HLYK HealthLynked Corporation (QB)

As filed with the Securities and Exchange Commission on June 17, 2019

Registration No. 333-217309

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

Post-Effective Amendment No. 2

 

FORM S-1

REGISTRATION STATEMENT

UNDER THE SECURITIES ACT OF 1933

 

HealthLynked Corp.

(Exact Name of Registrant as specified in its charter)

 

Nevada		7373		47-1634127
(State or other Jurisdiction of Incorporation or Organization)		(Primary Standard Industrial Classification Code Number)		(I.R.S. Employer Identification No.)

 

1726 Medical Blvd Suite 101

Naples, Florida 34110

Telephone: (239) 513-1992

Facsimile: (239) 513-9022

(Address, including zip code, and telephone number, including area code, of Registrant’s principal executive offices)

 

Michael Dent, M.D.

Chief Executive Officer

1726 Medical Blvd Suite 101

Naples, Florida 34110

Telephone: (239) 513-1992

Facsimile: (239) 513-9022)

(Name, Address, Including Zip Code, and Telephone Number, Including Area Code, of Agent for Service)

 

With copies to:

 

Andrea Cataneo

Sheppard, Mullin, Richter & Hampton LLP

30 Rockefeller Plaza

New York, NY 10012

Telephone: (212) 653-8700

Facsimile: (212) 653-8701

 

Approximate date of commencement of proposed sale to the public:

As soon as practicable after the effective date of this registration statement.

 

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box.  þ

 

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act of 1933 registration statement number of the earlier effective registration statement for the same offering. ☐

 

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

 

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

 

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

 

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

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided to Section 7(a)(2)(B) of the Securities Act. ☐

 

 

CALCULATION OF REGISTRATION FEE

 

Title of Each Class of Securities to be Registered		Amount to be Registered (1)				Proposed Maximum Offering Price per Share				Proposed Maximum Aggregate Offering Price (2)				Amount of Registration Fee
Common Stock, par value $0.0001 per share			21,000,000			$	0.20			$	4,200,000			$	486.78	*

 

(1)	This registration statement shall also cover any additional shares of common stock which become issuable by reason of any stock dividend, stock split, recapitalization or any other similar transaction effected without the receipt of consideration which results in an increase in the number of the registrant’s outstanding shares of common stock.
(2)	Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(o) under the Securities Act of 1933, as amended.
*	Previously paid

   

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.

 

 

 

EXPLANATORY NOTE

 

This Post-Effective Amendment No. 2 (this “Post-Effective Amendment”) to the registration statement on Form S-1 (File No. 333- 217309) (the “Registration Statement”), is being filed pursuant to Section 10(a)(3) of the Securities Act of 1933, as amended (the “Securities Act”) to update the Registration Statement by, among other things, including (i) the audited consolidated financial statements of HealthLynked Corp. (the “Registrant”) as at and for the year ended December 31, 2018 which were filed with the Securities and Exchange Commission (the “Commission”) on April 1, 2019 as part of the Registrant’s Annual Report on Form 10-K , and (ii) the unaudited condensed consolidated financial statements as at and for the three month period ended March 31, 2019.

 

This Post-Effective Amendment covers only the resale, from time to time, of up to 21,000,000 shares of common stock issuable to the Selling Stockholder listed herein under an Investment Agreement by and between the Company and the Selling Stockholder. The Registrant previously paid to the Commission the entire registration fee relating to the shares of common stock that are the subject of this Post-Effective Amendment. The Registrant paid a fee of $486.78 in connection with the registration of 21,000,000 shares of common stock in connection with the Registration Statement.

 

 

CALCULATION OF REGISTRATION FEE

 

Title of Each Class of Securities to be Registered		Amount to be Registered (1)				Proposed Maximum Offering Price per Share				Proposed Maximum Aggregate Offering Price (2)				Amount of Registration Fee
Common Stock, par value $0.0001 per share			21,000,000			$	0.20			$	4,200,000			$	486.78	*

 

(1)	This registration statement shall also cover any additional shares of common stock which become issuable by reason of any stock dividend, stock split, recapitalization or any other similar transaction effected without the receipt of consideration which results in an increase in the number of the registrant’s outstanding shares of common stock.
(2)	Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(o) under the Securities Act of 1933, as amended.
*	Previously paid

   

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.

 

 

The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and we are not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.

 

PRELIMINARY PROSPECTUS

Subject To Completion, Dated June 17, 2019

 

21,000,000 Shares

 

HEALTHLYNKED CORP.

 

Common Stock

 

This prospectus relates to shares of common stock of HealthLynked Corp. that may be sold by the selling stockholder identified in this prospectus. The shares of common stock offered under this prospectus by the selling stockholder are issuable to Iconic Holdings LLC, or Iconic, pursuant to an investment agreement between Iconic and ourselves entered into in July 2016 and amended in March 2017. We are registering the offer and sale of the shares to satisfy registration rights we have granted. We will not receive any of the proceeds from the sale of shares by the selling stockholder.

 

The selling stockholder may sell the shares of common stock described in this prospectus in a number of different ways and at varying prices. We provide more information about how the selling stockholder may sell its shares of common stock in the section titled “Plan of Distribution.” Iconic is an “underwriter” within the meaning of the Securities Act of 1933, as amended, in connection with sales of shares offered pursuant to this prospectus. We will pay the expenses incurred in registering the shares, including legal and accounting fees.

 

Our common stock has been traded on the OTCQB under the symbol “HLYK” since May 10, 2017. The last reported sale price of our common stock on the OTCQB on June 13, 2019 was $0.2499.

 

In addition, we qualify as an “emerging growth company” as defined in Section 2(a)(19) of the Securities Act of 1933 and, as such, are allowed to provide in this prospectus more limited disclosures than an issuer that would not so qualify. Furthermore, for so long as we remain an emerging growth company, we will qualify for certain limited exceptions from investor protection laws such as the Sarbanes Oxley Act of 2002 and the Investor Protection and Securities Reform Act of 2010. Please read “Risk Factors” and “Prospectus Summary—Emerging Growth Company Status.”

 

Investing in our common stock is highly speculative and involves a high degree of risk. You should carefully consider the risks and uncertainties described under the heading “Risk Factors” beginning on page 4 of this prospectus before making a decision to purchase our common stock.

 

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense.

 

The date of this prospectus is              , 2019

 

 

TABLE OF CONTENTS

 

PROSPECTUS SUMMARY	1
SPECIAL NOTE REGARDING FORWARD LOOKING STATEMENTS	18
RISK FACTORS	4
USE OF PROCEEDS	19
MARKET FOR OUR COMMON STOCK AND RELATED STOCKHOLDER MATTERS	19
DIVIDEND POLICY	19
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	20
BUSINESS	35
MANAGEMENT	46
EXECUTIVE COMPENSATION	48
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS	50
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT	52
SELLING STOCKHOLDER	53
DESCRIPTION OF SECURITIES	54
PLAN OF DISTRIBUTION	63
LEGAL MATTERS	64
EXPERTS	64
WHERE YOU CAN FIND ADDITIONAL INFORMATION	65
INDEX TO FINANCIAL STATEMENTS	F-1

 

You should rely only on the information contained in this prospectus. We have not authorized any other person to provide you with different information. If anyone provides you with different or inconsistent information, you should not rely on it. We are not making an offer to sell these securities in any jurisdiction where an offer or sale is not permitted. You should assume that the information appearing in this prospectus is accurate only as of the date on the front cover of this prospectus. Our business, financial condition, results of operations and prospects may have changed since that date.

 

 

RISK FACTORS

 

FINANCIAL AND GENERAL BUSINESS RISKS

   

Our subsidiary the Naples Women’s Center, currently our only source of income, has incurred losses in the past and may not be able to achieve profitability in the future.

 

Even though our NWC subsidiary was established in 1996, it is subject to many of the risks inherent in the practice of medicine. We cannot give any assurance that NWC’s operations will continue as currently intended and no assurance can be given that we can continue to receive reimbursement from third party payers. Further, changes in Healthcare regulations in the coming years may negatively impact our operations. NWC realized segment loss from operations for the years ended December 31, 2017 and 2018 and the three months ended March 31, 2019. During the second half of 2018, we had one physician who did not renew her contract, one leave due to an unexpected disability, and a third leave due to early retirement. Even with these losses, NWC experienced 7% revenue growth in 2018. By the second quarter of 2019, we expect to have all three physicians replaced and then we plan to hire approximately two to five additional new physicians over the next two to five years, which will result in increased costs and expenses, which may result in future operating losses.

 

We may never be able to implement our proposed online personal medical information and archiving system and as such, an investment in us at this stage of our business is extremely risky.

 

The HealthLynked Network was launched in 2018 with positive early results. We have over 200 physicians “in network” and over 475,000 patients. We continually develop additional functionality of the Network. However, we cannot predict the scale of how many physicians and patients will adopt our technology, or even when they do, the timing of such large scale adoption. Further, it is possible that other competitors with greater resources could enter the market and make it more difficult for us to attract or keep customers. Consequently, at this phase of our development, our future is speculative and depends on the proper execution of our business model, including our deployment of the Patient Access Hub.

 

No assurance can be given that we will be able to timely repay the amounts due on convertible notes outstanding.

 

At the present time, no assurance can be given that we will earn sufficient revenues or secure the necessary financing, if needed, to timely pay the amounts owed under convertible notes outstanding. Our convertible notes outstanding issued in 2016 and 2017 with an aggregate face value of $711,000 are secured by substantially all of our assets, including, but not limited to, receivables of NWC, machinery, equipment, contracts rights, and letters of credits. If we fail to timely repay the amounts owed under the these convertible notes, which mature on December 31, 2019, a default may allow the lender under the relevant instruments to accelerate the related debt and to exercise their remedies under these agreements, which will typically include the right to declare the principal amount of that debt, together with accrued and unpaid interest and other related amounts, immediately due and payable, to exercise any remedies the lender may have to foreclose on assets that are subject to liens securing that debt. As of December 31, 2018, we had convertible notes payable with an aggregate face value of $1,394,500 with maturities between July 30, 2019 and December 31, 2019. We expect to repay these obligations from outside funding sources, including but not limited to amounts available upon the exercise of the Put Right granted to us under the Investment Agreement, sales of our equity, loans from related parties and others, or to satisfy convertible notes payable through the issuance of shares upon conversion pursuant to the terms of the respective convertible notes payable. No assurances can be given that we will be able to access sufficient outside capital in a timely fashion in order to repay the convertible notes payable before they mature. In order to access cash available under the Investment Agreement or satisfy the convertible notes payable through the issuance of shares upon conversion, our common stock must be listed on a recognized stock exchange or market and the shares underlying the arrangement must be subject to an effective registration statement. If we are unable to meet these requirements, we will not have access to funds under this arrangement.

 

 

We have substantial future capital needs and our ability to continue as a going concern depends upon our ability to raise additional capital and achieve profitable operations.

 

We currently anticipate that our available cash resources will be sufficient to meet our presently anticipated working capital requirements through the third quarter of 2019. As of December 31, 2018, we had a working capital deficit of $2,983,926 and accumulated deficit $10,501,055. For the year ended December 31, 2018, we had a net loss of $5,790,835 and net cash used by operating activities of $2,356,186. As of March 31, 2019, we had a working capital deficit of $2,778,539 and accumulated deficit $11,561,772. For the three months ended March 31, 2019, we had a net loss of $1,060,717 and net cash used by operating activities of $600,393. We anticipate that we will need an additional $3,500,000 in 2019 to properly execute our business and acquisition plan and service debt maturing in 2019 of which most matures December 31, 2019. We may also need to raise additional funds in order to support more rapid expansion, develop new or enhanced services and products, make acquisitions, hire employees, respond to competitive pressures, acquire technologies or respond to unanticipated requirements. Management’s plans include attempting to improve our profitability and our ability to generate sufficient cash flow from operations to meet our operating needs on a timely basis, obtaining additional working capital funds through equity and debt financing arrangements, and restructuring on-going operations to eliminate inefficiencies to increase our cash balances. However, there can be no assurance that these plans and arrangements will be sufficient to fund our ongoing capital expenditures, working capital, and other requirements. Management intends to make every effort to identify and develop sources of funds. The outcome of these matters cannot be predicted at this time. There can be no assurance that any additional financings will be available to the Company on satisfactory terms and conditions, if at all. If adequate funds are not available on acceptable terms, we may be unable to develop or enhance our services and products, take advantage of future opportunities or respond to competitive pressures or unanticipated requirements, which could have a material adverse effect on our business, financial condition and operating results. Further, we may seek to raise additional funds through the issuance of equity securities, in which case, the percentage ownership of our shareholders will be reduced and holders may experience additional dilution in net book value per share.

 

Our future success depends on our ability to execute our business plan by fully developing our online medical records platform and recruiting physicians and patients to adopt and use the system. However, there is no guarantee that we will be able to successfully implement our business plan.

 

Our operations to date have been limited to the medical services provided by the NWC. We have not yet demonstrated our ability to successfully develop or market the online medical records platform we seek to provide through the HealthLynked Network. We have not entered into any agreements with third party doctors or patients to use our system for their medical records and there is no assurance that we will be able to enter into such agreements in the future.

  

We may not be able to effectively control and manage our growth.

 

Our strategy envisions a period of potentially rapid growth in our physician network over the next five years based on aggressively increasing our marketing efforts. We currently maintain a small in house programming, IT, administrative and sales personnel. The capacity to service the online medical records platform and our expected growth, including growth via acquisition, may impose a significant burden on our future planned administrative and operational resources. The growth of our business may require significant investments of capital and increased demands on our management, workforce and facilities. We will be required to substantially expand our administrative and operational resources and attract, train, manage and retain qualified employees, management and other personnel. Failure to do so, or to satisfy such increased demands would interrupt or have a material adverse effect on our business and results of operations.

 

The departure or loss of Dr. Michael Dent could disrupt our business.

 

During 2018, we depended heavily on the continued efforts of Dr. Michael Dent, Chief Executive Officer and Chairman of the Board, who provided us with a total of $101,450 and $338,470 in working capital during the year ended December 31, 2018 and 2017, respectively. Dr. Dent is also essential to our strategic vision and day-to-day operations and would be difficult to replace. While we have entered into a four-year written employment contract with Dr. Dent effective July 1, 2016, we cannot be certain that Dr. Dent will continue with us for any particular period of time. The departure or loss of Dr. Dent, or the inability to hire and retain a qualified replacement, could negatively impact our ability to manage our business.

 

 

We recently eliminated our direct sales force and moved to a telesales model, which may not be successful.

 

We eliminated our entire sales force in the fourth quarter of 2018 and adopted a telesales model. Although this change reduced our annual burn rate by an estimated $650,000 annually, there is no assurance that our more cost-efficient telesales model will be effective, and this could have a negative effect on the business and its growth.

 

The healthcare industry is highly regulated, and government authorities may determine that we have failed to comply with applicable laws, rules or regulations.

 

The healthcare industry, healthcare information technology, the online medical records platform services that we provide and the physicians’ medical practices we engage in through NWC are subject to extensive and complex federal, state and local laws, rules and regulations, compliance with which imposes substantial costs on us. Of particular importance are the provisions summarized as follows:

 

●

federal laws (including the federal False Claims Act) that prohibit entities and individuals from knowingly or recklessly making claims to Medicaid, Medicare and other government-funded programs that contain false or fraudulent information or from improperly retaining known overpayments;

 

●

a provision of the Social Security Act, commonly referred to as the “anti-kickback” statute, that prohibits the knowing and willful offer, payment, solicitation or receipt of any bribe, kickback, rebate or other remuneration, in cash or in kind, in return for the referral or recommendation of patients for items and services covered, in whole or in part, by federal healthcare programs, such as Medicaid and Medicare;

 

●

a provision of the Social Security Act, commonly referred to as the Stark Law, that, subject to limited exceptions, applies when physicians refer Medicare patients to an entity for the provision of certain “designated health services” if the physician or a member of such physician’s immediate family has a direct or indirect financial relationship (including a compensation arrangement) with the entity;

 

●

similar state law provisions pertaining to anti-kickback, fee splitting, self-referral and false claims issues, which typically are not limited to relationships involving government-funded programs;

 

●

provisions of the federal Health Insurance Portability and Accountability Act of 1996, as amended (“HIPAA”) that prohibit knowingly and willfully executing a scheme or artifice to defraud a healthcare benefit program or falsifying, concealing or covering up a material fact or making any material false, fictitious or fraudulent statement in connection with the delivery of or payment for healthcare benefits, items or services;

 

●

state laws that prohibit general business corporations from practicing medicine, controlling physicians’ medical decisions or engaging in certain practices, such as splitting fees with physicians;

 

●

federal and state healthcare programs may deny our application to become a participating provider that could in turn cause us to not be able to treat those patients or prohibit us from billing for the treatment services provided to such patients;

 

●

federal and state laws that prohibit providers from billing and receiving payment from Medicaid or Medicare for services unless the services are medically necessary, adequately and accurately documented and billed using codes that accurately reflect the type and level of services rendered;

 

●

federal and state laws pertaining to the provision of services by non-physician practitioners, such as advanced nurse practitioners, physician assistants and other clinical professionals, physician supervision of such services and reimbursement requirements that may be dependent on the manner in which the services are provided and documented; and

 

●

federal laws that impose civil administrative sanctions for, among other violations, inappropriate billing of services to federally funded healthcare programs, inappropriately reducing hospital care lengths of stay for such patients, or employing individuals who are excluded from participation in federally funded healthcare programs.

 

 

In addition, we believe that our business, including the business conducted through NWC, will continue to be subject to increasing regulation, the scope and effect of which we cannot predict.

 

We may in the future become the subject of regulatory or other investigations or proceedings, and our interpretations of applicable laws, rules and regulations may be challenged. For example, regulatory authorities or other parties may assert that our arrangements with the physicians using the HealthLynked Network constitute fee splitting and seek to invalidate these arrangements, which could have a material adverse effect on our business, financial condition, results of operations, cash flows and the trading price of our common stock. Regulatory authorities or other parties also could assert that our relationships violate the anti-kickback, fee splitting or self-referral laws and regulations. Such investigations, proceedings and challenges could result in substantial defense costs to us and a diversion of management’s time and attention. In addition, violations of these laws are punishable by monetary fines, civil and criminal penalties, exclusion from participation in government-sponsored healthcare programs, and forfeiture of amounts collected in violation of such laws and regulations, any of which could have a material adverse effect on our overall business, financial condition, results of operations, cash flows and the trading price of our common stock.

 

Federal and state laws that protect the privacy and security of protected health information may increase our costs and limit our ability to collect and use that information and subject us to penalties if we are unable to fully comply with such laws.

 

Numerous federal and state laws and regulations govern the collection, dissemination, use, security and confidentiality of individually identifiable health information. These laws include:

 

●

Provisions of HIPAA that limit how healthcare providers may use and disclose individually identifiable health information, provide certain rights to individuals with respect to that information and impose certain security requirements;

 

●

The Health Information Technology for Economic and Clinical Health Act (“HITECH”), which strengthens and expands the HIPAA Privacy Standards and Security Standards and imposes data breach notification obligations;

 

●

Other federal and state laws restricting the use and protecting the privacy and security of protected health information, many of which are not preempted by HIPAA;

 

●

Federal and state consumer protection laws; and

 

●

Federal and state laws regulating the conduct of research with human subjects.

 

Through the HealthLynked Network, we collect and maintain protected health information in paper and electronic format. New protected health information standards, whether implemented pursuant to HIPAA, HITECH, congressional action or otherwise, could have a significant effect on the manner in which we handle healthcare-related data and communicate with third parties, and compliance with these standards could impose significant costs on us, or limit our ability to offer certain services, thereby negatively impacting the business opportunities available to us.

 

In addition, if we do not comply with existing or new laws and regulations related to protected health information, we could be subject to remedies that include monetary fines, civil or administrative penalties, civil damage awards or criminal sanctions.

 

RISKS RELATED TO THE HEALTHLYNKED NETWORK

 

The market for Internet-based personal medical information and record archiving systems may not develop substantially further or develop more slowly than we expect, harming the growth of our business.

 

It is uncertain whether personal medical information and record archiving systems will achieve and sustain the high levels of demand and market acceptance we anticipate. Further, even though we expect NWC patients and physicians to use the HealthLynked Network, our success will depend, to a substantial extent, on the willingness of unaffiliated patients, physicians and hospitals to use our services. Some patients, physicians and hospitals may be reluctant or unwilling to use our services, because they may have concerns regarding the risks associated with the security and reliability, among other things, of the technology model associated with these services. If our target users do not believe our systems are secure and reliable, then the market for these services may not expand as much or develop as quickly as we expect, either of which would significantly adversely affect our business, financial condition, or operating results.

 

 

If we do not continue to innovate and provide services that are useful to our target users, we may not remain competitive, and our revenues and operating results could suffer.

 

Our success depends on our ability to keep pace with technological developments, satisfy increasingly sophisticated client requirements, and obtain market acceptance. Our competitors are constantly developing products and services that may become more efficient or appealing to our clients and users. As a result, we will be required to invest significant resources in research and development in order to enhance our existing services and introduce new high-quality services that clients and users will want, while offering these services at competitive prices.

 

If we are unable to predict user preferences or industry changes, or if we are unable to modify our services on a timely or cost-effective basis, we may lose clients and target users. Our operating results would also suffer if our innovations are not responsive to the needs of our clients and users, are not appropriately timed with market opportunity, or are not effectively brought to market. As technology continues to develop, our competitors may be able to offer results that are, or that are perceived to be, substantially similar to or better than those generated by our services. This may force us to compete on additional service attributes and to expend significant resources in order to remain competitive.

 

Failure to manage our rapid growth effectively could increase our expenses, decrease our revenue, and prevent us from implementing our business strategy.

 

To manage our anticipated future growth effectively, we will need to enhance our information technology infrastructure and financial and accounting systems and controls, as well as manage expanded operations in geographically distributed locations. We also must engage and retain a significant number of qualified professional services personnel, software engineers, technical personnel, and management personnel. Failure to manage our rapid growth effectively could lead us to over-invest or under-invest in technology and operations; result in weaknesses in our infrastructure, systems, or controls; give rise to operational mistakes, losses, or loss of productivity or business opportunities; reduce client or user satisfaction; limit our ability to respond to competitive pressures; and could also result in loss of employees and reduced productivity of remaining employees. Our growth could require significant capital expenditures and may divert financial resources and management attention from other projects, such as the development of new or enhanced services. If our management is unable to effectively manage our growth, our expenses may increase more than expected, our revenue could decline or may grow more slowly than expected, and we may be unable to implement our business strategy.

 

We may be unable to adequately protect, and we may incur significant costs in enforcing, our intellectual property and other proprietary rights.

 

Our success depends in part on our ability to enforce our intellectual property and other proprietary rights. We expect to rely upon a combination of copyright, trademark, trade secret, and unfair competition laws, as well as license and access agreements and other contractual provisions, to protect these rights.

 

Our attempts to protect our intellectual property through copyright, patent, and trademark registration may be challenged by others or invalidated through administrative process or litigation. While we have submitted the application for our first provisional patent for our Patient Access Hub and intend to submit other patent applications covering our integrated technology during 2019, the scope of issued patents, if any, may be insufficient to prevent competitors from providing products and services similar to ours, our patents may be successfully challenged, and we may not be able to obtain additional meaningful patent protection in the future. There can be no assurance that our patent registration efforts will be successful.

 

 

Our expected agreements with clients, users, vendors and strategic partners will limit their use of, and allow us to retain our rights in, our intellectual property and proprietary information. Further, we anticipate that these agreements will grant us ownership of intellectual property created in the performance of those agreements to the extent that it relates to the provision of our services. In addition, we require certain of our employees and consultants to enter into confidentiality, non-competition, and assignment of inventions agreements. We also require certain of our vendors and strategic partners to agree to contract provisions regarding confidentiality and non-competition. However, no assurance can be given that these agreements will not be breached, and we may not have adequate remedies for any such breach. Further, no assurance can be given that these agreements will be effective in preventing the unauthorized access to, or use of, our proprietary information or the reverse engineering of our technology. Agreement terms that address non-competition are difficult to enforce in many jurisdictions and may not be enforceable in any particular case. In any event, these agreements do not prevent our competitors from independently developing technology or authoring clinical information that is substantially equivalent or superior to our technology or the information we distribute.

 

To the extent that our intellectual property and other proprietary rights are not adequately protected, third parties might gain access to our proprietary information, develop and market products or services similar to ours, or use trademarks similar to ours, each of which could materially harm our business. Existing U.S. federal and state intellectual property laws offer only limited protection. In addition, if we resort to legal proceedings to enforce our intellectual property rights or to determine the validity and scope of the intellectual property or other proprietary rights of others, the proceedings could be burdensome and expensive, even if we were to prevail. Any litigation that may be necessary in the future could result in substantial costs and diversion of resources and could have a material adverse effect on our business, operating results, or financial condition.

 

In addition, our platforms incorporate “open source” software components that are licensed to us under various public domain licenses. While we believe that we have complied with our obligations under the various applicable licenses for open source software that we use, open source license terms are often ambiguous, and there is little or no legal precedent governing the interpretation of many of the terms of certain of these licenses. Therefore, the potential impact of such terms on our business is somewhat unknown. For example, some open source licenses require that those using the associated code disclose modifications made to that code and such modifications be licensed to third parties at no cost. We monitor our use of open source software in an effort to avoid uses in a manner that would require us to disclose or grant licenses under our proprietary source code. However, there can be no assurance that such efforts will be successful, and such use could inadvertently occur.

 

We may be sued by third parties for alleged infringement of their proprietary rights.

 

The software and Internet industries are characterized by the existence of a large number of patents, trademarks, and copyrights and by frequent litigation based on allegations of infringement or other violations of intellectual property rights. We may receive in the future communications from third parties claiming that we, our technology, or components thereof, infringe on the intellectual property rights of others. We may not be able to withstand such third-party claims against our technology, and we could lose the right to use third-party technologies that are the subject of such claims. Any intellectual property claims, whether with or without merit, could be time-consuming and expensive to resolve, divert management attention from executing our business plan, and require us to pay monetary damages or enter into royalty or licensing agreements. Although we intend that many of our third-party service providers will be obligated to indemnify us if their products infringe the rights of others, such indemnification may not be effective or adequate to protect us or the indemnifying party may be unable to uphold its contractual obligations.

 

Moreover, any settlement or adverse judgment resulting from such a claim could require us to pay substantial amounts of money or obtain a license to continue to use the technology or information that is the subject of the claim, or otherwise restrict or prohibit our use of the technology or information. There can be no assurance that we would be able to obtain a license on commercially reasonable terms, if at all, from third parties asserting an infringement claim; that we would be able to develop alternative technology on a timely basis, if at all; that we would be able to obtain a license to use a suitable alternative technology or information to permit us to continue offering, and our clients to continue using, our affected services; or that we would not need to change our product and design plans, which could require us to redesign affected products or services or delay new offerings. Accordingly, an adverse determination could prevent us from implementing our strategy or offering our services and products, as currently contemplated.

 

 

We may not be able to properly safeguard the information on the HealthLynked Network.

 

Information security risks have generally increased in recent years because of new technologies and the increased activities of perpetrators of cyber-attacks resulting in the theft of protected health, business or financial information. A failure in, or a breach of our information systems as a result of cyber-attacks could disrupt our business, result in the release or misuse of confidential or proprietary information, damage our reputation, and increase our administrative expenses. Although we plan to have robust information security procedures and other safeguards in place, as cyber threats continue to evolve, we may be required to expend additional resources to continue to enhance our information security measures or to investigate and remediate any information security vulnerabilities. Any of these disruptions or breaches of security could have a material adverse effect on our business, financial condition and results of operations.

 

Our employees may not take all appropriate measures to secure and protect confidential information in their possession.

 

Each of our employees is advised that they are responsible for the security of the information in our systems and to ensure that private information is kept confidential. Should an employee not follow appropriate security measures, including those that have been put in place to prevent cyber threats or attacks, the improper release of protected health information could result. The release of such information could have a material adverse effect our reputation and our business, financial condition, results of operations and cash flows.

 

RISKS RELATED TO THE PROVISION OF MEDICAL SERVICES BY NWC

 

Any state budgetary constraints could have an adverse effect on our reimbursement from Medicaid programs .

 

As a result of slow economic growth and volatile economic conditions, many states are continuing to collect less revenue than they did in prior years and as a consequence are facing budget shortfalls and underfunded pension and other obligations. Although the shortfalls for the more recent budgetary years have declined, they are still significant by historical standards. The financial condition in Florida or other states in which we may in the future could lead to reduced or delayed funding for Medicaid programs and, in turn, reduced or delayed reimbursement for physician services, which could adversely affect our results of operations, cash flows and financial condition.

 

The Affordable Care Act may have a significant effect on our business.

 

The Affordable Care Act contains a number of provisions that could affect us over the next several years. These provisions include the establishment of health insurance exchanges to facilitate the purchase of qualified health plans. Other provisions contain changes to healthcare fraud and abuse laws and expand the scope of the FCA.

 

The Affordable Care Act contains numerous other measures that could affect us. For example, payment modifiers are being developed that will differentiate payments to physicians under federal healthcare programs based on quality and cost of care. In addition, other provisions authorize voluntary demonstration projects relating to the bundling of payments for episodes of hospital care and the sharing of cost savings achieved under the Medicare program.

 

The Centers for Medicare and Medicaid Services (“CMS”) issued a final rule under the Affordable Care Act that is intended to allow physicians, hospitals and other health care providers to coordinate care for Medicare beneficiaries through Accountable Care Organizations (“ACOs”). ACOs are entities consisting of healthcare providers and suppliers organized to deliver services to Medicare beneficiaries and eligible to receive a share of any cost savings the entity can achieve by delivering services to those beneficiaries at a cost below a set baseline and based upon established quality of care standards. We will continue to evaluate the impact of the ACO regulations on our business and operations.

 

The Affordable Care Act also allows states to expand their Medicaid programs through an increase in the Medicaid eligibility income limit from a state’s current eligibility levels to 133% of the federal poverty level. It remains unclear to what extent states will expand their Medicaid programs by raising the income limit to 133% of the federal poverty level.

 

 

The Affordable Care Act also remains subject to continuing legislative scrutiny, including efforts by Congress to further amend or repeal a number of its provisions as well as administrative actions delaying the effectiveness of key provisions. As a result, we cannot predict with any assurance the ultimate effect of the Affordable Care Act on our Company, nor can we provide any assurance that its provisions will not have a material adverse effect on our business, financial condition, results of operations or cash flows.

 

Government-funded programs or private insurers may limit, reduce or make retroactive adjustments to reimbursement amounts or rates.

 

A portion of the net patient service revenue derived from services rendered through NWC is from payments made by Medicare and Medicaid and other government-sponsored or funded healthcare programs (the “GHC Programs”). These government-funded programs, as well as private insurers, have taken and may continue to take steps, including a movement toward increased use of managed care organizations, value-based purchasing, and new patient care models to control the cost, eligibility for, use and delivery of healthcare services as a result of budgetary constraints and cost containment pressures due to unfavorable economic conditions, rising healthcare costs and for other reasons. These government-funded programs and private insurers may attempt other measures to control costs, including bundling of services and denial of, or reduction in, reimbursement for certain services and treatments. As a result, payments from government programs or private payors may decrease significantly. Also, any adjustment in Medicare reimbursement rates may have a detrimental impact on our reimbursement rates not only for Medicare patients, but also because Medicaid and other third-party payors often base their reimbursement rates on a percentage of Medicare rates. Our business may also be materially affected by limitations on, or reductions in, reimbursement amounts or rates or elimination of coverage for certain individuals or treatments. Moreover, because government-funded programs generally provide for reimbursements on a fee-schedule basis rather than on a charge-related basis, we generally cannot increase our revenues from these programs by increasing the amount we charge for services rendered by NWC’s physicians. To the extent our costs increase, we may not be able to recover our increased costs from these programs, and cost containment measures and market changes in non-government-funded insurance plans have generally restricted our ability to recover, or shift to non-governmental payors, these increased costs. In addition, funds we receive from third-party payors are subject to audit with respect to the proper billing for physician and ancillary services and, accordingly, our revenue from these programs may be adjusted retroactively. Any retroactive adjustments to our reimbursement amounts could have a material effect on our financial condition, results of operations, cash flows and the trading price of our common stock.

 

Government-funded programs or private insurers may limit, reduce or make retroactive adjustments to reimbursement amounts or rates.

 

A portion of the net patient service revenue derived from services rendered through NWC is from payments made by Medicare and Medicaid and other government-sponsored or funded healthcare programs (the “GHC Programs”). These government-funded programs, as well as private insurers, have taken and may continue to take steps, including a movement toward increased use of managed care organizations, value-based purchasing, and new patient care models to control the cost, eligibility for, use and delivery of healthcare services as a result of budgetary constraints and cost containment pressures due to unfavorable economic conditions, rising healthcare costs and for other reasons. These government-funded programs and private insurers may attempt other measures to control costs, including bundling of services and denial of, or reduction in, reimbursement for certain services and treatments. As a result, payments from government programs or private payors may decrease significantly. Also, any adjustment in Medicare reimbursement rates may have a detrimental impact on our reimbursement rates not only for Medicare patients, but also because Medicaid and other third-party payors often base their reimbursement rates on a percentage of Medicare rates. Our business may also be materially affected by limitations on, or reductions in, reimbursement amounts or rates or elimination of coverage for certain individuals or treatments. Moreover, because government-funded programs generally provide for reimbursements on a fee-schedule basis rather than on a charge-related basis, we generally cannot increase our revenues from these programs by increasing the amount we charge for services rendered by NWC’s physicians. To the extent our costs increase, we may not be able to recover our increased costs from these programs, and cost containment measures and market changes in non-government-funded insurance plans have generally restricted our ability to recover, or shift to non-governmental payors, these increased costs. In addition, funds we receive from third-party payors are subject to audit with respect to the proper billing for physician and ancillary services and, accordingly, our revenue from these programs may be adjusted retroactively. Any retroactive adjustments to our reimbursement amounts could have a material effect on our financial condition, results of operations, cash flows and the trading price of our common stock.

 

 

We may become subject to billing investigations by federal and state government authorities.

 

Federal and state laws, rules and regulations impose substantial penalties, including criminal and civil fines, exclusion from participation in government healthcare programs and imprisonment, on entities or individuals (including any individual corporate officers or physicians deemed responsible) that fraudulently or wrongfully bill government-funded programs or other third-party payors for healthcare services. CMS issued a final rule requiring states to implement a Medicaid Recovery Audit Contractor (“RAC”) program effective January 1, 2012. States are required to contract with one or more eligible Medicaid RACs to review Medicaid claims for any overpayments or underpayments, and to recoup overpayments from providers on behalf of the state. In addition, federal laws, along with a growing number of state laws, allow a private person to bring a civil action in the name of the government for false billing violations. We believe that audits, inquiries and investigations from government agencies will occur from time to time in the ordinary course of NWC’s operations, which could result in substantial defense costs to us and a diversion of management’s time and attention. We cannot predict whether any future audits, inquiries or investigations, or the public disclosure of such matters, would have a material adverse effect on our business, financial condition, results of operations, cash flows and the trading price of our common stock.

  

We may not appropriately record or document the services provided by our physicians.

 

We must appropriately record and document the services our doctors provide to seek reimbursement for their services from third-party payors. If our physicians do not appropriately document, or where applicable, code for their services, we could be subjected to administrative, regulatory, civil, or criminal investigations or sanctions and our business, financial condition, results of operations and cash flows could be adversely affected.

 

We may not be able to successfully recruit and retain qualified physicians, who are key to NWC’s revenues and billing.

 

During the second half of 2018, we had one physician who did not renew her contract, one leave due to an unexpected disability, and a third leave due to early retirement. Although, we expect to have these three physicians replaced by the second quarter of 2019, this physician turnover negatively impacted our third and fourth quarter 2018 revenues. As part of our business plan, we may acquire other medical practices as we see fit to further develop, test and deploy the HealthLynked Network into new strategic regional areas throughout the country. We compete with many types of healthcare providers, including teaching, research and government institutions, hospitals and health systems and other practice groups, for the services of qualified doctors. We may not be able to continue to recruit new physicians or renew contracts with existing physicians on acceptable terms. If we do not do so, our ability to service execute our business plan may be adversely affected.

 

A significant number of NWC physicians could leave our practice and we may be unable to enforce the non-competition covenants of departed employees.

 

We have entered into employment agreements with the current NWC physicians. Certain of our employment agreements can be terminated without cause by any party upon prior written notice. In addition, substantially all of our physicians have agreed not to compete with us within a specified geographic area for a certain period after termination of employment. The law governing non-compete agreements and other forms of restrictive covenants varies from state to state. Although we believe that the non-competition and other restrictive covenants applicable to our affiliated physicians are reasonable in scope and duration and therefore enforceable under applicable state law, courts and arbitrators in some states are reluctant to strictly enforce non-compete agreements and restrictive covenants against physicians. Our physicians may leave our practices for a variety of reasons, including providing services for other types of healthcare providers, such as teaching, research and government institutions, hospitals and health systems and other practice groups. If a substantial number of our physicians leave our practices or we are unable to enforce the non-competition covenants in the employment agreements, our business, financial condition, results of operations and cash flows could be materially, and adversely affected. We cannot predict whether a court or arbitration panel would enforce these covenants in any particular case.

 

 

We may be subject to medical malpractice and other lawsuits not covered by insurance.

 

Our business entails an inherent risk of claims of medical malpractice against our affiliated physicians and us. We may also be subject to other lawsuits which may involve large claims and significant defense costs. Although we currently maintain liability insurance coverage intended to cover professional liability and other claims, there can be no assurance that our insurance coverage will be adequate to cover liabilities arising out of claims asserted against us. Liabilities in excess of our insurance coverage, including coverage for professional liability and other claims, could have a material adverse effect on our business, financial condition, results of operations, cash flows and the trading price of our common stock. See “Professional and General Liability Coverage.”

 

We may not be able to collect reimbursements for our services from third-party payors in a timely manner.

 

A significant portion of our net patient service revenue is derived from reimbursements from various third-party payors, including GHC Programs, private insurance plans and managed care plans, for services provided by NWC physicians. We are responsible for submitting reimbursement requests to these payors and collecting the reimbursements, and we assume the financial risks relating to uncollectible and delayed reimbursements. In the current healthcare environment, payors continue their efforts to control expenditures for healthcare, including revisions to coverage and reimbursement policies. Due to the nature of our business and our participation in government-funded and private reimbursement programs, we are involved from time to time in inquiries, reviews, audits and investigations by governmental agencies and private payors of our business practices, including assessments of our compliance with coding, billing and documentation requirements. We may be required to repay these agencies or private payors if a finding is made that we were incorrectly reimbursed, or we may be subjected to pre-payment reviews, which can be time-consuming and result in non-payment or delayed payment for the services we provide. We may also experience difficulties in collecting reimbursements because third-party payors may seek to reduce or delay reimbursements to which we are entitled for services that our affiliated physicians have provided. In addition, GHC Programs may deny our application to become a participating provider that could prevent us from providing services to patients or prohibit us from billing for such services. If we are not reimbursed fully and in a timely manner for such services or there is a finding that we were incorrectly reimbursed, our revenue, cash flows and financial condition could be materially, adversely affected.

 

Certain federal and state laws may limit our effectiveness at collecting monies owed to us from patients.

 

We utilize third parties to collect from patients any co-payments and other payments for services that are provided by NWC physicians. The federal Fair Debt Collection Practices Act restricts the methods that third-party collection companies may use to contact and seek payment from consumer debtors regarding past due accounts. State laws vary with respect to debt collection practices, although most state requirements are similar to those under the Fair Debt Collection Practices Act. The Florida Consumer Collection Practices Act, is broader than the federal legislation, applying the regulations to “creditors” as well as “collectors,” whereas the Fair Debt Collection Practices Act is applicable only to collectors. This prohibits creditors who are attempting to collect their own debts from engaging in behavior prohibited by the Fair Debt Collection Practices Act and Florida Consumer Collection Practices Act. The Act has very specific guidelines regarding which actions debt collectors and creditors may engage in to collect unpaid debt. If our collection practices or those of our collection agencies are inconsistent with these standards, we may be subject to actual damages and penalties. These factors and events could have a material adverse effect on our business, financial condition and results of operations.

 

We may not be able to maintain effective and efficient information systems.

 

The profitability of our business, including the services provided by NWC, is dependent on uninterrupted performance of our information systems. Failure to maintain reliable information systems, disruptions in our existing information systems or the implementation of new systems could cause disruptions in our business operations, including errors and delays in billings and collections, disputes with patients and payors, violations of patient privacy and confidentiality requirements and other regulatory requirements, increased administrative expenses and other adverse consequences.

 

 

RISKS RELATING TO OUR ORGANIZATION

 

Our articles of incorporation authorize our board to create a new series of preferred stock without further approval by our stockholders, which could adversely affect the rights of the holders of our common stock.

 

Our board of directors has the authority to fix and determine the relative rights and preferences of preferred stock. Our board of directors also has the authority to issue preferred stock without further stockholder approval. As a result, our board of directors could authorize the issuance of a series of preferred stock that would grant to holders the preferred right to our assets upon liquidation, the right to receive dividend payments before dividends are distributed to the holders of common stock and the right to the redemption of the shares, together with a premium, prior to the redemption of our common stock. In addition, our board of directors could authorize the issuance of a series of preferred stock that has greater voting power than our common stock or that is convertible into our common stock, which could decrease the relative voting power of our common stock or result in dilution to our existing stockholders.

 

Stockholders’ ability to influence corporate decisions may be limited because Michael Dent, our Chief Executive Officer and Chairman of the Board, currently owns a controlling percentage of our common stock.

 

Currently, Dr. Dent, our Chief Executive Officer and Chairman of the Board, beneficially owns approximately 53.62% of our outstanding common stock. As a result of this stock ownership, Dr. Dent can control all matters submitted to our stockholders for approval, including the election of directors and approval of any merger, consolidation or sale of all or substantially all of our assets. This concentration of voting power could delay or prevent an acquisition of our company on terms that other stockholders may desire. In addition, as the interests of Dr. Dent and our minority stockholders may not always be the same, this large concentration of voting power may lead to stockholder votes that are inconsistent with the best interests of our minority stockholders or the best interest of the Company as a whole.

 

Minority stockholders’ ability to influence corporate decisions may be limited because our Board is made up entirely of non-independent officers of the Company.

 

Currently, Dr. Dent, our Chief Executive Officer and Chairman of the Board, and Mr. George O’Leary, our Chief Financial Officer, comprise our Board of Directors. This concentration of non-independent power could delay or prevent an acquisition of our company on terms that stockholders may desire. In addition, as the interests of Dr. Dent, Mr. O’Leary, and our minority stockholders may not always be aligned, this large concentration of corporate power may lead to Board votes that are inconsistent with the best interests of our stockholders or the best interest of the Company as a whole.

 

If we fail to establish and maintain an effective system of internal control, we may not be able to report our financial results accurately or to prevent fraud. Any inability to report and file our financial results accurately and timely could harm our reputation and adversely impact the trading price of our common stock.

 

Effective internal control is necessary for us to provide reliable financial reports and prevent fraud. If we cannot provide reliable financial reports or prevent fraud, we may not be able to manage our business as effectively as we would if an effective control environment existed, and our business and reputation with investors may be harmed. As a result, our small size and any current internal control deficiencies may adversely affect our financial condition, results of operation and access to capital. We have not performed an in-depth analysis to determine if historical un-discovered failures of internal controls exist, and may in the future discover areas of our internal control that need improvement.

 

We are required to comply with the SEC’s rules implementing Section 302 of the Sarbanes-Oxley Act of 2002, which require our management to certify financial and other information in our quarterly and annual reports and provide an annual management report on the effectiveness of our internal control over financial reporting. However, we will not be required to make our first assessment of our internal control over financial reporting until the year following our first annual report required to be filed with the SEC. To comply with the requirements of being a public company, we will need to implement additional financial and management controls, reporting systems and procedures and hire accounting, finance and legal staff.

 

 

Further, our independent registered public accounting firm is not yet required to formally attest to the effectiveness of our internal controls over financial reporting, and will not be required to do so for as long as we are an “emerging growth company” pursuant to the provisions of the JOBS Act.

 

Public company compliance may make it more difficult to attract and retain officers and directors.

 

The Sarbanes-Oxley Act and rules subsequently implemented by the SEC have various requirements with regard to the corporate governance practices of public companies. As a public company, we expect these rules and regulations to increase our compliance costs and to make certain activities more time consuming and costly. As a public company, we also expect that these rules and regulations may make it more difficult and expensive for us to obtain director and officer liability insurance in the future and we may be required to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. As a result, it may be more difficult for us to attract and retain qualified persons to serve on our board of directors or as executive officers.

 

The public market for our common stock is limited.  Failure to develop or maintain a trading market could negatively affect its value and make it difficult or impossible for you to sell your shares.

 

Our common stock has traded on the OTCQB under the symbol “HLYK” since May 10, 2017.  There is a limited public market for our common stock and a more active public market for our common stock may not develop.  Failure to develop or maintain an active trading market could make it difficult to sell shares or recover any part of an investment in our common shares.  Even if a market for our common stock does develop, the market price of our common stock may be highly volatile.  In addition to the uncertainties relating to future operating performance and the profitability of operations, factors such as variations in interim financial results or various, as yet unpredictable, factors, many of which are beyond our control, may have a negative effect on the market price of our common stock.

 

Our common stock is subject to the “penny stock” rules of the SEC and the trading market in the securities is limited, which makes transactions in our common stock cumbersome and may reduce the value of an investment in our common stock.  

  

Rule 15g-9 under the Exchange Act establishes the definition of a “penny stock,” for the purposes relevant to us, as any equity security that has a market price of less than $5.00 per share or with an exercise price of less than $5.00 per share, subject to certain exceptions.  For any transaction involving a penny stock, unless exempt, the rules require: (a) that a broker or dealer approve a person’s account for transactions in penny stocks; and (b) the broker or dealer receive from the investor a written agreement to the transaction, setting forth the identity and quantity of the penny stock to be purchased.

 

In order to approve a person’s account for transactions in penny stocks, the broker or dealer must: (a) obtain financial information and investment experience objectives of the person and (b) make a reasonable determination that the transactions in penny stocks are suitable for that person and the person has sufficient knowledge and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks.

  

The broker or dealer must also deliver, prior to any transaction in a penny stock, a disclosure schedule prescribed by the SEC relating to the penny stock market, which, in highlight form: (a) sets forth the basis on which the broker or dealer made the suitability determination; and (b) confirms that the broker or dealer received a signed, written agreement from the investor prior to the transaction.  Generally, brokers may be less willing to execute transactions in securities subject to the “penny stock” rules.  This may make it more difficult for investors to dispose of our Common Stock and cause a decline in the market value of our Common Stock.

  

Disclosure also has to be made about the risks of investing in penny stocks in both public offerings and in secondary trading and about the commissions payable to both the broker or dealer and the registered representative, current quotations for the securities and the rights and remedies available to an investor in cases of fraud in penny stock transactions.  Finally, monthly statements have to be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks.

 

 

Drawdowns under the Investment Agreement may cause dilution to existing shareholders.

 

Iconic Holdings, LLC (“Iconic”), an investor, has committed to purchase up to $3,000,000 worth of shares of our common stock pursuant to the terms of an Investment Agreement entered into by and between the Company and Iconic, dated July 11, 2016 (the “Investment Agreement”). From time to time during the term of the Investment Agreement, and at our sole discretion, we may present Iconic with a put notice requiring Iconic to purchase shares of our common stock. The purchase price to be paid by Iconic will be 80% of the lowest volume weighted average price of our common stock during the five consecutive trading days prior to the date on which written notice is sent by us to the investor stating the number of shares that the Company is selling to the investor, subject to certain adjustments. As a result, our existing shareholders will experience immediate dilution upon the purchase of any of the shares by Iconic. The issue and sale of the shares under the Investment Agreement may also have an adverse effect on the market price of the common shares. Iconic may resell some, if not all, of the shares that we issue to it under the Investment Agreement and such sales could cause the market price of the common stock to decline significantly. To the extent of any such decline, any subsequent puts would require us to issue and sell a greater number of shares to Iconic in exchange for each dollar of the put amount. Under these circumstances, the existing shareholders of our company will experience greater dilution. The effect of this dilution may, in turn, cause the price of our common stock to decrease further, both because of the downward pressure on the stock price that would be caused by a large number of sales of our shares into the public market by Iconic, and because our existing stockholders may disagree with a decision to sell shares to Iconic at a time when our stock price is low, and may in response decide to sell additional shares, further decreasing our stock price. If we draw down amounts under the Investment Agreement when our share price is decreasing, we will need to issue more shares to raise the same amount of funding. During the years ended December 31, 2018 and 2017, we issued 2,440,337 and 222,588 shares pursuant to draws under the Investment Agreement, respectively, for gross proceeds of $440,523 and $27,618, respectively. During the three months ended March 31, 2019, we issued 2,128,644 common shares pursuant to draws made by us under the Investment Agreement and received an aggregate of $493,226 in net proceeds.

 

There is no guarantee that we will be able to fully utilize the Investment Agreement, if at all.

 

The purchase price and amount of shares we can sell to Iconic under the Investment Agreement shall depend on our stock price and stock volume, and we cannot guarantee that our stock price and trading volume will be adequate to allow us to raise sufficient funds under the agreement. The purchase price for shares sold to Iconic shall be 80% of the lowest volume weighted average price of our common stock during the five consecutive trading days prior to the date on which written notice is sent by us to the investor, subject to certain discounts and adjustments. The maximum Put Amount that the Company shall be entitled to put to Iconic per any applicable put notice is an amount of shares of common stock up to or equal to 100% of the average of the daily trading volume for the ten consecutive trading days immediately prior to the applicable put notice date, so long as such amount is at least $5,000 and does not exceed $150,000, as calculated by multiplying the Put Amount by the average daily weighted average price of our common stock for the ten consecutive trading days immediately prior to the applicable put notice date. In order to access cash available under the Investment Agreement, our common stock must be listed on a recognized stock exchange or market and the shares underlying the arrangement must be subject to an effective registration statement. We must also have complied with our obligations and otherwise not be in material breach or default of the Convertible Notes and warrants issued to Iconic. If we are unable to meet these requirements, we will not have access to funds under this arrangement. There can be no assurances that we will be able to meet these requirements.

 

Certain restrictions on the extent of puts and the delivery of advance notices may have little, if any, effect on the adverse impact of our issuance of shares in connection with the Investment Agreement and as such, Iconic may sell a large number of shares, resulting in substantial dilution to the value of shares held by existing stockholders.

 

Iconic has agreed, subject to certain exceptions listed in the investment agreement with Iconic, to refrain from holding an amount of shares which would result in Iconic or its affiliates owning more than 9.99% of the then-outstanding shares of our common stock at any one time. These restrictions, however, do not prevent Iconic from selling shares of our common stock received in connection with a put, and then receiving additional shares of our common stock in connection with a subsequent put. In this way, Iconic could sell more than 9.99% of the outstanding common stock in a relatively short time frame while never holding more than 9.99% at one time.

 

 

We may not be able to refinance, extend or repay our substantial indebtedness, which would have a material adverse effect on our financial condition and ability to continue as a going concern.

 

We anticipate that we will need to raise a significant amount of debt or equity capital in the near future in order to repay our outstanding debt obligations when they mature. As of March 31, 2019 and December 31, 2018, we had convertible notes payable with aggregate face value of $1,379,000 and $1,394,500, respectively, with maturities between July 30, 2019 and December 31, 2019. If we are unable to raise sufficient capital to repay these obligations at maturity and we are otherwise unable to extend the maturity dates or refinance these obligations, we would be in default. We cannot provide any assurances that we will be able to raise the necessary amount of capital to repay these obligations or that we will be able to extend the maturity dates or otherwise refinance these obligations. Upon a default, the holder of certain convertible notes payable with aggregate face value of $711,000 would have the right to exercise its rights and remedies to collect, which would include foreclosing on our assets. Accordingly, a default would have a material adverse effect on our business and, if our senior secured lender exercises its rights and remedies, we would likely be forced to seek bankruptcy protection.

 

As an “emerging growth company” under applicable law, we will be subject to lessened disclosure requirements, which could leave our shareholders without information or rights available to shareholders of more mature companies.

 

For as long as we remain an “emerging growth company” as defined in the JOBS Act, we have elected to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies” including, but not limited to:

 

●

not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act;

 

●

being permitted to provide only two years of audited financial statements with correspondingly reduced “Management’s Discussion and Analysis of Financial Condition and Results of Operations” disclosure;

 

●

taking advantage of an extension of time to comply with new or revised financial accounting standards;

 

●

reduced disclosure obligations regarding executive compensation in our periodic reports, proxy statements and registration statements; and

 

●

exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved.

 

We expect to take advantage of these reporting exemptions until we are no longer an “emerging growth company.” Because of these lessened regulatory requirements, our shareholders would be left without information or rights available to shareholders of more mature companies. We cannot predict whether investors will find our common stock less attractive if we rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile.

 

We are also a “smaller reporting company” as defined in Rule 12b-2 of the Exchange Act and have elected to follow certain scaled disclosure requirements available to smaller reporting companies.

  

Because we have elected to use the extended transition period for complying with new or revised accounting standards for an “emerging growth company” our financial statements may not be comparable to companies that comply with public company effective dates.

 

We have elected to use the extended transition period for complying with new or revised accounting standards under Section 102(b)(1) of the JOBS Act. This election allows us to delay the adoption of new or revised accounting standards that have different effective dates for public and private companies until those standards apply to private companies. While we are not currently delaying the implementation of any relevant accounting standards, in the future we may avail ourselves of this right, and as a result of this election, our financial statements may not be comparable to companies that comply with public company effective dates. Because our financial statements may not be comparable to companies that comply with public company effective dates, investors may have difficulty evaluating or comparing our business, performance or prospects in comparison to other public companies, which may have a negative impact on the value and liquidity of our common stock.

 

Our stockholders are subject to significant dilution upon the occurrence of certain events which could result in a decrease in our stock price.

 

As of June 13, 2019, we had approximately 63,071,832 shares of our common stock reserved or designated for future issuance upon the exercise of outstanding options and warrants, and conversion of outstanding convertible debt. Future sales of substantial amounts of our common stock into the public and the issuance of the shares reserved for future issuance, in payment of our debt, and/or upon exercise of outstanding options and warrants, will be dilutive to our existing stockholders and could result in a decrease in our stock price.

 

 

SPECIAL NOTE REGARDING FORWARD LOOKING STATEMENTS

 

This prospectus may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, about the Company and its subsidiaries. These forward-looking statements are intended to be covered by the safe harbor for forward-looking statements provided by the Private Securities Litigation Reform Act of 1995. Forward-looking statements are not statements of historical fact, and can be identified by the use of forward-looking terminology such as “believes,” “expects,” “may,” “will,” “could,” “should,” “projects,” “plans,” “goal,” “targets,” “potential,” “estimates,” “pro forma,” “seeks,” “intends,” or “anticipates” or the negative thereof or comparable terminology. Forward-looking statements include discussions of strategy, financial projections, guidance and estimates (including their underlying assumptions), statements regarding plans, objectives, expectations or consequences of various transactions, and statements about the future performance, operations, products and services of the Company and its subsidiaries. We caution our shareholders and other readers not to place undue reliance on such statements.

 

You should read this prospectus completely and with the understanding that our actual future results may be materially different from what we currently expect. Our business and operations are and will be subject to a variety of risks, uncertainties and other factors. Consequently, actual results and experience may materially differ from those contained in any forward-looking statements. Such risks, uncertainties and other factors that could cause actual results and experience to differ from those projected include, but are not limited to, the risk factors set forth herein under the title “Risk Factors.”

 

You should assume that the information appearing in this prospectus and any document incorporated herein by reference is accurate as of its date only. Because the risk factors referred to above could cause actual results or outcomes to differ materially from those expressed in any forward-looking statements made by us or on our behalf, you should not place undue reliance on any forward-looking statements. Further, any forward-looking statement speaks only as of the date on which the statement is made. New factors emerge from time to time, and it is not possible for us to predict which factors will arise. In addition, we cannot assess the impact of each factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. All written or oral forward-looking statements attributable to us or any person acting on our behalf made after the date of this prospectus are expressly qualified in their entirety by the risk factors and cautionary statements contained in this prospectus. Unless legally required, we do not undertake any obligation to release publicly any revisions to such forward-looking statements to reflect events or circumstances after the date of this prospectus or to reflect the occurrence of unanticipated events.

 

 

USE OF PROCEEDS

 

The selling stockholder will receive all of the proceeds from the sale of 21,000,000 shares offered by it under this prospectus.

 

We expect to receive up to $3,000,000 upon the exercise of the Put Right granted to us under the Investment Agreement, which we expect we would use primarily for working capital purposes such as sales, marketing and product development costs related to the commercialization of the HealthLynked Network, to supplement the operations of NWC, and for overhead costs. In order to access cash available under the Investment Agreement, our common stock must be listed on a recognized stock exchange or market and the shares underlying the arrangement must be subject to an effective registration statement, and we have complied with certain obligations under the Investment Agreement. If we are unable to meet these requirements, we will not have access to funds under this arrangement. There can be no assurances that we will be able to meet these requirements. The purchase price and amount of shares we can sell to Iconic under the Investment Agreement shall depend on our stock price and stock volume, and we cannot guarantee that our stock price and trading volume will be adequate to allow us to raise sufficient funds under the agreement.

 

MARKET FOR OUR COMMON STOCK AND RELATED STOCKHOLDER MATTERS

 

Since May 10, 2017, our common stock has been eligible for quotation and trades on the OTCQB under the symbol “HLYK.”  The last sale price of our common stock on June 13, 2019 was $0.2499. There are 119 shareholders of record of our common stock as of June 13, 2019.

 

DIVIDEND POLICY

 

We have not declared nor paid any cash dividend on our common stock, and we currently intend to retain future earnings, if any, to finance the expansion of our business, and we do not expect to pay any cash dividends in the foreseeable future. The decision whether to pay cash dividends on our common stock will be made by our board of directors, in their discretion, and will depend on our financial condition, results of operations, capital requirements and other factors that our board of directors considers significant.

 

 

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

Forward-Looking Statements

 

All statements contained in this prospectus, other than statements of historical facts, that address future activities, events or developments, are forward-looking statements, including, but not limited to, statements containing the word “believe,” “anticipate,” “expect” and word of similar import. These statements are based on certain assumptions and analyses made by us in light of our experience and our assessment of historical trends, current conditions and expected future developments as well as other factors we believe are appropriate under the circumstances. Although the Company believes that the expectations reflected in such forward-looking statements are reasonable, forward-looking statements are subject to risks and uncertainties that could cause actual results to differ from those projected. The Company cautions investors that any forward-looking statements made by the Company are not guarantees of future performance and that actual results may differ materially from those in the forward-looking statements. Such risks and uncertainties include, without limitation: established competitors who have substantially greater financial resources and operating histories, regulatory delays or denials, ability to compete as a start-up company in a highly competitive market, and access to sources of capital.

 

The following discussion and analysis should be read in conjunction with our financial statements and notes thereto included elsewhere in this prospectus. Except for the historical information contained herein, the discussion in this prospectus contains certain forward-looking statements that involve risks and uncertainties, such as statements of our plans, objectives, expectations and intentions. The cautionary statements made in this prospectus should be read as being applicable to all related forward-looking statements wherever they appear in this prospectus. The Company’s actual results could differ materially from those discussed here.

 

Overview

 

HealthLynked Corp. (the “Company,” “we,” “our, “us” or “HLYK”) was incorporated in the State of Nevada on August 4, 2014. On September 2, 2014, the Company filed Amended and Restated Articles of Incorporation setting the total number of authorized shares at 250,000,000 shares, which included up to 230,000,000 shares of common stock and 20,000,000 shares of “blank check” preferred stock. On February 5, 2018, the Company filed an Amendment to its Amended and Restated Articles of Incorporation with the Secretary of State of Nevada to increase the number of authorized shares of common stock to 500,000,000 shares. The Company also previously had 2,953,840 designated shares of Series A Preferred Stock in 2014, which were converted into the 2,953,840 shares of the Company’s common shares on July 30, 2016.

 

On September 5, 2014, the Company entered into the Share Exchange Agreement with Naples Women’s Center, LLC (“NWC”), a multi-specialty medical group including OB/GYN (both Obstetrics and Gynecology), and general practice located in Naples, Florida, acquiring 100% of the LLC membership interests of NWC in exchange for an aggregate of 50,000,000 shares of the Company’s common stock to the members of NWC.

  

The Company operates online personal medical information and record archive system, the “HealthLynked Network,” which enables patients and doctors to keep track of medical information via the Internet in a cloud based system. Patients complete a detailed online personal medical history including past surgical history, medications, allergies, and family history. Once this information is entered patients and their treating physicians are able to update the information as needed to provide a comprehensive medical history.

 

The Company was formed for the purpose of acquiring NWC, and eventually developing its own online medical information system business as described above. Prior to the share exchange, NWC was an ongoing operation that had been in existence since 1996. NWC has generated revenues since its inception.

 

 

Critical accounting policies and significant judgments and estimates

 

This management’s discussion and analysis of the Company’s financial condition and results of operations is based on the Company’s consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States, or GAAP. The preparation of these consolidated financial statements requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements, as well as the reported expenses incurred during the reporting periods. The Company’s estimates are based on historical experience and on various other factors that the Company believes are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. The Company believes that the accounting policies discussed below are critical to understanding the Company’s historical and future performance, as these policies relate to the more significant areas involving management’s judgments and estimates.

 

Patient Service Revenue

 

Patient service revenue is reported at the amount that reflects the consideration to which the Company expects to be entitled in exchange for providing patient care. These amounts are due from patients and third-party payors (including health insurers and government programs) and includes variable consideration for retroactive revenue adjustments due to settlement of audits, reviews, and investigations. Generally, the Company bills patients and third-party payors within days after the services are performed and/or the patient is discharged from the facility. Revenue is recognized as performance obligations are satisfied.

 

Performance obligations are determined based on the nature of the services provided by the Company. Revenue for performance obligations satisfied over time is recognized based on actual charges incurred in relation to total expected charges. The Company believes that this method provides a faithful depiction of the transfer of services over the term of the performance obligation based on the inputs needed to satisfy the obligation. Revenue for performance obligations satisfied at a point in time is recognized when goods or services are provided and the Company does not believe it is required to provide additional goods or services to the patient.

 

The Company determines the transaction price based on standard charges for goods and services provided, reduced by contractual adjustments provided to third-party payors, discounts provided to uninsured patients in accordance with the Company’s policy, and/or implicit price concessions provided to uninsured patients. The Company determines its estimates of contractual adjustments and discounts based on contractual agreements, its discount policies, and historical experience. The Company determines its estimate of implicit price concessions based on its historical collection experience with this class of patients.

 

Agreements with third-party payors typically provide for payments at amounts less than established charges. A summary of the payment arrangements with major third-party payors follows:

 

●

Medicare:  Certain inpatient acute care services are paid at prospectively determined rates per discharge based on clinical, diagnostic and other factors. Certain services are paid based on cost-reimbursement methodologies subject to certain limits. Physician services are paid based upon established fee schedules. Outpatient services are paid using prospectively determined rates.

 

●

Medicaid:  Reimbursements for Medicaid services are generally paid at prospectively determined rates per discharge, per occasion of service, or per covered member.

 

●

Other:  Payment agreements with certain commercial insurance carriers, health maintenance organizations, and preferred provider organizations provide for payment using prospectively determined rates per discharge, discounts from established charges, and prospectively determined daily rates.

 

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

 

 

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

 

The Company also provides services to uninsured patients, and offers those uninsured patients a discount, either by policy or law, from standard charges. The Company estimates the transaction price for patients with deductibles and coinsurance and from those who are uninsured based on historical experience and current market conditions. The initial estimate of the transaction price is determined by reducing the standard charge by any contractual adjustments, discounts, and implicit price concessions. Subsequent changes to the estimate of the transaction price are generally recorded as adjustments to patient service revenue in the period of the change.

 

Cash and Cash Equivalents

 

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

 

Accounts Receivable

 

Trade receivables are carried at their estimated collectible amounts. Trade credit is generally extended on a short-term basis; thus trade receivables do not bear interest. Trade accounts receivable are periodically evaluated for collectability based on past collectability of the insurance companies, government agencies, and customers’ accounts receivable during the related period which generally approximates 45% of total billings. Trade accounts receivable are recorded at this net amount.

 

Capital Leases

 

Costs associated with capitalized leases are capitalized and depreciated ratably over the term of the related useful life of the asset and/or the capital lease term.

 

Concentrations of Credit Risk

 

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

 

Property and Equipment

 

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

 

The Company examines the possibility of decreases in the value of fixed assets when events or changes in circumstances reflect the fact that their recorded value may not be recoverable. The Company recognizes an impairment loss when the sum of expected undiscounted future cash flows is less than the carrying amount of the asset. The amount of impairment is measured as the difference between the asset’s estimated fair value and its book value.

 

 

Convertible Notes

 

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

 

Derivative Financial Instruments

 

The Company reviews the terms of convertible debt, equity instruments and other financing arrangements to determine whether there are embedded derivative instruments, including embedded conversion options that are required to be bifurcated and accounted for separately as a derivative financial instrument. Also, in connection with the issuance of financing instruments, the Company may issue freestanding options or warrants that may, depending on their terms, be accounted for as derivative instrument liabilities, rather than as equity. Derivative financial instruments are initially measured at their fair value. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported as charges or credits to income. To the extent that the initial fair values of the freestanding and/or bifurcated derivative instrument liabilities exceed the total proceeds received, an immediate charge to income is recognized, in order to initially record the derivative instrument liabilities at their fair value. The discount from the face value of convertible debt instruments resulting from allocating some or all of the proceeds to the derivative instruments is amortized over the life of the instrument through periodic charges to income.

 

The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is reassessed at the end of each reporting period. If reclassification is required, the fair value of the derivative instrument, as of the determination date, is reclassified. Any previous charges or credits to income for changes in the fair value of the derivative instrument are not reversed. Derivative instrument liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement of the derivative instrument could be required within twelve months of the balance sheet date. The Company does not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks.

 

Fair Value of Assets and Liabilities

 

Fair value is the price that would be received from the sale of an asset or paid to transfer a liability (i.e. an exit price) in the principal or most advantageous market in an orderly transaction between market participants. In determining fair value, the accounting standards have established a three-level hierarchy that distinguishes between (i) market data obtained or developed from independent sources (i.e., observable data inputs) and (ii) a reporting entity’s own data and assumptions that market participants would use in pricing an asset or liability (i.e., unobservable data inputs). Financial assets and financial liabilities measured and reported at fair value are classified in one of the following categories, in order of priority of observability and objectivity of pricing inputs:

 

●

Level 1 –  Fair value based on quoted prices in active markets for identical assets or liabilities

 

●

Level 2  – Fair value based on significant directly observable data (other than Level 1 quoted prices) or significant indirectly observable data through corroboration with observable market data. Inputs would normally be (i) quoted prices in active markets for similar assets or liabilities, (ii) quoted prices in inactive markets for identical or similar assets or liabilities or (iii) information derived from or corroborated by observable market data.

 

●

Level 3  – Fair value based on prices or valuation techniques that require significant unobservable data inputs. Inputs would normally be a reporting entity’s own data and judgments about assumptions that market participants would use in pricing the asset or liability

 

 

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

 

Stock-Based Compensation

 

The Company accounts for our stock based compensation under ASC 718 “Compensation – Stock Compensation” using the fair value based method. Under this method, compensation cost is measured at the grant date based on the value of the award and is recognized over the service period, which is usually the vesting period. This guidance establishes standards for the accounting for transactions in which an entity exchanges it equity instruments for goods or services. It also addresses transactions in which an entity incurs liabilities in exchange for goods or services that are based on the fair value of the entity’s equity instruments or that may be settled by the issuance of those equity instruments.

 

The Company uses the fair value method for equity instruments granted to non-employees and use the Black-Scholes model for measuring the fair value of options. The stock based fair value compensation is determined as of the date of the grant or the date at which the performance of the services is completed (measurement date) and is recognized over the vesting periods.

 

Income Taxes

 

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

 

Recurring Fair Value Measurements

 

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

 

Net Income (Loss) per Share 

 

Basic net income (loss) per common share is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding during the period. Outstanding stock options, warrants and other dilutive securities are excluded from the calculation of diluted net loss per common share if inclusion of these securities would be anti-dilutive.

 

 

Common stock awards

 

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

 

Warrants

 

In connection with certain financing, consulting and collaboration arrangements, the Company has issued warrants to purchase shares of its common stock. The outstanding warrants are standalone instruments that are not puttable or mandatorily redeemable by the holder and are classified as equity awards. The Company measures the fair value of the awards using the Black-Scholes option pricing model as of the measurement date. Warrants issued in conjunction with the issuance of common stock are initially recorded at fair value as a reduction in additional paid-in capital of the common stock issued. All other warrants are recorded at fair value as expense over the requisite service period or at the date of issuance, if there is not a service period. Warrants granted in connection with ongoing arrangements are more fully described in Note 11,  Shareholders’ Deficit .

 

Business Segments

 

The Company uses the “management approach” to identify its reportable segments. The management approach designates the internal organization used by management for making operating decisions and assessing performance as the basis for identifying the Company’s reportable segments. Using the management approach, the Company determined that it has one operating segment due to business similarities and similar economic characteristics.

 

Recent Accounting Pronouncements

 

In May 2014, the FASB issued ASU 2014-09,  Revenue from Contracts with Customers — Topic 606 , which supersedes the revenue recognition requirements in FASB ASC 605. The new guidance primarily states that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods and services. In January 2017 and September 2017, the FASB issued several amendments to ASU 2014-09, including updates stemming from SEC Accounting Staff Announcement in July 2017. The amendments and updates included clarification on accounting for principal versus agent considerations (i.e., reporting gross versus net), licenses of intellectual property and identification of performance obligations. These amendments and updates do not change the core principle of the standard, but provide clarity and implementation guidance. The Company adopted this standard on January 1, 2018 and selected the modified retrospective transition method. The Company has modified its accounting policies to reflect the requirements of this standard, however, the planned adoption did not materially impact the Company’s financial statements and related disclosures.

 

In January 2016, the FASB issued ASU No. 2016-01,  Financial Instruments — Overall: Recognition and Measurement of Financial Assets and Financial Liabilities.  The guidance affects the accounting for equity investments, financial liabilities under the fair value option and the presentation and disclosure requirements of financial instruments. The guidance is effective in the first quarter of fiscal 2019. Early adoption is permitted for the accounting guidance on financial liabilities under the fair value option. The Company is currently evaluating the impact of the new guidance on its financial statements.

  

In February 2016, the FASB issued ASU 2016-02,  Leases (Topic 842)  and subsequently amended the guidance relating largely to transition considerations under the standard in January 2017. The objective of this update is to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. This ASU is effective for fiscal years beginning after December 15, 2018, including interim periods within those annual periods and is to be applied utilizing a modified retrospective approach. The Company is currently evaluating the new guidance to determine the impact it may have on its financial statements.

 

 

In August 2016, the FASB issued ASC Update No. 2016-15, (Topic 230) Classification of Certain Cash Receipts and Cash Payments. This ASC update provides specific guidance on the presentation of certain cash flow items where there is currently diversity in practice, including, but not limited to, debt prepayment or debt extinguishment costs, contingent consideration payments made after a business combination, proceeds from the settlement of insurance claims, and distributions received from equity method investees. The updated guidance is effective for interim and annual periods beginning after December 15, 2017, and should be applied retrospectively unless impracticable. The Company implemented this guidance effective January 1, 2018. The adoption of ASC Update No. 2016-15 did not have a significant impact on the Company’s statement of cash flows.

 

In November 2016, the FASB issued ASU No. 2016-18,  Statement of Cash Flows (Topic 230): Restricted Cash . The objective of this ASU is to eliminate the diversity in practice related to the classification of restricted cash or restricted cash equivalents in the statement of cash flows. For public business entities, this ASU is effective for annual and interim reporting periods beginning after December 15, 2017, with early adoption permitted. The amendments in this update should be applied retrospectively to all periods presented. The Company adopted this standard on January 1, 2018 and such adoption did not have a material impact on the Company’s financial statements.

 

In January 2017, the FASB issued ASC Update No. 2017-01, (Topic 805) Business Combinations – Clarifying the Definition of a Business. The amendments in this update provide a more robust framework to use in determining when a set of assets and activities constitute a business. This guidance narrows the definition of a business by providing specific requirements that contribute to the creation of outputs that must be present to be considered a business. The guidance further clarifies the appropriate accounting when substantially all of the fair value of the gross assets acquired (or disposed of) is concentrated in a single identifiable asset or a group of similar identifiable assets is that of an acquisition (disposition) of assets, not a business. This framework will reduce the number of transactions that an entity must further evaluate to determine whether transactions are business combinations or asset acquisitions. The updated guidance is effective for interim and annual periods beginning after December 15, 2017, and should be applied on a prospective basis. Early adoption is permitted only for transactions that have not been reported in financial statements that have been issued. The Company implemented this guidance effective January 1, 2018. The implementation of this guidance did not have an effect on the Company’s financial position or results of operations.

 

In July 2017, the FASB issued ASU No. 2017-11,  Earnings Per Share, Distinguishing Liabilities from Equity and Derivatives and Hedging , which changes the accounting and earnings per share for certain instruments with down round features. The amendments in this ASU should be applied using a cumulative-effect adjustment as of the beginning of the fiscal year or retrospective adjustment to each period presented and is effective for annual periods beginning after December 15, 2018, and interim periods within those periods. The Company is currently evaluating the requirements of this new guidance and has not yet determined its impact on the Company’s financial statements.

 

On December 22, 2017 the SEC staff issued Staff Accounting Bulletin 118 (SAB 118), which provides guidance on accounting for the tax effects of the Tax Cuts and Jobs Act (the TCJA).  SAB 118 provides a measurement period that should not extend beyond one year from the enactment date for companies to complete the accounting under ASC 740. In accordance with SAB 118, a company must reflect the income tax effects of those aspects of the TCJA for which the accounting under ASC 740 is complete. To the extent that a company’s accounting for certain income tax effects of the TCJA is incomplete but for which they are able to determine a reasonable estimate, it must record a provisional amount in the financial statements. Provisional treatment is proper in light of anticipated additional guidance from various taxing authorities, the SEC, the FASB, and even the Joint Committee on Taxation. If a company cannot determine a provisional amount to be included in the financial statements, it should continue to apply ASC 740 on the basis of the provisions of the tax laws that were in effect immediately before the enactment of the TCJA. The Company has applied this guidance to its financial statements.

 

In February 2018, the Financial Accounting Standards Board (“FASB”) issued ASC Update No 2018-02 (Topic 220) Income Statement – Reporting Comprehensive Income: Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income.  This ASC update allows for a reclassification into retained earnings of the stranded tax effects in accumulated other comprehensive income (“AOCI”) resulting from the enactment of the Tax Cuts and Jobs Act (“TCJA”). The updated guidance is effective for interim and annual periods beginning after December 15, 2018.  The Company is evaluating the impact ASU 2018-09 may have on its consolidated financial statements.

 

 

In March 2018, the FASB issued ASU 2018-05, Income Taxes (Topic 740) - Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 118. This standard amends Accounting Standards Codification 740, Income Taxes (ASC 740) to provide guidance on accounting for the tax effects of the Tax Cuts and Jobs Act (the Tax Reform Act) pursuant to Staff Accounting Bulletin No. 118, which allows companies to complete the accounting under ASC 740 within a one-year measurement period from the Tax Act enactment date. This standard did not materially impact the Company’s financial statements and related disclosures.

 

In June 2018, the FASB issued ASU 2018-07, Compensation - Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting, to expand the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from nonemployees and supersedes the guidance in Subtopic 505-50, Equity - Equity-Based Payments to Non-Employees. Under ASU 2018-07, equity-classified nonemployee share-based payment awards are measured at the grant date fair value on the grant date The probability of satisfying performance conditions must be considered for equity-classified nonemployee share-based payment awards with such conditions. ASU 2018-07 is effective for fiscal years beginning after December 15, 2018, with early adoption permitted. The Company is currently evaluating the impact of the new standard on the Company’s Consolidated Financial Statements.

 

In July 2018, the FASB issued ASU 2018-09 to provide clarification and correction of errors to the Codification. The amendments in this update cover multiple Accounting Standards Updates. Some topics in the update may require transition guidance with effective dates for annual periods beginning after December 15, 2018. The Company is evaluating the impact ASU 2018-09 may have on its consolidated financial statements.

 

RESULTS OF OPERATIONS: YEARS ENDED DECEMBER 31, 2018 AND 2017

 

The following table summarizes the changes in our results of operations for the year ended December 31, 2018 compared with the year ended December 31, 2017:

 

		Years Ended December 31,								Change
		2018				2017				Increase (Decrease) in $				Increase (Decrease) in %
Patient service revenue, net		$	2,259,002			$	2,103,579			$	155,423				7	%
Salaries and benefits			2,366,582				2,022,445				344,137				17	%
General and administrative			2,840,784				1,848,866				991,918				54	%
Depreciation and amortization			23,782				23,606				176				1	%
Loss from operations			(2,972,146	)			(1,791,338	)			1,180,808				66	%
Loss on extinguishment of debt			(393,123	)			(290,581	)			102,542				35	%
Change in fair value of debt			(140,789	)			---				140,789				100	%
Financing cost			(1,221,911	)			(72,956	)			1,148,955				1575	%
Amortization of original issue and debt discounts on notes payable and convertible notes			(763,616	)			(330,435	)			433,181				131	%
Change in fair value of derivative financial instruments			(106,141	)			3,967				110,108				2776	%
Interest expense			(193,109	)			(99,668	)			93,441				94	%
Total other expenses			(2,818,689	)			(789,673	)			2,029,016				257	%
Net loss		$	(5,790,835	)		$	(2,581,011	)		$	3,209,824				124	%

 

Patient service revenue increased by $155,423, or 7%, from 2017 to 2018, primarily as a result of a 7% increase in gross billing from existing physicians.

 

 

Salaries and benefits increased by $344,137, or 17%, in 2018 primarily as a result of increased salary expense associated with medical practice production pay, HLYK’s overhead and hiring of the HLYK sales team that was in place for most of 2018.

 

General and administrative costs increased by $991,918, or 54%, in 2018 primarily due to higher stock- and cash-based consulting and professional costs in 2018, as well as higher information technology, sales and promotional costs associated with the rollout of the HealthLynked Network.

 

Depreciation and amortization increased by $176, or 1%, in 2018 primarily as a result of new property and equipment acquisitions in 2017.

  

Loss from operations increased by $1,180,808, or 66%, in 2018 primarily as a result of increased HLYK headcount, higher stock- and cash-based consulting fees and professional costs associated with the rollout of the HealthLynked Network, offset by higher revenue from the medical practice.

 

Loss on extinguishment of debt in 2018 arose from an extinguishment loss in the amount of $348,938 related to the extension of debt issued to Dr. Michael Dent, as well as extinguishment losses totaling $335,951 related to the extension of convertible notes, offset by gains of $291,766 related to the write-off of derivative liabilities associated with nine convertible notes repaid during the period. Loss on extinguishment of debt in 2017 arose from warrants issued in connection with the extension of the maturity date of three convertible notes.

 

Change in fair value of debt of $140,789 in 2018 arose from the treatment of the extensions of the $550k Note, the $50k Note, the $111k Note and certain notes issued to Dr. Michael Dent as extinguishment and reissuance transactions, resulting these notes being carried at fair value. The change in fair value at the end of each reporting period is recorded as “Change in fair value of debt.”

 

Financing cost in 2018 arose from the excess of fair value of derivative instruments over net proceeds received from the July 2018 Private Placement transaction, as well as from the issuance of 16 convertible promissory notes with a floating conversion rate that gave rise to an ECF derivative instrument with a fair value greater than the face value of the notes. Financing cost in 2017 arose from the issuance of three convertible promissory notes with a floating conversion rate that gave rise to an ECF derivative instrument with a fair value greater than the face value of the notes.

 

Amortization of original issue and debt discounts increased by $433,181, or 131%, in 2018 as a result of the amortization of more convertible notes with larger discounts being amortized in 2018.

 

Change in fair value of derivative financial instruments increased by $110,108, or 2,776%, as a result of (i) a loss on the change in fair value of derivative financial instruments in 2018 of $385,856 associated with the revaluation and reclassification to equity of derivatives associated with warrants issued in the July 2018 Private Placement, and (ii) changes in fair value of derivative financial instruments embedded in convertible promissory notes.

 

Interest expense increased by $93,441, or 94%, in 2018 as a result of increased interest on new convertible notes issued in 2018, as well as on new notes issued to Dr. Dent during the second half of 2017 and the first quarter of 2018.

 

Total other expenses increased by $2,029,016, or 257%, in 2018 primarily as a result of financing costs related to the July 2018 Private Placement and convertible notes issued in 2018, higher amortization of discounts on outstanding convertible promissory notes in 2018, a loss on the change in fair value of debt in 2018, and a loss on the change in fair value of derivative financial instruments in 2018 compared to a small gain in 2017.

 

Net loss increased by $3,209,824, or 124%, in 2018 primarily as a result of financing costs, amortization of debt discounts and changes in fair value of debt and derivative financial instruments, as well as increased salaries, benefits and overhead costs associated with preparing for the HealthLynked Network product launch and public company costs. These increases were offset by an increase in revenue of 155,423, or 7%.

 

 

RESULTS OF OPERATIONS: THREE MONTHS ENDED MARCH 31, 2019 AND 2018

 

The following table summarizes the changes in our results of operations for the three months ended March 31, 2019 compared with the three months ended March 31, 2018:

 

		Three Months Ended March 31,								Change
		2019				2018				Increase (Decrease) in $				Increase (Decrease) in %
Patient service revenue, net		$	464,990			$	645,639			$	(180,649	)			-28	%
Salaries and benefits			529,225				560,856				(31,631	)			-6	%
General and administrative			757,356				574,828				182,528				32	%
Depreciation and amortization			1,655				6,029				(4,374	)			-73	%
Loss from operations			(823,246	)			(496,074	)			327,172				66	%
Loss on extinguishment of debt			(139,798	)			(325,223	)			(185,425	)			-57	%
Change in fair value of debt			(29,697	)			(57,946	)			(28,249	)			-49	%
Financing cost			(33,903	)			(192,062	)			(158,159	)			-82	%
Amortization of original issue and debt discounts on notes payable and convertible notes			(179,384	)			(154,835	)			24,549				16	%
Change in fair value of derivative financial instruments			191,633				(14,621	)			(206,254	)			-1411	%
Interest expense			(46,322	)			(40,347	)			5,975				15	%
Total other expenses			(237,471	)			(785,034	)			(547,563	)			-70	%
Net loss		$	(1,060,717	)		$	(1,281,108	)		$	(220,391	)			-17	%

 

Patient service revenue decreased by $180,649, or 28%, from three months ended March 31, 2019 to 2018, primarily as a result of a 30% decrease in gross billing due to physician turnover, disability and retirement.

 

Salaries and benefits decreased by $31,631, or 6%, in 2019 primarily as a result of decreased salary expense associated with NWC production pay and a shift from a direct sales to an indirect sale approach for HLYK.

 

General and administrative costs increased by $182,528, or 32%, in 2019 primarily due to higher stock-based consulting fees and professional costs in 2019, as well as higher legal, professional and accounting costs related to the acquisition of HCFM.

 

Depreciation and amortization decreased by $4,374, or 73%, in 2019 primarily as a result of the adoption of ASU 2016-02 in the three months ended March 31, 2019, which resulted in charges associated with a capital lease that were previously recorded as depreciation being charged to general and administrative expense.

 

Loss from operations increased by $327,172, or 66%, in 2019 primarily as a result of decreased revenue compared to the same period of 2018, increased stock-based consulting fees and professional costs in 2019 and higher legal, professional and accounting costs related to the acquisition of HCFM.

 

Loss on extinguishment of debt decreased by $185,425, or 77%, in 2019. Loss on extinguishment of debt in 2019 arose from conversion of a convertible note. Loss on extinguishment of debt in 2018 arose from the cash repayment of five convertible notes.

 

Change in fair value of debt decreased by $28,249, or 49%, and results from certain convertible notes and notes payable to Dr. Michael Dent that were extended in previous periods and treated as an extinguishment and reissuance for accounting purposes, requiring these notes to be subsequently carried at fair value. The change in fair value at the end of each reporting period is recorded as “Change in fair value of debt.”

 

 

Financing cost decreased by $158,159, or 82% in 2019. Financing cost arises from the issuance of convertible promissory notes with a floating conversion rate that gave rise to an ECF derivative instrument with a fair value greater than the face value of the notes. During 2019, we entered into two such notes with aggregate face value of $156,000, as compared to 2018 when we entered into four such notes with aggregate face value of $358,500.

 

Amortization of original issue and debt discounts increased by $24,549, or 16%, in 2019 as a result of the amortization of convertible notes with larger average discount balances being amortized in 2019.

 

Change in fair value of derivative financial instruments decreased by $206,254, or 1,411% as a result of gains in fair value of derivative financial instruments embedded in convertible promissory notes in 2019.

 

Interest expense increased by $5,975, or 15%, in 2019 as a result of higher average balance on convertible notes and notes payable to Dr. Dent during 2019.

 

Total other expenses decreased by $547,563, or 70%, in 2019 primarily as a result of gains from changes in the fair values of derivative financial instruments, fewer extinguished convertible notes compared to 2018 that gave rise to debt extinguishment losses, and decreased financing costs associated with lower inception value of convertible notes in 2019.

 

Net loss decreased by $220,391, or 17%, in 2019 primarily as a result of gains from changes in the fair values of derivative financial instruments, fewer extinguished convertible notes compared to 2018 that gave rise to debt extinguishment losses, and decreased financing costs associated with lower inception value of convertible notes in 2019, offset by higher general and administrative costs and lower revenue.

 

Liquidity and Capital Resources

 

Going Concern

 

As of March 31, 2019, we had a working capital deficit of $2,778,539 and accumulated deficit $11,561,772. For the three months ended March 31, 2019, we had a net loss of $1,060,717 and net cash used by operating activities of $600,393. Net cash used in investing activities was $4,302. Net cash provided by financing activities was $983,226, resulting principally from $833,226 proceeds from the sale of common stock and $150,000 net proceeds from the issuance of convertible notes.

 

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

 

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

 

 

As further discussed below in “Significant Liquidity Events,” in July 2018, we completed a Private Placement (the “July 2018 Private Placement”) and received net proceeds of $1,774,690. Moreover, in July 2016, we entered into an Investment Agreement (the “Investment Agreement”) pursuant to which the investor has agreed to purchase up to $3,000,000 of our common stock over a three-year period starting upon registration of the underlying shares, with such shares put to the investor by us pursuant to a specified formula that limits the number of shares able to be put to the investor to the number equal to the average trading volume of our common shares for the ten consecutive trading days prior to the put notice being issued. During the three months ended March 31, 2019, we received $493,226 from the proceeds of the sale of 2,128,644 shares pursuant to the Investment Agreement.

 

We intend that the cost of implementing our development and sales efforts related to the HealthLynked Network, as well as maintaining our existing and expanding overhead and administrative costs, will be funded principally by cash received from (i) the July 2018 Private Placement, (ii) the put rights associated with the Investment Agreement, and (iii) other funding mechanisms, including sales of our common stock, loans from related parties and convertible notes. We expect to repay our outstanding convertible notes, which have an aggregate face value of $1,379,000 as of March 31, 2019, from outside funding sources, including but not limited to new convertible notes payable, amounts available upon the exercise of the put rights granted to us under the Investment Agreement, sales of equity, loans from related parties and others or through the conversion of the convertible notes into equity. No assurances can be given that we will be able to access sufficient outside capital in a timely fashion in order to repay the convertible notes before they mature. If necessary funds are not available, our business and operations would be materially adversely affected and in such event, we would attempt to reduce costs and adjust its business plan.

 

Significant Liquidity Events

 

Through March 31, 2019, we have funded our operations principally through a combination of convertible promissory notes, private placements of our common stock, promissory notes and related party debt, as described below.

 

July 2018 Private Placement

 

On July 17, 2018, we completed the July 2018 Private Placement pursuant to which we sold the following securities: (1) an aggregate of 3,900,000 shares of our common stock, par value $0.0001 per share, (2) Pre-Funded Warrants to purchase an aggregate of 4,100,000 shares of our common stock with an exercise price of $0.0001 and a term of five-years, (3) Series A Warrants to purchase up to an aggregate of 8,000,000 shares of our common stock with an exercise price of $0.25 per share (subsequently reset to $0.2233 on the Repricing Date) and a term of five years, and (4) Series B Warrants to purchase up to a maximum of 17,000,000 shares of our common stock (subsequently reset at 2,745,757 pursuant to the terms of such warrants) at an exercise price of $0.0001. Net proceeds to the Company were $1,774,690. The Company also issued to the placement agent 640,000 Series A Warrants with the same terms as the investor’s Series A Warrants and Series B Warrants to purchase up to a maximum of 219,661 shares of Company common stock at an exercise price of $0.0001.

 

Investment Agreement

 

On July 7, 2016, we entered into the Investment Agreement with an accredited investor pursuant to which an accredited investor agreed to invest up to $3,000,000 to purchase the Company’s common stock, par value of $.0001 per share. The purchase price for such shares shall be 80% of the lowest volume weighted average price of our common stock during the five consecutive trading days prior to the date on which written notice is sent by us to the investor stating the number of shares that the Company is selling to the investor, subject to certain discounts and adjustments. Further, pursuant to an Amended Investment Agreement dated March 22, 2017, we granted to the investor warrants to purchase an aggregate of seven (7) million shares of common stock with the following fixed exercise prices: (i) four million shares at $0.25 per share; (ii) two million shares at $0.50 per share; and (iii) one million shares at $1.00 per share. The warrants also contain a “cashless exercise” provision and the shares underlying the warrants will not be registered. During the three months ended March 31, 2019 and years ended December 31, 2018 and 2017, we received proceeds from the sale of shares pursuant to the Investment Agreement totaling $493,226 (2,128,644 shares), $440,523 (2,440,337 shares) and $27,640 (222,588 shares), respectively.

 

 

Other Sales of Common Stock

 

During 2017, we sold 5,873,609 shares of common stock in private placement transactions to 18 investors and received $821,000 in proceeds from the sales. The shares were issued at a share price between $0.10 and $0.30 per share.

 

During 2018, we sold 3,534,891 shares of common stock in six separate private placement transactions. We 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, we 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 three months ended March 31, 2019, we sold 1,133,334 shares of common stock in two separate private placement transactions and received $340,000 in proceeds from the sales. The shares were issued at a share price of $0.30 per share.

 

Convertible Notes Payable

 

As of March 31, 2019, we had outstanding convertible notes payable with aggregate face value of $1,379,000 maturing between July and December 2019, as follows:

 

										Conversion
						Interest				Price/
		Face Value				Rate				Discount				Term
$550k Note - July 2016		$	550,000				6	%		$	0.08			December 31, 2019
$50k Note - July 2016			50,000				10	%		$	0.10			December 31, 2019
$111k Note - May 2017			111,000				10	%		$	0.35			December 31, 2019
$171.5k Note - October 2017			171,500				10	%			35	%		December 31, 2019
$103k Note I - October 2018			103,000				10	%			39	%		July 30, 2019
$103k Note II - November 2018			103,000				10	%			39	%		August 30, 2019
$153k Note - November 2018			153,000				10	%			25	%		August 19, 2019
$103k Note III - December 2018			103,000				10	%			39	%		December 3, 2019
$78k Note I - January 2019			78,000				10	%			25	%		October 14, 2019
$78k Note II - January 2019			78,000				10	%			39	%		November 15, 2019
		$	1,500,500

 

Plan of operation and future funding requirements

 

Our plan of operations is to operate NWC and continue to invest in our cloud-based online personal medical information and record archiving system, the “HealthLynked Network,” which enables patients and doctors to keep track of medical information via the Internet in a cloud-based system.

 

We intend to market the HealthLynked Network via direct sales force targeting physicians’ offices, direct to patient marketing, affiliated marketing campaigns, co-marketing with online medical supplies retailer MedOffice Direct, and expanded southeast regional sales efforts. We intend that our initial primary sales strategy will be direct physician sales through the use of regional sales representatives whom we will hire as access to capital allows. In combination with our direct sales, we intend to also utilize Internet based marketing to increase penetration to targeted geographical areas. These campaigns will be focused on both physician providers and patient members.

 

If we fail to complete the development of, or successfully market, the HealthLynked Network, our ability to realize future increases in revenue and operating profits could be impacted, and our results of operations and financial position would be materially adversely affected.

 

The capital from the July 2018 Private Placement was raised for the purpose of technology enhancement, sales and marketing initiatives and for our planned acquisition strategy. Beginning in the fourth quarter of 2018 and first quarter of 2019, we plan to acquire health service businesses and offer physician owners cash, stock, and deferred compensation. We expect to initially target practices in Florida with at least $1 million in annual revenue and that demonstrate at least three current consecutive years of strong profitability. On April 12, 2019, the Company completed its first acquisition of Hughes Center for Functional Medicine, P.A. (“HCFM”) for (i) $500,000 in cash, (ii) 3,968,254 shares of the Corporation’s common stock, and (iii) “earn-out” payments in the aggregate amount of $500,000 to be paid over three (3) years, subject to certain revenue and profit targets. 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.

 

 

We anticipate that approximately 50% of the proceeds from the July 2018 Private Placement will be used for sales and marketing related costs and the remainder for executive compensation, IT expenses and legal and accounting expenses related to being a public company. We plan on raising additional capital to fund our recently disclosed acquisition strategy. In addition, we have extended a significant portion of our outstanding debt until December 31, 2019. Specifically, all of Dr. Michael Dent’s notes payable with an aggregate face value of $646,000 and all of Iconic Holdings LLC convertible notes payable with an aggregate face value of $711,000 have been extended until December 31, 2019.

 

We intend that the cost of implementing our development and sales efforts related to the HealthLynked Network, as well as maintaining our existing and expanding overhead and administrative costs, will be funded principally by the July 2018 Private Placement in addition to the cash received by us from the put rights associated with the Investment Agreement and new convertible notes payable. We expect to repay outstanding convertible notes from outside funding sources, including but not limited to amounts available upon the exercise of the put rights granted to us under the Investment Agreement, sales of our equity, loans from outside parties and the conversion of such related party notes to equity. No assurances can be given that we will be able to access sufficient outside capital in a timely fashion in order to repay the convertible notes before they mature. In order to access cash available under the Investment Agreement, our common stock must be listed on a recognized stock exchange or market and the shares underlying the arrangement must be subject to an effective registration statement. On May 10, 2017, our stock began trading on the OTCQB, which qualifies as a recognized stock exchange or market pursuant to the terms of the Investment Agreement, under the symbol “HLYK.” Although we have met the requirements to utilize the funds available under the Investment Agreement, there can be no assurances that we will be able to continue to meet these requirements. Additionally, the amount available to us upon the exercise of the put rights granted to us under the Investment Agreement is dependent upon the trading volume of our stock. Between May 22, 2017 and March 31, 2019, our daily trading volume averaged approximately 115,000 shares per day. Based upon increases in our volume since the end of 2017, Iconic Holdings has increased our maximum amount to access on the equity line from $150,000 maximum to $300,000 maximum. We project that amounts available to us upon the exercise of the put rights granted to us under the Investment Agreement will be sufficient to meet our capital requirements.

 

Historical Cash Flows

 

		Three Months Ended March 31,
		2019				2018
Net cash (used in) provided by:
Operating activities		$	(600,393	)		$	(424,154	)
Investing Activities			(4,302	)			(201	)
Financing activities			983,226				403,659
Net increase (decrease) in cash		$	378,531			$	(20,696	)

 

Operating Activities  – During the three months ended March 31, 2019, we used cash from operating activities of $600,393, as compared with $424,154 in the same period of 2018. The increased cash usage results from an increase in professional and other overhead costs associated with preparing for product launch and operating as a public company in 2019.

 

Investing Activities  – Our business is not capital intensive, and as such cash flows from investing activities are minimal in each period. Capital expenditures of $4,302 in the three months ended March 31, 2019 and $201 in the three months ended March 31, 2018 are comprised of computer equipment and furniture.

 

 

Financing Activities  – During the three months ended March 31, 2019, we realized $833,226 from the proceeds of the sale of shares of common stock to investors and pursuant to the Investment Agreement and $150,000 net proceeds from the issuance of convertible notes.

 

Exercise of Warrants and Options

 

There were no proceeds generated from the exercise of warrants or options during the three months ended March 31, 2019.

 

Other Outstanding Obligations

 

Warrants

 

As of March 31, 2019, 45,058,874 shares of our Common Stock were issuable pursuant to the exercise of warrants with exercise prices ranging from $0.0001 to $1.00.

 

Options

 

As of March 31, 2019, 3,549,250 shares of our Common Stock were issuable pursuant to the exercise of options with exercise prices ranging from $0.08 to $0.31.

 

Off Balance Sheet Arrangements

 

We did not have, during the periods presented, and we do not currently have, any off-balance sheet arrangements, as defined under applicable Securities and Exchange Commission rules.

 

Contractual Obligations

 

		Operating				Capital				Total
		Leases				Leases				Commitments
2019 (April through December)		$	206,098			$	13,761			$	219,859
2020			162,055				4,587				166,642
2021			---				---				---
2022			---				---				---
2023			---				---				---
Total lease payments			368,153				18,348				386,501
Less interest			(28,957	)			(1,027	)			(29,984	)
Present value of lease liabilities		$	339,196			$	17,321			$	356,517

 

Operating lease commitments relate to three leases in Naples, Florida. First, the Company entered into an operating lease for its main office in Naples, Florida. The lease commenced on August 1, 2013 and expires July 31, 2020. The lease is for a 6901 square-foot space. The base rent for the first full year of the lease term is $251,287 per annum with increases during the period. Second, the Company entered into another operating lease in the same building for an additional 361 square feet space for use of the medical equipment for the same period. The base rent for the first full year of the lease term is $13,140 per annum. Third, the Company leases on a month-to-month basis approximately 2,500 square feet of office space in Naples, FL. Monthly rent is approximately $3,300.

 

Financing lease commitments are comprised of a capital equipment finance lease for Ultrasound equipment with Everbank. There was no interest on this lease. The monthly payment is $1,529 for 60 months ending in March 2020.

 

 

BUSINESS

 

Overview

 

HealthLynked Corp. is a growth stage company incorporated in the state of Nevada on August 6, 2014. We operate a cloud-based Patient Information Network (PIN) and record archiving system, referred to as the “HealthLynked Network,” which enables patients and doctors to keep track of medical information via the Internet in a cloud based system. Through our website, www.HealthLynked.com and our mobile apps, patients can complete a detailed online personal medical history including past surgical history, medications, allergies, and family medical history. Once this information is entered, patients and their treating physicians are able to update the information as needed, to provide a comprehensive and up to date medical history.

 

We believe that the HealthLynked Network offers several advantages to patients and physicians not available in the market today. We provide a comprehensive marketing solution allowing physicians to market to both active and inactive patients, and an easy to use connection at the point of care through our patient access HUB. Patient members can access medical newsfeeds and groups. Our real-time appointment scheduling application allows for patients to book appointments online with participating healthcare providers. Our database and record archives allow for seamless sharing of medical records between healthcare providers and keeps patients in control of shared access. In the HealthLynked Network, parents can create accounts for their children that are linked to their family account, allowing them to provide access to healthcare providers, track vaccination records, allow hospitals and schools access to important medical information in case of emergencies. The HealthLynked Network will be accessible 24 hours a day, 7 days a week, via the internet and on mobile applications for both Android and iOS devices. We believe this type of accessibility is important for schools and during office visits, but more important, in times of a medical emergency.

 

We anticipate that our system will also provide for 24-hour access to medical specialist healthcare providers who can answer medical questions and direct appropriate care to paying members. In addition to 24-hour access, patients may also schedule telemedicine consultations at set times with participating healthcare providers who have expertise in various specialized areas of medicine. Participating physicians can elect to allow patients to request online appointments either via our real-time app or by setting, in their administrator dashboard panel, times and days of the week that patients may request appointments. Appointment requests are then sent by our system to an email address specified by the physician’s office, who are then requested to follow up to confirm these appointment requests or automatically accept the appointment request.

 

HealthLynked has created 880,000 physician base profiles for most physicians in the United States. Physicians’ HealthLynked profiles are searchable on the Internet. Physicians claim their profiles confirming the accuracy of the information free of charge.

 

There are three type of providers in the HealthLynked Network: in-network, out of network and participating providers. All physicians can claim their profile and update basic information online and add videos and images of their profile. Once a provider has claimed their profile they are considered in-network. Providers that opt pay a monthly fee for access to the full range of HealthLynked Network services, which include online scheduling, marketing services and analytics about their practice performance.

 

HealthLynked provider profiles enable participating providers to market directly to patients through our patient access HUB and online marketing services to recruit new patients and reengage with former patients. Physician practices generate more income the more patients they treat, so maximizing efficiency and patient turnover is critical to increasing total revenues and profitability. As such, we believe that our system will enable physicians to reduce the amount of time required to process patient intake forms, as patients will no longer be required to spend ten to thirty minutes filling out forms at each visit, and the practices’ staffs will not need to input this information multiple times into their electronic medical records systems. Patients complete their online profiles once, and thereafter, they and their physicians are able to update their profiles as needed. Physicians’ participating in the HealthLynked Network are required to update the patient records within 24 hours of seeing the patient. The information is organized in an easy to read format in order that a physician be able to review the necessary information quickly during, and prior to, patient visits, which in turn facilitates a more comprehensive and effective patient encounter.

 

 

Patient data is stored in conformity with the  Health Insurance Portability and Accountability Act  of 1996,  the Health Information Technology for Economic and Clinical Health Act, and the regulations promulgated under each by the U.S. Department of Health and Human Services, Office of Civil Rights  (collectively, “HIPAA”). The network utilizes Amazon AWS infrastructure which uses Amazon “HIPPA” complaint servers along with Amazon RDS with LAMP, HTML5 and several JavaScript frameworks, including Angular and React. Recommendations for end users are 512 kbps+ internet connection speed and a web browser such as Google Chrome, Internet Explorer, Mozilla Firefox, Safari or handheld devices such as iOS devices, android phones or tablets. Our developers utilize third party controls for functionality and user interface where the use of those controls adds value to the system beyond custom creation of new tools. We intend to adjust forward compatibility for major browser version updates, new browsers, operating system updates or new operating system as needed. The HealthLynked Network is EMR agnostic, and is compatible with all electronic medical records systems, allowing for minimal barriers to participation and broader penetration of the market.

 

Acquisition of NWC

 

In August 2014, we acquired the NWC, an OB/GYN practice in Naples, Florida that was established in 1996.

 

This acquisition provided a foundation for ongoing development of the HealthLynked Network by allowing us to register NWC’s approximately 6,000 active patients and 6,500 inactive patients and to utilize the expertise of our employed physicians to help in the design and strategy for deployment of the HealthLynked Network. It is anticipated that future medical practices may be acquired from time to time as we see fit to further develop, test and deploy the HealthLynked Network into new strategic regional areas throughout the country.

 

Through NWC, we also provide Obstetrical and Gynecological medical services to patients in the South West Florida region. NWC currently employs four OB/GYN physicians and two ARNP nurse practitioners. The services offered include obstetrical services for high and low risk patients, in office ultrasonography, and prenatal testing. Gynecological services include general physical exams, surgical procedures such as hysterectomy, bladder incontinence procedures, pelvic reconstruction, sterilization, endometrial ablation, advanced robotic surgery, contraceptive management and infertility testing and treatment.

 

The HealthLynked Network- How It Works

 

Our system walks patients through a series of easy to use pages with point and click selections and drop-down menus that allow them to enter their past medical history, past surgical history, allergies, medications, and family medical history. In addition, members can create accounts for children under the age of 18 and keep track of required visits and vaccines. Members select physicians, schools, hospitals and other parties to whom they wish to grant access to their records. This access can be either ongoing, or restricted by time and date, in accordance with the patient’s control settings.

 

Physicians are required to have a claimed active account in order to access patients’ online records and receive referrals for new patients. Once a patient has granted their physician access to their medical charts, office intake paperwork can be downloaded by the physician without the need for the patient to fill out lengthy and repetitive paperwork. Upon completion of the office visit, providers are required to upload the medical record into the online patients’ file within 24 hours via eFax, APIs with select EMRs or through the HealthLynked Portal. Each patient’s account has a unique bar code that when faxed into our system is recognized for that patient, and archived in the patient’s chart, by date and provider. The HealthLynked Network is independent of any EMR system and physicians only require a fax machine or computer to participate, allowing for minimal barriers to participation and broader penetration of the market.

 

In addition to serving as a complete medical record archive, we believe that the HealthLynked Network allows for shorter wait times at doctors’ offices by giving doctors immediate access to patients’ complete medical information, insurance information and required treatment consent forms. Patients only need to verify their treating physician’s access to their files upon or prior to their next doctor’s visit. Patients are also able to coordinate multiple physician visits and keep an updated and complete personal medical record archive. These files may also be shared among a patient’s different specialty physicians, a function that we believe is especially helpful for patients who travel and may need to access their records or obtain physician referrals in multiple localities. We also believe that the HealthLynked Network is especially useful in medical emergencies when patients are unable to provide a medical history on their own because our system allows patients the option to grant healthcare providers, in advance, special access in emergency situations.

 

 

The HealthLynked Network also provides an online scheduling function for patients to book appointments with participating providers. Healthcare provider profiles feature physicians’ biographies, office locations, hours and available appointment times. In addition, the platform will provide patients with a list of recommended health screenings tailored to each patient’s unique medical history and demographics. Recommended screenings could include, but is not limited to, annual mammograms for women over the age of 40, colonoscopy every 10 years after the age of 50, recommended pap smear screenings, routine blood tests, and prostate exams. This base service will be free for patients. However, we plan to charge additional fees for real-time schedule booking, access to telemedicine service and access to a 24-hour nurse’s hotline and to charge physicians for upgraded physician profiles and SEO marketing.

  

Benefits for Multiple Constituencies

 

We believe that the HealthLynked Network provides numerous benefits for patients and their relatives, medical providers, hospitals, emergency rooms and schools.

 

Benefits for patients:

 

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Base service, which includes all of the below benefits other than telemedicine and the nurse hotline, will be free

 

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Easy online scheduling of appointments

 

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Real-time booking for appointments available within 4 hours

 

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Keep track of co-pays and deductibles on insurance plans

 

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More accurate and detailed personal medical history

 

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Complete medication lists with dosing and warnings of potential drug interactions

 

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Ability to create accounts for children, and track recommended health screenings and vaccines

 

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When traveling, patients will have the ability to access their medical records online 24 hours a day, 7 days a week even in the case of an emergency

 

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Shortened wait times at physicians’ offices by reducing the need to fill out redundant paper work

 

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Access to a referral network of physicians across the United States who participate in the HealthLynked Network

 

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Patients can access family members’ records in the event of illness or accident

 

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Access to telemedicine for medical consultations and appointments for fee paying members

 

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24 hour nurse hotline available for fee paying members

 

Benefits for physicians and providers:

 

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More accurate patient medical history including past medical records

 

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“EMR Agnostic” and compatible with all electronic medical records systems

 

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A detailed and accurate medications list from patients

 

 

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Shortened time for patients to complete necessary paperwork translating into improved efficiency, shorter wait times, greater patient satisfaction and higher revenues

 

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Referral source for new patients

 

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Online marketing profiles

 

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Comprehensive Marketing to active and inactive patients

 

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SEO and marketing options

 

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Co-pay and deductible information on patients’ insurance plans will be readily available

 

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Additional revenue stream from signing up new patients

 

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Online and real-time patient scheduling to control gaps in scheduling due to last minute cancelations by existing patients

 

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Low membership fees of $300 - $400 per month per provider during the first year

 

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Patient Access Hub “PAH” (provisional patent pending) is provided to physician offices free of charge to provide free Wi-Fi for their patients. Patient analytics are provided to physician members.

 

Benefits for hospitals and emergency rooms:

 

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Information on patients who present that are not conscious to provide a complete medical history

 

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Information on traveling patients who present to a hospital in an emergency situation

 

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Online access to patient information 24 hours a day, 7 days a week

 

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“EMR Agnostic” and compatible with all electronic medical records systems

 

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No new equipment required

 

Benefits for schools:

 

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Access by authorized school officials to students’ medical histories

 

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Linked access to students’ primary care physicians

 

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Access to vaccination records

 

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Allergy and medication tracking

 

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Emergency contact information of family members

 

Benefits for parents :

 

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Complete children profiles

 

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Access given to schools in case of medical emergences

 

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List of allergies available to those granted access

 

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Vaccine records available to those granted access

 

 

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Recommended health screenings

 

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Journal for health log and milestones through news feeds and groups

 

Business Model

 

Our business model is focused on market penetration and recruiting physicians and patients to use our system for archiving patient medical records, comprehensive marketing to active and inactive patients, a way to connect on a regular basis utilizing news feeds and groups, accessing new patients, and for on-line “real-time” scheduling physician appointments.

 

We currently charge physicians $300 - $400 per month to participate in the network. Physicians upload their patients into a secure patient portal to market to their active and inactive patients. They initially send to all their patients an email inviting them to claim their HLYK profile free of charge, update their profiles and bring it with them to their next visit to the physician’s office.

 

We also anticipate charging certain healthcare facilities either an annual or monthly fee that will vary per facility based upon number of professionals per facility. Currently, it is anticipated that hospitals and emergency rooms would be charged a higher fee for our services once our patient network has been expanded.

 

The base services of our network are free for patients, and they may also upgrade their service should they wish to receive telemedicine services and access to a 24-hour nurse hotline.

 

Pursuant to our business strategy, we acquired NWC to begin deployment of the HealthLynked Network and register NWC’s approximately 6,000 active patients and 6,500 inactive patients into the HealthLynked system. While we expect to generate minimal revenues from physician fees related to such deployment in fiscal 2019, we anticipate that establishing the patient database will be a valuable marketing tool for telesales to physician practices. During the second half of 2018, we had one physician who did not renew her contract, one physician who went out on an unexpected disability leave, and another physician who retired. Notwithstanding the unexpected losses of three physicians, with the assistance of the HealthLynked Network in marketing to former patients, we were able to increase practice revenue from 2017 by 7%. By the second quarter of 2019, we expect to have all three physicians replaced, and will then plan to further expand NWC by engaging two to five additional physicians and project, although no assurance can be given, that by 2021 NWC will generate annual aggregate net revenues of between $3,500,000 and $5,000,000. We believe that targeting women’s practices to market HealthLynked is one of the best approaches as women generally make most of the healthcare decisions for their families.

 

Sales Strategy

 

During the fourth quarter of 2018, the Company developed a more efficient strategy regarding the marketing of the HealthLynked Network utilizing its patient access hub technology:

 

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Eliminated the direct sales force, reducing our burn rate by approximately $50,000 per month

 

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Adopted a more efficient telesales model for bringing on physicians “in network” to the HealthLynked Network, including the following:

 

o

Starting with physicians claiming their existing base profiles, confirming accuracy, and opting to be an “in network” provider free of charge

 

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Providing Patient Access Hub (“PAH”) offering Wi-Fi to the practice patients free of charge

 

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Providing patient analytics off the PAH to provider members

 

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SEO/SEM campaigns direct to physician practices

 

 

o

Participation in healthcare events that offer CME credits to physicians is another excellent vehicle that we are using to introduce HLYK and our network to physicians. We anticipate one event per quarter as part of our marketing plan.

 

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Focusing on comprehensive marketing to physicians active and inactive patients to improve retention and significantly increase practice revenue

 

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Physicians upload patients in secured HLYK portal and send email for patients to claim their HLYK profile and update it to bring into the office for their next visit.

 

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Use of HealthLynked Network for on-line appointment scheduling for patients

 

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Direct to patient marketing:

 

o

SEO/SEM campaigns direct to patients

 

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Affiliated marketing campaigns

 

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Co-marketing with MedOfficeDirect (a virtual distributor of medical supplies to the general public and to physicians’ offices that is affiliated with our management team)

 

After 1.5 years of direct sales efforts, during the fourth quarter of 2018, we decided to eliminate the entire direct sales force after developing a more efficient and effective strategy for onboarding new in-network providers which eliminating $650,000 of annual cost. During the second quarter of 2019 we are planning to deploy our Patient Access Hub ‘PAH” (provisional patent pending) providing free Wi-Fi to the practice patients at no cost to our in-network physicians. Physician members will receive patient analytics from the PAH and we anticipate by the fourth quarter of 2019 we will be attracting 1,000 physicians and 300,000 patients per quarter utilizing the patient access hub.

 

PAH analytics will include information such as most popular days, most popular times of day, patient wait times per physician, patient mix, and social media footprint, to name a few.

 

Healthcare events that offer continuing medical education (“CME”) credits to Physicians have proven to be an excellent target market for our services and we plan to continue with this strategy of at least one event per quarter going forward.

 

Our projected rapid growth over the next five years is due in large part to our roll out and utilization of the Patient Access Hub in medical practices.

 

Our marketing efforts towards physicians will emphasize how our systems can provide patient analytics, increase practice revenues, improve office efficiencies, and improve the accuracy of recorded patients’ medical histories.

 

Once a physician agrees to become a paying member, they will put all their patients in a secured portal in the cloud, and email them to claim their profile, update it and bring it in for their next office visit. As mentioned above, access to the HealthLynked Network is free for patients. The physicians will then market to their active and inactive patients and it is anticipated that physicians will generate up to $100,000 in incremental annual revenue for an investment of $4,800 per year.

 

In combination with our telesales efforts described above, we intend to also utilize internet based search engine marketing an optimization (SEM/SEO) to increase our presence in certain targeted geographical areas. These campaigns will be focused on both physicians and patients. We believe that direct to consumer marketing through email campaigns will be an effective way to build interest and drive patient and physician demand for our services. We anticipate that we will be able to foster faster market penetration and increase demand for our services by marketing to “both sides”, the consumer and the practitioner once the telesales model is solidified.

 

 

Our campaigns will direct patients to look for physicians in the HealthLynked Network to ensure that they maintain the accuracy and completeness of their medical records. Our system will further allow patients to search for “in-network” physician providers and schedule online “real-time” appointments via our system. We believe that physicians in the HealthLynked Network will see an increase in new patients as a result of their participation and as more patients claim their profiles from the use of the PAH and the physicians’ initial emails to patients, the value to physicians of joining our network will increase from not only existing patient marketing, but also for acquisition of new patients in the HealthLynked Network.

 

We believe that affiliated marketing campaigns will be very helpful in attracting new users and increasing market awareness. We intend to partner with pharmaceutical companies, medical distributors, insurance companies; medical societies and others to cross market our products.

 

Intellectual Property

 

We have registered “HealthLynked” and our corporate logo as a service mark with the United States Patent and Trademark Office (the “USPTO”). We also filed a provisional patent application for the use of our Patient Access Hub filed on March 6, 2019 with the USPTO. We plan to file other patent applications as needed to protect our technology as soon as the technology is launched, which is currently anticipated to be during the third and fourth quarters of 2019.

 

Research and Development

 

Our research and development efforts consist of building, developing, and enhancing the HealthLynked Network, including comprehensive marketing to active and inactive patients, the real time scheduling of appointments through our new mobile application, regular appointment scheduling, telemedicine appointment scheduling, sharing of secured documents between physicians and patients, and devise independent access mobile, tablet and web browser. Further, we are developing our systems to provide for secured date storage, drug interaction alerts, and the barcoding of documents for retrieval and storage.

 

Professional and General Liability Coverage

 

We maintain professional and general liability insurance policies with third-party insurers generally on a claims-made basis, subject to deductibles, policy aggregates, exclusions, and other restrictions, in accordance with standard industry practice. We believe that our insurance coverage is appropriate based upon our claims experience and the nature and risks of our business. However, no assurance can be given that any pending or future claim against us will not be successful or if successful will not exceed the limits of available insurance coverage. Our business entails an inherent risk of claims of medical malpractice against our affiliated physicians and us. We contract and pay premiums for professional liability insurance that indemnifies us and our affiliated healthcare professionals generally on a claims-made basis for losses incurred related to medical malpractice litigation. Professional liability coverage is required in order for our physicians to maintain hospital privileges.

 

Employees

 

As of June 13, 2019, we had 39 employees. None of our employees are covered by a collective bargaining agreement. We consider our relationship with our employees to be excellent.

 

Competition

 

The markets for our products and services are highly competitive, and are characterized by rapidly evolving technology and product standards, as well as frequent introduction of new products and services. All of our competitors are more established, benefit from greater name recognition, and have substantially greater financial, technical, and marketing resources than we do.

 

Our principal existing competitors include but are not limited to ZocDoc, Inc., AthenaHealth Inc., All-scripts Healthcare Solutions, Inc., Cerner Corporation, Epic Systems Corporation, Teledoc Health Inc. and Veritone Inc. In addition, we expect that major software information systems companies, large information technology consulting service providers, start-up companies, managed care companies and others specializing in the health care industry may offer competitive products and services. 

 

 

We believe that we differ from our competitors in that we are not practice management software or an EMR provider. Companies like AthenaHealth Inc., All scripts Healthcare Solutions, Inc., Cerner and Epic Systems Corporation offer software solutions to operate and manage a medical practice. Functions of these systems include patient billing, monitoring patient account balances and payments, tracking of appointments and creating encounter visits for each patient seen. HealthLynked works in conjunction with these practice management software systems and does not seek to replace them. Patients’ medical encounters created by these systems are uploaded to the patient’s profile in the HealthLynked Network. The HealthLynked Network can incorporate any physical or digital documents into a patient’s medical record history and thus allow it to be utilized across all healthcare platforms. HealthLynked provides an online appointment scheduling application that is similar to ZocDoc, Inc.’s offering, but in addition offers telemedicine appointments through our own patient interface. 

 

The advantage of having a healthcare network independent of any one practice management or EMR software allows the HealthLynked system to be fully utilized across the entire medical community. Integration and participation by both patients and healthcare providers in a unified platform offers significant advantages in the quality and nature of healthcare delivery in the future. To our knowledge a unified healthcare network like HealthLynked currently does not exist in the market.  

 

Amazon, Google, and Apple have also announced their intention to enter into the digital healthcare space, including in the area of patient health records.

 

Government Regulation  

 

The healthcare industry is governed by a framework of federal and state laws, rules and regulations that are extensive and complex and for which, in many cases, the industry has the benefit of only limited judicial and regulatory interpretation. If we are found to have violated these laws, rules or regulations, our business, financial condition and results of operations could be materially, adversely affected. Moreover, healthcare reform continues to attract significant legislative interest, regulatory activity, new approaches, legal challenges and public attention that create uncertainty and the potential for additional changes. Healthcare reform implementation, additional legislation or regulations, and other changes in government policy or regulation may affect our reimbursement, restrict our existing operations, limit the expansion of our business or impose additional compliance requirements and costs, any of which could have a material adverse effect on our business, financial condition, results of operations, cash flows and the trading price of our common stock. 

 

Licensing and Certification 

 

The state of Florida imposes licensing requirements on individual physicians and clinical professionals, and on facilities operated or utilized by healthcare practices. We may have to obtain regulatory approval, including certificates of need, before establishing certain types of healthcare facilities, offering certain services or expending amounts in excess of statutory thresholds for healthcare equipment, facilities or programs. We are also required to meet applicable Medicaid provider requirements under state laws and regulations and Medicare provider requirements under federal laws, rules and regulations. 

 

Fraud and Abuse Provisions 

 

Existing federal laws, as well as similar state laws, relating to government-sponsored or funded healthcare programs, or “GHC Programs,” impose a variety of fraud and abuse prohibitions on healthcare companies like us. These laws are interpreted broadly and enforced aggressively by multiple government agencies, including the Office of Inspector General of the Department of Health and Human Services, the Department of Justice (the “DOJ”) and various state agencies. In addition, in the Deficit Reduction Act of 2005, Congress established a Medicaid Integrity Program to enhance federal and state efforts to detect Medicaid fraud, waste and abuse and provide financial incentives for states to enact their own false claims legislation as an additional enforcement tool against Medicaid fraud and abuse. Since then, a growing number of states have enacted or expanded healthcare fraud and abuse laws. 

 

 

The fraud and abuse provisions include extensive federal and state laws, rules and regulations applicable to us, particularly on the services offered through NWC. In particular, the federal anti-kickback statute has criminal provisions relating to the offer, payment, solicitation or receipt of any remuneration in return for either referring Medicaid, Medicare or other GHC Program business, or purchasing, leasing, ordering, or arranging for or recommending any service or item for which payment may be made by GHC Programs. In addition, the federal physician self-referral law, commonly known as the “Stark Law,” applies to physician ordering of certain designated health services reimbursable by Medicare from an entity with which the physician has a prohibited financial relationship. These laws are broadly worded and have been broadly interpreted by federal courts, and potentially subject many healthcare business arrangements to government investigation and prosecution, which can be costly and time consuming. Violations of these laws are punishable by substantial penalties, including monetary fines, civil penalties, administrative remedies, criminal sanctions (in the case of the anti-kickback statute), exclusion from participation in GHC Programs and forfeiture of amounts collected in violation of such laws, any of which could have an adverse effect on our business and results of operations.  

 

There are a variety of other types of federal and state fraud and abuse laws, including laws authorizing the imposition of criminal, civil and administrative penalties for filing false or fraudulent claims for reimbursement with government healthcare programs. These laws include the civil False Claims Act (“FCA”), which prohibits the submission of, or causing to be submitted, false claims to GHC Programs, including Medicaid, Medicare, TRICARE (the program for military dependents and retirees), the Federal Employees Health Benefits Program, and insurance plans purchased through the recently established Affordable Care Act exchanges. Substantial civil fines and multiple damages, along with other remedies, can be imposed for violating the FCA. Furthermore, proving a violation of the FCA requires only that the government show that the individual or company that submitted or caused to be submitted an allegedly false claim acted in “reckless disregard” or in “deliberate ignorance” of the truth or falsity of the claim or with “willful disregard,” notwithstanding that there may have been no specific intent to defraud the government program and no actual knowledge that the claim was false (which typically are required to be shown to sustain a criminal conviction). The FCA also applies to the improper retention of known overpayments and includes “whistleblower” provisions that permit private citizens to sue a claimant on behalf of the government and thereby share in the amounts recovered under the law and to receive additional remedies. In recent years, many cases have been brought against healthcare companies by such “whistleblowers,” which have resulted in judgments or, more often, settlements involving substantial payments to the government by the companies involved. It is anticipated that the number of such actions against healthcare companies will continue to increase with the enactment or enhancement of a growing number of state false claims acts, certain amendments to the FCA and enhanced government enforcement.

 

In addition, federal and state agencies that administer healthcare programs have at their disposal statutes, commonly known as “civil money penalty laws,” that authorize substantial administrative fines and exclusion from government programs in cases where an individual or company that filed a false claim, or caused a false claim to be filed, knew or should have known that the claim was false or fraudulent. As under the FCA, it often is not necessary for the agency to show that the claimant had actual knowledge that the claim was false or fraudulent in order to impose these penalties.

 

The civil and administrative false claims statutes are being applied in an increasingly broader range of circumstances. For example, government authorities have asserted that claiming reimbursement for services that fail to meet applicable quality standards may, under certain circumstances, violate these statutes. Government authorities also often take the position, now with support in the FCA, that claims for services that were induced by kickbacks, Stark Law violations or other illicit marketing schemes are fraudulent and, therefore, violate the false claims statutes. Many of the laws and regulations referenced above can be used in conjunction with each other.

 

If we were excluded from participation in any government-sponsored healthcare programs, not only would we be prohibited from submitting claims for reimbursement under such programs, but we also would be unable to contract with other healthcare providers, such as hospitals, to provide services to them. It could also adversely affect our ability to contract with, or to obtain payment from, non-governmental payors.

 

 

Although we intend to conduct our business in compliance with all applicable federal and state fraud and abuse laws, many of the laws, rules and regulations applicable to us, including those relating to billing and those relating to financial relationships with physicians and hospitals, are broadly worded and may be interpreted or applied by prosecutorial, regulatory or judicial authorities in ways that we cannot predict. Accordingly, we cannot assure you that our arrangements or business practices will not be subject to government scrutiny or be alleged or found to violate applicable fraud and abuse laws. Moreover, the standards of business conduct expected of healthcare companies under these laws and regulations have become more stringent in recent years, even in instances where there has been no change in statutory or regulatory language. If there is a determination by government authorities that we have not complied with any of these laws, rules and regulations, our business, financial condition and results of operations could be materially, adversely affected.

 

Government Reimbursement Requirements

 

In order to participate in the various state Medicaid programs and in the Medicare program, we must comply with stringent and often complex enrollment and reimbursement requirements. Moreover, different states impose differing standards for their Medicaid programs. While we believe that we adhere to the laws, rules and regulations applicable to the government programs in which we participate, any failure to comply with these laws, rules and regulations could negatively affect our business, financial condition and results of operations.

 

In addition, GHC Programs are subject to statutory and regulatory changes, administrative rulings, interpretations and determinations, requirements for utilization review and new governmental funding restrictions, all of which may materially increase or decrease program payments, as well as affect the cost of providing services and the timing of payments to providers. Moreover, because these programs generally provide for reimbursement on a fee-schedule basis rather than on a charge-related basis, we generally cannot increase our revenue by increasing the amount we charge for our services. To the extent our costs increase, we may not be able to recover our increased costs from these programs, and cost containment measures and market changes in non-governmental insurance plans have generally restricted our ability to recover, or shift to non-governmental payors, these increased costs. In attempts to limit federal and state spending, there have been, and we expect that there will continue to be, a number of proposals to limit or reduce Medicaid and Medicare reimbursement for various services. Our business may be significantly and adversely affected by any such changes in reimbursement policies and other legislative initiatives aimed at reducing healthcare costs associated with Medicaid, Medicare and other government healthcare programs.

 

Our business also could be adversely affected by reductions in or limitations of reimbursement amounts or rates under these government programs, reductions in funding of these programs or elimination of coverage for certain individuals or treatments under these programs.

 

HIPAA and Other Privacy Laws

 

Numerous federal and state laws, rules and regulations govern the collection, dissemination, use and confidentiality of protected health information, including the HIPAA, and its implementing regulations, violations of which are punishable by monetary fines, civil penalties and, in some cases, criminal sanctions. As part of the HealthLynked Network and our medical record keeping, third-party billing and other services, we collect and maintain protected health information on the patients that we serve.

 

Pursuant to HIPAA, the U.S. Department of Health and Human Services, Office of Civil Rights (“HHS”) has adopted standards to protect the privacy and security of individually identifiable health information, known as the Privacy Standards and Security Standards. HHS’ Privacy Standards apply to medical records and other individually identifiable health information in any form, whether electronic, paper or oral, that is used or disclosed by healthcare providers, hospitals, health plans and healthcare clearinghouses, which are known as “Covered Entities.” We have implemented privacy policies and procedures, including training programs, designed to be compliant with the HIPAA Privacy Standards.

 

HHS’ Security Standards require healthcare providers to implement administrative, physical and technical safeguards to protect the integrity, confidentiality and availability of individually identifiable health information that is electronically received, maintained or transmitted (including between us and our affiliated practices). We have implemented security policies, procedures and systems designed to facilitate compliance with the HIPAA Security Standards.

 

 

In February 2009, Congress enacted the Health Information Technology for Economic and Clinical Health Act, or “HITECH.” Among other changes to the law governing protected health information, HITECH strengthened and expanded HIPAA, increased penalties for violations, gave patients new rights to restrict uses and disclosures of their health information, and imposed a number of privacy and security requirements directly on third-parties that perform functions or services for us or on our behalf. Specifically, HITECH requires that Covered entities report any unauthorized use or disclosure of protected health information that meets the definition of a breach, to the affected individuals, HHS and, depending on the number of affected individuals, the media for the affected market. In addition, HITECH requires that business associates report breaches to their Covered Entity customers. HITECH also authorizes state Attorneys General to bring civil actions in response to violations of HIPAA that threaten the privacy of state residents. Final regulations implementing the HITECH requirements were issued in January 2013. We have privacy policies and procedures aimed at ensuring compliance with HITECH requirements. In addition to the federal HIPAA and HITECH requirements, numerous other state and certain other federal laws protect the confidentiality of patient information, including state medical privacy laws, state social security number protection laws, state genetic privacy laws, human subjects research laws and federal and state consumer protection laws.

 

Environmental Regulations

 

Our healthcare operations generate medical waste that must be disposed of in compliance with federal, state and local environmental laws, rules and regulations. Our office-based operations are subject to compliance with various other environmental laws, rules and regulations. Such compliance does not, and we anticipate that such compliance will not, materially affect our capital expenditures, financial position or results of operations.

 

Fair Debt Collection Practices Act

 

Some of our operations may be subject to compliance with certain provisions of the Fair Debt Collection Practices Act and comparable state laws. Under the Fair Debt Collection Practices Act, a third-party collection company is restricted in the methods it uses to contact consumer debtors and elicit payments with respect to placed accounts. Requirements under state collection agency statutes vary, with most requiring compliance similar to that required under the Fair Debt Collection Practices Act. Florida’s Consumer Collection Practices Act is broader than the federal legislation, applying the regulations to “creditors” as well as “collectors,” whereas the Fair Debt Collection Practices Act is applicable only to collectors. This prohibits creditors who are attempting to collect their own debts from engaging in behavior prohibited by the Fair Debt Collection Practices Act and Consumer Collection Practices Act. The Consumer Collection Practices Act has very specific guidelines regarding which actions debt collectors and creditors may engage in to collect unpaid debt.

 

Government Investigations

 

We expect that audits, inquiries and investigations from government authorities, agencies, contractors and payors will occur in the ordinary course of business. Such audits, inquiries and investigations and their ultimate resolutions, individually or in the aggregate, could have a material adverse effect on our business, financial condition, results of operations, cash flows and the trading price of our common stock.

 

 

MANAGEMENT

 

The following table sets forth information regarding our executive officers and directors. All directors hold office for one-year terms until the election and qualification of their successors. Officers are elected by the board of directors and serve at the discretion of the board.

 

Name		Age		Positions with the Company
Michael Dent, MD		55		Chief Executive Officer and Chairman of the Board of Directors
George O’Leary		55		Chief Financial Officer, and Director

 

Michael T. Dent, MD, Founder, Chief Executive Officer and Chairman of the Board of Directors .   Dr. Dent founded the Naples Women’s Center in 1996 where he served as its principal executive from formation through February 2016. He is also Co-Founder and Managing Director of InLight Capital Partners LLC since January 2014 and is responsible for its healthcare, information technology and life science investments. He has held key leadership positions in business development, operations, corporate development, and strategy in the healthcare and technology industries since the mid-90s. Prior to founding InLight Capital Partners, Dr. Dent was Founder, Chairman and Chief Executive Officer of NeoGenomics Laboratories (Nasdaq: NEO) where he was on the Board of Directors from 1998 until July 2015. As a retired physician, Dr. Dent is uniquely qualified to understand the challenges and opportunities in healthcare and emerging technologies. Dr. Dent received his Bachelors Degree from Davidson College, where he majored in both Biology and Pre-Med, and went on to earn his medical degree from The University of South Carolina in Charleston, South Carolina. Dr. Dent also attended Florida Gulf Coast University’s Business Executive Education program. Dr. Dent holds board affiliations with MedOfficeDirect (Founder), and The Naples Women’s Center. Our board of directors believes Dr. Dent’s perspective as the founder of the Company, his industry knowledge and prior experience as a director of a public company and familiarity with public company governance, provide him with the qualifications and skills to serve as a director.

 

George G. O’Leary, Chief Financial Officer and Member of the Board of Directors .   Mr. O’Leary has served as our Chief Financial Officer since August 6, 2014. Mr. O’Leary is also Co-Founder and Managing Director of InLight Capital Partners LLC since January 2014. He is a financially trained senior executive specializing in innovative strategic problem solving across functional and industry boundaries. Mr. O’Leary is currently the Chairman of the Board of Directors of Timios Holdings Corp. since March 2014 and on the Board of Directors of MedOfficeDirect since October 2013. From June 2009 to May 2013 Mr. O’Leary was Chairman of the Board and Chief Financial Officer of Protection Plus Securities Corporation until it was sold to Universal Protection Services. From February 2007 to June 2015, Mr. O’Leary was a member of the Board of Directors of NeoMedia Technologies. Mr. O’Leary is founder and President of SKS Consulting of South Florida Corp. (“SKS”) since June 2006 where he works with public and private companies in board representation and/or under consulting agreements providing executive level management expertise, as well as helping the implementation and execution of their companies’ strategic & operational plans. Mr. O’Leary started SKS with the mission to help companies focus on high growth initiatives and execution of their core business while shedding non-core business assets. From 1996 to 2000, Mr. O’Leary was Chief Executive Officer and President of Communication Resources Incorporated (“CRI”), where annual revenues grew from $5 million to $40 million during his tenure. Prior to CRI, Mr. O’Leary was Vice President of Operations of Cablevision Industries, where he ran $125 million of business until it was sold to Time Warner. Mr. O’Leary started his professional career as a senior accountant with Peat Marwick and Mitchell (KPMG). Mr. O’Leary holds a B.B.A. degree in Accounting with honors from Siena College. Our board of directors believes Mr. O’Leary’s extensive business experience provides him with the qualifications and skills to serve as a director.

 

Family Relationships

 

No family relationships exist between any of our current or former directors or executive officers.

 

Involvement is Certain Legal Proceedings

 

No director, executive officer or control person of the Company has been involved in any legal proceeding listed in Item 401(f) of Regulation S-K in the past 10 years.

 

 

Limitation of Liability of Directors

 

Our Amended and Restated Articles of Incorporation states that directors and officers shall be indemnified and held harmless to the fullest extend legally permissible under the laws of the State of Nevada, from time to time, against all expenses, liability and loss (including attorney’s fees, judgments, fines and amounts paid or to be paid in settlement) reasonably incurred or suffered by him/her in connection with acts performed in such capacity. Such right of indemnification shall be a contract right, which may be enforced in a nay manner desired by such person. The expenses of officers and directors incurred in defending a civil or criminal action, suit or proceeding must be paid by the Company as they are incurred and in advance of the final disposition of the action, suit or proceeding.

 

Board Independence

 

Because the Company’s Common Stock is not listed on a national securities exchange, the Company does not currently comply with any board independence requirements. NASDAQ Listing Rule 5605(a)(2) provides that an “independent director” is a person other than an officer or employee of the company or any other individual having a relationship which, in the opinion of the company’s board of directors, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. The NASDAQ listing rules provide that a director cannot be considered independent if:

 

●

the director is, or at any time during the past three years was, an employee of the company;

 

●

the director or a family member of the director accepted any compensation from the company in excess of $120,000 during any period of 12 consecutive months within the three years preceding the independence determination (subject to certain exclusions, including, among other things, compensation for board or board committee service);

 

●

a family member of the director is, or at any time during the past three years was, an executive officer of the company;

 

●

the director or a family member of the director is a partner in, controlling stockholder of, or an executive officer of an entity to which the company made, or from which the company received, payments in the current or any of the past three fiscal years that exceed 5% of the recipient’s consolidated gross revenue for that year or $200,000, whichever is greater (subject to certain exclusions);

 

●

the director or a family member of the director is employed as an executive officer of an entity where, at any time during the past three years, any of the executive officers of the company served on the compensation committee of such other entity; or

 

●

the director or a family member of the director is a current partner of the company’s outside auditor, or at any time during the past three years was a partner or employee of the company’s outside auditor, and who worked on the company’s audit.

 

Based on this above, neither Dr. Dent nor Mr. O’Leary would be considered independent directors of the Company.

 

Board Committees

 

We do not have a standing audit committee. Our full board of directors perform the functions usually designated to an audit committee. While Mr. O’Leary qualifies as an “audit committee financial expert” as defined in Item 407(d)(5) of Regulation S-K, neither Mr. O’Leary nor Dr. Dent qualifies as “independent” as the term is used in Item 7(d)(3)(iv)(B) of Schedule 14A under the Securities Exchange Act of 1934, as amended, and as defined by NASDAQ Rules. We believe that our board of directors is capable of analyzing and evaluating our financial statements and understanding internal controls and procedures for financial reporting. Our board of directors does not believe that it is necessary to have an audit committee because management believes that the functions of an audit committees can be adequately performed by the board of directors. In addition, we believe that retaining an independent director who would qualify as an “audit committee financial expert” would be overly costly and burdensome and is not warranted in our circumstances given the stage of our development and the fact that we have not generated positive cash flow to date. If and when we generate increased revenue and positive cash flow in the future, we intend to form a standing audit committee and identify and appoint an independent financial expert to serve on our audit committee.

 

Code of Ethics

 

We have not yet adopted a Code of Ethics although we expect to adopt one as we further develop our infrastructure and business.

 

 

EXECUTIVE COMPENSATION

 

The following table sets forth information regarding compensation paid to our principal executive officer, principal financial officer, and our highest paid executive officer, for the years ended December 31, 2018 and 2017:

 

																				All
												Stock				Option				Other
				Salary				Bonus				Awards (1)				Awards (2)				Compensation				Total
Name and Position		Year		($)				($)				($)				($)				($)				($)
Michael Dent		2018			65,846				---				---				---				---				65,846
(Chief Executive Officer)		2017			70,000				---				---				---				---				70,000
George O’Leary		2018			157,692				12,500				30,549				366,587				---				567,328
(Chief Financial Officer)		2017			95,400				---				---				---				---				95,400
Robert Horel (3)		2018			215,000				---				---				---				---				215,000
(Chief Marketing Officer)		2017			232,145				---				---				---				---				232,145

 

(1)

Reflects fair value of unrestricted stock awards on the grant date. Stock awards for Mr. O’Leary in 2018 include 100,000 shares granted on July 1, 2018 pursuant to Mr. O’Leary’s Extension Letter Agreement.

 

(2)

Reflects the grant date fair values of stock options. Option awards for Mr. O’Leary in 2018 include a 10-year option to purchase 1,200,000 shares of Company common stock at an exercise price of $0.31 pursuant to Mr. O’Leary’s Extension Letter Agreement.

 

(3)

Mr. Horel was terminated with an effective date of January 31, 2019.

 

Employment Agreements

 

On July 1, 2016, we entered into an employment agreement with Dr. Michael Dent, Chief Executive Officer and a member of our Board of Directors. Dr. Dent’s employment agreement continues until terminated by Dr. Dent, or us and provides for an initial annual base salary of $70,000. Dr. Dent is eligible to receive performance-based incentives, pro-rated for the number of months of service in any given year. Annual bonuses are awarded based on set annual target incentives for executives and other senior ranking employees that are to be determined by the to-be-established Compensation Committee of the Board of Directors. In addition, Mr. Dent is also entitled to receive 500,000 time-based options, as well as 500,000 performance based options, all of which vest in accordance with the schedule set forth in the employment agreement. If Dr. Dent’s employment is terminated by us (unless such termination is “For Cause” (as defined in his employment agreement)), then upon signing a general waiver and release, Dr. Dent will be entitled to severance in an amount equal to 12 months of his then-current annual base salary, as well as the pro-rata portion of any bonus that would be due and payable to him. In the event that Dr. Dent terminates the employment agreement, he shall be entitled to any accrued but unpaid salary and other benefits up to and including the date of termination, and the pro-rata portion of any unvested time-based options up until the date of separation.

 

On July 1, 2016, we entered into an agreement with Mr. George O’Leary, our Chief Financial Officer and a member of our Board of Directors, extending his prior agreement with the Company. Mr. O’Leary’s employment agreement continues until terminated by Mr. O’Leary, or us and provides for an initial annual base salary of $90,000 a year and shall increase to $100,000 per year in year two. Mr. O’Leary is also eligible to receive performance-based incentives. In addition, Mr. O’Leary is also entitled to receive stock options to purchase up to 600,000 shares of common stock of the Company at an exercise price equivalent to the closing price per share at which the stock is quoted on the day prior to his start date. The grant of such options will be made pursuant to the Company’s stock option plan then in effect, shall have a ten-year term from the grant date and shall vest in accordance with the schedule set forth in the agreement. In addition, Mr. O’Leary shall receive healthcare allowance of $750 per month and a car allowance of $650 per month to be paid at the beginning of each month. If Mr. O’Leary employment is terminated by us (unless such termination is “For Cause” (as defined in his employment agreement), then upon signing a general waiver and release, Mr. O’Leary will be entitled to receive his base salary and the Company shall maintain his employee benefits for a period of twelve (12) months beginning on the date of termination. In the event that Mr. O’Leary terminates the agreement, he shall be entitled to any accrued by unpaid salary and other benefits up to and including the date of termination. On July 1, 2018, 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. In connection with the extension, Mr. O’Leary was also granted (i) 100,000 shares of Company common stock and will be granted an additional 100,000 shares on each of July 1, 2019, 2020 and 2021, and (ii) a 10-year option to purchase 1,200,000 shares of Company common stock at an exercise price of $0.31, of which 150,000 vest on July 1, 2019, 450,000 vest monthly from July 1, 2019 to July 1, 2022 and 600,000 vest based on specified performance measures related to the Company’s fiscal years 2018 through 2021.

 

 

Outstanding Equity Awards at Year-End

 

The following table contains information concerning unexercised options that have not vested as of December 31, 2018 with respect to the executive officers named in the Summary Compensation Table:

 

										Number of
										Securities
		Number of Securities								Underlying
		Underlying								Unexercised				Option
		Unexercised Options								Unearned				Exercise				Option
		Exercisable				Unexercisable				Options				Price				Expiration
		(#)				(#)				(#)				($)				Date
Michael Dent			625,000				375,000				375,000			$	0.08			7/1/2026
(Chief Executive Officer)
George O’Leary			400,000				200,000				200,000			$	0.08			7/1/2026
(Chief Financial Officer)			75,000				1,125,000				1,125,000			$	0.31			7/1/2028
Robert Horel (1)			139,583				610,413				610,413			$	0.20			11/28/2026
(Chief Marketing Officer)

 

(1)

Mr. Horel was terminated with an effective date of January 31, 2019.

 

On January 1, 2016, the Company instituted the 2016 Equity Incentive Plan (the “EIP”) for the purpose of having equity awards available to allow for equity participation by its employees. The EIP allows for the issuance of up to 15,503,680 shares of the Company’s common stock to employees, which may be issued in the form of stock options, stock appreciation rights, or restricted shares. The EIP is governed by the Company’s board, or a committee that may be appointed by the board in the future. During the years ended December 31, 2018 ad 2017, the Company made grants totaling 440,000 and 175,000 shares, respectively, of common stock pursuant to the EIP. The grants are subject to time-based vesting requirements and generally vest a portion upon grant and the balance on a straight-line basis over a period of four years.

 

During the year ended December 31, 2018, we granted a 10-year option to purchase 1,200,000 shares of common stock at an exercise price of $0.31 pursuant to Mr. O’Leary’s Extension Letter Agreement dated July 1, 2018.

 

Director Compensation

 

Our directors did not receive any compensation for their services for the years ending December 31, 2018 and 2017 except as set forth above.

 

 

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

 

Dr. Michael Dent

 

Prior to August 2014, NWC was owned and controlled by the Company’s Chief Executive Officer, Dr. Michael Dent (“DMD”). DMD first provided an up to $175,000 unsecured note payable to the Company with a 0% interest rate. During 2013 the limit on the unsecured Note Payable was increased up to $500,000 and during 2014 it was increased to $750,000 with a maturity date of December 31, 2017. All principal and interest is due at maturity of the $750k DMD Note on December 31, 2019. Interest accrued on the $750k DMD Note as of December 31, 2018 and 2017 was $66,859 and $43,963, respectively.

 

The carrying values of notes payable to Dr. Michael Dent as of December 31, 2018 and 2017 were as follows:

 

						Interest				Balance as of December 31,
Inception Date		Maturity Date		Borrower		Rate				2018				2017
January 12, 2017		January 13, 2019		HLYK			10	%		$	40,560	*		$	35,000
January 18, 2017		January 19, 2019		HLYK			10	%			23,165	*			20,000
January 24, 2017		January 15, 2019		HLYK			10	%			57,839	*			50,000
February 9, 2017		February 10, 2019		HLYK			10	%			34,586	*			30,000
April 20, 2017		April 21, 2019		HLYK			10	%			11,357	*			10,000
June 15, 2017		June 16, 2019		HLYK			10	%			36,464	*			32,500
August 17, 2017		August 18, 2018		HLYK			10	%			20,000				20,000
August 24, 2017		August 25, 2018		HLYK			10	%			37,500				37,500
September 7, 2017		September 8, 2018		HLYK			10	%			35,000				35,000
September 21, 2017		September 22, 2018		HLYK			10	%			26,500				26,500
September 29, 2017		September 30, 2018		HLYK			10	%			12,000				12,000
December 21, 2017		December 22, 2018		HLYK			10	%			14,000				14,000
January 8, 2018		January 9, 2019		HLYK			10	%			75,000				---
January 11, 2018		January 12, 2019		HLYK			10	%			9,000				---
January 26, 2018		January 27, 2019		HLYK			10	%			17,450				---
January 3, 2014		December 31, 2018		NWC			10	%			222,050				231,050
										$	672,471			$	553,550

 

On July 18, 2018, in connection with a $2,000,000 private placement by a third party investor, Dr. Dent agreed to extend the maturity date on all of the above notes until December 31, 2019. Interest accrued on the above unsecured promissory notes as of and December 31, 2018 and 2017 was $62,258 and $19,350, respectively.

 

On February 12, 2018, the Company issued a warrant to purchase 6,678,462 shares of common stock to DMD as an inducement to (i) extend the maturity dates of up to $439,450 loaned by Dr. Dent to the Company in 2017 and 2018 in the form of unsecured promissory notes, including $75,000 loaned from Dr. Dent to the Company in January 2018 to allow the Company to retire an existing convertible promissory note payable to Power-up Lending Group Ltd. before such convertible promissory note became eligible for conversion, and (ii) provide continued loans to the Company. The warrant is immediately exercisable at an exercise price of $0.065 per share, subject to adjustment, and expires five years after the date of issuance. The fair value of the warrants was calculated using the Black-Scholes pricing model at $337,466, with the following assumptions: risk-free interest rate of 2.56%, expected life of 5 years, volatility of 268.90%, and expected dividend yield of zero. On March 28, 2012, DMD agreed to extend the maturity dates of promissory notes with an aggregate face value of $177,500, which were originally scheduled to mature before September 30, 2018, by one year from the original maturity date. Because the fair value of the warrants was greater than 10% of the present value of the remaining cash flows under the modified promissory notes, the transaction was treated as a debt extinguishment and reissuance of new debt instruments pursuant to the guidance of ASC 470-50 “Debt – Modifications and Extinguishments” (“ASC 470-50”). A loss on debt extinguishment was recorded in the amount of $348,938, equal to the fair value of the warrants of $337,466, plus the excess of $11,472 of the fair value of the reissued debt instruments over the carrying value of the existing debt instruments. The change in fair value of the reissued debt instruments subsequent to the reissuance date was $821 in the year ended December 31, 2018 and is included on the statement of operations in “Change in fair value of debt.”

 

 

MedOffice Direct

 

During 2017, the Company entered into an agreement with MedOffice Direct (“MOD”), a company majority-owned by the Company’s CEO and largest shareholder, Dr. Michael Dent, pursuant to which the Company 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.

 

During 2017, the Company entered into a separate Marketing Agreement with MOD pursuant to which MOD agreed to market the HealthLynked Network to its physician practice clients, in exchange for a semi-annual fee of $25,000. This agreement was terminated effective April 1, 2018. During the years ended December 31, 2018 and 2017, the Company recognized general and administrative expense in the amount of $12,500 and $27,500, respectively, pursuant to this agreement. On July 1, 2018 HLYK and MOD signed a marketing and service agreement where HLYK will include MOD offering as part of its product offering to physicians and HLYK will receive 8% of revenue for new sales related to MOD products sold by the HLYK sales team.

 

Stock Repurchase

 

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.

 

 

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

 

The following table sets forth information with respect to the beneficial ownership of our common stock as of June 13, 2019 by (i) each person known by us to beneficially own more than 5.0% of our common stock, (ii) each of our directors, (iii) each of the named executive officers, and (iv) all of our directors and executive officers as a group. The percentages of common stock beneficially owned are reported on the basis of regulations of the SEC governing the determination of beneficial ownership of securities. Under the rules of the SEC, a person is deemed to be a beneficial owner of a security if that person has or shares voting power, which includes the power to vote or to direct the voting of the security, or investment power, which includes the power to dispose of or to direct the disposition of the security. Except as indicated in the footnotes to this table, each beneficial owner named in the table below has sole voting and sole investment power with respect to all shares beneficially owned and each person’s address is c/o HealthLynked Corp., 726 Medical Blvd Suite 101, Naples, Florida 34110. As of June 13, 2019, we had 101,068,541 shares issued and outstanding.

 

		Shares of Common Stock Beneficially Owned (1)				Percentage of Shares of Common Stock Beneficially Owned (2)
Dr. Michael Dent, Chief Executive Officer and Chairman (3)			59,215,435				53.62	%
George O’Leary, Chief Financial Officer, Chief Operating Officer and Director (4)			2,850,000				2.80	%
All officers and directors as a group (2 persons)			62,065,435				56.55	%
5% Stockholders:
Urania Holdings LLC (5)			5,620,000				5.49	%
Iconic Holdings, LLC (6)			10,096,747				9.99	%

 

(1)

Under Rule 13d-3 of the Exchange Act of 1934, as amended (the “Exchange Act”), a beneficial owner of a security includes any person who, directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise has or shares: (i) voting power, which includes the power to vote or to direct the voting of shares; and (ii) investment power, which includes the power to dispose or direct the disposition of shares. Certain shares may be deemed to be beneficially owned by more than one person (if, for example, persons share the power to vote or the power to dispose of the shares). In addition, shares are deemed to be beneficially owned by a person if the person has the right to acquire the shares (for example, upon exercise of an option) within 60 days of the date as of which the information is provided. In computing the percentage ownership of any person, the amount of shares outstanding is deemed to include the amount of shares beneficially owned by such person (and only such person) by reason of these acquisition rights.

 

(2)

Based on 101,068,541 shares of common stock issued and outstanding as of June 13, 2019.

 

(3)

Includes 2,953,640 shares of common stock held by Dr. Dent directly, 46,900,000 shares of common stock held in the name of Mary S. Dent Gifting Trust Common, 8,678,462 shares of common stock issuable upon exercise of warrants, and 683,333 vested employee stock options. Excludes 316,667 employee stock options which are subject to future vesting requirements and are not expected to vest within 60 days of June 13, 2019.

 

(4)

Includes 2,100,000 shares of common stock held by SKS Consulting of South Florida Corp., a corporation directly controlled by George O’Leary, 100,000 shares of common stock held by George O’Leary directly, and 650,000 vested employee stock options. Excludes 1,150,000 employee stock options which are subject to future vesting requirements and are not expected to vest within 60 days of June 13, 2019.

 

(5)

The address of this beneficial owner is 1405 Estuary Trail, Delray Beach, Florida 33483. Chris Salamone, as Chief Executive Officer of Urania Holdings LLC, holds voting and dispositive power over the securities of the Company held by Urania Holdings LLC. Includes 4,370,000 shares of common stock and 1,250,000 shares of common stock issuable upon exercise of warrants.

 

(6)

The address of this beneficial owner is 2251 San Diego Ave, #B150, San Diego CA 92110. Michael Sobeck as the Managing Member of Iconic Holdings, LLC holds voting and dispositive power over the securities of the Company held by Iconic Holdings, LLC. Includes (i) 9,479,643 shares of common stock issuable upon conversion of the Iconic Convertible Notes, each of which are subject to a 9.99% beneficial ownership limitation, and (ii) up to 617,104 shares issuable under warrants with 9.99% beneficial ownership limitation. Does not include (i) 15,602,340 shares of common stock issuable under warrants with 9.99% beneficial ownership limitation and (ii) up to 15,640,478 shares of common stock issuable under the Investment Agreement, which are subject to a 9.99% beneficial ownership limitation.

 

 

SELLING STOCKHOLDER

 

This prospectus covers the resale, from time to time, of up to 21,000,000 shares of common stock issuable to Iconic under the Investment Agreement. We are registering the shares hereby pursuant to the terms of a registration rights agreement between us and Iconic, in order to permit it to offer the shares for resale from time to time. Except as described in the registration statement of which this prospectus forms a part, there is no relationship between us and Iconic.

 

Number of Shares

Number of

Number of Shares

Beneficially Owned

Shares

Beneficially Owned

Prior to this Offering

Being

After this Offering (2)

Selling Stockholder

Number

Percent (1)

Offered

Number

Percent (1)

Iconic Holdings, LLC (3)

10,096,747

(4)

9.99

%

21,000,000

11,659,231

(5)

9.99

%

 

(1)

Applicable percentage ownership is based on 101,068,541 shares of common stock outstanding as of June 13, 2019. “Beneficial ownership” includes shares for which an individual, directly or indirectly, has or shares voting or investment power, or both. Unless otherwise indicated, all of the listed persons have sole voting and investment power over the shares listed opposite their names. Beneficial ownership as reported in the above table has been determined in accordance with Rule 13d-3 of the Exchange Act. In computing the percentage ownership of any person, the amount of shares outstanding is deemed to include the amount of shares beneficially owned by such person (and only such person) by reason of these acquisition rights.

 

(2)

We have assumed that the selling stockholder will sell all of the shares being offered in this offering.

 

(3)

The address of this selling stockholder is 2251 San Diego Ave, #B150, San Diego CA 92110. Michael Sobeck as the Managing Member of Iconic Holdings, LLC holds voting and dispositive power over the securities of the Company held by Iconic Holdings, LLC.

 

(4)

Beneficial ownership prior to the offering includes (i) 9,479,643 shares of common stock issuable upon conversion of the Iconic Convertible Notes, each of which are subject to a 9.99% beneficial ownership limitation, and (ii) up to 317,143 shares issuable under warrants with 9.99% beneficial ownership limitation. Does not include (i) 15,602,340 shares of common stock issuable under warrants with 9.99% beneficial ownership limitation and (ii) up to 15,640,478 shares of common stock issuable under the Investment Agreement, which are subject to a 9.99% beneficial ownership limitation..

 

(5)

Beneficial ownership following the offering includes (i) 9,479,643 shares of common stock issuable upon conversion of the Convertible Notes, and (ii) 2,179,588 shares of common stock issuable under warrants, which are subject to a 9.99% beneficial ownership limitation.  Excludes 14,039,856 shares issuable under the warrants.

 

 

DESCRIPTION OF SECURITIES

 

Authorized and Outstanding Capital Stock

 

We have authorized 500,000,000 shares of common stock, par value $0.0001, 101,068,541 of which are currently issued and outstanding. We currently have 20,000,000 shares of “blank check” preferred stock. We had previously designated and issued 2,953,640 shares of Series A Preferred Stock in September 2014, however these shares were converted to common stock on July 30, 2016.

 

Common Stock

 

The holders of our common stock are entitled to one vote per share. In addition, the holders of our common stock will be entitled to receive ratably dividends, if any, declared by our board of directors out of legally available funds; however, the current policy of our board of directors is to retain earnings, if any, for operations and growth. Upon liquidation, dissolution or winding-up, the holders of our common stock will be entitled to share ratably in all assets that are legally available for distribution. The holders of our common stock will have no preemptive, subscription, redemption or conversion rights. The rights, preferences and privileges of holders of our common stock will be subject to, and may be adversely affected by, the rights of the holders of any series of preferred stock, which may be designated solely by action of our board of directors and issued in the future.

 

Blank Check Preferred Stock

 

Our board of directors will be authorized, subject to any limitations prescribed by law, without further vote or action by our stockholders, to issue from time to time shares of preferred stock in one or more series. Each series of preferred stock will have the number of shares, designations, preferences, voting powers, qualifications and special or relative rights or privileges as shall be determined by our board of directors, which may include, among others, dividend rights, voting rights, liquidation preferences, conversion rights and preemptive rights.

 

Warrants

 

On March 22, 2017, the Company entered into the Amended Investment Agreement whereby the parties have agreed to modify the terms of Investment Agreement by providing that in lieu of granting the investor warrants for each $50,000 that the investor tenders to the Company, the Company shall grant, and has granted, to the investor warrants to purchase an aggregate of seven million shares of common stock. The warrants shall have the following fixed exercise prices: (i) four million shares at $0.25 per share; (ii) two million shares at $0.50 per share; and (iii) one million shares at $1.00 per share. The warrants also contain a “cashless exercise” provision and the shares underlying the warrants will not be registered.

 

In connection with the Investment Agreement, we also issued to Iconic a warrant to purchase up to 6,111,111 shares of our common stock, at an exercise price of $0.09 per share. The warrant shall expire on July 11, 2021 and shall have a “cashless” exercise provision. The warrant has a 4.99% beneficial ownership limitation which may be adjusted at the holder’s request to a 9.99% beneficial ownership limitation upon 61 days’ notice.

 

On January 2, 2015, NWC agreed to issue to Dr. Dent 2,000,000 ten-year warrants to purchase common shares at an exercise price of $0.05 per share as compensation for interest accrued on loans made by Dr. Dent to NWC. The warrants had a fair value of $52,847.

 

In July 2016, we issued to investors five-year warrants to purchase up to 2,187,500 shares of common stock at an exercise price of $0.10 per share.

 

In July 2016 we issued Delaney five year warrants to purchase 277,778 shares of commons stock at an exercise price of $0.09, in exchange for services provided.

 

In February 2017 we issued the counterparty in the Investment Agreement a warrant to purchase up to 500,000 shares of our common stock, at an exercise price of $0.15 per share. The warrant shall expire on February 10, 2020 and shall have a “cashless” exercise provision. The warrant has a 9.99% beneficial ownership limitation.

 

 

On March 22, 2017, we granted to Iconic five-year warrants to purchase an aggregate of 7,000,000 shares of common stock. The warrants have the following fixed exercise prices: (i) 4,000,000 shares at $0.25 per share; (ii) 2,000,000 shares at $0.50 per share; and (iii) 1,000,000 shares at $1.00 per share. The warrants also contain a “cashless exercise” provision and the shares underlying the warrants will not be registered. We also issued to a third party five-year fee warrants to purchase 200,000 shares of our common stock at an exercise price of $0.25 per share, 100,000 shares of our common stock at an exercise price of $0.50 per share, and 50,000 shares of our common stock at an exercise price of $1.00 per share.

 

On May 22, 2017, in connection with the issuance of the $111k Note, we issued to Iconic a five-year warrant to purchase 133,333 shares of our common stock at an exercise price of $0.75 per share. We also issued to a third party a five-year fee warrant to purchase 6,667 shares of our common stock at an exercise price of $0.75 per share.

 

On August 8, 2017, in exchange for a five-year warrant to purchase 1,000,000 shares of common stock at an exercise price of $0.30 per share, Iconic agreed to (i) extend the maturity date of the Secured Note until July 7, 2018, and (ii) extend the maturity date of the Fee Note until July 11, 2018.

 

During October 2017, we sold 1,461,111 shares of common stock in private placement transactions to 3 investors at a share price between $0.18 and $0.20 per share. In connection with the stock sales, we also issued 959,998 five-year warrants to purchase shares of common stock at an exercise price of $0.30 per share.

 

On January 11, 2018, we sold 588,235 shares of common stock in a private placement transaction to an investor and received $50,000 in proceeds from the sale. The shares were issued at a share price of $0.085 per share. In connection with the stock sale, we also issued 588,235 five-year warrants to purchase shares of common stock at an exercise price of $0.15 per share.

 

On February 12, 2018, we issued a warrant to purchase 6,678,462 shares of common stock to Dr. Michael Dent as an inducement to (i) extend the maturity dates of up to $439,450 loaned by Dr. Dent to us in 2017 and 2018 in the form of unsecured promissory notes, including $75,000 loaned from Dr. Dent to us in January 2018 to allow us to retire an existing convertible promissory note payable before such convertible promissory note became eligible for conversion, and (ii) provide continued loans to us. The warrant is immediately exercisable at an exercise price of $0.065 per share, subject to adjustment, and expires five years after the date of issuance.

 

On February 28, 2018, we sold 2,352,942 shares of common stock in private placement transactions to two investors and received $200,000 in proceeds from the sale. The shares were issued at a share price of $0.085 per share. In connection with the stock sales, we also issued to the investors 1,764,706 five-year warrants to purchase shares of common stock at an exercise price of $0.15 per share.

 

On March 28, 2018, in exchange for a five-year warrant to purchase 125,000 shares of HLYK common stock at an exercise price of $0.05 per share, Iconic agreed to extend the maturity date of the $111k Note until July 11, 2018.

 

On May 10, 2018, we sold 100,000 shares of common stock in private placement transactions to an investor and received $15,500 in proceeds from the sale. The shares were issued at a share price of $0.155 per share. In connection with the stock sale, we also issued 50,000 five-year warrants to purchase shares of common stock at an exercise price of $0.25 per share.

 

On June 6, 2018, we issued 600,000 five-year warrants with an exercise price of $0.15 to two individuals for consulting services to be performed between June 6 and December 6, 2018.

 

On June 14, 2018, we sold 208,000 shares of common stock in private placement transactions to an investor and received $52,000 in proceeds from the sale. The shares were issued at a share price of $0.25 per share. In connection with the stock sale, we also issued 104,000 five-year warrants to purchase shares of common stock at an exercise price of $0.35 per share.

 

On July 11, 2018, we and the issuer of three previously-issued convertible promissory notes (dated July 7, 2016 with a face value of $550,000, July 7, 2016 with a face value of $50,000 and May 22, 2017 with a face value of $111,000 ) entered into an Amendment agreement related to these notes, 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 of our common shares at an exercise price of $0.25, and (ii) a three-year warrant to purchase 300,000 of our common shares at an exercise price of $0.50.

 

 

On July 13, 2018, we and the issuer of three previously-issued convertible promissory notes (dated July 7, 2016 with a face value of $550,000, July 7, 2016 with a face value of $50,000 and May 22, 2017 with a face value of $111,000 ) entered into a second Amendment agreement, pursuant to which the holder agreed to further extend the maturity date of these notes until December 31, 2019 in exchange for (i) three-year warrant to purchase 175,000 of our common shares at an exercise price of $0.25, and (ii) three-year warrant to purchase 75,000 of our common shares at an exercise price of $0.50.

 

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.

 

On August 15, 2018, we sold 285,714 shares of common stock in a private placement transaction to an investor and received $100,000 in proceeds from the sale. The shares were issued at a share price of $0.35 per share. In connection with the stock sale, we also issued 142,857 five-year warrants to purchase shares of common stock at an exercise price of $0.45 per share.

 

On August 20, 2018, we 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.

 

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.

 

On December 6, 2018, the Company granted three-year warrants to purchase 240,000 shares at an exercise price of $0.20 per share to the advisors for services to be provided over an additional three-month period.

 

On February 28, 2019, we sold 133,334 shares of common stock in a private placement transaction to an investor and received $40,000 in proceeds from the sale. In connection with the stock sale, we also issued 66,667 five-year warrants to purchase shares of common stock at an exercise price of $0.40 per share.

 

On March 6, 2019, the Company granted three-year warrants to purchase 180,000 shares at an exercise price of $0.35 per share to the advisors for services to be provided over an additional three-month period.

 

On March 7, 2019, we sold 1,000,000 shares of common stock in a private placement transaction to an investor and received $300,000 in proceeds from the sale. In connection with the stock sale, we also issued 500,000 five-year warrants to purchase shares of common stock at an exercise price of $0.40 per share and 250,000 five-year warrants to purchase shares of common stock at an exercise price of $0.50 per share.

 

On April 12, 2019, we issued 600,000 five year warrants to purchase shares of common stock at an exercise price of $0.25 per share in connection with a $357,500 convertible promissory note.

 

 

Convertible Notes

 

In connection with the Investment Agreement, we issued the Secured Note due April 11, 2017 in the principal amount of $550,000. At any time and from time to time, the holder of the Secured Note may convert, in whole or in part, the outstanding and unpaid principal amount under the Secured Note into shares of the Company’s common stock at a conversion price of $0.08 per share. In addition, we also issued the Fee Note due July 11, 2017 in the principal amount of $50,000. The holder of the Fee Note also has the right to, at the holder’s sole option, at any time and from time to time, to convert in whole or in part the outstanding and unpaid principal amount under the Fee Note into shares of the Company’s common stock at a conversion price of $0.10 per share. The Convertible Notes have a 9.99% beneficial ownership limitation. The Secured Note matures on July 7, 2018 and the Fee Note matures on July 11, 2018.

 

On May 22, 2017, we entered into the $111k Note, which matures on July 11, 2018. The $111k Note is convertible into shares of our common stock at the discretion of the note holder at a fixed price of $0.35 per share, and is secured by all of our assets.

 

 

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.

 

 

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 24% 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 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.

 

On January 24, 2019, the Company entered into a securities purchase agreement for the sale of a $78,000 convertible note (the “$78k Note II”). The $78k Note II included $3,000 fees for net proceeds of $75,000. The $78k Note II has an interest rate of 10% and a default interest rate of 22% and matures on November 15, 2019. The $78k 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.

 

On April 3, 2019, the Company entered into a securities purchase agreement for the sale of a $103,000 convertible note (the “$103k Note III”). 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 22% and matures on February 28, 2020. 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, 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.

 

On April 11, 2019, the Company entered into securities purchase agreements for the sale of two identical convertible notes with an aggregate face value of $209,000 (the “$209k Notes”). The $209k Notes included $9,000 fees for net proceeds of $200,000. The $209k Notes have an interest rate of 10% and a default interest rate of 22%, mature on April 11, 2020, and 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. In connection with the $209k Notes, the Company also issued to the holder 25,000 shares of Company common stock valued at $6,250, which was recorded to equity. 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.

 

 

On April 15, 2019, the Company issued a fixed convertible note with a face value of $357,500 (the “$357.5k Note”). The $357.5k Note included $32,500 fees for net proceeds of $325,000. The $357.5k Note has an interest rate of 10%, matures on December 31, 2019, and may be converted into common stock of the Company by the holder at any time, subject to a 9.99% beneficial ownership limitation, at a fixed conversion price per share of $0.20, or 1,787,500 shares. At inception, the investors were also granted a five-year warrant to purchase 600,000 shares of the Company’s common stock at an exercise price of $0.25 per share. Upon an event of default, 140% of the outstanding principal and any interest due amount shall be immediately due and the conversion price resets 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.

 

On May 7, 2019, the Company entered into a securities purchase agreement for the sale of a $103,000 convertible note (the “$103k Note IV”). The $103k Note IV included $3,000 fees for net proceeds of $100,000. The $103k Note IV has an interest rate of 10% and a default interest rate of 22% and matures on February 28, 2020. The $103k Note IV may be converted into common stock of the Company by the holder at any time after the 6-month anniversary of the issuance date, subject to a 4.99% beneficial ownership limitation, at a conversion price per share equal to a 39% discount to the lowest bid or trading price of the Company’s common stock during the fifteen (15) trading days prior to the conversion date. Upon an event of default caused by the Company’s failure to deliver shares upon a conversion pursuant to the terms of the note, 300% of the outstanding principal and any interest due amount shall be immediately due. Upon an event of default caused by the Company’s breach of any other events of default specified in the note, 150% of the outstanding principal and any interest due amount shall be immediately due.

 

On June 3, 2019, the Company entered into a securities purchase agreement for the sale of a $154,000 convertible note (the “$154k Note”). The $154k Note included $4,000 fees for net proceeds of $150,000. The $154k Note has an interest rate of 10% and a default interest rate of 22% and matures on February 28, 2020. The $154k 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, 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

 

 

PLAN OF DISTRIBUTION

 

We are registering 21,000,000 shares of common stock under this prospectus on behalf of Iconic. Except as described below, to our knowledge, the selling stockholder has not entered into any agreement, arrangement or understanding with any particular broker or market maker with respect to the shares of common stock offered hereby, nor, except as described below, do we know the identity of any brokers or market makers that may participate in the sale of the shares.

 

The selling stockholder may decide not to sell any shares. The selling stockholder may from time to time offer some or all of the shares of common stock through brokers, dealers or agents who may receive compensation in the form of discounts, concessions or commissions from the selling stockholder and/or the purchasers of the shares of common stock for whom they may act as agent. In effecting sales, broker-dealers that are engaged by the selling stockholder may arrange for other broker-dealers to participate. Iconic is an “underwriter” within the meaning of the Securities Act. Any brokers, dealers or agents who participate in the distribution of the shares of common stock may also be deemed to be “underwriters,” and any profits on the sale of the shares of common stock by them and any discounts, commissions or concessions received by any such brokers, dealers or agents may be deemed to be underwriting discounts and commissions under the Securities Act. Iconic has advised us that it may effect resales of our common stock through any one or more registered broker-dealers. Because the selling stockholder is deemed to be an underwriter, the selling stockholder will be subject to the prospectus delivery requirements of the Securities Act and may be subject to certain statutory liabilities of, including but not limited to, Sections 11, 12 and 17 of the Securities Act and Rule 10b-5 under the Securities Exchange Act of 1934, as amended, or the Exchange Act.

 

The selling stockholder will act independently of us in making decisions with respect to the timing, manner and size of each sale. Such sales may be made over the OTCQB at then prevailing market prices, at prices related to prevailing market prices or at privately negotiated prices. The shares of common stock may be sold according to one or more of the following methods:

  

●

a block trade in which the broker or dealer so engaged will attempt to sell the shares of common stock as agent but may position and resell a portion of the block as principal to facilitate the transaction;

 

●

purchases by a broker or dealer as principal and resale by such broker or dealer for its account pursuant to this prospectus;

 

●

ordinary brokerage transactions and transactions in which the broker solicits purchasers;

 

●

privately negotiated transactions;

 

●

a combination of such methods of sale; and

 

●

any other method permitted pursuant to applicable law.

 

Any shares covered by this prospectus which qualify for sale pursuant to Rule 144 of the Securities Act may be sold under Rule 144 rather than pursuant to this prospectus. In addition, the selling stockholder may transfer the shares by other means not described in this prospectus.

 

 

Any broker-dealer participating in such transactions as agent may receive commissions from Iconic (and, if they act as agent for the purchaser of such shares, from such purchaser). Broker-dealers may agree with Iconic to sell a specified number of shares at a stipulated price per share, and, to the extent such a broker-dealer is unable to do so acting as agent for Iconic, to purchase as principal any unsold shares at the price required to fulfill the broker-dealer commitment to Iconic. Broker-dealers who acquire shares as principal may thereafter resell such shares from time to time in transactions (which may involve crosses and block transactions and which may involve sales to and through other broker-dealers, including transactions of the nature described above) on the Nasdaq Capital Market, on the over-the-counter market, in privately-negotiated transactions or otherwise at market prices prevailing at the time of sale or at negotiated prices, and in connection with such resales may pay to or receive from the purchasers of such shares commissions computed as described above. To the extent required under the Securities Act, an amendment to this prospectus, or a supplemental prospectus will be filed, disclosing:

 

●

the name of any such broker-dealers;

 

●

the number of shares involved;

 

●

the price at which such shares are to be sold;

 

●

the commission paid or discounts or concessions allowed to such broker-dealers, where applicable;

 

●

that such broker-dealers did not conduct any investigation to verify the information set out or incorporated by reference in this prospectus, as supplemented; and

 

●

other facts material to the transaction.

 

Underwriters and purchasers that are deemed underwriters under the Securities Act may engage in transactions that stabilize, maintain or otherwise affect the price of the securities, including the entry of stabilizing bids or syndicate covering transactions or the imposition of penalty bids. Iconic and any other persons participating in the sale or distribution of the shares will be subject to the applicable provisions of the Exchange Act and the rules and regulations thereunder including, without limitation, Regulation M. These provisions may restrict certain activities of, and limit the timing of, purchases by the selling stockholder or other persons or entities. Furthermore, under Regulation M, persons engaged in a distribution of securities are prohibited from simultaneously engaging in market making and certain other activities with respect to such securities for a specified period of time prior to the commencement of such distributions, subject to special exceptions or exemptions. Regulation M may restrict the ability of any person engaged in the distribution of the securities to engage in market-making and certain other activities with respect to those securities. In addition, the anti-manipulation rules under the Exchange Act may apply to sales of the securities in the market. All of these limitations may affect the marketability of the shares and the ability of any person to engage in market-making activities with respect to the securities.

 

We have agreed to pay the expenses of registering the shares of common stock under the Securities Act, including registration and filing fees, printing expenses, administrative expenses and certain legal and accounting fees. The selling stockholder will bear all discounts, commissions or other amounts payable to underwriters, dealers or agents, as well as transfer taxes and certain other expenses associated with the sale of securities.

 

Under the terms of the registration rights agreement with Iconic, we have agreed to indemnify the selling stockholder and certain other persons against certain liabilities in connection with the offering of the shares of common stock offered hereby, including liabilities arising under the Securities Act or, if such indemnity is unavailable, to contribute toward amounts required to be paid in respect of such liabilities.

 

At any time a particular offer of the shares of common stock is made, a revised prospectus or prospectus supplement, if required, will be distributed. Such prospectus supplement or post-effective amendment will be filed with the SEC, to reflect the disclosure of required additional information with respect to the distribution of the shares of common stock. We may suspend the sale of shares by the selling stockholder pursuant to this prospectus for certain periods of time for certain reasons, including if the prospectus is required to be supplemented or amended to include additional material information.

 

LEGAL MATTERS

 

Sheppard, Mullin, Richter & Hampton LLP, New York, New York, has passed upon the validity of the shares of our Common Stock to be sold in this offering.

 

EXPERTS

 

Our audited financial statements as of December 31, 2018 and 2017 have been included in this prospectus in reliance on the report of RBSM LLP, an independent registered public accounting firm appearing elsewhere herein given on the authority of said firm as experts in auditing and accounting.

 

 

WHERE YOU CAN FIND ADDITIONAL INFORMATION

 

We have filed with the SEC a registration statement on Form S-1, together with any amendments and related exhibits, under the Securities Act with respect to our shares of common stock offered by this prospectus. The registration statement contains additional information about us and the shares of common stock that we are offering in this prospectus.

 

We file annual, quarterly and current reports and other information with the SEC under the Exchange Act. Such reports and other information filed by the Company with the SEC are available free of charge on the SEC’s website. You may also request a copy of those filings, excluding exhibits, from us at no cost. These requests should be addressed to us at: George O’Leary, Chief Financial Officer, HealthLynked Corp., 1726 Medical Blvd Suite 101, Naples, Florida 34110 and our telephone number is: 239-513-1992. The public may read and copy any materials filed by the Company with the SEC at the SEC’s Public Reference Room at 100 F Street, NE, Room 1580, Washington, DC 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains an Internet site that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC at  www.sec.gov . The contents of these websites are not incorporated into this filing by reference. Further, the Company’s references to the URLs for these websites are intended to be inactive textual references only.

 

 

INDEX TO FINANCIAL STATEMENTS

 

CONTENTS	PAGE NO.
Report of Independent Registered Public Accounting Firm	F-2
Consolidated Balance Sheets at December 31, 2018 and 2017	F-3
Consolidated Statements of Operations for the Years Ended December 31, 2018 and 2017	F-4
Consolidated Statement of Changes in Shareholders’ Deficit for the Years Ended December 31, 2018 and 2017	F-5
Consolidated Statements of Cash Flows for the Years Ended December 31, 2018 and 2017	F-6
Notes to the Consolidated Financial Statements	F-8
Condensed Consolidated Balance Sheets at March 31, 2019 and December 31, 2018	F-52
Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2019 and 2018	F-53
Condensed Consolidated Statement of Changes in Shareholders’ Deficit for the Three Months Ended March 31, 2019 and 2018	F-54
Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2019 and 2018	F-55
Notes to the Condensed Consolidated Financial Statements	F-56

 

 

Report of Independent Registered Public Accounting Firm

  

To the Board of Directors and Shareholders of

Healthlynked Corporation

  

Opinion on the Financial Statements

 

We have audited the accompanying consolidated balance sheets of Healthlynked Corporation (the “Company”), as of December 31, 2018 and 2017, and the related consolidated statements of operations, stockholders’ equity and cash flows for each of the two years in the period ended December 31, 2018 and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2018 and 2017, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2018, in conformity with accounting principles generally accepted in the United States of America.

 

The Company’s Ability to Continue as a Going Concern

 

The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note 3 to the accompanying consolidated financial statements, the Company has suffered recurring losses from operations, generated negative cash flows from operating activities, has an accumulated deficit and has stated that substantial doubt exists about Company’s ability to continue as a going concern. Management’s evaluation of the events and conditions and management’s plans in regarding these matters are also described in Note 3. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

Basis for Opinion

 

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

 

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The company is not required to have, nor were we engaged to perform, an audit of the Company’s internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

 

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

  

/s/ RBSM LLP

We have served as the Company’s auditor since 2014.   New York, New York April 1, 2019

 

 

HEALTHLYNKED CORPORATION

CONSOLIDATED BALANCE SHEETS

 

		December 31,
		2018				2017
ASSETS
Current Assets
Cash		$	135,778			$	50,006
Accounts receivable, net of allowance for doubtful accounts of $13,972 and $-0- as of December 31, 2018 and 2017, respectively			114,884				113,349
Prepaid expenses			28,542				81,892
Deferred offering costs			96,022				121,620
Total Current Assets			375,226				366,867
Property, plant and equipment, net of accumulated depreciation of $752,173 and $728,391 as of December 31, 2018 and 2017, respectively			42,597				63,376
Deposits			9,540				9,540
Total Assets		$	427,363			$	439,783
LIABILITIES AND SHAREHOLDERS’ DEFICIT
Current Liabilities
Accounts payable and accrued expenses		$	394,333			$	253,514
Capital lease, current portion			19,877				18,348
Due to related party, current portion			429,717				363,845
Notes payable to related party, current portion			672,471				553,550
Notes payable, net of original issue discount and debt discount of $-0  and $26,881 as of December 31, 2018 and 2017, respectively			---				70,186
Convertible notes payable, net of original issue discount and debt discount of $386,473 and $266,642 as of December 31, 2018 and 2017, respectively			1,042,314				811,858
Derivative financial instruments			800,440				398,489
Total Current Liabilities			3,359,152				2,469,790
Long-Term Liabilities
Capital leases, long-term portion			3,058				21,406
Total Liabilities			3,362,210				2,491,196
Shareholders’ Deficit
Common stock, par value $0.0001 per share, 500,000,000 shares authorized, 85,178,902 and 72,302,937 shares issued and outstanding as of December 31, 2018 and 2017, respectively			8,518				7,230
Common stock issuable, $0.0001 par value; 114,080 and 122,101 shares as of December 31, 2018 and 2017, respectively			26,137				8,276
Additional paid-in capital			7,531,553				2,638,311
Accumulated deficit			(10,501,055	)			(4,705,230	)
Total Shareholders’ Deficit			(2,934,847	)			(2,051,413	)
Total Liabilities and Shareholders’ Deficit		$	427,363			$	439,783

 

See the accompanying notes to these Consolidated Financial Statements

 

 

HEALTHLYNKED CORPORATION

CONSOLIDATED STATEMENT OF OPERATIONS

 

		Years Ended December 31,
		2018				2017
Revenue
Patient service revenue, net		$	2,259,002			$	2,103,579
Operating Expenses
Salaries and benefits			2,366,582				2,022,445
General and administrative			2,840,784				1,848,866
Depreciation and amortization			23,782				23,606
Total Operating Expenses			5,231,148				3,894,917
Loss from operations			(2,972,146	)			(1,791,338	)
Other Income (Expenses)
Loss on extinguishment of debt			(393,123	)			(290,581	)
Change in fair value of debt			(140,789	)			---
Financing cost			(1,221,911	)			(72,956	)
Amortization of original issue and debt discounts on notes payable and convertible notes			(763,616	)			(330,435	)
Change in fair value of derivative financial instrument			(106,141	)			3,967
Interest expense			(193,109	)			(99,668	)
Total other expenses			(2,818,689	)			(789,673	)
Net loss before provision for income taxes			(5,790,835	)			(2,581,011	)
Provision for income taxes			---				---
Net loss		$	(5,790,835	)		$	(2,581,011	)
Net loss per share, basic and diluted:
Basic		$	(0.07	)		$	(0.04	)
Fully diluted		$	(0.07	)		$	(0.04	)
Weighted average number of common shares:
Basic			78,816,272				69,560,481
Fully diluted			78,816,272				69,560,481

 

See the accompanying notes to these Consolidated Financial Statements

 

 

HEALTHLYNKED CORPORATION

CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ DEFICIT

YEARS ENDED DECEMBER 31, 2018 AND 2017

 

		Number of Shares								Common				Additional								Total
		Common				Common				Stock				Paid-in				Accumulated				Shareholders’
		Stock				Stock				Issuable				Capital				Deficit				Deficit
		(#)				($)				($)				($)				($)				($)
Balance at December 31, 2016			65,753,640				6,575				6,451				1,199,511				(2,124,219	)			(911,682	)
Sale of common stock			6,096,197				610				---				758,654				---				759,264
Fair value of warrants allocated to proceeds of common stock			---				---				---				89,376				---				89,376
Fair value of warrants allocated to proceeds of convertible notes payable			---				---				---				73,696				---				73,696
Fair value of warrants issued pursuant to Amended Investment Agreement			---				---				---				153,625				---				153,625
Fair value of warrants issued to extend convertible notes payable			---				---				---				290,581				---				290,581
Consultant fees payable with common shares and warrants			276,850				28				1,817				52,083				---				53,928
Shares and options issued pursuant to employee equity incentive plan			176,250				17				8				20,785				---				20,810
Net loss			---				---				---				---				(2,581,011	)			(2,581,011	)
Balance at December 31, 2017			72,302,937				7,230				8,276				2,638,311				(4,705,230	)			(2,051,413	)
Sale of common stock			9,875,228				988				---				2,450,180				---				2,451,168
Sale of common stock initially allocated to derivative financial instruments			---				---				---				(1,774,298	)			---				(1,774,298	)
Fair value of warrants allocated to proceeds of common stock			---				---				---				181,788				---				181,788
Fair value of warrants issued to extend related party notes payable			---				---				---				337,466				---				337,466
Fair value of warrants issued to extend convertible notes payable			---				---				---				229,900				---				229,900
Fair value of warrants issued to retire convertible notes payable			---				---				---				143,014				---				143,014
Shares issued with convertible notes payable			35,000				4				---				5,593				---				5,597
Fair value of warrants issued for professional services			---				---				---				296,447				---				296,447
Derivative liabilities transferred to additional paid-in capital			---				---				---				2,783,372				---				2,783,372
Conversion of convertible notes payable to common stock			384,839				38				---				42,173				---				42,211
Derivative liabilities reclassified into additional paid in capital for convertible notes payable conversion into shares			---				---				---				63,549				---				63,549
Consultant fees payable with common shares and warrants			277,147				28				17,869				31,660				---				49,557
Shares and options issued pursuant to employee equity incentive plan			403,750				40				(8	)			102,598				---				102,630
Exercise of warrants			2,000,001				200				---				(200	)			---				---
Repurchase and retirement of treasury shares			(100,000	)			(10	)			---				---				(4,990	)			(5,000	)
Net loss			---				---				---				---				(5,790,835	)			(5,790,835	)
Balance at December 31, 2018			85,178,902				8,518				26,137				7,531,553				(10,501,055	)			(2,934,847	)

 

See the accompanying notes to these Consolidated Financial Statements

 

 

HEALTHLYNKED CORPORATION

CONSOLIDATED STATEMENT OF CASH FLOWS

 

		Years Ended December 31,
		2018				2017
Cash Flows from Operating Activities
Net loss		$	(5,790,835	)		$	(2,581,011	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation			23,782				23,606
Stock based compensation, including amortization of prepaid fees			474,231				106,743
Amortization of original issue discount and debt discount on convertible notes			763,616				330,435
Financing cost			1,221,911				72,956
Change in fair value of derivative financial instrument			106,141				(3,967	)
Loss on extinguishment of debt			393,123				290,581
Change in fair value of debt			140,789				---
Changes in operating assets and liabilities:
Accounts receivable			(1,535	)			33,525
Prepaid expenses and deposits			53,350				(38,347	)
Accounts payable and accrued expenses			193,400				105,042
Due to related party, current portion			65,841				41,168
Net cash used in operating activities			(2,356,186	)			(1,619,269	)
Cash Flows from Investing Activities
Acquisition of property and equipment			(3,002	)			(16,147	)
Net cash used in investing activities			(3,002	)			(16,147	)
Cash Flows from Financing Activities
Proceeds from sale of common stock			2,632,956				848,639
Proceeds from issuance of convertible notes			1,255,500				429,500
Repayment of convertible notes			(1,388,560	)			---
Proceeds from related party loans			101,450				338,470
Repayment of related party loans			(9,000	)			(11,192	)
Proceeds from notes payable and bank loans			73,500				148,510
Repayment of notes payable and bank loans			(199,067	)			(108,873	)
Payments on capital leases			(16,819	)			(18,348	)
Repurchase and retirement of treasury stock			(5,000	)			---
Net cash provided by financing activities			2,444,960				1,626,706
Net decrease in cash			85,772				(8,710	)
Cash, beginning of period			50,006				58,716
Cash, end of period		$	135,778			$	50,006

 

 

HEALTHLYNKED CORPORATION

CONSOLIDATED STATEMENT OF CASH FLOWS

 

		Years Ended December 31,
		2018				2017
Supplemental disclosure of cash flow information:
Cash paid during the period for interest		$	79,844			$	1,002
Cash paid during the period for income tax		$	---			$	---
Schedule of non-cash investing and financing activities:			$				$
Fair value of warrants issued to extend maturity date of convertible notes payable		$	229,902			$	7,506
Fair value of beneficial conversion feature and original issue discount allocated to proceeds of convertible notes payable		$	1,848,098			$	66,190
Common stock issuable issued during period		$	13,799			$	6,451
Derivative liabilities written off with repayment of convertible notes payable		$	1,102,882			$	---
Derivative liabilities written off at end of warrant repricing period		$	2,783,372			$	---
Fair value of warrants issued to extend related party notes payable		$	337,466			$	---
Fair value of warrants issued to extinguish convertible notes payable		$	143,014			$	---
Fair of warrants issued for professional service		$	130,306			$	---
Fair value of warrants issued pursuant to Amended Investment Agreement		$	---			$	153,625
Derivative liabilities reclassified into additional paid in capital for convertible notes payable conversion into shares		$	63,549			$	---
Conversion of convertible notes payable to common stock		$	62,036			$	---
Fair value of common shares issued with convertible notes payable		$	5,593			$	---
Cashless exercise of warrants		$	200			$	---

   

See the accompanying notes to these Consolidated Financial Statements

 

 

HEALTHLYNKED CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2018 AND 2017

 

NOTE 1 – BUSINESS AND BUSINESS PRESENTATION

 

HealthLynked Corp., a Nevada corporation (the “Company” or “HLYK”) filed its Articles of Incorporation on August 4, 2014. On September 3, 2014 HLYK filed Amended Articles of Incorporation clarifying that the total authorized shares of 250,000,000 shares are broken up between 230,000,000 common shares and 20,000,000 preferred shares. On February 5, 2018, the Company filed an amendment with the Secretary of State of Nevada to increase the amount of authorized shares of common stock to 500,000,000 shares.

 

On September 5, 2014, HLYK entered into a share exchange agreement (the “Share Exchange Agreement”) with Naples Women’s Center LLC (“NWC”), a Florida Limited Liability Company (“LLC”), acquiring 100% of the LLC membership units of NWC through the issuance of 50,000,000 shares of HLYK common stock to the members of NWC (the “Restructuring”).

 

NWC is a multi-specialty medical group including OB/GYN (both Obstetrics and Gynecology), and General Practice located in Naples, Florida.

 

HLYK operates an online personal medical information and record archive system, the “HealthLynked Network”, which enables patients and doctors to keep track of medical information via the Internet in a cloud based system. Patients complete a detailed online personal medical history including past surgical history, medications, allergies, and family history. Once this information is entered patients and their treating physicians are able to update the information as needed to provide a comprehensive medical history.

 

These consolidated financial statements reflect all adjustments including normal recurring adjustments, which, in the opinion of management, are necessary to present fairly the financial position, results of operations and cash flows for the periods presented in accordance with the GAAP.

 

All significant intercompany transactions and balances have been eliminated upon consolidation. In addition, certain amounts in the prior periods’ consolidated financial statements have been reclassified to conform to the current period presentation.

 

NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES

 

A summary of the significant accounting policies applied in the presentation of the accompanying consolidated financial statements follows:

 

Basis of Presentation

 

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

 

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

 

Use of Estimates

 

The preparation of the consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. Accordingly, actual results could differ from those estimates. Significant estimates include assumptions about collection of accounts receivable, the valuation and recognition of stock-based compensation expense, valuation allowance for deferred tax assets and useful life of fixed assets.

 

Patient Service Revenue

 

Patient service revenue is reported at the amount that reflects the consideration to which the Company expects to be entitled in exchange for providing patient care. These amounts are due from patients and third-party payors (including health insurers and government programs) and includes variable consideration for retroactive revenue adjustments due to settlement of audits, reviews, and investigations. Generally, the Company bills patients and third-party payors within days after the services are performed and/or the patient is discharged from the facility. Revenue is recognized as performance obligations are satisfied.

 

 

HEALTHLYNKED CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2018 AND 2017

 

NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

Performance obligations are determined based on the nature of the services provided by the Company. Revenue for performance obligations satisfied over time is recognized based on actual charges incurred in relation to total expected charges. The Company believes that this method provides a faithful depiction of the transfer of services over the term of the performance obligation based on the inputs needed to satisfy the obligation. Revenue for performance obligations satisfied at a point in time is recognized when goods or services are provided and the Company does not believe it is required to provide additional goods or services to the patient.

 

The Company determines the transaction price based on standard charges for goods and services provided, reduced by contractual adjustments provided to third-party payors, discounts provided to uninsured patients in accordance with the Company’s policy, and/or implicit price concessions provided to uninsured patients. The Company determines its estimates of contractual adjustments and discounts based on contractual agreements, its discount policies, and historical experience. The Company determines its estimate of implicit price concessions based on its historical collection experience with this class of patients.

 

Agreements with third-party payors typically provide for payments at amounts less than established charges. A summary of the payment arrangements with major third-party payors follows:

 

●

Medicare: Certain inpatient acute care services are paid at prospectively determined rates per discharge based on clinical, diagnostic and other factors. Certain services are paid based on cost-reimbursement methodologies subject to certain limits. Physician services are paid based upon established fee schedules. Outpatient services are paid using prospectively determined rates.

 

●

Medicaid: Reimbursements for Medicaid services are generally paid at prospectively determined rates per discharge, per occasion of service, or per covered member.

 

●

Other: Payment agreements with certain commercial insurance carriers, health maintenance organizations, and preferred provider organizations provide for payment using prospectively determined rates per discharge, discounts from established charges, and prospectively determined daily rates.

 

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

 

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

 

The Company also provides services to uninsured patients, and offers those uninsured patients a discount, either by policy or law, from standard charges. The Company estimates the transaction price for patients with deductibles and coinsurance and from those who are uninsured based on historical experience and current market conditions. The initial estimate of the transaction price is determined by reducing the standard charge by any contractual adjustments, discounts, and implicit price concessions. Subsequent changes to the estimate of the transaction price are generally recorded as adjustments to patient service revenue in the period of the change.

 

Cash and Cash Equivalents

 

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

 

 

HEALTHLYNKED CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2018 AND 2017

 

NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

Accounts Receivable

 

Trade receivables are carried at their estimated collectible amounts. Trade credit is generally extended on a short-term basis; thus trade receivables do not bear interest. Trade accounts receivable are periodically evaluated for collectability based on past collectability of the insurance companies, government agencies, and customers’ accounts receivable during the related period which generally approximates 45% of total billings. Trade accounts receivable are recorded at this net amount. As of December 31, 2018 and 2017, the Company’s gross accounts receivable were $244,956 and $256,446, respectively, and net accounts receivable were $114,884 and $113,349, respectively, based upon net reporting of accounts receivable. As of December 31, 2018 and 2017, the Company’s allowance of doubtful accounts was $13,972 and $-0-, respectively.

 

Capital Leases

 

Costs associated with capitalized leases are capitalized and depreciated ratably over the term of the related useful life of the asset and/or the capital lease term. The related depreciation was $18,348 and $18,348 for the years ended December 31, 2018 and 2017, respectively. Accumulated depreciation of capitalized leases was $322,087 and $303,738 at December 31, 2018 and 2017, respectively.

 

Concentrations of Credit Risk

 

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

 

Property and Equipment

 

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

 

The Company examines the possibility of decreases in the value of fixed assets when events or changes in circumstances reflect the fact that their recorded value may not be recoverable. The Company recognizes an impairment loss when the sum of expected undiscounted future cash flows is less than the carrying amount of the asset. The amount of impairment is measured as the difference between the asset’s estimated fair value and its book value. There was no impairment as of December 31, 2018 and December 31, 2017.  

 

Convertible Notes

 

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

 

 

HEALTHLYNKED CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2018 AND 2017

 

NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

Derivative Financial Instruments

 

The Company reviews the terms of convertible debt, equity instruments and other financing arrangements to determine whether there are embedded derivative instruments, including embedded conversion options that are required to be bifurcated and accounted for separately as a derivative financial instrument. Also, in connection with the issuance of financing instruments, the Company may issue freestanding options or warrants that may, depending on their terms, be accounted for as derivative instrument liabilities, rather than as equity. Derivative financial instruments are initially measured at their fair value. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported as charges or credits to income. To the extent that the initial fair values of the freestanding and/or bifurcated derivative instrument liabilities exceed the total proceeds received, an immediate charge to income is recognized, in order to initially record the derivative instrument liabilities at their fair value. The discount from the face value of convertible debt instruments resulting from allocating some or all of the proceeds to the derivative instruments is amortized over the life of the instrument through periodic charges to income.

 

The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is reassessed at the end of each reporting period. If reclassification is required, the fair value of the derivative instrument, as of the determination date, is reclassified. Any previous charges or credits to income for changes in the fair value of the derivative instrument are not reversed. Derivative instrument liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement of the derivative instrument could be required within twelve months of the balance sheet date. The Company does not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks.

 

Fair Value of Assets and Liabilities

 

Fair value is the price that would be received from the sale of an asset or paid to transfer a liability (i.e. an exit price) in the principal or most advantageous market in an orderly transaction between market participants. In determining fair value, the accounting standards have established a three-level hierarchy that distinguishes between (i) market data obtained or developed from independent sources (i.e., observable data inputs) and (ii) a reporting entity’s own data and assumptions that market participants would use in pricing an asset or liability (i.e., unobservable data inputs). Financial assets and financial liabilities measured and reported at fair value are classified in one of the following categories, in order of priority of observability and objectivity of pricing inputs:

 

●

Level 1 – Fair value based on quoted prices in active markets for identical assets or liabilities

 

●

Level 2 – Fair value based on significant directly observable data (other than Level 1 quoted prices) or significant indirectly observable data through corroboration with observable market data. Inputs would normally be (i) quoted prices in active markets for similar assets or liabilities, (ii) quoted prices in inactive markets for identical or similar assets or liabilities or (iii) information derived from or corroborated by observable market data.

 

●

Level 3 – Fair value based on prices or valuation techniques that require significant unobservable data inputs. Inputs would normally be a reporting entity’s own data and judgments about assumptions that market participants would use in pricing the asset or liability

 

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

 

Stock-Based Compensation

 

The Company accounts for stock based compensation under ASC 718 “Compensation – Stock Compensation” using the fair value based method. Under this method, compensation cost is measured at the grant date based on the value of the award and is recognized over the service period, which is usually the vesting period. This guidance establishes standards for the accounting for transactions in which an entity exchanges it equity instruments for goods or services. It also addresses transactions in which an entity incurs liabilities in exchange for goods or services that are based on the fair value of the entity’s equity instruments or that may be settled by the issuance of those equity instruments.

 

The Company uses the fair value method for equity instruments granted to non-employees and use the Black-Scholes model for measuring the fair value of options. The stock based fair value compensation is determined as of the date of the grant or the date at which the performance of the services is completed (measurement date) and is recognized over the vesting periods.

 

 

HEALTHLYNKED CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2018 AND 2017

 

NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

Income Taxes

 

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

 

Recurring Fair Value Measurements

 

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

 

Net Income (Loss) per Share  

 

Basic net income (loss) per common share is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding during the period. During the years ended December 31, 2018 and 2017, the Company reported a net loss and excluded all outstanding stock options, warrants and other dilutive securities from the calculation of diluted net loss per common share because inclusion of these securities would have been anti-dilutive. As of December 31, 2018 and 2017, potentially dilutive securities were comprised of (i) 46,161,463 and 20,526,387 warrants outstanding, respectively, (ii) 3,707,996 and 2,349,996 stock options outstanding, respectively, (iii) 15,517,111 and 22,022,021 shares issuable upon conversion of convertible notes, respectively, and (iv) 565,000 and 628,750 unissued shares subject to future vesting requirements granted pursuant to the Company’s Employee Incentive Plan.  

 

Common stock awards

 

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

 

Warrants

 

In connection with certain financing, consulting and collaboration arrangements, the Company has issued warrants to purchase shares of its common stock. The outstanding warrants are standalone instruments that are not puttable or mandatorily redeemable by the holder and are classified as equity awards. The Company measures the fair value of the awards using the Black-Scholes option pricing model as of the measurement date. Warrants issued in conjunction with the issuance of common stock are initially recorded at fair value as a reduction in additional paid-in capital of the common stock issued. All other warrants are recorded at fair value as expense over the requisite service period or at the date of issuance, if there is not a service period. Warrants granted in connection with ongoing arrangements are more fully described in Note 11, Shareholders’ Deficit .

 

 

HEALTHLYNKED CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2018 AND 2017

 

NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

Business Segments

 

The Company uses the “management approach” to identify its reportable segments. The management approach designates the internal organization used by management for making operating decisions and assessing performance as the basis for identifying the Company’s reportable segments. Using the management approach, the Company determined that it has one operating segment due to business similarities and similar economic characteristics.

 

Recent Accounting Pronouncements

 

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers — Topic 606 , which supersedes the revenue recognition requirements in FASB ASC 605. The new guidance primarily states that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods and services. In January 2017 and September 2017, the FASB issued several amendments to ASU 2014-09, including updates stemming from SEC Accounting Staff Announcement in July 2017. The amendments and updates included clarification on accounting for principal versus agent considerations (i.e., reporting gross versus net), licenses of intellectual property and identification of performance obligations. These amendments and updates do not change the core principle of the standard, but provide clarity and implementation guidance. The Company adopted this standard on January 1, 2018 and selected the modified retrospective transition method. The Company has modified its accounting policies to reflect the requirements of this standard, however, the planned adoption did not materially impact the Company’s financial statements and related disclosures.

 

In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments — Overall: Recognition and Measurement of Financial Assets and Financial Liabilities. The guidance affects the accounting for equity investments, financial liabilities under the fair value option and the presentation and disclosure requirements of financial instruments. The guidance is effective in the first quarter of fiscal 2019. Early adoption is permitted for the accounting guidance on financial liabilities under the fair value option. The Company is currently evaluating the impact of the new guidance on its financial statements.

 

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) and subsequently amended the guidance relating largely to transition considerations under the standard in January 2017. The objective of this update is to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. This ASU is effective for fiscal years beginning after December 15, 2018, including interim periods within those annual periods and is to be applied utilizing a modified retrospective approach. The Company is currently evaluating the new guidance to determine the impact it may have on its financial statements.

 

In August 2016, the FASB issued ASC Update No. 2016-15, (Topic 230) Classification of Certain Cash Receipts and Cash Payments. This ASC update provides specific guidance on the presentation of certain cash flow items where there is currently diversity in practice, including, but not limited to, debt prepayment or debt extinguishment costs, contingent consideration payments made after a business combination, proceeds from the settlement of insurance claims, and distributions received from equity method investees. The updated guidance is effective for interim and annual periods beginning after December 15, 2017, and should be applied retrospectively unless impracticable. The Company implemented this guidance effective January 1, 2018. The adoption of ASC Update No. 2016-15 did not have a significant impact on the Company’s statement of cash flows.

 

In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash . The objective of this ASU is to eliminate the diversity in practice related to the classification of restricted cash or restricted cash equivalents in the statement of cash flows. For public business entities, this ASU is effective for annual and interim reporting periods beginning after December 15, 2017, with early adoption permitted. The amendments in this update should be applied retrospectively to all periods presented. The Company adopted this standard on January 1, 2018 and the adoption did not have a material impact on the Company’s financial statements.

 

 

HEALTHLYNKED CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2018 AND 2017

 

NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

In January 2017, the FASB issued ASC Update No. 2017-01, (Topic 805) Business Combinations – Clarifying the Definition of a Business. The amendments in this update provide a more robust framework to use in determining when a set of assets and activities constitute a business. This guidance narrows the definition of a business by providing specific requirements that contribute to the creation of outputs that must be present to be considered a business. The guidance further clarifies the appropriate accounting when substantially all of the fair value of the gross assets acquired (or disposed of) is concentrated in a single identifiable asset or a group of similar identifiable assets is that of an acquisition (disposition) of assets, not a business. This framework will reduce the number of transactions that an entity must further evaluate to determine whether transactions are business combinations or asset acquisitions. The updated guidance is effective for interim and annual periods beginning after December 15, 2017, and should be applied on a prospective basis. Early adoption is permitted only for transactions that have not been reported in financial statements that have been issued. The Company implemented this guidance effective January 1, 2018. The implementation of this guidance did not have an effect on the Company’s financial position or results of operations.

 

In July 2017, the FASB issued ASU No. 2017-11, Earnings Per Share, Distinguishing Liabilities from Equity and Derivatives and Hedging , which changes the accounting and earnings per share for certain instruments with down round features. The amendments in this ASU should be applied using a cumulative-effect adjustment as of the beginning of the fiscal year or retrospective adjustment to each period presented and is effective for annual periods beginning after December 15, 2018, and interim periods within those periods. The Company is currently evaluating the requirements of this new guidance and has not yet determined its impact on the Company’s financial statements.

 

On December 22, 2017 the SEC staff issued Staff Accounting Bulletin 118 (SAB 118), which provides guidance on accounting for the tax effects of the Tax Cuts and Jobs Act (the TCJA).  SAB 118 provides a measurement period that should not extend beyond one year from the enactment date for companies to complete the accounting under ASC 740. In accordance with SAB 118, a company must reflect the income tax effects of those aspects of the TCJA for which the accounting under ASC 740 is complete. To the extent that a company’s accounting for certain income tax effects of the TCJA is incomplete but for which they are able to determine a reasonable estimate, it must record a provisional amount in the financial statements. Provisional treatment is proper in light of anticipated additional guidance from various taxing authorities, the SEC, the FASB, and even the Joint Committee on Taxation. If a company cannot determine a provisional amount to be included in the financial statements, it should continue to apply ASC 740 on the basis of the provisions of the tax laws that were in effect immediately before the enactment of the TCJA. The Company has applied this guidance to its financial statements.

 

In February 2018, the Financial Accounting Standards Board (“FASB”) issued ASC Update No 2018-02 (Topic 220) Income Statement – Reporting Comprehensive Income: Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income.  This ASC update allows for a reclassification into retained earnings of the stranded tax effects in accumulated other comprehensive income (“AOCI”) resulting from the enactment of the Tax Cuts and Jobs Act (“TCJA”). The updated guidance is effective for interim and annual periods beginning after December 15, 2018.  The Company is evaluating the impact ASU 2018-09 may have on its consolidated financial statements.

 

In March 2018, the FASB issued ASU 2018-05, Income Taxes (Topic 740) - Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 118. This standard amends Accounting Standards Codification 740, Income Taxes (ASC 740) to provide guidance on accounting for the tax effects of the Tax Cuts and Jobs Act (the Tax Reform Act) pursuant to Staff Accounting Bulletin No. 118, which allows companies to complete the accounting under ASC 740 within a one-year measurement period from the Tax Act enactment date. This standard did not materially impact the Company’s financial statements and related disclosures.

 

In June 2018, the FASB issued ASU 2018-07, Compensation - Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting, to expand the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from nonemployees and supersedes the guidance in Subtopic 505-50, Equity - Equity-Based Payments to Non-Employees. Under ASU 2018-07, equity-classified nonemployee share-based payment awards are measured at the grant date fair value on the grant date The probability of satisfying performance conditions must be considered for equity-classified nonemployee share-based payment awards with such conditions. ASU 2018-07 is effective for fiscal years beginning after December 15, 2018, with early adoption permitted. The Company is currently evaluating the impact of the new standard on the Company’s Consolidated Financial Statements.

 

In July 2018, the FASB issued ASU 2018-09 to provide clarification and correction of errors to the Codification. The amendments in this update cover multiple Accounting Standards Updates. Some topics in the update may require transition guidance with effective dates for annual periods beginning after December 15, 2018. The Company is evaluating the impact ASU 2018-09 may have on its consolidated financial statements.

 

 

HEALTHLYNKED CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2018 AND 2017

 

NOTE 3 – GOING CONCERN MATTERS AND LIQUIDITY

 

As of December 31, 2018, the Company had a working capital deficit of $2,983,926 and accumulated deficit $10,501,055. For the year ended December 31, 2018, the Company had a net loss of $5,790,835 and net cash used by operating activities of $2,356,186. Net cash used in investing activities was $3,002. Net cash provided by financing activities was $2,444,960, resulting principally from $2,632,956 proceeds from the sale of common stock, $1,255,500 net proceeds from the issuance of convertible notes, $101,450 net proceeds from related party loans and $73,500 net proceeds from the issuance of notes payable

 

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

 

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

 

During July 2016, HLYK entered into an Investment Agreement (the “Investment Agreement”) pursuant to which the investor has agreed to purchase up to $3,000,000 of HLYK common stock over a three-year period starting upon registration of the underlying shares, with such shares put to the investor by the Company pursuant to a specified formula that limits the number of shares able to be put to the investor to the number equal to the average trading volume of the Company’s common shares for the ten consecutive trading days prior to the put notice being issued. During the year ended December 31, 2018, the Company received $440,523 from the proceeds of the sale of 2,440,337 shares pursuant to the Investment Agreement. During July 2018, we also entered into a private placement transaction that generated net proceeds to the Company of $1,774,690. See Note 11.

 

NOTE 4 – DEFERRED OFFERING COSTS AND PREPAID STOCK COMPENSATION

 

Deferred Offering Costs

 

On July 7, 2016, the Company entered into the Investment Agreement with an accredited investor, pursuant to which an accredited investor agreed to invest up to $3,000,000 to purchase the Company’s common stock, par value of $.0001 per share. The purchase price for such shares shall be 80% of the lowest volume weighted average price of the Company’s common stock during the five consecutive trading days prior to the date on which written notice is sent by the Company to the investor stating the number of shares that the Company is selling to the investor, subject to certain discounts and adjustments. Further, for each $50,000 that the investor tenders to the Company for the purchase of shares of common stock, the investor was to be granted warrants for the purchase of an equivalent number of shares of common stock. The warrants were to expire five (5) years from their respective grant dates and have an exercise price equal to 130% of the weighted average purchase price for the respective “$50,000 increment.”

 

On March 22, 2017, the Company and the investor entered into an Amended Investment Agreement (the “Amended Investment Agreement”) whereby the parties agreed to modify the terms of the Investment Agreement by providing that in lieu of granting the investor warrants for each $50,000 that the investor tenders to the Company, the Company granted to the investor warrants to purchase an aggregate of 7,000,000 shares of common stock. The warrants have the following fixed exercise prices: (i) 4,000,000 shares at $0.25 per share; (ii) 2,000,000 shares at $0.50 per share; and (iii) 1,000,000 shares at $1.00 per share. The warrants also contain a “cashless exercise” provision and the shares underlying the warrants will not be registered. The fair value of the warrants was calculated using the Black-Scholes pricing model at $56,635, with the following assumptions: risk-free interest rate of 1.95%, expected life of 5 years, volatility of 40%, and expected dividend yield of zero.

 

On June 7, 2017, the Company also granted warrants to purchase 200,000 shares at $0.25 per share, 100,000 shares at $0.50 per share and 50,000 shares at $1.00 per share to an advisor as a fee in connection with the Amended Investment Agreement. The fair value of the warrants was calculated using the Black-Scholes pricing model at $96,990, with the following assumptions: risk-free interest rate of 1.74%, expected life of 5 years, volatility of 40%, and expected dividend yield of zero.

 

 

HEALTHLYNKED CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2018 AND 2017

 

NOTE 4 – DEFERRED OFFERING COSTS AND PREPAID STOCK COMPENSATION (CONTINUED)

 

This fair value of the warrants described above was recorded as a deferred offering cost and will be amortized over the period during which the Company can access the financing, which begins the day after a registration statement registering shares underlying the Investment Agreement is declared effective by the United States Securities and Exchange Commission (the “SEC”), and ends 3 years from that date. On May 15, 2017, the SEC declared effective a registration statement registering shares underlying the Investment Agreement. During the years ended December 31, 2018 and 2017, the Company recognized $51,208 and $32,005, respectively, in general and administrative expense related to the cost of the warrants.

 

Prepaid Stock Compensation

 

On June 6, 2018, the Company granted three-year warrants to purchase 600,000 shares at an exercise price of $0.15 per share to two advisors for services to be provided over a six-month period. The fair value of the warrants was calculated using the Black-Scholes pricing model at $94,844, with the following assumptions: risk-free interest rate of 2.65%, expected life of 3 years, volatility of 286.98%, and expected dividend yield of zero. During the years ended December 31, 2018 and 2017, the Company recognized $94,844 and $-0-, respectively, in general and administrative expense related to the cost of these warrants.

 

On December 6, 2018, the Company granted additional three-year warrants to purchase 240,000 shares at an exercise price of $0.20 per share to the advisors for services to be provided over an additional three-month period. The fair value of the warrants was calculated using the Black-Scholes pricing model at $35,462, with the following assumptions: risk-free interest rate of 2.76%, expected life of 3 years, volatility of 285.22%, and expected dividend yield of zero. During the years ended December 31, 2018 and 2017, the Company recognized $9,850 and $-0-, respectively, in general and administrative expense related to the cost of these warrants.

 

NOTE 5 – PROPERTY, PLANT, AND EQUIPMENT

 

Property, plant and equipment at December 31, 2018 and 2017 are as follows:

 

		December 31,
		2018				2017
Capital Lease equipment		$	343,492			$	343,492
Telephone equipment			12,308				12,308
Furniture, Transport and Office equipment			438,970				435,967
Total Property, plant and equipment			794,770				791,767
Less: accumulated depreciation			(752,173	)			(728,391	)
Property, plant and equipment, net		$	42,597			$	63,376

 

Depreciation expense during the years ended December 31, 2018 and 2017 was $23,782 and $23,606, respectively.

 

NOTE 6 – DUE TO RELATED PARTY AND RELATED PARTY TRANSACTIONS

 

Amounts due to related parties as of December 31, 2018 and 2017 were comprised of the following:

 

		December 31,
		2018				2017
Due to related party:
Deferred compensation, Dr. Michael Dent		$	300,600			$	300,600
Accrued interest payable to Dr. Michael Dent			129,117				63,245
Total due to related party			429,717				363,845
Notes payable to related party:
Notes payable to Dr. Michael Dent, current portion			672,471				553,550

 

F- 16

 

 

HEALTHLYNKED CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2018 AND 2017

 

NOTE 6 – DUE TO RELATED PARTY AND RELATED PARTY TRANSACTIONS (CONTINUED)

 

Notes Payable to Dr. Michael Dent

 

Prior to August 2014, NWC was owned and controlled by the Company’s Chief Executive Officer, Dr. Michael Dent (“DMD”). DMD first provided an up to $175,000 unsecured note payable to the Company with a 0% interest rate. During 2013 the limit on the unsecured Note Payable was increased up to $500,000 and during 2014 it was increased to $750,000 with a maturity date of December 31, 2017. All principal and interest is due at maturity of the $750k DMD Note on December 31, 2019. Interest accrued on the $750k DMD Note as of December 31, 2018 and 2017 was $66,859 and $43,963, respectively.

 

The carrying values of notes payable to Dr. Michael Dent as of December 31, 2018 and 2017 were as follows:

 

							Interest				Balance as of December 31,
Inception Date		Maturity Date		Borrower			Rate				2018				2017
January 12, 2017		January 13, 2019		HLYK				10	%		$	40,560	*		$	35,000
January 18, 2017		January 19, 2019		HLYK				10	%			23,165	*			20,000
January 24, 2017		January 15, 2019		HLYK				10	%			57,839	*			50,000
February 9, 2017		February 10, 2019		HLYK				10	%			34,586	*			30,000
April 20, 2017		April 21, 2019		HLYK				10	%			11,357	*			10,000
June 15, 2017		June 16, 2019		HLYK				10	%			36,464	*			32,500
August 17, 2017		August 18, 2018		HLYK				10	%			20,000				20,000
August 24, 2017		August 25, 2018		HLYK				10	%			37,500				37,500
September 7, 2017		September 8, 2018		HLYK				10	%			35,000				35,000
September 21, 2017		September 22, 2018		HLYK				10	%			26,500				26,500
September 29, 2017		September 30, 2018		HLYK				10	%			12,000				12,000
December 21, 2017		December 22, 2018		HLYK				10	%			14,000				14,000
January 8, 2018		January 9, 2019		HLYK				10	%			75,000				---
January 11, 2018		January 12, 2019		HLYK				10	%			9,000				---
January 26, 2018		January 27, 2019		HLYK				10	%			17,450				---
January 3, 2014		December 31, 2018		NWC				10	%			222,050				231,050
											$	672,471			$	553,550

 

On July 18, 2018, in connection with a $2,000,000 private placement by a third party investor, Dr. Dent agreed to extend the maturity date on all of the above notes until December 31, 2019. Interest accrued on the above unsecured promissory notes as of and December 31, 2018 and 2017 was $62,258 and $19,350, respectively.

 

On February 12, 2018, the Company issued a warrant to purchase 6,678,462 shares of common stock to DMD as an inducement to (i) extend the maturity dates of up to $439,450 loaned by Dr. Dent to the Company in 2017 and 2018 in the form of unsecured promissory notes, including $75,000 loaned from Dr. Dent to the Company in January 2018 to allow the Company to retire an existing convertible promissory note payable to Power-up Lending Group Ltd. before such convertible promissory note became eligible for conversion, and (ii) provide continued loans to the Company. The warrant is immediately exercisable at an exercise price of $0.065 per share, subject to adjustment, and expires five years after the date of issuance. The fair value of the warrants was calculated using the Black-Scholes pricing model at $337,466, with the following assumptions: risk-free interest rate of 2.56%, expected life of 5 years, volatility of 268.90%, and expected dividend yield of zero. On March 28, 2012, DMD agreed to extend the maturity dates of promissory notes with an aggregate face value of $177,500, which were originally scheduled to mature before September 30, 2018, by one year from the original maturity date. Because the fair value of the warrants was greater than 10% of the present value of the remaining cash flows under the modified promissory notes, the transaction was treated as a debt extinguishment and reissuance of new debt instruments pursuant to the guidance of ASC 470-50 “Debt – Modifications and Extinguishments” (“ASC 470-50”). A loss on debt extinguishment was recorded in the amount of $348,938, equal to the fair value of the warrants of $337,466, plus the excess of $11,472 of the fair value of the reissued debt instruments over the carrying value of the existing debt instruments. The change in fair value of the reissued debt instruments subsequent to the reissuance date was $15,029 in the year ended December 31, 2018 and is included on the statement of operations in “Change in fair value of debt.”

 

F- 17

 

 

HEALTHLYNKED CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2018 AND 2017

 

NOTE 6 – DUE TO RELATED PARTY AND RELATED PARTY TRANSACTIONS (CONTINUED)

 

MedOffice Direct

 

During 2017, the Company entered into an agreement with MedOffice Direct (“MOD”), a company majority-owned by the Company’s CEO and largest shareholder, Dr. Michael Dent, pursuant to which the Company 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.

 

During 2017, the Company entered into a separate Marketing Agreement with MOD pursuant to which MOD agreed to market the HealthLynked Network to its physician practice clients, in exchange for a semi-annual fee of $25,000. This agreement was terminated effective April 1, 2018. During the years ended December 31, 2018 and 2017, the Company recognized general and administrative expense in the amount of $12,500 and $27,500, respectively, pursuant to this agreement. On July 1, 2018 HLYK and MOD signed a marketing and service agreement where HLYK will include MOD offering as part of its product offering to physicians and HLYK will receive 8% of revenue for new sales related to MOD products sold by the HLYK sales team.

 

Stock Repurchase

 

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.

 

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

 

F- 18

 

 

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.

 

F- 19

 

 

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.

 

F- 20

 

 

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

 

F- 21

 

 

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.

 

F- 22

 

 

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

 

F- 23

 

 

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.

 

F- 24

 

 

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.

 

F- 25

 

 

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.

 

F- 26

 

 

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.

 

F- 27

 

 

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.

 

F- 28

 

 

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

 

F- 29

 

 

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.

 

F- 30

 

 

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.

 

F- 31

 

 

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.

 

F- 32

 

 

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%.

 

F- 33

 

 

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%.

 

F- 34

 

 

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.

 

F- 35

 

 

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%.

 

F- 36

 

 

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.

F- 37

 

 

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.

 

F- 38

 

 

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.

 

F- 39

 

 

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.”

 

F- 40

 

 

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.

 

F- 41

 

 

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.

 

F- 42

 

 

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.

 

F- 43

 

 

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.

 

F- 44

 

 

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

 

F- 45

 

 

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

 

F- 46

 

 

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.

 

F- 47

 

 

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.

 

F- 48

 

 

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.

 

F- 49

 

 

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.

 

F- 50

 

 

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.

  

F- 51

 

 

HEALTHLYNKED CORP.

CONDENSED CONSOLIDATED BALANCE SHEETS

 

		March 31,				December 31,
		2019				2018
ASSETS		(unaudited)
Current Assets
Cash		$	514,309			$	135,778
Accounts receivable, net of allowance for doubtful accounts of $13,972 and $13,972 as of March 31, 2019 and December 31, 2018, respectively			106,905				114,884
Prepaid expenses			18,639				28,542
Deferred offering costs			57,609				96,022
Total Current Assets			697,462				375,226
Property, plant and equipment, net of accumulated depreciation of $683,494 and $752,173 as of March 31, 2019 and December 31, 2018, respectively			23,837				42,597
ROU lease assets, long term portion and deposits			364,987				9,540
Total Assets		$	1,086,286			$	427,363
LIABILITIES AND SHAREHOLDERS’ DEFICIT
Current Liabilities
Accounts payable and accrued expenses		$	447,096			$	394,333
Capital lease, current portion			---				19,877
Lease liability, current portion			266,130				---
Due to related party, current portion			446,276				429,717
Notes payable to related party, current portion			678,329				672,471
Convertible notes payable, net of original issue discount and debt discount of $363,089 and $386,473 as of March 31, 2019 and December 31, 2018, respectively			1,057,315				1,042,314
Derivative financial instruments			580,855				800,440
Total Current Liabilities			3,476,001				3,359,152
Long-Term Liabilities
Capital leases, long-term portion			---				3,058
Lease liability, long term portion			90,387				---
Total Liabilities			3,566,388				3,362,210
Shareholders’ Deficit
Common stock, par value $0.0001 per share, 500,000,000 shares authorized, 93,577,019 and 85,178,902 shares issued and outstanding as of March 31, 2019 and December 31, 2018, respectively			9,358				8,518
Common stock issuable, $0.0001 par value; 205,301 and 114,080 shares as of March 31, 2019 and December 31, 2018, respectively			46,097				26,137
Additional paid-in capital			9,026,215				7,531,553
Accumulated deficit			(11,561,772	)			(10,501,055	)
Total Shareholders’ Deficit			(2,480,102	)			(2,934,847	)
Total Liabilities and Shareholders’ Deficit		$	1,086,286			$	427,363

 

See the accompanying notes to these Unaudited Condensed Consolidated Financial Statements

 

F- 52

 

 

HEALTHLYNKED CORP.

CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

(UNAUDITED)

 

		Three Months Ended March 31,
		2019				2018
Revenue
Patient service revenue, net		$	464,990			$	645,639
Operating Expenses
Salaries and benefits			529,225				560,856
General and administrative			757,356				574,828
Depreciation and amortization			1,655				6,029
Total Operating Expenses			1,288,236				1,141,713
Loss from operations			(823,246	)			(496,074	)
Other Income (Expenses)
Loss on extinguishment of debt			(139,798	)			(325,223	)
Change in fair value of debt			(29,697	)			(57,946	)
Financing cost			(33,903	)			(192,062	)
Amortization of original issue and debt discounts on notes payable and convertible notes			(179,384	)			(154,835	)
Change in fair value of derivative financial instrument			191,633				(14,621	)
Interest expense			(46,322	)			(40,347	)
Total other expenses			(237,471	)			(785,034	)
Net loss before provision for income taxes			(1,060,717	)			(1,281,108	)
Provision for income taxes			---				---
Net loss		$	(1,060,717	)		$	(1,281,108	)
Net loss per share, basic and diluted:
Basic		$	(0.01	)		$	(0.02	)
Fully diluted		$	(0.01	)		$	(0.02	)
Weighted average number of common shares:
Basic			88,506,930				72,907,455
Fully diluted			88,506,930				72,907,455

 

See the accompanying notes to these Unaudited Condensed Consolidated Financial Statements

 

F- 53

 

 

HEALTHLYNKED CORP.

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ DEFICIT

THREE MONTHS ENDED MARCH 31, 2019 AND 2018

(UNAUDITED)

 

		Number of Shares								Common				Additional								Total
		Common				Common				Stock				Paid-in				Accumulated				Shareholders’
		Stock				Stock				Issuable				Capital				Deficit				Deficit
		(#)				($)				($)				($)				($)				($)
Balance at December 31, 2018			85,178,902				8,518				26,137				7,531,553				(10,501,055	)			(2,934,847	)
Sale of common stock			3,261,978				326				---				693,832				---				694,158
Fair value of warrants allocated to proceeds of common stock			---				---				---				139,068				---				139,068
Shares issued with convertible notes payable			28,000				3				---				4,673				---				4,676
Fair value of warrants issued for professional services			---				---				---				54,257				---				54,257
Conversion of convertible notes payable to common stock			2,512,821				251				---				534,980				---				535,231
Consultant fees payable with common shares and warrants			270,000				27				19,960				6,850				---				26,837
Shares and options issued pursuant to employee equity incentive plan			113,750				12				---				61,223				---				61,235
Exercise of stock warrants			2,098,427				210				---				(210	)			---				---
Exercise of stock options			113,141				11				---				(11	)			---				---
Net loss			---				---				---				---				(1,060,717	)			(1,060,717	)
Balance at March 31, 2019			93,577,019				9,358				46,097				9,026,215				(11,561,772	)			(2,480,102	)

 

		Number of Shares								Common				Additional								Total
		Common				Common				Stock				Paid-in				Accumulated				Shareholders’
		Stock				Stock				Issuable				Capital				Deficit				Deficit
		(#)				($)				($)				($)				($)				($)
Balance at December 31, 2017			72,302,937				7,230				8,276				2,638,311				(4,705,230	)			(2,051,413	)
Sale of common stock			631,204				63				236				133,312				---				133,611
Fair value of warrants allocated to proceeds of common stock			---				---				---				117,956				---				117,956
Fair value of warrants issued to extend related party notes payable			---				---				---				337,467				---				337,467
Fair value of warrants issued to extend convertible notes payable			---				---				---				10,199				---				10,199
Consultant fees payable with common shares and warrants			---				---				5,287				---				---				5,287
Shares and options issued pursuant to employee equity incentive plan			75,000				8				(8	)			5,577				---				5,577
Net loss			---				---				---				---				(1,281,108	)			(1,281,108	)
Balance at March 31, 2018			73,009,141				7,301				13,791				3,242,822				(5,986,338	)			(2,722,424	)

 

See the accompanying notes to these Unaudited Condensed Consolidated Financial Statements

 

F- 54

 

 

HEALTHLYNKED CORP.

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

(UNAUDITED)

 

		Three Months Ended March 31,
		2019				2018
Cash Flows from Operating Activities
Net loss		$	(1,060,717	)		$	(1,281,108	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation			1,655				6,029
Stock based compensation, including amortization of prepaid fees			180,741				23,666
Amortization of original issue discount and debt discount on convertible notes			179,384				154,835
Financing cost			33,903				192,062
Change in fair value of derivative financial instrument			(191,633	)			14,621
Loss on extinguishment of debt			139,798				325,223
Change in fair value of debt			29,697				57,946
Changes in operating assets and liabilities:
Accounts receivable			7,979				(36,174	)
Prepaid expenses and deposits			9,903				12,575
Accounts payable and accrued expenses			51,237				90,336
Lease liability			1,070				---
Due to related party, current portion			16,590				15,835
Net cash used in operating activities			(600,393	)			(424,154	)
Cash Flows from Investing Activities
Acquisition of property and equipment			(4,302	)			(201	)
Net cash used in investing activities			(4,302	)			(201	)
Cash Flows from Financing Activities
Proceeds from sale of common stock			833,226				251,568
Proceeds from issuance of convertible notes			150,000				325,000
Repayment of convertible notes			---				(209,682	)
Proceeds from related party loans			---				101,450
Repayment of related party loans			---				(9,000	)
Repayment of notes payable and bank loans			---				(52,619	)
Payments on capital leases			---				(3,058	)
Net cash provided by financing activities			983,226				403,659
Net increase (decrease) in cash			378,531				(20,696	)
Cash, beginning of period			135,778				50,006
Cash, end of period		$	514,309			$	29,310
Supplemental disclosure of cash flow information:
Cash paid during the period for interest		$	830			$	7,117
Cash paid during the period for income tax		$	---			$	---
Schedule of non-cash investing and financing activities:
Fair value of beneficial conversion feature and original issue discount allocated to proceeds of convertible notes payable		$	179,227			$	---
Common stock issuable issued during period		$	4,483			$	8
Fair of warrants issued for professional service		$	14,743			$	---
Conversion of convertible note payable to common shares		$	535,231			$	---
Fair value of common shares issued with convertible notes payable		$	4,676			$	---
Cashless exercise of options and warrants		$	222			$	---
Adoption of lease obligation and ROU asset		$	417,317			$	---
Fair value of beneficial conversion feature and original issue discount allocated to proceeds of convertible note payable		$	---				325,000
Fair value of warrants issued to extend maturity date of convertible notes payable		$	---			$	10,199
Fair value of warrants issued to extend related party notes payable		$	---			$	337,466
Derivative liabilities written off with repayment of convertible notes payable		$	---			$	160,850

 

See the accompanying notes to these Unaudited Condensed Consolidated Financial Statements

 

F- 55

 

 

HEALTHLYNKED CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2019

(UNAUDITED)

 

NOTE 1 - BUSINESS AND BUSINESS PRESENTATION

 

HealthLynked Corp., a Nevada corporation (the “Company” or “HLYK”) filed its Articles of Incorporation on August 4, 2014 with the Secretary of State of Nevada. On September 3, 2014 HLYK filed Amended Articles of Incorporation clarifying that the total authorized shares of 250,000,000 shares are broken up between 230,000,000 common shares and 20,000,000 preferred shares. On February 5, 2018, the Company filed an amendment with the Secretary of State of Nevada to increase the amount of authorized shares of common stock to 500,000,000 shares.

 

On September 5, 2014, HLYK entered into a share exchange agreement (the “Share Exchange Agreement”) with Naples Women’s Center LLC (“NWC”), a Florida Limited Liability Company (“LLC”), acquiring 100% of the LLC membership units of NWC through the issuance of 50,000,000 shares of HLYK common stock to the members of NWC (the “Restructuring”).

 

NWC is a multi-specialty medical group including OB/GYN (both Obstetrics and Gynecology), and General Practice located in Naples, Florida.

 

On June 28, 2018, the Company formed wholly-owned subsidiary HLYK FL LLC (“Merger Sub”) to act as the acquiring entity in the acquisition of Hughes Center for Functional Medicine, P.A. (the “HCFM”). The acquisition of HCFM was completed on April 12, 2019. See “Note 15 – SUBSEQUENT EVENTS.” Merger Sub did not have any material activity since its inception or during the three months ended March 31, 2019.

 

HLYK operates an online personal medical information and record archive system, the “HealthLynked Network”, which enables patients and doctors to keep track of medical information via the Internet in a cloud-based system. Patients complete a detailed online personal medical history including past surgical history, medications, allergies, and family history. Once this information is entered patients and their treating physicians are able to update the information as needed to provide a comprehensive medical history.

 

These unaudited condensed consolidated financial statements reflect all adjustments including normal recurring adjustments, which, in the opinion of management, are necessary to present fairly the financial position, results of operations and cash flows for the periods presented in accordance with the GAAP. These unaudited condensed consolidated financial statements should be read in conjunction with the Company’s consolidated financial statements and notes thereto for the years ended December 31, 2018 and 2017, respectively, which are included in the Company’s Form 10-K filed with the United States Securities and Exchange Commission on April 1, 2019. The Company assumes that the users of the interim financial information herein have read, or have access to, the audited consolidated financial statements for the preceding period, and that the adequacy of additional disclosure needed for a fair presentation may be determined in that context. The results of operations for the three months ended March 31, 2019 are not necessarily indicative of results for the entire year ending December 31, 2019.

 

All significant intercompany transactions and balances have been eliminated upon consolidation. In addition, certain amounts in the prior periods’ consolidated financial statements have been reclassified to conform to the current period presentation.

 

NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES

 

A summary of the significant accounting policies applied in the presentation of the accompanying consolidated financial statements follows:

 

Basis of Presentation

 

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

 

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

 

F- 56

 

 

HEALTHLYNKED CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2019

(UNAUDITED)

 

NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

Use of Estimates

 

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

 

Adopted Accounting Pronouncements

 

Effective January 1, 2019, the Company adopted Accounting Standards Update (“ASU”) No. 2016-02, Leases (“ASU 2016-02”) using the required modified retrospective approach. ASU 2016-02 requires lessees to record most leases on their balance sheets but recognize expenses on their income statements in a manner similar to current accounting. See discussion below under the caption “Leases” in this Note 2 and in Note 7 for more detail on the Company’s accounting policy with respect to lease accounting.

 

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

 

Patient Service Revenue

 

Patient service revenue is reported at the amount that reflects the consideration to which the Company expects to be entitled in exchange for providing patient care. These amounts are due from patients and third-party payors (including health insurers and government programs) and includes variable consideration for retroactive revenue adjustments due to settlement of audits, reviews, and investigations. Generally, the Company bills patients and third-party payors within days after the services are performed and/or the patient is discharged from the facility. Revenue is recognized as performance obligations are satisfied.

 

Performance obligations are determined based on the nature of the services provided by the Company. Revenue for performance obligations satisfied over time is recognized based on actual charges incurred in relation to total expected charges. The Company believes that this method provides a faithful depiction of the transfer of services over the term of the performance obligation based on the inputs needed to satisfy the obligation. Revenue for performance obligations satisfied at a point in time is recognized when goods or services are provided and the Company does not believe it is required to provide additional goods or services to the patient.

 

The Company determines the transaction price based on standard charges for goods and services provided, reduced by contractual adjustments provided to third-party payors, discounts provided to uninsured patients in accordance with the Company’s policy, and/or implicit price concessions provided to uninsured patients. The Company determines its estimates of contractual adjustments and discounts based on contractual agreements, its discount policies, and historical experience. The Company determines its estimate of implicit price concessions based on its historical collection experience with this class of patients.

 

Agreements with third-party payors typically provide for payments at amounts less than established charges. A summary of the payment arrangements with major third-party payors follows:

 

●

Medicare: Certain inpatient acute care services are paid at prospectively determined rates per discharge based on clinical, diagnostic and other factors. Certain services are paid based on cost-reimbursement methodologies subject to certain limits. Physician services are paid based upon established fee schedules. Outpatient services are paid using prospectively determined rates.

 

●

Medicaid: Reimbursements for Medicaid services are generally paid at prospectively determined rates per discharge, per occasion of service, or per covered member.

 

●

Other: Payment agreements with certain commercial insurance carriers, health maintenance organizations, and preferred provider organizations provide for payment using prospectively determined rates per discharge, discounts from established charges, and prospectively determined daily rates.

 

F- 57

 

 

HEALTHLYNKED CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2019

(UNAUDITED)

 

NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

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

 

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

 

The Company also provides services to uninsured patients, and offers those uninsured patients a discount, either by policy or law, from standard charges. The Company estimates the transaction price for patients with deductibles and coinsurance and from those who are uninsured based on historical experience and current market conditions. The initial estimate of the transaction price is determined by reducing the standard charge by any contractual adjustments, discounts, and implicit price concessions. Subsequent changes to the estimate of the transaction price are generally recorded as adjustments to patient service revenue in the period of the change.

 

Cash and Cash Equivalents

 

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

 

Accounts Receivable

 

Trade receivables are carried at their estimated collectible amounts. Trade credit is generally extended on a short-term basis; thus trade receivables do not bear interest. Trade accounts receivable are periodically evaluated for collectability based on past collectability of the insurance companies, government agencies, and customers’ accounts receivable during the related period which generally approximates 47% of total billings. Trade accounts receivable are recorded at this net amount. As of March 31, 2019 and December 31, 2018, the Company’s gross accounts receivable were $227,943 and $244,956, respectively, and net accounts receivable were $106,905 and $114,884, respectively, based upon net reporting of accounts receivable. As of March 31, 2019 and December 31, 2018, the Company’s allowance of doubtful accounts was $13,972 and $13,972, respectively.

 

Leases

 

Upon transition under ASU 2016-02, the Company elected the suite of practical expedients as a package applied to all of its leases, including (i) not reassessing whether any expired or existing contracts are or contain leases, (ii) not reassessing the lease classification for any expired or existing leases, and (iii) not reassessing initial direct costs for any existing leases. For new leases, the Company will determine if an arrangement is or contains a lease at inception. Leases are included as right-of-use (“ROU”) assets within other assets and ROU liabilities within accrued expenses and other liabilities and within other long-term liabilities on the Company’s condensed consolidated balance sheets.

 

F- 58

 

 

HEALTHLYNKED CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2019

(UNAUDITED)

 

NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

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

 

Adoption of ASU 2016-02 had an impact of $355,447 and $356,517 million on the Company’s assets and liabilities, respectively, and had no material impact on cash provided by or used in operating, investing or financing activities on the Company’s unaudited condensed consolidated statements of cash flows.

 

Concentrations of Credit Risk

 

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

 

Property and Equipment

 

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

 

The Company examines the possibility of decreases in the value of fixed assets when events or changes in circumstances reflect the fact that their recorded value may not be recoverable. The Company recognizes an impairment loss when the sum of expected undiscounted future cash flows is less than the carrying amount of the asset. The amount of impairment is measured as the difference between the asset’s estimated fair value and its book value. There was no impairment as of March 31, 2019 and December 31, 2018.  

 

Convertible Notes

 

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

 

Derivative Financial Instruments

 

The Company reviews the terms of convertible debt, equity instruments and other financing arrangements to determine whether there are embedded derivative instruments, including embedded conversion options that are required to be bifurcated and accounted for separately as a derivative financial instrument. Also, in connection with the issuance of financing instruments, the Company may issue freestanding options or warrants that may, depending on their terms, be accounted for as derivative instrument liabilities, rather than as equity. Derivative financial instruments are initially measured at their fair value. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported as charges or credits to income. To the extent that the initial fair values of the freestanding and/or bifurcated derivative instrument liabilities exceed the total proceeds received, an immediate charge to income is recognized, in order to initially record the derivative instrument liabilities at their fair value. The discount from the face value of convertible debt instruments resulting from allocating some or all of the proceeds to the derivative instruments is amortized over the life of the instrument through periodic charges to income.

 

F- 59

 

 

HEALTHLYNKED CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2019

(UNAUDITED)

 

NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is reassessed at the end of each reporting period. If reclassification is required, the fair value of the derivative instrument, as of the determination date, is reclassified. Any previous charges or credits to income for changes in the fair value of the derivative instrument are not reversed. Derivative instrument liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement of the derivative instrument could be required within twelve months of the balance sheet date. The Company does not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks.

 

Fair Value of Assets and Liabilities

 

Fair value is the price that would be received from the sale of an asset or paid to transfer a liability (i.e. an exit price) in the principal or most advantageous market in an orderly transaction between market participants. In determining fair value, the accounting standards have established a three-level hierarchy that distinguishes between (i) market data obtained or developed from independent sources (i.e., observable data inputs) and (ii) a reporting entity’s own data and assumptions that market participants would use in pricing an asset or liability (i.e., unobservable data inputs). Financial assets and financial liabilities measured and reported at fair value are classified in one of the following categories, in order of priority of observability and objectivity of pricing inputs:

 

●

Level 1 – Fair value based on quoted prices in active markets for identical assets or liabilities

 

●

Level 2 – Fair value based on significant directly observable data (other than Level 1 quoted prices) or significant indirectly observable data through corroboration with observable market data. Inputs would normally be (i) quoted prices in active markets for similar assets or liabilities, (ii) quoted prices in inactive markets for identical or similar assets or liabilities or (iii) information derived from or corroborated by observable market data.

 

●

Level 3 – Fair value based on prices or valuation techniques that require significant unobservable data inputs. Inputs would normally be a reporting entity’s own data and judgments about assumptions that market participants would use in pricing the asset or liability

 

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

 

Stock-Based Compensation

 

The Company accounts for stock-based compensation under ASC 718 “Compensation – Stock Compensation” using the fair value based method. Under this method, compensation cost is measured at the grant date based on the value of the award and is recognized over the service period, which is usually the vesting period. This guidance establishes standards for the accounting for transactions in which an entity exchanges it equity instruments for goods or services. It also addresses transactions in which an entity incurs liabilities in exchange for goods or services that are based on the fair value of the entity’s equity instruments or that may be settled by the issuance of those equity instruments.

 

The Company uses the fair value method for equity instruments granted to non-employees and use the Black-Scholes model for measuring the fair value of options. The stock based fair value compensation is determined as of the date of the grant or the date at which the performance of the services is completed (measurement date) and is recognized over the vesting periods.

 

F- 60

 

 

HEALTHLYNKED CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2019

(UNAUDITED)

 

NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

Income Taxes

 

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

 

Recurring Fair Value Measurements

 

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

 

Net Loss per Share  

 

Basic net income (loss) per common share is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding during the period. During the three months ended March 31, 2019 and 2018, the Company reported a net loss and excluded all outstanding stock options, warrants and other dilutive securities from the calculation of diluted net loss per common share because inclusion of these securities would have been anti-dilutive. As of March 31, 2019 and December 31, 2018, potentially dilutive securities were comprised of (i) 45,058,874 and 46,161,463 warrants outstanding, respectively, (ii) 3,549,250 and 3,707,996 stock options outstanding, respectively, (iii) 10,346,866 and 15,517,111 shares issuable upon conversion of convertible notes, respectively, and (iv) 463,750 and 565,000 unissued shares subject to future vesting requirements granted pursuant to the Company’s Employee Incentive Plan.  

 

Common stock awards

 

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

 

Warrants

 

In connection with certain financing, consulting and collaboration arrangements, the Company has issued warrants to purchase shares of its common stock. The outstanding warrants are standalone instruments that are not puttable or mandatorily redeemable by the holder and are classified as equity awards. The Company measures the fair value of the awards using the Black-Scholes option pricing model as of the measurement date. Warrants issued in conjunction with the issuance of common stock are initially recorded at fair value as a reduction in additional paid-in capital of the common stock issued. All other warrants are recorded at fair value as expense over the requisite service period or at the date of issuance, if there is not a service period. Warrants granted in connection with ongoing arrangements are more fully described in Note 11, Shareholders’ Deficit .

 

F- 61

 

 

HEALTHLYNKED CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2019

(UNAUDITED)

 

NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

Business Segments

 

The Company uses the “management approach” to identify its reportable segments. The management approach designates the internal organization used by management for making operating decisions and assessing performance as the basis for identifying the Company’s reportable segments. Using the management approach, the Company determined that it has two operating segments: NWC (multi-specialty medical group including OB/GYN and General Practice) and HLYK (develops and markets the “HealthLynked Network,” an online personal medical information and record archive system).

 

NOTE 3 – GOING CONCERN MATTERS AND LIQUIDITY

 

As of March 31, 2019, the Company had a working capital deficit of $2,778,539 and accumulated deficit $11,561,772. For the three months ended March 31, 2019, the Company had a net loss of $1,060,717 and net cash used by operating activities of $600,393. Net cash used in investing activities was $4,302. Net cash provided by financing activities was $983,226, resulting principally from $833,226 proceeds from the sale of common stock and $150,000 net proceeds from the issuance of convertible notes.

 

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

 

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

 

During July 2016, HLYK entered into an Investment Agreement (the “Investment Agreement”) pursuant to which the investor has agreed to purchase up to $3,000,000 of HLYK common stock over a three-year period starting upon registration of the underlying shares, with such shares put to the investor by the Company pursuant to a specified formula that limits the number of shares able to be put to the investor to the number equal to the average trading volume of the Company’s common shares for the ten consecutive trading days prior to the put notice being issued. During the three months ended March 31, 2019, the Company received $493,226 from the proceeds of the sale of 2,128,644 shares pursuant to the Investment Agreement.

 

NOTE 4 – DEFERRED OFFERING COSTS AND PREPAID EXPENSES

 

Deferred Offering Costs

 

On July 7, 2016, the Company entered into the Investment Agreement with an accredited investor, pursuant to which an accredited investor agreed to invest up to $3,000,000 to purchase the Company’s common stock, par value of $.0001 per share. The purchase price for such shares shall be 80% of the lowest volume weighted average price of the Company’s common stock during the five consecutive trading days prior to the date on which written notice is sent by the Company to the investor stating the number of shares that the Company is selling to the investor, subject to certain discounts and adjustments. Further, for each $50,000 that the investor tenders to the Company for the purchase of shares of common stock, the investor was to be granted warrants for the purchase of an equivalent number of shares of common stock. The warrants were to expire five (5) years from their respective grant dates and have an exercise price equal to 130% of the weighted average purchase price for the respective “$50,000 increment.”

 

F- 62

 

 

HEALTHLYNKED CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2019

(UNAUDITED)

 

NOTE 4 – DEFERRED OFFERING COSTS AND PREPAID EXPENSES (CONTINUED)

 

On March 22, 2017, the Company and the investor entered into an Amended Investment Agreement (the “Amended Investment Agreement”) whereby the parties agreed to modify the terms of the Investment Agreement by providing that in lieu of granting the investor warrants for each $50,000 that the investor tenders to the Company, the Company granted to the investor warrants to purchase an aggregate of 7,000,000 shares of common stock. The warrants have the following fixed exercise prices: (i) 4,000,000 shares at $0.25 per share; (ii) 2,000,000 shares at $0.50 per share; and (iii) 1,000,000 shares at $1.00 per share. The warrants also contain a “cashless exercise” provision and the shares underlying the warrants will not be registered. The fair value of the warrants was calculated using the Black-Scholes pricing model at $56,635, with the following assumptions: risk-free interest rate of 1.95%, expected life of 5 years, volatility of 40%, and expected dividend yield of zero.

 

On June 7, 2017, the Company also granted warrants to purchase 200,000 shares at $0.25 per share, 100,000 shares at $0.50 per share and 50,000 shares at $1.00 per share to an advisor as a fee in connection with the Amended Investment Agreement. The fair value of the warrants was calculated using the Black-Scholes pricing model at $96,990, with the following assumptions: risk-free interest rate of 1.74%, expected life of 5 years, volatility of 40%, and expected dividend yield of zero.

 

This fair value of the warrants described above was recorded as a deferred offering cost and will be amortized over the period during which the Company can access the financing, which begins the day after a registration statement registering shares underlying the Investment Agreement is declared effective by the United States Securities and Exchange Commission (the “SEC”), and ends 3 years from that date. On May 15, 2017, the SEC declared effective a registration statement registering shares underlying the Investment Agreement. During the three months ended March 31, 2019 and 2018, the Company recognized $12,802 and $12,802, respectively, in general and administrative expense related to the cost of the warrants.

 

Prepaid Expenses

 

On December 6, 2018, the Company granted additional three-year warrants to purchase 240,000 shares at an exercise price of $0.20 per share to two advisors for services to be provided over a three-month period. The fair value of the warrants was calculated using the Black-Scholes pricing model at $35,462, with the following assumptions: risk-free interest rate of 2.76%, expected life of 3 years, volatility of 285.22%, and expected dividend yield of zero. The Company recognized $25,611 and $-0- in the three months ended March 31, 2019 and 2018, respectively, to general and administrative expense related to the cost of the warrants.

 

NOTE 5 – PROPERTY, PLANT, AND EQUIPMENT

 

Property, plant and equipment at March 31, 2019 and December 31, 2018 are as follows:

 

		March 31,				December 31,
		2019				2018
Capital Lease equipment		$	251,752			$	343,492
Telephone equipment			12,308				12,308
Furniture, Transport and Office equipment			443,271				438,970
Total Property, plant and equipment			707,331				794,770
Less: accumulated depreciation			(683,494	)			(752,173	)
Property, plant and equipment, net		$	23,837			$	42,597

 

Depreciation expense during the three months ended three months ended March 31, 2019 and 2018 was $1,655 and $6,029, respectively.

 

F- 63

 

 

HEALTHLYNKED CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2019

(UNAUDITED)

 

NOTE 6 – NOTES PAYABLE AND OTHER AMOUNTS DUE TO RELATED PARTY

 

Amounts due to related parties as of March 31, 2019 and December 31, 2018 were comprised of the following:

 

		March 31,				December 31,
		2019				2018
Due to related party:
Deferred compensation, Dr. Michael Dent		$	300,600			$	300,600
Accrued interest payable to Dr. Michael Dent			145,676				129,117
Total due to related party		$	446,276			$	429,717
Notes payable to related party:
Notes payable to Dr. Michael Dent, current portion		$	678,329			$	672,471

 

Notes Payable to Dr. Michael Dent

 

Prior to August 2014, NWC was owned and controlled by the Company’s Chief Executive Officer, Dr. Michael Dent (“DMD”). DMD first provided an up to $175,000 unsecured note payable to the Company with a 0% interest rate. During 2013 the limit on the unsecured Note Payable was increased up to $500,000 and during 2014 it was increased to $750,000 with a maturity date of December 31, 2017. All principal and interest is due at maturity of the $750k DMD Note on December 31, 2019. Interest accrued on the $750k DMD Note as of March 31, 2019 and December 31, 2018 was $72,687 and $66,859, respectively.

 

The carrying values of notes payable to Dr. Michael Dent as of March 31, 2019 and December 31, 2018 were as follows:

 

							Interest				March 31,				December 31,
Inception Date		Maturity Date		Borrower			Rate				2019				2018
January 12, 2017		January 13, 2019		HLYK				10	%		$	41,750	*		$	40,560	*
January 18, 2017		January 19, 2019		HLYK				10	%			23,827	*			23,165	*
January 24, 2017		January 15, 2019		HLYK				10	%			59,491	*			57,839	*
February 9, 2017		February 10, 2019		HLYK				10	%			35,574	*			34,586	*
April 20, 2017		April 21, 2019		HLYK				10	%			11,681	*			11,357	*
June 15, 2017		June 16, 2019		HLYK				10	%			37,506	*			36,464	*
August 17, 2017		August 18, 2018		HLYK				10	%			20,000				20,000
August 24, 2017		August 25, 2018		HLYK				10	%			37,500				37,500
September 7, 2017		September 8, 2018		HLYK				10	%			35,000				35,000
September 21, 2017		September 22, 2018		HLYK				10	%			26,500				26,500
September 29, 2017		September 30, 2018		HLYK				10	%			12,000				12,000
December 21, 2017		December 22, 2018		HLYK				10	%			14,000				14,000
January 8, 2018		January 9, 2019		HLYK				10	%			75,000				75,000
January 11, 2018		January 12, 2019		HLYK				10	%			9,000				9,000
January 26, 2018		January 27, 2019		HLYK				10	%			17,450				17,450
January 3, 2014		December 31, 2018		NWC				10	%			222,050				222,050
											$	678,329			$	672,471

 

* - Denotes that note payable is carried at fair value

 

On July 18, 2018, in connection with a $2,000,000 private placement by a third-party investor, Dr. Dent agreed to extend the maturity date on all of the above notes until December 31, 2019. Interest accrued on the above unsecured promissory notes as of March 31, 2019 and December 31, 2018 was $73,020 and $62,258, respectively.

 

F- 64

 

 

HEALTHLYNKED CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2019

(UNAUDITED)

 

NOTE 6 – NOTES PAYABLE AND OTHER AMOUNTS DUE TO RELATED PARTY (CONTINUED)

 

On February 12, 2018, the Company issued a warrant to purchase 6,678,462 shares of common stock to DMD as an inducement to (i) extend the maturity dates of up to $439,450 loaned by Dr. Dent to the Company in 2017 and 2018 in the form of unsecured promissory notes, including $75,000 loaned from Dr. Dent to the Company in January 2018 to allow the Company to retire an existing convertible promissory note payable to Power-up Lending Group Ltd. before such convertible promissory note became eligible for conversion, and (ii) provide continued loans to the Company. The warrant is immediately exercisable at an exercise price of $0.065 per share, subject to adjustment, and expires five years after the date of issuance. The fair value of the warrants was calculated using the Black-Scholes pricing model at $337,466, with the following assumptions: risk-free interest rate of 2.56%, expected life of 5 years, volatility of 268.90%, and expected dividend yield of zero. On March 28, 2018, DMD agreed to extend the maturity dates of promissory notes with an aggregate face value of $177,500, which were originally scheduled to mature before September 30, 2018, by one year from the original maturity date. Because the fair value of the warrants was greater than 10% of the present value of the remaining cash flows under the modified promissory notes, the transaction was treated as a debt extinguishment and reissuance of new debt instruments pursuant to the guidance of ASC 470-50 “Debt – Modifications and Extinguishments” (“ASC 470-50”). A loss on debt extinguishment was recorded in the amount of $348,938, equal to the fair value of the warrants of $337,466, plus the excess of $11,472 of the fair value of the reissued debt instruments over the carrying value of the existing debt instruments. The change in fair value of the reissued debt instruments subsequent to the reissuance date was $5,828 and $3,449 in the three months ended three months ended March 31, 2019 and 2018, respectively, and is included on the statement of operations in “Change in fair value of debt.”

 

MedOffice Direct

 

During 2017, the Company entered into an agreement with MedOffice Direct (“MOD”), a company majority-owned by the Company’s CEO and largest shareholder, Dr. Michael Dent, pursuant to which the Company 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 three months ended March 31, 2019 and 2018, the Company recognized rent expense to MOD in the amount of $-0- and $6,120, respectively, pursuant to this agreement.

 

During 2017, the Company entered into a separate Marketing Agreement with MOD pursuant to which MOD agreed to market the HealthLynked Network to its physician practice clients, in exchange for a semi-annual fee of $25,000. This agreement was terminated effective April 1, 2018. During the three months ended March 31, 2019 and 2018, the Company recognized general and administrative expense in the amount of $-0- and $12,500, respectively, pursuant to this agreement. On July 1, 2018 HLYK and MOD signed a marketing and service agreement pursuant to which HLYK will include MOD offering as part of its product offering to Physicians and HLYK will receive 8% of revenue for new sales related to MOD products sold through the HLYK network.

 

NOTE 7 – LEASES

 

The Company has two operating leases for office space and equipment that expire in July 2020. The Company’s weighted-average remaining lease term relating to its operating leases is 1.3 years, with a weighted-average discount rate of 11.71%. The Company is also lessee in a capital equipment finance lease for medical equipment entered into in March 2015 and expiring in March 2020. The Company’s weighted-average remaining lease term relating to its financing lease is 1.0 years, with a weighted-average discount rate of 9.38%. The Company’s lease agreements generally do not provide an implicit borrowing rate, therefore an internal incremental borrowing rate is determined based on information available at lease commencement date for purposes of determining the present value of lease payments.

 

The table below summarizes the Company’s lease-related assets and liabilities as of March 31, 2019:

 

		As of March 31, 2019
		Operating				Financing				Total
		Leases				Leases				Leases
Lease assets		$	338,126			$	17,321			$	355,447
Lease liabilities
Lease liabilities (short term)		$	248,809			$	17,321			$	266,130
Lease liabilities (long term)			90,387				---				90,387
Total lease liabilities		$	339,196			$	17,321			$	356,517

 

F- 65

 

 

HEALTHLYNKED CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2019

(UNAUDITED)

 

NOTE 7 – LEASES (CONTINUED)

 

The Company incurred lease expense of $73,415 for the three months ended March 31, 2019, of which $68,828 related to operating leases and $4,587 related to financing leases.

 

Maturities of operating lease liabilities were as follows as of March 31, 2019:

 

		Operating				Capital				Total
		Leases				Leases				Commitments
2019 (April through December)		$	206,098			$	13,761			$	219,859
2020			162,055				4,587				166,642
2021			---				---				---
2022			---				---				---
2023			---				---				---
Total lease payments			368,153				18,348				386,501
Less interest			(28,957	)			(1,027	)			(29,984	)
Present value of lease liabilities		$	339,196			$	17,321			$	356,517

 

NOTE 8 – NOTES PAYABLE

 

On December 20, 2017, the Company entered into a Merchant Cash Advance Factoring Agreement (“MCA”) with Power Up Lending Group, Ltd. (the “PULG”) pursuant to which the Company received an advance of $75,000 before closing fees (the “December MCA”). The Company is required to repay the advance, which acts like an ordinary note payable, at the rate of $4,048 per week until the balance of $102,000, which was scheduled for June 2018. At inception, the Company recognized a note payable in the amount of $102,000 and a discount against the note payable of $28,500. The discount was being amortized over the life of the instrument. During the three months ended March 31, 2019 and 2018, the Company made installment payments of $-0- and $52,619, respectively, on the December MCA. During the three months ended March 31, 2019 and 2018, the Company recognized amortization of the discount in the amount of $-0- and $14,574, respectively. The December MCA was repaid on June 1, 2018.

 

NOTE 9 –CONVERTIBLE NOTES PAYABLE

 

Convertible notes payable as of March 31, 2019 and December 31, 2018 are comprised of the following:

 

		March 31,				December 31,
		2019				2018
$550k Note - July 2016		$	611,651	*		$	594,813
$50k Note - July 2016			62,019	*			60,312
$111k Note - May 2017			128,734	*			125,190
$171.5k Note - October 2017			---				186,472
$103k Note I - October 2018			103,000				103,000
$103k Note II - November 2018			103,000				103,000
$153k Note - November 2018			153,000				153,000
$103k Note III - December 2018			103,000				103,000
$78k Note I - January 2019			78,000				---
$78k Note II - January 2019			78,000				---
			1,420,404				1,428,787
Less: unamortized discount			(363,089	)			(386,473	)
Convertible notes payable, net of original issue discount and debt discount			1,057,315				1,042,314

 

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

 

F- 66

 

 

HEALTHLYNKED CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2019

(UNAUDITED)

 

NOTE 9 –CONVERTIBLE NOTES PAYABLE (CONTINUED)

 

Amortization expense and interest expense recognized on each convertible note outstanding during the three months ended March 31, 2019 and 2018 were as follows:

 

		Amortization of Debt Discount								Interest Expanse
		Three Months Ended March 31,								Three Months Ended March 31,
		2019				2018				2019				2018
$550k Note - July 2016		$	---			$	---			$	8,137			$	8,137
$50k Note - July 2016			---				---				1,233				1,233
$111k Note - May 2017			---				11,011				4,078				4,078
$53k Note - July 2017			---				1,520				---				116
$35k Note - September 2017			---				7,972				---				614
$55k Note - September 2017			---				10,849				---				1,085
$53k Note II - October 2017			---				17,036				---				1,307
$171.5k Note - October 2017			---				42,404				1,785				4,229
$57.8k Note - January 2018			---				13,923				---				1,392
$112.8k Note - February 2018			---				17,608				---				1,761
$83k Note - February 2018			---				10,460				---				1,046
$105k Note - March 2018			---				7,479				---				748
$103k Note I - October 2018			32,526				---				2,540				---
$103k Note II - November 2018			31,856				---				2,540				---
$153k Note - November 2018			50,440				---				3,773				---
$103k Note III - December 2018			25,397				---				2,540				---
$78k Note I - January 2019			21,714				---				1,624				---
$78k Note II - January 2019			17,451				---				1,410				---
		$	179,384			$	140,262			$	29,660			$	25,746

 

Unamortized debt discount on outstanding convertible notes payable as of March 31, 2019 and December 31, 2018 are comprised of the following:

 

		Unamortized Discount as of
		March 31,				December 31,
		2019				2018
$103k Note I - October 2018		$	43,730			$	76,256
$103k Note II - November 2018			53,801				85,656
$153k Note - November 2018			79,022				129,462
$103k Note III - December 2018			69,701				95,099
$78k Note I - January 2019			56,286				---
$78k Note II - January 2019			60,549				---
		$	363,089			$	386,473

 

F- 67

 

 

HEALTHLYNKED CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2019

(UNAUDITED)

 

NOTE 9 –CONVERTIBLE NOTES PAYABLE (CONTINUED)

 

Certain of our convertible notes payable are also carried at fair value and revalued at each period end, with changes to fair value recorded to the statement of operations under “Change in Fair Value of Debt.” The changes in fair value during the three months ended March 31, 2019 and 2018 on such instruments were as follows:

 

		Change in Fair Value of Debt								Fair Value of Debt as of
		Three Months Ended March 31,								March 31,				December 31,
		2019				2018				2019				2018
$550k Note - July 2016		$	16,838			$	46,298			$	611,651			$	594,813
$50k Note - July 2016			1,707				8,199				62,019				60,312
$111k Note - May 2017			3,544				8,815				128,734				125,190
$171.5k Note - October 2017			1,781				---				---				186,472
		$	23,870			$	63,312			$	802,404			$	966,787

 

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, or 6,875,000 of the Company’s common shares, 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. 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.”

 

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, or 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.”

 

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, or 317,143 of the Company’s common shares, and is secured by all of the Company’s assets. The Company received $100,000 net proceeds from the note after an $11,000 original issue discount. At inception, the investors were also granted a five-year warrant to purchase 133,333 shares of the Company’s common stock at an exercise price of $0.75 per share.

 

F- 68

 

 

HEALTHLYNKED CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2019

(UNAUDITED)

 

NOTE 9 –CONVERTIBLE NOTES PAYABLE (CONTINUED)

 

On March 28, 2018, in exchange for a five-year warrant to purchase 125,000 shares of HLYK common stock at an exercise price of $0.05 per share, the holder of the $111k Note agreed to extend the maturity date from the original date of January 22, 2018 until July 11, 2018. The fair value of the warrants using Black/Scholes was $10,199 with the following assumptions: risk-free interest rate of 2.59%, expected life of 5 years, volatility of 578.45%, and expected dividend yield of zero. The issuance of the warrants in exchange for the maturity extension was treated as an extinguishment and reissuance of existing debt pursuant to the guidance of ASC 470-50. Accordingly, the $111k Note is carried at fair value and is revalued at each period end, with changes to fair value recorded to the statement of operations under “Change in Fair Value of Debt.” During July 2018, the maturity date of the $111k Note was further extended until December 31, 2017.

 

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. 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 three months ended March 31, 2018 in connection with the repayment, as follows:

 

Cash repayment		$	74,922
Less face value of convertible note payable retired			(53,000	)
Less carrying value of derivative financial instruments arising from ECF			(53,893	)
Less accrued interest			(2,644	)
Plus carrying value of discount at extinguishment			18,427
Gain on extinguishment of debt		$	(16,188	)

 

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. 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 three months ended March 31, 2018 in connection with the repayment, as follows:

 

Cash repayment		$	49,502
Less face value of convertible note payable retired			(35,000	)
Less carrying value of derivative financial instruments arising from ECF			(37,269	)
Less accrued interest			(1,716	)
Plus carrying value of discount at extinguishment			12,705
Gain on extinguishment of debt		$	(11,778	)

 

Convertible Notes Payable ($55,000) – September 2017

 

On September 11, 2017, the Company entered into a securities purchase agreement for the sale of a $55,000 convertible note (the “$55k Note”) to Crown Bridge Partners LLC. 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 three months ended March 31, 2018 in connection with the repayment, as follows:

 

Cash repayment		$	85,258
Less face value of convertible note payable retired			(55,000	)
Less carrying value of derivative financial instruments arising from ECF			(69,687	)
Less accrued interest			(2,759	)
Plus carrying value of discount at extinguishment			27,425
Gain on extinguishment of debt		$	(14,763	)

 

F- 69

 

 

HEALTHLYNKED CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2019

(UNAUDITED)

 

NOTE 9 –CONVERTIBLE NOTES PAYABLE (CONTINUED)

 

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 had an interest rate of 10% and a default interest rate of 22% and matures on October 26, 2018. The $171.5k Note was convertible 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 was 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 was immediately due. During three months ended March 31, 2019, the holder of the $171.5k Note converted the entire principal balance of $171,500 into 2,512,821 shares of Company common stock.

 

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 had an interest rate of 10% and a default interest rate of 18% and was scheduled to mature 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 28% 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. During third and fourth quarter of 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. Accrued but unpaid interest of $21,990 was outstanding as of March 31, 2019.

 

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.

 

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 of $2,054 in the third quarter of 2018 in connection with the repayment

 

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.

 

F- 70

 

 

HEALTHLYNKED CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2019

(UNAUDITED)

 

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 of $51,251 in the third quarter of 2018 in connection with the repayment.

 

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.

 

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 of $51,804 in the third quarter of 2018 in connection with the repayment.

 

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

 

On January 14, 2019, the Company entered into a securities purchase agreement for the sale of a $78,000 convertible note (the “$78k Note”). The $78k Note 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 24% 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 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 $78k Note was calculated using the Black-Scholes pricing model at $78,088, with the following assumptions: risk-free interest rate of 2.57%, expected life of 0.75 years, volatility of 243.61%, and expected dividend yield of zero. In connection with the $78k Note, the Company also issued to the holder 28,000 shares of Company common stock valued at $4,676, which was recorded to equity. Because the fair value of the ECF exceeded the net proceeds from the $78k Note, a charge was recorded to “Financing cost” for the excess of the fair value of the fair value of the ECF of $78,088 and the common shares issued of $4,676 over the net proceeds from the note of $75,000, for a net charge of $7,764. 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		$	78,088
Original issue discount and fees			3,000
Fair value of shares recorded to equity			4,676
Financing cost			(7,764	)
Convertible note			---
Gross proceeds		$	78,000

 

F- 71

 

 

HEALTHLYNKED CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2019

(UNAUDITED)

 

NOTE 9 –CONVERTIBLE NOTES PAYABLE (CONTINUED)

 

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

 

On January 24, 2018, the Company entered into a securities purchase agreement for the sale of a $78,000 convertible note (the “$78k Note II”). The $78k Note II included $3,000 fees for net proceeds of $75,000. The $78k Note II has an interest rate of 10% and a default interest rate of 22% and matures on November 15, 2019. The $78k 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 $78k Note II was calculated using the Black-Scholes pricing model at $101,139, with the following assumptions: risk-free interest rate of 2.58%, expected life of 0.81 years, volatility of 243.03%, and expected dividend yield of zero. Because the fair value of the ECF exceeded the net proceeds from the $78k Note II, a charge was recorded to “Financing cost” for the excess of the fair value of the fair value of the ECF of $101,139 over the net proceeds from the note of $75,000, for a net charge of $26,139. 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		$	101,139
Original issue discount and fees			3,000
Financing cost			(26,139	)
Convertible note			---
Gross proceeds		$	78,000

 

NOTE 10 – DERIVATIVE FINANCIAL INSTRUMENTS

 

Derivative financial instruments are comprised of the fair value of conversion features embedded in convertible promissory notes for which the conversion rate is not fixed, but instead is adjusted based on a discount to the market price of the Company’s common stock. The fair market value of the derivative liabilities was calculated at inception of each convertible promissory notes for which the conversion rate is not fixed and allocated to the respective convertible notes, with any excess recorded as a charge to “Financing cost.” The derivative financial instruments are then revalued at the end of each period, with the change in value recorded to “Change in fair value of on derivative financial instruments.”

 

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

 

										Change in
		Fair Value				Inception of				Fair Value				Conversion				Fair Value
		as of				Derivative				of Derivative				of Derivative				as of
		December 31,				Financial				Financial				Financial				March 31,
		2018				Instruments				Instruments				Instruments				2019
$171.5k Note - October 2017		$	229,902			$	---			$	(22,720	)		$	(207,182	)		$	---
$103k Note I - October 2018			131,617				---				(33,857	)			---				97,760
$103k Note II - November 2018			135,845				---				(32,378	)			---				103,467
$153k Note - November 2018			157,426				---				(45,408	)			---				112,018
$103k Note III - December 2018			145,650				---				(28,544	)			---				117,106
$78k Note I - January 2019			---				78,088				(14,573	)			---				63,515
$78k Note II - January 2019			---				101,142				(14,153	)			---				86,989
		$	800,440			$	179,230			$	(191,633	)		$	(207,182	)		$	580,855

 

F- 72

 

 

HEALTHLYNKED CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2019

(UNAUDITED)

 

NOTE 10 – DERIVATIVE FINANCIAL INSTRUMENTS (CONTINUED)

 

Derivative financial instruments and changes thereto recorded in the three months ended March 31, 2018 include the following:

 

										Change in
		Fair Value				Inception of				Fair Value				Write off				Fair Value
		as of				Derivative				of Derivative				Derivative				as of
		December 31,				Financial				Financial				Financial				March 31,
		2017				Instruments				Instruments				Instruments				2018
		(audited)
$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				---				617				---				58,833
$171.5k Note - October 2017			190,580				---				11,979				---				202,559
$57.8k Note - January 2018			---				82,653				(2,905	)			---				79,748
$112.8k Note - February 2018			---				161,527				(2,371	)			---				159,156
$83k Note - February 2018			---				119,512				(1,525	)			---				117,987
$105k Note - March 2018			---				153,371				(2,331	)			---				151,040
		$	398,489			$	517,063			$	14,621			$	(160,850	)		$	769,323

 

During the three months ended March 31, 2019, the $171.5k Note was converted in full into common shares by the holder.

 

During the three months ended March 31, 2018, three convertible notes were repaid in full for cash. Accordingly, the derivative financial instruments associated with the ECFs of these convertible notes were written off in connection with the extinguishment of each convertible note.

 

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 2.40% to 2.73%, expected life of 0.33 to 1.00 years, volatility of 202.73% to 293.97%, 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

 

Sales of Common Stock

 

On January 11, 2018, the Company sold 588,235 shares of common stock in a private placement transaction to an investor and received $50,000 in proceeds from the sale. The shares were issued at a share price of $0.085 per share. In connection with the stock sales, the Company also issued 588,235 five-year warrants to purchase shares of common stock at an exercise price of $0.15 per share.

 

On February 28, 2018, the Company sold 2,352,942 shares of common stock in private placement transactions to two investors and received $200,000 in proceeds from the sale. The shares were issued at a share price of $0.085 per share. In connection with the stock sales, the Company also issued 1,764,706 five-year warrants to purchase shares of common stock at an exercise price of $0.15 per share.

 

During the three months ended March 31, 2019, the Company sold 1,133,334 shares of common stock in two separate private placement transactions and received $340,000 in proceeds from the sales. The shares were issued at a share price of $0.30 per share. In connection with the stock sale, we also issued 566,667 five-year warrants to purchase shares of common stock at an exercise price of $0.40 per share and 250,000 three-year warrants to purchase shares of common stock at an exercise price of $0.50 per share.

 

During the three months ended March 31, 2019 and 2018, the Company issued 2,128,644 and 42,969 common shares, respectively, pursuant to draws made by the Company under the Investment Agreement and received an aggregate of $493,226 and $1,563, respectively, in net proceeds from the draws.

 

F- 73

 

 

HEALTHLYNKED CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2019

(UNAUDITED)

 

NOTE 11 – SHAREHOLDERS’ DEFICIT (CONTINUED)

 

Common Stock Issuable

 

As of March 31, 2019 and December 31, 2018, the Company was obligated to issue 205,301 and 114,080 shares of common stock, respectively, in exchange for professional services provided by two third party consultants. During the three months ended March 31, 2019 and 2018, the Company recognized expense related to shares earned by the consultants of $46,098 and $5,287, respectively.

 

Stock Warrants

 

Transactions involving our stock warrants during the three months ended three months ended March 31, 2019 and 2018 are summarized as follows:

 

		2019								2018
						Weighted								Weighted
						Average								Average
						Exercise								Exercise
		Number				Price				Number				Price
Outstanding at beginning of the period			46,161,463			$	0.18				20,526,387			$	0.23
Granted during the period			996,667			$	0.42				9,156,403			$	0.09
Exercised during the period			(2,099,256	)		$	0.00				---			$	---
Terminated during the period			---			$	---				---			$	---
Outstanding at end of the period			45,058,874			$	0.19				29,682,790			$	0.19
Exercisable at end of the period			45,058,874			$	0.19				29,682,790			$	0.19
Weighted average remaining life			3.5				years				4.9				years

 

The following table summarizes information about the Company’s stock warrants outstanding as of March 31, 2019:

 

Warrants Outstanding																Warrants Exercisable
								Weighted-
								Average				Weighted-								Weighted-
								Remaining				Average								Average
Exercise				Number				Contractual				Exercise				Number				Exercise
Prices				Outstanding				Life (years)				Price				Exercisable				Price
$	0.0001 to 0.09				18,157,768				3.6			$	0.06				18,157,768			$	0.06
$	0.10 to 0.24				14,520,441				3.8			$	0.19				14,520,441			$	0.19
$	0.25 to 0.49				8,440,665				3.3			$	0.29				8,440,665			$	0.29
$	0.50 to 1.00				3,940,000				2.9			$	0.64				3,940,000			$	0.64
$	0.05 to 1.00				45,058,874				3.5			$	0.20				45,058,874			$	0.20

 

During the three months ended March 31, 2019, the Company issued 996,667 warrants. The fair value of the warrant was calculated using the Black-Scholes pricing model with the following assumptions: risk-free interest rate of 2.44% to 2.52%, expected life of 3 to 5 years, volatility of 212.96% to 216.35%, and expected dividend yield of zero. The aggregate grant date fair value of warrants issued during the three months ended March 31, 2019 was $294,707.

 

During the three months ended March 31, 2018, the Company issued 9,156,403 warrants. The fair value of the warrant was calculated using the Black-Scholes pricing model with the following assumptions: risk-free interest rate of 2.23% to 2.65%, expected life of 5 years, volatility of 261.18 - 278.45%, and expected dividend yield of zero. The aggregate grant date fair value of warrants issued during the three months ended March 31, 2018 was $582,311.

 

F- 74

 

 

HEALTHLYNKED CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2019

(UNAUDITED)

 

NOTE 11 – SHAREHOLDERS’ DEFICIT (CONTINUED)

 

Employee Equity Incentive Plan

 

On January 1, 2016, the Company instituted the Employee Equity Incentive Plan (the “EIP”) for the purpose of having equity awards available to allow for equity participation by its employees. The EIP allows for the issuance of up to 15,503,680 shares of the Company’s common stock to employees, which may be issued in the form of stock options, stock appreciation rights, or restricted shares. The EIP is governed by the Company’s board, or a committee that may be appointed by the board in the future.

 

The following table summarizes the status of shares issued and outstanding under the EIP outstanding as of and for the three months ended March 31, 2019 and 2018:

 

		2019				2018
Outstanding at beginning of the period			1,738,750				1,498,750
Granted during the period			61,563				---
Terminated during the period			---				---
Outstanding at end of the period			1,800,313				1,498,750
Shares vested at period-end			1,336,563				1,058,750
Weighted average grant date fair value of shares granted during the period		$	0.26			$	---
Aggregate grant date fair value of shares granted during the period		$	12,805			$	---
Shares available for grant pursuant to EIP at period-end			10,154,118				11,654,934

 

Total stock-based compensation recognized for grants under the EIP was $32,779 and $2,435 during the three months ended March 31, 2019 and 2018. Total unrecognized stock compensation related to these grants was $92,918 as of March 31, 2019.

 

A summary of the status of non-vested shares issued pursuant to the EIP as of and for the three months ended March 31, 2019 and 2018 is presented below:

 

		2019								2018
						Weighted								Weighted
						Average								Average
						Grant Date								Grant Date
		Shares				Fair Value				Shares				Fair Value
Nonvested at beginning of period			540,000			$	0.16				628,750			$	0.05
Granted			---			$	---				---			$	---
Vested			(76,250	)		$	0.04				(188,750	)		$	0.04
Forfeited			---			$	---				---			$	---
Nonvested at end of period			463,750			$	0.18				440,000			$	0.05

 

F- 75

 

 

HEALTHLYNKED CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2019

(UNAUDITED)

 

NOTE 11 – SHAREHOLDERS’ DEFICIT (CONTINUED)

 

Employee Stock Options

 

The following table summarizes the status of options outstanding as of and for the three months ended March 31, 2019 and 2018:

 

		2019								2018
						Weighted								Weighted
						Average								Average
						Exercise								Exercise
		Number				Price				Number				Price
Outstanding at beginning of the period			3,707,996			$	0.18				2,349,996			$	0.12
Granted during the period			591,250			$	0.26				---			$	---
Exercised during the period			(154,166	)		$	0.20				---			$	---
Forfeited during the period			(595,830	)		$	0.20				---			$	---
Outstanding at end of the period			3,549,250			$	0.19				2,349,996			$	0.12
Options exercisable at period-end			1,261,000								637,500
Weighted average remaining life (in years)			8.2								8.4
Weighted average grant date fair value of options granted during the period		$	0.21							$	---
Options available for grant at period-end			10,154,118								11,654,934

 

The following table summarizes information about the Company’s stock options outstanding as of March 31, 2019:

 

Options Outstanding																Options Exercisable
								Weighted-
								Average				Weighted-								Weighted-
								Remaining				Average								Average
Exercise				Number				Contractual				Exercise				Number				Exercise
Prices				Outstanding				Life (years)				Price				Exercisable				Price
$	--- to 0.10				1,733,000				6.9			$	0.08				1,183,000				0.08
$	0.11 to 0.31				1,816,250				9.5			$	0.29				78,000				0.31
$	0.08 to 0.31				3,549,250				8.2			$	0.19				1,261,000			$	0.10

 

Total stock-based compensation recognized related to option grants was $28,456 and $2,354 during the three months ended March 31, 2019 and 2018, respectively.

 

A summary of the status of non-vested options issued pursuant to the EIP as of and for the three months ended March 31, 2019 and 2018 is presented below:

 

		2019								2018
						Weighted								Weighted
						Average								Average
						Grant Date								Grant Date
		Shares				Fair Value				Shares				Fair Value
Nonvested at beginning of period			2,332,413			$	0.13				1,774,996			$	0.03
Granted			591,250			$	0.21				---			$	---
Vested			(39,583	)		$	0.03				(62,500	)		$	0.03
Forfeited			(595,830	)		$	0.02				---			$	---
Nonvested at end of period			2,288,250			$	0.18				1,712,496			$	0.03

 

F- 76

 

 

HEALTHLYNKED CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2019

(UNAUDITED)

 

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

 

Maturities of operating lease liabilities were as follows as of March 31, 2019:

 

		Operating				Capital				Total
		Leases				Leases				Commitments
2019 (April through December)		$	206,098			$	13,761			$	219,859
2020			162,055				4,587				166,642
2021			---				---				---
2022			---				---				---
2023			---				---				---
Total lease payments			368,153				18,348				386,501
Less interest			(28,957	)			(1,027	)			(29,984	)
Present value of lease liabilities		$	339,196			$	17,321			$	356,517

 

Employment/Consulting Agreements

 

The Company has employment agreements with each of its four physicians. The agreements generally call for a fixed salary at the beginning of the contract with a transaction to performance-based pay later in the contract. The contracts expire at various times through 2019, with early termination available upon a notice period of 30-90 days during which compensation is paid to the physician but NWC has no further severance obligation.

 

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

 

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

 

F- 77

 

 

HEALTHLYNKED CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2019

(UNAUDITED)

 

NOTE 13 – SEGMENT REPORTING

 

The Company has two reportable segments: NWC and HLYK. NWC is a multi-specialty medical group including OB/GYN (both Obstetrics and Gynecology), and General Practice. The practice’s office is located in Naples, Florida. HLYK plans to operate an online personal medical information and record archive system, the “HealthLynked Network”, which will enable patients and doctors to keep track of medical information via the Internet in a cloud-based system. Patients will complete a detailed online personal medical history including past surgical history, medications, allergies, and family history. Once this information is entered patients and their treating physicians will be able to update the information as needed to provide a comprehensive medical history. 

 

The Company evaluates performance and allocates resources based on profit or loss from operations before income taxes. The accounting policies of the reportable segments are the same as those described in the summary of significant accounting policies.

 

Segment information for the three months ended March 31, 2019 and 2018 was as follows:

 

		Three Months Ended March 31, 2019												Three Months Ended March 31, 2018
		NWC				HLYK				Total				NWC				HLYK				Total
Revenue
Patient service revenue, net		$	464,990			$	---			$	464,990			$	645,639			$	---			$	645,639
Operating Expenses
Salaries and benefits			350,238				178,987				529,225				403,055				157,801				560,856
General and administrative			242,600				514,756				757,356				225,652				349,176				574,828
Depreciation and amortization			1,060				595				1,655				5,574				455				6,029
Total Operating Expenses			593,898				694,338				1,288,236				634,281				507,432				1,141,713
Loss from operations		$	(128,908	)		$	(694,338	)		$	(823,246	)		$	11,358			$	(507,432	)		$	(496,074	)
Other Segment Information
Interest expense		$	5,828			$	40,494			$	46,322			$	5,697			$	34,650			$	40,347
Loss on extinguishment of debt		$	---			$	139,798			$	139,798			$	---			$	325,223			$	325,223
Financing cost		$	---			$	33,903			$	33,903			$	---			$	192,062			$	192,062
Amortization of original issue and debt discounts on convertible notes		$	---			$	179,384			$	179,384			$	---			$	154,835			$	154,835
Change in fair value of debt		$	---			$	29,697			$	29,697			$	---			$	57,946			$	57,946
Change in fair value of derivative financial instruments		$	---			$	(191,633	)		$	(191,633	)		$	---			$	14,621			$	14,621

 

 

		March 31, 2019												December 31, 2018
Identifiable assets		$	520,535			$	565,751			$	1,086,286			$	184,912			$	242,451			$	427,363

 

During the three months ended March 31, 2019 and 2018, HLYK recognized revenue of $1,941 and $6,888, respectively, related to subscription revenue billed to and paid for by NWC physicians for access to the HealthLynked Network. The revenue for HLYK and related expense for NWC were eliminated on consolidation.

 

NOTE 14 – FAIR VALUE OF FINANCIAL INSTRUMENTS

 

The carrying amounts of certain financial instruments, including cash and cash equivalents, accounts receivable and accounts payable, approximate their respective fair values due to the short-term nature of such instruments.

 

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

 

F- 78

 

 

HEALTHLYNKED CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2019

(UNAUDITED)

 

NOTE 14 – FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)

 

The following table summarizes the conclusions reached regarding fair value measurements as of March 31, 2019 and December 31, 2018:

 

		As of March 31, 2019
														Total
		Level 1				Level 2				Level 3				Fair Value
Convertible notes payable		$	---			$	---			$	802,404			$	802,404
Notes payable to related party			---				---				209,829				209,829
Derivative financial instruments			---				---				580,855				580,855
Total		$	---			$	---			$	1,593,088			$	1,593,088

 

		As of December 31, 2018
														Total
		Level 1				Level 2				Level 3				Fair Value
Convertible notes payable		$	---			$	---			$	780,315			$	780,315
Notes payable to related party			---				---				203,971				203,971
Derivative financial instruments			---				---				800,440				800,440
Total		$	---			$	---			$	1,784,726			$	1,784,726

 

The changes in Level 3 financial instruments that are measured at fair value on a recurring basis during the three months ended March 31, 2019 and 2018 were as follows:

 

		Three Months Ended March 31,
		2019				2018
Convertible notes payable		$	(23,869	)		$	(54,497	)
Notes payable to related party			(5,828	)			(3,449	)
Derivative financial instruments			191,633				(14,621	)
Total		$	161,936			$	(72,567	)

 

NOTE 15 – SUBSEQUENT EVENTS

 

On April 12, 2019 the Company acquired a 100% interest in HCFM, a medical practice engaged in improving the health of its patients through individualized and integrative health care. Under the terms of acquisition, we paid HCFM shareholders $500,000 in cash and issued 3,968,254 shares of our common stock along with an earn out provision of $500,000 that may be earned based on the performance of HCFM in fiscal years ended December 31, 2019-21. The total consideration represents a transaction value of approximately $2 million. The Company funded the acquisition of HCFM through available cash and the issuance of restricted common shares. The Company plans to account for the transaction as an acquisition of a business pursuant to ASC 805, “Business Combinations” (“ASC 805”). The Company is currently engaged in establishing the acquisition date fair value and allocating the fair value across the specific assets and liabilities acquired pursuant to the requirements of ASC 805. The Company expects that the required enterprise valuation of the acquisition and purchase price allocation will be completed by and included in our financial statements reporting our second quarter activity as of June 30, 2019.

 

F- 79

 

 

HEALTHLYNKED CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2019

(UNAUDITED)

 

NOTE 15 – SUBSEQUENT EVENTS (CONTINUED)

 

On April 3, 2019, the Company entered into a securities purchase agreement for the sale of a $103,000 convertible note. The note included $3,000 fees for net proceeds of $100,000. The note has an interest rate of 10% and a default interest rate of 22%, matures on February 28, 2020 and 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.

 

On April 4, 2019, the Company repaid a convertible note dated October 18, 2018 with a face value of $103,000, along with interest accrued thereon, for a one-time cash payment of $134,500.

 

On April 11, 2019, the Company entered into securities purchase agreements for the sale of two identical convertible notes with an aggregate face value of $209,000. The notes included $9,000 fees for net proceeds of $200,000. The notes have an interest rate of 10% and a default interest rate of 22%, mature on April 11, 2020, and 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.

 

On April 15, 2019, the Company issued a convertible note with a face value of $357,500. The note included $32,500 fees for net proceeds of $325,000. The note has an interest rate of 10%, matures on December 31, 2019, and may be converted into common stock of the Company by the holder at any time, subject to a 9.99% beneficial ownership limitation, at a fixed conversion price per share of $0.20. Upon an event of default, 140% of the outstanding principal and any interest due amount shall be immediately due and the conversion price resets 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.

 

On May 7, 2019, the Company entered into a securities purchase agreement for the sale of a $103,000 convertible note. The note included $3,000 fees for net proceeds of $100,000. The note has an interest rate of 10% and a default interest rate of 22%, matures on February 28, 2020 and 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.

 

On May 7, 2018, the Company prepaid the balance on a convertible note payable dated November 12, 2018 with a face value of $103,000, plus interest accrued thereon, for a one-time cash payment of $134,888.

 

F- 80

 

 

PART II - INFORMATION NOT REQUIRED IN PROSPECTUS

 

Item 13. Other Expenses of Issuances and Distribution.

 

The following table sets forth the costs and expenses paid by us in connection with the issuance and distribution of the securities being registered. None of the following expenses are payable by the selling securityholders. All of the amounts shown are estimates, except for the SEC registration fee. 

 

SEC registration fee		$	486.78
Legal fees and expenses		$	25,000.00
Accounting fees and expenses		$	5,000.00
Miscellaneous		$	5,000.00
TOTAL		$	35,486.78

 

Item 14. Indemnification of Directors and Officers.

 

Nevada Revised Statutes (“NRS”) Sections 78.7502 and 78.751 provide us with the power to indemnify any of our directors and officers. The director or officer must have conducted himself/herself in good faith and reasonably believe that his/her conduct was in, or not opposed to, our best interests. In a criminal action, the director, officer, employee or agent must not have had reasonable cause to believe his/her conduct was unlawful.

 

Under NRS Section 78.751, advances for expenses may be made by agreement if the director or officer affirms in writing that he/she believes he/she has met the standards and will personally repay the expenses if it is determined such officer or director did not meet the standards.

 

We are also permitted to apply for insurance on behalf of any director, officer, employee or other agent for liability arising out of his actions, whether or not the NRS would permit indemnification.

 

INSOFAR AS INDEMNIFICATION FOR LIABILITIES ARISING UNDER THE SECURITIES ACT MAY BE PERMITTED FOR OUR DIRECTORS, OFFICERS AND CONTROLLING PERSONS PURSUANT TO THE FOREGOING PROVISIONS, OR OTHERWISE, WE HAVE BEEN ADVISED THAT IN THE OPINION OF THE SEC SUCH INDEMNIFICATION IS AGAINST PUBLIC POLICY AS EXPRESSED IN THE SECURITIES ACT AND IS, THEREFORE, UNENFORCEABLE.

 

II- 1

 

 

Item 15. Recent Sales of Unregistered Securities.

 

In January 2016, we issued 612,500 shares of common stock as stock grants to our employees.

 

In June 2016 we sold 3,980,000 shares of our common stock to certain accredited investors at a purchase price of $0.05 per share.

 

In June 2016 we issued an additional 900,000 shares of common stock to SKS.

 

In July 2016, we sold 2,187,500 shares of our common stock to certain accredited investors at a purchase price of $0.08 per share and issued 5-year warrants at $0.10 per share.

 

In July 2016 we issued an additional 1,000,000 to Delaney Equity Group, LLC as per our contractual agreement to do so. We also issued Delaney warrants to purchase 277,778 shares of commons stock at an exercise price of $0.09 and a five-year term, in exchange for services provided.

 

In July 2016 we raised $550,000 of convertible debt, convertible into common shares at $0.08 per share and issued 5-year warrants with an exercise price of $0.09 per share. The investors were also granted a five-year warrant to purchase 6,111,111 shares of the Company’s common stock at an exercise price of $0.09 per share.

 

In July 2016, we entered into an Investment Agreement with Iconic Holdings, LLC pursuant to which it agreed to invest up to $3,000,000 to purchase the Company’s common stock, par value of $.0001 per share. The purchase price for such shares shall be 80% of the lowest volume weighted average price of our common stock during the five consecutive trading days prior to the date on which written notice is sent by us to the investor stating the number of shares that the Company is selling to the investor (the “Put Right”), subject to certain discounts and adjustments. We also issued to the investor a warrant to purchase up to 6,111,111 shares of our common stock, at an exercise price of $0.09 per share.

 

On March 22, 2017, the Company entered into the Amended Investment Agreement whereby the parties have agreed to modify the terms of Investment Agreement by providing that in lieu of granting the investor warrants for each $50,000 that the investor tenders to the Company, the Company shall grant, and has granted, to the investor warrants to purchase an aggregate of seven (7) million shares of common stock. The warrants shall have the following fixed exercise prices: (i) four million shares at $0.25 per share; (ii) two million shares at $0.50 per share; and (iii) one million shares at $1.00 per share. The warrants also contain a “cashless exercise” provision and the shares underlying the warrants will not be registered.

 

Pursuant to the Investment Agreement, the Company also entered into a Registration Rights Agreement with the investor whereby it agreed to register for resale 21,000,000 shares of the Company’s common stock issuable pursuant to the terms of the Investment Agreement.

 

In July 2016, we granted a total of 1,600,000 employee stock options our Chief Executive Officer and Chief Financial Officer with an exercise price of $0.08 per share and a legal life of 10 years. Of the total grant, 700,000 options vest over time for a period up to four years, and 900,000 vest based on Company performance measures. The aggregate grant date fair value of options granted in the nine months ended September 30, 2016 was $51,120 (net of expected forfeitures).

 

In November 2016, we granted a total of 749,996 employee stock options to an employee with an exercise price of $0.20 per share and a legal life of 10 years. Of the total grant, 299,996 options vest over time for a period up to three years, and 450,000 vest based on future Company and individual performance measures. The aggregate grant date fair value of the options was $14,301 (net of expected forfeitures).

 

In February 2017, the Company sold 2,100,000 shares of common stock to three investors. The Company received $210,000 in proceeds from the sale. The shares were issued at a share price of $0.10 per share.

 

II- 2

 

 

In February 2017, the Company issued a warrant to purchase up to 500,000 shares of common stock at an exercise price of $0.15 per share. The warrant shall expire on February 10, 2020 and may be exercised on a cashless basis. The warrant has a 9.99% beneficial ownership limitation.

 

In April 2017, the Company sold 1,850,000 shares of common stock to five investors. The Company received $185,000 in proceeds from the sale. The shares were issued at a share price of $0.10 per share.

 

During July 2017, we sold 45,833 shares of common stock to three investors. The Company received $13,000 in proceeds from the sale. The shares were issued at a share price of $0.20 per share with respect to 27,500 shares and at $0.30 per share with respect to 38,333 shares.

 

In August 2017, we issued a warrant to purchase up to 1,000,000 shares of common stock at an exercise price of $0.30 per share. The warrant shall expire on August 8, 2022 and may be exercised on a cashless basis. The warrant has a 9.99% beneficial ownership limitation.

 

During October and November 2017, we sold 1,461,111 shares of common stock to three investors. The Company received $288,000 in proceeds from the sale. The shares were issued at a share price of $0.18 per share with respect to 211,111 shares and at $0.20 per share with respect to 1,250,000 shares. In connection with the stock sales, we also issued 959,998 five-year warrants to purchase shares of common stock at an exercise price of $0.30 per share.

 

During the first quarter of 2018, we sold 2,941,177 shares of common stock in private placement transactions to three investors and received $250,000 in proceeds. The shares were issued at a share price of $0.085 per share. We also issued 2,352,941 five-year warrants with an exercise price of $0.15 per share in connection with the stock sales.

 

On May 10, 2018, we sold 100,000 shares of common stock in private placement transactions to an investor and received $15,500 in proceeds from the sale. The shares were issued at a share price of $0.155 per share. In connection with the stock sale, we also issued 50,000 five-year warrants to purchase shares of common stock at an exercise price of $0.25 per share.

 

On June 14, 2018, we sold 208,000 shares of common stock in private placement transactions to an investor and received $52,000 in proceeds from the sale. The shares were issued at a share price of $0.25 per share. In connection with the stock sale, we also issued 104,000 five-year warrants to purchase shares of common stock at an exercise price of $0.35 per share.

 

On June 6, 2018, we issued 600,000 five-year warrants with an exercise price of $0.15 to two individuals for consulting services to be performed between June 6 and December 6, 2018.

 

On July 11, 2018, we and the issuer of three previously-issued convertible promissory notes (dated July 7, 2016 with a face value of $550,000, July 7, 2016 with a face value of $50,000 and May 22, 2017 with a face value of $111,000 ) entered into an Amendment agreement related to these notes, 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 of our common shares at an exercise price of $0.25, and (ii) a three-year warrant to purchase 300,000 of our common shares at an exercise price of $0.50.

 

On July 13, 2018, we and the issuer of three previously-issued convertible promissory notes (dated July 7, 2016 with a face value of $550,000, July 7, 2016 with a face value of $50,000 and May 22, 2017 with a face value of $111,000 ) entered into a second Amendment agreement, pursuant to which the holder agreed to further extend the maturity date of these notes until December 31, 2019 in exchange for (i) three-year warrant to purchase 175,000 of our common shares at an exercise price of $0.25, and (ii) three-year warrant to purchase 75,000 of our common shares at an exercise price of $0.50.

 

On July 18, 2018, we completed the July 2018 Private Placement pursuant to which we sold the following securities: (1) an aggregate of 3,900,000 shares of our common stock, par value $0.0001 per share, (2) Pre-Funded Warrants to purchase an aggregate of 4,100,000 shares of our common stock with an exercise price of $0.0001 and a five-year life, (3) Series A Warrants to purchase up to an aggregate of 8,000,000 shares of our common stock with an exercise price of $0.25 per share (subsequently reset to $0.2233 on the Repricing Date) and a term of five years, and (4) Series B Warrants to purchase up to a maximum of 17,000,000 shares of our common stock (subsequently set at 2,745,757 on the Repricing Date) at an exercise price of $0.0001. Net proceeds to we were $1,774,690. We 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 our common stock at an exercise price of $0.0001.

 

II- 3

 

 

On August 7, 2018, we prepaid the balance on a convertible promissory note dated February 2, 2018 with a face value of $112,750 and also issued the holder a 3-year warrant to purchase 100,000 shares of our common stock at an exercise price of $0.25 in connection with the extinguishment.

 

On August 15, 2018, we sold 285,714 shares of common stock in a private placement transaction to an investor and received $100,000 in proceeds from the sale. The shares were issued at a share price of $0.35 per share. In connection with the stock sale, we also issued 142,857 five-year warrants to purchase shares of common stock at an exercise price of $0.45 per share.

 

On August 16, 2018, we prepaid the balance on a convertible promissory note dated February 13, 2018with a face value of $83,000 and also issued the holder a 5-year warrant to purchase 237,143 shares of our common stock at an exercise price of $0.35 in connection with the extinguishment.

 

On August 20, 2018, we 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 August and October 2018, we issued 384,839 common shares to a convertible note holder upon conversion of outstanding principal and interest by the note holder.

 

On October 2, 2018, the investor in the July 18, 2018 private placement transaction exercised 2,000,001 of the Pre-Funded Warrants. We did not receive any proceeds from the transaction.

 

On November 21, 2018, we issued 35,000 common shares to the holder of a $153,000 convertible promissory note as an inducement to enter into the convertible promissory note transaction. We did not receive any proceeds from the transaction.

 

On January 15, 2019, we issued 28,000 common shares to the holder of a $78,000 convertible promissory note as an inducement to enter into the convertible promissory note transaction. We did not receive any proceeds from the transaction.

 

On February 7, 2019, we issued 2,512,821 common shares to a convertible note holder upon conversion of outstanding principal by the note holder.

 

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.

 

On February 21, 2019, we issued 20,000 common shares to a third party consultant as partial compensation for professional services.

 

On March 19, 2019, we issued 250,000 common shares to a third-party consultant as partial compensation for professional services.

 

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.

 

On April 12, 2019 the Company acquired a 100% interest in HCFM, a medical practice engaged in improving the health of its patients through individualized and integrative health care. Under the terms of acquisition, we paid HCFM shareholders $500,000 in cash and issued 3,968,254 shares of our common stock along with an earn out provision of $500,000 that may be earned based on the performance of HCFM in fiscal years ended December 31, 2019-21.

 

II- 4

 

 

On April 16, 2019, we issued 50,000 common shares to the holders of two identical convertible promissory notes with a face value of $209,000 as an inducement to enter into the convertible promissory note transaction. We did not receive any proceeds from the transaction.

 

On May 9, 2019, we issued 30,000 common shares to a third party consultant as partial compensation for professional services.

 

On May 21, 2019 and June 5, 2019, we issued 740,002 common shares to a convertible note holder upon conversion of outstanding principal by the note holder.

 

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

 

Item 16. Exhibits and Financial Statement Schedules.

 

(a)

Exhibits.

 

EXHIBIT INDEX

 

Exhibit No.		Exhibit Description
2.1		Share Exchange Agreement (Filed as Exhibit 2.1 to the Company’s Draft Registration Statement on Form S-1 filed with the Commission on January 9, 2017)
3.1		Articles of Incorporation (Filed as Exhibit 3.1 to the Company’s Draft Registration Statement on Form S-1 filed with the Commission on January 9, 2017)
3.2		Amended and Restated Articles of Incorporation (Filed as Exhibit 3.2 to the Company’s Draft Registration Statement on Form S-1 filed with the Commission on January 9, 2017)
3.3		By-Laws (Filed as Exhibit 3.3 to the Company’s Draft Registration Statement on Form S-1 filed with the Commission on January 9, 2017)
3.4		Certificate of Designation of Series A Convertible Preferred Stock (Filed as Exhibit 3.4 to the Company’s Draft Registration Statement on Form S-1 filed with the Commission on January 9, 2017)
3.5		Certificate of Amendment to Articles of Incorporation (Filed as Exhibit 3.1 to the Company’s Current Report on Form 8-K filed with the Commission on February 6, 2018)
5.1		Opinion of Sheppard, Mullin, Richter Hampton LLP (Filed as Exhibit 5.1 to Amendment No. 1 to the Company’s Registration Statement on Form S-1 filed with the Commission on May 25, 2018).
10.1		Form of Private Placement Subscription Agreements (Filed as Exhibit 10.1 to the Company’s Draft Registration Statement on Form S-1 filed with the Commission on January 9, 2017)
10.2		Series A Conversion Notice (Filed as Exhibit 10.2 to the Company’s Draft Registration Statement on Form S-1 filed with the Commission on January 9, 2017)
10.3		Form of Notes Issued to Dr. Michael Dent (Filed as Exhibit 10.3 to the Company’s Draft Registration Statement on Form S-1 filed with the Commission on January 9, 2017)
10.4		Form of Warrants Issued to Dr. Michael Dent (Filed as Exhibit 10.4 to the Company’s Draft Registration Statement on Form S-1 filed with the Commission on January 9, 2017)
10.5		Advisor Consulting Banking Agreement with Delaney Equity Group LLC (Filed as Exhibit 10.5 to the Company’s Draft Registration Statement on Form S-1 filed with the Commission on January 9, 2017)
10.6		Warrant Agreement with Delaney Equity Group LLC (Filed as Exhibit 10.6 to the Company’s Draft Registration Statement on Form S-1 filed with the Commission on January 9, 2017)
10.7		Investment Agreement with Iconic Holdings LLC (Filed as Exhibit 10.7 to the Company’s Draft Registration Statement on Form S-1 filed with the Commission on January 9, 2017)

 

II- 5

 

 

10.8		Registration Rights Agreement with Iconic Holdings LLC (Filed as Exhibit 10.8 to the Company’s Draft Registration Statement on Form S-1 filed with the Commission on January 9, 2017)
10.9		Security Agreement with Iconic Holdings LLC (Filed as Exhibit 10.9 to the Company’s Draft Registration Statement on Form S-1 filed with the Commission on January 9, 2017)
10.10		Form of Intellectual Property Security Agreement with Iconic Holdings LLC (Filed as Exhibit 10.10 to the Company’s Draft Registration Statement on Form S-1 filed with the Commission on January 9, 2017)
10.11		Secured Note Issued to Iconic Holdings LLC (Filed as Exhibit 10.11 to the Company’s Draft Registration Statement on Form S-1 filed with the Commission on January 9, 2017)
10.12		Fee Note Issued to Iconic Holdings LLC (Filed as Exhibit 10.12 to the Company’s Draft Registration Statement on Form S-1 filed with the Commission on January 9, 2017)
10.13		Warrant Issued to Iconic Holdings LLC in July 2016 (Filed as Exhibit 10.13 to the Company’s Draft Registration Statement on Form S-1 filed with the Commission on January 9, 2017)
10.14+		Form of Employment Agreement with Dr. Michael Dent (Filed as Exhibit 10.14 to the Company’s Draft Registration Statement on Form S-1 filed with the Commission on January 9, 2017)
10.15+		Form of Employment Agreement with George O’Leary (Filed as Exhibit 10.15 to the Company’s Draft Registration Statement on Form S-1 filed with the Commission on January 9, 2017)
10.16+		Employment Agreement with Robert Horel (Filed as Exhibit 10.16 to the Company’s Registration Statement on Form S-1 filed with the Commission on March 13, 2017)
10.17		Loan Agreement with Florida Community Bank (Filed as Exhibit 10.16 to the Company’s Registration Statement on Form S-1 filed with the Commission on February 8, 2017)
10.18+		2016 Equity Incentive Plan (Filed as Exhibit 10.17 to the Company’s Draft Registration Statement on Form S-1 filed with the Commission on January 9, 2017)
10.19		Form of Warrant Agreement with Investors in July 2016 Private Placement (Filed as Exhibit 10.13 to the Company’s Draft Registration Statement on Form S-1 filed with the Commission on January 9, 2017)
10.20		Amendment #1 to Secured Note Issued to Iconic Holdings LLC (Filed as Exhibit 10.20 to the Company’s Registration Statement on Form S-1 filed with the Commission on March 13, 2017)
10.21		Warrant Issued to Iconic Holdings LLC in February 2017 (Filed as Exhibit 10.21 to the Company’s Registration Statement on Form S-1 filed with the Commission on March 13, 2017)
10.22		Amendment to Investment Agreement with Iconic Holdings LLC (Filed as Exhibit 10.22 to the Company’s Registration Statement on Form S-1 filed with the Commission on March 23, 2017)
10.23		Warrant for Four Million Shares of Common Stock Issued to Iconic Holdings LLC in March 2017 (Filed as Exhibit 10.23 to the Company’s Registration Statement on Form S-1 filed with the Commission on March 23, 2017)
10.24		Warrant for Two Million Shares of Common Stock Issued to Iconic Holdings LLC in March 2017 (Filed as Exhibit 10.24 to the Company’s Registration Statement on Form S-1 filed with the Commission on March 23, 2017)
10.25		Warrant for One Million Shares of Common Stock Issued to Iconic Holdings LLC in March 2017 (Filed as Exhibit 10.22 to the Company’s Registration Statement on Form S-1 filed with the Commission on March 23, 2017)
10.26		Fixed Convertible Promissory Note with Iconic Holdings LLC (Filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Commission on May 25, 2017)
10.27		Form of Warrant Issued to Iconic Holdings LLC (Filed as Exhibit 10.2 to the Company’s Current Report on Form 8-K filed with the Commission on May 25, 2017)
10.28		Amendment No. 1 to Security Agreement with Iconic Holdings LLC (Filed as Exhibit 10.3 to the Company’s Current Report on Form 8-K filed with the Commission on May 25, 2017)
10.29		Amendment No. 1 to Subsidiary Guarantee with Iconic Holdings LLC (Filed as Exhibit 10.4 to the Company’s Current Report on Form 8-K filed with the Commission on May 25, 2017)
10.30		Amendment No. 1 to Intellectual Property Security Agreement with Iconic Holdings LLC (Filed as Exhibit 10.5 to the Company’s Current Report on Form 8-K filed with the Commission on May 25, 2017)

 

II- 6

 

 

10.31		Unsecured Promissory Note with Dr. Michael Dent (Filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Commission on June 21, 2017)
10.32		Securities Purchase Agreement with Power Up Lending Group, Ltd. (Filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Commission on July 17, 2017)
10.33		Convertible Promissory Note with Power Up Lending Group, Ltd. (Filed as Exhibit 10.2 to the Company’s Current Report on Form 8-K filed with the Commission on July 17, 2017)
10.34		Form of Amendment #2, dated August 14, 2017, by and between HealthLynked and Iconic Holdings, LLC (Filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Commission on August 11, 2017)
10.35		Form of Common Stock Purchase Warrant, dated August 14, 2017, by and between HealthLynked Corp., and Iconic Holdings, LLC (Filed as Exhibit 10.2 to the Company’s Current Report on Form 8-K filed with the Commission on August 11, 2017)
10.36		Securities Purchase Agreement with Power Up Lending Group, Ltd. (Filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Commission on September 15, 2017)
10.37		Convertible Promissory Note with Power Up Lending Group, Ltd. (Filed as Exhibit 10.2 to the Company’s Current Report on Form 8-K filed with the Commission on September 15, 2017)
10.38		Securities Purchase Agreement with Crown Bridge Partners LLC (Filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Commission on September 21, 2017)
10.39		Convertible Promissory Note with Crown Bridge Partners LLC (Filed as Exhibit 10.2 to the Company’s Current Report on Form 8-K filed with the Commission on September 21, 2017)
10.40		Securities Purchase Agreement with PULG (Filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Commission on October 27, 2017)
10.41		Convertible Promissory Note with PULG (Filed as Exhibit 10.2 to the Company’s Current Report on Form 8-K filed with the Commission on October 27, 2017)
10.42		Securities Purchase Agreement (Filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Commission on November 3, 2017)
10.43		Convertible Promissory Note (Filed as Exhibit 10.2 to the Company’s Current Report on Form 8-K filed with the Commission on November 3, 2017)
10.44		Form of Subscription Agreement (Filed as Exhibit 10.3 to the Company’s Current Report on Form 8-K filed with the Commission on November 3, 2017)
10.45		Form of Warrant Agreement (Filed as Exhibit 10.4 to the Company’s Current Report on Form 8-K filed with the Commission on November 3, 2017)
10.46		Securities Purchase Agreement with Morningview Financial LLC dated January 2, 2018 (Filed as Exhibit 10.1 to the Company’s Form 10-Q filed with the Commission on May 15, 2018)
10.47		Convertible Promissory Note with Morningview Financial LLC dated January 2, 2018 (Filed as Exhibit 10.2 to the Company’s Form 10-Q filed with the Commission on May 15, 2018)
10.48		Securities Purchase Agreement with Auctus Fund LLC dated February 2, 2018 (Filed as Exhibit 10.3 to the Company’s Form 10-Q filed with the Commission on May 15, 2018)
10.49		Convertible Promissory Note with Auctus Fund LLC dated February 2, 2018 (Filed as Exhibit 10.4 to the Company’s Form 10-Q filed with the Commission on May 15, 2018)
10.50		Securities Purchase Agreement with EMA Financial LLC dated February 13, 2018 (Filed as Exhibit 10.6 to the Company’s Form 10-Q filed with the Commission on May 15, 2018)
10.51		Convertible Promissory Note with EMA Financial LLC dated February 13, 2018 (Filed as Exhibit 10.7 to the Company’s Form 10-Q filed with the Commission on May 15, 2018)
10.52		Form of Warrant Agreement issued to Dr. Michael Dent (Filed as Exhibit 4.1 to the Company’s Current Report on Form 8-K filed with the Commission on February 15, 2018)
10.53		Securities Purchase Agreement with LG Capital Funding LLC dated March 5, 2018 (Filed as Exhibit 10.9 to the Company’s Form 10-Q filed with the Commission on May 15, 2018)
10.54		Convertible Promissory Note with LG Capital Funding LLC dated March 5, 2018 (Filed as Exhibit 10.10 to the Company’s Form 10-Q filed with the Commission on May 15, 2018)
10.55		Form of Securities Purchase Agreement with Power Up Lending Group Ltd. dated April 2, 2018 (Filed as Exhibit 10.11 to the Company’s Form 10-Q filed with the Commission on May 15, 2018)
10.56		Form of Convertible Promissory Note with Power Up Lending Group Ltd. dated April 2, 2018 (Filed as Exhibit 10.12 to the Company’s Form 10-Q filed with the Commission on May 15, 2018)

 

II- 7

 

 

10.57		Form of Securities Purchase Agreement with Morningview Financial LLC dated April 16, 2018 (Filed as Exhibit 10.13 to the Company’s Form 10-Q filed with the Commission on May 15, 2018)
10.58		Form of Convertible Promissory Note with Morningview Financial LLC dated April 16, 2018 (Filed as Exhibit 10.14 to the Company’s Form 10-Q filed with the Commission on May 15, 2018)
10.59		Form of Securities Purchase Agreement with One44 Capital LLC dated April 18, 2018 (Filed as Exhibit 10.15 to the Company’s Form 10-Q filed with the Commission on May 15, 2018)
10.60		Form of Convertible Promissory Note with One44 Capital LLC dated April 18, 2018 (Filed as Exhibit 10.16 to the Company’s Form 10-Q filed with the Commission on May 15, 2018)
10.61		Form of Securities Purchase Agreement with Power Up Lending Group Ltd. dated April 18, 2018 (Filed as Exhibit 10.17 to the Company’s Form 10-Q filed with the Commission on May 15, 2018)
10.62		Form of Convertible Promissory Note with Power Up Lending Group Ltd. dated April 18, 2018 (Filed as Exhibit 10.18 to the Company’s Form 10-Q filed with the Commission on May 15, 2018)
10.63		Form of Securities Purchase Agreement with LG Capital Funding LLC dated May 3, 2018 (Filed as Exhibit 10.19 to the Company’s Form 10-Q filed with the Commission on May 15, 2018)
10.64		Form of Convertible Promissory Note with LG Capital Funding LLC dated May 3, 2018 (Filed as Exhibit 10.20 to the Company’s Form 10-Q filed with the Commission on May 15, 2018)
10.65		Form of Securities Purchase Agreement with Cerberus Finance Group Ltd. dated May 7, 2018 (Filed as Exhibit 10.21 to the Company’s Form 10-Q filed with the Commission on May 15, 2018)
10.66		Form of Convertible Promissory Note with Cerberus Finance Group Ltd. dated May 7, 2018 (Filed as Exhibit 10.22 to the Company’s Form 10-Q filed with the Commission on May 15, 2018)
10.67		Form of Securities Purchase Agreement with Power Up Lending Group Ltd. dated May 9, 2018 (Filed as Exhibit 10.23 to the Company’s Form 10-Q filed with the Commission on May 15, 2018)
10.68		Form of Convertible Promissory Note with Power Up Lending Group Ltd. dated May 9, 2018 (Filed as Exhibit 10.24 to the Company’s Form 10-Q filed with the Commission on May 15, 2018)
10.69		Form of Securities Purchase Agreement with Adar Bays LLC dated May 24, 2018 (Filed as Exhibit 10.25 to the Company’s Quarterly Report on Form 10-Q filed with the Commission on August 14, 2018)
10.70		Form of Convertible Promissory Note with Adar Bays LLC dated May 24, 2018 (Filed as Exhibit 10.26 to the Company’s Quarterly Report on Form 10-Q filed with the Commission on August 14, 2018)
10.71		Extension Letter Agreement, dated July 1, 2018, by and among HealthLynked Corp. and the George O’Leary (Filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Commission on July 6, 2018)
10.72		Amendment #4 to Investment Agreement, dated June 19, 2018, by and among HealthLynked Corp. and the Buyers listed therein (Filed as Exhibit 1.1 to the Company’s Current Report on Form 8-K filed with the Commission on June 20, 2018)
10.73		Securities Purchase Agreement, dated July 16, 2018, by and among HealthLynked Corp. and the Buyers listed therein (Filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Commission on July 19, 2018)
10.74		Registration Rights Agreement, dated July 16, 2018, by and among HealthLynked Corp. and the Buyers listed therein (Filed as Exhibit 10.2 to the Company’s Current Report on Form 8-K filed with the Commission on July 19, 2018)
10.75		Form of Series A Warrant (Filed as Exhibit 10.3 to the Company’s Current Report on Form 8-K filed with the Commission on July 19, 2018)
10.76		Form of Series B Warrant (Filed as Exhibit 10.4 to the Company’s Current Report on Form 8-K filed with the Commission on July 19, 2018)

 

II- 8

 

 

10.77		Form of Pre-Funded Warrants (Filed as Exhibit 10.5 to the Company’s Current Report on Form 8-K filed with the Commission on July 19, 2018)
10.78		Amendment to Notes, dated July 16, 2018 (Filed as Exhibit 10.6 to the Company’s Current Report on Form 8-K filed with the Commission on July 19, 2018)
10.79		Amendment to Note, dated July 16, 2018 (Filed as Exhibit 10.7 to the Company’s Current Report on Form 8-K filed with the Commission on July 19, 2018)
10.80		Press Release, dated July 19, 2018 (Filed as Exhibit 99.1 to the Company’s Current Report on Form 8-K filed with the Commission on July 19, 2018)
10.81		Disclosure Schedules to the Securities Purchase Agreement, dated July 16, 2018, by and among the Corporation and the Investors (Filed as Exhibit 1.1 to the Company’s Current Report on Form 8-K filed with the Commission on August 16, 2018)
10.82		Form of Lock-Up Agreement (Filed as Exhibit 1.2 to the Company’s Current Report on Form 8-K filed with the Commission on August 16, 2018)
10.83		Agreement and Plan of Merger, dated January 15, 2019, by and among HealthLynked Corp., HLYK Florida, LLC, Hughes Center for Functional Medicine, P.A., and Pamela A. Hughes, D.O. (Filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Commission on January 22, 2019)
10.84		Press Release, dated January 22, 2019 (Filed as Exhibit 99.1 to the Company’s Current Report on Form 8-K filed with the Commission on January 22, 2019)
10.85		Form of Securities Purchase Agreement with BHP Capital NY Inc. dated January 14, 2019 (Filed as Exhibit 10.11 to the Company’s Form 10-Q filed with the Commission on May 15, 2019)
10.86		Form of Convertible Promissory Note with BHP Capital NY Inc. dated January 14, 2019 (Filed as Exhibit 10.12 to the Company’s Form 10-Q filed with the Commission on May 15, 2019)
10.87		Form of Securities Purchase Agreement with Power Up Lending Group Ltd. dated January 24, 2019 (Filed as Exhibit 10.15 to the Company’s Form 10-Q filed with the Commission on May 15, 2019)
10.88		Form of Convertible Promissory Note with Power Up Lending Group Ltd. dated January 24, 2019 (Filed as Exhibit 10.16 to the Company’s Form 10-Q filed with the Commission on May 15, 2019)
10.89		First Amendment to Agreement and Plan of Merger, dated April 12, 2019, by and among HealthLynked Corp., HLYK Florida, LLC, Hughes Center for Functional Medicine, P.A., and Pamela A. Hughes, D.O. (Filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Commission on April 18, 2019)
10.90		Form of Securities Purchase Agreement with Power Up Lending Group Ltd. dated April 3, 2019 (Filed as Exhibit 10.18 to the Company’s Form 10-Q filed with the Commission on May 15, 2019)
10.91		Form of Convertible Promissory Note with Power Up Lending Group Ltd. dated April 3, 2019 (Filed as Exhibit 10.19 to the Company’s Form 10-Q filed with the Commission on May 15, 2019)
10.92		Form of Securities Purchase Agreement with BHP Capital NY Inc. and Jefferson Street Capital LLC dated April 11, 2019 (Filed as Exhibit 10.20 to the Company’s Form 10-Q filed with the Commission on May 15, 2019)
10.93		Form of Convertible Promissory Note with BHP Capital NY Inc. dated April 11, 2019 (Filed as Exhibit 10.21 to the Company’s Form 10-Q filed with the Commission on May 15, 2019)
10.94		Form of Convertible Promissory Note with Jefferson Street Capital LLC dated April 11, 2019 (Filed as Exhibit 10.22 to the Company’s Form 10-Q filed with the Commission on May 15, 2019)
10.95		Form of Convertible Promissory Note with Iconic Holdings LLC dated April 15, 2019 (Filed as Exhibit 10.23 to the Company’s Form 10-Q filed with the Commission on May 15, 2019)
10.96		Form of Securities Purchase Agreement with Power Up Lending Group Ltd. dated May 7, 2019 (Filed as Exhibit 10.24 to the Company’s Form 10-Q filed with the Commission on May 15, 2019)
10.97		Form of Convertible Promissory Note with Power Up Lending Group Ltd. dated May 7, 2019 (Filed as Exhibit 10.25 to the Company’s Form 10-Q filed with the Commission on May 15, 2019)

 

II- 9

 

 

21.1		List of Subsidiaries (Filed as Exhibit 21.1 to the Company’s Draft Registration Statement on Form S-1 filed with the Commission on January 9, 2017)
23.1*		Consent of RBSM LLP
23.2		Consent of Sheppard, Mullin, Richter & Hampton LLP (Included in Exhibit 5.1)

 

* Filed herewith

+ Management contract or compensatory plan or arrangement.

 

(b)	Financial Statement Schedules.

 

All financial statement schedules have been omitted, since the required information is not applicable or is not present in amounts sufficient to require submission of the schedule, or because the information required is included in the financial statements and notes thereto.

 

Item 17. Undertakings.

 

The undersigned registrant hereby undertakes:

 

(1)  To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:

 

(i) To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933;

 

(ii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20 percent change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement;

 

(iii) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement.

 

(2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial  bona fide  offering thereof.

 

(3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.

 

(4) That, for the purpose of determining liability under the Securities Act of 1933 to any purchaser, each prospectus filed pursuant to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use.

 

(5) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.

 

II- 10

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized in the City of Naples, State of Florida on the 17th day of June 2019.

 

	HEALTHLYNKED CORP. (Registrant)
	By:	/s/ Michael Dent
		Name:	Michael Dent, M.D.
		Title:	Chief Executive Officer and Chairman (Principal Executive Officer)

 

Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated.

 

Name		Title		Date
/s/ Michael Dent, M.D.		Chief Executive Officer and Chairman (Principal Executive Officer)		June 17, 2019
Michael Dent
/s/ George O’Leary		Chief Financial Officer, (Principal Accounting Officer), and Director		June 17, 2019
George O’Leary

   

 

II-11

 

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