicians using the HealthLynked Network constitute fee splitting and seek to invalidate these arrangements, which could
have a material adverse effect on our business, financial condition, results of operations, cash flows and the trading price of
our common stock. Regulatory authorities or other parties also could assert that our relationships violate the anti-kickback,
fee splitting or self-referral laws and regulations. Such investigations, proceedings and challenges could result in substantial
defense costs to us and a diversion of management’s time and attention. In addition, violations of these laws are punishable
by monetary fines, civil and criminal penalties, exclusion from participation in government-sponsored healthcare programs, and
forfeiture of amounts collected in violation of such laws and regulations, any of which could have a material adverse effect on
our overall business, financial condition, results of operations, cash flows and the trading price of our common stock.
Federal
and state laws that protect the privacy and security of protected health information may increase our costs and limit our ability
to collect and use that information and subject us to penalties if we are unable to fully comply with such laws.
Numerous
federal and state laws and regulations govern the collection, dissemination, use, security and confidentiality of individually
identifiable health information. These laws include:
|
●
|
Provisions
of HIPAA that limit how healthcare providers may use and disclose individually identifiable
health information, provide certain rights to individuals with respect to that information
and impose certain security requirements;
|
|
●
|
The
Health Information Technology for Economic and Clinical Health Act (“HITECH”),
which strengthens and expands the HIPAA Privacy Standards and Security Standards and
imposes data breach notification obligations;
|
|
●
|
Other
federal and state laws restricting the use and protecting the privacy and security of
protected health information, many of which are not preempted by HIPAA;
|
|
●
|
Federal
and state consumer protection laws; and
|
|
●
|
Federal
and state laws regulating the conduct of research with human subjects.
|
Through
the HealthLynked Network, we collect and maintain protected health information in paper and electronic format. New protected health
information standards, whether implemented pursuant to HIPAA, HITECH, congressional action or otherwise, could have a significant
effect on the manner in which we handle healthcare-related data and communicate with third parties, and compliance with these
standards could impose significant costs on us, or limit our ability to offer certain services, thereby negatively impacting the
business opportunities available to us.
In
addition, if we do not comply with existing or new laws and regulations related to protected health information, we could be subject
to remedies that include monetary fines, civil or administrative penalties, civil damage awards or criminal sanctions.
RISKS
RELATED TO THE HEALTHLYNKED NETWORK
The
market for Internet-based personal medical information and record archiving systems may not develop substantially further or develop
more slowly than we expect, harming the growth of our business.
It
is uncertain whether personal medical information and record archiving systems will achieve and sustain the high levels of demand
and market acceptance we anticipate. Further, even though we expect NWC patients and physicians to use the HealthLynked Network,
our success will depend, to a substantial extent, on the willingness of unaffiliated patients, physicians and hospitals to use
our services. Some patients, physicians and hospitals may be reluctant or unwilling to use our services, because they may have
concerns regarding the risks associated with the security and reliability, among other things, of the technology model associated
with these services. If our target users do not believe our systems are secure and reliable, then the market for these services
may not expand as much or develop as quickly as we expect, either of which would significantly adversely affect our business,
financial condition, or operating results.
If
we do not continue to innovate and provide services that are useful to our target users, we may not remain competitive, and our
revenues and operating results could suffer.
Our
success depends on our ability to keep pace with technological developments, satisfy increasingly sophisticated client requirements,
and obtain market acceptance. Our competitors are constantly developing products and services that may become more efficient or
appealing to our clients and users. As a result, we will be required to invest significant resources in research and development
in order to enhance our existing services and introduce new high-quality services that clients and users will want, while offering
these services at competitive prices.
If
we are unable to predict user preferences or industry changes, or if we are unable to modify our services on a timely or cost-effective
basis, we may lose clients and target users. Our operating results would also suffer if our innovations are not responsive to
the needs of our clients and users, are not appropriately timed with market opportunity, or are not effectively brought to market.
As technology continues to develop, our competitors may be able to offer results that are, or that are perceived to be, substantially
similar to or better than those generated by our services. This may force us to compete on additional service attributes and to
expend significant resources in order to remain competitive.
Failure
to manage our rapid growth effectively could increase our expenses, decrease our revenue, and prevent us from implementing our
business strategy.
To
manage our anticipated future growth effectively, we will need to enhance our information technology infrastructure and financial
and accounting systems and controls, as well as manage expanded operations in geographically distributed locations. We also must
engage and retain a significant number of qualified professional services personnel, software engineers, technical personnel,
and management personnel. Failure to manage our rapid growth effectively could lead us to over-invest or under-invest in technology
and operations; result in weaknesses in our infrastructure, systems, or controls; give rise to operational mistakes, losses, or
loss of productivity or business opportunities; reduce client or user satisfaction; limit our ability to respond to competitive
pressures; and could also result in loss of employees and reduced productivity of remaining employees. Our growth could require
significant capital expenditures and may divert financial resources and management attention from other projects, such as the
development of new or enhanced services. If our management is unable to effectively manage our growth, our expenses may increase
more than expected, our revenue could decline or may grow more slowly than expected, and we may be unable to implement our business
strategy.
We
may be unable to adequately protect, and we may incur significant costs in enforcing, our intellectual property and other proprietary
rights.
Our
success depends in part on our ability to enforce our intellectual property and other proprietary rights. We expect to rely upon
a combination of copyright, trademark, trade secret, and unfair competition laws, as well as license and access agreements and
other contractual provisions, to protect these rights.
Our
attempts to protect our intellectual property through copyright, patent, and trademark registration may be challenged by others
or invalidated through administrative process or litigation. While we have submitted the application for our first provisional
patent for our Patient Access Hub and intend to submit other patent applications covering our integrated technology during 2019,
the scope of issued patents, if any, may be insufficient to prevent competitors from providing products and services similar to
ours, our patents may be successfully challenged, and we may not be able to obtain additional meaningful patent protection in
the future. There can be no assurance that our patent registration efforts will be successful.
Our
expected agreements with clients, users, vendors and strategic partners will limit their use of, and allow us to retain our rights
in, our intellectual property and proprietary information. Further, we anticipate that these agreements will grant us ownership
of intellectual property created in the performance of those agreements to the extent that it relates to the provision of our
services. In addition, we require certain of our employees and consultants to enter into confidentiality, non-competition, and
assignment of inventions agreements. We also require certain of our vendors and strategic partners to agree to contract provisions
regarding confidentiality and non-competition. However, no assurance can be given that these agreements will not be breached,
and we may not have adequate remedies for any such breach. Further, no assurance can be given that these agreements will be effective
in preventing the unauthorized access to, or use of, our proprietary information or the reverse engineering of our technology.
Agreement terms that address non-competition are difficult to enforce in many jurisdictions and may not be enforceable in any
particular case. In any event, these agreements do not prevent our competitors from independently developing technology or authoring
clinical information that is substantially equivalent or superior to our technology or the information we distribute.
To
the extent that our intellectual property and other proprietary rights are not adequately protected, third parties might gain
access to our proprietary information, develop and market products or services similar to ours, or use trademarks similar to ours,
each of which could materially harm our business. Existing U.S. federal and state intellectual property laws offer only limited
protection. In addition, if we resort to legal proceedings to enforce our intellectual property rights or to determine the validity
and scope of the intellectual property or other proprietary rights of others, the proceedings could be burdensome and expensive,
even if we were to prevail. Any litigation that may be necessary in the future could result in substantial costs and diversion
of resources and could have a material adverse effect on our business, operating results, or financial condition.
In
addition, our platforms incorporate “open source” software components that are licensed to us under various public
domain licenses. While we believe that we have complied with our obligations under the various applicable licenses for open source
software that we use, open source license terms are often ambiguous, and there is little or no legal precedent governing the interpretation
of many of the terms of certain of these licenses. Therefore, the potential impact of such terms on our business is somewhat unknown.
For example, some open source licenses require that those using the associated code disclose modifications made to that code and
such modifications be licensed to third parties at no cost. We monitor our use of open source software in an effort to avoid uses
in a manner that would require us to disclose or grant licenses under our proprietary source code. However, there can be no assurance
that such efforts will be successful, and such use could inadvertently occur.
We
may be sued by third parties for alleged infringement of their proprietary rights.
The
software and Internet industries are characterized by the existence of a large number of patents, trademarks, and copyrights and
by frequent litigation based on allegations of infringement or other violations of intellectual property rights. We may receive
in the future communications from third parties claiming that we, our technology, or components thereof, infringe on the intellectual
property rights of others. We may not be able to withstand such third-party claims against our technology, and we could lose the
right to use third-party technologies that are the subject of such claims. Any intellectual property claims, whether with or without
merit, could be time-consuming and expensive to resolve, divert management attention from executing our business plan, and require
us to pay monetary damages or enter into royalty or licensing agreements. Although we intend that many of our third-party service
providers will be obligated to indemnify us if their products infringe the rights of others, such indemnification may not be effective
or adequate to protect us or the indemnifying party may be unable to uphold its contractual obligations.
Moreover,
any settlement or adverse judgment resulting from such a claim could require us to pay substantial amounts of money or obtain
a license to continue to use the technology or information that is the subject of the claim, or otherwise restrict or prohibit
our use of the technology or information. There can be no assurance that we would be able to obtain a license on commercially
reasonable terms, if at all, from third parties asserting an infringement claim; that we would be able to develop alternative
technology on a timely basis, if at all; that we would be able to obtain a license to use a suitable alternative technology or
information to permit us to continue offering, and our clients to continue using, our affected services; or that we would not
need to change our product and design plans, which could require us to redesign affected products or services or delay new offerings.
Accordingly, an adverse determination could prevent us from implementing our strategy or offering our services and products, as
currently contemplated.
We
may not be able to properly safeguard the information on the HealthLynked Network.
Information
security risks have generally increased in recent years because of new technologies and the increased activities of perpetrators
of cyber-attacks resulting in the theft of protected health, business or financial information. A failure in, or a breach of our
information systems as a result of cyber-attacks could disrupt our business, result in the release or misuse of confidential or
proprietary information, damage our reputation, and increase our administrative expenses. Although we plan to have robust information
security procedures and other safeguards in place, as cyber threats continue to evolve, we may be required to expend additional
resources to continue to enhance our information security measures or to investigate and remediate any information security vulnerabilities.
Any of these disruptions or breaches of security could have a material adverse effect on our business, financial condition and
results of operations.
Our
employees may not take all appropriate measures to secure and protect confidential information in their possession.
Each
of our employees is advised that they are responsible for the security of the information in our systems and to ensure that private
information is kept confidential. Should an employee not follow appropriate security measures, including those that have been
put in place to prevent cyber threats or attacks, the improper release of protected health information could result. The release
of such information could have a material adverse effect our reputation and our business, financial condition, results of operations
and cash flows.
RISKS
RELATED TO THE PROVISION OF MEDICAL SERVICES BY NWC
Any
state budgetary constraints could have an adverse effect on our reimbursement from Medicaid programs
.
As
a result of slow economic growth and volatile economic conditions, many states are continuing to collect less revenue than they
did in prior years and as a consequence are facing budget shortfalls and underfunded pension and other obligations. Although the
shortfalls for the more recent budgetary years have declined, they are still significant by historical standards. The financial
condition in Florida or other states in which we may in the future could lead to reduced or delayed funding for Medicaid programs
and, in turn, reduced or delayed reimbursement for physician services, which could adversely affect our results of operations,
cash flows and financial condition.
The
Affordable Care Act may have a significant effect on our business.
The
Affordable Care Act contains a number of provisions that could affect us over the next several years. These provisions include
the establishment of health insurance exchanges to facilitate the purchase of qualified health plans. Other provisions contain
changes to healthcare fraud and abuse laws and expand the scope of the FCA.
The
Affordable Care Act contains numerous other measures that could affect us. For example, payment modifiers are being developed
that will differentiate payments to physicians under federal healthcare programs based on quality and cost of care. In addition,
other provisions authorize voluntary demonstration projects relating to the bundling of payments for episodes of hospital care
and the sharing of cost savings achieved under the Medicare program.
The
Centers for Medicare and Medicaid Services (“CMS”) issued a final rule under the Affordable Care Act that is intended
to allow physicians, hospitals and other health care providers to coordinate care for Medicare beneficiaries through Accountable
Care Organizations (“ACOs”). ACOs are entities consisting of healthcare providers and suppliers organized to deliver
services to Medicare beneficiaries and eligible to receive a share of any cost savings the entity can achieve by delivering services
to those beneficiaries at a cost below a set baseline and based upon established quality of care standards. We will continue to
evaluate the impact of the ACO regulations on our business and operations.
The
Affordable Care Act also allows states to expand their Medicaid programs through an increase in the Medicaid eligibility income
limit from a state’s current eligibility levels to 133% of the federal poverty level. It remains unclear to what extent
states will expand their Medicaid programs by raising the income limit to 133% of the federal poverty level.
The
Affordable Care Act also remains subject to continuing legislative scrutiny, including efforts by Congress to further amend or
repeal a number of its provisions as well as administrative actions delaying the effectiveness of key provisions. As a result,
we cannot predict with any assurance the ultimate effect of the Affordable Care Act on our Company, nor can we provide any assurance
that its provisions will not have a material adverse effect on our business, financial condition, results of operations or cash
flows.
Government-funded
programs or private insurers may limit, reduce or make retroactive adjustments to reimbursement amounts or rates.
A
portion of the net patient service revenue derived from services rendered through NWC is from payments made by Medicare and Medicaid and
other government-sponsored or funded healthcare programs (the “GHC Programs”). These government-funded programs, as
well as private insurers, have taken and may continue to take steps, including a movement toward increased use of managed care
organizations, value-based purchasing, and new patient care models to control the cost, eligibility for, use and delivery of healthcare
services as a result of budgetary constraints and cost containment pressures due to unfavorable economic conditions, rising healthcare
costs and for other reasons. These government-funded programs and private insurers may attempt other measures to control costs,
including bundling of services and denial of, or reduction in, reimbursement for certain services and treatments. As a result,
payments from government programs or private payors may decrease significantly. Also, any adjustment in Medicare reimbursement
rates may have a detrimental impact on our reimbursement rates not only for Medicare patients, but also because Medicaid and other
third-party payors often base their reimbursement rates on a percentage of Medicare rates. Our business may also be materially
affected by limitations on, or reductions in, reimbursement amounts or rates or elimination of coverage for certain individuals
or treatments. Moreover, because government-funded programs generally provide for reimbursements on a fee-schedule basis rather
than on a charge-related basis, we generally cannot increase our revenues from these programs by increasing the amount we charge
for services rendered by NWC’s physicians. To the extent our costs increase, we may not be able to recover our increased
costs from these programs, and cost containment measures and market changes in non-government-funded insurance plans have generally
restricted our ability to recover, or shift to non-governmental payors, these increased costs. In addition, funds we receive from
third-party payors are subject to audit with respect to the proper billing for physician and ancillary services and, accordingly,
our revenue from these programs may be adjusted retroactively. Any retroactive adjustments to our reimbursement amounts could
have a material effect on our financial condition, results of operations, cash flows and the trading price of our common stock.
Government-funded
programs or private insurers may limit, reduce or make retroactive adjustments to reimbursement amounts or rates.
A
portion of the net patient service revenue derived from services rendered through NWC is from payments made by Medicare and Medicaid and
other government-sponsored or funded healthcare programs (the “GHC Programs”). These government-funded programs, as
well as private insurers, have taken and may continue to take steps, including a movement toward increased use of managed care
organizations, value-based purchasing, and new patient care models to control the cost, eligibility for, use and delivery of healthcare
services as a result of budgetary constraints and cost containment pressures due to unfavorable economic conditions, rising healthcare
costs and for other reasons. These government-funded programs and private insurers may attempt other measures to control costs,
including bundling of services and denial of, or reduction in, reimbursement for certain services and treatments. As a result,
payments from government programs or private payors may decrease significantly. Also, any adjustment in Medicare reimbursement
rates may have a detrimental impact on our reimbursement rates not only for Medicare patients, but also because Medicaid and other
third-party payors often base their reimbursement rates on a percentage of Medicare rates. Our business may also be materially
affected by limitations on, or reductions in, reimbursement amounts or rates or elimination of coverage for certain individuals
or treatments. Moreover, because government-funded programs generally provide for reimbursements on a fee-schedule basis rather
than on a charge-related basis, we generally cannot increase our revenues from these programs by increasing the amount we charge
for services rendered by NWC’s physicians. To the extent our costs increase, we may not be able to recover our increased
costs from these programs, and cost containment measures and market changes in non-government-funded insurance plans have generally
restricted our ability to recover, or shift to non-governmental payors, these increased costs. In addition, funds we receive from
third-party payors are subject to audit with respect to the proper billing for physician and ancillary services and, accordingly,
our revenue from these programs may be adjusted retroactively. Any retroactive adjustments to our reimbursement amounts could
have a material effect on our financial condition, results of operations, cash flows and the trading price of our common stock.
We
may become subject to billing investigations by federal and state government authorities.
Federal
and state laws, rules and regulations impose substantial penalties, including criminal and civil fines, exclusion from participation
in government healthcare programs and imprisonment, on entities or individuals (including any individual corporate officers or
physicians deemed responsible) that fraudulently or wrongfully bill government-funded programs or other third-party payors for
healthcare services. CMS issued a final rule requiring states to implement a Medicaid Recovery Audit Contractor (“RAC”)
program effective January 1, 2012. States are required to contract with one or more eligible Medicaid RACs to review Medicaid
claims for any overpayments or underpayments, and to recoup overpayments from providers on behalf of the state. In addition, federal
laws, along with a growing number of state laws, allow a private person to bring a civil action in the name of the government
for false billing violations. We believe that audits, inquiries and investigations from government agencies will occur from time
to time in the ordinary course of NWC’s operations, which could result in substantial defense costs to us and a diversion
of management’s time and attention. We cannot predict whether any future audits, inquiries or investigations, or the public
disclosure of such matters, would have a material adverse effect on our business, financial condition, results of operations,
cash flows and the trading price of our common stock.
We
may not appropriately record or document the services provided by our physicians.
We
must appropriately record and document the services our doctors provide to seek reimbursement for their services from third-party
payors. If our physicians do not appropriately document, or where applicable, code for their services, we could be subjected to
administrative, regulatory, civil, or criminal investigations or sanctions and our business, financial condition, results of operations
and cash flows could be adversely affected.
We
may not be able to successfully recruit and retain qualified physicians, who are key to NWC’s revenues and billing.
During
the second half of 2018, we had one physician who did not renew her contract, one leave due to an unexpected disability, and a
third leave due to early retirement. Although, we expect to have these three physicians replaced by the second quarter of 2019,
this physician turnover negatively impacted our third and fourth quarter 2018 revenues. As part of our business plan, we may acquire
other medical practices as we see fit to further develop, test and deploy the HealthLynked Network into new strategic regional
areas throughout the country. We compete with many types of healthcare providers, including teaching, research and government
institutions, hospitals and health systems and other practice groups, for the services of qualified doctors. We may not be able
to continue to recruit new physicians or renew contracts with existing physicians on acceptable terms. If we do not do so, our
ability to service execute our business plan may be adversely affected.
A
significant number of NWC physicians could leave our practice and we may be unable to enforce the non-competition covenants of
departed employees.
We
have entered into employment agreements with the current NWC physicians. Certain of our employment agreements can be terminated
without cause by any party upon prior written notice. In addition, substantially all of our physicians have agreed not to compete
with us within a specified geographic area for a certain period after termination of employment. The law governing non-compete
agreements and other forms of restrictive covenants varies from state to state. Although we believe that the non-competition and
other restrictive covenants applicable to our affiliated physicians are reasonable in scope and duration and therefore enforceable
under applicable state law, courts and arbitrators in some states are reluctant to strictly enforce non-compete agreements and
restrictive covenants against physicians. Our physicians may leave our practices for a variety of reasons, including providing
services for other types of healthcare providers, such as teaching, research and government institutions, hospitals and health
systems and other practice groups. If a substantial number of our physicians leave our practices or we are unable to enforce the
non-competition covenants in the employment agreements, our business, financial condition, results of operations and cash flows
could be materially, and adversely affected. We cannot predict whether a court or arbitration panel would enforce these covenants
in any particular case.
We
may be subject to medical malpractice and other lawsuits not covered by insurance.
Our
business entails an inherent risk of claims of medical malpractice against our affiliated physicians and us. We may also be subject
to other lawsuits which may involve large claims and significant defense costs. Although we currently maintain liability insurance
coverage intended to cover professional liability and other claims, there can be no assurance that our insurance coverage will
be adequate to cover liabilities arising out of claims asserted against us. Liabilities in excess of our insurance coverage, including
coverage for professional liability and other claims, could have a material adverse effect on our business, financial condition,
results of operations, cash flows and the trading price of our common stock. See “Professional and General Liability Coverage.”
We
may not be able to collect reimbursements for our services from third-party payors in a timely manner.
A
significant portion of our net patient service revenue is derived from reimbursements from various third-party payors, including GHC
Programs, private insurance plans and managed care plans, for services provided by NWC physicians. We are responsible for submitting
reimbursement requests to these payors and collecting the reimbursements, and we assume the financial risks relating to uncollectible
and delayed reimbursements. In the current healthcare environment, payors continue their efforts to control expenditures for healthcare,
including revisions to coverage and reimbursement policies. Due to the nature of our business and our participation in government-funded
and private reimbursement programs, we are involved from time to time in inquiries, reviews, audits and investigations by governmental
agencies and private payors of our business practices, including assessments of our compliance with coding, billing and documentation
requirements. We may be required to repay these agencies or private payors if a finding is made that we were incorrectly reimbursed,
or we may be subjected to pre-payment reviews, which can be time-consuming and result in non-payment or delayed payment for the
services we provide. We may also experience difficulties in collecting reimbursements because third-party payors may seek to reduce
or delay reimbursements to which we are entitled for services that our affiliated physicians have provided. In addition, GHC Programs
may deny our application to become a participating provider that could prevent us from providing services to patients or prohibit
us from billing for such services. If we are not reimbursed fully and in a timely manner for such services or there is a finding
that we were incorrectly reimbursed, our revenue, cash flows and financial condition could be materially, adversely affected.
Certain
federal and state laws may limit our effectiveness at collecting monies owed to us from patients.
We
utilize third parties to collect from patients any co-payments and other payments for services that are provided by NWC physicians.
The federal Fair Debt Collection Practices Act restricts the methods that third-party collection companies may use to contact
and seek payment from consumer debtors regarding past due accounts. State laws vary with respect to debt collection practices,
although most state requirements are similar to those under the Fair Debt Collection Practices Act. The Florida Consumer Collection
Practices Act, is broader than the federal legislation, applying the regulations to “creditors” as well as “collectors,”
whereas the Fair Debt Collection Practices Act is applicable only to collectors. This prohibits creditors who are attempting
to collect their own debts from engaging in behavior prohibited by the Fair Debt Collection Practices Act and Florida
Consumer Collection Practices Act. The Act has very specific guidelines regarding which actions debt collectors and creditors
may engage in to collect unpaid debt. If our collection practices or those of our collection agencies are inconsistent with
these standards, we may be subject to actual damages and penalties. These factors and events could have a material adverse effect
on our business, financial condition and results of operations.
We
may not be able to maintain effective and efficient information systems.
The
profitability of our business, including the services provided by NWC, is dependent on uninterrupted performance of our information
systems. Failure to maintain reliable information systems, disruptions in our existing information systems or the implementation
of new systems could cause disruptions in our business operations, including errors and delays in billings and collections, disputes
with patients and payors, violations of patient privacy and confidentiality requirements and other regulatory requirements, increased
administrative expenses and other adverse consequences.
RISKS
RELATING TO OUR ORGANIZATION
Our
articles of incorporation authorize our board to create a new series of preferred stock without further approval by our stockholders,
which could adversely affect the rights of the holders of our common stock.
Our
board of directors has the authority to fix and determine the relative rights and preferences of preferred stock. Our board of
directors also has the authority to issue preferred stock without further stockholder approval. As a result, our board of directors
could authorize the issuance of a series of preferred stock that would grant to holders the preferred right to our assets upon
liquidation, the right to receive dividend payments before dividends are distributed to the holders of common stock and the right
to the redemption of the shares, together with a premium, prior to the redemption of our common stock. In addition, our board
of directors could authorize the issuance of a series of preferred stock that has greater voting power than our common stock or
that is convertible into our common stock, which could decrease the relative voting power of our common stock or result in dilution
to our existing stockholders.
Stockholders’
ability to influence corporate decisions may be limited because Michael Dent, our Chief Executive Officer and Chairman of the
Board, currently owns a controlling percentage of our common stock.
Currently,
Dr. Dent, our Chief Executive Officer and Chairman of the Board, beneficially owns approximately 53.62% of our outstanding common
stock. As a result of this stock ownership, Dr. Dent can control all matters submitted to our stockholders for approval, including
the election of directors and approval of any merger, consolidation or sale of all or substantially all of our assets. This concentration
of voting power could delay or prevent an acquisition of our company on terms that other stockholders may desire. In addition,
as the interests of Dr. Dent and our minority stockholders may not always be the same, this large concentration of voting power
may lead to stockholder votes that are inconsistent with the best interests of our minority stockholders or the best interest
of the Company as a whole.
Minority
stockholders’ ability to influence corporate decisions may be limited because our Board is made up entirely of non-independent
officers of the Company.
Currently,
Dr. Dent, our Chief Executive Officer and Chairman of the Board, and Mr. George O’Leary, our Chief Financial Officer, comprise
our Board of Directors. This concentration of non-independent power could delay or prevent an acquisition of our company on terms
that stockholders may desire. In addition, as the interests of Dr. Dent, Mr. O’Leary, and our minority stockholders may
not always be aligned, this large concentration of corporate power may lead to Board votes that are inconsistent with the best
interests of our stockholders or the best interest of the Company as a whole.
If
we fail to establish and maintain an effective system of internal control, we may not be able to report our financial results
accurately or to prevent fraud. Any inability to report and file our financial results accurately and timely could harm our reputation
and adversely impact the trading price of our common stock.
Effective
internal control is necessary for us to provide reliable financial reports and prevent fraud. If we cannot provide reliable financial
reports or prevent fraud, we may not be able to manage our business as effectively as we would if an effective control environment
existed, and our business and reputation with investors may be harmed. As a result, our small size and any current internal control
deficiencies may adversely affect our financial condition, results of operation and access to capital. We have not performed an
in-depth analysis to determine if historical un-discovered failures of internal controls exist, and may in the future discover
areas of our internal control that need improvement.
We
are required to comply with the SEC’s rules implementing Section 302 of the Sarbanes-Oxley Act of 2002, which require our
management to certify financial and other information in our quarterly and annual reports and provide an annual management report
on the effectiveness of our internal control over financial reporting. However, we will not be required to make our first assessment
of our internal control over financial reporting until the year following our first annual report required to be filed with the
SEC. To comply with the requirements of being a public company, we will need to implement additional financial and management
controls, reporting systems and procedures and hire accounting, finance and legal staff.
Further,
our independent registered public accounting firm is not yet required to formally attest to the effectiveness of our internal
controls over financial reporting, and will not be required to do so for as long as we are an “emerging growth company”
pursuant to the provisions of the JOBS Act.
Public
company compliance may make it more difficult to attract and retain officers and directors.
The
Sarbanes-Oxley Act and rules subsequently implemented by the SEC have various requirements with regard to the corporate governance
practices of public companies. As a public company, we expect these rules and regulations to increase our compliance costs and
to make certain activities more time consuming and costly. As a public company, we also expect that these rules and regulations
may make it more difficult and expensive for us to obtain director and officer liability insurance in the future and we may be
required to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage.
As a result, it may be more difficult for us to attract and retain qualified persons to serve on our board of directors or as
executive officers.
The
public market for our common stock is limited. Failure to develop or maintain a trading market could negatively affect
its value and make it difficult or impossible for you to sell your shares.
Our
common stock has traded on the OTCQB under the symbol “HLYK” since May 10, 2017. There is a limited public
market for our common stock and a more active public market for our common stock may not develop. Failure to develop
or maintain an active trading market could make it difficult to sell shares or recover any part of an investment in our common
shares. Even if a market for our common stock does develop, the market price of our common stock may be highly volatile. In
addition to the uncertainties relating to future operating performance and the profitability of operations, factors such as variations
in interim financial results or various, as yet unpredictable, factors, many of which are beyond our control, may have a negative
effect on the market price of our common stock.
Our
common stock is subject to the “penny stock” rules of the SEC and the trading market in the securities is limited,
which makes transactions in our common stock cumbersome and may reduce the value of an investment in our common stock.
Rule
15g-9 under the Exchange Act establishes the definition of a “penny stock,” for the purposes relevant to us, as any
equity security that has a market price of less than $5.00 per share or with an exercise price of less than $5.00 per share, subject
to certain exceptions. For any transaction involving a penny stock, unless exempt, the rules require: (a) that a broker
or dealer approve a person’s account for transactions in penny stocks; and (b) the broker or dealer receive from the investor
a written agreement to the transaction, setting forth the identity and quantity of the penny stock to be purchased.
In
order to approve a person’s account for transactions in penny stocks, the broker or dealer must: (a) obtain financial information
and investment experience objectives of the person and (b) make a reasonable determination that the transactions in penny stocks
are suitable for that person and the person has sufficient knowledge and experience in financial matters to be capable of evaluating
the risks of transactions in penny stocks.
The
broker or dealer must also deliver, prior to any transaction in a penny stock, a disclosure schedule prescribed by the SEC relating
to the penny stock market, which, in highlight form: (a) sets forth the basis on which the broker or dealer made the suitability
determination; and (b) confirms that the broker or dealer received a signed, written agreement from the investor prior to the
transaction. Generally, brokers may be less willing to execute transactions in securities subject to the “penny stock”
rules. This may make it more difficult for investors to dispose of our Common Stock and cause a decline in the market value
of our Common Stock.
Disclosure
also has to be made about the risks of investing in penny stocks in both public offerings and in secondary trading and about the
commissions payable to both the broker or dealer and the registered representative, current quotations for the securities and
the rights and remedies available to an investor in cases of fraud in penny stock transactions. Finally, monthly statements
have to be sent disclosing recent price information for the penny stock held in the account and information on the limited market
in penny stocks.
Drawdowns
under the Investment Agreement may cause dilution to existing shareholders.
Iconic
Holdings, LLC (“Iconic”), an investor, has committed to purchase up to $3,000,000 worth of shares of our common stock
pursuant to the terms of an Investment Agreement entered into by and between the Company and Iconic, dated July 11, 2016 (the
“Investment Agreement”). From time to time during the term of the Investment Agreement, and at our sole discretion,
we may present Iconic with a put notice requiring Iconic to purchase shares of our common stock. The purchase price to be paid
by Iconic will 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 adjustments. As a result, our existing shareholders will experience immediate dilution upon
the purchase of any of the shares by Iconic. The issue and sale of the shares under the Investment Agreement may also have an
adverse effect on the market price of the common shares. Iconic may resell some, if not all, of the shares that we issue to it
under the Investment Agreement and such sales could cause the market price of the common stock to decline significantly. To the
extent of any such decline, any subsequent puts would require us to issue and sell a greater number of shares to Iconic in exchange
for each dollar of the put amount. Under these circumstances, the existing shareholders of our company will experience greater
dilution. The effect of this dilution may, in turn, cause the price of our common stock to decrease further, both because of the
downward pressure on the stock price that would be caused by a large number of sales of our shares into the public market by Iconic,
and because our existing stockholders may disagree with a decision to sell shares to Iconic at a time when our stock price is
low, and may in response decide to sell additional shares, further decreasing our stock price. If we draw down amounts under the
Investment Agreement when our share price is decreasing, we will need to issue more shares to raise the same amount of funding.
During the years ended December 31, 2018 and 2017, we issued 2,440,337 and 222,588 shares pursuant to draws under the Investment
Agreement, respectively, for gross proceeds of $440,523 and $27,618, respectively. During the three months ended March 31, 2019,
we issued 2,128,644 common shares pursuant to draws made by us under the Investment Agreement and received an aggregate of $493,226
in net proceeds.
There
is no guarantee that we will be able to fully utilize the Investment Agreement, if at all.
The
purchase price and amount of shares we can sell to Iconic under the Investment Agreement shall depend on our stock price and stock
volume, and we cannot guarantee that our stock price and trading volume will be adequate to allow us to raise sufficient funds
under the agreement. The purchase price for shares sold to Iconic 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,
subject to certain discounts and adjustments. The maximum Put Amount that the Company shall be entitled to put to Iconic per any
applicable put notice is an amount of shares of common stock up to or equal to 100% of the average of the daily trading volume
for the ten consecutive trading days immediately prior to the applicable put notice date, so long as such amount is at least $5,000
and does not exceed $150,000, as calculated by multiplying the Put Amount by the average daily weighted average price of our common
stock for the ten consecutive trading days immediately prior to the applicable put notice date. 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. We must also have complied with our obligations and otherwise
not be in material breach or default of the Convertible Notes and warrants issued to Iconic. If we are unable to meet these requirements,
we will not have access to funds under this arrangement. There can be no assurances that we will be able to meet these requirements.
Certain
restrictions on the extent of puts and the delivery of advance notices may have little, if any, effect on the adverse impact of
our issuance of shares in connection with the Investment Agreement and as such, Iconic may sell a large number of shares, resulting
in substantial dilution to the value of shares held by existing stockholders.
Iconic
has agreed, subject to certain exceptions listed in the investment agreement with Iconic, to refrain from holding an amount of
shares which would result in Iconic or its affiliates owning more than 9.99% of the then-outstanding shares of our common stock
at any one time. These restrictions, however, do not prevent Iconic from selling shares of our common stock received in connection
with a put, and then receiving additional shares of our common stock in connection with a subsequent put. In this way, Iconic
could sell more than 9.99% of the outstanding common stock in a relatively short time frame while never holding more than 9.99%
at one time.
We
may not be able to refinance, extend or repay our substantial indebtedness, which would have a material adverse effect on our
financial condition and ability to continue as a going concern.
We
anticipate that we will need to raise a significant amount of debt or equity capital in the near future in order to repay our
outstanding debt obligations when they mature. As of March 31, 2019 and December 31, 2018, we had convertible notes payable with
aggregate face value of $1,379,000 and $1,394,500, respectively, with maturities between July 30, 2019 and December 31, 2019.
If we are unable to raise sufficient capital to repay these obligations at maturity and we are otherwise unable to extend the
maturity dates or refinance these obligations, we would be in default. We cannot provide any assurances that we will be able to
raise the necessary amount of capital to repay these obligations or that we will be able to extend the maturity dates or otherwise
refinance these obligations. Upon a default, the holder of certain convertible notes payable with aggregate face value of $711,000
would have the right to exercise its rights and remedies to collect, which would include foreclosing on our assets. Accordingly,
a default would have a material adverse effect on our business and, if our senior secured lender exercises its rights and remedies,
we would likely be forced to seek bankruptcy protection.
As
an “emerging growth company” under applicable law, we will be subject to lessened disclosure requirements, which could
leave our shareholders without information or rights available to shareholders of more mature companies.
For
as long as we remain an “emerging growth company” as defined in the JOBS Act, we have elected to take advantage of
certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging
growth companies” including, but not limited to:
|
●
|
not
being required to comply with the auditor attestation requirements of Section 404 of
the Sarbanes-Oxley Act;
|
|
●
|
being
permitted to provide only two years of audited financial statements with correspondingly
reduced “Management’s Discussion and Analysis of Financial Condition and
Results of Operations” disclosure;
|
|
●
|
taking
advantage of an extension of time to comply with new or revised financial accounting
standards;
|
|
●
|
reduced
disclosure obligations regarding executive compensation in our periodic reports, proxy
statements and registration statements; and
|
|
●
|
exemptions
from the requirements of holding a nonbinding advisory vote on executive compensation
and shareholder approval of any golden parachute payments not previously approved.
|
We
expect to take advantage of these reporting exemptions until we are no longer an “emerging growth company.” Because
of these lessened regulatory requirements, our shareholders would be left without information or rights available to shareholders
of more mature companies. We cannot predict whether investors will find our common stock less attractive if we rely on these exemptions.
If some investors find our common stock less attractive as a result, there may be a less active trading market for our common
stock and our stock price may be more volatile.
We
are also a “smaller reporting company” as defined in Rule 12b-2 of the Exchange Act and have elected to follow certain
scaled disclosure requirements available to smaller reporting companies.
Because
we have elected to use the extended transition period for complying with new or revised accounting standards for an “emerging
growth company” our financial statements may not be comparable to companies that comply with public company effective dates.
We
have elected to use the extended transition period for complying with new or revised accounting standards under Section 102(b)(1)
of the JOBS Act. This election allows us to delay the adoption of new or revised accounting standards that have different effective
dates for public and private companies until those standards apply to private companies. While we are not currently delaying the
implementation of any relevant accounting standards, in the future we may avail ourselves of this right, and as a result of this
election, our financial statements may not be comparable to companies that comply with public company effective dates. Because
our financial statements may not be comparable to companies that comply with public company effective dates, investors may have
difficulty evaluating or comparing our business, performance or prospects in comparison to other public companies, which may have
a negative impact on the value and liquidity of our common stock.
Our
stockholders are subject to significant dilution upon the occurrence of certain events which could result in a decrease in our
stock price.
As
of June 13, 2019, we had approximately 63,071,832 shares of our common stock reserved or designated for future issuance upon the
exercise of outstanding options and warrants, and conversion of outstanding convertible debt. Future sales of substantial amounts
of our common stock into the public and the issuance of the shares reserved for future issuance, in payment of our debt, and/or
upon exercise of outstanding options and warrants, will be dilutive to our existing stockholders and could result in a decrease
in our stock price.
SPECIAL
NOTE REGARDING FORWARD LOOKING STATEMENTS
This
prospectus may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended,
and Section 21E of the Securities Exchange Act of 1934, as amended, about the Company and its subsidiaries. These forward-looking
statements are intended to be covered by the safe harbor for forward-looking statements provided by the Private Securities Litigation
Reform Act of 1995. Forward-looking statements are not statements of historical fact, and can be identified by the use of forward-looking
terminology such as “believes,” “expects,” “may,” “will,” “could,”
“should,” “projects,” “plans,” “goal,” “targets,” “potential,”
“estimates,” “pro forma,” “seeks,” “intends,” or “anticipates” or
the negative thereof or comparable terminology. Forward-looking statements include discussions of strategy, financial projections,
guidance and estimates (including their underlying assumptions), statements regarding plans, objectives, expectations or consequences
of various transactions, and statements about the future performance, operations, products and services of the Company and its
subsidiaries. We caution our shareholders and other readers not to place undue reliance on such statements.
You
should read this prospectus completely and with the understanding that our actual future results may be materially different from
what we currently expect. Our business and operations are and will be subject to a variety of risks, uncertainties and other factors.
Consequently, actual results and experience may materially differ from those contained in any forward-looking statements. Such
risks, uncertainties and other factors that could cause actual results and experience to differ from those projected include,
but are not limited to, the risk factors set forth herein under the title “Risk Factors.”
You
should assume that the information appearing in this prospectus and any document incorporated herein by reference is accurate
as of its date only. Because the risk factors referred to above could cause actual results or outcomes to differ materially from
those expressed in any forward-looking statements made by us or on our behalf, you should not place undue reliance on any forward-looking
statements. Further, any forward-looking statement speaks only as of the date on which the statement is made. New factors emerge
from time to time, and it is not possible for us to predict which factors will arise. In addition, we cannot assess the impact
of each factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ
materially from those contained in any forward-looking statements. All written or oral forward-looking statements attributable
to us or any person acting on our behalf made after the date of this prospectus are expressly qualified in their entirety by the
risk factors and cautionary statements contained in this prospectus. Unless legally required, we do not undertake any obligation
to release publicly any revisions to such forward-looking statements to reflect events or circumstances after the date of this
prospectus or to reflect the occurrence of unanticipated events.
USE
OF PROCEEDS
The
selling stockholder will receive all of the proceeds from the sale of 21,000,000 shares offered by it under this prospectus.
We
expect to receive up to $3,000,000 upon the exercise of the Put Right granted to us under the Investment Agreement, which we expect
we would use primarily for working capital purposes such as sales, marketing and product development costs related to the commercialization
of the HealthLynked Network, to supplement the operations of NWC, and for overhead costs. 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, and we have complied with certain obligations under the Investment
Agreement. If we are unable to meet these requirements, we will not have access to funds under this arrangement. There can be
no assurances that we will be able to meet these requirements. The purchase price and amount of shares we can sell to Iconic under
the Investment Agreement shall depend on our stock price and stock volume, and we cannot guarantee that our stock price and trading
volume will be adequate to allow us to raise sufficient funds under the agreement.
MARKET
FOR OUR COMMON STOCK AND RELATED STOCKHOLDER MATTERS
Since
May 10, 2017, our common stock has been eligible for quotation and trades on the OTCQB under the symbol “HLYK.”
The last sale price of our common stock on June 13, 2019 was $0.2499. There are 119 shareholders of record of our common stock
as of June 13, 2019.
DIVIDEND
POLICY
We
have not declared nor paid any cash dividend on our common stock, and we currently intend to retain future earnings, if any, to
finance the expansion of our business, and we do not expect to pay any cash dividends in the foreseeable future. The decision
whether to pay cash dividends on our common stock will be made by our board of directors, in their discretion, and will depend
on our financial condition, results of operations, capital requirements and other factors that our board of directors considers
significant.
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Forward-Looking
Statements
All
statements contained in this prospectus, other than statements of historical facts, that address future activities, events or
developments, are forward-looking statements, including, but not limited to, statements containing the word “believe,”
“anticipate,” “expect” and word of similar import. These statements are based on certain assumptions and
analyses made by us in light of our experience and our assessment of historical trends, current conditions and expected future
developments as well as other factors we believe are appropriate under the circumstances. Although the Company believes that the
expectations reflected in such forward-looking statements are reasonable, forward-looking statements are subject to risks and
uncertainties that could cause actual results to differ from those projected. The Company cautions investors that any forward-looking
statements made by the Company are not guarantees of future performance and that actual results may differ materially from those
in the forward-looking statements. Such risks and uncertainties include, without limitation: established competitors who have
substantially greater financial resources and operating histories, regulatory delays or denials, ability to compete as a start-up
company in a highly competitive market, and access to sources of capital.
The
following discussion and analysis should be read in conjunction with our financial statements and notes thereto included elsewhere
in this prospectus. 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 our 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 consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles
in the United States, or GAAP. The preparation of these 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 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.
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.
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.
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.
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.
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 adopted this standard on January 1, 2018 and such adoption did 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 consolidated financial statements.
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 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 consolidated
financial statements.
RESULTS
OF OPERATIONS: YEARS ENDED DECEMBER 31, 2018 AND 2017
The
following table summarizes the changes in our results of operations for the year ended December 31, 2018 compared with the year
ended December 31, 2017:
|
|
Years Ended December 31,
|
|
|
Change
|
|
|
|
2018
|
|
|
2017
|
|
|
Increase (Decrease)
in
$
|
|
|
Increase (Decrease)
in
%
|
|
Patient service revenue, net
|
|
$
|
2,259,002
|
|
|
$
|
2,103,579
|
|
|
$
|
155,423
|
|
|
|
7
|
%
|
Salaries and benefits
|
|
|
2,366,582
|
|
|
|
2,022,445
|
|
|
|
344,137
|
|
|
|
17
|
%
|
General and administrative
|
|
|
2,840,784
|
|
|
|
1,848,866
|
|
|
|
991,918
|
|
|
|
54
|
%
|
Depreciation and amortization
|
|
|
23,782
|
|
|
|
23,606
|
|
|
|
176
|
|
|
|
1
|
%
|
Loss from operations
|
|
|
(2,972,146
|
)
|
|
|
(1,791,338
|
)
|
|
|
1,180,808
|
|
|
|
66
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss on extinguishment of debt
|
|
|
(393,123
|
)
|
|
|
(290,581
|
)
|
|
|
102,542
|
|
|
|
35
|
%
|
Change in fair value of debt
|
|
|
(140,789
|
)
|
|
|
---
|
|
|
|
140,789
|
|
|
|
100
|
%
|
Financing cost
|
|
|
(1,221,911
|
)
|
|
|
(72,956
|
)
|
|
|
1,148,955
|
|
|
|
1575
|
%
|
Amortization of original issue and debt discounts on
notes payable and convertible notes
|
|
|
(763,616
|
)
|
|
|
(330,435
|
)
|
|
|
433,181
|
|
|
|
131
|
%
|
Change in fair value of derivative financial instruments
|
|
|
(106,141
|
)
|
|
|
3,967
|
|
|
|
110,108
|
|
|
|
2776
|
%
|
Interest expense
|
|
|
(193,109
|
)
|
|
|
(99,668
|
)
|
|
|
93,441
|
|
|
|
94
|
%
|
Total other expenses
|
|
|
(2,818,689
|
)
|
|
|
(789,673
|
)
|
|
|
2,029,016
|
|
|
|
257
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(5,790,835
|
)
|
|
$
|
(2,581,011
|
)
|
|
$
|
3,209,824
|
|
|
|
124
|
%
|
Patient
service revenue increased by $155,423, or 7%, from 2017 to 2018, primarily as a result of a 7% increase in gross billing from
existing physicians.
Salaries
and benefits increased by $344,137, or 17%, in 2018 primarily as a result of increased salary expense associated with medical
practice production pay, HLYK’s overhead and hiring of the HLYK sales team that was in place for most of 2018.
General
and administrative costs increased by $991,918, or 54%, in 2018 primarily due to higher stock- and cash-based consulting 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 $176, or 1%, in 2018 primarily as a result of new property and equipment acquisitions in 2017.
Loss
from operations increased by $1,180,808, or 66%, in 2018 primarily as a result of increased HLYK headcount, higher stock- and
cash-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 $335,951 related to the extension of convertible notes,
offset by gains of $291,766 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 $140,789 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, as well as from the issuance of 16 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 $433,181, or 131%, 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 $110,108, or 2,776%, 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 $93,441, or 94%, 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 $2,029,016, or 257%, in 2018 primarily as a result of financing costs related to the July 2018 Private
Placement and convertible notes issued in 2018, higher amortization of discounts on outstanding convertible promissory notes in
2018, a loss on the change in fair value of debt in 2018, and a loss on the change in fair value of derivative financial instruments
in 2018 compared to a small gain in 2017.
Net
loss increased by $3,209,824, or 124%, in 2018 primarily as a result of financing costs, amortization of debt discounts and changes
in fair value of debt and 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 155,423, or 7%.
RESULTS
OF OPERATIONS: THREE MONTHS ENDED MARCH 31, 2019 AND 2018
The
following table summarizes the changes in our results of operations for the three months ended March 31, 2019 compared with the
three months ended March 31, 2018:
|
|
Three Months Ended March 31,
|
|
|
Change
|
|
|
|
2019
|
|
|
2018
|
|
|
Increase (Decrease)
in $
|
|
|
Increase (Decrease)
in %
|
|
Patient service revenue, net
|
|
$
|
464,990
|
|
|
$
|
645,639
|
|
|
$
|
(180,649
|
)
|
|
|
-28
|
%
|
Salaries and benefits
|
|
|
529,225
|
|
|
|
560,856
|
|
|
|
(31,631
|
)
|
|
|
-6
|
%
|
General and administrative
|
|
|
757,356
|
|
|
|
574,828
|
|
|
|
182,528
|
|
|
|
32
|
%
|
Depreciation and amortization
|
|
|
1,655
|
|
|
|
6,029
|
|
|
|
(4,374
|
)
|
|
|
-73
|
%
|
Loss from operations
|
|
|
(823,246
|
)
|
|
|
(496,074
|
)
|
|
|
327,172
|
|
|
|
66
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss on extinguishment of debt
|
|
|
(139,798
|
)
|
|
|
(325,223
|
)
|
|
|
(185,425
|
)
|
|
|
-57
|
%
|
Change in fair value of debt
|
|
|
(29,697
|
)
|
|
|
(57,946
|
)
|
|
|
(28,249
|
)
|
|
|
-49
|
%
|
Financing cost
|
|
|
(33,903
|
)
|
|
|
(192,062
|
)
|
|
|
(158,159
|
)
|
|
|
-82
|
%
|
Amortization of original issue and debt discounts on notes
payable and convertible notes
|
|
|
(179,384
|
)
|
|
|
(154,835
|
)
|
|
|
24,549
|
|
|
|
16
|
%
|
Change in fair value of derivative financial instruments
|
|
|
191,633
|
|
|
|
(14,621
|
)
|
|
|
(206,254
|
)
|
|
|
-1411
|
%
|
Interest expense
|
|
|
(46,322
|
)
|
|
|
(40,347
|
)
|
|
|
5,975
|
|
|
|
15
|
%
|
Total other expenses
|
|
|
(237,471
|
)
|
|
|
(785,034
|
)
|
|
|
(547,563
|
)
|
|
|
-70
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(1,060,717
|
)
|
|
$
|
(1,281,108
|
)
|
|
$
|
(220,391
|
)
|
|
|
-17
|
%
|
Patient
service revenue decreased by $180,649, or 28%, from three months ended March 31, 2019 to 2018, primarily as a result of a 30%
decrease in gross billing due to physician turnover, disability and retirement.
Salaries
and benefits decreased by $31,631, or 6%, in 2019 primarily as a result of decreased salary expense associated with NWC production
pay and a shift from a direct sales to an indirect sale approach for HLYK.
General
and administrative costs increased by $182,528, or 32%, in 2019 primarily due to higher stock-based consulting fees and professional
costs in 2019, as well as higher legal, professional and accounting costs related to the acquisition of HCFM.
Depreciation
and amortization decreased by $4,374, or 73%, in 2019 primarily as a result of the adoption of ASU 2016-02 in the three months
ended March 31, 2019, which resulted in charges associated with a capital lease that were previously recorded as depreciation
being charged to general and administrative expense.
Loss
from operations increased by $327,172, or 66%, in 2019 primarily as a result of decreased revenue compared to the same period
of 2018, increased stock-based consulting fees and professional costs in 2019 and higher legal, professional and accounting costs
related to the acquisition of HCFM.
Loss
on extinguishment of debt decreased by $185,425, or 77%, in 2019. Loss on extinguishment of debt in 2019 arose from conversion
of a convertible note. Loss on extinguishment of debt in 2018 arose from the cash repayment of five convertible notes.
Change
in fair value of debt decreased by $28,249, or 49%, and results from certain convertible notes and notes payable to Dr. Michael
Dent that were extended in previous periods and treated as an extinguishment and reissuance for accounting purposes, requiring
these notes to be subsequently 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 decreased by $158,159, or 82% in 2019. Financing cost arises from the issuance of 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. During
2019, we entered into two such notes with aggregate face value of $156,000, as compared to 2018 when we entered into four such
notes with aggregate face value of $358,500.
Amortization
of original issue and debt discounts increased by $24,549, or 16%, in 2019 as a result of the amortization of convertible notes
with larger average discount balances being amortized in 2019.
Change
in fair value of derivative financial instruments decreased by $206,254, or 1,411% as a result of gains in fair value of derivative
financial instruments embedded in convertible promissory notes in 2019.
Interest
expense increased by $5,975, or 15%, in 2019 as a result of higher average balance on convertible notes and notes payable to Dr.
Dent during 2019.
Total
other expenses decreased by $547,563, or 70%, in 2019 primarily as a result of gains from changes in the fair values of derivative
financial instruments, fewer extinguished convertible notes compared to 2018 that gave rise to debt extinguishment losses, and
decreased financing costs associated with lower inception value of convertible notes in 2019.
Net
loss decreased by $220,391, or 17%, in 2019 primarily as a result of gains from changes in the fair values of derivative financial
instruments, fewer extinguished convertible notes compared to 2018 that gave rise to debt extinguishment losses, and decreased
financing costs associated with lower inception value of convertible notes in 2019, offset by higher general and administrative
costs and lower revenue.
Liquidity
and Capital Resources
Going
Concern
As
of March 31, 2019, we had a working capital deficit of $2,778,539 and accumulated deficit $11,561,772. For the three months ended
March 31, 2019, we had a net loss of $1,060,717 and net cash used by operating activities of $600,393. Net cash used in investing
activities was $4,302. Net cash provided by financing activities was $983,226, resulting principally from $833,226 proceeds from
the sale of common stock and $150,000 net proceeds from the issuance of convertible notes.
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 three months ended March 31, 2019, we received $493,226 from the proceeds of the sale of 2,128,644 shares pursuant to the
Investment Agreement.
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 $1,379,000 as of March 31, 2019, 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
March 31, 2019, we have funded our operations principally through a combination of convertible promissory notes, private placements
of our common stock, promissory notes and related party debt, 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 three months ended March 31, 2019 and years ended December 31, 2018 and 2017, we received
proceeds from the sale of shares pursuant to the Investment Agreement totaling $493,226 (2,128,644 shares), $440,523 (2,440,337
shares) and $27,640 (222,588 shares), respectively.
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
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 sales,
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.
During
the three months ended March 31, 2019, we sold 1,133,334 shares of common stock in two separate private placement transactions
and received $340,000 in proceeds from the sales. The shares were issued at a share price of $0.30 per share.
Convertible
Notes Payable
As
of March 31, 2019, we had outstanding convertible notes payable with aggregate face value of $1,379,000 maturing between July
and December 2019, as follows:
|
|
|
|
|
|
|
|
Conversion
|
|
|
|
|
|
|
|
|
|
Interest
|
|
|
Price/
|
|
|
|
|
|
|
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
|
|
$103k
Note I - October 2018
|
|
|
103,000
|
|
|
|
10
|
%
|
|
|
39
|
%
|
|
July
30, 2019
|
|
$103k
Note II - November 2018
|
|
|
103,000
|
|
|
|
10
|
%
|
|
|
39
|
%
|
|
August
30, 2019
|
|
$153k
Note - November 2018
|
|
|
153,000
|
|
|
|
10
|
%
|
|
|
25
|
%
|
|
August
19, 2019
|
|
$103k
Note III - December 2018
|
|
|
103,000
|
|
|
|
10
|
%
|
|
|
39
|
%
|
|
December
3, 2019
|
|
$78k
Note I - January 2019
|
|
|
78,000
|
|
|
|
10
|
%
|
|
|
25
|
%
|
|
October
14, 2019
|
|
$78k
Note II - January 2019
|
|
|
78,000
|
|
|
|
10
|
%
|
|
|
39
|
%
|
|
November
15, 2019
|
|
|
|
$
|
1,500,500
|
|
|
|
|
|
|
|
|
|
|
|
|
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. On April 12, 2019, the Company completed its first acquisition of Hughes Center for Functional Medicine, P.A. (“HCFM”)
for (i) $500,000 in cash, (ii) 3,968,254 shares of the Corporation’s common stock, and (iii) “earn-out” payments
in the aggregate amount of $500,000 to be paid over three (3) years, subject to certain revenue and profit targets. HCFM is a
functional medicine practice focusing on neurodegenerative diseases such as Alzheimer’s, Parkinson’s and Multiple
Sclerosis along with other treatments aimed at improving health and slowing aging, including hormones, thyroid, weight loss, wellness
and prevention.
We
anticipate that approximately 50% of the proceeds from the July 2018 Private Placement 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 $711,000 have
been extended until December 31, 2019.
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 and new convertible notes payable.
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 March 31, 2019, our daily trading volume averaged approximately 115,000 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
|
|
Three Months Ended March 31,
|
|
|
|
2019
|
|
|
2018
|
|
Net cash (used in) provided by:
|
|
|
|
|
|
|
Operating activities
|
|
$
|
(600,393
|
)
|
|
$
|
(424,154
|
)
|
Investing Activities
|
|
|
(4,302
|
)
|
|
|
(201
|
)
|
Financing activities
|
|
|
983,226
|
|
|
|
403,659
|
|
Net increase (decrease) in cash
|
|
$
|
378,531
|
|
|
$
|
(20,696
|
)
|
Operating
Activities
– During the three months ended March 31, 2019, we used cash from operating activities of $600,393,
as compared with $424,154 in the same period of 2018. The increased cash usage results from an increase in professional and other
overhead costs associated with preparing for product launch and operating as a public company in 2019.
Investing
Activities
– Our business is not capital intensive, and as such cash flows from investing activities are minimal
in each period. Capital expenditures of $4,302 in the three months ended March 31, 2019 and $201 in the three months ended March
31, 2018 are comprised of computer equipment and furniture.
Financing
Activities
– During the three months ended March 31, 2019, we realized $833,226 from the proceeds of the sale of
shares of common stock to investors and pursuant to the Investment Agreement and $150,000 net proceeds from the issuance of convertible
notes.
Exercise
of Warrants and Options
There
were no proceeds generated from the exercise of warrants or options during the three months ended March 31, 2019.
Other
Outstanding Obligations
Warrants
As
of March 31, 2019, 45,058,874 shares of our Common Stock were issuable pursuant to the exercise of warrants with exercise prices
ranging from $0.0001 to $1.00.
Options
As
of March 31, 2019, 3,549,250 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
|
|
Operating
|
|
|
Capital
|
|
|
Total
|
|
|
|
Leases
|
|
|
Leases
|
|
|
Commitments
|
|
2019 (April through December)
|
|
$
|
206,098
|
|
|
$
|
13,761
|
|
|
$
|
219,859
|
|
2020
|
|
|
162,055
|
|
|
|
4,587
|
|
|
|
166,642
|
|
2021
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
2022
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
2023
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
Total lease payments
|
|
|
368,153
|
|
|
|
18,348
|
|
|
|
386,501
|
|
Less interest
|
|
|
(28,957
|
)
|
|
|
(1,027
|
)
|
|
|
(29,984
|
)
|
Present value of lease liabilities
|
|
$
|
339,196
|
|
|
$
|
17,321
|
|
|
$
|
356,517
|
|
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 leases on
a month-to-month basis approximately 2,500 square feet of office space in Naples, FL. Monthly rent is approximately $3,300.
Financing
lease commitments are comprised of a capital equipment finance lease for Ultrasound equipment with Everbank. There was no interest
on this lease. The monthly payment is $1,529 for 60 months ending in March 2020.
BUSINESS
Overview
HealthLynked
Corp. is a growth stage company incorporated in the state of Nevada on August 6, 2014. We operate a cloud-based Patient Information
Network (PIN) and record archiving system, referred to as the “HealthLynked Network,” which enables patients and doctors
to keep track of medical information via the Internet in a cloud based system. Through our website, www.HealthLynked.com and our
mobile apps, patients can complete a detailed online personal medical history including past surgical history, medications, allergies,
and family medical history. Once this information is entered, patients and their treating physicians are able to update the information
as needed, to provide a comprehensive and up to date medical history.
We
believe that the HealthLynked Network offers several advantages to patients and physicians not available in the market today.
We provide a comprehensive marketing solution allowing physicians to market to both active and inactive patients, and an easy
to use connection at the point of care through our patient access HUB. Patient members can access medical newsfeeds and groups.
Our real-time appointment scheduling application allows for patients to book appointments online with participating healthcare
providers. Our database and record archives allow for seamless sharing of medical records between healthcare providers and keeps
patients in control of shared access. In the HealthLynked Network, parents can create accounts for their children that are linked
to their family account, allowing them to provide access to healthcare providers, track vaccination records, allow hospitals and
schools access to important medical information in case of emergencies. The HealthLynked Network will be accessible 24 hours a
day, 7 days a week, via the internet and on mobile applications for both Android and iOS devices. We believe this type of accessibility
is important for schools and during office visits, but more important, in times of a medical emergency.
We
anticipate that our system will also provide for 24-hour access to medical specialist healthcare providers who can answer medical
questions and direct appropriate care to paying members. In addition to 24-hour access, patients may also schedule telemedicine
consultations at set times with participating healthcare providers who have expertise in various specialized areas of medicine.
Participating physicians can elect to allow patients to request online appointments either via our real-time app or by setting,
in their administrator dashboard panel, times and days of the week that patients may request appointments. Appointment requests
are then sent by our system to an email address specified by the physician’s office, who are then requested to follow up
to confirm these appointment requests or automatically accept the appointment request.
HealthLynked
has created 880,000 physician base profiles for most physicians in the United States. Physicians’ HealthLynked profiles
are searchable on the Internet. Physicians claim their profiles confirming the accuracy of the information free of charge.
There
are three type of providers in the HealthLynked Network: in-network, out of network and participating providers. All physicians
can claim their profile and update basic information online and add videos and images of their profile. Once a provider has claimed
their profile they are considered in-network. Providers that opt pay a monthly fee for access to the full range of HealthLynked
Network services, which include online scheduling, marketing services and analytics about their practice performance.
HealthLynked
provider profiles enable participating providers to market directly to patients through our patient access HUB and online marketing
services to recruit new patients and reengage with former patients. Physician practices generate more income the more patients
they treat, so maximizing efficiency and patient turnover is critical to increasing total revenues and profitability. As such,
we believe that our system will enable physicians to reduce the amount of time required to process patient intake forms, as patients
will no longer be required to spend ten to thirty minutes filling out forms at each visit, and the practices’ staffs will
not need to input this information multiple times into their electronic medical records systems. Patients complete their online
profiles once, and thereafter, they and their physicians are able to update their profiles as needed. Physicians’ participating
in the HealthLynked Network are required to update the patient records within 24 hours of seeing the patient. The information
is organized in an easy to read format in order that a physician be able to review the necessary information quickly during, and
prior to, patient visits, which in turn facilitates a more comprehensive and effective patient encounter.
Patient
data is stored in conformity with the
Health Insurance Portability and Accountability Act
of 1996,
the
Health Information Technology for Economic and Clinical Health Act, and the regulations promulgated under each by the U.S. Department
of Health and Human Services, Office of Civil Rights
(collectively, “HIPAA”). The network utilizes Amazon
AWS infrastructure which uses Amazon “HIPPA” complaint servers along with Amazon RDS with LAMP, HTML5 and several
JavaScript frameworks, including Angular and React. Recommendations for end users are 512 kbps+ internet connection speed and
a web browser such as Google Chrome, Internet Explorer, Mozilla Firefox, Safari or handheld devices such as iOS devices, android
phones or tablets. Our developers utilize third party controls for functionality and user interface where the use of those controls
adds value to the system beyond custom creation of new tools. We intend to adjust forward compatibility for major browser version
updates, new browsers, operating system updates or new operating system as needed. The HealthLynked Network is EMR agnostic, and
is compatible with all electronic medical records systems, allowing for minimal barriers to participation and broader penetration
of the market.
Acquisition
of NWC
In
August 2014, we acquired the NWC, an OB/GYN practice in Naples, Florida that was established in 1996.
This
acquisition provided a foundation for ongoing development of the HealthLynked Network by allowing us to register NWC’s approximately
6,000 active patients and 6,500 inactive patients and to utilize the expertise of our employed physicians to help in the design
and strategy for deployment of the HealthLynked Network. It is anticipated that future medical practices may be acquired from
time to time as we see fit to further develop, test and deploy the HealthLynked Network into new strategic regional areas throughout
the country.
Through
NWC, we also provide Obstetrical and Gynecological medical services to patients in the South West Florida region. NWC currently
employs four OB/GYN physicians and two ARNP nurse practitioners. The services offered include obstetrical services for high and
low risk patients, in office ultrasonography, and prenatal testing. Gynecological services include general physical exams, surgical
procedures such as hysterectomy, bladder incontinence procedures, pelvic reconstruction, sterilization, endometrial ablation,
advanced robotic surgery, contraceptive management and infertility testing and treatment.
The
HealthLynked Network- How It Works
Our
system walks patients through a series of easy to use pages with point and click selections and drop-down menus that allow them
to enter their past medical history, past surgical history, allergies, medications, and family medical history. In addition, members
can create accounts for children under the age of 18 and keep track of required visits and vaccines. Members select physicians,
schools, hospitals and other parties to whom they wish to grant access to their records. This access can be either ongoing, or
restricted by time and date, in accordance with the patient’s control settings.
Physicians
are required to have a claimed active account in order to access patients’ online records and receive referrals for new
patients. Once a patient has granted their physician access to their medical charts, office intake paperwork can be downloaded
by the physician without the need for the patient to fill out lengthy and repetitive paperwork. Upon completion of the office
visit, providers are required to upload the medical record into the online patients’ file within 24 hours via eFax, APIs
with select EMRs or through the HealthLynked Portal. Each patient’s account has a unique bar code that when faxed into our
system is recognized for that patient, and archived in the patient’s chart, by date and provider. The HealthLynked Network
is independent of any EMR system and physicians only require a fax machine or computer to participate, allowing for minimal barriers
to participation and broader penetration of the market.
In
addition to serving as a complete medical record archive, we believe that the HealthLynked Network allows for shorter wait times
at doctors’ offices by giving doctors immediate access to patients’ complete medical information, insurance information
and required treatment consent forms. Patients only need to verify their treating physician’s access to their files upon
or prior to their next doctor’s visit. Patients are also able to coordinate multiple physician visits and keep an updated
and complete personal medical record archive. These files may also be shared among a patient’s different specialty physicians,
a function that we believe is especially helpful for patients who travel and may need to access their records or obtain physician
referrals in multiple localities. We also believe that the HealthLynked Network is especially useful in medical emergencies when
patients are unable to provide a medical history on their own because our system allows patients the option to grant healthcare
providers, in advance, special access in emergency situations.
The
HealthLynked Network also provides an online scheduling function for patients to book appointments with participating providers.
Healthcare provider profiles feature physicians’ biographies, office locations, hours and available appointment times. In
addition, the platform will provide patients with a list of recommended health screenings tailored to each patient’s unique
medical history and demographics. Recommended screenings could include, but is not limited to, annual mammograms for women over
the age of 40, colonoscopy every 10 years after the age of 50, recommended pap smear screenings, routine blood tests, and prostate
exams. This base service will be free for patients. However, we plan to charge additional fees for real-time schedule booking,
access to telemedicine service and access to a 24-hour nurse’s hotline and to charge physicians for upgraded physician profiles
and SEO marketing.
Benefits
for Multiple Constituencies
We
believe that the HealthLynked Network provides numerous benefits for patients and their relatives, medical providers, hospitals,
emergency rooms and schools.
Benefits
for patients:
|
●
|
Base
service, which includes all of the below benefits other than telemedicine and the nurse
hotline, will be free
|
|
●
|
Easy
online scheduling of appointments
|
|
●
|
Real-time
booking for appointments available within 4 hours
|
|
●
|
Keep
track of co-pays and deductibles on insurance plans
|
|
●
|
More
accurate and detailed personal medical history
|
|
●
|
Complete
medication lists with dosing and warnings of potential drug interactions
|
|
●
|
Ability
to create accounts for children, and track recommended health screenings and vaccines
|
|
●
|
When
traveling, patients will have the ability to access their medical records online 24 hours
a day, 7 days a week even in the case of an emergency
|
|
●
|
Shortened
wait times at physicians’ offices by reducing the need to fill out redundant paper
work
|
|
●
|
Access
to a referral network of physicians across the United States who participate in the HealthLynked
Network
|
|
●
|
Patients
can access family members’ records in the event of illness or accident
|
|
●
|
Access
to telemedicine for medical consultations and appointments for fee paying members
|
|
●
|
24
hour nurse hotline available for fee paying members
|
Benefits
for physicians and providers:
|
●
|
More
accurate patient medical history including past medical records
|
|
●
|
“EMR
Agnostic” and compatible with all electronic medical records systems
|
|
●
|
A
detailed and accurate medications list from patients
|
|
●
|
Shortened
time for patients to complete necessary paperwork translating into improved efficiency,
shorter wait times, greater patient satisfaction and higher revenues
|
|
●
|
Referral
source for new patients
|
|
●
|
Online
marketing profiles
|
|
●
|
Comprehensive
Marketing to active and inactive patients
|
|
●
|
SEO
and marketing options
|
|
●
|
Co-pay
and deductible information on patients’ insurance plans will be readily available
|
|
●
|
Additional
revenue stream from signing up new patients
|
|
●
|
Online
and real-time patient scheduling to control gaps in scheduling due to last minute cancelations
by existing patients
|
|
●
|
Low
membership fees of $300 - $400 per month per provider during the first year
|
|
●
|
Patient
Access Hub “PAH” (provisional patent pending) is provided to physician offices
free of charge to provide free Wi-Fi for their patients. Patient analytics are provided
to physician members.
|
Benefits
for hospitals and emergency rooms:
|
●
|
Information
on patients who present that are not conscious to provide a complete medical history
|
|
●
|
Information
on traveling patients who present to a hospital in an emergency situation
|
|
●
|
Online
access to patient information 24 hours a day, 7 days a week
|
|
●
|
“EMR
Agnostic” and compatible with all electronic medical records systems
|
|
●
|
No
new equipment required
|
Benefits
for schools:
|
●
|
Access
by authorized school officials to students’ medical histories
|
|
●
|
Linked
access to students’ primary care physicians
|
|
●
|
Access
to vaccination records
|
|
●
|
Allergy
and medication tracking
|
|
●
|
Emergency
contact information of family members
|
Benefits
for parents
:
|
●
|
Complete
children profiles
|
|
●
|
Access
given to schools in case of medical emergences
|
|
●
|
List
of allergies available to those granted access
|
|
●
|
Vaccine
records available to those granted access
|
|
●
|
Recommended
health screenings
|
|
●
|
Journal
for health log and milestones through news feeds and groups
|
Business
Model
Our
business model is focused on market penetration and recruiting physicians and patients to use our system for archiving patient
medical records, comprehensive marketing to active and inactive patients, a way to connect on a regular basis utilizing news feeds
and groups, accessing new patients, and for on-line “real-time” scheduling physician appointments.
We
currently charge physicians $300 - $400 per month to participate in the network. Physicians upload their patients into a secure
patient portal to market to their active and inactive patients. They initially send to all their patients an email inviting them
to claim their HLYK profile free of charge, update their profiles and bring it with them to their next visit to the physician’s
office.
We
also anticipate charging certain healthcare facilities either an annual or monthly fee that will vary per facility based upon
number of professionals per facility. Currently, it is anticipated that hospitals and emergency rooms would be charged a higher
fee for our services once our patient network has been expanded.
The
base services of our network are free for patients, and they may also upgrade their service should they wish to receive telemedicine
services and access to a 24-hour nurse hotline.
Pursuant
to our business strategy, we acquired NWC to begin deployment of the HealthLynked Network and register NWC’s approximately
6,000 active patients and 6,500 inactive patients into the HealthLynked system. While we expect to generate minimal revenues from
physician fees related to such deployment in fiscal 2019, we anticipate that establishing the patient database will be a valuable
marketing tool for telesales to physician practices. During the second half of 2018, we had one physician who did not renew her
contract, one physician who went out on an unexpected disability leave, and another physician who retired. Notwithstanding the
unexpected losses of three physicians, with the assistance of the HealthLynked Network in marketing to former patients, we were
able to increase practice revenue from 2017 by 7%. By the second quarter of 2019, we expect to have all three physicians replaced,
and will then plan to further expand NWC by engaging two to five additional physicians and project, although no assurance can
be given, that by 2021 NWC will generate annual aggregate net revenues of between $3,500,000 and $5,000,000. We believe that targeting
women’s practices to market HealthLynked is one of the best approaches as women generally make most of the healthcare decisions
for their families.
Sales
Strategy
During
the fourth quarter of 2018, the Company developed a more efficient strategy regarding the marketing of the HealthLynked Network
utilizing its patient access hub technology:
|
●
|
Eliminated
the direct sales force, reducing our burn rate by approximately $50,000 per month
|
|
●
|
Adopted
a more efficient telesales model for bringing on physicians “in network”
to the HealthLynked Network, including the following:
|
|
o
|
Starting
with physicians claiming their existing base profiles, confirming accuracy, and opting
to be an “in network” provider free of charge
|
|
o
|
Providing
Patient Access Hub (“PAH”) offering Wi-Fi to the practice patients free of
charge
|
|
o
|
Providing
patient analytics off the PAH to provider members
|
|
o
|
SEO/SEM
campaigns direct to physician practices
|
|
o
|
Participation
in healthcare events that offer CME credits to physicians is another excellent vehicle
that we are using to introduce HLYK and our network to physicians. We anticipate one
event per quarter as part of our marketing plan.
|
|
o
|
Focusing
on comprehensive marketing to physicians active and inactive patients to improve retention
and significantly increase practice revenue
|
|
o
|
Physicians
upload patients in secured HLYK portal and send email for patients to claim their HLYK
profile and update it to bring into the office for their next visit.
|
|
o
|
Use
of HealthLynked Network for on-line appointment scheduling for patients
|
|
●
|
Direct
to patient marketing:
|
|
o
|
SEO/SEM
campaigns direct to patients
|
|
●
|
Affiliated
marketing campaigns
|
|
●
|
Co-marketing
with MedOfficeDirect (a virtual distributor of medical supplies to the general public
and to physicians’ offices that is affiliated with our management team)
|
After
1.5 years of direct sales efforts, during the fourth quarter of 2018, we decided to eliminate the entire direct sales force after
developing a more efficient and effective strategy for onboarding new in-network providers which eliminating $650,000 of annual
cost. During the second quarter of 2019 we are planning to deploy our Patient Access Hub ‘PAH” (provisional patent
pending) providing free Wi-Fi to the practice patients at no cost to our in-network physicians. Physician members will receive
patient analytics from the PAH and we anticipate by the fourth quarter of 2019 we will be attracting 1,000 physicians and 300,000
patients per quarter utilizing the patient access hub.
PAH
analytics will include information such as most popular days, most popular times of day, patient wait times per physician, patient
mix, and social media footprint, to name a few.
Healthcare
events that offer continuing medical education (“CME”) credits to Physicians have proven to be an excellent target
market for our services and we plan to continue with this strategy of at least one event per quarter going forward.
Our
projected rapid growth over the next five years is due in large part to our roll out and utilization of the Patient Access Hub
in medical practices.
Our
marketing efforts towards physicians will emphasize how our systems can provide patient analytics, increase practice revenues,
improve office efficiencies, and improve the accuracy of recorded patients’ medical histories.
Once
a physician agrees to become a paying member, they will put all their patients in a secured portal in the cloud, and email them
to claim their profile, update it and bring it in for their next office visit. As mentioned above, access to the HealthLynked
Network is free for patients. The physicians will then market to their active and inactive patients and it is anticipated that
physicians will generate up to $100,000 in incremental annual revenue for an investment of $4,800 per year.
In
combination with our telesales efforts described above, we intend to also utilize internet based search engine marketing an optimization
(SEM/SEO) to increase our presence in certain targeted geographical areas. These campaigns will be focused on both physicians
and patients. We believe that direct to consumer marketing through email campaigns will be an effective way to build interest
and drive patient and physician demand for our services. We anticipate that we will be able to foster faster market penetration
and increase demand for our services by marketing to “both sides”, the consumer and the practitioner once the telesales
model is solidified.
Our
campaigns will direct patients to look for physicians in the HealthLynked Network to ensure that they maintain the accuracy and
completeness of their medical records. Our system will further allow patients to search for “in-network” physician
providers and schedule online “real-time” appointments via our system. We believe that physicians in the HealthLynked
Network will see an increase in new patients as a result of their participation and as more patients claim their profiles from
the use of the PAH and the physicians’ initial emails to patients, the value to physicians of joining our network will increase
from not only existing patient marketing, but also for acquisition of new patients in the HealthLynked Network.
We
believe that affiliated marketing campaigns will be very helpful in attracting new users and increasing market awareness. We intend
to partner with pharmaceutical companies, medical distributors, insurance companies; medical societies and others to cross market
our products.
Intellectual
Property
We
have registered “HealthLynked” and our corporate logo as a service mark with the United States Patent and Trademark
Office (the “USPTO”). We also filed a provisional patent application for the use of our Patient Access Hub filed on
March 6, 2019 with the USPTO. We plan to file other patent applications as needed to protect our technology as soon as the technology
is launched, which is currently anticipated to be during the third and fourth quarters of 2019.
Research
and Development
Our
research and development efforts consist of building, developing, and enhancing the HealthLynked Network, including comprehensive
marketing to active and inactive patients, the real time scheduling of appointments through our new mobile application, regular
appointment scheduling, telemedicine appointment scheduling, sharing of secured documents between physicians and patients, and
devise independent access mobile, tablet and web browser. Further, we are developing our systems to provide for secured date storage,
drug interaction alerts, and the barcoding of documents for retrieval and storage.
Professional
and General Liability Coverage
We
maintain professional and general liability insurance policies with third-party insurers generally on a claims-made basis, subject
to deductibles, policy aggregates, exclusions, and other restrictions, in accordance with standard industry practice. We believe
that our insurance coverage is appropriate based upon our claims experience and the nature and risks of our business. However,
no assurance can be given that any pending or future claim against us will not be successful or if successful will not exceed
the limits of available insurance coverage. Our business entails an inherent risk of claims of medical malpractice against our
affiliated physicians and us. We contract and pay premiums for professional liability insurance that indemnifies us and our affiliated
healthcare professionals generally on a claims-made basis for losses incurred related to medical malpractice litigation. Professional
liability coverage is required in order for our physicians to maintain hospital privileges.
Employees
As
of June 13, 2019, we had 39 employees. None of our employees are covered by a collective bargaining agreement. We consider our
relationship with our employees to be excellent.
Competition
The
markets for our products and services are highly competitive, and are characterized by rapidly evolving technology and product
standards, as well as frequent introduction of new products and services. All of our competitors are more established, benefit
from greater name recognition, and have substantially greater financial, technical, and marketing resources than we do.
Our
principal existing competitors include but are not limited to ZocDoc, Inc., AthenaHealth Inc., All-scripts Healthcare Solutions,
Inc., Cerner Corporation, Epic Systems Corporation, Teledoc Health Inc. and Veritone Inc. In addition, we expect that major software
information systems companies, large information technology consulting service providers, start-up companies, managed care companies
and others specializing in the health care industry may offer competitive products and services.
We
believe that we differ from our competitors in that we are not practice management software or an EMR provider. Companies like
AthenaHealth Inc., All scripts Healthcare Solutions, Inc., Cerner and Epic Systems Corporation offer software solutions to operate
and manage a medical practice. Functions of these systems include patient billing, monitoring patient account balances and payments,
tracking of appointments and creating encounter visits for each patient seen. HealthLynked works in conjunction with these practice
management software systems and does not seek to replace them. Patients’ medical encounters created by these systems are
uploaded to the patient’s profile in the HealthLynked Network. The HealthLynked Network can incorporate any physical or
digital documents into a patient’s medical record history and thus allow it to be utilized across all healthcare platforms.
HealthLynked provides an online appointment scheduling application that is similar to ZocDoc, Inc.’s offering, but in addition
offers telemedicine appointments through our own patient interface.
The
advantage of having a healthcare network independent of any one practice management or EMR software allows the HealthLynked system
to be fully utilized across the entire medical community. Integration and participation by both patients and healthcare providers
in a unified platform offers significant advantages in the quality and nature of healthcare delivery in the future. To our knowledge
a unified healthcare network like HealthLynked currently does not exist in the market.
Amazon,
Google, and Apple have also announced their intention to enter into the digital healthcare space, including in the area of patient
health records.
Government
Regulation
The
healthcare industry is governed by a framework of federal and state laws, rules and regulations that are extensive and complex
and for which, in many cases, the industry has the benefit of only limited judicial and regulatory interpretation. If we are found
to have violated these laws, rules or regulations, our business, financial condition and results of operations could be materially,
adversely affected. Moreover, healthcare reform continues to attract significant legislative interest, regulatory activity, new
approaches, legal challenges and public attention that create uncertainty and the potential for additional changes. Healthcare
reform implementation, additional legislation or regulations, and other changes in government policy or regulation may affect
our reimbursement, restrict our existing operations, limit the expansion of our business or impose additional compliance requirements
and costs, any of which could have a material adverse effect on our business, financial condition, results of operations, cash
flows and the trading price of our common stock.
Licensing
and Certification
The
state of Florida imposes licensing requirements on individual physicians and clinical professionals, and on facilities operated
or utilized by healthcare practices. We may have to obtain regulatory approval, including certificates of need, before establishing
certain types of healthcare facilities, offering certain services or expending amounts in excess of statutory thresholds for healthcare
equipment, facilities or programs. We are also required to meet applicable Medicaid provider requirements under state laws and
regulations and Medicare provider requirements under federal laws, rules and regulations.
Fraud
and Abuse Provisions
Existing
federal laws, as well as similar state laws, relating to government-sponsored or funded healthcare programs, or “GHC
Programs,” impose a variety of fraud and abuse prohibitions on healthcare companies like us. These laws are interpreted
broadly and enforced aggressively by multiple government agencies, including the Office of Inspector General of the Department
of Health and Human Services, the Department of Justice (the “DOJ”) and various state agencies. In addition, in the
Deficit Reduction Act of 2005, Congress established a Medicaid Integrity Program to enhance federal and state efforts to detect
Medicaid fraud, waste and abuse and provide financial incentives for states to enact their own false claims legislation as an
additional enforcement tool against Medicaid fraud and abuse. Since then, a growing number of states have enacted or expanded
healthcare fraud and abuse laws.
The
fraud and abuse provisions include extensive federal and state laws, rules and regulations applicable to us, particularly on the
services offered through NWC. In particular, the federal anti-kickback statute has criminal provisions relating to the offer,
payment, solicitation or receipt of any remuneration in return for either referring Medicaid, Medicare or other GHC Program business,
or purchasing, leasing, ordering, or arranging for or recommending any service or item for which payment may be made by GHC Programs.
In addition, the federal physician self-referral law, commonly known as the “Stark Law,” applies to physician ordering
of certain designated health services reimbursable by Medicare from an entity with which the physician has a prohibited financial
relationship. These laws are broadly worded and have been broadly interpreted by federal courts, and potentially subject many
healthcare business arrangements to government investigation and prosecution, which can be costly and time consuming. Violations
of these laws are punishable by substantial penalties, including monetary fines, civil penalties, administrative remedies, criminal
sanctions (in the case of the anti-kickback statute), exclusion from participation in GHC Programs and forfeiture of amounts collected
in violation of such laws, any of which could have an adverse effect on our business and results of operations.
There
are a variety of other types of federal and state fraud and abuse laws, including laws authorizing the imposition of criminal,
civil and administrative penalties for filing false or fraudulent claims for reimbursement with government healthcare programs.
These laws include the civil False Claims Act (“FCA”), which prohibits the submission of, or causing to be submitted,
false claims to GHC Programs, including Medicaid, Medicare, TRICARE (the program for military dependents and retirees), the Federal
Employees Health Benefits Program, and insurance plans purchased through the recently established Affordable Care Act exchanges.
Substantial civil fines and multiple damages, along with other remedies, can be imposed for violating the FCA. Furthermore, proving
a violation of the FCA requires only that the government show that the individual or company that submitted or caused to be submitted
an allegedly false claim acted in “reckless disregard” or in “deliberate ignorance” of the truth or falsity
of the claim or with “willful disregard,” notwithstanding that there may have been no specific intent to defraud the
government program and no actual knowledge that the claim was false (which typically are required to be shown to sustain a criminal
conviction). The FCA also applies to the improper retention of known overpayments and includes “whistleblower” provisions
that permit private citizens to sue a claimant on behalf of the government and thereby share in the amounts recovered under the
law and to receive additional remedies. In recent years, many cases have been brought against healthcare companies by such “whistleblowers,”
which have resulted in judgments or, more often, settlements involving substantial payments to the government by the companies
involved. It is anticipated that the number of such actions against healthcare companies will continue to increase with the enactment
or enhancement of a growing number of state false claims acts, certain amendments to the FCA and enhanced government enforcement.
In
addition, federal and state agencies that administer healthcare programs have at their disposal statutes, commonly known as “civil
money penalty laws,” that authorize substantial administrative fines and exclusion from government programs in cases where
an individual or company that filed a false claim, or caused a false claim to be filed, knew or should have known that the claim
was false or fraudulent. As under the FCA, it often is not necessary for the agency to show that the claimant had actual knowledge
that the claim was false or fraudulent in order to impose these penalties.
The
civil and administrative false claims statutes are being applied in an increasingly broader range of circumstances. For example,
government authorities have asserted that claiming reimbursement for services that fail to meet applicable quality standards may,
under certain circumstances, violate these statutes. Government authorities also often take the position, now with support in
the FCA, that claims for services that were induced by kickbacks, Stark Law violations or other illicit marketing schemes are
fraudulent and, therefore, violate the false claims statutes. Many of the laws and regulations referenced above can be used in
conjunction with each other.
If
we were excluded from participation in any government-sponsored healthcare programs, not only would we be prohibited from submitting
claims for reimbursement under such programs, but we also would be unable to contract with other healthcare providers, such as
hospitals, to provide services to them. It could also adversely affect our ability to contract with, or to obtain payment from,
non-governmental payors.
Although
we intend to conduct our business in compliance with all applicable federal and state fraud and abuse laws, many of the laws,
rules and regulations applicable to us, including those relating to billing and those relating to financial relationships with
physicians and hospitals, are broadly worded and may be interpreted or applied by prosecutorial, regulatory or judicial authorities
in ways that we cannot predict. Accordingly, we cannot assure you that our arrangements or business practices will not be subject
to government scrutiny or be alleged or found to violate applicable fraud and abuse laws. Moreover, the standards of business
conduct expected of healthcare companies under these laws and regulations have become more stringent in recent years, even in
instances where there has been no change in statutory or regulatory language. If there is a determination by government authorities
that we have not complied with any of these laws, rules and regulations, our business, financial condition and results of operations
could be materially, adversely affected.
Government
Reimbursement Requirements
In
order to participate in the various state Medicaid programs and in the Medicare program, we must comply with stringent and often
complex enrollment and reimbursement requirements. Moreover, different states impose differing standards for their Medicaid programs.
While we believe that we adhere to the laws, rules and regulations applicable to the government programs in which we participate,
any failure to comply with these laws, rules and regulations could negatively affect our business, financial condition and results
of operations.
In
addition, GHC Programs are subject to statutory and regulatory changes, administrative rulings, interpretations and determinations,
requirements for utilization review and new governmental funding restrictions, all of which may materially increase or decrease
program payments, as well as affect the cost of providing services and the timing of payments to providers. Moreover, because
these programs generally provide for reimbursement on a fee-schedule basis rather than on a charge-related basis, we generally
cannot increase our revenue by increasing the amount we charge for our services. To the extent our costs increase, we may not
be able to recover our increased costs from these programs, and cost containment measures and market changes in non-governmental
insurance plans have generally restricted our ability to recover, or shift to non-governmental payors, these increased costs.
In attempts to limit federal and state spending, there have been, and we expect that there will continue to be, a number of proposals
to limit or reduce Medicaid and Medicare reimbursement for various services. Our business may be significantly and adversely affected
by any such changes in reimbursement policies and other legislative initiatives aimed at reducing healthcare costs associated
with Medicaid, Medicare and other government healthcare programs.
Our
business also could be adversely affected by reductions in or limitations of reimbursement amounts or rates under these government
programs, reductions in funding of these programs or elimination of coverage for certain individuals or treatments under these
programs.
HIPAA
and Other Privacy Laws
Numerous
federal and state laws, rules and regulations govern the collection, dissemination, use and confidentiality of protected health
information, including the HIPAA, and its implementing regulations, violations of which are punishable by monetary fines, civil
penalties and, in some cases, criminal sanctions. As part of the HealthLynked Network and our medical record keeping, third-party
billing and other services, we collect and maintain protected health information on the patients that we serve.
Pursuant
to HIPAA, the U.S. Department of Health and Human Services, Office of Civil Rights (“HHS”) has adopted standards to
protect the privacy and security of individually identifiable health information, known as the Privacy Standards and Security
Standards. HHS’ Privacy Standards apply to medical records and other individually identifiable health information in any
form, whether electronic, paper or oral, that is used or disclosed by healthcare providers, hospitals, health plans and healthcare
clearinghouses, which are known as “Covered Entities.” We have implemented privacy policies and procedures, including
training programs, designed to be compliant with the HIPAA Privacy Standards.
HHS’
Security Standards require healthcare providers to implement administrative, physical and technical safeguards to protect the
integrity, confidentiality and availability of individually identifiable health information that is electronically received, maintained
or transmitted (including between us and our affiliated practices). We have implemented security policies, procedures and systems
designed to facilitate compliance with the HIPAA Security Standards.
In
February 2009, Congress enacted the Health Information Technology for Economic and Clinical Health Act, or “HITECH.”
Among other changes to the law governing protected health information, HITECH strengthened and expanded HIPAA, increased penalties
for violations, gave patients new rights to restrict uses and disclosures of their health information, and imposed a number of
privacy and security requirements directly on third-parties that perform functions or services for us or on our behalf. Specifically,
HITECH requires that Covered entities report any unauthorized use or disclosure of protected health information that meets the
definition of a breach, to the affected individuals, HHS and, depending on the number of affected individuals, the media for the
affected market. In addition, HITECH requires that business associates report breaches to their Covered Entity customers. HITECH
also authorizes state Attorneys General to bring civil actions in response to violations of HIPAA that threaten the privacy of
state residents. Final regulations implementing the HITECH requirements were issued in January 2013. We have privacy policies
and procedures aimed at ensuring compliance with HITECH requirements. In addition to the federal HIPAA and HITECH requirements,
numerous other state and certain other federal laws protect the confidentiality of patient information, including state medical
privacy laws, state social security number protection laws, state genetic privacy laws, human subjects research laws and federal
and state consumer protection laws.
Environmental
Regulations
Our
healthcare operations generate medical waste that must be disposed of in compliance with federal, state and local environmental
laws, rules and regulations. Our office-based operations are subject to compliance with various other environmental laws, rules
and regulations. Such compliance does not, and we anticipate that such compliance will not, materially affect our capital expenditures,
financial position or results of operations.
Fair
Debt Collection Practices Act
Some
of our operations may be subject to compliance with certain provisions of the Fair Debt Collection Practices Act and comparable
state laws. Under the Fair Debt Collection Practices Act, a third-party collection company is restricted in the methods it uses
to contact consumer debtors and elicit payments with respect to placed accounts. Requirements under state collection agency statutes
vary, with most requiring compliance similar to that required under the Fair Debt Collection Practices Act. Florida’s Consumer
Collection Practices Act is broader than the federal legislation, applying the regulations to “creditors” as well
as “collectors,” whereas the Fair Debt Collection Practices Act is applicable only to collectors. This prohibits
creditors who are attempting to collect their own debts from engaging in behavior prohibited by the Fair Debt Collection
Practices Act and Consumer Collection Practices Act. The Consumer Collection Practices Act has very specific guidelines regarding
which actions debt collectors and creditors may engage in to collect unpaid debt.
Government
Investigations
We
expect that audits, inquiries and investigations from government authorities, agencies, contractors and payors will occur in the
ordinary course of business. Such audits, inquiries and investigations and their ultimate resolutions, individually or in the
aggregate, could have a material adverse effect on our business, financial condition, results of operations, cash flows and the
trading price of our common stock.
MANAGEMENT
The
following table sets forth information regarding our executive officers and directors. All directors hold office for one-year
terms until the election and qualification of their successors. Officers are elected by the board of directors and serve at the
discretion of the board.
Name
|
|
Age
|
|
Positions
with the Company
|
Michael
Dent, MD
|
|
55
|
|
Chief
Executive Officer and Chairman of the Board of Directors
|
George
O’Leary
|
|
55
|
|
Chief
Financial Officer, and Director
|
Michael
T. Dent, MD, Founder, Chief Executive Officer and Chairman of the Board of Directors
.
Dr. Dent founded the
Naples Women’s Center in 1996 where he served as its principal executive from formation through February 2016. He is also
Co-Founder and Managing Director of InLight Capital Partners LLC since January 2014 and is responsible for its healthcare, information
technology and life science investments. He has held key leadership positions in business development, operations, corporate development,
and strategy in the healthcare and technology industries since the mid-90s. Prior to founding InLight Capital Partners, Dr. Dent
was Founder, Chairman and Chief Executive Officer of NeoGenomics Laboratories (Nasdaq: NEO) where he was on the Board of Directors
from 1998 until July 2015. As a retired physician, Dr. Dent is uniquely qualified to understand the challenges and opportunities
in healthcare and emerging technologies. Dr. Dent received his Bachelors Degree from Davidson College, where he majored in both
Biology and Pre-Med, and went on to earn his medical degree from The University of South Carolina in Charleston, South Carolina.
Dr. Dent also attended Florida Gulf Coast University’s Business Executive Education program. Dr. Dent holds board affiliations
with MedOfficeDirect (Founder), and The Naples Women’s Center. Our board of directors believes Dr. Dent’s
perspective as the founder of the Company, his industry knowledge and prior experience as a director of a public company and familiarity
with public company governance, provide him with the qualifications and skills to serve as a director.
George
G. O’Leary, Chief Financial Officer and Member of the Board of Directors
.
Mr. O’Leary has
served as our Chief Financial Officer since August 6, 2014. Mr. O’Leary is also Co-Founder and Managing Director of InLight
Capital Partners LLC since January 2014. He is a financially trained senior executive specializing in innovative strategic problem
solving across functional and industry boundaries. Mr. O’Leary is currently the Chairman of the Board of Directors of Timios
Holdings Corp. since March 2014 and on the Board of Directors of MedOfficeDirect since October 2013. From June 2009 to May 2013
Mr. O’Leary was Chairman of the Board and Chief Financial Officer of Protection Plus Securities Corporation until it was
sold to Universal Protection Services. From February 2007 to June 2015, Mr. O’Leary was a member of the Board of Directors
of NeoMedia Technologies. Mr. O’Leary is founder and President of SKS Consulting of South Florida Corp. (“SKS”)
since June 2006 where he works with public and private companies in board representation and/or under consulting agreements providing
executive level management expertise, as well as helping the implementation and execution of their companies’ strategic
& operational plans. Mr. O’Leary started SKS with the mission to help companies focus on high growth initiatives and
execution of their core business while shedding non-core business assets. From 1996 to 2000, Mr. O’Leary was Chief Executive
Officer and President of Communication Resources Incorporated (“CRI”), where annual revenues grew from $5 million
to $40 million during his tenure. Prior to CRI, Mr. O’Leary was Vice President of Operations of Cablevision Industries,
where he ran $125 million of business until it was sold to Time Warner. Mr. O’Leary started his professional career as a
senior accountant with Peat Marwick and Mitchell (KPMG). Mr. O’Leary holds a B.B.A. degree in Accounting with honors from
Siena College. Our board of directors believes Mr. O’Leary’s extensive business experience provides him with
the qualifications and skills to serve as a director.
Family
Relationships
No
family relationships exist between any of our current or former directors or executive officers.
Involvement
is Certain Legal Proceedings
No
director, executive officer or control person of the Company has been involved in any legal proceeding listed in Item 401(f) of
Regulation S-K in the past 10 years.
Limitation
of Liability of Directors
Our
Amended and Restated Articles of Incorporation states that directors and officers shall be indemnified and held harmless to the
fullest extend legally permissible under the laws of the State of Nevada, from time to time, against all expenses, liability and
loss (including attorney’s fees, judgments, fines and amounts paid or to be paid in settlement) reasonably incurred or suffered
by him/her in connection with acts performed in such capacity. Such right of indemnification shall be a contract right, which
may be enforced in a nay manner desired by such person. The expenses of officers and directors incurred in defending a civil or
criminal action, suit or proceeding must be paid by the Company as they are incurred and in advance of the final disposition of
the action, suit or proceeding.
Board
Independence
Because
the Company’s Common Stock is not listed on a national securities exchange, the Company does not currently comply with any
board independence requirements. NASDAQ Listing Rule 5605(a)(2) provides that an “independent director” is a person
other than an officer or employee of the company or any other individual having a relationship which, in the opinion of the company’s
board of directors, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director.
The NASDAQ listing rules provide that a director cannot be considered independent if:
|
●
|
the
director is, or at any time during the past three years was, an employee of the company;
|
|
●
|
the
director or a family member of the director accepted any compensation from the company
in excess of $120,000 during any period of 12 consecutive months within the three years
preceding the independence determination (subject to certain exclusions, including, among
other things, compensation for board or board committee service);
|
|
●
|
a
family member of the director is, or at any time during the past three years was, an
executive officer of the company;
|
|
●
|
the
director or a family member of the director is a partner in, controlling stockholder
of, or an executive officer of an entity to which the company made, or from which the
company received, payments in the current or any of the past three fiscal years that
exceed 5% of the recipient’s consolidated gross revenue for that year or $200,000,
whichever is greater (subject to certain exclusions);
|
|
●
|
the
director or a family member of the director is employed as an executive officer of an
entity where, at any time during the past three years, any of the executive officers
of the company served on the compensation committee of such other entity; or
|
|
●
|
the
director or a family member of the director is a current partner of the company’s
outside auditor, or at any time during the past three years was a partner or employee
of the company’s outside auditor, and who worked on the company’s audit.
|
Based
on this above, neither Dr. Dent nor Mr. O’Leary would be considered independent directors of the Company.
Board
Committees
We
do not have a standing audit committee. Our full board of directors perform the functions usually designated to an audit committee.
While Mr. O’Leary qualifies as an “audit committee financial expert” as defined in Item 407(d)(5) of Regulation
S-K, neither Mr. O’Leary nor Dr. Dent qualifies as “independent” as the term is used in Item 7(d)(3)(iv)(B)
of Schedule 14A under the Securities Exchange Act of 1934, as amended, and as defined by NASDAQ Rules. We believe that our board
of directors is capable of analyzing and evaluating our financial statements and understanding internal controls and procedures
for financial reporting. Our board of directors does not believe that it is necessary to have an audit committee because management
believes that the functions of an audit committees can be adequately performed by the board of directors. In addition, we believe
that retaining an independent director who would qualify as an “audit committee financial expert” would be overly
costly and burdensome and is not warranted in our circumstances given the stage of our development and the fact that we have not
generated positive cash flow to date. If and when we generate increased revenue and positive cash flow in the future, we intend
to form a standing audit committee and identify and appoint an independent financial expert to serve on our audit committee.
Code
of Ethics
We
have not yet adopted a Code of Ethics although we expect to adopt one as we further develop our infrastructure and business.
EXECUTIVE
COMPENSATION
The
following table sets forth information regarding compensation paid to our principal executive officer, principal financial officer,
and our highest paid executive officer, for the years ended December 31, 2018 and 2017:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
|
|
|
Option
|
|
|
Other
|
|
|
|
|
|
|
|
|
Salary
|
|
|
Bonus
|
|
|
Awards (1)
|
|
|
Awards (2)
|
|
|
Compensation
|
|
|
Total
|
|
Name and Position
|
|
Year
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael Dent
|
|
2018
|
|
|
65,846
|
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
65,846
|
|
(Chief Executive Officer)
|
|
2017
|
|
|
70,000
|
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
70,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
George O’Leary
|
|
2018
|
|
|
157,692
|
|
|
|
12,500
|
|
|
|
30,549
|
|
|
|
366,587
|
|
|
|
---
|
|
|
|
567,328
|
|
(Chief Financial Officer)
|
|
2017
|
|
|
95,400
|
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
95,400
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert Horel (3)
|
|
2018
|
|
|
215,000
|
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
215,000
|
|
(Chief Marketing Officer)
|
|
2017
|
|
|
232,145
|
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
232,145
|
|
|
(1)
|
Reflects
fair value of unrestricted stock awards on the grant date. Stock awards for Mr. O’Leary
in 2018 include 100,000 shares granted on July 1, 2018 pursuant to Mr. O’Leary’s
Extension Letter Agreement.
|
|
(2)
|
Reflects
the grant date fair values of stock options. Option awards for Mr. O’Leary in 2018
include a 10-year option to purchase 1,200,000 shares of Company common stock at an exercise
price of $0.31 pursuant to Mr. O’Leary’s Extension Letter Agreement.
|
|
(3)
|
Mr.
Horel was terminated with an effective date of January 31, 2019.
|
Employment
Agreements
On
July 1, 2016, we entered into an employment agreement with Dr. Michael Dent, Chief Executive Officer and a member of our Board
of Directors. Dr. Dent’s employment agreement continues until terminated by Dr. Dent, or us and provides for an initial
annual base salary of $70,000. Dr. Dent is eligible to receive performance-based incentives, pro-rated for the number of months
of service in any given year. Annual bonuses are awarded based on set annual target incentives for executives and other senior
ranking employees that are to be determined by the to-be-established Compensation Committee of the Board of Directors. In addition,
Mr. Dent is also entitled to receive 500,000 time-based options, as well as 500,000 performance based options, all of which vest
in accordance with the schedule set forth in the employment agreement. If Dr. Dent’s employment is terminated by us (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 separation.
On
July 1, 2016, we entered into an agreement with Mr. George O’Leary, our Chief Financial Officer and a member of our Board
of Directors, extending his prior agreement with the Company. Mr. O’Leary’s employment agreement continues until terminated
by Mr. O’Leary, or us and provides for an initial annual base salary of $90,000 a year and shall increase to $100,000 per
year in year two. Mr. O’Leary is also eligible to receive performance-based incentives. In addition, Mr. O’Leary is
also entitled to receive stock options to purchase up to 600,000 shares of common stock of the Company at an exercise price equivalent
to the closing price per share at which the stock is quoted on the day prior to his start date. The grant of such options will
be made pursuant to the Company’s stock option plan then in effect, shall have a ten-year term from the grant date and shall
vest in accordance with the schedule set forth in the agreement. In addition, Mr. O’Leary shall receive healthcare allowance
of $750 per month and a car allowance of $650 per month to be paid at the beginning of each month. If Mr. O’Leary employment
is terminated by us (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. In connection with the extension, Mr. O’Leary was also granted (i) 100,000
shares of Company common stock and will be granted an additional 100,000 shares on each of July 1, 2019, 2020 and 2021, and (ii)
a 10-year option to purchase 1,200,000 shares of Company common stock at an exercise price of $0.31, of which 150,000 vest on
July 1, 2019, 450,000 vest monthly from July 1, 2019 to July 1, 2022 and 600,000 vest based on specified performance measures
related to the Company’s fiscal years 2018 through 2021.
Outstanding
Equity Awards at Year-End
The
following table contains information concerning unexercised options that have not vested as of December 31, 2018 with respect
to the executive officers named in the Summary Compensation Table:
|
|
|
|
|
|
|
|
Number of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities
|
|
|
|
|
|
|
|
|
Number of Securities
|
|
|
Underlying
|
|
|
|
|
|
|
|
|
Underlying
|
|
|
Unexercised
|
|
|
Option
|
|
|
|
|
|
Unexercised Options
|
|
|
Unearned
|
|
|
Exercise
|
|
|
Option
|
|
|
Exercisable
|
|
|
Unexercisable
|
|
|
Options
|
|
|
Price
|
|
|
Expiration
|
|
|
(#)
|
|
|
(#)
|
|
|
(#)
|
|
|
($)
|
|
|
Date
|
Michael Dent
|
|
|
625,000
|
|
|
|
375,000
|
|
|
|
375,000
|
|
|
$
|
0.08
|
|
|
7/1/2026
|
(Chief Executive Officer)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
George O’Leary
|
|
|
400,000
|
|
|
|
200,000
|
|
|
|
200,000
|
|
|
$
|
0.08
|
|
|
7/1/2026
|
(Chief Financial Officer)
|
|
|
75,000
|
|
|
|
1,125,000
|
|
|
|
1,125,000
|
|
|
$
|
0.31
|
|
|
7/1/2028
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert Horel (1)
|
|
|
139,583
|
|
|
|
610,413
|
|
|
|
610,413
|
|
|
$
|
0.20
|
|
|
11/28/2026
|
(Chief Marketing Officer)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Mr.
Horel was terminated with an effective date of January 31, 2019.
|
On
January 1, 2016, the Company instituted the 2016 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. During the years ended December 31, 2018 ad 2017, the Company made grants totaling 440,000 and 175,000 shares, respectively,
of common stock pursuant to the EIP. The grants are subject to time-based vesting requirements and generally vest a portion upon
grant and the balance on a straight-line basis over a period of four years.
During
the year ended December 31, 2018, we granted a 10-year option to purchase 1,200,000 shares of common stock at an exercise price
of $0.31 pursuant to Mr. O’Leary’s Extension Letter Agreement dated July 1, 2018.
Director
Compensation
Our
directors did not receive any compensation for their services for the years ending December 31, 2018 and 2017 except as set forth
above.
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
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. All principal and interest is due at maturity of the $750k DMD Note on December 31, 2019. Interest accrued on the $750k
DMD Note as of December 31, 2018 and 2017 was $66,859 and $43,963, respectively.
The
carrying values of notes payable to Dr. Michael Dent as of December 31, 2018 and 2017 were as follows:
|
|
|
|
|
|
Interest
|
|
|
Balance as of December 31,
|
|
Inception Date
|
|
Maturity Date
|
|
Borrower
|
|
Rate
|
|
|
2018
|
|
|
2017
|
|
January 12, 2017
|
|
January 13, 2019
|
|
HLYK
|
|
|
10
|
%
|
|
$
|
40,560
|
*
|
|
$
|
35,000
|
|
January 18, 2017
|
|
January 19, 2019
|
|
HLYK
|
|
|
10
|
%
|
|
|
23,165
|
*
|
|
|
20,000
|
|
January 24, 2017
|
|
January 15, 2019
|
|
HLYK
|
|
|
10
|
%
|
|
|
57,839
|
*
|
|
|
50,000
|
|
February 9, 2017
|
|
February 10, 2019
|
|
HLYK
|
|
|
10
|
%
|
|
|
34,586
|
*
|
|
|
30,000
|
|
April 20, 2017
|
|
April 21, 2019
|
|
HLYK
|
|
|
10
|
%
|
|
|
11,357
|
*
|
|
|
10,000
|
|
June 15, 2017
|
|
June 16, 2019
|
|
HLYK
|
|
|
10
|
%
|
|
|
36,464
|
*
|
|
|
32,500
|
|
August 17, 2017
|
|
August 18, 2018
|
|
HLYK
|
|
|
10
|
%
|
|
|
20,000
|
|
|
|
20,000
|
|
August 24, 2017
|
|
August 25, 2018
|
|
HLYK
|
|
|
10
|
%
|
|
|
37,500
|
|
|
|
37,500
|
|
September 7, 2017
|
|
September 8, 2018
|
|
HLYK
|
|
|
10
|
%
|
|
|
35,000
|
|
|
|
35,000
|
|
September 21, 2017
|
|
September 22, 2018
|
|
HLYK
|
|
|
10
|
%
|
|
|
26,500
|
|
|
|
26,500
|
|
September 29, 2017
|
|
September 30, 2018
|
|
HLYK
|
|
|
10
|
%
|
|
|
12,000
|
|
|
|
12,000
|
|
December 21, 2017
|
|
December 22, 2018
|
|
HLYK
|
|
|
10
|
%
|
|
|
14,000
|
|
|
|
14,000
|
|
January 8, 2018
|
|
January 9, 2019
|
|
HLYK
|
|
|
10
|
%
|
|
|
75,000
|
|
|
|
---
|
|
January 11, 2018
|
|
January 12, 2019
|
|
HLYK
|
|
|
10
|
%
|
|
|
9,000
|
|
|
|
---
|
|
January 26, 2018
|
|
January 27, 2019
|
|
HLYK
|
|
|
10
|
%
|
|
|
17,450
|
|
|
|
---
|
|
January 3, 2014
|
|
December 31, 2018
|
|
NWC
|
|
|
10
|
%
|
|
|
222,050
|
|
|
|
231,050
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
672,471
|
|
|
$
|
553,550
|
|
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 and December
31, 2018 and 2017 was $62,258 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 year ended December 31, 2018
and is included on the statement of operations in “Change in fair value of debt.”
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 agreed to 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. The agreement terminated on July 31, 2018. During the years ended December 31, 2018 and 2017, the Company recognized
rent expense to MOD in the amount of $30,457 and $-0-, respectively, pursuant to this agreement including $16,177 recognized in
2018 to write of the balance of a prepayment to MOD to be applied toward future rent.
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 years ended December 31, 2018 and 2017, the Company recognized general and administrative expense in
the amount of $12,500 and $27,500, 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.
Stock
Repurchase
On
October 3, 2018, the Company bought back 100,000 shares of common stock from a shareholder for a total purchase price of $5,000.
The shares were retired. The selling shareholder was the brother of our CEO Dr. Michael Dent.
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The
following table sets forth information with respect to the beneficial ownership of our common stock as of June 13, 2019 by (i)
each person known by us to beneficially own more than 5.0% of our common stock, (ii) each of our directors, (iii) each of the
named executive officers, and (iv) all of our directors and executive officers as a group. The percentages of common stock beneficially
owned are reported on the basis of regulations of the SEC governing the determination of beneficial ownership of securities. Under
the rules of the SEC, a person is deemed to be a beneficial owner of a security if that person has or shares voting power, which
includes the power to vote or to direct the voting of the security, or investment power, which includes the power to dispose of
or to direct the disposition of the security. Except as indicated in the footnotes to this table, each beneficial owner named
in the table below has sole voting and sole investment power with respect to all shares beneficially owned and each person’s
address is c/o HealthLynked Corp., 726 Medical Blvd Suite 101, Naples, Florida 34110. As of June 13, 2019, we had 101,068,541
shares issued and outstanding.
|
|
Shares
of Common Stock Beneficially Owned
(1)
|
|
|
Percentage
of Shares of Common Stock Beneficially Owned
(2)
|
|
Dr. Michael
Dent, Chief Executive Officer and Chairman
(3)
|
|
|
59,215,435
|
|
|
|
53.62
|
%
|
George
O’Leary, Chief Financial Officer, Chief Operating Officer and Director
(4)
|
|
|
2,850,000
|
|
|
|
2.80
|
%
|
All officers and directors as a group (2 persons)
|
|
|
62,065,435
|
|
|
|
56.55
|
%
|
5% Stockholders:
|
|
|
|
|
|
|
|
|
Urania Holdings LLC
(5)
|
|
|
5,620,000
|
|
|
|
5.49
|
%
|
Iconic Holdings, LLC
(6)
|
|
|
10,096,747
|
|
|
|
9.99
|
%
|
|
(1)
|
Under
Rule 13d-3 of the Exchange Act of 1934, as amended (the “Exchange Act”),
a beneficial owner of a security includes any person who, directly or indirectly, through
any contract, arrangement, understanding, relationship or otherwise has or shares: (i)
voting power, which includes the power to vote or to direct the voting of shares; and
(ii) investment power, which includes the power to dispose or direct the disposition
of shares. Certain shares may be deemed to be beneficially owned by more than one person
(if, for example, persons share the power to vote or the power to dispose of the shares).
In addition, shares are deemed to be beneficially owned by a person if the person has
the right to acquire the shares (for example, upon exercise of an option) within 60 days
of the date as of which the information is provided. In computing the percentage ownership
of any person, the amount of shares outstanding is deemed to include the amount of shares
beneficially owned by such person (and only such person) by reason of these acquisition
rights.
|
|
(2)
|
Based
on 101,068,541 shares of common stock issued and outstanding as of June 13, 2019.
|
|
(3)
|
Includes
2,953,640 shares of common stock held by Dr. Dent directly, 46,900,000 shares of common
stock held in the name of Mary S. Dent Gifting Trust Common, 8,678,462 shares of common
stock issuable upon exercise of warrants, and 683,333 vested employee stock options.
Excludes 316,667 employee stock options which are subject to future vesting requirements
and are not expected to vest within 60 days of June 13, 2019.
|
|
(4)
|
Includes
2,100,000 shares of common stock held by SKS Consulting of South Florida Corp., a corporation
directly controlled by George O’Leary, 100,000 shares of common stock held by George
O’Leary directly, and 650,000 vested employee stock options. Excludes 1,150,000
employee stock options which are subject to future vesting requirements and are not expected
to vest within 60 days of June 13, 2019.
|
|
(5)
|
The
address of this beneficial owner is 1405 Estuary Trail, Delray Beach, Florida 33483.
Chris Salamone, as Chief Executive Officer of Urania Holdings LLC, holds voting and dispositive
power over the securities of the Company held by Urania Holdings LLC. Includes 4,370,000
shares of common stock and 1,250,000 shares of common stock issuable upon exercise of
warrants.
|
|
(6)
|
The
address of this beneficial owner is 2251 San Diego Ave, #B150, San Diego CA 92110. Michael
Sobeck as the Managing Member of Iconic Holdings, LLC holds voting and dispositive power
over the securities of the Company held by Iconic Holdings, LLC. Includes (i) 9,479,643
shares of common stock issuable upon conversion of the Iconic Convertible Notes, each
of which are subject to a 9.99% beneficial ownership limitation, and (ii) up to 617,104
shares issuable under warrants with 9.99% beneficial ownership limitation. Does not include
(i) 15,602,340 shares of common stock issuable under warrants with 9.99% beneficial ownership
limitation and (ii) up to 15,640,478 shares of common stock issuable under the Investment
Agreement, which are subject to a 9.99% beneficial ownership limitation.
|
SELLING
STOCKHOLDER
This
prospectus covers the resale, from time to time, of up to 21,000,000 shares of common stock issuable to Iconic under the Investment
Agreement. We are registering the shares hereby pursuant to the terms of a registration rights agreement between us and Iconic,
in order to permit it to offer the shares for resale from time to time. Except as described in the registration statement of which
this prospectus forms a part, there is no relationship between us and Iconic.
|
|
Number of Shares
|
|
|
Number of
|
|
|
Number of Shares
|
|
|
|
Beneficially Owned
|
|
|
Shares
|
|
|
Beneficially Owned
|
|
|
|
Prior to this Offering
|
|
|
Being
|
|
|
After this Offering (2)
|
|
Selling Stockholder
|
|
Number
|
|
|
Percent (1)
|
|
|
Offered
|
|
|
Number
|
|
|
Percent (1)
|
|
Iconic Holdings, LLC (3)
|
|
|
10,096,747
|
(4)
|
|
|
9.99
|
%
|
|
|
21,000,000
|
|
|
|
11,659,231
|
(5)
|
|
|
9.99
|
%
|
|
(1)
|
Applicable
percentage ownership is based on 101,068,541 shares of common stock outstanding as of
June 13, 2019. “Beneficial ownership” includes shares for which an individual,
directly or indirectly, has or shares voting or investment power, or both. Unless otherwise
indicated, all of the listed persons have sole voting and investment power over the shares
listed opposite their names. Beneficial ownership as reported in the above table has
been determined in accordance with Rule 13d-3 of the Exchange Act. In computing
the percentage ownership of any person, the amount of shares outstanding is deemed to
include the amount of shares beneficially owned by such person (and only such person)
by reason of these acquisition rights.
|
|
(2)
|
We
have assumed that the selling stockholder will sell all of the shares being offered in
this offering.
|
|
(3)
|
The
address of this selling stockholder is 2251 San Diego Ave, #B150, San Diego CA 92110.
Michael Sobeck as the Managing Member of Iconic Holdings, LLC holds voting and dispositive
power over the securities of the Company held by Iconic Holdings, LLC.
|
|
(4)
|
Beneficial
ownership prior to the offering includes (i) 9,479,643 shares of common stock issuable
upon conversion of the Iconic Convertible Notes, each of which are subject to a 9.99%
beneficial ownership limitation, and (ii) up to 317,143 shares issuable under warrants
with 9.99% beneficial ownership limitation. Does not include (i) 15,602,340 shares of
common stock issuable under warrants with 9.99% beneficial ownership limitation and (ii)
up to 15,640,478 shares of common stock issuable under the Investment Agreement, which
are subject to a 9.99% beneficial ownership limitation..
|
|
(5)
|
Beneficial
ownership following the offering includes (i) 9,479,643 shares of common stock issuable
upon conversion of the Convertible Notes, and (ii) 2,179,588 shares of common stock issuable
under warrants, which are subject to a 9.99% beneficial ownership limitation. Excludes
14,039,856 shares issuable under the warrants.
|
DESCRIPTION
OF SECURITIES
Authorized
and Outstanding Capital Stock
We have authorized 500,000,000
shares of common stock, par value $0.0001, 101,068,541 of which are currently issued and outstanding. We currently have 20,000,000
shares of “blank check” preferred stock. We had previously designated and issued 2,953,640 shares of Series A Preferred
Stock in September 2014, however these shares were converted to common stock on July 30, 2016.
Common
Stock
The
holders of our common stock are entitled to one vote per share. In addition, the holders of our common stock will be entitled
to receive ratably dividends, if any, declared by our board of directors out of legally available funds; however, the current
policy of our board of directors is to retain earnings, if any, for operations and growth. Upon liquidation, dissolution or winding-up,
the holders of our common stock will be entitled to share ratably in all assets that are legally available for distribution. The
holders of our common stock will have no preemptive, subscription, redemption or conversion rights. The rights, preferences and
privileges of holders of our common stock will be subject to, and may be adversely affected by, the rights of the holders of any
series of preferred stock, which may be designated solely by action of our board of directors and issued in the future.
Blank
Check Preferred Stock
Our
board of directors will be authorized, subject to any limitations prescribed by law, without further vote or action by our stockholders,
to issue from time to time shares of preferred stock in one or more series. Each series of preferred stock will have the number
of shares, designations, preferences, voting powers, qualifications and special or relative rights or privileges as shall be determined
by our board of directors, which may include, among others, dividend rights, voting rights, liquidation preferences, conversion
rights and preemptive rights.
Warrants
On
March 22, 2017, the Company entered into the Amended Investment Agreement whereby the parties have agreed to modify the terms
of 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 shall grant, and has granted, to the investor warrants to purchase an aggregate of seven million shares
of common stock. The warrants shall have 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.
In
connection with the Investment Agreement, we also issued to Iconic a warrant to purchase up to 6,111,111 shares of our common
stock, at an exercise price of $0.09 per share. The warrant shall expire on July 11, 2021 and shall have a “cashless”
exercise provision. The warrant has a 4.99% beneficial ownership limitation which may be adjusted at the holder’s request
to a 9.99% beneficial ownership limitation upon 61 days’ notice.
On
January 2, 2015, NWC agreed to issue to Dr. Dent 2,000,000 ten-year warrants to purchase common shares at an exercise price of
$0.05 per share as compensation for interest accrued on loans made by Dr. Dent to NWC. The warrants had a fair value of $52,847.
In
July 2016, we issued to investors five-year warrants to purchase up to 2,187,500 shares of common stock at an exercise price of
$0.10 per share.
In
July 2016 we issued Delaney five year warrants to purchase 277,778 shares of commons stock at an exercise price of $0.09, in exchange
for services provided.
In
February 2017 we issued the counterparty in the Investment Agreement a warrant to purchase up to 500,000 shares of our common
stock, at an exercise price of $0.15 per share. The warrant shall expire on February 10, 2020 and shall have a “cashless”
exercise provision. The warrant has a 9.99% beneficial ownership limitation.
On
March 22, 2017, we granted to Iconic five-year 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. We also issued to a third party five-year fee warrants to purchase 200,000 shares
of our common stock at an exercise price of $0.25 per share, 100,000 shares of our common stock at an exercise price of $0.50
per share, and 50,000 shares of our common stock at an exercise price of $1.00 per share.
On
May 22, 2017, in connection with the issuance of the $111k Note, we issued to Iconic a five-year warrant to purchase 133,333 shares
of our common stock at an exercise price of $0.75 per share. We also issued to a third party a five-year fee warrant to purchase
6,667 shares of our common stock at an exercise price of $0.75 per share.
On
August 8, 2017, in exchange for a five-year warrant to purchase 1,000,000 shares of common stock at an exercise price of $0.30
per share, Iconic agreed to (i) extend the maturity date of the Secured Note until July 7, 2018, and (ii) extend the maturity
date of the Fee Note until July 11, 2018.
During
October 2017, we sold 1,461,111 shares of common stock in private placement transactions to 3 investors at a share price between
$0.18 and $0.20 per share. In connection with the stock sales, we also issued 959,998 five-year warrants to purchase shares of
common stock at an exercise price of $0.30 per share.
On
January 11, 2018, we sold 588,235 shares of common stock in a private placement transaction to an investor and received $50,000
in proceeds from the sale. The shares were issued at a share price of $0.085 per share. In connection with the stock sale, we
also issued 588,235 five-year warrants to purchase shares of common stock at an exercise price of $0.15 per share.
On
February 12, 2018, we issued a warrant to purchase 6,678,462 shares of common stock to Dr. Michael Dent as an inducement to (i)
extend the maturity dates of up to $439,450 loaned by Dr. Dent to us in 2017 and 2018 in the form of unsecured promissory notes,
including $75,000 loaned from Dr. Dent to us in January 2018 to allow us to retire an existing convertible promissory note payable
before such convertible promissory note became eligible for conversion, and (ii) provide continued loans to us. 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.
On
February 28, 2018, we sold 2,352,942 shares of common stock in private placement transactions to two investors and received $200,000
in proceeds from the sale. The shares were issued at a share price of $0.085 per share. In connection with the stock sales, we
also issued to the investors 1,764,706 five-year warrants to purchase shares of common stock at an exercise price of $0.15 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, Iconic agreed to extend the maturity date of the $111k Note until July 11, 2018.
On
May 10, 2018, we 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, we also
issued 50,000 five-year warrants to purchase shares of common stock at an exercise price of $0.25 per share.
On
June 6, 2018, we 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
June 14, 2018, we 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, we also
issued 104,000 five-year warrants to purchase shares of common stock at an exercise price of $0.35 per share.
On
July 11, 2018, we 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 of our common shares at an exercise price of $0.25, and
(ii) a three-year warrant to purchase 300,000 of our common shares at an exercise price of $0.50.
On
July 13, 2018, we 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 of our common shares at an exercise price of $0.25, and (ii) three-year
warrant to purchase 75,000 of our common shares at an exercise price of $0.50.
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.
On
August 15, 2018, we sold 285,714 shares of common stock in a private placement transaction 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, we also
issued 142,857 five-year warrants to purchase shares of common stock at an exercise price of $0.45 per share.
On
August 20, 2018, we 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.
On
October 31, 2018, the holder of the $171.5k Note agreed to extend the maturity date from the original date of October 26, 2018
until December 31, 2019 in exchange for (i) a three-year warrant to purchase 75,000 shares of Company common stock at an exercise
price of $0.25 per share, and (ii) a three-year warrant to purchase 25,000 shares of Company common stock at an exercise price
of $0.50 per share.
On
December 6, 2018, the Company granted three-year warrants to purchase 240,000 shares at an exercise price of $0.20 per share to
the advisors for services to be provided over an additional three-month period.
On
February 28, 2019, we sold 133,334 shares of common stock in a private placement transaction to an investor and received $40,000
in proceeds from the sale. In connection with the stock sale, we also issued 66,667 five-year warrants to purchase shares of common
stock at an exercise price of $0.40 per share.
On
March 6, 2019, the Company granted three-year warrants to purchase 180,000 shares at an exercise price of $0.35 per share to the
advisors for services to be provided over an additional three-month period.
On
March 7, 2019, we sold 1,000,000 shares of common stock in a private placement transaction to an investor and received $300,000
in proceeds from the sale. In connection with the stock sale, we also issued 500,000 five-year warrants to purchase shares of
common stock at an exercise price of $0.40 per share and 250,000 five-year warrants to purchase shares of common stock at an exercise
price of $0.50 per share.
On
April 12, 2019, we issued 600,000 five year warrants to purchase shares of common stock at an exercise price of $0.25 per share
in connection with a $357,500 convertible promissory note.
Convertible
Notes
In
connection with the Investment Agreement, we issued the Secured Note due April 11, 2017 in the principal amount of $550,000. At
any time and from time to time, the holder of the Secured Note may convert, in whole or in part, the outstanding and unpaid principal
amount under the Secured Note into shares of the Company’s common stock at a conversion price of $0.08 per share. In addition,
we also issued the Fee Note due July 11, 2017 in the principal amount of $50,000. The holder of the Fee Note also has the right
to, at the holder’s sole option, at any time and from time to time, to convert in whole or in part the outstanding and unpaid
principal amount under the Fee Note into shares of the Company’s common stock at a conversion price of $0.10 per share.
The Convertible Notes have a 9.99% beneficial ownership limitation. The Secured Note matures on July 7, 2018 and the Fee Note
matures on July 11, 2018.
On
May 22, 2017, we entered into the $111k Note, which matures on July 11, 2018. The $111k Note is convertible into shares of our
common stock at the discretion of the note holder at a fixed price of $0.35 per share, and is secured by all of our assets.
On
November 19, 2018, the Company entered into a securities purchase agreement for the sale of a $153,000 convertible note (the “$153k
Note”). The $153k Note included $3,000 fees for net proceeds of $150,000. The $153k Note has an interest rate of 10% and
a default interest rate of 22% and matures on August 19, 2019. The $153k 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 25% discount to the lowest bid or trading price of the Company’s common stock
during the ten (10) 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 January 14, 2019, the
Company entered into a securities purchase agreement for the sale of a $78,000 convertible note (the “$78k Note”).
The $78k Note included $3,000 fees for net proceeds of $75,000. The $78k Note has an interest rate of 10% and a default interest
rate of 24% and matures on October 14, 2019. The $78k 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 25% discount to the lowest bid or trading price of the Company’s common stock during the ten
(10) 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
January 24, 2019, the Company entered into a securities purchase agreement for the sale of a $78,000 convertible note (the “$78k
Note II”). The $78k Note II included $3,000 fees for net proceeds of $75,000. The $78k Note II has an interest rate of 10%
and a default interest rate of 22% and matures on November 15, 2019. The $78k 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.
On
April 3, 2019, the Company entered into a securities purchase agreement for the sale of a $103,000 convertible note (the “$103k
Note III”). The $103k Note III included $3,000 fees for net proceeds of $100,000. The $103k Note III has an interest rate
of 10% and a default interest rate of 22% and matures on February 28, 2020. The $103k 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.
On
April 11, 2019, the Company entered into securities purchase agreements for the sale of two identical convertible notes with an
aggregate face value of $209,000 (the “$209k Notes”). The $209k Notes included $9,000 fees for net proceeds of $200,000.
The $209k Notes have an interest rate of 10% and a default interest rate of 22%, mature on April 11, 2020, and 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 25% discount to the lowest bid or trading price of
the Company’s common stock during the ten (10) trading days prior to the conversion date. In connection with the $209k Notes,
the Company also issued to the holder 25,000 shares of Company common stock valued at $6,250, which was recorded to equity. 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
April 15, 2019, the Company issued a fixed convertible note with a face value of $357,500 (the “$357.5k Note”). The
$357.5k Note included $32,500 fees for net proceeds of $325,000. The $357.5k Note has an interest rate of 10%, matures on December
31, 2019, and may be converted into common stock of the Company by the holder at any time, subject to a 9.99% beneficial ownership
limitation, at a fixed conversion price per share of $0.20, or 1,787,500 shares. At inception, the investors were also granted
a five-year warrant to purchase 600,000 shares of the Company’s common stock at an exercise price of $0.25 per share. Upon
an event of default, 140% of the outstanding principal and any interest due amount shall be immediately due and the conversion
price resets 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.
On
May 7, 2019, the Company entered into a securities purchase agreement for the sale of a $103,000 convertible note (the “$103k
Note IV”). The $103k Note IV included $3,000 fees for net proceeds of $100,000. The $103k Note IV has an interest rate of
10% and a default interest rate of 22% and matures on February 28, 2020. The $103k Note IV may be converted into common stock
of the Company by the holder at any time after the 6-month anniversary of the issuance date, subject to a 4.99% beneficial ownership
limitation, at a conversion price per share equal to a 39% discount to the lowest bid or trading price of the Company’s
common stock during the fifteen (15) trading days prior to the conversion date. Upon an event of default caused by the Company’s
failure to deliver shares upon a conversion pursuant to the terms of the note, 300% of the outstanding principal and any interest
due amount shall be immediately due. Upon an event of default caused by the Company’s breach of any other events of default
specified in the note, 150% of the outstanding principal and any interest due amount shall be immediately due.
On
June 3, 2019, the Company entered into a securities purchase agreement for the sale of a $154,000 convertible note (the “$154k
Note”). The $154k Note included $4,000 fees for net proceeds of $150,000. The $154k Note has an interest rate of 10% and
a default interest rate of 22% and matures on February 28, 2020. The $154k 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, 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
PLAN
OF DISTRIBUTION
We
are registering 21,000,000 shares of common stock under this prospectus on behalf of Iconic. Except as described below, to our
knowledge, the selling stockholder has not entered into any agreement, arrangement or understanding with any particular broker
or market maker with respect to the shares of common stock offered hereby, nor, except as described below, do we know the identity
of any brokers or market makers that may participate in the sale of the shares.
The
selling stockholder may decide not to sell any shares. The selling stockholder may from time to time offer some or all of the
shares of common stock through brokers, dealers or agents who may receive compensation in the form of discounts, concessions or
commissions from the selling stockholder and/or the purchasers of the shares of common stock for whom they may act as agent. In
effecting sales, broker-dealers that are engaged by the selling stockholder may arrange for other broker-dealers to participate.
Iconic is an “underwriter” within the meaning of the Securities Act. Any brokers, dealers or agents who participate
in the distribution of the shares of common stock may also be deemed to be “underwriters,” and any profits on the
sale of the shares of common stock by them and any discounts, commissions or concessions received by any such brokers, dealers
or agents may be deemed to be underwriting discounts and commissions under the Securities Act. Iconic has advised us that it may
effect resales of our common stock through any one or more registered broker-dealers. Because the selling stockholder is deemed
to be an underwriter, the selling stockholder will be subject to the prospectus delivery requirements of the Securities Act and
may be subject to certain statutory liabilities of, including but not limited to, Sections 11, 12 and 17 of the Securities Act
and Rule 10b-5 under the Securities Exchange Act of 1934, as amended, or the Exchange Act.
The
selling stockholder will act independently of us in making decisions with respect to the timing, manner and size of each sale.
Such sales may be made over the OTCQB at then prevailing market prices, at prices related to prevailing market prices or at privately
negotiated prices. The shares of common stock may be sold according to one or more of the following methods:
|
●
|
a
block trade in which the broker or dealer so engaged will attempt to sell the shares
of common stock as agent but may position and resell a portion of the block as principal
to facilitate the transaction;
|
|
●
|
purchases
by a broker or dealer as principal and resale by such broker or dealer for its account
pursuant to this prospectus;
|
|
●
|
ordinary
brokerage transactions and transactions in which the broker solicits purchasers;
|
|
●
|
privately
negotiated transactions;
|
|
●
|
a
combination of such methods of sale; and
|
|
●
|
any
other method permitted pursuant to applicable law.
|
Any
shares covered by this prospectus which qualify for sale pursuant to Rule 144 of the Securities Act may be sold under Rule 144
rather than pursuant to this prospectus. In addition, the selling stockholder may transfer the shares by other means not described
in this prospectus.
Any
broker-dealer participating in such transactions as agent may receive commissions from Iconic (and, if they act as agent for the
purchaser of such shares, from such purchaser). Broker-dealers may agree with Iconic to sell a specified number of shares at a
stipulated price per share, and, to the extent such a broker-dealer is unable to do so acting as agent for Iconic, to purchase
as principal any unsold shares at the price required to fulfill the broker-dealer commitment to Iconic. Broker-dealers who acquire
shares as principal may thereafter resell such shares from time to time in transactions (which may involve crosses and block transactions
and which may involve sales to and through other broker-dealers, including transactions of the nature described above) on the
Nasdaq Capital Market, on the over-the-counter market, in privately-negotiated transactions or otherwise at market prices prevailing
at the time of sale or at negotiated prices, and in connection with such resales may pay to or receive from the purchasers of
such shares commissions computed as described above. To the extent required under the Securities Act, an amendment to this prospectus,
or a supplemental prospectus will be filed, disclosing:
|
●
|
the
name of any such broker-dealers;
|
|
●
|
the
number of shares involved;
|
|
●
|
the
price at which such shares are to be sold;
|
|
●
|
the
commission paid or discounts or concessions allowed to such broker-dealers, where applicable;
|
|
●
|
that
such broker-dealers did not conduct any investigation to verify the information set out
or incorporated by reference in this prospectus, as supplemented; and
|
|
●
|
other
facts material to the transaction.
|
Underwriters
and purchasers that are deemed underwriters under the Securities Act may engage in transactions that stabilize, maintain or otherwise
affect the price of the securities, including the entry of stabilizing bids or syndicate covering transactions or the imposition
of penalty bids. Iconic and any other persons participating in the sale or distribution of the shares will be subject to the applicable
provisions of the Exchange Act and the rules and regulations thereunder including, without limitation, Regulation M. These provisions
may restrict certain activities of, and limit the timing of, purchases by the selling stockholder or other persons or entities.
Furthermore, under Regulation M, persons engaged in a distribution of securities are prohibited from simultaneously engaging in
market making and certain other activities with respect to such securities for a specified period of time prior to the commencement
of such distributions, subject to special exceptions or exemptions. Regulation M may restrict the ability of any person engaged
in the distribution of the securities to engage in market-making and certain other activities with respect to those securities.
In addition, the anti-manipulation rules under the Exchange Act may apply to sales of the securities in the market. All of these
limitations may affect the marketability of the shares and the ability of any person to engage in market-making activities with
respect to the securities.
We
have agreed to pay the expenses of registering the shares of common stock under the Securities Act, including registration and
filing fees, printing expenses, administrative expenses and certain legal and accounting fees. The selling stockholder will bear
all discounts, commissions or other amounts payable to underwriters, dealers or agents, as well as transfer taxes and certain
other expenses associated with the sale of securities.
Under
the terms of the registration rights agreement with Iconic, we have agreed to indemnify the selling stockholder and certain other
persons against certain liabilities in connection with the offering of the shares of common stock offered hereby, including liabilities
arising under the Securities Act or, if such indemnity is unavailable, to contribute toward amounts required to be paid in respect
of such liabilities.
At
any time a particular offer of the shares of common stock is made, a revised prospectus or prospectus supplement, if required,
will be distributed. Such prospectus supplement or post-effective amendment will be filed with the SEC, to reflect the disclosure
of required additional information with respect to the distribution of the shares of common stock. We may suspend the sale of
shares by the selling stockholder pursuant to this prospectus for certain periods of time for certain reasons, including if the
prospectus is required to be supplemented or amended to include additional material information.
LEGAL
MATTERS
Sheppard,
Mullin, Richter & Hampton LLP, New York, New York, has passed upon the validity of the shares of our Common Stock to be sold
in this offering.
EXPERTS
Our
audited financial statements as of December 31, 2018 and 2017 have been included in this prospectus in reliance on the report
of RBSM LLP, an independent registered public accounting firm appearing elsewhere herein given on the authority of said firm as
experts in auditing and accounting.
WHERE
YOU CAN FIND ADDITIONAL INFORMATION
We
have filed with the SEC a registration statement on Form S-1, together with any amendments and related exhibits, under the Securities
Act with respect to our shares of common stock offered by this prospectus. The registration statement contains additional information
about us and the shares of common stock that we are offering in this prospectus.
We
file annual, quarterly and current reports and other information with the SEC under the Exchange Act. Such reports and other information
filed by the Company with the SEC are available free of charge on the SEC’s website. You may also request a copy of those
filings, excluding exhibits, from us at no cost. These requests should be addressed to us at: George O’Leary, Chief Financial
Officer, HealthLynked Corp., 1726 Medical Blvd Suite 101, Naples, Florida 34110 and our telephone number is: 239-513-1992.
The public may read and copy any materials filed by the Company with the SEC at the SEC’s Public Reference Room at 100 F
Street, NE, Room 1580, Washington, DC 20549. The public may obtain information on the operation of the Public Reference Room by
calling the SEC at 1-800-SEC-0330. The SEC maintains an Internet site that contains reports, proxy and information statements
and other information regarding issuers that file electronically with the SEC at
www.sec.gov
. The contents of these
websites are not incorporated into this filing by reference. Further, the Company’s references to the URLs for these websites
are intended to be inactive textual references only.
INDEX TO FINANCIAL
STATEMENTS
Report
of Independent Registered Public Accounting Firm
To
the Board of Directors and Shareholders of
Healthlynked
Corporation
Opinion
on the Financial Statements
We
have audited the accompanying consolidated balance sheets of Healthlynked Corporation (the “Company”), as of December
31, 2018 and 2017, and the related consolidated statements of operations, stockholders’ equity and cash flows for each of
the two years in the period ended December 31, 2018 and the related notes (collectively referred to as the “consolidated
financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects,
the financial position of the Company as of December 31, 2018 and 2017, and the results of its operations and its cash flows for
each of the two years in the period ended December 31, 2018, in conformity with accounting principles generally accepted in the
United States of America.
The
Company’s Ability to Continue as a Going Concern
The
accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern. As discussed
in Note 3 to the accompanying consolidated financial statements, the Company has suffered recurring losses from operations, generated
negative cash flows from operating activities, has an accumulated deficit and has stated that substantial doubt exists about Company’s
ability to continue as a going concern. Management’s evaluation of the events and conditions and management’s plans
in regarding these matters are also described in Note 3. The consolidated financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
Basis
for Opinion
These
consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the Public
Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance
with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the
PCAOB.
We
conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error
or fraud. The company is not required to have, nor were we engaged to perform, an audit of the Company’s internal control
over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial
reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over
financial reporting. Accordingly, we express no such opinion.
Our
audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to
error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence
regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles
used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.
We believe that our audits provide a reasonable basis for our opinion.
/s/
RBSM LLP
We
have served as the Company’s auditor since 2014.
New
York, New York
April
1, 2019
|
HEALTHLYNKED
CORPORATION
CONSOLIDATED
BALANCE SHEETS
|
|
December 31,
|
|
|
|
2018
|
|
|
2017
|
|
ASSETS
|
|
|
|
|
|
|
Current Assets
|
|
|
|
|
|
|
Cash
|
|
$
|
135,778
|
|
|
$
|
50,006
|
|
Accounts receivable, net of allowance for doubtful accounts of $13,972
and $-0- as of December 31, 2018 and 2017, respectively
|
|
|
114,884
|
|
|
|
113,349
|
|
Prepaid expenses
|
|
|
28,542
|
|
|
|
81,892
|
|
Deferred offering costs
|
|
|
96,022
|
|
|
|
121,620
|
|
Total Current Assets
|
|
|
375,226
|
|
|
|
366,867
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment, net of accumulated depreciation of $752,173
and $728,391 as of December 31, 2018 and 2017, respectively
|
|
|
42,597
|
|
|
|
63,376
|
|
Deposits
|
|
|
9,540
|
|
|
|
9,540
|
|
|
|
|
|
|
|
|
|
|
Total Assets
|
|
$
|
427,363
|
|
|
$
|
439,783
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS’ DEFICIT
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Liabilities
|
|
|
|
|
|
|
|
|
Accounts payable and accrued expenses
|
|
$
|
394,333
|
|
|
$
|
253,514
|
|
Capital lease, current portion
|
|
|
19,877
|
|
|
|
18,348
|
|
Due to related party, current portion
|
|
|
429,717
|
|
|
|
363,845
|
|
Notes payable to related party, current portion
|
|
|
672,471
|
|
|
|
553,550
|
|
Notes payable, net of original issue discount and debt discount of $-0
and $26,881 as of December 31, 2018 and 2017, respectively
|
|
|
---
|
|
|
|
70,186
|
|
Convertible notes payable, net of original issue discount and debt discount
of $386,473 and $266,642 as of December 31, 2018 and 2017, respectively
|
|
|
1,042,314
|
|
|
|
811,858
|
|
Derivative financial instruments
|
|
|
800,440
|
|
|
|
398,489
|
|
Total Current Liabilities
|
|
|
3,359,152
|
|
|
|
2,469,790
|
|
|
|
|
|
|
|
|
|
|
Long-Term Liabilities
|
|
|
|
|
|
|
|
|
Capital leases, long-term portion
|
|
|
3,058
|
|
|
|
21,406
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities
|
|
|
3,362,210
|
|
|
|
2,491,196
|
|
|
|
|
|
|
|
|
|
|
Shareholders’ Deficit
|
|
|
|
|
|
|
|
|
Common stock, par value $0.0001 per share, 500,000,000 shares authorized,
85,178,902 and 72,302,937 shares issued and outstanding as of December 31, 2018 and 2017, respectively
|
|
|
8,518
|
|
|
|
7,230
|
|
Common stock issuable, $0.0001 par value; 114,080 and 122,101 shares as
of December 31, 2018 and 2017, respectively
|
|
|
26,137
|
|
|
|
8,276
|
|
Additional paid-in capital
|
|
|
7,531,553
|
|
|
|
2,638,311
|
|
Accumulated deficit
|
|
|
(10,501,055
|
)
|
|
|
(4,705,230
|
)
|
Total Shareholders’ Deficit
|
|
|
(2,934,847
|
)
|
|
|
(2,051,413
|
)
|
|
|
|
|
|
|
|
|
|
Total Liabilities and Shareholders’ Deficit
|
|
$
|
427,363
|
|
|
$
|
439,783
|
|
See
the accompanying notes to these Consolidated Financial Statements
HEALTHLYNKED
CORPORATION
CONSOLIDATED
STATEMENT OF OPERATIONS
|
|
Years Ended December 31,
|
|
|
|
2018
|
|
|
2017
|
|
Revenue
|
|
|
|
|
|
|
Patient service revenue, net
|
|
$
|
2,259,002
|
|
|
$
|
2,103,579
|
|
|
|
|
|
|
|
|
|
|
Operating Expenses
|
|
|
|
|
|
|
|
|
Salaries and benefits
|
|
|
2,366,582
|
|
|
|
2,022,445
|
|
General and administrative
|
|
|
2,840,784
|
|
|
|
1,848,866
|
|
Depreciation and amortization
|
|
|
23,782
|
|
|
|
23,606
|
|
Total Operating Expenses
|
|
|
5,231,148
|
|
|
|
3,894,917
|
|
|
|
|
|
|
|
|
|
|
Loss from operations
|
|
|
(2,972,146
|
)
|
|
|
(1,791,338
|
)
|
|
|
|
|
|
|
|
|
|
Other Income (Expenses)
|
|
|
|
|
|
|
|
|
Loss on extinguishment of debt
|
|
|
(393,123
|
)
|
|
|
(290,581
|
)
|
Change in fair value of debt
|
|
|
(140,789
|
)
|
|
|
---
|
|
Financing cost
|
|
|
(1,221,911
|
)
|
|
|
(72,956
|
)
|
Amortization of original issue and debt discounts on notes payable and convertible notes
|
|
|
(763,616
|
)
|
|
|
(330,435
|
)
|
Change in fair value of derivative financial instrument
|
|
|
(106,141
|
)
|
|
|
3,967
|
|
Interest expense
|
|
|
(193,109
|
)
|
|
|
(99,668
|
)
|
Total other expenses
|
|
|
(2,818,689
|
)
|
|
|
(789,673
|
)
|
|
|
|
|
|
|
|
|
|
Net loss before provision for income taxes
|
|
|
(5,790,835
|
)
|
|
|
(2,581,011
|
)
|
|
|
|
|
|
|
|
|
|
Provision for income taxes
|
|
|
---
|
|
|
|
---
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(5,790,835
|
)
|
|
$
|
(2,581,011
|
)
|
|
|
|
|
|
|
|
|
|
Net loss per share, basic and diluted:
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
(0.07
|
)
|
|
$
|
(0.04
|
)
|
Fully diluted
|
|
$
|
(0.07
|
)
|
|
$
|
(0.04
|
)
|
|
|
|
|
|
|
|
|
|
Weighted average number of common shares:
|
|
|
|
|
|
|
|
|
Basic
|
|
|
78,816,272
|
|
|
|
69,560,481
|
|
Fully diluted
|
|
|
78,816,272
|
|
|
|
69,560,481
|
|
See
the accompanying notes to these Consolidated Financial Statements
HEALTHLYNKED
CORPORATION
CONSOLIDATED
STATEMENT OF CHANGES IN SHAREHOLDERS’ DEFICIT
YEARS
ENDED DECEMBER 31, 2018 AND 2017
|
|
Number of Shares
|
|
|
|
|
|
Common
|
|
|
Additional
|
|
|
|
|
|
Total
|
|
|
|
Common
|
|
|
Common
|
|
|
Stock
|
|
|
Paid-in
|
|
|
Accumulated
|
|
|
Shareholders’
|
|
|
|
Stock
|
|
|
Stock
|
|
|
Issuable
|
|
|
Capital
|
|
|
Deficit
|
|
|
Deficit
|
|
|
|
(#)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
Balance at December 31, 2016
|
|
|
65,753,640
|
|
|
|
6,575
|
|
|
|
6,451
|
|
|
|
1,199,511
|
|
|
|
(2,124,219
|
)
|
|
|
(911,682
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sale of common stock
|
|
|
6,096,197
|
|
|
|
610
|
|
|
|
---
|
|
|
|
758,654
|
|
|
|
---
|
|
|
|
759,264
|
|
Fair value of warrants allocated to proceeds of common
stock
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
89,376
|
|
|
|
---
|
|
|
|
89,376
|
|
Fair value of warrants allocated to proceeds of convertible
notes payable
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
73,696
|
|
|
|
---
|
|
|
|
73,696
|
|
Fair value of warrants issued pursuant to Amended Investment
Agreement
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
153,625
|
|
|
|
---
|
|
|
|
153,625
|
|
Fair value of warrants issued to extend convertible notes
payable
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
290,581
|
|
|
|
---
|
|
|
|
290,581
|
|
Consultant fees payable with common shares and warrants
|
|
|
276,850
|
|
|
|
28
|
|
|
|
1,817
|
|
|
|
52,083
|
|
|
|
---
|
|
|
|
53,928
|
|
Shares and options issued pursuant to employee equity
incentive plan
|
|
|
176,250
|
|
|
|
17
|
|
|
|
8
|
|
|
|
20,785
|
|
|
|
---
|
|
|
|
20,810
|
|
Net loss
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
(2,581,011
|
)
|
|
|
(2,581,011
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
|
9,875,228
|
|
|
|
988
|
|
|
|
---
|
|
|
|
2,450,180
|
|
|
|
---
|
|
|
|
2,451,168
|
|
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
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
337,466
|
|
|
|
---
|
|
|
|
337,466
|
|
Fair value of warrants issued to extend convertible notes
payable
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
229,900
|
|
|
|
---
|
|
|
|
229,900
|
|
Fair value of warrants issued to retire convertible notes
payable
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
143,014
|
|
|
|
---
|
|
|
|
143,014
|
|
Shares issued with convertible notes payable
|
|
|
35,000
|
|
|
|
4
|
|
|
|
---
|
|
|
|
5,593
|
|
|
|
---
|
|
|
|
5,597
|
|
Fair value of warrants issued for professional services
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
296,447
|
|
|
|
---
|
|
|
|
296,447
|
|
Derivative liabilities transferred to additional paid-in
capital
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
2,783,372
|
|
|
|
---
|
|
|
|
2,783,372
|
|
Conversion of convertible notes payable to common stock
|
|
|
384,839
|
|
|
|
38
|
|
|
|
---
|
|
|
|
42,173
|
|
|
|
---
|
|
|
|
42,211
|
|
Derivative liabilities reclassified into additional paid
in capital for convertible notes payable conversion into shares
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
63,549
|
|
|
|
---
|
|
|
|
63,549
|
|
Consultant fees payable with common shares and warrants
|
|
|
277,147
|
|
|
|
28
|
|
|
|
17,869
|
|
|
|
31,660
|
|
|
|
---
|
|
|
|
49,557
|
|
Shares and options issued pursuant to employee equity
incentive plan
|
|
|
403,750
|
|
|
|
40
|
|
|
|
(8
|
)
|
|
|
102,598
|
|
|
|
---
|
|
|
|
102,630
|
|
Exercise of warrants
|
|
|
2,000,001
|
|
|
|
200
|
|
|
|
---
|
|
|
|
(200
|
)
|
|
|
---
|
|
|
|
---
|
|
Repurchase and retirement of treasury shares
|
|
|
(100,000
|
)
|
|
|
(10
|
)
|
|
|
---
|
|
|
|
---
|
|
|
|
(4,990
|
)
|
|
|
(5,000
|
)
|
Net loss
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
(5,790,835
|
)
|
|
|
(5,790,835
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2018
|
|
|
85,178,902
|
|
|
|
8,518
|
|
|
|
26,137
|
|
|
|
7,531,553
|
|
|
|
(10,501,055
|
)
|
|
|
(2,934,847
|
)
|
See
the accompanying notes to these Consolidated Financial Statements
HEALTHLYNKED
CORPORATION
CONSOLIDATED
STATEMENT OF CASH FLOWS
|
|
Years Ended December 31,
|
|
|
|
2018
|
|
|
2017
|
|
Cash Flows from Operating Activities
|
|
|
|
|
|
|
Net loss
|
|
$
|
(5,790,835
|
)
|
|
$
|
(2,581,011
|
)
|
Adjustments to reconcile net loss to net cash used in operating activities:
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
23,782
|
|
|
|
23,606
|
|
Stock based compensation, including amortization of prepaid fees
|
|
|
474,231
|
|
|
|
106,743
|
|
Amortization of original issue discount and debt discount on convertible
notes
|
|
|
763,616
|
|
|
|
330,435
|
|
Financing cost
|
|
|
1,221,911
|
|
|
|
72,956
|
|
Change in fair value of derivative financial instrument
|
|
|
106,141
|
|
|
|
(3,967
|
)
|
Loss on extinguishment of debt
|
|
|
393,123
|
|
|
|
290,581
|
|
Change in fair value of debt
|
|
|
140,789
|
|
|
|
---
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
(1,535
|
)
|
|
|
33,525
|
|
Prepaid expenses and deposits
|
|
|
53,350
|
|
|
|
(38,347
|
)
|
Accounts payable and accrued expenses
|
|
|
193,400
|
|
|
|
105,042
|
|
Due to related party, current portion
|
|
|
65,841
|
|
|
|
41,168
|
|
Net cash used in operating activities
|
|
|
(2,356,186
|
)
|
|
|
(1,619,269
|
)
|
|
|
|
|
|
|
|
|
|
Cash Flows from Investing Activities
|
|
|
|
|
|
|
|
|
Acquisition of property and equipment
|
|
|
(3,002
|
)
|
|
|
(16,147
|
)
|
Net cash used in investing activities
|
|
|
(3,002
|
)
|
|
|
(16,147
|
)
|
|
|
|
|
|
|
|
|
|
Cash Flows from Financing Activities
|
|
|
|
|
|
|
|
|
Proceeds from sale of common stock
|
|
|
2,632,956
|
|
|
|
848,639
|
|
Proceeds from issuance of convertible notes
|
|
|
1,255,500
|
|
|
|
429,500
|
|
Repayment of convertible notes
|
|
|
(1,388,560
|
)
|
|
|
---
|
|
Proceeds from related party loans
|
|
|
101,450
|
|
|
|
338,470
|
|
Repayment of related party loans
|
|
|
(9,000
|
)
|
|
|
(11,192
|
)
|
Proceeds from notes payable and bank loans
|
|
|
73,500
|
|
|
|
148,510
|
|
Repayment of notes payable and bank loans
|
|
|
(199,067
|
)
|
|
|
(108,873
|
)
|
Payments on capital leases
|
|
|
(16,819
|
)
|
|
|
(18,348
|
)
|
Repurchase and retirement of treasury stock
|
|
|
(5,000
|
)
|
|
|
---
|
|
Net cash provided by financing activities
|
|
|
2,444,960
|
|
|
|
1,626,706
|
|
|
|
|
|
|
|
|
|
|
Net decrease in cash
|
|
|
85,772
|
|
|
|
(8,710
|
)
|
Cash, beginning of period
|
|
|
50,006
|
|
|
|
58,716
|
|
|
|
|
|
|
|
|
|
|
Cash, end of period
|
|
$
|
135,778
|
|
|
$
|
50,006
|
|
HEALTHLYNKED
CORPORATION
CONSOLIDATED
STATEMENT OF CASH FLOWS
|
|
Years Ended December 31,
|
|
|
|
2018
|
|
|
2017
|
|
|
|
|
|
|
|
|
Supplemental disclosure of cash flow information:
|
|
|
|
|
|
|
Cash paid during the period for interest
|
|
$
|
79,844
|
|
|
$
|
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
|
|
$
|
229,902
|
|
|
$
|
7,506
|
|
Fair value of beneficial conversion feature and original
issue discount allocated to proceeds of convertible notes payable
|
|
$
|
1,848,098
|
|
|
$
|
66,190
|
|
Common stock issuable issued during period
|
|
$
|
13,799
|
|
|
$
|
6,451
|
|
Derivative liabilities written off with repayment of convertible notes
payable
|
|
$
|
1,102,882
|
|
|
$
|
---
|
|
Derivative liabilities written off 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
|
|
$
|
130,306
|
|
|
$
|
---
|
|
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
|
|
$
|
63,549
|
|
|
$
|
---
|
|
Conversion of convertible notes payable to common stock
|
|
$
|
62,036
|
|
|
$
|
---
|
|
Fair value of common shares issued with convertible notes payable
|
|
$
|
5,593
|
|
|
$
|
---
|
|
Cashless exercise of warrants
|
|
$
|
200
|
|
|
$
|
---
|
|
See
the accompanying notes to these Consolidated Financial Statements
HEALTHLYNKED
CORPORATION
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2018 AND 2017
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
an 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
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.
All
significant intercompany transactions and balances have been eliminated upon consolidation. In addition, certain amounts in the
prior periods’ consolidated financial statements have been reclassified to conform to the current period presentation.
NOTE
2 – SIGNIFICANT ACCOUNTING POLICIES
A summary of the significant accounting policies
applied in the presentation of the accompanying consolidated financial statements follows:
Basis of Presentation
The accompanying consolidated financial statements
have been prepared in conformity with accounting principles generally accepted in the United States of America (“US GAAP”).
All amounts referred to in the notes to the
consolidated financial statements are in United States Dollars ($) unless stated otherwise.
Use of Estimates
The preparation of the consolidated financial
statements in conformity with 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 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.
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.
HEALTHLYNKED
CORPORATION
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2018 AND 2017
NOTE
2 – SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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.
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.
HEALTHLYNKED
CORPORATION
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2018 AND 2017
NOTE
2 – SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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 December
31, 2018 and 2017, the Company’s gross accounts receivable were $244,956 and $256,446, respectively, and net accounts receivable
were $114,884 and $113,349, respectively, based upon net reporting of accounts receivable. As of December 31, 2018 and 2017, the
Company’s allowance of doubtful accounts was $13,972 and $-0-, respectively.
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 $18,348 and $18,348 for the years ended December 31, 2018 and 2017,
respectively. Accumulated depreciation of capitalized leases was $322,087 and $303,738 at December 31, 2018 and 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 December 31, 2018 and December 31, 2017.
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.”
HEALTHLYNKED
CORPORATION
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2018 AND 2017
NOTE
2 – SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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
|
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.
HEALTHLYNKED
CORPORATION
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2018 AND 2017
NOTE
2 – SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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 years ended December 31, 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 December 31, 2018 and 2017, potentially dilutive securities
were comprised of (i) 46,161,463 and 20,526,387 warrants outstanding, respectively, (ii) 3,707,996 and 2,349,996 stock options
outstanding, respectively, (iii) 15,517,111 and 22,022,021 shares issuable upon conversion of convertible notes, respectively,
and (iv) 565,000 and 628,750 unissued shares subject to future vesting requirements granted pursuant to the Company’s Employee
Incentive Plan.
Common
stock awards
The
Company grants common stock awards to non-employees in exchange for services provided. The Company measures the fair value of
these awards using the fair value of the services provided or the fair value of the awards granted, whichever is more reliably
measurable. The fair value measurement date of these awards is generally the date the performance of services is complete. The
fair value of the awards is recognized on a straight-line basis as services are rendered. The share-based payments related to
common stock awards for the settlement of services provided by non-employees is recorded on the consolidated statement of comprehensive
loss in the same manner and charged to the same account as if such settlements had been made in cash.
Warrants
In
connection with certain financing, consulting and collaboration arrangements, the Company has issued warrants to purchase shares
of its common stock. The outstanding warrants are standalone instruments that are not puttable or mandatorily redeemable by the
holder and are classified as equity awards. The Company measures the fair value of the awards using the Black-Scholes 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
.
HEALTHLYNKED
CORPORATION
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2018 AND 2017
NOTE
2 – SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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.
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 adopted this standard on January 1, 2018 and the adoption did not have a material impact on
the Company’s financial statements.
HEALTHLYNKED
CORPORATION
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2018 AND 2017
NOTE
2 – SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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 consolidated financial statements.
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 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 consolidated
financial statements.
HEALTHLYNKED
CORPORATION
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2018 AND 2017
NOTE
3 – GOING CONCERN MATTERS AND LIQUIDITY
As
of December 31, 2018, the Company had a working capital deficit of $2,983,926 and accumulated deficit $10,501,055. For the year
ended December 31, 2018, the Company had a net loss of $5,790,835 and net cash used by operating activities of $2,356,186. Net
cash used in investing activities was $3,002. Net cash provided by financing activities was $2,444,960, resulting principally
from $2,632,956 proceeds from the sale of common stock, $1,255,500 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 year ended December 31, 2018, the Company received $440,523 from
the proceeds of the sale of 2,440,337 shares pursuant to the Investment Agreement. During July 2018, we also entered into a private
placement transaction that generated net proceeds to the Company of $1,774,690. See Note 11.
NOTE
4 – DEFERRED OFFERING COSTS AND PREPAID STOCK COMPENSATION
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.
HEALTHLYNKED
CORPORATION
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2018 AND 2017
NOTE
4 – DEFERRED OFFERING COSTS AND PREPAID STOCK COMPENSATION (CONTINUED)
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 years ended December 31, 2018 and 2017, the Company recognized $51,208 and $32,005, respectively,
in general and administrative expense related to the cost of the warrants.
Prepaid
Stock Compensation
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. During the years ended December 31, 2018 and 2017, the Company recognized $94,844
and $-0-, respectively, in general and administrative expense related to the cost of these warrants.
On
December 6, 2018, the Company granted additional three-year warrants to purchase 240,000 shares at an exercise price of $0.20
per share to the advisors for services to be provided over an additional three-month period. The fair value of the warrants was
calculated using the Black-Scholes pricing model at $35,462, with the following assumptions: risk-free interest rate of 2.76%,
expected life of 3 years, volatility of 285.22%, and expected dividend yield of zero. During the years ended December 31, 2018
and 2017, the Company recognized $9,850 and $-0-, respectively, in general and administrative expense related to the cost of these
warrants.
NOTE
5 – PROPERTY, PLANT, AND EQUIPMENT
Property,
plant and equipment at December 31, 2018 and 2017 are as follows:
|
|
December 31,
|
|
|
|
2018
|
|
|
2017
|
|
|
|
|
|
|
|
|
Capital Lease equipment
|
|
$
|
343,492
|
|
|
$
|
343,492
|
|
Telephone equipment
|
|
|
12,308
|
|
|
|
12,308
|
|
Furniture, Transport and Office equipment
|
|
|
438,970
|
|
|
|
435,967
|
|
|
|
|
|
|
|
|
|
|
Total Property, plant and equipment
|
|
|
794,770
|
|
|
|
791,767
|
|
Less: accumulated depreciation
|
|
|
(752,173
|
)
|
|
|
(728,391
|
)
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment, net
|
|
$
|
42,597
|
|
|
$
|
63,376
|
|
Depreciation
expense during the years ended December 31, 2018 and 2017 was $23,782 and $23,606, respectively.
NOTE
6 – DUE TO RELATED PARTY AND RELATED PARTY TRANSACTIONS
Amounts
due to related parties as of December 31, 2018 and 2017 were comprised of the following:
|
|
December 31,
|
|
|
|
2018
|
|
|
2017
|
|
Due to related party:
|
|
|
|
|
|
|
Deferred compensation, Dr. Michael Dent
|
|
$
|
300,600
|
|
|
$
|
300,600
|
|
Accrued interest payable to Dr. Michael Dent
|
|
|
129,117
|
|
|
|
63,245
|
|
Total due to related party
|
|
|
429,717
|
|
|
|
363,845
|
|
|
|
|
|
|
|
|
|
|
Notes payable to related party:
|
|
|
|
|
|
|
|
|
Notes payable to Dr. Michael Dent, current portion
|
|
|
672,471
|
|
|
|
553,550
|
|
HEALTHLYNKED
CORPORATION
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2018 AND 2017
NOTE
6 – DUE TO RELATED PARTY AND RELATED PARTY TRANSACTIONS (CONTINUED)
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. All principal and interest is due at maturity of the $750k DMD Note on December 31, 2019. Interest accrued on the $750k
DMD Note as of December 31, 2018 and 2017 was $66,859 and $43,963, respectively.
The
carrying values of notes payable to Dr. Michael Dent as of December 31, 2018 and 2017 were as follows:
|
|
|
|
|
|
|
Interest
|
|
|
Balance as of December 31,
|
|
Inception Date
|
|
Maturity Date
|
|
Borrower
|
|
|
Rate
|
|
|
2018
|
|
|
2017
|
|
January 12, 2017
|
|
January 13, 2019
|
|
HLYK
|
|
|
|
10
|
%
|
|
$
|
40,560
|
*
|
|
$
|
35,000
|
|
January 18, 2017
|
|
January 19, 2019
|
|
HLYK
|
|
|
|
10
|
%
|
|
|
23,165
|
*
|
|
|
20,000
|
|
January 24, 2017
|
|
January 15, 2019
|
|
HLYK
|
|
|
|
10
|
%
|
|
|
57,839
|
*
|
|
|
50,000
|
|
February 9, 2017
|
|
February 10, 2019
|
|
HLYK
|
|
|
|
10
|
%
|
|
|
34,586
|
*
|
|
|
30,000
|
|
April 20, 2017
|
|
April 21, 2019
|
|
HLYK
|
|
|
|
10
|
%
|
|
|
11,357
|
*
|
|
|
10,000
|
|
June 15, 2017
|
|
June 16, 2019
|
|
HLYK
|
|
|
|
10
|
%
|
|
|
36,464
|
*
|
|
|
32,500
|
|
August 17, 2017
|
|
August 18, 2018
|
|
HLYK
|
|
|
|
10
|
%
|
|
|
20,000
|
|
|
|
20,000
|
|
August 24, 2017
|
|
August 25, 2018
|
|
HLYK
|
|
|
|
10
|
%
|
|
|
37,500
|
|
|
|
37,500
|
|
September 7, 2017
|
|
September 8, 2018
|
|
HLYK
|
|
|
|
10
|
%
|
|
|
35,000
|
|
|
|
35,000
|
|
September 21, 2017
|
|
September 22, 2018
|
|
HLYK
|
|
|
|
10
|
%
|
|
|
26,500
|
|
|
|
26,500
|
|
September 29, 2017
|
|
September 30, 2018
|
|
HLYK
|
|
|
|
10
|
%
|
|
|
12,000
|
|
|
|
12,000
|
|
December 21, 2017
|
|
December 22, 2018
|
|
HLYK
|
|
|
|
10
|
%
|
|
|
14,000
|
|
|
|
14,000
|
|
January 8, 2018
|
|
January 9, 2019
|
|
HLYK
|
|
|
|
10
|
%
|
|
|
75,000
|
|
|
|
---
|
|
January 11, 2018
|
|
January 12, 2019
|
|
HLYK
|
|
|
|
10
|
%
|
|
|
9,000
|
|
|
|
---
|
|
January 26, 2018
|
|
January 27, 2019
|
|
HLYK
|
|
|
|
10
|
%
|
|
|
17,450
|
|
|
|
---
|
|
January 3, 2014
|
|
December 31, 2018
|
|
NWC
|
|
|
|
10
|
%
|
|
|
222,050
|
|
|
|
231,050
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
672,471
|
|
|
$
|
553,550
|
|
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 and December
31, 2018 and 2017 was $62,258 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 $15,029 in the year ended December 31, 2018
and is included on the statement of operations in “Change in fair value of debt.”
HEALTHLYNKED
CORPORATION
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2018 AND 2017
NOTE
6 – DUE TO RELATED PARTY AND RELATED PARTY TRANSACTIONS (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 agreed to 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. The agreement terminated on July 31, 2018. During the years ended December 31, 2018 and 2017, the Company recognized
rent expense to MOD in the amount of $30,457 and $-0-, respectively, pursuant to this agreement including $16,177 recognized in
2018 to write of the balance of a prepayment to MOD to be applied toward future rent.
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 years ended December 31, 2018 and 2017, the Company recognized general and administrative expense in
the amount of $12,500 and $27,500, 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.
Stock
Repurchase
On
October 3, 2018, the Company bought back 100,000 shares of common stock from a shareholder for a total purchase price of $5,000.
The shares were retired. The selling shareholder was the brother of our CEO Dr. Michael Dent.
NOTE
7 – CAPITAL LEASE
Capital
lease obligations as of December 31, 2018 and 2017 are comprised of the following:
|
|
December 31,
|
|
|
|
2018
|
|
|
2017
|
|
|
|
|
|
|
|
|
Note payable, New Everbank Lease
|
|
$
|
22,935
|
|
|
$
|
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
|
|
$
|
3,058
|
|
|
$
|
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 December 31, 2018 and 2017, the Company
owed Everbank $22,935 and $39,754, respectively, pursuant to this capital lease. During the years ended December 31, 2018 and
2017, the Company made payments on this capital lease of $16,819 and $18,348, respectively.
Future
minimum payments to which the Company is obligated pursuant to the capital leases as of December 31, 2018 are as follows:
2019
|
|
$
|
19,877
|
|
2020
|
|
|
3,058
|
|
2021
|
|
|
---
|
|
2022
|
|
|
---
|
|
2023
|
|
|
---
|
|
|
|
|
|
|
Total
|
|
$
|
22,935
|
|
HEALTHLYNKED
CORPORATION
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2018 AND 2017
NOTE
8 – NOTES PAYABLE
On
July 11, 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 $26,000 before closing fees (the “July
2017 MCA”). The Company was required to repay the July 2017 MCA, which acted like an ordinary note payable, at the rate
of $1,372 per week until the balance of $34,580 was repaid. At inception, the Company recognized a note payable in the amount
of $34,580 and a discount against the note payable of $9,550. The discount was being amortized over the life of the instrument.
The July 2017 MCA was repaid in full on December 20, 2017. During the year ended December 31, 2017, the Company recognized amortization
of the discount in the amount of $9,550, including $1,096 recognized to amortize the remaining discount at retirement.
On
August 9, 2017, the Company entered into a second MCA with PULG pursuant to which the Company received an advance of $51,000 before
closing fees (the “August 2017 MCA”). The Company was required to repay the advance, which acted like an ordinary
note payable, at the rate of $2,752 per week until the balance of $69,360 was repaid. At inception, the Company recognized a note
payable in the amount of $69,360 and a discount against the note payable of $19,380. The discount was being amortized over the
life of the instrument. The August 2017 MCA was repaid in full on December 20, 2017. During the year ended December 31, 2017,
the Company recognized amortization of the discount in the amount of $19,380, including $5,161 recognized to amortize the remaining
discount at retirement.
On
December 20, 2017, the Company entered into a third MCA with PULG pursuant to which the Company received an advance of $75,000
before closing fees (the “December 2017 MCA”). The Company was 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 was repaid. 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 year ended December 31, 2018, the Company made installment payments of $89,048 on the December
2017 MCA. The December 2017 MCA was repaid on June 1, 2018. During the year ended December 31, 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. During
the year ended December 31, 2017, the Company recognized amortization of the discount in the amount of $1,619.
On
June 1, 2018, the Company entered into a fourth MCA with PULG pursuant to which the Company received an advance of $75,000 before
closing fees (the “December 2018 MCA”). The Company was 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 was being amortized over the life of the instrument.
During the year ended December 31, 2018, the Company recognized amortization of the discount in the amount of $28,500. The December
2018 MCA was repaid in full in November 2018.
HEALTHLYNKED
CORPORATION
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2018 AND 2017
NOTE
9 – CONVERTIBLE NOTES PAYABLE
Convertible
notes payable as of December 31, 2018 and 2017 were comprised of the following:
|
|
December 31,
|
|
|
|
2018
|
|
|
2017
|
|
|
|
|
|
|
|
|
$550k Note - July 2016
|
|
$
|
594,813
|
*
|
|
$
|
550,000
|
|
$50k Note - July 2016
|
|
|
60,312
|
*
|
|
|
50,000
|
|
$111k Note - May 2017
|
|
|
125,190
|
*
|
|
|
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
|
|
|
186,472
|
|
|
|
171,500
|
|
$103k Note I - October 2018
|
|
|
103,000
|
|
|
|
---
|
|
$103k Note II - November 2018
|
|
|
103,000
|
|
|
|
---
|
|
$153k Note - November 2018
|
|
|
153,000
|
|
|
|
---
|
|
$103k Note III - December 2018
|
|
|
103,000
|
|
|
|
---
|
|
|
|
|
1,428,787
|
|
|
|
1,078,500
|
|
Less: unamortized discount
|
|
|
(386,473
|
)
|
|
|
(266,642
|
)
|
Convertible notes payable, net of original issue discount and debt discount
|
|
|
1,042,314
|
|
|
|
811,858
|
|
*
- Denotes that convertible note payable is carried at fair value
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 years ended
December 31, 2018 and 2017 was $-0- and $104,137, respectively. As of December 31, 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 December 31, 2018 was $594,813. During the years ended December 31, 2018 and 2017, a change in
fair value of debt related to this instrument was recorded in the amount of $96,787 and $-0-, respectively.
During
the years ended December 31, 2018 and 2017, the Company made no repayments on this instrument. During the years ended December
31, 2018 and 2017, the Company recorded interest expense on this instrument totaling $33,090 and $33,000, 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 in 2018.
HEALTHLYNKED
CORPORATION
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2018 AND 2017
NOTE
9 – CONVERTIBLE NOTES PAYABLE (CONTINUED)
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 in 2018.
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. Amortization
expense related to the discount in the years ended December 31, 2018 and 2017 was $-0- and $17,701, respectively. As of December
31, 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 December 31, 2018 was $60,312. During the years ended December 31, 2018 and 2017, a change in fair
value of debt related to this instrument was recorded in the amount of $13,257 and $-0-, respectively.
During
the years ended December 31, 2018 and 2017, the Company made no repayments on this instrument. During the years ended December
31, 2018 and 2017, the Company recorded interest expense on this instrument totaling $5,014 and $5,000, 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. The
fair value of the warrants was calculated using the Black-Scholes pricing model at $42,305, with the following assumptions: risk-free
interest rate of 1.80%, expected life of 5 years, volatility of 40%, and expected dividend yield of zero. The net proceeds from
the issuance of the $111k Note, being $100,000 after the original issue discount, were then allocated to the warrants and the
convertible note instrument based on their relative fair values, of which $27,595 was allocated to the warrants and $72,405 to
the convertible note. The intrinsic value of the embedded conversion feature of the $111k note was then calculated as $38,595.
The original issue discount, warrants and embedded conversion feature were then allocated and recorded as discounts against the
carrying value of the $111k Note. The final allocation of the proceeds at inception was as follows:
Original issue discount
|
|
$
|
11,000
|
|
Warrants
|
|
|
27,595
|
|
Embedded conversion feature
|
|
|
38,595
|
|
Convertible note
|
|
|
33,810
|
|
|
|
|
|
|
Gross proceeds
|
|
$
|
111,000
|
|
HEALTHLYNKED
CORPORATION
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2018 AND 2017
NOTE
9 – CONVERTIBLE NOTES PAYABLE (CONTINUED)
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 December 31, 2018 was $125,190. During the years ended December 31, 2018 and 2017, a change in fair value of debt related to
this instrument was recorded in the amount of $10,474 and $-0-, respectively.
Amortization
expense related to the discount in the years ended December 31, 2018 and 2017 was $6,931 and $70,259, respectively. As of December
31, 2018, the unamortized discount was $-0-. As of December 31, 2018, this instrument was convertible into 317,143 of the Company’s
common shares.
During
the years ended December 31, 2018 and 2017, the Company made no repayments on this instrument. During the years ended December
31, 2018 and 2017, the Company recorded interest expense on this instrument totaling $16,537 and $10,103, 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.
The
fair value of the ECF of the $53k Note was calculated using the Black-Scholes pricing model at $58,154, with the following assumptions:
risk-free interest rate of 1.23%, expected life of 0.76 years, volatility of 183.6%, and expected dividend yield of zero. Because
the fair value of the ECF exceeded the net proceeds from the $53k Note, a charge was recorded to “Financing cost”
for the excess of the fair value of the fair value of the ECF of $58,154 over the net proceeds from the note of $50,000, for a
net charge of $8,154. 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
|
|
$
|
58,154
|
|
Original issue discount
|
|
|
3,000
|
|
Financing cost
|
|
|
(8,154
|
)
|
Convertible note
|
|
|
---
|
|
|
|
|
|
|
Gross proceeds
|
|
$
|
53,000
|
|
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 years ended December
31, 2018 and 2017 was $1,520 and $33,054, respectively. During the years ended December 31, 2018 and 2017, the Company recorded
interest expense on this instrument totaling $116 and $2,527, respectively.
HEALTHLYNKED
CORPORATION
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2018 AND 2017
NOTE
9 – CONVERTIBLE NOTES PAYABLE (CONTINUED)
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 year ended December 31, 2018 in connection with the repayment,
as follows:
Face value of convertible note payable retired
|
|
$
|
53,000
|
|
Carrying value of derivative financial instruments arising from ECF
|
|
|
53,893
|
|
Accrued interest
|
|
|
2,644
|
|
Less cash repayment
|
|
|
(74,922
|
)
|
Less carrying value of debt 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
fair value of the ECF of the $35k Note was calculated using the Black-Scholes pricing model at $38,338, with the following assumptions:
risk-free interest rate of 1.21%, expected life of 0.77 years, volatility of 177.2%, and expected dividend yield of zero. Because
the fair value of the ECF exceeded the net proceeds from the $35k Note, a charge was recorded to “Financing cost”
for the excess of the fair value of the fair value of the ECF of $38,338 over the net proceeds from the note of $32,000, for a
net charge of $6,338. 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
|
|
$
|
38,338
|
|
Original issue discount
|
|
|
3,000
|
|
Financing cost
|
|
|
(6,338
|
)
|
Convertible note
|
|
|
---
|
|
|
|
|
|
|
Gross proceeds
|
|
$
|
35,000
|
|
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 years ended December
31, 2018 and 2017 was $7,972 and $14,324, respectively. During the years ended December 31, 2018 and 2017, the Company recorded
interest expense on this instrument totaling $614 and $1,103, 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 year ended December 31, 2018 in connection with the repayment, as
follows:
Face value of convertible note payable retired
|
|
$
|
35,000
|
|
Carrying value of derivative financial instruments arising from ECF
|
|
|
37,269
|
|
Accrued interest
|
|
|
1,716
|
|
Less cash repayment
|
|
|
(49,502
|
)
|
Less carrying value of debt discount at extinguishment
|
|
|
(12,705
|
)
|
|
|
|
|
|
Gain on extinguishment of debt
|
|
$
|
11,778
|
|
HEALTHLYNKED
CORPORATION
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2018 AND 2017
NOTE
9 – CONVERTIBLE NOTES PAYABLE (CONTINUED)
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.
The
fair value of the ECF of the $55k Note was calculated using the Black-Scholes pricing model at $65,332, with the following assumptions:
risk-free interest rate of 1.24%, expected life of 1 year, volatility of 175.1%, and expected dividend yield of zero. Because
the fair value of the ECF exceeded the net proceeds from the $55k Note, a charge was recorded to “Financing cost”
for the excess of the fair value of the fair value of the ECF of $65,332 over the net proceeds from the note of $47,500, for a
net charge of $17,832. 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
|
|
$
|
65,332
|
|
Original issue discount
|
|
|
7,500
|
|
Financing cost
|
|
|
(17,832
|
)
|
Convertible note
|
|
|
---
|
|
|
|
|
|
|
Gross proceeds
|
|
$
|
55,000
|
|
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 years ended December
31, 2018 and 2017 was $10,849 and $16,276, respectively. During the years ended December 31, 2018 and 2017, the Company recorded
interest expense on this instrument totaling $1,085 and $1,673, 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 year ended December 31, 2018 in connection with the repayment, as
follows:
Face value of convertible note payable retired
|
|
$
|
55,000
|
|
Carrying value of derivative financial instruments arising from ECF
|
|
|
69,687
|
|
Accrued interest
|
|
|
2,759
|
|
Less cash repayment
|
|
|
(85,258
|
)
|
Less carrying value of debt 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.
HEALTHLYNKED
CORPORATION
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2018 AND 2017
NOTE
9 – CONVERTIBLE NOTES PAYABLE (CONTINUED)
The
fair value of the ECF of the $53k Note II was calculated using the Black-Scholes pricing model at $57,571, with the following
assumptions: risk-free interest rate of 1.42%, expected life of 0.77 years, volatility of 174.46%, and expected dividend yield
of zero. Because the fair value of the ECF exceeded the net proceeds from the $53k Note II, a charge was recorded to “Financing
cost” for the excess of the fair value of the fair value of the ECF of $57,571 over the net proceeds from the note of $50,000,
for a net charge of $7,571. 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
|
|
$
|
57,571
|
|
Original issue discount
|
|
|
3,000
|
|
Financing cost
|
|
|
(7,571
|
)
|
Convertible note
|
|
|
---
|
|
|
|
|
|
|
Gross proceeds
|
|
$
|
53,000
|
|
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 years ended December
31, 2018 and 2017 was $20,443 and $13,061, respectively. During the years ended December 31, 2018 and 2017, the Company recorded
interest expense on this instrument totaling $261 and $1,002, 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 year ended December 31, 2018 in connection with the repayment,
as follows:
Face value of convertible note payable retired
|
|
$
|
53,000
|
|
Carrying value of derivative financial instruments arising from ECF
|
|
|
55,790
|
|
Accrued interest
|
|
|
2,571
|
|
Less cash repayment
|
|
|
(75,000
|
)
|
Less carrying value of debt 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 was originally scheduled to mature on October
26, 2018, as amended and described below. 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.
HEALTHLYNKED
CORPORATION
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2018 AND 2017
NOTE
9 – CONVERTIBLE NOTES PAYABLE (CONTINUED)
The
fair value of the ECF of the $171.5k Note was calculated using the Black-Scholes pricing model at $183,061, with the following
assumptions: risk-free interest rate of 1.42%, expected life of 1 year, volatility of 172.67%, and expected dividend yield of
zero. Because the fair value of the ECF exceeded the net proceeds from the $171.5k Note, a charge was recorded to “Financing
cost” for the excess of the fair value of the fair value of the ECF of $183,061 over the net proceeds from the note of $150,000,
for a net charge of $33,061. 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
|
|
$
|
183,061
|
|
Original issue discount
|
|
|
21,500
|
|
Financing cost
|
|
|
(33,061
|
)
|
Convertible note
|
|
|
---
|
|
|
|
|
|
|
Gross proceeds
|
|
$
|
171,500
|
|
Amortization
expense related to the discount in the years ended December 31, 2018 and 2017 was $14,0875 and $30,625, respectively.
On October 31, 2018, the holder of the
$171.5k Note agreed to extend the maturity date from the original date of October 26, 2018 until December 31, 2019 in exchange
for (i) a three-year warrant to purchase 75,000 shares of Company common stock at an exercise price of $0.25 per share, and (ii)
a three-year warrant to purchase 25,000 shares of Company common stock at an exercise price of $0.50 per share. The fair value
of the warrants using Black/Scholes was $26,282 with the following assumptions: risk-free interest rate of 2.93%, expected life
of 3 years, volatility of 291.52%, 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 $171.5k Note is carried at fair value subsequent to the extinguishment date 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 December 31, 2018 was $186,472. During the years ended December 31, 2018 and 2017, a change in fair value of
debt related to this instrument was recorded in the amount of $5,241 and $-0-, respectively.
During
the years ended December 31, 2018 and 2017, the Company made no repayments on this instrument. During the years ended December
31, 2018 and 2017, the Company recorded interest expense on this instrument totaling $17,150 and $3,054, respectively. As of December
31, 2018, the unamortized discount was $-0- and the note was convertible into 1,954,416 of the Company’s common shares.
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.
HEALTHLYNKED
CORPORATION
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2018 AND 2017
NOTE
9 – CONVERTIBLE NOTES PAYABLE (CONTINUED)
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
|
|
|
---
|
|
|
|
|
|
|
Gross proceeds
|
|
$
|
57,750
|
|
The
discount resulting from the original issue discount and embedded conversion feature was being amortized over the life of the instrument,
which was schedule to mature on January 2, 2019. Amortization expense related to the discount in the years ended December 31,
2018 and 2017 was $37,925 and $-0-, respectively. During the years ended December 31, 2018 and 2017, the Company recorded interest
expense on this instrument totaling $3,786 and $-0-, respectively.
During
the year ended December 31, 2018, the holder of the $58k Note converted the entire principal balance of $57,750, as well as accrued
interest in the amount of $3,786, into 384,839 shares of Company common stock.
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
fair value of the ECF of the $113k Note was calculated using the Black-Scholes pricing model at $161,527, with the following assumptions:
risk-free interest rate of 1.88%, expected life of 1 year, volatility of 264.93%, and expected dividend yield of zero. Because
the fair value of the ECF exceeded the net proceeds from the $113k Note, a charge was recorded to “Financing cost”
for the excess of the fair value of the fair value of the ECF of $161,527 over the net proceeds from the note of $100,000, for
a net charge of $61,527. 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
|
|
$
|
161,527
|
|
Original issue discount and fees
|
|
|
12,750
|
|
Financing cost
|
|
|
(61,527
|
)
|
Convertible note
|
|
|
---
|
|
|
|
|
|
|
Gross proceeds
|
|
$
|
112,750
|
|
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 years ended December 31,
2018 and 2017 was $57,456 and $-0-, respectively. During the years ended December 31, 2018 and 2017, the Company recorded interest
expense on this instrument totaling $5,746 and $-0-, respectively.
HEALTHLYNKED
CORPORATION
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2018 AND 2017
NOTE
9 – CONVERTIBLE NOTES PAYABLE (CONTINUED)
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 year ended December 31, 2018 in connection with the repayment, as follows:
Face value of convertible note payable retired
|
|
$
|
112,750
|
|
Carrying value of derivative financial instruments arising from ECF
|
|
|
140,962
|
|
Accrued interest
|
|
|
5,746
|
|
Less cash repayment
|
|
|
(151,536
|
)
|
Less fair value of warrant issued in connection with extinguishment
|
|
|
(50,614
|
)
|
Less carrying value of debt 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.
The
fair value of the ECF of the $83k Note was calculated using the Black-Scholes pricing model at $119,512, with the following assumptions:
risk-free interest rate of 1.95%, expected life of 1 year, volatility of 268.44%, and expected dividend yield of zero. Because
the fair value of the ECF exceeded the net proceeds from the $83k Note, a charge was recorded to “Financing cost”
for the excess of the fair value of the fair value of the ECF of $119,512 over the net proceeds from the note of $75,000, for
a net charge of $44,512. 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
|
|
$
|
119,512
|
|
Original issue discount and fees
|
|
|
8,000
|
|
Financing cost
|
|
|
(44,512
|
)
|
Convertible note
|
|
|
---
|
|
|
|
|
|
|
Gross proceeds
|
|
$
|
83,000
|
|
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 years ended December 31,
2018 and 2017 was $41,841 and $-0-, respectively. During the years ended December 31, 2018 and 2017, the Company recorded interest
expense on this instrument totaling $4,184 and $-0-, respectively.
HEALTHLYNKED
CORPORATION
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2018 AND 2017
NOTE
9 – CONVERTIBLE NOTES PAYABLE (CONTINUED)
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 loss
on debt extinguishment in the year ended December 31, 2018 in connection with the repayment, as follows:
Face value of convertible note payable retired
|
|
$
|
83,000
|
|
Carrying value of derivative financial instruments arising from ECF
|
|
|
106,720
|
|
Accrued interest
|
|
|
4,184
|
|
Less cash repayment
|
|
|
(111,596
|
)
|
Less fair value of warrant issued in connection with extinguishment
|
|
|
(92,400
|
)
|
Less carrying value of debt discount at extinguishment
|
|
|
(41,159
|
)
|
|
|
|
|
|
Loss 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
fair value of the ECF of the $105k Note was calculated using the Black-Scholes pricing model at $153,371, with the following assumptions:
risk-free interest rate of 2.06%, expected life of 1 year, volatility of 278.96%, and expected dividend yield of zero. Because
the fair value of the ECF exceeded the net proceeds from the $105k Note, a charge was recorded to “Financing cost”
for the excess of the fair value of the fair value of the ECF of $153,371 over the net proceeds from the note of $100,000, for
a net charge of $53,371. 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
|
|
$
|
153,371
|
|
Original issue discount and fees
|
|
|
5,000
|
|
Financing cost
|
|
|
(53,371
|
)
|
Convertible note
|
|
|
---
|
|
|
|
|
|
|
Gross proceeds
|
|
$
|
105,000
|
|
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 years ended December 31, 2018
and 2017 was $51,205 and $-0-, respectively. During the years ended December 31, 2018 and 2017, the Company recorded interest
expense on this instrument totaling $5,121 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 year ended December 31, 2018 in connection with the repayment,
as follows:
Face value of convertible note payable retired
|
|
$
|
105,000
|
|
Carrying value of derivative financial instruments arising from ECF
|
|
|
136,175
|
|
Accrued interest
|
|
|
5,121
|
|
Less cash repayment
|
|
|
(140,697
|
)
|
Less carrying value of debt discount at extinguishment
|
|
|
(53,795
|
)
|
|
|
|
|
|
Gain on extinguishment of debt
|
|
$
|
51,804
|
|
HEALTHLYNKED
CORPORATION
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2018 AND 2017
NOTE
9 – CONVERTIBLE NOTES PAYABLE (CONTINUED)
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.
The
fair value of the ECF of the $63k Note was calculated using the Black-Scholes pricing model at $83,806, with the following assumptions:
risk-free interest rate of 2.08%, expected life of 0.79 years, volatility of 260.76%, 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 $83,806 over the net proceeds from the note of $60,000, for a net charge of $23,806.
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
|
|
$
|
83,806
|
|
Original issue discount and fees
|
|
|
3,000
|
|
Financing cost
|
|
|
(23,806
|
)
|
Convertible note
|
|
|
---
|
|
|
|
|
|
|
Gross proceeds
|
|
$
|
63,000
|
|
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 years ended December 31,
2018 and 2017 was $39,594 and $-0-, respectively. During the years ended December 31, 2018 and 2017, the Company recorded interest
expense on this instrument totaling $3,124 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 year ended December 31, 2018 in connection with the repayment,
as follows:
Face value of convertible note payable retired
|
|
$
|
63,000
|
|
Carrying value of derivative financial instruments arising from ECF
|
|
|
72,336
|
|
Accrued interest
|
|
|
3,124
|
|
Less cash repayment
|
|
|
(89,198
|
)
|
Less carrying value of debt 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.
HEALTHLYNKED
CORPORATION
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2018 AND 2017
NOTE
9 – CONVERTIBLE NOTES PAYABLE (CONTINUED)
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
|
|
|
---
|
|
|
|
|
|
|
Gross proceeds
|
|
$
|
57,750
|
|
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 years ended December 31,
2018 and 2017 was $28,954 and $-0-, respectively. During the years ended December 31, 2018 and 2017, the Company recorded interest
expense on this instrument totaling $2,895 and $-0-, respectively.
On
October 16, 2018, the Company prepaid the balance on the $57.8k Note II, including accrued interest, for a one-time cash payment
of $81,850. The Company recognized a gain on debt extinguishment in the year ended December 31, 2018 in connection with the repayment,
as follows:
Face value of convertible note payable retired
|
|
$
|
57,750
|
|
Carrying value of derivative financial instruments arising from ECF
|
|
|
74,428
|
|
Accrued interest
|
|
|
2,895
|
|
Less cash repayment
|
|
|
(81,850
|
)
|
Less carrying value of debt discount at extinguishment
|
|
|
(28,796
|
)
|
|
|
|
|
|
Gain on extinguishment of debt
|
|
$
|
24,427
|
|
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.
HEALTHLYNKED
CORPORATION
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2018 AND 2017
NOTE
9 – CONVERTIBLE NOTES PAYABLE (CONTINUED)
The
fair value of the ECF of the $90k Note was calculated using the Black-Scholes pricing model at $130,136, with the following assumptions:
risk-free interest rate of 2.17%, expected life of 1 year, 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 $130,136 over the net proceeds from the note of $85,500, for a net charge of $44,636.
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
|
|
$
|
130,136
|
|
Original issue discount and fees
|
|
|
4,500
|
|
Financing cost
|
|
|
(44,636
|
)
|
Convertible note
|
|
|
---
|
|
|
|
|
|
|
Gross proceeds
|
|
$
|
90,000
|
|
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 years ended December 31, 2018
and 2017 was $31,562 and $-0-, respectively. During the years ended December 31, 2018 and 2017, the Company recorded interest
expense on this instrument totaling $3,156 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 year ended December 31, 2018 in connection with the repayment,
as follows:
Face value of convertible note payable retired
|
|
$
|
90,000
|
|
Carrying value of derivative financial instruments arising from ECF
|
|
|
123,030
|
|
Accrued interest
|
|
|
3,156
|
|
Less cash repayment
|
|
|
(119,240
|
)
|
Less carrying value of debt 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.
HEALTHLYNKED
CORPORATION
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2018 AND 2017
NOTE
9 – CONVERTIBLE NOTES PAYABLE (CONTINUED)
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
|
|
|
---
|
|
|
|
|
|
|
Gross proceeds
|
|
$
|
53,000
|
|
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 30, 2019. Amortization expense related to the discount in the years ended December 31,
2018 and 2017 was $33,794 and $-0-, respectively. During the years ended December 31, 2018 and 2017, the Company recorded interest
expense on this instrument totaling $2,657 and $-0-, respectively.
On
October 18, 2018, the Company prepaid the balance on the $53k Note III, including accrued interest, for a one-time cash payment
of $75,039. The Company recognized a gain on debt extinguishment in the year ended December 31, 2018 in connection with the repayment,
as follows:
Face value of convertible note payable retired
|
|
$
|
53,000
|
|
Carrying value of derivative financial instruments arising from ECF
|
|
|
59,533
|
|
Accrued interest
|
|
|
2,657
|
|
Less cash repayment
|
|
|
(75,039
|
)
|
Less carrying value of debt discount at extinguishment
|
|
|
(19,206
|
)
|
|
|
|
|
|
Gain on extinguishment of debt
|
|
$
|
20,945
|
|
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%.
HEALTHLYNKED
CORPORATION
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2018 AND 2017
NOTE
9 – CONVERTIBLE NOTES PAYABLE (CONTINUED)
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
|
|
|
---
|
|
|
|
|
|
|
Gross proceeds
|
|
$
|
68,250
|
|
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 May 3, 2019. Amortization expense related to the discount in the years ended December 31, 2018
and 2017 was $33,566 and $-0-, respectively. During the years ended December 31, 2018 and 2017, the Company recorded interest
expense on this instrument totaling $3,366 and $-0-, respectively.
On
October 30, 2018, the Company prepaid the balance on the $68.3k Note, including accrued interest, for a one-time cash payment
of $91,644. The Company recognized a gain on debt extinguishment in the year ended December 31, 2018 in connection with the repayment,
as follows:
Face value of convertible note payable retired
|
|
$
|
68,250
|
|
Carrying value of derivative financial instruments arising from ECF
|
|
|
91,132
|
|
Accrued interest
|
|
|
3,366
|
|
Less cash repayment
|
|
|
(91,644
|
)
|
Less carrying value of debt discount at extinguishment
|
|
|
(34,684
|
)
|
|
|
|
|
|
Gain on extinguishment of debt
|
|
$
|
36,420
|
|
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%.
HEALTHLYNKED
CORPORATION
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2018 AND 2017
NOTE
9 – CONVERTIBLE NOTES PAYABLE (CONTINUED)
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
|
|
|
---
|
|
|
|
|
|
|
Gross proceeds
|
|
$
|
37,000
|
|
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 May 7, 2019. Amortization expense related to the discount in the years ended December 31, 2018
and 2017 was $18,145 and $-0-, respectively. During the years ended December 31, 2018 and 2017, the Company recorded interest
expense on this instrument totaling $1,815 and $-0-, respectively.
On
November 2, 2018, the Company prepaid the balance on the $37k Note, including accrued interest, for a one-time cash payment of
$49,144. The Company recognized a gain on debt extinguishment in the year ended December 31, 2018 in connection with the repayment,
as follows:
Face value of convertible note payable retired
|
|
$
|
37,000
|
|
Carrying value of derivative financial instruments arising from ECF
|
|
|
47,763
|
|
Accrued interest
|
|
|
1,815
|
|
Less cash repayment
|
|
|
(49,144
|
)
|
Less carrying value of debt discount at extinguishment
|
|
|
(18,855
|
)
|
|
|
|
|
|
Gain on extinguishment of debt
|
|
$
|
18,579
|
|
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.
HEALTHLYNKED
CORPORATION
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2018 AND 2017
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
|
|
|
---
|
|
|
|
|
|
|
Gross proceeds
|
|
$
|
63,000
|
|
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 May 7, 2019. Amortization expense related to the discount in the years ended December 31, 2018
and 2017 was $31,240 and $-0-, respectively. During the years ended December 31, 2018 and 2017, the Company recorded interest
expense on this instrument totaling $3,107 and $-0-, respectively.
On
November 5, 2018, the Company prepaid the balance on the $63k Note II, including accrued interest, for a one-time cash payment
of $89,198. The Company recognized a gain on debt extinguishment in the year ended December 31, 2018 in connection with the repayment,
as follows:
Face value of convertible note payable retired
|
|
$
|
63,000
|
|
Carrying value of derivative financial instruments arising from ECF
|
|
|
81,017
|
|
Accrued interest
|
|
|
3,107
|
|
Less cash repayment
|
|
|
(89,198
|
)
|
Less carrying value of debt discount at extinguishment
|
|
|
(31,760
|
)
|
|
|
|
|
|
Gain on extinguishment of debt
|
|
$
|
26,166
|
|
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 not paid at maturity, the amount due under the note increases by 10%.
HEALTHLYNKED
CORPORATION
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2018 AND 2017
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 $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
|
|
|
---
|
|
|
|
|
|
|
Gross proceeds
|
|
$
|
78,750
|
|
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 May 24, 2019. Amortization expense related to the discount in the years ended December 31, 2018
and 2017 was $38,836 and $-0-, respectively. During the years ended December 31, 2018 and 2017, the Company recorded interest
expense on this instrument totaling $3,938 and $-0-, respectively.
On
November 20, 2018, the Company prepaid the balance on the $78.8k Note, including accrued interest, for a one-time cash payment
of $104,738. The Company recognized a gain on debt extinguishment in the year ended December 31, 2018 in connection with the repayment,
as follows:
Face value of convertible note payable retired
|
|
$
|
78,750
|
|
Carrying value of derivative financial instruments arising from ECF
|
|
|
100,669
|
|
Accrued interest
|
|
|
3,938
|
|
Less cash repayment
|
|
|
(104,738
|
)
|
Less carrying value of debt discount at extinguishment
|
|
|
(39,914
|
)
|
|
|
|
|
|
Gain on extinguishment of debt
|
|
$
|
38,705
|
|
Convertible
Notes Payable ($103,000) – October 2018
On
October 18, 2018, the Company entered into a securities purchase agreement for the sale of a $103,000 convertible note (the “$103k
Note I”). The $103k Note I included $3,000 fees for net proceeds of $100,000. The $103k Note I has an interest rate of 10%
and a default interest rate of 22% and matures on July 30, 2019. The $103k Note I 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.
HEALTHLYNKED
CORPORATION
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2018 AND 2017
NOTE
9 – CONVERTIBLE NOTES PAYABLE (CONTINUED)
The
fair value of the ECF of the $103k Note I was calculated using the Black-Scholes pricing model at $143,836, with the following
assumptions: risk-free interest rate of 2.67%, expected life of 0.78 years, volatility of 293.97%, and expected dividend yield
of zero. Because the fair value of the ECF exceeded the net proceeds from the $103k Note I, a charge was recorded to “Financing
cost” for the excess of the fair value of the fair value of the ECF of $143,836 over the net proceeds from the note of $100,000,
for a net charge of $43,836. 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
|
|
$
|
143,836
|
|
Original issue discount and fees
|
|
|
3,000
|
|
Financing cost
|
|
|
(43,836
|
)
|
Convertible note
|
|
|
---
|
|
|
|
|
|
|
Gross proceeds
|
|
$
|
103,000
|
|
The
discount resulting from the original issue discount and embedded conversion feature is being amortized over the life of the note,
which is schedule to mature on July 30, 2019. Amortization expense related to the discount in the years ended December 31, 2018
and 2017 was $26,744 and $-0-, respectively. During the years ended December 31, 2018 and 2017, the Company recorded interest
expense on this instrument totaling $2,088 and $-0-, respectively. As of December 31, 2018, the unamortized discount was $76,256
and the note was convertible into 1,250,759 of the Company’s common shares.
Convertible
Notes Payable ($103,000) – November 2018
On
November 12, 2018, the Company entered into a securities purchase agreement for the sale of a $103,000 convertible note (the “$103k
Note II”). The $103k Note II included $3,000 fees for net proceeds of $100,000. The $103k Note II has an interest rate of
10% and a default interest rate of 22% and matures on August 30, 2019. The $103k 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.
The
fair value of the ECF of the $103k Note II was calculated using the Black-Scholes pricing model at $142,915, with the following
assumptions: risk-free interest rate of 2.73%, expected life of 0.80 years, volatility of 286.23%, and expected dividend yield
of zero. Because the fair value of the ECF exceeded the net proceeds from the $103k Note II, a charge was recorded to “Financing
cost” for the excess of the fair value of the fair value of the ECF of $142,915 over the net proceeds from the note of $100,000,
for a net charge of $42,915. 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
|
|
$
|
142,915
|
|
Original issue discount and fees
|
|
|
3,000
|
|
Financing cost
|
|
|
(42,915
|
)
|
Convertible note
|
|
|
---
|
|
|
|
|
|
|
Gross proceeds
|
|
$
|
103,000
|
|
The
discount resulting from the original issue discount and embedded conversion feature is being amortized over the life of the note,
which is schedule to mature on August 30, 2019. Amortization expense related to the discount in the years ended December 31, 2018
and 2017 was $17,344 and $-0-, respectively. During the years ended December 31, 2018 and 2017, the Company recorded interest
expense on this instrument totaling $1,383 and $-0-, respectively. As of December 31, 2018, the unamortized discount was $85,656
and the note was convertible into 1,250,759 of the Company’s common shares.
HEALTHLYNKED
CORPORATION
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2018 AND 2017
NOTE
9 – CONVERTIBLE NOTES PAYABLE (CONTINUED)
Convertible
Notes Payable ($153,000) – November 2018
On
November 19, 2018, the Company entered into a securities purchase agreement for the sale of a $153,000 convertible note (the “$153k
Note”). The $153k Note included $3,000 fees for net proceeds of $150,000. The $153k Note has an interest rate of 10% and
a default interest rate of 22% and matures on August 19, 2019. The $153k 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 25% discount to the lowest bid or trading price of the Company’s common stock
during the ten (10) 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 $153k Note was calculated using the Black-Scholes pricing model at $166,388, with the following assumptions:
risk-free interest rate of 2.66%, expected life of 0.75 years, volatility of 286.07%, and expected dividend yield of zero. In
connection with the $153k Note, the Company also issued to the holder 35,000 shares of Company common stock valued at $5,597,
which was recorded to equity. Because the fair value of the ECF exceeded the net proceeds from the $153k Note, a charge was recorded
to “Financing cost” for the excess of the fair value of the fair value of the ECF of $166,388 and the common shares
issued of $5,597 over the net proceeds from the note of $150,000, for a net charge of $21,974. 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
|
|
$
|
166,378
|
|
Original issue discount and fees
|
|
|
3,000
|
|
Fair value of shares recorded to equity
|
|
|
5,597
|
|
Financing cost
|
|
|
(21,975
|
)
|
Convertible note
|
|
|
---
|
|
|
|
|
|
|
Gross proceeds
|
|
$
|
153,000
|
|
The
discount resulting from the original issue discount and embedded conversion feature is being amortized over the life of the note,
which is schedule to mature on August 19, 2019. Amortization expense related to the discount in the years ended December 31, 2018
and 2017 was $23,538 and $-0-, respectively. During the years ended December 31, 2018 and 2017, the Company recorded interest
expense on this instrument totaling $1,761 and $-0-, respectively. As of December 31, 2018, the unamortized discount was $129,462
and the note was convertible into 1,511,111 of the Company’s common shares.
Convertible
Notes Payable ($103,000) – December 2018
On
December 3, 2018, the Company entered into a securities purchase agreement for the sale of a $103,000 convertible note (the “$103k
Note III”). The $103k Note III included $3,000 fees for net proceeds of $100,000. The $103k Note III has an interest rate
of 10% and a default interest rate of 18% and matures on December 3, 2019. The $103k 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, 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.
HEALTHLYNKED
CORPORATION
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2018 AND 2017
NOTE
9 – CONVERTIBLE NOTES PAYABLE (CONTINUED)
The
fair value of the ECF of the $103k Note III was calculated using the Black-Scholes pricing model at $148,965, with the following
assumptions: risk-free interest rate of 2.72%, expected life of 1.00 year, volatility of 284.75%, and expected dividend yield
of zero. Because the fair value of the ECF exceeded the net proceeds from the $103k Note III, a charge was recorded to “Financing
cost” for the excess of the fair value of the fair value of the ECF of $148,965 over the net proceeds from the note of $100,000,
for a net charge of $48,965. 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
|
|
$
|
148,965
|
|
Original issue discount and fees
|
|
|
3,000
|
|
Financing cost
|
|
|
(48,965
|
)
|
Convertible note
|
|
|
---
|
|
|
|
|
|
|
Gross proceeds
|
|
$
|
103,000
|
|
The
discount resulting from the original issue discount and embedded conversion feature is being amortized over the life of the note,
which is schedule to mature on December 3, 2019. Amortization expense related to the discount in the years ended December 31,
2018 and 2017 was $7,901 and $-0-, respectively. During the years ended December 31, 2018 and 2017, the Company recorded interest
expense on this instrument totaling $790 and $-0-, respectively. As of December 31, 2018, the unamortized discount was $95,099
and the note was convertible into 1,857,923 of the Company’s common shares.
NOTE
10 – DERIVATIVE FINANCIAL INSTRUMENTS
Derivative
financial instruments are comprised of (i) 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, and (ii) the fair value of certain warrants issued in connection with the July 2018 Private Placement (as defined
in Note 11) for which the exercise price or the number of shares issuable was not fixed upon the issuance of the warrants. The
fair market value of derivative liabilities related to convertible promissory notes was calculated at inception of each convertible
promissory note for which the conversion rate was not fixed and allocated to the components of the respective convertible notes,
with any excess recorded as a charge to “Financing cost.” The fair market value of derivative liabilities related
to warrants issued in the July 2018 Private Placement was initially allocated to the proceeds of the transaction. When the exercise
price and number of shares became fixed in September 2018, the fair value of the warrants was reallocated to shareholders’
equity. Derivative financial instruments are revalued at the end of each period, with the change in value recorded to “Change
in fair value of on derivative financial instruments.”
HEALTHLYNKED
CORPORATION
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2018 AND 2017
NOTE
10 – DERIVATIVE FINANCIAL INSTRUMENTS (CONTINUED)
Derivative
financial instruments recorded in years ended December 31, 2018 include the following:
|
|
|
|
|
|
|
|
Change in
|
|
|
|
|
|
|
|
|
|
Fair Value
|
|
|
Inception of
|
|
|
Fair Value
|
|
|
Extinguishment
|
|
|
Fair Value
|
|
|
|
as of
|
|
|
Derivative
|
|
|
of Derivative
|
|
|
of Derivative
|
|
|
as of
|
|
|
|
December 31,
|
|
|
Financial
|
|
|
Financial
|
|
|
Financial
|
|
|
December 31,
|
|
|
|
2017
|
|
|
Instruments
|
|
|
Instruments
|
|
|
Instruments
|
|
|
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
|
|
|
|
---
|
|
|
|
5,032
|
|
|
|
(69,688
|
)
|
|
|
---
|
|
$53k Note #2 - October 2017
|
|
|
58,216
|
|
|
|
---
|
|
|
|
(2,427
|
)
|
|
|
(55,789
|
)
|
|
|
---
|
|
$171.5k Note - October 2017
|
|
|
190,580
|
|
|
|
---
|
|
|
|
(108,201
|
)
|
|
|
147,523
|
|
|
|
229,902
|
|
$57.8k Note - January 2018
|
|
|
---
|
|
|
|
82,652
|
|
|
|
(19,103
|
)
|
|
|
(63,549
|
)
|
|
|
---
|
|
$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
|
|
|
|
(11,469
|
)
|
|
|
(72,337
|
)
|
|
|
---
|
|
$57.8k Note - April 2018
|
|
|
---
|
|
|
|
83,397
|
|
|
|
(8,968
|
)
|
|
|
(74,429
|
)
|
|
|
---
|
|
$90k Note - April 2018
|
|
|
---
|
|
|
|
130,136
|
|
|
|
(7,106
|
)
|
|
|
(123,030
|
)
|
|
|
---
|
|
$53k Note II - April 2018
|
|
|
---
|
|
|
|
71,679
|
|
|
|
(12,147
|
)
|
|
|
(59,532
|
)
|
|
|
---
|
|
$68.3k Note - May 2018
|
|
|
---
|
|
|
|
99,422
|
|
|
|
(8,290
|
)
|
|
|
(91,132
|
)
|
|
|
---
|
|
$37k Note - May 2018
|
|
|
---
|
|
|
|
54,086
|
|
|
|
(6,323
|
)
|
|
|
(47,763
|
)
|
|
|
---
|
|
$63k Note II - May 2018
|
|
|
---
|
|
|
|
90,390
|
|
|
|
(9,373
|
)
|
|
|
(81,017
|
)
|
|
|
---
|
|
$78.8k Note - May 2018
|
|
|
---
|
|
|
|
116,027
|
|
|
|
(15,358
|
)
|
|
|
(100,669
|
)
|
|
|
---
|
|
$2M PIPE - July 2018
|
|
|
---
|
|
|
|
2,397,516
|
|
|
|
385,856
|
|
|
|
(2,783,372
|
)
|
|
|
---
|
|
$103k Note I - October 2018
|
|
|
---
|
|
|
|
143,834
|
|
|
|
(12,217
|
)
|
|
|
---
|
|
|
|
131,617
|
|
$103k Note II - November 2018
|
|
|
---
|
|
|
|
142,915
|
|
|
|
(7,070
|
)
|
|
|
---
|
|
|
|
135,845
|
|
$153k Note - November 2018
|
|
|
---
|
|
|
|
166,378
|
|
|
|
(8,952
|
)
|
|
|
---
|
|
|
|
157,426
|
|
$103k Note III - December 2018
|
|
|
---
|
|
|
|
148,965
|
|
|
|
(3,315
|
)
|
|
|
---
|
|
|
|
145,650
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
398,489
|
|
|
$
|
4,245,613
|
|
|
$
|
106,141
|
|
|
$
|
(3,949,803
|
)
|
|
$
|
800,440
|
|
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 2.73%, expected life of 0.01 to 1.17 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
Common
Stock
The
holders of the Company’s common stock are entitled to one vote per share. In addition, the holders of common stock will
be entitled to receive ratably dividends, if any, declared by the board of directors out of legally available funds; however,
the current policy of the board of directors is to retain earnings, if any, for operations and growth. Upon liquidation, dissolution
or winding-up, the holders of common stock will be entitled to share ratably in all assets that are legally available for distribution.
The holders of common stock will have no preemptive, subscription, redemption or conversion rights. The rights, preferences and
privileges of holders of common stock will be subject to, and may be adversely affected by, the rights of the holders of any series
of preferred stock, which may be designated solely by action of the board of directors and issued in the future.
On
January 3, 2018, holders of a majority of the voting power of the outstanding capital stock of the Company, acting by written
consented, authorized and approved an amendment to the Amended and Restated Articles of Incorporation of the Company increasing
the amount of authorized shares of common stock to 500,000,000 shares from 230,000,000 shares. On February 5, 2018, the Company
filed the amendment with the Secretary of State of Nevada to effect the increase.
HEALTHLYNKED
CORPORATION
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2018 AND 2017
NOTE
11 – SHAREHOLDERS’ DEFICIT (CONTINUED)
On
October 3, 2018, the Company bought back 100,000 shares of common stock from a shareholder for a total purchase price of $5,000.
The shares were retired. The selling shareholder was the brother of our CEO Dr. Michael Dent.
Preferred
Stock
The
Company’s board of directors will be authorized, subject to any limitations prescribed by law, without further vote or action
by our stockholders, to issue from time to time shares of preferred stock in one or more series. Each series of preferred stock
will have the number of shares, designations, preferences, voting powers, qualifications and special or relative rights or privileges
as shall be determined by our board of directors, which may include, among others, dividend rights, voting rights, liquidation
preferences, conversion rights and preemptive rights.
On
September 4, 2014, the Company filed with the Nevada Secretary of State a certificate of designation for up to 20,000,000 shares
of Series A Convertible Preferred Stock (the “Series A”). Each share of Series A Convertible Preferred Stock (“Series
A”) issued in 2014 converts into one share of common, has voting rights on an as converted basis, and receives liquidation
preferences. Series A shares are not redeemable and have no dividend rights. No shares of Series A were outstanding as of December
31, 2018 or 2017.
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.
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.
HEALTHLYNKED
CORPORATION
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2018 AND 2017
NOTE
11 – SHAREHOLDERS’ DEFICIT (CONTINUED)
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
Private Placements
During
the year ended December 31, 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 year ended December 31, 2017, the Company sold 1,461,111 shares of common stock in private placement transactions to 3 investors
and received $288,000 in proceeds from the sales. The shares were issued at a share price between $0.18 and $0.20 per share. In
connection with the stock sales, the Company also issued 959,998 five-year warrants to purchase shares of common stock at an exercise
price of $0.30 per share.
Investment
Agreement Draws
During
the year ended December 31, 2018, the Company issued 2,440,337 common shares pursuant to draws made by the Company under the Investment
Agreement. The Company received an aggregate of $440,523 in net proceeds from the draws.
During
the years ended December 31, 2017, the Company issued 222,588 common shares pursuant to draws made by the Company under the Investment
Agreement. The Company received $27,640 in proceeds from the draws.
Common
Stock Issuable
As
of December 31, 2018 and 2017, the Company was obligated to issue 114,080 and 47,101 shares of common stock, respectively, in
exchange for professional services provided by two third party consultants. During the years ended December 31, 2018 and 2017,
the Company recognized expense related to shares earned by the consultants of $49,556 and $58,265, respectively. During August
2017, 276,850 shares were issued to one of the consultants with a value of $49,996, in satisfaction of shares accrued through
August 25, 2017. During June 2018, 277,147 shares were issued to one of the consultants with a value of $31,688, in satisfaction
of shares accrued through August 25, 2017.
As
of December 31, 2018 and 2017, the Company was obligated to issue -0- and 75,000 shares, respectively, to an employee pursuant
to the EIP.
HEALTHLYNKED
CORPORATION
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2018 AND 2017
NOTE
11 – SHAREHOLDERS’ DEFICIT (CONTINUED)
Stock
Warrants
Transactions
involving our stock warrants during the years ended December 31, 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
|
|
|
27,635,819
|
|
|
$
|
0.13
|
|
|
|
9,949,998
|
|
|
$
|
0.39
|
|
Exercised during the period
|
|
|
(2,000,744
|
)
|
|
$
|
(0.00
|
)
|
|
|
---
|
|
|
$
|
---
|
|
Terminated during the period
|
|
|
---
|
|
|
$
|
---
|
|
|
|
---
|
|
|
$
|
---
|
|
Outstanding at end of the period
|
|
|
46,161,463
|
|
|
$
|
0.18
|
|
|
|
20,526,387
|
|
|
$
|
0.23
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable at end of the period
|
|
|
46,161,463
|
|
|
$
|
0.18
|
|
|
|
20,526,387
|
|
|
$
|
0.23
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average remaining life
|
|
|
3.8
|
|
|
|
years
|
|
|
|
4.2
|
|
|
|
years
|
|
The
following table summarizes information about the Company’s stock warrants outstanding as of December 31, 2018:
Warrants
Outstanding
|
|
Warrants
Exercisable
|
|
|
|
|
|
|
Weighted-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
Weighted-
|
|
|
|
|
|
Weighted-
|
|
|
|
|
|
|
Remaining
|
|
|
Average
|
|
|
|
|
|
Average
|
|
|
|
Number
|
|
|
Contractual
|
|
|
Exercise
|
|
|
Number
|
|
|
Exercise
|
|
Exercise
Prices
|
|
|
Outstanding
|
|
|
|
Life (years)
|
|
|
|
Price
|
|
|
|
Exercisable
|
|
|
|
Price
|
|
$ 0.0001 to 0.09
|
|
|
20,257,024
|
|
|
|
3.9
|
|
|
$
|
0.06
|
|
|
|
20,257,024
|
|
|
$
|
0.06
|
|
$ 0.10 to 0.24
|
|
|
14,520,441
|
|
|
|
4.0
|
|
|
$
|
0.19
|
|
|
|
14,520,441
|
|
|
$
|
0.19
|
|
$ 0.25 to 0.49
|
|
|
7,693,998
|
|
|
|
3.5
|
|
|
$
|
0.28
|
|
|
|
7,693,998
|
|
|
$
|
0.28
|
|
$ 0.50 to 1.00
|
|
|
3,690,000
|
|
|
|
3.2
|
|
|
$
|
0.65
|
|
|
|
3,690,000
|
|
|
$
|
0.65
|
|
$ 0.05 to 1.00
|
|
|
46,161,463
|
|
|
|
3.8
|
|
|
$
|
0.18
|
|
|
|
46,161,463
|
|
|
$
|
0.18
|
|
During
the year ended December 31, 2018, the Company issued 27,635,819 warrants. The fair value of warrants issued in 2018 was calculated
using the Black-Scholes pricing model with the following assumptions: risk-free interest rate of 2.32% to 2.93%, expected life
of 3.0 to 5.0 years, volatility of 261.18% to 308.60%, and expected dividend yield of zero. During the year ended December 31,
2017, the Company issued 9,949,998 warrants. The fair value of warrants issued in 2017 was calculated using the Black-Scholes
pricing model with the following assumptions: risk-free interest rate of 1.74% to 2.01%, expected life of 5 years, volatility
of 40.00% to 190.86%, and expected dividend yield of zero. The aggregate grant date fair value of warrants issued during the years
ended December 31, 2018 and 2017 was $4,645,46 and $629,299, respectively.
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 year ended December 31, 2018, the Company recognized general
and administrative expense of $94,844, 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 the year ended December 31, 2018, the Company
recognized general and administrative expense of $145,861 related to these warrants.
HEALTHLYNKED
CORPORATION
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2018 AND 2017
NOTE
11 – SHAREHOLDERS’ DEFICIT (CONTINUED)
Employee
Equity Incentive Plan
On
January 1, 2016, the Company instituted 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 years ended
December 31, 2018 and 2017:
|
|
2018
|
|
|
2017
|
|
Outstanding at beginning of the period
|
|
|
1,498,750
|
|
|
|
1,552,500
|
|
Granted during the period
|
|
|
440,000
|
|
|
|
175,000
|
|
Terminated during the period
|
|
|
(200,000
|
)
|
|
|
(228,750
|
)
|
Outstanding at end of the period
|
|
|
1,738,750
|
|
|
|
1,498,750
|
|
|
|
|
|
|
|
|
|
|
Shares vested at period-end
|
|
|
1,198,750
|
|
|
|
870,000
|
|
Weighted average grant date fair value of shares granted during the period
|
|
$
|
0.30
|
|
|
$
|
0.09
|
|
Aggregate grant date fair value of shares granted during the period
|
|
$
|
107,197
|
|
|
$
|
15,750
|
|
Shares available for grant pursuant to EIP at period-end
|
|
|
10,075,934
|
|
|
|
11,654,934
|
|
Total
stock based compensation recognized for grants under the EIP was $28,678 and $11,153 during the years ended December 31, 2018
and 2017, respectively. Total unrecognized stock compensation related to these grants was $103,452 as of December 31, 2018.
A
summary of the status of non-vested shares issued pursuant to the EIP as of December 31, 2018 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
|
|
|
440,000
|
|
|
$
|
0.24
|
|
|
|
100,000
|
|
|
$
|
0.09
|
|
Vested
|
|
|
(328,750
|
)
|
|
$
|
0.13
|
|
|
|
(182,500
|
)
|
|
$
|
0.04
|
|
Forfeited
|
|
|
(200,000
|
)
|
|
$
|
0.04
|
|
|
|
(228,750
|
)
|
|
$
|
0.04
|
|
Nonvested at end of period
|
|
|
540,000
|
|
|
$
|
0.16
|
|
|
|
628,750
|
|
|
$
|
0.05
|
|
HEALTHLYNKED
CORPORATION
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2018 AND 2017
NOTE
11 – SHAREHOLDERS’ DEFICIT (CONTINUED)
Employee
Stock Options
The
following table summarizes the status of options outstanding as of and for the years ended of December 31, 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
|
|
|
1,383,000
|
|
|
$
|
0.29
|
|
|
|
---
|
|
|
$
|
---
|
|
Exercised during the period
|
|
|
---
|
|
|
$
|
---
|
|
|
|
---
|
|
|
$
|
---
|
|
Forfeited during the period
|
|
|
(25,000
|
)
|
|
$
|
0.15
|
|
|
|
---
|
|
|
$
|
---
|
|
Outstanding at end of the period
|
|
|
3,707,996
|
|
|
$
|
0.18
|
|
|
|
2,349,996
|
|
|
$
|
0.12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options exercisable at period-end
|
|
|
1,375,583
|
|
|
|
|
|
|
|
575,000
|
|
|
|
|
|
Weighted average remaining life (in years)
|
|
|
8.1
|
|
|
|
|
|
|
|
8.6
|
|
|
|
|
|
Weighted average grant date fair value of options granted during the period
|
|
$
|
0.22
|
|
|
|
|
|
|
$
|
---
|
|
|
|
|
|
Options available for grant at period-end
|
|
|
10,075,684
|
|
|
|
|
|
|
|
11,654,934
|
|
|
|
|
|
The
following table summarizes information about the Company’s stock options outstanding as of December 31, 2018:
Options Outstanding
|
|
Options Exercisable
|
|
|
|
|
|
|
Weighted-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
Weighted-
|
|
|
|
|
|
Weighted-
|
|
|
|
|
|
|
Remaining
|
|
|
Average
|
|
|
|
|
|
Average
|
|
|
|
Number
|
|
|
Contractual
|
|
|
Exercise
|
|
|
Number
|
|
|
Exercise
|
|
Exercise Prices
|
|
Outstanding
|
|
|
Life (years)
|
|
|
Price
|
|
|
Exercisable
|
|
|
Price
|
|
$ --- to 0.10
|
|
|
1,733,000
|
|
|
|
7.1
|
|
|
$
|
0.08
|
|
|
|
1,158,000
|
|
|
|
0.08
|
|
$ 0.11 to 0.20
|
|
|
749,996
|
|
|
|
7.9
|
|
|
$
|
0.20
|
|
|
|
139,583
|
|
|
|
0.20
|
|
$ 0.21 to 0.31
|
|
|
1,225,000
|
|
|
|
9.5
|
|
|
$
|
0.31
|
|
|
|
78,000
|
|
|
|
0.31
|
|
$ 0.08 to 0.31
|
|
|
3,707,996
|
|
|
|
8.1
|
|
|
$
|
0.18
|
|
|
|
1,375,583
|
|
|
$
|
0.11
|
|
Total
stock based compensation recognized related to option grants was $73,954 and $9,779 during the years ended December 31, 2018 and
2017, respectively.
A
summary of the status of non-vested options issued pursuant to the EIP as of December 31, 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
|
|
|
1,383,000
|
|
|
$
|
0.22
|
|
|
|
---
|
|
|
$
|
---
|
|
Vested
|
|
|
(803,583
|
)
|
|
$
|
0.05
|
|
|
|
(475,000
|
)
|
|
$
|
0.03
|
|
Forfeited
|
|
|
(22,000
|
)
|
|
$
|
0.12
|
|
|
|
---
|
|
|
$
|
---
|
|
Nonvested at end of period
|
|
|
2,332,413
|
|
|
$
|
0.13
|
|
|
|
1,774,996
|
|
|
$
|
0.03
|
|
HEALTHLYNKED
CORPORATION
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2018 AND 2017
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 agreed to 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. The agreement terminated on July 31, 2018. During the years ended December 31, 2018 and 2017, the
Company recognized rent expense to MOD in the amount of $30,457 and $-0-, respectively, pursuant to this agreement including $16,177
recognized in 2018 to write of the balance of a prepayment to MOD to be applied toward future rent.
Total
lease expense for the years ended December 31, 2017 and 2016 was $296,075 and $294,745, respectively.
Future
minimum lease payments (excluding real estate taxes and maintenance costs) as of December 31, 2018 are as follows:
|
|
Operating
|
|
|
Capital
|
|
|
Total
|
|
|
|
Leases
|
|
|
Leases
|
|
|
Commitments
|
|
2019
|
|
$
|
273,856
|
|
|
$
|
19,877
|
|
|
$
|
293,733
|
|
2020
|
|
|
162,055
|
|
|
|
3,058
|
|
|
|
165,113
|
|
2021
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
2022
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
2023
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
435,911
|
|
|
$
|
22,935
|
|
|
$
|
458,846
|
|
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.
HEALTHLYNKED
CORPORATION
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2018 AND 2017
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 – INCOME TAXES
The
tax reform bill that Congress voted to approve Dec. 20, 2017, also known as the “Tax Cuts and Jobs Act”, made sweeping
modifications to the Internal Revenue Code, including a much lower corporate tax rate, changes to credits and deductions, and
a move to a territorial system for corporations that have overseas earnings. The act replaced the prior-law graduated corporate
tax rate, which taxed income over $10 million at 35%, with a flat rate of 21%. The Company has not reviewed the all of the changes
the “Tax Cuts and Jobs Act” that will apply to the Company, but is reviewing such changes. Due to the continuing loss
position of the Company, management believes such changes should not be material.
The
following is a reconciliation of the statutory federal income tax rate applied to pre-tax accounting net loss compared to the
income taxes in the consolidated statement of operations:
|
|
2018
|
|
|
2017
|
|
|
|
|
|
|
|
|
Pre-tax loss
|
|
$
|
(5,790,835
|
)
|
|
$
|
(2,581,011
|
)
|
Statutory rate - Tax Law Change 2017
|
|
|
21
|
%
|
|
|
21
|
%
|
Income tax benefit at statutory rate
|
|
|
(1,216,075
|
)
|
|
|
(542,012
|
)
|
Permanent and other differences
|
|
|
---
|
|
|
|
---
|
|
|
|
|
|
|
|
|
|
|
Change in valuation allowance
|
|
$
|
(1,216,075
|
)
|
|
$
|
(542,012
|
)
|
As
of December 31, 2018 and 2017, the types of temporary differences between the tax basis of assets and liabilities and their financial
reporting amounts which gave rise to deferred taxes, and their tax effects were as follows:
|
|
2018
|
|
|
2017
|
|
|
|
|
|
|
|
|
Net operating loss carry forwards
|
|
$
|
1,893,245
|
|
|
$
|
576,049
|
|
Stock based compensation expense
|
|
|
-
|
|
|
|
-
|
|
Total deferred tax assets
|
|
|
1,893,245
|
|
|
|
576,049
|
|
Valuation allowance
|
|
|
(1,893,245
|
)
|
|
|
(576,049
|
)
|
|
|
|
|
|
|
|
|
|
Net deferred tax assets
|
|
$
|
-
|
|
|
$
|
-
|
|
Due
to the uncertainty of the utilization and recoverability of the loss carry-forwards and other deferred tax assets, Management
has determined a full valuation allowance for the deferred tax assets, since it is more likely than not that the deferred tax
assets will not be realizable.
HEALTHLYNKED
CORPORATION
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2018 AND 2017
NOTE
13 – INCOME TAXES (CONTINUED)
Prior
to 2014, the Company was an S-Corporation, as defined in the Internal Revenue Code. As an S-Corporation, income/losses were passed
through to the stockholders for each year. During 2014, the Company failed to meet the requirements of an S-Corporation when it
authorized and issued a second class of stock other than common stock. The S-Corporation requirements allow only one class of
stock, among other certain requirements, to maintain S-Corporation status, as defined. The Company upon failing to maintain its
S Corporation status became a C-Corporation during 2014. Prior year losses and up to the date that the Company lost its S-Corporation
status are not available to the Company, since they were passed through to qualified S-Corporation shareholders. The net operating
loss (“NOL”) carryovers presented in this note are estimates based on the losses reported at December 31, 2018, 2017
and 2016. Such NOL carryovers could also be subject to IRC Section 382/383 change of ownership rules, Management has not reviewed
the Company’s ownership changes at the date of this filing. If an ownership change has occurred the entire amount of Deferred
Tax Assets could be limited or possibly eliminated. Based upon Management’s assessment a full valuation allowance has been
placed upon the Net Deferred Tax Assets, since it is more likely than not that such Assets will not be realized. Therefore, no
financial statement benefit has been taken for the Deferred Tax Assets, as of the filing date.
Prior
to September 5, 2014, the date on which NWC and HLYK completed the Restructuring, the Company’s business was comprised of
the operations of NWC, which at the time was an LLC comprised of two members. All income taxes resulting from the operation of
NWC were passed through to the personal income tax returns of the LLC members. Subsequent to September 5, 2014, HLKD reports the
consolidated operations of NWC and HLKD in its tax returns. On a consolidated basis, the Company did not have any tax liability
for 2017 or 2018 due to its pre-tax losses. Such return filings are being reviewed by Management, based upon the Company failing
to meet the S-Corporation status, as defined. The Company believes there would be no tax liability created for the S corporation
failure, since the Company has had losses for the periods presented in this filing.
The
Company has not taken any uncertain tax positions on any of its open income tax returns filed through the period ended December
31, 2018. The Company’s methods of accounting are based on established income tax principles in the Internal Revenue Code
and are reflected within its filed income tax returns on the accrual basis.
The
Company re-assesses the validity of its conclusions regarding uncertain tax positions on a quarterly basis to determine if facts
or circumstances have arisen that might cause the Company to change its judgment regarding the likelihood of a tax position’s
sustainability under audit. The Company has determined that there were no uncertain tax positions for the years ended December
31, 2018 and 2017.
NOTE
14 – 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.
HEALTHLYNKED
CORPORATION
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2018 AND 2017
NOTE
14 – SEGMENT REPORTING (CONTINUED)
Segment
information for the years ended December 31, 2018 and 2017 was as follows:
|
|
Year Ended December 31, 2018
|
|
|
Year Ended December 31, 2017
|
|
|
|
NWC
|
|
|
HLYK
|
|
|
Total
|
|
|
NWC
|
|
|
HLYK
|
|
|
Total
|
|
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Patient service revenue, net
|
|
$
|
2,259,002
|
|
|
$
|
---
|
|
|
$
|
2,259,002
|
|
|
$
|
2,103,579
|
|
|
$
|
---
|
|
|
$
|
2,103,579
|
|
Medicare incentives
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
Total revenue
|
|
|
2,259,002
|
|
|
|
---
|
|
|
|
2,259,002
|
|
|
|
2,103,579
|
|
|
|
---
|
|
|
|
2,103,579
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and benefits
|
|
|
1,446,243
|
|
|
|
920,339
|
|
|
|
2,366,582
|
|
|
|
1,395,455
|
|
|
|
626,990
|
|
|
|
2,022,445
|
|
General and administrative
|
|
|
903,019
|
|
|
|
1,937,765
|
|
|
|
2,840,784
|
|
|
|
854,080
|
|
|
|
994,786
|
|
|
|
1,848,866
|
|
Depreciation and amortization
|
|
|
21,870
|
|
|
|
1,912
|
|
|
|
23,782
|
|
|
|
22,387
|
|
|
|
1,219
|
|
|
|
23,606
|
|
Total Operating Expenses
|
|
|
2,371,132
|
|
|
|
2,860,016
|
|
|
|
5,231,148
|
|
|
|
2,271,922
|
|
|
|
1,622,995
|
|
|
|
3,894,917
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from operations
|
|
$
|
(112,130
|
)
|
|
$
|
(2,860,016
|
)
|
|
$
|
(2,972,146
|
)
|
|
$
|
(168,343
|
)
|
|
$
|
(1,622,995
|
)
|
|
$
|
(1,791,338
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Segment Information
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
$
|
24,356
|
|
|
$
|
168,753
|
|
|
$
|
193,109
|
|
|
$
|
22,857
|
|
|
$
|
76,811
|
|
|
$
|
99,668
|
|
Loss on extinguishment of debt
|
|
$
|
---
|
|
|
$
|
393,123
|
|
|
$
|
393,123
|
|
|
$
|
---
|
|
|
$
|
290,581
|
|
|
$
|
290,581
|
|
Financing cost
|
|
$
|
---
|
|
|
$
|
1,221,911
|
|
|
$
|
1,221,911
|
|
|
$
|
---
|
|
|
$
|
72,956
|
|
|
$
|
72,956
|
|
Amortization of original issue and debt discounts on
convertible notes
|
|
$
|
---
|
|
|
$
|
763,616
|
|
|
$
|
763,616
|
|
|
$
|
---
|
|
|
$
|
330,435
|
|
|
$
|
330,435
|
|
Change in fair value of debt
|
|
$
|
---
|
|
|
$
|
140,789
|
|
|
$
|
140,789
|
|
|
$
|
---
|
|
|
$
|
---
|
|
|
$
|
---
|
|
Change in fair value of derivative financial instruments
|
|
$
|
---
|
|
|
$
|
106,141
|
|
|
$
|
106,141
|
|
|
$
|
---
|
|
|
$
|
(3,967
|
)
|
|
$
|
(3,967
|
)
|
Identifiable assets
|
|
$
|
184,912
|
|
|
$
|
242,451
|
|
|
$
|
427,363
|
|
|
$
|
269,424
|
|
|
$
|
170,359
|
|
|
$
|
439,783
|
|
During
the years ended December 31, 2018 and 2017, HLYK realized revenue of $13,388 and $4,414, respectively, to subscription revenue
billed to and paid for by NWC physicians for access to the HealthLynked Network, which the Company test-launched during the third
quarter of 2017. The revenue for HLYK and related expense for NWC were eliminated on consolidation.
NOTE
15 – SUBSEQUENT EVENTS
On
January 14, 2019, the Company entered into a securities purchase agreement for the sale of a $78,000 convertible note (the “$78k
Note”). The $78k Note included $3,000 fees for net proceeds of $75,000. The $78k Note has an interest rate of 10% and a
default interest rate of 22% and matures on October 14, 2019. The $78k Note may be converted into common stock of the Company
by the holder at any time after the issuance date, subject to a 4.99% beneficial ownership limitation, at a conversion price per
share equal to a 25% discount to the lowest bid or trading price of the Company’s common stock during the ten (10) 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. In connection with the $78k Note, the Company also issued to the
holder 28,000 shares of Company common stock.
On
January 15, 2019, the Company entered into a definitive agreement to acquire Hughes Center for Functional Medicine, P.A. (“HCFM”)
for $750,000 in cash, $750,000 in shares of Company common stock and $500,000 in a three-year performance-based payout. HCFM is
a functional medicine practice focusing on neurodegenerative diseases such as Alzheimer’s, Parkinson’s and Multiple
Sclerosis along with other treatments aimed at improving health and slowing aging, including hormones, thyroid, weight loss, wellness
and prevention.
HEALTHLYNKED
CORPORATION
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2018 AND 2017
NOTE
15 – SUBSEQUENT EVENTS (CONTINUED)
On
January 28, 2019, the Company entered into a consulting agreement with an unrelated third party to provide services in exchange
for 125,000 shares of Company common stock to be issued at the time of the agreement and up to 375,000 upon achievement of future
milestones. During March 2018, the Company issued 250,000 of the shares, including 125,000 due on signing of the agreement and
125,00 upon achievement of the first milestone.
On
February 7, 2019, the holder of the holder of the $171.5k Note converted the entire principal balance of $171,500 into 2,512,821
shares of Company common stock
On
February 13, 2019, the investor in the July 18, 2018 private placement transaction exercised the remaining 2,098,427 of the Pre-Funded
Warrants. We did not receive any proceeds from the transaction.
Between
January 1, 2019 and March 27, 2019, the Company made draws pursuant to the Investment Agreement totaling 1,694,043 shares for
proceeds of $404,394.
During
February and March 2019, the Company sold 1,250,000 shares of common stock in two separate private placement transactions and
received $340,000 in proceeds from the sales. The shares were issued at a share price of $0.30 per share. In connection with the
stock sale, we also issued 566,667 five-year warrants to purchase shares of common stock at an exercise price of $0.40 per share
and 250,000 three-year warrants to purchase shares of common stock at an exercise price of $0.50 per share.
HEALTHLYNKED
CORP.
CONDENSED
CONSOLIDATED BALANCE SHEETS
|
|
March 31,
|
|
|
December 31,
|
|
|
|
2019
|
|
|
2018
|
|
ASSETS
|
|
(unaudited)
|
|
|
|
|
Current Assets
|
|
|
|
|
|
|
Cash
|
|
$
|
514,309
|
|
|
$
|
135,778
|
|
Accounts receivable, net of allowance for doubtful accounts of $13,972
and $13,972 as of March 31, 2019 and December 31, 2018, respectively
|
|
|
106,905
|
|
|
|
114,884
|
|
Prepaid expenses
|
|
|
18,639
|
|
|
|
28,542
|
|
Deferred offering costs
|
|
|
57,609
|
|
|
|
96,022
|
|
Total Current Assets
|
|
|
697,462
|
|
|
|
375,226
|
|
Property, plant and equipment, net of accumulated depreciation of
$683,494 and $752,173 as of March 31, 2019 and December 31, 2018, respectively
|
|
|
23,837
|
|
|
|
42,597
|
|
ROU lease assets, long term portion and deposits
|
|
|
364,987
|
|
|
|
9,540
|
|
|
|
|
|
|
|
|
|
|
Total Assets
|
|
$
|
1,086,286
|
|
|
$
|
427,363
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS’ DEFICIT
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Liabilities
|
|
|
|
|
|
|
|
|
Accounts payable and accrued expenses
|
|
$
|
447,096
|
|
|
$
|
394,333
|
|
Capital lease, current portion
|
|
|
---
|
|
|
|
19,877
|
|
Lease liability, current portion
|
|
|
266,130
|
|
|
|
---
|
|
Due to related party, current portion
|
|
|
446,276
|
|
|
|
429,717
|
|
Notes payable to related party, current portion
|
|
|
678,329
|
|
|
|
672,471
|
|
Convertible notes payable, net of original issue discount and debt
discount of $363,089 and $386,473 as of March 31, 2019 and December 31, 2018, respectively
|
|
|
1,057,315
|
|
|
|
1,042,314
|
|
Derivative financial instruments
|
|
|
580,855
|
|
|
|
800,440
|
|
Total Current Liabilities
|
|
|
3,476,001
|
|
|
|
3,359,152
|
|
|
|
|
|
|
|
|
|
|
Long-Term Liabilities
|
|
|
|
|
|
|
|
|
Capital leases, long-term portion
|
|
|
---
|
|
|
|
3,058
|
|
Lease liability, long term portion
|
|
|
90,387
|
|
|
|
---
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities
|
|
|
3,566,388
|
|
|
|
3,362,210
|
|
|
|
|
|
|
|
|
|
|
Shareholders’ Deficit
|
|
|
|
|
|
|
|
|
Common stock, par value $0.0001 per share, 500,000,000 shares authorized,
93,577,019 and 85,178,902 shares issued and outstanding as of March 31, 2019 and December 31, 2018, respectively
|
|
|
9,358
|
|
|
|
8,518
|
|
Common stock issuable, $0.0001 par value; 205,301 and 114,080 shares
as of March 31, 2019 and December 31, 2018, respectively
|
|
|
46,097
|
|
|
|
26,137
|
|
Additional paid-in capital
|
|
|
9,026,215
|
|
|
|
7,531,553
|
|
Accumulated deficit
|
|
|
(11,561,772
|
)
|
|
|
(10,501,055
|
)
|
Total Shareholders’ Deficit
|
|
|
(2,480,102
|
)
|
|
|
(2,934,847
|
)
|
|
|
|
|
|
|
|
|
|
Total Liabilities and Shareholders’ Deficit
|
|
$
|
1,086,286
|
|
|
$
|
427,363
|
|
See
the accompanying notes to these Unaudited Condensed Consolidated Financial Statements
HEALTHLYNKED
CORP.
CONDENSED
CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
|
|
Three Months Ended
March 31,
|
|
|
|
2019
|
|
|
2018
|
|
Revenue
|
|
|
|
|
|
|
Patient service revenue, net
|
|
$
|
464,990
|
|
|
$
|
645,639
|
|
|
|
|
|
|
|
|
|
|
Operating Expenses
|
|
|
|
|
|
|
|
|
Salaries and benefits
|
|
|
529,225
|
|
|
|
560,856
|
|
General and administrative
|
|
|
757,356
|
|
|
|
574,828
|
|
Depreciation and amortization
|
|
|
1,655
|
|
|
|
6,029
|
|
Total Operating Expenses
|
|
|
1,288,236
|
|
|
|
1,141,713
|
|
|
|
|
|
|
|
|
|
|
Loss from operations
|
|
|
(823,246
|
)
|
|
|
(496,074
|
)
|
|
|
|
|
|
|
|
|
|
Other Income (Expenses)
|
|
|
|
|
|
|
|
|
Loss on extinguishment of debt
|
|
|
(139,798
|
)
|
|
|
(325,223
|
)
|
Change in fair value of debt
|
|
|
(29,697
|
)
|
|
|
(57,946
|
)
|
Financing cost
|
|
|
(33,903
|
)
|
|
|
(192,062
|
)
|
Amortization of original issue and debt discounts on notes payable
and convertible notes
|
|
|
(179,384
|
)
|
|
|
(154,835
|
)
|
Change in fair value of derivative financial instrument
|
|
|
191,633
|
|
|
|
(14,621
|
)
|
Interest expense
|
|
|
(46,322
|
)
|
|
|
(40,347
|
)
|
Total other expenses
|
|
|
(237,471
|
)
|
|
|
(785,034
|
)
|
|
|
|
|
|
|
|
|
|
Net loss before provision for income taxes
|
|
|
(1,060,717
|
)
|
|
|
(1,281,108
|
)
|
|
|
|
|
|
|
|
|
|
Provision for income taxes
|
|
|
---
|
|
|
|
---
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(1,060,717
|
)
|
|
$
|
(1,281,108
|
)
|
|
|
|
|
|
|
|
|
|
Net loss per share, basic and diluted:
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
(0.01
|
)
|
|
$
|
(0.02
|
)
|
Fully diluted
|
|
$
|
(0.01
|
)
|
|
$
|
(0.02
|
)
|
|
|
|
|
|
|
|
|
|
Weighted average number of common shares:
|
|
|
|
|
|
|
|
|
Basic
|
|
|
88,506,930
|
|
|
|
72,907,455
|
|
Fully diluted
|
|
|
88,506,930
|
|
|
|
72,907,455
|
|
See
the accompanying notes to these Unaudited Condensed Consolidated Financial Statements
HEALTHLYNKED
CORP.
CONDENSED
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ DEFICIT
THREE
MONTHS ENDED MARCH 31, 2019 AND 2018
(UNAUDITED)
|
|
Number of Shares
|
|
|
|
|
|
Common
|
|
|
Additional
|
|
|
|
|
|
Total
|
|
|
|
Common
|
|
|
Common
|
|
|
Stock
|
|
|
Paid-in
|
|
|
Accumulated
|
|
|
Shareholders’
|
|
|
|
Stock
|
|
|
Stock
|
|
|
Issuable
|
|
|
Capital
|
|
|
Deficit
|
|
|
Deficit
|
|
|
|
(#)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
Balance at December 31, 2018
|
|
|
85,178,902
|
|
|
|
8,518
|
|
|
|
26,137
|
|
|
|
7,531,553
|
|
|
|
(10,501,055
|
)
|
|
|
(2,934,847
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sale of common stock
|
|
|
3,261,978
|
|
|
|
326
|
|
|
|
---
|
|
|
|
693,832
|
|
|
|
---
|
|
|
|
694,158
|
|
Fair value of warrants allocated to proceeds of common stock
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
139,068
|
|
|
|
---
|
|
|
|
139,068
|
|
Shares issued with convertible notes payable
|
|
|
28,000
|
|
|
|
3
|
|
|
|
---
|
|
|
|
4,673
|
|
|
|
---
|
|
|
|
4,676
|
|
Fair value of warrants issued for professional services
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
54,257
|
|
|
|
---
|
|
|
|
54,257
|
|
Conversion of convertible notes payable to common stock
|
|
|
2,512,821
|
|
|
|
251
|
|
|
|
---
|
|
|
|
534,980
|
|
|
|
---
|
|
|
|
535,231
|
|
Consultant fees payable with common shares and warrants
|
|
|
270,000
|
|
|
|
27
|
|
|
|
19,960
|
|
|
|
6,850
|
|
|
|
---
|
|
|
|
26,837
|
|
Shares and options issued pursuant to employee equity incentive plan
|
|
|
113,750
|
|
|
|
12
|
|
|
|
---
|
|
|
|
61,223
|
|
|
|
---
|
|
|
|
61,235
|
|
Exercise of stock warrants
|
|
|
2,098,427
|
|
|
|
210
|
|
|
|
---
|
|
|
|
(210
|
)
|
|
|
---
|
|
|
|
---
|
|
Exercise of stock options
|
|
|
113,141
|
|
|
|
11
|
|
|
|
---
|
|
|
|
(11
|
)
|
|
|
---
|
|
|
|
---
|
|
Net loss
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
(1,060,717
|
)
|
|
|
(1,060,717
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at March 31, 2019
|
|
|
93,577,019
|
|
|
|
9,358
|
|
|
|
46,097
|
|
|
|
9,026,215
|
|
|
|
(11,561,772
|
)
|
|
|
(2,480,102
|
)
|
|
|
Number of Shares
|
|
|
|
|
|
Common
|
|
|
Additional
|
|
|
|
|
|
Total
|
|
|
|
Common
|
|
|
Common
|
|
|
Stock
|
|
|
Paid-in
|
|
|
Accumulated
|
|
|
Shareholders’
|
|
|
|
Stock
|
|
|
Stock
|
|
|
Issuable
|
|
|
Capital
|
|
|
Deficit
|
|
|
Deficit
|
|
|
|
(#)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
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
|
|
|
631,204
|
|
|
|
63
|
|
|
|
236
|
|
|
|
133,312
|
|
|
|
---
|
|
|
|
133,611
|
|
Fair value of warrants allocated to proceeds of common stock
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
117,956
|
|
|
|
---
|
|
|
|
117,956
|
|
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
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
10,199
|
|
|
|
---
|
|
|
|
10,199
|
|
Consultant fees payable with common shares and warrants
|
|
|
---
|
|
|
|
---
|
|
|
|
5,287
|
|
|
|
---
|
|
|
|
---
|
|
|
|
5,287
|
|
Shares and options issued pursuant to employee equity incentive plan
|
|
|
75,000
|
|
|
|
8
|
|
|
|
(8
|
)
|
|
|
5,577
|
|
|
|
---
|
|
|
|
5,577
|
|
Net loss
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
(1,281,108
|
)
|
|
|
(1,281,108
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at March 31, 2018
|
|
|
73,009,141
|
|
|
|
7,301
|
|
|
|
13,791
|
|
|
|
3,242,822
|
|
|
|
(5,986,338
|
)
|
|
|
(2,722,424
|
)
|
See
the accompanying notes to these Unaudited Condensed Consolidated Financial Statements
HEALTHLYNKED
CORP.
CONDENSED
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
|
|
Three Months Ended
March 31,
|
|
|
|
2019
|
|
|
2018
|
|
Cash Flows from Operating Activities
|
|
|
|
|
|
|
Net loss
|
|
$
|
(1,060,717
|
)
|
|
$
|
(1,281,108
|
)
|
Adjustments to reconcile net loss to net cash used in operating activities:
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
1,655
|
|
|
|
6,029
|
|
Stock based compensation, including amortization of prepaid
fees
|
|
|
180,741
|
|
|
|
23,666
|
|
Amortization of original issue discount and debt discount
on convertible notes
|
|
|
179,384
|
|
|
|
154,835
|
|
Financing cost
|
|
|
33,903
|
|
|
|
192,062
|
|
Change in fair value of derivative financial instrument
|
|
|
(191,633
|
)
|
|
|
14,621
|
|
Loss on extinguishment of debt
|
|
|
139,798
|
|
|
|
325,223
|
|
Change in fair value of debt
|
|
|
29,697
|
|
|
|
57,946
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
7,979
|
|
|
|
(36,174
|
)
|
Prepaid expenses and deposits
|
|
|
9,903
|
|
|
|
12,575
|
|
Accounts payable and accrued expenses
|
|
|
51,237
|
|
|
|
90,336
|
|
Lease liability
|
|
|
1,070
|
|
|
|
---
|
|
Due to related party, current
portion
|
|
|
16,590
|
|
|
|
15,835
|
|
Net cash used in operating activities
|
|
|
(600,393
|
)
|
|
|
(424,154
|
)
|
|
|
|
|
|
|
|
|
|
Cash Flows from Investing Activities
|
|
|
|
|
|
|
|
|
Acquisition of property and equipment
|
|
|
(4,302
|
)
|
|
|
(201
|
)
|
Net cash used in investing activities
|
|
|
(4,302
|
)
|
|
|
(201
|
)
|
|
|
|
|
|
|
|
|
|
Cash Flows from Financing Activities
|
|
|
|
|
|
|
|
|
Proceeds from sale of common stock
|
|
|
833,226
|
|
|
|
251,568
|
|
Proceeds from issuance of convertible notes
|
|
|
150,000
|
|
|
|
325,000
|
|
Repayment of convertible notes
|
|
|
---
|
|
|
|
(209,682
|
)
|
Proceeds from related party loans
|
|
|
---
|
|
|
|
101,450
|
|
Repayment of related party loans
|
|
|
---
|
|
|
|
(9,000
|
)
|
Repayment of notes payable and bank loans
|
|
|
---
|
|
|
|
(52,619
|
)
|
Payments on capital leases
|
|
|
---
|
|
|
|
(3,058
|
)
|
Net cash provided by financing activities
|
|
|
983,226
|
|
|
|
403,659
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash
|
|
|
378,531
|
|
|
|
(20,696
|
)
|
Cash, beginning of period
|
|
|
135,778
|
|
|
|
50,006
|
|
|
|
|
|
|
|
|
|
|
Cash, end of period
|
|
$
|
514,309
|
|
|
$
|
29,310
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosure of cash flow information:
|
|
|
|
|
|
|
|
|
Cash paid during the period for interest
|
|
$
|
830
|
|
|
$
|
7,117
|
|
Cash paid during the period for income tax
|
|
$
|
---
|
|
|
$
|
---
|
|
Schedule of non-cash investing and financing activities:
|
|
|
|
|
|
|
|
|
Fair value of beneficial conversion feature and original
issue discount allocated to proceeds of convertible notes payable
|
|
$
|
179,227
|
|
|
$
|
---
|
|
Common stock issuable issued during period
|
|
$
|
4,483
|
|
|
$
|
8
|
|
Fair of warrants issued for professional service
|
|
$
|
14,743
|
|
|
$
|
---
|
|
Conversion of convertible note payable to common shares
|
|
$
|
535,231
|
|
|
$
|
---
|
|
Fair value of common shares issued with convertible notes
payable
|
|
$
|
4,676
|
|
|
$
|
---
|
|
Cashless exercise of options and warrants
|
|
$
|
222
|
|
|
$
|
---
|
|
Adoption of lease obligation and ROU asset
|
|
$
|
417,317
|
|
|
$
|
---
|
|
Fair value of beneficial conversion feature and original
issue discount allocated to proceeds of convertible note payable
|
|
$
|
---
|
|
|
|
325,000
|
|
Fair value of warrants issued to extend maturity date
of convertible notes payable
|
|
$
|
---
|
|
|
$
|
10,199
|
|
Fair value of warrants issued to extend related party
notes payable
|
|
$
|
---
|
|
|
$
|
337,466
|
|
Derivative liabilities written off with repayment
of convertible notes payable
|
|
$
|
---
|
|
|
$
|
160,850
|
|
See
the accompanying notes to these Unaudited Condensed Consolidated Financial Statements
HEALTHLYNKED
CORP.
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH
31, 2019
(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 with the Secretary of State of Nevada. 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 an 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.
On
June 28, 2018, the Company formed wholly-owned subsidiary HLYK FL LLC (“Merger Sub”) to act as the acquiring entity
in the acquisition of Hughes Center for Functional Medicine, P.A. (the “HCFM”). The acquisition of HCFM was completed
on April 12, 2019. See “Note 15 – SUBSEQUENT EVENTS.” Merger Sub did not have any material activity since its
inception or during the three months ended March 31, 2019.
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, 2018 and 2017, respectively,
which are included in the Company’s Form 10-K filed with the United States Securities and Exchange Commission on April 1,
2019. 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 months ended March 31, 2019 are not necessarily indicative
of results for the entire year ending December 31, 2019.
All
significant intercompany transactions and balances have been eliminated upon consolidation. In addition, certain amounts in the
prior periods’ consolidated financial statements have been reclassified to conform to the current period presentation.
NOTE
2 – SIGNIFICANT ACCOUNTING POLICIES
A
summary of the significant accounting policies applied in the presentation of the accompanying consolidated financial statements
follows:
Basis
of Presentation
The
accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted
in the United States of America (“US GAAP”).
All
amounts referred to in the notes to the unaudited condensed consolidated financial statements are in United States Dollars ($)
unless stated otherwise.
HEALTHLYNKED
CORP.
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH
31, 2019
(UNAUDITED)
NOTE
2 – SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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 consolidated financial statements, and the reported amounts of revenues and
expenses during the reporting period. Accordingly, actual results could differ from those estimates. Significant estimates include
assumptions about collection of accounts receivable, the valuation and recognition of stock-based compensation expense, valuation
allowance for deferred tax assets, borrowing rate consideration for ROU lease assets including related lease liability and useful
life of fixed assets.
Adopted
Accounting Pronouncements
Effective
January 1, 2019, the Company adopted Accounting Standards Update (“ASU”) No. 2016-02, Leases (“ASU
2016-02”) using the required modified retrospective approach. ASU 2016-02 requires lessees to record most leases on their
balance sheets but recognize expenses on their income statements in a manner similar to current accounting. See discussion below
under the caption “Leases” in this Note 2 and in Note 7 for more detail on the Company’s accounting
policy with respect to lease accounting.
Effective
January 1, 2019, the Company adopted ASU 2018-07, Compensation - Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based
Payment Accounting. ASU 2018-07 expands the scope of Topic 718 to include share-based payment transactions for acquiring goods
and services from nonemployees and supersedes the guidance in Subtopic 505-50, Equity - Equity-Based Payments to Non-Employees.
The adoption of this guidance did not materially impact the Company’s financial statements and related disclosures.
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.
|
HEALTHLYNKED
CORP.
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH
31, 2019
(UNAUDITED)
NOTE
2 – SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Laws
and regulations concerning government programs, including Medicare and Medicaid, are complex and subject to varying interpretation.
As a result of investigations by governmental agencies, various health care organizations have received requests for information
and notices regarding alleged noncompliance with those laws and regulations, which, in some instances, have resulted in organizations
entering into significant settlement agreements. Compliance with such laws and regulations may also be subject to future government
review and interpretation as well as significant regulatory action, including fines, penalties, and potential exclusion from the
related programs. There can be no assurance that regulatory authorities will not challenge the Company’s compliance with
these laws and regulations, and it is not possible to determine the impact, if any, such claims or penalties would have upon the
Company. In addition, the contracts the Company has with commercial payors also provide for retroactive audit and review of claims.
Settlements
with third-party payors for retroactive adjustments due to audits, reviews or investigations are considered variable consideration
and are included in the determination of the estimated transaction price for providing patient care. These settlements are estimated
based on the terms of the payment agreement with the payor, correspondence from the payor and the Company’s historical settlement
activity, including an assessment to ensure that it is probable that a significant reversal in the amount of cumulative revenue
recognized will not occur when the uncertainty associated with the retroactive adjustment is subsequently resolved. Estimated
settlements are adjusted in future periods as adjustments become known, or as years are settled or are no longer subject to such
audits, reviews, and investigations.
The
Company also provides services to uninsured patients, and offers those uninsured patients a discount, either by policy or law,
from standard charges. The Company estimates the transaction price for patients with deductibles and coinsurance and from those
who are uninsured based on historical experience and current market conditions. The initial estimate of the transaction price
is determined by reducing the standard charge by any contractual adjustments, discounts, and implicit price concessions. Subsequent
changes to the estimate of the transaction price are generally recorded as adjustments to patient service revenue in the period
of the change.
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 47% of total billings. Trade accounts receivable are recorded at this net amount. As of March 31,
2019 and December 31, 2018, the Company’s gross accounts receivable were $227,943 and $244,956, respectively, and net accounts
receivable were $106,905 and $114,884, respectively, based upon net reporting of accounts receivable. As of March 31, 2019 and
December 31, 2018, the Company’s allowance of doubtful accounts was $13,972 and $13,972, respectively.
Leases
Upon
transition under ASU 2016-02, the Company elected the suite of practical expedients as a package applied to all of its leases,
including (i) not reassessing whether any expired or existing contracts are or contain leases, (ii) not reassessing the lease
classification for any expired or existing leases, and (iii) not reassessing initial direct costs for any existing leases. For
new leases, the Company will determine if an arrangement is or contains a lease at inception. Leases are included as right-of-use
(“ROU”) assets within other assets and ROU liabilities within accrued expenses and other liabilities and within other
long-term liabilities on the Company’s condensed consolidated balance sheets.
HEALTHLYNKED
CORP.
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH
31, 2019
(UNAUDITED)
NOTE
2 – SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
ROU
assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. The
Company’s leases do not provide an implicit rate. The Company uses its incremental borrowing rate based on the information
available at commencement date in determining the present value of lease payments. The ROU asset also includes any lease payments
made and excludes lease incentives. Lease expense for lease payments is recognized on a straight-line basis over the lease term.
Adoption
of ASU 2016-02 had an impact of $355,447 and $356,517 million on the Company’s assets and liabilities, respectively, and
had no material impact on cash provided by or used in operating, investing or financing activities on the Company’s unaudited
condensed consolidated statements of cash flows.
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 March 31, 2019 and December 31, 2018.
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.
HEALTHLYNKED
CORP.
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH
31, 2019
(UNAUDITED)
NOTE
2 – SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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 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.
HEALTHLYNKED
CORP.
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH
31, 2019
(UNAUDITED)
NOTE
2 – SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Income
Taxes
The
Company follows Accounting Standards Codification subtopic 740-10, Income Taxes (“ASC 740-10”) for recording the provision
for income taxes. Deferred tax assets and liabilities are computed based upon the difference between the financial statement and
income tax basis of assets and liabilities using the enacted marginal tax rate applicable when the related asset or liability
is expected to be realized or settled. Deferred income tax expenses or benefits are based on the changes in the asset or liability
during each period. If available evidence suggests that it is more likely than not that some portion or all of the deferred tax
assets will not be realized, a valuation allowance is required to reduce the deferred tax assets to the amount that is more likely
than not to be realized. Future changes in such valuation allowance are included in the provision for deferred income taxes in
the period of change. Deferred income taxes may arise from temporary differences resulting from income and expense items reported
for financial accounting and tax purposes in different periods. Deferred taxes are classified as current or non-current, depending
on the classification of assets and liabilities to which they relate. Deferred taxes arising from temporary differences that are
not related to an asset or liability are classified as current or non-current depending on the periods in which the temporary
differences are expected to reverse and are considered immaterial. No Income Tax has been provided for the three months ended
March 31, 2019, since the Company has sustained a loss for the period. Due to the uncertainty of the utilization and recoverability
of the loss carry-forwards (including the three months ended March 31, 2019) and other deferred tax assets, management has
determined a full valuation allowance for the deferred tax assets, since it is more likely than not that the deferred tax assets
will not be realizable.
Recurring
Fair Value Measurements
The
carrying value of the Company’s financial assets and financial liabilities is their cost, which may differ from fair value.
The carrying value of cash held as demand deposits, money market and certificates of deposit, marketable investments, accounts
receivable, short-term borrowings, accounts payable, accrued liabilities, and derivative financial instruments approximated their
fair value.
Net
Loss per Share
Basic net income (loss) per common share is
computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding during the period.
During the three months ended March 31, 2019 and 2018, 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 March 31, 2019 and December 31, 2018, potentially dilutive securities were comprised of (i)
45,058,874 and 46,161,463 warrants outstanding, respectively, (ii) 3,549,250 and 3,707,996 stock options outstanding, respectively,
(iii) 10,346,866 and 15,517,111 shares issuable upon conversion of convertible notes, respectively, and (iv) 463,750 and 565,000
unissued shares subject to future vesting requirements granted pursuant to the Company’s Employee Incentive Plan.
Common
stock awards
The
Company grants common stock awards to non-employees in exchange for services provided. The Company measures the fair value of
these awards using the fair value of the services provided or the fair value of the awards granted, whichever is more reliably
measurable. The fair value measurement date of these awards is generally the date the performance of services is complete. The
fair value of the awards is recognized on a straight-line basis as services are rendered. The share-based payments related to
common stock awards for the settlement of services provided by non-employees is recorded on the consolidated statement of comprehensive
loss in the same manner and charged to the same account as if such settlements had been made in cash.
Warrants
In
connection with certain financing, consulting and collaboration arrangements, the Company has issued warrants to purchase shares
of its common stock. The outstanding warrants are standalone instruments that are not puttable or mandatorily redeemable by the
holder and are classified as equity awards. The Company measures the fair value of the awards using the Black-Scholes 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
.
HEALTHLYNKED
CORP.
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH
31, 2019
(UNAUDITED)
NOTE
2 – SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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 two operating segments: NWC (multi-specialty medical group including OB/GYN
and General Practice) and HLYK (develops and markets the “HealthLynked Network,” an online personal medical information
and record archive system).
NOTE
3 – GOING CONCERN MATTERS AND LIQUIDITY
As
of March 31, 2019, the Company had a working capital deficit of $2,778,539 and accumulated deficit $11,561,772. For the three
months ended March 31, 2019, the Company had a net loss of $1,060,717 and net cash used by operating activities of $600,393. Net
cash used in investing activities was $4,302. Net cash provided by financing activities was $983,226, resulting principally from
$833,226 proceeds from the sale of common stock and $150,000 net proceeds from the issuance of convertible notes.
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 three months ended March 31, 2019, the Company received $493,226
from the proceeds of the sale of 2,128,644 shares pursuant to the Investment Agreement.
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.”
HEALTHLYNKED
CORP.
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH
31, 2019
(UNAUDITED)
NOTE
4 – DEFERRED OFFERING COSTS AND PREPAID EXPENSES (CONTINUED)
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 March 31, 2019 and 2018, the Company recognized $12,802 and $12,802, respectively,
in general and administrative expense related to the cost of the warrants.
Prepaid
Expenses
On
December 6, 2018, the Company granted additional three-year warrants to purchase 240,000 shares at an exercise price of $0.20
per share to two advisors for services to be provided over a three-month period. The fair value of the warrants was calculated
using the Black-Scholes pricing model at $35,462, with the following assumptions: risk-free interest rate of 2.76%, expected life
of 3 years, volatility of 285.22%, and expected dividend yield of zero. The Company recognized $25,611 and $-0- in the three months
ended March 31, 2019 and 2018, respectively, to general and administrative expense related to the cost of the warrants.
NOTE
5 – PROPERTY, PLANT, AND EQUIPMENT
Property,
plant and equipment at March 31, 2019 and December 31, 2018 are as follows:
|
|
March 31,
|
|
|
December 31,
|
|
|
|
2019
|
|
|
2018
|
|
|
|
|
|
|
|
|
Capital Lease equipment
|
|
$
|
251,752
|
|
|
$
|
343,492
|
|
Telephone equipment
|
|
|
12,308
|
|
|
|
12,308
|
|
Furniture, Transport and Office equipment
|
|
|
443,271
|
|
|
|
438,970
|
|
|
|
|
|
|
|
|
|
|
Total Property, plant and equipment
|
|
|
707,331
|
|
|
|
794,770
|
|
Less: accumulated depreciation
|
|
|
(683,494
|
)
|
|
|
(752,173
|
)
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment, net
|
|
$
|
23,837
|
|
|
$
|
42,597
|
|
Depreciation
expense during the three months ended three months ended March 31, 2019 and 2018 was $1,655 and $6,029, respectively.
HEALTHLYNKED
CORP.
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH
31, 2019
(UNAUDITED)
NOTE
6 – NOTES PAYABLE AND OTHER AMOUNTS DUE TO RELATED PARTY
Amounts
due to related parties as of March 31, 2019 and December 31, 2018 were comprised of the following:
|
|
March 31,
|
|
|
December 31,
|
|
|
|
2019
|
|
|
2018
|
|
Due to related party:
|
|
|
|
|
|
|
Deferred compensation, Dr. Michael Dent
|
|
$
|
300,600
|
|
|
$
|
300,600
|
|
Accrued interest payable to Dr. Michael Dent
|
|
|
145,676
|
|
|
|
129,117
|
|
Total due to related party
|
|
$
|
446,276
|
|
|
$
|
429,717
|
|
|
|
|
|
|
|
|
|
|
Notes payable to related party:
|
|
|
|
|
|
|
|
|
Notes payable to Dr. Michael Dent, current portion
|
|
$
|
678,329
|
|
|
$
|
672,471
|
|
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. All principal and interest is due at maturity of the $750k DMD Note on December 31, 2019. Interest accrued on the $750k
DMD Note as of March 31, 2019 and December 31, 2018 was $72,687 and $66,859, respectively.
The
carrying values of notes payable to Dr. Michael Dent as of March 31, 2019 and December 31, 2018 were as follows:
|
|
|
|
|
|
|
Interest
|
|
|
March 31,
|
|
|
December 31,
|
|
Inception Date
|
|
Maturity Date
|
|
Borrower
|
|
|
Rate
|
|
|
2019
|
|
|
2018
|
|
January 12, 2017
|
|
January 13, 2019
|
|
HLYK
|
|
|
|
10
|
%
|
|
$
|
41,750
|
*
|
|
$
|
40,560
|
*
|
January 18, 2017
|
|
January 19, 2019
|
|
HLYK
|
|
|
|
10
|
%
|
|
|
23,827
|
*
|
|
|
23,165
|
*
|
January 24, 2017
|
|
January 15, 2019
|
|
HLYK
|
|
|
|
10
|
%
|
|
|
59,491
|
*
|
|
|
57,839
|
*
|
February 9, 2017
|
|
February 10, 2019
|
|
HLYK
|
|
|
|
10
|
%
|
|
|
35,574
|
*
|
|
|
34,586
|
*
|
April 20, 2017
|
|
April 21, 2019
|
|
HLYK
|
|
|
|
10
|
%
|
|
|
11,681
|
*
|
|
|
11,357
|
*
|
June 15, 2017
|
|
June 16, 2019
|
|
HLYK
|
|
|
|
10
|
%
|
|
|
37,506
|
*
|
|
|
36,464
|
*
|
August 17, 2017
|
|
August 18, 2018
|
|
HLYK
|
|
|
|
10
|
%
|
|
|
20,000
|
|
|
|
20,000
|
|
August 24, 2017
|
|
August 25, 2018
|
|
HLYK
|
|
|
|
10
|
%
|
|
|
37,500
|
|
|
|
37,500
|
|
September 7, 2017
|
|
September 8, 2018
|
|
HLYK
|
|
|
|
10
|
%
|
|
|
35,000
|
|
|
|
35,000
|
|
September 21, 2017
|
|
September 22, 2018
|
|
HLYK
|
|
|
|
10
|
%
|
|
|
26,500
|
|
|
|
26,500
|
|
September 29, 2017
|
|
September 30, 2018
|
|
HLYK
|
|
|
|
10
|
%
|
|
|
12,000
|
|
|
|
12,000
|
|
December 21, 2017
|
|
December 22, 2018
|
|
HLYK
|
|
|
|
10
|
%
|
|
|
14,000
|
|
|
|
14,000
|
|
January 8, 2018
|
|
January 9, 2019
|
|
HLYK
|
|
|
|
10
|
%
|
|
|
75,000
|
|
|
|
75,000
|
|
January 11, 2018
|
|
January 12, 2019
|
|
HLYK
|
|
|
|
10
|
%
|
|
|
9,000
|
|
|
|
9,000
|
|
January 26, 2018
|
|
January 27, 2019
|
|
HLYK
|
|
|
|
10
|
%
|
|
|
17,450
|
|
|
|
17,450
|
|
January 3, 2014
|
|
December 31, 2018
|
|
NWC
|
|
|
|
10
|
%
|
|
|
222,050
|
|
|
|
222,050
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
678,329
|
|
|
$
|
672,471
|
|
* - 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 March 31,
2019 and December 31, 2018 was $73,020 and $62,258, respectively.
HEALTHLYNKED
CORP.
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH
31, 2019
(UNAUDITED)
NOTE
6 – NOTES PAYABLE AND OTHER AMOUNTS DUE TO RELATED PARTY (CONTINUED)
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, 2018, 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 $5,828 and $3,449 in the three months ended
three months ended March 31, 2019 and 2018, respectively, and is included on the statement of operations in “Change in fair
value of debt.”
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 agreed to 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. The agreement terminated on July 31, 2018. During the three months ended March 31, 2019 and 2018, the Company recognized
rent expense to MOD in the amount of $-0- and $6,120, respectively, pursuant to this agreement.
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 March 31, 2019 and 2018, the Company recognized general and administrative expense
in the amount of $-0- and $12,500, respectively, pursuant to this agreement. On July 1, 2018 HLYK and MOD signed a marketing and
service agreement pursuant to which 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 through the HLYK network.
NOTE
7 – LEASES
The
Company has two operating leases for office space and equipment that expire in July 2020. The Company’s weighted-average
remaining lease term relating to its operating leases is 1.3 years, with a weighted-average discount rate of 11.71%.
The Company is also lessee in a capital equipment finance lease for medical equipment entered into in March 2015 and expiring
in March 2020. The Company’s weighted-average remaining lease term relating to its financing lease is 1.0 years,
with a weighted-average discount rate of 9.38%. The Company’s lease agreements generally do not provide an implicit
borrowing rate, therefore an internal incremental borrowing rate is determined based on information available at lease commencement
date for purposes of determining the present value of lease payments.
The
table below summarizes the Company’s lease-related assets and liabilities as of March 31, 2019:
|
|
As of March 31, 2019
|
|
|
|
Operating
|
|
|
Financing
|
|
|
Total
|
|
|
|
Leases
|
|
|
Leases
|
|
|
Leases
|
|
Lease assets
|
|
$
|
338,126
|
|
|
$
|
17,321
|
|
|
$
|
355,447
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lease liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
Lease liabilities (short term)
|
|
$
|
248,809
|
|
|
$
|
17,321
|
|
|
$
|
266,130
|
|
Lease liabilities (long term)
|
|
|
90,387
|
|
|
|
---
|
|
|
|
90,387
|
|
Total lease liabilities
|
|
$
|
339,196
|
|
|
$
|
17,321
|
|
|
$
|
356,517
|
|
HEALTHLYNKED
CORP.
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH
31, 2019
(UNAUDITED)
NOTE
7 – LEASES (CONTINUED)
The
Company incurred lease expense of $73,415 for the three months ended March 31, 2019, of which $68,828 related to operating
leases and $4,587 related to financing leases.
Maturities
of operating lease liabilities were as follows as of March 31, 2019:
|
|
Operating
|
|
|
Capital
|
|
|
Total
|
|
|
|
Leases
|
|
|
Leases
|
|
|
Commitments
|
|
2019 (April through December)
|
|
$
|
206,098
|
|
|
$
|
13,761
|
|
|
$
|
219,859
|
|
2020
|
|
|
162,055
|
|
|
|
4,587
|
|
|
|
166,642
|
|
2021
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
2022
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
2023
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
Total lease payments
|
|
|
368,153
|
|
|
|
18,348
|
|
|
|
386,501
|
|
Less interest
|
|
|
(28,957
|
)
|
|
|
(1,027
|
)
|
|
|
(29,984
|
)
|
Present value of lease liabilities
|
|
$
|
339,196
|
|
|
$
|
17,321
|
|
|
$
|
356,517
|
|
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 three months ended March 31, 2019 and 2018, the Company made installment payments of $-0- and $52,619,
respectively, on the December MCA. During the three months ended March 31, 2019 and 2018, the Company recognized amortization
of the discount in the amount of $-0- and $14,574, respectively. The December MCA was repaid on June 1, 2018.
NOTE
9 –CONVERTIBLE NOTES PAYABLE
Convertible
notes payable as of March 31, 2019 and December 31, 2018 are comprised of the following:
|
|
March 31,
|
|
|
December 31,
|
|
|
|
2019
|
|
|
2018
|
|
|
|
|
|
|
|
|
$550k Note - July 2016
|
|
$
|
611,651
|
*
|
|
$
|
594,813
|
|
$50k Note - July 2016
|
|
|
62,019
|
*
|
|
|
60,312
|
|
$111k Note - May 2017
|
|
|
128,734
|
*
|
|
|
125,190
|
|
$171.5k Note - October 2017
|
|
|
---
|
|
|
|
186,472
|
|
$103k Note I - October 2018
|
|
|
103,000
|
|
|
|
103,000
|
|
$103k Note II - November 2018
|
|
|
103,000
|
|
|
|
103,000
|
|
$153k Note - November 2018
|
|
|
153,000
|
|
|
|
153,000
|
|
$103k Note III - December 2018
|
|
|
103,000
|
|
|
|
103,000
|
|
$78k Note I - January 2019
|
|
|
78,000
|
|
|
|
---
|
|
$78k Note II - January 2019
|
|
|
78,000
|
|
|
|
---
|
|
|
|
|
1,420,404
|
|
|
|
1,428,787
|
|
Less: unamortized discount
|
|
|
(363,089
|
)
|
|
|
(386,473
|
)
|
Convertible notes payable, net of original issue discount
and debt discount
|
|
|
1,057,315
|
|
|
|
1,042,314
|
|
* - Denotes
that convertible note payable is carried at fair value
HEALTHLYNKED
CORP.
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH
31, 2019
(UNAUDITED)
NOTE
9 –CONVERTIBLE NOTES PAYABLE (CONTINUED)
Amortization
expense and interest expense recognized on each convertible note outstanding during the three months ended March 31, 2019 and
2018 were as follows:
|
|
Amortization of Debt Discount
|
|
|
Interest Expanse
|
|
|
|
Three Months Ended
March 31,
|
|
|
Three Months Ended
March 31,
|
|
|
|
2019
|
|
|
2018
|
|
|
2019
|
|
|
2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$550k Note - July 2016
|
|
$
|
---
|
|
|
$
|
---
|
|
|
$
|
8,137
|
|
|
$
|
8,137
|
|
$50k Note - July 2016
|
|
|
---
|
|
|
|
---
|
|
|
|
1,233
|
|
|
|
1,233
|
|
$111k Note - May 2017
|
|
|
---
|
|
|
|
11,011
|
|
|
|
4,078
|
|
|
|
4,078
|
|
$53k Note - July 2017
|
|
|
---
|
|
|
|
1,520
|
|
|
|
---
|
|
|
|
116
|
|
$35k Note - September 2017
|
|
|
---
|
|
|
|
7,972
|
|
|
|
---
|
|
|
|
614
|
|
$55k Note - September 2017
|
|
|
---
|
|
|
|
10,849
|
|
|
|
---
|
|
|
|
1,085
|
|
$53k Note II - October 2017
|
|
|
---
|
|
|
|
17,036
|
|
|
|
---
|
|
|
|
1,307
|
|
$171.5k Note - October 2017
|
|
|
---
|
|
|
|
42,404
|
|
|
|
1,785
|
|
|
|
4,229
|
|
$57.8k Note - January 2018
|
|
|
---
|
|
|
|
13,923
|
|
|
|
---
|
|
|
|
1,392
|
|
$112.8k Note - February 2018
|
|
|
---
|
|
|
|
17,608
|
|
|
|
---
|
|
|
|
1,761
|
|
$83k Note - February 2018
|
|
|
---
|
|
|
|
10,460
|
|
|
|
---
|
|
|
|
1,046
|
|
$105k Note - March 2018
|
|
|
---
|
|
|
|
7,479
|
|
|
|
---
|
|
|
|
748
|
|
$103k Note I - October 2018
|
|
|
32,526
|
|
|
|
---
|
|
|
|
2,540
|
|
|
|
---
|
|
$103k Note II - November 2018
|
|
|
31,856
|
|
|
|
---
|
|
|
|
2,540
|
|
|
|
---
|
|
$153k Note - November 2018
|
|
|
50,440
|
|
|
|
---
|
|
|
|
3,773
|
|
|
|
---
|
|
$103k Note III - December 2018
|
|
|
25,397
|
|
|
|
---
|
|
|
|
2,540
|
|
|
|
---
|
|
$78k Note I - January 2019
|
|
|
21,714
|
|
|
|
---
|
|
|
|
1,624
|
|
|
|
---
|
|
$78k Note II - January 2019
|
|
|
17,451
|
|
|
|
---
|
|
|
|
1,410
|
|
|
|
---
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
179,384
|
|
|
$
|
140,262
|
|
|
$
|
29,660
|
|
|
$
|
25,746
|
|
Unamortized
debt discount on outstanding convertible notes payable as of March 31, 2019 and December 31, 2018 are comprised of the following:
|
|
Unamortized Discount as of
|
|
|
|
March 31,
|
|
|
December 31,
|
|
|
|
2019
|
|
|
2018
|
|
|
|
|
|
|
|
|
$103k Note I - October 2018
|
|
$
|
43,730
|
|
|
$
|
76,256
|
|
$103k Note II - November 2018
|
|
|
53,801
|
|
|
|
85,656
|
|
$153k Note - November 2018
|
|
|
79,022
|
|
|
|
129,462
|
|
$103k Note III - December 2018
|
|
|
69,701
|
|
|
|
95,099
|
|
$78k Note I - January 2019
|
|
|
56,286
|
|
|
|
---
|
|
$78k Note II - January 2019
|
|
|
60,549
|
|
|
|
---
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
363,089
|
|
|
$
|
386,473
|
|
HEALTHLYNKED
CORP.
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH
31, 2019
(UNAUDITED)
NOTE
9 –CONVERTIBLE NOTES PAYABLE (CONTINUED)
Certain
of our convertible notes payable are also carried at fair value and revalued at each period end, with changes to fair value recorded
to the statement of operations under “Change in Fair Value of Debt.” The changes in fair value during the three months
ended March 31, 2019 and 2018 on such instruments were as follows:
|
|
Change in Fair Value of Debt
|
|
|
Fair Value of Debt as of
|
|
|
|
Three Months Ended March 31,
|
|
|
March 31,
|
|
|
December 31,
|
|
|
|
2019
|
|
|
2018
|
|
|
2019
|
|
|
2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$550k Note - July 2016
|
|
$
|
16,838
|
|
|
$
|
46,298
|
|
|
$
|
611,651
|
|
|
$
|
594,813
|
|
$50k Note - July 2016
|
|
|
1,707
|
|
|
|
8,199
|
|
|
|
62,019
|
|
|
|
60,312
|
|
$111k Note - May 2017
|
|
|
3,544
|
|
|
|
8,815
|
|
|
|
128,734
|
|
|
|
125,190
|
|
$171.5k Note - October 2017
|
|
|
1,781
|
|
|
|
---
|
|
|
|
---
|
|
|
|
186,472
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
23,870
|
|
|
$
|
63,312
|
|
|
$
|
802,404
|
|
|
$
|
966,787
|
|
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, or 6,875,000 of the Company’s common shares, 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. 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.”
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, or 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.”
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, or 317,143 of the Company’s common shares, and is secured by all
of the Company’s assets. The Company received $100,000 net proceeds from the note after an $11,000 original issue discount.
At inception, the investors were also granted a five-year warrant to purchase 133,333 shares of the Company’s common stock
at an exercise price of $0.75 per share.
HEALTHLYNKED
CORP.
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH
31, 2019
(UNAUDITED)
NOTE
9 –CONVERTIBLE NOTES PAYABLE (CONTINUED)
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.” During July 2018, the maturity date
of the $111k Note was further extended until December 31, 2017.
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. 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 three months ended March 31, 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. 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 three months ended March 31, 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. 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 three months ended
March 31, 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
|
)
|
HEALTHLYNKED
CORP.
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH
31, 2019
(UNAUDITED)
NOTE
9 –CONVERTIBLE NOTES PAYABLE (CONTINUED)
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 had an interest rate of 10% and a default interest rate of 22% and matures on October 26, 2018. The $171.5k Note
was convertible 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 was 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 was immediately due. During
three months ended March 31, 2019, the holder of the $171.5k Note converted the entire principal balance of $171,500 into 2,512,821
shares of Company common stock.
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 had an interest rate of 10% and a default interest rate of 18% and was scheduled to
mature 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 28% 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. During third and fourth quarter of 2018, the
holder of the $58k Note converted the entire principal balance of $57,750, as well as accrued interest in the amount of $3,786,
into 384,839 shares of Company common stock. Accrued but unpaid interest of $21,990 was outstanding as of March 31, 2019.
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.
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 of $2,054 in the third quarter of 2018 in connection with the repayment
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.
HEALTHLYNKED
CORP.
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH
31, 2019
(UNAUDITED)
NOTE
9 –CONVERTIBLE NOTES PAYABLE (CONTINUED)
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 loss
on debt extinguishment of $51,251 in the third quarter of 2018 in connection with the repayment.
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.
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 of $51,804 in the third quarter of 2018 in connection with the
repayment.
Convertible
Notes Payable ($78,000) – January 2019
On
January 14, 2019, the Company entered into a securities purchase agreement for the sale of a $78,000 convertible note (the “$78k
Note”). The $78k Note included $3,000 fees for net proceeds of $75,000. The $78k Note has an interest rate of 10% and a
default interest rate of 24% and matures on October 14, 2019. The $78k 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 25% discount to the lowest bid or trading price of the Company’s common stock
during the ten (10) 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 $78k Note was calculated using the Black-Scholes pricing model at $78,088, with the following assumptions:
risk-free interest rate of 2.57%, expected life of 0.75 years, volatility of 243.61%, and expected dividend yield of zero. In
connection with the $78k Note, the Company also issued to the holder 28,000 shares of Company common stock valued at $4,676, which
was recorded to equity. Because the fair value of the ECF exceeded the net proceeds from the $78k Note, a charge was recorded
to “Financing cost” for the excess of the fair value of the fair value of the ECF of $78,088 and the common shares
issued of $4,676 over the net proceeds from the note of $75,000, for a net charge of $7,764. 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
|
|
$
|
78,088
|
|
Original issue discount and fees
|
|
|
3,000
|
|
Fair value of shares recorded to equity
|
|
|
4,676
|
|
Financing cost
|
|
|
(7,764
|
)
|
Convertible note
|
|
|
---
|
|
|
|
|
|
|
Gross proceeds
|
|
$
|
78,000
|
|
HEALTHLYNKED
CORP.
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH
31, 2019
(UNAUDITED)
NOTE
9 –CONVERTIBLE NOTES PAYABLE (CONTINUED)
Convertible
Notes Payable ($78,000) – January 2019
On
January 24, 2018, the Company entered into a securities purchase agreement for the sale of a $78,000 convertible note (the “$78k
Note II”). The $78k Note II included $3,000 fees for net proceeds of $75,000. The $78k Note II has an interest rate of 10%
and a default interest rate of 22% and matures on November 15, 2019. The $78k 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.
The
fair value of the ECF of the $78k Note II was calculated using the Black-Scholes pricing model at $101,139, with the following
assumptions: risk-free interest rate of 2.58%, expected life of 0.81 years, volatility of 243.03%, and expected dividend yield
of zero. Because the fair value of the ECF exceeded the net proceeds from the $78k Note II, a charge was recorded to “Financing
cost” for the excess of the fair value of the fair value of the ECF of $101,139 over the net proceeds from the note of $75,000,
for a net charge of $26,139. 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
|
|
$
|
101,139
|
|
Original issue discount and fees
|
|
|
3,000
|
|
Financing cost
|
|
|
(26,139
|
)
|
Convertible note
|
|
|
---
|
|
|
|
|
|
|
Gross proceeds
|
|
$
|
78,000
|
|
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 three months ended March 31, 2019 include the following:
|
|
|
|
|
|
|
|
Change in
|
|
|
|
|
|
|
|
|
|
Fair Value
|
|
|
Inception of
|
|
|
Fair Value
|
|
|
Conversion
|
|
|
Fair Value
|
|
|
|
as of
|
|
|
Derivative
|
|
|
of Derivative
|
|
|
of Derivative
|
|
|
as of
|
|
|
|
December 31,
|
|
|
Financial
|
|
|
Financial
|
|
|
Financial
|
|
|
March 31,
|
|
|
|
2018
|
|
|
Instruments
|
|
|
Instruments
|
|
|
Instruments
|
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$171.5k Note - October 2017
|
|
$
|
229,902
|
|
|
$
|
---
|
|
|
$
|
(22,720
|
)
|
|
$
|
(207,182
|
)
|
|
$
|
---
|
|
$103k Note I - October 2018
|
|
|
131,617
|
|
|
|
---
|
|
|
|
(33,857
|
)
|
|
|
---
|
|
|
|
97,760
|
|
$103k Note II - November 2018
|
|
|
135,845
|
|
|
|
---
|
|
|
|
(32,378
|
)
|
|
|
---
|
|
|
|
103,467
|
|
$153k Note - November 2018
|
|
|
157,426
|
|
|
|
---
|
|
|
|
(45,408
|
)
|
|
|
---
|
|
|
|
112,018
|
|
$103k Note III - December 2018
|
|
|
145,650
|
|
|
|
---
|
|
|
|
(28,544
|
)
|
|
|
---
|
|
|
|
117,106
|
|
$78k Note I - January 2019
|
|
|
---
|
|
|
|
78,088
|
|
|
|
(14,573
|
)
|
|
|
---
|
|
|
|
63,515
|
|
$78k Note II - January 2019
|
|
|
---
|
|
|
|
101,142
|
|
|
|
(14,153
|
)
|
|
|
---
|
|
|
|
86,989
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
800,440
|
|
|
$
|
179,230
|
|
|
$
|
(191,633
|
)
|
|
$
|
(207,182
|
)
|
|
$
|
580,855
|
|
HEALTHLYNKED
CORP.
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH
31, 2019
(UNAUDITED)
NOTE
10 – DERIVATIVE FINANCIAL INSTRUMENTS (CONTINUED)
Derivative
financial instruments and changes thereto recorded in the three months ended March 31, 2018 include the following:
|
|
|
|
|
|
|
|
Change in
|
|
|
|
|
|
|
|
|
|
Fair Value
|
|
|
Inception of
|
|
|
Fair Value
|
|
|
Write off
|
|
|
Fair Value
|
|
|
|
as of
|
|
|
Derivative
|
|
|
of Derivative
|
|
|
Derivative
|
|
|
as of
|
|
|
|
December 31,
|
|
|
Financial
|
|
|
Financial
|
|
|
Financial
|
|
|
March 31,
|
|
|
|
2017
|
|
|
Instruments
|
|
|
Instruments
|
|
|
Instruments
|
|
|
2018
|
|
|
|
(audited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$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
|
|
|
|
---
|
|
|
|
5,032
|
|
|
|
(69,688
|
)
|
|
|
---
|
|
$53k Note #2 - October 2017
|
|
|
58,216
|
|
|
|
---
|
|
|
|
617
|
|
|
|
---
|
|
|
|
58,833
|
|
$171.5k Note - October 2017
|
|
|
190,580
|
|
|
|
---
|
|
|
|
11,979
|
|
|
|
---
|
|
|
|
202,559
|
|
$57.8k Note - January 2018
|
|
|
---
|
|
|
|
82,653
|
|
|
|
(2,905
|
)
|
|
|
---
|
|
|
|
79,748
|
|
$112.8k Note - February 2018
|
|
|
---
|
|
|
|
161,527
|
|
|
|
(2,371
|
)
|
|
|
---
|
|
|
|
159,156
|
|
$83k Note - February 2018
|
|
|
---
|
|
|
|
119,512
|
|
|
|
(1,525
|
)
|
|
|
---
|
|
|
|
117,987
|
|
$105k Note - March 2018
|
|
|
---
|
|
|
|
153,371
|
|
|
|
(2,331
|
)
|
|
|
---
|
|
|
|
151,040
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
398,489
|
|
|
$
|
517,063
|
|
|
$
|
14,621
|
|
|
$
|
(160,850
|
)
|
|
$
|
769,323
|
|
During
the three months ended March 31, 2019, the $171.5k Note was converted in full into common shares by the holder.
During
the three months ended March 31, 2018, three convertible notes were 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 2.40% to 2.73%, expected life of 0.33 to 1.00 years, volatility of 202.73% to 293.97%, 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
Sales
of Common Stock
On
January 11, 2018, the Company sold 588,235 shares of common stock in a private placement transaction to an investor and received
$50,000 in proceeds from the sale. The shares were issued at a share price of $0.085 per share. In connection with the stock sales,
the Company also issued 588,235 five-year warrants to purchase shares of common stock at an exercise price of $0.15 per share.
On
February 28, 2018, the Company sold 2,352,942 shares of common stock in private placement transactions to two investors and received
$200,000 in proceeds from the sale. The shares were issued at a share price of $0.085 per share. In connection with the stock
sales, the Company also issued 1,764,706 five-year warrants to purchase shares of common stock at an exercise price of $0.15 per
share.
During
the three months ended March 31, 2019, the Company sold 1,133,334 shares of common stock in two separate private placement transactions
and received $340,000 in proceeds from the sales. The shares were issued at a share price of $0.30 per share. In connection with
the stock sale, we also issued 566,667 five-year warrants to purchase shares of common stock at an exercise price of $0.40 per
share and 250,000 three-year warrants to purchase shares of common stock at an exercise price of $0.50 per share.
During
the three months ended March 31, 2019 and 2018, the Company issued 2,128,644 and 42,969 common shares, respectively, pursuant
to draws made by the Company under the Investment Agreement and received an aggregate of $493,226 and $1,563, respectively, in
net proceeds from the draws.
HEALTHLYNKED
CORP.
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH
31, 2019
(UNAUDITED)
NOTE
11 – SHAREHOLDERS’ DEFICIT (CONTINUED)
Common
Stock Issuable
As
of March 31, 2019 and December 31, 2018, the Company was obligated to issue 205,301 and 114,080 shares of common stock, respectively,
in exchange for professional services provided by two third party consultants. During the three months ended March 31, 2019 and
2018, the Company recognized expense related to shares earned by the consultants of $46,098 and $5,287, respectively.
Stock
Warrants
Transactions
involving our stock warrants during the three months ended three months ended March 31, 2019 and 2018 are summarized as follows:
|
|
2019
|
|
|
2018
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
Exercise
|
|
|
|
|
|
Exercise
|
|
|
|
Number
|
|
|
Price
|
|
|
Number
|
|
|
Price
|
|
Outstanding at beginning of the period
|
|
|
46,161,463
|
|
|
$
|
0.18
|
|
|
|
20,526,387
|
|
|
$
|
0.23
|
|
Granted during the period
|
|
|
996,667
|
|
|
$
|
0.42
|
|
|
|
9,156,403
|
|
|
$
|
0.09
|
|
Exercised during the period
|
|
|
(2,099,256
|
)
|
|
$
|
0.00
|
|
|
|
---
|
|
|
$
|
---
|
|
Terminated during the period
|
|
|
---
|
|
|
$
|
---
|
|
|
|
---
|
|
|
$
|
---
|
|
Outstanding at end of the period
|
|
|
45,058,874
|
|
|
$
|
0.19
|
|
|
|
29,682,790
|
|
|
$
|
0.19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable at end of the period
|
|
|
45,058,874
|
|
|
$
|
0.19
|
|
|
|
29,682,790
|
|
|
$
|
0.19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average remaining life
|
|
|
3.5
|
|
|
|
years
|
|
|
|
4.9
|
|
|
|
years
|
|
The
following table summarizes information about the Company’s stock warrants outstanding as of March 31, 2019:
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
|
|
|
|
18,157,768
|
|
|
|
3.6
|
|
|
$
|
0.06
|
|
|
|
18,157,768
|
|
|
$
|
0.06
|
|
$
|
0.10
to 0.24
|
|
|
|
14,520,441
|
|
|
|
3.8
|
|
|
$
|
0.19
|
|
|
|
14,520,441
|
|
|
$
|
0.19
|
|
$
|
0.25
to 0.49
|
|
|
|
8,440,665
|
|
|
|
3.3
|
|
|
$
|
0.29
|
|
|
|
8,440,665
|
|
|
$
|
0.29
|
|
$
|
0.50
to 1.00
|
|
|
|
3,940,000
|
|
|
|
2.9
|
|
|
$
|
0.64
|
|
|
|
3,940,000
|
|
|
$
|
0.64
|
|
$
|
0.05
to 1.00
|
|
|
|
45,058,874
|
|
|
|
3.5
|
|
|
$
|
0.20
|
|
|
|
45,058,874
|
|
|
$
|
0.20
|
|
During
the three months ended March 31, 2019, the Company issued 996,667 warrants. The fair value of the warrant was calculated using
the Black-Scholes pricing model with the following assumptions: risk-free interest rate of 2.44% to 2.52%, expected life of 3
to 5 years, volatility of 212.96% to 216.35%, and expected dividend yield of zero. The aggregate grant date fair value of warrants
issued during the three months ended March 31, 2019 was $294,707.
During
the three months ended March 31, 2018, the Company issued 9,156,403 warrants. The fair value of the warrant was calculated using
the Black-Scholes pricing model with the following assumptions: risk-free interest rate of 2.23% to 2.65%, expected life of 5
years, volatility of 261.18 - 278.45%, and expected dividend yield of zero. The aggregate grant date fair value of warrants issued
during the three months ended March 31, 2018 was $582,311.
HEALTHLYNKED
CORP.
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH
31, 2019
(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 three months
ended March 31, 2019 and 2018:
|
|
2019
|
|
|
2018
|
|
Outstanding at beginning of the period
|
|
|
1,738,750
|
|
|
|
1,498,750
|
|
Granted during the period
|
|
|
61,563
|
|
|
|
---
|
|
Terminated during the period
|
|
|
---
|
|
|
|
---
|
|
Outstanding at end of the period
|
|
|
1,800,313
|
|
|
|
1,498,750
|
|
|
|
|
|
|
|
|
|
|
Shares vested at period-end
|
|
|
1,336,563
|
|
|
|
1,058,750
|
|
Weighted average grant date fair value of shares granted during the period
|
|
$
|
0.26
|
|
|
$
|
---
|
|
Aggregate grant date fair value of shares granted during the period
|
|
$
|
12,805
|
|
|
$
|
---
|
|
Shares available for grant pursuant to EIP at period-end
|
|
|
10,154,118
|
|
|
|
11,654,934
|
|
Total
stock-based compensation recognized for grants under the EIP was $32,779 and $2,435 during the three months ended March 31, 2019
and 2018. Total unrecognized stock compensation related to these grants was $92,918 as of March 31, 2019.
A
summary of the status of non-vested shares issued pursuant to the EIP as of and for the three months ended March 31, 2019 and
2018 is presented below:
|
|
2019
|
|
|
2018
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
Grant Date
|
|
|
|
|
|
Grant Date
|
|
|
|
Shares
|
|
|
Fair Value
|
|
|
Shares
|
|
|
Fair Value
|
|
Nonvested at beginning of period
|
|
|
540,000
|
|
|
$
|
0.16
|
|
|
|
628,750
|
|
|
$
|
0.05
|
|
Granted
|
|
|
---
|
|
|
$
|
---
|
|
|
|
---
|
|
|
$
|
---
|
|
Vested
|
|
|
(76,250
|
)
|
|
$
|
0.04
|
|
|
|
(188,750
|
)
|
|
$
|
0.04
|
|
Forfeited
|
|
|
---
|
|
|
$
|
---
|
|
|
|
---
|
|
|
$
|
---
|
|
Nonvested at end of period
|
|
|
463,750
|
|
|
$
|
0.18
|
|
|
|
440,000
|
|
|
$
|
0.05
|
|
HEALTHLYNKED
CORP.
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH
31, 2019
(UNAUDITED)
NOTE
11 – SHAREHOLDERS’ DEFICIT (CONTINUED)
Employee
Stock Options
The
following table summarizes the status of options outstanding as of and for the three months ended March 31, 2019 and 2018:
|
|
2019
|
|
|
2018
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
Exercise
|
|
|
|
|
|
Exercise
|
|
|
|
Number
|
|
|
Price
|
|
|
Number
|
|
|
Price
|
|
Outstanding at beginning of the period
|
|
|
3,707,996
|
|
|
$
|
0.18
|
|
|
|
2,349,996
|
|
|
$
|
0.12
|
|
Granted during the period
|
|
|
591,250
|
|
|
$
|
0.26
|
|
|
|
---
|
|
|
$
|
---
|
|
Exercised during the period
|
|
|
(154,166
|
)
|
|
$
|
0.20
|
|
|
|
---
|
|
|
$
|
---
|
|
Forfeited during the period
|
|
|
(595,830
|
)
|
|
$
|
0.20
|
|
|
|
---
|
|
|
$
|
---
|
|
Outstanding at end of the period
|
|
|
3,549,250
|
|
|
$
|
0.19
|
|
|
|
2,349,996
|
|
|
$
|
0.12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options exercisable at period-end
|
|
|
1,261,000
|
|
|
|
|
|
|
|
637,500
|
|
|
|
|
|
Weighted average remaining life (in years)
|
|
|
8.2
|
|
|
|
|
|
|
|
8.4
|
|
|
|
|
|
Weighted average grant date fair value of options
granted during the period
|
|
$
|
0.21
|
|
|
|
|
|
|
$
|
---
|
|
|
|
|
|
Options available for grant at period-end
|
|
|
10,154,118
|
|
|
|
|
|
|
|
11,654,934
|
|
|
|
|
|
The
following table summarizes information about the Company’s stock options outstanding as of March 31, 2019:
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
|
|
|
|
6.9
|
|
|
$
|
0.08
|
|
|
|
1,183,000
|
|
|
|
0.08
|
|
$
|
0.11
to 0.31
|
|
|
|
1,816,250
|
|
|
|
9.5
|
|
|
$
|
0.29
|
|
|
|
78,000
|
|
|
|
0.31
|
|
$
|
0.08
to 0.31
|
|
|
|
3,549,250
|
|
|
|
8.2
|
|
|
$
|
0.19
|
|
|
|
1,261,000
|
|
|
$
|
0.10
|
|
Total
stock-based compensation recognized related to option grants was $28,456 and $2,354 during the three months ended March 31, 2019
and 2018, respectively.
A
summary of the status of non-vested options issued pursuant to the EIP as of and for the three months ended March 31, 2019 and
2018 is presented below:
|
|
2019
|
|
|
2018
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
Grant Date
|
|
|
|
|
|
Grant Date
|
|
|
|
Shares
|
|
|
Fair Value
|
|
|
Shares
|
|
|
Fair Value
|
|
Nonvested at beginning of period
|
|
|
2,332,413
|
|
|
$
|
0.13
|
|
|
|
1,774,996
|
|
|
$
|
0.03
|
|
Granted
|
|
|
591,250
|
|
|
$
|
0.21
|
|
|
|
---
|
|
|
$
|
---
|
|
Vested
|
|
|
(39,583
|
)
|
|
$
|
0.03
|
|
|
|
(62,500
|
)
|
|
$
|
0.03
|
|
Forfeited
|
|
|
(595,830
|
)
|
|
$
|
0.02
|
|
|
|
---
|
|
|
$
|
---
|
|
Nonvested at end of period
|
|
|
2,288,250
|
|
|
$
|
0.18
|
|
|
|
1,712,496
|
|
|
$
|
0.03
|
|
HEALTHLYNKED
CORP.
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH
31, 2019
(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
Maturities
of operating lease liabilities were as follows as of March 31, 2019:
|
|
Operating
|
|
|
Capital
|
|
|
Total
|
|
|
|
Leases
|
|
|
Leases
|
|
|
Commitments
|
|
2019 (April through December)
|
|
$
|
206,098
|
|
|
$
|
13,761
|
|
|
$
|
219,859
|
|
2020
|
|
|
162,055
|
|
|
|
4,587
|
|
|
|
166,642
|
|
2021
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
2022
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
2023
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
Total lease payments
|
|
|
368,153
|
|
|
|
18,348
|
|
|
|
386,501
|
|
Less interest
|
|
|
(28,957
|
)
|
|
|
(1,027
|
)
|
|
|
(29,984
|
)
|
Present value of lease liabilities
|
|
$
|
339,196
|
|
|
$
|
17,321
|
|
|
$
|
356,517
|
|
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.
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.
HEALTHLYNKED
CORP.
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH
31, 2019
(UNAUDITED)
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 March 31, 2019 and 2018 was as follows:
|
|
Three Months Ended March
31, 2019
|
|
|
Three Months Ended March
31, 2018
|
|
|
|
NWC
|
|
|
HLYK
|
|
|
Total
|
|
|
NWC
|
|
|
HLYK
|
|
|
Total
|
|
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Patient service revenue, net
|
|
$
|
464,990
|
|
|
$
|
---
|
|
|
$
|
464,990
|
|
|
$
|
645,639
|
|
|
$
|
---
|
|
|
$
|
645,639
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and benefits
|
|
|
350,238
|
|
|
|
178,987
|
|
|
|
529,225
|
|
|
|
403,055
|
|
|
|
157,801
|
|
|
|
560,856
|
|
General and administrative
|
|
|
242,600
|
|
|
|
514,756
|
|
|
|
757,356
|
|
|
|
225,652
|
|
|
|
349,176
|
|
|
|
574,828
|
|
Depreciation and amortization
|
|
|
1,060
|
|
|
|
595
|
|
|
|
1,655
|
|
|
|
5,574
|
|
|
|
455
|
|
|
|
6,029
|
|
Total Operating Expenses
|
|
|
593,898
|
|
|
|
694,338
|
|
|
|
1,288,236
|
|
|
|
634,281
|
|
|
|
507,432
|
|
|
|
1,141,713
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from operations
|
|
$
|
(128,908
|
)
|
|
$
|
(694,338
|
)
|
|
$
|
(823,246
|
)
|
|
$
|
11,358
|
|
|
$
|
(507,432
|
)
|
|
$
|
(496,074
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Segment Information
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
$
|
5,828
|
|
|
$
|
40,494
|
|
|
$
|
46,322
|
|
|
$
|
5,697
|
|
|
$
|
34,650
|
|
|
$
|
40,347
|
|
Loss on extinguishment of debt
|
|
$
|
---
|
|
|
$
|
139,798
|
|
|
$
|
139,798
|
|
|
$
|
---
|
|
|
$
|
325,223
|
|
|
$
|
325,223
|
|
Financing cost
|
|
$
|
---
|
|
|
$
|
33,903
|
|
|
$
|
33,903
|
|
|
$
|
---
|
|
|
$
|
192,062
|
|
|
$
|
192,062
|
|
Amortization of original issue and debt discounts on convertible notes
|
|
$
|
---
|
|
|
$
|
179,384
|
|
|
$
|
179,384
|
|
|
$
|
---
|
|
|
$
|
154,835
|
|
|
$
|
154,835
|
|
Change in fair value of debt
|
|
$
|
---
|
|
|
$
|
29,697
|
|
|
$
|
29,697
|
|
|
$
|
---
|
|
|
$
|
57,946
|
|
|
$
|
57,946
|
|
Change in fair value of derivative financial instruments
|
|
$
|
---
|
|
|
$
|
(191,633
|
)
|
|
$
|
(191,633
|
)
|
|
$
|
---
|
|
|
$
|
14,621
|
|
|
$
|
14,621
|
|
|
|
March 31, 2019
|
|
|
December 31, 2018
|
|
Identifiable assets
|
|
$
|
520,535
|
|
|
$
|
565,751
|
|
|
$
|
1,086,286
|
|
|
$
|
184,912
|
|
|
$
|
242,451
|
|
|
$
|
427,363
|
|
During
the three months ended March 31, 2019 and 2018, HLYK recognized revenue of $1,941 and $6,888, respectively, related to subscription
revenue billed to and paid for by NWC physicians for access to the HealthLynked Network. 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.
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.
HEALTHLYNKED
CORP.
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH
31, 2019
(UNAUDITED)
NOTE
14 – FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
The
following table summarizes the conclusions reached regarding fair value measurements as of March 31, 2019 and December 31, 2018:
|
|
As of March 31, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Fair Value
|
|
Convertible notes payable
|
|
$
|
---
|
|
|
$
|
---
|
|
|
$
|
802,404
|
|
|
$
|
802,404
|
|
Notes payable to related party
|
|
|
---
|
|
|
|
---
|
|
|
|
209,829
|
|
|
|
209,829
|
|
Derivative financial instruments
|
|
|
---
|
|
|
|
---
|
|
|
|
580,855
|
|
|
|
580,855
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
---
|
|
|
$
|
---
|
|
|
$
|
1,593,088
|
|
|
$
|
1,593,088
|
|
|
|
As of December 31, 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Fair Value
|
|
Convertible notes payable
|
|
$
|
---
|
|
|
$
|
---
|
|
|
$
|
780,315
|
|
|
$
|
780,315
|
|
Notes payable to related party
|
|
|
---
|
|
|
|
---
|
|
|
|
203,971
|
|
|
|
203,971
|
|
Derivative financial instruments
|
|
|
---
|
|
|
|
---
|
|
|
|
800,440
|
|
|
|
800,440
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
---
|
|
|
$
|
---
|
|
|
$
|
1,784,726
|
|
|
$
|
1,784,726
|
|
The
changes in Level 3 financial instruments that are measured at fair value on a recurring basis during the three months ended March
31, 2019 and 2018 were as follows:
|
|
Three Months Ended
March 31,
|
|
|
|
2019
|
|
|
2018
|
|
|
|
|
|
|
|
|
Convertible notes payable
|
|
$
|
(23,869
|
)
|
|
$
|
(54,497
|
)
|
Notes payable to related party
|
|
|
(5,828
|
)
|
|
|
(3,449
|
)
|
Derivative financial instruments
|
|
|
191,633
|
|
|
|
(14,621
|
)
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
161,936
|
|
|
$
|
(72,567
|
)
|
NOTE
15 – SUBSEQUENT EVENTS
On
April 12, 2019 the Company acquired a 100% interest in HCFM, a medical practice engaged in improving the health of its patients
through individualized and integrative health care. Under the terms of acquisition, we paid HCFM shareholders $500,000 in cash
and issued 3,968,254 shares of our common stock along with an earn out provision of $500,000 that may be earned based on the performance
of HCFM in fiscal years ended December 31, 2019-21. The total consideration represents a transaction value of approximately $2
million. The Company funded the acquisition of HCFM through available cash and the issuance of restricted common shares. The Company
plans to account for the transaction as an acquisition of a business pursuant to ASC 805, “Business Combinations”
(“ASC 805”). The Company is currently engaged in establishing the acquisition date fair value and allocating the fair
value across the specific assets and liabilities acquired pursuant to the requirements of ASC 805. The Company expects that the
required enterprise valuation of the acquisition and purchase price allocation will be completed by and included in our financial
statements reporting our second quarter activity as of June 30, 2019.
HEALTHLYNKED
CORP.
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH
31, 2019
(UNAUDITED)
NOTE
15 – SUBSEQUENT EVENTS (CONTINUED)
On
April 3, 2019, the Company entered into a securities purchase agreement for the sale of a $103,000 convertible note. The note
included $3,000 fees for net proceeds of $100,000. The note has an interest rate of 10% and a default interest rate of 22%, matures
on February 28, 2020 and 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.
On
April 4, 2019, the Company repaid a convertible note dated October 18, 2018 with a face value of $103,000, along with interest
accrued thereon, for a one-time cash payment of $134,500.
On
April 11, 2019, the Company entered into securities purchase agreements for the sale of two identical convertible notes with an
aggregate face value of $209,000. The notes included $9,000 fees for net proceeds of $200,000. The notes have an interest rate
of 10% and a default interest rate of 22%, mature on April 11, 2020, and 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 25% discount to the lowest bid or trading price of the Company’s common stock
during the ten (10) 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
April 15, 2019, the Company issued a convertible note with a face value of $357,500. The note included $32,500 fees for net proceeds
of $325,000. The note has an interest rate of 10%, matures on December 31, 2019, and may be converted into common stock of the
Company by the holder at any time, subject to a 9.99% beneficial ownership limitation, at a fixed conversion price per share of
$0.20. Upon an event of default, 140% of the outstanding principal and any interest due amount shall be immediately due and the
conversion price resets 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.
On
May 7, 2019, the Company entered into a securities purchase agreement for the sale of a $103,000 convertible note. The note included
$3,000 fees for net proceeds of $100,000. The note has an interest rate of 10% and a default interest rate of 22%, matures on
February 28, 2020 and 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.
On
May 7, 2018, the Company prepaid the balance on a convertible note payable dated November 12, 2018 with a face value of $103,000,
plus interest accrued thereon, for a one-time cash payment of $134,888.
PART II - INFORMATION NOT REQUIRED IN
PROSPECTUS
Item 13. Other Expenses of Issuances and Distribution.
The following table
sets forth the costs and expenses paid by us in connection with the issuance and distribution of the securities being registered.
None of the following expenses are payable by the selling securityholders. All of the amounts shown are estimates, except for
the SEC registration fee.
SEC registration fee
|
|
$
|
486.78
|
|
Legal fees and expenses
|
|
$
|
25,000.00
|
|
Accounting fees and expenses
|
|
$
|
5,000.00
|
|
Miscellaneous
|
|
$
|
5,000.00
|
|
TOTAL
|
|
$
|
35,486.78
|
|
Item 14. Indemnification of Directors
and Officers.
Nevada Revised Statutes
(“NRS”) Sections 78.7502 and 78.751 provide us with the power to indemnify any of our directors and officers. The
director or officer must have conducted himself/herself in good faith and reasonably believe that his/her conduct was in, or not
opposed to, our best interests. In a criminal action, the director, officer, employee or agent must not have had reasonable cause
to believe his/her conduct was unlawful.
Under NRS Section
78.751, advances for expenses may be made by agreement if the director or officer affirms in writing that he/she believes he/she
has met the standards and will personally repay the expenses if it is determined such officer or director did not meet the standards.
We are also permitted
to apply for insurance on behalf of any director, officer, employee or other agent for liability arising out of his actions, whether
or not the NRS would permit indemnification.
INSOFAR AS INDEMNIFICATION
FOR LIABILITIES ARISING UNDER THE SECURITIES ACT MAY BE PERMITTED FOR OUR DIRECTORS, OFFICERS AND CONTROLLING PERSONS PURSUANT
TO THE FOREGOING PROVISIONS, OR OTHERWISE, WE HAVE BEEN ADVISED THAT IN THE OPINION OF THE SEC SUCH INDEMNIFICATION IS AGAINST
PUBLIC POLICY AS EXPRESSED IN THE SECURITIES ACT AND IS, THEREFORE, UNENFORCEABLE.
Item 15. Recent Sales of Unregistered Securities.
In January 2016, we
issued 612,500 shares of common stock as stock grants to our employees.
In June 2016 we sold
3,980,000 shares of our common stock to certain accredited investors at a purchase price of $0.05 per share.
In June 2016 we issued
an additional 900,000 shares of common stock to SKS.
In July 2016, we sold
2,187,500 shares of our common stock to certain accredited investors at a purchase price of $0.08 per share and issued 5-year
warrants at $0.10 per share.
In July 2016 we issued
an additional 1,000,000 to Delaney Equity Group, LLC as per our contractual agreement to do so. We also issued Delaney warrants
to purchase 277,778 shares of commons stock at an exercise price of $0.09 and a five-year term, in exchange for services provided.
In July 2016 we raised
$550,000 of convertible debt, convertible into common shares at $0.08 per share and issued 5-year warrants with an exercise price
of $0.09 per share. The investors were also granted a five-year warrant to purchase 6,111,111 shares of the Company’s common
stock at an exercise price of $0.09 per share.
In July 2016, we entered
into an Investment Agreement with Iconic Holdings, LLC pursuant to which it 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 (the “Put Right”),
subject to certain discounts and adjustments. We also issued to the investor a warrant to purchase up to 6,111,111 shares of our
common stock, at an exercise price of $0.09 per share.
On March 22, 2017,
the Company entered into the Amended Investment Agreement whereby the parties have agreed to modify the terms of 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
shall grant, and has granted, to the investor warrants to purchase an aggregate of seven (7) million shares of common stock. The
warrants shall have 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.
Pursuant to the Investment
Agreement, the Company also entered into a Registration Rights Agreement with the investor whereby it agreed to register for resale
21,000,000 shares of the Company’s common stock issuable pursuant to the terms of the Investment Agreement.
In July 2016, we granted
a total of 1,600,000 employee stock options our Chief Executive Officer and Chief Financial Officer with an exercise price of
$0.08 per share and a legal life of 10 years. Of the total grant, 700,000 options vest over time for a period up to four years,
and 900,000 vest based on Company performance measures. The aggregate grant date fair value of options granted in the nine months
ended September 30, 2016 was $51,120 (net of expected forfeitures).
In November 2016,
we granted a total of 749,996 employee stock options to an employee with an exercise price of $0.20 per share and a legal life
of 10 years. Of the total grant, 299,996 options vest over time for a period up to three years, and 450,000 vest based on future
Company and individual performance measures. The aggregate grant date fair value of the options was $14,301 (net of expected forfeitures).
In February 2017,
the Company sold 2,100,000 shares of common stock to three investors. The Company received $210,000 in proceeds from the sale.
The shares were issued at a share price of $0.10 per share.
In February 2017,
the Company issued a warrant to purchase up to 500,000 shares of common stock at an exercise price of $0.15 per share. The warrant
shall expire on February 10, 2020 and may be exercised on a cashless basis. The warrant has a 9.99% beneficial ownership
limitation.
In April 2017, the
Company sold 1,850,000 shares of common stock to five investors. The Company received $185,000 in proceeds from the sale. The
shares were issued at a share price of $0.10 per share.
During July 2017,
we sold 45,833 shares of common stock to three investors. The Company received $13,000 in proceeds from the sale. The shares were
issued at a share price of $0.20 per share with respect to 27,500 shares and at $0.30 per share with respect to 38,333 shares.
In August 2017, we
issued a warrant to purchase up to 1,000,000 shares of common stock at an exercise price of $0.30 per share. The warrant shall
expire on August 8, 2022 and may be exercised on a cashless basis. The warrant has a 9.99% beneficial ownership limitation.
During October and
November 2017, we sold 1,461,111 shares of common stock to three investors. The Company received $288,000 in proceeds from the
sale. The shares were issued at a share price of $0.18 per share with respect to 211,111 shares and at $0.20 per share with respect
to 1,250,000 shares. In connection with the stock sales, we also issued 959,998 five-year warrants to purchase shares of common
stock at an exercise price of $0.30 per share.
During the first quarter
of 2018, we sold 2,941,177 shares of common stock in private placement transactions to three investors and received $250,000 in
proceeds. The shares were issued at a share price of $0.085 per share. We also issued 2,352,941 five-year warrants with an exercise
price of $0.15 per share in connection with the stock sales.
On May 10, 2018, we
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, we 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,
we 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, we 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, we
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,
we 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 of our common shares at an exercise price of $0.25, and (ii) a three-year warrant
to purchase 300,000 of our common shares at an exercise price of $0.50.
On July 13, 2018,
we 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 of our common shares at an exercise price of $0.25, and (ii) three-year warrant to
purchase 75,000 of our common 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 we were $1,774,690. We
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 our common stock at an exercise price of $0.0001.
On August 7, 2018,
we 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 our common stock at an exercise price of $0.25 in connection with the extinguishment.
On August 15, 2018,
we sold 285,714 shares of common stock in a private placement transaction 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, we 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,
we 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 our common stock at an exercise price of $0.35 in connection with the extinguishment.
On August 20, 2018,
we 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 August and
October 2018, we issued 384,839 common shares to a convertible note holder upon conversion of outstanding principal and interest
by the note holder.
On October 2, 2018,
the investor in the July 18, 2018 private placement transaction exercised 2,000,001 of the Pre-Funded Warrants. We did not receive
any proceeds from the transaction.
On November 21, 2018,
we issued 35,000 common shares to the holder of a $153,000 convertible promissory note as an inducement to enter into the convertible
promissory note transaction. We did not receive any proceeds from the transaction.
On January 15, 2019,
we issued 28,000 common shares to the holder of a $78,000 convertible promissory note as an inducement to enter into the convertible
promissory note transaction. We did not receive any proceeds from the transaction.
On February 7, 2019,
we issued 2,512,821 common shares to a convertible note holder upon conversion of outstanding principal by the note holder.
On February 13, 2019,
the investor in the July 18, 2018 private placement transaction exercised the remaining 2,098,427 of the Pre-Funded Warrants.
We did not receive any proceeds from the transaction.
On February 21, 2019,
we issued 20,000 common shares to a third party consultant as partial compensation for professional services.
On March 19, 2019,
we issued 250,000 common shares to a third-party consultant as partial compensation for professional services.
During February and
March 2019, the Company sold 1,250,000 shares of common stock in two separate private placement transactions and received $340,000
in proceeds from the sales. The shares were issued at a share price of $0.30 per share. In connection with the stock sale, we
also issued 566,667 five-year warrants to purchase shares of common stock at an exercise price of $0.40 per share and 250,000
three-year warrants to purchase shares of common stock at an exercise price of $0.50 per share.
On April 12, 2019
the Company acquired a 100% interest in HCFM, a medical practice engaged in improving the health of its patients through individualized
and integrative health care. Under the terms of acquisition, we paid HCFM shareholders $500,000 in cash and issued 3,968,254 shares
of our common stock along with an earn out provision of $500,000 that may be earned based on the performance of HCFM in fiscal
years ended December 31, 2019-21.
On April 16, 2019,
we issued 50,000 common shares to the holders of two identical convertible promissory notes with a face value of $209,000 as an
inducement to enter into the convertible promissory note transaction. We did not receive any proceeds from the transaction.
On May 9, 2019, we
issued 30,000 common shares to a third party consultant as partial compensation for professional services.
On May 21, 2019 and
June 5, 2019, we issued 740,002 common shares to a convertible note holder upon conversion of outstanding principal by the note
holder.
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 only and not
with a view to or for sale in connection with any distribution thereof, and appropriate legends were placed upon the stock certificates
issued in these transactions
Item 16. Exhibits and Financial Statement
Schedules.
EXHIBIT INDEX
Exhibit No.
|
|
Exhibit
Description
|
2.1
|
|
Share
Exchange Agreement (Filed as Exhibit 2.1 to the Company’s Draft Registration Statement on Form S-1 filed with the Commission
on January 9, 2017)
|
3.1
|
|
Articles
of Incorporation (Filed as Exhibit 3.1 to the Company’s Draft Registration Statement on Form S-1 filed with the Commission
on January 9, 2017)
|
3.2
|
|
Amended
and Restated Articles of Incorporation (Filed as Exhibit 3.2 to the Company’s Draft Registration Statement on Form S-1
filed with the Commission on January 9, 2017)
|
3.3
|
|
By-Laws
(Filed as Exhibit 3.3 to the Company’s Draft Registration Statement on Form S-1 filed with the Commission on January
9, 2017)
|
3.4
|
|
Certificate
of Designation of Series A Convertible Preferred Stock (Filed as Exhibit 3.4 to the Company’s Draft Registration Statement
on Form S-1 filed with the Commission on January 9, 2017)
|
3.5
|
|
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)
|
5.1
|
|
Opinion of Sheppard, Mullin, Richter Hampton LLP (Filed as Exhibit 5.1 to Amendment No. 1 to the Company’s Registration Statement on Form S-1 filed with the Commission on May 25, 2018).
|
10.1
|
|
Form
of Private Placement Subscription Agreements (Filed as Exhibit 10.1 to the Company’s Draft Registration Statement on
Form S-1 filed with the Commission on January 9, 2017)
|
10.2
|
|
Series
A Conversion Notice (Filed as Exhibit 10.2 to the Company’s Draft Registration Statement on Form S-1 filed with the
Commission on January 9, 2017)
|
10.3
|
|
Form
of Notes Issued to Dr. Michael Dent (Filed as Exhibit 10.3 to the Company’s Draft Registration Statement on Form S-1
filed with the Commission on January 9, 2017)
|
10.4
|
|
Form
of Warrants Issued to Dr. Michael Dent (Filed as Exhibit 10.4 to the Company’s Draft Registration Statement on Form
S-1 filed with the Commission on January 9, 2017)
|
10.5
|
|
Advisor
Consulting Banking Agreement with Delaney Equity Group LLC (Filed as Exhibit 10.5 to the Company’s Draft Registration
Statement on Form S-1 filed with the Commission on January 9, 2017)
|
10.6
|
|
Warrant
Agreement with Delaney Equity Group LLC (Filed as Exhibit 10.6 to the Company’s Draft Registration Statement on Form
S-1 filed with the Commission on January 9, 2017)
|
10.7
|
|
Investment
Agreement with Iconic Holdings LLC (Filed as Exhibit 10.7 to the Company’s Draft Registration Statement on Form S-1
filed with the Commission on January 9, 2017)
|
10.8
|
|
Registration
Rights Agreement with Iconic Holdings LLC (Filed as Exhibit 10.8 to the Company’s Draft Registration Statement on Form
S-1 filed with the Commission on January 9, 2017)
|
10.9
|
|
Security
Agreement with Iconic Holdings LLC (Filed as Exhibit 10.9 to the Company’s Draft Registration Statement on Form S-1
filed with the Commission on January 9, 2017)
|
10.10
|
|
Form
of Intellectual Property Security Agreement with Iconic Holdings LLC (Filed as Exhibit 10.10 to the Company’s Draft
Registration Statement on Form S-1 filed with the Commission on January 9, 2017)
|
10.11
|
|
Secured
Note Issued to Iconic Holdings LLC (Filed as Exhibit 10.11 to the Company’s Draft Registration Statement on Form S-1
filed with the Commission on January 9, 2017)
|
10.12
|
|
Fee
Note Issued to Iconic Holdings LLC (Filed as Exhibit 10.12 to the Company’s Draft Registration Statement on Form S-1
filed with the Commission on January 9, 2017)
|
10.13
|
|
Warrant
Issued to Iconic Holdings LLC in July 2016 (Filed as Exhibit 10.13 to the Company’s Draft Registration Statement on
Form S-1 filed with the Commission on January 9, 2017)
|
10.14+
|
|
Form
of Employment Agreement with Dr. Michael Dent (Filed as Exhibit 10.14 to the Company’s Draft Registration Statement
on Form S-1 filed with the Commission on January 9, 2017)
|
10.15+
|
|
Form
of Employment Agreement with George O’Leary (Filed as Exhibit 10.15 to the Company’s Draft Registration Statement
on Form S-1 filed with the Commission on January 9, 2017)
|
10.16+
|
|
Employment
Agreement with Robert Horel (Filed as Exhibit 10.16 to the Company’s Registration Statement on Form S-1 filed with the
Commission on March 13, 2017)
|
10.17
|
|
Loan
Agreement with Florida Community Bank (Filed as Exhibit 10.16 to the Company’s Registration Statement on Form S-1 filed
with the Commission on February 8, 2017)
|
10.18+
|
|
2016
Equity Incentive Plan (Filed as Exhibit 10.17 to the Company’s Draft Registration Statement on Form S-1 filed with the
Commission on January 9, 2017)
|
10.19
|
|
Form
of Warrant Agreement with Investors in July 2016 Private Placement (Filed as Exhibit 10.13 to the Company’s Draft Registration
Statement on Form S-1 filed with the Commission on January 9, 2017)
|
10.20
|
|
Amendment
#1 to Secured Note Issued to Iconic Holdings LLC (Filed as Exhibit 10.20 to the Company’s Registration Statement on
Form S-1 filed with the Commission on March 13, 2017)
|
10.21
|
|
Warrant
Issued to Iconic Holdings LLC in February 2017 (Filed as Exhibit 10.21 to the Company’s Registration Statement on Form
S-1 filed with the Commission on March 13, 2017)
|
10.22
|
|
Amendment
to Investment Agreement with Iconic Holdings LLC (Filed as Exhibit 10.22 to the Company’s Registration Statement on
Form S-1 filed with the Commission on March 23, 2017)
|
10.23
|
|
Warrant
for Four Million Shares of Common Stock Issued to Iconic Holdings LLC in March 2017 (Filed as Exhibit 10.23 to the Company’s
Registration Statement on Form S-1 filed with the Commission on March 23, 2017)
|
10.24
|
|
Warrant
for Two Million Shares of Common Stock Issued to Iconic Holdings LLC in March 2017 (Filed as Exhibit 10.24 to the Company’s
Registration Statement on Form S-1 filed with the Commission on March 23, 2017)
|
10.25
|
|
Warrant for One Million Shares of Common Stock Issued to Iconic Holdings LLC in March 2017 (Filed as Exhibit 10.22 to the Company’s Registration Statement on Form S-1 filed with the Commission on March 23, 2017)
|
10.26
|
|
Fixed
Convertible Promissory Note with Iconic Holdings LLC (Filed as Exhibit 10.1 to the Company’s Current Report on Form
8-K filed with the Commission on May 25, 2017)
|
10.27
|
|
Form
of Warrant Issued to Iconic Holdings LLC (Filed as Exhibit 10.2 to the Company’s Current Report on Form 8-K filed with
the Commission on May 25, 2017)
|
10.28
|
|
Amendment
No. 1 to Security Agreement with Iconic Holdings LLC (Filed as Exhibit 10.3 to the Company’s Current Report on Form
8-K filed with the Commission on May 25, 2017)
|
10.29
|
|
Amendment
No. 1 to Subsidiary Guarantee with Iconic Holdings LLC (Filed as Exhibit 10.4 to the Company’s Current Report on Form
8-K filed with the Commission on May 25, 2017)
|
10.30
|
|
Amendment
No. 1 to Intellectual Property Security Agreement with Iconic Holdings LLC (Filed as Exhibit 10.5 to the Company’s Current
Report on Form 8-K filed with the Commission on May 25, 2017)
|
10.31
|
|
Unsecured
Promissory Note with Dr. Michael Dent (Filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with
the Commission on June 21, 2017)
|
10.32
|
|
Securities
Purchase Agreement with Power Up Lending Group, Ltd. (Filed as Exhibit 10.1 to the Company’s Current Report on Form
8-K filed with the Commission on July 17, 2017)
|
10.33
|
|
Convertible
Promissory Note with Power Up Lending Group, Ltd. (Filed as Exhibit 10.2 to the Company’s Current Report on Form 8-K
filed with the Commission on July 17, 2017)
|
10.34
|
|
Form of Amendment #2, dated August 14, 2017, by and between HealthLynked and Iconic Holdings, LLC (Filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Commission on August 11, 2017)
|
10.35
|
|
Form of Common Stock Purchase Warrant, dated August 14, 2017, by and between HealthLynked Corp., and Iconic Holdings, LLC (Filed as Exhibit 10.2 to the Company’s Current Report on Form 8-K filed with the Commission on August 11, 2017)
|
10.36
|
|
Securities
Purchase Agreement with Power Up Lending Group, Ltd. (Filed as Exhibit 10.1 to the Company’s Current Report on Form
8-K filed with the Commission on September 15, 2017)
|
10.37
|
|
Convertible
Promissory Note with Power Up Lending Group, Ltd. (Filed as Exhibit 10.2 to the Company’s Current Report on Form 8-K
filed with the Commission on September 15, 2017)
|
10.38
|
|
Securities
Purchase Agreement with Crown Bridge Partners LLC (Filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K
filed with the Commission on September 21, 2017)
|
10.39
|
|
Convertible
Promissory Note with Crown Bridge Partners LLC (Filed as Exhibit 10.2 to the Company’s Current Report on Form 8-K filed
with the Commission on September 21, 2017)
|
10.40
|
|
Securities
Purchase Agreement with PULG (Filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Commission
on October 27, 2017)
|
10.41
|
|
Convertible
Promissory Note with PULG (Filed as Exhibit 10.2 to the Company’s Current Report on Form 8-K filed with the Commission
on October 27, 2017)
|
10.42
|
|
Securities
Purchase Agreement (Filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Commission on November
3, 2017)
|
10.43
|
|
Convertible
Promissory Note (Filed as Exhibit 10.2 to the Company’s Current Report on Form 8-K filed with the Commission on November
3, 2017)
|
10.44
|
|
Form
of Subscription Agreement (Filed as Exhibit 10.3 to the Company’s Current Report on Form 8-K filed with the Commission
on November 3, 2017)
|
10.45
|
|
Form
of Warrant Agreement (Filed as Exhibit 10.4 to the Company’s Current Report on Form 8-K filed with the Commission on
November 3, 2017)
|
10.46
|
|
Securities
Purchase Agreement with Morningview Financial LLC dated January 2, 2018 (Filed as Exhibit 10.1 to the Company’s Form
10-Q filed with the Commission on May 15, 2018)
|
10.47
|
|
Convertible
Promissory Note with Morningview Financial LLC dated January 2, 2018 (Filed as Exhibit 10.2 to the Company’s Form 10-Q
filed with the Commission on May 15, 2018)
|
10.48
|
|
Securities
Purchase Agreement with Auctus Fund LLC dated February 2, 2018 (Filed as Exhibit 10.3 to the Company’s Form 10-Q filed
with the Commission on May 15, 2018)
|
10.49
|
|
Convertible
Promissory Note with Auctus Fund LLC dated February 2, 2018 (Filed as Exhibit 10.4 to the Company’s Form 10-Q filed
with the Commission on May 15, 2018)
|
10.50
|
|
Securities
Purchase Agreement with EMA Financial LLC dated February 13, 2018 (Filed as Exhibit 10.6 to the Company’s Form 10-Q
filed with the Commission on May 15, 2018)
|
10.51
|
|
Convertible
Promissory Note with EMA Financial LLC dated February 13, 2018 (Filed as Exhibit 10.7 to the Company’s Form 10-Q filed
with the Commission on May 15, 2018)
|
10.52
|
|
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)
|
10.53
|
|
Securities
Purchase Agreement with LG Capital Funding LLC dated March 5, 2018 (Filed as Exhibit 10.9 to the Company’s Form 10-Q
filed with the Commission on May 15, 2018)
|
10.54
|
|
Convertible
Promissory Note with LG Capital Funding LLC dated March 5, 2018 (Filed as Exhibit 10.10 to the Company’s Form 10-Q filed
with the Commission on May 15, 2018)
|
10.55
|
|
Form
of Securities Purchase Agreement with Power Up Lending Group Ltd. dated April 2, 2018 (Filed as Exhibit 10.11 to the Company’s
Form 10-Q filed with the Commission on May 15, 2018)
|
10.56
|
|
Form
of Convertible Promissory Note with Power Up Lending Group Ltd. dated April 2, 2018 (Filed as Exhibit 10.12 to the Company’s
Form 10-Q filed with the Commission on May 15, 2018)
|
10.57
|
|
Form
of Securities Purchase Agreement with Morningview Financial LLC dated April 16, 2018 (Filed as Exhibit 10.13 to the Company’s
Form 10-Q filed with the Commission on May 15, 2018)
|
10.58
|
|
Form
of Convertible Promissory Note with Morningview Financial LLC dated April 16, 2018 (Filed as Exhibit 10.14 to the Company’s
Form 10-Q filed with the Commission on May 15, 2018)
|
10.59
|
|
Form
of Securities Purchase Agreement with One44 Capital LLC dated April 18, 2018 (Filed as Exhibit 10.15 to the Company’s
Form 10-Q filed with the Commission on May 15, 2018)
|
10.60
|
|
Form
of Convertible Promissory Note with One44 Capital LLC dated April 18, 2018 (Filed as Exhibit 10.16 to the Company’s
Form 10-Q filed with the Commission on May 15, 2018)
|
10.61
|
|
Form
of Securities Purchase Agreement with Power Up Lending Group Ltd. dated April 18, 2018 (Filed as Exhibit 10.17 to the Company’s
Form 10-Q filed with the Commission on May 15, 2018)
|
10.62
|
|
Form
of Convertible Promissory Note with Power Up Lending Group Ltd. dated April 18, 2018 (Filed as Exhibit 10.18 to the Company’s
Form 10-Q filed with the Commission on May 15, 2018)
|
10.63
|
|
Form
of Securities Purchase Agreement with LG Capital Funding LLC dated May 3, 2018 (Filed as Exhibit 10.19 to the Company’s
Form 10-Q filed with the Commission on May 15, 2018)
|
10.64
|
|
Form
of Convertible Promissory Note with LG Capital Funding LLC dated May 3, 2018 (Filed as Exhibit 10.20 to the Company’s
Form 10-Q filed with the Commission on May 15, 2018)
|
10.65
|
|
Form
of Securities Purchase Agreement with Cerberus Finance Group Ltd. dated May 7, 2018 (Filed as Exhibit 10.21 to the Company’s
Form 10-Q filed with the Commission on May 15, 2018)
|
10.66
|
|
Form
of Convertible Promissory Note with Cerberus Finance Group Ltd. dated May 7, 2018 (Filed as Exhibit 10.22 to the Company’s
Form 10-Q filed with the Commission on May 15, 2018)
|
10.67
|
|
Form
of Securities Purchase Agreement with Power Up Lending Group Ltd. dated May 9, 2018 (Filed as Exhibit 10.23 to the Company’s
Form 10-Q filed with the Commission on May 15, 2018)
|
10.68
|
|
Form
of Convertible Promissory Note with Power Up Lending Group Ltd. dated May 9, 2018 (Filed as Exhibit 10.24 to the Company’s
Form 10-Q filed with the Commission on May 15, 2018)
|
10.69
|
|
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)
|
10.70
|
|
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)
|
10.71
|
|
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)
|
10.72
|
|
Amendment #4 to Investment Agreement, dated June 19, 2018, by and among HealthLynked Corp. and the Buyers listed therein (Filed as Exhibit 1.1 to the Company’s Current Report on Form 8-K filed with the Commission on June 20, 2018)
|
10.73
|
|
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)
|
10.74
|
|
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)
|
10.75
|
|
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)
|
10.76
|
|
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)
|
10.77
|
|
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)
|
10.78
|
|
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)
|
10.79
|
|
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)
|
10.80
|
|
Press Release, dated July 19, 2018 (Filed as Exhibit 99.1 to the Company’s Current Report on Form 8-K filed with the Commission on July 19, 2018)
|
10.81
|
|
Disclosure
Schedules to the Securities Purchase Agreement, dated July 16, 2018, by and among the Corporation and the Investors (Filed
as Exhibit 1.1 to the Company’s Current Report on Form 8-K filed with the Commission on August 16, 2018)
|
10.82
|
|
Form
of Lock-Up Agreement (Filed as Exhibit 1.2 to the Company’s Current Report on Form 8-K filed with the Commission on
August 16, 2018)
|
10.83
|
|
Agreement
and Plan of Merger, dated January 15, 2019, by and among HealthLynked Corp., HLYK Florida, LLC, Hughes Center for Functional
Medicine, P.A., and Pamela A. Hughes, D.O. (Filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed
with the Commission on January 22, 2019)
|
10.84
|
|
Press
Release, dated January 22, 2019 (Filed as Exhibit 99.1 to the Company’s Current Report on Form 8-K filed with the Commission
on January 22, 2019)
|
10.85
|
|
Form
of Securities Purchase Agreement with BHP Capital NY Inc. dated January 14, 2019 (Filed as Exhibit 10.11 to the Company’s
Form 10-Q filed with the Commission on May 15, 2019)
|
10.86
|
|
Form of Convertible Promissory Note with BHP Capital NY Inc. dated January 14, 2019 (Filed as Exhibit 10.12 to the Company’s Form 10-Q filed with the Commission on May 15, 2019)
|
10.87
|
|
Form
of Securities Purchase Agreement with Power Up Lending Group Ltd. dated January 24, 2019 (Filed as Exhibit 10.15 to the Company’s
Form 10-Q filed with the Commission on May 15, 2019)
|
10.88
|
|
Form
of Convertible Promissory Note with Power Up Lending Group Ltd. dated January 24, 2019 (Filed as Exhibit 10.16 to the Company’s
Form 10-Q filed with the Commission on May 15, 2019)
|
10.89
|
|
First
Amendment to Agreement and Plan of Merger, dated April 12, 2019, by and among HealthLynked Corp., HLYK Florida, LLC, Hughes
Center for Functional Medicine, P.A., and Pamela A. Hughes, D.O. (Filed as Exhibit 10.1 to the Company’s Current Report
on Form 8-K filed with the Commission on April 18, 2019)
|
10.90
|
|
Form
of Securities Purchase Agreement with Power Up Lending Group Ltd. dated April 3, 2019 (Filed as Exhibit 10.18 to the Company’s
Form 10-Q filed with the Commission on May 15, 2019)
|
10.91
|
|
Form
of Convertible Promissory Note with Power Up Lending Group Ltd. dated April 3, 2019 (Filed as Exhibit 10.19 to the Company’s
Form 10-Q filed with the Commission on May 15, 2019)
|
10.92
|
|
Form
of Securities Purchase Agreement with BHP Capital NY Inc. and Jefferson Street Capital LLC dated April 11, 2019 (Filed as
Exhibit 10.20 to the Company’s Form 10-Q filed with the Commission on May 15, 2019)
|
10.93
|
|
Form
of Convertible Promissory Note with BHP Capital NY Inc. dated April 11, 2019 (Filed as Exhibit 10.21 to the Company’s
Form 10-Q filed with the Commission on May 15, 2019)
|
10.94
|
|
Form
of Convertible Promissory Note with Jefferson Street Capital LLC dated April 11, 2019 (Filed as Exhibit 10.22 to the Company’s
Form 10-Q filed with the Commission on May 15, 2019)
|
10.95
|
|
Form
of Convertible Promissory Note with Iconic Holdings LLC dated April 15, 2019 (Filed as Exhibit 10.23 to the Company’s
Form 10-Q filed with the Commission on May 15, 2019)
|
10.96
|
|
Form
of Securities Purchase Agreement with Power Up Lending Group Ltd. dated May 7, 2019 (Filed as Exhibit 10.24 to the Company’s
Form 10-Q filed with the Commission on May 15, 2019)
|
10.97
|
|
Form
of Convertible Promissory Note with Power Up Lending Group Ltd. dated May 7, 2019 (Filed as Exhibit 10.25 to the Company’s
Form 10-Q filed with the Commission on May 15, 2019)
|
* Filed herewith
+ Management
contract or compensatory plan or arrangement.
(b)
|
Financial Statement Schedules.
|
All financial statement schedules have
been omitted, since the required information is not applicable or is not present in amounts sufficient to require submission of
the schedule, or because the information required is included in the financial statements and notes thereto.
Item 17. Undertakings.
The undersigned registrant hereby undertakes:
(1) To file,
during any period in which offers or sales are being made, a post-effective amendment to this registration statement:
(i) To include
any prospectus required by Section 10(a)(3) of the Securities Act of 1933;
(ii) To reflect
in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective
amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b)
if, in the aggregate, the changes in volume and price represent no more than a 20 percent change in the maximum aggregate offering
price set forth in the “Calculation of Registration Fee” table in the effective registration statement;
(iii) To include
any material information with respect to the plan of distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement.
(2) That, for
the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial
bona fide
offering thereof.
(3) To remove
from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination
of the offering.
(4) That, for
the purpose of determining liability under the Securities Act of 1933 to any purchaser, each prospectus filed pursuant to Rule
424(b) as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or
other than prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration statement
as of the date it is first used after effectiveness. Provided, however, that no statement made in a registration statement or
prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into
the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract
of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that
was part of the registration statement or made in any such document immediately prior to such date of first use.
(5) Insofar as
indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion
of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant
of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered,
the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
SIGNATURES
Pursuant to the requirements of the Securities
Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto
duly authorized in the City of Naples, State of Florida on the 17th day of June 2019.
|
HEALTHLYNKED CORP.
(Registrant)
|
|
|
|
By:
|
/s/ Michael Dent
|
|
|
Name:
|
Michael Dent, M.D.
|
|
|
Title:
|
Chief Executive Officer and Chairman
(Principal Executive Officer)
|
Pursuant to the requirements of the Securities
Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated.
Name
|
|
Title
|
|
Date
|
|
|
|
|
|
/s/ Michael Dent, M.D.
|
|
Chief Executive Officer and Chairman (Principal Executive
Officer)
|
|
June 17, 2019
|
Michael Dent
|
|
|
|
|
|
|
|
|
|
/s/ George O’Leary
|
|
Chief Financial Officer, (Principal Accounting Officer), and
Director
|
|
June 17, 2019
|
George O’Leary
|
|
|
|
|
II-11
HealthLynked (QB) (USOTC:HLYK)
Historical Stock Chart
From Aug 2024 to Sep 2024
HealthLynked (QB) (USOTC:HLYK)
Historical Stock Chart
From Sep 2023 to Sep 2024