Attached files
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8-K/A - AMENDMENT NO. 1 TO CURRENT REPORT - HealthLynked Corp | ea124861-8ka1_healthlynked.htm |
EX-99.2 - UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS OF CURA HEALTH MANAGEMENT - HealthLynked Corp | ea124861ex99-2_health.htm |
EX-99.1 - AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF CURA HEALTH MANAGEMENT LLC FOR THE - HealthLynked Corp | ea124861ex99-1_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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