UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10–Q
☒ QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For
the quarterly period ended September 30, 2021
or
☐ TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For
the transition period from
[
] to
[
]
Commission
file number: 000-55768
|
HealthLynked
Corp. |
|
(Exact
name of registrant as specified in its charter) |
|
|
|
|
|
Nevada |
|
47-1634127 |
|
(State
or other jurisdiction of
incorporation
or organization)
|
|
(I.R.S.
Employer
Identification
No.)
|
|
|
|
|
|
1265
Creekside Parkway, Suite 302, Naples FL 34108 |
|
(Address
of principal executive offices) |
|
|
|
(800)
928-7144 |
|
(Registrant’s
telephone number, including area code) |
|
|
|
|
|
(Former
name, former address and former fiscal year, if changed since last
report) |
Securities
registered pursuant to Section 12(b) of the Act:
None.
Indicate
by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the Registrant was required to file such
reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes ☒ No ☐
Indicate
by check mark whether the registrant has submitted electronically
every Interactive Data File required to be submitted pursuant to
Rule 405 of Regulation S-T (§232.405 of this chapter) during the
preceding 12 months (or for such shorter period that the registrant
was required to submit such files). Yes ☒ No
☐
Indicate
by check mark whether the registrant is a large accelerated filer,
an accelerated filer, a non-accelerated filer, smaller reporting
company, or an emerging growth company. See the definitions of
“large accelerated filer,” “accelerated filer,” “smaller reporting
company,” and “emerging growth company” in Rule 12b-2 of the
Exchange Act.
|
Large
accelerated filer |
☐ |
Accelerated
filer |
☐ |
| Non-accelerated
filer |
☒ |
Smaller
reporting company |
☒ |
| |
|
Emerging
growth company |
☒ |
If an
emerging growth company, indicate by check mark if the registrant
has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided
pursuant to Section 13(a) of the Exchange Act. ☐
Indicate
by check mark whether the registrant is a shell company (as defined
in Rule 12b-2 of the Exchange Act). Yes ☐ No
☒
As of
November 15, 2021, there were 237,769,723 shares of the issuer's
common stock, par value $0.0001, outstanding.
TABLE
OF CONTENTS
PART
I. FINANCIAL INFORMATION
Item
1. Financial Statements
| |
|
September 30, |
|
|
December 31, |
|
| |
|
2021 |
|
|
2020 |
|
| ASSETS |
|
(Unaudited) |
|
|
|
|
| Current Assets |
|
|
|
|
|
|
| Cash |
|
$ |
5,448,791 |
|
|
$ |
162,184 |
|
|
Accounts receivable, net of allowance for doubtful accounts of
$13,972 and $13,972 as of September 30, 2021 and December 31, 2020,
respectively |
|
|
112,983 |
|
|
|
87,153 |
|
| Inventory |
|
|
106,906 |
|
|
|
95,200 |
|
| Prepaid
expenses and other |
|
|
68,836 |
|
|
|
59,003 |
|
| Total Current Assets |
|
|
5,737,516 |
|
|
|
403,540 |
|
| |
|
|
|
|
|
|
|
|
|
Property, plant and equipment, net of accumulated depreciation of
$258,222 and $177,457 as of September 30, 2021 and December
31, 2020, respectively |
|
|
368,997 |
|
|
|
437,286 |
|
|
Intangible assets, net of accumulated amortization of $694,450 and
$151,776 as of September 30, 2021 and December 31, 2020,
respectively |
|
|
5,059,088 |
|
|
|
5,601,762 |
|
| Goodwill |
|
|
1,148,105 |
|
|
|
1,148,105 |
|
| ROU lease
assets and deposits |
|
|
648,406 |
|
|
|
435,855 |
|
| |
|
|
|
|
|
|
|
|
| Total Assets |
|
$ |
12,962,112 |
|
|
$ |
8,026,548 |
|
| |
|
|
|
|
|
|
|
|
| LIABILITIES AND
SHAREHOLDERS’ EQUITY |
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
| Current
Liabilities |
|
|
|
|
|
|
|
|
| Accounts payable and accrued
expenses |
|
$ |
1,761,162 |
|
|
$ |
1,891,749 |
|
| Contract liabilities |
|
|
30,535 |
|
|
|
89,425 |
|
| Lease liability, current portion |
|
|
292,844 |
|
|
|
150,251 |
|
| Due to related party, current
portion |
|
|
300,600 |
|
|
|
300,600 |
|
| Government and vendor notes payable,
current portion |
|
|
---
|
|
|
|
411,427 |
|
|
Convertible notes payable, net of original issue discount and debt
discount of $-0- and $-0- as of September 30, 2021 and
December 31, 2020, respectively |
|
|
---
|
|
|
|
1,336,350 |
|
| Contingent
acquisition consideration, current portion |
|
|
282,211 |
|
|
|
701,961 |
|
| Total Current Liabilities |
|
|
2,667,352 |
|
|
|
4,881,763 |
|
| |
|
|
|
|
|
|
|
|
| Long-Term
Liabilities |
|
|
|
|
|
|
|
|
| Government and vendor notes payable,
long term portion |
|
|
450,000 |
|
|
|
722,508 |
|
| Contingent acquisition consideration,
long term portion |
|
|
764,501 |
|
|
|
798,479 |
|
| Lease
liability, long term portion |
|
|
309,799 |
|
|
|
273,790 |
|
| |
|
|
|
|
|
|
|
|
| Total
Liabilities |
|
|
4,191,652 |
|
|
|
6,676,540 |
|
| |
|
|
|
|
|
|
|
|
| Shareholders’
Equity |
|
|
|
|
|
|
|
|
| Common
stock, par value $0.0001 per share, 500,000,000 shares authorized,
235,703,829 and 187,967,881 shares issued and outstanding as of
September 30, 2021 and December 31, 2020, respectively |
|
|
23,570 |
|
|
|
18,797 |
|
|
Series B convertible preferred stock, par value $0.001 per share,
20,000,000 shares authorized, 2,750,000 and -0- shares issued and
outstanding as of September 30, 2021 and December 31, 2020,
respectively |
|
|
2,750 |
|
|
|
2,750 |
|
| Common
stock issuable, $0.0001 par value; 2,517,458 and 2,150,020 shares
as of September 30, 2021 and December 31, 2020, respectively |
|
|
728,368 |
|
|
|
262,273 |
|
| Additional paid-in capital |
|
|
38,497,916 |
|
|
|
22,851,098 |
|
| Accumulated
deficit |
|
|
(30,482,144 |
) |
|
|
(21,784,910 |
) |
| Total
Shareholders’ Equity |
|
|
8,770,460 |
|
|
|
1,350,008 |
|
| |
|
|
|
|
|
|
|
|
| Total Liabilities
and Shareholders’ Equity |
|
$ |
12,962,112 |
|
|
$ |
8,026,548 |
|
See
the accompanying notes to these Unaudited Condensed Consolidated
Financial Statements
HEALTHLYNKED
CORP.
CONDENSED
CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
|
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
|
|
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
|
Revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
Patient service revenue, net |
|
$ |
1,394,356 |
|
|
$ |
1,054,806 |
|
|
$ |
4,379,282 |
|
|
$ |
3,502,836 |
|
|
Medicare shared savings revenue |
|
|
2,419,312 |
|
|
|
767,744 |
|
|
|
2,419,312 |
|
|
|
767,744 |
|
|
Consulting and event revenue |
|
|
69,595 |
|
|
|
217,605 |
|
|
|
229,114 |
|
|
|
268,025 |
|
|
Product revenue |
|
|
161,456 |
|
|
|
---
|
|
|
|
512,325 |
|
|
|
---
|
|
|
Total revenue |
|
|
4,044,719 |
|
|
|
2,040,155 |
|
|
|
7,540,033 |
|
|
|
4,538,605 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Expenses and Costs |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Practice salaries and benefits |
|
|
739,024 |
|
|
|
590,690 |
|
|
|
2,305,993 |
|
|
|
1,910,897 |
|
|
Other practice operating expenses |
|
|
549,086 |
|
|
|
548,667 |
|
|
|
1,790,874 |
|
|
|
1,633,380 |
|
|
Medicare shared savings expenses |
|
|
1,748,585 |
|
|
|
759,848 |
|
|
|
2,157,555 |
|
|
|
824,084 |
|
|
Cost of product revenue |
|
|
145,432 |
|
|
|
---
|
|
|
|
474,026 |
|
|
|
---
|
|
|
Selling, general and administrative expenses |
|
|
1,147,591 |
|
|
|
958,874 |
|
|
|
3,661,206 |
|
|
|
2,116,159 |
|
|
Depreciation and amortization |
|
|
205,311 |
|
|
|
25,151 |
|
|
|
623,438 |
|
|
|
74,811 |
|
|
Total Operating Expenses and Costs |
|
|
4,535,029 |
|
|
|
2,883,230 |
|
|
|
11,013,092 |
|
|
|
6,559,331 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from operations |
|
|
(490,310 |
) |
|
|
(843,075 |
) |
|
|
(3,473,059 |
) |
|
|
(2,020,726 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Income (Expenses) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss on sales of marketable securities |
|
|
---
|
|
|
|
(281,606 |
) |
|
|
---
|
|
|
|
(281,606 |
) |
|
Gain (loss) on extinguishment of debt |
|
|
---
|
|
|
|
(450,999 |
) |
|
|
(4,957,168 |
) |
|
|
(1,347,371 |
) |
|
Change in fair value of debt |
|
|
---
|
|
|
|
(79,062 |
) |
|
|
(19,246 |
) |
|
|
(198,764 |
) |
|
Amortization of original issue and debt discounts on notes payable
and convertible notes |
|
|
---
|
|
|
|
(65,816 |
) |
|
|
---
|
|
|
|
(530,930 |
) |
|
Change in fair value of derivative financial instruments |
|
|
---
|
|
|
|
12,802 |
|
|
|
---
|
|
|
|
739,485 |
|
|
Change in fair value of contingent acquisition consideration |
|
|
126,411 |
|
|
|
45,996 |
|
|
|
(234,678 |
) |
|
|
687 |
|
|
Interest income (expense) |
|
|
(4,118 |
) |
|
|
(72,535 |
) |
|
|
(13,083 |
) |
|
|
(193,134 |
) |
|
Total other income (expenses) |
|
|
122,293 |
|
|
|
(891,220 |
) |
|
|
(5,224,175 |
) |
|
|
(1,811,633 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss before provision for income taxes |
|
|
(368,017 |
) |
|
|
(1,734,295 |
) |
|
|
(8,697,234 |
) |
|
|
(3,832,359 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for income taxes |
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(368,017 |
) |
|
$ |
(1,734,295 |
) |
|
$ |
(8,697,234 |
) |
|
$ |
(3,832,359 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deemed dividend - amortization of beneficial conversion feature and
down round adjustment to warrants |
|
|
(88,393 |
) |
|
|
(63,862 |
) |
|
|
(265,179 |
) |
|
|
(63,862 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss to common stockholders |
|
$ |
(456,410 |
) |
|
$ |
(1,798,157 |
) |
|
$ |
(8,962,413 |
) |
|
$ |
(3,896,221 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per share to common stockholders, basic and diluted: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Basic |
|
$ |
(0.00 |
) |
|
$ |
(0.01 |
) |
|
$ |
(0.04 |
) |
|
$ |
(0.03 |
) |
|
Fully diluted |
|
$ |
(0.00 |
) |
|
$ |
(0.01 |
) |
|
$ |
(0.04 |
) |
|
$ |
(0.03 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Weighted
average number of common shares: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Basic |
|
|
232,203,244 |
|
|
|
147,366,619 |
|
|
|
224,658,709 |
|
|
|
129,234,540 |
|
|
Fully diluted |
|
|
232,203,244 |
|
|
|
147,366,619 |
|
|
|
224,658,709 |
|
|
|
129,234,540 |
|
See
the accompanying notes to these Unaudited Condensed Consolidated
Financial Statements
HEALTHLYNKED
CORP.
CONDENSED
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY
(DEFICIT)
NINE
MONTHS ENDED SEPTEMBER 30, 2021
(UNAUDITED)
|
|
|
Number of Shares |
|
|
|
|
|
|
|
|
Common |
|
|
Additional |
|
|
|
|
|
Total |
|
|
|
|
Common |
|
|
Preferred |
|
|
Common |
|
|
Preferred |
|
|
Stock |
|
|
Paid-in |
|
|
Accumulated |
|
|
Shareholders’ |
|
|
|
|
Stock |
|
|
Stock |
|
|
Stock |
|
|
Stock |
|
|
Issuable |
|
|
Capital |
|
|
Deficit |
|
|
Equity (Deficit) |
|
| |
|
(#) |
|
|
(#) |
|
|
($) |
|
|
($) |
|
|
($) |
|
|
($) |
|
|
($) |
|
|
($) |
|
|
Balance at December 31, 2020 |
|
|
187,967,881 |
|
|
|
2,750,000 |
|
|
|
18,797 |
|
|
|
2,750 |
|
|
|
262,273 |
|
|
|
22,851,098 |
|
|
|
(21,784,910 |
) |
|
|
1,350,008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales of common stock |
|
|
14,793,864 |
|
|
|
--- |
|
|
|
1,479 |
|
|
|
---
|
|
|
|
|
|
|
|
2,981,367 |
|
|
|
---
|
|
|
|
2,982,846 |
|
|
Fair value of warrants allocated to proceeds of common stock |
|
|
--- |
|
|
|
--- |
|
|
|
---
|
|
|
|
---
|
|
|
|
|
|
|
|
1,406,515 |
|
|
|
---
|
|
|
|
1,406,515 |
|
|
Conversion of convertible notes payable to common stock |
|
|
13,538,494 |
|
|
|
---
|
|
|
|
1,354 |
|
|
|
---
|
|
|
|
|
|
|
|
4,060,194 |
|
|
|
---
|
|
|
|
4,061,548 |
|
|
Fair value of warrants issued in connection with conversion and
retirement of convertible notes payable |
|
|
--- |
|
|
|
--- |
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
3,201,138 |
|
|
|
---
|
|
|
|
3,201,138 |
|
|
Fair value of warrants issued for professional services |
|
|
--- |
|
|
|
--- |
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
32,426 |
|
|
|
---
|
|
|
|
32,426 |
|
|
Consultant and director fees payable with common shares and
warrants |
|
|
475,000 |
|
|
|
--- |
|
|
|
48 |
|
|
|
---
|
|
|
|
114,500 |
|
|
|
122,781 |
|
|
|
---
|
|
|
|
237,329 |
|
|
Shares and options issued pursuant to employee equity incentive
plan |
|
|
240,310 |
|
|
|
---
|
|
|
|
24 |
|
|
|
---
|
|
|
|
(14,956 |
) |
|
|
52,337 |
|
|
|
---
|
|
|
|
37,405 |
|
| Exercise
of stock warrants |
|
|
9,047,332 |
|
|
|
---
|
|
|
|
905 |
|
|
|
---
|
|
|
|
62,500 |
|
|
|
613,316 |
|
|
|
---
|
|
|
|
676,721 |
|
| Exercise
of stock options |
|
|
12,500 |
|
|
|
---
|
|
|
|
1 |
|
|
|
---
|
|
|
|
|
|
|
|
3,149 |
|
|
|
---
|
|
|
|
3,150 |
|
|
Net loss |
|
|
--- |
|
|
|
--- |
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
(7,823,453 |
) |
|
|
(7,823,453 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at March 31, 2021 |
|
|
226,075,381 |
|
|
|
2,750,000 |
|
|
|
22,608 |
|
|
|
2,750 |
|
|
|
424,317 |
|
|
|
35,324,321 |
|
|
|
(29,608,363 |
) |
|
|
6,165,633 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales of common stock |
|
|
374,177 |
|
|
|
--- |
|
|
|
37 |
|
|
|
---
|
|
|
|
---
|
|
|
|
177,642 |
|
|
|
---
|
|
|
|
177,679 |
|
|
Fair value of warrants allocated to proceeds of common stock |
|
|
--- |
|
|
|
--- |
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
82,320 |
|
|
|
---
|
|
|
|
82,320 |
|
|
Fair value of warrants issued for professional services |
|
|
--- |
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
--- |
|
|
|
3,603 |
|
|
|
---
|
|
|
|
3,603 |
|
|
Consultant and director fees payable with common shares and
warrants |
|
|
93,492 |
|
|
|
--- |
|
|
|
9 |
|
|
|
---
|
|
|
|
68,807 |
|
|
|
17,990 |
|
|
|
---
|
|
|
|
86,806 |
|
|
Shares and options issued pursuant to employee equity incentive
plan |
|
|
875,047 |
|
|
|
---
|
|
|
|
88 |
|
|
|
---
|
|
|
|
(147,791 |
) |
|
|
211,358 |
|
|
|
---
|
|
|
|
63,655 |
|
| Exercise
of stock warrants |
|
|
1,225,000 |
|
|
|
--- |
|
|
|
123 |
|
|
|
---
|
|
|
|
62,500 |
|
|
|
152,378 |
|
|
|
--- |
|
|
|
215,001 |
|
| Exercise
of stock options |
|
|
133,000 |
|
|
|
--- |
|
|
|
13 |
|
|
|
--- |
|
|
|
--- |
|
|
|
13,287 |
|
|
|
--- |
|
|
|
13,300 |
|
|
Net loss |
|
|
--- |
|
|
|
--- |
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
(505,764 |
) |
|
|
(505,764 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at June 30, 2021 |
|
|
228,776,097 |
|
|
|
2,750,000 |
|
|
|
22,878 |
|
|
|
2,750 |
|
|
|
407,833 |
|
|
|
35,982,899 |
|
|
|
(30,114,127 |
) |
|
|
6,302,233 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales of common stock |
|
|
4,703,704 |
|
|
|
--- |
|
|
|
470 |
|
|
|
---
|
|
|
|
---
|
|
|
|
1,608,874 |
|
|
|
---
|
|
|
|
1,609,344 |
|
|
Fair value of warrants allocated to proceeds of common stock |
|
|
--- |
|
|
|
--- |
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
690,577 |
|
|
|
---
|
|
|
|
690,577 |
|
|
Contingent acquisition consideration issuable |
|
|
--- |
|
|
|
--- |
|
|
|
---
|
|
|
|
---
|
|
|
|
366,300 |
|
|
|
---
|
|
|
|
---
|
|
|
|
366,300 |
|
|
Fair value of warrants issued for professional services |
|
|
--- |
|
|
|
--- |
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
3,603 |
|
|
|
---
|
|
|
|
3,603 |
|
|
Consultant and director fees payable with common shares and
warrants |
|
|
8,750 |
|
|
|
--- |
|
|
|
1 |
|
|
|
---
|
|
|
|
84,785 |
|
|
|
4,942 |
|
|
|
---
|
|
|
|
89,728 |
|
|
Shares and options issued pursuant to employee equity incentive
plan |
|
|
375,000 |
|
|
|
--- |
|
|
|
37 |
|
|
|
---
|
|
|
|
(5,550 |
) |
|
|
25,955 |
|
|
|
---
|
|
|
|
20,442 |
|
| Exercise
of stock warrants |
|
|
1,840,278 |
|
|
|
--- |
|
|
|
184 |
|
|
|
---
|
|
|
|
(125,000 |
) |
|
|
181,066 |
|
|
|
---
|
|
|
|
56,250 |
|
|
Net loss |
|
|
--- |
|
|
|
--- |
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
(368,017 |
) |
|
|
(368,017 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at September 30, 2021 |
|
|
235,703,829 |
|
|
|
2,750,000 |
|
|
|
23,570 |
|
|
|
2,750 |
|
|
|
728,368 |
|
|
|
38,497,916 |
|
|
|
(30,482,144 |
) |
|
|
8,770,460 |
|
See
the accompanying notes to these Unaudited Condensed Consolidated
Financial Statements
HEALTHLYNKED
CORP.
CONDENSED
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY
(DEFICIT)
NINE
MONTHS ENDED SEPTEMBER 30, 2020
(UNAUDITED)
|
|
|
Number of Shares |
|
|
|
|
|
|
|
|
Common |
|
|
Additional |
|
|
|
|
|
Total |
|
|
|
|
Common |
|
|
Preferred |
|
|
Common |
|
|
Preferred |
|
|
Stock |
|
|
Paid-in |
|
|
Accumulated |
|
|
Shareholders’ |
|
|
|
|
Stock |
|
|
Stock |
|
|
Stock |
|
|
Stock |
|
|
Issuable |
|
|
Capital |
|
|
Deficit |
|
|
Equity (Deficit) |
|
|
|
|
(#) |
|
|
(#) |
|
|
($) |
|
|
($) |
|
|
($) |
|
|
($) |
|
|
($) |
|
|
($) |
|
|
Balance at December 31, 2019 |
|
|
109,894,490 |
|
|
|
--- |
|
|
|
10,990 |
|
|
|
---
|
|
|
|
159,538 |
|
|
|
13,016,446 |
|
|
|
(16,029,654 |
) |
|
|
(2,842,680 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sale of common stock |
|
|
4,187,566 |
|
|
|
--- |
|
|
|
419 |
|
|
|
---
|
|
|
|
(59,000 |
) |
|
|
407,181 |
|
|
|
|
|
|
|
348,600 |
|
|
Fair value of warrants allocated to proceeds of common stock |
|
|
--- |
|
|
|
--- |
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
88,833 |
|
|
|
---
|
|
|
|
88,833 |
|
|
Conversion of convertible notes payable to common stock |
|
|
4,672,612 |
|
|
|
--- |
|
|
|
467 |
|
|
|
---
|
|
|
|
51,652 |
|
|
|
600,441 |
|
|
|
---
|
|
|
|
652,560 |
|
|
Consultant and director fees payable with common shares and
warrants |
|
|
--- |
|
|
|
--- |
|
|
|
---
|
|
|
|
---
|
|
|
|
60,212 |
|
|
|
6,666 |
|
|
|
---
|
|
|
|
66,878 |
|
|
Shares and options issued pursuant to employee equity incentive
plan |
|
|
132,500 |
|
|
|
--- |
|
|
|
13 |
|
|
|
--- |
|
|
|
(7,161 |
) |
|
|
45,724 |
|
|
|
--- |
|
|
|
38,576 |
|
|
Net loss |
|
|
--- |
|
|
|
--- |
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
(580,216 |
) |
|
|
(580,216 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at March 31, 2020 |
|
|
118,887,168 |
|
|
|
--- |
|
|
|
11,889 |
|
|
|
---
|
|
|
|
205,241 |
|
|
|
14,165,291 |
|
|
|
(16,609,870 |
) |
|
|
(2,227,449 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition of Cura Health Management LLC |
|
|
2,240,838 |
|
|
|
--- |
|
|
|
224 |
|
|
|
---
|
|
|
|
---
|
|
|
|
201,451 |
|
|
|
---
|
|
|
|
201,675 |
|
|
Sale of common stock |
|
|
3,180,312 |
|
|
|
--- |
|
|
|
318 |
|
|
|
---
|
|
|
|
24,651 |
|
|
|
228,808 |
|
|
|
---
|
|
|
|
253,777 |
|
|
Fair value of warrants allocated to proceeds of common stock |
|
|
--- |
|
|
|
--- |
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
33,482 |
|
|
|
---
|
|
|
|
33,482 |
|
|
Conversion of convertible notes payable to common stock |
|
|
6,669,320 |
|
|
|
--- |
|
|
|
667 |
|
|
|
---
|
|
|
|
(51,652 |
) |
|
|
584,268 |
|
|
|
---
|
|
|
|
533,283 |
|
|
Consultant and director fees payable with common shares and
warrants |
|
|
111,110 |
|
|
|
--- |
|
|
|
11 |
|
|
|
---
|
|
|
|
34,705 |
|
|
|
8,989 |
|
|
|
---
|
|
|
|
43,705 |
|
|
Shares and options issued pursuant to employee equity incentive
plan |
|
|
163,027 |
|
|
|
--- |
|
|
|
16 |
|
|
|
---
|
|
|
|
|
|
|
|
39,397 |
|
|
|
---
|
|
|
|
39,413 |
|
|
Net loss |
|
|
--- |
|
|
|
--- |
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
(1,517,848 |
) |
|
|
(1,517,848 |
) |
|
Balance at June 30, 2020 |
|
|
131,251,775 |
|
|
|
--- |
|
|
|
13,125 |
|
|
|
---
|
|
|
|
212,945 |
|
|
|
15,261,686 |
|
|
|
(18,127,718 |
) |
|
|
(2,639,962 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contingent acquisition consideration issued |
|
|
1,835,626 |
|
|
|
--- |
|
|
|
184 |
|
|
|
---
|
|
|
|
|
|
|
|
292,599 |
|
|
|
---
|
|
|
|
292,783 |
|
|
Sales of common stock |
|
|
4,829,289 |
|
|
|
--- |
|
|
|
483 |
|
|
|
---
|
|
|
|
(23,901 |
) |
|
|
340,582 |
|
|
|
---
|
|
|
|
317,164 |
|
|
Fair value of warrants allocated to proceeds of common stock |
|
|
--- |
|
|
|
--- |
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
57,444 |
|
|
|
---
|
|
|
|
57,444 |
|
|
Sale of common and preferred stock in exchange for marketable
securities |
|
|
24,522,727 |
|
|
|
2,750,000 |
|
|
|
2,452 |
|
|
|
2,750 |
|
|
|
---
|
|
|
|
3,061,687 |
|
|
|
|
|
|
|
3,066,889 |
|
|
Conversion of convertible notes payable to common stock |
|
|
2,855,191 |
|
|
|
--- |
|
|
|
286 |
|
|
|
---
|
|
|
|
---
|
|
|
|
479,387 |
|
|
|
---
|
|
|
|
479,673 |
|
|
Gain on extinguishment of related party debt allocated to
additional paid in capital |
|
|
--- |
|
|
|
--- |
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
283,862 |
|
|
|
---
|
|
|
|
283,862 |
|
|
Consultant and director fees payable with common shares and
warrants |
|
|
1,003,751 |
|
|
|
--- |
|
|
|
100 |
|
|
|
---
|
|
|
|
(6,952 |
) |
|
|
136,611 |
|
|
|
---
|
|
|
|
129,759 |
|
|
Shares and options issued pursuant to employee equity incentive
plan |
|
|
529,465 |
|
|
|
--- |
|
|
|
53 |
|
|
|
---
|
|
|
|
---
|
|
|
|
98,448 |
|
|
|
---
|
|
|
|
98,501 |
|
|
Net loss |
|
|
--- |
|
|
|
--- |
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
(1,734,295 |
) |
|
|
(1,734,295 |
) |
|
Balance at September 30, 2020 |
|
|
166,827,824 |
|
|
|
2,750,000 |
|
|
|
16,683 |
|
|
|
2,750 |
|
|
|
182,092 |
|
|
|
20,012,306 |
|
|
|
(19,862,013 |
) |
|
|
351,818 |
|
See
the accompanying notes to these Unaudited Condensed Consolidated
Financial Statements
HEALTHLYNKED
CORP.
CONDENSED
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
| |
|
Nine Months Ended
September 30,
|
|
| |
|
2021 |
|
|
2020 |
|
| Cash Flows from Operating
Activities |
|
|
|
|
|
|
| Net loss |
|
$ |
(8,697,234 |
) |
|
$ |
(3,832,359 |
) |
| Adjustments to reconcile net loss to
net cash used in operating activities: |
|
|
|
|
|
|
|
|
| Depreciation and
amortization |
|
|
623,438 |
|
|
|
74,811 |
|
| Stock based
compensation, including amortization of prepaid fees |
|
|
574,998 |
|
|
|
436,038 |
|
| Amortization of
original issue discount and debt discount on convertible notes |
|
|
---
|
|
|
|
530,930 |
|
| Loss on sales of
marketable securities |
|
|
---
|
|
|
|
281,606 |
|
| Change in fair
value of derivative financial instruments |
|
|
---
|
|
|
|
(739,485 |
) |
| Loss on
extinguishment of debt |
|
|
4,957,168 |
|
|
|
1,347,371 |
|
| Change in fair
value of debt |
|
|
19,246 |
|
|
|
198,764 |
|
| Change in fair
value of contingent acquisition consideration |
|
|
234,678 |
|
|
|
(687 |
) |
| Changes in
operating assets and liabilities: |
|
|
|
|
|
|
|
|
| Accounts
receivable |
|
|
(25,831 |
) |
|
|
(20,297 |
) |
| Inventory |
|
|
(11,706 |
) |
|
|
(34,740 |
) |
| Prepaid expenses
and deposits |
|
|
(40,516 |
) |
|
|
51,575 |
|
| ROU lease
assets |
|
|
78,835 |
|
|
|
200,372 |
|
| Accounts payable
and accrued expenses |
|
|
800,732 |
|
|
|
615,434 |
|
| Lease
liability |
|
|
(82,102 |
) |
|
|
(197,877 |
) |
| Due to related
party, current portion |
|
|
---
|
|
|
|
46,370 |
|
|
Contract liabilities |
|
|
(58,890 |
) |
|
|
(52,321 |
) |
| Net cash used
in operating activities |
|
|
(1,627,184 |
) |
|
|
(1,094,495 |
) |
| |
|
|
|
|
|
|
|
|
| Cash Flows from
Investing Activities |
|
|
|
|
|
|
|
|
| Proceeds from sale of marketable
securities |
|
|
---
|
|
|
|
2,740,806 |
|
| Acquisition, net of cash acquired |
|
|
---
|
|
|
|
(164,005 |
) |
| Payment of contingent acquisition
consideration |
|
|
(322,106 |
) |
|
|
(137,390 |
) |
| Acquisition of
property and equipment |
|
|
(12,475 |
) |
|
|
(13,541 |
) |
| Net cash (used
in) provided by investing activities |
|
|
(334,581 |
) |
|
|
2,425,870 |
|
| |
|
|
|
|
|
|
|
|
| Cash Flows from
Financing Activities |
|
|
|
|
|
|
|
|
| Proceeds from sale of common
stock |
|
|
6,949,281 |
|
|
|
1,099,300 |
|
| Proceeds from exercise of options and
warrants |
|
|
350,200 |
|
|
|
---
|
|
| Proceeds from issuance of convertible
notes |
|
|
---
|
|
|
|
827,500 |
|
| Repayment of convertible notes |
|
|
---
|
|
|
|
(1,882,405 |
) |
| Proceeds from related party loans |
|
|
---
|
|
|
|
149,000 |
|
| Repayment of related party loans |
|
|
---
|
|
|
|
(967,756 |
) |
| Proceeds from government loans |
|
|
---
|
|
|
|
1,045,669 |
|
| Repayment of
vendor loans payable |
|
|
(51,109 |
) |
|
|
---
|
|
| Net cash
provided by financing activities |
|
|
7,248,372 |
|
|
|
271,308 |
|
| |
|
|
|
|
|
|
|
|
| Net increase in cash |
|
|
5,286,607 |
|
|
|
1,602,683 |
|
| Cash, beginning of period |
|
|
162,184 |
|
|
|
110,441 |
|
| |
|
|
|
|
|
|
|
|
| Cash, end of period |
|
$ |
5,448,791 |
|
|
$ |
1,713,124 |
|
(continued)
HEALTHLYNKED
CORP.
CONDENSED
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
| |
|
Nine Months Ended
September 30,
|
|
| |
|
2021 |
|
|
2020 |
|
| Supplemental disclosure of cash flow information: |
|
|
|
|
|
|
|
Cash paid during the period for interest |
|
$ |
232 |
|
|
$ |
202,768 |
|
|
Cash paid during the period for income tax |
|
$ |
---
|
|
|
$ |
---
|
|
|
Schedule of non-cash investing and financing activities: |
|
|
|
|
|
|
|
|
|
Forgiveness of government loans |
|
$ |
632,826 |
|
|
$ |
---
|
|
|
Common stock issuable issued during period |
|
$ |
192,547 |
|
|
$ |
66,161 |
|
|
Fair value of warrants issued for professional service |
|
$ |
39,632 |
|
|
$ |
---
|
|
|
Incremental fair value of warrants modified to extend maturity date
of convertible notes payable |
|
$ |
126,502 |
|
|
$ |
---
|
|
|
Conversion of convertible note payable to common shares |
|
$ |
4,061,549 |
|
|
$ |
1,665,516 |
|
|
Fair value of warrants issued in connection with conversion of
convertible notes payable |
|
$ |
3,074,637 |
|
|
$ |
---
|
|
|
Accrued liabilities relieved upon cashless exercise of
warrants |
|
$ |
614,221 |
|
|
$ |
---
|
|
|
Contingent acquisition consideration payable in common stock |
|
$ |
366,300 |
|
|
$ |
---
|
|
|
Initial derivative liability and fair value of beneficial
conversion feature and original issue discount allocated to
proceeds of variable convertible notes payable |
|
$ |
---
|
|
|
$ |
211,497 |
|
|
Adoption of lease obligation and ROU asset |
|
$ |
---
|
|
|
$ |
219,744 |
|
| Fair value of
shares issued as initial acquisition consideration |
|
$ |
---
|
|
|
$ |
201,675 |
|
| Fair value of
shares issued as contingent acquisition consideration |
|
$ |
---
|
|
|
$ |
292,783 |
|
|
Fair value of contingent acquisition consideration issued |
|
$ |
---
|
|
|
$ |
1,057,785 |
|
|
Derivative liabilities written off with repayment of convertible
notes payable |
|
$ |
---
|
|
|
$ |
328,000 |
|
|
Derivative liabilities written off with conversion of convertible
notes payable |
|
$ |
---
|
|
|
$ |
135,300 |
|
|
Reduction in contingent acquisition consideration |
|
$ |
---
|
|
|
$ |
200,328 |
|
|
Fair value of marketable securities received as consideration for
sale of common and preferred shares |
|
$ |
---
|
|
|
$ |
3,006,889 |
|
|
Gain on extinguishment of related party debt allocated to
additional paid in capital |
|
$ |
---
|
|
|
$ |
283,862 |
|
See
the accompanying notes to these Unaudited Condensed Consolidated
Financial Statements
HEALTHLYNKED
CORP.
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER
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
September 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 nine months ended September 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 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
SEPTEMBER
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:
|
● |
Medicare:
Certain inpatient acute care services are paid at prospectively
determined rates per discharge based on clinical, diagnostic and
other factors. Certain services are paid based on
cost-reimbursement methodologies subject to certain limits.
Physician services are paid based upon established fee schedules.
Outpatient services are paid using prospectively determined
rates. |
|
● |
Medicaid:
Reimbursements for Medicaid services are generally paid at
prospectively determined rates per discharge, per occasion of
service, or per covered member. |
|
● |
Other:
Payment agreements with certain commercial insurance carriers,
health maintenance organizations, and preferred provider
organizations provide for payment using prospectively determined
rates per discharge, discounts from established charges, and
prospectively determined daily rates. |
HEALTHLYNKED
CORP.
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER
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 $15,966 and $35,779 as of September 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 plan year 2020 in
September 2021 and for plan year 2019 in September 2020.
Accordingly, the Company recognized Medicare shared savings revenue
of $2,419,312 and $767,744 in the three and nine months ended
September 30, 2021 and 2020, respectively. 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.
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 $-0- and $47,864 as
of September 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
SEPTEMBER
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 $14,569 and $5,782 as of September 30, 2021
and December 31, 2020, respectively. There were no contract assets
as of September 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 $3,919 and
$26,839 and as of September 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 $30,535 and $89,425
as of September 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. The Company received
Medicare shared savings payments and recognized revenue of
$2,419,312 for plan year 2020 in September 2021 and $767,744 for
plan year 2019 in September 2020. Of the Medicare shared savings
payments received, $979,736 and $388,884 were recognized as
provider shared savings expense in the quarter and year-to-date
periods ended September 30, 2021 and 2020, respectively, and are
included in “Medicare shared savings expenses” on the accompanying
Condensed Consolidated Statement of Operations.
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. As of September 30, 2021 and December 31, 2020, the
Company had $4,205,870 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 48.1% of total billings. Trade
accounts receivable are recorded at this net amount. As of
September 30, 2021 and December 31, 2020, the Company’s gross
patient services accounts receivable were $245,148 and $165,464,
respectively, and net patient services accounts receivable were
$111,658 and $71,655, respectively, based upon net reporting of
accounts receivable. As of September 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 September 30, 2021 and December 31, 2020,
respectively.
HEALTHLYNKED
CORP.
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER
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 nine months
ended September 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
SEPTEMBER
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
SEPTEMBER
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:
|
|
● |
Level
1 – Fair value based on quoted prices in active markets for
identical assets or liabilities; |
|
|
● |
Level
2 – Fair value based on significant directly observable data
(other than Level 1 quoted prices) or significant indirectly
observable data through corroboration with observable market data.
Inputs would normally be (i) quoted prices in active markets for
similar assets or liabilities, (ii) quoted prices in inactive
markets for identical or similar assets or liabilities or (iii)
information derived from or corroborated by observable market
data; |
|
|
● |
Level
3 – Fair value based on prices or valuation techniques that
require significant unobservable data inputs. Inputs would normally
be a reporting entity’s own data and judgments about assumptions
that market participants would use in pricing the asset or
liability. |
The
fair value measurement level for an asset or liability is based on
the lowest level of any input that is significant to the fair value
measurement. Valuation techniques should maximize the use of
observable inputs and minimize the use of unobservable
inputs.
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
SEPTEMBER
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 nine months ended
September 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 nine
months ended September 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 September 30, 2021 and December 31, 2020,
potentially dilutive securities were comprised of (i) 60,136,992
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) 90,000 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
SEPTEMBER
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
SEPTEMBER
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 September 30, 2021, the Company had cash balances of
$5,448,791, working capital of $3,070,164 and accumulated deficit
$30,482,144. For the nine months ended September 30, 2021, the
Company had a net loss of $8,697,234 and net cash used by operating
activities of $1,627,184. Net cash used in investing activities was
$334,581. Net cash provided by financing activities was $7,248,372,
including $6,949,281 received from sales of common stock in private
placements, registered direct transactions and puts pursuant to the
July 2016 $3 million investment agreement (the “Investment
Agreement”), and $350,200 in 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. During August 2021, the Company sold
3,703,704 common shares and 1,851,852 five-year warrants with an
exercise price of $0.65 to an institutional investor at an offering
price of $0.54 per share, resulting in gross proceeds of
$2,000,000.
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
SEPTEMBER
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. Following the acquisition, HCFM was
rebranded as NCFM and was combined with NWC to form the Company’s
Health Services segment. 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
$1,764,672. The Company accounted for the transaction as an
acquisition of a business pursuant to ASC 805, “Business
Combinations” (“ASC 805”).
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 September 30, 2021 and 2020, the Company
recognized losses on the change in the fair value of contingent
acquisition consideration of ($14,316) and ($1,185), respectively.
During the nine months ended September 30, 2021 and 2020, the
Company recognized losses on the change in the fair value of
contingent acquisition consideration of ($63,769) and ($12,512),
respectively. During the nine months ended September 30, 2021 and
2020, the Company paid the sellers $196,000 and $47,000 cash,
respectively, in satisfaction of the second year and first year
earn-outs, respectively.
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
SEPTEMBER
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 the Company’s common stock issued at
closing, (iii) up to $223,500 additional cash and $660,000 in
additional shares of the Company’s common stock 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
(the “Second Amendment”) and in satisfaction of the Current
Earnout, the Company paid $90,389 cash, issued 1,835,625 shares of
the Company’s common stock 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 “Residual Earnout”). During September 2021, the Company was
notified of the amount of Medicare shared savings and received
payment for plan year 2020 in the amount of $2,419,312. As a
result, the sellers were paid the residual $124,043 cash in
September 2021 and issued 806,828 shares of Company common stock
with a value of $366,300 in October 2021 pursuant to the Residual
Earnout. Following the payments, the Company has no further
obligations under the Residual Earnout. The Company also determined
that the sellers did not earn any of the $62,500 year one Future
Earnout related to the performance period May 19, 2020 to May 18,
2021.
HEALTHLYNKED CORP.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
(UNAUDITED)
NOTE 4 – ACQUISITIONS (CONTINUED)
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 September 30, 2021 and 2020, the Company
recognized gains (losses) on the change in the fair value of
contingent acquisition consideration of ($116,151) and $47,181,
respectively. During the nine months ended September 30, 2021 and
2020, the Company recognized gains (losses) on the change in the
fair value of contingent acquisition consideration of ($54,848) and
$13,200, respectively.
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.
HEALTHLYNKED CORP.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
(UNAUDITED)
NOTE 4 – ACQUISITIONS (CONTINUED)
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 |
|
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 September 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 $256,877 and
$-0-, respectively. During the nine months ended September 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 ($116,062) 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.
HEALTHLYNKED CORP.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
(UNAUDITED)
NOTE 4 – ACQUISITIONS (CONTINUED)
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 nine-month
period ending September 30, 2020. All acquired entities were
included in the Company’s consolidated results of operations in the
full three- and nine-month periods ended September 30, 2021.
| Revenue |
|
$ |
4,740,283 |
|
| Net loss |
|
$ |
(3,846,293 |
) |
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.
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 of the
Company’s common stock 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 $-0- in the three months ending September 30, 2021 and 2020,
respectively, and $-0- and $19,203 in the nine months ending
September 30, 2021 and 2020, respectively.
NOTE 6 – PROPERTY, PLANT, AND EQUIPMENT
Property, plant and equipment at September 30, 2021 and December
31, 2020 were as follows:
| |
|
September 30, |
|
|
December 31, |
|
| |
|
2021 |
|
|
2020 |
|
| |
|
|
|
|
|
|
| Medical equipment |
|
$ |
484,126 |
|
|
$ |
484,126 |
|
| Furniture,
office equipment and leasehold improvements |
|
|
143,093 |
|
|
|
130,617 |
|
| |
|
|
|
|
|
|
|
|
| Total property, plant and
equipment |
|
|
627,219 |
|
|
|
614,743 |
|
| Less:
accumulated depreciation |
|
|
(258,222 |
) |
|
|
(177,457 |
) |
| |
|
|
|
|
|
|
|
|
| Property, plant
and equipment, net |
|
$ |
368,997 |
|
|
$ |
437,286 |
|
Depreciation expense during the three months ended September 30,
2021 and 2020 was $26,343 and $23,084, respectively. Depreciation
expense during the nine months ended September 30, 2021 and 2020
was $80,764 and $68,655, respectively.
HEALTHLYNKED CORP.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
(UNAUDITED)
NOTE 7 – INTANGIBLE ASSETS AND GOODWILL
Intangible assets at September 30, 2021 and December 31, 2020 were
as follows:
| |
|
September 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 |
|
|
(694,450 |
) |
|
|
(151,776 |
) |
| |
|
|
|
|
|
|
|
|
| Intangible
assets, net |
|
$ |
5,059,088 |
|
|
$ |
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.
Amortization expense in the three months ended September 30, 2021
and 2020 was $178,968 and $2,067, respectively. Amortization
expense in the nine months ended September 30, 2021 and 2020 was
$542,674 and $6,156, respectively. No impairment charges were
recognized related to goodwill and intangible assets in the three
or nine months ended September 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
September 30, 2021, the Company’s weighted-average remaining lease
term relating to its operating leases was 2.0 years, with
a weighted-average discount rate of 20.49%. The Company was
also previously a 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 September 30, 2021 and December 31, 2020:
| |
|
September 30, |
|
|
December 31, |
|
| |
|
2021 |
|
|
2020 |
|
| Lease
assets |
|
$ |
599,781 |
|
|
$ |
417,913 |
|
| |
|
|
|
|
|
|
|
|
| Lease
liabilities |
|
|
|
|
|
|
|
|
| Lease
liabilities (short term) |
|
$ |
292,844 |
|
|
$ |
150,251 |
|
|
Lease liabilities (long term) |
|
|
309,799 |
|
|
|
273,790 |
|
| Total
lease liabilities |
|
$ |
602,643 |
|
|
$ |
424,041 |
|
HEALTHLYNKED CORP.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
(UNAUDITED)
NOTE 8 – LEASES (CONTINUED)
Lease expense in the three and nine months ended September 30, 2021
and 2020 was as follow:
| |
|
Three Months Ended
September 30,
|
|
|
Nine Months Ended
September 30,
|
|
| |
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Operating leases |
|
$ |
99,544 |
|
|
$ |
61,526 |
|
|
$ |
241,909 |
|
|
$ |
242,891 |
|
| Financing
leases |
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
4,587 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total lease
expense |
|
$ |
99,544 |
|
|
$ |
61,526 |
|
|
$ |
241,909 |
|
|
$ |
247,478 |
|
Maturities of operating lease liabilities were as follows as of
September 30, 2021:
| 2021 (July to
December) |
|
$ |
107,623 |
|
| 2022 |
|
|
383,619 |
|
| 2023 |
|
|
273,844 |
|
| Total lease payments |
|
|
765,086 |
|
| Less
interest |
|
|
(162,443 |
) |
| Present value of lease
liabilities |
|
$ |
602,643 |
|
NOTE 9 – CONTRACT LIABILITIES
Amounts related to contract liabilities as of September 30, 2021
and December 31, 2020 were as follow:
| |
|
September 30, |
|
|
December 31, |
|
| |
|
2021 |
|
|
2020 |
|
| |
|
|
|
|
|
|
| Patient services paid but
not provided |
|
$ |
15,966 |
|
|
$ |
35,779 |
|
| Consulting services paid but not
provided |
|
|
---
|
|
|
|
47,864 |
|
| Unshipped
products |
|
|
14,569 |
|
|
|
5,782 |
|
| |
|
$ |
30,535 |
|
|
$ |
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 September 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 September 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 $32,968
during the three months ended September 30, 2021 and 2020,
respectively, and $-0- and $80,935 during the nine months ended
September 30, 2021 and 2020, respectively. No interest was accrued
on the Dent Notes as of September 30, 2020 or December 31, 2020.
Interest expense on the Dent Notes was $-0- and $14,159 in the
three months ended September 30, 2021 and 2020, respectively, and
$-0- and $86,446 in the nine months ended September 30, 2021 and
2020, respectively.
HEALTHLYNKED CORP.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
(UNAUDITED)
NOTE 10 – AMOUNTS DUE TO RELATED PARTY AND RELATED PARTY
TRANSACTIONS (CONTINUED)
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 $36,059 during the three months ended September 30, 2021 and
2020, respectively, and $-0- and $187,500 during the nine months
ended September 30, 2021 and 2020, respectively. The Company
recognized amortization of the discount in the amount of $-0- and
$-0-, during the three months ended September 30, 2021 and 2020,
respectively, and $-0- and $38,500, during the nine months ended
September 30, 2021 and 2020, respectively.
NOTE 11 – GOVERNMENT AND VENDOR NOTES PAYABLE
Government and vendor notes payable as of September 30, 2021 and
December 31, 2020 were comprised of the following:
| |
|
September 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 nine 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 nine
months ended September 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 and were subsequently extended by the SBA until 24 months
from the inception date. Interest accrued on SBA Disaster Relief
loans payable as of September 30, 2021 and December 31, 2020 was
$20,484 and $12,240, respectively. Interest expense on the loans
was $4,226 and $861 for the three months ended September 30, 2021
and 2020, respectively, and $12,594 and $861 for the nine months
ended September 30, 2021 and 2020, respectively.
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.
HEALTHLYNKED CORP.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
(UNAUDITED)
NOTE 12 – CONVERTIBLE NOTES PAYABLE
Convertible notes payable as of September 30, 2021 and December 31,
2020 were comprised of the following:
| |
|
September 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 |
|
Amortization of debt discount recognized on each convertible note
outstanding during the three and nine months ended September 30,
2021 and 2020 are shown in the following table. There were no
unamortized discounts as of September 30, 2021 or December 31, 2020
related to convertible notes payable.
| |
|
Three Months Ended
September 30, |
|
|
Nine Months Ended
September 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 |
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
21,038 |
|
| $142.5k Note - October 2019 |
|
|
---
|
|
|
|
21,804 |
|
|
|
---
|
|
|
|
92,663 |
|
| $103k Note V - October 2019 |
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
29,143 |
|
| $108.9k Note II - October 2019 |
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
33,205 |
|
| $128.5k Note - October 2019 |
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
51,705 |
|
| $103k Note VI - November 2019 |
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
39,450 |
|
| $78.8k Note II - December 2019 |
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
27,111 |
|
| $131.3k Note - January 2020 |
|
|
---
|
|
|
|
1,158 |
|
|
|
---
|
|
|
|
16,205 |
|
| $78k Note IV - January 2020 |
|
|
---
|
|
|
|
1,608 |
|
|
|
---
|
|
|
|
14,955 |
|
| $157.5k Note - March 2020 |
|
|
---
|
|
|
|
7,432 |
|
|
|
---
|
|
|
|
20,044 |
|
| $157.5k Note II - April 2020 |
|
|
---
|
|
|
|
9,127 |
|
|
|
---
|
|
|
|
21,436 |
|
| $135k Note - April 2020 |
|
|
---
|
|
|
|
7,744 |
|
|
|
---
|
|
|
|
17,718 |
|
| $83k Note II - April 2020 |
|
|
---
|
|
|
|
6,675 |
|
|
|
---
|
|
|
|
13,767 |
|
| $128k Note - April 2020 |
|
|
---
|
|
|
|
10,268 |
|
|
|
---
|
|
|
|
18,097 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
$ |
---
|
|
|
$ |
65,816 |
|
|
$ |
---
|
|
|
$ |
492,430 |
|
HEALTHLYNKED CORP.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
(UNAUDITED)
NOTE 12 – CONVERTIBLE NOTES PAYABLE (CONTINUED)
Interest expense recognized on each convertible note outstanding
during the three and nine months ended September 30, 2021 and 2020
were as follows:
| |
|
Three Months Ended
September 30, |
|
|
Nine Months Ended
September 30, |
|
| |
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
| $550k Note - July 2016 |
|
$ |
---
|
|
|
$ |
8,318 |
|
|
$ |
2,351 |
|
|
$ |
24,773 |
|
| $50k Note - July 2016 |
|
|
---
|
|
|
|
1,260 |
|
|
|
219 |
|
|
|
3,753 |
|
| $111k Note - May 2017 |
|
|
---
|
|
|
|
2,042 |
|
|
|
333 |
|
|
|
8,755 |
|
| $357.5k Note - April 2019 |
|
|
---
|
|
|
|
9,012 |
|
|
|
1,469 |
|
|
|
18,751 |
|
| $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 |
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
2,564 |
|
| $142.5k Note - October 2019 |
|
|
---
|
|
|
|
3,592 |
|
|
|
---
|
|
|
|
12,884 |
|
| $103k Note V - October 2019 |
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
2,653 |
|
| $108.9k Note II - October 2019 |
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
3,970 |
|
| $128.5k Note - October 2019 |
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
5,149 |
|
| $103k Note VI - November 2019 |
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
3,527 |
|
| $78.8k Note II - December 2019 |
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
3,344 |
|
| $131.3k Note - January 2020 |
|
|
---
|
|
|
|
467 |
|
|
|
---
|
|
|
|
6,545 |
|
| $78k Note IV - January 2020 |
|
|
---
|
|
|
|
427 |
|
|
|
---
|
|
|
|
3,975 |
|
| $157.5k Note - March 2020 |
|
|
---
|
|
|
|
2,848 |
|
|
|
---
|
|
|
|
7,681 |
|
| $157.5k Note II - April 2020 |
|
|
---
|
|
|
|
2,848 |
|
|
|
---
|
|
|
|
6,688 |
|
| $135k Note - April 2020 |
|
|
---
|
|
|
|
2,441 |
|
|
|
---
|
|
|
|
5,585 |
|
| $83k Note II - April 2020 |
|
|
---
|
|
|
|
1,819 |
|
|
|
---
|
|
|
|
3,752 |
|
| $128k Note - April 2020 |
|
|
---
|
|
|
|
2,805 |
|
|
|
---
|
|
|
|
4,945 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
$ |
---
|
|
|
$ |
37,879 |
|
|
$ |
4,372 |
|
|
$ |
133,757 |
|
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 nine
months ended September 30, 2021 and 2020 and the fair value as of
such instruments as of September 30, 2021 and December 31, 2020
were as follows:
| |
|
Change in Fair Value of Debt |
|
|
Fair Value of Debt as of |
|
| |
|
Three Months Ended
September 30, |
|
|
Nine Months Ended
September 30, |
|
|
September 30, |
|
|
December 31, |
|
| |
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| $550k Note - July 2016 |
|
$ |
---
|
|
|
$ |
24,285 |
|
|
$ |
10,344 |
|
|
$ |
59,618 |
|
|
$ |
---
|
|
|
$ |
719,790 |
|
| $50k Note - July 2016 |
|
|
---
|
|
|
|
2,520 |
|
|
|
1,017 |
|
|
|
6,187 |
|
|
|
---
|
|
|
|
71,611 |
|
| $111k Note - May 2017 |
|
|
---
|
|
|
|
4,721 |
|
|
|
1,706 |
|
|
|
16,261 |
|
|
|
---
|
|
|
|
120,659 |
|
| $357.5k Note - April 2019 |
|
|
---
|
|
|
|
14,567 |
|
|
|
6,179 |
|
|
|
35,763 |
|
|
|
---
|
|
|
|
424,290 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
$ |
---
|
|
|
$ |
46,093 |
|
|
$ |
19,246 |
|
|
$ |
117,829 |
|
|
$ |
---
|
|
|
$ |
1,336,350 |
|
HEALTHLYNKED CORP.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
(UNAUDITED)
NOTE 12 – CONVERTIBLE NOTES PAYABLE (CONTINUED)
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 nine months ended September 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 $5,463,492 in the nine
months ended September 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.
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.
HEALTHLYNKED CORP.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
(UNAUDITED)
NOTE 12 – CONVERTIBLE NOTES PAYABLE (CONTINUED)
Convertible Note Payable
($111,000) – May 2017
On May 22, 2017, the Company entered into a 10% fixed convertible
secured promissory note with an investor with a face value of
$111,000. The $111k Note 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 nine months ended September
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 nine months ended September 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 nine months ended September 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 nine months ended September 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
($78,000) – July 2019
On July 16, 2019, the Company issued a $78,000 convertible note
(the “$78k Note III”). During the nine months ended September 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 nine months ended
September 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
SEPTEMBER 30, 2021
(UNAUDITED)
NOTE 12 – CONVERTIBLE NOTES PAYABLE (CONTINUED)
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 nine months ended
September 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 nine
months ended September 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 nine months ended September 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, 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 nine months ended September 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
($142,500) – October 2019
On October 1, 2019, the Company issued a $142,500 convertible note
(the “$142.5k Note”). During the nine months ended September 30,
2020, the holder converted the full principal of $142,500 and
accrued interest of $14,250 into 2,855,191 shares of Company common
stock. In connection with the conversions, the Company recognized a
loss on debt extinguishment of $305,100 in the nine months ended
September 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
($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 nine months ended
September 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 nine months ended September 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 nine months ended September 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
SEPTEMBER 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 nine months ended September 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. In connection with the
repayment, the Company recognized a loss on debt extinguishment of
$24,663 in the nine months ended September 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
($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. In connection with the
repayment, the Company recognized a loss on debt extinguishment of
$9,104 in the nine months ended September 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
($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. In connection with the
repayment, the Company recognized a loss on debt extinguishment of
$28,150 in the nine months ended September 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
($157,500) – April 2020
On April 2, 2020, the Company issued a $157,500 convertible note
(the “$157.5k Note II”). On September 4, 2020, the Company prepaid
the balance on the $157.5k Note, including accrued interest, for a
one-time cash payment of $205,235. In connection with the
repayment, the Company recognized a loss on debt extinguishment of
$31,490 in the nine months ended September 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
($135,000) – April 2020
On April 6, 2020, the Company issued a $135,000 convertible note
(the “$135k Note”). On September 4, 2020, the Company prepaid the
balance on the $135k Note, including accrued interest, for a
one-time cash payment of $175,592. In connection with the
repayment, the Company recognized a loss on debt extinguishment of
$18,479 in the nine months ended September 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
($83,000) – April 2020
On April 6, 2020, the Company issued an $83,000 convertible note
(the “$83k Note”). On September 18, 2020, the Company prepaid the
balance on the $83k Note, including accrued interest, for a
one-time cash payment of $108,127. In connection with the
repayment, the Company recognized a loss on debt extinguishment of
$13,012 in the nine months ended September 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
SEPTEMBER 30, 2021
(UNAUDITED)
NOTE 12 – CONVERTIBLE NOTES PAYABLE (CONTINUED)
Convertible Note Payable
($128,000) – April 2020
On April 30, 2020, the Company issued a $128,000 convertible note
(the “$128k Note”). On September 18, 2020, the Company prepaid the
balance on the $128k Note, including accrued interest, for a
one-time cash payment of $165,962. In connection with the
repayment, the Company recognized a loss on debt extinguishment of
$21,000 in the nine months ended September 30, 2020, equal to the
excess of the payment amount over the carrying value of the note,
derivative embedded conversion feature and accrued interest.
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 nine months ended September 30, 2021 and 2020 include
the following:
| |
|
Three Months Ended
September 30, |
|
|
Nine Months Ended
September 30, |
|
| |
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Balance, beginning of period |
|
$ |
---
|
|
|
$ |
257,384 |
|
|
$ |
---
|
|
|
$ |
991,288 |
|
| Inception of derivative financial
instruments |
|
|
---
|
|
|
|
--- |
|
|
|
---
|
|
|
|
211,498 |
|
| Change in fair value of derivative
financial instruments |
|
|
---
|
|
|
|
(12,802 |
) |
|
|
---
|
|
|
|
(739,485 |
) |
| Conversion or
extinguishment of derivative financial instruments |
|
|
---
|
|
|
|
(244,582 |
) |
|
|
---
|
|
|
|
(463,301 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Balance, end of period |
|
$ |
---
|
|
|
$ |
--- |
|
|
$ |
---
|
|
|
$ |
--- |
|
Fair market value of the derivative financial instruments was
measured using the following assumptions:
| |
|
Nine Months Ended
September 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 144.51% |
|
| 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
September 30, 2021 or December 31, 2020.
HEALTHLYNKED CORP.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
(UNAUDITED)
NOTE 14 – SHAREHOLDERS’ EQUITY
Registered Direct Offering
– August 2021
On August 26, 2021, the Company entered into a securities purchase
agreement with a certain institutional investor (the “Purchaser”)
pursuant to which the Company agreed to sell in a registered direct
offering (the “Registered Direct Offering”) 3,703,704 shares of the
Company’s common stock to the Purchaser at an offering price of
$0.54 per share and issue associated warrants. In a concurrent
private placement, the Company also sold to the Purchaser
unregistered warrants (the “Warrants”) to purchase up to an
aggregate of 1,851,852 shares of common stock, representing 50% of
the shares of common stock that may be purchased in the Registered
Direct Offering. The Warrants are exercisable at an exercise price
of $0.65 per share, are exercisable immediately upon issuance and
have a term of exercise equal to five years from the date of
issuance. The Company also issued compensation warrants to its
placement agent to purchase up to 269,269 shares of common stock,
equal to 8.0% of the aggregate number of shares of common stock
placed in the Registered Direct Offering. The placement agent
warrants have a term of five (5) years from the commencement of
sales under the Registered Direct Offering and an exercise price of
$0.675 per share of common stock (equal to 125% of the offering
price per share of common stock).
The Company received net proceeds from the sale of shares of common
stock, after deducting placement agent fees and other offering
expenses payable by the Company, of $1,719,921. The transactions
closed on August 31, 2021.
Private
Placements
During the nine months ended September 30, 2021, the Company sold
13,161,943 shares of common stock in 53 separate private placement
transactions. The Company received $4,328,725 in proceeds from the
sales. In connection with these stock sales, the Company also
issued 6,581,527 five-year warrants to purchase shares of common
stock at exercise prices between $0.27 and $1.05 per share.
During the nine months ended September 30, 2020, the Company sold
6,650,843 shares of common stock in 20 separate private placement
transactions and received $673,001 in proceeds from the sales. In
connection with the stock sales, the Company also issued 3,463,825
five-year warrants to purchase shares of common stock at exercise
price between $0.16 and $0.27 per share.
Investment Agreement
Draws
During nine months ended September 30, 2021 and 2020, the Company
issued 3,006,098 and 4,975,491 common shares, respectively,
pursuant to draws made by the Company under the Investment
Agreement and received an aggregate of $900,636 and $426,299,
respectively, in net proceeds from the draws.
Shares issued to
Consultants
During the nine months ended September 30, 2021 and 2020, the
Company issued 677,242 and 1,214,861 common shares, respectively,
to consultants for services rendered. In connection with the
issuances, the Company recognized expenses totaling $151,322 and
$156,501 in the nine months ended September 30, 2021 and 2020,
respectively.
Common Stock
Issuable
As of September 30, 2021 and December 31, 2020, the Company was
obligated to issue the following shares:
| |
|
September 30, 2021 |
|
|
December
31, 2020 |
|
| |
|
Amount |
|
|
Shares |
|
|
Amount |
|
|
Shares |
|
| Shares issuable to
consultants, employees and directors |
|
$ |
728,368 |
|
|
|
2,517,458 |
|
|
$ |
262,273 |
|
|
|
2,150,020 |
|
HEALTHLYNKED CORP.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
(UNAUDITED)
NOTE 14 – SHAREHOLDERS’ EQUITY (CONTINUED)
Stock Warrants
Transactions involving our stock warrants during the nine months
ended September 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 |
|
|
$ |
0.17 |
|
|
|
47,056,293 |
|
|
$ |
0.17 |
|
| Granted during the period |
|
|
22,421,026 |
|
|
$ |
0.39 |
|
|
|
3,463,825 |
|
|
$ |
0.20 |
|
| Exercised during the period |
|
|
(13,637,020 |
) |
|
$ |
(0.18 |
) |
|
|
---
|
|
|
$ |
---
|
|
| Expired during
the period |
|
|
---
|
|
|
$ |
0.00 |
|
|
|
(50,000 |
) |
|
$ |
(0.40 |
) |
| Outstanding at
end of the period |
|
|
60,136,992 |
|
|
$ |
0.25 |
|
|
|
50,470,118 |
|
|
$ |
0.18 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Exercisable at end of the period |
|
|
60,136,992 |
|
|
$ |
0.25 |
|
|
|
50,470,118 |
|
|
$ |
0.18 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Weighted average remaining life |
|
|
3.4 years |
|
|
|
|
|
|
|
3.4 years |
|
|
|
|
|
The following table summarizes information about the Company’s
stock warrants outstanding as of September 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 |
|
|
|
14,789,573 |
|
|
|
3.3 |
|
|
$ |
0.07 |
|
|
|
14,789,573 |
|
|
$ |
0.07 |
|
| $ |
0.10 to 0.24 |
|
|
|
9,714,380 |
|
|
|
2.9 |
|
|
$ |
0.17 |
|
|
|
9,714,380 |
|
|
$ |
0.17 |
|
| $ |
0.25 to 0.49 |
|
|
|
31,741,448 |
|
|
|
3.5 |
|
|
$ |
0.31 |
|
|
|
31,741,448 |
|
|
$ |
0.31 |
|
|
$ |
0.50 to 1.05 |
|
|
|
3,891,591 |
|
|
|
4.3 |
|
|
$ |
0.67 |
|
|
|
3,891,591 |
|
|
$ |
0.67 |
|
|
$ |
0.05
to 1.00 |
|
|
|
60,136,992 |
|
|
|
3.4 |
|
|
$ |
0.25 |
|
|
|
60,136,992 |
|
|
$ |
0.25 |
|
During the nine months ended September 30, 2021 and 2020, the
Company issued 22,421,026 and 3,463,825 warrants, respectively, the
aggregate grant date fair value of which was $5,823,476 and
$222,987, respectively. The fair value of the warrants was
calculated using the following range of assumptions:
| |
|
Nine Months Ended
September 30, |
|
| |
|
2021 |
|
|
2020 |
|
| |
|
|
|
|
|
|
| Pricing model
utilized |
|
|
Binomial Lattice |
|
|
|
Binomial Lattice |
|
| Risk free rate range |
|
|
0.38% to 0.97% |
|
|
|
0.19% 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.
HEALTHLYNKED CORP.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
(UNAUDITED)
NOTE 14 – SHAREHOLDERS’ EQUITY (CONTINUED)
During the nine months ended September 30, 2021, the Company
received $333,750 upon the exercise of 3,065,278 warrants with
exercise prices between $0.09 and $0.15. 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 nine months ended September 30, 2020.
Employee Equity Incentive
Plan
On January 1, 2016, the Company adopted the 2016 Employee Equity
Incentive Plan (the “2016 EIP”) for the purpose of having equity
awards available to allow for equity participation by its
employees. The 2016 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 2016 EIP is governed by the Company’s board, or
a committee that may be appointed by the board in the future. The
plan expired during 2021 but allows for the prospective issuance of
additional shares subject to vesting of awards made prior to
expiration of the plan.
On September 9, 2021, the Company adopted the 2021 Employee Equity
Incentive Plan (the “2021 EIP”) for the purpose of having equity
awards available to allow for equity participation by its
employees. The 2021 EIP allows for the issuance of up to 20,000,000
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 2021 EIP is governed by the Company’s board, or
a committee that may be appointed by the board in the future. No
awards were made under the 2021 EIP during the three or nine months
ended September 30 2021 or 2020.
The following table summarizes the status of shares issued and
outstanding under the 2016 EIP outstanding as of and for the nine
months ended September 30, 2021 and 2020:
| |
|
2021 |
|
|
2020 |
|
| Outstanding at beginning
of the period |
|
|
2,603,528 |
|
|
|
1,874,063 |
|
| Granted during the period |
|
|
1,015,047 |
|
|
|
664,465 |
|
| Forfeited
during the period |
|
|
(52,500 |
) |
|
|
(62,500 |
) |
| Outstanding at
end of the period |
|
|
3,566,075 |
|
|
|
2,476,028 |
|
| |
|
|
|
|
|
|
|
|
| Shares vested at period-end |
|
|
3,476,075 |
|
|
|
2,176,028 |
|
| Weighted average grant date fair value of shares granted during
the period |
|
$ |
0.27 |
|
|
$ |
0.14 |
|
| Aggregate grant date fair value of
shares granted during the period |
|
$ |
4,050 |
|
|
$ |
18,760 |
|
| Shares available for grant pursuant at
period-end |
|
|
8,923,855 |
|
|
|
9,778,403 |
|
Total stock-based compensation recognized for employee grants was
$60,422 and $79,196 during the three months ended September 30,
2021 and 2020, respectively, and $239,729 and $109,349 during the
nine months ended September 30, 2021 and 2020, respectively. Total
unrecognized stock compensation related to these grants was $25,575
as of September 30, 2021.
A summary of the status of nonvested shares issued pursuant to the
2016 EIP as of and for the nine months ended September 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 |
|
|
1,015,047 |
|
|
$ |
0.27 |
|
|
|
664,465 |
|
|
$ |
0.14 |
|
| Vested |
|
|
(1,075,047 |
) |
|
$ |
(0.26 |
) |
|
|
(609,465 |
) |
|
$ |
(0.14 |
) |
| Forfeited |
|
|
(50,000 |
) |
|
$ |
(0.10 |
) |
|
|
(87,500 |
) |
|
$ |
(0.06 |
) |
| Nonvested at end of period |
|
|
90,000 |
|
|
$ |
0.19 |
|
|
|
300,000 |
|
|
$ |
0.20 |
|
HEALTHLYNKED CORP.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
(UNAUDITED)
NOTE 14 – SHAREHOLDERS’ EQUITY (CONTINUED)
During the nine months ended September 30, 2021 and 2020, the
Company issued 1,235,047 and 724,992 shares under the 2016 EIP
pursuant to the grants and vesting described in the tables above,
respectively, of which 428,543 and 724,992, 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 nine months ended September 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 |
|
|
|
60,000 |
|
|
$ |
0.09 |
|
| 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 |
|
|
|
3,249,250 |
|
|
$ |
0.20 |
|
The following table summarizes information about the Company’s
stock options outstanding as of September 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 |
|
Total stock-based compensation recognized related to option grants
was $9,615 and $19,305 during the three months ended September 30,
2021 and 2020, respectively, and $64,304 and $61,155 during the
nine months ended September 30, 2021 and 2020, respectively. During
the nine months ended September 30, 2021, the Company received
$16,450 upon the exercise of 145,500 options with exercise prices
between $0.10 and $0.252. There were no options exercised during
the nine months ended September 30, 2020.
A summary of the status of nonvested options issued pursuant to the
EIP as of and for the nine months ended September 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 |
|
|
|
60,000 |
|
|
$ |
0.07 |
|
| Vested |
|
|
(255,000 |
) |
|
$ |
(0.25 |
) |
|
|
(379,375 |
) |
|
$ |
(0.20 |
) |
| Forfeited |
|
|
(29,375 |
) |
|
$ |
(0.12 |
) |
|
|
(80,000 |
) |
|
$ |
(0.21 |
) |
| Nonvested at end of period |
|
|
840,000 |
|
|
$ |
0.24 |
|
|
|
1,236,875 |
|
|
$ |
0.21 |
|
HEALTHLYNKED CORP.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
(UNAUDITED)
NOTE 15 – CONTINGENT ACQUISITION CONSIDERATION
Contingent acquisition consideration as of September 30, 2021 and
December 31, 2020 was comprised of the following:
| |
|
September 30, |
|
|
December 31, |
|
| |
|
2021 |
|
|
2020 |
|
| |
|
|
|
|
|
|
| Fair value of HCFM
contingent acquisition consideration |
|
$ |
169,005 |
|
|
$ |
301,236 |
|
| Fair value of CHM contingent
acquisition consideration |
|
|
245,102 |
|
|
|
682,661 |
|
| Fair value of
MOD contingent acquisition consideration |
|
|
632,605 |
|
|
|
516,543 |
|
| |
|
|
|
|
|
|
|
|
| |
|
$ |
1,046,712 |
|
|
$ |
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 $126,411 and $45,996
during the three months ended September 30, 2021 and 2020,
respectively, and ($234,678) and $687 during the nine months ended
September 30, 2021 and 2020, respectively.
Maturities of contingent acquisition consideration were as follows
as of September 30, 2021:
| 2021 (October to
December) |
|
$ |
16,632 |
|
| 2022 |
|
|
325,904 |
|
| 2023 |
|
|
352,809 |
|
| 2024 |
|
|
351,367 |
|
| |
|
$ |
1,046,712 |
|
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.
HEALTHLYNKED CORP.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
(UNAUDITED)
NOTE 16 – COMMITMENTS AND CONTINGENCIES (CONTINUED)
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
September 30, 2021:
| 2021 (October to
December) |
|
$ |
107,623 |
|
| 2022 |
|
|
383,619 |
|
| 2023 |
|
|
273,844 |
|
| Total lease payments |
|
|
765,086 |
|
| Less
interest |
|
|
(162,443 |
) |
| Present value of
lease liabilities |
|
$ |
602,643 |
|
Employment/Consulting
Agreements
The Company has employment agreements with certain of its
physicians, nurse practitioners and physical therapists in the
Health Services division. The agreements generally call for a fixed
salary at the beginning of the contract with a transaction to
performance-based pay later in the contract.
On July 1, 2016, the Company entered into an employment agreement
with Dr. Michael Dent, Chief Executive Officer and a member of the
Board of Directors. Dr. Dent’s employment agreement continues until
terminated by Dr. Dent or the Company. If Dr. Dent’s employment is
terminated by the Company (unless such termination is “For Cause”
as defined in his employment agreement), then upon signing a
general waiver and release, Dr. Dent will be entitled to severance
in an amount equal to 12 months of his then-current annual base
salary, as well as the pro-rata portion of any bonus that would be
due and payable to him. In the event that Dr. Dent terminates the
employment agreement, he shall be entitled to any accrued but
unpaid salary and other benefits up to and including the date of
termination, and the pro-rata portion of any unvested time-based
options up until the date of termination.
On July 1, 2016, the Company entered into an agreement with Mr.
George O’Leary, the Company’s Chief Financial Officer and a member
of the Board of Directors, extending his prior agreement with the
Company. 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.
HEALTHLYNKED CORP.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
(UNAUDITED)
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.
Segment information for the three months ended September 30, 2021
was as follows:
| |
|
Three Months Ended September 30, 2021 |
|
| |
|
Health
Services |
|
|
Digital
Healthcare |
|
|
ACO /
MSO |
|
|
Medical
Distribution |
|
|
Total |
|
| Revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Patient service revenue, net |
|
$ |
1,394,356 |
|
|
$ |
---
|
|
|
$ |
---
|
|
|
$ |
---
|
|
|
$ |
1,394,356 |
|
|
Medicare shared savings revenue |
|
|
---
|
|
|
|
---
|
|
|
|
2,419,312 |
|
|
|
---
|
|
|
|
2,419,312 |
|
|
Consulting and event revenue |
|
|
---
|
|
|
|
---
|
|
|
|
69,595 |
|
|
|
---
|
|
|
|
69,595 |
|
|
Product revenue |
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
161,456 |
|
|
|
161,456 |
|
|
Total revenue |
|
|
1,394,356 |
|
|
|
---
|
|
|
|
2,488,907 |
|
|
|
161,456 |
|
|
|
4,044,719 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Practice salaries and benefits |
|
|
739,024 |
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
739,024 |
|
|
Other practice operating expenses |
|
|
549,086 |
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
549,086 |
|
|
Medicare shared savings expenses |
|
|
---
|
|
|
|
---
|
|
|
|
1,748,585 |
|
|
|
---
|
|
|
|
1,748,585 |
|
|
Cost of product revenue |
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
145,432 |
|
|
|
145,432 |
|
|
Selling, general and administrative expenses |
|
|
---
|
|
|
|
1,093,461 |
|
|
|
---
|
|
|
|
54,130 |
|
|
|
1,147,591 |
|
|
Depreciation and amortization |
|
|
26,196 |
|
|
|
2,215 |
|
|
|
---
|
|
|
|
176,900 |
|
|
|
205,311 |
|
|
Total Operating Expenses |
|
|
1,314,306 |
|
|
|
1,095,676 |
|
|
|
1,748,585 |
|
|
|
376,462 |
|
|
|
4,535,029 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income from operations |
|
$ |
80,050 |
|
|
$ |
(1,095,676 |
) |
|
$ |
740,322 |
|
|
$ |
(215,006 |
) |
|
$ |
(490,310 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Segment Information |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense (income) |
|
$ |
2,706 |
|
|
$ |
1,412 |
|
|
$ |
---
|
|
|
$ |
---
|
|
|
$ |
4,118 |
|
|
Change in fair value of contingent acquisition consideration |
|
$ |
---
|
|
|
$ |
(126,411 |
) |
|
$ |
---
|
|
|
$ |
---
|
|
|
$ |
(126,411 |
) |
HEALTHLYNKED CORP.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
(UNAUDITED)
NOTE 17 – SEGMENT REPORTING (CONTINUED)
Segment information for the nine months ended September 30, 2021
was as follows:
| |
|
Nine
Months Ended September 30, 2021 |
|
| |
|
Health
Services |
|
|
Digital
Healthcare |
|
|
ACO
/ MSO |
|
|
Medical
Distribution |
|
|
Total |
|
| Revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Patient
service revenue, net |
|
$ |
4,379,282 |
|
|
$ |
---
|
|
|
$ |
---
|
|
|
$ |
---
|
|
|
$ |
4,379,282 |
|
| Medicare
shared savings revenue |
|
|
---
|
|
|
|
---
|
|
|
|
2,419,312 |
|
|
|
---
|
|
|
|
2,419,312 |
|
| Consulting
and event revenue |
|
|
---
|
|
|
|
11,905 |
|
|
|
217,209 |
|
|
|
---
|
|
|
|
229,114 |
|
| Product
revenue |
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
512,325 |
|
|
|
512,325 |
|
| Total
revenue |
|
|
4,379,282 |
|
|
|
11,905 |
|
|
|
2,636,521 |
|
|
|
512,325 |
|
|
|
7,540,033 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Operating
Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Practice
salaries and benefits |
|
|
2,305,993 |
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
2,305,993 |
|
| Other
practice operating expenses |
|
|
1,790,874 |
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
1,790,874 |
|
| Medicare
shared savings expenses |
|
|
---
|
|
|
|
---
|
|
|
|
2,157,555 |
|
|
|
---
|
|
|
|
2,157,555 |
|
| Cost
of product revenue |
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
474,026 |
|
|
|
474,026 |
|
| Selling,
general and administrative expenses |
|
|
---
|
|
|
|
3,472,493 |
|
|
|
---
|
|
|
|
188,713 |
|
|
|
3,661,206 |
|
| Depreciation
and amortization |
|
|
83,493 |
|
|
|
3,405 |
|
|
|
---
|
|
|
|
536,540 |
|
|
|
623,438 |
|
| Total
Operating Expenses |
|
|
4,180,360 |
|
|
|
3,475,898 |
|
|
|
2,157,555 |
|
|
|
1,199,279 |
|
|
|
11,013,092 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (Loss)
income from operations |
|
$ |
198,922 |
|
|
$ |
(3,463,993 |
) |
|
$ |
478,966 |
|
|
$ |
(686,954 |
) |
|
$ |
(3,473,059 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Other
Segment Information |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Interest
expense (income) |
|
$ |
5,145 |
|
|
$ |
8,038 |
|
|
$ |
---
|
|
|
$ |
(100 |
) |
|
$ |
13,083 |
|
| Loss
(gain) 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 |
|
$ |
---
|
|
|
$ |
234,678 |
|
|
$ |
---
|
|
|
$ |
---
|
|
|
$ |
234,678 |
|
| |
|
September
30, 2021 |
|
| Identifiable
assets |
|
$ |
2,104,819 |
|
|
$ |
3,967,850 |
|
|
$ |
2,850,949 |
|
|
$ |
2,890,389 |
|
|
$ |
11,814,007 |
|
| Goodwill |
|
$ |
---
|
|
|
$ |
---
|
|
|
$ |
381,856 |
|
|
$ |
766,249 |
|
|
$ |
1,148,105 |
|
HEALTHLYNKED CORP.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
(UNAUDITED)
NOTE 17 – SEGMENT REPORTING (CONTINUED)
Segment information for the three months ended September 30, 2020
was as follows:
| |
|
Three
Months Ended September 30, 2020 |
|
| |
|
Health
Services |
|
|
Digital
Healthcare |
|
|
ACO
/ MSO |
|
|
Medical
Distribution |
|
|
Total |
|
| Revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Patient
service revenue, net |
|
$ |
1,054,806 |
|
|
$ |
---
|
|
|
$ |
---
|
|
|
$ |
---
|
|
|
$ |
1,054,806 |
|
| Medicare
shared savings revenue |
|
|
---
|
|
|
|
---
|
|
|
|
767,744 |
|
|
|
---
|
|
|
|
767,744 |
|
| Consulting
revenue |
|
|
---
|
|
|
|
---
|
|
|
|
217,605 |
|
|
|
---
|
|
|
|
217,605 |
|
| Product
revenue |
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
| Total
revenue |
|
|
1,054,806 |
|
|
|
---
|
|
|
|
985,349 |
|
|
|
---
|
|
|
|
2,040,155 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Operating
Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Practice
salaries and benefits |
|
|
590,690 |
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
590,690 |
|
| Other
practice operating expenses |
|
|
548,667 |
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
548,667 |
|
| Medicare
shared savings expenses |
|
|
---
|
|
|
|
---
|
|
|
|
759,848 |
|
|
|
---
|
|
|
|
759,848 |
|
| Cost
of product revenue |
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
| Selling,
general and administrative expenses |
|
|
---
|
|
|
|
958,874 |
|
|
|
---
|
|
|
|
---
|
|
|
|
958,874 |
|
| Depreciation
and amortization |
|
|
24,557 |
|
|
|
594 |
|
|
|
---
|
|
|
|
---
|
|
|
|
25,151 |
|
| Total
Operating Expenses |
|
|
1,163,914 |
|
|
|
959,468 |
|
|
|
759,848 |
|
|
|
---
|
|
|
|
2,883,230 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Loss
from operations |
|
$ |
(109,108 |
) |
|
$ |
(959,468 |
) |
|
$ |
225,501 |
|
|
$ |
---
|
|
|
$ |
(843,075 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Other
Segment Information |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Interest
expense |
|
$ |
23,186 |
|
|
$ |
49,349 |
|
|
$ |
---
|
|
|
$ |
---
|
|
|
$ |
72,535 |
|
| Loss
on sales of marketable securities |
|
$ |
---
|
|
|
$ |
281,606 |
|
|
$ |
---
|
|
|
$ |
---
|
|
|
$ |
281,606 |
|
| Loss
on extinguishment of debt |
|
$ |
---
|
|
|
$ |
450,999 |
|
|
$ |
---
|
|
|
$ |
---
|
|
|
$ |
450,999 |
|
| Amortization
of original issue and debt discounts on convertible
notes |
|
$ |
---
|
|
|
$ |
65,816 |
|
|
$ |
---
|
|
|
$ |
---
|
|
|
$ |
65,816 |
|
| Change
in fair value of debt |
|
$ |
---
|
|
|
$ |
79,062 |
|
|
$ |
---
|
|
|
$ |
---
|
|
|
$ |
79,062 |
|
| Change
in fair value of derivative financial instruments |
|
$ |
---
|
|
|
$ |
(12,802 |
) |
|
$ |
---
|
|
|
$ |
---
|
|
|
$ |
(12,802 |
) |
| Change
in fair value of contingent acquisition consideration |
|
$ |
---
|
|
|
$ |
(45,996 |
) |
|
$ |
---
|
|
|
$ |
---
|
|
|
$ |
(45,996 |
) |
HEALTHLYNKED CORP.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
(UNAUDITED)
NOTE 17 – SEGMENT REPORTING (CONTINUED)
Segment information for the nine months ended September 30, 2020
was as follows:
| |
|
Nine
Months Ended September 30, 2020 |
|
| |
|
Health
Services |
|
|
Digital
Healthcare |
|
|
ACO
/ MSO |
|
|
Medical
Distribution |
|
|
Total |
|
| Revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Patient
service revenue, net |
|
$ |
3,502,836 |
|
|
$ |
---
|
|
|
$ |
---
|
|
|
$ |
---
|
|
|
$ |
3,502,836 |
|
| Medicare
shared savings revenue |
|
|
---
|
|
|
|
---
|
|
|
|
767,744 |
|
|
|
---
|
|
|
|
767,744 |
|
| Consulting
revenue |
|
|
---
|
|
|
|
---
|
|
|
|
268,025 |
|
|
|
---
|
|
|
|
268,025 |
|
| Product
revenue |
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
| Total
revenue |
|
|
3,502,836 |
|
|
|
---
|
|
|
|
1,035,769 |
|
|
|
---
|
|
|
|
4,538,605 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Operating
Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Practice
salaries and benefits |
|
|
1,910,897 |
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
1,910,897 |
|
| Other
practice operating expenses |
|
|
1,633,380 |
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
1,633,380 |
|
| Medicare
shared savings expenses |
|
|
---
|
|
|
|
---
|
|
|
|
824,084 |
|
|
|
---
|
|
|
|
824,084 |
|
| Cost
of product revenue |
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
| Selling,
general and administrative expenses |
|
|
---
|
|
|
|
2,116,159 |
|
|
|
---
|
|
|
|
---
|
|
|
|
2,116,159 |
|
| Depreciation
and amortization |
|
|
73,027 |
|
|
|
1,784 |
|
|
|
---
|
|
|
|
---
|
|
|
|
74,811 |
|
| Total
Operating Expenses |
|
|
3,617,304 |
|
|
|
2,117,943 |
|
|
|
824,084 |
|
|
|
---
|
|
|
|
6,559,331 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Loss
from operations |
|
$ |
(114,468 |
) |
|
$ |
(2,117,943 |
) |
|
$ |
211,685 |
|
|
$ |
---
|
|
|
$ |
(2,020,726 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Other
Segment Information |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Interest
expense |
|
$ |
35,096 |
|
|
$ |
158,038 |
|
|
$ |
---
|
|
|
$ |
---
|
|
|
$ |
193,134 |
|
| Loss
on sales of marketable securities |
|
$ |
---
|
|
|
$ |
281,606 |
|
|
$ |
---
|
|
|
$ |
---
|
|
|
$ |
281,606 |
|
| Loss
on extinguishment of debt |
|
$ |
---
|
|
|
$ |
1,347,371 |
|
|
$ |
---
|
|
|
$ |
---
|
|
|
$ |
1,347,371 |
|
| Amortization
of original issue and debt discounts on convertible
notes |
|
$ |
---
|
|
|
$ |
530,930 |
|
|
$ |
---
|
|
|
$ |
---
|
|
|
$ |
530,930 |
|
| Change
in fair value of debt |
|
$ |
---
|
|
|
$ |
198,764 |
|
|
$ |
---
|
|
|
$ |
---
|
|
|
$ |
198,764 |
|
| Change
in fair value of derivative financial instruments |
|
$ |
---
|
|
|
$ |
(739,485 |
) |
|
$ |
---
|
|
|
$ |
---
|
|
|
$ |
(739,485 |
) |
| Change
in fair value of contingent acquisition consideration |
|
$ |
---
|
|
|
$ |
(687 |
) |
|
$ |
---
|
|
|
$ |
---
|
|
|
$ |
(687 |
) |
| |
|
September
30, 2020 |
|
| Identifiable
assets |
|
$ |
2,250,647 |
|
|
$ |
952,716 |
|
|
$ |
901,736 |
|
|
$ |
---
|
|
|
$ |
4,105,099 |
|
| Goodwill |
|
$ |
---
|
|
|
$ |
---
|
|
|
$ |
1,454,856 |
|
|
$ |
---
|
|
|
$ |
1,454,856 |
|
The Digital Healthcare segment recognized revenue of $400 and
$1,366 in the three months ended September 30, 2021 and 2020,
respectively, and $743 and $3,797 in the nine months ended
September 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
SEPTEMBER 30, 2021
(UNAUDITED)
NOTE 18 – FAIR VALUE OF FINANCIAL INSTRUMENTS
(CONTINUED)
The following table summarizes the conclusions reached regarding
fair value measurements as of September 30, 2021 and December 31,
2020:
|
|
|
As of September 30, 2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Fair Value |
|
|
Contingent acquisition consideration |
|
$ |
---
|
|
|
$ |
---
|
|
|
$ |
1,046,712 |
|
|
$ |
1,046,712 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
---
|
|
|
$ |
---
|
|
|
$ |
1,046,712 |
|
|
$ |
1,046,712 |
|
|
|
|
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 nine months
ended September 30, 2021 and 2020 were as follows:
| |
|
Three Months Ended
September 30, |
|
|
Nine Months Ended
September 30, |
|
| |
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible notes payable |
|
$ |
---
|
|
|
$ |
(46,094 |
) |
|
$ |
(19,246 |
) |
|
$ |
(117,829 |
) |
| Notes payable to
related party |
|
|
---
|
|
|
|
(32,968 |
) |
|
|
---
|
|
|
|
(80,935 |
) |
| Derivative
financial instruments |
|
|
---
|
|
|
|
12,802 |
|
|
|
---
|
|
|
|
739,485 |
|
|
Contingent acquisition consideration |
|
|
126,411 |
|
|
|
45,996 |
|
|
|
(234,678 |
) |
|
|
687 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total |
|
$ |
126,411 |
|
|
$ |
(20,264 |
) |
|
$ |
(253,924 |
) |
|
$ |
541,408 |
|
NOTE 19 – SUBSEQUENT EVENTS
None.
Item 2. Management’s Discussion and Analysis of Financial
Condition and Results of Operations
Forward-Looking Statements
You should read the following discussion and analysis of our
financial condition and results of operations together with our
financial statements and the related notes appearing elsewhere in
this report. In addition to historical information, this discussion
and analysis contains forward-looking statements that involve
risks, uncertainties and assumptions. Our actual results may differ
materially from those discussed below. Factors that could cause or
contribute to such differences include, but are not limited to,
those identified below, and those discussed in the section titled
“Item 1A. Risk Factors” included in our most recent Annual Report
on Form 10-K. All amounts in this report are in U.S. dollars,
unless otherwise noted.
Overview
HealthLynked Corp. (the “Company,” “we,” “our,” or “us”) was
incorporated in the State of Nevada on August 4, 2014. We currently
operate 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. Our 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. Our
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. Our 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. Our
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 we acquired on October 19, 2020.
Recent Developments
During August 2021, we sold in a registered direct offering
3,703,704 common shares and 1,851,852 five-year warrants with an
exercise price of $0.65 to an institutional investor at an offering
price of $0.54 per share, resulting in gross proceeds of
$2,000,000. Net proceeds after offering costs and expenses were
$1,719,921.
During the nine months ended September 30, 2021, we sold 13,161,943
shares of common stock in 53 separate private placement
transactions. We received $4,328,725 in proceeds from the sales. In
connection with these stock sales, we also issued 6,581,527
five-year warrants to purchase shares of common stock at exercise
prices between $0.27 and $1.05 per share. During the same period,
we also issued 3,006,098 shares pursuant to draws under the
Investment Agreement for additional gross proceeds of $900,636.
See “Liquidity and Capital Resources-Significant Liquidity
Events-Investment Agreement” below for further details on the
financing transactions.
Critical accounting policies and significant judgments and
estimates
See Note 2, “Significant Accounting Policies,” in the
Notes to consolidated Financial Statements.
Results of Operations
Comparison of Three Months
Ended September 30, 2021 and 2020
The following table summarizes the changes in our results of
operations for the three months ended September 30, 2021 compared
with the three months ended September 30, 2020:
| |
|
Three Months Ended September 30, |
|
|
Change |
|
| |
|
2021 |
|
|
2020 |
|
|
$ |
|
|
% |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Patient service revenue, net |
|
$ |
1,394,356 |
|
|
$ |
1,054,806 |
|
|
$ |
339,550 |
|
|
|
32 |
% |
|
Medicare shared savings revenue |
|
|
2,419,312 |
|
|
|
767,744 |
|
|
|
1,651,568 |
|
|
|
215 |
% |
|
Consulting and event revenue |
|
|
69,595 |
|
|
|
217,605 |
|
|
|
(148,010 |
) |
|
|
68 |
% |
|
Product revenue |
|
|
161,456 |
|
|
|
--- |
|
|
|
161,456 |
|
|
|
* |
|
|
Total revenue |
|
|
4,044,719 |
|
|
|
2,040,155 |
|
|
|
2,004,564 |
|
|
|
98 |
% |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Expenses and Costs |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Practice salaries and benefits |
|
|
739,024 |
|
|
|
590,690 |
|
|
|
148,334 |
|
|
|
25 |
% |
|
Other practice operating expenses |
|
|
549,086 |
|
|
|
548,667 |
|
|
|
419 |
|
|
|
0 |
% |
|
Medicare shared savings expenses |
|
|
1,748,585 |
|
|
|
759,848 |
|
|
|
988,737 |
|
|
|
130 |
% |
|
Cost of product revenue |
|
|
145,432 |
|
|
|
--- |
|
|
|
145,532 |
|
|
|
* |
|
|
Selling, general and administrative expenses |
|
|
1,147,591 |
|
|
|
958,874 |
|
|
|
188,717 |
|
|
|
20 |
% |
|
Depreciation and amortization |
|
|
205,311 |
|
|
|
25,151 |
|
|
|
180,160 |
|
|
|
716 |
% |
|
Loss from operations |
|
|
(490,310 |
) |
|
|
(843,075 |
) |
|
|
352,765 |
|
|
|
42 |
% |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Income (Expenses) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss on sales of marketable securities |
|
|
--- |
|
|
|
(281,606 |
) |
|
|
281,606 |
|
|
|
100 |
% |
|
Loss on extinguishment of debt |
|
|
--- |
|
|
|
(450,999 |
) |
|
|
450,999 |
|
|
|
100 |
% |
|
Change in fair value of debt |
|
|
--- |
|
|
|
(79,062 |
) |
|
|
79,062 |
|
|
|
100 |
% |
|
Amortization of original issue and debt discounts on notes payable
and convertible notes |
|
|
--- |
|
|
|
(65,816 |
) |
|
|
65,816 |
|
|
|
100 |
% |
|
Change in fair value of derivative financial instruments |
|
|
--- |
|
|
|
12,802 |
|
|
|
(12,802 |
) |
|
|
100 |
% |
|
Change in fair value of contingent acquisition consideration |
|
|
126,411 |
|
|
|
45,996 |
|
|
|
80,415 |
|
|
|
175 |
% |
|
Interest expense |
|
|
(4,118 |
) |
|
|
(72,535 |
) |
|
|
68,417 |
|
|
|
94 |
% |
|
Total other income (expenses) |
|
|
122,293 |
|
|
|
(891,220 |
) |
|
|
1,013,513 |
|
|
|
114 |
% |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(368,017 |
) |
|
$ |
(1,734,295 |
) |
|
$ |
1,366,278 |
|
|
|
79 |
% |
* - Denotes new line item on statement of operations for which
there was no corresponding activity in the same period of 2020.
Revenue
Patient service revenue in the three months ended September 30,
2021 increased by $339,550, or 32% year-over-year, to $1,394,365,
primarily as a result of increased patient service revenue at our
NCFM practice of $230,331, increases at our NWC practice of
$85,975, and increases at our BTG practice of $23,065.
Medicare shared savings revenue in the three months ended September
30, 2021 increased by $1,651,568, or 215%, year-over-year to
$2,419,312 as a result of the higher $2,419,312 MSSP payment
received in September 2021 compared to a payment of $767,744
received in September 2020.
Consulting and event revenue in the three months ended September
30, 2021 decreased by $148,010, or 68% year-over-year, to $69,595
as a result of decreased consulting revenue in our ACO/MSO
Division.
Product revenue was $161,456 in the three months ended September
30, 2021. Product revenue was earned by the Medical Distribution
Division comprised of the operations acquired with MOD in October
2020, so there was no corresponding revenue in the three months
ended September 30, 2020.
Operating Expenses and Costs
Practice salaries and benefits increased by $148,334, or 25%, to
$739,024 in the three months ended September 30, 2021 primarily as
a result of increased staffing at each of our service facilities
relative to 2020 to meet an increase in patient visits in 2021
relative to 2020.
Other practice operating costs increased by $419, or less than 1%,
to $549,086 due primarily to higher costs at NCFM corresponding to
the increase in revenue.
Medicare shared savings expenses increased by $988,737, or 130%, to
$1,748,585 as a result of the higher $2,419,312 MSSP payment
received in September 2021 compared to a payment of $767,744
received in September 2020, resulting in higher payments to
participating providers. Medicare shared savings expenses represent
costs incurred to deliver Medicare shared savings revenue,
including overhead and consulting fees related to advising
participating physician practices, as well as the physicians’
contractual portion of any shared savings received by the ACO.
Cost of product revenue was $145,432 in the three months ended
September 30, 2021. Cost of product revenue relates to the cost of
medical products sold by the Medical Distribution Division, which
is comprised of the operations acquired with MOD in October 2020,
so there was no corresponding cost in the three months ended
September 30, 2020.
Selling, general and administrative costs increased by $188,717, or
20%, to $1,147,591 in the three months ended September 30, 2021
compared to the same period of 2020, primarily due to more
personnel in our corporate function in connection with our
continued expansion, as well as increased legal, accounting and
consulting fees, stock-based consulting fees, and development and
promotional costs associated with building and marketing the
HealthLynked Network and its related applications.
Depreciation and amortization increased the three months ended
September 30, 2021 by $180,160, or 716%, to $205,311 compared to
the same period in 2020, primarily as a result of amortization of
finite-lived intangible assets acquired in the MOD acquisition.
Loss from operations decreased by $352,765, or 42%, to $490,310 in
the three months ended September 30, 2021 compared to the same
period in 2020, primarily as a result of a year-over-year increase
in Medicare shared savings revenue of $1,651,568, offset by higher
selling, general and administrative costs and higher amortization
expense related to acquired intangible assets.
Other Income (Expenses)
Loss on sales of marketable securities was $281,606, or 100%, in
the three months ended September 30, 2020. Such losses arose in the
three months ended September 30, 2020 from sales of marketable
securities in the August 2020 Equity Transaction at prices below
the acquisition price. There were no such losses in the three
months ended September 30, 2021.
Loss on extinguishment of debt of $450,999 in the three months
ended September 30, 2020 arose when the fair value of consideration
paid to retire previously outstanding convertible note exceeded the
carrying value of the instruments retired, including any related
derivative financial instruments, such as embedded conversion
features. No such debt was retired, and therefore there were no
corresponding charges, in the three months ended September 30,
2021.
Loss from the change in fair value of debt of $79,062 in the three
months ended September 30, 2020 resulted from certain convertible
notes and notes payable to related parties that, in previous
periods, were extended and treated as an extinguishment and
reissuance for accounting purposes, requiring these notes to be
subsequently carried at fair value and revalued at each period end.
After conversion of our remaining convertible notes outstanding in
January 2021, we had no further debt carried at fair value, and
therefore no change in fair value of debt in the three months ended
September 30, 2021.
Amortization of original issue and debt discounts was $65,816 in
the three months ended September 30, 2020. With the retirement in
2020 of all floating rate convertible notes that with discounts
subject to amortization, there were no corresponding charges in the
three months ended September 30, 2021.
Gain from the change in fair value of derivative financial
instruments was $12,802 in the three months ended September 30,
2020. We retired all derivative financial instruments in 2020 with
the repayment of all adjustable-rate convertible notes payable that
had associated embedded conversion feature derivatives, so there
were no corresponding charges in the three months ended September
30, 2021.
Gains from the change in fair value of contingent acquisition
consideration increased by $80,415, or 175%, to $126,411 in the
three months ended September 30, 2021. Fair value of contingent
acquisition consideration relates to future acquisition
consideration that may be payable if certain prescribed performance
milestones are met by businesses acquired by us, including NCFM
(acquired in April 2019), CHM (acquired in May 2020), and MOD
(acquired in October 2020). The fair value of contingent
acquisition consideration is remeasured at each reporting period
using a probability-weighted discounted cash flow model. The
increase in gains in 2021 was due primarily to a $218,201 decrease
in fair value of contingent acquisition consideration related to
our acquisition of MOD, which is payable in a fixed number of
shares upon achievement of annual revenue milestones of the
underlying business between 2021 and 2024.
Interest expense decreased by $68,417, or 94%, to $4,118 in the
three months ended September 30, 2021 when compared to the same
period in 2020, as a result of the repayment and conversion of
convertible notes and notes payable to related parties during 2020,
combined with low-interest government loans added to our balance
sheet, resulting in substantially lower debt balances in 2021.
Total other income (expenses) increased by $1,013,513, or 114%, in
the three months ended September 30, 2021 to income of $122,293
compared to expense in the same period in 2020 of $891,220,
primarily as a result of other expenses incurred in 2020 –
including loss on sales of marketable securities, loss on
extinguishment of debt, loss on change in fair value of debt,
amortization of original issue and debt discounts on notes payable
and convertible notes, and change in fair value of derivative
financial instruments – related to convertible debt and other
instruments no longer held by us, resulting in no corresponding
charges in the three months ended September 30, 2021.
Net loss decreased by $1,366,278, or 79%, to $368,017 in the three
months ended September 30, 2021 when compared to the same period in
2020, primarily as a result of (i) debt-related charges incurred in
2020 corresponding to debt that has since been retired, (ii) a 100%
increase in our revenue streams year-over year, including an
increase of $1,651,568 in our annual MSSP revenue receipt, (iii)
losses on sales of marketable securities incurred in 2020 with
corresponding losses in 2021, and (iv) increased gains on the
reduction in fair value of contingent acquisition consideration
payable related to three of our acquisitions. The lower loss was
offset by increases in Medicare shared savings expenses
corresponding to the increase in MSSP revenue and selling, general
and administrative expenses.
Comparison of Nine months
Ended September 30, 2021 and 2020
The following table summarizes the changes in our results of
operations for the nine months ended September 30, 2021 compared
with the nine months ended September 30, 2020:
| |
|
Nine Months Ended September 30, |
|
|
Change |
|
| |
|
2021 |
|
|
2020 |
|
|
$ |
|
|
% |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Patient service revenue, net |
|
$ |
4,379,282 |
|
|
$ |
3,502,836 |
|
|
$ |
876,446 |
|
|
|
25 |
% |
|
Medicare shared savings revenue |
|
|
2,419,312 |
|
|
|
767,744 |
|
|
|
1,651,568 |
|
|
|
215 |
% |
|
Consulting and event revenue |
|
|
229,114 |
|
|
|
268,025 |
|
|
|
(38,911 |
) |
|
|
15 |
% |
|
Product revenue |
|
|
512,325 |
|
|
|
--- |
|
|
|
512,235 |
|
|
|
* |
|
|
Total revenue |
|
|
7,540,033 |
|
|
|
4,538,605 |
|
|
|
3,001,428 |
|
|
|
66 |
% |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Expenses and Costs |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Practice salaries and benefits |
|
|
2,305,993 |
|
|
|
1,910,897 |
|
|
|
395,096 |
|
|
|
21 |
% |
|
Other practice operating expenses |
|
|
1,790,874 |
|
|
|
1,633,380 |
|
|
|
157,494 |
|
|
|
10 |
% |
|
Medicare shared savings expenses |
|
|
2,157,555 |
|
|
|
824,084 |
|
|
|
1,333,471 |
|
|
|
162 |
% |
|
Cost of product revenue |
|
|
474,026 |
|
|
|
--- |
|
|
|
474,026 |
|
|
|
* |
|
|
Selling, general and administrative expenses |
|
|
3,661,206 |
|
|
|
2,116,159 |
|
|
|
1,545,047 |
|
|
|
73 |
% |
|
Depreciation and amortization |
|
|
623,438 |
|
|
|
74,811 |
|
|
|
548,627 |
|
|
|
733 |
% |
|
Loss from operations |
|
|
(3,473,059 |
) |
|
|
(2,020,726 |
) |
|
|
(1,452,333 |
) |
|
|
72 |
% |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Income (Expenses) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss on sales of marketable securities |
|
|
--- |
|
|
|
(281,606 |
) |
|
|
281,606 |
|
|
|
100 |
% |
|
Loss on extinguishment of debt |
|
|
(4,957,168 |
) |
|
|
(1,347,371 |
) |
|
|
(3,609,797 |
) |
|
|
268 |
% |
|
Change in fair value of debt |
|
|
(19,246 |
) |
|
|
(198,764 |
) |
|
|
179,518 |
|
|
|
90 |
% |
|
Amortization of original issue and debt discounts on notes payable
and convertible notes |
|
|
--- |
|
|
|
(530,930 |
) |
|
|
530,930 |
|
|
|
100 |
% |
|
Change in fair value of derivative financial instruments |
|
|
--- |
|
|
|
739,485 |
|
|
|
(739,485 |
) |
|
|
100 |
% |
|
Change in fair value of contingent acquisition consideration |
|
|
(234,678 |
) |
|
|
687 |
|
|
|
(235,365 |
) |
|
|
34260 |
% |
|
Interest expense |
|
|
(13,083 |
) |
|
|
(193,134 |
) |
|
|
180,051 |
|
|
|
93 |
% |
|
Total other expenses |
|
|
(5,224,175 |
) |
|
|
(1,811,633 |
) |
|
|
(3,412,542 |
) |
|
|
188 |
% |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(8,697,234 |
) |
|
$ |
(3,832,359 |
) |
|
$ |
(4,864,875 |
) |
|
|
127 |
% |
* - Denotes new line item on statement of operations for which
there was no corresponding activity in the same period of 2020.
Revenue
Patient service revenue in the nine months ended September 30, 2021
increased by $876,446, or 25% year-over-year, to $4,379,282
primarily as a result of increased patient service revenue at our
NCFM practice of $661,277, increases at our NWC practice of
$200,832, and increases at our BTG practice of $14,158.
Medicare shared savings revenue in the nine months ended September
30, 2021 increased by $1,651,568, or 215%, to $2,419,312
year-over-year as a result of the higher $2,419,312 MSSP payment
received in September 2021 compared to a payment of $767,744
received in September 2020.
Consulting and event revenue in the nine months ended September 30,
2021 decreased by $38,911, or 15% year-over-year to $229,114.
Consulting revenue of $217,209 was earned by the ACO/MSO Division
in 2021, compared to $268,025 in the corresponding period of 2020.
Event revenue of $11,905 was earned in connection with the
HealthLynked Future of Healthcare Summit held in March 2021.
Product revenue was $512,325 in the nine months ended September 30,
2021. Product revenue was earned by the Medical Distribution
Division comprised of the operations acquired with MOD in October
2020, so there was no corresponding revenue in the nine months
ended September 30, 2020.
Operating Expenses and Costs
Practice salaries and benefits increased by $395,096, or 21%, to
$2,305,993 in the nine months ended September 30, 2021 primarily as
a result of increased staffing at each of our service facilities
relative to 2020 to meet an increase in patient visits in 2021
relative to 2020.
Other practice operating costs increased by $157,494, or 10%, to
1,790,874 in the nine months ended September 30, 2021 corresponding
to increased revenue at NCFM and NWC practices.
Medicare shared savings expenses increased by $1,331,471, or 162%
to $2,157,555 as a result of the higher $2,419,312 MSSP payment
received in September 2021 compared to a payment of $767,744
received in September 2020, resulting in higher payments to
participating providers. Medicare shared savings expenses represent
costs incurred to deliver Medicare shared savings revenue,
including overhead and consulting fees related to advising
participating physician practices, as well as the physicians’
contractual portion of any shared savings received by the ACO.
Cost of product revenue was $474,026 in the nine months ended
September 30, 2021. Cost of product revenue relates to the cost of
medical products sold by the newly formed Medical Distribution
Division, which is comprised of the operations acquired with MOD in
October 2020, so there was no corresponding cost in the nine months
ended September 30, 2020.
Selling, general and administrative costs increased by $1,545,047,
or 73%, to $3,661,206 in the nine months ended September 30, 2021
compared to the nine months ended September 30, 2020, primarily due
to increased stock-based consulting fees, cash-based legal,
accounting and consulting fees, more personnel in our corporate
function in connection with our continued expansion, and higher
advertising, promotional and development costs associated with
developing and marketing the HealthLynked Network and related
applications.
Depreciation and amortization increased the nine months ended
September 30, 2021 by $548,627, or 733%, to $623,438 compared to
the same period in 2020, primarily as a result of amortization of
finite-lived intangible assets acquired in the MOD acquisition.
Loss from operations increased by $1,452,333, or 72%, to $3,473,059
in the nine months ended September 30, 2021 compared to the same
period in 2020, primarily as a result of increased selling, general
and administrative costs related to our expansion as well as
amortization of intangibles from MOD, offset by increases in each
of our revenue streams.
Other Income (Expenses)
Loss on sales of marketable securities was $281,606, or 100%, in
the nine months ended September 30, 2020. Such losses arose in the
three months ended September 30, 2020 from sales of marketable
securities in the August 2020 Equity Transaction at prices below
the acquisition price. There were no such losses in the three
months ended September 30, 2021.
Loss on extinguishment of debt in the nine months ended September
30, 2021 increased by $3,609,797, or 268%, to $4,957,168 as
compared to the same period in 2020, primarily as a result of a
January 2021 transaction pursuant to which the holder of
convertible notes with a face value of $1,038,500 and $317,096 of
accrued interest agreed to convert the notes pursuant to the
original note terms and agreed to a leak-out provision on the
received shares in exchange for a 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, we recognized a loss on
debt extinguishment of $5,463,492 in the nine months ended
September 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. This loss was offset
by a debt extinguishment gain of $632,826 related to the
forgiveness of PPP loans in May and June 2021. Losses on
extinguishment of debt in the nine months ended September 30, 2020
resulted from an excess of fair value of consideration paid to
retire a convertible notes over the carrying value of the
instrument and related derivatives being retired.
Losses from the change in fair value of debt decreased by $179,518,
or 90%, to $19,246 for the nine months ended September 30, 2021
when compared to the same period in 2020. Such gains and losses
result from certain convertible notes and notes payable to related
parties that, in previous periods, were extended and treated as an
extinguishment and reissuance for accounting purposes, requiring
these notes to be subsequently carried at fair value. The change in
fair value at the end of each reporting period is recorded as
“Change in fair value of debt.” After conversion of our remaining
convertible notes outstanding in January 2021, we had no further
debt carried at fair value.
Amortization of original issue and debt discounts was $530,930 for
the nine months ended September 30, 2020. With the retirement in
2020 of all floating rate convertible notes that with discounts
subject to amortization, there were no corresponding charges in the
nine months ended September 30, 2021.
Gains from the change in fair value of derivative financial
instruments was $739,485 for the nine months ended September 30,
2020. We retired all derivative financial instruments in 2020 with
the repayment of all adjustable-rate convertible notes payable that
had associated embedded conversion feature derivatives, so there
were no corresponding gains or charges in the nine months ended
September 30, 2021.
(Loss) gain from the change in fair value of contingent acquisition
consideration increased by $235,365, or 34,260%, to a loss of
$234,678 in the nine months ended September 30, 2021 when compared
to the same period in 2020. The increase in the loss in 2021 was
due primarily to the increase in fair value of contingent
acquisition consideration related to our acquisition of MOD, which
is payable in a fixed number of shares upon achievement of annual
revenue milestones of the underlying business between 2021 and
2024. Due in large part to an increase in our stock price since
December 31, 2020, the fair value of the liability increased
substantially.
Interest expense decreased by $180,051, or 93%, to $13,083 for the
nine months ended September 30, 2021 when compared to the same
period in 2020, as a result of the repayment and conversion of
convertible notes and notes payable to related parties during 2020,
combined with low-interest government loans added to our balance
sheet, resulting in substantially lower debt balances in 2021.
Total other expenses increased by $3,412,542, or 188%, to
$5,224,175 in the nine months ended September 30, 2021 when
compared to the same period in 2020 primarily as a result of a (i)
$5,589,994 loss on extinguishment of debt associated with the
retirement of our last remaining convertible notes payable in 2021,
(ii) an increase in losses from the change in fair value of
contingent acquisition due principally to the fixed-share structure
of the MOD contingent consideration, and (iii) a gain in change in
fair value of derivative financial instruments in 2020 with no
corresponding income or charge in 2021.
Net loss increased by $4,864,875, or 127%, to $8,697,234 in the
nine months ended September 30, 2021 when compared to the same
period in 2020 primarily as a result of (i) a loss on
extinguishment of debt associated with the retirement of our last
remaining convertible notes payable in 2021, (ii) increased
selling, general and administrative costs related to our expansion,
an increase in losses from the change in fair value of contingent
acquisition due to the fixed-share structure of the MOD contingent
consideration, and (iii) a gain in change in fair value of
derivative financial instruments in 2020 with no corresponding
income or charge in 2021. The increased losses were offset by a 67%
overall increase in our revenue year-over-year, a gain on debt
extinguishment related to the forgiveness of PPP Loans in 2021, and
the retirement of convertible debt that eliminated debt discount
amortization charges incurred in prior periods.
Seasonal Nature of Operations
We acquired CHM in May 2020. CHM’s primary source of revenue is
derived from payments earned under the Medicare shared savings
program. Such amounts are determined annually when we are notified
by CMS of the amount of shared savings earned. Accordingly, we
recognize Medicare shared savings revenue in the period in which
the CMS notifies us of the exact amount of shared savings to be
paid, which historically has occurred during the three-month period
ended September 30 for the program year ended December 31 of the
previous year. Medicare shared savings revenue for the program year
ended December 31, 2020, for which we received notification and
payment in September 2021, was $2,419,312. Medicare shared savings
revenue for the program year ended December 31, 2019, for which we
received notification and payment in September 2020, was $767,744.
Future recognition of Medicare shared savings revenue is expected
to result in a material increase in our consolidated revenues in
the third fiscal quarter of each year compared to the first, second
and fourth fiscal quarters. Likewise, in the period in which we
recognize Medicare shared savings revenue, we also determine the
amount of shared savings expense to be paid to physicians
participating in our ACO. This expense is also expected to be
recognized in the third fiscal quarter of each year and is expected
to materially increase our total operating expenses in the third
fiscal quarter compared to other quarters of the fiscal year.
Liquidity and Capital Resources
As of September 30, 2021, we had cash balances of $5,448,791,
working capital of $3,070,164 and accumulated deficit $30,482,144.
For the nine months ended September 30, 2021, we had a net loss of
$8,697,234 and net cash used by operating activities of $1,627,184.
Net cash used in investing activities was $334,581. Net cash
provided by financing activities was $7,248,372, including
$6,949,281 received from sales of common stock in private
placements, registered direct transactions and puts pursuant to the
July 2016 $3 million investment agreement (the “Investment
Agreement”), and $350,200 in 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. During August 2021, we sold 3,703,704
common shares and 1,851,852 five-year warrants with an exercise
price of $0.65 to an institutional investor at an offering price of
$0.54 per share, resulting in gross proceeds of $2,000,000.
We believe that we have sufficient cash on hand to fund the
business for at least the next 12 months. We intend that the longer
term (i.e., beyond twelve months) cost of completing additional
intended acquisitions, implementing our 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 we will be able to access additional outside capital in a
timely fashion. If necessary funds are not available, our business
and operations would be materially adversely affected and in such
event, we would attempt to reduce costs and adjust our 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 our
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.
Significant Liquidity
Events
Historically, we have funded our operations principally through a
combination of convertible promissory notes, private placements of
our common stock, promissory notes and related party debt, as
described below.
Registered Direct Offering – August 2021
On August 26, 2021, we entered into a securities purchase agreement
with a certain institutional investor (the “Purchaser”) pursuant to
which we agreed to sell in a registered direct offering (the
“Registered Direct Offering”) 3,703,704 shares of our common stock
to the Purchaser at an offering price of $0.54 per share. In a
concurrent private placement, we also sold to the Purchaser
unregistered warrants (the “Warrants”) to purchase up to an
aggregate of 1,851,852 shares of our common stock, representing 50%
of the shares of common stock that were purchased in the Registered
Direct Offering. The Warrants are exercisable at an exercise price
of $0.65 per share, are exercisable immediately upon issuance and
have a term of exercise equal to five years from the date of
issuance. We also issued compensation warrants to our placement
agent to purchase up to 269,269 shares of common stock, equal to
8.0% of the aggregate number of shares of common stock placed in
the Registered Direct Offering. The placement agent warrants have a
term of five (5) years from the commencement of sales under the
Registered Direct Offering and an exercise price of $0.675 per
share of common stock (equal to 125% of the offering price per
share of common stock in the Registered Direct Offering).
We received net proceeds from the in the Registered Direct
Offering, after deducting placement agent fees and other offering
expenses payable by us, of $1,719,921. The transactions closed on
August 31, 2021.
2021 Equity Transactions
During the nine months ended September 30, 2021, we sold 13,161,943
shares of common stock in 53 separate private placement
transactions. We received $4,328,725 in proceeds from the sales. In
connection with these stock sales, we also issued 6,581,527
five-year warrants to purchase shares of common stock at exercise
prices between $0.27 and $1.05 per share.
Investment Agreement
In July 2016, we entered into an Investment Agreement (the
“Investment Agreement”) with Iconic Holdings, LLC (the “Investor”),
pursuant to which the Investor agreed to purchase up to $3,000,000
of our common stock over a three-year period starting upon
registration of the underlying shares, with such shares put to the
Investor by us pursuant to a specified formula that limits the
number of shares able to be put to the Investor to the number equal
to the average trading volume of our common shares for the ten
consecutive trading days prior to the put notice being issued. In
May 2020, the Investment Agreement, which was scheduled to expire
on May 15, 2020, was extended until the earlier of May 15, 2022 or
until the registration statement covering the agreement is no
longer in effect. During the nine months ended September 30, 2021
and 2020, we issued 3,006,098 and 4,975,491 shares of common stock
pursuant to draws under the Investment Agreement, respectively, for
gross proceeds of $900,636 and $426,299, respectively.
Plan of operation and
future funding requirements
Our plan of operations is to profitably operate our Health Services
business and continue to invest in our Digital Healthcare business,
including our cloud-based online personal medical information and
record archiving system, the “HealthLynked Network.”
We intend to market the HealthLynked Network via telesales
targeting physicians’ offices, direct to patient marketing,
affiliated marketing campaigns, co-marketing with our Medical
Distribution businesses retailer MOD, and expanded southeast
regional sales efforts. We intend that our initial primary sales
strategy will be physician telesales through the use of telesales
representatives whom we will hire as access to capital allows. In
combination with our telesales, we intend to also utilize Internet
based marketing to increase penetration to targeted geographical
areas. These campaigns will be focused on both physician providers
and patient members. We also intend to leverage MOD’s discounted
medical supplies as an offering to our patient and physician
members in both the HealthLynked Network and our ACO network and
plans. If we fail to complete the development of, or successfully
market, the HealthLynked Network, our ability to realize future
increases in revenue and operating profits could be impacted, and
our results of operations and financial position would be
materially adversely affected.
A summarized
timeline of our strategic acquisition transactions and the related
funding sources is as follows:
|
● |
In
July 2018 we raised approximately $1.8 million in a private
placement for the purpose of technology enhancement, sales and
marketing initiatives and to fund a portion of the first phase of
our planned acquisition strategy. |
|
● |
In
2019, we began implementation of our plan to acquire health service
businesses and offer physician owners cash, stock, and deferred
compensation. |
|
● |
On
April 15, 2019, we acquired HCFM for $750,000 in cash, $750,000 in
shares of our common stock and $500,000 in a three-year
performance-based payout. |
|
● |
On
May 18, 2020, we acquired CHM for $214,000 in cash, $201,675 in
shares of our common stock, up to $223,000 cash and $660,000 in
shares of our common stock based on a target MSSP payment of
$1,725,000 in the current year, and up to $437,500 in a four-year
performance-based payout. |
|
● |
On
August 20, 2020, we completed the August 2020 Equity Transaction
with Trusts controlled by our CEO, Dr. Michael Dent, pursuant to
which the Trusts contributed an aggregate of 76,026 NEO Shares with
a fair value of $3,066,889 to us, in exchange for an aggregate of
2,750,000 shares of our newly designated Series B Preferred Stock
and an aggregate of 24,522,727 shares of our common
stock. |
|
● |
On
October 19, 2020, we acquired MOD, a virtual distributor of
discounted medical supplies selling to both consumers and medical
practices throughout the United States, in exchange for (i)
19,045,563 restricted shares of our common stock valued at
$2,704,470, (ii) the issuance of an aggregate of up to 10,004,749
restricted shares of the buyer’s common stock valued at up to
$2,602,330 over a four year period based on MOD achieving certain
revenue targets, and (iii) the partial satisfaction of certain
outstanding debt obligations of MOD in the amount of $703,200 in
cash by us. |
|
● |
During
the second half of 2020, we retired floating rate convertible debt
with a face value of $1,012,750 through conversions and repayments
and repaid related party notes with a face value of $646,000 in an
effort to improve our balance sheet. |
|
● |
During
January 2021, the holder of $1,038,500 fixed rate convertible debt
converted the full 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, we had no further convertible debt
outstanding. |
|
● |
During
August 2021, we sold in the Registered Direct Offering 3,703,704
shares of common stock and 1,851,852 five-year warrants with an
exercise price of $0.65 to an institutional investor at an offering
price of $0.54 per share, resulting in gross proceeds of $2,000,00
and net proceeds after offering costs and expenses of
$1,719,921. |
|
● |
During
the nine months ended September 30, 2021, we sold 13,161,943 shares
of common stock in 53 separate private placement transactions. We
received $4,328,725 in proceeds from the sales. In connection with
these stock sales, we also issued 6,581,527 five-year warrants to
purchase shares of common stock at exercise prices between $0.27
and $1.05 per share. We also issued 3,006,098 shares pursuant to
draws under the Investment Agreement for additional gross proceeds
of $900,636. |
Currently, we are focusing on acquiring additional profitable ACOs
with a concentration on physician-based ACOs in Florida, the
Southeast, Texas, New Jersey and Arizona. ACOs’ objectives are to
reduce patients’ healthcare costs while improving their health. Our
initial targets are physician-based Florida Medicare ACOs.
Profitable ACOs have shared savings, which are payments made by the
Medicare governing body CMS to ACOs whose Medicare patients have
aggregate total savings over the regional threshold for all
Medicare patients in the territory and that meet CMS’ quality
standards. Given HealthLynked’s goal to improve healthcare and
reduce healthcare costs for all patients, we anticipate that the
ACO acquisition model can help us expand both physician and patient
utilization of the HealthLynked Network while continuing to add
incremental revenue and profit from to our health services and ACO
segments. We plan to raise additional capital to fund our ongoing
acquisition strategy.
Historical Cash
Flows
| |
|
Nine Months Ended
September 30, |
|
| |
|
2021 |
|
|
2020 |
|
| Net cash (used in) provided by: |
|
|
|
|
|
|
| Operating activities |
|
$(1,627,184) |
|
|
$(1,094,495) |
|
|
Investing Activities |
|
|
(334,581 |
) |
|
|
2,425,870 |
|
|
Financing activities |
|
|
7,248,372 |
|
|
|
271,308 |
|
| Net
increase (decrease) in cash |
|
$ |
5,286,607 |
|
|
$ |
1,602,683 |
|
Operating Activities – During the nine months ended
September 30, 2021, we used cash from operating activities of
$1,627,184, as compared with $1,094,495 in the same period of 2020.
The increase in cash usage results primarily from increased
selling, general and administrative costs increased related to our
continued expansion, offset by increases in our revenue streams in
2021 compared to 2020.
Investing Activities – During the nine months ended
September 30, 2021, we used $334,581 in investing activities,
including $196,000 contingent acquisition consideration payment
paid the sellers of NCFM and $126,106 contingent acquisition
consideration payment paid the sellers of Cura, plus $12,475 for
the acquisition of computers and equipment. During the same period
of 2020, we generated $2,425,870 from investing activities,
including $2,740,806 received from the sale of marketable
securities received in an August 2020 financing transaction, offset
by $164,005 used to acquire CHM (net of $49,995 cash received),
$137,390 paid against contingent acquisition consideration related
to the acquisitions of NCFM and CHM and $13,541 for the acquisition
of computers and equipment.
Financing Activities – During the nine months ended
September 30, 2021 and 2020, we realized $7,248,372 and $271,308,
respectively, in financing activities. Cash realized in 2021 was
comprised mainly of $5,229,360 from the sale of common stock
pursuant to private placements and puts under the Investment
Agreement, $1,719,921 net proceeds from the Registered Direct
Offering, and $350,200 proceeds from the exercise of options and
warrants. We also made cash repayments against a vendor note in the
amount of $51,109, retiring the note in full. Cash realized in 2020
was comprised mainly of $1,099,300 from the proceeds of the sale of
shares of common stock to investors and pursuant to the Investment
Agreement, $1,045,669 net proceeds from government loans, $827,500
from the issuance of convertible notes, $149,000 from related party
loans and. We also repaid $1,882,405 of convertible loans and
$967,756 of related party loans.
Off Balance Sheet Arrangements
We did not have, during the periods presented, and we do not
currently have, any off-balance sheet arrangements, as defined
under applicable Securities and Exchange Commission rules.
Item 3. Quantitative and Qualitative Disclosures about Market
Risk
The Company is not required to provide the information required by
this Item as it is a “smaller reporting company,” as defined in
Rule 229.10(f)(1).
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures (as defined in Rules
13a-15(e) and 15d-15(e)) promulgated under the Securities Exchange
Act of 1934, as amended (the “Exchange Act”) that are designed to
ensure that information required to be disclosed in Exchange Act
reports is recorded, processed, summarized and reported within the
time periods specified in the Securities and Exchange Commission’s
rules and forms, and that such information is accumulated and
communicated to our management, including our principal executive
and principal financial officers, or persons performing similar
functions, as appropriate to allow timely decisions regarding
required disclosure.
Our management evaluated, with the participation of our Chief
Executive Officer and Chief Financial Officer, the effectiveness of
our disclosure controls and procedures as of September 30, 2020
based on the framework in “Internal Control – Integrated Framework”
issued by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO) in 2013. Based on that evaluation, our management
concluded that our disclosure controls and procedures were
effective as of September 30, 2021.
Changes in Internal Control over Financial Reporting
There was no change in the Company’s internal control over
financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of
the Exchange Act) during the fiscal quarter ended September 30,
2021 that has materially affected, or is reasonably likely to
materially affect, the Company’s internal control over financial
reporting.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
From time to time, we may become involved in various lawsuits and
legal proceedings, which arise, in the ordinary course of business.
However, litigation is subject to inherent uncertainties, and an
adverse result in these or other matters may arise from time to
time that may harm our business.
We are not aware of any such legal proceedings that we believe will
have, individually or in the aggregate, a material adverse effect
on our business, financial condition or operating results.
Item 1A. Risk Factors
The Company is not required to provide the information required by
this item as it is a “smaller reporting company,” as defined by
Rule 229.10(f)(1).
Item 2. Unregistered Sales of Equity Securities and Use of
Proceeds
Except as previously disclosed in a Current Report on Form 8-K, or
as set forth below, the Company has not sold securities that were
not registered under the Securities Act of 1933, as amended (the
“Securities Act”), during the period covered by this report.
During the three months ended September 30, 2021, we sold 1,000,000
shares of common stock for cash in a private placement transaction
to an accredited investor. We received $580,000 in proceeds from
the sales. In connection with this stock sale, we also issued
500,000 five-year warrants to the accredited investor to purchase
shares of common stock at an exercise price of $0.75 per share.
During the three months ended September 30, 2021, we issued 208,750
shares of common stock to two separate consultants as compensation
for services provided.
During the three months ended September 30, 2021, we issued
1,840,278 shares of common stock to three separate warrant holders
upon exercise of outstanding warrants for aggregate proceeds of
$181,250.
The sales of the above securities were exempt from registration
under the Securities Act in reliance upon Section 4(a)(2) of
the Securities Act and/or Regulation D promulgated thereunder, as
transactions by an issuer not involving any public offering. The
recipients of the securities in each of these transactions
represented their intentions to acquire the securities for
investment purposes only and not with a view to or for sale in
connection with any distribution thereof, and appropriate
restrictive legends were placed upon the stock certificates issued
in these transactions.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
None.
Item 6. Exhibits
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
Dated: November 15, 2021
| |
HEALTHLYNKED CORP. |
| |
|
| |
By: |
/s/
Michael Dent |
| |
|
Name: |
Michael Dent |
| |
|
Title: |
Chief Executive Officer and Chairman
(Principal Executive Officer)
|
| |
By: |
/s/ George
O’Leary |
| |
|
Name: |
George O’Leary |
| |
|
Title: |
Chief Financial Officer
(Principal Financial Officer)
|
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