UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

(Mark One)

 

[X]QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 20192020

 

[  ]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM                       TO

 

Commission file number: 001-38797

 

IMAC Holdings, Inc.

(Exact name of registrant as specified in its charter)

 

Delaware 83-0784691

(State or Other Jurisdiction of

Incorporation or Organization)

 

(I.R.S. Employer

Identification No.)

 

1605 Westgate Circle, Brentwood, Tennessee 37027
(Address of Principal Executive Offices) (Zip Code)

 

(844) 266-4622

(Registrant’s Telephone Number, Including Area Code)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class Trading Symbol(s) Name of each exchange on which registered
Common Stock, par value $0.001 per share IMAC NASDAQ Capital Market
Warrants to Purchase Common Stock IMACW NASDAQ Capital Market

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [  ]

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes [X] No [  ]

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer[  ]Accelerated filer[  ]
    
Non-accelerated filer[X]Smaller reporting company[X]
    
  Emerging growth company[X]

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [  ]

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [  ] No [X]

 

As of May 10, 201914, 2020 the registrant had 8,316,79710,009,098 shares of Common Stock ($0.001 par value)common stock (par value $0.001 per share) outstanding.

 

 

 

 

 


IMAC HOLDINGS, INC.

TABLE OF CONTENTS

 

 Page
IMPORTANT INFORMATION REGARDING FORWARD-LOOKING STATEMENTS3
  
PART I. FINANCIAL INFORMATION4
Item 1. Financial Statements (Unaudited)4
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations2021
Item 3. Quantitative and Qualitative Disclosures about Market Risk2831
Item 4. Controls and Procedures2831
  
PART II. OTHER INFORMATION2932
Item 1. Legal Proceedings2932
Item 1A. Risk Factors2932
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds2932
Item 3. Defaults Upon Senior Securities2933
Item 4. Mine Safety Disclosures2933
Item 5. Other Information2933
Item 6. Exhibits3033

2

Important Information Regarding Forward-Looking Statements

 

Portions of this Quarterly Report on Form 10-Q (including information incorporated by reference) include “forward-looking statements” based on our current beliefs, expectations, and projections regarding our business strategies, market potential, future financial performance, industry, and other matters. This includes, in particular, “Item 2 — Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this Quarterly Report on Form 10-Q, as well as other portions of this Quarterly Report on Form 10-Q. The words “believe,” “expect,” “anticipate,” “project,” “could,” “would,” and similar expressions, among others, generally identify “forward-looking statements,” which speak only as of the date the statements were made. The matters discussed in these forward-looking statements are subject to risks, uncertainties, and other factors that could cause our actual results to differ materially from those projected, anticipated, or implied in the forward-looking statements. The most significant of these risks, uncertainties, and other factors are described in “Item 1A — Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 20182019 filed with the U.S. Securities and Exchange Commission on April 16, 2019.March 26, 2020. Except to the limited extent required by applicable law, we undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.

 

3

 

PART I. FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS

 

IMAC HOLDINGS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

 March 31, 2019  December 31, 2018  

March 31, 2020

  December 31, 2019 
ASSETS                
Current assets:                
Cash $3,065,553  $194,316  $1,281,940  $373,689 
Accounts receivable, net  665,080   303,630   1,421,131   1,258,325 
Due from related parties  -   - 
Deferred compensation, current portion  265,677   312,258 
Other assets  400,959   170,163   572,559   633,303 
Total current assets  4,131,592   668,109   3,541,307   2,577,575 
                
Property and equipment, net  3,221,183   3,333,638   3,530,767   3,692,009 
                
Other assets:                
Goodwill  2,042,125   2,042,125   2,040,696   2,040,696 
Intangible assets, net  4,126,748   4,257,434   7,072,302   7,169,072 
Deferred IPO Costs  -   335,318 
Deferred equity costs  143,655   170,274 
Deferred compensation, net of current portion  422,544   549,563 
Security deposits  441,473   438,163   551,284   499,488 
Right of use asset  4,027,124   -   3,800,997   3,719,401 
Total other assets  10,637,470   7,073,040   14,031,478   14,148,494 
                
Total assets $17,990,245  $11,074,787  $21,103,552  $20,418,078 
                
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)        
LIABILITIES AND STOCKHOLDERS’ EQUITY        
                
Current liabilities:                
Accounts payable and accrued expenses $1,548,220  $1,261,582  $3,278,967  $2,909,666 
Acquisition liabilities  10,000   7,259,208 
Patient deposits  939,772   454,380   292,475   189,691 
Due to related parties  -   - 
Notes payable, current portion  3,032,686   4,459,302 
Capital lease obligation, current portion  16,920   16,740 
Notes payable, current portion, net of deferred loan costs  4,089,567   1,422,554 
Finance lease obligation, current portion  17,662   17,473 
Line of credit  229,961   379,961   79,961   79,961 
Operating lease  724,587   - 
Liability to issue common stock, current portion  501,844   421,044 
Operating lease liability, current portion  1,024,491   1,025,247 
Total current liabilities  6,502,146   13,831,173   9,284,967   6,065,636 
                
Long-term liabilities:                
Notes payable, net of current portion  276,854   317,291   320,352   2,109,065 
Capital Lease Obligation, net of current portion  79,740   84,038 
Deferred Rent  185,022   197,991 
Lease Incentive Obligation  549,695   576,454 
Operating lease, net of current portion  3,310,403   - 
Finance lease obligation, net of current portion  62,078   66,565 
Liability to issue common stock, net of current portion  417,266   578,866 
Operating lease liability, net of current portion  3,691,169   3,660,654 
Other non-current liabilities  45,000   - 
                
Total liabilities  10,903,860   15,006,947   13,820,832   12,480,786 
                
Stockholders’ equity (deficit):        
Preferred stock - $0.001 par value, 5,000,000 authorized, nil issued and outstanding  -   - 
Common stock; $0.001 par value, 30,000,000 authorized, 7,252,923 and 4,533,623 shares issued and outstanding at March 31, 2019 and December 31, 2018, respectively  7,253   4,534 
Stockholders’ equity:        
Preferred stock - $0.001 par value, 5,000,000 authorized, nil issued and outstanding at March 31, 2020 and December 31, 2019  -   - 
Common stock - $0.001 par value, 30,000,000 authorized, 10,009,098 and 8,913,258 shares issued and outstanding at March 31, 2020 and December 31, 2019, respectively  10,003   8,907 
Additional paid-in capital  14,280,204   1,233,966   21,465,115   20,050,634 
Accumulated deficit  (5,144,009)  (3,544,820)  (11,775,595)  (10,042,050)
Non-controlling interest  (2,057,063)  (1,625,840)  (2,416,803)  (2,080,199)
Total stockholders’ equity (deficit)  7,086,385   (3,932,160)
Total stockholders’ equity  7,282,720   7,937,292 
                
Total liabilities and stockholders’ equity (deficit) $17,990,245  $11,074,787 
Total liabilities and stockholders’ equity $21,103,552  $20,418,078 

 

See accompanying notes to the unaudited condensed consolidated financial statements.

 

4

 

IMAC HOLDINGS, INC.

CONDENSEDCONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

 Three Months Ended March 31,  

Three Months Ended

March 31,

 
 2019  2018  2020  2019 
     
Patient revenues $7,289,022  $532,872 
Contractual adjustments  (4,519,194)  (298,619)
Total patient revenue, net  2,769,828   234,253 
Patient revenues, net $3,309,069  $2,769,828 
                
Management fees  -   33,600   12,487   - 
Total revenue  2,769,828   267,853   3,321,556   2,769,828 
                
Operating expenses:                
Patient expenses  436,129   37,134   379,817   436,129 
Salaries and benefits  2,064,623   446,796   2,926,150   2,064,623 
Share-based compensation  3,749   3,749   81,084   3,749 
Advertising and marketing  347,016   93,178   241,817   347,016 
General and administrative  977,369   239,692   1,236,138   977,369 
Depreciation and amortization  285,567   31,268   450,495   285,567 
Total operating expenses  4,114,453   851,817   5,315,501   4,114,453 
                
Operating loss  (1,344,626)  (583,964)  (1,993,945)  (1,344,625)
                
Other income (expense):        
Interest income  -   3,312 
Other (loss)  (15,955)  - 
Other expenses:        
Other expenses  -   (15,955)
Beneficial conversion interest expense  (639,159)  -   -   (639,159)
Interest expense  (30,671)  (23,552)  (76,204)  (30,671)
Total other (expenses)  (685,785)  (20,240)
        
Loss before equity in (loss) of non-consolidated affiliate  (2,030,410)  (604,204)
        
Equity in (loss) of non-consolidated affiliate  -   (85,651)
Total other expenses  (76,204)  (685,785)
                
Net loss before income taxes  (2,030,410)  (689,855)  (2,070,149)  (2,030,410)
                
Income taxes  -   -   -   - 
                
Net loss  (2,030,410)  (689,855)  (2,070,149)  (2,030,410)
                
Net loss attributable to the non-controlling interest  431,223   285,191   336,604   431,223 
                
Net loss attributable to IMAC Holdings, Inc. $(1,599,187) $(404,664) $(1,733,545) $(1,599,187)
                
Net loss per share attributable to common stockholders                
Basic and diluted $(0.27) $(0.09) $(0.18) $(0.27)
                
Weighted average common shares outstanding                
Basic and diluted  5,919,856   

4,533,623

   9,611,252   5,919,856 

 

See accompanying notes to the unaudited condensed consolidated financial statements.

 

5

 

IMAC HOLDINGS, INC.

CONDENSEDCONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)

(Unaudited)

 

  Common Stock  Additional  Non-       
  Number of
Shares
  Par  Paid-In-
Capital
  Controlling
Interest
  Accumulated Deficit  Total 
                   
Balance, December 31, 2018  4,553,623  $4,534  $1,233,966  $(1,625,840) $(3,544,820)  (3,932,160)
Common stock issued for initial public offering proceeds, net of related fees  850,000   850   3,503,314           3,504,164 
Issuance of common stock in connection with convertible notes  449,217   449   2,245,636           2,246,085 
Issuance of common stock in connection with acquisitions  1,410,183   1,410   7,247,798           7,249,208 
Exercise of warrants  9,900   10   49,490           49,500 
Net loss              (431,223)  (1,599,187)  (2,030,410)
Balance, March 31, 2019  7,252,923  $7,253  $  14,280,204  $(2,057,063) $(5,144,007) $7,086,387 

  Common Stock  Additional  Non-       
  

Number of

Shares

  Par  

Paid-In-

Capital

  

Controlling

Interest

  

Accumulated

Deficit

  Total 
                   
Balance, December 31, 2018  4,533,623  $4,534  $1,233,966  $(1,625,840) $(3,544,820) $(3,932,160)
                         
Common stock issued for initial public offering proceeds, net of related fees  850,000   850   3,503,314   -   -   3,504,164 
                         
Issuance of common stock in connection with convertible notes  449,217   449   2,245,636   -   -   2,246,085 
                         
Issuance of common stock in connection with acquisitions  1,410,183   1,410   7,247,798   -   -   7,249,208 
                         
Exercise of warrants  9,900   10   49,490   -   -   49,500 
                         
Net loss  -   -   -   (431,223)  (1,599,187)  (2,030,410)
                         
Balance, March 31, 2019  7,252,923  $7,253  $14,280,204  $(2,057,063) $(5,144,007) $7,086,387 
  Common Stock  Additional  Non-       
  Number of
Shares
  Par  Paid-In-
Capital
  Controlling
Interest
  Accumulated Deficit  Total 
                   
Balance, December 31, 2019  8,913,258  $8,907  $20,050,634  $(2,080,199) $(10,042,050)  7,937,292 
Issuance of common stock  1,095,840   1,096   1,376,122           1,377,218 
Issuance of employee stock options          38,359           38,359 
Net loss              (336,604)  (1,733,545)  (2,070,149)
Balance, March 31, 2020    10,009,098  $10,003  $  21,465,115  $(2,416,803) $(11,775,595) $7,282,720 

 

See accompanying notes to unaudited condensed consolidated financial statements.

 

6

 

IMAC HOLDINGS, INC.

CONDENSEDCONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

 Three Months Ended March 31, 
 2019  2018  

Three Months Ended

March 31,

 
      2020  2019 
Cash flows from operating activities:                
Net loss $(2,030,410) $(689,855) $(2,070,149) $(2,030,410)
Adjustments to reconcile net loss to net cash used in operating activities:                
Depreciation and amortization  285,567   31,268   450,495   285,567 
Beneficial conversion interest expense  

639,159

   

-

   -   639,159 
Share based compensation  81,084   - 
Deferred rent  (12,969)  2,408   -   (12,969)
Equity in loss of non-consolidated affiliate  -   85,651 
(Increase) decrease in operating assets:                
Accounts receivable, net  (361,450)  (503)  (141,966)  (361,450)
Due from related parties  -   - 
Other assets  (230,796)  (118,410)  64,120   (230,796)
Security deposits  (3,310)  -   (51,796)  (3,310)
Increase (decrease) in operating liabilities:                
Accounts payable and accrued expenses  361,428   136,685   408,221   361,428 
Patient deposits  485,392   (22,249)  102,784   485,392 
Lease incentive obligation  (26,759)  (1,536)  -   (26,759)
Net cash (used in) operating activities  (894,149)  (576,541)
Net cash used in operating activities  (1,157,207)  (894,149)
                
Cash flows from investing activities:                
Purchase of property and equipment  (42,426)  (1,191,620)  (7,243)  (42,426)
Investment in and advances go IMAC St Louis LLC  -   (124,106)
Net cash (used in) investing activities  (42,426)  (1,315,726)
Acquisition of IMAC Florida (Note 7)  (200,000)  - 
Net cash used in investing activities  (207,243)  (42,426)
                
Cash flows from financing activities:                
Proceeds from initial public offering  3,839,482   - 
Proceeds from initial public offering, net of related fees  -   3,839,482 
Proceeds from warrants exercised  49,500   -   -   49,500 
Proceeds from issuance of common stock  1,403,837   - 
Proceeds from notes payable  100,000   2,262,500   1,200,000   100,000 
Payments on notes payable  (27,053)  (20,590)  (256,838)  (27,053)
Proceeds from line of credit  -   75,000 
Payments of debt issuance costs  (70,000)  - 
Payments on line of credit  (150,000)  -   -   (150,000)
Payments on capital lease obligation  (4,118)  (1,922)
Payments on finance lease obligation  (4,298)  (4,118)
Net cash provided by financing activities  3,807,811   2,314,988   2,272,701   3,807,811 
                
Net increase in cash  2,871,237   422,721   908,251   2,871,237 
                
Cash, beginning of period  194,316   127,788   373,689   194,316 
                
Cash, end of period $3,065,553  $550,509  $1,281,940  $3,065,553 
                
Supplemental cash flow information:                
Interest paid $30,671  $23,552  $27,412  $30,671 
Non cash financing and investing:        
Debt discount notes payable $115,000  $- 

 

See accompanying notes to the unaudited condensed consolidated financial statements.

7

IMAC HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

Note 1 – Description of Business

 

IMAC Holdings, Inc. and its affiliates (collectively, the “Company”) provide orthopedic therapies through its chain of IMAC Regeneration Centers. Through its consolidated and equity owned entities, its outpatient medical clinics provide conservative, non-invasive medical treatments to help patients with back pain, knee pain, joint pain, ligament and tendon damage, and other related soft tissue conditions. The Company had openedopen two (2) medical clinics located in Tennessee and opened or acquired through management service agreements nine (9)fourteen (14) medical clinics located in Kentucky, Missouri, Illinois and MissouriFlorida at March 31, 2019.2020. The Company has partnered with several well-known sports stars such as Ozzie DavisSmith, David Price, Tony Delk and David PriceMike Ditka in opening its medical clinics, with a focus around treating sports injuries.

 

Effective June 1, 2018, the Company converted from IMAC Holdings, LLC a Kentucky limited liability company to IMAC Holdings, Inc. a Delaware corporation, followed by a reverse stock split in February 2019. These accounting changes have been given retrospective treatment in the condensed consolidated financial statements.

 

During February 2019, the Company completed an initial public offering (“IPO”) of securities. See Note 13.13 – Stockholder’s Equity.

 

Note 2 – Summary of Significant Accounting Policies

 

Principles of Consolidation

 

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with Generally Accepted Accounting Principles (“GAAP”) in the United States of America (“U.S.”) as promulgated by the Financial Accounting Standards Board (“FASB”), Accounting Standards Codification (“ASC”) and with the rules and regulations of the U.SU.S. Securities and Exchange Commission (“SEC” or the “Commission”). In our opinion, the accompanying unaudited condensed consolidated financial statements contain all adjustments (which are of a normal recurring nature) necessary for a fair presentation. Interim results are not necessarily indicative of results for a full year. Therefore, the interim unauditedThe information contained in these condensed consolidated financial statements should be read in conjunction with the Company’s consolidated financial statements containedand notes thereto for the fiscal year ended December 31, 2019 included in the Company’s Annual Report on Form 10-K.10-K filed with the SEC on March 26, 2020.

The accompanying condensed consolidated financial statements include the accounts of IMAC Holdings, Inc. (“IMAC Holdings”) and the following entities which are consolidated due to direct ownership of a controlling voting interest or other rights granted to us as the sole general partner or managing member of the entity: IMAC Management Services, LLC (“IMAC Management”), IMAC Regeneration Management, LLC (“IMAC Texas”) and, IMAC Regeneration Management of Nashville, LLC (“IMAC Nashville”), IMAC Management of Illinois, LLC (“IMAC Illinois”) and IMAC Management of Florida, LLC (“IMAC Florida”); the following entity which is consolidated with IMAC Regeneration Management of Nashville, LLC due to control by contract: IMAC Regeneration Center of Nashville, PC (“IMAC Nashville PC”); and the following entity which prior to June 1, 2018 was held as a minority interest, IMAC Regeneration Center of St. Louis, LLC (“IMAC St. Louis”).

 

In June 2018, the Company consummated certain transactions resulting in the acquisition of the outstanding equity interests in IMAC St. Louis and Clinic Management Associates of KY, LLC (“CMA of KY”), an entity which is consolidated withconsolidates Integrated Medical and Chiropractic Regeneration Center, PSC (“IMAC Kentucky”) due to control by contract. These entities are included in the condensed consolidated financial statements from the date of acquisition.

 

In August 2018, the Company acquired 100% of Advantage Hand Therapy and Orthopedic Rehabilitation, LLC (“Advantage Therapy”) and 70% of BioFirma LLC (“BioFirma”). Both companies are consolidated due to direct ownership of a controlling voting interest or other rights granted to us as the sole general partner or managing member of the entity. On October 1, 2019, the Company acquired the 30% of BioFirma’s membership interests which were not previously held by the Company, resulting in the Company owning 100% of the membership interests of BioFirma. Substantially all the assets of BioFirma were sold effective December 31, 2019.

In April 2019, the Company consummated certain transactions resulting in the acquisition of the outstanding equity interest in ISDI Holdings II, Inc., an Illinois corporation (“ISDI Holdings II”), and PHR Holdings, Inc., an Illinois corporation (“PHR Holdings”), entities which consolidate the results of Progressive Health and Rehabilitation, Ltd (“Progressive”) and Illinois Spine and Disc Institute, Ltd (“ISDI”) due to control by contract. These entities are included in the condensed consolidated financial statements from the date of acquisition.

In November 2019, IMAC Illinois entered into a management agreement for an occupational and physical therapy practice in Rockford, Illinois. This entity is included in the condensed consolidated financial statements due to control by contract from the date of entry into the management agreement.

In January 2020, the Company consummated an agreement for the acquisition of Chiropractic Health of Southwest Florida, Inc. (“CHSF”) in Bonita Springs, Florida. This entity is included in the condensed consolidated financial statements from the date of acquisition.

 

All significant intercompany balances and transactions have been eliminated in consolidation.

 

Use of Estimates

 

The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses at the date and for the periods that the condensed consolidated financial statements are prepared. On an ongoing basis, the Company evaluates its estimates, including those related to insurance adjustments and provisions for doubtful accounts. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. Actual results could materially differ from those estimates.

 

Revenue Recognition

 

The Company’s patient service revenue is derived from non-surgical procedures performed at our outpatient medical clinics and patient visits to physicians. The fees for such services are billed either to the patient or a third- partythird-party payer, including Medicare. We recognize patientStarting in January 2020, the Company implemented wellness maintenance programs on a subscription basis. There are three membership plans offered with different levels of service revenue, netfor each plan. The Company recognizes service revenues based upon the estimated amounts the Company expects to be entitled to receive from patients and third-party payers. Estimates of contractual allowances, which we estimateadjustments are based upon the payment terms specified in the related contractual agreements. The Company also records estimated implicit price concessions (based primarily on historical collection experience) related to uninsured accounts to record these revenues at the historical trend of our cash collections and contractual write-offs.estimated amounts expected to be collected.

8

 

Other management service fees are derived from management services where the Company provides billings and collections support to the clinics and where management services are provided based on state specific regulations known as the corporate practice of medicine (“CPM”). Under the CPM, a business corporation is precluded from practicing medicine or employing a physician to provide professional medical services. In these circumstances, the Company provides all administrative support to the physician-owned PC through an LLC. The PC is consolidated due to control by contract (an “MSA” – Management Services Agreement). The fees we derive from these management arrangements are either based on a predetermined percentage of the revenue of each clinic or a percentage mark up on the costs of the LLC. WeThe company recognize other management service revenue in the period in which services are rendered. These revenues are earned by IMAC Nashville, IMAC Management and IMAC ManagementIllinois and are eliminated in consolidation to the extent owned.

 

The Company’s patient revenue consisted of the following as of March 31, 2020 and 2019:

  March 31, 2020  March 31, 2019 
       
Patient revenues $7,151,942  $7,289,022 
Contractual adjustments  (3,842,873)  (4,519,194)
Patient revenue, net $3,309,069  $2,769,828 

Patient Deposits

 

Patient deposits are derived from patient payments in advance of services delivered. Our service lines include traditional and regenerative medicine. Regenerative medicine procedures are notrarely paid by insurance carriers; therefore, the Company typically requires up-front payment from the patient for regenerative services and any co-pays and deductibles as required by the patient specific insurance carrier. For some patients, credit is provided through an outside vendor. In this case, the Company is paid from the credit card company and the risk is transferred to the credit card company for collection from the patient. These funds are accounted for as patient deposits until the procedures are performed at which point the patient deposit is recognized as patient service revenue.

 

Fair Value of Financial Instruments

 

The carrying amount of accounts receivable and accounts payable and acquisition liabilities approximate their respective fair values due to the short- term nature. The carrying amount of the line of credit and note payable approximates fair values due to their market interest rates. Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and cash equivalents and accounts receivable.

 

Cash and Cash Equivalents

 

The Company considers all short-term investments with an original maturity of three months or less to be cash equivalents. The Company had no cash equivalents.equivalents at March 31, 2020 and 2019.

 

Accounts Receivable

 

Accounts receivable primarily consists of amounts due from third-party payers (non-governmental), governmental payers and private pay patients and is recorded net of allowances for doubtful accounts and contractual discounts. The Company’s ability to collect outstanding receivables is critical to its results of operations and cash flows. Accordingly, accounts receivable reported in the Company’s condensed consolidated financial statements areis recorded at the net amount expected to be received. The Company’s primary collection risks are (i) the risk of overestimation of net revenues at the time of billing that may result in the Company receiving less than the recorded receivable, (ii) the risk of non-payment as a result of commercial insurance companies’ denial of claims, (iii) the risk that patients will fail to remit insurance payments to the Company when the commercial insurance company pays out-of-network claims directly to the patient, (iv) resource and capacity constraints that may prevent the Company from handling the volume of billing and collection issues in a timely manner, (v) the risk that patients do not pay the Company for their self-pay balances (including co-pays, deductibles and any portion of the claim not covered by insurance) and (vi) the risk of non-payment from uninsured patients.

 

The Company’s accounts receivable from third-party payers are recorded net of estimated contractual adjustments and allowances from third-party payers, which are estimated based on the historical trend of the Company’s facilities’ cash collections and contractual write- offs,write-offs, accounts receivable aging, established fee schedules, relationships with payers and procedure statistics. While changes in estimated reimbursement from third-party payers remain a possibility, the Company expects that any such changes would be minimal and, therefore, would not have a material effect on the Company’s financial condition or results of operations. The Company’s collection policies and procedures are based on the type of payer,payor, size of claim and estimated collection percentage for each patient account. The operating systems used to manage the Company’s patient accounts provide for an aging schedule in 30-day increments, by payer, physician and patient. The Company analyzes accounts receivable at each of the facilities to ensure the proper collection and aged category. The operating systems generate reports that assist in the collection efforts by prioritizing patient accounts. Collection efforts include direct contact with insurance carriers or patients and written correspondence.

 

910

Allowance for Doubtful Accounts, Contractual and Other Discounts

 

Management estimates the allowance for contractual and other discounts based on its historical collection experience and contracted relationship with the payers. The services authorized and provided and related reimbursement are often subject to interpretation and negotiation that could result in payments that differ from the Company’s estimates. The Company’s allowance for doubtful accounts is based on historical experience, but management also takes into consideration the age of accounts, creditworthiness and current economic trends when evaluating the adequacy of the allowance for doubtful accounts. An account may be written-off only after the Company has pursued collection efforts or otherwise determines an account to be uncollectible. Uncollectible balances are written-off against the allowance. Recoveries of previously written-off balances are credited to income when the recoveries are made.

 

Property and Equipment

 

Property and equipment are stated at cost, less accumulated depreciation. Additions and improvements to property and equipment are capitalized at cost. Depreciation of owned assets and amortization of leasehold improvements are computed using the straight-line method over the shorter of the estimated useful lives of the related assets or the lease term. The cost of assets sold or retired, and the related accumulated depreciation are removed from the accounts and any resulting gains or losses are reflected in other income (expense) for the year. Expenditures for maintenance and repairs are charged to expense as incurred.

 

Intangible Assets

 

The Company capitalizes the fair value of intangible assets acquired in business combinations. Intangible assets are amortized on a straight-line basis over their estimated economic useful lives, generally the contract term. The Company performs valuations of assets acquired and liabilities assumed on each acquisition accounted for as a business combination and allocates the purchase price of each acquired business to its respective net tangible and intangible assets. Acquired intangible assets include trade names, non-compete agreements, customer relationships and contractual agreements.

 

Goodwill

The Company tests goodwill for impairment on an annual basis, or when events or circumstances indicate the fair value of a reporting unit is below its carrying value.

 

Our goodwill represents the excess of the purchase price over the fair value of the net identifiable assets acquired in business combinations. The goodwill generated from the business combinations is primarily related to the value placed on the employee workforce and expected synergies. Judgment is involved in determining if an indicator or change in circumstances relating to impairment has occurred. Such changes may include, among others, a significant decline in expected future cash flows, a significant adverse change in the business climate, and unforeseen competition. There was no goodwill impairment for the years presented.

 

The Company tests goodwill for impairment on an annual basis, or when events or circumstances indicate the fair value of a reporting unit is below its carrying value.

Long-Lived Assets

 

Long-lived assets such as property and equipment and intangible assets are evaluated for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. There were no impairments of long livedlong-lived assets for the years presented.

 

Advertising and Marketing

 

The Company uses advertising and marketing to promote its services. Advertising and marketing costs are expensed as incurred. Advertising and marketing expense was $347,016$241,817 and $93,178$347,016 for the three months ended March 31, 2020 and 2019, and 2018, respectively (unaudited).respectively.

 

Net Loss Per Share

 

Basic net loss per common share is computed by dividing net loss applicable to common stockholders by the weighted-average number of common shares outstanding during the period. Diluted net loss per common share is determined using the weighted-average of common shares outstanding during the period, adjusted for the dilutive effect of common stock equivalents, consisting of the conversion option embedded in convertible debt. The weighted-average number of common shares outstanding excludes common stock equivalents because their inclusion would have an anti-dilutive effect.

 

1011

Income Taxes

 

Following the Company’s conversion to a Delaware corporation in 2018, IMAC Management,Nashville, IMAC Texas, and IMAC Nashville areSt. Louis continued as single-member limited liability companies (wholly owned by the Company) that are disregarded entities for tax purposes and are taxeddo not file separate returns. Their activity is included as partnerships.part of IMAC Holdings Inc. Advantage Therapy, IMAC Illinois and IMAC Florida are also disregarded entities for tax purposes. BioFirma was a limited liability company taxed as a partnership through May 31, 2018. Aspartnership. Effective October 1, 2019, BioFirma became wholly owned by IMAC Holdings and is a result, incomedisregarded entity for tax liabilities are passed through topurposes. IMAC Management is a C-corporation and is included in the individual members.consolidated return of IMAC Holdings as a subsidiary.

Any future benefit arising from losses have been offset by a valuation allowance. Accordingly, no provision for income taxes wereis reflected in the condensed consolidated financial statements for periods prior to May 31, 2018 at which time IMAC Holdings converted from a limited liability company to a Delaware corporation.

statements. The Company records a liability for uncertain tax positions when it is probable that a loss has been incurred and the amount can be reasonably estimated. Interest and penalties related to income tax matters, if any, would be recognized as a component of income tax expense. For the three months endedAt March 31, 20192020 and 2018,December 31, 2019, the Company had no liabilities for uncertain tax positions. The Company continually evaluates expiring statutes of limitations, audits, proposed settlements, changes in tax law and new authoritative rulings. Currently, the tax years subsequent to 20162017 are open and subject to examination by the taxing authorities.

Recently Issued Accounting Pronouncements

In January 2017, the Financial Accounting Standards Board (“FASB”) issued ASU 2017-04 “Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment”. This update simplifies the subsequent measurement of goodwill by eliminating Step 2 from the goodwill impairment test. Under this updated standard, an entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value, but the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. An entity also should consider income tax effects from any tax-deductible goodwill on the carrying amount of the reporting unit when measuring the goodwill impairment loss, if any. This guidance is effective prospectively and is effective for interim and annual periods beginning after December 15, 2019 with early adoption permitted. The Company does not expect the adoption of this guidance to have a material impact on our condensed consolidated financial statements.

In February 2016, the FASB issued ASU 2016-02, “Leases” which, for operating leases, requires a lessee to recognize a right-of-use asset and a lease liability, initially measured at the present value of the lease payments, in its balance sheet. The standard also requires a lessee to recognize a single lease cost, calculated so that the cost of the lease is allocated over the lease term, on a generally straight-line basis. The ASU was effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. We recognized a right of use asset and related obligation on our condensed consolidated financial statements.

 

Note 3 – Capital Requirements, Liquidity and Going Concern Considerations

 

The Company’s condensed consolidated financial statements are prepared in accordance with GAAP including the assumption of a going concern basis, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. However, as shown in the accompanying condensed consolidated financial statements, the Company has sustained substantial losses from operations since inception and hashad a deficiency in working capital of approximately $13.1 million and $2.4$5.7 million at December 31, 2018 and March 31, 2019, respectively.2020. The Company had a net loss of approximately $2.0 million and $0.7$2.1 million at March 31, 2019 and 2018, respectively,2020, and used cash in operations of $0.8 million and $0.6approximately $1.2 million at March 31, 2019 and 2018, respectively, in its operations.2020. The Company expects to continue to incur significant expenditures to develop and expand its owned and managed outpatient medical clinics.

 

Management recognizes that the Company must obtain additional resources to successfully integrate its acquired and managed clinics and implement its business plans. Through DecemberMarch 31, 2018,2020, the Company hadhas received funding in the form of indebtedness. Subsequent to December 31, 2018,indebtedness and the Company completed an initial public offeringissuance of 850,000 units, in which the Company received aggregate gross proceeds of approximately $4.3 million and extinguished liabilities of approximately $7.2 million.common stock. Management plans to continue to raise funds and/or refinance the Company’sour indebtedness to support itsour operations in 20192020 and beyond. However, no assurances can be given that the Companywe will be successful. If management is not able to timely and successfully raise additional capital and/or refinance indebtedness, the implementation of the Company’s business plan, financial condition and results of operations will be materially affected. These condensed consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

 

Note 4 - Global Pandemic and Management’s Plans

On January 30, 2020, the World Health Organization (WHO) announced a global health emergency because of a new strain of coronavirus originating in Wuhan, China (the “COVID-19 outbreak”) and the risks to the international community as the virus spread globally beyond the point of origin. On March 20, 2020 the WHO classified the COVID-19 outbreak as a pandemic, based on the rapid increase in exposure globally.

The full impact of the COVID-19 outbreak continues to evolve as of the date of these condensed consolidated financial statements. As such, it is uncertain as to the full magnitude that the pandemic will have on the Company’s combined financial condition, liquidity and future results of operations. Management is actively monitoring the impact of the global situation on its consolidated financial condition, liquidity, operations, suppliers, industry and workforce. Given the daily evolution of the COVID-19 outbreak and the global responses to curb its spread, the Company is not able to estimate the effects of the COVID-19 outbreak on its results of operations, financial condition, or liquidity for fiscal year 2020.

1112

 

Note 45 – Concentration of Credit Risks

 

Cash

 

The Company maintains its cash in accounts at financial institutions, which may, at times, exceed federally-insured limits of $250,000. As of March 31, 2019 and December 31, 2018, theThe Company had $2,536,458 and $0, respectively,approximately $802,932 of cash in excess of federally insured limits. The Company has not experienced any losses on such accounts and does not feel it is exposed to any significant risk with respect to cash.

 

Revenue and Accounts Receivable

 

TheAs of March 31, 2020 and December 31, 2019, the Company had the following revenue and accounts receivable concentrations:

 

 March 31, 
 2019  2018  March 31, 2020  December 31, 2019 
 % of Revenue  % of Accounts Receivable  % of Revenue  % of Accounts Receivable  % of Revenue  % of Accounts Receivable  % of Revenue  % of Accounts Receivable 
    (unaudited)       (Unaudited)   
Patient payment  54%  54%  64%  64%  39%  30%  47%  40%
Medicare payment  22%  22%  13%  13%  34%  29%  27%  26%
Insurance payment  24%  24%  23%  23%  27%  41%  26%  34%
Total  100%  100%  100%  100%

 

Note 56 – Accounts Receivable

 

AccountsThe Company’s accounts receivable consisted of the following at March 31, 2019 and December 31, 2018:following:

 

 March 31, 2019  December 31, 2018  March 31, 2020  December 31, 2019 
 (unaudited)  (Unaudited) 
Gross accounts receivable $727,976  $314,185  $1,450,113  $1,285,228 
Less: allowance for doubtful accounts          (28,982)  (26,903)
and contractual adjustments  (62,896)  (10,555)
Accounts receivable, net $665,080  $303,630  $1,421,131  $1,258,325 

 

Note 67 – Business Acquisitions

During June 2018, the Company acquired CMA of Kentucky and IMAC St. Louis for aggregate consideration of approximately $6.1 million to be paid in equity. The operating results of these two companies have been included in the Company’s consolidated financial statements from their dates of acquisition. The Company accounted for the transactions as business combinations, and has allocated the purchase consideration to the net assets acquired based on estimated fair values.

In addition, during June 2018, the Company acquired the non-controlling interest held in its majority-owned subsidiary IMAC Nashville for $300,000 to be paid in equity.

During August 2018, the Company acquired Advantage Therapy and BioFirma for aggregate consideration of approximately $900,000 to be paid in cash and equity. The operating results of these two companies have been included in the Company’s consolidated financial statements from their dates of acquisition. The Company accounted for the transactions as business combinations, and has allocated the purchase consideration to the net assets acquired based on estimated fair values.

12

IMAC Kentucky

On June 29, 2018, IMAC Management completed a merger of CMA of KY into IMAC Management. Pursuant to this merger, IMAC Management has a long-term MSA to provide exclusive comprehensive management and related administrative services to IMAC Kentucky, an entity engaged in the practice of medicine through physicians and nurse practitioners. Under the IMAC Kentucky MSA, the Company receives service fees based on the cost of the services provided, plus a specified markup percentage, and a discretionary annual bonus.

The Company has included the consolidated financial results of IMAC Kentucky in its consolidated financial statements from the date of acquisition.

IMAC St. Louis

On June 1, 2018, the Company acquired the remaining 64% membership interest in IMAC St. Louis not already owned by it pursuant to a Unit Purchase Agreement, increasing the Company’s ownership to 100%. IMAC St. Louis operates two (2) Ozzie Smith Centers in Missouri. Pursuant to the terms of the Unit Purchase Agreement, the Company agreed to pay the current owners, upon the closing of the Company’s initial public offering, an amount equal to 1.05 times the total collections from payments at the IMAC St. Louis centers on account of regeneration-related services and associated products from the period from June 1, 2017 to May 31, 2018, or $1,490,632. The purchase consideration will be payable in the form of shares of our common stock based on the price per share of the Company’s common stock in the Company’s initial public offering. See Note 13.

The Company has included the financial results of IMAC St. Louis in its consolidated financial statements from June 1, 2018, the date of acquisition.

IMAC Nashville

Also on June 1, 2018, the Company acquired the remaining 25% of the outstanding units of the limited liability company membership interests not already owned by the Company in IMAC Nashville for $300,000 which was paid in shares of our common stock based on the price per share of the Company’s common stock in the Company’s initial public offering. See Note 13.

Advantage Therapy

On August 1, 2018, the Company entered into an agreement to purchase all outstanding membership units of Advantage Therapy. The purchase price for the interests was equal to the dollar amount represented by 0.7 times the total collections from payments for service in Advantage Therapy’s account from June 1, 2017 to May 31, 2018, or approximately $892,000, of which $870,000 and $22,000 and were payable in equity and cash, respectively. See Note 13.

The Company has included the financial results of Advantage Therapy in its consolidated financial statements from August 1, 2018, the date of acquisition.

 

BioFirma

 

On August 1, 2018, the Company entered into an agreement to purchase 70% of all outstanding membership units of BioFirma LLC. The purchase price for the interests was $1,000 paid in cash. BioFirma owns a trademark on NeoCyte, an umbilical cord-derived mononuclear cell product following FDA cGMP regulations. The Company has committed to further research and development of NeoCyte and other regenerative medicine products.

 

The Company has included the financial results of BioFirma in itsthe condensed consolidated financial statements from August 1, 2018, the date of acquisition.

 

On October 1, 2019, the holder of the 30% of the membership interests of BioFirma and the Company entered into an Assignment and Assumption of Interests of BioFirma LLC, pursuant to which the Company acquired the 30% of BioFirma’s membership interests which were not previously held by the Company, resulting in the Company owning 100% of the membership interests of BioFirma.

On December 31, 2019, the Company and BioFirma consummated the sale of substantially all of BioFirma’s assets pursuant to an asset purchase agreement with Self Care Regeneration LLC for a purchase price of $320,800, plus the assumption of certain of BioFirma’s liabilities, all of which were due to be paid to us no later than March 30, 2020. On March 31, 2020, the due date for the payment of the asset sale purchase price was extended to June 30, 2020.

13

IMAC Illinois

 

On April 1, 2019, the Company and its wholly owned subsidiary IMAC Illinois entered into an Agreement and Plan of Merger (the “Merger Agreement”) for the acquisition of a practice management group that manages three clinics in the Chicago, Illinois area. The acquisition was completed on April 19, 2019. Pursuant to the Merger Agreement, the Company issued 1,002,306 restricted shares of the Company’s common stock (the “Merger Consideration”) valued at approximately $4.1 million. The Company has included the financial results of IMAC Illinois, which controls the three Chicago-area clinics, from April 19, 2019, the date of acquisition.

IMAC Florida

On January 13, 2020, the Company and its wholly owned subsidiary IMAC Florida consummated the acquisition of CHSF, a chiropractic practice in Bonita Springs, Florida. The transaction was completed as a purchase of the practice for $200,000. The Company has included the financial results of IMAC Florida, which controls CHSF, from January 13, 2020, the date of acquisition.

 

The following table summarizes the fair value of consideration paid and the allocation of purchase price to the fair value of net assets acquired for the business acquisitions:acquisitions since January 1, 2019:

 

  IMAC Kentucky  IMAC St. Louis  Advantage
Therapy
  BioFirma 
Property & equipment $607,257  $-  $18,647  $- 
Intangible Assets  4,224,113   264,000   37,000   1,429 
Goodwill  -   1,327,507   713,189   - 
Other assets  5,521   -   255,018   - 
Current liabilities  (119,902)  -   (50,948)  - 
Noncurrent liabilities  (118,413)  -   (79,975)  - 
Non-controlling interest  -   -   -   (429)
  $4,598,576  $1,591,507  $892,931  $1,000 
  Florida 
Property & equipment $50,358 
Intangible assets  128,802 
Other assets  20,840 
  $200,000 

 

Note 78 – Property and Equipment

 

The Company’s property and equipment consisted of the following:following at March 31, 2020 and December 31, 2019:

 

  Estimated March 31,  December 31, 
  Useful Life in Years 2019  2018 
         
Land and Building 40 $1,175,000  $1,175,000 
Leasehold improvements Shorter of asset or lease term  1,614,778   1,427,828 
Equipment 1.5 - 7  1,557,646   1,180,093 
Total property and equipment    4,347,424   3,782,921 
Less: accumulated depreciation    (1,126,241)  (449,283)
Total property and equipment, net   $3,221,183  $3,333,638 

In March 2018, the Company purchased real estate in Lexington, Kentucky for the development of an IMAC facility for approximately $1.2 million. The Company funded the purchase with a note payable. See Note 11.

  Estimated    
  Useful Life in Years March 31, 2020  December 31, 2019 
         
Land and building 40 (Building) $1,175,000  $1,175,000 
Leasehold improvements Shorter of asset or lease term  2,264,798   2,262,398 
Equipment 1.5 - 7  2,003,549   1,948,347 
Total property and equipment    5,443,347   5,385,745 
           
Less: accumulated depreciation    (1,912,580)  (1,693,736)
Total property and equipment, net   $3,530,767  $3,692,009 

 

Depreciation was $154,881$218,843 and $31,268$154,881 for the three months ended March 31, 2020 and 2019, and 2018, respectively.

14

 

Note 89 – Intangibles Assets and Goodwill

 

The Company’s intangible assets that were acquired in connection withand goodwill consisted of the business acquisition transactions (Note 6) during 2018 were as follows:following at March 31, 2020 and December 31, 2019:

 

    December 31, 2018 
  Estimated    Accumulated    
  Useful Life Cost  Amortization  Net 
            
Intangible assets:              
Management service agreement 10 years $4,224,113  $(211,206) $4,012,907 
Non-compete agreements    301,000   (56,473)  244,527 
Definite lived assets 3 years  4,525,113   (267,679)  4,257,434 
Goodwill    2,042,125   -   2,042,125 
Total intangible assets and goodwill   $6,567,238  $(267,679) $6,299,559 

    March 31, 2019 
            
  Estimated      Accumulated     
  Useful Life  Cost   Amortization   Net 
               
Intangible assets:              
Management service agreement 10 years $4,224,113  $(316,808) $3,907,305 
Non-compete agreements    301,000   (81,557)  219,443 
Definite lived assets 3 years  4,525,113   (398,365)  4,126,748 
Goodwill    2,042,125   -   2,042,125 
Total intangible assets and goodwill   $6,567,238  $(398,365) $6,168,873 
    March 31, 2020 
  Estimated    Accumulated    
  Useful Life Cost  Amortization  Net 
            
Intangible assets:              
Management service agreements 10 years $7,940,398  $(1,110,849) $6,829,549 
Non-compete agreements 3 years  301,000   (181,889)  119,111 
Customer lists 3 years  134,882   (11,240)  123,642 
Definite lived assets    8,376,280   (1,303,978)  7,072,302 
Goodwill    2,040,696   -   2,040,696 
Total intangible assets and goodwill   $10,416,976  $(1,303,978) $9,112,998 
    December 31, 2019 
  Estimated    Accumulated    
  Useful Life Cost  Amortization  Net 
            
Intangible assets:              
Management service agreements 10 years $8,019,199  $(994,321) $7,024,878 
Non-compete agreements 3 years  301,000   (156,806)  144,194 
Definite lived assets    8,320,199   (1,151,127)  7,169,072 
Goodwill    2,040,696   -   2,040,696 
Total intangible assets and goodwill   $10,360,895  $(1,151,127) $9,209,768 

 

Amortization was $231,652 and $130,686 for the three months ended March 31, 2020 and 2019, respectively.

The Company’s estimated future amortization of intangible assets was as follows:

 

Years Ending December 31,      
      
2019 (nine months) $392,058 
2020  522,744 
2020 (nine months) $704,500 
2021  466,273   882,861 
2022  422,411   839,000 
2023  422,411   794,040 
2024  794,040 
Thereafter  1,900,851   3,057,861 
 $4,126,748  $7,072,302 

 

Note 910 – Operating Leases

Adoption of ASC Topic 842, Leases

 

On January 1, 2019, the Company adopted TopicASC 842 using the modified retrospective method applied to leases that were in place as ofat January 1, 2019. Results for reportingoperating periods beginning after January 1, 2019 are presented under TopicASC 842, while prior period amounts are not adjusted and continue to be reported in accordance with our historic accounting under TopicASC 840. The Company’s leases consistsconsist of operating leases that mostly relate to real estate rental agreements. AllMost of the value of the Company’s lease portfolio relates to a real estate lease agreements that were entered into starting March 2017.

 

Practical Expedients and Elections

The Company elected the package of practical expedients permitted under the transition guidance, which allowed us to carryforward our historical lease classification, our assessment on whether a contract is or contains a lease, and our initial direct costs for any leases that exist prior to adoption of the new standard. We also elected the short-term lease recognition exemption for all leases that qualify.

Discount Rate Applied to Property Operating LeaseLeases

 

To determine the present value of minimum future lease payments for operating leases at January 1, 2019, the Company was required to estimate a rate of interest that we would have to pay to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment (the “incremental borrowing rate” or “IBR”).

 

The Company determined the appropriate IBR by identifying a reference rate and making adjustments that take into consideration financing options and certain lease-specific circumstances. For the reference rate, the Company used the ten year mortgage interest rate.

 

Right of Use Assets

 

Right of use assets are included in the unauditedCompany’s condensed consolidated Balance Sheetbalance sheet were as follows:

 

 March 31, 2020  December 31, 2019 
        
Non-current assets           
Right of use assets, net of amortization $4,027,124  $3,800,997  $3,719,401 
    
Total operating lease cost    

 

15

Total operating lease cost

Individual components of the total lease cost incurred by the Company iswere as follows:

 

  

Three Months Ended

March 31, 2019

 
    
Operating lease expense $208,912 
     
Minimum rental payments under operating leases are recognized on a straight light basis over the term of the lease.    
  

Three Months Ended

March 31, 2020

  

Three Months Ended

March 31, 2019

 
         
Operating lease expense $306,632  $211,674 

 

Maturity of operating leases

Minimum rental payments under operating leases are recognized on a straight light basis over the term of the lease.

Maturity of operating leases

 

The Company’s amount of future minimum lease payments under operating leases are as follows:

 

  Operating Lease 
     
Undiscounted future minimum lease payments:    
2019 (remainder of year) $637,733 
2020  794,101 
2021  643,082 
2022  641,947 
2023  611,158 
Thereafter  1,100,783 
Total  4,428,803 
Amount representing imputed interest  (393,813)
Total operating lease liability  4,034,990 
Current portion of operating lease liability  (724,587)
Operating lease liability, non-current $3,310,403 

15

  Operating Leases 
    
Undiscounted future minimum lease payments:    
2020 (nine months) $887,150 
2021  1,017,114 
2022  1,022,348 
2023  939,971 
2024  601,468 
Thereafter  588,246 
Total  5,056,297 
Amount representing imputed interest  (340,637)
Total operating lease liability  4,715,660 
Current portion of operating lease liability  (1,024,491)
Operating lease liability, non-current $3,691,169 

 

Note 1011LinesLine of Credit

IMAC Nashville had a $150,000 line of credit with a financial institution that matured on October 15, 2018. The line bore interest at 6.50% per annum. The line is secured by substantially all of the Company’s assets and personally guaranteed by the members. The LOC had a $150,000 balance at December 31, 2018. The line of credit was repaid in February 2019.

IMAC Kentucky has a $150,000 line of credit with a financial institution that matured on August 1, 2018. The line bears interest at 4.25% per annum. The line was secured by substantially all of the IMAC Kentucky’s assets and personally guaranteed by the members. The LOC had a $150,000 balance at December 31, 2018 and $150,000 (unaudited) at March 31, 2019.

 

Advantage Therapy has a $100,000 line of credit with a financial institution that matures on November 20, 2020. The line bearsaccrues interest at a variable rate which is currently 6.0% per annum. The line is secured by substantially all of IMAC Holding’s assets. The LOCThis line of credit had a $79,975 balance at December 31, 2018 andof $79,961 at March 31, 2020 and December 31, 2019.

 

Note 11-Notes12 – Notes Payable

 

On March 25, 2020, the Company entered into a note purchase agreement with Iliad Research & Trading, L.P. (the “Holder”), pursuant to which the Company agreed to issue and sell to the Holder a secured promissory note (the “Note”) in an aggregate initial principal amount of $1,115,000 (the “Initial Principal Amount”), which is payable on or before the date that is 18 months from the issuance date (the “Maturity Date”). The Initial Principal Amount includes an original issue discount of $100,000 and $15,000 that the Company agreed to pay to the Holder to cover the Holder’s legal fees, accounting costs, due diligence and other transaction costs. In exchange for the Note, the Holder paid an aggregate purchase price of $1,000,000. Interest on the Note accrues at a rate of 10% per annum and is payable on the Maturity Date or otherwise in accordance with the Note. The Note may be prepaid by the Company (with the payment of a premium), may be required by the Holder to be redeemed by the Company for up to $200,000 per month after the six-month anniversary of the issuance of the Note (subject to certain deferral rights), and is subject to customary event of default (with a default interest rate of up to 22%). The Note transaction documents also give the Holder a right of first refusal to future debt issuances and a right to the first $250,000 of every $1 million of proceeds from future sales of equity by the Company. The Note is secured by the assets of the Company, other that the Company’s owned real property, intellectual property and accounts receivable, pursuant to a security agreement.

  

March 31,

2019

  December 31,
2018
 
       
Note payable to The Edward S. Bredniak Trust in the amount of up to $2,000,000. An existing note payable with this entity in the amount of $379,676 has been combined into the new note payable. The note carries an interest rate of 10% per annum and all outstanding balances are due and payable December 31, 2019. $1,684,426  $1,584,426 
         
Note payable to a financial institution in the amount of $200,000 dated November 15, 2017. The note requires 66 consecutive monthly installments of $2,652 including principal and interest at 5%, with a balloon payment of $60,000 which was paid on June 15, 2018. The note matures on May 15, 2023, and is secured by the personal guarantees of the Company’s management.  119,259   125,670 
         
Convertible notes issued to various investors, which accrued interest at 4%, and converted to common stock in connection with the closing of the Company’s initial public offering. See Note 13. The notes were convertible to equity at or prior to maturity at a 20% discount to the per share price of a sale of equity securities. At the time of issuance of the convertible notes, the Company was unable to calculate the amount of a beneficial conversion (“BCF”) and related discount to be recorded until the occurrence of a qualified financing by the Company. Upon the closing of the Company’s initial public offering, the Company recognized the BCF and related interest charge associated with the discount, and the BCF has been classified as a liability to the extent it met the conditions for derivative treatment at the time of recognition.  -   1,540,000 
         
$1.2 million mortgage loan with a financial institution. The loan agreement is for 6-months and carries an interest rate 3.35%. The loan matured in 2018 and was extended to 2019. It is currently interest only and is now on a month to month basis.  1,232,500   1,232,500 
         
Note payable to a financial institution in the amount of $131,400 dated August 1, 2016. The note requires 120 monthly installments of $1,394 including principal and interest at 5%. The note matures on July 1, 2026 and is secured by a letter of credit.  102,498   105,374 
         
Note payable to a financial institution in the amount of $200,000 dated May 4, 2016. The note requires 60 monthly installments of $3,881 including principal and interest at 4.25%. The note matures on May 4, 2021 and is secured by the equipment and personal guarantees of the Company’s management.  96,232   106,778 
         
Note payable to an employee in the amount of $101,906 dated March 8, 2017. The note requires 5 annual installments of $23,350 including principal and interest at 5%. The note matures on December 31, 2021 and is unsecured.  60,000   60,000 
         
Note payable to a financial institution in the amount of $133,555 dated September 17, 2014. The note requires 60 monthly installments of $2,475 including principal and interest at 4.25%. The note matures on September 17, 2019.  14,625   21,845 
   3,309,540   4,776,593 
Less: current portion:  (3,032,686)  (4,459,302)
  $276,854  $317,291 

Set forth below is a summary of the Company’s outstanding debt as of:

 

16

  March 31,  December 31, 
  2020  2019 
       
Note payable to The Edward S. Bredniak Trust in the amount of up to $2,000,000. An existing note payable with this entity in the amount of $379,676 has been combined into the new note payable which carries an interest rate of 10% per annum. The Note was amended in June 2019 and all outstanding balances are due January 5, 2021. $1,750,000  $1,750,000 
         
Note payable to a financial institution in the amount of $200,000 dated November 15, 2017. The note requires 66 consecutive monthly installments of $2,652 including principal and interest at 5%, with a balloon payment of $60,000 which was paid on June 15, 2018. The note matures on May 15, 2023, and is secured by the personal guarantees of certain Company executives.  92,904   99,628 
         
$1.2 million mortgage loan with a financial institution. The loan agreement was originally for 6-months and carries an interest rate 3.35%. The loan matured in 2019. It is currently due on demand, with interest being paid monthly.  1,232,500   1,232,500 
         
Note payable to a financial institution in the amount of $131,400 dated August 1, 2016. The note requires 120 monthly installments of $1,394 including principal and interest at 5%. The note matures on July 1, 2026, and is secured by a letter of credit.  90,629   93,652 
         
Note payable to a financial institution in the amount of $200,000 dated May 4, 2016. The note requires 60 monthly installments of $3,881 including principal and interest at 4.25%. The note matures on May 4, 2021, and is secured by the equipment and personal guarantees of certain Company executives.  52,910   63,913 
         
Note payable to an employee in the amount of $101,906 dated March 8, 2017. The note requires payment of five annual installments of $23,350, including principal and interest at 5%. The note matures on December 31, 2021, and is unsecured.  40,000   60,000 
         
$112,800 payable to a landlord of Advantage Therapy, LLC pursuant to a lease dated March 1, 2019. The debt is payable in 60 monthly installments of $2,129, including principal and interest at 5%. The debt matures on June 1, 2024.  97,621   102,744 
         
Note payable to a financial institution in the amount of $140,000, dated September 25, 2019. The note requires 36 consecutive monthly installments of $4,225 including principal and interest at 5.39%. The note matures on September 19, 2022 and is secured by a personal guarantee of the Vice President of Business Development of the Company.  118,217   129,182 
         
Note payable in the amount of $1,115,000, dated March 25, 2020. The note is payable on or before September 25, 2021. The interest on the note accrues at a rate of 10% per annum and is payable on the maturity date or otherwise in accordance with the note.  1,115,000   - 
         
Unamortized debt issuance costs  (179,862)  - 
         
   4,409,919   3,531,619 
Less: current portion:  (4,089,567)  (1,422,554)
  $320,352  $2,109,065 

Principal maturities of the Company’s notes payable are as follows:

 

Years Ending December 31, Amount 
    
2019 (nine months) $3,012,357 
2020  104,435 
2021  80,968 
2022  43,935 
2023  27,404 
Thereafter  40,441 
Total $3,309,540 

Note 12 – Related Party Transactions

From time to time, the Company advances funds to, and receives funds from, entities with common ownership. At December 31, 2018 and March 31, 2019, the amount owed to related parties was $0.

The Company contracted with SpeakLife to provide staff training and patient advocacy services for $99,000 per year. SpeakLife is owned by the Company’s Executive Vice President of Clinical Operations. This contract was terminated on June 30, 2018.

The Company contracted with UCI to provide marketing services to chiropractic practitioners and sources opportunities to expand chiropractic practices into regenerative medicine for $144,000 per year. UCI is owned by the spouse of the Company’s Chief Operations Officer. This contract was terminated on June 30, 2018.

Years Ending December 31, Amount 
    
2020 (nine months) $2,073,216 
2021  2,127,820 
2022  104,186 
2023  51,657 
2024  27,631 
Thereafter  25,409 
Total $4,409,919 

 

Note 13 – Shareholders’Stockholders’ Equity

 

Prior to the Company’s conversion to a corporation, the Company had 400 member units authorized with 365 units issued and outstanding.

 

On June 1, 2018, the Company converted its 365 outstanding member units into 6,582,737 shares of common stock with a $0.001 par value pursuant to the Company’s conversion from a limited liability company to a corporation. The conversion has been given retrospective treatment.

 

On February 12, 2019, the Company completed a reverse split of its 6,582,737 shares of common stock outstanding to 4,533,623 shares of common stock outstanding pursuant to an amendment of the Company’s certificate of incorporation. The reverse split has been given retrospective treatment.

 

During February 2019, the Company completed an initial public offering of securities and issued 850,000 shares of its common stock, along with 1,700,000 warrants to purchase common stock and an option to purchase 34,000 shares of common stock for gross proceeds of $4,356,815. The Company also issued 449,217 shares of common stock for the conversion of its 4% convertible notes and 1,410,183 shares to satisfy deferred acquisition consideration payable in connection with its 2018 business acquisitions.

On April 19, 2019, the Company consummated the transaction contemplated by the Merger Agreement and issued 1,002,306 shares of its common stock as Merger Consideration.

On July 15, 2019, the Company signed a $10 million share purchase agreement (the “Purchase Agreement”) with Lincoln Park Capital Fund, LLC (“Lincoln Park”), an Illinois limited liability company. In consideration for entering into the $10 million agreement, the Company issued to Lincoln Park 60,006 shares of Company common stock as a commitment fee. The Purchase Agreement limits our sales of shares of common stock to Lincoln Park to 1,669,359 shares of common stock, representing 19.99% of the shares of common stock outstanding on the date of the Purchase Agreement unless (a) stockholder approval is obtained to issue more than such amount or (b) the average price of all applicable sales of our common stock to Lincoln Park under the Purchase Agreement equals or exceeds the lower of (i) the closing price of our common stock on the Nasdaq Capital Market immediately preceding July 15, 2019 or (ii) the average of the closing price of our common stock on the Nasdaq Capital Market for the five business days immediately preceding July 15, 2019. As of March 31, 2020, pursuant to the Purchase Agreement, the Company sold an aggregate of 1,602,294 shares of common stock of the Company to Lincoln Park for aggregate proceeds to the Company of $2,424,053 (excluding the 60,006 shares issued to Lincoln Park as a commitment fee).

2018 Incentive Compensation Plan

The Company’s board of directors and holders of a majority of outstanding shares approved and adopted the Company’s 2018 Incentive Compensation Plan (“2018 Plan”) in May 2018, reserving the issuance of up to 1,000,000 shares of common stock (subject to certain adjustments) upon exercise of stock options and grants of other equity awards. The 2018 Plan provides for the grant of incentive stock options (“ISOs”), nonstatutory stock options, stock appreciation rights, restricted stock awards, restricted stock unit awards, performance-based stock awards, other forms of equity compensation and performance cash awards. ISOs may be granted only to employees. All other awards may be granted to employees, including officers, and to the Company’s non-employee directors and consultants, and affiliates.

 

1718

Stock Options

As of March 31, 2020, the Company had issued stock options to purchase 452,872 shares of its common stock as non-qualified stock options to various employees of the Company. These options vest over a period of four years, with 25% vesting after one year and the remaining 75% vesting in equal monthly installments over the following 36 months and are exercisable for a period of ten years. Stock based compensation for stock options is estimated at the grant date based on the fair value calculated using the Black-Scholes method. The per-share fair values of these options is calculated based on the Black-Scholes-Merton pricing model with the following assumptions: a volatility rate of 32.2%, risk free rate of 2.4% and the expected term of 10 years.

 

Restricted Stock Units

On May 21, 2019, the Company granted an aggregate of 277,500 Restricted Stock Units (“RSUs”) to certain employees, executives and Board members, the terms of which vest over various periods between the date of grant and four years following the date of grant. On August 13, 2019, 30,000 shares of common stock were issued pursuant to granted RSUs which had vested as of such date.

 

Note 14 – Retirement Plan

 

The Company offers a 401(k) plan that covers eligible employees. The plan provides for voluntary salary deferrals for eligible employees. Additionally, the Company is required to make matching contributions of 50% of up to 6 % of total compensation for those employees making salary deferrals. The Company made contributions of $7,407$19,690 and $0$7,407 during the three months ended March 31, 20192020 and 2018,2019, respectively.

 

Note 15 – Income Taxes

 

The Company’s provision for income taxes differs from the amount computed by applying the statutory federal income tax rate to income before provision for income taxes. The sources and tax effects of the differences are as follows:

 

Deferred tax benefit at the federal statutory rate  21%
Valuation allowance  -21%
   0%

 

At March 31, 2019,2020, the Company hashad a net operating loss carryforward of approximately $3.7 million for federal and state purposes. This loss will be available to offset future taxable income. If not used, this carryforward will begin to expire in 2029. The deferred tax asset relating to the operating loss carryforward has been fully reserved at March 31, 2019.2020. The principal differences between the operating loss for income tax purposes and reporting purposes are shares issued for services and share-based compensation and a temporary difference in depreciation expense.

 

Note 16 – Commitments and Contingencies

 

The Company is subject to extensive regulation, including health insurance regulations directed at ascertaining the appropriateness of reimbursement, preventing fraud and abuse and otherwise regulating reimbursement. To ensure compliance, various insurance providers often conduct audits and request patient records and other documents to support claims submitted by the Company for payment of services rendered to customers. In the event that an audit results in discrepancies in the records provided, insurance providers may be entitled to extrapolate the results of the audit to make overpayment demands based on a wider population of claims than those examined in the audit.

 

TheFrom time to time the Company ismay become subject to threatened andand/or asserted various legal proceedingsclaims arising in the ordinary course of our business. The outcomeManagement is not aware of any legal proceeding is not within the Company’s complete control, it is often difficult to predict and is resolved over very long periods of time. Estimating probable losses associated with any legal proceedingsmatters, either individually or other loss contingencies are very complex and require the analysis of many factors including assumptions about potential actions by third parties. Loss contingencies are disclosed when there is at least a reasonable possibility that a loss has been incurred and are recorded as liabilities in the condensed consolidated financial statements when it is both (1) probable or knownaggregate, that a liability has been incurred and (2) the amount of the loss isare reasonably estimable. If the reasonable estimate of the loss is a range and no amount within the range is a better estimate, the minimum amount of the range is recorded as a liability. If a loss contingency is not probable or cannot be reasonably estimated, a liability is not recorded in the financial statements.

In February 2019, the Company was made aware of a lawsuit involving a contract dispute with BioFirma. Management believes the ultimate resolution of this matter will notlikely to have a material impact on the Company’s financial condition, or results of operations.operations or liquidity.

 

1819

 

Note 17 - Subsequent Events

 

On April 1, 2019,21, 2020, the Company entered into a loan with Pinnacle Bank as the lender (“Lender”) in an Agreementaggregate principal amount of $1,691,520 (the “Loan”) pursuant to the Paycheck Protection Program (the “PPP”) under the Coronavirus Aid, Relief, and PlanEconomic Security (CARES) Act. The Loan is evidenced by a promissory note (the “PPP Note”) dated April 21, 2020 and matures on April 21, 2022. The PPP Note bears interest at a rate of Merger (the “Merger Agreement”) for1.000% per annum, with the acquisitionfirst six months of a practice management group that manages three clinics in the Chicago, Illinois area. On April 19, 2019,interest deferred. Principal and interest are payable monthly commencing on November 21, 2020 and may be prepaid by the Company entered into an Amendmentat any time prior to the Merger Agreement (the “Amendment”), effective as of April 19, 2019 at 12:05 a.m.,maturity with IMAC Management of Illinois, LLC, an Illinois limited liability company (“Merger Sub”), ISDI Holdings, Inc., an Illinois corporation (“ISDI Holdings I”), ISDI Holdings II, Inc., an Illinois corporation (“ISDI Holdings II”), PHR Holdings, Inc., an Illinois corporation (“PHR Holdings”), and Jason Hui, sole shareholder of each of ISDI Holdings II and PHR Holdings (the “Shareholder”), inno prepayment penalties. In order to amendbe entitled to forgiveness, funds from the Agreement, executedLoan may only be used for payroll costs, costs used to continue group health care benefits, mortgage payments, rent utilities, and interest on April 1, 2019 by and among the Company, Merger Sub, ISDI Holdings I and the Shareholder, to remove ISDI Holdings I as a party to the Agreement and, in its place, add ISDI Holdings II and PHR Holdings as parties to the Agreement and provide for the merger of each of ISDI Holdings II and PHR Holdings with and into Merger Sub (the “Merger”) onother debt obligations under the terms and conditions set forth inoutlined by the Agreement.

PPP. The Merger was completed on April 19, 2019, with Merger Sub remaining asCompany intends to use all or a significant majority of the surviving entity. PursuantLoan amount for the qualifying expenses. The Loan will not be deemed restricted issuance pursuant to the Agreement, as amendedterms of the note purchase agreement entered into by the Amendment, at the effective time of the Merger (the “Effective Time”), each of ISDI Holdings IICompany and PHR Holdings’ issued and outstanding shares of common stock were cancelled and were converted automatically into the right of the Shareholder to receive 1,002,306 restricted shares of the Company’s common stock (the “Merger Consideration”). The Merger Consideration was issued to the Shareholder and a trust designated by the ShareholderIliad Research & Trading, L.P. on April 22, 2019. Representations were made to the Company regarding such share recipients’ knowledge and experience, ability to bear economic risk and investment purpose with respect to the restricted shares they received. The Merger Consideration was issued in reliance on an exemption from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”), provided by Section 4(a)(2) of the Securities Act as a private offering. Such issuance did not involve a public offering, and was made without general solicitation or advertising.March 25, 2020.

 

In connectionApril 2020, the Company received approximately $400,000 from the CARES Act Provider Relief Fund, a federal fund allocated for general distribution to Medicare facilities and providers impacted by the COVID-19 outbreak. Further allocations of funds provided for in the CARES Act may be received in future periods. However, we are not able to estimate the amount of additional funds we may receive. These government payments are currently expected to be recognized in our operations during the second quarter of 2020 and will not be subject to repayment, provided the Company is able to attest to and comply with the completionterms and conditions of the Merger, the Company also entered intofunding.

Further legislation enacted on April 24, 2020 provides for an employment agreement with Dr. Jason Hui,additional $75 billion in emergency appropriations to eligible healthcare providers which was effective as of April 19, 2019 and extends for a term expiring on March 31, 2022. Pursuant to his employment agreement, Dr. Hui has agreed to devote substantially all of his business time, attention and ability,respond to the Company as our Executive Vice PresidentCOVID-19 outbreak. Recipients will not be required to repay the government for such funds received, provided they comply with the terms and conditions of Development. The employment agreement provides that Dr. Hui will receive a base salary at a rate of $350,000 per year through March 31, 2020, a base salary at a rate of $355,000 per year from April 1, 2020 through March 31, 2021federal legislation and a base salary at a rate of $360,000 per year for the period of April 1, 2021 through March 31, 2022.rules and regulations promulgated thereunder, which have not yet been finalized.

19

ITEM 2.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

This management’sThe following discussion and analysis of financial condition and results of operations (“MD&A”), contains forward-looking statements that involve risks and uncertainties. Please see “Important Information Regarding Forward-Looking Statements” for a discussion of the uncertainties, risks, and assumptions that may cause ourOur actual results tocould differ materially from those discussedanticipated in these forward-looking statements as a result of various factors, including those set forth previously under the forward-looking statements.caption “Risk Factors.” This discussionManagement’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with our unaudited condensed consolidated financial statements and related notes thereto and the other disclosures contained elsewhere in this Quarterly Report on Form 10-Q, and the audited consolidated financial statements and related notes thereto for the fiscal year ended December 31, 2018, which were included elsewhere in our Form 10-K, filed with the SEC on April 16, 2019.this report.

 

The results of operations for the periods reflected herein are not necessarily indicative of results that may be expected for future periods.

 

References in this MD&A to “we,” “us,” “our,” “our company,” “our business” and “IMAC Holdings” are to IMAC Holdings, Inc., a Delaware corporation and prior to the Corporate Conversion (defined below), IMAC Holdings, LLC, a Kentucky limited liability company, and in each case, theirthe following entities which are consolidated subsidiaries.due to direct ownership of a controlling voting interest or other rights granted to us as the sole general partner or managing member of the entity: IMAC Management Services, LLC (“IMAC Management”), IMAC Regeneration Management, LLC (“IMAC Texas”) IMAC Regeneration Management of Nashville, LLC (“IMAC Nashville”) IMAC Management of Illinois, LLC (“IMAC Illinois”) and IMAC Management of Florida, LLC (“IMAC Florida”); the following entity which is consolidated with IMAC Regeneration Management of Nashville, LLC due to control by contract: IMAC Regeneration Center of Nashville, PC (“IMAC Nashville PC”); and the following which prior to June 1, 2018 was held as a minority interest, IMAC Regeneration Center of St. Louis, LLC (“IMAC St. Louis”).

 

Overview

 

We are a provider of movement and orthopedic therapies and minimally invasive procedures performed through our regenerative and rehabilitative medical treatments to improve the physical health of our patients at our fast-growing chain of IMAC Regeneration Centers which we own or manage. Our outpatient medical clinics provide conservative, minimally invasive medical treatments to help patients with back pain, knee pain, joint pain, ligament and tendon damage, and other related soft tissue conditions. Our licensed healthcare professionals evaluate each patient and provide a custom treatment plan that integrates traditional medical procedures and innovative regenerative medicine procedures in combination with physical medicine. We do not use or offer opioid-based prescriptions as part of our treatment options in order to help our patients avoid the dangers of opioid abuse and addiction. The original IMAC Regeneration Center opened in Kentucky in August 2000 and remains the flagship location of our current business, which was formally organized in March 2015. To date, we have opened seven, acquired eight and acquired sevenmanage one outpatient medical clinics in Kentucky, Missouri, Tennessee, Illinois and Illinois,Florida, and plan to further expand the reach of our facilities to other strategic locations throughout the United States. We have partnered with several active and former professional athletes, including Ozzie Smith, David Price, Tony Delk and Mike Ditka, in the branding of our IMAC Regeneration Centers. Our outpatient medical clinics emphasize our focus around treating sports and orthopedic injuries as an alternative to traditional surgeries for repair or joint replacement.

 

Revenues

Our revenue mix is diversified betweenWe own our medical treatmentsclinics directly or have entered into long-term management services agreements to operate and physiological treatments. Our medical treatments are further segmented into traditional medical and regenerative medicine practices. For the last full fiscal year and the first quarter of 2019, traditional medical treatments comprised approximately 33%control certain of our total net patient revenues, while regenerativemedical clinics by contract. Our preference is to own the clinics; however, some state laws restrict the corporate practice of medicine accounted for approximately 31%and require a licensed medical practitioner or own the clinic. Accordingly, our managed clinics are owned exclusively by a medical professional within a professional service corporation (formed as a limited liability company or corporation) and are under common control with us in order to comply with state laws regulating the ownership of our total net patient revenues. Physiological treatments generated the remainder of our total net patient revenues as physical therapy amounted to 33% and chiropractic care at 3% of such revenues.medical practices. We are an in-network provider for traditional physical medical treatments, such as physical therapy, chiropracticcompensated under management services agreements through service fees based on the cost of the services provided, plus a specified markup percentage, and medical evaluations, with most private health insurance carriers. Regenerative medical treatments are typically not covered by insurance, but paid by the patient. For more information on our revenue recognition policies, see “Critical Accounting Policies and Estimates - Revenue Recognition.”

See the tables below for more information regarding our revenue breakdown by service type and payor.

  Three Months Ended March 31, 
  2019  2018 
       
Outpatient facilities revenues  100%  87.46%
Other services revenue(1)  -%  12.54%
         
Total  100.00%  100.00%

(1) Other is comprised of administrative and management fees prior to IMAC’s ownership.

20

Outpatient Facility Revenue

  Three Months Ended March 31, 
  2019  2018 
Private insurance payors  24%  23%
Government payors  22%  13%
Patient payor  54%  64%
Other  -%  -%
Total  100.00%  100.00%

We recorded consolidated patient billings of $7,289,022 and $532,872 and realized total net patient revenues, less allowances for contractual adjustments with third-party payers, of $2,769,828 and $234,253 for the three months ended March 31, 2019 and 2018, respectively. Our net loss for the three months ended March 31, 2019 and 2018 was $1,599,187 and $404,664, respectively.

Procedures performed and visits to our clinics are an indication of business activity. Procedures showed an increase of 1,383.5% for the quarter ended March 31, 2019 compared to the quarter ended March 31, 2018. Procedures increased from 5,011a discretionary annual bonus determined in the quarter ended March 31, 2018 to 74,340 in the quarter ended March 31, 2019. Visits to our clinics showed an increasesole discretion of 1,715.3% for the quarter ended March 31, 2019 compared to the quarter ended March 31, 2018. Visits increased from 1,698 in the quarter ended March 31, 2018 to 30,824 in the quarter ended March 31, 2019.each professional service corporation.

 

Corporate Conversion

 

Prior to June 1, 2018, we were a Kentucky limited liability company named IMAC Holdings, LLC. Effective June 1, 2018, we converted into a Delaware corporation pursuant to a statutory merger (the “Corporate Conversion”) and changed our name to IMAC Holdings, Inc. All of our outstanding membership interests were exchanged on a proportional basis into shares of common stock of IMAC Holdings, Inc.

Following the Corporate Conversion, IMAC Holdings, Inc. continues to hold all of the property and assets of IMAC Holdings, LLC and all of the debts and obligations of IMAC Holdings, LLC continue as the debts and obligations of IMAC Holdings, Inc. The purpose of the Corporate Conversion was to reorganize our corporate structure so that the top tier entity in our corporate structure is a corporation rather than a limited liability company and so that our existing owners own shares of our common stock rather than membership interests in a limited liability company. Except as otherwise noted herein, the condensed consolidated financial statements (unaudited) included herein are those of IMAC Holdings, Inc. and its consolidated subsidiaries.

 

Initial Public Offering

 

On February 15, 2019, we completed our initial public offering of 850,000 units, with each unit consisting one share of our common stock and two warrants each to purchase one share of our common stock, at a combined initial public offering price of $5.125 per unit. The exercise price of the warrants is $5.00 per warrant. The units immediately and automatically separated upon issuance, and the common stock and warrants trade on The NASDAQ Capital Market under the ticker symbols “IMAC” and “IMACW,” respectively.

 

We received aggregate gross proceeds of $4,356,250 from our initial public offering, before deducting underwriting discounts, commissions and other related expenses. Proceeds from the offering will behave been used for financing the costs of leasing, developing and acquiring new clinic locations, funding research and new product development activities, and for working capital and general corporate purposes.

 

In addition, upon the closing of our initial public offering, we issued unit purchase options to Dawson James Securities, Inc., as representative of the several underwriters, and its affiliates entitling them to purchase a number of our securities equal to 4% of the securities sold in the initial public offering. The unit purchase options have an exercise price equal to 120% of the public offering price of the units (or $6.15 per share and two warrants) and may be exercised on a cashless basis. The unit purchase options are not redeemable by us.

 

21

Impacts of and Response to COVID-19 Outbreak

In March 2020, federal, state and local government authorities issued orders and guidance in order to combat the spread of the COVID-19 outbreak. These actions have required or encouraged our patients to remain at home except for essential activities and may reduce patient visits to our clinics. For example, the governor of Kentucky ordered all chiropractic facilities in the state of Kentucky to close effective March 20, 2020, which caused us to close our Kentucky chiropractic facilities until such order was lifted on May 4, 2020. The full extent and duration of such actions and their impacts over the longer term remain uncertain and dependent on future developments that cannot be accurately predicted at this time, such as the severity and transmission rate of the COVID-19 outbreak and the extent and effectiveness of containment actions taken.

 

Our response plan has multiple facets and continues to evolve as the pandemic unfolds. As a precautionary measure, we have taken steps to enhance our operational and financial flexibility to react to the risks the COVID-19 outbreak presents to our business, including the following:

Launched telemedicine communications for remote patient engagement;
Suspended operations in three Kentucky clinics to comply with government orders until we were allowed to resume operations on May 4, 2020; and
Suspended operations at one clinic in Cook County, Illinois to comply with government orders until such order is lifted.

The COVID-19 outbreak appears likely to cause significant economic harm across the United States, and the negative economic conditions that may result in reduced patient demand in our industry. We may experience a material loss of patients, revenue and market share as a result of the suspension of any operations. Initiatives to implement telehealth engagement with patients may not be adopted by existing and new patients. Patient habits may also be altered in the medium to long term. Negative economic conditions, a decrease in our revenue and consequent longer term trends harmful to our business may all exert pressure on our company during the pendency of emergency restrictions on our operations and beyond. Due to such conditions, we terminated the employment of 11% of our employees on March 20, 2020, to reduce costs associated with non-essential personnel. Additional furloughs were conducted through March 31, 2020, resulting in a 19% reduction in staff and company-wide salary reductions of approximately 10%.

We cannot predict with certainty when public health and economic conditions will return to normal. A decline in patient visits and/or the possible suspension of operations mandated in response to the COVID-19 outbreak, and the consequent loss of revenue and cash flow during this period may make it difficult for us to obtain capital necessary to fund our operations.

Matters that May or Are Currently Affecting Our Business

 

We believe that the growth of our business and our future success depend on various opportunities, challenges, trends and other factors, including the following:

 

 Our ability to identify, contract with, install equipment and operate a large number of outpatient medical clinics and attract new patients to them;
   
 Our need to hire additional healthcare professionals in order to operate the large number of clinics we intend to open;
   
 Our ability to enhance revenue at each facility on an ongoing basis through additional patient volume and new services;
   
 Our ability to obtain additional financing for the projected costs associated with the acquisition, management and development of new clinics, and the personnel involved, if and when needed;
   
 Our ability to attract competent, skilled medical and sales personnel for our operations at acceptable prices to manage our overhead; and
   
 Our ability to control our operating expenses as we expand our organization into neighboring states.

 

Critical Accounting Policies and Estimates

 

The preparation of our condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses at the date and for the periods that the condensed consolidated financial statements are prepared. On an ongoing basis, we evaluate our estimates, including those related to insurance adjustments and provisions for doubtful accounts. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. Actual results could materially differ from those estimates.

 

We believe that, of the significant accounting policies discussed in our Notes to the Condensed Consolidated Financial Statements (Unaudited), the following accounting policies require our most difficult, subjective or complex judgments in the preparation of our financial statements.

 

Intangible Assets

The Company capitalizes the fair value of intangible assets acquired in business combinations. Intangible assets are amortized on a straight-line basis over their estimated economic useful lives, generally the contract term. The Company performs valuations of assets acquired and liabilities assumed on each acquisition accounted for as a business combination and allocates the purchase price of each acquired business to its respective net tangible and intangible assets. Acquired intangible assets include trade names, non-compete agreements, customer relationships and contractual agreements.

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Goodwill

Our goodwill represents the excess of the purchase price over the fair value of the net identifiable assets acquired in business combinations. The goodwill generated from the business combinations is primarily related to the value placed on the employee workforce and expected synergies. Judgment is involved in determining if an indicator or change in circumstances relating to impairment has occurred. Such changes may include, among others, a significant decline in expected future cash flows, a significant adverse change in the business climate, and unforeseen competition. There was no goodwill impairment for the years presented.

The Company tests goodwill for impairment on an annual basis, or when events or circumstances indicate the fair value of a reporting unit is below its carrying value. No impairments of goodwill were recorded for the three months ended March 31, 2020.

Revenue Recognition

 

Our patient service revenue is derived from minimally invasive procedures performed at our outpatient medical clinics and patient visits to physicians. The fees for such services are billed either to the patient or a third-party payer, including Medicare. Starting in January 2020, we implemented wellness maintenance programs on a subscription basis. There are three membership plans offered with different levels of service for each plan. We recognize patient service revenue, net of contractual allowances,adjustments, which we estimate based on the historical trend of our cash collections and contractual write-offs in the period in which services are performed. Contractual adjustments represent discounts offered for patients serviced within a negotiated third-party payer contract.

 

Other management service fees are derived from management services where we provide billings and collections support to the clinics and where management services are provided based on state specific regulations known as the corporate practice of medicine (“CPM”). Under the CPM, a business corporation is precluded from practicing medicine or employing a physician to provide professional medical services. In these circumstances, we provide all administrative support to the physician-owned professional corporation (“PC”) through a limited liability company. The PC is consolidated due to control by contract (an “SMA” or Service Management Agreement). The fees we derive from these management arrangements are based on a percentage mark-up on the costs of the LLC. We recognize other management service revenue in the period in which services are rendered. These revenues are eliminated in consolidation.

 

Patient Deposits

 

Patient deposits are derived from patient payments in advance of services delivered. Our service lines include traditional and regenerative medicine. Regenerative medicine procedures are not paid by insurance carriers; therefore, we typically require up-front payment from the patient for regenerative services and any co-pays and deductibles as required by the patient specific insurance carrier. For some patients, credit is provided through an outside vendor. In this case, we are paid from the outsourced credit vendor and the risk is transferred to the credit vendor for collection from the patient. These funds are accounted for as patient deposits until the procedures are performed at which point the patient deposit is recognized as patient service revenue.

 

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Accounts Receivable

 

Accounts receivable primarily consists of amounts due from third-party payers (non-governmental), governmental payers and private pay patients and is recorded net of allowances for doubtful accounts and contractual discounts. Our ability to collect outstanding receivables is critical to our results of operations and cash flows. Accordingly, accounts receivable reported in our condensed consolidated financial statements are recorded at the net amount expected to be received. Our primary collection risks are (i) the risk of overestimation of net revenues at the time of billing that may result in our receiving less than the recorded receivable, (ii) the risk of non-payment as a result of commercial insurance companies’ denial of claims, (iii) the risk that patients will fail to remit insurance payments to us when the commercial insurance company pays out-of-network claims directly to the patient, (iv) resource and capacity constraints that may prevent us from handling the volume of billing and collection issues in a timely manner, (v) the risk that patients do not pay us for their self-pay balances (including co-pays, deductibles and any portion of the claim not covered by insurance), and (vi) the risk of non-payment from uninsured patients.

Our accounts receivables from third-party payers are recorded net of estimated contractual adjustments and allowances from third-party payers, which are estimated based on the historical trend of our facilities’ cash collections and contractual write-offs, accounts receivable aging, established fee schedules, relationships with payers and procedure statistics. While changes in estimated reimbursement from third-party payers remain a possibility, we expect that any such changes would be minimal and, therefore, would not have a material effect on our financial condition or results of operations. Our collection policies and procedures are based on the type of payer,payor, size of claim and estimated collection percentage for each patient account. The operating systems used to manage our patient accounts provide for an aging schedule in 30-day increments, by payer, physician and patient. We analyze accounts receivable at each of the facilities to ensure the proper collection and aged category. The operating systems generate reports that assist in the collection efforts by prioritizing patient accounts. Collection efforts include direct contact with insurance carriers or patients and written correspondence.

 

Income Taxes

 

Prior to June 1, 2018, IMAC Holdings IMAC Management Services, IMAC Texas, IMAC of St. Louis and IMAC Nashville were limited liability companies andwas taxed as partnerships.a partnership through May 31, 2018. As a result, income tax liabilities were passed through to the individual members. Accordingly, no provision for income taxes were reflected in the consolidated financial statements for periods prior to May 31, 2018, at which time the Company converted from a limited liability company to a Delaware corporation. Subsequent to the Company converting to a Delaware corporation, IMAC Nashville, IMAC Texas, IMAC St. Louis continued as single-member limited liability companies that are disregarded entities for tax purposes and do not file separate returns. Their activity is included as part of IMAC Holdings Inc. Advantage Therapy, IMAC Illinois and IMAC Florida are also disregarded entities for tax purposes. BioFirma was a limited liability company taxed as a partnership. Effective October 1, 2019, BioFirma became wholly owned by IMAC Holdings and is a disregarded entity for tax purposes. IMAC Management is a C-corporation and is included in the consolidated return of IMAC Holdings as a subsidiary.

Any future tax benefit arising from post conversion corporate losses have been offset by a valuation allowance. Accordingly, no provision for income taxes is reflected in our condensedthe consolidated financial statements. For more information, see “Corporate Conversion.”The Company records a liability for uncertain tax positions when it is probable that a loss has been incurred and the amount can be reasonably estimated. Interest and penalties related to income tax matters, if any, would be recognized as a component of income tax expense. At March 31, 2020 and December 31, 2019, the Company had no liabilities for uncertain tax positions. The Company continually evaluates expiring statutes of limitations, audits, proposed settlements, changes in tax law and new authoritative rulings. Currently, the tax years subsequent to 2017 are open and subject to examination by the taxing authorities.

 

Results of Operations for the Three Months Ended March 31, 20192020 Compared to the Three Months Ended March 31, 20182019

 

We own our medical clinics directly or have entered into long-term management services agreements to operate and control these medical clinics by contract. Our preference is to own the clinics; however, some state laws restrict the corporate practice of medicine and require a licensed medical practitioner to own the clinic. Accordingly, our managed clinics are owned exclusively by a medical professional within a professional service corporation (formed as a limited liability company or corporation) under common control with us or eligible members of our company in order to comply with state laws regulating the ownership of medical practices. We are compensated under management services agreements through service fees based on the cost of the services provided, plus a specified markup percentage, and a discretionary annual bonus determined in the sole discretion of each professional service corporation.

The following table sets forth a summary of IMAC Holdings, Inc.’s statements of operations for the three months ended March 31, 20192020 and 2018:2019:

 

  

Three Months Ended

March 31,

 
  2020  2019 
       
Patient revenues $7,151,942  $7,289,022 
Contractual adjustments  (3,842,873)  (4,519,194)
Total patient revenue, net  3,309,069   2,769,828 
         
Management fees  12,487   - 
Total revenue  3,321,556   2,769,828 
         
Operating expenses:        
Patient expenses  379,817   436,129 
Salaries and benefits  2,926,150   2,064,623 
Share-based compensation  81,084   3,749 
Advertising and marketing  241,817   347,016 
General and administrative  1,236,138   977,369 
Depreciation and amortization  450,495   285,567 
Total operating expenses  5,315,501   4,114,453 
         
Operating loss  (1,993,945)  (1,344,626)
         
Other expense:        
Other expenses  -   (15,955)
Beneficial conversion interest expense  -   (639,159)
Interest expense  (76,204)  (30,671)
Total other expenses  (76,204)  (685,785)
         
Net loss before income taxes  (2,070,149)  (2,030,411)
         
Income taxes  -   - 
         
Net loss  (2,070,149)  (2,030,411)
         
Net loss attributable to the non-controlling interest  336,604   431,223 
         
Net loss attributable to IMAC Holdings, Inc. $(1,733,545) $(1,599,188)
         
Net loss per share attributable to common stockholders        
Basic and diluted $(0.18) $(0.27)
         
Weighted average common shares outstanding        
Basic and diluted  9,611,252   5,919,856 

  Three Months Ended March 31, 
  2019  2018 
       
Patient revenues $7,289,022  $532,872 
Contractual adjustments  (4,519,194)  (298,619)
Total patient revenues, net $2,769,828  $234,253 
Other revenue:        
Internal management fee revenue  -   33,600 
Total revenue  2,769,828   267,853 
Operating expenses:        
Patient expenses  436,129   37,134 
Salaries and benefits  2,064,623   446,796 
Share-based compensation  3,749   3,749 
Advertising and marketing  347,016   93,178 
General and administrative  977,369   239,692 
Depreciation and amortization  285,567   31,268 
Total operating expenses  4,114,454   851,817 
Operating loss $(1,344,626) $(583,964)
Other income (expenses):        
Interest income  -   3,312 
Other (loss)  (15,955)  - 
Beneficial conversion interest expense  (639,159)  - 
Interest expense  (30,671)  (23,552)
Total other (expenses)  (685,785)  (20,240)
Loss before equity in (loss) of non-consolidated affiliate $(2,030,410) $(604,204)
Equity in (loss) of non-consolidated affiliate  -   (85,651)
Net loss before income taxes $(2,030,410) $(689,855)
Income taxes  -   - 
Net loss $(2,030,410) $(689,855)
Net loss attributable to the non-controlling interest  431,223   285,191 
Net loss attributable to the IMAC Holdings, Inc. $(1,599,187) $(404,664)

Revenues

Our revenue mix is diversified between medical treatments and physiological treatments. Our medical treatments are further segmented into traditional medical and regenerative medicine practices. We are an in-network provider for traditional physical medical treatments, such as physical therapy, chiropractic services and medical evaluations, with most private health insurance carriers. Regenerative medical treatments are typically not covered by insurance, but paid by the patient. For more information on our revenue recognition policies, see “Critical Accounting Policies and Estimates - Revenue Recognition.”

See the table below for more information regarding our revenue breakdown by service type.

 

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Three Months Ended

March 31,

 
  2020  2019 
    
Revenues:        
Medical treatments  67%  64%
Physical therapy  30%  33%
Chiropractic care  3%  3%
   100%  100%

 

During the three months ended March 31, 2019, ourPatient service revenues increased 934.1%19% to $2.77 million from $0.27 million for the same period in 2018. We incurred net loss attributable to IMAC Holdings Inc. for the three months ended March 31, 2019 of $1.60 million, compared to net loss of $0.40$3.3 million for the three months ended March 31, 2018. The primary reasons for the increase were the costs associated with preparing for, completing and on-going costs relating2020, compared to our initial public offering, as well as costs associated with our 2018 acquisitions.

Revenues

Revenues for the three months ended March 31, 2019 and 2018 were as follows:

  Three Months Ended March 31, 
  2019  2018 
  (in thousands) 
Revenues:        
Outpatient facility services $2,770  $234 
All other  -   34 
Total revenues $2,770  $268 

Patient service revenues increased 1,082.4% to $2.77$2.8 million for the three months ended March 31, 2019. These increases were primarily due to the 2019 comparedacquisitions ofISDI Holdings II and PHR Holdings. We expect to $0.23 millionsee a negative impact on patient service revenue due to the COVID-19 outbreak in the quarter, ending June 30, 2020.

Visits to our clinics are an indication of business activity. Visits increased 2% for the three months ended March 31, 2018, primarily2020 compared to the three months ended March 31, 2019. Visits increased from 30,824 in the three months ended March 31, 2019 to 31,603 in the three months ended March 31, 2020. Charges per visit also increased from $89.86 per visit to $109.54 per visit from March 31, 2019 to March 31, 2020, respectively. We expect to see a negative impact on patient service revenue due to the 2018 acquisitionsCOVID-19 outbreak in the quarter ending June 30, 2020.

Starting in January 2020, we implemented wellness maintenance programs on a subscription basis. As of March 31, 2020, the following markets had active memberships: 320 memberships at IMAC Management (Kentucky), 32 memberships at IMAC Nashville, 127 memberships at IMAC St. Louis and eight memberships at IMAC Illinois. All active memberships at IMAC Management were paused in April 2020 due to an order of the governor of Kentucky IMAC of Missouri and Advantage Health. The decreaseto close all elective care facilities in other service revenues is due to a decrease in management and administrative service fees derived from non-consolidated outpatient clinics.Kentucky.

 

Operating Expenses

 

Operating expenses consist of patient expenses, salaries and benefits, share based compensation, advertising and marketing, general and administrative expenses and depreciation expenses. Patient expenses consist of medical supplies for services rendered.

 

Patient expenses.Cost of revenues (patient expense) was $0.44 milliondecreased $56,000 to $380,000 for the three months ended March 31, 20192020, as compared to $0.04 million for the three months ended March 31, 2018, with the increase in costs primarily attributable to our 2018 acquisitions. As a percentage of revenues, patient expenses were 15.75 % for the three months ended March 31, 2019, compared to 15.85% fordriven by improvements in supply management and changes in the three months ended March 31, 2018.

patient mix of services provided.

 

Salaries and benefits consist of payroll, benefits and related party contracts.

contracts. Salaries and benefits expenses were $2.06 million and $0.45 million for the three months ended March 31, 2020, as compared to the three months ended March 31, 2019, and 2018, respectively. The increase of $1.62increased $0.9 million to $2.9 million, which was attributable to our 20182019 acquisitions in the Chicago and the costs relatedRockford, Illinois areas.

Share-based compensation.Share-based compensation increased from $4,000 to the preparation and on-going accounting, legal and operational costs of our initial public offering. Salaries and benefit expense related to our 2018 business acquisitions was $1.36 million$81,000 for the three months ended March 31, 2019 with no acquisition related salaries2020, as compared to the three months ended March 31, 2019.

Advertising and benefit expensemarketing.Advertising and marketing expenses decreased $105,000, or 30%, to $242,000 for the three months ended March 31, 2018. New employee salaries and benefits expense increased by $0.26 million2020, as compared to $347,000 for the three months ended March 31, 2019 compared2019. The decrease was due to the same period for 2018. The increase was attributable to IMAC Holdings adding staff related to the preparation of, and on-going accounting, legal and operational costs of, our initial public offering.

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Share-based compensation consistsreduced marketing spending as a result of the value of company stock for sponsor efforts outside of an endorsement agreement. At the timeimpact of the compensation, our company was still a limited liability company; therefore, compensation was in the form of limited liability company units instead of stock. The units converted to stock effective upon the Company’s conversion from a limited liability company to a corporation.COVID-19 outbreak on consumer engagement.

 

Share based compensation was $0.004General and $0.004 million for the three months ended March 31, 2019 and 2018, respectively. As a percentage of revenues, share based compensation was 0.14% and 1.40% for the three months ended March 31, 2019 and 2018, respectively.

Advertising and marketing consists of marketing, business promotion and brand recognition.

Advertising and marketing was $0.35 million and $0.09 million for the three months ended March 31, 2019 and 2018, respectively. Advertising for acquired clinics was $0.18 million and $0 for the three months ended March 31, 2019 and 2018, respectively. Advertising for new clinics opened by us was $0.09 million and $0.05 million for the three months ended March 31, 2019 and 2018. As a percentage of revenues, advertising and marketing was 12.53% and 34.79% for the three months ended March 31, 2019 and 2018, respectively.

administrative expense.General and administrative expense (G&A)(“G&A”) consists of all other costs other than advertising and marketing, salaries and wages, patient expenses and depreciation.

G&A increased 26% from $977,000 to $1.2 million in the three months ended March 31, 2020 and 2019, respectively. G&A increase was $0.98 millionprimarily due to travel, rent, insurance and $0.24 millionservice fees related to the April 2019 acquisition of the clinics managed by IMAC of Illinois and the January 2020 acquisition of CHSF. The aggregate average monthly rent of our clinics for the three months ended March 31, 2020 and 2019 was $111,200 and 2018,$78,200, respectively. Our 2018 acquisitions accounted for $0.42 million of the increase. New clinics opened by us accounted for $0.006 million of the increase. Overhead costs such as accounting, legal, audit, and other costs associated with our initial public offering accounted for $0.3 million of the increase in expense for the three months ended March 31, 2019 as compared to the same period in 2018. As a percentage of revenues, general and administrative expense was 35.29% and 89.49% for the three months ended March 31, 2019 and 2018, respectively.

 

We purchase fixed assets, such asDepreciation and amortization.Depreciation is related to our property and equipment or medical equipment,purchases to use in the course of our business activities. We capitalize the full cost of the asset onAmortization is related to our balance sheet and depreciate the cost over the asset’s estimated useful life.

We incurred $0.29 million and $0.03 million of depreciationbusiness acquisitions. Depreciation and amortization costsincreased from $286,000 for the three months ended March 31, 2019 and 2018, respectively. The increase was due to depreciation and amortization costs associated with the acquisitions of IMAC of Kentucky, IMAC of Missouri, and Advantage Therapy. As a percentage of revenues, depreciation and amortization expense was 10.3% and 11.7%$450,000 for the three months ended March 31, 2020. The increase in depreciation and amortization expense resulted from the 2019 and 2018, respectively.

Other income (loss)

Other income (loss) consists of interest expense, interest income, gain on acquisition and loss on disposal of an asset.

We incurred $0.69 million and $0.02 million in other losses for the three months ended March 31, 2019 and 2018, respectively. Beneficial conversion interest expense relating to the conversion of our 4% convertible notes to shares of our common stock accounted for $0.64 million of the increase. Acquisitions in 2018 accounted for $0.014 millionclinics managed by IMAC of Illinois and the increase in other losses and additional interest at the corporate level accounted for $0.012 millionJanuary 2020 acquisition of the increase.

Loss before equity in (loss) of non-consolidated affiliateCHSF.

Loss before equity in (loss) of non-consolidated affiliates was $2.03 million and $0.60 million for the three months ended March 31, 2019 and 2018, respectively. Acquisitions accounted for $0.11 million of the increase in loss while the loss for new facilities decreased by $0.25 million in the three months ended March 31, 2019 as compared to the same period in 2018. Overhead loss increased by $0.76 million in the three months ended March 31, 2019 as compared to the same period in 2018.

Equity in (loss) of non-consolidated affiliate

Equity in (loss) of non-consolidated affiliate is the proportional share (based on ownership) of the net earnings or losses of an unconsolidated affiliate.

Equity in (loss) of non-consolidated affiliate is the proportional share (based on ownership) of the net earnings or losses of an unconsolidated affiliate. Total loss of a non-consolidated affiliate decreased by $0.086 million for the three months ended March 31, 2019 as compared to the same period in 2018. The decrease was related to IMAC Holdings’ 36% ownership of the outstanding limited liability company membership units of IMAC of St. Louis.

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Net loss attributable to the non-controlling interest

. Net loss attributable to the non-controlling interest is the amount of net income (loss) for the period allocated to non-controlling partners of IMAC Holdings, Inc. that is included in the entity’s consolidated financial statements.

 

Analysis of Cash Flows

Net loss attributable

The primary source of our operating cash flow is the collection of accounts receivable from patients, private insurance companies, government programs, self-insured employers and other payers.

During the three months ended March 31, 2020, net cash used in operations increased to the non-controlling interest increased by approximately $0.15$1.2 million compared to $0.9 million for the three months ended March 31, 2019 as compared2019. This difference was primarily attributable to lower beneficial conversion interest expense during the three months ended March 31, 2018. Acquisitions accounted for $0.21 million of the increase2019.

Net cash used in loss and IMAC of Tennessee PC accounted for $0.50 million of the reduction in loss forinvesting activities during the three months ended March 31, 2020 and 2019 as compared towas $207,000 and $42,000, respectively. This was primarily driven by the same periodacquisition of CHSF in 2018.

Net lossJanuary 2020.

 

Net loss forcash provided by financing activities during the three months ended March 31, 2020 was $2.3 million, including proceeds from notes payable, net of related fees, which totaled $1.2 million, and proceeds from the issuance of common stock of $1.1 million. Net cash provided by financing activities during the three months ended March 31, 2019 was $1.60$3.8 million, compared to a net loss of $0.40 million for the three months ended March 31 2018. The increase in net loss of $1.20 million was the result of additional costs to IMAC Holdings, Inc. for the preparation forincluding proceeds from our initial public offering, on-going costs associatednet of related fees.

Reconciliation of Non-GAAP Financial Measures

This report contains certain non-GAAP financial measures, including non-GAAP net income and adjusted EBITDA, which are used by management in analyzing our financial results and ongoing operational performance.

In order to better assess the Company’s financial results, management believes that net income before interest, income taxes, stock based compensation, and depreciation and amortization (“adjusted EBITDA”) is a useful measure for evaluating the operating performance of the Company because adjusted EBITDA reflects net income adjusted for certain non-cash and/or non-operating items. We also believe that adjusted EBITDA is useful to many investors to assess the Company’s ongoing results from current operations. Adjusted EBITDA is a non-GAAP financial measure and should not be considered a measure of financial performance under GAAP. Because adjusted EBITDA is not a measurement determined in accordance with becomingGAAP, such non-GAAP financial measures are susceptible to varying calculations. Accordingly, adjusted EBITDA, as presented, may not be comparable to other similarly titled measures of other companies.

This non-GAAP financial measure should not be considered as a public companysubstitute for, or superior to, measures of financial performance which are prepared in accordance with US GAAP and restructuringmay be different from non-GAAP financial measures used by other companies and have limitations as analytical tools.

A reconciliation of facility level resourcesadjusted EBITDA to the corporate level to prepare for expected growth.most directly comparable GAAP measure is set forth below.

  March 31, 2020  March 31, 2019 
GAAP loss attributable to IMAC Holdings, Inc. $(1,733,545) $(1,599,187)
Interest expense  76,204   30,671 
Beneficial conversion interest expense  -   639,159 
Share-based compensation expense  81,084   3,749 
Depreciation and amortization  450,495   285,567 
Adjusted EBITDA $(1,125,762) $(640,041)

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Liquidity and Capital Resources

 

As of March 31, 2019,2020, we had $3,065,553$1.3 million in cash and deficiency in working capital of $(2,370,554).$5.7 million. As of December 31, 2018,2019, we had cash of $194,316$373,689 and deficiency in working capital of $(13,163,064).$3.5 million. The increase in working capital deficiency was primarily due to our initial public offering completedthe increase in February 2019.the current portion of notes payable for 2020.

 

In February 2019, we completed an initial public offering of units of our common stock and warrants to purchase our common stock for net proceeds to us of approximately $3,797,916, after deducting underwriting discount and commissions and estimated offering expenses payable by us. We believe the net proceeds of our recent public offering, together with the cash at March 31, 20192020, proceeds from the Iliad Note and offerings of securities anticipated to be made pursuant our effective registration statement on Form S-3, will be sufficient to meet our cash, operational and liquidity requirements for at least 12 months.

 

As of March 31, 2019,2020, we had approximately $6.5$9.2 million in current liabilities. In connection with the closingThe Iliad Note represents $935,000 of our initial public offering in February 2019, we subsequently satisfied approximately $7.2 million in acquisition-related liabilities through the issuance of common stock and converted approximately $1.7 million in promissory notes issued incurrent liabilities. Of our 2018 private placement into shares of our common stock. Of the remaining current liabilities as of March 31, 2020, approximately $1.2 million represents a mortgage on our Lexington, Kentucky property, approximately $1.6and $1.8 million represents an existingowed under the note payable to theThe Edward S. Bredniak Revocable Trust, which is due and payable in the fourth quarter of 2019, and approximately $0.94 million represents patient deposits prior to services being performed, which will be recognized as revenue in the near term.Trust. Lastly, we have approximately $1.5$2.1 million in current liabilities outstanding to our vendors and inunder operating lines of credit, which we have historically paid down in the normal course of our business.

 

As of March 31, 2019,2020, we had an accumulated deficit of ($5,144,007).$11.8 million. Prior to our initial public offering, we funded our operations primarily through the sale and issuance of convertible notes, bridge loans, and the use of funds from operations. Accordingly, we anticipate that we will need to raise additional capital to fund future operations. However, we may be unable to raise additional funds or enter into such arrangements when needed or favorable terms, or at all, which would have a negative impact on our financial condition and could force us to delay, limit, reduce or terminate our development or acquisition activity. Failure to receive additional funding could also cause us to cease operations, in part or in full. Furthermore, even if we believe we have sufficient funds for our current of future operating plans, we may seek additional capital due to favorable market conditions or strategic considerations.

Our independent registered public accounting firm has indicated that our financial condition raises substantial doubt as to our ability to continue as a going concern.

 

Operating ActivitiesOn July 15, 2019, we signed the $10 million Purchase Agreement with Lincoln Park. We also entered into a registration rights agreement (the “Registration Agreement”) with Lincoln Park in which we agreed to file a registration statement related to the transaction with the SEC covering the shares of our common stock that may be issued to Lincoln Park under the Purchase Agreement.

Pursuant to the Purchase Agreement, we have the right, in our sole discretion, over a 36-month period to sell shares of common stock to Lincoln Park, subject to certain limitations contained in the Purchase Agreement, in amounts up to 50,000 shares per regular sale, which may be increased to up to 100,000 shares depending on certain conditions as set forth in the Purchase Agreement (and subject to adjustment for any reorganization, recapitalization, non-cash dividend, stock split, reverse stock split or other similar transaction as provided in the Purchase Agreement), up to the aggregate commitment of $10 million (“Regular Purchases”). In addition to Regular Purchases and subject to the terms and conditions of the Purchase Agreement, we in our sole discretion may direct Lincoln Park on each purchase date to make “accelerated purchases” and “additional accelerated purchases” on the following business day as provided in the Purchase Agreement. However, in no event may we sell any number of shares that would result in Lincoln Park beneficially owning more than 4.99% of our outstanding common stock.

There are no upper limits on the per share price Lincoln Park may pay to purchase our common stock; however, we may not sell more than $1,000,000 in shares of common stock to Lincoln Park per Regular Purchase. The purchase price of the shares related to the $10 million of future funding will be based on the prevailing market prices of our shares without any fixed discount. Furthermore, we control the timing and amount of any future sales, if any, of shares of common stock to Lincoln Park.

 

The primary sourcePurchase Agreement limits our sales of shares of common stock to Lincoln Park to 1,669,359 shares of common stock, representing 19.99% of the shares of common stock outstanding on the date of the Purchase Agreement unless (a) stockholder approval is obtained to issue more than such amount or (b) the average price of all applicable sales of our operating cash flowcommon stock to Lincoln Park under the Purchase Agreement equals or exceeds the lower of (i) the closing price of our common stock on the Nasdaq Capital Market immediately preceding July 15, 2019 or (ii) the average of the closing price of our common stock on the Nasdaq Capital Market for the five Business Days immediately preceding July 15, 2019.

The Purchase Agreement contains customary representations, warranties, covenants, closing conditions and indemnification and termination provisions by, among and for the benefit of the parties. Additionally, Lincoln Park has agreed not to cause or engage in any manner whatsoever, any direct or indirect short selling or hedging of our common stock. The Purchase Agreement does not limit our ability to raise capital from other sources at our sole discretion, provided that we have agreed not to enter into any “variable rate” transactions with any third party for the 36-month period following the execution of the Purchase Agreement.

In consideration for entering into the $10 million agreement, we issued to Lincoln Park 60,006 shares of our common stock as a commitment fee and will issue up to an additional 60,006 shares pro rata, when and if Lincoln Park purchases, at the Company’s sole discretion, the $10 million aggregate commitment. The Purchase Agreement may be terminated by us at any time at our discretion without any cost to us. The proceeds received by us under the Purchase Agreement may be used for any corporate purpose at our sole discretion.

As of March 31, 2020, pursuant to the Purchase Agreement, the Company sold an aggregate of 1,602,294 shares of common stock of the Company to Lincoln Park for aggregate proceeds to the Company of $2,424,053 (excluding the 60,006 shares previously issued to Lincoln Park as a commitment fee).

On March 25, 2020, the Company entered into a note purchase agreement with Iliad Research & Trading, L.P., pursuant to which the Company agreed to issue and sell to the Holder a secured promissory note in an aggregate initial principal amount of $1,115,000, which is payable on or before the collectiondate that is 18 months from the issuance date. The Initial Principal Amount includes an original issue discount of $100,000 and $15,000 that the Company agreed to pay to the Holder to cover the Holder’s legal fees, accounting costs, due diligence and other transaction costs. In exchange for the Note, the Holder paid an aggregate purchase price of $1,000,000. Interest on the Note accrues at a rate of 10% per annum and is payable on the Maturity Date or otherwise in accordance with the Note. The Note may be prepaid by the Company (with the payment of a premium), may be required by the Holder to be redeemed by the Company for up to $200,000 per month after the six-month anniversary of the issuance of the Note (subject to certain deferral rights), and is subject to customary events of default (with a default interest rate of up to 22%). The Note transaction documents also give the Holder a right of first refusal to future debt issuances and a right to the first $250,000 of every $1 million of proceeds from future sales of equity by the Company. The Note is secured by the assets of the Company, other than the Company’s owned real property, intellectual property and accounts receivable, from patients, private insurance companies, government programs, self-insured employers and other payers.

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pursuant to a security agreement. The following table sets forth our primary sources and usesCompany will use the proceeds of cashthe Note for certain growth initiatives including an IND filing with the three months ended March 31, 2019 and 2018.

  Three Months Ended March 31, 
  2019  2018 
Statements of Cash Flow Data:        
Net cash used in operating activities $(894,149) $(576,541)
Net cash used in investing activities  (42,426)  (1,315,726)
Net cash provided by financing activities  3,807,811   2,314,988 
Net increase in cash  2,871,236   422,721
Cash, beginning of period  194,316   127,788 
Cash, end of period $3,065,552  $550,509 

During the three months ended March 31, 2019, our operating cash flow from operations decreased to $(894,149) compared to $(576,541) for the three months ended March 31, 2018. This decrease was primarily attributable to our net loss and increase in accounts receivable and other assets.

Investing Activities

Net cash used in investing activities during the three months ended March 31, 2019 and 2018 were $(42,426) and $(1,315,726), respectively. This included $(42,426) and $(1,191,620) for the three months ended March 31, 2019 and 2018, respectively, related to purchases of property and equipment and leasehold improvements.

Financing Activities

Net cash provided by financing activities during the three months ended March 31, 2019 was $3,807,811, including proceeds from our initial public offering, net of related fees, which totaled $3,504,164. Net cash provided by financing activities during the three months ended March 31, 2018 was $2,314,988, including proceeds from notes payable, which totaled $2,262,500.FDA.

 

Contractual Obligations

 

The following table summarizes our contractual obligations by period as of March 31, 2019:2020:

 

  Payments Due by Period 
  Total  Less Than 1
Year
  1-3 Years  4-5 years  More Than 5
Years
 
                
Short-term debt obligations $3,146,888  $3,146,888  $-  $-  $- 
Long-term debt obligations, including interest  438,380   109,539   255,658   46,708   26,475 
Capital lease obligations, including interest  113,579   16,354   65,417   31,809   - 
Operating lease obligations  4,368,072   637,733   2,079,129   1,062,963   588,247 
Total $8,066,920  $3,910,514  $2,400,204  $1,141,479  $614,722 

  Three Months Ended March 31, 2019 
  Current Portion  Long Term  Total 
Short-term debt obligations $3,146,888  $-  $3,146,888 
Long-term debt obligations, including interest  198,539   328,841   438,380 
Capital lease obligations, including interest  16,354   97,225   113,579 
Operating lease obligations  637,733   3,730,339   4,368,072 
Total contractual obligations $3,910,514  $4,156,406  $8,066,920 
  Payments Due by Period 
  Total  Less Than 1 Year  1-3 Years  4-5 Years  More Than 5 Years 
Short-term obligations $2,440,412  $2,440,412  $-  $-  $- 
Long-term obligations, including interest  2,637,126   -   2,581,149   46,221   9,756 
Finance lease obligations, including interest  91,774   16,354   65,417   10,003   - 
Operating lease obligations  5,056,297   887,150   2,979,432   901,837   287,878 
  $   10,225,609  $3,343,916  $5,625,998  $958,061  $297,634 

 

Off-Balance Sheet Arrangements

 

As of March 31, 2019, we2020, the Company did not have any off-balance sheet arrangements.

 

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Impact of Inflation

 

We believe that inflation has not had a material impact on our results of operations for the three months ended March 31, 20192020 and 2018.2019. We cannot assure you that future inflation will not have an adverse impact on our operating results and financial condition.

 

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ITEM 3.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

Not applicable.

 

ITEM 4.CONTROLS AND PROCEDURES

 

Disclosure Controls and Procedures

 

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our Securities Exchange Act of 1934 (the “Exchange Act”) reports is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to our management, including our chief executive officer and interim chief financial officer, as appropriate, to allow for timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, we recognize that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

 

As further discussed below, we carried out an evaluation, under the supervision and with the participation of our management, including our chief executive officer and interim chief financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act. Based on that evaluation, our chief executive officer and interim chief financial officer concluded that, because of certain material weaknesses in our internal control over financial reporting our disclosure controls and procedures as defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act were not effective as of March 31, 2019.2020. The material weaknesses relate to the absence of in-house accounting personnel with the ability to properly account for complex transactions and a lack of separation of duties between accounting and other functions.

 

We hired a consulting firm to advise on technical issues related to U.S. GAAP as related to the maintenance of our accounting books and records and the preparation of our consolidated financial statements. Although we are aware of the risks associated with not having dedicated accounting personnel, we are also at an early stage in the development of our business. We anticipate expanding our accounting functions with dedicated staff and improving our internal accounting procedures and separation of duties when we can absorb the costs of such expansion and improvement with additional capital resources. In the meantime, management will continue to observe and assess our internal accounting function and make necessary improvements whenever they may be required. If our remedial measures are insufficient to address the material weakness, or if additional material weaknesses or significant deficiencies in our internal control over financial reporting are discovered or occur in the future, our consolidated financial statements may contain material misstatements, and we could be required to restate our financial results. In addition, if we are unable to successfully remediate this material weakness and if we are unable to produce accurate and timely financial statements, our stock price may be adversely affected and we may be unable to maintain compliance with applicable stock exchange listing requirements.

 

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act. Under the supervision and with the participation of our management, including our chief executive officer and interim chief financial officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework inInternal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). Because of its inherent limitations, internal control over financial reporting may not prevent or detect all misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Based on our evaluation under the framework inInternal Control—Integrated Framework (2013), our management concluded that, because of certain material weaknesses in our internal control over financial reporting our disclosure controls and procedures as defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act were not effective as of March 31, 2019.2020.

 

Changes in Internal Control over Financial Reporting

 

There has been no change in our internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Rules 13a-15 or 15d-15 under the Exchange Act that occurred during our most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

 

ITEM 1.LEGAL PROCEEDINGS

 

From time to time, we may become involved in various lawsuits and legal proceedings that arise in the ordinary course of our business, as described below. Litigation is, however, subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business. We are currently not aware of any legal proceedings or claims that we believe would or could have, individually or in the aggregate, a material adverse effect on us. Regardless of final outcomes, however, any such proceedings or claims may nonetheless impose a significant burden on management and employees and may come with costly defense costs or unfavorable preliminary interim rulings.

 

In February 2019, we received notice of a lawsuit involving BioFirma, LLC. We own 70% of the membership interests of BioFirma. As of the date of this filing, the lawsuit is pending; however, we do not believe this will have a material adverse effect on us. The total amount being contested by BioFirma with the opposing party is $30,000.

ITEM 1A.RISK FACTORS

 

Investors should carefully review and consider the information regarding certain factors which could materially affect our business, operating results, cash flows, and financial condition set forth under Item 1A, Risk Factors, in our fiscal 20182019 Annual Report on Form 10-K filed with the SEC on April 16, 2019.

March 26, 2020. There have been no material changes to such risk factors, except as set forth below. The risk factors set forth below supplement, and should be read together with, that section for disclosures regarding what we believe are the more significant risks and uncertainties related to our businesses. We do not believe that there have been any other material additions or changes to the risk factors previously disclosed in our fiscal 20182019 Annual Report on Form 10-K, although we may disclose changes to such factors or disclose additional factors from time to time in our future filings with the SEC. Additional risks and uncertainties not presently known to us or that we currently deem immaterial also may impair our business operations.

 

Our business and results of operations will be, and our financial condition may be, impacted by the COVID-19 outbreak and such impact could be materially adverse.

The global spread of the COVID-19 outbreak has created significant volatility, uncertainty and economic disruption. The extent to which the COVID-19 outbreak impacts our business, operations and financial results is uncertain and will depend on numerous evolving factors that we may be able to accurately predict, including:

the duration and scope of the pandemic;
governmental, business and individual actions taken in response to the pandemic and the impact of those actions on national and global economic activity;
the actions taken in response to economic disruption;
the impact of business disruptions and reductions in employment levels on our patients and the resulting impact on their demand for our orthopedic therapies and other medical treatments;
the increase in business failures amount suppliers and other businesses with which we collaborate;
our patients’ ability to pay for orthopedic therapies and other medical treatments; and
our ability to provide our orthopedic therapies and other medical treatments, including as a result of our employees or our patients working remotely and/or closures of our medical clinics.

Any of these factors could cause or contribute to the risks and uncertainties identified in our Annual Report on Form 10-K for the year ended December 31, 2019 and could materially adversely affect our business, financial condition and results of operations.

ITEM 2.UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

 

None.

ITEM 3.DEFAULTS UPON SENIOR SECURITIES

 

None.

 

ITEM 4.MINE SAFETY DISCLOSURES

 

Not applicable.

 

ITEM 5.OTHER INFORMATION

 

On April 29, 2019, we confirmed that D. Anthony Bond will no longer serve as our Chief Financial Officer or any other position he held with the Company. Mr. Bond’s separation from employment was not in connection with any disagreement relating to our operations, policies or practices.None.

 

On April 30, 2019, our Board appointed Sheri Gardzina, age 50, to serve as our interim Chief Financial Officer and Corporate Secretary (and to be our principal financial officer and principal accounting officer). Ms. Gardzina is a licensed certified public accountant in Tennessee with more than 20 years of diverse public accounting, financial and business consulting experience with a variety of companies in the healthcare industry. Ms. Gardzina joined the Company in November 2017 as the Controller and was most recently the Executive Vice President of Finance of the Company. She was a key participant in the preparation of the financial statements for our February 2019 initial public offering.

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ITEM 6.EXHIBITS

 

Exhibit Number Description
   
2.1 Agreement and Plan of Merger, dates as of April 1, 2019, by and among IMAC Holdings Inc., IMAC Management of Illinois, LLC, ISDI Holdings Inc. and Jason Hui (filed as Exhibit 2.1 to the Company’s Current Report on Form 8-K filed with the SEC on April 3, 2019 and incorporated herein by reference).
   
2.2 Amendment to Agreement and Plan of Merger, dated April 19, 2019, by and among IMAC Holdings Inc., IMAC Management of Illinois, LLC, ISDI Holdings, Inc., ISDI Holdings II, Inc., PHR Holdings, Inc., and Jason Hui (filed as Exhibit 2.2 to the Company’s Current Report on Form 8-K filed with the SEC on April 25, 2019 and incorporated herein by reference).
   
3.1 Certificate of Incorporation of IMAC Holdings, Inc. (filed as Exhibit 3.1 to the Company’s Registration Statement on Form S-1 filed with the SEC on September 17, 2018 and incorporated herein by reference).
   
3.2 Certificate of Amendment to the Certificate of Incorporation of IMAC Holdings, Inc. (filed as Exhibit 3.2 to the Company’s Registration Statement on Form S-1/A filed with the SEC on December 10, 2018 and incorporated herein by reference).
   
3.3 Certificate of Correction of the Certificate of Incorporation of IMAC Holdings, Inc. filed with the Delaware Secretary of State on August 8, 2019 (filed as Exhibit 3.4 to the Company’s Current Report on Form 8-K filed with the SEC on August 9, 2019 and incorporated herein by reference).
3.4Bylaws of IMAC Holdings, Inc. (filed as Exhibit 3.2 to the Company’s Registration Statement on Form S-1 filed with the SEC on September 17, 2018 and incorporated herein by reference).
   
4.1 Specimen Common Stock Certificate (filed as Exhibit 4.1 to the Company’s Registration Statement on Form S-1 filed with the SEC on September 17, 2018 and incorporated herein by reference).
   
4.2 Form of Common Stock Warrant certificate (filed as Exhibit 4.2 to the Company’s Registration Statement on Form S-1/A filed with the SEC on December 3, 2018 and incorporated herein by reference).
   
4.3 Form of Warrant Agency Agreement between IMAC Holdings, Inc. and Equity Stock Transfer, LLC (filed as Exhibit 4.3 to the Company’s Registration Statement on Form S-1/A filed with the SEC on December 3, 2018 and incorporated herein by reference).
   
4.4 Form of Underwriters’ Unit Purchase Option (filed as Exhibit 4.4 to the Company’s Registration Statement on Form S-1/A filed with the SEC on February 8, 2019 and incorporated herein by reference).
10.1†10.1 Employment Agreement, dated asForm of March 1, 2019, between10% Promissory Note issued by IMAC Holdings, Inc. and Jeffrey S. Ervin (filed as Exhibit 10.13 to the Company’s Annual Report on Form 10-K filed with the SEC on April 16, 2019 and incorporated herein by reference).
10.2†Employment Agreement, dated as of March 1, 2019, between IMAC Holdings, Inc. and Matthew C. Wallis (filed as Exhibit 10.14 to the Company’s Annual Report on Form 10-K filed with the SEC on April 16, 2019 and incorporated herein by reference).
10.3†

Employment Agreement, dated as of April 19, 2019, between IMAC Holdings, Inc. and Jason Hui (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on April 25, 2019March 9, 2020 and incorporated herein by reference).

10.2Note Purchase Agreement, dated March 25, 2020 (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on March 30, 2020 and incorporated herein by reference).
10.3Promissory Note, dated March 25, 2020 (filed as Exhibit 10.2 to the Company’s Current Report on Form 8-K filed with the SEC on March 30, 2020 and incorporated herein by reference).
10.4Security Agreement, dated March 25, 2020 (filed as Exhibit 10.3 to the Company’s Current Report on Form 8-K filed with the SEC on March 30, 2020 and incorporated herein by reference).
   
31.1* Certification of the Principal Executive Officer pursuant to Rules 13a-14(a) and 15d-14(a) promulgated pursuant to the Securities Exchange Act of 1934, as amended.
   
31.2* Certification of the Principal Financial Officer pursuant to Rules 13a-14(a) and 15d-14(a) promulgated pursuant to the Securities Exchange Act of 1934, as amended.

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32.1** Certification of the Principal Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
   
32.2** Certification of the Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
   
101.INS* XBRL Instance Document
   
101.SCH* XBRL Taxonomy Extension Schema
   
101.CAL* XBRL Taxonomy Extension Calculation Linkbase
   
101.LAB* XBRL Taxonomy Extension Labels Linkbase
   
101.PRE* XBRL Taxonomy Extension Presentation Linkbase
   
101.DEF* XBRL Taxonomy Extension Definition Linkbase

 

Compensatory plan or agreement.
*Filed herewith.
  
**This certification is being furnished solely to accompany this quarterly report pursuant to 18 U.S.C. § 1350, and is not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not to be incorporated by reference into any filing of IMAC Holdings, Inc., whether made before or after the date hereof, regardless of any general incorporation language in such filing.


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SIGNATURES

 

Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

 IMAC HOLDINGS, INC.
   
Date: May 15, 201914, 2020By:/s/ Jeffrey S. Ervin
  

Jeffrey S. Ervin

Chief Executive Officer

(Principal Executive Officer, Duly Authorized Officer)

 

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