UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
FORM
10-Q
(Mark
One)
[X] |
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30,
2020 |
[ ] |
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO |
Commission
file number: 001-38797
IMAC
Holdings, Inc.
(Exact
name of registrant as specified in its charter)
Delaware |
|
83-0784691 |
(State
or Other Jurisdiction of
Incorporation
or Organization)
|
|
(I.R.S.
Employer
Identification
No.)
|
1605
Westgate Circle, Brentwood, Tennessee |
|
37027 |
(Address
of Principal Executive Offices) |
|
(Zip
Code) |
(844)
266-4622
(Registrant’s
Telephone Number, Including Area Code)
Securities
registered pursuant to Section 12(b) of the Act:
Title
of each class |
|
Trading
Symbol(s) |
|
Name
of each exchange on which registered |
Common
Stock, par value $0.001 per share |
|
IMAC |
|
NASDAQ
Capital Market |
Warrants
to Purchase Common Stock |
|
IMACW |
|
NASDAQ
Capital Market |
Indicate
by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes [X] No [ ]
Indicate
by check mark whether the registrant has submitted electronically
every Interactive Data File required to be submitted pursuant to
Rule 405 of Regulation S-T (§232.405 of this chapter) during the
preceding 12 months (or for such shorter period that the registrant
was required to submit such files). Yes [X] No
[ ]
Indicate
by check mark whether the registrant is a large accelerated filer,
an accelerated filer, a non-accelerated filer, smaller reporting
company, or an emerging growth company. See the definitions of
“large accelerated filer,” “accelerated filer,” “smaller reporting
company,” and “emerging growth company” in Rule 12b-2 of the
Exchange Act.
Large
accelerated filer |
[ ] |
Accelerated
filer |
[ ] |
|
|
|
|
Non-accelerated
filer |
[X] |
Smaller
reporting company |
[X] |
|
|
|
|
|
|
Emerging
growth company |
[X] |
If an
emerging growth company, indicate by check mark if the registrant
has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided
pursuant to Section 13(a) of the Exchange Act.
[ ]
Indicate
by check mark whether the registrant is a shell company (as defined
in Rule 12b-2 of the Exchange Act). Yes [ ] No
[X]
As of
November 12, 2020 the registrant had 11,839,972 shares of common
stock (par value $0.001 per share) outstanding.
IMAC
HOLDINGS, INC.
TABLE
OF CONTENTS
Important Information Regarding
Forward-Looking Statements
Portions
of this Quarterly Report on Form 10-Q (including information
incorporated by reference) include “forward-looking statements”
based on our current beliefs, expectations, and projections
regarding our business strategies, market potential, future
financial performance, industry, and other matters. This includes,
in particular, “Item 2 — Management’s Discussion and Analysis of
Financial Condition and Results of Operations” of this Quarterly
Report on Form 10-Q, as well as other portions of this Quarterly
Report on Form 10-Q. The words “believe,” “expect,” “anticipate,”
“project,” “could,” “would,” and similar expressions, among others,
generally identify “forward-looking statements,” which speak only
as of the date the statements were made. The matters discussed in
these forward-looking statements are subject to risks,
uncertainties, and other factors that could cause our actual
results to differ materially from those projected, anticipated, or
implied in the forward-looking statements. The most significant of
these risks, uncertainties, and other factors are described in
“Item 1A — Risk Factors” in our Annual Report on Form 10-K for the
fiscal year ended December 31, 2019 filed with the U.S. Securities
and Exchange Commission on March 26, 2020. Except to the limited
extent required by applicable law, we undertake no obligation to
update or revise any forward-looking statements, whether as a
result of new information, future events, or otherwise.
PART I. FINANCIAL
INFORMATION
ITEM 1. FINANCIAL
STATEMENTS
IMAC
HOLDINGS, INC.
CONDENSED
CONSOLIDATED BALANCE SHEETS
(Unaudited)
|
|
September 30, 2020 |
|
|
December 31, 2019 |
|
ASSETS |
|
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
|
Cash |
|
$ |
1,664,304 |
|
|
$ |
373,689 |
|
Accounts
receivable, net |
|
|
1,433,457 |
|
|
|
1,258,325 |
|
Deferred
compensation, current portion |
|
|
241,946 |
|
|
|
312,258 |
|
Other
assets |
|
|
452,741 |
|
|
|
633,303 |
|
Total current
assets |
|
|
3,792,448 |
|
|
|
2,577,575 |
|
|
|
|
|
|
|
|
|
|
Property and equipment, net |
|
|
1,861,879 |
|
|
|
3,692,009 |
|
|
|
|
|
|
|
|
|
|
Other assets: |
|
|
|
|
|
|
|
|
Goodwill |
|
|
2,040,696 |
|
|
|
2,040,696 |
|
Intangible assets,
net |
|
|
6,846,385 |
|
|
|
7,169,072 |
|
Deferred equity
costs |
|
|
143,655 |
|
|
|
170,274 |
|
Deferred
compensation, net of current portion |
|
|
310,006 |
|
|
|
549,563 |
|
Security
deposits |
|
|
413,407 |
|
|
|
499,488 |
|
Right
of use asset |
|
|
3,965,755 |
|
|
|
3,719,401 |
|
Total
other assets |
|
|
13,719,904 |
|
|
|
14,148,494 |
|
|
|
|
|
|
|
|
|
|
Total
assets |
|
$ |
19,374,231 |
|
|
$ |
20,418,078 |
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
Accounts payable
and accrued expenses |
|
$ |
2,367,438 |
|
|
$ |
2,909,666 |
|
Patient
deposits |
|
|
373,678 |
|
|
|
189,691 |
|
Notes payable,
current portion, net of deferred loan costs |
|
|
1,839,306 |
|
|
|
1,422,554 |
|
Finance lease
obligation, current portion |
|
|
18,047 |
|
|
|
17,473 |
|
Line of credit |
|
|
79,961 |
|
|
|
79,961 |
|
Liability to issue
common stock, current portion |
|
|
310,575 |
|
|
|
421,044 |
|
Operating lease liability, current portion |
|
|
1,051,964 |
|
|
|
1,025,247 |
|
Total
current liabilities |
|
|
6,040,969 |
|
|
|
6,065,636 |
|
|
|
|
|
|
|
|
|
|
Long-term liabilities: |
|
|
|
|
|
|
|
|
Notes payable, net
of current portion |
|
|
2,671,333 |
|
|
|
2,109,065 |
|
Finance lease
obligation, net of current portion |
|
|
52,957 |
|
|
|
66,565 |
|
Liability to issue
common stock, net of current portion |
|
|
378,760 |
|
|
|
578,866 |
|
Operating lease
liability, net of current portion |
|
|
3,723,398 |
|
|
|
3,660,654 |
|
Other
non-current liabilities |
|
|
15,000 |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
Total
liabilities |
|
|
12,882,417 |
|
|
|
12,480,786 |
|
|
|
|
|
|
|
|
|
|
Stockholders’ equity: |
|
|
|
|
|
|
|
|
Preferred stock -
$0.001 par value, 5,000,000 authorized, nil issued and outstanding
at September 30, 2020 and December 31, 2019, respectively |
|
|
- |
|
|
|
- |
|
Common stock -
$0.001 par value, 30,000,000 authorized, 11,839,972 and 8,913,258
shares issued and outstanding at September 30, 2020 and December
31, 2019, respectively |
|
|
11,834 |
|
|
|
8,907 |
|
Additional paid-in
capital |
|
|
24,119,889 |
|
|
|
20,050,634 |
|
Accumulated
deficit |
|
|
(15,235,941 |
) |
|
|
(10,042,050 |
) |
Non-controlling interest |
|
|
(2,403,968 |
) |
|
|
(2,080,199 |
) |
Total
stockholders’ equity |
|
|
6,491,814 |
|
|
|
7,937,292 |
|
|
|
|
|
|
|
|
|
|
Total
liabilities and stockholders’ equity |
|
$ |
19,374,231 |
|
|
$ |
20,418,078 |
|
See
accompanying notes to the unaudited condensed consolidated
financial statements.
IMAC
HOLDINGS, INC.
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
|
|
Three Months Ended
September 30, |
|
|
Nine Months Ended
September 30, |
|
|
|
2020 |
|
|
2019 |
|
|
2020 |
|
|
2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Patient revenues, net |
|
$ |
3,477,841 |
|
|
$ |
4,355,904 |
|
|
$ |
9,359,490 |
|
|
$ |
10,882,487 |
|
Management
fees |
|
|
- |
|
|
|
- |
|
|
|
12,487 |
|
|
|
- |
|
Total revenue |
|
|
3,477,841 |
|
|
|
4,355,904 |
|
|
|
9,371,977 |
|
|
|
10,882,487 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Patient
expenses |
|
|
428,615 |
|
|
|
950,517 |
|
|
|
1,213,799 |
|
|
|
2,314,424 |
|
Salaries and
benefits |
|
|
2,622,266 |
|
|
|
2,878,391 |
|
|
|
7,882,665 |
|
|
|
7,536,223 |
|
Share-based
compensation |
|
|
108,377 |
|
|
|
112,959 |
|
|
|
311,406 |
|
|
|
288,298 |
|
Advertising and
marketing |
|
|
234,694 |
|
|
|
317,800 |
|
|
|
650,861 |
|
|
|
1,014,144 |
|
Grant funds |
|
|
- |
|
|
|
- |
|
|
|
(415,978 |
) |
|
|
- |
|
General and
administrative |
|
|
961,521 |
|
|
|
1,311,315 |
|
|
|
3,406,116 |
|
|
|
3,718,506 |
|
Depreciation and amortization |
|
|
430,121 |
|
|
|
422,405 |
|
|
|
1,334,267 |
|
|
|
1,104,961 |
|
Total
operating expenses |
|
|
4,785,594 |
|
|
|
5,993,387 |
|
|
|
14,383,136 |
|
|
|
15,976,556 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating loss |
|
|
(1,307,753 |
) |
|
|
(1,637,483 |
) |
|
|
(5,011,159 |
) |
|
|
(5,094,069 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
income |
|
|
6,028 |
|
|
|
120 |
|
|
|
6,067 |
|
|
|
125 |
|
Other income
(expenses) |
|
|
6 |
|
|
|
(94 |
) |
|
|
6 |
|
|
|
(15,384 |
) |
Beneficial
conversion interest expense |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(639,159 |
) |
Gain (loss) on
extinguishment of debt |
|
|
9,783 |
|
|
|
- |
|
|
|
(99,761 |
) |
|
|
- |
|
Loss on disposal
of assets |
|
|
(39,047 |
) |
|
|
- |
|
|
|
(60,272 |
) |
|
|
- |
|
Interest expense |
|
|
(141,416 |
) |
|
|
(74,456 |
) |
|
|
(352,541 |
) |
|
|
(190,337 |
) |
Total
other (expenses) |
|
|
(164,646 |
) |
|
|
(74,430 |
) |
|
|
(506,501 |
) |
|
|
(844,755 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss before income taxes |
|
|
(1,472,399 |
) |
|
|
(1,711,913 |
) |
|
|
(5,517,660 |
) |
|
|
(5,938,824 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income taxes |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
|
(1,472,399 |
) |
|
|
(1,711,913 |
) |
|
|
(5,517,660 |
) |
|
|
(5,938,824 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
attributable to the non-controlling interest |
|
|
42,741 |
|
|
|
162,951 |
|
|
|
323,769 |
|
|
|
889,907 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
attributable to IMAC Holdings, Inc. |
|
$ |
(1,429,658 |
) |
|
$ |
(1,548,962 |
) |
|
$ |
(5,193,891 |
) |
|
$ |
(5,048,917 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per share attributable to
common stockholders |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and
diluted |
|
$ |
(0.12 |
) |
|
$ |
(0.19 |
) |
|
$ |
(0.49 |
) |
|
$ |
(0.68 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and
diluted |
|
|
11,839,972 |
|
|
|
8,366,287 |
|
|
|
10,549,899 |
|
|
|
7,472,738 |
|
See
accompanying notes to the unaudited condensed consolidated
financial statements.
IMAC
HOLDINGS, INC.
CONDENSED
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(Unaudited)
|
|
Common Stock |
|
|
Additional |
|
|
Non- |
|
|
|
|
|
|
|
|
|
Number of
Shares |
|
|
Par |
|
|
Paid-In-
Capital |
|
|
Controlling
Interest |
|
|
Accumulated Deficit |
|
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2018 |
|
|
4,533,623 |
|
|
$ |
4,534 |
|
|
$ |
1,233,966 |
|
|
$ |
(1,625,840 |
) |
|
$ |
(3,544,820 |
) |
|
$ |
(3,932,160 |
) |
Common stock issued for initial public
offering proceeds, net of related fees |
|
|
850,000 |
|
|
|
850 |
|
|
|
3,503,314 |
|
|
|
- |
|
|
|
- |
|
|
|
3,504,164 |
|
Issuance of common stock in connection
with convertible notes |
|
|
449,217 |
|
|
|
449 |
|
|
|
2,245,636 |
|
|
|
- |
|
|
|
- |
|
|
|
2,246,085 |
|
Issuance of common stock in connection
with acquisitions |
|
|
1,410,183 |
|
|
|
1,410 |
|
|
|
7,247,798 |
|
|
|
- |
|
|
|
- |
|
|
|
7,249,208 |
|
Exercise of warrants |
|
|
9,900 |
|
|
|
10 |
|
|
|
49,490 |
|
|
|
- |
|
|
|
- |
|
|
|
49,500 |
|
Net loss |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(431,223 |
) |
|
|
(1,599,187 |
) |
|
|
(2,030,410 |
) |
Balance, March 31, 2019 |
|
|
7,252,923 |
|
|
|
7,253 |
|
|
|
14,280,204 |
|
|
|
(2,057,063 |
) |
|
|
(5,144,007 |
) |
|
|
7,086,387 |
|
Issuance of common stock in connection
with acquisitions |
|
|
1,002,306 |
|
|
|
1,002 |
|
|
|
4,072,436 |
|
|
|
- |
|
|
|
- |
|
|
|
4,073,438 |
|
Exercise of warrants |
|
|
61,569 |
|
|
|
62 |
|
|
|
307,783 |
|
|
|
- |
|
|
|
- |
|
|
|
307,845 |
|
Issuance of employee stock
options |
|
|
- |
|
|
|
- |
|
|
|
16,216 |
|
|
|
- |
|
|
|
- |
|
|
|
16,216 |
|
Net loss |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(295,733 |
) |
|
|
(1,900,768 |
) |
|
|
(2,196,501 |
) |
Balance, June 30, 2019 |
|
|
8,316,798 |
|
|
|
8,317 |
|
|
|
18,676,639 |
|
|
|
(2,352,796 |
) |
|
|
(7,044,775 |
) |
|
|
9,287,385 |
|
Issuance of common stock |
|
|
133,297 |
|
|
|
133 |
|
|
|
150,652 |
|
|
|
- |
|
|
|
- |
|
|
|
150,785 |
|
Issuance of employee stock
options |
|
|
- |
|
|
|
- |
|
|
|
35,963 |
|
|
|
- |
|
|
|
- |
|
|
|
35,963 |
|
Net loss |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(162,951 |
) |
|
|
(1,548,962 |
) |
|
|
(1,711,913 |
) |
Balance, September 30, 2019 |
|
|
8,450,095 |
|
|
$ |
8,450 |
|
|
$ |
18,863,254 |
|
|
$ |
(2,515,747 |
) |
|
$ |
(8,593,737 |
) |
|
$ |
7,762,220 |
|
|
|
Common Stock |
|
|
Additional |
|
|
Non- |
|
|
|
|
|
|
|
|
|
Number of
Shares |
|
|
Par |
|
|
Paid-In-
Capital |
|
|
Controlling
Interest |
|
|
Accumulated Deficit |
|
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2019 |
|
|
8,913,257 |
|
|
$ |
8,907 |
|
|
$ |
20,050,634 |
|
|
$ |
(2,080,199 |
) |
|
$ |
(10,042,050 |
) |
|
$ |
7,937,292 |
|
Issuance of common stock |
|
|
1,095,840 |
|
|
|
1,096 |
|
|
|
1,376,122 |
|
|
|
- |
|
|
|
- |
|
|
|
1,377,218 |
|
Issuance of employee stock
options |
|
|
- |
|
|
|
- |
|
|
|
38,359 |
|
|
|
- |
|
|
|
- |
|
|
|
38,359 |
|
Net loss |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(336,604 |
) |
|
|
(1,733,545 |
) |
|
|
(2,070,149 |
) |
Balance, March 31, 2020 |
|
|
10,009,097 |
|
|
|
10,003 |
|
|
|
21,465,115 |
|
|
|
(2,416,803 |
) |
|
|
(11,775,595 |
) |
|
|
7,282,720 |
|
Issuance of common stock |
|
|
1,830,875 |
|
|
|
1,831 |
|
|
|
2,576,820 |
|
|
|
- |
|
|
|
- |
|
|
|
2,578,651 |
|
Issuance of employee stock
options |
|
|
- |
|
|
|
- |
|
|
|
37,569 |
|
|
|
- |
|
|
|
- |
|
|
|
37,569 |
|
Net income
(loss) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
55,576 |
|
|
|
(2,030,688 |
) |
|
|
(1,975,112 |
) |
Balance, June 30, 2020 |
|
|
11,839,972 |
|
|
|
11,834 |
|
|
|
24,079,504 |
|
|
|
(2,361,227 |
) |
|
|
(13,806,283 |
) |
|
|
7,923,828 |
|
Issuance of employee stock
options |
|
|
- |
|
|
|
- |
|
|
|
40,385 |
|
|
|
- |
|
|
|
- |
|
|
|
40,385 |
|
Net loss |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(42,741 |
) |
|
|
(1,429,658 |
) |
|
|
(1,472,399 |
) |
Balance, September 30, 2020 |
|
|
11,839,972 |
|
|
$ |
11,834 |
|
|
$ |
24,119,889 |
|
|
$ |
(2,403,968 |
) |
|
$ |
(15,235,941 |
) |
|
$ |
6,491,814 |
|
See
accompanying notes to unaudited condensed consolidated financial
statements.
IMAC
HOLDINGS, INC.
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
|
|
Nine
Months Ended
September
30,
|
|
|
|
2020 |
|
|
2019 |
|
Cash flows from operating
activities: |
|
|
|
|
|
|
|
|
Net
loss |
|
$ |
(5,517,660 |
) |
|
$ |
(5,938,824 |
) |
Adjustments to
reconcile net loss to net cash used in operating activities: |
|
|
|
|
|
|
|
|
Depreciation and
amortization |
|
|
1,334,267 |
|
|
|
1,104,961 |
|
Beneficial
conversion interest expense |
|
|
- |
|
|
|
639,159 |
|
Share based compensation |
|
|
311,406 |
|
|
|
288,298 |
|
Loss on
disposition of assets |
|
|
1,959 |
|
|
|
- |
|
Non cash
expense |
|
|
- |
|
|
|
150,785 |
|
(Increase)
decrease in operating assets: |
|
|
|
|
|
|
|
|
Accounts
receivable, net |
|
|
(154,292 |
) |
|
|
64,046 |
|
Other assets |
|
|
251,976 |
|
|
|
(53,450 |
) |
Security
deposits |
|
|
86,081 |
|
|
|
(59,966 |
) |
Increase
(decrease) in operating liabilities: |
|
|
|
|
|
|
|
|
Accounts payable
and accrued expenses |
|
|
(518,074 |
) |
|
|
736,704 |
|
Patient
deposits |
|
|
183,987 |
|
|
|
358,906 |
|
Lease
incentive obligation |
|
|
- |
|
|
|
(85,894 |
) |
Net
cash used in operating activities |
|
|
(4,020,350 |
) |
|
|
(2,795,275 |
) |
|
|
|
|
|
|
|
|
|
Cash flows from investing
activities: |
|
|
|
|
|
|
|
|
Purchase of
property and equipment |
|
|
(52,626 |
) |
|
|
(688,312 |
) |
Purchase of
license fee |
|
|
(243,750 |
) |
|
|
- |
|
Acquisition of IMAC Florida (Note 6) |
|
|
(200,000 |
) |
|
|
- |
|
Net
cash used in investing activities |
|
|
(496,376 |
) |
|
|
(688,312 |
) |
|
|
|
|
|
|
|
|
|
Cash flows from financing
activities: |
|
|
|
|
|
|
|
|
Proceeds from
initial public offering, net of related fees |
|
|
- |
|
|
|
3,839,482 |
|
Proceeds from
warrants exercised |
|
|
- |
|
|
|
357,345 |
|
Proceeds from
issuance of common stock |
|
|
3,736,613 |
|
|
|
- |
|
Proceeds from
notes payable |
|
|
2,891,520 |
|
|
|
212,800 |
|
Payments on notes
payable |
|
|
(737,758 |
) |
|
|
(86,958 |
) |
Payments of debt
issuance costs |
|
|
(70,000 |
) |
|
|
- |
|
Proceeds from line
of credit |
|
|
- |
|
|
|
20,000 |
|
Payments on line
of credit |
|
|
- |
|
|
|
(300,000 |
) |
Payments on finance lease obligation |
|
|
(13,034 |
) |
|
|
(12,487 |
) |
Net cash
provided by financing activities |
|
|
5,807,341 |
|
|
|
4,030,182 |
|
|
|
|
|
|
|
|
|
|
Net increase in cash |
|
|
1,290,615 |
|
|
|
546,595 |
|
|
|
|
|
|
|
|
|
|
Cash, beginning of period |
|
|
373,689 |
|
|
|
194,316 |
|
|
|
|
|
|
|
|
|
|
Cash, end of period |
|
$ |
1,664,304 |
|
|
$ |
740,911 |
|
|
|
|
|
|
|
|
|
|
Supplemental cash flow information: |
|
|
|
|
|
|
|
|
Interest
paid |
|
$ |
63,152 |
|
|
$ |
97,147 |
|
Taxes paid |
|
|
- |
|
|
$ |
18,533 |
|
Non cash financing and investing: |
|
|
|
|
|
|
|
|
Debt discount
notes payable |
|
$ |
115,000 |
|
|
$ |
- |
|
Debt payment by
sale of property and equipment |
|
$ |
1,232,500 |
|
|
$ |
- |
|
Business
acquisition via stock issuance |
|
$ |
- |
|
|
$ |
3,771,978 |
|
See
accompanying notes to the unaudited condensed consolidated
financial statements.
IMAC
HOLDINGS, INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1 – Description of Business
IMAC
Holdings, Inc. and its affiliates (collectively, the “Company”)
provide orthopedic therapies through its chain of IMAC Regeneration
Centers. Through its consolidated and equity owned entities, its
outpatient medical clinics provide conservative, non-invasive
medical treatments to help patients with back pain, knee pain,
joint pain, ligament and tendon damage, and other related soft
tissue conditions. The Company had open two (2) medical clinics
located in Tennessee and opened or acquired through management
service agreements thirteen (13) medical clinics located in
Kentucky, Missouri, Illinois and Florida at September 30, 2020. The
Company has partnered with several well-known sports stars such as
Ozzie Smith, David Price, Tony Delk and Mike Ditka in opening its
medical clinics, with a focus around treating sports
injuries.
Effective
June 1, 2018, the Company converted from IMAC Holdings, LLC a
Kentucky limited liability company to IMAC Holdings, Inc. a
Delaware corporation, followed by a reverse stock split in February
2019. These accounting changes have been given retrospective
treatment in the condensed consolidated financial
statements.
During
February 2019, the Company completed an initial public offering
(“IPO”) of securities. See Note 12 – Stockholder’s
Equity.
Note 2 – Summary of Significant Accounting
Policies
Principles of Consolidation
The
accompanying condensed consolidated financial statements have been
prepared in accordance with Generally Accepted Accounting
Principles (“GAAP”) in the United States of America (“U.S.”) as
promulgated by the Financial Accounting Standards Board (“FASB”),
Accounting Standards Codification (“ASC”) and with the rules and
regulations of the U.S. Securities and Exchange Commission (“SEC”
or the “Commission”). The information contained in these condensed
consolidated financial statements should be read in conjunction
with the Company’s consolidated financial statements and notes
thereto for the fiscal year ended December 31, 2019 included in the
Company’s Annual Report on Form 10-K filed with the SEC on March
26, 2020.
The
accompanying condensed consolidated financial statements include
the accounts of IMAC Holdings, Inc. (“IMAC Holdings”) and the
following entities which are consolidated due to direct ownership
of a controlling voting interest or other rights granted to us as
the sole general partner or managing member of the entity: IMAC
Management Services, LLC (“IMAC Management”), IMAC Regeneration
Management, LLC (“IMAC Texas”), IMAC Regeneration Management of
Nashville, LLC (“IMAC Nashville”), IMAC Management of Illinois, LLC
(“IMAC Illinois”) and IMAC Management of Florida, LLC (“IMAC
Florida”); the following entity which is consolidated with IMAC
Regeneration Management of Nashville, LLC due to control by
contract: IMAC Regeneration Center of Nashville, PC (“IMAC
Nashville PC”); and the following which prior to June 1, 2018 was
held as a minority interest, IMAC Regeneration Center of St. Louis,
LLC (“IMAC St. Louis”).
In
June 2018, the Company consummated certain transactions resulting
in the acquisition of the outstanding equity interests in IMAC St.
Louis and Clinic Management Associates of KY, LLC (“CMA of KY”), an
entity which consolidates Integrated Medical and Chiropractic
Regeneration Center, PSC (“IMAC Kentucky”) due to control by
contract. These entities are included in the condensed consolidated
financial statements from the date of acquisition.
In
August 2018, the Company acquired 100% of Advantage Hand Therapy
and Orthopedic Rehabilitation, LLC (“Advantage Therapy”) and 70% of
BioFirma LLC (“BioFirma”). Both companies are consolidated due to
direct ownership of a controlling voting interest or other rights
granted to us as the sole general partner or managing member of the
entity. On October 1, 2019, the Company acquired the 30% of
BioFirma’s membership interests which were not previously held by
the Company, resulting in the Company owning 100% of the membership
interests of BioFirma. Substantially all the assets of BioFirma
were sold effective December 31, 2019; however as of September 30,
2020, the acquirer of the assets had paid $10,000 in cash and gave
the Company medical supplies valued at $27,500 as a payment
in-kind. The Company has established a bad debt reserve of 100% of
the remaining selling price, $312,000.
In
April 2019, the Company consummated certain transactions resulting
in the acquisition of the outstanding equity interest in ISDI
Holdings II, Inc., an Illinois corporation (“ISDI Holdings II”),
and PHR Holdings, Inc., an Illinois corporation (“PHR Holdings”),
entities which consolidate the results of Progressive Health and
Rehabilitation, Ltd (“Progressive”) and Illinois Spine and Disc
Institute, Ltd (“ISDI”) due to control by contract. These entities
are included in the condensed consolidated financial statements
from the date of acquisition.
In
November 2019, IMAC Illinois entered into a management agreement
for an occupational and physical therapy practice in Rockford,
Illinois. This entity is included in the condensed consolidated
financial statements due to control by contract from the date of
entry into the management agreement.
In
January 2020, the Company consummated an agreement for the
acquisition of Chiropractic Health of Southwest Florida, Inc.
(“CHSF”) in Bonita Springs, Florida. This entity is included in the
condensed consolidated financial statements from the date of
acquisition.
All
significant intercompany balances and transactions have been
eliminated in consolidation.
Use of Estimates
The
preparation of condensed consolidated financial statements in
conformity with GAAP requires management to make estimates and
assumptions that affect the reported amounts of assets,
liabilities, revenues and expenses at the date and for the periods
that the condensed consolidated financial statements are prepared.
On an ongoing basis, the Company evaluates its estimates, including
those related to insurance adjustments and provisions for doubtful
accounts. The Company bases its estimates on historical experience
and on various other assumptions that are believed to be reasonable
under the circumstances. Actual results could materially differ
from those estimates.
COVID-19 Pandemic
On
January 30, 2020, the World Health Organization (WHO) announced a
global health emergency because of a new strain of coronavirus
originating in Wuhan, China (the “COVID-19 outbreak”) and the risks
to the international community as the virus spread globally beyond
the point of origin. On March 20, 2020 the WHO classified the
COVID-19 outbreak as a pandemic, based on the rapid increase in
exposure globally.
The
full impact of the COVID-19 outbreak continues to evolve as of the
date of these condensed consolidated financial statements. As such,
it is uncertain as to the full magnitude that the pandemic will
have on the Company’s combined financial condition, liquidity and
future results of operations. Management is actively monitoring the
impact of the global situation on its consolidated financial
condition, liquidity, operations, suppliers, industry and
workforce. Given the daily evolution of the COVID-19 outbreak and
the global responses to curb its spread, the Company is not able to
estimate the effects of the COVID-19 outbreak on its results of
operations, financial condition, or liquidity for fiscal year 2020
beyond the results presented in these condensed consolidated
financial statements and this quarterly report.
CARES Act
The
Company is continuing to closely monitor legislative actions at the
federal, state and local levels including the Coronavirus Aid,
Relief, and Economic Security Act (the “CARES Act”) and other
governmental assistance that might be available in response to the
COVID-19 pandemic. As part of the CARES Act, the United States
government initially announced that it would offer $100 billion of
relief to eligible health care providers. On April 7, 2020, Centers
for Medicare and Medicaid Services (“CMS”) officials indicated they
would distribute $30 billion of direct grants to hospitals, ASCs
and other health care providers based on how much they bill
Medicare. Payments received from these grants are not required to
be repaid provided the recipients attest to and comply with certain
terms and conditions, including limitations on balance billing and
not using funds received from the grants to reimburse expenses or
losses that other sources are obligated to reimburse.
The
Company received approximately $416,000 of the grant funds
distributed under the CARES Act Provider Relief Fund program in
April 2020. Based on an analysis of the compliance and reporting
requirements and the impact of the COVID-19 pandemic on our
operating results through the end of the third quarter, these funds
were recognized as a reduction in operating expenses under the line
item “Grant funds” in the condensed consolidated statements of
operations for the nine months ended September 30, 2020. The
recognition of amounts received is conditioned upon certification
that payment will be used to prevent, prepare for and respond to
the COVID-19 pandemic and shall reimburse the recipient only for
healthcare related expenses or lost revenues that are attributable
to the COVID-19 pandemic. Amounts are recognized as a reduction to
operating costs and expenses only to the extent the Company is
reasonably assured that underlying conditions are met.
Revenue Recognition
The
Company’s patient service revenue is derived from non-surgical
procedures performed at our outpatient medical clinics and patient
visits to physicians. The fees for such services are billed either
to the patient or a third-party payer, including Medicare. Starting
in January 2020, the Company implemented wellness maintenance
programs on a subscription basis. There are three membership plans
offered with different levels of service for each plan. The Company
recognizes service revenues based upon the estimated amounts the
Company expects to be entitled to receive from patients and
third-party payers. Estimates of contractual adjustments are based
upon the payment terms specified in the related contractual
agreements. The Company also records estimated implicit price
concessions (based primarily on historical collection experience)
related to uninsured accounts to record these revenues at the
estimated amounts expected to be collected.
Other
management service fees are derived from management services where
the Company provides billings and collections support to the
clinics and where management services are provided based on state
specific regulations known as the corporate practice of medicine
(“CPM”). Under the CPM, a business corporation is precluded from
practicing medicine or employing a physician to provide
professional medical services. In these circumstances, the Company
provides all administrative support to the physician-owned PC
through an LLC. The PC is consolidated due to control by contract
(an “MSA” – Management Services Agreement). The fees we derive from
these management arrangements are either based on a predetermined
percentage of the revenue of each clinic or a percentage mark up on
the costs of the LLC. The company recognize other management
service revenue in the period in which services are rendered. These
revenues are earned by IMAC Nashville, IMAC Management and IMAC
Illinois and are eliminated in consolidation to the extent
owned.
The
Company’s patient revenue consisted of the following for the three
and nine months ended September 30, 2020 and September 30,
2019:
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
|
|
September 30, 2020 |
|
|
September 30, 2019 |
|
|
September 30, 2020 |
|
|
September 30, 2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Patient revenues |
|
$ |
8,191,160 |
|
|
$ |
8,712,495 |
|
|
$ |
20,938,380 |
|
|
$ |
24,889,336 |
|
Contractual
adjustments |
|
|
(4,713,319 |
) |
|
|
(4,356,591 |
) |
|
|
(11,578,890 |
) |
|
|
(14,006,849 |
) |
Patient
revenue, net |
|
$ |
3,477,841 |
|
|
$ |
4,355,904 |
|
|
$ |
9,359,490 |
|
|
$ |
10,882,487 |
|
Patient Deposits
Patient
deposits are derived from patient payments in advance of services
delivered. Our service lines include traditional and regenerative
medicine. Regenerative medicine procedures are rarely paid by
insurance carriers; therefore, the Company typically requires
up-front payment from the patient for regenerative services and any
co-pays and deductibles as required by the patient specific
insurance carrier. For some patients, credit is provided through an
outside vendor. In this case, the Company is paid from the credit
card company and the risk is transferred to the credit card company
for collection from the patient. These funds are accounted for as
patient deposits until the procedures are performed at which point
the patient deposit is recognized as patient service
revenue.
Fair Value of Financial Instruments
The
carrying amount of accounts receivable and accounts payable
approximate their respective fair values due to the short- term
nature. The carrying amount of the line of credit and note payable
approximates fair values due to their market interest rates.
Financial instruments that potentially subject the Company to
concentrations of credit risk consist principally of cash and cash
equivalents and accounts receivable.
Cash and Cash Equivalents
The
Company considers all short-term investments with an original
maturity of three months or less to be cash equivalents. The
Company had no cash equivalents at September 30, 2020 and December
31, 2019.
Accounts Receivable
Accounts
receivable primarily consists of amounts due from third-party
payers (non-governmental), governmental payers and private pay
patients and is recorded net of allowances for doubtful accounts
and contractual discounts. The Company’s ability to collect
outstanding receivables is critical to its results of operations
and cash flows. Accordingly, accounts receivable reported in the
Company’s condensed consolidated financial statements is recorded
at the net amount expected to be received. The Company’s primary
collection risks are (i) the risk of overestimation of net revenues
at the time of billing that may result in the Company receiving
less than the recorded receivable, (ii) the risk of non-payment as
a result of commercial insurance companies’ denial of claims, (iii)
the risk that patients will fail to remit insurance payments to the
Company when the commercial insurance company pays out-of-network
claims directly to the patient, (iv) resource and capacity
constraints that may prevent the Company from handling the volume
of billing and collection issues in a timely manner, (v) the risk
that patients do not pay the Company for their self-pay balances
(including co-pays, deductibles and any portion of the claim not
covered by insurance) and (vi) the risk of non-payment from
uninsured patients.
The
Company’s accounts receivable from third-party payers are recorded
net of estimated contractual adjustments and allowances from
third-party payers, which are estimated based on the historical
trend of the Company’s facilities’ cash collections and contractual
write-offs, accounts receivable aging, established fee schedules,
relationships with payers and procedure statistics. While changes
in estimated reimbursement from third-party payers remain a
possibility, the Company expects that any such changes would be
minimal and, therefore, would not have a material effect on the
Company’s financial condition or results of operations. The
Company’s collection policies and procedures are based on the type
of payor, size of claim and estimated collection percentage for
each patient account. The Company analyzes accounts receivable at
each of the facilities to ensure the proper collection and aged
category. The operating systems generate reports that assist in the
collection efforts by prioritizing patient accounts. Collection
efforts include direct contact with insurance carriers or patients
and written correspondence.
Allowance for Doubtful Accounts, Contractual and Other
Discounts
Management
estimates the allowance for contractual and other discounts based
on its historical collection experience and contracted relationship
with the payers. The services authorized and provided and related
reimbursement are often subject to interpretation and negotiation
that could result in payments that differ from the Company’s
estimates. The Company’s allowance for doubtful accounts is based
on historical experience, but management also takes into
consideration the age of accounts, creditworthiness and current
economic trends when evaluating the adequacy of the allowance for
doubtful accounts. An account may be written-off only after the
Company has pursued collection efforts or otherwise determines an
account to be uncollectible. Uncollectible balances are written-off
against the allowance. Recoveries of previously written-off
balances are credited to income when the recoveries are
made.
Property and Equipment
Property
and equipment are stated at cost, less accumulated depreciation.
Additions and improvements to property and equipment are
capitalized at cost. Depreciation of owned assets and amortization
of leasehold improvements are computed using the straight-line
method over the shorter of the estimated useful lives of the
related assets or the lease term. The cost of assets sold or
retired, and the related accumulated depreciation are removed from
the accounts and any resulting gains or losses are reflected in
other income (expense) for the year. Expenditures for maintenance
and repairs are charged to expense as incurred.
Intangible Assets
The
Company capitalizes the fair value of intangible assets acquired in
business combinations. Intangible assets are amortized on a
straight-line basis over their estimated economic useful lives,
generally the contract term. The Company performs valuations of
assets acquired and liabilities assumed on each acquisition
accounted for as a business combination and allocates the purchase
price of each acquired business to its respective net tangible and
intangible assets. Acquired intangible assets include trade names,
non-compete agreements, customer relationships and contractual
agreements.
Goodwill
Our
goodwill represents the excess of the purchase price over the fair
value of the net identifiable assets acquired in business
combinations. The goodwill generated from the business combinations
is primarily related to the value placed on the employee workforce
and expected synergies. Judgment is involved in determining if an
indicator or change in circumstances relating to impairment has
occurred. Such changes may include, among others, a significant
decline in expected future cash flows, a significant adverse change
in the business climate, and unforeseen competition. There was no
goodwill impairment for the years presented.
The
Company tests goodwill for impairment on an annual basis, and when
events or circumstances indicate the fair value of a reporting unit
may be below its carrying value.
Long-Lived Assets
Long-lived
assets such as property and equipment and intangible assets are
evaluated for impairment whenever events or changes in
circumstances indicate that the carrying amount may not be
recoverable. There were no impairments of long-lived assets for the
years presented.
Advertising and Marketing
The
Company uses advertising and marketing to promote its services.
Advertising and marketing costs are expensed as incurred.
Advertising and marketing expense was $234,694 and $317,800 for the
three months ended September 30, 2020 and 2019, respectively and
was $650,861 and $1,014,144 for the nine months ended September 30,
2020 and 2019, respectively.
Net Loss Per Share
Basic
net loss per common share is computed by dividing net loss
applicable to common stockholders by the weighted-average number of
common shares outstanding during the period. Diluted net loss per
common share is determined using the weighted-average of common
shares outstanding during the period, adjusted for the dilutive
effect of common stock equivalents, consisting of the conversion
option embedded in convertible debt. The weighted-average number of
common shares outstanding excludes common stock equivalents because
their inclusion would have an anti-dilutive effect.
Income Taxes
Following
the Company’s conversion to a Delaware corporation in 2018, IMAC
Nashville, IMAC Texas, IMAC St. Louis continued as single-member
limited liability companies (wholly owned by the Company) that are
disregarded entities for tax purposes and do not file separate
returns. Their activity is included as part of IMAC Holdings Inc.
Advantage Therapy, IMAC Illinois and IMAC Florida are also
disregarded entities for tax purposes. BioFirma was a limited
liability company taxed as a partnership. Effective October 1, 2019
until its disposal on December 31, 2019, BioFirma was a disregarded
entity for tax purposes. IMAC Management is a C-corporation and is
included in the consolidated return of IMAC Holdings as a
subsidiary.
Any
future benefit arising from losses have been offset by a valuation
allowance. Accordingly, no provision for income taxes is reflected
in the condensed consolidated financial statements. The Company
records a liability for uncertain tax positions when it is probable
that a loss has been incurred and the amount can be reasonably
estimated. Interest and penalties related to income tax matters, if
any, would be recognized as a component of income tax expense. At
September 30, 2020 and December 31, 2019, the Company had no
liabilities for uncertain tax positions. The Company continually
evaluates expiring statutes of limitations, audits, proposed
settlements, changes in tax law and new authoritative rulings.
Currently, the tax years subsequent to 2017 are open and subject to
examination by the taxing authorities.
Note 3 – Capital Requirements, Liquidity and Going Concern
Considerations
The
Company’s condensed consolidated financial statements are prepared
in accordance with GAAP including the assumption of a going concern
basis, which contemplates the realization of assets and liquidation
of liabilities in the normal course of business. However, as shown
in the accompanying condensed consolidated financial statements,
the Company has sustained substantial losses from operations since
inception and had a deficiency in working capital of approximately
$2.2 million and $3.5 million at September 30, 2020 and December
31, 2019. The Company had a net loss of approximately $5.2 million
and $5.0 million at September 30, 2020 and 2019, respectively, and
used cash in operations of approximately $4.0 million and $2.8
million at September 30, 2020 and 2019, respectively. The Company
expects to continue to incur significant expenditures to develop
and expand its owned and managed outpatient medical
clinics.
Management
recognizes that the Company must obtain additional resources to
successfully integrate its acquired and managed clinics and
implement its business plans. Through September 30, 2020, the
Company has received funding in the form of indebtedness and the
issuance of common stock. Management plans to continue to raise
funds and/or refinance our indebtedness to support our operations
in 2020 and beyond. However, no assurances can be given that we
will be successful. If management is not able to timely and
successfully raise additional capital and/or refinance
indebtedness, the implementation of the Company’s business plan,
financial condition and results of operations will be materially
affected. These condensed consolidated financial statements do not
include any adjustments relating to the recoverability and
classification of recorded asset amounts and classification of
liabilities that might be necessary should the Company be unable to
continue as a going concern.
Note 4 – Concentration of Credit Risks
Cash
The
Company maintains its cash in accounts at financial institutions,
which may, at times, exceed federally-insured limits of $250,000.
As of September 30, 2020, the Company had approximately $150,956 of
cash in excess of federally insured limits.
Revenue and Accounts Receivable
As of
September 30, 2020 and December 31, 2019, the Company had the
following revenue and accounts receivable
concentrations:
|
|
September 30, 2020 |
|
|
December 31, 2019 |
|
|
|
% of Revenue |
|
|
% of Accounts Receivable |
|
|
% of Revenue |
|
|
% of Accounts Receivable |
|
|
|
(Unaudited) |
|
|
|
|
|
|
|
Patient payment |
|
|
34 |
% |
|
|
30 |
% |
|
|
47 |
% |
|
|
40 |
% |
Medicare payment |
|
|
40 |
% |
|
|
26 |
% |
|
|
27 |
% |
|
|
26 |
% |
Insurance payment |
|
|
26 |
% |
|
|
44 |
% |
|
|
26 |
% |
|
|
34 |
% |
Note 5 – Accounts Receivable
As of
September 30, 2020 and December 31, 2019, the Company’s accounts
receivable consisted of the following:
|
|
September 30, 2020 |
|
|
December 31, 2019 |
|
|
|
|
(Unaudited) |
|
|
|
|
Gross accounts
receivable |
|
$ |
1,462,439 |
|
|
$ |
1,285,228 |
|
Less: allowance
for doubtful accounts |
|
|
(28,982 |
) |
|
|
(26,903 |
) |
Accounts
receivable, net |
|
$ |
1,433,457 |
|
|
$ |
1,258,325 |
|
Note 6 – Business Acquisitions
BioFirma
On
August 1, 2018, the Company entered into an agreement to purchase
70% of all outstanding membership units of BioFirma LLC. The
purchase price for the interests was $1,000 paid in
cash.
The
Company has included the financial results of BioFirma in the
condensed consolidated financial statements from August 1, 2018,
the date of acquisition.
On
October 1, 2019, the holder of the 30% of the membership interests
of BioFirma and the Company entered into an Assignment and
Assumption of Interests of BioFirma LLC, pursuant to which the
Company acquired the 30% of BioFirma’s membership interests which
were not previously held by the Company, resulting in the Company
owning 100% of the membership interests of BioFirma.
On
December 31, 2019, the Company and BioFirma consummated the sale of
substantially all of BioFirma’s assets pursuant to an asset
purchase agreement with Self Care Regeneration LLC for a purchase
price of $320,800, plus the assumption of certain of BioFirma’s
liabilities, all of which were due to be paid to us no later than
March 30, 2020. On March 31, 2020, the due date for the payment of
the asset sale purchase price was extended to June 30, 2020. As of
September 30, 2020, the acquirer of the assets had paid $10,000 in
cash and gave the Company medical supplies valued at $27,500 as a
payment in-kind. The Company has established a bad debt reserve of
100% of the remaining selling price, $312,000.
IMAC Illinois
On
April 1, 2019, the Company and its wholly owned subsidiary IMAC
Illinois entered into an Agreement and Plan of Merger (the “Merger
Agreement”) for the acquisition of a practice management group that
manages three clinics in the Chicago, Illinois area. The
acquisition was completed on April 19, 2019. Pursuant to the Merger
Agreement, the Company issued 1,002,306 restricted shares of the
Company’s common stock (the “Merger Consideration”) valued at
approximately $4.1 million. The Company has included the financial
results of IMAC Illinois, which controls the three Chicago-area
clinics, from April 19, 2019, the date of acquisition.
IMAC Florida
On
January 13, 2020, the Company and its wholly owned subsidiary IMAC
Florida consummated the acquisition of CHSF, a chiropractic
practice in Bonita Springs, Florida. The transaction was completed
as a purchase of the practice for $200,000. The Company has
included the financial results of IMAC Florida, which controls
CHSF, from January 13, 2020, the date of acquisition.
The
following table summarizes the fair value of consideration paid and
the allocation of purchase price to the fair value of net assets
acquired for the acquisition of the IMAC Florida
business:
|
|
Florida |
|
Property &
equipment |
|
$ |
50,358 |
|
Customer lists |
|
|
128,802 |
|
Other
assets |
|
|
20,840 |
|
|
|
$ |
200,000 |
|
Note 7 – Property and Equipment
The
Company’s property and equipment consisted of the following at
September 30, 2020 and December 31, 2019:
|
|
Estimated
Useful Life in Years |
|
September 30, 2020 |
|
|
December 31, 2019 |
|
|
|
|
|
|
|
|
|
|
Land and building |
|
40 (Building) |
|
$ |
- |
|
|
$ |
1,175,000 |
|
Leasehold improvements |
|
Shorter of asset or lease term |
|
|
2,007,805 |
|
|
|
2,262,398 |
|
Equipment |
|
1.5 - 7 |
|
|
1,991,182 |
|
|
|
1,948,347 |
|
Total property and
equipment |
|
|
|
|
3,998,987 |
|
|
|
5,385,745 |
|
|
|
|
|
|
|
|
|
|
|
|
Less:
accumulated depreciation |
|
|
|
|
(2,162,007 |
) |
|
|
(1,693,736 |
) |
|
|
|
|
|
1,836,980 |
|
|
|
3,692,009 |
|
Construction in
progress |
|
|
|
|
24,899 |
|
|
|
- |
|
Total property
and equipment, net |
|
|
|
$ |
1,861,879 |
|
|
$ |
3,692,009 |
|
Depreciation
was $195,288 and $198,812 for the three months ended September 30,
2020 and 2019, respectively and $632,949 and $527,088 for the nine
months ended September 30, 2020 and 2019, respectively.
Note 8 – Intangibles Assets and Goodwill
The
Company’s intangible assets and goodwill consisted of the following
at September 30, 2020 and December 31, 2019:
|
|
|
|
September 30, 2020 |
|
|
|
Estimated |
|
|
|
|
Accumulated |
|
|
|
|
|
|
Useful Life |
|
Cost |
|
|
Amortization |
|
|
Net |
|
|
|
|
|
|
|
|
|
|
|
|
|
Intangible
assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Management service agreements |
|
10 years |
|
$ |
7,940,398 |
|
|
$ |
(1,507,868 |
) |
|
$ |
6,432,530 |
|
Non-compete
agreements |
|
3 years |
|
|
301,000 |
|
|
|
(232,056 |
) |
|
|
68,944 |
|
Customer lists |
|
3 years |
|
|
134,882 |
|
|
|
(33,721 |
) |
|
|
101,161 |
|
Definite lived assets |
|
|
|
|
8,376,280 |
|
|
|
(1,773,645 |
) |
|
|
6,602,635 |
|
Research and
development |
|
|
|
|
243,750 |
|
|
|
- |
|
|
|
243,750 |
|
Goodwill |
|
|
|
|
2,040,696 |
|
|
|
- |
|
|
|
2,040,696 |
|
Total
intangible assets and goodwill |
|
|
|
$ |
10,660,726 |
|
|
$ |
(1,773,645 |
) |
|
$ |
8,887,081 |
|
|
|
|
|
December 31, 2019 |
|
|
|
Estimated |
|
|
|
|
Accumulated |
|
|
|
|
|
|
Useful Life |
|
Cost |
|
|
Amortization |
|
|
Net |
|
|
|
|
|
|
|
|
|
|
|
|
|
Intangible
assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Management service agreements |
|
10 years |
|
$ |
8,019,199 |
|
|
$ |
(994,321 |
) |
|
$ |
7,024,878 |
|
Non-compete agreements |
|
3 years |
|
|
301,000 |
|
|
|
(156,806 |
) |
|
|
144,194 |
|
Definite lived assets |
|
|
|
|
8,320,199 |
|
|
|
(1,151,127 |
) |
|
|
7,169,072 |
|
Goodwill |
|
|
|
|
2,040,696 |
|
|
|
- |
|
|
|
2,040,696 |
|
Total
intangible assets and goodwill |
|
|
|
$ |
10,360,895 |
|
|
$ |
(1,151,127 |
) |
|
$ |
9,209,768 |
|
Amortization
was $234,833 and $223,593 for the three months ended September 30,
2020 and 2019, respectively, and $701,318 and $577,873 for the nine
months ended September 30, 2020 and 2019, respectively.
The
Company’s estimated future amortization of intangible assets was as
follows:
Years Ending December 31, |
|
|
|
|
|
|
|
2020 (three months) |
|
$ |
234,833 |
|
2021 |
|
|
882,861 |
|
2022 |
|
|
839,000 |
|
2023 |
|
|
794,040 |
|
2024 |
|
|
794,040 |
|
Thereafter |
|
|
3,057,861 |
|
|
|
$ |
6,602,635 |
|
Note 9 – Operating Leases
On
January 1, 2019, the Company adopted ASC 842 using the modified
retrospective method applied to leases that were in place at
January 1, 2019. Results for operating periods beginning after
January 1, 2019 are presented under ASC 842, while prior period
amounts are not adjusted and continue to be reported in accordance
with our historic accounting under ASC 840. The Company’s leases
consist of operating leases that mostly relate to real estate
rental agreements. Most of the value of the Company’s lease
portfolio relates to real estate lease agreements that were entered
into starting March 2017.
Discount Rate Applied to Operating Leases
To
determine the present value of minimum future lease payments for
operating leases at January 1, 2019, the Company was required to
estimate a rate of interest that we would have to pay to borrow on
a collateralized basis over a similar term an amount equal to the
lease payments in a similar economic environment (the “incremental
borrowing rate” or “IBR”).
The
Company determined the appropriate IBR by identifying a reference
rate and making adjustments that take into consideration financing
options and certain lease-specific circumstances. For the reference
rate, the Company used the ten year mortgage interest
rate.
Right of Use Assets
Right
of use assets included in the Company’s condensed consolidated
balance sheet were as follows:
|
|
September 30, 2020 |
|
|
December 31, 2019 |
|
|
|
|
|
|
|
|
Non-current assets |
|
|
|
|
|
|
|
|
Right of use assets, net of
amortization |
|
$ |
3,965,755 |
|
|
$ |
3,719,401 |
|
Total operating lease cost
Individual
components of the total lease cost incurred by the Company were as
follows:
|
|
Nine
Months
Ended
September
30, 2020
|
|
|
Nine
Months
Ended
September
30, 2019
|
|
|
|
|
|
|
|
|
|
|
Operating lease expense |
|
$ |
942,351 |
|
|
$ |
751,175 |
|
Minimum
rental payments under operating leases are recognized on a straight
light basis over the term of the lease.
Maturity of operating leases
The
Company’s amount of future minimum lease payments under operating
leases are as follows:
|
|
Operating
Leases |
|
|
|
|
|
Undiscounted future minimum lease
payments: |
|
|
|
|
2020 (three months) |
|
$ |
296,690 |
|
2021 |
|
|
1,165,714 |
|
2022 |
|
|
1,160,098 |
|
2023 |
|
|
1,069,971 |
|
2024 |
|
|
731,468 |
|
Thereafter |
|
|
664,081 |
|
Total |
|
|
5,088,022 |
|
Amount
representing imputed interest |
|
|
(312,660 |
) |
Total operating
lease liability |
|
|
4,775,362 |
|
Current portion
of operating lease liability |
|
|
(1,051,964 |
) |
Operating lease
liability, non-current |
|
$ |
3,723,398 |
|
Note 10 – Line of Credit
Advantage
Therapy has a $100,000 line of credit with a financial institution
that matures on November 20, 2020. The line accrues interest at a
variable rate which is currently 6.0% per annum. The line is
secured by substantially all of IMAC Holding’s assets. This line of
credit had a balance of $79,961 at September 30, 2020 and December
31, 2019.
Note 11 – Notes Payable
On
March 25, 2020, the Company entered into a note purchase agreement
with Iliad Research & Trading, L.P. (the “Holder”), pursuant to
which the Company agreed to issue and sell to the Holder a secured
promissory note (the “Note”) in an aggregate initial principal
amount of $1,115,000 (the “Initial Principal Amount”), which is
payable on or before the date that is 18 months from the issuance
date (the “Maturity Date”). The Initial Principal Amount includes
an original issue discount of $100,000 and $15,000 that the Company
agreed to pay to the Holder to cover the Holder’s legal fees,
accounting costs, due diligence and other transaction costs. In
exchange for the Note, the Holder paid an aggregate purchase price
of $1,000,000. Interest on the Note accrues at a rate of 10% per
annum and is payable on the Maturity Date or otherwise in
accordance with the Note. The Note may be prepaid by the Company
(with the payment of a premium), may be required by the Holder to
be redeemed by the Company for up to $200,000 per month after the
six-month anniversary of the issuance of the Note (subject to
certain deferral rights), and is subject to customary event of
default (with a default interest rate of up to 22%). The Note
transaction documents also give the Holder a right of first refusal
to future debt issuances and a right to the first $250,000 of every
$1 million of proceeds from future sales of equity by the Company.
The Note is secured by the assets of the Company, other that the
Company’s owned real property, intellectual property and accounts
receivable, pursuant to a security agreement. See “Note 16 –
Subsequent Events” for information regarding a subsequent note
transaction with the Holder in October 2020.
On
April 16, 2020, the Company entered into a loan with Pinnacle Bank
as the lender (“Lender”) in an aggregate principal amount of
$1,691,520 (the “Loan”) pursuant to the Paycheck Protection Program
(the “PPP”) under the Coronavirus Aid, Relief, and Economic
Security (CARES) Act. The Loan is evidenced by a promissory note
(the “PPP Note”) dated April 16, 2020 and matures on April 16,
2022. The PPP Note bears interest at a rate of 1.000% per annum,
with the first six months of payments deferred. On October 20,
2020, IMAC submitted a loan forgiveness application to the U.S.
Small Business Administration (“SBA”). However, principal and
interest on the Loan will be payable monthly following a
determination by the SBA that any amount under the PPP Note not be
forgiven. In order to be entitled to forgiveness, funds from the
Loan may only be used for payroll costs, costs used to continue
group health care benefits, mortgage payments, rent utilities, and
interest on other debt obligations under the terms and conditions
outlined by the PPP. The Company used all of the Loan amount for
such qualifying expenses. The Loan was deemed not to be a
restricted issuance pursuant to the terms of the note purchase
agreement entered into by the Company and Iliad Research &
Trading, L.P. on March 25, 2020.
Set
forth below is a summary of the Company’s outstanding debt as of
September 30, 2020 and December 31, 2019:
|
|
September 30, |
|
|
December 31, |
|
|
|
2020 |
|
|
2019 |
|
|
|
|
|
|
|
|
Note payable to The Edward
S. Bredniak Trust in the amount of up to $2,000,000. An existing
note payable with this entity in the amount of $379,676 has been
combined into the new note payable which carries an interest rate
of 10% per annum. The Note was amended in September 2020 and all
outstanding balances are due January 5, 2022. |
|
$ |
1,750,000 |
|
|
$ |
1,750,000 |
|
|
|
|
|
|
|
|
|
|
Note payable to a financial
institution in the amount of $200,000 dated November 15, 2017. The
note requires 66 consecutive monthly installments of $2,652
including principal and interest at 5%, with a balloon payment of
$60,000 which was paid on June 15, 2018. The note matures on May
15, 2023, and is secured by the personal guarantees of certain
Company executives. |
|
|
79,221 |
|
|
|
99,628 |
|
|
|
|
|
|
|
|
|
|
$1.2 million mortgage loan with a
financial institution. The loan agreement was originally for
6-months and carries an interest rate 3.35%. The loan matured in
2019. As of June 30, 2020, it was due on demand, with interest
being paid monthly. This mortgage was repaid on July 24, 2020. |
|
|
- |
|
|
|
1,232,500 |
|
|
|
|
|
|
|
|
|
|
Note payable to a financial
institution in the amount of $131,400 dated August 1, 2016. The
note requires 120 monthly installments of $1,394 including
principal and interest at 5%. The note matures on July 1, 2026, and
is secured by a letter of credit. |
|
|
84,468 |
|
|
|
93,652 |
|
|
|
|
|
|
|
|
|
|
Note payable to a financial
institution in the amount of $200,000 dated May 4, 2016. The note
requires 60 monthly installments of $3,881 including principal and
interest at 4.25%. The note matures on May 4, 2021, and is secured
by the equipment and personal guarantees of certain Company
executives. |
|
|
30,550 |
|
|
|
63,913 |
|
|
|
|
|
|
|
|
|
|
Note payable to an employee in the
amount of $101,906 dated March 8, 2017. The note requires payment
of five annual installments of $23,350, including principal and
interest at 5%. The note matures on December 31, 2021, and is
unsecured. |
|
|
40,000 |
|
|
|
60,000 |
|
|
|
|
|
|
|
|
|
|
$112,800 payable to a landlord of
Advantage Therapy, LLC pursuant to a lease dated March 1, 2019. The
debt is payable in 60 monthly installments of $2,129, including
principal and interest at 5%. The debt matures on June 1,
2024. |
|
|
87,181 |
|
|
|
102,744 |
|
|
|
|
|
|
|
|
|
|
Note payable to a financial
institution in the amount of $140,000, dated September 25, 2019.
The note requires 36 consecutive monthly installments of $4,225
including principal and interest at 5.39%. The note matures on
September 19, 2022 and is secured by a personal guarantee of the
Vice President of Business Development of the Company. |
|
|
95,866 |
|
|
|
129,182 |
|
|
|
|
|
|
|
|
|
|
Note payable to a financial
institution in the amount of $1,691,520 dated April 16, 2020. Any
amounts under this note which are not determined to be forgivable
by the SBA shall be repaid in 18 equal monthly installments,
commencing after the SBA makes such determination. The note matures
on April 16, 2022. |
|
|
1,691,520 |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
Note payable in the amount of
$1,115,000, dated March 25, 2020. The note is payable on or before
September 25, 2021. The interest on the note accrues at a rate of
10% per annum and is payable on the maturity date or otherwise in
accordance with the note. |
|
|
709,075 |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
Unamortized
debt issuance costs |
|
|
(57,242 |
) |
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
4,510,639 |
|
|
|
3,531,619 |
|
Less: current
portion: |
|
|
(1,839,306 |
) |
|
|
(1,422,554 |
) |
|
|
$ |
2,671,333 |
|
|
$ |
2,109,065 |
|
Principal
maturities of the Company’s notes payable are as
follows:
Years Ending December 31, |
|
Amount |
|
|
|
|
|
2020 (three months) |
|
$ |
780,126 |
|
2021 |
|
|
1,391,632 |
|
2022 |
|
|
2,234,184 |
|
2023 |
|
|
51,657 |
|
2024 |
|
|
27,631 |
|
Thereafter |
|
|
25,409 |
|
Total |
|
$ |
4,510,639 |
|
Note 12 – Stockholders’ Equity
Prior
to the Company’s conversion to a corporation, the Company had 400
member units authorized with 365 units issued and
outstanding.
On
June 1, 2018, the Company converted its 365 outstanding member
units into 6,582,737 shares of common stock with a $0.001 par value
pursuant to the Company’s conversion from a limited liability
company to a corporation.
On
February 12, 2019, the Company completed a reverse split of its
6,582,737 shares of common stock to 4,533,623 shares of common
stock outstanding pursuant to an amendment of the Company’s
certificate of incorporation. The reverse split has been given
retrospective treatment.
During
February 2019, the Company completed an initial public offering of
securities and issued 850,000 shares of its common stock, along
with 1,700,000 warrants to purchase common stock and an option to
purchase 34,000 shares of common stock for gross proceeds of
$4,356,815. The Company also issued 449,217 shares of common stock
for the conversion of its 4% convertible notes and 1,410,183 shares
to satisfy deferred acquisition consideration payable in connection
with its 2018 business acquisitions.
On
April 19, 2019, the Company consummated the Merger Agreement and
issued 1,002,306 shares of its common stock in Merger
Consideration.
On
July 15, 2019, the Company signed a $10 million share purchase
agreement (the “Purchase Agreement”) with Lincoln Park Capital
Fund, LLC (“Lincoln Park”), an Illinois limited liability company.
In consideration for entering into the $10 million agreement, the
Company issued to Lincoln Park 60,006 shares of Company common
stock as a commitment fee. The Purchase Agreement limits our sales
of shares of common stock to Lincoln Park to 1,669,359 shares of
common stock, representing 19.99% of the shares of common stock
outstanding on the date of the Purchase Agreement unless (a)
stockholder approval is obtained to issue more than such amount or
(b) the average price of all applicable sales of our common stock
to Lincoln Park under the Purchase Agreement equals or exceeds the
lower of (i) the closing price of our common stock on the Nasdaq
Capital Market immediately preceding July 15, 2019 or (ii) the
average of the closing price of our common stock on the Nasdaq
Capital Market for the five business days immediately preceding
July 15, 2019. As of September 30, 2020, pursuant to the Purchase
Agreement, the Company sold an aggregate of 1,602,294 shares of
common stock of the Company to Lincoln Park for aggregate proceeds
to the Company of $2,424,053 (excluding the 60,006 shares issued to
Lincoln Park as a commitment fee).
On
June 18, 2020, the Company entered into a securities purchase
agreement (the “Securities Purchase Agreement”) with institutional
accredited investors (the “Purchasers”) pursuant to which the
Company offered for sale to the Purchasers an aggregate of
1,764,000 shares (the “Shares”) of its common stock, in a
registered direct offering (the “Registered Direct Offering”). The
Shares were offered by the Company pursuant to its shelf
registration statement on Form S-3 (File No. 333-237455) originally
filed with the SEC on March 27, 2020 (as amended, the “Registration
Statement”), which was declared effective on April 3, 2020. The
purchase price for one Share in the Registered Direct Offering was
$1.50, and closing of the Registered Direct Offering occurred on
June 22, 2020. The Company received $2.644 million in gross
proceeds from the Registered Direct Offering. The Company used
approximately $0.5 million of the gross proceeds for the repayment
of certain indebtedness, and the remaining proceeds to the Company
will be used to finance the costs of developing and acquiring
additional outpatient medical clinics as part of the Company’s
growth and expansion strategy and for working capital.
2018 Incentive Compensation Plan
The
Company’s board of directors and holders of a majority of
outstanding shares approved and adopted the Company’s 2018
Incentive Compensation Plan (“2018 Plan”) in May 2018, reserving
the issuance of up to 1,000,000 shares of common stock (subject to
certain adjustments) upon exercise of stock options and grants of
other equity awards. The 2018 Plan provides for the grant of
incentive stock options (“ISOs”), nonstatutory stock options, stock
appreciation rights, restricted stock awards, restricted stock unit
awards, performance-based stock awards, other forms of equity
compensation and performance cash awards. ISOs may be granted only
to employees. All other awards may be granted to employees,
including officers, and to the Company’s non-employee directors and
consultants, and affiliates.
Stock Options
As of
September 30, 2020, the Company had issued stock options to
purchase 411,518 shares of its common stock as non-qualified stock
options to various employees of the Company. These options vest
over a period of four years, with 25% vesting after one year and
the remaining 75% vesting in equal monthly installments over the
following 36 months and are exercisable for a period of ten years.
Stock based compensation for stock options is estimated at the
grant date based on the fair value calculated using the
Black-Scholes method. The per-share fair values of these options is
calculated based on the Black-Scholes-Merton pricing model with the
following assumptions: a volatility rate of 32.2%, risk free rate
of 2.4% and the expected term of 10 years.
Restricted Stock Units
On
May 21, 2019, the Company granted an aggregate of 277,500
Restricted Stock Units (“RSUs”) to certain employees, executives
and directors of the Company, the terms of which vest over various
periods between the date of grant and May 21, 2023. On August 13,
2019, 30,000 shares of common stock were issued pursuant to
previously granted RSUs which had vested as of such date. On May
21, 2020, the Company granted 10,000 RSUs to a director of the
Company, which vested immediately. On June 30, 2020, 66,875 shares
of common stock were issued pursuant to previously granted RSUs
which had vested as of such date.
Note 13 – Retirement Plan
The
Company offers a 401(k) plan that covers eligible employees. The
plan provides for voluntary salary deferrals for eligible
employees. Additionally, the Company is required to make matching
contributions of 50% of up to 6 % of total compensation for those
employees making salary deferrals. The Company made contributions
of $31,879 and $20,042 during the three months ended September 30,
2020 and 2019, respectively, and $71,674 and $40,804 during the
nine months ended September 30, 2020 and 2019,
respectively.
Note 14 – Income Taxes
The
provision for income taxes differs from the amount computed by
applying the statutory federal income tax rate to income before
provision for income taxes. The sources and tax effects of the
differences are as follows:
Deferred tax benefit at
the federal statutory rate |
|
|
21 |
% |
Valuation
allowance |
|
|
-21 |
% |
|
|
|
0 |
% |
At
September 30, 2020, the Company had a net operating loss
carryforward of approximately $3.7 million for federal and state
purposes. This loss will be available to offset future taxable
income. If not used, this carryforward will begin to expire in
2029. The deferred tax asset relating to the operating loss
carryforward has been fully reserved at September 30, 2020. The
principal differences between the operating loss for income tax
purposes and reporting purposes are shares issued for services and
share-based compensation and a temporary difference in depreciation
expense.
Note 15 – Commitments and Contingencies
The
Company is subject to extensive regulation, including health
insurance regulations directed at ascertaining the appropriateness
of reimbursement, preventing fraud and abuse and otherwise
regulating reimbursement. To ensure compliance, various insurance
providers often conduct audits and request patient records and
other documents to support claims submitted by the Company for
payment of services rendered to customers. In the event that an
audit results in discrepancies in the records provided, insurance
providers may be entitled to extrapolate the results of the audit
to make overpayment demands based on a wider population of claims
than those examined in the audit.
From
time to time the Company may become subject to threatened and/or
asserted claims arising in the ordinary course of our business.
Management is not aware of any matters, either individually or in
the aggregate, that are reasonably likely to have a material impact
on the Company’s financial condition, results of operations or
liquidity.
Note 16 - Subsequent Events
On
October 5, 2020, the Company launched an at-the-market offering
(the “Offering”) of up to $5,000,000 worth of shares of the
Company’s common stock, par value $0.001 per share, pursuant to an
At-The-Market Issuance Sales Agreement, dated October 5, 2020, by
and between the Company and Ascendiant Capital Markets, LLC. To
date, no shares have been sold and issued pursuant to the
Offering.
On October 21, 2020, David Ellwanger, George Hampton and Gerard
Hayden, directors of the Company, delivered emails notifying the
Company of their intention to resign from the Board of Directors of
the Company (the “Board”) and from all of their Board committee
positions, effective as of the earlier of November 30, 2020 or the
appointment of their respective replacements to the Board.
On
October 31, 2020, the Board of the Company appointed Maurice E.
(Mo) Evans, Michael D. Pruitt and Cary W. Sucoff as directors of
the Company, effective on that date. Effective as of the
appointments of Messrs. Evans, Pruitt and Sucoff, the resignations
of directors David Ellwanger, George Hampton and Gerard Hayden were
also effective.
On October 29, 2020, the Company entered into a note purchase
agreement (the “October Purchase Agreement”) with Iliad Research
& Trading, L.P., pursuant to which the Company agreed to issue
and sell to the Holder a secured promissory note (the “October
Note”) in an initial principal amount of $2,690,000 (the “October
Principal Amount”), which is payable on or before April 29, 2022.
The October Principal Amount includes an original discount of
$175,000 and $15,000 that the Company agreed to pay to the Holder
to cover the Holder’s legal fees, accounting costs, due diligence
and other transaction costs. In exchange for the October Note, the
Holder paid a purchase price of $2,500,000. The October Purchase
Agreement also provides for indemnification of the Holder and its
affiliates in the event that they incur loss or damage related to,
amount other things, breach by the Company of any of its
representations, warranties or covenants under the October Purchase
Agreement. In connection with the October Purchase Agreement and
the October Note, the Company entered into a Security Agreement
with the Holder (the “October Security Agreement”), pursuant to
which the obligations of the Company is secured by all of the
assets of the Company, excluding the Company’s accounts receivable
and intellectual property. Upon an event of default under the
October Note, the October Security Agreement entitles the Holder to
take possession of such collateral; provided that the Holder’s
security interest and remedies with respect to the collateral are
junior in priority to the security interest previously granted by
the Company to the Holder in connection with a separate financing
entered into by them on March 25, 2020, for which the Holder holds
a senior, first-priority security interest in the same
collateral.
On
November 9, 2020, the Company consummated an agreement for the
acquisition of assets of Lockwood Chiropractic, LLC in Webster
Groves, Missouri, effective November 14, 2020. The transaction was
completed as an all-cash asset purchase for $2,000.
ITEM
2. |
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
The
following discussion contains forward-looking statements that
involve risks and uncertainties. Our actual results could differ
materially from those anticipated in these forward-looking
statements as a result of various factors, including those set
forth previously under the caption “Risk Factors.” This
Management’s Discussion and Analysis of Financial Condition and
Results of Operations should be read in conjunction with our
audited consolidated financial statements and related notes
included elsewhere in this report.
The
results of operations for the periods reflected herein are not
necessarily indicative of results that may be expected for future
periods.
References
in this MD&A to “we,” “us,” “our,” “our company,” “our
business” and “IMAC Holdings” are to IMAC Holdings, Inc., a
Delaware corporation and prior to the Corporate Conversion (defined
below), IMAC Holdings, LLC, a Kentucky limited liability company,
and the following entities which are consolidated due to direct
ownership of a controlling voting interest or other rights granted
to us as the sole general partner or managing member of the entity:
IMAC Management Services, LLC (“IMAC Management”), IMAC
Regeneration Management, LLC (“IMAC Texas”) IMAC Regeneration
Management of Nashville, LLC (“IMAC Nashville”) IMAC Management of
Illinois, LLC (“IMAC Illinois”) and IMAC Management of Florida, LLC
(“IMAC Florida”); the following entity which is consolidated with
IMAC Regeneration Management of Nashville, LLC due to control by
contract: IMAC Regeneration Center of Nashville, PC (“IMAC
Nashville PC”); and the following which prior to June 1, 2018 was
held as a minority interest, IMAC Regeneration Center of St. Louis,
LLC (“IMAC St. Louis”).
Overview
We
are a provider of movement and orthopedic therapies and minimally
invasive procedures performed through our regenerative and
rehabilitative medical treatments to improve the physical health of
our patients at our fast-growing chain of IMAC Regeneration Centers
which we own or manage. Our outpatient medical clinics provide
conservative, minimally invasive medical treatments to help
patients with back pain, knee pain, joint pain, ligament and tendon
damage, and other related soft tissue conditions. Our licensed
healthcare professionals evaluate each patient and provide a custom
treatment plan that integrates traditional medical procedures and
innovative regenerative medicine procedures in combination with
physical medicine. We do not use or offer opioid-based
prescriptions as part of our treatment options in order to help our
patients avoid the dangers of opioid abuse and addiction. The
original IMAC Regeneration Center opened in Kentucky in August 2000
and remains the flagship location of our current business, which
was formally organized in March 2015. To date, we have opened
seven, acquired six and manage two outpatient medical clinics in
Kentucky, Missouri, Tennessee, Illinois and Florida, and plan to
further expand the reach of our facilities to other strategic
locations throughout the United States. We have partnered with
several active and former professional athletes, including Ozzie
Smith, David Price, Tony Delk and Mike Ditka, in the branding of
our IMAC Regeneration Centers. Our outpatient medical clinics
emphasize our focus around treating sports and orthopedic injuries
as an alternative to traditional surgeries for repair or joint
replacement.
We
own our medical clinics directly or have entered into long-term
management services agreements to operate and control certain of
our medical clinics by contract. Our preference is to own the
clinics; however, some state laws restrict the corporate practice
of medicine and require a licensed medical practitioner to own the
clinic. Accordingly, our managed clinics are owned exclusively by a
medical professional within a professional service corporation
(formed as a limited liability company or corporation) and are
under common control with us in order to comply with state laws
regulating the ownership of medical practices. We are compensated
under management services agreements through service fees based on
the cost of the services provided, plus a specified markup
percentage, and a discretionary annual bonus determined in the sole
discretion of each professional service corporation.
Corporate Conversion
Prior
to June 1, 2018, we were a Kentucky limited liability company named
IMAC Holdings, LLC. Effective June 1, 2018, we converted into a
Delaware corporation pursuant to a statutory merger (the “Corporate
Conversion”) and changed our name to IMAC Holdings, Inc. All of our
outstanding membership interests were exchanged on a proportional
basis into shares of common stock of IMAC Holdings, Inc.
Following
the Corporate Conversion, IMAC Holdings, Inc. continues to hold all
of the property and assets of IMAC Holdings, LLC and all of the
debts and obligations of IMAC Holdings, LLC continue as the debts
and obligations of IMAC Holdings, Inc. The purpose of the Corporate
Conversion was to reorganize our corporate structure so that the
top tier entity in our corporate structure is a corporation rather
than a limited liability company and so that our existing owners
own shares of our common stock rather than membership interests in
a limited liability company. Except as otherwise noted herein, the
consolidated financial statements included herein are those of IMAC
Holdings, Inc. and its consolidated subsidiaries.
Initial Public Offering
On
February 15, 2019, we completed our initial public offering of
850,000 units, with each unit consisting one share of our common
stock and two warrants each to purchase one share of our common
stock, at a combined initial public offering price of $5.125 per
unit. The exercise price of the warrants is $5.00 per warrant. The
units immediately and automatically separated upon issuance, and
the common stock and warrants trade on The NASDAQ Capital Market
under the ticker symbols “IMAC” and “IMACW,”
respectively.
We
received aggregate gross proceeds of $4,356,250 from our initial
public offering, before deducting underwriting discounts,
commissions and other related expenses. Proceeds from the offering
have been used for financing the costs of leasing, developing and
acquiring new clinic locations, funding research and new product
development activities, and for working capital and general
corporate purposes.
In
addition, upon the closing of our initial public offering, we
issued unit purchase options to Dawson James Securities, Inc., as
representative of the several underwriters, and its affiliates
entitling them to purchase a number of our securities equal to 4%
of the securities sold in the initial public offering. The unit
purchase options have an exercise price equal to 120% of the public
offering price of the units (or $6.15 per share and two warrants)
and may be exercised on a cashless basis. The unit purchase options
are not redeemable by us.
Significant financial metrics
Significant
financial metrics of the Company for the third quarter of 2020 are
set forth in the bullets below.
|
● |
Net
loss of $1.4 million in the third quarter of 2020 compared to a net
loss of $1.5 million in the third quarter of 2019. |
|
● |
Adjusted
EBITDA1 of ($727,000) in the third quarter of 2020
compared to ($939,000) in the third quarter of 2019. |
|
|
|
|
(1) |
Adjusted
EBITDA is a non-GAAP financial measure most closely comparable to
the GAAP measure of net loss. See “Reconciliation of Non-GAAP
Financial Matters” below for a full reconciliation of the GAAP and
non-GAAP measures. |
Impacts of and Response to COVID-19 Outbreak
In
March 2020, federal, state and local government authorities issued
orders and guidance in order to combat the spread of the COVID-19
outbreak. These actions have required or encouraged our patients to
remain at home except for essential activities and may reduce
patient visits to our clinics. For example, the governor of
Kentucky ordered all chiropractic facilities in the state of
Kentucky to close effective March 20, 2020, which caused us to
close our Kentucky chiropractic facilities until such order was
lifted on May 4, 2020. The full extent and duration of such actions
and their impacts over the longer term remain uncertain and
dependent on future developments that cannot be accurately
predicted at this time, such as the severity and transmission rate
of the COVID-19 outbreak and the extent and effectiveness of
containment actions taken.
Our
response plan has multiple facets and continues to evolve as the
pandemic unfolds. As a precautionary measure, we have taken steps
to enhance our operational and financial flexibility to react to
the risks the COVID-19 outbreak presents to our business, including
the following:
|
● |
Launched
telemedicine communications for remote patient
engagement; |
|
● |
Suspended
operations in three Kentucky clinics to comply with government
orders until we were allowed to resume operations on May 4, 2020;
and |
|
● |
Suspended
operations at one clinic in Cook County, Illinois to comply with
government orders until such order is lifted. The lease for this
clinic expired June 30, 2020 and was not renewed. |
The
COVID-19 outbreak appears likely to cause significant economic harm
across the United States, and the negative economic conditions that
may result in reduced patient demand in our industry. We may
experience a material loss of patients, revenue and market share as
a result of the suspension of any operations. Initiatives to
implement telehealth engagement with patients may not be adopted by
existing and new patients. Patient habits may also be altered in
the medium to long term. Negative economic conditions, a decrease
in our revenue and consequent longer term trends harmful to our
business may all exert pressure on our company during the pendency
of emergency restrictions on our operations and beyond. Due to such
conditions, beginning in the month of March 2020 we began to
terminate or furlough employees to reduce costs associated with
non-essential personnel, which resulted in a 27% reduction in
workforce. As of September 30, 2020, 98% of the full and part-time
workforce had returned from furlough.
CARES Act
The
Company is continuing to closely monitor legislative actions at the
federal, state and local levels including the Coronavirus Aid,
Relief, and Economic Security Act (the “CARES Act”) and other
governmental assistance that might be available in response to the
COVID-19 pandemic. As part of the CARES Act, the United States
government initially announced that it would offer $100 billion of
relief to eligible health care providers. On April 7, 2020, Centers
for Medicare and Medicaid Services (“CMS”) officials indicated they
would distribute $30 billion of direct grants to hospitals, ASCs
and other health care providers based on how much they bill
Medicare. Payments received from these grants are not required to
be repaid provided the recipients attest to and comply with certain
terms and conditions, including limitations on balance billing and
not using funds received from the grants to reimburse expenses or
losses that other sources are obligated to reimburse.
The Company received approximately $416,000 of the grant funds
distributed under the CARES Act Provider Relief Fund program in
April 2020. Based on an analysis of the compliance and reporting
requirements and the impact of the COVID-19 pandemic on our
operating results through the end of the third quarter, these funds
were recognized as a reduction in operating expenses under the line
item “Grant funds” in the condensed consolidated statements of
operations for the nine months ended September 30, 2020. The
recognition of amounts received is conditioned upon certification
that payment will be used to prevent, prepare for and respond to
the COVID-19 pandemic and shall reimburse the recipient only for
healthcare related expenses or lost revenues that are attributable
to the COVID-19 pandemic. Amounts are recognized as a reduction to
operating costs and expenses only to the extent the Company is
reasonably assured that underlying conditions are met.
We
cannot predict with certainty when public health and economic
conditions will return to normal. A decline in patient visits
and/or the possible suspension of operations mandated in response
to the COVID-19 outbreak, and the consequent loss of revenue and
cash flow during this period may make it difficult for us to obtain
capital necessary to fund our operations.
Matters that May or Are Currently Affecting Our
Business
We
believe that the growth of our business and our future success
depend on various opportunities, challenges, trends and other
factors, including the following:
|
● |
Our
ability to identify, contract with, install equipment and operate a
large number of outpatient medical clinics and attract new patients
to them; |
|
|
|
|
● |
Our
need to hire additional healthcare professionals in order to
operate the large number of clinics we intend to open; |
|
|
|
|
● |
Our
ability to enhance revenue at each facility on an ongoing basis
through additional patient volume and new services; |
|
|
|
|
● |
Our
ability to obtain additional financing for the projected costs
associated with the acquisition, management and development of new
clinics, and the personnel involved, if and when
needed; |
|
|
|
|
● |
Our
ability to attract competent, skilled medical and sales personnel
for our operations at acceptable prices to manage our overhead;
and |
|
|
|
|
● |
Our
ability to control our operating expenses as we expand our
organization into neighboring states. |
Critical
Accounting Policies and Estimates
The
preparation of our condensed consolidated financial statements in
conformity with GAAP requires management to make estimates and
assumptions that affect the reported amounts of assets,
liabilities, revenues and expenses at the date and for the periods
that the condensed consolidated financial statements are prepared.
On an ongoing basis, we evaluate our estimates, including those
related to insurance adjustments and provisions for doubtful
accounts. We base our estimates on historical experience and on
various other assumptions that are believed to be reasonable under
the circumstances. Actual results could materially differ from
those estimates.
We
believe that, of the significant accounting policies discussed in
our Notes to the Condensed Consolidated Financial Statements
(Unaudited), the following accounting policies require our most
difficult, subjective or complex judgments in the preparation of
our financial statements.
Intangible Assets
The
Company capitalizes the fair value of intangible assets acquired in
business combinations. Intangible assets are amortized on a
straight-line basis over their estimated economic useful lives,
generally the contract term. The Company performs valuations of
assets acquired and liabilities assumed on each acquisition
accounted for as a business combination and allocates the purchase
price of each acquired business to its respective net tangible and
intangible assets. Acquired intangible assets include trade names,
non-compete agreements, customer relationships and contractual
agreements.
Goodwill
Our
goodwill represents the excess of the purchase price over the fair
value of the net identifiable assets acquired in business
combinations. The goodwill generated from the business combinations
is primarily related to the value placed on the employee workforce
and expected synergies. Judgment is involved in determining if an
indicator or change in circumstances relating to impairment has
occurred. Such changes may include, among others, a significant
decline in expected future cash flows, a significant adverse change
in the business climate, and unforeseen competition. There was no
goodwill impairment for the years presented.
The
Company tests goodwill for impairment on an annual basis, or when
events or circumstances indicate the fair value of a reporting unit
is below its carrying value. No impairments of goodwill were
recorded for the nine months ended September 30, 2020.
Revenue Recognition
Our
patient service revenue is derived from minimally invasive
procedures performed at our outpatient medical clinics and patient
visits to physicians. The fees for such services are billed either
to the patient or a third-party payer, including Medicare. Starting
in January 2020, we implemented wellness maintenance programs on a
subscription basis. There are three membership plans offered with
different levels of service for each plan. We recognize patient
service revenue, net of contractual adjustments, which we estimate
based on the historical trend of our cash collections and
contractual write-offs in the period in which services are
performed. Contractual adjustments represent discounts offered for
patients serviced within a negotiated third-party payer
contract.
Other
management service fees are derived from management services where
we provide billings and collections support to the clinics and
where management services are provided based on state specific
regulations known as the corporate practice of medicine (“CPM”).
Under the CPM, a business corporation is precluded from practicing
medicine or employing a physician to provide professional medical
services. In these circumstances, we provide all administrative
support to the physician-owned professional corporation (“PC”)
through a limited liability company. The PC is consolidated due to
control by contract (an “SMA” or Service Management Agreement). The
fees we derive from these management arrangements are based on a
percentage mark-up on the costs of the LLC. We recognize other
management service revenue in the period in which services are
rendered. These revenues are eliminated in
consolidation.
Patient Deposits
Patient
deposits are derived from patient payments in advance of services
delivered. Our service lines include traditional and regenerative
medicine. Regenerative medicine procedures are not paid by
insurance carriers; therefore, we typically require up-front
payment from the patient for regenerative services and any co-pays
and deductibles as required by the patient specific insurance
carrier. For some patients, credit is provided through an outside
vendor. In this case, we are paid from the outsourced credit vendor
and the risk is transferred to the credit vendor for collection
from the patient. These funds are accounted for as patient deposits
until the procedures are performed at which point the patient
deposit is recognized as patient service revenue.
Accounts Receivable
Accounts
receivable primarily consists of amounts due from third-party
payers (non-governmental), governmental payers and private pay
patients and is recorded net of allowances for doubtful accounts
and contractual discounts. Our ability to collect outstanding
receivables is critical to our results of operations and cash
flows. Accordingly, accounts receivable reported in our
consolidated financial statements are recorded at the net amount
expected to be received. Our primary collection risks are (i) the
risk of overestimation of net revenues at the time of billing that
may result in our receiving less than the recorded receivable, (ii)
the risk of non-payment as a result of commercial insurance
companies’ denial of claims, (iii) the risk that patients will fail
to remit insurance payments to us when the commercial insurance
company pays out-of-network claims directly to the patient, (iv)
resource and capacity constraints that may prevent us from handling
the volume of billing and collection issues in a timely manner, (v)
the risk that patients do not pay us for their self-pay balances
(including co-pays, deductibles and any portion of the claim not
covered by insurance), and (vi) the risk of non-payment from
uninsured patients.
Our
accounts receivables from third-party payers are recorded net of
estimated contractual adjustments and allowances from third-party
payers, which are estimated based on the historical trend of our
facilities’ cash collections and contractual write-offs, accounts
receivable aging, established fee schedules, relationships with
payers and procedure statistics. While changes in estimated
reimbursement from third-party payers remain a possibility, we
expect that any such changes would be minimal and, therefore, would
not have a material effect on our financial condition or results of
operations. Our collection policies and procedures are based on the
type of payor, size of claim and estimated collection percentage
for each patient account. The operating systems used to manage our
patient accounts provide for an aging schedule in 30-day
increments, by payer, physician and patient. We analyze accounts
receivable at each of the facilities to ensure the proper
collection and aged category. The operating systems generate
reports that assist in the collection efforts by prioritizing
patient accounts. Collection efforts include direct contact with
insurance carriers or patients and written
correspondence.
Income Taxes
IMAC
Holdings was taxed as a partnership through May 31, 2018. As a
result, income tax liabilities were passed through to the
individual members. Accordingly, no provision for income taxes were
reflected in the consolidated financial statements for periods
prior to May 31, 2018, at which time the Company converted from a
limited liability company to a Delaware corporation. Subsequent to
the Company converting to a Delaware corporation, IMAC Nashville,
IMAC Texas, IMAC St. Louis continued as single-member limited
liability companies that are disregarded entities for tax purposes
and do not file separate returns. Their activity is included as
part of IMAC Holdings Inc. Advantage Therapy, IMAC Illinois and
IMAC Florida are also disregarded entities for tax purposes.
BioFirma was a limited liability company taxed as a partnership.
Effective October 1, 2019, BioFirma became wholly owned by IMAC
Holdings and is a disregarded entity for tax purposes. BioFirma
discontinued operations as of December 31, 2019. IMAC Management is
a C-corporation and is included in the consolidated return of IMAC
Holdings as a subsidiary.
Any
future benefit arising from losses have been offset by a valuation
allowance. Accordingly, no provision for income taxes is reflected
in the consolidated financial statements. The Company records a
liability for uncertain tax positions when it is probable that a
loss has been incurred and the amount can be reasonably estimated.
Interest and penalties related to income tax matters, if any, would
be recognized as a component of income tax expense. At September
30, 2020 and December 31, 2019, the Company had no liabilities for
uncertain tax positions. The Company continually evaluates expiring
statutes of limitations, audits, proposed settlements, changes in
tax law and new authoritative rulings. Currently, the tax years
subsequent to 2017 are open and subject to examination by the
taxing authorities.
Results
of Operations for the Three and Nine Months Ended September 30,
2020 Compared to the Three and Nine Months Ended September 30,
2019
We
own our medical clinics directly or have entered into long-term
management services agreements to operate and control these medical
clinics by contract. Our preference is to own the clinics; however,
some state laws restrict the corporate practice of medicine and
require a licensed medical practitioner to own the clinic.
Accordingly, our managed clinics are owned exclusively by a medical
professional within a professional service corporation (formed as a
limited liability company or corporation) under common control with
us or eligible members of our company in order to comply with state
laws regulating the ownership of medical practices. We are
compensated under management services agreements through service
fees based on the cost of the services provided, plus a specified
markup percentage, and a discretionary annual bonus determined in
the sole discretion of each professional service
corporation.
Revenues
Our
revenue mix is diversified between medical treatments and
physiological treatments. Our medical treatments are further
segmented into traditional medical and regenerative medicine
practices. We are an in-network provider for traditional physical
medical treatments, such as physical therapy, chiropractic services
and medical evaluations, with most private health insurance
carriers. Regenerative medical treatments are typically not covered
by insurance, but paid by the patient. For more information on our
revenue recognition policies, see “Critical Accounting Policies and
Estimates - Revenue Recognition.”
Revenues
for the three months ended September 30, 2020 and 2019 were as
follows:
|
|
Three
Months Ended
September
30,
|
|
|
|
2020 |
|
|
2019 |
|
|
|
(in
thousands, unaudited) |
|
Revenues: |
|
|
|
|
|
|
|
|
Outpatient facility
services |
|
$ |
3,356 |
|
|
$ |
4,356 |
|
Memberships |
|
|
122 |
|
|
|
- |
|
Total
revenues |
|
$ |
3,478 |
|
|
$ |
4,356 |
|
Revenues
for the nine months ended September 30, 2020 and 2019 were as
follows:
|
|
Nine
Months Ended
September
30,
|
|
|
|
2020 |
|
|
2019 |
|
|
|
(in
thousands, unaudited) |
|
Revenues: |
|
|
|
|
|
|
|
|
Outpatient facility
services |
|
$ |
9,057 |
|
|
$ |
10,882 |
|
Memberships |
|
|
302 |
|
|
|
- |
|
Total
revenues |
|
$ |
9,359 |
|
|
$ |
10,882 |
|
See
the table below for more information regarding our revenue
breakdown by service type.
|
|
Nine
Months Ended
September
30,
|
|
|
|
2020 |
|
|
2019 |
|
|
|
|
|
Revenues: |
|
|
|
|
|
|
|
|
Medical treatments |
|
|
66 |
% |
|
|
59 |
% |
Physical therapy |
|
|
31 |
% |
|
|
36 |
% |
Chiropractic
care |
|
|
3 |
% |
|
|
5 |
% |
|
|
|
100 |
% |
|
|
100 |
% |
Patient
service revenues decreased 20% to $3.5 million for the three months
ended September 30, 2020, compared to $4.4 million for the three
months ended September 30, 2019. During the three months ended
September 30, 2020, chiropractic visits and physical therapy visits
recovered from the COVID-19 outbreak; however, medical treatment
visits did not recover, resulting in the 20% decrease in patient
service revenues during such period. Patient service revenues
decreased 14% to $9.4 million for the nine months ended September
30, 2020, compared to $10.9 million for the nine months ended
September 30, 2019. This decrease is attributable to the IMAC
Chicago and IMAC Florida acquisitions that occurred in April 2019
and January 2020, respectively, along with the impacts of the
COVID-19 outbreak.
Visits to our clinics are an indication of business activity.
Visits increased 10% for the three months ended September 30, 2020
compared to the three months ended September 30, 2019. Visits
increased from 35,749 visits in the three months ended September
30, 2019 to 39,345 visits in the three months ended September 30,
2020. However, during the quarter ended September 30, 2020, some
visits were determined to not be billable and therefore are not
included in the following visits total. Billable visits increased
8% to 37,992 visits for the three months ended September 30, 2020,
compared to 35,061 visits for the three months ended September 30,
2019. The charge per visit decreased by 26% from $124.24 per visit
for the three months ended September 30, 2019 to $91.55 per visit
for the three months ended September 30, 2020. This decrease in
charges per visit is due to the change in procedure mix.
Starting
in January 2020, we implemented wellness maintenance programs on a
subscription basis. As of September 30, 2020, there were 762 active
memberships. All active memberships at our Kentucky locations were
paused in April 2020 due to an order of the governor of Kentucky to
close all elective care facilities in Kentucky. Therefore, similar
to visits, there was a significant decrease in memberships in April
2020. Memberships increased by 20% to 762 as of September 2020, as
compared to 637 active memberships as of June 2020.
Operating Expenses
Operating
expenses consist of patient expenses, salaries and benefits, share
based compensation, advertising and marketing, general and
administrative expenses and depreciation expenses.
Patient
expenses consist of medical supplies for services
rendered.
Patient Expenses |
|
2020 |
|
|
2019 |
|
|
Change from Prior Year |
|
|
Percent Change from Prior Year |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30 |
|
$ |
429,000 |
|
|
$ |
951,000 |
|
|
$ |
(522,000 |
) |
|
|
(55 |
)% |
Nine Months Ended September 30 |
|
|
1,214,000 |
|
|
|
2,314,000 |
|
|
|
(1,100,00 |
) |
|
|
(48 |
)% |
Cost of revenues (patient expense) decreased for the three and nine
months ended September 30, 2020 as compared to September 30, 2019.
The decrease in the three months ended September 30, 2020 was
driven by improvements in supply management and changes in the
patient mix of services provided, as knee-oriented care dropped 44%
as compared to the three months ended September 30, 2019 and is a
high cost service compared to other services provided.
Salaries
and benefits consist of payroll, benefits and related party
contracts.
Salaries and Benefits |
|
2020 |
|
|
2019 |
|
|
Change from Prior Year |
|
|
Percent Change from Prior Year |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30 |
|
$ |
2,622,000 |
|
|
$ |
2,878,000 |
|
|
$ |
(256,000 |
) |
|
|
(9 |
)% |
Nine Months Ended September 30 |
|
|
7,883,000 |
|
|
|
7,536,000 |
|
|
|
347,000 |
|
|
|
5 |
% |
Salaries and benefits expenses for the three months ended September
30, 2020, as compared to the three months ended September 30, 2019,
decreased due to the reduction in workforce as a result of the
COVID-19 outbreak. For the nine months ended September 30, 2020, as
compared to the nine months ended September 30, 2019, salaries and
benefits expenses increased due to our April 2019 acquisition of
clinics in the Chicago, Illinois areas.
Share-based
compensation consists of the value of equity incentive grants
issued to employees, directors and board members which have vested
during the period.
Share-based Compensation |
|
2020 |
|
|
2019 |
|
|
Change from Prior Year |
|
|
Percent Change from Prior Year |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30 |
|
$ |
108,000 |
|
|
$ |
113,000 |
|
|
$ |
(5,000 |
) |
|
|
(4 |
)% |
Nine Months Ended September 30 |
|
|
311,000 |
|
|
|
288,000 |
|
|
|
23,000 |
|
|
|
8 |
% |
Share-based
compensation was relatively consistent for the three months ended
September 30, 2020, as compared to the three months ended September
30, 2019. Share-based compensation increased $23,000 for the nine
months ended September 30, 2020 compared to the nine months ended
September 30, 2019 since share-based compensation began to be
awarded in May 2019.
Advertising
and marketing consist of marketing, business promotion and brand
recognition.
Advertising and Marketing |
|
2020 |
|
|
2019 |
|
|
Change from Prior Year |
|
|
Percent Change from Prior Year |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30 |
|
$ |
235,000 |
|
|
$ |
318,000 |
|
|
$ |
(83,000 |
) |
|
|
(26 |
)% |
Nine Months Ended September 30 |
|
|
651,000 |
|
|
|
1,014,000 |
|
|
|
(363,000 |
) |
|
|
(36 |
)% |
Advertising
and marketing expenses decreased $83,000 for the three months ended
September 30, 2020, as compared to the three months ended September
30, 2019. The decrease was attributable to a shift to more
cost-effective marketing strategies.
Advertising
and marketing expenses decreased $363,000 for the nine months ended
September 30, 2020, as compared to the nine months ended September
30, 2019. The decrease was due to
reduced marketing spending as a result of the impact of the
COVID-19 outbreak and a shift to more cost-effective marketing
strategies.
General
and administrative expense (“G&A”) consist of all other costs
than advertising and marketing, salaries and benefits, patient
expenses and depreciation.
General and Administrative |
|
2020 |
|
|
2019 |
|
|
Change from Prior Year |
|
|
Percent Change from Prior Year |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30 |
|
$ |
962,000 |
|
|
$ |
1,311,000 |
|
|
$ |
(349,000 |
) |
|
|
(27 |
)% |
Nine Months Ended September 30 |
|
|
3,406,000 |
|
|
|
3,719,000 |
|
|
|
(313,000 |
) |
|
|
(8 |
)% |
G&A
decreased in the three months ended September 30, 2020 as compared
to the three months ended September 30, 2019. Due to the COVID-19
outbreak, travel expenses have decreased in 2020 compared to 2019.
For example, travel expenses for the three months ended September
30, 2020 were $27,000 compared to $75,000 for the three months
ended September 30, 2019. Travel expenses for the nine months ended
September 30, 2020 were $100,000 compared to $207,000 for the nine
months ended September 30, 2019. Also, in 2020 centralized
purchasing was implemented in order to streamline supply ordering
for all markets which has resulted in a reduction in other expenses
and accelerated expense synergies.
Depreciation
is related to our property and equipment purchases to use in the
course of our business activities. Amortization is related to our
business acquisitions.
Depreciation and Amortization |
|
2020 |
|
|
2019 |
|
|
Change from Prior Year |
|
|
Percent Change from Prior Year |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, |
|
$ |
430,000 |
|
|
$ |
422,000 |
|
|
$ |
8,000 |
|
|
|
2 |
% |
Nine Months Ended September
30, |
|
|
1,334,000 |
|
|
|
1,105,000 |
|
|
|
229,000 |
|
|
|
21 |
% |
Depreciation
and amortization increased for the three and nine months ended
September 30, 2020 compared to the three and nine months ended
September 30, 2019. For the three months ended September 30, 2020,
the increase is attributable to the January 2020 acquisition of
CHSF. For the nine months ended September 30, 2020, the increase in
depreciation and amortization expense resulted from the April 2019
acquisition of the clinics managed by IMAC of Illinois and the
January 2020 acquisition of CHSF.
Net
loss attributable to the non-controlling interest. Net loss
attributable to the non-controlling interest is the amount of net
income (loss) for the period allocated to non-controlling partners
of IMAC Holdings, Inc. that is included in the entity’s
consolidated financial statements.
Analysis of Cash Flows
The
primary source of our operating cash flow is the collection of
accounts receivable from patients, private insurance companies,
government programs, self-insured employers and other
payers.
During
the nine months ended September 30, 2020, net cash used in
operations increased to $4.0 million compared to $2.8 million for
the nine months ended September 30, 2019. This difference was
primarily attributable to the change in accounts payable and
accrued expenses during the nine months ended September 30,
2020.
Net
cash used in investing activities during the nine months ended
September 30, 2020 and 2019 was $496,000 and $688,000,
respectively. This was primarily driven by the acquisition of CHSF
in January 2020 and the acquisition of the proprietary license
fee.
Net
cash provided by financing activities during the nine months ended
September 30, 2020 was $5.8 million, including proceeds from notes
payable, net of related fees, which totaled $2.9 million, and
proceeds from the issuance of common stock of $3.8 million. Net
cash provided by financing activities during the nine months ended
September 30, 2019 was $4.0 million, including proceeds from our
initial public offering, net of related fees.
Reconciliation
of Non-GAAP Financial Measures
This
report contains certain non-GAAP financial measures, including
non-GAAP net income and adjusted EBITDA, which are used by
management in analyzing our financial results and ongoing
operational performance.
In
order to better assess the Company’s financial results, management
believes that net income before interest, income taxes, stock based
compensation, and depreciation and amortization (“adjusted EBITDA”)
is a useful measure for evaluating the operating performance of the
Company because adjusted EBITDA reflects net income adjusted for
certain non-cash and/or non-operating items. We also believe that
adjusted EBITDA is useful to many investors to assess the Company’s
ongoing results from current operations. Adjusted EBITDA is a
non-GAAP financial measure and should not be considered a measure
of financial performance under GAAP. Because adjusted EBITDA is not
a measurement determined in accordance with GAAP, such non-GAAP
financial measures are susceptible to varying calculations.
Accordingly, adjusted EBITDA, as presented, may not be comparable
to other similarly titled measures of other companies.
This
non-GAAP financial measure should not be considered as a substitute
for, or superior to, measures of financial performance which are
prepared in accordance with US GAAP and may be different from
non-GAAP financial measures used by other companies and have
limitations as analytical tools.
A
reconciliation of adjusted EBITDA to the most directly comparable
GAAP measure is set forth below.
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
|
|
September 30,
2020 |
|
|
September 30,
2019 |
|
|
September 30,
2020 |
|
|
September 30,
2019 |
|
GAAP loss attributable to
IMAC Holdings, Inc. |
|
$ |
(1,429,658 |
) |
|
$ |
(1,548,962 |
) |
|
$ |
(5,193,891 |
) |
|
$ |
(5,048,917 |
) |
Interest income |
|
|
(6,028 |
) |
|
|
(120 |
) |
|
|
(6,067 |
) |
|
|
(125 |
) |
Interest expense |
|
|
141,416 |
|
|
|
74,456 |
|
|
|
352,541 |
|
|
|
190,337 |
|
Beneficial conversion interest
expense |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
639,159 |
|
Share-based compensation expense |
|
|
108,377 |
|
|
|
112,959 |
|
|
|
311,406 |
|
|
|
288,298 |
|
Depreciation and amortization |
|
|
430,121 |
|
|
|
422,405 |
|
|
|
1,334,267 |
|
|
|
1,104,961 |
|
(Gain) loss on extinguishment of
debt |
|
|
(9,783 |
) |
|
|
- |
|
|
|
99,761 |
|
|
|
- |
|
Loss on sale of
assets |
|
|
39,047 |
|
|
|
- |
|
|
|
60,272 |
|
|
|
- |
|
Adjusted
EBITDA |
|
$ |
(726,508 |
) |
|
$ |
(939,262 |
) |
|
$ |
(3,041,711 |
) |
|
$ |
(2,826,287 |
) |
Liquidity
and Capital Resources
As of
September 30, 2020, we had $1.7 million in cash and deficiency in
working capital of $2.2 million. As of December 31, 2019, we had
cash of $374,000 and deficiency in working capital of $3.5 million.
The decrease in working capital deficiency was primarily due to the
increase in current assets.
We
believe our cash at September 30, 2020, including proceeds from the
Iliad Note, PPP Note and the Registered Direct Offering, will be
sufficient to meet our cash, operational and liquidity requirements
for at least 12 months.
As of September 30, 2020, we had approximately $6.0 million in
current liabilities. The Note represents $652,000 and the PPP Note
represents $1.0 million of our current liabilities. Of our
remaining current liabilities as of September 30, 2020,
approximately $1.0 million in current liabilities outstanding to
our vendors and under operating lines of credit, which we have
historically paid down in the normal course of our business.
Lastly, accrued wages, taxes, 401k contributions and paid time off
represent approximately $788,000 of the remaining current
liabilities.
As of
September 30, 2020, we had an accumulated deficit of $15.2 million.
Prior to our initial public offering, we funded our operations
primarily through the sale and issuance of convertible notes,
bridge loans, and the use of funds from operations. Accordingly, we
anticipate that we will need to raise additional capital to fund
future operations. However, we may be unable to raise additional
funds or enter into such arrangements when needed or favorable
terms, or at all, which would have a negative impact on our
financial condition and could force us to delay, limit, reduce or
terminate our development or acquisition activity. Failure to
receive additional funding could also cause us to cease operations,
in part or in full. Furthermore, even if we believe we have
sufficient funds for our current of future operating plans, we may
seek additional capital due to favorable market conditions or
strategic considerations. Our independent registered public
accounting firm has indicated that our financial condition raises
substantial doubt as to our ability to continue as a going
concern.
On
July 15, 2019, we signed the $10 million Purchase Agreement with
Lincoln Park. We also entered into a registration rights agreement
(the “Registration Agreement”) with Lincoln Park in which we agreed
to file a registration statement related to the transaction with
the SEC covering the shares of our common stock that may be issued
to Lincoln Park under the Purchase Agreement.
Pursuant
to the Purchase Agreement, we have the right, in our sole
discretion, over a 36-month period to sell shares of common stock
to Lincoln Park, subject to certain limitations contained in the
Purchase Agreement, in amounts up to 50,000 shares per regular
sale, which may be increased to up to 100,000 shares depending on
certain conditions as set forth in the Purchase Agreement (and
subject to adjustment for any reorganization, recapitalization,
non-cash dividend, stock split, reverse stock split or other
similar transaction as provided in the Purchase Agreement), up to
the aggregate commitment of $10 million (“Regular Purchases”). In
addition to Regular Purchases and subject to the terms and
conditions of the Purchase Agreement, we in our sole discretion may
direct Lincoln Park on each purchase date to make “accelerated
purchases” and “additional accelerated purchases” on the following
business day as provided in the Purchase Agreement. However, in no
event may we sell any number of shares that would result in Lincoln
Park beneficially owning more than 4.99% of our outstanding common
stock.
There
are no upper limits on the per share price Lincoln Park may pay to
purchase our common stock; however, we may not sell more than
$1,000,000 in shares of common stock to Lincoln Park per Regular
Purchase. The purchase price of the shares related to the $10
million of future funding will be based on the prevailing market
prices of our shares without any fixed discount. Furthermore, we
control the timing and amount of any future sales, if any, of
shares of common stock to Lincoln Park.
The
Purchase Agreement limits our sales of shares of common stock to
Lincoln Park to 1,669,359 shares of common stock, representing
19.99% of the shares of common stock outstanding on the date of the
Purchase Agreement unless (a) stockholder approval is obtained to
issue more than such amount or (b) the average price of all
applicable sales of our common stock to Lincoln Park under the
Purchase Agreement equals or exceeds the lower of (i) the closing
price of our common stock on the Nasdaq Capital Market immediately
preceding July 15, 2019 or (ii) the average of the closing price of
our common stock on the Nasdaq Capital Market for the five Business
Days immediately preceding July 15, 2019.
The
Purchase Agreement contains customary representations, warranties,
covenants, closing conditions and indemnification and termination
provisions by, among and for the benefit of the parties.
Additionally, Lincoln Park has agreed not to cause or engage in any
manner whatsoever, any direct or indirect short selling or hedging
of our common stock. The Purchase Agreement does not limit our
ability to raise capital from other sources at our sole discretion,
provided that we have agreed not to enter into any “variable rate”
transactions with any third party for the 36-month period following
the execution of the Purchase Agreement.
In
consideration for entering into the $10 million agreement, we
issued to Lincoln Park 60,006 shares of our common stock as a
commitment fee and will issue up to an additional 60,006 shares pro
rata, when and if Lincoln Park purchases, at the Company’s sole
discretion, the $10 million aggregate commitment. The Purchase
Agreement may be terminated by us at any time at our discretion
without any cost to us. The proceeds received by us under the
Purchase Agreement may be used for any corporate purpose at our
sole discretion.
As of
September 30, 2020, pursuant to the Purchase Agreement, the Company
sold an aggregate of 1,602,294 shares of common stock of the
Company to Lincoln Park for aggregate proceeds to the Company of
$2,424,053 (excluding the 60,006 shares previously issued to
Lincoln Park as a commitment fee). No shares were sold during the
three months ended September 30, 2020.
On
March 25, 2020, the Company entered into a note purchase agreement
with Iliad Research & Trading, L.P., pursuant to which the
Company agreed to issue and sell to the Holder a secured promissory
note in an aggregate initial principal amount of $1,115,000, which
is payable on or before the date that is 18 months from the
issuance date. The Initial Principal Amount includes an original
issue discount of $100,000 and $15,000 that the Company agreed to
pay to the Holder to cover the Holder’s legal fees, accounting
costs, due diligence and other transaction costs. In exchange for
the Note, the Holder paid an aggregate purchase price of
$1,000,000. Interest on the Note accrues at a rate of 10% per annum
and is payable on the Maturity Date or otherwise in accordance with
the Note. The Note may be prepaid by the Company (with the payment
of a premium), may be required by the Holder to be redeemed by the
Company for up to $200,000 per month after the six-month
anniversary of the issuance of the Note (subject to certain
deferral rights), and is subject to customary events of default
(with a default interest rate of up to 22%). The Note transaction
documents also give the Holder a right of first refusal to future
debt issuances and a right to the first $250,000 of every $1
million of proceeds from future sales of equity by the Company. The
Note is secured by the assets of the Company, other than the
Company’s owned real property, intellectual property and accounts
receivable, pursuant to a security agreement. The Company will use
the proceeds of the Note for certain growth initiatives including
an IND filing with the FDA.
On
June 18, 2020, the Company entered into the Securities Purchase
Agreement with institutional accredited investors pursuant to which
the Company offered for sale to the Purchasers an aggregate of
1,764,000 shares of its common stock in a registered direct
offering. The Shares were offered by the Company pursuant to its
shelf registration statement on Form S-3 (File No. 333-237455)
originally filed with the SEC on March 27, 2020 and declared
effective on April 3, 2020. The purchase price for one Share in the
Registered Direct Offering was $1.50, and closing of the Registered
Direct Offering occurred on June 22, 2020. The Company received
$2.644 million in gross proceeds from the Registered Direct
Offering. The Company used approximately $0.5 million of the gross
proceeds for the repayment of certain indebtedness, and the
remaining proceeds to the Company will be used to finance the costs
of developing and acquiring additional outpatient medical clinics
as part of the Company’s growth and expansion strategy and for
working capital.
On
October 29, 2020, the Company entered into the October Purchase
Agreement with Iliad Research & Trading, L.P., pursuant to
which the Company agreed to issue and sell to the Holder a secured
promissory note in an initial principal amount of $2,690,000, which
is payable on or before April 29, 2022. The October Principal
Amount includes an original discount of $175,000 and $15,000 that
the Company agreed to pay to the Holder to cover the Holder’s legal
fees, accounting costs, due diligence and other transaction costs.
In exchange for the October Note, the Holder paid a purchase price
of $2,500,000. The October Purchase Agreement also provides for
indemnification of the Holder and its affiliates in the event that
they incur loss or damage related to, amount other things, breach
by the Company of any of its representations, warranties or
covenants under the October Purchase Agreement. In connection with
the October Purchase Agreement and the October Note, the Company
entered into a Security Agreement with the Holder, pursuant to
which the obligations of the Company is secured by all of the
assets of the Company, excluding the Company’s accounts receivable
and intellectual property. Upon an event of default under the
October Note, the October Security Agreement entitles the Holder to
take possession of such collateral; provided that the Holder’s
security interest and remedies with respect to the collateral are
junior in priority to the security interest previously granted by
the Company to the Holder in connection with a separate financing
entered into by them on March 25, 2020, for which the Holder holds
a senior, first-priority security interest in the same
collateral.
Contractual
Obligations
The
following table summarizes our contractual obligations by period as
of September 30, 2020:
|
|
Payments Due by Period |
|
|
|
Total |
|
|
Less Than 1 Year |
|
|
1-3 Years |
|
|
4-5 Years |
|
|
More Than 5 Years |
|
Short-term
obligations |
|
$ |
1,114,456 |
|
|
$ |
1,114,456 |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
Long-term obligations, including
interest |
|
|
4,022,495 |
|
|
|
- |
|
|
|
3,966,518 |
|
|
|
46,221 |
|
|
|
9,756 |
|
Finance lease obligations, including
interest |
|
|
80,871 |
|
|
|
5,451 |
|
|
|
65,417 |
|
|
|
10,003 |
|
|
|
- |
|
Operating lease
obligations |
|
|
5,088,021 |
|
|
|
296,690 |
|
|
|
3,395,782 |
|
|
|
1,107,671 |
|
|
|
287,878 |
|
|
|
$ |
10,305,843 |
|
|
$ |
1,416,597 |
|
|
$ |
7,427,717 |
|
|
$ |
1,163,895 |
|
|
$ |
297,634 |
|
Off-Balance Sheet Arrangements
As of
September 30, 2020, the Company did not have any off-balance sheet
arrangements.
Impact of Inflation
We
believe that inflation has not had a material impact on our results
of operations for the three and nine months ended September 30,
2020 and 2019. We cannot assure you that future inflation will not
have an adverse impact on our operating results and financial
condition.
ITEM
3. |
QUANTITATIVE AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK |
Not
applicable.
ITEM
4. |
CONTROLS AND PROCEDURES |
Disclosure
Controls and Procedures
We
maintain disclosure controls and procedures that are designed to
ensure that information required to be disclosed in our Securities
Exchange Act of 1934 (the “Exchange Act”) reports is recorded,
processed, summarized, and reported within the time periods
specified in the SEC’s rules and forms and that such information is
accumulated and communicated to our management, including our chief
executive officer and interim chief financial officer, as
appropriate, to allow for timely decisions regarding required
disclosure. In designing and evaluating the disclosure controls and
procedures, we recognize that any controls and procedures, no
matter how well designed and operated, can provide only reasonable
assurance of achieving the desired control objectives, and
management is required to apply its judgment in evaluating the
cost-benefit relationship of possible controls and
procedures.
As
further discussed below, we carried out an evaluation, under the
supervision and with the participation of our management, including
our chief executive officer and interim chief financial officer, of
the effectiveness of the design and operation of our disclosure
controls and procedures, as defined in Rules 13a-15(e) and
15d-15(e) of the Exchange Act. Based on that evaluation, our chief
executive officer and interim chief financial officer concluded
that, because of certain material weaknesses in our internal
control over financial reporting our disclosure controls and
procedures as defined in Rule 13a-15(e) and 15d-15(e) under the
Exchange Act were not effective as of September 30, 2020. The
material weaknesses relate to the absence of in-house accounting
personnel with the ability to properly account for complex
transactions and a lack of separation of duties between accounting
and other functions.
We
hired a consulting firm to advise on technical issues related to
U.S. GAAP as related to the maintenance of our accounting books and
records and the preparation of our consolidated financial
statements. Although we are aware of the risks associated with not
having dedicated accounting personnel, we are also at an early
stage in the development of our business. We anticipate expanding
our accounting functions with dedicated staff and improving our
internal accounting procedures and separation of duties when we can
absorb the costs of such expansion and improvement with additional
capital resources. In the meantime, management will continue to
observe and assess our internal accounting function and make
necessary improvements whenever they may be required. If our
remedial measures are insufficient to address the material
weakness, or if additional material weaknesses or significant
deficiencies in our internal control over financial reporting are
discovered or occur in the future, our consolidated financial
statements may contain material misstatements, and we could be
required to restate our financial results. In addition, if we are
unable to successfully remediate this material weakness and if we
are unable to produce accurate and timely financial statements, our
stock price may be adversely affected and we may be unable to
maintain compliance with applicable stock exchange listing
requirements.
Our
management is responsible for establishing and maintaining adequate
internal control over financial reporting, as such term is defined
in Rules 13a-15(f) and 15d-15(f) of the Exchange Act. Under the
supervision and with the participation of our management, including
our chief executive officer and interim chief financial officer, we
conducted an evaluation of the effectiveness of our internal
control over financial reporting based on the framework in
Internal Control—Integrated Framework (2013) issued by the
Committee of Sponsoring Organizations of the Treadway Commission
(“COSO”). Because of its inherent limitations, internal control
over financial reporting may not prevent or detect all
misstatements. Also, projections of any evaluation of effectiveness
to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of
compliance with the policies or procedures may deteriorate.
Therefore, even those systems determined to be effective can
provide only reasonable assurance with respect to financial
statement preparation and presentation. Based on our evaluation
under the framework in Internal Control—Integrated Framework
(2013), our management concluded that, because of certain
material weaknesses in our internal control over financial
reporting our disclosure controls and procedures as defined in Rule
13a-15(e) and 15d-15(e) under the Exchange Act were not effective
as of September 30, 2020.
Changes
in Internal Control over Financial Reporting
There
has been no change in our internal control over financial reporting
identified in connection with the evaluation required by paragraph
(d) of Rules 13a-15 or 15d-15 under the Exchange Act that occurred
during our most recent fiscal quarter that has materially affected,
or is reasonably likely to materially affect, our internal control
over financial reporting.
PART II. OTHER
INFORMATION
ITEM
1. |
LEGAL PROCEEDINGS |
From
time to time, we may become involved in various lawsuits and legal
proceedings that arise in the ordinary course of our business, as
described below. Litigation is, however, subject to inherent
uncertainties, and an adverse result in these or other matters may
arise from time to time that may harm our business. We are
currently not aware of any legal proceedings or claims that we
believe would or could have, individually or in the aggregate, a
material adverse effect on us. Regardless of final outcomes,
however, any such proceedings or claims may nonetheless impose a
significant burden on management and employees and may come with
costly defense costs or unfavorable preliminary interim
rulings.
Investors
should carefully review and consider the information regarding
certain factors which could materially affect our business,
operating results, cash flows, and financial condition set forth
under Item 1A, Risk Factors, in our fiscal 2019 Annual Report on
Form 10-K filed with the SEC on March 26, 2020. There have been no
material changes to such risk factors, except as set forth below.
The risk factors set forth below supplement, and should be read
together with, that section for disclosures regarding what we
believe are the more significant risks and uncertainties related to
our businesses. We do not believe that there have been any other
material additions or changes to the risk factors previously
disclosed in our fiscal 2019 Annual Report on Form 10-K, although
we may disclose changes to such factors or disclose additional
factors from time to time in our future filings with the SEC.
Additional risks and uncertainties not presently known to us or
that we currently deem immaterial also may impair our business
operations.
Our business and results of operations will be, and our financial
condition may be, impacted by the COVID-19 outbreak and such impact
could be materially adverse.
The
global spread of the COVID-19 outbreak has created significant
volatility, uncertainty and economic disruption. The extent to
which the COVID-19 outbreak impacts our business, operations and
financial results is uncertain and will depend on numerous evolving
factors that we may be able to accurately predict,
including:
|
● |
the
duration and scope of the pandemic; |
|
● |
governmental,
business and individual actions taken in response to the pandemic
and the impact of those actions on national and global economic
activity; |
|
● |
the
actions taken in response to economic disruption; |
|
● |
the
impact of business disruptions and reductions in employment levels
on our patients and the resulting impact on their demand for our
orthopedic therapies and other medical treatments; |
|
● |
the
increase in business failures amount suppliers and other businesses
with which we collaborate; |
|
● |
our
patients’ ability to pay for orthopedic therapies and other medical
treatments; and |
|
● |
our
ability to provide our orthopedic therapies and other medical
treatments, including as a result of our employees or our patients
working remotely and/or closures of our medical
clinics. |
Any
of these factors could cause or contribute to the risks and
uncertainties identified in our Annual Report on Form 10-K for the
year ended December 31, 2019 and could materially adversely affect
our business, financial condition and results of
operations.
ITEM
2. |
UNREGISTERED SALES OF EQUITY SECURITIES
AND USE OF PROCEEDS |
None.
ITEM
3. |
DEFAULTS UPON SENIOR
SECURITIES |
None.
ITEM
4. |
MINE SAFETY DISCLOSURES |
Not
applicable.
ITEM
5. |
OTHER INFORMATION |
None.
Exhibit
Number |
|
Description |
|
|
|
1.1 |
|
At-The Market Issuance Sales
Agreement, dated October 5, 2020, by and between IMAC Holdings,
Inc. and Ascendiant Capital Markets, LLC (filed as Exhibit 1.1 to
the Company’s Current Report on Form 8-K filed with the SEC on
October 5, 2020 and incorporated herein by reference). |
|
|
|
2.1 |
|
Agreement
and Plan of Merger, dates as of April 1, 2019, by and among IMAC
Holdings Inc., IMAC Management of Illinois, LLC, ISDI Holdings Inc.
and Jason Hui (filed as Exhibit 2.1 to the Company’s Current Report
on Form 8-K filed with the SEC on April 3, 2019 and incorporated
herein by reference). |
|
|
|
2.2 |
|
Amendment
to Agreement and Plan of Merger, dated April 19, 2019, by and among
IMAC Holdings Inc., IMAC Management of Illinois, LLC, ISDI
Holdings, Inc., ISDI Holdings II, Inc., PHR Holdings, Inc., and
Jason Hui (filed as Exhibit 2.2 to the Company’s Current Report on
Form 8-K filed with the SEC on April 25, 2019 and incorporated
herein by reference). |
|
|
|
3.1 |
|
Certificate
of Incorporation of IMAC Holdings, Inc. (filed as Exhibit 3.1 to
the Company’s Registration Statement on Form S-1 filed with the SEC
on September 17, 2018 and incorporated herein by
reference). |
|
|
|
3.2 |
|
Certificate
of Amendment to the Certificate of Incorporation of IMAC Holdings,
Inc. (filed as Exhibit 3.2 to the Company’s Registration Statement
on Form S-1/A filed with the SEC on December 10, 2018 and
incorporated herein by reference). |
|
|
|
3.3 |
|
Certificate
of Correction of the Certificate of Incorporation of IMAC Holdings,
Inc. filed with the Delaware Secretary of State on August 8, 2019
(filed as Exhibit 3.4 to the Company’s Current Report on Form 8-K
filed with the SEC on August 9, 2019 and incorporated herein by
reference). |
|
|
|
3.4 |
|
Bylaws
of IMAC Holdings, Inc. (filed as Exhibit 3.2 to the Company’s
Registration Statement on Form S-1 filed with the SEC on September
17, 2018 and incorporated herein by reference). |
|
|
|
4.1 |
|
Specimen
Common Stock Certificate (filed as Exhibit 4.1 to the Company’s
Registration Statement on Form S-1 filed with the SEC on September
17, 2018 and incorporated herein by reference). |
|
|
|
4.2 |
|
Form
of Common Stock Warrant certificate (filed as Exhibit 4.2 to the
Company’s Registration Statement on Form S-1/A filed with the SEC
on December 3, 2018 and incorporated herein by
reference). |
|
|
|
4.3 |
|
Form
of Warrant Agency Agreement between IMAC Holdings, Inc. and Equity
Stock Transfer, LLC (filed as Exhibit 4.3 to the Company’s
Registration Statement on Form S-1/A filed with the SEC on December
3, 2018 and incorporated herein by reference). |
|
|
|
4.4 |
|
Form
of Underwriters’ Unit Purchase Option (filed as Exhibit 4.4 to the
Company’s Registration Statement on Form S-1/A filed with the SEC
on February 8, 2019 and incorporated herein by
reference). |
10.1 |
|
Note Purchase Agreement, dated as of
October 29, 2020 (filed as Exhibit 10.1 to the Company’s Current
Report on Form 8-K filed with the SEC on November 3, 2020 and
incorporated herein by reference).
|
|
|
|
10.2 |
|
Promissory Note, dated as of October
29, 2020 (filed as Exhibit 10.2 to the Company’s Current Report on
Form 8-K filed with the SEC on November 3, 2020 and incorporated
herein by reference).
|
|
|
|
10.3 |
|
Security Agreement, dated as of
October 29, 2020 (filed as Exhibit 10.3 to the Company’s Current
Report on Form 8-K filed with the SEC on November 3, 2020 and
incorporated herein by reference).
|
|
|
|
31.1* |
|
Certification
of the Principal Executive Officer pursuant to Rules 13a-14(a) and
15d-14(a) promulgated pursuant to the Securities Exchange Act of
1934, as amended. |
|
|
|
31.2* |
|
Certification
of the Principal Financial Officer pursuant to Rules 13a-14(a) and
15d-14(a) promulgated pursuant to the Securities Exchange Act of
1934, as amended. |
|
|
|
32.1** |
|
Certification
of the Principal Executive Officer pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002. |
|
|
|
32.2** |
|
Certification
of the Principal Financial Officer pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002. |
|
|
|
101.INS* |
|
XBRL
Instance Document |
|
|
|
101.SCH* |
|
XBRL
Taxonomy Extension Schema |
|
|
|
101.CAL* |
|
XBRL
Taxonomy Extension Calculation Linkbase |
|
|
|
101.LAB* |
|
XBRL
Taxonomy Extension Labels Linkbase |
|
|
|
101.PRE* |
|
XBRL
Taxonomy Extension Presentation Linkbase |
|
|
|
101.DEF* |
|
XBRL
Taxonomy Extension Definition Linkbase |
* |
Filed
herewith. |
|
|
** |
This
certification is being furnished solely to accompany this quarterly
report pursuant to 18 U.S.C. § 1350, and is not being filed for
purposes of Section 18 of the Securities Exchange Act of 1934, as
amended, and is not to be incorporated by reference into any filing
of IMAC Holdings, Inc., whether made before or after the date
hereof, regardless of any general incorporation language in such
filing. |
SIGNATURES
Pursuant
to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
|
IMAC
HOLDINGS, INC. |
|
|
|
Date:
November 12, 2020 |
By: |
/s/
Jeffrey S. Ervin |
|
|
Jeffrey
S. Ervin |
|
|
Chief
Executive Officer
(Principal
Executive Officer, Duly Authorized Officer)
|