# HealthLynked Corp: Form 10-Q for the period ended Jun 30, 2023

- Company: [HealthLynked Corp](/companies/hlyk.md) (CIK 1680139)
- Form: 10-Q
- Filed: 2023-08-14
- Accepted by EDGAR: Aug 14, 2023, 16:12 ET
- Period: 2023-06-30
- Accession: 0001213900-23-067049
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1680139/000121390023067049/f10q0623_healthlynked.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1680139/000121390023067049/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2023-06-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2023-04-01 to 2023-06-30 | $1.7m | us-gaap:Revenues |
| Revenue | 6 months, 2023-01-01 to 2023-06-30 | $35.5k | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Selling, general and administrative | 3 months, 2023-04-01 to 2023-06-30 | $833.7k | us-gaap:SellingGeneralAndAdministrativeExpense |
| Selling, general and administrative | 6 months, 2023-01-01 to 2023-06-30 | $1.9m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Operating income | 3 months, 2023-04-01 to 2023-06-30 | −$798.1k | us-gaap:OperatingIncomeLoss |
| Operating income | 6 months, 2023-01-01 to 2023-06-30 | −$1.9m | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months, 2023-04-01 to 2023-06-30 | $39.1k | us-gaap:InterestExpense |
| Interest expense | 6 months, 2023-01-01 to 2023-06-30 | $50.5k | us-gaap:InterestExpense |
| Net income | 3 months, 2023-04-01 to 2023-06-30 | −$1.0m | us-gaap:NetIncomeLoss |
| Net income | 6 months, 2023-01-01 to 2023-06-30 | $448.5k | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2023-04-01 to 2023-06-30 | $0.00 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 6 months, 2023-01-01 to 2023-06-30 | $0.00 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2023-04-01 to 2023-06-30 | $0.00 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 6 months, 2023-01-01 to 2023-06-30 | $0.00 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2023-04-01 to 2023-06-30 | 259,817,248 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 6 months, 2023-01-01 to 2023-06-30 | 258,481,657 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 6 months, 2023-01-01 to 2023-06-30 | −$1.7m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Cash and equivalents | at 2023-06-30 | $343.2k | us-gaap:Cash |
| Current assets | at 2023-06-30 | $1.8m | us-gaap:AssetsCurrent |
| Total assets | at 2023-06-30 | $5.5m | us-gaap:Assets |
| Current liabilities | at 2023-06-30 | $3.3m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2023-06-30 | $4.0m | us-gaap:Liabilities |
| Shareholders' equity | at 2023-06-30 | $1.6m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 44,786 characters.

### 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 three distinct divisions: the Health Services Division, the Digital Healthcare 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, (iii) Bridging the Gap Physical Therapy (“BTG”), a physical therapy practice in Bonita Springs, FL that provides hands-on functional manual therapy techniques to speed patients’ recovery and manage pain without pain medication or surgery, and (iv) Aesthetic Enhancements Unlimited (“AEU”), a patient service facility specializing in minimally and non-invasive cosmetic services acquired by the Company in May 2022. 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 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 we acquired in October 2020.

#### Recent Development – ACO/MSO Division

On January 17, 2023, we entered into an Agreement and Plan of Merger (the “AHP Merger Agreement”) pursuant to which PBACO Holding, LLC, an operator of ACOs, (“Buyer”) agreed to buy, and we agreed to sell, our wholly owned subsidiary ACO Health Partners LLC (“AHP”)(the transaction, the “AHP Sale”). Pursuant to the terms of the AHP Merger Agreement, we received or will receive the following consideration: (1) $750,000 in cash paid upon signing of the definitive agreement (received January 18, 2023) (the “Upfront Cash Consideration”); (2) up to $1,750,000 net incremental cash based on agreement to participate in Buyer’s ACO by AHP’s existing physician practices or newly added practices, scaled based on the number of covered patients transferred to PBACO by July 31, 2023 (the “Incremental Cash Consideration”), of which $1,225,000 ($1,180,000 net after commissions) was received in June 2023; (3) in the event that Buyer completes a planned initial public offering (“IPO”) by August 1, 2024, shares in the public entity at the time of the IPO with a value equal to AHP’s 2021 earnings before interest, taxes depreciation and amortization (“EBITDA”) times the multiple of EBITDA used to value the public entity’s IPO shares, net of any cash consideration previously paid by the Buyer and subject to vesting requirements detailed in the AHP Merger Agreement (the “IPO Share Consideration”); (4) net proceeds, including allocation for expenses, from any MSSP Shared Savings related to AHP’s plan year 2022, which, if earned, would be determined and paid by the CMS by October 2023 (the “2022 MSSP Consideration”); (5) $500,000 of the Incremental Cash Consideration will be allocated to AHP’s participating physicians upon receipt and will reimbursed to us by the Buyer in 2024 from the Buyer’s plan year 2023 (and if necessary, 2024) MSSP Shared Savings (the “Physician Advance Consideration”); and (6) the Buyer shall reimburse us for expenses incurred by the Company in operating AHP from January 1, 2023 to January 16, 2023 (the “Stub Period Reimbursement”), which was paid in March 2023 in the amount of $31,381. We are also required to indemnify the Buyer against liabilities arising from Buyer’s operation of AHP prior to the Buyer’s IPO date, less a deductible equal to 1% of the aggregate merger consideration (the “Indemnification Clause”). During July 2023, the Company received an additional $150,000 ($120,000 net after commissions) for meeting additional participating physician transfer milestones. The Company has no further rights to any additional Incremental Cash Consideration. The Company may earn up to an additional $300,000 for participating physician transfer milestones earned prior to July 31, 2023 that are under review and for which a determination will be made in third quarter of 2023.

In the event Buyer goes public through means other than an IPO, the parties agreed to modify the terms of the IPO Share Consideration to implement such alternate structure. In the event Buyer does not go public by IPO or other means by August 1, 2024, we receive no IPO Share Consideration, and the transaction consideration is capped at the cash consideration of up to $3,000,000 plus the MSSP Consideration. Pursuant to the terms of the Merger Agreement, formal transfer of the equity ownership of AHP from us to the Buyer will occur at the earlier of (i) Buyer’s IPO, (ii) Buyer going public by other means, or (iii) if Buyer does not go public, on August 1, 2024. Until that time, we have the right, but not the obligation, to reacquire AHP for a price equal to any consideration already paid by the Buyer for AHP, plus all expenses incurred by Buyer in operating AHP after January 16, 2023.

We have classified the results of the ACO/MSO Division as discontinued operations in the accompanying consolidated statement of operations for all periods presented. Additionally, the assets and liabilities associated with the ACO/MSO Division transferred to the Buyer in the transaction are classified as held for sale in the Company’s consolidated balance sheet as of December 31, 2022. As a result of the AHP Sale and pursuant to the terms and conditions of the AHP Merger Agreement and the MSA, we ceased to have a controlling financial interest in AHP as of January 17, 2023. Accordingly, in connection the AHP Sale, we deconsolidated AHP as of January 17, 2023.

### 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 June 30, 2023 and 2022

The following table summarizes the changes in our results of operations for the three months ended June 30, 2023 compared with the three months ended June 30, 2022:

|  | Three Months Ended June 30, 2023 | 2022 | Change $% |  |
| --- | ---: | ---: | ---: | ---: |
| Patient service revenue, net | $1,630,334 | $1,431,776 | $198,558 | 14% |
| Subscription and event revenue | 19,177 | 1,639 | 17,538 | 1070% |
| Product revenue | 53,985 | 130,459 | (76,474) | -59% |
| Total revenue | 1,703,496 | 1,563,874 | 139,622 | 9% |
| **Operating Expenses and Costs** |  |  |  |  |
| Practice salaries and benefits | 898,992 | 816,398 | 82,594 | 10% |
| Other practice operating expenses | 646,216 | 639,119 | 7,097 | 1% |
| Cost of product revenue | 34,397 | 170,543 | (136,146) | -80% |
| Selling, general and administrative expenses | 833,689 | 1,255,511 | (421,822) | -34% |
| Depreciation and amortization | 88,293 | 208,912 | (120,619) | -58% |
| Loss from operations | (798,091) | (1,526,609) | 728,518 | -48% |
| **Other Income (Expenses)** |  |  |  |  |
| Loss on extinguishment of debt | (44,169) | --- | (44,169) | \* |
| Amortization of original issue discounts on notes payable | (128,689) | --- | (128,689) | \* |
| Gain from realization of contingent sale consideration receivable | 15,000 | --- | 15,000 | \* |
| Change in fair value of contingent acquisition consideration | 6,070 | 93,768 | (87,698) | -94% |
| Interest expense | (39,124) | (4,488) | (34,636) | 772% |
| Total other income (expenses) | (190,912) | 89,280 | (280,192) | -314% |
| Loss from continuing operations | (989,003) | (1,437,329) | 448,326 | -31% |
| Loss from operations of discontinued operations | (14,452) | (152,492) | 138,040 | -91% |
| **Net income (loss)** | $(1,003,455) | $(1,589,821) | $586,366 | -37% |

\* - 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 June 30, 2023 increased by $198,558, or 14% year-over-year, from $1,431,776, to $1,630,334, primarily as a result of a 13% year-over-year increase at our NCFM practice of $139,495 and 24% at our BTG practice of $17,020, as well as the addition of AEU revenue of $83,378 following its acquisition in May 2022. The increases were offset by a decrease of $41,336 at NWC.

Subscription and event revenue in the three months ended June 30, 2023 increased by $17,538, or 1,070% year-over-year, to $19,177, from $1,639, due to an increase in HealthLynked Network paid subscriptions.

Product revenue was $53,985 in the three months ended June 30, 2023, compared to $130,459 in the three months ended June 30, 2022, a decrease of $76,474, or 59%. Product revenue was earned by the Medical Distribution Division, comprised of the operations of MOD. During the fourth quarter of 2022, we restructured our pricing in MOD to more accurately recapture the price of products sold with more consistent profit. The price increases led in part to the decline in revenue.

#### Operating Expenses and Costs

Practice salaries and benefits increased by $82,594, or 10%, to $898,992 in the three months ended June 30, 2023, compared to $816,398 in the three months ended June 30, 2022, as a result of increased production pay and personnel costs corresponding to increased revenue and the addition of AEU salaries and benefits in 2023 with no corresponding cost in 2022, offset by fewer full-time equivalents at NWC.

Other practice operating costs increased by $7,097, or 1%, to $646,216 in the three months ended June 30, 2023 from $639,119 in the three months ended June 30, 2022, primarily as a result of the addition of AEU operating costs starting in 2023 with no corresponding cost in 2022, offset by decreases at NWC and BTG as a result of cost cutting efforts.

Cost of product revenue was $34,397 in the three months ended June 30, 2023, a decrease of $136,146, or 80%, compared to $170,543 in the same period of 2022, corresponding to the decline in product sales for the period compared to the same period in the prior year.

Selling, general and administrative costs decreased by $421,822, or 34%, to $833,689 in the three months ended June 30, 2023 compared to $1,255,511 in the three months ended June 30, 2022, primarily due to lower personnel and overhead costs in our corporate function resulting from focused cost cutting efforts.

Depreciation and amortization decreased in the three months ended June 30, 2023 by $120,619, or 58%, to $88,293 compared to $208,912 in the three months ended June 30, 2022, primarily as a result of the full impairment of MOD depreciable intangible assets in fourth quarter 2022, eliminating approximately $177,000 in quarterly depreciation in 2023 and after. This decrease was offset by depreciation on NCFM intangible assets that were previously treated as indefinite lived and for which depreciation was initiated in 2023.

Loss from operations decreased by $728,518, or 48%, to $798,091 in the three months ended June 30, 2023 compared to $1,526,609 in the three months ended June 30, 2022, primarily as a result of lower selling, general and administrative costs in our corporate function resulting from focused cost cutting efforts, as well as a $139,622, or 9%, year-over-year increase in revenue and increased product profitability in spite of lower product revenue.

#### Other Income (Expenses)

Loss on extinguishment of debt in the three months ended June 30, 2023 was $44,169 resulting from extension and early repayment of notes payable to our CEO and Chairman, Dr. Dent, and our CFO, George O’Leary. Losses represent the excess of the repayment amount over the carrying value (net of unamortized discounts) of the debt instruments at the time of repayment and the excess of the fair value of extended debt and related warrant consideration over the fair value of debt before its extension. There were no gains or losses from the extinguishment of debt in the three months ended June 30, 2022.

Amortization of original issue and debt discounts on notes payable and convertible notes in the three months ended June 30, 2023 was $128,689, resulting from amortization of discounts arising from warrants attached to debt instruments and original issue discounts on notes payable issued in the fourth quarter of 2022 and the first half of 2023. There was no corresponding amortization of original issue and debt discounts in the three months ended June 30, 2022.

Gain from realization of contingent sale consideration receivable was $15,000 in the three months ended June 30, 2023, resulting from an excess of actual proceeds received from the sale of the ACO Business in the second quarter 2023 in excess of the amount estimated to be received at the time of the sale.

Gain from the change in fair value of contingent acquisition consideration decreased by $87,698, or 94%, to $6,070 in the three months ended June 30, 2023, compared to $93,768 in the three months ended June 30, 2022. 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 three months ended June 30, 2022, our share price decreased, resulting in a decrease in the fair value of the contingent acquisition consideration liability and a corresponding gain from the change in fair value. With the repayment of NCFM contingent acquisition consideration in 2022 and the derecognition of CHM/AHP contingent acquisition consideration with the AHP Sale, the only remaining contingent acquisition consideration relates to MOD earnout years 3 and 4.

Interest expense increased by $34,636, or 772%, to $39,124 for the three months ended June 30, 2023, compared to interest expense of $4,488 in the three months ended June 30, 2022, due to an increase in interest-bearing notes payable to related parties and third parties during fourth quarter of 2022 and first half of 2023.

Total other income (expenses) decreased by $280,192, or 314%, to expense of $190,912 in the three months ended June 30, 2023 compared to income of $89,280 in the three months ended June 30, 2022. The change was primarily a result of gain from the change in fair value of contingent acquisition consideration in the three months ended June 30, 2022, due principally to the fixed-share structure of the MOD contingent consideration, offset by higher other expenses related to increased borrowing, including loss on extinguishment of debt and amortization of original issue discounts on notes payable.

Loss from continuing operations decreased by $448,326, or 31%, to $989,003 in the three months ended June 30, 2023, compared to $1,437,329 in the three months ended June 30, 2022. The decrease was due primarily to a 48% reduction in the loss from operations, offset by higher other expenses related to increased borrowing, including loss on extinguishment of debt and amortization of original issue discounts on notes payable.

#### Gain (loss) on discontinued operations

As a result of the AHP sale on January 17, 2023, our ACO/MSO Division was classified as discontinued operations in the accompanying consolidated statement of operations for the three months ended June 30, 2023 and 2022. Loss from operations of discontinued operations decreased by $138,040, or 91%, from $152,492 in the three months ended June 30, 2022 to $14,452 in the three months ended June 30, 2023. The decreased loss was due primarily to the fact that the business operated for a full quarter in 2022, while the 2023 loss reflects winding down costs of the discontinued operation.

#### Net Income (Loss)

Net income (loss) decreased by $586,366, or 37%, to a net loss $1,003,455 in the three months ended June 30, 2023, compared to net loss of $1,589,821 in the three months ended June 30, 2022, primarily as a result of reduced selling, general and administrative costs and a $139,622, or 9%, year-over-year increase in revenue, offset by higher other expenses related to increased borrowing, including loss on extinguishment of debt and amortization of original issue discounts on notes payable.

#### Comparison of Six Months Ended June 30, 2023 and 2022

The following table summarizes the changes in our results of operations for the six months ended June 30, 2023 compared with the six months ended June 30, 2022:

|  | Six Months Ended June 30, 2023 | 2022 | Change $% |  |
| --- | ---: | ---: | ---: | ---: |
| Patient service revenue, net | $3,330,615 | $2,807,461 | $523,154 | 19% |
| Subscription and event revenue | 35,476 | 8,263 | 27,213 | 329% |
| Product revenue | 92,559 | 277,428 | (184,869) | -67% |
| Total revenue | 3,458,650 | 3,093,152 | 365,498 | 12% |
| **Operating Expenses and Costs** |  |  |  |  |
| Practice salaries and benefits | 1,862,649 | 1,534,471 | 328,178 | 21% |
| Other practice operating expenses | 1,270,463 | 1,201,770 | 68,693 | 6% |
| Cost of product revenue | 66,457 | 331,354 | (264,897) | -80% |
| Selling, general and administrative expenses | 1,937,437 | 2,590,651 | (653,214) | -25% |
| Depreciation and amortization | 176,370 | 412,802 | (236,432) | -57% |
| Loss from operations | (1,854,726) | (2,977,896) | 1,123,170 | -38% |
| **Other Income (Expenses)** |  |  |  |  |
| Loss on extinguishment of debt | (88,932) | --- | (88,932) | \* |
| Amortization of original issue discounts on notes payable | (192,049) | --- | (192,049) | \* |
| Gain from realization of contingent sale consideration receivable | 15,000 | --- | 15,000 | \* |
| Change in fair value of contingent acquisition consideration | 4,364 | 532,090 | (527,726) | -99% |
| Interest expense | (50,505) | (9,511) | (40,994) | 431% |
| Total other income (expenses) | (312,122) | 522,579 | (834,701) | -160% |
| Loss from continuing operations | (2,166,848) | (2,455,317) | 288,469 | -12% |
| **Loss from operations of discontinued operations** |  |  |  |  |
| Loss from operations of discontinued operations | (58,741) | (302,627) | 243,886 | -81% |
| Gain from disposal of discontinued operations | 2,674,069 | --- | 2,674,069 | \* |
| Gain (loss) on discontinued operations | 2,615,328 | (302,627) | 2,917,955 | -964% |
| **Net income (loss)** | $448,480 | $(2,757,944) | $3,206,424 | -116% |

\* - 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 six months ended June 30, 2023 increased by $523,154, or 19% year-over-year, from $2,807,461, to $3,330,615, primarily as a result of an 18% year-over-year increase at our NCFM practice of $386,097 and the addition of AEU revenue of $199,412 following its acquisition in May 2022, offset by decreases of $56,049 at NWC and $6,307 at BTG.

Subscription and event revenue in the six months ended June 30, 2023 increased by $27,213, or 329% year-over-year, to $35,476, from $8,263, due to an increase in HealthLynked Network paid subscriptions.

Product revenue was $92,559 in the six months ended June 30, 2023, compared to $277,428 in the six months ended June 30, 2022, a decrease of $184,869, or 67%. Product revenue was earned by the Medical Distribution Division, comprised of the operations of MOD. During the fourth quarter of 2022, we restructured our pricing in MOD to more accurately recapture the price of products sold with more consistent profit. The price increases led in part to the decline in revenue.

#### Operating Expenses and Costs

Practice salaries and benefits increased by $328,178, or 21%, to $1,862,649 in the six months ended June 30, 2023, compared to $1,534,471 in the six months ended June 30, 2022, as a result of increased production pay and personnel costs corresponding to increased revenue and the addition of AEU salaries and benefits in 2023 with no corresponding cost in 2022, offset by fewer full-time equivalents at NWC.

Other practice operating costs increased by $68,693, or 6%, to $1,270,463 in the six months ended June 30, 2023 from $1,201,770 in the six months ended June 30, 2022, primarily as a result of the addition of AEU operating costs starting in 2023 with no corresponding cost in 2022.

Cost of product revenue was $66,457 in the six months ended June 30, 2023, a decrease of $264,897, or 80%, compared to $331,354 in the same period of 2022, corresponding to the decline in product sales for the period compared to the same period in the prior year.

Selling, general and administrative costs decreased by $653,214, or 25%, to $1,937,437 in the six months ended June 30, 2023 compared to $2,590,651 in the six months ended June 30, 2022, primarily due to lower personnel and overhead costs in our corporate function resulting from focused cost cutting efforts.

Depreciation and amortization decreased in the six months ended June 30, 2023 by $236,432, or 57%, to $176,370 compared to $412,802 in the six months ended June 30, 2022, primarily as a result of the full impairment of MOD depreciable intangible assets in fourth quarter 2022, eliminating approximately $177,000 in quarterly depreciation in 2023 and after. This decrease was offset by depreciation on NCFM intangible assets that were previously treated as indefinite lived and for which depreciation was initiated in 2023.

Loss from operations decreased by $1,123,170, or 38%, to $1,854,726 in the six months ended June 30, 2023 compared to $2,977,896 in the six months ended June 30, 2022, primarily as a result of lower selling, general and administrative costs in our corporate function resulting from focused cost cutting efforts, as well as a $365,498, or 12%, year-over-year increase in revenue and increased product profitability in spite of lower product revenue.

#### Other Income (Expenses)

Loss on extinguishment of debt in the six months ended June 30, 2023 was $88,932 resulting from extension and early repayment of notes payable to our CEO and Chairman, Dr. Dent, and our CFO, George O’Leary. Losses represent the excess of the repayment amount over the carrying value (net of unamortized discounts) of the debt instruments at the time of repayment and the excess of the fair value of extended debt and related warrant consideration over the fair value of debt before its extension. There were no gains or losses from the extinguishment of debt in the six months ended June 30, 2022.

Amortization of original issue and debt discounts on notes payable and convertible notes in the six months ended June 30, 2023 was $192,049, resulting from amortization of discounts arising from warrants attached to debt instruments and original issue discounts on notes payable issued in the fourth quarter of 2022 and the first half of 2023. There was no corresponding amortization of original issue and debt discounts in the six months ended June 30, 2022.

Gain from realization of contingent sale consideration receivable was $15,000 in the six months ended June 30, 2023, resulting from an excess of actual proceeds received from the sale of the ACO Business in the second quarter 2023 in excess of the amount estimated to be received at the time of the sale.

Gain from the change in fair value of contingent acquisition consideration decreased by $527,726, or 99%, to $4,364 in the six months ended June 30, 2023, compared to $532,090 in the six months ended June 30, 2022. 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 six months ended June 30, 2022, our share price decreased, resulting in a decrease in the fair value of the contingent acquisition consideration liability and a corresponding gain from the change in fair value. With the repayment of NCFM contingent acquisition consideration in 2022 and the derecognition of CHM/AHP contingent acquisition consideration with the AHP Sale, the only remaining contingent acquisition consideration relates to MOD earnout years 3 and 4.

Interest expense increased by $40,994, or 431%, to $50,505 for the six months ended June 30, 2023, compared to interest expense of $9,511 in the six months ended June 30, 2022, due to an increase in interest-bearing notes payable to related parties and third parties during fourth quarter of 2022 and first half of 2023.

Total other income (expenses) decreased by $834,701, or 160%, to expense of $312,122 in the six months ended June 30, 2023 compared to income of $522,579 in the six months ended June 30, 2022. The change was primarily a result of a $532,090 gain from the change in fair value of contingent acquisition consideration in the six months ended June 30, 2022, due principally to the fixed-share structure of the MOD contingent consideration, offset by higher other expenses related to increased borrowing, including loss on extinguishment of debt and amortization of original issue discounts on notes payable.

Loss from continuing operations decreased by $288,469, or 12%, to $2,166,848 in the six months ended June 30, 2023, compared to $2,455,317 in the six months ended June 30, 2022. The decrease was due primarily to a 38% reduction in the loss from operations, offset by higher other expenses related to increased borrowing, including loss on extinguishment of debt and amortization of original issue discounts on notes payable and reduced income from the change in fair value of contingent acquisition consideration.

#### Gain (loss) on discontinued operations

As a result of the AHP sale on January 17, 2023, our ACO/MSO Division was classified as discontinued operations in the accompanying consolidated statement of operations for the six months ended June 30, 2023 and 2022. Loss from operations of discontinued operations decreased by $243,886, or 81%, from $302,627 in the six months ended June 30, 2022 to $58,741 in the six months ended June 30, 2023. The decreased loss was due primarily to the fact that the business operated for a full quarter in 2022, while the 2023 loss reflects winding down costs of the discontinued operation after the sale on January 17, 2023.

Effective January 17, 2023, we completed the AHP Sale, at which time we discontinued the operations of CHM and ceased to have a controlling financial interest in AHP. In connection with the AHP Sale, as of January 17, 2023, we recognized the fair value of consideration received and receivable from the AHP Sale, recognized an indemnification liability related to potential claims resulting from the AHP Sale, derecognized the carrying value of assets and liabilities transferred to the Buyer or otherwise derecognized in connection with in the AHP Sale, and recorded a gain on sale for the excess of consideration received over carrying value of assets derecognized and liabilities recognized. Accordingly, we recorded a gain from disposal of AHP in the amount of $2,674,069 in the six months ended June 30, 2023.

#### Net Income (Loss)

Net income (loss) increased by $3,206,424, or 116%, to net income of $448,480 in the six months ended June 30, 2023, compared to net loss of $2,757,944 in the six months ended June 30, 2022, primarily as a result of (i) the gain from disposal of AHP in the amount of $2,674,069 in the six months ended June 30, 2023 as described above, (ii) a $365,498, or 12%, year-over-year increase in revenue, and (iii) reduced selling, general and administrative costs, offset by a gain of $532,090 from a decrease in fair value of contingent acquisition consideration in the six months ended June 30, 2022 compared to $4,364 in the six months ended June 30, 2023, and higher other expenses related to increased borrowing, including loss on extinguishment of debt and amortization of original issue discounts on notes payable.

### Seasonal Nature of Operations

We do not experience any material seasonality related to any of our continuing operations. Prior to the discontinuation of our ACO/MSO Division, that division’s primary source of revenue was from payments earned under the Medicare shared savings program for which shared savings determinations were made annually by the CMS in the third calendar quarter of each year, resulting in potential revenue spikes in the third quarter. With the sale of the ACO/MSO Division in January 2023, we will no longer be subject to this type of seasonality.

### Impairment Analysis

Long-lived assets (including amortizable identifiable intangible assets) or asset groups held for use are tested for recoverability whenever events or changes in circumstances indicate that their carrying amount may not be recoverable. When such events occur, we compare the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset or asset group to the carrying amount of a long-lived asset or asset group. The cash flows are based on our best estimate of future cash flows derived from the most recent business projections. If this comparison indicates that the asset is not recoverable, we estimate the fair value of the asset group using a discounted cash flow model. An impairment charge is then recorded for any excess carrying value above the estimated fair value of the asset group.

Goodwill is tested for impairment on an annual basis and more often if circumstances indicate that an impairment may be necessary. Goodwill impairment is recognized for any excess carrying value above the estimated fair value of the asset group. Fair value is estimated using the same approach as described above for long-lived asset testing.

The significant assumptions we use in the discounted cash flow models are revenue growth rate, gross profit margins on product sales, operating income margin, and the discount rate used to determine the present value of the cash flow projections. Among other inputs, revenue growth rate and operating income margin are determined by management using historical performance trends, projected performance from existing partnerships, industry data, relevant changes in the reporting unit’s underlying business, and other market trends that may affect the reporting unit. The discount rate is based on the estimated weighted average cost of capital as of the test date of market participants in the industry in which the reporting unit operates. The assumptions used in the discounted cash flow model are subject to significant judgment and uncertainty. Changes in projected revenue growth rates, gross profit margins, projected operating income margins, or estimated discount rates due to uncertain market conditions, losses of key physicians in our Health Services reporting unit, changes in technology, or other factors, could result in one or more of our reporting units with a significant amount of identifiable intangible assets recognizing material impairment charges, which could be material to our results of operations and financial position. Our historical or projected revenues or cash flows may not be indicative of actual future results.

### Liquidity and Capital Resources

#### Liquidity Condition

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 (August 14, 2024).

Management considered our current financial condition and liquidity sources, including current funds available, forecasted future cash flows and our obligations due before August 14, 2024 and concluded that, without additional funding, we will not have sufficient funds to meet our obligations within one year from the date the consolidated financial statements were issued. Without raising additional capital, either via additional advances made pursuant to the SEPA or from other sources, there is substantial doubt about our ability to continue as a going concern through August 14, 2024. The accompanying 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 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 losses and cash outflows from operating activities since inception. As of June 30, 2023, we had cash balances of $918,972, a working capital deficit of $1,527,036 and an accumulated deficit of $40,572,453. For the six months ended June 30, 2023, we generated net income of $448,480, which included a gain from the sale of AHP of $2,674,069. Loss from continuing operations for the six months ended June 30, 2023 was $2,166,848 and we used cash from operating activities of $1,703,255. Notwithstanding the gain from the sale of AHP, we expect to continue to incur net losses and have significant cash outflows for at least the next 12 months.

#### Significant Liquidity Transactions

Through June 30, 2023, we have funded our operations principally through a combination of sales of our common stock, convertible and non-convertible promissory notes, government issued debt, and related party debt, as described below.

On July 5, 2022, we entered into a Standby Equity Purchase Agreement (the “SEPA”) with YA II PN, Ltd. (“Yorkville”). Pursuant to the SEPA, we have the right to sell to Yorkville up to 30,000,000 shares of our common stock, par value $0.0001 per share, at our request any time during the three-year commitment period set forth in the SEPA. Because the purchase price per share to be paid by Yorkville for the shares of common stock sold by us to Yorkville pursuant to the SEPA, if any, will fluctuate based on the market prices of our common 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 we will receive from those sales, if any. During the six months ended June 30, 2023, we sold 225,000 shares of common stock, receiving $18,765 in proceeds, all of which was applied to the balance of a July 19, 2022 promissory note payable to Yorkville that was retired in the three months ended June 30, 2023.

During the six months ended June 30, 2023, we issued seven notes payable to our Chairman and CEO, Dr. Michael Dent, one note payable to our Chief Financial Officer, George O’Leary, and two notes payable two third parties for aggregate net proceeds of $1,053,500. We also made repayments on notes payable totaling $929,545.

During the six months ended June 30, 2023, we sold 7,416,667 shares of common stock to two investors in separate private placement transactions. We received $475,000 in proceeds from the sales. In connection with the stock sales, we also issued 3,062,500 five-year warrants to purchase shares of common stock at exercise prices between $0.15 and $0.20 per share and a 3-month warrant to purchase 5,000,000 shares of common stock at an exercise price of $0.05.

On January 17, 2023, we entered into the AHP Merger Agreement, pursuant to which the Buyer agreed to buy, and we agreed to sell, AHP. We received $750,000 upon signing of the AHP Merger Agreement, $31,381 in March 2023 for the Stub Period Reimbursement, $1,225,000 ($1,180,000 net after commissions) on June 15, 2022 and $150,000 ($120,000 net after commissions) in July 2023 for meeting participating physician transfer milestones outlined in the AHP Merger Agreement. We may receive future proceeds comprised of (i) up to an additional $300,000 may be received in the third quarter of 2023 for participating physician transfer milestones earned prior to July 31, 2023 that are under review, (ii) net proceeds, after allocation for expenses, from any MSSP Shared Savings related to AHP’s plan year 2022, which, if earned, would be determined and paid by the CMS by October 2023, (iii) proceeds from sale of shares of the buyer if the buyer completes an initial public offering by August 1, 2024, and (iv) up to $500,000 of the Physician Advance Consideration from the Buyer’s plan year 2023 (and if necessary, 2024) MSSP Shared Savings.

Without raising additional capital, whether via additional advances made pursuant to the SEPA, from the sale of equity or debt instruments, from the realization of contingent sale consideration related to the AHP Sale, or from other sources, there is substantial doubt about our ability to continue as a going concern through August 14, 2024. The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. This basis of presentation contemplates the recovery of the Company’s assets and the satisfaction of liabilities in the normal course of business.

#### 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 are marketing the HealthLynked Network by targeting large health systems, hospitals and universities. In addition, we are marketing via direct-to-patient marketing, affiliated marketing campaigns, co-marketing with our Medical Distribution businesses subsidiary MOD, and expanded southeast regional sales efforts. Our initial sales strategy is utilizing Internet-based marketing to increase penetration to targeted geographical areas. These campaigns are focused on both physician practices 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. 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.

We plan to raise additional capital to fund our ongoing plan of operation, although we can give no assurances that such funding will be available on terms acceptable to the Company.

#### Historical Cash Flows

| Net cash (used in) provided by: | Six Months Ended June 30, 2023 | 2022 |
| --- | ---: | ---: |
| Net cash used in continuing operating activities | $(1,653,694) | $(2,132,359) |
| Net cash used in discontinued operating activities | (49,561) | (385,793) |
| Net cash used in operating activities | (1,703,255) | (2,518,152) |
| Net cash provided by (used in) continuing investing activities | 1,961,381 | (531,864) |
| Net cash provided by (used in) discontinued investing activities | --- | --- |
| Net cash provided by (used in) investing activities | 1,961,381 | (531,864) |
| Net cash provided by continuing financing activities | 598,955 | 9,488 |
| Net cash provided by discontinued financing activities | --- | --- |
| Net cash provided by financing activities | 598,955 | 9,488 |
| Net increase (decrease) in cash from continuing operating | 906,642 | (2,654,735) |
| Net (decrease) in cash from discontinued operating | (49,561) | (385,793) |
| Net increase (decrease) in cash | $857,081 | $(3,040,528) |

*Operating Activities –* During the six months ended June 30, 2023, we used cash from operating activities of $1,703,255, as compared with $2,518,152 in the six months ended June 30, 2022. Net cash used in continuing operating activities decreased by $478,665, due primarily to decreased selling, general and administrative expenses resulting from focused cost cutting efforts, combined with increased revenue and profitability in our Health Services Division. Cash used in operations of our discontinued ACO/MSO Division also decreased by $336,232 as a result of the unit being sold on January 17, 2023.

*Investing Activities –* During the six months ended June 30, 2023, we realized $1,961,381 from investing activities, comprised of cash proceeds received form the AHP sale, including $750,000 Upfront Cash Consideration, $31,381 Stub Period Reimbursement, and $1,225,000 ($1,180,000 net after commissions) of Incremental Cash Consideration. During the six months ended June 30, 2022, we used $531,864 in investing activities, including $300,916 used to acquire AEU (net of cash acquired), $207,384 contingent acquisition consideration payment paid the sellers of NCFM related to the third and final year of earn-out, and $23,564 to acquire fixed assets.

*Financing Activities –* During the six months ended June 30, 2023, cash provided by financing activities was comprised of $475,000 proceeds from the sale of common stock (net of $18,765 received from sales of common stock under the SEPA that were applied to the balance of the Note Payable) and $1,053,000 from the issuance of notes payable, offset by $929,545 repayments made against notes payable balances (net of $18,765 received from sales of common stock under the SEPA that were applied to the balance of the Note Payable). During the six months ended June 30, 2022, we received $10,000 from the sale of common stock and paid $512 against notes acquired in the AEU transaction.

### Exercise of Warrants and Options

No warrants or options were exercised during the six months ended June 30, 2023.

During the six months ended June 30, 2022, the Company issued 1,394 shares upon cashless exercise of 12,500 option shares exercised using a cashless exercise feature. No warrants were exercised.

### Other Outstanding Obligations at June 30, 2023

As of June 30, 2023, (i) 75,066,459 shares of our Common Stock are issuable pursuant to the exercise of warrants with exercise prices ranging from $0.04 to $1.05, (ii) 4,866,732 shares of our Common Stock are issuable pursuant to the exercise of options with exercise prices ranging from $0.06 to $0.766, (iii) 815,795 shares of our Common Stock are issuable pursuant to future vesting of stock grants, (iv) up to 13,750,000 shares of our Common Stock are issuable upon conversion of Series B Preferred, and (v) up to 3,087,628 shares of our Common Stock are issuable that are earned but not paid under consulting and director compensation arrangements.

### 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.

## Market risk

As filed, 149 characters.

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).

## Controls and procedures

As filed, 1,692 characters.

### 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 June 30, 2023 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, and in light of the material weaknesses found in our internal controls over financial reporting, our management concluded that our disclosure controls and procedures were not effective as of June 30, 2023.

### 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 June 30, 2023 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

## Risk factors

As filed, 149 characters.

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).

Filed Aug 14, 2023.
Source: SEC EDGAR, the filing index for accession 0001213900-23-067049. Last ingested by Listed: Oct 24, 2026, 15:07 ET. No prices; not investment advice.