IMAC Holdings(BACK) - 2023 Q3 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) Unaudited statements show a significant decline in assets and revenue, a net loss, and key corporate actions Condensed Consolidated Balance Sheets Total assets and stockholders' equity declined significantly due to net losses and operational changes Condensed Consolidated Balance Sheet Highlights (in thousands) | Balance Sheet Item | Sep 30, 2023 (Unaudited) | Dec 31, 2022 | | :--- | :--- | :--- | | Total Current Assets | $2,071.7 | $4,207.9 | | Total Assets | $4,264.5 | $11,081.6 | | Total Current Liabilities | $2,459.4 | $3,713.8 | | Total Liabilities | $3,236.1 | $6,430.3 | | Total Stockholders' Equity | $1,028.4 | $4,651.3 | Condensed Consolidated Statements of Operations Revenues fell sharply due to clinic sales, resulting in a nine-month net loss of $8.0 million Statement of Operations Summary (Unaudited) | Metric | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :--- | :--- | :--- | :--- | :--- | | Total Revenue | $1,565,820 | $3,786,228 | $5,003,159 | $12,714,302 | | Operating Loss | $(2,897,611) | $(6,346,159) | $(7,975,547) | $(11,292,137) | | Net Loss | $(2,857,671) | $(6,333,625) | $(7,960,429) | $(11,339,849) | | Net Loss Per Share (Basic & Diluted) | $(2.63) | $(6.93) | $(7.28) | $(12.66) | Condensed Consolidated Statements of Cash Flows Cash from financing was offset by cash used in operations and a loan, decreasing the overall cash position Cash Flow Summary for the Nine Months Ended September 30 (Unaudited) | Cash Flow Activity | 2023 | 2022 | | :--- | :--- | :--- | | Net Cash from Operating Activities | $(2,957,156) | $(8,220,753) | | Net Cash from Investing Activities | $(1,870,000) | $(215,940) | | Net Cash from Financing Activities | $4,288,591 | $4,151,104 | | Net Decrease in Cash | $(538,565) | $(4,285,589) | | Cash, End of Period | $224,646 | $2,833,391 | Notes to Condensed Consolidated Financial Statements Notes detail a pending merger, asset sales, a reverse stock split, and significant Medicare audit contingencies - The company entered into a merger agreement with Theralink Technologies, Inc. on May 23, 2023, where Theralink will become a wholly-owned subsidiary. Post-merger, Theralink shareholders will own approximately 85% of the combined company's shares[23][24] - In the first nine months of 2023, the company closed five underperforming clinics and sold its Louisiana Orthopedic, Illinois (Ricardo Knight, PC), and The BackSpace, LLC operations to raise capital[22][31] - A 30-for-1 reverse stock split of common stock was implemented on September 7, 2023, reducing authorized shares from 60 million to 2 million[85] - In July 2023, the company raised $4.3 million in gross proceeds by selling Series A-1 and A-2 Convertible Preferred Stock and warrants. Approximately $3.0 million of these proceeds were loaned to Theralink[90] - The company is appealing multiple overpayment claims from CMS contractors. One claim from October 2021 alleges a $2.7 million overpayment, and another from May 2022 alleges a $492,086 overpayment. Both are in the appeals process[100][101] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses a strategic shift through asset sales, leading to lower revenue but a reduced EBITDA loss - During the first half of 2023, the company closed five underperforming locations and sold its Louisiana Orthopedic, Chicago practices, and The BackSpace, LLC operations to raise capital and support ongoing operations[118] Revenue Comparison (in thousands) | Period | 2023 | 2022 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Three Months Ended Sep 30 | $1,566 | $3,786 | $(2,220) | (58.6)% | | Nine Months Ended Sep 30 | $5,003 | $12,714 | $(7,711) | (60.6)% | Operating Expense Comparison - Nine Months Ended Sep 30 (in thousands) | Expense Category | 2023 | 2022 | Change | | :--- | :--- | :--- | :--- | | Salaries and Benefits | $4,477 | $11,173 | $(6,696) | | Advertising and Marketing | $120 | $858 | $(738) | | General and Administrative | $3,524 | $5,539 | $(2,015) | | Depreciation and Amortization | $387 | $1,367 | $(980) | Adjusted EBITDA Reconciliation (Non-GAAP, in thousands) | Period | Q3 2023 | Q3 2022 | Nine Months 2023 | Nine Months 2022 | | :--- | :--- | :--- | :--- | :--- | | GAAP Net Loss | $(2,858) | $(6,334) | $(7,960) | $(11,340) | | Adjusted EBITDA | $(537) | $(1,918) | $(3,479) | $(5,679) | - As of September 30, 2023, the company had $0.2 million in cash and negative working capital of ($0.5) million, a decrease from $0.5 million in working capital at year-end 2022[159] Item 3. Quantitative and Qualitative Disclosures about Market Risk This section is not applicable to the company - The company has indicated that quantitative and qualitative disclosures about market risk are not applicable[165] Item 4. Controls and Procedures Disclosure controls were deemed ineffective due to material weaknesses in internal financial reporting expertise - The CEO and CFO concluded that disclosure controls and procedures were not effective as of September 30, 2023[167] - Identified material weaknesses include the absence of in-house accounting personnel capable of handling complex transactions and a lack of separation of duties[167] - To mitigate these weaknesses, the company has hired a consulting firm to advise on U.S. GAAP compliance and financial statement preparation[168] PART II. OTHER INFORMATION Item 1. Legal Proceedings The company reports no legal proceedings expected to have a material adverse effect on the business - The company states it is not aware of any legal proceedings that would have a material adverse effect on the business[172] Item 1A. Risk Factors Key risks include a history of net losses, a Nasdaq non-compliance notice, and uncertainties of the Theralink merger - The company has a history of net losses, reporting a loss of approximately $8.0 million for the nine months ended September 30, 2023, and has received a going concern qualification[59][174] - On May 31, 2023, the company received a notice from Nasdaq for failing to maintain the minimum $2.5 million stockholders' equity requirement. A plan to regain compliance was submitted following a financing transaction in July 2023[177] - The completion of the merger with Theralink is subject to numerous risks, including shareholder approvals, potential for the deal not to close, and the risk that expected synergies and cost savings may not be realized[184] - The company sold $4.3 million in convertible preferred stock and warrants in July 2023. The conversion of these securities is contingent on shareholder approval and could be dilutive to existing common stockholders[182] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds No unregistered sales of equity securities were reported during the period - None reported for the period[185] Item 3. Defaults Upon Senior Securities No defaults upon senior securities were reported during the period - None reported for the period[185] Item 4. Mine Safety Disclosures This section is not applicable to the company - Not applicable[185] Item 5. Other Information No other information was reported for the period - None reported for the period[185] Item 6. Exhibits This section lists all exhibits filed with the report, including agreements and officer certifications - Lists various corporate and financial documents filed with the report, such as Certificates of Designation for preferred stock, securities purchase agreements, and Sarbanes-Oxley certifications[186][187][189]