Workflow
IMAC Holdings(BACK) - 2023 Q1 - Quarterly Report
IMAC HoldingsIMAC Holdings(US:BACK)2023-05-18 16:00

General Information This section provides an overview of IMAC Holdings, Inc.'s classification and common stock outstanding - IMAC Holdings, Inc. is classified as a smaller reporting company and an emerging growth company2 Common Stock Outstanding | As of Date | Shares Outstanding | | :----------- | :------------------- | | May 19, 2023 | 33,017,049 | Important Information Regarding Forward-Looking Statements This section highlights the inherent risks of forward-looking statements, noting actual results may differ materially - The report contains forward-looking statements, particularly in 'Item 2 — Management's Discussion and Analysis of Financial Condition and Results of Operations', which are subject to risks and uncertainties5 - Actual results may differ materially from projections due to factors described in 'Item 1A — Risk Factors' in the Annual Report on Form 10-K5 PART I. FINANCIAL INFORMATION This part presents the unaudited condensed consolidated financial statements and management's discussion and analysis Item 1. Financial Statements (Unaudited) This section provides the unaudited condensed consolidated financial statements for IMAC Holdings, Inc. for the quarter ended March 31, 2023, and comparative periods, including the balance sheets, statements of operations, statements of stockholders' equity, and statements of cash flows, followed by comprehensive notes detailing accounting policies and financial specifics Condensed Consolidated Balance Sheets This section presents the company's financial position, detailing assets, liabilities, and stockholders' equity Condensed Consolidated Balance Sheet Highlights | Metric | March 31, 2023 (Unaudited) ($) | December 31, 2022 ($) | | :--------------------------- | :--------------------------- | :------------------ | | Total Assets | $5,842,800 | $11,081,606 | | Total Liabilities | $4,845,845 | $6,430,350 | | Total Stockholders' Equity | $996,955 | $4,651,256 | | Accumulated Deficit | $(50,218,393) | $(46,519,740) | - Total assets decreased by approximately 47.3% from $11.08 million at December 31, 2022, to $5.84 million at March 31, 2023810 - Total stockholders' equity decreased by approximately 78.6% from $4.65 million at December 31, 2022, to $0.99 million at March 31, 20239 Condensed Consolidated Statements of Operations This section outlines the company's financial performance, including revenues, operating expenses, and net loss for the reporting periods Condensed Consolidated Statements of Operations Highlights (Three Months Ended March 31) | Metric | 2023 (Unaudited) ($) | 2022 (Unaudited) ($) | | :------------------------------------- | :--------------- | :--------------- | | Total Revenue | $2,093,362 | $3,894,987 | | Total Operating Expenses | $5,789,548 | $7,039,807 | | Operating Loss | $(3,696,186) | $(3,144,820) | | Net Loss | $(3,698,653) | $(3,162,125) | | Net Loss Per Share (Basic and Diluted) | $(0.11) | $(0.12) | - Total revenue decreased by approximately 46.3% from $3.89 million in Q1 2022 to $2.09 million in Q1 202312 - Loss on disposal or impairment of assets significantly increased from $47,429 in Q1 2022 to $1,441,012 in Q1 202312 Condensed Consolidated Statements of Stockholders' Equity This section details changes in the company's stockholders' equity, including accumulated deficit, for the reporting period Condensed Consolidated Statements of Stockholders' Equity Highlights | Metric | December 31, 2022 ($) | March 31, 2023 ($) | | :--------------------------- | :---------------- | :------------- | | Total Stockholders' Equity | $4,651,256 | $996,955 | | Accumulated Deficit | $(46,519,740) | $(50,218,393) | | Net Loss (Q1 2023) | N/A | $(3,698,653) | - Accumulated deficit increased from $(46,519,740) at December 31, 2022, to $(50,218,393) at March 31, 2023, reflecting the net loss14 Condensed Consolidated Statements of Cash Flows This section presents cash inflows and outflows from operating, investing, and financing activities for the reporting periods Condensed Consolidated Statements of Cash Flows Highlights (Three Months Ended March 31) | Cash Flow Activity | 2023 (Unaudited) ($) | 2022 (Unaudited) ($) | | :-------------------------------- | :--------------- | :--------------- | | Net Cash from Operating Activities | $(1,417,578) | $(2,592,551) | | Net Cash from Investing Activities | $1,050,000 | $(216,079) | | Net Cash from Financing Activities | $(5,529) | $(35,099) | | Net Decrease in Cash | $(373,107) | $(2,843,729) | | Cash, End of Period | $390,104 | $4,275,251 | - Proceeds from sale of Louisiana Orthopedic operations provided $1,050,000 in cash from investing activities in Q1 202316 - Net cash used in operating activities decreased by 45.3% from $2.59 million in Q1 2022 to $1.42 million in Q1 202316 Notes to Condensed Consolidated Financial Statements This section details accounting policies, significant transactions, financial position, and going concern considerations - IMAC Holdings, Inc. provides movement, orthopedic, and neurological therapies through its IMAC Regeneration Centers and is conducting a clinical trial for an investigational compound for Parkinson's disease18 - In Q1 2023, the company closed four underperforming clinics and sold its Louisiana Orthopedic practice and The BackSpace, LLC operations to raise capital and support ongoing operations1923 Key Financial Position Indicators | Metric | March 31, 2023 | December 31, 2022 | | :---------------- | :------------- | :---------------- | | Working Capital | $(1.73) million | $(0.5) million | | Net Loss (Q1) | $(3.7) million | $(3.16) million | | Cash Used in Ops (Q1) | $(1.4) million | $(2.59) million | - The company's financial statements are prepared under a going concern assumption, but recurring losses and negative working capital raise substantial doubt about its ability to continue as a going concern5051 Accounts Receivable, Net | Date | Amount ($) | | :----------- | :----------- | | Mar 31, 2023 | $1,077,291 | | Dec 31, 2022 | $2,881,239 | Property and Equipment, Net | Date | Amount ($) | | :----------- | :----------- | | Mar 31, 2023 | $683,452 | | Dec 31, 2022 | $1,584,714 | Intangible Assets, Net | Date | Amount ($) | | :----------- | :----------- | | Mar 31, 2023 | $1,200,263 | | Dec 31, 2022 | $1,365,457 | - Intangible assets of approximately $61,000 for the Louisiana market and $60,000 for BackSpace retail stores were written off as impaired in Q1 2023 due to sales6162 - The company is subject to several CMS audits, with potential overpayment claims, and has accrued $20,000 for one such potential overpayment related to Progressive Health899091 - Subsequent to March 31, 2023, the company agreed to sell its Chicago market operations, including fixed assets, intangible assets, and associated leases92 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section discusses the company's financial condition and results of operations for the three months ended March 31, 2023, compared to the same period in 2022. It highlights a significant decrease in revenue and an increased net loss, primarily due to strategic divestitures and clinic closures aimed at improving financial stability. The company also provides a reconciliation of non-GAAP financial measures and discusses its liquidity challenges Special Note Regarding Forward-Looking Information This section cautions on forward-looking statements, noting inherent uncertainties and potential for differing actual results - The discussion includes forward-looking statements, which are not guarantees of future performance and are subject to risks and uncertainties, particularly those in Item 1A. Risk Factors95 - The company cautions that actual results, performance, and achievements could differ materially from those expressed or implied in forward-looking statements96 Overview This section describes IMAC Holdings' business model, medical treatments, and recent strategic actions - IMAC Holdings provides non-invasive medical treatments for pain and soft tissue conditions through its IMAC Regeneration Centers and BackSpace clinics, focusing on sports medicine without opioids98 - In Q1 2023, the company closed four underperforming clinics and sold its Louisiana Orthopedic practice and The BackSpace, LLC operations to generate capital and support ongoing operations99 - The company operates clinics directly or through long-term management services agreements in states with corporate practice of medicine restrictions, consolidating financial results due to operational control100 Significant Financial Metrics This section highlights key financial performance indicators for Q1 2023 versus Q1 2022 Significant Financial Metrics (Q1 2023 vs. Q1 2022) | Metric | Q1 2023 ($) | Q1 2022 ($) | | :----------------- | :---------- | :---------- | | Net Patient Revenue | $2.4 million | $3.9 million | | Working Capital | $(1.5) million | $0.5 million | | Adjusted EBITDA | $(1.6) million | $(2.5) million | - The company sold its Louisiana market and BackSpace retail stores, and closed four underperforming locations during Q1 2023102 Matters that May or Are Currently Affecting Our Business This section outlines critical factors for future success, including personnel, patient volume, and financing needs - Key factors for future success include hiring additional healthcare professionals and enhancing revenue through increased patient volume and new services104 - The company needs to obtain additional financing for clinic acquisitions, management, and development, and control operating expenses during expansion104 Results of Operations for the Three Months Ended March 31, 2023 Compared to the Three Ended March 31, 2022 This section provides a comparative analysis of revenues and operating expenses for Q1 2023 and 2022 Revenue Breakdown (Three Months Ended March 31) | Revenue Type | 2023 (in thousands $) | 2022 (in thousands $) | | :----------------------- | :------------------ | :------------------ | | Outpatient facility services | $1,905 | $3,661 | | Memberships | $188 | $234 | | Total Revenues | $2,093 | $3,895 | - Total revenues decreased by approximately $1.8 million, mainly due to the sale of the Louisiana market, BackSpace retail stores, and closure of underperforming clinics110 Operating Expenses (Three Months Ended March 31) | Expense Category | 2023 ($) | 2022 ($) | Change ($) | Percent Change (%) | | :------------------------- | :------- | :------- | :--------- | :------------- | | Patient Expenses | $266,000 | $460,000 | $(194,000) | (42)% | | Salaries and Benefits | $2,313,000 | $3,899,000 | $(1,586,000) | (41)% | | Advertising and Marketing | $75,000 | $370,000 | $(295,000) | (80)% | | General and Administrative | $1,504,000 | $1,815,000 | $(310,000) | (17)% | | Depreciation and Amortization | $190,000 | $447,000 | $(257,000) | (57)% | | Loss on disposal and impairment | $1,441,000 | $47,000 | $1,394,000 | 2,966% | - Loss on disposal and impairment of assets increased by $1,394,000 (2,966%) in Q1 2023 due to the sale of Louisiana and retail stores, clinic closures, and equipment sales125 Analysis of Cash Flows This section analyzes the company's cash flows from operating, investing, and financing activities for Q1 2023 - Net cash used in operating activities was approximately $1.4 million in Q1 2023, primarily due to loss on disposition of assets126 - Net cash provided by investing activities was $1,050,000 in Q1 2023, attributed to the sale of Louisiana Orthopedic operations126 - Net cash used in financing activities was approximately $6,000 in Q1 2023, mainly consisting of $17,000 in debt payments126 Reconciliation of Non-GAAP Financial Measures This section reconciles GAAP net loss to Adjusted EBITDA, a non-GAAP measure for operating performance - Adjusted EBITDA is presented as a non-GAAP financial measure to evaluate operating performance, excluding non-cash and non-operating items128 Adjusted EBITDA Reconciliation (Three Months Ended March 31) | Metric | 2023 ($) | 2022 ($) | | :------------------------------------- | :----------- | :----------- | | GAAP Loss Attributable to IMAC Holdings | $(3,699,000) | $(3,162,000) | | Interest Expense | $2,000 | $4,000 | | Other Expense | $0 | $13,000 | | Share-based Compensation Expense | $86,000 | $189,000 | | Depreciation and Amortization | $190,000 | $447,000 | | Loss on Disposition and Impairment of Assets | $1,441,000 | $47,000 | | Adjusted EBITDA | $(1,979,000) | $(2,462,000) | - Adjusted EBITDA improved by $483,000 (19.6%) from Q1 2022 to Q1 2023130 Liquidity and Capital Resources This section assesses the company's ability to meet financial obligations, including cash, working capital, and commitments Liquidity Position | Metric | March 31, 2023 ($) | December 31, 2022 ($) | | :---------------- | :------------- | :---------------- | | Cash | $0.4 million | $0.8 million | | Working Capital | $(1.7) million | $0.5 million | | Current Liabilities | $3.5 million | N/A | - Operating leases represent $1.0 million of current liabilities, with accounts payable and accrued expenses making up $0.9 million and $0.8 million, respectively131 Contractual Obligations as of March 31, 2023 | Obligation Type | Total ($) | Less Than 1 Year ($) | 1-3 Years ($) | 4-5 Years ($) | | :------------------------------ | :---------- | :--------------- | :---------- | :---------- | | Short-term obligations | $37,005 | $37,005 | $- | $- | | Long-term obligations (incl. interest) | $55,971 | $- | $55,971 | $- | | Finance lease obligations (incl. interest) | $26,357 | $16,354 | $10,003 | $- | | Operating lease obligations | $2,428,439 | $832,959 | $1,439,966 | $155,514 | | Total | $2,547,772 | $886,318 | $1,505,940 | $155,514 | Off-Balance Sheet Arrangements This section confirms the absence of any off-balance sheet arrangements as of March 31, 2023 - The company had no off-balance sheet arrangements as of March 31, 2023134 Item 3. Quantitative and Qualitative Disclosures about Market Risk This section states that quantitative and qualitative disclosures about market risk are not applicable to the company - Quantitative and qualitative disclosures about market risk are not applicable135 Item 4. Controls and Procedures The company's disclosure controls and procedures were deemed ineffective as of March 31, 2023, due to material weaknesses in internal control over financial reporting. These weaknesses include the absence of in-house accounting personnel capable of handling complex transactions and a lack of separation of duties. Management plans to expand accounting functions and improve procedures when additional capital resources become available - Disclosure controls and procedures were not effective as of March 31, 2023, due to material weaknesses in internal control over financial reporting137139 - Material weaknesses include the absence of in-house accounting personnel for complex transactions and a lack of separation of duties137219 - Management plans to expand accounting functions and improve internal procedures with dedicated staff and additional capital resources138220 - No changes in internal control over financial reporting occurred during the most recent fiscal quarter that materially affected, or are reasonably likely to materially affect, internal control over financial reporting140 PART II. OTHER INFORMATION This part provides additional information, including legal proceedings and risk factors Item 1. Legal Proceedings The company may be involved in various lawsuits and legal proceedings in the ordinary course of business but is currently unaware of any matters that would have a material adverse effect on its financial condition, results of operations, or liquidity - The company is not currently aware of any legal proceedings or claims that are reasonably likely to have a material adverse effect on its financial condition, results of operations, or liquidity142 Item 1A. Risk Factors This section details numerous risks that could materially and adversely affect the company's business, financial condition, or results of operations. Key risks include recurring losses and going concern doubts, challenges in implementing growth strategies, dependence on key personnel, intense competition, regulatory compliance, and risks related to clinical trials, data security, and stock ownership Financial and Operational Risks This section outlines significant financial and operational challenges, including recurring losses, going concern, and funding - The company recorded net losses for the three months ended March 31, 2023 ($3.699 million) and 2022 ($3.162 million), and there is no assurance of future profitability144145 - Recurring losses from operations and a net capital deficiency raise substantial doubt about the company's ability to continue as a going concern146149161 - The company needs additional funding to support operations and implement business plans, with no assurance of successful capital raising51157 - Failure to obtain financing on acceptable terms could materially adversely affect operations and the ability to implement growth and expansion strategies158159 Business Model and Regulatory Compliance Risks This section addresses risks from management services agreements, medical control, and conflicts of interest - The company manages, but does not own, certain medical clinics and does not employ medical service providers, making its financial and operational success highly dependent on professional service corporations164165 - Management services agreements can be terminated, leading to a loss of management fees and adverse effects on operating results and financial condition166 - Lack of direct control over medical care in facilities and potential changes in state medical board licensing or ownership requirements pose risks to operations and revenue168169170 - Potential conflicts of interest exist with management services agreements, particularly with clinics owned by company executives, which could diverge from company interests172173176 Personnel and Competition Risks This section highlights risks from key executive loss, personnel attraction, and intense competition - The loss of services from CEO Jeffrey S. Ervin or President Matthew C. Wallis, DC, would materially and adversely affect business operations and prospects178179 - Success depends on the ability to attract and retain highly skilled managerial personnel, medical doctors, chiropractors, and other practitioners180 - The company faces strong competition from established orthopedic surgeons, pain management clinics, and hospital systems, which may be better capitalized182 - The services provided are relatively new and unique, and there is no certainty of achieving or sustaining market acceptance or sufficient patient volume183 Healthcare Industry and Brand Risks This section covers risks from healthcare law compliance, insurance changes, revenue, and brand reputation - Compliance with numerous government laws and regulations, including those from the FDA and CMS, could require substantial capital expenditures and increase costs if regulations change186 - Changes to national health insurance policy or third-party insurance carrier fee schedules could decrease patient revenue and adversely affect financial performance187 - If private health insurance, Medicare, and Medicaid begin covering regenerative medical treatments, per-treatment revenue might decline due to tighter fee schedules, and competition could increase188 - Any adverse change to the brand, reputation, or financial performance of an IMAC Regeneration Center at one location could negatively affect the entire company189 Legal, Audit, and Regulatory Risks This section details risks from uninsured losses, CMS audit claims, and FDA investigations - The company may incur losses not covered by insurance, or losses exceeding insured limits, which could materially adversely affect financial performance190 - Audits by CMS, health insurance providers, and the IRS could result in reclaimed payments, increased tax liabilities, or unexpected expenses191 - The company is subject to multiple CMS overpayment claims and payment suspensions, including a $2.7 million claim for Progressive Health and a $0.5 million claim for Advantage Therapy, with ongoing appeals194195 - The FDA's pursuit of 'bad actors' in the regenerative medicine industry could subject the company to broad investigations regarding its treatments196197 Clinical Trial and CRO Dependence Risks This section addresses risks from clinical trial delays, CRO reliance, drug approval, and healthcare law compliance - Delays or difficulties in patient enrollment for clinical trials, due to factors like patient withdrawal, adverse events, or competition, could materially adversely affect R&D efforts199200201 - Reliance on CROs for preclinical and clinical studies means the company is responsible for ensuring compliance with regulations, and CRO failures could delay or terminate trials203204205 - The company has no prior experience in bringing a drug to regulatory approval, and the FDA may require additional studies, causing significant delays or increased resource expenditure207 - The company is subject to federal and state healthcare laws (e.g., Anti-Kickback Statute, False Claims Act), and non-compliance could lead to criminal sanctions, civil penalties, and exclusion from government programs209210 Data Security and IT System Risks This section outlines risks from system disruptions, cyber-attacks, data breaches, and unauthorized data access - Significant disruptions in computer systems, including cyber-attacks, could result in loss or degradation of service, harming business and reputation211212213 - Breaches of security measures, due to employee error, malfeasance, or system vulnerabilities, could lead to unauthorized access to patient data, legal claims, and material costs216 - Changes in third-party vendors or systems could cause interruptions, delays, and potential loss, misuse, or theft of data, adversely affecting operations215 Accounting and Regulatory Compliance Risks (Emerging Growth Company) This section discusses risks from internal control weaknesses, reduced reporting, and accounting changes - Material weaknesses in internal controls over financial reporting, such as lack of in-house accounting personnel for complex transactions and insufficient separation of duties, render disclosure controls ineffective219 - As an 'emerging growth company' and 'smaller reporting company,' the company utilizes reduced reporting requirements, which may affect comparability of financial statements and investor attractiveness221222 - Changes in accounting principles or interpretations could result in unfavorable accounting charges or restatements, potentially causing stock price decline218 Risks Relating to Ownership of Common Stock and Warrants This section covers risks from stock price volatility, delisting, ownership, no dividends, dilution, and anti-takeover measures - The market price of common stock is volatile, and trading below $1.00 per share risks delisting from The Nasdaq Capital Market225228229 - Concentration of ownership among executive officers and directors may limit other stockholders' influence on significant corporate decisions238 - The company does not expect to pay dividends in the foreseeable future, retaining earnings for operations, expansion, and debt repayment239 - Future issuances of common stock, warrants, or other securities to finance growth could dilute existing stockholders' ownership and voting strength, and potentially depress the market price240241 - Anti-takeover provisions in charter documents and Delaware law could discourage, delay, or prevent a change in control, potentially affecting the stock price233234237 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section states that there were no unregistered sales of equity securities or use of proceeds to report for the period - No unregistered sales of equity securities or use of proceeds were reported245 Item 3. Defaults Upon Senior Securities This section states that there were no defaults upon senior securities to report for the period - No defaults upon senior securities were reported247 Item 4. Mine Safety Disclosures This section states that mine safety disclosures are not applicable to the company - Mine safety disclosures are not applicable247 Item 5. Other Information This section states that there is no other information to report for the period - No other information was reported247 Item 6. Exhibits This section lists the exhibits filed as part of the Form 10-Q, including certifications, XBRL documents, and various corporate and contractual agreements incorporated by reference - The exhibits include certifications (Principal Executive Officer, Principal Financial Officer), Inline XBRL documents, and various corporate and contractual agreements248249 - Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 are furnished but not filed for Section 18 purposes250