10-Q 1 f10q0923_healthlynked.htm QUARTERLY REPORT

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10–Q

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended September 30, 2023

 

or

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from [               ] to [                ]

 

Commission file number: 000-55768

 

HealthLynked Corp.
(Exact name of registrant as specified in its charter)
     
Nevada   47-1634127
(State or other jurisdiction of
incorporation or organization)
  (I.R.S. Employer
Identification No.)
     
1265 Creekside Parkway, Suite 302, Naples FL 34108
(Address of principal executive offices)
 
(800) 928-7144
(Registrant’s telephone number, including area code)
 
 
(Former name, former address and former fiscal year, if changed since last report)

 

Securities registered pursuant to Section 12(b) of the Act: None.

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes ☒  No ☐

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes ☒  No ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer ☐  Accelerated filer ☐ 
Non-accelerated filer ☒  Smaller reporting company  
    Emerging growth company  

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐  No

 

As of November 14, 2023, there were 267,428,633 shares of the issuer’s common stock, par value $0.0001, outstanding.

 

 

 

 

 

TABLE OF CONTENTS

 

    PAGE NO.
     
PART I FINANCIAL INFORMATION 1
Item 1 Financial Statements (Unaudited) 1
Item 2 Management’s Discussion and Analysis of Financial Condition and Results of Operations 40
Item 3 Quantitative and Qualitative Disclosures about Market Risk 50
Item 4 Controls and Procedures 50
     
Part II OTHER INFORMATION 51
Item 1 Legal Proceedings 51
Item 1A Risk Factors 51
Item 2 Unregistered Sales of Equity Securities and Use of Proceeds 51
Item 3 Defaults upon Senior Securities 51
Item 4 Mine Safety Disclosure 51
Item 5 Other Information 51
Item 6 Exhibits 52

 

i

 

 

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

 

HEALTHLYNKED CORP.

CONDENSED CONSOLIDATED BALANCE SHEETS

 

   September 30,   December 31, 
   2023   2022 
ASSETS  (Unaudited)     
Current Assets        
Cash  $51,328   $61,891 
Earned sale consideration receivable   1,873,993    --- 
Accounts receivable, net of allowance for doubtful accounts of $-0- and $-0- as of September 30, 2023 and December 31, 2022, respectively   41,525    72,284 
Inventory, net   142,253    192,833 
Contract assets   14,583    269,736 
Prepaid expenses and other   78,391    92,940 
Current assets held for sale   ---    1,454,856 
Total Current Assets   2,202,073    2,144,540 
           
Property, plant and equipment, net of accumulated depreciation of $489,836 and $397,194 as of September 30, 2023 and December 31, 2022, respectively   321,981    413,123 
Intangible assets, net of accumulated amortization of $201,651 and $30,531 as of September 30, 2023 and December 31, 2022, respectively   940,887    1,112,007 
Goodwill   ---    319,958 
Right of use lease assets   518,819    540,181 
Deferred equity compensation and deposits   42,400    50,907 
Contingent sale consideration receivable, long term portion   1,663,163    --- 
           
Total Assets  $5,689,323   $4,580,716 
           
LIABILITIES AND SHAREHOLDERS’ EQUITY          
Current Liabilities          
Accounts payable and accrued expenses  $1,623,275   $1,602,558 
Contract liabilities   197,769    574,847 
Lease liability, current portion   230,910    344,464 
Notes payable and other amounts due to related party, net of unamortized original issue discount of $76,104 and $104,490 as of September 30, 2023 and December 31, 2022, respectively   807,576    506,110 
Notes payable, current portion, net of unamortized original issue discount of $72,200 and $37,748 as of September 30, 2023 and December 31, 2022, respectively   326,916    291,650 
Liability-classified equity instruments, current portion   30,000    30,000 
Indemnification liability   143,974    --- 
Contingent acquisition consideration, current portion   ---    100,068 
Current liabilities held for sale   ---    25,000 
Total Current Liabilities   3,360,420    3,474,697 
           
Long-Term Liabilities          
Government notes payable, long term portion   450,000    450,000 
Liability-classified equity instruments, long term portion   22,500    45,000 
Contingent acquisition consideration, long term portion   4,100    98,239 
Lease liability, long term portion   291,410    198,330 
           
Total Liabilities   4,128,430    4,266,266 
           
Commitments and contingencies (Note 15)   
 
    
 
 
           
Shareholders’ Equity          
Common stock, par value $0.0001 per share, 500,000,000 shares authorized, 265,559,110 and 255,940,389 shares issued and outstanding as of September 30, 2023 and December 31, 2022, respectively   26,556    25,594 
Series B convertible preferred stock, par value $0.001 per share, 20,000,000 shares authorized, 2,750,000 and 2,750,000 shares issued and outstanding as of September 30, 2023 and December 31, 2022, respectively   2,750    2,750 
Common stock issuable, $0.0001 par value; 3,829,082 and 2,585,542 as of September 30, 2023 and December 31, 2022, respectively   321,937    225,584 
Additional paid-in capital   41,957,027    41,081,455 
Accumulated deficit   (40,747,377)   (41,020,933)
Total Shareholders’ Equity   1,560,893    314,450 
           
Total Liabilities and Shareholders’ Equity  $5,689,323   $4,580,716 

 

See the accompanying notes to these Unaudited Condensed Consolidated Financial Statements

 

1

 

 

HEALTHLYNKED CORP.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

 

   Three Months Ended
September 30,
   Nine Months Ended
September 30,
 
   2023   2022   2023   2022 
Revenue                
Patient service revenue, net  $1,271,466   $1,262,253   $4,602,081   $4,069,714 
Subscription and event revenue   18,574    1,170    54,050    9,433 
Product revenue   42,475    95,449    135,034    372,877 
Total revenue   1,332,515    1,358,872    4,791,165    4,452,024 
                     
Operating Expenses and Costs                    
Practice salaries and benefits   772,416    810,058    2,635,065    2,344,529 
Other practice operating expenses   529,067    695,300    1,799,530    1,897,070 
Cost of product revenue   40,820    87,775    107,277    419,129 
Selling, general and administrative expenses   767,705    1,088,133    2,705,142    3,678,784 
Depreciation and amortization   87,392    209,504    263,762    622,306 
Impairment loss   319,958    ---    319,958    --- 
Total Operating Expenses and Costs   2,517,358    2,890,770    7,830,734    8,961,818 
                     
Loss from operations   (1,184,843)   (1,531,898)   (3,039,569)   (4,509,794)
                     
Other Income (Expenses)                    
Loss on extinguishment of debt   ---    ---    (88,932)   --- 
Gain from expiration of liability classified equity instruments   92,641    ---    92,641    --- 
Financing cost   ---    (110,000)   ---    (110,000)
Amortization of original issue discounts on notes payable   (132,155)   (21,020)   (324,204)   (21,020)
Gain from realization of contingent sale consideration receivable   1,075,857    ---    1,090,857    --- 
Change in fair value of contingent acquisition consideration   4,819    133,483    9,183    665,573 
Interest expense and other   (17,689)   (5,640)   (68,194)   (15,151)
Total other income (expenses)   1,023,473    (3,177)   711,351    519,402 
                     
Loss from continuing operations before provision for income taxes   (161,370)   (1,535,075)   (2,328,218)   (3,990,392)
                     
Provision for income taxes   ---    ---    ---    --- 
                     
Loss from continuing operations   (161,370)   (1,535,075)   (2,328,218)   (3,990,392)
                     
Discontinued operations (Note 4)                    
Loss from operations of discontinued operations   (13,554)   (248,726)   (72,295)   (551,353)
Gain from disposal of discontinued operations   ---    ---    2,674,069    --- 
Gain (loss) on discontinued operations   (13,554)   (248,726)   2,601,774    (551,353)
                     
Net income (loss)   (174,924)   (1,783,801)   273,556    (4,541,745)
                     
Deemed dividend - amortization of beneficial conversion feature   ---    (88,393)   ---    (265,179)
                     
Net income (loss) to common shareholders  $(174,924)  $(1,872,194)  $273,556   $(4,806,924)
                     
Loss per share from continuing operations, basic and diluted:                    
Basic  $(0.00)  $(0.01)  $(0.01)  $(0.02)
Fully diluted   (0.00)   (0.01)   (0.01)   (0.02)
                     
Gain (loss) on discontinued operations, basic and diluted:                    
Basic  $(0.00)  $(0.00)  $0.01   $(0.00)
Fully diluted   (0.00)   (0.00)   0.01    (0.00)
                     
Net income (loss) per share to common shareholders, basic and diluted:                    
Basic  $(0.00)  $(0.01)  $0.00   $(0.02)
Fully diluted   (0.00)   (0.01)   0.00    (0.02)
                     
Weighted average number of common shares:                    
Basic   265,519,460    243,355,562    260,853,370    240,006,507 
Fully diluted   265,519,460    243,355,562    260,853,370    240,006,507 

 

See the accompanying notes to these Unaudited Condensed Consolidated Financial Statements

 

2

 

 

HEALTHLYNKED CORP.

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY

NINE MONTHS ENDED SEPTEMBER 30, 2023

(UNAUDITED)

 

   Number of Shares           Common   Additional       Total 
   Common   Preferred   Common   Preferred   Stock   Paid-in   Accumulated   Shareholders’ 
   Stock   Stock   Stock   Stock   Issuable   Capital   Deficit   Equity 
   (#)   (#)   ($)   ($)   ($)   ($)   ($)   ($) 
Balance at December 31, 2022   255,940,389    2,750,000    25,594    2,750    225,584    41,081,455    (41,020,933)   314,450 
                                         
Sales of common stock pursuant to Standby Equity Purchase Agreement   225,000    ---    22    ---    ---    18,743    ---    18,765 
Other sales of common stock   2,000,000         200    
 
    ---    125,998    
 
    126,198 
Fair value of warrants allocated to proceeds of common stock   ---    ---    ---    ---    ---    73,802    ---    73,802 
Fair value of warrants allocated to proceeds of related party debt   ---    ---    ---    ---    ---    95,393    ---    95,393 
Consultant and director fees payable with common shares and warrants   ---    ---    ---    ---    54,972    
 
    ---    54,972 
Shares and options issued to employees   987,500    ---    99    ---    (34,200)   67,229    ---    33,128 
Net income   ---    ---    ---    ---    ---    ---    1,451,935    1,451,935 
                                         
Balance at March 31, 2023   259,152,889    2,750,000    25,915    2,750    246,356    41,462,620    (39,568,998)   2,168,643 
                                         
Other sales of common stock   5,416,667         542         ---    154,072         154,614 
Fair value of warrants allocated to proceeds of common stock   ---    ---    ---    ---    ---    120,386    ---    120,386 
Fair value of warrants allocated to proceeds of related party debt   ---    ---    ---    ---    ---    50,025    ---    50,025 
Consultant and director fees payable with common shares and warrants   200,000    ---    20    ---    37,236    15,380    ---    52,636 
Shares and options issued to employees   60,000    ---    6    ---         24,607    ---    24,613 
Incremental fair value of repriced warrants   ---    ---    ---    ---    ---    4,358         4,358 
Net loss   ---    ---    ---    ---    ---    ---    (1,003,455)   (1,003,455)
                                         
Balance at June 30, 2023   264,829,556    2,750,000    26,483    2,750    283,592    41,831,448    (40,572,453)   1,571,820 
                                         
Shares issued to vendors   729,554         73         ---    48,807         48,880 
Fair value of warrants allocated to proceeds of debt   ---    ---    ---    ---    ---    59,352    ---    59,352 
Consultant and director fees payable with common shares and warrants        ---         ---    38,345         ---    38,345 
Shares and options issued to employees        ---    
 
    ---         17,420    ---    17,420 
Net loss   ---    ---    ---    ---    ---    ---    (174,924)   (174,924)
                                         
Balance at September 30, 2023   265,559,110    2,750,000    26,556    2,750    321,937    41,957,027    (40,747,377)   1,560,893 

 

See the accompanying notes to these Unaudited Condensed Consolidated Financial Statements

 

3

 

 

HEALTHLYNKED CORP.

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY

NINE MONTHS ENDED SEPTEMBER 30, 2022

(UNAUDITED)

 

   Number of Shares           Common   Additional       Total 
   Common   Preferred   Common   Preferred   Stock   Paid-in   Accumulated   Shareholders’ 
   Stock   Stock   Stock   Stock   Issuable   Capital   Deficit   Equity 
   (#)   (#)   ($)   ($)   ($)   ($)   ($)   ($) 
Balance at December 31, 2021   237,893,473    2,750,000    23,789    2,750    282,347    39,100,197    (32,205,189)   7,203,894 
                                         
Consultant and director fees payable with common shares and warrants   5,250    ---    1    ---    73,470    8,044    ---    81,515 
Shares and options issued to employees   133,000    ---    13    ---    (37,777)   64,547    ---    26,783 
Exercise of stock options   1,394    ---    ---    ---    ---    ---    ---    --- 
Net loss   ---    ---    ---    ---    ---    ---    (1,168,123)   (1,168,123)
                                         
Balance at March 31, 2022   238,033,117    2,750,000    23,803    2,750    318,040    39,172,788    (33,373,312)   6,144,069 
                                         
Sales of common stock   66,667    ---    7    ---    ---    8,270    ---    8,277 
Fair value of warrants allocated to proceeds of common stock   ---    ---    ---    ---    ---    1,723    ---    1,723 
Shares issued in acquisition of AEU   871,633    ---    79    ---    ---    103,725    ---    103,804 
Consultant and director fees payable
with common shares and warrants
   79,011    ---    16    ---    58,252    47,164    ---    105,432 
Shares and options issued to employees   30,000    ---    3    ---    (31,250)   62,364    ---    31,117 
Net loss   ---    ---    ---    ---    ---    ---    (1,589,821)   (1,589,821)
                                         
Balance at June 30, 2022   239,080,428    2,750,000    23,908    2,750    345,042    39,396,034    (34,963,133)   4,804,601 
                                         
Sales of common stock pursuant to Standby Equity Purchase Agreement   2,708,100    ---    271    ---         297,134    ---    297,405 
Stock based financing fees   895,255    ---    90    ---         99,910    ---    100,000 
Other sales of common stock   4,931,818    
 
    493              405,587    
 
    406,080 
Fair value of warrants allocated to proceeds of common stock   ---    ---         ---         118,920    ---    118,920 
Consultant and director fees payable
with common shares and warrants
   142,024    ---    14    ---    43,803    49,036    ---    92,853 
Shares and options issued to employees   100,000    ---    10    ---    (43,500)   43,526    ---    36 
Net loss   ---    ---    ---    ---    ---    ---    (1,783,801)   (1,783,801)
                                         
Balance at September 30, 2022   247,857,625    2,750,000    24,786    2,750    345,345    40,410,147    (36,746,934)   4,036,094 

 

See the accompanying notes to these Unaudited Condensed Consolidated Financial Statements

 

4

 

 

HEALTHLYNKED CORP.

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

(UNAUDITED)

 

   Nine Months Ended
September 30,
 
   2023   2022 
Cash Flows from Operating Activities        
Net income (loss)  $273,556   $(4,541,745)
Loss from discontinued operations   72,295    551,353 
Adjustments to reconcile net loss to net cash used in operating activities:          
Gain from disposal of discontinued operations   (2,674,069)   
---
 
Depreciation and amortization   263,762    622,306 
Impairment loss   319,958    
---
 
Stock based compensation, including amortization of deferred equity compensation   225,472    326,485 
Gain from expiration of liability classified equity instruments   (92,641)   
---
 
Amortization of debt discount   324,204    21,020 
Stock-based financing cost   
---
    100,000 
Loss on extinguishment of debt   88,932    
---
 
Gain from realization of contingent sale consideration receivable   (1,090,857)   
---
 
Change in fair value of contingent acquisition consideration   (9,183)   (665,573)
Changes in operating assets and liabilities:          
Accounts receivable   8,252    44,938 
Inventory   50,580    (40,345)
Contract assets   255,153    
---
 
Prepaid expenses and deposits   557    35,697 
Right of use lease assets   551,736    255,632 
Accounts payable and accrued expenses   (507,408)   313,595 
Lease liability   (550,848)   (254,756)
Contract liabilities   (377,079)   (7,585)
Net cash used in continuing operating activities   (2,867,628)   (3,238,978)
Net cash used in discontinued operating activities   (84,946)   (523,666)
Net cash used in operating activities   (2,952,574)   (3,762,644)
           
Cash Flows from Investing Activities          
Acquisition, net of cash acquired   
---
    (313,802)
Payment of contingent acquisition consideration   
---
    (207,384)
Proceeds from sale of discontinued operations   2,321,381    
---
 
Acquisition of property and equipment   (1,500)   (23,564)
Net cash provided by (used in) continuing investing activities   2,319,881    (544,750)
Net cash used in discontinued investing activities   
---
    
---
 
Net cash provided by (used in) investing activities   2,319,881    (544,750)
           
Cash Flows from Financing Activities          
Proceeds from sale of common stock   475,000    706,787 
Proceeds from notes payable   1,733,750    522,500 
Repayment of notes payable   (1,586,620)   (55,379)
Net cash provided by continuing financing activities   622,130    1,173,908 
Net cash provided by discontinued financing activities   
---
    
---
 
Net cash provided by financing activities   622,130    1,173,908 
           
Net increase (decrease) in cash   (10,563)   (3,133,486)
Cash, beginning of period   61,891    3,291,646 
           
Cash, end of period  $51,328   $158,160 
Supplemental disclosure of cash flow information:          
Cash paid during the period for interest  $21,041   $2,514 
Cash paid during the period for income tax  $
---
   $
---
 
Schedule of non-cash investing and financing activities:          
Common stock issuable issued during period  $34,105   $112,528 
Net carrying value of equity liabilities (assets) written off  $12,147   $21,359 
Recognition of operating lease: right of use asset and lease liability  $296,004   $284,905 
Proceeds from sale of common stock under Standby Equity Purchase Agreement applied to note payable balance  $18,765   $125,618 
Fair value of warrants allocated to proceeds of related party debt 

$

95,393

  

$

---

 
Fair value of warrants allocated to proceeds of third party debt  $59,351   $
---
 
Fair value of warrants issued to extend related party debt  $50,025   $
---
 
Warrant liability incurred in connection with collection of contingent sale consideration receivable  $10,820   $
---
 
Fair value of shares issued to pay vendor accounts payable balance  $48,881   $
---
 
Debt discount and original issue discount allocated to proceeds of notes payable  $
---
    38,500 
Fair value of shares issued as purchase price consideration  $
---
   $103,804 
Fair value of liability-classified equity instruments cancelled (net of earned)  $12,147   $
---
 

 

See the accompanying notes to these Unaudited Condensed Consolidated Financial Statements

 

5

 

 

HEALTHLYNKED CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2023 (UNAUDITED)

 

NOTE 1 – BUSINESS AND BUSINESS PRESENTATION

 

HealthLynked Corp. (the “Company”) was incorporated in the State of Nevada on August 4, 2014. On September 2, 2014, the Company filed Amended and Restated Articles of Incorporation with the Secretary of State of Nevada setting the total number of authorized shares at 250,000,000 shares, which included up to 230,000,000 shares of common stock and 20,000,000 shares of “blank check” preferred stock. On February 5, 2018, the Company filed an Amendment to its Amended and Restated Articles of Incorporation with the Secretary of State of Nevada to increase the number of authorized shares of common stock to 500,000,000 shares.

 

The Company currently operates in three distinct divisions: the Health Services Division, the Digital Healthcare Division, and the Medical Distribution Division. The Health Services division is comprised of the operations of (i) Naples Women’s Center (“NWC”), a multi-specialty medical group including OB/GYN (both Obstetrics and Gynecology) and General Practice, (ii) Naples Center for Functional Medicine (“NCFM”), a Functional Medical Practice engaged in improving the health of its patients through individualized and integrative health care, (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, and (iv) Aesthetic Enhancements Unlimited (“AEU”), a patient service facility specializing in minimally and non-invasive cosmetic services acquired by the Company in May 2022. The Digital Healthcare division develops and operates an online personal medical information and record archive system, the “HealthLynked Network,” which enables patients and doctors to keep track of medical information via the Internet in a cloud-based system. The Medical Distribution Division is comprised of the operations of MedOffice Direct LLC (“MOD”), a virtual distributor of discounted medical supplies selling to both consumers and medical practices throughout the United States.

 

During October 2022, the Company’s Board of Directors (the “Board”) approved a plan to sell the Company’s ACO/MSO (Accountable Care Organization / Managed Service Organization) Division, comprised of the operations of Cura Health Management LLC (“CHM”) and its subsidiary ACO Health Partners LLC (“AHP”), which operates an Accountable Care Organization (“ACO”) and Managed Service Organization (“MSO”) that assists physician practices in providing coordinated and more efficient care to patients via the Medicare Shared Savings Program (“MSSP”) as administered by the Centers for Medicare and Medicaid Services (the “CMS”). On January 17, 2023, the Company entered into an Agreement and Plan of Merger (the “AHP Merger Agreement”) pursuant to which PBACO Holding, LLC, an operator of ACOs, (“Buyer”) agreed to buy, and the Company agreed to sell, AHP. See Note 4, “Discontinued Operations,” for additional information.

 

These unaudited condensed consolidated financial statements reflect all adjustments including normal recurring adjustments, which, in the opinion of management, are necessary to present fairly the financial position, results of operations and cash flows for the periods presented in accordance with the accounting principles generally accepted in the United States of America (“GAAP”). These unaudited condensed consolidated financial statements should be read in conjunction with the Company’s consolidated financial statements and notes thereto for the years ended December 31, 2022 and 2021, respectively, which are included in the Company’s Form 10-K, filed with the United States Securities and Exchange Commission (the “Commission”) on March 31, 2023. 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, 2023 are not necessarily indicative of results for the entire year ending December 31, 2023.

 

On a consolidated basis, the Company’s operations are comprised of the parent company, HealthLynked Corp., and its five subsidiaries: NWC, NCFM, BTG, MOD and AEU. Results through January 17, 2023 also include operations of AHP, which was sold, and CHM, which was discontinued, both effective as of January 17, 2023. 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.

 

Uncertainty Due to Geopolitical Events

 

Due to the Hamas-Israel and Russia-Ukraine conflicts, there has been uncertainty and disruption in the global economy. Although these events did not have a direct material adverse impact on the Company’s financial results for the three and nine months ended September 30, 2023, at this time the Company is unable to fully assess the aggregate impact the Hamas-Israel and Russia-Ukraine conflicts will have on its business due to various uncertainties, which include, but are not limited to, the duration of the conflicts, the conflicts’ effect on the economy, the impact on the Company’s businesses and actions that may be taken by governmental authorities related to the conflicts.

 

6

 

 

HEALTHLYNKED CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2023 (UNAUDITED)

 

NOTE 1 – BUSINESS AND BUSINESS PRESENTATION (CONTINUED)

 

COVID-19 Update

 

The continuing COVID-19 global pandemic has caused significant disruption to the economy and financial markets globally, and the full extent of the potential impacts of COVID-19 are not yet known. Circumstances caused by the COVID-19 pandemic are complex, and uncertain. The impact of COVID-19 has not been significant to the Company’s results of operations, financial condition, and liquidity and capital resources. Although no material impairment or other effects have been identified to date, there is substantial uncertainty in the nature and degree of its continued effects over time. That uncertainty affects management’s accounting estimates and assumptions, which could result in greater variability in a variety of areas that depend on these estimates and assumptions as additional events and information become known. The Company will continue to consider the potential impact of the COVID-19 pandemic on its business operations.

 

Our key Medical Distribution supplier is a limited- or sole-source supplier. Disruptions in deliveries, capacity constraints, production disruptions up- or down-stream, price increases, or decreased availability of raw materials or commodities, including as a result of war, natural disasters (including the effects of climate change such as sea level rise, drought, flooding, wildfires and more intense weather events), actual or threatened public health emergencies or other business continuity events, adversely affect our operations and, depending on the length and severity of the disruption, can limit our ability to meet our commitments to customers or significantly impact our operating profit or cash flows.

 

NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES

 

A summary of the significant accounting policies applied in the presentation of the accompanying consolidated financial statements follows:

 

Basis of Presentation

 

The accompanying consolidated financial statements have been prepared in conformity with GAAP. All amounts referred to in the notes to the consolidated financial statements are in United States Dollars ($) unless stated otherwise.

 

Use of Estimates

 

The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect certain reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. Accordingly, actual results could differ from those estimates. Significant estimates include assumptions about fair valuation of acquired intangible assets; cash flow and fair value assumptions associated with measurements of contingent sale consideration receivable, contingent acquisition consideration payable, and impairment of intangible assets and goodwill; valuation of inventory; collection of accounts receivable; the valuation and recognition of stock-based compensation expense; valuation allowance for deferred tax assets; and borrowing rate consideration for right-of-use (“ROU”) lease assets including related lease liability and useful life of fixed assets.

 

Revenue Recognition

 

Patient service revenue

 

Patient service revenue is earned for patient services provided to patients at our NWC facility, functional medicine services provided to patients at our NCFM facility, and physical therapy services provided to patients at our BTG facility. Patient service revenue is reported at the amount that reflects the consideration to which the Company expects to be entitled in exchange for providing patient care. These amounts are due from patients and third-party payors (including health insurers and government programs) and include variable consideration for retroactive revenue adjustments due to settlement of audits, reviews, and investigations. Generally, the Company bills patients and third-party payors within days after the services are performed and/or the patient is discharged from the facility. Revenue is recognized as performance obligations are satisfied.

 

7

 

 

HEALTHLYNKED CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2023 (UNAUDITED)

 

NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

Performance obligations are determined based on the nature of the services provided by the Company. Revenue for performance obligations satisfied over time includes revenue from NCFM Medical Memberships and Concierge contracts, NWC annual administration fees, and BTG physical therapy bundles. Revenue from NCFM Medical Memberships and Concierge contracts and NWC annual administration fees, which include bundled products and services that have substantially the same pattern of transfer to the customer, is recognized over the period of delivery, which is the same as the period of the contract (typically, one year). Revenue from prepaid BTG physical therapy bundles, for which performance obligations are satisfied over time as visits are incurred, is recognized based on actual visits incurred in relation to total expected visits. At inception of such contracts, the Company recognizes contract liabilities for the value of services to be provided and, where applicable, contract assets for recoverable amounts incurred to obtain a customer contract that would not have incurred if the contract had not been obtained. The Company believes that these methods provide a faithful depiction of the transfer of services over the term of the performance obligations based on the inputs needed to satisfy the obligation.

 

Revenue for performance obligations satisfied at a point in time, which includes all patient service revenue other than NCFM Medical Memberships and Concierge contracts, NWC annual administration fees, and BTG physical therapy bundles, is recognized when goods or services are provided at the time of the patient visit, and at which time the Company is not required to provide additional goods or services to the patient.

 

The Company determines the transaction price based on standard charges for goods and services provided, reduced by contractual adjustments provided to third-party payors, discounts provided to uninsured patients in accordance with the Company’s policy, and/or implicit price concessions provided to uninsured patients. Estimates of contractual adjustments and discounts require significant judgment and are based on the Company’s current 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. There were no material changes during the nine months ended September 30, 2023 or 2022 to the judgments applied in determining the amount and timing of patient service revenue.

 

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.

 

Laws and regulations concerning government programs, including Medicare and Medicaid, are complex and subject to varying interpretation. As a result of investigations by governmental agencies, various health care organizations have received requests for information and notices regarding alleged noncompliance with those laws and regulations, which, in some instances, have resulted in organizations entering into significant settlement agreements. Compliance with such laws and regulations may also be subject to future government review and interpretation as well as significant regulatory action, including fines, penalties, and potential exclusion from the related programs. There can be no assurance that regulatory authorities will not challenge the Company’s compliance with these laws and regulations, and it is not possible to determine the impact, if any, such claims or penalties would have upon the Company. In addition, the contracts the Company has with commercial payors also provide for retroactive audit and review of claims.

 

Settlements with third-party payors for retroactive adjustments due to audits, reviews or investigations are considered variable consideration and are included in the determination of the estimated transaction price for providing patient care. These settlements are estimated based on the terms of the payment agreement with the payor, correspondence from the payor and the Company’s historical settlement activity, including an assessment to ensure that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the retroactive adjustment is subsequently resolved. Estimated settlements are adjusted in future periods as adjustments become known, or as years are settled or are no longer subject to such audits, reviews, and investigations.

 

8

 

 

HEALTHLYNKED CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2023 (UNAUDITED)

 

NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

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 for those who are uninsured based on historical experience and current market conditions. The initial estimate of the transaction price is determined by reducing the standard charge by any contractual adjustments, discounts, and implicit price concessions. Subsequent changes to the estimate of the transaction price are generally recorded as adjustments to patient service revenue in the period of the change. Patient services provided by NCFM, BTG and AEU are provided on a cash basis and not submitted through third party insurance providers.

 

Product and Other Revenue

 

Revenue is derived from the distribution of medical products that are sourced from a third party. The Company recognizes revenue at a point in time when title transfers to customers and the Company has no further obligation to provide services related to such products, which occurs when the product ships. The Company is the principal in its revenue transactions and as a result revenue is recorded on a gross basis. The Company has determined that it controls the ability to direct the use of the product provided prior to transfer to a customer, is primarily responsible for fulfilling the promise to provide the product to its customer, has discretion in establishing prices, and ultimately controls the transfer of the product to the customer. Shipping and handling costs billed to customers are recorded in revenue. Contract liabilities related to product revenue are recognized when payment is received but for which the Company has not met its product fulfillment performance obligation.

 

Sales are made inclusive of sales tax, where such sales tax is applicable. Sales tax is applicable on sales made in the state of Florida, where the Company has physical nexus. The Company has determined that it does not have economic nexus in any other states. The Company does not sell products outside of the United States.

 

The Company maintains a return policy that allows customers to return a product within a specified period of time prior to and subsequent to the expiration date of the product. The Company analyzes the need for a product return allowance at the end of each period based on eligible products.

 

Cash and Cash Equivalents

 

For financial statement purposes, the Company considers all highly liquid investments with original maturities of six months or less to be cash and cash equivalents. Accounts at each institution are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to $250,000. The Company had $-0- and $-0- in cash balances in excess of the FDIC insured limit as of September 30, 2023 and December 31, 2022, respectively.

 

Accounts Receivable

 

Trade receivables related to NWC services billed to third party payors are carried at the estimated collectible amount. 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 58% of total billings. Trade accounts receivable are recorded at this net amount. As of September 30, 2023 and December 31, 2022, the Company’s gross patient services accounts receivable were $71,227 and $98,180, respectively, and net patient services accounts receivable were $41,525 and $49,777, respectively, based upon net reporting of accounts receivable. The Company also had consulting accounts receivable of $-0- and $22,506 as of September 30, 2023 and December 31, 2022, respectively. As of September 30, 2023 and December 31, 2022, the Company’s allowance for doubtful accounts was $-0- and $-0-, respectively.

 

Other Comprehensive Income

 

The Company does not have any activity that results in Other Comprehensive Income.

 

9

 

 

HEALTHLYNKED CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2023 (UNAUDITED)

 

NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

Leases

 

Upon transition under ASU 2016-02, the Company elected the suite of practical expedients as a package applied to all of its leases, including (i) not reassessing whether any expired or existing contracts are or contain leases, (ii) not reassessing the lease classification for any expired or existing leases, and (iii) not reassessing initial direct costs for any existing leases. For new leases, the Company will determine if an arrangement is or contains a lease at inception. Leases are included as ROU assets within other assets and ROU liabilities within accrued expenses and other liabilities and within other long-term liabilities on the Company’s consolidated balance sheets.

 

ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. The Company’s leases do not provide an implicit rate. The Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. The ROU asset also includes any lease payments made and excludes lease incentives. Lease expense for lease payments is recognized on a straight-line basis over the lease term. See Note 8 for more complete details on balances as of the reporting periods presented herein.  

 

Inventory

 

Inventory consisting of supplements, is stated at the lower of cost or net realizable value. Cost is determined by the first-in, first-out method. Outdated inventory is directly charged to cost of goods sold.

 

Goodwill and Intangible Assets

 

Goodwill is recognized as the excess cost of an acquired entity over the net amount assigned to assets acquired and liabilities assumed. Goodwill is not amortized, but rather tested for impairment on an annual basis and more often if circumstances require. Impairment losses are recognized whenever the implied fair value of goodwill is less than its carrying value.

 

The Company recognizes an acquired intangible apart from goodwill whenever the intangible arises from contractual or other legal rights, or whenever it can be separated or divided from the acquired entity and sold, transferred, licensed, rented or exchanged, either individually or in combination with a related contract, asset or liability. Such intangibles are amortized over their estimated useful lives unless the estimated useful life is determined to be indefinite. Amortizable intangible assets are being amortized primarily over useful lives of five years. The straight-line method of amortization is used as it has been determined to approximate the use pattern of the assets. Impairment losses are recognized if the carrying amount of an intangible that is subject to amortization is not recoverable from expected future cash flows and its carrying amount exceeds its fair value. See Note 7, “Intangible Assets and Goodwill,” for further discussion of impairment charges in the nine months ended September 30, 2023.

 

Concentrations of Credit Risk

 

The Company’s financial instruments that are exposed to a concentration of credit risk are cash and accounts receivable. There are no patients/customers that represent 10% or more of the Company’s revenue or accounts receivable. Generally, the Company’s cash and cash equivalents are in checking accounts. The Company relies on a sole supplier for the fulfillment of substantially all of its product sales made through MOD.

 

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.

 

10

 

 

HEALTHLYNKED CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2023 (UNAUDITED)

 

NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

Fair Value of Assets and Liabilities

 

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

 

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

 

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

 

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

 

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

 

The Company utilizes a binomial lattice option pricing model to estimate the fair value of options, warrants, beneficial conversion features and other Level 3 financial assets and liabilities. The Company believes that the binomial lattice model results in the best 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 fairly value these instruments and, unlike less sophisticated models like the Black-Scholes model, it also accommodates assumptions regarding investor exercise behavior and other market conditions that market participants would likely consider in negotiating the transfer of such an instruments.

 

Stock-Based Compensation

 

The Company accounts for stock-based compensation to employees and nonemployees under Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 718 “Compensation – Stock Compensation” using the fair value-based method. Under this method, compensation cost is measured at the grant date based on the value of the award and is recognized over the service period, which is usually the vesting period. This guidance establishes standards for the accounting for transactions in which an entity exchanges its equity instruments for goods or services. It also addresses transactions in which an entity incurs liabilities in exchange for goods or services that are based on the fair value of the entity’s equity instruments or that may be settled by the issuance of those equity instruments. The Company uses a binomial lattice pricing model to estimate the fair value of options and warrants granted.

 

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.

 

11

 

 

HEALTHLYNKED CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2023 (UNAUDITED)

 

NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

No income tax has been provided for the three or nine months ended September 30, 2023 because the Company has sufficient operating loss carryforwards to offset any net income, including income from capital gains related to the disposal of discontinued operations, that it may realize in the full year 2023. Moreover, the Company expects to generate a loss for the full year 2023 inclusive of the gain from disposal of discontinued operations recognized in the three and nine months ended September 30, 2023. No income tax was provided for the three or nine months ended September 30, 2022 since the Company sustained losses in those 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 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, accounts payable, and accrued liabilities approximated their fair value.

 

Deemed Dividend

 

Through December 31, 2022, the Company incurred 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 contained 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 was accounted for as a beneficial conversion feature and affected income or loss available to common stockholders for purposes of earnings per share available to common stockholders. The Company may incur further deemed dividends on certain of its warrants containing a down-round provision equal to the difference in fair value of the warrants before and after the triggering of the down round adjustment.

 

Net 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. During the three and nine months ended September 30, 2023 and 2022, the Company reported a loss from continuing operations. As a result, diluted net income (loss) per common share is computed in the same manner as basic net income (loss) per common share, even though the Company had net income in the nine months ended September 30, 2023 after adjusting for discontinued operations. The Company 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, 2023 and December 31, 2022, potentially dilutive securities were comprised of (i) 71,396,486 and 68,109,094 warrants outstanding, respectively, (ii) 4,693,732 and 5,222,982 stock options outstanding, respectively, (iii) 1,992,652 and 1,651,435 unissued shares subject to future vesting requirements granted pursuant to the Company’s Employee Incentive Plan, (iv) 3,829,082 and 2,585,542 common shares issuable that are earned but not paid under consulting and director compensation arrangements, and (v) 13,750,000 and 13,750,000 shares of common stock issuable upon conversion of Series B Preferred. 

 

Common Stock Awards

 

The Company grants common stock awards to non-employees in exchange for services provided. The Company measures the fair value of these awards using the fair value of the services provided or the fair value of the awards granted, whichever is more reliably measurable. The fair value measurement date of these awards is generally the date the performance of services is complete. The fair value of the awards is recognized on a straight-line basis as services are rendered. The share-based payments related to common stock awards for the settlement of services provided by non-employees is recorded on the consolidated statement of operations in the same manner and charged to the same account as if such settlements had been made in cash. From time to time, the Company also issues stock awards settleable in a variable number of common shares. Such awards are classified as liabilities until such time as the number of shares underlying the grant is determinable.

 

12

 

 

HEALTHLYNKED CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2023 (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. The Company uses a binomial lattice pricing model to estimate the fair value of compensation options and warrants. Warrants issued in conjunction with the issuance of common stock are initially recorded at fair value as a reduction in additional paid-in capital of the common stock issued. All other warrants are recorded at fair value as expense over the requisite service period, or at the date of issuance, if there is not a service period. Certain of the Company’s warrants include a so-called down round provision. The Company accounts for such provisions pursuant to ASU No. 2017-11, Earnings Per Share, Distinguishing Liabilities from Equity and Derivatives and Hedging, which calls for the recognition of a deemed dividend in the amount of the incremental fair value of the warrant due to the down round when triggered.

 

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 GYN practice, the NCFM functional medicine practice, the BTG physical therapy practice, and the AEU cosmetic services practice), Digital Healthcare (develops and markets the “HealthLynked Network,” an online personal medical information and record archive system), and Medical Distribution (comprised of the operations of MOD, a virtual distributor of discounted medical supplies selling to both consumers and medical practices).

 

The Company’s ACO/MSO segment was sold on January 17, 2023. As described in further detail in Note 4, “Discontinued Operations,” this unit’s assets and liabilities are classified as held for sale as of December 31, 2022 and the unit’s results of operations are classified as “Income (loss) from operations of discontinued operations” in the three and nine months ended September 30, 2023 and 2022.

  

Recently Adopted Pronouncements

 

In March 2020, the FASB issued ASU 2020-03, “Codification Improvements to Financial Instruments.” The amendments in this update are to clarify, correct errors in, or make minor improvements to a variety of ASC topics. The changes in ASU 2020-03 are not expected to have a significant effect on current accounting practices. The ASU improves various financial instrument topics in the Codification to increase stakeholder awareness of the amendments and to expedite the improvement process by making the Codification easier to understand and easier to apply by eliminating inconsistencies and providing clarifications. The ASU is effective for smaller reporting companies for fiscal years beginning after December 15, 2022 with early application permitted. The Company adopted this standard for the year ended December 31, 2023. The adoption did not have a material effect on the Company’s consolidated financial statements.

 

In October 2021, the FASB issued guidance which requires companies to apply Topic 606, Revenue from Contracts with Customers, to recognize and measure contract assets and contract liabilities from contracts with customers acquired in a business combination. Public entities must adopt the new guidance for fiscal years beginning after December 15, 2022 and interim periods within those fiscal years, with early adoption permitted. The Company adopted this standard for the year ended December 31, 2023. The adoption did not have a material effect on the Company’s consolidated financial statements.

 

No other new accounting pronouncements were issued or became effective in the period that had, or are expected to have, a material impact on our consolidated Financial Statements.

 

13

 

 

HEALTHLYNKED CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2023 (UNAUDITED)

 

NOTE 3 – LIQUIDITY AND GOING CONCERN ANALYSIS

 

During the second quarter of 2014, the FASB issued ASU No. 2014-15, Presentation of Financial Statements - Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern. This update provided U.S. GAAP guidance on management’s responsibility in evaluating whether there is substantial doubt about a company’s ability to continue as a going concern and about related footnote disclosures. Under this standard, the Company is required to evaluate whether there is substantial doubt about its ability to continue as a going concern each reporting period, including interim periods. In evaluating the Company’s ability to continue as a going concern, management considered the conditions and events that could raise substantial doubt about the Company’s ability to continue as a going concern within 12 months after the Company’s financial statements were issued (November 14, 2024). Management considered the Company’s current financial condition and liquidity sources, including current funds available, forecasted future cash flows and the Company’s obligations due before November 14, 2024.

 

The Company is subject to a number of risks, including uncertainty related to product development and generation of revenues and positive cash flow from its Digital Healthcare division and a dependence on outside sources of capital. The attainment of profitable operations is dependent on future events, including obtaining adequate financing to fulfill the Company’s growth and operating activities and generating a level of revenues adequate to support the Company’s cost structure.

 

The Company has experienced net losses and cash outflows from operating activities since inception. As of September 30, 2023, the Company had cash balances of $51,328, a working capital deficit of $1,158,347 and an accumulated deficit of $40,747,377. For the nine months ended September 30, 2023, the Company generated net income of $273,556, which included a gain from the sale of AHP of $2,674,069 and a gain from the realization of contingent sale consideration receivable related to the sale of AHP of $1,090,857. Loss from continuing operations for nine months ended September 30, 2023 was $2,328,218 and the Company used cash from operating activities of $2,952,574. Notwithstanding the gain from the sale of AHP, the Company expects to continue to incur net losses and have significant cash outflows for at least the next 12 months.

 

Management has evaluated the significance of the conditions described above in relation to the Company’s ability to meet its obligations and concluded that, without additional funding, the Company will not have sufficient funds to meet its obligations within one year from the date the consolidated financial statements were issued.

 

On July 5, 2022, the Company entered into a Standby Equity Purchase Agreement (the “SEPA”) with YA II PN, Ltd. (“Yorkville”) (See Note 13, “Shareholders’ Equity,” below for additional information on the SEPA). Pursuant to the SEPA, the Company shall have the right to sell to Yorkville up to 30,000,000 of its shares of common stock, par value $0.0001 per share, at the Company’s request any time during the three-year commitment period set forth in the SEPA. Because the purchase price per share to be paid by Yorkville for the shares of common stock sold by the Company to Yorkville pursuant to the SEPA, if any, will fluctuate based on the market prices of the Company’s common stock during the applicable pricing period, the Company cannot reliably predict the actual purchase price per share to be paid by Yorkville for those shares, or the actual gross proceeds to be raised by the Company from those sales, if any. During the nine months ended September 30, 2023, the Company sold 225,000 shares of common stock under the SEPA, receiving $18,765 in proceeds, all of which was applied to the balance of a July 19, 2022 promissory note payable to Yorkville that was retired in March 2023.

 

During the nine months ended September 30, 2023, the Company issued ten notes payable to its Chairman and CEO, Dr. Michael Dent, one note payable to its Chief Financial Officer, George O’Leary, and four notes payable to third parties for aggregate net proceeds of $1,733,750. The Company also made repayments on notes payable totaling $1,586,620.

 

As described further in Note 4, “Discontinued Operations,” on January 17, 2023, the Company entered into the AHP Merger Agreement, pursuant to which the Buyer agreed to buy, and the Company agreed to sell, AHP. The Company received $750,000 upon signing of the AHP Merger Agreement, the $31,381 Stub Period Reimbursement (defined below) in March 2023, and $1,750,000 ($1,540,000 net after commissions) during June, July and August 2023 for meeting 100% of the participating physician transfer milestones outlined in the AHP Merger Agreement. During September 2023, AHP also received from the CMS a final determination of AHP’s Plan Year 2022 MSSP shared savings, of which the Company realized net proceeds of $1,186,231 after payments to participating physicians and commissions. Payment was received in October 2023. The Company may also receive future proceeds under the AHP Merger Agreement comprised of (i) up to $500,000 from the Buyer’s plan year 2023 (and if necessary, 2024) MSSP Shared Savings to reimburse amounts advanced to participating physicians at signing, and (ii) proceeds from sale of shares of the Buyer’s common stock if the Buyer completes an initial public offering by February 1, 2025.

 

Without raising additional capital, either via additional advances made pursuant to the SEPA or from other sources, there is substantial doubt about the Company’s ability to continue as a going concern through November 14, 2024. The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. This basis of presentation contemplates the recovery of the Company’s assets and the satisfaction of liabilities in the normal course of business.

 

14

 

 

HEALTHLYNKED CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2023 (UNAUDITED)

 

NOTE 4 – DISCONTINUED OPERATIONS

 

Description of Transaction

 

During the fourth quarter of 2022, the Board of Directors (the “Board”) approved a plan to sell the Company’s ACO/MSO Division, which assists physician practices in providing coordinated and more efficient care to patients via the MSSP as administered by the CMS, which rewards providers for efficiency in patient care. On January 17, 2023, the Company entered into the AHP Merger Agreement, pursuant to which the Buyer agreed to buy, and the Company agreed to sell, AHP (the “AHP Sale”). Pursuant to the terms of the AHP Merger Agreement, the Company received or will receive the following consideration: (1) $750,000 in cash paid upon signing of the definitive agreement (received January 18, 2023) (the “Upfront Cash Consideration”); (2) up to $1,750,000 net incremental cash based on the agreement to participate in Buyer’s ACO by AHP’s existing physician practices or newly added practices, scaled based on the number of covered patients transferred to PBACO by July 31, 2023 (the “Incremental Cash Consideration”), of which $1,225,000 ($1,180,000 net after commissions) was received in June 2023 and $150,000 ($120,000 net after commissions) was received in July 2023; (3) in the event that Buyer completes a planned initial public offering (“IPO”) by February 1, 2025, shares in the public entity at the time of the IPO with a value equal to AHP’s 2021 earnings before interest, taxes depreciation and amortization (“EBITDA”) times the multiple of EBITDA used to value the public entity’s IPO shares, net of any cash consideration previously paid by the Buyer and subject to vesting requirements detailed in the AHP Merger Agreement (the “IPO Share Consideration”); (4) net proceeds, including allocation for expenses, from any MSSP Shared Savings related to AHP’s plan year 2022, which, if earned, would be determined and paid by the CMS by October 2023 (the “2022 MSSP Consideration”); (5) $500,000 of the Incremental Cash Consideration will be allocated to AHP’s participating physicians upon receipt and will be reimbursed to HealthLynked by the Buyer in 2024 from the Buyer’s plan year 2023 (and if necessary, 2024) MSSP Shared Savings (the “Physician Advance Consideration”); and (6) the Buyer shall reimburse the Company for expenses incurred by the Company in operating AHP from January 1, 2023 to January 16, 2023 (the “Stub Period Reimbursement”). The Company is also required to indemnify the Buyer against liabilities arising from Buyer’s operation of AHP prior to the Buyer’s IPO date, less a deductible equal to 1% of the aggregate merger consideration (the “Indemnification Clause”).

 

In the event Buyer goes public through means other than an IPO, the parties agreed to modify the terms of the IPO Share Consideration to implement such alternate structure. In the event Buyer does not go public by IPO or other means by February 1, 2025, the Company receives no IPO Share Consideration, and the Transaction consideration is capped at the cash consideration of up to $3,000,000 plus the MSSP Consideration. Any participating physician advances will be repaid to the Company out of AHP’s 2023 performance year MSSP Shared Savings, which would be received in 2024.

 

Pursuant to the terms of the Merger Agreement, formal transfer of the equity ownership of AHP from the Company to the Buyer will occur at the earlier of (i) Buyer’s IPO, (ii) Buyer going public by other means, or (iii) if Buyer does not go public, on February 1, 2025. Until that time, the Company has the right, but not the obligation, to reacquire AHP for a price equal to any consideration already paid by the Buyer for AHP, plus all expenses incurred by Buyer in operating AHP after January 16, 2023.

 

Concurrent with the AHP Merger Agreement, AHP and the Buyer also entered into a Management Services Agreement (the “MSA”), pursuant to which the Buyer assumed full control of managing AHP’s business operations and paying AHP’s operating expenses after January 16, 2023. The term of the MSA is from January 17, 2023 to August 1, 2024, which is the latest date that equity ownership of AHP can transfer from the Company to the Buyer. The Buyer agreed in the Merger Agreement to reimburse the Company for reasonable expenses incurred by the Company in operating AHP from January 1, 2023 to January 16, 2023, which we refer to as the Stub Period Reimbursement, during which time the Company had operational and financial control of AHP and CHM. Concurrent with the AHP Merger Agreement and the MSA, and as a result of the Buyer assuming control and responsibility of AHP’s operations, the Company discontinued its operations of CHM.

 

Discontinued Operations

 

The Company has classified the results of the ACO/MSO Division as discontinued operations in the accompanying consolidated statement of operations for all periods presented. Additionally, the assets and liabilities associated with the ACO/MSO Division transferred to the Buyer in the transaction are classified as held for sale in the Company’s consolidated balance sheet as of December 31, 2022.

 

15

 

 

HEALTHLYNKED CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2023 (UNAUDITED)

 

NOTE 4 – DISCONTINUED OPERATIONS (CONTINUED)

 

The following table presents the aggregate carrying amounts of the classes of assets and liabilities of discontinued operations of the ACO/MSO Division classified as held for sale:

 

   September 30,   December 31, 
   2023   2022 
Assets Held for Sale        
Intangible assets, net  $---   $1,073,000 
Goodwill   ---    381,856 
Total assets held for sale   ---    1,454,856 
           
Liabilities Held for Sale          
Contract liabilities, current  $---   $25,000 
Total liabilities held for sale  $---   $25,000 

 

The financial results of the ACO/MSO Division are presented as income (loss) from discontinued operations, net of income taxes on our consolidated statement of operations. The following table presents financial results of the ACO/MSO Division for the three and nine months ended September 30, 2023 and 2022:

 

   Three Months Ended
September 30,
   Nine Months Ended
September 30,
 
   2023   2022   2023   2022 
Revenue:                
Consulting revenue  $---   $88,807   $23,646   $251,058 
Total revenue   ---    88,807    23,646    251,058 
                     
Operating Expenses and Costs:                    
Medicare shared savings expenses   13,554    337,533    95,941    802,411 
                     
Loss from operations of discontinued operations before income taxes   (13,554)   (248,726)   (72,295)   (551,353)
Provision for income taxes   ---    ---    ---    --- 
                     
Loss from discontinued operations, net of income taxes  $(13,554)  $(248,726)  $(72,295)  $(551,353)

 

Net cash used in operations of the ACO/MSO Division was $84,946 and $523,666 in the nine months ended September 30, 2023 and 2022, respectively. There were no cash flows from investing or financing activities of the ACO/MSO Division in the nine months ended September 30, 2023 or 2022.

 

Derecognition and Gain from Disposal of Discontinued Operations

 

As a result of the AHP Sale and pursuant to the terms and conditions of the AHP Merger Agreement and the MSA, the Company ceased to have a controlling financial interest in AHP as of January 17, 2023. Accordingly, in connection with the transaction, the Company deconsolidated AHP as of January 17, 2023.

 

In connection with the deconsolidation, the Company recognized the fair value of consideration received and receivable from the AHP Sale, recognized an indemnification liability related to potential claims resulting from the AHP Sale, derecognized the carrying value of assets and liabilities transferred to the Buyer or otherwise derecognized in connection with in the AHP Sale, and recorded a gain on sale for the excess of consideration received over carrying value of assets derecognized and liabilities recognized.

 

16

 

 

HEALTHLYNKED CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2023 (UNAUDITED)

 

NOTE 4 – DISCONTINUED OPERATIONS (CONTINUED)

 

The Company elected to record the contingent portion of consideration receivable at fair value on the sale date pursuant to the guidance in FASB Emerging Issues Task Force Issue 09-4, “Seller Accounting for Contingent Consideration,” (“EITF 09-4”). The fair value of consideration received and receivable is shown in the following table:

 

Upfront Cash Consideration paid at signing  $750,000 
      
Incremental Cash Consideration   1,311,567 
IPO Share Consideration   1,463,517 
2022 MSSP Consideration   312,987 
Physician Advance Consideration   199,645 
Stub Period Reimbursement   31,381 
Total fair value of contingent consideration receivable   3,319,097 
      
Total fair value of consideration received and receivable  $4,069,097 

 

The fair value of contingent consideration receivable was determined using an expected present value approach, which applies a discount rate to a probability-weighted stream of net cash flows based on multiple scenarios, as estimated by management. As such, the fair values of contingent consideration receivable rely on significant unobservable inputs and assumptions and there is uncertainty in the expected future cash flows used in the fair valuation. Significant assumptions related to the valuation of contingent consideration receivable include the likelihood of a Buyer IPO, the valuation of the Buyer’s common stock in a potential IPO, the likelihood that AHP would meet its performance benchmarks to the extent that it will receive shared savings for plan year 2022, the likelihood that AHP under the management of the Buyer would receive sufficient shared savings in plan years 2023 and/or 2024 to pay the Physician Advance Consideration, and the likelihood that the Company would be able to transfer or add new participating physicians to AHP before July 31, 2023 in order to collect the Incremental Cash Consideration.

 

The book value of the assets and liabilities derecognized on January 17, 2023 in connection with the sale were as follows:

 

Prepaid expenses  $1,500 
Intangible asset - ACO physician contract   1,073,000 
Goodwill   381,856 
Contract liability   (20,278)
Contingent acquisition consideration   (185,024)
Net Book Value of Assets and Liabilities Sold  $1,251,054 

 

Prepaid expenses are prepaid services from which the Buyer will benefit following the AHP Sale. Intangible assets and goodwill represent the carrying value of assets recorded at the time the Company acquired CHM and AHP in 2020 (the “Original Acquisition”). Contract liability represents remaining unearned revenue for which the Buyer is required to provide the performance obligations after January 17, 2023. In connection with the AHP Sale, the remaining value of contingent acquisition consideration (“CAC”) related to the Original Acquisition was written off.

 

After recording the fair value of consideration and derecognition of assets and liabilities, and an estimated liability related to the Indemnification Clause, the Company recorded a gain from disposal of discontinued operations in the amount of $2,674,069 as follows:

 

Total fair value of consideration received and receivable  $4,069,097 
Less: net book value of assets and liabilities sold   (1,251,054)
Less: fair value of Indemnification Clause   (143,974)
      
Gain from disposal of discontinued operations  $2,674,069 

 

After January 17, 2023, and as prescribed under EITF 09-4, the Company has elected to subsequently treat the contingent consideration receivable using gain contingency guidance and only record a gain or loss when the contingency is resolved. Accordingly, the Company does not prospectively remeasure the fair value of contingent consideration receivable each reporting period.

 

17

 

 

HEALTHLYNKED CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2023 (UNAUDITED)

 

NOTE 4 – DISCONTINUED OPERATIONS (CONTINUED)

 

Subsequent Receipts of Contingent Sale Consideration Receivable

 

The Company received $750,000 upon signing of the AHP Merger Agreement, the $31,381 Stub Period Reimbursement in March 2023, and $1,750,000 ($1,540,000 net after commissions) Incremental Cash Consideration during June, July and August 2023 for meeting 100% of the participating physician transfer milestones outlined in the AHP Merger Agreement. During September 2023, AHP received from the CMS a final determination of AHP’s Plan Year 2022 MSSP shared savings, of which the Company realized gross receipts of $1,873,993 and net proceeds of $1,186,231 after payments to participating physicians and commissions. Payment was received in October 2023.

 

Upon resolution of the amount of Incremental Cash Consideration and 2022 MSSP Consideration to be received by the Company, the Company recorded a gain on realization of the contingent sale consideration receivable for the excess of cash consideration received (or known to be receivable) over the carrying value of the contingent assets resolved. This gain is reflected in the “Other Income (Expense)” section of the accompanying Statements of Operations. Gains recognized during the nine months ended September 30, 2023 were as follows:

 

   Estimated   Resolved Net   Gain (loss) on 
   Fair Value on   Settlement   Realization of 
   Sale Date   Amount   Contingency 
Upfront Cash Consideration  $750,000   $750,000   $--- 
Stub Period Reimbursement   31,381    31,381    --- 
Incremental Cash Consideration   1,311,567    1,540,000    228,433 
2022 MSSP Consideration   312,987    1,175,411    862,424 
Total resolved contingent sale consideration receivable  $2,405,935   $3,496,792   $1,090,857 

 

The Company reduced the amount of “Contingent sale consideration receivable” and recorded “Earned sale consideration receivable” related to the 2022 MSSP Consideration in September 2023 when notification was received from the CMS regarding the final determined amount. At that time, the consideration became realizable (i.e., convertible to a known amount of cash). As of September 30, 2023, the amount of Earned sale consideration receivable reflected on the consolidated balance sheet was $1,873,993, which was received in the first week of October 2023.

 

The carrying value of the remaining unresolved components of contingent consideration receivable as of September 30, 2023 was as follows:

 

IPO Share Consideration  $1,463,518 
Physician Advance Consideration   199,645 
Remaining contingent sale consideration receivable  $1,663,163 

 

NOTE 5 – PREPAID EXPENSES AND OTHER

 

Prepaid and other expenses as of September 30, 2023 and December 31, 2022 were as follows:

 

   September 30,   December 31, 
   2023   2022 
         
Insurance prepayments  $7,832   $17,733 
Other expense prepayments   14,375    6,989 
Rent deposits   46,084    44,125 
Deferred equity compensation   52,500    75,000 
Total prepaid expenses and other   120,791    143,847 
Less: long term portion   (42,400)   (50,907)
Prepaid expenses and other, current portion  $78,391   $92,940 

 

18

 

 

HEALTHLYNKED CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2023 (UNAUDITED)

 

NOTE 5 – PREPAID EXPENSES AND OTHER (CONTINUED)

 

Deferred equity compensation reflects common stock grants made in 2021 and 2022 from the Company’s 2021 Equity Incentive Plan that vest over a four-year period and that are settleable for a fixed dollar amount rather than a fixed number of shares. The original grant date fair value of the equity compensation was $90,000. Amortization was $-0- and $1,359 in the three months ended September 30, 2023 and 2022, respectively, and $10,353 and $19,484 in the nine months ended September 30, 2023 and 2022, respectively. Unearned amounts written off were $7,500 and $7,500 in the three months ended September 30, 2023 and 2022, respectively, and $12,147 and $7,500 in the nine months ended September 30, 2023 and 2022, respectively. At inception, the Company recorded a corresponding liability captioned “Liability-classified equity instruments.”

 

NOTE 6 – PROPERTY, PLANT, AND EQUIPMENT

 

Property, plant and equipment as of September 30, 2023 and December 31, 2022 were as follows:

 

   September 30,   December 31, 
   2023   2022 
         
Medical equipment  $493,854   $493,854 
Furniture, office equipment and leasehold improvements   317,963    316,463 
           
Total property, plant and equipment   811,817    810,317 
Less: accumulated depreciation   (489,836)   (397,194)
           
Property, plant and equipment, net  $321,981   $413,123 

 

Depreciation expense during the three months ended September 30, 2023 and 2022 was $30,352 and $30,537, respectively, and $92,642 and $85,473 in the nine months ended September 30, 2023 and 2022, respectively.

 

NOTE 7 – INTANGIBLE ASSETS AND GOODWILL

 

Identifiable intangible assets as of September 30, 2023 and December 31, 2022 were as follows:

 

   September 30,   December 31, 
   2023   2022 
         
NCFM: Medical database  $1,101,538   $1,101,538 
NCFM: Website   41,000    41,000 
           
Total intangible assets   1,142,538    1,142,538 
Less: accumulated amortization   (201,651)   (30,531)
           
Intangible assets, net  $940,887   $1,112,007 

 

Intangible assets arose from the acquisition of NCFM in April 2019. Prior to December 31, 2022, the NCFM medical database was assumed to have an indefinite life and was not amortized. As of December 31, 2022, the Company determined that developing healthcare technologies has the potential to render certain of the protocols in the NCFM medical database obsolete. Accordingly, the Company determined that the NCFM medical database should be prospectively amortized over an estimated five-year useful life. Amortization expense related to intangible assets was $57,040 and $178,967 in the three months ended September 30, 2023 and 2022, respectively, and $171,120 and $536,833 in the nine months ended September 30, 2023 and 2022, respectively. Amortization expense in 2022 relates to intangible assets associated with the acquisition of MOD that were fully impaired in 2022 and had no further carrying value or related amortization expense after December 31, 2022.

 

Impairment of AEU Goodwill

 

In connection with the acquisition of AEU in May 2022, the Company recorded goodwill of $319,958, representing the excess fair value of consideration transferred over the fair value of the net identifiable assets acquired.

 

19

 

 

HEALTHLYNKED CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2023 (UNAUDITED)

 

NOTE 7 – INTANGIBLE ASSETS AND GOODWILL (CONTINUED)

 

During the third quarter of 2023, the Company determined that triggering events had occurred that required an impairment assessment of the AEU goodwill. The triggering events included (i) a material decline in revenue during third quarter 2023, and (ii) an inability of the business to achieve profitability since its acquisition. An impairment loss is recognized if the carrying amount of a reporting unit exceeds its fair value. The amount of impairment loss is measured as the excess of the reporting unit’s carrying value over its fair value. The Company determined that the carrying amount of the reporting unit, which consists of the AEU practice, exceeded its estimated fair value. Accordingly, the Company recorded an impairment charge in the amount of $319,958 to adjust carrying value of AEU goodwill to its estimated fair value of $-0- in the three and nine months ended September 30, 2023.

 

NOTE 8 – LEASES

 

The Company has separate operating leases for office space related to its NWC, NCFM, BTG and AEU practices, two separate leases relating to its corporate headquarters, and a copier lease that expire in July 2026, May 2025, March 2024, March 2026, November 2023, November 2023 and January 2027, respectively. As of September 30, 2023, the Company’s weighted-average remaining lease term relating to its operating leases was 2.3 years, with a weighted-average discount rate of 15.09%. Effective April 1, 2023, the Company entered into an extension of its existing lease for its BTG office through March 31, 2023. Effective August 1, 2023, the Company entered into an extension of its existing lease for its NWC office through July 31, 2026.

 

The table below summarizes the Company’s lease-related assets and liabilities as of September 30, 2023 and December 31, 2022:

 

   September 30,   December 31, 
   2023   2022 
Lease assets  $518,819   $540,181 
           
Lease liabilities          
Lease liabilities (short term)  $230,910   $344,464 
Lease liabilities (long term)   291,410    198,330 
Total lease liabilities  $522,320   $542,794 

 

Lease expense was $123,572 and $123,069 in the three months ended September 30, 2023 and 2022, respectively, and $345,759 and $318,814 in the nine months ended September 30, 2023 and 2022, respectively.

 

Maturities of operating lease liabilities were as follows as of September 30, 2023:

 

2023 (October to December)  $109,833 
2024   264,333 
2025   203,749 
2026   93,410 
2027   990 
Total lease payments   672,315 
Less interest   (149,995)
Present value of lease liabilities  $522,320 

 

20

 

 

HEALTHLYNKED CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2023 (UNAUDITED)

 

NOTE 9 – ACCOUNTS PAYABLE AND ACCRUED EXPENSES

 

Amounts related to accounts payable and accrued expenses as of September 30, 2023 and December 31, 2022 were as follows:

 

   September 30,   December 31, 
   2023   2022 
         
Trade accounts payable  $632,635   $863,662 
Accrued payroll liabilities   73,871    190,633 
Accrued operating expenses   131,705    389,655 
Accrued interest   54,541    63,615 
Accrued commissions payable from sale of AHP (a)   728,581    --- 
Accrued warrant liability (b)    ---    92,641 
Product return allowance   1,942    2,352 
   $1,623,275   $1,602,558 

 

(a)During September 2023, AHP received from the CMS a final determination of AHP’s Plan Year 2022 MSSP shared savings, of which the Company realized gross receipts of $1,873,993 and net proceeds of $1,186,231 after payments to participating physicians and commissions in satisfaction of the 2022 MSSP Consideration. Gross payment was received by the Company in October 2023. As of September 30, 2023, the Company accrued commissions and other fees payable resulting from the receipt and prior consideration received in the amount of $728,581. See Note 4 for complete description of the AHP sale and related consideration.

 

(b)During the nine months ended September 30, 2023, the Company wrote off a liability related to a dispute over unexercised warrants. The warrants in question expired unexercised during July 2023.

 

NOTE 10 – CONTRACT ASSETS AND LIABILITIES

 

Contract assets were $14,583 and $269,736 as of September 30, 2023 and December 31, 2022, respectively. Contract assets relate to amounts incurred to obtain a customer contract that would not have incurred if the contract had not been obtained, such as commissions, associated with NCFM Concierge and Membership Contracts.

 

Amounts related to contract liabilities as of September 30, 2023 and December 31, 2022 were as follows:

 

   September 30,   December 31, 
   2023   2022 
         
Patient services paid but not provided - NCFM  $29,167   $491,020 
Patient services paid but not provided - BTG   74,191    78,120 
Patient services paid but not provided - NWC   91,583    --- 
Unshipped products - MOD   2,828    5,707 
   $197,769   $574,847 

 

Contract liabilities relate to (i) NCFM Medical Membership and Concierge Service contracts pursuant to which patients prepay for access to services to be provided at the patient’s request over a period of time, (ii) BTG contracts pursuant to which patients prepay for access to a fixed number of visits used at the patients’ discretion, (iii) NWC annual administration fees, and (iv) MOD sold but unshipped products.

 

21

 

 

HEALTHLYNKED CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2023 (UNAUDITED)

 

NOTE 11 – AMOUNTS DUE TO RELATED PARTY AND RELATED PARTY TRANSACTIONS

 

Amounts due to related parties as of September 30, 2023 and December 31, 2022 were comprised of the following amounts owed to Dr. Michael Dent, the Company’s CEO:

 

   September 30,   December 31, 
   2023   2022 
         
Note Payable to Dr. Michael Dent, November 2022  $26,250   $172,500 
Note Payable to Dr. Michael Dent, December 2022   30,250    137,500 
Note Payable to Dr. Michael Dent, March 2023   63,005    --- 
Note Payable to Dr. Michael Dent, June 2023   26,875    --- 
Note Payable to Dr. Michael Dent, August 2023   343,200    --- 
Note Payable to Dr. Michael Dent, September 2023   93,500    --- 
Face value of notes payable to related party   583,080    310,000 
Less: unamortized discount   (76,104)   (104,490)
Notes payable to related party, total   506,976    205,510 
Plus deferred compensation payable to Dr. Michael Dent   300,600    300,600 
Total due to related party  $807,576   $506,110 

 

On November 8, 2022, the Company entered into a Merchant Cash Advance Factoring Agreement with a trust controlled by Dr. Dent, pursuant to which the Company received an advance of $150,000 (the “November MCA”). The Company is required to repay the November MCA at the rate of $3,750 per week until the balance of $195,000 is repaid, which is scheduled for November 2023. At inception, the Company recognized a note payable in the amount of $195,000 and a discount against the note payable of $45,000. The discount is being amortized over the life of the November MCA. The Company made payments totaling $45,000 and $-0- in the three months ended September 30, 2023 and 2022, respectively, and $146,250 and $-0- in the nine months ended September 30, 2023 and 2022, respectively. Amortization of debt discount was $11,219 and $-0- in the three months ended September 30, 2023 and 2022, respectively, and $33,658 and $-0- in the nine months ended September 30, 2023 and 2022. As of September 30, 2023 and December 31, 2022, remaining payments were $26,250 and $172,500, respectively, and the net carrying value was $21,072 and $133,664, respectively.

 

On December 13, 2022, the Company entered into a Merchant Cash Advance Factoring Agreement with a trust controlled by Dr. Dent, pursuant to which the Company received an advance of $110,000 (the “December MCA”). The Company is required to repay the December MCA at the rate of $2,750 per week until the balance of $143,000 is repaid, which is scheduled for December 2023. In connection with the December MCA, the Company issued 3,142,857 three-year warrants to the holder with an exercise price of $0.035. The fair value of the warrants was $63,420. At inception, the Company recognized a note payable in the amount of $143,000 and a discount against the note payable of $68,281 for the allocated fair value of the original issue discounts and warrants. The discount is being amortized over the life of the December MCA. The Company made payments totaling $33,000 and $-0- in the three months ended September 30, 2023 and 2022, respectively, and $107,250 and $-0- in the nine months ended September 30, 2023 and 2022, respectively. Amortization of debt discount was $17,070 and $-0- in the three months ended September 30, 2023 and 2022, respectively, and $51,211 and $-0- in the nine months ended September 30, 2023 and 2022. As of September 30, 2023 and December 31, 2022, remaining payments were $30,250 and $137,500, respectively, and the net carrying value was $15,806 and $71,845, respectively.

 

On January 5, 2023, the Company issued an unsecured promissory note to Dr. Dent with a face value of $10,000 (the “$10k Dent Note”). The $10k Dent Note bore interest at a rate of 15% per annum, was scheduled to mature six months from issuance and may be prepaid by the Company at any time before maturity without penalty. In connection with the $10k Dent Note, the Company issued 96,154 five-year warrants to the holder with an exercise price of $0.104. The fair value of the warrants was $6,843. At inception, the Company recognized a note payable in the amount of $10,000 and a discount against the note payable of $3,851 for the allocated fair value of the warrants. The discount was to be amortized over the life of the $10k Dent Note. The $10k Dent Note was repaid in full during January 2023. Amortization of debt discount and interest expense prior to repayment were $269 and $53, respectively, in the nine months ended September 30, 2023, and $-0- and $-0-, respectively, in the three months ended September 30, 2023. In connection with the repayment, the Company recognized a loss on extinguishment of debt of $-0- and $3,582 in the three and nine months ended September 30, 2023, respectively.

 

22

 

  

HEALTHLYNKED CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2023 (UNAUDITED)

 

NOTE 11 – AMOUNTS DUE TO RELATED PARTY AND RELATED PARTY TRANSACTIONS (CONTINUED)

 

On January 13, 2023, the Company issued an unsecured promissory note to Dr. Dent with a face value of $161,000 (the “January 2023 Dent Note”). Net proceeds were $160,000, taking into account the original issue discount of $1,000. The January 2023 Dent Note bore interest at a rate of 15% per annum, was scheduled to mature six months from issuance and may be prepaid by the Company at any time before maturity without penalty. In connection with the January 2023 Dent Note, the Company issued 860,215 three-year warrants to Dr. Dent with an exercise price of $0.093. The fair value of the warrants was $56,123. At inception, the Company recognized a note payable in the amount of $161,000 and a discount against the note payable of $42,553 for the allocated fair value of the original issue discount and warrants. The discount was to be amortized over the life of the January 2023 Dent Note. The January 2023 Dent Note was repaid in full during January 2023. Amortization of debt discount and interest expense prior to repayment were $1,373 and $397, respectively, in the nine months ended September 30, 2023, and $-0- and $-0-, respectively, in the three months ended September 30, 2023. In connection with the repayment, the Company recognized a loss on extinguishment of debt of $-0- and $41,181 in the three and nine months ended September 30, 2023, respectively.

 

On February 14, 2023, the Company issued an unsecured promissory note to Dr. Dent with a face value of $186,000 (the “February 2023 Dent Note”). Net proceeds were $185,000 after an original issue discount of $1,000. The February 2023 Dent Note bore interest at a rate of 15% per annum, matured six months from issuance and could be prepaid by the Company at any time before maturity without penalty. In connection with the February 2023 Dent Note, the Company issued 685,185 three-year warrants to Dr. Dent with an exercise price of $0.135. The fair value of the warrants was $66,136. At inception, the Company recognized a note payable in the amount of $186,000 and a discount against the note payable of $50,989 for the allocated fair value of the original issue discounts and warrants. The discount was amortized over the life of the February 2023 Dent Note. The February 2023 Dent Note was repaid in full during August 2023. Amortization of debt discount prior to repayment was $12,747 and $-