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 endedSeptember 30, 20172020

 

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.)
   
1726 Medical Blvd1035 Collier Center Way Suite 101,3, Naples FloridaFL 34110
(Address of principal executive offices)
 
239-513-9022(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 and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post 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 14, 2017,16, 2020, there were 72,167,469186,807,929 shares of the issuer’s common stock, par value $0.0001, outstanding and 2,750 shares of the issuer’s Series B Preferred shares par value $0.001, outstanding.

 

 

 

 

 

 

TABLE OF CONTENTS

 

  PAGE NO.
   
PART IFINANCIAL INFORMATION1
Item 1Financial Statements(Unaudited)Statements (Unaudited)1
Item 2Management’s Discussion and Analysis of Financial Condition and Results of Operations2644
Item 3Quantitative and Qualitative Disclosures about Market Risk3654
Item 4Controls and Procedures3654
   
Part IIOTHER INFORMATION3755
Item 1Legal Proceedings3755
Item 1ARisk Factors3755
Item 2Unregistered Sales of Equity Securities and Use of Proceeds3756
Item 3Defaults upon Senior Securities3756
Item 4Mine Safety Disclosure3756
Item 5Other Information3756
Item 6Exhibits3857

i

 

 

PART I. FINANCIAL INFORMATION

 

Item 1. Financial Statements

 

HEALTHLYNKED CORPORATION

(FORMERLY KNOWN AS NAPLES WOMEN’S CENTER)CORP.

CONDENSED CONSOLIDATED BALANCE SHEETS

 

 September 30, December 31, 
 2017  2016  September 30, December 31, 
 (unaudited)     2020  2019 
ASSETS       (Unaudited)   
Current Assets          
Cash $16,175  $58,716  $1,713,124  $110,441 
Accounts receivable, net  118,581   146,874 
Marketable securities  44,477   --- 
Accounts receivable, net of allowance for doubtful accounts of $13,972 and $13,972 as of September 30, 2020 and December 31, 2019, respectively  193,744   83,251 
Inventory  105,200   70,460 
Prepaid expenses  23,712   43,545   80,552   119,328 
Deferred offering costs  134,422   ---   ---   19,203 
Total Current Assets  292,890   249,135   2,137,097   402,683 
                
Property, plant and equipment, net of accumulated depreciation of $722,407 and $704,785 as of September 30, 2017 and December 31, 2016, respectively  66,452   70,836 
Deposits  9,540   9,540 
Property, plant and equipment, net of accumulated depreciation of $817,971 and $794,799 as of September 30, 2020 and December 31, 2019, respectively  458,674   513,788 
Goodwill and intangible assets, net of accumulated amortization of $12,064 and $5,908 as of September 30, 2020 and December 31, 2019, respectively  2,585,330   1,336,958 
ROU lease assets and deposits  314,992   293,125 
                
Total Assets $368,882  $329,511  $5,496,093  $2,546,554 
                
LIABILITIES AND SHAREHOLDERS’ DEFICIT        
LIABILITIES AND SHAREHOLDERS’ EQUITY (DEFICIT)        
                
Current Liabilities                
Accounts payable and accrued expenses $287,086  $148,474  $1,362,516  $836,465 
Capital lease, current portion  18,348   18,348 
Deferred revenue  51,714   --- 
Lease liability, current portion  105,233   201,523 
Due to related party, current portion  620,611   311,792   300,600   493,457 
Notes payable, net of original issue discount and debt discount of $19,226 and $-0- as of September 30, 2017 and December 31, 2016, respectively  50,352   --- 
Convertible notes payable, net of original issue discount and debt discount of $157,612 and $114,332 as of September 30, 2017 and December 31, 2016, respectively  696,388   485,668 
Notes payable to related party, current portion  ---   743,955 
Government notes payable, current portion  595,669   --- 
        
Convertible notes payable, net of original issue discount and debt discount of $-0- and $777,668 as of September 30, 2020 and December 31, 2019, respectively  1,153,279   1,542,036 
Contingent acquisition consideration, current portion  548,069   100,000 
Derivative financial instruments  156,412   ---   ---   991,288 
Total Current Liabilities  1,829,197   964,282   4,117,080   4,908,724 
                
Long-Term Liabilities                
Capital leases, long-term portion  25,993   39,754 
Due to related party, long-term portion  253,242   237,157 
        
Government notes payable, long term portion  

450,000

   

---

 
Contingent acquisition consideration, long term portion  378,528   400,000 
Lease liability, long term portion  198,667   80,510 
Total Liabilities  2,108,432   1,241,193   5,144,275   5,389,234 
                
Shareholders’ Deficit        
Common stock, par value $0.0001 per share, 230,000,000 shares authorized, 70,676,254 and 65,753,640 shares issued and outstanding as of September 30, 2017 and December 31, 2016, respectively  7,068   6,575 
Common stock issuable, $0.0001 par value; 10,313 and 80,643 shares as of September 30, 2017 and December 31, 2016, respectively  3,124   6,451 
Shareholders’ Equity (Deficit)        
Common stock, par value $0.0001 per share, 500,000,000 shares authorized, 166,827,824 and 109,894,490 shares issued and outstanding as of September 30, 2020 and December 31, 2019, respectively  16,683   10,990 
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, 2020 and December 31, 2019, respectively  2,750   --- 
Common stock issuable, $0.0001 par value; 1,465,238 and 1,047,904 shares as of September 30, 2020 and December 31, 2019, respectively  182,092   159,538 
Additional paid-in capital  2,333,224   1,199,511   20,012,306   13,016,446 
Accumulated deficit  (4,082,966)  (2,124,219)  (19,862,013)  (16,029,654)
Total Shareholders’ Deficit  (1,739,550)  (911,682)
Total Shareholders’ Equity (Deficit)  351,818   (2,842,680)
                
Total Liabilities and Shareholders’ Deficit $368,882  $329,511 
Total Liabilities and Shareholders’ Equity (Deficit) $5,496,093  $2,546,554 

 

See the accompanying notes to these Unaudited Condensed Consolidated Financial Statements

 

1

HEALTHLYNKED CORPORATION

(FORMERLY KNOWN AS NAPLES WOMEN’S CENTER)CORP.

CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

(UNAUDITED)

 

 Three Months Ended Nine Months Ended 
 September 30,  September 30,  Three Months Ended
September 30,		  Nine Months Ended
September 30,		 
 2017  2016  2017  2016  2020  2019  2020  2019 
Revenue                  
Patient service revenue, net $480,723  $499,448  $1,473,639  $1,515,293  $1,054,806  $1,172,561  $3,502,836  $2,845,941 
Medicare shared savings revenue  767,744   ---   767,744   --- 
Consulting revenue  217,605   ---   268,025   --- 
Total revenue  2,040,155   1,172,561   4,538,605   2,845,941 
                                
Operating Expenses                                
Salaries and benefits  506,206   432,949   1,469,211   1,134,073 
Practice salaries and benefits  590,690   708,571   1,910,897   1,762,662 
Other practice operating expenses  548,667   521,341   1,633,380   1,287,432 
Medicare shared savings expenses  759,848   ---   824,084   --- 
General and administrative  480,614   513,404   1,369,018   1,148,564   958,874   733,360   2,116,159   2,084,630 
Depreciation and amortization  6,056   5,718   17,623   15,804   25,151   24,980   74,811   48,345 
Total Operating Expenses  992,876   952,071   2,855,852   2,298,441   2,883,230   1,988,252   6,559,331   5,183,069 
                                
(Loss) income from operations  (512,153)  (452,623)  (1,382,213)  (783,148)
Loss from operations  (843,075)  (815,691)  (2,020,726)  (2,337,128)
                                
Other Income (Expenses)                                
Loss on extinguishment of debt  (290,581)  ---   (290,581)  --- 
Loss on sales of marketable securities  (281,606)  ---   (281,606)  --- 
Gain (loss) on extinguishment of debt  (450,999)  4,904   (1,347,371)  (62,459)
Change in fair value of debt  (79,062)  (28,885)  (198,764)  (88,991)
Financing cost  (32,324)  ---   (32,324)  ---   ---   (12,009)  ---   (133,244)
Amortization of original issue and debt discounts on notes payable and convertible notes  (63,552)  (100,187)  (194,120)  (100,187)  (65,816)  (362,728)  (530,930)  (841,725)
Proceeds from settlement of lawsuit      38,236       38,236 
Change in fair value of derivative financial instrument  5,412   ---   5,412   --- 
Change in fair value of derivative financial instruments  12,802   158,691   739,485   574,205 
Change in fair value of contingent acquisition consideration  45,996   ---   687   --- 
Interest expense  (27,124)  (13,409)  (64,921)  (24,391)  (72,535)  (69,562)  (193,134)  (176,229)
Total other expenses  (408,169)  (75,360)  (576,534)  (86,342)  (891,220)  (309,589)  (1,811,633)  (728,443)
                                
Net loss before provision for income taxes  (920,322)  (527,983)  (1,958,747)  (869,490)  (1,734,295)  (1,125,280)  (3,832,359)  (3,065,571)
                                
Provision for income taxes  ---   ---   ---   ---   ---   ---   ---   --- 
                                
Net loss $(920,322) $(527,983) $(1,958,747) $(869,490) $(1,734,295) $(1,125,280) $(3,832,359) $(3,065,571)
                                
Net loss per share, basic and diluted:                
Deemed dividend - amortization of beneficial conversion feature  (63,862)  ---   (63,862)  --- 
                
Net loss to common stockholders $(1,798,157) $(1,125,280) $(3,896,221) $(3,065,571)
                
Net loss per share to common stockholders, basic and diluted:                
Basic $(0.01) $(0.01) $(0.03) $(0.01) $(0.01) $(0.01) $(0.03) $(0.03)
Fully diluted $(0.01) $(0.01) $(0.03) $(0.01) $(0.01) $(0.01) $(0.03) $(0.03)
                                
Weighted average number of common shares:                                
Basic  69,625,763   64,215,769   68,805,330   61,984,252   147,366,619   102,644,860   129,234,540   96,603,087 
Fully diluted  69,625,763   64,215,769   68,805,330   61,984,252   147,366,619   102,644,860   129,234,540   96,603,087 

 

See the accompanying notes to these Unaudited Condensed Consolidated Financial Statements

 

2

HEALTHLYNKED CORPORATION

(FORMERLY KNOWN AS NAPLES WOMEN’S CENTER)CORP.

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ DEFICITEQUITY (DEFICIT)

THREE AND NINE MONTHS ENDED SEPTEMBER 30, 20172020

(UNAUDITED)

 

  Number of Shares  Common  Additional     Total 
  Common  Common  Stock  Paid-in  Accumulated  Shareholders’ 
  Stock  Stock  Issuable  Capital  Deficit  Deficit 
  (#)  ($)  ($)  ($)  ($)  ($) 
                   
Balance at December 31, 2016  65,753,640   6,575   6,451   1,199,511   (2,124,219)  (911,682)
                         
Sale of common stock  4,469,514   448   ---   547,908   ---   548,356 
Fair value of warrants allocated to proceeds of convertible notes payable  ---   ---   ---   73,696   ---   73,696 
Fair value of warrants issued pursuant to Amended Investment Agreement  ---   ---   ---   153,625   ---   153,625 
Fair value of warrants issued to extend convertible notes payable  ---   ---   ---   290,581   ---   290,581 
Consultant fees payable with common shares and warrants  276,850   28   (3,327)  52,083   ---   48,784 
Shares and options issued pursuant to employee equity incentive plan  176,250   17   ---   15,820   ---   15,837 
Net loss  ---   ---   ---   ---   (1,958,747)  (1,958,747)
                         
Balance at September 30, 2017  70,676,254   7,068   3,124   2,333,224   (4,082,966)  (1,739,550)
  Number of Shares        Common  Additional     Total
Shareholders’		 
  Common  Preferred  Common  Preferred  Stock  Paid-in  Accumulated  Equity 
  Stock  Stock  Stock  Stock  Issuable  Capital  Deficit  (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

 

3

HEALTHLYNKED CORPORATION

(FORMERLY KNOWN AS NAPLES WOMEN’S CENTER)CORP.

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWSCHANGES IN SHAREHOLDERS’ DEFICIT

THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2019

(UNAUDITED)

 

  Nine Months Ended September 30, 
  2017  2016 
Cash Flows from Operating Activities      
Net loss $(1,958,747) $(869,490)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:        
Depreciation  17,622   15,804 
Stock based compensation, including amortization of prepaid fees  83,823   120,037 
Amortization of original issue discount and debt discount on convertible notes  194,120   100,188 
Financing cost  32,324   --- 
Change in fair value of derivative financial instrument  (5,412)  --- 
Loss on extinguishment of debt  290,581   --- 
Non-cash expenses  ---   75,000 
Changes in operating assets and liabilities:        
Accounts receivable  28,293   107,607 
Prepaid expenses and deposits  19,832   36,261 
Accounts payable and accrued expenses  138,613   (93,834)
Due to related party, current portion  27,627   11,986 
Net cash used in operating activities  (1,131,324)  (496,441)
         
Cash Flows from Investing Activities        
Acquisition of property and equipment  (13,238)  (12,611)
Net cash used in investing activities  (13,238)  (12,611)
         
Cash Flows from Financing Activities        
Proceeds from sale of common stock  548,356   374,000 
Proceeds from issuance of convertible notes  229,500   475,000 
Proceeds from related party loans  308,470   176,500 
Repayment of related party loans  (11,192)  (123,273)
Proceeds from issuance of notes payable  75,010   --- 
Repayment of notes payable and bank loans  (34,362)  (84,980)
Payments on capital leases  (13,761)  (13,761)
Net cash provided by financing activities  1,102,021   803,486 
         
Net increase (decrease) in cash  (42,541)  294,434 
Cash, beginning of period  58,716   29,779 
         
Cash, end of period $16,175  $324,213 
         
Supplemental disclosure of cash flow information:        
Cash paid during the period for interest $1,002  $3,438 
Cash paid during the period for income tax $---  $--- 
Schedule of non-cash investing and financing activities:        
Fair value of warrants issued to extend maturity date of convertible notes payable, recognized as discount against convertible notes payable $7,506  $--- 
Fair value of warrants issued pursuant to Amended Investment Agreement $153,625  $--- 
Fair value of warrants, beneficial conversion feature and original issue discount allocated to proceeds of convertible notes payable $66,190  $272,957 
Initial derivative liabilities, beneficial conversion features and original issue discounts allocated to proceeds of convertible notes payable $153,625   --- 
Common stock issuable issued during period $6,451  $45,000 
Common stock issued for preferred stock conversion $---  $295 
  Number of Shares     Common  Additional     Total 
  Common  Common  Stock  Paid-in  Accumulated  Shareholders’ 
  Stock  Stock  Issuable  Capital  Deficit  Deficit 
  (#)  ($)  ($)  ($)  ($)  ($) 
Balance at December 31, 2018  85,178,902   8,518   26,137   7,531,553   (10,501,055)  (2,934,847)
                         
Sale of common stock  3,261,978   326   ---   693,832   ---   694,158 
Fair value of warrants allocated to proceeds of common stock  ---   ---   ---   139,068   ---   139,068 
Shares issued with convertible notes payable  28,000   3   ---   4,673   ---   4,676 
Fair value of warrants issued for professional services  ---   ---   ---   54,257   ---   54,257 
Conversion of convertible notes payable to common stock  2,512,821   251   ---   534,980   ---   535,231 
Consultant fees payable with common shares and warrants  270,000   27   19,960   6,850   ---   26,837 
Shares and options issued pursuant to employee equity incentive plan  113,750   12   ---   61,223   ---   61,235 
Exercise of stock warrants  2,098,427   210   ---   (210)  ---   --- 
Exercise of stock options  113,141   11   ---   (11)  ---   --- 
Net loss  ---   ---   ---   ---   (1,060,717)  (1,060,717)
                         
Balance at March 31, 2019  93,577,019   9,358   46,097   9,026,215   (11,561,772)  (2,480,102)
                         
Acquisition of Hughes Center for Functional Medicine  3,968,254   397   ---   999,603   ---   1,000,000 
Sale of common stock  567,953   57   34,418   110,989   ---   145,464 
Fair value of warrants allocated to proceeds of common stock  ---   ---   ---   15,582   ---   15,582 
Fair value of warrants allocated to proceeds of convertible notes payable  ---   ---   ---   225,323   ---   225,323 
Shares issued with convertible notes payable  50,000   5   ---   12,495   ---   12,500 
Fair value of warrants issued for professional services  ---   ---   ---   ---   ---   --- 
Conversion of convertible notes payable to common stock  740,002   74   ---   138,688   ---   138,762 
Consultant fees payable with common shares and warrants  30,000   3   24,833   39,510   ---   64,346 
Shares and options issued pursuant to employee equity incentive plan  135,313   13   ---   59,384   ---   59,397 
Exercise of stock warrants  2,000,000   200   ---   ---   ---   200 
Net loss  ---   ---   ---   ---   (879,574)  (879,574)
                         
Balance at June 30, 2019  101,068,541   10,107   105,348   10,627,789   (12,441,346)  (1,698,102)
                         
Sale of common stock  1,827,182   183   (9,418)  255,579   ---   246,344 
Shares issued with convertible notes payable  32,500   3   ---   6,939   ---   6,942 
Conversion of convertible notes payable to common stock  330,892   33   ---   63,626   ---   63,659 
Consultant fees payable with common shares and warrants  230,000   23   20,873   46,091   ---   66,987 
Shares and options issued pursuant to employee equity incentive plan  100,000   10   ---   34,540   ---   34,550 
Repurchase of treasury stock  ---   ---   ---   (1,200)  ---   (1,200)
Net loss  ---   ---   ---   ---   (1,125,280)  (1,125,280)
                         
Balance at September 30, 2019  103,589,115   10,359   116,803   11,033,364   (13,566,626)  (2,406,100)

 

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,		 
  2020  2019 
Cash Flows from Operating Activities        
Net loss $(3,832,359) $(3,065,571)
Adjustments to reconcile net loss to net cash used in operating activities:        
Depreciation and amortization  74,811   48,345 
Stock based compensation, including amortization of prepaid fees  436,038   431,626 
Amortization of original issue discount and debt discount on convertible notes  530,930   841,725 
Loss on sales of marketable securities  281,606   --- 
Financing cost  ---   133,244 
Change in fair value of derivative financial instruments  (739,485)  (574,205)
Loss on extinguishment of debt  1,347,371   62,459 
Change in fair value of debt  198,764   88,991 
Change in fair value of contingent acquisition consideration  (687)  --- 
Amortization of lease assets  200,372   206,485 
Changes in operating assets and liabilities:        
Accounts receivable  (20,297)  (5,044)
Inventory  (34,740)  (33,841)
Prepaid expenses and deposits  51,575   (33,110)
Accounts payable and accrued expenses  615,434   322,254 
Lease liability  (197,877)  (201,544)
Due to related party, current portion  46,370   49,252 
Deferred revenue  (52,321)  --- 
Net cash used in operating activities  (1,094,495)  (1,728,934)
         
Cash Flows from Investing Activities        
Proceeds from sale of marketable securities  2,740,806   --- 
Acquisition, net of cash acquired  (164,005)  (465,000)
Payment of contingent acquisition consideration  (137,390)  --- 
Acquisition of property and equipment  (13,541)  (10,056)
Net cash provided by (used in) investing activities  2,425,870   (475,056)
         
Cash Flows from Financing Activities        
Proceeds from sale of common stock  1,099,300   1,240,616 
Proceeds from exercise of warrants  ---   200 
Proceeds from issuance of convertible notes  827,500   1,540,000 
Repayment of convertible notes  (1,882,405)  (608,992)
Proceeds from related party loans  149,000   --- 
Repayment of related party loans  (967,756)  --- 
Proceeds from government loans  1,045,669   --- 
Repurchase and retirement of treasury stock  ---   (1,200)
Net cash provided by financing activities  271,308   2,170,624 
         
Net increase (decrease) increase in cash  1,602,683   (33,366)
Cash, beginning of period  110,441   135,778 
         
Cash, end of period $1,713,124  $102,412 

(continued)

4

5

 

HEALTHLYNKED CORPORATIONCORP.

(FORMERLY KNOWN AS NAPLES WOMEN’S CENTER)CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

(UNAUDITED)

  Nine Months Ended
September 30,		 
  2020  2019 
Supplemental disclosure of cash flow information:      
Cash paid during the period for interest $202,768  $23,573 
Cash paid during the period for income tax $---  $--- 
Schedule of non-cash investing and financing activities:        
Initial derivative liability and fair value of beneficial conversion feature and original issue discount allocated to proceeds of variable convertible notes payable $211,497  $1,276,703 
Common stock issuable issued during period $66,161  $35 
Fair value of warrants issued for professional service $---  $54,257 
Conversion of convertible note payable to common shares $1,665,516  $737,652 
Fair value of common shares issued with convertible notes payable $---  $24,118 
Cashless exercise of options and warrants $---  $221 
Adoption of lease obligation and ROU asset $219,744  $560,050 
Fair value of shares issued as acquisition consideration $201,675  $1,000,000 
Fair value of contingent acquisition consideration liability recorded at acquisition date $1,057,785  $500,000 
Derivative liabilities written off with repayment of convertible notes payable $328,000  $390,434 
Derivative liabilities written off with conversion of convertible notes payable $135,300  $--- 
Fair value of shares issued as contingent acquisition consideration $292,783  $--- 
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  $--- 
Fair value of warrants allocated to proceeds of fixed convertible notes payable $---  $225,323 
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, 2017 AND 20162020

(UNAUDITED)

 

NOTE 1 - BUSINESS AND BUSINESS PRESENTATION

 

HealthLynked Corporation, a Nevada corporationCorp. (the “Company” or “HLYK”) filed its Articleswas incorporated in the State of IncorporationNevada on August 4, 2014. On September 3,2, 2014, HLYKthe Company filed Amended and Restated Articles of Incorporation clarifying thatwith 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 250,000,000 shares are broken up between 230,000,000 common shares and 20,000,000 preferredstock to 500,000,000 shares.

 

OnAs of September 5, 2014, HLYK entered into a share exchange agreement (the “Share Exchange Agreement”) with30, 2020, the Company operated in three distinct divisions: the Health Services Division, the Digital Healthcare Division the ACO/MSO (Accountable Care Organization / Managed Service Organization) Division. The Health Services division is comprised of the operations of (i) Naples Women’s Center LLC (“NWC”), a Florida Limited Liability Company (“LLC”), acquiring 100% of the LLC membership units of NWC through the issuance of 50,000,000 shares of HLYK common stock to the members of NWC (the “Restructuring”).

NWC is a multi-specialty medical group including OB/GYN (both Obstetrics and Gynecology), and General Practice, located(ii) Naples Center for Functional Medicine (“NCFM”), a Functional Medical Practice acquired in Naples, Florida.

HLYK operatesApril 2019 that is engaged in improving the health of its patients through individualized and integrative health care, and (iii) Bridging the Gap Physical Therapy (“BTG”), a physical therapy practice in Bonita Springs, FL opened in January 2020 that provides hands-on functional manual therapy techniques to speed patients’ recovery and manage pain without pain medication or surgery. The Digital Healthcare division develops and plans to operate an online personal medical information and record archive system, the “HealthLynked Network”,Network,” which enableswill enable patients and doctors to keep track of medical information via the Internet in a cloud basedcloud-based system. Patients complete a detailed online personal medical history including past surgical history, medications, allergies,The ACO/MSO Division is comprised of the business acquired of Cura Health Management LLC (“CHM”) and family history. Once this information is enteredits 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 their treating physicians are able to update the information as needed to provide a comprehensive medical history.Medicaid Services (the “CMS”), which rewards providers for efficiency in patient care.

 

These unaudited condensed consolidated financial statements reflect all adjustments including normal recurring adjustments, which, in the opinion of management, are necessary to present fairly the financial position, results of operations and cash flows for the periods presented in accordance with the GAAP.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, 20162019 and 2015,2018, respectively, which are included in Amendment #2 to the Company’s Registration Statement on Form S-110-K, filed with the United States Securities and Exchange Commission on March 23, 2017.30, 2020. The Company assumes that the users of the interim financial information herein have read, or have access to, the audited consolidated financial statements for the preceding period, and that the adequacy of additional disclosure needed for a fair presentation may be determined in that context. The results of operations for the three and nine months ended September 30, 20172020 are not necessarily indicative of results for the entire year ending December 31, 2017.2020.

 

On a consolidated basis, the Company’s operations are comprised of the parent company, HealthLynked Corp. and its five subsidiaries: NWC, NCFM, BTG, CHM and AHP. 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 condensed consolidated financial statements follows:

 

Basis of Presentation

 

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

 

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

 


HEALTHLYNKED CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2020

(UNAUDITED)

NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Use of Estimates

 

The preparation of the condensed consolidated financial statements in conformity with generally accepted accounting principlesGAAP 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 condensed consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. Accordingly, actual results could differ from those estimates. Significant estimates include assumptions about collection of accounts receivable, the valuation and recognition of stock-based compensation expense, valuation allowance for deferred tax assets, borrowing rate consideration for right-of-use (“ROU”) lease assets including related lease liability and useful life of fixed assets.

 

5

HEALTHLYNKED CORPORATION

(FORMERLY KNOWN AS NAPLES WOMEN’S CENTER)

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2017 AND 2016

(UNAUDITED)Adopted Accounting Pronouncements

 

NOTEEffective January 1, 2019, the Company adopted Accounting Standards Update (“ASU”) No. 2016-02, Leases (“ASU 2016-02”) using the required modified retrospective approach. ASU 2016-02 requires lessees to record most leases on their balance sheets but recognize expenses on their income statements in a manner similar to current accounting. See discussion below under the caption “Leases” in this Note 2 – SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)and in Note 9 for more detail on the Company’s accounting policy with respect to lease accounting.

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

 

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 includes variable consideration for retroactive revenue adjustments due to settlement of audits, reviews, and investigations. Generally, the Company bills patients and third-party payors within days after the services are performed and/or the patient is discharged from the facility. Revenue is recognized as performance obligations are satisfied.

Performance obligations are determined based on the nature of the services provided by the Company. Revenue for performance obligations satisfied over time is recognized based on actual charges incurred in relation to total expected charges. The Company recognizes revenuebelieves 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 Accounting Standards Codification subtopic 605-10, Revenue Recognition (“ASC 605-10”)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.

8

HEALTHLYNKED CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2020

(UNAUDITED)

NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Laws and regulations concerning government programs, including Medicare and Medicaid, are complex and subject to varying interpretation. As a result of investigations by governmental agencies, various health care organizations have received requests for information and notices regarding alleged noncompliance with those laws and regulations, which, requires that four basic criteria mustin some instances, have resulted in organizations entering into significant settlement agreements. Compliance with such laws and regulations may also be met before revenuesubject 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 recognized: (1) persuasive evidenceno 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 arrangement exists; (2) delivery has occurred; (3)assessment to ensure that it is probable that a significant reversal in the sellingamount 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 fixeddetermined by reducing the standard charge by any contractual adjustments, discounts, and determinable;implicit price concessions. Subsequent changes to the estimate of the transaction price are generally recorded as adjustments to patient service revenue in the period of the change. Patient services provided by NCFM are provided on a cash basis and (4) collectability is reasonably assured. Determination of criteria (3) and (4) arenot submitted through third party insurance providers.

Medicare Shared Savings Revenue

The Company earns Medicare shared savings revenue based on management’s judgments regarding the fixed natureperformance of the selling pricespopulation 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 products delivered andamount of shared savings earned. Accordingly, the collectabilityCompany recognizes Medicare shared savings revenue in the period in which the CMS notifies the Company of those amounts. Patient service revenues are recognized at the timeexact amount of serviceshared savings to be paid, which historically has occurred during the three-month period ended September 30 for the netprogram year ended December 31 of the previous year. The Company was notified of the amount expectedof Medicare shared savings and received payment for such savings in September 2020. Accordingly, the Company recognized Medicare shared savings revenue of $767,744 in the three and nine months ended September 30, 2020. Based on the ACO operating agreements, the Company bears all costs of the ACO operations until revenue is recognized. At that point, the Company shares in up to be collected. Provisions for discounts and rebates100% of the revenue to customers, estimated returns and allowances, and other adjustmentsrecover its costs incurred.

 

Consulting Revenue

Also pursuant to ASC 606, the Company recognizes service revenue as services are provided, with any unearned but paid amounts recorded a deferred revenue liability at each balance sheet date.

Deferred Revenue

The Company’s deferred revenue liability balance was $51,714 and $-0- as of September 30, 2020 and December 31, 2019.


HEALTHLYNKED CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2020

(UNAUDITED)

NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

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 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 was notified of the amount of Medicare shared savings and received payment for such savings in September 2020 totaling $767,744, of which $388,884 had been determined to provider shared savings expense that will be paid to the providers in the fourth quarter of 2020. This amount was recognized as provider shared savings expense and accrued as of September 30, 2020.

Cash and Cash Equivalents

 

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

 

Accounts Receivable

 

Trade receivables are carried at their estimated collectible amounts. Trade credit is generally extended on a short-term basis; thus trade receivables do not bear interest. Trade accounts receivable are periodically evaluated for collectability based on past collectability of the insurance companies, government agencies, and customers’ accounts receivable during the related period which generally approximates 45%48% of total billings. Trade accounts receivable are recorded at this net amount. As of and September 30, 20172020 and December 31, 2016,2019, the Company’s gross patient services accounts receivable were $269,501$190,492 and $333,804,$188,503, respectively, and net patient services accounts receivable were $118,581$97,819 and $146,874,$97,223, respectively, based upon net reporting of accounts receivable. As of September 30, 2020 and December 31, 2019, the Company’s allowance of doubtful accounts was $13,972 and $13,972, respectively. The Company also had $109,897 accounts receivable related to amounts billed under consulting contracts.

 

Capital Leases

 

Costs associated with capitalizedUpon 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 capitalizedor contain leases, (ii) not reassessing the lease classification for any expired or existing leases, and depreciated ratably(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 term of the related useful life of the asset and/or the capital 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 9 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 unaudited condensed 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.


HEALTHLYNKED CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2020

(UNAUDITED)

NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

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 depreciationcontract, asset or liability. Such intangibles are amortized over their estimated useful lives unless the estimated useful life is determined to be indefinite. Amortizable intangible assets are being amortized primarily over useful lives of five years. The straight-line method of amortization is used as it has been determined to approximate the use pattern of the assets. Impairment losses are recognized if the carrying amount of an intangible that is subject to amortization is not recoverable from expected future cash flows and its carrying amount exceeds its fair value.

The Company also maintains intangible assets with indefinite lives, which are not amortized. These intangibles are tested for impairment on an annual basis and more often if circumstances require. Impairment losses are recognized whenever the implied fair value of these assets is less than their carrying value. No impairment charges were recognized in the three months ended September 30, 2017 and 2016 was $4,587 and $4,587, respectively. The related depreciation for theor nine months ended September 30, 2017 and 2016 was $13,761 and $13,761, respectively. Accumulated depreciation of capitalized leases was $299,151 and $285,390 at September 30, 2017 and December 31, 2016, respectively.2020 or 2019.

 

Concentrations of Credit Risk

 

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

 

Property and Equipment

 

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

 

The Company examines the possibility of decreases in the value of fixed assets when events or changes in circumstances reflect the fact that their recorded value may not be recoverable. The Company recognizes an impairment loss when the sum of expected undiscounted future cash flows is less than the carrying amount of the asset. The amount of impairment is measured as the difference between the asset’s estimated fair value and its book value. There was no impairment as of or for the periods ended September 30, 2017 and December 31, 2016.2020 or 2019.

 

6

HEALTHLYNKED CORPORATION

(FORMERLY KNOWN AS NAPLES WOMEN’S CENTER)

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2017 AND 2016

(UNAUDITED)

NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Convertible Notes

 

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


HEALTHLYNKED CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2020

(UNAUDITED)

 

NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Derivative Financial Instruments

 

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

 

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

 

Fair Value of Assets and Liabilities

 

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

 

●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.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 liabilityliability.

 

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.

7

 


HEALTHLYNKED CORP.

HEALTHLYNKED CORPORATION

(FORMERLY KNOWN AS NAPLES WOMEN’S CENTER)

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2017 AND 20162020

(UNAUDITED)

 

NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

Stock-Based Compensation

 

The Company accounts for stock basedstock-based compensation to employees and nonemployees under ASC 718 “Compensation – Stock Compensation” using the fair value basedvalue-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 itits equity instruments for goods or services. It also addresses transactions in which an entity incurs liabilities in exchange for goods or services that are based on the fair value of the entity’s equity instruments or that may be settled by the issuance of those equity instruments.

The Effective January 1, 2020, the Company uses the fair value method for equity instruments granteda binomial lattice pricing model to non-employees and use the Black-Scholes model for measuringestimate the fair value of options. The stock based fair value compensation is determined as ofoptions and warrants granted. In prior periods, the date ofCompany used the grant or the date at which the performance of the services is completed (measurement date) and is recognized over the vesting periods.Black-Scholes pricing model.

 

Income Taxes

 

The Company follows Accounting Standards Codification subtopic 740-10, Income Taxes (“ASC 740-10”) for recording the provision for income taxes. Deferred tax assets and liabilities are computed based upon the difference between the financial statement and income tax basis of assets and liabilities using the enacted marginal tax rate applicable when the related asset or liability is expected to be realized or settled. Deferred income tax expenses or benefits are based on the changes in the asset or liability during each period. If available evidence suggests that it is more likely than not that some portion or all of the deferred tax assets will not be realized, a valuation allowance is required to reduce the deferred tax assets to the amount that is more likely than not to be realized. Future changes in such valuation allowance are included in the provision for deferred income taxes in the period of change. Deferred income taxes may arise from temporary differences resulting from income and expense items reported for financial accounting and tax purposes in different periods. Deferred taxes are classified as current or non-current, depending on the classification of assets and liabilities to which they relate. Deferred taxes arising from temporary differences that are not related to an asset or liability are classified as current or non-current depending on the periods in which the temporary differences are expected to reverse and are considered immaterial. No Income Tax has been provided for the three and nine months ended September 30, 2020 or 2019, since the Company has sustained a loss for both periods. Due to the uncertainty of the utilization and recoverability of the loss carry-forwards and other deferred tax assets, management has determined a full valuation allowance for the deferred tax assets, since it is more likely than not that the deferred tax assets will not be realizable.

 

Recurring Fair Value Measurements

 

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

 

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.

Net Income (Loss)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 month periodsmonths ended September 30, 20172020 and 2016,2019, the Company reported a net loss and excluded all outstanding stock options, warrants and other dilutive securities from the calculation of diluted net loss per common share because inclusion of these securities would have been anti-dilutive. As of September 30, 20172020 and 2016,December 31, 2019, potentially dilutive securities were comprised of (i) 19,566,38950,470,118 and 10,576,38947,056,293 warrants outstanding, respectively, (ii) 2,349,9963,249,250 and 1,600,0003,269,250 stock options outstanding, respectively, (iii) 8,675,18010,298,333 and 7,375,00023,210,423 shares issuable upon conversion of convertible notes, respectively, (iv) 300,000 and (iv) 528,750 and 940,000332,500 unissued shares subject to future vesting requirements granted pursuant to the Company’s Employee Incentive Plan. Plan, and (v) up to 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, 2020

(UNAUDITED)

NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Warrants

In connection with certain financing, consulting and collaboration arrangements, the Company has issued warrants to purchase shares of its common stock. The outstanding warrants are standalone instruments that are not puttable or mandatorily redeemable by the holder and are classified as equity awards. The Company measures the fair value of the awards using the Black-Scholes pricing model as of the measurement date. Effective January 1, 2020, the Company uses a binomial lattice pricing model to estimate the fair value of compensation options and warrants. In prior periods, the Company used the Black-Scholes pricing model. Warrants issued in conjunction with the issuance of common stock are initially recorded at fair value as a reduction in additional paid-in capital of the common stock issued. All other warrants are recorded at fair value as expense over the requisite service period or at the date of issuance, if there is not a service period. Warrants granted in connection with ongoing arrangements are more fully described in Note 15, Shareholders’ Equity (Deficit).

Business Segments

The Company uses the “management approach” to identify its reportable segments. The management approach designates the internal organization used by management for making operating decisions and assessing performance as the basis for identifying the Company’s reportable segments. Using the management approach, the Company determined that it has three 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), and 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).

Recent Accounting Pronouncements

 

Effective January 1, 2019, the Company adopted Accounting Standards Update (“ASU”) No. 2016-02, Leases (“ASU 2016-02”) using the required modified retrospective approach. ASU 2016-02 requires lessees to record most leases on their balance sheets but recognize expenses on their income statements in a manner similar to current accounting. See discussion below under the caption “Leases” in this Note 2 and in Note 9 for more detail on the Company’s accounting policy with respect to lease accounting.

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

In SeptemberJanuary 2016, the FASB issued ASU No. 2016-01, Financial Instruments — Overall: Recognition and Measurement of Financial Assets and Financial Liabilities. The guidance affects the accounting for equity investments, financial liabilities under the fair value option and the presentation and disclosure requirements of financial instruments. The guidance is effective in the first quarter of fiscal 2019. We adopted this guidance effective January 1, 2019. The adoption of this guidance did not materially impact our financial statements and related disclosures.

In July 2017, the FASB issued ASU 2017-13, Revenue RecognitionNo. 2017-11, Earnings Per Share, Distinguishing Liabilities from Equity and Derivatives and Hedging, which changes the accounting and earnings per share for certain instruments with down round features. The amendments in this ASU should be applied using a cumulative-effect adjustment as of the beginning of the fiscal year or retrospective adjustment to each period presented and is effective for annual periods beginning after December 15, 2018, and interim periods within those periods. We adopted this guidance effective January 1, 2019. The adoption of this guidance did not materially impact our financial statements and related disclosures.

In February 2018, the Financial Accounting Standards Board (“FASB”) issued ASC Update No 2018-02 (Topic 605), Revenue220) Income Statement – Reporting Comprehensive Income: Reclassification of Certain Tax Effects from Contracts with Customers (Topic 606), Leases (Topic 840),Accumulated Other Comprehensive Income.  This ASC update allows for a reclassification into retained earnings of the stranded tax effects in accumulated other comprehensive income (“AOCI”) resulting from the enactment of the Tax Cuts and Leases (Topic 842)Jobs Act (“TCJA”). The updated guidance is effective for interim and annual periods beginning after December 15, 2018.  We adopted this guidance effective January 1, 2019. The adoption of this guidance did not materially impact our financial statements and related disclosures.

14

HEALTHLYNKED CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2020

(UNAUDITED)

NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

In June 2018, the FASB issued ASU 2018-07, Compensation - Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting, to expand the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from nonemployees and supersedes the guidance in Subtopic 505-50, Equity - Equity-Based Payments to Non-Employees. Under ASU 2018-07, equity-classified nonemployee share-based payment awards are measured at the grant date fair value on the grant date The probability of satisfying performance conditions must be considered for equity-classified nonemployee share-based payment awards with such conditions. ASU 2017-132018-07 is effective for fiscal years beginning after December 15, 2018.2018, with early adoption permitted. We are currently evaluating theadopted this guidance effective January 1, 2019. The adoption of this guidance did not materially impact of adopting ASU 2017-13 on our unaudited consolidated financial statements.

8

HEALTHLYNKED CORPORATION

(FORMERLY KNOWN AS NAPLES WOMEN’S CENTER)

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2017 AND 2016

(UNAUDITED)

NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)statements and related disclosures.

 

In January 2017,July 2018, the FASB issued ASU 2017-04, Intangibles-Goodwill2018-09 to provide clarification and Other (Topic 350), which simplifiescorrection of errors to the goodwill impairment test.Codification. The amendments in this update cover multiple Accounting Standards Updates. Some topics in the update may require transition guidance with effective datedates for ASU 2017-04 is for fiscal yearsannual periods beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after2018. We adopted this guidance effective January 1, 2017. We2019. The adoption of this guidance did not materially impact our financial statements and related disclosures.

No other new accounting pronouncements were issued or became effective in the period that had, or are currently evaluating theexpected to have, a material impact of adopting ASU 2017-04 on our unaudited condensed consolidated financial statements.

In January 2017, the FASB issued ASU No. 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business. This new standard clarifies the definition of a business and provides a screen to determine when an integrated set of assets and activities is not a business. The screen requires that when substantially all of the fair value of the gross assets acquired (or disposed of) is concentrated in a single identifiable asset or a group of similar identifiable assets, the set is not a business. This new standard will be effective for the Company on January 1, 2018; however, early adoption is permitted with prospective application to any business development transaction. We are currently evaluating the impact of adopting ASU 2017-04 on our unaudited condensed consolidated financial statements.

The Company applied ASU 2015-03: Interest – Imputation of Interest, which simplifies the presentation of debt issuance costs, and netted debt issue costs previously reported as assets with the related liability for presentation purposes.

On May 28, 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2014-09, Revenue from Contracts with Customers. The standard will eliminate the transaction- and industry-specific revenue recognition guidance under current U.S. GAAP and replace it with a principle-based approach for determining revenue recognition. The Company intends to adopt this guidance for the year ended December 31, 2017. The Company has not yet evaluated the impact the adoption this standard will have on its results of operations upon adoption.Statements.

In August 2014, the FASB issued ASU No. 2014-15 Presentation of Financial Statements-Going Concern. The amendments in this update apply to all reporting entities and require an entity’s management, in connection with preparing financial statements for each annual and interim reporting period, to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date that the financial statements are issued (or within one year after the date that the financial statements are available to be issued when applicable). This ASU is effective for annual periods ending after December 15, 2016. The Company adopted this standard for the year ended December 31, 2016. Based on the results of our analysis, no additional disclosures were required.

The Company has evaluated recent accounting pronouncements issued by the FASB (including its Emerging Issues Task Force), the AICPA and the SEC and we have not identified any that would have a material impact on the Company’s financial position, or statements.

 

NOTE 3 – GOING CONCERN MATTERS AND LIQUIDITY

 

As of September 30, 2017,2020, the Company had a working capital deficit of $1,536,307$1,979,983 and accumulated deficit $4,082,966.$19,862,013. For the nine months ended September 30, 2017,2020, the Company had a net loss of $1,958,747$3,896,221 and net cash used by operating activities of $1,131,324.$1,094,495. Net cash used inprovided by investing activities was $13,238.$2,425,870, including $2,740,806 received from the sale of marketable securities received in an August 2020 financing transaction. Net cash provided by financing activities was $1,102,021,$271,308, resulting principally from $548,356 from the proceeds of the sale of 4,469,514 shares of common stock, $308,470$1,045,669 proceeds from related party loans and $229,500grants issued by the federal government under the Payroll Protection Act, $827,500 net proceeds from the issuance of convertible notes. Subsequent to September 30, 2017, the Company received additional $150,000 netnotes, and $149,000 proceeds from the saleissuance of arelated party loans. The Company also repaid $1,882,405 of convertible promissory notenotes and $200,000 from the sale$967,756 of 1,000,000 common shares with an attached five-year warrant to purchase 666,666 shares of the Company’s common stock at an exercise price of $0.30 per share (see Note 14).related party loans during 2020.

 

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

 

9

HEALTHLYNKED CORPORATION

(FORMERLY KNOWN AS NAPLES WOMEN’S CENTER)

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2017 AND 2016

(UNAUDITED)

NOTE 3 – GOING CONCERN MATTERS AND LIQUIDITY (CONTINUED)

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

 

DuringA novel strain of coronavirus, COVID-19, that was first identified in China in December 2019, has surfaced in several regions across the year ended December 31, 2016, HLYK (i) received proceedsworld and resulted in travel restrictions and business slowdowns or shutdowns in affected areas. The further spread of $374,000 fromCOVID-19, and the salerequirement to take action to limit the spread of 6,167,500 shares of common stock, (ii) received net proceeds of $475,000 from the issuance of convertible promissory notes with a combined face value of $600,000,illness, may impact our ability to carry out our business as usual and (iii) entered into an Investment Agreement (the “Investment Agreement”) pursuantmay 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 investor has agreed to purchase up to $3,000,000 of HLYK common stock over a three-year period starting upon registrationultimate geographic spread of the underlying shares, with such shares put todisease, the investor by the Company pursuant to a specified formula that limits the number of shares able to be put to the investor to the number equal to the average trading volumeduration of the Company’s common shares foroutbreak, travel restrictions and social distancing in the ten consecutive trading days priorUnited 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 put notice being issued. During the nine months ended Septemberdisease. 


HEALTHLYNKED CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2017, the Company received $15,356 from the proceeds of the sale of 57,016 shares pursuant to the Investment Agreement.2020

(UNAUDITED)

NOTE 3 – GOING CONCERN MATTERS AND LIQUIDITY (CONTINUED)

 

The Company intends that the cost of completing intended acquisitions, implementing its development and sales efforts related to the HealthLynked Network, as well as maintaining its existing and expanding overhead and administrative costs, and repaying its outstanding convertible notes, which have an aggregate face value of $1,038,500 as of September 30, 2020, will be funded principallyfinanced from (i) anticipated profits generated by cash received by the Company fromNCFM, CHM and AHP, and MOD, which was acquired in October 2020, and (ii) outside funding sources, including the put rights associated with the Investment Agreement entered into in July of 2016 (the “Investment Agreement”), sales of common stock, government loans and supplemented by other funding mechanisms, including loans from related parties andissuance of additional convertible notes. The Company expects to repay its outstanding convertible notes – of which $111,000 face value matures on January 22, 2018, $53,000 on April 15, 2018, $35,000 on June 15, 2018, $550,000 on July 7, 2018, and $50,000 on July 11, 2018, and $55,000 on September 11, 2018 – from outside funding sources, including but not limited to amounts available upon the exercise of the put rights granted to the Company underIn May 2020, the Investment Agreement, sales of equity, loans from related parties and others or through the conversion of the notes into equity.which was scheduled to expire on May 15, 2020, was extended an additional two years to May 15, 2022. No assurances can be given that the Company will be able to access sufficient outside capital in a timely fashion in order to repay the convertible notes before they mature. If necessary funds are not available, the Company’s business and operations would be materially adversely affected and in such event, the Company would attempt to reduce costs and adjust its business plan.

 

NOTE 4 – DEFERRED OFFERING COSTSMARKETABLE SECURITIES

 

On July 7, 2016,August 20, 2020, the Company entered into a contribution agreement (the “Contribution Agreement”) with Michael T. Dent, Trustee of the InvestmentMary S. Dent Gifting Trust dated January 31, 2006 (the “Gifting Trust”), Michael Thomas Dent, Trustee under the Michael Thomas Dent Declaration of Trust dated March 23, 1998, as amended (the “MTD Trust” and together with the Gifting Trust, the “Trusts”), and Michael T. Dent, the Chief Executive Officer and Chairman of the board of directors of the Company. Pursuant to the Contribution Agreement, the Trusts contributed an aggregate of 76,026 freely trading shares of common stock of NeoGenomics, Inc. (“NEO” and the “NEO Shares”) (NASD:NEO) with a fair value of $3,006,889 to the Company. In consideration for the foregoing, the Company issued the Trusts an accredited investor, pursuant to whichaggregate of 2,750,000 shares of the Company’s newly designated Series B Preferred stock and an accredited investor agreed to invest up to $3,000,000 to purchaseaggregate of 24,522,727 shares of the Company’s common stock par(collectively, the “August 2020 Equity Transaction”).

During the three and nine months ended September 30, 2020, the Company sold 74,900 of the NEO Shares and received proceeds of $2,740,806, realizing losses of $281,606. As of September 30, 2020, the Company held 1,126 NEO Shares with a fair value of $.0001 per share. The purchase price$44,477.

NOTE 5 – ACQUISITIONS

Hughes Center for suchFunctional Medicine – April 2019

On April 12, 2019, the Company acquired a 100% interest in Hughes Center for Functional Medicine (“HCFM”), a medical practice engaged in improving the health of its patients through individualized and integrative health care. Under the terms of acquisition, the Company paid HCFM shareholders $500,000 in cash, issued 3,968,254 shares shall be 80% of the lowestCompany’s common stock and agreed to an earn-out provision of $500,000 that may be earned based on the performance of HCFM in the years ended on the first, second and third anniversary dates of the acquisition closing. The total consideration fair value represents a transaction value of $1,799,672. The Company accounted for the transaction as an acquisition of a business pursuant to ASC 805, “Business Combinations” (“ASC 805”).

Following the acquisition, HCFM was rebranded as NCFM and was combined with NWC to form the Company’s Health Services segment. As a result of the acquisition, the Company is expected to be a leading provider of Functional Medicine in Southwest Florida. The Company also expects to reduce costs in its Health Services segment through economies of scale.

The following table summarizes the fair value of consideration paid for HCFM:

Cash $500,000 
Common Stock (3,968,254 shares)  1,000,000 
Contingent acquisition consideration subject to earn-out  299,672 
     
Fair Value of Total Consideration $1,799,672 


HEALTHLYNKED CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2020

(UNAUDITED)

NOTE 5 – ACQUISITIONS (CONTINUED)

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 stock duringshares on the five consecutive trading days prior toacquisition date. The terms of the date on which written notice is sent byearn out require the Company to pay the investor statingformer owner of HCFM up to $100,000, $200,000 and $200,000 on the numberfirst, second and third anniversary, respectively, based on achievement by NCFM of revenue of at least $3,100,000 (50% weighting) and EBITDA of at least $550,000 (50% weighting) in the year preceding each anniversary date. The fair value of the contingent acquisition consideration related to the future earn-out payments was calculated using a probability-weighted discounted cash flow projection. The fair value of the contingent acquisition consideration is remeasured at the end of each reporting period and changes are included in the statement of operations under the caption “Change in fair value of contingent acquisition consideration.” During the three months ended September 30, 2020 and 2019, the Company recognized losses on the change in the fair value of contingent acquisition consideration related to the HCFM acquisition of $1,185 and $-0-, respectively. During the nine months ended September 30, 2020 and 2019, the Company recognized losses on the change in the fair value of contingent acquisition consideration of $12,512 and $-0-, respectively. During the nine months ended September 30, 2020, the Company paid the seller $47,000 in satisfaction of the first year of earn-out.

The following table summarizes the estimated fair values of the assets acquired at the acquisition date. There were no liabilities assumed in the acquisition of HCFM.

Cash $35,000 
Hyperbaric Chambers  452,289 
Medical Equipment  29,940 
Computer Equipment/Software  19,739 
Office Furniture & Equipment  23,052 
Inventory  72,114 
Leasehold Improvements  25,000 
Website  41,000 
Patient Management Platform Database  1,101,538 
     
Fair Value of Identifiable Assets Acquired $1,799,672 

The fair value of the website of $41,000 was determined based upon the cost to reconstruct and put into use applying current market rates. The fair value of the Patient Management Platform Database of $1,101,538 was estimated by applying the income approach. Under the income approach, the expected future cash flows generated by the Patient Management Platform Database are estimated and discounted to their net present value at an appropriate risk-adjusted rate of return. Significant factors considered in the calculation of the rate of return are the weighted average cost of capital and return on assets, as well as the risks inherent in the business. Cash flows were estimated based on EBITDA using forecasted revenue and costs. The measure is based on significant inputs that are not observable in the market (i.e. Level 3 inputs). Key assumptions include (i) a capitalization rate of 11.75% (ii) sustainable growth of 5% and (iii) a benefit stream using EBITDA cash flow. The Company finalized the purchase price allocation in March 2020 and determined that no goodwill was included in the acquisition.

Cura Health Management LLC – May 2020

On May 18, 2020, the Company acquired a 100% interest in Cura Health Management LLC (“CHM”) and its wholly owned subsidiary ACO Health Partners, LLC (“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, “Business Combinations” (“ASC 805”). Following the acquisition, the business of CHM will comprise the Company’s ACO/MSO Division.

Under the terms of acquisition, the Company paid CHM shareholders the following consideration: (i) $214,000 in cash paid at closing, (ii) 2,240,838 shares of HealthLynked common stock issued at closing, (iii) up to $223,500 additional cash and $660,000 in additional shares of HealthLynked common payable at the time CHM receives the final assessment of the calculation of MSSP savings for the 2019 program year, with this amount prorated based on a target MSSP payment (plus other ancillary revenue) of $1,725,000, and (iv) up to $437,500 based on the business achieving annual revenue of $2,250,000 and annual profit of $500,000 in each of the four years following closing.


HEALTHLYNKED CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2020

(UNAUDITED)

NOTE 5 – ACQUISITIONS (CONTINUED)

The total consideration fair value represents a transaction value of $1,473,460. The following table summarizes the fair value of consideration paid:

Cash paid at closing $214,000 
Shares issued at closing  201,675 
Cash and shares contingent upon 2019 program year MSSP payment target  778,192 
Cash contingent upon four-year earn-out  279,593 
     
  $1,473,460 

The fair value of the 2,240,838 common shares issued at closing was determined using the intraday average high and low trading price of the Company’s common shares on the acquisition date. The terms of the earn out require the Company to pay the former owners of CHM (i) up to $223,500 additional cash and to $660,000 of additional shares of Company common stock when CHM receives the final assessment of the calculation of 2019 plan year MSSP revenue (the “Current Earnout”), and (ii) up to $62,500, $125,000, $125,000 and $125,000 on the first, second, third and fourth anniversary, respectively, based on achievement by the underlying business of revenue of at least $2,250,000 (50% weighting) and profit of at least $500,000 (50% weighting) in the year preceding each anniversary date (the “Future Earnout”). During September 2020, pursuant to a Second Amendment to the Agreement and Plan of Merger and in satisfaction of the Current Earnout, the Company paid $90,389 cash, issued 1,835,625 shares and agreed that the balance of the Current Earnout that was not earned in 2020, being $124,043 cash and $366,300 in shares of Company common stock, would be deferred until the first future earnout year in which MSSP revenue exceeds $1.725 million and revenue from other services exceeds $605,000.

The fair value of the contingent acquisition consideration related to both the Current Earnout and the Future Earnout were calculated using a probability-weighted discounted cash flow projection. The fair value of the contingent acquisition consideration is sellingremeasured 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, 2020 and 2019, the Company recognized gains on the change in the fair value of contingent acquisition consideration related to the investor, subjectCHM acquisition of $47,181 and $-0-, respectively. During the nine months ended September 30, 2020 and 2019, the Company recognized gains on the change in the fair value of contingent acquisition consideration related to certain discountsthe CHM acquisition of $13,200 and adjustments. Further,$-0-, respectively.

The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the acquisition date:

Cash $49,995 
Accounts receivable  90,197 
Prepayments  15,294 
ACO physician contracts  1,073,000 
Goodwill  381,856 
Accounts payable  (32,846)
Deferred revenue  (104,034)
     
Fair Value of Identifiable Assets Acquired and Liabilities Assumed $1,473,460 

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 each $50,000 thatincome tax purposes.

18

HEALTHLYNKED CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2020

(UNAUDITED)

NOTE 5 – ACQUISITIONS (CONTINUED)

Pro Forma Financial Information

The following represents the investor tenders topro forma consolidated income statement as if HCFM and CHM had been included in the consolidated results of the Company for the purchaseentire nine-month period ending September 30, 2020 and 2019:

  Nine Months Ended
September 30,		 
  2020  2019 
Revenue $4,740,283  $3,741,591 
Net loss $(3,846,293) $(2,994,648)

These amounts have been calculated after applying the Company’s accounting policies and adjusting the results of shares of common stock,HCFM and CHM to reflect the investor wasadditional depreciation and amortization that would have been charged assuming the fair value adjustments to be granted warrants for the purchase of an equivalent number of shares of common stock. The warrants were to expire five (5) years from their respective grant datesproperty, plant and have an exercise price equal to 130% of the weighted average purchase price for the respective “$50,000 increment.”equipment and intangible assets had been applied on January 1, 2020 and 2019, respectively.

NOTE 6 – DEFERRED OFFERING COSTS AND PREPAID EXPENSES

 

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

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

10

HEALTHLYNKED CORPORATION

(FORMERLY KNOWN AS NAPLES WOMEN’S CENTER)

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2017 AND 2016

(UNAUDITED)

NOTE 4 – DEFERRED OFFERING COSTS (CONTINUED)

This fair value of the warrantstotaling $153,625 was recorded as a deferred offering cost and will beis being amortized over the initial period during which the Company canwas able access the financing, which begins the day after a registration statement registering shares underlying the Investment Agreement is declared effective by the United States Securities and Exchange Commission (the “SEC”), and ends 3 years from that date. Onbegan on May 15, 2017 the SEC declared effective a registration statement registering shares underlying the Investment Agreement. During the three and nine months ended September 30, 2017, theon May 15, 2020. The Company recognized $12,802 and $19,203, respectively, in general and administrative expense related to the cost of the warrants of $-0- and $12,802 in the three months ended September 30, 2020 and 2019, respectively, and $19,203 and $38,46 in the nine months ended September 30, 2020 and 2019, respectively.

On December 6, 2018, the Company granted three-year warrants to purchase 240,000 shares at an exercise price of $0.20 per share to two advisors for services to be provided over a three-month period. The fair value of the warrants of $35,462 was amortized over a three-month service period. During the three months ended September 30, 2020 and 2019, the Company recognized $-0- and $25,611, respectively, to general and administrative expense related to the warrants. The Company recognized general and administrative expense related to the warrants of $-0- and $-0- in the three months ended September 30, 2020 and 2019, respectively, and $-0- and $25,611 in the nine months ended September 30, 2020 and 2019, respectively.

 

NOTE 57 – PROPERTY, PLANT, AND EQUIPMENT

 

Property, plant and equipment at September 30, 20172020 and December 31, 20162019 are as follows:

 

  September 30,  December 31, 
  2017  2016 
     (audited) 
Capital Lease equipment $343,492  $343,492 
Telephone equipment  12,308   12,308 
Furniture, Transport and Office equipment  433,059   419,821 
         
Total Property, plant and equipment  788,859   775,621 
Less: accumulated depreciation  (722,407)  (704,785)
         
Property, plant and equipment, net $66,452  $70,836 
  September 30,  December 31, 
  2020  2019 
       
Capital lease equipment $---  $251,752 
Medical equipment  484,126   482,229 
Furniture, telephone and office equipment  792,519   529,123 
         
Total property, plant and equipment  1,276,645   1,263,104 
Less: accumulated depreciation  (817,971)  (749,316)
         
Property, plant and equipment, net $458,674  $513,788 

 

Depreciation expense during the three months ended September 30, 20172020 and 20162019 was $6,055$23,083 and $5,718,$22,913, respectively. Depreciation expense during the nine months ended September 30, 20172020 and 20162019 was $17,622$68,655 and $15,804,$44,503, respectively.

 

19

HEALTHLYNKED CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2020

(UNAUDITED)

NOTE 68 – INTANGIBLE ASSETS

Intangible assets at September 30, 2020 and December 31, 2019 are as follows:

  September 30,  December 31, 
  2020  2019 
       
NCFM: Medical database $1,101,538  $1,230,000 
NCFM: Website  41,000   41,000 
CHM: ACO physician contracts  1,073,000   --- 
Goodwill  381,856   71,866 
         
Total intangible assets  2,597,394   1,342,866 
Less: accumulated amortization  (12,064)  (5,908)
         
Intangible assets, net $2,585,330  $1,336,958 

Goodwill and intangible assets arose from the acquisitions of NCFM in April 2019 and CHM in May 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. Goodwill represents the excess of consideration transferred over the fair value of the net identifiable assets acquired related to the acquisition of CHM.

Amortization expense in the three months ended September 30, 2020 and 2019 was $2,067 and $2,067, respectively. Amortization expense in the nine months ended September 30, 2020 and 2019 was $6,156 and $3,842, respectively. No impairment charges were recognized related to goodwill and intangible assets in the three or nine months ended September 30, 2020 or 2019.

NOTE 9 – LEASES

The Company has three operating leases for office space related to its NWC, NCFM and BTG practices that expire in July 2023, May 2022, and March 2023, respectively. As of September 30, 2020, the Company’s weighted-average remaining lease term relating to its operating leases was 2.4 years, with a weighted-average discount rate of 33.89%. The Company was also lessee in a capital equipment finance lease for medical equipment entered into in March 2015 that expired in March 2020.

The table below summarizes the Company’s lease-related assets and liabilities as of September 30, 2020 and December 31, 2019:

  As of September 30, 2020  As of December 31, 2019 
  Operating  Financing  Total  Operating  Financing  Total 
  Leases  Leases  Leases  Leases  Leases  Leases 
Lease assets $297,050  $---  $297,050  $273,196  $4,482  $277,678 
                         
Lease liabilities                        
Lease liabilities (short term) $105,233  $---  $105,233  $197,041  $4,482  $201,523 
Lease liabilities (long term)  198,667   ---   198,667   80,510   ---   80,510 
Total lease liabilities $303,900  $---  $303,900  $277,551  $4,482  $282,033 

HEALTHLYNKED CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2020

(UNAUDITED)

NOTE 9 – LEASES (CONTINUED)

Lease expense in the three and nine months ended September 30, 2020 and 2019 was as follow:

  Three Months Ended
September 30,		  Nine Months Ended
September 30,		 
  2020  2019  2020  2019 
             
Operating leases $61,526  $85,573  $242,891  $239,974 
Financing leases  ---   4,587   4,587   13,761 
                 
Total lease expense $61,526  $90,160  $247,478  $253,735 

Maturities of operating and capital lease liabilities were as follows as of September 30, 2020:

  Operating  Capital  Total 
  Leases  Leases  Commitments 
2020 $50,882  $---  $50,882 
2021  205,430   ---   205,430 
2022  159,561   ---   159,561 
2023  68,457   ---   68,457 
Total lease payments  484,330   ---   484,330 
Less interest  (180,430)  ---   (180,430)
Present value of lease liabilities $303,900  $---  $303,900 

NOTE 10 – DEFERRED REVENUE

Amounts related to deferred contract revenue in the three and nine months ended September 30, 2020 and 2019 was as follow:

  Three Months Ended
September 30,		  Nine Months Ended
September 30,		 
  2020  2019  2020  2019 
             
Balance, beginning of period $106,281  $---  $---  $--- 
Acquisition of CHM  ---   ---   104,034   --- 
Payments received for unearned revenue  163,038   ---   215,705   --- 
Revenue earned  (217,605)  ---   (268,025)  --- 
                 
Balance, end of period $51,714  $---  $51,714  $--- 

Deferred revenue 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. The Company typically satisfies its performance obligations related to such contracts upon completion of service. Payment is typically made in the month prior to the services being provided.

21

HEALTHLYNKED CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2020

(UNAUDITED)

NOTE 11 – NOTES PAYABLE AND OTHER AMOUNTS DUE TO RELATED PARTY

 

Amounts due to related parties as of September 30, 20172020 and December 31, 20162019 were comprised of the following:

 

  September 30,  December 31, 
  2017  2016 
     (audited) 
Current portion:      
Notes payable and accrued interest, Dr. Michael Dent $320,011  $--- 
Deferred compensation, Dr. Michael Dent  300,600   300,600 
Due to MedOffice Direct  ---   11,192 
Total current portion  620,611   311,792 
         
Long term portion:        
Notes payable and accrued interest, Dr. Michael Dent  253,242   237,157 
         
Total due to related parties $873,853  $548,949 
  September 30,  December 31, 
  2020  2019 
Due to related party:      
Deferred compensation, Dr. Michael Dent $300,600  $300,600 
Accrued interest payable to Dr. Michael Dent  ---   192,857 
Total due to related party  300,600   493,457 
         
Notes payable to related party:        
Notes payable to Dr. Michael Dent and family (all current) $---  $743,955 

Notes Payable to Dr. Michael Dent

Our founder and CEO, Dr. Michael Dent, has made loans to the Company from time to time in the form of unsecured promissory notes payable (the “Dent Notes”). The carrying values of the Dent Notes as of September 30, 2020 and December 31, 2019 were as follows:

    Interest September 30,  December 31, 
Inception Date Maturity Date Rate 2020  2019 
January 12, 2017 December 31, 2020 10% $---  $38,378*
January 18, 2017 December 31, 2020 10%  ---   21,904*
January 24, 2017 December 31, 2020 10%  ---   54,696*
February 9, 2017 December 31, 2020 10%  ---   32,715*
April 20, 2017 December 31, 2020 10%  ---   10,754*
June 15, 2017 December 31, 2020 10%  ---   34,560*
August 17, 2017 December 31, 2020 10%  ---   20,997*
August 24, 2017 December 31, 2020 10%  ---   39,312*
September 7, 2017 December 31, 2020 10%  ---   36,586*
September 21, 2017 December 31, 2020 10%  ---   27,621*
September 29, 2017 December 31, 2020 10%  ---   12,487*
December 21, 2017 December 31, 2020 10%  ---   14,318*
January 8, 2018 December 31, 2020 10%  ---   76,415*
January 11, 2018 December 31, 2020 10%  ---   9,164*
January 26, 2018 December 31, 2020 10%  ---   17,712*
January 3, 2014 December 31, 2020 10%  ---   296,336*
             
      $---  $743,955 

*Denotes that note payable is reflected at fair value

On September 21, 2020, the Company and Dr. Dent entered into an agreement pursuant to which the Company repaid all obligations under the notes payable to Dr. Dent in exchange for one-time cash payment of $780,256. The payment was calculated as the face value of the Dent Notes of $646,000, plus $134,256 of interest accrued on the notes issued in 2017 and 2018. As part of the Agreement, Dr. Dent agreed to forgive interest of $105,003 accrued on the remaining Dent Notes. In connection with the agreement and repayment, the Company realized a gain of $283,863, being the excess of the carrying value of the Dent Notes over the consideration paid. This amount was recorded to additional paid in capital.

As denoted in the table above, prior to extinguishment certain of our notes payable to Dr. Dent 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 during the three months ended September 30, 2020 and 2019 were $32,968 and $5,986, respectively. The changes in fair value during the nine months ended September 30, 2020 and 2019 were $80,935 and $18,070, respectively. The fair value of these notes as of September 30, 2020 and December 31, 2019 was $-0- and $743,955, respectively.

 

11


HEALTHLYNKED CORP.

HEALTHLYNKED CORPORATION

(FORMERLY KNOWN AS NAPLES WOMEN’S CENTER)

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2017 AND 20162020

(UNAUDITED)

 

NOTE 611 – NOTES PAYABLE AND OTHER AMOUNTS DUE TO RELATED PARTY (CONTINUED)

Dr. Michael Dent

Prior to August 2014, NWC was owned and controlled by the Company’s Chief Executive Officer, Dr. Michael Dent (“DMD”). DMD first provided an up to $175,000 unsecured note payable to the Company with a 0% interest rate. During 2013 the limit on the unsecured Note Payable was increased up to $500,000 and during 2014 it was increased to $750,000 with a maturity date of December 31, 2017. During January 2017, the note was again amended to extend the maturity date until December 31, 2018, to accrue interest on outstanding balances after January 1, 2017 at a rate of 10% per annum, and to fix interest accrued on balances between January 1, 2015 and December 31, 2016 at an amount equal to $22,108 (the “$750k DMD Note”). All principal and interest is due at maturity of the $750k DMD Note. Interest accrued on the $750k DMD Note as of September 30, 2017 and December 31, 2016 was $38,192 and $22,108, respectively.

During the nine months ended September 30, 2017, the Company borrowed $308,500 from Dr. Dent under unsecured promissory notes as follows:

Inception Date Maturity Date Interest Rate  Amount 
January 12, 2017 January 13, 2018  10% $35,000 
January 18, 2017 January 19, 2018  10%  20,000 
January 24, 2017 January 15, 2018  10%  50,000 
February 9, 2017 February 10, 2018  10%  30,000 
April 20, 2017 April 21, 2018  15%  10,000 
June 15, 2017 June 16, 2018  10%  32,500 
August 17, 2017 August 18, 2018  10%  20,000 
August 24, 2017 August 25, 2018  10%  37,500 
September 7, 2017 September 8, 2018  10%  35,000 
September 21, 2017 September 22, 2018  10%  26,500 
September 29, 2017 September 30, 2018  10%  12,000 
           
        $308,500 

Interest accrued on the 2017 DMD Notes as of September 30, 2017 and December 31, 2016 was $11,511 and -0-, respectively.

MedOffice Direct

During 2016, MedOffice Direct (“MOD”), a company majority-owned by the Company’s CEO and largest shareholder, Dr. Michael Dent, paid a direct obligation of the Company in the amount of $25,000. The Company also paid direct obligations of MOD totaling $13,808 in 2016, resulting in an amount payable to MOD of $11,192 as of December 31, 2016. This amount was paid in full in January 2017.

During the nine months ended September 30, 2017, the Company entered into an agreement with MOD pursuant to which the Company will pay rent to MOD in the amount of $2,040 per month for office space in MOD’s facility used by the Company and its employees. The agreement is effective from January 1, 2017 through July 31, 2018. During the three and nine months ended September 30, 2017, the Company recognized rent expense related to the marketing agreement in the amount of $6,120 and $18,360, respectively, pursuant to this agreement and had prepaid an additional $4,929 toward future rent as of September 30, 2017.

12

HEALTHLYNKED CORPORATION

(FORMERLY KNOWN AS NAPLES WOMEN’S CENTER)

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2017 AND 2016

(UNAUDITED)

NOTE 7 – CAPITAL LEASE

Capital lease obligations as of September 30, 2017 and December 31, 2016 are comprised of the following:

  September 30,  December 31, 
  2017  2016 
     (audited) 
Note payable, New Everbank Lease $44,341  $58,102 
Less: note payable, New Everbank Lease (Capital leases), current portion  (18,348)  (18,348)
         
Notes payable, bank loans and capital leases, long-term portion $25,993  $39,754 

In March 2015, the Company entered into a capital equipment finance lease for Ultra Sound equipment with Everbank. There was no interest on this lease. The monthly payment is $1,529 for 60 months ending in March 2020. As of September 30, 2017, the Company owed Everbank $48,928 pursuant to this capital lease. During the nine months ended September 30, 2017 and 2016, the Company made payments on capital leases of $13,761 and $13,761, respectively.

Future minimum payments to which the Company is obligated pursuant to the capital leases as of September 30, 2017 are as follows:

2017 (October to December) $4,587 
2018  18,348 
2019  18,348 
2020  3,058 
2021  --- 
     
Total $44,341 

NOTE 8 – NOTES PAYABLE

 

On July 11, 2017,January 7, 2020, the Company entered into a Merchant Cash Advance Factoring Agreement (“MCA”) with Power Up Lending Group, Ltd. (the “PULG”)a trust controlled by Dr. Dent, pursuant to which the Company received an advance of $26,000$150,000 before closing fees.fees (the “2020 MCA”). The Company is required to repay the advance,2020 MCA, which acts like an ordinary note payable, at the rate of $1,372$7,212 per week until the balance of $34,580 has been repaid.$187,500 is repaid, which was scheduled for July 2020. At inception, the Company recognized a note payable in the amount of $34,580$187,500 and a discount against the note payable of $9,550.$38,500. The discount is being amortized over the life of the instrument. During eachThe Company made installment payments against the MCA of $36,059 and $-0-, respectively, during the three and nine month periods endingmonths ended September 30, 2017,2020 and 2019, and $187,500 and $-0-, respectively, during the nine months ended September 30, 2020 and 2019. The Company recognized amortization of the discount in the amount of $4,227. As$-0- and $-0-, respectively, during the three months ended September 30, 2020 and 2019, and $38,500 and $-0-, respectively, during the nine months ended September 30, 2020 and 2019. The 2020 MCA was repaid in full and retired during July 2020.

Interest accrued on the above notes payable as of September 30, 2017,2020 and December 31, 2019 was $-0- and $192,888, respectively. Interest expense on the net carrying value ofabove unsecured promissory notes was $14,159 and $16,598 for the instrument was $14,162.three months ended September 30, 2020 and 2019, respectively, and $86,446 and $49,252 for the nine months ended September 30, 2020 and 2019, respectively.

NOTE 12 – GOVERNMENT NOTES PAYABLE

 

On August 9, 2017,May 8, 2020, the Company entered into a second MCA with PULG pursuantand its subsidiaries received an aggregate of $585,969 in loans under the Paycheck Protection Program (the “PPP”). The PPP loans, administered by the U.S. Small Business Administration (the “SBA”) and processed through Wells Fargo bank, were issued under the recently enacted Coronavirus Aid, Relief, and Economic Security Act, also known as the CARES Act. The loans bear interest at 1% per annum and mature in May 2022. Principal and interest payments are deferred for the first six months of the loans. Pursuant to whichthe 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.

During June, July and August 2020, the Company and its subsidiaries received an advanceaggregate of $51,000 before closing fees.$450,000 in Disaster Relief Loans from the SBA. The Company is required to repayloans bear interest at 3.75% per annum and mature 30 years from issuance. Mandatory principal and interest payments begin 12 months from the advance, which acts like an ordinary note payable, at the rateinception date of $2,752 per week until the balance of $69,360 has been repaid. At inception, the Company recognized a note payable in the amount of $69,360 and a discount against the note payable of $19,380. The discount is being amortized over the life of the instrument. During each of the three and nine month periods ending September 30, 2017, the Company recognized amortization of the discount in the amount of $5,477. Asloan.

Interest accrued on government loans as of September 30, 2017,2020 and December 31, 2019 was $4,716 and $-0-, respectively. Interest expense on the net carrying value ofloans was $3,855 and $-0- for the instrument was $36,190.three months ended September 30, 2020 and 2019, respectively, and $4,716 and $-0- for the nine months ended September 30, 2020 and 2019, respectively.

 

13

23

 

 

HEALTHLYNKED CORPORATIONCORP.

(FORMERLY KNOWN AS NAPLES WOMEN’S CENTER)

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2017 AND 20162020

(UNAUDITED)

 

NOTE 9 –CONVERTIBLE13 – CONVERTIBLE NOTES PAYABLE

 

Convertible notes payable as of September 30, 20172020 and December 31, 2016 are2019 were comprised of the following:

 

  September 30,  December 31, 
  2017  2016 
     (audited) 
Face Value      
$550k Note - July 2016 $550,000  $550,000 
$50k Note - July 2016  50,000   50,000 
$111k Note - May 2017  111,000   --- 
$53k Note - July 2017  53,000   --- 
$35k Note - September 2017  35,000   --- 
$55k Note - September 2017  55,000   --- 
   854,000   600,000 
Unamortized Discount        
$550k Note - July 2016 $---  $(96,631)
$50k Note - July 2016  ---   (17,701)
$111k Note - May 2017  (35,917)  --- 
$53k Note - July 2017  (37,423)  --- 
$35k Note - September 2017  (32,135)  --- 
$55k Note - September 2017  (52,137)  --- 
   (157,612)  (114,332)
Net Book Value        
$550k Note - July 2016 $550,000  $453,369 
$50k Note - July 2016  50,000   32,299 
$111k Note - May 2017  75,083   --- 
$53k Note - July 2017  15,577   --- 
$35k Note - September 2017  2,865   --- 
$55k Note - September 2017  2,863   --- 
         
Convertible notes payable, net of original issue discount and debt discount $696,388  $485,668 
  September 30,  December 31, 
  2020  2019 
       
$550k Note - July 2016 $607,628* $548,010*
$50k Note - July 2016  63,053*  56,866*
$111k Note - May 2017  118,108*  118,606*
$357.5k Note - April 2019  364,490*  328,728*
$154k Note - June 2019  ---   50,000 
$136k Notes - July 2019  ---   135,850 
$78k Note III - July 2019  ---   78,000 
$230k Note - July 2019  ---   230,000 
$108.9k Note - August 2019  ---   108,947 
$142.5k Note - October 2019  ---   142,500 
$103k Note V - October 2019  ---   103,000 
$108.9k Note II - October 2019  ---   108,947 
$128.5k Note - October 2019  ---   128,500 
$103k Note VI - November 2019  ---   103,000 
$78.8k Note II - December 2019  ---   78,750 
   1,153,279   2,319,704 
Less: unamortized discount  ---   (777,668)
Convertible notes payable, net of original issue discount and debt discount $1,153,279  $1,542,036 

 

Convertible Notes Payable ($550,000) – July 2016

On July 7, 2016, the Company entered into a 6% fixed convertible secured promissory note with an investor with a face value of $550,000 (the “$550k Note”). The $550k Note is convertible into shares of the Company’s common stock at the discretion of the note holder at a fixed price of $0.08 per share, and is secured by all of the Company’s assets. The Company received $500,000 net proceeds from the note after a $50,000 original issue discount. At inception, the investors were also granted a five-year warrant to purchase 6,111,111 shares of the Company’s common stock at an exercise price of $0.09 per share. The fair value of the warrants was calculated using the Black-Scholes pricing model at $157,812, with the following assumptions: risk-free interest rate of 0.97%, expected life of 5 years, volatility of 40%, and expected dividend yield of zero. The net proceeds from the issuance of the $550k Note, being $500,000 after the original issue discount, were then allocated to the warrants and the convertible note instrument based on their relative fair values, of which $111,479 was allocated to the warrants and $388,521 to the convertible note. The intrinsic value of the embedded conversion feature of the $550k Note was then calculated as $161,479. The original issue discount, warrants and embedded conversion feature were then allocated and recorded as discounts against the carrying value of the $550k Note. 

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

 

14


HEALTHLYNKED CORP.

HEALTHLYNKED CORPORATION

(FORMERLY KNOWN AS NAPLES WOMEN’S CENTER)

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2017 AND 20162020

(UNAUDITED)

 

NOTE 9 –CONVERTIBLE13 – CONVERTIBLE NOTES PAYABLE (CONTINUED)

 

The final allocationAmortization of the proceeds at inception was as follows:

Original issue discount $50,000 
Warrants  111,479 
Embedded conversion feature  161,479 
Convertible note  227,042 
     
Face value of convertible note $550,000 

The $550k Note was originally schedule to maturedebt discount recognized on April 11, 2017. During February 2017, the holder of the $550k Note agreed to extend the maturity date until July 7, 2017 in exchange for a five-year warrant to purchase 500,000 shares of HLYK common stock at an exercise price of $0.15 per share. The fair value of the warrants of $7,506 was recorded as an additional discount against the $550k Note and was amortized over the new remaining life of the $550k Note. The fair value of the warrant was calculated using the Black-Scholes pricing model at $7,506, with the following assumptions: risk-free interest rate of 1.89%, expected life of 5 years, volatility of 40%, and expected dividend yield of zero. The issuance of the warrants in exchange for the maturity extension was treated as a modification of existing debt pursuant to the guidance of ASC 470-50 “Debt – Modifications and Extinguishments” (“ASC 470-50”).

On August 8, 2017, in exchange for a five-year warrant to purchase 1,000,000 shares of HLYK common stock at an exercise price of $0.30 per share, the holder of the $550k Note agreed to (i) further extend the maturity date of the $550k Note until July 7, 2018, and (ii) further extend the maturity date of the $50k Note (as defined herein) until July 11, 2018. The fair value of the warrant was calculated using the Black-Scholes pricing model at $290,581, with the following assumptions: risk-free interest rate of 1.81%, expected life of 5 years, volatility of 190.86%, and expected dividend yield of zero. The issuance of the warrants in exchange for the maturity extension was treated as a modification of existing debt pursuant to the guidance of ASC 470-50. Because the fair value of the warrants was greater than 10% of the present value of the remaining cash flows under the $550k Note and $50k Note, the transaction was treated as a debt extinguishment and reissuance of a new debt instrument, with the fair value of the warrants of $290,581 recorded as a loss on debt extinguishment. The carrying value of the $550k Note (as well as the $50k Note) did not change as a result of the extinguishment since the discounts recognized at inception of both notes were fully amortized at the time of the warrant issuance.

The discounts resulting from the original issue discount, warrants and embedded conversion feature were amortized over the life of the $550k Note. Amortization expense related to these discounts ineach convertible note outstanding during the three months ended September 30, 2017 and 2016 was $3,061 and $100,187, respectively. Amortization expense related to these discounts in the nine months ended September 30, 20172020 and 2016 was $104,137 and $100,187, respectively. As of September 30, 2017, the unamortized discount was $-0-. As of September 30, 2017, the $550k note was convertible into 6,875,000 of the Company’s common shares.2019 were as follows:

 

  Amortization of Debt Discount 
  Three Months Ended
September 30,		  Nine Months Ended
September 30,		 
  2020  2019  2020  2019 
             
$103k Note I - October 2018 $---  $---  $---  $33,972 
$103k Note II - November 2018  ---   ---   ---   44,952 
$153k Note - November 2018  ---   1,733   ---   91,451 
$103k Note III - December 2018  ---   ---   ---   42,611 
$78k Note I - January 2019  ---   4,286   ---   52,000 
$78k Note II - January 2019  ---   6,346   ---   47,858 
$103k Note III - April 2019  ---   28,628   ---   56,012 
$104.5k Note - April 2019  ---   26,268   ---   49,109 
$104.5k Note II - April 2019  ---   26,268   ---   49,109 
$357.5k Note - April 2019  ---   91,230   ---   166,593 
$103k Note IV - May 2019  ---   31,906   ---   50,633 
$154k Note - June 2019  ---   38,710   1,093   50,071 
$67.9k Note - July 2019  ---   16,277   7,252   16,277 
$67.9k Note II - July 2019  ---   16,277   2,813   16,277 
$78k Note III - July 2019  ---   20,512   6,208   20,512 
$230k Note - July 2019  ---   46,503   58,527   46,503 
$108.9k Note - August 2019  ---   7,784   21,038   7,785 
$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  $362,728  $492,430  $841,725 

During the nine months ended September 30, 2017 and 2016, the Company made no repayments on the $550k Note. During the three months ended September 30, 2017 and 2016, the Company recorded interest expense on the $550k Note totaling $8,318 and $7,685, respectively. During the nine months ended September 30, 2017 and 2016, the Company recorded interest expense on the $550k Note totaling $24,682 and $7,685, respectively.HEALTHLYNKED CORP.

Convertible Notes Payable ($50,000) – July 2016

On July 7, 2016, the Company entered into a 10% fixed convertible commitment fee promissory note with an investor with a face value of $50,000 maturing on July 11, 2017 (the “$50k Note”). The $50k note was issued as a commitment fee payable to the Investment Agreement investor in exchange for the investor’s commitment to enter into the Investment Agreement, subject to registration of the shares underlying the Investment Agreement. The $50k Note is convertible into shares of the Company’s common stock at the discretion of the note holder at a fixed price of $0.10 per share. The embedded conversion feature did not have any intrinsic value at issuance. Accordingly, the full face value of $50,000 was allocated to the convertible note instrument. As of September 30, 2017, the $50k Note was convertible into 500,000 of the Company’s common shares.

15

HEALTHLYNKED CORPORATION

(FORMERLY KNOWN AS NAPLES WOMEN’S CENTER)

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2017 AND 20162020

(UNAUDITED)

 

NOTE 9 –CONVERTIBLE13 – CONVERTIBLE NOTES PAYABLE (CONTINUED)

 

DuringUnamortized debt discount on outstanding convertible notes payable as of September 30, 2020 and December 31, 2019 were comprised of the following:

  Unamortized Discount as of 
  September 30,  December 31, 
  2020  2019 
       
$154k Note - June 2019 $      ---  $21,175 
$67.9k Note - July 2019  ---   20,497 
$67.9k Note II - July 2019  ---   20,497 
$78k Note III - July 2019  ---   32,657 
$230k Note - July 2019  ---   125,684 
$108.9k Note - August 2019  ---   59,392 
$142.5k Note - October 2019  ---   107,070 
$103k Note V - October 2019  ---   70,686 
$108.9k Note II - October 2019  ---   72,592 
$128.5k Note - October 2019  ---   106,732 
$103k Note VI - November 2019  ---   81,740 
$78.8k Note II - December 2019  ---   58,946 
         
  $---  $777,668 


HEALTHLYNKED CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2020

(UNAUDITED)

NOTE 13 – CONVERTIBLE NOTES PAYABLE (CONTINUED)

Interest expense recognized on each convertible note outstanding during the three and nine months ended September 30, 20172020 and 2016,2019 were as follows:

  Interest Expense 
  Three Months Ended
September 30,		  Nine Months Ended
September 30,		 
  2020  2019  2020  2019 
             
$550k Note - July 2016 $8,318  $8,318  $24,773  $24,682 
$50k Note - July 2016  1,260   1,260   3,753   3,740 
$111k Note - May 2017  2,042   4,168   8,755   12,369 
$171.5k Note - October 2017  ---   ---   ---   1,785 
$103k Note I - October 2018  ---   ---   ---   2,653 
$103k Note II - November 2018  ---   ---   ---   3,584 
$153k Note - November 2018  ---   297   ---   7,008 
$103k Note III - December 2018  ---   ---   ---   4,261 
$78k Note I - January 2019  ---   321   ---   3,889 
$78k Note II - January 2019  ---   513   ---   3,868 
$103k Note III - April 2019  ---   2,596   ---   5,079 
$104.5k Note - April 2019  ---   2,634   ---   4,924 
$104.5k Note II - April 2019  ---   2,634   ---   4,924 
$357.5k Note - April 2019  9,012   12,650   18,751   23,101 
$103k Note IV - May 2019  ---   2,596   ---   4,120 
$154k Note - June 2019  ---   3,882   46   5,021 
$67.9k Note - July 2019  ---   1,507   707   1,507 
$67.9k Note II - July 2019  ---   1,507   177   1,507 
$78k Note III - July 2019  ---   1,624   492   1,624 
$230k Note - July 2019  ---   4,663   3,041   4,663 
$108.9k Note - August 2019  ---   1,045   2,564   1,045 
$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  $52,215  $133,757  $125,354 

HEALTHLYNKED CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2020

(UNAUDITED)

NOTE 13 – CONVERTIBLE NOTES PAYABLE (CONTINUED)

Certain of our convertible notes payable are also carried at fair value and revalued at each period end, with changes to fair value recorded to the Company made no repayments on the $50k Note. Duringstatement of operations under “Change in Fair Value of Debt.” The changes in fair value during the three months ended September 30, 2017 and 2016, the Company recorded interest expense on the $50k Note totaling $1,260 and $1,164, respectively. During the nine months ended September 30, 20172020 and 2016,2019 and the Company recorded interest expense on the $50k Note totaling $3,740fair value as of such instruments as of September 30, 2020 and $1,164, respectively.December 31, 2019 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, 
  2020  2019  2020  2019  2020  2019 
                   
$550k Note - July 2016 $24,285  $17,455  $59,618  $52,708  $607,629  $548,010 
$50k Note - July 2016  2,520   1,770   6,187   5,343   63,053   56,866 
$111k Note - May 2017  4,721   3,674   16,261   11,089   118,108   118,606 
$171.5k Note - October 2017  ---   ---   ---   1,781   ---   --- 
$357.5k Note - April 2019  14,567   ---   35,763   ---   364,490   328,727 
                         
  $46,093  $22,899  $117,829  $70,921  $1,153,280  $1,052,209 

Convertible NotesNote Payable ($111,000) – May 2017

 

On May 22, 2017, the Company entered into a 10% fixed convertible secured promissory note with an investor with a face value of $111,000 (the “$111k Note”). The $111k Note matures on January 22, 2018.$111,000. The $111k Note is convertible into shares of the Company’s common stock at the discretion of the note holder at a fixed price of $0.35$0.15 per share, or 740,000 of the Company’s common shares, and is secured by all of the Company’s assets. The Company received $100,000 net proceeds from the note after an $11,000 original issue discount. At inception, the investors were also granted a five-year warrant to purchase 133,333 shares of the Company’s common stock at an exercise price of $0.75 per share. The $111k Note matures on December 31, 2020. On February 6, 2020, the holder of the $111k Note converted $30,000 principal on the note into 448,029 shares of Company common stock. In connection with the conversion, the Company recognized a loss on debt extinguishment of $25,394, representing the excess of the fair value of the warrants was calculated using the Black-Scholes pricing modelshares issued at $42,305, with the following assumptions: risk-free interest rate of 1.80%, expected life of 5 years, volatility of 40%, and expected dividend yield of zero. The net proceeds from the issuance of the $111k Note, being $100,000 after the original issue discount, were then allocated to the warrants and the convertible note instrument based on their relative fair values, of which $27,595 was allocated to the warrants and $72,405 to the convertible note. The intrinsic value of the embedded conversion feature of the $111k note was then calculated as $38,595. The original issue discount, warrants and embedded conversion feature were then allocated and recorded as discounts againstover the carrying value of the $111k Note. The final allocationportion of the proceeds at inception was as follows:

Original issue discount $11,000 
Warrants  27,595 
Embedded conversion feature  38,595 
Convertible note  33,810 
     
Notes payable and bank loans, long-term portion $111,000 

The discounts resulting fromhost instrument and the original issue discount, warrants and embeddedbifurcated conversion feature are being amortized over the life of the $111k Note. Amortization expense related to these discounts in the three and nine months ended September 30, 2017 was $28,986 and $41,273, respectively. No amortization expense was recognized during 2016 related to the $111k Note. As of September 30, 2017, the unamortized discount was $35,917. As of September 30, 2017, the $550k note was convertible into 317,143 of the Company’s common shares.converted.

 

During the nine months ended September 30, 2017 and 2016, the Company made no repayments on the $111k Note. During the three and nine months ended September 30, 2017 and 2016, the Company recorded interest expense on the $111k Note totaling $4,168 and $5,935, respectively. No interest expense was recognized on this note in 2016.

Convertible NotesNote Payable ($53,000)171,500) – JulyOctober 2017

 

On July 10,October 27, 2017, the Company entered into a securities purchase agreement for the sale of a $53,000$171,500 convertible note (the “$53k171.5k Note”) to PULG.an individual lender. On February 7, 2019, the holder of the $171.5k Note converted the entire principal balance of $171,500 into 2,512,821 shares of Company common stock. In connection with the conversion, the Company recognized a loss on debt extinguishment of $139,798, representing the excess of the fair value of the shares issued at conversion over the carrying value of the host instrument and the bifurcated conversion feature at the time of conversion.

Convertible Notes Payable ($103,000) – October 2018

On October 18, 2018, the Company issued a $103,000 convertible note (the “$103k Note I”). On April 4, 2019, the Company prepaid the balance on the $103k Note I, including accrued interest, for a one-time cash payment of $134,500. In connection with the repayment, the Company recognized a gain on debt extinguishment of $28,169 in the nine months ended September 30, 2019, equal to the excess of the payment amount over the carrying value of the note, derivative embedded conversion feature and accrued interest.

Convertible Notes Payable ($103,000) – November 2018

On November 12, 2018, the Company issued a $103,000 convertible note (the “$103k Note II”). On May 7, 2019, the Company prepaid the balance on the $103k Note II, including accrued interest, for a one-time cash payment of $134,888. In connection with the repayment, the Company recognized a gain on debt extinguishment of $23,821 in the nine months ended September 30, 2019, 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, 2020

(UNAUDITED)

NOTE 13 – CONVERTIBLE NOTES PAYABLE (CONTINUED)

Convertible Notes Payable ($153,000) – November 2018

On November 19, 2018, the Company issued a $153,000 convertible note (the “$153k Note”). During the nine months ended September 30, 2019, the holder converted the full principal in the amount of $153,000 and $8,768 of accrued interest into 1,070,894 shares of Company common stock. In connection with the conversion, the Company recognized a loss on debt extinguishment of $44,993, equal to the excess of the payment amount over the carrying value of the note, derivative embedded conversion feature and accrued interest.

Convertible Notes Payable ($103,000) – December 2018

On December 3, 2018, the Company issued a $103,000 convertible note (the “$103k Note III”). On May 31, 2019, the Company prepaid the balance on the $103k Note III, including accrued interest, for a one-time cash payment of $135,029. In connection with the repayment, the Company recognized a gain on debt extinguishment of $20,445 in the nine months ended September 30, 2019, 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 2019

On January 14, 2019, the Company issued a $78,000 convertible note (the “$78k Note”). The $53k$78k Note, includedincluding accrued interest, was repaid in July 2019 for a $3,000 original issue discount,one-time cash payment of $102,321. In connection with the repayment, the Company recognized a loss on debt extinguishment of $6,258 in the nine months ended September 30, 2019, 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 2019

On January 24, 2019, the Company issued a $78,000 convertible note (the “$78k Note II”). The $78k Note II, including accrued interest, was repaid in July 2019 for net proceedsa one-time cash payment of $50,000.$102,255. In connection with the repayment, the Company recognized a gain on debt extinguishment of $11,161 in the nine months ended September 30, 2019, 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 ($103,000) – April 2019

On April 3, 2019, the Company entered into a securities purchase agreement for the sale of a $103,000 convertible note (the “$103k Note III”). During the fourth quarter of 2019, the Company prepaid the balance on the $103k Note III, including accrued interest, for a one-time cash payment of $135,099.

Convertible Note Payable ($104,500) – April 2019

On April 11, 2019, the Company entered into securities purchase agreements for the sale of a $104,500 convertible note (the “$104.5k Note I”). During the fourth quarter of 2019, the holder of the $104.5k Note I converted the full principal in the amount of $104,500 and $5,768 of accrued interest into 1,176,189 shares of Company common stock.

Convertible Note Payable ($104,500) – April 2019

On April 11, 2019, the Company entered into securities purchase agreements for the sale of a second $104,500 convertible note (the “$104.5k Note II”). During the fourth quarter of 2019, the Company prepaid the balance on the $104.5k Note II, including accrued interest, for a one-time cash payment of $142,500.

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 $53k$357.5k Note has an interest rate of 10%, matures on December 31, 2020, and a default interest rate of 22%. The $53k Note may be converted into common stock of the Company by the holder at any time, following 180 days after the issuance date, subject to a 4.99%9.99% beneficial ownership limitation, at a fixed conversion price per share equal to a 39% discount to the average of the three (3) lowest closing bid prices during the fifteen (15) trading days prior to the conversion date. Upon an event of default caused by the Company’s failure to deliver shares upon a conversion pursuant to the terms of the Note, 300% of the outstanding principal and any interest due amount shall be immediately due. Upon an event of default caused by the Company’s breach of any other events of default specified in the $53k Note, 150% of the outstanding principal and any interest due amount shall be immediately due.$0.15, or 2,383,333 shares.


HEALTHLYNKED CORP.

16

HEALTHLYNKED CORPORATION

(FORMERLY KNOWN AS NAPLES WOMEN’S CENTER)

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2017 AND 20162020

(UNAUDITED)

 

NOTE 9 –CONVERTIBLE13 – CONVERTIBLE NOTES PAYABLE (CONTINUED)

 

The fairConvertible Note Payable ($103,000) – May 2019

On May 7, 2019, the Company issued a $103,000 convertible note (the “$103k Note IV”). During the fourth quarter of 2019, the Company prepaid the balance on the $103k Note IV, including accrued interest, for a one-time cash payment of $133,900.

Convertible Note Payable ($154,000) – June 2019

On June 3, 2019, the Company issued a $154,000 convertible note (the “$154k Note”), of which $104,000 was converted in the fourth quarter of 2019. During the nine months ended September 30, 2020, the holder converted the remaining unpaid principal balance of $50,000 and accrued interest of $8,572 into 968,390 shares of Company common stock. In connection with the conversion, the Company recognized a loss on debt extinguishment of $125,865 in the 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 (“ECF”)and accrued interest over the carrying value of the $53kportion of the host instrument and the bifurcated conversion feature converted.

Convertible Note was calculated usingPayable ($67,925) – July 2019

On July 11, 2019, the Black-Scholes pricing model at $58,154,Company issued a $67,925 convertible note (the “$67.9k Note I”). During the nine months ended September 30, 2020, the holder converted the full principal of $67,925 and accrued interest of $3,926 into 885,847 shares of Company common stock. In connection with the following assumptions: risk-freeconversion, the Company recognized a loss on debt extinguishment of $55,117 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 ($67,925) – July 2019

On July 11, 2019, the Company issued a second $67,925 convertible note (the “$67.9k Note II”). During the nine months ended September 30, 2020, the Company prepaid the balance on the $67.9k Note II, including accrued interest, ratefor a one-time cash payment of 1.23%, expected life$89,152. In connection with the repayment, the Company recognized a loss on debt extinguishment of 0.76 years, volatility$26,890 in the nine months ended September 30, 2020, equal to the excess of 183.6%,the payment amount over the carrying value of the note, derivative embedded conversion feature and expected dividend yieldaccrued 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 first quarter of zero. Because2020, 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.

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 first quarter of 2020, the holder converted $80,000 of principal and $4,373 of accrued interest on the note into 1,236,668 shares of Company common stock and the Company repaid principal of $150,000 and accrued interest of $9,128 for cash payments totaling $181,554. The note was retired upon these conversions and repayments. In connection with the conversions and repayments, the Company recognized a loss on debt extinguishment of $112,498 in the nine months ended September 30, 2020, equal to the excess of the cash payment amount and the fair value of the ECF exceededshares issued at conversion over the net proceeds fromcarrying value of the $53knote, derivative embedded conversion feature and accrued interest.

Convertible Note Payable ($108,947) – August 2019

On August 26, 2019, the Company issued a charge was recorded to “Financing cost” forconvertible note with a face value of $108,947 (the “$108.9k Note”). During the nine months ended September 30, 2020, the holder converted the full principal of $108,947 and accrued interest of $6,354 into 2,650,251 shares of Company common stock. In connection with the conversions, the Company recognized a loss on debt extinguishment of $161,617 in the nine months ended September 30, 2020, representing the excess of the fair value of the fairshares issued at conversion over the carrying value of the ECF of $58,154 over the net proceeds from the note of $50,000, for a net charge of $8,154. The ECF qualifies for derivative accounting and bifurcation under ASC 815, “Derivatives and Hedging.” The final allocationportion of the proceeds at inception was as follows:

Embedded conversion feature $58,154 
Original issue discount  3,000 
Financing cost  (8,154)
Convertible note  --- 
     
Notes payable and bank loans, long-term portion $53,000 

The discounts resulting fromhost instrument and the original issue discount, warrants and embeddedbifurcated conversion feature are being amortized over the life of the $53k Note. Amortization expense related to these discounts in each of the three and nine months ended Septemberconverted.


HEALTHLYNKED CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2017 was $15,577. No amortization expense was recognized during 2016 related to the $53k Note. As of September 30, 2017, the unamortized discount was $37,423. As of September 30, 2017, the $53k Note was convertible into 362,022 of the Company’s common shares, based on a 39% discount to the last sale price of the Company’s common stock of $0.24 on September 30, 2017.2020

(UNAUDITED)

 

NOTE 13 – CONVERTIBLE NOTES PAYABLE (CONTINUED)

Convertible Note Payable ($142,500) – October 2019

On October 1, 2019, the Company issued a convertible note with a face value of $142,500 (the “$142.5k Note”). During the nine months ended September 30, 20172020, the holder converted the full principal of $142,500 and 2016,accrued interest of $14,250 into 2,855,191 shares of Company common stock. In connection with the conversions, the Company made no repaymentsrecognized a loss on debt extinguishment of $305,100 in the $53k Note. During the three and nine months ended September 30, 2017 and 2016, the Company recorded interest expense on the $53k Note totaling $1,191 and $1,191, respectively. No interest expense was recognized on this note in 2016.

Convertible Notes Payable ($35,000) – September 2017

On September 7, 2017, the Company entered into a securities purchase agreement for the sale of a $35,000 convertible note (the “$35k Note”) to PULG. The $35k Note included a $3,000 original issue discount, for net proceeds of $32,000. The $35k Note has an interest rate of 10% and a default interest rate of 20%. The $35k Note may be converted into common stock of the Company by the holder at any time following 180 days after the issuance date, subject to a 4.99% beneficial ownership limitation, at a conversion price per share equal to a 39% discount to the average of the three (3) lowest closing bid prices during the fifteen (15) trading days prior to the conversion date. Upon an event of default caused by the Company’s failure to deliver shares upon a conversion pursuant to the terms of the $35k Note, 300% of the outstanding principal and any interest due amount shall be immediately due. Upon an event of default caused by the Company’s breach of any other events of default specified in the $35k Note, 150% of the outstanding principal and any interest due amount shall be immediately due.

The fair value of the ECF of the $35k Note was calculated using the Black-Scholes pricing model at $38,338, with the following assumptions: risk-free interest rate of 1.21%, expected life of 0.77 years, volatility of 177.2%, and expected dividend yield of zero. Because the fair value of the ECF exceeded the net proceeds from the $35k Note, a charge was recorded to “Financing cost” for2020, representing the excess of the fair value of the fairshares issued at conversion over the carrying value of the ECFportion of $38,338 over the net proceeds fromhost 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 of $32,000,(the “$103k Note V”). On April 3, 2020, 2020, the Company prepaid the balance on the $103k Note V, including accrued interest, for a net chargeone-time cash payment of $6,338. The ECF qualifies for derivative accounting and bifurcation under ASC 815, “Derivatives and Hedging.” The final allocation$135,205. In connection with the repayment, the Company recognized a loss on debt extinguishment of the proceeds at inception was as follows:

Embedded conversion feature $38,338 
Original issue discount  3,000 
Financing cost  (6,338)
Convertible note  --- 
     
Notes payable and bank loans, long-term portion $35,000 

17

HEALTHLYNKED CORPORATION

(FORMERLY KNOWN AS NAPLES WOMEN’S CENTER)

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2017 AND 2016

(UNAUDITED)

NOTE 9 –CONVERTIBLE NOTES PAYABLE (CONTINUED)

The discounts resulting from the original issue discount, warrants and embedded conversion feature are being amortized over the life of the $35k Note. Amortization expense related to these discounts$43,777 in each of the three and nine months ended September 30, 2017 was $2,865. No amortization expense was recognized during 2016 related2020, equal to the $35k Note. As of September 30, 2017, the unamortized discount was $32,135. As of September 30, 2017, the $35k Note was convertible into 239,071excess of the Company’s common shares, based on a 39% discount topayment amount over the last sale pricecarrying value of the Company’s common stock of $0.24 on September 30, 2017.note, derivative embedded conversion feature and accrued interest.

 

Convertible Note Payable ($108,947) – October 2019

On October 30, 2019, the Company issued a convertible note with a face value of $108,947 (the “$108.9k Note II”). During the nine months ended September 30, 20172020, the holder converted the full principal of $108,947 and 2016,accrued interest of $5,821 into 1,954,870 shares of Company common stock. In connection with the conversions, the Company made no repaymentsrecognized a loss on debt extinguishment of $76,895 in the $35k Note. During the three and nine months ended September 30, 2017 and 2016, the Company recorded interest expense on the $35k Note totaling $220 and $220, respectively. No interest expense was recognized on this note in 2016.

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

On September 11, 2017, the Company entered into a securities purchase agreement for the sale of a $55,000 convertible note (the “$55k Note”) to Crown Bridge Partners LLC. The $55k Note included a $7,500 original issue discount, for net proceeds of $47,500. The 55k Note has an interest rate of 10% and a default interest rate of 12%. The $55k Note may be converted into common stock of the Company by the holder at any time after the issuance date, subject to a 4.99% beneficial ownership limitation, at a conversion price per share equal to 60% multiplied by the lowest one (1) trading price for the Common Stock during the twenty (20) trading day period ending on the last complete trading day prior to the date of conversion. If, at any time while the $55k Note is outstanding, the conversion price pursuant to this formula is equal to or lower than $0.10, then an additional ten percent (10%) discount shall be factored into the conversion price until the $55k Note is no longer outstanding. In the event that shares of the Company’s Common Stock are not deliverable via DWAC following the conversion of any amount hereunder, an additional ten percent (10%) discount shall be factored into the Variable Conversion Price until the Note is no longer outstanding.

The fair value of the ECF of the $55k Note was calculated using the Black-Scholes pricing model at $65,332, with the following assumptions: risk-free interest rate of 1.24%, expected life of 1 year, volatility of 175.1%, and expected dividend yield of zero. Because the fair value of the ECF exceeded the net proceeds from the $55k Note, a charge was recorded to “Financing cost” for2020, representing the excess of the fair value of the fairshares issued at conversion over the carrying value of the ECF of $65,332 over the net proceeds from the note of $47,500, for a net charge of $17,832. The ECF qualifies for derivative accounting and bifurcation under ASC 815, “Derivatives and Hedging.” The final allocationportion of the proceeds at inception was as follows:

Embedded conversion feature $65,332 
Original issue discount  7,500 
Financing cost  (17,832)
Convertible note  --- 
     
Notes payable and bank loans, long-term portion $55,000 

The discounts resulting fromhost instrument and the original issue discount, warrants and embeddedbifurcated conversion feature are being amortized over the life of the $55k Note. Amortization expense related to these discounts in each of the three and nine months ended September 30, 2017 was $2,863. No amortization expense was recognized during 2016 related to the $55k Note. As of September 30, 2017, the unamortized discount was $52,137. As of September 30, 2017, the $55k Note was convertible into 381,944 of the Company’s common shares, based on a 40% discount to the last sale price of the Company’s common stock of $0.24 on September 30, 2017.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 the nine months ended September 30, 20172020, the holder converted the full principal of $128,500 and 2016,accrued interest of $8,832 into 3,197,877 shares of Company common stock. In connection with the conversion, the Company made no repaymentsrecognized a loss on debt extinguishment of $154,248 in the $55k Note. During the three and nine months ended September 30, 20172020, equal to the excess of the payment amount over the carrying value of the note, derivative embedded conversion feature and 2016,accrued interest.

Convertible Note Payable ($103,000) – November 2019

On November 4, 2019, the Company recorded interest expenseissued a $103,000 convertible note (the “$103k Note VI”). On May 4, 2020, the Company prepaid the balance on the $55k$103k Note totaling $286VI, 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 $286, respectively. No interest expense was recognized on this note in 2016.accrued interest.

 

18

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.


HEALTHLYNKED CORPORATIONCORP.

(FORMERLY KNOWN AS NAPLES WOMEN’S CENTER)

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2017 AND 20162020

(UNAUDITED)

NOTE 13 – CONVERTIBLE NOTES PAYABLE (CONTINUED)

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.

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 1014 – DERIVATIVE FINANCIAL INSTRUMENTS

 

Derivative financial instruments are comprised of the fair value of embedded conversion features (“ECFs”)embedded in convertible promissory issued in 2017notes 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 ofconvertible promissory note for which the $53k Note, the $35k Note and the $55k Noteconversion rate is not fixed and allocated to the respective convertible notes, with any excess recorded as a charge to “Financing cost.” The derivativeDerivative financial instruments are then revalued at the end of each period, with the change in value recorded to “Change in fair value of on derivative financial instruments.”


HEALTHLYNKED CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2020

(UNAUDITED)

NOTE 14 – DERIVATIVE FINANCIAL INSTRUMENTS (CONTINUED)

 

Derivative financial instruments and changes thereto recorded in the three and nine months ended September 30, 20172020 and 2019 include the following:

 

     Change in
fair value of		  Fair 
  Fair  Derivative  Value at 
  Value at  Financial  September 30, 
  Inception  Instruments  2017 
          
$53k Note ECF $58,154  $(4,769) $53,385 
$35k Note ECF  38,338   (578)  37,760 
$55k Note ECF  65,332   (65)  65,267 
             
  $161,824  $(5,412) $156,412 
  Three Months Ended
September 30,		  

Nine Months Ended

September 30,

 
  2020  2019  2020  2019 
             
Balance, beginning of period $257,384  $632,605  $991,288  $800,440 
Inception of derivative financial instruments  ---   472,644   211,498   1,276,703 
Change in fair value of derivative financial instruments  (12,802)  (158,691)  (739,485)  (574,205)
Conversion or extinguishment of derivative financial instruments  (244,582)  (119,898)  (463,301)  (676,278)
                 
Balance, end of period $---  $826,660  $--  $826,660 

 

Fair market value of the derivative financial instruments iswas measured using the Black-Scholes pricing model with the following assumptions: risk-free interest rate of 1.21-1.31%, expected life of 0.54-1.00 years, volatility of 175.1-183.6%, and expected dividend yield of zero.

  Nine Months Ended
September 30,
  2020 2019
     
Pricing model utilized Binomial Lattice Black/Scholes
Risk free rate range 0.05% to 1.61% 1.75% to 2.73%
Expected life range (in years) 0.14 to 1.00 0.01 to 1.00
Volatility range 117.48% to 144.51% 119.04% to 293.97%
Dividend yield 0.00% 0.00%

In addition, specific assumptions regarding investor exercise behavior were used in 2020, including probability assumptions related to estimated exercise behavior. The entire amount of derivative instrument liabilities is classified as current due to the fact that settlement of the derivative instruments could be required within twelve months of the balance sheet date.

 

During the nine months ended September 30, 2020, the Company repaid 13 outstanding convertible notes and holders converted in part or in full an additional eight 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, 2020.

NOTE 1115 – SHAREHOLDERS’ DEFICITEQUITY (DEFICIT)

 

IssuanceInvestment Transaction – August 2020

On August 20, 2020, the Company entered into the Contribution Agreement with the Trusts and Michael T. Dent, the Chief Executive Officer and Chairman of Commonthe board of directors of the Company. Pursuant to the Contribution Agreement, the Trusts contributed an aggregate of 76,026 shares of common stock of NeoGenomics, Inc. with a fair value of $3,006,889 to the Company. In consideration for the foregoing, the Company issued the Trusts an aggregate of 2,750,000 shares of the Company’s newly designated Series B Preferred stock and an aggregate of 24,522,727 shares of the Company’s common stock.


HEALTHLYNKED CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2020

(UNAUDITED)

NOTE 15 – SHAREHOLDERS’ EQUITY (DEFICIT) (CONTINUED)

Beginning on December 31, 2022, each share of Series B Preferred Stock is convertible into five shares of the Company’s common stock, subject to customary anti-dilution adjustments, including in the event of any stock split. The Series B Preferred Stock ranks senior to the common stock. Upon a liquidation, dissolution or winding up of the Company, whether voluntary or involuntary, the assets of the Company available for distribution to its stockholders will be distributed to holders of Series B Preferred Stock on an as converted basis and pro rata with the holders of common stock. Holders of Series B Preferred Stock are also entitled to participate in dividends declared or paid on the common stock on an as-converted basis.

The holders of Series B Preferred Stock generally are entitled to vote with the holders of the shares of common stock on all matters submitted for a vote of holders of shares of common stock (voting together with the holders of shares of common stock as one class). The holder of the shares of Preferred B Stock shall have that number of votes (identical in every other respect to the voting rights of the holders of common stock entitled to vote at any regular or special meeting of the shareholders) equal to 100 shares of common stock for each share of Preferred B Preferred Stock held (which shall never be deemed less than 51% of the vote required to approve any action), which Nevada law provides may or must be approved by vote or consent of the holders of common stock or the holders of other securities entitled to vote, if any.

At inception of the transaction, the Company recognized a beneficial conversion feature in the amount of $825,000, representing the difference between (i) the intrinsic price per share of the Series B Preferred based on the portion of proceeds allocated to the fair value of the Series B Preferred, and (ii) the fair value of the Company’s common stock. The beneficial conversion feature is being amortized as a deemed dividend from the inception date of the transaction through the end of the Series B Preferred conversion restriction on December 31, 2022. Amortization of the beneficial conversion feature is reflected in income or loss available to common stockholders on the statement of operations. Further, since the Company have negative retained earnings, so there is no change to APIC or anywhere else in net equity from the deemed dividend and therefore nothing to show on the statement of equity. 

Other Private Placements

 

During the nine months ended September 30, 2017,2019, the Company sold 4,412,4981,550,001 shares of common stock in three separate private placement transactions and received $415,000 in proceeds from the sales. In connection with the stock sales, the Company also issued 1,025,001 warrants to 15 investors. Thepurchase shares of common stock with exercise prices between $0.25 and $0.50.

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 $533,000$673,001 in proceeds from the sales. The shares were issued at aper share prices between $0.06 and $0.17. 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 $0.10$0.16 and $0.30$0.27 per share. Of these shares, 7,143 with respect to proceeds of $749 were issuable as of September 30, 2020.

Investment Agreement Draws

 

During the threenine months ended September 30, 2017,2020 and 2019, the Company issued 57,0164,975,491 and 4,273,779 common shares, respectively, pursuant to draws made by the Company under the Investment Agreement. The CompanyAgreement and received $15,356an aggregate of $426,299 and $825,616, respectively, in net proceeds from the draws.

 

During August 2017, the Company issued 276,850 shares to a consultant.

Common Stock Issuable

 

As of September 30, 20172020 and December 31, 2016,2019, the Company was obligated to issue 10,313 and 80,643the following shares:

  September 30,
2020		  December 31,
2019		 
  Amount  Shares  Amount  Shares 
             
Shares earned by consultants, employees and directors but not yet issued $181,343   1,458,095  $100,538   568,142 
Shares issuable pursuant to stock subscriptions received  749   7,143   59,000   479,762 
  $182,092   1,465,238  $159,538   1,047,904 

During December 2019, the Company completed stock subscription agreements totaling $59,000 for the sale of 479,762 shares of common stock, respectively, in exchange for professional services provided by a third party consultant during the further quarter of 2016stock. The funds were received and the first eight months of 2017. During the three and nine months ended September 30, 2017, the Company recognized expense related to shares earned by the consultant of $17,705 and $46,669, respectively. During August 2017, 276,850 shares were issued to the consultant with a value of $49,996, in satisfaction of shares accrued through August 25, 2017.January and February 2020.


HEALTHLYNKED CORP.

19

HEALTHLYNKED CORPORATION

(FORMERLY KNOWN AS NAPLES WOMEN’S CENTER)

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2017 AND 20162020

(UNAUDITED)

 

NOTE 1115 – SHAREHOLDERS’ DEFICITEQUITY (DEFICIT) (CONTINUED)

 

Stock Warrants

 

Transactions involving our stock warrants during the nine months ended September 30, 20172020 and 2019 are summarized as follows:

 

 2020  2019 
    Weighted     Weighted     Weighted 
    Average     Average     Average 
    Exercise     Exercise     Exercise 
 Number  Price  Number  Price  Number  Price 
Outstanding at beginning of the period  10,576,389  $0.08   47,056,293  $0.17   46,161,463  $0.18 
Granted during the period  8,990,000  $0.40   3,463,825  $0.20   1,805,001  $0.35 
Exercised during the period  ---  $---   ---  $---  ��(4,099,256) $(0.00)
Terminated during the period  ---  $--- 
Expired during the period  (50,000) $0.40   ---  $--- 
Outstanding at end of the period  19,566,389  $0.23   50,470,118  $0.18   43,867,208  $0.20 
                        
Exercisable at end of the period  19,566,389  $0.23   50,470,118  $0.18   43,867,208  $0.20 
                        
Weighted average remaining life  4.5 years       3.4 years       3.0 years     

 

The following table summarizes information about the Company’s stock warrants outstanding as of September 30, 2017:2020:

 

Warrants OutstandingWarrants Outstanding  Warrants Exercisable Warrants Outstanding  Warrants Exercisable 
    Weighted-             Weighted-        
    Average Weighted-     Weighted-      Average   Weighted-    Weighted- 
    Remaining Average     Average      Remaining   Average    Average 
ExerciseExercise Number Contractual Exercise Number Exercise  Exercise  Number Contractual   Exercise  Number   Exercise 
PricesPrices  Outstanding  Life (years)  Price  Exercisable  Price  Prices  Outstanding  Life (years)   Price  Exercisable   Price 
$0.05 to 0.09   8,388,889   4.6  $0.08   8,388,889  $0.08 0.0001 to 0.09   15,287,011   4.2  $0.07   15,287,011  $0.07 
$0.10 to 0.15   2,687,500   3.9  $0.11   2,687,500  $0.11 0.10 to 0.24   21,125,618   3.0  $0.18   21,125,618  $0.18 
$0.25 to 0.50   7,300,000   4.5  $0.33   7,300,000  $0.33 0.25 to 0.49   10,117,489   3.7  $0.28   10,117,489  $0.28 
$0.51 to 1.00   1,190,000   4.5  $0.97   1,190,000  $0.97 0.50 to 1.00   3,940,000   1.4  $0.28   3,940,000  $0.28 
$0.05 to 1.00   19,566,389   4.5  $0.23   19,566,389  $0.23 0.05 to 1.00   50,470,118   3.4  $0.18   50,470,118  $0.18 

 

During the nine months ended September 30, 2017,2020 and 2019, the Company issued 8,990,000 warrants. The fair value of3,463,825 and 1,805,001 warrants, respectively, the warrant was calculated using the Black-Scholes pricing model with the following assumptions: risk-free interest rate of 1.74% to 1.95%, expected life of 5 years, volatility of 40 - 190.86%, and expected dividend yield of zero. The aggregate grant date fair value of which was $222,987 and $477,097, respectively. The fair value of the warrants issued duringwas calculated using the nine months ended Septemberfollowing range of assumptions:

  Nine Months Ended September 30, 
  2020  2019 
       
Pricing model utilized  Binomial Lattice   Black/Scholes 
Risk free rate range  0.19% to 1.59%   1.66% to 2.52% 
Expected life range (in years)  5.00 years   3.00 to 5.00 
Volatility range  119.69% to 132.19%   119.34% to 212.98% 
Dividend yield  0.00%  0.00%

In addition, specific assumptions regarding investor exercise behavior were used in 2020, including probability assumptions related to estimated exercise behavior.


HEALTHLYNKED CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2017 was $496,132.2020

(UNAUDITED)

 

NOTE 15 – SHAREHOLDERS’ EQUITY (DEFICIT) (CONTINUED)

Employee Equity Incentive Plan

 

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

 

During August 2017, the Company issued 207,500 shares of common stock to employees under the EIP as a result of grants made in 2016 that vested during 2017.

20

HEALTHLYNKED CORPORATION

(FORMERLY KNOWN AS NAPLES WOMEN’S CENTER)

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2017 AND 2016

(UNAUDITED)

NOTE 11 – SHAREHOLDERS’ DEFICIT (CONTINUED)

The following table summarizes the status of shares issued and outstanding under the EIP outstanding as of and for the nine months ended September 30, 2017:2020 and 2019:

 

Outstanding at beginning of the period1,552,500
Granted during the period---
Terminated during the period(228,750)
Outstanding at end of the period1,323,750
Shares vested at period-end795,000
Weighted average grant date fair value of shares granted during the period$---
Aggregate grant date fair value of shares granted during the period$---
Shares available for grant pursuant to EIP at period-end11,829,934
  2020  2019 
Outstanding at beginning of the period  1,874,063   1,738,750 
Granted during the period  664,465   135,313 
Terminated during the period  (62,500)  --- 
Outstanding at end of the period  2,476,028   1,874,063 
         
Shares vested at period-end  2,176,028   1,510,313 
Weighted average grant date fair value of shares granted during the period $0.14  $0.26 
Aggregate grant date fair value of shares granted during the period $18,760  $12,805 
Shares available for grant pursuant to EIP at period-end  9,778,403   9,592,868 

 

Total stock basedstock-based compensation recognized for grants under the EIP was $2,435$79,196 and $3,030$10,534 during the three months ended September 30, 20172020 and 2016, respectively. Total stock based compensation recognized for grants under the EIP was $8,2152019, respectively, and $9,090$109,349 and $69,128 during the nine months ended September 30, 20172020 and 2016,2019, respectively. Total unrecognized stock compensation related to these grants was $31,655$31,989 as of September 30, 2017.2020.

 

A summary of the status of non-vestednonvested shares issued pursuant to the EIP as of and for the nine months ended September 30, 20172020 and 2019 is presented below:

 

    Weighted  2020  2019 
    Average     Weighted     Weighted 
    Grant Date     Average     Average 
 Shares  Fair Value     Grant Date     Grant Date 
Nonvested at January 1, 2017  940,000  $0.04 
 Shares  Fair Value  Shares  Fair Value 
Nonvested at beginning of period  332,500  $0.17   540,000  $0.16 
Granted  ---  $---   664,465  $0.14   ---  $--- 
Vested  (182,500) $0.04   (609,465) $0.14   (176,250) $0.16 
Forfeited  (228,750) $0.04   (87,500) $0.06   ---  $--- 
Nonvested at September 30, 2017  528,750  $0.04 
Nonvested at end of period  300,000  $0.20   363,750  $0.16 

 

HEALTHLYNKED CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2020

(UNAUDITED)

NOTE 15 – SHAREHOLDERS’ EQUITY (DEFICIT) (CONTINUED)

Employee Stock Options

 

The following table summarizes the status of options outstanding as of and for the nine months ended September 30, 2017:2020 and 2019:

 

     Weighted 
     Average 
     Exercise 
  Number  Price 
Outstanding at beginning of the period  2,349,996  $0.12 
Granted during the period  ---  $--- 
Exercised during the period  ---  $--- 
Terminated during the period  ---  $--- 
Outstanding at end of the period  2,349,996  $0.12 
         
Options exercisable at period-end  462,500     
Weighted average remaining life (in years)  8.9     
Weighted average grant date fair value of options granted during the period $---     
Options available for grant at period-end  11,829,934     

21

HEALTHLYNKED CORPORATION

(FORMERLY KNOWN AS NAPLES WOMEN’S CENTER)

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2017 AND 2016

(UNAUDITED)

NOTE 11 – SHAREHOLDERS’ DEFICIT (CONTINUED)

  2020  2019 
     Weighted     Weighted 
     Average     Average 
     Exercise     Exercise 
  Number  Price  Number  Price 
Outstanding at beginning of the period  3,269,250  $0.21   3,707,996  $0.18 
Granted during the period  60,000  $0.09   1,078,750  $0.26 
Exercised during the period  ---  $---   (154,166) $0.20 
Forfeited during the period  (80,000) $0.26   (595,830) $0.20 
Outstanding at end of the period  3,249,250  $0.20   4,036,750  $0.20 
                 
Options exercisable at period-end  2,012,375       1,486,000     
Weighted average remaining life (in years)  7.0       7.9     
Weighted average grant date fair value of options granted during the period $0.07      $0.20     
Options available for grant at period-end  9,775,903       9,592,868     

 

The following table summarizes information about the Company’s stock options outstanding as of September 30, 2017:2020:

 

Options OutstandingOptions Outstanding  Options Exercisable Options Outstanding  Options Exercisable 
    Weighted-             Weighted-        
    Average Weighted-     Weighted-      Average Weighted-     Weighted- 
    Remaining Average     Average      Remaining Average     Average 
ExerciseExercise Number Contractual Exercise Number Exercise  Exercise  Number Contractual Exercise Number Exercise 
PricesPrices  Outstanding  Life (years)  Price  Exercisable  Price  Prices  Outstanding  Life (years)  Price  Exercisable  Price 
$0.08   1,600,000   8.8  $0.08   100,000  $0.08 --- to 0.10   1,283,000   5.2  $0.08   1,283,000   0.08 
$0.20   749,996   9.2  $0.20   ---  $--- 0.11 to 0.31   1,966,250   8.1  $0.28   729,375   0.29 
$0.08 to 0.20   2,349,996   8.9  $0.12   100,000  $0.08 0.08 to 0.31   3,249,250   7.0  $0.20   2,012,375  $0.16 

 

Total stock basedstock-based compensation recognized related to option grants was $2,235$19,305 and $2,396$24,107 during the three months ended September 30, 20172020 and 2016. Total stock based compensation recognized related to option grants was $7,5042019, respectively, and $2,396$61,155 and $86,054 during the nine months ended September 30, 20172020 and 2016.2019, respectively.

 

A summary of the status of non-vestednonvested options issued pursuant to the EIP as of and for the nine months ended September 30, 20172020 and 2019 is presented below:

 

    Weighted  2020  2019 
    Average     Weighted     Weighted 
    Grant Date     Average     Average 
 Shares  Fair Value     Grant Date     Grant Date 
Nonvested at January 1, 2017  2,249,996  $0.03 
 Shares  Fair Value  Shares  Fair Value 
Nonvested at beginning of period  1,636,250  $0.22   2,332,413  $0.13 
Granted  ---  $---   60,000  $0.07   1,078,750  $0.20 
Vested  (362,500) $---   (379,375) $0.20   (264,583) $0.18 
Forfeited  ---  $---   (80,000) $0.21   (595,830) $0.02 
Nonvested at September 30, 2017  1,887,496  $0.03 
Nonvested at end of period  1,236,875  $0.21   2,550,750  $0.18 

37

HEALTHLYNKED CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2020

(UNAUDITED)

 

NOTE 1216 – 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.

Service contracts

 

The Company carries various service contracts on its office buildings & certain copier equipment for repairs, maintenance and inspections. All contracts are short term and can be cancelled.

 

Litigation

 

From time to time, we may become involved in various lawsuits and legal proceedings, which arise, in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business. We are not aware of any such legal proceedings that we believe will have, individually or in the aggregate, a material adverse effect on our business, financial condition or operating results.

 

Leases

On July 20, 2020, Empery Asset Master Ltd., Empery Tax Efficient, LP and Empery Tax Efficient II, LP, (the “Complainants”) filed a complaint against the Company in the Supreme Court of the State of New York. The Complaint alleges that the Company’s acquisition of CHM, in which the Company issued stock consideration of 2,240,838 common shares, triggered a change of control clause in warrants held by the Complainants that would allow the Complainants to demand cash value for their warrants. The Company believes that the asserted claims lack merit and intends to defend against all of the claims vigorously. Due to the inherent uncertainties of litigation, the Company cannot predict the outcome of the actions at this time and can give no assurance that the asserted claims will not have a material adverse effect on its financial position or results of operations. The Company has two real estate leases in Naples, Florida. Theresponded to the Complaint but discovery has not yet commenced as of the date of this filing.

On August 24, 2020, the Company entered into ana settlement agreement in response to a complaint filed by Delaney Equity Group LLC seeking unpaid fees from a 2015 Advisor, Consulting and Investment Banking Agreement. Pursuant to the terms of the settlement, the Company agreed to make cash payments totaling $75,000 over a six-month period. If the payments are not made in full and timely, the amount due increases to $112,500.

Leases

Maturities of operating lease for its main office in Naples, Florida beginning on August 1, 2013 and expiring July 31, 2020. The lease is for a 6901 square-foot space. The base rent for the first full yearliabilities were as follows as of the lease term is $251,287 per annum with increases during the period. The Company entered into another operating lease in the same building for an additional 361 square feet space for use of the medical equipment for the same period. The base rent for the first full year of the lease term is $13,140 per annum.September 30, 2020:

 

2020 $50,882 
2021  205,430 
2022  159,561 
2023  68,457 
Total lease payments  484,330 
Less interest  (180,430)
Present value of lease liabilities $303,900 
22


HEALTHLYNKED CORP.

HEALTHLYNKED CORPORATION

(FORMERLY KNOWN AS NAPLES WOMEN’S CENTER)

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2017 AND 20162020

(UNAUDITED)

 

NOTE 1216 – COMMITMENTS AND CONTINGENCIES (CONTINUED)

 

During the nine months ended September 30, 2017, theOur lease for office space for our NWC practice expired in July 2020. The Company entered into ana new three-year lease agreement with MOD pursuant to which the Company will pay rent to MODfor a different facility in the amountNaples facility comprised of $2,040 per month for office space3,650 square feet commencing in MOD’s facility used by the Company and its employees. The agreement is effective from January 1, 2017 through July 31, 2018. During the three and nine months ended September 30, 2017, the Company recognized rent expense related to the marketing agreement in the amount of $6,120 and $18,360, respectively, pursuant to this agreement and had prepaid an additional $4,929 toward future rent as of September 30, 2017.August 2020.

 

Total lease expense for the three months ended September 30, 2017 and 2016 was $77,636 and $78,940, respectively. Total lease expense for the nine months ended September 30, 2017 and 2016 was $217,926 and $266,021, respectively.

Future minimum lease payments (excluding real estate taxes and maintenance costs) as of September 30, 2017 are as follows:

2017 (October to December) $72,227 
2018  281,460 
2019  273,856 
2020  162,055 
2021  --- 
     
Total $789,598 

Employment/Consulting Agreements

 

The Company has employment agreements with eachcertain of its four physicians.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 basedperformance-based pay later in the contract. The contracts expire at various times through 2019, with early termination available upon a notice period of 30-90 days during which compensation is paid to the physician but NWC has no further severance obligation. During 2016, DMD retired from practice to focus on his duties as CEO of HLYK.

 

On July 1, 2016, HLYKthe 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 HLYK.the Company. If Dr. Dent’s employment is terminated by HLYKthe 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, HLYKthe Company entered into an agreement with Mr. George O’Leary, HLYK’sthe Company’s Chief Financial Officer and a member of the Board of Directors, extending his prior agreement with the Company. Mr. O’Leary’s employment agreement continues until terminated by Mr. O’Leary or HLYK.the Company. If Mr. O’Leary employment is terminated by HLYKthe Company (unless such termination is “For Cause” as defined in his employment agreement), then upon signing a general waiver and release, Mr. O’Leary will be entitled to receive his base salary and the Company shall maintain his employee benefits for a period of twelve (12) months beginning on the date of termination. In the event that Mr. O’Leary terminates the agreement, he shall be entitled to any accrued by unpaid salary and other benefits up to and including the date of termination. On July 1, 2018, the Company and Mr. O’Leary entered into an Extension Letter Agreement pursuant to which Mr. O’Leary was increased to full time employment (previously half-time) and agreed to extend the term of his employment to September 30, 2022. In addition to a base salary, the extension provides Mr. O’Leary with certain performance-based cash bonuses, stock grants, and stock option grants.

On May 18, 2020, the Company entered into separate 4-year consulting services agreements with each of the two principals of the ACO/MSO business acquired in May 2020 that call for each person to earn fixed annual consulting fees and a share of Medicare shared savings revenue, consulting revenue and overall profits generated by the underlying business.

 

NOTE 1317 – SEGMENT REPORTING

 

The Company has twothree reportable segments: NWCHealth Services, Digital Healthcare and HLYK. NWCACO/MCO. 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.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 practice’s office is located in Naples, Florida. HLYKCompany’s Digital Healthcare segment develops and plans to operate an online personal medical information and record archive system, the “HealthLynked Network”,Network,” which will enable patients and doctors to keep track of medical information via the Internet in a cloud basedcloud-based system. Patients will complete a detailed online personal medical history including past surgical history, medications, allergies,The ACO/MSO Division is comprised of the business acquired with CHM, which assists physician practices in providing coordinated and family history. Once this information is enteredmore efficient care to patients and their treating physicians will be able to updatevia the informationMSSP as needed to provide a comprehensive medical history.

administered by the CMS, which rewards providers for efficiency in patient care. 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.

 

39

23

 

 

HEALTHLYNKED CORPORATIONCORP.

(FORMERLY KNOWN AS NAPLES WOMEN’S CENTER)

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2017 AND 20162020

(UNAUDITED)

 

NOTE 1317 – SEGMENT REPORTING (CONTINUED)

 

Segment information for the three months ended September 30, 20172020 and 20162019 was as follows:

 

 Three Months Ended September 30, 2017  Three Months Ended September 30, 2016  Three Months Ended September 30, 2020  Three Months Ended September 30, 2019 
 NWC  HLYK  Total  NWC  HLYK  Total  Health Services  Digital Healthcare  ACO / MSO  Total  Health Services  Digital Healthcare  ACO / MSO  Total 
Revenue                              
Patient service revenue, net $480,723  $---  $480,723  $499,448  $---  $499,448  $1,054,806  $---  $---  $1,054,806  $1,172,561  $---  $---  $1,172,561 
Medicare shared savings revenue  ---   ---   767,744   767,744   ---   ---   ---   --- 
Consulting revenue  ---   ---   217,605   217,605   ---   ---   ---   --- 
Total revenue  1,054,806   ---   985,349   2,040,155   1,172,561   ---   ---   1,172,561 
                                                        
Operating Expenses                                                        
Salaries and benefits  345,895   160,311   506,206   347,242   85,707   432,949 
Practice salaries and benefits  590,690   ---   ---   590,690   708,571   ---   ---   708,571 
Other practice operating expenses  548,667   ---   ---   548,667   521,341   ---   ---   521,341 
Medicare shared savings expenses  ---   ---   759,848   759,848   ---   ---   ---   --- 
General and administrative  228,278   252,336   480,614   273,416   239,988   513,404   ---   958,874   ---   958,874   ---   733,360   ---   733,360 
Depreciation and amortization  5,601   455   6,056   5,718   ---   5,718   24,557   594   ---   25,151   24,385   595   ---   24,980 
Total Operating Expenses  579,774   413,102   992,876   626,376   325,695   952,071   1,163,914   959,468   759,848   2,883,230   1,254,297   733,955   ---   1,988,252 
                                                        
Loss from operations $(99,051) $(413,102) $(512,153) $(126,928) $(325,695) $(452,623) $(109,108) $(959,468) $225,501  $(843,075) $(81,736) $(733,955) $---  $(815,691)
                                                        
Other Segment Information                                                        
Interest expense $5,723  $21,401  $27,124  $4,442  $8,967  $13,409  $23,186  $49,349  $---  $72,535  $5,165  $64,397  $---  $69,562 
Loss on sales of marketable securities $

---

  $281,606  $

---

  $281,606  $

---

  $

---

  $

---

  $

---

 
Loss on extinguishment of debt $---  $290,581  $290,581  $---  $---  $---  $---  $450,999  $---  $450,999  $---  $(4,904) $---  $(4,904)
Financing cost $---  $32,324  $32,324  $---  $---  $---  $---  $---  $---  $---  $---  $12,009  $---  $12,009 
Amortization of original issue and debt discounts on convertible notes $---  $63,552  $63,552  $---  $100,187  $100,187  $---  $65,816  $---  $65,816  $---  $362,728  $---  $362,728 
Proceeds from settlement of lawsuit $---  $---  $---  $38,236  $---  $38,236 
Change in fair value of debt $---  $79,062  $---  $79,062  $---  $28,885  $---  $28,885 
Change in fair value of derivative financial instruments $---  $5,412  $5,412  $---  $---  $---  $---  $(12,802) $---  $(12,802) $---  $(158,691) $---  $(158,691)
Change in fair value of contingent acquisition consideration $---  $(45,996) $---  $(45,996) $---  $---  $---  $--- 

HEALTHLYNKED CORP.

  As of September 30, 2017  As of December 31, 2016 
Identifiable assets $217,344  $151,538  $368,882  $240,115  $89,396  $329,511 

During the three months ended September 30, 2017, HLYK recognized revenue of $2,377 related to subscription revenue billed to and paid for by NWC physicians for access to the HealthLynked Network, which the Company test-launched during the third quarter of 2017. The revenue for HLYK and related expense for NWC were eliminated on consolidation.

24

HEALTHLYNKED CORPORATION

(FORMERLY KNOWN AS NAPLES WOMEN’S CENTER)

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2017 AND 20162020

(UNAUDITED)

 

NOTE 1317 – SEGMENT REPORTING (CONTINUED)

 

Segment information for the nine months ended September 30, 20172020 and 20162019 was as follows:

 

 Nine Months Ended September 30, 2017  Nine Months Ended September 30, 2016  Nine Months Ended September 30, 2020  Nine Months Ended September 30, 2019 
 NWC  HLYK  Total  NWC  HLYK  Total  Health Services  Digital Healthcare  ACO / MSO  Total  Health Services  Digital Healthcare  ACO / MSO  Total 
Revenue                              
Patient service revenue, net $1,473,639  $---  $1,473,639  $1,515,293  $---  $1,515,293  $3,502,836  $---  $---  $3,502,836  $2,845,941  $---  $---  $2,845,941 
Medicare shared savings revenue  ---   ---   767,744   767,744   ---   ---   ---   --- 
Consulting revenue  ---   ---   268,025   268,025   ---   ---   ---   --- 
Total revenue  3,502,836   ---   1,035,769   4,538,605   2,845,941   ---   ---   2,845,941 
                                                        
Operating Expenses                                                        
Salaries and benefits  1,025,333   443,878   1,469,211   1,001,838   132,235   1,134,073 
Practice salaries and benefits  1,910,897   ---   ---   1,910,897   1,762,662   ---   ---   1,762,662 
Other practice operating expenses  1,633,380   ---   ---   1,633,380   1,287,432   ---   ---   1,287,432 
Medicare shared savings expenses  ---   ---   824,084   824,084   ---   ---   ---   --- 
General and administrative  619,112   749,906   1,369,018   825,603   322,961   1,148,564   ---   2,116,159   ---   

2,116,159

   ---   2,084,630   ---   2,084,630 
Depreciation and amortization  16,858   765   17,623   15,804   ---   15,804   73,027   1,784   ---   74,811   46,561   1,784   ---   48,345 
Total Operating Expenses  1,661,303   1,194,549   2,855,852   1,843,245   455,196   2,298,441   3,617,304   2,117,943   824,084   6,559,331   3,096,655   2,086,414   ---   5,183,069 
                                                        
Loss from operations $(187,664) $(1,194,549) $(1,382,213) $(327,952) $(455,196) $(783,148) $(114,468) $(2,117,943) $211,685  $(2,020,726) $(250,714) $(2,086,414) $---  $(2,337,128)
                                                        
Other Segment Information                                                        
Interest expense $17,086  $47,835  $64,921  $15,424  $8,967  $24,391  $35,096  $158,038  $---  $193,134  $17,010  $159,219  $---  $176,229 
                                
Loss on sales of marketable securities $---  $

281,606

  $---  $

281,606

  $---  $---  $---  $--- 
                                
Loss on extinguishment of debt $---  $290,581  $290,581  $---  $---  $---  $---  $1,347,371  $---  $1,347,371  $---  $62,459  $---  $62,459 
Financing cost $---  $32,324  $32,324  $---  $---  $---  $---  $---  $---  $---  $---  $133,244  $---  $133,244 
Amortization of original issue and debt discounts on convertible notes $---  $194,120  $194,120  $---  $100,187  $---  $---  $530,930  $---  $530,930  $---  $841,725  $---  $841,725 
Proceeds from settlement of lawsuit $---  $---  $---  $38,236  $---  $38,236 
Change in fair value of debt $---  $198,764  $---  $198,764  $---  $88,991  $---  $88,991 
Change in fair value of derivative financial instruments $---  $5,412  $5,412  $---  $---  $---  $---  $(739,485) $---  $(739,485) $---  $(574,205) $---  $(574,205)
Change in fair value of contingent acquisition consideration $---  $(687) $---  $(687)                

  September 30,
2020		  December 31,
2019		 
Identifiable assets $2,250,647  $952,716  $901,736  $4,105,099  $2,356,886  $117,802  $---  $2,474,688 
Goodwill $---  $---  $1,454,856  $1,454,856  $71,866  $---  $---  $71,866 

 

DuringThe Digital Healthcare segment recognized revenue of $1,366 and $1,164 in the three months ended September 30, 2020 and 2019, respectively, and $3,797 and $5,075 in the nine months ended September 30, 2017, HLYK recognized revenue of $2,3772020 and 2019, respectively, related to subscription revenue billed to and paid for by NWCthe Company’s physicians for access to the HealthLynked Network, which the Company test-launched during the third quarter of 2017.Network. The revenue for HLYKDigital Healthcare and related expense for NWCHealth Services were eliminated on consolidation.


HEALTHLYNKED CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2020

(UNAUDITED)

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.

The following table summarizes the conclusions reached regarding fair value measurements as of September 30, 2020 and December 31, 2019:

           Total 
  Level 1  Level 2  Level 3  Fair Value 
Convertible notes payable $---  $---  $1,153,279  $1,153,279 
Contingent acquisition consideration  ---   ---   926,597   926,597 
                 
Total $---  $---  $2,079,876  $2,079,876 

  As of December 31, 2019 
           Total 
  Level 1  Level 2  Level 3  Fair Value 
Convertible notes payable $---  $---  $723,482  $723,482 
Notes payable to related party  ---   ---   193,007   193,007 
Derivative financial instruments  ---   ---   991,288   991,288 
Contingent acquisition consideration  ---   ---   500,000   500,000 
                 
Total $---  $---  $2,407,777  $2,407,777 

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, 2020 and 2019 were as follows:

  Three Months Ended
September 30,		  Nine Months Ended
September 30,		 
  2020  2019  2020  2019 
             
Convertible notes payable $(46,094) $(22,899) $(117,829) $(70,921)
Notes payable to related party  (32,968)  (5,986)  (80,935)  (18,070)
Derivative financial instruments  12,802   158,691   739,485   574,205 
Contingent acquisition consideration  45,996   ---   687   --- 
                 
Total $(20,264) $129,806  $541,408  $485,214 

42

HEALTHLYNKED CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2020

(UNAUDITED)

 

NOTE 1419 – SUBSEQUENT EVENTS

 

On October 5, 2017, the Company sold 211,111 shares of common stock, as well as a five-year warrant to purchase an additional 126,666 shares at an exercise price of $0.30 per share, to one investor. The Company received $38,000 in proceeds from the sale. The shares were issued at a share price of $0.18 per share.

On October 18, 2017, the Company sold 250,000 shares of common stock, as well as a five-year warrant to purchase an additional 166,666 shares at an exercise price of $0.30 per share, to one investor. The Company received $50,000 in proceeds from the sale. The shares were issued at a share price of $0.20 per share.

On October 23, 2017,19, 2020, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) by and among the Company, MOD FL, LLC, a securities purchase agreement for the sale of a $53,000 convertible note to PULG. The note has an interest rate of 10%Florida limited liability company and a default interest rate of 22%. The note may be converted into common stockwholly owned subsidiary of the Company by the holder at any time following 180 days after the issuance date, subject to a 4.99% beneficial ownership limitation, at a conversion price per share equal to a 39% discount to the average(“Merger Sub”), MedOfficeDirect L.L.C. (“MOD”) and certain of the three (3) lowest closing bid prices duringmembers of MOD. The Merger Agreement provided that the fifteen (15) trading days prior to the conversion date. Upon an event of default caused by the Company’s failure to deliver shares uponMerger Sub would merge with and into MOD, with MOD surviving as a conversion pursuant to the terms of the note, 300% of the outstanding principal and any interest due amount shall be immediately due. Upon an event of default caused by the Company’s breach of any other events of default specified in the note, 150% of the outstanding principal and any interest due amount shall be immediately due.

On October 27, 2017, the Company entered into a securities purchase agreement for the sale of a $171,500 convertible note to an individual lender. Net proceeds to the Company were $150,000. The note has an interest rate of 10% and a default interest rate of 22%. The note may be converted into common stockwholly-owned subsidiary of the Company by(the “Merger”). As consideration for the holderMerger, the members of MOD are receiving consideration valued at any time following 180 days afterup to $6,010,000, including (i) the issuance date, subject to a 4.99% beneficial ownership limitation, at a conversion price per share equal to a 35% discount to the lowest closing bid price during the twenty (20) trading days prior to the conversion date. Uponof an eventaggregate of default caused by the Company’s failure to deliver shares upon a conversion pursuant to the terms of the note, 300% of the outstanding principal and any interest due amount shall be immediately due. Upon an event of default caused by the Company’s breach of any other events of default specified in the note, 150% of the outstanding principal and any interest due amount shall be immediately due.

On November 1, 2017, the Company sold 1,000,000 shares of common stock, par value $0.0001, to an accredited investor at a purchase price of $0.20 per share. Net proceeds to the Company were $200,000. The investor was also granted a five-year warrant to purchase 666,66619,045,563 restricted shares of the Company’s common stock valued at to $2,704,470 upon the closing of the Merger (the “Closing Shares”), (ii) the issuance of an exercise priceaggregate of $0.30 per share.up to 10,004,749 restricted shares of the Company’s common stock valued at up to $2,602,330 over a four year period based on MOD achieving certain revenue targets as set forth in the Merger Agreement (the “Earnout Shares”), and (iii) the partial satisfaction of certain outstanding debt obligations of MOD in the amount of $703,200 in cash by the Company. The Company and MOD completed the Merger by filing the Certificate of Merger with the Florida Department of State. As a result of the Merger, with MOD surviving as a wholly-owned subsidiary of the Company, the Company acquired all of the assets of MOD. MOD is 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 Group Purchasing Organization pricing discounts with a small unit-of-measure direct-to-consumer shipping model to make ordering medical supplies both convenient and highly cost effective for its users. 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 Merger Consideration in connection with the Merger as follows: (1) Dr. Dent received 10,573,745 Closing Shares and may earn up to 5,554,452 additional Earnout Shares, (2) Mr. O’Leary received 1,130,213 Closing Shares and may earn up to 593,707 additional Earnout Shares, and (3) Mr. Gasparini received 99,437 Closing Shares and may earn up to 52,235 additional Earnout Shares.

 

25

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

Forward-Looking Statements

 

AllYou should read the following discussion and analysis of our financial condition and results of operations together with our unaudited financial statements containedand the related notes appearing elsewhere in this report, other than statements ofreport. In addition to historical facts, that address future activities, events or developments, areinformation, this discussion and analysis contains forward-looking statements including, but not limited to, statements containing the word “believe,” “anticipate,” “expect”that involve risks, uncertainties and word of similar import. These statements are based on certain assumptions and analyses made by the Company in light of its experience and assessment of historical trends, current conditions and expected future developments as well as other factors the Company believes are appropriate under the circumstances. Although the Company believes that the expectations reflected in such forward-looking statements are reasonable, forward-looking statements are subject to risks and uncertainties that could cause actual results to differ from those projected. The Company cautions investors that any forward-looking statements made by the Company are not guarantees of future performance and thatassumptions. 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 forward-looking statements. Such risks and uncertainties include, without limitation: established competitors who have substantially greater financial resources and operating histories, regulatory delays or denials, ability to compete as a start-up companysection titled “Risk Factors” included in a highly competitive market, and access to sources of capital.our most recent Annual Report on Form 10-K. All amounts in this report are in U.S. dollars, unless otherwise noted.

 

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

 

Overview

The Company filed its ArticlesHealthLynked Corp. (the “Company,” “we,” “our, or “us”) was incorporated in the State of IncorporationNevada on August 4, 20142014. We currently operate in Nevada. On September 3, 2014, the Company filed Amended Articles of Incorporation setting forth the total authorized shares of 250,000,000 shares, 230,000,000 of which are designated as common sharesthree distinct divisions: Health Services and 20,000,000 as “blank check” preferred stock. The Company also had 2,953,840 designated shares of Series A Preferred Stock which were converted to common shares.

On September 5, 2014, the Company entered into the Share Exchange Agreement with NWC, acquiring 100%Digital Healthcare. Our Health Services division is comprised of the LLC membership unitsoperations of NWC through the issuance of an aggregate of 50,000,000 shares of the Company’s common stock to the members of NWC.

NWC is(i) Naples Women’s Center (“NWC”), a multi-specialty medical group including OB/GYN (both Obstetrics and Gynecology), and generalGeneral 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 located in Naples, Florida.

The Company operatesBonita Springs, FL 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 plans to operate an online personal medical information and record archive system, the “HealthLynked Network”,Network,” which enableswill enable patients and doctors to keep track of medical information via the Internet in a cloud basedcloud-based system. Patients completeOur 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 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.

Recent Developments

In January 2020, we launched a detailed online personalnew physical therapy practice in Bonita Springs, Florida called Bridging the Gap Physical Therapy. BTG employs two doctors who provide hands-on functional manual therapy techniques to speed patients’ recovery and manage pain without pain medication or surgery.

On May 18, 2020, we acquired a 100% interest in Cura Health Management LLC (“CHM”) and its wholly owned subsidiary ACO Health Partners, LLC (“AHP”). CHM is a healthcare enablement company that empowers local providers to own and operate in a franchise-like model that extends their reach and capabilities to maximize revenue, deliver quality care and improve patient outcomes. CHM’s resources and solutions are administered as an extension of providers’ current in-practice resources, expanding care coordination, care management services and value-based analytics. These solutions support financial success within both traditional payment models and expansion to new services, allowing partners to succeed within current and ever emerging value-based payment models. AHP is an accountable care organization (“ACO”) with providers around the U.S. participating in the Medicare Shared Savings Program (“MSSP). The MSSP is a program created under the Affordable Care Act and administered by the Center for Medicare and Medicaid Services (the “CMS”) to enhance the efficiency of healthcare provided to patients covered by Medicare. The MSSP 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 prescribed MSSP benchmarks. If the ACO’s covered patient population meets the MSSP benchmarks, the ACO then receives an incentive payment, as determined by the CMS, for each calendar year if the global population of patient lives covered by all providers in the ACO meets the MSSP benchmark requirements.

On August 20, 2020, we completed a financing transaction (the “August 2020 Equity Transaction”) with trusts (the “Trusts”) controlled by our CEO, Dr. Michael Dent, pursuant to which the Trusts contributed an aggregate of 76,026 shares of common stock of NeoGenomics, Inc. (NEO” and the “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.

Using in part the proceeds from sale of the NEO Shares received in the August 2020 Equity Transaction, during the three months ended September 30, 2020 we retired debt with a face value of $1,658,750, including $1,012,750 convertible notes with adjustable conversion rates pegged to a fixed discount to the trading price of our common stock. As of September 30, 2020, we had no further outstanding convertible notes with such adjustable conversion rates. We also retired accrued interest of $292,678 related to repayment of debt obligations during the quarter, including forgiveness of $105,003 accrued interest on notes payable to our CEO, Dr. Michael Dent.


On October 19, 2020, we acquired MedOfficeDirect L.L.C. (“MOD”), a virtual distributor of discounted medical historysupplies 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 Group Purchasing Organization pricing discounts with a small unit-of-measure direct-to-consumer shipping model to make ordering medical supplies both convenient and highly cost effective for its users.

Business Update Regarding COVID-19

During the first half of 2020, the spread of a new strain of coronavirus and the disease created by that virus, COVID-19, has created a global pandemic presenting substantial public health and economic challenges around the world. The global pandemic is affecting our employees, communities and business operations, as well as the global economy and financial markets. The full extent to which the COVID-19 pandemic will directly or indirectly impact our business, results of operations and financial condition will depend on future developments that are highly uncertain and cannot be accurately predicted, including past surgical history, medications, allergies,new information that may emerge concerning COVID-19, the actions taken to contain it or treat its impact and family history. Once this information is entered patientsthe economic impact on local, regional, national and their treating physicians are able to update the information as needed to provide a comprehensive medical history.international markets.

 

The Company was formed fordisclosure in the purposeremainder of acquiring NWC,this Management’s Discussion and eventually developing its own online medical information system business as described above. PriorAnalysis of Financial Condition and Results of Operations (MD&A) is qualified by the disclosure in this section on the impacts of COVID-19 and, to the share exchange, NWC was an ongoing operationextent that had been in existence since 1996. NWC generated revenuesthe disclosure in the prior years.remainder of this MD&A refers to a financial or performance metric that has been affected by a trend or activity, that reference is in addition to any impact discussed in this section of the impacts of the COVID-19 pandemic. The effect of the COVID-19 pandemic is rapidly evolving and, as such, the information contained herein is accurate as of the date hereof, but may become outdated due to changing circumstances beyond our present awareness or control.

 

Critical accounting policies and significant judgments and estimates

 

This management’s discussion and analysis of the Company’s financial condition and results of operations is based on the Company’s condensed consolidated financial statements, which have been prepared in accordance with generally accepted accounting principlesSee Note 2, “Significant Accounting Policies,” in the United States, or GAAP. The preparation of these condensed consolidated financial statements requires the CompanyNotes to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements, as well as the reported expenses incurred during the reporting periods. The Company’s estimates are based on historical experience and on various other factors that the Company believes are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. The Company believes that the accounting policies discussed below are critical to understanding the Company’s historical and future performance, as these policies relate to the more significant areas involving management’s judgments and estimates.

26

Revenue Recognition

The Company recognizes revenue in accordance with Accounting Standards Codification subtopic 605-10, Revenue Recognition (“ASC 605-10”) which requires that four basic criteria must be met before revenue can be recognized: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred; (3) the selling price is fixed and determinable; and (4) collectability is reasonably assured. Determination of criteria (3) and (4) are based on management’s judgments regarding the fixed nature of the selling prices of the products delivered and the collectability of those amounts. Patient service revenues are recognized at the time of service for the net amount expected to be collected. Provisions for discounts and rebates to customers, estimated returns and allowances, and other adjustments are provided for in the same period the related sales are recorded.

Cash and Cash Equivalents

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

Accounts Receivable

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

Capital Leases

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

Concentrations of Credit Risk

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

Property and Equipment

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

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

Convertible Notes

Convertible notes are regarded as compound instruments, consisting of a liability component and an equity component. The component parts of compound instruments are classified separately as financial liabilities and equity in accordance with the substance of the contractual arrangement. At the date of issue, the fair value of the liability component is estimated using the prevailing market interest rate for a similar non-convertible instrument. This amount is recorded as a liability on an amortized cost basis until extinguished upon conversion or at the instrument’s maturity date. The equity component is determined by deducting the amount of the liability component from the fair value of the compound instrument as a whole. This is recognized as additional paid-in capital and included in equity, net of income tax effects, and is not subsequently remeasured. After initial measurement, they are carried at amortized cost using the effective interest method.

27

Derivative Financial Instruments

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

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

Fair Value of Assets and Liabilities

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

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

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

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

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

Stock-Based Compensation

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

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

Income Taxes

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

28

Recurring Fair Value Measurements

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

Net Income (Loss) per Share 

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

Recent Accounting Pronouncements

In September 2017, the FASB issued ASU 2017-13, Revenue Recognition (Topic 605), Revenue from Contracts with Customers (Topic 606), Leases (Topic 840), and Leases (Topic 842). The effective date for ASU 2017-13 is for fiscal years beginning after December 15, 2018. We are currently evaluating the impact of adopting ASU 2017-13 on our unaudited consolidated financial statements.

In January 2017, the FASB issued ASU 2017-04, Intangibles-Goodwill and Other (Topic 350), which simplifies the goodwill impairment test. The effective date for ASU 2017-04 is for fiscal years beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. We are currently evaluating the impact of adopting ASU 2017-04 on our unaudited condensed consolidated financial statements.Financial Statements.


Results of Operations

 

In January 2017, the FASB issued ASU No. 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business. This new standard clarifies the definition of a business and provides a screen to determine when an integrated set of assets and activities is not a business. The screen requires that when substantially all of the fair value of the gross assets acquired (or disposed of) is concentrated in a single identifiable asset or a group of similar identifiable assets, the set is not a business. This new standard will be effective for the Company on January 1, 2018; however, early adoption is permitted with prospective application to any business development transaction. We are currently evaluating the impact of adopting ASU 2017-04 on our unaudited condensed consolidated financial statements.

The Company applied ASU 2015-03: Interest – Imputation of Interest, which simplifies the presentation of debt issuance costs, and netted debt issue costs previously reported as assets with the related liability for presentation purposes.

On May 28, 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2014-09, Revenue from Contracts with Customers. The standard will eliminate the transaction- and industry-specific revenue recognition guidance under current U.S. GAAP and replace it with a principle-based approach for determining revenue recognition. The Company intends to adopt this guidance for the year ended December 31, 2017. The Company has not yet evaluated the impact the adoption this standard will have on its results of operations upon adoption.

In August 2014, the FASB issued ASU No. 2014-15 Presentation of Financial Statements-Going Concern. The amendments in this update apply to all reporting entities and require an entity’s management, in connection with preparing financial statements for each annual and interim reporting period, to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date that the financial statements are issued (or within one year after the date that the financial statements are available to be issued when applicable). This ASU is effective for annual periods ending after December 15, 2016. The Company adopted this standard for the year ended December 31, 2016. Based on the results of our analysis, no additional disclosures were required.

The Company has evaluated recent accounting pronouncements issued by the FASB (including its Emerging Issues Task Force), the AICPA and the SEC and we have not identified any that would have a material impact on the Company’s financial position, or statements.

29

Results of Operations

Comparison of Three Months Ended September 30, 20172020 and 20162019

 

The following table summarizes the changes in our results of operations for the three months ended September 30, 20172020 compared with the three months ended September 30, 2016:2019:

 

 Three Months Ended September 30,  Change  Three Months Ended
September 30,		  Change 
 2017  2016  $  %  2020  2019  $  % 
Patient service revenue, net $480,723  $499,448  $(18,725)  -4% $1,054,806  $1,172,561  $(117,755)  -10%
Medicare shared savings revenue  767,744   ---   767,744   100%
Consulting revenue  217,605   ---   217,605   100%
Total revenue  2,040,155   1,172,561   867,594   74%
                                
Salaries and benefits  506,206   432,949   73,257   17%
Operating Expenses                
Practice salaries and benefits  590,690   708,571   (117,881)  -17%
Other practice operating costs  548,667   521,341   27,326   5%
Medicare shared savings expenses  759,848   ---   759,848   100%
General and administrative  480,614   513,404   (32,790)  -6%  958,874   733,360   225,514   31%
Depreciation and amortization  6,056   5,718   338   6%  25,151   24,980   171   1%
(Loss) income from operations  (512,153)  (452,623)  (59,530)  13%
Loss from operations  (843,075)  (815,691)  (27,384)  -3%
                                
Other Income (Expenses)                
Loss on sales of marketable securities  (281,606)  ---   (281,606)  100%
Loss on extinguishment of debt  (290,581)  ---   (290,581)  100%  (450,999)  4,904   (455,903)  9297%
Change in fair value of debt  (79,062)  (28,885)  (50,177)  -174%
Financing cost  (32,324)  ---   (32,324)  100%  ---   (12,009)  12,009   100%
Amortization of original issue and debt discounts on notes payable and convertible notes  (63,552)  (100,187)  36,635   -37%  (65,816)  (362,728)  296,912   82%
Proceeds from settlement of lawsuit  ---   38,236   (38,236)  -100%
Change in fair value of derivative financial instruments  5,412   ---   5,412   100%  12,802   158,691   (145,889)  92%
Change in fair value of contingent acquisition consideration  45,996   ---   45,996   -100%
Interest expense  (27,124)  (13,409)  (13,715)  102%  (72,535)  (69,562)  (2,973)  -4%
Total other expenses  (408,169)  (75,360)  (332,809)  442%  (891,220)  (309,589)  (581,631)  -188%
                                
Net loss $(920,322) $(527,983) $(392,339)  74% $(1,734,295) $(1,125,280) $(609,015)  -54%

 

Patient service revenue decreased by $18,725,$117,755, or 4%10%, from 20162019 to 2017,2020, primarily as a result of decreased collections on similar gross billing andin-person patient services revenue as a result of the impact from office closure during Hurricane Irma in September 2017.Coronavirus pandemic.

 

SalariesMedicare shared savings revenue increased by $767,744, or 100% from 2019 to 2020. The primary source of revenue of CHM, which we acquired in May 2020, is 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. During September 2020, we were notified of, and received payment for, our shared savings revenue relating to program year 2019 in the amount of $767,744.

Consulting revenue increased by $217,605, or 100%, from 2019 to 2020. Consulting revenue was earned by the newly formed ACO/MSO Division comprised of the operations of CHM acquired in May 2020.

Practice salaries and benefits increaseddecreased by $73,257,$117,881, or 17%, in 20172020 primarily as a result of temporary pay reductions implemented in second and third quarter 2020 due to the Coronavirus pandemic as well permanent reductions in staff at Naples Women’s Center in 2020.


Other practice operating costs increased salary expense associated with HLYK’sby $27,326, or 5%, in 2020 primarily as a result of the addition of BTG as a new practice at the beginning of 2020, offset by lower NWC practice operating costs resulting from cost reduction efforts.

Medicare shared savings expenses increased by $759,848, or 100%, in 2020. Medicare shared savings expenses represent costs incurred to deliver Medicare shared savings revenue, including overhead and formationconsulting fees related to advising participating physician practices, as well as the physicians’ contractual portion of any shared savings received by the HLYK sales team.ACO. There was no corresponding Medicare shared savings expense in 2019 as CHM was acquired in May 2020.

 

General and administrative costs decreasedincreased by $32,790,$225,514, or 6%31%, in 20172020 primarily due to the one-timeincreased legal, accounting and commissionsoftware development fees incurred in 2016 in connection2020 offset by lower corporate overhead expense associated with a shift from a direct sales to an indirect sale approach for our public listing and 2016 financing transactions.Digital Healthcare segment.

 

Depreciation and amortization increased by $338,$171, or 6%1%, in 20172020 primarily as a result of new property and equipment acquisitionsadditional depreciation from assets acquired in the fourth quarter of 2016 and the first three quarters of 2017.NCFM acquisition.

 

Loss from operations increased by $59,530,$27,384, or 13%3%, in 20172020 primarily as a result of increased salaries, benefitsdue to an increase in general and overhead costs associated with preparing for product launch and initial public listing, and the impact from office closure during Hurricane Irma in September 2017,administrative expense, offset by one-time legal and commission fees incurredprofits from the ACO/MSO business acquired in 2016May 2020.

Loss on sales of marketable securities increased by $281,606, or 100%, in connection with our public listing and 2016 financing transactions.2020. Such losses arose from sales of marketable securities acquired in the August 2020 Equity Transaction at prices below the acquisition price.

 

Loss on extinguishment of debt increased by $455,903, or 9,297%, to a loss of $450,999 in 2017 arose2020 compared to a gain of $4,904 in the same period of 2019, primarily as a result of the impact of repayment and conversion of convertible notes payable. Losses (gains) on extinguishment of debt arise when the fair value consideration paid to retire a debt instrument exceeds (is less than) the carrying value of the instrument being retired, including any related derivative financial instruments such as embedded conversion features (“ECFs”). Moreover, during the first quarter of 2020 we changed from the issuance ofBlack-Scholes model to a warrantbinomial lattice model to purchase 1,000,000 shares of HLYK common stock at an exercise price of $0.30 per share issued to the holder of the $550k Note in exchange for the extension of the maturity date of the note. Becauseestimate the fair value of certain financial instruments, including derivative financial instruments associated with outstanding convertible notes retired during 2020. The change in methodology generally resulted in lower values of our ECF derivative financial instruments, which in turn resulted in higher losses on debt extinguishment when such liabilities were retired.

Losses from the warrants was greater than 10% of the presentchange in fair value of the remaining cash flows under the $550k Notedebt increased by $50,177, or 174%, in 2020. Such losses result primarily from certain convertible notes and $50k Note, the transaction wasnotes payable to related parties that, in previous periods, were extended and treated as a debtan 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 a new debt instrument, with theeach reporting period is recorded as “Change in fair value of the warrants of $290,581 recorded as a loss on debt extinguishment.debt.”

 

Financing cost arose fromdecreased by $12,009, or 100% in 2020. Financing cost arises when the issuanceinception date fair value of threeembedded conversion features on a convertible promissory notes in the third quarter of 2017 that reflected a floating conversion rate that gave rise to an ECF derivative instrument with a fair valuenote are greater than the face value of the notes. As a result, the excess of the fair value of the ECF derivative instrument over the face value of thenote. No such notes totaling $32,324 was recognized as “Loss at inception of convertible notes payable” at the time of inception of the respective notes.were issued in 2020.

 

Amortization of original issue and debt discounts decreased by $36,635,$296,912, or 37%82%, in 20172020 as a result of the end of amortization of the $550k Note and the $50k Note in July 2017. These notes were amortized from their inception in July 2016 until early July 2017 with only small amortization amounts in third quarter 2017. These charges resulted from amortization of discounts against convertible notes related to an original issuewith smaller average discount beneficial conversion feature, and warrants issued with convertible notesbalances being amortized in 2016 and 2017.

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Proceeds from settlement of lawsuit were $38,236 in 2016, resulting from a one-time settlement of an employment dispute.2020.

 

Change in fair value of derivative financial instruments was $5,412decreased by $145,889, or 92%, to $12,802 compared to gains of $158,691 in 2017 and results2019. The change is due primarily to our change on January 1, 2020 from the Black-Scholes model to a binomial lattice model to estimate the fair value of certain financial instruments, including derivative financial instruments. We believe 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. Moreover, we retired all derivative financial instruments in third quarter 2020 with the repayment of all adjustable-rate convertible notes payable that had associated embedded conversion feature derivatives.

Change in the fair value of contingent acquisition consideration was $45,996 in 2020. There was no corresponding change in the same period 2019. Fair value of contingent acquisition consideration related to our acquisition of HCFM in April 2019 and CHM in May 2020 is estimated at each reporting period using a probability-weighted discounted cash flow model.

Interest expense increased by $2,973, or 4%, as a result of slightly higher average balance on convertible notes and notes payable to related parties during 2020.

Total other expenses increased by $581,631, or 188%, in 2020 primarily as a result of losses on sales of marketable securities incurred in 2020 with no corresponding charges in 2019, higher losses on extinguishment of debt related to repayment of convertible notes payable, and lower gains on change in fair value of derivative financial instruments embedded in convertible promissory notes between inception2020 resulting from a change in estimate methodology, offset by lower amortization of such derivative instrumentsoriginal issue and the end of the period.debt discounts due to lower average debt discount balances.

 


Interest expenseNet loss increased by $13,715,$609,015, or 102%54%, in 2017 as a result of increased interest on new convertible notes issued in 2017, as well as on notes issued to DMD.

Total other expenses increased by $332,809, or 442%, in 20172020 primarily as a result of a lossan increase in general and administrative expense, losses on sales of marketable securities incurred in 2020 with no corresponding charges in 2019, and higher losses on extinguishment of debt in 2017 in the amount of $290,581 in 2017 stemming from warrants issuedrelated to extend the maturity debt on outstanding convertible promissory notes, loss at inceptionrepayment of convertible notes issued in 2017 in the amount of $32,324, as well as income of $38,236payable, offset by profits from the settlementACO/MSO business acquired in May 2020 and lower amortization of a lawsuit in 2016.original issue and debt discounts due to lower average debt discount balances.

 

Net loss increased by $392,339, or 74%, in 2017 primarily as a result of loss on extinguishment of debt in 2017, increased salaries, benefits and overhead costs associated with preparing for product launch and public listing in 2017, the impact from office closure during Hurricane Irma in September 2017, as well as amortization of debt discounts on convertible notes, and loss at inception of convertible notes issued in 2017.

Comparison of Nine Months Endedmonths ended September 30, 20172020 and 20162019

 

The following table summarizes the changes in our results of operations for the nine months ended September 30, 20172020 compared with the nine months ended September 30, 2016:2019:

 

 

Nine Months Ended

September 30,

  Change  Nine Months Ended
September 30,		  Change 
 2017  2016  $  %  2020  2019  $  % 
Patient service revenue, net $1,473,639  $1,515,293  $(41,654)  -3% $3,502,836  $2,845,941  $656,895   23%
Medicare shared savings revenue  767,744   ---   767,744   100%
Consulting revenue  268,025   ---   268,025   100%
Total revenue  4,538,605   2,845,941   1,692,664   59%
                                
Salaries and benefits  1,469,211   1,134,073   335,138   30%
Operating Expenses                
Practice salaries and benefits  1,910,897   1,762,662   148,235   8%
Other practice operating costs  1,633,380   1,287,432   345,948   27%
Medicare shared savings expenses  824,084   ---   824,084   100%
General and administrative  1,369,018   1,148,564   220,454   19%  2,116,159   2,084,630   31,529   2%
Depreciation and amortization  17,623   15,804   1,819   12%  74,811   48,345   26,466   55%
(Loss) income from operations  (1,382,213)  (783,148)  (599,065)  76%
Loss from operations  (2,020,726)  (2,337,128)  316,402   14%
                                
Other Income (Expenses)                
Loss on sales of marketable securities  (281,606)  ---   (281,606)  100%
Loss on extinguishment of debt  (290,581)  ---   (290,581)  100%  (1,347,371)  (62,459)  (1,284,912)  -2057%
Change in fair value of debt  (198,764)  (88,991)  (109,773)  -123%
Financing cost  (32,324)  ---   (32,324)  100%  ---   (133,244)  133,244   100%
Amortization of original issue and debt discounts on notes payable and convertible notes  (194,120)  (100,187)  (93,933)  94%  (530,930)  (841,725)  310,795   37%
Proceeds from settlement of lawsuit  ---   38,236   (38,236)  -100%
Change in fair value of derivative financial instruments  5,412   ---   5,412   100%  739,485   574,205   165,280   -29%
Change in fair value of contingent acquisition consideration  687   ---   687   -100%
Interest expense  (64,921)  (24,391)  (40,530)  166%  (193,134)  (176,229)  (16,905)  -10%
Total other expenses  (576,534)  (86,342)  (490,192)  568%  (1,811,633)  (728,443)  (1,083,190)  -149%
                                
Net loss $(1,958,747) $(869,490) $(1,089,257)  125% $(3,832,359) $(3,065,571) $(766,788)  -25%

 

Patient service revenue decreasedincreased by $41,654,$656,895, or 3%23%, from 20162019 to 2017,2020, primarily as a result of higher revenue from NCFM (which was acquired April 15, 2019 and therefore only reflected in our operating results for five-and-a-half months of the 2019 period) and revenue from BTG (which started January 9, 2020 with no corresponding revenue in 2019), offset by lower revenue from NWC.

Medicare shared savings revenue increased by $767,744, or 100% from 2019 to 2020. The primary source of revenue of CHM, which we acquired in May 2020, is 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. During September 2020, we were notified of, and received payment for, our shared savings revenue relating to program year 2019 in the amount of $767,744.


Consulting revenue increased by $268,025, or 100%, from 2019 to 2020. Consulting revenue was earned by the newly formed ACO/MSO Division comprised of the operations acquired with CHM in May 2020.

Practice salaries and benefits increased by $148,235, or 8%, in 2020 primarily as a result of primarily as a result of decreased collections on similar gross billingnew practice salary and benefits expense from the impact from office closure during Hurricane Irmainception of BTG in September 2017.2020 and a full nine months of NCFM operating costs in 2020 compared to only five-and-a-half months in 2019.

 

Salaries and benefitsOther practice operating costs increased by $335,138,$345,948, or 30%27%, in 20172020 primarily as a result of a full period of practice operating costs related to BTG and NCFM in 2020, offset by lower practice operating costs corresponding to lower revenue at NWC.

Medicare shared savings expenses increased salary expense associated with HLYK’sby $824,084, or 100%, in 2020. Medicare shared savings expenses represent costs incurred to deliver Medicare shared savings revenue, including overhead and formationconsulting fees related to advising participating physician practices, as well as the physicians’ contractual portion of any shared savings received by the HLYK sales team.ACO. There was no corresponding Medicare shared savings expense in 2019 as CHM was acquired in May 2020.

 

General and administrative costs increased by $220,454,$31,529, or 19%2%, in 20172020 primarily due primarily to the increase inincreased legal, accounting and other professional and administrative costssoftware development fees in 2020 offset by lower corporate overhead expense associated with a shift from a direct sales to an indirect sale approach for our preparation for the launch of the HealthLynked Network, as well as costs associated with our initial public listing.Digital Healthcare segment.

31

 

Depreciation and amortization increased by $1,819,$26,466, or 12%55%, in 20172020 primarily as a result of new property and equipment acquisitionsdepreciation of assets acquired in the fourth quarter of 2016 and the first three quarters of 2017.NCFM acquisition.

 

Loss from operations increaseddecreased by $599,065,$316,403, or 76%14%, in 20172020 primarily as a result of profits from the ACO/MSO business acquired in May 2020 and improved profits from the Health Services Division, offset by higher general and administrative costs.

Loss on sales of marketable securities increased salaries, benefits and overhead costs associated with HLYK’s overhead and formationby $281,606, or 100%, in 2020. Such losses arose from sales of marketable securities acquired in the HLYK sales team and initial public listing, as well asAugust 2020 Equity Transaction at prices below the impact from office closure during Hurricane Irma in September 2017.acquisition price.

 

Loss on extinguishment of debt in 2017 aroseincreased by $1,284,912, or 2,057%, primarily as a result of the impact of repayment and conversion of convertible notes payable. Losses on extinguishment of debt arise when the fair value consideration paid to retire a convertible note exceeds the carrying value of the instrument being retired, including any related derivative financial instruments such as embedded conversion features (“ECFs”). Moreover, during the first quarter of 2020 we changed from the issuance ofBlack-Scholes model to a warrantbinomial lattice model to purchase 1,000,000 shares of HLYK common stock at an exercise price of $0.30 per share issued to the holder of the $550k Note in exchange for the extension of the maturity date of the note. Becauseestimate the fair value of certain financial instruments, including derivative financial instruments associated with outstanding convertible notes retired during 2020. The change in methodology generally resulted in lower values of our ECF derivative financial instruments, which in turn resulted in higher losses on debt extinguishment when such liabilities were retired.

Losses from the warrants was greater than 10% of the presentchange in fair value of the remaining cash flows under the $550k Notedebt increased by $109,773, or 123%, in 2020. Such gains and $50k Note, the transaction waslosses result from certain convertible notes and notes payable to related parties that, in previous periods, were extended and treated as a debtan 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 a new debt instrument, with theeach reporting period is recorded as “Change in fair value of the warrants of $290,581 recorded as a loss on debt extinguishment.debt.”

 

Financing cost arose fromdecreased by $133,244, or 100% in 2020. Financing cost arises when the issuanceinception date fair value of threeembedded conversion features on a convertible promissory notes in the third quarter of 2017 that reflected a floating conversion rate that gave rise to an ECF derivative instrument with a fair valuenote are greater than the face value of the notes. As a result, the excess of the fair value of the ECF derivative instrument over the face value of thenote. No such notes totaling $32,324 was recognized as “Loss at inception of convertible notes payable” at the time of inception of the respective notes.were issued in 2020.

 

Amortization of original issue and debt discounts increaseddecreased by $93,933,$310,795, or 94%37%, in 20172020 as a result of the amortization of newconvertible notes issuedwith smaller average discount balances being amortized in 2017.2020.

 

Proceeds from settlement of lawsuit were $38,236 in 2016, resulting from a one-time settlement of an employment dispute.

Change in fair value of derivative financial instruments was $5,412 in 2017 and resultsGains from the change in fair value of derivative financial instruments embeddedincreased by $165,280, or 29%. The change is due primarily to our change on January 1, 2020 from the Black-Scholes model to a binomial lattice model to estimate the fair value of certain financial instruments, including derivative financial instruments. We believe that the binomial lattice model results in convertible promissory notes between inceptiona 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. Moreover, we retired all derivative financial instruments in third quarter 2020 with the repayment of all adjustable-rate convertible notes payable that had associated embedded conversion feature derivatives.


Change in the fair value of contingent acquisition consideration was $687 in 2020. There was no corresponding change in the same period 2019. Fair value of contingent acquisition consideration related to our acquisition of HCFM in April 2019 and the end of the period.CHM in May 2020 is estimated at each reporting period using a probability-weighted discounted cash flow model.

 

Interest expense increased by $40,530,$16,905, or 166%10%, in 2017 as a result of increased interesthigher average balance on new convertible notes issued in 2017, as well as onand notes issuedpayable to DMD.related parties during 2020.

 

Total other expenses increased by $490,192,$1,083,190, or 568%149%, in 20172020 primarily as a result of a losshigher losses on extinguishment of debt in 2017 in the amount of $290,581 in 2017 stemming from warrants issued to extend the maturity debt on outstanding convertible promissory notes, higher amortization and interest expense related to new convertible promissory notes issued in 2017, a loss at inceptionrepayment of convertible notes issuedpayable and losses on sales of marketable securities incurred in 20172020 with no corresponding charges in the amount2019, offset by lower amortization of $32,324, as well as income of $38,236debt discounts on convertible notes payable and higher gains from the settlementchange in fair value of a lawsuit in 2016.derivative financial instruments.

 

Net loss increased by $1,089,257,$766,788, or 125%25%, in 20172020 primarily as a result of increased salaries, benefits and overhead costs associated with preparing for product launch and public listing in 2017, losshigher losses on extinguishment of debt related to repayment of convertible notes payable and losses on sales of marketable securities incurred in 2017,2020 with no corresponding charges in 2019, offset by profits from the impactACO/MSO business acquired in May 2020, improved profits from office closurethe Health Services Division, lower amortization of debt discounts on convertible notes payable and higher gains from the change in fair value of derivative financial instruments.

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 Hurricane Irmathe 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, 2019, for which we received notification and payment in September 2017, as well as higher amortization2020, 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 interestfourth fiscal quarters. Likewise, in the period in which we recognize Medicare shared savings revenue, we also determine the amount of shared savings expense related to new convertible promissory notes issuedbe paid to physicians participating in 2017.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

 

Going Concern

 

As of September 30, 2017, the Company2020, we had a working capital deficit of $1,536,307$1,979,983 and accumulated deficit $4,082,966.$19,862,013. For the nine months ended September 30, 2017, the Company2020, we had a net loss of $1,958,747$3,896,221 and net cash used by operating activities of $1,131,324.$1,094,495. Net cash used inprovided by investing activities was $13,238.$2,425,870, including $2,740,806 received from the sale of marketable securities received in an August 2020 financing transaction. Net cash provided by financing activities was $1,102,021,$271,308, resulting principally from $548,356 from the proceeds of the sale of 4,469,514 shares of common stock, $308,470$1,045,669 proceeds from related party loans and $229,500grants issued by the federal government under the Payroll Protection Act, $827,500 net proceeds from the issuance of convertible notes. Subsequent to September 30, 2017, the Company received additional $150,000 netnotes, and $149,000 proceeds from the saleissuance of a convertible promissory note and $200,000 from the sale of 1,000,000 common shares with an attached five-year warrant to purchase 666,666 shares of the Company’s common stock at an exercise price of $0.30 per share.related party loans.

 

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

 

32

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


A novel strain of coronavirus, COVID-19, that was first identified in China in December 2019, has surfaced in several regions across the world and resulted in travel restrictions and business slowdowns or shutdowns in affected areas. The further spread of COVID-19, and the requirement to take action to limit the spread of the illness, may impact our ability to carry out our business as usual and may materially adversely impact global economic conditions, our business and financial condition, including our potential to conduct financings on terms acceptable to us, if at all. The extent to which COVID-19 may impact our business will depend on future developments, which are highly uncertain and cannot be predicted with confidence, such as the ultimate geographic spread of the disease, the duration of the outbreak, travel restrictions and social distancing in the United States and other countries, business closures or business disruptions and the effectiveness of actions taken in the United States and other countries to contain and treat the disease. 

 

During the year ended December 31,In July 2016, HLYK (i) received proceeds of $374,000 from the sale of 6,167,500 shares of common stock, (ii) received net proceeds of $475,000 from the issuance of convertible promissory notes with a combined face value of $600,000, and (iii)we entered into an Investment Agreement (the “Investment Agreement”) with Iconic Holdings, LLC (the “Investor”), pursuant to which the investor hasInvestor agreed to purchase up to $3,000,000 of HLYKour common stock over a three-year period starting upon registration of the underlying shares, with such shares put to the investorInvestor by the Companyus pursuant to a specified formula that limits the number of shares able to be put to the investorInvestor to the number equal to the average trading volume of the Company’sour 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 an additional two years to May 15, 2022. During the nine months ended September 30, 2017, the Company2020 and 2019, we received $15,356$426,299 and $825,616, respectively, from the proceeds of the sale of 57,0164,975,491 and 4,273,779 shares, respectively, pursuant to the Investment Agreement.

 

The Company intendsWe intend that the cost of completing additional intended acquisitions, implementing itsour development and sales efforts related to the HealthLynked Network, as well as maintaining its existing and expanding overhead and administrative costs, and repaying outstanding convertible notes, which have an aggregate face value of $1,038,500 as of September 30, 2020, will be funded principallyfinanced from (i) profits generated by cash received by the Company fromNCFM, CHM and AHP and MOD, which was acquired in October 2020, and (ii) outside funding sources, including the put rights associated with the Investment Agreement, sales of common stock, government loans and supplemented by other funding mechanisms, including loans from related parties andissuance of additional convertible notes. The Company expects to repay its outstanding convertible notes – of which $111,000 face value matures on January 22, 2018, $53,000 on April 15, 2018, $35,000 on June 15, 2018, $550,000 on July 7, 2018, and $50,000 on July 11, 2018, and $55,000 on September 11, 2018 – from outside funding sources, including but not limited to amounts available upon the exercise of the put rights granted to the Company under the Investment Agreement, sales of equity, loans from related parties and others or through the conversion of the notes into equity. No assurances can be given that the Company will be able to access sufficient outside capital in a timely fashion in order to repay the convertible notes before they mature. If necessary funds are not available, the Company’s business and operations would be materially adversely affected and in such event, the Company would attempt to reduce costs and adjust its business plan.

 

Significant Liquidity Events

 

Through September 30, 2017,2020, we have funded our operations principally through a combination of related party debt andconvertible promissory notes, private placements of our common stock, promissory notes and related party debt, as described below.

August 2019 Equity Transaction

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. During the nine months ended September 30, 2020, we sold 74,900 of the NEO Shares and received proceeds of $2,740,806. As of September 30, 2020, the Company held 1,126 NEO Shares with a fair value of $44,477.


Investment Agreement

 

On July 7, 2016, we entered into three financing transactions as described below.the Investment Agreement with the Investor pursuant to which it agreed to invest up to $3,000,000 to purchase the Company’s common stock, par value of $.0001 per share. The transactions closedpurchase price for such shares shall be 80% of the lowest volume weighted average price of our common stock during the five consecutive trading days prior to the date on July 11, 2016.

●First, we entered into the Investment Agreement with an accredited investor pursuant to which an accredited investor agreed to invest up to $3,000,000 to purchase the Company’s common stock, par value of $.0001 per share. The purchase price for such shares shall be 80% of the lowest volume weighted average price of our common stock during the five consecutive trading days prior to the date on which written notice is sent by us to the investor stating the number of shares that the Company is selling to the investor, subject to certain discounts and adjustments. Further, pursuant to an Amended Investment Agreement dated March 22, 2017, we granted to the investorwhich written notice is sent by us to the Investor stating the number of shares that the Company is selling to the Investor, subject to certain discounts and adjustments. Further, pursuant to an Amended Investment Agreement dated March 22, 2017, we granted to the Investor warrants to purchase an aggregate of seven (7) million shares of common stock with the following fixed exercise prices: (i) four million shares at $0.25 per share; (ii) two million shares at $0.50 per share; and (iii) one million shares at $1.00 per share. The warrants also contain a “cashless exercise” provision and the shares underlying the warrants will not be registered.

●Second, we entered into a 6% fixed convertible secured promissory note with an investor with a face value of $550,000. The $550k Note is convertible into shares of the Company’s common stock at the discretion of the note holder at a fixed price of $0.08 per share, and is secured by all of the Company’s assets. The Company received $500,000 net proceeds from the note after a $50,000 original issue discount. The investors were also granted a five-year warrant to purchase 6,111,111 shares of the Company’s common stock at an exercise price of $0.09 per share. The $550k Note was originally scheduled to mature on April 11, 2017. In February 2017, the holder of the $550k Note agreed to extend the maturity date first until July 7, 2017 in exchange for a five-year warrant to purchase 500,000 shares of common stock at an exercise price of $0.15 per share and, most recently, until July 7, 2018 (as well as extend the maturity date of the $50k Note to July 11, 2018) in exchange for a five-year warrant to purchase 1,000,000 shares of common stock at an exercise price of $0.30 per share.

●Third, we entered into a 10% fixed convertible commitment fee promissory note with an investor with a face value of $50,000 maturing on July 11, 2017. The $50k note was issued as a commitment fee payable to the investor in exchange for the investor’s commitment to enter into the $3,000,000 purchase described above, subject to registration of the shares underlying the commitment. The $50k Note is convertible into shares of the Company’s common stock at the discretion of the note holder at a fixed price of $0.10 per share. The embedded conversion feature did not have any intrinsic value at issuance. On August 8, 2017, the holder of the Note agreed to extend the maturity date until July 11, 2018 (as well as extend the maturity date of the $550k Note to July 7, 2018) in exchange for a five-year warrant to purchase 1,000,000 shares of common stock at an exercise price of $0.30 per share.

33

On May 22, 2017, we entered into a 10% fixed convertible secured promissory note with an investor with a face value of $111,000. The $111k Note matures on January 22, 2018. The $111k Note is convertible into shares of the Company’s common stock at the discretion of the note holder at a fixed price of $0.35 per share, and is secured by all of the Company’s assets. The Company received $100,000 net proceeds from the note after an $11,000 original issue discount. At inception, the investors were also granted a five-year warrant to purchase 133,333 shares of the Company’s common stock at an exercise price of $0.75 per share.

During the three months ended September 30, 2017, we entered into a three separate floating conversion rate convertible secured promissory notes with a combined face value of $143,000, from which we received net proceeds of $129,500.

During 2016, we also sold 6,167,500 shares of common stock in private placement transactions, generating aggregate proceeds of $374,000. During the nine months ended September 30, 2017,2020 and years ended December 31, 2019 and 2018, we received an additional $533,000proceeds from the sale of 4,412,498shares pursuant to the Investment Agreement totaling $426,299 (4,975,491 shares), $929,986 (5,074,068 shares) and $440,523 (2,440,337 shares), respectively. During May 2020, the Investment Agreement was extended by two years and now expires on May 15, 2022.

Other Sales of Common Stock

During the nine months ended September 30, 2020, we sold 6,650,843 shares of our common stock in 20 separate private placement transactions. Duringtransactions and received $673,001 in proceeds from the third quarter of 2017 we also made our first draws on our $3,000,000 Investment Agreement totaling $15,356. Finally, we during 2017 we have borrowed $308,500 from our CEO Dr. Dent under 11 separate unsecured promissory notes.sales.

 

During the nine months ended September 30, 2019, we sold 1,550,001 shares of common stock in three separate private placement transactions and received $415,000 in proceeds from the sales.

Convertible Notes Payable

As of September 30, 2020, we had outstanding convertible notes payable with aggregate face value of $1,038,500 maturing on December 31, 2020, as follows:

     Interest  Price/   
  Face Value  Rate  Discount  Maturity
$550k Note - July 2016 $550,000   6% $0.08  December 31, 2020
$50k Note - July 2016  50,000   10% $0.10  December 31, 2020
$111k Note - May 2017  81,000   10% $0.35  December 31, 2020
$357.5k Note - April 2019  357,500   10% $0.20  December 31, 2020
  $1,038,500           

Plan of operation and future funding requirements

 

Our plan of operations is to profitably operate NWCour 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”, which enables patients and doctors to keep track of medical information via the Internet in a cloud based system.Network.”

 

During June 2017, we began a test-launch of the HealthLynked Network in three test markets in Florida, which continued through the third quarter of 2017. We intend to market the HealthLynked Network via direct sales force targeting physicians’ offices, direct to patient marketing, affiliated marketing campaigns, co-marketing with online medical supplies retailer MedOfficeDirect,MedOffice Direct, and expanded southeast regional sales efforts. We intend that our initial primary sales strategy will be direct physician sales through the use of regional sales representatives whom we will hire as access to capital allows. In combination with our direct sales, we intend to also utilize Internet based marketing to increase penetration to targeted geographical areas. These campaigns will be focused on both physician providers and patient members.

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.

 

WeA 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 the July 2018 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, the Company acquired MOD, a virtual distributor of discounted medical supplies selling to both consumers and medical practices throughout the United States, in exchange for 19,045,563 restricted shares of the Company’s common stock valued at to $2,704,470, the issuance of an aggregate of up to 10,004,749 restricted shares of 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.

Currently, we are focusing on acquiring additional profitable ACOs with a concentration on physician-based ACOs in Florida, the Southeast, Texas, New York and Michigan. 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 we will need an additional $375,000 in eachthe ACO acquisition model can help us expand both physician and patient utilization of the fourth quarter of 2017HealthLynked Network while continuing to add incremental revenue and first, secondprofit from to our health services and third quarters of 2018 to properly execute our business plan. We anticipate that approximately 50% of this amount will be used for sales and marketing related costs and the remainder for executive compensation, IT expenses and legal and accounting expenses related to being a public company.ACO segments.

 

We intend that the costplan to raise additional capital to fund our ongoing acquisition strategy. In addition, during 2019 we extended a significant portion of implementing our development and sales efforts related to the HealthLynked Network, as well as maintaining our existing and expanding overhead and administrative costs, will be funded principally by cash received by us from the put rights associated with the $3,000,000 Investment Agreement. We expect to repay outstanding debt until December 31, 2020, including convertible notes from outside funding sources, including but not limited to amounts available uponpayable held by the exerciseInvestor with an aggregate face value of the put rights granted to us under the Investment Agreement, sales of our equity, loans from related parties and others and the conversion of their notes to equity. No assurances can be given that we will be able to access sufficient outside capital in a timely fashion in order to repay the convertible notes before they mature. In order to access cash available under the Investment Agreement, our common stock must be listed on a recognized stock exchange or market and the shares underlying the arrangement must be subject to an effective registration statement. On May 10, 2017, our stock began trading on the OTCQB, which qualifies as a recognized stock exchange or market pursuant to the terms of the Investment Agreement, under the symbol “HLYK.” Although we have met the requirements to utilize the funds available under the Investment Agreement, there can be no assurances that we will be able to continue to meet these requirements. Additionally, the amount available to us upon the exercise of the put rights granted to us under the Investment Agreement is dependent upon the trading volume of our stock. Between May 22, 2017 and September 30, 2017, our daily trading volume averaged only about 6,800 shares per day. Until our stock reaches more substantial volumes, the amounts available to us upon the exercise of the put rights granted to us under the Investment Agreement will not be sufficient to meet our capital requirements. If we are unable to access sufficient funds upon the exercise of the put rights granted to us under the Investment Agreement, then we will be required to seek alternative financing including additional equity and debt financing similar to what we have raised to date. There can be no assurances that such alternative financing sources will be available. 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.$1,038,500.

 

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Historical Cash Flows

 

 Nine Months Ended September 30,  Nine Months Ended
September 30,		 
 2017  2016  2020  2019 
Net cash (used in) provided by:          
Operating activities $(1,131,324) $(496,441) $(1,094,495) $(1,728,934)
Investing Activities  (13,238)  (12,611)  2,425,870   (475,056)
Financing activities  1,102,021   803,486   271,308   2,170,624 
Net increase (decrease) in cash $(42,541) $294,434  $1,602,683  $(33,366)

 

Operating Activities– During the nine months ended September 30, 2017,2020, we used cash from operating activities of $1,131,324,$1,094,495, as compared with $496,441$1,728,934 in the same period of 2016.2019. The increaseddecrease in cash usage results from higher losses resulting primarily from increased salariesprofits generated by our ACO/MSO business, NCFM and benefits, as well an increaseBTG in sales, legal, accounting and other overhead costs associated with preparing for product launch and public listing in 2017.2020.

 

Investing Activities – Our business is not capital intensive, and as such cash flows from investing activities are minimal in each period. Capital expenditures of $13,238 inDuring the nine months ended September 30, 20172020, 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 $12,611 inCHM and $13,541 for the nine months ended September 30, 2016 are comprised solelyacquisition of computer equipmentcomputers and furniture.equipment. During the same period of 2019, we used $465,000 for the acquisition of HCFM (net of $35,000 cash received) and $10,056 for the acquisition of computers and equipment.

 

Financing Activities– During the nine months ended September 30, 2017,2020 and 2019, we realized $548,356$3,012,114 and $42,170,624, respectively, in investing activities. 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 sales of our common stock, $308,470 from related partygovernment loans, $229,500$827,500 from the issuance of convertible notes, payable, and $75,010 from the issuance of notes payable. We also made repayments on loans$149,000 from related party loans in the amountand. We also repaid $1,882,405 of $11,192, paid capital lease obligationsconvertible loans and $967,756 of $13,761, and repaid notes payable in the amount of $34,362.related party loans. During the nine months ended September 30, 2016,2019, we receivedrealized $1,240,616 from the proceeds of $475,000the sale of shares of common stock to investors and pursuant to the Investment Agreement and $1,540,000 net proceeds from the issuance of convertible promissory notes, $374,000 from the salewhile repaying $608,992 of common stock and $176,500 from related party loans. We also made repayments of $123,273 against related party loans, $84,980 against bank loans payable, and $13,761 against capital lease obligations. Since September 30, 2017 the company raised $400,000 in addition capital.convertible notes.

 

Exercise of Warrants and Options

There were no proceeds generated from the exercise of warrants or options during the nine months ended September 30, 2017.

Other Outstanding Obligations at September 30, 2017

Warrants

As of September 30, 2017, 19,566,389 shares of our Common Stock are issuable pursuant to the exercise of warrants with exercise prices ranging from $0.05 to $1.00.

Options

As of September 30, 2017, 2,349,996 shares of our Common Stock are issuable pursuant to the exercise of options with exercise prices ranging from $0.08 to $0.20.

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.

 

35

Contractual Obligations

Our contractual obligations as of September 30, 2017 were as follows:

  Operating  Capital  Total 
  Leases  Leases  Commitments 
2017 (October to December) $72,227  $4,587  $76,814 
2018  281,460   18,348   299,808 
2019  273,856   18,348   292,204 
2020  162,055   3,058   165,113 
2021  ---   ---   --- 
             
Total $789,598  $44,341  $833,939 

Operating lease commitments relate to three leases in Naples, Florida. First, the Company entered into an operating lease for its main office in Naples, Florida. The lease commenced on August 1, 2013 and expires July 31, 2020. The lease is for a 6901 square-foot space. The base rent for the first full year of the lease term is $251,287 per annum with increases during the period. Second, the Company entered into another operating lease in the same building for an additional 361 square feet space for use of the medical equipment for the same period. The base rent for the first full year of the lease term is $13,140 per annum. Third, the Company entered into an agreement with MOD pursuant to which the Company will pay rent to MOD in the amount of $2,040 per month for office space in MOD’s facility used by the Company and its employees. The agreement is effective from January 1, 2017 through July 31, 2018.

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

Item 3. Quantitative and qualitative disclosuresQualitative Disclosures about market riskMarket Risk

 

Pursuant to Item 305(e) of Regulation S-K (§229.305(e)), theThe Company is not required to provide the information required by this Item as it is a “smaller reporting company,” as defined byin Rule 229.10(f)(1).

 

Item 4. Controls and Procedures

 

Evaluation of Disclosure Controls and Procedures

 

AsWe maintain disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) promulgated under the Securities Exchange Act of September 30, 2017,1934, 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, assessedincluding 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 internal control over financial reporting as of September 30, 2020 based on the criteria for effective internal control over financial reporting establishedframework in Internal Control--Integrated Framework“Internal Control – Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) and SEC guidance on conducting such assessments.(COSO) in 2013. Based on that evaluation, theyour management concluded that during the period covered by this report, such internal controls and procedures were not effective to detect the inappropriate application of US GAAP rules as more fully described below. This was due to deficiencies that existed in the design or operation of our internal controlscontrol over financial reporting that adversely affected our internal controls and that may be considered to be material weaknesses.was effective at September 30, 2020.

 

The material weaknesses consist of controls associated with segregation of duties and a lack of written policies and procedures for internal controls. To address the material weaknesses, we performed additional analyses and other post-closing procedures to ensure that our condensed consolidated financial statements were prepared in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP).

Management believes that the material weaknesses set forth above did not have an effect on our financial results. However, management believes that the lack of a majority of outside directors on our board of directors results in ineffective oversight in the establishment and monitoring of required internal controls and procedures, which could result in a material misstatement in our financial statements in future periods.

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 Securities Exchange Act of 1934)Act) during the three and nine monthsfiscal quarter ended September 30, 20172020 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

 

36


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

On July 20, 2020, Empery Asset Master Ltd., Empery Tax Efficient, LP and Empery Tax Efficient II, LP, (the “Complainants”) filed a complaint against the Company in the aggregate,Supreme Court of the State of New York. The Complaint alleges that the Company’s acquisition of CHM, in which the Company issued stock consideration of 2,240,838 common shares, triggered a change of control clause in warrants held by the Complainants that would allow the Complainants to demand cash value for their warrants. The Company believes that the asserted claims lack merit and intends to defend against all of the claims vigorously. Due to the inherent uncertainties of litigation, the Company cannot predict the outcome of the actions at this time and can give no assurance that the asserted claims will not have a material adverse effect on our business,its financial conditionposition or operating results.results of operations. The Company has responded to the Complaint but discovery has not yet commenced as of the date of this filing

On August 24, 2020, the Company entered into a settlement agreement in response to a complaint filed by Delaney Equity Group LLC seeking unpaid fees from a 2015 Advisor, Consulting and Investment Banking Agreement. Pursuant to the terms of the settlement, the Company agreed to make cash payments totaling $75,000 over a six-month period. If the payments are not made in full and timely, the amount due increases to $112,500.

 

Item 1A. Risk Factors

During the period presented in this report, we have identified the material changes to our risk factors listed below as a result of our acquisition of CHM.

The Affordable Care Act, or ACA, and subsequent rules promulgated by CMS, including any repeal, replacement or modification to the ACA, could have a material adverse effect on our business and financial results.

 

The CompanyACA was signed into law in March 2010 and legislated broad-based changes to the U.S. health care system which continue to have a material impact on our business. There is not required to provideconsiderable discussion within the information required bynew Presidential administration and Congress about repealing and replacing the ACA. At this Item astime, it is uncertain whether, when, and what changes will be made to the ACA, and what impact such changes could have on our business. However, any changes to the ACA, including through any repeal and replacement to the ACA, could have a “smaller reporting company,” as definedmaterial adverse effect on our business, financial position and results of operations.

Under the MSSP, CMS has historically made payments to ACOs for a measurement year in the second half of the following year, which negatively impacts our cash flows. In order to receive revenues from CMS under the MSSP, the ACO must meet certain minimum savings rates (i.e. save the federal government money) and meet certain quality measures. More specifically, an ACO’s medical expenses for its assigned beneficiaries during a relevant measurement year must be below the benchmark established by Rule 229.10(f)(1).CMS for such ACO. Notwithstanding our efforts, our ACO may be unable to meet the required savings rates or may not satisfy the quality measures, which may result in our receiving no revenues and losing our investment in the acquisition and operation of CMS and AHP. In addition, the MSSP presents challenges and risks associated with the timeliness and accuracy of data and interpretation of complex rules, which may impact the timing and amount of revenue we can recognize and could have a material adverse effect on our ability to recoup any of our investment in this new business. Further, there can be no assurance that we will maintain positive relations with our ACO partners which may result in certain of the ACOs terminating our relationship, which could result in a potential loss of our investment. We continue to evaluate our ACO based on a variety of factors, including the level of commitment by the physicians in the ACO and the likelihood of the ACO achieving shared savings.


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.

 

On August 20, 2020, we entered into the Contribution Agreement with the Trusts and Michael T. Dent, the Chief Executive Officer and Chairman of the board of directors of the Company. Pursuant to the Contribution Agreement, the Trusts contributed an aggregate of 76,026 shares of common stock of NeoGenomics, Inc. with a fair value of $3,066,889 to the Company. In consideration for the foregoing, we issued the Trusts an aggregate of 2,750,000 shares of newly designated Series B Preferred Stock and an aggregate of 24,522,727 shares of common stock.

During July 2017, the Companythree months ended September 30, 2020, we sold 45,8332,624,202 shares of common stock in 9 separate private placement transactions and received $214,500 in proceeds from the sales. The shares were issued at per share prices between $0.06 and $0.17. In connection with the stock sales, we also issued 1,312,100 five-year warrants to purchase shares of common stock at exercise price between $0.16 and $0.27 per share.

During the three months ended September 30, 2020, we issued 2,855,191 shares of common stock upon the full or partial conversion of a convertible note payable. The shares retired $142,500 of convertible note payable principal and $14,250 of accrued interest.

During the three months ended September 30, 2020, we issued 731,471 shares of common stock to two separate consultants for services provided.

During the three investors. The Company received $13,000months ended September 30, 2020, we issued 1,835,626 shares of common stock to the selling shareholders of CHM in proceeds from the sale. The shares were issued at a share pricesatisfaction of $0.20 per share with respectcontingent acquisition consideration related to 27,500 shares and at $0.30 per share with respect to 38,333 shares.earnout payments.

 

The sales of the above securities were exempt from registration under the Securities Act in reliance upon Section 4(2)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.

 

37

Item 6. Exhibits

 

Exhibit No. Exhibit Description
10.13.1 FormArticles of Subscription Agreement
10.2Fixed Convertible Promissory Note with Iconic Holdings LLCIncorporation (Filed as Exhibit 10.13.1 to the Company’s Draft Registration Statement on Form S-1 filed with the Commission on January 9, 2017)
3.2Amended and Restated Articles of Incorporation (Filed as Exhibit 3.2 to the Company’s Draft Registration Statement on Form S-1 filed with the Commission on January 9, 2017)
3.3By-Laws (Filed as Exhibit 3.3 to the Company’s Draft Registration Statement on Form S-1 filed with the Commission on January 9, 2017)
3.4Certificate of Designation of Series A Convertible Preferred Stock (Filed as Exhibit 3.4 to the Company’s Draft Registration Statement on Form S-1 filed with the Commission on January 9, 2017)
3.5Certificate of Amended to Articles of Incorporation (Filed as Exhibit 3.1 to the Company’s Current Report on Form 8-K filed with the Commission on May 25, 2017)February 6, 2018)
10.33.6 FormCertificate of Warrant Issued to Iconic Holdings LLCDesignation of Series B Convertible Preferred Stock (Filed as Exhibit 10.23.1 to the Company’s Current Report on Form 8-K filed with the Commission on May 25, 2017)
10.4Amendment No. 1 to Security Agreement with Iconic Holdings LLC (Filed as Exhibit 10.3 to the Company’s Current Report on Form 8-K filed with the Commission on May 25, 2017)
10.5Amendment No. 1 to Subsidiary Guarantee with Iconic Holdings LLC (Filed as Exhibit 10.4 to the Company’s Current Report on Form 8-K filed with the Commission on May 25, 2017)
10.6Amendment No. 1 to Intellectual Property Security Agreement with Iconic Holdings LLC (Filed as Exhibit 10.5 to the Company’s Current Report on Form 8-K filed with the Commission on May 25, 2017)
10.7Unsecured Promissory Note with Dr. Michael Dent (Filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Commission on June 21, 2017)
10.8Securities Purchase Agreement with Power Up Lending Group, Ltd. (Filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Commission on July 17, 2017)
10.9Convertible Promissory Note with Power Up Lending Group, Ltd. (Filed as Exhibit 10.2 to the Company’s Current Report on Form 8-K filed with the Commission on July 17, 2017)
10.10Form of Amendment #2, dated August 8, 2017, by and between HealthLynked and Iconic Holdings, LLC (Filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Commission on August 11, 2017)26, 2020)
10.1110.1 FormContribution Agreement by and among the Company, The Michael T. Dent, Trustee of Common Stock Purchase Warrant,the Mary S. Dent Gifting Trust dated January 31, 2006, Michael Thomas Dent, Trustee under the Michael Thomas Dent Declaration of Trust dated March 23, 1998, as amended, and Michael T. Dent dated August 8, 2017, by and between HealthLynked Corp., and Iconic Holdings, LLC20, 2020 (Filed as Exhibit 10.210.1 to the Company’s Current Report on Form 8-K filed with the Commission on August 11, 2017)26, 2020)
10.1210.2 Securities Purchase Agreement with Power Up Lending Group, Ltd.and Plan of Merger (Filed as Exhibit 10.12.1 to the Company’s Current Report on Form 8-K filed with the Commission on September 15, 2017)
10.13Convertible Promissory Note with Power Up Lending Group, Ltd. (Filed as Exhibit 10.2 to the Company’s Current Report on Form 8-K filed with the Commission on September 15, 2017)
10.14Securities Purchase Agreement with Crown Bridge Partners LLC (Filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Commission on September 21, 2017)
10.15Convertible Promissory Note with Crown Bridge Partners LLC (Filed as Exhibit 10.2 to the Company’s Current Report on Form 8-K filed with the Commission on September 21, 2017)
10.16Securities Purchase Agreement with PULG (Filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Commission on October 27, 2017)21, 2020)
10.1731.1*Convertible Promissory Note with PULG (Filed as Exhibit 10.2 to the Company’s Current Report on Form 8-K filed with the Commission on October 27, 2017)
10.18Securities Purchase Agreement (Filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Commission on November 3, 2017)
10.19Convertible Promissory Note (Filed as Exhibit 10.2 to the Company’s Current Report on Form 8-K filed with the Commission on November 3, 2017)
10.20Form of Subscription Agreement (Filed as Exhibit 10.3 to the Company’s Current Report on Form 8-K filed with the Commission on November 3, 2017)
10.21Form of Warrant Agreement (Filed as Exhibit 10.4 to the Company’s Current Report on Form 8-K filed with the Commission on November 3, 2017)
31.1Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 of the Principal Executive Officer.Officer
31.231.2*Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 of the Principal Financial Officer and Principal Accounting Officer.Officer
32.132.1*Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 of the Principal Executive Officer
32.232.2*Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 of the Principal Financial Officer and Principal Accounting Officer
101101*XBRL Instance Document
  XBRL Taxonomy Extension Schema Document
  XBRL Taxonomy Extension Calculation Linkbase Document
  XBRL Taxonomy Extension Definition Linkbase Document
  XBRL Taxonomy Extension Label Linkbase Document
  XBRL Taxonomy Extension Presentation Linkbase Document

 

*38Filed herewith.

 


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 14, 201716, 2020

 

 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)

 

39

 

58