As
filed with the U.S. Securities and Exchange Commission on August 16, 2018
Registration
No. 333-[__]
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
S-1
REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OF 1933
HealthLynked
Corp.
(Exact
Name of Registrant as specified in its charter)
Nevada
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7373
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47-1634127
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(State
or other Jurisdiction of
Incorporation or Organization)
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(Primary
Standard Industrial
Classification Code Number)
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(I.R.S.
Employer
Identification No.)
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1726
Medical Blvd Suite 101
Naples,
Florida 34110
Telephone:
(239) 513-1992
Facsimile:
(239) 513-9022
(Address,
including zip code, and telephone number, including area code, of Registrant’s principal executive offices)
Michael
Dent, MD
Chief
Executive Officer
1726
Medical Blvd Suite 101
Naples,
Florida 34110
Telephone:
(239) 513-1992
Facsimile:
(239) 513-9022
(Name,
Address, Including Zip Code, and Telephone Number, Including Area Code, of Agent for Service)
With
copies to:
Andrea
Cataneo, Esq.
Sheppard,
Mullin, Richter & Hampton LLP
30
Rockefeller Plaza
New
York, NY 10012
Telephone:
(212) 653-8700
Facsimile:
(212) 653-8701
Approximate
date of commencement of proposed sale to the public:
As soon as practicable after the effective date of this registration
statement.
If
any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under
the Securities Act of 1933, check the following box.
þ
If
this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please
check the following box and list the Securities Act of 1933 registration statement number of the earlier effective registration
statement for the same offering. ☐
If
this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list
the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
If
this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list
the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
Indicate
by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting
company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,”
“smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check One):
Large accelerated filer
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☐
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Accelerated filer
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☐
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Non-accelerated filer
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☐ (Do
not check if a smaller reporting company)
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Smaller reporting company
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þ
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Emerging
growth company
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þ
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If
an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for
complying with any new or revised financial accounting standards provided to Section 7(a)(2)(B) of the Securities Act. ☐
CALCULATION
OF REGISTRATION FEE
Title of Each Class of Securities to be Registered
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Amount to be Registered
(1)
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Proposed Maximum Offering Price per Share
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Proposed
Maximum
Aggregate
Offering
Price
(2)
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Amount of Registration Fee
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Common Stock, par value $0.0001 per share
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3,900,000
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$
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0.41035
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$
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1,600,365
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$
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199
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Common Stock, par value $0.0001 per share
(3)
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4,100,000
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0.41035
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1,682,435
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2096
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Common Stock, par value $0.0001 per share
(4)
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8,000,0000
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0.41035
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3,282,800
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409
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Common Stock, par value $0.0001 per share
(5)
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17,000,000
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0.41035
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6,975,950
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869
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Total
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33,000,000
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$
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13,541,550
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$
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1,686
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(1)
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The
shares of our common stock being registered hereunder are being registered for sale by the selling security holders named
in the prospectus. Under Rule 416 of the Securities Act of 1933, as amended, the shares being registered include such indeterminate
number of shares of common stock as may be issuable with respect to the shares being registered in this registration statement
as a result of any stock splits, stock dividends or other similar event.
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(2)
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The
proposed maximum offering price per share and the proposed maximum aggregate offering price have been estimated solely for
the purpose of calculating the amount of the registration fee in accordance with Rule 457(c) under the Securities Act of 1933,
as amended, using the average of the high and low prices as reported on
the
OTC Market Group’s OTCQB marketplace
on August 13, 2018.
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(3)
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Represents
shares of common stock issuable upon exercise of outstanding Pre-Funded Warrants, as defined herein, to purchase shares of
common stock offered by the selling stockholders.
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(4)
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Represents
shares of common stock issuable upon exercise of outstanding Series A Warrants, as defined herein, to purchase shares of common
stock offered by the selling stockholders.
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(5)
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Represents
shares of common stock issuable upon exercise of outstanding Series B Warrants, as defined herein, to purchase shares of common
stock offered by the selling stockholders.
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THE
REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL
THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME
EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT SHALL
BECOME EFFECTIVE ON SUCH DATE AS THE U.S. SECURITIES AN EXCHANGE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
The information in this prospectus
is not complete and may be changed. The selling security holders may not sell these securities until the registration statement
filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and we
are not soliciting an offer to buy these securities in any state or jurisdiction where the offer or sale is not permitted.
SUBJECT
TO COMPLETION, DATED AUGUST 16, 2018
PRELIMINARY
PROSPECTUS
33,000,000
Shares
HEALTHLYNKED
CORP.
Common
Stock
This
prospectus relates to the sale by the selling security holders identified in this prospectus of up to 33,000,000 shares of our
common stock. All of these shares of our common stock are being offered for resale by the selling security holders. These shares
include (i) 3,900,000 shares of common stock issued to the selling security holders pursuant to the securities purchase agreement
among us and the selling security holders, dated July 16, 2018 (the “Securities Purchase Agreement”); (ii) 4,100,000
shares of common stock issuable to the selling security holders upon the exercise of the Pre-Funded Warrants, as defined in, and
issued in connection with, the Securities Purchase Agreement; (iii) 8,000,000 shares of common stock issuable to the selling security
holders upon the exercise the Series A Warrants, as defined in, and issued in connection with, the Securities Purchase Agreement;
and (iv) 17,000,000 shares of common stock issuable to the selling security holders upon the exercise of the Series B Warrants,
as defined in, and issued in connection with, the Securities Purchase Agreement.
Our
common stock is traded on the
on the OTC Market Group’s OTCQB marketplace
under
the symbol “HLYK.” The last reported sale price of our common stock on the OTCQB on August 13, 2018 was $0.429.
In
addition, we qualify as an “emerging growth company” as defined in Section 2(a)(19) of the Securities Act of 1933
and, as such, are allowed to provide in this prospectus more limited disclosures than an issuer that would not so qualify. Furthermore,
for so long as we remain an emerging growth company, we will qualify for certain limited exceptions from investor protection laws
such as the Sarbanes Oxley Act of 2002 and the Investor Protection and Securities Reform Act of 2010. Please read “Risk
Factors” and “Summary—Emerging Growth Company Status.”
Investing
in our common stock is highly speculative and involves a high degree of risk. You should carefully consider the risks and
uncertainties described under the heading “Risk Factors” beginning on page 10 of this prospectus before making a
decision to purchase our common stock.
NEITHER
THE U.S. SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES
OR PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The
distribution of this prospectus and the offering of the securities in certain jurisdictions may be restricted by law. Persons
outside the United States who come into possession of this prospectus must inform themselves about, and observe any restrictions
relating to, the offering of the securities and the distribution of this prospectus outside the United States. This prospectus
does not constitute, and may not be used in connection with, an offer to sell, or a solicitation of an offer to buy, any securities
offered by this prospectus in any jurisdiction in which it would be unlawful for us to make such an offer or solicitation.
The
date of this prospectus is , 2018
INCORPORATION
OF CERTAIN INFORMATION BY REFERENCE
The
SEC allows the Company to “incorporate by reference” the information it has filed with the SEC, which means that the
Company can disclose important information to you by referring you to those documents. The information that the Company incorporates
by reference is an important part of this prospectus, and information that it files later with the SEC will automatically update
and supersede this information. The documents the Company is incorporating by reference are:
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Our
Annual Report on Form 10-K for the year ended December 31, 2017, along with the financial statements and related notes thereto,
filed with the SEC on April 2, 2018;
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Our
Quarterly Reports on Form 10-Q, filed with the SEC on August 14, 2018 and May 15, 2018;
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Our Current Reports on Form 8-K, filed with the SEC on August 16, 2018, July 19, 2018, July 6, 2018, June 20, 2018, February 15, 2018 and February 6, 2018;
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Our
Definitive Information Statement on Schedule, 14C filed on January 16, 2018; and
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The
description of our common stock contained in our registration on Form 8-A12G (File No. 000-55768) filed with the SEC
on April 14, 2017, including any amendment or report filed for the purpose of updating such description.
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All
documents the Company subsequently files with the SEC pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act, except
as to any portion of any report or documents that is not deemed filed under such provisions, (1) on or after the date of
filing of the registration statement containing this prospectus and prior to the effectiveness of the registration statement and
(2) on or after the date of this prospectus until the earlier of the date on which all of the securities registered hereunder
have been sold or the registration statement of which this prospectus is a part has been withdrawn, shall be deemed incorporated
by reference in this prospectus and to be a part of this prospectus from the date of filing of those documents and will be automatically
updated and, to the extent described above, supersede information contained or incorporated by reference in this prospectus and
previously filed documents that are incorporated by reference in this prospectus. The public may read and copy any materials the
Company files with the SEC at the SEC’s Public Reference Room at 100 F Street, N.E., Washington, DC 20549. The public may
obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains an Internet
site that contains reports, proxy and information statements, and other information regarding issuers that file electronically
with the SEC and state the address of that site (http://www.sec.gov).
Nothing
in this prospectus shall be deemed to incorporate information furnished but not filed with the SEC pursuant to Item 2.02,
7.01 or 9.01 of Form 8-K.
Upon
written or oral request, we will provide without charge to each person to whom a copy of the prospectus is delivered a copy of
the documents incorporated by reference herein (other than exhibits to such documents, unless such exhibits are specifically incorporated
by reference herein). You may request a copy of these filings, at no cost, by writing or telephoning us at the following address:
George O’Leary, Chief Financial Officer at HealthLynked Corp., 1726 Medical Blvd Suite 101, Naples, FL 34110; Tel: (239)
513-1992. We maintain a website at http://www.healthlynked.com/investor.php. You may access our Annual Reports on Form 10-K, Quarterly
Reports on Form 10-Q, Current Reports on Form 8-K and other reports filed or furnished pursuant to Section 13(a) or 15(d)
of the Exchange Act with the SEC free of charge at our website as soon as reasonably practicable after such material is electronically
filed with, or furnished to, the SEC. The information contained in, or that can be accessed through, our website is not incorporated
by reference in, and is not part of, this prospectus.
TABLE
OF CONTENTS
You
should rely only on information contained in this prospectus or in any free writing prospectus we may authorize to be delivered
or made available to you. Neither the delivery of this prospectus nor the sale of our securities means that the information contained
in this prospectus or any free writing prospectus is correct after the date of this prospectus or such free writing prospectus.
This prospectus is not an offer to sell or the solicitation of an offer to buy our securities in any circumstances under which
the offer or solicitation is unlawful or in any state or other jurisdiction where the offer is not permitted. The information
contained in this prospectus is accurate only as of its date regardless of the time of delivery of this prospectus or of any sale
of common stock.
No
person is authorized in connection with this prospectus to give any information or to make any representations about us, the securities
offered hereby or any matter discussed in this prospectus, other than the information and representations contained in this prospectus.
If any other information or representation is given or made, such information or representation may not be relied upon as having
been authorized by us.
For
investors outside the United States
: We have not done anything that would permit this offering or possession or distribution
of this prospectus in any jurisdiction where action for that purpose is required, other than in the United States. You are required
to inform yourselves about and to observe any restrictions relating to this offering and the distribution of this prospectus.
Unless
otherwise indicated, information contained in this prospectus concerning our industry and the markets in which we operate, including
our general expectations and market position, market opportunity and market share, is based on information from our own management
estimates and research, as well as from industry and general publications and research, surveys and studies conducted by third
parties. Management estimates are derived from publicly available information, our knowledge of our industry and assumptions based
on such information and knowledge, which we believe to be reasonable. Our management’s estimates have not been verified
by any independent source, and we have not independently verified any third-party information. In addition, assumptions and estimates
of our and our industry’s future performance are necessarily subject to a high degree of uncertainty and risk due to a variety
of factors, including those described in “
Risk Factors
.” These and other factors could cause our future performance
to differ materially from our assumptions and estimates. See “
Cautionary Note Regarding Forward-Looking Statements
.”
PROSPECTUS
SUMMARY
The
following summary highlights information contained elsewhere in this prospectus. This summary may not contain all of the information
that may be important to you. You should read this entire prospectus carefully, including the sections entitled “Risk Factors”
and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our historical
financial statements and related notes included elsewhere in this prospectus. In this prospectus, unless the context provides
otherwise, the terms “HealthLynked,” “HLKD,” the “Company,” “we,” “us,”
and “our” refer to HealthLynked Corp. and its subsidiaries.
HealthLynked
Corp. is an emerging growth stage company incorporated in the State of Nevada on August 6, 2014. We operate a cloud-based online
personal medical information and record archiving system, referred to as the “HealthLynked Network,” which enables
patients and doctors to keep track of medical information via the Internet in a cloud based system. Through our website,
www.HealthLynked.com
,
patients are able to complete a detailed online personal medical history including past surgical history, medications, allergies,
and family medical history. Once this information is entered, patients and their treating physicians are able to update the information
as needed, to provide a comprehensive and up to date medical history.
We
believe that the HealthLynked Network offers a number of advantages to patients and physicians not available in the market today.
We provide a comprehensive marketing solution allowing physicians to market to both active and inactive patients, a way to connect
on a regular basis with their patients through newsfeeds and groups, and also access to new patients. Our real-time appointment
scheduling application allows for patients to book appointments online with participating healthcare providers in as soon as 30
minutes. Our database and record archives allow for seamless sharing of medical records between healthcare providers and keep
patients in control of shared access. In the HealthLynked Network, parents are able to create accounts for their children that
are linked to their family account, allowing them to provide access to healthcare providers, track vaccination records, allow
access by hospitals and allow schools to access medical histories, drug allergies and other medical information in case of emergencies.
The HealthLynked Network will be accessible 24 hours a day, 7 days a week, on web browsers and as a mobile phone application.
We believe this type of accessibility is convenient for schools and during office visits, but most importantly, is crucial in
times of a medical emergency.
Our
system provides for 24-hour access to medical specialist healthcare providers who can answer medical questions and direct appropriate
care to paying members. In addition to 24-hour access, patients may also schedule telemedicine consultations at set times with
participating healthcare providers who have expertise in various specialized areas of medicine. Participating physicians can elect
to allow patients to request online appointments either via our real-time app or by setting, in their administrator dashboard
panel, times and days of the week that patients may request appointments. Appointment requests are then sent by our system to
an email address specified by the physician’s office, who are then requested to follow up to confirm these appointment requests
or automatically accept the appointment request.
Patient
data is stored in conformity with the
Health Insurance Portability and Accountability Act
of 1996, as amended,
or “HIPAA.” The network utilizes Amazon AWS infrastructure which uses Amazon “HIPPA” complaint servers
along with Amazon RDS with LAMP, HTML5 and several JavaScript frameworks, including Angular and React. Recommendations for end
users are 512 kbps+ internet connection speed and a web browser such as Google Chrome, Internet Explorer, Mozilla Firefox, Safari
or handheld devices such as iOS devices, android phones or tablets. Our developers utilize third party controls for functionality
and user interface where the use of those controls adds value to the system beyond custom creation of new tools. We intend to
adjust forward compatibility for major browser version updates, new browsers, operating system updates or new operating system
as needed. The HealthLynked Network is EMR agnostic, and is compatible with all electronic medical records systems, allowing for
minimal barriers to participation and broader penetration of the market.
In
August 2014, we acquired Naples Women’s Center, LLC, a Florida limited liability company (“NWC”), an OB/GYN
practice in Naples, Florida that was established in 1996. This acquisition provided a foundation for ongoing development of the
HealthLynked Network by allowing us to register NWC’s approximately 6,000 active patients and 6500 inactive patients and
to utilize the expertise of our employed physicians to help in the design and strategy for deployment of the HealthLynked Network.
It is anticipated that future medical practices may be acquired from time to time as we see fit to further develop, test and deploy
the HealthLynked Network into new strategic regional areas throughout the country.
Our system walks patients
through a series of easy to use pages with point and click selections and drop down menus that allows them to enter their past
medical history, past surgical history, allergies, medications, and family medical history. In addition, members are allowed to
create accounts for children under the age of 18 and keep track of required visits and vaccines. Members select physicians, schools,
hospitals and other parties to whom they wish to grant access to their records. This access can be either ongoing, or restricted
by time and date, in accordance with the patient’s control settings.
We test-launched during
the third quarter of 2017 under the domain name “www.HealthLynked.com.” In August 2017, we completed over 54,000 HealthLynked
provider base profiles for physicians in Florida and 60,000 HealthLynked Provider base profiles for physicians in Texas. In September
2017, we completed HealthLynked provider base profiles covering physicians across the U.S totaling 880,000 physician base profiles.
In December 2017, we added 12,926 patient profiles in our Florida market. In January 2018, we released our Medical Newsfeed Service.
In April 2018, we announced a new feature allowing parents to create and manage profiles for their children under the age of 18
and also released our access control panel update allowing users to provide access control to other users, other than their existing
physicians, who can access their personal medical information. In April 2018, we also expanded our sales team into South Carolina.
In June 2018, we launched our mobile application for iPhone that connects patients with their healthcare providers and deployed
a number of healthcare algorithms for members that evaluate healthcare data of members and provide medical recommendations based
on each user’s specific healthcare information. In August 2018, we released a software upgrade that allows physicians to
connect with other physicians across the country.
JULY
2018 PRIVATE PLACEMENT OF COMMON STOCK AND WARRANTS
On
July 16, 2018, we entered into a Securities Purchase Agreement (the “Securities Purchase Agreement”) with certain
accredited investors (the “Investors”), who are the selling stockholders identified in this prospectus, pursuant to
which we sold the following securities for aggregate gross proceeds of approximately $2,000,000 to us (the “July Private
Placement”): (i) an aggregate of 3,900,000 shares of our common stock, par value $0.0001 per share (the “Common Stock”),
(ii) Series A warrants to purchase up to an aggregate of 8,000,000 shares of Common Stock (the “Series A Warrants”),
(iii) Series B warrants to purchase up to a maximum of 17,000,000 shares of Common Stock (of which, none are initially exercisable)
(the “Series B Warrants”), and (iv) pre-funded warrants to purchase an aggregate of 4,100,000 shares of Common Stock
(the “Pre-Funded Warrants” and, together with the Series A Warrants and Series B Warrants, the “Warrants”).
The Common Stock and the Warrants are herein referred to as the “Securities.” On July 17, 2018 (the “Closing
Date”), we and the Investors consummated the transactions contemplated by the Securities Purchase Agreement. All defined
terms used in this discussion of the July Private Placement and not defined herein are used as defined in the Securities Purchase
Agreement.
The
Securities Purchase Agreement
The
Securities Purchase Agreement contains customary representations and warranties concerning the Investors, including, but not limited
to, representations regarding accredited investor status and the nature of the July Private Placement.
The
Securities Purchase Agreement contains customary representations and warranties concerning us, including, but not limited to,
the following categories of representations and warranties:
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Our
financial condition
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Our
status as a reporting company and other securities law compliance matters
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Due
authorization of the July Private Placement and lack of conflicts with other agreements and government agencies with which we
are involved
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No
integration with other transactions and other securities law matters
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Equity
capitalization, status of contracts and other matters involving instruments we have issued
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Conduct
of our business
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Compliance
with certain federal laws
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Intellectual
property, employee relations and environmental matters
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Dilutive
effect of the Private Placement
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Related
party transactions
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No
disagreements with accountants and lawyers
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Under
the Securities Purchase Agreement, we have agreed to certain covenants including, but not limited to:
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Compliance
with Form D, blue sky, Current Report on Form 8-K and press release disclosures, timely SEC and financial disclosure, reservation
of shares at all times for complete exercise of all warrants issued in the July Private Placement and conduct of our business.
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From
the date hereof until the date that is the early of (i) the registration statement described in the Registration Rights Agreement
is effective; and (ii) all of the Securities become eligible for resale under Rule 144 (such date, the “Trigger Date”),
we may not file any other registration statements and until 90 days after Trigger Date, we may not enter into a subsequent placement
of our securities at a price which varies or may vary with the market price of the Common Stock, including by way of one or more
reset(s) to any fixed price. We also may not enter into, or effect a transaction under, any agreement, including, but not limited
to, an equity line of credit or “at-the-market” offering, whereby we issue securities at a future determined price.
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Notwithstanding the foregoing, from the date hereof until the Trigger Date, we are not prohibited from the issuance of shares of Common Stock or any “put” or similar transaction made pursuant to the Investment Agreement, as amended (the “Investment Agreement”), by and between the Company and Iconic Holdings, LLC (“Iconic”);
provided
, that if the Weighed Average Price (as defined in the Warrants) of the Common Stock is equal to or less than $0.15 at any time after the date hereof until the Trigger Date, the transactions described above involving the Investment Agreement will be prohibited until the Trigger Date.
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From
the date which is 90 days after the date of effectiveness of this registration statement until the two year anniversary of the
Closing Date, we must comply with participation rights by the Investors for up to 35% of any securities offered in any subsequent
placement.
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While
any Securities remain outstanding, without the prior written consent of the required Investors, we will neither change the date
on which any payments are due under any of the Related Party Loans to a date prior to December 31, 2019 nor make any payments
under any of the Related Party Loans prior to December 31, 2019.
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The
Securities Purchase Agreement also contains certain closing conditions and certain “miscellaneous” provisions including,
but not limited to, governing law and jurisdiction in New York and indemnification of the Investors by us for certain matters
under the Securities Purchase Agreement.
Terms
of the Series A Warrants
The
material terms of the Series A Warrants are as follows:
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The
Series A Warrants are exercisable at a price of $0.25 per share subject to certain adjustments, and the term of these warrants
is five (5) years from the date of issuance.
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Upon
receipt of an exercise notice, we must deliver unlegended shares to the Investor within two (2) trading days or pay penalties
equal to 1.0% of the product of (A) the sum of the number of shares of Common Stock not issued to the Investor on or prior to
the Share Delivery Date and to which the Investor is entitled, and (B) any trading price of the Common Stock selected by the Investor
in writing as in effect at any time during the period beginning on the applicable date of delivery of an Exercise Notice and ending
on the applicable Share Delivery Date, along with the cost of any buy-in.
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If
Rule 144 under the Securities Act (“Rule 144”) is available, under certain circumstances, we may exercise these warrants
pursuant to a standard cashless exercise provision.
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If
at any time while a warrant is outstanding, we do not have a sufficient number of authorized and unreserved shares of Common Stock
to satisfy its obligation to reserve for issuance upon exercise of a warrant at least a number of shares of Common Stock equal
to 100% of the number of shares of Common Stock as shall from time to time be necessary to effect the exercise of all of a warrant
then outstanding without regard to any limitation on exercise included herein and assuming that the Maximum Eligibility Number
is being determined based on a Reset Price equal to $0.08 (as adjusted for stock splits and the like), then the Company shall
immediately take all action necessary to increase the Company’s authorized shares of Common Stock to an amount sufficient
to allow the Company to reserve the Required Reserve Amount for this Warrant then outstanding.
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Until
we are listed on a Qualified Exchange (as such term is defined in the Series A Warrant), subject to exceptions, if securities
are listed lower than the exercise price, the exercise price resets to that lower price and the number of shares issuable increases
by the same ratio.
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If
there is a fundamental transaction, we have rights to be paid out in cash and securities as described in the warrants.
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The
warrants contain a standard 4.99% beneficial ownership limitation which may be increased to 9.99% upon certain conditions being
met.
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Terms
of the Series B Warrants
The
Series B Warrants contain the following terms (except as set forth below, the Series B Warrants contain terms similar to the terms
of the Series A Warrants):
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The
exercise price per share is equal to $0.0001 (based upon the difference between the 8,000,000
shares of Common Stock and Pre-Funded Warrants issued pursuant to the Securities Purchase
Agreement based on a purchase price per share of $0.25, and the number of shares of Common
Stock and Pre-Funded Warrants that would have been issued pursuant to the Securities
Purchase Agreement based on a reset purchase price equal to the greater of (i) $0.08
per share and (ii) a 10% discount to the market price of the Common Stock at and around
the time when the Registration Statement (as defined below) is declared effective (and,
if certain conditions are not satisfied, at other specified times).
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The
number of shares into which these warrants may be exercisable increases on three different
reset dates.
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On
the twenty first (21
st
) Trading Day after the date that is the earliest of
(i) the date that all Registrable Securities have become registered pursuant to an effective
Registration Statement that is available for the resale of all Registrable Securities,
provided
,
however
,
if less than all Registrable Securities have become registered for resale on the date
that a Registration Statement is declared effective, the Investor with respect to itself
only, shall have the right in its sole and absolute discretion to deem such condition
satisfied, (ii) the date that the Investor can sell all Registrable Securities pursuant
to Rule 144 without restriction or limitation and (iii) the date that is six (6) month
immediately following the Issuance Date, the number of shares exercisable increases to
the number of shares of Common Stock equal to the number (if positive) obtained
by subtracting (I) the sum of (x) the number of Common Shares purchased by the Investor
on the Closing Date pursuant to the Securities Purchase Agreement (as adjusted for stock
splits, stock dividends, recapitalizations, reorganizations, reclassification, combinations,
reverse stock splits or other similar events occurring after the Subscription Date) and
(y) the number of shares of Common Stock issuable upon exercise in full of all Pre-funded
Warrants (as defined in the Securities Purchase Agreement) purchased by the Investor
on the Closing Date pursuant to the Securities Purchase Agreement, from (II) the quotient
determined by dividing (x) the sum of (i) the aggregate Purchase Price paid by the Investor
on the Closing Date and (ii) the aggregate of all exercise prices paid or payable by
the Investor upon exercise in full of the Pre-Funded Warrants, by (y) the applicable
Reset Price determined as of the First Reset Date.
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On
the date after the First Reset Date that is the twenty first (21
st
) Trading
Day immediately following the date that is (i) in case the First Reset Date was triggered
by clause (i) of such definition, the earlier of (x) the date that the Investor can sell
all Registrable Securities without restriction or limitation pursuant to Rule 144 and
(y) the date that is the one (1) year anniversary of the Issuance Date and (ii) in case
the First Reset Date was triggered by clause (ii) or (iii) of such definition, the earliest
of (x) the date that all Registrable Securities are registered pursuant to an effective
Registration Statement that is available for the resale of all Registrable Securities,
the number of shares exercisable increases to the number of shares of Common Stock equal
to the number (if positive) obtained by subtracting (I) the sum of (x) the sum of (i)
the number of Common Shares purchased by the Investor on the Closing Date pursuant to
the Securities Purchase Agreement (as adjusted for stock splits, stock dividends, recapitalizations,
reorganizations, reclassification, combinations, reverse stock splits or other similar
events occurring after the Subscription Date) and (ii) the number of shares of Common
Stock issuable upon exercise in full of the Pre-funded Warrants (as defined in the Securities
Purchase Agreement) (as adjusted for stock splits, stock dividends, recapitalizations,
reorganizations, reclassification, combinations, reverse stock splits or other similar
events occurring after the Subscription Date) and (y) the First Reset Share Amount (as
adjusted for stock splits, stock dividends, recapitalizations, reorganizations, reclassification,
combinations, reverse stock splits or other similar events occurring after the First
Reset Date), from (II) the quotient determined by dividing (x) the sum of (i) the aggregate
Purchase Price paid by the Investor on the Closing Date and (ii) the aggregate of all
exercise prices paid or payable by the Investor upon exercise in full of the Pre-Funded
Warrants, by (y) the applicable Reset Price determined as of the Second Reset Date.
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On
the date after the Second Reset Date that is the twenty first (21
th
) Trading
Day immediately following the date that is the earlier of (i) the date that the Investor
can sell all Registrable Securities pursuant to Rule 144 without restriction or limitation
and without the requirement to be in compliance with Rule 144(c)(1) and (ii) the one
(1) year anniversary of the Issuance Date, the number of shares exercisable increases
to the number of shares of Common Stock equal to the number (if positive) obtained by
subtracting (I) the sum of (x) the sum of (i) the number of Common Shares purchased by
the Investor on the Closing Date pursuant to the Securities Purchase Agreement (as adjusted
for stock splits, stock dividends, recapitalizations, reorganizations, reclassification,
combinations, reverse stock splits or other similar events occurring after the Subscription
Date) and (ii) the number of shares of Common Stock issuable upon exercise in full of
the Pre-funded Warrants (as defined in the Securities Purchase Agreement) (as adjusted
for stock splits, stock dividends, recapitalizations, reorganizations, reclassification,
combinations, reverse stock splits or other similar events occurring after the Subscription
Date) (y) the First Reset Share Amount (as adjusted for stock splits, stock dividends,
recapitalizations, reorganizations, reclassification, combinations, reverse stock splits
or other similar events occurring after the First Reset Date) and (z) the Second Reset
Share Amount (as adjusted for stock splits, stock dividends, recapitalizations, reorganizations,
reclassification, combinations, reverse stock splits or other similar events occurring
after the Second Reset Date) from (II) the quotient determined by dividing (x) the sum
of (i) the aggregate Purchase Price paid by the Investor on the Closing Date and (ii)
the aggregate of all exercise prices paid or payable by the Investor upon exercise in
full of the Pre-Funded Warrants, by (y) the applicable Reset Price determined as of the
Third Reset Date.
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The
“Reset Price” is determined by means the greater of (i) the lower of (x)
ninety percent (90%) of the arithmetic average of the two (2) lowest Weighted Average
Prices of the Common Stock during the twenty (20) Trading Days immediately preceding
the applicable Reset Date (as adjusted for stock splits, stock dividends, recapitalizations,
reorganizations, reclassification, combinations, reverse stock splits or other similar
events during such period) and (y) the lowest price per share at which any share of Common
Stock was issued or “put” pursuant to the Investment Agreement from the period
beginning on the Subscription Date and ending on the Trigger Date (as defined in the
Securities Purchase Agreement), and (ii) $0.08.
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Terms
of the Pre-Funded Warrants
The
terms of the Pre-Funded Warrants are (except as set forth below, the terms of the Pre-Funded Warrants are substantially the same
as the terms of the Series A Warrants):
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The
exercise price is $0.0001 per share. The aggregate exercise price of this Warrant, except for a nominal exercise price of $0.0001
per Warrant Share, was pre-funded to the Company on or prior to the Issuance Date and, consequently, no additional consideration
(other than the nominal exercise price of $0.0001 per Warrant Share) shall be required to be paid.
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The
only price reset and change in number of shares exercisable is pro rata for stock splits and the like.
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The
Registration Rights Agreement
In
connection with the Securities Purchase Agreement, we also entered into a Registration Rights Agreement with the Investors (the
“Registration Rights Agreement”), pursuant to which we are required to file a Registration Statement on Form S-1 (a
“Registration Statement”) covering the resale of the Securities with thirty (30) days of the Closing Date. We are
further required to use our best efforts to have the Registration Statement declared effective by the SEC as soon as practicable,
but in no event later than the earlier of: (x) (i) in the event that the Registration Statement is not subject to a full review
by the SEC, ninety (90) calendar days after the Closing Date or (ii) in the event that the Registration Statement is subject to
a full review by the SEC, one hundred twenty (120) calendar days after the Closing Date; and (y) the fifth (5
th
) Business
Day (as such term is defined in the Registration Rights Agreement) after the date we are notified (orally or in writing, whichever
is earlier) by the SEC that such Registration Statement will not be reviewed or will not be subject to further review. If we fail
to (i) file the Registration Statement when required, (ii) have the Registration Statement declared effective when required or
(iii) maintain the effectiveness of the Registration Statement, we will be required to pay certain liquidated damages to the Investors.
Under
the terms of the Registration Rights Agreement, subject to certain limited exceptions, if the registration statement of which
this prospectus forms a part has not been declared effective within the time periods specified in the Registration Rights Agreement
or we otherwise fail to comply with certain provisions set forth in the Registration Rights Agreement, we will be required to
pay the selling stockholders, as liquidated damages, 2.0% of the amount invested upon such failure to comply and for each 30-day
period (or a pro rata portion thereof) during which such failure continues until the shares are sold or can be sold without restriction
under Rule 144.
The
Lock-Up Agreements
On
the Closing Date, Dr. Michael Dent, our Chief Executive Officer, and Mr. George O’Leary, our Chief Financial Officer, entered
into lock-up agreements with us pursuant to which they have agreed to not sell shares of our common stock until the date that
is ninety (90) calendar days after the earlier of the date that (i) such time one or more Registration Statement(s) covering the
resale of all Securities has been effective and available for the re-sale of all such Securities and (ii) such time as all of
the Securities may be sold without restriction or limitation pursuant to Rule 144.
Placement Agency Agreement
In
connection with the Private Placement, we entered into a Placement Agency Agreement with ThinkEquity, a division of Fordham Financial
Management, Inc. (the “Placement Agent”), pursuant to which the Corporation paid a cash fee of $160,000 to the Placement
Agent and agreed to issue to certain designees of the Placement Agent two (2) series of warrants to purchase, in the aggregate,
shares of Common Stock equal to 8.0% of the aggregate number of: (i) shares sold to the Investors, (ii) shares underlying the
Pre-Funded Warrants, and (iii) shares which ultimately become issuable upon exercise of the Series B Warrants, if any.
The
Securities discussed above were offered and issued to the Investors in reliance on the exemption from registration under the Securities
Act afforded by Section 4(a)(2) thereof and Rule 506 of Regulation D promulgated thereunder.
Simultaneously
with the execution of the Securities Purchase Agreement, the Corporation and Naples Women’s Center LLC, one of the Corporation’s
subsidiaries, each entered into agreements (the “Note Amendments”) with a related party to amend the terms of each
of the notes issued to such related party such that no payments will be, or required to be, made under any of those notes prior
to December 31, 2019.
The
foregoing descriptions of the Securities Purchase Agreement, the Registration Rights Agreement, the Warrants and the Note Amendments
do not purport to be complete and are qualified in their entirety by reference to the full text of the Securities Purchase Agreement,
the Registration Rights Agreement, and the Warrants, which are attached as exhibits to our Current Report on Form 8-K, filed on
July 19, 2018, and are incorporated herein by reference.
Emerging
Growth Company Status
We
are an “emerging growth company” as defined in the Jumpstart Our Business Startups Act, or “JOBS Act.”
For as long as we are an emerging growth company, unlike other public companies, we will not be required to:
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provide
an auditor’s attestation report on management’s assessment of the effectiveness of our system of internal control
over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act of 2002;
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comply
with any new requirements adopted by the Public Company Accounting Oversight Board, or the PCAOB, requiring mandatory audit
firm rotation or a supplement to the auditor’s report in which the auditor would be required to provide additional information
about the audit and the financial statements of the issuer;
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comply
with any new audit rules adopted by the PCAOB after April 5, 2012, unless the Securities and Exchange Commission determines
otherwise;
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provide
certain disclosure regarding executive compensation required of larger public companies; or
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obtain
shareholder approval of any golden parachute payments not previously approved or hold a nonbinding advisory vote on executive
compensation.
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We
will cease to be an “emerging growth company” upon the earliest of:
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when
we have $1 billion or more in annual revenues;
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when
we have at least $700 million in market value of our common stock held by non-affiliates;
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when
we issue more than $1 billion of non-convertible debt over a three-year period; or
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the
last day of the fiscal year following the fifth anniversary of our initial public offering.
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In
addition, Section 107 of the JOBS Act also provides that an emerging growth company can take advantage of the extended transition
period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words,
an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply
to private companies. We have elected to use the extended transition period for complying with new or revised accounting standards
under Section 102(b)(1), which will allow us to delay the adoption of new or revised accounting standards that have different
effective dates for public and private companies until those standards apply to private companies. As a result of this election,
our financial statements may not be comparable to companies that comply with public company effective dates.
STOCKHOLDER
DILUTION TABLE
The
following tables illustrate the increase in the number of shares issuable upon exercise of the Warrants at various stock prices:
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Stock Price at Reset Date(1)
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$0.429(2)
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$0.15
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$0.08
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Shares issuable upon exercise of Series A Warrants
|
|
|
8,000,000
|
|
|
|
8,000,000
|
|
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8,000,000
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|
Shares issuable upon exercise of Series B Warrants
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---
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6,814,815
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17,000,000
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|
Shares issuable upon exercise of Pre-Funded Warrants
|
|
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4,100,000
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4,100,000
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4,100,000
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Total
|
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12,100,000
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|
|
18,914,815
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29,100,000
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(1)
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This Stockholder Dilution Table reflects the total number
of new shares issuable upon exercise of the Series A, Series B and Pre-Funded Warrants at various stock prices. The number
of shares issuable upon exercise of the Series A and Pre-Funded Warrants does not fluctuate with the Company’ stock
price. The number of shares issuable upon exercise of the Series B Warrants is calculated pursuant to the provisions of the
Series B Warrant Agreement, assuming that the reset stock price could occur during any of the three reset dates contemplated
in the Series B Warrant Agreement.
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(2)
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Closing price on August 13, 2018.
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Corporate Information
Our address is 1726 Medical Blvd Suite 101, Naples, FL 34110, and our telephone number is: (800) 938-7144.
We maintain a website at http://www.healthlynked.com.
The information contained in, or that can be accessed through, our website is not incorporated by reference in, and is not part
of, this prospectus.
THE
OFFERING
Common
stock offered by selling security holders
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33,000,000
shares of our common stock. These shares include (i) 3,900,000 shares of common stock issued to the selling security holders;
(ii) 4,100,000 shares of common stock issuable to the selling security holders upon the exercise of the Pre-Funded Warrants;
(iii) 8,000,000 shares of common stock issuable to the selling security holders upon the exercise the Series A Warrants; and
(iv) 17,000,000 shares of common stock issuable to the selling security holders upon the exercise of the Series B Warrants.
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Offering
price
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The prevailing
market price for the shares or in privately negotiated transactions.
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Common stock
outstanding before the offering
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81,975,927
shares
(1)
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Common stock
outstanding after the offering
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94,075,927
shares
(2)
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Use of proceeds
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We
will not receive any proceeds from the sale of the common stock by the selling security holders.
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Risk Factors
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Investing
in our securities is highly speculative and involves a significant degree of risk. You should carefully consider the information
set forth in this prospectus and, in particular, the specific factors set forth in the “
Risk Factors
” section
beginning on page 10 of this prospectus before deciding whether or not to invest in our common stock.
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(1)
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Represents
the number of shares of our common stock outstanding as of August 13, 2018. Excludes (i) shares issuable under the Investment
Agreement with Iconic Holdings, LLC, dated July 11, 2016, as amended (the “Investment Agreement”), (ii) 692,143
shares of common stock issuable upon conversion of the convertible notes payable to Iconic Holdings LLC issued in July 2016
and May 2017 with an aggregate face value of $711,000 (the “Iconic Convertible Notes”), (iii) 11,197,381 shares
issuable upon conversion of other outstanding convertible notes, with variable conversion rates (the “Variable Convertible
Notes”), (iv) 3,707,996 shares of common stock issuable upon exercise of outstanding options, and (v) 43,436,790 shares
of common stock issuable upon exercise of outstanding warrants.
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(2)
|
Includes
(i) 81,975,927 shares of common stock and (ii) 12,100,000 shares of common stock initially issuable upon exercise of warrants
held by the selling security holders, with an additional 17,000,000 shares issuable if certain reset features are triggered.
Excludes (i) shares issuable under the Investment Agreement, (ii) 7,692,143 shares of common stock issuable upon conversion
of the Iconic Convertible Notes, (iii) 11,197,381 shares issuable upon conversion of the Variable Convertible Notes, (iv)
3,707,996 shares of common stock issuable upon exercise of outstanding options and (v) 31,336,790 shares of common stock
issuable upon exercise of outstanding warrants.
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SPECIAL
NOTE REGARDING FORWARD LOOKING STATEMENTS
This
prospectus contains “forward-looking statements,” which include information relating to future events, future financial
performance, financial projections, strategies, expectations, competitive environment and regulation. Words such as “may,”
“should,” “could,” “would,” “predicts,” “potential,” “continue,”
“expects,” “anticipates,” “future,” “intends,” “plans,” “believes,”
“estimates,” and similar expressions, as well as statements in future tense, identify forward-looking statements.
Forward-looking statements should not be read as a guarantee of future performance or results and may not be accurate indications
of when such performance or results will be achieved. Forward-looking statements are based on information we have when those statements
are made or management’s good faith belief as of that time with respect to future events and are subject to significant
risks and uncertainties that could cause actual performance or results to differ materially from those expressed in or suggested
by the forward-looking statements. Important factors that could cause such differences include, but are not limited to:
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Our
limited operating history;
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our
ability to manufacture, market and sell our products;
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our
ability to maintain or protect the validity of our U.S. and other patents and other intellectual property;
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our
ability to launch and penetrate markets;
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our
ability to retain key executive members;
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our
ability to internally develop new inventions and intellectual property;
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interpretations
of current laws and the passages of future laws; and
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acceptance
of our business model by investors and the commercial market.
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The
foregoing does not represent an exhaustive list of matters that may be covered by the forward-looking statements contained herein
or risk factors that we are faced with that may cause our actual results to differ from those anticipate in our forward-looking
statements. Please see “
Risk Factors
” for additional risks which could adversely impact our business and financial
performance.
Moreover, new risks
regularly emerge, and it is not possible for our management to predict or articulate all risks we face, nor can we assess the impact
of all risks on our business or the extent to which any risk, or combination of risks, may cause actual results to differ from
those contained in any forward-looking statements. All forward-looking statements included in this prospectus are based on information
available to us on the date of this prospectus. Except to the extent required by applicable laws or rules, we undertake no obligation
to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.
All subsequent written and oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified
in their entirety by the cautionary statements contained above and throughout this prospectus.
RISK
FACTORS
An
investment in our securities involves a high degree of risk. This prospectus contains a discussion of the risks applicable to an
investment in our securities. You should carefully consider the specific factors discussed under this “Risk Factors”
heading in this prospectus, together with all of the other information contained or incorporated by reference in this prospectus.
You should also consider the risks, uncertainties and assumptions discussed under Item 1A, “Risk Factors,” in our Annual
Report on Form 10-K for the fiscal year ended December 31, 2017 and any updates described in our Quarterly Reports on Form 10-Q
for the fiscal quarters ended March 31, 2018 and June 30, 2018, all of which are incorporated herein by reference, and may be amended,
supplemented or superseded from time to time by other reports we file with the SEC. The risks and uncertainties we have described
are not the only ones we face. Additional risks and uncertainties not presently known to us or that we currently deem immaterial
may also affect our operations.
RISKS
RELATED TO OUR BUSINESS AND FINANCIAL CONDITION
Our
subsidiary, the Naples Women’s Center, currently our only source of income, has incurred losses in the past and may not
be able to achieve profitability in the future.
Even
though our subsidiary, NWC, was established in 1996, it is subject to many of the risks inherent in the practice of medicine.
We cannot give any assurance that NWC’s operations will continue as currently intended, and no assurance can be given that
we can continue to receive reimbursement from third party payers. Further, changes in healthcare regulations in the coming years
may negatively impact our operations. NWC realized segment loss from operations for the year ended December 31, 2017 and 2016.
We expect to hire approximately five additional new physicians over the next two to five years, which will result in increased
costs and expenses, which may result in future operating losses.
The
HealthLynked Network, our online personal medical information and archiving system, is in the early stage of use, development,
and distribution, and as such, an investment in us at this stage of our business is extremely risky.
The
HealthLynked Network was test launched during 2017. Since the test launch, we have announced numerous upgrades and feature releases.
We cannot guarantee how long it will take us to fully develop all aspects of our envisioned technology. In addition, we cannot
predict whether physicians and patients will adopt our technology, or even if they do, the timing of such adoption. Further, it
is possible that other competitors will greater resources could enter the market and make it more difficult for us to attract or
keep customers. Consequently, at this phase of our development, our future is speculative and depends on the proper execution of
our business model.
No
assurance can be given that we will be able to timely repay the amounts due on convertible notes outstanding.
No
assurance can be given that we will earn sufficient revenues or secure the necessary financing, if needed, to timely pay the amounts
owed under Iconic Convertible Notes and the Variable Convertible Notes. The Iconic Convertible Notes are secured by substantially
all of our assets, including, but not limited to, receivables of NWC, machinery, equipment, contracts rights, and letters of credits.
If we fail to timely repay the amounts owed under the Iconic Convertible Notes, a default may allow the lender under the relevant
instruments to accelerate the related debt and to exercise their remedies under these agreements, which will typically include
the right to declare the principal amount of that debt, together with accrued and unpaid interest and other related amounts, immediately
due and payable, to exercise any remedies the lender may have to foreclose on assets that are subject to liens securing that debt.
As of June 30, 2018, the face value payable was $711,000 with respect to the Iconic Convertible Notes and $1,040,750 with respect
to the Variable Convertible Notes. We expect to repay these obligations from outside funding sources, including but not limited
to amounts available upon the exercise of the Put Right granted to us under the Investment Agreement, sales of our equity, loans
from related parties and others, or to satisfy convertible notes payable through the issuance of shares upon conversion pursuant
to the terms of the respective convertible notes payable. No assurances can be given that we will be able to access sufficient
outside capital in a timely fashion in order to repay the convertible notes payable before they mature. In order to access cash
available under the Investment Agreement or satisfy the convertible notes payable through the issuance of shares upon conversion,
our common stock must be listed on a recognized stock exchange or market and the shares underlying the arrangement must be subject
to an effective registration statement. If we are unable to meet these requirements, we will not have access to funds under this
arrangement.
We
have substantial future capital needs and our ability to continue as a going concern depends upon our ability to raise additional
capital and achieve profitable operations.
As
of June 30, 2018 and December 31, 2017, we had a working capital deficit of $1,886,656 and $2,102,923, respectively, and accumulated
deficit $7,096,587 and $4,705,230, respectively. For the six months ended June 30, 2018, we had a net loss of $2,391,357 and net
cash used by operating activities of $1,222,947. For the year ended December 31, 2017, we had a net loss of $2,581,011 and net
cash used by operating activities of $1,619,269. In July 2018, we completed the July Private Placement to help with the proper
execution of our business strategy and to service our debt that matures in 2018. We anticipate that approximately 50% of this
amount will be used for sales and marketing related costs and the remainder for executive compensation, information technology
expenses and legal and accounting expenses related to being a public company. We plan on raising additional capital to fund our
recently disclosed acquisition strategy. In addition, we have extended a significant portion of our outstanding debt until December
31, 2019. However, we anticipate that we will need an additional $2.4 million in 2018 to properly execute our business plan and
service debt maturing in 2018. We may also need to raise additional funds in order to support more rapid expansion, develop new
or enhanced services and products, hire employees, respond to competitive pressures, acquire technologies or respond to unanticipated
requirements. Management’s plans include attempting to improve our profitability and our ability to generate sufficient
cash flow from operations to meet our operating needs on a timely basis, obtaining additional working capital funds through equity
and debt financing arrangements, and restructuring on-going operations to eliminate inefficiencies to increase our cash balances.
However, there can be no assurance that these plans and arrangements will be sufficient to fund our ongoing capital expenditures,
working capital, and other requirements. Management intends to make every effort to identify and develop sources of funds. The
outcome of these matters cannot be predicted at this time. There can be no assurance that any additional financings will be available
to the Company on satisfactory terms and conditions, if at all. If adequate funds are not available on acceptable terms, we may
be unable to develop or enhance our services and products, take advantage of future opportunities or respond to competitive pressures
or unanticipated requirements, which could have a material adverse effect on our business, financial condition and operating results.
Further, we may seek to raise additional funds through the issuance of equity securities, in which case, the percentage ownership
of our shareholders will be reduced and holders may experience additional dilution in net book value per share.
We
may not have access to, or may otherwise be limited in, our financing options due to existing contractual obligations.
From
time to time we may need or desire to engage in equity and/or debt financings in order to obtain working capital. The Company’s
access to, and the availability of, such financings on acceptable terms and conditions in the future may be impacted by existing
contractual obligations with third parties (e.g. rights of participation, antidilution rights, market “stand-off”
covenants, etc.) There can be no assurance that we will have access to such financings on terms acceptable to us, or at all.
Our
future success depends on our ability to execute our business plan by fully developing our online medical records platform and
recruiting physicians and patients to adopt and use the system. However, there is no guarantee that we will be able to successfully
implement our business plan.
We
have not yet demonstrated our ability to successfully market our online medical records platform through the HealthLynked Network.
As of the date of this prospectus, we have not entered into any agreements with third party doctors or patients to use our system
for their medical records and there is no assurance that we will be able to enter into such agreements in the future.
We
may not be able to effectively control and manage our growth.
Our
strategy envisions a period of potentially rapid growth in our physician network over the next five years based on aggressively
increasing our marketing efforts. We intend to rely on the efforts of our newly engaged Chief Commercial Officer to attempt to
enroll over 2,000 new physicians by December 2018 with that level of growth doubling every year over the next five years. We currently
maintain a small in house programming, IT, administrative and sales personnel. The capacity to service the online medical records
platform and our expected growth may impose a significant burden on our future planned administrative and operational resources.
The growth of our business may require significant investments of capital and increased demands on our management, workforce and
facilities. We will be required to substantially expand our administrative and operational resources and attract, train, manage
and retain qualified employees, management and other personnel. Failure to do so, or to satisfy such increased demands would interrupt
or have a material adverse effect on our business and results of operations.
The
departure or loss of Dr. Michael Dent, our Chief Executive Officer, could disrupt our business.
We
depend heavily on the continued efforts of Dr. Michael Dent, Chief Executive Officer and Chairman of the Board, who has provided
us with a total of $101,450 in working capital during the six months ended June 30, 2018 and $338,470 during the year ended December
31, 2017. Dr. Dent is essential to our strategic vision and day-to-day operations and would be difficult to replace. While we
have entered into a four-year written employment contract with Dr. Dent effective July 1, 2016, we cannot be certain that Dr.
Dent will continue with us for any particular period of time. The departure or loss of Dr. Dent, or the inability to hire and
retain a qualified replacement, could negatively impact our ability to manage our business.
The
departure or loss of Robert Horel, our Chief Commercial Officer, could disrupt our business.
We
depend heavily on the continued efforts of Robert Horel, our Chief Commercial Officer. Mr. Horel’s expertise and contacts
are essential to our sales strategy and would be difficult to replace. While we have entered into a written employment contract
with Mr. Horel effective November 28, 2016, we cannot be certain that Mr. Horel will continue with us for any particular period
of time. The departure or loss of Mr. Horel, or the inability to hire and retain a qualified replacement, could negatively impact
our ability to manage our business.
The
healthcare industry is highly regulated, and government authorities may determine that we have failed to comply with applicable
laws, rules or regulations.
The
healthcare industry, healthcare information technology, the online medical records platform services that we provide and the physicians’
medical practices we engage in through NWC are subject to extensive and complex federal, state and local laws, rules and regulations,
compliance with which imposes substantial costs on us. Of particular importance are the provisions summarized as follows:
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federal
laws (including the federal False Claims Act) that prohibit entities and individuals from knowingly or recklessly making claims
to Medicaid, Medicare and other government-funded programs that contain false or fraudulent information or from improperly
retaining known overpayments;
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a
provision of the Social Security Act, commonly referred to as the “anti-kickback” statute, that prohibits the
knowing and willful offer, payment, solicitation or receipt of any bribe, kickback, rebate or other remuneration, in cash
or in kind, in return for the referral or recommendation of patients for items and services covered, in whole or in part,
by federal healthcare programs, such as Medicaid and Medicare;
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a
provision of the Social Security Act, commonly referred to as the Stark Law, that, subject to limited exceptions, applies
when physicians refer Medicare patients to an entity for the provision of certain “designated health services”
if the physician or a member of such physician’s immediate family has a direct or indirect financial relationship (including
a compensation arrangement) with the entity;
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similar
state law provisions pertaining to anti-kickback, fee splitting, self-referral and false claims issues, which typically are
not limited to relationships involving government-funded programs;
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provisions
of the
federal Health Insurance Portability and Accountability Act of 1996, as
amended (“HIPAA”)
that prohibit knowingly and willfully executing a scheme or artifice to defraud
a healthcare benefit program or falsifying, concealing or covering up a material fact or making any material false, fictitious
or fraudulent statement in connection with the delivery of or payment for healthcare benefits, items or services;
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state
laws that prohibit general business corporations from practicing medicine, controlling physicians’ medical decisions
or engaging in certain practices, such as splitting fees with physicians;
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federal
and state healthcare programs may deny our application to become a participating provider that could in turn cause us to not
be able to treat those patients or prohibit us from billing for the treatment services provided to such patients;
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federal
and state laws that prohibit providers from billing and receiving payment from Medicaid or Medicare for services unless the
services are medically necessary, adequately and accurately documented and billed using codes that accurately reflect the
type and level of services rendered;
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federal
and state laws pertaining to the provision of services by non-physician practitioners, such as advanced nurse practitioners,
physician assistants and other clinical professionals, physician supervision of such services and reimbursement requirements
that may be dependent on the manner in which the services are provided and documented; and
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federal
laws that impose civil administrative sanctions for, among other violations, inappropriate billing of services to federally
funded healthcare programs, inappropriately reducing hospital care lengths of stay for such patients, or employing individuals
who are excluded from participation in federally funded healthcare programs.
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In
addition, we believe that our business, including the business conducted through NWC, will continue to be subject to increasing
regulation, the scope and effect of which we cannot predict.
We
may in the future become the subject of regulatory or other investigations or proceedings, and our interpretations of applicable
laws, rules and regulations may be challenged. For example, regulatory authorities or other parties may assert that our arrangements
with the physicians using the HealthLynked Network constitute fee splitting and seek to invalidate these arrangements, which could
have a material adverse effect on our business, financial condition, results of operations, cash flows and the trading price of
our common stock. Regulatory authorities or other parties also could assert that our relationships violate the anti-kickback,
fee splitting or self-referral laws and regulations. Such investigations, proceedings and challenges could result in substantial
defense costs to us and a diversion of management’s time and attention. In addition, violations of these laws are punishable
by monetary fines, civil and criminal penalties, exclusion from participation in government-sponsored healthcare programs, and
forfeiture of amounts collected in violation of such laws and regulations, any of which could have a material adverse effect on
our overall business, financial condition, results of operations, cash flows and the trading price of our common stock.
Federal
and state laws that protect the privacy and security of protected health information may increase our costs and limit our ability
to collect and use that information and subject us to penalties if we are unable to fully comply with such laws.
Numerous
federal and state laws and regulations govern the collection, dissemination, use, security and confidentiality of individually
identifiable health information. These laws include:
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Provisions
of HIPAA that limit how healthcare providers may use and disclose individually identifiable health information, provide certain
rights to individuals with respect to that information and impose certain security requirements;
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The
Health Information Technology for Economic and Clinical Health Act (“HITECH”), which strengthens and expands the
HIPAA Privacy Standards and Security Standards and imposes data breach notification obligations;
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Other
federal and state laws restricting the use and protecting the privacy and security of protected health information, many of
which are not preempted by HIPAA;
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Federal
and state consumer protection laws; and
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Federal
and state laws regulating the conduct of research with human subjects.
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Through
the HealthLynked Network, we collect and maintain protected health information in paper and electronic format. New protected health
information standards, whether implemented pursuant to HIPAA, HITECH, congressional action or otherwise, could have a significant
effect on the manner in which we handle healthcare-related data and communicate with third parties, and compliance with these
standards could impose significant costs on us, or limit our ability to offer certain services, thereby negatively impacting the
business opportunities available to us.
In
addition, if we do not comply with existing or new laws and regulations related to protected health information, we could be subject
to remedies that include monetary fines, civil or administrative penalties, civil damage awards or criminal sanctions.
RISKS
RELATED TO THE HEALTHLYNKED NETWORK
The
market for Internet-based personal medical information and record archiving systems may not develop substantially further or develop
more slowly than we expect, harming the growth of our business.
It
is uncertain whether personal medical information and record archiving systems will achieve and sustain the high levels of demand
and market acceptance we anticipate. Further, even though we expect NWC patients and physicians to use the HealthLynked Network,
our success will depend, to a substantial extent, on the willingness of unaffiliated patients, physicians and hospitals to use
our services. Some patients, physicians and hospitals may be reluctant or unwilling to use our services, because they may have
concerns regarding the risks associated with the security and reliability, among other things, of the technology model associated
with these services. If our target users do not believe our systems are secure and reliable, then the market for these services
may not expand as much or develop as quickly as we expect, either of which would significantly adversely affect our business,
financial condition, or operating results.
If
we do not continue to innovate and provide services that are useful to our target users, we may not remain competitive, and our
revenues and operating results could suffer.
Our
success depends on our ability to keep pace with technological developments, satisfy increasingly sophisticated client requirements,
and obtain market acceptance. Our competitors are constantly developing products and services that may become more efficient or
appealing to our clients and users. As a result, we will be required to invest significant resources in research and development
in order to enhance our existing services and introduce new high-quality services that clients and users will want, while offering
these services at competitive prices.
If
we are unable to predict user preferences or industry changes, or if we are unable to modify our services on a timely or cost-effective
basis, we may lose clients and target users. Our operating results would also suffer if our innovations are not responsive to
the needs of our clients and users, are not appropriately timed with market opportunity, or are not effectively brought to market.
As technology continues to develop, our competitors may be able to offer results that are, or that are perceived to be, substantially
similar to or better than those generated by our services. This may force us to compete on additional service attributes and to
expend significant resources in order to remain competitive.
Failure
to manage our rapid growth effectively could increase our expenses, decrease our revenue, and prevent us from implementing our
business strategy.
To
manage our anticipated future growth effectively, we will need to enhance our information technology infrastructure and financial
and accounting systems and controls, as well as manage expanded operations in geographically distributed locations. We also must
engage and retain a significant number of qualified professional services personnel, software engineers, technical personnel,
and management personnel. Failure to manage our rapid growth effectively could lead us to over-invest or under-invest in technology
and operations; result in weaknesses in our infrastructure, systems, or controls; give rise to operational mistakes, losses, or
loss of productivity or business opportunities; reduce client or user satisfaction; limit our ability to respond to competitive
pressures; and could also result in loss of employees and reduced productivity of remaining employees. Our growth could require
significant capital expenditures and may divert financial resources and management attention from other projects, such as the
development of new or enhanced services. If our management is unable to effectively manage our growth, our expenses may increase
more than expected, our revenue could decline or may grow more slowly than expected, and we may be unable to implement our business
strategy
We
may be unable to adequately protect, and we may incur significant costs in enforcing, our intellectual property and other proprietary
rights.
Our
success depends in part on our ability to enforce our intellectual property and other proprietary rights. We expect to rely upon
a combination of copyright, trademark, trade secret, and unfair competition laws, as well as license and access agreements and
other contractual provisions, to protect these rights.
Our
attempts to protect our intellectual property through copyright, patent, and trademark registration may be challenged by others
or invalidated through administrative process or litigation. While we intend to submit patent applications covering our integrated
technology beginning in 2018, the scope of issued patents, if any, may be insufficient to prevent competitors from providing products
and services similar to ours, our patents may be successfully challenged, and we may not be able to obtain additional meaningful
patent protection in the future. There can be no assurance that our patent registration efforts will be successful.
Our
expected agreements with clients, users, vendors and strategic partners will limit their use of, and allow us to retain our rights
in, our intellectual property and proprietary information. Further, we anticipate that these agreements will grant us ownership
of intellectual property created in the performance of those agreements to the extent that it relates to the provision of our
services. In addition, we require certain of our employees and consultants to enter into confidentiality, non-competition, and
assignment of inventions agreements. We also require certain of our vendors and strategic partners to agree to contract provisions
regarding confidentiality and non-competition. However, no assurance can be given that these agreements will not be breached,
and we may not have adequate remedies for any such breach. Further, no assurance can be given that these agreements will be effective
in preventing the unauthorized access to, or use of, our proprietary information or the reverse engineering of our technology.
Agreement terms that address non-competition are difficult to enforce in many jurisdictions and may not be enforceable in any
particular case. In any event, these agreements do not prevent our competitors from independently developing technology or authoring
clinical information that is substantially equivalent or superior to our technology or the information we distribute.
To
the extent that our intellectual property and other proprietary rights are not adequately protected, third parties might gain
access to our proprietary information, develop and market products or services similar to ours, or use trademarks similar to ours,
each of which could materially harm our business. Existing U.S. federal and state intellectual property laws offer only limited
protection. In addition, if we resort to legal proceedings to enforce our intellectual property rights or to determine the validity
and scope of the intellectual property or other proprietary rights of others, the proceedings could be burdensome and expensive,
even if we were to prevail. Any litigation that may be necessary in the future could result in substantial costs and diversion
of resources and could have a material adverse effect on our business, operating results, or financial condition.
In
addition, our platforms incorporate “open source” software components that are licensed to us under various public
domain licenses. While we believe that we have complied with our obligations under the various applicable licenses for open source
software that we use, open source license terms are often ambiguous, and there is little or no legal precedent governing the interpretation
of many of the terms of certain of these licenses. Therefore, the potential impact of such terms on our business is somewhat unknown.
For example, some open source licenses require that those using the associated code disclose modifications made to that code and
such modifications be licensed to third parties at no cost. We monitor our use of open source software in an effort to avoid uses
in a manner that would require us to disclose or grant licenses under our proprietary source code. However, there can be no assurance
that such efforts will be successful, and such use could inadvertently occur.
RISKS
RELATED TO OUR INTELLECTUAL PROPERTY AND SECURITY CONCERNS
We
may be sued by third parties for alleged infringement of their proprietary rights.
The
software and Internet industries are characterized by the existence of a large number of patents, trademarks, and copyrights and
by frequent litigation based on allegations of infringement or other violations of intellectual property rights. We may receive
in the future communications from third parties claiming that we, our technology, or components thereof, infringe on the intellectual
property rights of others. We may not be able to withstand such third-party claims against our technology, and we could lose the
right to use third-party technologies that are the subject of such claims. Any intellectual property claims, whether with or without
merit, could be time-consuming and expensive to resolve, divert management attention from executing our business plan, and require
us to pay monetary damages or enter into royalty or licensing agreements. Although we intend that many of our third-party service
providers will be obligated to indemnify us if their products infringe the rights of others, such indemnification may not be effective
or adequate to protect us or the indemnifying party may be unable to uphold its contractual obligations.
Moreover,
any settlement or adverse judgment resulting from such a claim could require us to pay substantial amounts of money or obtain
a license to continue to use the technology or information that is the subject of the claim, or otherwise restrict or prohibit
our use of the technology or information. There can be no assurance that we would be able to obtain a license on commercially
reasonable terms, if at all, from third parties asserting an infringement claim; that we would be able to develop alternative
technology on a timely basis, if at all; that we would be able to obtain a license to use a suitable alternative technology or
information to permit us to continue offering, and our clients to continue using, our affected services; or that we would not
need to change our product and design plans, which could require us to redesign affected products or services or delay new offerings.
Accordingly, an adverse determination could prevent us from implementing our strategy or offering our services and products, as
currently contemplated.
We
may not be able to properly safeguard the information on the HealthLynked Network.
Information
security risks have generally increased in recent years because of new technologies and the increased activities of perpetrators
of cyber-attacks resulting in the theft of protected health, business or financial information. A failure in, or a breach of our
information systems as a result of cyber-attacks could disrupt our business, result in the release or misuse of confidential or
proprietary information, damage our reputation, and increase our administrative expenses. Although we plan to have robust information
security procedures and other safeguards in place, as cyber threats continue to evolve, we may be required to expend additional
resources to continue to enhance our information security measures or to investigate and remediate any information security vulnerabilities.
Any of these disruptions or breaches of security could have a material adverse effect on our business, financial condition and
results of operations.
Our
employees may not take all appropriate measures to secure and protect confidential information in their possession.
Each
of our employees is advised that they are responsible for the security of the information in our systems and to ensure that private
information is kept confidential. Should an employee not follow appropriate security measures, including those that have been
put in place to prevent cyber threats or attacks, the improper release of protected health information could result. The release
of such information could have a material adverse effect our reputation and our business, financial condition, results of operations
and cash flows.
RISKS
RELATED TO THE PROVISION OF MEDICAL SERVICES BY NWC
Any
state budgetary constraints could have an adverse effect on our reimbursement from Medicaid programs
.
As
a result of slow economic growth and volatile economic conditions, many states are continuing to collect less revenue than they
did in prior years and as a consequence are facing budget shortfalls and underfunded pension and other obligations. Although the
shortfalls for the more recent budgetary years have declined, they are still significant by historical standards. The financial
condition in Florida or other states in which we may in the future could lead to reduced or delayed funding for Medicaid programs
and, in turn, reduced or delayed reimbursement for physician services, which could adversely affect our results of operations,
cash flows and financial condition.
The
Affordable Care Act may have a significant effect on our business.
The
Affordable Care Act contains a number of provisions that could affect us over the next several years. These provisions include
the establishment of health insurance exchanges to facilitate the purchase of qualified health plans, expanding Medicaid eligibility,
subsidizing insurance premiums and creating requirements and incentives for businesses to provide healthcare benefits. Other provisions
contain changes to healthcare fraud and abuse laws and expand the scope of the FCA.
The
Affordable Care Act contains numerous other measures that could affect us. For example, payment modifiers are being developed
that will differentiate payments to physicians under federal healthcare programs based on quality and cost of care. In addition,
other provisions authorize voluntary demonstration projects relating to the bundling of payments for episodes of hospital care
and the sharing of cost savings achieved under the Medicare program.
The
Centers for Medicare and Medicaid Services (“CMS”) issued a final rule under the Affordable Care Act that is intended
to allow physicians, hospitals and other health care providers to coordinate care for Medicare beneficiaries through Accountable
Care Organizations (“ACOs”). ACOs are entities consisting of healthcare providers and suppliers organized to deliver
services to Medicare beneficiaries and eligible to receive a share of any cost savings the entity can achieve by delivering services
to those beneficiaries at a cost below a set baseline and based upon established quality of care standards. We will continue to
evaluate the impact of the ACO regulations on our business and operations.
Many
of the Affordable Care Act’s most significant reforms, such as the establishment of state-based and federally facilitated
insurance exchanges that provide a marketplace for eligible individuals and small employers to purchase health care insurance,
became effective relatively recently. On October 1, 2013, individuals began enrolling in health care insurance plans offered under
these state-based and federally-facilitated insurance exchanges, notwithstanding significant technical issues in accessing and
enrolling in the federal online exchange. Such issues may have delayed or reduced the purchase of health care insurance by uninsured
persons. In order to be covered on the effective date of January 1, 2014 individuals were required to enroll and pay their first
premium by December 24, 2013, however, extensions have been, and may continue to be granted on a case by case basis depending
on specific circumstances. Uninsured persons who do not enroll in health care insurance plans by March 31, 2014 will be required
to pay a penalty to the Internal Revenue Service, unless a hardship exception applies. The patient responsibility costs related
to health care plans obtained through the insurance exchanges may be high, and we may experience increased bad debt due to NWC’s
patients’ inability to pay for certain services.
The
Affordable Care Act also allows states to expand their Medicaid programs through an increase in the Medicaid eligibility income
limit from a state’s current eligibility levels to 133% of the federal poverty level. It remains unclear to what extent
states will expand their Medicaid programs by raising the income limit to 133% of the federal poverty level. As a result of these
and other uncertainties, we cannot predict whether there will be more uninsured patients in 2014 than anticipated when the Affordable
Care Act was enacted.
The
Affordable Care Act also remains subject to continuing legislative scrutiny, including efforts by Congress to amend or repeal
a number of its provisions as well as administrative actions delaying the effectiveness of key provisions. As a result, we cannot
predict with any assurance the ultimate effect of the Affordable Care Act on our Company, nor can we provide any assurance that
its provisions will not have a material adverse effect on our business, financial condition, results of operations or cash flows.
Government-funded
programs or private insurers may limit, reduce or make retroactive adjustments to reimbursement amounts or rates.
A
portion of the net patient service revenue derived from services rendered through NWC is from payments made by Medicare and Medicaid
and
other government-sponsored or funded healthcare programs (the “GHC Programs”)
. These government-funded programs,
as well as private insurers, have taken and may continue to take steps, including a movement toward increased use of managed care
organizations, value-based purchasing, and new patient care models to control the cost, eligibility for, use and delivery of healthcare
services as a result of budgetary constraints and cost containment pressures due to unfavorable economic conditions, rising healthcare
costs and for other reasons. These government-funded programs and private insurers may attempt other measures to control costs,
including bundling of services and denial of, or reduction in, reimbursement for certain services and treatments. As a result,
payments from government programs or private payors may decrease significantly. Also, any adjustment in Medicare reimbursement
rates may have a detrimental impact on our reimbursement rates not only for Medicare patients, but also because Medicaid and other
third-party payors often base their reimbursement rates on a percentage of Medicare rates. Our business may also be materially
affected by limitations on, or reductions in, reimbursement amounts or rates or elimination of coverage for certain individuals
or treatments. Moreover, because government-funded programs generally provide for reimbursements on a fee-schedule basis rather
than on a charge-related basis, we generally cannot increase our revenues from these programs by increasing the amount we charge
for services rendered by NWC’s physicians. To the extent our costs increase, we may not be able to recover our increased
costs from these programs, and cost containment measures and market changes in non-government-funded insurance plans have generally
restricted our ability to recover, or shift to non-governmental payors, these increased costs. In addition, funds we receive from
third-party payors are subject to audit with respect to the proper billing for physician and ancillary services and, accordingly,
our revenue from these programs may be adjusted retroactively. Any retroactive adjustments to our reimbursement amounts could
have a material effect on our financial condition, results of operations, cash flows and the trading price of our common stock.
We
may become subject to billing investigations by federal and state government authorities.
Federal
and state laws, rules and regulations impose substantial penalties, including criminal and civil fines, exclusion from participation
in government healthcare programs and imprisonment, on entities or individuals (including any individual corporate officers or
physicians deemed responsible) that fraudulently or wrongfully bill government-funded programs or other third-party payors for
healthcare services. CMS issued a final rule requiring states to implement a Medicaid Recovery Audit Contractor (“RAC”)
program effective January 1, 2012. States are required to contract with one or more eligible Medicaid RACs to review Medicaid
claims for any overpayments or underpayments, and to recoup overpayments from providers on behalf of the state. In addition, federal
laws, along with a growing number of state laws, allow a private person to bring a civil action in the name of the government
for false billing violations. We believe that audits, inquiries and investigations from government agencies will occur from time
to time in the ordinary course of NWC’s operations, which could result in substantial defense costs to us and a diversion
of management’s time and attention. We cannot predict whether any future audits, inquiries or investigations, or the public
disclosure of such matters, would have a material adverse effect on our business, financial condition, results of operations,
cash flows and the trading price of our common stock.
We
may not appropriately record or document the services provided by our physicians.
We
must appropriately record and document the services our doctors provide to seek reimbursement for their services from third-party
payors. If our physicians do not appropriately document, or where applicable, code for their services, we could be subjected to
administrative, regulatory, civil, or criminal investigations or sanctions and our business, financial condition, results of operations
and cash flows could be adversely affected.
We
may not be able to successfully recruit and retain qualified physicians, who are key to NWC’s revenues and billing
.
As
part of our business plan, we may acquire other medical practices as we see fit to further develop, test and deploy the HealthLynked
Network into new strategic regional areas throughout the country. We compete with many types of healthcare providers, including
teaching, research and government institutions, hospitals and health systems and other practice groups, for the services of qualified
doctors. We may not be able to continue to recruit new physicians or renew contracts with existing physicians on acceptable terms.
If we do not do so, our ability to service execute our business plan may be adversely affected. Our founder, Dr. Michael Dent,
retired in 2016 from seeing patients. We are in the process of replacing him with an experienced physician who is qualified to
perform surgeries. If we are unable to replace Dr. Dent, or to find a physician who can perform the same types of procedures,
including surgeries, it could have a material adverse effect on the operations of NWC.
A
significant number of NWC physicians could leave our practice and we may be unable to enforce the non-competition covenants of
departed employees.
We
have entered into employment agreements with the current NWC physicians. Certain of our employment agreements can be terminated
without cause by any party upon prior written notice. In addition, substantially all of our physicians have agreed not to compete
with us within a specified geographic area for a certain period after termination of employment. The law governing non-compete
agreements and other forms of restrictive covenants varies from state to state. Although we believe that the non-competition and
other restrictive covenants applicable to our affiliated physicians are reasonable in scope and duration and therefore enforceable
under applicable state law, courts and arbitrators in some states are reluctant to strictly enforce non-compete agreements and
restrictive covenants against physicians. Our physicians may leave our practices for a variety of reasons, including providing
services for other types of healthcare providers, such as teaching, research and government institutions, hospitals and health
systems and other practice groups. If a substantial number of our physicians leave our practices or we are unable to enforce the
non-competition covenants in the employment agreements, our business, financial condition, results of operations and cash flows
could be materially, and adversely affected. We cannot predict whether a court or arbitration panel would enforce these covenants
in any particular case.
We
may be subject to medical malpractice and other lawsuits not covered by insurance.
Our
business entails an inherent risk of claims of medical malpractice against our affiliated physicians and us. We may also be subject
to other lawsuits which may involve large claims and significant defense costs. Although we currently maintain liability insurance
coverage intended to cover professional liability and other claims, there can be no assurance that our insurance coverage will
be adequate to cover liabilities arising out of claims asserted against us. Liabilities in excess of our insurance coverage, including
coverage for professional liability and other claims, could have a material adverse effect on our business, financial condition,
results of operations, cash flows and the trading price of our common stock. See “Business-Professional and General Liability
Coverage.”
We
may not be able to collect reimbursements for our services from third-party payors in a timely manner.
A
significant portion of our net patient service revenue is derived from reimbursements from various third-party payors, including
GHC
Programs
, private insurance plans and managed care plans, for services provided by NWC physicians. We are responsible for
submitting reimbursement requests to these payors and collecting the reimbursements, and we assume the financial risks relating
to uncollectible and delayed reimbursements. In the current healthcare environment, payors continue their efforts to control expenditures
for healthcare, including revisions to coverage and reimbursement policies. Due to the nature of our business and our participation
in government-funded and private reimbursement programs, we are involved from time to time in inquiries, reviews, audits and investigations
by governmental agencies and private payors of our business practices, including assessments of our compliance with coding, billing
and documentation requirements. We may be required to repay these agencies or private payors if a finding is made that we were
incorrectly reimbursed, or we may be subjected to pre-payment reviews, which can be time-consuming and result in non-payment or
delayed payment for the services we provide. We may also experience difficulties in collecting reimbursements because third-party
payors may seek to reduce or delay reimbursements to which we are entitled for services that our affiliated physicians have provided.
In addition, GHC Programs may deny our application to become a participating provider that could prevent us from providing services
to patients or prohibit us from billing for such services. If we are not reimbursed fully and in a timely manner for such services
or there is a finding that we were incorrectly reimbursed, our revenue, cash flows and financial condition could be materially,
adversely affected.
Certain
federal and state laws may limit our effectiveness at collecting monies owed to us from patients.
We
utilize third parties to collect from patients any co-payments and other payments for services that are provided by NWC physicians.
The federal Fair Debt Collection Practices Act restricts the methods that third-party collection companies may use to contact
and seek payment from consumer debtors regarding past due accounts. State laws vary with respect to debt collection practices,
although most state requirements are similar to those under the Fair Debt Collection Practices Act. T
he
Florida Consumer Collection Practices Act, is broader than the federal legislation, applying the regulations to “creditors”
as well as “collectors,” whereas the
Fair Debt Collection Practices Act
is
applicable only to collectors. This prohibits creditors who are attempting to collect their own debts from engaging in behavior
prohibited by the
Fair Debt Collection Practices Act
and Florida Consumer
Collection Practices Act. The Act has very specific guidelines regarding which actions debt collectors and creditors may engage
in to collect unpaid debt.
If our collection practices or those of our collection agencies are inconsistent with these
standards, we may be subject to actual damages and penalties. These factors and events could have a material adverse effect on
our business, financial condition and results of operations.
We
may not be able to maintain effective and efficient information systems.
The
profitability of our business, including the services provided by NWC, is dependent on uninterrupted performance of our information
systems. Failure to maintain reliable information systems, disruptions in our existing information systems or the implementation
of new systems could cause disruptions in our business operations, including errors and delays in billings and collections, disputes
with patients and payors, violations of patient privacy and confidentiality requirements and other regulatory requirements, increased
administrative expenses and other adverse consequences.
RISKS
RELATING TO OUR ORGANIZATION
Our
articles of incorporation authorize our board to create a new series of preferred stock without further approval by our stockholders,
which could adversely affect the rights of the holders of our common stock.
Our
board of directors has the authority to fix and determine the relative rights and preferences of preferred stock. Our board of
directors also has the authority to issue preferred stock without further stockholder approval. As a result, our board of directors
could authorize the issuance of a series of preferred stock that would grant to holders the preferred right to our assets upon
liquidation, the right to receive dividend payments before dividends are distributed to the holders of common stock and the right
to the redemption of the shares, together with a premium, prior to the redemption of our common stock. In addition, our board
of directors could authorize the issuance of a series of preferred stock that has greater voting power than our common stock or
that is convertible into our common stock, which could decrease the relative voting power of our common stock or result in dilution
to our existing stockholders.
Stockholders’
ability to influence corporate decisions may be limited because Michael Dent, our Chief Executive Officer and Chairman of the
Board, currently owns a controlling percentage of our common stock.
Currently,
Dr. Dent, our Chief Executive Officer and Chairman of the Board, beneficially owns approximately 65% of our outstanding common
stock. As a result of this stock ownership, Dr. Dent can control all matters submitted to our stockholders for approval, including
the election of directors and approval of any merger, consolidation or sale of all or substantially all of our assets. This concentration
of voting power could delay or prevent an acquisition of our company on terms that other stockholders may desire. In addition,
as the interests of Dr. Dent and our minority stockholders may not always be the same, this large concentration of voting power
may lead to stockholder votes that are inconsistent with the best interests of our minority stockholders or the best interest
of the Company as a whole.
Minority
stockholders’ ability to influence corporate decisions may be limited because our Board is made up entirely of non-independent
officers of the Company.
Currently,
Dr. Dent, our Chief Executive Officer and Chairman of the Board, and Mr. George O’Leary, our Chief Financial Officer, comprise
our Board of Directors. This concentration of non-independent power could delay or prevent an acquisition of our company on terms
that stockholders may desire. In addition, as the interests of Dr. Dent, Mr. O’Leary, and our minority stockholders may
not always be aligned, this large concentration of corporate power may lead to Board votes that are inconsistent with the best
interests of our stockholders or the best interest of the Company as a whole.
If
we fail to establish and maintain an effective system of internal control, we may not be able to report our financial results
accurately or to prevent fraud. Any inability to report and file our financial results accurately and timely could harm our reputation
and adversely impact the trading price of our common stock.
Effective
internal control is necessary for us to provide reliable financial reports and prevent fraud. If we cannot provide reliable financial
reports or prevent fraud, we may not be able to manage our business as effectively as we would if an effective control environment
existed, and our business and reputation with investors may be harmed. As a result, our small size and any current internal control
deficiencies may adversely affect our financial condition, results of operation and access to capital. We have not performed an
in-depth analysis to determine if historical un-discovered failures of internal controls exist, and may in the future discover
areas of our internal control that need improvement.
We
are required to comply with the SEC’s rules implementing Section 302 of the Sarbanes-Oxley Act of 2002, which require our
management to certify financial and other information in our quarterly and annual reports and provide an annual management report
on the effectiveness of our internal control over financial reporting. However, we will not be required to make our first assessment
of our internal control over financial reporting until the year following our first annual report required to be filed with the
SEC. To comply with the requirements of being a public company, we will need to implement additional financial and management
controls, reporting systems and procedures and hire accounting, finance and legal staff.
Further,
our independent registered public accounting firm is not yet required to formally attest to the effectiveness of our internal
controls over financial reporting, and will not be required to do so for as long as we are an “emerging growth company”
pursuant to the provisions of the JOBS Act.
Public
company compliance may make it more difficult to attract and retain officers and directors.
The
Sarbanes-Oxley Act and new rules subsequently implemented by the SEC have required changes in corporate governance practices of
public companies. As a public company, we expect these new rules and regulations to increase our compliance costs and to make
certain activities more time consuming and costly. As a public company, we also expect that these new rules and regulations may
make it more difficult and expensive for us to obtain director and officer liability insurance in the future and we may be required
to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. As a
result, it may be more difficult for us to attract and retain qualified persons to serve on our board of directors or as executive
officers.
The
public market for our common stock is new and limited. Failure to develop or maintain a trading market could negatively
affect its value and make it difficult or impossible for you to sell your shares.
Our
common stock has traded on the OTCQB under the symbol “HLYK” since May 10, 2017. There is a limited public
market for our common stock and a more active public market for our common stock may not develop. Failure to develop
or maintain an active trading market could make it difficult to sell shares or recover any part of an investment in our common
shares. Even if a market for our common stock does develop, the market price of our common stock may be highly volatile. In
addition to the uncertainties relating to future operating performance and the profitability of operations, factors such as variations
in interim financial results or various, as yet unpredictable, factors, many of which are beyond our control, may have a negative
effect on the market price of our common stock.
Our
common stock is subject to the “penny stock” rules of the SEC and the trading market in the securities is limited,
which makes transactions in our common stock cumbersome and may reduce the value of an investment in our common stock.
Rule
15g-9 under the Exchange Act establishes the definition of a “penny stock,” for the purposes relevant to us, as any
equity security that has a market price of less than $5.00 per share or with an exercise price of less than $5.00 per share, subject
to certain exceptions. For any transaction involving a penny stock, unless exempt, the rules require: (a) that a broker
or dealer approve a person’s account for transactions in penny stocks; and (b) the broker or dealer receive from the investor
a written agreement to the transaction, setting forth the identity and quantity of the penny stock to be purchased.
In
order to approve a person’s account for transactions in penny stocks, the broker or dealer must: (a) obtain financial information
and investment experience objectives of the person and (b) make a reasonable determination that the transactions in penny stocks
are suitable for that person and the person has sufficient knowledge and experience in financial matters to be capable of evaluating
the risks of transactions in penny stocks.
The
broker or dealer must also deliver, prior to any transaction in a penny stock, a disclosure schedule prescribed by the SEC relating
to the penny stock market, which, in highlight form: (a) sets forth the basis on which the broker or dealer made the suitability
determination; and (b) confirms that the broker or dealer received a signed, written agreement from the investor prior to the
transaction. Generally, brokers may be less willing to execute transactions in securities subject to the “penny stock”
rules. This may make it more difficult for investors to dispose of our Common Stock and cause a decline in the market value
of our Common Stock.
Disclosure
also has to be made about the risks of investing in penny stocks in both public offerings and in secondary trading and about the
commissions payable to both the broker or dealer and the registered representative, current quotations for the securities and
the rights and remedies available to an investor in cases of fraud in penny stock transactions. Finally, monthly statements
have to be sent disclosing recent price information for the penny stock held in the account and information on the limited market
in penny stocks.
Drawdowns
under the Investment Agreement may cause dilution to existing shareholders.
Iconic
has committed to purchase up to $3,000,000 worth of shares of our common stock. From time to time during the term of the Investment
Agreement, and at our sole discretion, we may present Iconic with a put notice requiring Iconic to purchase shares of our common
stock. The purchase price to be paid by Iconic will be 80% of the lowest volume weighted average price of our common stock during
the five consecutive trading days prior to the date on which written notice is sent by us to the investor stating the number of
shares that the Company is selling to the investor, subject to certain adjustments. As a result, our existing shareholders will
experience immediate dilution upon the purchase of any of the shares by Iconic. The issue and sale of the shares under the Investment
Agreement may also have an adverse effect on the market price of the common shares. Iconic may resell some, if not all, of the
shares that we issue to it under the Investment Agreement and such sales could cause the market price of the common stock to decline
significantly. To the extent of any such decline, any subsequent puts would require us to issue and sell a greater number of shares
to Iconic in exchange for each dollar of the put amount. Under these circumstances, the existing shareholders of our company will
experience greater dilution. The effect of this dilution may, in turn, cause the price of our common stock to decrease further,
both because of the downward pressure on the stock price that would be caused by a large number of sales of our shares into the
public market by Iconic, and because our existing stockholders may disagree with a decision to sell shares to Iconic at a time
when our stock price is low, and may in response decide to sell additional shares, further decreasing our stock price. If we draw
down amounts under the Investment Agreement when our share price is decreasing, we will need to issue more shares to raise the
same amount of funding. During the six months ended June 30, 2018 and year ended December 31, 2017, we issued 1,856,480 shares
of our common stock for proceeds of $328,003 and 222,588 shares for proceeds of $27,618, respectively, pursuant to draws under
the Investment Agreement.
There
is no guarantee that we will be able to fully utilize the Investment Agreement, if at all.
The
purchase price and amount of shares we can sell to Iconic under the Investment Agreement shall depend on our stock price and stock
volume, and we cannot guarantee that our stock price and trading volume will be adequate to allow us to raise sufficient funds
under the agreement. The purchase price for shares sold to Iconic shall be 80% of the lowest volume weighted average price of
our common stock during the five consecutive trading days prior to the date on which written notice is sent by us to the investor,
subject to certain discounts and adjustments. The maximum Put Amount that the Company shall be entitled to put to Iconic per any
applicable put notice is an amount of shares of common stock up to or equal to 100% of the average of the daily trading volume
for the ten consecutive trading days immediately prior to the applicable put notice date, so long as such amount is at least $5,000
and does not exceed $150,000, as calculated by multiplying the Put Amount by the average daily weighted average price of our common
stock for the ten consecutive trading days immediately prior to the applicable put notice date. In order to access cash available
under the Investment Agreement, our common stock must be listed on a recognized stock exchange or market and the shares underlying
the arrangement must be subject to an effective registration statement. We must also have complied with our obligations and otherwise
not be in material breach or default of the Convertible Notes and warrants issued to Iconic. If we are unable to meet these requirements,
we will not have access to funds under this arrangement. There can be no assurances that we will be able to meet these requirements.
Certain
restrictions on the extent of puts and the delivery of advance notices may have little, if any, effect on the adverse impact of
our issuance of shares in connection with the Investment Agreement and as such, Iconic may sell a large number of shares, resulting
in substantial dilution to the value of shares held by existing stockholders.
Iconic
has agreed, subject to certain exceptions listed in the investment agreement with Iconic, to refrain from holding an amount of
shares which would result in Iconic or its affiliates owning more than 9.99% of the then-outstanding shares of our common stock
at any one time. These restrictions, however, do not prevent Iconic from selling shares of our common stock received in connection
with a put, and then receiving additional shares of our common stock in connection with a subsequent put. In this way, Iconic
could sell more than 9.99% of the outstanding common stock in a relatively short time frame while never holding more than 9.99%
at one time.
We
may not be able to refinance, extend or repay our substantial indebtedness owed to Iconic, which would have a material adverse
effect on our financial condition and ability to continue as a going concern.
We
anticipate that we will need to raise a significant amount of debt or equity capital in the near future in order to repay our
outstanding debt obligations owed to Iconic when they mature. As of August 15, 2018, we owed Iconic an aggregate of $804,745.
If we are unable to raise sufficient capital to repay these obligations at maturity and we are otherwise unable to extend the
maturity dates or refinance these obligations, we would be in default. We cannot provide any assurances that we will be able to
raise the necessary amount of capital to repay these obligations or that we will be able to extend the maturity dates or otherwise
refinance these obligations. Upon a default, Iconic would have the right to exercise its rights and remedies to collect, which
would include foreclosing on our assets. If we are in default of the Investment Agreement, this may cause cross-defaults with
other agreements to which we are a party, which could cause ramifications including the acceleration of other outstanding debt.
Accordingly, a default would have a material adverse effect on our business and, if our senior secured lender exercises its rights
and remedies, we would likely be forced to seek bankruptcy protection.
As
an “emerging growth company” under applicable law, we will be subject to lessened disclosure requirements, which could
leave our shareholders without information or rights available to shareholders of more mature companies.
For
as long as we remain an “emerging growth company” as defined in the JOBS Act, we have elected to take advantage of
certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging
growth companies” including, but not limited to:
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not
being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act;
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being
permitted to provide only two years of audited financial statements, in addition to any required unaudited interim financial
statements, with correspondingly reduced “Management’s Discussion and Analysis of Financial Condition and Results
of Operations” disclosure;
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●
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taking
advantage of an extension of time to comply with new or revised financial accounting standards;
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reduced
disclosure obligations regarding executive compensation in our periodic reports, proxy statements and registration statements;
and
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exemptions
from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden
parachute payments not previously approved.
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We
expect to take advantage of these reporting exemptions until we are no longer an “emerging growth company.” Because
of these lessened regulatory requirements, our shareholders would be left without information or rights available to shareholders
of more mature companies. We cannot predict whether investors will find our common stock less attractive if we rely on these exemptions.
If some investors find our common stock less attractive as a result, there may be a less active trading market for our common
stock and our stock price may be more volatile.
We
are also a “smaller reporting company” as defined in Rule 12b-2 of the Exchange Act and have elected to follow certain
scaled disclosure requirements available to smaller reporting companies.
Because
we have elected to use the extended transition period for complying with new or revised accounting standards for an “emerging
growth company” our financial statements may not be comparable to companies that comply with public company effective dates.
We
have elected to use the extended transition period for complying with new or revised accounting standards under Section 102(b)(1)
of the JOBS Act. This election allows us to delay the adoption of new or revised accounting standards that have different effective
dates for public and private companies until those standards apply to private companies. While we are not currently delaying the
implementation of any relevant accounting standards, in the future we may avail ourselves of this right, and as a result of this
election, our financial statements may not be comparable to companies that comply with public company effective dates. Because
our financial statements may not be comparable to companies that comply with public company effective dates, investors may have
difficulty evaluating or comparing our business, performance or prospects in comparison to other public companies, which may have
a negative impact on the value and liquidity of our common stock.
Our
stockholders are subject to significant dilution upon the occurrence of certain events which could result in a decrease in our
stock price.
As
of August 13, 2018, we had approximately 58,200,000 shares of our common stock reserved or designated for future issuance upon
the exercise of outstanding options and warrants, and conversion of outstanding convertible debt, including debt owed to Iconic
and others. Future sales of substantial amounts of our common stock into the public and the issuance of the shares reserved for
future issuance, in payment of our debt, and/or upon exercise of outstanding options and warrants, will be dilutive to our existing
stockholders and could result in a decrease in our stock price.
RISKS
RELATED TO OFFERING
Sales
of shares issued in the July Private Placement and issuable upon the exercise of the warrants may cause the market price of our
shares to decline.
On
July 17, 2018, we closed the July Private Placement and issued 3,900,000 shares of common stock and warrants to purchase up to
29,100,000 shares of common stock. We have agreed to register with the SEC the shares of common stock issued in the July Private
Placement and issuable upon exercise of the warrants for resale by the selling stockholders identified in this prospectus up to
29,100,000 shares. The registration statement of which this prospectus forms a part has been filed to satisfy this obligation.
Upon the effectiveness of the registration statement, an aggregate of 33,000,000 shares of common stock issued in the July Private
Placement and issuable upon exercise of the warrants may be freely sold in the open market. The sale of a significant amount of
these shares of common stock in the open market, or the perception that these sales may occur, could cause the market price of
shares of our common stock to decline or become highly volatile.
We
may have to pay liquidated damages to the selling stockholders, which would increase our expenses and reduce our cash resources.
In
connection with the July Private Placement, we entered into the Registration Rights Agreement and issued the Warrants. Under the
terms of the Registration Rights Agreement, subject to certain limited exceptions, if the registration statement of which this
prospectus forms a part has not been declared effective within the time periods specified in the Registration Rights Agreement,
or we otherwise fail to comply with certain provisions set forth in the Registration Rights Agreement, we will be required to pay
the selling stockholders, as liquidated damages, 2.0% of the amount invested upon such failure to comply and for each 30-day period
(or a pro rata portion thereof) during which such failure continues until the shares are sold or can be sold without restriction
under Rule 144 promulgated under the Securities Act. Under the terms of the Warrants, if we fail to timely deliver the shares underlying
the Warrants without any restrictive legend to the warrant holders, we will owe liquidated damages to the warrant holders. There
can be no assurance that the registration statement of which this prospectus forms a part will be declared effective by the SEC
or will remain effective for the time periods necessary to avoid payment of liquidated damages. Any payment of liquidated damages
would increase our expenses, reduce our cash resources and may limit or preclude us from advancing our product candidates through
clinical trials or otherwise growing our business.
Our
stockholders are subject to significant dilution upon the occurrence of certain events which could result in a decrease in our
stock price.
As
of August 13, 2018, we had approximately 58,200,000 shares of our common stock reserved or designated for future issuance upon
the exercise of outstanding options and warrants (including those in this offering), and conversion of convertible instruments.
Further, we may from time to time make an offer to our warrant holders to exchange their outstanding warrants for shares of our
common stock, a fewer number of warrants with more favorable terms, or a combination thereof.
Included
in the shares of common stock designated for future issuance discussed above are 29,100,000 shares that are subject to warrants
issued in the July Private Placement. These warrants contain provisions that, subject to certain exceptions, reset the exercise
price of such warrants if at any time while such warrants are outstanding we sell or issue (or are deemed to sell or issue) shares
of our common stock or rights, warrants, options or other securities or debt convertible, exercisable or exchangeable for shares
of our common stock at a price below the then current exercise price per share for such warrants. In the event of future price
resets, the number of shares of our common stock that are subject to such warrants increase so that the aggregate purchase price
payable applicable to the exercise of the warrants after the reset of the exercise price is the same as the aggregate purchase
price payable immediately prior to the reset. Any future resets to the exercise price of those warrants will have a further dilutive
effect on our existing stockholders and could result in a decrease in our stock price.
The
accounting treatment of the warrants issued in the July Private Placement could have a material adverse impact on our financial
statements.
Various
provisions of these warrants, including, but not limited to, various price reset and antidilution provisions will cause these
instruments to be treated as derivative liabilities. As a result, we will be forced to value these warrants at the end of each
fiscal quarter based upon complex accounting methods for the treatment of derivative liabilities such as Monte Carlo or other
similar valuation models, which will calculate the value of these warrants based upon a variety of factors, including price volatility
in the market price of our common stock. We cannot predict the financial impact of the issuance of these warrants on our financial
statements, specifically our balance sheet, and the deviation in the impact from quarter to quarter.
The
Securities Purchase Agreement for the July Private Placement includes various covenants, with which if we do not comply, we may
suffer potential monetary and other penalties.
The
Securities Purchase Agreement contains covenants, including, but not limited to, rights of participation in future financings
by us, current reporting under all Exchange Act requirements, and reservation of shares for warrants issued in conjunction with
the July Private Placement. If we do not comply with these covenants, we will be in breach of our obligations under this Agreement,
which may lead to exercise by the investors of the remedies available to them under this Agreement, which may cause a material
impact upon our financial condition.
Our
warrants contain provisions regarding delivery of shares upon exercise thereof, and any failure to meet those requirements will
cause us to suffer significant financial penalties.
If
we fail to meet our obligations to deliver shares upon exercise of any of the three (3) series of warrants issued in the July
Private Placement, then, in addition to all other remedies available to the holders thereof, we will be obligated to pay, in cash,
to such holders on each day after a share delivery date and during any period when we do not have sufficient authorized shares
to honor any such exercises, an amount equal to 1.0% of the product of (A) the sum of the number of shares of Common Stock not
issued to such holder on or prior to the Share Delivery Date (as such is defined in each of the Warrants) and to which the Holder
is entitled, and (B) any trading price of the Common Stock selected by such holder in writing as in effect at any time during
the period beginning on the applicable date of delivery of an exercise notice and ending on the applicable Share Delivery Date.
There is also a buy-in penalty on any shares not delivered. These penalties, especially if not cured immediately, can cause significant
monetary damages to us which may materially impact our cash flow and ability to operate.
USE
OF PROCEEDS
The
selling stockholders will receive all of the proceeds from the sale of the shares offered by them under this prospectus. We will
not receive any proceeds from the sale of the shares of Common Stock by the selling stockholders covered by this prospectus.
MARKET
FOR OUR COMMON STOCK AND RELATED STOCKHOLDER MATTERS
Market
Information
Our
common stock was initially eligible for quotation and trades on OTCPink on May 5, 2017 under the symbol “HLYK.” Since
May 10, 2017, our common stock has been eligible for quotation and trades on the OTCQB under the symbol “HLYK.”
The
following table reflects the high and low sale prices of our common stock for each quarter since our common stock began trading
on May 5, 2017. The share prices presented in the table represent prices between broker-dealers and do not include retail mark-ups
and markdowns or any commission to the dealer.
Quarter Ended
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High
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Low
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Quarter Ended September, 2018 (through August 13, 2018)
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$
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0.62
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$
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0.20
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|
Quarter Ended June 30, 2018 (through March 12, 2018)
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$
|
0.65
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|
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$
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0.07
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|
Quarter Ended March 31, 2018
|
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$
|
0.19
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|
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$
|
0.03
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|
Quarter Ended December 31, 2017
|
|
$
|
0.23
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|
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$
|
0.03
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|
Quarter Ended September 30, 2017
|
|
$
|
0.56
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|
|
$
|
0.21
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Quarter Ended June 30, 2017 (from May 5, 2017)
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$
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0.90
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$
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0.30
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|
The
last reported sales price of our common stock on the OTCQB on June 29, 2018 (the last trading day of our second fiscal quarter)
was $0.305 and on August 13, 2018, the last reported sales price was $0.429.
Holders
As
of August 13, 2018, we had 84 record holders of our common stock.
Equity
Compensation Plan Information
The
following table summarizes the total number of outstanding options and shares available for other future issuances of options
under the 2016 Equity Incentive Plan (the “EIP”) as of June 30, 2018. All of the outstanding awards listed below were
granted under the EIP.
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Number of Shares to be Issued Upon Exercise of Outstanding Options, Warrants and Rights
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Weighted-Average Exercise Price of Outstanding Options,
Warrants and Rights
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Number of Shares Remaining Available for Future Issuance Under the Equity Compensation Plan (Excluding Shares in First Column)
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Equity compensation plans approved by stockholders
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---
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---
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---
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Equity compensation plans not approved by stockholders
|
|
|
2,947,996
|
|
|
$
|
0.10
|
|
|
|
11,496,934
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|
On
January 1, 2016, the Company instituted the EIP for the purpose of having equity awards available to allow for equity participation
by its employees. The EIP allows for the issuance of up to 15,503,680 shares of the Company’s common stock to employees,
which may be issued in the form of stock options, stock appreciation rights, or restricted shares. The EIP is governed by the
Company’s board, or a committee that may be appointed by the board in the future. During the years ended December 31, 2017
and 2016, the Company made grants totaling 175,000 and 1,552,500 shares of restricted common stock pursuant to the EIP. No restricted
common stock grants were made during the six months ended June 30, 2018. The grants are subject to time-based vesting requirements
and generally vest a portion upon grant and the balance on a straight-line basis over a period of four years.
DIVIDEND
POLICY
We
have not declared nor paid any cash dividend on our common stock, and we currently intend to retain future earnings, if any, to
finance the expansion of our business, and we do not expect to pay any cash dividends in the foreseeable future. The decision
whether to pay cash dividends on our common stock will be made by our board of directors, in their discretion, and will depend
on our financial condition, results of operations, capital requirements and other factors that our board of directors considers
significant.
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
All
statements contained in this prospectus, other than statements of historical facts, that address future activities, events or
developments, are forward-looking statements, including, but not limited to, statements containing the word “believe,”
“anticipate,” “expect” and word of similar import. These statements are based on certain assumptions and
analyses made by us in light of our experience and our assessment of historical trends, current conditions and expected future
developments as well as other factors we believe are appropriate under the circumstances. Although the Company believes that the
expectations reflected in such forward-looking statements are reasonable, forward-looking statements are subject to risks and
uncertainties that could cause actual results to differ from those projected. The Company cautions investors that any forward-looking
statements made by the Company are not guarantees of future performance and that actual results may differ materially from those
in the forward-looking statements. Such risks and uncertainties include, without limitation: established competitors who have
substantially greater financial resources and operating histories, regulatory delays or denials, ability to compete as a start-up
company in a highly competitive market, and access to sources of capital.
The
following discussion and analysis should be read in conjunction with our financial statements and notes thereto included elsewhere
in this prospectus. Except for the historical information contained herein, the discussion in this prospectus contains certain
forward-looking statements that involve risks and uncertainties, such as statements of our plans, objectives, expectations and
intentions. The cautionary statements made in this prospectus should be read as being applicable to all related forward-looking
statements wherever they appear in this prospectus. The Company’s actual results could differ materially from those discussed
here.
Overview
The
Company filed its Articles of Incorporation on August 4, 2014 in Nevada. On September 3, 2014, the Company filed Amended Articles
of Incorporation setting forth the total authorized shares of 250,000,000 shares, 230,000,000 of which are designated as common
shares and 20,000,000 as “blank check” preferred stock. On February 5, 2018, the Company filed an amendment to its
Articles of Incorporation with the Secretary of State of Nevada to increase the amount of authorized shares of common stock to
500,000,000 shares. The Company also had 2,953,840 designated shares of Series A Preferred Stock which were converted to common
shares in 2016.
On
September 5, 2014, the Company entered into the Share Exchange Agreement with NWC, acquiring 100% of the LLC membership units
of NWC through the issuance of an aggregate of 50,000,000 shares of the Company’s common stock to the members of NWC.
NWC
is a multi-specialty medical group including OB/GYN (both Obstetrics and Gynecology), and general practice located in Naples,
Florida.
The
Company operates online personal medical information and record archive system, the “HealthLynked Network”, which
enables patients and doctors to keep track of medical information via the Internet in a cloud based system. Patients complete
a detailed online personal medical history including past surgical history, medications, allergies, and family history. Once this
information is entered patients and their treating physicians are able to update the information as needed to provide a comprehensive
medical history.
The
Company was formed for the purpose of acquiring NWC, and eventually developing its own online medical information system business
as described above. Prior to the share exchange, NWC was an ongoing operation that had been in existence since 1996. NWC generated
revenues in the prior years.
JOBS
Act
On
April 5, 2012, the Jumpstart Our Business Startups Act of 2012, or the JOBS Act, was enacted. Section 107 of the JOBS Act provides
that an “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B)
of the Securities Act of 1933, as amended, or the Securities Act, for complying with new or revised accounting standards. In other
words, an “emerging growth company” can delay the adoption of certain accounting standards until those standards would
otherwise apply to private companies. We have irrevocably elected not to avail ourselves of this extended transition period and,
as a result, we will adopt new or revised accounting standards on the relevant dates on which adoption of such standards is required
for other public companies.
We
are in the process of evaluating the benefits of relying on other exemptions and reduced reporting requirements provided by the
JOBS Act. Subject to certain conditions set forth in the JOBS Act, as an “emerging growth company,” we intend to rely
on certain of these exemptions from, without limitation, (i) providing an auditor’s attestation report on our system of
internal controls over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act and (ii) complying with any requirement
that may be adopted by the Public Company Accounting Oversight Board (PCAOB) regarding mandatory audit firm rotation or a supplement
to the auditor’s report providing additional information about the audit and the financial statements, known as the auditor
discussion and analysis. We will remain an “emerging growth company” until the earliest of (a) the last day of our
fiscal year following the fifth anniversary of the closing of this offering, (b) the last day of the first fiscal year in which
our annual gross revenues exceed $1.07 billion, (c) the last day of our fiscal year in which we are deemed to be a “large
accelerated filer” as defined in Rule 12b-2 under the Securities Exchange Act of 1934, or Exchange Act (which would occur
if the market value of our equity securities that is held by non-affiliates exceeds $700 million as of the last business day of
our most recently completed second fiscal quarter), or (d) the date on which we have issued more than $1 billion in nonconvertible
debt during the preceding three-year period.
Critical
accounting policies and significant judgments and estimates
This
management’s discussion and analysis of the Company’s financial condition and results of operations is based on the
Company’s condensed consolidated financial statements, which have been prepared in accordance with generally accepted accounting
principles in the United States, or GAAP. The preparation of these condensed consolidated financial statements requires the Company
to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent
assets and liabilities at the date of the condensed consolidated financial statements, as well as the reported expenses incurred
during the reporting periods. The Company’s estimates are based on historical experience and on various other factors that
the Company believes are reasonable under the circumstances, the results of which form the basis for making judgments about the
carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these
estimates under different assumptions or conditions. The Company believes that the accounting policies discussed below are critical
to understanding the Company’s historical and future performance, as these policies relate to the more significant areas
involving management’s judgments and estimates.
Patient
Service Revenue
Patient
service revenue is reported at the amount that reflects the consideration to which the Company expects to be entitled in exchange
for providing patient care. These amounts are due from patients and third-party payors (including health insurers and government
programs) and includes variable consideration for retroactive revenue adjustments due to settlement of audits, reviews, and investigations.
Generally, the Company bills patients and third-party payors within days after the services are performed and/or the patient is
discharged from the facility. Revenue is recognized as performance obligations are satisfied.
Performance
obligations are determined based on the nature of the services provided by the Company. Revenue for performance obligations satisfied
over time is recognized based on actual charges incurred in relation to total expected charges. The Company believes that this
method provides a faithful depiction of
the transfer of services over the term of the performance
obligation based on the inputs needed to satisfy the obligation. Revenue for performance obligations satisfied at a point in time
is recognized when goods or services are provided and the Company does not believe it is required to provide additional goods
or services to the patient.
The
Company determines the transaction price based on standard charges for goods and services provided, reduced by contractual adjustments
provided to third-party payors, discounts provided to uninsured patients in accordance with the Company’s policy, and/or
implicit price concessions provided to uninsured patients. The Company determines its estimates of contractual adjustments and
discounts based on contractual agreements, its discount policies, and historical experience. The Company determines its estimate
of implicit price concessions based on its historical collection experience with this class of patients.
Agreements
with third-party payors typically provide for payments at amounts less than established charges. A summary of the payment arrangements
with major third-party payors follows:
|
●
|
Medicare:
Certain inpatient acute care services are paid at prospectively determined rates per discharge based on clinical, diagnostic
and other factors. Certain services are paid based on cost-reimbursement methodologies subject to certain limits. Physician services
are paid based upon established fee schedules. Outpatient services are paid using prospectively determined rates.
|
|
●
|
Medicaid:
Reimbursements for Medicaid services are generally paid at prospectively determined rates per discharge, per occasion of service,
or per covered member.
|
|
●
|
Other:
Payment agreements with certain commercial insurance carriers, health maintenance organizations, and preferred provider organizations
provide for payment using prospectively determined rates per discharge, discounts from established charges, and prospectively
determined daily rates.
|
Laws
and regulations concerning government programs, including Medicare and Medicaid, are complex and subject to varying interpretation.
As a result of investigations by governmental agencies, various health care organizations have received requests for information
and notices regarding alleged noncompliance with those laws and regulations, which, in some instances, have resulted in organizations
entering into significant settlement agreements. Compliance with such laws and regulations may also be subject to future government
review and interpretation as well as significant regulatory action, including fines, penalties, and potential exclusion from the
related programs. There can be no assurance that regulatory authorities will not challenge the Company’s compliance with
these laws and regulations, and it is not possible to determine the impact, if any, such claims or penalties would have upon the
Company. In addition, the contracts the Company has with commercial payors also provide for retroactive audit and review of claims.
Settlements
with third-party payors for retroactive adjustments due to audits, reviews or investigations are considered variable consideration
and are included in the determination of the estimated transaction price for providing patient care. These settlements are estimated
based on the terms of the payment agreement with the payor, correspondence from the payor and the Company’s historical settlement
activity, including an assessment to ensure that it is probable that a significant reversal in the amount of cumulative revenue
recognized will not occur when the uncertainty associated with the retroactive adjustment is subsequently resolved. Estimated
settlements are adjusted in future periods as adjustments become known, or as years are settled or are no longer subject to such
audits, reviews, and investigations.
The
Company also provides services to uninsured patients, and offers those uninsured patients a discount, either by policy or law,
from standard charges. The Company estimates the transaction price for patients with deductibles and coinsurance and from those
who are uninsured based on historical experience and current market conditions. The initial estimate of the transaction price
is determined by reducing the standard charge by any contractual adjustments, discounts, and implicit price concessions. Subsequent
changes to the estimate of the transaction price are generally recorded as adjustments to patient service revenue in the period
of the change.
Cash
and Cash Equivalents
For
financial statement purposes, the Company considers all highly-liquid investments with original maturities of three months or
less to be cash and cash equivalents.
Accounts
Receivable
Trade
receivables are carried at their estimated collectible amounts. Trade credit is generally extended on a short-term basis; thus
trade receivables do not bear interest. Trade accounts receivable are periodically evaluated for collectability based on past
collectability of the insurance companies, government agencies, and customers’ accounts receivable during the related period
which generally approximates 45% of total billings. Trade accounts receivable are recorded at this net amount.
Capital
Leases
Costs
associated with capitalized leases are capitalized and depreciated ratably over the term of the related useful life of the asset
and/or the capital lease term.
Concentrations
of Credit Risk
The
Company’s financial instruments that are exposed to a concentration of credit risk are cash and accounts receivable. There
are no patients/customers that represent 10% or more of the Company’s revenue or accounts receivable. Generally, the Company’s
cash and cash equivalents are in checking accounts.
Property
and Equipment
Property
and equipment are stated at cost. When retired or otherwise disposed, the related carrying value and accumulated depreciation
are removed from the respective accounts and the net difference less any amount realized from disposition, is reflected in earnings.
For consolidated financial statement purposes, property and equipment are recorded at cost and depreciated using the straight-line
method over their estimated useful lives of 5 to 7 years. The cost of repairs and maintenance is expensed as incurred; major replacements
and improvements are capitalized.
The
Company examines the possibility of decreases in the value of fixed assets when events or changes in circumstances reflect the
fact that their recorded value may not be recoverable. The Company recognizes an impairment loss when the sum of expected undiscounted
future cash flows is less than the carrying amount of the asset. The amount of impairment is measured as the difference between
the asset’s estimated fair value and its book value.
Convertible
Notes
Convertible
notes are regarded as compound instruments, consisting of a liability component and an equity component. The component parts of
compound instruments are classified separately as financial liabilities and equity in accordance with the substance of the contractual
arrangement. At the date of issue, the fair value of the liability component is estimated using the prevailing market interest
rate for a similar non-convertible instrument. This amount is recorded as a liability on an amortized cost basis until extinguished
upon conversion or at the instrument’s maturity date. The equity component is determined by deducting the amount of the
liability component from the fair value of the compound instrument as a whole. This is recognized as additional paid-in capital
and included in equity, net of income tax effects, and is not subsequently remeasured. After initial measurement, they are carried
at amortized cost using the effective interest method. Convertible notes for which the maturity date has been extended and that
qualify for debt extinguishment treatment are recorded at fair value on the extinguishment date and then revalue at the end of
each reporting period, with the change recorded to the statement of operations under “Change in Fair Value of Debt.”
Derivative
Financial Instruments
The
Company reviews the terms of convertible debt, equity instruments and other financing arrangements to determine whether there
are embedded derivative instruments, including embedded conversion options that are required to be bifurcated and accounted for
separately as a derivative financial instrument. Also, in connection with the issuance of financing instruments, the Company may
issue freestanding options or warrants that may, depending on their terms, be accounted for as derivative instrument liabilities,
rather than as equity. Derivative financial instruments are initially measured at their fair value. For derivative financial instruments
that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued
at each reporting date, with changes in the fair value reported as charges or credits to income. To the extent that the initial
fair values of the freestanding and/or bifurcated derivative instrument liabilities exceed the total proceeds received, an immediate
charge to income is recognized, in order to initially record the derivative instrument liabilities at their fair value. The discount
from the face value of convertible debt instruments resulting from allocating some or all of the proceeds to the derivative instruments
is amortized over the life of the instrument through periodic charges to income.
The
classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is
reassessed at the end of each reporting period. If reclassification is required, the fair value of the derivative instrument,
as of the determination date, is reclassified. Any previous charges or credits to income for changes in the fair value of the
derivative instrument are not reversed. Derivative instrument liabilities are classified in the balance sheet as current or non-current
based on whether or not net-cash settlement of the derivative instrument could be required within twelve months of the balance
sheet date. The Company does not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks.
Fair
Value of Assets and Liabilities
Fair
value is the price that would be received from the sale of an asset or paid to transfer a liability (i.e. an exit price) in the
principal or most advantageous market in an orderly transaction between market participants. In determining fair value, the accounting
standards have established a three-level hierarchy that distinguishes between (i) market data obtained or developed from independent
sources (i.e., observable data inputs) and (ii) a reporting entity’s own data and assumptions that market participants would
use in pricing an asset or liability (i.e., unobservable data inputs). Financial assets and financial liabilities measured and
reported at fair value are classified in one of the following categories, in order of priority of observability and objectivity
of pricing inputs:
|
●
|
Level
1 –
Fair value based on quoted prices in active markets for identical assets or liabilities
|
|
●
|
Level
2
– Fair value based on significant directly observable data (other than Level 1 quoted prices) or significant
indirectly observable data through corroboration with observable market data. Inputs would normally be (i) quoted prices in active
markets for similar assets or liabilities, (ii) quoted prices in inactive markets for identical or similar assets or liabilities
or (iii) information derived from or corroborated by observable market data.
|
|
●
|
Level
3
– Fair value based on prices or valuation techniques that require significant unobservable data inputs. Inputs
would normally be a reporting entity’s own data and judgments about assumptions that market participants would use in pricing
the asset or liability
|
The
fair value measurement level for an asset or liability is based on the lowest level of any input that is significant to the fair
value measurement. Valuation techniques should maximize the use of observable inputs and minimize the use of unobservable inputs.
Stock-Based
Compensation
The
Company accounts for our stock based compensation under ASC 718 “Compensation – Stock Compensation” using the
fair value based method. Under this method, compensation cost is measured at the grant date based on the value of the award and
is recognized over the service period, which is usually the vesting period. This guidance establishes standards for the accounting
for transactions in which an entity exchanges it equity instruments for goods or services. It also addresses transactions in which
an entity incurs liabilities in exchange for goods or services that are based on the fair value of the entity’s equity instruments
or that may be settled by the issuance of those equity instruments.
The
Company uses the fair value method for equity instruments granted to non-employees and use the Black-Scholes model for measuring
the fair value of options. The stock based fair value compensation is determined as of the date of the grant or the date at which
the performance of the services is completed (measurement date) and is recognized over the vesting periods.
Income
Taxes
The
Company follows Accounting Standards Codification subtopic 740-10, Income Taxes (“ASC 740-10”) for recording the provision
for income taxes. Deferred tax assets and liabilities are computed based upon the difference between the financial statement and
income tax basis of assets and liabilities using the enacted marginal tax rate applicable when the related asset or liability
is expected to be realized or settled. Deferred income tax expenses or benefits are based on the changes in the asset or liability
during each period. If available evidence suggests that it is more likely than not that some portion or all of the deferred tax
assets will not be realized, a valuation allowance is required to reduce the deferred tax assets to the amount that is more likely
than not to be realized. Future changes in such valuation allowance are included in the provision for deferred income taxes in
the period of change. Deferred income taxes may arise from temporary differences resulting from income and expense items reported
for financial accounting and tax purposes in different periods. Deferred taxes are classified as current or non-current, depending
on the classification of assets and liabilities to which they relate. Deferred taxes arising from temporary differences that are
not related to an asset or liability are classified as current or non-current depending on the periods in which the temporary
differences are expected to reverse and are considered immaterial.
Recurring
Fair Value Measurements
The
carrying value of the Company’s financial assets and financial liabilities is their cost, which may differ from fair value.
The carrying value of cash held as demand deposits, money market and certificates of deposit, marketable investments, accounts
receivable, short-term borrowings, accounts payable and accrued liabilities approximated their fair value.
Net
Income (Loss) per Share
Basic
net income (loss) per common share is computed by dividing net income (loss) by the weighted average number of shares of common
stock outstanding during the period. Outstanding stock options, warrants and other dilutive securities are excluded from the calculation
of diluted net loss per common share if inclusion of these securities would be anti-dilutive.
Common
stock awards
The
Company grants common stock awards to non-employees in exchange for services provided. The Company measures the fair value of
these awards using the fair value of the services provided or the fair value of the awards granted, whichever is more reliably
measurable. The fair value measurement date of these awards is generally the date the performance of services is complete. The
fair value of the awards is recognized on a straight-line basis as services are rendered. The share-based payments related to
common stock awards for the settlement of services provided by non-employees is recorded on the consolidated statement of comprehensive
loss in the same manner and charged to the same account as if such settlements had been made in cash.
Warrants
In
connection with certain financing, consulting and collaboration arrangements, the Company has issued warrants to purchase shares
of its common stock. The outstanding warrants are standalone instruments that are not puttable or mandatorily redeemable by the
holder and are classified as equity awards. The Company measures the fair value of the awards using the Black-Scholes option pricing
model as of the measurement date. Warrants issued in conjunction with the issuance of common stock are initially recorded at fair
value as a reduction in additional paid-in capital of the common stock issued. All other warrants are recorded at fair value as
expense over the requisite service period or at the date of issuance, if there is not a service period. Warrants granted in connection
with ongoing arrangements are more fully described in Note 11,
Shareholders’ Deficit
.
Business
Segments
The
Company uses the "management approach" to identify its reportable segments. The management approach designates the internal
organization used by management for making operating decisions and assessing performance as the basis for identifying the Company's
reportable segments. Using the management approach, the Company determined that it has one operating segment due to business similarities
and similar economic characteristics.
Recent
Accounting Pronouncements
In
May 2014, the FASB issued ASU 2014-09,
Revenue from Contracts with Customers — Topic 606
, which supersedes the
revenue recognition requirements in FASB ASC 605. The new guidance primarily states that an entity should recognize revenue to
depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity
expects to be entitled in exchange for those goods and services. In January 2017 and September 2017, the FASB issued several amendments
to ASU 2014-09, including updates stemming from SEC Accounting Staff Announcement in July 2017. The amendments and updates included
clarification on accounting for principal versus agent considerations (i.e., reporting gross versus net), licenses of intellectual
property and identification of performance obligations. These amendments and updates do not change the core principle of the standard,
but provide clarity and implementation guidance. The Company adopted this standard on January 1, 2018 and selected the modified
retrospective transition method. The Company has modified its accounting policies to reflect the requirements of this standard,
however, the planned adoption did not materially impact the Company’s financial statements and related disclosures.
In
January 2016, the FASB issued ASU No. 2016-01,
Financial Instruments — Overall: Recognition and Measurement
of Financial Assets and Financial Liabilities.
The guidance affects the accounting for equity investments, financial
liabilities under the fair value option and the presentation and disclosure requirements of financial instruments. The guidance
is effective in the first quarter of fiscal 2019. Early adoption is permitted for the accounting guidance on financial liabilities
under the fair value option. The Company is currently evaluating the impact of the new guidance on its financial statements.
In
February 2016, the FASB issued ASU 2016-02,
Leases (Topic 842)
and subsequently amended the guidance relating
largely to transition considerations under the standard in January 2017. The objective of this update is to increase transparency
and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key
information about leasing arrangements. This ASU is effective for fiscal years beginning after December 15, 2018, including interim
periods within those annual periods and is to be applied utilizing a modified retrospective approach. The Company is currently
evaluating the new guidance to determine the impact it may have on its financial statements.
In
August 2016, the FASB issued ASC Update No. 2016-15, (Topic 230) Classification of Certain Cash Receipts and Cash Payments. This
ASC update provides specific guidance on the presentation of certain cash flow items where there is currently diversity in practice,
including, but not limited to, debt prepayment or debt extinguishment costs, contingent consideration payments made after a business
combination, proceeds from the settlement of insurance claims, and distributions received from equity method investees. The updated
guidance is effective for interim and annual periods beginning after December 15, 2017, and should be applied retrospectively
unless impracticable. The Company implemented this guidance effective January 1, 2018. The adoption of ASC Update No. 2016-15
did not have a significant impact on the Company’s statement of cash flows.
In
November 2016, the FASB issued ASU No. 2016-18,
Statement of Cash Flows (Topic 230): Restricted Cash
. The objective
of this ASU is to eliminate the diversity in practice related to the classification of
restricted
cash or restricted cash equivalents in the statement of cash flows.
For public business
entities, this ASU is effective for annual and interim reporting periods beginning after December 15, 2017, with early adoption
permitted. The amendments in this update should be applied retrospectively to all periods presented. The Company will adopt this
standard on January 1, 2018 and will not have a material impact on the Company’s financial statements.
In
January 2017, the FASB issued ASC Update No. 2017-01, (Topic 805) Business Combinations – Clarifying the Definition of a
Business. The amendments in this update provide a more robust framework to use in determining when a set of assets and activities
constitute a business. This guidance narrows the definition of a business by providing specific requirements that contribute to
the creation of outputs that must be present to be considered a business. The guidance further clarifies the appropriate accounting
when substantially all of the fair value of the gross assets acquired (or disposed of) is concentrated in a single identifiable
asset or a group of similar identifiable assets is that of an acquisition (disposition) of assets, not a business. This framework
will reduce the number of transactions that an entity must further evaluate to determine whether transactions are business combinations
or asset acquisitions. The updated guidance is effective for interim and annual periods beginning after December 15, 2017, and
should be applied on a prospective basis. Early adoption is permitted only for transactions that have not been reported in financial
statements that have been issued. The Company implemented this guidance effective January 1, 2018. The implementation of this
guidance did not have an effect on the Company’s financial position or results of operations.
In
July 2017, the FASB issued ASU No. 2017-11,
Earnings Per Share, Distinguishing Liabilities from Equity and Derivatives
and Hedging
, which changes the accounting and earnings per share for certain instruments with down round features. The amendments
in this ASU should be applied using a cumulative-effect adjustment as of the beginning of the fiscal year or retrospective adjustment
to each period presented and is effective for annual periods beginning after December 15, 2018, and interim periods within
those periods.
The Company is currently evaluating the requirements of this new guidance
and has not yet determined its impact on the Company’s financial statements.
On
December 22, 2017 the SEC staff issued Staff Accounting Bulletin 118 (SAB 118), which provides guidance on accounting
for the tax effects of the Tax Cuts and Jobs Act (the TCJA). SAB 118 provides a measurement period that should not
extend beyond one year from the enactment date for companies to complete the accounting under ASC 740. In accordance with
SAB 118, a company must reflect the income tax effects of those aspects of the TCJA for which the accounting under ASC 740
is complete. To the extent that a company’s accounting for certain income tax effects of the TCJA is incomplete but
for which they are able to determine a reasonable estimate, it must record a provisional amount in the financial statements. Provisional
treatment is proper in light of anticipated additional guidance from various taxing authorities, the SEC, the FASB, and even the
Joint Committee on Taxation. If a company cannot determine a provisional amount to be included in the financial statements,
it should continue to apply ASC 740 on the basis of the provisions of the tax laws that were in effect immediately before the
enactment of the TCJA. The Company has applied this guidance to its financial statements.
In
February 2018, the Financial Accounting Standards Board (“FASB”) issued ASC Update No 2018-02 (Topic 220) Income Statement
– Reporting Comprehensive Income: Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income.
This ASC update allows for a reclassification into retained earnings of the stranded tax effects in accumulated other comprehensive
income (“AOCI”) resulting from the enactment of the Tax Cuts and Jobs Act (“TCJA”). The updated guidance
is effective for interim and annual periods beginning after December 15, 2018. The Company is evaluating the impact ASU
2018-09 may have on its condensed consolidated financial statements.
In
March 2018, the FASB issued ASU 2018-05, Income Taxes (Topic 740) - Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting
Bulletin No. 118. This standard amends Accounting Standards Codification 740, Income Taxes (ASC 740) to provide
guidance on accounting for the tax effects of the Tax Cuts and Jobs Act (the Tax Reform Act) pursuant to Staff Accounting Bulletin
No. 118, which allows companies to complete the accounting under ASC 740 within a one-year measurement period from the Tax Act
enactment date. This standard did not materially impact the Company’s financial statements and related disclosures.
In
June 2018, the FASB issued ASU 2018-07, Compensation - Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based
Payment Accounting, to expand the scope of Topic 718 to include share-based payment transactions for acquiring goods and services
from nonemployees and supersedes the guidance in Subtopic 505-50, Equity - Equity-Based Payments to Non-Employees. Under ASU 2018-07,
equity-classified nonemployee share-based payment awards are measured at the grant date fair value on the grant date The probability
of satisfying performance conditions must be considered for equity-classified nonemployee share-based payment awards with such
conditions. ASU 2018-07 is effective for fiscal years beginning after December 15, 2018, with early adoption permitted. The Company
is currently evaluating the impact of the new standard on the Company's Condensed Consolidated Financial Statements.
In
July 2018, the FASB issued ASU 2018-09 to provide clarification and correction of errors to the Codification. The amendments in
this update cover multiple Accounting Standards Updates. Some topics in the update may require transition guidance with effective
dates for annual periods beginning after December 15, 2018. The Company is evaluating the impact ASU 2018-09 may have on its condensed
consolidated financial statements.
RESULTS
OF OPERATIONS: YEARS ENDED DECEMBER 31, 2017 AND 2016
The
following table summarizes the changes in our results of operations for the year ended December 31, 2017 compared with the year
ended December 31, 2016:
|
|
Year Ended December 31,
|
|
|
Change
|
|
|
|
2017
|
|
|
2016
|
|
|
Increase
(Decrease)
in $
|
|
|
Increase
(Decrease)
in %
|
|
Patient service revenue, net
|
|
$
|
2,103,579
|
|
|
$
|
1,945,664
|
|
|
$
|
157,915
|
|
|
|
8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and benefits
|
|
|
2,022,445
|
|
|
|
1,559,725
|
|
|
|
462,720
|
|
|
|
30
|
%
|
General and administrative
|
|
|
1,848,866
|
|
|
|
1,543,866
|
|
|
|
305,000
|
|
|
|
20
|
%
|
Depreciation and amortization
|
|
|
23,606
|
|
|
|
16,461
|
|
|
|
7,145
|
|
|
|
43
|
%
|
(Loss) income from operations
|
|
|
(1,791,338
|
)
|
|
|
(1,174,388
|
)
|
|
|
616,950
|
|
|
|
53
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss on extinguishment of debt
|
|
|
(290,581
|
)
|
|
|
---
|
|
|
|
290,581
|
|
|
|
100
|
%
|
Financing cost
|
|
|
(72,956
|
)
|
|
|
---
|
|
|
|
72,956
|
|
|
|
100
|
%
|
Amortization of original issue and debt discounts on notes payable and convertible notes
|
|
|
(330,435
|
)
|
|
|
(208,626
|
)
|
|
|
121,809
|
|
|
|
58
|
%
|
Proceeds from settlement of lawsuit
|
|
|
---
|
|
|
|
43,236
|
|
|
|
(43,236
|
)
|
|
|
-100
|
%
|
Change in fair value of derivative financial instruments
|
|
|
3,967
|
|
|
|
---
|
|
|
|
3,967
|
|
|
|
100
|
%
|
Interest expense
|
|
|
(99,668
|
)
|
|
|
(36,628
|
)
|
|
|
63,040
|
|
|
|
172
|
%
|
Total other expenses
|
|
|
(789,673
|
)
|
|
|
(202,018
|
)
|
|
|
587,655
|
|
|
|
291
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(2,581,011
|
)
|
|
$
|
(1,376,406
|
)
|
|
$
|
1,204,605
|
|
|
|
88
|
%
|
Patient
service revenue increased by $157,915, or 8%, from 2016 to 2017, primarily as a result of increased collections on similar gross
billing and improved pay or mix, offset by the impact from office closure during Hurricane Irma in September 2017.
Salaries
and benefits increased by $462,720, or 30%, in 2017 primarily as a result of increased salary expense associated with HLYK’s
overhead and formation of the HLYK sales team.
General
and administrative costs increased by $305,000, or 20%, in 2017 primarily due to higher legal and professional costs in 2017 associated
with the Company’s public listing, higher costs associated with the rollout of the HealthLynked Network, and increased costs
associated with office space and overhead for HLYK employees.
Depreciation
and amortization increased by $7,145, or 43%, in 2017 primarily as a result of new property and equipment acquisitions in the
2017.
Loss
from operations increased by $616,950, or 53%, in 2017 primarily as a result of increased salaries, benefits and overhead costs
associated with preparing for product launch and initial public listing, as well as higher legal and professional fees associated
with the Company’s public listing and the rollout of the HealthLynked Network.
Loss on extinguishment
of debt in 2017 arose from the issuance of a warrant to purchase 1,000,000 shares of our common stock at an exercise price of $0.30
per share issued to the holder of the 6% fixed convertible secured promissory note with a face value of $550,000 issued on July
7, 2016 (the “550k Note”) in exchange for the extension of the maturity date of the note. Because the fair value of
the warrants was greater than 10% of the present value of the remaining cash flows under the $550k Note and the 10% fixed convertible
commitment fee promissory note with an investor with a face value of $50,000 maturing on July 11, 2017, the transaction was treated
as a debt extinguishment and reissuance of a new debt instrument, with the fair value of the warrants of $290,581 recorded as a
loss on debt
Financing
cost arose from the issuance of five convertible promissory notes in the third quarter of 2017 that reflected a floating conversion
rate that gave rise to an ECF derivative instrument with a fair value greater than the face value of the notes. As a result, the
excess of the fair value of the ECF derivative instrument over the face value of the notes totaling $72,956 was recognized as
a financing cost at the time of inception of the respective notes.
Amortization
of original issue and debt discounts increased by $121,809, or 58%, in 2017 as a result of the amortization of eight convertible
notes payable in 2017 compared with only two in 2016.
Proceeds
from settlement of lawsuit were $43,236 in 2016, resulting from a one-time settlement of an employment dispute.
Change
in fair value of derivative financial instruments was $3,967 in 2017 resulting from the change in fair value of derivative financial
instruments embedded in convertible promissory notes between inception of such derivative instruments and the end of the period.
Interest
expense increased by $63,040, or 172%, in 2017 as a result of increased interest on new convertible notes issued in 2017, as well
as on notes issued to Dr. Dent.
Total
other expenses increased by $587,655, or 291%, in 2017 primarily as a result of a loss on extinguishment of debt in 2017 in the
amount of $290,581 in 2017 stemming from warrants issued to extend the maturity debt on outstanding convertible promissory notes,
higher amortization of discounts on outstanding convertible promissory notes of $121,809, financing cost related to convertible
notes issued in 2017 in the amount of $72,956, higher interest expense of $63,040 due to higher balances on convertible notes
payable, as well as income of $43,236 from the settlement of a lawsuit in 2016.
Net
loss increased by $1,204,605, or 88%, in 2017 primarily as a result of increased salaries, benefits and overhead costs associated
with preparing for product launch and public listing in 2017, loss on extinguishment of debt in 2017, financing costs related
to convertible notes payable, as well as higher amortization of debt discounts and interest expense on higher convertible notes
payable balances in 2017.
Historical
Cash Flows
|
|
Year Ended December 31,
|
|
|
|
2017
|
|
|
2016
|
|
Net cash (used in) provided by:
|
|
|
|
|
|
|
Operating activities
|
|
$
|
(1,619,269
|
)
|
|
$
|
(756,339
|
)
|
Investing Activities
|
|
|
(16,147
|
)
|
|
|
(12,611
|
)
|
Financing activities
|
|
|
1,626,706
|
|
|
|
797,887
|
|
Net increase (decrease) in cash
|
|
$
|
(8,710
|
)
|
|
$
|
28,937
|
|
Operating
Activities
– During the year ended December 31, 2017, we used cash from operating activities of $1,619,269, as
compared with $756,339 in the same period of 2016. The increased cash usage results from higher losses resulting primarily from
increased salaries and benefits, as well an increase in sales, legal, accounting and other overhead costs associated with preparing
for product launch and public listing in 2017.
Investing
Activities
– Our business is not capital intensive, and as such cash flows from investing activities are minimal
in each period. Capital expenditures of $16,147 in the year ended December 31, 2017 and $12,611 in the year ended December 31,
2016 are comprised solely of computer equipment and furniture.
Financing
Activities
– During the year ended December 31, 2017, we realized $848,639 proceeds from sales of our common stock,
$429,500 from the issuance of convertible notes payable, $338,470 from related party loans, and $148,510 from the issuance of
notes payable. We also made repayments on loans from related party loans in the amount of $11,192, paid capital lease obligations
of $18,348, and repaid notes payable in the amount of $108,873. During the year ended December 31, 2016, we received proceeds
of $475,000 from issuance of convertible promissory notes, $374,000 from the sale of common stock and $201,500 from related party
loans. We also made repayments of $149,285 against related party loans, $84,980 against bank loans payable, and $18,348 against
capital lease obligations.
Exercise
of Warrants and Options
There
were no proceeds generated from the exercise of warrants or options during the year ended December 31, 2017.
Other
Outstanding Obligations at December 31, 2017
Warrants
As
of December 31, 2017, 20,526,389 shares of our Common Stock are issuable pursuant to the exercise of warrants with exercise prices
ranging from $0.05 to $1.00.
Options
As
of December 31, 2017, 2,349,996 shares of our Common Stock are issuable pursuant to the exercise of options with exercise prices
ranging from $0.08 to $0.20.
Off
Balance Sheet Arrangements
We
did not have, during the periods presented, and we do not currently have, any off-balance sheet arrangements, as defined under
applicable Securities and Exchange Commission rules.
Contractual
Obligations
Our
contractual obligations as of December 31, 2017 were as follows:
|
|
Operating
|
|
|
Capital
|
|
|
Total
|
|
|
|
Leases
|
|
|
Leases
|
|
|
Commitments
|
|
2018
|
|
$
|
281,460
|
|
|
$
|
18,348
|
|
|
$
|
299,808
|
|
2019
|
|
|
273,856
|
|
|
|
18,348
|
|
|
|
292,204
|
|
2020
|
|
|
162,055
|
|
|
|
3,058
|
|
|
|
165,113
|
|
2021
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
2022
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
717,371
|
|
|
$
|
39,754
|
|
|
$
|
757,125
|
|
Operating
lease commitments relate to three leases in Naples, Florida. First, the Company entered into an operating lease for its main office
in Naples, Florida. The lease commenced on August 1, 2013 and expires July 31, 2020. The lease is for a 6901 square-foot space.
The base rent for the first full year of the lease term is $251,287 per annum with increases during the period. Second, the Company
entered into another operating lease in the same building for an additional 361 square feet space for use of the medical equipment
for the same period. The base rent for the first full year of the lease term is $13,140 per annum. Third, the Company entered
into an agreement with MOD pursuant to which the Company will pay rent to MOD in the amount of $2,040 per month for office space
in MOD’s facility used by the Company and its employees. The agreement is effective from January 1, 2017 through July 31,
2018.
Capital
lease commitments are comprised of a capital equipment finance lease for Ultra Sound equipment with Everbank. There was no interest
on this lease. The monthly payment is $1,529 for 60 months ending in March 2020.
RESULTS
OF OPERATIONS: SIXTH MONTHS ENDED JUNE 30, 2018 AND 2017
Comparison
of Three Months Ended June 30, 2018 and 2017
The
following table summarizes the changes in our results of operations for the three months ended June 30, 2018 compared with the
three months ended June 30, 2017:
|
|
Three Months Ended
June 30,
|
|
|
Change
|
|
|
|
2018
|
|
|
2017
|
|
|
Increase (Decrease) in
$
|
|
|
Increase (Decrease) in
%
|
|
Patient service revenue, net
|
|
$
|
566,320
|
|
|
$
|
516,798
|
|
|
$
|
49,522
|
|
|
|
10
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and benefits
|
|
|
618,143
|
|
|
|
495,131
|
|
|
|
123,012
|
|
|
|
25
|
%
|
General and administrative
|
|
|
552,583
|
|
|
|
498,378
|
|
|
|
54,205
|
|
|
|
11
|
%
|
Depreciation and amortization
|
|
|
6,029
|
|
|
|
5,859
|
|
|
|
170
|
|
|
|
3
|
%
|
(Loss) income from operations
|
|
|
(610,435
|
)
|
|
|
(482,570
|
)
|
|
|
127,865
|
|
|
|
-26
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain on extinguishment of debt
|
|
|
16,864
|
|
|
|
---
|
|
|
|
(16,864
|
)
|
|
|
100
|
%
|
Change in fair value of debt
|
|
|
(25,452
|
)
|
|
|
---
|
|
|
|
25,452
|
|
|
|
100
|
%
|
Financing cost
|
|
|
(248,443
|
)
|
|
|
---
|
|
|
|
248,443
|
|
|
|
100
|
%
|
Amortization of original issue and debt discounts on notes payable and convertible notes
|
|
|
(244,563
|
)
|
|
|
(58,524
|
)
|
|
|
186,039
|
|
|
|
-318
|
%
|
Change in fair value of derivative financial instruments
|
|
|
52,786
|
|
|
|
---
|
|
|
|
(52,786
|
)
|
|
|
100
|
%
|
Interest expense
|
|
|
(51,006
|
)
|
|
|
(20,210
|
)
|
|
|
30,796
|
|
|
|
-152
|
%
|
Total other expenses
|
|
|
(499,814
|
)
|
|
|
(78,734
|
)
|
|
|
421,080
|
|
|
|
-535
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(1,110,249
|
)
|
|
$
|
(561,304
|
)
|
|
$
|
548,945
|
|
|
|
-98
|
%
|
Patient
service revenue increased by $49,522, or 10%, from three months ended June 30, 2017 to 2018, primarily as a result of an 8% increase
in gross billing from existing physicians.
Salaries
and benefits increased by $123,012, or 25%, in 2018 primarily as a result of increased salary expense associated with NWC production
pay, HLYK’s overhead and formation of the HLYK sales team.
General
and administrative costs increased by $54,205, or 11%, in 2018 primarily due to higher professional costs in 2018, as well as
higher information technology, sales and promotional costs associated with the rollout of the HealthLynked Network.
Depreciation
and amortization increased by $170, or 3%, in 2018 primarily as a result of new property and equipment acquisitions in 2017.
Loss
from operations increased by $127,865, or 26%, in 2018 primarily as a result of increased HLYK headcount, professional fees and
costs associated with the rollout of the HealthLynked Network, offset by higher revenue from the NWC practice.
Gain
on extinguishment of debt in the three months ended June 30, 2018 arose from the repayment of the $53k Note II in April 2018,
which gave rise to a gain primarily as a result of derivative liabilities associated with this note that were written off in connection
with the repayment.
Change
in fair value of debt of $24,452 in 2018 arose from the treatment of the extensions of the $550k Note, the $50k Note, the $111k
Note and certain notes issued to Dr. Michael Dent as extinguishment and reissuance transactions, resulting these notes being carried
at fair value. The change in fair value at the end of each reporting period is recorded as “Change in fair value of debt.”
Financing
cost arose from the issuance of eight new convertible promissory notes in the three months ended June 30, 2018, each of which
reflected a floating conversion rate that gave rise to an ECF derivative instrument with a fair value greater than the face value
of the notes. As a result, the excess of the fair value of the ECF derivative instrument over the face value of the notes totaling
$248,443 was recognized as a financing cost at the time of inception of the respective notes.
Amortization
of original issue and debt discounts increased by $186,039, or 318%, in 2018 as a result of the amortization of more convertible
notes with larger discounts being amortized in 2018.
Change
in fair value of derivative financial instruments was $52,786 in 2018 resulting from the change in fair value of derivative financial
instruments embedded in convertible promissory notes.
Interest
expense increased by $30,796, or 152%, in 2018 as a result of increased interest on new convertible notes issued in 2018, as well
as on new notes issued to Dr. Dent during the second half of 2017 and the first quarter of 2018.
Total
other expenses increased by $421,080, or 535%, in 2018 primarily as a result of financing cost related to convertible notes issued
in 2018 in the amount of $248,443, higher amortization of discounts on outstanding convertible promissory notes of $244,563, and
higher interest expense of $22,760 due to higher balances on convertible notes payable.
Net
loss increased by $549,945, or 98%, in 2018 primarily as a result of financing costs and higher amortization of debt discounts,
as well as increased salaries, benefits and overhead costs associated with preparing for the HealthLynked Network product launch
and public company costs. These increases were offset by an increase in revenue of $49,522, or 10%.
Comparison
of Six Months Ended June 30, 2018 and 2017
The
following table summarizes the changes in our results of operations for the six months ended June 30, 2018 compared with the three
months ended June 30, 2017:
|
|
Six Months Ended
June 30,
|
|
|
Change
|
|
|
|
2018
|
|
|
2017
|
|
|
Increase (Decrease) in
$
|
|
|
Increase (Decrease) in
%
|
|
Patient service revenue, net
|
|
$
|
1,211,959
|
|
|
$
|
992,916
|
|
|
$
|
219,043
|
|
|
|
22
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and benefits
|
|
|
1,178,999
|
|
|
|
963,005
|
|
|
|
215,994
|
|
|
|
22
|
%
|
General and administrative
|
|
|
1,127,411
|
|
|
|
888,404
|
|
|
|
239,007
|
|
|
|
27
|
%
|
Depreciation and amortization
|
|
|
12,058
|
|
|
|
11,567
|
|
|
|
491
|
|
|
|
4
|
%
|
(Loss) income from operations
|
|
|
(1,106,509
|
)
|
|
|
(870,060
|
)
|
|
|
236,449
|
|
|
|
-27
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss on extinguishment of debt
|
|
|
(308,359
|
)
|
|
|
---
|
|
|
|
308,359
|
|
|
|
100
|
%
|
Change in fair value of debt
|
|
|
(83,398
|
)
|
|
|
---
|
|
|
|
83,398
|
|
|
|
100
|
%
|
Financing cost
|
|
|
(440,505
|
)
|
|
|
---
|
|
|
|
440,505
|
|
|
|
100
|
%
|
Amortization of original issue and debt discounts on notes payable and convertible notes
|
|
|
(399,398
|
)
|
|
|
(130,568
|
)
|
|
|
268,830
|
|
|
|
-206
|
%
|
Change in fair value of derivative financial instruments
|
|
|
38,165
|
|
|
|
---
|
|
|
|
(38,165
|
)
|
|
|
100
|
%
|
Interest expense
|
|
|
(91,353
|
)
|
|
|
(37,797
|
)
|
|
|
53,556
|
|
|
|
-142
|
%
|
Total other expenses
|
|
|
(1,284,848
|
)
|
|
|
(168,365
|
)
|
|
|
1,116,483
|
|
|
|
-663
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(2,391,357
|
)
|
|
$
|
(1,038,425
|
)
|
|
$
|
1,352,932
|
|
|
|
-130
|
%
|
Patient
service revenue increased by $219,043, or 22%, from six months ended June 30, 2017 to 2018, primarily as a result of a 18% increase
in gross billing from existing physicians.
Salaries
and benefits increased by $215,994, or 22%, in 2018 primarily as a result of increased salary expense associated with NWC production
pay, HLYK’s overhead and formation of the HLYK sales team.
General
and administrative costs increased by $239,007, or 27%, in 2018 primarily due to higher professional costs in 2018, as well as
higher information technology, sales and promotional costs associated with the rollout of the HealthLynked Network.
Depreciation
and amortization increased by $491, or 4%, in 2018 primarily as a result of new property and equipment acquisitions in 2017.
Loss
from operations increased by $236,449, or 27%, in 2018 primarily as a result of increased HLYK headcount, professional fees and
costs associated with the rollout of the HealthLynked Network, offset by higher revenue from the NWC practice.
Loss
on extinguishment of debt in the six months ended June 30, 2018 arose from an extinguishment loss in the amount of $348,938 related
to the extension of debt issued to Dr. Michael Dent, an extinguishment loss in the amount of $19,014 related to the extension
of the $111k Note, and gains of $59,593 related to the write-off of derivative liabilities associated with convertible notes repaid
during the period.
Change
in fair value of debt of $83,398 in 2018 arose from the treatment of the extensions of the $550k Note, the $50k Note, the $111k
Note and certain notes issued to Dr. Michael Dent as extinguishment and reissuance transactions, resulting these notes being carried
at fair value. The change in fair value at the end of each reporting period is recorded as “Change in fair value of debt.”
Financing
cost arose from the issuance of 12 new convertible promissory notes in the six months ended June 30, 2018, each of which reflected
a floating conversion rate that gave rise to an ECF derivative instrument with a fair value greater than the face value of the
notes. As a result, the excess of the fair value of the ECF derivative instrument over the face value of the notes totaling $440,505
was recognized as a financing cost at the time of inception of the respective notes.
Amortization
of original issue and debt discounts increased by $268,830, or 206%, in 2018 as a result of the amortization of more convertible
notes with larger discounts being amortized in 2018.
Change
in fair value of derivative financial instruments was $38,165 in 2018 resulting from the change in fair value of derivative financial
instruments embedded in convertible promissory notes.
Interest
expense increased by $53,556, or 142%, in 2018 as a result of increased interest on new convertible notes issued in 2018, as well
as on new notes issued to Dr. Dent during the second half of 2017 and the first quarter of 2018.
Total
other expenses increased by $1,116,483, or 663%, in 2018 primarily as a result of financing cost related to convertible notes
issued in 2018 in the amount of $440,505, higher amortization of discounts on outstanding convertible promissory notes of $399,398,
higher loss on extinguishment of debt by $268,830 in 2018, and higher interest expense of $91,355 due to higher balances on convertible
notes payable.
Net
loss increased by $1,352,932, or 130%, in 2018 primarily as a result of financing costs, higher amortization of debt discounts,
and losses on extinguishment of debt, as well as increased salaries, benefits and overhead costs associated with preparing for
the HealthLynked Network product launch and public company costs. These increases were offset by an increase in revenue of $219,043,
or 22%.
Liquidity
and Capital Resources
Going
Concern
As of December 31,
2017, we had a working capital deficit of $2,102,923 and accumulated deficit $4,705,230. For the year ended December 31, 2017,
we had a net loss of $2,581,011 and net cash used by operating activities of $1,619,269. Net cash used in investing activities
was $16,147. Net cash provided by financing activities was $1,626,706, resulting principally from $848,639 from the proceeds of
the sale of common stock, $429,500 net proceeds from the issuance of convertible notes, $338,470 proceeds from related party loans,
and $148,510 proceeds from issuance of notes payable.
As of June 30, 2018,
we had a working capital deficit of $1,883,656 and accumulated deficit $7,096,587. For the six months ended June 30, 2018, we had
a net loss of $2,391,357 and net cash used by operating activities of $1,222,947. Net cash used in investing activities was $201.
Net cash provided by financing activities was $1,211,369, resulting principally from $805,500 net proceeds from the issuance of
convertible notes, $645,503 from the proceeds of the sale of 631,204 shares of common stock and $101,450 proceeds from related
party loans. Subsequent to June 30, 2018, the Company completed a $2,000,000 private placement of common stock and warrants with
certain institutional investors on July 18, 2018. 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.
Our
cash balance and revenues generated are not currently sufficient and cannot be projected to cover our operating expenses for the
next twelve months from the date of this report. These matters raise substantial doubt about our ability to continue as a going
concern. Management’s plans include attempting to improve its business profitability and its ability to generate sufficient
cash flow from its operations to meet its needs on a timely basis, obtaining additional working capital funds through equity and
debt financing arrangements, and restructuring on-going operations to eliminate inefficiencies to raise cash balance in order
to meet our anticipated cash requirements for the next twelve months from the date of this report. However, there can be no assurance
that these plans and arrangements will be sufficient to fund our ongoing capital expenditures, working capital, and other requirements.
Management intends to make every effort to identify and develop sources of funds. The outcome of these matters cannot be predicted
at this time. There can be no assurance that any additional financings will be available to us on satisfactory terms and conditions,
if at all.
Our
ability to continue as a going concern is dependent upon our ability to raise additional capital and achieve profitable operations.
The accompanying consolidated financial statements do not include any adjustments related to the recoverability or classification
of asset-carrying amounts or the amounts and classification of liabilities that may result should we be unable to continue as
a going concern.
As
further discussed below in “Significant Liquidity Events,” in July 2016, we entered into an Investment Agreement (the
“Investment Agreement”) pursuant to which the investor has agreed to purchase up to $3,000,000 of our common stock
over a three-year period starting upon registration of the underlying shares, with such shares put to the investor by us pursuant
to a specified formula that limits the number of shares able to be put to the investor to the number equal to the average trading
volume of our common shares for the ten consecutive trading days prior to the put notice being issued. During the six months ended
June 30, 2018, we received $327,818 from the proceeds of the sale of 1,856,480 shares pursuant to the Investment Agreement.
We
intend that the cost of implementing our development and sales efforts related to the HealthLynked Network, as well as maintaining
our existing and expanding overhead and administrative costs, will be funded principally by cash received from the put rights
associated with the Investment Agreement and supplemented by other funding mechanisms, including sales of our common stock, loans
from related parties and convertible notes. We expect to repay our outstanding convertible notes, which have an aggregate face
value of $1,751,750 as of June 30, 2018, from outside funding sources, including but not limited to new convertible notes payable,
amounts available upon the exercise of the put rights granted to us under the Investment Agreement, sales of equity, loans from
related parties and others or through the conversion of the convertible notes into equity. No assurances can be given that we
will be able to access sufficient outside capital in a timely fashion in order to repay the convertible notes before they mature.
If necessary funds are not available, our business and operations would be materially adversely affected and in such event, we
would attempt to reduce costs and adjust its business plan.
Significant
Liquidity Events
Through
June 30, 2018, we have funded our operations principally through a combination of convertible promissory notes, promissory notes,
related party debt and private placements of our common stock, as described below.
Investment
Agreement
On
July 7, 2016, we entered into the Investment Agreement with an accredited investor pursuant to which an accredited investor agreed
to invest up to $3,000,000 to purchase the Company’s common stock, par value of $.0001 per share. The purchase price for
such shares shall be 80% of the lowest volume weighted average price of our common stock during the five consecutive trading days
prior to the date on which written notice is sent by us to the investor stating the number of shares that the Company is selling
to the investor, subject to certain discounts and adjustments. Further, pursuant to an Amended Investment Agreement dated March
22, 2017, we granted to the investor warrants to purchase an aggregate of seven (7) million shares of common stock with the following
fixed exercise prices: (i) four million shares at $0.25 per share; (ii) two million shares at $0.50 per share; and (iii) one million
shares at $1.00 per share. The warrants also contain a “cashless exercise” provision and the shares underlying the
warrants will not be registered. During the six months ended June 30, 2018, we received $327,818 from the proceeds of the sale
of 1,856,480 shares pursuant to the Investment Agreement.
Sales
of Common Stock
During
2017, we sold 5,873,609 shares of common stock in private placement transactions to 18 investors and received $821,000 in proceeds
from the sales. The shares were issued at a share price between $0.10 and $0.30 per share.
During
the six months ended June 30, 2018, we sold 3,249,177 shares of common stock in private placement transactions and received $317,175
in proceeds. The shares were issued at a share price between $0.085 and $0.25 per share.
On
July 18, 2018, we completed a $2,000,000 private placement of common stock and warrants with an institutional investor. We 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.
Convertible
Notes Payable
As
of June 30, 2018, we had outstanding convertible notes payable with aggregate face value of $1,751,750 maturing between July and
October 2018:
|
|
|
|
|
|
|
|
Conversion
|
|
|
|
|
|
|
Face Value
|
|
|
Interest
Rate
|
|
|
Price/
Discount*
|
|
|
Term
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$550k Note - July 2016
|
|
$
|
550,000
|
|
|
6
|
%
|
|
$
|
0.08
|
|
|
July 7, 2018
|
|
$50k Note - July 2016
|
|
|
50,000
|
|
|
10
|
%
|
|
$
|
0.10
|
|
|
July 11, 2018
|
|
$111k Note - May 2017
|
|
|
111,000
|
|
|
10
|
%
|
|
$
|
0.35
|
|
|
July 11, 2018
|
|
$171.5k Note - October 2017
|
|
|
171,500
|
|
|
10
|
%
|
|
|
35
|
%
|
|
October 26, 2018
|
|
$57.8k Note - January 2018
|
|
|
57,750
|
|
|
10
|
%
|
|
|
40
|
%
|
|
January 2, 2019
|
|
$112.8k Note - February 2018
|
|
|
112,750
|
|
|
10
|
%
|
|
|
40
|
%
|
|
February 2, 2019
|
|
$83k Note - February 2018
|
|
|
83,000
|
|
|
10
|
%
|
|
|
40
|
%
|
|
February 13, 2019
|
|
$105k Note - March 2018
|
|
|
105,000
|
|
|
10
|
%
|
|
|
40
|
%
|
|
March 5, 2019
|
|
$63k Note - April 2018
|
|
|
63,000
|
|
|
10
|
%
|
|
|
39
|
%
|
|
January 15, 2019
|
|
$57.8k Note - April 2018
|
|
|
57,750
|
|
|
10
|
%
|
|
|
28
|
%
|
|
April 17, 2018
|
|
$90k Note - April 2018
|
|
|
90,000
|
|
|
10
|
%
|
|
|
40
|
%
|
|
April 18, 2019
|
|
$53k Note II - April 2018
|
|
|
53,000
|
|
|
10
|
%
|
|
|
39
|
%
|
|
January 30, 2019
|
|
$68.3k Note - May 2018
|
|
|
68,250
|
|
|
10
|
%
|
|
|
40
|
%
|
|
May 3, 2019
|
|
$37k Note May 2018
|
|
|
37,000
|
|
|
10
|
%
|
|
|
40
|
%
|
|
May 7, 2019
|
|
$63k Note II - May 2018
|
|
|
63,000
|
|
|
10
|
%
|
|
|
39
|
%
|
|
February 28, 2019
|
|
$78.8k Note - May 2018
|
|
|
78,750
|
|
|
10
|
%
|
|
|
40
|
%
|
|
May 24, 2019
|
|
|
|
$
|
1,751,750
|
|
|
|
|
|
|
|
|
|
|
|
* Discount reflects
prescribed discount to then-current market price at time of conversion.
During
the six months ended June 30, 2018, we repaid four notes with aggregate face value of $196,000 and entered into the following
new convertible notes payable.
Plan
of operation and future funding requirements
Our
plan of operations is to operate NWC and continue to invest in our cloud-based online personal medical information and record
archiving system, the “HealthLynked Network,” which enables patients and doctors to keep track of medical information
via the Internet in a cloud based system.
During
June 2017, we began a test-launch of the HealthLynked Network in three test markets in Florida, which continued through the third
quarter of 2017. We intend to market the HealthLynked Network via direct sales force targeting physicians’ offices, direct
to patient marketing, affiliated marketing campaigns, co-marketing with online medical supplies retailer MedOffice Direct, and
expanded southeast regional sales efforts. We intend that our initial primary sales strategy will be direct physician sales through
the use of regional sales representatives whom we will hire as access to capital allows. In combination with our direct sales,
we intend to also utilize Internet based marketing to increase penetration to targeted geographical areas. These campaigns will
be focused on both physician providers and patient members.
If
we fail to complete the development of, or successfully market, the HealthLynked Network, our ability to realize future increases
in revenue and operating profits could be impacted, and our results of operations and financial position would be materially adversely
affected.
On
July 17, 2018, we completed a $2,000,000 private placement of common stock and warrants with an institutional investor. We 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. The capital was raised for the purpose of technology enhancement,
sales and marketing initiatives and for our planned acquisition strategy. Beginning in the second half of 2018, we plan to acquire
health service businesses and offer physician owners cash, stock, and deferred compensation. We expect to initially target practices
in Florida with at least $1 million in annual revenue and that demonstrate at least three current consecutive years of strong
profitability.
In
July 2018, we completed an equity financing of $2 million to help in properly executing our business plan and servicing our debt
that matures in 2018. We anticipate that approximately 50% of this amount will be used for sales and marketing related costs and
the remainder for executive compensation, IT expenses and legal and accounting expenses related to being a public company. We
plan on raising additional capital to fund our recently disclosed acquisition strategy. In addition, we have extended a significant
portion of our outstanding debt until December 31, 2019. Specifically, all of Dr. Michael Dent’s notes payable with an with
an aggregate face value of $646,000 and all of Iconic Holdings LLC convertible notes payable with an aggregate face value of $1,751,750
have been extended until December 31, 2019.
We
intend that the cost of implementing our development and sales efforts related to the HealthLynked Network, as well as maintaining
our existing and expanding overhead and administrative costs, will be funded principally by our recent equity financing for $2
million in addition to the cash received by us from the put rights associated with the Investment Agreement. We expect to repay
outstanding convertible notes from outside funding sources, including but not limited to amounts available upon the exercise of
the put rights granted to us under the Investment Agreement, sales of our equity, loans from outside parties and the conversion
of such related party notes to equity. No assurances can be given that we will be able to access sufficient outside capital in
a timely fashion in order to repay the convertible notes before they mature. In order to access cash available under the Investment
Agreement, our common stock must be listed on a recognized stock exchange or market and the shares underlying the arrangement
must be subject to an effective registration statement. On May 10, 2017, our stock began trading on the OTCQB, which qualifies
as a recognized stock exchange or market pursuant to the terms of the Investment Agreement, under the symbol “HLYK.”
Although we have met the requirements to utilize the funds available under the Investment Agreement, there can be no assurances
that we will be able to continue to meet these requirements. Additionally, the amount available to us upon the exercise of the
put rights granted to us under the Investment Agreement is dependent upon the trading volume of our stock. Between May 22, 2017
and June 30, 2018, our daily trading volume averaged approximately 68,000 shares per day. Based upon increases in our volume since
the end of 2017, Iconic Holdings has increased our maximum amount to access on the equity line from $150,000 maximum to $300,000
maximum. We project that amounts available to us upon the exercise of the put rights granted to us under the Investment Agreement
will be sufficient to meet our capital requirements.
Historical
Cash Flows
|
|
Six Months Ended
June 30,
|
|
|
|
2018
|
|
|
2017
|
|
Net cash (used in) provided by:
|
|
|
|
|
|
|
Operating activities
|
|
$
|
(1,222,947
|
)
|
|
$
|
(809,636
|
)
|
Investing Activities
|
|
|
(201
|
)
|
|
|
(7,046
|
)
|
Financing activities
|
|
|
1,211,369
|
|
|
|
777,104
|
|
Net increase (decrease) in cash
|
|
$
|
(11,779
|
)
|
|
$
|
(39,578
|
)
|
Operating
Activities
– During the six months ended June 30, 2018, we used cash from operating activities of $1,222,947, as compared
with $809,636 in the same period of 2017. The increased cash usage results from higher losses resulting primarily from increased
salaries and benefits, as well an increase in professional and other overhead costs associated with preparing for product launch
and operating as a public company in 2018.
Investing
Activities
– Our business is not capital intensive, and as such cash flows from investing activities are minimal in
each period. Capital expenditures of $201 in the six months ended June 30, 2018 and $7,046 in the six months ended June 30, 2017
are comprised of computer equipment and furniture.
Financing
Activities
– During the six months ended June 30, 2018, we realized $805,500 net proceeds from the issuance of convertible
notes, $645,503 from the proceeds of the sale of shares of common stock to investors and pursuant to the Investment Agreement,
$101,450 proceeds from related party loans, and $73,500 from notes payable. We also made repayments of $284,682 against convertible
notes, $113,257 against notes payable, $9,000 against related party loans and $7,645 on capital lease obligations.
Exercise
of Warrants and Options
There
were no proceeds generated from the exercise of warrants or options during the six months ended June 30, 2018.
Other
Outstanding Obligations
Warrants
As
of June 30, 2018, 30,486,790 shares of our Common Stock were issuable pursuant to the exercise of warrants with exercise prices
ranging from $0.05 to $1.00.
Options
As
of June 30, 2018, 2,507,996 shares of our Common Stock were issuable pursuant to the exercise of options with exercise prices
ranging from $0.08 to $0.20.
Off
Balance Sheet Arrangements
We
did not have, during the periods presented, and we do not currently have, any off-balance sheet arrangements, as defined under
applicable Securities and Exchange Commission rules.
Contractual
Obligations
Our
contractual obligations as of June 30, 2018 were as follows:
|
|
Operating
|
|
|
Capital
|
|
|
Total
|
|
|
|
Leases
|
|
|
Leases
|
|
|
Commitments
|
|
2018 (July to December)
|
|
$
|
137,006
|
|
|
$
|
10,703
|
|
|
$
|
147,709
|
|
2019
|
|
|
273,856
|
|
|
|
18,348
|
|
|
|
292,204
|
|
2020
|
|
|
162,055
|
|
|
|
3,058
|
|
|
|
165,113
|
|
2021
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
2022
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
572,917
|
|
|
$
|
32,109
|
|
|
$
|
605,026
|
|
Operating
lease commitments relate to three leases in Naples, Florida. First, the Company entered into an operating lease for its main office
in Naples, Florida. The lease commenced on August 1, 2013 and expires July 31, 2020. The lease is for a 6901 square-foot space.
The base rent for the first full year of the lease term is $251,287 per annum with increases during the period. Second, the Company
entered into another operating lease in the same building for an additional 361 square feet space for use of the medical equipment
for the same period. The base rent for the first full year of the lease term is $13,140 per annum. Third, the Company entered
into an agreement with MOD pursuant to which the Company will pay rent to MOD in the amount of $2,040 per month for office space
in MOD’s facility used by the Company and its employees. The agreement is effective from January 1, 2017 through July 31,
2018.
Capital
lease commitments are comprised of a capital equipment finance lease for Ultra Sound equipment with Everbank. There was no interest
on this lease. The monthly payment is $1,529 for 60 months ending in March 2020.
BUSINESS
HealthLynked Corp.
is a growth stage company incorporated in the State of Nevada on August 6, 2014. We operate a cloud-based online personal medical
information and record archiving system, referred to as the “HealthLynked Network”, which enables patients and doctors
to keep track of medical information via the Internet in a cloud based system. Through our website,
www.HealthLynked.com
,
Patients are able to complete a detailed online personal medical history including past surgical history, medications, allergies,
and family medical history. Once this information is entered, patients and their treating physicians are able to update the information
as needed, to provide a comprehensive and up to date medical history.
We believe that the
HealthLynked Network offers a number of advantages to patients and physicians not available in the market today. We provide a comprehensive
marketing solution allowing physicians to market to both active and inactive patients, a way to connect on a regular basis with
their patients through newsfeeds and groups, and also access to new patients. Our real-time appointment scheduling application
allows for patients to book appointments online with participating healthcare providers in as soon as 30 minutes from the time
of booking. Our database and record archives allow for seamless sharing of medical records between healthcare providers and keep
patients in control of shared access. In the HealthLynked Network, parents are able to create accounts for their children that
are linked to their family account, allowing them to provide access to healthcare providers, track vaccination records, allow access
by hospitals and allow schools to access medical histories, drug allergies and other medical information in case of emergencies.
The HealthLynked Network will be accessible 24 hours a day, 7 days a week, on web browsers and as a mobile phone application. We
believe this type of accessibility is convenient for schools and during office visits, but most importantly, is crucial in times
of a medical emergency.
Our system provides
for 24-hour access to medical specialist healthcare providers who can answer medical questions and direct appropriate care to paying
members. In addition to 24-hour access, patients may also schedule telemedicine consultations at set times with participating healthcare
providers who have expertise in various specialized areas of medicine. Participating physicians can elect to allow patients to
request online appointments either via our real-time app or by setting, in their administrator dashboard panel, times and days
of the week that patients may request appointments. Appointment requests are then sent by our system to an email address specified
by the physician’s office, who are then requested to follow up to confirm these appointment requests or automatically accept
the appointment request.
HealthLynked has created
880,000 physician base profiles of almost all physicians in the United States. Physicians HealthLynked profiles are searchable
on the Internet. Physicians claim their profiles confirming the accuracy of the information free of charge. There are three levels
of profiles; “Base,” “Standard” and “Premium”. Base profiles are created at no charge to the
physician. Standard profiles allow a physician to add additional features and marketing services. Premium profiles allow for the
addition of videos and other marketing services. HealthLynked provider profiles enable participating physicians to market directly
to patients by providing complete profiles, with their areas of specialization, hours of operation, participating insurance plans,
phone numbers and office addresses linked to Google maps. Physician practices generate more income the more patients they treat,
so maximizing efficiency and patient turnover is critical to increasing total revenues and profitability. As such, we believe that
our system will enable physicians to reduce the amount of time required to process patient intake forms, as patients will no longer
be required to spend ten to thirty minutes filling out forms at each visit, and the practices’ staffs will not need to input
this information multiple times into their electronic medical records systems. Patients complete their online profiles once and
thereafter, they and their physicians are able to update their profiles as needed. Physicians’ participation in the HealthLynked
Network is required to update the patient records within 24 hours of seeing the patient. The information is organized in an easy
to read format in order that a physician be able to review the necessary information quickly during and prior to patient visits,
which, in turn, facilitates a more comprehensive and effective patient encounter.
Patient data is stored
in conformity with the
Health Insurance Portability and Accountability Act
of 1996, or “HIPAA”. The
network utilizes Amazon AWS infrastructure which uses Amazon “HIPPA” complaint servers along with Amazon RDS with LAMP,
HTML5 and several JavaScript frameworks, including Angular and React. Recommendations for end users are 512 kbps+ internet connection
speed and a web browser such as Google Chrome, Internet Explorer, Mozilla Firefox, Safari or handheld devices such as iOS devices,
android phones or tablets. Our developers utilize third party controls for functionality and user interface where the use of those
controls adds value to the system beyond custom creation of new tools. We intend to adjust forward compatibility for major browser
version updates, new browsers, operating system updates or new operating system as needed. The HealthLynked Network is EMR agnostic,
and is compatible with all electronic medical records systems, allowing for minimal barriers to participation and broader penetration
of the market.
Acquisition of NWC
In August 2014, we
acquired the NWC, an OB/GYN practice in Naples, Florida that was established in 1996.
This acquisition provided
a foundation for ongoing development of the HealthLynked Network by allowing us to register NWC’s approximately 6,000 active
patients and 6500 inactive patients and to utilize the expertise of our employed physicians to help in the design and strategy
for deployment of the HealthLynked Network. It is anticipated that future medical practices may be acquired from time to time as
we see fit to further develop, test and deploy the HealthLynked Network into new strategic regional areas throughout the country.
Through NWC, we also
provide Obstetrical and Gynecological medical services to patients in the South West Florida region. NWC currently employs four
OB/GYN physicians and one ARNP nurse practitioner. The services offered include obstetrical services for high and low risk patients,
in office ultrasonography, and prenatal testing. Gynecological services include general physical exams, surgical procedures such
as hysterectomy, bladder incontinence procedures, pelvic reconstruction, sterilization, endometrial ablation, advanced robotic
surgery, contraceptive management and infertility testing and treatment.
The HealthLynked Network- How It Works
Our system walks patients
through a series of easy to use pages with point and click selections and drop down menus that allow them to enter their past medical
history, past surgical history, allergies, medications, and family medical history. In addition, members are allowed to create
accounts for children under the age of 18 and keep track of required visits and vaccines. Members select physicians, schools, hospitals
and other parties to whom they wish to grant access to their records. This access can be either ongoing, or restricted by time
and date, in accordance with the patient’s control settings.
Physicians are required
to have a claimed active account in order to access patients’ online records and receive referrals for new patients. Once
a patient has granted their physician access to their medical charts, office intake paperwork can be downloaded by the physician
without the need for the patient to fill out lengthy and repetitive paperwork. Upon completion of the office visit, providers are
required to upload the medical record into the online patients’ file within 24 hours via eFax, APIs with select EMRs or through
the HealthLynked Portal. Each patient’s account has a unique bar code that when faxed into our system is recognized for that
patient and archived in the patient’s chart, by date and provider. The HealthLynked Network is independent of any EMR system
and physicians only require a fax machine or computer to participate, allowing for minimal barriers to participation and broader
penetration of the market.
In addition to serving
as a complete medical record archive, we believe that the HealthLynked Network allows for shorter wait times at doctors’
offices by giving doctors immediate access to patients’ complete medical information, insurance information and required
treatment consent forms. Patients only need to verify their treating physician’s access to their files upon or prior to their
next doctor’s visit. Patients are also able to coordinate multiple physician visits and keep an updated and complete personal
medical record archive. These files may also be shared among a patient’s different specialty physicians, a function that
we believe is especially helpful for patients who travel and may need to access their records or obtain physician referrals in
multiple localities. We also believe that the HealthLynked Network is especially useful in medical emergencies when patients are
unable to provide a medical history on their own because our system allows patients the option to grant healthcare providers, in
advance, special access in emergency situations.
The HealthLynked Network
also provides an online scheduling function for patients to book appointments with participating providers. Healthcare provider
profiles feature physicians’ biographies, office locations, hours and available appointment times. In addition, the platform
will provide patients with a list of recommended health screenings tailored to each patient’s unique medical history and
demographics. Recommended screenings could include, but is not limited to, annual mammograms for women over the age of 40, colonoscopy
every 10 years after the age of 50, recommended pap smear screenings, routine blood tests, and prostate exams. This base service
will be free for patients. However, we plan to charge additional fees for real-time schedule booking, access to telemedicine service
and access to a 24-hour nurse’s hotline and to charge physicians for upgraded physician profiles and SEO marketing.
Benefits for Multiple Constituencies
We believe that the
HealthLynked Network provides numerous benefits for patients, medical providers, hospitals, emergency rooms and schools.
Benefits for patients:
|
●
|
Base service, which includes all of the below benefits other than telemedicine and the nurse hotline, will be free
|
|
|
|
|
●
|
Easy online scheduling of appointments
|
|
|
|
|
●
|
Real-time booking for appointments available in the next 4 hours
|
|
|
|
|
●
|
Keep track of co-pays and deductibles on insurance plans
|
|
|
|
|
●
|
More accurate and detailed personal medical history
|
|
|
|
|
●
|
Complete medication lists with dosing and warnings of potential drug interactions
|
|
|
|
|
●
|
Ability to create accounts for children, and track recommended health screenings and vaccines
|
|
|
|
|
●
|
When traveling, patients will have the ability to access their medical records online 24 hours a day, 7 days a week even in the case of an emergency
|
|
|
|
|
●
|
Shortened wait times at physicians’ offices by reducing the need to fill out redundant paper work
|
|
|
|
|
●
|
Access to a referral network of physicians across the United States who participate in the HealthLynked Network
|
|
|
|
|
●
|
Telemedicine online nurse/ physician triage to help patients get appropriate medical care for fee paying members
|
|
|
|
|
●
|
Patients can access family members’ records in the event of illness or accident
|
|
|
|
|
●
|
Access to telemedicine for medical consultations and appointments for fee paying members
|
|
|
|
|
●
|
24 hour nurse hotline available for fee paying members
|
Benefits for physicians
and providers:
|
●
|
More accurate patient
medical history including past medical records
|
|
●
|
“EMR Agnostic”
and compatible with all electronic medical records systems
|
|
●
|
A detailed and accurate
medications list from patients
|
|
●
|
Shortened time for patients
to complete necessary paperwork translating into improved efficiency, shorter wait times, greater patient satisfaction and higher
revenues
|
|
●
|
Referral source for new
patients
|
|
●
|
Online marketing profiles
|
|
●
|
Comprehensive Marketing
to active and inactive patients
|
|
●
|
SEO and marketing options
|
|
●
|
Co-pay and deductible
information on patients insurance plans will be readily available
|
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●
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Additional revenue stream
from signing up new patients
|
|
●
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Online and real-time
patient scheduling to control gaps in scheduling due to last minute cancelations by existing patients
|
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●
|
Low membership fees of
$300 - $400 per month per provider during the first year
|
|
●
|
No new equipment required
|
Benefits for hospitals
and emergency rooms:
|
●
|
Information on patients
who present that are not conscious to provide a complete medical history
|
|
●
|
Information on traveling
patients who present to a hospital in an emergency situation
|
|
●
|
Online access to patient
information 24 hours a day, 7 days a week
|
|
●
|
“EMR Agnostic”
and compatible with all electronic medical records systems
|
|
●
|
No new equipment required
|
Benefits for schools:
|
●
|
Access by authorized
school officials to students’ medical histories
|
|
●
|
Linked access to students’
primary care physicians
|
|
●
|
Access to vaccination
records
|
|
●
|
Allergy and medication
tracking
|
|
●
|
Emergency contact information
of family members
|
Benefits for parents
:
|
●
|
Complete children profiles
|
|
●
|
Access given to schools
in case of medical emergences
|
|
●
|
List of allergies available
to those granted access
|
|
●
|
Vaccine records available
to those granted access
|
|
●
|
Recommended health screenings
|
|
●
|
Journal for health log
and milestones through news feeds and groups
|
Our Strategy
Our strategy is focused
on market penetration and recruiting physicians and patients to use our system for archiving patient medical records, comprehensive
marketing to active and inactive patients, a way to connect on a regular basis utilizing news feeds and groups, accessing new patients,
and for on-line “real-time” scheduling physician appointments.
We currently charge
physicians $300 - $400 per month to participate in the network. Physicians upload their patients into a secure patient portal to
market to their active and inactive patients. They initially send to all their patients an email inviting them to claim their HLYK
profile free of charge, update their profiles and bring it with them to their next visit to the physician’s office.
We also anticipate
charging certain healthcare facilities either an annual or monthly fee that will vary per facility based upon number of professionals
per facility. Currently, it is anticipated that hospitals and emergency rooms would be charged a higher fee for our services once
our patient network has been expanded.
The base services of
our network are free for patients, and they may also upgrade their service should they wish to receive telemedicine services and
access to a 24-hour nurse hotline.
Pursuant to our business
strategy, we acquired NWC to begin deployment of the HealthLynked Network and register NWC’s approximately 6,000 active patients
and 6,500 inactive patients into the HealthLynked system. While we expect to generate minimal revenues from physician fees related
to such deployment in fiscal 2018, we anticipate that establishing the patient database will be a valuable marketing tool for our
sales team in marketing to new physicians in the marketplace. We plan to further expand NWC by engaging five additional physicians
and project, although no assurance can be given, that by 2020 NWC will generate annual aggregate net revenues of approximately
$5,000,000. We believe that targeting women’s practices to market HealthLynked is one of the best approaches as women generally
make most of the healthcare decisions for their families. We intend to begin expanding our sales force and marketing outside of
Florida to include Alabama, Georgia and South Carolina and establish a footprint within the southeastern United States by the end
of 2018.
Sales Strategy
We intend to execute
the following strategies during the third and fourth quarters of 2018:
|
●
|
Direct sales force targeting physicians’ offices
|
|
|
|
|
|
- Jacksonville and Orlando
- Signed 6 HealthLynked Advisory Board
Members
- Starting with physicians claiming their
existing base profiles confirming accuracy
- Focusing on comprehensive marketing to
physicians active and inactive patients to improve retention
- Physicians upload patients in secured
HLYK portal and send email to all patients to claim their HLYK profile and update it to bring into the office for their next visit.
- Use of HLYK network for on-line appointment
scheduling for patients
|
|
●
|
Direct to patient marketing:
|
|
●
|
SEO/SEM campaigns direct
to patients
|
|
●
|
Affiliated marketing
campaigns
|
|
●
|
Co-marketing with MedOfficeDirect
(a virtual distributor of medical supplies to physicians’ offices that is affiliated with our management team)
|
|
●
|
Expanded southeast regional
sales efforts
|
We intend that our
initial primary sales strategy will be direct physician sales through the use of regional sales representatives whom we have hired
on a reasonable cost basis. We have targeted two key metropolitan areas, Orlando and Jacksonville Florida and deployed a sales
representative in each location who reports to our Chief Commercial Officer, Robert Horel.
Rapid growth is expected
over the next five years, due in large part to our engagement of our Mr. Horel, a seasoned sales professional. Mr. Horel is responsible
for our overall sales and marketing efforts. However, we do not consider Mr. Horel to be a “named executive officer”
under Item 402 of Regulation S-K.
Mr. Horel was formerly
a sales executive at NeoGenomics, Inc. We believe that with his expertise and contacts, HealthLynked will be able to sign over
500 physicians in the next twelve months, with this level of growth doubling every year over the next five years. Under Mr. Horel’s
leadership, our sales team is projected to grow from 10 sales representatives to over 100 sales representatives during this five-year
period. Mr. Horel and Company management will decide on new markets after Orlando and Jacksonville have proven successful.
We intend to use our
client relationship management system Salesforce.com to track sales calls and market penetration. Our marketing efforts towards
physicians will emphasize how our systems can increase physician practice revenues, improve office efficiencies, and improve the
accuracy of recorded patients’ medical histories.
Once a physician agrees
to participate, they will put all their patients in a secured portal in the cloud, and email them to claim their profile, update
it and bring it in for their next office visit. As mentioned above, access to the HealthLynked Network is free for patients. The
physicians will then market to their active and inactive patients and it is anticipated that physicians will generate up to $100k
in incremental annual revenue for an investment of $4,800 per year.
In combination with
our direct sales, we intend to also utilize internet based search engine marketing an optimization (SEM/SEO) to increase our presence
in certain targeted geographical areas. These campaigns will be focused on both physicians and patients. We believe that direct
to consumer marketing through email campaigns will be an effective way to build interest and drive patient and physician demand
for our services. We anticipate that we will be able to foster faster market penetration and increase demand for our services by
marketing to “both sides”, the consumer and the practitioner once the direct sales model is solidified.
Our campaigns will
direct patients to look for physicians in the HealthLynked Network to ensure that they maintain the accuracy and completeness of
their medical records. Our system will further allow patients to search for in-network physician providers and schedule online
“real-time” appointments via our system. We believe that physicians in the HealthLynked Network will see an increase
in new patients as a result of their participation and as more patients claim their profiles from the physicians’ initial
emails to patients, the value to physicians of joining our network will increase from not only existing patient marketing, but
also for acquisition of new patients in the Network.
We believe that affiliated
marketing campaigns will be very helpful in attracting new users and increasing market awareness. We intend to partner with pharmaceutical
companies, medical distributors, insurance companies; medical societies and others to cross market our products. We have already
partnered with MedOfficeDirect, LLC, an online medical supply distributor affiliated with our management, to co-market our respective
services and share advertising on our web sites.
Intellectual Property
We have reserved the
domain www.HealthLynked.com and have registered “HealthLynked” and our corporate logo as a service mark with the United
States Patent and Trademark Office. We plan to file patent applications as needed to protect our technology, which is currently
anticipated to be during the fourth quarter of 2018.
Research and Development
Our research and development
efforts consist of building, developing, and enhancing the HealthLynked Network, including comprehensive marketing to active and
inactive patients, the real time scheduling of appointments through our new mobile application, regular appointment scheduling,
telemedicine appointment scheduling, sharing of secured documents between physicians and patients, and devise independent access
mobile, tablet and web browser. Further, we are developing our systems to provide for secured date storage, drug interaction alerts,
and the barcoding of documents for retrieval and storage.
Professional and General Liability Coverage
We
maintain professional and general liability insurance policies with third-party insurers generally on a claims-made basis, subject
to deductibles, policy aggregates, exclusions, and other restrictions, in accordance with standard industry practice. We believe
that our insurance coverage is appropriate based upon our claims experience and the nature and risks of our business. However,
no assurance can be given that any pending or future claim against us will not be successful or if successful will not exceed the
limits of available insurance coverage. Our business entails an inherent risk of claims of medical malpractice against our affiliated
physicians and us. We contract and pay premiums for professional liability insurance that indemnifies us and our affiliated healthcare
professionals generally on a claims-made basis for losses incurred related to medical malpractice litigation. Professional liability
coverage is required in order for our physicians to maintain hospital privileges.
Employees
As of August 13, 2018,
we had 31 employees. None of our employees are covered by a collective bargaining agreement. We consider our relationship with
our employees to be excellent.
Competition
The
markets for our products and services are highly competitive, and are characterized by rapidly evolving technology and product
standards, as well as frequent introduction of new products and services. All of our competitors are more established, benefit
from greater name recognition, and have substantially greater financial, technical, and marketing resources than we do.
Our
principal existing competitors include but are not limited to ZocDoc, Inc., AthenaHealth Inc., All scripts Healthcare Solutions,
Inc., Cerner Corporation and Epic Systems Corporation. In addition, we expect that major software information systems companies,
large information technology consulting service providers, start-up companies, managed care companies and others specializing in
the health care industry may offer competitive products and services.
We believe that we
differ from our competitors in that we are not practice management software or an EMR provider. Companies like AthenaHealth Inc.,
All scripts Healthcare Solutions, Inc., Cerner and Epic Systems Corporation offer software solutions to operate and manage a medical
practice. Functions of these systems include patient billing, monitoring patient account balances and payments, tracking of appointments
and creating encounter visits for each patient seen. HealthLynked works in conjunction with these practice management software
systems and does not seek to replace them. Patients’ medical encounters created by these systems are uploaded to the patient’s
profile in the HealthLynked Network. The HealthLynked Network can incorporate any physical or digital documents into a patient’s
medical record history and thus allow it to be utilized across all healthcare platforms. HealthLynked provides an online appointment
scheduling application that is similar to ZocDoc, Inc.’s offering, but in addition offers telemedicine appointments through
our own patient interface.
The advantage of having
a healthcare network independent of any one practice management or EMR software allows the HealthLynked system to be fully utilized
across the entire medical community. Integration and participation by both patients and healthcare providers in a unified platform
offers significant advantages in the quality and nature of healthcare delivery in the future. To our knowledge a unified healthcare
network like HealthLynked currently does not exist in the market.
Government Regulation
The
healthcare industry is governed by a framework of federal and state laws, rules and regulations that are extensive and complex
and for which, in many cases, the industry has the benefit of only limited judicial and regulatory interpretation. If we are found
to have violated these laws, rules or regulations, our business, financial condition and results of operations could be materially,
adversely affected. Moreover, the Affordable Care Act contains numerous provisions that are reshaping the United States healthcare
delivery system, and healthcare reform continues to attract significant legislative interest, regulatory activity, new approaches,
legal challenges and public attention that create uncertainty and the potential for additional changes. Healthcare reform implementation,
additional legislation or regulations, and other changes in government policy or regulation may affect our reimbursement, restrict
our existing operations, limit the expansion of our business or impose additional compliance requirements and costs, any of which
could have a material adverse effect on our business, financial condition, results of operations, cash flows and the trading price
of our common stock. See Risk Factors—“The Affordable Care Act may have a significant effect on our business.”
Licensing and
Certification
Florida
imposes licensing requirements on individual physicians and clinical professionals, and on facilities operated or utilized by healthcare
practices. We may have to obtain regulatory approval, including certificates of need, before establishing certain types of healthcare
facilities, offering certain services or expending amounts in excess of statutory thresholds for healthcare equipment, facilities
or programs. We are also required to meet applicable Medicaid provider requirements under state laws and regulations and Medicare
provider requirements under federal laws, rules and regulations.
Fraud and Abuse
Provisions
Existing
federal laws, as well as similar state laws, relating to
government-sponsored or funded
healthcare programs, or
GHC Programs, impose a variety of fraud and abuse prohibitions on healthcare companies like
us. These laws are interpreted broadly and enforced aggressively by multiple government agencies, including the Office of Inspector
General of the Department of Health and Human Services, the Department of Justice (the “DOJ”) and various state agencies.
In addition, in the Deficit Reduction Act of 2005, Congress established a Medicaid Integrity Program to enhance federal and state
efforts to detect Medicaid fraud, waste and abuse and provide financial incentives for states to enact their own false claims legislation
as an additional enforcement tool against Medicaid fraud and abuse. Since then, a growing number of states have enacted or expanded
healthcare fraud and abuse laws.
The
fraud and abuse provisions include extensive federal and state laws, rules and regulations applicable to us, particularly on the
services offered through NWC. In particular, the federal anti-kickback statute has criminal provisions relating to the offer, payment,
solicitation or receipt of any remuneration in return for either referring Medicaid, Medicare or other GHC Program business, or
purchasing, leasing, ordering, or arranging for or recommending any service or item for which payment may be made by GHC Programs.
In addition, the federal physician self-referral law, commonly known as the “Stark Law,” applies to physician ordering
of certain designated health services reimbursable by Medicare from an entity with which the physician has a prohibited financial
relationship. These laws are broadly worded and have been broadly interpreted by federal courts, and potentially subject many healthcare
business arrangements to government investigation and prosecution, which can be costly and time consuming. Violations of these
laws are punishable by substantial penalties, including monetary fines, civil penalties, administrative remedies, criminal sanctions
(in the case of the anti-kickback statute), exclusion from participation in GHC Programs and forfeiture of amounts collected in
violation of such laws, any of which could have an adverse effect on our business and results of operations.
There
are a variety of other types of federal and state fraud and abuse laws, including laws authorizing the imposition of criminal,
civil and administrative penalties for filing false or fraudulent claims for reimbursement with government healthcare programs.
These laws include the civil False Claims Act (“FCA”), which prohibits the submission of, or causing to be submitted,
false claims to GHC Programs, including Medicaid, Medicare, TRICARE (the program for military dependents and retirees), the Federal
Employees Health Benefits Program, and insurance plans purchased through the recently established Affordable Care Act exchanges.
Substantial civil fines and multiple damages, along with other remedies, can be imposed for violating the FCA. Furthermore, proving
a violation of the FCA requires only that the government show that the individual or company that submitted or caused to be submitted
an allegedly false claim acted in “reckless disregard” or in “deliberate ignorance” of the truth or falsity
of the claim or with “willful disregard,” notwithstanding that there may have been no specific intent to defraud the
government program and no actual knowledge that the claim was false (which typically are required to be shown to sustain a criminal
conviction). The FCA also applies to the improper retention of known overpayments and includes “whistleblower” provisions
that permit private citizens to sue a claimant on behalf of the government and thereby share in the amounts recovered under the
law and to receive additional remedies. In recent years, many cases have been brought against healthcare companies by such “whistleblowers,”
which have resulted in judgments or, more often, settlements involving substantial payments to the government by the companies
involved. It is anticipated that the number of such actions against healthcare companies will continue to increase with the enactment
or enhancement of a growing number of state false claims acts, certain amendments to the FCA and enhanced government enforcement.
In
addition, federal and state agencies that administer healthcare programs have at their disposal statutes, commonly known as “civil
money penalty laws,” that authorize substantial administrative fines and exclusion from government programs in cases where
an individual or company that filed a false claim, or caused a false claim to be filed, knew or should have known that the claim
was false or fraudulent. As under the FCA, it often is not necessary for the agency to show that the claimant had actual knowledge
that the claim was false or fraudulent in order to impose these penalties.
The
civil and administrative false claims statutes are being applied in an increasingly broader range of circumstances. For example,
government authorities have asserted that claiming reimbursement for services that fail to meet applicable quality standards may,
under certain circumstances, violate these statutes. Government authorities also often take the position, now with support in the
FCA, that claims for services that were induced by kickbacks, Stark Law violations or other illicit marketing schemes are fraudulent
and, therefore, violate the false claims statutes. Many of the laws and regulations referenced above can be used in conjunction
with each other.
If
we were excluded from participation in any government-sponsored healthcare programs, not only would we be prohibited from submitting
claims for reimbursement under such programs, but we also would be unable to contract with other healthcare providers, such as
hospitals, to provide services to them. It could also adversely affect our ability to contract with, or to obtain payment from,
non-governmental payors.
Although
we intend to conduct our business in compliance with all applicable federal and state fraud and abuse laws, many of the laws, rules
and regulations applicable to us, including those relating to billing and those relating to financial relationships with physicians
and hospitals, are broadly worded and may be interpreted or applied by prosecutorial, regulatory or judicial authorities in ways
that we cannot predict. Accordingly, we cannot assure you that our arrangements or business practices will not be subject to government
scrutiny or be alleged or found to violate applicable fraud and abuse laws. Moreover, the standards of business conduct expected
of healthcare companies under these laws and regulations have become more stringent in recent years, even in instances where there
has been no change in statutory or regulatory language. If there is a determination by government authorities that we have not
complied with any of these laws, rules and regulations, our business, financial condition and results of operations could be materially,
adversely affected.
Government
Reimbursement Requirements
In
order to participate in the various state Medicaid programs and in the Medicare program, we must comply with stringent and often
complex enrollment and reimbursement requirements. Moreover, different states impose differing standards for their Medicaid programs.
While we believe that we adhere to the laws, rules and regulations applicable to the government programs in which we participate,
any failure to comply with these laws, rules and regulations could negatively affect our business, financial condition and results
of operations.
In
addition, GHC Programs are subject to statutory and regulatory changes, administrative rulings, interpretations and determinations,
requirements for utilization review and new governmental funding restrictions, all of which may materially increase or decrease
program payments, as well as affect the cost of providing services and the timing of payments to providers. Moreover, because these
programs generally provide for reimbursement on a fee-schedule basis rather than on a charge-related basis, we generally cannot
increase our revenue by increasing the amount we charge for our services. To the extent our costs increase, we may not be able
to recover our increased costs from these programs, and cost containment measures and market changes in non-governmental insurance
plans have generally restricted our ability to recover, or shift to non-governmental payors, these increased costs. In attempts
to limit federal and state spending, there have been, and we expect that there will continue to be, a number of proposals to limit
or reduce Medicaid and Medicare reimbursement for various services. Our business may be significantly and adversely affected by
any such changes in reimbursement policies and other legislative initiatives aimed at reducing healthcare costs associated with
Medicaid, Medicare and other government healthcare programs.
Our
business also could be adversely affected by reductions in or limitations of reimbursement amounts or rates under these government
programs, reductions in funding of these programs or elimination of coverage for certain individuals or treatments under these
programs.
HIPAA and Other
Privacy Laws
Numerous
federal and state laws, rules and regulations govern the collection, dissemination, use and confidentiality of protected health
information, including the HIPAA, and its implementing regulations, violations of which are punishable by monetary fines, civil
penalties and, in some cases, criminal sanctions. As part of the HealthLynked Network and our medical record keeping, third-party
billing and other services, we collect and maintain protected health information on the patients that we serve.
Pursuant
to HIPAA, the U.S. Department of Health and Human Services (“HHS”) has adopted standards to protect the privacy and
security of individually identifiable health information, known as the Privacy Standards and Security Standards. HHS’ Privacy
Standards apply to medical records and other individually identifiable health information in any form, whether electronic, paper
or oral, that is used or disclosed by healthcare providers, hospitals, health plans and healthcare clearinghouses, which are known
as “Covered Entities.” We have implemented privacy policies and procedures, including training programs, designed to
be compliant with the HIPAA Privacy Standards.
HHS’
Security Standards require healthcare providers to implement administrative, physical and technical safeguards to protect the integrity,
confidentiality and availability of individually identifiable health information that is electronically received, maintained or
transmitted (including between us and our affiliated practices). We have implemented security policies, procedures and systems
designed to facilitate compliance with the HIPAA Security Standards.
In
February 2009, Congress enacted the HITECH as part of the ARRA. Among other changes to the law governing protected health information,
HITECH strengthened and expanded HIPAA, increased penalties for violations, gave patients new rights to restrict uses and disclosures
of their health information, and imposed a number of privacy and security requirements directly on third-parties that perform functions
or services for us or on our behalf. Specifically, HITECH requires that Covered entities report any unauthorized use or disclosure
of protected health information that meets the definition of a breach, to the affected individuals, HHS and, depending on the number
of affected individuals, the media for the affected market. In addition, HITECH requires that business associates report breaches
to their Covered Entity customers. HITECH also authorizes state Attorneys General to bring civil actions in response to violations
of HIPAA that threaten the privacy of state residents. Final regulations implementing the HITECH requirements were issued in January
2013. We have privacy policies and procedures aimed at ensuring compliance with HITECH requirements. In addition to the federal
HIPAA and HITECH requirements, numerous other state and certain other federal laws protect the confidentiality of patient information,
including state medical privacy laws, state social security number protection laws, state genetic privacy laws, human subjects
research laws and federal and state consumer protection laws.
Environmental
Regulations
Our
healthcare operations generate medical waste that must be disposed of in compliance with federal, state and local environmental
laws, rules and regulations. Our office-based operations are subject to compliance with various other environmental laws, rules
and regulations. Such compliance does not, and we anticipate that such compliance will not, materially affect our capital expenditures,
financial position or results of operations.
Fair Debt Collection Practices Act
Some of our operations
may be subject to compliance with certain provisions of the Fair Debt Collection Practices Act and comparable state laws. Under
the Fair Debt Collection Practices Act, a third-party collection company is restricted in the methods it uses to contact consumer
debtors and elicit payments with respect to placed accounts. Requirements under state collection agency statutes vary, with most
requiring compliance similar to that required under the Fair Debt Collection Practices Act. Florida’s
Consumer
Collection Practices Act is broader than the federal legislation, applying the regulations to “creditors” as well as
“collectors,” whereas the
Fair Debt Collection Practices Act
is
applicable only to collectors. This prohibits creditors who are attempting to collect their own debts from engaging in behavior
prohibited by the
Fair Debt Collection Practices Act
and Consumer Collection
Practices Act. The Consumer Collection Practices Act has very specific guidelines regarding which actions debt collectors and creditors
may engage in to collect unpaid debt.
Government
Investigations
We
expect that audits, inquiries and investigations from government authorities, agencies, contractors and payors will occur in the
ordinary course of business. Such audits, inquiries and investigations and their ultimate resolutions, individually or in the aggregate,
could have a material adverse effect on our business, financial condition, results of operations, cash flows and the trading price
of our common stock.
MANAGEMENT
The following table
sets forth information regarding our executive officers and directors. All directors hold office for one-year terms until the election
and qualification of their successors. Officers are elected by the board of directors and serve at the discretion of the board.
Name
|
|
Age
|
|
Positions with the Company
|
Michael Dent, MD
|
|
54
|
|
Chief Executive Officer and Chairman of the Board of Directors
|
George O’Leary
|
|
55
|
|
Chief Financial Officer, and Director
|
Robert H. Horel
|
|
53
|
|
Chief Commercial Officer
|
Michael T. Dent,
MD, Founder, Chief Executive Officer and Chairman of the Board of Directors
.
Dr. Dent founded the Naples Women’s
Center in 1996 where he served as its principal executive from formation through February 2016. He is also Co-Founder and Managing
Director of InLight Capital Partners LLC since January 2014 and is responsible for its healthcare, information technology and life
science investments. He has held key leadership positions in business development, operations, corporate development, and strategy
in the healthcare and technology industries since the mid-90s. Prior to founding InLight Capital Partners, Dr. Dent was Founder,
Chairman and Chief Executive Officer of NeoGenomics Laboratories (Nasdaq: NEO) where he was on the Board of Directors from 1998
until July 2015. As a retired physician, Dr. Dent is uniquely qualified to understand the challenges and opportunities in healthcare
and emerging technologies. Dr. Dent received his Bachelor’s Degree from Davidson College, where he majored in both Biology
and Pre-Med, and went on to earn his medical degree from The University of South Carolina in Charleston, South Carolina. Dr. Dent
also attended Florida Gulf Coast University’s Business Executive Education program. Dr. Dent’s holds board affiliations
with NeoGenomics Laboratories (Director), MedOfficeDirect (Founder), and The Naples Women’s Center. We believe Dr. Dent is
qualified to serve on our board of directors because of his medical expertise and business understandings of a physician’s
practice.
George G. O’Leary,
Chief Financial Officer and Member of the Board of Directors.
Mr. O’Leary has served as our Chief Financial
Officer since August 6, 2014. Mr. O’Leary is also Co-Founder and Managing Director of InLight Capital Partners LLC since
January 2014. He is a financially trained senior executive specializing in innovative strategic problem solving across functional
and industry boundaries. Mr. O’Leary is currently the Chairman of the Board of Directors of Timios Holdings Corp. since March
2014 and on the Board of Directors of MedOfficeDirect since October 2013. From June 2009 to May 2013 Mr. O’Leary was Chairman
of the Board and Chief Financial Officer of Protection Plus Securities Corporation until it was sold to Universal Protection Services.
From February 2007 to June 2015, Mr. O’Leary was a member of the Board of Directors of NeoMedia Technologies. Mr. O’Leary
is founder and President of SKS Consulting of South Florida Corp. (“SKS”) since June 2006 where he works with public
and private companies in board representation and/or under consulting agreements providing executive level management expertise,
as well as helping the implementation and execution of their companies’ strategic & operational plans. Mr. O’Leary
started SKS with the mission to help companies focus on high growth initiatives and execution of their core business while shedding
non-core business assets. From 1996 to 2000, Mr. O’Leary was Chief Executive Officer and President of Communication Resources
Incorporated (“CRI”), where annual revenues grew from $5 million to $40 million during his tenure. Prior to CRI, Mr.
O’Leary was Vice President of Operations of Cablevision Industries, where he ran $125 million of business until it was sold
to Time Warner. Mr. O’Leary started his professional career as a senior accountant with Peat Marwick and Mitchell (KPMG).
Mr. O’Leary holds a B.B.A. degree in Accounting with honors from Siena College. We believe Mr. O’Leary is qualified
to serve on our board of directors because of his finance and capital markets expertise.
Robert H. Horel,
JR, Chief Commercial Officer.
Mr. Horel has served as our Chief Commercial Officer since December of 2016.
He brings with him significant corporate strategic leadership success with a commercial concentration and an advanced acumen in
personnel and team development for focused achievement and execution that spans industries and functions. Prior to joining HealthLynked,
Mr. Horel served as the Vice President of Sales for ViraCor, a Eurofins corporation (EPA: ERF, US OTC), and before that,
the Vice President and General Manager of PathLogic, a division of NeoGenomics (Nasdaq: NEO). Mr. Horel also served as Vice President
of Sales and Marketing at NeoGenomics (NASDAQ: NEO) from May 2011 to October 2015 – a period of unequalled commercial performance
for that company. He joined NeoGenomics in December 2006 as the Regional Director for its Southeastern Region. Prior to NeoGenomics,
Mr. Horel held commercial positions of increasing prominence with Ventana Medical Systems (now a division of Roche), US Labs (now
a division of LabCorp), and Radiometer America, a division of Danaher (NYSE: DHR). Mr. Horel graduated from the United States
Naval Academy in 1987, earning a Bachelor of Science Degree with Distinction in Mechanical Engineering, and he served as a combat
seasoned pilot in the US Navy before beginning his business career in 1998.
Family Relationships
No family relationships
exist between any of our current or former directors or executive officers.
Involvement is Certain Legal Proceedings
No director, executive
officer or control person of the Company has been involved in any legal proceeding listed in Item 401(f) of Regulation S-K in the
past 10 years.
Limitation of Liability of Directors
Our Amended and Restated
Articles of Incorporation state that directors and officers shall be indemnified and held harmless to the fullest extend legally
permissible under the laws of the State of Nevada, from time to time, against all expenses, liability and loss (including attorney’s
fees, judgments, fines and amounts paid or to be paid in settlement) reasonably incurred or suffered by him/her in connection with
acts performed in such capacity. Such right of indemnification shall be a contract right, which may be enforced in a nay manner
desired by such person. The expenses of officers and directors incurred in defending a civil or criminal action, suit or proceeding
must be paid by the Company as they are incurred and in advance of the final disposition of the action, suit or proceeding.
Directors’ and Officers’
Liability Insurance
We have obtained directors’
and officers’ liability insurance insuring our directors against liability for acts or omissions in their capacity as directors
or officers. Such insurance also insures us against losses, which we may incur in indemnifying our officers and directors.
Our
officers and directors shall have indemnification rights under applicable laws, our standard indemnification agreement, and our
articles of incorporation and bylaws.
Board Independence
We are not an issuer
listed on a national stock exchange (as that term is defined in the Securities Exchange Act of 1934, as amended) and, as such,
are not subject to any director independence standards. Using the definition of independence set forth in the rules of the Nasdaq
Stock Market, however, none of our directors would be considered independent directors of the Company.
Board Committees
We expect our board
of directors, in the future, to appoint an audit committee, nominating committee and compensation committee, and to adopt charters
relative to each such committee. We intend to appoint such persons to committees of the board of directors that meet the required
corporate governance requirements imposed by a national securities exchange, although we are not required to comply in the future,
with such requirements until we elect to seek a listing on a national securities exchange. In addition, we intend that a majority
of our directors will be independent directors, of which at least one director will qualify as an “audit committee financial
expert,” within the meaning of Item 407(d)(5) of Regulation S-K, as promulgated by the SEC. As our Board of Directors is
solely comprised of those individuals who are the same individuals who prepare and sign our Forms 10-K and 10-Q, there is no possibility
of oversight from our Board of Directors as to these filings and our financial statements. While Mr. O’Leary qualifies as
an “audit committee financial expert” as defined in Item 407(d)(5) of Regulation S-K, neither Mr. O’Leary nor
Dr. Dent qualifies as “independent” as the term is used in Item 7(d)(3)(iv)(B) of Schedule 14A under the Securities
Exchange Act of 1934, as amended, and as defined by Rule 4200(a)(14) of the NASD Rules. We believe that our board of directors
is capable of analyzing and evaluating our financial statements and understanding internal controls and procedures for financial
reporting. Our board of directors does not believe that it is necessary to have an audit committee because management believes
that the functions of an audit committees can be adequately performed by the board of directors. In addition, we believe that retaining
an independent director who would qualify as an “audit committee financial expert” would be overly costly and burdensome
and is not warranted in our circumstances given the stage of our development and the fact that we have not generated positive cash
flow to date. If and when we generate increased revenue and positive cash flow in the future, we intend to appoint independent
directors so that we can form a standing audit committee and identify and appoint an independent financial expert to serve on our
audit committee.
Except as may be provided
in our bylaws, we do not currently have specified procedures in place pursuant to which security holders may recommend nominees
to the Board of Directors.
Code of Ethics
We have not yet adopted
a Code of Ethics although we expect to as we develop our infrastructure and business.
EXECUTIVE COMPENSATION
We are providing compensation
disclosure that satisfies the requirements applicable to emerging growth companies, as defined in the JOBS Act.
Summary Compensation Table
The following table
sets forth information regarding compensation paid to our principal executive officer, principal financial officer, and our highest
paid executive officer, for the years ended December 31, 2017 and 2016:
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Change in
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Pension
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Value and
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Non-
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Non-
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Equity
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Qualified
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Incentive
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Deferred
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All
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Plan
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Compen-
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Other
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Stock
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Option
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Compen-
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sation
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Compen-
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Salary
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Bonus
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Awards
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Awards
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sation
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Earnings
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sation
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Total
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Name and Position
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Year
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($)
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($)
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($)(1)
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($)
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($)
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($)
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($)
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($)
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Michael Dent
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2017
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70,000
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---
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---
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---
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---
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---
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---
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70,000
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(Chief Executive Officer)
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2016
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51,731
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---
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---
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31,950
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---
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---
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---
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83,681
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George O’Leary
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2017
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95,400
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---
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---
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---
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---
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---
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---
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95,400
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(Chief Financial Officer)
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2016
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65,995
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---
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---
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19,170
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---
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---
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---
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85,165
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Robert Horel
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2017
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232,145
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---
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---
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---
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---
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---
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---
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232,145
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(Chief Commercial Officer)
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2016
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15,926
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---
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---
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8,581
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---
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---
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---
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24,507
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(1)
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Reflects the grant date fair
values of stock options and restricted stock awards calculated in accordance with FASB Accounting Standards Codification Topic
718.
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Employment Agreements
Dr. Michael Dent
On July 1, 2016, we
entered into an employment agreement with Dr. Michael Dent, Chief Executive Officer and a member of our Board of Directors. Dr.
Dent’s employment agreement continues until terminated by Dr. Dent, or us and provides for an initial annual base salary
of $70,000. Dr. Dent is eligible to receive performance-based incentives, pro-rated for the number of months of service in any
given year. Annual bonuses are awarded based on set annual target incentives for executives and other senior ranking employees
that are to be determined by the to-be-established Compensation Committee of the Board of Directors. In addition, Mr. Dent is also
entitled to receive 500,000 time-based options, as well as 500,000 performance based options, all of which vest in accordance with
the schedule set forth in the employment agreement. If Dr. Dent’s employment is terminated by us (unless such termination
is “For Cause” (as defined in his employment agreement)), then upon signing a general waiver and release, Dr. Dent
will be entitled to severance in an amount equal to 12 months of his then-current annual base salary, as well as the pro-rata portion
of any bonus that would be due and payable to him. In the event that Dr. Dent terminates the employment agreement, he shall be
entitled to any accrued but unpaid salary and other benefits up to and including the date of termination, and the pro-rata portion
of any unvested time-based options up until the date of separation.
George O’Leary
On July 1, 2016, we
entered into an agreement with Mr. George O’Leary, our Chief Financial Officer and a member of our Board of Directors, extending
his prior agreement with the Company. Mr. O’Leary’s employment agreement continues until terminated by Mr. O’Leary,
or us and provides for an initial annual base salary of $90,000 a year and shall increase to $100,000 per year in year two. Mr.
O’Leary is also eligible to receive performance-based incentives. In addition, Mr. O’Leary is also entitled to receive
stock options to purchase up to 600,000 shares of common stock of the Company at an exercise price equivalent to the closing price
per share at which the stock is quoted on the day prior to his start date. The grant of such options will be made pursuant to the
Company’s stock option plan then in effect, shall have a ten-year term from the grant date and shall vest in accordance with
the schedule set forth in the agreement. In addition, Mr. O’Leary shall receive healthcare allowance of $750 per month and
a car allowance of $650 per month to be paid at the beginning of each month. If Mr. O’Leary employment is terminated by us
(unless such termination is “For Cause” (as defined in his employment agreement), then upon signing a general waiver
and release, Mr. O’Leary will be entitled to receive his base salary and the Company shall maintain his employee benefits
for a period of twelve (12) months beginning on the date of termination. In the event that Mr. O’Leary terminates the agreement,
he shall be entitled to any accrued by unpaid salary and other benefits up to and including the date of termination.
On July 1, 2018, we
entered into an Extension Letter Agreement (the “Extension”) to Mr. O’Leary’s Employment Agreement, originally
dated July 1, 2016, by and between the Corporation and Mr. George O’Leary, the Corporation’s Chief Financial Officer.
In the extension, among other things, Mr. O’Leary agreed to increase 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.
Robert Horel
On October 26, 2016,
we entered into an employment letter agreement (the “Horel Letter Agreement”) with Mr. Robert Horel, our Chief Commercial
Officer. The Horel Letter Agreement provides for a base salary of $215,000, as well as both time and performance based equity bonuses
(with such time-based equity grants vesting over a three (3) year period). The Horel Letter Agreement also provides for cash bonuses
contingent on certain performance goals and metrics.
Grants of Plan Based Awards and Outstanding Equity Awards
at Fiscal Year-End
The following table
contains information concerning unexercised options that have not vested as of December 31, 2017 with respect to the executive
officers named in the Summary Compensation Table:
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Number of
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Securities
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Number of Securities
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Underlying
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Underlying
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Unexercised
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Option
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Unexercised Options
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Unearned
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Exercise
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Option
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Exercisable
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Unexercisable
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Options
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Price
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Expiration
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(#)
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(#)
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(#)
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($)
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Date
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Michael Dent
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275,000
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725,000
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725,000
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$
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0.08
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6/30/2026
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(Chief Executive Officer)
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George O’Leary
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250,000
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350,000
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350,000
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$
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0.08
|
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|
6/30/2026
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(Chief Financial Officer)
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Robert Horel
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50,000
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699,996
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|
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699,996
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$
|
0.20
|
|
|
11/27/2026
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(Chief Commercial Officer)
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On January 1, 2016,
the Company instituted the 2016 Equity Incentive Plan (the “EIP”) for the purpose of having equity awards available
to allow for equity participation by its employees. The EIP allows for the issuance of up to 15,503,680 shares of the Company’s
common stock to employees, which may be issued in the form of stock options, stock appreciation rights, or restricted shares. The
EIP is governed by the Company’s board, or a committee that may be appointed by the board in the future. During the years
ended December 31, 2017 and 2016, the Company made grants totaling 175,000 and 1,552,500 shares of restricted common stock pursuant
to the EIP. The grants are subject to time-based vesting requirements and generally vest a portion upon grant and the balance on
a straight-line basis over a period of four years.
In June 2016, we issued
900,000 shares of common stock outside of the EIP to our Chief Financial Officer for services rendered in 2015. The shares of common
stock were valued at $45,000, or $0.05 per share based on concurrent sales of Company common stock to third parties at that price.
As of December 31,
2017, we had outstanding 1,600,000 stock options with an exercise price of $0.08 per share held by our executive officers, of which
1,000,000 were issued to our Chief Executive Officer and 600,000 were issued to our Chief Financial Officer. Of the 1,600,000 issued
options, 700,000 (500,000 held by our Chief Executive Officer and 200,000 held by our Chief Financial Officer) have time-based
vesting and 900,000 (500,000 held by our Chief Executive Officer and 400,000 held by our Chief Financial Officer) vest based on
Company performance measures. The grant date fair value of the options was $51,120. The options have a term of 10 years. As of
December 31, 2017, 525,000 of these options were vested.
As of December 31,
2017, we also had 749,996 outstanding stock options held by an employee with an exercise price of $0.20 per share and a term of
10 years. Of the total grant, 299,996 options shall vest over a three-year period, and 450,000 shall vest based on future Company
and individual performance measures. As of December 31, 2017, 50,000 of these options were vested.
Director Compensation
Our directors did not
receive any compensation for their services for the years ending December 31, 2017 and 2016 except as set forth above.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Prior to August 2014,
NWC was owned and controlled by the Company’s Chief Executive Officer, Dr. Michael Dent (“DMD”). DMD first provided
an up to $175,000 unsecured note payable to the Company with a 0% interest rate. During 2013 the limit on the unsecured Note Payable
was increased up to $500,000 and during 2014 it was increased to $750,000 with a maturity date of December 31, 2017 (the “$750k
DMD Note”). During January 2017, the $750k DMD Note was again amended to extend the maturity date until December 31, 2018,
to accrue interest on outstanding balances after January 1, 2017 at a rate of 10% per annum, and to fix interest accrued on balances
between January 1, 2015 and December 31, 2016 at an amount equal to $22,108. During July 2018, the note was further extend to December
31, 2019. All principal and interest is due at maturity of the $750k DMD Note. Interest accrued on the $750k DMD Note as of June
30, 2018 and December 31, 2017 was $55,665 and $43,963, respectively.
During the year ended
December 31, 2017 and six months ended June 30, 2018, the Company borrowed from Dr. Dent under additional unsecured promissory
notes as follows:
Inception Date
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Maturity Date
|
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Borrower
|
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Interest Rate
|
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Face Value
|
|
January 12, 2017
|
|
December 31, 2019
|
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HLYK
|
|
|
10
|
%
|
|
$
|
35,000
|
|
January 18, 2017
|
|
December 31, 2019
|
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HLYK
|
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10
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%
|
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|
20,000
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January 24, 2017
|
|
December 31, 2019
|
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HLYK
|
|
|
10
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%
|
|
|
50,000
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February 9, 2017
|
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December 31, 2019
|
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HLYK
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|
10
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%
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30,000
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April 20, 2017
|
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December 31, 2019
|
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HLYK
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10
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%
|
|
|
10,000
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June 15, 2017
|
|
December 31, 2019
|
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HLYK
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|
10
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%
|
|
|
32,500
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|
August 17, 2017
|
|
December 31, 2019
|
|
HLYK
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|
|
10
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%
|
|
|
20,000
|
|
August 24, 2017
|
|
December 31, 2019
|
|
HLYK
|
|
|
10
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%
|
|
|
37,500
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|
September 7, 2017
|
|
December 31, 2019
|
|
HLYK
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|
|
10
|
%
|
|
|
35,000
|
|
September 21, 2017
|
|
December 31, 2019
|
|
HLYK
|
|
|
10
|
%
|
|
|
26,500
|
|
September 29, 2017
|
|
December 31, 2019
|
|
HLYK
|
|
|
10
|
%
|
|
|
12,000
|
|
December 21, 2017
|
|
December 31, 2019
|
|
HLYK
|
|
|
10
|
%
|
|
|
14,000
|
|
January 8, 2018
|
|
December 31, 2019
|
|
HLYK
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|
|
10
|
%
|
|
|
75,000
|
|
January 11, 2018
|
|
December 31, 2019
|
|
HLYK
|
|
|
10
|
%
|
|
|
9,000
|
|
January 26, 2018
|
|
December 31, 2019
|
|
HLYK
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|
|
10
|
%
|
|
|
17,450
|
|
January 3, 2014
|
|
December 31, 2019
|
|
NWC
|
|
|
10
|
%
|
|
|
222,050
|
|
|
|
|
|
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|
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|
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|
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$
|
646,000
|
|
The interest accrued
on such notes as of June 30, 2018 and December 31, 2017 and 2016 was $40,218, $19,350 and -0-, respectively.
During 2016,
MedOffice Direct L.L.C. (“MOD”), a Florida limited liability company that is majority-owned by the
Company’s CEO and largest shareholder, Dr. Michael Dent, paid a direct obligation of the Company in the amount of
$25,000. The Company also paid direct obligations of MOD totaling $13,808 in 2016, resulting in an amount payable to MOD of
$11,192 as of December 31, 2016. This amount was paid in full in January 2017. During 2017, the Company entered into an
agreement with MOD, pursuant to which the Company agreed to pay rent to MOD in the amount of $2,040 per month for office
space in MOD’s facility used by the Company and its employees for the period from January 1, 2017 through July 31,
2018. During the six months ended June 30, 2018 and year ended December 31, 2017, the Company recognized rent expense to MOD
in the amount of $12,240 and $24,480, respectively. The Company had prepaid an additional $18,217 toward future rent as of
June 30, 2018.
During 2017, the Company
entered into a separate Marketing Agreement with MOD pursuant to which MOD agreed to market the HealthLynked Network to its physician
practice clients, in exchange for a semi-annual fee of $25,000. This agreement was terminated effective April 1, 2018. During the
three months ended June 30, 2018 and 2017, the Company recognized general and administrative expense in the amount of $-0- and
$25,000, respectively, pursuant to this agreement. During the six months ended June 30, 2018 and 2017, the Company recognized general
and administrative expense in the amount of $12,500 and $25,000, respectively, pursuant to this agreement. On July 1, 2018 HLYK
and MOD signed a marketing and service agreement where HLYK will include MOD offering as part of its product offering to Physicians
and HLYK will receive 8% of revenue for new sales related to MOD products sold by the HLYK sales team. The revenue percentage will
be split between HLYK and the HLYK sales representative.
During the year ended
December 31, 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 for the period from January
1, 2017 through July 31, 2018. During the years ended December 31, 2017 and 2016, the Company recognized rent expense related to
the marketing agreement in the amount of $24,480 and $-0-, respectively, pursuant to this agreement and had prepaid an additional
$24,459 toward future rent as of December 31, 2017. Dr. Dent is the majority owner of MOD.
On February 12, 2018,
the Company issued a warrant to purchase 6,678,462 shares of common stock to Dr. Dent as an inducement to (i) extend the maturity
dates of up to $439,450 loaned by Dr. Dent to the Company in 2017 and 2018 in the form of unsecured promissory notes, including
$75,000 loaned from Dr. Dent to the Company in January 2018 to allow the Company to retire an existing convertible promissory note
payable to Power-up Lending Group Ltd. before such convertible promissory note became eligible for conversion, and (ii) provide
continued loans to the Company. The warrant is immediately exercisable at an exercise price of $0.065 per share, subject to adjustment,
and expires five years after the date of issuance.
On July 16, 2018, simultaneously
with the execution of the Securities Purchase Agreement, the Company and NWC each entered into agreements (the “Note Amendments”)
with a Dr. Michael Dent, our Chief Executive Officer, to amend the terms of each of the notes issued to Dr. Dent such that no payments
will be, or required to be, made under any of those notes prior to December 31, 2019.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table
sets forth information with respect to the beneficial ownership of our common stock as of August 13, 2018 by (i) each person known
by us to beneficially own more than 5% of our common stock, (ii) each of our directors, (iii) each of the named executive officers,
and (iv) all of our directors and executive officers as a group. The percentages of common stock beneficially owned are reported
on the basis of regulations of the SEC governing the determination of beneficial ownership of securities. Under the rules of the
SEC, a person is deemed to be a beneficial owner of a security if that person has or shares voting power, which includes the power
to vote or to direct the voting of the security, or investment power, which includes the power to dispose of or to direct the disposition
of the security. Except as indicated in the footnotes to this table, each beneficial owner named in the table below has sole voting
and sole investment power with respect to all shares beneficially owned and each person’s address is c/o HealthLynked Corp.,
726
Medical Blvd Suite 101, Naples, Florida 34110
. As of August 13, 2018, we had 81,975,927 shares issued and outstanding.
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|
Shares of Common Stock Beneficially Owned (1)
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Percentage of Shares of Common Stock Beneficially Owned (2)
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Dr. Michael Dent, Chief Executive Officer and Chairman (3)
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59,090,435
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64.78
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%
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George O’Leary, Interim Chief Financial Officer, Chief Operating Officer and Director (4)
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2,500,000
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3.03
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%
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All officers and directors as a group (2 persons)
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61,590,435
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|
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67.94
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%
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5% Stockholders:
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|
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|
|
|
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Urania Holdings LLC (5)
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5,620,000
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6.75
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%
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Iconic Holdings, LLC (6)
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8,189,395
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9.99
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%
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(1)
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Under Rule 13d-3 of the Exchange
Act of 1934, as amended (the “Exchange Act”), a beneficial owner of a security includes any person who, directly or
indirectly, through any contract, arrangement, understanding, relationship or otherwise has or shares: (i) voting power, which
includes the power to vote or to direct the voting of shares; and (ii) investment power, which includes the power to dispose or
direct the disposition of shares. Certain shares may be deemed to be beneficially owned by more than one person (if, for example,
persons share the power to vote or the power to dispose of the shares). In addition, shares are deemed to be beneficially owned
by a person if the person has the right to acquire the shares (for example, upon exercise of an option) within 60 days of the
date as of which the information is provided. In computing the percentage ownership of any person, the amount of shares outstanding
is deemed to include the amount of shares beneficially owned by such person (and only such person) by reason of these acquisition
rights.
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(2)
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Based on 81,975,927 shares
of common stock issued and outstanding as of August 13, 2018.
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(3)
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Includes 2,953,640 shares
of common stock held by Dr. Dent directly, 46,900,000 shares of common stock held in the name of Mary S. Dent Gifting Trust Common,
8,678,462 shares of common stock issuable upon exercise of warrants, and 558,333 vested employee stock options. Excludes 441,667
employee stock options which are subject to future vesting requirements and are not expected to vest within 60 days of August
13, 2018.
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(4)
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Includes 2,100,000 shares
of common stock held by SKS Consulting of South Florida Corp., a corporation directly controlled by George O’Leary, and
400,000 vested employee stock options. Excludes 1,800,000 employee stock options which are subject to future vesting requirements
and are not expected to vest within 60 days of August 13, 2018.
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(5)
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The address of this beneficial
owner is 1405 Estuary Trail, Delray Beach, Florida 33483. Chris Salamone, as Chief Executive Officer of Urania Holdings LLC, holds
voting and dispositive power over the securities of the Company held by Urania Holdings LLC. Includes 4,370,000 shares of common
stock and 1,250,000 shares of common stock issuable upon exercise of warrants.
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(6)
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The address of this beneficial
owner is 2251 San Diego Ave, #B150, San Diego CA 92110. Michael Sobeck as the Managing Member of Iconic Holdings, LLC holds voting
and dispositive power over the securities of the Company held by Iconic Holdings, LLC. Includes (i) 7,692,143 shares of common
stock issuable upon conversion of the Iconic Convertible Notes, each of which are subject to a 9.99% beneficial ownership limitation,
and (ii) up to 497,252 shares issuable under warrants with 9.99% beneficial ownership limitation. Does not include (i) 15,122,192
shares of common stock issuable under warrants with 9.99% beneficial ownership limitation and (ii) up to 18,920,932 shares of
common stock issuable under the Investment Agreement, which are subject to a 9.99% beneficial ownership limitation.
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SELLING STOCKHOLDERS
The shares of common
stock being offered by the selling stockholders are those previously issued to the selling stockholders, and those issuable to
the selling stockholders, upon exercise of the warrants. For additional information regarding the issuances of those shares of
common stock and the warrants, see “Prospectus Summary – July Private Placement of Common Shares and Warrants”
above. We are registering the Common Stock in order to permit the selling stockholders to offer the shares for resale from time
to time. Except for the ownership of the shares of Common Stock and the Warrants, the selling stockholders have not had any material
relationship with us within the past three years.
The table below lists
the selling stockholders and other information regarding the beneficial ownership of the shares of Common Stock by each of the
selling stockholders. The second column lists the number of shares of Common Stock beneficially owned by each selling stockholder,
based on its ownership of the shares of Common Stock and the Warrants, as of August 13, 2018, assuming exercise of the Warrants
held by the selling stockholders on that date, without regard to any limitations on exercises.
The third column lists
the shares of Common Stock being offered by this prospectus by the selling stockholders.
In accordance with
the terms of the Registration Rights Agreement with the selling stockholders, this prospectus generally covers the resale of at
least the sum of (i) the maximum number of shares of Common Stock issued and (ii) the maximum number of shares of Common Stock
issuable upon exercise of the related Warrants, determined as if the outstanding Warrants were exercised in full as of the trading
day immediately preceding the date this registration statement was initially filed with the SEC, each as of the trading day immediately
preceding the applicable date of determination and all subject to adjustment as provided in the Registration Rights Agreement,
without regard to any limitations on the exercise of the Warrants. The fourth column assumes the sale of all of the shares offered
by the selling stockholders pursuant to this prospectus.
Under the terms of
the Warrants, a selling stockholder may not exercise the warrants to the extent such exercise would cause such selling stockholder,
together with its affiliates, to beneficially own a number of shares of Common Stock which would exceed 4.99% of our then outstanding
Common Stock following such exercise, excluding for purposes of such determination Common Stock issuable upon exercise of the Warrants
which have not been exercised. The number of shares in the second column does not reflect this limitation. The selling stockholders
may sell all, some or none of their shares in this offering. See “Plan of Distribution.”
Name of Selling Stockholder
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Number of Shares of Common
Stock Owned Prior to Offering
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|
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Maximum Number of Shares of
Common Stock to be Sold Pursuant to this Prospectus
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Number of Shares of Common
Stock Owned After Offering
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Empery Asset Master, Ltd.
(1)
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6,692,062
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13,802,378
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(4)
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0
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Empery Tax Efficient, LP
(2)
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1,529,692
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3,154,990
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(5)
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0
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Empery Tax Efficient II, LP
(3)
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7,778,246
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|
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16,042,633
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(6)
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0
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(1)
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Empery Asset Management LP, the authorized agent of Empery
Asset Master Ltd (“EAM”), has discretionary authority to vote and dispose of the shares held by EAM and may be deemed
to be the beneficial owner of these shares. Martin Hoe and Ryan Lane, in their capacity as investment managers of Empery Asset
Management LP, may also be deemed to have investment discretion and voting power over the shares held by EAM. EAM, Mr. Hoe and
Mr. Lane each disclaim any beneficial ownership of these shares. The business address for each of EAM, Empery Asset Management
LP and Messrs. Hoe and Lane is c/o Empery Asset Management, LP, 1 Rockefeller Plaza, Suite 1205, New York, NY 10020.
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(2)
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Empery Asset Management LP, the authorized agent of Empery
Tax Efficient, LP (“ETE”), has discretionary authority to vote and dispose of the shares held by ETE and may be deemed
to be the beneficial owner of these shares. Martin Hoe and Ryan Lane, in their capacity as investment managers of Empery Asset
Management LP, may also be deemed to have investment discretion and voting power over the shares held by ETE. ETE, Mr. Hoe and
Mr. Lane each disclaim any beneficial ownership of these shares. The business address for each of ETE, Empery Asset Management
LP and Messrs. Hoe and Lane is c/o Empery Asset Management, LP, 1 Rockefeller Plaza, Suite 1205, New York, NY 10020.
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(3) Empery
Asset Management LP, the authorized agent of Empery Tax Efficient II, LP (“ETE II”), has discretionary authority to
vote and dispose of the shares held by ETE II and may be deemed to be the beneficial owner of these shares. Martin Hoe and Ryan
Lane, in their capacity as investment managers of Empery Asset Management LP, may also be deemed to have investment discretion
and voting power over the shares held by ETE II. ETE II, Mr. Hoe and Mr. Lane each disclaim any beneficial ownership of these shares.
The business address for each of ETE II, Empery Asset Management LP and Messrs. Hoe and Lane is c/o Empery Asset Management, LP,
1 Rockefeller Plaza, Suite 1205, New York, NY 10020.
(4) Includes
(i) 1,631,190 shares of Common Stock held by the Selling Stockholder, (ii) 1,714,841 shares of Common Stock issuable upon exercise
of Pre-Funded Warrants held by the Selling Stockholder, (iii) 3,346,031 shares of Common Stock issuable upon exercise of the Series
A Warrants held by the Selling Stockholder and (iv) a maximum of 7,110,316 shares of Common Stock issuable upon exercise of the
Series B Warrants held by the Selling Stockholder, assuming that the Maximum Eligibility Number in the Series B Warrants is determined
based on an assumed Reset Price of $0.08 per share.
(5) Includes
(i) 372,862 shares of Common Stock held by the Selling Stockholder, (ii) 391,984 shares of Common Stock issuable upon exercise
of Pre-Funded Warrants held by the Selling Stockholder, (iii) 764,846 shares of Common Stock issuable upon exercise of the Series
A Warrants held by the Selling Stockholder and (iv) a maximum of 1,625,298 shares of Common Stock issuable upon exercise of the
Series B Warrants held by the Selling Stockholder, assuming that the Maximum Eligibility Number in the Series B Warrants is determined
based on an assumed Reset Price of $0.08 per share.
(6) Includes
(i) 1,895,948 shares of Common Stock held by the Selling Stockholder, (ii) 1,993,175 shares of Common Stock issuable upon exercise
of Pre-Funded Warrants held by the Selling Stockholder, (iii) 3,889,123 shares of Common Stock issuable upon exercise of the Series
A Warrants held by the Selling Stockholder and (iv) a maximum of 8,264,386 shares of Common Stock issuable upon exercise of the
Series B Warrants held by the Selling Stockholder, assuming that the Maximum Eligibility Number in the Series B Warrants is determined
based on an assumed Reset Price of $0.08 per share.
DESCRIPTION OF SECURITIES
Authorized and Outstanding Capital Stock
We have authorized
500,000,000 shares of common stock, par value $0.0001, 81,975,927 of which are currently issued and outstanding. Additionally,
we have 20,000,000 shares of “blank check” preferred stock authorized; however, there are no such shares of preferred
stock currently outstanding.
Common Stock
The holders of our
common stock are entitled to one vote per share. In addition, the holders of our common stock will be entitled to receive ratably
dividends, if any, declared by our board of directors out of legally available funds; however, the current policy of our board
of directors is to retain earnings, if any, for operations and growth. Upon liquidation, dissolution or winding-up, the holders
of our common stock will be entitled to share ratably in all assets that are legally available for distribution. The holders of
our common stock will have no preemptive, subscription, redemption or conversion rights. The rights, preferences and privileges
of holders of our common stock will be subject to, and may be adversely affected by, the rights of the holders of any series of
preferred stock, which may be designated solely by action of our board of directors and issued in the future.
Blank Check Preferred Stock
Our board of directors
will be authorized, subject to any limitations prescribed by law, without further vote or action by our stockholders, to issue
from time to time shares of preferred stock in one or more series. Each series of preferred stock will have the number of shares,
designations, preferences, voting powers, qualifications and special or relative rights or privileges as shall be determined by
our board of directors, which may include, among others, dividend rights, voting rights, liquidation preferences, conversion rights
and preemptive rights.
Warrants
On March 22, 2017,
the Company entered into an Amended Investment Agreement whereby the parties agreed to modify the terms of Investment Agreement
by providing that in lieu of granting the investor warrants for each $50,000 that the investor tenders to the Company, the Company
shall grant, and has granted, to the investor warrants to purchase an aggregate of seven million shares of common stock, regardless
of whether or not the investors tender further cash to the Company. The warrants shall have the following fixed exercise prices:
(i) four million shares at $0.25 per share; (ii) two million shares at $0.50 per share; and (iii) one million shares at $1.00 per
share. The warrants also contain a “cashless exercise” provision and the shares underlying the warrants will not be
registered.
In connection with
the Investment Agreement, we also issued to Iconic a warrant to purchase up to 6,111,111 shares of our common stock, at an exercise
price of $0.09 per share. The warrant shall expire on July 11, 2021 and also has a “cashless” exercise provision. The
warrant has a 4.99% beneficial ownership limitation which may be adjusted at the holder’s request to a 9.99% beneficial ownership
limitation upon 61 days’ prior notice.
On January 2, 2015,
NWC agreed to issue to Dr. Dent 2,000,000 ten-year warrants to purchase common shares at an exercise price of $0.05 per share as
compensation for interest accrued on loans made by Dr. Dent to NWC.
In July 2016, we issued
to investors five-year warrants to purchase up to 2,187,500 shares of common stock at an exercise price of $0.10 per share.
In July 2016 we issued
Delaney Equity Group, LLC (“Delaney”) five year warrants to purchase 277,778 shares of commons stock at an exercise
price of $0.09, in exchange for services provided.
In February 2017, pursuant
to the Investment Agreement, we issued Iconic Holdings, LLC a warrant to purchase up to 500,000 shares of our common stock, at
an exercise price of $0.15 per share. The warrant shall expire on February 10, 2020 and shall have a “cashless” exercise
provision. The warrant has a 9.99% beneficial ownership limitation.
On March 22, 2017,
we granted to Iconic five-year warrants to purchase an aggregate of 7,000,000 shares of common stock. The warrants have the following
fixed exercise prices: (i) 4,000,000 shares at $0.25 per share; (ii) 2,000,000 shares at $0.50 per share; and (iii) 1,000,000 shares
at $1.00 per share. The warrants also contain a “cashless exercise” provision and the shares underlying the warrants
will not be registered. We also issued to a third party five-year fee warrants to purchase 200,000 shares of our common stock at
an exercise price of $0.25 per share, 100,000 shares of our common stock at an exercise price of $0.50 per share, and 50,000 shares
of our common stock at an exercise price of $1.00 per share.
On May 22, 2017, in
connection with the issuance of the $111k Note, we issued to Iconic a five-year warrant to purchase 133,333 shares of our common
stock at an exercise price of $0.75 per share. We also issued to a third party a five-year fee warrant to purchase 6,667 shares
of our common stock at an exercise price of $0.75 per share.
On August 8, 2017,
in exchange for a five-year warrant to purchase 1,000,000 shares of common stock at an exercise price of $0.30 per share, Iconic
agreed to (i) extend the maturity date of the $550k Note until July 7, 2018, and (ii) extend the maturity date of the $50k Note
until July 11, 2018.
During October 2017,
we sold 1,461,111 shares of common stock in private placement transactions to 3 investors at a share price between $0.18 and $0.20
per share. In connection with the stock sales, we also issued 959,998 five-year warrants to purchase shares of common stock at
an exercise price of $0.30 per share.
On January 11, 2018,
we sold 588,235 shares of common stock in a private placement transaction to an investor and received $50,000 in proceeds from
the sale. The shares were issued at a share price of $0.085 per share. In connection with the stock sale, we also issued 588,235
five-year warrants to purchase shares of common stock at an exercise price of $0.15 per share.
On February 12, 2018,
we issued a warrant to purchase 6,678,462 shares of common stock to a related party, Dr. Michael Dent, our Chief Executive Officer
and Chairman of the Board, as an inducement to (i) extend the maturity dates of up to $439,450 loaned by Dr. Dent to us in 2017
and 2018 in the form of unsecured promissory notes, including $75,000 loaned from Dr. Dent to us in January 2018 to allow us to
retire an existing convertible promissory note payable before such convertible promissory note became eligible for conversion,
and (ii) provide continued loans to us. The warrant is immediately exercisable at an exercise price of $0.065 per share, subject
to adjustment, and expires five years after the date of issuance.
On February 28, 2018,
we sold 2,352,942 shares of common stock in private placement transactions to two investors and received $200,000 in proceeds from
the sale. The shares were issued at a share price of $0.085 per share. In connection with the stock sales, we also issued to the
investors 1,764,706 five-year warrants to purchase shares of common stock at an exercise price of $0.15 per share.
On March 28, 2018,
in exchange for a five-year warrant to purchase 125,000 shares of our common stock at an exercise price of $0.05 per share, Iconic
agreed to extend the maturity date of the $111k Note until July 11, 2018.
On May 10, 2018, we
sold 100,000 shares of common stock in private placement transactions to an investor and received $15,500 in proceeds from the
sale. The shares were issued at a share price of $0.155 per share. In connection with the stock sales, we also issued to the investor
50,000 five-year warrants to purchase shares of common stock at an exercise price of $0.25 per share.
On June 6, 2018, the
Company issued 600,000 five-year warrants with an exercise price of $0.15 to two individuals for consulting services to be performed
between June 6 and December 6, 2018.
On June 14, 2018, we
sold 208,000 shares of common stock in private placement transactions to an investor and received $52,000 in proceeds from the
sale. The shares were issued at a share price of $0.25 per share. In connection with the stock sales, we also issued to the investor
104,000 five-year warrants to purchase shares of common stock at an exercise price of $0.35 per share.
On July 11, 2018, in
exchange for a three-year warrant to purchase 200,000 shares of our common stock at an exercise price of $0.25 per share and a
three-year warrant to purchase 300,000 shares of our common stock at an exercise price of $0.50 per share, Iconic agreed to extend
the maturity date of the Convertible Notes until July 31, 2019.
On July 13, 2018, in
exchange for a three-year warrant to purchase 175,000 shares of our common stock at an exercise price of $0.25 per share and a
three-year warrant to purchase 75,000 shares of our common stock at an exercise price of $0.50 per share, Iconic agreed to extend
the maturity date of the Convertible Notes until December 31, 2019.
On July 16, 2018 we
issued: (ii) warrants to purchase up to an aggregate of 8,000,000 shares of our common stock with an exercise price of $0.25 per
share, subject to anti-dilution adjustments, and a term of five years (the “Series A Warrants”), (iii) warrants to
purchase up to a maximum of 17,000,000 shares of our common stock (of which, none are initially exercisable) for a nominal exercise
price , and (ii) a 10% discount to the market price of our common stock at and around the time when this Registration Statement
is declared effective by the SEC (and, if certain conditions are not satisfied, at other specified times) (the “Series B
Warrants”), and (iv) pre-funded warrants to purchase an aggregate of 4,100,000 shares of our common stock (the “Pre-Funded
Warrants”).
On August 9, 2018 warrants
to purchase up to an aggregate of 100,000 shares of our common stock with an exercise price of $0.25 per share, subject to anti-dilution
adjustments, and a term of three (3) years.
Convertible Notes
The sales of the securities
referenced below were exempt from registration under the Securities Act in reliance upon Section 4(a)(2) of the Securities
Act, and/or Regulation D as promulgated thereunder, as transactions by an issuer not involving any public offering. The recipients
of the securities in each of these transactions represented their intentions to acquire the securities for investment only and
not with a view to or for sale in connection with any distribution thereof, and appropriate legends were placed upon the stock
certificates issued in these transactions.
Investment Agreement Convertible Notes
In connection with
the Investment Agreement, we issued the $550k Note. At any time and from time to time, the holder of the $550k Note may convert,
in whole or in part, the outstanding and unpaid principal amount under the $550k Note into shares of the Company’s common
stock at a conversion price of $0.08 per share.
In addition, we also
concurrently issued the $50k Note. Iconic, as the holder of the $50k Note, also has the right to, at its sole option, at any time
and from time to time, to convert in whole or in part the outstanding and unpaid principal amount under the $50k Note into shares
of the Company’s common stock at a conversion price of $0.10 per share. The $550k Note and $50k Note have a 9.99% beneficial
ownership limitation. 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 $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.
On May 22, 2017, we
entered into the $111k Note. The $111k Note is convertible into shares of our common stock at the discretion of the note holder
at a fixed price of $0.35 per share, and is secured by all of our assets. The $121k Note was originally scheduled to mature on
January 22, 2018, but the maturity date was extended to July 11, 2018 during March 2018 and to December 31, 2019 during July 2018.
Other Convertible Notes
On July 10, 2017, we
entered into a securities purchase agreement for the sale of a $53,000 convertible note to PULG. The note included a $3,000 original
issue discount, for net proceeds of $50,000. The note has an interest rate of 10% and a default interest rate of 22% and matures
on April 15, 2018. The note may be converted into common stock 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. 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.
On September 7, 2017,
we entered into a securities purchase agreement for the sale of a $35,000 convertible note to PULG. The note included a $3,000
original issue discount, for net proceeds of $32,000. The note has an interest rate of 10% and a default interest rate of 20% and
matures on June 15, 2018. The note may be converted into common stock 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. On March 5, 2018,
the Company prepaid the balance on the note, including accrued interest, for a one-time cash payment of $49,502.
On September 11, 2017,
we entered into a securities purchase agreement for the sale of a $55,000 convertible note to Crown Bridge Partners LLC. The note
included a $7,500 original issue discount, for net proceeds of $47,500. The note has an interest rate of 10% and a default interest
rate of 12% and matures on September 11, 2018. The note may be converted into common stock 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. On March 13, 2018, the Company prepaid the balance on the note, including accrued interest,
for a one-time cash payment of $85,258.
On October 23, 2017,
we entered into a securities purchase agreement for the sale of a $53,000 convertible note to PULG. The note included a $3,000
original issue discount, for net proceeds of $50,000. The note has an interest rate of 10% and a default interest rate of 20% and
matures on July 30, 2018. The note may be converted into common stock 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. On April 18, 2018, the Company prepaid
the balance on the note, including accrued interest, for the amount of $75,000.
On October 27, 2017,
we entered into a securities purchase agreement for the sale of a $171,500 convertible note to an individual lender. The note included
a $21,500 original issue discount, for net proceeds of $150,000. The note has an interest rate of 10% and a default interest rate
of 22% and matures on October 26, 2018. The note may be converted into common stock 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.
On January 2, 2018,
we entered into a securities purchase agreement for the sale of a $57,750 convertible note. The transaction closed on January 3,
2018. The note included a $5,250 original issue discount and $2,500 fee for net proceeds of $50,000. The note has an interest rate
of 10% and a default interest rate of 18% and matures on January 2, 2019. The note may be converted into our common stock by the
holder at any time after the issuance date, subject to a 4.99% beneficial our common stock during the twenty (20) trading days
prior to the conversion date. Upon an event of default caused by our 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 our breach of any other events of default specified in the Note, 150% of the outstanding principal and any interest due
amount shall be immediately due.
On February 2, 2018,
we entered into a securities purchase agreement for the sale of a $112,750 convertible note. The transaction closed on February
8, 2018. The note included $12,750 fees for net proceeds of $100,000. The note has an interest rate of 10% and a default interest
rate of 24% and matures on February 2, 2019. The note may be converted into our common stock 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 our common stock during the twenty (20) trading days prior to the conversion date. Upon an event
of default caused by our 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 our 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. This
note was repaid in August 2018.
On February 13, 2018,
we entered into a securities purchase agreement for the sale of a $83,000 convertible note. The transaction closed on February
21, 2018. The note included $8,000 fees for net proceeds of $75,000. The note has an interest rate of 10% and a default interest
rate of 24% and matures on February 13, 2019. The note may be converted into our common stock of 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 our 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.
On March 5, 2018, we
entered into a securities purchase agreement for the sale of a $105,000 convertible note. The transaction closed on March 12, 2018.
The note included $5,000 fees for net proceeds of $100,000. The note has an interest rate of 10% and a default interest rate of
24% and matures on March 5, 2019. The note may be converted into our common stock of 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 our common stock during the twenty (20) trading days prior to the conversion date.
Upon an event of default, 110-150% of the outstanding principal and any interest due amount shall be immediately due, depending
on the nature of the breach.
On April 2, 2018, we
entered into a securities purchase agreement for the sale of a $63,000 convertible note. The transaction closed on April 3, 2018.
The note included $3,000 fees for net proceeds of $60,000. The note has an interest rate of 10% and a default interest rate of
22% and matures on January 15, 2019. The note may be converted into common stock 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 our common stock during the fifteen (15) trading days prior to the conversion date. Upon
an event of default caused by our 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 our breach of any other events
of default specified in the Note, 150% of the outstanding principal and any interest due amount shall be immediately due.
On April 16, 2018,
we entered into a securities purchase agreement for the sale of a $57,750 convertible note. The transaction closed on April 17,
2018. The note included $7,750 fees for net proceeds of $50,000. The note has an interest rate of 10% and a default interest rate
of 18% and matures on April 16, 2019. The note may be converted into common stock of 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 our common stock during the twenty (20) trading days prior to the conversion date. Upon an event of default
caused by our 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 our breach of any other events of default
specified in the Note, 150% of the outstanding principal and any interest due amount shall be immediately due.
On April 18, 2018,
we entered into a securities purchase agreement for the sale of a $90,000 convertible note. The transaction closed on April 18,
2018. The $90k Note included $4,500 fees for net proceeds of $85,500. The note has an interest rate of 10% and a default interest
rate of 24% and matures on April 18, 2019. The note may be converted into common stock of 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 our common stock during the twenty (20) trading days prior to the conversion date. Upon an event of default
caused by our failure to deliver shares upon a conversion pursuant to the terms of the Note, we 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 our breach of any other events of default specified in the Note, 150% of the outstanding principal and any
interest due amount shall be immediately
On April 18 2018, we
entered into a securities purchase agreement for the sale of a $53,000 convertible note. The transaction closed on April 23, 2018.
The note included $3,000 fees for net proceeds of $50,000. The note has an interest rate of 10% and a default interest rate of
22% and matures on January 30, 2019. The note may be converted into common stock 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 our common stock during the fifteen (15) trading days prior to the conversion date. Upon
an event of default caused by our 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 our 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 transaction closed
on May 4, 2018. The note included $3,250 fees for net proceeds of $60,000. The note has an interest rate of 10% and a default interest
rate of 24% and matures on May 3, 2019. The note may be converted into common stock 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 our common stock during the twenty (20) trading days prior to the conversion
date. Upon an event of default caused by our failure to deliver shares upon a conversion pursuant to the terms of the Note, we
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 our failure to maintain a listing for our common stock, the outstanding principal
shall increase by 50%. Upon an event of default caused by our failure to maintain a bid price for our common stock, the outstanding
principal shall increase by 20%.
On May 7, 2018, we
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 note included $2,000 fees for net proceeds of $35,000. The note has an interest rate of 10% and a default
interest rate of 24% and matures on May 7, 2019. The note may be converted into common stock of 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 our common stock during the twenty (20) trading days prior to the
conversion date. Upon an event of default caused by our failure to deliver shares upon a conversion pursuant to the terms of the
note, we 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 our failure to maintain a listing for its common stock, the
outstanding principal shall increase by 50%. Upon an event of default caused by our failure to maintain a bid price for its common
stock, the outstanding principal shall increase by 20%.
On May 9, 2018, we
entered into a securities purchase agreement for the sale of a $63,000 convertible note. The transaction closed on May 12, 2018.
The note included $3,000 fees for net proceeds of $60,000. The note has an interest rate of 10% and a default interest rate of
22% and matures on May 7, 2019. The note may be converted into common stock 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 our common stock during the fifteen (15) trading days prior to the conversion date. Upon
an event of default caused by our 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 our breach of any other events
of default specified in the Note, 150% of the outstanding principal and any interest due is immediately due and payable.
On May 24, 2018, the
Company entered into a securities purchase agreement for the sale of a $78,750 convertible note. The note included $3,750 fees
for net proceeds of $75,000. The note has an interest rate of 10% and a default interest rate of 24% and matures on May 24, 2019.
The note may be converted into common stock of the Company by the holder at any time after the 6-month anniversary of the issuance
date, subject to a 4.99% beneficial ownership limitation, at a conversion price per share equal to a 40% discount to the lowest
bid or trading price of the Company’s common stock during the twenty (20) trading days prior to the conversion date. Upon
an event of default caused by the Company’s failure to deliver shares upon a conversion pursuant to the terms of the Note,
the Company would incur a penalty of $250 per day beginning on the fourth day after the conversion notice, increasing to $500
per day beginning on the tenth day. Upon an event of default caused by the Company’s failure to maintain a listing for its
common stock, the outstanding principal shall increase by 50%. Upon an event of default caused by the Company’s failure
to maintain a bid price for its common stock, the outstanding principal shall increase by 20%. If not paid at maturity, the amount
due under the note increases by 10%.
PLAN OF DISTRIBUTION
We are registering
the shares of Common Stock previously issued and upon exercise of the Warrants to permit the resale of these shares of Common Stock
by the holders thereof and holders of the Warrants from time to time after the date of this prospectus. We will not receive any
of the proceeds from the sale by the selling stockholders of the shares of Common Stock. We will bear all fees and expenses incident
to our obligation to register the shares of Common Stock.
The selling stockholders
may sell all or a portion of the shares of Common Stock beneficially owned by them and offered hereby from time to time directly
or through one or more underwriters, broker-dealers or agents. If the shares of Common Stock are sold through underwriters or broker-dealers,
the selling stockholders will be responsible for underwriting discounts or commissions or agent’s commissions. The shares
of Common Stock may be sold in one or more transactions at fixed prices, at prevailing market prices at the time of the sale, at
varying prices determined at the time of sale, or at negotiated prices. These sales may be effected in transactions, which may
involve crosses or block transactions,
|
●
|
on any national securities
exchange or quotation service on which the securities may be listed or quoted at the time of sale;
|
|
●
|
in the over-the-counter
market;
|
|
●
|
in transactions otherwise
than on these exchanges or systems or in the over-the-counter market;
|
|
●
|
through the writing of
options, whether such options are listed on an options exchange or otherwise;
|
|
●
|
ordinary brokerage transactions
and transactions in which the broker-dealer solicits purchasers;
|
|
●
|
block trades in which
the broker-dealer will attempt to sell the shares as agent but may position and resell a portion of the block as principal to
facilitate the transaction;
|
|
●
|
purchases by a broker-dealer
as principal and resale by the broker-dealer for its account;
|
|
●
|
an exchange distribution
in accordance with the rules of the applicable exchange;
|
|
●
|
privately negotiated
transactions;
|
|
●
|
sales pursuant to Rule
144;
|
|
●
|
broker-dealers may agree
with the selling security holders to sell a specified number of such shares at a stipulated price per share;
|
|
●
|
a combination of any
such methods of sale; and
|
|
●
|
any other method permitted
pursuant to applicable law.
|
If the selling stockholders
effect such transactions by selling shares of Common Stock to or through underwriters, broker-dealers or agents, such underwriters,
broker-dealers or agents may receive commissions in the form of discounts, concessions or commissions from the selling stockholders
or commissions from purchasers of the shares of common stock for whom they may act as agent or to whom they may sell as principal
(which discounts, concessions or commissions as to particular underwriters, broker-dealers or agents may be in excess of those
customary in the types of transactions involved). In connection with sales of the shares of Common Stock or otherwise, the selling
stockholders may enter into hedging transactions with broker-dealers, which may in turn engage in short sales of the shares of
Common Stock in the course of hedging in positions they assume. The selling stockholders may also sell shares of Common Stock short
and deliver shares of Common Stock covered by this prospectus to close out short positions and to return borrowed shares in connection
with such short sales. The selling stockholders may also loan or pledge shares of Common Stock to broker-dealers that in turn may
sell such shares.
The selling stockholders
may pledge or grant a security interest in some or all of the Warrants or shares of Common Stock owned by them and, if they default
in the performance of their secured obligations, the pledgees or secured parties may offer and sell the shares of Common Stock
from time to time pursuant to this prospectus or any amendment to this prospectus under Rule 424(b)(3) or other applicable provision
of the Securities Act of 1933, as amended, amending, if necessary, the list of selling stockholders to include the pledgee, transferee
or other successors in interest as selling stockholders under this prospectus. The selling stockholders also may transfer and donate
the shares of Common Stock in other circumstances in which case the transferees, donees, pledgees or other successors in interest
will be the selling beneficial owners for purposes of this prospectus.
The selling stockholders
and any broker-dealer participating in the distribution of the shares of Common Stock may be deemed to be “underwriters”
within the meaning of the Securities Act, and any commission paid, or any discounts or concessions allowed to, any such broker-dealer
may be deemed to be underwriting commissions or discounts under the Securities Act. At the time a particular offering of the shares
of Common Stock is made, a prospectus supplement, if required, will be distributed which will set forth the aggregate amount of
shares of Common Stock being offered and the terms of the offering, including the name or names of any broker-dealers or agents,
any discounts, commissions and other terms constituting compensation from the selling stockholders and any discounts, commissions
or concessions allowed or reallowed or paid to broker-dealers.
Under the securities
laws of some states, the shares of Common Stock may be sold in such states only through registered or licensed brokers or dealers.
In addition, in some states the shares of Common Stock may not be sold unless such shares have been registered or qualified for
sale in such state or an exemption from registration or qualification is available and is complied with.
There can be no assurance
that any selling stockholder will sell any or all of the shares of Common Stock registered pursuant to the registration statement,
of which this prospectus forms a part.
The selling stockholders
and any other person participating in such distribution will be subject to applicable provisions of the Exchange Act, and the rules
and regulations thereunder, including, without limitation, Regulation M of the Exchange Act, which may limit the timing of purchases
and sales of any of the shares of Common Stock by the selling stockholders and any other participating person. Regulation M may
also restrict the ability of any person engaged in the distribution of the shares of Common Stock to engage in market-making activities
with respect to the shares of Common Stock. All of the foregoing may affect the marketability of the shares of Common Stock and
the ability of any person or entity to engage in market-making activities with respect to the shares of Common Stock.
We will pay all expenses
of the registration of the shares of Common Stock pursuant to the Registration Rights Agreement, estimated to be $57,686 in total,
including, without limitation, U.S. Securities and Exchange Commission filing fees and expenses of compliance with state securities
or “blue sky” laws; provided, however, that a selling stockholder will pay all underwriting discounts and selling commissions,
if any. We will indemnify the selling stockholders against liabilities, including some liabilities under the Securities Act, in
accordance with the Registration Rights Agreement, or the selling stockholders will be entitled to contribution. We may be indemnified
by the selling stockholders against civil liabilities, including liabilities under the Securities Act, that may arise from any
written information furnished to us by the selling stockholder specifically for use in this prospectus, in accordance with the
related Registration Rights Agreement, or we may be entitled to contribution.
Once sold under the
registration statement, of which this prospectus forms a part, the shares of Common Stock will be freely tradable in the hands
of persons other than our affiliates.
LEGAL MATTERS
Sheppard, Mullin, Richter & Hampton LLP, New York, New York, will pass upon the validity of the shares of our common stock in this offering.
EXPERTS
Our audited financial
statements as of December 31, 2017 and 2016 have been included in this prospectus in reliance on the report of RBSM LLP, an independent
registered public accounting firm appearing elsewhere herein given on the authority of said firm as experts in auditing and accounting.
WHERE YOU CAN FIND ADDITIONAL INFORMATION
We file annual, quarterly,
and special reports, along with other information with the SEC. Our SEC filings are available to the public over the internet on
the SEC’s website at http://www.sec.gov. You may also read and copy any document we file at the SEC’s Public Reference
Room at 100 F Street, NE, Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the Public Reference
Room.
This prospectus is
part of a Registration Statement on Form S-1 that we filed with the SEC to register the securities offered hereby under the Securities
Act of 1933, as amended. This prospectus does not contain all of the information included in the registration statement, including
certain exhibits and schedules. You may obtain the registration statement and exhibits to the registration statement from the SEC
at the address listed above or from the SEC’s internet site.
INDEX TO FINANCIAL STATEMENTS
Report
of Independent Registered Public Accounting Firm
To the Board of Directors and Shareholders
of
HealthLynked Corporation
Opinion on the Financial Statements
We have audited the accompanying consolidated
balance sheets of HealthLynked Corporation (the “Company”), as of December 31, 2017 and 2016, and the related consolidated
statements of operations, stockholders’ equity and cash flows for each of the two years in the period ended December 31,
2017 and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the
consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December
31, 2017 and 2016, and the results of its operations and its cash flows for each of the two years in the period ended December
31, 2017, in conformity with accounting principles generally accepted in the United States of America.
The Company's Ability to Continue as
a Going Concern
The accompanying consolidated financial
statements have been prepared assuming the Company will continue as a going concern. As discussed in Note 3 to the accompanying
consolidated financial statements, the Company has suffered recurring losses from operations, generated negative cash flows from
operating activities, has an accumulated deficit and has stated that substantial doubt exists about Company’s ability to
continue as a going concern. Management's evaluation of the events and conditions and management’s plans in regarding these
matters are also described in Note 3. The consolidated financial statements do not include any adjustments that might result from
the outcome of this uncertainty.
Basis for Opinion
These consolidated financial statements
are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial
statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United
States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws
and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with
the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement, whether due to error or fraud. The company is not required to have,
nor were we engaged to perform, an audit of the Company’s internal control over financial reporting. As part of our audits,
we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing
an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such
opinion.
Our audits included performing procedures
to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures
that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures
in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made
by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a
reasonable basis for our opinion.
We have served as the Company’s auditor since 2014
New York, New York
April 2, 2018
HEALTHLYNKED CORPORATION
CONSOLIDATED BALANCE SHEETS
|
|
December 31,
|
|
|
|
2017
|
|
|
2016
|
|
ASSETS
|
|
|
|
|
|
|
Current Assets
|
|
|
|
|
|
|
Cash
|
|
$
|
50,006
|
|
|
$
|
58,716
|
|
Accounts receivable, net
|
|
|
113,349
|
|
|
|
146,874
|
|
Prepaid expenses
|
|
|
81,892
|
|
|
|
43,545
|
|
Deferred offering costs
|
|
|
121,620
|
|
|
|
---
|
|
Total Current Assets
|
|
|
366,867
|
|
|
|
249,135
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment, net of accumulated depreciation of $728,391 and $704,785 as of
December 31, 2017 and 2016, respectively
|
|
|
63,376
|
|
|
|
70,836
|
|
Deposits
|
|
|
9,540
|
|
|
|
9,540
|
|
|
|
|
|
|
|
|
|
|
Total Assets
|
|
$
|
439,783
|
|
|
$
|
329,511
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS' DEFICIT
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Liabilities
|
|
|
|
|
|
|
|
|
Accounts payable and accrued expenses
|
|
$
|
253,514
|
|
|
$
|
148,474
|
|
Capital lease, current portion
|
|
|
18,348
|
|
|
|
18,348
|
|
Due to related party, current portion
|
|
|
917,395
|
|
|
|
311,792
|
|
Notes payable, net of original issue discount and debt discount of $26,881 and $-0- as of December 31, 2017 and 2016, respectively
|
|
|
70,186
|
|
|
|
---
|
|
Convertible notes payable, net of original issue discount and debt discount of $266,642 and $114,332 as of December 31, 2017 and 2016, respectively
|
|
|
811,858
|
|
|
|
485,668
|
|
Derivative financial instruments
|
|
|
398,489
|
|
|
|
---
|
|
Total Current Liabilities
|
|
|
2,469,790
|
|
|
|
964,282
|
|
|
|
|
|
|
|
|
|
|
Long-Term Liabilities
|
|
|
|
|
|
|
|
|
Capital leases, long-term portion
|
|
|
21,406
|
|
|
|
39,754
|
|
Due to related party, long-term portion
|
|
|
---
|
|
|
|
237,157
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities
|
|
|
2,491,196
|
|
|
|
1,241,193
|
|
|
|
|
|
|
|
|
|
|
Shareholders' Deficit
|
|
|
|
|
|
|
|
|
Common stock, par value $0.0001 per share, 230,000,000 shares authorized, 72,302,937 and 65,753,640 shares issued and outstanding as of December 31, 2017 and 2016, respectively
|
|
|
7,230
|
|
|
|
6,575
|
|
Common stock issuable, $0.0001 par value; 122,101 and 80,643 shares as of December 31, 2017 and 2016, respectively
|
|
|
8,276
|
|
|
|
6,451
|
|
Additional paid-in capital
|
|
|
2,638,311
|
|
|
|
1,199,511
|
|
Accumulated deficit
|
|
|
(4,705,230
|
)
|
|
|
(2,124,219
|
)
|
Total Shareholders' Deficit
|
|
|
(2,051,413
|
)
|
|
|
(911,682
|
)
|
|
|
|
|
|
|
|
|
|
Total Liabilities and Shareholders' Deficit
|
|
$
|
439,783
|
|
|
$
|
329,511
|
|
See the accompanying notes to these Consolidated Financial Statements
HEALTHLYNKED CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
|
|
Year Ended December 31,
|
|
|
|
2017
|
|
|
2016
|
|
Revenue
|
|
|
|
|
|
|
Patient service revenue, net
|
|
$
|
2,103,579
|
|
|
$
|
1,945,664
|
|
|
|
|
|
|
|
|
|
|
Operating Expenses
|
|
|
|
|
|
|
|
|
Salaries and benefits
|
|
|
2,022,445
|
|
|
|
1,559,725
|
|
General and administrative
|
|
|
1,848,866
|
|
|
|
1,543,866
|
|
Depreciation and amortization
|
|
|
23,606
|
|
|
|
16,461
|
|
Total Operating Expenses
|
|
|
3,894,917
|
|
|
|
3,120,052
|
|
|
|
|
|
|
|
|
|
|
(Loss) income from operations
|
|
|
(1,791,338
|
)
|
|
|
(1,174,388
|
)
|
|
|
|
|
|
|
|
|
|
Other Income (Expenses)
|
|
|
|
|
|
|
|
|
Loss on extinguishment of debt
|
|
|
(290,581
|
)
|
|
|
---
|
|
Financing cost
|
|
|
(72,956
|
)
|
|
|
---
|
|
Amortization of original issue and debt discounts on notes payable and convertible notes
|
|
|
(330,435
|
)
|
|
|
(208,626
|
)
|
Proceeds from settlement of lawsuit
|
|
|
|
|
|
|
43,236
|
|
Change in fair value of derivative financial instrument
|
|
|
3,967
|
|
|
|
---
|
|
Interest expense
|
|
|
(99,668
|
)
|
|
|
(36,628
|
)
|
Total other expenses
|
|
|
(789,673
|
)
|
|
|
(202,018
|
)
|
|
|
|
|
|
|
|
|
|
Net loss before provision for income taxes
|
|
|
(2,581,011
|
)
|
|
|
(1,376,406
|
)
|
|
|
|
|
|
|
|
|
|
Provision for income taxes
|
|
|
---
|
|
|
|
---
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(2,581,011
|
)
|
|
$
|
(1,376,406
|
)
|
|
|
|
|
|
|
|
|
|
Net loss per share, basic and diluted:
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
(0.04
|
)
|
|
$
|
(0.02
|
)
|
Fully diluted
|
|
$
|
(0.04
|
)
|
|
$
|
(0.02
|
)
|
|
|
|
|
|
|
|
|
|
Weighted average number of common shares:
|
|
|
|
|
|
|
|
|
Basic
|
|
|
69,560,481
|
|
|
|
60,034,482
|
|
Fully diluted
|
|
|
69,560,481
|
|
|
|
60,034,482
|
|
See the accompanying notes to these Consolidated Financial Statements
HEALTHLYNKED CORPORATION
CONSOLIDATED STATEMENT OF CHANGES IN
SHAREHOLDERS’ DEFICIT
YEARS ENDED DECEMBER 31, 2017 AND 2016
|
|
Number of Shares
|
|
|
|
|
|
|
|
|
Common
|
|
|
Additional
|
|
|
|
|
|
Total
|
|
|
|
Common
|
|
|
Preferred
|
|
|
Common
|
|
|
Preferred
|
|
|
Stock
|
|
|
Paid-in
|
|
|
Accumulated
|
|
|
Shareholders'
|
|
|
|
Stock
|
|
|
Stock
|
|
|
Stock
|
|
|
Stock
|
|
|
Issuable
|
|
|
Capital
|
|
|
Deficit
|
|
|
Deficit
|
|
|
|
(#)
|
|
|
(#)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
Balance at December 31, 2015
|
|
|
54,120,000
|
|
|
|
2,953,640
|
|
|
|
5,412
|
|
|
|
295
|
|
|
|
45,000
|
|
|
|
400,832
|
|
|
|
(747,813
|
)
|
|
|
(296,274
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sale of common stock
|
|
|
6,167,500
|
|
|
|
---
|
|
|
|
617
|
|
|
|
---
|
|
|
|
---
|
|
|
|
373,383
|
|
|
|
---
|
|
|
|
374,000
|
|
Consultant fees payable with common shares
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
6,451
|
|
|
|
---
|
|
|
|
---
|
|
|
|
6,451
|
|
Consultant fees paid with common shares and warrants
|
|
|
1,900,000
|
|
|
|
---
|
|
|
|
190
|
|
|
|
---
|
|
|
|
(45,000
|
)
|
|
|
131,983
|
|
|
|
---
|
|
|
|
87,173
|
|
Fair value of warrants and beneficial conversion feature allocated to proceeds of convertible notes payable
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
272,957
|
|
|
|
---
|
|
|
|
272,957
|
|
Shares and options issued pursuant to employee equity incentive plan
|
|
|
612,500
|
|
|
|
---
|
|
|
|
61
|
|
|
|
---
|
|
|
|
---
|
|
|
|
20,356
|
|
|
|
---
|
|
|
|
20,417
|
|
Conversion of preferred shares to common shares
|
|
|
2,953,640
|
|
|
|
(2,953,640
|
)
|
|
|
295
|
|
|
|
(295
|
)
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
Net loss
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
(1,376,406
|
)
|
|
|
(1,376,406
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2016
|
|
|
65,753,640
|
|
|
|
---
|
|
|
|
6,575
|
|
|
|
---
|
|
|
|
6,451
|
|
|
|
1,199,511
|
|
|
|
(2,124,219
|
)
|
|
|
(911,682
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sale of common stock
|
|
|
6,096,197
|
|
|
|
---
|
|
|
|
610
|
|
|
|
---
|
|
|
|
---
|
|
|
|
758,654
|
|
|
|
---
|
|
|
|
759,264
|
|
Fair value of warrants allocated to proceeds of common stock
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
89,376
|
|
|
|
---
|
|
|
|
89,376
|
|
Fair value of warrants allocated to proceeds of convertible notes payable
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
73,696
|
|
|
|
---
|
|
|
|
73,696
|
|
Fair value of warrants issued pursuant to Amended Investment Agreement
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
153,625
|
|
|
|
---
|
|
|
|
153,625
|
|
Fair value of warrants issued to extend convertible notes payable
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
290,581
|
|
|
|
---
|
|
|
|
290,581
|
|
Consultant fees payable with common shares and warrants
|
|
|
276,850
|
|
|
|
---
|
|
|
|
28
|
|
|
|
---
|
|
|
|
1,817
|
|
|
|
52,083
|
|
|
|
---
|
|
|
|
53,928
|
|
Shares and options issued pursuant to employee equity incentive plan
|
|
|
176,250
|
|
|
|
---
|
|
|
|
17
|
|
|
|
---
|
|
|
|
8
|
|
|
|
20,785
|
|
|
|
---
|
|
|
|
20,810
|
|
Net loss
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
(2,581,011
|
)
|
|
|
(2,581,011
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2017
|
|
|
72,302,937
|
|
|
|
---
|
|
|
|
7,230
|
|
|
|
---
|
|
|
|
8,276
|
|
|
|
2,638,311
|
|
|
|
(4,705,230
|
)
|
|
|
(2,051,413
|
)
|
See the accompanying notes to these Consolidated Financial Statements
HEALTHLYNKED CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
|
|
Year Ended December 31,
|
|
|
|
2017
|
|
|
2016
|
|
Cash Flows from Operating Activities
|
|
|
|
|
|
|
Net loss
|
|
$
|
(2,581,011
|
)
|
|
$
|
(1,376,406
|
)
|
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
23,606
|
|
|
|
16,461
|
|
Stock based compensation, including amortization of prepaid fees
|
|
|
106,743
|
|
|
|
146,208
|
|
Amortization of original issue discount and debt discount on convertible notes
|
|
|
330,435
|
|
|
|
208,626
|
|
Financing cost
|
|
|
72,956
|
|
|
|
75,000
|
|
Change in fair value of derivative financial instrument
|
|
|
(3,967
|
)
|
|
|
---
|
|
Loss on extinguishment of debt
|
|
|
290,581
|
|
|
|
---
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
33,525
|
|
|
|
153,252
|
|
Prepaid expenses and deposits
|
|
|
(38,347
|
)
|
|
|
3,042
|
|
Accounts payable and accrued expenses
|
|
|
105,042
|
|
|
|
3,207
|
|
Due to related party, current portion
|
|
|
41,168
|
|
|
|
14,271
|
|
Net cash used in operating activities
|
|
|
(1,619,269
|
)
|
|
|
(756,339
|
)
|
|
|
|
|
|
|
|
|
|
Cash Flows from Investing Activities
|
|
|
|
|
|
|
|
|
Acquisition of property and equipment
|
|
|
(16,147
|
)
|
|
|
(12,611
|
)
|
Net cash used in investing activities
|
|
|
(16,147
|
)
|
|
|
(12,611
|
)
|
|
|
|
|
|
|
|
|
|
Cash Flows from Financing Activities
|
|
|
|
|
|
|
|
|
Proceeds from sale of common stock
|
|
|
848,639
|
|
|
|
374,000
|
|
Proceeds from issuance of convertible notes
|
|
|
429,500
|
|
|
|
475,000
|
|
Proceeds from related party loans
|
|
|
338,470
|
|
|
|
201,500
|
|
Repayment of related party loans
|
|
|
(11,192
|
)
|
|
|
(149,285
|
)
|
Proceeds from issuance of notes payable
|
|
|
148,510
|
|
|
|
---
|
|
Repayment of notes payable and bank loans
|
|
|
(108,873
|
)
|
|
|
(84,980
|
)
|
Payments on capital leases
|
|
|
(18,348
|
)
|
|
|
(18,348
|
)
|
Net cash provided by financing activities
|
|
|
1,626,706
|
|
|
|
797,887
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash
|
|
|
(8,710
|
)
|
|
|
28,937
|
|
Cash, beginning of period
|
|
|
58,716
|
|
|
|
29,779
|
|
|
|
|
|
|
|
|
|
|
Cash, end of period
|
|
$
|
50,006
|
|
|
$
|
58,716
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosure of cash flow information:
|
|
|
|
|
|
|
|
|
Cash paid during the period for interest
|
|
$
|
1,002
|
|
|
$
|
3,813
|
|
Cash paid during the period for income tax
|
|
$
|
---
|
|
|
$
|
---
|
|
Schedule of non-cash investing and financing activities:
|
|
|
|
|
|
|
|
|
Fair value of warrants issued to extend maturity date of convertible notes payable, recognized as discount against convertible notes payable
|
|
$
|
7,506
|
|
|
$
|
---
|
|
Fair value of warrants issued pursuant to Amended Investment Agreement
|
|
$
|
153,625
|
|
|
$
|
---
|
|
Fair value of warrants, beneficial conversion feature and original issue discount allocated to proceeds of convertible notes payable
|
|
$
|
66,190
|
|
|
$
|
272,957
|
|
Fair value of warrants allocated to proceeds of common stock
|
|
$
|
89,376
|
|
|
|
---
|
|
Initial derivative liabilities, beneficial conversion features and original issue discounts allocated to proceeds of convertible notes payable
|
|
$
|
329,500
|
|
|
|
---
|
|
Common stock issuable issued during period
|
|
$
|
6,451
|
|
|
$
|
45,000
|
|
Common stock issued for preferred stock conversion
|
|
$
|
---
|
|
|
$
|
295
|
|
See the accompanying notes to these Consolidated Financial Statements
HEALTHLYNKED CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2017 AND 2016
NOTE 1 - BUSINESS AND BUSINESS PRESENTATION
HealthLynked Corporation, a Nevada corporation
(the “Company” or “HLYK”) filed its Articles of Incorporation on August 4, 2014. On September 3, 2014 HLYK
filed Amended Articles of Incorporation clarifying that the total authorized shares of 250,000,000 shares are broken up between
230,000,000 common shares and 20,000,000 preferred shares. On February 5, 2018, the Company filed the amendment with the Secretary
of State of Nevada to increase the amount of authorized shares of common stock to 500,000,000 shares.
On September 5, 2014, HLYK entered into
a share exchange agreement (the “Share Exchange Agreement”) with Naples Women’s Center LLC (“NWC”),
a Florida Limited Liability Company (“LLC”), acquiring 100% of the LLC membership units of NWC through the issuance
of 50,000,000 shares of HLYK common stock to the members of NWC (the “Restructuring”).
NWC is a multi-specialty medical group
including OB/GYN (both Obstetrics and Gynecology), and General Practice located in Naples, Florida.
HLYK operates an online personal medical
information and record archive system, the “HealthLynked Network”, which enables patients and doctors to keep track
of medical information via the Internet in a cloud based system. Patients complete a detailed online personal medical history including
past surgical history, medications, allergies, and family history. Once this information is entered patients and their treating
physicians are able to update the information as needed to provide a comprehensive medical history.
These consolidated financial
statements reflect all adjustments including normal recurring adjustments, which, in the opinion of management, are necessary to
present fairly the financial position, results of operations and cash flows for the periods presented in accordance with the GAAP.
All significant intercompany transactions
and balances have been eliminated upon consolidation. In addition, certain amounts in the prior periods’ consolidated financial
statements have been reclassified to conform to the current period presentation.
NOTE 2 – SIGNIFICANT ACCOUNTING
POLICIES
A summary of the significant accounting
policies applied in the presentation of the accompanying consolidated financial statements follows:
Basis of Presentation
The accompanying consolidated
financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America
(“US GAAP”).
All amounts referred to in the notes to
the consolidated financial statements are in United States Dollars ($) unless stated otherwise.
Use of Estimates
The preparation of the consolidated
financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions
that affect certain reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date
of the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period.
Accordingly, actual results could differ from those estimates. Significant estimates include assumptions about collection of accounts
receivable, the valuation and recognition of stock-based compensation expense, valuation allowance for deferred tax assets and
useful life of fixed assets.
Revenue Recognition
The Company recognizes revenue in accordance
with Accounting Standards Codification subtopic 605-10, Revenue Recognition (“ASC 605-10”) which requires that four
basic criteria must be met before revenue can be recognized: (1) persuasive evidence of an arrangement exists; (2) delivery has
occurred; (3) the selling price is fixed and determinable; and (4) collectability is reasonably assured. Determination of criteria
(3) and (4) are based on management’s judgments regarding the fixed nature of the selling prices of the products delivered
and the collectability of those amounts. Patient service revenues are recognized at the time of service for the net amount expected
to be collected. Provisions for discounts and rebates to customers, estimated returns and allowances, and other adjustments
HEALTHLYNKED CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2017 AND 2016
NOTE 2 – SIGNIFICANT ACCOUNTING
POLICIES (CONTINUED)
Cash and Cash Equivalents
For financial statement purposes, the Company
considers all highly-liquid investments with original maturities of three months or less to be cash and cash equivalents.
Accounts Receivable
Trade receivables are carried at their
estimated collectible amounts. Trade credit is generally extended on a short-term basis; thus trade receivables do not bear interest.
Trade accounts receivable are periodically evaluated for collectability based on past collectability of the insurance companies,
government agencies, and customers’ accounts receivable during the related period which generally approximates 45% of total
billings. Trade accounts receivable are recorded at this net amount. As of December 31, 2017 and December 31, 2016, the Company’s
gross accounts receivable were $256,446 and $333,804, respectively, and net accounts receivable were $113,349 and $146,874, respectively,
based upon net reporting of accounts receivable.
Capital Leases
Costs associated with capitalized leases
are capitalized and depreciated ratably over the term of the related useful life of the asset and/or the capital lease term. The
related depreciation for the years ended December 31, 2017 and 2016 was $18,348 and $18,348, respectively. Accumulated depreciation
of capitalized leases was $303,738 and $285,390 at December 31, 2017 and 2016, respectively.
Concentrations of Credit Risk
The Company’s financial instruments
that are exposed to a concentration of credit risk are cash and accounts receivable. There are no patients/customers that represent
10% or more of the Company’s revenue or accounts receivable. Generally, the Company’s cash and cash equivalents are
in checking accounts.
Property and Equipment
Property and equipment are stated at cost.
When retired or otherwise disposed, the related carrying value and accumulated depreciation are removed from the respective accounts
and the net difference less any amount realized from disposition, is reflected in earnings. For consolidated financial statement
purposes, property and equipment are recorded at cost and depreciated using the straight-line method over their estimated useful
lives of 5 to 7 years. The cost of repairs and maintenance is expensed as incurred; major replacements and improvements are capitalized.
The Company examines the possibility of
decreases in the value of fixed assets when events or changes in circumstances reflect the fact that their recorded value may not
be recoverable. The Company recognizes an impairment loss when the sum of expected undiscounted future cash flows is less than
the carrying amount of the asset. The amount of impairment is measured as the difference between the asset’s estimated fair
value and its book value. There was no impairment as of December 31, 2017 and 2016.
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.
HEALTHLYNKED CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2017 AND 2016
NOTE 2 – SIGNIFICANT ACCOUNTING
POLICIES (CONTINUED)
Derivative Financial Instruments
The Company reviews the terms of convertible
debt, equity instruments and other financing arrangements to determine whether there are embedded derivative instruments, including
embedded conversion options that are required to be bifurcated and accounted for separately as a derivative financial instrument.
Also, in connection with the issuance of financing instruments, the Company may issue freestanding options or warrants that may,
depending on their terms, be accounted for as derivative instrument liabilities, rather than as equity. Derivative financial instruments
are initially measured at their fair value. For derivative financial instruments that are accounted for as liabilities, the derivative
instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value
reported as charges or credits to income. To the extent that the initial fair values of the freestanding and/or bifurcated derivative
instrument liabilities exceed the total proceeds received, an immediate charge to income is recognized, in order to initially record
the derivative instrument liabilities at their fair value. The discount from the face value of convertible debt instruments resulting
from allocating some or all of the proceeds to the derivative instruments is amortized over the life of the instrument through
periodic charges to income.
The classification of derivative instruments,
including whether such instruments should be recorded as liabilities or as equity, is reassessed at the end of each reporting period.
If reclassification is required, the fair value of the derivative instrument, as of the determination date, is reclassified. Any
previous charges or credits to income for changes in the fair value of the derivative instrument are not reversed. Derivative instrument
liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement of the derivative
instrument could be required within twelve months of the balance sheet date. The Company does not use derivative instruments to
hedge exposures to cash flow, market, or foreign currency risks.
Fair Value of Assets and Liabilities
Fair
value is the price that would be received from the sale of an asset or paid to transfer a liability (i.e. an exit price) in the
principal or most advantageous market in an orderly transaction between market participants. In determining fair value, the accounting
standards have established a three-level hierarchy that distinguishes between (i) market data obtained or developed from independent
sources (i.e., observable data inputs) and (ii) a reporting entity’s own data and assumptions that market participants would
use in pricing an asset or liability (i.e., unobservable data inputs). Financial assets and financial liabilities measured and
reported at fair value are classified in one of the following categories, in order of priority of observability and objectivity
of pricing inputs:
|
●
|
Level 1 –
Fair value based on quoted prices in active markets for identical assets or liabilities
|
|
●
|
Level 2
– Fair value based on significant directly observable data (other than Level 1 quoted prices) or significant indirectly observable data through corroboration with observable market data. Inputs would normally be (i) quoted prices in active markets for similar assets or liabilities, (ii) quoted prices in inactive markets for identical or similar assets or liabilities or (iii) information derived from or corroborated by observable market data.
|
|
●
|
Level 3
– Fair value based on prices or valuation techniques that require significant unobservable data inputs. Inputs would normally be a reporting entity’s own data and judgments about assumptions that market participants would use in pricing the asset or liability
|
The fair value measurement level for an
asset or liability is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques
should maximize the use of observable inputs and minimize the use of unobservable inputs.
Stock-Based Compensation
The Company accounts for stock based compensation
under ASC 718 “Compensation – Stock Compensation” using the fair value based method. Under this method, compensation
cost is measured at the grant date based on the value of the award and is recognized over the service period, which is usually
the vesting period. This guidance establishes standards for the accounting for transactions in which an entity exchanges it equity
instruments for goods or services. It also addresses transactions in which an entity incurs liabilities in exchange for goods or
services that are based on the fair value of the entity’s equity instruments or that may be settled by the issuance of those
equity instruments.
HEALTHLYNKED CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS
DECEMBER 31, 2017 AND 2016
NOTE 2 – SIGNIFICANT ACCOUNTING
POLICIES (CONTINUED)
The Company uses the fair value method
for equity instruments granted to non-employees and use the Black-Scholes model for measuring the fair value of options. The stock
based fair value compensation is determined as of the date of the grant or the date at which the performance of the services is
completed (measurement date) and is recognized over the vesting periods.
Income Taxes
The Company follows Accounting Standards
Codification subtopic 740-10, Income Taxes (“ASC 740-10”) for recording the provision for income taxes. Deferred tax
assets and liabilities are computed based upon the difference between the financial statement and income tax basis of assets and
liabilities using the enacted marginal tax rate applicable when the related asset or liability is expected to be realized or settled.
Deferred income tax expenses or benefits are based on the changes in the asset or liability during each period. If available evidence
suggests that it is more likely than not that some portion or all of the deferred tax assets will not be realized, a valuation
allowance is required to reduce the deferred tax assets to the amount that is more likely than not to be realized. Future changes
in such valuation allowance are included in the provision for deferred income taxes in the period of change. Deferred income taxes
may arise from temporary differences resulting from income and expense items reported for financial accounting and tax purposes
in different periods. Deferred taxes are classified as current or non-current, depending on the classification of assets and liabilities
to which they relate. Deferred taxes arising from temporary differences that are not related to an asset or liability are classified
as current or non-current depending on the periods in which the temporary differences are expected to reverse and are considered
immaterial.
Recurring Fair Value Measurements
The carrying value of the Company’s
financial assets and financial liabilities is their cost, which may differ from fair value. The carrying value of cash held as
demand deposits, money market and certificates of deposit, marketable investments, accounts receivable, short-term borrowings,
accounts payable, accrued liabilities, and derivative financial instruments approximated their fair value.
Net Income (Loss) per Share
Basic net income (loss) per common share
is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding during the period.
During the years ended December 31, 2017 and 2016, the Company reported a net loss and excluded all outstanding stock options,
warrants and other dilutive securities from the calculation of diluted net loss per common share because inclusion of these securities
would have been anti-dilutive. As of December 31, 2017 and 2016, potentially dilutive securities were comprised of (i) 20,526,387
and 10,576,389 warrants outstanding, respectively, (ii) 2,349,996 and 1,600,000 stock options outstanding, respectively, (iii)
20,022,021 and 7,375,000 shares issuable upon conversion of convertible notes, respectively, and (iv) 628,750 and 940,000 unissued
shares subject to future vesting requirements granted pursuant to the Company’s Employee Incentive Plan.
Recent Accounting Pronouncements
In May 2014,
the FASB issued ASU 2014-09,
Revenue from Contracts with Customers — Topic 606
, which supersedes the revenue
recognition requirements in FASB ASC 605. The new guidance primarily states that an entity should recognize revenue to depict
the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects
to be entitled in exchange for those goods and services. In January 2017 and September 2017, the FASB issued several amendments
to ASU 2014-09, including updates stemming from SEC Accounting Staff Announcement in July 2017. The amendments and updates included
clarification on accounting for principal versus agent considerations (i.e., reporting gross versus net), licenses of intellectual
property and identification of performance obligations. These amendments and updates do not change the core principle of the standard,
but provide clarity and implementation guidance. The Company will adopt this standard on January 1, 2018 and selected the
modified retrospective transition method. The Company will modify its accounting policies to reflect the requirements of this
standard, however, the planned adoption is not expected to impact the Company’s financial statements and related disclosures.
In January 2016, the FASB issued ASU No. 2016-01,
Financial
Instruments — Overall: Recognition and Measurement of Financial Assets and Financial Liabilities.
The guidance
affects the accounting for equity investments, financial liabilities under the fair value option and the presentation and disclosure
requirements of financial instruments. The guidance is effective in the first quarter of fiscal 2019. Early adoption is permitted
for the accounting guidance on financial liabilities under the fair value option. The Company is currently evaluating the impact
of the new guidance on its financial statements.
HEALTHLYNKED CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2017 AND 2016
NOTE 2 – SIGNIFICANT ACCOUNTING
POLICIES (CONTINUED)
In February 2016, the FASB issued ASU
2016-02,
Leases (Topic 842)
and subsequently amended the guidance relating largely to transition considerations under the
standard in January 2017. The objective of this update is to increase transparency and comparability among organizations by recognizing
lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. This ASU is
effective for fiscal years beginning after December 15, 2018, including interim periods within those annual periods and is to be
applied utilizing a modified retrospective approach. The Company is currently evaluating the new guidance to determine the impact
it may have on its financial statements.
In November 2016, the
FASB issued ASU No. 2016-18,
Statement of Cash Flows (Topic 230): Restricted Cash
. The objective of this ASU is to
eliminate the diversity in practice related to the classification of
restricted cash or restricted cash equivalents in the
statement of cash flows.
For public business entities, this ASU is effective for annual and
interim reporting periods beginning after December 15, 2017, with early adoption permitted. The amendments in this update
should be applied retrospectively to all periods presented. The Company will adopt this standard on January 1, 2018 and will not
have a material impact on the Company’s financial statements.
In May 2017, the FASB issued ASU 2017-09,
Compensation -
Stock Compensation (Topic 718
)
:
Scope of Modification Accounting
(ASU 2016-09),
which provides
guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification
accounting in Topic 718. This pronouncement is effective for annual reporting periods beginning after December 15, 2017.
The
Company will adopt this standard on January 1, 2018 and will not have a material impact on the Company’s financial statements.
In July 2017, the FASB issued ASU No. 2017-11,
Earnings Per
Share, Distinguishing Liabilities from Equity and Derivatives and Hedging
, which changes the accounting and earnings per share
for certain instruments with down round features. The amendments in this ASU should be applied using a cumulative-effect adjustment
as of the beginning of the fiscal year or retrospective adjustment to each period presented and is effective for annual periods
beginning after December 15, 2018, and interim periods within those periods.
The Company
is currently evaluating the requirements of this new guidance and has not yet determined its impact on the Company’s financial
statements.
On December 22, 2017 the SEC staff issued Staff Accounting Bulletin 118 (SAB
118), which provides guidance on accounting for the tax effects of the Tax Cuts and Jobs Act (the TCJA). SAB 118 provides
a measurement period that should not extend beyond one year from the enactment date for companies to complete the accounting under
ASC 740. In accordance with SAB 118, a company must reflect the income tax effects of those aspects of the TCJA for which
the accounting under ASC 740 is complete. To the extent that a company’s accounting for certain income tax effects of the TCJA
is incomplete but for which they are able to determine a reasonable estimate, it must record a provisional amount in the financial
statements. Provisional treatment is proper in light of anticipated additional guidance from various taxing authorities, the
SEC, the FASB, and even the Joint Committee on Taxation. If a company cannot determine a provisional amount to be included
in the financial statements, it should continue to apply ASC 740 on the basis of the provisions of the tax laws that were in effect
immediately before the enactment of the TCJA. The Company has applied this guidance to its financial statements.
NOTE 3 – GOING CONCERN MATTERS
AND LIQUIDITY
As of December 31, 2017, we had a working
capital deficit of $2,102,923 and accumulated deficit $4,705,230. For the year ended December 31, 2017, we had a net loss of $2,581,011
and net cash used by operating activities of $1,619,269. Net cash used in investing activities was $16,147. Net cash provided by
financing activities was $1,626,706, resulting principally from $848,639 from the proceeds of the sale of common stock, $429,500
net proceeds from the issuance of convertible notes, $338,470 proceeds from related party loans, and $148,510 proceeds from issuance
of notes payable. Subsequent to December 31, 2017, we received additional $400,000 net proceeds from the sale of common stock and
$120,000 from the issuance of convertible notes payable. We used a portion of the proceeds to retire convertible notes payable
with a face value of $143,000.
HEALTHLYNKED CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2017 AND 2016
NOTE 3 – GOING CONCERN MATTERS
AND LIQUIDITY (CONTINUED)
The Company’s cash balance and revenues
generated are not currently sufficient and cannot be projected to cover its operating expenses for the next twelve months from
the date of this report. These matters raise substantial doubt about the Company’s ability to continue as a going concern.
Management’s plans include attempting to improve its business profitability and its ability to generate sufficient cash flow
from its operations to meet its needs on a timely basis, obtaining additional working capital funds through equity and debt financing
arrangements, and restructuring on-going operations to eliminate inefficiencies to raise cash balance in order to meet its anticipated
cash requirements for the next twelve months from the date of this report. However, there can be no assurance that these plans
and arrangements will be sufficient to fund the Company’s ongoing capital expenditures, working capital, and other requirements.
Management intends to make every effort to identify and develop sources of funds. The outcome of these matters cannot be predicted
at this time. There can be no assurance that any additional financings will be available to the Company on satisfactory terms and
conditions, if at all.
The ability of the Company to continue
as a going concern is dependent upon its ability to raise additional capital and achieve profitable operations. The accompanying consolidated financial statements do not include any adjustments related to the recoverability or classification of asset-carrying
amounts or the amounts and classification of liabilities that may result should the Company be unable to continue as a going concern.
During July 2016, HLYK entered into an
Investment Agreement (the “Investment Agreement”) pursuant to which the investor has agreed to purchase up to $3,000,000
of HLYK common stock over a three-year period starting upon registration of the underlying shares, with such shares put to the
investor by the Company pursuant to a specified formula that limits the number of shares able to be put to the investor to the
number equal to the average trading volume of the Company’s common shares for the ten consecutive trading days prior to
the put notice being issued. During the year ended December 31, 2017, the Company received $27,640 from the proceeds of the sale
of 222,588/ shares pursuant to the Investment Agreement.
The Company intends that the cost of
implementing its development and sales efforts related to the HealthLynked Network, as well as maintaining its existing and expanding
overhead and administrative costs, will be funded principally by cash received by the Company from the put rights associated with
the Investment Agreement and supplemented by other funding mechanisms, including sales of the Company’s common stock, loans
from related parties and convertible notes. The Company expects to repay its outstanding convertible notes, which have an aggregate
face value of $1,078,500 as of December 31, 2017, from outside funding sources, including but not limited to amounts available
upon the exercise of the put rights granted to the Company under the Investment Agreement, sales of equity, loans from related
parties and others or through the conversion of the notes into equity. No assurances can be given that the Company will be able
to access sufficient outside capital in a timely fashion in order to repay the convertible notes before they mature. If necessary
funds are not available, the Company’s business and operations would be materially adversely affected and in such event,
the Company would attempt to reduce costs and adjust its business plan.
NOTE 4 – DEFERRED OFFERING COSTS
On July 7, 2016, the Company entered into
the Investment Agreement with an accredited investor, pursuant to which an accredited investor agreed to invest up to $3,000,000
to purchase the Company’s common stock, par value of $.0001 per share. The purchase price for such shares shall be 80% of
the lowest volume weighted average price of the Company’s common stock during the five consecutive trading days prior to
the date on which written notice is sent by the Company to the investor stating the number of shares that the Company is selling
to the investor, subject to certain discounts and adjustments. Further, for each $50,000 that the investor tenders to the Company
for the purchase of shares of common stock, the investor was to be granted warrants for the purchase of an equivalent number of
shares of common stock. The warrants were to expire five (5) years from their respective grant dates and have an exercise price
equal to 130% of the weighted average purchase price for the respective “$50,000 increment.”
On March 22, 2017, the Company and the
investor entered into an Amended Investment Agreement (the “Amended Investment Agreement”) whereby the parties agreed
to modify the terms of the Investment Agreement by providing that in lieu of granting the investor warrants for each $50,000 that
the investor tenders to the Company, the Company granted to the investor warrants to purchase an aggregate of 7,000,000 shares
of common stock. The warrants have the following fixed exercise prices: (i) 4,000,000 shares at $0.25 per share; (ii) 2,000,000
shares at $0.50 per share; and (iii) 1,000,000 shares at $1.00 per share. The warrants also contain a “cashless exercise”
provision and the shares underlying the warrants will not be registered. The fair value of the warrants was calculated using the
Black-Scholes pricing model at $56,635, with the following assumptions: risk-free interest rate of 1.95%, expected life of 5 years,
volatility of 40%, and expected dividend yield of zero.
HEALTHLYNKED CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2017 AND 2016
NOTE 4 – DEFERRED OFFERING COSTS
(CONTINUED)
On June 7, 2017, the Company also granted
warrants to purchase 200,000 shares at $0.25 per share, 100,000 shares at $0.50 per share and 50,000 shares at $1.00 per share
to an advisor as a fee in connection with the Amended Investment Agreement. The fair value of the warrants was calculated using
the Black-Scholes pricing model at $96,990, with the following assumptions: risk-free interest rate of 1.74%, expected life of
5 years, volatility of 40%, and expected dividend yield of zero.
This fair value of the warrants was recorded
as a deferred offering cost and will be amortized over the period during which the Company can access the financing, which begins
the day after a registration statement registering shares underlying the Investment Agreement is declared effective by the United
States Securities and Exchange Commission (the “SEC”), and ends 3 years from that date. On May 15, 2017, the SEC declared
effective a registration statement registering shares underlying the Investment Agreement. During the year ended December 31,
2017, the Company recognized $32,005 in general and administrative expense related to the cost of the warrants.
NOTE 5 – PROPERTY, PLANT, AND
EQUIPMENT
Property, plant and equipment at December 31, 2017 and 2016
are as follows:
|
|
December 31,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
|
Capital Lease equipment
|
|
$
|
343,492
|
|
|
$
|
343,492
|
|
Telephone equipment
|
|
|
12,308
|
|
|
|
12,308
|
|
Furniture, Transport and Office equipment
|
|
|
435,967
|
|
|
|
419,821
|
|
|
|
|
|
|
|
|
|
|
Total Property, plant and equipment
|
|
|
791,767
|
|
|
|
775,621
|
|
Less: accumulated depreciation
|
|
|
(728,391
|
)
|
|
|
(704,785
|
)
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment, net
|
|
$
|
63,376
|
|
|
$
|
70,836
|
|
Depreciation expense during the years ended
December 31, 2017 and 2016 was $23,606 and $16,461, respectively.
NOTE 6 – DUE TO RELATED PARTY
Amounts due to related parties as of December
31, 2017 and 2016 were comprised of the following:
|
|
December 31,
|
|
|
|
2017
|
|
|
2016
|
|
Current portion:
|
|
|
|
|
|
|
Due to Dr. Michael Dent
|
|
$
|
616,795
|
|
|
$
|
---
|
|
Deferred compensation, Dr. Michael Dent
|
|
|
300,600
|
|
|
|
300,600
|
|
Due to MedOffice Direct
|
|
|
---
|
|
|
|
11,192
|
|
Total current portion
|
|
|
917,395
|
|
|
|
311,792
|
|
|
|
|
|
|
|
|
|
|
Long term portion:
|
|
|
|
|
|
|
|
|
Due to Dr. Michael Dent
|
|
|
---
|
|
|
|
237,157
|
|
|
|
|
|
|
|
|
|
|
Total due to related parties
|
|
$
|
917,395
|
|
|
$
|
548,949
|
|
HEALTHLYNKED CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2017 AND 2016
NOTE 6 – DUE TO RELATED PARTY
(CONTINUED)
Dr. Michael Dent
Prior to August 2014, NWC was owned and
controlled by the Company’s Chief Executive Officer, Dr. Michael Dent (“DMD”). DMD first provided an up to $175,000
unsecured note payable to the Company with a 0% interest rate. During 2013 the limit on the unsecured Note Payable was increased
up to $500,000 and during 2014 it was increased to $750,000 with a maturity date of December 31, 2017. During January 2017, the
note was again amended to extend the maturity date until December 31, 2018, to accrue interest on outstanding balances after January
1, 2017 at a rate of 10% per annum, and to fix interest accrued on balances between January 1, 2015 and December 31, 2016 at an
amount equal to $22,108 (the “$750k DMD Note”). All principal and interest is due at maturity of the $750k DMD Note.
Interest accrued on the $750k DMD Note as of December 31, 2017 and 2016 was $43,963 and $22,108, respectively.
During the year ended December 31, 2017,
the Company borrowed $322,500 from Dr. Dent under unsecured promissory notes as follows:
Inception Date
|
|
Maturity Date
|
|
Interest Rate
|
|
|
Amount
|
|
January 12, 2017
|
|
January 13, 2018
|
|
|
10
|
%
|
|
$
|
35,000
|
|
January 18, 2017
|
|
January 19, 2018
|
|
|
10
|
%
|
|
|
20,000
|
|
January 24, 2017
|
|
January 15, 2018
|
|
|
10
|
%
|
|
|
50,000
|
|
February 9, 2017
|
|
February 10, 2018
|
|
|
10
|
%
|
|
|
30,000
|
|
April 20, 2017
|
|
April 21, 2018
|
|
|
10
|
%
|
|
|
10,000
|
|
June 15, 2017
|
|
June 16, 2018
|
|
|
10
|
%
|
|
|
32,500
|
|
August 17, 2017
|
|
August 18, 2018
|
|
|
10
|
%
|
|
|
20,000
|
|
August 24, 2017
|
|
August 25, 2018
|
|
|
10
|
%
|
|
|
37,500
|
|
September 7, 2017
|
|
September 8, 2018
|
|
|
10
|
%
|
|
|
35,000
|
|
September 21, 2017
|
|
September 22, 2018
|
|
|
10
|
%
|
|
|
26,500
|
|
September 29, 2017
|
|
September 30, 2018
|
|
|
10
|
%
|
|
|
12,000
|
|
December 21, 2017
|
|
December 22, 2018
|
|
|
10
|
%
|
|
|
14,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
322,500
|
|
Interest accrued on the 2017 DMD Notes
as of December 31, 2017 and 2016 was $19,350 and -0-, respectively. During March 2018, the maturity date on notes payable to DMD
maturing on April 21, 2108 or earlier were extended by one year.
MedOffice Direct
During 2016, MedOffice Direct (“MOD”),
a company majority-owned by the Company’s CEO and largest shareholder, Dr. Michael Dent, paid a direct obligation of the
Company in the amount of $25,000. The Company also paid direct obligations of MOD totaling $13,808 in 2016, resulting in an amount
payable to MOD of $11,192 as of December 31, 2016. This amount was paid in full in January 2017.
During the year ended December 31, 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 for the period from January 1, 2017 through July
31, 2018. During the years ended December 31, 2017 and 2016, the Company recognized rent expense related to the marketing agreement
in the amount of $24,480 and $-0-, respectively, pursuant to this agreement and had prepaid an additional $24,459 toward future
rent as of December 31, 2017.
HEALTHLYNKED CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2017 AND 2016
NOTE 7 – CAPITAL LEASE
Capital lease obligations as of December 31, 2017 and 2016 are
comprised of the following:
|
|
December 31,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
|
Note payable, New Everbank Lease
|
|
$
|
39,754
|
|
|
$
|
58,102
|
|
Less: note payable, New Everbank Lease (Capital leases), current portion
|
|
|
(18,348
|
)
|
|
|
(18,348
|
)
|
|
|
|
|
|
|
|
|
|
Notes payable, bank loans and capital leases, long-term portion
|
|
$
|
21,406
|
|
|
$
|
39,754
|
|
In March 2015, the Company entered into
a capital equipment finance lease for Ultra Sound equipment with Everbank. There was no interest on this lease. The monthly payment
is $1,529 for 60 months ending in March 2020. As of December 31, 2017, the Company owed Everbank $39,754 pursuant to this capital
lease. During the years ended December 31, 2017 and 2016, the Company made payments on this capital lease of $18,348 and $18,348,
respectively.
HEALTHLYNKED CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2017 AND 2016
NOTE 7 – CAPITAL LEASE (CONTINUED)
Future minimum payments to which the Company
is obligated pursuant to the capital leases as of December 31, 2017 are as follows:
2018
|
|
$
|
18,348
|
|
2019
|
|
|
18,348
|
|
2020
|
|
|
3,058
|
|
2021
|
|
|
---
|
|
2022
|
|
|
---
|
|
|
|
|
|
|
Total
|
|
$
|
39,754
|
|
NOTE 8 – NOTES PAYABLE
On July 11, 2017, the Company entered into
a Merchant Cash Advance Factoring Agreement (“MCA”) with Power Up Lending Group, Ltd. (the “PULG”) pursuant
to which the Company received an advance of $26,000 before closing fees (the “July MCA”). The Company was required
to repay the July MCA, which acted like an ordinary note payable, at the rate of $1,372 per week until the balance of $34,580 was
repaid. At inception, the Company recognized a note payable in the amount of $34,580 and a discount against the note payable of
$9,550. The discount was being amortized over the life of the instrument. The July MCA was repaid in full on December 20, 2017.
During the year ended December 31, 2017, the Company recognized amortization of the discount in the amount of $9,550, including
$1,096 recognized to amortize the remaining discount at retirement.
On August 9, 2017, the Company entered
into a second MCA with PULG pursuant to which the Company received an advance of $51,000 before closing fees (the “August
MCA”). The Company was required to repay the advance, which acted like an ordinary note payable, at the rate of $2,752 per
week until the balance of $69,360 was repaid. At inception, the Company recognized a note payable in the amount of $69,360 and
a discount against the note payable of $19,380. The discount was being amortized over the life of the instrument. The August MCA
was repaid in full on December 20, 2017. During the year ended December 31, 2017, the Company recognized amortization of the discount
in the amount of $19,380, including $5,161 recognized to amortize the remaining discount at retirement.
On December 20, 2017, the Company entered
into a third MCA with PULG pursuant to which the Company received an advance of $75,000 before closing fees (the “December
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 is being amortized over the life of the instrument.
During the year ended December 31, 2017, the Company recognized amortization of the discount in the amount of $1,619. As of December
31, 2017, the net carrying value of the instrument was $70,186.
HEALTHLYNKED CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2017 AND 2016
NOTE 9 – CONVERTIBLE NOTES
PAYABLE
Convertible notes payable as of December 31, 2017 and 2016 are
comprised of the following:
|
|
December 31,
|
|
|
|
2017
|
|
|
2016
|
|
Face Value
|
|
|
|
|
|
|
$550k Note - July 2016
|
|
$
|
550,000
|
|
|
$
|
550,000
|
|
$50k Note - July 2016
|
|
|
50,000
|
|
|
|
50,000
|
|
$111k Note - May 2017
|
|
|
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
|
|
|
|
---
|
|
|
|
|
1,078,500
|
|
|
|
600,000
|
|
Unamortized Discount
|
|
|
|
|
|
|
|
|
$550k Note - July 2016
|
|
$
|
---
|
|
|
$
|
(96,631
|
)
|
$50k Note - July 2016
|
|
|
---
|
|
|
|
(17,701
|
)
|
$111k Note - May 2017
|
|
|
(6,931
|
)
|
|
|
---
|
|
$53k Note - July 2017
|
|
|
(19,946
|
)
|
|
|
---
|
|
$35k Note - September 2017
|
|
|
(20,676
|
)
|
|
|
---
|
|
$55k Note - September 2017
|
|
|
(38,274
|
)
|
|
|
---
|
|
$53k Note II - October 2017
|
|
|
(39,939
|
)
|
|
|
---
|
|
$171.5k Note - October 2017
|
|
|
(140,876
|
)
|
|
|
---
|
|
|
|
|
(266,642
|
)
|
|
|
(114,332
|
)
|
Net Book Value
|
|
|
|
|
|
|
|
|
$550k Note - July 2016
|
|
$
|
550,000
|
|
|
$
|
453,369
|
|
$50k Note - July 2016
|
|
|
50,000
|
|
|
|
32,299
|
|
$111k Note - May 2017
|
|
|
104,069
|
|
|
|
---
|
|
$53k Note - July 2017
|
|
|
33,054
|
|
|
|
---
|
|
$35k Note - September 2017
|
|
|
14,324
|
|
|
|
---
|
|
$55k Note - September 2017
|
|
|
16,726
|
|
|
|
---
|
|
$53k Note II - October 2017
|
|
|
13,061
|
|
|
|
---
|
|
$171.5k Note - October 2017
|
|
|
30,624
|
|
|
|
---
|
|
|
|
|
|
|
|
|
|
|
Convertible notes payable, net of original issue discount and debt discount
|
|
$
|
811,858
|
|
|
$
|
485,668
|
|
Convertible Note 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. At inception, the investors were also granted a five-year warrant to purchase 6,111,111
shares of the Company’s common stock at an exercise price of $0.09 per share. The fair value of the warrants was calculated
using the Black-Scholes pricing model at $157,812, with the following assumptions: risk-free interest rate of 0.97%, expected life
of 5 years, volatility of 40%, and expected dividend yield of zero. The net proceeds from the issuance of the $550k Note, being
$500,000 after the original issue discount, were then allocated to the warrants and the convertible note instrument based on their
relative fair values, of which $111,479 was allocated to the warrants and $388,521 to the convertible note. The intrinsic value
of the embedded conversion feature of the $550k Note was then calculated as $161,479. The original issue discount, warrants and
embedded conversion feature were then allocated and recorded as discounts against the carrying value of the $550k Note.
HEALTHLYNKED CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2017 AND 2016
NOTE 9 – CONVERTIBLE NOTES
PAYABLE (CONTINUED)
The final allocation of the proceeds at
inception was as follows:
Original issue discount
|
|
$
|
50,000
|
|
Warrants
|
|
|
111,479
|
|
Embedded conversion feature
|
|
|
161,479
|
|
Convertible note
|
|
|
227,042
|
|
|
|
|
|
|
Face value of convertible note
|
|
$
|
550,000
|
|
The $550k Note was originally schedule
to mature on April 11, 2017. During February 2017, the holder of the $550k Note agreed to extend the maturity date until July 7,
2017 in exchange for a five-year warrant to purchase 500,000 shares of HLYK common stock at an exercise price of $0.15 per share.
The fair value of the warrants of $7,506 was recorded as an additional discount against the $550k Note and was amortized over the
new remaining life of the $550k Note. The fair value of the warrant was calculated using the Black-Scholes pricing model at $7,506,
with the following assumptions: risk-free interest rate of 1.89%, expected life of 5 years, volatility of 40%, and expected dividend
yield of zero. The issuance of the warrants in exchange for the maturity extension was treated as a modification of existing debt
pursuant to the guidance of ASC 470-50 “Debt – Modifications and Extinguishments” (“ASC 470-50”).
On August 8, 2017, in exchange for a five-year
warrant to purchase 1,000,000 shares of HLYK common stock at an exercise price of $0.30 per share, the holder of the $550k Note
agreed to (i) further extend the maturity date of the $550k Note until July 7, 2018, and (ii) further extend the maturity date
of the $50k Note (as defined herein) until July 11, 2018. The fair value of the warrant was calculated using the Black-Scholes
pricing model at $290,581, with the following assumptions: risk-free interest rate of 1.81%, expected life of 5 years, volatility
of 190.86%, and expected dividend yield of zero. The issuance of the warrants in exchange for the maturity extension was treated
as a modification of existing debt pursuant to the guidance of ASC 470-50. Because the fair value of the warrants was greater than
10% of the present value of the remaining cash flows under the $550k Note and $50k Note, the transaction was treated as a debt
extinguishment and reissuance of a new debt instrument, with the fair value of the warrants of $290,581 recorded as a loss on debt
extinguishment. The carrying value of the $550k Note (as well as the $50k Note) did not change as a result of the extinguishment
since the discounts recognized at inception of both notes were fully amortized at the time of the warrant issuance.
The discounts resulting from the original
issue discount, warrants and embedded conversion feature were amortized over the life of the $550k Note. Amortization expense related
to these discounts in the years ended December 31, 2017 and 2016 was $104,137 and $208,626, respectively. As of December 31, 2017,
the unamortized discount was $-0-. As of December 31, 2017, the $550k note was convertible into 6,875,000 of the Company’s
common shares.
During the years ended December 31, 2017
and 2016, the Company made no repayments on the $550k Note. During the years ended December 31, 2017 and 2016, the Company recorded
interest expense on the $550k Note totaling $33,000 and $16,003, 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 maturing on July 11, 2017
(the “$50k Note”). 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. The embedded conversion feature did not have any intrinsic value at issuance. Accordingly,
the full face value of $50,000 was allocated to the convertible note instrument. As of December 31, 2017, the $50k Note was convertible
into 500,000 of the Company’s common shares.
During the years ended December 31, 2017
and 2016, the Company made no repayments on the $50k Note. During the years ended December 31, 2017 and 2016, the Company recorded
interest expense on the $50k Note totaling $5,000 and $2,425, respectively.
HEALTHLYNKED CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2017 AND 2016
NOTE 9 – CONVERTIBLE NOTES
PAYABLE (CONTINUED)
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 matures on January 22, 2018. The $111k Note is convertible into shares of the Company’s common stock at the
discretion of the note holder at a fixed price of $0.35 per share, and is secured by all of the Company’s assets. The Company
received $100,000 net proceeds from the note after an $11,000 original issue discount. At inception, the investors were also granted
a five-year warrant to purchase 133,333 shares of the Company’s common stock at an exercise price of $0.75 per share. The
fair value of the warrants was calculated using the Black-Scholes pricing model at $42,305, with the following assumptions: risk-free
interest rate of 1.80%, expected life of 5 years, volatility of 40%, and expected dividend yield of zero. The net proceeds from
the issuance of the $111k Note, being $100,000 after the original issue discount, were then allocated to the warrants and the convertible
note instrument based on their relative fair values, of which $27,595 was allocated to the warrants and $72,405 to the convertible
note. The intrinsic value of the embedded conversion feature of the $111k note was then calculated as $38,595. The original issue
discount, warrants and embedded conversion feature were then allocated and recorded as discounts against the carrying value of
the $111k Note. The final allocation of the proceeds at inception was as follows:
Original issue discount
|
|
$
|
11,000
|
|
Warrants
|
|
|
27,595
|
|
Embedded conversion feature
|
|
|
38,595
|
|
Convertible note
|
|
|
33,810
|
|
|
|
|
|
|
Notes payable and bank loans, long-term portion
|
|
$
|
111,000
|
|
The discounts resulting from the original
issue discount, warrants and embedded conversion feature are being amortized over the life of the $111k Note. Amortization expense
related to these discounts in the years ended December 31, 2017 and 2016 was $70,259 and $-0-, respectively. As of December 31,
2017, the unamortized discount was $6,931. As of December 31, 2017, the $111k Note was convertible into 317,143 of the Company’s
common shares.
During the years ended December 31, 2017
and 2016, the Company made no repayments on the $111k Note. During the years ended December 31, 2017 and 2016, the Company recorded
interest expense on the $111k Note totaling $10,103 and $-0-, 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% and matures on April 15, 2018. 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.
HEALTHLYNKED CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2017 AND 2016
NOTE 9 – CONVERTIBLE NOTES
PAYABLE (CONTINUED)
The fair value of the embedded conversion
feature (“ECF”) of the $53k Note was calculated using the Black-Scholes pricing model at $58,154, with the following
assumptions: risk-free interest rate of 1.23%, expected life of 0.76 years, volatility of 183.6%, and expected dividend yield of
zero. Because the fair value of the ECF exceeded the net proceeds from the $53k Note, a charge was recorded to “Financing
cost” for the excess of the fair value of the fair value of the ECF of $58,154 over the net proceeds from the note of $50,000,
for a net charge of $8,154. The ECF qualifies for derivative accounting and bifurcation under ASC 815, “Derivatives and Hedging.”
The final allocation of the proceeds at inception was as follows:
Embedded conversion feature
|
|
$
|
58,154
|
|
Original issue discount
|
|
|
3,000
|
|
Financing cost
|
|
|
(8,154
|
)
|
Convertible note
|
|
|
---
|
|
|
|
|
|
|
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 $53k Note. Amortization expense
related to these discounts in the years ended December 31, 2017 and 2016 was $33,054 and $-0-, respectively. As of December 31,
2017, the unamortized discount was $19,946. As of December 31, 2017, the $53k Note was convertible into 1,930,783 of the Company’s
common shares.
During the years ended December 31, 2017
and 2016, the Company made no repayments on the $53k Note. During the years ended December 31, 2017 and 2016, the Company recorded
interest expense on the $53k Note totaling $2,527 and $-0-, respectively. On January 8, 2018, the Company prepaid the balance on the $53k Note, including accrued interest,
for the amount of $74,922.
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% and matures on June 15, 2018. The $35k Note may be converted into common stock of the Company by the holder
at any time following 180 days after the issuance date, subject to a 4.99% beneficial ownership limitation, at a conversion price
per share equal to a 39% discount to the average of the three (3) lowest closing bid prices during the fifteen (15) trading days
prior to the conversion date. Upon an event of default caused by the Company’s failure to deliver shares upon a conversion
pursuant to the terms of the $35k Note, 300% of the outstanding principal and any interest due amount shall be immediately due.
Upon an event of default caused by the Company’s breach of any other events of default specified in the $35k Note, 150% of
the outstanding principal and any interest due amount shall be immediately due.
The fair value of the ECF of the $35k Note
was calculated using the Black-Scholes pricing model at $38,338, with the following assumptions: risk-free interest rate of 1.21%,
expected life of 0.77 years, volatility of 177.2%, and expected dividend yield of zero. Because the fair value of the ECF exceeded
the net proceeds from the $35k Note, a charge was recorded to “Financing cost” for the excess of the fair value of
the fair value of the ECF of $38,338 over the net proceeds from the note of $32,000, for a net charge of $6,338. The ECF qualifies
for derivative accounting and bifurcation under ASC 815, “Derivatives and Hedging.” The final allocation of the proceeds
at inception was as follows:
Embedded conversion feature
|
|
$
|
38,338
|
|
Original issue discount
|
|
|
3,000
|
|
Financing cost
|
|
|
(6,338
|
)
|
Convertible note
|
|
|
---
|
|
|
|
|
|
|
Notes payable and bank loans, long-term portion
|
|
$
|
35,000
|
|
The discounts resulting from the original
issue discount, warrants and embedded conversion feature are being amortized over the life of the $35k Note. Amortization expense
related to these discounts in the years ended December 31, 2017 and 2016 was $14,324 and $-0-, respectively. As of December 31,
2017, the unamortized discount was $20,676. As of December 31, 2017, the $35k Note was convertible into 1,275,046 of the Company’s
common shares.
HEALTHLYNKED CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2017 AND 2016
NOTE 9 – CONVERTIBLE NOTES
PAYABLE (CONTINUED)
During the years ended December 31, 2017
and 2016, the Company made no repayments on the $35k Note. During the years ended December 31, 2017 and 2016, the Company recorded
interest expense on the $35k Note totaling $1,103 and $-0-, respectively. On March 5, 2018, the Company prepaid the balance on the $35k Note, including accrued interest,
for the amount of $49,502.
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% and matures on September 11, 2018. 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 Note is no longer outstanding.
The fair value of the ECF of the $55k Note
was calculated using the Black-Scholes pricing model at $65,332, with the following assumptions: risk-free interest rate of 1.24%,
expected life of 1 year, volatility of 175.1%, and expected dividend yield of zero. Because the fair value of the ECF exceeded
the net proceeds from the $55k Note, a charge was recorded to “Financing cost” for the excess of the fair value of
the fair value of the ECF of $65,332 over the net proceeds from the note of $47,500, for a net charge of $17,832. The ECF qualifies
for derivative accounting and bifurcation under ASC 815, “Derivatives and Hedging.” The final allocation of the proceeds
at inception was as follows:
Embedded conversion feature
|
|
$
|
65,332
|
|
Original issue discount
|
|
|
7,500
|
|
Financing cost
|
|
|
(17,832
|
)
|
Convertible note
|
|
|
---
|
|
|
|
|
|
|
Notes payable and bank loans, long-term portion
|
|
$
|
55,000
|
|
The discounts resulting from the original
issue discount, warrants and embedded conversion feature are being amortized over the life of the $55k Note. Amortization expense
related to these discounts in the years ended December 31, 2017 and 2016 was $16,726 and $-0-, respectively. As of December 31,
2017, the unamortized discount was $38,274. As of December 31, 2017, the $55k Note was convertible into 2,037,037 of the Company’s
common shares.
During the years ended December 31, 2017
and 2016, the Company made no repayments on the $55k Note. During the years ended December 31, 2017 and 2016, the Company recorded
interest expense on the $55k Note totaling $1,673 and $-0-, respectively. On March 13, 2018, the Company prepaid the balance on the $55k Note, including accrued interest,
for the amount of $85,258.
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% and matures on July 30, 2018. The $53k Note II may be converted into common stock of the Company
by the holder at any time after the issuance date, subject to a 4.99% beneficial ownership limitation, at a conversion price per
share equal to 39% discount to the average of the three (3) lowest closing bid prices during the fifteen (15) trading days prior
to the conversion date. Upon an event of default caused by the Company’s failure to deliver shares upon a conversion pursuant
to the terms of the Note, 300% of the outstanding principal and any interest due amount shall be immediately due. Upon an event
of default caused by the Company’s breach of any other events of default specified in the Note, 150% of the outstanding principal
and any interest due amount shall be immediately due.
HEALTHLYNKED CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2017 AND 2016
NOTE 9 – CONVERTIBLE NOTES
PAYABLE (CONTINUED)
The fair value of the ECF of the $53k Note
II was calculated using the Black-Scholes pricing model at $57,571, with the following assumptions: risk-free interest rate of
1.42%, expected life of 0.77 years, volatility of 174.46%, and expected dividend yield of zero. Because the fair value of the ECF
exceeded the net proceeds from the $53k Note II, a charge was recorded to “Financing cost” for the excess of the fair
value of the fair value of the ECF of $57,571 over the net proceeds from the note of $50,000, for a net charge of $7,571. The ECF
qualifies for derivative accounting and bifurcation under ASC 815, “Derivatives and Hedging.” The final allocation
of the proceeds at inception was as follows:
Embedded conversion feature
|
|
$
|
57,571
|
|
Original issue discount
|
|
|
3,000
|
|
Financing cost
|
|
|
(7,571
|
)
|
Convertible note
|
|
|
---
|
|
|
|
|
|
|
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 $53k Note II. Amortization expense
related to these discounts in the years ended December 31, 2017 and 2016 was $13,061 and $-0-, respectively. As of December 31,
2017, the unamortized discount was $39,939. As of December 31, 2017, the $53k Note II was convertible into 1,930,783 of the Company’s
common shares.
During the years ended December 31, 2017
and 2016, the Company made no repayments on the $53k Note II. During the years ended December 31, 2017 and 2016, the Company recorded
interest expense on the $53k Note II totaling $1,002 and $-0-, respectively.
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.
The fair value of the ECF of the $171.5k
Note was calculated using the Black-Scholes pricing model at $183,061, with the following assumptions: risk-free interest rate
of 1.42%, expected life of 1 year, volatility of 172.67%, and expected dividend yield of zero. Because the fair value of the ECF
exceeded the net proceeds from the $171.5k Note, a charge was recorded to “Financing cost” for the excess of the fair
value of the fair value of the ECF of $183,061 over the net proceeds from the note of $150,000, for a net charge of $33,061. The
ECF qualifies for derivative accounting and bifurcation under ASC 815, “Derivatives and Hedging.” The final allocation
of the proceeds at inception was as follows:
Embedded conversion feature
|
|
$
|
183,061
|
|
Original issue discount
|
|
|
21,500
|
|
Financing cost
|
|
|
(33,061
|
)
|
Convertible note
|
|
|
---
|
|
|
|
|
|
|
Notes payable and bank loans, long-term portion
|
|
$
|
171,500
|
|
The discounts resulting from the original
issue discount, warrants and embedded conversion feature are being amortized over the life of the $171.5k Note. Amortization expense
related to these discounts in the years ended December 31, 2017 and 2016 was $30,625 and $-0-, respectively. As of December 31,
2017, the unamortized discount was $140,875. As of December 31, 2017, the $171.5k Note was convertible into 2,037,037 of the Company’s
common shares.
HEALTHLYNKED CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2017 AND 2016
NOTE 9 – CONVERTIBLE NOTES
PAYABLE (CONTINUED)
During the years ended December 31, 2017
and 2016, the Company made no repayments on the $171.5k Note. During the years ended December 31, 2017 and 2016, the Company recorded
interest expense on the $171.5k Note totaling $3,054 and $-0-, respectively.
NOTE 10 – DERIVATIVE FINANCIAL
INSTRUMENTS
Derivative financial instruments are comprised
of the fair value of conversion features embedded in convertible promissory issued in 2017 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 of the $53k Note, the $35k Note, the $55k Note, the $53k Note
II, and the $171.5k Note 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 recorded
in years ended December 31, 2017 include the following:
|
|
|
|
|
Change in
|
|
|
|
|
|
|
|
|
|
Fair Value of
|
|
|
Fair
|
|
|
|
Fair
|
|
|
Derivative
|
|
|
Value at
|
|
|
|
Value at
|
|
|
Financial
|
|
|
December 31
|
|
|
|
Inception
|
|
|
Instruments
|
|
|
2017
|
|
|
|
|
|
|
|
|
|
|
|
$53k Note - July 2017
|
|
$
|
58,154
|
|
|
$
|
(9,278
|
)
|
|
$
|
48,876
|
|
$35k Note - September 2017
|
|
|
38,338
|
|
|
|
(2,177
|
)
|
|
|
36,161
|
|
$55k Note - September 2017
|
|
|
65,332
|
|
|
|
(676
|
)
|
|
|
64,656
|
|
$53k Note II - October 2017
|
|
|
57,571
|
|
|
|
645
|
|
|
|
58,216
|
|
$171.5k Note - October 2017
|
|
|
183,061
|
|
|
|
7,519
|
|
|
|
190,580
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
402,456
|
|
|
$
|
(3,967
|
)
|
|
$
|
398,489
|
|
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 1.76%, expected life of 0.29 to 1.00 years, volatility of 172.67% to 205.70%, and expected dividend yield of zero. The entire
amount of derivative instrument liabilities is classified as current due to the fact that settlement of the derivative instruments
could be required within twelve months of the balance sheet date.
NOTE 11 – SHAREHOLDERS’
DEFICIT
Common Stock
The holders of the Company’s common
stock are entitled to one vote per share. In addition, the holders of common stock will be entitled to receive ratably dividends,
if any, declared by the board of directors out of legally available funds; however, the current policy of the board of directors
is to retain earnings, if any, for operations and growth. Upon liquidation, dissolution or winding-up, the holders of common stock
will be entitled to share ratably in all assets that are legally available for distribution. The holders of common stock will have
no preemptive, subscription, redemption or conversion rights. The rights, preferences and privileges of holders of common stock
will be subject to, and may be adversely affected by, the rights of the holders of any series of preferred stock, which may be
designated solely by action of the board of directors and issued in the future.
On January 3, 2018, holders of a majority
of the voting power of the outstanding capital stock of the Company, acting by written consented, authorized and approved an amendment
to the Amended and Restated Articles of Incorporation of the Company increasing the amount of authorized shares of common stock
to 500,000,000 shares from 230,000,000 shares. On February 5, 2018, the Company filed the amendment with the Secretary of State
of Nevada to effect the increase.
HEALTHLYNKED CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2017 AND 2016
NOTE 11 – SHAREHOLDERS’
DEFICIT (CONTINUED)
Preferred Stock
The Company’s board of directors
will be authorized, subject to any limitations prescribed by law, without further vote or action by our stockholders, to issue
from time to time shares of preferred stock in one or more series. Each series of preferred stock will have the number of shares,
designations, preferences, voting powers, qualifications and special or relative rights or privileges as shall be determined by
our board of directors, which may include, among others, dividend rights, voting rights, liquidation preferences, conversion rights
and preemptive rights.
On September 4, 2014, the Company filed
with the Nevada Secretary of State a certificate of designation for up to 20,000,000 shares of Series A Convertible Preferred Stock
(the “Series A”). Each share of Series A Convertible Preferred Stock (“Series A”) issued in 2014 converts
into one share of common, has voting rights on an as converted basis, and receives liquidation preferences. Series A shares are
not redeemable and have no dividend rights. No shares of Series A were outstanding as of December 31, 2017 or 2016.
Issuance of Common Stock
During the year ended December 31, 2017, the Company sold 4,412,498
shares of common stock in private placement transactions to 15 investors. The Company received $533,000 in proceeds from the sales.
The shares were issued at a share price between $0.10 and $0.30 per share.
During the year ended December 31, 2017, the Company sold 1,461,111
shares of common stock in private placement transactions to 3 investors and received $288,000 in proceeds from the sales. The shares
were issued at a share price between $0.18 and $0.20 per share. In connection with the stock sales, the Company also issued 959,998
five-year warrants to purchase shares of common stock at an exercise price of $0.30 per share.
During the years ended December 31, 2017, the Company issued
222,588 common shares pursuant to draws made by the Company under the Investment Agreement. The Company received $27,640 in proceeds
from the draws.
During the years ended December 31, 2017, the Company issued
276,850 shares to a consultant and 176,250 to employees that vested pursuant to prior grants made under the Company’s Employee
Equity Incentive Plan (the “EIP”).
Common Stock Issuable
As of December 31, 2017 and 2016, the Company
was obligated to issue 47,101 and 80,643 shares of common stock, respectively, in exchange for professional services provided by
a third party consultant beginning in the fourth quarter of 2016. During the years ended December 31, 2017, the Company recognized
expense related to shares earned by the consultant of $58,265 and $6,451, respectively. During August 2017, 276,850 shares were
issued to the consultant with a value of $49,996, in satisfaction of shares accrued through August 25, 2017.
As of December 31, 2017 and 2016, the Company
was obligated to issue 75,000 shares to an employee pursuant to the EIP. The shares were issued in February 2017.
HEALTHLYNKED CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2017 AND 2016
NOTE 11 – SHAREHOLDERS’
DEFICIT (CONTINUED)
Stock Warrants
Transactions involving our stock warrants during the years ended
December 31, 2017 and 2016 are summarized as follows:
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
Exercise
|
|
|
|
|
|
Exercise
|
|
|
|
Number
|
|
|
Price
|
|
|
Number
|
|
|
Price
|
|
Outstanding at beginning of the period
|
|
|
10,576,389
|
|
|
$
|
0.08
|
|
|
|
2,000,000
|
|
|
$
|
0.05
|
|
Granted during the period
|
|
|
9,949,998
|
|
|
$
|
0.39
|
|
|
|
8,576,389
|
|
|
$
|
0.09
|
|
Exercised during the period
|
|
|
---
|
|
|
$
|
---
|
|
|
|
---
|
|
|
$
|
---
|
|
Terminated during the period
|
|
|
---
|
|
|
$
|
---
|
|
|
|
---
|
|
|
$
|
---
|
|
Outstanding at end of the period
|
|
|
20,526,387
|
|
|
$
|
0.23
|
|
|
|
10,576,389
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable at end of the period
|
|
|
20,526,387
|
|
|
$
|
0.23
|
|
|
|
10,576,389
|
|
|
$
|
0.08
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average remaining life
|
|
|
4.2 years
|
|
|
|
5.2 years
|
|
The following table summarizes information
about the Company’s stock warrants outstanding as of December 31, 2017:
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
|
|
|
|
8,388,889
|
|
|
|
4.3
|
|
|
$
|
0.08
|
|
|
|
8,388,889
|
|
|
$
|
0.08
|
|
$
|
0.10 to 0.15
|
|
|
|
2,687,500
|
|
|
|
3.6
|
|
|
$
|
0.11
|
|
|
|
2,687,500
|
|
|
$
|
0.11
|
|
$
|
0.25 to 0.50
|
|
|
|
8,259,998
|
|
|
|
0.9
|
|
|
$
|
0.88
|
|
|
|
8,259,998
|
|
|
$
|
0.88
|
|
$
|
0.51 to 1.00
|
|
|
|
1,190,000
|
|
|
|
4.3
|
|
|
$
|
0.97
|
|
|
|
1,190,000
|
|
|
$
|
0.97
|
|
$
|
0.05 to 1.00
|
|
|
|
20,526,387
|
|
|
|
2.9
|
|
|
$
|
0.46
|
|
|
|
20,526,387
|
|
|
$
|
0.46
|
|
During the year ended December 31, 2017,
the Company issued 9,949,998 warrants. The fair value of warrants issued in 2017 was calculated using the Black-Scholes pricing
model with the following assumptions: risk-free interest rate of 1.74% to 2.01%, expected life of 5 years, volatility of 40.00%
to 190.86%, and expected dividend yield of zero. The aggregate grant date fair value of warrants issued during the years ended
December 31, 2017 and 2016 was $629,299 and $135,023, respectively.
Employee Equity Incentive Plan
On January 1, 2016, the Company instituted
the EIP for the purpose of having equity awards available to allow for equity participation by its employees. The EIP allows for
the issuance of up to 15,503,680 shares of the Company’s common stock to employees, which may be issued in the form of stock
options, stock appreciation rights, or restricted shares. The EIP is governed by the Company’s board, or a committee that
may be appointed by the board in the future.
During August 2017, the Company issued
207,500 shares of common stock to employees under the EIP as a result of grants made in 2016 that vested during 2017.
HEALTHLYNKED CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2017 AND 2016
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 years ended December 31, 2017 and 2016:
|
|
2017
|
|
|
2016
|
|
Outstanding at beginning of the period
|
|
|
1,552,500
|
|
|
|
---
|
|
Granted during the period
|
|
|
175,000
|
|
|
|
1,552,500
|
|
Terminated during the period
|
|
|
(228,750
|
)
|
|
|
---
|
|
Outstanding at end of the period
|
|
|
1,498,750
|
|
|
|
1,552,500
|
|
|
|
|
|
|
|
|
|
|
Shares vested at period-end
|
|
|
870,000
|
|
|
|
612,500
|
|
Weighted average grant date fair value of shares granted during the period
|
|
$
|
0.09
|
|
|
$
|
0.04
|
|
Aggregate grant date fair value of shares granted during the period
|
|
$
|
15,750
|
|
|
$
|
63,000
|
|
Shares available for grant pursuant to EIP at period-end
|
|
|
11,654,934
|
|
|
|
11,601,184
|
|
Total stock based compensation recognized
for grants under the EIP was $11,153 and $12,360 during the years ended December 31, 2017 and 2016, respectively. Total unrecognized
stock compensation related to these grants was $41,558 as of December 31, 2017.
A summary of the status of non-vested shares
issued pursuant to the EIP as of December 31, 2017 is presented below:
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
Grant Date
|
|
|
|
|
|
Grant Date
|
|
|
|
Shares
|
|
|
Fair Value
|
|
|
Shares
|
|
|
Fair Value
|
|
Nonvested at beginning of period
|
|
|
940,000
|
|
|
$
|
0.04
|
|
|
|
---
|
|
|
$
|
---
|
|
Granted
|
|
|
100,000
|
|
|
$
|
0.09
|
|
|
|
1,552,500
|
|
|
$
|
0.04
|
|
Vested
|
|
|
(182,500
|
)
|
|
$
|
0.04
|
|
|
|
(612,500
|
)
|
|
$
|
0.04
|
|
Forfeited
|
|
|
(228,750
|
)
|
|
$
|
0.04
|
|
|
|
---
|
|
|
$
|
---
|
|
Nonvested at end of period
|
|
|
628,750
|
|
|
$
|
0.05
|
|
|
|
940,000
|
|
|
$
|
0.04
|
|
Employee Stock Options
The following table summarizes the status of options outstanding
as of and for the years ended of December 31, 2017 and 2016:
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
Exercise
|
|
|
|
|
|
Exercise
|
|
|
|
Number
|
|
|
Price
|
|
|
Number
|
|
|
Price
|
|
Outstanding at beginning of the period
|
|
|
2,349,996
|
|
|
$
|
0.12
|
|
|
|
---
|
|
|
$
|
---
|
|
Granted during the period
|
|
|
---
|
|
|
$
|
---
|
|
|
|
2,349,996
|
|
|
$
|
0.12
|
|
Exercised during the period
|
|
|
---
|
|
|
$
|
---
|
|
|
|
---
|
|
|
$
|
---
|
|
Terminated during the period
|
|
|
---
|
|
|
$
|
---
|
|
|
|
---
|
|
|
$
|
---
|
|
Outstanding at end of the period
|
|
|
2,349,996
|
|
|
$
|
0.12
|
|
|
|
2,349,996
|
|
|
$
|
0.12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options exercisable at period-end
|
|
|
575,000
|
|
|
|
|
|
|
|
100,000
|
|
|
|
|
|
Weighted average remaining life (in years)
|
|
|
8.6
|
|
|
|
|
|
|
|
9.6
|
|
|
|
|
|
Weighted average grant date fair value of options granted during the period
|
|
$
|
---
|
|
|
|
|
|
|
$
|
0.03
|
|
|
|
|
|
Options available for grant at period-end
|
|
|
11,654,934
|
|
|
|
|
|
|
|
11,601,184
|
|
|
|
|
|
HEALTHLYNKED CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2017 AND 2016
NOTE 11 – SHAREHOLDERS’
DEFICIT (CONTINUED)
The following table summarizes information
about the Company’s stock options outstanding as of December 31, 2017:
Options Outstanding
|
|
|
Options Exercisable
|
|
|
|
|
|
|
|
Weighted-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
Weighted-
|
|
|
|
|
|
Weighted-
|
|
|
|
|
|
|
|
Remaining
|
|
|
Average
|
|
|
|
|
|
Average
|
|
Exercise
|
|
|
Number
|
|
|
Contractual
|
|
|
Exercise
|
|
|
Number
|
|
|
Exercise
|
|
Prices
|
|
|
Outstanding
|
|
|
Life (years)
|
|
|
Price
|
|
|
Exercisable
|
|
|
Price
|
|
$
|
0.08
|
|
|
|
1,600,000
|
|
|
|
8.5
|
|
|
$
|
0.08
|
|
|
|
525,000
|
|
|
$
|
0.08
|
|
$
|
0.20
|
|
|
|
749,996
|
|
|
|
8.9
|
|
|
$
|
0.20
|
|
|
|
50,000
|
|
|
$
|
0.20
|
|
$
|
0.08 to 0.20
|
|
|
|
2,349,996
|
|
|
|
8.6
|
|
|
$
|
0.12
|
|
|
|
575,000
|
|
|
$
|
0.09
|
|
Total stock based compensation recognized
related to option grants was $9,779 and $8,067 during the years ended December 31, 2017 and 2016, respectively.
A summary of the status of non-vested options
issued pursuant to the EIP as of December 31, 2017 and 2016 is presented below:
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
Grant Date
|
|
|
|
|
|
Grant Date
|
|
|
|
Shares
|
|
|
Fair Value
|
|
|
Shares
|
|
|
Fair Value
|
|
Nonvested at beginning of period
|
|
|
2,249,996
|
|
|
$
|
0.03
|
|
|
|
---
|
|
|
$
|
---
|
|
Granted
|
|
|
---
|
|
|
$
|
---
|
|
|
|
2,349,996
|
|
|
$
|
0.03
|
|
Vested
|
|
|
(475,000
|
)
|
|
$
|
0.03
|
|
|
|
(100,000
|
)
|
|
$
|
0.03
|
|
Forfeited
|
|
|
---
|
|
|
$
|
---
|
|
|
|
---
|
|
|
$
|
---
|
|
Nonvested at end of period
|
|
|
1,774,996
|
|
|
$
|
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 CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2017 AND 2016
NOTE 12 – COMMITMENTS AND CONTINGENCIES
(CONTINUED)
During the year ended December 31, 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 years ended December 31, 2017 and 2016, the Company recognized rent expense related to the marketing
agreement in the amount of $24,480 and $-0-, respectively, pursuant to this agreement and had prepaid an additional $24,459 toward
future rent as of December 31, 2017.
Total lease expense for the years ended
December 31, 2017 and 2016 was $294,745 and $336,385, respectively.
Future minimum lease payments (excluding
real estate taxes and maintenance costs) as of December 31, 2017 are as follows:
2018
|
|
$
|
281,460
|
|
2019
|
|
|
273,856
|
|
2020
|
|
|
162,055
|
|
2021
|
|
|
---
|
|
2022
|
|
|
---
|
|
|
|
|
|
|
Total
|
|
$
|
717,371
|
|
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.
During 2016, Dr. Dent retired from practice to focus on his duties as CEO of HLYK.
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, HLYK’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.
HEALTHLYNKED CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2017 AND 2016
NOTE 13 – INCOME TAXES
The tax reform bill that Congress voted to approve Dec. 20,
2017, also known as the “Tax Cuts and Jobs Act”, made sweeping modifications to the Internal Revenue Code, including
a much lower corporate tax rate, changes to credits and deductions, and a move to a territorial system for corporations that have
overseas earnings. The act replaced the prior-law graduated corporate tax rate, which taxed income over $10 million at 35%, with
a flat rate of 21%. The Company has not reviewed the all of the changes the “Tax Cuts and Jobs Act” that will apply
to the Company, but is reviewing such changes. Due to the continuing loss position of the Company, such changes should not be
material.
The following is a reconciliation of the
statutory federal income tax rate applied to pre-tax accounting net loss compared to the income taxes in the consolidated statement
of operations:
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
|
Pre-tax loss
|
|
$
|
(2,581,011
|
)
|
|
$
|
(1,376,406
|
)
|
Statutory rate - Tax Law Change 2017
|
|
|
21
|
%
|
|
|
21
|
%
|
Income tax benefit at statutory rate
|
|
|
(542,012
|
)
|
|
|
(289,045
|
)
|
Permanent and other differences
|
|
|
---
|
|
|
|
---
|
|
|
|
|
|
|
|
|
|
|
Change in valuation allowance
|
|
$
|
(542,012
|
)
|
|
$
|
(289,045
|
)
|
As of December 31, 2017 and 2016, the types
of temporary differences between the tax basis of assets and liabilities and their financial reporting amounts which gave rise
to deferred taxes, and their tax effects were as follows:
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
|
Net operating loss carryforwards
|
|
$
|
576,049
|
|
|
$
|
34,037
|
|
Stock based compensation expense
|
|
|
---
|
|
|
|
---
|
|
Total deferred tax assets
|
|
|
576,049
|
|
|
|
34,037
|
|
Valuation allowance
|
|
|
(576,049
|
)
|
|
|
(34,037
|
)
|
|
|
|
|
|
|
|
|
|
Net deferred tax assets
|
|
$
|
---
|
|
|
$
|
---
|
|
Due to the uncertainty of the utilization
and recoverability of the loss carry-forwards and other deferred tax assets, Management has determined a full valuation allowance
for the deferred tax assets, since it is more likely than not that the deferred tax assets will not be realizable.
Prior to 2014, the Company was an
S-Corporation, as defined in the Internal Revenue Code. As an S-Corporation, income/losses were passed through to the
stockholders for each year. During 2014, the Company failed to meet the requirements of an S-Corporation when it authorized
and issued a second class of stock other than common stock. The S-Corporation requirements allow only one class of stock,
among other certain requirements, to maintain S-Corporation status, as defined. The Company upon failing to maintain its S
Corporation status became a C-Corporation during 2014. Prior year losses and up to the date that the Company lost its
S-Corporation status are not available to the Company, since they were passed through to qualified S-Corporation
shareholders. The net operating loss (“NOL”) carryovers presented in this note are estimates based on the losses
reported at December 31, 2017, 2016 and 2015. Such NOL carryovers could also be subject to IRC Section 382 change of
ownership rules, but management has not reviewed the Company’s ownership changes at the date of this filing. Since the
NOLs based upon management’s assessment have a full valuation allowance, no benefit has been taken for the NOL’s,
as of the filing date.
HEALTHLYNKED CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2017 AND 2016
NOTE 13 – INCOME TAXES (CONTINUED)
Prior to September 5, 2014, the date on
which NWC and HLYK completed the Restructuring, the Company’s business was comprised of the operations of NWC, which at the
time was an LLC comprised of two members. All income taxes resulting from the operation of NWC were passed through to the personal
income tax returns of the LLC members. Subsequent to September 5, 2014, HLKD reports the consolidated operations of NWC and HLKD
in its tax returns. On a consolidated basis, the Company did not have any tax liability for 2016 or 2017 due to its pre-tax losses.
Such return filings are being reviewed by Management, based upon the Company failing to meet the S-Corporation status, as defined.
The Company believes there would be no tax liability created for the S corporation failure, since the Company has had losses for
the periods presented in this filing.
The Company has not taken any uncertain
tax positions on any of its open income tax returns filed through the period ended December 31, 2017. The Company’s methods
of accounting are based on established income tax principles in the Internal Revenue Code and are properly calculated and reflected
within its income tax returns on the accrual basis. In addition, Management believes it has filed income tax returns in all applicable
jurisdictions in which the Company had material nexus warranting an income tax return filing.
The Company re-assesses the validity of
its conclusions regarding uncertain tax positions on a quarterly basis to determine if facts or circumstances have arisen that
might cause the Company to change its judgment regarding the likelihood of a tax position’s sustainability under audit. The
Company has determined that there were no uncertain tax positions for the years ended December 31, 2017 and 2016.
NOTE 14 – SEGMENT REPORTING
The Company has two reportable segments:
NWC and HLYK. NWC is a multi-specialty medical group including OB/GYN (both Obstetrics and Gynecology), and General Practice. The
practice’s office is located in Naples, Florida. HLYK plans to operate an online personal medical information and record
archive system, the “HealthLynked Network”, which will enable patients and doctors to keep track of medical information
via the Internet in a cloud based system. Patients will complete a detailed online personal medical history including past surgical
history, medications, allergies, and family history. Once this information is entered patients and their treating physicians will
be able to update the information as needed to provide a comprehensive medical history.
The Company evaluates performance and allocates
resources based on profit or loss from operations before income taxes. The accounting policies of the reportable segments are the
same as those described in the summary of significant accounting policies.
HEALTHLYNKED CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2017 AND 2016
NOTE 14 – SEGMENT REPORTING (CONTINUED)
Segment information for the years ended
December 31, 2017 and 2016 was as follows:
|
|
2017
|
|
|
2016
|
|
|
|
NWC
|
|
|
HLYK
|
|
|
Total
|
|
|
NWC
|
|
|
HLYK
|
|
|
Total
|
|
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Patient service revenue, net
|
|
$
|
2,103,579
|
|
|
$
|
---
|
|
|
$
|
2,103,579
|
|
|
$
|
1,945,664
|
|
|
$
|
---
|
|
|
$
|
1,945,664
|
|
Medicare incentives
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
Total revenue
|
|
|
2,103,579
|
|
|
|
---
|
|
|
|
2,103,579
|
|
|
|
1,945,664
|
|
|
|
---
|
|
|
|
1,945,664
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and benefits
|
|
|
1,395,455
|
|
|
|
626,990
|
|
|
|
2,022,445
|
|
|
|
1,338,572
|
|
|
|
221,153
|
|
|
|
1,559,725
|
|
General and administrative
|
|
|
854,080
|
|
|
|
994,786
|
|
|
|
1,848,866
|
|
|
|
1,023,691
|
|
|
|
520,175
|
|
|
|
1,543,866
|
|
Depreciation and amortization
|
|
|
22,387
|
|
|
|
1,219
|
|
|
|
23,606
|
|
|
|
16,461
|
|
|
|
---
|
|
|
|
16,461
|
|
Total Operating Expenses
|
|
|
2,271,922
|
|
|
|
1,622,995
|
|
|
|
3,894,917
|
|
|
|
2,378,724
|
|
|
|
741,328
|
|
|
|
3,120,052
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from operations
|
|
$
|
(168,343
|
)
|
|
$
|
(1,622,995
|
)
|
|
$
|
(1,791,338
|
)
|
|
$
|
(433,060
|
)
|
|
$
|
(741,328
|
)
|
|
$
|
(1,174,388
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Segment Information
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
$
|
22,857
|
|
|
$
|
76,811
|
|
|
$
|
99,668
|
|
|
$
|
18,083
|
|
|
$
|
18,545
|
|
|
$
|
36,628
|
|
Loss on extinguishment of debt
|
|
$
|
---
|
|
|
$
|
290,581
|
|
|
$
|
290,581
|
|
|
$
|
---
|
|
|
$
|
---
|
|
|
$
|
---
|
|
Loss at inception of convertible notes payable
|
|
$
|
---
|
|
|
$
|
72,956
|
|
|
$
|
72,956
|
|
|
$
|
---
|
|
|
$
|
---
|
|
|
$
|
---
|
|
Amortization of original issue and debt discounts on convertible notes
|
|
$
|
---
|
|
|
$
|
330,435
|
|
|
$
|
330,435
|
|
|
$
|
---
|
|
|
$
|
208,626
|
|
|
$
|
208,626
|
|
Proceeds from settlement of lawsuit
|
|
$
|
---
|
|
|
$
|
---
|
|
|
$
|
---
|
|
|
$
|
(43,236
|
)
|
|
$
|
---
|
|
|
$
|
(43,236
|
)
|
Change in fair value of derivative financial instruments
|
|
$
|
---
|
|
|
$
|
(3,967
|
)
|
|
$
|
(3,967
|
)
|
|
$
|
---
|
|
|
$
|
---
|
|
|
$
|
---
|
|
Identifiable assets
|
|
$
|
269,424
|
|
|
$
|
170,359
|
|
|
$
|
439,783
|
|
|
$
|
240,115
|
|
|
$
|
89,396
|
|
|
$
|
329,511
|
|
During the year ended December 31, 2017,
HLYK realized revenue of $4,414 to subscription revenue billed to and paid for by NWC physicians for access to the HealthLynked
Network, which the Company test-launched during the third quarter of 2017. The revenue for HLYK and related expense for NWC were
eliminated on consolidation.
NOTE 15 – SUBSEQUENT EVENTS
On January 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 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 CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2017 AND 2016
NOTE 15 – SUBSEQUENT EVENTS (CONTINUED)
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 8, 2018, Michael Dent loaned $75,000 to the Company
in the form of an unsecured promissory note. The note bears interest at 10% per annum and matures on January 9, 2019.
On January 8, 2018, the Company prepaid
the balance on the $53k Note, including accrued interest, for the amount of $74,922.
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 2, 2018, the Company entered
into a securities purchase agreement for the sale of a $112,750 convertible note (the “$113k Note”). The transaction
closed on February 8, 2018. The $113k Note included $12,750 fees for net proceeds of $100,000. The $113k Note has an interest
rate of 10% and a default interest rate of 24% and matures on February 2, 2019. The $113k Note may be converted into common stock
of the Company by the holder at any time after the issuance date, subject to a 4.99% beneficial ownership limitation, at a conversion
price per share equal to 40% discount to the lowest bid or trading price of the Company’s common stock during the twenty
(20) trading days prior to the conversion date. Upon an event of default caused by the Company’s failure to deliver shares
upon a conversion pursuant to the terms of the Note, 200% of the outstanding principal and any interest due amount shall be immediately
due. Upon an event of default caused by the Company’s breach of any other events of default specified in the Note, 150%
of the outstanding principal and any interest due amount shall be immediately due.
On February 12, 2018, the Company issued
a warrant to purchase 6,678,462 shares of common stock to Chief Executive Officer and Chairman Dr. Michael Dent as an inducement
to (i) extend the maturity dates of up to $439,450 loaned by Dr. Dent to the Company in 2017 and 2018 in the form of unsecured
promissory notes, including $75,000 loaned from Dr. Dent to the Company in January 2018 to allow the Company to retire an existing
convertible promissory note payable to Power-up Lending Group Ltd. before such convertible promissory note became eligible for
conversion, and (ii) provide continued loans to the Company. The warrant is immediately exercisable at an exercise price of $0.065
per share, subject to adjustment, and expires five years after the date of issuance.
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.
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 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 issuance date, subject to a 9.9% beneficial ownership limitation, at a conversion
price per share equal to 40% discount to the lowest bid or trading price of the Company’s common stock during the twenty
(20) trading days prior to the conversion date. Upon an event of default, 110-150% of the outstanding principal and any interest
due amount shall be immediately due, depending on the nature of the breach.
On March 5, 2018, the Company prepaid the
balance on the $35k Note, including accrued interest, for the amount of $49,502.
On March 13, 2018, the Company prepaid
the balance on the $55k Note, including accrued interest, for the amount of $85,258.
HEALTHLYNKED
CORP.
CONDENSED
CONSOLIDATED BALANCE SHEETS
|
|
June 30,
|
|
|
December 31,
|
|
|
|
2018
|
|
|
2017
|
|
ASSETS
|
|
(unaudited)
|
|
|
|
|
Current Assets
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
38,227
|
|
|
$
|
50,006
|
|
Accounts receivable, net
|
|
|
141,853
|
|
|
|
113,349
|
|
Prepaid expenses
|
|
|
265,770
|
|
|
|
81,892
|
|
Deferred offering costs
|
|
|
178,421
|
|
|
|
121,620
|
|
Total Current Assets
|
|
|
624,271
|
|
|
|
366,867
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment, net of accumulated depreciation of $740,449 and $728,391 as of June 30, 2018 and December
31, 2017, respectively
|
|
|
51,519
|
|
|
|
63,376
|
|
Deposits
|
|
|
9,540
|
|
|
|
9,540
|
|
|
|
|
|
|
|
|
|
|
Total Assets
|
|
$
|
685,330
|
|
|
$
|
439,783
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS’ DEFICIT
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Liabilities
|
|
|
|
|
|
|
|
|
Accounts payable and accrued expenses
|
|
$
|
289,172
|
|
|
$
|
253,514
|
|
Capital lease, current portion
|
|
|
19,877
|
|
|
|
18,348
|
|
Due to related party, current portion
|
|
|
396,453
|
|
|
|
363,845
|
|
Notes payable to related party, current portion
|
|
|
---
|
|
|
|
553,550
|
|
Notes payable, net of original issue discount and debt discount of $23,940 and $26,881 as of
June 30, 2018 and December 31, 2017, respectively
|
|
|
61,869
|
|
|
|
70,186
|
|
Convertible notes payable, net of original issue discount and debt discount of $689,883 and $266,642 as of June 30, 2018
and December 31, 2017, respectively
|
|
|
350,867
|
|
|
|
811,858
|
|
Derivative financial instruments
|
|
|
1,389,689
|
|
|
|
398,489
|
|
Total Current Liabilities
|
|
|
2,507,927
|
|
|
|
2,469,790
|
|
|
|
|
|
|
|
|
|
|
Long-Term Liabilities
|
|
|
|
|
|
|
|
|
Capital leases, long-term portion
|
|
|
12,232
|
|
|
|
21,406
|
|
Notes payable to related party, long term portion
|
|
|
665,452
|
|
|
|
---
|
|
Convertible notes payable, long term portion
|
|
|
795,233
|
|
|
|
---
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities
|
|
|
3,980,844
|
|
|
|
2,491,196
|
|
|
|
|
|
|
|
|
|
|
Shareholders’ Deficit
|
|
|
|
|
|
|
|
|
Common stock, par value $0.0001 per share, 500,000,000 shares authorized, 77,949,491 and 72,302,937 shares issued and
outstanding as of June 30, 2018 and December 31, 2017, respectively
|
|
|
7,795
|
|
|
|
7,230
|
|
Common stock issuable, $0.0001 par value; 18,021 and 122,101 shares as of June 30, 2018 and December 31, 2017,
respectively
|
|
|
3,937
|
|
|
|
8,276
|
|
Additional paid-in capital
|
|
|
3,789,341
|
|
|
|
2,638,311
|
|
Accumulated deficit
|
|
|
(7,096,587
|
)
|
|
|
(4,705,230
|
)
|
Total Shareholders’ Deficit
|
|
|
(3,295,514
|
)
|
|
|
(2,051,413
|
)
|
|
|
|
|
|
|
|
|
|
Total Liabilities and Shareholders’ Deficit
|
|
$
|
685,330
|
|
|
$
|
439,783
|
|
See
the accompanying notes to these Unaudited Condensed Consolidated Financial Statements
HEALTHLYNKED
CORP.
CONDENSED
CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
|
|
Three Months Ended
June 30,
|
|
|
Six Months Ended
June 30,
|
|
|
|
2018
|
|
|
2017
|
|
|
2018
|
|
|
2017
|
|
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
Patient service revenue, net
|
|
$
|
566,320
|
|
|
$
|
516,798
|
|
|
$
|
1,211,959
|
|
|
$
|
992,916
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and benefits
|
|
|
618,143
|
|
|
|
495,131
|
|
|
|
1,178,999
|
|
|
|
963,005
|
|
General and administrative
|
|
|
552,583
|
|
|
|
498,378
|
|
|
|
1,127,411
|
|
|
|
888,404
|
|
Depreciation and amortization
|
|
|
6,029
|
|
|
|
5,859
|
|
|
|
12,058
|
|
|
|
11,567
|
|
Total Operating Expenses
|
|
|
1,176,755
|
|
|
|
999,368
|
|
|
|
2,318,468
|
|
|
|
1,862,976
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income from operations
|
|
|
(610,435
|
)
|
|
|
(482,570
|
)
|
|
|
(1,106,509
|
)
|
|
|
(870,060
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Income (Expenses)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain (loss) on extinguishment of debt
|
|
|
16,864
|
|
|
|
---
|
|
|
|
(308,359
|
)
|
|
|
---
|
|
Change in fair value of debt
|
|
|
(25,452
|
)
|
|
|
---
|
|
|
|
(83,398
|
)
|
|
|
---
|
|
Financing cost
|
|
|
(248,443
|
)
|
|
|
---
|
|
|
|
(440,505
|
)
|
|
|
---
|
|
Amortization of original issue and debt discounts on notes payable and convertible notes
|
|
|
(244,563
|
)
|
|
|
(58,524
|
)
|
|
|
(399,398
|
)
|
|
|
(130,568
|
)
|
Change in fair value of derivative financial instrument
|
|
|
52,786
|
|
|
|
---
|
|
|
|
38,165
|
|
|
|
---
|
|
Interest expense
|
|
|
(51,006
|
)
|
|
|
(20,210
|
)
|
|
|
(91,353
|
)
|
|
|
(37,797
|
)
|
Total other expenses
|
|
|
(499,814
|
)
|
|
|
(78,734
|
)
|
|
|
(1,284,848
|
)
|
|
|
(168,365
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss before provision for income taxes
|
|
|
(1,110,249
|
)
|
|
|
(561,304
|
)
|
|
|
(2,391,357
|
)
|
|
|
(1,038,425
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for income taxes
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(1,110,249
|
)
|
|
$
|
(561,304
|
)
|
|
$
|
(2,391,357
|
)
|
|
$
|
(1,038,425
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per share, basic and diluted:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
(0.01
|
)
|
|
$
|
(0.01
|
)
|
|
$
|
(0.03
|
)
|
|
$
|
(0.02
|
)
|
Fully diluted
|
|
$
|
(0.01
|
)
|
|
$
|
(0.01
|
)
|
|
$
|
(0.03
|
)
|
|
$
|
(0.02
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of common shares:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
75,871,643
|
|
|
|
69,411,880
|
|
|
|
74,397,741
|
|
|
|
68,028,225
|
|
Fully diluted
|
|
|
75,871,643
|
|
|
|
69,411,880
|
|
|
|
74,397,741
|
|
|
|
68,028,225
|
|
See
the accompanying notes to these Unaudited Condensed Consolidated Financial Statements
HEALTHLYNKED
CORP.
CONDENSED
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ DEFICIT
SIX
MONTHS ENDED JUNE 30, 2018
(UNAUDITED)
|
|
Number of Shares
|
|
|
|
|
|
Common
|
|
|
Additional
|
|
|
|
|
|
Total
|
|
|
|
Common
|
|
|
Common
|
|
|
Stock
|
|
|
Paid-in
|
|
|
Accumulated
|
|
|
Shareholders’
|
|
|
|
Stock
|
|
|
Stock
|
|
|
Issuable
|
|
|
Capital
|
|
|
Deficit
|
|
|
Deficit
|
|
|
|
(#)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
Balance
at December 31, 2017
|
|
|
72,302,937
|
|
|
|
7,230
|
|
|
|
8,276
|
|
|
|
2,638,311
|
|
|
|
(4,705,230
|
)
|
|
|
(2,051,413
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sale of common stock
|
|
|
631,204
|
|
|
|
511
|
|
|
|
---
|
|
|
|
498,971
|
|
|
|
---
|
|
|
|
499,482
|
|
Fair value of warrants allocated to proceeds of common stock
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
146,021
|
|
|
|
---
|
|
|
|
146,021
|
|
Fair value of warrants issued to extend related party notes payable
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
337,467
|
|
|
|
---
|
|
|
|
337,467
|
|
Fair value of warrants issued to extend convertible notes payable
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
10,199
|
|
|
|
---
|
|
|
|
10,199
|
|
Fair value of warrants issued for professional services
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
115,125
|
|
|
|
---
|
|
|
|
115,125
|
|
Consultant fees payable with common shares and warrants
|
|
|
---
|
|
|
|
28
|
|
|
|
(4,331
|
)
|
|
|
31,659
|
|
|
|
---
|
|
|
|
27,356
|
|
Shares and options issued pursuant to employee equity incentive plan
|
|
|
75,000
|
|
|
|
26
|
|
|
|
(8
|
)
|
|
|
11,588
|
|
|
|
---
|
|
|
|
11,606
|
|
Net loss
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
(2,391,357
|
)
|
|
|
(2,391,357
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at June 30, 2018
|
|
|
73,009,141
|
|
|
|
7,795
|
|
|
|
3,937
|
|
|
|
3,789,341
|
|
|
|
(7,096,587
|
)
|
|
|
(3,295,514
|
)
|
See
the accompanying notes to these Unaudited Condensed Consolidated Financial Statements
HEALTHLYNKED
CORP.
CONDENSED
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
|
|
Six Months Ended
June 30,
|
|
|
|
2018
|
|
|
2017
|
|
Cash Flows from Operating Activities
|
|
|
|
|
|
|
Net loss
|
|
$
|
(2,391,357
|
)
|
|
$
|
(1,038,425
|
)
|
Adjustments to reconcile net loss to net cash used in operating activities:
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
12,058
|
|
|
|
11,567
|
|
Stock based compensation, including amortization of prepaid fees
|
|
|
97,286
|
|
|
|
48,650
|
|
Amortization of original issue discount and debt discount on convertible notes
|
|
|
399,398
|
|
|
|
130,568
|
|
Financing cost
|
|
|
440,505
|
|
|
|
---
|
|
Change in fair value of derivative financial instrument
|
|
|
(38,165
|
)
|
|
|
---
|
|
Loss on extinguishment of debt
|
|
|
308,359
|
|
|
|
---
|
|
Change in fair value of debt
|
|
|
83,398
|
|
|
|
---
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
(28,504
|
)
|
|
|
2,273
|
|
Prepaid expenses and deposits
|
|
|
(183,878
|
)
|
|
|
15,921
|
|
Accounts payable and accrued expenses
|
|
|
45,345
|
|
|
|
3,322
|
|
Due to related party, current portion
|
|
|
32,608
|
|
|
|
16,488
|
|
Net cash used in operating activities
|
|
|
(1,222,947
|
)
|
|
|
(809,636
|
)
|
|
|
|
|
|
|
|
|
|
Cash Flows from Investing Activities
|
|
|
|
|
|
|
|
|
Acquisition of property and equipment
|
|
|
(201
|
)
|
|
|
(7,046
|
)
|
Net cash used in investing activities
|
|
|
(201
|
)
|
|
|
(7,046
|
)
|
|
|
|
|
|
|
|
|
|
Cash Flows from Financing Activities
|
|
|
|
|
|
|
|
|
Proceeds from sale of common stock
|
|
|
645,503
|
|
|
|
520,000
|
|
Proceeds from issuance of convertible notes
|
|
|
805,500
|
|
|
|
100,000
|
|
Repayment of convertible notes
|
|
|
(284,682
|
)
|
|
|
|
|
Proceeds from related party loans
|
|
|
101,450
|
|
|
|
177,470
|
|
Repayment of related party loans
|
|
|
(9,000
|
)
|
|
|
(11,192
|
)
|
Proceeds from notes payable and bank loans
|
|
|
73,500
|
|
|
|
---
|
|
Repayment of notes payable and bank loans
|
|
|
(113,257
|
)
|
|
|
|
|
Payments on capital leases
|
|
|
(7,645
|
)
|
|
|
(9,174
|
)
|
Net cash provided by financing activities
|
|
|
1,211,369
|
|
|
|
777,104
|
|
|
|
|
|
|
|
|
|
|
Net decrease in cash
|
|
|
(11,779
|
)
|
|
|
(39,578
|
)
|
Cash, beginning of period
|
|
|
50,006
|
|
|
|
58,716
|
|
|
|
|
|
|
|
|
|
|
Cash, end of period
|
|
$
|
38,227
|
|
|
$
|
19,138
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosure of cash flow information:
|
|
|
|
|
|
|
|
|
Cash paid during the period for interest
|
|
$
|
9,978
|
|
|
$
|
699
|
|
Cash paid during the period for income tax
|
|
|
---
|
|
|
|
---
|
|
Schedule of non-cash investing and financing activities:
|
|
|
|
|
|
|
|
|
Fair value of warrants issued to extend maturity date of convertible notes payable, recognized as discount against convertible notes payable
|
|
|
10,199
|
|
|
|
7,506
|
|
Fair value of beneficial conversion feature and original issue discount allocated to proceeds of convertible notes payable
|
|
|
1,246,005
|
|
|
|
66,190
|
|
Common stock issuable issued during period
|
|
|
54
|
|
|
|
---
|
|
Derivative liabilities written off with repayment of convertible notes payable
|
|
|
216,640
|
|
|
|
---
|
|
Fair value of warrants issued to extend related party notes payable
|
|
|
337,466
|
|
|
|
---
|
|
Fair of warrants issued for professional service
|
|
|
94,844
|
|
|
|
---
|
|
Fair value of warrants issued pursuant to Amended Investment Agreement
|
|
|
---
|
|
|
|
153,625
|
|
See
the accompanying notes to these Unaudited Condensed Consolidated Financial Statements
HEALTHLYNKED
CORP.
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2018 AND 2017
(UNAUDITED)
NOTE
1 – BUSINESS AND BUSINESS PRESENTATION
HealthLynked
Corp., a Nevada corporation (the “Company” or “HLYK”) filed its Articles of Incorporation on August 4,
2014. On September 3, 2014 HLYK filed Amended Articles of Incorporation clarifying that the total authorized shares of 250,000,000
shares are broken up between 230,000,000 common shares and 20,000,000 preferred shares. On February 5, 2018, the Company filed
the amendment with the Secretary of State of Nevada to increase the amount of authorized shares of common stock to 500,000,000
shares.
On
September 5, 2014, HLYK entered into a share exchange agreement (the “Share Exchange Agreement”) with Naples Women’s
Center LLC (“NWC”), a Florida Limited Liability Company (“LLC”), acquiring 100% of the LLC membership
units of NWC through the issuance of 50,000,000 shares of HLYK common stock to the members of NWC (the “Restructuring”).
NWC
is a multi-specialty medical group including OB/GYN (both Obstetrics and Gynecology), and General Practice located in Naples,
Florida.
HLYK
operates an online personal medical information and record archive system, the “HealthLynked Network”, which enables
patients and doctors to keep track of medical information via the Internet in a cloud based system. Patients complete a detailed
online personal medical history including past surgical history, medications, allergies, and family history. Once this information
is entered patients and their treating physicians are able to update the information as needed to provide a comprehensive medical
history.
These
unaudited condensed consolidated financial statements reflect all adjustments including normal recurring adjustments, which, in
the opinion of management, are necessary to present fairly the financial position, results of operations and cash flows for the
periods presented in accordance with the GAAP. These unaudited condensed consolidated financial statements should be read in conjunction
with the Company’s consolidated financial statements and notes thereto for the years ended December 31, 2017 and 2016, respectively,
which are included in the Company’s Form 10-K filed with the United States Securities and Exchange Commission on April 2,
2018. The Company assumes that the users of the interim financial information herein have read, or have access to, the audited
consolidated financial statements for the preceding period, and that the adequacy of additional disclosure needed for a fair presentation
may be determined in that context. The results of operations for the three and six months ended June 30, 2018 are not necessarily
indicative of results for the entire year ending December 31, 2018.
All
significant intercompany transactions and balances have been eliminated upon consolidation. In addition, certain amounts in the
prior periods’ consolidated financial statements have been reclassified to conform to the current period presentation.
NOTE
2 – SIGNIFICANT ACCOUNTING POLICIES
A
summary of the significant accounting policies applied in the presentation of the accompanying condensed consolidated financial
statements follows:
Basis
of Presentation
The
accompanying unaudited condensed consolidated financial statements have been prepared in conformity with accounting principles
generally accepted in the United States of America (“US GAAP”).
All
amounts referred to in the notes to the condensed consolidated financial statements are in United States Dollars ($) unless stated
otherwise.
Use
of Estimates
The
preparation of the condensed consolidated financial statements in conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect certain reported amounts of assets and liabilities and disclosures of
contingent assets and liabilities at the date of the condensed consolidated financial statements, and the reported amounts of
revenues and expenses during the reporting period. Accordingly, actual results could differ from those estimates. Significant
estimates include assumptions about collection of accounts receivable, the valuation and recognition of stock-based compensation
expense, valuation allowance for deferred tax assets and useful life of fixed assets.
HEALTHLYNKED
CORP.
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2018 AND 2017
(UNAUDITED)
NOTE
2 – SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Patient
Service Revenue
Patient
service revenue is reported at the amount that reflects the consideration to which the Company expects to be entitled in exchange
for providing patient care. These amounts are due from patients and third-party payors (including health insurers and government
programs) and includes variable consideration for retroactive revenue adjustments due to settlement of audits, reviews, and investigations.
Generally, the Company bills patients and third-party payors within days after the services are performed and/or the patient is
discharged from the facility. Revenue is recognized as performance obligations are satisfied.
Performance
obligations are determined based on the nature of the services provided by the Company. Revenue for performance obligations satisfied
over time is recognized based on actual charges incurred in relation to total expected charges. The Company believes that this
method provides a faithful depiction of the transfer of services over the term of the performance obligation based on the inputs
needed to satisfy the obligation. Revenue for performance obligations satisfied at a point in time is recognized when goods or
services are provided and the Company does not believe it is required to provide additional goods or services to the patient.
The
Company determines the transaction price based on standard charges for goods and services provided, reduced by contractual adjustments
provided to third-party payors, discounts provided to uninsured patients in accordance with the Company’s policy, and/or
implicit price concessions provided to uninsured patients. The Company determines its estimates of contractual adjustments and
discounts based on contractual agreements, its discount policies, and historical experience. The Company determines its estimate
of implicit price concessions based on its historical collection experience with this class of patients.
Agreements
with third-party payors typically provide for payments at amounts less than established charges. A summary of the payment arrangements
with major third-party payors follows:
|
●
|
Medicare:
Certain inpatient acute care services are paid at prospectively determined rates
per discharge based on clinical, diagnostic and other factors. Certain services are paid
based on cost-reimbursement methodologies subject to certain limits. Physician services
are paid based upon established fee schedules. Outpatient services are paid using prospectively
determined rates.
|
|
●
|
Medicaid:
Reimbursements for Medicaid services are generally paid at prospectively determined
rates per discharge, per occasion of service, or per covered member.
|
|
●
|
Other:
Payment agreements with certain commercial insurance carriers, health maintenance
organizations, and preferred provider organizations provide for payment using prospectively
determined rates per discharge, discounts from established charges, and prospectively
determined daily rates.
|
Laws
and regulations concerning government programs, including Medicare and Medicaid, are complex and subject to varying interpretation.
As a result of investigations by governmental agencies, various health care organizations have received requests for information
and notices regarding alleged noncompliance with those laws and regulations, which, in some instances, have resulted in organizations
entering into significant settlement agreements. Compliance with such laws and regulations may also be subject to future government
review and interpretation as well as significant regulatory action, including fines, penalties, and potential exclusion from the
related programs. There can be no assurance that regulatory authorities will not challenge the Company’s compliance with
these laws and regulations, and it is not possible to determine the impact, if any, such claims or penalties would have upon the
Company. In addition, the contracts the Company has with commercial payors also provide for retroactive audit and review of claims.
Settlements
with third-party payors for retroactive adjustments due to audits, reviews or investigations are considered variable consideration
and are included in the determination of the estimated transaction price for providing patient care. These settlements are estimated
based on the terms of the payment agreement with the payor, correspondence from the payor and the Company’s historical settlement
activity, including an assessment to ensure that it is probable that a significant reversal in the amount of cumulative revenue
recognized will not occur when the uncertainty associated with the retroactive adjustment is subsequently resolved. Estimated
settlements are adjusted in future periods as adjustments become known, or as years are settled or are no longer subject to such
audits, reviews, and investigations.
HEALTHLYNKED
CORP.
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2018 AND 2017
(UNAUDITED)
NOTE
2 – SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
The
Company also provides services to uninsured patients, and offers those uninsured patients a discount, either by policy or law,
from standard charges. The Company estimates the transaction price for patients with deductibles and coinsurance and from those
who are uninsured based on historical experience and current market conditions. The initial estimate of the transaction price
is determined by reducing the standard charge by any contractual adjustments, discounts, and implicit price concessions. Subsequent
changes to the estimate of the transaction price are generally recorded as adjustments to patient service revenue in the period
of the change.
Cash
and Cash Equivalents
For
financial statement purposes, the Company considers all highly-liquid investments with original maturities of three months or
less to be cash and cash equivalents.
Accounts
Receivable
Trade
receivables are carried at their estimated collectible amounts. Trade credit is generally extended on a short-term basis; thus
trade receivables do not bear interest. Trade accounts receivable are periodically evaluated for collectability based on past
collectability of the insurance companies, government agencies, and customers’ accounts receivable during the related period
which generally approximates 45% of total billings. Trade accounts receivable are recorded at this net amount. As of June 30,
2018 and December 31, 2017, the Company’s gross accounts receivable were $286,728 and $269,501, respectively, and net accounts
receivable were $141,853 and $113,349, respectively, based upon net reporting of accounts receivable.
Capital
Leases
Costs
associated with capitalized leases are capitalized and depreciated ratably over the term of the related useful life of the asset
and/or the capital lease term. The related depreciation was $4,587 and $4,587 for the three months ended June 30, 2018 and 2017,
respectively, and $9,174 and $9,174 for the six months ended June 30, 2018 and 2017, respectively. Accumulated depreciation of
capitalized leases was $312,912 and $303,738 at June 30, 2018 and December 31, 2017, respectively.
Concentrations
of Credit Risk
The
Company’s financial instruments that are exposed to a concentration of credit risk are cash and accounts receivable. There
are no patients/customers that represent 10% or more of the Company’s revenue or accounts receivable. Generally, the Company’s
cash and cash equivalents are in checking accounts.
Property
and Equipment
Property
and equipment are stated at cost. When retired or otherwise disposed, the related carrying value and accumulated depreciation
are removed from the respective accounts and the net difference less any amount realized from disposition, is reflected in earnings.
For consolidated financial statement purposes, property and equipment are recorded at cost and depreciated using the straight-line
method over their estimated useful lives of 5 to 7 years. The cost of repairs and maintenance is expensed as incurred; major replacements
and improvements are capitalized.
The
Company examines the possibility of decreases in the value of fixed assets when events or changes in circumstances reflect the
fact that their recorded value may not be recoverable. The Company recognizes an impairment loss when the sum of expected undiscounted
future cash flows is less than the carrying amount of the asset. The amount of impairment is measured as the difference between
the asset’s estimated fair value and its book value. There was no impairment as of June 30, 2018 and December 31, 2017.
HEALTHLYNKED
CORP.
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2018 AND 2017
(UNAUDITED)
NOTE
2 – SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Convertible
Notes
Convertible
notes are regarded as compound instruments, consisting of a liability component and an equity component. The component parts of
compound instruments are classified separately as financial liabilities and equity in accordance with the substance of the contractual
arrangement. At the date of issue, the fair value of the liability component is estimated using the prevailing market interest
rate for a similar non-convertible instrument. This amount is recorded as a liability on an amortized cost basis until extinguished
upon conversion or at the instrument’s maturity date. The equity component is determined by deducting the amount of the
liability component from the fair value of the compound instrument as a whole. This is recognized as additional paid-in capital
and included in equity, net of income tax effects, and is not subsequently remeasured. After initial measurement, they are carried
at amortized cost using the effective interest method. Convertible notes for which the maturity date has been extended and that
qualify for debt extinguishment treatment are recorded at fair value on the extinguishment date and then revalue at the end of
each reporting period, with the change recorded to the statement of operations under “Change in Fair Value of Debt.”
Derivative
Financial Instruments
The
Company reviews the terms of convertible debt, equity instruments and other financing arrangements to determine whether there
are embedded derivative instruments, including embedded conversion options that are required to be bifurcated and accounted for
separately as a derivative financial instrument. Also, in connection with the issuance of financing instruments, the Company may
issue freestanding options or warrants that may, depending on their terms, be accounted for as derivative instrument liabilities,
rather than as equity. Derivative financial instruments are initially measured at their fair value. For derivative financial instruments
that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued
at each reporting date, with changes in the fair value reported as charges or credits to income. To the extent that the initial
fair values of the freestanding and/or bifurcated derivative instrument liabilities exceed the total proceeds received, an immediate
charge to income is recognized, in order to initially record the derivative instrument liabilities at their fair value. The discount
from the face value of convertible debt instruments resulting from allocating some or all of the proceeds to the derivative instruments
is amortized over the life of the instrument through periodic charges to income.
The
classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is
reassessed at the end of each reporting period. If reclassification is required, the fair value of the derivative instrument,
as of the determination date, is reclassified. Any previous charges or credits to income for changes in the fair value of the
derivative instrument are not reversed. Derivative instrument liabilities are classified in the balance sheet as current or non-current
based on whether or not net-cash settlement of the derivative instrument could be required within twelve months of the balance
sheet date. The Company does not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks.
Fair
Value of Assets and Liabilities
Fair
value is the price that would be received from the sale of an asset or paid to transfer a liability (i.e. an exit price) in the
principal or most advantageous market in an orderly transaction between market participants. In determining fair value, the accounting
standards have established a three-level hierarchy that distinguishes between (i) market data obtained or developed from independent
sources (i.e., observable data inputs) and (ii) a reporting entity’s own data and assumptions that market participants would
use in pricing an asset or liability (i.e., unobservable data inputs). Financial assets and financial liabilities measured and
reported at fair value are classified in one of the following categories, in order of priority of observability and objectivity
of pricing inputs:
|
●
|
Level 1 –
Fair value based on quoted prices in active markets for identical assets or liabilities
|
|
●
|
Level 2
–
Fair value based on significant directly observable data (other than Level 1 quoted prices) or significant indirectly observable
data through corroboration with observable market data. Inputs would normally be (i) quoted prices in active markets for similar
assets or liabilities, (ii) quoted prices in inactive markets for identical or similar assets or liabilities or (iii) information
derived from or corroborated by observable market data.
|
|
●
|
Level 3
–
Fair value based on prices or valuation techniques that require significant unobservable data inputs. Inputs would normally
be a reporting entity’s own data and judgments about assumptions that market participants would use in pricing the asset
or liability
|
HEALTHLYNKED
CORP.
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2018 AND 2017
(UNAUDITED)
NOTE
2 – SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
The
fair value measurement level for an asset or liability is based on the lowest level of any input that is significant to the fair
value measurement. Valuation techniques should maximize the use of observable inputs and minimize the use of unobservable inputs.
Stock-Based
Compensation
The
Company accounts for stock based compensation under ASC 718 “Compensation – Stock Compensation” using the fair
value based method. Under this method, compensation cost is measured at the grant date based on the value of the award and is
recognized over the service period, which is usually the vesting period. This guidance establishes standards for the accounting
for transactions in which an entity exchanges it equity instruments for goods or services. It also addresses transactions in which
an entity incurs liabilities in exchange for goods or services that are based on the fair value of the entity’s equity instruments
or that may be settled by the issuance of those equity instruments.
The
Company uses the fair value method for equity instruments granted to non-employees and use the Black-Scholes model for measuring
the fair value of options. The stock based fair value compensation is determined as of the date of the grant or the date at which
the performance of the services is completed (measurement date) and is recognized over the vesting periods.
Income
Taxes
The
Company follows Accounting Standards Codification subtopic 740-10, Income Taxes (“ASC 740-10") for recording the provision
for income taxes. Deferred tax assets and liabilities are computed based upon the difference between the financial statement and
income tax basis of assets and liabilities using the enacted marginal tax rate applicable when the related asset or liability
is expected to be realized or settled. Deferred income tax expenses or benefits are based on the changes in the asset or liability
during each period. If available evidence suggests that it is more likely than not that some portion or all of the deferred tax
assets will not be realized, a valuation allowance is required to reduce the deferred tax assets to the amount that is more likely
than not to be realized. Future changes in such valuation allowance are included in the provision for deferred income taxes in
the period of change. Deferred income taxes may arise from temporary differences resulting from income and expense items reported
for financial accounting and tax purposes in different periods. Deferred taxes are classified as current or non-current, depending
on the classification of assets and liabilities to which they relate. Deferred taxes arising from temporary differences that are
not related to an asset or liability are classified as current or non-current depending on the periods in which the temporary
differences are expected to reverse and are considered immaterial.
Recurring
Fair Value Measurements
The
carrying value of the Company’s financial assets and financial liabilities is their cost, which may differ from fair value.
The carrying value of cash held as demand deposits, money market and certificates of deposit, marketable investments, accounts
receivable, short-term borrowings, accounts payable, accrued liabilities, and derivative financial instruments approximated their
fair value.
Net
Income (Loss) per Share
Basic
net income (loss) per common share is computed by dividing net income (loss) by the weighted average number of shares of common
stock outstanding during the period. During the three and six month periods ended June 30, 2018 and 2017, the Company reported
a net loss and excluded all outstanding stock options, warrants and other dilutive securities from the calculation of diluted
net loss per common share because inclusion of these securities would have been anti-dilutive. As of June 30, 2018 and 2017, potentially
dilutive securities were comprised of (i) 30,486,790 and 18,566,389 warrants outstanding, respectively, (ii) 2,507,996 and 2,349,996
stock options outstanding, respectively, (iii) 13,238,582 and 7,692,143 shares issuable upon conversion of convertible notes,
respectively, and (iv) 440,000 and 622,500 unissued shares subject to future vesting requirements granted pursuant to the Company’s
Employee Incentive Plan.
HEALTHLYNKED
CORP.
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2018 AND 2017
(UNAUDITED)
NOTE
2 – SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Common
stock awards
The
Company grants common stock awards to non-employees in exchange for services provided. The Company measures the fair value of
these awards using the fair value of the services provided or the fair value of the awards granted, whichever is more reliably
measurable. The fair value measurement date of these awards is generally the date the performance of services is complete. The
fair value of the awards is recognized on a straight-line basis as services are rendered. The share-based payments related to
common stock awards for the settlement of services provided by non-employees is recorded on the consolidated statement of comprehensive
loss in the same manner and charged to the same account as if such settlements had been made in cash.
Warrants
In
connection with certain financing, consulting and collaboration arrangements, the Company has issued warrants to purchase shares
of its common stock. The outstanding warrants are standalone instruments that are not puttable or mandatorily redeemable by the
holder and are classified as equity awards. The Company measures the fair value of the awards using the Black-Scholes option pricing
model as of the measurement date. Warrants issued in conjunction with the issuance of common stock are initially recorded at fair
value as a reduction in additional paid-in capital of the common stock issued. All other warrants are recorded at fair value as
expense over the requisite service period or at the date of issuance, if there is not a service period. Warrants granted in connection
with ongoing arrangements are more fully described in Note 11,
Shareholders’ Deficit
.
Business
Segments
The
Company uses the “management approach” to identify its reportable segments. The management approach designates the internal
organization used by management for making operating decisions and assessing performance as the basis for identifying the Company’s
reportable segments. Using the management approach, the Company determined that it has one operating segment due to business similarities
and similar economic characteristics.
Recent
Accounting Pronouncements
In
May 2014, the FASB issued ASU 2014-09,
Revenue from Contracts with Customers — Topic 606
, which supersedes the
revenue recognition requirements in FASB ASC 605. The new guidance primarily states that an entity should recognize revenue to
depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity
expects to be entitled in exchange for those goods and services. In January 2017 and September 2017, the FASB issued several amendments
to ASU 2014-09, including updates stemming from SEC Accounting Staff Announcement in July 2017. The amendments and updates included
clarification on accounting for principal versus agent considerations (i.e., reporting gross versus net), licenses of intellectual
property and identification of performance obligations. These amendments and updates do not change the core principle of the standard,
but provide clarity and implementation guidance. The Company adopted this standard on January 1, 2018 and selected the modified
retrospective transition method. The Company has modified its accounting policies to reflect the requirements of this standard,
however, the planned adoption did not materially impact the Company’s financial statements and related disclosures.
In
January 2016, the FASB issued ASU No. 2016-01,
Financial Instruments — Overall: Recognition and Measurement
of Financial Assets and Financial Liabilities.
The guidance affects the accounting for equity investments, financial liabilities
under the fair value option and the presentation and disclosure requirements of financial instruments. The guidance is effective
in the first quarter of fiscal 2019. Early adoption is permitted for the accounting guidance on financial liabilities under the
fair value option. The Company is currently evaluating the impact of the new guidance on its financial statements.
In
February 2016, the FASB issued ASU 2016-02,
Leases (Topic 842)
and subsequently amended the guidance relating largely to
transition considerations under the standard in January 2017. The objective of this update is to increase transparency and comparability
among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about
leasing arrangements. This ASU is effective for fiscal years beginning after December 15, 2018, including interim periods within
those annual periods and is to be applied utilizing a modified retrospective approach. The Company is currently evaluating the
new guidance to determine the impact it may have on its financial statements.
HEALTHLYNKED
CORP.
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2018 AND 2017
(UNAUDITED)
NOTE
2 – SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
In August 2016, the FASB issued ASC Update
No. 2016-15, (Topic 230) Classification of Certain Cash Receipts and Cash Payments. This ASC update provides specific guidance
on the presentation of certain cash flow items where there is currently diversity in practice, including, but not limited to, debt
prepayment or debt extinguishment costs, contingent consideration payments made after a business combination, proceeds from the
settlement of insurance claims, and distributions received from equity method investees. The updated guidance is effective for
interim and annual periods beginning after December 15, 2017, and should be applied retrospectively unless impracticable. The Company
implemented this guidance effective January 1, 2018. The adoption of ASC Update No. 2016-15 did not have a significant impact on
the Company’s statement of cash flows.
In
November 2016, the FASB issued ASU No. 2016-18,
Statement of Cash Flows (Topic 230): Restricted Cash
. The objective
of this ASU is to eliminate the diversity in practice related to the classification of
restricted
cash or restricted cash equivalents in the statement of cash flows.
For public business
entities, this ASU is effective for annual and interim reporting periods beginning after December 15, 2017, with early adoption
permitted. The amendments in this update should be applied retrospectively to all periods presented. The Company will adopt this
standard on January 1, 2018 and will not have a material impact on the Company’s financial statements.
In January 2017, the FASB issued ASC Update
No. 2017-01, (Topic 805) Business Combinations – Clarifying the Definition of a Business. The amendments in this update provide
a more robust framework to use in determining when a set of assets and activities constitute a business. This guidance narrows
the definition of a business by providing specific requirements that contribute to the creation of outputs that must be present
to be considered a business. The guidance further clarifies the appropriate accounting when substantially all of the fair value
of the gross assets acquired (or disposed of) is concentrated in a single identifiable asset or a group of similar identifiable
assets is that of an acquisition (disposition) of assets, not a business. This framework will reduce the number of transactions
that an entity must further evaluate to determine whether transactions are business combinations or asset acquisitions. The updated
guidance is effective for interim and annual periods beginning after December 15, 2017, and should be applied on a prospective
basis. Early adoption is permitted only for transactions that have not been reported in financial statements that have been issued.
The Company implemented this guidance effective January 1, 2018. The implementation of this guidance did not have an effect on
the Company’s financial position or results of operations.
In
July 2017, the FASB issued ASU No. 2017-11,
Earnings Per Share, Distinguishing Liabilities from Equity and Derivatives and
Hedging
, which changes the accounting and earnings per share for certain instruments with down round features. The amendments
in this ASU should be applied using a cumulative-effect adjustment as of the beginning of the fiscal year or retrospective adjustment
to each period presented and is effective for annual periods beginning after December 15, 2018, and interim periods within
those periods.
The Company is currently evaluating the requirements of this new guidance
and has not yet determined its impact on the Company’s financial statements.
On
December 22, 2017 the SEC staff issued Staff Accounting Bulletin 118 (SAB 118), which provides guidance on accounting
for the tax effects of the Tax Cuts and Jobs Act (the TCJA). SAB 118 provides a measurement period that should not
extend beyond one year from the enactment date for companies to complete the accounting under ASC 740. In accordance with
SAB 118, a company must reflect the income tax effects of those aspects of the TCJA for which the accounting under ASC 740
is complete. To the extent that a company’s accounting for certain income tax effects of the TCJA is incomplete but
for which they are able to determine a reasonable estimate, it must record a provisional amount in the financial statements. Provisional
treatment is proper in light of anticipated additional guidance from various taxing authorities, the SEC, the FASB, and even the
Joint Committee on Taxation. If a company cannot determine a provisional amount to be included in the financial statements,
it should continue to apply ASC 740 on the basis of the provisions of the tax laws that were in effect immediately before the
enactment of the TCJA. The Company has applied this guidance to its financial statements.
In February 2018, the Financial Accounting
Standards Board (“FASB”) issued ASC Update No 2018-02 (Topic 220) Income Statement – Reporting Comprehensive
Income: Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. This ASC update allows for
a reclassification into retained earnings of the stranded tax effects in accumulated other comprehensive income (“AOCI”)
resulting from the enactment of the Tax Cuts and Jobs Act (“TCJA”). The updated guidance is effective for interim
and annual periods beginning after December 15, 2018. The Company is evaluating the impact ASU 2018-09 may have on its condensed
consolidated financial statements.
HEALTHLYNKED
CORP.
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2018 AND 2017
(UNAUDITED)
NOTE
2 – SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
In March 2018, the FASB issued ASU 2018-05, Income Taxes (Topic 740) - Amendments to SEC
Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 118. This standard amends Accounting Standards Codification 740, Income
Taxes (ASC 740) to provide guidance on accounting for the tax effects of the Tax Cuts and Jobs Act (the Tax Reform Act) pursuant
to Staff Accounting Bulletin No. 118, which allows companies to complete the accounting under ASC 740 within a one-year measurement
period from the Tax Act enactment date. This standard did not materially impact the Company’s financial statements and related
disclosures.
In June 2018, the FASB issued ASU 2018-07,
Compensation - Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting, to expand the scope
of Topic 718 to include share-based payment transactions for acquiring goods and services from nonemployees and supersedes the
guidance in Subtopic 505-50, Equity - Equity-Based Payments to Non-Employees. Under ASU 2018-07, equity-classified nonemployee
share-based payment awards are measured at the grant date fair value on the grant date The probability of satisfying performance
conditions must be considered for equity-classified nonemployee share-based payment awards with such conditions. ASU 2018-07 is
effective for fiscal years beginning after December 15, 2018, with early adoption permitted. The Company is currently evaluating
the impact of the new standard on the Company’s Condensed Consolidated Financial Statements.
In July 2018, the FASB issued ASU 2018-09
to provide clarification and correction of errors to the Codification. The amendments in this update cover multiple Accounting
Standards Updates. Some topics in the update may require transition guidance with effective dates for annual periods beginning
after December 15, 2018. The Company is evaluating the impact ASU 2018-09 may have on its condensed consolidated financial statements.
NOTE
3 – GOING CONCERN MATTERS AND LIQUIDITY
As of June 30, 2018, the Company had a
working capital deficit of $1,883,656 and accumulated deficit $7,096,587. For the six months ended June 30, 2018, the Company had
a net loss of $2,391,357 and net cash used by operating activities of $1,222,947. Net cash used in investing activities was $201.
Net cash provided by financing activities was $1,211,369, resulting principally from $805,500 net proceeds from the issuance of
convertible notes, $645,503 from the proceeds of the sale of 631,204 shares of common stock and $101,450 proceeds from related
party loans. Subsequent to June 30, 2018, the Company completed a $2,000,000 private placement of common stock and warrants with
an institutional investor on July 18, 2018. 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.
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.
HEALTHLYNKED
CORP.
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2018 AND 2017
(UNAUDITED)
NOTE
3 – GOING CONCERN MATTERS AND LIQUIDITY (CONTINUED)
The
ability of the Company to continue as a going concern is dependent upon its ability to raise additional capital and achieve profitable
operations. The accompanying consolidated financial statements do not include any adjustments related to the recoverability or
classification of asset-carrying amounts or the amounts and classification of liabilities that may result should the Company be
unable to continue as a going concern.
During
July 2016, HLYK entered into an Investment Agreement (the “Investment Agreement”) pursuant to which the investor has
agreed to purchase up to $3,000,000 of HLYK common stock over a three-year period starting upon registration of the underlying
shares, with such shares put to the investor by the Company pursuant to a specified formula that limits the number of shares able
to be put to the investor to the number equal to the average trading volume of the Company’s common shares for the ten consecutive
trading days prior to the put notice being issued. During the six months ended June 30, 2018, the Company received $327,818 from
the proceeds of the sale of 1,856,480 shares pursuant to the Investment Agreement.
The
Company intends that the cost of implementing its development and sales efforts related to the HealthLynked Network, as well as
maintaining its existing and expanding overhead and administrative costs, will be funded principally by cash received by the Company
from the put rights associated with the Investment Agreement and supplemented by other funding mechanisms, including sales of
the Company’s common stock, loans from related parties and convertible notes. The Company expects to repay its outstanding
convertible notes, which have an aggregate face value of $1,751,750 as of June 30, 2018, from outside funding sources, including
but not limited to new convertible notes payable, amounts available upon the exercise of the put rights granted to the Company
under the Investment Agreement, sales of equity, loans from related parties and others or through the conversion of the convertible
notes into equity. No assurances can be given that the Company will be able to access sufficient outside capital in a timely fashion
in order to repay the convertible notes before they mature. If necessary funds are not available, the Company’s business
and operations would be materially adversely affected and in such event, the Company would attempt to reduce costs and adjust
its business plan.
NOTE 4 – DEFERRED OFFERING COSTS
AND PREPAID EXPENSES
Deferred Offering Costs
On
July 7, 2016, the Company entered into the Investment Agreement with an accredited investor, pursuant to which an accredited investor
agreed to invest up to $3,000,000 to purchase the Company’s common stock, par value of $.0001 per share. The purchase price
for such shares shall be 80% of the lowest volume weighted average price of the Company’s common stock during the five consecutive
trading days prior to the date on which written notice is sent by the Company to the investor stating the number of shares that
the Company is selling to the investor, subject to certain discounts and adjustments. Further, for each $50,000 that the investor
tenders to the Company for the purchase of shares of common stock, the investor was to be granted warrants for the purchase of
an equivalent number of shares of common stock. The warrants were to expire five (5) years from their respective grant dates and
have an exercise price equal to 130% of the weighted average purchase price for the respective “$50,000 increment.”
On
March 22, 2017, the Company and the investor entered into an Amended Investment Agreement (the “Amended Investment Agreement”)
whereby the parties agreed to modify the terms of the Investment Agreement by providing that in lieu of granting the investor
warrants for each $50,000 that the investor tenders to the Company, the Company granted to the investor warrants to purchase an
aggregate of 7,000,000 shares of common stock. The warrants have the following fixed exercise prices: (i) 4,000,000 shares at
$0.25 per share; (ii) 2,000,000 shares at $0.50 per share; and (iii) 1,000,000 shares at $1.00 per share. The warrants also contain
a “cashless exercise” provision and the shares underlying the warrants will not be registered. The fair value of the
warrants was calculated using the Black-Scholes pricing model at $56,635, with the following assumptions: risk-free interest rate
of 1.95%, expected life of 5 years, volatility of 40%, and expected dividend yield of zero.
HEALTHLYNKED
CORP.
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2018 AND 2017
(UNAUDITED)
NOTE
4 – DEFERRED OFFERING COSTS (CONTINUED)
On
June 7, 2017, the Company also granted warrants to purchase 200,000 shares at $0.25 per share, 100,000 shares at $0.50 per share
and 50,000 shares at $1.00 per share to an advisor as a fee in connection with the Amended Investment Agreement. The fair value
of the warrants was calculated using the Black-Scholes pricing model at $96,990, with the following assumptions: risk-free interest
rate of 1.74%, expected life of 5 years, volatility of 40%, and expected dividend yield of zero.
This fair value of the warrants described
above was recorded as a deferred offering cost and will be amortized over the period during which the Company can access the financing,
which begins the day after a registration statement registering shares underlying the Investment Agreement is declared effective
by the United States Securities and Exchange Commission (the “SEC”), and ends 3 years from that date. On May 15, 2017,
the SEC declared effective a registration statement registering shares underlying the Investment Agreement. During the three months
ended June 30, 2018 and 2017, the Company recognized $12,802 and $6,401, respectively, in general and administrative expense related
to the cost of the warrants. During the six months ended June 30, 2018 and 2017, the Company recognized $25,604 and $6,401, respectively,
in general and administrative expense related to the cost of the warrants.
Prepaid Expenses
On June 6, 2018, the Company granted three-year
warrants to purchase 600,000 shares at an exercise price of $0.15 per share to two advisors for services to be provided over a
six-month period. The fair value of the warrants was calculated using the Black-Scholes pricing model at $94,844, with the following
assumptions: risk-free interest rate of 2.65%, expected life of 3 years, volatility of 286.98%, and expected dividend yield of
zero. During each of the three and six months ended June 30, 2018, the Company recognized $12,439 in general and administrative
expense related to the cost of the warrants.
NOTE
5 – PROPERTY, PLANT, AND EQUIPMENT
Property,
plant and equipment at June 30, 2018 and December 31, 2017 are as follows:
|
|
June 30,
|
|
|
December 31,
|
|
|
|
2018
|
|
|
2017
|
|
Capital Lease equipment
|
|
$
|
343,492
|
|
|
$
|
343,492
|
|
Telephone equipment
|
|
|
12,308
|
|
|
|
12,308
|
|
Furniture, Transport and Office equipment
|
|
|
436,168
|
|
|
|
435,967
|
|
|
|
|
|
|
|
|
|
|
Total Property, plant and equipment
|
|
|
791,968
|
|
|
|
791,767
|
|
Less: accumulated depreciation
|
|
|
(740,449
|
)
|
|
|
(728,391
|
)
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment, net
|
|
$
|
51,519
|
|
|
$
|
63,376
|
|
Depreciation
expense during the three months ended June 30, 2018 and 2017 was $6,029 and $5,859, respectively. Depreciation expense during
the six months ended June 30, 2018 and 2017 was $12,058 and $11,567, respectively.
NOTE
6 – NOTES PAYABLE AND OTHER AMOUNTS DUE TO RELATED PARTY
Amounts
due to related parties as of June 30, 2018 and December 31, 2017 were comprised of the following:
|
|
June 30,
|
|
|
December 31,
|
|
|
|
2018
|
|
|
2017
|
|
Due to related party:
|
|
|
|
|
|
|
Deferred compensation, Dr. Michael Dent
|
|
$
|
300,600
|
|
|
$
|
300,600
|
|
Accrued interest payable to Dr. Michael Dent
|
|
|
95,853
|
|
|
|
63,245
|
|
Total due to related party
|
|
|
396,453
|
|
|
|
363,845
|
|
|
|
|
|
|
|
|
|
|
Notes payable to related party:
|
|
|
|
|
|
|
|
|
Notes payable to Dr. Michael Dent, current portion
|
|
|
---
|
|
|
|
553,550
|
|
Notes payable to Dr. Michael Dent, long term portion
|
|
|
665,452
|
|
|
|
---
|
|
Total notes payable to related party
|
|
$
|
665,452
|
|
|
$
|
553,550
|
|
HEALTHLYNKED
CORP.
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2018 AND 2017
(UNAUDITED)
NOTE
6 – NOTES PAYABLE AND OTHER AMOUNTS DUE TO RELATED PARTY (CONTINUED)
Notes
Payable to Dr. Michael Dent
Prior
to August 2014, NWC was owned and controlled by the Company’s Chief Executive Officer, Dr. Michael Dent (“DMD”).
DMD first provided an up to $175,000 unsecured note payable to the Company with a 0% interest rate. During 2013 the limit on the
unsecured Note Payable was increased up to $500,000 and during 2014 it was increased to $750,000 with a maturity date of December
31, 2017. During January 2017, the note was again amended to extend the maturity date until December 31, 2018, to accrue interest
on outstanding balances after January 1, 2017 at a rate of 10% per annum, and to fix interest accrued on balances between January
1, 2015 and December 31, 2016 at an amount equal to $22,108 (the “$750k DMD Note”). All principal and interest is
due at maturity of the $750k DMD Note. Interest accrued on the $750k DMD Note as of June 30, 2018 and December 31, 2017 was $55,665
and $43,963, respectively.
The
carrying values of notes payable to Dr. Michael Dent as of June 30, 2018 were as follows:
Inception Date
|
|
Maturity Date
|
|
Borrower
|
|
|
Interest Rate
|
|
|
Amount
|
|
January 12, 2017
|
|
January 13, 2019
|
|
|
HLYK
|
|
|
|
10
|
%
|
|
$
|
39,295
|
*
|
January 18, 2017
|
|
January 19, 2019
|
|
|
HLYK
|
|
|
|
10
|
%
|
|
|
22,454
|
*
|
January 24, 2017
|
|
January 15, 2019
|
|
|
HLYK
|
|
|
|
10
|
%
|
|
|
56,136
|
*
|
February 9, 2017
|
|
February 10, 2019
|
|
|
HLYK
|
|
|
|
10
|
%
|
|
|
33,363
|
*
|
April 20, 2017
|
|
April 21, 2019
|
|
|
HLYK
|
|
|
|
10
|
%
|
|
|
10,911
|
*
|
June 15, 2017
|
|
June 16, 2019
|
|
|
HLYK
|
|
|
|
10
|
%
|
|
|
34,793
|
*
|
August 17, 2017
|
|
August 18, 2018
|
|
|
HLYK
|
|
|
|
10
|
%
|
|
|
20,000
|
|
August 24, 2017
|
|
August 25, 2018
|
|
|
HLYK
|
|
|
|
10
|
%
|
|
|
37,500
|
|
September 7, 2017
|
|
September 8, 2018
|
|
|
HLYK
|
|
|
|
10
|
%
|
|
|
35,000
|
|
September 21, 2017
|
|
September 22, 2018
|
|
|
HLYK
|
|
|
|
10
|
%
|
|
|
26,500
|
|
September 29, 2017
|
|
September 30, 2018
|
|
|
HLYK
|
|
|
|
10
|
%
|
|
|
12,000
|
|
December 21, 2017
|
|
December 22, 2018
|
|
|
HLYK
|
|
|
|
10
|
%
|
|
|
14,000
|
|
January 8, 2018
|
|
January 9, 2019
|
|
|
HLYK
|
|
|
|
10
|
%
|
|
|
75,000
|
|
January 11, 2018
|
|
January 12, 2019
|
|
|
HLYK
|
|
|
|
10
|
%
|
|
|
9,000
|
|
January 26, 2018
|
|
January 27, 2019
|
|
|
HLYK
|
|
|
|
10
|
%
|
|
|
17,450
|
|
January 3, 2014
|
|
December 31, 2018
|
|
|
NWC
|
|
|
|
10
|
%
|
|
|
222,050
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
665,452
|
|
*
- Denotes that note payable is carried at fair value
On
July 18, 2018, in connection with a $2,000,000 private placement by a third party investor, Dr. Dent agreed to extend the maturity
date on all of the above notes until December 31, 2019. Interest accrued on the above unsecured promissory notes as of June 30,
2018 and December 31, 2017 was $40,218 and $19,350, respectively.
On
February 12, 2018, the Company issued a warrant to purchase 6,678,462 shares of common stock to DMD as an inducement to (i) extend
the maturity dates of up to $439,450 loaned by Dr. Dent to the Company in 2017 and 2018 in the form of unsecured promissory notes,
including $75,000 loaned from Dr. Dent to the Company in January 2018 to allow the Company to retire an existing convertible promissory
note payable to Power-up Lending Group Ltd. before such convertible promissory note became eligible for conversion, and (ii) provide
continued loans to the Company. The warrant is immediately exercisable at an exercise price of $0.065 per share, subject to adjustment,
and expires five years after the date of issuance. The fair value of the warrants was calculated using the Black-Scholes pricing
model at $337,466, with the following assumptions: risk-free interest rate of 2.56%, expected life of 5 years, volatility of 268.90%,
and expected dividend yield of zero. On March 28, 2012, DMD agreed to extend the maturity dates of promissory notes with an aggregate
face value of $177,500, which were originally scheduled to mature before June 30, 2018, by one year from the original maturity
date. Because the fair value of the warrants was greater than 10% of the present value of the remaining cash flows under the modified
promissory notes, the transaction was treated as a debt extinguishment and reissuance of new debt instruments pursuant to the
guidance of ASC 470-50 “Debt – Modifications and Extinguishments” (“ASC 470-50"). A loss on debt
extinguishment was recorded in the amount of $348,938, equal to the fair value of the warrants of $337,466, plus the excess of
$11,472 of the fair value of the reissued debt instruments over the carrying value of the existing debt instruments. The change
in fair value of the reissued debt instruments subsequent to the reissuance date was $4,532 in the three months ended June 30,
2018 and $7,981 in the six months ended June 30, 2018, which is included in “Change in fair value of debt.”
HEALTHLYNKED
CORP.
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2018 AND 2017
(UNAUDITED)
NOTE
6 – NOTES PAYABLE AND OTHER AMOUNTS DUE TO RELATED PARTY (CONTINUED)
MedOffice
Direct
During
2017, the Company entered into an agreement with MedOffice Direct (“MOD”), a company majority-owned by the Company’s
CEO and largest shareholder, Dr. Michael Dent, pursuant to which the Company will pay rent to MOD in the amount of $2,040 per
month for office space in MOD’s facility used by the Company and its employees for the period from January 1, 2017 through
July 31, 2018. During the three months ended June 30, 2018 and 2017, the Company recognized rent expense to MOD in the amount
of $6,120 and $6,120, respectively. During the six months ended June 30, 2018 and 2017, the Company recognized rent expense to
MOD in the amount of $12,240 and $12,240, respectively. The Company had prepaid an additional $18,217 toward future rent as of
June 30, 2018.
During
2017, the Company entered into a separate Marketing Agreement with MOD pursuant to which MOD agreed to market the HealthLynked
Network to its physician practice clients, in exchange for a semi-annual fee of $25,000. This agreement was terminated effective
April 1, 2018. During the three months ended June 30, 2018 and 2017, the Company recognized general and administrative expense
in the amount of $-0- and $25,000, respectively, pursuant to this agreement. During the six months ended June 30, 2018 and 2017,
the Company recognized general and administrative expense in the amount of $12,500 and $25,000, respectively, pursuant to this
agreement. On July 1, 2018 HLYK and MOD signed a marketing and service agreement where HLYK will include MOD offering as part
of its product offering to Physicians and HLYK will receive 8% of revenue for new sales related to MOD products sold by the HLYK
sales team. The revenue percentage will be split between HLYK and the HLYK sales representative.
NOTE
7 – CAPITAL LEASE
Capital
lease obligations as of 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.
PART II - INFORMATION NOT REQUIRED IN
PROSPECTUS
Item 13. Other Expenses of Issuances and Distribution.
The following
table sets forth the costs and expenses paid by us in connection with the issuance and distribution of the securities being
registered. None of the following expenses are payable by the selling security holders. All of the amounts shown are
estimates, except for the SEC registration fee.
SEC registration fee
|
|
$
|
1,686
|
|
Legal fees and expenses
|
|
$
|
50,000
|
|
Accounting fees and expenses
|
|
$
|
5,000
|
|
Miscellaneous
|
|
$
|
1,000
|
|
TOTAL
|
|
$
|
57,686
|
|
Item 14. Indemnification of Directors
and Officers.
Nevada Revised Statutes
(“NRS”) Sections 78.7502 and 78.751 provide us with the power to indemnify any of our directors and officers. The director
or officer must have conducted himself/herself in good faith and reasonably believe that his/her conduct was in, or not opposed
to, our best interests. In a criminal action, the director, officer, employee or agent must not have had reasonable cause to believe
his/her conduct was unlawful.
Under NRS Section 78.751,
advances for expenses may be made by agreement if the director or officer affirms in writing that he/she believes he/she has met
the standards and will personally repay the expenses if it is determined such officer or director did not meet the standards.
We are also permitted
to apply for insurance on behalf of any director, officer, employee or other agent for liability arising out of his actions, whether
or not the NRS would permit indemnification.
INSOFAR AS INDEMNIFICATION
FOR LIABILITIES ARISING UNDER THE SECURITIES ACT MAY BE PERMITTED FOR OUR DIRECTORS, OFFICERS AND CONTROLLING PERSONS PURSUANT
TO THE FOREGOING PROVISIONS, OR OTHERWISE, WE HAVE BEEN ADVISED THAT IN THE OPINION OF THE SEC SUCH INDEMNIFICATION IS AGAINST
PUBLIC POLICY AS EXPRESSED IN THE SECURITIES ACT AND IS, THEREFORE, UNENFORCEABLE.
Item 15. Recent Sales of Unregistered
Securities.
In January 2015, we
issued 1,200,000 shares of common stock to George O’Leary as compensation for his services.
In January 2015, we
issued to Dr. Dent 2,000,000 10 year warrants to purchase common shares at an exercise price of $0.05 per share as compensation
for interest accrued on loans made by Dr. Dent to NWC. The warrants had a fair value of $52,847.
In November 2015, we
issued 1,000,000 restricted common shares to Delaney based upon our contractual agreement to do so.
In January 2016, we
issued 612,500 shares of common stock as stock grants to our employees.
In June 2016 we sold
3,980,000 shares of our common stock to certain accredited investors at a purchase price of $0.05 per share.
In June 2016 we issued
an additional 900,000 shares of common stock to SKS.
In July 2016, we sold
2,187,500 shares of our common stock to certain accredited investors at a purchase price of $0.08 per share and issued 5-year warrants
at $0.10 per share.
In July 2016 we issued
an additional 1,000,000 to Delaney as per our contractual agreement to do so. We also issued Delaney warrants to purchase 277,778
shares of commons stock at an exercise price of $0.09 and a five-year term, in exchange for services provided.
In July 2016 we raised
$550,000 of convertible debt, convertible into common shares at $0.08 per share and issued 5-year warrants with an exercise price
of $0.09 per share. The investors were also granted a five-year warrant to purchase 6,111,111 shares of the Company’s common
stock at an exercise price of $0.09 per share.
In July 2016, we entered
into an Investment Agreement with Iconic Holdings, LLC pursuant to which it agreed to invest up to $3,000,000 to purchase the Company’s
common stock, par value of $.0001 per share. The purchase price for such shares shall be 80% of the lowest volume weighted average
price of our common stock during the five consecutive trading days prior to the date on which written notice is sent by us to the
investor stating the number of shares that the Company is selling to the investor (the “Put Right”), subject to certain
discounts and adjustments. We also issued to the investor a warrant to purchase up to 6,111,111 shares of our common stock, at
an exercise price of $0.09 per share.
In July 2016, we granted
a total of 1,600,000 employee stock options our Chief Executive Officer and Chief Financial Officer with an exercise price of $0.08
per share and a legal life of 10 years. Of the total grant, 700,000 options vest over time for a period up to four years, and 900,000
vest based on Company performance measures. The aggregate grant date fair value of options granted in the nine months ended September
30, 2016 was $51,120 (net of expected forfeitures).
In November 2016, we
granted a total of 749,996 employee stock options to an employee with an exercise price of $0.20 per share and a legal life of
10 years. Of the total grant, 299,996 options vest over time for a period up to three years, and 450,000 vest based on future Company
and individual performance measures. The aggregate grant date fair value of the options was $14,301 (net of expected forfeitures).
In February 2017, we
sold 2,100,000 shares of common stock to three investors. We received $210,000 in proceeds from the sale. The shares were issued
at a share price of $0.10 per share.
In February 2017, we
issued a warrant to purchase up to 500,000 shares of common stock at an exercise price of $0.15 per share. The warrant shall expire
on February 10, 2020 and may be exercised on a cashless basis. The warrant has a 9.99% beneficial ownership limitation.
On March 22, 2017,
we entered into the Amended Investment Agreement whereby the parties have agreed to modify the terms of Investment Agreement by
providing that in lieu of granting the investor warrants for each $50,000 that the investor tenders to the Company, we will grant,
and have granted, to the investor warrants to purchase an aggregate of seven (7) million shares of our common stock. The warrants
have the following fixed exercise prices: (i) four million shares at $0.25 per share; (ii) two million shares at $0.50 per share;
and (iii) one million shares at $1.00 per share. The warrants also contain a “cashless exercise” provision and the
shares underlying the warrants will not be registered.
Pursuant to the Investment
Agreement, we also entered into a Registration Rights Agreement with the investor whereby it agreed to register for resale 21,000,000
shares of the Company’s common stock issuable pursuant to the terms of the Investment Agreement.
In April 2017, we sold
1,850,000 shares of common stock to five investors. We received $185,000 in proceeds from the sale. The shares were issued at a
share price of $0.10 per share.
During July 2017, we
sold 45,833 shares of common stock to three investors. We received $13,000 in proceeds from the sale. The shares were issued at
a share price of $0.20 per share with respect to 27,500 shares and at $0.30 per share with respect to 38,333 shares.
In August 2017, we
issued a warrant to purchase up to 1,000,000 shares of common stock at an exercise price of $0.30 per share. The warrant shall
expire on August 8, 2022 and may be exercised on a cashless basis. The warrant has a 9.99% beneficial ownership limitation.
During October and
November 2017, we sold 1,461,111 shares of common stock to three investors. We received $288,000 in proceeds from the sale. The
shares were issued at a share price of $0.18 per share with respect to 211,111 shares and at $0.20 per share with respect to 1,250,000
shares. In connection with the stock sales, we also issued 959,998 five-year warrants to purchase shares of common stock at an
exercise price of $0.30 per share.
During the first quarter
of 2018, we sold 2,941,177 shares of common stock in private placement transactions to three investors and received $250,000 in
proceeds. The shares were issued at a share price of $0.085 per share. We also issued 2,352,941 five-year warrants with an exercise
price of $0.15 per share in connection with the stock sales.
On July 16, 2018, we
entered into a Securities Purchase Agreement (the “Securities Purchase Agreement”) with certain accredited investors
(the “Investors”), who are the selling security holders identified in this prospectus, pursuant to which we sold the
following securities for aggregate gross proceeds of approximately $2,000,000 (the “July Private Placement”): (i) an
aggregate of 3,900,000 shares of the Corporation’s common stock, par value $0.0001 per share (the “Common Stock”),
(ii) warrants to purchase up to an aggregate of 8,000,000 shares of Common Stock with an exercise price of $0.25 per share, subject
to anti-dilution adjustments, and a term of five years (the “Series A Warrants”), (iii) warrants to purchase up to
a maximum of 17,000,000 shares of Common Stock (of which, none are initially exercisable) for a nominal exercise price based on
the difference between the 8,000,000 shares of Common Stock and Pre-Funded Warrants issued pursuant to the Securities Purchase
Agreement based on a purchase price per share of $0.25, and the number of shares of Common Stock and Pre-Funded Warrants that would
have been issued pursuant to the Securities Purchase Agreement based on a reset purchase price equal to the greater of (i) $0.08
per share and (ii) a 10% discount to the market price of the Common Stock at and around the time when the Registration Statement
(as defined below) is declared effective by the SEC (and, if certain conditions are not satisfied, at other specified times) (the
“Series B Warrants”), and (iv) pre-funded warrants to purchase an aggregate of 4,100,000 shares of Common Stock (the
“Pre-Funded Warrants” and, together with the Series A Warrants and Series B Warrants, the “Warrants”).
On July 17, 2018 (the “Closing Date”), we and the Investors consummated the transactions contemplated by the Securities
Purchase Agreement.
The sales of the above
securities were exempt from registration under the Securities Act in reliance upon Section 4(a)(2) of the Securities Act,
and/or Regulation D as promulgated thereunder, as transactions by an issuer not involving any public offering. The recipients of
the securities in each of these transactions represented their intentions to acquire the securities for investment only and not
with a view to or for sale in connection with any distribution thereof, and appropriate legends were placed upon the stock certificates
issued in these transactions
Item 16. Exhibits and Financial Statement
Schedules.
EXHIBIT INDEX
5.1*
|
|
Opinion of Sheppard, Mullin, Richter Hampton LLP
|
10.1
|
|
Form of Private Placement Subscription Agreements (Filed as Exhibit 10.1 to the Company’s Draft Registration Statement on Form S-1 filed with the Commission on January 9, 2017)
|
10.2
|
|
Series A Conversion Notice (Filed as Exhibit 10.2 to the Company’s Draft Registration Statement on Form S-1 filed with the Commission on January 9, 2017)
|
10.3
|
|
Form of Notes Issued to Dr. Michael Dent (Filed as Exhibit 10.3 to the Company’s Draft Registration Statement on Form S-1 filed with the Commission on January 9, 2017)
|
10.4
|
|
Form of Warrants Issued to Dr. Michael Dent (Filed as Exhibit 10.4 to the Company’s Draft Registration Statement on Form S-1 filed with the Commission on January 9, 2017)
|
10.5
|
|
Advisor Consulting Banking Agreement with Delaney Equity Group LLC (Filed as Exhibit 10.5 to the Company’s Draft Registration Statement on Form S-1 filed with the Commission on January 9, 2017)
|
10.6
|
|
Warrant Agreement with Delaney Equity Group LLC (Filed as Exhibit 10.6 to the Company’s Draft Registration Statement on Form S-1 filed with the Commission on January 9, 2017)
|
10.7
|
|
Investment Agreement with Iconic Holdings LLC (Filed as Exhibit 10.7 to the Company’s Draft Registration Statement on Form S-1 filed with the Commission on January 9, 2017)
|
10.8
|
|
Registration Rights Agreement with Iconic Holdings LLC (Filed as Exhibit 10.8 to the Company’s Draft Registration Statement on Form S-1 filed with the Commission on January 9, 2017)
|
10.9
|
|
Security Agreement with Iconic Holdings LLC (Filed as Exhibit 10.9 to the Company’s Draft Registration Statement on Form S-1 filed with the Commission on January 9, 2017)
|
10.10
|
|
Form of Intellectual Property Security Agreement with Iconic Holdings LLC (Filed as Exhibit 10.10 to the Company’s Draft Registration Statement on Form S-1 filed with the Commission on January 9, 2017)
|
10.11
|
|
Secured Note Issued to Iconic Holdings LLC (Filed as Exhibit 10.11 to the Company’s Draft Registration Statement on Form S-1 filed with the Commission on January 9, 2017)
|
10.12
|
|
Fee Note Issued to Iconic Holdings LLC (Filed as Exhibit 10.12 to the Company’s Draft Registration Statement on Form S-1 filed with the Commission on January 9, 2017)
|
10.13
|
|
Warrant Issued to Iconic Holdings LLC in July 2016 (Filed as Exhibit 10.13 to the Company’s Draft Registration Statement on Form S-1 filed with the Commission on January 9, 2017)
|
10.14+
|
|
Form of Employment Agreement with Dr. Michael Dent (Filed as Exhibit 10.14 to the Company’s Draft Registration Statement on Form S-1 filed with the Commission on January 9, 2017)
|
10.15+
|
|
Form of Employment Agreement with George O’Leary (Filed as Exhibit 10.15 to the Company’s Draft Registration Statement on Form S-1 filed with the Commission on January 9, 2017)
|
10.16+
|
|
Employment Agreement with Robert Horel (Filed as Exhibit 10.16 to the Company’s Registration Statement on Form S-1 filed with the Commission on March 13, 2017)
|
10.17
|
|
Loan Agreement with Florida Community Bank (Filed as Exhibit 10.16 to the Company’s Registration Statement on Form S-1 filed with the Commission on February 8, 2017)
|
10.18+
|
|
2016 Equity Incentive Plan (Filed as Exhibit 10.17 to the Company’s Draft Registration Statement on Form S-1 filed with the Commission on January 9, 2017)
|
10.19
|
|
Form of Warrant Agreement with Investors in July 2016 Private Placement (Filed as Exhibit 10.13 to the Company’s Draft Registration Statement on Form S-1 filed with the Commission on January 9, 2017)
|
10.20
|
|
Amendment #1 to Secured Note Issued to Iconic Holdings LLC (Filed as Exhibit 10.20 to the Company’s Registration Statement on Form S-1 filed with the Commission on March 13, 2017)
|
10.21
|
|
Warrant Issued to Iconic Holdings LLC in February 2017 (Filed as Exhibit 10.21 to the Company’s Registration Statement on Form S-1 filed with the Commission on March 13, 2017)
|
10.22
|
|
Amendment to Investment Agreement with Iconic Holdings LLC (Filed as Exhibit 10.22 to the Company’s Registration Statement on Form S-1 filed with the Commission on March 23, 2017)
|
10.23
|
|
Warrant for Four Million Shares of Common Stock Issued to Iconic Holdings LLC in March 2017 (Filed as Exhibit 10.23 to the Company’s Registration Statement on Form S-1 filed with the Commission on March 23, 2017)
|
10.24
|
|
Warrant for Two Million Shares of Common Stock Issued to Iconic Holdings LLC in March 2017 (Filed as Exhibit 10.24 to the Company’s Registration Statement on Form S-1 filed with the Commission on March 23, 2017)
|
10.25
|
|
Warrant for One Million Shares of Common Stock Issued to Iconic Holdings LLC in March 2017 (Filed as Exhibit 10.22 to the Company’s Registration Statement on Form S-1 filed with the Commission on March 23, 2017)
|
10.26
|
|
Fixed Convertible Promissory Note with Iconic Holdings LLC (Filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Commission on May 25, 2017)
|
10.27
|
|
Form of Warrant Issued to Iconic Holdings LLC (Filed as Exhibit 10.2 to the Company’s Current Report on Form 8-K filed with the Commission on May 25, 2017)
|
10.28
|
|
Amendment No. 1 to Security Agreement with Iconic Holdings LLC (Filed as Exhibit 10.3 to the Company’s Current Report on Form 8-K filed with the Commission on May 25, 2017)
|
10.29
|
|
Amendment No. 1 to Subsidiary Guarantee with Iconic Holdings LLC (Filed as Exhibit 10.4 to the Company’s Current Report on Form 8-K filed with the Commission on May 25, 2017)
|
10.30
|
|
Amendment No. 1 to Intellectual Property Security Agreement with Iconic Holdings LLC (Filed as Exhibit 10.5 to the Company’s Current Report on Form 8-K filed with the Commission on May 25, 2017)
|
10.31
|
|
Unsecured Promissory Note with Dr. Michael Dent (Filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Commission on June 21, 2017)
|
10.32
|
|
Securities Purchase Agreement with Power Up Lending Group, Ltd. (Filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Commission on July 17, 2017)
|
10.33
|
|
Convertible Promissory Note with Power Up Lending Group, Ltd. (Filed as Exhibit 10.2 to the Company’s Current Report on Form 8-K filed with the Commission on July 17, 2017)
|
10.34
|
|
Form of Amendment #2, dated August 8, 2017, by and between HealthLynked and Iconic Holdings, LLC (Filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Commission on August 14, 2017)
|
10.35
|
|
Form of Common Stock Purchase Warrant, dated August 8, 2017, by and between HealthLynked Corp., and Iconic Holdings, LLC (Filed as Exhibit 10.2 to the Company’s Current Report on Form 8-K filed with the Commission on August 14, 2017)
|
10.36
|
|
Securities Purchase Agreement with Power Up Lending Group, Ltd. (Filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Commission on September 15, 2017)
|
10.37
|
|
Convertible Promissory Note with Power Up Lending Group, Ltd. (Filed as Exhibit 10.2 to the Company’s Current Report on Form 8-K filed with the Commission on September 15, 2017)
|
10.38
|
|
Securities Purchase Agreement with Crown Bridge Partners LLC (Filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Commission on September 21, 2017)
|
10.39
|
|
Convertible Promissory Note with Crown Bridge Partners LLC (Filed as Exhibit 10.2 to the Company’s Current Report on Form 8-K filed with the Commission on September 21, 2017)
|
10.40
|
|
Securities Purchase Agreement with PULG (Filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Commission on October 27, 2017)
|
10.41
|
|
Convertible Promissory Note with PULG (Filed as Exhibit 10.2 to the Company’s Current Report on Form 8-K filed with the Commission on October 27, 2017)
|
10.42
|
|
Securities Purchase Agreement (Filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Commission on November 3, 2017)
|
10.43
|
|
Convertible Promissory Note (Filed as Exhibit 10.2 to the Company’s Current Report on Form 8-K filed with the Commission on November 3, 2017)
|
10.44
|
|
Form of Subscription Agreement (Filed as Exhibit 10.3 to the Company’s Current Report on Form 8-K filed with the Commission on November 3, 2017)
|
10.45
|
|
Form of Warrant Agreement (Filed as Exhibit 10.4 to the Company’s Current Report on Form 8-K filed with the Commission on November 3, 2017)
|
10.46
|
|
Securities Purchase Agreement with Morningview Financial LLC dated January 2, 2018 (Filed as Exhibit 10.1 to the Company’s Form 10-Q filed with the Commission on May 15, 2018)
|
10.47
|
|
Convertible Promissory Note with Morningview Financial LLC dated January 2, 2018 (Filed as Exhibit 10.2 to the Company’s Form 10-Q filed with the Commission on May 15, 2018)
|
10.48
|
|
Securities Purchase Agreement with Auctus Fund LLC dated February 2, 2018 (Filed as Exhibit 10.3 to the Company’s Form 10-Q filed with the Commission on May 15, 2018)
|
10.49
|
|
Convertible Promissory Note with Auctus Fund LLC dated February 2, 2018 (Filed as Exhibit 10.4 to the Company’s Form 10-Q filed with the Commission on May 15, 2018)
|
10.50
|
|
Securities Purchase Agreement with EMA Financial LLC dated February 13, 2018 (Filed as Exhibit 10.6 to the Company’s Form 10-Q filed with the Commission on May 15, 2018)
|
10.51
|
|
Convertible Promissory Note with EMA Financial LLC dated February 13, 2018 (Filed as Exhibit 10.7 to the Company’s Form 10-Q filed with the Commission on May 15, 2018)
|
10.52
|
|
Form of Warrant Agreement issued to Dr. Michael Dent (Filed as Exhibit 4.1 to the Company’s Current Report on Form 8-K filed with the Commission on February 15, 2018)
|
10.53
|
|
Securities Purchase Agreement with LG Capital Funding LLC dated March 5, 2018 (Filed as Exhibit 10.9 to the Company’s Form 10-Q filed with the Commission on May 15, 2018)
|
10.54
|
|
Convertible Promissory Note with LG Capital Funding LLC dated March 5, 2018 (Filed as Exhibit 10.10 to the Company’s Form 10-Q filed with the Commission on May 15, 2018)
|
10.55
|
|
Form of Securities Purchase Agreement with Power Up Lending Group Ltd. dated April 2, 2018 (Filed as Exhibit 10.11 to the Company’s Form 10-Q filed with the Commission on May 15, 2018)
|
10.56
|
|
Form of Convertible Promissory Note with Power Up Lending Group Ltd. dated April 2, 2018 (Filed as Exhibit 10.12 to the Company’s Form 10-Q filed with the Commission on May 15, 2018)
|
10.57
|
|
Form of Securities Purchase Agreement with Morningview Financial LLC dated April 16, 2018 (Filed as Exhibit 10.13 to the Company’s Form 10-Q filed with the Commission on May 15, 2018)
|
10.58
|
|
Form of Convertible Promissory Note with Morningview Financial LLC dated April 16, 2018 (Filed as Exhibit 10.14 to the Company’s Form 10-Q filed with the Commission on May 15, 2018)
|
10.59
|
|
Form of Securities Purchase Agreement with One44 Capital LLC dated April 18, 2018 (Filed as Exhibit 10.15 to the Company’s Form 10-Q filed with the Commission on May 15, 2018)
|
10.60
|
|
Form of Convertible Promissory Note with One44 Capital LLC dated April 18, 2018 (Filed as Exhibit 10.16 to the Company’s Form 10-Q filed with the Commission on May 15, 2018)
|
10.61
|
|
Form of Securities Purchase Agreement with Power Up Lending Group Ltd. dated April 18, 2018 (Filed as Exhibit 10.17 to the Company’s Form 10-Q filed with the Commission on May 15, 2018)
|
10.62
|
|
Form of Convertible Promissory Note with Power Up Lending Group Ltd. dated April 18, 2018 (Filed as Exhibit 10.18 to the Company’s Form 10-Q filed with the Commission on May 15, 2018)
|
10.63
|
|
Form of Securities Purchase Agreement with LG Capital Funding LLC dated May 3, 2018 (Filed as Exhibit 10.19 to the Company’s Form 10-Q filed with the Commission on May 15, 2018)
|
10.64
|
|
Form of Convertible Promissory Note with LG Capital Funding LLC dated May 3, 2018 (Filed as Exhibit 10.20 to the Company’s Form 10-Q filed with the Commission on May 15, 2018)
|
10.65
|
|
Form of Securities Purchase Agreement with Cerberus Finance Group Ltd. dated May 7, 2018 (Filed as Exhibit 10.21 to the Company’s Form 10-Q filed with the Commission on May 15, 2018)
|
10.66
|
|
Form of Convertible Promissory Note with Cerberus Finance Group Ltd. dated May 7, 2018 (Filed as Exhibit 10.22 to the Company’s Form 10-Q filed with the Commission on May 15, 2018)
|
10.67
|
|
Form of Securities Purchase Agreement with Power Up Lending Group Ltd. dated May 9, 2018 (Filed as Exhibit 10.23 to the Company’s Form 10-Q filed with the Commission on May 15, 2018)
|
10.68
|
|
Form of Convertible Promissory Note with Power Up Lending Group Ltd. dated May 9, 2018 (Filed as Exhibit 10.24 to the Company’s Form 10-Q filed with the Commission on May 15, 2018)
|
10.69
|
|
Form of Securities Purchase Agreement with Adar Bays LLC dated May 24, 2018 (Filed as Exhibit 10.25 to the Company’s Form 10-Q filed with the Commission on August 14, 2018)
|
10.70
|
|
Form of Convertible Promissory Note with Adar Bays LLC dated May 24, 2018 (Filed as Exhibit 10.26 to the Company’s Form 10-Q filed with the Commission on August 14, 2018)
|
10.71
|
|
Securities Purchase Agreement, dated July 16, 2018, by and among HealthLynked Corp. and the Buyers listed therein (Filed with the Commission as Exhibit 10.1 to the Company’s Current Report on Form 8-K on July 19, 2018)
|
10.72
|
|
Registration Rights Agreement, dated July 16, 2018, by and among HealthLynked Corp. and the Buyers listed therein (Filed with the Commission as Exhibit 10.1 to the Company’s Current Report on Form 8-K on July 19, 2018)
|
10.73
|
|
Form of Series A Warrant
(Filed with the Commission as Exhibit 10.1 to the Company’s Current Report on Form 8-K on July 19, 2018)
|
10.74
|
|
Form of Series B Warrant (Filed with the Commission as Exhibit 10.1 to the Company’s Current Report on Form 8-K on July 19, 2018)
|
10.75
|
|
Form of Pre-Funded Warrant
(Filed with the Commission as Exhibit 10.1 to the Company’s Current Report on Form 8-K on July 19, 2018)
|
10.76
|
|
Amendment to Notes, issued to Dr. Michael Dent by the Company (Filed with the Commission as Exhibit 10.1 to the Company’s Current Report on Form 8-K on July 19, 2018)
|
10.77
|
|
Amendment to Notes, issued to Dr. Michael Dent by Naples Women’s Center, LLC (
Filed with the Commission as Exhibit 10.1 to the Company’s Current Report on Form 8-K on July 19, 2018)
|
10.78
|
|
Form of Lock-Up Agreement (Filed with the Commission as Exhibit 1.2 to the Company’s Current Report on Form 8-K on August 16, 2018)
|
21.1*
|
|
List of Subsidiaries
|
23.1*
|
|
Consent of RBSM LLP
|
23.2*
|
|
Consent of Sheppard, Mullin, Richter & Hampton LLP (Included in Exhibit 5.1)
|
|
+
|
Management contract or compensatory plan or arrangement.
|
(b)
|
Financial Statement Schedules.
|
All financial statement schedules have
been omitted, since the required information is not applicable or is not present in amounts sufficient to require submission of
the schedule, or because the information required is included in the financial statements and notes thereto.
Item 17. Undertakings.
The undersigned registrant hereby undertakes:
(1)
To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:
(i) To
include any prospectus required by Section 10(a)(3) of the Securities Act of 1933;
(ii) To
reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set
forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if
the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high
end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule
424(b) if, in the aggregate, the changes in volume and price represent no more than a 20 percent change in the maximum aggregate
offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement;
(iii) To include
any material information with respect to the plan of distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement.
(2) That,
for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial
bona fide
offering thereof.
(3) To
remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the
termination of the offering.
(4) That,
for the purpose of determining liability under the Securities Act of 1933 to any purchaser, each prospectus filed pursuant to Rule
424(b) as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or
other than prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration statement
as of the date it is first used after effectiveness. Provided, however, that no statement made in a registration statement or prospectus
that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration
statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior
to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of
the registration statement or made in any such document immediately prior to such date of first use.
(5) Insofar
as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion
of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant
of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered,
the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
SIGNATURES
Pursuant to the requirements
of the Securities Act of 1933, the registrant has duly caused this registration statement on Form S-1 to be signed on its behalf
by the undersigned, thereunto duly authorized, in the City of Naples, State of Florida on the 16th day of August, 2018.
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HEALTHLYNKED CORP.
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(Registrant)
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By:
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/s/ Michael Dent
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Name:
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Michael Dent
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Title:
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Chief Executive Officer and Chairman
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(Principal Executive Officer)
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Pursuant to the requirements of the Securities
Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated.
Name
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Title
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Date
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/s/ Michael Dent
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Chief Executive Officer and Chairman (Principal Executive Officer)
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August 16, 2018
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Michael Dent
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/s/ George O’Leary
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Chief Financial Officer, (Principal Accounting Officer), and Director
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August 16, 2018
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George O’Leary
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