NOTE
7 – CAPITAL LEASE
Capital
lease obligations as of June 30, 2018 and December 31, 2017 are comprised of the following:
|
|
June 30,
|
|
|
December 31,
|
|
|
|
2018
|
|
|
2017
|
|
Note payable, New Everbank Lease
|
|
$
|
32,109
|
|
|
$
|
39,754
|
|
Less: note payable, New Everbank Lease (Capital leases), current portion
|
|
|
(19,877
|
)
|
|
|
(18,348
|
)
|
|
|
|
|
|
|
|
|
|
Notes payable, bank loans and capital leases, long-term portion
|
|
$
|
12,232
|
|
|
$
|
21,406
|
|
In
March 2015, the Company entered into a capital equipment finance lease for Ultra Sound equipment with Everbank. There was no interest
on this lease. The monthly payment is $1,529 for 60 months ending in March 2020. As of June 30, 2018, the Company owed Everbank
$32,109 pursuant to this capital lease. During the three months ended June 30, 2018 and 2017, the Company made payments on this
capital lease of $4,587 and $4,587, respectively. During the six months ended June 30, 2018 and 2017, the Company made payments
on this capital lease of $7,645 and $9,174, respectively.
Future
minimum payments to which the Company is obligated pursuant to the capital leases as of June, 2018 are as follows:
2018 (July to December)
|
|
$
|
10,703
|
|
2019
|
|
|
18,348
|
|
2020
|
|
|
3,058
|
|
2021
|
|
|
---
|
|
2022
|
|
|
---
|
|
|
|
|
|
|
Total
|
|
$
|
32,109
|
|
HEALTHLYNKED
CORP.
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2018 AND 2017
(UNAUDITED)
NOTE
8 – NOTES PAYABLE
On
December 20, 2017, the Company entered into a Merchant Cash Advance Factoring Agreement (“MCA”) with Power Up Lending
Group, Ltd. (the “PULG”) pursuant to which the Company received an advance of $75,000 before closing fees (the “December
MCA”). The Company is required to repay the advance, which acts like an ordinary note payable, at the rate of $4,048 per
week until the balance of $102,000 has been repaid in June 2018. At inception, the Company recognized a note payable in the amount
of $102,000 and a discount against the note payable of $28,500. The discount was being amortized over the life of the instrument.
During the six months ended June 30, 2018, the Company made installment payments of $89,048. The December MCA was repaid on June
1, 2018. During the six months ended June 30, 2018, the Company recognized amortization of the discount in the amount of $26,881,
including $2,267 recognized to amortize the remaining discount at retirement.
On
June 1, 2018, the Company entered into a new MCA with PULG pursuant to which the Company received an advance of $75,000 before
closing fees (the “December MCA”). The Company is required to repay the advance at the rate of $4,048 per week until
the balance of $102,000 has been repaid in November 2018. At inception, the Company recognized a note payable in the amount of
$102,000 and a discount against the note payable of $28,500. The discount is being amortized over the life of the instrument.
During the three and six months ended June 30, 2018, the Company recognized amortization of the discount in the amount of $4,560.
As of June 30, 2018, the net carrying value of the instrument was $61,869.
NOTE
9 – CONVERTIBLE NOTES PAYABLE
Convertible
notes payable as of June 30, 2018 and December 31, 2017 are comprised of the following:
|
|
June 30,
|
|
|
December 31,
|
|
|
|
2018
|
|
|
2017
|
|
|
|
|
|
|
|
|
$550k Note - July 2016
|
|
$
|
612,409
|
*
|
|
$
|
550,000
|
|
$50k Note - July 2016
|
|
|
59,771
|
*
|
|
|
50,000
|
|
$111k Note - May 2017
|
|
|
123,053
|
*
|
|
|
111,000
|
|
$53k Note - July 2017
|
|
|
---
|
|
|
|
53,000
|
|
$35k Note - September 2017
|
|
|
---
|
|
|
|
35,000
|
|
$55k Note - September 2017
|
|
|
---
|
|
|
|
55,000
|
|
$53k Note II - October 2017
|
|
|
---
|
|
|
|
53,000
|
|
$171.5k Note - October 2017
|
|
|
171,500
|
|
|
|
171,500
|
|
$57.8k Note - January 2018
|
|
|
57,750
|
|
|
|
---
|
|
$112.8k Note - February 2018
|
|
|
112,750
|
|
|
|
---
|
|
$83k Note - February 2018
|
|
|
83,000
|
|
|
|
---
|
|
$105k Note - March 2018
|
|
|
105,000
|
|
|
|
---
|
|
$63k Note - April 2018
|
|
|
63,000
|
|
|
|
---
|
|
$57.8k Note - April 2018
|
|
|
57,750
|
|
|
|
---
|
|
$90k Note - April 2018
|
|
|
90,000
|
|
|
|
---
|
|
$53k Note II - April 2018
|
|
|
53,000
|
|
|
|
---
|
|
$68.3k Note - May 2018
|
|
|
68,250
|
|
|
|
---
|
|
$37k Note May 2018
|
|
|
37,000
|
|
|
|
---
|
|
$63k Note II - May 2018
|
|
|
63,000
|
|
|
|
---
|
|
$78.8k Note - May 2018
|
|
|
78,750
|
|
|
|
---
|
|
|
|
|
1,835,983
|
|
|
|
1,078,500
|
|
Less: unamortized discount
|
|
|
(689,883
|
)
|
|
|
(266,642
|
)
|
Convertible notes payable, net of original issue discount and debt discount
|
|
|
1,146,100
|
|
|
|
811,858
|
|
Less: convertible notes payable, long term portion
|
|
|
(795,233
|
)
|
|
|
---
|
|
Convertible notes payable, current portion
|
|
$
|
350,867
|
|
|
$
|
811,858
|
|
*
- Denotes that convertible note payable is carried at fair value
HEALTHLYNKED
CORP.
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2018 AND 2017
(UNAUDITED)
NOTE
9 – CONVERTIBLE NOTES PAYABLE (CONTINUED)
Convertible
Notes Payable ($550,000) – July 2016
On
July 7, 2016, the Company entered into a 6% fixed convertible secured promissory note with an investor with a face value of $550,000
(the “$550k Note”). The $550k Note is convertible into shares of the Company’s common stock at the discretion
of the note holder at a fixed price of $0.08 per share, and is secured by all of the Company’s assets. The Company received
$500,000 net proceeds from the note after a $50,000 original issue discount. The $550k Note was originally scheduled to mature
on April 11, 2017, but the maturity date was extended to July 7, 2018 during August 2017 and to December 31, 2019 during July
2018. The discount from the original issue discount, warrants and embedded conversion feature (“ECF”) associated with
the $550k Note was amortized over the original life of the note. There was no amortization of such discounts in the three or six
months ended June 30, 2018 or 2017. As of June 30, 2018, the unamortized discount was $-0- and the $550k Note was convertible
into 6,875,000 of the Company’s common shares.
The
$550k Note is carried at fair value due to an extinguishment and reissuance recorded in 2017 and is revalued at each period end,
with changes to fair value recorded to the statement of operations under “Change in Fair Value of Debt.” The fair
value of this instrument as of June 30, 2018 was $612,408. During the three months ended June 30, 2018 and 2017, a change in fair
value of debt related to this instrument was recorded in the amount of $16,110 and $-0-, respectively. During the six months ended
June 30, 2018 and 2017, a change in fair value of debt related to this instrument was recorded in the amount of $62,408 and $-0-,
respectively.
During
the six months ended June 30, 2018 and 2017, the Company made no repayments on this instrument. During the three months ended
June 30, 2018 and 2017, the Company recorded interest expense on this instrument totaling $8,227 and $8,227, respectively. During
the six months ended June 30, 2018 and 2017, the Company recorded interest expense on this instrument totaling $16,364 and $16,364,
respectively.
Convertible
Notes Payable ($50,000) – July 2016
On
July 7, 2016, the Company entered into a 10% fixed convertible commitment fee promissory note with an investor with a face value
of $50,000 (the “$50k Note”). The $50k Note was originally scheduled to mature on April 11, 2017, but the maturity
date was extended to July 11, 2018 during August 2017 and to December 31, 2019 during July 2018. The $50k note was issued as a
commitment fee payable to the Investment Agreement investor in exchange for the investor’s commitment to enter into the
Investment Agreement, subject to registration of the shares underlying the Investment Agreement. The $50k Note is convertible
into shares of the Company’s common stock at the discretion of the note holder at a fixed price of $0.10 per share. As of
June 30, 2018, the $50k Note was convertible into 500,000 of the Company’s common shares.
The
$50k Note is carried at fair value due to an extinguishment and reissuance recorded in 2017 and is revalued at each period end,
with changes to fair value recorded to the statement of operations under “Change in Fair Value of Debt.” The fair
value of this instrument as of June 30, 2018 was $59,771. During the three months ended June 30, 2018 and 2017, a change in fair
value of debt related to this instrument was recorded in the amount of $1,572 and $-0-, respectively. During the six months ended
June 30, 2018 and 2017, a change in fair value of debt related to this instrument was recorded in the amount of $9,771 and $-0,
respectively.
During
the six months ended June 30, 2018 and 2017, the Company made no repayments on this instrument. During the three months ended
June 30, 2018 and 2017, the Company recorded interest expense on this instrument totaling $1,247 and $1,247, respectively. During
the six months ended June 30, 2018 and 2017, the Company recorded interest expense on this instrument totaling $2,479 and $2,479,
respectively.
Convertible
Notes Payable ($111,000) – May 2017
On
May 22, 2017, the Company entered into a 10% fixed convertible secured promissory note with an investor with a face value of $111,000
(the “$111k Note”). The $111k Note is convertible into shares of the Company’s common stock at the discretion
of the note holder at a fixed price of $0.35 per share, and is secured by all of the Company’s assets. The Company received
$100,000 net proceeds from the note after an $11,000 original issue discount. At inception, the investors were also granted a
five-year warrant to purchase 133,333 shares of the Company’s common stock at an exercise price of $0.75 per share.
HEALTHLYNKED
CORP.
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2018 AND 2017
(UNAUDITED)
NOTE
9 – CONVERTIBLE NOTES PAYABLE (CONTINUED)
On
March 28, 2018, in exchange for a five-year warrant to purchase 125,000 shares of HLYK common stock at an exercise price of $0.05
per share, the holder of the $111k Note agreed to extend the maturity date from the original date of January 22, 2018 until July
11, 2018. The fair value of the warrants using Black/Scholes was $10,199 with the following assumptions: risk-free interest rate
of 2.59%, expected life of 5 years, volatility of 578.45%, and expected dividend yield of zero. The issuance of the warrants in
exchange for the maturity extension was treated as an extinguishment and reissuance of existing debt pursuant to the guidance
of ASC 470-50. Accordingly, the $111k Note is carried at fair value and is revalued at each period end, with changes to fair value
recorded to the statement of operations under “Change in Fair Value of Debt.” The fair value of this instrument as
of June 30, 2018 was $123,503. During the three months ended June 30, 2018 and 2017, a change in fair value of debt related to
this instrument was recorded in the amount of $3,238 and $-0-, respectively. During the six months ended June 30, 2018 and 2017,
a change in fair value of debt related to this instrument was recorded in the amount of $3,238 and $-0, respectively. In July
2018, the maturity was further extended until December 31, 2019.
Amortization
expense related to discounts on this instrument in the three months ended June 30, 2018 and 2017 was $-0- and $12,287, respectively.
Amortization expense related to discounts in the six months ended June 30, 2018 and 2017 was $6,931and $12,287, respectively.
As of June 30, 2018, the unamortized discount was $-0-. As of June 30, 2018, this instrument was convertible into 317,143 of the
Company’s common shares.
During
the six months ended June 30, 2018 and 2017, the Company made no repayments on this instrument. During the three months ended
June 30, 2018 and 2017, the Company recorded interest expense on this instrument totaling $4,078 and $1,767, respectively. During
the six months ended June 30, 2018 and 2017, the Company recorded interest expense on this instrument totaling $8,246 and $1,767,
respectively.
Convertible
Notes Payable ($53,000) – July 2017
On
July 10, 2017, the Company entered into a securities purchase agreement for the sale of a $53,000 convertible note (the “$53k
Note”) to PULG. The $53k Note included a $3,000 original issue discount, for net proceeds of $50,000. The $53k Note has
an interest rate of 10% and a default interest rate of 22%. The $53k Note may be converted into common stock of the Company by
the holder at any time following 180 days after the issuance date, subject to a 4.99% beneficial ownership limitation, at a conversion
price per share equal to a 39% discount to the average of the three (3) lowest closing bid prices during the fifteen (15) trading
days prior to the conversion date. Upon an event of default caused by the Company’s failure to deliver shares upon a conversion
pursuant to the terms of the Note, 300% of the outstanding principal and any interest due amount shall be immediately due. Upon
an event of default caused by the Company’s breach of any other events of default specified in the $53k Note, 150% of the
outstanding principal and any interest due amount shall be immediately due.
The
discount resulting from the original issue discount and embedded conversion feature was being amortized over the life of the $53k
Note, which was schedule to mature on April 15, 2018. Amortization expense related to the discount in the three months ended June
30, 2018 and 2017 was $1,520 and $-0-, respectively and amortization expense in the six months ended June 30, 2018 and 2017 was
$1,520 and $-0-. On January 8, 2018, the Company prepaid the balance on the $53k Note, including accrued interest, for a one-time
cash payment of $74,922. The Company recognized a gain on debt extinguishment in the six months ended June 30, 2018 in connection
with the repayment, as follows:
Cash repayment
|
|
$
|
74,922
|
|
Less face value of convertible note payable retired
|
|
|
(53,000
|
)
|
Less carrying value of derivative financial instruments arising from ECF
|
|
|
(53,893
|
)
|
Less accrued interest
|
|
|
(2,644
|
)
|
Plus carrying value of discount at extinguishment
|
|
|
18,427
|
|
|
|
|
|
|
Gain on extinguishment of debt
|
|
$
|
(16,188
|
)
|
HEALTHLYNKED
CORP.
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2018 AND 2017
(UNAUDITED)
NOTE
9 – CONVERTIBLE NOTES PAYABLE (CONTINUED)
Convertible
Notes Payable ($35,000) – September 2017
On
September 7, 2017, the Company entered into a securities purchase agreement for the sale of a $35,000 convertible note (the “$35k
Note”) to PULG. The $35k Note included a $3,000 original issue discount, for net proceeds of $32,000. The $35k Note has
an interest rate of 10% and a default interest rate of 20%. The $35k Note may be converted into common stock of the Company by
the holder at any time following 180 days after the issuance date, subject to a 4.99% beneficial ownership limitation, at a conversion
price per share equal to a 39% discount to the average of the three (3) lowest closing bid prices during the fifteen (15) trading
days prior to the conversion date. Upon an event of default caused by the Company’s failure to deliver shares upon a conversion
pursuant to the terms of the $35k Note, 300% of the outstanding principal and any interest due amount shall be immediately due.
Upon an event of default caused by the Company’s breach of any other events of default specified in the $35k Note, 150%
of the outstanding principal and any interest due amount shall be immediately due.
The
discount resulting from the original issue discount and embedded conversion feature was being amortized over the life of the $35k
Note, which was schedule to mature on June 15, 2018. Amortization expense related to the discount in the three months ended June
30, 2018 and 2017 was $614 and $-0-, respectively, and in the six months ended June 30, 2018 and 2017 was $614 and $-0-, respectively.
On March 5, 2018, the Company prepaid the balance on the $35k Note, including accrued interest, for a one-time cash payment of
$49,502. The Company recognized a gain on debt extinguishment in the six months ended June 30, 2018 in connection with the repayment,
as follows:
Cash repayment
|
|
$
|
49,502
|
|
Less face value of convertible note payable retired
|
|
|
(35,000
|
)
|
Less carrying value of derivative financial instruments arising from ECF
|
|
|
(37,269
|
)
|
Less accrued interest
|
|
|
(1,716
|
)
|
Plus carrying value of discount at extinguishment
|
|
|
12,705
|
|
|
|
|
|
|
Gain on extinguishment of debt
|
|
$
|
(11,778
|
)
|
Convertible
Notes Payable ($55,000) – September 2017
On
September 11, 2017, the Company entered into a securities purchase agreement for the sale of a $55,000 convertible note (the “$55k
Note”) to Crown Bridge Partners LLC. The $55k Note included a $7,500 original issue discount, for net proceeds of $47,500.
The 55k Note has an interest rate of 10% and a default interest rate of 12%. The $55k Note may be converted into common stock
of the Company by the holder at any time after the issuance date, subject to a 4.99% beneficial ownership limitation, at a conversion
price per share equal to 60% multiplied by the lowest one (1) trading price for the Common Stock during the twenty (20) trading
day period ending on the last complete trading day prior to the date of conversion. If, at any time while the $55k Note is outstanding,
the conversion price pursuant to this formula is equal to or lower than $0.10, then an additional ten percent (10%) discount shall
be factored into the conversion price until the $55k Note is no longer outstanding. In the event that shares of the Company’s
Common Stock are not deliverable via DWAC following the conversion of any amount hereunder, an additional ten percent (10%) discount
shall be factored into the Variable Conversion Price until the $55k Note is no longer outstanding.
The
discount resulting from the original issue discount and embedded conversion feature was being amortized over the life of the $55k
Note, which was schedule to mature on September 11, 2018. Amortization expense related to the discount in the three months ended
June 30, 2018 and 2017 was $1,085 and $-0-, respectively, and in the six months ended June 30, 2018 and 2017 was $1,085 and $-0-,
respectively. On March 13, 2018, the Company prepaid the balance on the $55k Note, including accrued interest, for a one-time
cash payment of $85,258. The Company recognized a gain on debt extinguishment in the six months ended June 30, 2018 in connection
with the repayment, as follows:
Cash repayment
|
|
$
|
85,258
|
|
Less face value of convertible note payable retired
|
|
|
(55,000
|
)
|
Less carrying value of derivative financial instruments arising from ECF
|
|
|
(69,687
|
)
|
Less accrued interest
|
|
|
(2,759
|
)
|
Plus carrying value of discount at extinguishment
|
|
|
27,425
|
|
|
|
|
|
|
Gain on extinguishment of debt
|
|
$
|
(14,763
|
)
|
HEALTHLYNKED
CORP.
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2018 AND 2017
(UNAUDITED)
NOTE
9 – CONVERTIBLE NOTES PAYABLE (CONTINUED)
Convertible
Notes Payable ($53,000) – October 2017
On
October 23, 2017, the Company entered into a securities purchase agreement for the sale of a $53,000 convertible note (the “$53k
Note II”) to PULG. The $53k Note II included a $3,000 original issue discount, for net proceeds of $50,000. The $53k Note
II has an interest rate of 10% and a default interest rate of 20%. The $53k Note II may be converted into common stock of the
Company by the holder at any time after the issuance date, subject to a 4.99% beneficial ownership limitation, at a conversion
price per share equal to 39% discount to the average of the three (3) lowest closing bid prices during the fifteen (15) trading
days prior to the conversion date. Upon an event of default caused by the Company’s failure to deliver shares upon a conversion
pursuant to the terms of the Note, 300% of the outstanding principal and any interest due amount shall be immediately due. Upon
an event of default caused by the Company’s breach of any other events of default specified in the Note, 150% of the outstanding
principal and any interest due amount shall be immediately due.
The
discount resulting from the original issue discount and embedded conversion feature was being amortized over the life of the $53k
Note II, which was schedule to mature on July 30, 2018. Amortization expense related to the discount in the three months ended
June 30, 2018 and 2017 was $3,407 and $-0-, respectively, and in the six months ended June 30, 2018 and 2017 was $20,443 and $-0-,
respectively. On April 18, 2018, the Company prepaid the balance on the $53k Note II, including accrued interest, for a one-time
cash payment of $75,000. The Company recognized a gain on debt extinguishment in the six months ended June 30, 2018 in connection
with the repayment, as follows:
Cash repayment
|
|
$
|
75,000
|
|
Less face value of convertible note payable retired
|
|
|
(53,000
|
)
|
Less carrying value of derivative financial instruments arising from ECF
|
|
|
(55,790
|
)
|
Less accrued interest
|
|
|
(2,571
|
)
|
Plus carrying value of discount at extinguishment
|
|
|
19,496
|
|
|
|
|
|
|
Gain on extinguishment of debt
|
|
$
|
(16,865
|
)
|
Convertible
Notes Payable ($171,500) – October 2017
On
October 27, 2017, the Company entered into a securities purchase agreement for the sale of a $171,500 convertible note (the “$171.5k
Note”) to an individual lender. The $171.5k Note included a $21,500 original issue discount, for net proceeds of $150,000.
The $171.5k Note has an interest rate of 10% and a default interest rate of 22% and matures on October 26, 2018. The $171.5k Note
may be converted into common stock of the Company by the holder at any time following 180 days after the issuance date, subject
to a 4.99% beneficial ownership limitation, at a conversion price per share equal to a 35% discount to the lowest closing bid
price during the twenty (20) trading days prior to the conversion date. Upon an event of default caused by the Company’s
failure to deliver shares upon a conversion pursuant to the terms of the $171.5k Note, 300% of the outstanding principal and any
interest due amount shall be immediately due. Upon an event of default caused by the Company’s breach of any other events
of default specified in the $171.5k Note, 150% of the outstanding principal and any interest due amount shall be immediately due.
Amortization
expense related to discounts on this instrument in the three months ended June 30, 2018 and 2017 was $42,875 and $-0-, respectively.
Amortization expense related to discounts in the six months ended June 30, 2018 and 2017 was $85,279 and $-0-, respectively. As
of June 30, 2018, the unamortized discount was $55,596.
During
the six months ended June 30, 2018 and 2017, the Company made no repayments on this instrument. During the three months ended
June 30, 2018 and 2017, the Company recorded interest expense on this instrument totaling $4,276 and $-0-, respectively. During
the six months ended June 30, 2018 and 2017, the Company recorded interest expense on this instrument totaling $8,504 and $-0-,
respectively.
HEALTHLYNKED
CORP.
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2018 AND 2017
(UNAUDITED)
NOTE
9 – CONVERTIBLE NOTES PAYABLE (CONTINUED)
Convertible
Notes Payable ($57,750) – January 2018
On January 2, 2018, the Company entered
into a securities purchase agreement for the sale of a $57,750 convertible note (the “$58k Note”). The transaction
closed on January 3, 2018. The $58k Note included a $5,250 original issue discount and $2,500 fee for net proceeds of $50,000.
The $58k Note has an interest rate of 10% and a default interest rate of 18% and matures on January 2, 2019. The $58k Note was
convertible into common stock of the Company by the holder at any time after the issuance date, subject to a 4.99% beneficial ownership
limitation, at a conversion price per share equal to 40% discount to the lowest bid or trading price of the Company’s common
stock during the twenty (20) trading days prior to the conversion date. On June 26, 2018, the holder agreed, without consideration,
to reduce the discount to 28% of the volume weighted average price of the Company’s common stock for the 10 days prior to
the conversion date. Because this the change in terms resulted in a decrease to the value of the ECF, no amounts were recorded
to reflect the change in terms. Upon an event of default caused by the Company’s failure to deliver shares upon a conversion
pursuant to the terms of the Note, 200% of the outstanding principal and any interest due amount shall be immediately due. Upon
an event of default caused by the Company’s breach of any other events of default specified in the Note, 150% of the outstanding
principal and any interest due amount shall be immediately due.
The
fair value of the ECF of the $58k Note was calculated using the Black-Scholes pricing model at $82,652, with the following assumptions:
risk-free interest rate of 1.83%, expected life of 1 year, volatility of 264.29%, and expected dividend yield of zero. Because
the fair value of the ECF exceeded the net proceeds from the $58k Note, a charge was recorded to “Financing cost”
for the excess of the fair value of the fair value of the ECF of $82,652 over the net proceeds from the note of $50,000, for a
net charge of $32,652. The ECF qualifies for derivative accounting and bifurcation under ASC 815, “Derivatives and Hedging.”
The final allocation of the proceeds at inception was as follows:
Embedded conversion feature
|
|
$
|
82,652
|
|
Original issue discount and fees
|
|
|
7,750
|
|
Financing cost
|
|
|
(32,652
|
)
|
Convertible note
|
|
|
---
|
|
|
|
|
|
|
Notes payable and bank loans, long-term portion
|
|
$
|
57,750
|
|
Amortization
expense related to discounts on this instrument in the three months ended June 30, 2018 and 2017 was $14,398 and $-0-, respectively.
Amortization expense related to discounts in the six months ended June 30, 2018 and 2017 was $28,321and $-0-, respectively. As
of June 30, 2018, the unamortized discount was $29,429.
During
the six months ended June 30, 2018 and 2017, the Company made no repayments on this instrument. During the three months ended
June 30, 2018 and 2017, the Company recorded interest expense on this instrument totaling $1,440 and $-0-, respectively. During
the six months ended June 30, 2018 and 2017, the Company recorded interest expense on this instrument totaling $2,832 and $-0-,
respectively.
Convertible
Notes Payable ($112,750) – February 2018
On
February 2, 2018, the Company entered into a securities purchase agreement for the sale of a $112,750 convertible note (the “$113k
Note”). The transaction closed on February 8, 2018. The $113k Note included $12,750 fees for net proceeds of $100,000. The
$113k Note has an interest rate of 10% and a default interest rate of 24% and matures on February 2, 2019. The $113k Note may
be converted into common stock of the Company by the holder at any time after the issuance date, subject to a 4.99% beneficial
ownership limitation, at a conversion price per share equal to 40% discount to the lowest bid or trading price of the Company’s
common stock during the twenty (20) trading days prior to the conversion date. Upon an event of default caused by the Company’s
failure to deliver shares upon a conversion pursuant to the terms of the Note, 200% of the outstanding principal and any interest
due amount shall be immediately due. Upon an event of default caused by the Company’s breach of any other events of default
specified in the Note, 150% of the outstanding principal and any interest due amount shall be immediately due.
HEALTHLYNKED
CORP.
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2018 AND 2017
(UNAUDITED)
NOTE
9 – CONVERTIBLE NOTES PAYABLE (CONTINUED)
The
fair value of the ECF of the $113k Note was calculated using the Black-Scholes pricing model at $161,527, with the following assumptions:
risk-free interest rate of 1.88%, expected life of 1 year, volatility of 264.93%, and expected dividend yield of zero. Because
the fair value of the ECF exceeded the net proceeds from the $113k Note, a charge was recorded to “Financing cost”
for the excess of the fair value of the fair value of the ECF of $161,527 over the net proceeds from the note of $100,000, for
a net charge of $61,527. The ECF qualifies for derivative accounting and bifurcation under ASC 815, “Derivatives and Hedging.”
The final allocation of the proceeds at inception was as follows:
Embedded conversion feature
|
|
$
|
161,527
|
|
Original issue discount and fees
|
|
|
12,750
|
|
Financing cost
|
|
|
(61,527
|
)
|
Convertible note
|
|
|
---
|
|
|
|
|
|
|
Notes payable and bank loans, long-term portion
|
|
$
|
112,750
|
|
The
discounts resulting from the original issue discount, warrants and embedded conversion feature are being amortized over the life
of the $113k Note. Amortization expense related to discounts on this instrument in the three months ended June 30, 2018 and 2017
was $28,110 and $-0-, respectively. Amortization expense related to discounts in the six months ended June 30, 2018 and 2017 was
$45,718 and $-0-, respectively. As of June 30, 2018, the unamortized discount was $67,032.
During
the six months ended June 30, 2018 and 2017, the Company made no repayments on this instrument. During the three months ended
June 30, 2018 and 2017, the Company recorded interest expense on this instrument totaling $2,811 and $-0-, respectively. During
the six months ended June 30, 2018 and 2017, the Company recorded interest expense on this instrument totaling $4,572 and $-0-,
respectively.
Convertible
Notes Payable ($83,000) – February 2018
On
February 13, 2018, the Company entered into a securities purchase agreement for the sale of a $83,000 convertible note (the “$83k
Note”). The transaction closed on February 21, 2018. The $83k Note included $8,000 fees for net proceeds of $75,000. The
$83k Note has an interest rate of 10% and a default interest rate of 24% and matures on February 13, 2019. The $113k Note may
be converted into common stock of the Company by the holder at any time after the issuance date, subject to a 4.99% beneficial
ownership limitation, at a conversion price per share equal to 40% discount to the lowest bid or trading price of the Company’s
common stock during the twenty (20) trading days prior to the conversion date. Upon an event of default, 200% of the outstanding
principal and any interest due amount shall be immediately due.
The
fair value of the ECF of the $83k Note was calculated using the Black-Scholes pricing model at $119,512, with the following assumptions:
risk-free interest rate of 1.95%, expected life of 1 year, volatility of 268.44%, and expected dividend yield of zero. Because
the fair value of the ECF exceeded the net proceeds from the $83k Note, a charge was recorded to “Financing cost”
for the excess of the fair value of the fair value of the ECF of $119,512 over the net proceeds from the note of $75,000, for
a net charge of $44,512. The ECF qualifies for derivative accounting and bifurcation under ASC 815, “Derivatives and Hedging.”
The final allocation of the proceeds at inception was as follows:
Embedded conversion feature
|
|
$
|
119,512
|
|
Original issue discount and fees
|
|
|
8,000
|
|
Financing cost
|
|
|
(44,512
|
)
|
Convertible note
|
|
|
---
|
|
|
|
|
|
|
Notes payable and bank loans, long-term portion
|
|
$
|
83,000
|
|
The
discounts resulting from the original issue discount, warrants and embedded conversion feature are being amortized over the life
of the $83k Note. Amortization expense related to discounts on this instrument in the three months ended June 30, 2018 and 2017
was $20,693 and $-0-, respectively. Amortization expense related to discounts in the six months ended June 30, 2018 and 2017 was
$31,153 and $-0-, respectively. As of June 30, 2018, the unamortized discount was $51,847.
HEALTHLYNKED
CORP.
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2018 AND 2017
(UNAUDITED)
NOTE
9 – CONVERTIBLE NOTES PAYABLE (CONTINUED)
During
the six months ended June 30, 2018 and 2017, the Company made no repayments on this instrument. During the three months ended
June 30, 2018 and 2017, the Company recorded interest expense on this instrument totaling $2,069 and $-0-, respectively. During
the six months ended June 30, 2018 and 2017, the Company recorded interest expense on this instrument totaling $3,115 and $-0-,
respectively.
Convertible
Notes Payable ($105,000) – March 2018
On
March 5, 2018, the Company entered into a securities purchase agreement for the sale of a $105,000 convertible note (the “$105k
Note”). The transaction closed on March 12, 2018. The $105k Note included $5,000 fees for net proceeds of $100,000. The
$105k Note has an interest rate of 10% and a default interest rate of 24% and matures on March 5, 2019. The $113k Note may be
converted into common stock of the Company by the holder at any time after the 6-month anniversary of the issuance date, subject
to a 9.9% beneficial ownership limitation, at a conversion price per share equal to 40% discount to the lowest bid or trading
price of the Company’s common stock during the twenty (20) trading days prior to the conversion date. Upon an event of default,
110-150% of the outstanding principal and any interest due amount shall be immediately due, depending on the nature of the breach.
The
fair value of the ECF of the $105k Note was calculated using the Black-Scholes pricing model at $153,371, with the following assumptions:
risk-free interest rate of 2.06%, expected life of 1 year, volatility of 278.96%, and expected dividend yield of zero. Because
the fair value of the ECF exceeded the net proceeds from the $105k Note, a charge was recorded to “Financing cost”
for the excess of the fair value of the fair value of the ECF of $153,371 over the net proceeds from the note of $100,000, for
a net charge of $53,371. The ECF qualifies for derivative accounting and bifurcation under ASC 815, “Derivatives and Hedging.”
The final allocation of the proceeds at inception was as follows:
Embedded conversion feature
|
|
$
|
153,371
|
|
Original issue discount and fees
|
|
|
5,000
|
|
Financing cost
|
|
|
(53,371
|
)
|
Convertible note
|
|
|
---
|
|
|
|
|
|
|
Notes payable and bank loans, long-term portion
|
|
$
|
105,000
|
|
The
discounts resulting from the original issue discount, warrants and embedded conversion feature are being amortized over the life
of the $105k Note. Amortization expense related to discounts on this instrument in the three months ended June 30, 2018 and 2017
was $26,178 and $-0-, respectively. Amortization expense related to discounts in the six months ended June 30, 2018 and 2017 was
$33,658 and $-0-, respectively. As of June 30, 2018, the unamortized discount was $71,342.
During
the six months ended June 30, 2018 and 2017, the Company made no repayments on this instrument. During the three months ended
June 30, 2018 and 2017, the Company recorded interest expense on this instrument totaling $2,618 and $-0-, respectively. During
the six months ended June 30, 2018 and 2017, the Company recorded interest expense on this instrument totaling $3,366 and $-0-,
respectively.
Convertible
Notes Payable ($63,000) – April 2018
On
April 2, 2018, the Company entered into a securities purchase agreement for the sale of a $63,000 convertible note (the “$63k
Note”). The transaction closed on April 3, 2018. The $63k Note included $3,000 fees for net proceeds of $60,000. The $63k
Note has an interest rate of 10% and a default interest rate of 22% and matures on January 15, 2019. The $63k Note may be converted
into common stock of the Company by the holder at any time after the 6-month anniversary of the issuance date, subject to a 4.99%
beneficial ownership limitation, at a conversion price per share equal to a 39% discount to the lowest bid or trading price of
the Company’s common stock during the fifteen (15) trading days prior to the conversion date. Upon an event of default caused
by the Company’s failure to deliver shares upon a conversion pursuant to the terms of the Note, 300% of the outstanding
principal and any interest due amount shall be immediately due. Upon an event of default caused by the Company’s breach
of any other events of default specified in the Note, 150% of the outstanding principal and any interest due amount shall be immediately
due.
HEALTHLYNKED
CORP.
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2018 AND 2017
(UNAUDITED)
NOTE
9 – CONVERTIBLE NOTES PAYABLE (CONTINUED)
The
fair value of the ECF of the $63k Note was calculated using the Black-Scholes pricing model at $83,806, with the following assumptions:
risk-free interest rate of 2.08%, expected life of 0.79 years, volatility of 260.76%, and expected dividend yield of zero. Because
the fair value of the ECF exceeded the net proceeds, a charge was recorded to “Financing cost” for the excess of the
fair value of the fair value of the ECF of $83,806 over the net proceeds from the note of $60,000, for a net charge of $23,806.
The ECF qualifies for derivative accounting and bifurcation under ASC 815, “Derivatives and Hedging.” The final allocation
of the proceeds at inception was as follows:
Embedded conversion feature
|
|
$
|
83,806
|
|
Original issue discount and fees
|
|
|
3,000
|
|
Financing cost
|
|
|
(23,806
|
)
|
Convertible note
|
|
|
---
|
|
|
|
|
|
|
Notes payable and bank loans, long-term portion
|
|
$
|
63,000
|
|
The
discounts resulting from the original issue discount, warrants and embedded conversion feature are being amortized over the life
of the note. Amortization expense related to discounts on this instrument in the three and six months ended June 30, 2018 was
$19,469. As of June 30, 2018, the unamortized discount was $43,531.
During
the six months ended June 30, 2018 and 2017, the Company made no repayments on this instrument. During the three and six months
ended June 30, 2018 and 2017, the Company recorded interest expense on this instrument totaling $1,536 and $-0-, respectively.
Convertible
Notes Payable ($57,750) – April 2018
On
April 16, 2018, the Company entered into a securities purchase agreement for the sale of a $57,750 convertible note (the “$57.8k
Note II”). The transaction closed on April 17, 2018. The $57.8k Note II Note included $7,750 fees for net proceeds of $50,000.
The $57.8k Note II Note has an interest rate of 10% and a default interest rate of 18% and matures on April 16, 2019. The $57.8k
Note II Note may be converted into common stock of the Company by the holder at any time after the issuance date, subject to a
4.99% beneficial ownership limitation, at a conversion price per share equal to a 40% discount to the lowest bid or trading price
of the Company’s common stock during the twenty (20) trading days prior to the conversion date. Upon an event of default
caused by the Company’s failure to deliver shares upon a conversion pursuant to the terms of the Note, 200% of the outstanding
principal and any interest due amount shall be immediately due. Upon an event of default caused by the Company’s breach
of any other events of default specified in the Note, 150% of the outstanding principal and any interest due amount shall be immediately
due.
The
fair value of the ECF of the $57.8k Note II was calculated using the Black-Scholes pricing model at $83,897, with the following
assumptions: risk-free interest rate of 2.12%, expected life of 1 year, volatility of 270.41%, and expected dividend yield of
zero. Because the fair value of the ECF exceeded the net proceeds, a charge was recorded to “Financing cost” for the
excess of the fair value of the fair value of the ECF of $83,397 over the net proceeds from the note of $50,000, for a net charge
of $33,397. The ECF qualifies for derivative accounting and bifurcation under ASC 815, “Derivatives and Hedging.”
The final allocation of the proceeds at inception was as follows:
Embedded conversion feature
|
|
$
|
83,397
|
|
Original issue discount and fees
|
|
|
7,750
|
|
Financing cost
|
|
|
(33,397
|
)
|
Convertible note
|
|
|
---
|
|
|
|
|
|
|
Notes payable and bank loans, long-term portion
|
|
$
|
57,750
|
|
The
discounts resulting from the original issue discount, warrants and embedded conversion feature are being amortized over the life
of the note. Amortization expense related to discounts on this instrument in the three and six months ended June 30, 2018 was
$11,866. As of June 30, 2018, the unamortized discount was $45,884.
HEALTHLYNKED
CORP.
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2018 AND 2017
(UNAUDITED)
NOTE
9 – CONVERTIBLE NOTES PAYABLE (CONTINUED)
During
the six months ended June 30, 2018 and 2017, the Company made no repayments on this instrument. During the three and six months
ended June 30, 2018, the Company recorded interest expense on this instrument totaling $1,187, respectively.
Convertible
Notes Payable ($90,000) – April 2018
On
April 18, 2018, the Company entered into a securities purchase agreement for the sale of a $90,000 convertible note (the “$90k
Note”). The transaction closed on April 18, 2018. The $90k Note included $4,500 fees for net proceeds of $85,500. The $90k
Note has an interest rate of 10% and a default interest rate of 24% and matures on April 18, 2019. The $90k Note may be converted
into common stock of the Company by the holder at any time after the issuance date, subject to a 4.99% beneficial ownership limitation,
at a conversion price per share equal to a 40% discount to the lowest bid or trading price of the Company’s common stock
during the twenty (20) trading days prior to the conversion date. Upon an event of default caused by the Company’s failure
to deliver shares upon a conversion pursuant to the terms of the Note, the Company would incur a penalty of $250 per day beginning
on the fourth day after the conversion notice, increasing to $500 per day beginning on the tenth day. Upon an event of default
caused by the Company’s breach of any other events of default specified in the Note, 150% of the outstanding principal and
any interest due amount shall be immediately.
The
fair value of the ECF of the $90k Note was calculated using the Black-Scholes pricing model at $130,136, with the following assumptions:
risk-free interest rate of 2.17%, expected life of 1 year, volatility of 271.31%, and expected dividend yield of zero. Because
the fair value of the ECF exceeded the net proceeds, a charge was recorded to “Financing cost” for the excess of the
fair value of the fair value of the ECF of $130,136 over the net proceeds from the note of $85,500, for a net charge of $44,636.
The ECF qualifies for derivative accounting and bifurcation under ASC 815, “Derivatives and Hedging.” The final allocation
of the proceeds at inception was as follows:
Embedded conversion feature
|
|
$
|
130,136
|
|
Original issue discount and fees
|
|
|
4,500
|
|
Financing cost
|
|
|
(44,636
|
)
|
Convertible note
|
|
|
---
|
|
|
|
|
|
|
Notes payable and bank loans, long-term portion
|
|
$
|
90,000
|
|
The
discounts resulting from the original issue discount, warrants and embedded conversion feature are being amortized over the life
of the note. Amortization expense related to discounts on this instrument in the three and six months ended June 30, 2018 was
$18,000. As of June 30, 2018, the unamortized discount was $72,000.
During
the six months ended June 30, 2018 and 2017, the Company made no repayments on this instrument. During the three and six months
ended June 30, 2018, the Company recorded interest expense on this instrument totaling $1,800.
Convertible
Notes Payable ($53,000) – April 2018
On
April 18, 2018, the Company entered into a securities purchase agreement for the sale of a $53,000 convertible note (the “$53k
Note III”). The transaction closed on April 23, 2018. The $53k Note III included $3,000 fees for net proceeds of $50,000.
The $53k Note III has an interest rate of 10% and a default interest rate of 22% and matures on January 30, 2019. The $53k Note
III may be converted into common stock of the Company by the holder at any time after the 6-month anniversary of the issuance
date, subject to a 4.99% beneficial ownership limitation, at a conversion price per share equal to a 39% discount to the lowest
bid or trading price of the Company’s common stock during the fifteen (15) trading days prior to the conversion date. Upon
an event of default caused by the Company’s failure to deliver shares upon a conversion pursuant to the terms of the Note,
300% of the outstanding principal and any interest due amount shall be immediately due. Upon an event of default caused by the
Company’s breach of any other events of default specified in the Note, 150% of the outstanding principal and any interest
due amount shall be immediately due.
HEALTHLYNKED
CORP.
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2018 AND 2017
(UNAUDITED)
NOTE
9 – CONVERTIBLE NOTES PAYABLE (CONTINUED)
The
fair value of the ECF of the $53k Note III was calculated using the Black-Scholes pricing model at $71,679, with the following
assumptions: risk-free interest rate of 2.17%, expected life of 0.79 years, volatility of 271.31%, and expected dividend yield
of zero. Because the fair value of the ECF exceeded the net proceeds, a charge was recorded to “Financing cost” for
the excess of the fair value of the fair value of the ECF of $71,679 over the net proceeds from the note of $50,000, for a net
charge of $21,679. The ECF qualifies for derivative accounting and bifurcation under ASC 815, “Derivatives and Hedging.”
The final allocation of the proceeds at inception was as follows:
Embedded conversion feature
|
|
$
|
71,679
|
|
Original issue discount and fees
|
|
|
3,000
|
|
Financing cost
|
|
|
(21,679
|
)
|
Convertible note
|
|
|
---
|
|
|
|
|
|
|
Notes payable and bank loans, long-term portion
|
|
$
|
53,000
|
|
The
discounts resulting from the original issue discount, warrants and embedded conversion feature are being amortized over the life
of the note. Amortization expense related to discounts on this instrument in the three and six months ended June 30, 2018 was
$13,481. As of June 30, 2018, the unamortized discount was $39,519.
During
the six months ended June 30, 2018 and 2017, the Company made no repayments on this instrument. During the three and six months
ended June 30, 2018, the Company recorded interest expense on this instrument totaling $1,060.
Convertible
Notes Payable ($68,250) – May 2018
On
May 3, 2018, the Company entered into a securities purchase agreement for the sale of a $68,250 convertible note (the “$68.3k
Note”). The transaction closed on May 4, 2018. The $68.3k Note included $3,250 fees for net proceeds of $60,000. The $68.3k
Note has an interest rate of 10% and a default interest rate of 24% and matures on May 3, 2019. The $68.3k Note may be converted
into common stock of the Company by the holder at any time after the 6-month anniversary of the issuance date, subject to a 4.99%
beneficial ownership limitation, at a conversion price per share equal to a 40% discount to the lowest bid or trading price of
the Company’s common stock during the twenty (20) trading days prior to the conversion date. Upon an event of default caused
by the Company’s failure to deliver shares upon a conversion pursuant to the terms of the Note, the Company would incur
a penalty of $250 per day beginning on the fourth day after the conversion notice, increasing to $500 per day beginning on the
tenth day. Upon an event of default caused by the Company’s failure to maintain a listing for its common stock, the outstanding
principal shall increase by 50%. Upon an event of default caused by the Company’s failure to maintain a bid price for its
common stock, the outstanding principal shall increase by 20%.
The
fair value of the ECF of the $68.3k Note was calculated using the Black-Scholes pricing model at $99,422, with the following assumptions:
risk-free interest rate of 2.24%, expected life of 1 year, volatility of 276.40%, and expected dividend yield of zero. Because
the fair value of the ECF exceeded the net proceeds, a charge was recorded to “Financing cost” for the excess of the
fair value of the fair value of the ECF of $99,422 over the net proceeds from the note of $65,000, for a net charge of $34,422.
The ECF qualifies for derivative accounting and bifurcation under ASC 815, “Derivatives and Hedging.” The final allocation
of the proceeds at inception was as follows:
Embedded conversion feature
|
|
$
|
99,422
|
|
Original issue discount and fees
|
|
|
3,250
|
|
Financing cost
|
|
|
(34,422
|
)
|
Convertible note
|
|
|
---
|
|
|
|
|
|
|
Notes payable and bank loans, long-term portion
|
|
$
|
68,250
|
|
HEALTHLYNKED
CORP.
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2018 AND 2017
(UNAUDITED)
NOTE
9 – CONVERTIBLE NOTES PAYABLE (CONTINUED)
The
discounts resulting from the original issue discount, warrants and embedded conversion feature are being amortized over the life
of the note. Amortization expense related to discounts on this instrument in the three and six months ended June 30, 2018 was
$10,816. As of June 30, 2018, the unamortized discount was $57,434.
During
the six months ended June 30, 2018 and 2017, the Company made no repayments on this instrument. During the three and six months
ended June 30, 2018, the Company recorded interest expense on this instrument totaling $1,085.
Convertible
Notes Payable ($37,000) – May 2018
On
May 7, 2018, the Company entered into a securities purchase agreement for the sale of a $37,000 convertible note (the “$37k
Note”). The transaction closed on May 9, 2018. The $37k Note included $2,000 fees for net proceeds of $35,000. The $37k
Note has an interest rate of 10% and a default interest rate of 24% and matures on May 7, 2019. The $37k Note may be converted
into common stock of the Company by the holder at any time after the 6-month anniversary of the issuance date, subject to a 4.99%
beneficial ownership limitation, at a conversion price per share equal to a 40% discount to the lowest bid or trading price of
the Company’s common stock during the twenty (20) trading days prior to the conversion date. Upon an event of default caused
by the Company’s failure to deliver shares upon a conversion pursuant to the terms of the Note, the Company would incur
a penalty of $250 per day beginning on the fourth day after the conversion notice, increasing to $500 per day beginning on the
tenth day. Upon an event of default caused by the Company’s failure to maintain a listing for its common stock, the outstanding
principal shall increase by 50%. Upon an event of default caused by the Company’s failure to maintain a bid price for its
common stock, the outstanding principal shall increase by 20%.
The
fair value of the ECF of the $37k Note was calculated using the Black-Scholes pricing model at $54,086, with the following assumptions:
risk-free interest rate of 2.25%, expected life of 1 year, volatility of 279.44%, and expected dividend yield of zero. Because
the fair value of the ECF exceeded the net proceeds, a charge was recorded to “Financing cost” for the excess of the
fair value of the fair value of the ECF of $54,086 over the net proceeds from the note of $35,000, for a net charge of $19,086.
The ECF qualifies for derivative accounting and bifurcation under ASC 815, “Derivatives and Hedging.” The final allocation
of the proceeds at inception was as follows:
Embedded conversion feature
|
|
$
|
54,086
|
|
Original issue discount and fees
|
|
|
2,000
|
|
Financing cost
|
|
|
(19,086
|
)
|
Convertible note
|
|
|
---
|
|
|
|
|
|
|
Notes payable and bank loans, long-term portion
|
|
$
|
37,000
|
|
The
discounts resulting from the original issue discount, warrants and embedded conversion feature are being amortized over the life
of the note. Amortization expense related to discounts on this instrument in the three and six months ended June 30, 2018 was
$5,474. As of June 30, 2018, the unamortized discount was $31,526.
During
the six months ended June 30, 2018 and 2017, the Company made no repayments on this instrument. During the three and six months
ended June 30, 2018, the Company recorded interest expense on this instrument totaling $547.
Convertible
Notes Payable ($63,000) – May 2018
On
May 9, 2018, the Company entered into a securities purchase agreement for the sale of a $63,000 convertible note (the “$63k
Note II”). The transaction closed on May 12, 2018. The $63k Note II included $3,000 fees for net proceeds of $60,000. The
$63k Note II has an interest rate of 10% and a default interest rate of 22% and matures on May 7, 2019. The $63k Note II may be
converted into common stock of the Company by the holder at any time after the 6-month anniversary of the issuance date, subject
to a 4.99% beneficial ownership limitation, at a conversion price per share equal to a 39% discount to the lowest bid or trading
price of the Company’s common stock during the fifteen (15) trading days prior to the conversion date. Upon an event of
default caused by the Company’s failure to deliver shares upon a conversion pursuant to the terms of the Note, 300% of the
outstanding principal and any interest due amount shall be immediately due. Upon an event of default caused by the Company’s
breach of any other events of default specified in the Note, 150% of the outstanding principal and any interest due amount shall
be immediately due.
HEALTHLYNKED
CORP.
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2018 AND 2017
(UNAUDITED)
NOTE
9 – CONVERTIBLE NOTES PAYABLE (CONTINUED)
The
fair value of the ECF of the $63k Note II was calculated using the Black-Scholes pricing model at $90,390, with the following
assumptions: risk-free interest rate of 2.27%, expected life of 0.99 years, volatility of 279.53%, and expected dividend yield
of zero. Because the fair value of the ECF exceeded the net proceeds, a charge was recorded to “Financing cost” for
the excess of the fair value of the fair value of the ECF of $90,390 over the net proceeds from the note of $60,000, for a net
charge of $30,390. The ECF qualifies for derivative accounting and bifurcation under ASC 815, “Derivatives and Hedging.”
The final allocation of the proceeds at inception was as follows:
Embedded conversion feature
|
|
$
|
90,390
|
|
Original issue discount and fees
|
|
|
3,000
|
|
Financing cost
|
|
|
(30,390
|
)
|
Convertible note
|
|
|
---
|
|
|
|
|
|
|
Notes payable and bank loans, long-term portion
|
|
$
|
63,000
|
|
The
discounts resulting from the original issue discount, warrants and embedded conversion feature are being amortized over the life
of the note. Amortization expense related to discounts on this instrument in the three and six months ended June 30, 2018 was
$9,025. As of June 30, 2018, the unamortized discount was $53,975.
During
the six months ended June 30, 2018 and 2017, the Company made no repayments on this instrument. During the three and six months
ended June 30, 2018, the Company recorded interest expense on this instrument totaling $898.
Convertible
Notes Payable ($78,750) – May 2018
On
May 24, 2018, the Company entered into a securities purchase agreement for the sale of a $78,750 convertible note (the “$78.8k
Note”). The $78.8k Note included $3,750 fees for net proceeds of $75,000. The $78.8k Note has an interest rate of 10% and
a default interest rate of 24% and matures on May 24, 2019. The $78.8k Note may be converted into common stock of the Company
by the holder at any time after the 6-month anniversary of the issuance date, subject to a 4.99% beneficial ownership limitation,
at a conversion price per share equal to a 40% discount to the lowest bid or trading price of the Company’s common stock
during the twenty (20) trading days prior to the conversion date. Upon an event of default caused by the Company’s failure
to deliver shares upon a conversion pursuant to the terms of the Note, the Company would incur a penalty of $250 per day beginning
on the fourth day after the conversion notice, increasing to $500 per day beginning on the tenth day. Upon an event of default
caused by the Company’s failure to maintain a listing for its common stock, the outstanding principal shall increase by
50%. Upon an event of default caused by the Company’s failure to maintain a bid price for its common stock, the outstanding
principal shall increase by 20%. If nto paid at maturity, the amount due under the note increases by 10%.
The
fair value of the ECF of the $63k Note II was calculated using the Black-Scholes pricing model at $116,027, with the following
assumptions: risk-free interest rate of 2.28%, expected life of 1 year, volatility of 285.70%, and expected dividend yield of
zero. Because the fair value of the ECF exceeded the net proceeds from the $63k Note II, a charge was recorded to “Financing
cost” for the excess of the fair value of the fair value of the ECF of $116,027 over the net proceeds from the note of $75,000,
for a net charge of $41,027. The ECF qualifies for derivative accounting and bifurcation under ASC 815, “Derivatives and
Hedging.” The final allocation of the proceeds at inception was as follows:
Embedded conversion feature
|
|
$
|
116,027
|
|
Original issue discount and fees
|
|
|
3,750
|
|
Financing cost
|
|
|
(41,027
|
)
|
Convertible note
|
|
|
---
|
|
|
|
|
|
|
Notes payable and bank loans, long-term portion
|
|
$
|
78,750
|
|
The
discounts resulting from the original issue discount, warrants and embedded conversion feature are being amortized over the life
of the note. Amortization expense related to discounts on this instrument in the three and six months ended June 30, 2018 was
$7,983. As of June 30, 2018, the unamortized discount was $70,767.
HEALTHLYNKED
CORP.
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2018 AND 2017
(UNAUDITED)
NOTE
9 – CONVERTIBLE NOTES PAYABLE (CONTINUED)
During
the six months ended June 30, 2018 and 2017, the Company made no repayments on this instrument. During the three and six months
ended June 30, 2018, the Company recorded interest expense on this instrument totaling $798.
NOTE
10 – DERIVATIVE FINANCIAL INSTRUMENTS
Derivative
financial instruments are comprised of the fair value of conversion features embedded in convertible promissory notes for which
the conversion rate is not fixed, but instead is adjusted based on a discount to the market price of the Company’s common
stock. The fair market value of the derivative liabilities was calculated at inception of each convertible promissory notes for
which the conversion rate is not fixed and allocated to the respective convertible notes, with any excess recorded as a charge
to “Financing cost.” The derivative financial instruments are then revalued at the end of each period, with the change
in value recorded to “Change in fair value of on derivative financial instruments.”
Derivative
financial instruments and changes thereto recorded in the six months ended June 30, 2018 include the following:
|
|
|
|
|
|
|
|
Change in
|
|
|
|
|
|
|
|
|
|
Fair Value
|
|
|
Inception of
|
|
|
Fair Value
|
|
|
Write off
|
|
|
Fair Value
|
|
|
|
as of
|
|
|
Derivative
|
|
|
of Derivative
|
|
|
Derivative
|
|
|
as of
|
|
|
|
December 31,
|
|
|
Financial
|
|
|
Financial
|
|
|
Financial
|
|
|
June 30,
|
|
|
|
2017
|
|
|
Instruments
|
|
|
Instruments
|
|
|
Instruments
|
|
|
2018
|
|
$53k Note - July 2017
|
|
$
|
48,876
|
|
|
$
|
---
|
|
|
$
|
5,017
|
|
|
$
|
(53,893
|
)
|
|
$
|
---
|
|
$35k Note - September 2017
|
|
|
36,161
|
|
|
|
---
|
|
|
|
1,108
|
|
|
|
(37,269
|
)
|
|
|
---
|
|
$55k Note - September 2017
|
|
|
64,656
|
|
|
|
---
|
|
|
|
5,032
|
|
|
|
(69,688
|
)
|
|
|
---
|
|
$53k Note #2 - October 2017
|
|
|
58,216
|
|
|
|
---
|
|
|
|
(2,426
|
)
|
|
|
(55,790
|
)
|
|
|
---
|
|
$171.5k Note - October 2017
|
|
|
190,580
|
|
|
|
---
|
|
|
|
(7,953
|
)
|
|
|
---
|
|
|
|
182,627
|
|
$57.8k Note - January 2018
|
|
|
---
|
|
|
|
82,652
|
|
|
|
(21,229
|
)
|
|
|
---
|
|
|
|
61,423
|
|
$112.8k Note - February 2018
|
|
|
---
|
|
|
|
161,527
|
|
|
|
(8,207
|
)
|
|
|
---
|
|
|
|
153,320
|
|
$83k Note - February 2018
|
|
|
---
|
|
|
|
119,512
|
|
|
|
(5,433
|
)
|
|
|
---
|
|
|
|
114,079
|
|
$105k Note - March 2018
|
|
|
---
|
|
|
|
153,371
|
|
|
|
(6,482
|
)
|
|
|
---
|
|
|
|
146,889
|
|
$63k Note - April 2018
|
|
|
---
|
|
|
|
83,806
|
|
|
|
234
|
|
|
|
---
|
|
|
|
84,040
|
|
$57.8k Note - April 2018
|
|
|
---
|
|
|
|
83,397
|
|
|
|
(51
|
)
|
|
|
---
|
|
|
|
83,346
|
|
$90k Note - April 2018
|
|
|
---
|
|
|
|
130,136
|
|
|
|
(78
|
)
|
|
|
---
|
|
|
|
130,058
|
|
$53k Note II - April 2018
|
|
|
---
|
|
|
|
71,679
|
|
|
|
172
|
|
|
|
---
|
|
|
|
71,851
|
|
$68.3k Note - May 2018
|
|
|
---
|
|
|
|
99,422
|
|
|
|
189
|
|
|
|
---
|
|
|
|
99,611
|
|
$37k Note May 2018
|
|
|
---
|
|
|
|
54,086
|
|
|
|
11
|
|
|
|
---
|
|
|
|
54,097
|
|
$63k Note II - May 2018
|
|
|
---
|
|
|
|
90,390
|
|
|
|
1,721
|
|
|
|
---
|
|
|
|
92,111
|
|
$78.8k Note - May 2018
|
|
|
---
|
|
|
|
116,027
|
|
|
|
210
|
|
|
|
---
|
|
|
|
116,237
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
398,489
|
|
|
$
|
1,246,005
|
|
|
$
|
(38,165
|
)
|
|
$
|
(216,640
|
)
|
|
$
|
1,389,689
|
|
During
the six months ended June 30, 2018, the $53k Note, the $35k Note, the $55k Note, and the $53k Note II were each repaid in full.
Accordingly, the derivative financial instruments associated with the ECFs of these convertible notes were written off in connection
with the extinguishment of each convertible note.
Fair
market value of the derivative financial instruments is measured using the Black-Scholes pricing model with the following assumptions:
risk-free interest rate of 1.21% to 2.33%, expected life of 0.27-1.00 years, volatility of 172.67% to 303.06%, and expected dividend
yield of zero. The entire amount of derivative instrument liabilities is classified as current due to the fact that settlement
of the derivative instruments could be required within twelve months of the balance sheet date. The Company had no derivative
financial instruments in the six months ended June 30, 2017.
HEALTHLYNKED
CORP.
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2018 AND 2017
(UNAUDITED)
NOTE
11 – SHAREHOLDERS’ DEFICIT
Issuance
of Common Stock
On
January 3, 2018, holders of a majority of the voting power of the outstanding capital stock of the Company, acting by written
consented, authorized and approved an amendment to the Amended and Restated Articles of Incorporation of the Company increasing
the amount of authorized shares of common stock to 500,000,000 shares from 230,000,000 shares. On February 5, 2018, the Company
filed the amendment with the Secretary of State of Nevada to effect the increase.
On
January 11, 2018, the Company sold 588,235 shares of common stock in a private placement transaction to an investor and received
$50,000 in proceeds from the sale. The shares were issued at a share price of $0.085 per share. In connection with the stock sales,
the Company also issued 588,235 five-year warrants to purchase shares of common stock at an exercise price of $0.15 per share.
On
February 28, 2018, the Company sold 2,352,942 shares of common stock in private placement transactions to two investors and received
$200,000 in proceeds from the sale. The shares were issued at a share price of $0.085 per share. In connection with the stock
sales, the Company also issued 1,764,706 five-year warrants to purchase shares of common stock at an exercise price of $0.15 per
share.
On
May 10, 2018, the Company sold 100,000 shares of common stock in private placement transactions to an investor and received $15,500
in proceeds from the sale. The shares were issued at a share price of $0.155 per share. In connection with the stock sale, the
Company also issued 50,000 five-year warrants to purchase shares of common stock at an exercise price of $0.25 per share.
On
June 14, 2018, the Company sold 208,000 shares of common stock in private placement transactions to an investor and received $52,000
in proceeds from the sale. The shares were issued at a share price of $0.25 per share. In connection with the stock sale, the
Company also issued 104,000 five-year warrants to purchase shares of common stock at an exercise price of $0.35 per share.
During
the six months ended June 30, 2018, the Company issued 1,856,480 common shares pursuant to draws made by the Company under the
Investment Agreement. The Company received an aggregate of $328,003 in net proceeds from the draws.
Common
Stock Issuable
As
of June 30, 2018 and December 31, 2017, the Company was obligated to issue 18,021 and 47,101 shares of common stock, respectively,
in exchange for professional services provided by a third party consultant. During the six months ended June 30, 2018 and 2017,
the Company recognized expense related to shares earned by the consultant of $27,354 and $28,964, respectively.
As
of June 30, 2018 and December 31, 2017, the Company was obligated to issue -0- and 75,000 shares, respectively, to an employee
pursuant to the EIP.
HEALTHLYNKED
CORP.
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2018 AND 2017
(UNAUDITED)
NOTE
11 – SHAREHOLDERS’ DEFICIT (CONTINUED)
Stock
Warrants
Transactions
involving our stock warrants during the six months ended June 30, 2018 and 2017 are summarized as follows:
|
|
2018
|
|
|
2017
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
Exercise
|
|
|
|
|
|
Exercise
|
|
|
|
Number
|
|
|
Price
|
|
|
Number
|
|
|
Price
|
|
Outstanding at beginning of the period
|
|
|
20,526,387
|
|
|
$
|
0.23
|
|
|
|
10,576,389
|
|
|
$
|
0.08
|
|
Granted during the period
|
|
|
9,960,403
|
|
|
$
|
0.10
|
|
|
|
7,990,000
|
|
|
$
|
0.42
|
|
Exercised during the period
|
|
|
---
|
|
|
$
|
---
|
|
|
|
---
|
|
|
$
|
---
|
|
Terminated during the period
|
|
|
---
|
|
|
$
|
---
|
|
|
|
---
|
|
|
$
|
---
|
|
Outstanding at end of the period
|
|
|
30,486,790
|
|
|
$
|
0.19
|
|
|
|
18,566,389
|
|
|
$
|
0.23
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable at end of the period
|
|
|
30,486,790
|
|
|
$
|
0.19
|
|
|
|
18,566,389
|
|
|
$
|
0.23
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average remaining life
|
|
|
4.0 years
|
|
|
|
|
|
|
|
4.7 years
|
|
|
|
|
|
The
following table summarizes information about the Company’s stock warrants outstanding as of June 30, 2018:
Warrants Outstanding
|
|
|
Warrants Exercisable
|
|
|
|
|
|
|
|
Weighted-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
Weighted-
|
|
|
|
|
|
Weighted-
|
|
|
|
|
|
|
|
Remaining
|
|
|
Average
|
|
|
|
|
|
Average
|
|
Exercise
|
|
|
Number
|
|
|
Contractual
|
|
|
Exercise
|
|
|
Number
|
|
|
Exercise
|
|
Prices
|
|
|
Outstanding
|
|
|
Life (years)
|
|
|
Price
|
|
|
Exercisable
|
|
|
Price
|
|
$
|
0.05 to 0.09
|
|
|
|
15,192,351
|
|
|
|
4.2
|
|
|
$
|
0.07
|
|
|
|
15,192,351
|
|
|
$
|
0.07
|
|
$
|
0.10 to 0.15
|
|
|
|
5,640,441
|
|
|
|
3.7
|
|
|
$
|
0.13
|
|
|
|
5,640,441
|
|
|
$
|
0.13
|
|
$
|
0.25 to 0.50
|
|
|
|
8,463,998
|
|
|
|
3.9
|
|
|
$
|
0.33
|
|
|
|
8,463,998
|
|
|
$
|
0.33
|
|
$
|
0.51 to 1.00
|
|
|
|
1,190,000
|
|
|
|
3.8
|
|
|
$
|
0.97
|
|
|
|
1,190,000
|
|
|
$
|
0.97
|
|
$
|
0.05 to 1.00
|
|
|
|
30,486,790
|
|
|
|
4.0
|
|
|
$
|
0.19
|
|
|
|
30,486,790
|
|
|
$
|
0.19
|
|
During
the six months ended June 30, 2018, the Company issued 9,960,403 warrants. The fair value of the warrants was calculated using
the Black-Scholes pricing model with the following assumptions: risk-free interest rate of 2.32% to 2.83%, expected life of 3-5
years, volatility of 261.18% to 301.64%, and expected dividend yield of zero. The aggregate grant date fair value of warrants
issued during the six months ended June 30, 2018 was $705,221.
In
June 2018, the Company issued 600,000 five-year warrants with an exercise price of $0.15 to two individuals for consulting services
to be performed between June 6 and December 6, 2018. The fair value of the warrants was $94,844, which is being recognized on
a straight-line basis over the six-month service period. During the six months ended June 30, 2018, the Company recognized general
and administrative expense of $12,439 related to these warrants.
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.
HEALTHLYNKED
CORP.
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2018 AND 2017
(UNAUDITED)
NOTE
11 – SHAREHOLDERS’ DEFICIT (CONTINUED)
The
following table summarizes the status of shares issued and outstanding under the EIP outstanding as of and for the six months
ended June 30, 2018 and 2017:
|
|
2018
|
|
|
2017
|
|
Outstanding at beginning of the period
|
|
|
1,498,750
|
|
|
|
1,552,500
|
|
Granted during the period
|
|
|
---
|
|
|
|
---
|
|
Terminated during the period
|
|
|
---
|
|
|
|
(110,000
|
)
|
Outstanding at end of the period
|
|
|
1,498,750
|
|
|
|
1,442,500
|
|
|
|
|
|
|
|
|
|
|
Shares vested at period-end
|
|
|
1,058,750
|
|
|
|
813,750
|
|
Weighted average grant date fair value of shares granted during the period
|
|
$
|
---
|
|
|
$
|
---
|
|
Aggregate grant date fair value of shares granted during the period
|
|
$
|
---
|
|
|
$
|
---
|
|
Shares available for grant pursuant to EIP at period-end
|
|
|
11,496,934
|
|
|
|
11,711,184
|
|
Total
stock based compensation recognized for grants under the EIP was $6,445 and $6,020 during the six months ended June 30, 2018 and
2017, respectively. Total unrecognized stock compensation related to these grants was $38,335 as of June 30, 2018.
A
summary of the status of non-vested shares issued pursuant to the EIP as of and for the six months ended June 30, 2018 and 2017
is presented below:
|
|
2018
|
|
|
2017
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
Grant Date
|
|
|
|
|
|
Grant Date
|
|
|
|
Shares
|
|
|
Fair Value
|
|
|
Shares
|
|
|
Fair Value
|
|
Nonvested at beginning of period
|
|
|
628,750
|
|
|
$
|
0.05
|
|
|
|
940,000
|
|
|
$
|
0.04
|
|
Granted
|
|
|
---
|
|
|
$
|
---
|
|
|
|
---
|
|
|
$
|
---
|
|
Vested
|
|
|
(188,750
|
)
|
|
$
|
0.04
|
|
|
|
(207,500
|
)
|
|
$
|
0.04
|
|
Forfeited
|
|
|
---
|
|
|
$
|
---
|
|
|
|
(110,000
|
)
|
|
$
|
0.05
|
|
Nonvested at end of period
|
|
|
440,000
|
|
|
$
|
0.05
|
|
|
|
622,500
|
|
|
$
|
0.04
|
|
Employee
Stock Options
The
following table summarizes the status of options outstanding as of and for the six months ended June 30, 2018 and 2017:
|
|
2018
|
|
|
2017
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
Exercise
|
|
|
|
|
|
Exercise
|
|
|
|
Number
|
|
|
Price
|
|
|
Number
|
|
|
Price
|
|
Outstanding at beginning of the period
|
|
|
2,349,996
|
|
|
$
|
0.12
|
|
|
|
2,349,996
|
|
|
$
|
0.12
|
|
Granted during the period
|
|
|
158,000
|
|
|
$
|
0.11
|
|
|
|
---
|
|
|
$
|
---
|
|
Exercised during the period
|
|
|
---
|
|
|
$
|
---
|
|
|
|
---
|
|
|
$
|
---
|
|
Forfeited during the period
|
|
|
---
|
|
|
$
|
---
|
|
|
|
---
|
|
|
$
|
---
|
|
Outstanding at end of the period
|
|
|
2,507,996
|
|
|
$
|
0.12
|
|
|
|
2,349,996
|
|
|
$
|
0.12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options exercisable at period-end
|
|
|
836,000
|
|
|
|
|
|
|
|
100,000
|
|
|
|
|
|
Weighted average remaining life (in years)
|
|
|
7.9
|
|
|
|
|
|
|
|
9.1
|
|
|
|
|
|
Weighted average grant date fair value of options granted during the period
|
|
$
|
0.09
|
|
|
|
|
|
|
$
|
---
|
|
|
|
|
|
Options available for grant at period-end
|
|
|
11,496,934
|
|
|
|
|
|
|
|
11,711,184
|
|
|
|
|
|
HEALTHLYNKED
CORP.
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2018 AND 2017
(UNAUDITED)
NOTE
11 – SHAREHOLDERS’ DEFICIT (CONTINUED)
The
following table summarizes information about the Company’s stock options outstanding as of June 30, 2018:
Options Outstanding
|
|
Options Exercisable
|
|
|
|
|
|
|
|
Weighted-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
Weighted-
|
|
|
|
|
|
Weighted-
|
|
|
|
|
|
|
|
Remaining
|
|
|
Average
|
|
|
|
|
|
Average
|
|
Exercise
|
|
|
Number
|
|
|
Contractual
|
|
|
Exercise
|
|
|
Number
|
|
|
Exercise
|
|
Prices
|
|
|
Outstanding
|
|
|
Life (years)
|
|
|
Price
|
|
|
Exercisable
|
|
|
Price
|
|
$
|
--- to 0.10
|
|
|
|
1,733,000
|
|
|
|
7.6
|
|
|
$
|
0.08
|
|
|
|
783,000
|
|
|
|
0.08
|
|
$
|
0.11 to 0.20
|
|
|
|
774,996
|
|
|
|
8.5
|
|
|
$
|
0.20
|
|
|
|
53,000
|
|
|
|
0.19
|
|
$
|
0.08 to 0.20
|
|
|
|
2,507,996
|
|
|
|
7.9
|
|
|
$
|
0.12
|
|
|
|
836,000
|
|
|
$
|
0.09
|
|
Total
stock based compensation recognized related to option grants was $3,223 and $2,750 during the three months ended June 30, 2018
and 2017, respectively, and $6,445 and $5,900 during the six months ended June 30, 2018 and 2017.
A
summary of the status of non-vested options issued pursuant to the EIP as of and for the six months ended June 30, 2018 and 2017
is presented below:
|
|
2018
|
|
|
2017
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
Grant Date
|
|
|
|
|
|
Grant Date
|
|
|
|
Shares
|
|
|
Fair Value
|
|
|
Shares
|
|
|
Fair Value
|
|
Nonvested at beginning of period
|
|
|
1,774,996
|
|
|
$
|
0.03
|
|
|
|
2,249,996
|
|
|
$
|
0.03
|
|
Granted
|
|
|
158,000
|
|
|
$
|
0.09
|
|
|
|
---
|
|
|
$
|
---
|
|
Vested
|
|
|
(261,000
|
)
|
|
$
|
0.02
|
|
|
|
---
|
|
|
$
|
---
|
|
Forfeited
|
|
|
---
|
|
|
$
|
---
|
|
|
|
---
|
|
|
$
|
---
|
|
Nonvested at end of period
|
|
|
1,671,996
|
|
|
$
|
0.03
|
|
|
|
2,249,996
|
|
|
$
|
0.03
|
|
NOTE
12 – COMMITMENTS AND CONTINGENCIES
Service
contracts
The
Company carries various service contracts on its office buildings & certain copier equipment for repairs, maintenance and
inspections. All contracts are short term and can be cancelled.
Litigation
From
time to time, we may become involved in various lawsuits and legal proceedings, which arise, in the ordinary course of business.
However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time
to time that may harm our business. We are not aware of any such legal proceedings that we believe will have, individually or
in the aggregate, a material adverse effect on our business, financial condition or operating results.
Leases
The
Company has two real estate leases in Naples, Florida. The Company entered into an operating lease for its main office in Naples,
Florida beginning on August 1, 2013 and expiring July 31, 2020. The lease is for a 6901 square-foot space. The base rent for the
first full year of the lease term is $251,287 per annum with increases during the period. The Company entered into another operating
lease in the same building for an additional 361 square feet space for use of the medical equipment for the same period. The base
rent for the first full year of the lease term is $13,140 per annum.
HEALTHLYNKED
CORP.
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2018 AND 2017
(UNAUDITED)
NOTE
12 – COMMITMENTS AND CONTINGENCIES (CONTINUED)
During
2017, the Company entered into an agreement with MOD pursuant to which the Company will pay rent to MOD in the amount of $2,040
per month for office space in MOD’s facility used by the Company and its employees. The agreement is effective from January
1, 2017 through July 31, 2018. During the six months ended June 30, 2018 and 2017, the Company recognized rent expense related
to the marketing agreement in the amount of $12,240 and $12,240, respectively, pursuant to this agreement and had prepaid an additional
$18,217 toward future rent as of June 30, 2018.
Total
lease expense for the three months ended June, 2018 and 2017 was $68,610 and $78,530, respectively. Total lease expense for the
six months ended June, 2018 and 2017 was $146,621 and $140,290, respectively.
Future
minimum lease payments (excluding real estate taxes and maintenance costs) as of June 30, 2018 are as follows:
2018 (July to December)
|
|
$
|
137,006
|
|
2019
|
|
|
273,856
|
|
2020
|
|
|
162,055
|
|
2021
|
|
|
---
|
|
2022
|
|
|
---
|
|
|
|
|
|
|
Total
|
|
$
|
572,917
|
|
Employment/Consulting
Agreements
The
Company has employment agreements with each of its four physicians. The agreements generally call for a fixed salary at the beginning
of the contract with a transaction to performance based pay later in the contract. The contracts expire at various times through
2019, with early termination available upon a notice period of 30-90 days during which compensation is paid to the physician but
NWC has no further severance obligation.
On
July 1, 2016, HLYK entered into an employment agreement with Dr. Michael Dent, Chief Executive Officer and a member of the Board
of Directors. Dr. Dent’s employment agreement continues until terminated by Dr. Dent or HLYK. If Dr. Dent’s employment
is terminated by HLYK (unless such termination is “For Cause” as defined in his employment agreement), then upon signing
a general waiver and release, Dr. Dent will be entitled to severance in an amount equal to 12 months of his then-current annual
base salary, as well as the pro-rata portion of any bonus that would be due and payable to him. In the event that Dr. Dent terminates
the employment agreement, he shall be entitled to any accrued but unpaid salary and other benefits up to and including the date
of termination, and the pro-rata portion of any unvested time-based options up until the date of termination.
On
July 1, 2016, HLYK entered into an agreement with Mr. George O’Leary, the Company’s Chief Financial Officer and a
member of the Board of Directors, extending his prior agreement with the Company. Mr. O’Leary’s employment agreement
continues until terminated by Mr. O’Leary or HLYK. If Mr. O’Leary employment is terminated by HLYK (unless such
termination is “For Cause” as defined in his employment agreement), then upon signing a general waiver and release,
Mr. O’Leary will be entitled to receive his base salary and the Company shall maintain his employee benefits for a period
of twelve (12) months beginning on the date of termination. In the event that Mr. O’Leary terminates the agreement, he shall
be entitled to any accrued by unpaid salary and other benefits up to and including the date of termination. On July 1, 2018, HLYK
and Mr. O’Leary entered into an Extension Letter Agreement pursuant to which Mr. O’Leary was increased to
full time employment (previously half-time) and agreed to extend the term of his employment to June 30, 2022. In addition to a
base salary, the extension provides Mr. O’Leary with certain performance-based cash bonuses, stock grants, and stock option
grants.
NOTE
13 – SEGMENT REPORTING
The
Company has two reportable segments: NWC and HLYK. NWC is a multi-specialty medical group including OB/GYN (both Obstetrics and
Gynecology), and General Practice. The practice’s office is located in Naples, Florida. HLYK plans to operate an online
personal medical information and record archive system, the “HealthLynked Network”, which will enable patients and
doctors to keep track of medical information via the Internet in a cloud based system. Patients will complete a detailed online
personal medical history including past surgical history, medications, allergies, and family history. Once this information is
entered patients and their treating physicians will be able to update the information as needed to provide a comprehensive medical
history.
HEALTHLYNKED
CORP.
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2018 AND 2017
(UNAUDITED)
NOTE
13 – SEGMENT REPORTING (CONTINUED)
The
Company evaluates performance and allocates resources based on profit or loss from operations before income taxes. The accounting
policies of the reportable segments are the same as those described in the summary of significant accounting policies.
Segment
information for the three months ended June 30, 2018 and 2017 was as follows:
|
|
Three Months Ended June 30, 2018
|
|
|
Three Months Ended June 30, 2017
|
|
|
|
NWC
|
|
|
HLYK
|
|
|
Total
|
|
|
NWC
|
|
|
HLYK
|
|
|
Total
|
|
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Patient service revenue, net
|
|
$
|
566,320
|
|
|
$
|
---
|
|
|
$
|
566,320
|
|
|
$
|
516,798
|
|
|
$
|
---
|
|
|
$
|
516,798
|
|
Medicare incentives
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
Total revenue
|
|
|
566,320
|
|
|
|
---
|
|
|
|
566,320
|
|
|
|
516,798
|
|
|
|
---
|
|
|
|
516,798
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and benefits
|
|
|
348,955
|
|
|
|
269,188
|
|
|
|
618,143
|
|
|
|
334,484
|
|
|
|
160,647
|
|
|
|
495,131
|
|
General and administrative
|
|
|
190,808
|
|
|
|
361,775
|
|
|
|
552,583
|
|
|
|
213,501
|
|
|
|
284,877
|
|
|
|
498,378
|
|
Depreciation and amortization
|
|
|
5,575
|
|
|
|
454
|
|
|
|
6,029
|
|
|
|
5,602
|
|
|
|
257
|
|
|
|
5,859
|
|
Total Operating Expenses
|
|
|
545,338
|
|
|
|
631,417
|
|
|
|
1,176,755
|
|
|
|
553,587
|
|
|
|
445,781
|
|
|
|
999,368
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from operations
|
|
$
|
20,982
|
|
|
$
|
(631,417
|
)
|
|
$
|
(610,435
|
)
|
|
$
|
(36,789
|
)
|
|
$
|
(445,781
|
)
|
|
$
|
(482,570
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Segment Information
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
$
|
6,005
|
|
|
$
|
45,001
|
|
|
$
|
51,006
|
|
|
$
|
5,603
|
|
|
$
|
14,607
|
|
|
$
|
20,210
|
|
Loss on extinguishment of debt
|
|
$
|
---
|
|
|
$
|
(16,864
|
)
|
|
$
|
(16,864
|
)
|
|
$
|
---
|
|
|
$
|
---
|
|
|
$
|
---
|
|
Loss at inception of convertible notes payable
|
|
$
|
---
|
|
|
$
|
248,443
|
|
|
$
|
248,443
|
|
|
$
|
---
|
|
|
$
|
---
|
|
|
$
|
---
|
|
Amortization of original issue and debt discounts on convertible notes
|
|
$
|
---
|
|
|
$
|
244,563
|
|
|
$
|
244,563
|
|
|
$
|
---
|
|
|
$
|
58,524
|
|
|
$
|
58,524
|
|
Change in fair value of derivative financial instruments
|
|
$
|
---
|
|
|
$
|
52,786
|
|
|
$
|
52,786
|
|
|
$
|
---
|
|
|
$
|
---
|
|
|
$
|
---
|
|
HEALTHLYNKED
CORP.
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2018 AND 2017
(UNAUDITED)
NOTE
13 – SEGMENT REPORTING (CONTINUED)
Segment
information for the six months ended June 30, 2018 and 2017 was as follows:
|
|
Six
Months Ended June 30, 2018
|
|
|
Six
Months Ended June 30, 2017
|
|
|
|
NWC
|
|
|
HLYK
|
|
|
Total
|
|
|
NWC
|
|
|
HLYK
|
|
|
Total
|
|
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Patient service revenue, net
|
|
$
|
1,211,959
|
|
|
|
$---
|
|
|
$
|
1,211,959
|
|
|
$
|
992,916
|
|
|
$
|
---
|
|
|
$
|
992,916
|
|
Medicare incentives
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
Total revenue
|
|
|
1,211,959
|
|
|
|
---
|
|
|
|
1,211,959
|
|
|
|
992,916
|
|
|
|
---
|
|
|
|
992,916
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and benefits
|
|
|
752,010
|
|
|
|
426,989
|
|
|
|
1,178,999
|
|
|
|
679,438
|
|
|
|
283,567
|
|
|
|
963,005
|
|
General and administrative
|
|
|
416,460
|
|
|
|
710,951
|
|
|
|
1,127,411
|
|
|
|
390,834
|
|
|
|
497,570
|
|
|
|
888,404
|
|
Depreciation and amortization
|
|
|
11,149
|
|
|
|
909
|
|
|
|
12,058
|
|
|
|
11,257
|
|
|
|
310
|
|
|
|
11,567
|
|
Total Operating Expenses
|
|
|
1,179,619
|
|
|
|
1,138,849
|
|
|
|
2,318,468
|
|
|
|
1,081,529
|
|
|
|
781,447
|
|
|
|
1,862,976
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from operations
|
|
$
|
32,340
|
|
|
$
|
(1,138,849
|
)
|
|
$
|
(1,106,509
|
)
|
|
$
|
(88,613
|
)
|
|
$
|
(781,447
|
)
|
|
$
|
(870,060
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Segment Information
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
$
|
11,702
|
|
|
$
|
79,651
|
|
|
$
|
91,353
|
|
|
$
|
11,363
|
|
|
$
|
26,434
|
|
|
$
|
37,797
|
|
Loss on extinguishment of debt
|
|
$
|
---
|
|
|
$
|
308,359
|
|
|
$
|
308,359
|
|
|
$
|
---
|
|
|
$
|
---
|
|
|
$
|
---
|
|
Loss at inception of convertible notes payable
|
|
$
|
---
|
|
|
$
|
440,505
|
|
|
$
|
440,505
|
|
|
$
|
---
|
|
|
$
|
---
|
|
|
$
|
---
|
|
Amortization of original issue and debt discounts on convertible notes
|
|
$
|
---
|
|
|
$
|
399,398
|
|
|
$
|
399,398
|
|
|
$
|
---
|
|
|
$
|
130,568
|
|
|
$
|
130,568
|
|
Change in fair value of derivative financial instruments
|
|
$
|
---
|
|
|
$
|
38,165
|
|
|
$
|
38,165
|
|
|
$
|
---
|
|
|
$
|
---
|
|
|
$
|
---
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As
of June 30, 2018
|
|
|
|
As
of December 31, 2017
|
|
Identifiable assets
|
|
$
|
238,025
|
|
|
$
|
447,305
|
|
|
$
|
685,330
|
|
|
$
|
248,255
|
|
|
$
|
108,267
|
|
|
$
|
356,522
|
|
During
the three and six months ended June 30, 2018, HLYK recognized revenue of $6,888 related to subscription revenue billed to and
paid for by NWC physicians for access to the HealthLynked Network, which the Company test-launched starting in the third quarter
of 2017. The revenue for HLYK and related expense for NWC were eliminated on consolidation.
NOTE
14 – FAIR VALUE OF FINANCIAL INSTRUMENTS
The
carrying amounts of certain financial instruments, including cash and cash equivalents, accounts receivable and accounts payable,
approximate their respective fair values due to the short-term nature of such instruments.
HEALTHLYNKED
CORP.
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2018 AND 2017
(UNAUDITED)
NOTE
14 – FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
The
Company measures certain financial instruments at fair value on a recurring basis, including certain convertible notes payable
and related party loans which were extinguished and reissued and are therefore subject to fair value measurement, as well as derivative
financial instruments arising from conversion features embedded in convertible promissory notes for which the conversion rate
is not fixed. All financial instruments carried at fair value fall within Level 3 of the fair value hierarchy as their value is
based on unobservable inputs. The Company evaluates its financial assets and liabilities subject to fair value measurements on
a recurring basis to determine the appropriate level in which to classify them for each reporting period. This determination requires
significant judgments to be made.
The
following table summarizes the conclusions reached regarding fair value measurements as of June 30, 2018 and December 31, 2017:
|
|
As of June 30, 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Fair Value
|
|
Convertible notes payable
|
|
$
|
---
|
|
|
$
|
---
|
|
|
$
|
795,233
|
|
|
$
|
795,233
|
|
Notes payable to related party
|
|
|
---
|
|
|
|
---
|
|
|
|
196,952
|
|
|
|
196,952
|
|
Derivative financial instruments
|
|
|
---
|
|
|
|
---
|
|
|
|
1,389,689
|
|
|
|
1,389,689
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
---
|
|
|
$
|
---
|
|
|
$
|
2,381,874
|
|
|
$
|
2,381,874
|
|
|
|
As of December 31, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Fair Value
|
|
Convertible notes payable
|
|
$
|
---
|
|
|
$
|
---
|
|
|
$
|
---
|
|
|
$
|
---
|
|
Notes payable to related party
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
Derivative financial instruments
|
|
|
---
|
|
|
|
---
|
|
|
|
398,489
|
|
|
|
398,489
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
---
|
|
|
$
|
---
|
|
|
$
|
398,489
|
|
|
$
|
398,489
|
|
The
changes in Level 3 financial instruments that are measured at fair value on a recurring basis during the three and six months
ended June 30, 2018 and 2017 were as follows:
|
|
Three Months Ended
June 30,
|
|
|
Six Months Ended
June 30,
|
|
|
|
2018
|
|
|
2017
|
|
|
2018
|
|
|
2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible notes payable
|
|
$
|
(20,921
|
)
|
|
$
|
---
|
|
|
$
|
(75,418
|
)
|
|
$
|
---
|
|
Notes payable to related party
|
|
|
(4,531
|
)
|
|
|
---
|
|
|
|
(7,980
|
)
|
|
|
---
|
|
Derivative financial instruments
|
|
|
52,786
|
|
|
|
---
|
|
|
|
38,165
|
|
|
|
---
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
27,334
|
|
|
$
|
---
|
|
|
$
|
(45,233
|
)
|
|
$
|
---
|
|
NOTE
15 – SUBSEQUENT EVENTS
On July 11, 2018, the Company issued 200,000
three-year warrants with an exercise price of $0.25 and 300,000 three-year warrants with an exercise price of $0.50 to Iconic in
exchange for extending the maturity date of the $550k Note, the $50k Note and the $111k Note until July 31, 2019.
On July 13, 2018, the Company issued 175,000 three-year warrants with an exercise price of $0.25 and 75,000
three-year warrants with an exercise price of $0.50 to Iconic in exchange for further extending the maturity date of the $550k
Note, the $50k Note and the $111k Note until December 31, 2019.
On July 18, 2018, the Company completed
a $2,000,000 private placement of common stock and warrants with an accredited investor. The Company issued 3,900,000 shares of
common stock, pre-funded warrants to purchase 4,100,000 shares of common stock, and warrants to purchase 8,000,000 shares of common
stock, plus additional warrants to purchase shares of common stock that may become exercisable following the registration of the
securities issued in the private placement.
On August 7, 2018, the Company repaid the
$113k Note in full for a total payment of $151,536.