UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2021

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

Commission file number: 001-38797

IMAC Holdings, Inc.

(Exact name of registrant as specified in its charter)

Delaware

83-0784691

(State or Other Jurisdiction of

Incorporation or Organization)

(I.R.S. Employer

Identification No.)

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

(844) 266-4622

(Registrant’s Telephone Number, Including Area Code)

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

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

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

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

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

Large accelerated filer	☐	Accelerated filer	☐

Non-accelerated filer	☒	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 is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of August 11, 2021, the registrant had 25,322,356 shares of common stock (par value $0.001 per share) outstanding.

IMAC HOLDINGS, INC.

TABLE OF CONTENTS

	Page
IMPORTANT INFORMATION REGARDING FORWARD-LOOKING STATEMENTS	3

PART I. FINANCIAL INFORMATION	4
Item 1. Financial Statements (Unaudited)	4
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	21
Item 3. Quantitative and Qualitative Disclosures about Market Risk	33
Item 4. Controls and Procedures	33

PART II. OTHER INFORMATION	34
Item 1. Legal Proceedings	34
Item 1A. Risk Factors	34
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	35
Item 3. Defaults Upon Senior Securities	35
Item 4. Mine Safety Disclosures	35
Item 5. Other Information	35
Item 6. Exhibits	36

Important Information Regarding Forward-Looking Statements

Portions of this Quarterly Report on Form 10-Q (including information incorporated by reference) include “forward-looking statements” based on our current beliefs, expectations, and projections regarding our business strategies, market potential, future financial performance, industry, and other matters. This includes, in particular, “Item 2 — Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this Quarterly Report on Form 10-Q, as well as other portions of this Quarterly Report on Form 10-Q. The words “believe,” “expect,” “anticipate,” “project,” “could,” “would,” and similar expressions, among others, generally identify “forward-looking statements,” which speak only as of the date the statements were made. The matters discussed in these forward-looking statements are subject to risks, uncertainties, and other factors that could cause our actual results to differ materially from those projected, anticipated, or implied in the forward-looking statements. The most significant of these risks, uncertainties, and other factors are described in “Item 1A — Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020 filed with the U.S. Securities and Exchange Commission on March 4, 2021. Except to the limited extent required by applicable law, we undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

IMAC HOLDINGS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

	June 30, 2021			December 31, 2020
ASSETS
Current assets:
Cash	$	13,621,610		$	2,623,952
Accounts receivable, net		1,340,343			1,513,683
Deferred compensation, current portion		324,081			309,375
Other assets		977,053			310,359
Total current assets		16,263,087			4,757,369

Property and equipment, net		1,868,732			1,777,042

Other assets:
Goodwill		2,040,696			2,040,696
Intangible assets, net		6,718,964			6,611,551
Deferred compensation, net of current portion		210,219			354,906
Security deposits		400,756			388,407
Right of use asset		5,029,827			3,816,035
Total other assets		14,400,462			13,211,595

Total assets	$	32,532,281		$	19,746,006

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:
Accounts payable and accrued expenses	$	1,383,137		$	1,692,283
Patient deposits		413,243			295,071
Notes payable, current portion, net of deferred loan costs		1,863,849			2,527,324
Finance lease obligation, current portion		18,641			18,242
Liability to issue common stock, current portion		334,575			339,375
Operating lease liability, current portion		1,424,662			1,078,107
Total current liabilities		5,438,107			5,950,402

Long-term liabilities:
Notes payable, net of current portion		151,180			1,958,883
Finance lease obligation, net of current portion		38,901			48,323
Liability to issue common stock, net of current portion		233,285			468,760
Operating lease liability, net of current portion		4,292,525			3,506,484

Total liabilities		10,153,998			11,932,852

Commitments and Contingencies – Note 14		-			-

Stockholders’ equity:
Preferred stock - $0.001 par value, 5,000,000 authorized, nil issued and outstanding at June 30, 2021 and December 31, 2020, respectively.		-			-
Common stock - $0.001 par value, 30,000,000 authorized; 25,980,598 and 12,839,972 shares issued at June 30, 2021 and December 31, 2020, respectively; and 25,322,356 and 12,747,055 outstanding at June 30, 2021 and December 31, 2020, respectively.		25,323			12,747
Additional paid-in capital		44,785,811			25,465,094
Accumulated deficit		(19,031,862	)		(15,045,783	)
Non-controlling interest		(3,400,989	)		(2,618,904	)
Total stockholders’ equity		22,378,283			7,813,154

Total liabilities and stockholders’ equity	$	32,532,281		$	19,746,006

See accompanying notes to the unaudited condensed consolidated financial statements.

IMAC HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	2021			2020			2021			2020
	Three Months Ended June 30,						Six Months Ended June 30,
	2021			2020			2021			2020

Patient revenues, net	$	3,462,814		$	2,572,580		$	6,487,622		$	5,881,649
Other income		2,701			-			6,078			-
Management fees		-			-			36,068			12,487
Total revenue		3,465,515			2,572,580			6,529,768			5,894,136

Operating expenses:
Patient expenses		339,951			405,367			681,363			785,184
Salaries and benefits		2,996,674			2,334,249			5,750,922			5,260,399
Share-based compensation		123,169			121,945			233,776			203,029
Advertising and marketing		315,529			174,350			581,077			416,167
Grant funds		-			(415,978	)		-			(415,978	)
General and administrative		1,661,193			1,208,457			2,880,531			2,444,595
Depreciation and amortization		441,804			453,651			864,005			904,146
Total operating expenses		5,878,320			4,282,041			10,991,674			9,597,542

Operating loss		(2,412,805	)		(1,709,461	)		(4,461,906	)		(3,703,406	)

Other income (expense):
Interest income		-			39			-			39
Other income		135			-			135			-
Gain (loss) on extinguishment of debt		108			(109,544	)		108			(109,544	)
Gain (loss) on disposal of assets		49			(21,225	)		(3,994	)		(21,225	)
Interest expense		(126,228	)		(134,921	)		(302,507	)		(211,125	)
Total other (expenses)		(125,936	)		(265,651	)		(306,258	)		(341,855	)

Net loss before income taxes		(2,538,741	)		(1,975,112	)		(4,768,164	)		(4,045,261	)

Income taxes		-			-			-			-

Net loss		(2,538,741	)		(1,975,112	)		(4,768,164	)		(4,045,261	)

Net loss (income) attributable to the non-controlling interest		542,697			(55,576	)		782,085			281,028

Net loss attributable to IMAC Holdings, Inc.	$	(1,996,044	)	$	(2,030,688	)	$	(3,986,079	)	$	(3,764,233	)

Net loss per share attributable to common stockholders
Basic and diluted	$	(0.08	)	$	(0.20	)	$	(0.20	)	$	(0.38	)
Net loss per share attributable to common stockholders Basic and diluted	$	(0.08	)	$	(0.20	)	$	(0.20	)	$	(0.38	)

Weighted average common shares outstanding
Basic and diluted		25,143,201			10,184,294			19,476,793			9,897,773
Weighted average common shares outstanding Basic and diluted		25,143,201			10,184,294			19,476,793			9,897,773

See accompanying notes to the unaudited condensed consolidated financial statements.

IMAC HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited)

	Number of Shares		Par		Paid-In- Capital		Controlling Interest			Accumulated Deficit			Total
	Common Stock				Additional		Non-
	Number of Shares		Par		Paid-In- Capital		Controlling Interest			Accumulated Deficit			Total

Balance, December 31, 2019		8,913,258	$	8,907	$	20,050,634	$	(2,080,199	)	$	(10,042,050	)	$	7,937,292
Issuance of common stock		1,095,840		1,096		1,376,122		-			-			1,377,218
Issuance of employee stock options		-		-		38,359		-			-			38,359
Net loss		-		-		-		(336,604	)		(1,733,545	)		(2,070,149	)
Balance, March 31, 2020		10,009,098		10,003		21,465,115		(2,416,803	)		(11,775,595	)		7,282,720
Issuance of common stock		1,830,875		1,831		2,576,820		-			-			2,578,651
Issuance of employee stock options		-		-		37,569		-			-			37,569
Net income (loss)		-		-		-		55,576			(2,030,688	)		(1,975,112	)
Balance, June 30, 2020		11,839,973	$	11,834	$	24,079,504	$	(2,361,227	)	$	(13,806,283	)	$	7,923,828

	Common Stock				Additional		Non-
	Number of Shares		Par		Paid-In- Capital		Controlling Interest			Accumulated Deficit			Total

Balance, December 31, 2020		12,747,055	$	12,747	$	25,465,094	$	(2,618,904	)	$	(15,045,783	)	$	7,813,154
Issuance of common stock		11,259,676		11,260		17,198,664		-			-			17,209,924
Issuance of employee stock options		-		-		39,052		-			-			39,052
Net loss		-		-		-		(239,388	)		(1,990,035	)		(2,229,423	)
Balance, March 31, 2021		24,006,731		24,007		42,702,810		(2,858,292	)		(17,035,818	)		22,832,707
Issuance of common stock		1,315,625		1,316		2,043,459		-			-			2,044,775
Issuance of employee stock options		-		-		39,542		-			-			39,542
Net loss		-		-		-		(542,697	)		(1,996,044	)		(2,538,741	)
Net income (loss)		-		-		-		(542,697	)		(1,996,044	)		(2,538,741	)
Balance, June 30, 2021		25,322,356	$	25,323	$	44,785,811	$	(3,400,989	)	$	(19,031,862	)	$	22,378,283

See accompanying notes to unaudited condensed consolidated financial statements.

IMAC HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	2021			2020
	Six Months Ended June 30,
	2021			2020
Cash flows from operating activities:
Net loss	$	(4,768,164	)	$	(4,045,261	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		864,005			904,146
Share based compensation		233,776			203,030
Loss on disposition of assets		3,994			(16,577	)
(Increase) decrease in operating assets:
Accounts receivable, net		173,340			(210,707	)
Other assets		(630,626	)		299,721
Security deposits		(7,349	)		48,204
Increase (decrease) in operating liabilities:
Accounts payable and accrued expenses		(317,776	)		(329,056	)
Patient deposits		118,172			161,451
Net cash used in operating activities		(4,330,628	)		(2,985,049	)

Cash flows from investing activities:
Purchase of property and equipment		(240,938	)		(10,511	)
Purchase of license fee		-			(243,750	)
Brand development		(66,495	)		-
Acquisitions (Note 6)		(731,909	)		(200,000	)
Proceeds from sale of fixed assets		2,650			-
Net cash used in investing activities		(1,036,692	)		(454,261	)

Cash flows from financing activities:
Proceeds from issuance of common stock		19,005,323			3,774,617
Proceeds from notes payable		-			2,891,520
Payments on notes payable		(2,624,102	)		(719,104	)
Payments of debt issuance costs		-			(70,000	)
Payments on finance lease obligation		(16,243	)		(8,643	)
Net cash provided by financing activities		16,364,978			5,868,390

Net increase in cash		10,997,658			2,429,080

Cash, beginning of period		2,623,952			373,689

Cash, end of period	$	13,621,610		$	2,802,769

Supplemental cash flow information:
Interest paid	$	183,849		$	56,058
Non cash financing and investing:
Debt discount notes payable	$	-		$	115,000

See accompanying notes to the unaudited condensed consolidated financial statements.

IMAC HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1 – Description of Business

IMAC Holdings, Inc. is a holding company for IMAC Regeneration Centers, The Back Space retail store 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, Missouri and Tennessee as of June 30, 2021. The Company has a joint venture with an outpatient medical clinic in Kentucky. 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 June 30, 2021, the Back Space has opened one retail clinic location in 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.

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

Note 2 – Summary of Significant Accounting Policies

Principles of Consolidation

The accompanying condensed consolidated financial statements have been prepared in accordance with Generally Accepted Accounting Principles (“GAAP”) in the United States of America (“U.S.”) as promulgated by the Financial Accounting Standards Board (“FASB”), Accounting Standards Codification (“ASC”) and with the rules and regulations of the U.S. Securities and Exchange Commission (“SEC” or the “Commission”). The information contained in these condensed consolidated financial statements should be read in conjunction with the Company’s consolidated financial statements and notes thereto for the fiscal year ended December 31, 2020 included in the Company’s Annual Report on Form 10-K filed with the SEC on March 4, 2021.

The accompanying condensed consolidated financial statements include the accounts of IMAC Holdings, Inc. (“IMAC Holdings”) and the following entities which are consolidated due to direct ownership of a controlling voting interest or other rights granted to us as the sole general partner or managing member of the entity: IMAC 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”), Chiropractic Health of Southwest Florida, Inc. (“SW Florida”) and The Back Space LLC (“Back Space”); 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 Management of Florida, LLC due to control by contract: Willmitch Chiropractic, P.A. and IMAC Medical of Florida, PA (“Florida Medical”) and the following entity which is consolidated with The Back Space LLC due to control by contract: The Back Space.

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

In February 2021, the Company completed the asset purchase of and signed a Management Services Agreement with Willmitch Chiropractic, P.A. in Tampa, Florida. This entity is included in the condensed consolidated financial statements from the date of acquisition.

In March 2021, the Company completed the asset purchase of NHC Chiropractic, PLLC dba Synergy Healthcare in Orlando, Florida. The assets acquired are included in the condensed consolidated financial statements from the date of acquisition.

In June 2021, the Company completed the asset purchase of Fort Pierce Chiropractic in Fort Pierce, Florida and Active Medical Center in Naperville, Illinois. These acquisitions are included in the condensed consolidated financial statements from the date of acquisition.

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

Use of Estimates

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

COVID-19 Pandemic

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

The full impact of the COVID-19 outbreak continues to evolve as of the date of these condensed consolidated financial statements. As such, it is uncertain as to the full magnitude that the pandemic will have on the Company’s combined financial condition, liquidity and future results of operations. Management is actively monitoring the impact of the global situation on its consolidated financial condition, liquidity, operations, suppliers, industry and workforce. Given the daily evolution of the COVID-19 outbreak and the global responses to curb its spread, the Company is not able to estimate the effects of the COVID-19 outbreak on its results of operations, financial condition, or liquidity for fiscal year 2021 beyond the results presented in these condensed consolidated financial statements and this quarterly report.

Due to the impacts of COVID-19 we have seen an increase in recruiting and labor costs as well as delays in supply chain.

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 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 and IMAC Florida 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 a Walmart retail location as part of Back Space. The fees for such services are paid and recognized as incurred.

Patient Deposits

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

Fair Value of Financial Instruments

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

Cash and Cash Equivalents

The Company considers all short-term investments with an original maturity of three months or less to be cash equivalents. The Company had no cash equivalents at June 30, 2021 and December 31, 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 condensed consolidated financial statements is recorded at the net amount expected to be received. The Company’s primary collection risks are (i) the risk of overestimation of net revenues at the time of billing that may result in the Company receiving less than the recorded receivable, (ii) the risk of non-payment as a result of commercial insurance companies’ denial of claims, (iii) the risk that patients will fail to remit insurance payments to the Company when the commercial insurance company pays out-of-network claims directly to the patient, (iv) resource and capacity constraints that may prevent the Company from handling the volume of billing and collection issues in a timely manner, (v) the risk that patients do not pay the Company for their self-pay balances (including co-pays, deductibles and any portion of the claim not covered by insurance) and (vi) the risk of non-payment from uninsured patients.

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

Allowance for Doubtful Accounts, Contractual and Other Discounts

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

Property and Equipment

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

Intangible Assets

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

Goodwill

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

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

Long-Lived Assets

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

Advertising and Marketing

The Company uses advertising and marketing to promote its services. Advertising and marketing costs are expensed as incurred. Advertising and marketing expense was $315,529 and $174,350 for three months ended June 30, 2021 and 2020, respectively and was $581,077 and $416,167 for the six months ended June 30, 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 period. Diluted net loss per common share is determined using the weighted-average of common shares outstanding during the period, adjusted for the dilutive effect of common stock equivalents, consisting of the conversion option embedded in convertible debt. The weighted-average number of common shares outstanding excludes common stock equivalents because their inclusion would have an anti-dilutive effect.

Income Taxes

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

Any future benefit arising from losses have been offset by a valuation allowance. Accordingly, no provision for income taxes is reflected in the condensed consolidated financial statements. The Company records a liability for uncertain tax positions when it is probable that a loss has been incurred and the amount can be reasonably estimated. Interest and penalties related to income tax matters, if any, would be recognized as a component of income tax expense. At June 30, 2021 and December 31, 2020, the Company had no liabilities for uncertain tax positions. The Company continually evaluates expiring statutes of limitations, audits, proposed settlements, changes in tax law and new authoritative rulings. Currently, the tax years subsequent to 2017 are open and subject to examination by the taxing authorities.

Note 3 – Capital Requirements, Liquidity and Going Concern Considerations

The Company had positive working capital of approximately $10.8 million at June 30, 2021 and a deficiency in working capital of $1.2 million at December 31, 2020. The Company had a net loss of approximately $4.0 million for the six months ended June 30, 2021, and used cash in operations of approximately $4.3 million at June 30, 2021. The Company expects to continue to incur significant expenditures to develop and expand its owned and managed outpatient medical clinics.

Prior to the Company’s March 2021 public offering, the Company funded its business plan through debt and equity securities. Management expects to continue to incur net losses and have significant cash outflows for at least the next 12 months. During the quarter ended March 31, 2021, the Company completed a public offering and received proceeds of approximately $17 million. During the quarter ended June 30, 2021, the Company sold an additional 1,193,750 shares for proceeds of approximately $1.9 million. These events served to mitigate the conditions that historically raised substantial doubt about the Company’s ability to continue as a going concern.

Based on this analysis, the Company has the ability to continue as a going concern for at least the next 12 months and meet its financial obligations as they become due.

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

As of June 30, 2021 and December 31, 2020, the Company had the following revenue and accounts receivable concentrations:

	June 30, 2021						December 31, 2020
	% of Revenue			% of Accounts Receivable			% of Revenue			% of Accounts Receivable
	(Unaudited)
Patient payment		39	%		36	%		35	%		38	%
Medicare payment		38	%		17	%		40	%		16	%
Insurance payment		23	%		47	%		25	%		46	%

Note 5 – Accounts Receivable

As of June 30, 2021 and December 31, 2020, the Company’s accounts receivable consisted of the following:

Schedule of Accounts Receivable

	June 30, 2021			December 31, 2020
	(Unaudited)
Gross accounts receivable	$	1,369,325		$	1,542,665
Less: allowance for doubtful accounts		(28,982	)		(28,982	)
Accounts receivable, net	$	1,340,343		$	1,513,683

Note 6 – Business Acquisitions

IMAC Florida

In February 2021, the Company completed the asset purchase of and signed Management Services Agreement with Willmitch Chiropractic, P.A. in Tampa, Florida. The transaction was completed as an asset purchase 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.

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.

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.

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.

The following table summarizes the fair value of consideration paid and the allocation of purchase price to the fair value of net assets acquired for the acquisitions:

	Orlando			Tampa		Fort Pierce		Naperville
Property & equipment	$	149,720		$	7,400	$	45,000	$	49,000
Intangible assets		-			413,600		5,000		151,000
Other assets		-			-		-		5,000
Current liabilities		(7,220	)		-		-		-
Total net assets acquired	$	142,500		$	421,000	$	50,000	$	205,000

Note 7 – Property and Equipment

The Company’s property and equipment consisted of the following at June 30, 2021 and December 31, 2020:

Schedule of Property and Equipment

	Estimated Useful Life in Years	June 30, 2021			December 31, 2020

Leasehold improvements	Shorter of asset or lease term	$	2,109,268		$	2,064,669
Equipment	1.5 - 7		2,366,065			2,012,276
Total property and equipment			4,475,333			4,076,945

Less: accumulated depreciation			(2,616,723	)		(2,302,273	)
Property and equipment			1,858,610			1,774,672
Construction in progress			10,122			2,370
Total property and equipment, net		$	1,868,732		$	1,777,042

Depreciation expense was $171,378 and $218,818 for the three months ended June 30, 2021 and 2020, respectively and $335,323 and $437,661 for the six months ended June 30, 2021 and 2020, respectively.

Note 8 – Intangibles Assets and Goodwill

The Company’s intangible assets and goodwill consisted of the following at June 30, 2021 and December 31, 2020:

		June 30, 2021
	Estimated			Accumulated
	Useful Life	Cost		Amortization			Net

Intangible assets:
Management service agreements	10 years	$	7,940,398	$	(2,110,731	)	$	5,829,667
Non-compete agreements	3 years		306,000		(300,181	)		5,819
Customer lists	3 years		699,482		(124,632	)		574,850
Brand development	10 years		66,495		(1,617	)		64,878
Definite lived assets			9,012,375		(2,537,161	)		6,475,214
Research and development			243,750		-			243,750
Goodwill			2,040,696		-			2,040,696
Total intangible assets and goodwill		$	11,296,821	$	(2,537,161	)	$	8,759,660

		December 31, 2020
	Estimated			Accumulated
	Useful Life	Cost		Amortization			Net

Intangible assets:
Management service agreements	10 years	$	7,940,398	$	(1,706,379	)	$	6,234,019
Non-compete agreements	3 years		301,000		(257,139	)		43,861
Customer lists	3 years		134,882		(44,961	)		89,921
Definite lived assets			8,376,280		(2,008,479	)		6,367,801
Research and development			243,750		-			243,750
Goodwill			2,040,696		-			2,040,696
Total intangible assets and goodwill		$	10,660,726	$	(2,008,479	)	$	8,652,247

Amortization was $270,426 and $234,833 for the three months ended June 30, 2021 and 2020, respectively and $528,682 and $466,485 for the six months ended June 30, 2021 and 2020, respectively.

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

Years Ending December 31,

2021 (six months)	$	515,209
2022		1,034,133
2023		987,715
2024		830,934
2025		798,473
Thereafter		2,308,750
Total	$	6,475,214

Note 9 – Operating Leases

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

Discount Rate Applied to Operating Leases

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

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

Right of Use Assets

Right of use assets included in the Company’s condensed consolidated balance sheet were as follows:

	June 30, 2021		December 31, 2020

Non-current assets
Right of use assets, net of amortization	$	5,029,827	$	3,816,035

Total operating lease cost

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

Schedule of Operating Lease Cost

Six Months

Ended

June 30, 2021

Six Months

Ended

June 30, 2020

Operating lease expense

595,936

618,508

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

Maturity of operating leases

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

	Operating Leases

Undiscounted future minimum lease payments:
2021 (six months)	$	777,087
2022		1,559,757
2023		1,470,472
2024		1,094,345
2025		718,733
Thereafter		448,196
Total		6,068,590
Amount representing imputed interest		(351,403	)
Total operating lease liability		5,717,187
Total		6,068,590
Current portion of operating lease liability		(1,424,662	)
Operating lease liability, non-current	$	4,292,525
Total operating lease liability		5,717,187

Note 10 – Notes Payable

Set forth below is a summary of the Company’s outstanding debt as of June 30, 2021 and December 31, 2020:

Schedule of Notes Payable

	June 30,			December 31,
	2021			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.	$	-		$	1,750,000

Note payable to a financial institution in the amount of $200,000 dated November 15, 2017. The note requires 66 consecutive monthly installments of $2,652 including principal and interest at 5%, with a balloon payment of $60,000 which was paid on June 15, 2018. The note matures on May 15, 2023, and is secured by the personal guarantees of certain Company executives.		58,004			72,238

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.		74,935			81,330

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 matured on May 4, 2021, and is secured by the equipment and personal guarantees of certain Company executives.		-			19,191

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.		-			20,000

$112,800 payable to a landlord of Advantage Therapy, LLC pursuant to a lease dated March 1, 2019. The debt is payable in 60 monthly installments of $2,129, including principal and interest at 5%. The debt matures on June 1, 2024.		71,025			81,862

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.		61,129			84,444

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.		1,906,366			2,690,000

Unamortized debt issuance costs		(156,430	)		(312,858	)

Notes payable		2,015,029			4,486,207
Less: current portion:		(1,863,849	)		(2,527,324	)
	$	151,180		$	1,958,883

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

Years Ending December 31,	Amount

2021 (six months)	$	1,806,146
2022		104,186
2023		51,657
2024		27,631
2025		15,813
Thereafter		9,596
Total	$	2,015,029

Note 11 – Stockholders’ 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 Shares were offered by the Company pursuant to its shelf registration statement on Form S-3 (File No. 333-237455) originally filed with the SEC on March 27, 2020 (as amended, the “Registration Statement”), which was declared effective on April 3, 2020. The purchase price for one Share in the Registered Direct Offering was $1.50, and closing of the Registered Direct Offering occurred on June 22, 2020. The Company received $2.644 million in gross proceeds from the Registered Direct Offering. The Company used approximately $0.5 million of the gross proceeds for the repayment of certain indebtedness, and the remaining proceeds to the Company will be used to finance the costs of developing and acquiring additional outpatient medical clinics as part of the Company’s growth and expansion strategy and for working capital.

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 June 30, 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 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 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.

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 June 30, 2021, the Company had issued stock options to purchase 435,518 shares of its common stock as non-qualified stock options to various employees of the Company. These options vest over a period of four years, with 25% vesting after one year and the remaining 75% vesting in equal monthly installments over the following 36 months and are exercisable for a period of ten years. Stock based compensation for stock options is estimated at the grant date based on the fair value calculated using the Black-Scholes method. The per-share fair values of these options is calculated based on the Black-Scholes-Merton pricing model with the following assumptions: a volatility rate of 32.2%, risk free rate of 2.4% and the expected term of 10 years.

Restricted Stock Units

On May 21, 2019, the Company granted an aggregate of 277,500 Restricted Stock Units (“RSUs”) to certain employees, executives and directors of the Company, the terms of which vest over various periods between the date of grant and May 21, 2023. As of June 30, 2021, 143,750 shares of common stock were issued pursuant to previously granted RSUs which had vested as of such date. 40,000 shares were cancelled in 2020 due to board member departures.

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. As of June 30, 2021, 75,000 RSUs had vested and were issued to Board members.

On January 30, 2021, the Company granted an aggregate of 15,000 RSUs to non-executive staff and contractors with these RSUs vesting after one year.

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 100% of up to 3% and 50% of 5% of total compensation for those employees making salary deferrals. The Company made contributions of $35,032 and $20,105 during the three months ended June 30, 2021 and 2020, respectively, and $69,106 and $39,795 during the six months ended June 30, 2021 and 2020, respectively.

Note 13 – Income Taxes

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

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

At June 30, 2021, the Company had a net operating loss carryforward of approximately $11.4 million for federal and state purposes. This loss will be available to offset future taxable income. There is no expiration of this carryforward as it was generated after December 31, 2017. The deferred tax asset relating to the operating loss carryforward has been fully reserved. The principal differences between the operating loss for income tax purposes and reporting purposes are shares issued for services and share-based compensation and a temporary difference in depreciation expense.

Note 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 April 15, 2021, the Company received notification from Covent Bridge Group, a CMS contractor, that they are recommending to CMS that the Company was overpaid in the amount of $2,921,868. 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. On June 3, 2021, the Company received a request for payment from CMS in the amount of $2,918,472. The Company has begun its own internal audit process and disagrees with the interpretation of the medical records and the extrapolation techniques used to derive this balance. The Company has initiated the appropriate appeals.

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.XBRL

As of June 30, 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.

Note 15 - Subsequent Events

On July 2, 2021, the Company submitted a Redetermination Request to CMS for the first appeal phase. See Note 14 – Commitment and Contingencies.

On August 9, 2021, The Company’s shareholder’s approved the Board of Directors’ proposal to increase the number of authorized shares of the Company’s common stock to 60,000,000 shares from 30,000,000 shares.

ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth previously under the caption “Risk Factors.” This Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with our audited consolidated financial statements and related notes included elsewhere in this report.

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

References in this MD&A to “we,” “us,” “our,” “our company,” “our business” and “IMAC Holdings” are to IMAC Holdings, Inc., a Delaware corporation and prior to the Corporate Conversion (defined below), IMAC Holdings, LLC, a Kentucky limited liability company, and the following entities which are consolidated due to direct ownership of a controlling voting interest or other rights granted to us as the sole general partner or managing member of the entity: IMAC 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 and Orthopedic Rehabilitation, LLC (“Advantage Therapy”), IMAC Management of Florida, LLC (“IMAC Florida”), Chiropractic Health of Southwest Florida, Inc. (“SW Florida”) and The Back Space LLC (“Back Space”); 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 Management of Florida, LLC due to control by contract: Willmitch Chiropractic, P.A. and IMAC Medical of Florida, PA (“Florida Medical”) and the following entity which is consolidated with The Back Space LLC due to control by contract: The Back Space.

Overview

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

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

Significant financial metrics

Significant financial metrics of the Company for the second quarter of 2021 are set forth in the bullets below.

	●	Working capital is $10.8 million as of June 30, 2021 compared to a working capital deficiency of $1.2 million as of December 31, 2020.
	●	Adjusted EBITDA¹ of ($1.3 million) in the second quarter of 2021 compared to ($1.2 million) in the second quarter of 2020.
	●	Received $1.9 million of gross proceeds from the issuance of common stock.
	●	The Company had one-time expenses of $108,000 in the second quarter of 2021, consisting of: $57,000 in consulting and $51,000 in recruiting.
	●	The BackSpace incurred $25,000 in one-time/start-up expenses.
	●	The Company incurred $195,000 in FDA related expenses during the second quarter of 2021.
	●	The Company paid $900,000 of principal and interest during the second quarter of 2021 towards the Iliad note payable.
	●	The Company performed two acquisitions during the second quarter of 2021, totaling $255,000.
	(1)	Adjusted EBITDA is a non-GAAP financial measure most closely comparable to the GAAP measure of net loss. See “Reconciliation of Non-GAAP Financial Matters” below for a full reconciliation of the GAAP and non-GAAP measures.

Impacts of and Response to COVID-19 Outbreak

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

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

	●	Launched telemedicine communications for remote patient engagement;
	●	Suspended operations in three Kentucky clinics to comply with government orders until we were allowed to resume operations on May 4, 2020; and
	●	Suspended operations at one clinic in Cook County, Illinois to comply with government orders until such order is lifted. The lease for this clinic expired June 30, 2020 and was not renewed.

The COVID-19 outbreak appears likely to cause significant economic harm across the United States, and the negative economic conditions that may result in reduced patient demand in our industry. We may experience a material loss of patients, revenue and market share as a result of the suspension of any operations. Initiatives to implement telehealth engagement with patients may not be adopted by existing and new patients. Patient habits may also be altered in the medium to long term. Negative economic conditions, a decrease in our revenue and consequent longer term trends harmful to our business may all exert pressure on our company during the pendency of emergency restrictions on our operations and beyond. Due to such conditions, beginning in the month of March 2020 we began to terminate or furlough employees to reduce costs associated with non-essential personnel, which resulted in a 27% reduction in workforce. As of June 30, 2021, 98% of the full and part-time workforce had returned from furlough.

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

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

Intangible Assets