HealthLynked Corp: Form 10-Q for the period ended Jun 30, 2024

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:

• Health Services Division: This division includes a diverse range of practices in Naples Women’s Center (“NWC”), offering comprehensive Obstetrics and Gynecology services; Naples Center for Functional Medicine (“NCFM”), which provides personalized and integrative healthcare solutions; Bridging the Gap Physical Therapy (“BTG”) in Bonita Springs, specializing in manual therapy techniques to expedite recovery and manage pain without the need for medications or surgery; and Aesthetic Enhancements Unlimited (“AEU”), which focuses on minimally and non-invasive cosmetic services.
• Digital Healthcare Division: At the forefront of healthcare innovation, this division develops and manages an advanced online concierge medical service. The HealthLynked Network facilitates efficient management of medical records and care, allowing seamless patient appointment scheduling, comprehensive telemedicine services, and a cloud-based system for medical information and records management. It also supports physicians in expanding their practices and acquiring new patients through our robust online scheduling system.
• Medical Distribution Division: MedOffice Direct LLC (“MOD”), a part of this division, operates as a virtual distributor of discounted medical supplies to consumers and medical practices nationwide, ensuring timely and cost-effective delivery.

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 the condensed consolidated financial statements.

Results of Operations

Comparison of Three Months Ended June 30, 2024 and 2023

The following table summarizes the changes in our results of operations for the three months ended June 30, 2024 compared with the three months ended June 30, 2023:

* - 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 decreased by $867,171, or 53% year-over-year, from $1,630,334 in the three months ended June 30, 2023, to $763,163 in the three months ended June 30, 2024, primarily as a result of (i) a 54% year-over-year decrease at our NCFM practice of $669,398 due to changes in clinical staffing that saw the departure of three physicians in 2023, two of which have been replaced, (ii) a 91% year-over-year decrease at our AEU practice of $109,506 due to the departure of our primary half-time physician and attrition from the practice, and (iii) a 48% decrease at our NWC practice facility of $91,657 due to the departure of a half-time physician, offset by (iv) 4% increase of $3,391 at our BTG practice. The reduction in revenue was offset in part by a corresponding designed reduction in practice operating costs as described below in the fluctuation of “Practice salaries and benefits” and “Other practice operating costs,” which declined by a combined $642,095 from the three months ended June 30, 2023 to the same period of 2024. While we expect patient service revenue to increase in future periods from levels realized in the three months ended June 30, 2024 as we plan to add additional physicians and continue patient marketing and retention efforts, there is no guarantee that such increases will occur.

Subscription revenue in the three months ended June 30, 2024 decreased by $11,011, or 57% year-over-year, to $8,166, from $19,177, due primarily to a decrease in HealthLynked Network paid subscriptions that were paired with NCFM membership contracts.

Product revenue was $23,749 in the three months ended June 30, 2024, compared to $53,985 in the three months ended June 30, 2023, a decrease of $30,236, or 56%. Product revenue was earned by the Medical Distribution Division, comprised of the operations of MOD, which decreased due to decreased marketing efforts and demand for our products at our offered price points.

Operating Expenses and Costs

Practice salaries and benefits decreased by $385,101, or 43%, to $513,891 in the three months ended June 30, 2024, compared to $898,992 in the three months ended June 30, 2023, primarily as a result of focused cost reduction efforts at all of our practices starting in mid-2023.

Other practice operating costs decreased by $256,994 or 40%, to $389,222 in the three months ended June 30, 2024 from $646,216 in the three months ended June 30, 2023, primarily as a result of focused cost reduction efforts at all of our practices starting in mid-2023.

Cost of product revenue was $24,723 in the three months ended June 30, 2024, a decrease of $9,674, or 28%, compared to $34,397 in the same period of 2023, corresponding to the decline in product sales for the period compared to the same period in the prior year.

Selling, general and administrative costs increased by $27,780, or 3%, to $861,469 in the three months ended June 30, 2024 compared to $833,689 in the three months ended June 30, 2023, primarily due to higher payroll and legal and accounting costs.

Depreciation and amortization in the three months ended June 30, 2024 decreased by $3,031, or 3%, to $85,262 compared to $88,293 in the three months ended June 30, 2023, primarily as a result of certain fixed asset reaching the end of their depreciable lives during 2023.

Loss from operations increased by $281,398, or 35%, to $1,079,489 in the three months ended June 30, 2024 compared to $798,091 in the three months ended June 30, 2023, primarily as a result of decreased revenue, offset in part by reduced practice operating costs and corporate overhead costs.

Other Income (Expenses)

Loss on extinguishment of debt in the three months ended June 30, 2024 was $73,567, compared to a loss of $44,169 in the three months ended June 30, 2023. Loss on extinguishment of debt in 2023 resulted from the extension of notes payable to our CEO and CFO. Loss on extinguishment of debt in 2024 resulted from a maturing note payable to Dr. Dent refinanced with a new convertible notes payable in the same amount.

Gains from the change in fair value of debt was $27,900 in the three months ended June 30, 2024 related to two notes payable to Dr. Michael Dent that were recorded at fair value following extension of the maturity dates of the notes. These notes are revalued at their fair value at the end of each period, with the changes recorded as gains or losses from the change in fair value of debt. There were no such gains or losses in the three months ended June 30, 2023.

Amortization of original issue and debt discounts on notes payable and convertible notes in the three months ended June 30, 2024 was $371,356, an increase of $242,667, or 189%, compared to $128,689 in the three months ended June 30, 2023. Amortization of discounts arose from original issue discounts on notes payable, warrants attached to notes payable, and beneficial conversion features in convertible notes payable. The increase was due to higher notes payable balances and larger equity-based and original issue discounts offered for new notes payable, and therefore larger corresponding amortizable discount balances, in 2024 compared to 2023.

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. No such gains were realized in the three months ended June 30, 2024.

Gain from the change in fair value of contingent acquisition consideration decreased by $5,435, or 90%, to a gain of $635 in the three months ended June 30, 2024, compared to a gain of $6,070 in the three months ended June 30, 2023. These charges relate to the fourth and final year of the MOD earnout, which will resolve based on the performance of our Medical Distribution Division in calendar year 2024.

Interest expense increased by $5,435, or 14%, to $44,559 for the three months ended June 30, 2024, compared to $39,124 in the three months ended June 30, 2023, due to an increase in interest-bearing notes payable to related parties and third parties during the second half of 2023 and first half of 2024.

Total other income (expenses) increased by $270,035, or 141%, to net expense of $460,947 in the three months ended June 30, 2024 compared to net expense of $190,912 in the three months ended June 30, 2023. The change was primarily a result of increased debt discount amortization charges in 2024 corresponding to higher debt discount balances and higher debt extinguishment loss in 2024.

Loss from continuing operations increased by $551,433, or 56%, to $1,540,436 in the three months ended June 30, 2024, compared to $989,003 in the three months ended June 30, 2023. The increased loss was due primarily a decrease in revenue and increased financing related other expenses, offset in part by reduced practice operating costs and corporate overhead costs.

Gain (loss) from operations of 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, 2024 and 2023. Loss from operations of discontinued operations decreased by $14,452, or 100%, from $14,452 in the three months ended June 30, 2023 to $-0- in the three months ended June 30, 2024. The loss in 2023 reflects winding down costs of the discontinued operation after the sale on January 17, 2023. No revenue or costs were incurred related to the business in the three months ended June 30, 2024.

Net loss

Net loss increased by $536,981, or 54%, to $1,540,436 in the three months ended June 30, 2024, compared to $1,003,455 in the three months ended June 30, 2023, primarily as a result of a decrease in revenue and increased financing related other expenses, offset in part by reduced practice operating costs and corporate overhead costs.

Comparison of Six Months Ended June 30, 2024 and 2023

The following table summarizes the changes in our results of operations for the six months ended June 30, 2024 compared with the six months ended June 30, 2023:

* - 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 decreased by $1,603,831, or 48% year-over-year, from $3,330,615 in the six months ended June 30, 2023, to $1,726,784 in the six months ended June 30, 2024, primarily as a result of (i) a 50% year-over-year decrease at our NCFM practice of $1,252,184 due to changes in clinical staffing that saw the departure of three physicians in 2023, two of which have been replaced, (ii) a 92% year-over-year decrease at our AEU practice of $216,891 due to the departure of our primary physician and attrition from the practice, and (iii) a 40% decrease at our NWC practice facility of $161,841, offset by (iv) 16% increase of $27,085 at our BTG practice. The reduction in revenue was offset in part by a corresponding designed reduction in practice operating costs as described below in the fluctuation of “Practice salaries and benefits” and “Other practice operating costs,” which declined by a combined $1,164,260 from the six months ended June 30, 2023 to the same period of 2024. While we expect patient service revenue to increase in future periods from levels realized in the six months ended June 30, 2024 as we plan to add additional physicians and continue patient marketing and retention efforts, there is no guarantee that such increases will occur.

Subscription revenue in the six months ended June 30, 2024 decreased by $19,682, or 55% year-over-year, to $15,794, from $35,476, due primarily to a decrease in HealthLynked Network paid subscriptions that were paired with NCFM membership contracts.

Product revenue was $56,732 in the six months ended June 30, 2024, compared to $92,559 in the six months ended June 30, 2023, a decrease of $35,827, or 39%. Product revenue was earned by the Medical Distribution Division, comprised of the operations of MOD, which decreased due to decreased marketing efforts and demand for our products at our offered price points.

Operating Expenses and Costs

Practice salaries and benefits decreased by $765,602, or 41%, to $1,097,047 in the six months ended June 30, 2024, compared to $1,862,649 in the six months ended June 30, 2023, primarily as a result of focused cost reduction efforts at all of our practices starting in mid-2023.

Other practice operating costs decreased by $398,658 or 31%, to $871,805 in the six months ended June 30, 2024 from $1,270,463 in the six months ended June 30, 2023, primarily as a result of focused cost reduction efforts at all of our practices starting in mid-2023.

Cost of product revenue was $55,302 in the six months ended June 30, 2024, a decrease of $11,155, or 17%, compared to $66,457 in the same period of 2023, 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 $76,525, or 4%, to $1,860,912 in the six months ended June 30, 2024 compared to $1,937,437 in the six months ended June 30, 2023, primarily due to lower consulting and other overhead costs in our corporate function resulting from focused cost cutting efforts.

Depreciation and amortization in the six months ended June 30, 2024 decreased by $4,599, or 3%, to $171,771 compared to $176,370 in the six months ended June 30, 2023, primarily as a result of certain fixed asset reaching the end of their depreciable lives during 2023.

Loss from operations increased by $402,801, or 22%, to $2,257,527 in the six months ended June 30, 2024 compared to $1,854,726 in the six months ended June 30, 2023, primarily as a result of decreased revenue, offset in part by reduced practice operating costs and corporate overhead costs.

Other Income (Expenses)

Loss on extinguishment of debt in the six months ended June 30, 2024 was $170,227, compared to a loss of $88,932 in the six months ended June 30, 2023. Loss on extinguishment of debt in 2023 resulted from early repayment of notes payable to our CEO and extension of notes payable to our CEO and CFO. Loss on extinguishment of debt in 2024 resulted primarily from two maturing notes payable to Dr. Dent refinanced with new convertible notes payable in the same amount.

Gains from the change in fair value of debt was $27,900 in the six months ended June 30, 2024 related to two notes payable to Dr. Michael Dent that were recorded at fair value following extension of the maturity dates of the notes. These notes are revalued at their fair value at the end of each period, with the changes recorded as gains or losses from the change in fair value of debt. There were no such gains or losses in the six months ended June 30, 2023.

Amortization of original issue and debt discounts on notes payable and convertible notes in the six months ended June 30, 2024 was $479,621, an increase of $387,572, or 150%, compared to $192,049 in the six months ended June 30, 2023. Amortization of discounts arose from original issue discounts on notes payable, warrants attached to notes payable, and beneficial conversion features in convertible notes payable. The increase was due to higher notes payable balances and larger equity-based and original issue discounts offered for new notes payable, and therefore larger corresponding amortizable discount balances, in 2024 compared to 2023.

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. No such gains were realized in the six months ended June 30, 2024.

Gain from the change in fair value of contingent acquisition consideration decreased by $3,653, or 84%, to a gain of $711 in the six months ended June 30, 2024, compared to a gain of $4,364 in the six months ended June 30, 2023. These charges relate to the fourth and final year of the MOD earnout, which will resolve based on the performance of our Medical Distribution Division in calendar year 2024.

Interest expense decreased by $1,115, or 2%, to $49,390 for the six months ended June 30, 2024, compared to $50,505 in the six months ended June 30, 2023, due similar interest-bearing notes payable balances during the six months ended June 30, 2023 and 2024.

Total other income (expenses) increased by $358,505, or 115%, to net expense of $670,627 in the six months ended June 30, 2024 compared to net expense of $312,122 in the six months ended June 30, 2023. The change was primarily a result of increased debt discount amortization charges in 2024 corresponding to higher debt discount balances and higher debt extinguishment loss in 2024.

Loss from continuing operations increased by $761,306, or 35%, to $2,928,154 in the six months ended June 30, 2024, compared to $2,166,848 in the six months ended June 30, 2023. The increased loss was due primarily a decrease in revenue and increased financing related other expenses, offset in part by reduced practice operating costs and corporate overhead costs.

Gain (loss) from operations of 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, 2024 and 2023. Loss from operations of discontinued operations decreased by $58,741, or 100%, from $58,741 in the six months ended June 30, 2023 to $-0- in the six months ended June 30, 2024. The loss in 2023 reflects winding down costs of the discontinued operation after the sale on January 17, 2023. No revenue or costs were incurred related to the business in the six months ended June 30, 2024.

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) decreased by $3,376,634, or 753%, to a net loss of ($2,928,154) in the six months ended June 30, 2024, compared to net income of $448,480 in the six months ended June 30, 2023, 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 with no corresponding gain in the six months ended June 30, 2024, (ii) a decrease in revenue and increased financing related other expenses, offset in part by (iii) reduced practice operating costs and corporate overhead costs.

Seasonal Nature of Operations

We do not experience any material seasonality related to any of our continuing operations.

Liquidity and Capital Resources

Liquidity Condition

During the second quarter of 2014, the Financial Accounting Standards Board (“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, 2025).

Management considered our current financial condition and liquidity sources, including current funds available, forecasted future cash flows and our obligations due before August 14, 2025 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, 2025. 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.

As of June 30, 2024, we had cash balances of $172,700, a working capital deficit of $1,390,094 and an accumulated deficit of $44,961,290. For the six months ended June 30, 2024, we had a net loss of $2,928,154 and we used cash from operating activities of $1,713,549. 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, 2024, 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 three months ended June 30, 2023, we sold 225,000 shares of common stock under the SEPA, receiving $18,765 in proceeds, all of which was applied to the balance of a then-outstanding promissory note payable to Yorkville. We have not sold any additional shares under the SEPA since January 2023.

During the six months ended June 30, 2024, we issued five new convertible notes payable to our CEO, Dr. Michael Dent, for aggregate net cash proceeds of $1,650,000 and refinanced an existing note with a principal of $166,500. We also issued a note payable to a third party for net cash proceeds of $135,000. We made repayments on related party and third party notes of $37,602 and $510,773, respectively.

During the six months ended June 30, 2024, we sold 5,977,193 shares of common stock to four investors in separate private placement transactions. We received $405,000 in proceeds from the sales. In connection with the stock sales, we also issued 2,500,000 five-year warrants to purchase shares of common stock at an exercise price of $0.17 per share and 438,596 five-year warrants to purchase shares of common stock at an exercise price of $0.16 per share.

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, $1,750,000 ($1,540,000 net after commissions) in Incremental Cash Consideration during June, July and August for meeting participating physician transfer milestones, and $1,873,993 gross ($1,186,231 net after commissions) in October 2023 from the 2022 MSSP Consideration. We may receive future proceeds comprised of proceeds from sale of shares of the Buyer if the Buyer completes an initial public offering by February 1, 2025 and 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 receipt of remaining contingent consideration related to the sale of the ACO/MSO Division, or from other sources, there is substantial doubt about the Company’s ability to continue as a going concern through May 15, 2025. 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.

Historical Cash Flows

Operating Activities – During the six months ended June 30, 2024, we used cash from operating activities of $1,713,549, as compared with $1,703,255 in the six months ended June 30, 2023. The slight increase in cash usage results primarily an overall reduction in revenue, offset by cost reduction efforts at our Health Services practices and a decrease of $49,561 in cash used in operations of our discontinued ACO/MSO Division resulting from the unit being sold on January 17, 2023.

Investing Activities – During the six months ended June 30, 2024, we used $2,598 in investing activities related to acquisition of computers and office equipment. 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.

Financing Activities – During the six months ended June 30, 2024, cash provided by financing activities was $1,641,625, comprised of $405,000, from the sale of common stock, $1,650,000 from the issuance of notes payable to related parties, and $135,000 from the issuance of notes payable to third parties, offset by $548,375 repayments made against notes payable balances. 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).

Exercise of Warrants and Options

No warrants or options were exercised during the six months ended June 30, 2024 or 2023.

Other Outstanding Obligations at June 30, 2024

As of June 30, 2024, 96,064,592 shares of our common stock are issuable pursuant to the exercise of warrants with exercise prices ranging from $0.035 to $1.05.

As of June 30, 2024, 9,448,730 shares of our common stock are issuable pursuant to the exercise of options with exercise prices ranging from $0.0569 to $0.31.

As of June 30, 2024, 613,160 shares of our common stock are issuable pursuant to future vesting of stock grants.

As of June 30, 2024, 1,977,143 shares of our common stock are earned but unissued pursuant to consulting and director agreements.

As of June 30, 2024, 36,972,139 shares of our common stock are issuable upon the conversion of outstanding convertible notes payable at the option of the holders of those instruments.

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.

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).

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, 2024 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, 2024.

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, 2024 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

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).