UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10–Q

 

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

 

For the quarterly period ended March 31, 2020

 

or

 

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

 

For the transition period from [               ] to [                ]

 

Commission file number: 000-55768

 

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

 

Securities registered pursuant to Section 12(b) of the Act: None.

 

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

 

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

 

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

 

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

 

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

 

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

 

As of May 14, 2020, there were 124,221,432 shares of the issuer's common stock, par value $0.0001, outstanding.

 

 

 

 

 

 

TABLE OF CONTENTS

 

    PAGE NO.
     
PART I FINANCIAL INFORMATION 1
Item 1 Financial Statements (Unaudited) 1
Item 2 Management’s Discussion and Analysis of Financial Condition and Results of Operations 33
Item 3 Quantitative and Qualitative Disclosures about Market Risk 44
Item 4 Controls and Procedures 44
     
Part II OTHER INFORMATION 45
Item 1 Legal Proceedings 45
Item 1A  Risk Factors 45
Item 2 Unregistered Sales of Equity Securities and Use of Proceeds 45
Item 3 Defaults upon Senior Securities 45
Item 4 Mine Safety Disclosure 45
Item 5 Other Information 45
Item 6 Exhibits 46

 

i

 

 

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

 

HEALTHLYNKED CORP.

CONDENSED CONSOLIDATED BALANCE SHEETS

 

    March 31,     December 31,  
    2020     2019  
    (Unaudited)        
ASSETS            
Current Assets            
Cash   $ 204,266     $ 110,441  
Accounts receivable, net of allowance for doubtful accounts of $13,972 and $13,972 as of March 31, 2020 and December 31, 2019, respectively     74,161       83,251  
Inventory     89,601       70,460  
Prepaid expenses     56,766       119,328  
Deferred offering costs     6,401       19,203  
Total Current Assets     431,195       402,683  
                 
Property, plant and equipment, net of accumulated depreciation of $772,057 and $749,316 as of March 31, 2020 and December 31, 2019, respectively     491,047       513,788  
Intangible assets, net of accumulated amortization of $7,953 and $5,908 as of March 31, 2020 and December 31, 2019, respectively     1,134,585       1,336,958  
ROU lease assets and deposits     255,662       293,125  
                 
Total Assets   $ 2,312,489     $ 2,546,554  
                 
LIABILITIES AND SHAREHOLDERS’ DEFICIT                
                 
Current Liabilities                
Accounts payable and accrued expenses   $ 786,095     $ 836,465  
Lease liability, current portion     145,869       201,523  
Due to related party, current portion     509,563       493,457  
Notes payable to related party, current portion     817,037       743,955  
                 
Convertible notes payable, net of original issue discount and debt discount of $427,567 and $777,668 as of March 31, 2020 and December 31, 2019, respectively     1,651,917       1,542,036  
Contingent acquisition consideration, current portion     50,263       100,000  
Derivative financial instruments     219,938       991,288  
Total Current Liabilities     4,180,682       4,908,724  
                 
Long-Term Liabilities                
Contingent acquisition consideration, long term portion     256,031       400,000  
Lease liability, long term portion     103,225       80,510  
                 
Total Liabilities     4,539,938       5,389,234  
                 
Shareholders’ Deficit                
Common stock, par value $0.0001 per share, 500,000,000 shares authorized, 118,887,168 and 109,894,490 shares issued and outstanding as of March 31, 2020 and December 31, 2019, respectively     11,889       10,990  
Common stock issuable, $0.0001 par value; 1,652,347 and 1,047,904 shares as of March 31, 2020 and December 31, 2019, respectively     205,241       159,538  
Additional paid-in capital     14,165,291       13,016,446  
Accumulated deficit     (16,609,870 )     (16,029,654 )
Total Shareholders’ Deficit     (2,227,449 )     (2,842,680 )
                 
Total Liabilities and Shareholders’ Deficit   $ 2,312,489     $ 2,546,554  

 

See the accompanying notes to these Unaudited Condensed Consolidated Financial Statements

 

1

 

 

HEALTHLYNKED CORP.

CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

(UNAUDITED)

 

    Three Months Ended
March 31,
 
    2020     2019  
Revenue            
Patient service revenue, net   $ 1,336,940     $ 464,990  
                 
Operating Expenses                
Practice salaries and benefits     765,121       350,240  
Other practice operating costs     563,691       244,539  
General and administrative     510,976       691,802  
Depreciation and amortization     24,786       1,655  
Total Operating Expenses     1,864,574       1,288,236  
                 
Loss from operations     (527,634 )     (823,246 )
                 
Other Income (Expenses)                
Loss on extinguishment of debt     (467,937 )     (139,798 )
Change in fair value of debt     35,965       (29,697 )
Financing cost     ---       (33,903 )
Amortization of original issue and debt discounts on notes payable and convertible notes     (292,163 )     (179,384 )
Change in fair value of derivative financial instruments and contingent acquisition consideration     733,734       191,633  
Interest expense     (62,181 )     (46,322 )
Total other expenses     (52,582 )     (237,471 )
                 
Net loss before provision for income taxes     (580,216 )     (1,060,717 )
                 
Provision for income taxes     ---       ---  
                 
Net loss   $ (580,216 )   $ (1,060,717 )
                 
Net loss per share, basic and diluted:                
Basic   $ (0.01 )   $ (0.01 )
Fully diluted   $ (0.01 )   $ (0.01 )
                 
Weighted average number of common shares:                
Basic     114,601,960       88,506,930  
Fully diluted     114,601,960       88,506,930  

 

See the accompanying notes to these Unaudited Condensed Consolidated Financial Statements

 

2

 

 

HEALTHLYNKED CORP.

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ DEFICIT

THREE MONTHS ENDED MARCH 31, 2020 AND 2019

(UNAUDITED)

 

 

    Number of Shares           Common     Additional           Total  
    Common     Common     Stock     Paid-in     Accumulated     Shareholders’  
    Stock     Stock     Issuable     Capital     Deficit     Deficit  
    (#)     ($)     ($)     ($)     ($)     ($)  
Balance at December 31, 2019     109,894,490       10,990       159,538       13,016,446       (16,029,654 )     (2,842,680 )
                                                 
Sale of common stock     4,187,566       419       (59,000 )     407,181       ---       348,600  
Fair value of warrants allocated to proceeds of common stock     ---       ---       ---       88,833       ---       88,833  
Conversion of convertible notes payable to common stock     4,672,612       467       51,652       600,441       ---       652,560  
Consultant and director fees payable with common shares and warrants     ---       ---       60,212       6,666       ---       66,878  
Shares and options issued pursuant to employee equity incentive plan     132,500       13       (7,161 )     45,724       ---       38,576  
Net loss     ---       ---       ---       ---       (580,216 )     (580,216 )
                                                 
Balance at March 31, 2020     118,887,168       11,889       205,241       14,165,291       (16,609,870 )     (2,227,449 )

 

    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 )

 

See the accompanying notes to these Unaudited Condensed Consolidated Financial Statements

 

3

 

 

HEALTHLYNKED CORP.

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

(UNAUDITED)

 

    Three Months Ended
March 31,
 
    2020     2019  
Cash Flows from Operating Activities            
Net loss   $ (580,216 )   $ (1,060,717 )
Adjustments to reconcile net loss to net cash used in operating activities:                
Depreciation and amortization     24,786       1,655  
Stock based compensation, including amortization of prepaid fees     118,257       180,741  
Amortization of original issue discount and debt discount on convertible notes     292,163       179,384  
Financing cost     ---       33,903  
Change in fair value of derivative financial instruments and contingent acquisition consideration     (733,734 )     (191,633 )
Loss on extinguishment of debt     467,937       139,798  
Change in fair value of debt     (35,965 )     29,697  
Changes in operating assets and liabilities:                
Accounts receivable     9,090       7,979  
Inventory     (19,141 )     ---  
Prepaid expenses and deposits     62,562       9,903  
ROU lease assets     80,760       61,870  
Accounts payable and accrued expenses     (10,556 )     51,237  
Lease liability     (76,236 )     (60,800 )
Due to related party, current portion     16,106       16,590  
Net cash used in operating activities     (384,187 )     (600,393 )
                 
Cash Flows from Investing Activities                
Acquisition of property and equipment     ---       (4,302 )
Net cash used in investing activities     ---       (4,302 )
                 
Cash Flows from Financing Activities                
Proceeds from sale of common stock     437,433       833,226  
Proceeds from issuance of convertible notes     344,000       ---  
Repayment of convertible notes     (373,094 )     150,000  
Proceeds from related party loans     149,000       ---  
Repayment of related party loans     (79,327 )     ---  
Net cash provided by financing activities     478,012       983,226  
                 
Net increase in cash     93,825       378,531  
Cash, beginning of period     110,441       135,778  
                 
Cash, end of period   $ 204,266     $ 514,309  

 

(continued)

 

4

 

 

HEALTHLYNKED CORP.

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

(UNAUDITED)

 

    Three Months Ended
March 31,
 
    2020     2019  
Supplemental disclosure of cash flow information:            
Cash paid during the period for interest   $ 15,016     $ 830  
Cash paid during the period for income tax   $ ---     $ ---  
Schedule of non-cash investing and financing activities:                
Initial derivative liability and fair value of beneficial conversion feature and original issue discount allocated to proceeds of variable convertible notes payable   $ 72,890     $ 179,227  
Common stock issuable issued during period   $ 66,175     $ 4,483  
Fair value of warrants issued for professional service   $ ---     $ 14,743  
Conversion of convertible note payable to common shares   $ 652,560     $ 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   $ 43,297     $ 417,317  

Derivative liabilities written off with repayment and conversion of convertible notes payable

  $ 103,885     $ ---  
Reduction in contingent acquisition consideration   $ 200,328     $ ---  

 

See the accompanying notes to these Unaudited Condensed Consolidated Financial Statements

 

5

 

 

HEALTHLYNKED CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2020

(UNAUDITED)

 

NOTE 1 - BUSINESS AND BUSINESS PRESENTATION

 

HealthLynked Corp. (the “Company”) was incorporated in the State of Nevada on August 4, 2014. On September 2, 2014, the Company filed Amended and Restated Articles of Incorporation with the Secretary of State of Nevada setting the total number of authorized shares at 250,000,000 shares, which included up to 230,000,000 shares of common stock and 20,000,000 shares of “blank check” preferred stock. On February 5, 2018, the Company filed an Amendment to its Amended and Restated Articles of Incorporation with the Secretary of State of Nevada to increase the number of authorized shares of common stock to 500,000,000 shares.

 

The Company operates in two distinct divisions: Health Services and Digital Healthcare. The Health Services division is comprised of the operations of (i) Naples Women’s Center (“NWC”), a multi-specialty medical group including OB/GYN (both Obstetrics and Gynecology) and General Practice, (ii) Naples Center for Functional Medicine (“NCFM”), a Functional Medical Practice acquired in April 2019 that is engaged in improving the health of its patients through individualized and integrative health care, and (iii) Bridging the Gap Physical Therapy (“BTG”), a physical therapy practice in Bonita Springs, FL opened in January 2020 that provides hands-on functional manual therapy techniques to speed patients’ recovery and manage pain without pain medication or surgery. The Digital Healthcare division develops and plans to operate an online personal medical information and record archive system, the “HealthLynked Network,” which will enable patients and doctors to keep track of medical information via the Internet in a cloud-based system.

 

These unaudited condensed consolidated financial statements reflect all adjustments including normal recurring adjustments, which, in the opinion of management, are necessary to present fairly the financial position, results of operations and cash flows for the periods presented in accordance with the accounting principles generally accepted in the United States of America (“GAAP”). These unaudited condensed consolidated financial statements should be read in conjunction with the Company’s consolidated financial statements and notes thereto for the years ended December 31, 2019 and 2018, respectively, which are included in the Company’s Form 10-K, filed with the United States Securities and Exchange Commission on March 30, 2020. The Company assumes that the users of the interim financial information herein have read, or have access to, the audited consolidated financial statements for the preceding period, and that the adequacy of additional disclosure needed for a fair presentation may be determined in that context. The results of operations for the three months ended March 31, 2020 are not necessarily indicative of results for the entire year ending December 31, 2020.

 

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 unaudited condensed consolidated financial statements follows:

 

Basis of Presentation

 

The accompanying unaudited condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“US GAAP”).

 

All amounts referred to in the notes to the consolidated financial statements are in United States Dollars ($) unless stated otherwise.

 

Use of Estimates

 

The preparation of the unaudited condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect certain reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. Accordingly, actual results could differ from those estimates. Significant estimates include assumptions about collection of accounts receivable, the valuation and recognition of stock-based compensation expense, valuation allowance for deferred tax assets, borrowing rate consideration for right-of-use (“ROU”) lease assets including related lease liability and useful life of fixed assets.

 

6

 

 

HEALTHLYNKED CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2020

(UNAUDITED)

 

NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

Adopted Accounting Pronouncements

 

Effective January 1, 2019, the Company adopted Accounting Standards Update (“ASU”) No. 2016-02, Leases (“ASU 2016-02”) using the required modified retrospective approach. ASU 2016-02 requires lessees to record most leases on their balance sheets but recognize expenses on their income statements in a manner similar to current accounting. See discussion below under the caption “Leases” in this Note 2 and in Note 8 for more detail on the Company’s accounting policy with respect to lease accounting.

 

Effective January 1, 2019, the Company adopted ASU 2018-07, Compensation - Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting. ASU 2018-07 expands the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from nonemployees and supersedes the guidance in Subtopic 505-50, Equity - Equity-Based Payments to Non-Employees. The adoption of this guidance did not materially impact the Company’s financial statements and related disclosures.

 

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.

 

7

 

 

HEALTHLYNKED CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2020

(UNAUDITED)

 

NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

Laws and regulations concerning government programs, including Medicare and Medicaid, are complex and subject to varying interpretation. As a result of investigations by governmental agencies, various health care organizations have received requests for information and notices regarding alleged noncompliance with those laws and regulations, which, in some instances, have resulted in organizations entering into significant settlement agreements. Compliance with such laws and regulations may also be subject to future government review and interpretation as well as significant regulatory action, including fines, penalties, and potential exclusion from the related programs. There can be no assurance that regulatory authorities will not challenge the Company’s compliance with these laws and regulations, and it is not possible to determine the impact, if any, such claims or penalties would have upon the Company. In addition, the contracts the Company has with commercial payors also provide for retroactive audit and review of claims.

 

Settlements with third-party payors for retroactive adjustments due to audits, reviews or investigations are considered variable consideration and are included in the determination of the estimated transaction price for providing patient care. These settlements are estimated based on the terms of the payment agreement with the payor, correspondence from the payor and the Company’s historical settlement activity, including an assessment to ensure that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the retroactive adjustment is subsequently resolved. Estimated settlements are adjusted in future periods as adjustments become known, or as years are settled or are no longer subject to such audits, reviews, and investigations.

 

The Company also provides services to uninsured patients, and offers those uninsured patients a discount, either by policy or law, from standard charges. The Company estimates the transaction price for patients with deductibles and coinsurance and from those who are uninsured based on historical experience and current market conditions. The initial estimate of the transaction price is determined by reducing the standard charge by any contractual adjustments, discounts, and implicit price concessions. Subsequent changes to the estimate of the transaction price are generally recorded as adjustments to patient service revenue in the period of the change. Patient services provided by NCFM are provided on a cash basis and not submitted through third party insurance providers.

 

Cash and Cash Equivalents

 

For financial statement purposes, the Company considers all highly liquid investments with original maturities of three months or less to be cash and cash equivalents.

 

Accounts Receivable

 

Trade receivables are carried at their estimated collectible amounts. Trade credit is generally extended on a short-term basis; thus trade receivables do not bear interest. Trade accounts receivable are periodically evaluated for collectability based on past collectability of the insurance companies, government agencies, and customers’ accounts receivable during the related period which generally approximates 48% of total billings. Trade accounts receivable are recorded at this net amount. As of and March 31, 2020 and December 31, 2019, the Company’s gross accounts receivable were $156,458 and $174,531, respectively, and net accounts receivable were $74,161 and $83,251, respectively, based upon net reporting of accounts receivable. As of March 31, 2020 and December 31, 2019, 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 ROU assets within other assets and ROU liabilities within accrued expenses and other liabilities and within other long-term liabilities on the Company’s consolidated balance sheets.

 

ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. The Company’s leases do not provide an implicit rate. The Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. The ROU asset also includes any lease payments made and excludes lease incentives. Lease expense for lease payments is recognized on a straight-line basis over the lease term. The Company adopted ASU 2016-02 in the first quarter of 2019. See Note 8 for more complete details on balances at March 31, 2020, and December 31, 2019. The adoption had no material impact on cash provided by or used in operating, investing or financing activities on the Company’s unaudited condensed consolidated statements of cash flows.

 

8

 

 

HEALTHLYNKED CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2020

(UNAUDITED)

 

NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

Inventory

 

Inventory consisting of supplements, is stated at the lower of cost or net realizable value. Cost is determined by the first-in, first-out method. Outdated inventory is directly charged to cost of goods sold.

 

Goodwill and Intangible Assets

 

Goodwill is recognized as the excess cost of an acquired entity over the net amount assigned to assets acquired and liabilities assumed. Goodwill is not amortized, but rather tested for impairment on an annual basis and more often if circumstances require. Impairment losses are recognized whenever the implied fair value of goodwill is less than its carrying value.

 

The Company recognizes an acquired intangible apart from goodwill whenever the intangible arises from contractual or other legal rights, or whenever it can be separated or divided from the acquired entity and sold, transferred, licensed, rented or exchanged, either individually or in combination with a related contract, asset or liability. Such intangibles are amortized over their estimated useful lives unless the estimated useful life is determined to be indefinite. Amortizable intangible assets are being amortized primarily over useful lives of five years. The straight-line method of amortization is used as it has been determined to approximate the use pattern of the assets. Impairment losses are recognized if the carrying amount of an intangible that is subject to amortization is not recoverable from expected future cash flows and its carrying amount exceeds its fair value.

 

The Company also maintains intangible assets with indefinite lives, which are not amortized. These intangibles are tested for impairment on an annual basis and more often if circumstances require. Impairment losses are recognized whenever the implied fair value of these assets is less than their carrying value. No impairment charges were recognized in the three months ended March 31, 2020 or 2019.

 

Concentrations of Credit Risk

 

The Company’s financial instruments that are exposed to a concentration of credit risk are cash and accounts receivable. There are no patients/customers that represent 10% or more of the Company’s revenue or accounts receivable. Generally, the Company’s cash and cash equivalents are in checking accounts.

 

Property and Equipment

 

Property and equipment are stated at cost. When retired or otherwise disposed, the related carrying value and accumulated depreciation are removed from the respective accounts and the net difference less any amount realized from disposition, is reflected in earnings. For consolidated financial statement purposes, property and equipment are recorded at cost and depreciated using the straight-line method over their estimated useful lives of 5 to 7 years. The cost of repairs and maintenance is expensed as incurred; major replacements and improvements are capitalized.

 

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, 2020 or 2019. 

 

Convertible Notes

 

Convertible notes are regarded as compound instruments, consisting of a liability component and an equity component. The component parts of compound instruments are classified separately as financial liabilities and equity in accordance with the substance of the contractual arrangement. At the date of issue, the fair value of the liability component is estimated using the prevailing market interest rate for a similar non-convertible instrument. This amount is recorded as a liability on an amortized cost basis until extinguished upon conversion or at the instrument’s maturity date. The equity component is determined by deducting the amount of the liability component from the fair value of the compound instrument as a whole. This is recognized as additional paid-in capital and included in equity, net of income tax effects, and is not subsequently remeasured. After initial measurement, they are carried at amortized cost using the effective interest method. Convertible notes for which the maturity date has been extended and that qualify for debt extinguishment treatment are recorded at fair value on the extinguishment date and then revalue at the end of each reporting period, with the change recorded to the statement of operations under “Change in Fair Value of Debt.”

 

9

 

 

HEALTHLYNKED CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2020

(UNAUDITED)

 

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.

 

Prior to January 1, 2020, the Company utilized the closed-form Black-Scholes option pricing model to estimate the fair value of options, warrants, beneficial conversion features and other Level 3 financial assets and liabilities. Effective January 1, 2020, the Company changed to a binomial lattice option pricing model. The Company believes that the binomial lattice model results in a better estimate of fair value because it embodies all of the requisite assumptions (including the underlying price, exercise price, term, volatility, and risk-free interest-rate) necessary to fair value these instruments and, unlike the Black-Scholes model, also accommodates assumptions regarding investor exercise behavior and other market conditions that market participants would likely consider in negotiating the transfer of such an instruments.

 

10

 

 

HEALTHLYNKED CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2020

(UNAUDITED)

 

NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

Stock-Based Compensation

 

The Company accounts for stock-based compensation to employees and nonemployees under ASC 718 “Compensation – Stock Compensation” using the fair value-based method. Under this method, compensation cost is measured at the grant date based on the value of the award and is recognized over the service period, which is usually the vesting period. This guidance establishes standards for the accounting for transactions in which an entity exchanges its equity instruments for goods or services. It also addresses transactions in which an entity incurs liabilities in exchange for goods or services that are based on the fair value of the entity’s equity instruments or that may be settled by the issuance of those equity instruments. Effective January 1, 2020, the Company uses a binomial lattice pricing model to estimate the fair value of options and warrants granted. In prior periods, the Company used the Black-Scholes pricing model.

 

Income Taxes

 

The Company follows Accounting Standards Codification subtopic 740-10, Income Taxes (“ASC 740-10”) for recording the provision for income taxes. Deferred tax assets and liabilities are computed based upon the difference between the financial statement and income tax basis of assets and liabilities using the enacted marginal tax rate applicable when the related asset or liability is expected to be realized or settled. Deferred income tax expenses or benefits are based on the changes in the asset or liability during each period. If available evidence suggests that it is more likely than not that some portion or all of the deferred tax assets will not be realized, a valuation allowance is required to reduce the deferred tax assets to the amount that is more likely than not to be realized. Future changes in such valuation allowance are included in the provision for deferred income taxes in the period of change. Deferred income taxes may arise from temporary differences resulting from income and expense items reported for financial accounting and tax purposes in different periods. Deferred taxes are classified as current or non-current, depending on the classification of assets and liabilities to which they relate. Deferred taxes arising from temporary differences that are not related to an asset or liability are classified as current or non-current depending on the periods in which the temporary differences are expected to reverse and are considered immaterial. No Income Tax has been provided for the three months ended March 31, 2020 or 2019, since the Company has sustained a loss for both periods. Due to the uncertainty of the utilization and recoverability of the loss carry-forwards and other deferred tax assets, management has determined a full valuation allowance for the deferred tax assets, since it is more likely than not that the deferred tax assets will not be realizable.

 

Recurring Fair Value Measurements

 

The carrying value of the Company’s financial assets and financial liabilities is their cost, which may differ from fair value. The carrying value of cash held as demand deposits, money market and certificates of deposit, marketable investments, accounts receivable, short-term borrowings, accounts payable, accrued liabilities, and derivative financial instruments approximated their fair value.

 

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, 2020 or 2019, the Company reported a net loss and excluded all outstanding stock options, warrants and other dilutive securities from the calculation of diluted net loss per common share because inclusion of these securities would have been anti-dilutive. As of March 31, 2020 and December 31, 2019, potentially dilutive securities were comprised of (i) 48,333,767 and 47,056,293 warrants outstanding, respectively, (ii) 3,209,250 and 3,269,250 stock options outstanding, respectively, (iii) 30,177,865 and 23,210,423 shares issuable upon conversion of convertible notes, respectively, and (iv) 318,750 and 332,500 unissued shares subject to future vesting requirements granted pursuant to the Company’s Employee Incentive Plan. 

 

Common stock awards

 

The Company grants common stock awards to non-employees in exchange for services provided. The Company measures the fair value of these awards using the fair value of the services provided or the fair value of the awards granted, whichever is more reliably measurable. The fair value measurement date of these awards is generally the date the performance of services is complete. The fair value of the awards is recognized on a straight-line basis as services are rendered. The share-based payments related to common stock awards for the settlement of services provided by non-employees is recorded on the consolidated statement of comprehensive loss in the same manner and charged to the same account as if such settlements had been made in cash.

 

11

 

 

HEALTHLYNKED CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2020

(UNAUDITED)

 

NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

Warrants

 

In connection with certain financing, consulting and collaboration arrangements, the Company has issued warrants to purchase shares of its common stock. The outstanding warrants are standalone instruments that are not puttable or mandatorily redeemable by the holder and are classified as equity awards. The Company measures the fair value of the awards using the Black-Scholes pricing model as of the measurement date. Effective January 1, 2020, the Company uses a binomial lattice pricing model to estimate the fair value of compensation options and warrants. In prior periods, the Company used the Black-Scholes pricing model. Warrants issued in conjunction with the issuance of common stock are initially recorded at fair value as a reduction in additional paid-in capital of the common stock issued. All other warrants are recorded at fair value as expense over the requisite service period or at the date of issuance, if there is not a service period. Warrants granted in connection with ongoing arrangements are more fully described in Note 12, 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 two operating segments: Health Services (multi-specialty medical group including the NWC OB/GYN practice and the NCFM practice acquired in April 2019) and Digital Healthcare (develops and markets the “HealthLynked Network,” an online personal medical information and record archive system).

 

Recent Accounting Pronouncements

 

Effective January 1, 2019, the Company adopted Accounting Standards Update (“ASU”) No. 2016-02, Leases (“ASU 2016-02”) using the required modified retrospective approach. ASU 2016-02 requires lessees to record most leases on their balance sheets but recognize expenses on their income statements in a manner similar to current accounting. See discussion below under the caption “Leases” in this Note 2 and in Note 9 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.

 

In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments — Overall: Recognition and Measurement of Financial Assets and Financial Liabilities. The guidance affects the accounting for equity investments, financial liabilities under the fair value option and the presentation and disclosure requirements of financial instruments. The guidance is effective in the first quarter of fiscal 2019. We adopted this guidance effective January 1, 2019. The adoption of this guidance did not materially impact our financial statements and related disclosures.

 

In July 2017, the FASB issued ASU No. 2017-11, Earnings Per Share, Distinguishing Liabilities from Equity and Derivatives and Hedging, which changes the accounting and earnings per share for certain instruments with down round features. The amendments in this ASU should be applied using a cumulative-effect adjustment as of the beginning of the fiscal year or retrospective adjustment to each period presented and is effective for annual periods beginning after December 15, 2018, and interim periods within those periods. We adopted this guidance effective January 1, 2019. The adoption of this guidance did not materially impact our financial statements and related disclosures.

 

In February 2018, the Financial Accounting Standards Board (“FASB”) issued ASC Update No 2018-02 (Topic 220) Income Statement – Reporting Comprehensive Income: Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income.  This ASC update allows for a reclassification into retained earnings of the stranded tax effects in accumulated other comprehensive income (“AOCI”) resulting from the enactment of the Tax Cuts and Jobs Act (“TCJA”). The updated guidance is effective for interim and annual periods beginning after December 15, 2018.  We adopted this guidance effective January 1, 2019. The adoption of this guidance did not materially impact our financial statements and related disclosures.

 

12

 

 

HEALTHLYNKED CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2020

(UNAUDITED)

 

NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

In June 2018, the FASB issued ASU 2018-07, Compensation - Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting, to expand the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from nonemployees and supersedes the guidance in Subtopic 505-50, Equity - Equity-Based Payments to Non-Employees. Under ASU 2018-07, equity-classified nonemployee share-based payment awards are measured at the grant date fair value on the grant date The probability of satisfying performance conditions must be considered for equity-classified nonemployee share-based payment awards with such conditions. ASU 2018-07 is effective for fiscal years beginning after December 15, 2018, with early adoption permitted. We adopted this guidance effective January 1, 2019. The adoption of this guidance did not materially impact our financial statements and related disclosures.

 

In July 2018, the FASB issued ASU 2018-09 to provide clarification and correction of errors to the Codification. The amendments in this update cover multiple Accounting Standards Updates. Some topics in the update may require transition guidance with effective dates for annual periods beginning after December 15, 2018. We adopted this guidance effective January 1, 2019. The adoption of this guidance did not materially impact our financial statements and related disclosures.

 

NOTE 3 – GOING CONCERN MATTERS AND LIQUIDITY

 

As of March 31, 2020, the Company had a working capital deficit of $3,749,487 and accumulated deficit $16,609,870. For the three months ended March 31, 2020, the Company had a net loss of $580,216 and net cash used by operating activities of $384,187. Net cash used in investing activities was $-0-. Net cash provided by financing activities was $478,012, resulting principally from $437,433 proceeds from the sale of common stock, $344,000 net proceeds from the issuance of convertible notes and $149,000 proceeds from the issuance of related party loans.

 

The Company’s cash balance and revenues generated are not currently sufficient and cannot be projected to cover its operating expenses for the next twelve months from the date of this report. These matters raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans include attempting to improve its business profitability and its ability to generate sufficient cash flow from its operations to meet its needs on a timely basis, obtaining additional working capital funds through equity and debt financing arrangements, and restructuring on-going operations to eliminate inefficiencies to raise cash balance in order to meet its anticipated cash requirements for the next twelve months from the date of this report. However, there can be no assurance that these plans and arrangements will be sufficient to fund the Company’s ongoing capital expenditures, working capital, and other requirements. Management intends to make every effort to identify and develop sources of funds. The outcome of these matters cannot be predicted at this time. There can be no assurance that any additional financings will be available to the Company on satisfactory terms and conditions, if at all.

 

The ability of the Company to continue as a going concern is dependent upon its ability to raise additional capital and achieve profitable operations. The accompanying consolidated financial statements do not include any adjustments related to the recoverability or classification of asset-carrying amounts or the amounts and classification of liabilities that may result should the Company be unable to continue as a going concern. 

 

A novel strain of coronavirus, COVID-19, that was first identified in China in December 2019, has surfaced in several regions across the world and resulted in travel restrictions and business slowdowns or shutdowns in affected areas. The further spread of COVID-19, and the requirement to take action to limit the spread of the illness, may impact our ability to carry out our business as usual and may materially adversely impact global economic conditions, our business and financial condition, including our potential to conduct financings on terms acceptable to us, if at all. The extent to which COVID-19 may impact our business will depend on future developments, which are highly uncertain and cannot be predicted with confidence, such as the ultimate geographic spread of the disease, the duration of the outbreak, travel restrictions and social distancing in the United States and other countries, business closures or business disruptions and the effectiveness of actions taken in the United States and other countries to contain and treat the disease. 

 

13

 

 

HEALTHLYNKED CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2020

(UNAUDITED)

 

NOTE 3 – GOING CONCERN MATTERS AND LIQUIDITY (CONTINUED)

 

The Company intends that the cost of completing intended acquisitions, implementing its development and sales efforts related to the HealthLynked Network, as well as maintaining existing and expanding overhead and administrative costs, will be financed from (i) profits generated by NCFM and, upon completion of the acquisition, from Cura and AHP, and (ii) outside funding sources, including the put rights associated with the Investment Agreement, issuance of convertible notes, sales of common stock, and loans from related parties. The Company expects to repay our outstanding convertible notes, which have an aggregate face value of $2,133,895 as of March 31, 2020, from outside funding sources, including but not limited to new convertible notes payable, amounts available upon the exercise of the put rights granted under the Investment Agreement, sales of equity, loans from related parties and others, or through the conversion of convertible notes into equity. No assurances can be given that the Company will be able to access sufficient outside capital in a timely fashion in order to repay the convertible notes before they mature. If necessary funds are not available, the Company’s business and operations would be materially adversely affected and in such event, the Company would attempt to reduce costs and adjust its business plan.

 

NOTE 4 – ACQUISITION

 

On April 12, 2019, the Company acquired a 100% interest in Hughes Center for Functional medicine (“HCFM”), a medical practice engaged in improving the health of its patients through individualized and integrative health care. Under the terms of acquisition, the Company paid HCFM shareholders $500,000 in cash, issued 3,968,254 shares of the Company’s common stock and agreed to an earn-out provision of $500,000 that may be earned based on the performance of HCFM in the years ended on the first, second and third anniversary dates of the acquisition closing. The total consideration fair value represents a transaction value of $1,799,672. The Company accounted for the transaction as an acquisition of a business pursuant to ASC 805, “Business Combinations” (“ASC 805”).

 

Following the acquisition, HCFM was rebranded as NCFM and was combined with NWC to form the Company’s Health Services segment. As a result of the acquisition, the Company is expected to be a leading provider of Functional Medicine in Southwest Florida. The Company also expects to reduce costs in its Health Services segment through economies of scale.

 

The following table summarizes the fair value of consideration paid for HCFM.

 

Cash   $ 500,000  
Common Stock (3,968,254 shares)     1,000,000  
Contingent acquisition consideration subject to earn-out     299,672  
         
Fair Value of Total Consideration   $ 1,799,672  

 

The fair value of the 3,968,254 common shares issued as part of the acquisition consideration was determined using the intraday volume weighted average price of the Company’s common shares on the acquisition date. The terms of the earn out require the Company to pay the former owner of HCFM up to $100,000, $200,000 and $200,000 on the first, second and third anniversary, respectively, based on achievement by NCFM of revenue of at least $3,100,000 (50% weighting) and EBITDA of at least $550,000 (50% weighting) in the year preceding each anniversary date. The fair value of the contingent acquisition consideration related to the future earn-out payments was calculated using a probability-weighted discounted cash flow projection. The fair value of the contingent acquisition consideration is remeasured at the end of each reporting period and changes are included in the statement of operations under the caption “Change in fair value of derivative financial instruments and contingent acquisition consideration.” During the three months ended March 31, 2020 and 2019, the Company recognized losses on the change in the fair value of contingent acquisition consideration of $6,621 and $-0-, respectively.

 

14

 

 

HEALTHLYNKED CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2020

(UNAUDITED)

 

NOTE 4 – ACQUISITION (CONTINUED)

 

The following table summarizes the estimated fair values of the assets acquired at the acquisition date. There were no liabilities assumed in the acquisition of HCFM.

 

Cash   $ 35,000  
Hyperbaric Chambers     452,289  
Medical Equipment     29,940  
Computer Equipment/Software     19,739  
Office Furniture & Equipment     23,052  
Inventory     72,114  
Leasehold Improvements     25,000  
Website     41,000  
Patient Management Platform Database     1,101,538  
         
Fair Value of Identifiable Assets Acquired   $

1,799,672

 

 

The fair value of the website of $41,000 was determined based upon the cost to reconstruct and put into use applying current market rates. The fair value of the Patient Management Platform Database of $1,101,538 was estimated by applying the income approach. Under the income approach, the expected future cash flows generated by the Patient Management Platform Database are estimated and discounted to their net present value at an appropriate risk-adjusted rate of return. Significant factors considered in the calculation of the rate of return are the weighted average cost of capital and return on assets, as well as the risks inherent in the business. Cash flows were estimated based on EBITDA using forecasted revenue and costs. The measure is based on significant inputs that are not observable in the market (i.e. Level 3 inputs). Key assumptions include (i) a capitalization rate of 11.75% (ii) sustainable growth of 5% and (iii) a benefit stream using EBITDA cash flow. The Company finalized the purchase price allocation in March 2020 and determined that no goodwill was included in the acquisition.

 

The following represents the pro forma consolidated income statement as if HCFM had been included in the consolidated results of the Company for the entire three-month periods ending March 31, 2020 and 2019:

 

    Three Months Ended
March 31,
 
    2020     2019  
             
Revenue   $ 1,336,940     $ 1,187,170  
Net loss   $ (580,216 )   $ (1,035,152 )

 

These amounts have been calculated after applying the Company’s accounting policies and adjusting the results of HCFM to reflect the additional depreciation and amortization that would have been charged assuming the fair value adjustments to property, plant and equipment and intangible assets had been applied on January 1, 2020 and 2019, respectively.

 

NOTE 5 – DEFERRED OFFERING COSTS AND PREPAID EXPENSES

 

On March 22, 2017, the Company the Company granted to the investor in the Investment Agreement warrants to purchase 4,000,000 shares at $0.25 per share, 2,000,000 shares at $0.50 per share and 1,000,000 shares at $1.00 per share. On June 7, 2017, the Company also granted warrants to purchase 200,000 shares at $0.25 per share, 100,000 shares at $0.50 per share and 50,000 shares at $1.00 per share to an advisor as a fee in connection with the Investment Agreement. The aggregate fair value of these warrants totaling $153,625 was recorded as a deferred offering cost and is being amortized over the period during which the Company can access the financing, which began on May 15, 2017 and ends on May 15, 2020. During the three months ended March 31, 2020 and 2019, the Company recognized $12,802 and $12,802, respectively, in general and administrative expense related to the cost of the warrants.

 

On December 6, 2018, the Company granted three-year warrants to purchase 240,000 shares at an exercise price of $0.20 per share to two advisors for services to be provided over a three-month period. The fair value of the warrants of $35,462 was amortized over a three-month service period. During the three months ended March 31, 2020 and 2019, the Company recognized $-0- and $25,611, respectively, to general and administrative expense related to the warrants.

 

15

 

 

HEALTHLYNKED CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2020

(UNAUDITED)

 

NOTE 6 – PROPERTY, PLANT, AND EQUIPMENT

 

Property, plant and equipment at March 31, 2020 and December 31, 2019 are as follows:

 

    March 31,     December 31,  
    2020     2019  
             
Capital lease equipment   $ 251,752     $ 251,752  
Medical equipment     482,229       482,229  
Telephone equipment     12,308       12,308  
Furniture, transport and office equipment     516,815       516,815  
                 
Total property, plant and equipment     1,263,104       1,263,104  
Less: accumulated depreciation     (772,057 )     (749,316 )
                 
Property, plant and equipment, net   $ 491,047     $ 513,788  

 

Depreciation expense during the three months ended March 31, 2020 and 2019 was $22,742 and $1,655, respectively.

 

NOTE 7 – INTANGIBLE ASSETS

 

Intangible assets at March 31, 2020 and December 31, 2019 are as follows:

 

    March 31,     December 31,  
    2020     2019  
             
Medical database   $ 1,101,538     $ 1,230,000  
Website     41,000       41,000  
Goodwill     ---       71,866  
                 
Total intangible assets     1,142,538       1,342,866  
Less: accumulated amortization     (7,953 )     (5,908 )
                 
Intangible assets, net   $ 1,134,585     $ 1,336,958  

 

Goodwill and intangible assets arose from the acquisition of NCFM in April 2019. The medical database is assumed to have an indefinite life and is not amortized. The website is being amortized on a straight-line basis over its estimated useful life of five years. Goodwill represents the excess of consideration transferred over the fair value of the net identifiable assets acquired related to the acquisition of NCFM. The Company finalized the purchase price allocation in March 2020 and determined that no goodwill was included in the acquisition.

 

Amortization expense in the three months ended March 31, 2020 and 2019 was $2,044 and $-0-, respectively. No impairment charges were recognized related to goodwill and intangible assets in the three months ended March 31, 2020 or 2019.

 

NOTE 8 – LEASES

 

The Company has two operating leases for office space and equipment that expire in July 2020, an operating lease for office space that expires in May 2022, and an operating lease for office space that expires in March 2023. The Company’s weighted-average remaining lease term relating to its operating leases is 1.7 years, with a weighted-average discount rate of 21.48%.

 

16

 

 

HEALTHLYNKED CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2020

(UNAUDITED)

 

NOTE 8 – LEASES (CONTINUED)

 

The Company is also lessee in a capital equipment finance lease for medical equipment entered into in March 2015 that expired in March 2020. The Company’s weighted-average remaining lease term relating to its financing lease is -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 was 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, 2020:

 

    As of March 31, 2020     As of December 31, 2019  
    Operating     Financing     Total     Operating     Financing     Total  
    Leases     Leases     Leases     Leases     Leases     Leases  
Lease assets   $ 240,215     $ -       $ 240,215     $ 273,196     $ 4,482     $ 277,678  
                                                 
Lease liabilities                                                
Lease liabilities (short term)   $ 145,869     $ -       $ 145,869     $ 197,041     $ 4,482     $ 201,523  
Lease liabilities (long term)     103,225       -         103,225       80,510       -         80,510  
Total lease liabilities   $ 249,094     $ -       $ 249,094     $ 277,551     $ 4,482     $ 282,033  

  

The Company incurred lease expense of $95,269 ($90,682 related to operating leases and $4,587 related to financing leases) and $73,415 ($68,828 related to operating leases and $4,587 related to financing leases) in the three months ended March 31, 2020 and 2019, respectively.

 

Maturities of operating and capital lease liabilities were as follows as of March 31, 2020:

 

    Operating     Capital     Total  
    Leases     Leases     Commitments  
2020   $ 164,809     $ ---     $ 164,809  
2021     98,531       ---       98,531  
2022     52,662       ---       52,662  
2023     6,099       ---       6,099  
Total lease payments     322,101       ---       322,101  
Less interest     (73,007 )     ---       (73,007 )
Present value of lease liabilities   $ 249,094     $ ---     $ 249,094  

 

NOTE 9 – NOTES PAYABLE AND OTHER AMOUNTS DUE TO RELATED PARTY

 

Amounts due to related parties as of March 31, 2020 and December 31, 2019 were comprised of the following:

 

    March 31,     December 31,  
    2020     2019  
Due to related party:            
Deferred compensation, Dr. Michael Dent   $ 300,600     $ 300,600  
Accrued interest payable to Dr. Michael Dent     208,963       192,857  
Total due to related party     509,563       493,457  
                 
Notes payable to related party:                
Notes payable to Dr. Michael Dent and family (all current)   $ 817,037     $ 743,955  

 

17

 

 

HEALTHLYNKED CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2020

(UNAUDITED)

 

NOTE 9 – NOTES PAYABLE AND OTHER AMOUNTS DUE TO RELATED PARTY (CONTINUED)

 

Notes Payable to Dr. Michael Dent

 

Our founder and CEO, Dr. Michael Dent, has made loans to the Company from time to time in the form of unsecured promissory notes payable. The carrying values of notes payable to Dr. Dent as of March 31, 2020 and December 31, 2019 were as follows:

 

        Interest     March 31,     December 31,  
Inception Date   Maturity Date   Rate     2020     2019  
January 12, 2017   December 31, 2020     10 %   $ 37,624 *   $ 38,378 *
January 18, 2017   December 31, 2020     10 %     21,474 *     21,904 *
January 24, 2017   December 31, 2020     10 %     53,623 *     54,696 *
February 9, 2017   December 31, 2020     10 %     32,073 *     32,715 *
April 20, 2017   December 31, 2020     10 %     10,543 *     10,754 *
June 15, 2017   December 31, 2020     10 %     33,881 *     34,560 *
August 17, 2017   December 31, 2020     10 %     20,585 *     20,997 *
August 24, 2017   December 31, 2020     10 %     38,541 *     39,312 *
September 7, 2017   December 31, 2020     10 %     35,868 *     36,586 *
September 21, 2017   December 31, 2020     10 %     27,079 *     27,621 *
September 29, 2017   December 31, 2020     10 %     12,242 *     12,487 *
December 21, 2017   December 31, 2020     10 %     14,037 *     14,318 *
January 8, 2018   December 31, 2020     10 %     74,915 *     76,415 *
January 11, 2018   December 31, 2020     10 %     8,984 *     9,164 *
January 26, 2018   December 31, 2020     10 %     17,364 *     17,712 *
January 3, 2014   December 31, 2020     10 %     290,519 *     296,336 *
January 7, 2020   July 3, 2020     10 %     87,685       ---  
                             
                $ 817,037     $ 743,955  

 

* Denotes that note payable is reflected at fair value

 

As denoted in the table above, certain of our notes payable to Dr. Dent are carried at fair value and revalued at each period end, with changes to fair value recorded to the statement of operations under “Change in Fair Value of Debt.” The changes in fair value during the three months ended March 31, 2020 and 2019 was $(21,362) and $(14,603), respectively and the fair value of these notes as of March 31, 2020 and December 31, 2019 was $729,352 and $743,955, respectively.

 

On January 7, 2020, the Company entered into a Merchant Cash Advance Factoring Agreement (“MCA”) with a trust controlled by Dr. Dent, pursuant to which the Company received an advance of $150,000 before closing fees (the “2020 MCA”). The Company is required to repay the 2020 MCA, which acts like an ordinary note payable, at the rate of $7,212 per week until the balance of $187,500 is repaid, which was scheduled for July 2020. At inception, the Company recognized a note payable in the amount of $187,500 and a discount against the note payable of $38,500. The discount is being amortized over the life of the instrument. During the three months ended March 31, 2020 and 2019, the Company made installment payments of $79,327 and $-0-, respectively. During the three months ended March 31, 2020 and 2019, the Company recognized amortization of the discount in the amount of $18,012 and $-0-, respectively. As of March 31, 2020 and December 31, 2019, the carrying value of the MCA was $87,685 and $-0-, respectively.

 

Interest accrued on the above notes payable as of March 31, 2020 and December 31, 2019 was $208,963 and $192,888, respectively. Interest expense on the above unsecured promissory notes for the three months ended March 31, 2020 and 2019 was $34,117 and $16,237, respectively.

 

18

 

 

HEALTHLYNKED CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2020

(UNAUDITED)

 

NOTE 10 – CONVERTIBLE NOTES PAYABLE

 

Convertible notes payable as of March 31, 2020 and December 31, 2019 were comprised of the following:

 

    March 31,     December 31,  
    2020     2019  
             
$550k Note - July 2016   $ 537,253 *   $ 548,010  
$50k Note - July 2016     55,750 *     56,866  
$111k Note - May 2017     98,811 *     118,606  
$357.5k Note - April 2019     322,276 *     328,728  
$154k Note - June 2019     ---       50,000  
$136k Notes - July 2019     ---       135,850  
$78k Note III - July 2019     ---       78,000  
$230k Note - July 2019     ---       230,000  
$108.9k Note - August 2019     33,947       108,947  
$142.5k Note - October 2019     142,500       142,500  
$103k Note V - October 2019     103,000       103,000  
$108.9k Note II - October 2019     108,947       108,947  
$128.5k Note - October 2019     128,500       128,500  
$103k Note VI - November 2019     103,000       103,000  
$78.8k Note II - December 2019     78,750       78,750  
$131.3k Note - January 2020     131,250       ---  
$78k Note IV - January 2020     78,000       ---  
$157.5k Note - March 2020     157,500       ---  
      2,079,484       2,319,704  
Less: unamortized discount     (427,567 )     (777,668 )
Convertible notes payable, net of original issue discount and debt discount   $ 1,651,917     $ 1,542,036  

 

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

 

19

 

 

HEALTHLYNKED CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2020

(UNAUDITED)

 

NOTE 10 – CONVERTIBLE NOTES PAYABLE (CONTINUED)

 

Interest expense and amortization of debt discount recognized on each convertible note outstanding during the three months ended March 31, 2020 and 2019 were as follows:

 

    Interest Expense     Amortization of Debt Discount  
    Three Months Ended March 31,     Three Months Ended March 31,  
    2020     2019     2020     2019  
                         
$550k Note - July 2016   $ 8,225     $ 8,136     $ ---     $ ---  
$50k Note - July 2016     1,247       1,233       ---       ---  
$111k Note - May 2017     4,694       4,078       ---       ---  
$171.5k Note - October 2017     ---       1,785       ---       ---  
$103k Note I - October 2018     ---       2,540       ---       32,526  
$103k Note II - November 2018     ---       2,540       ---       31,856  
$153k Note - November 2018     ---       3,773       ---       50,440  
$103k Note III - December 2018     ---       2,540       ---       25,397  
$78k Note I - January 2019     ---       1,624       ---       21,714  
$78k Note II - January 2019     ---       1,410       ---       17,451  
$357.5k Note - April 2019     829       ---       ---       ---  
$154k Note - June 2019     46       ---       1,093       ---  
$67.9k Note - July 2019     707       ---       7,252       ---  
$67.9k Note II - July 2019     177       ---       2,813       ---  
$78k Note III - July 2019     492       ---       6,208       ---  
$230k Note - July 2019     3,041       ---       58,526       ---  
$108.9k Note - August 2019     2,545       ---       20,960       ---  
$142.5k Note - October 2019     5,739       ---       35,430       ---  
$103k Note V - October 2019     2,568       ---       28,213       ---  
$108.9k Note II - October 2019     2,716       ---       21,730       ---  
$128.5k Note - October 2019     3,204       ---       31,949       ---  
$103k Note VI - November 2019     2,568       ---       28,720       ---  
$78.8k Note II - December 2019     1,963       ---       15,917       ---  
$131.3k Note - January 2020     2,805       ---       6,945       ---  
$78k Note IV - January 2020     1,603       ---       6,030       ---  
$157.5k Note - March 2020     906       ---       2,365       ---  
                                 
    $ 46,075     $ 29,659     $ 274,151     $ 179,384  

 

20

 

 

HEALTHLYNKED CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2020

(UNAUDITED)

 

NOTE 10 – CONVERTIBLE NOTES PAYABLE (CONTINUED)

 

Unamortized debt discount on outstanding convertible notes payable as of March 31, 2020 and December 31, 2019 were comprised of the following:

 

    Unamortized Discount as of  
    March 31,     December 31,  
    2020     2019  
             
$154k Note - June 2019   $ ---     $ 21,175  
$67.9k Note - July 2019     ---       20,497  
$67.9k Note II - July 2019     ---       20,497  
$78k Note III - July 2019     ---       32,657  
$230k Note - July 2019     ---       125,684  
$108.9k Note - August 2019     11,460       59,392  
$142.5k Note - October 2019     71,639       107,070  
$103k Note V - October 2019     42,474       70,686  
$108.9k Note II - October 2019     50,862       72,592  
$128.5k Note - October 2019     74,783       106,732  
$103k Note VI - November 2019     53,021       81,740  
$78.8k Note II - December 2019     43,028       58,946  
$131.3k Note - January 2020     25,643       ---  
$78k Note IV - January 2020     15,920       ---  
$157.5k Note - March 2020     38,737       ---  
                 
    $ 427,567     $ 777,668  

 

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, 2020 and 2019 and the fair value as of the three months then ended 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,  
    2020     2019     2020     2019  
                         
$550k Note - July 2016   $ (10,757 )   $ 16,838     $ 537,253     $ 548,010  
$50k Note - July 2016     (1,116 )     1,707       55,750       56,866  
$111k Note - May 2017     (3,036 )     3,544       98,811       118,606  
$171.5k Note - October 2017     ---       1,781       ---       ---  
$357.5k Note - April 2019     (6,453 )     ---       322,275       328,727  
                                 
    $ (21,362 )   $ 23,870     $ 1,014,089     $ 1,052,209  

 

Convertible Note 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, including accrued interest, was prepaid in July 2019 for a one-time cash payment of $102,321.

 

Convertible Note Payable ($78,000) – January 2019

 

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, including accrued interest, was prepaid in July 2019 for a one-time cash payment of $102,255.

 

21

 

 

HEALTHLYNKED CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2020

(UNAUDITED)

 

NOTE 10 – CONVERTIBLE NOTES PAYABLE (CONTINUED)

 

Convertible Note Payable ($111,000) – May 2017

 

On May 22, 2017, the Company entered into a 10% fixed convertible secured promissory note with an investor with a face value of $111,000. The $111k Note is convertible into shares of the Company’s common stock at the discretion of the note holder at a fixed price of $0.15 per share, or 740,000 of the Company’s common shares, and is secured by all of the Company’s assets. The Company received $100,000 net proceeds from the note after an $11,000 original issue discount. At inception, the investors were also granted a five-year warrant to purchase 133,333 shares of the Company’s common stock at an exercise price of $0.75 per share. The $111k Note matures on December 31, 2020. On February 6, 2020, the holder of the $111k Note converted $30,000 principal on the note into 448,029 shares of Company common stock. In connection with the conversion, the Company recognized a loss on debt extinguishment of $25,394, representing the excess of the fair value of the shares issued at conversion over the carrying value of the portion of the host instrument and the bifurcated conversion feature converted.

 

Convertible Note Payable ($154,000) – June 2019

 

On June 3, 2019, the Company issued a $154,000 convertible note (the “$154k Note”). During the three months ended March 31, 2020, the holder converted the remaining unpaid principal balance of $50,000 and accrued interest of $8,572 into 968,390 shares of Company common stock. In connection with the conversion, the Company recognized a loss on debt extinguishment of $125,865 in the three months ended March 31, 2020, representing the excess of the fair value of the shares issued at conversion over the carrying value of the portion of the host instrument and the bifurcated conversion feature converted.

 

Convertible Note Payable ($67,925) – July 2019

 

On July 11, 2019, the Company issued a $67,925 convertible note (the “$67.9k Note I”). During the three months ended March 31, 2020, the holder converted the full principal of $67,925 and accrued interest of $3,926 into 885,847 shares of Company common stock. In connection with the conversion, the Company recognized a loss on debt extinguishment of $55,117 in the three months ended March 31, 2020, representing the excess of the fair value of the shares issued at conversion over the carrying value of the portion of the host instrument and the bifurcated conversion feature converted.

 

Convertible Note Payable ($67,925) – July 2019

 

On July 11, 2019, the Company issued a second $67,925 convertible note (the “$67.9k Note II”). During the three months ended March 31, 2020, the Company prepaid the balance on the $67.9k Note II, including accrued interest, for a one-time cash payment of $89,152. In connection with the repayment, the Company recognized a loss on debt extinguishment of $26,890 in the three months ended March 31, 2020, equal to the excess of the payment amount over the carrying value of the note, derivative embedded conversion feature and accrued interest.

 

Convertible Note Payable ($78,000) – July 2019

 

On July 16, 2019, the Company issued a $78,000 convertible note (the “$78k Note III”). During the three months ended March 31, 2020, the Company prepaid the balance on the $78k Note III, including accrued interest, for a one-time cash payment of $102,388. In connection with the repayment, the Company recognized a loss on debt extinguishment of $31,432 in the three months ended March 31, 2020, equal to the excess of the payment amount over the carrying value of the note, derivative embedded conversion feature and accrued interest.

 

Convertible Note Payable ($230,000) – July 2019

 

On July 18, 2019, the Company issued a convertible note with a face value of $230,000 (the “$230k Note”). During the three months ended March 31, 2020, the holder converted $80,000 of principal and $4,373 of accrued interest on the note into 1,236,668 shares of Company common stock and the Company repaid principal of $150,000 and accrued interest of $9,128 for cash payments totaling $181,554. The note was retired upon these conversions and repayments. In connection with the conversions and repayments, the Company recognized a loss on debt extinguishment of $112,498 in the three months ended March 31, 2020 equal to the excess of the cash payment amount and the fair value of the shares issued at conversion over the carrying value of the note, derivative embedded conversion feature and accrued interest.

 

22

 

 

HEALTHLYNKED CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2020

(UNAUDITED)

 

NOTE 10 – CONVERTIBLE NOTES PAYABLE (CONTINUED)

 

Convertible Note Payable ($108,947) – August 2019

 

On August 26, 2019, the Company issued a convertible note with a face value of $108,947 (the “$108.9k Note”). During the three months ended March 31, 2020, the holder converted principal of $75,000 and accrued interest of $6,335 into 1,779,322 shares of Company common stock. In connection with the conversion, the Company recognized a loss on debt extinguishment of $90,732 in the three months ended March 31, 2020, representing the excess of the fair value of the shares issued at conversion over the carrying value of the portion of the host instrument and the bifurcated conversion feature converted.

 

Convertible Note Payable ($131,250) – January 2020

 

On January 13, 2020, the Company issued a $131,250 convertible note (the “$131.3k Note”). The $131.3k Note included $8,750 fees and discounts for net proceeds of $122,500. The $131.3k Note has an interest rate of 10% and a default interest rate of 22% and matures on January 13, 2021. The $131.3k Note may be converted into common stock of the Company by the holder at any time after the issuance date, subject to a 4.99% beneficial ownership limitation, at a conversion price per share equal to a 25% discount to the lowest bid or trading price of the Company’s common stock during the thirteen (13) trading days prior to the conversion date. Upon an event of default caused by the Company’s failure to deliver shares upon a conversion pursuant to the terms of the note, 300% of the outstanding principal and any interest due amount shall be immediately due. Upon an event of default caused by the Company’s breach of any other events of default specified in the note, 150% of the outstanding principal and any interest due amount shall be immediately due.

 

The fair value of the embedded conversion feature (“ECF”) was calculated using a binomial lattice pricing model at $23,838. The ECF qualifies for derivative accounting and bifurcation under ASC 815, “Derivatives and Hedging.” The final allocation of the proceeds at inception was as follows:

 

Embedded conversion feature   $ 23,838  
Original issue discount and fees     8,750  
Convertible note     98,662  
         
Gross proceeds   $ 131,250  

 

Convertible Note Payable ($78,000) – January 2020

 

On January 16, 2020, the Company issued a $78,000 convertible note (the “$78k Note IV”). The $78k Note IV included $3,000 fees for net proceeds of $75,000. The $78k Note IV has an interest rate of 10% and a default interest rate of 22% and matures on October 15, 2020. The $78k Note IV may be converted into common stock of the Company by the holder at any time after the 6-month anniversary of the issuance date, subject to a 4.99% beneficial ownership limitation, at a conversion price per share equal to a 39% discount to the lowest bid or trading price of the Company’s common stock during the fifteen (15) trading days prior to the conversion date. Upon an event of default caused by the Company’s failure to deliver shares upon a conversion pursuant to the terms of the note, 300% of the outstanding principal and any interest due amount shall be immediately due. Upon an event of default caused by the Company’s breach of any other events of default specified in the note, 150% of the outstanding principal and any interest due amount shall be immediately due.

 

The fair value of the ECF was calculated using a binomial lattice pricing model at $18,950. The ECF qualifies for derivative accounting and bifurcation under ASC 815, “Derivatives and Hedging.” The final allocation of the proceeds at inception was as follows:

 

Embedded conversion feature   $ 18,950  
Original issue discount and fees     3,000  
Convertible note     56,050  
         
Gross proceeds   $ 78,000  

 

23

 

 

HEALTHLYNKED CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2020

(UNAUDITED)

 

NOTE 10 – CONVERTIBLE NOTES PAYABLE (CONTINUED)

 

Convertible Note Payable ($157,500) – March 2020

 

On March 10, 2020, the Company issued a $157,500 convertible note (the “$157.5k Note”). The $157.5k Note included $11,000 fees for net proceeds of $146,500. The $157.5k Note has an interest rate of 10% and a default interest rate of 22% and matures on March 10, 2021. The $157.5k Note may be converted into common stock of the Company by the holder at any time after the issuance date, subject to a 4.99% beneficial ownership limitation, at a conversion price per share equal to a 25% discount to the lowest bid or trading price of the Company’s common stock during the thirteen (13) trading days prior to the conversion date. Upon an event of default caused by the Company’s failure to deliver shares upon a conversion pursuant to the terms of the note, 300% of the outstanding principal and any interest due amount shall be immediately due. Upon an event of default caused by the Company’s breach of any other events of default specified in the note, 150% of the outstanding principal and any interest due amount shall be immediately due.

 

The fair value of the ECF was calculated using a binomial lattice pricing model at $30,102. The ECF qualifies for derivative accounting and bifurcation under ASC 815, “Derivatives and Hedging.” The final allocation of the proceeds at inception was as follows:

 

Embedded conversion feature   $ 30,102  
Original issue discount and fees     11,000  
Convertible note     116,398  
         
Gross proceeds   $ 157,500  

 

NOTE 11 – DERIVATIVE FINANCIAL INSTRUMENTS

 

Derivative financial instruments are comprised of (i) the fair value of ECFs embedded in convertible promissory notes for which the conversion rate is not fixed, but instead is adjusted based on a discount to the market price of the Company’s common stock, and (ii) a conditional cash redemption feature included in certain outstanding warrant agreements. The fair market value of the ECF derivative liabilities was calculated at inception of each convertible promissory note for which the conversion rate is not fixed and allocated to the respective convertible notes, with any excess recorded as a charge to “Financing cost.” The fair market value of the warrant feature derivative liabilities, which is only exercisable upon a change of control of the Company, was calculated as of the time that the beneficial ownership of the Company’s management and board fell below 50% and therefore a change of control a transaction, including a hostile takeover, was no longer within the Company’s control. Derivative financial instruments are revalued at the end of each period, with the change in value recorded to “Change in fair value of on derivative financial instruments.”

 

Derivative financial instruments and changes thereto recorded in the three months ended March 31, 2020 and 2019 include the following:

 

    Three Months Ended
March 31,
 
    2020     2019  
             
Balance, beginning of period   $ 991,288     $ 800,440  
Inception of derivative financial instruments     72,890       179,230  
Change in fair value of derivative financial instruments     (740,355 )     (191,633 )
Conversion or extinguishment of derivative financial instruments     (103,885 )     (207,182 )
                 
Balance, end of period   $ 219,938     $ 580,855  

 

24

 

 

HEALTHLYNKED CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2020

(UNAUDITED)

 

NOTE 11 – DERIVATIVE FINANCIAL INSTRUMENTS (CONTINUED)

 

Fair market value of the derivative financial instruments was measured using the following assumptions:

 

    Three Months Ended March 31,
    2020   2019
         
Pricing model utilized   Binomial Lattice   Black/Scholes
Risk free rate range   0.05% to 1.61%   2.40% to 2.73%
Expected life range (in years)   0.14 to 1.00   0.33 to 1.00
Volatility range   117.48% to 125.32%   202.73% to 293.97%
Dividend yield   0.00%   0.00%

 

In addition, specific assumptions regarding investor exercise behavior were used in 2020, including probability assumptions related to estimated exercise behavior. The entire amount of derivative instrument liabilities is classified as current due to the fact that settlement of the derivative instruments could be required within twelve months of the balance sheet date.

 

During the three months ended March 31, 2020 and 2019, five and one convertible notes, respectively, were converted in part or in full into common shares by the holders, and three and zero convertible notes, respectively, were repaid in part or in full in cash. Accordingly, the derivative financial instruments associated with the ECFs of these convertible notes were written off in connection with the extinguishment of each convertible note.

 

NOTE 12 – SHAREHOLDERS’ DEFICIT

 

Private Placements

 

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, 2020, the Company sold 2,412,087 shares of common stock in seven separate private placement transactions and received $315,000 in proceeds from the sales. The shares were issued at a share price of $0.13 per share with respect to 2,269,230 shares and $0.14 per share with respect to 142,857 shares. In connection with the stock sales, the Company also issued 1,134,616 five-year warrants to purchase shares of common stock at an exercise price of $0.23 and 71,429 five-year warrants to purchase shares of common stock at an exercise price of $0.24 per share.

 

Investment Agreement Draws

 

During three months ended March 31, 2020 and 2019, the Company issued 1,331,432 and 2,128,644 common shares, respectively, pursuant to draws made by the Company under the Investment Agreement and received an aggregate of $122,433 and $493,226, respectively, in net proceeds from the draws.

 

Common Stock Issuable

 

As of March 31, 2020 and December 31, 2019, the Company was obligated to issue the following shares:

 

    March 31, 2020     December 31, 2019  
    Amount     Shares     Amount     Shares  
                         
Shares issuable pursuant to consulting agreements   $ 123,589       740,439     $ 93,377       493,142  
Shares issuable to employees and directors     30,000       266,264       7,161       75,000  
Shares issuable pursuant to stock subscriptions received     ---       ---       59,000       479,762  
Shares issuable pursuant to convertible note conversion notices     51,652       645,644       ---       ---  
    $ 205,241       1,652,347     $ 159,538       1,047,904  

25

 

 

HEALTHLYNKED CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2020

(UNAUDITED)

 

NOTE 12 – SHAREHOLDERS’ DEFICIT (CONTINUED)

 

During December 2019, the Company completed stock subscription agreements totaling $59,000 for the sale of 479,762 shares of common stock. The funds were received and shares were issued in January and February 2020.

 

Stock Warrants

 

Transactions involving our stock warrants during the three months ended March 31, 2020 and 2019 are summarized as follows:

 

    2020     2019  
          Weighted           Weighted  
          Average           Average  
          Exercise           Exercise  
    Number     Price     Number     Price  
Outstanding at beginning of the period     47,056,293     $ 0.21       46,161,463     $ 0.18  
Granted during the period     1,277,474     $ 0.23       996,667     $ 0.42  
Exercised during the period     ---     $ ---       (2,099,256 )   $ (0.00 )
Terminated during the period     ---     $ ---       ---     $ ---  
Outstanding at end of the period     48,333,767     $ 0.21       45,058,874     $ 0.19  
                                 
Exercisable at end of the period     48,333,767     $ 0.21       45,058,874     $ 0.19  
                                 
Weighted average remaining life     3.8 years       3.5 years  

 

The following table summarizes information about the Company’s stock warrants outstanding as of March 31, 2020:

 

Warrants Outstanding   Warrants Exercisable  
          Weighted-                    
          Average     Weighted-           Weighted-  
          Remaining     Average           Average  
Exercise   Number     Contractual     Exercise     Number     Exercise  
Prices   Outstanding     Life (years)     Price     Exercisable     Price  
$ 0.0001 to 0.09     15,287,011       4.7     $ 0.07       15,287,011     $ 0.07  
$ 0.10 to 0.24     19,012,796       3.3     $ 0.18       19,012,796     $ 0.18  
$ 0.25 to 0.49     10,093,960       4.2     $ 0.29       10,093,960     $ 0.29  
$ 0.50 to 1.00     3,940,000       1.9     $ 0.28       3,940,000     $ 0.28  
$ 0.05 to 1.00     48,333,767       3.8     $ 0.18       48,333,767     $ 0.18  

 

During the three months ended March 31, 2020 and 2019, the Company issued 1,277,474 and 996.667 warrants, respectively, the aggregate grant date fair value of which was $100,547 and $294,707, respectively. The fair value of the warrant was calculated using the following assumptions:

 

    Three Months Ended March 31,
    2020   2019
         
Pricing model utilized   Binomial Lattice   Black/Scholes
Risk free rate range   1.38% to 1.59%   2.44% to 2.52%
Expected life range (in years)   5.00 years   3.00 to 5.00
Volatility range   119.69% to 124.02%   212.96% to 216.35%
Dividend yield   0.00%   0.00%

26

 

 

HEALTHLYNKED CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2020

(UNAUDITED)

 

NOTE 12 – SHAREHOLDERS’ DEFICIT (CONTINUED)

 

In addition, specific assumptions regarding investor exercise behavior were used in 2020, including probability assumptions related to estimated exercise behavior.

 

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, 2020 and 2019:

 

    2020     2019  
Outstanding at beginning of the period     1,874,063       1,738,750  
Granted during the period     207,500       61,563  
Terminated during the period     (62,500 )     ---  
Outstanding at end of the period     2,019,063       1,800,313  
                 
Shares vested at period-end     1,700,313       1,336,563  
Weighted average grant date fair value of shares granted during the period   $ 0.10     $ 0.26  
Aggregate grant date fair value of shares granted during the period   $ 17,000     $ 12,805  
Shares available for grant pursuant to EIP at period-end     10,275,368       10,154,118  

 

Total stock-based compensation recognized for grants under the EIP was $17,696 and $32,779 during the three months ended March 31, 2020 and 2019, respectively. Total unrecognized stock compensation related to these grants was $53,382 as of March 31, 2020.

 

A summary of the status of nonvested shares issued pursuant to the EIP as of and for the three months ended March 31, 2020 and 2019 is presented below:

 

    2020     2019  
          Weighted           Weighted  
          Average           Average  
          Grant Date           Grant Date  
    Shares     Fair Value     Shares     Fair Value  
Nonvested at beginning of period     332,500     $ 0.17       540,000     $ 0.16  
Granted     207,500     $ 0.10       ---     $ ---  
Vested     (158,750 )   $ 0.08       (76,250 )   $ 0.04  
Forfeited     (62,500 )   $ 0.07       ---   $ ---  
Nonvested at end of period     318,750     $ 0.19       463,750     $ 0.18  

 

27

 

 

HEALTHLYNKED CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2020

(UNAUDITED)

 

NOTE 12 – 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, 2020 and 2019:

 

    2020     2019  
          Weighted           Weighted  
          Average           Average  
          Exercise           Exercise  
    Number     Price     Number     Price  
Outstanding at beginning of the period     3,269,250     $ 0.21       3,707,996     $ 0.18  
Granted during the period     20,000     $ 0.11       591,250     $ 0.26  
Exercised during the period     ---     $ ---       (154,166 )   $ 0.20  
Forfeited during the period     (80,000 )   $ 0.26       (595,830 )   $ 0.20  
Outstanding at end of the period     3,209,250     $ 0.20       3,549,250     $ 0.19  
                                 
Options exercisable at period-end     1,926,125               1,261,000          
Weighted average remaining life (in years)     7.4               8.2          
Weighted average grant date fair value of options granted during the period   $ ---             $ 0.21          
Options available for grant at period-end     10,275,368               10,154,118          

 

The following table summarizes information about the Company’s stock options outstanding as of March 31, 2020:

 

Options Outstanding   Options Exercisable  
          Weighted-                    
          Average     Weighted-           Weighted-  
          Remaining     Average           Average  
Exercise   Number     Contractual     Exercise     Number     Exercise  
Prices   Outstanding     Life (years)     Price     Exercisable     Price  
$ --- to 0.10     1,283,000       5.7     $ 0.08       1,270,500       0.08  
$ 0.11 to 0.31     1,926,250       8.6     $ 0.28       655,625       0.29  
$ 0.08 to 0.31     3,209,250       7.4     $ 0.20       1,926,125     $ 0.15  

 

Total stock-based compensation recognized related to option grants was $20,880 and $28,456 during the three months ended March 31, 2020 and 2019, respectively.

 

A summary of the status of nonvested options issued pursuant to the EIP as of and for the three months ended March 31, 2020 and 2019 is presented below:

 

    2020     2019  
          Weighted           Weighted  
          Average           Average  
          Grant Date           Grant Date  
    Shares     Fair Value     Shares     Fair Value  
Nonvested at beginning of period     1,636,250     $ 0.22       2,332,413     $ 0.13  
Granted     20,000     $ 0.08       591,250     $ 0.21  
Vested     (293,125 )   $ 0.20       (39,583 )   $ 0.03  
Forfeited     (80,000 )   $ 0.21       (595,830 )   $ 0.02  
Nonvested at end of period     1,283,125     $ 0.22       2,288,250     $ 0.18  

 

28

 

 

HEALTHLYNKED CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2020

(UNAUDITED)

 

NOTE 13 – 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 lease liabilities were as follows as of March 31, 2020:

 

    Operating     Capital     Total  
    Leases     Leases     Commitments  
2020   $ 164,809     $ ---     $ 164,809  
2021     98,531       ---       98,531  
2022     52,662       ---       52,662  
2023     6,099       ---       6,099  
Total lease payments     322,101       ---       322,101  
Less interest     (73,007 )     ---       (73,007 )
Present value of lease liabilities   $ 249,094     $ ---     $ 249,094  

 

Employment/Consulting Agreements

 

The Company has employment agreements with certain of its physicians, nurse practitioners and physical therapists in the Health Services division. The agreements generally call for a fixed salary at the beginning of the contract with a transaction to performance-based pay later in the contract.

 

On July 1, 2016, the Company entered into an employment agreement with Dr. Michael Dent, Chief Executive Officer and a member of the Board of Directors. Dr. Dent’s employment agreement continues until terminated by Dr. Dent or the Company. If Dr. Dent’s employment is terminated by the Company (unless such termination is “For Cause” as defined in his employment agreement), then upon signing a general waiver and release, Dr. Dent will be entitled to severance in an amount equal to 12 months of his then-current annual base salary, as well as the pro-rata portion of any bonus that would be due and payable to him. In the event that Dr. Dent terminates the employment agreement, he shall be entitled to any accrued but unpaid salary and other benefits up to and including the date of termination, and the pro-rata portion of any unvested time-based options up until the date of termination.

 

On July 1, 2016, the Company entered into an agreement with Mr. George O’Leary, the Company’s Chief Financial Officer and a member of the Board of Directors, extending his prior agreement with the Company. Mr. O’Leary’s employment agreement continues until terminated by Mr. O’Leary or the Company. If Mr. O’Leary employment is terminated by the Company (unless such termination is “For Cause” as defined in his employment agreement), then upon signing a general waiver and release, Mr. O’Leary will be entitled to receive his base salary and the Company shall maintain his employee benefits for a period of twelve (12) months beginning on the date of termination. In the event that Mr. O’Leary terminates the agreement, he shall be entitled to any accrued by unpaid salary and other benefits up to and including the date of termination. On July 1, 2018, the Company and Mr. O’Leary entered into an Extension Letter Agreement pursuant to which Mr. O’Leary was increased to full time employment (previously half-time) and agreed to extend the term of his employment to September 30, 2022. In addition to a base salary, the extension provides Mr. O’Leary with certain performance-based cash bonuses, stock grants, and stock option grants.

 

29

 

 

HEALTHLYNKED CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2020

(UNAUDITED)

 

NOTE 14 – SEGMENT REPORTING

 

The Company has two reportable segments: Health Services and Digital Healthcare. Health Services division is comprised of the operations of (i) Naples Women’s Center (“NWC”), a multi-specialty medical group including OB/GYN (both Obstetrics and Gynecology), and General Practice, (ii) Naples Center for Functional Medicine (“NCFM”), a Functional Medical Practice acquired in April 2019 that is engaged in improving the health of its patients through individualized and integrative health care, and (iii) Bridging the Gap Physical Therapy (“BTG”), a newly-formed physical therapy practice in Bonita Springs, FL that provides hands-on functional manual therapy techniques to speed patients’ recovery and manage pain without pain medication or surgery. The Company’s Digital Healthcare segment develops and plans to operate an online personal medical information and record archive system, the “HealthLynked Network,” which will enable patients and doctors to keep track of medical information via the Internet in a cloud-based system. The 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, 2020 and 2019 was as follows:

 

    Three Months Ended March 31, 2020     Three Months Ended March 31, 2019  
    Health Services     Digital Healthcare     Total     Health Services     Digital Healthcare     Total  
Revenue                                    
Patient service revenue, net   $ 1,336,940     $ ---     $ 1,336,940     $ 464,990     $ ---     $ 464,990  
                                                 
Operating Expenses                                                
Practice salaries and benefits     765,121       ---       765,121       350,240       ---       350,240  
Other practice operating costs     563,691       ---       563,691       244,539       ---       244,539  
General and administrative     ---       510,976       510,976       ---       691,802       691,802  
Depreciation and amortization     24,191       595       24,786       1,060       595       1,655  
Total Operating Expenses     1,353,003       511,571       1,864,574       595,839       692,397       1,288,236  
                                                 
Loss from operations   $ (16,063 )   $ (511,571 )   $ (527,634 )   $ (130,849 )   $ (692,397 )   $ (823,246 )
                                                 
Other Segment Information                                                
Interest expense   $ 5,536     $ 56,645     $ 62,181     $ 5,828     $ 40,494     $ 46,322  
Loss on extinguishment of debt   $ ---     $ 467,937     $ 467,937     $ ---     $ 139,798     $ 139,798  
Financing cost   $ ---     $ ---     $ ---     $ ---     $ 33,903     $ 33,903  
Amortization of original issue and debt discounts on convertible notes   $ ---     $ 292,163     $ 292,163     $ ---     $ 179,384     $ 179,384  
Change in fair value of debt   $ ---     $ (35,965 )   $ (35,965 )   $ ---     $ 29,697     $ 29,697  
Change in fair value of derivative financial instruments and contingent acquisition consideration   $ ---     $ (733,734 )   $ (733,734 )   $ ---     $ (191,633 )   $ (191,633 )
    March 31, 2020     December 31, 2019  
Identifiable assets   $ 2,175,990     $ 136,499     $ 2,312,489     $ 2,428,752     $ 117,802     $ 2,546,554  
Goodwill   $ ---     $ ---     $ ---     $ 71,866     $ ---     $ 71,866  

 

The Digital Healthcare segment recognized revenue of $1,356 and $1,941 in the three months ended March 31, 2020 and 2019, respectively, related to subscription revenue billed to and paid for by the Company’s physicians for access to the HealthLynked Network. The revenue for Digital Healthcare and related expense for Health Services were eliminated on consolidation.

 

30

 

 

HEALTHLYNKED CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2020

(UNAUDITED)

 

NOTE 15 – FAIR VALUE OF FINANCIAL INSTRUMENTS

 

The carrying amounts of certain financial instruments, including cash and cash equivalents, accounts receivable and accounts payable, approximate their respective fair values due to the short-term nature of such instruments. The Company measures certain financial instruments at fair value on a recurring basis, including certain convertible notes payable and related party loans which were extinguished and reissued and are therefore subject to fair value measurement, as well as derivative financial instruments arising from conversion features embedded in convertible promissory notes for which the conversion rate is not fixed. All financial instruments carried at fair value fall within Level 3 of the fair value hierarchy as their value is based on unobservable inputs. The Company evaluates its financial assets and liabilities subject to fair value measurements on a recurring basis to determine the appropriate level in which to classify them for each reporting period. This determination requires significant judgments to be made.

 

The following table summarizes the conclusions reached regarding fair value measurements as of March 31, 2020 and December 31, 2019:

 

    As of March 31, 2020  
                      Total  
    Level 1     Level 2     Level 3     Fair Value  
Convertible notes payable   $ -       $ -       $ 1,014,090     $ 1,014,090  
Notes payable to related party     -         -         729,352       729,352  
Derivative financial instruments     -         -         219,938       219,938  
                                 
Total   $ -       $ -       $ 1,963,380     $ 1,963,380  

 

    As of December 31, 2019  
                      Total  
    Level 1     Level 2     Level 3     Fair Value  
Convertible notes payable   $ -       $ -       $ 1,052,209     $ 1,052,209  
Notes payable to related party     -         -         743,955       743,955  
Derivative financial instruments     -         -         991,288       991,288  
                                 
Total   $ -       $ -       $ 2,787,452     $ 2,787,452  

 

The changes in Level 3 financial instruments that are measured at fair value on a recurring basis during the three months ended March 31, 2020 and 2019 were as follows:

 

    Three Months Ended March 31,  
    2020     2019  
             
Convertible notes payable   $ 21,362     $ (23,869 )
Notes payable to related party     14,603       (5,828 )
Derivative financial instruments     740,355       191,633  
Contingent acquisition consideration     (6,621 )     -    
                 
Total   $ 769,699     $ 161,936  

 

NOTE 16 – SUBSEQUENT EVENTS

 

On April 2, 2020, the holder of the $108.9k Note converted the remaining principal balance of $33,947 and accrued interest of $19 into 870,929 shares of the Company’s common stock. The note was retired upon this conversion.

 

31

 

 

HEALTHLYNKED CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2020

(UNAUDITED)

 

NOTE 16 – SUBSEQUENT EVENTS (CONTINUED)

 

On April 2, 2020, the Company issued a $157,500 convertible note (the “$157.5k Note”). The $157.5k Note included $10,500 fees and discounts for net proceeds of $147,000. The $157.5k Note has an interest rate of 10% and a default interest rate of 22% and matures on April 2, 2021. The $157.5k Note may be converted into common stock of the Company by the holder at any time six months after the issuance date, subject to a 4.99% beneficial ownership limitation, at a conversion price per share equal to a 29% discount to the lowest bid or trading price of the Company’s common stock during the thirteen (13) trading days prior to the conversion date.

 

On April 3, 2020, the Company prepaid the balance on the $103k Note V, including accrued interest, for a one-time cash payment of $135,205. 

 

On April 6, 2020, the Company issued a $135,000 convertible note (the “$135k Note”). The $135k Note included $3,500 fees and discounts for net proceeds of $131,500. The $135k Note has an interest rate of 10% and a default interest rate of 18% and matures on April 6, 2021. The $135k Note may be converted into common stock of the Company by the holder at any time six months after the issuance date, subject to a 4.99% beneficial ownership limitation, at a conversion price per share equal to a 39% discount to the lowest bid or trading price of the Company’s common stock during the fifteen (15) trading days prior to the conversion date.

 

On April 6, 2020, the Company issued an $83,000 convertible note (the “$83k Note”). The $83k Note included $3,000 fees and discounts for net proceeds of $80,000. The $83k Note has an interest rate of 10% and a default interest rate of 22% and matures on February 15, 2021. The $83k Note may be converted into common stock of the Company by the holder at any time six months after the issuance date, subject to a 4.99% beneficial ownership limitation, at a conversion price per share equal to a 39% discount to the lowest bid or trading price of the Company’s common stock during the fifteen (15) trading days prior to the conversion date.

 

On April 30, 2020, the Company issued a $128,000 convertible note (the “$128k Note”). The $128k Note included $3,000 fees and discounts for net proceeds of $125,000. The $128k Note has an interest rate of 10% and a default interest rate of 2% and matures on February 28, 2021. The $128k Note may be converted into common stock of the Company by the holder at any time six months after the issuance date, subject to a 4.99% beneficial ownership limitation, at a conversion price per share equal to a 39% discount to the lowest bid or trading price of the Company’s common stock during the fifteen (15) trading days prior to the conversion date.

 

On May 4, 2020, the Company prepaid the balance on the $103k Note VI, including accrued interest, for a one-time cash payment of $135,099.  

 

On May 5, 2020, the holder of the $108.9k Note II converted principal of $25,000 and accrued interest of $5,538 into 479,030 shares of the Company’s common stock..

 

On May 8, 2020, the holder of the $128.5k Note converted principal of $25,000 and $500 in fees into 491,804 shares of the Company’s common stock.

 

On May 8, 2020, the Company and its subsidiaries received an aggregate of $585,000 in loans under the Paycheck Protection Program (the “PPP”). The PPP loans, administered by the U.S. Small Business Administration and processed through Wells Fargo bank, were issued under the recently enacted Coronavirus Aid, Relief, and Economic Security Act, also known as the CARES Act. The loans bear interest at 1% per annum in mature in May 2022. Principal and interest payments are deferred for the first six months of the loans. Pursuant to the terms of the PPP, principal amounts may be forgiven if loan proceeds are used for qualifying expenses as described in the CARES Act, including costs such as payroll, benefits, employer payroll taxes, rent and utilities. The Company plans to use the proceeds for payroll costs and other permitted expenses.

 

On May 12, 2020, the Company sold 1,075,269 shares of common stock in a private placement transaction to an accredited investor and received $100,000 in proceeds from the sales. In connection with the stock sale, the Company also issued 537,644 five-year warrants to purchase shares of common stock at an exercise price of $0.19 per share.

 

32

 

 

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

 

Forward-Looking Statements

 

You should read the following discussion and analysis of our financial condition and results of operations together with our unaudited financial statements and the related notes appearing elsewhere in this report. In addition to historical information, this discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results may differ materially from those discussed below. Factors that could cause or contribute to such differences include, but are not limited to, those identified below, and those discussed in the section titled “Risk Factors” included in our most recent Annual Report on Form 10-K. All amounts in this report are in U.S. dollars, unless otherwise noted.

 

Overview

 

HealthLynked Corp. (the “Company,” “we,” “our, or “us”) was incorporated in the State of Nevada on August 4, 2014. We currently operate in two distinct divisions: Health Services and Digital Healthcare. Our Health Services division is comprised of the operations of (i) Naples Women’s Center (“NWC”), a multi-specialty medical group including OB/GYN (both Obstetrics and Gynecology), and General Practice, (ii) Naples Center for Functional Medicine (“NCFM”), a Functional Medical Practice acquired in April 2019 that is engaged in improving the health of its patients through individualized and integrative health care, and (iii) Bridging the Gap Physical Therapy (“BTG”), a newly-formed physical therapy practice in Bonita Springs, FL that provides hands-on functional manual therapy techniques to speed patients’ recovery and manage pain without pain medication or surgery. Our Digital Healthcare division develops and plans to operate an online personal medical information and record archive system, the “HealthLynked Network,” which will enable patients and doctors to keep track of medical information via the Internet in a cloud-based system.

 

Recent Developments

 

In January 2020, we launched a new physical therapy practice in Bonita Springs, Florida called Bridging the Gap Physical Therapy, or BTG. BTG employs two doctors who provide hands-on functional manual therapy techniques to speed patients’ recovery and manage pain without pain medication or surgery.

 

On February 5, 2020, we entered into an Agreement and Plan of Merger to acquire CHM and its subsidiary AHP. CHM is a healthcare enablement company that empowers local providers to own and operate in a franchise-like model that extends their reach and capabilities to maximize revenue, deliver quality care and improve patient outcomes. CHM’s resources and solutions are administered as an extension of providers’ current in-practice resources, expanding care coordination, care management services and value-based analytics. These solutions support financial success within both traditional payment models and expansion to new services, allowing partners to succeed within current and ever emerging value-based payment models. AHP is an ACO with providers around the U.S. participating in the Medicare Shared Savings Program. AHP was formed to benefit the patients (Medicare Fee-for-Service Beneficiaries), providers and the communities it serves. AHP is built on a model of coordinated care to ensure that patients, especially the chronically ill and the elderly, receive the right care at the right time, avoiding unnecessary duplication of services and prevention of medical errors. Following completion of the acquisition, the business of CHM and AHP will constitute a new ACO division.

 

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.

 

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Adopted Accounting Pronouncements 

 

Effective January 1, 2019, we 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 “Leases” below for additional discussion of the impact on our financial statements and related disclosures.

 

Effective January 1, 2019, we 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 our 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.

 

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.

 

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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 48% of total billings. Trade accounts receivable are recorded at this net amount.

 

Inventory

 

Inventory consisting of supplements, is stated at the lower of cost or net realizable value. Cost is determined by the first-in, first-out method. Outdated inventory is directly charged to cost of goods sold.

 

Leases

 

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.

 

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 consolidated balance sheets.

 

ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. The Company’s leases do not provide an implicit rate. The Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. The ROU asset also includes any lease payments made and excludes lease incentives. Lease expense for lease payments is recognized on a straight-line basis over the lease term.

  

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.

 

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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

 

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The fair value measurement level for an asset or liability is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques should maximize the use of observable inputs and minimize the use of unobservable inputs.

 

Prior to January 1, 2020, the Company utilized the closed-form Black-Scholes option pricing model to estimate the fair value of options, warrants, beneficial conversion features and other Level 3 financial assets and liabilities. Effective January 1, 2020, the Company changed to a binomial lattice option pricing model. The Company believes that the binomial lattice model results in a better estimate of fair value because it embodies all of the requisite assumptions (including the underlying price, exercise price, term, volatility, and risk-free interest-rate) necessary to fair value these instruments and, unlike the Black-Scholes model, also accommodates assumptions regarding investor exercise behavior and other market conditions that market participants would likely consider in negotiating the transfer of such an instruments.

 

Stock-Based Compensation

 

The Company accounts for stock-based compensation to employees and nonemployees under ASC 718 “Compensation – Stock Compensation” using the fair value-based method. Under this method, compensation cost is measured at the grant date based on the value of the award and is recognized over the service period, which is usually the vesting period. This guidance establishes standards for the accounting for transactions in which an entity exchanges its equity instruments for goods or services. It also addresses transactions in which an entity incurs liabilities in exchange for goods or services that are based on the fair value of the entity’s equity instruments or that may be settled by the issuance of those equity instruments. Effective January 1, 2020, the Company uses a binomial lattice pricing model to estimate the fair value of options and warrants granted. In prior periods, the Company used the Black-Scholes pricing model.

 

Income Taxes

 

The Company follows Accounting Standards Codification subtopic 740-10, Income Taxes (“ASC 740-10”) for recording the provision for income taxes. Deferred tax assets and liabilities are computed based upon the difference between the financial statement and income tax basis of assets and liabilities using the enacted marginal tax rate applicable when the related asset or liability is expected to be realized or settled. Deferred income tax expenses or benefits are based on the changes in the asset or liability during each period. If available evidence suggests that it is more likely than not that some portion or all of the deferred tax assets will not be realized, a valuation allowance is required to reduce the deferred tax assets to the amount that is more likely than not to be realized. Future changes in such valuation allowance are included in the provision for deferred income taxes in the period of change. Deferred income taxes may arise from temporary differences resulting from income and expense items reported for financial accounting and tax purposes in different periods. Deferred taxes are classified as current or non-current, depending on the classification of assets and liabilities to which they relate. Deferred taxes arising from temporary differences that are not related to an asset or liability are classified as current or non-current depending on the periods in which the temporary differences are expected to reverse and are considered immaterial.

 

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.

 

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Warrants

 

In connection with certain financing, consulting and collaboration arrangements, the Company has issued warrants to purchase shares of its common stock. The outstanding warrants are standalone instruments that are not puttable or mandatorily redeemable by the holder and are classified as equity awards. The Company measures the fair value of the awards using the Black-Scholes pricing model as of the measurement date. Effective January 1, 2020, the Company uses a binomial lattice pricing model to estimate the fair value of compensation options and warrants. In prior periods, the Company used the Black-Scholes pricing model. Warrants issued in conjunction with the issuance of common stock are initially recorded at fair value as a reduction in additional paid-in capital of the common stock issued. All other warrants are recorded at fair value as expense over the requisite service period or at the date of issuance, if there is not a service period.

 

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: Health Services (multi-specialty medical group including OB/GYN, functional medicine and physical therapy practices) and Digital Healthcare (develops and markets the “HealthLynked Network,” an online personal medical information and record archive system).

 

Recent Accounting Pronouncements

 

Effective January 1, 2019, we 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 “Leases” below for additional discussion of the impact on our financial statements and related disclosures.

 

Effective January 1, 2019, we 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 our financial statements and related disclosures.

 

In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments — Overall: Recognition and Measurement of Financial Assets and Financial Liabilities. The guidance affects the accounting for equity investments, financial liabilities under the fair value option and the presentation and disclosure requirements of financial instruments. The guidance is effective in the first quarter of fiscal 2019. We adopted this guidance effective January 1, 2019. The adoption of this guidance did not materially impact our financial statements and related disclosures.

 

In July 2017, the FASB issued ASU No. 2017-11, Earnings Per Share, Distinguishing Liabilities from Equity and Derivatives and Hedging, which changes the accounting and earnings per share for certain instruments with down round features. The amendments in this ASU should be applied using a cumulative-effect adjustment as of the beginning of the fiscal year or retrospective adjustment to each period presented and is effective for annual periods beginning after December 15, 2018, and interim periods within those periods. We adopted this guidance effective January 1, 2019. The adoption of this guidance did not materially impact our financial statements and related disclosures.

 

In February 2018, the Financial Accounting Standards Board (“FASB”) issued ASC Update No 2018-02 (Topic 220) Income Statement – Reporting Comprehensive Income: Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income.  This ASC update allows for a reclassification into retained earnings of the stranded tax effects in accumulated other comprehensive income (“AOCI”) resulting from the enactment of the Tax Cuts and Jobs Act (“TCJA”). The updated guidance is effective for interim and annual periods beginning after December 15, 2018.  We adopted this guidance effective January 1, 2019. The adoption of this guidance did not materially impact our financial statements and related disclosures.

 

In June 2018, the FASB issued ASU 2018-07, Compensation - Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting, to expand the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from nonemployees and supersedes the guidance in Subtopic 505-50, Equity - Equity-Based Payments to Non-Employees. Under ASU 2018-07, equity-classified nonemployee share-based payment awards are measured at the grant date fair value on the grant date The probability of satisfying performance conditions must be considered for equity-classified nonemployee share-based payment awards with such conditions. ASU 2018-07 is effective for fiscal years beginning after December 15, 2018, with early adoption permitted. We adopted this guidance effective January 1, 2019. The adoption of this guidance did not materially impact our financial statements and related disclosures.

 

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In July 2018, the FASB issued ASU 2018-09 to provide clarification and correction of errors to the Codification. The amendments in this update cover multiple Accounting Standards Updates. Some topics in the update may require transition guidance with effective dates for annual periods beginning after December 15, 2018. We adopted this guidance effective January 1, 2019. The adoption of this guidance did not materially impact our financial statements and related disclosures.

 

Results of Operations

 

Comparison of Three Months Ended March 31, 2020 and 2019

 

The following table summarizes the changes in our results of operations for the three months ended March 31, 2020 compared with the three months ended March 31, 2019:

 

    Three Months Ended
March 31,
    Change  
    2020     2019     Increase (Decrease) in $     Increase (Decrease) in %  
Patient service revenue, net   $ 1,336,940     $ 464,990     $ 871,950       188 %
                                 
Operating Expenses                                
Practice salaries and benefits     765,121       350,240       414,881       118 %
Other practice operating costs     563,691       244,539       319,152       131 %
General and administrative     510,976       691,802       (180,826 )     -26 %
Depreciation and amortization     24,786       1,655       23,131       1398 %
Loss from operations     (527,634 )     (823,246 )     295,612       36 %
                                 
Other Income (Expenses)                                
Loss on extinguishment of debt     (467,937 )     (139,798 )     (328,139 )     -235 %
Change in fair value of debt     35,965       (29,697 )     65,662       221 %
Financing cost     ---       (33,903 )     33,903       100 %
Amortization of original issue and debt discounts on notes payable and convertible notes     (292,163 )     (179,384 )     (112,779 )     -63 %
Change in fair value of derivative financial instruments and contingent acquisition consideration     733,734       191,633       542,101       -283 %
Interest expense     (62,181 )     (46,322 )     (15,859 )     -34 %
Total other expenses     (52,582 )     (237,471 )     184,889       78 %
                                 
Net loss   $ (580,216 )   $ (1,060,717 )   $ 480,501       45 %

 

Patient service revenue increased by $871,950, or 188%, from three months ended March 31, 2019 to 2020, primarily as a result of $846,272 revenue from NCFM (acquired on April 12, 2019) and $82,738 from BTG (started January 9, 2020), offset by lower revenue from NWC operations of $57,061.

 

Practice salaries and benefits increased by $414,881, or 118%, in 2020 primarily as a result of new practice salary and benefits expense from the acquisition of NCFM and the inception of BTG.

 

Other practice operating costs increased by $319,152, or 131%, in 2020 primarily as a result of new practice operating costs from the acquisition of NCFM and the inception of BTG.

 

General and administrative costs decreased by $180,826, or 26%, in 2020 primarily due to lower legal and accounting fees in 2020 as well as lower corporate overhead expense associated with a shift from a direct sales to an indirect sale approach for our Digital Healthcare segment.

 

Depreciation and amortization increased by $23,131, or 1,398%, in 2020 primarily as a result of depreciation of assets acquired in the NCFM acquisition.

 

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Loss from operations decreased by $295,612, or 36%, in 2020 primarily as a result revenue and profit from the operations of NCFM and BTG in 2020, combined with lower general and administrative expenses related to the Digital Healthcare segment.

 

Loss on extinguishment of debt increased by $328,139, or 235%, in 2020, primarily as a result in the increase in the number of convertible notes payable repaid and converted. During 2020, we repaid $295,925 of principal and holders converted an additional $302,925 of principal into common shares. During 2019, we had only one conversion of principal totaling $171,500. Losses on extinguishment of debt arise when the fair value consideration paid to retire a convertible note exceeds the carrying value of the instrument being retired.

 

Change in fair value of debt increased by $65,662, or 221%, from a loss of $29,697 in 2019 to a gain of $35,965 in 2020. Such gains and losses result from certain convertible notes and notes payable to related parties that, in previous periods, were extended 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 $33,903, or 10% in 2020. Financing cost arises when the inception date fair value of embedded conversion features on a convertible note are greater than the face value of the note. No such notes were issued in 2020.

 

Amortization of original issue and debt discounts increased by $112,779, or 63%, in 2020 as a result of the amortization of convertible notes with larger average discount balances being amortized in 2020.

 

Income from the change in fair value of derivative financial instruments and contingent acquisition consideration increased by $542,101, or 283%, due in large part to our change on January 1, 2020 from the Black-Scholes model to a binomial lattice model to estimate the fair value of certain financial instruments, including derivative financial instruments. We believe that the binomial lattice model results in a better estimate of fair value because it embodies all of the requisite assumptions (including the underlying price, exercise price, term, volatility, and risk-free interest-rate) necessary to fair value these instruments and, unlike the Black-Scholes model, also accommodates assumptions regarding investor exercise behavior and other market conditions that market participants would likely consider in negotiating the transfer of such an instruments. The increase in the change in fair value of derivative financial instruments stemmed primarily from the decrease in the fair value of certain bifurcated beneficial conversion feature derivative liabilities associated with convertible notes payable that were issued prior to January 1, 2020. We also recognized a loss on the change in the fair value of contingent acquisition consideration of $6,621 in 2020.

 

Interest expense increased by $15,859, or 34%, as a result of higher average balance on convertible notes and notes payable to related parties during 2020.

 

Total other expenses decreased by $184,889, or 78%, in 2020 primarily as a result of a substantial gain on change in fair value of derivative financial instruments in 2020 resulting from a change in estimate methodology, offset by higher amortization of original issue and debt discounts due to higher debt balances and higher loss on extinguishment of debt resulting from repayment and conversion of convertible notes payable.

 

Net loss decreased by $480,501, or 45%, in 2020 primarily as a result of revenue and profit from the NCFM and BTG businesses in 2020 that were not acquired or operations in 2019 and a gain on change in fair value of derivative financial instruments in 2020 resulting from a change in estimate methodology, offset by higher amortization of original issue and debt discounts due to higher debt balances and higher loss on extinguishment of debt resulting from repayment and conversion of convertible notes payable.

 

Liquidity and Capital Resources

 

Going Concern

 

As of March 31, 2020, we had a working capital deficit of $3,749,487 and accumulated deficit $16,609,870. For the three months ended March 31, 2020, we had a net loss of $580,216 and net cash used by operating activities of $384,187. Net cash used in investing activities was $-0-. Net cash provided by financing activities was $478,012, resulting principally from $437,433 proceeds from the sale of common stock, $344,000 net proceeds from the issuance of convertible notes and $149,000 proceeds from the issuance of related party loans.

 

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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. 

 

A novel strain of coronavirus, COVID-19, that was first identified in China in December 2019, has surfaced in several regions across the world and resulted in travel restrictions and business slowdowns or shutdowns in affected areas. The further spread of COVID-19, and the requirement to take action to limit the spread of the illness, may impact our ability to carry out our business as usual and may materially adversely impact global economic conditions, our business and financial condition, including our potential to conduct financings on terms acceptable to us, if at all. The extent to which COVID-19 may impact our business will depend on future developments, which are highly uncertain and cannot be predicted with confidence, such as the ultimate geographic spread of the disease, the duration of the outbreak, travel restrictions and social distancing in the United States and other countries, business closures or business disruptions and the effectiveness of actions taken in the United States and other countries to contain and treat the disease. We have taken certain cost-cutting measures, such as salary reductions, in order to address financial concerns caused by the COVID-19 pandemic, however no assurance can be given that these measures will prove effective in mitigating the economic downturn.

 

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, 2020 and 2019, we received $122,423 and $493,226, respectively, from the proceeds of the sale of 1,331,432 and 2,128,644 shares, respectively, pursuant to the Investment Agreement. The investment agreement expires on May 15, 2020.

 

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 financed from (i) profits generated by NCFM and, upon completion of the acquisition, from Cura and AHP, and (ii) outside funding sources available to us, including the put rights associated with the Investment Agreement, issuance of convertible notes, sales of our common stock, and loans from related parties. We expect to repay our outstanding convertible notes, which have an aggregate face value of $2,133,895 as of March 31, 2020, 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 our business plan.

 

Significant Liquidity Events

 

Through March 31, 2020, 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 a transaction (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.

 

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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, 2020 and 2019 and the years ended December 31, 2019 and 2018, we received proceeds from the sale of shares pursuant to the Investment Agreement totaling $122,423 (1,331,432 shares), $493,226 (2,128,644 shares), $929,986 (5,074,068 shares) and $440,523 (2,440,337 shares), respectively. The Investment Agreement expires on May 15, 2020.

 

Other Sales of Common Stock

 

During the three months ended March 31, 2020, the Company sold 2,554,944 shares of common stock in seven separate private placement transactions and received $335,000 in proceeds from the sales. The shares were issued at a share price of $0.23 per share with respect to 2,269,230 shares and $0.24 per share with respect to 285,714 shares.

 

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, 2020, we had outstanding convertible notes payable with aggregate face value of $2,133,895 maturing between August 15, 2020 and March 10, 2021, as follows:

                Conversion      
          Interest     Price/      
    Face Value     Rate     Discount     Maturity
$550k Note - July 2016   $ 550,000       6 %   $ 0.08     December 31, 2020
$50k Note - July 2016     50,000       10 %   $ 0.10     December 31, 2020
$111k Note - May 2017     111,000       10 %   $ 0.35     December 31, 2020
$357.5k Note - April 2019     357,500       10 %   $ 0.20     December 31, 2020
$108.9k Note - August 2019     33,947       10 %     25 %   August 26, 2020
$142.5k Note - October 2019     142,500       10 %     39 %   October 1, 2020
$103k Note V - October 2019     103,000       10 %     39 %   August 15, 2020
$108.9k Note II - October 2019     108,947       10 %     25 %   October 30, 2020
$128.5k Note - October 2019     128,500       10 %     39 %   October 30, 2020
$103k Note VI - November 2019     103,000       10 %     39 %   September 15, 2020
$78.8k Note II - December 2019     78,750       10 %     25 %   December 5, 2020
$131.3k Note - January 2020     131,250       10 %     25 %   January 31, 2021
$78k Note IV - January 2020     78,000       10 %     39 %   October 15, 2020
$157.5k Note - March 2020     157,500       10 %     25 %   March 10, 2021
    $ 2,133,895                      

 

PPP Loans

 

On May 8, 2020, we received an aggregate of $585,000 in loans under the Paycheck Protection Program (the “PPP”). The PPP loans, administered by the U.S. Small Business Administration and processed through Wells Fargo bank, were issued under the recently enacted Coronavirus Aid, Relief, and Economic Security Act, also known as the CARES Act. The loans bear interest at 1% per annum in mature in May 2022. Principal and interest payments are deferred for the first six months of the loans. Pursuant to the terms of the PPP, principal amounts may be forgiven if loan proceeds are used for qualifying expenses as described in the CARES Act, including costs such as payroll, benefits, employer payroll taxes, rent and utilities. We plan to use the proceeds for payroll costs and other permitted expenses.

 

Plan of operation and future funding requirements

 

Our plan of operations is to profitably operate our Health Services business and continue to invest in our Digital Healthcare business, including our cloud-based online personal medical information and record archiving system, the “HealthLynked Network.”

 

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.

 

In July 2018 we raised approximately $1.8 million in the July 2018 Private Placement for the purpose of technology enhancement, sales and marketing initiatives and to fund a portion of the first phase of our planned acquisition strategy. In 2019, we began implementation of our plan to acquire health service businesses and offer physician owners cash, stock, and deferred compensation. On April 15, 2019, we acquired HCFM for $750,000 in cash, $750,000 in shares of Company common stock and $500,000 in a three-year performance-based payout.

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Currently, we are focusing on acquiring profitable ACOs with a concentration on physician-based ACOs in Florida, the Southeast, Texas, New York and Michigan. ACOs’ objectives are to reduce patients’ healthcare costs while improving their health. Our initial targets are physician-based Florida Medicare ACOs. Profitable ACOs have shared savings, which are payments made by the Medicare governing body CMS to ACOs whose Medicare patients have aggregate total savings over the regional threshold for all Medicare patients in the territory and that meet CMS’ quality standards. Given HealthLynked’s goal to improve healthcare and reduce healthcare costs for all patients, we anticipate that the ACO acquisition model can help us expand both physician and patient utilization of the HealthLynked Network while continuing to add incremental revenue and profit from to our health services and ACO segments. To this end, on February 5, 2020, subject to certain closing conditions, we entered into an Agreement and Plan of Merger to acquire Jacksonville, Florida-based CHM and its subsidiary AHP. CHM is a healthcare enablement company that empowers local providers to own and operate in a franchise-like model that extends their reach and capabilities to maximize revenue, deliver quality care and improve patient outcomes. CHM’s subsidiary AHP is an ACO with providers around the U.S. participating in the Medicare Shared Savings Program.

 

We plan to raise additional capital to fund our ongoing acquisition strategy. In addition, during 2019 we extended a significant portion of our outstanding debt until December 31, 2020. Specifically, all of Dr. Michael Dent’s notes payable with an aggregate face value of $646,000 and convertible notes payable held by Iconic Holdings LLC with an aggregate face value of $1,068,000 have been extended until December 31, 2020.

 

Historical Cash Flows

 

    Three Months Ended
March 31,
 
    2020     2019  
Net cash (used in) provided by:            
Operating activities   $ (384,187 )   $ (600,393 )
Investing Activities     ---       (4,302 )
Financing activities     478,012       983,226  
Net increase in cash   $ 93,825     $ 378,531  

 

Operating Activities – During the three months ended March 31, 2020, we used cash from operating activities of $384,187, as compared with $600,393 in the same period of 2019. The decrease in cash usage results primarily from profits generated by NCFM and BTG in 2020, neither of which were operating under as part of the Company in the first quarter of 2019.

 

Investing Activities – During the three months ended March 31, 2020 and 2019, we used $-0- and $4,302, respectively, in investing activities, comprised mainly of computer and equipment purchases for the acquisition of HCFM (net of $35,000 cash received).

 

Financing Activities – During the three months ended March 31, 2020, we realized $437,433 from the proceeds of the sale of shares of common stock to investors and pursuant to the Investment Agreement, $344,000 net proceeds from the issuance of convertible notes and $149,000 net proceeds from the issuance of related party loans. We also repaid $373,094 of convertible loans. 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, 2020 or 2019.

 

Other Outstanding Obligations

 

Warrants

 

As of March 31, 2020, 48,333,767 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, 2020, 3,209,250 shares of our Common Stock were issuable pursuant to the exercise of options with exercise prices ranging from $0.08 to $0.31.

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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  
2020   $ 164,809     $ ---     $ 164,809  
2021     98,531       ---       98,531  
2022     52,662       ---       52,662  
2023     6,099       ---       6,099  
Total lease payments     322,101       ---       322,101  
Less interest     (73,007 )     ---       (73,007 )
Present value of lease liabilities   $ 249,094     $ ---     $ 249,094  

 

Operating lease commitments relate to the following leases in Naples, Florida. First, we entered into an operating lease for our NWC practice office in Naples, Florida. The lease commenced on August 1, 2013 and expires July 31, 2020. The lease is for a 6,901 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, we 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, we lease on a month-to-month basis approximately 2,500 square feet of office space in Naples, FL used for Digital Services division administration. Monthly rent is approximately $3,300. Fourth, we lease approximately 3,700 square feet for our NCFM practice office in Naples, Florida. The lease commenced on April 5, 2019 and expires May 30, 2022. Base rent for the first full year of the lease term is $66,825 per annum with scheduled increases in years two and three. Fifth, we entered into an operating lease for our BTG practice in Bonita Springs, FL. The lease commenced on January 9, 2020 and expires March 31, 2023. The lease is for a 2,149 square-foot space. The base rent for the first full year of the lease term is $21,490 per annum with increases during the period.

 

Our previous financing lease commitment, comprised of a capital equipment finance lease for Ultrasound equipment, expired in March 2020.

 

Item 3. Quantitative and Qualitative Disclosures about Market Risk

 

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

 

Item 4. Controls and Procedures

 

Evaluation of Disclosure Controls and Procedures

 

We maintain disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) that are designed to ensure that information required to be disclosed in Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

 

Our management evaluated, with the participation of our Chief Executive Officer and Chief Financial Officer, the effectiveness of our internal control over financial reporting as of March 31, 2020 based on the framework in “Internal Control – Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in 2013. Based on that evaluation, our management concluded that our internal control over financial reporting was effective at March 31, 2020.

 

Changes in Internal Control over Financial Reporting

 

There was no change in the Company’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) during the fiscal quarter ended March 31, 2020 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

 

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PART II. OTHER INFORMATION

 

Item 1. Legal Proceedings

 

From time to time, we may become involved in various lawsuits and legal proceedings, which arise, in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business. We are not aware of any such legal proceedings that we believe will have, individually or in the aggregate, a material adverse effect on our business, financial condition or operating results.

 

Item 1A. Risk Factors

 

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

 

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

 

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

 

During the three months ended March 31, 2020, we sold 2,412,087 shares of common stock in seven separate private placement transactions to accredited investors and received $315,000 in proceeds from the sales. The shares were issued at a share price of $0.13 per share with respect to 2,269,230 shares and $0.14 per share with respect to 142,857 shares. In connection with the stock sale, we also issued 1,134,616 five-year warrants to purchase shares of common stock at an exercise price of $0.23 and 71,429 five-year warrants to purchase shares of common stock at an exercise price of $0.24 per share.

 

During the three months ended March 31, 2020, we issued 4,672,612 shares of common stock upon the full or partial conversion of five separate convertible notes payable. The shares retired $302,925 of convertible note payable principal and $23,206 of accrued interest.

 

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

 

Item 3. Defaults Upon Senior Securities

 

None.

 

Item 4. Mine Safety Disclosures

 

Not applicable.

 

Item 5. Other Information

 

None.

 

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Item 6. Exhibits

 

Exhibit No.    Exhibit Description
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 Amended to Articles of Incorporation (Filed as Exhibit 3.1 to the Company’s Current Report on Form 8-K filed with the Commission on February 6, 2018)
10.1   Form of Securities Purchase Agreement with BHP Capital NY Inc. dated January 13, 2020 (Filed as Exhibit 10.38 to the Company’s Annual Report on Form 10-K filed with the Commission on March 30, 2020)
10.2   Form of Convertible Promissory Note with BHP Capital NY Inc. dated January 13, 2020 (Filed as Exhibit 10.39 to the Company’s Annual Report on Form 10-K filed with the Commission on March 30, 2020)
10.3   Shareholder Letter, dated January 9, 2020 (Filed as Exhibit 99.1 to the Company’s Current Report on Form 8-K filed with the Commission on January 13, 2020)
10.4   Presentation Materials (Filed as Exhibit 99.2 to the Company’s Current Report on Form 8-K filed with the Commission on January 13, 2020)
10.5   Form of Securities Purchase Agreement with Power Up Lending Group Ltd. dated January 22, 2020 (Filed as Exhibit 10.42 to the Company’s Annual Report on Form 10-K filed with the Commission on March 30, 2020)
10.6   Form of Convertible Promissory Note with Power Up Lending Group Ltd. dated January 22, 2020 (Filed as Exhibit 10.43 to the Company’s Annual Report on Form 10-K filed with the Commission on March 30, 2020)
10.7   Agreement and Plan of Merger, dated February 5, 2020, by and among HealthLynked Corp., HLYK Florida, LLC, Cura Health Management LLC, ACO Health Partners, LLC, Bradberry Holdings LLC and FocusOne Holdings, LLC (Filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Commission on February 11, 2020)
10.8   Press Release, dated February 11, 2020 (Filed as Exhibit 10.2 to the Company’s Current Report on Form 8-K filed with the Commission on February 11, 2020)
10.9   Form of Securities Purchase Agreement with BHP Capital NY Inc. dated March 13, 2020 (Filed as Exhibit 10.46 to the Company’s Annual Report on Form 10-K filed with the Commission on March 30, 2020)
10.10   Form of Convertible Promissory Note with BHP Capital NY Inc. dated March 13, 2020 (Filed as Exhibit 10.47 to the Company’s Annual Report on Form 10-K filed with the Commission on March 30, 2020)
10.11 * Form of Securities Purchase Agreement with Platinum Point Capital LLC dated April 2, 2020
10.12 * Form of Convertible Promissory Note with Platinum Point Capital LLC dated April 2, 2020
10.13 * Form of Securities Purchase Agreement with Morningview Financial, LLC dated April 6, 2020
10.14 * Form of Convertible Promissory Note with Morningview Financial, LLC dated April 6, 2020
10.15 * Form of Securities Purchase Agreement with Power Up Lending Group Ltd. dated April 6, 2020
10.16 * Form of Convertible Promissory Note with Power Up Lending Group Ltd. dated April 6, 2020
10.17 * Form of Securities Purchase Agreement with Power Up Lending Group Ltd. dated April 30, 2020
10.18 *

Form of Convertible Promissory Note with Power Up Lending Group Ltd. dated April 30, 2020

31.1 * Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 of the Principal Executive Officer
31.2 * Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 of the Principal Financial Officer and Principal Accounting Officer
32.1 * Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 of the Principal Executive Officer
32.2 * Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 of the Principal Financial Officer and Principal Accounting Officer
101 * XBRL Instance Document
    XBRL Taxonomy Extension Schema Document
    XBRL Taxonomy Extension Calculation Linkbase Document
    XBRL Taxonomy Extension Definition Linkbase Document
    XBRL Taxonomy Extension Label Linkbase Document
    XBRL Taxonomy Extension Presentation Linkbase Document

 

* Filed herewith.

 

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SIGNATURES

 

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

 

Dated: May 15, 2020

 

  HEALTHLYNKED CORP.
   
  By: /s/ Michael Dent
    Name:  Michael Dent
    Title: Chief Executive Officer and Chairman
(Principal Executive Officer)
   
  By: /s/ George O’Leary
    Name:  George O’Leary
    Title: Chief Financial Officer
(Principal Financial Officer)

 

 

47

 

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