CONDENSED
NOTES TO UNAUDITED FINANCIAL STATEMENTS
JUNE
30, 2022
(UNAUDITED)
NOTE
1 - ORGANIZATION AND NATURE OF OPERATIONS
Theralink
Technologies, Inc., formerly OncBioMune Pharmaceuticals, Inc. (the “Company”), was a clinical-stage biopharmaceutical company
engaged in the development of novel cancer immunotherapy products, with a proprietary vaccine technology. On June 5, 2020, the Company
acquired the assets (the “Asset Sale Transaction”) of Avant Diagnostics, Inc., a Nevada corporation established in 2009 (“Avant”)
pursuant to the Asset Purchase Agreement dated May 12, 2020, between the Company and Avant (the “Asset Purchase Agreement”).
Avant is a commercial-stage precision medicine and molecular data-generating company that focuses on the development and commercialization
of a series of patented, proprietary data-generating assays that may provide important actionable information for physicians and patients,
as well as biopharmaceutical companies, in the area of oncology.
Pursuant
to the Asset Purchase Agreement, the Company acquired substantially all of the assets of Avant and assumed certain of its liabilities.
Upon the terms and subject to the conditions of the Asset Purchase Agreement, Avant sold to the Company, all of Avant’s title and
interest in all the assets, properties and rights of every kind and nature, whether real, personal or mixed, tangible or intangible (including
goodwill), wherever located and whether existing or hereafter acquired, except for the specific excluded assets, which relate to, or
are used or held for use in connection with, Avant’s business. The Company also hired Avant’s employees upon consummation
of the Asset Sale Transaction. As consideration for the Asset Sale Transaction, the Company issued to Avant 1,000 shares of a newly created
Series D-1 Preferred Stock which held 54.55% of all voting rights on an as-converted basis with the common stock. Upon the effectiveness
of an increase of the Company’s authorized shares of common stock from 6,666,667 shares to 12,000,000,000 shares, all such shares
of Series D-1 Preferred Stock issued to Avant automatically converted into 5,081,549,184 shares of the Company’s common stock.
Avant possessed majority voting control of the Company immediately following the Asset Sale Transaction and controlled the Company’s
Board of Directors after the termination of the ten-day waiting period required by Rule 14f-1 under the Exchange Act. Accordingly, the
Asset Sale Transaction was accounted for, in substance, as an asset acquisition of the Company’s net asset by Avant and a recapitalization
of Avant. Avant is considered the historical registrant and the historical operations presented are those of Avant since Avant
obtained 54.55% majority voting control of the Company. All share and per share data in the accompanying unaudited financial statements
and footnotes has been retrospectively adjusted for the recapitalization.
On
July 11, 2021, the Company’s wholly-owned subsidiary, OncBioMune, LLC, was administratively dissolved by the Louisiana Secretary
of State for failing to meet its filing requirements and pay the associated fees (see Note 3).
In
connection with the Asset Sale Transaction, the Company entered into an Exchange Agreement, effective June 5, 2020, by and among OncBioMune
Pharmaceuticals, Inc. and the investors named therein, whereby the Company agreed to exchange certain convertible promissory notes and
warrants outstanding for shares of Series C-1 Convertible Preferred Stock of the Company and options to purchase shares of the Company’s
wholly-owned subsidiary, OncBioMune Sub Inc. OncBioMune Sub Inc. holds the patents used in the prior business of OncBioMune Pharmaceuticals,
Inc. In July 2021, certain of those investors exercised their options to purchase the shares of OncBioMune Sub Inc. On July 26, 2021,
the Company transferred all 10,000 shares of OncBioMune Sub Inc. held by the Company to the various investors for gross proceeds of $1,000
(see Note 3).
On
February 25, 2022, FINRA recognized the Company’s name change to Theralink Technologies, Inc. and the related ticker symbol change
from “OBMP” to “THER” went into effect.
NOTE
2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis
of Presentation
The
accompanying interim unaudited financial statements have been prepared in accordance with accounting principles generally accepted in
the United States of America and the rules and regulations of the United States Securities and Exchange Commission (“SEC”)
for interim financial information, which present the unaudited financial statements of the Company as of June 30, 2022. The interim unaudited
financial statements do not include all the information and notes necessary for a comprehensive presentation of financial position and
results of operations and should be read in conjunction with the audited financial statements of the Form 10-K filed on January 13, 2022.
It is management’s opinion that all material adjustments (consisting of normal recurring adjustments and non-recurring adjustments)
have been made for the fair presentation of the unaudited financial statements. The results for the interim period are not necessarily
indicative of the results to be expected for the year ending September 30, 2022.
THERALINK
TECHNOLOGIES, INC.
CONDENSED
NOTES TO UNAUDITED FINANCIAL STATEMENTS
JUNE
30, 2022
(UNAUDITED)
Going
Concern
These
unaudited financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the settlement
of liabilities and commitments in the normal course of business. As reflected in the accompanying unaudited financial statements, the
Company had net loss and net cash used in operations of $5,057,056 and $4,460,633, respectively, for the nine months ended June 30, 2022.
Additionally, the Company had an accumulated deficit, stockholders’ deficit and working capital deficit of $55,062,418, $5,113,501
and $1,584,036 at June 30, 2022. Management believes that these matters raise substantial doubt about the Company’s ability to
continue as a going concern for twelve months from the issuance date of this report.
The
Company cannot provide assurance that it will ultimately achieve profitable operations or become cash flow positive or raise additional
debt or equity capital. Additionally, the current capital resources are not adequate to continue operating and maintaining the business
strategy for a period of twelve months from the issuance date of this report. The Company will seek to raise capital through additional
debt and equity financings to fund its operations in the future.
Although
the Company has historically raised capital from sales of equity and the issuance of promissory notes, there is no assurance that it
will be able to continue to do so. If the Company is unable to raise additional capital or secure additional lending in the near future,
management expects that the Company will need to curtail or cease operations. These unaudited financial statements do not include any
adjustments related 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.
The
global pandemic COVID-19, otherwise referred to as the Coronavirus, could impair our ability to raise additional funding or make such
funding more costly. The ongoing global pandemic has caused cessation of normal business operations and initially caused capital markets
to decline sharply. This could make it more difficult for the Company to access capital. It is currently difficult to estimate with any
certainty how long the pandemic and resulting curtailment of business will continue, and its effect on capital markets and the Company’s
ability to raise funds is, accordingly, difficult to quantify. In addition, to the extent that any of the Company’s personnel or
consultants are affected by the virus, this could cause delays or disruption in our planned research and development activities.
Use
of Estimates
The
preparation of financial statements in conformity with U.S. GAAP requires management to make judgments, assumptions, and estimates that
affect the amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements
and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. Management
bases its estimates and assumptions on current facts, historical experience, and various other factors that it believes are reasonable
under the circumstances, to determine the carrying values of assets and liabilities that are not readily apparent from other sources.
Significant estimates during the nine months ended June 30, 2022 and year ended September 30, 2021 include, but are not necessarily limited
to, estimates of contingent liabilities, valuation of marketable securities, useful life of property and equipment, valuation of right-of-use
(“ROU”) assets and lease liabilities, assumptions used in assessing impairment of long-lived assets, allowances for accounts
receivable, estimates of current and deferred income taxes and deferred tax valuation allowances and the fair value of non-cash equity
transactions.
Fair
Value of Financial Instruments and Fair Value Measurements
FASB
ASC 820 - Fair Value Measurements and Disclosures, defines fair value as the price that would be received to sell an asset or paid to
transfer a liability in an orderly transaction between market participants at the measurement date. FASB ASC 820 requires disclosures
about the fair value of all financial instruments, whether or not recognized, for financial statement purposes. Disclosures about the
fair value of financial instruments are based on pertinent information available to the Company on June 30, 2022. Accordingly, the estimates
presented in these financial statements are not necessarily indicative of the amounts that could be realized on the disposition of the
financial instruments. FASB ASC 820 specifies a hierarchy of valuation techniques based on whether the inputs to those valuation techniques
are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect
market assumptions. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities
(Level 1 measurement) and the lowest priority to unobservable inputs (Level 3 measurement). The three levels of the fair value hierarchy
are as follows:
| |
Level
1—Inputs are unadjusted quoted prices in active markets for identical assets or liabilities available at the measurement date. |
| |
Level
2—Inputs are unadjusted quoted prices for similar assets and liabilities in active markets, quoted prices for identical or
similar assets and liabilities in markets that are not active, inputs other than quoted prices that are observable, and inputs derived
from or corroborated by observable market data. |
| |
|
| |
Level
3—Inputs are unobservable inputs which reflect the reporting entity’s own assumptions on what assumptions the market
participants would use in pricing the asset or liability based on the best available information. |
THERALINK
TECHNOLOGIES, INC.
CONDENSED
NOTES TO UNAUDITED FINANCIAL STATEMENTS
JUNE
30, 2022
(UNAUDITED)
Cash
and Cash Equivalents
The
Company considers all highly liquid instruments purchased with an original maturity of three months or less to be cash equivalents. The
Company’s investment policy is to preserve principal and maintain liquidity. The Company periodically monitors its positions with,
and the credit quality of, the financial institutions with which it invests.
Prepaid
Assets
Prepaid
assets are carried at amortized cost. Significant prepaid assets as of June 30, 2022 and September 30, 2021 include, but are not necessarily
limited to, prepaid insurance, prepaid consulting fees, prepaid equipment maintenance fees and retainers for professional services.
Laboratory
Supplies
Laboratory
supplies are normally consumed within a year from purchase and any unused laboratory supplies are classified as current assets and reflected
in the accompanying unaudited balance sheet as laboratory supplies.
Property
and Equipment
Fixed
assets are stated at cost and depreciated using the straight-line method over their estimated useful lives, which range from three to
five years. Leasehold improvements are depreciated over the shorter of their useful life or the lease term including scheduled renewal
terms. Maintenance and repairs are charged to expense as incurred. When assets are retired or disposed of, the cost and accumulated depreciation
are removed from the accounts, and any resulting gains or losses are included in income in the year of disposition. The Company examines
the possibility of decreases in the value of these assets when events or changes in circumstances reflect the fact that their recorded
value may not be recoverable.
Impairment
of Long-Lived Assets
In
accordance with ASC Topic 360, the Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate
that the carrying amount of the assets may not be fully recoverable, or at least annually. The Company recognizes an impairment loss
when the sum of expected undiscounted future cash flows is less than the carrying amount of the asset. The amount of impairment is measured
as the difference between the asset’s estimated fair value and its book value.
Stock-Based
Compensation
Stock-based
compensation is accounted for based on the requirements of the Share-Based Payment Topic of ASC 718 which requires recognition in the
financial statements of the cost of employee and director services received in exchange for an award of equity instruments over the period
the employee or director is required to perform the services in exchange for the award (presumptively, the vesting period). The ASC also
requires measurement of the cost of employee and director services received in exchange for an award based on the grant-date fair value
of the award.
Pursuant
to ASC 505-50 - Equity-Based Payments to Non-Employees, all share-based payments to non-employees, including grants of stock options,
were recognized in the financial statements as compensation expense over the service period of the consulting arrangement or until performance
conditions are expected to be met. Using a Black Scholes valuation model, the Company periodically reassessed the fair value of non-employee
options until service conditions are met, which generally aligns with the vesting period of the options, and the Company adjusts the
expense recognized in the financial statements accordingly. In June 2018, the FASB issued ASU No. 2018-07, Improvements to Nonemployee
Share-Based Payment Accounting, which simplifies several aspects of the accounting for nonemployee share-based payment transactions by
expanding the scope of the stock-based compensation guidance in ASC 718 to include share-based payment transactions for acquiring goods
and services from non-employees. ASU No. 2018-07 is effective for annual periods beginning after December 15, 2018, including interim
periods within those annual periods. Early adoption is permitted, but entities may not adopt prior to adopting the new revenue recognition
guidance in ASC 606. The Company early adopted ASU No. 2018-07 during the period September 30, 2018, and the adoption did not have any
impact on its financial statements.
THERALINK
TECHNOLOGIES, INC.
CONDENSED
NOTES TO UNAUDITED FINANCIAL STATEMENTS
JUNE
30, 2022
(UNAUDITED)
Revenue
Recognition and Contract Assets and Liabilities
In
accordance with ASU Topic 606 - Revenue from Contracts with Customers, the Company recognizes revenue in accordance with that
core principle by applying the following steps:
Step
1: Identify the contract(s) with a customer.
Step
2: Identify the performance obligations in the contract.
Step
3: Determine the transaction price.
Step
4: Allocate the transaction price to the performance obligations in the contract.
Step
5: Recognize revenue when (or as) the entity satisfies a performance obligation.
The
Company provides research and development support to biopharmaceutical companies to assist their drug development programs. In January
2021, the Company began performing tumor profiling to support clinical patient therapeutic intervention. The services provided by the
Company are performance obligations under services contracts. These contracts are completed over time and may lead to deferred revenue
for services not completed at the end of a period which is reflected as contract liabilities on the accompanying unaudited balance sheet.
The Company may include, in accounts receivable, amounts billed to customers in advance of services being initiated or completed. If
the Company has a right to such consideration that is unconditional such as for contractually allowed billings, such amounts billed in
advance would be offset by a contract liability. Management reviews the completion status of all jobs monthly to determine the appropriate
amount of revenue to recognize. The Company offers these services to biopharmaceutical companies and to private individuals. The Company
uses various output methods to recognize revenues. The revenue recognized from services provided to private individuals during the nine
months ended June 30, 2022 and year ended September 30, 2021 were minimal and therefore was not disaggregated for disclosure purposes.
Contract
Liabilities
Contract
liabilities are cash deposits received from customers and advance billing included in accounts receivable on uncompleted contracts for
which revenues have not been recognized as of the balance sheet date.
Contract
liabilities as of June 30, 2022 and September 30, 2021 are as follows:
SCHEDULE
OF CONTRACT LIABILITIES
| | |
June 30, 2022 | | |
September 30, 2021 | |
| Contract liabilities beginning balance | |
$ | 135,150 | | |
$ | — | |
| Billings and cash receipts on uncompleted contracts | |
| 325,048 | | |
| 281,012 | |
| Less: revenues recognized during the period | |
| (157,525 | ) | |
| (145,862 | ) |
| Total contract liabilities | |
$ | 302,672 | | |
$ | 135,150 | |
During
the nine months ended June 30, 2022, the Company recognized $157,525 of the contract liabilities, of which $22,250 was related to the
uncompleted contracts from the prior period.
Cost
of Revenue
The
cost of revenue consists of the cost of labor, supplies and materials.
Accounts
Receivable and Allowance for Doubtful Accounts
Trade
receivables are carried at their estimated collectible amounts. Trade credit is generally extended on a short-term basis and does not
bear interest. Trade accounts receivable are periodically evaluated for collectability based on past credit history with customers and
their current financial condition.
Any
charges to the allowance for doubtful accounts on accounts receivable are charged to operations in amounts sufficient to maintain the
allowance for uncollectible accounts at a level management believes is adequate to cover any probable losses. Management determines the
adequacy of the allowance based on historical write-off percentages and the current status of accounts receivable. Accounts receivable
are charged off against the allowance when collectability is determined to be permanently impaired.
Concentrations
Concentration
of Credit Risk
The
Company maintains its cash in banks and financial institutions that at times may exceed the federally insured limit of $250,000. As of
June 30, 2022 and September 30, 2021, the cash balances were in excess of the FDIC insured limit by $0 and $68,122, respectively. The
Company has not experienced any losses in such accounts through June 30, 2022.
THERALINK
TECHNOLOGIES, INC.
CONDENSED
NOTES TO UNAUDITED FINANCIAL STATEMENTS
JUNE
30, 2022
(UNAUDITED)
Concentration
of Revenues
For
the three months ended June 30, 2022, the Company generated total revenue of $164,213 of which 52% and 13% were from two of the Company’s
customers. For the three months ended June 30, 2021, the Company generated total revenue of $278,925 of which 56%, 18% and 14% were from
three of the Company’s customers.
For
the nine months ended June 30, 2022, the Company generated total revenue of $262,688 of which 32%, 23% and 17% were from three of the Company’s
customers. For the nine months ended June 30, 2021, the Company generated total revenue of $415,029 of which 38%, 14% and 13% were from
three of the Company’s customers.
Concentration
of Accounts Receivable
As
of June 30, 2022, the Company had accounts receivable of $109,380 of which 34%, 19%, 14%, 12%, 11% and 10% were from six of the Company’s
customers, respectively. As of September 30, 2021, the Company did not have any accounts receivable.
Concentration
of Contract Liabilities
As
of June 30, 2022, the Company had deferred revenue reflected as contract liabilities of $302,672
of which 42%,
25%, 15%
and 10%
were from four of the Company’s customers. As of September 30, 2021, the Company had deferred revenue reflected as contract
liabilities of $135,150 of which 56%, 24%
and 16%
were from three of the Company’s customers.
Concentration
of Vendor
Generally,
the Company relies on one vendor to perform the Company’s patient reporting and contract research (formerly called sample analysis)
which is an integral part of the Company’s operation and revenue stream. Any disruption in this service could have a material adverse
effect on the Company’s business, financial condition and results of operations.
During
the nine months ended June 30, 2022 and 2021, the Company incurred $275,372 and $733,242, respectively, or 100% of it patient reporting
and contract research (formerly called sample analysis) expense from one vendor.
Basic
and Diluted Loss Per Share
Pursuant
to ASC 260-10-45, basic loss per common share is computed by dividing the net loss by the weighted average number of shares of common
stock outstanding for the periods presented. Diluted loss per share is computed by dividing the net loss by the weighted average number
of shares of common stock, common stock equivalents and potentially dilutive securities outstanding during the period. Potentially dilutive
common shares consist of common stock issuable for stock options and warrants (using the treasury stock method), convertible notes and
common stock issuable. These common stock equivalents may be dilutive in the future. The following potentially dilutive equity securities
outstanding as of June 30, 2022 and 2021 were not included in the computation of dilutive loss per common share because the effect would
have been anti-dilutive:
SCHEDULE
OF ANTI-DILUTIVE SHARES OUTSTANDING
| | |
June 30, | |
| | |
2022 | | |
2021 | |
| Stock warrants | |
| 1,876,207,963 | | |
| 920,572,535 | |
| Series C-1 preferred stock | |
| 156,626,175 | | |
| 445,301,289 | |
| Series C-2 preferred stock | |
| 453,067,129 | | |
| 733,542,619 | |
| Series E preferred stock | |
| 638,977,636 | | |
| 533,333,333 | |
| Series F preferred stock | |
| 319,488,818 | | |
| — | |
| Convertible notes | |
| 1,417,522,294 | | |
| — | |
| | |
| 4,861,890,015 | | |
| 2,632,749 | |
Income
Taxes
The
Company accounts for income tax using the liability method prescribed by ASC 740 - Income Taxes. Under this method, deferred tax assets
and liabilities are determined based on the difference between the financial reporting and tax bases of assets and liabilities using
enacted tax rates that will be in effect in the year in which the differences are expected to reverse. The Company records a valuation
allowance to offset deferred tax assets if based on the weight of available evidence, it is more-likely-than-not that some portion, or
all, of the deferred tax assets will not be realized. The effect on deferred taxes of a change in tax rates is recognized as income or
loss in the period that includes the enactment date.
THERALINK
TECHNOLOGIES, INC.
CONDENSED
NOTES TO UNAUDITED FINANCIAL STATEMENTS
JUNE
30, 2022
(UNAUDITED)
The
Company follows the accounting guidance for uncertainty in income taxes using the provisions of ASC 740 “Income Taxes”.
Using that guidance, tax positions initially need to be recognized in the financial statements when it is more likely than not the position
will be sustained upon examination by the tax authorities. As of June 30, 2022 and September 30, 2021, the Company had no uncertain tax
positions that qualify for either recognition or disclosure in the financial statements. The Company recognizes interest and penalties
related to uncertain income tax positions in other expense. However, no such interest and penalties were recorded as of June 30, 2022 and September 30, 2021.
Related
Parties
Parties
are considered to be related to the Company if the parties, directly or indirectly, through one or more intermediaries, control, are
controlled by, or are under common control with the Company. Related parties also include principal owners of the Company, its management,
members of the immediate families of principal owners of the Company and its management and other parties with which the Company may
deal with if one party controls or can significantly influence the management or operating policies of the other to an extent that one
of the transacting parties might be prevented from fully pursuing its own separate interests.
Leases
The
Company accounts for its leases using the method prescribed by ASC 842 – Lease Accounting. The Company assess whether the
contract is, or contains, a lease at the inception of a contract which is based on (i) whether the contract involves the use of a distinct
identified asset, (ii) whether the Company obtains the right to substantially all the economic benefit from the use of the asset throughout
the period, and (iii) whether the Company has the right to direct the use of the asset. The Company allocates the consideration in the
contract to each lease component based on its relative stand-alone price to determine the lease payments. The Company has elected not
to recognize right-of-use (“ROU”) assets and lease liabilities for short-term leases that have a term of 12 months or less.
Operating
and financing lease ROU assets represents the right to use the leased asset for the lease term. Operating and financing lease liabilities
are recognized based on the present value of the future minimum lease payments over the lease term at the commencement date. As most
leases do not provide an implicit rate, the Company uses an incremental borrowing rate based on the information available at the adoption
date in determining the present value of future payments. Lease expense for minimum lease payments is amortized on a straight-line basis
over the lease term and is included in general and administrative expenses in the unaudited statements of operations.
Recent
Accounting Pronouncements
In
August 2020, the FASB issued ASU 2020-06—Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives
and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an
Entity’s Own Equity (“ASU 2020-06”) to simplify the accounting for convertible instruments by removing certain
separation models in Subtopic 470- 20, Debt with Conversion and Other Options, for convertible instruments. Under the amendments
in ASU 2020-06, the embedded conversion features no longer are separated from the host contract for convertible instruments with conversion
features that are not required to be accounted for as derivatives under Topic 815, Derivatives and Hedging, or that do not result in
substantial premiums accounted for as paid-in capital. Consequently, a convertible debt instrument will be accounted for as a single
liability measured at its amortized cost and a convertible preferred stock will be accounted for as a single equity instrument measured
at its historical cost, as long as no other features require bifurcation and recognition as derivatives. By removing those separation
models, the interest rate of convertible debt instruments typically will be closer to the coupon interest rate when applying the guidance
in Topic 835, Interest. The amendments in ASU 2020-06 provide financial statement users with a simpler and more consistent starting point
to perform analyses across entities. The amendments also improve the operability of the guidance and reduce, to a large extent, the complexities
in the accounting for convertible instruments and the difficulties with the interpretation and application of the relevant guidance.
To further improve the decision usefulness and relevance of the information being provided to users of financial statements, amendments
in ASU 2020-06 increased information transparency by making the following amendments to the disclosure for convertible instruments:
| 1. |
Added
a disclosure objective |
| 2. |
Added
information about events or conditions that occur during the reporting period that cause conversion contingencies to be met or conversion
terms to be significantly changed |
| 3. |
Added
information on which party controls the conversion rights |
| 4. |
Aligned
disclosure requirements for contingently convertible instruments with disclosure requirements for other convertible instruments |
| 5. |
Required
that existing fair value disclosures in Topic 825, Financial Instruments, be provided at the individual convertible instrument level
rather than in the aggregate. |
THERALINK
TECHNOLOGIES, INC.
CONDENSED
NOTES TO UNAUDITED FINANCIAL STATEMENTS
JUNE
30, 2022
(UNAUDITED)
Additionally,
for convertible debt instruments with substantial premiums accounted for as paid-in capital, amendments in ASU 2020-06 added disclosures
about (1) the fair value amount and the level of fair value hierarchy of the entire instrument for public business entities and (2) the
premium amount recorded as paid-in capital.
The
amendments in ASU 2020-06 are effective for public business entities, excluding entities eligible to be smaller reporting companies as
defined by the SEC, for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. For all
other entities, the amendments are effective for fiscal years beginning after December 15, 2023, including interim periods within those
fiscal years. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, including interim periods
within those fiscal years. Entities should adopt the guidance as of the beginning of its annual fiscal year and are allowed to adopt
the guidance through either a modified retrospective method of transition or a fully retrospective method of transition. In applying
the modified retrospective method, entities should apply the guidance to transactions outstanding as of the beginning of the fiscal year
in which the amendments are adopted. Transactions that were settled (or expired) during prior reporting periods are unaffected. The cumulative
effect of the change should be recognized as an adjustment to the opening balance of retained earnings at the date of adoption. If an
entity elects the fully retrospective method of transition, the cumulative effect of the change should be recognized as an adjustment
to the opening balance of retained earnings in the first comparative period presented. The Company early adopted ASU 2020-06 and its
adoption did not have any material impact on the Company’s financial statements.
In
May 2021, the FASB issued ASU 2021-04, Earnings Per Share (Topic 260), Debt-Modifications and Extinguishments (Subtopic 470-50),
Compensation-Stock Compensation (Topic 718), and Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic 815-40).
The new ASU addresses issuer’s accounting for certain modifications or exchanges of freestanding equity-classified written call
options. This amendment is effective for all entities, for fiscal years beginning after December 15, 2021, including interim periods
within those fiscal years. Early adoption is permitted. The Company early adopted ASU 2020-06 and its adoption did not have any material
impact on the Company’s financial statements.
Management
does not believe that any other recently issued, but not yet effective accounting pronouncements, if adopted, would have a material effect
on the Company’s financial statements.
NOTE
3 – DISPOSAL OF SUBSIDIARIES AND RECAPITALIZATION
Administrative
Dissolution of OncBioMune, LLC
On
July 11, 2021, the Company’s wholly-owned subsidiary OncBioMune, LLC was administratively dissolved by the Louisiana Secretary
of State for failing to meet its filing requirements and pay the associated fees (see Note 1). The Company deconsolidated OncBioMune,
LLC on July 11, 2021 and recognized a gain of $9,916 which was recorded in the statement of operations as a gain on the dissolution of
a subsidiary.
Exercise
of Options to Purchase Shares of OncBioMune Sub Inc.
In
connection with the Asset Sale Transaction, the Company entered into an Exchange Agreement, effective June 5, 2020, by and among OncBioMune
Pharmaceuticals, Inc. and the investors named therein, whereby the Company agreed to exchange certain convertible promissory notes and
warrants outstanding for shares of Series C-1 Convertible Preferred Stock of the Company and the option to purchase shares of the Company’s
wholly-owned subsidiary, OncBioMune Sub Inc. OncBioMune Sub Inc. holds the patents used in the prior business of OncBioMune Pharmaceuticals,
Inc. In July 2021, certain of those investors exercised their options to purchase the shares of OncBioMune Sub Inc. On July 26, 2021,
the Company transferred all 10,000 shares of OncBioMune Sub Inc. held by the Company to the various investors for aggregate proceeds
of $1,000. The proceeds were recorded in the statement of operations as a gain on the disposal of a subsidiary (see Note 1).
NOTE
4 – MARKETABLE SECURITIES
During
the fiscal year ended 2017, the Company acquired 1,000,000 shares of common stock of Amarantus BioScience Holdings, Inc. (“AMBS”)
with a fair value of $40,980. The AMBS common stock is recorded as marketable securities in the accompanying unaudited balance sheets.
Its fair value is adjusted every reporting period and the change in fair value is recorded in the unaudited statements of operations
as unrealized gain or (loss) on marketable securities. During the nine months ended June 30, 2022 and 2021, the Company recorded $8,600
and $3,600 of unrealized loss on marketable securities, respectively. As of June 30, 2022 and September 30, 2021, the fair value of these
shares was $2,400 and $11,000, respectively.
THERALINK
TECHNOLOGIES, INC.
CONDENSED
NOTES TO UNAUDITED FINANCIAL STATEMENTS
JUNE
30, 2022
(UNAUDITED)
NOTE
5 – PROPERTY AND EQUIPMENT
Property
and equipment are recorded at cost. Once placed in service, they are depreciated on the straight-line method over their estimated useful
lives. Leasehold improvements are accreted over the shorter of the estimated economic life or related lease terms. Fixed assets consist
of the following:
SCHEDULE
OF PROPERTY AND EQUIPMENT
| | |
Estimated
Useful Life in
Years | |
June
30, 2022 | | |
September 30,
2021 | |
| | |
| |
| (Unaudited) | | |
| | |
| Laboratory equipment | |
5 | |
$ | 553,648 | | |
$ | 470,159 | |
| Furniture | |
5 | |
| 24,567 | | |
| 24,567 | |
| Leasehold improvements | |
5 | |
| 353,826 | | |
| 349,115 | |
| Computer equipment | |
3 | |
| 68,490 | | |
| 68,490 | |
| Property and equipment gross | |
| |
| 1,000,531 | | |
| 912,331 | |
| Less accumulated depreciation | |
| |
| (322,159 | ) | |
| (213,404 | ) |
| Property and equipment, net | |
| |
$ | 678,372 | | |
$ | 698,927 | |
For
the three months ended June 30, 2022 and 2021, depreciation expense related to property and equipment amounted to $36,825 and $34,879,
respectively.
For
the nine months ended June 30, 2022 and 2021, depreciation expense related to property and equipment amounted to $108,754 and $103,856,
respectively.
Leased
equipment was not included in the table above as it was accounted for in accordance with ASU 842 – Leases. These leases
are discussed in Note 7 under financing lease right-of-use (“ROU”) assets and financing lease liabilities.
NOTE
6 – DEBT
At
June 30, 2022, the convertible notes payable consisted of the following:
SCHEDULE
OF CONVERTIBLE NOTES PAYABLE
| | |
June 30, 2022 | | |
September 30, 2021 | |
| Principal amount | |
$ | 2,425,000 | | |
$ | — | |
| Less: debt discount | |
| (2,142,533 | ) | |
| — | |
| Convertible notes payable, net | |
$ | 282,467 | | |
$ | — | |
| | |
| | | |
| | |
| Principal amount – related party | |
$ | 2,900,000 | | |
$ | 1,000,000 | |
| Less: debt discount – related party | |
| (1,925,238 | ) | |
| (935,019 | ) |
| Convertible note payable - related party, net | |
$ | 974,762 | | |
$ | 64,981 | |
| | |
| | | |
| | |
| Total convertible notes payable, net | |
$ | 1,257,229 | | |
$ | 64,981 | |
Convertible
Debt – Related Party
On
May 12, 2021, the Company entered into a Securities Purchase Agreement (“May 2021 SPA”) with a related party, who is an
affiliate stockholder (“May 2021 Investor”) to purchase a convertible note (“May 2021 Note”) and
accompanying warrants (“May 2021 Warrants”) for an aggregate investment amount of $1,000,000
(see Note 8). The May 2021 Note has a principal value of $1,000,000
and bears an interest rate of 8%
per annum (which shall increase to 10%
per year upon the occurrence of an “Event of Default” (as defined in the May 2021 Note)) and shall mature on May
12, 2026. The Company received the proceeds in three tranches with the first tranche of $333,334
received in May 2021, the second tranche of $333,333
received in June 2021 and the third tranche of $333,333
received in July 2021. The May 2021 Note is convertible at any time into shares of the Company’s common stock at a conversion
price equal to $0.00313
per share for any amount of principal and accrued interest remaining outstanding (subject to adjustment). The Company may prepay the
May 2021 Note at any time in an amount equal to 110%
of the outstanding principal balance and accrued interest. In connection with the Company’s obligations under the May 2021
Note, the Company entered into a security agreement (“May 2021 Security Agreement”) with the May 2021 Investor as the
agent pursuant to which the Company granted a lien on the laboratory equipment of the Company (“Collateral”), for the
benefit of the May 2021 Investor, to secure the Company’s obligations under the May 2021 Note. Upon an Event of Default (as
defined in the May 2021 Note), the May 2021 Investor may, among other things, collect or take possession of the Collateral, proceed
with the foreclosure of the security interest in the Collateral or sell, lease or dispose of the Collateral. The May 2021 Note and
May 2021 Warrants include a down-round provision under which the conversion price and exercise price are reduced if the Company
sells or issues any securities including options, convertible securities, with the exception of exempt issuance (as defined in the
agreements), or amended outstanding securities, at a lower conversion or exercise price than that of the May 2021 Note and May 2021
Warrants. The conversion and exercise price of the May 2021 Note and May 2021 Warrants are reduced equal to the lower conversion and
exercise price of the new issuance or amended securities. During the year ended September 30, 2021, the Company paid $19,142
of accrued interest. As of September 30, 2021, the May 2021 Note had an outstanding principal balance of $1,000,000
and accrued interest of $6,575.
It is reflected in the accompanying balance sheet at $64,981,
as a long-term convertible note payable – related party, net of discount. As of June 30, 2022, the May 2021 Note had an
outstanding principal balance of $1,000,000
and accrued interest of $4,932.
It is reflected in the accompanying unaudited balance sheet at $216,470
as a long-term convertible note payable – related party, net of discount in the amount of $783,530
(see Note 8).
THERALINK
TECHNOLOGIES, INC.
CONDENSED
NOTES TO UNAUDITED FINANCIAL STATEMENTS
JUNE
30, 2022
(UNAUDITED)
The
May 2021 Warrants has an exercise price of $0.00313 per share (subject to adjustment) until May 12, 2026 and is exercisable for cash
at any time. The May 2021 Warrants was valued at $984,200 using the relative fair value method which was recorded as a debt discount
which is being amortized over the life of the May 2021 Note. In addition, the May 2021 Note had a beneficial conversion feature (“BCF”)
in the amount of $15,800 which was recorded as a debt discount which is being amortized over the life of the May 2021 Note. The debt
discount totaled $1,000,000. During the nine months ended June 30, 2022, the Company amortized $151,489 of the debt discount which is
included in interest expense in the accompanying unaudited statement of operations.
On
November 1, 2021, the Company entered into a Securities Purchase Agreement (“First November 2021 SPA”) with a related
party, who is an affiliate stockholder (“First November 2021 Investor”), to purchase three convertible notes
(collectively as “First November 2021 Notes”) and three accompanying warrants (collectively as
“First November 2021 Warrants”), for an aggregate investment amount of $1,000,000.
The first note issued on November 1, 2021, had a principal balance of $334,000
and accompanying warrants to purchase up to 18,251,367
shares of common stock. The second note issued on December 1, 2021, had a principal balance of $333,000
and accompanying warrants to purchase up to 18,196,722
shares of common stock. The third note issued on January 1, 2022, had a principal balance of $333,000
and accompanying warrants to purchase up to 18,196,722
shares of common stock. The Company received $1,000,000
in aggregate proceeds from the First November 2021 Notes. The First November 2021 Notes bear an interest rate of 8%
per annum (which shall increase to 10%
per year upon the occurrence of an “Event of Default” (as defined in the First November 2021 Notes)) and mature on November
1, 2026. The First November 2021 Warrants are exercisable at any time and expire on November 1, 2026. The First November 2021
Warrants were initially valued at $990,048
using the relative fair value method and were recorded as debt discount which is being amortized over the life of the First November
2021 Notes. The First November 2021 Notes and First November 2021 Warrants are convertible and exercisable, respectively, into
shares of the Company’s common stock at a price equal to $0.00366
per share (subject to adjustment). The First November 2021 Notes and First November 2021 Warrants include a down-round provision
under which the conversion price and exercise price are reduced if the Company sells or issues any securities including options,
convertible securities, with the exception of exempt issuance (as defined in the agreements), or amended outstanding securities, at
a lower conversion or exercise price than that of the First November 2021 Notes and First November 2021 Warrants. The conversion and
exercise price of the First November 2021 Notes and First November 2021 Warrants are reduced equal to the lower conversion and
exercise price of the new issuance or amended securities. The Company may prepay the First November 2021 Notes at any time in an
amount equal to 110%
of the outstanding principal balance and accrued interest. At the election of the First November 2021 Investor, the First November
2021 Notes can be converted in whole or in part at any time and from time to time. Further, upon maturity the Company may pay the
outstanding balance of the First November 2021 Notes in cash or convert it into shares of common stock. Upon the listing by the
Company or the trading of the common stock on a Qualified National Exchange (as defined in the First November 2021 Notes), the
Conversion Amount shall automatically be converted into fully-paid and non-assessable shares of common stock.
On
January 26, 2022, a notice and request for consent regarding a change in offering terms was sent by the Company to the First November
2021 Investor. Upon the approval of the First November 2021 Investor, the Company modified the terms of the First November 2021 SPA which
increased the warrants issuable from 20% to 100% of the common stock issuable upon conversion of the notes purchased. As a result, the
First November 2021 Investor received additional cashlessly-exercisable warrants equal to 80% of the common stock issuable upon conversion
of the First November 2021 Notes. The Company issued additional warrants to purchase up to 218,579,234 shares of common stock to the
First November 2021 Investor which increased the total relative fair value of all warrants in total by $34,630 recorded as debt discount
which is being amortized over the life of the First November 2021 Notes (see Note 8 and 9). The modification of the First November 2021
SPA did not meet the requirements of a debt extinguishment under ASC 470-50 - Debt Modifications and Exchanges; however it represented
a substantial modification whereby the First November 2021 Investor received a substantial amount of additional warrants for the same
principal amount of investment hence it was accounted for, in substance, as a debt modification ASC 470-50 and no gain or losses was
recognized. As of June 30, 2022, the First November 2021 Notes had an outstanding principal of $1,000,000 and accrued interest of $6,575.
The First November 2021 Notes are reflected in the accompanying unaudited balance sheet at $88,997 as a long-term convertible note payable
– related party, net of discount in the amount of $911,003 (see Note 8) as of June 30, 2022.
THERALINK
TECHNOLOGIES, INC.
CONDENSED
NOTES TO UNAUDITED FINANCIAL STATEMENTS
JUNE
30, 2022
(UNAUDITED)
On
April 5, 2022, the Company entered into a Securities Purchase Agreement (“First April 2022 SPA”) with a related party,
Matthew Schwartz, who is a member of the board of directors (“Investor”), to purchase a convertible note with principal
of $100,000
(“First April 2022 Note”) with accompanying warrants to purchase 4,201,681
shares of common stock (“First April 2022 Warrants”). The Company received net proceeds of $100,000
on March 24, 2022. The First April 2022 Warrants were valued at $89,815
using the relative fair value method and were recorded as debt discount which is being amortized over the life of the First April
2022 Note. The First April 2022 Warrants are exercisable at any time and expire on April 1, 2027. The First April 2022 Note bears an
interest rate of 8%
per annum (which shall increase to 10%
per year upon the occurrence of an “Event of Default” (as defined in the First April 2022 Note)) and matures on April
1, 2027. The First April 2022 Note and First April 2022 Warrants are convertible and exercisable, respectively, into shares
of the Company’s common stock at a price equal to $0.00476
per share (subject to adjustment). The First April 2022 Note and First April 2022 Warrants include a down-round provision under
which the conversion price and exercise price are reduced if the Company sells or issues any securities including options,
convertible securities, with the exception of exempt issuance (as defined in the agreements), or amended outstanding securities, at
a lower conversion or exercise price than that of the First April 2022 Note and First April 2022 Warrants. The conversion and
exercise price of the First April 2022 Note and First April 2022 Warrants are reduced equal to the lower conversion and exercise
price of the new issuance or amended securities. For so long as the First April 2022 Warrants remains outstanding and until the listing by the Company or the trading of the common stock on a Qualified National Exchange (as defined in the agreement); (i) if the Company issues warrants to investors in an offering of common stock or of any equity linked security (each a “Subsequent Offering”), and such warrants equal more than 20% warrant coverage, then a number of additional shares will be added to the First April 2022 Warrants such that the First April 2022 Warrants shall equal the same percentage of the warrant coverage offered to the investors in the Subsequent Offering and; (ii) if the Company issues warrants in a Subsequent Offering which may be exercised by means of a cashless exercises, then the First April 2022 Warrants shall be exercisable by the same cashless exercise feature of the warrants issued in the Subsequent Offering. The Company may prepay the First April 2022 Note at any time at an amount equal to 110%
of the outstanding principal balance and accrued interest. At the election of the Investor, the First April 2022 Note can be
converted in whole or in part at any time and from time to time. Further, upon maturity the Company may pay the outstanding balance
of the First April 2022 Note in cash or convert it into shares of common stock. Upon the listing by the Company or the trading of
the common stock on a Qualified National Exchange, the conversion amount (as defined in the First April 2022 Note) shall
automatically be converted into fully-paid and non-assessable shares of common stock. As of June 30, 2022, the First April 2022 Note
had an outstanding principal balance of $100,000
and accrued interest of $1,885.
The First April 2022 Note is reflected in the accompanying unaudited balance sheet at $14,424
as a long-term convertible note payable – related party, net of discount in the amount of $85,576
(see Note 8) as of June 30, 2022.
On
May 9, 2022, the Company entered into a Securities Purchase Agreement (“May 2022 SPA”) with a related party, who is an
affiliate stockholder (“May 2022 Investor”), to purchase four convertible notes for an aggregate investment amount of
$1,000,000
(collectively as “May 2022 Notes”) and accompanying warrants to purchase shares of common stock
equal to 20%
of the number of the total shares of common stock issuable upon the conversion of the May 2022 Notes (collectively as “May
2022 Warrants”). The first note issued on May 9, 2022, had a principal balance of $250,000
and accompanying warrants to purchase up to 10,504,202
shares of common stock. The second note issued on May 24, 2022, had a principal balance of $250,000
and accompanying warrants to purchase up to 10,504,202
shares of common stock. The third note issued on June 10, 2022, had a principal balance of $250,000
and accompanying warrants to purchase up to 10,504,202
shares of common stock. The Company received $750,000
in aggregate proceeds from the May 2022 Notes. The May 2022 Notes bear an interest rate of 8%
per annum (which shall increase to 10%
per year upon the occurrence of an “Event of Default” (as defined in the May 2022 Notes)) and mature on April 1, 2027.
The May 2022 Warrants are exercisable at any time and expire on April 1, 2027. The May 2022 Warrants were valued at $142,489
using the relative fair value method and were recorded as debt discount which is being amortized over the life of the May 2022
Notes. The May 2022 Notes and May 2022 Warrants are convertible and exercisable, respectively, into shares of the Company’s
common stock at a price equal to $0.00476
per share (subject to adjustment). The May 2022 Notes and May 2022 Warrants include a down-round provision under which the
conversion price and exercise price are reduced if the Company sells or issues any securities including options, convertible
securities, with the exception of exempt issuance (as defined in the agreements), or amended outstanding securities, at a lower
conversion or exercise price than that of the May 2022 Notes and May 2022 Warrants. The conversion and exercise price of the May
2022 Notes and May 2022 Warrants are reduced equal to the lower conversion and exercise price of the new issuance or amended
securities. For so long as the May 2022 Warrants remains outstanding and until the listing by the Company or the trading of the common stock on a Qualified National Exchange (as defined in the agreement); (i) if the Company issues warrants to investors in an offering of common stock or of any equity linked security (each a “Subsequent Offering”), and such warrants equal more than 20% warrant coverage, then a number of additional shares will be added to the May 2022 Warrants such that the May 2022 Warrants shall equal the same percentage of the warrant coverage offered to the investors in the Subsequent Offering and; (ii) if the Company issues warrants in a Subsequent Offering which may be exercised by means of a cashless exercises, then the May 2022 Warrants shall be exercisable by the same cashless exercise feature of the warrants issued in the Subsequent Offering. The Company may prepay the May 2022 Notes at any time at an amount equal to 110%
of the outstanding principal balance and accrued interest. At the election of the May 2022 Investor, the May 2022 Notes can be
converted in whole or in part at any time and from time to time. Further, upon maturity the Company may pay the outstanding balance
of the May 2022 Notes in cash or convert it into shares of common stock. Upon the listing by the Company or the trading of the
common stock on a Qualified National Exchange, the conversion amount (as defined in the May 2022 Notes) shall automatically be
converted into fully-paid and non-assessable shares of common stock. As of June 30, 2022, the May 2022 Notes had an aggregate
outstanding principal balance of $750,000
and accrued interest of $5,973.
The May 2022 Notes are reflected in the accompanying unaudited balance sheet at $610,743
as a long-term convertible note payable – related party, net of discount in the amount of $139,257
(see Note 8) as of June 30, 2022.
On
June 15, 2022, the Company closed a Securities Purchase Agreement (“June 2022 SPA”) with a related party, Danica Holly,
who is a member of the board of directors (“Investor”), to purchase a convertible note with principal of $50,000
(“June 2022 Note”) with accompanying warrants to purchase 2,100,840
shares of common stock (“June 2022 Warrants”). The Company received net proceeds of $50,000
on June 15, 2022. The June 2022 Warrants were valued at $5,924
using the relative fair value method and were recorded as debt discount which is being amortized over the life of the June 2022
Note. The June 2022 Warrants are exercisable at any time and expire on April 1, 2027. The June 2022 Note bears an interest rate of 8%
per annum (which shall increase to 10%
per year upon the occurrence of an “Event of Default” (as defined in the June 2022 Note)) and matures on April
1, 2027. The June 2022 Note and June 2022 Warrants are convertible and exercisable, respectively, into shares of the
Company’s common stock at a price equal to $0.00476
per share (subject to adjustment). The June 2022 Note and June 2022 Warrants include a down-round provision under which the
conversion price and exercise price are reduced if the Company sells or issues any securities including options, convertible
securities, with the exception of exempt issuance (as defined in the agreements), or amended outstanding securities, at a lower
conversion or exercise price than that of the June 2022 Note and June 2022 Warrants. The conversion and exercise price of the June
2022 Note and June 2022 Warrants are reduced equal to the lower conversion and exercise price of the new issuance or amended
securities. For so long as the June 2022 Warrants remains outstanding and until the listing by the Company or the trading of the common stock on a Qualified National Exchange (as defined in the agreement); (i) if the Company issues warrants to investors in an offering of common stock or of any equity linked security (each a “Subsequent Offering”), and such warrants equal more than 20% warrant coverage, then a number of additional shares will be added to the June 2022 Warrants such that the June 2022 Warrants shall equal the same percentage of the warrant coverage offered to the investors in the Subsequent Offering and; (ii) if the Company issues warrants in a Subsequent Offering which may be exercised by means of a cashless exercises, then the June 2022 Warrants shall be exercisable by the same cashless exercise feature of the warrants issued in the Subsequent Offering. The Company may prepay the June 2022 Note at any time at an amount equal to 110%
of the outstanding principal balance and accrued interest. At the election of the Investor, the June 2022 Note can be converted in
whole or in part at any time and from time to time. Further, upon maturity the Company may pay the outstanding balance of the June
2022 Note in cash or convert it into shares of common stock. Upon the listing by the Company or the trading of the common stock on a
Qualified National Exchange, the conversion amount (as defined in the June 2022 Note) shall automatically be converted into
fully-paid and non-assessable shares of common stock. As of June 30, 2022, the June 2022 Note had an outstanding principal balance
of $50,000
and accrued interest of $164.
The June 2022 Note are reflected in the accompanying unaudited balance sheet at $44,127
as a long-term convertible note payable – related party, net of discount in the amount of $5,873
(see Note 8) as of June 30, 2022.
THERALINK
TECHNOLOGIES, INC.
CONDENSED
NOTES TO UNAUDITED FINANCIAL STATEMENTS
JUNE
30, 2022
(UNAUDITED)
Convertible
Debt
On
November 1, 2021, the Company entered into a Securities Purchase Agreement (“Second November 2021 SPA”) with an investor
(“Second November 2021 Investor”) to purchase two convertible notes (collectively as “Second November 2021
Notes”) and two accompanying warrants (collectively as “Second November 2021 Warrants”),
for an aggregate investment amount of $500,000.
The first note, issued on November 1, 2021, had a principal balance of $250,000
and accompanying warrants to purchase up to 13,661,203
shares of common stock. The second note issued on December 1, 2021, had a principal balance of $250,000
and accompanying warrants to purchase up to 13,661,203
shares of common stock. The Company received $500,000
in aggregate proceeds from the Second November 2021 Notes. The Second November 2021 Notes bear an interest rate of 8%
per annum (which shall increase to 10%
per year upon the occurrence of an “Event of Default” (as defined in the Second November 2021 Notes)) and mature on November
1, 2026. The Second November 2021 Warrants are exercisable at any time and expire on November 1, 2026. The Second November
2021 Warrants to purchase up to 27,322,406
shares of common stock were valued at $495,560
using the relative fair value method and were recorded as a debt discount which is being amortized over the life of the Second
November 2021 Notes. The Second November 2021 Notes and Second November 2021 Warrants are convertible and exercisable, respectively,
into shares of the Company’s common stock at a price equal to $0.00366
per share (subject to adjustment). The Second November 2021 Notes and Second November 2021 Warrants include a down-round provision
under which the conversion price and exercise price are reduced if the Company sells or issues any securities including options,
convertible securities, with the exception of exempt issuance (as defined in the agreements), or amended outstanding securities, at
a lower conversion or exercise price than that of the Second November 2021 Notes and Second November 2021 Warrants. The conversion
and exercise price of the Second November 2021 Notes and Second November 2021 Warrants are reduced equal to the lower conversion and
exercise price of the new issuance or amended securities. The Company may prepay the Second November 2021 Notes at any time in an
amount equal to 110%
of the outstanding principal balance and accrued interest. At the election of the Second November 2021 Investor, the Second November
2021 Notes can be converted in whole or in part at any time and from time to time. Further, upon maturity the Company may pay the
outstanding balance of the Second November 2021 Notes in cash or convert it into shares of common stock. Upon the listing by the
Company or the trading of the common stock on a Qualified National Exchange (as defined in the Second November 2021 Notes), the
conversion amount shall automatically be converted into fully-paid and non-assessable shares of common stock. The
Company shall not effect the conversion of any of the Second November 2021 Notes held by the Second November 2021 Investor, and the
Second November 2021 Investor shall not have the right to convert any of the Second November 2021 Notes and any such conversion
shall be null and void and treated as if never made, to the extent that after giving effect to such conversion, such restricted
holder would beneficially own in excess of 4.99% of the shares of common stock outstanding immediately after giving effect to such
conversion (which provision may be increased to a maximum of 9.9% by written notice from the Second November 2021 Investor to the
Company, which notice shall be effective 61 calendar days after the date of such notice).
On
January 26, 2022, a notice and request for consent regarding a change in offering terms was sent by the Company to the Second November
2021 Investor. Upon the approval of the Second November 2021 Investor, the Company modified the terms of the Second November 2021 SPA
which increased the warrants issuable from 20% to100% of the common stock issuable upon conversion of the notes purchased. As a result,
the Second November 2021 Investor received additional cashlessly-exercisable warrants equal to 80% of the common stock issuable upon
conversion of the Second November 2021 Notes. The Company issued additional warrants to purchase up to 109,289,616 shares of common stock
to the Second November 2021 Investor which increased the total relative fair value of all warrants in total by $22,429 recorded as debt
discount which is being amortized over the life of the Second November 2021 Notes (see Note 9). The modification of the Second November
2021 SPA did not meet the requirements of a debt extinguishment under ASC 470-50 - Debt Modifications and Exchanges; however it
represented a substantial modification whereby the Second November 2021 Investor received a substantial amount of additional warrants
for the same principal amount of investment hence it was accounted for, in substance, as a debt modification ASC 470-50 and no gain or
losses was recognized. As of June 30, 2022, the Second November 2021 Notes had an outstanding principal balance of $500,000 and accrued
interest of $24,438. The Second November 2021 Notes are reflected in the accompanying unaudited balance sheet at $44,087 as a long-term
convertible note payable, net of discount in the amount of $455,913 as of June 30, 2022.
THERALINK
TECHNOLOGIES, INC.
CONDENSED
NOTES TO UNAUDITED FINANCIAL STATEMENTS
JUNE
30, 2022
(UNAUDITED)
On
November 1, 2021, the Company entered into a Securities Purchase Agreement (“Third November 2021 SPA”) with an investor
(“Third November 2021 Investor”) to purchase two convertible notes (collectively as “Third November 2021
Notes”) and two accompanying warrants (collectively as “Third November 2021 Warrants”), for
an aggregate investment amount of $500,000.
The first note issued on November 1, 2021, had a principal balance of $250,000
and accompanying warrants to purchase up to 13,661,203
shares of common stock. The second note issued on December 1, 2021, had a principal balance of $250,000
and accompanying warrants to purchase up to 13,661,203
shares of common stock. The Company received $500,000
in aggregate proceeds from the Third November 2021 Notes. The Third November 2021 Notes bear an interest rate of 8%
per annum (which shall increase to 10%
per year upon the occurrence of an “Event of Default” (as defined in the Third November 2021 Notes)) and mature on November
1, 2026. The Third November 2021 Warrants are exercisable at any time and expire on November 1, 2026. The Third November 2021
Warrants to purchase up to 27,322,406
shares of common stock were valued at $495,560
using the relative fair value method and were recorded as a debt discount which is being amortized over the life of the Third
November 2021 Notes. The Third November 2021 Notes and Third November 2021 Warrants are convertible and exercisable, respectively,
into shares of the Company’s common stock at a price equal to $0.00366
per share (subject to adjustment). The Third November 2021 Notes and Third November 2021 Warrants include a down-round provision
under which the conversion price and exercise price are reduced if the Company sells or issues any securities including options,
convertible securities, with the exception of exempt issuance (as defined in the agreements), or amended outstanding securities, at
a lower conversion or exercise price than that of the Third November 2021 Notes and Third November 2021 Warrants. The conversion and
exercise price of the Third November 2021 Notes and Third November 2021 Warrants are reduced equal to the lower conversion and
exercise price of the new issuance or amended securities. The Company may prepay the Third November 2021 Notes at any time in an
amount equal to 110%
of the outstanding principal balance and accrued interest. At the election of the Third November 2021 Investor, the Third November
2021 Notes can be converted in whole or in part at any time and from time to time. Further, upon maturity the Company may pay the
outstanding balance of the Third November 2021 Notes in cash or convert it into shares of common stock. Upon the listing by the
Company or the trading of the common stock on a Qualified National Exchange (as defined in the Third November 2021 Notes), the
Conversion Amount shall automatically be converted into fully paid and non-assessable shares of common stock. The
Company shall not effect the conversion of any of the Third November 2021 Notes held by the Third November 2021 Investor, and the
Third November 2021 Investor shall not have the right to convert any of the Third November 2021 Notes and any such conversion shall
be null and void and treated as if never made, to the extent that after giving effect to such conversion, such restricted holder
would beneficially own in excess of 4.99% of the shares of common stock outstanding immediately after giving effect to such
conversion (which provision may be increased to a maximum of 9.9% by written notice from the Third November 2021 Investor to the
Company, which notice shall be effective 61 calendar days after the date of such notice).
On
January 26, 2022, a notice and request for consent regarding a change in offering terms was sent by the Company to the Third November
2021 Investor. Upon the approval of the Third November 2021 Investor, the Company modified the terms of the Third November 2021 SPA which
increased the warrants issuable from 20% to100% of the common stock issuable upon conversion of the notes purchased. As a result, the
Third November 2021 Investor received additional cashlessly-exercisable warrants equal to 80% of the common stock issuable upon conversion
of the Third November 2021 Notes. The Company issued additional warrants to purchase up to shares of common stock to the
Third November 2021 Investor which increased the total relative fair value of all warrants in total by $22,429 recorded as debt discount
which is being amortized over the life of the Third November 2021 Notes (see Note 9). The modification of the Third November 2021 SPA
did not meet the requirements of a debt extinguishment under ASC 470-50 - Debt Modifications and Exchanges; however it represented
a substantial modification whereby the Third November 2021 Investor received a substantial amount of additional warrants for the same
principal amount of investment, hence it was accounted for, in substance, as a debt modification ASC 470-50 and no gain or losses was
recognized. As of June 30, 2022, the Third November 2021 Notes had an outstanding principal balance of $500,000 and accrued interest
of $24,329. The Third November 2021 Notes are reflected in the accompanying unaudited balance sheet at $44,087 as a long-term convertible
note payable, net of discount in the amount of $455,913 as of June 30, 2022.
On
January 27, 2022, the Company entered into a Securities Purchase Agreement (“First January 2022 SPA”) with an investor (“First
January 2022 Investor”) to purchase a convertible note with a principal balance of $500,000 (“First January 2022 Note”) with the
Company receiving $500,000 in proceeds and accompanying warrants to purchase up to 136,612,022 shares
of common stock (“First January 2022 Warrants”). The First January 2022 Note bears an interest rate of 8%
per annum (which shall increase to 10%
per year upon the occurrence of an “Event of Default” (as defined in the First January 2022 Note)) and mature on November
1, 2026. The First January 2022 Warrants are exercisable at any time and expire on November 1, 2026. The First January 2022 Warrants
to purchase up to 136,612,022
shares of common stock were valued at $472,403
using the relative fair value method and were recorded as a debt discount which is being amortized over the life of the First
January 2022 Note. The First January 2022 Note and First January 2022 Warrants are convertible and exercisable, respectively, into shares
of the Company’s common stock at a price equal to $0.00366
per share (subject to adjustment). The First January 2022 Note and First January 2022 Warrants include a down-round provision
under which the conversion price and exercise price are reduced if the Company sells or issues any securities including options, convertible
securities, with the exception of exempt issuance (as defined in the agreements), or amended outstanding securities, at a lower conversion
or exercise price than that of the First January 2022 Note and First January 2022 Warrants include. The conversion and exercise price
of the First January 2022 Note and First January 2022 Warrants include are reduced equal to the lower conversion and exercise price of
the new issuance or amended securities. The Company may prepay the First January 2022 Note at any time in an amount equal to 110%
of the outstanding principal balance and accrued interest. At the election of the First January 2022 Investor, the First January 2022
Note can be converted in whole or in part at any time and from time to time). Further, upon maturity the Company may pay the outstanding
balance of the First January 2022 Note in cash or convert it into shares of common stock. Upon the listing by the Company or the trading
of the common stock on a Qualified National Exchange (as defined in the First January 2022 Note), the conversion amount shall automatically
be converted into fully-paid and non-assessable shares of common stock. The
Company shall not effect any conversion of the First January 2022 Note and the First January 2022 Investor shall not have the right to
convert any amount of the First January 2022 Note and any such conversion shall be null and void and treated as if never made, to the
extent that after giving effect to such conversion, such restricted holder would beneficially own in excess of 4.99% of the shares of
common stock outstanding immediately after giving effect to such conversion (which provision may be increased to a maximum of 9.9% by
such First January 2022 Investor by written notice from the First January 2022 Investor to the Company, which notice shall be effective
61 calendar days after the date of such notice. As of June 30, 2022, the First January 2022 Note had an outstanding principal
balance of $500,000
and accrued interest of $16,877.
The First January 2022 Note is reflected in the accompanying unaudited balance sheet at $45,712
as a long-term convertible note payable, net of discount in the amount of $454,288
as of June 30, 2022.
THERALINK
TECHNOLOGIES, INC.
CONDENSED
NOTES TO UNAUDITED FINANCIAL STATEMENTS
JUNE
30, 2022
(UNAUDITED)
On
January 31, 2022, the Company entered into a Securities Purchase Agreement (“Second January 2022 SPA”) with an investor (“Second
January 2022 Investor”) to purchase a convertible note with principal balance of $500,000
(“Second January 2022 Note”) with
the Company receiving $500,000 in proceeds and accompanying warrants to purchase up to 136,612,022
shares of common stock (“Second January
2022 Warrants”). The Second January 2022 Note bears an interest rate of 8%
per annum (which shall increase to 10%
per year upon the occurrence of an “Event of Default” (as defined in the Second January 2022 Note)) and mature on November
1, 2026. The Second January 2022 Warrants are
exercisable at any time and expire on November 1, 2026. The Second January 2022 Warrants to purchase up to 136,612,022
shares of common stock were valued at $469,810
using the relative fair value method and recorded
as a debt discount which is being amortized over the life of the Second January 2022 Note. The Second January 2022 Note and Second January
2022 Warrants are convertible and exercisable, respectively, into shares of the Company’s common stock at a price equal to $0.00366
per share (subject to adjustment). The Second
January 2022 Note and Second January 2022 Warrants include a down-round provision under which the conversion price and exercise price
are reduced if the Company sells or issues any securities including options, convertible securities, with the exception of exempt issuance
(as defined in the agreements), or amended outstanding securities, at a lower conversion or exercise price than that of the Second January
2022 Note and Second January 2022 Warrants. The conversion and exercise price of the Second January 2022 Note and Second January 2022
Warrants are reduced equal to the lower conversion and exercise price of the new issuance or amended securities. The Company may prepay
the Second January 2022 Note at any time in an amount equal to 110%
of the outstanding principal balance and accrued interest. At the election of the Second January 2022 Investor, the Second January 2022
Note can be converted in whole or in part at any time and from time to time. Further, upon maturity the Company may pay the outstanding
balance of the Second January 2022 Note in cash or convert it into shares of common stock. Upon the listing by the Company or the trading
of the common stock on a Qualified National Exchange (as defined in the Second January 2022 Note), the conversion amount shall automatically
be converted into fully-paid and non-assessable shares of common stock. The
Company shall not effect the conversion of any of the Second January 2022 Note held by the Second January 2022 Investor, and the Second
January 2022 Investor shall not have the right to convert any of the Second January 2022 Note and any such conversion shall be null and
void and treated as if never made, to the extent that after giving effect to such conversion, such restricted holder would beneficially
own in excess of 4.99% of the shares of common stock outstanding immediately after giving effect to such conversion (which provision
may be increased to a maximum of 9.9% by such Second January 2022 Investor by written notice from the Second January 2022 Investor to
the Company, which notice shall be effective 61 calendar days after the date of such notice. As
of June 30, 2022, the Second January 2022 Note had an outstanding principal balance of $500,000
and accrued interest of $16,438.
The Second January 2022 Note is reflected in the accompanying unaudited balance sheet at $44,799
as a long-term convertible note payable, net
of discount in the amount of $455,201
as of June 30, 2022.
During
April 2022, the Company entered into a Securities Purchase Agreement (“Second April 2022 SPA”) with various investors
(“Investors”), to purchase convertible notes for an aggregate investment amount of $425,000
(collectively as “Second April 2022 Notes”) with the Company receiving $425,000
of proceeds and accompanying warrants to purchase up to an aggregate of 17,857,144
shares of common stock (collectively as “Second April 2022 Warrants”). The Second April 2022 Warrants were valued at
$335,593
using the relative fair value method and were recorded as debt discount which is being amortized over the life of the Second April
2022 Notes. The Second April 2022 Notes bear an interest rate of 8%
per annum (which shall increase to 10%
per year upon the occurrence of an “Event of Default” (as defined in the Second April 2022 Notes)) and matures on April
1, 2027. The Second April 2022 Warrants are exercisable at any time and expire on April 1, 2027. The Second April 2022 Notes
and Second April 2022 Warrants are convertible and exercisable, respectively, into shares of the Company’s common stock at a
price equal to $0.00476
per share (subject to adjustment). The Second April 2022 Notes and Second April 2022 Warrants include a down-round provision under
which the conversion price and exercise price are reduced if the Company sells or issues any securities including options,
convertible securities, with the exception of exempt issuance (as defined in the agreements), or amended outstanding securities, at
a lower conversion or exercise price than that of the Second April 2022 Notes and Second April 2022 Warrants. The conversion and
exercise price of the Second April 2022 Notes and Second April 2022 Warrants are reduced equal to the lower conversion and exercise
price of the new issuance or amended securities. For so long as the Second April 2022 Warrants remains outstanding and until the listing by the Company or the trading of the common stock on a Qualified National Exchange (as defined in the agreement); (i) if the Company issues warrants to investors in an offering of common stock or of any equity linked security (each a “Subsequent Offering”), and such warrants equal more than 20% warrant coverage, then a number of additional shares will be added to the Second April 2022 Warrants such that the Second April 2022 Warrants shall equal the same percentage of the warrant coverage offered to the investors in the Subsequent Offering and; (ii) if the Company issues warrants in a Subsequent Offering which may be exercised by means of a cashless exercises, then the Second April 2022 Warrants shall be exercisable by the same cashless exercise feature of the warrants issued in the Subsequent Offering. The Company may prepay the Second April 2022 Notes at any time at an amount equal
to 110%
of the outstanding principal balance and accrued interest. At the election of the Investors, the Second April 2022 Notes can be
converted in whole or in part at any time and from time to time. Further, upon maturity the Company may pay the outstanding balance
of the Second April 2022 Notes in cash or convert it into shares of common stock. Upon the listing by the Company or the trading of
the common stock on a Qualified National Exchange, the conversion amount (as defined in the Second April 2022 Notes) shall
automatically be converted into fully-paid and non-assessable shares of common stock. As of June 30, 2022, the Second April 2022
Notes had an aggregate outstanding principal balance of $425,000
and accrued interest of $7,140.
The Second April 2022 Notes are reflected in the accompanying unaudited balance sheet at $103,782
as a long-term convertible note payable, net of discount in the amount of $321,218
as of June 30, 2022.
THERALINK
TECHNOLOGIES, INC.
CONDENSED
NOTES TO UNAUDITED FINANCIAL STATEMENTS
JUNE
30, 2022
(UNAUDITED)
Notes
Payable - Related Party
On
April 26, 2021, the Company entered into a Promissory Note Agreement with Jeffrey Busch who serves as a member of the Board of Directors
and a related party, for a principal amount of $100,000. The Company received proceeds of $100,000. The note bears an annual interest
rate of 1%, matures on April 1, 2022 and can be prepaid in whole or in part without penalty. Pursuant to the note, the Company has a
90-day grace period following the maturity date after which the lender shall charge a late payment fee equal to 1% of the outstanding
principal balance and cost of collection, including legal fees. As of September 30, 2021, the note had an outstanding principal balance
of $100,000 and accrued interest of $428 (see Note 8 and see amendment below).
On
October 21, 2021, the Company entered into a Promissory Note Agreement with Jeffrey Busch who serves as a member of the Board of Directors
and a related party, for a principal amount of $150,000. The Company received proceeds of $150,000. The note bore an annual interest
rate of 1%, matured on December 1, 2021 and could have been prepaid in whole or in part without penalty. Pursuant to the note, the Company
has a 90-day grace period following the maturity date after which the lender was permitted to charge a late payment fee equal to 1% of
the outstanding principal balance and cost of collection, including legal fees. During the nine months ended June 30, 2022, the Company
fully paid the outstanding balance on the note. As of June 30, 2022, the note had no outstanding balance (see Note 8).
On
May 5, 2022, the Company and Jeffrey Busch (collectively as “Parties”) amended the April 26, 2021 note (discussed above)
with principal amount of $100,000 (discussed above) (“Original Note”) pursuant to which the Parties increased the principal
amount to $350,000 (“New Note”) with the Company receiving additional $250,000 of proceeds and added a contingent conversion
feature. The New Note bears an annual interest rate of 1% (which shall increase to 2% in an event of a default) and matures on May 5,
2024. The New Note may not be prepaid and is only convertible upon an occurrence of a public offering. The outstanding principal plus
any unpaid accrued interest (“Conversion Amount”) of the New Note is convertible into shares of common stock at the price
for which the common stock was sold in the public offering. Pursuant to ASC 470-50 - Debt Modifications and Exchanges, the amendment
was accounted for as a debt extinguishment because the contingent conversion feature added to the New Note resulted in a substantial
modification of the Original Note. No gain or loss was recognized in connection with the debt extinguishment. As of June 30, 2022, the
New Note had an outstanding principal balance of $350,000, reflected as notes payable – related party in the accompanying
unaudited balance sheet since the conditions for its contingent conversion has not yet been met, and accrued interest of $1,650 (see
Note 8).
Note
Payable
In
September 2017, the Company entered into a note agreement with a third-party investor. Pursuant to the note, the Company borrowed a principal
amount of $1,000. The note bears an annual interest rate of 33.3%, is unsecured and in default due to non-payment of the balance pursuant
to the repayment terms. As of June 30, 2022, the note had principal and accrued interest balances of $1,000 and $1,604, respectively.
NOTE
7 –LEASE LIABILITIES
Financing
Lease Right-of-Use (“ROU”) Assets and Financing Lease Liabilities
Effective
November 2018, the Company entered into a financing agreement with the first lessor to finance the purchase of equipment. Pursuant to
the financing agreement, the Company shall make a monthly payment of $379 for a period of 60 months commencing in November 2018 through
October 2023. At the effective date of the financing agreement, the Company recorded a financing lease payable of $16,065.
Effective
November 2018, the Company entered into a financing agreement with a second lessor to finance the purchase of equipment. Pursuant to
the financing agreement, the Company shall make a monthly payment of $1,439 for a period of 60 months commencing in November 2018 through
October 2023. At the effective date of the financing agreement, the Company recorded a financing lease payable of $62,394.
THERALINK
TECHNOLOGIES, INC.
CONDENSED
NOTES TO UNAUDITED FINANCIAL STATEMENTS
JUNE
30, 2022
(UNAUDITED)
Effective
March 2019, the Company entered into a financing agreement with a third lessor to finance the purchase of equipment. Pursuant to the
financing agreement, the Company shall make a monthly payment of $1,496 for a period of 60 months commencing in March 2019 through February
2024. At the effective date of the financing agreement, the Company recorded a financing lease payable of $64,940.
Effective
August 2019, the Company entered into a financing agreement with a fourth lessor to finance the purchase of equipment. Pursuant to the
financing agreement, the Company shall make a monthly payment of $397 for a period of 60 months commencing in August 2019 through July
2024. At the effective date of the financing agreement, the Company recorded a financing lease payable of $19,622.
Effective
January 2020, the Company entered into a financing agreement with a fifth lessor to finance the purchase of equipment. Pursuant to the
financing agreement, the Company shall make a monthly payment of $1,395 for a period of 60 months commencing in January 2020 through
December 2025. At the effective date of the financing agreement, the Company recorded a financing lease payable of $68,821.
The
significant assumption used to determine the present value of the financing lease payables was the discount rate which ranged from 8%
and 15% based on the Company’s estimated effective rate pursuant to the financing agreements.
Financing
lease right-of-use assets (“Financing ROU”) is summarized below:
SCHEDULE OF FINANCIAL LEASE RIGHT-OF-USE ASSETS
| | |
| | | |
| | |
| | |
June 30, 2022 | | |
September 30,
2021 | |
| | |
(Unaudited) | | |
| |
| Financing ROU assets | |
$ | 231,841 | | |
$ | 231,841 | |
| Less accumulated depreciation | |
| (155,295 | ) | |
| (120,518 | ) |
| Balance of Financing ROU assets | |
$ | 76,546 | | |
$ | 111,323 | |
For
the three months ended June 30, 2022 and 2021, depreciation expense related to Financing ROU assets amounted to $11,593 for both periods.
For
the nine months ended June 30, 2022 and 2021, depreciation expense related to Financing ROU assets amounted to $34,777 for both periods.
Financing
lease liability related to the Financing ROU assets is summarized below:
SCHEDULE OF FINANCIAL LEASE LIABILITY
| | |
| | | |
| | |
| | |
June 30, 2022 | | |
September 30,
2021 | |
| | |
(Unaudited) | | |
| |
| Financing lease payables for equipment | |
$ | 231,841 | | |
$ | 231,841 | |
| Total financing lease payables | |
| 231,841 | | |
| 231,841 | |
| Payments of financing lease liabilities | |
| (130,968 | ) | |
| (95,726 | ) |
| Total | |
| 100,873 | | |
| 136,115 | |
| Less: short term portion | |
| (52,351 | ) | |
| (47,730 | ) |
| Long term portion | |
$ | 48,522 | | |
$ | 88,385 | |
Future
minimum lease payments under the financing lease agreements at June 30, 2022 are as follows:
SCHEDULE OF FUTURE MINIMUM LEASE PAYMENTS
| | |
| | |
| Years ending September 30, | |
Amount | |
| | |
(Unaudited) | |
| 2022 | |
$ | 15,321 | |
| 2023 | |
| 53,787 | |
| 2024 | |
| 40,875 | |
| 2025 | |
| 4,185 | |
| Total minimum financing lease payments | |
| 114,168 | |
| Less: discount to fair value | |
| (13,295 | ) |
| Total financing lease payable at June 30, 2022 | |
$ | 100,873 | |
THERALINK
TECHNOLOGIES, INC.
CONDENSED
NOTES TO UNAUDITED FINANCIAL STATEMENTS
JUNE
30, 2022
(UNAUDITED)
Operating
Lease Right-of-Use (“ROU”) Asset and Operating Lease Liabilities
In
December 2019, the Company entered into a lease agreement for its corporate and laboratory facility in Golden, Colorado. The lease is
for a period of 61 months, with an option to extend, commencing in February 2020 and expiring in February 2025. Pursuant to the lease
agreement, the lease requires the Company to pay a monthly base rent of; (i) $4,878 in the first year; (ii) $5,026 in the second year;
(iii) $5,179 in the third year; (iv) $5,335 in the fourth year and; (v) $5,495 in the fifth year, plus a pro rata share of operating
expenses beginning February 2020.
In
February 2020, pursuant to ASC 842 – Leases, the Company calculated the present value of the total lease payments using
a discount rate of 12% which was based on the Company’s estimated incremental borrowing rate. The Company recorded an operating
right-of-use asset and lease liability of $231,337 in connection with the lease.
On
June 10, 2021, the Company entered into an amendment to its existing Warehouse Lease (the “Lease Amendment”), effective October
3, 2021, for its laboratory facility in Golden, CO (see Note 10). The Lease Amendment provided for: (i) an extension to the term of the
original lease to five years following the completion of the Company’s improvements to the Expansion Premises (defined below);
(ii) an expansion of the premises to include the premises located at Unit 404, Building F, 15000 West 6th Avenue, Golden, Colorado 80401,
consisting of approximately 4,734 rentable square feet (the “Expansion Premises”); (iii) an annual base rent modification;
(iv) an increase to the security deposit; (v) tenant improvement allowance; (vi) additional parking and; (vii) two renewal options, each
for five year terms, for a total of ten years.
Pursuant
to the Lease Amendment, the Company must pay a total annual base rent of; (1) $115,823 for year one; (2) $119,310 for year two; (3) $122,893
for year three; (4) $126,580 for year four; (5) $130,377 for year five; (6) $135,163 for year six; (7) $139,218 for year seven; (8) $143,394
for year eight; (9) $147,696 for year nine; (10) $152,127 for year ten; (11) $156,331 for year eleven; (12) $161,391 for year twelve;
(13) $166,233 for year thirteen; (14) $171,220 for year fourteen and; (15) $176,357 for year fifteen.
In
October 2021, pursuant to ASC 842 – Leases, the Company wrote off the balances of the operating asset of $168,664 and operating
liability of $176,893 related to the original lease and recognized a gain on lease modification in the amount of $8,229 which was included
in general and administrative expense in the accompanying unaudited statement of operation. The Company calculated the present value
of the total lease payments in the Lease Amendment using a discount rate of 8% which was based on the Company’s incremental borrowing
rate at the effective date and recorded an operating right-of-use asset and an operating lease liability of $1,212,708.
For
the nine months ended June 30, 2022, lease costs amounted to $151,180 which included base lease costs of $86,677 and other expenses of
$64,503, all of which were expensed during the period and included in general and administrative expenses on the accompanying unaudited
statements of operations.
Operating
Right-of-use asset (“ROU”) is summarized below:
SCHEDULE OF OPERATING RIGHT-OF-USE ASSET
| | |
| | | |
| | |
| | |
June 30, 2022 | | |
September 30, 2021 | |
| | |
(Unaudited) | | |
| |
| Operating office lease | |
$ | 1,212,708 | | |
$ | 231,337 | |
| Less accumulated reduction | |
| (45,517 | ) | |
| (62,673 | ) |
| Balance of Operating ROU asset | |
$ | 1,167,191 | | |
$ | 168,664 | |
Operating
lease liability related to the ROU asset is summarized below:
SCHEDULE OF OPERATING LEASE LIABILITY
| | |
| | | |
| | |
| | |
June 30, 2022 | | |
September 30,
2021 | |
| | |
(Unaudited) | | |
| |
| Operating office lease | |
$ | 1,212,708 | | |
$ | 231,337 | |
| Total operating lease liability | |
| 1,212,708 | | |
| 231,337 | |
| Reduction of operating lease liability | |
| (23,989 | ) | |
| (54,444 | ) |
| Total | |
| 1,188,719 | | |
| 176,893 | |
| Less: short term portion | |
| (24,181 | ) | |
| (42,411 | ) |
| Long term portion | |
$ | 1,164,538 | | |
$ | 134,482 | |
THERALINK
TECHNOLOGIES, INC.
CONDENSED
NOTES TO UNAUDITED FINANCIAL STATEMENTS
JUNE
30, 2022
(UNAUDITED)
Future
base lease payments under the non-cancellable operating lease at June 30, 2022 are as follows:
SCHEDULE OF FUTURE BASE LEASE PAYMENTS
| | |
| | |
| Years ending September 30, | |
Amount | |
| | |
(Unaudited) | |
| 2022 | |
$ | 29,146 | |
| 2023 | |
| 119,310 | |
| 2024 | |
| 122,893 | |
| 2025 | |
| 126,580 | |
| 2026 | |
| 130,377 | |
| 2027 and thereafter | |
| 1,549,130 | |
| Total minimum non-cancellable operating lease payments | |
| 2,077,436 | |
| Less: discount to fair value | |
| (888,717 | ) |
| Total operating lease liability at June 30, 2022 | |
$ | 1,188,719 | |
NOTE
8 – RELATED-PARTY TRANSACTIONS
Effective
January 1, 2021, the Company entered into a consulting agreement with Mr. Kucharchuk, a member of the Board of Directors, to serve as
a strategic advisor. The agreement was effective for a period of twelve months, commencing on January 1, 2021 and shall renew on a month-to
month basis, subject to the right of the Company and Mr. Kucharchuk to terminate the agreement pursuant to the agreement. Pursuant to
the agreement, Mr. Kucharchuk shall be paid $2,000 per month. As of June 30, 2022 and September 30, 2021, the Company recorded accrued
consulting fees in the amount of $0 and $18,000, respectively, reflected as accrued liabilities – related party in the accompanying
unaudited balance sheet (see Note 10). As of June 30, 2022, the Company had an accounts payable – related payable balance of $6,000
related to this consulting agreement.
On
April 26, 2021, the Company entered into a Promissory Note Agreement with Jeffrey Busch who serves as a member of the Board of Directors
and a related party, for a principal balance of $100,000 (see Note 6). On May 5, 2022, the parties amended the April 26, 2021 note pursuant
to which the principal amount was increased to $350,000 (“New Note”) with the Company receiving additional $250,000 of proceeds
and added a conversion feature. The New Note bears an annual interest rate of 1% (which shall increase to 2% in an event of a default)
and matures on May 5, 2024. As of June 30, 2022, the New Note had an outstanding principal balance of $350,000, reflected as notes
payable – related party in the accompanying unaudited balance sheet since the conditions for its contingent conversion has
not yet been met, and accrued interest of $1,650 (see Note 6).
On
May 12, 2021, the Company and the May 2021 Investor entered into a May 2021 SPA to purchase a convertible May 2021 Note and with principal
value of $1,000,000 and accompanying May 2021 Warrants (see Note 6). In connection with the Company’s obligations under the May
2021 Note, the Company entered into a security agreement with the May 2021 Investor as agent, pursuant to which the Company granted a
lien on the laboratory equipment of the Company, for the benefit of the related party. As of June 30, 2022, the May 2021 Note had an
outstanding principal balance of $1,000,000 and accrued interest of $4,932 (see Note 6).
On
October 21, 2021, the Company entered into a Promissory Note Agreement with Jeffrey Busch who serves as a member of the Board of Directors
and a related party, for a principal balance of $150,000. During the nine months ended June 30, 2022, the Company fully paid the outstanding
balance on the note. As of June 30, 2022, the note had no outstanding balance (see Note 6).
On
November 1, 2021, pursuant to the First November 2021 SPA the First November 2021 Investor purchased three notes with aggregate principal
of $1,000,000 with accompanying First November 2021 Warrants to purchase up to an aggregate of 54,644,811 shares of common stock. As
of June 30, 2022, the First November 2021 Notes had an outstanding principal balance of $1,000,000 and accrued interest of $6,575 (see
Note 6).
On
January 26, 2022, a notice and request for consent regarding a change in offering terms was sent by the Company to the First November
2021 Investor. Upon the approval of the First November 2021 Investor, the Company modified the terms of the First November 2021 SPA which
increased the warrants issuable from 20% to100% of the common stock issuable upon conversion of the notes purchased. As a result, the
First November 2021 Investor received additional cashlessly-exercisable warrants equal to 80% of the common stock issuable upon conversion
of the First November 2021 Notes. The Company issued additional warrants to purchase up to 218,579,234 shares of common stock to the
First November 2021 Investor which increased the total relative fair value of all warrants in total by $34,630 recorded as debt discount
which is being amortized over the life of the First November 2021 Notes (see Note 6 and 9).
THERALINK
TECHNOLOGIES, INC.
CONDENSED
NOTES TO UNAUDITED FINANCIAL STATEMENTS
JUNE
30, 2022
(UNAUDITED)
On
April 5, 2022, pursuant to the First April 2022 SPA, Matthew Schwartz, a member of the Board of Directors and a related party, purchased
a convertible note with principal of $100,000 with accompanying First April 2022 Warrants to purchase 4,201,681 shares of common stock.
The Company received net proceeds of $100,000 on March 24, 2022. As of June 30, 2022, the First April 2022 Note had an outstanding principal
balance of $100,000 and accrued interest of $1,885 (see Note 6).
On
May 9, 2022, pursuant to the May 2022 SPA the May 2022 Investor purchased four convertible notes for an aggregate investment amount of
$1,000,000 with accompanying May 2022 Warrants to purchase shares of common stock equal to 20% of the number of the total shares of common
stock issuable upon the conversion of the May 2022 Notes. During the nine months ended June 30, 2022, The Company received an aggregate
of $750,000 of proceeds and issued an aggregate of 21,008,404 of the May 2022 Warrants. As of June 30, 2022, the May 2022 Notes had an
aggregate outstanding principal balance of $750,000 and accrued interest of $5,973 (see Note 6).
On
June 15, 2022, pursuant to the June 2022 SPA, Danica Holley, a member of the Board of Directors and a related party, purchased a convertible
note with principal of $50,000 with accompanying June 2022 Warrants to purchase 2,100,840 shares of common stock. As of June 30, 2022,
the June 2022 Note had an outstanding principal balance of $50,000 and accrued interest of $164 (see Note 6).
During
the nine months ended June 30, 2022, the Company advanced a total of $13,883 to a related party, which is an affiliate entity. As of
June 30, 2022 and September 30, 2021, the Company had related party receivable balances of $35,594 and $21,711, respectively, reflected
in the accompanying unaudited balance sheets as other receivable.
As
of June 30, 2022 and September 30, 2021, the Company owed several executives and directors for expense reimbursements and consulting
fees in the aggregate amount of $6,000 and $3,714, respectively, which is reflected on the accompanying unaudited balance sheet as accounts
payable – related party.
At
June 30, 2022 and September 30, 2021, net amount due to related parties consisted of the following:
SCHEDULE OF RELATED PARTIES TRANSACTION
| | |
| | | |
| | |
| | |
June 30, 2022 | | |
September 30, 2021 | |
| | |
(Unaudited) | | |
| |
| Convertible notes principal – related party | |
$ | 2,900,000 | | |
$ | 1,000,000 | |
| Discount on convertible notes - related party | |
| (1,925,238 | ) | |
| (935,019 | ) |
| Note payable principal – related party | |
| 350,000 | | |
| 100,000 | |
| Consulting fee – related party | |
| — | | |
| 18,000 | |
| Accounts payable – related party | |
| 6,000 | | |
| 3,714 | |
| Other receivable - related party | |
| (35,594 | ) | |
| (21,711 | ) |
| Total | |
$ | 1,295,168 | | |
$ | 164,984 | |
NOTE
9 – STOCKHOLDERS’ DEFICIT
Shares
Authorized
On
September 22, 2020, the Company filed with the Nevada Secretary of State, an amendment to its Articles of Incorporation to change its
name from “OncBioMune Pharmaceutical, Inc.” to “Theralink Technologies, Inc.” and increase its authorized shares
of common stock from 6,666,667 shares of common stock at $0.0001 per share par value to 12,000,000,000 shares of common stock at $0.0001
per share par value, effective September 24, 2020.
On
July 1, 2022, the Company filed with the Nevada Secretary of State, an amendment to its Articles of Incorporation to increase its authorized
shares of common stock from 12,000,000,000 shares to 100,000,000,000 shares of common stock at $0.0001 per share par value.
Series
A Preferred Stock
As
of June 30, 2022 and September 30, 2021, there were 667 shares of the Company’s Series A Preferred Stock issued and outstanding
held by a former member of the Board of Directors.
THERALINK
TECHNOLOGIES, INC.
CONDENSED
NOTES TO UNAUDITED FINANCIAL STATEMENTS
JUNE
30, 2022
(UNAUDITED)
Series
C-1 Preferred Stock
During
the nine months ended June 30, 2022, various holders of the Series C-1 Preferred Stock converted an aggregate of 1,923 shares of Series
C-1 Preferred Stock into 288,637,529 shares of the Company’s common stock (see below – Common Stock Issued Upon Conversion
of Series C-1 Preferred Stock).
As
of June 30, 2022 and September 30, 2021, the Company had 1,043 and 2,966 shares of Series C-1 Preferred Stock, respectively, issued and
outstanding.
Series
C-2 Preferred Stock
During
the nine months ended June 30, 2022, a holder of the Series C-2 Preferred Stock converted 1,880 shares of Series C-1 Preferred Stock
into 280,475,491 shares of the Company’s common stock (see below – Common Stock Issued Upon Conversion of Series C-2 Preferred
Stock).
As
of June 30, 2022 and September 30, 2021, the Company had 3,037 and 4,917 shares of Series C-2 Preferred Stock, respectively, issued and
outstanding.
Series
E Preferred Stock
On
September 15, 2020, the Company filed a Certificate of Designation, Preferences and Rights of Series E Preferred Stock (the “Series
E Certificate of Designation”) with the Nevada Secretary of the State to designate 2,000 shares of its previously authorized preferred
stock as Series E Preferred Stock, par value $0.0001 per share and a stated value of $2,000 per share. The Series E Certificate of Designation
and its filing were approved by the Company’s Board of Directors without stockholder approval as provided for in the Company’s
Articles of Incorporation and under Nevada law. The holders of shares of Series E Preferred Stock have the following preferences and
rights:
| |
● |
From
the initial issuance date, cumulative dividends on each share of Series E shall accrue, on a quarterly basis in arrears (with any
partial quarter calculated on a pro-rata basis), at the rate of 8% per annum on the stated value, plus any additional amount thereon.
Dividends shall be paid within 15 days after the end of each fiscal quarter (“Dividend Payment Date”), at the option
of the Holder in cash or through the issuance of shares of common stock. In the event that the Holder elects to receive its dividends
in shares of common stock the number of shares of common stock to be issued to each applicable Holder shall be determined by dividing
the total dividend outstanding to such Holder by the average closing price of the common stock during the five trading days on the
principal market prior to the dividend payment date. |
| |
|
|
| |
● |
Holders
of shares of Series E Preferred Stock are entitled to dividends or distributions on each share on an “as converted” into
common stock basis, if, as and when declared from time to time by the Board of Directors. |
| |
|
|
| |
● |
Each
share of Series E Preferred Stock is convertible into shares of common stock any time after the initial issuance date at the conversion
price which is the lesser of: (i) $0.00375 or (ii) 75% of the average closing price of the common stock during the prior five trading
days on the principal market, subject to adjustment as provided in the Series E Certificate of Designation including a price protection
provision for offerings below the conversion price, provided, however, the conversion price shall never be less than $0.0021. The
number of shares of common stock issuable upon conversion shall be determined by multiplying the number of outstanding shares by
the stated value per share of $2,000 plus accrued dividends and dividing that number by the conversion price. |
| |
● |
In
connection with, (i) a Change of Control of the Company or (ii) on the closing of, a Qualified Public Offering by the Company, all
of the outstanding shares of Series E (including any fraction of a share) shall automatically convert into an aggregate number of
shares of common stock (including any fraction of a share) by multiplying the number of outstanding shares by the stated value per
share of $2,000 plus accrued dividends and dividing that number (including any fraction of a share) by the lesser of: (i) $0.00375
or (ii) 75% of the average closing price of the common stock during the prior five trading days on the principal market, subject
to adjustment as provided in the Series E Certificate of Designation including a price protection provision for offerings below the
conversion price. However, the conversion price shall never be less than $0.0021. If a closing of a Change of Control transaction
or a Qualified Public Offering occurs, such automatic conversion of all of the outstanding shares of Series E shall be deemed to
have been converted into shares of Common Stock immediately prior to the closing of such transaction or Qualified Public Offering. |
| |
|
|
| |
● |
In
the event the Company issues or sells any securities including options or convertible securities, except for any Exempt Issuance
(as defined in the Series E Certificate of Designation), at a price, an exercise price or conversion price of less than the conversion
price, then upon such issuance or sale, the Series E Preferred Stock conversion price shall be reduced to the sale price or the exercise
price or conversion price of the securities sold. |
| |
|
|
| |
● |
Holders
of Series E Preferred Stock have no voting rights. |
THERALINK
TECHNOLOGIES, INC.
CONDENSED
NOTES TO UNAUDITED FINANCIAL STATEMENTS
JUNE
30, 2022
(UNAUDITED)
During
the year ended September 30, 2021, the issuance of Series F Preferred Stock triggered the price protection clause in the Series E Preferred
Stock. Thus, the conversion price of the Series E Preferred Stock was reduced from $0.00375 to $0.00313 on that date.
During
the three and nine months ended June 30, 2022, the Company recorded dividends related to the Series E Preferred Stock in the amount of
$39,890 and $119,671, respectively. During the three and nine months ended June 30, 2021, the Company recorded dividends related to the
Series E Preferred Stock in the amount of $39,452 and $119,561, respectively.
As
of June 30, 2022 and September 30, 2021, dividend payable balances were $13,151 and $13,151, respectively, reflected in the accompanying
unaudited balance sheet in accrued liabilities instead of temporary equity.
As
of June 30, 2022 and September 30, 2021, the Company had 1,000 shares of Series E Preferred Stock issued and outstanding classified as
temporary equity in the accompanying unaudited balance sheets.
Series
F Preferred Stock
On
July 30, 2021, the Company filed a Certificate of Designation, Preferences and Rights of Series F Preferred Stock (the “Series
F Certificate of Designation”), with the Nevada Secretary of State to designate 1,000 shares of its previously authorized preferred
stock as Series F Preferred Stock, par value $0.0001 per share and a stated value of $2,000 per share. The Series F Certificate of Designation
and its filing were approved by the Company’s Board of Directors without stockholder approval as provided for in the Company’s
Articles of Incorporation and under Nevada law. The holders of shares of Series F Preferred Stock have the following preferences and
rights:
| |
● |
From
the Initial Issuance Date, cumulative dividends on each share of Series F shall accrue, on a monthly basis in arrears (with any partial
month being made on a pro-rata basis), at the rate of 8% per annum on the stated value, plus any additional amount thereon. Dividends
shall be paid within 15 days after the end of each month (“Dividend Payment Date”), at the option of the Holder in cash
or through the issuance of shares of common stock. In the event that the Holder elects to receive its dividends in shares of common
stock the number of shares of common stock to be issued to each applicable Holder shall be determined by dividing the total dividend
payable to such Holder by the average closing price of the common stock during the five trading days on the principal market prior
to the dividend payment date. |
| |
|
|
| |
● |
Holders
of shares of Series F Preferred Stock are entitled to dividends or distributions on each share on an “as converted” into
common stock basis, if, as and when declared from time to time by the Board of Directors. |
| |
|
|
| |
● |
Each
share of Series F Preferred Stock is convertible into shares of common stock any time after the initial issuance date at the conversion
price which is the lesser of: (i) $0.00313 or (ii) 75% of the average closing price of the common stock during the prior five trading
days on the principal market, subject to adjustment as provided in the Series F Certificate of Designation including a price protection
provision for offerings below the conversion price,provided, however, the conversion price shall never be less than $0.0016. The
number of shares of common stock issuable upon conversion shall be determined by multiplying the number of outstanding shares by
the stated value per share of $2,000 plus additional amount by the conversion price. |
| |
|
|
| |
● |
In
connection with, (i) a Change of Control of the Company or (ii) on the closing of, a Qualified Public Offering by the Company, all
of the outstanding shares of Series F Preferred Stock (including any fraction of a share) shall automatically convert along with
the additional amount into an aggregate number of shares of common stock (including any fraction of a share) as is determined by
dividing the number of shares of Series F Preferred Stock (including any fraction of a share) by the automatic conversion price then
in effect. If a closing of a Change of Control transaction or a Qualified Public Offering occurs, such automatic conversion of all
of the outstanding shares of Series F Preferred Stock shall be deemed to have been converted into shares of common stock immediately
prior to the closing of such transaction or Qualified Public Offering. |
| |
|
|
| |
● |
In
the event the Company issues or sells any securities including options or convertible securities, except for any Exempt Issuance
(as defined in the Series F Certificate of Designation), at a price, an exercise price or conversion price of less than the conversion
price, then upon such issuance or sale, the Series F Preferred Stock conversion price shall be reduced to the sale price, or the
exercise price or conversion price of the securities sold. |
THERALINK
TECHNOLOGIES, INC.
CONDENSED
NOTES TO UNAUDITED FINANCIAL STATEMENTS
JUNE
30, 2022
(UNAUDITED)
| |
● |
Series
F Preferred Stock shall rank pari passu with respect to the preferences as to dividends, distributions and payments upon the liquidation,
dissolution and winding up of the Company with the Series C-1 Preferred Stock of the Company, the Series C-2 Preferred Stock of the
Company, and the Series E Preferred Stock of the Corporation (the “Parity Stock”), and all other shares of capital stock
of the Company shall be junior in rank to all Series F shares with respect to the preferences as to dividends (except for the common
stock, which shall be pari passu as provided in the Series F Certificate of Designation), distributions and payments upon the liquidation,
dissolution and winding up of the Company (such junior stock is referred to herein collectively as “Junior Stock”). The
rights of all such Junior Stock shall be subject to the rights, powers, preferences and privileges of the Series F Preferred Stock.
Without limiting any other provision of the Series F Certificate of Designation, without the prior express consent of the Required
Holder, the Company shall not hereafter authorize or issue any additional or other shares of capital stock that is (i) of senior
rank to the Series F Preferred Stock in respect of the preferences as to dividends, distributions and payments upon the liquidation,
dissolution and winding up of the Company (collectively, the “Senior Preferred Stock”), or (ii) Parity Stock. Except
as provided for in the Certificate of Designation, in the event of the merger or consolidation of the Company into another corporation,
the Series F Preferred Stock shall maintain their relative rights, powers, designations, privileges and preferences provided for
in the Certificate of Designation for a period of at least two years following such merger or consolidation and no such merger or
consolidation shall cause result inconsistent therewith. |
During
the three and nine months ended June 30, 2022, the Company recorded dividends related to the Series F Preferred Stock in the amount of
$19,945 and $59,836, respectively. During the three and nine months ended June 30, 2021, there were no recorded dividends related to
the Series F Preferred Stock.
As
of June 30, 2022 and September 30, 2021, dividend payable balances were $6,575 and $6,728, respectively, which were reflected in the
accompanying unaudited balance sheet in accrued liabilities instead of temporary equity.
As
of June 30, 2022 and September 30, 2021, the Company had 500 shares of Series F Preferred Stock issued and outstanding classified as
temporary equity in the accompanying unaudited balance sheets.
Common
Stock
Common
Stock Issued Upon Conversion of Series C-1 Preferred Stock
| ● |
During
the nine months ended June 30, 2022, the Company issued an aggregate of 288,637,529 shares of the Company’s common stock to
various investors upon their conversion of an aggregate of 1,923 shares of the Series C-1 Preferred Stock. |
Common
Stock Issued Upon Conversion of Series C-2 Preferred Stock
| ● |
During
the nine months ended June 30, 2022, the Company issued an aggregate of 280,575,491 shares of the Company’s common stock to
an investor upon conversion of 1,880 shares of the Series C-2 Preferred Stock. |
Common
Stock Issued Upon Accounts Payable Settlements
| ● |
During
the nine months ended June 30, 2022, the Company issued an aggregate of 26,913,738 shares of the Company’s common stock to
two consultants upon the close of their respective settlement agreements, dated October 18, 2021, to settle accounts payable balances
in aggregate amount of $84,240 or $0.00313 per share, valued with the share price of common stock sold in private placements during
the same period (see Note 10). |
Common
Stock Issued for Subscription Payable
| ● |
During
the nine months ended June 30, 2022, the Company issued an aggregate of 431,309,907 shares of the Company’s common stock to
various investors in connection with the subscription payable aggregate amount of $1,350,000. The subscription payable resulted from
Subscription Agreements entered into by the Company with several accredited investors, during the year ended September 30, 2021,
to sell, in a private placement, an aggregate of 431,309,907 shares of its common stock, at a purchase price of $1,350,000 or $0.00313
per share (see Note 10). |
As
of June 30, 2022, the Company had 6,151,499,919 shares of common stock outstanding of which 47,923,323 have not yet been issued.
Stock
Options
Effective
February 18, 2011, the Company’s Board of Directors (“Board”) adopted and approved the 2011 stock option plan. A total
of 57 options to acquire shares of the Company’s common stock were authorized under the 2011 stock option plan. No options were
granted under the 2011 stock option plan and the plan has expired as of March 31, 2022.
THERALINK
TECHNOLOGIES, INC.
CONDENSED
NOTES TO UNAUDITED FINANCIAL STATEMENTS
JUNE
30, 2022
(UNAUDITED)
On
April 28, 2020, the Board approved the 2020 Equity Incentive Plan (“2020 Plan”), as amended on May 29, 2020. On April 18,
2022, the Board terminated the 2020 Plan and any shares reserved thereunder are no longer subject to reservation and the Company had
no options issued and outstanding under the 2020 Plan.
On
April 18, 2022, the Company’s Board of Directors (“Board”) and the shareholders approved the 2022 Equity Incentive
Plan (“2022 Plan”) at which time the plan became effective. Upon the effective date of the 2022 Plan, 1,915,000,000 shares
of the Company’s common stock were reserved for issuance under the 2022 Plan (“Reserved Share Amount”), subject to
the adjustments described in the 2022 Plan, and such Reserved Share Amount, when issued in accordance with the 2022 Plan, shall be validly
issued, fully paid, and non-assessable. Pursuant to the 2022 Plan, the option price of each incentive stock option (except those that
constitute substitute awards) shall be at least the fair market value of a share on the grant date; provided, however, that in the event
that a grantee is a ten percent stockholder as of the grant date, the option price of an incentive stock option shall be not less than
110% of the fair market value of a share on the grant date, in no case shall the option price of any option be less than the par value
of a share. As of June 30, 2022, the Company had no options issued and outstanding under the 2022 Plan.
Warrants
On
November 1, 2021, the Company issued the First November 2021 Warrants to purchase an aggregate of 54,644,811 shares of common stock.
The First November 2021 Warrants are exercisable at any time at a price equal to $0.00366 per share (subject to adjustment) until November
1, 2026. The First November 2021 Warrants were valued at $990,048 using the relative fair value method and were recorded as a debt discount
which is being amortized over the life of the First November 2021 Notes (see Note 6 and Note 8).
On
November 1, 2021, the Company issued the Second November 2021 Warrants to purchase an aggregate of 27,322,406 shares of common stock.
The Second November 2021 Warrants are exercisable at any time at a price equal to $0.00366 per share (subject to adjustment) until November
1, 2026. The Second November 2021 Warrants were valued at $495,560 using the relative fair value method and were recorded as a debt discount
which is being amortized over the life of the Second November 2021 Notes (see Note 6).
On
November 1, 2021, the Company issued the Third November 2021 Warrants to purchase an aggregate of 27,322,406 shares of common stock.
The Third November 2021 Warrants are exercisable at any time at a price equal to $0.00366 per share (subject to adjustment) until November
1, 2026. The Third November 2021 Warrants were valued at $495,560 using the relative fair value method and were recorded as a debt discount
which is being amortized over the life of the Third November 2021 Notes (see Note 6).
On
January 26, 2022, the Company, upon the approval of the First November 2021 Investor, amended the First November 2021 SPA whereby the
Company issued additional cashlessly-exercisable warrants to purchase 218,579,234 shares of common stock. As a result, the total relative
fair value of all warrants in total increased by $34,630, recorded as debt discount, which is being amortized over the life of the First
November 2021 Notes (see Note 6). These warrants are exercisable at a price equal to $0.00366 per share (subject to adjustment) until
November 1, 2026.
On
January 26, 2022, the Company, upon the approval of the Second November 2021 Investor, amended the Second November 2021 SPA whereby the
Company issued additional cashlessly-exercisable warrants to purchase 109,289,616 shares of common stock. As a result, the total relative
fair value of all warrants in total increased by $22,429, recorded as debt discount, which is being amortized over the life of the Second
November 2021 Notes (see Note 6). These warrants are exercisable at a price equal to $0.00366 per share (subject to adjustment) until
November 1, 2026.
On
January 26, 2022, the Company, upon the approval of the Third November 2021 Investor, amended the Third November 2021 SPA whereby the
Company issued additional cashlessly-exercisable warrants to purchase 109,289,616 shares of common stock. As a result, the total relative
fair value of all warrants in total increased by $22,429, recorded as debt discount, which is being amortized over the life of the Third
November 2021 Notes (see Note 6). These warrants are exercisable at a price equal to $0.00366 per share (subject to adjustment) until
November 1, 2026.
On
January 27, 2022, the Company issued the First January 2022 Warrants to purchase an aggregate of 136,612,022 shares of common stock.
The First January 2022 Warrants are exercisable at any time at a price equal to $0.00366 per share (subject to adjustment) until November
1, 2026. The First January 2022 Warrants were valued at $472,403 using the relative fair value method and were recorded as a debt discount
which is being amortized over the life of the First January 2022 Note (see Note 6).
On
January 31, 2022, the Company issued the Second January 2022 Warrants to purchase an aggregate of 136,612,022 shares of common stock.
The Second January 2022 Warrants are exercisable at any time at a price equal to $0.00366 per share (subject to adjustment) until November
1, 2026. The Second January 2022 Warrants were valued at $469,810 using the relative fair value method and were recorded as a debt discount
which is being amortized over the life of the Second January 2022 Note (see Note 6).
THERALINK
TECHNOLOGIES, INC.
CONDENSED
NOTES TO UNAUDITED FINANCIAL STATEMENTS
JUNE
30, 2022
(UNAUDITED)
On
January 31, 2022, the Company issued to two consultants an aggregate of 16,393,443 warrants as a placement fee in connection with the
First January 2022 Note and Second January 2022 Note (collectively as “January 2022 Notes”) (see Note 6). These warrants
are exercisable at a price equal to $0.00366 per share until November 1, 2024. These warrants were valued at $54,595 using the relative
fair value method and were recorded as a debt discount which is being amortized over the life of the January 2022 Note.
On
April 5, 2022, the Company issued the First April 2022 Warrants to purchase 4,201,681 shares of common stock. The First April 2022 Warrants
are exercisable at any time at a price equal to $0.00476 per share (subject to adjustment) until April 1, 2027. The First April 2022
Warrants were valued at $89,815 using the relative fair value method and was recorded as debt discount which is being amortized over
the life of the First April 2022 Note (see Note 6 and Note 8).
During
April 2022, the Company issued the Second April 2022 Warrants to purchase an aggregate of 17,857,144 shares of common stock. The Second
April 2022 Warrants are exercisable at any time at price equal to $0.00476 per share (subject to adjustment) until April 1, 2027. The
Second April 2022 Warrants were valued at $335,593 using the relative fair value method and were recorded as debt discount which is being
amortized over the life of the Second April 2022 Notes (see Note 6).
On
May 9, 2022, the Company issued the May 2022 Warrants to purchase an aggregate of 31,512,606 shares of common stock. The May 2022 Warrants
are exercisable at any time at a price equal to $0.00476 per share (subject to adjustment) until April 1, 2027. The May 2022 Warrants
were valued at $142,489 using the relative fair value method and were recorded as debt discount which is being amortized over the life
of the May 2022 Notes (see Note 6 and Note 8).
On
June 15, 2022, the Company issued the June 2022 Warrants to purchase 2,100,840 shares of common stock. The June 2022 Warrants are exercisable
at any time at a price equal to $0.00476 per share (subject to adjustment) until April 1, 2027. The June 2022 Warrants were valued at
$5,924 using the relative fair value method and were recorded as debt discount which is being amortized over the life of the June 2022
Note (see Note 6 and Note 8).
As
of June 30, 2022, the Company had 1,876,207,963 warrants issued and outstanding.
Warrants
activities for the nine months ended June 30, 2022 is summarized as follows:
SCHEDULE OF WARRANTS
| | |
| | |
| | |
Weighted | | |
| |
| | |
| | |
Weighted | | |
Average | | |
| |
| | |
| | |
Average | | |
Remaining | | |
Aggregate | |
| | |
Number of | | |
Exercise | | |
Contractual | | |
Intrinsic | |
| | |
Warrants | | |
Price | | |
Term (Years) | | |
Value | |
| Balance Outstanding at September 30, 2021 | |
| 984,470,116 | | |
$ | 0.0023 | | |
| 3.50 | | |
$ | — | |
| Issued in connection with a convertible debt – related party (see Note 6 and Note 8) | |
| 311,039,172 | | |
$ | 0.0038 | | |
| 4.39 | | |
$ | — | |
| Issued in connection with a convertible debt (see Note 6) | |
| 580,698,675 | | |
| 0.0037 | | |
| 4.31 | | |
$ | — | |
| Balance Outstanding at June 30, 222 | |
| 1,876,207,963 | | |
$ | 0.0030 | | |
| 3.51 | | |
$ | — | |
| Exercisable at June 30, 222 | |
| 1,672,006,282 | | |
$ | 0.0031 | | |
| 3.56 | | |
$ | — | |
NOTE
10 – COMMITMENTS AND CONTINGENCIES
Employment
Agreements
Michael
Ruxin, M.D.
On
June 5, 2020, the Company and Dr. Michael Ruxin entered into an employment agreement (the “Ruxin Employment Agreement”) for
Dr. Ruxin to serve as the Company’s Chief Executive Officer, President and a director.
The
Ruxin Employment Agreement provides that Dr. Ruxin will be employed for a five-year term commencing on June 5, 2020. The term will be
automatically extended for one additional year upon the fifth anniversary of the effective date without any affirmative action, unless
either party to the agreement provides at least sixty (60) days’ advance written notice to the other party that the employment
period will not be extended. Dr. Ruxin will be entitled to receive an annual base salary of $300,000 and will be eligible for an annual
discretionary bonus of 150% of such base salary. In the Ruxin Employment Agreement, Dr. Ruxin is entitled to, subject to the approval
of the Board or a committee thereof, and under the 2020 Plan (i) a one-time grant of 49,047,059 Restricted Stock Units (“RSUs”)
and (ii) a one-time grant of options to purchase 420,691,653 shares of common stock, both of which will be subject to the terms and conditions
of the applicable award agreements when executed. Dr. Ruxin is entitled to participate in any and all benefit plans, from time to time,
in effect for senior management, along with vacation, sick and holiday pay in accordance with the Company’s policies established
and in effect from time to time. As of June 30, 2022, the RSUs and options have not yet been granted or issued as the Board and Dr. Ruxin
have not yet agreed on the terms of the options. For the period of May 2021 through November 2021, Dr. Ruxin deferred 50% of his salary.
As of June 30, 2022 and September 30, 2021, the Company had accrued payroll related to Dr. Ruxin’s salary deferment of $87,500
and $62,500, respectively.
THERALINK
TECHNOLOGIES, INC.
CONDENSED
NOTES TO UNAUDITED FINANCIAL STATEMENTS
JUNE
30, 2022
(UNAUDITED)
Dr.
Ruxin is an “at-will” employee and his employment may be terminated by the Company at any time, with or without cause. In
the event Dr. Ruxin’s employment is terminated by the Company without Cause (as defined in the Ruxin Employment Agreement), with
Good Reason (as defined in the Ruxin Employment Agreement) or as a result of a non-renewal of the term of employment under the Ruxin
Employment Agreement, Dr. Ruxin shall be entitled to receive the sum of (I) the Severance Multiple (as defined below), multiplied
by his base salary immediately prior to such termination and (II) a pro-rata portion of his bonus for the year in which such termination
occurs equal to (a) his bonus for the most recently completed calendar year (if any), multiplied by (b) a fraction, the numerator
of which is the number of days that have elapsed from the beginning of such calendar year through the date of termination and the denominator
of which is the total number of days in such calendar year. “Severance Multiple” shall mean 3.0; provided, however,
that if the date of termination occurs on or at any time during the twelve (12)-month period following a Change in Control, the Severance
Multiple shall mean 4.0. In addition, the Company shall accelerate the vesting of any outstanding, unvested equity awards granted to
Dr. Ruxin prior to the date of termination. Dr. Ruxin shall be entitled to reimbursement of any COBRA payment made during the 18-month
period following the date of termination.
The
Ruxin Employment Agreement also contains covenants (a) restricting the executive from engaging in any activity competitive with our business
during the term of the employment agreement and in the event of termination, for a period of one year thereafter, (b) prohibiting the
executive from disclosing confidential information regarding the Company, and (c) soliciting employees, customers and prospective customers
during the term of the employment agreement and for a period of one year thereafter.
Jeffrey
Busch
On
June 5, 2020, the Company and Jeffrey Busch entered into an employment agreement (the “Busch Employment Agreement”) for Mr.
Busch to serve as the Company’s Chairman of the Board of Directors.
The
Busch Employment Agreement provides that Mr. Busch will be employed for a five-year term commencing on June 5, 2020. The term will be
automatically extended for one additional year upon the fifth anniversary of the effective date without any affirmative action, unless
either party to the agreement provides at least sixty (60) days’ advance written notice to the other party that the employment
period will not be extended. Mr. Busch will be entitled to receive an annual base salary of $60,000 and will be eligible for an annual
discretionary bonus. In the Busch Employment Agreement, Mr. Busch is entitled to, subject to the approval of the Board or committee thereof,
and under the 2020 Plan (i) a one-time grant of 49,047,059 Restricted Stock (“RSUs”) and (ii) a one-time grant of options
to purchase 420,691,653 shares of common stock, both of which will be subject to the terms and conditions of the applicable award agreements
when executed. Mr. Busch is entitled to participate in any and all benefit plans, from time to time, in effect for senior management,
along with vacation, sick and holiday pay in accordance with the Company’s policies established and in effect from time to time.
As of June 30, 2022, the RSUs and options have not yet been granted or issued as the Board and Mr. Busch have not yet agreed on the terms
of the options. As of June 30, 2022 and September 30, 2021, the Company had accrued director compensation of $177,500 and $132,500, respectively.
Mr.
Busch is an “at-will” employee and his employment may be terminated by the Company at any time, with or without cause. In
the event Mr. Busch’s employment is terminated by the Company without Cause (as defined in the Busch Employment Agreement), with
Good Reason (as defined in the Busch Employment Agreement) or as a result of a non-renewal of the term of employment under the Busch
Employment Agreement, Mr. Busch shall be entitled to receive the sum of (I) the Severance Multiple (as defined below), multiplied
by his base salary immediately prior to such termination and (II) a pro-rata portion of his bonus for the year in which such termination
occurs equal to (a) his bonus for the most recently completed calendar year (if any), multiplied by (b) a fraction, the numerator
of which is the number of days that have elapsed from the beginning of such calendar year through the date of termination and the denominator
of which is the total number of days in such calendar year. “Severance Multiple” shall mean 3.0; provided, however,
that if the date of termination occurs on or at any time during the twelve (12)-month period following a Change in Control, the Severance
Multiple shall mean 4.0. In addition, the Company shall accelerate the vesting of any outstanding, unvested equity awards granted to
Mr. Busch prior to the date of termination.
The
Busch Employment Agreement also contains covenants (a) restricting the executive from engaging in any activity competitive with our business
during the term of the employment agreement and in the event of termination, for a period of one year thereafter, (b) prohibiting the
executive from disclosing confidential information regarding the Company, and (c) soliciting employees, customers and prospective customers
during the term of the employment agreement and for a period of one year thereafter.
THERALINK
TECHNOLOGIES, INC.
CONDENSED
NOTES TO UNAUDITED FINANCIAL STATEMENTS
JUNE
30, 2022
(UNAUDITED)
Thomas
E. Chilcott, III
On
September 24, 2020, the Company appointed Thomas E. Chilcott, III, to serve as the Chief Financial Officer. The Company entered into
an offer letter with Mr. Chilcott which provides that his base salary will be $225,000 per year. Mr. Chilcott is entitled to participate
in all medical and other benefits that the Company has established for its employees. The offer letter also provides that Mr. Chilcott
will be granted an option to purchase up to 94,545,096 shares of the Company’s common stock subject to terms including exercise
price to be set by the Board of Directors of the Company. As of March 31, 2022, no bonus was due and no options have been granted to
Mr. Chilcott.
On
December 31, 2021, the Company’s Board approved an increase in the base salary of Thomas E. Chilcott, III, the Company’s
Chief Financial Officer, from $225,000 to $300,000 per year. The increase was effective January 1, 2022. The Board also approved two
new bonuses for which Mr. Chilcott will be eligible: (i) a $37,500 bonus payable upon the Company’s completion of a capital raise
of at least $1,000,000; and (ii) a $37,500 bonus payable upon the Company’s completion of a capital raise of at least $2,000,000
in the aggregate. During the nine months ended June 30, 2022, an aggregate bonus of $75,000 was paid to Mr. Chilcott.
Consulting
Agreements
On
July 5, 2020, the Company and a consultant entered into a Scientific Advisory Board Service Agreement (“Scientific Advisory Agreement”)
which provides for; (i) $2,000 monthly compensation; (ii) 88,786,943 stock options under the 2020 Plan and; (iii) $1,500 per day for
any special project requiring more than six hours of advisory service in a single day performed upon a written request from the Company.
Either party may terminate the Scientific Advisory Agreement at any time upon ten days’ written notice to the other party unless
either party neglects or fails to perform its obligations under the Scientific Advisory Agreement; then the termination notice shall
be effective upon receipt of the same. As of June 30, 2022, the Company and the consultants have not agreed on the terms of the 88,786,943
stock options and therefore these stock options are not considered granted by the Company.
On
July 5, 2020, the Company and a consultant entered into a Pathology Advisory Board Service Agreement (the “Pathology Advisory Agreement”)
which provides for; (i) $272 monthly compensation; (ii) 77,972,192 stock options under the 2020 Plan and; (iii) $1,500 per day for any
special project requiring more than six hours of advisory service in a single day performed upon a written request from the Company.
Either party may terminate the Pathology Advisory Agreement at any time upon ten days’ written notice to the other party unless
either party neglects or fails to perform its obligations under the Pathology Advisory Agreement; then the termination notice shall be
effective upon receipt of the same. As of June 30, 2022, the Company and the consultants have not agreed on the terms of the 77,972,192
stock options and therefore these stock options are not considered granted by the Company.
Effective
January 1, 2021, the Company entered into a consulting agreement with Mr. Kucharchuk, a member of the Board of Directors, to serve as
a strategic advisor. The agreement was effective for a period of twelve months, commencing on January 1, 2021 and shall renew on a month-to
month basis, subject to the right of the Company and Mr. Kucharchuk to terminate the agreement pursuant to the agreement. Pursuant to
the agreement, Mr. Kucharchuk shall be paid $2,000 per month. As of June 30, 2022 and September 30, 2021, the Company recorded accrued
consulting fees in the amount of $0 and $18,000, respectively, reflected under accrued liabilities – related party in the accompanying
unaudited balance sheets (see Note 8).
License
Agreements
GMU
License Agreement
In
September 2006, the Company entered into an exclusive license agreement with George Mason Intellectual Properties (“GMU License
Agreement”), a non-profit corporation formed for the benefit of George Mason University (“GMU”) which: (1) grants an
exclusive worldwide license, with the right to grant sublicenses, under the licensed inventions to make, have made, import, use, market,
offer for sale and sell products designed, manufactured, used and/or marketed for all fields and for all uses, subject to the exclusions
as defined in the GMU License Agreement; (2) grants an exclusive option to license past, existing, or future inventions in the Company’s
field, from inventors that are obligated to assign to GMU and who have signed a memorandum of understanding acknowledging that developed
intellectual property will be offered, subject to the exclusions as defined in the GMU License Agreement; (3) the license and option
granted specifically excludes biomarkers for lung, ovarian, and breast cancers in a diagnostic field of use and GMU inventions developed
using materials obtained from third parties under agreements granting rights to inventions made using said materials and; (4) grants
right to assign or otherwise transfer the license so long as such assignment or transfer is accompanied by a change of control transaction
and GMU is given 14 days’ prior notice. In addition, the Company is required to make an annual payment of $50,000 to GMU as well
as pay GMU a quarterly royalty equal to the net revenue multiplied by one and one-half percent (1.5%), due on a quarterly basis or a
quarterly sublicense royalty equal to the net revenue multiplied by fifteen percent (15%). Further, the Company has the right of first
refusal for all technology associated with RPPA technology from GMU. As of June 30, 2022 and September 30, 2021, the Company has accrued
royalty fees of $1,985 and $1,591, respectively, reflected in the accompanying unaudited balance sheet in accrued liabilities.
THERALINK
TECHNOLOGIES, INC.
CONDENSED
NOTES TO UNAUDITED FINANCIAL STATEMENTS
JUNE
30, 2022
(UNAUDITED)
NIH
License Agreement
In
March 2018, the Company entered into two license agreements (“NIH License Agreements”) with the National Institutes of Health
(“NIH”) which grants the Company an exclusive and a nonexclusive United States license for certain patents. Pursuant to the
NIH License Agreements, the Company is required to make an annual payment of $1,000 to the NIH as well as pay the NIH a royalty equal
to the net sales multiplied by three percent (3.0%) every June 30th and December 31st. Commencing on January 1st
of the year following the year of the first commercial sale, the Company is subject to a non-refundable minimum annual royalty
of $5,000. In addition, a sublicense royalty equal to the net revenue multiplied by ten percent (10%) will be payable upon sublicensing.
As of June 30, 2022 and September 30, 2021, the Company has accrued royalty fees of $0 and $24,830, respectively, reflected in the accompanying
unaudited balance sheet in accrued liabilities.
Employee
Stock Options
In
June 2020, in connection with the Asset Sale Transaction (see Note 1), the Company planned to issue approximately 1.8 billion stock options
to employees, which includes the options in the employment agreements discussed above. As of June 30, 2022, these stock options had not
yet been granted by the Company.
Lease
In
December 2019, the Company entered into a lease agreement for its corporate and laboratory facility in Golden, Colorado. The lease is
for a period of 61 months, with an option to extend, commencing in February 2020 and expiring in February 2025 (see Note 7).
On
June 10, 2021, the Company entered into an amendment to its existing Warehouse Lease (“Lease Amendment”), effective October
3, 2021, for its laboratory facility in Golden, CO (see Note 7). The Lease Amendment provided for: (i) an extension to the term of the
original lease to five years following the completion of the Company’s improvements to the Expansion Premises (defined below);
(ii) an expansion of the premises to include the premises located at Unit 404, Building F, 15000 West 6th Avenue, Golden,
Colorado 80401, consisting of approximately 4,734 rentable square feet (the “Expansion Premises”); (iii) an annual base rent
modification; (iv) an increase to the security deposit; (v) tenant improvement allowance; (vi) additional parking and; (vii) two renewal
options, each for five year terms, for a total of ten years.
Pursuant
to the Lease Amendment, the Company must pay a total annual base rent of; (1) $115,823 for year one; (2) $119,310 for year two; (3) $122,893
for year three; (4) $126,580 for year four; (5) $130,377 for year five; (6) $135,163 for year six; (7) $139,218 for year seven; (8) $143,394
for year eight; (9) $147,696 for year nine; (10) $152,127 for year ten; (11) $156,331 for year eleven; (12) $161,391 for year twelve;
(13) $166,233 for year thirteen; (14) $171,220 for year fourteen and; (15) $176,357 for year fifteen.
Subscriptions
Payable
During
the year ended September 30, 2021, the Company, entered into Subscription Agreements with several accredited investors to sell, in a
private placement, an aggregate of 431,309,907 shares of its common stock, par value $0.0001 per share, at a purchase price of $0.00313
per share for an aggregate purchase price of $1,350,000. These shares of common stock were sold by the Company in reliance upon an exemption
from the registration requirements of the Securities Act of 1933 (the “Act”) afforded by Section 4(a)(2) of the Act
and/or Rule 506 of Regulation D thereunder. The private placements were made directly by the Company and no underwriter or placement
agent was engaged by the Company. As of September 30, 2021, these shares of common stock have not yet been issued as the Company is unable
to issue shares of common stock until FINRA approved the Company’s name change to Theralink Technologies, Inc. and the related
ticker symbol change. Accordingly, the $1,350,000 was reflected in the unaudited consolidated balance sheet as subscription payable.
On February 25, 2022, FINRA recognized the Company’s name change to Theralink Technologies, Inc. and the related ticker symbol
change from “OBMP” to “THER” (see Note 1). During the nine months ended June 30, 2022, the Company issued 431,309,907
shares of its common stock to the investors (see Note 9). Accordingly, there was no subscription payable balance as of June 30, 2022.
Settlement
of Accounts Payable
On
October 18, 2021, the Company entered into separate agreements with two consultants (collectively as “Parties”), to settle
$42,120 in accounts payable balances for each consultant for an aggregate amount of $84,240 and convertible into 26,913,738 shares of
common stock. During the nine months ended June 30, 2022, the Company issued 26,913,738 shares of its common stock to these two consultants
(see Note 9) to settle accounts payable balances in an aggregate amount of $84,240 in (see Note 9).
THERALINK
TECHNOLOGIES, INC.
CONDENSED
NOTES TO UNAUDITED FINANCIAL STATEMENTS
JUNE
30, 2022
(UNAUDITED)
Other
Contingencies
Pursuant
to ASC 450-20 – Loss Contingencies, liabilities for contingencies arising from claims, assessments, litigation, fines and
penalties and other sources are recorded when it is probable that a liability has been incurred and the amount of the assessment can
be reasonably estimated. As of June 30, 2022 and September 30, 2021, the Company has recorded a contingent liability of $76,640 and $71,240,
respectively, resulting from certain liabilities of Avant prior to the asset sale and recapitalization transaction (see Note 1). The
contingent liabilities consisted of two notes payables with a total outstanding principal balance of $40,000 as of June 30, 2022 and
September 30, 2021 and accrued interest payable of $36,640 and $31,240 as of June 30, 2022 and September 30, 2021, respectively.
Legal
Action
In
August 2017, numerous purported plaintiffs brought an action against Avant Diagnostics and its previous executive team in the District
Court of Harris County Texas. The action alleges the plaintiffs were engaged by Avant to perform services prior to 2018, which they were
not compensated for, and were issued certain restricted shares of Avant as payment of those services and Avant did not remove the restrictive
legend from said shares. The plaintiffs are seeking $1,000,000 in monetary relief. On July 1, 2021, the Company and Dr. Ruxin were added
as defendants in the lawsuit. On March 7, 2022, the Court granted the Company and Dr. Ruxin’s Motion to Dismiss for lack of personal
jurisdiction. On January 7, 2022, the plaintiffs filed an amended complaint adding Jeffrey Busch and Andrew Kucharchuk as defendants.
Mr. Busch and Mr. Kucharchuk filed a motion to dismiss for lack of personal jurisdiction. On July 7, 2022, plaintiffs filed a Notice
of Non-Suit and dismissed the amended complaint against Mr. Busch and Mr. Kucharchuk. The remaining claims against Avant Diagnostics
are still pending.
On
December 10, 2021, YPH LLC filed a complaint against the Company in the District Court for the Southern District of New York alleging
that Theralink breached its Certificate of Designation for Series C-1 Convertible Preferred Stock by failing to honor a conversion notice
submitted to it by YPH. Based on these and other allegations, Plaintiff asserted a breach of contract claim claiming that it has damages
in excess of $100 million. The case continues to be in the pleadings stage with Theralink filing its last response on March 30, 2022.
The Company believes these claims are without merit and intends to defend plaintiffs’ lawsuits vigorously. The Company currently
believes the likelihood of a loss contingency related to these matters is remote and, therefore, no provision for a loss contingency
is required.
NOTE
11 – SUBSEQUENT EVENTS
Convertible
Debt
On
July 1, 2022, Company issued the fourth note of the May 2022 Notes (see Note 6) with the Company receiving proceeds of $250,000
and issued accompanying warrants to purchase up to 10,504,202
shares of common stock. These warrants are exercisable any time at $0.00476
until on April 1, 2027. These warrants were valued at $35,186
using the relative fair value method and shall be recorded as debt discount to be amortized over the life of the May 2022
Notes.
On
July 1, 2022, the Company entered into a Securities Purchase Agreement with an investor (“July 2022 Investor”), to
purchase a convertible note for a principal amount of $50,000
(“July 2022 Note”) with the Company receiving $50,000
of proceeds and accompanying warrants to purchase 2,100,840
shares of common stock (“July 2022 Warrants”). The July 2022 Note bear an interest rate of 8%
per annum (which shall increase to 10%
per year upon the occurrence of an “Event of Default” (as defined in the July 2022 Note)) and matures on April
1, 2027. The July 2022 Warrants are exercisable at any time and expire on April 1, 2027. The July 2022 Warrants were valued
at $8,190
using the relative fair value method and shall be recorded as debt discount to be amortized over the life of the July 2022 Note. The
July 2022 Note and July 2022 Warrants are convertible and exercisable, respectively, into shares of the Company’s common stock
at a price equal to $0.00476
per share (subject to adjustment). The July 2022 Note and July 2022 Warrants include a down-round provision under which the
conversion price and exercise price are reduced if the Company sells or issues any securities including options, convertible
securities, with the exception of exempt issuance (as defined in the agreements), or amended outstanding securities, at a lower
conversion or exercise price than that of the July 2022 Note and July 2022 Warrants. The conversion and exercise price of the July
2022 Note and July 2022 Warrants are reduced equal to the lower conversion and exercise price of the new issuance or amended
securities. For so long as the July 2022 Warrants remains outstanding and until the listing by the Company or the trading of the common stock on a Qualified National Exchange (as defined in the agreement); (i) if the Company issues warrants to investors in an offering of common stock or of any equity linked security (each a “Subsequent Offering”), and such warrants equal more than 20% warrant coverage, then a number of additional shares will be added to the July 2022 Warrants such that the July 2022 Warrants shall equal the same percentage of the warrant coverage offered to the investors in the Subsequent Offering and; (ii) if the Company issues warrants in a Subsequent Offering which may be exercised by means of a cashless exercises, then the July 2022 Warrants shall be exercisable by the same cashless exercise feature of the warrants issued in the Subsequent Offering. The Company may prepay the July 2022 Note at any time at an amount equal to 110%
of the outstanding principal balance and accrued interest. At the election of the July 2022 Investor, the July 2022 Note can be
converted in whole or in part at any time and from time to time. Further, upon maturity the Company may pay the outstanding balance
of the July 2022 Note in cash or convert it into shares of common stock. Upon the listing by the Company or the trading of the
common stock on a Qualified National Exchange (as defined in the July 2022 Note), the conversion amount shall automatically be
converted into fully-paid and non-assessable shares of common stock.
THERALINK
TECHNOLOGIES, INC.
CONDENSED
NOTES TO UNAUDITED FINANCIAL STATEMENTS
JUNE
30, 2022
(UNAUDITED)
Related
Party Promissory Notes
On
July 29, 2022, the Company entered into a Demand Promissory Note Agreement with Jeffrey Busch who serves as a member of the Board of
Directors and a related party, for a principal balance of $125,000. The note bears an annual interest rate of 8% and is payable on demand.
The outstanding principal and accrued interest of the note is contingently convertible, in full, at the option of the lender, into the
same security which is being issued by the Company in its next private placement of equity or equity backed securities at any time after
the inception date.
On
July 29, 2022, the Company entered into a Demand Promissory Note Agreement with related party, who is an affiliate stockholder, for a
principal balance of $375,000. The note bears an annual interest rate of 8% and is payable on demand. The outstanding principal and accrued
interest of the note is contingently convertible, in full, at the option of the lender, into the same security which is being issued
by the Company in its next private placement of equity or equity backed securities at any time after the inception date.