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.
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.
|
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.
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.
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.
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
.
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.”
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.
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.
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
|
|
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
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
|
|
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.
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
|
)
|
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.
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
|
|
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
|
|
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.
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.
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
|
|
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
|
|
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.
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.
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.
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.