See the accompanying notes to these Unaudited
Condensed Consolidated Financial Statements
See the accompanying notes to these Unaudited
Condensed Consolidated Financial Statements
See the accompanying notes to these Unaudited
Condensed Consolidated Financial Statements
See the accompanying notes to these Unaudited
Condensed Consolidated Financial Statements
See the accompanying notes to these Unaudited
Condensed Consolidated Financial Statements
NOTES TO THE CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
SEPTEMBER 30, 2020
(UNAUDITED)
NOTE 1 - BUSINESS AND BUSINESS PRESENTATION
HealthLynked Corp. (the “Company”)
was incorporated in the State of Nevada on August 4, 2014. On September 2, 2014, the Company filed Amended and Restated Articles
of Incorporation with the Secretary of State of Nevada setting the total number of authorized shares at 250,000,000 shares, which
included up to 230,000,000 shares of common stock and 20,000,000 shares of “blank check” preferred stock. On February
5, 2018, the Company filed an Amendment to its Amended and Restated Articles of Incorporation with the Secretary of State of Nevada
to increase the number of authorized shares of common stock to 500,000,000 shares.
As of September 30, 2020, the Company operated in three distinct divisions: the Health Services Division,
the Digital Healthcare Division the ACO/MSO (Accountable Care Organization / Managed Service Organization) Division. The Health
Services division is comprised of the operations of (i) Naples Women’s Center (“NWC”), a multi-specialty medical
group including OB/GYN (both Obstetrics and Gynecology) and General Practice, (ii) Naples Center for Functional Medicine (“NCFM”),
a Functional Medical Practice acquired in April 2019 that is engaged in improving the health of its patients through individualized
and integrative health care, and (iii) Bridging the Gap Physical Therapy (“BTG”), a physical therapy practice in Bonita
Springs, FL opened in January 2020 that provides hands-on functional manual therapy techniques to speed patients’ recovery
and manage pain without pain medication or surgery. The Digital Healthcare division develops and plans to operate an online personal
medical information and record archive system, the “HealthLynked Network,” which will enable patients and doctors to
keep track of medical information via the Internet in a cloud-based system. The ACO/MSO Division is comprised of the business acquired
of Cura Health Management LLC (“CHM”) and its subsidiary ACO Health Partners LLC (“AHP”), which were acquired
by the Company on May 18, 2020. CHM and AHP operate an Accountable Care Organization (“ACO”) and Managed Service Organization
(“MSO”) that assists physician practices in providing coordinated and more efficient care to patients via the Medicare
Shared Savings Program (“MSSP”) as administered by the Centers for Medicare and Medicaid Services (the “CMS”),
which rewards providers for efficiency in patient care.
These unaudited condensed consolidated
financial statements reflect all adjustments including normal recurring adjustments, which, in the opinion of management, are
necessary to present fairly the financial position, results of operations and cash flows for the periods presented in accordance
with the accounting principles generally accepted in the United States of America (“GAAP”). These unaudited condensed
consolidated financial statements should be read in conjunction with the Company’s consolidated financial statements and
notes thereto for the years ended December 31, 2019 and 2018, respectively, which are included in the Company’s Form 10-K,
filed with the United States Securities and Exchange Commission on March 30, 2020. The Company assumes that the users of the interim
financial information herein have read, or have access to, the audited consolidated financial statements for the preceding period,
and that the adequacy of additional disclosure needed for a fair presentation may be determined in that context. The results of
operations for the three and nine months ended September 30, 2020 are not necessarily indicative of results for the entire year
ending December 31, 2020.
On a consolidated basis, the Company’s
operations are comprised of the parent company, HealthLynked Corp. and its five subsidiaries: NWC, NCFM, BTG, CHM and AHP. All
significant intercompany transactions and balances have been eliminated upon consolidation. In addition, certain amounts in the
prior periods’ consolidated financial statements have been reclassified to conform to the current period presentation.
NOTE 2 – SIGNIFICANT ACCOUNTING
POLICIES
A summary of the significant accounting
policies applied in the presentation of the accompanying consolidated financial statements follows:
Basis of Presentation
The accompanying consolidated financial
statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“US
GAAP”).
All amounts referred to in the notes to
the consolidated financial statements are in United States Dollars ($) unless stated otherwise.
HEALTHLYNKED CORP.
NOTES TO THE CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
SEPTEMBER 30, 2020
(UNAUDITED)
NOTE 2 – SIGNIFICANT ACCOUNTING
POLICIES (CONTINUED)
Use of Estimates
The preparation of the consolidated financial
statements in conformity with GAAP requires management to make estimates and assumptions that affect certain reported amounts
of assets and liabilities and disclosures of contingent assets and liabilities at the date of the consolidated financial statements,
and the reported amounts of revenues and expenses during the reporting period. Accordingly, actual results could differ from those
estimates. Significant estimates include assumptions about collection of accounts receivable, the valuation and recognition of
stock-based compensation expense, valuation allowance for deferred tax assets, borrowing rate consideration for right-of-use (“ROU”)
lease assets including related lease liability and useful life of fixed assets.
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 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.
Revenue Recognition
Patient service revenue
Patient service revenue is reported at
the amount that reflects the consideration to which the Company expects to be entitled in exchange for providing patient care.
These amounts are due from patients and third-party payors (including health insurers and government programs) and includes variable
consideration for retroactive revenue adjustments due to settlement of audits, reviews, and investigations. Generally, the Company
bills patients and third-party payors within days after the services are performed and/or the patient is discharged from the facility.
Revenue is recognized as performance obligations are satisfied.
Performance obligations are determined
based on the nature of the services provided by the Company. Revenue for performance obligations satisfied over time is recognized
based on actual charges incurred in relation to total expected charges. The Company believes that this method provides a faithful
depiction of the transfer of services over the term of the performance obligation based on the inputs needed to satisfy the obligation.
Revenue for performance obligations satisfied at a point in time is recognized when goods or services are provided and the Company
does not believe it is required to provide additional goods or services to the patient.
The Company determines the transaction
price based on standard charges for goods and services provided, reduced by contractual adjustments provided to third-party payors,
discounts provided to uninsured patients in accordance with the Company’s policy, and/or implicit price concessions provided
to uninsured patients. The Company determines its estimates of contractual adjustments and discounts based on contractual agreements,
its discount policies, and historical experience. The Company determines its estimate of implicit price concessions based on its
historical collection experience with this class of patients.
Agreements with third-party payors typically
provide for payments at amounts less than established charges. A summary of the payment arrangements
with major third-party payors follows:
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Medicare:
Certain inpatient acute care services are paid at prospectively determined rates
per discharge based on clinical, diagnostic and other factors. Certain services are paid
based on cost-reimbursement methodologies subject to certain limits. Physician services
are paid based upon established fee schedules. Outpatient services are paid using prospectively
determined rates.
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●
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Medicaid:
Reimbursements for Medicaid services are generally paid at prospectively determined
rates per discharge, per occasion of service, or per covered member.
|
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●
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Other:
Payment agreements with certain commercial insurance carriers, health maintenance
organizations, and preferred provider organizations provide for payment using prospectively
determined rates per discharge, discounts from established charges, and prospectively
determined daily rates.
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HEALTHLYNKED
CORP.
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER
30, 2020
(UNAUDITED)
NOTE
2 – SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Laws
and regulations concerning government programs, including Medicare and Medicaid, are complex and subject to varying interpretation.
As a result of investigations by governmental agencies, various health care organizations have received requests for information
and notices regarding alleged noncompliance with those laws and regulations, which, in some instances, have resulted in organizations
entering into significant settlement agreements. Compliance with such laws and regulations may also be subject to future government
review and interpretation as well as significant regulatory action, including fines, penalties, and potential exclusion from the
related programs. There can be no assurance that regulatory authorities will not challenge the Company’s compliance with
these laws and regulations, and it is not possible to determine the impact, if any, such claims or penalties would have upon the
Company. In addition, the contracts the Company has with commercial payors also provide for retroactive audit and review of claims.
Settlements
with third-party payors for retroactive adjustments due to audits, reviews or investigations are considered variable consideration
and are included in the determination of the estimated transaction price for providing patient care. These settlements are estimated
based on the terms of the payment agreement with the payor, correspondence from the payor and the Company’s historical settlement
activity, including an assessment to ensure that it is probable that a significant reversal in the amount of cumulative revenue
recognized will not occur when the uncertainty associated with the retroactive adjustment is subsequently resolved. Estimated
settlements are adjusted in future periods as adjustments become known, or as years are settled or are no longer subject to such
audits, reviews, and investigations.
The
Company also provides services to uninsured patients, and offers those uninsured patients a discount, either by policy or law,
from standard charges. The Company estimates the transaction price for patients with deductibles and coinsurance and from those
who are uninsured based on historical experience and current market conditions. The initial estimate of the transaction price
is determined by reducing the standard charge by any contractual adjustments, discounts, and implicit price concessions. Subsequent
changes to the estimate of the transaction price are generally recorded as adjustments to patient service revenue in the period
of the change. Patient services provided by NCFM are provided on a cash basis and not submitted through third party insurance
providers.
Medicare
Shared Savings Revenue
The
Company earns Medicare shared savings revenue based on performance of the population of patient lives for which it is accountable
as an ACO against benchmarks established by the MSSP. Because the MSSP, which was formed in 2012, is relatively new and has limited
historical experience, the Company cannot accurately predict the amount of shared savings that will be determined by CMS. Such
amounts are determined annually when the Company is notified by CMS of the amount of shared savings earned. Accordingly, the Company
recognizes Medicare shared savings revenue in the period in which the CMS notifies the Company of the exact amount of shared savings
to be paid, which historically has occurred during the three-month period ended September 30 for the program year ended December
31 of the previous year. The Company was notified of the amount of Medicare shared savings and received payment for such savings
in September 2020. Accordingly, the Company recognized Medicare shared savings revenue of $767,744 in the three and nine months
ended September 30, 2020. Based on the ACO operating agreements, the Company bears all costs of the ACO operations until revenue
is recognized. At that point, the Company shares in up to 100% of the revenue to recover its costs incurred.
Consulting
Revenue
Also
pursuant to ASC 606, the Company recognizes service revenue as services are provided, with any unearned but paid amounts recorded
a deferred revenue liability at each balance sheet date.
Deferred
Revenue
The
Company’s deferred revenue liability balance was $51,714 and $-0- as of September 30, 2020 and December 31, 2019.
HEALTHLYNKED
CORP.
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER
30, 2020
(UNAUDITED)
NOTE
2 – SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Provider
shared savings expense
Provider
shared savings expense represents payments made to the ACO’s participating providers. The pool of provider shared savings
expense paid to all participating providers, as well as the amounts paid to each individual participating provider from the pool,
is determined by ACO management. Shared Savings expense is recognized in the period in which the size of the payment pool is determined,
which typically corresponds the period in which the shared saving payment is received from CMS and shared savings revenue is recognized.
This typically occurs in the second half of the year following the completion of the program year. The Company was notified of
the amount of Medicare shared savings and received payment for such savings in September 2020 totaling $767,744, of which $388,884
had been determined to provider shared savings expense that will be paid to the providers in the fourth quarter of 2020. This
amount was recognized as provider shared savings expense and accrued as of September 30, 2020.
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 September 30, 2020 and December 31, 2019, the Company’s gross patient
services accounts receivable were $190,492 and $188,503, respectively, and net patient services accounts receivable were $97,819
and $97,223, respectively, based upon net reporting of accounts receivable. As of September 30, 2020 and December 31, 2019, the
Company’s allowance of doubtful accounts was $13,972 and $13,972, respectively. The Company also had $109,897 accounts receivable
related to amounts billed under consulting contracts.
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 9 for more complete details on balances as of the reporting
periods presented herein. The adoption had no material impact on cash provided by or used in operating, investing or financing
activities on the Company’s unaudited condensed consolidated statements of cash flows.
Inventory
Inventory
consisting of supplements, is stated at the lower of cost or net realizable value. Cost is determined by the first-in, first-out
method. Outdated inventory is directly charged to cost of goods sold.
Goodwill
and Intangible Assets
Goodwill
is recognized as the excess cost of an acquired entity over the net amount assigned to assets acquired and liabilities assumed.
Goodwill is not amortized, but rather tested for impairment on an annual basis and more often if circumstances require. Impairment
losses are recognized whenever the implied fair value of goodwill is less than its carrying value.
HEALTHLYNKED
CORP.
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER
30, 2020
(UNAUDITED)
NOTE
2 – SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
The
Company recognizes an acquired intangible apart from goodwill whenever the intangible arises from contractual or other legal rights,
or whenever it can be separated or divided from the acquired entity and sold, transferred, licensed, rented or exchanged, either
individually or in combination with a related contract, asset or liability. Such intangibles are amortized over their estimated
useful lives unless the estimated useful life is determined to be indefinite. Amortizable intangible assets are being amortized
primarily over useful lives of five years. The straight-line method of amortization is used as it has been determined to approximate
the use pattern of the assets. Impairment losses are recognized if the carrying amount of an intangible that is subject to amortization
is not recoverable from expected future cash flows and its carrying amount exceeds its fair value.
The
Company also maintains intangible assets with indefinite lives, which are not amortized. These intangibles are tested for impairment
on an annual basis and more often if circumstances require. Impairment losses are recognized whenever the implied fair value of
these assets is less than their carrying value. No impairment charges were recognized in the three or nine months ended September
30, 2020 or 2019.
Concentrations
of Credit Risk
The
Company’s financial instruments that are exposed to a concentration of credit risk are cash and accounts receivable. There
are no patients/customers that represent 10% or more of the Company’s revenue or accounts receivable. Generally, the Company’s
cash and cash equivalents are in checking accounts.
Property
and Equipment
Property
and equipment are stated at cost. When retired or otherwise disposed, the related carrying value and accumulated depreciation
are removed from the respective accounts and the net difference less any amount realized from disposition, is reflected in earnings.
For consolidated financial statement purposes, property and equipment are recorded at cost and depreciated using the straight-line
method over their estimated useful lives of 5 to 7 years. The cost of repairs and maintenance is expensed as incurred; major replacements
and improvements are capitalized.
The
Company examines the possibility of decreases in the value of fixed assets when events or changes in circumstances reflect the
fact that their recorded value may not be recoverable. The Company recognizes an impairment loss when the sum of expected undiscounted
future cash flows is less than the carrying amount of the asset. The amount of impairment is measured as the difference between
the asset’s estimated fair value and its book value. There was no impairment as of or for the periods ended September 30,
2020 or 2019.
Convertible
Notes
Convertible
notes are regarded as compound instruments, consisting of a liability component and an equity component. The component parts of
compound instruments are classified separately as financial liabilities and equity in accordance with the substance of the contractual
arrangement. At the date of issue, the fair value of the liability component is estimated using the prevailing market interest
rate for a similar non-convertible instrument. This amount is recorded as a liability on an amortized cost basis until extinguished
upon conversion or at the instrument’s maturity date. The equity component is determined by deducting the amount of the
liability component from the fair value of the compound instrument as a whole. This is recognized as additional paid-in capital
and included in equity, net of income tax effects, and is not subsequently remeasured. After initial measurement, they are carried
at amortized cost using the effective interest method. Convertible notes for which the maturity date has been extended and that
qualify for debt extinguishment treatment are recorded at fair value on the extinguishment date and then revalue at the end of
each reporting period, with the change recorded to the statement of operations under “Change in Fair Value of Debt.”
HEALTHLYNKED
CORP.
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER
30, 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:
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●
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Level
1 – Fair value based on quoted prices in active markets for identical assets
or liabilities;
|
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●
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Level
2 – Fair value based on significant directly observable data (other than Level
1 quoted prices) or significant indirectly observable data through corroboration with
observable market data. Inputs would normally be (i) quoted prices in active markets
for similar assets or liabilities, (ii) quoted prices in inactive markets for identical
or similar assets or liabilities or (iii) information derived from or corroborated by
observable market data;
|
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●
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Level
3 – Fair value based on prices or valuation techniques that require significant
unobservable data inputs. Inputs would normally be a reporting entity’s own data
and judgments about assumptions that market participants would use in pricing the asset
or liability.
|
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.
HEALTHLYNKED
CORP.
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER
30, 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 and nine months
ended September 30, 2020 or 2019, since the Company has sustained a loss for both periods. Due to the uncertainty of the utilization
and recoverability of the loss carry-forwards and other deferred tax assets, management has determined a full valuation allowance
for the deferred tax assets, since it is more likely than not that the deferred tax assets will not be realizable.
Recurring
Fair Value Measurements
The
carrying value of the Company’s financial assets and financial liabilities is their cost, which may differ from fair value.
The carrying value of cash held as demand deposits, money market and certificates of deposit, marketable investments, accounts
receivable, short-term borrowings, accounts payable, accrued liabilities, and derivative financial instruments approximated their
fair value.
Deemed dividend
The Company incurs a deemed dividend on
Series B Convertible Preferred Voting Stock (the “Series B Preferred”). As the intrinsic price per share of the Series
B Preferred was less than the deemed fair value of the Company’s common stock on the date of issuance of the Series B Preferred,
the Series B Preferred contains a beneficial conversion feature as described in FASB ASC 470-20, “Debt with Conversion and
Other Options.” The difference in the stated conversion price and estimated fair value of the common stock is accounted for
as a beneficial conversion feature and affects income or loss available to common stockholders for purposes of earnings per share
available to common stockholders.
Net
Loss per Share
Basic net income (loss) per common share is computed by dividing
net income (loss) by the weighted average number of shares of common stock outstanding during the period. During the three and
nine months ended September 30, 2020 and 2019, the Company reported a net loss and excluded all outstanding stock options, warrants
and other dilutive securities from the calculation of diluted net loss per common share because inclusion of these securities would
have been anti-dilutive. As of September 30, 2020 and December 31, 2019, potentially dilutive securities were comprised of (i)
50,470,118 and 47,056,293 warrants outstanding, respectively, (ii) 3,249,250 and 3,269,250 stock options outstanding, respectively,
(iii) 10,298,333 and 23,210,423 shares issuable upon conversion of convertible notes, respectively, (iv) 300,000 and 332,500
unissued shares subject to future vesting requirements granted pursuant to the Company’s Employee Incentive Plan, and (v) up to 13,750,000 shares of common stock issuable upon conversion of Series B Preferred.
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.
HEALTHLYNKED
CORP.
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER
30, 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 15, Shareholders’ Equity (Deficit).
Business
Segments
The
Company uses the “management approach” to identify its reportable segments. The management approach designates the
internal organization used by management for making operating decisions and assessing performance as the basis for identifying
the Company’s reportable segments. Using the management approach, the Company determined that it has three operating segments:
Health Services (multi-specialty medical group including the NWC OB/GYN practice, the NCFM practice acquired in April 2019 and
the BTG physical therapy practice launched in 2020), Digital Healthcare (develops and markets the “HealthLynked Network,”
an online personal medical information and record archive system), and ACO/MSO (comprised of the ACO/MSO business acquired with
CHM in May 2020, which assists physician practices in providing coordinated and more efficient care to patients via the MSSP).
Recent
Accounting Pronouncements
Effective
January 1, 2019, the Company adopted Accounting Standards Update (“ASU”) No. 2016-02, Leases (“ASU
2016-02”) using the required modified retrospective approach. ASU 2016-02 requires lessees to record most leases on their
balance sheets but recognize expenses on their income statements in a manner similar to current accounting. See discussion below
under the caption “Leases” in this Note 2 and in Note 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.
HEALTHLYNKED
CORP.
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER
30, 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.
No
other new accounting pronouncements were issued or became effective in the period that had, or are expected to have, a material
impact on our unaudited condensed consolidated Financial Statements.
NOTE
3 – GOING CONCERN MATTERS AND LIQUIDITY
As of September 30, 2020, the Company had a working capital
deficit of $1,979,983 and accumulated deficit $19,862,013. For the nine months ended September 30, 2020, the Company had a net
loss of $3,896,221 and net cash used by operating activities of $1,094,495. Net cash provided by investing activities was $2,425,870,
including $2,740,806 received from the sale of marketable securities received in an August 2020 financing transaction. Net cash
provided by financing activities was $271,308, resulting principally from $1,045,669 proceeds from loans and grants issued by the
federal government under the Payroll Protection Act, $827,500 net proceeds from the issuance of convertible notes, and $149,000
proceeds from the issuance of related party loans. The Company also repaid $1,882,405 of convertible notes and $967,756 of related
party loans during 2020.
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.
HEALTHLYNKED
CORP.
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER
30, 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, maintaining existing and expanding overhead
and administrative costs, and repaying its outstanding convertible notes, which have an aggregate face value of $1,038,500 as of
September 30, 2020, will be financed from (i) anticipated profits generated by NCFM, CHM and AHP, and MOD, which was acquired in
October 2020, and (ii) outside funding sources, including the put rights associated with the Investment Agreement entered into
in July of 2016 (the “Investment Agreement”), sales of common stock, government loans and issuance of additional convertible
notes. In May 2020, the Investment Agreement, which was scheduled to expire on May 15, 2020, was extended an additional two years
to May 15, 2022. No assurances can be given that the Company will be able to access sufficient outside capital in a timely fashion
in order to repay the convertible notes before they mature. If necessary funds are not available, the Company’s business
and operations would be materially adversely affected and in such event, the Company would attempt to reduce costs and adjust its
business plan.
NOTE
4 – MARKETABLE SECURITIES
On August 20, 2020, the Company entered
into a contribution agreement (the “Contribution Agreement”) with Michael T. Dent, Trustee of the Mary S. Dent Gifting
Trust dated January 31, 2006 (the “Gifting Trust”), Michael Thomas Dent, Trustee under the Michael Thomas Dent Declaration
of Trust dated March 23, 1998, as amended (the “MTD Trust” and together with the Gifting Trust, the “Trusts”),
and Michael T. Dent, the Chief Executive Officer and Chairman of the board of directors of the Company. Pursuant to the Contribution
Agreement, the Trusts contributed an aggregate of 76,026 freely trading shares of common stock of NeoGenomics, Inc. (“NEO”
and the “NEO Shares”) (NASD:NEO) with a fair value of $3,006,889 to the Company. In consideration for the foregoing,
the Company issued the Trusts an aggregate of 2,750,000 shares of the Company’s newly designated Series B Preferred stock
and an aggregate of 24,522,727 shares of the Company’s common stock (collectively, the “August 2020 Equity Transaction”).
During the three and nine months ended
September 30, 2020, the Company sold 74,900 of the NEO Shares and received proceeds of $2,740,806, realizing losses of $281,606.
As of September 30, 2020, the Company held 1,126 NEO Shares with a fair value of $44,477.
NOTE
5 – ACQUISITIONS
Hughes
Center for Functional Medicine – April 2019
On
April 12, 2019, the Company acquired a 100% interest in Hughes Center for Functional Medicine (“HCFM”), a medical
practice engaged in improving the health of its patients through individualized and integrative health care. Under the terms of
acquisition, the Company paid HCFM shareholders $500,000 in cash, issued 3,968,254 shares of the Company’s common stock
and agreed to an earn-out provision of $500,000 that may be earned based on the performance of HCFM in the years ended on the
first, second and third anniversary dates of the acquisition closing. The total consideration fair value represents a transaction
value of $1,799,672. The Company accounted for the transaction as an acquisition of a business pursuant to ASC 805, “Business
Combinations” (“ASC 805”).
Following
the acquisition, HCFM was rebranded as NCFM and was combined with NWC to form the Company’s Health Services segment. As
a result of the acquisition, the Company is expected to be a leading provider of Functional Medicine in Southwest Florida. The
Company also expects to reduce costs in its Health Services segment through economies of scale.
The
following table summarizes the fair value of consideration paid for HCFM:
Cash
|
|
$
|
500,000
|
|
Common Stock (3,968,254 shares)
|
|
|
1,000,000
|
|
Contingent acquisition consideration subject to earn-out
|
|
|
299,672
|
|
|
|
|
|
|
Fair Value of Total Consideration
|
|
$
|
1,799,672
|
|
HEALTHLYNKED
CORP.
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER
30, 2020
(UNAUDITED)
NOTE
5 – ACQUISITIONS (CONTINUED)
The
fair value of the 3,968,254 common shares issued as part of the acquisition consideration was determined using the intraday volume
weighted average price of the Company’s common shares on the acquisition date. The terms of the earn out require the Company
to pay the former owner of HCFM up to $100,000, $200,000 and $200,000 on the first, second and third anniversary, respectively,
based on achievement by NCFM of revenue of at least $3,100,000 (50% weighting) and EBITDA of at least $550,000 (50% weighting)
in the year preceding each anniversary date. The fair value of the contingent acquisition consideration related to the future
earn-out payments was calculated using a probability-weighted discounted cash flow projection. The fair value of the contingent
acquisition consideration is remeasured at the end of each reporting period and changes are included in the statement of operations
under the caption “Change in fair value of contingent acquisition consideration.” During the three months ended September
30, 2020 and 2019, the Company recognized losses on the change in the fair value of contingent acquisition consideration related
to the HCFM acquisition of $1,185 and $-0-, respectively. During the nine months ended September 30, 2020 and 2019, the Company
recognized losses on the change in the fair value of contingent acquisition consideration of $12,512 and $-0-, respectively. During
the nine months ended September 30, 2020, the Company paid the seller $47,000 in satisfaction of the first year of earn-out.
The
following table summarizes the estimated fair values of the assets acquired at the acquisition date. There were no liabilities
assumed in the acquisition of HCFM.
Cash
|
|
$
|
35,000
|
|
Hyperbaric Chambers
|
|
|
452,289
|
|
Medical Equipment
|
|
|
29,940
|
|
Computer Equipment/Software
|
|
|
19,739
|
|
Office Furniture & Equipment
|
|
|
23,052
|
|
Inventory
|
|
|
72,114
|
|
Leasehold Improvements
|
|
|
25,000
|
|
Website
|
|
|
41,000
|
|
Patient Management Platform Database
|
|
|
1,101,538
|
|
|
|
|
|
|
Fair Value of Identifiable Assets Acquired
|
|
$
|
1,799,672
|
|
The
fair value of the website of $41,000 was determined based upon the cost to reconstruct and put into use applying current market
rates. The fair value of the Patient Management Platform Database of $1,101,538 was estimated by applying the income approach.
Under the income approach, the expected future cash flows generated by the Patient Management Platform Database are estimated
and discounted to their net present value at an appropriate risk-adjusted rate of return. Significant factors considered in the
calculation of the rate of return are the weighted average cost of capital and return on assets, as well as the risks inherent
in the business. Cash flows were estimated based on EBITDA using forecasted revenue and costs. The measure is based on significant
inputs that are not observable in the market (i.e. Level 3 inputs). Key assumptions include (i) a capitalization rate of 11.75%
(ii) sustainable growth of 5% and (iii) a benefit stream using EBITDA cash flow. The Company finalized the purchase price allocation
in March 2020 and determined that no goodwill was included in the acquisition.
Cura
Health Management LLC – May 2020
On
May 18, 2020, the Company acquired a 100% interest in Cura Health Management LLC (“CHM”) and its wholly owned subsidiary
ACO Health Partners, LLC (“AHP”). CHM and AHP assist physician practices in providing coordinated and more efficient
care to patients via the MSSP. The Company accounted for the transaction as an acquisition of a business pursuant to ASC 805,
“Business Combinations” (“ASC 805”). Following the acquisition, the business of CHM will comprise the
Company’s ACO/MSO Division.
Under
the terms of acquisition, the Company paid CHM shareholders the following consideration: (i) $214,000 in cash paid at closing,
(ii) 2,240,838 shares of HealthLynked common stock issued at closing, (iii) up to $223,500 additional cash and $660,000 in additional
shares of HealthLynked common payable at the time CHM receives the final assessment of the calculation of MSSP savings for the
2019 program year, with this amount prorated based on a target MSSP payment (plus other ancillary revenue) of $1,725,000, and
(iv) up to $437,500 based on the business achieving annual revenue of $2,250,000 and annual profit of $500,000 in each of the
four years following closing.
HEALTHLYNKED
CORP.
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER
30, 2020
(UNAUDITED)
NOTE
5 – ACQUISITIONS (CONTINUED)
The
total consideration fair value represents a transaction value of $1,473,460. The following table summarizes the fair value of
consideration paid:
Cash paid at closing
|
|
$
|
214,000
|
|
Shares issued at closing
|
|
|
201,675
|
|
Cash and shares contingent upon 2019 program year MSSP payment target
|
|
|
778,192
|
|
Cash contingent upon four-year earn-out
|
|
|
279,593
|
|
|
|
|
|
|
|
|
$
|
1,473,460
|
|
The fair value of the 2,240,838 common shares issued at closing
was determined using the intraday average high and low trading price of the Company’s common shares on the acquisition date.
The terms of the earn out require the Company to pay the former owners of CHM (i) up to $223,500 additional cash and to $660,000
of additional shares of Company common stock when CHM receives the final assessment of the calculation of 2019 plan year MSSP revenue
(the “Current Earnout”), and (ii) up to $62,500, $125,000, $125,000 and $125,000 on the first, second, third and fourth
anniversary, respectively, based on achievement by the underlying business of revenue of at least $2,250,000 (50% weighting) and
profit of at least $500,000 (50% weighting) in the year preceding each anniversary date (the “Future Earnout”). During
September 2020, pursuant to a Second Amendment to the Agreement and Plan of Merger and in satisfaction of the Current Earnout,
the Company paid $90,389 cash, issued 1,835,625 shares and agreed that the balance of the Current Earnout that was not earned in
2020, being $124,043 cash and $366,300 in shares of Company common stock, would be deferred until the first future earnout year
in which MSSP revenue exceeds $1.725 million and revenue from other services exceeds $605,000.
The
fair value of the contingent acquisition consideration related to both the Current Earnout and the Future Earnout were calculated
using a probability-weighted discounted cash flow projection. The fair value of the contingent acquisition consideration is remeasured
at the end of each reporting period and changes are included in the statement of operations under the caption “Change in
fair value of contingent acquisition consideration.” During the three months ended September 30, 2020 and 2019, the Company
recognized gains on the change in the fair value of contingent acquisition consideration related to the CHM acquisition of $47,181
and $-0-, respectively. During the nine months ended September 30, 2020 and 2019, the Company recognized gains on the change in
the fair value of contingent acquisition consideration related to the CHM acquisition of $13,200 and $-0-, respectively.
The
following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the acquisition date:
Cash
|
|
$
|
49,995
|
|
Accounts receivable
|
|
|
90,197
|
|
Prepayments
|
|
|
15,294
|
|
ACO physician contracts
|
|
|
1,073,000
|
|
Goodwill
|
|
|
381,856
|
|
Accounts payable
|
|
|
(32,846
|
)
|
Deferred revenue
|
|
|
(104,034
|
)
|
|
|
|
|
|
Fair Value of Identifiable Assets Acquired and Liabilities Assumed
|
|
$
|
1,473,460
|
|
The
fair value of the ACO Physician Contracts of $1,073,000 was estimated by applying the income approach. Under the income approach,
the expected future cash flows generated by the ACO Physician Contracts are estimated and discounted to their net present value
at an appropriate risk-adjusted rate of return. Significant factors considered in the calculation of the rate of return are the
weighted average cost of capital and return on assets, as well as the risks inherent in the business. Cash flows were estimated
based on EBITDA using forecasted revenue and costs. The measure is based on significant inputs that are not observable in the
market (i.e. Level 3 inputs). Key assumptions include (i) a capitalization rate of 24.24% (ii) sustainable growth of 5.00% and
(iii) a benefit stream using EBITDA cash flow. Goodwill of $381,856 arising from the acquisition consists of value associated
with the legacy name. None of the goodwill recognized is expected to be deductible for income tax purposes.
HEALTHLYNKED
CORP.
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER
30, 2020
(UNAUDITED)
NOTE
5 – ACQUISITIONS (CONTINUED)
Pro
Forma Financial Information
The
following represents the pro forma consolidated income statement as if HCFM and CHM had been included in the consolidated results
of the Company for the entire nine-month period ending September 30, 2020 and 2019:
|
|
Nine Months Ended
September 30,
|
|
|
|
2020
|
|
|
2019
|
|
Revenue
|
|
$
|
4,740,283
|
|
|
$
|
3,741,591
|
|
Net loss
|
|
$
|
(3,846,293
|
)
|
|
$
|
(2,994,648
|
)
|
These
amounts have been calculated after applying the Company’s accounting policies and adjusting the results of HCFM and CHM
to reflect the additional depreciation and amortization that would have been charged assuming the fair value adjustments to property,
plant and equipment and intangible assets had been applied on January 1, 2020 and 2019, respectively.
NOTE
6 – DEFERRED OFFERING COSTS AND PREPAID EXPENSES
On March 22, 2017, the Company granted to the Investor warrants
to purchase 4,000,000 shares at $0.25 per share, 2,000,000 shares at $0.50 per share and 1,000,000 shares at $1.00 per share. On
June 7, 2017, the Company also granted warrants to purchase 200,000 shares at $0.25 per share, 100,000 shares at $0.50 per share
and 50,000 shares at $1.00 per share to an advisor as a fee in connection with the Investment Agreement. The aggregate fair value
of these warrants totaling $153,625 was recorded as a deferred offering cost and is being amortized over the initial period during
which the Company was able access the financing, which began on May 15, 2017 and ended on May 15, 2020. The Company recognized
general and administrative expense related to the cost of the warrants of $-0- and $12,802 in the three months ended September
30, 2020 and 2019, respectively, and $19,203 and $38,46 in the nine months ended September 30, 2020 and 2019, respectively.
On
December 6, 2018, the Company granted three-year warrants to purchase 240,000 shares at an exercise price of $0.20 per share to
two advisors for services to be provided over a three-month period. The fair value of the warrants of $35,462 was amortized over
a three-month service period. During the three months ended September 30, 2020 and 2019, the Company recognized $-0- and $25,611,
respectively, to general and administrative expense related to the warrants. The Company recognized general and administrative
expense related to the warrants of $-0- and $-0- in the three months ended September 30, 2020 and 2019, respectively, and $-0-
and $25,611 in the nine months ended September 30, 2020 and 2019, respectively.
NOTE
7 – PROPERTY, PLANT, AND EQUIPMENT
Property,
plant and equipment at September 30, 2020 and December 31, 2019 are as follows:
|
|
September 30,
|
|
|
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
Capital lease equipment
|
|
$
|
---
|
|
|
$
|
251,752
|
|
Medical equipment
|
|
|
484,126
|
|
|
|
482,229
|
|
Furniture, telephone and office equipment
|
|
|
792,519
|
|
|
|
529,123
|
|
|
|
|
|
|
|
|
|
|
Total property, plant and equipment
|
|
|
1,276,645
|
|
|
|
1,263,104
|
|
Less: accumulated depreciation
|
|
|
(817,971
|
)
|
|
|
(749,316
|
)
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment, net
|
|
$
|
458,674
|
|
|
$
|
513,788
|
|
Depreciation
expense during the three months ended September 30, 2020 and 2019 was $23,083 and $22,913, respectively. Depreciation expense
during the nine months ended September 30, 2020 and 2019 was $68,655 and $44,503, respectively.
HEALTHLYNKED
CORP.
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER
30, 2020
(UNAUDITED)
NOTE
8 – INTANGIBLE ASSETS
Intangible
assets at September 30, 2020 and December 31, 2019 are as follows:
|
|
September 30,
|
|
|
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
NCFM: Medical database
|
|
$
|
1,101,538
|
|
|
$
|
1,230,000
|
|
NCFM: Website
|
|
|
41,000
|
|
|
|
41,000
|
|
CHM: ACO physician contracts
|
|
|
1,073,000
|
|
|
|
---
|
|
Goodwill
|
|
|
381,856
|
|
|
|
71,866
|
|
|
|
|
|
|
|
|
|
|
Total intangible assets
|
|
|
2,597,394
|
|
|
|
1,342,866
|
|
Less: accumulated amortization
|
|
|
(12,064
|
)
|
|
|
(5,908
|
)
|
|
|
|
|
|
|
|
|
|
Intangible assets, net
|
|
$
|
2,585,330
|
|
|
$
|
1,336,958
|
|
Goodwill
and intangible assets arose from the acquisitions of NCFM in April 2019 and CHM in May 2020. The NCFM medical database is assumed
to have an indefinite life and is not amortized and the website is being amortized on a straight-line basis over its estimated
useful life of five years. The CHM ACO physician contracts are assumed to have an indefinite life and are not amortized. Goodwill
represents the excess of consideration transferred over the fair value of the net identifiable assets acquired related to the
acquisition of CHM.
Amortization
expense in the three months ended September 30, 2020 and 2019 was $2,067 and $2,067, respectively. Amortization expense in the
nine months ended September 30, 2020 and 2019 was $6,156 and $3,842, respectively. No impairment charges were recognized related
to goodwill and intangible assets in the three or nine months ended September 30, 2020 or 2019.
NOTE
9 – LEASES
The Company has three operating leases for office space related
to its NWC, NCFM and BTG practices that expire in July 2023, May 2022, and March 2023, respectively. As of September 30, 2020,
the Company’s weighted-average remaining lease term relating to its operating leases was 2.4 years, with a weighted-average
discount rate of 33.89%. The Company was also lessee in a capital equipment finance lease for medical equipment entered into
in March 2015 that expired in March 2020.
The table below summarizes the Company’s lease-related
assets and liabilities as of September 30, 2020 and December 31, 2019:
|
|
As of September 30, 2020
|
|
|
As of December 31, 2019
|
|
|
|
Operating
|
|
|
Financing
|
|
|
Total
|
|
|
Operating
|
|
|
Financing
|
|
|
Total
|
|
|
|
Leases
|
|
|
Leases
|
|
|
Leases
|
|
|
Leases
|
|
|
Leases
|
|
|
Leases
|
|
Lease assets
|
|
$
|
297,050
|
|
|
$
|
---
|
|
|
$
|
297,050
|
|
|
$
|
273,196
|
|
|
$
|
4,482
|
|
|
$
|
277,678
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lease liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lease liabilities (short term)
|
|
$
|
105,233
|
|
|
$
|
---
|
|
|
$
|
105,233
|
|
|
$
|
197,041
|
|
|
$
|
4,482
|
|
|
$
|
201,523
|
|
Lease liabilities (long term)
|
|
|
198,667
|
|
|
|
---
|
|
|
|
198,667
|
|
|
|
80,510
|
|
|
|
---
|
|
|
|
80,510
|
|
Total lease liabilities
|
|
$
|
303,900
|
|
|
$
|
---
|
|
|
$
|
303,900
|
|
|
$
|
277,551
|
|
|
$
|
4,482
|
|
|
$
|
282,033
|
|
HEALTHLYNKED
CORP.
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER
30, 2020
(UNAUDITED)
NOTE
9 – LEASES (CONTINUED)
Lease
expense in the three and nine months ended September 30, 2020 and 2019 was as follow:
|
|
Three Months Ended
September 30,
|
|
|
Nine Months Ended
September 30,
|
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating leases
|
|
$
|
61,526
|
|
|
$
|
85,573
|
|
|
$
|
242,891
|
|
|
$
|
239,974
|
|
Financing leases
|
|
|
---
|
|
|
|
4,587
|
|
|
|
4,587
|
|
|
|
13,761
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total lease expense
|
|
$
|
61,526
|
|
|
$
|
90,160
|
|
|
$
|
247,478
|
|
|
$
|
253,735
|
|
Maturities
of operating and capital lease liabilities were as follows as of September 30, 2020:
|
|
Operating
|
|
|
Capital
|
|
|
Total
|
|
|
|
Leases
|
|
|
Leases
|
|
|
Commitments
|
|
2020
|
|
$
|
50,882
|
|
|
$
|
---
|
|
|
$
|
50,882
|
|
2021
|
|
|
205,430
|
|
|
|
---
|
|
|
|
205,430
|
|
2022
|
|
|
159,561
|
|
|
|
---
|
|
|
|
159,561
|
|
2023
|
|
|
68,457
|
|
|
|
---
|
|
|
|
68,457
|
|
Total lease payments
|
|
|
484,330
|
|
|
|
---
|
|
|
|
484,330
|
|
Less interest
|
|
|
(180,430
|
)
|
|
|
---
|
|
|
|
(180,430
|
)
|
Present value of lease liabilities
|
|
$
|
303,900
|
|
|
$
|
---
|
|
|
$
|
303,900
|
|
NOTE
10 – DEFERRED REVENUE
Amounts
related to deferred contract revenue in the three and nine months ended September 30, 2020 and 2019 was as follow:
|
|
Three Months Ended
September 30,
|
|
|
Nine Months Ended
September 30,
|
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, beginning of period
|
|
$
|
106,281
|
|
|
$
|
---
|
|
|
$
|
---
|
|
|
$
|
---
|
|
Acquisition of CHM
|
|
|
---
|
|
|
|
---
|
|
|
|
104,034
|
|
|
|
---
|
|
Payments received for unearned revenue
|
|
|
163,038
|
|
|
|
---
|
|
|
|
215,705
|
|
|
|
---
|
|
Revenue earned
|
|
|
(217,605
|
)
|
|
|
---
|
|
|
|
(268,025
|
)
|
|
|
---
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, end of period
|
|
$
|
51,714
|
|
|
$
|
---
|
|
|
$
|
51,714
|
|
|
$
|
---
|
|
Deferred
revenue relates to contracted consulting services at CHM for which payment has been made but services have not yet been rendered
as of the measurement date. The Company typically satisfies its performance obligations related to such contracts upon completion
of service. Payment is typically made in the month prior to the services being provided.
HEALTHLYNKED
CORP.
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER
30, 2020
(UNAUDITED)
NOTE
11 – NOTES PAYABLE AND OTHER AMOUNTS DUE TO RELATED PARTY
Amounts
due to related parties as of September 30, 2020 and December 31, 2019 were comprised of the following:
|
|
September 30,
|
|
|
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
Due to related party:
|
|
|
|
|
|
|
Deferred compensation, Dr. Michael Dent
|
|
$
|
300,600
|
|
|
$
|
300,600
|
|
Accrued interest payable to Dr. Michael Dent
|
|
|
---
|
|
|
|
192,857
|
|
Total due to related party
|
|
|
300,600
|
|
|
|
493,457
|
|
|
|
|
|
|
|
|
|
|
Notes payable to related party:
|
|
|
|
|
|
|
|
|
Notes payable to Dr. Michael Dent and family (all current)
|
|
$
|
---
|
|
|
$
|
743,955
|
|
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 “Dent Notes”). The carrying values of the Dent Notes as of September 30, 2020 and December 31, 2019 were as follows:
|
|
|
|
Interest
|
|
September 30,
|
|
|
December 31,
|
|
Inception Date
|
|
Maturity Date
|
|
Rate
|
|
2020
|
|
|
2019
|
|
January 12, 2017
|
|
December 31, 2020
|
|
10%
|
|
$
|
---
|
|
|
$
|
38,378
|
*
|
January 18, 2017
|
|
December 31, 2020
|
|
10%
|
|
|
---
|
|
|
|
21,904
|
*
|
January 24, 2017
|
|
December 31, 2020
|
|
10%
|
|
|
---
|
|
|
|
54,696
|
*
|
February 9, 2017
|
|
December 31, 2020
|
|
10%
|
|
|
---
|
|
|
|
32,715
|
*
|
April 20, 2017
|
|
December 31, 2020
|
|
10%
|
|
|
---
|
|
|
|
10,754
|
*
|
June 15, 2017
|
|
December 31, 2020
|
|
10%
|
|
|
---
|
|
|
|
34,560
|
*
|
August 17, 2017
|
|
December 31, 2020
|
|
10%
|
|
|
---
|
|
|
|
20,997
|
*
|
August 24, 2017
|
|
December 31, 2020
|
|
10%
|
|
|
---
|
|
|
|
39,312
|
*
|
September 7, 2017
|
|
December 31, 2020
|
|
10%
|
|
|
---
|
|
|
|
36,586
|
*
|
September 21, 2017
|
|
December 31, 2020
|
|
10%
|
|
|
---
|
|
|
|
27,621
|
*
|
September 29, 2017
|
|
December 31, 2020
|
|
10%
|
|
|
---
|
|
|
|
12,487
|
*
|
December 21, 2017
|
|
December 31, 2020
|
|
10%
|
|
|
---
|
|
|
|
14,318
|
*
|
January 8, 2018
|
|
December 31, 2020
|
|
10%
|
|
|
---
|
|
|
|
76,415
|
*
|
January 11, 2018
|
|
December 31, 2020
|
|
10%
|
|
|
---
|
|
|
|
9,164
|
*
|
January 26, 2018
|
|
December 31, 2020
|
|
10%
|
|
|
---
|
|
|
|
17,712
|
*
|
January 3, 2014
|
|
December 31, 2020
|
|
10%
|
|
|
---
|
|
|
|
296,336
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
---
|
|
|
$
|
743,955
|
|
|
*
|
Denotes
that note payable is reflected at fair value
|
On
September 21, 2020, the Company and Dr. Dent entered into an agreement pursuant to which the Company repaid all obligations under
the notes payable to Dr. Dent in exchange for one-time cash payment of $780,256. The payment was calculated as the face value
of the Dent Notes of $646,000, plus $134,256 of interest accrued on the notes issued in 2017 and 2018. As part of the Agreement,
Dr. Dent agreed to forgive interest of $105,003 accrued on the remaining Dent Notes. In connection with the agreement and repayment,
the Company realized a gain of $283,863, being the excess of the carrying value of the Dent Notes over the consideration paid.
This amount was recorded to additional paid in capital.
As
denoted in the table above, prior to extinguishment certain of our notes payable to Dr. Dent were 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 September 30, 2020 and 2019 were $32,968 and $5,986, respectively. The
changes in fair value during the nine months ended September 30, 2020 and 2019 were $80,935 and $18,070, respectively. The fair
value of these notes as of September 30, 2020 and December 31, 2019 was $-0- and $743,955, respectively.
HEALTHLYNKED
CORP.
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER
30, 2020
(UNAUDITED)
NOTE
11 – NOTES PAYABLE AND OTHER AMOUNTS DUE TO RELATED PARTY (CONTINUED)
On
January 7, 2020, the Company entered into a Merchant Cash Advance Factoring Agreement (“MCA”) with a trust controlled
by Dr. Dent, pursuant to which the Company received an advance of $150,000 before closing fees (the “2020 MCA”). The
Company is required to repay the 2020 MCA, which acts like an ordinary note payable, at the rate of $7,212 per week until the
balance of $187,500 is repaid, which was scheduled for July 2020. At inception, the Company recognized a note payable in the amount
of $187,500 and a discount against the note payable of $38,500. The discount is being amortized over the life of the instrument.
The Company made installment payments against the MCA of $36,059 and $-0-, respectively, during the three months ended September
30, 2020 and 2019, and $187,500 and $-0-, respectively, during the nine months ended September 30, 2020 and 2019. The Company
recognized amortization of the discount in the amount of $-0- and $-0-, respectively, during the three months ended September
30, 2020 and 2019, and $38,500 and $-0-, respectively, during the nine months ended September 30, 2020 and 2019. The 2020 MCA
was repaid in full and retired during July 2020.
Interest
accrued on the above notes payable as of September 30, 2020 and December 31, 2019 was $-0- and $192,888, respectively. Interest
expense on the above unsecured promissory notes was $14,159 and $16,598 for the three months ended September 30, 2020 and 2019,
respectively, and $86,446 and $49,252 for the nine months ended September 30, 2020 and 2019, respectively.
NOTE
12 – GOVERNMENT NOTES PAYABLE
On May 8, 2020, the Company and its subsidiaries
received an aggregate of $585,969 in loans under the Paycheck Protection Program (the “PPP”). The PPP loans, administered
by the U.S. Small Business Administration (the “SBA”) 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 and 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.
During June, July and August 2020, the
Company and its subsidiaries received an aggregate of $450,000 in Disaster Relief Loans from the SBA. The loans bear interest at
3.75% per annum and mature 30 years from issuance. Mandatory principal and interest payments begin 12 months from the inception
date of each loan.
Interest accrued on government loans as
of September 30, 2020 and December 31, 2019 was $4,716 and $-0-, respectively. Interest expense on the loans was $3,855 and $-0-
for the three months ended September 30, 2020 and 2019, respectively, and $4,716 and $-0- for the nine months ended September 30,
2020 and 2019, respectively.
HEALTHLYNKED
CORP.
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER
30, 2020
(UNAUDITED)
NOTE
13 – CONVERTIBLE NOTES PAYABLE
Convertible
notes payable as of September 30, 2020 and December 31, 2019 were comprised of the following:
|
|
September 30,
|
|
|
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
$550k Note - July 2016
|
|
$
|
607,628
|
*
|
|
$
|
548,010
|
*
|
$50k Note - July 2016
|
|
|
63,053
|
*
|
|
|
56,866
|
*
|
$111k Note - May 2017
|
|
|
118,108
|
*
|
|
|
118,606
|
*
|
$357.5k Note - April 2019
|
|
|
364,490
|
*
|
|
|
328,728
|
*
|
$154k Note - June 2019
|
|
|
---
|
|
|
|
50,000
|
|
$136k Notes - July 2019
|
|
|
---
|
|
|
|
135,850
|
|
$78k Note III - July 2019
|
|
|
---
|
|
|
|
78,000
|
|
$230k Note - July 2019
|
|
|
---
|
|
|
|
230,000
|
|
$108.9k Note - August 2019
|
|
|
---
|
|
|
|
108,947
|
|
$142.5k Note - October 2019
|
|
|
---
|
|
|
|
142,500
|
|
$103k Note V - October 2019
|
|
|
---
|
|
|
|
103,000
|
|
$108.9k Note II - October 2019
|
|
|
---
|
|
|
|
108,947
|
|
$128.5k Note - October 2019
|
|
|
---
|
|
|
|
128,500
|
|
$103k Note VI - November 2019
|
|
|
---
|
|
|
|
103,000
|
|
$78.8k Note II - December 2019
|
|
|
---
|
|
|
|
78,750
|
|
|
|
|
1,153,279
|
|
|
|
2,319,704
|
|
Less: unamortized discount
|
|
|
---
|
|
|
|
(777,668
|
)
|
Convertible notes payable, net of original issue discount and debt discount
|
|
$
|
1,153,279
|
|
|
$
|
1,542,036
|
|
*
|
-
|
Denotes that convertible note payable is carried at fair value
|
HEALTHLYNKED
CORP.
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER
30, 2020
(UNAUDITED)
NOTE
13 – CONVERTIBLE NOTES PAYABLE (CONTINUED)
Amortization
of debt discount recognized on each convertible note outstanding during the three and nine months ended September 30, 2020 and
2019 were as follows:
|
|
Amortization of Debt Discount
|
|
|
|
Three Months Ended
September 30,
|
|
|
Nine Months Ended
September 30,
|
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$103k Note I - October 2018
|
|
$
|
---
|
|
|
$
|
---
|
|
|
$
|
---
|
|
|
$
|
33,972
|
|
$103k Note II - November 2018
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
44,952
|
|
$153k Note - November 2018
|
|
|
---
|
|
|
|
1,733
|
|
|
|
---
|
|
|
|
91,451
|
|
$103k Note III - December 2018
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
42,611
|
|
$78k Note I - January 2019
|
|
|
---
|
|
|
|
4,286
|
|
|
|
---
|
|
|
|
52,000
|
|
$78k Note II - January 2019
|
|
|
---
|
|
|
|
6,346
|
|
|
|
---
|
|
|
|
47,858
|
|
$103k Note III - April 2019
|
|
|
---
|
|
|
|
28,628
|
|
|
|
---
|
|
|
|
56,012
|
|
$104.5k Note - April 2019
|
|
|
---
|
|
|
|
26,268
|
|
|
|
---
|
|
|
|
49,109
|
|
$104.5k Note II - April 2019
|
|
|
---
|
|
|
|
26,268
|
|
|
|
---
|
|
|
|
49,109
|
|
$357.5k Note - April 2019
|
|
|
---
|
|
|
|
91,230
|
|
|
|
---
|
|
|
|
166,593
|
|
$103k Note IV - May 2019
|
|
|
---
|
|
|
|
31,906
|
|
|
|
---
|
|
|
|
50,633
|
|
$154k Note - June 2019
|
|
|
---
|
|
|
|
38,710
|
|
|
|
1,093
|
|
|
|
50,071
|
|
$67.9k Note - July 2019
|
|
|
---
|
|
|
|
16,277
|
|
|
|
7,252
|
|
|
|
16,277
|
|
$67.9k Note II - July 2019
|
|
|
---
|
|
|
|
16,277
|
|
|
|
2,813
|
|
|
|
16,277
|
|
$78k Note III - July 2019
|
|
|
---
|
|
|
|
20,512
|
|
|
|
6,208
|
|
|
|
20,512
|
|
$230k Note - July 2019
|
|
|
---
|
|
|
|
46,503
|
|
|
|
58,527
|
|
|
|
46,503
|
|
$108.9k Note - August 2019
|
|
|
---
|
|
|
|
7,784
|
|
|
|
21,038
|
|
|
|
7,785
|
|
$142.5k Note - October 2019
|
|
|
21,804
|
|
|
|
---
|
|
|
|
92,663
|
|
|
|
---
|
|
$103k Note V - October 2019
|
|
|
---
|
|
|
|
---
|
|
|
|
29,143
|
|
|
|
---
|
|
$108.9k Note II - October 2019
|
|
|
---
|
|
|
|
---
|
|
|
|
33,205
|
|
|
|
---
|
|
$128.5k Note - October 2019
|
|
|
---
|
|
|
|
---
|
|
|
|
51,705
|
|
|
|
---
|
|
$103k Note VI - November 2019
|
|
|
---
|
|
|
|
---
|
|
|
|
39,450
|
|
|
|
---
|
|
$78.8k Note II - December 2019
|
|
|
---
|
|
|
|
---
|
|
|
|
27,111
|
|
|
|
---
|
|
$131.3k Note - January 2020
|
|
|
1,158
|
|
|
|
---
|
|
|
|
16,205
|
|
|
|
---
|
|
$78k Note IV - January 2020
|
|
|
1,608
|
|
|
|
---
|
|
|
|
14,955
|
|
|
|
---
|
|
$157.5k Note - March 2020
|
|
|
7,432
|
|
|
|
---
|
|
|
|
20,044
|
|
|
|
---
|
|
$157.5k Note II - April 2020
|
|
|
9,127
|
|
|
|
---
|
|
|
|
21,436
|
|
|
|
---
|
|
$135k Note - April 2020
|
|
|
7,744
|
|
|
|
---
|
|
|
|
17,718
|
|
|
|
---
|
|
$83k Note II - April 2020
|
|
|
6,675
|
|
|
|
---
|
|
|
|
13,767
|
|
|
|
---
|
|
$128k Note - April 2020
|
|
|
10,268
|
|
|
|
---
|
|
|
|
18,097
|
|
|
|
---
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
65,816
|
|
|
$
|
362,728
|
|
|
$
|
492,430
|
|
|
$
|
841,725
|
|
HEALTHLYNKED
CORP.
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER
30, 2020
(UNAUDITED)
NOTE
13 – CONVERTIBLE NOTES PAYABLE (CONTINUED)
Unamortized
debt discount on outstanding convertible notes payable as of September 30, 2020 and December 31, 2019 were comprised of the following:
|
|
Unamortized Discount as of
|
|
|
|
September 30,
|
|
|
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
$154k Note - June 2019
|
|
$
|
---
|
|
|
$
|
21,175
|
|
$67.9k Note - July 2019
|
|
|
---
|
|
|
|
20,497
|
|
$67.9k Note II - July 2019
|
|
|
---
|
|
|
|
20,497
|
|
$78k Note III - July 2019
|
|
|
---
|
|
|
|
32,657
|
|
$230k Note - July 2019
|
|
|
---
|
|
|
|
125,684
|
|
$108.9k Note - August 2019
|
|
|
---
|
|
|
|
59,392
|
|
$142.5k Note - October 2019
|
|
|
---
|
|
|
|
107,070
|
|
$103k Note V - October 2019
|
|
|
---
|
|
|
|
70,686
|
|
$108.9k Note II - October 2019
|
|
|
---
|
|
|
|
72,592
|
|
$128.5k Note - October 2019
|
|
|
---
|
|
|
|
106,732
|
|
$103k Note VI - November 2019
|
|
|
---
|
|
|
|
81,740
|
|
$78.8k Note II - December 2019
|
|
|
---
|
|
|
|
58,946
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
---
|
|
|
$
|
777,668
|
|
HEALTHLYNKED
CORP.
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER
30, 2020
(UNAUDITED)
NOTE
13 – CONVERTIBLE NOTES PAYABLE (CONTINUED)
Interest
expense recognized on each convertible note outstanding during the three and nine months ended September 30, 2020 and 2019 were
as follows:
|
|
Interest Expense
|
|
|
|
Three Months Ended
September 30,
|
|
|
Nine Months Ended
September 30,
|
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$550k Note - July 2016
|
|
$
|
8,318
|
|
|
$
|
8,318
|
|
|
$
|
24,773
|
|
|
$
|
24,682
|
|
$50k Note - July 2016
|
|
|
1,260
|
|
|
|
1,260
|
|
|
|
3,753
|
|
|
|
3,740
|
|
$111k Note - May 2017
|
|
|
2,042
|
|
|
|
4,168
|
|
|
|
8,755
|
|
|
|
12,369
|
|
$171.5k Note - October 2017
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
1,785
|
|
$103k Note I - October 2018
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
2,653
|
|
$103k Note II - November 2018
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
3,584
|
|
$153k Note - November 2018
|
|
|
---
|
|
|
|
297
|
|
|
|
---
|
|
|
|
7,008
|
|
$103k Note III - December 2018
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
4,261
|
|
$78k Note I - January 2019
|
|
|
---
|
|
|
|
321
|
|
|
|
---
|
|
|
|
3,889
|
|
$78k Note II - January 2019
|
|
|
---
|
|
|
|
513
|
|
|
|
---
|
|
|
|
3,868
|
|
$103k Note III - April 2019
|
|
|
---
|
|
|
|
2,596
|
|
|
|
---
|
|
|
|
5,079
|
|
$104.5k Note - April 2019
|
|
|
---
|
|
|
|
2,634
|
|
|
|
---
|
|
|
|
4,924
|
|
$104.5k Note II - April 2019
|
|
|
---
|
|
|
|
2,634
|
|
|
|
---
|
|
|
|
4,924
|
|
$357.5k Note - April 2019
|
|
|
9,012
|
|
|
|
12,650
|
|
|
|
18,751
|
|
|
|
23,101
|
|
$103k Note IV - May 2019
|
|
|
---
|
|
|
|
2,596
|
|
|
|
---
|
|
|
|
4,120
|
|
$154k Note - June 2019
|
|
|
---
|
|
|
|
3,882
|
|
|
|
46
|
|
|
|
5,021
|
|
$67.9k Note - July 2019
|
|
|
---
|
|
|
|
1,507
|
|
|
|
707
|
|
|
|
1,507
|
|
$67.9k Note II - July 2019
|
|
|
---
|
|
|
|
1,507
|
|
|
|
177
|
|
|
|
1,507
|
|
$78k Note III - July 2019
|
|
|
---
|
|
|
|
1,624
|
|
|
|
492
|
|
|
|
1,624
|
|
$230k Note - July 2019
|
|
|
---
|
|
|
|
4,663
|
|
|
|
3,041
|
|
|
|
4,663
|
|
$108.9k Note - August 2019
|
|
|
---
|
|
|
|
1,045
|
|
|
|
2,564
|
|
|
|
1,045
|
|
$142.5k Note - October 2019
|
|
|
3,592
|
|
|
|
---
|
|
|
|
12,884
|
|
|
|
---
|
|
$103k Note V - October 2019
|
|
|
---
|
|
|
|
---
|
|
|
|
2,653
|
|
|
|
---
|
|
$108.9k Note II - October 2019
|
|
|
---
|
|
|
|
---
|
|
|
|
3,970
|
|
|
|
---
|
|
$128.5k Note - October 2019
|
|
|
---
|
|
|
|
---
|
|
|
|
5,149
|
|
|
|
---
|
|
$103k Note VI - November 2019
|
|
|
---
|
|
|
|
---
|
|
|
|
3,527
|
|
|
|
---
|
|
$78.8k Note II - December 2019
|
|
|
---
|
|
|
|
---
|
|
|
|
3,344
|
|
|
|
---
|
|
$131.3k Note - January 2020
|
|
|
467
|
|
|
|
---
|
|
|
|
6,545
|
|
|
|
---
|
|
$78k Note IV - January 2020
|
|
|
427
|
|
|
|
---
|
|
|
|
3,975
|
|
|
|
---
|
|
$157.5k Note - March 2020
|
|
|
2,848
|
|
|
|
---
|
|
|
|
7,681
|
|
|
|
---
|
|
$157.5k Note II - April 2020
|
|
|
2,848
|
|
|
|
---
|
|
|
|
6,688
|
|
|
|
---
|
|
$135k Note - April 2020
|
|
|
2,441
|
|
|
|
---
|
|
|
|
5,585
|
|
|
|
---
|
|
$83k Note II - April 2020
|
|
|
1,819
|
|
|
|
---
|
|
|
|
3,752
|
|
|
|
---
|
|
$128k Note - April 2020
|
|
|
2,805
|
|
|
|
---
|
|
|
|
4,945
|
|
|
|
---
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
37,879
|
|
|
$
|
52,215
|
|
|
$
|
133,757
|
|
|
$
|
125,354
|
|
HEALTHLYNKED
CORP.
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER
30, 2020
(UNAUDITED)
NOTE
13 – CONVERTIBLE NOTES PAYABLE (CONTINUED)
Certain
of our convertible notes payable are also carried at fair value and revalued at each period end, with changes to fair value recorded
to the statement of operations under “Change in Fair Value of Debt.” The changes in fair value during the three and
nine months ended September 30, 2020 and 2019 and the fair value as of such instruments as of September 30, 2020 and December
31, 2019 were as follows:
|
|
Change in Fair Value of Debt
|
|
|
Fair Value of Debt as of
|
|
|
|
Three Months Ended
September 30,
|
|
|
Nine Months Ended
September 30,
|
|
|
September 30,
|
|
|
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$550k Note - July 2016
|
|
$
|
24,285
|
|
|
$
|
17,455
|
|
|
$
|
59,618
|
|
|
$
|
52,708
|
|
|
$
|
607,629
|
|
|
$
|
548,010
|
|
$50k Note - July 2016
|
|
|
2,520
|
|
|
|
1,770
|
|
|
|
6,187
|
|
|
|
5,343
|
|
|
|
63,053
|
|
|
|
56,866
|
|
$111k Note - May 2017
|
|
|
4,721
|
|
|
|
3,674
|
|
|
|
16,261
|
|
|
|
11,089
|
|
|
|
118,108
|
|
|
|
118,606
|
|
$171.5k Note - October 2017
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
1,781
|
|
|
|
---
|
|
|
|
---
|
|
$357.5k Note - April 2019
|
|
|
14,567
|
|
|
|
---
|
|
|
|
35,763
|
|
|
|
---
|
|
|
|
364,490
|
|
|
|
328,727
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
46,093
|
|
|
$
|
22,899
|
|
|
$
|
117,829
|
|
|
$
|
70,921
|
|
|
$
|
1,153,280
|
|
|
$
|
1,052,209
|
|
Convertible
Note Payable ($111,000) – May 2017
On
May 22, 2017, the Company entered into a 10% fixed convertible secured promissory note with an investor with a face value of $111,000.
The $111k Note is convertible into shares of the Company’s common stock at the discretion of the note holder at a fixed
price of $0.15 per share, or 740,000 of the Company’s common shares, and is secured by all of the Company’s assets.
The Company received $100,000 net proceeds from the note after an $11,000 original issue discount. At inception, the investors
were also granted a five-year warrant to purchase 133,333 shares of the Company’s common stock at an exercise price of $0.75
per share. The $111k Note matures on December 31, 2020. On February 6, 2020, the holder of the $111k Note converted $30,000 principal
on the note into 448,029 shares of Company common stock. In connection with the conversion, the Company recognized a loss on debt
extinguishment of $25,394, representing the excess of the fair value of the shares issued at conversion over the carrying value
of the portion of the host instrument and the bifurcated conversion feature converted.
Convertible
Note Payable ($171,500) – October 2017
On
October 27, 2017, the Company entered into a securities purchase agreement for the sale of a $171,500 convertible note (the “$171.5k
Note”) to an individual lender. On February 7, 2019, the holder of the $171.5k Note converted the entire principal balance
of $171,500 into 2,512,821 shares of Company common stock. In connection with the conversion, the Company recognized a loss on
debt extinguishment of $139,798, representing the excess of the fair value of the shares issued at conversion over the carrying
value of the host instrument and the bifurcated conversion feature at the time of conversion.
Convertible
Notes Payable ($103,000) – October 2018
On
October 18, 2018, the Company issued a $103,000 convertible note (the “$103k Note I”). On April 4, 2019, the Company
prepaid the balance on the $103k Note I, including accrued interest, for a one-time cash payment of $134,500. In connection with
the repayment, the Company recognized a gain on debt extinguishment of $28,169 in the nine months ended September 30, 2019, equal
to the excess of the payment amount over the carrying value of the note, derivative embedded conversion feature and accrued interest.
Convertible
Notes Payable ($103,000) – November 2018
On
November 12, 2018, the Company issued a $103,000 convertible note (the “$103k Note II”). On May 7, 2019, the Company
prepaid the balance on the $103k Note II, including accrued interest, for a one-time cash payment of $134,888. In connection with
the repayment, the Company recognized a gain on debt extinguishment of $23,821 in the nine months ended September 30, 2019, equal
to the excess of the payment amount over the carrying value of the note, derivative embedded conversion feature and accrued interest.
HEALTHLYNKED
CORP.
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER
30, 2020
(UNAUDITED)
NOTE
13 – CONVERTIBLE NOTES PAYABLE (CONTINUED)
Convertible
Notes Payable ($153,000) – November 2018
On
November 19, 2018, the Company issued a $153,000 convertible note (the “$153k Note”). During the nine months ended
September 30, 2019, the holder converted the full principal in the amount of $153,000 and $8,768 of accrued interest into 1,070,894
shares of Company common stock. In connection with the conversion, the Company recognized a loss on debt extinguishment of $44,993,
equal to the excess of the payment amount over the carrying value of the note, derivative embedded conversion feature and accrued
interest.
Convertible
Notes Payable ($103,000) – December 2018
On
December 3, 2018, the Company issued a $103,000 convertible note (the “$103k Note III”). On May 31, 2019, the Company
prepaid the balance on the $103k Note III, including accrued interest, for a one-time cash payment of $135,029. In connection
with the repayment, the Company recognized a gain on debt extinguishment of $20,445 in the nine months ended September 30, 2019,
equal to the excess of the payment amount over the carrying value of the note, derivative embedded conversion feature and accrued
interest.
Convertible
Note Payable ($78,000) – January 2019
On
January 14, 2019, the Company issued a $78,000 convertible note (the “$78k Note”). The $78k Note, including accrued
interest, was repaid in July 2019 for a one-time cash payment of $102,321. In connection with the repayment, the Company recognized
a loss on debt extinguishment of $6,258 in the nine months ended September 30, 2019, equal to the excess of the payment amount
over the carrying value of the note, derivative embedded conversion feature and accrued interest.
Convertible
Note Payable ($78,000) – January 2019
On
January 24, 2019, the Company issued a $78,000 convertible note (the “$78k Note II”). The $78k Note II, including
accrued interest, was repaid in July 2019 for a one-time cash payment of $102,255. In connection with the repayment, the Company
recognized a gain on debt extinguishment of $11,161 in the nine months ended September 30, 2019, equal to the excess of the payment
amount over the carrying value of the note, derivative embedded conversion feature and accrued interest.
Convertible
Note Payable ($103,000) – April 2019
On
April 3, 2019, the Company entered into a securities purchase agreement for the sale of a $103,000 convertible note (the “$103k
Note III”). During the fourth quarter of 2019, the Company prepaid the balance on the $103k Note III, including accrued
interest, for a one-time cash payment of $135,099.
Convertible
Note Payable ($104,500) – April 2019
On
April 11, 2019, the Company entered into securities purchase agreements for the sale of a $104,500 convertible note (the “$104.5k
Note I”). During the fourth quarter of 2019, the holder of the $104.5k Note I converted the full principal in the amount
of $104,500 and $5,768 of accrued interest into 1,176,189 shares of Company common stock.
Convertible
Note Payable ($104,500) – April 2019
On
April 11, 2019, the Company entered into securities purchase agreements for the sale of a second $104,500 convertible note (the
“$104.5k Note II”). During the fourth quarter of 2019, the Company prepaid the balance on the $104.5k Note II, including
accrued interest, for a one-time cash payment of $142,500.
Convertible
Note Payable ($357,500) – April 2019
On
April 15, 2019, the Company issued a fixed convertible note with a face value of $357,500 (the “$357.5k Note”). The
$357.5k Note has an interest rate of 10%, matures on December 31, 2020, and may be converted into common stock of the Company
by the holder at any time, subject to a 9.99% beneficial ownership limitation, at a fixed conversion price per share of $0.15,
or 2,383,333 shares.
HEALTHLYNKED
CORP.
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER
30, 2020
(UNAUDITED)
NOTE
13 – CONVERTIBLE NOTES PAYABLE (CONTINUED)
Convertible
Note Payable ($103,000) – May 2019
On
May 7, 2019, the Company issued a $103,000 convertible note (the “$103k Note IV”). During the fourth quarter of 2019,
the Company prepaid the balance on the $103k Note IV, including accrued interest, for a one-time cash payment of $133,900.
Convertible
Note Payable ($154,000) – June 2019
On
June 3, 2019, the Company issued a $154,000 convertible note (the “$154k Note”), of which $104,000 was converted in
the fourth quarter of 2019. During the nine months ended September 30, 2020, the holder converted the remaining unpaid principal
balance of $50,000 and accrued interest of $8,572 into 968,390 shares of Company common stock. In connection with the conversion,
the Company recognized a loss on debt extinguishment of $125,865 in the nine months ended September 30, 2020, equal to the excess
of the payment amount over the carrying value of the note, derivative embedded conversion feature and accrued interest 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 nine months ended September
30, 2020, the holder converted the full principal of $67,925 and accrued interest of $3,926 into 885,847 shares of Company common
stock. In connection with the conversion, the Company recognized a loss on debt extinguishment of $55,117 in the nine months ended
September 30, 2020, equal to the excess of the payment amount over the carrying value of the note, derivative embedded conversion
feature and accrued interest.
Convertible
Note Payable ($67,925) – July 2019
On
July 11, 2019, the Company issued a second $67,925 convertible note (the “$67.9k Note II”). During the nine months
ended September 30, 2020, the Company prepaid the balance on the $67.9k Note II, including accrued interest, for a one-time cash
payment of $89,152. In connection with the repayment, the Company recognized a loss on debt extinguishment of $26,890 in the nine
months ended September 30, 2020, equal to the excess of the payment amount over the carrying value of the note, derivative embedded
conversion feature and accrued interest.
Convertible
Note Payable ($78,000) – July 2019
On
July 16, 2019, the Company issued a $78,000 convertible note (the “$78k Note III”). During the first quarter of 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 nine months ended September
30, 2020, equal to the excess of the payment amount over the carrying value of the note, derivative embedded conversion feature
and accrued interest.
Convertible
Note Payable ($230,000) – July 2019
On
July 18, 2019, the Company issued a convertible note with a face value of $230,000 (the “$230k Note”). During the
first quarter of 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 nine months ended September 30, 2020, equal to the excess of the cash
payment amount and the fair value of the shares issued at conversion over the carrying value of the note, derivative embedded
conversion feature and accrued interest.
Convertible
Note Payable ($108,947) – August 2019
On
August 26, 2019, the Company issued a convertible note with a face value of $108,947 (the “$108.9k Note”). During
the nine months ended September 30, 2020, the holder converted the full principal of $108,947 and accrued interest of $6,354 into
2,650,251 shares of Company common stock. In connection with the conversions, the Company recognized a loss on debt extinguishment
of $161,617 in the nine months ended September 30, 2020, representing the excess of the fair value of the shares issued at conversion
over the carrying value of the portion of the host instrument and the bifurcated conversion feature converted.
HEALTHLYNKED
CORP.
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER
30, 2020
(UNAUDITED)
NOTE
13 – CONVERTIBLE NOTES PAYABLE (CONTINUED)
Convertible
Note Payable ($142,500) – October 2019
On
October 1, 2019, the Company issued a convertible note with a face value of $142,500 (the “$142.5k Note”). During
the nine months ended September 30, 2020, the holder converted the full principal of $142,500 and accrued interest of $14,250
into 2,855,191 shares of Company common stock. In connection with the conversions, the Company recognized a loss on debt extinguishment
of $305,100 in the nine months ended September 30, 2020, representing the excess of the fair value of the shares issued at conversion
over the carrying value of the portion of the host instrument and the bifurcated conversion feature converted.
Convertible
Note Payable ($103,000) – October 2019
On
October 1, 2019, the Company issued a $103,000 convertible note (the “$103k Note V”). On April 3, 2020, 2020, the
Company prepaid the balance on the $103k Note V, including accrued interest, for a one-time cash payment of $135,205. In connection
with the repayment, the Company recognized a loss on debt extinguishment of $43,777 in the nine months ended September 30, 2020,
equal to the excess of the payment amount over the carrying value of the note, derivative embedded conversion feature and accrued
interest.
Convertible
Note Payable ($108,947) – October 2019
On
October 30, 2019, the Company issued a convertible note with a face value of $108,947 (the “$108.9k Note II”). During
the nine months ended September 30, 2020, the holder converted the full principal of $108,947 and accrued interest of $5,821 into
1,954,870 shares of Company common stock. In connection with the conversions, the Company recognized a loss on debt extinguishment
of $76,895 in the nine months ended September 30, 2020, representing the excess of the fair value of the shares issued at conversion
over the carrying value of the portion of the host instrument and the bifurcated conversion feature converted.
Convertible
Note Payable ($128,500) – October 2019
On
October 30, 2019, the Company issued a $128,500 convertible note (the “$128.5k Note”). During the nine months ended
September 30, 2020, the holder converted the full principal of $128,500 and accrued interest of $8,832 into 3,197,877 shares of
Company common stock. In connection with the conversion, the Company recognized a loss on debt extinguishment of $154,248 in the
nine months ended September 30, 2020, equal to the excess of the payment amount over the carrying value of the note, derivative
embedded conversion feature and accrued interest.
Convertible
Note Payable ($103,000) – November 2019
On
November 4, 2019, the Company issued a $103,000 convertible note (the “$103k Note VI”). On May 4, 2020, the Company
prepaid the balance on the $103k Note VI, including accrued interest, for a one-time cash payment of $135,099. In connection with
the repayment, the Company recognized a loss on debt extinguishment of $45,077 in the nine months ended September 30, 2020, equal
to the excess of the payment amount over the carrying value of the note, derivative embedded conversion feature and accrued interest.
Convertible
Note Payable ($78,750) – December 2019
On
December 2, 2019, the Company issued a $78,750 convertible note (the “$78.8k Note”). On June 3, 2020, the Company
prepaid the balance on the $78.8k Note, including accrued interest, for a one-time cash payment of $103,359. In connection with
the repayment, the Company recognized a loss on debt extinguishment of $37,554 in the nine months ended September 30, 2020, equal
to the excess of the payment amount over the carrying value of the note, derivative embedded conversion feature and accrued interest.
Convertible
Note Payable ($131,250) – January 2020
On
January 13, 2020, the Company issued a $131,250 convertible note (the “$131.3k Note”). On July 13, 2020, the Company
prepaid the balance on the $131.3k Note, including accrued interest, for a one-time cash payment of $172,108. In connection with
the repayment, the Company recognized a loss on debt extinguishment of $24,663 in the nine months ended September 30, 2020, equal
to the excess of the payment amount over the carrying value of the note, derivative embedded conversion feature and accrued interest.
HEALTHLYNKED
CORP.
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER
30, 2020
(UNAUDITED)
NOTE
13 – CONVERTIBLE NOTES PAYABLE (CONTINUED)
Convertible
Note Payable ($78,000) – January 2020
On
January 16, 2020, the Company issued a $78,000 convertible note (the “$78k Note IV”). On July 20, 2020, the Company
prepaid the balance on the $78k Note IV, including accrued interest, for a one-time cash payment of $102,308. In connection with
the repayment, the Company recognized a loss on debt extinguishment of $9,104 in the nine months ended September 30, 2020, equal
to the excess of the payment amount over the carrying value of the note, derivative embedded conversion feature and accrued interest.
Convertible
Note Payable ($157,500) – March 2020
On
March 10, 2020, the Company issued a $157,500 convertible note (the “$157.5k Note”). On September 4, 2020, the Company
prepaid the balance on the $157.5k Note, including accrued interest, for a one-time cash payment of $206,314. In connection with
the repayment, the Company recognized a loss on debt extinguishment of $28,150 in the nine months ended September 30, 2020, equal
to the excess of the payment amount over the carrying value of the note, derivative embedded conversion feature and accrued interest.
Convertible
Note Payable ($157,500) – April 2020
On
April 2, 2020, the Company issued a $157,500 convertible note (the “$157.5k Note II”). On September 4, 2020, the Company
prepaid the balance on the $157.5k Note, including accrued interest, for a one-time cash payment of $205,235. In connection with
the repayment, the Company recognized a loss on debt extinguishment of $31,490 in the nine months ended September 30, 2020, equal
to the excess of the payment amount over the carrying value of the note, derivative embedded conversion feature and accrued interest.
Convertible
Note Payable ($135,000) – April 2020
On
April 6, 2020, the Company issued a $135,000 convertible note (the “$135k Note”). On September 4, 2020, the Company
prepaid the balance on the $135k Note, including accrued interest, for a one-time cash payment of $175,592. In connection with
the repayment, the Company recognized a loss on debt extinguishment of $18,479 in the nine months ended September 30, 2020, equal
to the excess of the payment amount over the carrying value of the note, derivative embedded conversion feature and accrued interest.
Convertible
Note Payable ($83,000) – April 2020
On
April 6, 2020, the Company issued an $83,000 convertible note (the “$83k Note”). On September 18, 2020, the Company
prepaid the balance on the $83k Note, including accrued interest, for a one-time cash payment of $108,127. In connection with
the repayment, the Company recognized a loss on debt extinguishment of $13,012 in the nine months ended September 30, 2020, equal
to the excess of the payment amount over the carrying value of the note, derivative embedded conversion feature and accrued interest.
Convertible
Note Payable ($128,000) – April 2020
On
April 30, 2020, the Company issued a $128,000 convertible note (the “$128k Note”). On September 18, 2020, the Company
prepaid the balance on the $128k Note, including accrued interest, for a one-time cash payment of $165,962. In connection with
the repayment, the Company recognized a loss on debt extinguishment of $21,000 in the nine months ended September 30, 2020, equal
to the excess of the payment amount over the carrying value of the note, derivative embedded conversion feature and accrued interest.
NOTE
14 – DERIVATIVE FINANCIAL INSTRUMENTS
Derivative financial instruments are comprised
of the fair value of embedded conversion features (“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. 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.”
Derivative financial instruments are revalued at the end of each period, with the change in value recorded to “Change in
fair value of on derivative financial instruments.”
HEALTHLYNKED
CORP.
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER
30, 2020
(UNAUDITED)
NOTE
14 – DERIVATIVE FINANCIAL INSTRUMENTS (CONTINUED)
Derivative
financial instruments and changes thereto recorded in the three and nine months ended September 30, 2020 and 2019 include the
following:
|
|
Three Months Ended
September 30,
|
|
|
Nine Months Ended
September 30,
|
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, beginning of period
|
|
$
|
257,384
|
|
|
$
|
632,605
|
|
|
$
|
991,288
|
|
|
$
|
800,440
|
|
Inception of derivative financial instruments
|
|
|
---
|
|
|
|
472,644
|
|
|
|
211,498
|
|
|
|
1,276,703
|
|
Change in fair value of derivative financial instruments
|
|
|
(12,802
|
)
|
|
|
(158,691
|
)
|
|
|
(739,485
|
)
|
|
|
(574,205
|
)
|
Conversion or extinguishment of derivative financial instruments
|
|
|
(244,582
|
)
|
|
|
(119,898
|
)
|
|
|
(463,301
|
)
|
|
|
(676,278
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, end of period
|
|
$
|
---
|
|
|
$
|
826,660
|
|
|
$
|
--
|
|
|
$
|
826,660
|
|
Fair
market value of the derivative financial instruments was measured using the following assumptions:
|
|
Nine Months Ended
September 30,
|
|
|
2020
|
|
2019
|
|
|
|
|
|
Pricing model utilized
|
|
Binomial Lattice
|
|
Black/Scholes
|
Risk free rate range
|
|
0.05% to 1.61%
|
|
1.75% to 2.73%
|
Expected life range (in years)
|
|
0.14 to 1.00
|
|
0.01 to 1.00
|
Volatility range
|
|
117.48% to 144.51%
|
|
119.04% 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 nine months ended September 30, 2020, the Company repaid 13 outstanding convertible notes and holders converted in part or
in full an additional eight convertible notes for which the conversion rate was adjusted based on a discount to the market price
of the Company’s common stock, which gave rise to ECF-related derivative financial instruments. Accordingly, the Company
had no further derivative financial instruments outstanding as of September 30, 2020.
NOTE 15 – SHAREHOLDERS’
EQUITY (DEFICIT)
Investment
Transaction – August 2020
On August 20, 2020, the Company entered
into the Contribution Agreement with the Trusts and Michael T. Dent, the Chief Executive Officer and Chairman of the board of
directors of the Company. Pursuant to the Contribution Agreement, the Trusts contributed an aggregate of 76,026 shares of common
stock of NeoGenomics, Inc. with a fair value of $3,006,889 to the Company. In consideration for the foregoing, the Company issued
the Trusts an aggregate of 2,750,000 shares of the Company’s newly designated Series B Preferred stock and an aggregate
of 24,522,727 shares of the Company’s common stock.
HEALTHLYNKED CORP.
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER
30, 2020
(UNAUDITED)
NOTE 15 – SHAREHOLDERS’
EQUITY (DEFICIT) (CONTINUED)
Beginning
on December 31, 2022, each share of Series B Preferred Stock is convertible into five shares of the Company’s common stock,
subject to customary anti-dilution adjustments, including in the event of any stock split. The Series B Preferred Stock ranks
senior to the common stock. Upon a liquidation, dissolution or winding up of the Company, whether voluntary or involuntary, the
assets of the Company available for distribution to its stockholders will be distributed to holders of Series B Preferred Stock
on an as converted basis and pro rata with the holders of common stock. Holders of Series B Preferred Stock are also entitled
to participate in dividends declared or paid on the common stock on an as-converted basis.
The
holders of Series B Preferred Stock generally are entitled to vote with the holders of the shares of common stock on all matters
submitted for a vote of holders of shares of common stock (voting together with the holders of shares of common stock as one class).
The holder of the shares of Preferred B Stock shall have that number of votes (identical in every other respect to the voting
rights of the holders of common stock entitled to vote at any regular or special meeting of the shareholders) equal to 100 shares
of common stock for each share of Preferred B Preferred Stock held (which shall never be deemed less than 51% of the vote required
to approve any action), which Nevada law provides may or must be approved by vote or consent of the holders of common stock or
the holders of other securities entitled to vote, if any.
At inception of the transaction, the Company
recognized a beneficial conversion feature in the amount of $825,000, representing the difference between (i) the intrinsic price
per share of the Series B Preferred based on the portion of proceeds allocated to the fair value of the Series B Preferred, and
(ii) the fair value of the Company’s common stock. The beneficial conversion feature is being amortized as a deemed dividend
from the inception date of the transaction through the end of the Series B Preferred conversion restriction on December 31, 2022.
Amortization of the beneficial conversion feature is reflected in income or loss available to common stockholders on the statement
of operations. Further, since the Company have negative retained earnings, so there is no change to APIC or anywhere else in net
equity from the deemed dividend and therefore nothing to show on the statement of equity.
Other
Private Placements
During
the nine months ended September 30, 2019, the Company sold 1,550,001 shares of common stock in three separate private placement
transactions and received $415,000 in proceeds from the sales. In connection with the stock sales, the Company also issued 1,025,001
warrants to purchase shares of common stock with exercise prices between $0.25 and $0.50.
During the nine months ended September
30, 2020, the Company sold 6,650,843 shares of common stock in 20 separate private placement transactions and received $673,001
in proceeds from the sales. The shares were issued at per share prices between $0.06 and $0.17. In connection with the stock sales,
the Company also issued 3,463,825 five-year warrants to purchase shares of common stock at exercise price between $0.16 and $0.27
per share. Of these shares, 7,143 with respect to proceeds of $749 were issuable as of September 30, 2020.
Investment
Agreement Draws
During
the nine months ended September 30, 2020 and 2019, the Company issued 4,975,491 and 4,273,779 common shares, respectively, pursuant
to draws made by the Company under the Investment Agreement and received an aggregate of $426,299 and $825,616, respectively,
in net proceeds from the draws.
Common
Stock Issuable
As
of September 30, 2020 and December 31, 2019, the Company was obligated to issue the following shares:
|
|
September 30,
2020
|
|
|
December 31,
2019
|
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares earned by consultants, employees and directors but not
yet issued
|
|
$
|
181,343
|
|
|
|
1,458,095
|
|
|
$
|
100,538
|
|
|
|
568,142
|
|
Shares issuable pursuant to stock subscriptions received
|
|
|
749
|
|
|
|
7,143
|
|
|
|
59,000
|
|
|
|
479,762
|
|
|
|
$
|
182,092
|
|
|
|
1,465,238
|
|
|
$
|
159,538
|
|
|
|
1,047,904
|
|
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.
HEALTHLYNKED
CORP.
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER
30, 2020
(UNAUDITED)
NOTE 15 – SHAREHOLDERS’
EQUITY (DEFICIT) (CONTINUED)
Stock
Warrants
Transactions
involving our stock warrants during the nine months ended September 30, 2020 and 2019 are summarized as follows:
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
Exercise
|
|
|
|
|
|
Exercise
|
|
|
|
Number
|
|
|
Price
|
|
|
Number
|
|
|
Price
|
|
Outstanding at beginning of the period
|
|
|
47,056,293
|
|
|
$
|
0.17
|
|
|
|
46,161,463
|
|
|
$
|
0.18
|
|
Granted during the period
|
|
|
3,463,825
|
|
|
$
|
0.20
|
|
|
|
1,805,001
|
|
|
$
|
0.35
|
|
Exercised during the period
|
|
|
---
|
|
|
$
|
---
|
|
|
|
(4,099,256
|
)
|
|
$
|
(0.00
|
)
|
Expired during the period
|
|
|
(50,000
|
)
|
|
$
|
0.40
|
|
|
|
---
|
|
|
$
|
---
|
|
Outstanding at end of the period
|
|
|
50,470,118
|
|
|
$
|
0.18
|
|
|
|
43,867,208
|
|
|
$
|
0.20
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable at end of the period
|
|
|
50,470,118
|
|
|
$
|
0.18
|
|
|
|
43,867,208
|
|
|
$
|
0.20
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average remaining life
|
|
|
3.4 years
|
|
|
|
|
|
|
|
3.0 years
|
|
|
|
|
|
The
following table summarizes information about the Company’s stock warrants outstanding as of September 30, 2020:
Warrants Outstanding
|
|
|
Warrants Exercisable
|
|
|
|
|
|
|
|
Weighted-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
Weighted-
|
|
|
|
|
|
Weighted-
|
|
|
|
|
|
|
|
Remaining
|
|
|
Average
|
|
|
|
|
|
Average
|
|
Exercise
|
|
|
Number
|
|
|
Contractual
|
|
|
Exercise
|
|
|
Number
|
|
|
Exercise
|
|
Prices
|
|
|
Outstanding
|
|
|
Life (years)
|
|
|
Price
|
|
|
Exercisable
|
|
|
Price
|
|
$
|
0.0001 to 0.09
|
|
|
|
15,287,011
|
|
|
|
4.2
|
|
|
$
|
0.07
|
|
|
|
15,287,011
|
|
|
$
|
0.07
|
|
$
|
0.10
to 0.24
|
|
|
|
21,125,618
|
|
|
|
3.0
|
|
|
$
|
0.18
|
|
|
|
21,125,618
|
|
|
$
|
0.18
|
|
$
|
0.25
to 0.49
|
|
|
|
10,117,489
|
|
|
|
3.7
|
|
|
$
|
0.28
|
|
|
|
10,117,489
|
|
|
$
|
0.28
|
|
$
|
0.50
to 1.00
|
|
|
|
3,940,000
|
|
|
|
1.4
|
|
|
$
|
0.28
|
|
|
|
3,940,000
|
|
|
$
|
0.28
|
|
$
|
0.05
to 1.00
|
|
|
|
50,470,118
|
|
|
|
3.4
|
|
|
$
|
0.18
|
|
|
|
50,470,118
|
|
|
$
|
0.18
|
|
During
the nine months ended September 30, 2020 and 2019, the Company issued 3,463,825 and 1,805,001 warrants, respectively, the aggregate
grant date fair value of which was $222,987 and $477,097, respectively. The fair value of the warrants was calculated using the
following range of assumptions:
|
|
Nine Months Ended September 30,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
Pricing model utilized
|
|
|
Binomial Lattice
|
|
|
|
Black/Scholes
|
|
Risk free rate range
|
|
|
0.19% to 1.59%
|
|
|
|
1.66% to 2.52%
|
|
Expected life range (in years)
|
|
|
5.00 years
|
|
|
|
3.00 to 5.00
|
|
Volatility range
|
|
|
119.69% to 132.19%
|
|
|
|
119.34% to 212.98%
|
|
Dividend yield
|
|
|
0.00%
|
|
|
|
0.00%
|
|
In
addition, specific assumptions regarding investor exercise behavior were used in 2020, including probability assumptions related
to estimated exercise behavior.
HEALTHLYNKED
CORP.
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER
30, 2020
(UNAUDITED)
NOTE 15 – SHAREHOLDERS’
EQUITY (DEFICIT) (CONTINUED)
Employee
Equity Incentive Plan
On
January 1, 2016, the Company instituted the Employee Equity Incentive Plan (the “EIP”) for the purpose of having equity
awards available to allow for equity participation by its employees. The EIP allows for the issuance of up to 15,503,680 shares
of the Company’s common stock to employees, which may be issued in the form of stock options, stock appreciation rights,
or restricted shares. The EIP is governed by the Company’s board, or a committee that may be appointed by the board in the
future.
The
following table summarizes the status of shares issued and outstanding under the EIP outstanding as of and for the nine months
ended September 30, 2020 and 2019:
|
|
2020
|
|
|
2019
|
|
Outstanding at beginning of the period
|
|
|
1,874,063
|
|
|
|
1,738,750
|
|
Granted during the period
|
|
|
664,465
|
|
|
|
135,313
|
|
Terminated during the period
|
|
|
(62,500
|
)
|
|
|
---
|
|
Outstanding at end of the period
|
|
|
2,476,028
|
|
|
|
1,874,063
|
|
|
|
|
|
|
|
|
|
|
Shares vested at period-end
|
|
|
2,176,028
|
|
|
|
1,510,313
|
|
Weighted average grant date fair value of shares granted during the period
|
|
$
|
0.14
|
|
|
$
|
0.26
|
|
Aggregate grant date fair value of shares granted during the period
|
|
$
|
18,760
|
|
|
$
|
12,805
|
|
Shares available for grant pursuant to EIP at period-end
|
|
|
9,778,403
|
|
|
|
9,592,868
|
|
Total
stock-based compensation recognized for grants under the EIP was $79,196 and $10,534 during the three months ended September 30,
2020 and 2019, respectively, and $109,349 and $69,128 during the nine months ended September 30, 2020 and 2019, respectively.
Total unrecognized stock compensation related to these grants was $31,989 as of September 30, 2020.
A
summary of the status of nonvested shares issued pursuant to the EIP as of and for the nine months ended September 30, 2020 and
2019 is presented below:
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
Grant Date
|
|
|
|
|
|
Grant Date
|
|
|
|
Shares
|
|
|
Fair Value
|
|
|
Shares
|
|
|
Fair Value
|
|
Nonvested at beginning of period
|
|
|
332,500
|
|
|
$
|
0.17
|
|
|
|
540,000
|
|
|
$
|
0.16
|
|
Granted
|
|
|
664,465
|
|
|
$
|
0.14
|
|
|
|
---
|
|
|
$
|
---
|
|
Vested
|
|
|
(609,465
|
)
|
|
$
|
0.14
|
|
|
|
(176,250
|
)
|
|
$
|
0.16
|
|
Forfeited
|
|
|
(87,500
|
)
|
|
$
|
0.06
|
|
|
|
---
|
|
|
$
|
---
|
|
Nonvested at end of period
|
|
|
300,000
|
|
|
$
|
0.20
|
|
|
|
363,750
|
|
|
$
|
0.16
|
|
HEALTHLYNKED
CORP.
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER
30, 2020
(UNAUDITED)
NOTE 15 – SHAREHOLDERS’
EQUITY (DEFICIT) (CONTINUED)
Employee
Stock Options
The
following table summarizes the status of options outstanding as of and for the nine months ended September 30, 2020 and 2019:
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
Exercise
|
|
|
|
|
|
Exercise
|
|
|
|
Number
|
|
|
Price
|
|
|
Number
|
|
|
Price
|
|
Outstanding at beginning of the period
|
|
|
3,269,250
|
|
|
$
|
0.21
|
|
|
|
3,707,996
|
|
|
$
|
0.18
|
|
Granted during the period
|
|
|
60,000
|
|
|
$
|
0.09
|
|
|
|
1,078,750
|
|
|
$
|
0.26
|
|
Exercised during the period
|
|
|
---
|
|
|
$
|
---
|
|
|
|
(154,166
|
)
|
|
$
|
0.20
|
|
Forfeited during the period
|
|
|
(80,000
|
)
|
|
$
|
0.26
|
|
|
|
(595,830
|
)
|
|
$
|
0.20
|
|
Outstanding at end of the period
|
|
|
3,249,250
|
|
|
$
|
0.20
|
|
|
|
4,036,750
|
|
|
$
|
0.20
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options exercisable at period-end
|
|
|
2,012,375
|
|
|
|
|
|
|
|
1,486,000
|
|
|
|
|
|
Weighted average remaining life (in years)
|
|
|
7.0
|
|
|
|
|
|
|
|
7.9
|
|
|
|
|
|
Weighted average grant date fair value of options granted during the period
|
|
$
|
0.07
|
|
|
|
|
|
|
$
|
0.20
|
|
|
|
|
|
Options available for grant at period-end
|
|
|
9,775,903
|
|
|
|
|
|
|
|
9,592,868
|
|
|
|
|
|
The
following table summarizes information about the Company’s stock options outstanding as of September 30, 2020:
Options Outstanding
|
|
|
Options Exercisable
|
|
|
|
|
|
|
|
Weighted-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
Weighted-
|
|
|
|
|
|
Weighted-
|
|
|
|
|
|
|
|
Remaining
|
|
|
Average
|
|
|
|
|
|
Average
|
|
Exercise
|
|
|
Number
|
|
|
Contractual
|
|
|
Exercise
|
|
|
Number
|
|
|
Exercise
|
|
Prices
|
|
|
Outstanding
|
|
|
Life (years)
|
|
|
Price
|
|
|
Exercisable
|
|
|
Price
|
|
$
|
---
to 0.10
|
|
|
|
1,283,000
|
|
|
|
5.2
|
|
|
$
|
0.08
|
|
|
|
1,283,000
|
|
|
|
0.08
|
|
$
|
0.11
to 0.31
|
|
|
|
1,966,250
|
|
|
|
8.1
|
|
|
$
|
0.28
|
|
|
|
729,375
|
|
|
|
0.29
|
|
$
|
0.08
to 0.31
|
|
|
|
3,249,250
|
|
|
|
7.0
|
|
|
$
|
0.20
|
|
|
|
2,012,375
|
|
|
$
|
0.16
|
|
Total
stock-based compensation recognized related to option grants was $19,305 and $24,107 during the three months ended September 30,
2020 and 2019, respectively, and $61,155 and $86,054 during the nine months ended September 30, 2020 and 2019, respectively.
A
summary of the status of nonvested options issued pursuant to the EIP as of and for the nine months ended September 30, 2020 and
2019 is presented below:
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
Grant Date
|
|
|
|
|
|
Grant Date
|
|
|
|
Shares
|
|
|
Fair Value
|
|
|
Shares
|
|
|
Fair Value
|
|
Nonvested at beginning of period
|
|
|
1,636,250
|
|
|
$
|
0.22
|
|
|
|
2,332,413
|
|
|
$
|
0.13
|
|
Granted
|
|
|
60,000
|
|
|
$
|
0.07
|
|
|
|
1,078,750
|
|
|
$
|
0.20
|
|
Vested
|
|
|
(379,375
|
)
|
|
$
|
0.20
|
|
|
|
(264,583
|
)
|
|
$
|
0.18
|
|
Forfeited
|
|
|
(80,000
|
)
|
|
$
|
0.21
|
|
|
|
(595,830
|
)
|
|
$
|
0.02
|
|
Nonvested at end of period
|
|
|
1,236,875
|
|
|
$
|
0.21
|
|
|
|
2,550,750
|
|
|
$
|
0.18
|
|
HEALTHLYNKED
CORP.
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER
30, 2020
(UNAUDITED)
NOTE
16 – COMMITMENTS AND CONTINGENCIES
Contracts
related to Medicare shared savings revenue
The
Company acquired CHM and its subsidiary AHP on May 18, 2020. CHM and AHP combine to operate an ACO under the terms of the MSSP
as administered by the CMS. The MSSP is a program created under the Affordable Care Act (the “ACA,” also known as
“Obamacare”) designed to enhance the efficiency of healthcare provided to patients covered by Medicare. The program
allows for the creation of ACOs, which are organizations that agree to take responsibility for the efficiency of healthcare services
provided by a group of participating healthcare providers under Medicare. The ACO is held accountable for the efficiency of the
healthcare services of its participating providers as measured against benchmarks prescribed in the MSSP and earns shared savings
payments if such benchmarks are met.
The
Company, via AHP is party to a Medicare Shared Savings Program Accountable Care Organization Participation Agreement with the
CMS that establishes AHP as an ACO. The agreement is effective through December 31, 2024. The Company must comply with the terms
and conditions of the agreement in order to maintain its status as an ACO and generate shared savings revenue.
The
Company, via CHM, is party to 33 separate participant agreements with participating providers that are members of the Company’s
ACO with expiration dates between 2020 and 2024. These agreements include certain restrictions and requirements to which the participating
providers must adhere in order to maintain participation in the ACO.
Service
contracts
The
Company carries various service contracts on its office buildings & certain copier equipment for repairs, maintenance and
inspections. All contracts are short term and can be cancelled.
Litigation
From
time to time, we may become involved in various lawsuits and legal proceedings, which arise, in the ordinary course of business.
However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time
to time that may harm our business. 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.
On July 20, 2020, Empery Asset Master Ltd.,
Empery Tax Efficient, LP and Empery Tax Efficient II, LP, (the “Complainants”) filed a complaint against the Company
in the Supreme Court of the State of New York. The Complaint alleges that the Company’s acquisition of CHM, in which the
Company issued stock consideration of 2,240,838 common shares, triggered a change of control clause in warrants held by the Complainants
that would allow the Complainants to demand cash value for their warrants. The Company believes that the asserted claims lack merit
and intends to defend against all of the claims vigorously. Due to the inherent uncertainties of litigation, the Company cannot
predict the outcome of the actions at this time and can give no assurance that the asserted claims will not have a material adverse
effect on its financial position or results of operations. The Company has responded to the Complaint but discovery has not yet
commenced as of the date of this filing.
On August 24, 2020, the Company entered into
a settlement agreement in response to a complaint filed by Delaney Equity Group LLC seeking unpaid fees from a 2015 Advisor, Consulting
and Investment Banking Agreement. Pursuant to the terms of the settlement, the Company agreed to make cash payments totaling $75,000
over a six-month period. If the payments are not made in full and timely, the amount due increases to $112,500.
Leases
Maturities
of operating lease liabilities were as follows as of September 30, 2020:
2020
|
|
$
|
50,882
|
|
2021
|
|
|
205,430
|
|
2022
|
|
|
159,561
|
|
2023
|
|
|
68,457
|
|
Total lease payments
|
|
|
484,330
|
|
Less interest
|
|
|
(180,430
|
)
|
Present value of lease liabilities
|
|
$
|
303,900
|
|
HEALTHLYNKED
CORP.
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER
30, 2020
(UNAUDITED)
NOTE
16 – COMMITMENTS AND CONTINGENCIES (CONTINUED)
Our
lease for office space for our NWC practice expired in July 2020. The Company entered into a new three-year lease agreement for
a different facility in Naples facility comprised of 3,650 square feet commencing in August 2020.
Employment/Consulting
Agreements
The
Company has employment agreements with certain of its physicians, nurse practitioners and physical therapists in the Health Services
division. The agreements generally call for a fixed salary at the beginning of the contract with a transaction to performance-based
pay later in the contract.
On
July 1, 2016, the Company entered into an employment agreement with Dr. Michael Dent, Chief Executive Officer and a member of
the Board of Directors. Dr. Dent’s employment agreement continues until terminated by Dr. Dent or the Company. If Dr. Dent’s
employment is terminated by the Company (unless such termination is “For Cause” as defined in his employment agreement),
then upon signing a general waiver and release, Dr. Dent will be entitled to severance in an amount equal to 12 months of his
then-current annual base salary, as well as the pro-rata portion of any bonus that would be due and payable to him. In the event
that Dr. Dent terminates the employment agreement, he shall be entitled to any accrued but unpaid salary and other benefits up
to and including the date of termination, and the pro-rata portion of any unvested time-based options up until the date of termination.
On
July 1, 2016, the Company entered into an agreement with Mr. George O’Leary, the Company’s Chief Financial Officer
and a member of the Board of Directors, extending his prior agreement with the Company. Mr. O’Leary’s employment agreement
continues until terminated by Mr. O’Leary or the Company. If Mr. O’Leary employment is terminated by the Company
(unless such termination is “For Cause” as defined in his employment agreement), then upon signing a general waiver
and release, Mr. O’Leary will be entitled to receive his base salary and the Company shall maintain his employee benefits
for a period of twelve (12) months beginning on the date of termination. In the event that Mr. O’Leary terminates the agreement,
he shall be entitled to any accrued by unpaid salary and other benefits up to and including the date of termination. On July 1,
2018, the Company and Mr. O’Leary entered into an Extension Letter Agreement pursuant to which Mr. O’Leary
was increased to full time employment (previously half-time) and agreed to extend the term of his employment to September 30,
2022. In addition to a base salary, the extension provides Mr. O’Leary with certain performance-based cash bonuses, stock
grants, and stock option grants.
On
May 18, 2020, the Company entered into separate 4-year consulting services agreements with each of the two principals of the ACO/MSO
business acquired in May 2020 that call for each person to earn fixed annual consulting fees and a share of Medicare shared savings
revenue, consulting revenue and overall profits generated by the underlying business.
NOTE
17 – SEGMENT REPORTING
The
Company has three reportable segments: Health Services, Digital Healthcare and ACO/MCO. Health Services division is comprised
of the operations of (i) Naples Women’s Center (“NWC”), a multi-specialty medical group including OB/GYN (both
Obstetrics and Gynecology), and General Practice, (ii) Naples Center for Functional Medicine (“NCFM”), a Functional
Medical Practice acquired in April 2019 that is engaged in improving the health of its patients through individualized and integrative
health care, and (iii) Bridging the Gap Physical Therapy (“BTG”), a physical therapy practice in Bonita Springs, FL
that provides hands-on functional manual therapy techniques to speed patients’ recovery and manage pain without pain medication
or surgery. The Company’s Digital Healthcare segment develops and plans to operate an online personal medical information
and record archive system, the “HealthLynked Network,” which will enable patients and doctors to keep track of medical
information via the Internet in a cloud-based system. The ACO/MSO Division is comprised of the business acquired with CHM, which
assists physician practices in providing coordinated and more efficient care to patients via the MSSP as administered by the CMS,
which rewards providers for efficiency in patient care. The Company evaluates performance and allocates resources based on profit
or loss from operations before income taxes. The accounting policies of the reportable segments are the same as those described
in the summary of significant accounting policies.
HEALTHLYNKED
CORP.
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER
30, 2020
(UNAUDITED)
NOTE
17 – SEGMENT REPORTING (CONTINUED)
Segment
information for the three months ended September 30, 2020 and 2019 was as follows:
|
|
Three Months Ended September 30, 2020
|
|
|
Three Months Ended September 30, 2019
|
|
|
|
Health Services
|
|
|
Digital Healthcare
|
|
|
ACO / MSO
|
|
|
Total
|
|
|
Health Services
|
|
|
Digital Healthcare
|
|
|
ACO / MSO
|
|
|
Total
|
|
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Patient service revenue, net
|
|
$
|
1,054,806
|
|
|
$
|
---
|
|
|
$
|
---
|
|
|
$
|
1,054,806
|
|
|
$
|
1,172,561
|
|
|
$
|
---
|
|
|
$
|
---
|
|
|
$
|
1,172,561
|
|
Medicare shared savings revenue
|
|
|
---
|
|
|
|
---
|
|
|
|
767,744
|
|
|
|
767,744
|
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
Consulting revenue
|
|
|
---
|
|
|
|
---
|
|
|
|
217,605
|
|
|
|
217,605
|
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
Total revenue
|
|
|
1,054,806
|
|
|
|
---
|
|
|
|
985,349
|
|
|
|
2,040,155
|
|
|
|
1,172,561
|
|
|
|
---
|
|
|
|
---
|
|
|
|
1,172,561
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Practice salaries and benefits
|
|
|
590,690
|
|
|
|
---
|
|
|
|
---
|
|
|
|
590,690
|
|
|
|
708,571
|
|
|
|
---
|
|
|
|
---
|
|
|
|
708,571
|
|
Other practice operating expenses
|
|
|
548,667
|
|
|
|
---
|
|
|
|
---
|
|
|
|
548,667
|
|
|
|
521,341
|
|
|
|
---
|
|
|
|
---
|
|
|
|
521,341
|
|
Medicare shared savings expenses
|
|
|
---
|
|
|
|
---
|
|
|
|
759,848
|
|
|
|
759,848
|
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
General and administrative
|
|
|
---
|
|
|
|
958,874
|
|
|
|
---
|
|
|
|
958,874
|
|
|
|
---
|
|
|
|
733,360
|
|
|
|
---
|
|
|
|
733,360
|
|
Depreciation and amortization
|
|
|
24,557
|
|
|
|
594
|
|
|
|
---
|
|
|
|
25,151
|
|
|
|
24,385
|
|
|
|
595
|
|
|
|
---
|
|
|
|
24,980
|
|
Total Operating Expenses
|
|
|
1,163,914
|
|
|
|
959,468
|
|
|
|
759,848
|
|
|
|
2,883,230
|
|
|
|
1,254,297
|
|
|
|
733,955
|
|
|
|
---
|
|
|
|
1,988,252
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from operations
|
|
$
|
(109,108
|
)
|
|
$
|
(959,468
|
)
|
|
$
|
225,501
|
|
|
$
|
(843,075
|
)
|
|
$
|
(81,736
|
)
|
|
$
|
(733,955
|
)
|
|
$
|
---
|
|
|
$
|
(815,691
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Segment Information
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
$
|
23,186
|
|
|
$
|
49,349
|
|
|
$
|
---
|
|
|
$
|
72,535
|
|
|
$
|
5,165
|
|
|
$
|
64,397
|
|
|
$
|
---
|
|
|
$
|
69,562
|
|
Loss on sales of marketable securities
|
|
$
|
---
|
|
|
$
|
281,606
|
|
|
$
|
---
|
|
|
$
|
281,606
|
|
|
$
|
---
|
|
|
$
|
---
|
|
|
$
|
---
|
|
|
$
|
---
|
|
Loss on extinguishment of debt
|
|
$
|
---
|
|
|
$
|
450,999
|
|
|
$
|
---
|
|
|
$
|
450,999
|
|
|
$
|
---
|
|
|
$
|
(4,904
|
)
|
|
$
|
---
|
|
|
$
|
(4,904
|
)
|
Financing cost
|
|
$
|
---
|
|
|
$
|
---
|
|
|
$
|
---
|
|
|
$
|
---
|
|
|
$
|
---
|
|
|
$
|
12,009
|
|
|
$
|
---
|
|
|
$
|
12,009
|
|
Amortization of original issue and debt discounts on convertible notes
|
|
$
|
---
|
|
|
$
|
65,816
|
|
|
$
|
---
|
|
|
$
|
65,816
|
|
|
$
|
---
|
|
|
$
|
362,728
|
|
|
$
|
---
|
|
|
$
|
362,728
|
|
Change in fair value of debt
|
|
$
|
---
|
|
|
$
|
79,062
|
|
|
$
|
---
|
|
|
$
|
79,062
|
|
|
$
|
---
|
|
|
$
|
28,885
|
|
|
$
|
---
|
|
|
$
|
28,885
|
|
Change in fair value of derivative financial instruments
|
|
$
|
---
|
|
|
$
|
(12,802
|
)
|
|
$
|
---
|
|
|
$
|
(12,802
|
)
|
|
$
|
---
|
|
|
$
|
(158,691
|
)
|
|
$
|
---
|
|
|
$
|
(158,691
|
)
|
Change in fair value of contingent acquisition consideration
|
|
$
|
---
|
|
|
$
|
(45,996
|
)
|
|
$
|
---
|
|
|
$
|
(45,996
|
)
|
|
$
|
---
|
|
|
$
|
---
|
|
|
$
|
---
|
|
|
$
|
---
|
|
HEALTHLYNKED
CORP.
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER
30, 2020
(UNAUDITED)
NOTE
17 – SEGMENT REPORTING (CONTINUED)
Segment
information for the nine months ended September 30, 2020 and 2019 was as follows:
|
|
Nine Months Ended September 30, 2020
|
|
|
Nine Months Ended September 30, 2019
|
|
|
|
Health Services
|
|
|
Digital Healthcare
|
|
|
ACO / MSO
|
|
|
Total
|
|
|
Health Services
|
|
|
Digital Healthcare
|
|
|
ACO / MSO
|
|
|
Total
|
|
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Patient service revenue, net
|
|
$
|
3,502,836
|
|
|
$
|
---
|
|
|
$
|
---
|
|
|
$
|
3,502,836
|
|
|
$
|
2,845,941
|
|
|
$
|
---
|
|
|
$
|
---
|
|
|
$
|
2,845,941
|
|
Medicare shared savings revenue
|
|
|
---
|
|
|
|
---
|
|
|
|
767,744
|
|
|
|
767,744
|
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
Consulting revenue
|
|
|
---
|
|
|
|
---
|
|
|
|
268,025
|
|
|
|
268,025
|
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
Total revenue
|
|
|
3,502,836
|
|
|
|
---
|
|
|
|
1,035,769
|
|
|
|
4,538,605
|
|
|
|
2,845,941
|
|
|
|
---
|
|
|
|
---
|
|
|
|
2,845,941
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Practice salaries and benefits
|
|
|
1,910,897
|
|
|
|
---
|
|
|
|
---
|
|
|
|
1,910,897
|
|
|
|
1,762,662
|
|
|
|
---
|
|
|
|
---
|
|
|
|
1,762,662
|
|
Other practice operating expenses
|
|
|
1,633,380
|
|
|
|
---
|
|
|
|
---
|
|
|
|
1,633,380
|
|
|
|
1,287,432
|
|
|
|
---
|
|
|
|
---
|
|
|
|
1,287,432
|
|
Medicare shared savings expenses
|
|
|
---
|
|
|
|
---
|
|
|
|
824,084
|
|
|
|
824,084
|
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
General and administrative
|
|
|
---
|
|
|
|
2,116,159
|
|
|
|
---
|
|
|
|
2,116,159
|
|
|
|
---
|
|
|
|
2,084,630
|
|
|
|
---
|
|
|
|
2,084,630
|
|
Depreciation and amortization
|
|
|
73,027
|
|
|
|
1,784
|
|
|
|
---
|
|
|
|
74,811
|
|
|
|
46,561
|
|
|
|
1,784
|
|
|
|
---
|
|
|
|
48,345
|
|
Total Operating Expenses
|
|
|
3,617,304
|
|
|
|
2,117,943
|
|
|
|
824,084
|
|
|
|
6,559,331
|
|
|
|
3,096,655
|
|
|
|
2,086,414
|
|
|
|
---
|
|
|
|
5,183,069
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from operations
|
|
$
|
(114,468
|
)
|
|
$
|
(2,117,943
|
)
|
|
$
|
211,685
|
|
|
$
|
(2,020,726
|
)
|
|
$
|
(250,714
|
)
|
|
$
|
(2,086,414
|
)
|
|
$
|
---
|
|
|
$
|
(2,337,128
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Segment Information
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
$
|
35,096
|
|
|
$
|
158,038
|
|
|
$
|
---
|
|
|
$
|
193,134
|
|
|
$
|
17,010
|
|
|
$
|
159,219
|
|
|
$
|
---
|
|
|
$
|
176,229
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss on sales of marketable securities
|
|
$
|
---
|
|
|
$
|
281,606
|
|
|
$
|
---
|
|
|
$
|
281,606
|
|
|
$
|
---
|
|
|
$
|
---
|
|
|
$
|
---
|
|
|
$
|
---
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss on extinguishment of debt
|
|
$
|
---
|
|
|
$
|
1,347,371
|
|
|
$
|
---
|
|
|
$
|
1,347,371
|
|
|
$
|
---
|
|
|
$
|
62,459
|
|
|
$
|
---
|
|
|
$
|
62,459
|
|
Financing cost
|
|
$
|
---
|
|
|
$
|
---
|
|
|
$
|
---
|
|
|
$
|
---
|
|
|
$
|
---
|
|
|
$
|
133,244
|
|
|
$
|
---
|
|
|
$
|
133,244
|
|
Amortization of original issue and debt discounts on convertible notes
|
|
$
|
---
|
|
|
$
|
530,930
|
|
|
$
|
---
|
|
|
$
|
530,930
|
|
|
$
|
---
|
|
|
$
|
841,725
|
|
|
$
|
---
|
|
|
$
|
841,725
|
|
Change in fair value of debt
|
|
$
|
---
|
|
|
$
|
198,764
|
|
|
$
|
---
|
|
|
$
|
198,764
|
|
|
$
|
---
|
|
|
$
|
88,991
|
|
|
$
|
---
|
|
|
$
|
88,991
|
|
Change in fair value of derivative financial instruments
|
|
$
|
---
|
|
|
$
|
(739,485
|
)
|
|
$
|
---
|
|
|
$
|
(739,485
|
)
|
|
$
|
---
|
|
|
$
|
(574,205
|
)
|
|
$
|
---
|
|
|
$
|
(574,205
|
)
|
Change in fair value of contingent acquisition consideration
|
|
$
|
---
|
|
|
$
|
(687
|
)
|
|
$
|
---
|
|
|
$
|
(687
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30,
2020
|
|
|
December 31,
2019
|
|
Identifiable assets
|
|
$
|
2,250,647
|
|
|
$
|
952,716
|
|
|
$
|
901,736
|
|
|
$
|
4,105,099
|
|
|
$
|
2,356,886
|
|
|
$
|
117,802
|
|
|
$
|
---
|
|
|
$
|
2,474,688
|
|
Goodwill
|
|
$
|
---
|
|
|
$
|
---
|
|
|
$
|
1,454,856
|
|
|
$
|
1,454,856
|
|
|
$
|
71,866
|
|
|
$
|
---
|
|
|
$
|
---
|
|
|
$
|
71,866
|
|
The
Digital Healthcare segment recognized revenue of $1,366 and $1,164 in the three months ended September 30, 2020 and 2019, respectively,
and $3,797 and $5,075 in the nine months ended September 30, 2020 and 2019, respectively, related to subscription revenue billed
to and paid for by the Company’s physicians for access to the HealthLynked Network. The revenue for Digital Healthcare and
related expense for Health Services were eliminated on consolidation.
HEALTHLYNKED
CORP.
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER
30, 2020
(UNAUDITED)
NOTE
18 – 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 September 30, 2020 and December 31, 2019:
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Fair Value
|
|
Convertible notes payable
|
|
$
|
---
|
|
|
$
|
---
|
|
|
$
|
1,153,279
|
|
|
$
|
1,153,279
|
|
Contingent acquisition consideration
|
|
|
---
|
|
|
|
---
|
|
|
|
926,597
|
|
|
|
926,597
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
---
|
|
|
$
|
---
|
|
|
$
|
2,079,876
|
|
|
$
|
2,079,876
|
|
|
|
As of December 31, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Fair Value
|
|
Convertible notes payable
|
|
$
|
---
|
|
|
$
|
---
|
|
|
$
|
723,482
|
|
|
$
|
723,482
|
|
Notes payable to related party
|
|
|
---
|
|
|
|
---
|
|
|
|
193,007
|
|
|
|
193,007
|
|
Derivative financial instruments
|
|
|
---
|
|
|
|
---
|
|
|
|
991,288
|
|
|
|
991,288
|
|
Contingent acquisition consideration
|
|
|
---
|
|
|
|
---
|
|
|
|
500,000
|
|
|
|
500,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
---
|
|
|
$
|
---
|
|
|
$
|
2,407,777
|
|
|
$
|
2,407,777
|
|
The
changes in Level 3 financial instruments that are measured at fair value on a recurring basis during the three and nine months
ended September 30, 2020 and 2019 were as follows:
|
|
Three Months Ended
September 30,
|
|
|
Nine Months Ended
September 30,
|
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible notes payable
|
|
$
|
(46,094
|
)
|
|
$
|
(22,899
|
)
|
|
$
|
(117,829
|
)
|
|
$
|
(70,921
|
)
|
Notes payable to related party
|
|
|
(32,968
|
)
|
|
|
(5,986
|
)
|
|
|
(80,935
|
)
|
|
|
(18,070
|
)
|
Derivative financial instruments
|
|
|
12,802
|
|
|
|
158,691
|
|
|
|
739,485
|
|
|
|
574,205
|
|
Contingent acquisition consideration
|
|
|
45,996
|
|
|
|
---
|
|
|
|
687
|
|
|
|
---
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
(20,264
|
)
|
|
$
|
129,806
|
|
|
$
|
541,408
|
|
|
$
|
485,214
|
|
HEALTHLYNKED
CORP.
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER
30, 2020
(UNAUDITED)
NOTE
19 – SUBSEQUENT EVENTS
On October 19, 2020, the Company entered into an Agreement and
Plan of Merger (the “Merger Agreement”) by and among the Company, MOD FL, LLC, a Florida limited liability company
and wholly owned subsidiary of the Company (“Merger Sub”), MedOfficeDirect L.L.C. (“MOD”) and certain of
the members of MOD. The Merger Agreement provided that the Merger Sub would merge with and into MOD, with MOD surviving as a wholly-owned
subsidiary of the Company (the “Merger”). As consideration for the Merger, the members of MOD are receiving consideration
valued at up to $6,010,000, including (i) the issuance of an aggregate of 19,045,563 restricted shares of the Company’s common
stock valued at to $2,704,470 upon the closing of the Merger (the “Closing Shares”), (ii) the issuance of an aggregate
of up to 10,004,749 restricted shares of the Company’s common stock valued at up to $2,602,330 over a four year period based
on MOD achieving certain revenue targets as set forth in the Merger Agreement (the “Earnout Shares”), and (iii) the
partial satisfaction of certain outstanding debt obligations of MOD in the amount of $703,200 in cash by the Company. The Company
and MOD completed the Merger by filing the Certificate of Merger with the Florida Department of State. As a result of the Merger,
with MOD surviving as a wholly-owned subsidiary of the Company, the Company acquired all of the assets of MOD. MOD is a virtual
distributor of discounted medical supplies selling to both consumers and medical practices throughout the United States. With over
13,000 name brand medical products in over 150 different categories, MOD leverages Group Purchasing Organization pricing discounts
with a small unit-of-measure direct-to-consumer shipping model to make ordering medical supplies both convenient and highly cost
effective for its users. Dr. Michael Dent, the Chief Executive Officer and the Chairman of the Board of Directors of the Company,
George O’Leary, the Chief Financial Officer and a director of the Company, and Robert Gasparini, a director of the Company,
were members of MOD and received Merger Consideration in connection with the Merger as follows: (1) Dr. Dent received 10,573,745
Closing Shares and may earn up to 5,554,452 additional Earnout Shares, (2) Mr. O’Leary received 1,130,213 Closing Shares
and may earn up to 593,707 additional Earnout Shares, and (3) Mr. Gasparini received 99,437 Closing Shares and may earn up to 52,235
additional Earnout Shares.