See the accompanying notes to these Unaudited
Condensed Consolidated Financial Statements
See the accompanying notes to these Unaudited
Condensed Consolidated Financial Statements
See the accompanying notes to these Unaudited
Condensed Consolidated Financial Statements
See the accompanying notes to these Unaudited
Condensed Consolidated Financial Statements
NOTES TO THE CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
MARCH 31, 2020
(UNAUDITED)
NOTE 1 - BUSINESS AND BUSINESS PRESENTATION
HealthLynked Corp. (the “Company”)
was incorporated in the State of Nevada on August 4, 2014. On September 2, 2014, the Company filed Amended and Restated Articles
of Incorporation with the Secretary of State of Nevada setting the total number of authorized shares at 250,000,000 shares, which
included up to 230,000,000 shares of common stock and 20,000,000 shares of “blank check” preferred stock. On February
5, 2018, the Company filed an Amendment to its Amended and Restated Articles of Incorporation with the Secretary of State of Nevada
to increase the number of authorized shares of common stock to 500,000,000 shares.
The Company operates in two distinct divisions:
Health Services and Digital Healthcare. The Health Services division is comprised of the operations of (i) Naples Women’s
Center (“NWC”), a multi-specialty medical group including OB/GYN (both Obstetrics and Gynecology) and General Practice,
(ii) Naples Center for Functional Medicine (“NCFM”), a Functional Medical Practice acquired in April 2019 that is engaged
in improving the health of its patients through individualized and integrative health care, and (iii) Bridging the Gap Physical
Therapy (“BTG”), a physical therapy practice in Bonita Springs, FL opened in January 2020 that provides hands-on functional
manual therapy techniques to speed patients’ recovery and manage pain without pain medication or surgery. The Digital Healthcare
division develops and 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.
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 accounting principles generally accepted in the United States of America (“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, 2019 and 2018, respectively, which are included in the Company’s Form
10-K, filed with the United States Securities and Exchange Commission on March 30, 2020. 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, 2020 are not necessarily indicative of results for the entire year ending
December 31, 2020.
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 unaudited condensed consolidated financial statements follows:
Basis of Presentation
The accompanying unaudited condensed consolidated
financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America
(“US GAAP”).
All amounts referred to in the notes to the
consolidated financial statements are in United States Dollars ($) unless stated otherwise.
Use of Estimates
The preparation of the unaudited condensed
consolidated financial statements in conformity with GAAP 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 right-of-use (“ROU”) lease assets including related lease liability and useful life of fixed assets.
HEALTHLYNKED CORP.
NOTES TO THE CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
MARCH 31, 2020
(UNAUDITED)
NOTE 2 – SIGNIFICANT ACCOUNTING
POLICIES (CONTINUED)
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 8 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:
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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.
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Medicaid: Reimbursements
for Medicaid services are generally paid at prospectively determined rates per discharge,
per occasion of service, or per covered member.
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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.
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HEALTHLYNKED CORP.
NOTES TO THE CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
MARCH 31, 2020
(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. Patient services provided
by NCFM are provided on a cash basis and not submitted through third party insurance providers.
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 48% of total billings.
Trade accounts receivable are recorded at this net amount. As of and March 31, 2020 and December 31, 2019, the Company’s
gross accounts receivable were $156,458 and $174,531, respectively, and net accounts receivable were $74,161 and $83,251, respectively,
based upon net reporting of accounts receivable. As of March 31, 2020 and December 31, 2019, 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 ROU assets within other assets and ROU liabilities within
accrued expenses and other liabilities and within other long-term liabilities on the Company’s consolidated balance sheets.
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. The Company adopted ASU 2016-02 in the first quarter of 2019. See Note
8 for more complete details on balances at March 31, 2020, and December 31, 2019. The adoption 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.
HEALTHLYNKED CORP.
NOTES TO THE CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
MARCH 31, 2020
(UNAUDITED)
NOTE 2 – SIGNIFICANT ACCOUNTING
POLICIES (CONTINUED)
Inventory
Inventory consisting of supplements, is
stated at the lower of cost or net realizable value. Cost is determined by the first-in, first-out method. Outdated inventory
is directly charged to cost of goods sold.
Goodwill and Intangible Assets
Goodwill is recognized as the excess cost
of an acquired entity over the net amount assigned to assets acquired and liabilities assumed. Goodwill is not amortized, but
rather tested for impairment on an annual basis and more often if circumstances require. Impairment losses are recognized whenever
the implied fair value of goodwill is less than its carrying value.
The Company recognizes an acquired intangible
apart from goodwill whenever the intangible arises from contractual or other legal rights, or whenever it can be separated or
divided from the acquired entity and sold, transferred, licensed, rented or exchanged, either individually or in combination with
a related contract, asset or liability. Such intangibles are amortized over their estimated useful lives unless the estimated
useful life is determined to be indefinite. Amortizable intangible assets are being amortized primarily over useful lives of five
years. The straight-line method of amortization is used as it has been determined to approximate the use pattern of the assets.
Impairment losses are recognized if the carrying amount of an intangible that is subject to amortization is not recoverable from
expected future cash flows and its carrying amount exceeds its fair value.
The Company also maintains intangible
assets with indefinite lives, which are not amortized. These intangibles are tested for impairment on an annual basis and more
often if circumstances require. Impairment losses are recognized whenever the implied fair value of these assets is less than
their carrying value. No impairment charges were recognized in the three months ended March 31, 2020 or 2019.
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, 2020 or 2019.
Convertible Notes
Convertible notes are regarded as compound
instruments, consisting of a liability component and an equity component. The component parts of compound instruments are classified
separately as financial liabilities and equity in accordance with the substance of the contractual arrangement. At the date of
issue, the fair value of the liability component is estimated using the prevailing market interest rate for a similar non-convertible
instrument. This amount is recorded as a liability on an amortized cost basis until extinguished upon conversion or at the instrument’s
maturity date. The equity component is determined by deducting the amount of the liability component from the fair value of the
compound instrument as a whole. This is recognized as additional paid-in capital and included in equity, net of income tax effects,
and is not subsequently remeasured. After initial measurement, they are carried at amortized cost using the effective interest
method. Convertible notes for which the maturity date has been extended and that qualify for debt extinguishment treatment are
recorded at fair value on the extinguishment date and then revalue at the end of each reporting period, with the change recorded
to the statement of operations under “Change in Fair Value of Debt.”
HEALTHLYNKED CORP.
NOTES TO THE CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
MARCH 31, 2020
(UNAUDITED)
NOTE 2 – SIGNIFICANT ACCOUNTING
POLICIES (CONTINUED)
Derivative Financial Instruments
The Company reviews the terms of convertible
debt, equity instruments and other financing arrangements to determine whether there are embedded derivative instruments, including
embedded conversion options that are required to be bifurcated and accounted for separately as a derivative financial instrument.
Also, in connection with the issuance of financing instruments, the Company may issue freestanding options or warrants that may,
depending on their terms, be accounted for as derivative instrument liabilities, rather than as equity. Derivative financial instruments
are initially measured at their fair value. For derivative financial instruments that are accounted for as liabilities, the derivative
instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value
reported as charges or credits to income. To the extent that the initial fair values of the freestanding and/or bifurcated derivative
instrument liabilities exceed the total proceeds received, an immediate charge to income is recognized, in order to initially
record the derivative instrument liabilities at their fair value. The discount from the face value of convertible debt instruments
resulting from allocating some or all of the proceeds to the derivative instruments is amortized over the life of the instrument
through periodic charges to income.
The classification of derivative instruments,
including whether such instruments should be recorded as liabilities or as equity, is reassessed at the end of each reporting
period. If reclassification is required, the fair value of the derivative instrument, as of the determination date, is reclassified.
Any previous charges or credits to income for changes in the fair value of the derivative instrument are not reversed. Derivative
instrument liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement
of the derivative instrument could be required within twelve months of the balance sheet date. The Company does not use derivative
instruments to hedge exposures to cash flow, market, or foreign currency risks.
Fair Value of Assets and Liabilities
Fair value is the price that would be
received from the sale of an asset or paid to transfer a liability (i.e. an exit price) in the principal or most advantageous
market in an orderly transaction between market participants. In determining fair value, the accounting standards have established
a three-level hierarchy that distinguishes between (i) market data obtained or developed from independent sources (i.e., observable
data inputs) and (ii) a reporting entity’s own data and assumptions that market participants would use in pricing an asset
or liability (i.e., unobservable data inputs). Financial assets and financial liabilities measured and reported at fair value
are classified in one of the following categories, in order of priority of observability and objectivity of pricing inputs:
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Level 1 – Fair
value based on quoted prices in active markets for identical assets or liabilities;
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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;
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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.
Prior to January 1, 2020, the Company
utilized the closed-form Black-Scholes option pricing model to estimate the fair value of options, warrants, beneficial conversion
features and other Level 3 financial assets and liabilities. Effective January 1, 2020, the Company changed to a binomial lattice
option pricing model. The Company believes that the binomial lattice model results in a better estimate of fair value because
it embodies all of the requisite assumptions (including the underlying price, exercise price, term, volatility, and risk-free
interest-rate) necessary to fair value these instruments and, unlike the Black-Scholes model, also accommodates assumptions regarding
investor exercise behavior and other market conditions that market participants would likely consider in negotiating the transfer
of such an instruments.
HEALTHLYNKED CORP.
NOTES TO THE CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
MARCH 31, 2020
(UNAUDITED)
NOTE 2 – SIGNIFICANT ACCOUNTING
POLICIES (CONTINUED)
Stock-Based Compensation
The Company accounts for stock-based compensation
to employees and nonemployees 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 its 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. Effective January 1, 2020, the Company uses a binomial lattice pricing
model to estimate the fair value of options and warrants granted. In prior periods, the Company used the Black-Scholes pricing
model.
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, 2020 or 2019, since the Company has sustained
a loss for both periods. Due to the uncertainty of the utilization and recoverability of the loss carry-forwards and other deferred
tax assets, management has determined a full valuation allowance for the deferred tax assets, since it is more likely than not
that the deferred tax assets will not be realizable.
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, 2020 or 2019, 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, 2020 and December 31, 2019, potentially dilutive securities
were comprised of (i) 48,333,767 and 47,056,293 warrants outstanding, respectively, (ii) 3,209,250 and 3,269,250 stock options
outstanding, respectively, (iii) 30,177,865 and 23,210,423 shares issuable upon conversion of convertible notes, respectively,
and (iv) 318,750 and 332,500 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.
HEALTHLYNKED CORP.
NOTES TO THE CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
MARCH 31, 2020
(UNAUDITED)
NOTE 2 – SIGNIFICANT ACCOUNTING
POLICIES (CONTINUED)
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 pricing model as of the
measurement date. Effective January 1, 2020, the Company uses a binomial lattice pricing model to estimate the fair value of compensation
options and warrants. In prior periods, the Company used the Black-Scholes pricing model. 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 12,
Shareholders’ Deficit.
Business Segments
The Company uses the “management
approach” to identify its reportable segments. The management approach designates the internal organization used by management
for making operating decisions and assessing performance as the basis for identifying the Company’s reportable segments.
Using the management approach, the Company determined that it has two operating segments: Health Services (multi-specialty medical
group including the NWC OB/GYN practice and the NCFM practice acquired in April 2019) and Digital Healthcare (develops and markets
the “HealthLynked Network,” an online personal medical information and record archive system).
Recent 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 9 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.
In January 2016, the FASB issued ASU No. 2016-01,
Financial Instruments — Overall: Recognition and Measurement of Financial Assets and Financial Liabilities.
The guidance affects the accounting for equity investments, financial liabilities under the fair value option and the presentation
and disclosure requirements of financial instruments. The guidance is effective in the first quarter of fiscal 2019. We adopted
this guidance effective January 1, 2019. The adoption of this guidance did not materially impact our financial statements and
related disclosures.
In July 2017, the FASB issued ASU No.
2017-11, Earnings Per Share, Distinguishing Liabilities from Equity and Derivatives and Hedging, which changes the accounting
and earnings per share for certain instruments with down round features. The amendments in this ASU should be applied using a
cumulative-effect adjustment as of the beginning of the fiscal year or retrospective adjustment to each period presented and is
effective for annual periods beginning after December 15, 2018, and interim periods within those periods. We adopted this
guidance effective January 1, 2019. The adoption of this guidance did not materially impact our financial statements and related
disclosures.
In February 2018, the Financial Accounting
Standards Board (“FASB”) issued ASC Update No 2018-02 (Topic 220) Income Statement – Reporting Comprehensive
Income: Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. This ASC update allows for
a reclassification into retained earnings of the stranded tax effects in accumulated other comprehensive income (“AOCI”)
resulting from the enactment of the Tax Cuts and Jobs Act (“TCJA”). The updated guidance is effective for interim
and annual periods beginning after December 15, 2018. We adopted this guidance effective January 1, 2019. The adoption of
this guidance did not materially impact our financial statements and related disclosures.
HEALTHLYNKED CORP.
NOTES TO THE CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
MARCH 31, 2020
(UNAUDITED)
NOTE 2 – SIGNIFICANT ACCOUNTING
POLICIES (CONTINUED)
In June 2018, the FASB issued ASU 2018-07,
Compensation - Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting, to expand the scope
of Topic 718 to include share-based payment transactions for acquiring goods and services from nonemployees and supersedes the
guidance in Subtopic 505-50, Equity - Equity-Based Payments to Non-Employees. Under ASU 2018-07, equity-classified nonemployee
share-based payment awards are measured at the grant date fair value on the grant date The probability of satisfying performance
conditions must be considered for equity-classified nonemployee share-based payment awards with such conditions. ASU 2018-07 is
effective for fiscal years beginning after December 15, 2018, with early adoption permitted. We adopted this guidance effective
January 1, 2019. The adoption of this guidance did not materially impact our financial statements and related disclosures.
In July 2018, the FASB issued ASU 2018-09 to provide clarification
and correction of errors to the Codification. The amendments in this update cover multiple Accounting Standards Updates. Some
topics in the update may require transition guidance with effective dates for annual periods beginning after December 15, 2018.
We adopted this guidance effective January 1, 2019. The adoption of this guidance did not materially impact our financial statements
and related disclosures.
NOTE 3 – GOING CONCERN MATTERS
AND LIQUIDITY
As of March 31, 2020, the Company had a working
capital deficit of $3,749,487 and accumulated deficit $16,609,870. For the three months ended March 31, 2020, the Company had a
net loss of $580,216 and net cash used by operating activities of $384,187. Net cash used in investing activities was $-0-. Net
cash provided by financing activities was $478,012, resulting principally from $437,433 proceeds from the sale of common stock,
$344,000 net proceeds from the issuance of convertible notes and $149,000 proceeds from the issuance of related party loans.
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.
A novel strain of coronavirus, COVID-19,
that was first identified in China in December 2019, has surfaced in several regions across the world and resulted in travel restrictions
and business slowdowns or shutdowns in affected areas. The further spread of COVID-19, and the requirement to take action to limit
the spread of the illness, may impact our ability to carry out our business as usual and may materially adversely impact global
economic conditions, our business and financial condition, including our potential to conduct financings on terms acceptable to
us, if at all. The extent to which COVID-19 may impact our business will depend on future developments, which are highly uncertain
and cannot be predicted with confidence, such as the ultimate geographic spread of the disease, the duration of the outbreak,
travel restrictions and social distancing in the United States and other countries, business closures or business disruptions
and the effectiveness of actions taken in the United States and other countries to contain and treat the disease.
HEALTHLYNKED CORP.
NOTES TO THE CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
MARCH 31, 2020
(UNAUDITED)
NOTE 3 – GOING CONCERN MATTERS
AND LIQUIDITY (CONTINUED)
The Company intends that the cost of completing
intended acquisitions, implementing its development and sales efforts related to the HealthLynked Network, as well as maintaining
existing and expanding overhead and administrative costs, will be financed from (i) profits generated by NCFM and, upon completion
of the acquisition, from Cura and AHP, and (ii) outside funding sources, including the put rights associated with the Investment
Agreement, issuance of convertible notes, sales of common stock, and loans from related parties. The Company expects to repay
our outstanding convertible notes, which have an aggregate face value of $2,133,895 as of March 31, 2020, from outside funding
sources, including but not limited to new convertible notes payable, amounts available upon the exercise of the put rights granted
under the Investment Agreement, sales of equity, loans from related parties and others, or through the conversion of convertible
notes into equity. No assurances can be given that the Company will be able to access sufficient outside capital in a timely fashion
in order to repay the convertible notes before they mature. If necessary funds are not available, the Company’s business
and operations would be materially adversely affected and in such event, the Company would attempt to reduce costs and adjust
its business plan.
NOTE 4 – ACQUISITION
On April 12, 2019, the Company acquired
a 100% interest in Hughes Center for Functional medicine (“HCFM”), a medical practice engaged in improving the health
of its patients through individualized and integrative health care. Under the terms of acquisition, the Company paid HCFM shareholders
$500,000 in cash, issued 3,968,254 shares of the Company’s common stock and agreed to an earn-out provision of $500,000
that may be earned based on the performance of HCFM in the years ended on the first, second and third anniversary dates of the
acquisition closing. The total consideration fair value represents a transaction value of $1,799,672. The Company accounted for
the transaction as an acquisition of a business pursuant to ASC 805, “Business Combinations” (“ASC 805”).
Following the acquisition, HCFM was rebranded
as NCFM and was combined with NWC to form the Company’s Health Services segment. As a result of the acquisition, the Company
is expected to be a leading provider of Functional Medicine in Southwest Florida. The Company also expects to reduce costs in
its Health Services segment through economies of scale.
The following table summarizes the fair
value of consideration paid for HCFM.
Cash
|
|
$
|
500,000
|
|
Common Stock (3,968,254 shares)
|
|
|
1,000,000
|
|
Contingent acquisition consideration subject to earn-out
|
|
|
299,672
|
|
|
|
|
|
|
Fair Value of Total Consideration
|
|
$
|
1,799,672
|
|
The fair value of the 3,968,254 common
shares issued as part of the acquisition consideration was determined using the intraday volume weighted average price of the
Company’s common shares on the acquisition date. The terms of the earn out require the Company to pay the former owner of
HCFM up to $100,000, $200,000 and $200,000 on the first, second and third anniversary, respectively, based on achievement by NCFM
of revenue of at least $3,100,000 (50% weighting) and EBITDA of at least $550,000 (50% weighting) in the year preceding each anniversary
date. The fair value of the contingent acquisition consideration related to the future earn-out payments was calculated using
a probability-weighted discounted cash flow projection. The fair value of the contingent acquisition consideration is remeasured
at the end of each reporting period and changes are included in the statement of operations under the caption “Change in
fair value of derivative financial instruments and contingent acquisition consideration.” During the three months ended
March 31, 2020 and 2019, the Company recognized losses on the change in the fair value of contingent acquisition consideration
of $6,621 and $-0-, respectively.
HEALTHLYNKED CORP.
NOTES TO THE CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
MARCH 31, 2020
(UNAUDITED)
NOTE 4 – ACQUISITION (CONTINUED)
The following table summarizes the estimated
fair values of the assets acquired at the acquisition date. There were no liabilities assumed in the acquisition of HCFM.
Cash
|
|
$
|
35,000
|
|
Hyperbaric Chambers
|
|
|
452,289
|
|
Medical Equipment
|
|
|
29,940
|
|
Computer Equipment/Software
|
|
|
19,739
|
|
Office Furniture & Equipment
|
|
|
23,052
|
|
Inventory
|
|
|
72,114
|
|
Leasehold Improvements
|
|
|
25,000
|
|
Website
|
|
|
41,000
|
|
Patient Management Platform Database
|
|
|
1,101,538
|
|
|
|
|
|
|
Fair Value of Identifiable Assets Acquired
|
|
$
|
1,799,672
|
|
The fair value of the website of $41,000
was determined based upon the cost to reconstruct and put into use applying current market rates. The fair value of the Patient
Management Platform Database of $1,101,538 was estimated by applying the income approach. Under the income approach, the expected
future cash flows generated by the Patient Management Platform Database are estimated and discounted to their net present value
at an appropriate risk-adjusted rate of return. Significant factors considered in the calculation of the rate of return are the
weighted average cost of capital and return on assets, as well as the risks inherent in the business. Cash flows were estimated
based on EBITDA using forecasted revenue and costs. The measure is based on significant inputs that are not observable in the
market (i.e. Level 3 inputs). Key assumptions include (i) a capitalization rate of 11.75% (ii) sustainable growth of 5% and (iii)
a benefit stream using EBITDA cash flow. The Company finalized the purchase price allocation in March 2020 and determined that
no goodwill was included in the acquisition.
The following represents the pro forma consolidated income
statement as if HCFM had been included in the consolidated results of the Company for the entire three-month periods ending March 31,
2020 and 2019:
|
|
Three Months Ended
March 31,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
1,336,940
|
|
|
$
|
1,187,170
|
|
Net loss
|
|
$
|
(580,216
|
)
|
|
$
|
(1,035,152
|
)
|
These amounts have been calculated after
applying the Company’s accounting policies and adjusting the results of HCFM to reflect the additional depreciation and
amortization that would have been charged assuming the fair value adjustments to property, plant and equipment and intangible
assets had been applied on January 1, 2020 and 2019, respectively.
NOTE 5 – DEFERRED OFFERING COSTS
AND PREPAID EXPENSES
On March 22, 2017, the Company the Company
granted to the investor in the Investment Agreement warrants to purchase 4,000,000 shares at $0.25 per share, 2,000,000 shares
at $0.50 per share and 1,000,000 shares at $1.00 per share. 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 Investment Agreement. The aggregate fair value of these warrants totaling $153,625 was recorded as a deferred offering
cost and is being amortized over the period during which the Company can access the financing, which began on May 15, 2017 and
ends on May 15, 2020. During the three months ended March 31, 2020 and 2019, the Company recognized $12,802 and $12,802,
respectively, in general and administrative expense related to the cost of the warrants.
On December 6, 2018, the Company granted
three-year warrants to purchase 240,000 shares at an exercise price of $0.20 per share to two advisors for services to be provided
over a three-month period. The fair value of the warrants of $35,462 was amortized over a three-month service period. During the
three months ended March 31, 2020 and 2019, the Company recognized $-0- and $25,611, respectively, to general and administrative
expense related to the warrants.
HEALTHLYNKED CORP.
NOTES TO THE CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
MARCH 31, 2020
(UNAUDITED)
NOTE 6 – PROPERTY, PLANT, AND
EQUIPMENT
Property, plant and equipment at March 31, 2020 and December
31, 2019 are as follows:
|
|
March 31,
|
|
|
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
Capital lease equipment
|
|
$
|
251,752
|
|
|
$
|
251,752
|
|
Medical equipment
|
|
|
482,229
|
|
|
|
482,229
|
|
Telephone equipment
|
|
|
12,308
|
|
|
|
12,308
|
|
Furniture, transport and office equipment
|
|
|
516,815
|
|
|
|
516,815
|
|
|
|
|
|
|
|
|
|
|
Total property, plant and equipment
|
|
|
1,263,104
|
|
|
|
1,263,104
|
|
Less: accumulated depreciation
|
|
|
(772,057
|
)
|
|
|
(749,316
|
)
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment, net
|
|
$
|
491,047
|
|
|
$
|
513,788
|
|
Depreciation expense during the three
months ended March 31, 2020 and 2019 was $22,742 and $1,655, respectively.
NOTE 7 – INTANGIBLE ASSETS
Intangible assets at March 31, 2020 and December 31,
2019 are as follows:
|
|
March 31,
|
|
|
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
Medical database
|
|
$
|
1,101,538
|
|
|
$
|
1,230,000
|
|
Website
|
|
|
41,000
|
|
|
|
41,000
|
|
Goodwill
|
|
|
---
|
|
|
|
71,866
|
|
|
|
|
|
|
|
|
|
|
Total intangible assets
|
|
|
1,142,538
|
|
|
|
1,342,866
|
|
Less: accumulated amortization
|
|
|
(7,953
|
)
|
|
|
(5,908
|
)
|
|
|
|
|
|
|
|
|
|
Intangible assets, net
|
|
$
|
1,134,585
|
|
|
$
|
1,336,958
|
|
Goodwill and intangible assets arose from
the acquisition of NCFM in April 2019. The medical database is assumed to have an indefinite life and is not amortized. The website
is being amortized on a straight-line basis over its estimated useful life of five years. Goodwill represents the excess of consideration
transferred over the fair value of the net identifiable assets acquired related to the acquisition of NCFM. The Company finalized
the purchase price allocation in March 2020 and determined that no goodwill was included in the acquisition.
Amortization expense in the three months
ended March 31, 2020 and 2019 was $2,044 and $-0-, respectively. No impairment charges were recognized related to goodwill
and intangible assets in the three months ended March 31, 2020 or 2019.
NOTE 8 – LEASES
The Company has two operating leases for
office space and equipment that expire in July 2020, an operating lease for office space that expires in May 2022, and an operating
lease for office space that expires in March 2023. The Company’s weighted-average remaining lease term relating to its operating
leases is 1.7 years, with a weighted-average discount rate of 21.48%.
HEALTHLYNKED CORP.
NOTES TO THE CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
MARCH 31, 2020
(UNAUDITED)
NOTE 8 – LEASES (CONTINUED)
The Company is also lessee in a capital
equipment finance lease for medical equipment entered into in March 2015 that expired in March 2020. The Company’s weighted-average
remaining lease term relating to its financing lease is -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 was 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, 2020:
|
|
As of March 31, 2020
|
|
|
As of December 31, 2019
|
|
|
|
Operating
|
|
|
Financing
|
|
|
Total
|
|
|
Operating
|
|
|
Financing
|
|
|
Total
|
|
|
|
Leases
|
|
|
Leases
|
|
|
Leases
|
|
|
Leases
|
|
|
Leases
|
|
|
Leases
|
|
Lease assets
|
|
$
|
240,215
|
|
|
$
|
-
|
|
|
$
|
240,215
|
|
|
$
|
273,196
|
|
|
$
|
4,482
|
|
|
$
|
277,678
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lease liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lease liabilities (short term)
|
|
$
|
145,869
|
|
|
$
|
-
|
|
|
$
|
145,869
|
|
|
$
|
197,041
|
|
|
$
|
4,482
|
|
|
$
|
201,523
|
|
Lease liabilities (long term)
|
|
|
103,225
|
|
|
|
-
|
|
|
|
103,225
|
|
|
|
80,510
|
|
|
|
-
|
|
|
|
80,510
|
|
Total lease liabilities
|
|
$
|
249,094
|
|
|
$
|
-
|
|
|
$
|
249,094
|
|
|
$
|
277,551
|
|
|
$
|
4,482
|
|
|
$
|
282,033
|
|
The Company incurred lease expense of $95,269
($90,682 related to operating leases and $4,587 related to financing leases) and $73,415 ($68,828 related to operating leases
and $4,587 related to financing leases) in the three months ended March 31, 2020 and 2019, respectively.
Maturities of operating and capital lease
liabilities were as follows as of March 31, 2020:
|
|
Operating
|
|
|
Capital
|
|
|
Total
|
|
|
|
Leases
|
|
|
Leases
|
|
|
Commitments
|
|
2020
|
|
$
|
164,809
|
|
|
$
|
---
|
|
|
$
|
164,809
|
|
2021
|
|
|
98,531
|
|
|
|
---
|
|
|
|
98,531
|
|
2022
|
|
|
52,662
|
|
|
|
---
|
|
|
|
52,662
|
|
2023
|
|
|
6,099
|
|
|
|
---
|
|
|
|
6,099
|
|
Total lease payments
|
|
|
322,101
|
|
|
|
---
|
|
|
|
322,101
|
|
Less interest
|
|
|
(73,007
|
)
|
|
|
---
|
|
|
|
(73,007
|
)
|
Present value of lease liabilities
|
|
$
|
249,094
|
|
|
$
|
---
|
|
|
$
|
249,094
|
|
NOTE 9 – NOTES PAYABLE AND OTHER
AMOUNTS DUE TO RELATED PARTY
Amounts due to related parties as of March
31, 2020 and December 31, 2019 were comprised of the following:
|
|
March 31,
|
|
|
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
Due to related party:
|
|
|
|
|
|
|
Deferred compensation, Dr. Michael Dent
|
|
$
|
300,600
|
|
|
$
|
300,600
|
|
Accrued interest payable to Dr. Michael Dent
|
|
|
208,963
|
|
|
|
192,857
|
|
Total due to related party
|
|
|
509,563
|
|
|
|
493,457
|
|
|
|
|
|
|
|
|
|
|
Notes payable to related party:
|
|
|
|
|
|
|
|
|
Notes payable to Dr. Michael Dent and family (all current)
|
|
$
|
817,037
|
|
|
$
|
743,955
|
|
HEALTHLYNKED CORP.
NOTES TO THE CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
MARCH 31, 2020
(UNAUDITED)
NOTE 9 – NOTES PAYABLE AND OTHER
AMOUNTS DUE TO RELATED PARTY (CONTINUED)
Notes Payable to Dr. Michael Dent
Our founder and CEO, Dr. Michael Dent,
has made loans to the Company from time to time in the form of unsecured promissory notes payable. The carrying values of notes
payable to Dr. Dent as of March 31, 2020 and December 31, 2019 were as follows:
|
|
|
|
Interest
|
|
|
March 31,
|
|
|
December 31,
|
|
Inception Date
|
|
Maturity Date
|
|
Rate
|
|
|
2020
|
|
|
2019
|
|
January 12, 2017
|
|
December 31, 2020
|
|
|
10
|
%
|
|
$
|
37,624
|
*
|
|
$
|
38,378
|
*
|
January 18, 2017
|
|
December 31, 2020
|
|
|
10
|
%
|
|
|
21,474
|
*
|
|
|
21,904
|
*
|
January 24, 2017
|
|
December 31, 2020
|
|
|
10
|
%
|
|
|
53,623
|
*
|
|
|
54,696
|
*
|
February 9, 2017
|
|
December 31, 2020
|
|
|
10
|
%
|
|
|
32,073
|
*
|
|
|
32,715
|
*
|
April 20, 2017
|
|
December 31, 2020
|
|
|
10
|
%
|
|
|
10,543
|
*
|
|
|
10,754
|
*
|
June 15, 2017
|
|
December 31, 2020
|
|
|
10
|
%
|
|
|
33,881
|
*
|
|
|
34,560
|
*
|
August 17, 2017
|
|
December 31, 2020
|
|
|
10
|
%
|
|
|
20,585
|
*
|
|
|
20,997
|
*
|
August 24, 2017
|
|
December 31, 2020
|
|
|
10
|
%
|
|
|
38,541
|
*
|
|
|
39,312
|
*
|
September 7, 2017
|
|
December 31, 2020
|
|
|
10
|
%
|
|
|
35,868
|
*
|
|
|
36,586
|
*
|
September 21, 2017
|
|
December 31, 2020
|
|
|
10
|
%
|
|
|
27,079
|
*
|
|
|
27,621
|
*
|
September 29, 2017
|
|
December 31, 2020
|
|
|
10
|
%
|
|
|
12,242
|
*
|
|
|
12,487
|
*
|
December 21, 2017
|
|
December 31, 2020
|
|
|
10
|
%
|
|
|
14,037
|
*
|
|
|
14,318
|
*
|
January 8, 2018
|
|
December 31, 2020
|
|
|
10
|
%
|
|
|
74,915
|
*
|
|
|
76,415
|
*
|
January 11, 2018
|
|
December 31, 2020
|
|
|
10
|
%
|
|
|
8,984
|
*
|
|
|
9,164
|
*
|
January 26, 2018
|
|
December 31, 2020
|
|
|
10
|
%
|
|
|
17,364
|
*
|
|
|
17,712
|
*
|
January 3, 2014
|
|
December 31, 2020
|
|
|
10
|
%
|
|
|
290,519
|
*
|
|
|
296,336
|
*
|
January 7, 2020
|
|
July 3, 2020
|
|
|
10
|
%
|
|
|
87,685
|
|
|
|
---
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
817,037
|
|
|
$
|
743,955
|
|
|
*
|
Denotes that note payable is reflected
at fair value
|
As denoted in the table above, certain of our
notes payable to Dr. Dent are 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, 2020 and 2019 was $(21,362) and $(14,603), respectively and the fair value of these notes as of March 31, 2020 and December
31, 2019 was $729,352 and $743,955, respectively.
On January 7, 2020, the Company entered into
a Merchant Cash Advance Factoring Agreement (“MCA”) with a trust controlled by Dr. Dent, pursuant to which the Company
received an advance of $150,000 before closing fees (the “2020 MCA”). The Company is required to repay the 2020 MCA,
which acts like an ordinary note payable, at the rate of $7,212 per week until the balance of $187,500 is repaid, which was scheduled
for July 2020. At inception, the Company recognized a note payable in the amount of $187,500 and a discount against the note payable
of $38,500. The discount is being amortized over the life of the instrument. During the three months ended March 31, 2020
and 2019, the Company made installment payments of $79,327 and $-0-, respectively. During the three months ended March 31,
2020 and 2019, the Company recognized amortization of the discount in the amount of $18,012 and $-0-, respectively. As of March
31, 2020 and December 31, 2019, the carrying value of the MCA was $87,685 and $-0-, respectively.
Interest accrued on the above notes payable
as of March 31, 2020 and December 31, 2019 was $208,963 and $192,888, respectively. Interest expense on the above unsecured promissory
notes for the three months ended March 31, 2020 and 2019 was $34,117 and $16,237, respectively.
HEALTHLYNKED CORP.
NOTES TO THE CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
MARCH 31, 2020
(UNAUDITED)
NOTE 10 – CONVERTIBLE NOTES PAYABLE
Convertible notes payable as of March 31, 2020 and December
31, 2019 were comprised of the following:
|
|
March 31,
|
|
|
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
$550k Note - July 2016
|
|
$
|
537,253
|
*
|
|
$
|
548,010
|
|
$50k Note - July 2016
|
|
|
55,750
|
*
|
|
|
56,866
|
|
$111k Note - May 2017
|
|
|
98,811
|
*
|
|
|
118,606
|
|
$357.5k Note - April 2019
|
|
|
322,276
|
*
|
|
|
328,728
|
|
$154k Note - June 2019
|
|
|
---
|
|
|
|
50,000
|
|
$136k Notes - July 2019
|
|
|
---
|
|
|
|
135,850
|
|
$78k Note III - July 2019
|
|
|
---
|
|
|
|
78,000
|
|
$230k Note - July 2019
|
|
|
---
|
|
|
|
230,000
|
|
$108.9k Note - August 2019
|
|
|
33,947
|
|
|
|
108,947
|
|
$142.5k Note - October 2019
|
|
|
142,500
|
|
|
|
142,500
|
|
$103k Note V - October 2019
|
|
|
103,000
|
|
|
|
103,000
|
|
$108.9k Note II - October 2019
|
|
|
108,947
|
|
|
|
108,947
|
|
$128.5k Note - October 2019
|
|
|
128,500
|
|
|
|
128,500
|
|
$103k Note VI - November 2019
|
|
|
103,000
|
|
|
|
103,000
|
|
$78.8k Note II - December 2019
|
|
|
78,750
|
|
|
|
78,750
|
|
$131.3k Note - January 2020
|
|
|
131,250
|
|
|
|
---
|
|
$78k Note IV - January 2020
|
|
|
78,000
|
|
|
|
---
|
|
$157.5k Note - March 2020
|
|
|
157,500
|
|
|
|
---
|
|
|
|
|
2,079,484
|
|
|
|
2,319,704
|
|
Less: unamortized discount
|
|
|
(427,567
|
)
|
|
|
(777,668
|
)
|
Convertible notes payable, net of original issue discount and debt discount
|
|
$
|
1,651,917
|
|
|
$
|
1,542,036
|
|
* - Denotes that convertible
note payable is carried at fair value
HEALTHLYNKED CORP.
NOTES TO THE CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
MARCH 31, 2020
(UNAUDITED)
NOTE 10 – CONVERTIBLE NOTES PAYABLE
(CONTINUED)
Interest expense and amortization of debt
discount recognized on each convertible note outstanding during the three months ended March 31, 2020 and 2019 were as follows:
|
|
Interest Expense
|
|
|
Amortization of Debt Discount
|
|
|
|
Three Months Ended March 31,
|
|
|
Three Months Ended March 31,
|
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$550k Note - July 2016
|
|
$
|
8,225
|
|
|
$
|
8,136
|
|
|
$
|
---
|
|
|
$
|
---
|
|
$50k Note - July 2016
|
|
|
1,247
|
|
|
|
1,233
|
|
|
|
---
|
|
|
|
---
|
|
$111k Note - May 2017
|
|
|
4,694
|
|
|
|
4,078
|
|
|
|
---
|
|
|
|
---
|
|
$171.5k Note - October 2017
|
|
|
---
|
|
|
|
1,785
|
|
|
|
---
|
|
|
|
---
|
|
$103k Note I - October 2018
|
|
|
---
|
|
|
|
2,540
|
|
|
|
---
|
|
|
|
32,526
|
|
$103k Note II - November 2018
|
|
|
---
|
|
|
|
2,540
|
|
|
|
---
|
|
|
|
31,856
|
|
$153k Note - November 2018
|
|
|
---
|
|
|
|
3,773
|
|
|
|
---
|
|
|
|
50,440
|
|
$103k Note III - December 2018
|
|
|
---
|
|
|
|
2,540
|
|
|
|
---
|
|
|
|
25,397
|
|
$78k Note I - January 2019
|
|
|
---
|
|
|
|
1,624
|
|
|
|
---
|
|
|
|
21,714
|
|
$78k Note II - January 2019
|
|
|
---
|
|
|
|
1,410
|
|
|
|
---
|
|
|
|
17,451
|
|
$357.5k Note - April 2019
|
|
|
829
|
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
$154k Note - June 2019
|
|
|
46
|
|
|
|
---
|
|
|
|
1,093
|
|
|
|
---
|
|
$67.9k Note - July 2019
|
|
|
707
|
|
|
|
---
|
|
|
|
7,252
|
|
|
|
---
|
|
$67.9k Note II - July 2019
|
|
|
177
|
|
|
|
---
|
|
|
|
2,813
|
|
|
|
---
|
|
$78k Note III - July 2019
|
|
|
492
|
|
|
|
---
|
|
|
|
6,208
|
|
|
|
---
|
|
$230k Note - July 2019
|
|
|
3,041
|
|
|
|
---
|
|
|
|
58,526
|
|
|
|
---
|
|
$108.9k Note - August 2019
|
|
|
2,545
|
|
|
|
---
|
|
|
|
20,960
|
|
|
|
---
|
|
$142.5k Note - October 2019
|
|
|
5,739
|
|
|
|
---
|
|
|
|
35,430
|
|
|
|
---
|
|
$103k Note V - October 2019
|
|
|
2,568
|
|
|
|
---
|
|
|
|
28,213
|
|
|
|
---
|
|
$108.9k Note II - October 2019
|
|
|
2,716
|
|
|
|
---
|
|
|
|
21,730
|
|
|
|
---
|
|
$128.5k Note - October 2019
|
|
|
3,204
|
|
|
|
---
|
|
|
|
31,949
|
|
|
|
---
|
|
$103k Note VI - November 2019
|
|
|
2,568
|
|
|
|
---
|
|
|
|
28,720
|
|
|
|
---
|
|
$78.8k Note II - December 2019
|
|
|
1,963
|
|
|
|
---
|
|
|
|
15,917
|
|
|
|
---
|
|
$131.3k Note - January 2020
|
|
|
2,805
|
|
|
|
---
|
|
|
|
6,945
|
|
|
|
---
|
|
$78k Note IV - January 2020
|
|
|
1,603
|
|
|
|
---
|
|
|
|
6,030
|
|
|
|
---
|
|
$157.5k Note - March 2020
|
|
|
906
|
|
|
|
---
|
|
|
|
2,365
|
|
|
|
---
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
46,075
|
|
|
$
|
29,659
|
|
|
$
|
274,151
|
|
|
$
|
179,384
|
|
HEALTHLYNKED CORP.
NOTES TO THE CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
MARCH 31, 2020
(UNAUDITED)
NOTE 10 – CONVERTIBLE NOTES PAYABLE
(CONTINUED)
Unamortized debt discount on outstanding
convertible notes payable as of March 31, 2020 and December 31, 2019 were comprised of the following:
|
|
Unamortized
Discount as of
|
|
|
|
March 31,
|
|
|
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
$154k Note - June 2019
|
|
$
|
---
|
|
|
$
|
21,175
|
|
$67.9k Note - July 2019
|
|
|
---
|
|
|
|
20,497
|
|
$67.9k Note II - July 2019
|
|
|
---
|
|
|
|
20,497
|
|
$78k Note III - July 2019
|
|
|
---
|
|
|
|
32,657
|
|
$230k Note - July 2019
|
|
|
---
|
|
|
|
125,684
|
|
$108.9k Note - August 2019
|
|
|
11,460
|
|
|
|
59,392
|
|
$142.5k Note - October 2019
|
|
|
71,639
|
|
|
|
107,070
|
|
$103k Note V - October 2019
|
|
|
42,474
|
|
|
|
70,686
|
|
$108.9k Note II - October 2019
|
|
|
50,862
|
|
|
|
72,592
|
|
$128.5k Note - October 2019
|
|
|
74,783
|
|
|
|
106,732
|
|
$103k Note VI - November 2019
|
|
|
53,021
|
|
|
|
81,740
|
|
$78.8k Note II - December 2019
|
|
|
43,028
|
|
|
|
58,946
|
|
$131.3k Note - January 2020
|
|
|
25,643
|
|
|
|
---
|
|
$78k Note IV - January 2020
|
|
|
15,920
|
|
|
|
---
|
|
$157.5k Note - March 2020
|
|
|
38,737
|
|
|
|
---
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
427,567
|
|
|
$
|
777,668
|
|
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, 2020
and 2019 and the fair value as of the three months then ended 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,
|
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$550k Note - July 2016
|
|
$
|
(10,757
|
)
|
|
$
|
16,838
|
|
|
$
|
537,253
|
|
|
$
|
548,010
|
|
$50k Note - July 2016
|
|
|
(1,116
|
)
|
|
|
1,707
|
|
|
|
55,750
|
|
|
|
56,866
|
|
$111k Note - May 2017
|
|
|
(3,036
|
)
|
|
|
3,544
|
|
|
|
98,811
|
|
|
|
118,606
|
|
$171.5k Note - October 2017
|
|
|
---
|
|
|
|
1,781
|
|
|
|
---
|
|
|
|
---
|
|
$357.5k Note - April 2019
|
|
|
(6,453
|
)
|
|
|
---
|
|
|
|
322,275
|
|
|
|
328,727
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(21,362
|
)
|
|
$
|
23,870
|
|
|
$
|
1,014,089
|
|
|
$
|
1,052,209
|
|
Convertible Note 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,
including accrued interest, was prepaid in July 2019 for a one-time cash payment of $102,321.
Convertible Note Payable ($78,000)
– January 2019
On January 24, 2019, the Company entered
into a securities purchase agreement for the sale of a $78,000 convertible note (the “$78k Note II”). The $78k Note
II, including accrued interest, was prepaid in July 2019 for a one-time cash payment of $102,255.
HEALTHLYNKED CORP.
NOTES TO THE CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
MARCH 31, 2020
(UNAUDITED)
NOTE 10 – CONVERTIBLE NOTES PAYABLE
(CONTINUED)
Convertible Note 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 is convertible
into shares of the Company’s common stock at the discretion of the note holder at a fixed price of $0.15 per share, or 740,000
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. The $111k Note matures on December
31, 2020. On February 6, 2020, the holder of the $111k Note converted $30,000 principal on the note into 448,029 shares of Company
common stock. In connection with the conversion, the Company recognized a loss on debt extinguishment of $25,394, representing
the excess of the fair value of the shares issued at conversion over the carrying value of the portion of the host instrument
and the bifurcated conversion feature converted.
Convertible Note Payable ($154,000)
– June 2019
On June 3, 2019, the Company issued a
$154,000 convertible note (the “$154k Note”). During the three months ended March 31, 2020, the holder converted
the remaining unpaid principal balance of $50,000 and accrued interest of $8,572 into 968,390 shares of Company common stock.
In connection with the conversion, the Company recognized a loss on debt extinguishment of $125,865 in the three months ended
March 31, 2020, representing the excess of the fair value of the shares issued at conversion over the carrying value of the
portion of the host instrument and the bifurcated conversion feature converted.
Convertible Note Payable ($67,925)
– July 2019
On July 11, 2019, the Company issued a
$67,925 convertible note (the “$67.9k Note I”). During the three months ended March 31, 2020, the holder converted
the full principal of $67,925 and accrued interest of $3,926 into 885,847 shares of Company common stock. In connection with the
conversion, the Company recognized a loss on debt extinguishment of $55,117 in the three months ended March 31, 2020, representing
the excess of the fair value of the shares issued at conversion over the carrying value of the portion of the host instrument
and the bifurcated conversion feature converted.
Convertible Note Payable ($67,925)
– July 2019
On July 11, 2019, the Company issued a
second $67,925 convertible note (the “$67.9k Note II”). During the three months ended March 31, 2020, the Company
prepaid the balance on the $67.9k Note II, including accrued interest, for a one-time cash payment of $89,152. In connection with
the repayment, the Company recognized a loss on debt extinguishment of $26,890 in the three months ended March 31, 2020,
equal to the excess of the payment amount over the carrying value of the note, derivative embedded conversion feature and accrued
interest.
Convertible Note Payable ($78,000)
– July 2019
On July 16, 2019, the Company issued a
$78,000 convertible note (the “$78k Note III”). During the three months ended March 31, 2020, the Company prepaid
the balance on the $78k Note III, including accrued interest, for a one-time cash payment of $102,388. In connection with the
repayment, the Company recognized a loss on debt extinguishment of $31,432 in the three months ended March 31, 2020, equal
to the excess of the payment amount over the carrying value of the note, derivative embedded conversion feature and accrued interest.
Convertible Note Payable ($230,000)
– July 2019
On July 18, 2019, the Company issued a
convertible note with a face value of $230,000 (the “$230k Note”). During the three months ended March 31, 2020,
the holder converted $80,000 of principal and $4,373 of accrued interest on the note into 1,236,668 shares of Company common stock
and the Company repaid principal of $150,000 and accrued interest of $9,128 for cash payments totaling $181,554. The note was
retired upon these conversions and repayments. In connection with the conversions and repayments, the Company recognized a loss
on debt extinguishment of $112,498 in the three months ended March 31, 2020 equal to the excess of the cash payment amount
and the fair value of the shares issued at conversion over the carrying value of the note, derivative embedded conversion feature
and accrued interest.
HEALTHLYNKED CORP.
NOTES TO THE CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
MARCH 31, 2020
(UNAUDITED)
NOTE 10 – CONVERTIBLE NOTES PAYABLE
(CONTINUED)
Convertible Note Payable ($108,947)
– August 2019
On August 26, 2019, the Company issued
a convertible note with a face value of $108,947 (the “$108.9k Note”). During the three months ended March 31, 2020,
the holder converted principal of $75,000 and accrued interest of $6,335 into 1,779,322 shares of Company common stock. In connection
with the conversion, the Company recognized a loss on debt extinguishment of $90,732 in the three months ended March 31, 2020,
representing the excess of the fair value of the shares issued at conversion over the carrying value of the portion of the host
instrument and the bifurcated conversion feature converted.
Convertible Note Payable ($131,250)
– January 2020
On January 13, 2020, the Company issued
a $131,250 convertible note (the “$131.3k Note”). The $131.3k Note included $8,750 fees and discounts for net proceeds
of $122,500. The $131.3k Note has an interest rate of 10% and a default interest rate of 22% and matures on January 13, 2021.
The $131.3k Note may be converted into common stock of the Company by the holder at any time after the issuance date, subject
to a 4.99% beneficial ownership limitation, at a conversion price per share equal to a 25% discount to the lowest bid or trading
price of the Company’s common stock during the thirteen (13) 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 embedded conversion
feature (“ECF”) was calculated using a binomial lattice pricing model at $23,838. 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
|
|
$
|
23,838
|
|
Original issue discount and fees
|
|
|
8,750
|
|
Convertible note
|
|
|
98,662
|
|
|
|
|
|
|
Gross proceeds
|
|
$
|
131,250
|
|
Convertible Note Payable ($78,000)
– January 2020
On January 16, 2020, the Company issued
a $78,000 convertible note (the “$78k Note IV”). The $78k Note IV included $3,000 fees for net proceeds of $75,000.
The $78k Note IV has an interest rate of 10% and a default interest rate of 22% and matures on October 15, 2020. The $78k Note
IV may be converted into common stock of the Company by the holder at any time after the 6-month anniversary of the issuance date,
subject to a 4.99% beneficial ownership limitation, at a conversion price per share equal to a 39% discount to the lowest bid
or trading price of the Company’s common stock during the fifteen (15) trading days prior to the conversion date. Upon an
event of default caused by the Company’s failure to deliver shares upon a conversion pursuant to the terms of the note,
300% of the outstanding principal and any interest due amount shall be immediately due. Upon an event of default caused by the
Company’s breach of any other events of default specified in the note, 150% of the outstanding principal and any interest
due amount shall be immediately due.
The fair value of the ECF was calculated
using a binomial lattice pricing model at $18,950. 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
|
|
$
|
18,950
|
|
Original issue discount and fees
|
|
|
3,000
|
|
Convertible note
|
|
|
56,050
|
|
|
|
|
|
|
Gross proceeds
|
|
$
|
78,000
|
|
HEALTHLYNKED CORP.
NOTES TO THE CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
MARCH 31, 2020
(UNAUDITED)
NOTE 10 – CONVERTIBLE NOTES PAYABLE
(CONTINUED)
Convertible Note Payable ($157,500)
– March 2020
On March 10, 2020, the Company issued
a $157,500 convertible note (the “$157.5k Note”). The $157.5k Note included $11,000 fees for net proceeds of $146,500.
The $157.5k Note has an interest rate of 10% and a default interest rate of 22% and matures on March 10, 2021. The $157.5k Note
may be converted into common stock of the Company by the holder at any time after the issuance date, subject to a 4.99% beneficial
ownership limitation, at a conversion price per share equal to a 25% discount to the lowest bid or trading price of the Company’s
common stock during the thirteen (13) 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 was calculated
using a binomial lattice pricing model at $30,102. 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
|
|
$
|
30,102
|
|
Original issue discount and fees
|
|
|
11,000
|
|
Convertible note
|
|
|
116,398
|
|
|
|
|
|
|
Gross proceeds
|
|
$
|
157,500
|
|
NOTE 11 – DERIVATIVE FINANCIAL
INSTRUMENTS
Derivative financial instruments are comprised
of (i) the fair value of ECFs embedded in convertible promissory notes for which the conversion rate is not fixed, but instead
is adjusted based on a discount to the market price of the Company’s common stock, and (ii) a conditional cash redemption
feature included in certain outstanding warrant agreements. The fair market value of the ECF derivative liabilities was calculated
at inception of each convertible promissory note 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 fair market value of the warrant feature derivative
liabilities, which is only exercisable upon a change of control of the Company, was calculated as of the time that the beneficial
ownership of the Company’s management and board fell below 50% and therefore a change of control a transaction, including
a hostile takeover, was no longer within the Company’s control. Derivative financial instruments are revalued at the end
of each period, with the change in value recorded to “Change in fair value of on derivative financial instruments.”
Derivative financial instruments and changes
thereto recorded in the three months ended March 31, 2020 and 2019 include the following:
|
|
Three Months Ended
March 31,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
Balance, beginning of period
|
|
$
|
991,288
|
|
|
$
|
800,440
|
|
Inception of derivative financial instruments
|
|
|
72,890
|
|
|
|
179,230
|
|
Change in fair value of derivative financial instruments
|
|
|
(740,355
|
)
|
|
|
(191,633
|
)
|
Conversion or extinguishment of derivative financial instruments
|
|
|
(103,885
|
)
|
|
|
(207,182
|
)
|
|
|
|
|
|
|
|
|
|
Balance, end of period
|
|
$
|
219,938
|
|
|
$
|
580,855
|
|
HEALTHLYNKED CORP.
NOTES TO THE CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
MARCH 31, 2020
(UNAUDITED)
NOTE 11 – DERIVATIVE FINANCIAL
INSTRUMENTS (CONTINUED)
Fair market value of the derivative financial
instruments was measured using the following assumptions:
|
|
Three Months Ended March
31,
|
|
|
2020
|
|
2019
|
|
|
|
|
|
Pricing model utilized
|
|
Binomial Lattice
|
|
Black/Scholes
|
Risk free rate range
|
|
0.05% to 1.61%
|
|
2.40% to 2.73%
|
Expected life range (in years)
|
|
0.14 to 1.00
|
|
0.33 to 1.00
|
Volatility range
|
|
117.48% to 125.32%
|
|
202.73% to 293.97%
|
Dividend yield
|
|
0.00%
|
|
0.00%
|
In addition, specific assumptions regarding
investor exercise behavior were used in 2020, including probability assumptions related to estimated exercise behavior. 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.
During the three months ended March 31,
2020 and 2019, five and one convertible notes, respectively, were converted in part or in full into common shares by the holders,
and three and zero convertible notes, respectively, were repaid in part or in full in 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.
NOTE 12 – SHAREHOLDERS’
DEFICIT
Private Placements
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, 2020,
the Company sold 2,412,087 shares of common stock in seven separate private placement transactions and received $315,000 in proceeds
from the sales. The shares were issued at a share price of $0.13 per share with respect to 2,269,230 shares and $0.14 per share
with respect to 142,857 shares. In connection with the stock sales, the Company also issued 1,134,616 five-year warrants to purchase
shares of common stock at an exercise price of $0.23 and 71,429 five-year warrants to purchase shares of common stock at an exercise
price of $0.24 per share.
Investment Agreement Draws
During three months ended March 31, 2020
and 2019, the Company issued 1,331,432 and 2,128,644 common shares, respectively, pursuant to draws made by the Company under
the Investment Agreement and received an aggregate of $122,433 and $493,226, respectively, in net proceeds from the draws.
Common Stock Issuable
As of March 31, 2020 and December 31,
2019, the Company was obligated to issue the following shares:
|
|
March 31, 2020
|
|
|
December 31, 2019
|
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares issuable pursuant to consulting agreements
|
|
$
|
123,589
|
|
|
|
740,439
|
|
|
$
|
93,377
|
|
|
|
493,142
|
|
Shares issuable to employees and directors
|
|
|
30,000
|
|
|
|
266,264
|
|
|
|
7,161
|
|
|
|
75,000
|
|
Shares issuable pursuant to stock subscriptions received
|
|
|
---
|
|
|
|
---
|
|
|
|
59,000
|
|
|
|
479,762
|
|
Shares issuable pursuant to convertible note conversion notices
|
|
|
51,652
|
|
|
|
645,644
|
|
|
|
---
|
|
|
|
---
|
|
|
|
$
|
205,241
|
|
|
|
1,652,347
|
|
|
$
|
159,538
|
|
|
|
1,047,904
|
|
HEALTHLYNKED CORP.
NOTES TO THE CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
MARCH 31, 2020
(UNAUDITED)
NOTE 12 – SHAREHOLDERS’
DEFICIT (CONTINUED)
During December 2019, the Company completed stock subscription
agreements totaling $59,000 for the sale of 479,762 shares of common stock. The funds were received and shares were issued in
January and February 2020.
Stock Warrants
Transactions involving our stock warrants
during the three months ended March 31, 2020 and 2019 are summarized as follows:
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
Exercise
|
|
|
|
|
|
Exercise
|
|
|
|
Number
|
|
|
Price
|
|
|
Number
|
|
|
Price
|
|
Outstanding at beginning of the period
|
|
|
47,056,293
|
|
|
$
|
0.21
|
|
|
|
46,161,463
|
|
|
$
|
0.18
|
|
Granted during the period
|
|
|
1,277,474
|
|
|
$
|
0.23
|
|
|
|
996,667
|
|
|
$
|
0.42
|
|
Exercised during the period
|
|
|
---
|
|
|
$
|
---
|
|
|
|
(2,099,256
|
)
|
|
$
|
(0.00
|
)
|
Terminated during the period
|
|
|
---
|
|
|
$
|
---
|
|
|
|
---
|
|
|
$
|
---
|
|
Outstanding at end of the period
|
|
|
48,333,767
|
|
|
$
|
0.21
|
|
|
|
45,058,874
|
|
|
$
|
0.19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable at end of the period
|
|
|
48,333,767
|
|
|
$
|
0.21
|
|
|
|
45,058,874
|
|
|
$
|
0.19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average remaining life
|
|
|
3.8 years
|
|
|
|
3.5 years
|
|
The following table summarizes information
about the Company’s stock warrants outstanding as of March 31, 2020:
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
|
|
|
15,287,011
|
|
|
|
4.7
|
|
|
$
|
0.07
|
|
|
|
15,287,011
|
|
|
$
|
0.07
|
|
$
|
0.10 to 0.24
|
|
|
19,012,796
|
|
|
|
3.3
|
|
|
$
|
0.18
|
|
|
|
19,012,796
|
|
|
$
|
0.18
|
|
$
|
0.25 to 0.49
|
|
|
10,093,960
|
|
|
|
4.2
|
|
|
$
|
0.29
|
|
|
|
10,093,960
|
|
|
$
|
0.29
|
|
$
|
0.50 to 1.00
|
|
|
3,940,000
|
|
|
|
1.9
|
|
|
$
|
0.28
|
|
|
|
3,940,000
|
|
|
$
|
0.28
|
|
$
|
0.05 to 1.00
|
|
|
48,333,767
|
|
|
|
3.8
|
|
|
$
|
0.18
|
|
|
|
48,333,767
|
|
|
$
|
0.18
|
|
During the three months ended March 31,
2020 and 2019, the Company issued 1,277,474 and 996.667 warrants, respectively, the aggregate grant date fair value of which was
$100,547 and $294,707, respectively. The fair value of the warrant was calculated using the following assumptions:
|
|
Three Months Ended March
31,
|
|
|
2020
|
|
2019
|
|
|
|
|
|
Pricing model utilized
|
|
Binomial Lattice
|
|
Black/Scholes
|
Risk free rate range
|
|
1.38% to 1.59%
|
|
2.44% to 2.52%
|
Expected life range (in years)
|
|
5.00 years
|
|
3.00 to 5.00
|
Volatility range
|
|
119.69% to 124.02%
|
|
212.96% to 216.35%
|
Dividend yield
|
|
0.00%
|
|
0.00%
|
HEALTHLYNKED CORP.
NOTES TO THE CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
MARCH 31, 2020
(UNAUDITED)
NOTE 12 – SHAREHOLDERS’
DEFICIT (CONTINUED)
In addition, specific assumptions regarding
investor exercise behavior were used in 2020, including probability assumptions related to estimated exercise behavior.
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, 2020 and 2019:
|
|
2020
|
|
|
2019
|
|
Outstanding at beginning of the period
|
|
|
1,874,063
|
|
|
|
1,738,750
|
|
Granted during the period
|
|
|
207,500
|
|
|
|
61,563
|
|
Terminated during the period
|
|
|
(62,500
|
)
|
|
|
---
|
|
Outstanding at end of the period
|
|
|
2,019,063
|
|
|
|
1,800,313
|
|
|
|
|
|
|
|
|
|
|
Shares vested at period-end
|
|
|
1,700,313
|
|
|
|
1,336,563
|
|
Weighted average grant date fair value of shares granted during the period
|
|
$
|
0.10
|
|
|
$
|
0.26
|
|
Aggregate grant date fair value of shares granted during the period
|
|
$
|
17,000
|
|
|
$
|
12,805
|
|
Shares available for grant pursuant to EIP at period-end
|
|
|
10,275,368
|
|
|
|
10,154,118
|
|
Total stock-based compensation recognized
for grants under the EIP was $17,696 and $32,779 during the three months ended March 31, 2020 and 2019, respectively. Total unrecognized
stock compensation related to these grants was $53,382 as of March 31, 2020.
A summary of the status of nonvested shares
issued pursuant to the EIP as of and for the three months ended March 31, 2020 and 2019 is presented below:
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
Grant Date
|
|
|
|
|
|
Grant Date
|
|
|
|
Shares
|
|
|
Fair Value
|
|
|
Shares
|
|
|
Fair Value
|
|
Nonvested at beginning of period
|
|
|
332,500
|
|
|
$
|
0.17
|
|
|
|
540,000
|
|
|
$
|
0.16
|
|
Granted
|
|
|
207,500
|
|
|
$
|
0.10
|
|
|
|
---
|
|
|
$
|
---
|
|
Vested
|
|
|
(158,750
|
)
|
|
$
|
0.08
|
|
|
|
(76,250
|
)
|
|
$
|
0.04
|
|
Forfeited
|
|
|
(62,500
|
)
|
|
$
|
0.07
|
|
|
|
---
|
|
|
$
|
---
|
|
Nonvested at end of period
|
|
|
318,750
|
|
|
$
|
0.19
|
|
|
|
463,750
|
|
|
$
|
0.18
|
|
HEALTHLYNKED CORP.
NOTES TO THE CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
MARCH 31, 2020
(UNAUDITED)
NOTE 12 – 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, 2020 and 2019:
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
Exercise
|
|
|
|
|
|
Exercise
|
|
|
|
Number
|
|
|
Price
|
|
|
Number
|
|
|
Price
|
|
Outstanding at beginning of the period
|
|
|
3,269,250
|
|
|
$
|
0.21
|
|
|
|
3,707,996
|
|
|
$
|
0.18
|
|
Granted during the period
|
|
|
20,000
|
|
|
$
|
0.11
|
|
|
|
591,250
|
|
|
$
|
0.26
|
|
Exercised during the period
|
|
|
---
|
|
|
$
|
---
|
|
|
|
(154,166
|
)
|
|
$
|
0.20
|
|
Forfeited during the period
|
|
|
(80,000
|
)
|
|
$
|
0.26
|
|
|
|
(595,830
|
)
|
|
$
|
0.20
|
|
Outstanding at end of the period
|
|
|
3,209,250
|
|
|
$
|
0.20
|
|
|
|
3,549,250
|
|
|
$
|
0.19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options exercisable at period-end
|
|
|
1,926,125
|
|
|
|
|
|
|
|
1,261,000
|
|
|
|
|
|
Weighted average remaining life (in years)
|
|
|
7.4
|
|
|
|
|
|
|
|
8.2
|
|
|
|
|
|
Weighted average grant date fair value of options granted during the period
|
|
$
|
---
|
|
|
|
|
|
|
$
|
0.21
|
|
|
|
|
|
Options available for grant at period-end
|
|
|
10,275,368
|
|
|
|
|
|
|
|
10,154,118
|
|
|
|
|
|
The following table summarizes information
about the Company’s stock options outstanding as of March 31, 2020:
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
|
|
|
1,283,000
|
|
|
|
5.7
|
|
|
$
|
0.08
|
|
|
|
1,270,500
|
|
|
|
0.08
|
|
$
|
0.11 to 0.31
|
|
|
1,926,250
|
|
|
|
8.6
|
|
|
$
|
0.28
|
|
|
|
655,625
|
|
|
|
0.29
|
|
$
|
0.08 to 0.31
|
|
|
3,209,250
|
|
|
|
7.4
|
|
|
$
|
0.20
|
|
|
|
1,926,125
|
|
|
$
|
0.15
|
|
Total stock-based compensation recognized
related to option grants was $20,880 and $28,456 during the three months ended March 31, 2020 and 2019, respectively.
A summary of the status of nonvested options
issued pursuant to the EIP as of and for the three months ended March 31, 2020 and 2019 is presented below:
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
Grant Date
|
|
|
|
|
|
Grant Date
|
|
|
|
Shares
|
|
|
Fair Value
|
|
|
Shares
|
|
|
Fair Value
|
|
Nonvested at beginning of period
|
|
|
1,636,250
|
|
|
$
|
0.22
|
|
|
|
2,332,413
|
|
|
$
|
0.13
|
|
Granted
|
|
|
20,000
|
|
|
$
|
0.08
|
|
|
|
591,250
|
|
|
$
|
0.21
|
|
Vested
|
|
|
(293,125
|
)
|
|
$
|
0.20
|
|
|
|
(39,583
|
)
|
|
$
|
0.03
|
|
Forfeited
|
|
|
(80,000
|
)
|
|
$
|
0.21
|
|
|
|
(595,830
|
)
|
|
$
|
0.02
|
|
Nonvested at end of period
|
|
|
1,283,125
|
|
|
$
|
0.22
|
|
|
|
2,288,250
|
|
|
$
|
0.18
|
|
HEALTHLYNKED CORP.
NOTES TO THE CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
MARCH 31, 2020
(UNAUDITED)
NOTE 13 – 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 lease liabilities were as follows as of March
31, 2020:
|
|
Operating
|
|
|
Capital
|
|
|
Total
|
|
|
|
Leases
|
|
|
Leases
|
|
|
Commitments
|
|
2020
|
|
$
|
164,809
|
|
|
$
|
---
|
|
|
$
|
164,809
|
|
2021
|
|
|
98,531
|
|
|
|
---
|
|
|
|
98,531
|
|
2022
|
|
|
52,662
|
|
|
|
---
|
|
|
|
52,662
|
|
2023
|
|
|
6,099
|
|
|
|
---
|
|
|
|
6,099
|
|
Total lease payments
|
|
|
322,101
|
|
|
|
---
|
|
|
|
322,101
|
|
Less interest
|
|
|
(73,007
|
)
|
|
|
---
|
|
|
|
(73,007
|
)
|
Present value of lease liabilities
|
|
$
|
249,094
|
|
|
$
|
---
|
|
|
$
|
249,094
|
|
Employment/Consulting Agreements
The Company has employment agreements
with certain of its physicians, nurse practitioners and physical therapists in the Health Services division. 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.
On July 1, 2016, the Company 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 the Company. If Dr. Dent’s employment is terminated by the
Company (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, the Company 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 the Company. If Mr. O’Leary employment is terminated by the Company (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, the Company 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, 2020
(UNAUDITED)
NOTE 14 – SEGMENT REPORTING
The Company has two reportable segments:
Health Services and Digital Healthcare. Health Services division is comprised of the operations of (i) Naples Women’s Center
(“NWC”), a multi-specialty medical group including OB/GYN (both Obstetrics and Gynecology), and General Practice,
(ii) Naples Center for Functional Medicine (“NCFM”), a Functional Medical Practice acquired in April 2019 that is
engaged in improving the health of its patients through individualized and integrative health care, and (iii) Bridging the Gap
Physical Therapy (“BTG”), a newly-formed physical therapy practice in Bonita Springs, FL that provides hands-on functional
manual therapy techniques to speed patients’ recovery and manage pain without pain medication or surgery. The Company’s
Digital Healthcare segment develops and 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. 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, 2020 and 2019 was as follows:
|
|
Three Months Ended March
31, 2020
|
|
|
Three Months Ended March
31, 2019
|
|
|
|
Health Services
|
|
|
Digital Healthcare
|
|
|
Total
|
|
|
Health Services
|
|
|
Digital Healthcare
|
|
|
Total
|
|
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Patient service revenue, net
|
|
$
|
1,336,940
|
|
|
$
|
---
|
|
|
$
|
1,336,940
|
|
|
$
|
464,990
|
|
|
$
|
---
|
|
|
$
|
464,990
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Practice salaries and benefits
|
|
|
765,121
|
|
|
|
---
|
|
|
|
765,121
|
|
|
|
350,240
|
|
|
|
---
|
|
|
|
350,240
|
|
Other practice operating costs
|
|
|
563,691
|
|
|
|
---
|
|
|
|
563,691
|
|
|
|
244,539
|
|
|
|
---
|
|
|
|
244,539
|
|
General and administrative
|
|
|
---
|
|
|
|
510,976
|
|
|
|
510,976
|
|
|
|
---
|
|
|
|
691,802
|
|
|
|
691,802
|
|
Depreciation and amortization
|
|
|
24,191
|
|
|
|
595
|
|
|
|
24,786
|
|
|
|
1,060
|
|
|
|
595
|
|
|
|
1,655
|
|
Total Operating Expenses
|
|
|
1,353,003
|
|
|
|
511,571
|
|
|
|
1,864,574
|
|
|
|
595,839
|
|
|
|
692,397
|
|
|
|
1,288,236
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from operations
|
|
$
|
(16,063
|
)
|
|
$
|
(511,571
|
)
|
|
$
|
(527,634
|
)
|
|
$
|
(130,849
|
)
|
|
$
|
(692,397
|
)
|
|
$
|
(823,246
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Segment Information
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
$
|
5,536
|
|
|
$
|
56,645
|
|
|
$
|
62,181
|
|
|
$
|
5,828
|
|
|
$
|
40,494
|
|
|
$
|
46,322
|
|
Loss on extinguishment of debt
|
|
$
|
---
|
|
|
$
|
467,937
|
|
|
$
|
467,937
|
|
|
$
|
---
|
|
|
$
|
139,798
|
|
|
$
|
139,798
|
|
Financing cost
|
|
$
|
---
|
|
|
$
|
---
|
|
|
$
|
---
|
|
|
$
|
---
|
|
|
$
|
33,903
|
|
|
$
|
33,903
|
|
Amortization of original issue and debt discounts
on convertible notes
|
|
$
|
---
|
|
|
$
|
292,163
|
|
|
$
|
292,163
|
|
|
$
|
---
|
|
|
$
|
179,384
|
|
|
$
|
179,384
|
|
Change in fair value of debt
|
|
$
|
---
|
|
|
$
|
(35,965
|
)
|
|
$
|
(35,965
|
)
|
|
$
|
---
|
|
|
$
|
29,697
|
|
|
$
|
29,697
|
|
Change in fair value of derivative financial instruments
and contingent acquisition consideration
|
|
$
|
---
|
|
|
$
|
(733,734
|
)
|
|
$
|
(733,734
|
)
|
|
$
|
---
|
|
|
$
|
(191,633
|
)
|
|
$
|
(191,633
|
)
|
|
|
March 31, 2020
|
|
|
December 31, 2019
|
|
Identifiable assets
|
|
$
|
2,175,990
|
|
|
$
|
136,499
|
|
|
$
|
2,312,489
|
|
|
$
|
2,428,752
|
|
|
$
|
117,802
|
|
|
$
|
2,546,554
|
|
Goodwill
|
|
$
|
---
|
|
|
$
|
---
|
|
|
$
|
---
|
|
|
$
|
71,866
|
|
|
$
|
---
|
|
|
$
|
71,866
|
|
The Digital Healthcare segment recognized
revenue of $1,356 and $1,941 in the three months ended March 31, 2020 and 2019, respectively, related to subscription revenue
billed to and paid for by the Company’s physicians for access to the HealthLynked Network. The revenue for Digital Healthcare
and related expense for Health Services were eliminated on consolidation.
HEALTHLYNKED CORP.
NOTES TO THE CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
MARCH 31, 2020
(UNAUDITED)
NOTE 15 – 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.
The following table summarizes the conclusions
reached regarding fair value measurements as of March 31, 2020 and December 31, 2019:
|
|
As of March 31, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Fair Value
|
|
Convertible notes payable
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
1,014,090
|
|
|
$
|
1,014,090
|
|
Notes payable to related party
|
|
|
-
|
|
|
|
-
|
|
|
|
729,352
|
|
|
|
729,352
|
|
Derivative financial instruments
|
|
|
-
|
|
|
|
-
|
|
|
|
219,938
|
|
|
|
219,938
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
1,963,380
|
|
|
$
|
1,963,380
|
|
|
|
As of December 31, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Fair Value
|
|
Convertible notes payable
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
1,052,209
|
|
|
$
|
1,052,209
|
|
Notes payable to related party
|
|
|
-
|
|
|
|
-
|
|
|
|
743,955
|
|
|
|
743,955
|
|
Derivative financial instruments
|
|
|
-
|
|
|
|
-
|
|
|
|
991,288
|
|
|
|
991,288
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
2,787,452
|
|
|
$
|
2,787,452
|
|
The changes in Level 3 financial instruments that are measured
at fair value on a recurring basis during the three months ended March 31, 2020 and 2019 were as follows:
|
|
Three Months Ended March 31,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
Convertible notes payable
|
|
$
|
21,362
|
|
|
$
|
(23,869
|
)
|
Notes payable to related party
|
|
|
14,603
|
|
|
|
(5,828
|
)
|
Derivative financial instruments
|
|
|
740,355
|
|
|
|
191,633
|
|
Contingent acquisition consideration
|
|
|
(6,621
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
769,699
|
|
|
$
|
161,936
|
|
NOTE 16 – SUBSEQUENT EVENTS
On April 2, 2020, the holder of the $108.9k
Note converted the remaining principal balance of $33,947 and accrued interest of $19 into 870,929 shares of the Company’s
common stock. The note was retired upon this conversion.
HEALTHLYNKED CORP.
NOTES TO THE CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
MARCH 31, 2020
(UNAUDITED)
NOTE 16 – SUBSEQUENT EVENTS (CONTINUED)
On April 2, 2020, the Company issued a
$157,500 convertible note (the “$157.5k Note”). The $157.5k Note included $10,500 fees and discounts for net proceeds
of $147,000. The $157.5k Note has an interest rate of 10% and a default interest rate of 22% and matures on April 2, 2021. The
$157.5k Note may be converted into common stock of the Company by the holder at any time six months after the issuance date, subject
to a 4.99% beneficial ownership limitation, at a conversion price per share equal to a 29% discount to the lowest bid or trading
price of the Company’s common stock during the thirteen (13) trading days prior to the conversion date.
On April 3, 2020, the Company prepaid
the balance on the $103k Note V, including accrued interest, for a one-time cash payment of $135,205.
On April 6, 2020, the Company issued a
$135,000 convertible note (the “$135k Note”). The $135k Note included $3,500 fees and discounts for net proceeds of
$131,500. The $135k Note has an interest rate of 10% and a default interest rate of 18% and matures on April 6, 2021. The $135k
Note may be converted into common stock of the Company by the holder at any time six months after the issuance date, subject to
a 4.99% beneficial ownership limitation, at a conversion price per share equal to a 39% discount to the lowest bid or trading
price of the Company’s common stock during the fifteen (15) trading days prior to the conversion date.
On April 6, 2020, the Company issued an
$83,000 convertible note (the “$83k Note”). The $83k Note included $3,000 fees and discounts for net proceeds of $80,000.
The $83k Note has an interest rate of 10% and a default interest rate of 22% and matures on February 15, 2021. The $83k Note may
be converted into common stock of the Company by the holder at any time six months after the issuance date, subject to a 4.99%
beneficial ownership limitation, at a conversion price per share equal to a 39% discount to the lowest bid or trading price of
the Company’s common stock during the fifteen (15) trading days prior to the conversion date.
On April 30, 2020, the Company issued a $128,000
convertible note (the “$128k Note”). The $128k Note included $3,000 fees and discounts for net proceeds of $125,000.
The $128k Note has an interest rate of 10% and a default interest rate of 2% and matures on February 28, 2021. The $128k Note may
be converted into common stock of the Company by the holder at any time six months after the issuance date, subject to a 4.99%
beneficial ownership limitation, at a conversion price per share equal to a 39% discount to the lowest bid or trading price of
the Company’s common stock during the fifteen (15) trading days prior to the conversion date.
On May 4, 2020, the Company prepaid the balance
on the $103k Note VI, including accrued interest, for a one-time cash payment of $135,099.
On May 5, 2020, the holder of the $108.9k Note
II converted principal of $25,000 and accrued interest of $5,538 into 479,030 shares of the Company’s common stock..
On May 8, 2020, the holder of the $128.5k Note
converted principal of $25,000 and $500 in fees into 491,804 shares of the Company’s common stock.
On May 8, 2020, the Company and its subsidiaries received an aggregate
of $585,000 in loans under the Paycheck Protection Program (the “PPP”). The PPP loans, administered by the U.S. Small
Business Administration and processed through Wells Fargo bank, were issued under the recently enacted Coronavirus Aid, Relief,
and Economic Security Act, also known as the CARES Act. The loans bear interest at 1% per annum in mature in May 2022. Principal
and interest payments are deferred for the first six months of the loans. Pursuant to the terms of the PPP, principal amounts may
be forgiven if loan proceeds are used for qualifying expenses as described in the CARES Act, including costs such as payroll, benefits,
employer payroll taxes, rent and utilities. The Company plans to use the proceeds for payroll costs and other permitted expenses.
On May 12, 2020, the Company sold 1,075,269
shares of common stock in a private placement transaction to an accredited investor and received $100,000 in proceeds from the
sales. In connection with the stock sale, the Company also issued 537,644 five-year warrants to purchase shares of common stock
at an exercise price of $0.19 per share.