UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
Form 10-K
(Mark One)
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2021
or
☐ 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
(State or Other Jurisdiction
of Incorporation or Organization)
1605 Westgate Circle, Brentwood, Tennessee
(Address of Principal Executive Offices)
83-0784691
(I.R.S. Employer
Identification No.)
37027
(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
Common Stock, par value $0.001 per share
Warrants to Purchase Common Stock
Trading Symbol(s)
IMAC
IMACW
Name of each exchange on which registered
The NASDAQ Stock Market LLC
The NASDAQ Stock Market LLC
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒
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 ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted posted 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 ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a 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
Non-accelerated filer
☐
☒
Accelerated filer
Smaller reporting company
Emerging growth company
☐
☒
☒
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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control
over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or
issued its audit report. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
The aggregate market value of the registrant’s voting common stock held by non-affiliates based on the closing stock price on June 30, 2021, was
approximately $17 million. For purposes of this computation only, all executive officers and directors have been deemed affiliates.
The number of outstanding shares of the registrant’s common stock, par value $0.001 per share, as of April 12, 2022 was 26,485,167.
None.
DOCUMENTS INCORPORATED BY REFERENCE
IMAC HOLDINGS, INC.
FORM 10-K—ANNUAL REPORT
For the Fiscal Year Ended December 31, 2021
Table of Contents
PART I
Item 1
Item 1A
Item 1B
Item 2
Item 3
Item 4
PART II
Item 5
Item 6
Item 7
Item 7A
Item 8
Item 9
Item 9A
Item 9B
Item 9C
PART III
Item 10
Item 11
Item 12
Item 13
Item 14
PART IV
Item 15
Item 16
Signatures
Business
Risk Factors
Unresolved Staff Comments
Properties
Legal Proceedings
Mine Safety Disclosures
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
[Reserved]
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Quantitative and Qualitative Disclosures About Market Risk
Financial Statements and Supplementary Data
Changes in and Disagreements with Accountants on Accounting and Financial Disclosures
Controls and Procedures
Other Information
Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Directors, Executive Officers and Corporate Governance
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Certain Relationships and Related Transactions, and Director Independence
Principal Accounting Fees and Services
Exhibits, Financial Statement Schedules
Form 10-K Summary
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Cautionary Statement Regarding Forward-Looking Statements
PART I
Portions of this Annual Report on Form 10-K (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 7 — Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this Annual Report on
Form 10-K, as well as other portions of this Annual Report on Form 10-K. 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” of this Annual Report on Form 10-K. 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.
Unless the context requires otherwise, references herein to “we,” “us,” “our,” “our company,” “our business” or “IMAC Holdings” are to IMAC
Holdings, Inc., a Delaware corporation, and prior to the Corporate Conversion discussed herein, IMAC Holdings, LLC, a Kentucky limited liability
company, and in each case, their consolidated subsidiaries.
ITEM 1.
BUSINESS
Overview
We are a provider and manager of value-based, conservative medical care combining life science advancements with traditional medical care for
movement-restricting diseases and conditions in IMAC Regeneration Centers and BackSpace clinics. Our Innovative Medical Advancements and Care
(IMAC) Regeneration Centers combine medical and physical procedures to improve patient experiences and outcomes and reduce healthcare costs as
compared to other available treatment options. As of December 31, 2021, we own five and manage twelve outpatient clinics that provide regenerative,
orthopedic and minimally invasive procedures and therapies. Our treatments are performed by licensed medical practitioners through our regenerative
rehabilitation protocols designed to improve the physical health, to advance the quality of life and to lessen the pain of our patients. We do not prescribe
opioids, but instead offer an alternative to conventional surgery or joint replacement surgery by delivering minimally invasive medical treatments to help
patients with sports injuries, back pain, knee pain, joint pain, ligament and tendon damage, and other related soft tissue conditions. Our employees focus on
providing exceptional customer service to give our patients a memorable and caring experience. We believe that we have priced our treatments to be
affordable by 95% of the population and are well positioned in the expanding regenerative medical sector.
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Our licensed healthcare professionals provide each patient a custom treatment plan that integrates innovative regenerative medicine protocols
(representing 12% of our revenue) with traditional, minimally invasive (minimizing skin punctures) medical procedures (representing 55% of our revenue)
in combination with physical therapies (representing 28% of our revenue from physical therapy), chiropractic care (representing 3% of our revenue) and
remaining 2% of our revenue from memberships. 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. We have successfully treated patients that were previously addicted to opioids because of joint or
soft tissue related pain. Further, our procedures comply with all professional athletic league drug restriction policies, including the NFL, NBA, NHL and
MLB.
Dr. Matthew Wallis, DC, our President, opened the first IMAC Regeneration Center in Paducah, Kentucky in August 2000, which remains the
flagship location of our current business. Dr. Jason Brame, DC joined Dr. Wallis in 2008. In 2015, Drs. Wallis and Brame hired Jeffrey S. Ervin as our
Chief Executive Officer to collectively create and implement their growth strategy. The result was the formal creation of IMAC Holdings, Limited Liability
Company (“LLC”) to expand IMAC clinics outside of western Kentucky, with such facilities to remain owned or operated under the group using the IMAC
Regeneration Center name and services. In June 2018, we completed a corporate conversion in which IMAC Holdings, LLC was converted to IMAC
Holdings, Inc. to consolidate ownership of existing clinics and implement our growth strategy. In February 2019, we completed an initial public offering
and our shares commenced trading on the Nasdaq Capital Market.
We are focused on providing natural, non-opioid solutions to pain as consumers increasingly demand conservative treatments for an aging
population. The demand for our services continues to grow fueled by consumer preferences for organic healthcare solutions over traditionally invasive
orthopedic practices. We believe that our regenerative rehabilitation treatments are provided to patients at a much lower price than our primary competitors,
including orthopedic surgeons, pain management clinics and hospital systems targeting invasive joint reconstruction. Surgical joint replacements cost
several times more than our therapies initially treating the same condition. The U.S. government has recently adopted strict surgery pre-approval initiatives
to reduce the cost for CMS and limit the proliferation of opioids since they accompany substantially all joint replacement surgeries.
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We believe patient satisfaction is driven by our five fundamental beliefs:
● We believe that the body has the ability to heal itself, and better results occur with our solutions to unlock the body’s natural healing process;
● We believe in the power of doctors, from many different specializations, working together for the best patient care possible;
● We believe that employees should know patients by their face, not by a chart number;
● We believe consumers have a choice regardless of physician referral or insurance coverage; and
● We believe a medical setting should be comforting.
We are led by senior executive officers who together have more than 100 years of combined experience in the healthcare services industry. Jeffrey
S. Ervin, co-founder of IMAC Holdings and our Chief Executive Officer, joined us in March 2015. Mr. Ervin has a history of sourcing private equity
investments and managing private equity operations in the healthcare and other growth industries. Mr. Ervin earned an M.B.A. degree from Vanderbilt
University. The founder of our company, Matthew C. Wallis, DC, a licensed chiropractor, is our President. Dr. Wallis has implemented strategies in the
company to create consistent operating efficiencies for our sales, marketing and service delivery operations. Sheri F. Gardzina serves as our Chief Financial
Officer and joined the company in November 2017. Mrs. Gardzina earned an M.B.A. and M.S. from Northeastern University and is a licensed Certified
Public Accountant. Ben Lerner, DC, a licensed chiropractor, joined the team in February 2022 as our Chief Operating Officer.
Our Operations
We currently operate 17 outpatient medical clinics in six states and 4 BackSpace locations in two states as of December 31, 2021. In 2020, we
acquired a chiropractic clinic in Florida and a chiropractic clinic in Missouri. In 2021, we added three managed clinics in Florida, one managed clinic in
Illinois, one managed clinic in Louisiana, and acquired a management company in Louisiana that manages an orthopedic specialist clinic. There were also
4 BackSpace clinics opened in 2021 in Missouri and Tennessee.
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Below is a description of each of our outpatient medical clinics:
Kentucky Market
In November 2015, we relocated our Paducah, Kentucky operations into a 10,200 square foot build-to-suit facility. This facility serves as an
anchor clinic for the western Kentucky market of roughly 50,000 residents. The clinic performs medical evaluations with x-ray, fluoroscopic spine, joint
and appendage injections, regenerative medicine and physical medicine. The lease term ended in December 2020 and is now continuing on a month-to-
month basis.
In March 2018, we purchased a medical practice building in Lexington, Kentucky, for $1.2 million. The Lexington, Kentucky clinic was our
seventh IMAC outpatient medical clinic, which we named the Tony Delk Center, and opened on July 2, 2018. This building was sold in June 2020 and we
then entered into a lease for the building that expires in July 2025.
We opened a 4,700 square foot facility in Murray, Kentucky, a town of nearly 15,000 residents near the Tennessee border in February 2017. This
facility provides medical evaluations, fluoroscopic joint and appendage injections, and physical medicine and refers patients to Paducah for regenerative
PRP medical procedures. The lease is scheduled to expire in December 2023.
Missouri Market, St. Louis
In January 2016, IMAC of St. Louis, LLC, doing business as the Ozzie Smith Center, executed a lease for a 13,300 square foot facility in
Chesterfield, Missouri, a suburb 18 miles west of downtown St. Louis. The Ozzie Smith Center opened in May 2016. The lease agreement runs until
August 2026. Dr. Devin Bell, D.O. is the medical director. The clinic performs medical evaluations with x-ray, fluoroscopic spine, joint and appendage
injections, regenerative PRP medicine and physical medicine. Namesake Ozzie Smith was inducted into the Major League Baseball Hall of Fame in 2002
and replicas of his 13 gold glove trophies are in the lobby of the clinic.
The Ozzie Smith Center opened a satellite facility in St. Peters, Missouri to assist with demand from suburbs west of the Missouri River. The St.
Peters clinic opened for business in July 2017. The lease expires in August 2022. The facility operates under the direction of Dr. Bell and offers patient
medical evaluations with x-ray, fluoroscopic joint and appendage injections, and physical medicine. This clinic discontinued patient care in December
2021.
The Ozzie Smith Center acquired the chiropractic clinic of Lockwood Chiropractic in Webster Groves, Missouri, a suburb of St. Louis, in
November 2020. The clinic relocated to a new medical facility in January 2022, which gives us the opportunity to expand medical services to broaden our
patient base while expanding into neighboring suburbs.
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Missouri Market, Springfield
In August 2018, we acquired the physical and occupational therapy provider, Advantage Therapy, which operated four locations in the Springfield,
Missouri metropolitan area. The South Springfield location originally occupied 5,000 square feet, until it was relocated in September 2019 to a 7,520
square feet location which has a lease that expires in August 2024. The North Springfield, Monett and Ozark locations function as satellite locations. The
North Springfield location functions within 2,400 square feet with a lease that expires in May 2022. The Monett location occupied 2,200 square feet
pursuant to a lease that expired in February 2021. We negotiated with the landlord to exit the lease early, and closed the facility in December 2020. The
Ozark location operated in approximately 1,000 square feet, until it was relocated in 2019 to a 2,740 square foot location with a lease that expires in May
2024. Advantage Therapy is an established business with more than ten years of operations in the Springfield, Missouri market.
Tennessee Market
The David Price Center opened in Brentwood, Tennessee in May 2017. Dr. Rachel Rome, M.D. is an anesthesiologist and interventional pain
management specialist and serves as its medical director. The 7,500 square foot clinic is leased through July 2024. The clinic performs medical evaluations
with x-ray, fluoroscopic spine, joint and appendage injections, regenerative PRP medicine and physical medicine.
In November 2017, we opened a 5,500 square foot facility in Murfreesboro, Tennessee however, this clinic discontinued patient care in February
2021.
Chicago Market
In April 2019, we acquired the non-medical assets of, and management agreements for, a regenerative medicine and physical medicine practice
operating in three locations in the Chicago, Illinois metropolitan area. The Arlington Heights location occupies 3,390 square feet and has a lease which
expires in July 2023. The Buffalo Grove location occupied 2,850 square feet and had a lease which expired in July 2020 and was not renewed. The Elgin
location occupies 3,880 square feet and has a lease which expires in October 2023.
In November 2019, we entered into a management agreement for an occupational and physical therapy practice in Rockford, Illinois. This location
occupies 3,056 square feet and has a lease that expires in July 2023. This management agreement was terminated in 2021.
In June 2021, we completed an asset purchase in Naperville, Illinois. The clinic provides a wide variety of orthopedic treatments for various
conditions through a combination of medical and physical rehabilitation services. This location occupies 2,153 square feet and has a lease that expires in
July 2025.
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Florida Market
In January 2020, we acquired the assets and assumed the building lease liability of Chiropractic Health of Southwest Florida, Inc. in Bonita
Springs, Florida. The building lease expires in December 2024. The acquisition of this practice expanded our presence into a new market where we have
extended our service offering to incorporate medical procedures, to the existing physical therapy, chiropractic care and soft tissue therapies.
In February 2021, we acquired the business of Willmitch Chiropractic, P.A. in Tampa, Florida. This location provides chiropractic care and
occupies 3,613 square feet with a lease that expires in April 2026.
In March 2021, we completed an asset purchase in Orlando, Florida. The clinic operates in 2,500 square feet with a lease that expires in September
2023.
In June 2021, we completed an asset purchase in Fort Piece, Florida. The clinic provides chiropractic care and will be incorporating medical
procedures. This clinic occupies 3,368 square feet and the lease for this space expires in May 2026.
IMAC Medical of Louisiana.
In October 2021, we acquired the assets and management agreement of IMAC Medical of Louisiana in Baton Rouge, Louisiana. The building is
leased through December 2026 with 9,000 of square feet.
BackSpace
As of December 31, 2021 we had opened 4 BackSpace clinics in Missouri and Tennessee. These clinics are located in Walmart and provide
chiropractic adjustments, nerve and muscle stimulation, and percussion tool therapies for soft tissue recovery, muscle relaxation, and spinal wellness. The
current lease includes the addition of 6 locations to be opened in early 2022 in Tennessee and Florida.
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Our Services
The licensed healthcare professionals at our clinics work with each patient to create a protocol customized for each patient by utilizing a
combination of the following traditional and innovative treatments:
Medical Treatments. Our specialized team of doctors work together to provide the latest minimally invasive, prescription-free treatments for
movement challenges or pain related to orthopedic conditions. The treatments are customized to treat the underlying condition instead of addressing the
challenge with prescriptions or surgeries.
Regenerative Medicine. Regenerative therapy at IMAC Regeneration Centers utilizes undifferentiated cellular tissue to regenerate damaged tissue.
The majority of our procedures utilize cells from the patient, harvested under minimal manipulation, and applied during the same visit to the clinic. These
autologous cells help to heal degenerative soft tissue conditions, which cause pain or compromise the patient’s quality of life. Platelet therapies comprise
the greatest percentage of regenerative procedures. Independent studies in this area, including a recent safety and feasibility study published by Dr. Peter B.
Fodor, “Adipose Derived Stromal Cell Injections for Pain Management of Osteoarthritis in the Human Knee Joint” (Aesthetic Surgery Journal, February
2016), have supported claims that autologous cell treatments using adipose and bone marrow lead to improved function and decreased pain within joints,
muscles and connective tissue and can help alleviate osteoarthritis and degenerative disease. We believe that we have followed the increasingly accepted
protocols described in this and other similar studies in connection with our regenerative therapies.
Physical Medicine. Our team of medical practitioners start by collaboratively building a personalized physical medicine treatment plan designed
to help patients get back to living the life they deserve.
Physical Therapy. With a combination of biomechanical loading and tissue mobilization, our licensed physical rehabilitation therapists work with
each patient to help the body restore skill within the joint or soft tissue.
Spinal Decompression. During this treatment, the spine is stretched and relaxed intermittently in a controlled manner, creating a negative pressure
in the disc area that can pull herniated or bulging tissue back into the disc. Whether caused by trauma or degeneration, we realize the impact a spinal injury
can have on the quality of one’s life and are committed to providing the most innovative, minimally invasive medical technology and care to relieve back
pain and restore function.
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Chiropractic Manipulation. Common for spine conditions, manual manipulation is used to increase range of motion, reduce nerve irritability and
improve function.
FDA Clinical Trial
In November 2017, we engaged a medical consulting group to advise us on current regenerative medicine therapy protocols and to organize a
clinical trial towards an investigational new drug application (IND) with the FDA, while pursuing a voluntary Regenerative Medicine Advanced Therapy
(RMAT) designation. This process is defined under Section 3033 of the 21st Century Cures Act. We intend to conduct an investigator-initiated trial
utilizing regenerative advancements to alleviate symptoms of debilitating, neurological conditions and diseases. Stem cell therapy is emerging as a
potentially revolutionary new way to treat disease and injury, with wide-ranging medical benefits. It aims to repair damaged and diseased body parts with
Healthy new cells provided by stem cell transplants.
The medical consulting group has assisted us in conducting research, establishing patient engagement tools and developing clinical strategies to
achieve the IND and RMAT. We executed a technology transfer agreement with a research university to license an FDA Phase I approved mesenchymal
stem cell drug candidate. We submitted an IND application with the FDA using this therapeutic product in May 2020, and the FDA Office of Tissues and
Advanced Therapies authorized the Phase I clinical trial in August 2020. IMAC physicians were trained to administer treatments within IMAC facilities
and the FDA approved opening enrollment for the trial in November 2020. The first enrollee was treated in December 2020, utilizing umbilical cord-
derived allogenic mesenchymal stem cells for the treatment of bradykinesia due to Parkinson’s disease. The Phase 1 clinical trial consists of a 15-patient
dose escalation safety and tolerability study. The trial is being divided into three groups: (1) five patients with bradykinesia due to Parkinson’s disease will
receive a low dose, (2) five patients will receive a medium intravenous dose, (3) and five patients will receive a high intravenous dose. Each trial
participant will receive an intravenous infusion of stem cells and be tracked for 12 months for data collection, as required within the study.
No assurance can be given that the FDA will approve advancement beyond a Phase I study or the RMAT designation. We believe the RMAT
designation may be helpful in differentiating our services and gaining a broader collaborative connection with the FDA. Failure to earn the RMAT
designation will result in unfulfilled research expenses, but should not have a materially adverse effect on our operations or financial condition.
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Our Growth and Expansion Strategy
We have developed a comprehensive approach and well-defined model for new clinic openings ranging from site selection to staffing to
acquisition targets and performance metrics. Given the current market valuations, we favor growth through acquisitions of profitable physical medicine
centers with a decade or more of history in a current location. We believe these targets can be found with favorable long-term transaction prices in
contiguous or current markets to capitalize on operational and marketing efficiencies.
The key elements of our strategy that we believe will continue to propel our growth and expansion are:
Open New Outpatient Locations and Facilities. We are in the process of identifying new locations at which to lease, develop, or acquire operating
practices to transition into new IMAC Regeneration Centers. We anticipate expansion by acquisition of operating clinics in the Midwest and southern
United States within the next 12 months. By branching into states with significant demand and underserved populations, we anticipate broader brand
recognition and early adoption by patients. We anticipate small expansions within a two-hour drive of existing markets will allow us to capitalize on our
regional market familiarity and to leverage locally established administrative infrastructure.
Expand Our Service Offerings to Employers, Government Programs, and Self-Insured Health Plans. We launched a corporate accounts
division in March 2019 to target employers researching conservative treatment options for their employees. The program is in place to focus on minimizing
employee time away from work due to injuries or occupational hazards and limit use of aggressive orthopedic treatments and the threat of opioid abuse for
employees enrolled in an employer health plan. Since the creation of the group, we have not only obtained contracts directly with employers, but also
achieved designations with federal programs expanding medical access and service offerings for enrollees. In November 2019, we were accepted as a
Veterans Affairs Community Care Network provider making IMAC a certified medical center for the 20 million enrollees in a Veterans Affairs
administered benefit plan. Additionally, in 2020 most of our clinics achieved network credentialling to treat patients that receive US Department of Labor
medical benefits.
Accelerate Research and Development of New Regenerative Products. We have licensed a FDA Phase I approved stem cell product from a
research university. With this product, we gained FDA authorization to conduct a Phase I clinical trial for the purpose of researching and developing
regenerative medicine products for neurological diseases that restrict movement. We began a low-cost clinical trial in 2020 with the goal of identifying
innovative treatments to deliver within IMAC Regeneration Centers.
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Expand Our Advertising and Marketing. We intend to increase our advertising and marketing efforts and reach throughout our primary service
areas in order to grow patient volume at our existing facilities and spur interest in newer locations. Our current marketing efforts include a combination of
local television, digital and event advertising. We have introduced employer marketing initiatives with help from our celebrity endorsers. While we
welcome patients that are referred to us by other healthcare providers, we believe that direct marketing will generate more new patients for our outpatient
clinics than relying solely on antiquated medical referral practices.
Offer State-of-the-Art Orthopedic Treatments. Our regenerative rehabilitation techniques are used to prevent arthritis, treat meniscus tears, defeat
muscle deterioration and address other damaged tissue conditions. We will continue offering innovative therapies and recently approved medical
technologies, including alternative medicine treatments, and will adapt our treatment offerings as new treatments are developed and come to market. By
bringing together a diverse array of medical specialists, we are able to treat more health conditions and attract a larger base of patients.
Expand our Spinal Care and Wellness Clinic. We have tremendous experience treating patients with back and neck pain and recognize the
underserved population for such a widely-impacted symptom. We intend to expand our retail healthcare concept focused on treatments for back and neck
pain, soft-tissue recovery, muscle tension, and spinal wellness while providing chiropractic adjustments, nerve and muscle stimulation, and percussion tool
therapies. We anticipate a combination of clinics to be managed through management service agreements or franchised.
Advertising and Marketing
Our corporate advertising and marketing efforts focus on increasing our brand awareness and communicating our commitment to “success without
major surgery,” along with the many other competitive advantages our company offers. Our marketing strategy is to offer an innovative and recently
approved medical technologies for movement and orthopedic therapies that appeal to a wide range of potential patients, continually elevate awareness of
our brand and generate demand for our outpatient medical services. We rely on a number of channels in this area, including digital advertising, email
marketing, social media and affiliate marketing, as well as through strategic partnerships with well-known sports celebrities to build our endorsements and
draw patients to our IMAC Regeneration Centers. Our celebrity endorsers appear in our press marketing and social media marketing efforts and help
generate interest in our brand and services. We maintain our website at www.imacregeneration.com. We intend to hire additional sales and marketing
personnel and increase our spending on sales, marketing and promotion in connection with the continued expansion of our outpatient locations. Advertising
and marketing expense was approximately $1,325,000 and $933,000 for the years ended December 31, 2021 and 2020, respectively.
Our sales and marketing strategy focuses on active individuals who seek to maintain, restore and maximize their health and wellness. A majority
of our customers are located within 25 miles of one of our outpatient medical clinics. During the years ended December 31, 2021 and 2020, no single
customer accounted for more than 10% of our consolidated revenue.
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Competition and Our Competitive Advantages
The outpatient physical therapy industry is highly competitive, with thousands of clinics across the country. While some of our competitors offer
regenerative medical treatments as an effective treatment for degenerative health conditions, we believe that few companies have the multi-disciplinary
approach of combining physical therapy and medical professionals working together to generate optimal regenerative health outcomes. One of our major
competitive advantages is the ability to deliver medical treatments alongside complementary physical medicine and provide broadly affordable regenerative
treatments.
Competitive factors affecting our business include quality of care, cost, treatment outcomes, convenience of location, and relationships with, and
ability to meet the needs of, referral and insurance payor sources. Our clinics compete, directly or indirectly, with many types of healthcare providers
including the physical therapy departments of hospitals, private therapy clinics, physician-owned therapy clinics, and chiropractors. We may face more
intense competition if consolidation of the therapy industry continues.
We believe that we differentiate ourselves from our competition and have been able to grow our business as a result of the following competitive
strengths:
Our Minimally Invasive Approach to Traditional Orthopedic Care. We pay particular attention to rehabilitating our patients’ musculoskeletal
system to reduce pain and enhance mobility without major surgery or anesthesia. By combining physical therapy and regenerative medicine, we are able to
treat a variety of physical conditions by using a patient’s own body to help heal itself.
Strong Regional Presence. We own five and manage twelve clinics in six states, providing us leverage for implementation of our marketing
strategies and utilization of our staff. We believe we offer a broader platform of regenerative therapies than our regional competitors.
We Do Not Prescribe Addictive Opioids. 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. We focus on preventing the potential for addiction through our regenerative-based therapies that
help alleviate chronic pain.
Utilizing Diverse Medical Specialists for Customized Care. Our treatment protocols are customized by a team of medical doctors, nurse
practitioners, chiropractors and physical therapists and are designed to heal damaged tissue without major surgery or prescription pain medication. This
team approach delivers comprehensive service while avoiding the higher costs of major reconstructive surgery by medical specialists.
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Protection of Proprietary Information
We own various U.S. federal trademark registrations and applications, and unregistered trademarks, including the registered mark “IMAC
Regeneration Center.” We rely on trademark laws in the United States, as well as confidentiality procedures and contractual provisions, to protect our
proprietary information and brand. We cannot assure you that existing trademark laws or contractual rights will be adequate for protecting our intellectual
property and proprietary information. Protection of confidential information, trade secrets and other intellectual property rights in the markets in which we
operate and compete is highly uncertain and may involve complex legal questions. We cannot completely prevent the unauthorized use or infringement of
our confidential information or intellectual property rights as such prevention is inherently difficult. Costly and time-consuming litigation could be
necessary to enforce and determine the scope of our confidential information and intellectual property protection.
We are not aware of any claims of infringement or other challenges to our rights in our trademarks. We do not expect to need any additional
intellectual property rights to carry out our growth and expansion strategy.
For years ended December 31, 2021 and 2020, we did not incur any material time or labor for the development of the technology we use in our
operations.
Government Regulation
Numerous federal, state and local regulations regulate healthcare services and those who provide them. Some states into which we may expand
have laws requiring facilities employing health professionals and providing health-related services to be licensed and, in some cases, to obtain a certificate
of need (that is, demonstrating to a state regulatory authority the need for, and financial feasibility of, new facilities or the commencement of new
healthcare services). None of the states in which we currently operate require a certificate of need for the operation of our physical therapy business
functions. Our healthcare professionals and/or medical clinics, however, are required to be licensed, as determined by the state in which they provide
services. Failure to obtain or maintain any required certificates, approvals or licenses could have a material adverse effect on our business, financial
condition and results of operations.
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Regulations Controlling Fraud and Abuse. Various federal and state laws regulate financial relationships involving providers of healthcare
services. These laws include Section 1128B(b) of the Social Security Act (42 U.S. C. § 1320a-7b(b)) (the “Fraud and Abuse Law”), under which civil and
criminal penalties can be imposed upon persons who, among other things, offer, solicit, pay or receive remuneration in return for (i) the referral of patients
for the rendering of any item or service for which payment may be made, in whole or in part, by a Federal health care program (including Medicare and
Medicaid); or (ii) purchasing, leasing, ordering, or arranging for or recommending purchasing, leasing, ordering any good, facility, service, or item for
which payment may be made, in whole or in part, by a Federal health care program (including Medicare and Medicaid). We believe that our business
procedures and business arrangements are in compliance with these provisions. However, the provisions are broadly written and the full extent of their
specific application to specific facts and arrangements to which we are a party is uncertain and difficult to predict. In addition, several states have enacted
state laws similar to the Fraud and Abuse Law, which may be more restrictive than the federal Fraud and Abuse Law.
Stark Law. Provisions of the Omnibus Budget Reconciliation Act of 1993 (42 U.S.C. §1395nn) (the “Stark Law”) prohibit referrals by a physician
of “designated health services” which are payable, in whole or in part, by Medicare or Medicaid, to an entity in which the physician or the physician’s
immediate family member has an investment interest or other financial relationship, subject to several exceptions. Unlike the Fraud and Abuse Law, the
Stark Law is a strict liability statute. Proof of intent to violate the Stark Law is not required. Physical therapy services are among the “designated health
services.” Further, the Stark Law has application to our management contracts with individual physicians and physician groups, as well as, any other
financial relationship between us and referring physicians, including medical advisor arrangements and any financial transaction resulting from a clinic
acquisition. The Stark Law also prohibits billing for services rendered pursuant to a prohibited referral. Several states have enacted laws similar to the Stark
Law. These state laws may cover all (not just Medicare and Medicaid) patients. As with the Fraud and Abuse Law, we consider the Stark Law in planning
our outpatient clinics, establishing contractual and other arrangements with physicians, marketing and other activities, and believe that our operations are in
substantial compliance with the Stark Law. If we violate the Stark Law or any similar state laws, our financial results and operations could be adversely
affected. Penalties for violations include denial of payment for the services, significant civil monetary penalties, and exclusion from the Medicare and
Medicaid programs.
HIPAA. In an effort to further combat healthcare fraud and protect patient confidentially, Congress included several anti-fraud measures in the
Health Insurance Portability and Accountability Act of 1996 (“HIPAA”). HIPAA created a source of funding for fraud control to coordinate federal, state
and local healthcare law enforcement programs, conduct investigations, provide guidance to the healthcare industry concerning fraudulent healthcare
practices, and establish a national data bank to receive and report final adverse actions. HIPAA also criminalized certain forms of health fraud against all
public and private payers. Additionally, HIPAA mandates the adoption of standards regarding the exchange of healthcare information in an effort to ensure
the privacy and electronic security of patient information and standards relating to the privacy of health information. Sanctions for failing to comply with
HIPAA include criminal penalties and civil sanctions. In February of 2009, the American Recovery and Reinvestment Act of 2009 (“ARRA”) was signed
into law. Title XIII of ARRA, the Health Information Technology for Economic and Clinical Health Act (“HITECH”), provided for substantial Medicare
and Medicaid incentives for providers to adopt electronic health records (“EHRs”) and grants for the development of health information exchange (“HIE”).
Recognizing that HIE and EHR systems will not be implemented unless the public can be assured that the privacy and security of patient information in
such systems is protected, HITECH also significantly expanded the scope of the privacy and security requirements under HIPAA. Most notable are the
mandatory breach notification requirements and a heightened enforcement scheme that includes increased penalties, and which now apply to business
associates as well as to covered entities. In addition to HIPAA, a number of states have adopted laws and/or regulations applicable in the use and disclosure
of individually identifiable health information that can be more stringent than comparable provisions under HIPAA.
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We believe that our operations comply with applicable standards for privacy and security of protected healthcare information. We cannot predict
what negative effect, if any, HIPAA/HITECH or any applicable state law or regulation will have on our business.
Cybersecurity. We are a medical provider and comply with HIPAA and data sensitivity requirements as regulated by local and federal authorities.
Our patient data is hosted, managed and secured with an approved Electronic Medical Record vendor. Cybersecurity is of paramount importance and our
executive officers have implemented routine cyber breach insurance policies to protect our company from potential predatory initiatives to access patient
and company data. See “Risk Factors – Our reputation and relationships with patients would be harmed if our patients’ data, particularly personally
identifying data, were to be subject to a cyber-attack or otherwise by unauthorized persons.”
FDA Drug Approval Process
In the United States, pharmaceutical products are subject to extensive regulation by the Food and Drug Administration (the “FDA”). The Federal
Food, Drug, and Cosmetic Act (“FDC Act”) and other federal and state statutes and regulations, govern, among other things, the research, development,
testing, manufacture, storage, recordkeeping, approval, labeling, promotion and marketing, distribution, post-approval monitoring and reporting, sampling
and import and export of pharmaceutical products. Failure to comply with applicable U.S. requirements may subject a company to a variety of
administrative or judicial sanctions, such as FDA refusal to approve pending new drug applications (“NDAs”), warning or untitled letters, product recalls,
product seizures, total or partial suspension of production or distribution, injunctions, fines, civil penalties and criminal prosecution. As a result of these
regulations, pharmaceutical product development and approval are very expensive and time consuming.
Pharmaceutical product development for a new product or certain changes to an approved product in the United States typically involves
preclinical laboratory and animal tests, the submission to the FDA of an investigational new drug (“IND”), which must become effective before clinical
testing may commence, and adequate and well-controlled clinical trials to establish the safety and effectiveness of the drug for each indication for which
FDA approval is sought. Satisfaction of FDA pre-market approval requirements typically takes many years and the actual time required may vary
substantially based upon the type, complexity and novelty of the product or disease.
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Clinical trials to support NDAs for marketing approval are typically conducted in three sequential phases, but the phases may overlap. In Phase 1,
the initial introduction of the drug into healthy human subjects or patients, the drug is tested to assess pharmacological actions, side effects associated with
increasing doses and, if possible, early evidence on effectiveness. For dermatology products, Phase 2 usually involves trials in a limited patient population
to determine metabolism, pharmacokinetics, the effectiveness of the drug for a particular indication, dosage tolerance and optimum dosage, and to identify
common adverse effects and safety risks. If a compound demonstrates evidence of effectiveness and an acceptable safety profile in Phase 2 evaluations,
Phase 3 clinical trials are undertaken to obtain the additional information about clinical efficacy and safety in a larger number of patients, typically at
geographically dispersed clinical trial sites, to permit the FDA to evaluate the overall benefit-risk relationship of the drug and to provide adequate
information for the labeling of the drug. In most cases the FDA requires two adequate and well-controlled Phase 3 clinical trials with statistically
significant results to demonstrate the efficacy of the drug. A single Phase 3 clinical trial with other confirmatory evidence may be sufficient in rare
instances where the study is a large multicenter trial demonstrating internal consistency and a statistically very persuasive finding of an effect on mortality,
irreversible morbidity or prevention of a disease with a potentially serious outcome and confirmation of the result in a second trial would be practically or
ethically impossible.
After completion of the required activities, including clinical testing, a NDA is prepared and submitted to the FDA. FDA approval of the NDA is
required before marketing of the product may begin in the United States.
The FDA also may refer applications for novel drug products, or drug products that present difficult questions of safety or efficacy, to an advisory
committee, typically a panel that includes clinicians and other experts, for review, evaluation and a recommendation as to whether the application should be
approved. The FDA is not bound by the recommendation of an advisory committee, but it generally follows such recommendations. Before approving an
NDA, the FDA will typically inspect one or more clinical sites to assure compliance with the FDA’s good clinical practice requirements. Additionally, the
FDA typically inspects the facility or the facilities at which the drug is manufactured and may inspect the sponsor company and investigator sites that
participated in the clinical trials. The FDA will not approve the product unless compliance with current good manufacturing practice (“cGMP”) is
satisfactory and the NDA contains data that provide substantial evidence that the drug is safe and effective for the stated indication.
After the FDA evaluates the NDA and the manufacturing facilities, it issues either an approval letter or a complete response letter. A complete
response letter generally outlines the deficiencies in the submission and may require substantial additional testing, or information, in order for the FDA to
reconsider the application. If, or when, those deficiencies have been addressed to the FDA’s satisfaction following FDA review of a resubmission of the
NDA, the FDA will issue an approval letter.
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An approval letter authorizes commercial marketing of the drug with specific prescribing information for specific indications. As a condition of
NDA approval, the FDA may require a risk evaluation and mitigation strategy (“REMS”), to help ensure that the benefits of the drug outweigh the potential
risks. REMS can include medication guides, communication plans for healthcare professionals and elements to assure safe use (“ETASU”). ETASU can
include, but are not limited to, special training or certification for prescribing or dispensing, dispensing only under certain circumstances, special
monitoring and the use of patient registries. The requirement for a REMS can materially affect the potential market and profitability of the drug. Moreover,
product approval may require substantial post-approval testing and surveillance to monitor the drug’s safety or efficacy. Once granted, product approvals
may be withdrawn if compliance with regulatory standards is not maintained or problems are identified following initial marketing.
Changes to some of the conditions established in an approved application, including changes in indications, labeling, or manufacturing processes
or facilities, require submission and FDA approval of a new NDA or NDA supplement before the change can be implemented. An NDA supplement for a
new indication typically requires clinical data similar to that in the original application, and the FDA generally uses the same procedures and actions in
reviewing NDA supplements as it does in reviewing NDAs.
Section 505(b)(2) New Drug Applications
Most drug products obtain FDA marketing approval pursuant to an NDA filed under section 505(b)(1) of the FDC Act. An alternative is a special
type of NDA, commonly referred to as a Section 505(b)(2) NDA (“505(b)(2) NDA”), which enables the applicant to rely, in part, on the FDA’s previous
approval of a similar product, or published literature, in support of its application.
505(b)(2) NDAs often provide an alternate path to FDA approval for new or improved formulations or new uses of previously approved products.
Section 505(b)(2) permits the filing of an NDA where at least some of the information required for approval comes from studies not conducted by, or for,
the applicant and for which the applicant has not obtained a right of reference. If the 505(b)(2) NDA applicant can establish that reliance on the FDA’s
previous approval is scientifically appropriate, it may eliminate the need to conduct certain preclinical or clinical studies of the new product. The FDA may
also require companies to perform additional studies or measurements to support the change from the approved product. The FDA may then approve the
new product candidate for all, or some, of the label indications for which the referenced product has been approved, as well as for any new indication
sought by the Section 505(b)(2) NDA applicant.
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Biologics
Biological products used for the prevention, treatment or cure of a disease or condition of a human being are subject to regulation under the FDC
Act, except the section of the FDC Act which governs the approval of NDAs. Biological products are approved for marketing under provisions of the
Public Health Service Act (“PHSA”), via a Biologics License Application (“BLA”). However, the application process and requirements for approval of
BLAs and BLA supplements, including review timelines, are very similar to those for NDAs and NDA supplements, and biologics are associated with
similar approval risks and costs as other drugs.
Post-Approval Requirements
Once a NDA is approved, a product will be subject to certain post-approval requirements. For instance, the FDA closely regulates the post-
approval marketing and promotion of drugs, including standards and regulations for direct-to-consumer advertising, off-label promotion, industry-
sponsored scientific and educational activities and promotional activities involving the internet. Drugs may be marketed only for the approved indications
and in accordance with the provisions of the approved labeling.
Adverse event reporting and submission of periodic safety reports is required following FDA approval of a NDA. The FDA also may require post-
marketing testing, known as Phase 4 testing, REMS and surveillance to monitor the effects of an approved product, or the FDA may place conditions on an
approval that could restrict the distribution or use of the product. In addition, quality-control, drug manufacture, packaging and labeling procedures must
continue to conform to cGMPs after approval. Drug manufacturers and certain of their subcontractors are required to register their establishments with the
FDA and certain state agencies. Registration with the FDA subjects entities to periodic unannounced inspections by the FDA, during which the agency
inspects manufacturing facilities to assess compliance with cGMPs. Accordingly, manufacturers must continue to expend time, money and effort in the
areas of production and quality-control to maintain compliance with cGMPs. Regulatory authorities may withdraw product approvals or request product
recalls if a company fails to comply with regulatory standards, if it encounters problems following initial marketing, or if previously unrecognized
problems are subsequently discovered.
Pediatric Information
Under the Pediatric Research Equity Act, NDAs or supplements to NDAs must contain data to assess the safety and effectiveness of the drug for
the claimed indications in all relevant pediatric subpopulations and to support dosing and administration for each pediatric subpopulation for which the
drug is safe and effective. The FDA may grant full or partial waivers, or deferrals, for submission of data.
The Best Pharmaceuticals for Children Act (“BPCA”) provides NDA holders a six-month extension of any exclusivity, patent or non-patent, for a
drug if certain conditions are met. Conditions for exclusivity include the FDA’s determination that information relating to the use of a new drug in the
pediatric population may produce health benefits in that population, the FDA making a written request for pediatric studies and the applicant agreeing to
perform, and reporting on, the requested studies within the statutory timeframe. Applications under the BPCA are treated as priority applications, with all
of the benefits that designation confers.
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Disclosure of Clinical Trial Information
Sponsors of clinical trials of FDA-regulated products, including drugs, are required to register and disclose certain clinical trial information.
Information related to the product, patient population, phase of investigation, study sites and investigators and other aspects of the clinical trial is then made
public as part of the registration. Sponsors are also obligated to disclose the results of their clinical trials after completion. Competitors may use this
publicly available information to gain knowledge regarding the progress of our programs.
Regenerative Medicine Advanced Therapies (RMAT) Designation
The FDA has established a Regenerative Medicine Advanced Therapy (“RMAT”) designation as part of its implementation of the 21st Century
Cures Act, or Cures Act. The RMAT designation program is intended to fulfill the Cures Act requirement that the FDA facilitate an efficient development
program for, and expedite review of, any drug that meets the following criteria: (1) it qualifies as a RMAT, which is defined as a cell therapy, therapeutic
tissue engineering product, human cell and tissue product, or any combination product using such therapies or products, with limited exceptions; (2) it is
intended to treat, modify, reverse, or cure a serious or life-threatening disease or condition; and (3) preliminary clinical evidence indicates that the drug has
the potential to address unmet medical needs for such a disease or condition. Like breakthrough therapy designation, RMAT designation provides potential
benefits that include more frequent meetings with FDA to discuss the development plan for the product candidate, and eligibility for rolling review and
priority review. Products granted RMAT designation may also be eligible for accelerated approval on the basis of a surrogate or intermediate endpoint
reasonably likely to predict long-term clinical benefit, or reliance upon data obtained from a meaningful number of sites, including through expansion to
additional sites. RMAT-designated products that receive accelerated approval may, as appropriate, fulfill their post-approval requirements through the
submission of clinical evidence, clinical studies, patient registries, or other sources of real world evidence (such as electronic health records); through the
collection of larger confirmatory data sets; or via post-approval monitoring of all patients treated with such therapy prior to approval of the therapy.
Other Regulatory Factors. Political, economic and regulatory influences are fundamentally changing the healthcare industry in the United States.
Congress, state legislatures and the private sector continue to review and assess alternative healthcare delivery and payment systems. Potential alternative
approaches could include mandated basic healthcare benefits, controls on healthcare spending through limitations on the growth of private health insurance
premiums and Medicare and Medicaid spending, the creation of large insurance purchasing groups, and price controls. Legislative debate is expected to
continue in the future and market forces are expected to demand only modest increases or reduced costs. For instance, managed care entities are demanding
lower reimbursement rates from healthcare providers and, in some cases, are requiring or encouraging providers to accept capitated payments that may not
allow providers to cover their full costs or realize traditional levels of profitability. We cannot reasonably predict what impact the adoption of federal or
state healthcare reform measures or future private sector reform may have on our business.
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In recent years, federal and state governments have launched several initiatives aimed at uncovering behavior that violates the federal civil and
criminal laws regarding false claims and fraudulent billing and coding practices. Such laws require providers to adhere to complex reimbursement
requirements regarding proper billing and coding in order to be compensated for their services by government payers. Our compliance program requires
adherence to applicable law and promotes reimbursement education and training; however, a determination that our clinics’ billing and coding practices are
false or fraudulent could have a material adverse effect on us.
As a result of our participation in the Medicare and Medicaid programs, we are subject to various governmental inspections, reviews, audits and
investigations to verify our compliance with these programs and applicable laws and regulations. Managed care payers may also reserve the right to
conduct audits. An adverse inspection, review, audit or investigation could result in refunding amounts we have been paid; fines penalties and/or revocation
of billing privileges for the affected clinics; exclusion from participation in the Medicare or Medicaid programs or one or more managed care payer
network; or damage to our reputation.
We and our outpatient medical clinics are subject to federal and state laws prohibiting entities and individuals from knowingly and willfully
making claims to Medicare, Medicaid and other governmental programs and third-party payers that contain false or fraudulent information. The federal
False Claims Act encourages private individuals to file suits on behalf of the government against healthcare providers such as us. As such suits are
generally filed under seal with a court to allow the government adequate time to investigate and determine whether it will intervene in the action, the
implicated healthcare providers often are unaware of the suit until the government has made its determination and the seal is lifted. Violations or alleged
violations of such laws, and any related lawsuits, could result in (i) exclusion from participation in Medicare, Medicaid and other federal healthcare
programs, or (ii) significant financial or criminal sanctions, resulting in the possibility of substantial financial penalties for small billing errors that are
replicated in a large number of claims, as each individual claim could be deemed a separate violation. In addition, many states also have enacted similar
statutes, which may include criminal penalties, substantial fines, and treble damages.
Employees and Human Capital Management
As of April 1, 2022, we employed 177 individuals, of which 154 were full-time employees. As of that date, none of our employees were governed
by collective bargaining agreements or were members of a union. We consider our relations with our employees to be very good. We expect to add
employees in 2022 as we implement organic and acquisition growth strategies. Integrating new staff into our culture is important for developing a positive
work environment and maintaining future job satisfaction. Since December 2017, we have issued a semi-annual employee satisfaction survey to identify
opportunities to enhance our corporate culture. We strive for greater diversity and inclusion through our employment and management practices. Today, our
full-time employees range in age from 18-68 years, 33% of our executive team is female, 40% of our medical doctors represent a racial minority, and 72%
of our full-time staff is female. We remain further committed to increasing the diversity of our employee base.
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In the states in which our current outpatient clinics are located, persons performing designated medical or physical therapy services are required to
be licensed by the state. Based on standard employee screening systems in place, all persons currently employed by us who are required to be licensed are
licensed. We are not aware of any federal licensing requirements applicable to our employees.
Medical Advisory Board
We have a Medical Advisory Board comprised of all IMAC medical physicians. The Advisory Board meets quarterly to discuss matters relating to
our therapies, range of medical treatments and strategic direction, and periodically presents its suggestions to our Board and to executive management. On
March 20, 2020, the Advisory Board met to complete a COVID-19 preparedness plan. Members of the Advisory Board are reimbursed by us for out-of-
pocket expenses incurred in serving on the Advisory Board.
Business Transactions
Chiropractic Health of Southwest Florida. In January 2020, we acquired the assets and assumed the building lease liability of Chiropractic
Health of Southwest Florida, Inc. (CHSF) in Bonita Springs, Florida. The building lease expires in December 2024. The acquisition of this practice
expands into a new market where we can provide additional services from what was being provided, which included physical therapy, chiropractic care and
soft tissue therapies.
Campbell Chiropractic. In August 2020, we entered into a sublease agreement with Campbell Chiropractic in Richmond, Kentucky. The shared
space arrangement allowed us full access to the space twice weekly. This agreement was terminated in 2021.
Lockwood Chiropractic, LLC. We acquired the chiropractic clinic of Lockwood Chiropractic in Webster Groves, Missouri, a suburb of St. Louis,
in a Practice Purchase Agreement in November 2020. The facility will continue to operate under the direction of Sharon Whalen, D.C. and will provide us
the opportunity to provide our services to a wider patient base outside the city.
Willmitch Chiropractic, P.A. We acquired this clinic located in Tampa, Florida in February 2021. This acquisition continues our expansion into
the Florida market and the founder, Martin Willmitch, will remain with the Company and serve as Vice President of Managed Care.
NHC Chiropractic, PPLC dba Synergy Healthcare. We acquired the assets of this practice in Orlando, Florida in March 2021. The clinic
provides chiropractic care and the Company is implementing its regenerative rehabilitation offering, including its patient wellness subscriptions to the
clinic’s established services.
Fort Pierce Chiropractic. We completed an asset purchase of this clinic located in Fort Pierce, Florida and the third Florida addition in 2021. This
clinic provides chiropractic care and the Company will be introducing medical services to the current patient base.
Active Medical Center. We acquired the assets of this clinic located in Naperville, Illinois in June 2021. This clinic provides a variety of
orthopedic treatments for various conditions through a combination of medical and physical rehabilitation services and will join the other two Mike Ditka
clinics in the Chicago area.
Louisiana Orthopaedic & Sports Rehab Institute. We completed the acquisition of this practice management company in Baton Rouge, Louisiana
in October 2021. The founder of this clinic, Allen Johnston, M.D., will be joining IMAC as a Medical Director, as we expand our presence into Louisiana.
BackSpace. BackSpace entered into three management agreements with ChiroMart, LLC, ChiroMart Missouri, LLC and ChiroMart Florida, LLC.
These are related to the BackSpace locations operated in Walmart’s located in Tennessee, Missouri and Florida, respectively.
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Corporate Information and Incorporation
The first IMAC Regeneration Center was organized in August 2000 as a Kentucky professional service corporation. That center was the
forerunner to our current business and remains our flagship location. Matthew C. Wallis, DC and Jason Brame, DC, together with Jeffrey S. Ervin, became
the founding members of IMAC Holdings, LLC, a Kentucky limited liability company organized in March 2015, to expand our management team to
support our clinical expansion while meeting the requirements of state healthcare practice guidelines and ownership laws.
Our consolidated financial statements include the accounts of IMAC Holdings, Inc. 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 Regeneration
Center of St. Louis, LLC (“IMAC St. Louis”), 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”),
Advantage Hand Therapy and Orthopedic Rehabilitation, LLC (“Advantage Therapy”), IMAC Management of Florida, LLC (“IMAC Florida”), Louisiana
Orthopaedic & Sports Rehab (“IMAC Louisiana”) and The Back Space, LLC (“BackSpace”); 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”); the
following entities which are consolidated with IMAC Management of Illinois, LLC due to control by contract: Progressive Health and Rehabilitation, Ltd.,
Illinois Spine and Disc Institute, Ltd. and Ricardo Knight, P.C.; the following entity which is consolidated with IMAC Management Services, LLC due to
control by contract: Integrated Medicine and Chiropractic Regeneration Center PSC (Kentucky PC); the following entities which are consolidated with
IMAC Florida due to control by contract: Willmitch Chiropractic, P.A. and IMAC Medical of Florida, P.A.; the following entity which is consolidated with
Louisiana Orthopaedic & Sports Rehab due to control by contract: IMAC Medical of Louisiana, a Medical Corporation; and the following entities which
are consolidated with BackSpace due to control by contract: ChiroMart LLC, ChiroMart Florida LLC, and ChiroMart Missouri LLC.
Effective June 1, 2018, IMAC Holdings converted into a Delaware corporation and we changed our name to IMAC Holdings, Inc., which is
referred to herein as the Corporate Conversion. In conjunction with the conversion, all of our outstanding membership interests were exchanged on a
proportional basis into shares of common stock.
Our principal executive offices are located at 1605 Westgate Circle, Brentwood, Tennessee 37027 and our telephone number is (844) 266-IMAC
(4622). We maintain a corporate website at http://www.imacregeneration.com.
Available Information
We file electronically with the Securities and Exchange Commission (the “SEC”), our annual reports on Form 10-K, quarterly reports on Form 10-Q,
and current reports on Form 8-K pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (“Exchange Act”). The public may read and
copy any materials filed by us with the SEC at the SEC’s Public Reference Room at 100 F Street, NW, Washington, D.C. 20549. The public may obtain
information on the operation of the SEC’s Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains an Internet site
(www.sec.gov), which contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC.
Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and all amendments to those reports are available free
of charge on our website at https://imacregeneration.com as soon as reasonably practicable after such material is electronically filed with, or furnished to,
the SEC. Such reports will remain available on our website for at least 12 months and are also available free of charge by written request or by contacting
us at 844-266-4622.
The contents of our website or any other website are not incorporated by reference into this Annual Report.
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ITEM 1A. RISK FACTORS
In addition to the information set forth at the beginning of this Form 10-K entitled “Cautionary Statement Regarding Forward-Looking Statements,” you
should consider that there are numerous and varied risks, known and unknown, that may prevent us from achieving our goals. If any of these risks actually
occur, our business, financial condition or results of operation may be materially and adversely affected. In such case, the trading price of our securities
could decline and investors could lose all or part of their investment. These risk factors may not identify all risks that we face and our operations could
also be affected by factors that are not presently known to us or that we currently consider to be immaterial to our operations.
Risks Relating to Our Company, Business and Industry
We recorded a net loss for the twelve months ended December 31, 2021 and December 31, 2020 and there can be no assurance that our future
operations will result in net income.
For the twelve months ended December 31, 2021 and December 31, 2020, we had net revenue of approximately $14,386,000 and $12,835,000,
respectively, and we had net loss of approximately $10,542,000 and $5,542,000, respectively. There can be no assurance that our future operations will
result in net income. Our failure to increase our revenues or improve our gross margins will harm our business. We may not be able to sustain or increase
profitability on a quarterly or annual basis in the future. If our revenues grow more slowly than we anticipate, our gross margins fail to improve or our
operating expenses exceed our expectations, our operating results will suffer. The fee we charge for our management services may decrease, which would
reduce our revenues and harm our business. If we are unable to sell our services at acceptable prices relative to our costs, or if we fail to develop and
introduce new services on a timely basis and services from which we can derive additional revenues, our financial results will suffer.
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Further, because of our small size and limited operating history, our company is particularly susceptible to adverse effects from changes in the law,
economic conditions, consumer tastes, competition and other contingencies or events beyond our control. It may be more difficult for us to prepare for and
respond to these types of risks than it would be for a company with an established business and operating cash flow. Due to changing circumstances or an
inability to implement any portion of our growth and expansion strategy, we may be forced to change dramatically our planned operations.
We have suffered a disruption of the operation of our business as a result of the outbreak of coronavirus in the United States. Closures due to
government orders or guidance and other related effects of the coronavirus pandemic may cause a material adverse effect on our business.
In March 2020, federal, state and local government authorities issued orders and guidance in order to combat the spread of the coronavirus
pandemic. 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 is lifted. 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
coronavirus and the extent and effectiveness of containment actions taken.
The coronavirus pandemic 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 and revenue 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.
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 coronavirus, 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.
We may fail completely to implement key elements of our growth and expansion strategy, which could adversely affect our operations and financial
performance.
If we cannot implement one or more key elements of our growth and expansion strategy, including raising sufficient capital, hiring and retaining
qualified staff, leasing and developing acceptable premises for our medical clinics, securing necessary service contracts on favorable or adequate terms,
generating sufficient revenue and achieving numerous other objectives, our projected financial performance may be materially adversely affected. Even if
all of the key elements of our growth and expansion strategy are successfully implemented, we may not achieve the favorable results, operations and
financial performance that we anticipate.
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The development and operation of our medical clinics will require additional capital, and we may not be able to obtain additional capital on favorable
or even acceptable terms. We may also have to incur additional debt, which may adversely affect our liquidity and operating performance.
Our ability to successfully grow our business and implement our growth and expansion strategy depends in large part on the availability of
adequate capital to finance operations. We can give no assurance that we will continue to have sufficient capital to support the continued operations of our
company. Changes in our growth and expansion strategy, lower than anticipated revenue for the medical clinics, unanticipated and/or uncontrollable events
in the credit or equity markets, changes to our liquidity, increased expenses, and other events may cause us to seek additional debt or equity financing.
Financing may not be available on favorable or acceptable terms, or at all, and our failure to raise capital could adversely affect our operations and financial
condition.
Additional equity financing may result in a dilution of the pro rata ownership stake of our stockholders. Further, we may be required to offer
subsequent investors investment terms, such as preferred distributions and voting rights, that are superior to the rights of existing stockholders, which could
have an adverse effect on the value of the investment of our existing stockholders.
Additional debt financing, if available, may involve significant cash payment obligations, covenants and financial ratios that restrict our ability to
operate and grow our business, and would cause us to incur additional interest expense and financing costs. As a consequence, our operating performance
may be materially adversely affected.
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We incur substantial start-up expenses for our medical clinics and do not expect to make a profit at any clinic until at least six to twelve months after
opening each medical clinic.
We will incur substantial expenses to implement our growth and expansion strategy, including costs for leasing and developing the premises for
each medical clinic, purchasing medical and office equipment, purchasing medical supplies and inventory, marketing and advertising, recruiting and hiring
staff, and other expenses. We estimate that it will take at least $700,000 to open each clinic, with an additional $300,000 of operating capital and $200,000
credit line needed to purchase equipment and fund operating losses during the first six months of operation. These start-up costs may increase if there are
any delays, problems or other events not currently anticipated. Although we expect each medical clinic to become profitable approximately six to twelve
months after opening based on our experience with opening the Ozzie Smith Centers in Chesterfield, Missouri in May 2016 and in St. Peters, Missouri in
August 2017, and the IMAC Regeneration Center in Murray, Kentucky in February 2017, no guarantee can be made that any of the clinics or our company
overall will operate profitably. By way of example, the David Price Center in Brentwood, Tennessee, which opened in May 2017, initially experienced
unforeseen delays in staffing, construction and marketing launch. If we do not reach profitability and recover our start-up expenses and other accumulated
operating losses, stockholders will likely suffer a significant decline in the value of their investment.
We may be unable to obtain financing on acceptable terms, or at all, which could materially adversely affect our operations and ability to successfully
implement our growth and expansion strategy.
Our growth and expansion strategy relies on obtaining sufficient financing, including one or more equipment lines to purchase medical and office
equipment and one or more lines of credit for operating and related expenses. We may not be able to obtain financing on acceptable terms or in the amount
anticipated by our growth and expansion strategy. If unable to secure the amount of financing anticipated by our growth and expansion strategy, we may be
unable to implement one or more portions of our growth and expansion strategy. If we accept less favorable terms for our financing than anticipated, we
may incur additional expenses and restrictions on operations and may be less liquid and less profitable than expected. Should either of these events occur,
we could suffer material adverse effects to our ability to implement our growth and expansion strategy and operate successfully.
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We may seek additional funding through a combination of equity offerings, debt financing, government or third-party funding, commercialization,
marketing and distribution arrangements and other collaborations, strategic alliances and licensing arrangements. Additional funding may not be available
to us on acceptable terms or at all. In addition, the terms of any financing may adversely affect the holdings or rights of the stockholders. Any new equity
securities we issue could have rights, preferences, and privileges superior to those of holders of our existing capital stock. In addition, the issuance of
additional shares by us, or the possibility of such issuance, may cause the market price of our shares to decline. Any debt financing secured by us in the
future could involve restrictive covenants relating to our capital-raising activities and other financial and operational matter, which may make it more
difficult for us to obtain additional capital and the pursue business opportunities.
If we are unable to obtain funding on a timely basis, we may be required to significantly curtail one or more of our efforts, our ability to support
our business growth and to respond to business challenges could be significantly limited, and we could be forced to halt operations. Accordingly, our
business may fail, in which case you would lose the entire amount of your investment in our common stock.
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.
Our financial statements have been prepared assuming that we will continue to operate as a going concern, which contemplates the realization of
assets and the satisfaction of liabilities in the normal course of business. However, our independent registered public accounting firm has included in its
audit opinion for the year ended December 31, 2021 a statement that there is substantial doubt as to our ability to continue as a going concern as a result of
continued losses and financial condition at December 31, 2021, unless we are able to obtain additional financing, enter into strategic alliances or sell assets.
The reaction of investors to the inclusion of a going concern statement by our auditors, our current lack of cash resources and our potential inability to
continue as a going concern may adversely affect our share price and our ability to raise new capital or enter into strategic alliances. If we become unable to
obtain additional capital and to continue as a going concern, we may have to liquidate our assets and the values we receive for our assets in liquidation or
dissolution could be significantly lower than the values reflected in our financial statements.
26
We plan to incur indebtedness to implement our growth and expansion strategy and, as a consequence, may be unprofitable and unsuccessful in
achieving our financial and operating goals.
We plan to finance some of our start-up and operating costs through debt leveraging, including one or more equipment lines and one or more lines
of credit. This debt could adversely affect our financial performance and ability to:
● implement our growth and expansion strategy;
● recoup start-up costs;
● operate profitably;
● maintain acceptable levels of liquidity;
● obtain additional financing in the future for working capital, capital expenditures, development and other general business purposes;
● obtain additional financing on favorable terms; and
● compete effectively or operate successfully under adverse economic conditions.
We will manage, but will not own, certain of the medical clinics or employ the medical service providers who will treat patients at the clinics.
Several of our medical clinics will be owned exclusively by a professional service corporation in order to comply with state laws regulating the
ownership of medical practices. We will, in turn, through a contractual arrangement, provide long-term, exclusive management services to those
professional service corporations and their medical professionals. All employees who provide direct medical services to patients will be employed by the
professional service corporation. These management services agreements protect us from certain liability and provide a structured engagement to deliver
non-medical, comprehensive management and administrative services to help the medical professionals operate the business. The management services
agreements authorize us to act on behalf of the professional service corporation, but do not authorize the professional service corporations to act on our
behalf or enter into contracts with third parties on our behalf. We will employ the non-medical provider staff for the clinics and provide comprehensive
management and administrative services to help the professional service corporation operate the clinics. We may also loan money to the professional
service corporation for certain payroll and development costs, although we have no obligation to do so. This arrangement makes our financial and
operational success highly dependent on the professional service corporation. Under our management service agreements, we provide exclusive
comprehensive management and related administrative services to the professional service corporation and receive management fees. Due to this financial
and operational control by contract, our financial statements consolidate the financial results of the professional service corporations. However, we will
have little, if any, tangible assets as to those operations. These characteristics increase the risk associated with an investment in our company.
Our management services agreements may be terminated.
The management services agreements we have with several of our clinics may be terminated by mutual agreement of us and the applicable clinic,
by a non-breaching party after 30 days following an uncured breach by the other party, upon a bankruptcy of either party or by us upon 90 days’ prior
written notice to the clinic. The termination of a management services agreement would result in the termination of payment of management fees from the
applicable clinic, which could have an adverse effect on our operating results and financial condition.
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We do not control the delivery of medical care at any of our facilities.
We have no direct control over the medical care in any of our facilities. State medical boards govern the licensing and delivery of medical care
within a state. For this reason, the medical practitioners are solely responsible for making medical decisions with their abilities and experience. We run the
risk of being associated with a medical practitioner that performs poorly or does not comply with medical board legislation. When we are responsible for
the recruitment or staffing of medical professionals, we may hire a professional that delivers care outside of medical protocols. Our inability to exercise
control over the medical care and managed centers increases the risks associated with an investment in our company.
State medical boards may amend licensing requirements for medical service providers, service delivery oversight for midlevel practitioners, and
ownership or location requirements for the delivery of medical treatments.
We have no direct control over the medical care in any of our facilities. State medical boards govern the licensing and delivery of medical care
within a state. Each state medical board controls the level of licensing required for each medical practitioner and the requirements to obtain such a license
to deliver medical care. Furthermore, the state medical board typically determines the required practitioner oversight for medical practitioners based on
their license achieved, earned degrees and continuing education. The current requirements for these practitioners may change in the future and we run the
risk of additional expenses necessary to meet the state medical board requirements. The state medical board may also determine the location in which
services are delivered. We risk the loss of revenue or retrofitting expense if the state medical board amends location requirements for the delivery of certain
treatments. Similarly, state medical boards may amend ownership or management requirements for the operation of medical clinics within their respective
state. The board may also investigate or dispute the legal establishment of owned or managed medical clinics. We risk a material loss of ownership of or
management control and subsequent fee from medical clinics that are in our possession or control.
Adverse medical outcomes are possible with conservative and minimally invasive treatments.
Medical practitioners performing services at our IMAC facilities run the risk of delivering treatments for which the patient may experience a poor
outcome. This is possible with non-invasive and minimally invasive services alike, including the use of autologous treatments in which a patient’s own
cells are used to regenerate damaged tissues. At our IMAC Regeneration Centers, a minimally invasive treatment involves puncturing the skin with a
needle or a minor incision which could lead to infection, bleeding, pain, nausea, or other similar results. Non-invasive and conservative physical medicine
treatments may possibly cause soft tissue tears, contusions, heart conditions, stroke, and other physically straining conditions. The treatments or potential
clinical research studies may yield further patient risks. An adverse outcome may include but not be limited to a loss of feeling, chronic pain, long-term
disability, or death. We have obtained medical malpractice coverage in the event an adverse outcome occurs. However, the insurance limits may be
exceeded or liability outside of the coverage may adversely impact the financial performance of the business, including any potential negative media
coverage on patient volume.
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Potential conflicts of interest exist with respect to the management services agreement that we have entered into concerning our clinics in Kentucky,
and it is possible our interests and the affiliated owners of those clinics may diverge.
Our medical clinics in Kentucky are held by a professional service corporation that is owned by Matthew C. Wallis, DC, our Chief Operating
Officer, a director and co-founder of our company, and Jason Brame, DC, a co-founding member of our company, in order to comply with the state’s laws
regulating the ownership of medical practices. The professional service corporation directs the provision of medical services to patients and employs the
physicians and registered nurses at the clinics, we do not. Rather, pursuant to the terms of a long-term, exclusive management services agreement, we
employ the non-medical provider staff for the clinics and provide comprehensive management and administrative services to help the professional service
corporation operate the clinics. We believe that the service fees and other terms of our management services agreement are standard in the outpatient
healthcare practice area. Nonetheless, the management services agreement presents the possibility of a conflict of interest in the event that issues arise with
regard to the respective medical and non-medical services being provided at the clinics, including quality of care issues of which we become aware and
billing and collection matters that we handle on behalf of the physician practices, where our interests may diverge from those of Drs. Wallis and Brame
acting on behalf of the professional service corporation. No such issues, however, have occurred during this arrangement.
The management services agreement provides that we will have the right to control the daily operations of the medical clinics subject, in the case
of practicing medicine, to the direction of Drs. Wallis and Brame acting on behalf of the professional service corporation. Our interests with respect to such
direction may be at odds with those of Drs. Wallis and Brame, requiring them to recuse themselves from our decisions relating to such matters, or even
from further involvement with our company.
We comply with applicable state law with respect to transactions (including business opportunities and management services agreements)
involving potential conflicts. Applicable state corporate law requires that all transactions involving our company and any director or executive officer (or
other entities with which they are affiliated) are subject to full disclosure and approval of the majority of the disinterested independent members of our
Board of Directors, approval of the majority of our stockholders or the determination that the contract or transaction is intrinsically fair to us. More
particularly, our policy is to have any related party transactions (i.e., transactions involving a director, an officer or an affiliate of our company) be approved
solely by a majority of the disinterested independent directors serving on the Board of Directors.
Drs. Wallis and Brame are significant holders of our outstanding shares of common stock and we anticipate they will continue to own a significant
percentage of our outstanding shares. Dr. Wallis founded our original IMAC medical clinic in Paducah, Kentucky in August 2000 and, with Jeffrey S.
Ervin, our Chief Executive Officer, founded our current company in March 2015. Dr. Wallis, working with Mr. Ervin, will be substantially responsible for
selecting the business direction we take, the medical clinics we open in the future and the services we may provide. The management services agreement
may present Drs. Wallis and Brame with conflicts of interest.
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The loss of the services of Jeffrey S. Ervin or Matthew C. Wallis, DC for any reason would materially and adversely affect our business operations and
prospects.
Our financial success is dependent to a significant degree upon the efforts of Jeffrey S. Ervin, our Chief Executive Officer, and Matthew C. Wallis,
DC, our President. Mr. Ervin, who has unique knowledge regarding the roll-out of our IMAC Regeneration Centers, and Dr. Wallis, who has extensive
business contacts, would be extremely difficult to replace. We have entered into employment arrangements with Mr. Ervin and Dr. Wallis, however there
can be no assurance that Mr. Ervin or Dr. Wallis will continue to provide services to us. A voluntary or involuntary departure by either executive could
have a materially adverse effect on our business operations if we were not able to attract a qualified replacement for him in a timely manner. We do not
have a key-man life insurance policy for our benefit on the life of either Mr. Ervin or Dr. Wallis.
We will depend heavily on the efforts of our key personnel, as well as sports celebrity endorsers.
Our success depends, to a significant extent, upon the efforts and abilities of our officers and key employees, including medical and chiropractic
doctors and other practitioners, and our sports celebrity endorsers. Loss or abatement of the services of any of these persons, or any adverse change to the
sports celebrity endorsers, could have a material adverse effect on us and our business, operations and financial performance.
Our success also will depend on our ability to identify, attract, hire, train and motivate highly skilled managerial personnel, medical doctors,
chiropractors, licensed physical therapists, and other practitioners. Failure to attract and retain key personnel could have a material adverse effect on our
business, prospects, financial condition and results of operation. Further, the quality, philosophy and performance of key personnel could adversely affect
our operations and performance.
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We may fail to obtain the business licenses and any other licenses necessary to operate our medical clinics, or the necessary engineering, building,
occupancy and other permits to develop the premises for the clinics, which would materially adversely affect our growth and expansion strategy.
If we cannot obtain approval for business licenses or any other licenses necessary to operate our medical clinics, it could materially adversely
affect our growth and expansion strategy and could result in a failure to implement our growth and expansion strategy. Failure to obtain the necessary
engineering, building, occupancy and other permits from applicable governmental authorities to develop the premises for our medical clinics could also
materially adversely affect our growth and expansion strategy and could result in a failure to implement our growth and expansion strategy.
We may face strong competition from other providers in our primary service areas, and increased competition from new competitors, which may hinder
our ability to obtain and retain customers.
We will be in competition with other more established companies using a variety of treatments for the conditions and ailments that our services are
intended to treat, including orthopedic surgeons, pain management clinics, hospital systems and outpatient surgery centers providing joint reconstruction
and related surgeries. These companies may be better capitalized and have more established name recognition than us. We may face additional competition
in the future if other providers enter our primary service areas. Competition from existing providers and providers that may begin competing with us in the
future could materially adversely affect our operations and financial performance.
Further, the services provided by our company are relatively new and unique. We cannot be certain that our services will achieve or sustain market
acceptance, or that a sufficient volume of patients in the Florida, Illinois, Kentucky, Louisiana, Missouri and Tennessee areas will utilize our services. We
will be in competition with alternative treatment methods, including those presently existing and those that may develop in the future. As such, our growth
and expansion strategy carries many unknown factors that subject us and our investors to a high degree of uncertainty and risk.
We are competing in a dynamic market with risk of technological change.
The market for medical, physical therapy and chiropractic services is characterized by frequent technological developments and innovations, new
product and service introductions, and evolving industry standards. The dynamic character of these products and services will require us to effectively use
leading and new technologies, develop our expertise and reputation, enhance our current service offerings and continue to improve the effectiveness,
feasibility and consistency of our services. There can be no assurance that we will be successful in responding quickly, cost-effectively and sufficiently to
these and other such developments.
Our success will depend largely upon general economic conditions and consumer acceptance in our primary service areas.
Our current primary service areas are located in certain geographical areas in the states of Florida, Illinois, Kentucky, Louisiana, Missouri and
Tennessee. Our operations and profitability could be adversely affected by a local economic downturn, changes in local consumer acceptance of our
approach to healthcare, and discretionary spending power, and other unforeseen or unexpected changes within those areas.
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We are required to comply with numerous government laws and regulations, which could change, increasing costs and adversely affecting our
financial performance and operations.
Medical and chiropractic service providers are subject to extensive federal, state and local regulation, including but not limited to regulation by the
U.S. Food and Drug Administration, Centers for Medicare & Medicaid Services, and other government entities. We are subject to regulation by these
entities as well as a variety of other laws and regulations. Compliance with such laws and regulations could require substantial capital expenditures. Such
regulations may be changed from time to time, or new regulations adopted, which could result in additional or unexpected costs of compliance.
Changes to national health insurance policy and third-party insurance carrier fee schedules for traditional medical treatments could decrease patient
revenue and adversely affect our financial performance and operations.
Political, economic and regulatory influences are subjecting medical and chiropractic service providers, health insurance providers and other
participants in the healthcare industry in the United States to potential fundamental changes. Potential changes to nationwide health insurance policy are
currently being debated. We cannot predict what impact the adoption of any federal or state healthcare reform or private sector insurance reform may have
on our business.
We receive payment for the services we render to patients from their private health insurance providers and from Medicare and Medicaid. If third-
party payers change the expected fee schedule (the amount paid by such payers for services rendered by us), we could experience a loss of revenue, which
could adversely affect financial performance.
At the present time, most private health insurance providers do not cover the regenerative medical treatments provided at our medical clinics.
However, traditional physical medical treatments provided at our medical clinics, such as physical therapy, chiropractic services and medical evaluations,
are covered by most health insurance providers. Medicare and Medicaid take the same position as private insurers and reimburse patients for traditional
physical medical treatments but not for regenerative medical treatments. If private health insurance providers and Medicare and Medicaid were to begin
covering regenerative medical treatments, the revenue we would receive on a per-treatment basis would likely decline given their tighter fee schedules.
Further, such a change might result in increased competition as additional healthcare providers begin offering our customized services.
We could be adversely affected by changes relating to the IMAC Regeneration Center brand name.
We are a holding company in which our medical clinics are formed in separate subsidiaries. Our subsidiaries are currently operating in Florida,
Illinois, Kentucky, Louisiana, Missouri and Tennessee. As a consequence of this entity structure, any adverse change to the brand, reputation, financial
performance or other aspects of the IMAC Regeneration Center brand at any one location could adversely affect the operations and financial performance
of the entire company.
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We may incur losses that are not covered by insurance.
We maintain insurance policies against professional liability, general commercial liability and other potential losses of our company. All of the
regenerative, medical, physical therapy and chiropractic treatments performed at our clinics are covered by our malpractice insurance; however, there is an
upper limit to the payout allowable in the event of our malpractice. Poor patient outcomes for healthcare providers may result in legal actions and/or
settlements outside of the scope of our malpractice insurance coverage. Regenerative medicine represents approximately 2% of our patient visits and 12%
of our revenue. Future innovations in regenerative medicine may require review or approval of such innovations by governmental regulators. During formal
research studies performed in collaboration with regulators, we may be required to obtain new insurance policies and there is no assurance that insurance
policy underwriters will provide coverage for such research initiatives. If an uninsured loss or a loss in excess of insured limits occurs, our financial
performance and operation could suffer material adverse effects.
We are susceptible to risks relating to investigation or audit by the Centers for Medicare & Medicaid Services (“CMS”), health insurance providers and
the IRS.
We may be audited by CMS or any health insurance provider that pays us for services provided to patients. Any such audit may result in reclaimed
payments, which would decrease our revenue and adversely affect our financial performance. Our federal tax returns may be audited by the IRS and our
state tax returns may be audited by applicable state government authorities. Any such audit may result in the challenge and disallowance of some of our
deductions or an increase in our taxable income. No assurance can be made with regard to the deductibility of certain tax items or the position taken by us
on our tax returns. Further, an audit or any litigation resulting from an audit could unexpectedly increase our expenses and adversely affect financial
performance and operations.
We are subject to the possible repayment of a claimed CMS overpayment , but we cannot predict the outcome.
On April 15, 2021, the Company received notification from Covent Bridge Group, a Center for Medicare & Medicaid Services (“CMS”)
contractor, that they are recommending to CMS that the Company was overpaid in the amount of $2,921,868. This amount represents a statistical
extrapolation of $11,530 of charges from a sample of 40 claims for the periods February 2017 to November 2020.
On June 3, 2021, the Company received a request for payment from CMS in the amount of $2,918,472. The Company initiated the appropriate
appeals and then the Company received a notification dated September 30, 2021, from CMS that they “found the request to be favorable by reversing the
extrapolation to actual”. The Company received a separate notification stating “the extrapolated overpayment was reduced to the actual overpayment
amount for the sampled denied claims $5,327.73,” which had been paid as of December 31, 2021.
This amount represented a statistical extrapolation of $11,530 of charges from a sample of 40 claims for the periods February 2017 to November
2020. The Company began its own internal audit process and disagrees with the interpretation of the medical records and the extrapolation techniques used
to derive the balance. The Company continued the appeals process to the second level appeal related to the error rate and are anticipating a third appeal on
the remaining $5,327.73 amount.
On October 21, 2021, the Company received notification from Covent Bridge Group, a Center for Medicare & Medicaid Services (“CMS”)
contractor, that they are recommending to CMS that the Company was overpaid in the amount of $2,716,056.33. This amount represents a statistical
extrapolation of $6,791.33 of charges from a sample of 38 claims for the periods July 2017 to November 2020 for Progressive Health & Rehabilitation, Ltd
(“Progressive Health”). The Company entered into a management agreement with Progressive Health in April 2019 and therefore liable for only a portion
of the sampled claims. There were a total of 38 claims reviewed, 25 of these claims were from the period prior to the management agreement with the
Company and the remaining 13 claims were related to the period that Progressive Health was managed by the Company. In December 2021, the Company
received a request for payment from CMS in the amount of $2,709,265. The Company has begun its own internal audit process and has initiated the
appropriate appeals.
The Company is unable to predict the timing and ultimate outcome of this matter. Any potential loss may be classified as errors and omissions for
which insurance coverage was in place during a majority of the years being evaluated. As of December 31, 2021, the Company has recorded no liability for
this claim as we do not believe that an estimate of a reasonably possible loss or range of loss can be made at this time.
The Food and Drug Administration has pursued bad actors in the regenerative medicine therapy industry, and we could be included in any broad
investigation.
The U.S. Food and Drug Administration has pursued bad actors in the regenerative medicine therapy industry. Since we provide regenerative
medicine treatments, we may be subject to broad investigations from the FDA or state medical boards regarding the marketing and medical delivery of our
treatments. In November 2017, we engaged a medical consulting group to advise us on current protocols in this area and to organize a clinical trial towards
an investigational new drug application with the FDA, while pursuing a voluntary regenerative medicine advanced therapy (RMAT) designation under
Section 3033 of the 21st Century Cures Act.
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Any significant disruption in our computer systems or those of third parties that we utilize in our operations could result in a loss or degradation of
service and could adversely impact our business.
Our reputation and ability to attract, retain and serve our patients and users is dependent upon the reliable performance of our computer systems
and those of third parties that we utilize in our operations. These systems may be subject to damage or interruption from earthquakes, adverse weather
conditions, other natural disasters, terrorist attacks, power loss, telecommunications failures, computer viruses, computer denial of service attacks or other
attempts to harm these systems. Interruptions in these systems, or to the internet in general, could make our service unavailable or impair our ability to
deliver content to our customers. Service interruptions, errors in our software or the unavailability of computer systems used in our operations could
diminish the overall attractiveness of our services to existing and potential patients. In addition, during the second half of 2019, we began the
implementation of an updated medical and financial platform in our clinics.
Our servers and those of third parties we use in our operations are vulnerable to computer viruses, physical or electronic break-ins and similar
disruptions and periodically experience directed attacks intended to lead to interruptions and delays in our service and operations as well as loss, misuse or
theft of data. Any attempt by hackers to disrupt our service or otherwise access our systems, if successful, could harm our business, be expensive to remedy
and damage our reputation. We have implemented certain systems and processes to thwart hackers and, to date, hackers have not had a material impact on
our service or systems. However, this is no assurance that hackers may not be successful in the future. Efforts to prevent hackers from disrupting our
service or otherwise accessing our systems are expensive to implement and may limit the functionality of or otherwise negatively impact our service
offering and systems. Any significant disruption to our service or access to our systems could result in a loss of patients and adversely affect our business
and results of operation.
We utilize our own communications and computer hardware systems located either in our facilities or in that of a third-party data center. In
addition, we utilize third-party internet-based or “cloud” computing services in connection with our business operations. We also utilize third-party content
delivery networks to help us stream content to our patients and other parties over the internet. Problems faced by us or our service providers, including
technological or business-related disruptions, could adversely impact the experience of our audiences and users.
During the normal course of business, we may choose to pursue services with a different third-party vendor or pursue a change in systems which
could result in interruptions and delays in our service and operations as well as loss, misuse, or theft of data. We have implemented systems and processes
to mitigate these risks and, to date, have not experienced a material impact on our services or systems due to change in systems or third-party. However,
this is no assurance that a change in systems or services used by us or a change in third-party vendors may not have a material impact in the future. Any
significant disruption to our service or access to our systems could result in a loss of patients and adversely affect our business and results of operations.
Our reputation and relationships with patients would be harmed if our patients’ data, particularly personally identifying data, were to be subject to a
cyber-attack or otherwise accessed by unauthorized persons.
We maintain personal data regarding our patients, including their names and other information. With respect to personally identifying data, we rely
on licensed encryption and authentication technology to secure such information. We also take measures to protect against unauthorized intrusion into our
patients’ data. Despite these measures, we could experience, though we have not to date experienced, a cyber-attack or other unauthorized intrusion into
our patients’ data. Our security measures could also be breached due to employee error, malfeasance, system errors or vulnerabilities, or otherwise. In the
event our security measures are breached, or if our services are subject to attacks that impair or deny the ability of patients to access our services, current
and potential patients may become unwilling to provide us the information necessary for them to become users of our services or may curtail or stop using
our services. In addition, we could face legal claims for such a breach. The costs relating to any data breach could be material and exceed the limits of the
insurance we maintain against the risks of a data breach. For these reasons, should an unauthorized intrusion into our patients’ data occur, our business
could be adversely affected. Changes to operating rules could increase our operating expenses and adversely affect our business and results of operations.
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Changes in accounting principles or guidance, or in their interpretations, could result in unfavorable accounting charges or effects, including changes
to our previously filed consolidated financial statements, which could cause our stock price to decline.
We prepare our consolidated financial statements in accordance with accounting principles generally accepted in the United States of America.
These principles are subject to interpretation by the SEC and various bodies formed to interpret and create appropriate accounting principles and guidance.
A change in these principles or guidance, or in their interpretations, may have a significant negative effect on our reported results and retrospectively affect
previously reported results, which, in turn, could cause our stock price to decline.
Our management has identified material weaknesses in our internal controls over our financial reporting.
Our Chief Executive Officer and Chief Financial Officer carried out an evaluation 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 Chief Financial Officer concluded that our disclosure controls and procedures are not effective because of certain material weaknesses in our
internal control over financial reporting. The material weaknesses relates to the absence of in-house accounting personnel with the ability to properly
account for complex transactions and the lack of separation of duties between accounting and other functions.
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.
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We are an “emerging growth company” and our election to delay adoption of new or revised accounting standards applicable to public companies may
result in our consolidated financial statements not being comparable to those of some other public companies. As a result of this and other reduced
disclosure requirements applicable to emerging growth companies, our securities may be less attractive to investors.
As a public reporting company with less than $1.07 billion in revenue during our last fiscal year, we qualify as an “emerging growth company”
under the JOBS Act. An emerging growth company may take advantage of specified reduced reporting requirements that are otherwise generally applicable
to public companies. In particular, as an emerging growth company, we:
● are not required to obtain an attestation and report from our auditors on our management’s assessment of our internal control over financial
reporting pursuant to the Sarbanes-Oxley Act;
● are not required to provide a detailed narrative disclosure discussing our compensation principles, objectives and elements and analyzing how
those elements fit with our principles and objectives (commonly referred to as “compensation discussion and analysis”);
● are not required to obtain a non-binding advisory vote from our stockholders on executive compensation or golden parachute arrangements
(commonly referred to as the “say-on-pay,” “say-on-frequency” and “say-on-golden-parachute” votes);
● are exempt from certain executive compensation disclosure provisions requiring a pay-for-performance graph and CEO pay ratio disclosure;
● may present only two years of audited financial statements and only two years of related Management’s Discussion & Analysis of Financial
Condition and Results of Operations, or MD&A; and
● are eligible to claim longer phase-in periods for the adoption of new or revised financial accounting standards under §107 of the JOBS Act.
We intend to take advantage of all of these reduced reporting requirements and exemptions, including the longer phase-in periods for the adoption
of new or revised financial accounting standards under §107 of the JOBS Act. Our election to use the phase-in periods may make it difficult to compare our
consolidated financial statements to those of non-emerging growth companies and other emerging growth companies that have opted out of the phase-in
periods under §107 of the JOBS Act.
36
Certain of these reduced reporting requirements and exemptions were already available to us due to the fact that we also qualify as a “smaller
reporting company” under SEC rules. For instance, smaller reporting companies are not required to obtain an auditor attestation and report regarding
management’s assessment of internal control over financial reporting, are not required to provide a compensation discussion and analysis, are not required
to provide a pay-for-performance graph or CEO pay ratio disclosure, and may present only two years of audited financial statements and related MD&A
disclosure.
Under the JOBS Act, we may take advantage of the above-described reduced reporting requirements and exemptions for up to five years after our
initial sale of common equity pursuant to a registration statement declared effective under the Securities Act, or such earlier time that we no longer meet the
definition of an emerging growth company. In this regard, the JOBS Act provides that we would cease to be an “emerging growth company” if we have
more than $1.07 billion in annual revenue, have more than $700 million in market value of our common stock held by non-affiliates, or issue more than
$1.0 billion in principal amount of non-convertible debt over a three-year period. Under current SEC rules, however, we will continue to qualify as a
“smaller reporting company” for so long as we have a public float (i.e., the market value of common equity held by non-affiliates) of less than $250 million
as of the last business day of our most recently completed second fiscal quarter.
Our stock price is volatile and an investment could decline in value.
Risks Related to Ownership of Our Common Stock and Warrants
The market price of our common stock fluctuates substantially as a result of many factors, some of which are beyond our control. During the 52-
week period prior to the filing of this Annual Report, the market price of our common stock ranged from a low of $0.83 per share to a high of $2.27 per
share, and as of April 12, 2022, was $0.83 per share. These fluctuations could cause you to lose all or part of the value of your investment in our common
stock and/or warrants. Factors that could cause fluctuations in the market price of our common stock include the following:
● quarterly variations in our results of operations;
● results of operations that vary from the expectations of securities analysts and investors;
● results of operations that vary from those of our competitors;
● changes in expectations as to our future financial performance, including financial estimates by securities analysts;
37
● publication of research reports about us or the outpatient medical clinic business;
● announcements by us or our competitors of significant contracts, acquisitions or capital commitments;
● announcements by third parties of significant claims or proceedings against us;
● changes affecting the availability of financing in the outpatient medical services market;
● regulatory developments in the outpatient medical clinic business;
● significant future sales of our common stock;
● additions or departures of key personnel;
● the realization of any of the other risk factors presented in this prospectus; and
● general economic, market and currency factors and conditions unrelated to our performance.
In addition, the stock market in general has experienced significant price and volume fluctuations that have often been unrelated or
disproportionate to operating performance of individual companies. These broad market factors may seriously harm the market price of our common stock,
regardless of our operating performance. In the past, following periods of volatility in the market price of a company’s securities, securities class action
litigation has often been instituted. A class action suit against us could result in significant liabilities and, regardless of the outcome, could result in
substantial costs and the diversion of our management’s attention and resources.
Our stock price is below $1.00 per share, and if it continues, our common stock may be subject to delisting from The Nasdaq Capital Market.
If the bid price of our common stock were to close below the required minimum $1.00 per share for 30 consecutive business days, we may receive
a deficiency notice from Nasdaq regarding our failure to comply with Nasdaq Marketplace Rule 5550(a)(2). If we receive such a notice, pursuant to
Marketplace Rule 5810(c)(3)(A), we may become subject to a period of 180 calendar days to regain compliance with Rule 5550(a)(2). If at any time the bid
price of our common stock closes at $1.00 per share or more for a minimum of 10 consecutive business days, we will regain compliance with Rule 5550(a)
(2). In the event we do not regain compliance with Rule 5550(a)(2) prior to the expiration of any Nasdaq compliance period, Nasdaq may notify us that our
common stock is subject to delisting. We may appeal such a delisting determination to a Nasdaq hearing panel and the delisting may be stayed pending the
panel’s determination. At such hearing, we would present a plan to regain compliance and Nasdaq would then subsequently render a decision. We are
currently evaluating our alternatives to resolve any listing deficiency. To the extent that we are unable to resolve a listing deficiency, there is a risk that our
common stock may be delisted from Nasdaq, which would adversely impact liquidity of our common stock and potentially result in even lower bid prices
for our common stock.
38
If securities or industry analysts do not publish or cease publishing research or reports about us, our business or our market, or if they change their
recommendations regarding our stock adversely, or if our actual results differ significantly from our guidance, our stock price and trading volume
could decline.
The trading market for our common stock will be influenced by the research and reports that industry or securities analysts may publish about us,
our business, our market or our competitors. If any of the analysts who may cover us change their recommendation regarding our stock adversely, or
provide more favorable relative recommendations about our competitors, our stock price would likely decline. If any analyst who may cover us were to
cease coverage of our company or fail to regularly publish reports on us, we could lose visibility in the financial markets, which in turn could cause our
stock price or trading volume to decline.
In addition, from time to time, we may release earnings guidance or other forward-looking statements in our earnings releases, earnings
conference calls or otherwise regarding our future performance that represent our management’s estimates as of the date of release. Some or all of the
assumptions of any future guidance that we furnish may not materialize or may vary significantly from actual future results. Any failure to meet guidance
or analysts’ expectations could have a material adverse effect on the trading price or volume of our stock.
Anti-takeover provisions in our charter documents could discourage, delay or prevent a change in control of our company and may affect the trading
price of our common stock.
Our corporate documents and the Delaware General Corporation Law contain provisions that may enable our board of directors to resist a change
in control of our company even if a change in control were to be considered favorable by you and other stockholders. These provisions:
● authorize the issuance of “blank check” preferred stock that could be issued by our board of directors to help defend against a takeover attempt;
● establish advance notice requirements for nominating directors and proposing matters to be voted on by stockholders at stockholder meetings;
● provide that stockholders are only entitled to call a special meeting upon written request by 331/3% of the outstanding common stock; and
● require supermajority stockholder voting to effect certain amendments to our certificate of incorporation and bylaws.
In addition, Delaware law prohibits large stockholders, in particular those owning 15% or more of our outstanding voting stock, from merging or
consolidating with us except under certain circumstances. These provisions and other provisions under Delaware law could discourage, delay or prevent a
transaction involving a change in control of our company. These provisions could also discourage proxy contests and make it more difficult for you and
other stockholders to elect directors of your choosing and cause us to take other corporate actions you desire.
39
We have 5,000,000 authorized unissued shares of preferred stock, and our board has the ability to designate the rights and preferences of this preferred
stock without your vote.
Our certificate of incorporation authorizes our board of directors to issue “blank check” preferred stock and to fix the rights, preferences,
privileges and restrictions, including voting rights, of these shares, without further stockholder approval. The rights of the holders of common stock will be
subject to and may be adversely affected by the rights of holders of any preferred stock that may be issued in the future. As indicated in the preceding risk
factor, the ability to issue preferred stock without stockholder approval could have the effect of making it more difficult for a third party to acquire a
majority of the voting stock of our company thereby discouraging, delaying or preventing a change in control of our company. We currently have no
outstanding shares of preferred stock, or plans to issue any such shares in the future.
Concentration of ownership of our common stock among our existing executive officers and directors may limit our other stockholders from
influencing significant corporate decisions.
Jeffrey S. Ervin, our Chief Executive Officer, Matthew C. Wallis, DC, our President, and our other executive officers and directors own a
significant percentage of our outstanding shares. These persons, acting together, are able to influence all matters requiring stockholder approval, including
the election and removal of directors and any merger or other significant corporate transactions. The interests of this group of stockholders may not
coincide with our interests or the interests of other stockholders.
We do not expect to pay any dividends on our common stock for the foreseeable future.
We currently expect to retain all future earnings, if any, for future operation, expansion and debt repayment and have no current plans to pay any
cash dividends to holders of our common stock for the foreseeable future. Any decision to declare and pay dividends in the future will be made at the
discretion of our board of directors and will depend on, among other things, our operating results, financial condition, cash requirements, contractual
restrictions and other factors that our board of directors may deem relevant. In addition, we must comply with the covenants in our credit agreements in
order to be able to pay cash dividends, and our ability to pay dividends generally may be further limited by covenants of any future outstanding
indebtedness we or our subsidiaries incur. As a result, you may not receive any return on an investment in our common stock unless you sell our common
stock for a price greater than that which you paid for it.
40
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 2.
PROPERTIES
We manage our business operations from our principal executive office in Brentwood, Tennessee, in approximately 2,250 square feet of leased
space. Our office lease extends through July 2024, under which we currently pay $5,000 per month. Our business is conducted at seventeen outpatient
medical clinics and four backspace clinics. Our total rent expense was $1,379,000 under our office and medical clinic leases for 2021. For more
information about our outpatient locations and the terms of their leases, see Item 1, “Business - Our Operations” above.
We believe our present office space and locations are adequate for our current operations and for near-term planned expansion.
ITEM 3.
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.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
41
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF
PART II
EQUITY SECURITIES
Market Information
In connection with the completion of our initial public offering, our common stock and warrants began trading on the Nasdaq Capital Market on
February 13, 2019, under the symbols “IMAC” and “IMACW”, respectively.
As of April 12, 2022, there were approximately 22 holders of record of our common stock. We believe that the number of beneficial owners is
substantially greater than the number of record holders because a large portion of our common stock is held of record through brokerage firms in “street
name.”
Dividend Policy
Our board of directors will determine our future dividend policy based on our result of operations, financial condition, capital requirements and
other circumstances. We have not previously declared or paid any cash dividends on our common stock. We anticipate that we will retain earnings to
support operations and finance the growth of our business. Accordingly, it is not anticipated that any cash dividends will be paid on our common stock in
the foreseeable future.
Securities Authorized for Issuance Under Equity Compensation Plans
See “2018 Incentive Compensation Plan” under Item 11 in Part III of this Annual Report.
ITEM 6.
SELECTED CONSOLIDATED FINANCIAL DATA
Reserved.
42
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from
those anticipated in these forward-looking statements as a result of various factors, including those set forth previously under the caption “Risk Factors.”
This Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with our audited consolidated
financial statements and related notes included elsewhere in this report.
The results of operations for the periods reflected herein are not necessarily indicative of results that may be expected for future periods.
References in this MD&A to “we,” “us,” “our,” “our company,” “our business” and “IMAC Holdings” are to IMAC Holdings, Inc., a Delaware
corporation and prior to the Corporate Conversion (defined below), IMAC Holdings, LLC, a Kentucky limited liability company, and the following entities
which are consolidated due to direct ownership of a controlling voting interest or other rights granted to us as the sole general partner or managing
member of the entity: IMAC Regeneration Center of St. Louis, LLC (“IMAC St. Louis”), 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”), Advantage Hand Therapy and Orthopedic Rehabilitation, LLC (“Advantage Therapy”), IMAC Management of Florida, LLC
(“IMAC Florida”), Louisiana Orthopaedic & Sports Rehab (“IMAC Louisiana”) and The Back Space, LLC (“BackSpace”); 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”); the following entities which are consolidated with IMAC Management of Illinois, LLC due to control by contract: Progressive Health and
Rehabilitation, Ltd., Illinois Spine and Disc Institute, Ltd. and Ricardo Knight, P.C.; the following entity which is consolidated with IMAC Management
Services, LLC due to control by contract: Integrated Medicine and Chiropractic Regeneration Center PSC (Kentucky PC); the following entities which are
consolidated with IMAC Florida due to control by contract: Willmitch Chiropractic, P.A. and IMAC Medical of Florida, P.A.; the following entity which is
consolidated with Louisiana Orthopaedic & Sports Rehab due to control by contract: IMAC Medical of Louisiana, a Medical Corporation; and the
following entities which are consolidated with BackSpace due to control by contract: ChiroMart LLC, ChiroMart Florida LLC, and ChiroMart Missouri
LLC.
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 chain of IMAC Regeneration Centers and BackSpace clinics 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 seventeen outpatient medical clinics in Florida, Illinois, Kentucky, Louisiana, Missouri and Tennessee, and plan
to further expand the reach of our facilities to other strategic locations throughout the United States. We have four BackSpace locations opened in
Tennessee and Missouri with 6 more clinics scheduled to open during the first quarter of 2022 in Tennessee and Florida. We have partnered with several
active and former professional athletes, including Ozzie Smith, David Price, Tony Delk and Mike Ditka, in the branding of our IMAC Regeneration
Centers. Our outpatient medical clinics emphasize our focus around treating sports and orthopedic injuries as an alternative to traditional surgeries for
repair or joint replacement.
We own our medical clinics directly or have entered into long-term management services agreements to operate and control certain of our medical
clinics by contract. Our preference is to own the clinics; however, some state laws restrict the corporate practice of medicine and require a licensed medical
practitioner to own the clinic. Accordingly, our managed clinics are owned exclusively by a medical professional within a professional service corporation
(formed as a limited liability company or corporation) and are under common control with us in order to comply with state laws regulating the ownership
of medical practices. We are compensated under management services agreements through service fees based on the cost of the services provided, plus a
specified markup percentage, and a discretionary annual bonus determined in the sole discretion of each professional service corporation.
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Corporate Conversion
Prior to June 1, 2018, we were a Kentucky limited liability company named IMAC Holdings, LLC. Effective June 1, 2018, we converted into a
Delaware corporation pursuant to a statutory merger (the “Corporate Conversion”) and changed our name to IMAC Holdings, Inc. All of our outstanding
membership interests were exchanged on a proportional basis into shares of common stock of IMAC Holdings, Inc.
Following the Corporate Conversion, IMAC Holdings, Inc. continues to hold all of the property and assets of IMAC Holdings, LLC and all of the
debts and obligations of IMAC Holdings, LLC continue as the debts and obligations of IMAC Holdings, Inc. The purpose of the Corporate Conversion was
to reorganize our corporate structure so that the top tier entity in our corporate structure is a corporation rather than a limited liability company and so that
our existing owners own shares of our common stock rather than membership interests in a limited liability company. Except as otherwise noted herein, the
consolidated financial statements included herein are those of IMAC Holdings, Inc. and its consolidated subsidiaries.
44
Significant financial metrics
Our significant financial metrics of the Company for the year ended December 31, 2021 are set forth in the bullets below.
● Net loss of $10.5 million in the year ended 2021 compared to a net loss of $5.5 million in the year ended 2020.
● Adjusted EBITDA1 of ($7.7 million) for the year ended December 31, 2021 compared to ($4.4) for the year ended December 31, 2020.
● The Company incurred $593,000 in FDA related expenses for the year ended December 31, 2021 compared to $209,000 for the year
ended December 31, 2020.
● The Company paid $4.4 million of principal and interest in 2021.
● Operating expenses increased $2.2 million related to the five IMAC clinics acquired in 2021.
● The BackSpace incurred initial opening expenses of $69,000
● The Company had one-time expenses of $441,000, consisting of: $108,000 in earnout post-acquisition, $90,000 in share based
compensation due to a change in the vesting schedule, $97,000 in one-time consulting fees, $63,000 in legal and $51,000 in recruiting.
(1) Adjusted EBITDA is a non-GAAP financial measure most closely comparable to the GAAP measure of net loss. See “Reconciliation of
Non-GAAP Financial Matters” below for a full reconciliation of the GAAP and non-GAAP measures.
Impacts of and Response to COVID-19 Outbreak
In March 2020, federal, state and local government authorities issued orders and guidance in order to combat the spread of the COVID-19
outbreak. These actions have required or encouraged our patients to remain at home except for essential activities and may reduce patient visits to our
clinics. For example, the governor of Kentucky ordered all chiropractic facilities in the state of Kentucky to close effective March 20, 2020, which caused
us to close our Kentucky chiropractic facilities until such order was lifted on May 4, 2020. The full extent and duration of such actions and their impacts
over the longer term remain uncertain and dependent on future developments that cannot be accurately predicted at this time, such as the severity and
transmission rate of the COVID-19 outbreak and the extent and effectiveness of containment actions taken.
45
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 located in Cook County, Illinois to comply with government orders until such order is lifted. The lease for this
clinic expired June 30, 2020 and was not renewed.
The COVID-19 outbreak appears likely to cause significant economic harm across the United States, and the negative economic conditions that
may result in reduced patient demand in our industry. We may experience a material loss of patients, revenue and market share as a result of the suspension
of any operations. Initiatives to implement telehealth engagement with patients may not be adopted by existing and new patients. Patient habits may also be
altered in the medium to long term. Negative economic conditions, a decrease in our revenue and consequent longer term trends harmful to our business
may all exert pressure on our company during the pendency of emergency restrictions on our operations and beyond. Due to such conditions, beginning in
the month of March 2020 we began to terminate or furlough employees to reduce costs associated with non-essential personnel, which resulted in a 27%
reduction in workforce.
46
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. Due to the impacts of COVID-19 we have seen an increase in recruiting and labor costs
as well as delays in supply chain.
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 consolidated financial statements in conformity with accounting principles generally accepted in the United States 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 consolidated financial statements are prepared. On an ongoing basis, we evaluate our estimates, including those related to insurance adjustments
and provisions for doubtful accounts, useful lives of intangibles, property and equipment, and valuation of goodwill. 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.
47
We believe that, of the significant accounting policies discussed in our Notes to the Consolidated Financial Statements, 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. Intangible
assets are subject to annual impairment tests and no impairments were recorded for the years presented.
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.
The goodwill test is performed at least annually, or more frequently if events or changes in circumstances indicate that the asset might be
impaired. The annual impairment test includes an option to perform a qualitative assessment of whether it is more likely than not that a reporting unit’s fair
value is less than its carrying value; the qualitative test may be performed prior to, or as an alternative to, performing a quantitative goodwill impairment
test. If, after assessing the totality of events or circumstances, the Company determines that it is more likely than not that the fair value of a reporting unit is
less than its carrying value, then the Company is required to perform the quantitative goodwill impairment test. Otherwise, no further analysis is required.
There was no goodwill impairment for the years presented.
Revenue Recognition
The Company’s patient service revenue is derived from non-surgical procedures performed at our outpatient medical clinics. The fees for such
services are billed either to the patient or a third-party payer, including Medicare.
The Company recognizes service revenues based upon the estimated amounts the Company expects to be entitled to receive from patients and
third-party payers. Estimates of contractual adjustments are based upon the payment terms specified in the related contractual agreements. The Company
also records estimated implicit price concessions (based primarily on historical collection experience) related to uninsured accounts to record these
revenues at the estimated amounts expected to be collected. Such estimates are subject to revisions which may be material.
Starting in January 2020, the Company implemented wellness maintenance programs on a subscription basis. There are five membership plans
offered with different levels of service for each plan. The Company recognizes membership revenue on a monthly basis. Enrollment in the wellness
maintenance program can occur at any time during the month and can be cancelled at any time.
Other management service fees are derived from management services where the Company provides billings and collections support to the clinics
and where management services are provided based on state specific regulations known as the corporate practice of medicine (“CPM”). Under the CPM, a
business corporation is precluded from practicing medicine or employing a physician to provide professional medical services. In these circumstances, the
Company provides all administrative support to the physician-owned PC through an LLC. The PC is consolidated due to control by contract (an “MSA” –
Management Services Agreement). The fees we derive from these management arrangements are either based on a predetermined percentage of the
revenue of each clinic or a percentage mark up on the costs of the LLC. The company recognizes other management service revenue in the period in which
services are rendered. These revenues are earned by IMAC Nashville, IMAC Management, IMAC Illinois, IMAC Florida and IMAC Louisiana and are
eliminated in consolidation to the extent owned.
Starting in June 2021, the Company began offering outpatient chiropractic and spinal care services as well as memberships services in Walmart
retail locations as part of Back Space. The fees for such services are paid and recognized as incurred.
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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 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 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 our facilities’ cash collections and contractual write-offs, accounts receivable aging, established fee
schedules, relationships with payers and procedure statistics. While changes in estimated reimbursement from third-party payers remain a possibility, we
expect that any such changes would be minimal and, therefore, would not have a material effect on our financial condition or results of operations. Our
collection policies and procedures are based on the type of payor, size of claim and estimated collection percentage for each patient account. The operating
systems used to manage our patient accounts provide for an aging schedule in 30-day increments, by payer, physician and patient. We analyze accounts
receivable at each of the facilities to ensure the proper collection and aged category. The operating systems generate reports that assist in the collection
efforts by prioritizing patient accounts. Collection efforts include direct contact with insurance carriers or patients and written correspondence.
Income Taxes
Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis and
operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in
the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax
rates is recognized in income in the period that includes the enactment date.
Deferred tax assets are required to be reduced by a valuation allowance to the extent that, based on the weight of available evidence, it is more
likely than not that the deferred tax assets will not be realized. These are based on estimates of future taxable income which are highly subjective and
subject to changes.
49
Results of Operations for the Twelve Months Ended December 31, 2021 Compared to the Twelve Months Ended December 31, 2020
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.See Note 15 for previously reported financial information that has been revised.
Revenues
Our revenue mix is diversified between medical treatments and physiological treatments. Our medical treatments are further segmented into
traditional medical and regenerative medicine practices. We are an in-network provider for traditional physical medical treatments, such as physical
therapy, chiropractic services and medical evaluations, with most private health insurance carriers. Regenerative medical treatments are typically not
covered by insurance, but paid by the patient. For more information on our revenue recognition policies, see “Critical Accounting Policies and Estimates -
Revenue Recognition.”
Revenues for the years ended December 31, 2021 and 2020 were as follows:
Revenues:
Outpatient facility services
Memberships
Retail clinics
Total revenues
Year Ended
December 31,
2021
2020
(in thousands)
13,475 $
656
33
14,164 $
12,414
409
-
12,823
$
$
50
See the table below for more information regarding our revenue breakdown by service type.
Revenues:
Medical treatments
Physical therapy
Chiropractic care
Memberships
Year Ended December 31,
2021
2020
67.0%
28.1%
2.8%
2.1%
100%
66.1%
30.4%
2.1%
1.4%
100%
Visits to our clinics are an indication of business activity. The following table is a breakdown of visits by type for the year ended December 31,
2021 and 2020.
Visits:
Physical therapy
Chiropractic care
Medical treatments
Other
Membership
Year Ended December 31,
2021
2020
56,261
20,265
39,036
262
52,684
168,508
48,553
15,644
38,002
230
33,059
135,488
51
Consolidated Results
Total revenues increased $1.3 million due to acquisitions, continued same-store growth, opening of retail clinics and improvements from the
negative impact of COVID-19 on 2020.
IMAC Clinics
The total revenue increase of $1.3 million is attributed to the increase of revenues for IMAC Clinics. Same-store revenues decreased $202,000
overall from 2020 to 2021. This decrease was driven by the closure of two clinics in Illinois and Tennessee resulting in a decrease of $595,000 however the
remaining same stores increased $393,000. New clinics attributed to $1.5 million of the overall increase.
Retail Clinics
The Company began opening retail clinics in Walmart in June 2021 and as of December 31, 2021 had four clinics opened in Tennessee and
Missouri. The company has scheduled 6 additional locations to open during the first quarter of 2022. The retail clinics provides outpatient chiropractic and
spinal care services. For the year ended December 31, 2021, the retail clinics had 1,038 visits.
Memberships
A wellness membership program was implemented at IMAC Clinics in January 2020 and this wellness program has different plan levels that
include services for chiropractic care and medical treatments on a monthly subscription basis. Therefore, memberships could have multiple visits in one
month, however only one payment is received for these visits. IMAC Clinics had 1,189 and 849 active members for the years ended in December 31, 2021
and 2020, respectively. BackSpace also has a membership plan for chiropractic care on a monthly subscription basis. As of December 31, 2021, 76% of the
BackSpace revenue was related to memberships.
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
2021
2020
Change from
Prior Year
Percent
Change from
Prior Year
Year Ended December 31
$
1,628,000 $
1,624,000 $
4,000
0.2%
Cost of revenues (patient expense) stayed relatively consistent for the year ended December 31, 2021 as compared to December 31, 2020 although
patient revenue increased 10%. This is attributed to improvements in supply management as the Company centralized medical ordering for all clinics and
the implementation of supply discounts related to volume purchases. The rotation of service mix also reduced supply costs, for example cell therapy visits
decreased 20% which is a higher cost procedure.
Salaries and benefits consist of payroll, benefits and related party contracts.
Salaries and Benefits
2021
2020
Change from
Prior Year
Percent
Change from
Prior Year
Year Ended December 31
$
12,739,000 $
10,495,000 $
2,244,000
21%
Salaries and benefits expenses for the year ended December 31, 2021, as compared to the year ended December 31, 2020, increased by 21%. An
increase would have been expected considering the Company added five IMAC locations in 2021, one clinic opened at the end of 2020 with a full year in
2021 and opened four BackSpace locations during 2021. These new clinics attributed to $1.6 million of the increase. $320,000 of the increase is a result of
the executive compensation adjustments approved by the compensation committee in 2021.
52
Share-based compensation consists of the value of equity incentive grants issued to employees, directors and board members which have vested
during the period.
Share-based Compensation
2021
2020
Change from
Prior Year
Percent
Change from
Prior Year
Year Ended December 31
$
571,000 $
392,000 $
179,000
46%
Share-based compensation increased due to the amended vesting schedule of the RSUs awarded to the board in 2020. This change reflected an
increase of $90,000 in share-based compensation compared to what was expected with the original schedule. The Company also awarded RSUs in January
2021 that vest in January 2022 as well as RSUs awarded in December 2021 that vested immediately, this attributed to $40,000 of the increase.
Advertising and marketing consist of marketing, business promotion and brand recognition.
Advertising and Marketing
2021
2020
Change from
Prior Year
Percent
Change from
Prior Year
Year Ended December 31
$
1,325,000 $
933,000 $
392,000
42%
Advertising and marketing expenses increased $392,000 for the year ended December 31, 2021, as compared to the year ended December 31,
2020. During 2020 the Company reduced marketing spending as a result of the impact of the COVID-19 outbreak however marketing efforts were fully
implemented for 2021 along with marketing for new clinics. There was a similar increase in online and website advertising for 2021 as compared to 2020.
$256,000 of the total increase was attributed to online and website advertising. Patient visits increased in 2021 that coincides with our increase in marketing
in all of our locations as well as adding advertising for new locations.
General and administrative expense (“G&A”) consist of all other costs than advertising and marketing, salaries and benefits, patient expenses
and depreciation.
General and Administrative
2021
2020
Change from
Prior Year
Percent
Change from
Prior Year
Year Ended December 31
$
6,423,000 $
4,557,000 $
1,866,000
41%
G&A increased in the year ended December 31, 2021 as compared to the year ended December 31, 2020. The opening of the five IMAC clinics
and the BackSpace clinics in 2021 attributed $745,000 of the increase for 2021. There was an additional of $122,000 in billing services due to the increase
in collections from same-store clinics in 2021. $50,000 of the increase is attributed to an increase in travel as 2020 was impacted by pandemic. See FDA
impact below.
53
FDA Clinical Trial
In August 2020, the United States Food and Drug Administration (the “FDA”) approved the Company’s investigational new drug application. The
Company has begun Phase 1 of the clinical trial, which will be conducted over a 12-month period. The Company incurred $574,000 in expenses related to
consultants, supplies, software and travel for the clinical trial during 2021, which is included in the G&A totals above. This is compared to $209,000 that
was incurred for the trial in 2020.
Depreciation is related to our property and equipment purchases to use in the course of our business activities. Amortization is related to our
business acquisitions.
Depreciation and Amortization
2021
2020
Change from
Prior Year
Percent
Change from
Prior Year
Year Ended December 31
$
1,649,000 $
1,722,000 $
(73,000)
(4)%
Depreciation and amortization decreased for the year ended December 31, 2021 compared to the year ended December 31, 2020. This decrease is
attributed to non-competes and fixed assets that were fully amortized and depreciated during 2021.
Analysis of Cash Flows
The primary source of our operating cash flow is the collection of accounts receivable from patients, private insurance companies, government
programs, self-insured employers and other payers.
During the year ended December 31, 2021, net cash used in operations increased to $7.6 million compared to $6.0 million for the year ended
December 31, 2020. This increase was primarily attributable to our net loss and the $1.5 million gain on extinguishment of debt in 2020 from the Paycheck
Protection Program (“PPP”) loan forgiveness.
Net cash used in investing activities during the years ended December 31, 2021 and 2020 was $2.5 million and $0.6 million, respectively. This
was primarily driven by the acquisitions made in 2021, which attributed to $3.2 million of the change.
Net cash provided by financing activities during the year ended December 31, 2021 was $14.5 million, including proceeds from the sale of
common stock, net of related fees, which totaled $20.2 million, reduced by principal repayments of $4.4 million. Net cash provided by financing activities
during the year ended December 31, 2020 was $8.8 million, including proceeds from the sale of common stock, net of related fees, which totaled $5.2
million and issuances of notes payable of $5.4 million, reduced by principal repayments of $1.5 million.
54
Reconciliation of Non-GAAP Financial Measures
This report contains certain non-GAAP financial measures, including non-GAAP net income and adjusted EBITDA, which are used by
management in analyzing our financial results and ongoing operational performance.
In order to better assess the Company’s financial results, management believes that net income before interest, income taxes, stock based
compensation, and depreciation and amortization (“adjusted EBITDA”) is a useful measure for evaluating the operating performance of the Company
because adjusted EBITDA reflects net income adjusted for certain non-cash and/or non-operating items. We also believe that adjusted EBITDA is useful to
many investors to assess the Company’s ongoing results from current operations. Adjusted EBITDA is a non-GAAP financial measure and should not be
considered a measure of financial performance under GAAP. Because adjusted EBITDA is not a measurement determined in accordance with GAAP, such
non-GAAP financial measures are susceptible to varying calculations. Accordingly, adjusted EBITDA, as presented, may not be comparable to other
similarly titled measures of other companies.
This non-GAAP financial measure should not be considered as a substitute for, or superior to, measures of financial performance which are
prepared in accordance with US GAAP and may be different from non-GAAP financial measures used by other companies and have limitations as
analytical tools.
A reconciliation of adjusted EBITDA to the most directly comparable GAAP measures is set forth below.
GAAP loss attributable to IMAC Holdings, Inc.
Interest income
Interest expense
Share-based compensation expense
Loss on disposal of assets
Other income
Gain on extinguishment of debt
Depreciation and amortization
Adjusted EBITDA
2021
2020
$
$
(10,542,000) $
(3,000)
504,000
571,000
149,000
(57,000)
-
1,649,000
(7,729,000) $
(5,542,000)
(6,000)
563,000
392,000
64,000
-
(1,551,000)
1,722,000
(4,358,000)
55
Liquidity and Capital Resources
As of December 31, 2021, we had $7.1 million in cash and working capital of $4.1 million. As of December 31, 2020, we had cash of $2.6 million
and deficiency in working capital of $1.2 million. The decrease in working capital deficiency was primarily due to the increase in current assets as cash
increased by $4.5 million.
We believe our cash at December 31, 2021 will be sufficient to meet our cash, operational and liquidity requirements for at least 12 months after
the filing of this Annual Report.
As of December 31, 2021, we had approximately $4.9 million in current liabilities. Approximately $2.5 million of our current liabilities
outstanding were to our vendors, which we have historically paid down in the normal course of our business, and accrued payroll. Patient deposits
accounted for approximately $321,000 of our current liabilities. The current portion of notes payable by us accounted for approximately $254,000 of our
current liabilities. The current portion of our finance lease obligations accounted for approximately $19,000 of our current liabilities. The current portion of
our liability to issue common stock accounted for approximately $338,000 of our current liabilities. The current portion of our operating lease liability
accounted for approximately $1.5 million of our current liabilities.
As of December 31, 2021, we had an accumulated deficit of $28.2 million. 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 management team has
determined that our financial condition raises substantial doubt as to our ability to continue as a going concern.
56
Registered Direct Offering
On June 18, 2020, the Company entered into the Securities Purchase Agreement with institutional accredited investors pursuant to which the
Company offered for sale to the Purchasers an aggregate of 1,764,000 shares of its common stock in a registered direct offering. The Shares were offered
by the Company pursuant to its shelf registration statement on Form S-3 (File No. 333-237455) originally filed with the SEC on March 27, 2020 and
declared effective on April 3, 2020. The purchase price for one Share in the Registered Direct Offering was $1.50, and closing of the Registered Direct
Offering occurred on June 22, 2020. The Company received $2.644 million in gross proceeds from the Registered Direct Offering. The Company used
approximately $0.5 million of the gross proceeds for the repayment of certain indebtedness, and the remaining proceeds to the Company will be used to
finance the costs of developing and acquiring additional outpatient medical clinics as part of the Company’s growth and expansion strategy and for working
capital.
At-the-Market Offering
On October 5, 2020, the Company launched an at-the-market offering (the “Offering”) of up to $5,000,000 worth of shares of the Company’s
common stock, par value $0.001 per share, pursuant to an At-The-Market Issuance Sales Agreement, dated October 5, 2020, by and between the Company
and Ascendiant Capital Markets, LLC. Since the launch and as of December 31, 2021, pursuant to the Agreement, the Company had sold 1,541,758 shares
of common stock through Ascendiant Capital Markets for aggregate proceeds to the Company of $2.9 million.
Iliad Note
On October 29, 2020, the Company entered into the Note Purchase Agreement with Iliad pursuant to which the Company agreed to issue and sell
to Iliad a secured promissory note in an initial principal amount of $2,690,000, which is payable on or before April 29, 2022. The October Principal
Amount includes an original discount of $175,000 and $15,000 that the Company agreed to pay to Iliad to cover legal fees, accounting costs, due diligence
and other transaction costs. In exchange for the October Note, Iliad paid a purchase price of $2,500,000. The October Purchase Agreement also provides
for indemnification of Iliad and its affiliates in the event that they incur loss or damage related to, amount other things, breach by the Company of any of its
representations, warranties or covenants under the October Purchase Agreement. In connection with the October Purchase Agreement and the October
Note, the Company entered into a Security Agreement with Iliad, pursuant to which the obligations of the Company is secured by all of the assets of the
Company, excluding the Company’s accounts receivable and intellectual property. Upon an event of default under the October Note, the October Security
Agreement entitles the Holder to take possession of such collateral; provided that Iliad’s security interest and remedies with respect to the collateral are
junior in priority to the security interest previously granted by the Company to Iliad in connection with a separate financing entered into by them on March
25, 2020, for which Iliad holds a senior, first-priority security interest in the same collateral. The Company repaid the note in January 2022.
Public Offering
On March 26, 2021, the Company completed a public offering by issuing 10,625,000 shares of common stock for gross proceeds of $17 million.
The Company used approximately $1.8 million for the repayment of certain indebtedness and is using the remaining proceeds for the repayment of certain
other indebtedness, to finance the costs of developing and acquiring additional outpatient medical clinics and healthcare centers as part of the Company’s
growth and expansion strategy and for working capital.
On April 7, 2021 the Company closed on the sale of an additional 1,193,750 shares of common stock at the then public offering price of $1.60 per
share, pursuant to the 15% over-allotment option exercised in full by the underwriters in connection with its public offering that closed March 2021.
57
Contractual Obligations
The following table summarizes our contractual obligations by period as of December 31, 2021:
Short-term obligations
Long-term obligations, including interest
Finance lease obligations, including interest
Operating lease obligations, including interest
Impact of Inflation
Payments Due by Period
Total
266,418
111,498
53,615
6,112,578
6,544,109
$
$
$
$
Less Than
1 Year
1-3 Years
4-5 Years
More Than
5 Years
266,418
-
21,806
1,711,748
1,999,972
$
$
- $
101,748
31,809
3,705,414
3,838,971 $
- $
9,750
-
613,725
623,475 $
-
-
-
81,691
81,691
We believe that inflation has not had a material impact on our results of operations for the years ended December 31, 2021 and 2020. We cannot
assure you that future inflation will not have an adverse impact on our operating results and financial condition.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable for smaller reporting companies.
58
ITEM 8.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Registered Public Accounting Firm (Cherry Bekaert LLP, PCAOB ID 00677)
Report of Independent Registered Public Accounting Firm (Daszkal Bolton, LLP, PCAOB ID 229)
Consolidated Balance Sheets at December 31, 2021 and 2020
Consolidated Statements of Operations for the Years Ended December 31, 2021 and 2020
Consolidated Statements of Stockholders’ Equity for the Years Ended December 31, 2021 and 2020
Consolidated Statements of Cash Flows for the Years Ended December 31, 2021 and 2020
Notes to Consolidated Financial Statements
59
Page
60
61
62
63
64
65
66
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Shareholders
of IMAC Holdings, Inc.
Brentwood, Tennessee
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheet of IMAC Holdings, Inc. (the “Company”), as of December 31, 2021, and the related
consolidated statements of operations, shareholders’ equity, and cash flows for the year ended December 31, 2021, and the related notes (collectively
referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the
financial position of the Company as of December 31, 2021, and the results of its operations and its cash flows for the year ended December 31, 2021, in
conformity with accounting principles generally accepted in the United States of America.
The Company’s Ability to Continue as a Going Concern
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 3 to the
consolidated financial statements, the Company has suffered recurring losses from operations and has a net capital deficiency that raise substantial doubt
about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 3. The consolidated financial
statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s
consolidated financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board
(United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the
applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not
required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit, we are required to obtain an
understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal
control over financial reporting. Accordingly, we express no such opinion.
Our audit included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or
fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and
disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by
management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audit provides a reasonable basis
for our opinion.
/s/ Cherry Bekaert LLP
We have served as the Company’s auditor since 2021.
Nashville, Tennessee
April 14, 2022
60
Report of Independent Registered Public Accounting Firm
To the Board of Directors
Stockholders of IMAC Holdings, Inc.
Brentwood, TN
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheet of IMAC Holdings, Inc. (the “Company”) at December 31, 2020, and the related
consolidated statements of operations, stockholders’ equity and cash flows for the year then ended, and the related notes (collectively referred to as the
consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the
Company at December 31, 2020, and the results of its operations and its cash flows for the year then ended, in conformity with accounting principles
generally accepted in the United States of America.
Emphasis of Matter
As discussed in Note 2, the accompanying consolidated financial statements at and for the year ended December 31, 2020 have been revised.
Going Concern Uncertainty
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in
Note 3 to the financial statements, the Company has suffered recurring losses from operations and has a net capital deficiency that raise substantial doubt
about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 3. The financial statements do not
include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s
financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States)
(PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and
regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not
required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit, we are required to obtain an
understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal
control over financial reporting. Accordingly, we express no such opinion.
Our audit included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or
fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and
disclosures in the consolidated financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by
management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audit provide a reasonable basis for
our opinion.
/s/ Daszkal Bolton LLP
We served as the Company’s auditor from 2017 - 2021.
Boca Raton, Florida
March 3, 2021, except for Note 2 as to which the date is April 14, 2022
61
IMAC Holdings, Inc.
Consolidated Balance Sheets
December 31, 2021 and 2020
$
$
$
2021
2020
(As Revised)
7,118,980 $
1,209,333
191,657
547,536
9,067,506
2,323,163
4,661,796
5,797,469
73,816
357,050
4,948,393
15,838,524
2,623,952
1,513,683
309,375
310,359
4,757,369
1,777,042
2,040,696
6,611,551
354,906
388,407
3,816,035
13,211,595
27,229,193 $
19,746,006
2,523,332 $
320,917
254,487
19,050
337,935
1,478,140
4,933,861
104,697
29,273
189,375
4,018,926
9,276,132
1,692,283
295,071
2,527,324
18,242
339,375
1,078,107
5,950,402
1,958,883
48,323
468,760
3,506,484
11,932,852
ASSETS
Current assets:
Cash
Accounts receivable, net
Deferred compensation, current portion
Other assets
Total current assets
Property and equipment, net
Other assets:
Goodwill
Intangible assets, net
Deferred compensation, net of current portion
Security deposits
Right of use asset
Total other assets
Total assets
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued expenses
Patient deposits
Notes payable, current portion
Finance lease obligation, current portion
Liability to issue common stock, current portion
Operating lease liability, current portion
Total current liabilities
Long-term liabilities:
Notes payable, net of current portion
Finance lease obligation, net of current portion
Liability to issue common stock, net of current portion
Operating lease liability, net of current portion
Total liabilities
Commitment and Contingencies – Note 14
Stockholders’ equity:
Preferred stock - $0.001 par value, 5,000,000 authorized, nil issued and outstanding at
December 31, 2021 and 2020
Common stock; $0.001 par value, 30,000,000 authorized; 26,876,409 and 12,839,972
shares issued at December 31, 2021 and 2020, respectively; 26,218,167 and 12,747,055
shares outstanding at December 31, 2021 and 2020, respectively.
Additional paid-in capital
Accumulated deficit
Total stockholders’ equity
-
-
26,218
46,133,777
(28,206,934)
17,953,061
12,747
25,465,094
(17,664,687)
7,813,154
Total liabilities and stockholders’ equity
$
27,229,193 $
19,746,006
See notes to consolidated financial statements
62
IMAC Holdings, Inc.
Consolidated Statements of Operations
For the Years Ended December 31, 2021 and 2020
Patient revenue, net
Other income
Management fees
Total revenue
Operating expenses:
Patient expenses
Salaries and benefits
Share-based compensation
Advertising and marketing
Grant funds
General and administrative
Depreciation and amortization
Loss on disposal of assets
Total operating expenses
Operating loss
Other income (expense):
Interest income
Other income
Gain on extinguishment of debt
Interest expense
Total other income (expenses)
Net loss before income taxes
Income taxes
Net loss
Net loss per share attributable to common stockholders
Basic and diluted
Weighted average common shares outstanding
Basic and diluted
$
$
$
2021
2020
(As Revised)
14,163,668 $
6,092
216,068
14,385,828
1,628,206
12,739,283
570,513
1,324,715
-
6,422,818
1,649,187
149,464
24,484,186
12,822,711
-
12,487
12,835,198
1,623,999
10,495,284
392,050
933,338
(415,978)
4,556,554
1,722,465
63,779
19,371,491
(10,098,358)
(6,536,293)
2,885
57,329
-
(504,103)
(443,889)
6,073
6
1,550,843
(563,067)
993,855
(10,542,247)
(5,542,438)
-
-
(10,542,247) $
(5,542,438)
(0.47) $
(0.50)
22,551,699
11,050,144
See notes to consolidated financial statements
63
Balance, December 31, 2019
Correction of immaterial error related to non-
controlling interest
Balance, December 31, 2019, as revised
Issuance of common stock
Issuance of employee stock options
Net loss, as revised
Balance, December 31, 2020, as revised
Issuance of common stock
Issuance of employee stock options
Net loss
Balance, December 31, 2021
IMAC Holdings, Inc.
Consolidated Statement of Stockholders’ Equity
For the Years Ended December 31, 2021 and 2020
Common Stock
Number of
Shares
Par
Additional
Paid-In-
Capital
Non-
Controlling
Interest
Accumulated
Deficit
Total
8,913,258 $
8,907 $ 20,050,634 $ (2,080,199) $ (10,042,050) $ 7,937,292
-
8,913,258
3,833,798
-
-
-
8,907
3,833
-
-
-
20,050,634
5,264,381
150,085
-
12,747,055 $ 12,747 $ 25,465,094 $
13,471
13,471,113
-
-
-
-
20,514,828
153,855
-
26,218,167 $ 26,218 $ 46,133,777 $
(2,080,199)
(12,122,249)
-
-
(5,542,438)
-
2,080,199
7,937,292
-
5,268,215
-
150,085
-
-
(5,542,438)
- $ (17,664,687) $ 7,813,154
20,528,299
-
-
153,855
-
-
-
(10,542,247)
(10,542,247)
- $ (28,206,934) $ 17,953,061
See notes to consolidated financial statements
64
IMAC Holdings, Inc.
Consolidated Statements of Cash Flows
For the Years Ended December 31, 2021 and 2020
Year Ended December 31,
2021
2020
$
(10,542,247) $
(5,542,438)
Cash flows from operating activities:
Net loss
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization
Share based compensation
Loss on disposition of assets
Gain on extinguishment of debt
Gain on lease modification
Amortization of debt issuance expense
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable, net
(Increase) decrease in other assets
(Increase) decrease in security deposits
Decrease in right of use/lease liability
Increase (decrease) in accounts payable and accrued expenses
Increase in patient deposits
Net cash from operating activities
Cash flows from investing activities:
Purchase of property and equipment
Brand development
Purchase of license fee
Acquisitions
Proceeds from sale of property and equipment
Net cash from investing activities
Cash flows from financing activities:
Proceeds from issuance of common stock
Proceeds from notes payable
Payments on notes payable
Payments of debt issuance costs
Payments on line of credit
Payments on finance lease obligation
Net cash from financing activities
Net increase in cash
Cash, beginning of period
Cash, end of period
Supplemental cash flow information:
Interest paid
Non Cash Financing and Investing:
Business acquisition via stock issuance
Debt discount notes payable
Debt payments by sale of property and equipment
Gain on extinguishment of debt
1,649,187
570,513
149,464
-
(57,086)
312,857
304,350
(158,834)
36,357
(162,797)
281,428
25,846
(7,590,962)
(694,376)
(69,070)
-
(1,718,500)
24,450
(2,457,496)
19,005,323
-
(4,436,375)
-
-
(25,462)
14,543,486
4,495,028
2,623,952
1,722,465
392,050
63,779
(1,550,843)
-
237,143
(234,518)
162,891
111,081
(197,944)
(1,262,432)
105,380
(5,993,386)
(125,987)
-
(243,750)
(200,000)
-
(569,737)
5,181,855
5,391,520
(1,505,055)
(157,500)
(79,961)
(17,473)
8,813,386
2,250,263
373,689
2,623,952
63,152
-
305,000
1,232,500
1,700,603
$
$
$
$
$
$
7,118,980 $
239,011 $
1,200,000 $
- $
- $
- $
See notes to consolidated financial statements
65
Note 1 – Description of Business
IMAC Holdings, Inc. is a holding company for IMAC Regeneration Centers, The Back Space retail stores and our Investigational New Drug division.
IMAC Holdings, Inc. and its affiliates (collectively, the “Company”) provide movement, orthopedic and neurological 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 has
opened or acquired through management service agreements seventeen (17) medical clinics located in Florida, Illinois, Kentucky, Louisiana, Missouri and
Tennessee as of December 31, 2021. The Company has partnered with several well-known sports stars such as Ozzie Smith, David Price, Tony Delk and
Mike Ditka in opening its medical clinics, with a focus on delivering sports medicine treatments without opioids. The Back Space operates a healthcare
center specializing in chiropractic and spinal care services inside Walmart retail locations. As of December 31, 2021, the Back Space has opened four retail
clinic locations in Missouri and Tennessee. The Company’s Investigational New Drug division is conducting a clinical trial for its investigational
compound utilizing umbilical cord-derived allogenic mesenchymal stem cells for the treatment of bradykinesia due to Parkinson’s disease.
Note 2 – Summary of Significant Accounting Policies
Principles of Consolidation
The accompanying consolidated financial statements have been prepared in accordance with Generally Accepted Accounting Principles (“GAAP”) in the
United States of America (“U.S.”) as promulgated by the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”)
and with the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”).
The accompanying consolidated financial statements include the accounts of IMAC Holdings, Inc. 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
Regeneration Center of St. Louis, LLC (“IMAC St. Louis”), 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”), Advantage Hand Therapy and Orthopedic Rehabilitation, LLC (“Advantage Therapy”), IMAC Management of Florida, LLC (“IMAC
Florida”), Louisiana Orthopaedic & Sports Rehab (“IMAC Louisiana”) and The Back Space, LLC (“BackSpace”); 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”); the following entities which are consolidated with IMAC Management of Illinois, LLC due to control by contract: Progressive Health and
Rehabilitation, Ltd., Illinois Spine and Disc Institute, Ltd. and Ricardo Knight, P.C.; the following entity which is consolidated with IMAC Management
Services, LLC due to control by contract: Integrated Medicine and Chiropractic Regeneration Center PSC (Kentucky PC); the following entities which are
consolidated with IMAC Florida due to control by contract: Willmitch Chiropractic, P.A. and IMAC Medical of Florida, P.A.; the following entity which is
consolidated with Louisiana Orthopaedic & Sports Rehab due to control by contract: IMAC Medical of Louisiana, a Medical Corporation; and the
following entities which are consolidated with BackSpace due to control by contract: ChiroMart LLC, ChiroMart Florida LLC, and ChiroMart Missouri
LLC.
In January 2020, the Company consummated an agreement for the acquisition of Chiropractic Health of Southwest Florida, Inc. (“CHSF”) in Bonita
Springs, Florida.
In February 2021, the Company completed the asset purchase of and signed a Management Services Agreement with Willmitch Chiropractic, P.A. in
Tampa, Florida.
In March 2021, the Company completed the asset purchase of NHC Chiropractic, PLLC dba Synergy Healthcare in Orlando, Florida.
In June 2021, the Company completed the asset purchase of Fort Pierce Chiropractic in Fort Pierce, Florida and Active Medical Center in Naperville,
Illinois.
In October 2021, the Company consummated certain transactions resulting in the acquisition of the outstanding equity interest in Louisiana Orthopaedic &
Sports Rehab Institute, Inc, an entity which presents the results of Louisiana Medical due to control by contract.
These acquisitions are included in the consolidated financial statements from the date of acquisition. All significant intercompany balances and transactions
have been eliminated in consolidation.
66
Correction of Immaterial Error
In connection with the evaluation of the accounting treatment for a new management agreement that was entered into during the fourth quarter of 2021, the
Company reviewed the accounting of our existing management agreements with our PC entities combined with our current business practices. As a result
of our review, we identified an accounting error related to recording of non-controlling interest. Management has determined that the previously
recognized non-controlling interest should not have been included as part of our results.
In accordance with Staff Accounting Bulletin (“SAB”) No. 99, “Materiality,” and SAB No. 108, “Considering the Effects of Prior Year Misstatements
when Quantifying Misstatements in Current Year Financial Statements,” the Company evaluated the error and determined that the related impact did not
materially misstate previously issued consolidated financial statements. Although the Company concluded that the misstatement was not material to its
previously issued consolidated financial statements, the Company has determined it is appropriate to adjust its previously issued consolidated financial
statements to correct for the error in the context of comparative financial statements. The following are the relevant line items from the Company’s
consolidated financial statements which illustrate the effect of the corrections to the periods presented:
Consolidated balance sheet
Accumulated deficit
Non-controlling interest
Total stockholder’s equity
Consolidated statement of income
Net loss attributable to non-controlling interest
Net loss attributable to IMAC Holdings, Inc.
Basic and diluted loss per common share
Consolidated statement of stockholders’ equity
Accumulated deficit
Non-controlling interest
Total stockholders’ equity
Use of Estimates
December 31, 2020
As Previously
Reported
Adjustments
As Revised
$
(15,045,783)
(2,618,904)
7,813,154
(2,618,904) $
2,618,904
-
(17,664,687)
-
7,813,154
(538,705)
(5,003,733)
(0.45)
538,705
(538,705)
(0.05)
-
(5,542,438)
(0.50)
December 31, 2019
As Previously
Reported
Adjustments
As Revised
$
(10,042,050)
(2,080,199)
7,937,292
(2,080,199) $
2,080,199
-
(12,122,249)
-
7,937,292
$
$
The preparation of 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 consolidated financial statements are prepared. On an
ongoing basis, the Company evaluates its estimates, including those related to insurance adjustments and provisions for doubtful accounts. The Company
bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. Actual results
could materially differ from those estimates.
COVID-19 Pandemic
On January 30, 2020, the World Health Organization (WHO) announced a global health emergency because of a new strain of coronavirus originating in
Wuhan, China (the “COVID-19 outbreak”) and the risks to the international community as the virus spread globally beyond the point of origin. On March
20, 2020 the WHO classified the COVID-19 outbreak as a pandemic, based on the rapid increase in exposure globally.
The full impact of the COVID-19 outbreak continues to evolve as of the date of these 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 2021 beyond the results presented in these consolidated financial
statements.
Due to the impacts of COVID-19 we have seen an increase in recruiting and labor costs as well as delays in supply chain.
67
Revenue Recognition
The Company’s patient service revenue is derived from non-surgical procedures performed at our outpatient medical clinics. The fees for such services are
billed either to the patient or a third-party payer, including Medicare.
The Company recognizes service revenues based upon the estimated amounts the Company expects to be entitled to receive from patients and third-party
payers. Estimates of contractual adjustments are based upon the payment terms specified in the related contractual agreements. The Company also records
estimated implicit price concessions (based primarily on historical collection experience) related to uninsured accounts to record these revenues at the
estimated amounts expected to be collected.
Starting in January 2020, the Company implemented wellness maintenance programs on a subscription basis. There are five membership plans offered with
different levels of service for each plan. The Company recognizes membership revenue on a monthly basis. Enrollment in the wellness maintenance
program can occur at any time during the month and can be dis-enrolled at any time.
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 a LLC. The PC is consolidated due to control by contract (an “MSA” –
Management Services Agreement). The fees we derive from these management arrangements are either based on a predetermined percentage of the
revenue of each clinic or a percentage mark up on the costs of the LLC. The company recognize other management service revenue in the period in which
services are rendered. These revenues are earned by IMAC Nashville, IMAC Management, IMAC Illinois, IMAC Florida, IMAC Louisiana and the Back
Space and are eliminated in consolidation to the extent owned.
68
Patient Deposits
Patient deposits are derived from patient payments in advance of services delivered. Our service lines include traditional and regenerative medicine.
Regenerative medicine procedures are rarely paid by insurance carriers; therefore, the Company typically requires up-front payment from the patient for
regenerative services and any co-pays and deductibles as required by the patient specific insurance carrier. For some patients, credit is provided through an
outside vendor. In this case, the Company is paid from the credit card company and the risk is transferred to the credit card company for collection from the
patient. These funds are accounted for as patient deposits until the procedures are performed at which point the patient deposit is recognized as patient
service revenue.
Fair Value of Financial Instruments
The carrying amount of accounts receivable and accounts payable approximate their respective fair values due to the short-term nature. The carrying
amount of the line of credit and note payable approximates fair values due to their market interest rates. Financial instruments that potentially subject the
Company to concentrations of credit risk consist principally of cash and cash equivalents and accounts receivable.
Variable Interest Entities
Certain states prohibit the “corporate practice of medicine,” which restricts business corporations from practicing medical care by exercising control over
clinical decisions by doctors. In states which prohibit the corporate practice of medicine, the Company enters into long-term management agreements with
professional corporations (“PCs”) that are owned by licensed doctors, which, in turn employ or contract with doctors who provide professional care in its
clinics. Under these management agreements with PCs, the Company provides, on an exclusive basis, all non-clinical services of the practice.
The consolidated financial statements include the accounts of variable interest entities (“VIE”) in which the Company is the primary beneficiary under the
provisions of the FASB Accounting Standards Codification 810, “Consolidation”. The Company has the power to direct the activities that most
significantly impact a VIE’s economic performance. Additionally, the Company would absorb the majority of the expected losses from any of these entities
should such expected losses occur. As of December 31, 2021, the Company’s consolidated VIE’s include 8 PCs.
The total assets (excluding goodwill and intangible assets, net) of the consolidated VIEs included in the accompanying consolidated balance sheets as of
December 31, 2021 and 2020, were approximately $2.2 million and $1.7 million respectively, and the total liabilities of the consolidated VIEs were
approximately $666,000 and $661,000, respectively.
Cash and Cash Equivalents
The Company considers all short-term investments with an original maturity of three months or less to be cash equivalents. The Company had no cash
equivalents at December 31, 2021 and 2020.
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 consolidated financial statements is recorded at the net amount
expected to be received.
The Company’s accounts receivable from third-party payers are recorded net of estimated contractual adjustments and allowances from third-party payers,
which are estimated based on the historical trend of the Company’s facilities’ cash collections and contractual write-offs, accounts receivable aging,
established fee schedules, relationships with payers and procedure statistics. While changes in estimated reimbursement from third-party payers remain a
possibility, the Company expects that any such changes would be minimal and, therefore, would not have a material effect on the Company’s financial
condition or results of operations. The Company’s collection policies and procedures are based on the type of payor, size of claim and estimated collection
percentage for each patient account. The Company analyzes accounts receivable at each of the facilities to ensure the proper collection and aged category.
The operating systems generate reports that assist in the collection efforts by prioritizing patient accounts. Collection efforts include direct contact with
insurance carriers or patients and written correspondence.
Allowance for Doubtful Accounts, Contractual and Other Discounts
Management estimates the allowance for contractual and other discounts based on its historical collection experience and contracted relationship with the
payers. The services authorized and provided and related reimbursement are often subject to interpretation and negotiation that could result in payments
that differ from the Company’s estimates. The Company’s allowance for doubtful accounts is based on historical experience, but management also takes
into consideration the age of accounts, creditworthiness and current economic trends when evaluating the adequacy of the allowance for doubtful accounts.
An account may be written-off only after the Company has pursued collection efforts or otherwise determines an account to be uncollectible. Uncollectible
balances are written-off against the allowance. Recoveries of previously written-off balances are credited to income when the recoveries are made.
69
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 are computed using the straight-line method over the estimated useful lives 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.
Goodwill
Our goodwill represents the excess of the purchase price over the fair value of the net identifiable assets acquired and liabilities assumed 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.
The goodwill test is performed at least annually, or more frequently if events or changes in circumstances indicate that the asset might be impaired. The
annual impairment test includes an option to perform a qualitative assessment of whether it is more likely than not that a reporting unit’s fair value is less
than its carrying value; the qualitative test may be performed prior to, or as an alternative to, performing a quantitative goodwill impairment test. If, after
assessing the totality of events or circumstances, the Company determines that it is more likely than not that the fair value of a reporting unit is less than its
carrying value, then the Company is required to perform the quantitative goodwill impairment test. Otherwise, no further analysis is required.
The Company operates under one reporting unit. The quantitative impairment test involves the comparison of the fair value of the reporting unit to its
carrying value. The Company calculates the fair value of each reporting unit using either (i) a discounted cash flows analysis that converts future cash flow
amounts into a single discounted present value amount or (ii) a market approach. The Company assesses the valuation methodology based upon the
relevance and availability of the data at the time that the valuation is performed. The Company compares the estimate of fair value for the reporting unit to
the carrying value of the reporting unit. If the carrying value is greater than the estimate of fair value, an impairment loss will be recognized in the amount
of the excess.
70
The Company performs its annual impairment test during the fourth quarter of the fiscal year. For the year ended December 31, 2020 and 2021, the
Company performed a qualitative impairment test and, based on the totality of information available for the reporting units, the Company concluded that it
was more-likely-than-not that the estimated fair values of the reporting units were greater than the carrying values of the reporting units and, as such, no
further analysis was required. There was no goodwill impairment for the years presented.
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 triggering events and no impairments of long-lived assets for the years presented.
Advertising and Marketing
The Company uses advertising and marketing to promote its services. Advertising and marketing costs are expensed as incurred. Advertising and marketing
expense was approximately $1,325,000 and $933,000 for the years ended December 31, 2021 and 2020, 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 year. Diluted net loss per common share is determined using the weighted-average of common shares outstanding during the year,
adjusted for the dilutive effect of common stock equivalents, consisting of the conversion option embedded in convertible debt. The weighted-average
number of common shares outstanding excludes common stock equivalents because their inclusion would have an anti-dilutive effect.
Income Taxes
Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis and operating
loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years
in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is
recognized in income in the period that includes the enactment date.
Deferred tax assets are required to be reduced by a valuation allowance to the extent that, based on the weight of available evidence, it is more likely than
not that the deferred tax assets will not be realized.
71
Note 3 – Capital Requirements, Liquidity and Going Concern Considerations
The Company’s consolidated financial statements are prepared in accordance with GAAP and includes 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 consolidated
financial statements, the Company has sustained substantial losses from operations since inception. The Company had working capital of approximately
$4.1 million at December 31, 2021 and a deficiency in working capital of approximately $1.2 million at December 31, 2020. The Company had a net loss
of approximately $10.5 million at December 31, 2021, and used cash in operations of approximately $7.6 million for the year ended December 31, 2021.
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. Management plans to continue to raise funds and/or refinance our indebtedness to support our operations in 2022 and beyond. However, no
assurances can be given that we will be successful. If management is not able to timely and successfully raise additional capital, the implementation of the
Company’s business plan, financial condition and results of operations will be materially affected. These 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.
72
Note 4 – Concentration of Credit Risks
Cash
The Company maintains its cash in accounts at financial institutions, which may, at times, exceed federally-insured limits of $250,000.
Revenue and Accounts Receivable Concentration
As of December 31, 2021 and 2020, the Company had revenue and accounts receivable concentration related to payments from Medicare as outlined in the
table below:
2021
2020
% of
Revenue
% of
Accounts
Receivable
% of
Revenue
% of
Accounts
Receivable
Medicare payments
37%
16%
40%
16%
Note 5 – Accounts Receivable
Accounts receivable consisted of the following at December 31:
Accounts receivable, net of contractual adjustments
Less: allowance for doubtful accounts
Accounts receivable, net
2021
2020
1,290,312 $
(80,979)
1,209,333 $
1,542,665
(28,982)
1,513,683
$
$
73
Note 6 – Business Acquisitions
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. A total of $128,802 was allocated to customer lists, $50,358 to property and
equipment and $20,840 to other assets.
In February 2021, the Company completed the acquisition of and signed Management Services Agreement with Willmitch Chiropractic, P.A. in Tampa,
Florida. The transaction was completed for $421,000. Willmitch Chiropractic’s founder, Martin Willmitch, will remain with the Company and serve as Vice
President of Managed Care of IMAC Holdings. A total of $7,400 was allocated to property and equipment with the remaining $413,600, being allocated to
goodwill.
In March 2021, the Company completed the asset purchase of NHC Chiropractic, PLLC dba Synergy Healthcare in Orlando, Florida. The transaction was
completed as an asset purchase for $142,500. A total of $149,720 was allocated to property and equipment and $7,220 being allocated to acquired payables.
In June 2021, the Company completed an asset purchase of Fort Pierce Chiropractic in Fort Pierce, Florida. The transaction was completed as an asset
purchase for $50,000. A total of $45,000 was allocated to property and equipment with the remaining $5,000 being allocated to customer lists.
IMAC Chicago
In June 2021, the Company also completed an asset purchase of Active Medical Center in Naperville, Illinois. The transaction was completed as an asset
purchase for $205,000. A total of $200,000 was allocated to property and equipment with the remaining $5,000 being allocated to deposits.
IMAC Louisiana
In October 2021, the Company consummated certain transactions resulting in the acquisition of the outstanding equity interest in Louisiana Orthopaedic &
Sports Rehab Institute, Inc. The transaction was completed for $1,200,000 and $1,200,000 stock.
The Company is in the process of completing its formal valuation analysis to identify and determine the fair value of identifiable tangible assets acquired
related to this acquisition. Thus, the final allocation of the purchase price may differ from the preliminary allocation at December 31, 2021 based on
completion of the valuation of the identifiable intangible assets. A total of $192,500 has been allocated to property and equipment with the remaining
$2,207,500 allocated to goodwill. Changes in the estimated valuation will likely result in adjustments to goodwill. The Company does not expect the
adjustments to be material.
The acquired businesses contributed revenues of approximately $928,000 and losses of approximately $3,000 to the Company from the periods acquired to
December 31, 2021. The following unaudited pro forma summary presents consolidated information of the Company as if the business transactions had
occurred on January 1, 2020.
Revenue
Loss
Pro forma year
ended
December 31, 2021
(unaudited)
Pro forma year
ended
December 31, 2020
(unaudited)
15,893,773 $
(10,769,552)
15,657,944
(5,588,396)
$
74
Note 7 – Property and Equipment
Property and equipment consisted of the following at December 31:
Leasehold improvements
Equipment
Total property and equipment
Less: accumulated depreciation
Construction in progress
Total property and equipment, net
Estimated
Useful Life in Years
Shorter of asset or lease
term
1.5 – 10
2021
2020
$
$
2,127,762 $
2,810,028
4,937,790
(2,990,902)
1,946,888
376,275
2,323,163 $
2,064,669
2,012,276
4,076,945
(2,302,273)
1,774,672
2,370
1,777,042
Depreciation was $761,034 and $786,313 for the years ended December 31, 2021 and 2020, respectively.
Note 8 – Intangibles Assets and Goodwill
Intangible assets that were acquired in connection with the acquisition transactions (Note 6) during 2021 and 2020:
Estimated
Useful Life
Cost
December 31, 2021
Accumulated
Amortization
Intangible assets:
Management service agreements
Non-compete agreements
Customer lists
Brand development
Definite lived assets
Research and development
Goodwill
Total intangible assets and goodwill
Intangible assets:
Management service agreements
Non-compete agreements
Customer lists
Definite lived assets
Research and development
Goodwill
Total intangible assets and goodwill
10 years
3 years
3 years
15 years
Estimated
Useful Life
10 years
3 years
3 years
$
$
$
$
7,940,398 $
306,000
134,882
69,071
8,450,351
243,750
4,661,796
13,355,897 $
(2,500,418) $
(302,458)
(89,921)
(3,835)
(2,896,632)
-
-
(2,896,632) $
Net
5,439,980
3,542
44,961
65,236
5,553,719
243,750
4,661,796
10,459,265
December 31, 2020
Accumulated
Amortization
Net
Cost
7,940,398 $
301,000
134,882
8,376,280
243,750
2,040,696
10,660,726 $
(1,706,379) $
(257,139)
(44,961)
(2,008,479)
-
-
(2,008,479) $
6,234,019
43,861
89,921
6,367,081
243,750
2,040,696
8,652,247
Amortization was $888,153 and $936,152 for the years ended December 31, 2021 and 2020, respectively.
The Company’s estimated future amortization of intangible assets is as follows:
Years Ending December 31,
2022
2023
2024
2025
2026
Thereafter
$
$
75
846,260
799,686
798,645
798,645
798,645
1,511,838
5,553,719
Note 9 – Operating Leases
On January 1, 2019, the Company adopted Topic ASC 842 using the modified retrospective method applied to leases that were in place at January 1, 2019.
The Company’s leases consist of operating leases that relate to real estate rental agreements. All of the value of the Company’s lease portfolio upon
adoption relates to real estate lease agreements that were entered into starting March 2017.
Discount Rate Applied to Property Operating Lease
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 of leases added during the year ended December 31, 2021, the Company used a weighted
average interest rate.
Right of Use Assets
Right of use assets are included in the consolidated Balance Sheet as follows:
Non-current assets
Right of use assets, net of amortization
Total operating lease cost
December 31,
2021
December 31,
2020
$
4,948,393 $
3,816,035
Individual components of the total lease cost incurred by the Company is as follows:
Year Ended
December 31,
2021
Year Ended
December 31,
2020
Operating lease expense
$
1,333,916 $
1,236,180
Minimum rental payments under operating leases are recognized on a straight light basis over the term of the lease.
Maturity of operating leases
The amount of future minimum lease payments under operating are as follows:
Undiscounted future minimum lease payments:
2022
2023
2024
2025
2026
Thereafter
Total
Amount representing imputed interest
Total operating lease liability
Current portion of operating lease liability
Operating lease liability, non-current
Operating
Leases
1,711,749
1,612,648
1,223,487
869,279
539,902
155,514
6,112,579
(615,513)
5,497,066
(1,478,140)
4,018,926
$
$
76
Note 10 – Notes Payable
Set forth below is a summary of the Company’s outstanding debt as of December 31, 2021 and December 31, 2020:
Note payable to Edward S. Bredniak 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. This note was amended in September 2020 and all
outstanding balances are due January 5, 2022. This note was paid in full on March 29, 2021.
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.
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.
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 is
secured by the equipment and personal guarantees of certain Company executives. This note was
paid in full on May 4, 2021.
Note payable to an employee in the amount of $101,906 dated March 8, 2017. The note requires
payments in five annual installments of $23,350, including principal and interest at 5%. The note
matures on December 31, 2021, and is unsecured. This note was paid in full on June 8, 2021.
$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.
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.
Note payable in the amount of $2,690,000, dated October 29, 2020. The note is payable on or
before April 29, 2022. The interest on the note accrues at a rate of 7% per annum and is payable on
the maturity date or otherwise in accordance with the note.
Unamortized debt issuance costs
Less: current portion:
77
December 31,
2021
December 31,
2020
$
- $
1,750,000
43,413
72,238
68,378
81,330
-
-
19,191
20,000
59,913
81,862
37,179
84,444
150,301
2,690,000
-
(312,858)
359,184
(254,487)
104,697 $
4,486,207
(2,527,324)
1,958,883
$
Principal maturities of notes payable are as follows:
Years Ending December 31,
Amount
2022
2023
2024
2025
2026
Thereafter
Total
$
$
254,487
51,657
27,631
15,813
9,596
-
359,184
Note 11 – Shareholders’ Equity
On June 18, 2020, the Company entered into a securities purchase agreement (the “Securities Purchase Agreement”) with institutional accredited investors
(the “Purchasers”) pursuant to which the Company offered for sale to the Purchasers an aggregate of 1,764,000 shares (the “Shares”) of its common stock,
in a registered direct offering (the “Registered Direct Offering”). The purchase price for one Share in the Registered Direct Offering was $1.50, and closing
of the Registered Direct Offering occurred on June 22, 2020. The Company received $2.644 million in gross proceeds from the Registered Direct Offering.
The Company used approximately $0.5 million of the gross proceeds for the repayment of certain indebtedness, and the remaining proceeds to the
Company will be used to finance the costs of developing and acquiring additional outpatient medical clinics as part of the Company’s growth and
expansion strategy and for working capital.
On October 5, 2020, the Company launched an at-the-market offering of up to $5,000,000 worth of shares of the Company’s common stock pursuant to an
At-The-Market Issuance Sales Agreement, dated October 5, 2020, by and between the Company and Ascendiant Capital Markets, LLC. Since the launch
and as of December 31, 2021, pursuant to the Agreement, the Company had sold 1,541,758 shares of common stock through Ascendiant Capital Markets
for aggregate proceeds to the Company of $2.9 million.
During March 2021, the Company completed a public offering by issuing 10,625,000 shares of common stock for gross proceeds of $17.0 million and
incurring $1.2 million in expenses related to public offering. The Company used approximately $1.8 million for the repayment of certain indebtedness and
is using the remaining proceeds for the repayment of certain other indebtedness, to finance the costs of developing and acquiring additional outpatient
medical clinics and healthcare centers as part of the Company’s growth and expansion strategy and for working capital.
On April 7, 2021 the Company closed on the sale of an additional 1,193,750 shares of common stock at the recent public offering price of $1.60 per share,
pursuant to the 15% over-allotment option exercised in full by the underwriters in connection with its public offering that closed March 2021. The
Company received gross proceeds of $1.91 million and incurred approximately $115,000 in additional expenses.
On October 1, 2021, the Company completed a stock purchase agreement and issued 810,811 shares of its common stock as consideration. This transaction
was part of the $1,200,000 in stock consideration for the Louisiana acquisition.
2018 Incentive Compensation Plan
The Company’s board of directors and holders of a majority of outstanding shares approved and adopted the Company’s 2018 Incentive Compensation Plan
(“2018 Plan”) in May 2018, reserving the issuance of up to 1,000,000 shares of common stock (subject to certain adjustments) upon exercise of stock
options and grants of other equity awards. The 2018 Plan provides for the grant of incentive stock options (“ISOs”), nonstatutory stock options, stock
appreciation rights, restricted stock awards, restricted stock unit awards, performance-based stock awards, other forms of equity compensation and
performance cash awards. ISOs may be granted only to employees. All other awards may be granted to employees, including officers, and to the
Company’s non-employee directors and consultants, and affiliates.
Stock Options
As of December 30, 2021, the Company had issued non-qualified stock options to purchase 367,051 shares of its common stock to various employees of
the Company. Most 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. One award granted in 2021 vests over a period of one year and is 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.
78
The information below summarizes the stock options:
Outstanding at December 31, 2019
Granted
Exercised
Cancelled
Outstanding at December 31, 2020
Granted
Exercised
Cancelled
Outstanding at December 31, 2021
Restricted Stock Units
Number of
Shares
Weighted
Average
Exercise Price
Weighted
Average
Remaining
Contractual
Life
306,202
90,500
-
(36,533)
360,169
49,000
-
(42,118)
367,051
$
$
$
4.04
1.24
-
2.12
3.43
1.60
-
3.92
3.23
3.38
3.07
-
2.87
3.35
3.40
-
1.44
3.58
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.
On May 21, 2020, the Company granted 10,000 RSUs to a Board member that vested immediately.
On October 20, 2020, the Company granted an aggregate of 300,000 RSUs to Board members with these RSUs vesting in eight equal quarterly installments
commencing on February 1, 2021, provided the Board members remain directors of the Company. Effective October 2021, the vesting schedule was
amended to a one-year vesting period. As of December 31, 2021, 150,000 RSUs had vested and were issued to the Board members.
On January 30, 2021, the Company granted an aggregate of 17,000 RSUs to non-executive staff and contractors with these RSUs vesting after one year.
On October 27, 2021 the Company granted 10,000 shares to a consultant that vested immediately.
Outstanding at December 31, 2019
Granted
Vested
Cancelled
Outstanding at December 31, 2020
Granted
Vested
Cancelled
Outstanding at December 31, 2021
Number of
Shares
Weighted
Average Grant
Date Fair Value
247,500 $
310,000
(76,875)
(40,000)
440,625 $
27,000
(206,875)
-
260,750 $
4.04
0.83
3.72
4.04
1.83
1.56
1.56
-
2.02
79
Note 12 – 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 $139,870 and $103,902 during 2021 and 2020, respectively.
Note 13 – Income Taxes
For the year ended December 31, 2021, and December 31, 2020, no income tax expense or benefit was recorded related to income taxes due to the
Company’s overall operating results and the change in the valuation allowance. The components of income tax expense (benefit) for the year ended
December 31, 2021, and December 31, 2020, are as follows:
Current income tax expense (refund) - federal
Current income tax expense (refund) - state
Total current income tax expense (refund)
Deferred income tax expense (benefit) - federal
Deferred income tax expense (benefit) - state
Total deferred income tax expense (benefit)
Total provision for income taxes
December 31,
2021
December 31,
2020
- $
-
-
-
-
-
- $
-
-
-
-
-
-
-
$
$
The reconciliation of the income tax expense (benefit) to the U.S. federal statutory income tax rate is as follows:
Federal statutory income tax
Permanent differences
Change in valuation allowance
State income taxes, net of federal benefit
Total
December 31,
2021
December 31,
2020
21.00%
(0.01)%
(25.77)%
4.78%
0.00%
21.00%
(0.04)%
(25.73)%
4.77%
0.00%
The tax effects of temporary differences which give rise to the significant portions of deferred tax assets or liabilities at December 31, 2021 and 2020 are as
follows:
Deferred tax assets:
Reserves & allowances
Charitable contribution carry-forward
Net operating loss carry-forward - federal
Net operating loss carry-forward - state
Non-qualified stock options
Total deferred tax assets
Deferred tax liabilities:
Depreciation
Amortization
Total deferred tax liabilities
Less valuation allowance
Total net deferred tax assets
December 31,
2021
December 31,
2020
$
$
$
$
$
20,880 $
3,020
6,049,391
1,887,147
349,328
8,309,766 $
(200,738) $
(119,004)
(319,742) $
(7,990,024)
- $
73,758
3,020
3,826,275
1,182,423
202,222
5,287,698
(161,956)
(58,951)
(220,907)
(5,066,791)
-
80
The Company has federal net operating loss carry-forward of approximately $28.8 million and state and local net operating losses of approximately $30.1
million. There is no expiration of the federal loss carry-forwards as all federal net operating loss carry-forwards were generated after 2017. The state and
local operating loss carry-forwards are subject to expiration beginning in 2031.
ASC 740 requires a valuation allowance to reduce the deferred tax assets reported if, based on the weight of all available positive and negative evidence, it
is more likely than not that some portion or all of the deferred tax assets will not be realized. Management assessed all available evidence to estimate if
sufficient future taxable income will be generated in the appropriate period and of the appropriate character to realize deferred tax assets. Based on
Management’s assessment, on December 31, 2021, and 2020, a full valuation allowance of $8.0 million and $5.1 million, respectively, was required. The
current year increase in valuation allowance is $2.9 million primarily related to the increase in deferred tax assets for net operating losses generated by
current year operations.
The Company performed a comprehensive review of its uncertain tax positions and determined that no adjustments were necessary relating to unrecognized
tax benefits as December 31, 2021. The Company had no unrecognized tax benefits recorded as of December 31, 2021, and December 31, 2020. The
Company is subject to taxation by federal, state, and local taxing authorities. The Company’s federal, state, and local income tax returns are subject to
examination by taxing authorities for three years after the returns are filed, and the Company’s federal, state, and local income tax returns for 2018 through
2020 remain open to examination.
Note 14 – Commitments and Contingencies
The Company accrues a liability and charges operations for the estimated costs of contingent liabilities, including adjudication or settlement of various
asserted and unasserted claims existing as of the balance sheet date, where there is a reasonable possibility that a loss has been incurred and the loss (or
range of probable loss) is estimable.
From time to time the Company may become subject to threatened and/or asserted claims arising in the ordinary course of our business. Other than the
matter described below, management is not aware of any matters, either individually or in the aggregate, that are reasonably likely to have a material
impact on the Company’s financial condition, results of operations or liquidity.
Third Party Audit
From time to time, in the ordinary course of business, we are subject to audits under various governmental programs in which third party firms engaged by
the Center for Medicare & Medicaid Services (“CMS”) conduct extensive reviews of claims data to identify potential improper payments. We cannot
predict the ultimate outcome of any regulatory reviews or other governmental audits and investigations.
On June 3, 2021, the Company received a request for payment from CMS in the amount of $2,918,472. The Company initiated the appropriate appeals and
then the Company received a notification dated September 30, 2021, from CMS that they “found the request to be favorable by reversing the extrapolation
to actual”. The Company received a separate notification stating “the extrapolated overpayment was reduced to the actual overpayment amount for the
sampled denied claims $5,327.73,” which had been paid as of December 31, 2021.
This amount represented a statistical extrapolation of $11,530 of charges from a sample of 40 claims for the periods February 2017 to November 2020. The
Company began its own internal audit process and disagrees with the interpretation of the medical records and the extrapolation techniques used to derive
the balance. The Company continued the appeals process to the second level appeal related to the error rate and are anticipating a third appeal on the
remaining $5,327.73 amount.
At this stage of the appeals process, based on the information currently available to the Company, the Company is unable to predict the timing and ultimate
outcome of this matter and therefore is unable to estimate the range of possible loss. Any potential loss may be classified as errors and omissions for which
insurance coverage was in place during a majority of the years being evaluated.
On October 21, 2021, the Company received notification from Covent Bridge Group, a Center for Medicare & Medicaid Services (“CMS”) contractor, that
they are recommending to CMS that the Company was overpaid in the amount of $2,716,056.33. This amount represents a statistical extrapolation of
$6,791.33 of charges from a sample of 38 claims for the periods July 2017 to November 2020 for Progressive Health & Rehabilitation, Ltd (“Progressive
Health”). The Company entered into a management agreement with Progressive Health in April 2019 and therefore liable for only a portion of the sampled
claims. There were a total of 38 claims reviewed, 25 of these claims were from the period prior to the management agreement with the Company and the
remaining 13 claims were related to the period that Progressive Health was managed by the Company. In December 2021, the Company received a request
for payment from CMS in the amount of $2,709,265. The Company has begun its own internal audit process and has initiated the appropriate appeals.
As of December 31, 2021, the Company has not recorded a provision for this claim, as management does not believe that an estimate of a possible loss or
range of loss can reasonably be made at this time.
81
Note 15 – Quarterly Data – Unaudited
Revised Interim Financial Information
The following tables present amounts previously reported and revised as a result of the error associated with the accounting for our managed PCs. See Note
2 for additional information.
Consolidated balance sheet
Accumulated deficit
Non-controlling interests
As of and For the Three Months
Ended March 31, 2020
As Previously
Reported
As Revised
$
(11,775,595) $
(2,416,803)
(14,192,398)
-
Consolidated statement of income
Net loss attributable to non-controlling interest
Net loss attributable to IMAC Holdings, Inc.
(336,604)
(1,733,545)
-
(2,070,149)
Basic and diluted loss per common share
(0.18)
(0.22)
Consolidated balance sheet
Accumulated deficit
Non-controlling interests
As of and For the Three Months Ended
June 30, 2020
As of and For the Six Months Ended
June 30, 2020
As Previously
Reported
As Revised
As Previously
Reported
As Revised
$
(13,806,283)
(2,361,227)
$
(16,167,510) $
-
(13,806,283) $
(2,361,227)
(16,167,510)
-
Consolidated statement of income
Net (loss) income attributable to non-controlling interest
Net loss attributable to IMAC Holdings, Inc.
55,576
(2,030,688)
-
(1,975,112)
(281,028)
(3,764,233)
-
(4,045,261)
Basic and diluted loss per common share
(0.20)
(0.19)
(0.38)
(0.41)
Consolidated balance sheet
Accumulated deficit
Non-controlling interests
Consolidated statement of income
Net loss attributable to non-controlling interest
Net loss attributable to IMAC Holdings, Inc.
As of and For the Three Months Ended
September 30, 2020
As of and For the Nine Months Ended
September 30, 2020
As Previously
Reported
As Revised
As Previously
Reported
As Revised
$
(15,235,941)
(2,403,968)
$
(17,639,909) $
-
(15,235,941) $
(2,403,968)
(17,639,909)
-
(42,741)
(1,429,658)
-
(1,472,399)
(323,769)
(5,193,891)
-
(5,517,660)
Basic and diluted loss per common share
(0.12)
(0.12)
(0.49)
(0.52)
Consolidated balance sheet
Accumulated deficit
Non-controlling interests
As of and For the Three Months
Ended March 31, 2021
As Previously
Reported
As Revised
$
(17,035,818) $
(2,858,292)
(19,894,110)
-
Consolidated statement of income
Net loss attributable to non-controlling interest
Net loss attributable to IMAC Holdings, Inc.
(239,388)
(1,990,035)
-
(2,229,423)
Basic and diluted loss per common share
(0.15)
(0.17)
Consolidated balance sheet
Accumulated deficit
Non-controlling interests
As of and For the Three Months Ended
June 30, 2021
As of and For the Six Months Ended
June 30, 2021
As Previously
Reported
As Revised
As Previously
Reported
As Revised
$
(19,031,862)
(3,400,989)
$
(22,432,851) $
-
(19,031,862) $
(3,400,989)
(22,432,851)
-
Consolidated statement of income
Net loss attributable to non-controlling interest
Net loss attributable to IMAC Holdings, Inc.
(542,697)
(1,996,044)
-
(2,538,741)
(782,085)
(3,986,079)
-
(4,768,164)
Basic and diluted loss per common share
(0.08)
(0.10)
(0.20)
(0.24)
Consolidated balance sheet
Accumulated deficit
Non-controlling interests
Consolidated statement of income
Net loss attributable to non-controlling interest
Net loss attributable to IMAC Holdings, Inc.
As of and For the Three Months Ended
September 30, 2021
As of and For the Nine Months Ended
September 30, 2021
As Previously
Reported
As Revised
As Previously
Reported
As Revised
$
(20,752,598)
(4,572,884)
$
(25,325,482) $
-
(20,752,598) $
(4,572,884)
(25,325,482)
-
(1,171,895)
(1,720,736)
-
(2,892,631)
(1,953,980)
(5,706,815)
-
(7,660,795)
Basic and diluted loss per common share
(0.07)
(0.11)
(0.27)
(0.36)
Note 16 – Subsequent Events
In February 2022 the Company announced Dr. Ben Lerner had become the Chief Operating Officer and Dr. Matt Wallis, current COO, will continue with
the Company as President and Executive Director.
82
ITEM 9.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES
None.
ITEM 9A. CONTROLS AND PROCEDURES
(1)
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our Securities and
Exchange Commission Act of 1934 reports is recorded, processed, summarized, and reported within the time periods specified in the Securities and
Exchange Commission’s rules and forms and that such information is accumulated and communicated to our management, including our chief executive
officer and 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 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 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 December 31, 2021. The material weaknesses relates 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 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.
(2)
Management’s Report on Internal Control over Financial Reporting
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 chief financial officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework
in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”).
Because of its inherent limitations, internal control over financial reporting may not prevent or detect all misstatements. Also, projections of any evaluation
of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of
compliance with the policies or procedures may deteriorate. Therefore, even those systems determined to be effective can provide only reasonable
assurance with respect to financial statement preparation and presentation. Based on our evaluation under the framework in Internal Control—Integrated
Framework (2013), our management concluded that our internal control over financial reporting was ineffective as of December 31, 2021 and 2020.
(3)
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 Securities Exchange Act of 1934 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.
ITEM 9B. OTHER INFORMATION
None.
ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
None.
83
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE
The names and ages of our executive officers and directors, and their positions with us, are as follows:
PART III
Name
Jeffrey S. Ervin
Matthew C. Wallis, DC
Sheri F. Gardzina, CPA
Maurice E. Evans
Michael D. Pruitt
Cary W. Sucoff
Age
44
48
53
42
61
69
Position
Chief Executive Officer and Director
Chief Operating Officer and Director
Chief Financial Officer
Director
Director
Director
Jeffrey S. Ervin co-founded our company in March 2015 and serves as our Chief Executive Officer and a member of our Board of Directors. Mr.
Ervin earned his M.B.A. from Vanderbilt University and has a history of working within strategic finance roles in the healthcare and high tech industries.
Following his M.B.A., Mr. Ervin was the Senior Financial Analyst and Vice President of Finance for the Baptist Hospital System of Nashville from 2006 to
September 2011, responsible for sourcing and managing direct investments to satisfy pension obligations. After these five years, Mr. Ervin joined
Medicare.com parent Medx Publishing in October 2011 as the senior financial officer tasked with building administrative functions to satisfy rapid growth
in the CMS education sector. During this time through March 2015, Medicare.com earned INC. 500 recognition and he was instrumental in the acquisition
of Medicaid.com which was sold to United Healthcare Group. Mr. Ervin was also responsible for the disposition and ultimate sale of Medicare.com to
eHealth Insurance.
As our Chief Executive Officer and a director, Mr. Ervin leads the Board and manages our company. Mr. Ervin brings extensive healthcare
services industry knowledge and a deep background in growing early-stage companies, mergers and acquisitions and capital market activities. His service
as the Chief Executive Officer and a director creates a critical link between management and our Board of Directors.
Matthew C. Wallis, DC co-founded our company in March 2015 and serves as our Chief Operating Officer and a member of our Board of
Directors. Dr. Wallis established the first Integrated Medicine and Chiropractic (IMAC) Regeneration Center in August 2000 and has led the Paducah,
Kentucky center since then. Prior to establishing the first IMAC medical clinic, Dr. Wallis practiced as a licensed chiropractor in Kentucky. As our Chief
Operating Officer, Dr. Wallis, has implemented consistent operating efficiencies for our sales, marketing and serviced delivery operations. Dr. Wallis
received a Doctor of Chiropractic (DC) degree from Life University.
Dr. Wallis’ 18 years of experience in the healthcare services industry, day-to-day operational leadership of our initial Paducah, Kentucky medical
clinic and in-depth knowledge of our company’s rehabilitative services make him well qualified as a member of the Board.
84
Sheri F. Gardzina, CPA joined our company in November 2017 and serves as our Chief Financial Officer. Prior to joining IMAC, Ms. Gardzina
served as the controller or member of the accounting executive team of Smile Direct Club, LLC, a marketer of invisible aligners, from June 2016 to
September 2017, Adoration Health, a home health and hospice company, from October 2015 to June 2016, Lattimore, Black, Morgan & Cain, an
accounting and consulting firm where she provided temporary chief financial officer services to Peak Health Solutions, from August to September 2015,
EB Employee Solutions, LLC, a healthcare self-insurance product developer, from May to December 2014, and Inspiris Inc., a start-up care management
company sold to Optum, from November 2003 to May 2014. Ms. Gardzina started her career as an auditor with Ernst & Young, where she worked from
October 1994 to August 1997. Ms. Gardzina earned a B.S. degree in business administration and finance from Purdue University and an M.S. in
accountancy and M.B.A. from Northeastern University.
Maurice E. (Mo) Evans joined our Board of Directors in October 2020. Mr. Evans. is a business leader, advisor, consultant, investor and speaker
to businesses in the sports business vertical. He is the co-founder of ELOS Sports and Entertainment, LLC (“ELOS”), a provider of brand management
services to athletes and businesses in the sports and entertainment industry. Mr. Evans has served as the principal of ELOS since 2014. Prior to that, from
2001 to 2012, he was a professional basketball player, playing for the Washington Wizards, Atlanta Hawks, Orlando Magic, Los Angeles Lakers, Detroit
Pistons and Sacramento Kings. He also served as Executive Vice President of the NBA Players Association from 2010 to 2013. Mr. Evans received a B.A.
degree from the University of Texas at Austin. Mr. Evans provides more than a decade of experience in leading and managing customer-centric personal
service organizations such as the NBA Players Association and ELOS Sports and Entertainment, which is highly relevant to our business, making him well
qualified as a member of our Board. He also brings to our company a unique perspective of how an athlete addresses a sports injury.
Michael D. Pruitt joined our Board of Directors in October 2020. He founded Avenel Financial Group, a boutique financial services firm
concentrating on emerging technology company investments in 1999. In 2001, he formed Avenel Ventures, a technology investment and private venture
capital firm. In February 2005, Mr. Pruitt formed Chanticleer Holdings, Inc., then a public holding company (now known as Sonnet BioTherapeutics
Holdings, Inc.), and he served as Chairman of the Board of Directors and Chief Executive Officer until April 1, 2020, at which time the restaurant
operations of Chanticleer Holdings were spun out into a new public entity, Amergent Hospitality Group, Inc., where Mr. Pruitt has served as its Chairman
and Chief Executive Officer to date. Mr. Pruitt also served as a director on the board of Hooters of America, LLC from 2011 to 2019. Mr. Pruitt received a
B.A. degree from Costal Carolina University. He currently sits on the Board of Visitors of the E. Craig Wall Sr. College of Business Administration, the
Coastal Education Foundation Board, and the Athletic Committee of the Board of Trustees. Mr. Pruitt’s over 15 years of day-to-day operational leadership
and service as a board member at public companies Chanticleer Holdings and Amergent Hospitality Group make him well qualified as a member of the
Board. He also brings transactional expertise in mergers and acquisitions and capital markets.
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Cary W Sucoff joined our Board of Directors in October 2020. Mr. Sucoff has more than 30 years of securities industry experience encompassing
supervisory, banking and sales responsibilities. He has participated in the financing of more than 100 public and private companies. Since 2011, Mr. Sucoff
has owned and operated Equity Source Partners LLC, an advisory and consulting firm. Mr. Sucoff currently serves on the board of directors of ContraFect
Corporation, Legacy Education Alliance Inc., First Wave Technologies, Inc. and Galimedix Pharmaceuticals Inc. In addition, Mr. Sucoff currently serves as
a consultant to Sapience Therapeutics. Mr. Sucoff is the past President of New England Law|Boston, has been a member of its Board of Trustees for over
25 years and is the current Chairman of its Endowment Committee. Mr. Sucoff received a B.A. degree from the State University of New York at
Binghamton and a J.D. from New England School of Law, where he was managing editor of the Law Review and graduated magna cum laude. He has been
a member of the Bar of the State of New York since 1978. Mr. Sucoff demonstrates knowledge of our company’s business due to his many years of
experience as an investor, consultant and board member with a range of companies in the healthcare industry, making his input invaluable to the board’s
discussion of our growth and expansion strategy. He also brings experience in corporate controls and governance as a lawyer.
Code of Ethics
We have adopted a Code of Business Ethics and Conduct (“Ethics Code”) that applies to all our officers, directors, employees, and contractors.
The Ethics Code contains general guidelines for conducting our business consistent with the highest standards of business ethics and compliance with
applicable law, and is intended to qualify as a “code of ethics” within the meaning of Section 406 of the Sarbanes-Oxley Act of 2002 and Item 406 of
Regulation S-K. Day-to-day compliance with the Ethics Code is overseen by the Company compliance officer appointed by our Board of Directors. If we
make any substantive amendments to the Ethics Code or grant any waiver from a provision of the Ethics Code to any director or executive officer, we will
promptly disclose the nature of the amendment or waiver on our website at https://ir.imacregeneration.com.
Board Composition
Our business and affairs are managed under the direction of our board of directors. The number of directors is determined by our board of
directors, subject to the terms of our certificate of incorporation and bylaws. Our board of directors currently consists of five members.
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Director Independence
Or common stock and warrants are listed for trading on The NASDAQ Capital Market. Under Nasdaq rules, independent directors must comprise
a majority of a listed company’s board of directors. In addition, Nasdaq rules require that, subject to specified exceptions, each member of a listed
company’s audit, compensation and nominating and governance committees must be independent. Under Nasdaq rules, a director will only qualify as an
“independent director” if, in the opinion of that company’s board of directors, that person does not have a relationship that would interfere with the exercise
of independent judgment in carrying out the responsibilities of a director.
Audit committee members must also satisfy the independence criteria set forth in Rule 10A-3 under the Exchange Act. In order to be considered
independent for purposes of Rule 10A-3, a member of an audit committee of a listed company may not, other than in his or her capacity as a member of the
audit committee, the board of directors, or any other board committee: (i) accept, directly or indirectly, any consulting, advisory, or other compensatory fee
from the listed company or any of its subsidiaries; or (ii) be an affiliated person of the listed company or any of its subsidiaries.
Our board of directors undertook a review of its composition, the composition of its committees and the independence of each director. Based
upon information requested from and provided by each director concerning his or her background, employment and affiliations, including family
relationships, our board of directors has determined that Messrs. Evans, Pruitt and Sucoff, representing a majority of our directors, do not have any
relationships that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director and that each of these directors
is “independent” as that term is defined under Nasdaq rules. In making these determinations, our board of directors considered the relationships that each
non-employee director has with our company and all other facts and circumstances our board of directors deemed relevant in determining their
independence, including the beneficial ownership of our capital stock by each non-employee director.
Board Committees
Our board of directors has three standing committees: an audit committee, a compensation committee and a nominating and corporate governance
committee. Under Nasdaq rules, the membership of the audit committee is required to consist entirely of independent directors, subject to applicable phase-
in periods. The following is a brief description of our committees.
Audit committee. In accordance with our audit committee charter, our audit committee oversees our corporate accounting and financial reporting
processes and our internal controls over financial reporting; evaluates the independent public accounting firm’s qualifications, independence and
performance; engages and provides for the compensation of the independent public accounting firm; approves the retention of the independent public
accounting firm to perform any proposed permissible non-audit services; reviews our consolidated financial statements; reviews our critical accounting
policies and estimates and internal controls over financial reporting; and discusses with management and the independent registered public accounting firm
the results of the annual audit and the reviews of our quarterly consolidated financial statements. We believe that our audit committee members meet the
requirements for financial literacy under the current requirements of the Sarbanes-Oxley Act, Nasdaq and SEC rules and regulations. In addition, the board
of directors has determined that Michael D. Pruitt is qualified as an audit committee financial expert within the meaning of SEC regulations. We have made
this determination based on information received by our board of directors, including questionnaires provided by the members of our audit committee. The
audit committee is composed of Messrs. Pruitt (Chairman), Evans and Sucoff.
Compensation committee. In accordance with our compensation committee charter, our compensation committee reviews and recommends
policies relating to compensation and benefits of our officers and employees, including reviewing and approving corporate goals and objectives relevant to
compensation of the Chief Executive Officer and other senior officers, evaluating the performance of these officers in light of those goals and objectives
and setting compensation of these officers based on such evaluations. The compensation committee also administers the issuance of stock options and other
awards under our equity-based incentive plans. We believe that the composition of our compensation committee meets the requirements for independence
under, and the functioning of our compensation committee complies with, any applicable requirements of the Sarbanes-Oxley Act, Nasdaq and SEC rules
and regulations. We intend to comply with future requirements to the extent they become applicable to us. The compensation committee is composed of
Messrs. Evans (Chairman) and Pruitt.
Nominating and governance committee. In accordance with our nominating and governance committee charter, our nominating and governance
committee recommends to the board of directors nominees for election as directors, and meets as necessary to review director candidates and nominees for
election as directors; recommends members for each committee of the board; oversee corporate governance standards and compliance with applicable
listing and regulatory requirements; develops and recommends to the board governance principles applicable to the company; and oversee the evaluation of
the board and its committees. We believe that the composition of our nominating and governance committee meets the requirements for independence
under, and the functioning of our compensation committee complies with, any applicable requirements of the Sarbanes-Oxley Act, Nasdaq and SEC rules
and regulations. We intend to comply with future requirements to the extent they become applicable to us. The nominating and governance committee is
composed of Messrs. Sucoff (Chairman) and Evans.
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Compensation Committee Interlocks and Insider Participation
None of the members of our compensation committee is an executive officer or employee of our company. None of our executive officers serves
as a member of the board of directors or compensation committee of any entity that has one or more executive officers serving on our board of directors or
compensation committee.
Limitations on Director and Officer Liability and Indemnification
Our certificate of incorporation limits the liability of our directors to the maximum extent permitted by Delaware law. Delaware law provides that
directors of a corporation will not be personally liable for monetary damages for breach of their fiduciary duties as directors, except liability for:
● any breach of their duty of loyalty to the corporation or its stockholders;
● acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law;
● unlawful payments of dividends or unlawful stock repurchases or redemptions; or
● any transaction from which the director derived an improper personal benefit.
Our certificate of incorporation and our bylaws provide that we are required to indemnify our directors and officers, in each case to the fullest
extent permitted by Delaware law. Any repeal of or modification to our certificate of incorporation and our bylaws may not adversely affect any right or
protection of a director or officer for or with respect to any acts or omissions of such director or officer occurring prior to such amendment or repeal. Our
bylaws will also provide that we shall advance expenses incurred by a director or officer in advance of the final disposition of any action or proceeding, and
permit us to secure insurance on behalf of any officer, director, employee or other agent for any liability arising out of his or her actions in connection with
their services to us, regardless of whether our bylaws permit such indemnification.
We intend to enter into separate indemnification agreements with our directors and executive officers, in addition to the indemnification provided
for in our bylaws. These agreements, among other things, provide that we will indemnify our directors and executive officers for certain expenses
(including attorneys’ fees), judgments, fines, penalties and settlement amounts incurred by a director or executive officer in any action or proceeding
arising out of such person’s services as one of our directors or executive officers, or any other company or enterprise to which the person provides services
at our request. We believe that these provisions and agreements are necessary to attract and retain qualified persons as directors and executive officers.
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The limitation of liability and indemnification provisions that are contained in our certificate of incorporation and our bylaws may discourage
stockholders from bringing a lawsuit against our directors for breach of their fiduciary duty. They may also reduce the likelihood of derivative litigation
against our directors and officers, even though an action, if successful, might benefit us and other stockholders. Further, a stockholder’s investment may be
adversely affected to the extent that we pay the costs of settlement and damage awards against directors and officers as required by these indemnification
provisions. There is no pending litigation or proceeding involving one of our directors or executive officers as to which indemnification is required or
permitted, and we are not aware of any threatened litigation or proceeding that may result in a claim for indemnification.
The Board of Directors’ Role in Risk Oversight
Our Board of Directors, as a whole and also at the committee level, has an active role in managing enterprise risk. The members of our Board of
Directors participate in our risk oversight assessment by receiving regular reports from members of senior management and the Company compliance
officer appointed by our Board of Directors on areas of material risk to us, including operational, financial, legal and regulatory, and strategic and
reputational risks. The Compensation Committee is responsible for overseeing the management of risks relating to our executive compensation plans and
arrangements. The Audit Committee oversees management of financial risks, as well as our policies with respect to risk assessment and risk management.
The Nominating and Governance Committee manages risks associated with the independence of our Board of Directors and potential conflicts of interest.
Members of the management team report directly to our Board of Directors or the appropriate committee. The directors then use this information to
understand, identify, manage, and mitigate risk. Once a committee has considered the reports from management, the chairperson will report on the matter to
our full Board of Directors at the next meeting of the Board of Directors, or sooner if deemed necessary. This enables our Board of Directors and its
committees to effectively carry out its risk oversight role.
Communications with our Board of Directors
Any stockholder may send correspondence to our Board of Directors, c/o IMAC Holdings, Inc., 1605 Westgate Circle, Brentwood, Tennessee
37027 and our telephone number is (844) 266-IMAC (4622). Our management will review all correspondence addressed to our Board of Directors, or any
individual director, and forward all such communications to our Board of Directors or the appropriate director prior to the next regularly scheduled meeting
of our Board of Directors following the receipt of the communication, unless the corporate secretary decides the communication is more suitably directed
to Company management and forwards the communication to Company management. Our management will summarize all stockholder correspondence
directed to our Board of Directors that is not forwarded to our Board of Directors and will make such correspondence available to our Board of Directors
for its review at the request of any member of our Board of Directors.
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Indebtedness of Directors and Executive Officers
None of our directors or executive officers or their respective associates or affiliates is currently indebted to us.
Compliance with Section 16(a) of the Exchange Act
Section 16(a) of the Exchange Act requires our executive officers, directors and holders of more than 10% of our equity securities to file reports of
ownership and changes in ownership of our securities (Forms 3, 4 and 5) with the SEC. To the best of our knowledge, based solely on a review of the
Section 16(a) reports and written statements from executive officers and directors, for the years ended December 31, 2021 and 2020, all required reports of
executive officers, directors and holders of more than 10% of our equity securities were filed on time, except for any such reports which may have been
filed late due to administrative delays.
Family Relationships
There are no family relationships among our directors and executive officers.
ITEM 11. EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth summary compensation information for the following persons: (i) all persons serving as our principal executive
officer during the years ended December 31, 2021 and 2020, and (ii) our two other most highly compensated executive officers who received compensation
during the years ended December 31, 2021 and 2020 of at least $100,000 and who were executive officers on December 31, 2021 and 2020. We refer to
these persons as our “named executive officers” in this prospectus. The following table includes all compensation earned by the named executive officers
for the respective period, regardless of whether such amounts were actually paid during the period:
Name and Position
Jeffrey S. Ervin,
Chief Executive Officer
Matthew C. Wallis, DC,
Chief Operating Officer
Sheri Gardzina,
Chief Financial Officer
Employment Agreements
Years
2021
2020
2021
2020
2021
2020
Salary
$ 327,690
253,291
289,831
254,177
Bonus
$ 50,000
-
-
-
242,320
172,651
12,500
-
Stock
Awards
-
$
-
Option
Awards
-
$
-
-
-
-
-
-
-
-
-
Non-
equity
Incentive
Plan
Comp
-
-
$
-
-
-
-
Non-
qualified
Deferred
Comp
-
-
$
All
Other
Comp
-
-
$
-
-
-
-
-
-
-
-
Total
$ 377,690
253,291
289,831
254,177
254,820
172,651
We entered into employment agreements effective March 1, 2019 with each of Jeffrey Ervin and Matthew Wallis. The employment agreements
with Messrs. Ervin and Wallis extend for a term expiring on February 28, 2023.
Pursuant to their employment agreements, Messrs. Ervin and Wallis have agreed to devote substantially all of their business time, attention and ability, to
our business as our Chief Executive Officer and Chief Operating Officer, respectively. The compensation committee approved their salaries to increase to
$350,000 and $300,000 annually, respectively. In addition, each executive may be entitled to receive, at the sole discretion of our board of directors, cash
bonuses based on the executive meeting and exceeding performance goals of the company. Each executive is entitled to participate in our 2018 Incentive
Compensation Plan. We have also agreed to pay or reimburse each executive up to $100 per month for the business use of their personal cell phone.
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The employment agreements also provide for termination by us upon death or disability of the executive (defined as three aggregate months of
incapacity during any 365-consecutive day period) or upon conviction of a felony crime of moral turpitude or a material breach of their obligations to us. In
the event any of the employment agreements are terminated by us without cause, such executive will be entitled to compensation for the balance of the
term.
In the event of a change of control of our company, Messrs. Ervin and Wallis may terminate their employment within six months after such event
and will be entitled to continue to be paid pursuant to the terms of their respective employment agreements.
The employment agreements also contain covenants (a) restricting the executive from engaging in any activities competitive with our business
during the terms of such employment agreements and one year thereafter, (b) prohibiting the executive from disclosure of confidential information
regarding us at any time and (c) confirming that all intellectual property developed by the executive and relating to our business constitutes our sole and
exclusive property.
Grants of Plan-Based Awards
As of December 31, 2021, the Company had outstanding stock options to purchase 367,051 shares of its common stock which were granted 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, are exercisable for a period of ten years, and enable the holders to
purchase shares of the Company’s common stock at the exercise price of award. The per-share fair values of these options are range from $0.64 to $1.87
based on Black-Scholes-Merton pricing model.
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. On June 30, 2020, 56,875 shares of common stock were
issued pursuant to granted RSUs which had vested.
On May 21, 2020, the Company granted 10,000 Restricted Stock Units (“RSUs”) to board member Gerard M. Hayden, Jr., which vested
immediately.
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On October 20, 2020, the Company granted an aggregate of 300,000 RSUs to Board members with these RSUs vesting in eight equal quarterly
installments commencing on February 1, 2021, provided the Board members remain directors of the Company. Effective October 2021, the vesting
schedule was amended to a one-year vesting period. As of December 31, 2021, 150,000 RSUs had vested and were issued to the Board members.
On January 30, 2021, the Company granted an aggregate of 17,000 RSUs to non-executive staff and contractors with these RSUs vesting after one
year.
On October 27, 2021 the Company granted 10,000 shares to a consultant that vested immediately.
Outstanding Equity Awards at December 31, 2021
No stock options or other equity awards were granted to any of our named executive officers during the year ended December 31, 2021. Mr. Ervin
and Ms. Gardzina were awarded 150,000 and 37,500 restricted stock units and 150,000 and 37,500 stock options, respectively, during the year ended
December 31, 2019.
The following table presents the outstanding equity awards held by each of the named executive officers as of the fiscal year ended December 31,
2021, including the value of the stock awards.
Name
Jeffrey Ervin
Sheri Gardzina
Grant
Date
5/21/2019
5/21/2019
(1) Four-year vesting with four equal annual installments
Option Awards
Stock Awards
Number of
Securities
Underlying
Unexercised
Options
(#)
Unexercisable
Option
Exercise
Price
($)
15,625(1)
13,281(1)
$
$
4.04
4.04
Option
Expiration
Date
5/21/2029
5/21/2029
Number
of
Shares or
Units
of Stock
That
Have Not
Vested
(#)
75,000(1)
18,750(1)
Market
Value of
Shares or
Units
That Have
Not
Vested
($)
85,500
21,375
$
$
Number of
Securities
Underlying
Unexercised
Options
(#)
Exercisable
96,875
24,219
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2018 Incentive Compensation Plan
Under our 2018 Incentive Compensation Plan (the “Plan”), adopted by our board of directors and holders of a majority of our outstanding shares
of common stock in May 2018, 1,000,000 shares of common stock (subject to certain adjustments) are reserved for issuance upon exercise of stock options
and grants of other equity awards. The Plan is designed to serve as an incentive for attracting and retaining qualified and motivated employees, officers,
directors, consultants and other persons who provide services to us. The compensation committee of our board of directors administers and interprets the
Plan and is authorized to grant stock options and other equity awards thereunder to all eligible employees of our company, including non-employee
consultants to our company and directors.
The Plan provides for the granting of “incentive stock options” (as defined in Section 422 of the Code), non-statutory stock options, stock
appreciation rights, shares of restricted stock, restricted stock units, deferred stock, dividend equivalents, bonus stock and awards in lieu of cash
compensation, other stock-based awards and performance awards. Options may be granted under the Plan on such terms and at such prices as determined
by the compensation committee of the board, except that the per share exercise price of the stock options cannot be less than the fair market value of our
common stock on the date of grant. Each option will be exercisable after the period or periods specified in the stock option agreement, but all stock options
must be exercised within ten years from the date of grant. Options granted under the Plan are not transferable other than by will or by the laws of descent
and distribution. The compensation committee of the board has the authority to amend or terminate the Plan, provided that no amendment shall be made
without stockholder approval if such stockholder approval is necessary to comply with any tax or regulatory requirement. Unless terminated sooner, the
Plan will terminate ten years from its effective date.
Equity Compensation Plan Summary
The following table provides information as of December 31, 2021, relating to our equity compensation plan:
Number of
Securities
Remaining
Available for
Further
Issuance Under
Equity
Compensation
Plans (Excluding
Securities
Reflected
in the First
Column)
Number of
Securities to
be Issued Upon
Exercise
of Outstanding
Equity Grants
Weighted-
Average
Exercise Price of
Outstanding
Options
367,051
-
367,051
$
$
$
3.23
-
3.23
632,949
-
632,949
Plan Category
Equity compensation plan approved by security holders (1)
Equity compensation plans not approved by security holders
Total
(1) Consists solely of the 2018 Incentive Compensation Plan.
Director Compensation
We compensate each non-employee director through annual stock option grants and by paying a cash fee for each board of directors and
committee meeting attended. Our directors in 2021, Messrs. Evans, Pruitt, and Sucoff, were paid $2,000 each per quarter in the beginning of 2021. The
directors then amended compensation effective April 2021 and were paid $11,250 each per quarter. The directors were also awarded 100,000 restricted
stock units each. See compensation for the year ended December 31, 2021 in the table below.
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Non-Employee Director Compensation Table
The following table sets forth summary information concerning compensation paid or accrued for services rendered to us in all capacities to the non-
employee members of our Board of Directors for the fiscal year ended December 31, 2021.
Name
Maurice E. Evans
Michael D. Pruitt
Cary W. Sucoff
Fees Paid
in Cash
($)
38,833
38,833
38,833
$
$
$
Stock
Awards
($) (1)
$
$
$
-
-
-
Option
Awards
($)
-
-
-
Non-Equity
Incentive
Plan
Compensation
($)
Nonqualified
Deferred
Compensation
Earnings
($)
-
-
-
-
-
-
All Other
Comp
($)
-
-
-
Total
($)
38,833
38,833
38,833
$
$
$
(1) Represents full fair value at grant date of RSUs granted to our directors, computed in accordance with FASB ASC Topic 718.
ITEM 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER
MATTERS
The following table sets forth information as of April 12, 2022 regarding the beneficial ownership of our common stock by (i) each person we
know to be the beneficial owner of 5% or more of our common stock, (ii) each of our current executive officers, (iii) each of our directors, and (iv) all of
our current executive officers and directors as a group. Information with respect to beneficial ownership has been furnished by each director, executive
officer or 5% or more stockholder, as the case may be. The address for all executive officers and directors is c/o IMAC Holdings, Inc., 1605 Westgate
Circle, Brentwood, Tennessee 37027.
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Percentage of beneficial ownership in the table below is calculated based on 26,485,167 shares of common stock outstanding as of April 12, 2022.
Beneficial ownership is determined in accordance with the rules of the SEC, which generally attribute beneficial ownership of securities to persons who
possess sole or shared voting power or investment power with respect to those securities and includes shares of our common stock issuable pursuant to the
exercise of stock options, warrants or other securities that are immediately exercisable or convertible or exercisable or convertible within 60 days of April
12, 2022. Unless otherwise indicated, the persons or entities identified in this table have sole voting and investment power with respect to all shares shown
as beneficially owned by them.
Name of Beneficial Owner
Jeffrey S. Ervin
Matthew C. Wallis
Benjamin Lerner
Sheri Gardzina
Michael Pruitt
Maurice Evans
Cary Sucoff
All directors and executive officers as a group (7 persons)
*
Less than 1% of outstanding shares.
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Shares
Beneficially
Owned
Percentage
Beneficially
Owned
333,900
1,751,694
100,000
18,950
101,250
242,122
100,000
2,647,916
1.2%
6.7%
*
*
*
*
*
18.4%
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDENPENDENCE
Policies and Procedures for Transactions with Related Persons
Our board of directors intends to adopt a written related person transaction policy to set forth the policies and procedures for the review and
approval or ratification of related person transactions. Related persons include any executive officer, director or a holder of more than 5% of our common
stock, including any of their immediate family members and any entity owned or controlled by such persons. Related person transactions refers to any
transaction, arrangement or relationship, or any series of similar transactions, arrangements or relationships in which (i) we were or are to be a participant,
(ii) the amount involved exceeds $120,000, and (iii) a related person had or will have a direct or indirect material interest. Related person transactions
include, without limitation, purchases of goods or services by or from the related person or entities in which the related person has a material interest,
indebtedness, guarantees of indebtedness, and employment by us of a related person, in each case subject to certain exceptions set forth in Item 404 of
Regulation S-K under the Securities Act.
We expect that the policy will provide that in any related person transaction, our audit committee and board of directors will consider all of the
available material facts and circumstances of the transaction, including: the direct and indirect interests of the related persons; in the event the related
person is a director (or immediate family member of a director or an entity with which a director is affiliated), the impact that the transaction will have on a
director’s independence; the risks, costs and benefits of the transaction to us; and whether any alternative transactions or sources for comparable services or
products are available. After considering all such facts and circumstances, our audit committee and board of directors will determine whether approval or
ratification of the related person transaction is in our best interests. For example, if our audit committee determines that the proposed terms of a related
person transaction are reasonable and at least as favorable as could have been obtained from unrelated third parties, it will recommend to our board of
directors that such transaction be approved or ratified. In addition, if a related person transaction will compromise the independence of one of our directors,
our audit committee may recommend that our board of directors reject the transaction if it could affect our ability to comply with securities laws and
regulations or Nasdaq listing requirements.
Each transaction described in this section was entered into prior to the adoption of our audit committee charter and the foregoing policy proposal.
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Corporate Conversion
Effective June 1, 2018, we converted to a Delaware corporation and changed our name to IMAC Holdings, Inc. Prior to June 1, 2018, we were a
Kentucky limited liability company controlled by Matthew C. Wallis, DC, Jason Brame, DC, and Jeffrey S. Ervin. Upon the Corporate Conversion, all of
our outstanding membership interests were exchanged on a proportional basis for shares of common stock of IMAC Holdings, Inc.
Business Transactions
Chiropractic Health of Southwest Florida. In January 2020, we acquired the assets and assumed the building lease liability of Chiropractic
Health of Southwest Florida, Inc. (CHSF) in Bonita Springs, Florida. The building lease expires in December 2024. The acquisition of this practice
expands into a new market where we can provide additional services from what was being provided, which included physical therapy, chiropractic care and
soft tissue therapies.
Campbell Chiropractic. In August 2020, we entered into a sublease agreement with Campbell Chiropractic in Richmond, Kentucky. The shared
space arrangement allowed us full access to the space twice weekly. This agreement was terminated in 2021.
Lockwood Chiropractic, LLC. We acquired the chiropractic clinic of Lockwood Chiropractic in Webster Groves, Missouri, a suburb of St. Louis,
in a Practice Purchase Agreement in November 2020. The facility will continue to operate under the direction of Sharon Whalen, D.C. and will provide us
the opportunity to provide our services to a wider patient base outside the city.
Willmitch Chiropractic, P.A. We acquired this clinic located in Tampa, Florida in February 2021. This acquisition continues our expansion into
the Florida market and the founder, Martin Willmitch, will remain with the Company and serve as Vice President of Managed Care.
NHC Chiropractic, PPLC dba Synergy Healthcare. We acquired the assets of this practice in Orlando, Florida in March 2021. The clinic
provides chiropractic care and the Company is implementing its regenerative rehabilitation offering, including its patient wellness subscriptions to the
clinic’s established services.
Fort Pierce Chiropractic. We completed an asset purchase of this clinic located in Fort Pierce, Florida and the third Florida addition in June 2021.
This clinic provides chiropractic care and the Company will be introducing medical services to the current patient base.
Active Medical Center. We acquired the assets of this clinic located in Naperville, Illinois in June 2021. This clinic provides a variety of
orthopedic treatments for various conditions through a combination of medical and physical rehabilitation services and will join the other two Mike Ditka
clinics in the Chicago area.
Louisiana Orthopaedic & Sports Rehab Institute. We completed the acquisition of this practice management company in Baton Rouge, Louisiana
in October 2021. The founder of this clinic, Allen Johnston, M.D., will be joining IMAC as a Medical Director, as we expand our presence into Louisiana.
BackSpace. BackSpace entered into three management agreements with ChiroMart, LLC, ChiroMart Missouri, LLC and ChiroMart Florida, LLC.
These are related to the BackSpace locations operated in Walmart’s located in Tennessee, Missouri and Florida.
97
Related Party Transactions
On June 1, 2018, we entered into a note payable to the Edward S. Bredniak Revocable Trust, the trustee of which is Edward S. Bredniak, a former
director of our company, in the amount of up to $2,000,000. An existing note payable with this entity with an outstanding balance of $379,675.60 was
combined into a new note payable. The note carried an interest rate of 10% per annum and all outstanding balances were due and payable 13 months after
the closing of this offering. On June 28, 2019, we entered into an amendment to this note (the “Amendment”). Among other things, the Amendment
provided for the extension of the maturity of the note to January 5, 2021, reduced the principal amount of the note from $2,000,000 to $1,750,000,
corrected the name of the lender under the note from The Edward S. Bredniak Revocable Trust u/a dated 8/14/2015 to Edward S. Bredniak, and provided
for the payment of any outstanding amounts under the note which exceed $1,750,000 as of the date of the Amendment. The proceeds of this note were used
to satisfy ongoing working capital needs, expenses related to the preparation for our initial public offering, equipment and construction costs related to new
clinic locations, and potential business combination and transaction expenses. In November 2020, we entered into an amendment to this note (the
“Amendment 2.0”) that provided for the extension of the maturity of the note to January 5, 2022. This note was paid in full on March 29, 2021.
Indemnification Agreements
We have entered into an indemnification agreement with each of our directors and executive officers. The indemnification agreements and our
certificate of incorporation and bylaws require us to indemnify our directors and executive officers to the fullest extent permitted by Delaware law.
Director Independence
Our Board of Directors has determined that Messrs. Evans, Pruitt and Sucoff, representing a majority of our directors, are independent directors
(as currently defined in Rule 5605(a)(2) of the NASDAQ listing rules). In determining the independence of our directors, the Board of Directors considered
all transactions in which the Company and any director had any interest, including those discussed above. The independent directors meet as often as
necessary to fulfill their responsibilities, including meeting at least twice annually in executive session without the presence of non-independent directors
and management.
98
ITEM 14.
PRINCIPAL ACCOUNTING FEES AND SERVICES
On August 26, 2021, the Audit Committee of the Company concluded a competitive review process of independent registered public accounting
firms. As a result of this process and following careful deliberation, on August 26, 2021, the Audit Committee approved the dismissal of Daszkal Bolton
LLP as the Company’s independent registered public accounting firm effective as of such date. The Company provided Daszkal Bolton LLP with formal
notice of such dismissal on August 27, 2021.
The reports of Daszkal Bolton LLP on the Company’s consolidated financial statements as of and for the years ended December 31, 2020 and
2019 did not contain an adverse opinion or a disclaimer of opinion, and were not qualified or modified as to uncertainty, audit scope or accounting
principles.
During the Company’s two most recent fiscal years and the subsequent interim period preceding Daszkal Bolton’s dismissal, there were: (i) no
disagreements (within the meaning of Item 304(a)(1)(iv) of Regulation S-K and the related instructions thereto) with Daszkal Bolton LLP on any matter of
accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreements, if not resolved to Daszkal Bolton’s
satisfaction, would have caused Daszkal Bolton to make reference to the subject matter thereof in connection with its reports on the Company’s
consolidated financial statements for such years; and (ii) no reportable events (as such term is defined in Item 304(a)(1)(v) of Regulation S-K).
On August 26, 2021, the Audit Committee engaged Cherry Bekaert, LLP (“Cherry Bekaert”) as the Company’s independent registered public
accounting firm for the fiscal year ending December 31, 2021.
During the Company’s two most recent fiscal years and the subsequent interim period preceding Cherry Bekaert’s engagement, neither the
Company nor anyone on its behalf consulted with Cherry Bekaert regarding either: (i) the application of accounting principles to a specified transaction,
either completed or proposed, or the type of audit opinion that might be rendered on the Company’s financial statements, and neither a written report nor
oral advice was provided to the Company that Cherry Bekaert concluded was an important factor considered by the Company in reaching a decision as to
the accounting, auditing or financial reporting issue; or (ii) any matter that was either the subject of a disagreement (within the meaning of Item 304(a)(1)
(iv) of Regulation S-K and the related instructions thereto) or a reportable event (as such term is defined in Item 304(a)(1)(v) of Regulation S-K).
99
The following table sets forth the aggregate accounting fees paid by us for the year ended December 31, 2021 and the year ended December 31, 2020. The
below fees were paid to the firm Daszkal Bolton LLP and Cherry Bekaert. All non-audit related services in the table were pre-approved and/or ratified by
the Audit Committee of our Board of Directors.
Type of Fees
Audit fees
Audit related fees
Tax fees
Total
Types of Fees Explanation
Year Ended
December 31,
2021
Year Ended
December 31,
2020
$
$
195,500 $
24,720
15,000
235,220 $
149,000
27,750
8,000
184,750
Audit Fees. Audit fees were incurred for accounting services rendered for the audit of our consolidated financial statements for the years ended December
31, 2021 and 2020 and reviews of quarterly consolidated financial statements.
Audit Related Fees. We incurred fees in connection with accounting reviews for Form-3 Comfort Letters to Underwriters, 8-Ks and agreed-upon
procedures.
Audit Committee Pre-Approval of Services by Independent Registered Public Accounting Firm
Section 10A(i)(1) of the Exchange Act and related SEC rules require that all auditing and permissible non-audit services to be performed by our principal
accountants be approved in advance by the Audit Committee of the Board. Pursuant to Section 10A(i)(3) of the Exchange Act and related SEC rules, the
Audit Committee has established procedures by which the Chairman of the Audit Committee may pre-approve such services provided that the pre-approval
is detailed as to the particular service or category of services to be rendered and the Chairman reports the details of the services to the full Audit Committee
at its next regularly scheduled meeting.
The audit committee has considered the services provided by Daszkal Bolton LLP and Cherry Bekaert LLP as disclosed above in the captions “audit fees”
and “tax fees” and has concluded that such services are compatible with the independence of Daszkal Bolton LLP and Cherry Bekaert LLP as our principal
accountants.
Our Board has considered the nature and amount of fees billed by our independent auditors and believes that the provision of services for activities
unrelated to the audit is compatible with maintaining our independent auditors’ independence.
100
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
Exhibit
Number
PART IV
Description
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
3.3
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).
Certificate of Correction of the Certificate of Incorporation of IMAC Holdings, Inc. filed with the Delaware Secretary of State on August 8,
2019 (filed as Exhibit 3.4 to the Company’s Current Report on Form 8-K filed with the SEC on August 9, 2019 and incorporated herein by
reference).
3.4
Bylaws of IMAC Holdings, Inc. (filed as Exhibit 3.2 to the Company’s Registration Statement on Form S-1 filed with the SEC on
September 17, 2018 and incorporated herein by reference).
4.1
Specimen Common Stock Certificate (filed as Exhibit 4.1 to the Company’s Registration Statement on Form S-1 filed with the SEC on
September 17, 2018 and incorporated herein by reference).
4.2
4.3
4.4
4.5
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).
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).
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).
Description of the Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934 (filed as Exhibit 4.5 to the
Company’s Annual Report on Form 10-K filed with the SEC on March 26, 2020 and incorporated herein by reference).
10.1†
2018 Incentive Compensation Plan (filed as Exhibit 10.1 to the Company’s Registration Statement on Form S-1 filed with the SEC on
September 17, 2018 and incorporated herein by reference).
10.2
Form of Indemnification Agreement (filed as Exhibit 10.2 to the Company’s Registration Statement on Form S-1 filed with the SEC on
September 17, 2018 and incorporated herein by reference).
10.4
10.7
Management Services Agreement between IMAC Holdings, LLC and Integrated Medicine and Chiropractic Regeneration Center PSC (filed
as Exhibit 10.4 to the Company’s Registration Statement on Form S-1 filed with the SEC on September 17, 2018 and incorporated herein by
reference).
Commercial Line of Credit Agreement, dated May 1, 2018, between Integrated Medicine and Chiropractic Regeneration Center of St. Louis,
LLC and Independence Bank of Kentucky (filed as Exhibit 10.12 to the Company’s Registration Statement on Form S-1 filed with the SEC
on September 17, 2018 and incorporated herein by reference).
101
10.11
Addendum to Merger Agreement with Clinic Management Associates, LLC (filed as Exhibit 10.18 to the Company’s Registration Statement
on Form S-1 filed with the SEC on October 26, 2018 and incorporated herein by reference).
10.12
Addendum to Unit Purchase Agreement among IMAC Holdings, Inc., IMAC of St. Louis, LLC and certain unitholders of IMAC of St.
Louis LLC (filed as Exhibit 10.19 to the Company’s Registration Statement on Form S-1 filed with the SEC on October 26, 2018 and
incorporated herein by reference).
10.13†
Employment Agreement, dated as of March 1, 2019, between IMAC Holdings, Inc. and Jeffrey S. Ervin (filed as Exhibit 10.13 to the
Company’s Current Report on Form 10-K filed with the SEC on April 16, 2019 and incorporated herein by reference).
10.14†
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 Current Report on Form 10-K filed with the SEC on April 16, 2019 and incorporated herein by reference).
10.15†
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, 2019 and incorporated herein by reference).
10.17
10.20
Lease, dated as of March 1, 2019, by and between Advantage Therapy, LLC and Sagamore Hill Development Company, LLC (filed as
Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q filed with the SEC on November 14, 2019 and incorporated herein by
reference).
Amended and Restated Term Note, dated as of September 19, 2019, made by Progressive Health and Rehabilitation, LTD in favor of PNC
Bank, National Association (filed as Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q filed with the SEC on November 14,
2019 and incorporated herein by reference).
10.21
Form of 10% Promissory Note issued by IMAC Holdings, Inc. (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed
with the SEC on March 9, 2020 and incorporated herein by reference).
10.22
Employment Agreement, dated as of February 4, 2022 and commencing February 21, 2022, between IMAC Holdings, Inc. and Dr. Ben
Lerner. (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on February 21, 2022 and incorporated
herein by reference).
21.1*
List of subsidiaries.
31.1*
Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2*
Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1*
Certification of Principal Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2*
Certification of Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Compensatory plan or agreement.
Filed herewith
The certifications attached as Exhibits 32.1 and 32.2 that accompany this Annual Report on Form 10-K are not deemed filed with the Securities and
Exchange Commission and are not to be incorporated by reference into any filing of IMAC Holdings, Inc. under the Securities and Exchange Act of
1933, as amended, or the Securities and Exchange Act of 1934, as amended, whether made before or after the date of this 10-K, irrespective of any
general incorporation language contained in such filings.
†
*
+
All other schedules are omitted because they are not applicable or the required information is shown in the consolidated financial statements or notes
thereto.
ITEM 16.
FORM 10-K SUMMARY
None.
102
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
SIGNATURES
Dated: April 14, 2022
IMAC HOLDINGS, INC.
By:
Name:
Title:
/s/ Jeffrey S. Ervin
Jeffrey S. Ervin
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the registrant
and in the capacities and on the dates indicated:
Name
/s/ Jeffrey S. Ervin
Jeffrey S. Ervin
/s/ Sheri Gardzina
Sheri Gardzina
/s/ Matthew C. Wallis
Matthew C. Wallis
/s/ Maurice E. Evans
Maurice E. Evans
/s/ Michael D. Pruitt
Michael D. Pruitt
/s/ Cary W. Sucoff
Cary W. Sucoff
Title
Director and Chief Executive Officer
(Principal Executive Officer)
Chief Financial Officer
(Principal Financial and Accounting Officer)
Date
April 14, 2022
April 14, 2022
Director and President
April 14, 2022
Director
Director
Director
103
April 14, 2022
April 14, 2022
April 14, 2022
Name of Subsidiary
Name of Parent Company
Subsidiary State of Organization
SUBSIDIARIES OF THE REGISTRANT
EXHIBIT 21.1
IMAC of St. Louis, LLC
IMAC Holdings, Inc.
Missouri
IMAC Regeneration Management of Nashville, LLC
IMAC Holdings, Inc.
Tennessee
IMAC Management Services LLC
IMAC Holdings, Inc.
Kentucky
IMAC Management of Illinois, LLC
IMAC Holdings, Inc.
Illinois
IMAC Regeneration Management, LLC
IMAC Holdings, Inc.
Texas
Advantage Hand Therapy and Orthopedic Rehabilitation,
LLC
IMAC Holdings, Inc.
Missouri
IMAC Management of Florida, LLC
IMAC Holdings, Inc.
Florida
Louisiana Orthopaedic & Sports Rehab Institute
IMAC Holdings, Inc.
Louisiana
The Back Space, LLC
IMAC Holdings, Inc.
Delaware
Exhibit 31.1
CERTIFICATION UNDER SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Jeffrey Ervin, Chief Executive Officer of IMAC Holdings, Inc. (the “Registrant”), certify that:
1. I have reviewed this Annual Report on Form 10-K for the twelve months ended December 31, 2021 of IMAC Holdings, Inc. (the “Annual
Report “);
2. Based on my knowledge, this Annual Report does not contain any untrue statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this
Annual Report;
3. Based on my knowledge, the financial statements, and other financial information included in this Annual Report, fairly present in all material
respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this Annual Report;
4. The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for
the Registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my
supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to me by others within
those entities, particularly during the period in which this Annual Report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under
my supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles;
about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this Annual Report based on such evaluation; and
(c) Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this Annual Report my conclusions
(d) Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s
most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to
materially affect, the Registrant’s internal control over financial reporting; and
5. The Registrant’s other certifying officer and I have disclosed, based on my most recent evaluation of internal control over financial reporting, to
the Registrant’s auditors and the audit committee of the Registrant’s board of directors (or persons performing the equivalent functions):
reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s
internal control over financial reporting.
Date: April 14, 2022
/s/ Jeffrey Ervin
By:
Name: Jeffrey Ervin
Title: Chief Executive Officer
(Principal Executive Officer)
Exhibit 31.2
CERTIFICATION UNDER SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Sheri Gardzina, Chief Financial Officer of IMAC Holdings, Inc. (the “Registrant “), certify that:
1. I have reviewed this Annual Report on Form 10-K for the twelve months ended December 31, 2021 of IMAC Holdings, Inc. (the “Annual
Report “);
2. Based on my knowledge, this Annual Report does not contain any untrue statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this
Annual Report;
3. Based on my knowledge, the financial statements, and other financial information included in this Annual Report, fairly present in all material
respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this Annual Report;
4. The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for
the Registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my
supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to me by others within
those entities, particularly during the period in which this Annual Report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under
my supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles;
about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this Annual Report based on such evaluation; and
(c) Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this Annual Report my conclusions
(d) Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s
most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to
materially affect, the Registrant’s internal control over financial reporting; and
5. The Registrant’s other certifying officer and I have disclosed, based on my most recent evaluation of internal control over financial reporting, to
the Registrant’s auditors and the audit committee of the Registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are
reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s
internal control over financial reporting.
Date: April 14, 2022
/s/ Sheri Gardzina
By:
Name: Sheri Gardzina
Title: Chief Financial Officer
(Principal Financial Officer)
Exhibit 32.1
CERTIFICATION UNDER SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the filing by IMAC Holdings, Inc. (the “Registrant”) of its Annual Report on Form 10-K for the year ended December 31,
2021 (the “Annual Report”) with the Securities and Exchange Commission, I, Jeffrey Ervin, certify, pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(i) The Annual Report fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of
1934, as amended; and
(ii) The information contained in the Annual Report fairly presents, in all material respects, the financial condition and results of operations of the
Registrant.
A signed original of this written statement required by Section 906 has been provided to the Registrant and will be retained by the Registrant and
furnished to the Securities and Exchange Commission or its staff upon request.
Date: April 14, 2022
/s/ Jeffrey Ervin
By:
Name: Jeffrey Ervin
Title: Chief Executive Officer
(Principal Executive Officer)
Exhibit 32.2
CERTIFICATION UNDER SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the filing by IMAC Holdings, Inc. (the “Registrant”) of its Annual Report on Form 10-K for the year ended December 31,
2021 (the “Annual Report”) with the Securities and Exchange Commission, I, Sheri Gardzina, certify, pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(i) The Annual Report fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of
1934, as amended; and
(ii) The information contained in the Annual Report fairly presents, in all material respects, the financial condition and results of operations of the
Registrant.
A signed original of this written statement required by Section 906 has been provided to the Registrant and will be retained by the Registrant and
furnished to the Securities and Exchange Commission or its staff upon request.
Date: April 14, 2022
/s/ Sheri Gardzina
By:
Name: Sheri Gardzina
Title: Chief Financial Officer
(Principal Financial Officer)