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8-K/A - AMENDMENT NO. 1 TO CURRENT REPORT - HealthLynked Corpea124861-8ka1_healthlynked.htm
EX-99.2 - UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS OF CURA HEALTH MANAGEMENT - HealthLynked Corpea124861ex99-2_health.htm
EX-99.1 - AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF CURA HEALTH MANAGEMENT LLC FOR THE - HealthLynked Corpea124861ex99-1_health.htm

Exhibit 99.3

 

UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS

 

Basis of presentation

 

The following unaudited pro forma consolidated balance sheet and statements of income are presented to give effect to the acquisition of Cura Health Management LLC (“CHM”) by HealthLynked Corp (“HealthLynked”). The pro forma information was prepared based on the historical financial statements and related notes of HealthLynked and CHM, as adjusted for the pro forma impact of applying the acquisition method of accounting in accordance with Generally Accepted Accounting Principles in the United States (“U.S. GAAP”). The pro forma adjustments are based upon available information and assumptions that HealthLynked believes are reasonable. The allocation of the purchase price of the CHM acquisition reflected in these unaudited pro forma consolidated financial statements has been based upon preliminary estimates of the fair value of assets acquired and liabilities assumed. The pro forma adjustments are therefore preliminary and have been prepared to illustrate the estimated effect of the acquisition.

 

The unaudited pro forma consolidated balance sheet has been prepared to reflect the transaction as if the transaction had occurred on March 31, 2020. The unaudited pro forma consolidated statements of operations combine the results of HealthLynked and CHM for the three months ended March 31, 2020, as if the transaction had occurred on January 1, 2020 and for the fiscal year ended December 31, 2019, as if the transaction had occurred on January 1, 2019.

 

The unaudited pro forma consolidated financial statements were prepared using the acquisition method of accounting with HealthLynked treated as the acquiring entity. Accordingly, the aggregate value of the consideration paid by HealthLynked to complete the acquisition was allocated to the assets acquired and liabilities assumed from CHM based upon their estimated fair values on the closing date of the acquisition. HealthLynked has not completed the detailed valuations necessary to estimate the fair value of the assets acquired and the liabilities assumed from CHM and the related allocations of purchase price, nor has HealthLynked identified all adjustments necessary to conform CHM’s accounting policies to HealthLynked’s accounting policies. Additionally, a final determination of the fair value of assets acquired and liabilities assumed from CHM will be based on the actual net tangible and intangible assets and liabilities of CHM that existed as of the closing date. Accordingly, the pro forma purchase price adjustments presented herein are preliminary, and may not reflect any final purchase price adjustments made. HealthLynked estimated the fair value of CHM’s assets and liabilities based on discussions with CHM’s management, due diligence and preliminary work performed by third-party valuation specialists. As the final valuations are being performed, increases or decreases in the fair value of relevant balance sheet amounts will result in adjustments, which may result in material differences from the information presented herein.

 

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HealthLynked Corp.

Unaudited Pro Forma Consolidated Balance Sheets

As of March 31, 2020

 

           Pro Forma   Pro Forma 
   HealthLynked   CHM   Adjustments   Consolidated 
ASSETS                
Current Assets                
Cash  $204,266   $176,190   $(89,000)(1)  $291,456 
Accounts receivable, net   74,161    52,874         127,035 
Inventory   89,601              89,601 
Prepaid expenses   56,766    28,199         84,965 
Deferred offering costs   6,401              6,401 
Total Current Assets   431,195    257,263    (89,000)   599,458 
                     
Property, plant and equipment, net   491,047              491,047 
Intangible assets, net   1,134,585         1,282,976(2)   2,417,561 
ROU lease assets, deposits and other long term assets   255,662    53         255,715 
                     
Total Assets  $2,312,489   $257,316   $1,193,976   $3,763,781 
                     
LIABILITIES AND SHAREHOLDERS’ DEFICIT                    
Current Liabilities                    
Accounts payable and accrued expenses  $786,095   $5,147   $    $791,242 
Deferred revenue        50,420         50,420 
Lease liability, current portion   145,869              145,869 
Due to related party, current portion   509,563    11,265         520,828 
Notes payable to related party, current portion   817,037              817,037 
Convertible notes payable, net of original issue discount   1,651,917         88,982(3)   1,740,899 
Notes payable                  --- 
Contingent acquisition consideration   50,263         1,057,785(4)   1,108,048 
Derivative financial instruments   219,938         36,018(5)   255,956 
Total Current Liabilities   4,180,682    66,832    1,182,785    5,430,299 
                     
Long-Term Liabilities                    
Contingent acquisition consideration, long term portion   256,031              256,031 
Lease liability, long term portion   103,225              103,225 
                     
Total Liabilities   4,539,938    66,832    1,182,785    5,789,555 
                     
Shareholders’ Deficit                    
Common stock   11,889         224(6)   12,113 
Common stock issuable   205,241              205,241 
Additional paid-in capital   14,165,291         201,451(7)   14,366,742 
Members’ equity   ---    190,484    (190,484)(8)   --- 
Retained earnings (accumulated deficit)   (16,609,870)             (16,609,870)
Total Shareholders’ Deficit   (2,227,449)   190,484    11,191    (2,025,774)
                     
Total Liabilities and Shareholders’ Deficit  $2,312,489   $257,316   $1,193,976   $3,763,781 

 

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HealthLynked Corp.

Unaudited Pro Forma Consolidated Statement of Operations

For the Three Months Ended March 31, 2020

 

           Pro Forma   Pro Forma 
   HealthLynked   CHM   Adjustments   Consolidated 
Revenue                
Patient service revenue, net  $1,336,940   $    $    $1,336,940 
Medicare shared savings revenue                  --- 
Service revenue        151,259         151,259 
Total revenue   1,336,940    151,259         1,488,199 
                     
Operating Expenses                    
Practice salaries and benefits   765,121              765,121 
Other practice operating expenses   563,691              563,691 
General and administrative   510,976    173,732         684,708 
Depreciation and amortization   24,786          (1)   24,786 
Total Operating Expenses   1,864,574    173,732         2,038,306 
                     
Loss from operations   (527,634)   (22,473)        (550,107)
                     
Other Income (Expenses)                    
Loss on extinguishment of debt   (467,937)             (467,937)
Change in fair value of debt   35,965              35,965 
Amortization of original issue and debt discounts on notes payable and convertible notes   (292,163)        (11,680)(2)   (303,843)
Change in fair value of derivative financial instrument   733,734              733,734 
Interest expense   (62,181)        (3,191)(2)   (65,372)
Total other expenses   (52,582)        (14,871)   (67,453)
                     
Net loss before provision for income taxes   (580,216)   (22,473)   (14,871)   (617,560)
                     
Provision for income taxes   ---              --- 
                     
Net loss  $(580,216)  $(22,473)  $(14,871)  $(617,560)
                     
Net loss per share, basic and diluted:                    
Basic  $(0.005)            $(0.005)
Fully diluted  $(0.005)            $(0.005)
                     
Weighted average number of common shares:                    
Basic   114,601,960         2,240,838(3)   116,842,798 
Fully diluted   114,601,960         2,240,838(3)   116,842,798 

 

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HealthLynked Corp.

Unaudited Pro Forma Consolidated Statement of Operations

For the Year Ended December 31, 2019

 

           Pro Forma   Pro Forma 
   HealthLynked   CHM   Adjustments   Consolidated 
Revenue                
Patient service revenue, net  $4,018,818   $    $    $4,018,818 
Medicare shared savings revenue        1,920,318         1,920,318 
Service revenue        95,000         95,000 
Revenue from related parties        3,250         3,250 
Total revenue   4,018,818    2,018,568         6,037,386 
                     
Operating Expenses                    
Practice salaries and benefits   2,393,954              2,393,954 
Other practice operating expenses   1,845,070              1,845,070 
Provider shared savings expense        780,982         780,982 
General and administrative   2,915,419    257,184         3,172,603 
Depreciation and amortization   73,385          (1)   73,385 
Total Operating Expenses   7,227,828    1,038,166         8,265,994 
                     
Income (loss) from operations   (3,209,010)   980,402         (2,228,608)
                     
Other Income (Expenses)                    
Loss on extinguishment of debt   (1,229,777)             (1,229,777)
Change in fair value of debt   (121,508)             (121,508)
Financing cost   (135,528)             (135,528)
Amortization of original issue and debt discounts on notes payable and convertible notes   (1,260,513)        (39,018)(2)   (1,299,531)
Change in fair value of derivative financial instrument   671,822              671,822 
Interest expense   (244,085)        (3,191)(2)   (247,276)
Total other expenses   (2,319,589)        (42,209)   (2,361,798)
                     
Net loss before provision for income taxes   (5,528,599)   980,402    (42,209)   (4,590,406)
                     
Provision for income taxes   ---              ---- 
                     
Net income (loss)  $(5,528,599)  $980,402   $(42,209)  $(4,590,406)
                     
Net loss per share, basic and diluted:                    
Basic  $(0.056)            $(0.045)
Fully diluted  $(0.056)            $(0.045)
                     
Weighted average number of common shares:                    
Basic   99,059,677         2,240,838(3)   101,300,515 
Fully diluted   99,059,677         2,240,838(3)   101,300,515 

 

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HealthLynked Corp.

Notes to Unaudited Pro Forma Consolidated Financial Information

 

Note 1 – Purchase Price Consideration

 

On May 18, 2020, the Company acquired a 100% interest in CHM and its wholly owned subsidiary AHP. Under the terms of acquisition, the Company paid CHM shareholders the following consideration: (i) $214,000 in cash paid at closing, (ii) 2,240,838 shares of HealthLynked common stock issued at closing, (iii) up to $223,500 additional cash and $660,000 in additional shares of HealthLynked common payable at the time CHM receives the final assessment of the calculation of MSSP savings for the 2019 program year, with this amount prorated based on a target MSSP payment (plus other ancillary revenue) of $1,725,000, and (iv) up to $437,500 based on the business achieving annual revenue of $2,250,000 and annual profit of $500,000 in each of the four years following closing.

 

The fair value of the 2,240,838 common shares issued at closing was determined using the intraday average high and low trading price of the Company’s common shares on the acquisition date. The terms of the earn out require the Company to pay the former owners of CHM 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 fair value of the contingent acquisition consideration related to both the four-year earn-out and the current year MSSP savings amount were calculated using a probability-weighted discounted cash flow projection.

 

The table below represents the total fair value of the purchase price consideration:

 

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

 

Note 2 – Pro Forma Adjustments

 

Following is a description of the unaudited pro forma adjustments reflected in the unaudited pro forma consolidated financial statements.

 

Adjustments to the pro forma consolidated balance sheet

 

(1)The pro forma adjustments to cash reflect the cash paid for the acquisition as follows:

 

Cash portion of purchase consideration  $(214,000)
Proceeds from convertible note payable used to finance portion of acquisition   125,000 
   Total  $(89,000)

 

(2)The pro forma adjustments to goodwill and other intangible assets reflect the following:

 

Cash portion of purchase consideration  $214,000 
Stock consideration   201,675 
Contingent purchase consideration   1,057,785 
Eliminate equity of CHM   (190,484)
   Total  $1,282,976 

 

The aggregate value of the consideration paid by HealthLynked to complete the acquisition was allocated to the assets acquired and liabilities assumed from CHM based upon their estimated fair values on the closing date of the acquisition. HealthLynked has not completed the detailed valuations necessary to estimate the fair value of the assets acquired and the liabilities assumed from CHM and the related allocations of purchase price. Accordingly, such excess is presented as “Goodwill and other intangible assets” on the accompanying unaudited pro forma consolidated balance sheets.

 

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(3)The pro forma adjustment to convertible notes payable reflects the issue date fair value of a convertible note that financed in part the cash portion of the acquisition price paid at closing (the “Note”), comprised of $128,000 face value net of a $3,000 cash discount and a $36,018 discounts for the fair value of a beneficial conversion features.

 

(4)The pro forma adjustments to contingent acquisition consideration reflects the fair value of future purchase price consideration that can be earned by the selling shareholders based on achievement of specified milestones in the underlying CHM business as follows: (i) up to $223,500 additional cash payable at the time CHM receives the final assessment of the calculation of Medicare Shared Savings Plan (“MSSP”) savings for the current year (estimated to be by September 2020), with this amount prorated based on a target MSSP payment (plus other ancillary revenue) of $1,725,000; (ii) up to $660,000 additional shares of HealthLynked common stock prorated against a target MSSP payment of $1,725,000; (iii) earn-out payments up to a total of $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, with $62,500 available in year one following the closing and $125,000 available in years 2-4, weighted each year 50% on revenue goal and 50% on profit goal.

 

(5)The pro forma adjustment to derivative financial instrument is to record the beneficial conversion feature of the Note as if it had had been issued as of the balance sheet date. The convertible note contained an embedded conversion feature (“ECF”) that qualified for derivative accounting and bifurcation under ASC 815, “Derivatives and Hedging.” The inception date fair value of the ECF was $36,018.

 

(6)The pro forma adjustment to common stock reflects the $0.0001 par value of the 2,240,838 shares issued at closing.

 

(7)The pro forma adjustment to additional paid-in capital reflects the following:

 

Number of shares   2,240,838 
Average of high and low trading prices on closing date (May 18, 2020)  $0.090 
Fair value of shares  $201,675 
Less: portion of stock consideration allocated to common stock  $(224)
Portion of stock consideration allocated to additional paid-in capital  $201,451 

 

(8)The pro forma adjustments to retained earnings is to eliminate the retained earnings of CHM.

 

Adjustments to the pro forma consolidated statement of operations

 

(1)No pro forma adjustment is recorded to reflect the amortization of purchased intangibles, comprised of ACO Physician Contracts and Goodwill, because HealthLynked these intangible assets to have an indefinite life.

 

(2)Pro forma adjustments reflect pro forma amortization of original issue and debt discounts and accrued interest on the Note for the periods presented.

 

(3)The pro forma adjustments to weighted average common shares reflects 2,240,838 shares issued as consideration at closing of the acquisition of CHM as if the acquisition had occurred at the beginning of the period presented

 

 

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