NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2021
(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.
As
of June 30, 2021, the Company operated in four distinct divisions: the Health Services Division, the Digital Healthcare Division, the
ACO/MSO (Accountable Care Organization / Managed Service Organization) Division, and the Medical Distribution Division. 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 operates an online personal medical information and record archive
system, the “HealthLynked Network,” which enables patients and doctors to keep track of medical information via the Internet
in a cloud-based system. The ACO/MSO Division is comprised of the business acquired of Cura Health Management LLC (“CHM”)
and its subsidiary ACO Health Partners LLC (“AHP”), which were acquired by the Company on May 18, 2020. CHM and AHP operate
an Accountable Care Organization (“ACO”) and Managed Service Organization (“MSO”) that assists physician practices
in providing coordinated and more efficient care to patients via the Medicare Shared Savings Program (“MSSP”) as administered
by the Centers for Medicare and Medicaid Services (the “CMS”), which rewards providers for efficiency in patient care. The
Medical Distribution Division is comprised of the operations of MedOffice Direct LLC (“MOD”), a virtual distributor of discounted
medical supplies selling to both consumers and medical practices throughout the United States acquired by the Company on October 19,
2020.
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, 2020 and 2019, respectively, which are included in the Company’s Form 10-K,
filed with the United States Securities and Exchange Commission on March 31, 2021. The Company assumes that the users of the interim
financial information herein have read, or have access to, the audited consolidated financial statements for the preceding period, and
that the adequacy of additional disclosure needed for a fair presentation may be determined in that context. The results of operations
for the three and six months ended June 30, 2021 are not necessarily indicative of results for the entire year ending December 31, 2021.
On
a consolidated basis, the Company’s operations are comprised of the parent company, HealthLynked Corp., and its six subsidiaries:
NWC, NCFM, BTG, CHM, AHP and MOD. All significant intercompany transactions and balances have been eliminated upon consolidation. In
addition, certain amounts in the prior periods’ consolidated financial statements have been reclassified to conform to the current
period presentation.
NOTE
2 – SIGNIFICANT ACCOUNTING POLICIES
A
summary of the significant accounting policies applied in the presentation of the accompanying consolidated financial statements follows:
Basis
of Presentation
The
accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the
United States of America (“US GAAP”).
All
amounts referred to in the notes to the consolidated financial statements are in United States Dollars ($) unless stated otherwise.
HEALTHLYNKED
CORP.
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2021
(UNAUDITED)
NOTE
2 – SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Use
of Estimates
The
preparation of the 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 fair valuation of acquired intangible assets, cash flow
and fair value assumptions associated with measurements of contingent acquisition consideration and impairment of intangible assets and
goodwill, valuation of inventory, 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.
Revenue
Recognition
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 include 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
JUNE
30, 2021
(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
and BTG are provided on a cash basis and not submitted through third party insurance providers. Contract liabilities related to prepaid
BTG patient service revenue were $43,752 and $35,779 as of June 30, 2021 and December 31, 2020, respectively
Medicare
Shared Savings Revenue
The
Company earns Medicare shared savings revenue based on performance of the population of patient lives for which it is accountable as
an ACO against benchmarks established by the MSSP. Because the MSSP, which was formed in 2012, is relatively new and has limited historical
experience, the Company cannot accurately predict the amount of shared savings that will be determined by CMS. Such amounts are determined
annually when the Company is notified by CMS of the amount of shared savings earned. Accordingly, the Company recognizes Medicare shared
savings revenue in the period in which the CMS notifies the Company of the exact amount of shared savings to be paid, which historically
has occurred during the fiscal quarter ended September 30 for the program year ended December 31 of the previous year. The Company was
notified of the amount of Medicare shared savings and received payment for such savings in September 2020. Accordingly, the Company recognized
Medicare shared savings revenue of $767,744 in the year ended December 31, 2020. Based on the ACO operating agreements, the Company bears
all costs of the ACO operations until revenue is recognized. At that point, the Company shares in up to 100% of the revenue to recover
its costs incurred. No revenue Medicare Shared Savings revenue was earned during the three or six months ended June 30, 2021 or 2020.
Consulting
and Event Revenue
Also
pursuant to ASC 606, the Company recognizes service revenue as services are provided, with any unearned but paid amounts recorded as
a contract liability at each balance sheet date. Contract liabilities related to consulting revenue were $25,000 and $47,864 as of June
30, 2021 and December 31, 2020, respectively. Event revenue, comprised of admission fees for summit events, is recognized when an event
is held.
HEALTHLYNKED
CORP.
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2021
(UNAUDITED)
NOTE
2 – SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Product
Revenue
Revenue
is derived from the distribution of medical products that are sourced from a third party. The Company recognizes revenue at a point in
time when title transfers to customers and the Company has no further obligation to provide services related to such products, which
occurs when the product ships. The Company is the principal in its revenue transactions and as a result revenue is recorded on a gross
basis. The Company has determined that it controls the ability to direct the use of the product provided prior to transfer to a customer,
is primarily responsible for fulfilling the promise to provide the product to its customer, has discretion in establishing prices, and
ultimately controls the transfer of the product to the customer. Shipping and handling costs billed to customers are recorded in revenue.
Contract liabilities related to product revenue were $2,095 and $5,782 as of June 30, 2021 and December 31, 2020, respectively. There
were no contract assets as of June 30, 2021 or December 31, 2020.
Sales
are made inclusive of sales tax, where such sales tax is applicable. Sales tax is applicable on sales made in the state of Florida, where
the Company has physical nexus. The Company has determined that it does not have economic nexus in any other states. The Company does
not sell products outside of the United States.
The
Company maintains a return policy that allows customers to return a product within a specified period of time prior to and
subsequent to the expiration date of the product. The Company analyzes the need for a product return allowance at the end of each
period based on eligible products. Product return allowance was $4,070 and $26,839 and as of June 30, 2021 and December 31, 2020,
respectively.
Contract
Liabilities
Contract
liabilities represent payments from customers for consulting services, patient services and medical products that precede the Company’s
service or product fulfillment performance obligation. The Company’s contract liabilities balance was $70,847 and $89,425 as of
June 30, 2021 and December 31, 2020, respectively.
Provider
shared savings expense
Provider
shared savings expense represents payments made to the ACO’s participating providers. The pool of provider shared savings expense
paid to all participating providers, as well as the amounts paid to each individual participating provider from the pool, is determined
by ACO management. Shared Savings expense is recognized in the period in which the size of the payment pool is determined, which typically
corresponds to the period in which the shared saving payment is received from CMS and shared savings revenue is recognized. This typically
occurs in the second half of the year following the completion of the program year.
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 at each institution are insured by the Federal Deposit Insurance Corporation (“FDIC”)
up to $250,000. At June 30, 2021 and December 31, 2020, the Company had $2,310,474 and $18,227 in excess of the FDIC insured limit, respectively.
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
48.2% of total billings. Trade accounts receivable are recorded at this net amount. As of and June 30, 2021 and December 31, 2020, the
Company’s gross patient services accounts receivable were $189,425 and $165,464, respectively, and net patient services accounts
receivable were $84,568 and $71,655, respectively, based upon net reporting of accounts receivable. As of June 30, 2021 and December
31, 2020, the Company’s allowance of doubtful accounts was $13,972 and $13,972, respectively. The Company also had $-0- and $15,498
accounts receivable related to amounts billed under consulting contracts as of and June 30, 2021 and December 31, 2020, respectively.
HEALTHLYNKED
CORP.
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2021
(UNAUDITED)
NOTE
2 – SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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 as of the reporting periods presented herein. The adoption had no material
impact on cash provided by or used in operating, investing or financing activities on the Company’s consolidated statements of
cash flows.
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 or six months ended June 30, 2021 or 2020.
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. The Company relies on a sole supplier for the fulfillment of all of its product sales
made through MOD, which was acquired by the Company in October 2020.
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.
HEALTHLYNKED
CORP.
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2021
(UNAUDITED)
NOTE
2 – SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
The
Company examines the possibility of decreases in the value of fixed assets when events or changes in circumstances reflect the fact that
their recorded value may not be recoverable. The Company recognizes an impairment loss when the sum of expected undiscounted future cash
flows is less than the carrying amount of the asset. The amount of impairment is measured as the difference between the asset’s
estimated fair value and its book value.
Convertible
Notes
Convertible
notes are regarded as compound instruments, consisting of a liability component and an equity component. The component parts of compound
instruments are classified separately as financial liabilities and equity in accordance with the substance of the contractual arrangement.
At the date of issue, the fair value of the liability component is estimated using the prevailing market interest rate for a similar
non-convertible instrument. This amount is recorded as a liability on an amortized cost basis until extinguished upon conversion or at
the instrument’s maturity date. The equity component is determined by deducting the amount of the liability component from the
fair value of the compound instrument as a whole. This is recognized as additional paid-in capital and included in equity, net of income
tax effects, and is not subsequently remeasured. After initial measurement, they are carried at amortized cost using the effective interest
method. Convertible notes for which the maturity date has been extended and that qualify for debt extinguishment treatment are recorded
at fair value on the extinguishment date and then revalued at the end of each reporting period, with the change recorded to the statement
of operations under “Change in Fair Value of Debt.”
Government
Notes Payable
During 2020, the Company
and certain of its subsidiaries received loans under the Paycheck Protection Program (the “PPP”). The PPP loans, administered
by the U.S. Small Business Administration (the “SBA”), were issued under the Coronavirus Aid, Relief, and Economic Security
Act, also known as the CARES Act. 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
accounts for forgiveness of government loans pursuant to FASB ASC 470, “Debt,” (“ASC 470”). Pursuant to ASC 470,
loan forgiveness is recognized in earnings as a gain on extinguishment of debt when the debt is legally released by the lender.
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.
HEALTHLYNKED
CORP.
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2021
(UNAUDITED)
NOTE
2 – SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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.
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.
HEALTHLYNKED
CORP.
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2021
(UNAUDITED)
NOTE
2 – SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Income
Taxes
The
Company follows Accounting Standards Codification subtopic 740-10, Income Taxes (“ASC 740-10”) for recording the provision
for income taxes. Deferred tax assets and liabilities are computed based upon the difference between the financial statement and income
tax basis of assets and liabilities using the enacted marginal tax rate applicable when the related asset or liability is expected to
be realized or settled. Deferred income tax expenses or benefits are based on the changes in the asset or liability during each period.
If available evidence suggests that it is more likely than not that some portion or all of the deferred tax assets will not be realized,
a valuation allowance is required to reduce the deferred tax assets to the amount that is more likely than not to be realized. Future
changes in such valuation allowance are included in the provision for deferred income taxes in the period of change. Deferred income
taxes may arise from temporary differences resulting from income and expense items reported for financial accounting and tax purposes
in different periods. Deferred taxes are classified as current or non-current, depending on the classification of assets and liabilities
to which they relate. Deferred taxes arising from temporary differences that are not related to an asset or liability are classified
as current or non-current depending on the periods in which the temporary differences are expected to reverse and are considered immaterial.
No Income Tax has been provided for the three or six months ended June 30, 2021 or 2020, 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.
Deemed
Dividend
The
Company incurs a deemed dividend on Series B Convertible Preferred Voting Stock (the “Series B Preferred”). As the intrinsic
price per share of the Series B Preferred was less than the deemed fair value of the Company’s common stock on the date of issuance
of the Series B Preferred, the Series B Preferred contains a beneficial conversion feature as described in FASB ASC 470-20, “Debt
with Conversion and Other Options.” The difference in the stated conversion price and estimated fair value of the common stock
is accounted for as a beneficial conversion feature and affects income or loss available to common stockholders for purposes of earnings
per share available to common stockholders. The Company incurs further deemed dividends on certain of its warrants containing a down
round provision equal to the difference in fair value of the warrants before and after the triggering of the down round adjustment.
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 and six months ended June 30, 2021 and 2020, the Company reported a net loss and excluded
all outstanding stock options, warrants and other dilutive securities from the calculation of diluted net loss per common share because
inclusion of these securities would have been anti-dilutive. As of June 30, 2021 and December 31, 2020, potentially dilutive securities
were comprised of (i) 58,079,122 and 51,352,986 warrants outstanding, respectively, (ii) 3,013,750 and 3,111,750 stock options outstanding,
respectively, (iii) -0- and 10,298,333 shares issuable upon conversion of convertible notes, respectively, (iv) 165,000 and 200,000 unissued
shares subject to future vesting requirements granted pursuant to the Company’s Employee Incentive Plan, and (v) up to 13,750,000
and 13,750,000 shares of common stock issuable upon conversion of Series B Preferred.
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
JUNE
30, 2021
(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. Certain of the Company’s warrants include a so-called down round provision. The Company accounts for such provisions pursuant
to ASU No. 2017-11, Earnings Per Share, Distinguishing Liabilities from Equity and Derivatives and Hedging, which calls for the
recognition of a deemed dividend in the amount of the incremental fair value of the warrant due to the down round when triggered, warrants
granted in connection with ongoing arrangements are more fully described in Note 14, Shareholders’ Equity.
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 four operating segments: Health Services (multi-specialty
medical group including the NWC OB/GYN practice, the NCFM practice acquired in April 2019 and the BTG physical therapy practice launched
in 2020), Digital Healthcare (develops and markets the “HealthLynked Network,” an online personal medical information and
record archive system), ACO/MSO (comprised of the ACO/MSO business acquired with CHM in May 2020, which assists physician practices in
providing coordinated and more efficient care to patients via the MSSP), and Medical Distribution (comprised of the operations of MOD,
a virtual distributor of discounted medical supplies selling to both consumers and medical practices acquired by the Company on October
19, 2020).
Recent
Accounting Pronouncements
In
December 2019, the FASB issued ASU 2019-12 Simplifying the Accounting for Income Taxes, which eliminates the need for an organization
to analyze whether the following apply in a given period: (1) exception to the incremental approach for intra-period tax allocation;
(2) exceptions to accounting for basis differences when there are ownership changes in foreign investments; and (3) exceptions in interim
period income tax accounting for year-to-date losses that exceed anticipated losses. ASU No. 2019-12 is effective for fiscal years beginning
after December 15, 2020, and interim periods within those fiscal years. The Company does not expect that this standard will have a material
effect on its consolidated financial statements.
In
March 2020, the FASB issued ASU 2020-03, “Codification Improvements to Financial Instruments”: The amendments in this update
are to clarify, correct errors in, or make minor improvements to a variety of ASC topics. The changes in ASU 2020-03 are not expected
to have a significant effect on current accounting practices. The ASU improves various financial instrument topics in the Codification
to increase stakeholder awareness of the amendments and to expedite the improvement process by making the Codification easier to understand
and easier to apply by eliminating inconsistencies and providing clarifications. The ASU is effective for smaller reporting companies
for fiscal years beginning after December 15, 2022 with early application permitted. The Company is currently evaluating the impact the
adoption of this guidance may have on its consolidated financial statements.
In
August 2020, the FASB issued ASU 2020-06 Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts
in Entity’s Own Equity (Subtopic 815-40) related to the measurement and disclosure requirements for convertible instruments
and contracts in an entity’s own equity. The pronouncement simplifies and adds disclosure requirements for the accounting and measurement
of convertible instruments and the settlement assessment for contracts in an entity’s own equity. This pronouncement is effective
for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2021 and early adoption is permitted,
but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. The Company
is currently evaluating the impact that this standard will have on its consolidated financial statements.
HEALTHLYNKED
CORP.
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2021
(UNAUDITED)
NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
In May 2021, the Financial
Accounting Standards Board (“FASB”) issued ASU 2021-04, Earnings Per Share (Topic 260), Debt—Modifications and Extinguishments
(Subtopic 470-50), Compensation—Stock Compensation (Topic 718), and Derivatives and Hedging—Contracts in Entity’s Own
Equity (Subtopic 815-40). ASU 2021-04 clarifies and reduces diversity in an issuer’s accounting for modifications or exchanges
of freestanding equity-classified written call options (for example, warrants) that remain equity classified after modification or exchange.
The ASU provides guidance to clarify whether an issuer should account for a modification or an exchange of a freestanding equity-classified
written call option that remains equity classified after modification or exchange as (1) an adjustment to equity and, if so, the related
earnings per share effects, if any, or (2) an expense and, if so, the manner and pattern of recognition. ASU 2021-04 is effective for
annual beginning after December 15, 2021, including interim periods within those fiscal years. Early adoption is permitted, including
adoption in an interim period. The Company is currently evaluating the impact that this standard will have on its consolidated financial
statements
No
other new accounting pronouncements were issued or became effective in the period that had, or are expected to have, a material impact
on our consolidated Financial Statements.
NOTE
3 – LIQUIDITY
As
of June 30, 2021, the Company had cash balances of $2,589,635, working capital of $911,146 and accumulated deficit $30,114,127. For the
six months ended June 30, 2021, the Company had a net loss of $8,329,217 and net cash used by operating activities of $2,261,352. Net
cash used in investing activities was $203,399. Net cash provided by financing activities was $4,892,202, including $4,649,360 received
from sales of common stock in private placement transactions and puts pursuant to the July 2016 $3 million investment agreement (the
“Investment Agreement”) and $293,951 proceeds from the exercise of stock options and warrants. During January 2021, the holder
of $1,038,500 fixed rate convertible debt converted the entire face value of $1,038,500, plus $317,096 of accrued interest on such notes,
into 13,538,494 shares of common stock pursuant to the original conversion terms of the underlying notes. Following the conversion, the
Company had no further convertible debt outstanding. During May 2021, PPP loans in the amount of $632,826 plus $6,503 accrued interest were forgiven.
Management believes that the Company has sufficient cash on hand to fund the business for at least the next 12
months. The
Company intends that the longer term (i.e., beyond twelve months) cost of completing additional intended acquisitions, implementing its
development and sales efforts related to the HealthLynked Network and maintaining existing and expanding overhead and administrative
costs will be financed from (i) cash on hand resulting from fund raising efforts in 2021, (ii) profits generated by NCFM, BTG and CHM
(including expected Medicare Shared Savings revenue projected to be received annually in the third fiscal quarter of each year), and
(iii) the use of further outside funding sources. No assurances can be given that the Company will be able to access additional outside
capital in a timely fashion. 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.
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. In March 2020, the World Health Organization
declared the outbreak of COVID-19 a pandemic. The outbreak of the pandemic is materially adversely affecting the Company’s employees,
patients, communities and business operations, as well as the U.S. economy and financial markets. 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. In response to
COVID-19, the Company implemented additional safety measures in its patient services locations and its corporate headquarters.
HEALTHLYNKED CORP.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
JUNE 30, 2021
(UNAUDITED)
NOTE
4 – ACQUISITIONS
Hughes
Center for Functional Medicine – April 2019
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
total consideration fair value represents a transaction value of $1,764,672. The following table summarizes the fair value of consideration
paid:
Cash
|
|
$
|
500,000
|
|
Common Stock (3,968,254 shares)
|
|
|
1,000,000
|
|
Fair Value of Contingent Acquisition Consideration
|
|
|
299,672
|
|
Less cash received
|
|
|
(35,000
|
)
|
|
|
|
|
|
Fair Value of Total Consideration
|
|
$
|
1,764,672
|
|
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. In May 2020, the Company paid the seller $47,000 in satisfaction of the year 1 earn out. In May 2021, the Company paid
the seller $196,000 in satisfaction of the year 2 earn out.
The
fair value of the contingent acquisition consideration related to the future earn-out payments is calculated using a probability-weighted
discounted cash flow projection and 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 contingent acquisition consideration.” During the three months ended June 30,
2021 and 2020, the Company recognized losses on the change in the fair value of contingent acquisition consideration of ($38,145) and
($4,706), respectively. During the six months ended June 30, 2021 and 2020, the Company recognized losses on the change in the fair value
of contingent acquisition consideration of ($49,453) and ($11,327), respectively. During the three months ended June 30, 2021, the Company
paid the sellers $196,000 cash in satisfaction of the second year earn-out.
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.
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
|
|
$
|
1,764,672
|
|
HEALTHLYNKED CORP.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
JUNE 30, 2021
(UNAUDITED)
NOTE 4 – ACQUISITIONS (CONTINUED)
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.
Cura
Health Management LLC – May 2020
On
May 18, 2020, the Company acquired a 100% interest in CHM and its wholly owned subsidiary AHP. CHM and AHP assist physician practices
in providing coordinated and more efficient care to patients via the MSSP. The Company accounted for the transaction as an acquisition
of a business pursuant to ASC 805. Following the acquisition, the business of CHM comprised the Company’s ACO/MSO Division.
Under
the terms of acquisition, the Company paid CHM shareholders the following consideration: (i) $214,000 in cash paid at closing, (ii) 2,240,838
shares of HealthLynked common stock issued at closing, (iii) up to $223,500 additional cash and $660,000 in additional shares of HealthLynked
common payable at the time CHM receives the final assessment of the calculation of MSSP savings for the 2019 program year, with this
amount prorated based on a target MSSP payment (plus other ancillary revenue) of $1,725,000, and (iv) up to $437,500 based on the business
achieving annual revenue of $2,250,000 and annual profit of $500,000 in each of the four years following closing.
The
total consideration fair value represents a transaction value of $1,423,465. The following table summarizes the fair value of consideration
paid:
Cash paid at closing
|
|
$
|
214,000
|
|
Shares issued at closing (2,240,838 shares)
|
|
|
201,675
|
|
Cash and shares contingent upon 2019 program year MSSP payment target
|
|
|
778,192
|
|
Cash contingent upon four-year earn-out
|
|
|
279,593
|
|
Less cash received
|
|
|
(49,995
|
)
|
|
|
|
|
|
|
|
$
|
1,423,465
|
|
The
fair value of the 2,240,838 common shares issued at closing was determined using the intraday average high and low trading price of the
Company’s common shares on the acquisition date. The terms of the earn out require the Company to pay the former owners of CHM
(i) up to $223,500 additional cash and to $660,000 of additional shares of Company common stock when CHM receives the final assessment
of the calculation of 2019 plan year MSSP revenue (the “Current Earnout”), and (ii) up to $62,500, $125,000, $125,000 and
$125,000 on the first, second, third and fourth anniversary, respectively, based on achievement by the underlying business of revenue
of at least $2,250,000 (50% weighting) and profit of at least $500,000 (50% weighting) in the year preceding each anniversary date (the
“Future Earnout”). During September 2020, pursuant to a Second Amendment to the Agreement and Plan of Merger and in satisfaction
of the Current Earnout, the Company paid $90,389 cash, issued 1,835,625 shares and agreed that the balance of the Current Earnout that
was not earned in 2020, being $124,043 cash and $366,300 in shares of Company common stock, would be deferred until the first future
earnout year in which MSSP revenue exceeds $1.725 million and revenue from other services exceeds $605,000.
The
fair value of the contingent acquisition consideration related to both the Current Earnout and the Future Earnout were 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
contingent acquisition consideration.” During the three months ended June 30, 2021 and 2020, the Company recognized gains (losses)
on the change in the fair value of contingent acquisition consideration of $94,555 and ($33,981), respectively. During the six months
ended June 30, 2021 and 2020, the Company recognized gains (losses) on the change in the fair value of contingent acquisition consideration
of $61,303 and ($33,981), respectively.
HEALTHLYNKED CORP.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
JUNE 30, 2021
(UNAUDITED)
NOTE 4 – ACQUISITIONS (CONTINUED)
The
following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the acquisition date:
Accounts receivable
|
|
$
|
90,197
|
|
Prepayments
|
|
|
15,294
|
|
ACO physician contracts
|
|
|
1,073,000
|
|
Goodwill
|
|
|
381,856
|
|
Accounts payable
|
|
|
(32,848
|
)
|
Deferred revenue
|
|
|
(104,034
|
)
|
|
|
|
|
|
Fair Value of Identifiable Assets Acquired and Liabilities Assumed
|
|
$
|
1,423,465
|
|
The
fair value of the ACO Physician Contracts of $1,073,000 was estimated by applying the income approach. Under the income approach, the
expected future cash flows generated by the ACO Physician Contracts 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 24.24% (ii) sustainable growth of 5.00% and (iii) a benefit stream using EBITDA cash flow. Goodwill
of $381,856 arising from the acquisition consists of value associated with the legacy name. None of the goodwill recognized is expected
to be deductible for income tax purposes.
MedOffice
Direct LLC – October 2020
On
October 19, 2020, the Company acquired a 100% interest in MOD, a virtual distributor of discounted medical supplies selling to both consumers
and medical practices throughout the United States. With over 13,000 name brand medical products in over 150 different categories, MOD
leverages pricing discounts with a small unit-of-measure direct-to-consumer shipping model to make ordering medical supplies more convenient
and cost effective for its users. The Company accounted for the transaction as an acquisition of a business pursuant to ASC 805. Following
the acquisition, the business of MOD comprised the Company’s Medical Distribution Division.
Under
the terms of acquisition, the Company paid the following consideration: (i) 19,045,563 shares of Company common stock issued at closing,
(ii) partial satisfaction of certain outstanding debt obligations of MOD in the amount of $703,200 in cash paid by the Company, and (iii)
up to 10,004,749 restricted shares of the Company’s common stock over a four-year period based on MOD achieving prescribed revenue
targets in calendar years 2021 through 2024.
Dr.
Michael Dent, the Chief Executive Officer and the Chairman of the Board of Directors of the Company, George O’Leary, the Chief
Financial Officer and a director of the Company, and Robert Gasparini, a director of the Company, were members of MOD and received consideration
in connection with Company’s acquisition of MOD as follows: (1) Dr. Dent received 10,573,745 Company common shares at closing,
may earn up to 5,554,452 additional Company common shares pursuant to the earn-out, and received $457,200 cash repayment of debt, (2)
Mr. O’Leary received 1,130,213 Company common shares at closing, may earn up to 593,707 additional Company common shares pursuant
to the earn-out, and received $66,000 cash repayment of debt, and (3) Mr. Gasparini received 99,437 Company common shares at closing
and may earn up to 52,235 additional Company common shares pursuant to the earn-out.
The
total consideration fair value represents a transaction value of $3,999,730. The following table summarizes the fair value of consideration
paid:
Shares issued at closing (19,045,563 shares)
|
|
$
|
2,704,470
|
|
Payment of MOD debt obligations in cash
|
|
|
703,200
|
|
Shares contingent upon four-year earn-out
|
|
|
649,108
|
|
Less cash received
|
|
|
(57,048
|
)
|
|
|
|
|
|
|
|
$
|
3,999,730
|
|
HEALTHLYNKED CORP.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
JUNE 30, 2021
(UNAUDITED)
NOTE 4 – ACQUISITIONS (CONTINUED)
The
fair value of the 19,045,563 common shares issued at closing was determined using the average closing price for the five days prior to
the closing date of October 19, 2020. The terms of the earn out require the Company to issue to the former equity members of MOD up to
1,9688,448 shares, 3,154,264 shares, 2,631,195 shares and 2,250,842 shares, respectively, (the “MOD Earnout Shares”) based
on achievement by the underlying business of revenue of at least $1,500,000 in 2021, $1,875,000 in 2022, $2,344,000 in 2023 and $2,930,000
in 2024. The MOD Earnout Shares are issuable by April 30 of the year following the measurement year.
The
fair value of the contingent acquisition consideration related to the MOD Earnout Shares 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 contingent acquisition
consideration.” During the three months ended June 30, 2021 and 2020, the Company recognized gains (losses) on the change in the
fair value of contingent acquisition consideration related to the MOD Earnout Shares of $218,201 and $-0-, respectively. During the six
months ended June 30, 2021 and 2020, the Company recognized gains (losses) on the change in the fair value of contingent acquisition
consideration related to the MOD Earnout Shares of ($372,939) and $-0-, respectively.
The following table summarizes the estimated fair
values of the assets acquired and liabilities assumed at the acquisition date:
Website
|
|
$
|
3,538,000
|
|
Goodwill
|
|
|
766,249
|
|
Accounts payable and accruals
|
|
|
(160,762
|
)
|
Notes payable
|
|
|
(90,759
|
)
|
Deferred revenue
|
|
|
(52,998
|
)
|
|
|
|
|
|
Fair Value of Identifiable Assets Acquired and Liabilities Assumed
|
|
$
|
3,999,730
|
|
The
fair value of the website of $3,538,000 was estimated by applying the income approach. Under the income approach, the expected future
cash flows generated by the asset 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 discount rate
of 23.48% (ii) sustainable growth of 3.00% and (iii) a benefit stream using EBITDA cash flow. The website is being amortized over a five-year
expected life. Goodwill of $766,249 arising from the acquisition consists of value associated with the legacy name. None of the goodwill
recognized is expected to be deductible for income tax purposes.
Pro
Forma Financial Information
The
following table represents the pro forma consolidated income statement as if HCFM, CHM and MOD had been included in the consolidated
results of the Company for the entire six-month period ending June 30, 2020. All acquired entities were included in the Company’s
consolidated results of operations in the full three- and six-month periods ended June 30, 2021.
Revenue
|
|
$
|
2,700,128
|
|
Net loss
|
|
$
|
(2,175,860
|
)
|
These
amounts have been calculated after applying the Company’s accounting policies and adjusting the results of HCFM, CHM and MOD 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, 2021 and 2020, respectively.
HEALTHLYNKED CORP.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
JUNE 30, 2021
(UNAUDITED)
NOTE
5 – PREPAID EXPENSES AND OTHER
On
March 22, 2017, 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 was amortized over the initial period during which the Company was able access the financing, which began on May 15, 2017 and ended
on May 15, 2020. The Company recognized general and administrative expense related to the cost of the warrants of $-0- and $6,401 in
the three months ending June 30, 2021 and 2020, respectively, and $-0- and $12,802 in the six months ending June 30, 2021 and 2020, respectively.
NOTE
6 – PROPERTY, PLANT, AND EQUIPMENT
Property,
plant and equipment at June 30, 2021 and December 31, 2020 were as follows:
|
|
June 30,
|
|
|
December 31,
|
|
|
|
2021
|
|
|
2020
|
|
|
|
|
|
|
|
|
Medical equipment
|
|
$
|
484,126
|
|
|
$
|
484,126
|
|
Furniture, office equipment and leasehold improvements
|
|
|
138,017
|
|
|
|
130,617
|
|
|
|
|
|
|
|
|
|
|
Total property, plant and equipment
|
|
|
622,143
|
|
|
|
614,743
|
|
Less: accumulated depreciation
|
|
|
(231,878
|
)
|
|
|
(177,457
|
)
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment, net
|
|
$
|
390,265
|
|
|
$
|
437,286
|
|
Depreciation
expense during the three months ended June 30, 2021 and 2020 was $27,525 and $22,830, respectively. Depreciation expense during the six
months ended June 30, 2021 and 2020 was $54,421 and $45,572, respectively.
NOTE
7 – INTANGIBLE ASSETS AND GOODWILL
Intangible
assets at June 30, 2021 and December 31, 2020 were as follows:
|
|
June 30,
|
|
|
December 31,
|
|
|
|
2021
|
|
|
2020
|
|
|
|
|
|
|
|
|
NCFM: Medical database
|
|
$
|
1,101,538
|
|
|
$
|
1,101,538
|
|
NCFM: Website
|
|
|
41,000
|
|
|
|
41,000
|
|
CHM: ACO physician contracts
|
|
|
1,073,000
|
|
|
|
1,073,000
|
|
MOD: Website
|
|
|
3,538,000
|
|
|
|
3,538,000
|
|
|
|
|
|
|
|
|
|
|
Total intangible assets
|
|
|
5,753,538
|
|
|
|
5,753,538
|
|
Less: accumulated amortization
|
|
|
(515,482
|
)
|
|
|
(151,776
|
)
|
|
|
|
|
|
|
|
|
|
Intangible assets, net
|
|
$
|
5,238,056
|
|
|
$
|
5,601,762
|
|
Goodwill
and intangible assets arose from the acquisitions of NCFM in April 2019, CHM in May 2020, and MOD in October 2020. The NCFM medical database
is assumed to have an indefinite life and is not amortized and the website is being amortized on a straight-line basis over its estimated
useful life of five years. The CHM ACO physician contracts are assumed to have an indefinite life and are not amortized. The MOD 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 CHM and MOD.
HEALTHLYNKED CORP.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
JUNE 30, 2021
(UNAUDITED)
NOTE 7 – INTANGIBLE ASSETS AND GOODWILL
(CONTINUED)
Amortization
expense in the three months ended June 30, 2021 and 2020 was $178,944 and $2,045, respectively. Amortization expense in the six months
ended June 30, 2021 and 2020 was $363,706 and $4,089, respectively. No impairment charges were recognized related to goodwill and intangible
assets in the three or six months ended June 30, 2021 or 2020.
NOTE
8 – LEASES
The
Company has separate operating leases for office space related to its NWC, NCFM and BTG practices and two separate lease relating to
its corporate headquarters that expire in July 2023, May 2022, March 2023, November 2023 and November 2023, respectively. As of June
30, 2021, the Company’s weighted-average remaining lease term relating to its operating leases was 2.2 years, with a
weighted-average discount rate of 20.67%. The Company was also lessee in a capital equipment finance lease for medical equipment
entered into in March 2015 that expired in March 2020.
The table below summarizes the Company’s
lease-related assets and liabilities as of June 30, 2021 and December 31, 2020:
|
|
June 30,
|
|
|
December 31,
|
|
|
|
2021
|
|
|
2020
|
|
Lease assets
|
|
$
|
669,551
|
|
|
$
|
417,913
|
|
|
|
|
|
|
|
|
|
|
Lease liabilities
|
|
|
|
|
|
|
|
|
Lease liabilities (short term)
|
|
$
|
296,638
|
|
|
$
|
150,251
|
|
Lease liabilities (long term)
|
|
|
377,176
|
|
|
|
273,790
|
|
Total lease liabilities
|
|
$
|
673,814
|
|
|
$
|
424,041
|
|
Lease expense in the three and six months ended
June 30, 2021 and 2020 was as follow:
|
|
Three Months Ended
June 30,
|
|
|
Six Months Ended
June 30,
|
|
|
|
2021
|
|
|
2020
|
|
|
2021
|
|
|
2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating leases
|
|
$
|
76,855
|
|
|
$
|
90,682
|
|
|
$
|
142,366
|
|
|
$
|
181,365
|
|
Financing leases
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
4,587
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total lease expense
|
|
$
|
76,855
|
|
|
$
|
90,682
|
|
|
$
|
142,366
|
|
|
$
|
185,952
|
|
Maturities of operating lease liabilities were
as follows as of June 30, 2021:
2021 (July to December)
|
|
$
|
215,245
|
|
2022
|
|
|
383,619
|
|
2023
|
|
|
273,844
|
|
Total lease payments
|
|
|
872,708
|
|
Less interest
|
|
|
(198,894
|
)
|
Present value of lease liabilities
|
|
$
|
673,814
|
|
HEALTHLYNKED CORP.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
JUNE 30, 2021
(UNAUDITED)
NOTE 9 – CONTRACT LIABILITIES
Amounts related to contract liabilities as of
June 30, 2021 and December 31, 2020 were as follow:
|
|
June 30,
|
|
|
December 31,
|
|
|
|
2021
|
|
|
2020
|
|
|
|
|
|
|
|
|
Patient services paid but not provided
|
|
$
|
43,752
|
|
|
$
|
35,779
|
|
Consulting services paid but not provided
|
|
|
25,000
|
|
|
|
47,864
|
|
Unshipped products
|
|
|
2,095
|
|
|
|
5,782
|
|
|
|
$
|
70,847
|
|
|
$
|
89,425
|
|
Contract liabilities relates to contracted consulting
services at CHM for which payment has been made but services have not yet been rendered as of the measurement date, physical therapy services
purchased as a prepaid bundle for which services have not yet been provided, and MOD products that have been ordered and paid for by the
customer but which have not been shipped as of the measurement date. The Company typically satisfies its performance obligations related
to such contracts upon completion of service or shipment of product. Payment is typically made in the period prior to the services being
provided.
NOTE 10 – AMOUNTS DUE TO RELATED PARTY
AND RELATED PARTY TRANSACTIONS
Amounts due to related parties as of June 30,
2021 and December 31, 2020 were comprised of deferred compensation in the amount of $300,600.
Retired Notes Payable to Dr. Dent
Our founder and CEO, Dr. Michael Dent, made loans
to the Company from time to time in the form of unsecured promissory notes payable (the “Dent Notes”). The Dent Notes were
repaid in full during September 2020 and had no balance as of June 30, 2021 or December 31, 2020. Prior to repayment, the Dent Notes were
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 were $-0- and $62,570 during the three months ended June 30, 2021 and 2020, respectively,
and $-0- and $47,967 during the six months ended June 30, 2021 and 2020, respectively. No interest was accrued on the Dent Notes as of
June 30, 2020 or December 31, 2020. Interest expense on the Dent Notes was $-0- and $36,594 in the three months ended June 30, 2021 and
2020, respectively, and $-0- and $70,711 in the six months ended June 30, 2021 and 2020, respectively.
Other Amounts Due to Dr. Dent
On January 7, 2020, the Company entered into a
Merchant Cash Advance Factoring Agreement with a trust controlled by Dr. Dent, pursuant to which the Company received an advance of $149,000
(the “2020 MCA”). The Company was 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 was amortized over the life of the
instrument. The 2020 MCA was repaid in full and retired during July 2020. The Company made installment payments against the MCA of $-0-
and $72,114 during the three months ended June 30, 2021 and 2020, respectively, and $-0- and $151,441 during the six months ended June
30, 2021 and 2020, respectively. The Company recognized amortization of the discount in the amount of $-0- and $20,488, during the three
months ended June 30, 2021 and 2020, respectively, and $-0- and $38,500, during the six months ended June 30, 2021 and 2020, respectively.
HEALTHLYNKED CORP.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
JUNE 30, 2021
(UNAUDITED)
NOTE 11 – GOVERNMENT AND VENDOR NOTES
PAYABLE
Government and vendor notes payable as of June
30, 2021 and December 31, 2020 were comprised of the following:
|
|
June 30,
|
|
|
December 31,
|
|
|
|
2021
|
|
|
2020
|
|
|
|
|
|
|
|
|
PPP loans
|
|
$
|
---
|
|
|
$
|
632,826
|
|
Disaster relief loans
|
|
|
450,000
|
|
|
|
450,000
|
|
Vendor note
|
|
|
---
|
|
|
|
51,109
|
|
Total government and vendor notes payable
|
|
|
450,000
|
|
|
|
1,133,935
|
|
Less: long term portion
|
|
|
(450,000
|
)
|
|
|
(722,508
|
)
|
Government and vendor notes payable, current portion
|
|
$
|
---
|
|
|
$
|
411,427
|
|
During May and June 2020, the Company and certain
of its subsidiaries received an aggregate of $621,069 in loans under the PPP. The Company also acquired a PPP loan in the MOD acquisition
with an inception date of April 3, 2020 and a face value of $11,757. The PPP loans, administered by SBA, were issued under the Coronavirus
Aid, Relief, and Economic Security Act, also known as the CARES Act. The loans bore interest at 1% per annum and were scheduled to mature
in May and June 2022. Principal and interest payments were 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 entirety of the PPP loans outstanding, comprised of $632,826
principal and $6,503 accrued interest, was forgiven in May 2021. As a result of the forgiveness, the Company recognized a gain on extinguishment of debt in the amount of $632,826 and interest income of $6,503 during the three and six months ended
June 30, 2021.
During June, July and August 2020, the
Company and its subsidiaries received an aggregate of $450,000 in Disaster Relief Loans from the SBA. The loans bear interest at
3.75% per annum and mature 30 years from issuance. Mandatory principal and interest payments were originally scheduled to begin 12
months from the inception date of each loan, but were extended by the SBA until 24 months from the inception date.
In connection with the October 19, 2020 of MOD,
the Company acquired a note payable to MOD’s primary product vendor with a remaining principal balance of $79,002 as of the acquisition
date. The vendor note was paid in full during the first quarter of 2021.
Interest accrued on SBA Disaster Relief loans
payable as of June 30, 2021 and December 31, 2020 was $16,259 and $12,240, respectively. Interest expense on the loans was $4,207 and
$861 for the three months ended June 30, 2021 and 2020, respectively, and $8,368 and $861 for the six months ended June 30, 2021 and 2020,
respectively.
NOTE 12 – CONVERTIBLE NOTES PAYABLE
Convertible notes payable as of June 30, 2021 and December 31, 2020
were comprised of the following:
|
|
June 30,
|
|
|
December 31,
|
|
|
|
2021
|
|
|
2020
|
|
|
|
|
|
|
|
|
$550k Note - July 2016
|
|
$
|
---
|
|
|
$
|
719,790
|
|
$50k Note - July 2016
|
|
|
---
|
|
|
|
71,611
|
|
$111k Note - May 2017
|
|
|
---
|
|
|
|
120,659
|
|
$357.5k Note - April 2019
|
|
|
---
|
|
|
|
424,290
|
|
|
|
|
---
|
|
|
|
1,336,350
|
|
Less: unamortized discount
|
|
|
---
|
|
|
|
---
|
|
Convertible notes payable, net of original issue discount and debt discount
|
|
$
|
---
|
|
|
$
|
1,336,350
|
|
HEALTHLYNKED CORP.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
JUNE 30, 2021
(UNAUDITED)
NOTE 12 – CONVERTIBLE NOTES PAYABLE (CONTINUED)
Amortization of debt discount recognized on
each convertible note outstanding during the three and six months ended June 30, 2021 and 2020 are shown in the following table.
There were no unamortized discounts as of June 30, 2021 or December 31, 2020 related to convertible notes payable.
|
|
Three Months Ended
June 30,
|
|
|
Six Months Ended
June 30,
|
|
|
|
2021
|
|
|
2020
|
|
|
2021
|
|
|
2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$154k Note - June 2019
|
|
$
|
---
|
|
|
$
|
---
|
|
|
$
|
---
|
|
|
$
|
1,093
|
|
$67.9k Note - July 2019
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
7,252
|
|
$67.9k Note II - July 2019
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
2,813
|
|
$78k Note III - July 2019
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
6,208
|
|
$230k Note - July 2019
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
58,527
|
|
$108.9k Note - August 2019
|
|
|
---
|
|
|
|
78
|
|
|
|
---
|
|
|
|
21,038
|
|
$142.5k Note - October 2019
|
|
|
---
|
|
|
|
35,430
|
|
|
|
---
|
|
|
|
70,861
|
|
$103k Note V - October 2019
|
|
|
---
|
|
|
|
930
|
|
|
|
---
|
|
|
|
29,143
|
|
$108.9k Note II - October 2019
|
|
|
---
|
|
|
|
11,475
|
|
|
|
---
|
|
|
|
33,205
|
|
$128.5k Note - October 2019
|
|
|
---
|
|
|
|
19,755
|
|
|
|
---
|
|
|
|
51,705
|
|
$103k Note VI - November 2019
|
|
|
---
|
|
|
|
10,730
|
|
|
|
---
|
|
|
|
39,450
|
|
$78.8k Note II - December 2019
|
|
|
---
|
|
|
|
11,194
|
|
|
|
---
|
|
|
|
27,111
|
|
$131.3k Note - January 2020
|
|
|
---
|
|
|
|
8,103
|
|
|
|
---
|
|
|
|
15,048
|
|
$78k Note IV - January 2020
|
|
|
---
|
|
|
|
7,317
|
|
|
|
---
|
|
|
|
13,347
|
|
$157.5k Note - March 2020
|
|
|
---
|
|
|
|
10,248
|
|
|
|
---
|
|
|
|
12,610
|
|
$157.5k Note II - April 2020
|
|
|
---
|
|
|
|
12,308
|
|
|
|
---
|
|
|
|
12,308
|
|
$135k Note - April 2020
|
|
|
---
|
|
|
|
9,974
|
|
|
|
---
|
|
|
|
9,974
|
|
$83k Note II - April 2020
|
|
|
---
|
|
|
|
7,092
|
|
|
|
---
|
|
|
|
7,092
|
|
$128k Note - April 2020
|
|
|
---
|
|
|
|
7,829
|
|
|
|
---
|
|
|
|
7,829
|
|
|
|
$
|
---
|
|
|
$
|
152,463
|
|
|
$
|
---
|
|
|
$
|
426,614
|
|
HEALTHLYNKED CORP.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
JUNE 30, 2021
(UNAUDITED)
NOTE 12 – CONVERTIBLE NOTES PAYABLE (CONTINUED)
Interest expense recognized on each convertible
note outstanding during the three and six months ended June 30, 2021 and 2020 were as follows:
|
|
Three Months Ended
June 30,
|
|
|
Six Months Ended
June 30,
|
|
|
|
2021
|
|
|
2020
|
|
|
2021
|
|
|
2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$550k Note - July 2016
|
|
$
|
---
|
|
|
$
|
8,227
|
|
|
$
|
2,351
|
|
|
$
|
16,455
|
|
$50k Note - July 2016
|
|
|
---
|
|
|
|
1,247
|
|
|
|
219
|
|
|
|
2,493
|
|
$111k Note - May 2017
|
|
|
---
|
|
|
|
2,019
|
|
|
|
333
|
|
|
|
6,714
|
|
$357.5k Note - April 2019
|
|
|
---
|
|
|
|
8,913
|
|
|
|
1,469
|
|
|
|
9,742
|
|
$154k Note - June 2019
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
46
|
|
$67.9k Note - July 2019
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
707
|
|
$67.9k Note II - July 2019
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
177
|
|
$78k Note III - July 2019
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
492
|
|
$230k Note - July 2019
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
3,041
|
|
$108.9k Note - August 2019
|
|
|
---
|
|
|
|
19
|
|
|
|
---
|
|
|
|
2,564
|
|
$142.5k Note - October 2019
|
|
|
---
|
|
|
|
3,553
|
|
|
|
---
|
|
|
|
9,291
|
|
$103k Note V - October 2019
|
|
|
---
|
|
|
|
85
|
|
|
|
---
|
|
|
|
2,653
|
|
$108.9k Note II - October 2019
|
|
|
---
|
|
|
|
1,254
|
|
|
|
---
|
|
|
|
3,970
|
|
$128.5k Note - October 2019
|
|
|
---
|
|
|
|
1,946
|
|
|
|
---
|
|
|
|
5,149
|
|
$103k Note VI - November 2019
|
|
|
---
|
|
|
|
959
|
|
|
|
---
|
|
|
|
3,527
|
|
$78.8k Note II - December 2019
|
|
|
---
|
|
|
|
1,381
|
|
|
|
---
|
|
|
|
3,344
|
|
$131.3k Note - January 2020
|
|
|
---
|
|
|
|
3,272
|
|
|
|
---
|
|
|
|
6,077
|
|
$78k Note IV - January 2020
|
|
|
---
|
|
|
|
1,945
|
|
|
|
---
|
|
|
|
3,547
|
|
$157.5k Note - March 2020
|
|
|
---
|
|
|
|
3,927
|
|
|
|
---
|
|
|
|
4,833
|
|
$157.5k Note II - April 2020
|
|
|
---
|
|
|
|
3,840
|
|
|
|
---
|
|
|
|
3,840
|
|
$135k Note - April 2020
|
|
|
---
|
|
|
|
3,144
|
|
|
|
---
|
|
|
|
3,144
|
|
$83k Note II - April 2020
|
|
|
---
|
|
|
|
1,933
|
|
|
|
---
|
|
|
|
1,933
|
|
$128k Note - April 2020
|
|
|
---
|
|
|
|
2,139
|
|
|
|
---
|
|
|
|
2,139
|
|
|
|
$
|
---
|
|
|
$
|
49,803
|
|
|
$
|
4,372
|
|
|
$
|
95,878
|
|
HEALTHLYNKED CORP.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
JUNE 30, 2021
(UNAUDITED)
NOTE 12 – CONVERTIBLE NOTES PAYABLE (CONTINUED)
Certain of the Company’s 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 and six months ended June 30, 2021 and 2020
and the fair value as of such instruments as of June 30, 2021 and December 31, 2020 were as follows:
|
|
Change in Fair Value of Debt
|
|
|
Fair Value of Debt as of
|
|
|
|
Three Months Ended
June 30,
|
|
|
Six
Months Ended
June 30,
|
|
|
June 30,
|
|
|
December 31,
|
|
|
|
2021
|
|
|
2020
|
|
|
2021
|
|
|
2020
|
|
|
2021
|
|
|
2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$550k Note - July 2016
|
|
$
|
---
|
|
|
$
|
46,090
|
|
|
$
|
10,344
|
|
|
$
|
35,333
|
|
|
$
|
---
|
|
|
$
|
719,790
|
|
$50k Note - July 2016
|
|
|
---
|
|
|
|
4,783
|
|
|
|
1,017
|
|
|
|
3,667
|
|
|
|
---
|
|
|
|
71,611
|
|
$111k Note - May 2017
|
|
|
---
|
|
|
|
14,577
|
|
|
|
1,706
|
|
|
|
11,541
|
|
|
|
---
|
|
|
|
120,659
|
|
$357.5k Note - April 2019
|
|
|
---
|
|
|
|
27,647
|
|
|
|
6,179
|
|
|
|
21,194
|
|
|
|
---
|
|
|
|
424,290
|
|
|
|
$
|
---
|
|
|
$
|
93,097
|
|
|
$
|
19,246
|
|
|
$
|
71,735
|
|
|
$
|
---
|
|
|
$
|
1,336,350
|
|
Extension and Conversion – January 2021
On January 6, 2021, the holder of the Company’s
four remaining fixed rate convertible promissory notes with a face value of $1,038,500 – comprised of a $550,000 6% fixed convertible
secured promissory note dated July 7, 2016 (the “$550k Note”), a $50,000 10% fixed convertible commitment fee promissory note
dated July 7, 2016 (the “$50k Note”), $81,000 of principal remaining on a $111,000 10% fixed convertible secured promissory
note dated May 22, 2017 (the “$111k Note”), and a $357,500 10% fixed convertible note dated April 15, 2019 (the “$357.5k
Note” and together with the $550k Note, the $50k Note and the $111k Note, the “Remaining Notes”) – agreed to extend
the maturity date on the Remaining Notes to January 14, 2021. In exchange for the extension, the Company agreed to extend the expiration
date of 3,508,333 existing warrants held by the holder (the “Extended Warrants”) from dates between July 2021 and March 2022
until March 2023. Because the fair value of consideration issued was greater than 10% of the present value of the remaining cash flows
under the modified Remaining Notes, the transaction was treated as a debt extinguishment and reissuance of new debt instruments pursuant
to the guidance of ASC 470-50. A loss on debt extinguishment was recorded in the amount of $126,502 in the six months ended June 30, 2021,
equal to the incremental fair value of the Extended Warrants before and after the modification.
On January 14, 2021, the Company and the holder
of the Remaining Notes entered into a series of agreements pursuant to which (i) the holder agreed to convert the full face value of $1,038,500
and $317,096 of accrued interest on the Remaining Notes into 13,538,494 shares of common stock pursuant to the original conversion terms
of the underlying notes, (ii) the holder agreed to a 180-day leak out provision, whereby, from and after January 14, 2021, it may not
sell in shares of the Company’s common stock in excess of 5% of the Company’s daily trading volume for the first 90 days and
10% of the Company’s daily volume for the next 90 days, subject to certain exceptions, (iii) the holder agreed to release all security
interests and share reserves related to the Remaining Notes, and (iv) the Company issued to the holder a new five-year warrant to purchase
13,538,494 shares of common stock at an exercise price of $0.30 per share. In connection with the conversion, the Company recognized a
loss on debt extinguishment of $5,463,592 in the six months ended June 30, 2021, representing the excess of the fair value of the shares
and warrant issued at conversion over the carrying value of the host instrument and accrued interest.
Convertible Note Payable ($550,000) –
July 2016
On July 7, 2016, the Company entered into a 6%
fixed convertible secured promissory note with an investor with a face value of $550,000. The $550k Note and related interest was convertible
into shares of common stock at the discretion of the note holder at a fixed price of $0.08 per share of the Company’s common shares
and was secured by all of the Company’s assets. The $550k Note was scheduled to mature on January 14, 2021. The $550k Note was carried
at fair value due to an extinguishment and reissuance recorded in 2017 and was revalued at each period end, with changes to fair value
recorded to the statement of operations under “Change in Fair Value of Debt.” The holder converted the full principal of $550,000,
plus $180,129 of accrued interest, into 9,126,610 shares of common stock on January 14, 2021.
HEALTHLYNKED CORP.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
JUNE 30, 2021
(UNAUDITED)
NOTE 12 – CONVERTIBLE NOTES PAYABLE (CONTINUED)
Convertible Note Payable ($50,000) –
July 2016
On July 7, 2016, the Company entered into a 10%
fixed convertible commitment fee promissory note with an investor with a face value of $50,000. The $50k Note was scheduled to mature
on January 14, 2021. The $50k note was issued as a commitment fee payable to the Investment Agreement investor in exchange for the investor’s
commitment to enter into the Investment Agreement, subject to registration of the shares underlying the Investment Agreement. The $50k
Note and related interest was convertible into shares of common stock at the discretion of the note holder at a fixed price of $0.10 per
share. The $50k Note was carried at fair value due to an extinguishment and reissuance recorded in 2017 and is revalued at each period
end, with changes to fair value recorded to the statement of operations under “Change in Fair Value of Debt.” The holder converted
the full principal of $50,000 plus $22,630 of accrued interest into 726,302 shares of common stock on January 14, 2021.
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 and related interest was convertible
into shares of common stock at the discretion of the note holder at a fixed price of $0.15 per share and was 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 common stock at an exercise price of $0.75 per share. The $111k Note
was scheduled to mature on January 14, 2021. On February 6, 2020, the holder of the $111k Note converted $30,000 principal on the note
into 448,029 shares of common stock. In connection with the conversion, the Company recognized a loss on debt extinguishment of $25,394
in the six months ended June 30, 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. The holder converted the remaining principal
of $81,000 plus $180,129 of accrued interest into 815,787 shares of common stock on January 14, 2021.
Convertible Note Payable ($357,500) –
April 2019
On April 15, 2019, the Company issued a fixed
convertible note with a face value of $357,500 (the “$357.5k Note”). The $357.5k Note had an interest rate of 10%, matures
on December 31, 2020, and was convertible into common stock by the holder at any time, subject to a 9.99% beneficial ownership limitation,
at a fixed conversion price per share of $0.15, or 2,383,333 shares. The holder converted the full principal of $357,500 plus $72,969
of accrued interest into 2,869,795 shares on January 14, 2021.
Convertible Note Payable ($154,000) –
June 2019
On June 3, 2019, the Company issued a $154,000
convertible note (the “$154k Note”). On January 8, 2020, the holder converted the remaining unpaid principal balance of $50,000
and accrued interest of $8,572 into 968,390 shares of common stock. In connection with the conversion, the Company recognized a loss on
debt extinguishment of $125,865 in the six months ended June 30, 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 January and February 2020, the holder converted the full principal of $67,925
and accrued interest of $3,926 into 885,847 shares of common stock. In connection with the conversion, the Company recognized a loss on
debt extinguishment of $55,117 in the six months ended June 30, 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”). On January 14, 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 six months ended June 30, 2020, equal to the excess of the payment amount over the carrying value
of the note, derivative embedded conversion feature and accrued interest.
HEALTHLYNKED CORP.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
JUNE 30, 2021
(UNAUDITED)
NOTE 12 – CONVERTIBLE NOTES PAYABLE (CONTINUED)
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 six months ended June 30, 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 six months ended June 30, 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 six months ended June 30, 2020, the holder converted $80,000
of principal and $4,373 of accrued interest on the note into 1,236,668 shares of 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 six months ended June 30,
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.
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 March 2020, the holder converted principal of $75,000 and
accrued interest of $6,335 into 1,779,322 shares of common stock. In connection with the conversion, the Company recognized a loss on
debt extinguishment of $90,732 in the six months ended June 30, 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 ($103,000) –
October 2019
On October 1, 2019, the Company issued a $103,000
convertible note (the “$103k Note V”). On April 3, 2020, 2020, the Company prepaid the balance on the $103k Note V, including
accrued interest, for a one-time cash payment of $135,205. In connection with the repayment, the Company recognized a loss on debt extinguishment
of $43,777 in the six months ended June 30, 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 ($108,947) –
October 2019
On October 30, 2019, the Company issued a convertible
note with a face value of $108,947 (the “$108.9k Note II”). During May and June 2020, the holder converted the full principal
of $108,947 and accrued interest of $5,821 into 1,954,870 shares of Company common stock. In connection with the conversions, the Company
recognized a loss on debt extinguishment of $76,895 in the six months ended June 30, 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 ($128,500) –
October 2019
On October 30, 2019, the Company issued a $128,500
convertible note (the “$128.5k Note”). During May and June 2020, the holder converted the full principal of $128,500 and accrued
interest of $8,832 into 3,197,877 shares of Company common stock. In connection with the conversion, the Company recognized a loss on
debt extinguishment of $154,248 in the six months ended June 30, 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 ($103,000) –
November 2019
On November 4, 2019, the Company issued a $103,000
convertible note (the “$103k Note VI”). 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. In connection with the repayment, the Company recognized a loss on debt extinguishment
of $45,077 in the six months ended June 30, 2020, equal to the excess of the payment amount over the carrying value of the note, derivative
embedded conversion feature and accrued interest.
HEALTHLYNKED CORP.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
JUNE 30, 2021
(UNAUDITED)
NOTE 12 – CONVERTIBLE NOTES PAYABLE (CONTINUED)
Convertible Note Payable ($78,750) –
December 2019
On December 2, 2019, the Company issued a $78,750
convertible note (the “$78.8k Note”). On June 3, 2020, the Company prepaid the balance on the $78.8k Note, including accrued
interest, for a one-time cash payment of $103,359. In connection with the repayment, the Company recognized a loss on debt extinguishment
of $37,554 in the six months ended June 30, 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 ($131,250) –
January 2020
On January 13, 2020, the Company issued a $131,250
convertible note (the “$131.3k Note”). On July 13, 2020, the Company prepaid the balance on the $131.3k Note, including accrued
interest, for a one-time cash payment of $172,108.
Convertible Note Payable ($78,000) –
January 2020
On January 16, 2020, the Company issued a $78,000
convertible note (the “$78k Note IV”). On July 20, 2020, the Company prepaid the balance on the $78k Note IV, including accrued
interest, for a one-time cash payment of $102,308.
Convertible Note Payable ($157,500) –
March 2020
On March 10, 2020, the Company issued a $157,500
convertible note (the “$157.5k Note”). On September 4, 2020, the Company prepaid the balance on the $157.5k Note, including
accrued interest, for a one-time cash payment of $206,314.
NOTE 13 – DERIVATIVE FINANCIAL INSTRUMENTS
Derivative financial instruments are comprised
of the fair value of embedded conversion features (“ECFs”) in convertible promissory notes for which the conversion rate is
not fixed, but instead is adjusted based on a discount to the market price of the Company’s common stock. The fair market value
of the 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.” 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 and six months ended June 30, 2021 and 2020 include the following:
|
|
Three Months Ended
June 30,
|
|
|
Six Months Ended
June 30,
|
|
|
|
2021
|
|
|
2020
|
|
|
2021
|
|
|
2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, beginning of period
|
|
$
|
---
|
|
|
$
|
219,938
|
|
|
$
|
---
|
|
|
$
|
991,288
|
|
Inception of derivative financial instruments
|
|
|
---
|
|
|
|
138,608
|
|
|
|
---
|
|
|
|
211,498
|
|
Change in fair value of derivative financial instruments
|
|
|
---
|
|
|
|
13,672
|
|
|
|
---
|
|
|
|
(726,683
|
)
|
Conversion or extinguishment of derivative financial instruments
|
|
|
---
|
|
|
|
(114,834
|
)
|
|
|
---
|
|
|
|
(218,719
|
)
|
Balance, end of period
|
|
$
|
---
|
|
|
$
|
257,384
|
|
|
$
|
---
|
|
|
$
|
257,384
|
|
HEALTHLYNKED CORP.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
JUNE 30, 2021
(UNAUDITED)
NOTE 13 – DERIVATIVE FINANCIAL INSTRUMENTS
(CONTINUED)
Fair market value of the derivative financial
instruments was measured using the following assumptions:
|
|
Six Months Ended
June 30,
|
|
|
|
2021
|
|
|
2020
|
|
|
|
|
|
|
|
|
Pricing model utilized
|
|
|
Binomial Lattice
|
|
|
|
Binomial Lattice
|
|
Risk free rate range
|
|
|
---
|
|
|
|
0.05% to 1.61%
|
|
Expected life range (in years)
|
|
|
---
|
|
|
|
0.14 to 1.00
|
|
Volatility range
|
|
|
---
|
|
|
|
117.48% to 134.20%
|
|
Dividend yield
|
|
|
---
|
|
|
|
0.00%
|
|
In addition, specific assumptions regarding investor
exercise behavior were used in the above periods, 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 2020, the Company retired all convertible
notes for which the conversion rate was adjusted based on a discount to the market price of the Company’s common stock, which gave
rise to ECF-related derivative financial instruments. Accordingly, the Company had no further derivative financial instruments outstanding
as of June 30, 2021 or December 31, 2020.
NOTE 14 – SHAREHOLDERS’ EQUITY
Private Placements
During the six months ended June 30, 2021, the
Company sold 12,161,943 shares of common stock in 52 separate private placement transactions. The Company received $3,748,725 in proceeds
from the sales. In connection with the stock sales, the Company also issued 6,081,527 five-year warrants to purchase shares of common
stock at exercise prices between $0.27 and $1.05 per share.
During the six months ended June 30, 2020, the
Company sold 4,303,427 shares of common stock in 12 separate private placement transactions and received $478,500 in proceeds from the
sales. In connection with the stock sales, the Company also issued 1,926,725 five-year warrants to purchase shares of common stock at
exercise price between $0.16 and $0.24 per share.
Investment Agreement Draws
During six months ended June 30, 2021 and 2020,
the Company issued 3,006,098 and 3,298,975 common shares, respectively, pursuant to draws made by the Company under the Investment Agreement
and received an aggregate of $900,636 and $266,190, respectively, in net proceeds from the draws.
Shares issued to Consultants
During the six months ended June 30, 2021
and 2020, the Company issued 623,802 and 111,110 common shares, respectively, to consultants for services rendered. In connection
with the issuances, the Company recognized expenses totaling $131,828 and $18,000 in the six months ended June 30, 2021 and 2020,
respectively.
HEALTHLYNKED CORP.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
JUNE 30, 2021
(UNAUDITED)
NOTE 14 – SHAREHOLDERS’ EQUITY
(CONTINUED)
Common Stock Issuable
As of June 30, 2021 and December 31, 2020, the
Company was obligated to issue the following shares:
|
|
June 30, 2021
|
|
|
December 31, 2020
|
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares issuable to consultants, employees and directors
|
|
$
|
407,833
|
|
|
|
2,836,896
|
|
|
$
|
262,273
|
|
|
|
2,150,020
|
|
Stock Warrants
Transactions involving our stock warrants during
the six months ended June 30, 2021 and 2020 are summarized as follows:
|
|
2021
|
|
|
2020
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
Exercise
|
|
|
|
|
|
Exercise
|
|
|
|
Number
|
|
|
Price
|
|
|
Number
|
|
|
Price
|
|
Outstanding at beginning of the period
|
|
|
51,352,986
|
|
|
$
|
0.14
|
|
|
|
47,056,293
|
|
|
$
|
0.18
|
|
Granted during the period
|
|
|
19,772,878
|
|
|
$
|
0.35
|
|
|
|
2,151,725
|
|
|
$
|
0.21
|
|
Exercised during the period
|
|
|
(13,046,742
|
)
|
|
$
|
(0.05
|
)
|
|
|
---
|
|
|
$
|
---
|
|
Outstanding at end of the period
|
|
|
58,079,122
|
|
|
$
|
0.23
|
|
|
|
49,208,018
|
|
|
$
|
0.18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable at end of the period
|
|
|
58,079,122
|
|
|
$
|
0.23
|
|
|
|
49,208,018
|
|
|
$
|
0.18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average remaining life
|
|
|
3.6 years
|
|
|
|
3.6 years
|
|
The following table summarizes information about
the Company’s stock warrants outstanding as of June 30, 2021:
|
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
|
|
|
|
15,067,351
|
|
|
|
3.4
|
|
|
$
|
0.07
|
|
|
|
15,067,351
|
|
|
$
|
0.07
|
|
|
$
|
0.10 to 0.24
|
|
|
|
9,699,499
|
|
|
|
3.1
|
|
|
$
|
0.16
|
|
|
|
9,699,499
|
|
|
$
|
0.16
|
|
|
$
|
0.25 to 0.49
|
|
|
|
28,560,496
|
|
|
|
4.1
|
|
|
$
|
0.31
|
|
|
|
28,560,496
|
|
|
$
|
0.31
|
|
|
$
|
0.50 to 1.00
|
|
|
|
4,751,776
|
|
|
|
2.1
|
|
|
$
|
0.36
|
|
|
|
4,751,776
|
|
|
$
|
0.36
|
|
|
$
|
0.05 to 1.00
|
|
|
|
58,079,122
|
|
|
|
3.6
|
|
|
$
|
0.23
|
|
|
|
58,079,122
|
|
|
$
|
0.23
|
|
HEALTHLYNKED CORP.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
JUNE 30, 2021
(UNAUDITED)
NOTE 14 – SHAREHOLDERS’ EQUITY
(CONTINUED)
During the six months ended June 30, 2021 and
2020, the Company issued 19,772,878 and 2,151,725 warrants, respectively, the aggregate grant date fair value of which was $4,617,335
and $144,234, respectively. The fair value of the warrants was calculated using the following range of assumptions:
|
|
Six Months Ended June 30,
|
|
|
|
2021
|
|
|
2020
|
|
|
|
|
|
|
|
|
Pricing model utilized
|
|
|
Binomial Lattice
|
|
|
|
Binomial Lattice
|
|
Risk free rate range
|
|
|
0.38% to 0.97%
|
|
|
|
0.30% to 1.59%
|
|
Expected life range (in years)
|
|
|
3.00 to 5.00 years
|
|
|
|
5.00 years
|
|
Volatility range
|
|
|
170.58% to 193.21%
|
|
|
|
119.69% to 132.19%
|
|
Dividend yield
|
|
|
0.00
|
%
|
|
|
0.00
|
%
|
In addition, specific assumptions regarding investor
exercise behavior were used in the above periods, including probability assumptions related to estimated exercise behavior.
During the six months ended June 30, 2021,
the Company received $277,500 upon the exercise of 2,475,000 warrants with exercise prices between $0.10 and $0.252. Additionally,
the Company issued 9,047,332 shares upon cashless exercise of 10,571,742 warrant shares exercised using a cashless exercise feature
in settlement of litigation and other disputes amounts totaling $614,221 that had been accrued in 2020. There were no warrants
exercised during the six months ended June 30, 2020.
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 common 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 six months ended June 30, 2021 and 2020:
|
|
2021
|
|
|
2020
|
|
Outstanding at beginning of the period
|
|
|
2,603,528
|
|
|
|
1,874,063
|
|
Granted during the period
|
|
|
940,047
|
|
|
|
232,500
|
|
Forfeited during the period
|
|
|
(52,500
|
)
|
|
|
(62,500
|
)
|
Outstanding at end of the period
|
|
|
3,491,075
|
|
|
|
2,044,063
|
|
|
|
|
|
|
|
|
|
|
Shares vested at period-end
|
|
|
3,326,075
|
|
|
|
1,744,063
|
|
Weighted average grant date fair value of shares granted during the period
|
|
$
|
0.27
|
|
|
$
|
0.10
|
|
Aggregate grant date fair value of shares granted during the period
|
|
$
|
4,050
|
|
|
$
|
18,760
|
|
Shares available for grant pursuant to EIP at period-end
|
|
|
8,998,855
|
|
|
|
10,230,368
|
|
Total stock-based compensation recognized
for employee grants under the EIP was $76,195 and $12,456 during the three months ended June 30, 2021 and 2020, respectively, and
$89,016 and $30,153 during the six months ended June 30, 2021 and 2020, respectively. Total unrecognized stock compensation related
to these grants was $15,312 as of June 30, 2021.
HEALTHLYNKED CORP.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
JUNE 30, 2021
(UNAUDITED)
NOTE 14 – SHAREHOLDERS’ EQUITY
(CONTINUED)
A summary of the status of nonvested shares issued
pursuant to the EIP as of and for the six months ended June 30, 2021 and 2020 is presented below:
|
|
2021
|
|
|
2020
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
Grant Date
|
|
|
|
|
|
Grant Date
|
|
|
|
Shares
|
|
|
Fair Value
|
|
|
Shares
|
|
|
Fair Value
|
|
Nonvested at beginning of period
|
|
|
200,000
|
|
|
$
|
0.17
|
|
|
|
332,500
|
|
|
$
|
0.17
|
|
Granted
|
|
|
940,047
|
|
|
$
|
0.27
|
|
|
|
232,500
|
|
|
$
|
0.10
|
|
Vested
|
|
|
(925,047
|
)
|
|
$
|
(0.27
|
)
|
|
|
(177,500
|
)
|
|
$
|
(0.08
|
)
|
Forfeited
|
|
|
(50,000
|
)
|
|
$
|
(0.10
|
)
|
|
|
(87,500
|
)
|
|
$
|
(0.06
|
)
|
Nonvested at end of period
|
|
|
165,000
|
|
|
$
|
0.22
|
|
|
|
300,000
|
|
|
$
|
0.20
|
|
During the six months ended June 30, 2021 and 2020, the Company issued
1,115,357 and 295,527 shares under the EIP pursuant to the grants and vesting described in the tables above, respectively, of which 308,853
and 295,527, respectively were issued to employees and 806,504 and -0-, respectively, were issued to directors.
Employee Stock Options
The following table summarizes the status of options
outstanding as of and for the six months ended June 30, 2021 and 2020:
|
|
2021
|
|
|
2020
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
Exercise
|
|
|
|
|
|
Exercise
|
|
|
|
Number
|
|
|
Price
|
|
|
Number
|
|
|
Price
|
|
Outstanding at beginning of the period
|
|
|
3,111,750
|
|
|
$
|
0.20
|
|
|
|
3,269,250
|
|
|
$
|
0.21
|
|
Granted during the period
|
|
|
80,000
|
|
|
$
|
0.75
|
|
|
|
40,000
|
|
|
$
|
0.10
|
|
Exercised during the period
|
|
|
(145,500
|
)
|
|
$
|
(0.11
|
)
|
|
|
---
|
|
|
$
|
---
|
|
Forfeited during the period
|
|
|
(32,500
|
)
|
|
$
|
(0.16
|
)
|
|
|
(80,000
|
)
|
|
$
|
(0.26
|
)
|
Outstanding at end of the period
|
|
|
3,013,750
|
|
|
$
|
0.22
|
|
|
|
3,229,250
|
|
|
$
|
0.20
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options exercisable at period-end
|
|
|
2,173,750
|
|
|
|
|
|
|
|
1,974,875
|
|
|
|
|
|
Weighted average remaining life (in years)
|
|
|
6.5
|
|
|
|
|
|
|
|
7.2
|
|
|
|
|
|
Weighted average grant date fair value of options granted during the period
|
|
$
|
---
|
|
|
|
|
|
|
$
|
0.08
|
|
|
|
|
|
Options available for grant at period-end
|
|
|
8,998,855
|
|
|
|
|
|
|
|
10,255,368
|
|
|
|
|
|
The following table summarizes information about
the Company’s stock options outstanding as of June 30, 2021:
|
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 0.25
|
|
|
|
1,652,500
|
|
|
|
5.9
|
|
|
$
|
0.13
|
|
|
|
1,381,250
|
|
|
|
0.11
|
|
|
$
|
0.25 to 0.50
|
|
|
|
1,281,250
|
|
|
|
7.1
|
|
|
$
|
0.30
|
|
|
|
762,500
|
|
|
|
0.30
|
|
|
$
|
0.51 to 0.77
|
|
|
|
80,000
|
|
|
|
9.7
|
|
|
$
|
0.75
|
|
|
|
30,000
|
|
|
|
0.75
|
|
|
$
|
0.08 to 0.31
|
|
|
|
3,013,750
|
|
|
|
6.5
|
|
|
$
|
0.22
|
|
|
|
2,173,750
|
|
|
$
|
0.19
|
|
HEALTHLYNKED CORP.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
JUNE 30, 2021
(UNAUDITED)
NOTE 14 – SHAREHOLDERS’ EQUITY
(CONTINUED)
Total stock-based compensation recognized related
to option grants was $36,355 and $20,971 during the three months ended June 30, 2021 and 2020, respectively, and $54,689 and $41,850 during
the six months ended June 30, 2021 and 2020, respectively.
A summary of the status of nonvested options issued
pursuant to the EIP as of and for the six months ended June 30, 2021 and 2020 is presented below:
|
|
2021
|
|
|
2020
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
Grant Date
|
|
|
|
|
|
Grant Date
|
|
|
|
Shares
|
|
|
Fair Value
|
|
|
Shares
|
|
|
Fair Value
|
|
Nonvested at beginning of period
|
|
|
1,044,375
|
|
|
$
|
0.21
|
|
|
|
1,636,250
|
|
|
$
|
0.22
|
|
Granted
|
|
|
80,000
|
|
|
$
|
0.62
|
|
|
|
40,000
|
|
|
$
|
0.08
|
|
Vested
|
|
|
(255,000
|
)
|
|
$
|
(0.25
|
)
|
|
|
(341,875
|
)
|
|
$
|
(0.20
|
)
|
Forfeited
|
|
|
(29,375
|
)
|
|
$
|
(0.12
|
)
|
|
|
(80,000
|
)
|
|
$
|
(0.21
|
)
|
Nonvested at end of period
|
|
|
840,000
|
|
|
$
|
0.24
|
|
|
|
1,254,375
|
|
|
$
|
0.22
|
|
NOTE 15 – CONTINGENT ACQUISITION CONSIDERATION
Contingent acquisition consideration as of June 30, 2021 and December
31, 2020 was comprised of the following:
|
|
June 30,
|
|
|
December 31,
|
|
|
|
2021
|
|
|
2020
|
|
|
|
|
|
|
|
|
Fair value of HCFM contingent acquisition consideration
|
|
$
|
154,689
|
|
|
$
|
301,236
|
|
Fair value of CHM contingent acquisition consideration
|
|
|
621,358
|
|
|
|
682,661
|
|
Fair value of MOD contingent acquisition consideration
|
|
|
889,482
|
|
|
|
516,543
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,665,529
|
|
|
$
|
1,500,440
|
|
Contingent acquisition consideration relates to
future earn-out payments potentially payable related to the Company’s acquisitions of HCFM, CHM and MOD. The terms of the earn-outs
related to each acquisition require the Company to pay the former owners additional acquisition consideration for the achievement of prescribed
revenue and/or earnings targets for performance of the underlying business for up to four years after the respective acquisition date.
Contingent acquisition consideration for each entity is recorded at fair value 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 contingent acquisition consideration.” Gain (loss)
from the change in fair value of contingent acquisition consideration was $274,611 and ($38,688) during the three months ended June 30,
2021 and 2020, respectively, and ($361,089) and ($45,309) during the six months ended June 30, 2021 and 2020, respectively.
Maturities of contingent acquisition consideration were as follows
as of June 30, 2021:
2021 (July to December)
|
|
$
|
389,190
|
|
2022
|
|
|
336,838
|
|
2023
|
|
|
468,997
|
|
2024
|
|
|
470,504
|
|
|
|
$
|
1,665,529
|
|
HEALTHLYNKED CORP.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
JUNE 30, 2021
(UNAUDITED)
NOTE 16 – COMMITMENTS AND CONTINGENCIES
Contracts Related to Medicare Shared Savings
Revenue
The Company acquired CHM and its subsidiary AHP
on May 18, 2020. CHM and AHP combine to operate an ACO under the terms of the MSSP as administered by the CMS. The MSSP is a program created
under the Affordable Care Act (the “ACA,” also known as “Obamacare”) designed to enhance the efficiency of healthcare
provided to patients covered by Medicare. The program allows for the creation of ACOs, which are organizations that agree to take responsibility
for the efficiency of healthcare services provided by a group of participating healthcare providers under Medicare. The ACO is held accountable
for the efficiency of the healthcare services of its participating providers as measured against benchmarks prescribed in the MSSP and
earns shared savings payments if such benchmarks are met.
The Company, via AHP is party to a Medicare Shared
Savings Program Accountable Care Organization Participation Agreement with the CMS that establishes AHP as an ACO. The agreement is effective
through December 31, 2024. The Company must comply with the terms and conditions of the agreement in order to maintain its status as an
ACO and generate shared savings revenue.
The Company, via CHM, is party to 33 separate
participant agreements with participating providers that are members of the Company’s ACO with expiration dates between 2020 and
2024. These agreements include certain restrictions and requirements to which the participating providers must adhere in order to maintain
participation in the ACO.
Supplier Concentration
The Company relies on a sole supplier for the
fulfillment of all of its product sales made through MOD, which was acquired by the Company in October 2020.
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
None.
Leases
Maturities of operating lease liabilities were as follows as of June
30, 2021:
2021 (July to December)
|
|
$
|
215,245
|
|
2022
|
|
|
383,619
|
|
2023
|
|
|
273,844
|
|
Total lease payments
|
|
|
872,708
|
|
Less interest
|
|
|
(198,894
|
)
|
Present value of lease liabilities
|
|
$
|
673,814
|
|
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.
HEALTHLYNKED CORP.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
JUNE 30, 2021
(UNAUDITED)
NOTE 16 – COMMITMENTS AND CONTINGENCIES
(CONTINUED)
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. If Mr. O’Leary’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, 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.
On May 18, 2020, the Company entered into separate
4-year consulting services agreements with each of the two principals of the ACO/MSO business acquired in May 2020 that call for each
person to earn fixed annual consulting fees and a share of Medicare shared savings revenue, consulting revenue and overall profits generated
by the underlying business.
NOTE 17 – SEGMENT REPORTING
The Company has four reportable segments: Health
Services, Digital Healthcare, ACO/MCO and Medical Distribution. 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 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 ACO/MSO Division is comprised
of the business acquired with CHM, which assists physician practices in providing coordinated and more efficient care to patients via
the MSSP as administered by the CMS, which rewards providers for efficiency in patient care. The Medical Distribution Division is comprised
of the operations of MedOffice Direct LLC (“MOD”), a virtual distributor of discounted medical supplies selling to both consumers
and medical practices throughout the United States acquired by the Company on October 19, 2020.
The Company evaluates performance and allocates
resources based on profit or loss from operations before income taxes. The accounting policies of the reportable segments are the same
as those described in the summary of significant accounting policies.
HEALTHLYNKED CORP.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
JUNE 30, 2021
(UNAUDITED)
NOTE 17 – SEGMENT REPORTING (CONTINUED)
Segment information for the three months ended
June 30, 2021 was as follows:
|
|
Three Months Ended June 30, 2021
|
|
|
|
Health Services
|
|
|
Digital
Healthcare
|
|
|
ACO / MSO
|
|
|
Medical
Distribution
|
|
|
Total
|
|
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Patient service revenue, net
|
|
$
|
1,470,550
|
|
|
$
|
---
|
|
|
$
|
---
|
|
|
$
|
---
|
|
|
$
|
1,470,550
|
|
Consulting and event revenue
|
|
|
---
|
|
|
|
972
|
|
|
|
70,892
|
|
|
|
---
|
|
|
|
71,864
|
|
Product revenue
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
168,206
|
|
|
|
168,206
|
|
Total revenue
|
|
|
1,470,550
|
|
|
|
972
|
|
|
|
70,892
|
|
|
|
168,206
|
|
|
|
1,710,620
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Practice salaries and benefits
|
|
|
903,032
|
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
903,032
|
|
Other practice operating expenses
|
|
|
511,004
|
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
511,004
|
|
Medicare shared savings expenses
|
|
|
---
|
|
|
|
---
|
|
|
|
197,463
|
|
|
|
---
|
|
|
|
197,463
|
|
Cost of product revenue
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
159,998
|
|
|
|
159,998
|
|
Selling, general and administrative expenses
|
|
|
---
|
|
|
|
1,073,712
|
|
|
|
---
|
|
|
|
73,766
|
|
|
|
1,147,478
|
|
Depreciation and amortization
|
|
|
28,974
|
|
|
|
595
|
|
|
|
---
|
|
|
|
176,900
|
|
|
|
206,469
|
|
Total Operating Expenses
|
|
|
1,443,010
|
|
|
|
1,074,307
|
|
|
|
197,463
|
|
|
|
410,664
|
|
|
|
3,125,444
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income from operations
|
|
$
|
27,540
|
|
|
$
|
(1,073,335
|
)
|
|
$
|
(126,571
|
)
|
|
$
|
(242,458
|
)
|
|
$
|
(1,414,824
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Segment Information
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense (income)
|
|
$
|
(1,758
|
)
|
|
$
|
344
|
|
|
$
|
---
|
|
|
$
|
(209
|
)
|
|
$
|
(1,623
|
)
|
Gain on extinguishment of debt
|
|
$
|
(502,959
|
)
|
|
$
|
(118,110
|
)
|
|
$
|
---
|
|
|
$
|
(11,757
|
)
|
|
$
|
(632,826
|
)
|
Change in fair value of contingent acquisition consideration
|
|
$
|
---
|
|
|
$
|
(274,611
|
)
|
|
$
|
---
|
|
|
$
|
---
|
|
|
$
|
(274,611
|
)
|
HEALTHLYNKED CORP.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
JUNE 30, 2021
(UNAUDITED)
NOTE 17 – SEGMENT REPORTING (CONTINUED)
Segment information for the six months ended June
30, 2021 was as follows:
|
|
Six Months Ended June 30, 2021
|
|
|
|
Health Services
|
|
|
Digital
Healthcare
|
|
|
ACO / MSO
|
|
|
Medical
Distribution
|
|
|
Total
|
|
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Patient service revenue, net
|
|
$
|
2,984,926
|
|
|
$
|
---
|
|
|
$
|
---
|
|
|
$
|
---
|
|
|
$
|
2,984,926
|
|
Consulting and event revenue
|
|
|
---
|
|
|
|
12,085
|
|
|
|
147,434
|
|
|
|
---
|
|
|
|
159,519
|
|
Product revenue
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
350,869
|
|
|
|
350,869
|
|
Total revenue
|
|
|
2,984,926
|
|
|
|
12,085
|
|
|
|
147,434
|
|
|
|
350,869
|
|
|
|
3,495,314
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Practice salaries and benefits
|
|
|
1,566,969
|
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
1,566,969
|
|
Other practice operating expenses
|
|
|
1,241,788
|
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
1,241,788
|
|
Medicare shared savings expenses
|
|
|
---
|
|
|
|
---
|
|
|
|
408,970
|
|
|
|
---
|
|
|
|
408,970
|
|
Cost of product revenue
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
328,594
|
|
|
|
328,594
|
|
Selling, general and administrative expenses
|
|
|
---
|
|
|
|
2,379,032
|
|
|
|
---
|
|
|
|
134,583
|
|
|
|
2,513,615
|
|
Depreciation and amortization
|
|
|
57,297
|
|
|
|
1,190
|
|
|
|
---
|
|
|
|
359,640
|
|
|
|
418,127
|
|
Total Operating Expenses
|
|
|
2,866,054
|
|
|
|
2,380,222
|
|
|
|
408,970
|
|
|
|
822,817
|
|
|
|
6,478,063
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income from operations
|
|
$
|
118,872
|
|
|
$
|
(2,368,137
|
)
|
|
$
|
(261,536
|
)
|
|
$
|
(471,948
|
)
|
|
$
|
(2,982,749
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Segment Information
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense (income)
|
|
$
|
2,439
|
|
|
$
|
6,626
|
|
|
$
|
---
|
|
|
$
|
(100
|
)
|
|
$
|
8,965
|
|
(Gain) loss on extinguishment of debt
|
|
$
|
(502,959
|
)
|
|
$
|
5,471,884
|
|
|
$
|
---
|
|
|
$
|
(11,757
|
)
|
|
$
|
4,957,168
|
|
Change in fair value of debt
|
|
$
|
---
|
|
|
$
|
19,246
|
|
|
$
|
---
|
|
|
$
|
---
|
|
|
$
|
19,246
|
|
Change in fair value of contingent acquisition consideration
|
|
$
|
---
|
|
|
$
|
361,089
|
|
|
$
|
---
|
|
|
$
|
---
|
|
|
$
|
361,089
|
|
|
|
June 30, 2021
|
|
Identifiable assets
|
|
$
|
2,163,058
|
|
|
$
|
2,843,315
|
|
|
$
|
1,101,230
|
|
|
$
|
3,077,259
|
|
|
$
|
9,184,862
|
|
Goodwill
|
|
$
|
---
|
|
|
$
|
---
|
|
|
$
|
381,856
|
|
|
$
|
766,249
|
|
|
$
|
1,148,105
|
|
HEALTHLYNKED CORP.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
JUNE 30, 2021
(UNAUDITED)
NOTE 17 – SEGMENT REPORTING (CONTINUED)
Segment information for the three months ended
June 30, 2020 was as follows:
|
|
Health
Services
|
|
|
Digital
Healthcare
|
|
|
ACO / MSO
|
|
|
Medical
Distribution
|
|
|
Total
|
|
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Patient service revenue, net
|
|
$
|
1,111,090
|
|
|
$
|
---
|
|
|
$
|
---
|
|
|
$
|
---
|
|
|
$
|
1,111,090
|
|
Medicare shared savings revenue
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
Consulting revenue
|
|
|
---
|
|
|
|
---
|
|
|
|
50,420
|
|
|
|
---
|
|
|
|
50,420
|
|
Product revenue
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
Total revenue
|
|
|
1,111,090
|
|
|
|
---
|
|
|
|
50,420
|
|
|
|
---
|
|
|
|
1,161,510
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Practice salaries and benefits
|
|
|
555,086
|
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
555,086
|
|
Other practice operating expenses
|
|
|
521,022
|
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
521,022
|
|
Medicare shared savings expenses
|
|
|
---
|
|
|
|
---
|
|
|
|
64,236
|
|
|
|
---
|
|
|
|
64,236
|
|
Cost of product revenue
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
Selling, general and administrative expenses
|
|
|
---
|
|
|
|
646,309
|
|
|
|
---
|
|
|
|
---
|
|
|
|
646,309
|
|
Depreciation and amortization
|
|
|
24,279
|
|
|
|
595
|
|
|
|
---
|
|
|
|
---
|
|
|
|
24,874
|
|
Total Operating Expenses
|
|
|
1,100,387
|
|
|
|
646,904
|
|
|
|
---
|
|
|
|
---
|
|
|
|
1,811,527
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from operations
|
|
$
|
10,703
|
|
|
$
|
(646,904
|
)
|
|
$
|
---
|
|
|
$
|
---
|
|
|
$
|
(650,017
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Segment Information
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
$
|
6,374
|
|
|
$
|
52,044
|
|
|
$
|
---
|
|
|
$
|
---
|
|
|
$
|
58,418
|
|
Loss on extinguishment of debt
|
|
$
|
---
|
|
|
$
|
428,435
|
|
|
$
|
---
|
|
|
$
|
---
|
|
|
$
|
428,435
|
|
Amortization of original issue and debt discounts on convertible notes
|
|
$
|
---
|
|
|
$
|
172,951
|
|
|
$
|
---
|
|
|
$
|
---
|
|
|
$
|
172,951
|
|
Change in fair value of debt
|
|
$
|
---
|
|
|
$
|
155,667
|
|
|
$
|
---
|
|
|
$
|
---
|
|
|
$
|
155,667
|
|
Change in fair value of derivative financial instruments
|
|
$
|
---
|
|
|
$
|
13,672
|
|
|
$
|
---
|
|
|
$
|
---
|
|
|
$
|
13,672
|
|
Change in fair value of contingent acquisition consideration
|
|
$
|
---
|
|
|
$
|
38,688
|
|
|
$
|
---
|
|
|
$
|
---
|
|
|
$
|
38,688
|
|
HEALTHLYNKED CORP.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
JUNE 30, 2021
(UNAUDITED)
NOTE 17 – SEGMENT REPORTING (CONTINUED)
Segment information for the six months ended June
30, 2020 was as follows:
|
|
Six Months Ended June 30, 2020
|
|
|
|
Health
Services
|
|
|
Digital
Healthcare
|
|
|
ACO /MSO
|
|
|
Medical
Distribution
|
|
|
Total
|
|
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Patient service revenue, net
|
|
$
|
2,448,030
|
|
|
$
|
---
|
|
|
$
|
---
|
|
|
$
|
---
|
|
|
$
|
2,448,030
|
|
Medicare shared savings revenue
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
Consulting revenue
|
|
|
---
|
|
|
|
---
|
|
|
|
50,420
|
|
|
|
---
|
|
|
|
50,420
|
|
Product revenue
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
Total revenue
|
|
|
2,448,030
|
|
|
|
---
|
|
|
|
50,420
|
|
|
|
---
|
|
|
|
2,498,450
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Practice salaries and benefits
|
|
|
1,320,207
|
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
1,320,207
|
|
Other practice operating expenses
|
|
|
1,084,713
|
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
1,084,713
|
|
Medicare shared savings expenses
|
|
|
---
|
|
|
|
---
|
|
|
|
64,236
|
|
|
|
---
|
|
|
|
64,236
|
|
Cost of product revenue
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
Selling, general and administrative expenses
|
|
|
---
|
|
|
|
1,157,285
|
|
|
|
---
|
|
|
|
---
|
|
|
|
1,157,285
|
|
Depreciation and amortization
|
|
|
48,470
|
|
|
|
1,190
|
|
|
|
---
|
|
|
|
---
|
|
|
|
49,660
|
|
Total Operating Expenses
|
|
|
2,453,390
|
|
|
|
1,158,475
|
|
|
|
---
|
|
|
|
---
|
|
|
|
3,676,101
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from operations
|
|
$
|
(5,360
|
)
|
|
$
|
(1,158,475
|
)
|
|
$
|
---
|
|
|
$
|
---
|
|
|
$
|
(1,177,651
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Segment Information
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
$
|
11,910
|
|
|
$
|
108,689
|
|
|
$
|
---
|
|
|
$
|
---
|
|
|
$
|
120,599
|
|
Loss on extinguishment of debt
|
|
$
|
---
|
|
|
$
|
896,372
|
|
|
$
|
---
|
|
|
$
|
---
|
|
|
$
|
896,372
|
|
Amortization of original issue and debt discounts on convertible notes
|
|
$
|
---
|
|
|
$
|
465,114
|
|
|
$
|
---
|
|
|
$
|
---
|
|
|
$
|
465,114
|
|
Change in fair value of debt
|
|
$
|
---
|
|
|
$
|
119,702
|
|
|
$
|
---
|
|
|
$
|
---
|
|
|
$
|
119,702
|
|
Change in fair value of derivative financial instruments
|
|
$
|
---
|
|
|
$
|
(726,683
|
)
|
|
$
|
---
|
|
|
$
|
---
|
|
|
$
|
(726,683
|
)
|
Change in fair value of contingent acquisition consideration
|
|
$
|
---
|
|
|
$
|
45,309
|
|
|
$
|
---
|
|
|
$
|
---
|
|
|
$
|
45,309
|
|
|
|
June 30, 2020
|
|
Identifiable assets
|
|
$
|
2,229,258
|
|
|
$
|
92,734
|
|
|
$
|
1,592,900
|
|
|
$
|
---
|
|
|
$
|
3,914,892
|
|
Goodwill
|
|
$
|
---
|
|
|
$
|
---
|
|
|
$
|
381,856
|
|
|
$
|
---
|
|
|
$
|
381,856
|
|
The Digital Healthcare segment recognized revenue
of $383 and $1,075 in the three months ended June 30, 2021 and 2020, respectively, and $563 and $2,431 in the six months ended June 30,
2021 and 2020, 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.
NOTE 18 – FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts of certain financial instruments,
including cash and cash equivalents, accounts receivable and accounts payable, approximate their respective fair values due to the short-term
nature of such instruments. The Company measures certain financial instruments at fair value on a recurring basis, including certain convertible
notes payable and related party loans which were extinguished and reissued and are therefore subject to fair value measurement, as well
as derivative financial instruments arising from conversion features embedded in convertible promissory notes for which the conversion
rate is not fixed. All financial instruments carried at fair value fall within Level 3 of the fair value hierarchy as their value is based
on unobservable inputs. The Company evaluates its financial assets and liabilities subject to fair value measurements on a recurring basis
to determine the appropriate level in which to classify them for each reporting period. This determination requires significant judgments
to be made.
HEALTHLYNKED CORP.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
JUNE 30, 2021
(UNAUDITED)
NOTE 18 – FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
The following table summarizes the conclusions
reached regarding fair value measurements as of June 30, 2021 and December 31, 2020:
|
|
As of June 30, 2021
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Fair Value
|
|
Contingent acquisition consideration
|
|
$
|
---
|
|
|
$
|
---
|
|
|
$
|
1,665,529
|
|
|
$
|
1,665,529
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
---
|
|
|
$
|
---
|
|
|
$
|
1,665,529
|
|
|
$
|
1,665,529
|
|
|
|
As of December 31, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Fair Value
|
|
Convertible notes payable
|
|
$
|
---
|
|
|
$
|
---
|
|
|
$
|
1,336,350
|
|
|
$
|
1,336,350
|
|
Contingent acquisition consideration
|
|
|
---
|
|
|
|
---
|
|
|
|
1,500,440
|
|
|
|
1,500,440
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
---
|
|
|
$
|
---
|
|
|
$
|
2,836,790
|
|
|
$
|
2,836,790
|
|
The changes in Level 3 financial instruments that
are measured at fair value on a recurring basis during the three and six months ended June 30, 2021 and 2020 were as follows:
|
|
Three Months Ended June 30,
|
|
|
Six Months Ended June 30,
|
|
|
|
2021
|
|
|
2020
|
|
|
2021
|
|
|
2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible notes payable
|
|
$
|
---
|
|
|
$
|
(93,097
|
)
|
|
$
|
(19,246
|
)
|
|
$
|
(71,735
|
)
|
Notes payable to related party
|
|
|
---
|
|
|
|
(62,570
|
)
|
|
|
---
|
|
|
|
(47,967
|
)
|
Derivative financial instruments
|
|
|
---
|
|
|
|
(13,672
|
)
|
|
|
---
|
|
|
|
726,683
|
|
Contingent acquisition consideration
|
|
|
274,611
|
|
|
|
(38,688
|
)
|
|
|
(361,089
|
)
|
|
|
(45,309
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
274,611
|
|
|
$
|
(208,027
|
)
|
|
$
|
(380,335
|
)
|
|
$
|
561,672
|
|
NOTE 19 – SUBSEQUENT EVENTS
None.