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 March 31,September 30, 2022

 

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 May 13,November 14, 2022, there were 238,983,761254,382,625 shares of the issuer’s common stock, par value $0.0001, outstanding.

 

 

 

 

 

 

TABLE OF CONTENTS

 

  PAGE NO.
   
PART IFINANCIAL INFORMATION1
Item 1Financial Statements (Unaudited)1
Item 2Management’s Discussion and Analysis of Financial Condition and Results of Operations3035
Item 3Quantitative and Qualitative Disclosures about Market Risk3543
Item 4Controls and Procedures3543
   
Part IIOTHER INFORMATION3644
Item 1Legal Proceedings3644
Item 1ARisk Factors3644
Item 2Unregistered Sales of Equity Securities and Use of Proceeds3643
Item 3Defaults upon Senior Securities3644
Item 4Mine Safety Disclosure3644
Item 5Other Information3644
Item 6Exhibits36Exhibits45

 

i

 

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

HEALTHLYNKED CORP.

CONDENSED CONSOLIDATED BALANCE SHEETS

 

 March 31, December 31,  September 30, December 31, 
 2022  2021  2022  2021 
ASSETS (Unaudited)     (Unaudited)    
Current Assets          
Cash $1,926,714  $3,291,646  $158,160  $3,291,646 
Accounts receivable, net of allowance for doubtful accounts of $13,972 and $13,972 as of March 31, 2022 and December 31, 2021, respectively  78,127   86,287 
Accounts receivable, net of allowance for doubtful accounts of $-0- and $13,972 as of September 30, 2022 and December 31, 2021, respectively  63,855   86,287 
Inventory  155,153   134,930   188,546   134,930 
Prepaid expenses and other  85,695   137,630   94,968   137,630 
Total Current Assets  2,245,689   3,650,493   505,529   3,650,493 
                
Property, plant and equipment, net of accumulated depreciation of $308,480 and $283,512 as of March 31, 2022 and December 31, 2021, respectively  347,528   350,482 
Intangible assets, net of accumulated amortization of $1,052,338 and $873,417 as of March 31, 2022 and December 31, 2021, respectively  4,701,200   4,880,121 
Property, plant and equipment, net of accumulated depreciation of $368,985 and $283,512 as of September 30, 2022 and December 31, 2021, respectively  441,332   350,482 
Intangible assets, net of accumulated amortization of $1,410,250 and $873,417 as of September 30, 2022 and December 31, 2021, respectively  4,343,288   4,880,121 
Goodwill  1,148,105   1,148,105   1,468,063   1,148,105 
Right of use lease assets  499,144   526,730   636,267   526,730 
Deferred equity compensation and deposits  130,188   138,625   84,091   138,625 
                
Total Assets $9,071,854  $10,694,556  $7,478,570  $10,694,556 
                
LIABILITIES AND SHAREHOLDERS’ EQUITY                
        
Current Liabilities                
Accounts payable and accrued expenses $760,390  $790,843  $1,194,293  $790,843 
Contract liabilities  33,348   72,838   65,252   72,838 
Lease liability, current portion  294,442   288,966   378,759   288,966 
Due to related party, current portion  300,600   300,600   300,600   300,600 
Notes payable, current portion, net of unamortized original issue discount of $20,879 and $-0- as of September 30, 2022 and December 31, 2021  397,869   --- 
Liability-classified equity instruments, current portion  35,625   61,250   30,625   61,250 
Contingent acquisition consideration, current portion  317,757   403,466   128,074   403,466 
Total Current Liabilities  1,742,162   1,917,963   2,495,472   1,917,963 
                
Long-Term Liabilities                
Government and vendor notes payable, long term portion  450,000   450,000 
Government notes payable, long term portion  450,000   450,000 
Liability-classified equity instruments, long term portion  101,250   101,250   52,500   101,250 
Contingent acquisition consideration, long term portion  429,611   782,224   184,659   782,224 
Lease liability, long term portion  204,762   239,225   259,845   239,225 
                
Total Liabilities  2,927,785   3,490,662   3,442,476   3,490,662 
                
Shareholders’ Equity                
Common stock, par value $0.0001 per share, 500,000,000 shares authorized, 238,033,117 and 237,893,473 shares issued and outstanding as of March 31, 2022 and December 31, 2021, respectively  23,803   23,789 
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 March 31, 2022 and December 31, 2021, respectively  2,750   2,750 
Common stock issuable, $0.0001 par value; 938,191 and 719,366 shares as of March 31, 2022 and December 31, 2021, respectively  318,040   282,347 
Common stock, par value $0.0001 per share, 500,000,000 shares authorized, 247,857,625 and 237,893,473 shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively  24,786   23,789 
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, 2022 and December 31, 2021, respectively  2,750   2,750 
Common stock issuable, $0.0001 par value; 1,329,469 and 719,366 shares as of September 30, 2022 and December 31, 2021, respectively  345,345   282,347 
Additional paid-in capital  39,172,788   39,100,197   40,410,147   39,100,197 
Accumulated deficit  (33,373,312)  (32,205,189)  (36,746,934)  (32,205,189)
Total Shareholders’ Equity  6,144,069   7,203,894   4,036,094   7,203,894 
                
Total Liabilities and Shareholders’ Equity $9,071,854  $10,694,556  $7,478,570  $10,694,556 

See the accompanying notes to these Unaudited Condensed Consolidated Financial Statements


HEALTHLYNKED CORP.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

  Three Months Ended
September 30,
  Nine Months Ended
September 30,
 
  2022  2021  2022  2021 
Revenue            
Patient service revenue, net $1,262,253  $1,394,356  $4,069,714  $4,379,282 
Medicare shared savings revenue  ---   2,419,312   ---   2,419,312 
Subscription, consulting and event revenue  89,977   69,595   260,491   229,114 
Product revenue  95,449   161,456   372,877   512,325 
Total revenue  1,447,679   4,044,719   4,703,082   7,540,033 
                 
Operating Expenses and Costs                
Practice salaries and benefits  810,058   739,024   2,344,529   2,305,993 
Other practice operating expenses  695,300   549,086   1,897,070   1,790,874 
Medicare shared savings expenses  337,533   1,748,585   802,411   2,157,555 
Cost of product revenue  87,775   145,432   419,129   474,026 
Selling, general and administrative expenses  1,088,133   1,147,591   3,678,784   3,661,206 
Depreciation and amortization  209,504   205,311   622,306   623,438 
Total Operating Expenses and Costs  3,228,303   4,535,029   9,764,229   11,013,092 
                 
Loss from operations  (1,780,624)  (490,310)  (5,061,147)  (3,473,059)
                 
Other Income (Expenses)                
Gain (loss) on extinguishment of debt  ---   ---   ---   (4,957,168)
Change in fair value of debt  ---   ---   ---   (19,246)
Financing cost  (110,000)  ---   (110,000)  --- 
Amortization of original issue discounts on notes payable  (21,020)  ---   (21,020)  --- 
Change in fair value of contingent acquisition consideration  133,483   126,411   665,573   (234,678)
Interest (expense) income  (5,640)  (4,118)  (15,151)  (13,083)
Total other income (expenses)  (3,177)  122,293   519,402   (5,224,175)
                 
Net loss before provision for income taxes  (1,783,801)  (368,017)  (4,541,745)  (8,697,234)
                 
Provision for income taxes  ---   ---   ---   --- 
                 
Net loss  (1,783,801)  (368,017)  (4,541,745)  (8,697,234)
                 
Deemed dividend - amortization of beneficial conversion feature  (88,393)  (88,393)  (265,179)  (265,179)
                 
Net loss to common shareholders $(1,872,194) $(456,410) $(4,806,924) $(8,962,413)
                 
Net loss per share to common shareholders, basic and diluted:                
Basic $(0.01) $(0.00) $(0.02) $(0.04)
Fully diluted  (0.01)  (0.00)  (0.02)  (0.04)
                 
Weighted average number of common shares:                
Basic  243,355,562   232,203,244   240,006,507   224,658,709 
Fully diluted  243,355,562   232,203,244   240,006,507   224,658,709 

 

See the accompanying notes to these Unaudited Condensed Consolidated Financial Statements

 


 

HEALTHLYNKED CORP.

CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

(UNAUDITED)

  Three Months Ended
March 31,
 
  2022  2021 
Revenue      
Patient service revenue, net $1,375,685  $1,514,376 
Subscription, consulting and event revenue  84,218   87,655 
Product revenue  146,969   182,663 
Total revenue  1,606,872   1,784,694 
         
Operating Expenses and Costs        
Practice salaries and benefits  718,073   663,937 
Other practice operating expenses  562,651   730,784 
Medicare shared savings expenses  227,729   211,507 
Cost of product revenue  160,811   168,596 
Selling, general and administrative expenses  1,335,140   1,366,137 
Depreciation and amortization  203,890   211,658 
Total Operating Expenses and Costs  3,208,294   3,352,619 
         
Loss from operations  (1,601,422)  (1,567,925)
         
Other Income (Expenses)        
Loss on extinguishment of debt     (5,589,994)
Change in fair value of debt     (19,246)
Change in fair value of contingent acquisition consideration  438,322   (635,700)
Interest expense  (5,023)  (10,588)
Total other income (expenses)  433,299   (6,255,528)
         
Net loss before provision for income taxes  (1,168,123)  (7,823,453)
         
Provision for income taxes      
         
Net loss $(1,168,123) $(7,823,453)
         
Deemed dividend - amortization of beneficial conversion feature and down round adjustment to warrants  (88,393)  (88,393)
         
Net loss to common shareholders $(1,256,516) $(7,911,846)
         
Net loss per share to common shareholders, basic and diluted:        
Basic $(0.01) $(0.04)
Fully diluted $(0.01) $(0.04)
         
Weighted average number of common shares:        
Basic  238,008,478   213,279,052 
Fully diluted  238,008,478   213,279,052 

See the accompanying notes to these Unaudited Condensed Consolidated Financial Statements


HEALTHLYNKED CORP.

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

THREENINE MONTHS ENDED MARCH 31,SEPTEMBER 30, 2022 AND MARCH 31, 2021

(UNAUDITED)

 Number of Shares       Common Additional     Total
Shareholders’
  Number of Shares       Common Additional     Total 
 Common Preferred Common Preferred Stock Paid-in Accumulated Equity  Common Preferred Common Preferred Stock Paid-in Accumulated Shareholders’ 
 Stock  Stock  Stock  Stock  Issuable  Capital  Deficit  (Deficit)  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   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   5,250   ---   1   ---   73,470   8,044   ---   81,515 
Shares and options issued to employees  133,000      13      (37,777)  64,547      26,783   133,000   ---   13   ---   (37,777)  64,547   ---   26,783 
Exercise of stock options  1,394                        1,394   ---   ---   ---   ---   ---   ---   --- 
Net loss                    (1,168,123)  (1,168,123)  ---   ---   ---   ---   ---   ---   (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   238,033,117   2,750,000   23,803   2,750   318,040   39,172,788   (33,373,312)  6,144,069 
                                
                                
Balance at December 31, 2020  187,967,881   2,750,000   18,797   2,750   262,273   22,851,098   (21,784,910)  1,350,008 
                                
Sales of common stock  14,793,864      1,479          2,981,367      2,982,846   66,667   ---   7   ---   ---   8,270   ---   8,277 
Fair value of warrants allocated to proceeds of common stock                  1,406,515      1,406,515   ---   ---   ---   ---   ---   1,723   ---   1,723 
Conversion of convertible notes payable to common stock  13,538,494      1,354          4,060,194      4,061,548 
Fair value of warrants issued in connection with conversion and retirement of convertible notes payable                 3,201,138      3,201,138 
Fair value of warrants issued for professional services                 32,426      32,426 
Shares issued in acquisition of AEU  871,633   ---   79   ---   ---   103,725   ---   103,804 
Consultant and director fees payable with common shares and warrants  475,000      48      114,500   122,781      237,329   79,011   ---   16   ---   58,252   47,164   ---   105,432 
Shares and options issued pursuant to employee equity incentive plan  240,310      24      (14,956)  52,337      37,405 
Exercise of stock warrants  9,047,332      905      62,500   613,316      676,721 
Exercise of stock options  12,500      1          3,149      3,150 
Shares and options issued to employees  30,000   ---   3   ---   (31,250)  62,364   ---   31,117 
Net loss                    (7,823,453)  (7,823,453)  ---   ---   ---   ---   ---   ---   (1,589,821)  (1,589,821)
                                
Balance at March 31, 2021  226,075,381   2,750,000   22,608   2,750   424,317   35,324,321   (29,608,363)  6,165,633 
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 shares 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

 


 

 

HEALTHLYNKED CORP.

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

NINE MONTHS ENDED SEPTEMBER 30, 2021

(UNAUDITED)

  Number of Shares        Common  Additional     Total 
  Common  Preferred  Common  Preferred  Stock  Paid-in  Accumulated  Shareholders’ 
  Stock  Stock  Stock  Stock  Issuable  Capital  Deficit  Equity 
  (#)  (#)  ($)  ($)  ($)  ($)  ($)  ($) 
Balance at December 31, 2020  187,967,881   2,750,000   18,797   2,750   262,273   22,851,098   (21,784,910)  1,350,008 
                                 
Sales of common stock  14,793,864   ---   1,479   ---       2,981,367   ---   2,982,846 
Fair value of warrants allocated to proceeds of common stock  ---   ---   ---   ---       1,406,515   ---   1,406,515 
Conversion of convertible notes payable to common stock  13,538,494   ---   1,354   ---       4,060,194   ---   4,061,548 
Fair value of warrants issued in connection with conversion and retirement of convertible notes payable  ---   ---   ---   ---   ---   3,201,138   ---   3,201,138 
Fair value of warrants issued for professional services  ---   ---   ---   ---   ---   32,426   ---   32,426 
Consultant and director fees payable with common shares and warrants  475,000   ---   48   ---   114,500   122,781   ---   237,329 
Shares and options issued pursuant to employee equity incentive plan  240,310   ---   24   ---   (14,956)  52,337   ---   37,405 
Exercise of stock warrants  9,047,332   ---   905   ---   62,500   613,316   ---   676,721 
Exercise of stock options  12,500   ---   1   ---       3,149   ---   3,150 
Net loss  ---   ---   ---   ---   ---   ---   (7,823,453)  (7,823,453)
                                 
Balance at March 31, 2021  226,075,381   2,750,000   22,608   2,750   424,317   35,324,321   (29,608,363)  6,165,633 
                                 
Sales of common stock  374,177   ---   37   ---   ---   177,642   ---   177,679 
Fair value of warrants allocated to proceeds of common stock  ---   ---   ---   ---   ---   82,320   ---   82,320 
Fair value of warrants issued for professional services  ---   ---   ---   ---   ---   3,603   ---   3,603 
Consultant and director fees payable with common shares and warrants  93,492   ---   9   ---   68,807   17,990   ---   86,806 
Shares and options issued pursuant to employee equity incentive plan  875,047   ---   88   ---   (147,791)  211,358   ---   63,655 
Exercise of stock warrants  1,225,000   ---   123   ---   62,500   152,378   ---   215,001 
Exercise of stock options  133,000   ---   13   ---   ---   13,287   ---   13,300 
Net loss  ---   ---   ---   ---   ---   ---   (505,764)  (505,764)
                                 
Balance at June 30, 2021  228,776,097   2,750,000   22,878   2,750   407,833   35,982,899   (30,114,127)  6,302,233 
Sales of common stock  4,703,704   ---   470   ---   ---   1,608,874   ---   1,609,344 
Fair value of warrants allocated to proceeds of common stock  ---   ---   ---   ---   ---   690,577   ---   690,577 
Contingent acquisition consideration issuable  ---   ---   ---   ---   366,300   ---   ---   366,300 
Fair value of warrants issued for professional services  ---   ---   ---   ---   ---   3,603   ---   3,603 
Consultant and director fees payable with common shares and warrants  8,750   ---   1   ---   84,785   4,942   ---   89,728 
Shares and options issued pursuant to employee equity incentive plan  375,000   ---   37   ---   (5,550)  25,955   ---   20,442 
Exercise of stock warrants  1,840,278   ---   184   ---   (125,000)  181,066   ---   56,250 
Net loss  ---   ---   ---   ---   ---   ---   (368,017)  (368,017)
Balance at September 30, 2021  235,703,829   2,750,000   23,570   2,750   728,368   38,497,916   (30,482,144)  8,770,460 

See the accompanying notes to these Unaudited Condensed Consolidated Financial Statements



HEALTHLYNKED CORP.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

 Three Months Ended
March 31,
  Nine Months Ended
September 30,
 
 2022  2021  2022  2021 
Cash Flows from Operating Activities          
Net loss $(1,168,123) $(7,823,453) $(4,541,745) $(8,697,234)
Adjustments to reconcile net loss to net cash used in operating activities:                
Depreciation and amortization  203,890   211,658   622,306   623,438 
Stock based compensation, including amortization of deferred equity compensation  116,735   307,160   326,485   574,998 
Amortization of debt discount  21,020   --- 
Stock-based financing cost  100,000   --- 
Loss on extinguishment of debt     5,589,994   ---   4,957,168 
Change in fair value of debt     19,246   ---   19,246 
Change in fair value of contingent acquisition consideration  (438,322)  635,700   (665,573)  234,678 
Changes in operating assets and liabilities:                
Accounts receivable  8,160   (38,152)  22,432   (25,831)
Inventory  (20,223)  (16,202)  (40,345)  (11,706)
Prepaid expenses and deposits  26,310   4,032   29,072   (40,516)
ROU lease assets  33,309   24,234 
Right of use lease assets  255,632   78,835 
Accounts payable and accrued expenses  (30,455)  (83,854)  370,413   800,732 
Lease liability  (34,710)  (24,956)  (254,756)  (82,102)
Contract liabilities  (39,489)  (22,366)  (7,585)  (58,890)
Net cash used in operating activities  (1,342,918)  (1,216,959)  (3,762,644)  (1,627,184)
                
Cash Flows from Investing Activities                
Acquisition, net of cash acquired  (313,802)  --- 
Payment of contingent acquisition consideration  (207,384)  (322,106)
Acquisition of property and equipment  (22,014)  (7,399)  (23,564)  (12,475)
Net cash used in investing activities  (22,014)  (7,399)  (544,750)  (334,581)
                
Cash Flows from Financing Activities                
Proceeds from sale of common stock     4,389,361   706,787   6,949,281 
Proceeds from exercise of options and warrants     65,650   ---   350,200 
Repayment of vendor loans payable     (51,109)
Proceeds from notes payable  522,500   --- 
Repayment of notes payable  (55,379)  (51,109)
Net cash provided by financing activities     4,403,902   1,173,908   7,248,372 
                
Net increase (decrease) in cash  (1,364,932)  3,179,544 
Net (decrease) increase in cash  (3,133,486)  5,286,607 
Cash, beginning of period  3,291,646   162,184   3,291,646   162,184 
                
Cash, end of period $1,926,714  $3,341,728  $158,160  $5,448,791 
                
Supplemental disclosure of cash flow information:                
Cash paid during the period for interest $  $232  $2,514  $232 
Cash paid during the period for income tax $  $  $---  $--- 
Schedule of non-cash investing and financing activities:                
Fair value of shares issued as purchase price consideration $103,804  $--- 
Common stock issuable issued during period $37,778  $66,161  $112,528  $192,547 
Net carrying value of equity liabilities (assets) written off $21,359  $--- 
Proceeds from sale of common stock under Standby Equity Purchase Agreement applied to note payable balance $125,618  $--- 
Debt discount and original issue discount allocated to proceeds of notes payable $38,500  $--- 
Recognition of operating lease: right of use asset and lease liability $284,905  $--- 
Forgiveness of government loans $---  $632,826 
Fair value of warrants issued for professional service $---  $36,030 
Incremental fair value of warrants modified to extend maturity date of convertible notes payable $  $126,502  $---  $126,502 
Conversion of convertible note payable to common shares $  $4,061,549  $---  $4,061,549 
Fair value of warrants issued in connection with conversion of convertible notes payable $  $3,074,637  $---  $3,074,637 
Accrued liabilities relieved upon cashless exercise of warrants $  $614,221  $---  $614,221 
Fair value of liability-classified equity instruments cancelled (net of earned) $25,625  $ 
Contingent acquisition consideration payable in common stock $---  $366,300 

See the accompanying notes to these Unaudited Condensed Consolidated Financial Statements

 


 

HEALTHLYNKED CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31,SEPTEMBER 30, 2022

(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.

 

WeThe Company currently operateoperates in four distinct divisions: the Health Services Division, the Digital Healthcare Division, the ACO/MSO (Accountable Care Organization / Managed Service Organization) Division, and the Medical Distribution Division. The Health Services division is comprised of the operations of (i) Naples Women’s Center (“NWC”), a multi-specialty medical group including OB/GYN (both Obstetrics and Gynecology) and General Practice, (ii) Naples Center for Functional Medicine (“NCFM”), a Functional Medical Practice engaged in improving the health of its patients through individualized and integrative health care, and (iii) Bridging the Gap Physical Therapy (“BTG”), a physical therapy practice in Bonita Springs, FL that provides hands-on functional manual therapy techniques to speed patients’ recovery and manage pain without pain medication or surgery.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 ACO/MSO Division is comprised of the operations of Cura Health Management LLC (“CHM”) and its subsidiary ACO Health Partners LLC (“AHP”), which were acquired by the Company on May 18, 2020. CHM and AHP operate an Accountable Care Organization (“ACO”) and Managed Service Organization (“MSO”) that assists physician practices in providing coordinated and more efficient care to patients via the Medicare Shared Savings Program (“MSSP”) as administered by the Centers for Medicare and Medicaid Services (the “CMS”), which rewards providers for efficiency in patient care. The Medical Distribution Division is comprised of the operations of MedOffice Direct LLC (“MOD”), a virtual distributor of discounted medical supplies selling to both consumers and medical practices throughout the United States acquiredStates. As described in Note 18, “Subsequent Events,” during October 2022, the Company’s Board of Directors approved the sale of the ACO/MSO Division. The Company expects to complete sale by first quarter 2023 and use the Company on October 19, 2020.cash proceeds generated from the sale to supplement its operating cash requirements and pursue additional acquisitions.

 

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, 2021 and 2020, 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, 2022, as amended by the Company’s Form 10-K/A filed with the Commission on June 3, 2022. 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 March 31,September 30, 2022 are not necessarily indicative of results for the entire year ending December 31, 2022.

 

On a consolidated basis, the Company’s operations are comprised of the parent company, HealthLynked Corp., and its sixseven subsidiaries: NWC, NCFM, BTG, CHM, AHP, MOD and MOD.AEU. All significant intercompany transactions and balances have been eliminated upon consolidation. In addition, certain amounts in the prior periods’ consolidated financial statements have been reclassified to conform to the current period presentation.

 

NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES

 

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

 

Basis of Presentation

 

The accompanying condensed consolidated financial statements have been prepared in conformity with GAAP.

 

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

 


 

 

HEALTHLYNKED CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31,SEPTEMBER 30, 2022

(UNAUDITED)

 

NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

Use of Estimates

 

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

 

Revenue Recognition

 

Patient service revenue

 

Patient service revenue is earned for GYN 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.

 

Performance obligations are determined based on the nature of the services provided by the Company. Revenue for performance obligations satisfied over time, which includes prepaid BTG physical therapy bundles for which performance obligations are satisfied over time as visits are incurred, is recognized based on actual charges incurred in relation to total expected charges. The Company believes that this method provides a faithful depiction of the transfer of services over the term of the performance obligation based on the inputs needed to satisfy the obligation. Revenue for performance obligations satisfied at a point in time, which includes all patient service revenue other than 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 doesis not believe it is required to provide additional goods or services to the patient.

 

The Company determines the transaction price based on standard charges for goods and services provided, reduced by contractual adjustments provided to third-party payors, discounts provided to uninsured patients in accordance with the Company’s policy, and/or implicit price concessions provided to uninsured patients. The Company determines its estimatesEstimates 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, 2022 or 2021 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.

 


 

HEALTHLYNKED CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31,SEPTEMBER 30, 2022

(UNAUDITED)

 

NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

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

 

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

 

The Company also provides services to uninsured patients, and offers those uninsured patients a discount, either by policy or law, from standard charges. The Company estimates the transaction price for patients with deductibles and coinsurance and from those who are uninsured based on historical experience and current market conditions. The initial estimate of the transaction price is determined by reducing the standard charge by any contractual adjustments, discounts, and implicit price concessions. Subsequent changes to the estimate of the transaction price are generally recorded as adjustments to patient service revenue in the period of the change. Patient services provided by NCFM, BTG and BTGAEU are provided on a cash basis and not submitted through third party insurance providers. Contract liabilities related to prepaid BTG patient service revenue were $22,461$23,015 and $42,530 as of March 31,September 30, 2022 and December 31, 2021, respectively.

 

Medicare Shared Savings Revenue

 

The Company earns Medicare shared savings revenue based on performance of the population of patient lives for which it is accountable as an ACO against benchmarks established by the MSSP. Because the MSSP, which was formed in 2012, is relatively new and has limited historical experience, the Company cannot accurately predict the amount of shared savings that will be determined by CMS. Such amounts are determined annually when the Company is notified by CMS of the amount of shared savings earned. Accordingly, the Company recognizes Medicare shared savings revenue in the period in which the CMS notifies the Company of the exact amount of shared savings to be paid, which historically has occurred during the fiscal quarter ended September 30 for the program year ended December 31 of the previous year. Based on the ACO operating agreements, the Company bears all costs of the ACO operations until revenue is recognized. At that point, the Company shares in up to 100% of the revenue to recover its costs incurred. Because of the timing of recognition of Medicare shared savings revenue, no Medicare shared savings revenue was recognized in the three months ended March 31, 2022 and 2021.

 

Consulting and Event Revenue

 

Also pursuant to ASC 606, the Company recognizes service revenue as services are provided, with any unearned but paid amounts recorded as a contract liability at each balance sheet date. Contract liabilities related to consulting revenue were $-0-$25,000 and $25,000 as of March 31,September 30, 2022 and December 31, 2021, respectively. Event revenue, comprised of admission fees for summit events, is recognized when an event is held.

 


HEALTHLYNKED CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2022

(UNAUDITED)

NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Product Revenue

 

Revenue is derived from the distribution of medical products that are sourced from a third party. The Company recognizes revenue at a point in time when title transfers to customers and the Company has no further obligation to provide services related to such products, which occurs when the product ships. The Company is the principal in its revenue transactions and as a result revenue is recorded on a gross basis. The Company has determined that it controls the ability to direct the use of the product provided prior to transfer to a customer, is primarily responsible for fulfilling the promise to provide the product to its customer, has discretion in establishing prices, and ultimately controls the transfer of the product to the customer. Shipping and handling costs billed to customers are recorded in revenue. Contract liabilities related to product revenue were $10,887$17,237 and $5,308 as of March 31,September 30, 2022 and December 31, 2021, respectively. There were no contract assets as of March 31,September 30, 2022 or December 31, 2021.

 



HEALTHLYNKED CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2022

(UNAUDITED)

NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

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

 

The Company maintains a return policy that allows customers to return a product within a specified period of time prior to and subsequent to the expiration date of the product. The Company analyzes the need for a product return allowance at the end of each period based on eligible products. Product return allowance was $9,526$5,643 and $14,834 and as of March 31,September 30, 2022 and December 31, 2021, respectively.

 

Contract Liabilities

 

Contract liabilities represent payments from customers for consulting services, patient services and medical products that precede the Company’s service or product fulfillment performance obligation. The Company’s total contract liabilities balance was $33,348were $65,252 and $72,838 as of March 31,September 30, 2022 and December 31, 2021, respectively.

 

Provider shared savings expense

 

Provider shared savings expense represents the ongoing operating expenses of the ACO and annual payments made to the ACO’s participating providers.providers from shared savings revenue payments received from CMS (the “Annual Provider Payment”). The pool of provider shared savings expense paid to all participating providers,funds available for the Annual Provider Payment, as well as the amounts paid to each individual participating provider from the pool, is determined by ACO management. Shared Savings expensemanagement after an annual determination of Medicare shared savings revenue is made by CMS. Expenses related to ongoing operation of the ACO may be deducted from the Medicare shared savings revenue before determining the Annual Provider Payment. Such expenses are recognized in “Provider shared savings expense” as incurred. Expense related to the Annual Provider Payment is recognized in the period in which the size of the paymentAnnual Provider Payment pool is determined, which typically corresponds to the period in which the shared saving payment is received from CMS and shared savings revenue is recognized. This typically occurs in the second half of the year following the completion of the program year. Because of the timing of recognition of Medicare shared savings revenue, there was no Medicare shared savings revenue or related provider shared savings expense recognized in the three months ended March 31, 2022 and 2021.

 

Cash and Cash Equivalents

 

For financial statement purposes, the Company considers all highly liquid investments with original maturities of threesix months or less to be cash and cash equivalents. Accounts at each institution are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to $250,000. As of March 31,September 30, 2022 and December 31, 2021, the Company had $1,666,580$-0- and $2,957,040 in excess of the FDIC insured limit, respectively.

 

Accounts Receivable

 

Trade receivables are carried at their estimated collectible amounts. Trade credit is generally extended on a short-term basis; thus trade receivables do not bear interest. Trade accounts receivable are periodically evaluated for collectability based on past collectability of the insurance companies, government agencies, and customers’ accounts receivable during the related period which generally approximates 48% of total billings. Trade accounts receivable are recorded at this net amount. As of March 31,September 30, 2022 and December 31, 2021, the Company’s gross patient services accounts receivable were $174,493$84,905 and $193,363, respectively, and net patient services accounts receivable were $76,890$41,349 and $86,287, respectively, based upon net reporting of accounts receivable. The Company also had consulting services receivable of $22,506 and $-0- as of September 30, 2022 and December 31, 2021, respectively. As of March 31,September 30, 2022 and December 31, 2021, the Company’s allowance of doubtful accounts was $13,972$-0- and $13,972, respectively.

 


HEALTHLYNKED CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2022

(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.

 


HEALTHLYNKED CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2022

(UNAUDITED)

NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. The Company’s leases do not provide an implicit rate. The Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. The ROU asset also includes any lease payments made and excludes lease incentives. Lease expense for lease payments is recognized on a straight-line basis over the lease term. The Company adopted ASU 2016-02 in the first quarter of 2019. See Note 78 for more complete details on balances as of the reporting periods presented herein.  The adoption had no material impact on cash provided by or used in operating, investing or financing activities on the Company’s consolidated statements of cash flows.

 

Inventory

 

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

 

Goodwill and Intangible Assets

 

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

 

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

 

The Company also maintains intangible assets with indefinite lives, which are not amortized. These intangibles are tested for impairment on an annual basis and more often if circumstances require. Impairment losses are recognized whenever the implied fair value of these assets is less than their carrying value. No impairment charges were recognized in the three and nine months ended March 31,September 30, 2022 andor 2021.

 

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.

 


HEALTHLYNKED CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2022

(UNAUDITED)

NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

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

 


HEALTHLYNKED CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2022

(UNAUDITED)

NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Convertible Notes

 

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

 

Government Notes Payable

 

During 2020, the Company and certain of its subsidiaries received loans under the Paycheck Protection Program (the “PPP”). The PPP loans, administered by the U.S. Small Business Administration (the “SBA”), were issued under the Coronavirus Aid, Relief, and Economic Security Act, also known as the CARES Act. Pursuant to the terms of the PPP, principal amounts may be forgiven if loan proceeds are used for qualifying expenses as described in the CARES Act, including costs such as payroll, benefits, employer payroll taxes, rent and utilities. The Company accounts for forgiveness of government loans pursuant to FASB ASC 470, “Debt,” (“ASC 470”). Pursuant to ASC 470, loan forgiveness is recognized in earnings as a gain on extinguishment of debt when the debt is legally released by the lender.

 

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.

 


HEALTHLYNKED CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2022

(UNAUDITED)

NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

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.

 


HEALTHLYNKED CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2022

(UNAUDITED)

NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Stock-Based Compensation

 

The Company accounts for stock-based compensation to employees and nonemployees under ASC 718 “Compensation – Stock Compensation” using the fair value-based method. Under this method, compensation cost is measured at the grant date based on the value of the award and is recognized over the service period, which is usually the vesting period. This guidance establishes standards for the accounting for transactions in which an entity exchanges its equity instruments for goods or services. It also addresses transactions in which an entity incurs liabilities in exchange for goods or services that are based on the fair value of the entity’s equity instruments or that may be settled by the issuance of those equity instruments. 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. No income tax has been provided for the three and nine months ended March 31,September 30, 2022 and 2021, since the Company has sustained a loss for both periods. Due to the uncertainty of the utilization and recoverability of the loss carry-forwards and other deferred tax assets, management has determined a full valuation allowance for the deferred tax assets, since it is more likely than not that the deferred tax assets will not be realizable.

 

Recurring Fair Value Measurements

 

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

 

Deemed Dividend

 

The Company incurs a deemed dividend on Series B Convertible Preferred Voting Stock (the “Series B Preferred”). As the intrinsic price per share of the Series B Preferred was less than the deemed fair value of the Company’s common stock on the date of issuance of the Series B Preferred, the Series B Preferred contains a beneficial conversion feature as described in FASB ASC 470-20, “Debt with Conversion and Other Options.” The difference in the stated conversion price and estimated fair value of the common stock is accounted for as a beneficial conversion feature and affects income or loss available to common stockholders for purposes of earnings per share available to common stockholders. The Company incurs further deemed dividends on certain of its warrants containing a down round provision equal to the difference in fair value of the warrants before and after the triggering of the down round adjustment.

 


HEALTHLYNKED CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2022

(UNAUDITED)

NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Net Loss per Share

 

Basic net income (loss) per common share is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding during the period. During the three and nine months ended March 31,September 30, 2022 and 2021, the Company reported a net loss and excluded all outstanding stock options, warrants and other dilutive securities from the calculation of diluted net loss per common share because inclusion of these securities would have been anti-dilutive. As of March 31,September 30, 2022 and December 31, 2021, potentially dilutive securities were comprised of (i) 59,366,99262,259,569 and 59,796,992 warrants outstanding, respectively, (ii) 3,306,2503,999,250 and 3,456,250 stock options outstanding, respectively, (iii) 232,036219,768 and 302,050 unissued shares subject to future vesting requirements granted pursuant to the Company’s Employee Incentive Plan, (iv) up to 1,329,469 common shares issuable that are earned but not paid under consulting and (iv)director compensation arrangements, and (v) up to 13,750,000 and 13,750,000 shares of common stock issuable upon conversion of Series B Preferred.



HEALTHLYNKED CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2022

(UNAUDITED)

NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

Common stock awards

 

The Company grants common stock awards to non-employees in exchange for services provided. The Company measures the fair value of these awards using the fair value of the services provided or the fair value of the awards granted, whichever is more reliably measurable. The fair value measurement date of these awards is generally the date the performance of services is complete. The fair value of the awards is recognized on a straight-line basis as services are rendered. The share-based payments related to common stock awards for the settlement of services provided by non-employees is recorded on the consolidated statement of comprehensive loss in the same manner and charged to the same account as if such settlements had been made in cash. 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.

 

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, warrants granted in connection with ongoing arrangements are more fully described in Note 13, Shareholders’ Equity.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 four operating segments: Health Services (multi-specialty medical group including the NWC OB/GYN practice, the NCFM functional medicine practice, acquired in April 2019 and the BTG physical therapy practice, launched in 2020)and the AEU cosmetic services practice), Digital Healthcare (develops and markets the “HealthLynked Network,” an online personal medical information and record archive system), ACO/MSO (comprised of the ACO/MSO business acquired with CHM in May 2020, which assists physician practices in providing coordinated and more efficient care to patients via the MSSP), and Medical Distribution (comprised of the operations of MOD, a virtual distributor of discounted medical supplies selling to both consumers and medical practices acquired by the Company on October 19, 2020)practices).


  

HEALTHLYNKED CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2022

(UNAUDITED)

NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Recently Issued Accounting 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 is currently evaluating the impact the adoption of this guidance may have on its consolidated financial statements.

 

In August 2020, the FASB issued ASU 2020-06 Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40) related to the measurement and disclosure requirements for convertible instruments and contracts in an entity’s own equity. The pronouncement simplifies and adds disclosure requirements for the accounting and measurement of convertible instruments and the settlement assessment for contracts in an entity’s own equity. This pronouncement is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2021 and early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. The Company is currently evaluating the impact that this standard will have on its consolidated financial statements.

 


HEALTHLYNKED CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2022

(UNAUDITED)

NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

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 is currently evaluating the impact and timing of adoption of this guidance.

 

Recently Adopted Pronouncements

 

In December 2019, the FASB issued ASU 2019-12 Simplifying the Accounting for Income Taxes, which eliminates the need for an organization to analyze whether the following apply in a given period: (1) exception to the incremental approach for intra-period tax allocation; (2) exceptions to accounting for basis differences when there are ownership changes in foreign investments; and (3) exceptions in interim period income tax accounting for year-to-date losses that exceed anticipated losses. ASU No. 2019-12 is effective for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years. The Company adopted this standard in the year ended December 31, 2021. The adoption did not have a material effect on the Company’s consolidated financial statements.

 

In May 2021, the Financial Accounting Standards Board (“FASB”) issued ASU 2021-04, Earnings Per Share (Topic 260), Debt—Modifications and Extinguishments (Subtopic 470-50), Compensation—Stock Compensation (Topic 718), and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40). ASU 2021-04 clarifies and reduces diversity in an issuer’s accounting for modifications or exchanges of freestanding equity-classified written call options (for example, warrants) that remain equity classified after modification or exchange. The ASU provides guidance to clarify whether an issuer should account for a modification or an exchange of a freestanding equity-classified written call option that remains equity classified after modification or exchange as (1) an adjustment to equity and, if so, the related earnings per share effects, if any, or (2) an expense and, if so, the manner and pattern of recognition. ASU 2021-04 is effective for annual periods beginning after December 15, 2021, including interim periods within those fiscal years. Early adoption is permitted, including adoption in an interim period. The Company is currently evaluating the impact that this standard will have on its consolidated financial statements. The Company adopted this standard for the year ended December 31, 2022. 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.

 


HEALTHLYNKED CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2022

(UNAUDITED)

NOTE 3 – LIQUIDITY AND GOING CONCERN ANALYSIS

 

Liquidity and Going Concern

 

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 (May 16,(November 14, 2022). 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 May 16,November 14, 2023.

 

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 March 31,September 30, 2022, the Company had cash balances of $1,926,714,$158,160, a working capital deficit of $503,527$1,989,943 and an accumulated deficit of $33,373,312.$36,746,934. For the threenine months ended March 31,September 30, 2022, the Company had a net loss of $1,168,123,$4,541,745, net cash used by operating activities of $1,342,918,$3,762,644, and no cash$1,173,908 provided by financing activities. The Company expects to continue to incur net losses and have significant cash outflows for at least the next 12 months.

 



HEALTHLYNKED CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2022

(UNAUDITED)

NOTE 3 – LIQUIDITY AND GOING CONCERN ANALYSIS (CONTINUED)

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 condensed consolidated financial statements were issued.

 

On April 20, 2021,July 5, 2022, the Company filedentered into a shelf registration statementStandby Equity Purchase Agreement (the “SEPA”) with YA II PN, Ltd. (“Yorkville”) (See Note 13, “Shareholders’ Equity,” below for additional information on form S-3 that was declared effectivethe 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. The sale of common stock pursuant to the SEPA provides the Company with additional cash flow availability for operational purposes. Because the purchase price per share to be paid by Yorkville for the shares of common stock sold by the Securities and Exchange CommissionCompany to Yorkville pursuant to the SEPA, if any, will fluctuate based on April 26, 2021 (the “Shelf Registration”). The Shelf Registration registered for resale up to $50,000,000the market prices of the Company’s common stock. During August 2021,stock during the applicable pricing period, the Company sold 3,703,704cannot 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 three and nine months ended September 30, 2022, the Company made 11 advances under the SEPA, receiving $297,405 in proceeds for the issuance of 2,708,100 shares of common shares and 1,851,852 five-year warrantsstock, of which $125,618 was applied to the balance of the Promissory Note (as defined below).

On July 19, 2022, the Company issued to Yorkville a promissory note with an exerciseinitial principal amount equal to $550,000 (the “Promissory Note”) at a purchase price of $0.65 to an institutional investor at an offering price of $0.54 per share pursuantequal to the Shelf Registration, generating grossprincipal amount of the Promissory Note less any original issue discounts and fees. The Promissory Note will mature on the six-month anniversary of execution (See Note 12, “Notes Payable,” below for additional information). During the three and nine months ended September 30, 2022, the Company made payments of $149,595 against the Promissory Note, including $125,618 applied from proceeds of $2,000,000. The Company may still make sales of common stock up to an additional $48,000,000 under the Shelf Registration. Management intends to alleviate the conditionsSEPA. The unpaid principal balance as of September 30, 2022 was $411,405.

As described above by raising additional capital from the Shelf Registration. However, there is no assurance that management’s plans will be successful. The Company’s ability to obtain additional financingfurther in the debt and equity capital markets is subject to several factors, including market and economic conditions,Note 18, “Subsequent Events,” during October 2022, the Company’s performanceBoard of Directors approved a plan to sell the ACO/MSO Division, comprised of the operations of CHM and investor sentiment with respect toits subsidiary AHP, which were acquired by the Company on May 18, 2020. CHM and AHP operate an ACO that assists physician practices in providing coordinated and more efficient care to patients via the MSSP, as administered by the CMS, which rewards providers for efficiency in patient care. The Company expects to use the cash proceeds generated from a sale to supplement its industry.operating cash requirements and pursue additional acquisitions. The Company expects to complete a sale by the first quarter of 2023.

 

Without raising additional capital, either via additional advances made pursuant to the Shelf RegistrationSEPA or from other sources, there is substantial doubt about the Company’s ability to continue as a going concern through May 16,November 14, 2023. The accompanying condensed 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.

NOTE 4 – ACQUISITION

 

COVID-19On May 13, 2022, the Company acquired AEU, a patient service facility specializing in minimally and non-invasive cosmetic services including fat reduction, body sculpting, wrinkle reduction, hair removal, IV hydration, and feminine rejuvenation. The Company accounted for the transaction as an acquisition of a business pursuant to ASC 805, “Business Combinations” (“ASC 805”). Following the acquisition, AEU was incorporated into the Company’s Health Services segment.

 

A novel strainUnder the terms of coronavirus, COVID-19, that was first identified in China in December 2019, has surfaced in several regions acrossacquisition, the world and resulted in travel restrictions and business slowdowns or shutdowns in affected areas. In March 2020, the World Health Organization declared the outbreakCompany paid AEU equity holders consideration of COVID-19 a pandemic. The outbreak(i) $139,923 cash (less $11,198 cash on hand at AEU as of the pandemic is materially adversely affectingclosing date), (ii) payment in cash of direct financial obligation of AEU on, or in close proximity to, the date of the business combination, in the amount of $185,077, and (iii) 792,394 shares of Company common stock at closing with a fair value of $103,804 determined using the average closing price of the Company’s employees, patients, communities and business operations, as well ascommon shares for the U.S. economy and financial markets.five days preceding the acquisition date. The further spreadtotal consideration fair value represents a transaction value of COVID-19, and$417,606. The following table summarizes the requirement to take action to limit the spreadfair value of the illness, may impact our ability to carry out our business as usual and may materially adversely impact global economic conditions, our business and financial condition, including our potential to conduct financings on terms acceptable to us, if at all. The extent to which COVID-19 may impact our business will depend on future developments, which are highly uncertain and cannot be predicted with confidence, such as the ultimate geographic spread of the disease, the duration of the outbreak, travel restrictions and social distancing in the United States and other countries, business closures or business disruptions and the effectiveness of actions taken in the United States and other countries to contain and treat the disease. In response to COVID-19, the Company implemented additional safety measures in its patient services locations and its corporate headquarters.consideration paid:

Fair value of shares issued at closing $103,804 
Cash consideration  139,923 
Payment of AEU debt obligations in cash  185,077 
Less cash received  (11,198)
Total Fair Value of Consideration Paid $417,606 


 

HEALTHLYNKED CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31,SEPTEMBER 30, 2022

(UNAUDITED)

NOTE 4 – ACQUISITION (CONTINUED)

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

Inventory $13,272 
Fixed assets  152,759 
Right of use lease asset  80,264 
Accounts payable and accruals  (33,037)
Loans payable  (35,346)
Lease liability  (80,264)
Fair Value of Identifiable Assets Acquired and Liabilities Assumed $97,648 

Goodwill of $319,958 arising from the acquisition consists of value associated with the legacy name. None of the goodwill recognized is expected to be deductible for income tax purposes.

The following table represents the pro forma consolidated income statement as if AEU had been included in the consolidated results of the Company for the nine months ended September 30, 2022 and 2021.

  Nine Months Ended
September 30,
 
  2022  2021 
Revenue $4,919,274  $5,245,035 
Net loss $(4,455,431) $(8,568,344)

These amounts have been calculated after applying the Company’s accounting policies and adjusting the results of AEU to reflect the additional depreciation that would have been charged assuming the fair value adjustments to property, plant and equipment had been applied on January 1 of the period presented.

NOTE 45 – PREPAID EXPENSES AND OTHER

 

Prepaid and other expenses as of March 31,September 30, 2022 and December 31, 2021 were as follows:

 March 31, December 31,  September 30, December 31, 
 2022  2021  2022  2021 
          
Insurance prepayments $17,733  $25,020  $20,899  $25,020 
Other expense prepayments  31,837   50,860   30,910   50,860 
Rent deposits  49,125   49,125   44,125   49,125 
Deferred equity compensation  117,188   151,250   83,125   151,250 
Total prepaid expenses and other  215,883   276,255   179,059   276,255 
Less: long term portion  (130,188)  (138,625)  (84,091)  (138,625)
Prepaid expenses and other, current portion $85,695  $137,630  $94,968  $137,630 

 

Deferred equity compensation reflects common stock grants made in 2021 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 $165,000.$255,000. Amortization was $1,359 and $-0-, respectively, in the three months ended March 31,September 30, 2022 and 2021 was $9,063$19,484 and $-0-, respectively.respectively, in the nine months ended September 30, 2022 and 2021. At inception, the Company recorded a corresponding liability captioned “Liability-classified equity instruments.”

 


HEALTHLYNKED CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2022

(UNAUDITED)

NOTE 56 – PROPERTY, PLANT, AND EQUIPMENT

 

Property, plant and equipment as of March 31,September 30, 2022 and December 31, 2021 were as follows:

 March 31, December 31,  September 30, December 31, 
 2022  2021  2022  2021 
          
Medical equipment $493,854  $484,126  $493,854  $484,126 
Furniture, office equipment and leasehold improvements  162,154   149,868   316,463   149,868 
                
Total property, plant and equipment  656,008   633,994   810,317   633,994 
Less: accumulated depreciation  (308,480)  (283,512)  (368,985)  (283,512)
                
Property, plant and equipment, net $347,528  $350,482  $441,332  $350,482 

 

Depreciation expense during the three months ended March 31,September 30, 2022 and 2021 was $24,969$30,537 and $26,896,$26,343, respectively. Depreciation expense during the nine months ended September 30, 2022 and 2021 was $85,473 and $80,764, respectively.

 


HEALTHLYNKED CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2022

(UNAUDITED)

NOTE 67 – INTANGIBLE ASSETS AND GOODWILL

 

IntangibleIdentifiable intangible assets as of March 31,September 30, 2022 and December 31, 2021 were as follows:

 

 March 31, December 31,  September 30, December 31, 
 2022  2021  2022  2021 
          
NCFM: Medical database $1,101,538  $1,101,538  $1,101,538  $1,101,538 
NCFM: Website  41,000   41,000   41,000   41,000 
CHM: ACO physician contracts  1,073,000   1,073,000   1,073,000   1,073,000 
MOD: Website  3,538,000   3,538,000   3,538,000   3,538,000 
                
Total intangible assets  5,753,538   5,753,538   5,753,538   5,753,538 
Less: accumulated amortization  (1,052,338)  (873,417)  (1,410,250)  (873,417)
                
Intangible assets, net $4,701,200  $4,880,121  $4,343,288  $4,880,121 

Goodwill as of September 30, 2022 and December 31, 2021 was as follows:

  September 30,  December 31, 
  2022  2021 
       
CHM $381,856  $381,856 
MOD  766,249   766,249 
AEU  319,958   --- 
         
Goodwill $1,468,063  $1,148,105 

 

Goodwill and intangible assets arose from the acquisitions of NCFM in April 2019, CHM in May 2020, and MOD in October 2020.2020, and AEU in May 2022. The NCFM medical database is assumed to have an indefinite life and is not amortized and the website is being amortized on a straight-line basis over its estimated useful life of five years. The CHM ACO physician contracts are assumed to have an indefinite life and are not amortized. The MOD website is being amortized on a straight-line basis over its estimated useful life of five years.

 

Goodwill represents the excess of consideration transferred over the fair value of the net identifiable assets acquired related to the acquisitionacquisitions of CHM, and MOD, and amounts to $1,148,105 as of March 31, 2022 and December 31, 2021.AEU.

 



HEALTHLYNKED CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2022

(UNAUDITED)

NOTE 7 – INTANGIBLE ASSETS AND GOODWILL (CONTINUED)

Amortization expense related to intangible assets in the three months ended March 31,September 30, 2022 and 2021 was $178,921$178,967 and $184,762,$178,968, respectively. Amortization expense in the nine months ended September 30, 2022 and 2021 was $536,833 and $542,674, respectively. No impairment charges were recognized related to goodwill and intangible assets in the three and nine months ended March 31,September 30, 2022 andor 2021.

 

NOTE 78 – LEASES

 

The Company has separate operating leases for office space related to its NWC, NCFM, BTG and BTGAEU practices, two separate leases relating to its corporate headquarters, and a copier lease that expire in July 2023, May 2022,2025, March 2023, March 2026, November 2023, November 2023 and January 2027, respectively. As of March 31,September 30, 2022, the Company’s weighted-average remaining lease term relating to its operating leases was 1.92.1 years, with a weighted-average discount rate of 18.39%11.36%.

 

The table below summarizes the Company’s lease-related assets and liabilities as of March 31,September 30, 2022 and December 31, 2021:

 March 31, December 31,  September 30, December 31, 
 2022 2021  2022  2021 
Lease assets $499,144  $526,730  $636,267  $526,730 
                
Lease liabilities                
Lease liabilities (short term) $294,442  $288,966  $378,759  $288,966 
Lease liabilities (long term)  204,762   239,225   259,845   239,225 
Total lease liabilities $499,204  $528,191  $638,604  $528,191 

 

Lease expense was $101,394$123,069 and $65,511$99,544 in the three months ended March 31,September 30, 2022 and 2021, respectively, and $31,814 and $241,909 in the nine months ended September 30, 2022 and 2021, respectively.

 


HEALTHLYNKED CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2022

(UNAUDITED)

NOTE 7 – LEASES (CONTINUED)

Maturities of operating lease liabilities were as follows as of March 31,September 30, 2022:

2022 (April to December) $284,905 
2022 (October to December) $119,116 
2023  285,721   396,833 
2024  11,877   126,116 
2025  11,877   74,729 
2026  11,877   18,148 
2027  990   990 
Total lease payments  607,247   735,932 
Less interest  (108,043)  (97,328)
Present value of lease liabilities $499,204  $638,604 

 

NOTE 89 – ACCOUNTS PAYABLE AND ACCRUED EXPENSES

 

Amounts related to accounts payable and accrued expenses as of March 31,September 30, 2022 and December 31, 2021 were as follows:

  March 31,  December 31, 
  2022  2021 
       
Trade accounts payable $356,832  $306,220 
Accrued payroll liabilities  66,282   172,500 
Accrued operating expenses  286,345   265,411 
Accrued interest  50,931   46,712 
  $760,390  $790,843 

  September 30,  December 31, 
  2022  2021 
       
Trade accounts payable $649,185  $306,220 
Accrued payroll liabilities  94,106   172,500 
Accrued operating expenses  391,653   265,411 
Accrued interest  59,349   46,712 
  $1,194,293  $790,843 


HEALTHLYNKED CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2022

(UNAUDITED)

NOTE 910 – CONTRACT LIABILITIES

Amounts related to contract liabilities as of March 31,September 30, 2022 and December 31, 2021 were as follows:

 March 31, December 31,  September 30, December 31, 
 2022  2021  2022  2021 
          
Patient services paid but not provided $22,461  $42,530  $23,015  $42,530 
Consulting services paid but not provided     25,000   25,000   25,000 
Unshipped products  10,887   5,308   17,237   5,308 
 $33,348  $72,838  $65,252  $72,838 

Contract liabilities relate to contracted consulting services at CHM for which payment has been made but services have not yet been rendered as of the measurement date, physical therapy services purchased as a prepaid bundle for which services have not yet been provided, and MOD products that have been ordered and paid for by the customer, but which have not been shipped as of the measurement date. The Company typically satisfies its performance obligations related to such contracts, for which payment is typically made prior to the goods or services being provided, upon completion of service or shipment of product. Payment is typically made in the period prior to the services being provided.

NOTE 1011 – AMOUNTS DUE TO RELATED PARTY AND RELATED PARTY TRANSACTIONS

Amounts due to related parties as of March 31,September 30, 2022 and December 31, 2021 were comprised of deferred compensation payable to the Company’s founder and CEO, Dr. Michael Dent, in the amount of $300,600.

DuringThe Company paid consulting fees to Dr. Dent’s spouse pursuant to a consulting agreement amounting to $39,038 and $33,462 in the three months ended March 31,September 30, 2022 and 2021, respectively, and $100,385 and $111,731 in the Company paid Dr. Dent’s spouse $22,308nine months ended September 30, 2022 and $33,462, respectively, in consulting fees pursuant to a consulting agreement.2021, respectively.


NOTE 12 – NOTES PAYABLE

 

Notes payable as of September 30, 2022 and December 31, 2021 were as follows:

HEALTHLYNKED CORP.

  September 30,  December 31, 
  2022  2021 
       
SBA Disaster relief loans $450,000  $450,000 
Promissory note payable to SEPA investor  411,405   --- 
AEU note payable  7,343   --- 
Face value of notes payable  868,748   450,000 
Less: unamortized discount  (20,879)  --- 
Notes payable, total  847,869   450,000 
Less: long term portion  (450,000)  (450,000)
Notes payable, current portion $397,869  $--- 

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2022

(UNAUDITED)

NOTE 11 – GOVERNMENT AND VENDOR NOTES PAYABLE

Government Notes Payable

During May and June 2020, the Company and certain of its subsidiaries received an aggregate of $621,069 in loans under the PPP. The Company also acquired a PPP loan in the MOD acquisition with an inception date of April 3, 2020 and a face value of $11,757. The PPP loans, administered by SBA, were issued under the Coronavirus Aid, Relief, and Economic Security Act, also known as the CARES Act. The loans bore interest at 1% per annum and were scheduled to mature in May and June 2022. Principal and interest payments were deferred for the first nine months of the loans. Pursuant to the terms of the PPP, principal amounts may be forgiven if loan proceeds are used for qualifying expenses as described in the CARES Act, including costs such as payroll, benefits, employer payroll taxes, rent and utilities. The entirety of the PPP loans outstanding, comprised of $632,826 principal and $6,503 accrued interest, was forgiven in May 2021. As a result of the forgiveness, the Company recognized a gain on extinguishment of debt in the amount of $632,826 and interest income of $6,503 during the nine months ended September 30, 2021.


HEALTHLYNKED CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2022

(UNAUDITED)

NOTE 12 – NOTES PAYABLE (CONTINUED)

During June, July and August 2020, the Company and its subsidiaries received an aggregate of $450,000 in Disaster Relief Loans from the SBA. The loans bear interest at 3.75% per annum and mature 30 years from issuance. Mandatory principal and interest payments were originally scheduled to begin 12 months from the inception date of each loan and were subsequently extended by the SBA until 30 months from the inception date. Installment payments are now scheduled to begin in December 2022.

In connection with the October 19, 2020 acquisition of MOD, the Company acquired a note payable to MOD’s primary product vendor with a remaining principal balance of $79,002 as of the acquisition date and $51,109 as of December 31, 2020. The vendor note was paid in full during the first quarter of 2021.

Interest accrued on government and vendor notes payableSBA loans as of March 31,September 30, 2022 and December 31, 2021 was $28,942$37,359 and $24,723, respectively. Interest expense on the loans was $4,219$4,252 and $7,605$4,226 for the three months ended March 31,September 30, 2022 and 2021, respectively, and $12,636 and $12,594 for the nine months ended September 30, 2022 and 2021, respectively.

NOTE 12 – CONVERTIBLE NOTES PAYABLE

Promissory and Other Notes Payable

On July 19, 2022, pursuant to a Note Purchase Agreement between the Company and Yorkville, dated July 5, 2022, the Company issued to Yorkville the Promissory Note with an initial stated principal amount equal to $550,000 at a purchase price equal to the principal amount of the Promissory Note less any original issue discounts and fees. The Promissory Note includes a 5% original issue discount, accrues interest at a rate of 0%, and will be repaid in five equal monthly installments beginning on August 19, 2022. Each monthly installment includes a 2% payment premium, totaling $561,000 in total cash repayments. The Company received net proceeds of $522,500. At inception, the Company recorded a discount against the note of $38,500, representing the difference between the total required repayments and the net proceeds received, which is being amortized over the repayment period. Amortization expense related to the discount was $18,480 in each of the three and nine months ended September 30, 2022. During the three and nine months ended September 30, 2022, the Company made payments of $149,595 against the Promissory Note , including $125,618 applied from proceeds of sales of common stock under the SEPA. The unpaid principal balance was $411,405 and the unamortized discount balance was $20,020 as of September 30, 2022.

In connection with the May 13, 2022 acquisition of AEU, the Company acquired (i) a bank note payable with a remaining principal balance of $9,689 that was repaid in full during July 2022, and (ii) a note payable to a third-party lender (the “AEU Note”) with a remaining principal balance of $29,057, an original issue discount of $3,400, and a net carrying value of $25,657. Amortization expense related to the AEU Note discount was $2,540 in each of the three and nine months ended September 30, 2022. During the three and nine months ended September 30, 2022, the Company made payments of $14,340 and $21,713, respectively, against the Promissory Note. The unpaid principal balance was $7,343 and the unamortized discount balance was $859 as of September 30, 2022.

Convertible Notes Payable

The Company had no convertible notes payable as of March 31,September 30, 2022 or December 31, 2021.

On January 6, 2021, the holder of the Company’s four remaining fixed rate convertible promissory notes with a face value of $1,038,500 – comprised of a $550,000 6% fixed convertible secured promissory note dated July 7, 2016 (the “$550k Note”), a $50,000 10% fixed convertible commitment fee promissory note dated July 7, 2016 (the “$50k Note”), $81,000 of principal remaining on a $111,000 10% fixed convertible secured promissory note dated May 22, 2017 (the “$111k Note”), and a $357,500 10% fixed convertible note dated April 15, 2019 (the “$357.5k Note” and together with the $550k Note, the $50k Note and the $111k Note, the “Remaining“Extended Notes”) – agreed to extend the maturity date on the RemainingExtended Notes to January 14, 2021. In exchange for the extension, the Company agreed to extend the expiration date of 3,508,333 existing warrants held by the holder (the “Extended Warrants”) from dates between July 2021 and March 2022 until March 2023. Because the fair value of consideration issued was greater than 10% of the present value of the remaining cash flows under the modified RemainingExtended Notes, the transaction was treated as a debt extinguishment and reissuance of new debt instruments pursuant to the guidance of ASC 470-50. A loss on debt extinguishment was recorded in the amount of $126,502 in the yearnine months ended December 31,September 30, 2021, equal to the incremental fair value of the Extended Warrants before and after the modification.


HEALTHLYNKED CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2022

(UNAUDITED)

NOTE 12 – NOTES PAYABLE (CONTINUED)

On January 14, 2021, the Company and the holder of the RemainingExtended Notes entered into a series of agreements pursuant to which (i) the holder agreed to convert the full face value of $1,038,500 and $317,096 of accrued interest on the RemainingExtended Notes into 13,538,494 shares of common stock pursuant to the original conversion terms of the underlying notes, (ii) the holder agreed to a 180-day leak out provision, whereby, from and after January 14, 2021, it may not sell in shares of the Company’s common stock in excess of 5% of the Company’s daily trading volume for the first 90 days and 10% of the Company’s daily volume for the next 90 days, subject to certain exceptions, (iii) the holder agreed to release all security interests and share reserves related to the RemainingExtended Notes, and (iv) the Company issued to the holder a new five-year warrant to purchase 13,538,494 shares of common stock at an exercise price of $0.30 per share. In connection with the conversion, the Company recognized a loss on debt extinguishment of $5,463,492 in the threenine months ended March 31,September 30, 2021, representing the excess of the fair value of the shares and warrant issued at conversion over the carrying value of the host instrument and accrued interest. Following the conversion, the Company had no further convertible notes outstanding.

Prior to conversion, the RemainingExtended Notes were carried at fair value and revalued at each period end, with changes to fair value recorded to the statement of operations under “Change in Fair Value of Debt.” The changes in fair value duringwere $-0- in each of the three months ended March 31,September 30, 2022 and 2021 and were $-0- and $19,246 during the nine months ended September 30, 2022 and 2021, respectively.

Interest expense on convertible notes outstanding were $-0- and $4,372 during the three and nine months ended March 31, 2022September 30, 2021, respectively. There was no interest on convertible notes during the three and 2021 was $-0- and $4,372, respectively.nine months ended September 30, 2022.


HEALTHLYNKED CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2022

(UNAUDITED)

NOTE 13 – SHAREHOLDERS’ EQUITY

Private PlacementsSEPA Advances

During the three months ended March 31, 2021,On July 5, 2022, the Company sold 11,787,766entered into the SEPA with Yorkville, pursuant to which the Company shall have the right, but not the obligation, 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 commitment period commencing on July 5, 2022 and terminating on the earliest of (i) the first day of the month following the 36-month anniversary of the SEPA and (ii) the date on which Yorkville shall have made payment of any advances requested pursuant to the SEPA for shares of the Company’s common stock equal to the commitment amount of 30,000,000 shares of common stock. Each SEPA Advance may be for a number of shares of common stock with an aggregate value of up to greater of: (i) an amount equal to thirty percent (30%) of the aggregate daily volume traded of the Company’s common stock for the three (3) trading days immediately preceding notice from the Company of an Advance, or (ii) 2,000,000 shares of common stock. The shares would be purchased at 96.0% of the average of the daily volume weighted average price of the Company’s common stock as reported by Bloomberg L.P. during regular trading hours during each of the three consecutive trading days commencing on the trading day following the Company’s submission of an Advance notice to Yorkville and would be subject to certain limitations, including that Yorkville could not purchase any shares that would result in 46it owning more than 4.99% of the Company’s outstanding common stock at the time of an Advance. On July 11, 2022, the Company filed a Form S-1 registration statement registering up to 30,000,000 shares of common stock underlying the SEPA. The registration statement was declared effective on July 19, 2022.

As consideration for Yorkville’s irrevocable commitment to purchase shares of common stock at the Company’s direction upon the terms and subject to the conditions set forth in the SEPA, upon execution of the SEPA, the Company paid Yorkville’s structuring and due diligence fees of $10,000 in cash and issued to Yorkville 895,255 shares of common stock with a fair value of $100,000 as a commitment fee. During the three and nine months ended September 30, 2022, the Company recognized $110,000 in other expense “Financing Cost” in the accompanying consolidated statement of operations.

During the three and nine months ended September 30, 2022, the Company made 11 advances under the SEPA, receiving $297,405 in proceeds for the issuance of 2,708,100 shares of common stock, of which $125,618 was applied to the balance of the Promissory Note.

Private Placements

During the nine months ended September 30, 2022, the Company sold 4,998,485 shares of common stock to six separate investors in private placement transactions. The Company received $3,488,725$535,000 in proceeds from the sales. In connection with the stock sales, the Company also issued 5,893,889 five-year3,249,244 five-year warrants to purchase shares of common stock at exercise prices between $0.12 and $0.25 per share.


HEALTHLYNKED CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2022

(UNAUDITED)

NOTE 13 – SHAREHOLDERS’ EQUITY (CONTINUED)

During the nine months ended September 30, 2021, the Company sold 13,161,943 shares of common stock in 53 separate private placement transactions. The Company received $4,328,725 in proceeds from the sales. In connection with these stock sales, the Company also issued 6,581,527 five-year warrants to purchase shares of common stock at exercise prices between $0.27 and $1.05 per share.

Prior Investment Agreement Draws

During the threenine months ended March 31,September 30, 2021, the Company issued 3,006,098 common shares pursuant to draws made by the Company under the Investment Agreementnow-expired July 2016 $3 million investment agreement and received an aggregate of $900,636 in net proceeds from the draws.

Shares issued to Consultants

During the threenine months ended March 31,September 30, 2022 and 2021, the Company issued 5,250305,524 and 475,000677,242 common shares, respectively, to consultants for services rendered. In connection with the issuances, the Company recognized expenses totaling $8,044$37,696 and $122,829$151,322 in the threenine months ended March 31,September 30, 2022 and 2021, respectively.

Common Stock Issuable

As of March 31,September 30, 2022 and December 31, 2021, the Company was obligated to issue the following shares:

  March 31, 2022  December 31, 2020 
  Amount  Shares  Amount  Shares 
             
Shares issuable to consultants, employees and directors $318,040   938,191   282,347   719,366 
  September 30, 2022  December 31, 2021 
  Amount  Shares  Amount  Shares 
Shares issuable to consultants, employees and directors $345,345   1,329,469  $282,347   719,366 

Stock Warrants

Transactions involving our stock warrants during the threenine months ended March 31,September 30, 2022 and 2021 are summarized as follows:

 2022  2021  2022  2021 
    Weighted     Weighted     Weighted     Weighted 
    Average     Average     Average     Average 
    Exercise     Exercise     Exercise     Exercise 
 Number  Price  Number  Price  Number  Price  Number  Price 
Outstanding at beginning of the period  59,796,992  $0.25   51,352,986  $0.14   59,796,992  $0.25   51,352,986  $0.17 
Granted during the period    $0.00   19,585,790  $0.34   3,249,244  $0.17   22,421,026  $0.39 
Exercised during the period    $0.00   (11,196,742) $(0.06)  ---  $---   (13,637,020) $(0.18)
Expired during the period  (430,000) $(0.44)    $   (786,667) $(0.44)  ---  $--- 
Outstanding at end of the period  59,366,992  $0.25   59,742,034  $0.22   62,259,569  $0.24   60,136,992  $0.25 
                                
Exercisable at end of the period  59,366,992  $0.25   59,742,034  $0.22   62,259,569  $0.24   60,136,992  $0.25 
                                
Weighted average remaining life  3.0 years   3.7 years   2.6 years       3.4 years     


 

HEALTHLYNKED CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31,SEPTEMBER 30, 2022

(UNAUDITED)

NOTE 13 – SHAREHOLDERS’ EQUITY (CONTINUED)

The following table summarizes information about the Company’s stock warrants outstanding as of March 31,September 30, 2022:

Warrants Outstanding   Warrants Exercisable 
  Weighted- Warrants Outstanding Warrants Exercisable
  Average  Weighted-    Weighted-      Weighted-        
  Remaining  Average    Average      Average Weighted-     Weighted- 
Exercise  Number  Contractual  Exercise   Number   Exercise      Remaining Average     Average 
Prices  Outstanding  Life (years)  Price   Exercisable   Price 
ExerciseExercise Number Contractual Exercise Number Exercise 
PricesPrices  Outstanding  Life (years)  Price  Exercisable  Price 
$0.0001 to 0.09  14,789,573  2.8 $0.07   14,789,573  $0.07 0.0001 to 0.09   14,789,573   2.3  $0.07   14,789,573  $0.07 
$0.10 to 0.24  9,474,380  2.5 $0.17   9,474,380  $0.17 0.10 to 0.24   12,690,290   2.7  $0.17   12,690,290  $0.17 
$0.25 to 0.49  31,486,448  3.1 $0.31   31,486,448  $0.31 0.25 to 0.49   31,319,782   2.6  $0.31   31,319,782  $0.31 
$0.50 to 1.05  3,616,591  4.1 $0.69   3,616,591  $0.69 0.50 to 1.05   3,459,924   3.8  $0.69   3,459,924  $0.69 
$0.05 to 1.00  59,366,992  3.0 $0.25   59,366,992  $0.25 0.05 to 1.00   62,259,569   2.6  $0.24   62,259,569  $0.24 

 

During the threenine months ended March 31,September 30, 2022 and 2021, the Company issued -0-3,249,244 and 19,585,79022,421,026 warrants, respectively, the aggregate grant date fair value of which was $-0-$151,909 and $4,496,555,$5,823,476, respectively. The fair value of the warrants was calculated using the following range of assumptions:

 2022 2021 2022 2021
Pricing model utilized No warrants issued Binomial Lattice Binomial Lattice Binomial Lattice
Risk free rate range No warrants issued 0.38% to 0.86% 2.94% 0.38% to 0.97%
Expected life range (in years) No warrants issued 3.00 to 5.00 years 5.00 years 3.00 to 5.00 years
Volatility range No warrants issued 170.58% to 193.21% 74.50% 170.58% to 193.21%
Dividend yield No warrants issued 0.00% 0.00% 0.00%

There were no warrants exercised during the threenine months ended March 31,September 30, 2022. During the threenine months ended March 31,September 30, 2021, the Company received $62,500$333,750 upon the exercise of 625,0003,065,278 warrants with an exercise price of $0.10.prices between $0.09 and $0.15. Additionally, the Company issued 9,047,332 shares upon cashless exercise of 10,571,742 warrant shares exercised using a cashless exercise feature in settlement of litigation and other disputes in amounts totaling $614,221 that had been accrued in 2020.

Employee Equity Incentive Plans

On January 1, 2016, the Company adopted the 2016 Employee Equity Incentive Plan (the “2016 EIP”) for the purpose of having equity awards available to allow for equity participation by its employees. The 2016 EIP allowed for the issuance of up to 15,503,680 shares of the Company’s common stock to employees, which may be issued in the form of stock options, stock appreciation rights, or common shares. The 2016 EIP is governed by the Company’s board, or a committee that may be appointed by the board in the future. The 2016 EIP expired during 2021 but allows for the prospective issuance of shares of common stock subject to vesting of awards made prior to expiration of the 2016 EIP.

On September 9, 2021, the Company adopted the 2021 Employee Equity Incentive Plan (the “2021 EIP” and, together with the 2016 EIP, the “EIPs”) for the purpose of having equity awards available to allow for equity participation by its employees. The 2021 EIP allows for the issuance of up to 20,000,000 shares of the Company’s common stock to employees, which may be issued in the form of stock options, stock appreciation rights, or common shares. The 2021 EIP is governed by the Company’s board, or a committee that may be appointed by the board in the future.


 

HEALTHLYNKED CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31,SEPTEMBER 30, 2022

(UNAUDITED)

NOTE 13 – SHAREHOLDERS’ EQUITY (CONTINUED)

Amounts recognized in the financial statements with respect to the EIPs in the threenine months ended March 31,September 30, 2022 and 2021 were as follows:

 2022  2021  2022  2021 
Total cost of share-based payment plans during the period $100,422  $307,160  $335,860  $574,998 
Amounts capitalized in deferred equity compensation during period $  $  $---  $--- 
Amounts charged against income for amounts previously capitalized $8,438  $  $(9,375) $--- 
Amounts charged against income, before income tax benefit $108,860  $307,160  $326,485  $574,998 
Amount of related income tax benefit recognized in income $  $  $---  $--- 

Stock Options  

Stock options granted under the EIPs typically vest over a period of three to four years or based on achievement of Company and individual performance goals. The following table summarizes stock option activity as of and for the threenine months ended March 31,September 30, 2022 and 2021:

 2022  2021  2022  2021 
    Weighted     Weighted     Weighted     Weighted 
    Average     Average     Average     Average 
    Exercise     Exercise     Exercise     Exercise 
Stock options Number  Price  Number  Price  Number  Price  Number  Price 
Outstanding at beginning of period  3,456,250  $0.23   3,111,750  $0.20   3,456,250  $0.23   3,111,750  $0.20 
Granted during the period    $     $   975,000  $0.16   80,000  $0.75 
Exercised during the period  (12,500) $(0.26)  (12,500) $(0.25)  (12,500) $(0.26)  (145,500) $(0.11)
Forfeited during the period  (137,500) $(0.35)  (32,500) $(0.16)  (419,500) $(0.31)  (32,500) $(0.16)
Outstanding at end of period  3,306,250  $0.22   3,066,750  $0.20   3,999,250  $0.20   3,013,750  $0.22 
                                
Options exercisable at period-end  2,535,000  $0.20   2,276,750  $0.17   2,655,500  $0.20   2,173,750  $0.19 

As of March 31,September 30, 2022, there was $108,313$150,101 of total unrecognized compensation cost related to options granted under the EIPs. That cost is expected to be recognized over a weighted-average period of 2.42.2 years.

The total fair value of options vested during the threenine months ended March 31,September 30, 2022 and 2021 was $2,627$42,966 and $46,746,$64,321, respectively. The aggregate intrinsic value of share options exercised during the threenine months ended March 31,September 30, 2022 and 2021 was $388 and $9,725,$98,335, respectively. The weighted-average grant-date fair value of option grants made during the nine months ended September 30, 2022 and 2021 was $0.09 per share and $0.62 per share, respectively. During the threenine months ended March 31,September 30, 2022, the Company issued 1,394 shares upon cashless exercise of 12,500 option shares exercised using a cashless exercise feature. During the threenine months ended March 31,September 30, 2021, the Company received $3,150$16,450 upon the exercise of 12,500145,500 options with an exercise price ofprices between $0.10 and $0.252.

The fair value of each stock option award is estimated on the date of grant using a binomial lattice option-pricing model based on the assumptions noted in the following table. No options were granted during the three months ended March 31, 2022 and 2021. The Company’s accounting policy is to estimate forfeitures in determining the amount of total compensation cost to record each period. The fair value of options granted for the nine months ended September 30, 2022 and 2021 was calculated using the following range of assumptions:

  2022 2021
Pricing model utilized Binomial Lattice Binomial Lattice
Risk free rate range 2.81% to 2.90% 1.47% to 2.90%
Expected life range (in years) 10.00 years 10.00 years
Volatility range 74.38% to 74.50% 74.38% to 192.25%
Dividend yield 0.00% 0.00%


 

HEALTHLYNKED CORP.

HEALTHLYNKED CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31,SEPTEMBER 30, 2022

(UNAUDITED)

NOTE 13 – SHAREHOLDERS’ EQUITY (CONTINUED)

The following table summarizes the status and activity of nonvested options issued pursuant to the EIPs as of and for the threenine months ended March 31,September 30, 2022 and 2021:

 2022  2021  2022  2021 
    Weighted     Weighted     Weighted     Weighted 
    Average     Average     Average     Average 
    Grant Date     Grant Date     Grant Date     Grant Date 
Stock options Shares  Fair Value  Shares  Fair Value  Shares  Fair Value  Shares  Fair Value 
Nonvested options at beginning of period  858,750  $0.23   1,044,375  $0.21   858,750  $0.23   1,044,375  $0.21 
Granted    $     $   975,000  $0.09   80,000  $0.62 
Vested  (12,500) $(0.21)  (225,000) $(0.21)  (195,750) $(0.22)  (255,000) $(0.25)
Forfeited  (75,000) $(0.32)  (29,375) $(0.12)  (294,250) $(0.26)  (29,375) $(0.12)
Nonvested options at end of period  771,250  $0.22   790,000  $0.22   1,343,750  $0.12   840,000  $0.24 

Stock Grants  

Stock grant awards made under the EIPs typically vest either immediately or over a period of up to four years. The following table summarizes stock grant activity as of and for the threenine months ended March 31,September 30, 2022 and 2021:

 2022  2021  2022  2021 
    Weighted     Weighted     Weighted     Weighted 
    Average     Average     Average     Average 
    Grant Date     Grant Date     Grant Date     Grant Date 
Stock Grants Shares  Fair Value  Shares  Fair Value  Shares  Fair Value  Shares  Fair Value 
Nonvested grants at beginning of period  302,050  $0.07   200,000  $0.17   302,050  $0.27   200,000  $0.17 
Granted  157,454  $0.19   87,500  $0.11   377,454  $0.17   1,015,047  $0.27 
Vested  (122,514) $(0.12)  (87,500) $(0.12)  (354,782) $(0.23)  (1,075,047) $(0.26)
Forfeited  (104,954) $(0.19)    $   (104,954) $(0.19)  (50,000) $(0.10)
Nonvested grants at end of period  232,036  $0.07   200,000  $0.17   219,768  $0.20   90,000  $0.19 

As of December 31, 2021,September 30, 2022, there was $33,618$22,538 of total unrecognized compensation cost related to stock grants made under the EIPs. That cost is expected to be recognized over a weighted-average period of 0.21.1 years. The weighted-average grant-date fair value of share grants made during the threenine months ended March 31,September 30, 2022 and 2021 was $0.19$0.12 per share and $0.11$0.27 per share, respectively. The aggregate fair value of share grants that vested during the threenine months ended March 31,September 30, 2022 and 2021 was $15,138$44.820 and $10,810,$270,918, respectively.

The fair value of each stock grant is calculated using the closing sale price of the Company’s common stock on the date of grant using. The Company’s accounting policy is to estimate forfeitures in determining the amount of total compensation cost to record each period.

Liability-Classified Equity Instruments

During 2021, the Company made certain compensation stock grants from the 2021 EIP 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 $165,000. The Company recognized an asset captioned “Deferred equity compensation” and an offsetting liability captioned as a “Liability-classified equity instrument.” During the threenine months ended March 31,September 30, 2022, the Company (i) replaced certain variable share contracts with a new fixed share compensation structure. As a result, the Companystructure and accordingly de-recognized $25,000 of deferred stock compensation and liability-classified equity instruments. Amortizationinstruments, and (ii) de-recognized $106,141 of the remaining deferred stock compensation assets inand $135,000 of liability-classified equity instruments as a result of the three months ended March 31,termination of the employee and related future equity rights to which the equity asset and liability related.

During 2022, the Company made an additional grant of stock options from the 2021 EIP with a fixed fair value that may be earned based on achievement of performance targets on a quarterly basis through June 2025. The fixed value of $90,000 was recognized as deferred stock compensation and 2021 was $9,063liability-classified equity instruments. The Company also de-recognized $7,500 of deferred stock compensation and $-0-, respectively. The liability will be convertedliability-classified equity instruments related to equity when shares are issued pursuant to prescribed vesting events.this grant based on the target not being achieved for the third quarter of 2022.


 

HEALTHLYNKED CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31,SEPTEMBER 30, 2022

(UNAUDITED)

NOTE 13 – SHAREHOLDERS’ EQUITY (CONTINUED)

Amortization of deferred stock compensation assets in the three and nine months ended September 30, 2022 was $1,359 and $14,484, respectively. There was no amortization related to deferred stock compensation assets in the three or nine months ended September 30, 2021. The liability will be converted to equity if and when shares are earned and issued pursuant to prescribed vesting events.

NOTE 14 – CONTINGENT ACQUISITION CONSIDERATION

Contingent acquisition consideration relates to future earn-out payments potentially payable related to the Company’s acquisitions of Hughes Center for Functional Medicine (“HCFM”) in 2019 and CHM and MOD in 2020. The terms of the earn-outs related to each acquisition require the Company to pay the former owners additional acquisition consideration for the achievement of prescribed revenue and/or earnings targets for performance of the underlying business for up to four years after the respective acquisition date. Contingent acquisition consideration for each entity is recorded at fair value using a probability-weighted discounted cash flow projection. The fair value of the contingent acquisition consideration is remeasured at the end of each reporting period and changes are included in the statement of operations under the caption “Change in fair value of contingent acquisition consideration.”

Contingent acquisition consideration as of March 31,September 30, 2022 and December 31, 2021 was comprised of the following:

 March 31, December 31,  September 30, December 31, 
 2022  2021  2022  2021 
          
Fair value of HCFM contingent acquisition consideration $176,263  $172,124  $---  $172,124 
Fair value of CHM contingent acquisition consideration  270,152   276,529   218,236   276,529 
Fair value of MOD contingent acquisition consideration  300,953   737,037   94,497   737,037 
Total contingent acquisition consideration  747,368   1,185,690   312,733   1,185,690 
Less: long term portion  (429,611)  (782,224)  (184,659)  (782,224)
Contingent acquisition consideration, current portion $317,757  $403,466  $128,074  $403,466 

During the three and nine months ended March 31,September 30, 2022 and 2021, the Company recognized gains (losses) on the change in the fair value of contingent acquisition consideration as follows:

  Three Months Ended
March 31,
 
  2022  2021 
       
Change in fair value of HCFM contingent acquisition consideration $(4,139) $(11,308)
Change in fair value of CHM contingent acquisition consideration  6,376   (33,252)
Change in fair value of MOD contingent acquisition consideration  436,085   (591,140)
         
  $438,322  $(635,700)
  

Three Months Ended

September 30,

  

Nine Months Ended

September 30,

 
  2022  2021  2022  2021 
             
HCFM contingent acquisition consideration $---  $(14,316) $(35,259) $(63,769)
CHM contingent acquisition consideration  62,516   (116,150)  58,292   (54,848)
MOD contingent acquisition consideration  70,967   256,877   642,540   (116,061)
                 
  $133,483  $126,411  $665,573  $(234,678)

Maturities of contingent acquisition consideration were as follows as of March 31,September 30, 2022:

2022 (April to December) $317,756 
2022 (October to December) $92,546 
2023  218,227   85,169 
2024  211,385   135,018 
 $747,368  $312,733 


HEALTHLYNKED CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2022

(UNAUDITED)

NOTE 14 – CONTINGENT ACQUISITION CONSIDERATION (CONTINUED)

Hughes Center for Functional Medicine Acquisition – April 2019

On April 12, 2019, the Company acquired a 100% interest in HCFM, a medical practice engaged in improving the health of its patients through individualized and integrative health care. Following the acquisition, HCFM was rebranded as NCFM and was combined with NWC to form the Company’s Health Services segment. Under the terms of acquisition, the Company paid HCFM shareholdersthe seller $500,000 in cash, issued 3,968,254 shares of the Company’s common stock and agreed to an earn-out provision of $500,000 that may be earned based on the performance of NCFM in the years ended on the first, second and third anniversary dates of the acquisition closing. The total consideration fair value represented a transaction fair value of $1,764,672. In May 2020, the Company paid the seller $47,000 in satisfaction of the year 1 earn out. In May 2021, the Company paid the seller $196,000 in satisfaction of the year 2 earn out. In May 2022, the Company paid the seller $207,384 in satisfaction of the year 3 earn out. The Company has no further earn out obligations related to the NCFM acquisition.


HEALTHLYNKED CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2022

(UNAUDITED)

NOTE 14 – CONTINGENT ACQUISITION CONSIDERATION (CONTINUED)

Cura Health Management LLC Acquisition – May 2020

On May 18, 2020, the Company acquired a 100% interest in CHM and its wholly owned subsidiary AHP. CHM and AHP assist physician practices in providing coordinated and more efficient care to patients via the MSSP. The Company accounted for the transaction as an acquisition of a business pursuant to ASC 805. Following the acquisition and through third quarter 2022, the business of CHM comprised the Company’s ACO/MSO Division. Under the terms of acquisition, the Company paid CHM shareholders the following consideration: (i) $214,000 in cash paid at closing, (ii) 2,240,838 shares of the Company’s common stock issued at closing, (iii) up to $223,500 additional cash and $660,000 in additional shares of the Company’s common stock payable at the time CHM receives the final assessment of the calculation of MSSP savings for the 2019 program year, with this amount prorated based on a target MSSP payment (plus other ancillary revenue) of $1,725,000, and (iv) up to $437,500 based on the business achieving annual revenue of $2,250,000 and annual profit of $500,000 in each of the four years following closing.

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

During September 2021, the Company was notified of the amount of Medicare shared savings and received payment for plan year 2020 in the amount of $2,419,312. Because the shared saving payment exceeded $1.725 million, the sellers were paid $124,043 cash and issued 806,828 shares of Company common stock with a value of $366,300 pursuant to the Residual Earnout. Following the payments, the Company had no further obligations under the Residual Earnout. The Company also determined that the sellers did not earn any of the $62,500 year-one Future Earnout related to the performance period May 19, 2020 to May 18, 2021.

MedOffice Direct LLC Acquisition – October 2020

On October 19, 2020, the Company acquired a 100% interest in MOD, a virtual distributor of discounted medical supplies selling to both consumers and medical practices throughout the United States. With over 13,000 name brand medical products in over 150 different categories, MOD leverages pricing discounts with a small unit-of-measure direct-to-consumer shipping model to make ordering medical supplies more convenient and cost effective for its users. The Company accounted for the transaction as an acquisition of a business pursuant to ASC 805. Following the acquisition, the business of MOD comprised the Company’s Medical Distribution Division. Under the terms of acquisition, the Company paid the following consideration: (i) 19,045,563 shares of Company common stock issued at closing, (ii) partial satisfaction of certain outstanding debt obligations of MOD in the amount of $703,200 in cash paid by the Company, and (iii) up to 10,004,749 restricted shares of the Company’s common stock over a four-year period based on MOD achieving revenue targets in calendar years 2021 through 2024 of $1,500,000, $1,875,000, $2,344,000, and $2,930,000, respectively. The first year of earnout measured based on performance in calendar year 2021 was not met.


HEALTHLYNKED CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2022

(UNAUDITED)

NOTE 15 – COMMITMENTS AND CONTINGENCIES

Contracts Related to Medicare Shared Savings Revenue

The Company acquired CHM and its subsidiary AHP on May 18, 2020. CHM and AHP combine to operate an ACO under the terms of the MSSP as administered by the CMS. The MSSP is a program created under the Affordable Care Act (the “ACA,” also known as “Obamacare”) designed to enhance the efficiency of healthcare provided to patients covered by Medicare. The program allows for the creation of ACOs, which are organizations that agree to take responsibility for the efficiency of healthcare services provided by a group of participating healthcare providers under Medicare. The ACO is held accountable for the efficiency of the healthcare services of its participating providers as measured against benchmarks prescribed in the MSSP and earns shared savings payments if such benchmarks are met.

The Company, via AHP, is party to a Medicare Shared Savings Program Accountable Care Organization Participation Agreement with the CMS that establishes AHP as an ACO. The agreement is effective through December 31, 2024. The Company must comply with the terms and conditions of the agreement in order to maintain its status as an ACO and generate shared savings revenue.


HEALTHLYNKED CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2022

(UNAUDITED)

NOTE 15 – COMMITMENTS AND CONTINGENCIES (CONTINUED)

The Company, via CHM, is party to approximately 33 separate participant agreements with participating providers that are members of the Company’s ACO with expiration dates through 2024. These agreements include certain restrictions and requirements to which the participating providers must adhere in order to maintain participation in the ACO.

Supplier Concentration

The Company relies on a solesingle supplier for the fulfillment of allapproximately 96% of its product sales made through MOD.

Service contracts

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

Litigation

None.

None.Leases

Leases

Maturities of operating lease liabilities were as follows as of March 31,September 30, 2022:

2022 $284,905 
2022 (October to December) $119,116 
2023  285,721   396,833 
2024  11,877   126,116 
2025  11,877   74,729 
2026  11,877   18,148 
2027  990   990 
Total lease payments  607,247   735,932 
Less interest  (108,043)  (97,328)
Present value of lease liabilities $499,204  $638,604 

Employment/Consulting Agreements

The Company has employment agreements with certain of its physicians, nurse practitioners and physical therapists in the Health Services division. The agreements generally call for a fixed salary at the beginning of the contract with a transaction to performance-based pay later in the contract.


HEALTHLYNKED CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2022

(UNAUDITED)

NOTE 15 – COMMITMENTS AND CONTINGENCIES (CONTINUED)

On October 13, 2022, the Company entered into an offer letter (the “Agreement”) with George O’Leary in his continuing capacity as Chief Financial Officer of the Company. The Agreement was effective as of July 1, 2022 and provides that Mr. O’Leary’s base salary will be $259,000 per year, with annual review and adjustment at the discretion of the Chief Executive Officer and Compensation Committee of the Board of Directors of the Company, and an annual incentive bonus of 25% of annual salary based on the achievement of the Company of certain financial metrics as approved by the Compensation Committee. In addition, Mr. O’Leary will be eligible for a cash bonus of $50,000 upon the uplisting of the Company and completion of a financing round at the time of uplisting. The Agreement also provides that Mr. O’Leary will receive a grant of 100,000 shares of restricted stock upon execution of the Agreement and additional grants of 100,000 restricted shares on each of July 1, 2023, 2024 and 2025. Mr. O’Leary was also granted 1,200,000 stock options with an exercise price of $0.06, a portion of which are subject to time vesting and a portion of which are subject to vesting upon the achievement of certain of the Company’s corporate objectives and Mr. O’Leary’s individual objectives. If Mr. O’Leary is terminated without cause the Company will provide Mr. O’Leary as severance an amount equal to six (6) months of his base salary. Concurrently, the Company and Mr. O’Leary entered into a Non-Disclosure, Non-Solicitation and Non-Compete Agreement, effective as of September 20, 2022 that contains a non-solicitation and non-compete provision which will be in effect for a two-year period following the termination of Mr. O’Leary’s employment relationship with the Company; provided, however, such period is shortened to six (6) months if Mr. O’Leary is terminated without cause.

On July 1, 2016, the Company entered into an employment agreement with Dr. Michael Dent, Chief Executive Officer and a member of the Board of Directors. Dr. Dent’s employment agreement continues until terminated by Dr. Dent or the Company. If Dr. Dent’s employment is terminated by the Company (unless such termination is “For Cause” as defined in his employment agreement), then upon signing a general waiver and release, Dr. Dent will be entitled to severance in an amount equal to 12 months of his then-current annual base salary, as well as the pro-rata portion of any bonus that would be due and payable to him. In the event that Dr. Dent terminates the employment agreement, he shall be entitled to any accrued but unpaid salary and other benefits up to and including the date of termination, and the pro-rata portion of any unvested time-based options up until the date of termination.

On July 1, 2018, the Company entered into an agreement with Mr. George O’Leary, the Company’s Chief Financial Officer and a member of the Board of Directors. If Mr. O’Leary’s employment is terminated by the Company (unless such termination is “For Cause” as defined in his employment agreement), then upon signing a general waiver and release, Mr. O’Leary will be entitled to receive his base salary for a period of six months beginning on the date of termination. The agreement expires on June 30, 2022. In addition to a base salary, the agreement provided Mr. O’Leary with certain performance-based cash bonuses, stock grants, and stock option grants.


HEALTHLYNKED CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2022

(UNAUDITED)

NOTE 15 – COMMITMENTS AND CONTINGENCIES (CONTINUED)

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

Litigation

 

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

 

NOTE 16 – SEGMENT REPORTING

The Company has 4four reportable segments: Health Services, Digital Healthcare, ACO/MCOMSO and Medical Distribution. The Health Services division is comprised of the operations of (i) Naples Women’s Center (“NWC”),NWC, a multi-specialty medical group including OB/GYN (both Obstetrics and Gynecology), and General Practice, (ii) Naples Center for Functional Medicine (“NCFM”),NCFM, a Functional Medical Practice acquired in April 2019 that is engaged in improving the health of its patients through individualized and integrative health care, and (iii) Bridging the Gap Physical Therapy (“BTG”),BTG, a physical therapy practice in Bonita Springs, FL that provides hands-on functional manual therapy techniques to speed patients’ recovery and manage pain without pain medication or surgery. The Company’s Digital Healthcare segment develops and plans to operate an online personal medical information and record archive system, the “HealthLynked Network,” which will enable patients and doctors to keep track of medical information via the Internet in a cloud-based system. The ACO/MSO Division is comprised of the business acquired with CHM, which assists physician practices in providing coordinated and more efficient care to patients via the MSSP as administered by the CMS, which rewards providers for efficiency in patient care. The Medical Distribution Division is comprised of the operations of MedOffice Direct LLC (“MOD”),MOD, a virtual distributor of discounted medical supplies selling to both consumers and medical practices throughout the United States acquired by the Company on October 19, 2020.States.

The Company evaluates performance and allocates resources based on profit or loss from operations before income taxes. The accounting policies of the reportable segments are the same as those described in the summary of significant accounting policies.


HEALTHLYNKED CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2022

(UNAUDITED)

NOTE 16 – SEGMENT REPORTING (CONTINUED)

Segment information for the three months ended September 30, 2022 was as follows:

  Three Months Ended September 30, 2022 
  Health Services  Digital Healthcare  ACO / MSO  Medical Distribution  Total 
Revenue               
Patient service revenue, net $1,262,253  $---  $---  $---  $1,262,253 
Subscription, consulting and event revenue  ---   1,171   88,806   ---   89,977 
Product revenue  ---   ---   ---   95,449   95,449 
Total revenue  1,262,253   1,171   88,806   95,449   1,447,679 
                     
Operating Expenses                    
Practice salaries and benefits  810,058   ---   ---   ---   810,058 
Other practice operating expenses  695,300   ---   ---   ---   695,300 
Medicare shared savings expenses  ---   ---   337,533   ---   337,533 
Cost of product revenue  ---   ---   ---   87,775   87,775 
Selling, general and administrative expenses  ---   1,055,178   ---   32,955   1,088,133 
Depreciation and amortization  31,198   1,406   ---   176,900   209,504 
Total Operating Expenses  1,536,556   1,056,584   337,533   297,630   3,228,303 
                     
(Loss) income from operations $(274,303) $(1,055,413) $(248,727) $(202,181) $(1,780,624)
                     
Other Segment Information                    
Interest expense (income) $2,815  $2,825  $---  $---  $5,640 
Financing cost $110,000  $---  $---  $---  $110,000 
Amortization of original issue discounts on notes payable $18,480  $2,540  $---  $---  $21,020 
Change in fair value of contingent acquisition consideration $---  $(133,483) $---  $---  $(133,483)


 

HEALTHLYNKED CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31,SEPTEMBER 30, 2022

(UNAUDITED)

NOTE 16 – SEGMENT REPORTING (CONTINUED)

Segment information for the threenine months ended March 31,September 30, 2022 was as follows:

  Three Months Ended March 31, 2022 
  Health Services  Digital Healthcare  ACO / MSO  Medical Distribution  Total 
Revenue               
Patient service revenue, net $1,375,685  $  $  $  $1,375,685 
Medicare shared savings revenue               
Subscription, consulting and event revenue     6,624   77,594      84,218 
Product revenue           146,969   146,969 
Total revenue  1,375,685   6,624   77,594   146,969   1,606,872 
                     
Operating Expenses                    
Practice salaries and benefits  718,073            718,073 
Other practice operating expenses  562,651            562,651 
Medicare shared savings expenses        227,729      227,729 
Cost of product revenue           160,811   160,811 
Selling, general and administrative expenses     1,264,876      70,264   1,335,140 
Depreciation and amortization  25,518   1,472      176,900   203,890 
Total Operating Expenses  1,306,242   1,266,348   227,729   407,975   3,208,294 
                     
Income (loss) from operations $69,443  $(1,259,724) $(150,135) $(261,006) $(1,601,422)
                     
Other Segment Information                    
Interest expense (income) $2,812  $2,211  $  $  $5,023 
Change in fair value of contingent acquisition consideration $  $(438,322) $  $  $(438,322)
                     
   March 31, 2022 
Identifiable assets $2,056,661  $2,208,771  $1,115,871  $2,542,446  $7,923,749 
Goodwill $  $  $381,856  $766,249  $1,148,105 
                     
   December 31, 2021 
Identifiable assets $2,152,533  $3,450,332  $1,167,965  $2,775,621  $9,546,451 
Goodwill $  $  $381,856  $766,249  $1,148,105 

  Nine Months Ended September 30, 2022 
  Health Services  Digital Healthcare  ACO / MSO  Medical Distribution  Total 
Revenue               
Patient service revenue, net $4,069,714  $---  $---  $---  $4,069,714 
Subscription, consulting and event revenue  ---   9,433   251,058   ---   260,491 
Product revenue  ---   ---   ---   372,877   372,877 
Total revenue  4,069,714   9,433   251,058   372,877   4,703,082 
                     
Operating Expenses                    
Practice salaries and benefits  2,344,529   ---   ---   ---   2,344,529 
Other practice operating expenses  1,897,070   ---   ---   ---   1,897,070 
Medicare shared savings expenses  ---   ---   802,411   ---   802,411 
Cost of product revenue  ---   ---   ---   419,129   419,129 
Selling, general and administrative expenses  ---   3,529,289   ---   149,495   3,678,784 
Depreciation and amortization  87,134   4,472   ---   530,700   622,306 
Total Operating Expenses  4,328,733   3,533,761   802,411   1,099,324   9,764,229 
                     
Income (loss) from operations $(259,019) $(3,524,328) $(551,353) $(726,447) $(5,061,147)
                     
Other Segment Information                    
Interest expense (income) $8,420  $6,731  $---  $---  $15,151 
Financing cost $110,000  $---  $---  $---  $110,000 
Amortization of original issue discounts on notes payable $18,480  $2,540  $---  $---  $21,020 
Change in fair value of contingent acquisition consideration $---  $(665,573) $---  $---  $(665,573)
                     
   September 30, 2022 
Identifiable assets $2,182,272  $507,030  $1,132,696  $2,188,509  $6,010,507 
Goodwill $319,958  $---  $381,856  $766,249  $1,468,063 
                     
   December 31, 2021 
Identifiable assets $2,152,533  $3,450,332  $1,167,965  $2,775,621  $9,546,451 
Goodwill $---  $---  $381,856  $766,249  $1,148,105 


 

HEALTHLYNKED CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31,SEPTEMBER 30, 2022

(UNAUDITED)

NOTE 16 – SEGMENT REPORTING (CONTINUED)

Segment information for the three months ended March 31,September 30, 2021 was as follows:

 Three Months Ended March 31, 2021  Three Months Ended September 30, 2021 
 Health Services  Digital Healthcare  ACO / MSO  Medical Distribution  Total  Health Services  Digital Healthcare  ACO / MSO  Medical Distribution  Total 
Revenue                      
Patient service revenue, net $1,514,376  $  $  $  $1,514,376  $1,394,356  $---  $---  $---  $1,394,356 
Consulting and event revenue     11,113   76,542      87,655 
Medicare shared savings revenue  ---   ---   2,419,312   ---   2,419,312 
Subscription, consulting and event revenue  ---   ---   69,595   ---   69,595 
Product revenue           182,663   182,663   ---   ---   ---   161,456   161,456 
Total revenue  1,514,376   11,113   76,542   182,663   1,784,694   1,394,356   ---   2,488,907   161,456   4,044,719 
                                        
Operating Expenses                                        
Practice salaries and benefits  663,937            663,937   739,024   ---   ---   ---   739,024 
Other practice operating expenses  730,784            730,784   549,086   ---   ---   ---   549,086 
Medicare shared savings expenses        211,507      211,507   ---   ---   1,748,585   ---   1,748,585 
Cost of product revenue           168,596   168,596   ---   ---   ---   145,432   145,432 
Selling, general and administrative expenses     1,305,320      60,817   1,366,137   ---   1,093,461   ---   54,130   1,147,591 
Depreciation and amortization  28,323   595   0   182,740   211,658   26,196   2,215   ---   176,900   205,311 
Total Operating Expenses  1,423,044   1,305,915   211,507   412,153   3,352,619   1,314,306   1,095,676   1,748,585   376,462   4,535,029 
                                        
Income (loss) from operations $91,332  $(1,294,802) $(134,965) $(229,490) $(1,567,925)
Loss from operations $80,050  $(1,095,676) $740,322  $(215,006) $(490,310)
                                        
Other Segment Information                                        
Interest expense $4,197  $6,282  $  $109  $10,588 
Loss on extinguishment of debt $  $5,589,994  $  $  $5,589,994 
Change in fair value of debt $  $19,246  $  $  $19,246 
Interest expense (income) $2,706  $1,412  $---  $---  $4,118 
Change in fair value of contingent acquisition consideration $  $635,700  $  $  $635,700  $---  $(126,411) $---  $---   (126,411)
   
  March 31, 2021
Identifiable assets $2,411,744  $3,043,929  $1,128,491  $3,287,628  $9,871,792 
Goodwill $  $  $381,856  $766,249  $1,148,105 


HEALTHLYNKED CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2022

(UNAUDITED)

NOTE 16 – SEGMENT REPORTING (CONTINUED)

Segment information for the nine months ended September 30, 2021 was as follows:

  Nine Months Ended September 30, 2021 
  Health
Services
  Digital
Healthcare
  ACO /
MSO
  Medical
Distribution
  Total 
Revenue               
Patient service revenue, net $4,379,282  $---  $---  $---  $4,379,282 
Medicare shared savings revenue  ---   ---   2,419,312   ---   2,419,312 
Subscription, consulting and event revenue  ---   11,905   217,209   ---   229,114 
Product revenue  ---   ---   ---   512,325   512,325 
Total revenue  4,379,282   11,905   2,636,521   512,325   7,540,033 
                     
Operating Expenses                    
Practice salaries and benefits  2,305,993   ---   ---   ---   2,305,993 
Other practice operating expenses  1,790,874   ---   ---   ---   1,790,874 
Medicare shared savings expenses  ---   ---   2,157,555   ---   2,157,555 
Cost of product revenue  ---   ---   ---   474,026   474,026 
Selling, general and administrative expenses  ---   3,472,493   ---   188,713   3,661,206 
Depreciation and amortization  83,493   3,405   ---   536,540   623,438 
Total Operating Expenses  4,180,360   3,475,898   2,157,555   1,199,279   11,013,092 
                     
Income (loss) from operations $198,922  $(3,463,993) $478,966  $(686,954) $(3,473,059)
                     
Other Segment Information                    
Interest expense (income) $5,145  $8,038  $---  $(100) $13,083 
(Gain) loss on extinguishment of debt $(502,959) $5,471,884  $---  $(11,757) $4,957,168 
Change in fair value of debt $---  $19,246  $---  $---  $19,246 
Change in fair value of contingent acquisition consideration $---  $234,678  $---  $---  $234,678 
                     
   September 30, 2021
Identifiable assets $2,104,819  $3,967,850  $2,850,949  $2,890,389  $11,814,007 
Goodwill $---  $---  $381,856  $766,249  $1,148,105 

The Digital Healthcare made intercompany sales of $280$180 and $180$400 in the three months ended March 31,September 30, 2022 and 2021, respectively, and $640 and $743 in the nine months ended September 30, 2022 and 2021, respectively, related to subscription revenue billed to and paid for by the Company’s physicians for access to the HealthLynked Network. The Medical Distribution segment made intercompany sales of $13,533$3,144 and $-0- in the three months ended March 31,September 30, 2022 and 2021, respectively, and $25,214 and $-0- in the nine months ended September 30, 2022 and 2021, respectively, related to medical products sold to practices in the Company’s Health Services segment. Intercompany revenue and the related costs are eliminated on consolidation.

NOTE 17 – FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying amounts of certain financial instruments, including cash and cash equivalents, accounts receivable and accounts payable, approximate their respective fair values due to the short-term nature of such instruments. The Company measures certain financial instruments at fair value on a recurring basis, including certain convertible notes payable and related party loans, which were extinguished and reissued and are therefore subject to fair value measurement, derivative financial instruments arising from conversion features embedded in convertible promissory notes for which the conversion rate was not fixed, and equity-class. All financial instruments carried at fair value fall within Level 3 of the fair value hierarchy as their value is based on unobservable inputs. The Company evaluates its financial assets and liabilities subject to fair value measurements on a recurring basis to determine the appropriate level in which to classify them for each reporting period. This determination requires significant judgments to be made.


 

HEALTHLYNKED CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31,SEPTEMBER 30, 2022

(UNAUDITED)

NOTE 17 – FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)

The following table summarizes the conclusions reached regarding fair value measurements as of March 31,September 30, 2022 and December 31, 2021:

  As of March 31, 2022  As of December 31, 2021 
  Level 1  Level 2  Level 3  Total  Level 1  Level 2  Level 3  Total 
Liability-classified equity instruments $  $  $136,875  $136,875  $  $  $162,500  $162,500 
Contingent acquisition consideration        747,368   747,368         1,185,690   1,185,690 
                                 
Total $  $  $884,243  $884,243  $  $  $1,348,190  $1,348,190 

  As of September 30, 2022  As of December 31, 2021 
  Level 1  Level 2  Level 3  Total  Level 1  Level 2  Level 3  Total 
Liability-classified equity instruments $---  $---  $83,125  $83,125  $---  $

---

  $162,500  $162,500 
Contingent acquisition consideration  ---   ---   312,733   312,733   ---   ---   1,185,690   1,185,690 
                                 
Total $---  $---  $395,858  $395,858  $---  $

---

  $1,348,190  $1,348,190 

The changes in Level 3 financial instruments that are measured at fair value on a recurring basis during the three and nine months ended March 31,September 30, 2022 and 2021 were as follows:

 Three Months Ended
March 31,
  Three Months Ended
September 30,
  Nine Months Ended
September 30,
 
 2022  2021  2022  2021  2022  2021 
              
Convertible notes payable $  $(19,246) $---  $---  $---  $(19,246)
Contingent acquisition consideration  438,322   (635,700)  133,483   126,411   665,573   (234,678)
                        
Total $438,322  $(654,946) $133,483  $126,411  $665,573  $(253,924)

NOTE 18 – SUBSEQUENT EVENTS

 

On MayOctober 13, 2022, the Company entered into the Agreement with George O’Leary in his continuing capacity as Chief Financial Officer of the Company. The Agreement was effective as of July 1, 2022 and provides that Mr. O’Leary’s base salary will be $259,000 per year, with annual review and adjustment at the discretion of the Chief Executive Officer and Compensation Committee of the Board of Directors of the Company, and an agreement to acquire Aesthetic Enhancements Unlimited (“AEU”),annual incentive bonus of 25% of annual salary based on the achievement of the Company of certain financial metrics as approved by the Compensation Committee. In addition, Mr. O’Leary will be eligible for a patient service facility specializing in minimallycash bonus of $50,000 upon the uplisting of the Company and non-invasive cosmetic services including fat reduction, body sculpting, wrinkle reduction, hair removal, IV hydration, and feminine rejuvenation.completion of a financing round at the time of uplisting. The purchase price includes $325,000 cash, 792,394Agreement also provides that Mr. O’Leary will receive a grant of 100,000 shares of restricted stock upon execution of the Agreement and additional grants of 100,000 restricted shares on each of July 1, 2023, 2024 and 2025. Mr. O’Leary was also granted 1,200,000 stock options with an exercise price of $0.06, a portion of which are subject to time vesting and a portion of which are subject to vesting upon the achievement of certain of the Company’s corporate objectives and Mr. O’Leary’s individual objectives. If Mr. O’Leary is terminated without cause the Company common stock,will provide Mr. O’Leary as severance an amount equal to six (6) months of his base salary. Concurrently, the Company and the assumptionMr. O’Leary entered into a Non-Disclosure, Non-Solicitation and Non-Compete Agreement, effective as of up to $75,000 in liabilities. AEUSeptember 20, 2022 that contains a non-solicitation and non-compete provision which will be incorporatedin effect for a two-year period following the termination of Mr. O’Leary’s employment relationship with the Company; provided, however, such period is shortened to six (6) months if Mr. O’Leary is terminated without cause.

During October 2022, the Company initiated a plan to sell the ACO/MSO Division, comprised of the operations of CHM and its subsidiary AHP, which were acquired by the Company on May 18, 2020. CHM and AHP operate an ACO that assists physician practices in providing coordinated and more efficient care to patients via the MSSP, as administered by the CMS, which rewards providers for efficiency in patient care. The Company expects to use the cash proceeds generated from a sale to supplement its operating cash requirements and pursue additional acquisitions. The Company expects to complete a sale by the first quarter of 2023.

On October 21, 2022, the Company issued a promissory note payable to an investor in the principal amount of $144,760 (the “October 2022 Note”). The October 2022 Note had an original issue discount of $15,510 and fees of $4,250, resulting in net proceeds to the Company of $125,000. The October 2022 Note does not bear interest in excess of the original issue discount and matures on October 31, 2023. The Company is required to make 10 monthly payments of $16,213 starting November 30, 2022.

On November 8, 2022, the Company entered into a Merchant Cash Advance (“MCA”) agreement with a trust controlled by the Company’s Health Services segment. ClosingChief Executive Officer, Dr. Michael Dent, pursuant to which the Company received an advance of $150,000. The Company is expectedrequired to be completedrepay the MCA, which acts like a note payable, at the rate of $3,750 per week of May 16, 2022.for 52 weeks. The MCA is guaranteed by the Company’s NCFM subsidiary.


 

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

Forward-Looking Statements

You should read the following discussion and analysis of our financial condition and results of operations together with our financial statements and the related notes appearing elsewhere in this report. In addition to historical information, this discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results may differ materially from those discussed below. Factors that could cause or contribute to such differences include, but are not limited to, those identified below, and those discussed in the section titled “Item 1A. Risk Factors” included in our most recent Annual Report on Form 10-K. All amounts in this report are in U.S. dollars, unless otherwise noted.

Overview

General

HealthLynked Corp. (the “Company,” “we,” “our,” or “us”) was incorporated in the State of Nevada on August 4, 2014. We currently operate in fourthree distinct divisions: the Health Services Division, the Digital Healthcare Division, the ACO/MSO (Accountable Care Organization / Managed Service Organization) Division, and the Medical Distribution Division. Our Health Services division is comprised of the operations of (i) Naples Women’s Center (“NWC”), a multi-specialty medical group including OB/GYN (both Obstetrics and Gynecology) and General Practice, (ii) Naples Center for Functional Medicine (“NCFM”), a Functional Medical Practice engaged in improving the health of its patients through individualized and integrative health care, and (iii) Bridging the Gap Physical Therapy (“BTG”), a physical therapy practice in Bonita Springs, FL that provides hands-on functional manual therapy techniques to speed patients’ recovery and manage pain without pain medication or surgery.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. Our Digital Healthcare division develops and operates an online personal medical information and record archive system, the “HealthLynked Network,” which enables patients and doctors to keep track of medical information via the Internet in a cloud-based system. Our ACO/MSOMedical Distribution Division is comprised of the operations of MedOffice Direct LLC (“MOD”), a virtual distributor of discounted medical supplies selling to both consumers and medical practices throughout the United States we acquired on October 19, 2020.

Recent Development – ACO/MSO Division

On October 21, 2022, our Board of Directors approved a plan to sell our 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 were acquired by the Company on May 18, 2020. CHM and AHP operate an Accountable Care Organization (“ACO”) and Managed Service Organization (“MSO”) that assists physician practices in providing coordinated and more efficient care to patients via the Medicare Shared Savings Program (“MSSP”) as administered by the Centers for Medicare and Medicaid Services (the “CMS”), which rewards providers for efficiency in patient care. Our Medical Distribution Division is comprisedWe expect to use the cash proceeds generated from a sale to supplement its operating cash requirements and pursue additional acquisitions. We expect to complete a sale by the first quarter of 2023.

We received an initial determination during third quarter 2022 from the CMS that our ACO missed its plan year 2021 benchmark expenditures, for which we would have received payment in September 2022, by just 0.03% on total ACO expenditures of approximately $112 million. During September 2022, we requested and received a reconsideration appeal (the “MSSP Appeal”) with the CMS on the basis that certain of our included expenditures were directly related to long-haul Covid-19 and should therefore be excluded from consideration in calculation of our shared savings. We are awaiting the outcome of the operationsMSSP Appeal, which we expect during the fourth quarter of MedOffice Direct LLC (“MOD”), a virtual distributor2022. Because we recognize Medicare shared savings revenue and related provider shared savings expense when we receive official notification from CMS of discounted medical supplies sellingany amounts to both consumersbe paid to us, we will only recognize revenue and medical practices throughoutexpense related to plan year 2021 shared savings if and when we are notified that the United StatesMSSP Appeal is successful. If the MSSP Appeal is unsuccessful, we acquired on October 19, 2020.will not receive any Medicare shared savings payments related to plan year 2021 and therefore will not recognize any Medicare shared savings revenue or provider shared saving expense in 2022.

Critical accounting policies and significant judgments and estimates

For a discussion of our critical accounting policies, see Note 2, “Significant Accounting Policies,” in the Notes to consolidated Financial Statements.


 

Results of Operations

Comparison of Three Months Ended March 31,September 30, 2022 and 2021

The following table summarizes the changes in our results of operations for the three months ended March 31,September 30, 2022 compared with the three months ended March 31,September 30, 2021:

 Three Months Ended
March 31,
  Change  Three Months Ended September 30,  Change 
 2022  2021  $  %  2022  2021  $  % 
                  
Patient service revenue, net $1,375,685  $1,514,376  $(138,691)  9% $1,262,253  $1,394,356  $(132,103)  -9%
Medicare shared savings revenue  ---   2,419,312   (2,419,312)  -100%
Subscription, consulting and event revenue  84,218   87,655   (3,437)  4%  89,977   69,595   20,382   29%
Product revenue  146,969   182,663   (35,694)  20%  95,449   161,456   (66,007)  -41%
Total revenue  1,606,872   1,784,694   (177,822)  10%  1,447,679   4,044,719   (2,597,040) ��-64%
                                
Operating Expenses and Costs                                
Practice salaries and benefits  718,073   663,937   54,136   8%  810,058   739,024   71,034   10%
Other practice operating expenses  562,651   730,784   (168,133)  23%  695,300   549,086   146,214   27%
Medicare shared savings expenses  227,729   211,507   16,222   8%  337,533   1,748,585   (1,411,052)  -81%
Cost of product revenue  160,811   168,596   (7,785)  5%  87,775   145,432   (57,657)  -40%
Selling, general and administrative expenses  1,335,140   1,366,137   (30,997)  2%  1,088,133   1,147,591   (59,458)  -5%
Depreciation and amortization  203,890   211,658   (7,768)  4%  209,504   205,311   4,193   2%
Loss from operations  (1,601,422)  (1,567,925)  (33,497)  2%  (1,780,624)  (490,310)  (1,290,314)  263%
                                
Other Income (Expenses)                                
Loss on extinguishment of debt     (5,589,994)  5,589,994   100%
Change in fair value of debt     (19,246)  19,246   100%
Financing cost  (110,000)  ---   *   * 
Amortization of original issue and debt discounts on notes payable and convertible notes  (21,020)  ---   *   * 
Change in fair value of contingent acquisition consideration  438,322   (635,700)  1,074,022   169%  133,483   126,411   7,072   6%
Interest expense  (5,023)  (10,588)  5,565   53%  (5,640)  (4,118)  (1,522)  37%
Total other income (expenses)  433,299   (6,255,528)  6,688,827   107%
Total other expenses  (3,177)  122,293   (125,470)  -103%
                                
Net loss $(1,168,123) $(7,823,453) $6,655,330   85% $(1,783,801) $(368,017) $(1,415,784)  385%

Revenue* - Denotes line item on statement of operations for which there was no corresponding activity in the same period of prior year.

Revenue

Patient service revenue in the three months ended March 31,September 30, 2022 decreased by $138,691,$132,103, or 9% year-over-year, to $1,375,685,$1,262,253, primarily as a result of decreased patient service revenue at our NWC practice of $199,205and BTG practices due primarily to the departure of a physician,closures at both offices in September 2022 from Hurricane Ian, offset by a year-over-year increasesincrease at our NCFM practice of $46,327 and BTG practicesthe addition of $58,190 and $2,324, respectively.AEU revenue following its acquisition in second quarter 2022.

Medicare shared savings revenue in the three months ended September 30, 2022 decreased by $2,419,312, or 100%, year-over-year, to $-0- as a result of an initial determination during third quarter 2022 from the CMS that our ACO narrowly missed its plan year 2021 benchmark expenditures, for which we would have received payment in September 2022. During September 2022, we filed the MSSP Appeal with the CMS to review the calculation of our shared savings. We are awaiting the outcome of the MSSP Appeal, which we expect during the fourth quarter of 2022. Because we recognize Medicare shared savings revenue when we receive official notification from CMS of any amounts to be paid to us, we will only recognize revenue related to plan year 2021 shared savings if and when we are notified that the MSSP Appeal is successful. If the MSSP Appeal is unsuccessful, we will not receive any Medicare shared savings payments related to plan year 2021 and therefore will not recognize any Medicare shared savings revenue in 2022.


Subscription, consulting and event revenue in the three months ended March 31,September 30, 2022 decreasedincreased by $3,437,$20,382, or 4%29% year-over-year, to $84,218.$89,977. Consulting revenue of $77,594$88,806 was earned by the ACO/MSO Division in 2022, compared to $76,452$69,595 in the three months ended March 31,September 30, 2021. Subscription and event revenue of $6,624$1,171 and $11,113$-0- in 2022 and 2021, respectively, was earned from Digital Healthcare division subscription revenues and attendance fees for the Company’s annual healthcare summit.revenues.

Product revenue was $146,969$95,449 in the three months ended March 31,September 30, 2022, compared to $182,663$161,456 in the three months ended March 31,September 30, 2021, a decrease of $35,694,$66,007, or 20%41%. Product revenue was earned by the Medical Distribution Division, comprised of the operations of MOD.

Operating Expenses and Costs

Practice salaries and benefits increased by $54,136,$71,034, or 8%10%, to $718,073$810,058 in the three months ended March 31,September 30, 2022, primarily as a result of increased staffing at our NCFM facilitythe addition of AEU salaries and benefits for a full quarter in 2022 with no corresponding to an increasecost in patient visits in 2022.2021.

Other practice operating costs decreasedincreased by $168,133,$146,214, or 23%27%, to $562,651$695,300 in the three months ended March 31,September 30, 2022, due to reduced overhead at eachprimarily as a result of our facilities.the addition of AEU operating costs for a full quarter in 2022 with no corresponding cost in 2021.


Medicare shared savings expenses increased by $16,222, or 8% to $227,729 in the three months ended March 31,September 30, 2022 decreased by $1,411,052, or 81%, year-over-year, to $337,533 as a result of an initial determination during third quarter 2022 from the CMS that our ACO narrowly missed its plan year 2021 benchmark expenditures, for which we would have received payment in September 2022. Because there was no shared savings awarded in the initial notification, the portion of shared savings shared with our participating providers was $-0- in 2022. During September 2022, we filed the MSSP Appeal with the CMS. We are awaiting the outcome of the MSSP Appeal, which we expect during the fourth quarter of 2022. Because we recognize provider shared savings expense when we receive official notification from CMS of any amounts to be paid to us, we will only recognize such expense related to plan year 2021 shared savings if and when we are notified that the reconsideration appeal is successful. If the reconsideration appeal is unsuccessful, we will not receive any Medicare shared savings expenses represent costs incurredpayments related to deliverplan year 2021 and therefore will not recognize any Medicare shared savings revenue including overhead and consulting fees related to advising participating physician practices, as well as the physicians’ portion of anyor provider shared savings received by the ACO.saving expense in 2022.

Cost of product revenue was $160,811$87,775 in the three months ended March 31,September 30, 2022, a decrease of $7,785,$57,657, or 5%40%, compared to the same period of 2021, corresponding to the decreasedecline in year-over-year sales.product sales for the quarter compared to the same period in the prior year.

Selling, general and administrative costs decreased by $30,997,$59,458, or 2%5%, to $1,335,140$1,088,133 in the three months ended March 31,September 30, 2022 compared to the three months ended March 31,September 30, 2021, primarily due to lower stock-based consulting fees, travel costs and advertising costs incurred in 2022 compared to 2021.

Depreciation and amortization increased in the three months ended September 30, 2022 by $4,193, or 2%, to $209,504 compared to the three months ended September 30, 2021 as a result of the addition of new depreciable medical equipment from the AEU acquisition. We did not add any new intangible assets subject to amortization during either period.

Loss from operations increased by $1,290,314, or 263%, to $1,780,624 in the three months ended September 30, 2022 compared to the three months ended September 30, 2021, primarily as a result of receiving no Medicare shared savings revenue (net of provider shared savings expense) in 2022, which is under appeal as described above, decreased patient service revenue at our NWC and BTG practices due primarily to closures at both offices in September 2022 from Hurricane Ian, and decrease in product revenue.

Other Income (Expenses)

Financing cost in the three months ended September 30, 2021 was $110,000, resulting from cash and stock-based fees paid in connection with the July 2022 Standby Equity Purchase Agreement (“SEPA”). There were no financing costs in the third quarter of 2021.

Amortization of original issue and debt discounts on notes payable and convertible notes in the three months ended September 30, 2021 was $21,020, resulting from amortization of original issue discounts on our July 2022 $550,000 promissory note and on a note payable assumed in our acquisition of AEU.

Gains from the change in fair value of contingent acquisition consideration increased by $7,072, or 6%, to $133,483 in the three months ended September 30, 2022, compared to $126,411 in the three months ended September 30, 2021. Because contingent acquisition consideration related to our acquisition of MOD is payable in a fixed number of shares, changes in the fair value of the contingent acquisition consideration fluctuates with our share price. During each of the three months ended September 30, 2022 and 2021, our share price decreased from the price at the end of the preceding quarter, resulting in a decrease in the fair value of the contingent acquisition consideration liability and a corresponding gain from the change in fair value of the liability.


Interest expense increased by $1,522, or 37%, to $5,640 for the three months ended September 30, 2022 as a result of the forgiveness of PPP loans in 2021. Interest expense relates primarily to long-term SBA loans.

Total other income (expenses) decreased by $125,470, or 103%, to expense of ($3,177) in the three months ended September 30, 2022 compared to income of $122,293 in the three months ended September 30, 2021. The change was primarily a result of financing costs and amortization of debt discounts associated with the July 2022 SEPA and $550,000 promissory note, respectively.

Net loss increased by $1,415,784, or 385%, to $1,783,801 in the three months ended September 30, 2022, compared to net loss of $368,017 in the three months ended September 30, 2021, primarily as a result of (i) the initial determination by CMS of no Medicare shared savings revenue (net of provider shared savings expense) in 2022, which is under appeal as described above, (ii) higher practice operating costs, (iii) lower patient service revenue resulting from office closures associated with Hurricane Ian in September 2022, and (iv) financing costs associated with the July 2022 SEPA.

Comparison of Nine Months Ended September 30, 2022 and 2021

The following table summarizes the changes in our results of operations for the nine months ended September 30, 2022 compared with the nine months ended September 30, 2021:

  Nine Months Ended
September 30,
  Change 
  2022  2021  $  % 
             
Patient service revenue, net $4,069,714  $4,379,282  $(309,568)  -7%
Medicare shared savings revenue  ---   2,419,312   (2,419,312)  -100%
Subscription, consulting and event revenue  260,491   229,114   31,377   14%
Product revenue  372,877   512,325   (139,448)  -27%
Total revenue  4,703,082   7,540,033   (2,836,951)  -38%
                 
Operating Expenses and Costs                
Practice salaries and benefits  2,344,529   2,305,993   38,536   2%
Other practice operating expenses  1,897,070   1,790,874   106,196   6%
Medicare shared savings expenses  802,411   2,157,555   (1,355,144)  -63%
Cost of product revenue  419,129   474,026   (54,897)  -12%
Selling, general and administrative expenses  3,678,784   3,661,206   17,578   0%
Depreciation and amortization  622,306   623,438   (1,132)  0%
Loss from operations  (5,061,147)  (3,473,059)  (1,588,088)  46%
                 
Other Income (Expenses)                
Gain (loss) on extinguishment of debt  ---   (4,957,168)  4,957,168   -100%
Change in fair value of debt  ---   (19,246)  19,246   -100%
Financing cost  (110,000)  ---   *   * 
Amortization of original issue discounts on notes payable  (21,020)  ---   *   * 
Change in fair value of contingent acquisition consideration  665,573   (234,678)  900,251   -384%
Interest expense  (15,151)  (13,083)  (2,068)  16%
Total other income (expenses)  519,402   (5,224,175)  5,743,577   -110%
                 
Net loss $(4,541,745) $(8,697,234)  4,155,489   -48%

* - Denotes line item on statement of operations for which there was no corresponding activity in the same period of prior year.

* - Denotes change of less than 1%.


Revenue

Patient service revenue in the nine months ended September 30, 2022 decreased by $309,568, or 7% year-over-year, to $4,069,714, primarily as a result of decreased patient service revenue at our NWC practice of $632,275 due to the departure of a physician and a decrease at BTG of $48,051, offset by a year-over-year increase at our NCFM practice of $247,314 and the addition of AEU revenue following its acquisition.

Medicare shared savings revenue in the nine months ended September 30, 2022 decreased by $2,419,312, or 100%, year-over-year, to $-0- as a result of an initial determination during third quarter 2022 from the CMS that our ACO narrowly missed its plan year 2021 benchmark expenditures, for which we would have received payment in September 2022. During September 2022, we filed the MSSP Appeal with the CMS to review the calculation of our shared savings. We are awaiting the outcome of the MSSP Appeal, which we expect during the fourth quarter of 2022. Because we recognize Medicare shared savings revenue when we receive official notification from CMS of any amounts to be paid to us, we will only recognize revenue related to plan year 2021 shared savings if and when we are notified that the MSSP Appeal is successful. If the MSSP Appeal is unsuccessful, we will not receive any Medicare shared savings payments related to plan year 2021 and therefore will not recognize any Medicare shared savings revenue in 2022.

Subscription, consulting and event revenue in the nine months ended September 30, 2022 increased by $31,377, or 14% year-over-year to $260,491. Consulting revenue of $251,058 was earned by the ACO/MSO Division in 2022, compared to $217,209 in the three months ended June 30, 2021. Subscription and event revenue of $9,433 and $11,905 in 2022 and 2021, respectively, was earned from Digital Healthcare division subscription and event revenues.

Product revenue was $372,877 in the nine months ended September 30, 2022, compared to $512,235 in the nine months ended September 30, 2021, a decrease of $139,448, or 27%. Product revenue was earned by the Medical Distribution Division, comprised of the operations of MOD.

Operating Expenses and Costs

Practice salaries and benefits increased by $38,536, or 2%, to $2,344,529 in the nine months ended September 30, 2022 primarily as a result of the addition of AEU salaries and benefits starting in May 2022 with no corresponding cost in 2021.

Other practice operating costs increased by $106,196, or 6%, to $1,897,070 in the nine months ended September 30, 2022, primarily as a result of the addition of AEU operating costs starting in May 2022 with no corresponding cost in 2021.

Medicare shared savings expenses in the nine months ended September 30, 2022 decreased by $1,355,144, or 63%, year-over-year, to $802,411 as a result of an initial determination during third quarter 2022 from the CMS that our ACO narrowly missed its plan year 2021 benchmark expenditures, for which we would have received payment in September 2022. Because there was no shared savings awarded in the initial notification, the portion of shared savings shared with our participating providers was $-0- in 2022. During September 2022, we filed the MSSP Appeal with the CMS. We are awaiting the outcome of the MSSP Appeal, which we expect during the fourth quarter of 2022. Because we recognize provider shared savings expense when we receive official notification from CMS of any amounts to be paid to us, we will only recognize such expense related to plan year 2021 shared savings if and when we are notified that the reconsideration appeal is successful. If the reconsideration appeal is unsuccessful, we will not receive any Medicare shared savings payments related to plan year 2021 and therefore will not recognize any Medicare shared savings revenue or provider shared saving expense in 2022.

Cost of product revenue was $419,129 in the nine months ended September 30, 2022, a decrease of $54,897, or 12%, compared to the same period of 2021, corresponding to the decline in product sales for the period compared to the same period in the prior year. During the nine months ended September 30, 2022, we also made two sales with corresponding cost of product revenue of $89,395 for which we do not believe it is probable that we will collect from the customers. As a result, the cost of product revenue is recognized in the three months ended September 30, 2022 with no corresponding revenue recognized.

Selling, general and administrative costs increased by $17,578, or less than 1%, to $3,678,784 in the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021, primarily due to more personnel, overhead, promotional and development costs in our corporate function in connection with our continued investment in the HealthLynked Network, offset by lower stock-based and cash-based consulting fees, and legal and accounting fees in 2022 compared to 2021, offset by more personnel and overhead costs in our corporate function in connection with our continued expansion, as well as increased promotional and development costs associated with developing and marketing the HealthLynked Network and related applications.2021.

Depreciation and amortization decreased in the threenine months ended March 31,September 30, 2022 by $7,768,$1,132, or 4%less than 1%, to $203,890$622,306 compared to the threenine months ended March 31,September 30, 2021, primarily as a result of certain fixed assets reaching the end of their depreciable lives.lives in 2021, offset by the addition of new depreciable medical equipment from the AEU acquisition. We did not add any new intangible assets subject to amortization during either period.


Loss from operations increased by $33,497,$1,588,088, or 2%46%, to $1,601,422$5,061,147 in the threenine months ended March 31,September 30, 2022 compared to the threenine months ended March 31,September 30, 2021, primarily as a result of receiving no Medicare shared savings revenue (net of provider shared savings expense) in 2022, which is under appeal as described above, lower patient service and product revenue and an increase in practice salaries and benefits.operating costs.

Other Income (Expenses)

Loss on extinguishment of debt in the threenine months ended March 31,September 30, 2021 was $5,589,994, primarily as a result of a January 2021 transaction pursuant to which the holder of convertible notes with a face value of $1,038,500 and $317,096 of accrued interest agreed to convert the notes pursuant to the original note terms and agreed to a leak-out provision on the received shares in exchange for a five-year warrant to purchase 13,538,494 shares of common stock at an exercise price of $0.30 per share. In connection with the conversion, we recognized$4,957,168 resulting from (i) a loss on debt extinguishment of $5,463,492 in the three months ended March 31, 2021,$5,589,994 representing the excess of the fair value of the shares and a warrant issued at conversion of convertible notes over the carrying value of the host instrumentinstruments and accrued interest. No loss oninterest, and (ii) a debt extinguishment gain of $632,826 related to the forgiveness of PPP loans in May and June 2021. There were no gains or losses from the extinguishment of debt was recognized in the three months ended March 31, 2022.

Losses from the change in fair value of debt was $19,246 in the threenine months ended March 31,September 30, 2021. Such losses resulted from certain convertible notes and notes payable to related parties that, in previous periods, were extended and treated as an extinguishment and reissuance for accounting purposes, requiring these notes to be subsequently carried at fair value. The change in fair value at the end of each reporting period was recorded as “Change in fair value of debt.” After conversion of our remaining convertible notes outstanding in January 2021, we had no further debt carried at fair value, and therefore no change in fair value of debt in the threenine months ended March 31,September 30, 2022

Financing cost in the nine months ended September 30, 2021 was $110,000, resulting from cash and stock-based fees paid in connection with the July 2022 SEPA. There were no financing costs in the third quarter of 2021.

Amortization of original issue and debt discounts on notes payable and convertible notes in the nine months ended September 30, 2021 was $21,020, resulting from amortization of original issue discounts on our July 2022 $550,000 promissory note and on a note payable assumed in our acquisition of AEU.

Gain (loss) from the change in fair value of contingent acquisition consideration decreasedincreased by $1,074,022,$900,251, or 169%384%, to a gain of $438,322$665,573 in the threenine months ended March 31,September 30, 2022, compared to a loss of $635,700$234,678 in the threenine months ended March 31,September 30, 2021. Because contingent acquisition consideration related to our acquisition of MOD is payable in a fixed number of shares, changes in the fair value of the contingent acquisition consideration fluctuates with our share price. During the threenine months ended March 31,September 30, 2021, our share price increased substantially, resulting in an increase in the fair value of the contingent acquisition consideration liability and a corresponding loss from the change in fair value. During the threenine months ended March 31,September 30, 2022, our share price decreased substantially, resulting in a gain from the decrease in fair value of the liability.

Interest expense decreasedincreased by $5,565,$2,068, or 53%16%, to $5,023$15,151 for the threenine months ended March 31,September 30, 2022, compared to interest expense of $10,588$13,083 in the threenine months ended March 31, 2021, as a result of the repayment and conversion of convertible notes and notes payableSeptember 30, 2021. Interest expense relates primarily to related parties during 2020 and forgiveness of PPP loans in 2021, leaving low-interest government loans as our only debt.long-term SBA loans.

Total other income (expenses) decreasedincreased by $6,688,827,$5,743,577, or 107%110%, to income of $433,299$519,402 in the threenine months ended March 31,September 30, 2022 compared to expense of $6,255,528$5,224,175 in the threenine months ended March 31,September 30, 2021. The change was primarily a result of a $5,589,994 loss on extinguishment of debt associated with the retirement of our last remaining convertible notes payable in 2021, and a largegain from the change in fair value of contingent acquisition recognized in the nine months ended September 30, 2022, contrasted to a loss in the nine months ended September 30, 2021, due principally to the fixed-share structure of the MOD contingent consideration.

Net loss decreased by $4,155,489, or 48%, to $4,541,745 in the nine months ended September 30, 2022, compared to net loss of $8,697,234 in the nine months ended September 30, 2021, primarily as a result of (i) the initial determination by CMS of no Medicare shared savings revenue (net of provider shared savings expense) in 2022, which is under appeal as described above, (ii) an increase in the gain from the change in fair value of contingent acquisition recognized in 2022 due principally to the fixed-share structure of the MOD contingent consideration.


Net loss decreased by $6,655,330, or 85%, to $1,168,123 in the three months ended March 31, 2022, compared to net loss of $7,823,453 in the three months ended March 31, 2021, primarily as a result of (i) a loss on extinguishment of debt of $5,589,994 in 2021 associated with the retirement of our last remaining convertible notes payable, (ii) a $438,322 gain from the change in fair value of contingent acquisition recognized in 2022, as compared to a loss of $635,700 in 2021, due principally to the fair value impact of changes in our stock price on the fixed-share structure of the MOD contingent acquisition consideration, (iii) decreasesa decrease in otherpatient services revenue at our NWC facility and a decrease in product revenue, and (iv) an increase in practice salaries and operating costs in our Health Services division, offset by (iv) a decrease in patient services revenue, primarily at our NWC facility.division.


Seasonal Nature of Operations

We acquired CHM in May 2020. CHM’s primary source of revenue is derived from payments earned under the Medicare shared savings program. Such amounts are determined annually when we are notified by CMS of the amount of shared savings earned. Accordingly, we recognize Medicare shared savings revenue in the period in which the CMS notifies us of the exact amount of shared savings to be paid, which historically has occurred during the three-month period ended September 30 for the program year ended December 31 of the previous year. Medicare shared savings revenue for the program year ended December 31, 2020, for which we received payment and recognized revenue in September 2021, was $2,419,312. Medicare shared savings revenue for the program year ended December 31, 2019, for which we received payment and recognized revenue in September 2020, was $767,744. Future recognition of Medicare shared savings revenue is expected to result in a material increase in our consolidated revenues in the third fiscal quarter of each year compared to the first, second and fourth fiscal quarters. Likewise, in the period in which we recognize Medicare shared savings revenue, we also determine the amount of shared savings expense to be paid to physicians participating in our ACO. This expense is also expected to be recognized in the third fiscal quarter of each year and is expected to materially increase our total operating expenses in the third fiscal quarter compared to other quarters of the fiscal year.year

As described above, we received an initial determination during third quarter 2022 from the CMS that our ACO missed its plan year 2021 benchmark expenditures, for which we would have received payment in September 2022, by just 0.03% on total ACO expenditures of approximately $112 million. During September 2022, we filed the MSSP Appeal with the CMS on the basis that certain of our included expenditures were directly related to long-haul Covid-19 and should therefore be excluded from consideration in calculation of our shared savings. We are awaiting the outcome of the MSSP Appeal, which we expect during the fourth quarter of 2022. Because we recognize Medicare shared savings revenue and related provider shared savings expense when we receive official notification from CMS of any amounts to be paid to us, we will only recognize revenue and expense related to plan year 2021 shared savings if and when we are notified that the MSSP Appeal is successful. If the MSSP Appeal is unsuccessful, we will not receive any Medicare shared savings payments related to plan year 2021 and therefore will not recognize any Medicare shared savings revenue or provider shared saving expense in 2022.

Liquidity and Capital Resources

Liquidity and Going Concern

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, we are required to evaluate whether there is substantial doubt about our ability to continue as a going concern each reporting period, including interim periods. In evaluating our ability to continue as a going concern, management considered the conditions and events that could raise substantial doubt about our ability to continue as a going concern within 12 months after our financial statements were issued (May 16,(November 14, 2022). Management considered our current financial condition and liquidity sources, including current funds available, forecasted future cash flows and our obligations due before May 16,November 14, 2023.

We are subject to a number of risks, including uncertainty related to product development and generation of revenues and positive cash flow from our 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 our growth and operating activities and generating a level of revenues adequate to support our cost structure.

We have experienced net losses and cash outflows from operating activities since inception. As of March 31,September 30, 2022, we had cash balances of $1,926,714,$158,160, a working capital deficit of $503,527$1,989,943 and an accumulated deficit of $33,373,312.$36,746,934. For the threenine months ended March 31,September 30, 2022, we had a net loss of $1,168,123,$4,541,745, net cash used by operating activities of $1,342,918,$3,762,644, and no cash provided by financing activities.activities of $1,173,908. We expect 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 our ability to meet our obligations and concluded that, without additional funding, we will not have sufficient funds to meet our obligations within one year from the date the condensed consolidated financial statements were issued.

On April 20, 2021,July 5, 2022, we filedentered into a shelf registration statement on form S-3 that was declared effective by the Securities and Exchange Commission on April 26, 2021Standby Equity Purchase Agreement (the “Shelf Registration”“SEPA”) with YA II PN, Ltd. (“Yorkville”). The Shelf Registration registered for resalePursuant to the SEPA, we shall have the right to sell to Yorkville up to $50,000,00030,000,000 of our shares of common stock, par value $0.0001 per share, at our request any time during the 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 us to Yorkville pursuant to the SEPA, if any, will fluctuate based on the market prices of our common stock.stock during the applicable pricing period, we 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 us from those sales, if any. During August 2021,the three and nine months ended September 30, 2022, we sold 3,703,704made 11 advances under the SEPA, receiving $297,405 in proceeds for the issuance of 2,708,100 shares of common sharesstock, of which $125,618 was applied to the balance of the Promissory Note.

On July 19, 2022, pursuant to a Note Purchase Agreement between us and 1,851,852 five-year warrantsYorkville, dated July 5, 2022, we issued to Yorkville a promissory note with an exerciseinitial principal amount equal to $550,000 (the “Promissory Note”) at a purchase price of $0.65 to an institutional investor at an offering price of $0.54 per share pursuantequal to the Shelf Registration, generating grossprincipal amount of the Promissory Note less any original issue discounts and fees. We received net proceeds of $2,000,000. We$522,500. The Promissory Note will mature on the six-month anniversary of execution. The Promissory Note accrues interest at a rate of 0%, but was issued with 5% original issue discount, and will be repaid in five equal monthly installments beginning on August 19, 2022. The Promissory Note may still makebe repaid with the proceeds of an advance under the SEPA, or repaid in cash and, if repaid in cash, together with a 2% premium. During the third quarter of 2022, we made repayments totaling $149,595 against the Promissory Note, including $125,618 applied from proceeds of sales of common stock up to an additional $48,000,000 under the Shelf Registration. Management intends to alleviate the conditions described above by raising additional capital from the Shelf Registration. However, there is no assurance that management’s plans will be successful. Our ability to obtain additional financing in the debt and equity capital markets is subject to several factors, including market and economic conditions, our performance and investor sentiment with respect to us and our industry.SEPA.


On October 21, 2022, our Board of Directors approved a plan to sell the ACO/MSO Division, comprised of the operations of CHM and its subsidiary AHP, which we acquired on May 18, 2020. CHM and AHP operate an ACO that 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. We expect to use the cash proceeds generated from a sale to supplement our operating cash requirements and pursue additional acquisitions. We expect to complete a sale by the first quarter of 2023.

Without raising additional capital, either via additional Advances made pursuant to the Shelf RegistrationSEPA, from the sale of debt or equity, from the sale of the ACO/MSO Division, or from other sources, there is substantial doubt about our ability to continue as a going concern through May 16,November 14, 2023. The accompanying condensed consolidated financial statements have been prepared assuming that we will continue as a going concern. This basis of presentation contemplates the recovery of our assets and the satisfaction of liabilities in the normal course of business.

We intend that the longer term (i.e., beyond twelve months) cost of completing additional intended acquisitions, implementing our development and sales efforts related to the HealthLynked Network and maintaining existing and expanding overhead and administrative costs will be financed from (i) cash on hand, (ii) profits generated by NCFM, BTG and CHM (including expected Medicare Shared Savings revenue projected to be received annually in the third fiscal quarter of each year), and (iii) the use of further outside funding sources. No assurances can be given that we will be able to access additional outside capital in a timely fashion. If necessary funds are not available, our business and operations would be materially adversely affected and in such event, we would attempt to reduce costs and adjust our business plan.

COVID-19

A novel strain of coronavirus, COVID-19, that was first identified in China in December 2019, has surfaced in several regions across the world and resulted in travel restrictions and business slowdowns or shutdowns in affected areas. In March 2020, the World Health Organization declared the outbreak of COVID-19 a pandemic. The outbreak of the pandemic is materially adversely affecting our employees, patients, communities and business operations, as well as the U.S. economy and financial markets. The further spread of COVID-19, and the requirement to take action to limit the spread of the illness, may impact our ability to carry out our business as usual and may materially adversely impact global economic conditions, our business and financial condition, including our potential to conduct financings on terms acceptable to us, if at all. The extent to which COVID-19 may impact our business will depend on future developments, which are highly uncertain and cannot be predicted with confidence, such as the ultimate geographic spread of the disease, the duration of the outbreak, travel restrictions and social distancing in the United States and other countries, business closures or business disruptions and the effectiveness of actions taken in the United States and other countries to contain and treat the disease. In response to COVID-19, we implemented additional safety measures in our patient services locations and our corporate headquarters.

Plan of operation and future funding requirements

Our plan of operations is to profitably operate our Health Services business and continue to invest in our Digital Healthcare business, including our cloud-based online personal medical information and record archiving system, the “HealthLynked Network.”

We intend to marketare marketing the HealthLynked Network through top level sales efforts with our new VP of sales Jeffrey Cohenby targeting large health systems, hospitals and universities. In addition, we will marketare marketing via telesales targeting physicians’ offices, direct to patientdirect-to-patient marketing, affiliated marketing campaigns, co-marketing with our Medical Distribution businesses retailersubsidiary MOD, and expanded southeast regional sales efforts. We intend that ourOur initial primary sales strategy will beis utilizing Internet-based marketing to increase penetration to targeted geographical areas. These campaigns are focused on both physician providers and patient members. We also are leveraging MOD’s discounted medical supplies as an offering to our patient and physician members in the HealthLynked Network. We also intend to utilize physician telesales through the use of telesales representatives whom we will hire as access to capital allows. In combination with our telesales, we intend to also utilize Internet based marketing to increase penetration to targeted geographical areas. These campaigns will be focused on both physician providers and patient members. We also intend to leverage MOD’s discounted medical supplies as an offering to our patient and physician members in both the HealthLynked Network and our ACO network and plans. If we fail to complete the development of, or successfully market, the HealthLynked Network, our ability to realize future increases in revenue and operating profits could be impacted, and our results of operations and financial position would be materially adversely affected.

Currently, we are focusing on acquiring additional profitable ACOs with a concentration on physician-based ACOs in Florida, the Southeast, Texas, New Jersey and Arizona. ACOs’ objectives are to reduce patients’ healthcare costs while improving their health. Our initial targets are physician-based Florida Medicare ACOs. Profitable ACOs have shared savings, which are payments made by the Medicare governing body CMS to ACOs whose Medicare patients have aggregate total savings over the regional threshold for all Medicare patients in the territory and that meet CMS’ quality standards. Given HealthLynked’s goal to improve healthcare and reduce healthcare costs for all patients, we anticipate that the ACO acquisition model can help us expand both physician and patient utilization of the HealthLynked Network while continuing to add incremental revenue and profit from to our Health Services and ACO/MSO business units. We plan to raise additional capital to fund our ongoing acquisition strategy.

Historical Cash Flows

 Three Months Ended
March 31,
  Nine Months Ended
September 30,
 
 2022  2021  2022  2021 
Net cash (used in) provided by:          
Operating activities $(1,342,918) $(1,216,959) $(3,762,644) $(1,627,184)
Investing Activities  (22,014)  (7,399)
Investing activities  (544,750)  (334,581)
Financing activities     4,403,902   1,173,908   7,248,372 
Net increase (decrease) in cash $(1,364,932) $3,179,544  $(3,133,486) $5,286,607 


Operating Activities – During the threenine months ended March 31,September 30, 2022, we used cash from operating activities of $1,342,918,$3,762,644, as compared with $1,216,959$1,627,184 in the threenine months ended March 31,September 30, 2021. The increase in cash usage results primarily from year-over-year decreases in Medicare shared savings revenue (net of provider shared savings expense) for which we are awaiting the outcome of an appeal, patient service and product revenue, as well as increased selling, increased general and administrative costs increased related to our continued expansion.expansion and investment in developing and marketing the HealthLynked Network.


Investing Activities – During the threenine months ended March 31,September 30, 2022, we used $22,014$544,750 in investing activities, including $313,802 used to acquire AEU (net of cash acquired), $207,384 contingent acquisition consideration payment paid to the sellers of NCFM related to the third and final year of earn-out, and $23,564 to acquire fixed assets. During the nine months ended September 30, 2021, we used $334,581 in investing activities, including $196,000 contingent acquisition consideration payment paid the sellers of NCFM and $126,106 contingent acquisition consideration payment paid the sellers of Cura, plus $12,475 for the acquisition of computers and office equipment. During the three months ended March 31, 2021, we used $7,399 in investing activities for the acquisition of computers and office equipment.

Financing Activities – During the threenine months ended March 31,September 30, 2022, we did not have any cash flowsreceived $706,787 from the sale of common stock (net of $125,618 received from sales of common stock under the SEPA that were applied to the balance of the Note Payable), $522,500 from the issuance of notes payable and paid $55,379 against notes payable balances (net of $125,618 received from sales of common stock under the SEPA that were applied to the balance of the Note Payable). During the nine months ended September 30, 2022 and 2021, we realized $7,248,372 and $271,308, respectively, in financing activities. Cash generated from financing activitiesrealized in 2021 in the amount of $4,403,902 was comprised mainly of $4,389,361$5,229,360 from the sale of common stock pursuant to private placements and puts under the Investment Agreement, $1,719,921 net proceeds from the Registered Direct Offering, and $65,650$350,200 proceeds from the exercise of options and warrants, offset bywarrants. We also made cash repayments against a vendor note in the amount of $51,109.$51,109, retiring the note in full.

Off Balance Sheet Arrangements

We did not have, during the periods presented, and we do not currently have, any off-balance sheet arrangements, as defined under applicable Securities and Exchange Commission rules.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

The Company is not required to provide the information required by this Item as it is a “smaller reporting company,” as defined in Rule 229.10(f)(1).

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e)) promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) that are designed to ensure that information required to be disclosed in Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

Our management evaluated, with the participation of our Chief Executive Officer and Chief Financial Officer, the effectiveness of our disclosure controls and procedures as of March 31,September 30, 2022 based on the framework in “Internal Control – Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in 2013. Based on that evaluation, our management concluded that our disclosure controls and procedures were effective as of March 31,September 30, 2022.

Changes in Internal Control over Financial Reporting

There was no change in the Company’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) during the fiscal quarter ended March 31,September 30, 2022 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.


 

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

From time to time, we may become involved in various lawsuits and legal proceedings, which arise, in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business.

We are not aware of any such legal proceedings that we believe will have, individually or in the aggregate, a material adverse effect on our business, financial condition or operating results.

Item 1A. Risk Factors

The Company is not required to provide the information required by this item as it is a “smaller reporting company,” as defined by Rule 229.10(f)(1).

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Except as previously disclosed in a Current Report on Form 8-K or in a Form 10-Q, or as set forth below, the Company has not sold securities that were not registered under the Securities Act of 1933, as amended (the “Securities Act”), during the period covered by this report.report:

On July 5, 2022, we sold 3,181,818 shares of common stock for cash in a private placement transaction to three separate accredited investors. We received $350,000 in proceeds from the sale. In connection with the stock sale, we also issued 1,590,909 five-year warrants to purchase shares of common stock at an exercise price of $0.22 per share.

On July 26, 2022, we issued 142,024 shares of common stock to a consultant as compensation for services provided.

On September 27, 2022, we sold 1,750,000 shares of common stock for cash in a private placement transaction to two separate accredited investors. We received $175,000 in proceeds from the sale. In connection with the stock sale, we also issued 1,625,000 five-year warrants to purchase shares of common stock at exercise prices between $0.12 and $0.15 per share.

The sales of the above securities were exempt from registration under the Securities Act in reliance upon Section 4(a)(2) of the Securities Act, as transactions by an issuer not involving any public offering. The recipients of the securities in each of these transactions represented their intentions to acquire the securities for investment only and not with a view to or for sale in connection with any distribution thereof, and appropriate legends were placed upon the stock certificates issued in these transactions.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.


Item 6. Exhibits

Exhibit No. Exhibit Description
31.1*10.1 Extension Letter Agreement, by and between HealthLynked Corp. and George O’Leary, dated October 13, 2022 (Filed as Exhibit 10.1 to the Company’s Form 8-K filed with the Commission on October 19, 2022)
10.2Non-Disclosure, Non-Solicitation and Non-Compete Agreement between HealthLynked Corp. and George O’Leary, dated October 13, 2022 (Filed as Exhibit 10.2 to the Company’s Form 8-K filed with the Commission on October 19, 2022)
31.1*Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 of the Principal Executive Officer
31.2*31.2*Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 of the Principal Financial Officer and Principal Accounting Officer
32.1*32.1*Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 of the Principal Executive Officer
32.2*32.2*Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 of the Principal Financial Officer and Principal Accounting Officer
101.INS* Inline XBRL Instance Document.
101.SCH* Inline XBRL Taxonomy Extension Schema Document.
101.CAL* Inline XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF* Inline XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB* Inline XBRL Taxonomy Extension Label Linkbase Document.
101.PRE* Inline XBRL Taxonomy Extension Presentation Linkbase Document.
104* Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

**Filed herewith.


 

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Dated: May 16,November 14, 2022

HEALTHLYNKED CORP.
By:/s/ Michael Dent
Name:Michael Dent
Title:

Chief Executive Officer and Chairman

(Principal Executive Officer)

By:/s/ George O’Leary
Name:George O’Leary
Title:

Chief Financial Officer

(Principal Financial Officer)

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