NOTE
7 – CAPITAL LEASE
Capital
lease obligations as of December 31, 2018 and 2017 are comprised of the following:
|
|
December 31,
|
|
|
|
2018
|
|
|
2017
|
|
|
|
|
|
|
|
|
Note payable, New Everbank Lease
|
|
$
|
22,935
|
|
|
$
|
39,754
|
|
Less: note payable, New Everbank Lease (Capital leases), current portion
|
|
|
(19,877
|
)
|
|
|
(18,348
|
)
|
|
|
|
|
|
|
|
|
|
Notes payable, bank loans and capital leases, long-term portion
|
|
$
|
3,058
|
|
|
$
|
21,406
|
|
In
March 2015, the Company entered into a capital equipment finance lease for Ultra Sound equipment with Everbank. There was no interest
on this lease. The monthly payment is $1,529 for 60 months ending in March 2020. As of December 31, 2018 and 2017, the Company
owed Everbank $22,935 and $39,754, respectively, pursuant to this capital lease. During the years ended December 31, 2018 and
2017, the Company made payments on this capital lease of $16,819 and $18,348, respectively.
Future
minimum payments to which the Company is obligated pursuant to the capital leases as of December 31, 2018 are as follows:
2019
|
|
$
|
19,877
|
|
2020
|
|
|
3,058
|
|
2021
|
|
|
---
|
|
2022
|
|
|
---
|
|
2023
|
|
|
---
|
|
|
|
|
|
|
Total
|
|
$
|
22,935
|
|
HEALTHLYNKED
CORPORATION
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2018 AND 2017
NOTE
8 – NOTES PAYABLE
On
July 11, 2017, the Company entered into a Merchant Cash Advance Factoring Agreement (“MCA”) with Power Up Lending
Group, Ltd. (the “PULG”) pursuant to which the Company received an advance of $26,000 before closing fees (the “July
2017 MCA”). The Company was required to repay the July 2017 MCA, which acted like an ordinary note payable, at the rate
of $1,372 per week until the balance of $34,580 was repaid. At inception, the Company recognized a note payable in the amount
of $34,580 and a discount against the note payable of $9,550. The discount was being amortized over the life of the instrument.
The July 2017 MCA was repaid in full on December 20, 2017. During the year ended December 31, 2017, the Company recognized amortization
of the discount in the amount of $9,550, including $1,096 recognized to amortize the remaining discount at retirement.
On
August 9, 2017, the Company entered into a second MCA with PULG pursuant to which the Company received an advance of $51,000 before
closing fees (the “August 2017 MCA”). The Company was required to repay the advance, which acted like an ordinary
note payable, at the rate of $2,752 per week until the balance of $69,360 was repaid. At inception, the Company recognized a note
payable in the amount of $69,360 and a discount against the note payable of $19,380. The discount was being amortized over the
life of the instrument. The August 2017 MCA was repaid in full on December 20, 2017. During the year ended December 31, 2017,
the Company recognized amortization of the discount in the amount of $19,380, including $5,161 recognized to amortize the remaining
discount at retirement.
On
December 20, 2017, the Company entered into a third MCA with PULG pursuant to which the Company received an advance of $75,000
before closing fees (the “December 2017 MCA”). The Company was required to repay the advance, which acts like an ordinary
note payable, at the rate of $4,048 per week until the balance of $102,000 was repaid. At inception, the Company recognized a
note payable in the amount of $102,000 and a discount against the note payable of $28,500. The discount was being amortized over
the life of the instrument. During the year ended December 31, 2018, the Company made installment payments of $89,048 on the December
2017 MCA. The December 2017 MCA was repaid on June 1, 2018. During the year ended December 31, 2018, the Company recognized amortization
of the discount in the amount of $26,881, including $2,267 recognized to amortize the remaining discount at retirement. During
the year ended December 31, 2017, the Company recognized amortization of the discount in the amount of $1,619.
On
June 1, 2018, the Company entered into a fourth MCA with PULG pursuant to which the Company received an advance of $75,000 before
closing fees (the “December 2018 MCA”). The Company was required to repay the advance at the rate of $4,048 per week
until the balance of $102,000 has been repaid in November 2018. At inception, the Company recognized a note payable in the amount
of $102,000 and a discount against the note payable of $28,500. The discount was being amortized over the life of the instrument.
During the year ended December 31, 2018, the Company recognized amortization of the discount in the amount of $28,500. The December
2018 MCA was repaid in full in November 2018.
HEALTHLYNKED
CORPORATION
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2018 AND 2017
NOTE
9 – CONVERTIBLE NOTES PAYABLE
Convertible
notes payable as of December 31, 2018 and 2017 were comprised of the following:
|
|
December 31,
|
|
|
|
2018
|
|
|
2017
|
|
|
|
|
|
|
|
|
$550k Note - July 2016
|
|
$
|
594,813
|
*
|
|
$
|
550,000
|
|
$50k Note - July 2016
|
|
|
60,312
|
*
|
|
|
50,000
|
|
$111k Note - May 2017
|
|
|
125,190
|
*
|
|
|
111,000
|
|
$53k Note - July 2017
|
|
|
---
|
|
|
|
53,000
|
|
$35k Note - September 2017
|
|
|
---
|
|
|
|
35,000
|
|
$55k Note - September 2017
|
|
|
---
|
|
|
|
55,000
|
|
$53k Note II - October 2017
|
|
|
---
|
|
|
|
53,000
|
|
$171.5k Note - October 2017
|
|
|
186,472
|
|
|
|
171,500
|
|
$103k Note I - October 2018
|
|
|
103,000
|
|
|
|
---
|
|
$103k Note II - November 2018
|
|
|
103,000
|
|
|
|
---
|
|
$153k Note - November 2018
|
|
|
153,000
|
|
|
|
---
|
|
$103k Note III - December 2018
|
|
|
103,000
|
|
|
|
---
|
|
|
|
|
1,428,787
|
|
|
|
1,078,500
|
|
Less: unamortized discount
|
|
|
(386,473
|
)
|
|
|
(266,642
|
)
|
Convertible notes payable, net of original issue discount and debt discount
|
|
|
1,042,314
|
|
|
|
811,858
|
|
*
- Denotes that convertible note payable is carried at fair value
Convertible
Notes Payable ($550,000) – July 2016
On
July 7, 2016, the Company entered into a 6% fixed convertible secured promissory note with an investor with a face value of $550,000
(the “$550k Note”). The $550k Note is convertible into shares of the Company’s common stock at the discretion
of the note holder at a fixed price of $0.08 per share, and is secured by all of the Company’s assets. The Company received
$500,000 net proceeds from the note after a $50,000 original issue discount. The $550k Note was originally scheduled to mature
on April 11, 2017, but the maturity date was extended to July 7, 2018 during August 2017 and to December 31, 2019 during July
2018. The discount from the original issue discount, warrants and embedded conversion feature (“ECF”) associated with
the $550k Note was amortized over the original life of the note. Amortization expense related to the discount in the years ended
December 31, 2018 and 2017 was $-0- and $104,137, respectively. As of December 31, 2018, the unamortized discount was $-0- and
the $550k Note was convertible into 6,875,000 of the Company’s common shares.
The
$550k Note is carried at fair value due to an extinguishment and reissuance recorded in 2017 and is revalued at each period end,
with changes to fair value recorded to the statement of operations under “Change in Fair Value of Debt.” The fair
value of this instrument as of December 31, 2018 was $594,813. During the years ended December 31, 2018 and 2017, a change in
fair value of debt related to this instrument was recorded in the amount of $96,787 and $-0-, respectively.
During
the years ended December 31, 2018 and 2017, the Company made no repayments on this instrument. During the years ended December
31, 2018 and 2017, the Company recorded interest expense on this instrument totaling $33,090 and $33,000, respectively.
On
July 11, 2018, the Company and the issuer of the $550k Note, the $50k Note and the $111k Note entered into an Amendment agreement
related to these notes (the “First Extension”), pursuant to which the holder agreed to extend the maturity date of
the three notes until July 31, 2019 in exchange for (i) a three-year warrant to purchase 200,000 Company shares at an exercise
price of $0.25, and (ii) a three-year warrant to purchase 300,000 Company shares at an exercise price of $0.50. The fair value
of the warrants was $133,019, using the Black/Scholes pricing models with the following assumptions: risk-free interest rate of
2.67%, expected life of 3 years, volatility of 287.57%, and expected dividend yield of zero. In connection with the warrant issuance,
the Company recognized a loss on extinguishment of debt in the amount of $90,624 in 2018.
HEALTHLYNKED
CORPORATION
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2018 AND 2017
NOTE
9 – CONVERTIBLE NOTES PAYABLE (CONTINUED)
On
July 13, 2018, the Company and the issuer entered into a second Amendment agreement, pursuant to which the holder agreed to further
extend the maturity date of the Iconic Notes until December 31, 2019 in exchange for an additional (i) three-year warrant to purchase
175,000 Company shares at an exercise price of $0.25, and (ii) three-year warrant to purchase 75,000 Company shares at an exercise
price of $0.50. The fair value of the warrants was $60,401, using the Black/Scholes pricing models with the following assumptions:
risk-free interest rate of 2.66%, expected life of 3 years, volatility of 287,77%, and expected dividend yield of zero. In connection
with the warrant issuance, the Company recognized a loss on extinguishment of debt in the amount of $42,777 in 2018.
Convertible
Notes Payable ($50,000) – July 2016
On
July 7, 2016, the Company entered into a 10% fixed convertible commitment fee promissory note with an investor with a face value
of $50,000 (the “$50k Note”). The $50k Note was originally scheduled to mature on April 11, 2017, but the maturity
date was extended to July 11, 2018 during August 2017 and to December 31, 2019 during July 2018. The $50k note was issued as a
commitment fee payable to the Investment Agreement investor in exchange for the investor’s commitment to enter into the
Investment Agreement, subject to registration of the shares underlying the Investment Agreement. The $50k Note is convertible
into shares of the Company’s common stock at the discretion of the note holder at a fixed price of $0.10 per share. Amortization
expense related to the discount in the years ended December 31, 2018 and 2017 was $-0- and $17,701, respectively. As of December
31, 2018, the $50k Note was convertible into 500,000 of the Company’s common shares.
The
$50k Note is carried at fair value due to an extinguishment and reissuance recorded in 2017 and is revalued at each period end,
with changes to fair value recorded to the statement of operations under “Change in Fair Value of Debt.” The fair
value of this instrument as of December 31, 2018 was $60,312. During the years ended December 31, 2018 and 2017, a change in fair
value of debt related to this instrument was recorded in the amount of $13,257 and $-0-, respectively.
During
the years ended December 31, 2018 and 2017, the Company made no repayments on this instrument. During the years ended December
31, 2018 and 2017, the Company recorded interest expense on this instrument totaling $5,014 and $5,000, respectively.
Convertible
Notes Payable ($111,000) – May 2017
On
May 22, 2017, the Company entered into a 10% fixed convertible secured promissory note with an investor with a face value of $111,000
(the “$111k Note”). The $111k Note is convertible into shares of the Company’s common stock at the discretion
of the note holder at a fixed price of $0.35 per share, and is secured by all of the Company’s assets. The Company received
$100,000 net proceeds from the note after an $11,000 original issue discount. At inception, the investors were also granted a
five-year warrant to purchase 133,333 shares of the Company’s common stock at an exercise price of $0.75 per share. The
fair value of the warrants was calculated using the Black-Scholes pricing model at $42,305, with the following assumptions: risk-free
interest rate of 1.80%, expected life of 5 years, volatility of 40%, and expected dividend yield of zero. The net proceeds from
the issuance of the $111k Note, being $100,000 after the original issue discount, were then allocated to the warrants and the
convertible note instrument based on their relative fair values, of which $27,595 was allocated to the warrants and $72,405 to
the convertible note. The intrinsic value of the embedded conversion feature of the $111k note was then calculated as $38,595.
The original issue discount, warrants and embedded conversion feature were then allocated and recorded as discounts against the
carrying value of the $111k Note. The final allocation of the proceeds at inception was as follows:
Original issue discount
|
|
$
|
11,000
|
|
Warrants
|
|
|
27,595
|
|
Embedded conversion feature
|
|
|
38,595
|
|
Convertible note
|
|
|
33,810
|
|
|
|
|
|
|
Gross proceeds
|
|
$
|
111,000
|
|
HEALTHLYNKED
CORPORATION
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2018 AND 2017
NOTE
9 – CONVERTIBLE NOTES PAYABLE (CONTINUED)
On
March 28, 2018, in exchange for a five-year warrant to purchase 125,000 shares of HLYK common stock at an exercise price of $0.05
per share, the holder of the $111k Note agreed to extend the maturity date from the original date of January 22, 2018 until July
11, 2018. The fair value of the warrants using Black/Scholes was $10,199 with the following assumptions: risk-free interest rate
of 2.59%, expected life of 5 years, volatility of 578.45%, and expected dividend yield of zero. The issuance of the warrants in
exchange for the maturity extension was treated as an extinguishment and reissuance of existing debt pursuant to the guidance
of ASC 470-50. Accordingly, the $111k Note is carried at fair value and is revalued at each period end, with changes to fair value
recorded to the statement of operations under “Change in Fair Value of Debt.” The fair value of this instrument as
of December 31, 2018 was $125,190. During the years ended December 31, 2018 and 2017, a change in fair value of debt related to
this instrument was recorded in the amount of $10,474 and $-0-, respectively.
Amortization
expense related to the discount in the years ended December 31, 2018 and 2017 was $6,931 and $70,259, respectively. As of December
31, 2018, the unamortized discount was $-0-. As of December 31, 2018, this instrument was convertible into 317,143 of the Company’s
common shares.
During
the years ended December 31, 2018 and 2017, the Company made no repayments on this instrument. During the years ended December
31, 2018 and 2017, the Company recorded interest expense on this instrument totaling $16,537 and $10,103, respectively.
Convertible
Notes Payable ($53,000) – July 2017
On
July 10, 2017, the Company entered into a securities purchase agreement for the sale of a $53,000 convertible note (the “$53k
Note”) to PULG. The $53k Note included a $3,000 original issue discount, for net proceeds of $50,000. The $53k Note has
an interest rate of 10% and a default interest rate of 22%. The $53k Note may be converted into common stock of the Company by
the holder at any time following 180 days after the issuance date, subject to a 4.99% beneficial ownership limitation, at a conversion
price per share equal to a 39% discount to the average of the three (3) lowest closing bid prices during the fifteen (15) trading
days prior to the conversion date. Upon an event of default caused by the Company’s failure to deliver shares upon a conversion
pursuant to the terms of the Note, 300% of the outstanding principal and any interest due amount shall be immediately due. Upon
an event of default caused by the Company’s breach of any other events of default specified in the $53k Note, 150% of the
outstanding principal and any interest due amount shall be immediately due.
The
fair value of the ECF of the $53k Note was calculated using the Black-Scholes pricing model at $58,154, with the following assumptions:
risk-free interest rate of 1.23%, expected life of 0.76 years, volatility of 183.6%, and expected dividend yield of zero. Because
the fair value of the ECF exceeded the net proceeds from the $53k Note, a charge was recorded to “Financing cost”
for the excess of the fair value of the fair value of the ECF of $58,154 over the net proceeds from the note of $50,000, for a
net charge of $8,154. The ECF qualifies for derivative accounting and bifurcation under ASC 815, “Derivatives and Hedging.”
The final allocation of the proceeds at inception was as follows:
Embedded conversion feature
|
|
$
|
58,154
|
|
Original issue discount
|
|
|
3,000
|
|
Financing cost
|
|
|
(8,154
|
)
|
Convertible note
|
|
|
---
|
|
|
|
|
|
|
Gross proceeds
|
|
$
|
53,000
|
|
The
discount resulting from the original issue discount and embedded conversion feature was being amortized over the life of the $53k
Note, which was schedule to mature on April 15, 2018. Amortization expense related to the discount in the years ended December
31, 2018 and 2017 was $1,520 and $33,054, respectively. During the years ended December 31, 2018 and 2017, the Company recorded
interest expense on this instrument totaling $116 and $2,527, respectively.
HEALTHLYNKED
CORPORATION
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2018 AND 2017
NOTE
9 – CONVERTIBLE NOTES PAYABLE (CONTINUED)
On
January 8, 2018, the Company prepaid the balance on the $53k Note, including accrued interest, for a one-time cash payment of
$74,922. The Company recognized a gain on debt extinguishment in the year ended December 31, 2018 in connection with the repayment,
as follows:
Face value of convertible note payable retired
|
|
$
|
53,000
|
|
Carrying value of derivative financial instruments arising from ECF
|
|
|
53,893
|
|
Accrued interest
|
|
|
2,644
|
|
Less cash repayment
|
|
|
(74,922
|
)
|
Less carrying value of debt discount at extinguishment
|
|
|
(18,427
|
)
|
|
|
|
|
|
Gain on extinguishment of debt
|
|
$
|
16,188
|
|
Convertible
Notes Payable ($35,000) – September 2017
On
September 7, 2017, the Company entered into a securities purchase agreement for the sale of a $35,000 convertible note (the “$35k
Note”) to PULG. The $35k Note included a $3,000 original issue discount, for net proceeds of $32,000. The $35k Note has
an interest rate of 10% and a default interest rate of 20%. The $35k Note may be converted into common stock of the Company by
the holder at any time following 180 days after the issuance date, subject to a 4.99% beneficial ownership limitation, at a conversion
price per share equal to a 39% discount to the average of the three (3) lowest closing bid prices during the fifteen (15) trading
days prior to the conversion date. Upon an event of default caused by the Company’s failure to deliver shares upon a conversion
pursuant to the terms of the $35k Note, 300% of the outstanding principal and any interest due amount shall be immediately due.
Upon an event of default caused by the Company’s breach of any other events of default specified in the $35k Note, 150%
of the outstanding principal and any interest due amount shall be immediately due.
The
fair value of the ECF of the $35k Note was calculated using the Black-Scholes pricing model at $38,338, with the following assumptions:
risk-free interest rate of 1.21%, expected life of 0.77 years, volatility of 177.2%, and expected dividend yield of zero. Because
the fair value of the ECF exceeded the net proceeds from the $35k Note, a charge was recorded to “Financing cost”
for the excess of the fair value of the fair value of the ECF of $38,338 over the net proceeds from the note of $32,000, for a
net charge of $6,338. The ECF qualifies for derivative accounting and bifurcation under ASC 815, “Derivatives and Hedging.”
The final allocation of the proceeds at inception was as follows:
Embedded conversion feature
|
|
$
|
38,338
|
|
Original issue discount
|
|
|
3,000
|
|
Financing cost
|
|
|
(6,338
|
)
|
Convertible note
|
|
|
---
|
|
|
|
|
|
|
Gross proceeds
|
|
$
|
35,000
|
|
The
discount resulting from the original issue discount and embedded conversion feature was being amortized over the life of the $35k
Note, which was schedule to mature on June 15, 2018. Amortization expense related to the discount in the years ended December
31, 2018 and 2017 was $7,972 and $14,324, respectively. During the years ended December 31, 2018 and 2017, the Company recorded
interest expense on this instrument totaling $614 and $1,103, respectively.
On
March 5, 2018, the Company prepaid the balance on the $35k Note, including accrued interest, for a one-time cash payment of $49,502.
The Company recognized a gain on debt extinguishment in the year ended December 31, 2018 in connection with the repayment, as
follows:
Face value of convertible note payable retired
|
|
$
|
35,000
|
|
Carrying value of derivative financial instruments arising from ECF
|
|
|
37,269
|
|
Accrued interest
|
|
|
1,716
|
|
Less cash repayment
|
|
|
(49,502
|
)
|
Less carrying value of debt discount at extinguishment
|
|
|
(12,705
|
)
|
|
|
|
|
|
Gain on extinguishment of debt
|
|
$
|
11,778
|
|
HEALTHLYNKED
CORPORATION
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2018 AND 2017
NOTE
9 – CONVERTIBLE NOTES PAYABLE (CONTINUED)
Convertible
Notes Payable ($55,000) – September 2017
On
September 11, 2017, the Company entered into a securities purchase agreement for the sale of a $55,000 convertible note (the “$55k
Note”) to Crown Bridge Partners LLC. The $55k Note included a $7,500 original issue discount, for net proceeds of $47,500.
The 55k Note has an interest rate of 10% and a default interest rate of 12%. The $55k Note may be converted into common stock
of the Company by the holder at any time after the issuance date, subject to a 4.99% beneficial ownership limitation, at a conversion
price per share equal to 60% multiplied by the lowest one (1) trading price for the Common Stock during the twenty (20) trading
day period ending on the last complete trading day prior to the date of conversion. If, at any time while the $55k Note is outstanding,
the conversion price pursuant to this formula is equal to or lower than $0.10, then an additional ten percent (10%) discount shall
be factored into the conversion price until the $55k Note is no longer outstanding. In the event that shares of the Company’s
Common Stock are not deliverable via DWAC following the conversion of any amount hereunder, an additional ten percent (10%) discount
shall be factored into the Variable Conversion Price until the $55k Note is no longer outstanding.
The
fair value of the ECF of the $55k Note was calculated using the Black-Scholes pricing model at $65,332, with the following assumptions:
risk-free interest rate of 1.24%, expected life of 1 year, volatility of 175.1%, and expected dividend yield of zero. Because
the fair value of the ECF exceeded the net proceeds from the $55k Note, a charge was recorded to “Financing cost”
for the excess of the fair value of the fair value of the ECF of $65,332 over the net proceeds from the note of $47,500, for a
net charge of $17,832. The ECF qualifies for derivative accounting and bifurcation under ASC 815, “Derivatives and Hedging.”
The final allocation of the proceeds at inception was as follows:
Embedded conversion feature
|
|
$
|
65,332
|
|
Original issue discount
|
|
|
7,500
|
|
Financing cost
|
|
|
(17,832
|
)
|
Convertible note
|
|
|
---
|
|
|
|
|
|
|
Gross proceeds
|
|
$
|
55,000
|
|
The
discount resulting from the original issue discount and embedded conversion feature was being amortized over the life of the $55k
Note, which was schedule to mature on September 11, 2018. Amortization expense related to the discount in the years ended December
31, 2018 and 2017 was $10,849 and $16,276, respectively. During the years ended December 31, 2018 and 2017, the Company recorded
interest expense on this instrument totaling $1,085 and $1,673, respectively.
On
March 13, 2018, the Company prepaid the balance on the $55k Note, including accrued interest, for a one-time cash payment of $85,258.
The Company recognized a gain on debt extinguishment in the year ended December 31, 2018 in connection with the repayment, as
follows:
Face value of convertible note payable retired
|
|
$
|
55,000
|
|
Carrying value of derivative financial instruments arising from ECF
|
|
|
69,687
|
|
Accrued interest
|
|
|
2,759
|
|
Less cash repayment
|
|
|
(85,258
|
)
|
Less carrying value of debt discount at extinguishment
|
|
|
(27,425
|
)
|
|
|
|
|
|
Gain on extinguishment of debt
|
|
$
|
14,763
|
|
Convertible
Notes Payable ($53,000) – October 2017
On
October 23, 2017, the Company entered into a securities purchase agreement for the sale of a $53,000 convertible note (the “$53k
Note II”) to PULG. The $53k Note II included a $3,000 original issue discount, for net proceeds of $50,000. The $53k Note
II has an interest rate of 10% and a default interest rate of 20%. The $53k Note II may be converted into common stock of the
Company by the holder at any time after the issuance date, subject to a 4.99% beneficial ownership limitation, at a conversion
price per share equal to 39% discount to the average of the three (3) lowest closing bid prices during the fifteen (15) trading
days prior to the conversion date. Upon an event of default caused by the Company’s failure to deliver shares upon a conversion
pursuant to the terms of the Note, 300% of the outstanding principal and any interest due amount shall be immediately due. Upon
an event of default caused by the Company’s breach of any other events of default specified in the Note, 150% of the outstanding
principal and any interest due amount shall be immediately due.
HEALTHLYNKED
CORPORATION
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2018 AND 2017
NOTE
9 – CONVERTIBLE NOTES PAYABLE (CONTINUED)
The
fair value of the ECF of the $53k Note II was calculated using the Black-Scholes pricing model at $57,571, with the following
assumptions: risk-free interest rate of 1.42%, expected life of 0.77 years, volatility of 174.46%, and expected dividend yield
of zero. Because the fair value of the ECF exceeded the net proceeds from the $53k Note II, a charge was recorded to “Financing
cost” for the excess of the fair value of the fair value of the ECF of $57,571 over the net proceeds from the note of $50,000,
for a net charge of $7,571. The ECF qualifies for derivative accounting and bifurcation under ASC 815, “Derivatives and
Hedging.” The final allocation of the proceeds at inception was as follows:
Embedded conversion feature
|
|
$
|
57,571
|
|
Original issue discount
|
|
|
3,000
|
|
Financing cost
|
|
|
(7,571
|
)
|
Convertible note
|
|
|
---
|
|
|
|
|
|
|
Gross proceeds
|
|
$
|
53,000
|
|
The
discount resulting from the original issue discount and embedded conversion feature was being amortized over the life of the $53k
Note II, which was schedule to mature on July 30, 2018. Amortization expense related to the discount in the years ended December
31, 2018 and 2017 was $20,443 and $13,061, respectively. During the years ended December 31, 2018 and 2017, the Company recorded
interest expense on this instrument totaling $261 and $1,002, respectively.
On
April 18, 2018, the Company prepaid the balance on the $53k Note II, including accrued interest, for a one-time cash payment of
$75,000. The Company recognized a gain on debt extinguishment in the year ended December 31, 2018 in connection with the repayment,
as follows:
Face value of convertible note payable retired
|
|
$
|
53,000
|
|
Carrying value of derivative financial instruments arising from ECF
|
|
|
55,790
|
|
Accrued interest
|
|
|
2,571
|
|
Less cash repayment
|
|
|
(75,000
|
)
|
Less carrying value of debt discount at extinguishment
|
|
|
(19,496
|
)
|
|
|
|
|
|
Gain on extinguishment of debt
|
|
$
|
16,865
|
|
Convertible
Notes Payable ($171,500) – October 2017
On
October 27, 2017, the Company entered into a securities purchase agreement for the sale of a $171,500 convertible note (the “$171.5k
Note”) to an individual lender. The $171.5k Note included a $21,500 original issue discount, for net proceeds of $150,000.
The $171.5k Note has an interest rate of 10% and a default interest rate of 22% and was originally scheduled to mature on October
26, 2018, as amended and described below. The $171.5k Note may be converted into common stock of the Company by the holder at
any time following 180 days after the issuance date, subject to a 4.99% beneficial ownership limitation, at a conversion price
per share equal to a 35% discount to the lowest closing bid price during the twenty (20) trading days prior to the conversion
date. Upon an event of default caused by the Company’s failure to deliver shares upon a conversion pursuant to the terms
of the $171.5k Note, 300% of the outstanding principal and any interest due amount shall be immediately due. Upon an event of
default caused by the Company’s breach of any other events of default specified in the $171.5k Note, 150% of the outstanding
principal and any interest due amount shall be immediately due.
HEALTHLYNKED
CORPORATION
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2018 AND 2017
NOTE
9 – CONVERTIBLE NOTES PAYABLE (CONTINUED)
The
fair value of the ECF of the $171.5k Note was calculated using the Black-Scholes pricing model at $183,061, with the following
assumptions: risk-free interest rate of 1.42%, expected life of 1 year, volatility of 172.67%, and expected dividend yield of
zero. Because the fair value of the ECF exceeded the net proceeds from the $171.5k Note, a charge was recorded to “Financing
cost” for the excess of the fair value of the fair value of the ECF of $183,061 over the net proceeds from the note of $150,000,
for a net charge of $33,061. The ECF qualifies for derivative accounting and bifurcation under ASC 815, “Derivatives and
Hedging.” The final allocation of the proceeds at inception was as follows:
Embedded conversion feature
|
|
$
|
183,061
|
|
Original issue discount
|
|
|
21,500
|
|
Financing cost
|
|
|
(33,061
|
)
|
Convertible note
|
|
|
---
|
|
|
|
|
|
|
Gross proceeds
|
|
$
|
171,500
|
|
Amortization
expense related to the discount in the years ended December 31, 2018 and 2017 was $14,0875 and $30,625, respectively.
On October 31, 2018, the holder of the
$171.5k Note agreed to extend the maturity date from the original date of October 26, 2018 until December 31, 2019 in exchange
for (i) a three-year warrant to purchase 75,000 shares of Company common stock at an exercise price of $0.25 per share, and (ii)
a three-year warrant to purchase 25,000 shares of Company common stock at an exercise price of $0.50 per share. The fair value
of the warrants using Black/Scholes was $26,282 with the following assumptions: risk-free interest rate of 2.93%, expected life
of 3 years, volatility of 291.52%, and expected dividend yield of zero. The issuance of the warrants in exchange for the maturity
extension was treated as an extinguishment and reissuance of existing debt pursuant to the guidance of ASC 470-50. Accordingly,
the $171.5k Note is carried at fair value subsequent to the extinguishment date and is revalued at each period end, with changes
to fair value recorded to the statement of operations under “Change in Fair Value of Debt.” The fair value of this
instrument as of December 31, 2018 was $186,472. During the years ended December 31, 2018 and 2017, a change in fair value of debt
related to this instrument was recorded in the amount of $5,241 and $-0-, respectively.
During
the years ended December 31, 2018 and 2017, the Company made no repayments on this instrument. During the years ended December
31, 2018 and 2017, the Company recorded interest expense on this instrument totaling $17,150 and $3,054, respectively. As of December
31, 2018, the unamortized discount was $-0- and the note was convertible into 1,954,416 of the Company’s common shares.
Convertible
Notes Payable ($57,750) – January 2018
On
January 2, 2018, the Company entered into a securities purchase agreement for the sale of a $57,750 convertible note (the “$58k
Note”). The transaction closed on January 3, 2018. The $58k Note included a $5,250 original issue discount and $2,500 fee
for net proceeds of $50,000. The $58k Note has an interest rate of 10% and a default interest rate of 18% and matures on January
2, 2019. The $58k Note was convertible into common stock of the Company by the holder at any time after the issuance date, subject
to a 4.99% beneficial ownership limitation, at a conversion price per share equal to 40% discount to the lowest bid or trading
price of the Company’s common stock during the twenty (20) trading days prior to the conversion date. On June 26, 2018,
the holder agreed, without consideration, to reduce the discount to 28% of the volume weighted average price of the Company’s
common stock for the 10 days prior to the conversion date. Because this the change in terms resulted in a decrease to the value
of the ECF, no amounts were recorded to reflect the change in terms. Upon an event of default caused by the Company’s failure
to deliver shares upon a conversion pursuant to the terms of the Note, 200% of the outstanding principal and any interest due
amount shall be immediately due. Upon an event of default caused by the Company’s breach of any other events of default
specified in the Note, 150% of the outstanding principal and any interest due amount shall be immediately due.
HEALTHLYNKED
CORPORATION
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2018 AND 2017
NOTE
9 – CONVERTIBLE NOTES PAYABLE (CONTINUED)
The
fair value of the ECF of the $58k Note was calculated using the Black-Scholes pricing model at $82,652, with the following assumptions:
risk-free interest rate of 1.83%, expected life of 1 year, volatility of 264.29%, and expected dividend yield of zero. Because
the fair value of the ECF exceeded the net proceeds from the $58k Note, a charge was recorded to “Financing cost”
for the excess of the fair value of the fair value of the ECF of $82,652 over the net proceeds from the note of $50,000, for a
net charge of $32,652. The ECF qualifies for derivative accounting and bifurcation under ASC 815, “Derivatives and Hedging.”
The final allocation of the proceeds at inception was as follows:
Embedded conversion feature
|
|
$
|
82,652
|
|
Original issue discount and fees
|
|
|
7,750
|
|
Financing cost
|
|
|
(32,652
|
)
|
Convertible note
|
|
|
---
|
|
|
|
|
|
|
Gross proceeds
|
|
$
|
57,750
|
|
The
discount resulting from the original issue discount and embedded conversion feature was being amortized over the life of the instrument,
which was schedule to mature on January 2, 2019. Amortization expense related to the discount in the years ended December 31,
2018 and 2017 was $37,925 and $-0-, respectively. During the years ended December 31, 2018 and 2017, the Company recorded interest
expense on this instrument totaling $3,786 and $-0-, respectively.
During
the year ended December 31, 2018, the holder of the $58k Note converted the entire principal balance of $57,750, as well as accrued
interest in the amount of $3,786, into 384,839 shares of Company common stock.
Convertible
Notes Payable ($112,750) – February 2018
On
February 2, 2018, the Company entered into a securities purchase agreement for the sale of a $112,750 convertible note (the “$113k
Note”). The transaction closed on February 8, 2018. The $113k Note included $12,750 fees for net proceeds of $100,000. The
$113k Note has an interest rate of 10% and a default interest rate of 24% and matures on February 2, 2019. The $113k Note may
be converted into common stock of the Company by the holder at any time after the issuance date, subject to a 4.99% beneficial
ownership limitation, at a conversion price per share equal to 40% discount to the lowest bid or trading price of the Company’s
common stock during the twenty (20) trading days prior to the conversion date. Upon an event of default caused by the Company’s
failure to deliver shares upon a conversion pursuant to the terms of the Note, 200% of the outstanding principal and any interest
due amount shall be immediately due. Upon an event of default caused by the Company’s breach of any other events of default
specified in the Note, 150% of the outstanding principal and any interest due amount shall be immediately due.
The
fair value of the ECF of the $113k Note was calculated using the Black-Scholes pricing model at $161,527, with the following assumptions:
risk-free interest rate of 1.88%, expected life of 1 year, volatility of 264.93%, and expected dividend yield of zero. Because
the fair value of the ECF exceeded the net proceeds from the $113k Note, a charge was recorded to “Financing cost”
for the excess of the fair value of the fair value of the ECF of $161,527 over the net proceeds from the note of $100,000, for
a net charge of $61,527. The ECF qualifies for derivative accounting and bifurcation under ASC 815, “Derivatives and Hedging.”
The final allocation of the proceeds at inception was as follows:
Embedded conversion feature
|
|
$
|
161,527
|
|
Original issue discount and fees
|
|
|
12,750
|
|
Financing cost
|
|
|
(61,527
|
)
|
Convertible note
|
|
|
---
|
|
|
|
|
|
|
Gross proceeds
|
|
$
|
112,750
|
|
The
discount resulting from the original issue discount and embedded conversion feature was being amortized over the life of the note,
which was schedule to mature on February 2, 2019. Amortization expense related to the discount in the years ended December 31,
2018 and 2017 was $57,456 and $-0-, respectively. During the years ended December 31, 2018 and 2017, the Company recorded interest
expense on this instrument totaling $5,746 and $-0-, respectively.
HEALTHLYNKED
CORPORATION
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2018 AND 2017
NOTE
9 – CONVERTIBLE NOTES PAYABLE (CONTINUED)
On
August 7, 2018, the Company prepaid the balance on the $113k Note, including accrued interest, for a one-time cash payment of
$151,536. In connection with the extinguishment, the Company also issued the holder a 3-year warrant to purchase 100,000 shares
of Company common stock at an exercise price of $0.25. The fair value of the warrant was $50,614. The Company recognized a gain
on debt extinguishment in the year ended December 31, 2018 in connection with the repayment, as follows:
Face value of convertible note payable retired
|
|
$
|
112,750
|
|
Carrying value of derivative financial instruments arising from ECF
|
|
|
140,962
|
|
Accrued interest
|
|
|
5,746
|
|
Less cash repayment
|
|
|
(151,536
|
)
|
Less fair value of warrant issued in connection with extinguishment
|
|
|
(50,614
|
)
|
Less carrying value of debt discount at extinguishment
|
|
|
(55,294
|
)
|
|
|
|
|
|
Gain on extinguishment of debt
|
|
$
|
2,014
|
|
Convertible
Notes Payable ($83,000) – February 2018
On
February 13, 2018, the Company entered into a securities purchase agreement for the sale of a $83,000 convertible note (the “$83k
Note”). The transaction closed on February 21, 2018. The $83k Note included $8,000 fees for net proceeds of $75,000. The
$83k Note has an interest rate of 10% and a default interest rate of 24% and matures on February 13, 2019. The $113k Note may
be converted into common stock of the Company by the holder at any time after the issuance date, subject to a 4.99% beneficial
ownership limitation, at a conversion price per share equal to 40% discount to the lowest bid or trading price of the Company’s
common stock during the twenty (20) trading days prior to the conversion date. Upon an event of default, 200% of the outstanding
principal and any interest due amount shall be immediately due.
The
fair value of the ECF of the $83k Note was calculated using the Black-Scholes pricing model at $119,512, with the following assumptions:
risk-free interest rate of 1.95%, expected life of 1 year, volatility of 268.44%, and expected dividend yield of zero. Because
the fair value of the ECF exceeded the net proceeds from the $83k Note, a charge was recorded to “Financing cost”
for the excess of the fair value of the fair value of the ECF of $119,512 over the net proceeds from the note of $75,000, for
a net charge of $44,512. The ECF qualifies for derivative accounting and bifurcation under ASC 815, “Derivatives and Hedging.”
The final allocation of the proceeds at inception was as follows:
Embedded conversion feature
|
|
$
|
119,512
|
|
Original issue discount and fees
|
|
|
8,000
|
|
Financing cost
|
|
|
(44,512
|
)
|
Convertible note
|
|
|
---
|
|
|
|
|
|
|
Gross proceeds
|
|
$
|
83,000
|
|
The
discount resulting from the original issue discount and embedded conversion feature was being amortized over the life of the note,
which was schedule to mature on February 13, 2019. Amortization expense related to the discount in the years ended December 31,
2018 and 2017 was $41,841 and $-0-, respectively. During the years ended December 31, 2018 and 2017, the Company recorded interest
expense on this instrument totaling $4,184 and $-0-, respectively.
HEALTHLYNKED
CORPORATION
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2018 AND 2017
NOTE
9 – CONVERTIBLE NOTES PAYABLE (CONTINUED)
On
August 16, 2018, the Company prepaid the balance on the $83k Note, including accrued interest, for a one-time cash payment of
$111,596. In connection with the extinguishment, the Company also issued the holder a 5-year warrant to purchase 237,143 shares
of Company common stock at an exercise price of $0.35. The fair value of the warrant was $92,400. The Company recognized a loss
on debt extinguishment in the year ended December 31, 2018 in connection with the repayment, as follows:
Face value of convertible note payable retired
|
|
$
|
83,000
|
|
Carrying value of derivative financial instruments arising from ECF
|
|
|
106,720
|
|
Accrued interest
|
|
|
4,184
|
|
Less cash repayment
|
|
|
(111,596
|
)
|
Less fair value of warrant issued in connection with extinguishment
|
|
|
(92,400
|
)
|
Less carrying value of debt discount at extinguishment
|
|
|
(41,159
|
)
|
|
|
|
|
|
Loss on extinguishment of debt
|
|
$
|
(51,251
|
)
|
Convertible
Notes Payable ($105,000) – March 2018
On
March 5, 2018, the Company entered into a securities purchase agreement for the sale of a $105,000 convertible note (the “$105k
Note”). The transaction closed on March 12, 2018. The $105k Note included $5,000 fees for net proceeds of $100,000. The
$105k Note has an interest rate of 10% and a default interest rate of 24% and matures on March 5, 2019. The $113k Note may be
converted into common stock of the Company by the holder at any time after the 6-month anniversary of the issuance date, subject
to a 9.9% beneficial ownership limitation, at a conversion price per share equal to 40% discount to the lowest bid or trading
price of the Company’s common stock during the twenty (20) trading days prior to the conversion date. Upon an event of default,
110-150% of the outstanding principal and any interest due amount shall be immediately due, depending on the nature of the breach.
The
fair value of the ECF of the $105k Note was calculated using the Black-Scholes pricing model at $153,371, with the following assumptions:
risk-free interest rate of 2.06%, expected life of 1 year, volatility of 278.96%, and expected dividend yield of zero. Because
the fair value of the ECF exceeded the net proceeds from the $105k Note, a charge was recorded to “Financing cost”
for the excess of the fair value of the fair value of the ECF of $153,371 over the net proceeds from the note of $100,000, for
a net charge of $53,371. The ECF qualifies for derivative accounting and bifurcation under ASC 815, “Derivatives and Hedging.”
The final allocation of the proceeds at inception was as follows:
Embedded conversion feature
|
|
$
|
153,371
|
|
Original issue discount and fees
|
|
|
5,000
|
|
Financing cost
|
|
|
(53,371
|
)
|
Convertible note
|
|
|
---
|
|
|
|
|
|
|
Gross proceeds
|
|
$
|
105,000
|
|
The
discount resulting from the original issue discount and embedded conversion feature was being amortized over the life of the note,
which was schedule to mature on March 5, 2019. Amortization expense related to the discount in the years ended December 31, 2018
and 2017 was $51,205 and $-0-, respectively. During the years ended December 31, 2018 and 2017, the Company recorded interest
expense on this instrument totaling $5,121 and $-0-, respectively.
On
August 30, 2018, the Company prepaid the balance on the $105k Note, including accrued interest, for a one-time cash payment of
$140,697. The Company recognized a gain on debt extinguishment in the year ended December 31, 2018 in connection with the repayment,
as follows:
Face value of convertible note payable retired
|
|
$
|
105,000
|
|
Carrying value of derivative financial instruments arising from ECF
|
|
|
136,175
|
|
Accrued interest
|
|
|
5,121
|
|
Less cash repayment
|
|
|
(140,697
|
)
|
Less carrying value of debt discount at extinguishment
|
|
|
(53,795
|
)
|
|
|
|
|
|
Gain on extinguishment of debt
|
|
$
|
51,804
|
|
HEALTHLYNKED
CORPORATION
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2018 AND 2017
NOTE
9 – CONVERTIBLE NOTES PAYABLE (CONTINUED)
Convertible
Notes Payable ($63,000) – April 2018
On
April 2, 2018, the Company entered into a securities purchase agreement for the sale of a $63,000 convertible note (the “$63k
Note”). The transaction closed on April 3, 2018. The $63k Note included $3,000 fees for net proceeds of $60,000. The $63k
Note has an interest rate of 10% and a default interest rate of 22% and matures on January 15, 2019. The $63k Note may be converted
into common stock of the Company by the holder at any time after the 6-month anniversary of the issuance date, subject to a 4.99%
beneficial ownership limitation, at a conversion price per share equal to a 39% discount to the lowest bid or trading price of
the Company’s common stock during the fifteen (15) trading days prior to the conversion date. Upon an event of default caused
by the Company’s failure to deliver shares upon a conversion pursuant to the terms of the Note, 300% of the outstanding
principal and any interest due amount shall be immediately due. Upon an event of default caused by the Company’s breach
of any other events of default specified in the Note, 150% of the outstanding principal and any interest due amount shall be immediately
due.
The
fair value of the ECF of the $63k Note was calculated using the Black-Scholes pricing model at $83,806, with the following assumptions:
risk-free interest rate of 2.08%, expected life of 0.79 years, volatility of 260.76%, and expected dividend yield of zero. Because
the fair value of the ECF exceeded the net proceeds, a charge was recorded to “Financing cost” for the excess of the
fair value of the fair value of the ECF of $83,806 over the net proceeds from the note of $60,000, for a net charge of $23,806.
The ECF qualifies for derivative accounting and bifurcation under ASC 815, “Derivatives and Hedging.” The final allocation
of the proceeds at inception was as follows:
Embedded conversion feature
|
|
$
|
83,806
|
|
Original issue discount and fees
|
|
|
3,000
|
|
Financing cost
|
|
|
(23,806
|
)
|
Convertible note
|
|
|
---
|
|
|
|
|
|
|
Gross proceeds
|
|
$
|
63,000
|
|
The
discount resulting from the original issue discount and embedded conversion feature was being amortized over the life of the note,
which was schedule to mature on January 15, 2019. Amortization expense related to the discount in the years ended December 31,
2018 and 2017 was $39,594 and $-0-, respectively. During the years ended December 31, 2018 and 2017, the Company recorded interest
expense on this instrument totaling $3,124 and $-0-, respectively.
On
September 28, 2018, the Company prepaid the balance on the $63k Note, including accrued interest, for a one-time cash payment
of $89,198. The Company recognized a gain on debt extinguishment in the year ended December 31, 2018 in connection with the repayment,
as follows:
Face value of convertible note payable retired
|
|
$
|
63,000
|
|
Carrying value of derivative financial instruments arising from ECF
|
|
|
72,336
|
|
Accrued interest
|
|
|
3,124
|
|
Less cash repayment
|
|
|
(89,198
|
)
|
Less carrying value of debt discount at extinguishment
|
|
|
(23,406
|
)
|
|
|
|
|
|
Gain on extinguishment of debt
|
|
$
|
25,856
|
|
Convertible
Notes Payable ($57,750) – April 2018
On
April 16, 2018, the Company entered into a securities purchase agreement for the sale of a $57,750 convertible note (the “$57.8k
Note II”). The transaction closed on April 17, 2018. The $57.8k Note II Note included $7,750 fees for net proceeds of $50,000.
The $57.8k Note II Note has an interest rate of 10% and a default interest rate of 18% and matures on April 16, 2019. The $57.8k
Note II Note may be converted into common stock of the Company by the holder at any time after the issuance date, subject to a
4.99% beneficial ownership limitation, at a conversion price per share equal to a 40% discount to the lowest bid or trading price
of the Company’s common stock during the twenty (20) trading days prior to the conversion date. Upon an event of default
caused by the Company’s failure to deliver shares upon a conversion pursuant to the terms of the Note, 200% of the outstanding
principal and any interest due amount shall be immediately due. Upon an event of default caused by the Company’s breach
of any other events of default specified in the Note, 150% of the outstanding principal and any interest due amount shall be immediately
due.
HEALTHLYNKED
CORPORATION
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2018 AND 2017
NOTE
9 – CONVERTIBLE NOTES PAYABLE (CONTINUED)
The
fair value of the ECF of the $57.8k Note II was calculated using the Black-Scholes pricing model at $83,897, with the following
assumptions: risk-free interest rate of 2.12%, expected life of 1 year, volatility of 270.41%, and expected dividend yield of
zero. Because the fair value of the ECF exceeded the net proceeds, a charge was recorded to “Financing cost” for the
excess of the fair value of the fair value of the ECF of $83,397 over the net proceeds from the note of $50,000, for a net charge
of $33,397. The ECF qualifies for derivative accounting and bifurcation under ASC 815, “Derivatives and Hedging.”
The final allocation of the proceeds at inception was as follows:
Embedded conversion feature
|
|
$
|
83,397
|
|
Original issue discount and fees
|
|
|
7,750
|
|
Financing cost
|
|
|
(33,397
|
)
|
Convertible note
|
|
|
---
|
|
|
|
|
|
|
Gross proceeds
|
|
$
|
57,750
|
|
The
discount resulting from the original issue discount and embedded conversion feature was being amortized over the life of the note,
which was schedule to mature on January 15, 2019. Amortization expense related to the discount in the years ended December 31,
2018 and 2017 was $28,954 and $-0-, respectively. During the years ended December 31, 2018 and 2017, the Company recorded interest
expense on this instrument totaling $2,895 and $-0-, respectively.
On
October 16, 2018, the Company prepaid the balance on the $57.8k Note II, including accrued interest, for a one-time cash payment
of $81,850. The Company recognized a gain on debt extinguishment in the year ended December 31, 2018 in connection with the repayment,
as follows:
Face value of convertible note payable retired
|
|
$
|
57,750
|
|
Carrying value of derivative financial instruments arising from ECF
|
|
|
74,428
|
|
Accrued interest
|
|
|
2,895
|
|
Less cash repayment
|
|
|
(81,850
|
)
|
Less carrying value of debt discount at extinguishment
|
|
|
(28,796
|
)
|
|
|
|
|
|
Gain on extinguishment of debt
|
|
$
|
24,427
|
|
Convertible
Notes Payable ($90,000) – April 2018
On
April 18, 2018, the Company entered into a securities purchase agreement for the sale of a $90,000 convertible note (the “$90k
Note”). The transaction closed on April 18, 2018. The $90k Note included $4,500 fees for net proceeds of $85,500. The $90k
Note has an interest rate of 10% and a default interest rate of 24% and matures on April 18, 2019. The $90k Note may be converted
into common stock of the Company by the holder at any time after the issuance date, subject to a 4.99% beneficial ownership limitation,
at a conversion price per share equal to a 40% discount to the lowest bid or trading price of the Company’s common stock
during the twenty (20) trading days prior to the conversion date. Upon an event of default caused by the Company’s failure
to deliver shares upon a conversion pursuant to the terms of the Note, the Company would incur a penalty of $250 per day beginning
on the fourth day after the conversion notice, increasing to $500 per day beginning on the tenth day. Upon an event of default
caused by the Company’s breach of any other events of default specified in the Note, 150% of the outstanding principal and
any interest due amount shall be immediately.
HEALTHLYNKED
CORPORATION
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2018 AND 2017
NOTE
9 – CONVERTIBLE NOTES PAYABLE (CONTINUED)
The
fair value of the ECF of the $90k Note was calculated using the Black-Scholes pricing model at $130,136, with the following assumptions:
risk-free interest rate of 2.17%, expected life of 1 year, volatility of 271.31%, and expected dividend yield of zero. Because
the fair value of the ECF exceeded the net proceeds, a charge was recorded to “Financing cost” for the excess of the
fair value of the fair value of the ECF of $130,136 over the net proceeds from the note of $85,500, for a net charge of $44,636.
The ECF qualifies for derivative accounting and bifurcation under ASC 815, “Derivatives and Hedging.” The final allocation
of the proceeds at inception was as follows:
Embedded conversion feature
|
|
$
|
130,136
|
|
Original issue discount and fees
|
|
|
4,500
|
|
Financing cost
|
|
|
(44,636
|
)
|
Convertible note
|
|
|
---
|
|
|
|
|
|
|
Gross proceeds
|
|
$
|
90,000
|
|
The
discount resulting from the original issue discount and embedded conversion feature was being amortized over the life of the note,
which was schedule to mature on July 18, 2019. Amortization expense related to the discount in the years ended December 31, 2018
and 2017 was $31,562 and $-0-, respectively. During the years ended December 31, 2018 and 2017, the Company recorded interest
expense on this instrument totaling $3,156 and $-0-, respectively.
On
August 24, 2018, the Company prepaid the balance on the $90k Note, including accrued interest, for a one-time cash payment of
$119,240. The Company recognized a gain on debt extinguishment in the year ended December 31, 2018 in connection with the repayment,
as follows:
Face value of convertible note payable retired
|
|
$
|
90,000
|
|
Carrying value of derivative financial instruments arising from ECF
|
|
|
123,030
|
|
Accrued interest
|
|
|
3,156
|
|
Less cash repayment
|
|
|
(119,240
|
)
|
Less carrying value of debt discount at extinguishment
|
|
|
(58,438
|
)
|
|
|
|
|
|
Gain on extinguishment of debt
|
|
$
|
38,508
|
|
Convertible
Notes Payable ($53,000) – April 2018
On
April 18, 2018, the Company entered into a securities purchase agreement for the sale of a $53,000 convertible note (the “$53k
Note III”). The transaction closed on April 23, 2018. The $53k Note III included $3,000 fees for net proceeds of $50,000.
The $53k Note III has an interest rate of 10% and a default interest rate of 22% and matures on January 30, 2019. The $53k Note
III may be converted into common stock of the Company by the holder at any time after the 6-month anniversary of the issuance
date, subject to a 4.99% beneficial ownership limitation, at a conversion price per share equal to a 39% discount to the lowest
bid or trading price of the Company’s common stock during the fifteen (15) trading days prior to the conversion date. Upon
an event of default caused by the Company’s failure to deliver shares upon a conversion pursuant to the terms of the Note,
300% of the outstanding principal and any interest due amount shall be immediately due. Upon an event of default caused by the
Company’s breach of any other events of default specified in the Note, 150% of the outstanding principal and any interest
due amount shall be immediately due.
HEALTHLYNKED
CORPORATION
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2018 AND 2017
NOTE
9 – CONVERTIBLE NOTES PAYABLE (CONTINUED)
The
fair value of the ECF of the $53k Note III was calculated using the Black-Scholes pricing model at $71,679, with the following
assumptions: risk-free interest rate of 2.17%, expected life of 0.79 years, volatility of 271.31%, and expected dividend yield
of zero. Because the fair value of the ECF exceeded the net proceeds, a charge was recorded to “Financing cost” for
the excess of the fair value of the fair value of the ECF of $71,679 over the net proceeds from the note of $50,000, for a net
charge of $21,679. The ECF qualifies for derivative accounting and bifurcation under ASC 815, “Derivatives and Hedging.”
The final allocation of the proceeds at inception was as follows:
Embedded conversion feature
|
|
$
|
71,679
|
|
Original issue discount and fees
|
|
|
3,000
|
|
Financing cost
|
|
|
(21,679
|
)
|
Convertible note
|
|
|
---
|
|
|
|
|
|
|
Gross proceeds
|
|
$
|
53,000
|
|
The
discount resulting from the original issue discount and embedded conversion feature was being amortized over the life of the note,
which was schedule to mature on January 30, 2019. Amortization expense related to the discount in the years ended December 31,
2018 and 2017 was $33,794 and $-0-, respectively. During the years ended December 31, 2018 and 2017, the Company recorded interest
expense on this instrument totaling $2,657 and $-0-, respectively.
On
October 18, 2018, the Company prepaid the balance on the $53k Note III, including accrued interest, for a one-time cash payment
of $75,039. The Company recognized a gain on debt extinguishment in the year ended December 31, 2018 in connection with the repayment,
as follows:
Face value of convertible note payable retired
|
|
$
|
53,000
|
|
Carrying value of derivative financial instruments arising from ECF
|
|
|
59,533
|
|
Accrued interest
|
|
|
2,657
|
|
Less cash repayment
|
|
|
(75,039
|
)
|
Less carrying value of debt discount at extinguishment
|
|
|
(19,206
|
)
|
|
|
|
|
|
Gain on extinguishment of debt
|
|
$
|
20,945
|
|
Convertible
Notes Payable ($68,250) – May 2018
On
May 3, 2018, the Company entered into a securities purchase agreement for the sale of a $68,250 convertible note (the “$68.3k
Note”). The transaction closed on May 4, 2018. The $68.3k Note included $3,250 fees for net proceeds of $60,000. The $68.3k
Note has an interest rate of 10% and a default interest rate of 24% and matures on May 3, 2019. The $68.3k Note may be converted
into common stock of the Company by the holder at any time after the 6-month anniversary of the issuance date, subject to a 4.99%
beneficial ownership limitation, at a conversion price per share equal to a 40% discount to the lowest bid or trading price of
the Company’s common stock during the twenty (20) trading days prior to the conversion date. Upon an event of default caused
by the Company’s failure to deliver shares upon a conversion pursuant to the terms of the Note, the Company would incur
a penalty of $250 per day beginning on the fourth day after the conversion notice, increasing to $500 per day beginning on the
tenth day. Upon an event of default caused by the Company’s failure to maintain a listing for its common stock, the outstanding
principal shall increase by 50%. Upon an event of default caused by the Company’s failure to maintain a bid price for its
common stock, the outstanding principal shall increase by 20%.
HEALTHLYNKED
CORPORATION
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2018 AND 2017
NOTE
9 – CONVERTIBLE NOTES PAYABLE (CONTINUED)
The
fair value of the ECF of the $68.3k Note was calculated using the Black-Scholes pricing model at $99,422, with the following assumptions:
risk-free interest rate of 2.24%, expected life of 1 year, volatility of 276.40%, and expected dividend yield of zero. Because
the fair value of the ECF exceeded the net proceeds, a charge was recorded to “Financing cost” for the excess of the
fair value of the fair value of the ECF of $99,422 over the net proceeds from the note of $65,000, for a net charge of $34,422.
The ECF qualifies for derivative accounting and bifurcation under ASC 815, “Derivatives and Hedging.” The final allocation
of the proceeds at inception was as follows:
Embedded conversion feature
|
|
$
|
99,422
|
|
Original issue discount and fees
|
|
|
3,250
|
|
Financing cost
|
|
|
(34,422
|
)
|
Convertible note
|
|
|
---
|
|
|
|
|
|
|
Gross proceeds
|
|
$
|
68,250
|
|
The
discount resulting from the original issue discount and embedded conversion feature was being amortized over the life of the note,
which was schedule to mature on May 3, 2019. Amortization expense related to the discount in the years ended December 31, 2018
and 2017 was $33,566 and $-0-, respectively. During the years ended December 31, 2018 and 2017, the Company recorded interest
expense on this instrument totaling $3,366 and $-0-, respectively.
On
October 30, 2018, the Company prepaid the balance on the $68.3k Note, including accrued interest, for a one-time cash payment
of $91,644. The Company recognized a gain on debt extinguishment in the year ended December 31, 2018 in connection with the repayment,
as follows:
Face value of convertible note payable retired
|
|
$
|
68,250
|
|
Carrying value of derivative financial instruments arising from ECF
|
|
|
91,132
|
|
Accrued interest
|
|
|
3,366
|
|
Less cash repayment
|
|
|
(91,644
|
)
|
Less carrying value of debt discount at extinguishment
|
|
|
(34,684
|
)
|
|
|
|
|
|
Gain on extinguishment of debt
|
|
$
|
36,420
|
|
Convertible
Notes Payable ($37,000) – May 2018
On
May 7, 2018, the Company entered into a securities purchase agreement for the sale of a $37,000 convertible note (the “$37k
Note”). The transaction closed on May 9, 2018. The $37k Note included $2,000 fees for net proceeds of $35,000. The $37k
Note has an interest rate of 10% and a default interest rate of 24% and matures on May 7, 2019. The $37k Note may be converted
into common stock of the Company by the holder at any time after the 6-month anniversary of the issuance date, subject to a 4.99%
beneficial ownership limitation, at a conversion price per share equal to a 40% discount to the lowest bid or trading price of
the Company’s common stock during the twenty (20) trading days prior to the conversion date. Upon an event of default caused
by the Company’s failure to deliver shares upon a conversion pursuant to the terms of the Note, the Company would incur
a penalty of $250 per day beginning on the fourth day after the conversion notice, increasing to $500 per day beginning on the
tenth day. Upon an event of default caused by the Company’s failure to maintain a listing for its common stock, the outstanding
principal shall increase by 50%. Upon an event of default caused by the Company’s failure to maintain a bid price for its
common stock, the outstanding principal shall increase by 20%.
HEALTHLYNKED
CORPORATION
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2018 AND 2017
NOTE
9 – CONVERTIBLE NOTES PAYABLE (CONTINUED)
The
fair value of the ECF of the $37k Note was calculated using the Black-Scholes pricing model at $54,086, with the following assumptions:
risk-free interest rate of 2.25%, expected life of 1 year, volatility of 279.44%, and expected dividend yield of zero. Because
the fair value of the ECF exceeded the net proceeds, a charge was recorded to “Financing cost” for the excess of the
fair value of the fair value of the ECF of $54,086 over the net proceeds from the note of $35,000, for a net charge of $19,086.
The ECF qualifies for derivative accounting and bifurcation under ASC 815, “Derivatives and Hedging.” The final allocation
of the proceeds at inception was as follows:
Embedded conversion feature
|
|
$
|
54,086
|
|
Original issue discount and fees
|
|
|
2,000
|
|
Financing cost
|
|
|
(19,086
|
)
|
Convertible note
|
|
|
---
|
|
|
|
|
|
|
Gross proceeds
|
|
$
|
37,000
|
|
The
discount resulting from the original issue discount and embedded conversion feature was being amortized over the life of the note,
which was schedule to mature on May 7, 2019. Amortization expense related to the discount in the years ended December 31, 2018
and 2017 was $18,145 and $-0-, respectively. During the years ended December 31, 2018 and 2017, the Company recorded interest
expense on this instrument totaling $1,815 and $-0-, respectively.
On
November 2, 2018, the Company prepaid the balance on the $37k Note, including accrued interest, for a one-time cash payment of
$49,144. The Company recognized a gain on debt extinguishment in the year ended December 31, 2018 in connection with the repayment,
as follows:
Face value of convertible note payable retired
|
|
$
|
37,000
|
|
Carrying value of derivative financial instruments arising from ECF
|
|
|
47,763
|
|
Accrued interest
|
|
|
1,815
|
|
Less cash repayment
|
|
|
(49,144
|
)
|
Less carrying value of debt discount at extinguishment
|
|
|
(18,855
|
)
|
|
|
|
|
|
Gain on extinguishment of debt
|
|
$
|
18,579
|
|
Convertible
Notes Payable ($63,000) – May 2018
On
May 9, 2018, the Company entered into a securities purchase agreement for the sale of a $63,000 convertible note (the “$63k
Note II”). The transaction closed on May 12, 2018. The $63k Note II included $3,000 fees for net proceeds of $60,000. The
$63k Note II has an interest rate of 10% and a default interest rate of 22% and matures on May 7, 2019. The $63k Note II may be
converted into common stock of the Company by the holder at any time after the 6-month anniversary of the issuance date, subject
to a 4.99% beneficial ownership limitation, at a conversion price per share equal to a 39% discount to the lowest bid or trading
price of the Company’s common stock during the fifteen (15) trading days prior to the conversion date. Upon an event of
default caused by the Company’s failure to deliver shares upon a conversion pursuant to the terms of the Note, 300% of the
outstanding principal and any interest due amount shall be immediately due. Upon an event of default caused by the Company’s
breach of any other events of default specified in the Note, 150% of the outstanding principal and any interest due amount shall
be immediately due.
HEALTHLYNKED
CORPORATION
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2018 AND 2017
NOTE
9 – CONVERTIBLE NOTES PAYABLE (CONTINUED)
The
fair value of the ECF of the $63k Note II was calculated using the Black-Scholes pricing model at $90,390, with the following
assumptions: risk-free interest rate of 2.27%, expected life of 0.99 years, volatility of 279.53%, and expected dividend yield
of zero. Because the fair value of the ECF exceeded the net proceeds, a charge was recorded to “Financing cost” for
the excess of the fair value of the fair value of the ECF of $90,390 over the net proceeds from the note of $60,000, for a net
charge of $30,390. The ECF qualifies for derivative accounting and bifurcation under ASC 815, “Derivatives and Hedging.”
The final allocation of the proceeds at inception was as follows:
Embedded conversion feature
|
|
$
|
90,390
|
|
Original issue discount and fees
|
|
|
3,000
|
|
Financing cost
|
|
|
(30,390
|
)
|
Convertible note
|
|
|
---
|
|
|
|
|
|
|
Gross proceeds
|
|
$
|
63,000
|
|
The
discount resulting from the original issue discount and embedded conversion feature was being amortized over the life of the note,
which was schedule to mature on May 7, 2019. Amortization expense related to the discount in the years ended December 31, 2018
and 2017 was $31,240 and $-0-, respectively. During the years ended December 31, 2018 and 2017, the Company recorded interest
expense on this instrument totaling $3,107 and $-0-, respectively.
On
November 5, 2018, the Company prepaid the balance on the $63k Note II, including accrued interest, for a one-time cash payment
of $89,198. The Company recognized a gain on debt extinguishment in the year ended December 31, 2018 in connection with the repayment,
as follows:
Face value of convertible note payable retired
|
|
$
|
63,000
|
|
Carrying value of derivative financial instruments arising from ECF
|
|
|
81,017
|
|
Accrued interest
|
|
|
3,107
|
|
Less cash repayment
|
|
|
(89,198
|
)
|
Less carrying value of debt discount at extinguishment
|
|
|
(31,760
|
)
|
|
|
|
|
|
Gain on extinguishment of debt
|
|
$
|
26,166
|
|
Convertible
Notes Payable ($78,750) – May 2018
On
May 24, 2018, the Company entered into a securities purchase agreement for the sale of a $78,750 convertible note (the “$78.8k
Note”). The $78.8k Note included $3,750 fees for net proceeds of $75,000. The $78.8k Note has an interest rate of 10% and
a default interest rate of 24% and matures on May 24, 2019. The $78.8k Note may be converted into common stock of the Company
by the holder at any time after the 6-month anniversary of the issuance date, subject to a 4.99% beneficial ownership limitation,
at a conversion price per share equal to a 40% discount to the lowest bid or trading price of the Company’s common stock
during the twenty (20) trading days prior to the conversion date. Upon an event of default caused by the Company’s failure
to deliver shares upon a conversion pursuant to the terms of the Note, the Company would incur a penalty of $250 per day beginning
on the fourth day after the conversion notice, increasing to $500 per day beginning on the tenth day. Upon an event of default
caused by the Company’s failure to maintain a listing for its common stock, the outstanding principal shall increase by
50%. Upon an event of default caused by the Company’s failure to maintain a bid price for its common stock, the outstanding
principal shall increase by 20%. If not paid at maturity, the amount due under the note increases by 10%.
HEALTHLYNKED
CORPORATION
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2018 AND 2017
NOTE
9 – CONVERTIBLE NOTES PAYABLE (CONTINUED)
The
fair value of the ECF of the $63k Note II was calculated using the Black-Scholes pricing model at $116,027, with the following
assumptions: risk-free interest rate of 2.28%, expected life of 1 year, volatility of 285.70%, and expected dividend yield of
zero. Because the fair value of the ECF exceeded the net proceeds from the $63k Note II, a charge was recorded to “Financing
cost” for the excess of the fair value of the fair value of the ECF of $116,027 over the net proceeds from the note of $75,000,
for a net charge of $41,027. The ECF qualifies for derivative accounting and bifurcation under ASC 815, “Derivatives and
Hedging.” The final allocation of the proceeds at inception was as follows:
Embedded conversion feature
|
|
$
|
116,027
|
|
Original issue discount and fees
|
|
|
3,750
|
|
Financing cost
|
|
|
(41,027
|
)
|
Convertible note
|
|
|
---
|
|
|
|
|
|
|
Gross proceeds
|
|
$
|
78,750
|
|
The
discount resulting from the original issue discount and embedded conversion feature was being amortized over the life of the note,
which was schedule to mature on May 24, 2019. Amortization expense related to the discount in the years ended December 31, 2018
and 2017 was $38,836 and $-0-, respectively. During the years ended December 31, 2018 and 2017, the Company recorded interest
expense on this instrument totaling $3,938 and $-0-, respectively.
On
November 20, 2018, the Company prepaid the balance on the $78.8k Note, including accrued interest, for a one-time cash payment
of $104,738. The Company recognized a gain on debt extinguishment in the year ended December 31, 2018 in connection with the repayment,
as follows:
Face value of convertible note payable retired
|
|
$
|
78,750
|
|
Carrying value of derivative financial instruments arising from ECF
|
|
|
100,669
|
|
Accrued interest
|
|
|
3,938
|
|
Less cash repayment
|
|
|
(104,738
|
)
|
Less carrying value of debt discount at extinguishment
|
|
|
(39,914
|
)
|
|
|
|
|
|
Gain on extinguishment of debt
|
|
$
|
38,705
|
|
Convertible
Notes Payable ($103,000) – October 2018
On
October 18, 2018, the Company entered into a securities purchase agreement for the sale of a $103,000 convertible note (the “$103k
Note I”). The $103k Note I included $3,000 fees for net proceeds of $100,000. The $103k Note I has an interest rate of 10%
and a default interest rate of 22% and matures on July 30, 2019. The $103k Note I may be converted into common stock of the Company
by the holder at any time after the 6-month anniversary of the issuance date, subject to a 4.99% beneficial ownership limitation,
at a conversion price per share equal to a 39% discount to the lowest bid or trading price of the Company’s common stock
during the fifteen (15) trading days prior to the conversion date. Upon an event of default caused by the Company’s failure
to deliver shares upon a conversion pursuant to the terms of the note, 300% of the outstanding principal and any interest due
amount shall be immediately due. Upon an event of default caused by the Company’s breach of any other events of default
specified in the note, 150% of the outstanding principal and any interest due amount shall be immediately due.
HEALTHLYNKED
CORPORATION
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2018 AND 2017
NOTE
9 – CONVERTIBLE NOTES PAYABLE (CONTINUED)
The
fair value of the ECF of the $103k Note I was calculated using the Black-Scholes pricing model at $143,836, with the following
assumptions: risk-free interest rate of 2.67%, expected life of 0.78 years, volatility of 293.97%, and expected dividend yield
of zero. Because the fair value of the ECF exceeded the net proceeds from the $103k Note I, a charge was recorded to “Financing
cost” for the excess of the fair value of the fair value of the ECF of $143,836 over the net proceeds from the note of $100,000,
for a net charge of $43,836. The ECF qualifies for derivative accounting and bifurcation under ASC 815, “Derivatives and
Hedging.” The final allocation of the proceeds at inception was as follows:
Embedded conversion feature
|
|
$
|
143,836
|
|
Original issue discount and fees
|
|
|
3,000
|
|
Financing cost
|
|
|
(43,836
|
)
|
Convertible note
|
|
|
---
|
|
|
|
|
|
|
Gross proceeds
|
|
$
|
103,000
|
|
The
discount resulting from the original issue discount and embedded conversion feature is being amortized over the life of the note,
which is schedule to mature on July 30, 2019. Amortization expense related to the discount in the years ended December 31, 2018
and 2017 was $26,744 and $-0-, respectively. During the years ended December 31, 2018 and 2017, the Company recorded interest
expense on this instrument totaling $2,088 and $-0-, respectively. As of December 31, 2018, the unamortized discount was $76,256
and the note was convertible into 1,250,759 of the Company’s common shares.
Convertible
Notes Payable ($103,000) – November 2018
On
November 12, 2018, the Company entered into a securities purchase agreement for the sale of a $103,000 convertible note (the “$103k
Note II”). The $103k Note II included $3,000 fees for net proceeds of $100,000. The $103k Note II has an interest rate of
10% and a default interest rate of 22% and matures on August 30, 2019. The $103k Note II may be converted into common stock of
the Company by the holder at any time after the 6-month anniversary of the issuance date, subject to a 4.99% beneficial ownership
limitation, at a conversion price per share equal to a 39% discount to the lowest bid or trading price of the Company’s
common stock during the fifteen (15) trading days prior to the conversion date. Upon an event of default caused by the Company’s
failure to deliver shares upon a conversion pursuant to the terms of the note, 300% of the outstanding principal and any interest
due amount shall be immediately due. Upon an event of default caused by the Company’s breach of any other events of default
specified in the note, 150% of the outstanding principal and any interest due amount shall be immediately due.
The fair value of the ECF of the $103k Note II was calculated
using the Black-Scholes pricing model at $142,915, with the following assumptions: risk-free interest rate of 2.73%, expected
life of 0.80 years, volatility of 286.23%, and expected dividend yield of zero. Because the fair value of the ECF exceeded the
net proceeds from the $103k Note II, a charge was recorded to “Financing cost” for the excess of the fair value of
the fair value of the ECF of $142,915 over the net proceeds from the note of $100,000, for a net charge of $42,915. The ECF qualifies
for derivative accounting and bifurcation under ASC 815, “Derivatives and Hedging.” The final allocation of the proceeds
at inception was as follows:
Embedded conversion feature
|
|
$
|
142,915
|
|
Original issue discount and fees
|
|
|
3,000
|
|
Financing cost
|
|
|
(42,915
|
)
|
Convertible note
|
|
|
---
|
|
|
|
|
|
|
Gross proceeds
|
|
$
|
103,000
|
|
The
discount resulting from the original issue discount and embedded conversion feature is being amortized over the life of the note,
which is schedule to mature on August 30, 2019. Amortization expense related to the discount in the years ended December 31, 2018
and 2017 was $17,344 and $-0-, respectively. During the years ended December 31, 2018 and 2017, the Company recorded interest
expense on this instrument totaling $1,383 and $-0-, respectively. As of December 31, 2018, the unamortized discount was $85,656
and the note was convertible into 1,250,759 of the Company’s common shares.
HEALTHLYNKED
CORPORATION
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2018 AND 2017
NOTE
9 – CONVERTIBLE NOTES PAYABLE (CONTINUED)
Convertible
Notes Payable ($153,000) – November 2018
On
November 19, 2018, the Company entered into a securities purchase agreement for the sale of a $153,000 convertible note (the “$153k
Note”). The $153k Note included $3,000 fees for net proceeds of $150,000. The $153k Note has an interest rate of 10% and
a default interest rate of 22% and matures on August 19, 2019. The $153k Note may be converted into common stock of the Company
by the holder at any time after the 6-month anniversary of the issuance date, subject to a 4.99% beneficial ownership limitation,
at a conversion price per share equal to a 25% discount to the lowest bid or trading price of the Company’s common stock
during the ten (10) trading days prior to the conversion date. Upon an event of default caused by the Company’s failure
to deliver shares upon a conversion pursuant to the terms of the note, 300% of the outstanding principal and any interest due
amount shall be immediately due. Upon an event of default caused by the Company’s breach of any other events of default
specified in the note, 150% of the outstanding principal and any interest due amount shall be immediately due.
The fair value of the ECF of the $153k Note was calculated
using the Black-Scholes pricing model at $166,388, with the following assumptions: risk-free interest rate of 2.66%, expected
life of 0.75 years, volatility of 286.07%, and expected dividend yield of zero. In connection with the $153k Note, the Company
also issued to the holder 35,000 shares of Company common stock valued at $5,597, which was recorded to equity. Because the fair
value of the ECF exceeded the net proceeds from the $153k Note, a charge was recorded to “Financing cost” for the
excess of the fair value of the fair value of the ECF of $166,388 and the common shares issued of $5,597 over the net proceeds
from the note of $150,000, for a net charge of $21,974. The ECF qualifies for derivative accounting and bifurcation under ASC
815, “Derivatives and Hedging.” The final allocation of the proceeds at inception was as follows:
Embedded conversion feature
|
|
$
|
166,378
|
|
Original issue discount and fees
|
|
|
3,000
|
|
Fair value of shares recorded to equity
|
|
|
5,597
|
|
Financing cost
|
|
|
(21,975
|
)
|
Convertible note
|
|
|
---
|
|
|
|
|
|
|
Gross proceeds
|
|
$
|
153,000
|
|
The
discount resulting from the original issue discount and embedded conversion feature is being amortized over the life of the note,
which is schedule to mature on August 19, 2019. Amortization expense related to the discount in the years ended December 31, 2018
and 2017 was $23,538 and $-0-, respectively. During the years ended December 31, 2018 and 2017, the Company recorded interest
expense on this instrument totaling $1,761 and $-0-, respectively. As of December 31, 2018, the unamortized discount was $129,462
and the note was convertible into 1,511,111 of the Company’s common shares.
Convertible
Notes Payable ($103,000) – December 2018
On
December 3, 2018, the Company entered into a securities purchase agreement for the sale of a $103,000 convertible note (the “$103k
Note III”). The $103k Note III included $3,000 fees for net proceeds of $100,000. The $103k Note III has an interest rate
of 10% and a default interest rate of 18% and matures on December 3, 2019. The $103k Note III may be converted into common stock
of the Company by the holder at any time after the 6-month anniversary of the issuance date, subject to a 4.99% beneficial ownership
limitation, at a conversion price per share equal to a 39% discount to the lowest bid or trading price of the Company’s
common stock during the fifteen (15) trading days prior to the conversion date. Upon an event of default caused by the Company’s
failure to deliver shares upon a conversion pursuant to the terms of the Note, 200% of the outstanding principal and any interest
due amount shall be immediately due. Upon an event of default caused by the Company’s breach of any other events of default
specified in the Note, 150% of the outstanding principal and any interest due amount shall be immediately due.
HEALTHLYNKED
CORPORATION
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2018 AND 2017
NOTE
9 – CONVERTIBLE NOTES PAYABLE (CONTINUED)
The
fair value of the ECF of the $103k Note III was calculated using the Black-Scholes pricing model at $148,965, with the following
assumptions: risk-free interest rate of 2.72%, expected life of 1.00 year, volatility of 284.75%, and expected dividend yield
of zero. Because the fair value of the ECF exceeded the net proceeds from the $103k Note III, a charge was recorded to “Financing
cost” for the excess of the fair value of the fair value of the ECF of $148,965 over the net proceeds from the note of $100,000,
for a net charge of $48,965. The ECF qualifies for derivative accounting and bifurcation under ASC 815, “Derivatives and
Hedging.” The final allocation of the proceeds at inception was as follows:
Embedded conversion feature
|
|
$
|
148,965
|
|
Original issue discount and fees
|
|
|
3,000
|
|
Financing cost
|
|
|
(48,965
|
)
|
Convertible note
|
|
|
---
|
|
|
|
|
|
|
Gross proceeds
|
|
$
|
103,000
|
|
The
discount resulting from the original issue discount and embedded conversion feature is being amortized over the life of the note,
which is schedule to mature on December 3, 2019. Amortization expense related to the discount in the years ended December 31,
2018 and 2017 was $7,901 and $-0-, respectively. During the years ended December 31, 2018 and 2017, the Company recorded interest
expense on this instrument totaling $790 and $-0-, respectively. As of December 31, 2018, the unamortized discount was $95,099
and the note was convertible into 1,857,923 of the Company’s common shares.
NOTE
10 – DERIVATIVE FINANCIAL INSTRUMENTS
Derivative
financial instruments are comprised of (i) the fair value of conversion features embedded in convertible promissory notes for
which the conversion rate is not fixed, but instead is adjusted based on a discount to the market price of the Company’s
common stock, and (ii) the fair value of certain warrants issued in connection with the July 2018 Private Placement (as defined
in Note 11) for which the exercise price or the number of shares issuable was not fixed upon the issuance of the warrants. The
fair market value of derivative liabilities related to convertible promissory notes was calculated at inception of each convertible
promissory note for which the conversion rate was not fixed and allocated to the components of the respective convertible notes,
with any excess recorded as a charge to “Financing cost.” The fair market value of derivative liabilities related
to warrants issued in the July 2018 Private Placement was initially allocated to the proceeds of the transaction. When the exercise
price and number of shares became fixed in September 2018, the fair value of the warrants was reallocated to shareholders’
equity. Derivative financial instruments are revalued at the end of each period, with the change in value recorded to “Change
in fair value of on derivative financial instruments.”
HEALTHLYNKED
CORPORATION
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2018 AND 2017
NOTE
10 – DERIVATIVE FINANCIAL INSTRUMENTS (CONTINUED)
Derivative
financial instruments recorded in years ended December 31, 2018 include the following:
|
|
|
|
|
|
|
|
Change in
|
|
|
|
|
|
|
|
|
|
Fair Value
|
|
|
Inception of
|
|
|
Fair Value
|
|
|
Extinguishment
|
|
|
Fair Value
|
|
|
|
as of
|
|
|
Derivative
|
|
|
of Derivative
|
|
|
of Derivative
|
|
|
as of
|
|
|
|
December 31,
|
|
|
Financial
|
|
|
Financial
|
|
|
Financial
|
|
|
December 31,
|
|
|
|
2017
|
|
|
Instruments
|
|
|
Instruments
|
|
|
Instruments
|
|
|
2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$53k Note - July 2017
|
|
$
|
48,876
|
|
|
$
|
---
|
|
|
$
|
5,017
|
|
|
$
|
(53,893
|
)
|
|
$
|
---
|
|
$35k Note - September 2017
|
|
|
36,161
|
|
|
|
---
|
|
|
|
1,108
|
|
|
|
(37,269
|
)
|
|
|
---
|
|
$55k Note - September 2017
|
|
|
64,656
|
|
|
|
---
|
|
|
|
5,032
|
|
|
|
(69,688
|
)
|
|
|
---
|
|
$53k Note #2 - October 2017
|
|
|
58,216
|
|
|
|
---
|
|
|
|
(2,427
|
)
|
|
|
(55,789
|
)
|
|
|
---
|
|
$171.5k Note - October 2017
|
|
|
190,580
|
|
|
|
---
|
|
|
|
(108,201
|
)
|
|
|
147,523
|
|
|
|
229,902
|
|
$57.8k Note - January 2018
|
|
|
---
|
|
|
|
82,652
|
|
|
|
(19,103
|
)
|
|
|
(63,549
|
)
|
|
|
---
|
|
$112.8k Note - February 2018
|
|
|
---
|
|
|
|
161,527
|
|
|
|
(20,565
|
)
|
|
|
(140,962
|
)
|
|
|
---
|
|
$83k Note - February 2018
|
|
|
---
|
|
|
|
119,512
|
|
|
|
(12,792
|
)
|
|
|
(106,720
|
)
|
|
|
---
|
|
$105k Note - March 2018
|
|
|
---
|
|
|
|
153,371
|
|
|
|
(17,196
|
)
|
|
|
(136,175
|
)
|
|
|
---
|
|
$63k Note - April 2018
|
|
|
---
|
|
|
|
83,806
|
|
|
|
(11,469
|
)
|
|
|
(72,337
|
)
|
|
|
---
|
|
$57.8k Note - April 2018
|
|
|
---
|
|
|
|
83,397
|
|
|
|
(8,968
|
)
|
|
|
(74,429
|
)
|
|
|
---
|
|
$90k Note - April 2018
|
|
|
---
|
|
|
|
130,136
|
|
|
|
(7,106
|
)
|
|
|
(123,030
|
)
|
|
|
---
|
|
$53k Note II - April 2018
|
|
|
---
|
|
|
|
71,679
|
|
|
|
(12,147
|
)
|
|
|
(59,532
|
)
|
|
|
---
|
|
$68.3k Note - May 2018
|
|
|
---
|
|
|
|
99,422
|
|
|
|
(8,290
|
)
|
|
|
(91,132
|
)
|
|
|
---
|
|
$37k Note - May 2018
|
|
|
---
|
|
|
|
54,086
|
|
|
|
(6,323
|
)
|
|
|
(47,763
|
)
|
|
|
---
|
|
$63k Note II - May 2018
|
|
|
---
|
|
|
|
90,390
|
|
|
|
(9,373
|
)
|
|
|
(81,017
|
)
|
|
|
---
|
|
$78.8k Note - May 2018
|
|
|
---
|
|
|
|
116,027
|
|
|
|
(15,358
|
)
|
|
|
(100,669
|
)
|
|
|
---
|
|
$2M PIPE - July 2018
|
|
|
---
|
|
|
|
2,397,516
|
|
|
|
385,856
|
|
|
|
(2,783,372
|
)
|
|
|
---
|
|
$103k Note I - October 2018
|
|
|
---
|
|
|
|
143,834
|
|
|
|
(12,217
|
)
|
|
|
---
|
|
|
|
131,617
|
|
$103k Note II - November 2018
|
|
|
---
|
|
|
|
142,915
|
|
|
|
(7,070
|
)
|
|
|
---
|
|
|
|
135,845
|
|
$153k Note - November 2018
|
|
|
---
|
|
|
|
166,378
|
|
|
|
(8,952
|
)
|
|
|
---
|
|
|
|
157,426
|
|
$103k Note III - December 2018
|
|
|
---
|
|
|
|
148,965
|
|
|
|
(3,315
|
)
|
|
|
---
|
|
|
|
145,650
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
398,489
|
|
|
$
|
4,245,613
|
|
|
$
|
106,141
|
|
|
$
|
(3,949,803
|
)
|
|
$
|
800,440
|
|
Fair
market value of the derivative financial instruments is measured using the Black-Scholes pricing model with the following assumptions:
risk-free interest rate of 1.21% to 2.73%, expected life of 0.01 to 1.17 years, volatility of 172.67% to 303.06%, and expected
dividend yield of zero. The entire amount of derivative instrument liabilities is classified as current due to the fact that settlement
of the derivative instruments could be required within twelve months of the balance sheet date.
NOTE
11 – SHAREHOLDERS’ DEFICIT
Common
Stock
The
holders of the Company’s common stock are entitled to one vote per share. In addition, the holders of common stock will
be entitled to receive ratably dividends, if any, declared by the board of directors out of legally available funds; however,
the current policy of the board of directors is to retain earnings, if any, for operations and growth. Upon liquidation, dissolution
or winding-up, the holders of common stock will be entitled to share ratably in all assets that are legally available for distribution.
The holders of common stock will have no preemptive, subscription, redemption or conversion rights. The rights, preferences and
privileges of holders of common stock will be subject to, and may be adversely affected by, the rights of the holders of any series
of preferred stock, which may be designated solely by action of the board of directors and issued in the future.
On
January 3, 2018, holders of a majority of the voting power of the outstanding capital stock of the Company, acting by written
consented, authorized and approved an amendment to the Amended and Restated Articles of Incorporation of the Company increasing
the amount of authorized shares of common stock to 500,000,000 shares from 230,000,000 shares. On February 5, 2018, the Company
filed the amendment with the Secretary of State of Nevada to effect the increase.
HEALTHLYNKED
CORPORATION
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2018 AND 2017
NOTE
11 – SHAREHOLDERS’ DEFICIT (CONTINUED)
On
October 3, 2018, the Company bought back 100,000 shares of common stock from a shareholder for a total purchase price of $5,000.
The shares were retired. The selling shareholder was the brother of our CEO Dr. Michael Dent.
Preferred
Stock
The
Company’s board of directors will be authorized, subject to any limitations prescribed by law, without further vote or action
by our stockholders, to issue from time to time shares of preferred stock in one or more series. Each series of preferred stock
will have the number of shares, designations, preferences, voting powers, qualifications and special or relative rights or privileges
as shall be determined by our board of directors, which may include, among others, dividend rights, voting rights, liquidation
preferences, conversion rights and preemptive rights.
On
September 4, 2014, the Company filed with the Nevada Secretary of State a certificate of designation for up to 20,000,000 shares
of Series A Convertible Preferred Stock (the “Series A”). Each share of Series A Convertible Preferred Stock (“Series
A”) issued in 2014 converts into one share of common, has voting rights on an as converted basis, and receives liquidation
preferences. Series A shares are not redeemable and have no dividend rights. No shares of Series A were outstanding as of December
31, 2018 or 2017.
July
2018 Private Placement
On
July 16, 2018, the Company entered into a Securities Purchase Agreement with certain accredited investors pursuant to which the
Company sold the following securities (the “July 2018 Private Placement”): (1) an aggregate of 3,900,000 shares of
the Company’s common stock, par value $0.0001 per share, (2) Pre-Funded Warrants to purchase an aggregate of 4,100,000 shares
of Company common stock with an exercise price of $0.0001 and a five-year life, (3) Series A Warrants to purchase 8,000,000 shares
of Company common stock with an exercise price of $0.25 per share, subject to anti-dilution and other adjustment as described
below, and a term of five years, and (4) Series B Warrants to purchase up to a maximum of 17,000,000 shares of Company common
stock, subject to adjustment as described below, at a fixed exercise price of $0.0001. On July 18, 2018, the Company and the investors
consummated the transaction. The Company received gross proceeds of $1,999,590. After investor legal fees of $15,000 and placement
agent fees of $209,900, net proceeds to the Company were $1,774,690. The Company also issued to the placement agent 640,000 Series
A Warrants with the same terms as the investor’s Series A Warrants and Series B Warrants to purchase up to a maximum of
1,360,000 shares of Company common stock at an exercise price of $0.0001.
The
warrants issued in the transaction were treated as follows at inception: (1) because the Series A Warrants were not settled at
a fixed price, these instruments did not qualify for equity classification and were recorded as derivative financial instruments
with an inception date fair value of $1,984,722, (2) because the Series B Warrants were not settled into a fixed number of shares,
these instruments did not qualify for equity classification and were recorded as derivative financial instruments with an inception
date fair value of $412,794, (3) the Pre-Funded Warrants were settled into a fixed number of shares at a fixed price and were
classified as equity with an inception date fair value of $942,988. The fair value of all warrants at inception was calculated
using the Black-Scholes option pricing model with an assumed risk-free interest rate of 2.77%, expected life of 5 years, volatility
of 288.0%, and expected dividend yield of zero. At inception, the net proceeds of $1,774,690 were classified first to common stock
for the par value of common shares issued and second to derivative liabilities using the fair value of such instruments, with
the excess amount of $623,216 recorded as “Financing cost” on the statement of operations.
In
connection with the transaction, the Company also entered into a Registration Rights Agreement with the investors, pursuant to
which the Company was required to (i) file a registration statement on Form S-1 covering the resale of the securities issued in
the transaction with thirty (30) days of the closing, and (ii) use its best efforts to have the registration statement declared
effective by the U.S. Securities and Exchange Commission (the “SEC”) as soon as practicable, but in no event later
than the earlier of: (x) (i) in the event that the registration statement is not subject to a full review by the SEC, ninety (90)
calendar days after the closing or (ii) in the event that the registration statement is subject to a full review by the SEC, one
hundred twenty (120) calendar days after the closing; and (y) the fifth (5
th
) Business Day (as such term is defined
in the Registration Rights Agreement) after the date the Company is notified (orally or in writing, whichever is earlier) by the
SEC that such registration statement will not be reviewed or will not be subject to further review. If the Company fails to (i)
file the registration statement when required, (ii) have the registration statement declared effective when required or (iii)
maintain the effectiveness of the registration statement, the Company will be required to pay certain liquidated damages to the
Investors.
HEALTHLYNKED
CORPORATION
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2018 AND 2017
NOTE
11 – SHAREHOLDERS’ DEFICIT (CONTINUED)
The
Company filed a registration statement on August 16, 2018 that was declared effective by the SEC on August 22, 2018. Based on
the price of the Company’s common stock during the repricing period that began following the effectiveness of the registration
statement and ended on September 21, 2018 (the “Repricing Date”), the following adjustments were made to the securities
issued in the transaction: (1) the exercise price of the Series A Warrants issued to the investors and the placement agent was
reduced from $0.25 to $0.2233, and (2) the number of Series B Warrants issuable was set at 2,745,757 for the investors and 219,660
for the placement agent. At the Repricing Date, the exercise price of the Series A Warrants and the number of shares issuable
pursuant to the Series B Warrants was fixed. Accordingly, the derivative liabilities related to the Series A and Series B Warrants
were revalued as of the Repricing Date at $2,071,680 and $711,692, respectively, using the Black-Scholes option pricing model
with an assumed risk-free interest rate of 2.95%, expected life of 4.82 years, volatility of 298.82%, and expected dividend yield
of zero, and reclassified to equity. The Company recognized a loss on change in fair value of derivative liabilities related to
the Series A and Series B Warrants of $385,856 between the closing date and the Repricing Date.
Other
Private Placements
During
the year ended December 31, 2018, the Company sold 3,534,891 shares of common stock in six separate private placement transactions.
The Company received $417,500 in proceeds from the sales, which were transacted at share prices between $0.085 and $0.35 per share.
In connection with these stock sales, the Company also issued 2,649,798 five-year warrants to purchase shares of common stock
at exercise prices between $0.15 and $0.45 per share.
During
the year ended December 31, 2017, the Company sold 1,461,111 shares of common stock in private placement transactions to 3 investors
and received $288,000 in proceeds from the sales. The shares were issued at a share price between $0.18 and $0.20 per share. In
connection with the stock sales, the Company also issued 959,998 five-year warrants to purchase shares of common stock at an exercise
price of $0.30 per share.
Investment
Agreement Draws
During
the year ended December 31, 2018, the Company issued 2,440,337 common shares pursuant to draws made by the Company under the Investment
Agreement. The Company received an aggregate of $440,523 in net proceeds from the draws.
During
the years ended December 31, 2017, the Company issued 222,588 common shares pursuant to draws made by the Company under the Investment
Agreement. The Company received $27,640 in proceeds from the draws.
Common
Stock Issuable
As
of December 31, 2018 and 2017, the Company was obligated to issue 114,080 and 47,101 shares of common stock, respectively, in
exchange for professional services provided by two third party consultants. During the years ended December 31, 2018 and 2017,
the Company recognized expense related to shares earned by the consultants of $49,556 and $58,265, respectively. During August
2017, 276,850 shares were issued to one of the consultants with a value of $49,996, in satisfaction of shares accrued through
August 25, 2017. During June 2018, 277,147 shares were issued to one of the consultants with a value of $31,688, in satisfaction
of shares accrued through August 25, 2017.
As
of December 31, 2018 and 2017, the Company was obligated to issue -0- and 75,000 shares, respectively, to an employee pursuant
to the EIP.
HEALTHLYNKED
CORPORATION
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2018 AND 2017
NOTE
11 – SHAREHOLDERS’ DEFICIT (CONTINUED)
Stock
Warrants
Transactions
involving our stock warrants during the years ended December 31, 2018 and 2017 are summarized as follows:
|
|
2018
|
|
|
2017
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
Exercise
|
|
|
|
|
|
Exercise
|
|
|
|
Number
|
|
|
Price
|
|
|
Number
|
|
|
Price
|
|
Outstanding at beginning of the period
|
|
|
20,526,387
|
|
|
$
|
0.23
|
|
|
|
10,576,389
|
|
|
$
|
0.08
|
|
Granted during the period
|
|
|
27,635,819
|
|
|
$
|
0.13
|
|
|
|
9,949,998
|
|
|
$
|
0.39
|
|
Exercised during the period
|
|
|
(2,000,744
|
)
|
|
$
|
(0.00
|
)
|
|
|
---
|
|
|
$
|
---
|
|
Terminated during the period
|
|
|
---
|
|
|
$
|
---
|
|
|
|
---
|
|
|
$
|
---
|
|
Outstanding at end of the period
|
|
|
46,161,463
|
|
|
$
|
0.18
|
|
|
|
20,526,387
|
|
|
$
|
0.23
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable at end of the period
|
|
|
46,161,463
|
|
|
$
|
0.18
|
|
|
|
20,526,387
|
|
|
$
|
0.23
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average remaining life
|
|
|
3.8
|
|
|
|
years
|
|
|
|
4.2
|
|
|
|
years
|
|
The
following table summarizes information about the Company’s stock warrants outstanding as of December 31, 2018:
Warrants
Outstanding
|
|
Warrants
Exercisable
|
|
|
|
|
|
|
Weighted-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
Weighted-
|
|
|
|
|
|
Weighted-
|
|
|
|
|
|
|
Remaining
|
|
|
Average
|
|
|
|
|
|
Average
|
|
|
|
Number
|
|
|
Contractual
|
|
|
Exercise
|
|
|
Number
|
|
|
Exercise
|
|
Exercise
Prices
|
|
|
Outstanding
|
|
|
|
Life (years)
|
|
|
|
Price
|
|
|
|
Exercisable
|
|
|
|
Price
|
|
$ 0.0001 to 0.09
|
|
|
20,257,024
|
|
|
|
3.9
|
|
|
$
|
0.06
|
|
|
|
20,257,024
|
|
|
$
|
0.06
|
|
$ 0.10 to 0.24
|
|
|
14,520,441
|
|
|
|
4.0
|
|
|
$
|
0.19
|
|
|
|
14,520,441
|
|
|
$
|
0.19
|
|
$ 0.25 to 0.49
|
|
|
7,693,998
|
|
|
|
3.5
|
|
|
$
|
0.28
|
|
|
|
7,693,998
|
|
|
$
|
0.28
|
|
$ 0.50 to 1.00
|
|
|
3,690,000
|
|
|
|
3.2
|
|
|
$
|
0.65
|
|
|
|
3,690,000
|
|
|
$
|
0.65
|
|
$ 0.05 to 1.00
|
|
|
46,161,463
|
|
|
|
3.8
|
|
|
$
|
0.18
|
|
|
|
46,161,463
|
|
|
$
|
0.18
|
|
During
the year ended December 31, 2018, the Company issued 27,635,819 warrants. The fair value of warrants issued in 2018 was calculated
using the Black-Scholes pricing model with the following assumptions: risk-free interest rate of 2.32% to 2.93%, expected life
of 3.0 to 5.0 years, volatility of 261.18% to 308.60%, and expected dividend yield of zero. During the year ended December 31,
2017, the Company issued 9,949,998 warrants. The fair value of warrants issued in 2017 was calculated using the Black-Scholes
pricing model with the following assumptions: risk-free interest rate of 1.74% to 2.01%, expected life of 5 years, volatility
of 40.00% to 190.86%, and expected dividend yield of zero. The aggregate grant date fair value of warrants issued during the years
ended December 31, 2018 and 2017 was $4,645,46 and $629,299, respectively.
In
June 2018, the Company issued 600,000 five-year warrants with an exercise price of $0.15 to two individuals for consulting services
to be performed between June 6 and December 6, 2018. The fair value of the warrants was $94,844, which is being recognized on
a straight-line basis over the six-month service period. During the year ended December 31, 2018, the Company recognized general
and administrative expense of $94,844, related to these warrants.
In
August 2018, the Company issued 400,000 five-year warrants with an exercise price of $0.35 to a consultant for services performed.
The fair value of the warrants was $145,861, which was recognized at issuance. During the year ended December 31, 2018, the Company
recognized general and administrative expense of $145,861 related to these warrants.
HEALTHLYNKED
CORPORATION
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2018 AND 2017
NOTE
11 – SHAREHOLDERS’ DEFICIT (CONTINUED)
Employee
Equity Incentive Plan
On
January 1, 2016, the Company instituted the EIP for the purpose of having equity awards available to allow for equity participation
by its employees. The EIP allows for the issuance of up to 15,503,680 shares of the Company’s common stock to employees,
which may be issued in the form of stock options, stock appreciation rights, or restricted shares. The EIP is governed by the
Company’s board, or a committee that may be appointed by the board in the future.
The
following table summarizes the status of shares issued and outstanding under the EIP outstanding as of and for the years ended
December 31, 2018 and 2017:
|
|
2018
|
|
|
2017
|
|
Outstanding at beginning of the period
|
|
|
1,498,750
|
|
|
|
1,552,500
|
|
Granted during the period
|
|
|
440,000
|
|
|
|
175,000
|
|
Terminated during the period
|
|
|
(200,000
|
)
|
|
|
(228,750
|
)
|
Outstanding at end of the period
|
|
|
1,738,750
|
|
|
|
1,498,750
|
|
|
|
|
|
|
|
|
|
|
Shares vested at period-end
|
|
|
1,198,750
|
|
|
|
870,000
|
|
Weighted average grant date fair value of shares granted during the period
|
|
$
|
0.30
|
|
|
$
|
0.09
|
|
Aggregate grant date fair value of shares granted during the period
|
|
$
|
107,197
|
|
|
$
|
15,750
|
|
Shares available for grant pursuant to EIP at period-end
|
|
|
10,075,934
|
|
|
|
11,654,934
|
|
Total
stock based compensation recognized for grants under the EIP was $28,678 and $11,153 during the years ended December 31, 2018
and 2017, respectively. Total unrecognized stock compensation related to these grants was $103,452 as of December 31, 2018.
A
summary of the status of non-vested shares issued pursuant to the EIP as of December 31, 2018 is presented below:
|
|
2018
|
|
|
2017
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
Grant Date
|
|
|
|
|
|
Grant Date
|
|
|
|
Shares
|
|
|
Fair Value
|
|
|
Shares
|
|
|
Fair Value
|
|
Nonvested at beginning of period
|
|
|
628,750
|
|
|
$
|
0.05
|
|
|
|
940,000
|
|
|
$
|
0.04
|
|
Granted
|
|
|
440,000
|
|
|
$
|
0.24
|
|
|
|
100,000
|
|
|
$
|
0.09
|
|
Vested
|
|
|
(328,750
|
)
|
|
$
|
0.13
|
|
|
|
(182,500
|
)
|
|
$
|
0.04
|
|
Forfeited
|
|
|
(200,000
|
)
|
|
$
|
0.04
|
|
|
|
(228,750
|
)
|
|
$
|
0.04
|
|
Nonvested at end of period
|
|
|
540,000
|
|
|
$
|
0.16
|
|
|
|
628,750
|
|
|
$
|
0.05
|
|
HEALTHLYNKED
CORPORATION
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2018 AND 2017
NOTE
11 – SHAREHOLDERS’ DEFICIT (CONTINUED)
Employee
Stock Options
The
following table summarizes the status of options outstanding as of and for the years ended of December 31, 2018 and 2017:
|
|
2018
|
|
|
2017
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
Exercise
|
|
|
|
|
|
Exercise
|
|
|
|
Number
|
|
|
Price
|
|
|
Number
|
|
|
Price
|
|
Outstanding at beginning of the period
|
|
|
2,349,996
|
|
|
$
|
0.12
|
|
|
|
2,349,996
|
|
|
$
|
0.12
|
|
Granted during the period
|
|
|
1,383,000
|
|
|
$
|
0.29
|
|
|
|
---
|
|
|
$
|
---
|
|
Exercised during the period
|
|
|
---
|
|
|
$
|
---
|
|
|
|
---
|
|
|
$
|
---
|
|
Forfeited during the period
|
|
|
(25,000
|
)
|
|
$
|
0.15
|
|
|
|
---
|
|
|
$
|
---
|
|
Outstanding at end of the period
|
|
|
3,707,996
|
|
|
$
|
0.18
|
|
|
|
2,349,996
|
|
|
$
|
0.12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options exercisable at period-end
|
|
|
1,375,583
|
|
|
|
|
|
|
|
575,000
|
|
|
|
|
|
Weighted average remaining life (in years)
|
|
|
8.1
|
|
|
|
|
|
|
|
8.6
|
|
|
|
|
|
Weighted average grant date fair value of options granted during the period
|
|
$
|
0.22
|
|
|
|
|
|
|
$
|
---
|
|
|
|
|
|
Options available for grant at period-end
|
|
|
10,075,684
|
|
|
|
|
|
|
|
11,654,934
|
|
|
|
|
|
The
following table summarizes information about the Company’s stock options outstanding as of December 31, 2018:
Options Outstanding
|
|
Options Exercisable
|
|
|
|
|
|
|
Weighted-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
Weighted-
|
|
|
|
|
|
Weighted-
|
|
|
|
|
|
|
Remaining
|
|
|
Average
|
|
|
|
|
|
Average
|
|
|
|
Number
|
|
|
Contractual
|
|
|
Exercise
|
|
|
Number
|
|
|
Exercise
|
|
Exercise Prices
|
|
Outstanding
|
|
|
Life (years)
|
|
|
Price
|
|
|
Exercisable
|
|
|
Price
|
|
$ --- to 0.10
|
|
|
1,733,000
|
|
|
|
7.1
|
|
|
$
|
0.08
|
|
|
|
1,158,000
|
|
|
|
0.08
|
|
$ 0.11 to 0.20
|
|
|
749,996
|
|
|
|
7.9
|
|
|
$
|
0.20
|
|
|
|
139,583
|
|
|
|
0.20
|
|
$ 0.21 to 0.31
|
|
|
1,225,000
|
|
|
|
9.5
|
|
|
$
|
0.31
|
|
|
|
78,000
|
|
|
|
0.31
|
|
$ 0.08 to 0.31
|
|
|
3,707,996
|
|
|
|
8.1
|
|
|
$
|
0.18
|
|
|
|
1,375,583
|
|
|
$
|
0.11
|
|
Total
stock based compensation recognized related to option grants was $73,954 and $9,779 during the years ended December 31, 2018 and
2017, respectively.
A
summary of the status of non-vested options issued pursuant to the EIP as of December 31, 2018 and 2017 is presented below:
|
|
2018
|
|
|
2017
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
Grant Date
|
|
|
|
|
|
Grant Date
|
|
|
|
Shares
|
|
|
Fair Value
|
|
|
Shares
|
|
|
Fair Value
|
|
Nonvested at beginning of period
|
|
|
1,774,996
|
|
|
$
|
0.03
|
|
|
|
2,249,996
|
|
|
$
|
0.03
|
|
Granted
|
|
|
1,383,000
|
|
|
$
|
0.22
|
|
|
|
---
|
|
|
$
|
---
|
|
Vested
|
|
|
(803,583
|
)
|
|
$
|
0.05
|
|
|
|
(475,000
|
)
|
|
$
|
0.03
|
|
Forfeited
|
|
|
(22,000
|
)
|
|
$
|
0.12
|
|
|
|
---
|
|
|
$
|
---
|
|
Nonvested at end of period
|
|
|
2,332,413
|
|
|
$
|
0.13
|
|
|
|
1,774,996
|
|
|
$
|
0.03
|
|
HEALTHLYNKED
CORPORATION
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2018 AND 2017
NOTE
12 – COMMITMENTS AND CONTINGENCIES
Service
contracts
The
Company carries various service contracts on its office buildings & certain copier equipment for repairs, maintenance and
inspections. All contracts are short term and can be cancelled.
Litigation
From
time to time, we may become involved in various lawsuits and legal proceedings, which arise, in the ordinary course of business.
However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time
to time that may harm our business. We are not aware of any such legal proceedings that we believe will have, individually or
in the aggregate, a material adverse effect on our business, financial condition or operating results.
Leases
The
Company has two real estate leases in Naples, Florida. The Company entered into an operating lease for its main office in Naples,
Florida beginning on August 1, 2013 and expiring July 31, 2020. The lease is for a 6901 square-foot space. The base rent for the
first full year of the lease term is $251,287 per annum with increases during the period. The Company entered into another operating
lease in the same building for an additional 361 square feet space for use of the medical equipment for the same period. The base
rent for the first full year of the lease term is $13,140 per annum.
During
2017, the Company entered into an agreement with MOD pursuant to which the Company agreed to pay rent to MOD in the amount of
$2,040 per month for office space in MOD’s facility used by the Company and its employees for the period from January 1,
2017 through July 31, 2018. The agreement terminated on July 31, 2018. During the years ended December 31, 2018 and 2017, the
Company recognized rent expense to MOD in the amount of $30,457 and $-0-, respectively, pursuant to this agreement including $16,177
recognized in 2018 to write of the balance of a prepayment to MOD to be applied toward future rent.
Total
lease expense for the years ended December 31, 2017 and 2016 was $296,075 and $294,745, respectively.
Future
minimum lease payments (excluding real estate taxes and maintenance costs) as of December 31, 2018 are as follows:
|
|
Operating
|
|
|
Capital
|
|
|
Total
|
|
|
|
Leases
|
|
|
Leases
|
|
|
Commitments
|
|
2019
|
|
$
|
273,856
|
|
|
$
|
19,877
|
|
|
$
|
293,733
|
|
2020
|
|
|
162,055
|
|
|
|
3,058
|
|
|
|
165,113
|
|
2021
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
2022
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
2023
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
435,911
|
|
|
$
|
22,935
|
|
|
$
|
458,846
|
|
Employment/Consulting
Agreements
The
Company has employment agreements with each of its four physicians. The agreements generally call for a fixed salary at the beginning
of the contract with a transaction to performance based pay later in the contract. The contracts expire at various times through
2019, with early termination available upon a notice period of 30-90 days during which compensation is paid to the physician but
NWC has no further severance obligation.
On
July 1, 2016, HLYK entered into an employment agreement with Dr. Michael Dent, Chief Executive Officer and a member of the Board
of Directors. Dr. Dent’s employment agreement continues until terminated by Dr. Dent or HLYK. If Dr. Dent’s employment
is terminated by HLYK (unless such termination is “For Cause” as defined in his employment agreement), then upon signing
a general waiver and release, Dr. Dent will be entitled to severance in an amount equal to 12 months of his then-current annual
base salary, as well as the pro-rata portion of any bonus that would be due and payable to him. In the event that Dr. Dent terminates
the employment agreement, he shall be entitled to any accrued but unpaid salary and other benefits up to and including the date
of termination, and the pro-rata portion of any unvested time-based options up until the date of termination.
HEALTHLYNKED
CORPORATION
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2018 AND 2017
NOTE
12 – COMMITMENTS AND CONTINGENCIES (CONTINUED)
On
July 1, 2016, HLYK entered into an agreement with Mr. George O’Leary, the Company’s Chief Financial Officer and a
member of the Board of Directors, extending his prior agreement with the Company. Mr. O’Leary’s employment agreement
continues until terminated by Mr. O’Leary or HLYK. If Mr. O’Leary employment is terminated by HLYK (unless such
termination is “For Cause” as defined in his employment agreement), then upon signing a general waiver and release,
Mr. O’Leary will be entitled to receive his base salary and the Company shall maintain his employee benefits for a period
of twelve (12) months beginning on the date of termination. In the event that Mr. O’Leary terminates the agreement, he shall
be entitled to any accrued by unpaid salary and other benefits up to and including the date of termination. On July 1, 2018, HLYK
and Mr. O’Leary entered into an Extension Letter Agreement pursuant to which Mr. O’Leary was increased to
full time employment (previously half-time) and agreed to extend the term of his employment to September 30, 2022. In addition
to a base salary, the extension provides Mr. O’Leary with certain performance-based cash bonuses, stock grants, and stock
option grants.
NOTE
13 – INCOME TAXES
The
tax reform bill that Congress voted to approve Dec. 20, 2017, also known as the “Tax Cuts and Jobs Act”, made sweeping
modifications to the Internal Revenue Code, including a much lower corporate tax rate, changes to credits and deductions, and
a move to a territorial system for corporations that have overseas earnings. The act replaced the prior-law graduated corporate
tax rate, which taxed income over $10 million at 35%, with a flat rate of 21%. The Company has not reviewed the all of the changes
the “Tax Cuts and Jobs Act” that will apply to the Company, but is reviewing such changes. Due to the continuing loss
position of the Company, management believes such changes should not be material.
The
following is a reconciliation of the statutory federal income tax rate applied to pre-tax accounting net loss compared to the
income taxes in the consolidated statement of operations:
|
|
2018
|
|
|
2017
|
|
|
|
|
|
|
|
|
Pre-tax loss
|
|
$
|
(5,790,835
|
)
|
|
$
|
(2,581,011
|
)
|
Statutory rate - Tax Law Change 2017
|
|
|
21
|
%
|
|
|
21
|
%
|
Income tax benefit at statutory rate
|
|
|
(1,216,075
|
)
|
|
|
(542,012
|
)
|
Permanent and other differences
|
|
|
---
|
|
|
|
---
|
|
|
|
|
|
|
|
|
|
|
Change in valuation allowance
|
|
$
|
(1,216,075
|
)
|
|
$
|
(542,012
|
)
|
As
of December 31, 2018 and 2017, the types of temporary differences between the tax basis of assets and liabilities and their financial
reporting amounts which gave rise to deferred taxes, and their tax effects were as follows:
|
|
2018
|
|
|
2017
|
|
|
|
|
|
|
|
|
Net operating loss carry forwards
|
|
$
|
1,893,245
|
|
|
$
|
576,049
|
|
Stock based compensation expense
|
|
|
-
|
|
|
|
-
|
|
Total deferred tax assets
|
|
|
1,893,245
|
|
|
|
576,049
|
|
Valuation allowance
|
|
|
(1,893,245
|
)
|
|
|
(576,049
|
)
|
|
|
|
|
|
|
|
|
|
Net deferred tax assets
|
|
$
|
-
|
|
|
$
|
-
|
|
Due
to the uncertainty of the utilization and recoverability of the loss carry-forwards and other deferred tax assets, Management
has determined a full valuation allowance for the deferred tax assets, since it is more likely than not that the deferred tax
assets will not be realizable.
HEALTHLYNKED
CORPORATION
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2018 AND 2017
NOTE
13 – INCOME TAXES (CONTINUED)
Prior
to 2014, the Company was an S-Corporation, as defined in the Internal Revenue Code. As an S-Corporation, income/losses were passed
through to the stockholders for each year. During 2014, the Company failed to meet the requirements of an S-Corporation when it
authorized and issued a second class of stock other than common stock. The S-Corporation requirements allow only one class of
stock, among other certain requirements, to maintain S-Corporation status, as defined. The Company upon failing to maintain its
S Corporation status became a C-Corporation during 2014. Prior year losses and up to the date that the Company lost its S-Corporation
status are not available to the Company, since they were passed through to qualified S-Corporation shareholders. The net operating
loss (“NOL”) carryovers presented in this note are estimates based on the losses reported at December 31, 2018, 2017
and 2016. Such NOL carryovers could also be subject to IRC Section 382/383 change of ownership rules, Management has not reviewed
the Company’s ownership changes at the date of this filing. If an ownership change has occurred the entire amount of Deferred
Tax Assets could be limited or possibly eliminated. Based upon Management’s assessment a full valuation allowance has been
placed upon the Net Deferred Tax Assets, since it is more likely than not that such Assets will not be realized. Therefore, no
financial statement benefit has been taken for the Deferred Tax Assets, as of the filing date.
Prior
to September 5, 2014, the date on which NWC and HLYK completed the Restructuring, the Company’s business was comprised of
the operations of NWC, which at the time was an LLC comprised of two members. All income taxes resulting from the operation of
NWC were passed through to the personal income tax returns of the LLC members. Subsequent to September 5, 2014, HLKD reports the
consolidated operations of NWC and HLKD in its tax returns. On a consolidated basis, the Company did not have any tax liability
for 2017 or 2018 due to its pre-tax losses. Such return filings are being reviewed by Management, based upon the Company failing
to meet the S-Corporation status, as defined. The Company believes there would be no tax liability created for the S corporation
failure, since the Company has had losses for the periods presented in this filing.
The
Company has not taken any uncertain tax positions on any of its open income tax returns filed through the period ended December
31, 2018. The Company’s methods of accounting are based on established income tax principles in the Internal Revenue Code
and are reflected within its filed income tax returns on the accrual basis.
The
Company re-assesses the validity of its conclusions regarding uncertain tax positions on a quarterly basis to determine if facts
or circumstances have arisen that might cause the Company to change its judgment regarding the likelihood of a tax position’s
sustainability under audit. The Company has determined that there were no uncertain tax positions for the years ended December
31, 2018 and 2017.
NOTE
14 – SEGMENT REPORTING
The
Company has two reportable segments: NWC and HLYK. NWC is a multi-specialty medical group including OB/GYN (both Obstetrics and
Gynecology), and General Practice. The practice’s office is located in Naples, Florida. HLYK plans to operate an online
personal medical information and record archive system, the “HealthLynked Network”, which will enable patients and
doctors to keep track of medical information via the Internet in a cloud based system. Patients will complete a detailed online
personal medical history including past surgical history, medications, allergies, and family history. Once this information is
entered patients and their treating physicians will be able to update the information as needed to provide a comprehensive medical
history.
The
Company evaluates performance and allocates resources based on profit or loss from operations before income taxes. The accounting
policies of the reportable segments are the same as those described in the summary of significant accounting policies.
HEALTHLYNKED
CORPORATION
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2018 AND 2017
NOTE
14 – SEGMENT REPORTING (CONTINUED)
Segment
information for the years ended December 31, 2018 and 2017 was as follows:
|
|
Year Ended December 31, 2018
|
|
|
Year Ended December 31, 2017
|
|
|
|
NWC
|
|
|
HLYK
|
|
|
Total
|
|
|
NWC
|
|
|
HLYK
|
|
|
Total
|
|
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Patient service revenue, net
|
|
$
|
2,259,002
|
|
|
$
|
---
|
|
|
$
|
2,259,002
|
|
|
$
|
2,103,579
|
|
|
$
|
---
|
|
|
$
|
2,103,579
|
|
Medicare incentives
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
Total revenue
|
|
|
2,259,002
|
|
|
|
---
|
|
|
|
2,259,002
|
|
|
|
2,103,579
|
|
|
|
---
|
|
|
|
2,103,579
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and benefits
|
|
|
1,446,243
|
|
|
|
920,339
|
|
|
|
2,366,582
|
|
|
|
1,395,455
|
|
|
|
626,990
|
|
|
|
2,022,445
|
|
General and administrative
|
|
|
903,019
|
|
|
|
1,937,765
|
|
|
|
2,840,784
|
|
|
|
854,080
|
|
|
|
994,786
|
|
|
|
1,848,866
|
|
Depreciation and amortization
|
|
|
21,870
|
|
|
|
1,912
|
|
|
|
23,782
|
|
|
|
22,387
|
|
|
|
1,219
|
|
|
|
23,606
|
|
Total Operating Expenses
|
|
|
2,371,132
|
|
|
|
2,860,016
|
|
|
|
5,231,148
|
|
|
|
2,271,922
|
|
|
|
1,622,995
|
|
|
|
3,894,917
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from operations
|
|
$
|
(112,130
|
)
|
|
$
|
(2,860,016
|
)
|
|
$
|
(2,972,146
|
)
|
|
$
|
(168,343
|
)
|
|
$
|
(1,622,995
|
)
|
|
$
|
(1,791,338
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Segment Information
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
$
|
24,356
|
|
|
$
|
168,753
|
|
|
$
|
193,109
|
|
|
$
|
22,857
|
|
|
$
|
76,811
|
|
|
$
|
99,668
|
|
Loss on extinguishment of debt
|
|
$
|
---
|
|
|
$
|
393,123
|
|
|
$
|
393,123
|
|
|
$
|
---
|
|
|
$
|
290,581
|
|
|
$
|
290,581
|
|
Financing cost
|
|
$
|
---
|
|
|
$
|
1,221,911
|
|
|
$
|
1,221,911
|
|
|
$
|
---
|
|
|
$
|
72,956
|
|
|
$
|
72,956
|
|
Amortization of original issue and debt discounts on convertible notes
|
|
$
|
---
|
|
|
$
|
763,616
|
|
|
$
|
763,616
|
|
|
$
|
---
|
|
|
$
|
330,435
|
|
|
$
|
330,435
|
|
Change in fair value of debt
|
|
$
|
---
|
|
|
$
|
140,789
|
|
|
$
|
140,789
|
|
|
$
|
---
|
|
|
$
|
---
|
|
|
$
|
---
|
|
Change in fair value of derivative financial instruments
|
|
$
|
---
|
|
|
$
|
106,141
|
|
|
$
|
106,141
|
|
|
$
|
---
|
|
|
$
|
(3,967
|
)
|
|
$
|
(3,967
|
)
|
Identifiable assets
|
|
$
|
184,912
|
|
|
$
|
242,451
|
|
|
$
|
427,363
|
|
|
$
|
269,424
|
|
|
$
|
170,359
|
|
|
$
|
439,783
|
|
During
the years ended December 31, 2018 and 2017, HLYK realized revenue of $13,388 and $4,414, respectively, to subscription revenue
billed to and paid for by NWC physicians for access to the HealthLynked Network, which the Company test-launched during the third
quarter of 2017. The revenue for HLYK and related expense for NWC were eliminated on consolidation.
NOTE
15 – SUBSEQUENT EVENTS
On
January 14, 2019, the Company entered into a securities purchase agreement for the sale of a $78,000 convertible note (the “$78k
Note”). The $78k Note included $3,000 fees for net proceeds of $75,000. The $78k Note has an interest rate of 10% and a
default interest rate of 22% and matures on October 14, 2019. The $78k Note may be converted into common stock of the Company
by the holder at any time after the issuance date, subject to a 4.99% beneficial ownership limitation, at a conversion price per
share equal to a 25% discount to the lowest bid or trading price of the Company’s common stock during the ten (10) trading
days prior to the conversion date. Upon an event of default caused by the Company’s failure to deliver shares upon a conversion
pursuant to the terms of the note, 300% of the outstanding principal and any interest due amount shall be immediately due. Upon
an event of default caused by the Company’s breach of any other events of default specified in the note, 150% of the outstanding
principal and any interest due amount shall be immediately due. In connection with the $78k Note, the Company also issued to the
holder 28,000 shares of Company common stock.
On
January 15, 2019, the Company entered into a definitive agreement to acquire Hughes Center for Functional Medicine, P.A. (“HCFM”)
for $750,000 in cash, $750,000 in shares of Company common stock and $500,000 in a three-year performance-based payout. HCFM is
a functional medicine practice focusing on neurodegenerative diseases such as Alzheimer’s, Parkinson’s and Multiple
Sclerosis along with other treatments aimed at improving health and slowing aging, including hormones, thyroid, weight loss, wellness
and prevention.
HEALTHLYNKED
CORPORATION
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2018 AND 2017
NOTE
15 – SUBSEQUENT EVENTS (CONTINUED)
On
January 28, 2019, the Company entered into a consulting agreement with an unrelated third party to provide services in exchange
for 125,000 shares of Company common stock to be issued at the time of the agreement and up to 375,000 upon achievement of future
milestones. During March 2018, the Company issued 250,000 of the shares, including 125,000 due on signing of the agreement and
125,00 upon achievement of the first milestone.
On
February 7, 2019, the holder of the holder of the $171.5k Note converted the entire principal balance of $171,500 into 2,512,821
shares of Company common stock
On
February 13, 2019, the investor in the July 18, 2018 private placement transaction exercised the remaining 2,098,427 of the Pre-Funded
Warrants. We did not receive any proceeds from the transaction.
Between
January 1, 2019 and March 27, 2019, the Company made draws pursuant to the Investment Agreement totaling 1,694,043 shares for
proceeds of $404,394.
During
February and March 2019, the Company sold 1,250,000 shares of common stock in two separate private placement transactions and
received $340,000 in proceeds from the sales. The shares were issued at a share price of $0.30 per share. In connection with the
stock sale, we also issued 566,667 five-year warrants to purchase shares of common stock at an exercise price of $0.40 per share
and 250,000 three-year warrants to purchase shares of common stock at an exercise price of $0.50 per share.