IMAC HOLDINGS, INC. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (form 10-Q)

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



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

References in this MD&A to "we," "us," "our," "our company," "our business" and
"IMAC Holdings" are to IMAC Holdings, Inc., a Delaware corporation and prior to
the Corporate Conversion (defined below), IMAC Holdings, LLC, a Kentucky limited
liability company, and the following entities which are consolidated due to
direct ownership of a controlling voting interest or other rights granted to us
as the sole general partner or managing member of the entity: IMAC Regeneration
Center of St. Louis, LLC ("IMAC St. Louis"), IMAC Management Services, LLC
("IMAC Management"), IMAC Regeneration Management, LLC ("IMAC Texas") IMAC
Regeneration Management of Nashville, LLC ("IMAC Nashville") IMAC Management of
Illinois, LLC ("IMAC Illinois"), Advantage Hand Therapy and Orthopedic
Rehabilitation, LLC ("Advantage Therapy"), IMAC Management of Florida, LLC
("IMAC Florida"), Louisiana Orthopaedic & Sports Rehab ("IMAC Louisiana") and
The Back Space, LLC ("BackSpace"); the following entity which is consolidated
with IMAC Regeneration Management of Nashville, LLC due to control by contract:
IMAC Regeneration Center of Nashville, PC ("IMAC Nashville PC"); the following
entities which are consolidated with IMAC Management of Illinois, LLC due to
control by contract: Progressive Health and Rehabilitation, Ltd., Illinois Spine
and Disc Institute, Ltd. and Ricardo Knight, P.C.; the following entity which is
consolidated with IMAC Management Services, LLC due to control by contract:
Integrated Medicine and Chiropractic Regeneration Center PSC ("Kentucky PC");
the following entities which are consolidated with IMAC Florida due to control
by contract: Willmitch Chiropractic, P.A. and IMAC Medical of Florida, P.A.; the
following entity which is consolidated with Louisiana Orthopaedic & Sports Rehab
due to control by contract: IMAC Medical of Louisiana, a Medical Corporation;
and the following entities which are consolidated with BackSpace due to control
by contract: ChiroMart LLC, ChiroMart Florida LLC, and ChiroMart Missouri LLC.



Overview



We are a provider of movement and orthopedic therapies and minimally invasive
procedures performed through our regenerative and rehabilitative medical
treatments to improve the physical health of our patients at our chain of IMAC
Regeneration Centers and BackSpace clinics which we own or manage. Our
outpatient medical clinics provide conservative, minimally invasive medical
treatments to help patients with back pain, knee pain, joint pain, ligament and
tendon damage, and other related soft tissue conditions. Our licensed healthcare
professionals evaluate each patient and provide a custom treatment plan that
integrates traditional medical procedures and innovative regenerative medicine
procedures in combination with physical medicine. We do not use or offer
opioid-based prescriptions as part of our treatment options in order to help our
patients avoid the dangers of opioid abuse and addiction. The original IMAC
Regeneration Center opened in Kentucky in August 2000 and remains the flagship
location of our current business, which was formally organized in March 2015. To
date, we have fifteen outpatient medical clinics in Florida, Illinois, Kentucky,
Louisiana, Missouri and Tennessee, and plan to further expand the reach of our
facilities to other strategic locations throughout the United States. We have
ten BackSpace locations opened in Florida, Missouri and Tennessee. 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.



21





Significant financial metrics

Significant financial metrics of the Company for the first quarter of 2022 are
set forth in the bullets below.

? Net patient revenue increased to $3.9 million for the first quarter of 2022

from $3.0 million for the first quarter of 2021.

? Working capital is $1.4 million as of March 31, 2022 compared to working

capital of $4.1 million as of December 31, 2021.

? Adjusted EBITDA1 of ($2.5 million) in the first quarter of 2022 compared to

($1.5 million) in the first quarter of 2021.

? Opened 6 BackSpace locations during the first quarter of 2022.

? The Company had one-time expenses of $228,000, consisting of: $131,000 in

executive sign-on bonus and other compensation, $67,000 in post earn-out

expense, and $30,000 in one-time consulting fees.

(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 Recent Economic Events and COVID-19



The Company has been impacted by recent events such as inflation, the ongoing
COVID-19 pandemic and supply chain delays. Our response plan has multiple facets
and continues to evolve as events unfold. 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.



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.



22





We cannot predict with certainty when public health and economic conditions will
return to normal. A decline in patient visits 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 economic events and 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.



Results of Operations for the Three Months Ended March 31, 2022 Compared to the
Three Ended March 31, 2021



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



Revenues


Our revenue mix is diversified between medical treatments and physiological
treatments. Our medical treatments are further segmented into traditional
medical and regenerative medicine practices. We are an in-network provider for
traditional physical medical treatments, such as physical therapy, chiropractic
services and medical evaluations, with most private health insurance carriers.
Regenerative medical treatments are typically not covered by insurance, but paid
by the patient. For more information on our revenue recognition policies, see
"Notes to the Consolidated Financial Statements" that were included in the
Form
10-K.



Revenues for the three months ended March 31, 2022 and 2021 were as follows:



                                     Three Months Ended
                                         March 31,
                                    2022               2021
                                 (in thousands, unaudited)
Revenues:
Outpatient facility services   $        3,661        $  2,880
Memberships                               234             145
Total revenues                 $        3,895        $  3,025




23






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



                        Three Months Ended
                             March 31,
                       2022            2021

Revenues:
Medical treatments          68 %            63 %
Physical therapy            24 %            30 %
Chiropractic care            2 %             2 %
Memberships                  6 %             5 %
                           100 %           100 %




Consolidated Results



Total revenues increased approximately $870,000 due to acquisitions, same-store
growth, and opening of retail clinics. Visits to our clinics are an indication
of business activity. Total visits increased 6% for the three months ended March
31, 2022 compared to the three months ended March 31, 2021. Visits increased
from 38,381 in the first quarter of 2021 to 40,866 in the first quarter of
2022.



IMAC Clinics


Of the total revenue increase, approximately $763,000 is attributed to the
increase of revenues for IMAC Clinics. Same-store revenues increased $23,000
overall for the three months ended March 31, 2022 compared to the three months
ended March 31, 2021. This increase was driven by the closure of four IMAC
clinics resulting in a decrease of $138,000 however the remaining same stores
increased $160,000. New clinics attributed to approximately $740,000 of the
overall increase.



A wellness membership program was implemented at IMAC Clinics in January 2020
and this wellness program has different plan levels that include services for
chiropractic care and medical treatments on a monthly subscription basis.
Therefore, memberships could have multiple visits in one month, however only one
payment is received for these visits. IMAC Clinics had 934 and 1,048 active
members for the three months ended in March 31, 2022 and 2021, respectively. The
membership decrease is attributable to adverse weather and a 10% price increase
to the most popular membership plan.



BackSpace Clinics


The Company began opening retail clinics in Walmart in June 2021 and as of March
31, 2022 IMAC had ten clinics opened in Florida, Missouri and Tennessee. The
retail clinics provides outpatient chiropractic and spinal care services.
BackSpace offers a single visit and membership plan for chiropractic care on a
monthly subscription basis. As of March 31, 2022, 75% of the BackSpace revenue
was related to memberships.



Operating Expenses


Operating expenses consist of patient expenses, salaries and benefits, share
based compensation, advertising and marketing, general and administrative
expenses and depreciation expenses.

Patient expenses consist of medical supplies for services rendered.


                                                                                    Percent
                                                                 Change from      Change from
        Patient Expenses              2022           2021         Prior Year       Prior Year

Three Months Ended March 31        $  460,000     $  341,000     $    119,000               35 %




Cost of revenues (patient expense) increased for the three months ended March
31, 2022 as compared to March 31, 2021, due to an increase in business. Patient
expense as a percent of revenue has remained consistent from 11.8% for the first
quarter of 2022 compared to 11.3% for the first quarter of 2021.



24






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



                                                                                       Percent
                                                                   Change from       Change from
     Salaries and Benefits            2022            2021          Prior Year       Prior Year

Three Months Ended March 31        $ 3,710,000     $ 2,754,000     $    956,000                35 %




Salaries and benefits expenses for the three months ended March 31, 2022, as
compared to the three months ended March 31, 2021, increased due to the hiring
of new providers for the 10 BackSpace clinics and 4 new IMAC clinics opened
since March 31, 2021.



Share-based compensation consists of the value of equity incentive grants issued
to employees, directors and board members which have vested during the period.



                                                                                     Percent
                                                                  Change from      Change from
    Share-based Compensation          2022           2021         Prior Year        Prior Year

Three Months Ended March 31        $  189,000     $  111,000     $      78,000               70 %



Share-based compensation increased 70% for the three months ended March 31,
2022
, as compared to the three months ended March 31, 2021 due to $106,000 in
Restricted Stock Units (RSUs) awarded in February 2022.



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



                                                                                    Percent
                                                                 Change from      Change from
   Advertising and Marketing          2022           2021         Prior Year       Prior Year

Three Months Ended March 31        $  370,000     $  266,000     $    104,000               39 %



Advertising and marketing expenses increased $104,000 for the three months ended
March 31, 2022, as compared to the three months ended March 31, 2021. This
increase is attributable to the increase of online and television marketing
programs for the existing and new clinics as well as the launch of new BackSpace
clinics.



General and administrative expense ("G&A") consist of all other costs than
advertising and marketing, salaries and benefits, patient expenses and
depreciation.



                                                                                      Percent
                                                                   Change from      Change from
   General and Administrative         2022            2021          Prior Year       Prior Year

Three Months Ended March 31        $ 1,815,000     $ 1,219,000     $    596,000               49 %




25






G&A increased in the three months ended March 31, 2022 as compared to the three
months ended March 31, 2021. There was a $117,000 increase in rent expense from
the first quarter of 2021 compared to the first quarter of 2022 due to the 4 new
IMAC clinic locations as well as the 10 Backspace locations. The Company had an
increase of $46,000 in travel expenses in the first quarter of 2022 compared to
the first quarter of 2021 due to the increase in travel since COVID-19 as well
as preparing the new Backspace locations for opening. There was a $141,000
increase in contractors and consultants related to collaborative agreements,
Backspace operations and Louisiana valuation. Software and other subscriptions
increased $93,000 in the first quarter of 2022 compared to the first quarter of
2021, which is attributable to the new IMAC locations and Backspace. See FDA
impact below.



FDA Clinical Trial


In August 2020, the United States Food and Drug Administration (the "FDA")
approved the Company's investigational new drug application. The Company has
begun the third cohort of Phase 1 of the clinical trial, which will be completed
during the summer of 2022. The Company incurred $104,000 in G&A expenses related
to consultants, supplies, software and travel for the clinic trial during the
three months ended March 31, 2022 compared to $81,000 in the three months ended
March 31, 2021. Salaries related to the trial were $22,000 for the three months
ended March 31, 2022 compared to $30,000 for the three months ended March 31,
2021.


Depreciation is related to our property and equipment purchases to use in the
course of our business activities. Amortization is related to our business
acquisitions.



                                                                  Change 

from Percent Change

 Depreciation and Amortization        2022           2021         Prior 

Year from Prior Year

Three Months Ended March 31 $ 447,000 $ 422,000 $ 25,000

                   6 %




Depreciation and amortization increased for the three months ended March 31,
2022 compared to the three months ended March 31, 2021. The increase is
attributable to the assets added from 2021 acquisitions as well as the 10 new
Backspace locations.



Depreciation is related to our property and equipment purchases to use in the
course of our business activities. Amortization is related to our business
acquisitions.



                                                                                   Percent Change
                                                                  Change from        from Prior
Loss on disposal and impairment       2022           2021         Prior Year            Year

Three Months Ended March 31        $   47,000     $    4,000     $      43,000              1,075 %




Loss on disposal and impairment increased $43,000 for the three months ended
March 31, 2022 compared to the three months ended March 31, 2021. IMAC made a
decision in March 2022 to close the Bonita Springs office and therefore the
value of the customer list was impaired, which attributed to $33,000 of this
increase. The remaining balance is related to the disposal of fixed assets.

26






Analysis of Cash Flows


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



During the three months ended March 31, 2022, net cash used in operations
increased to $2.4 million compared to $1.7 million for the three months ended
March 31, 2021. This difference was primarily attributable to the increase in
accounts receivable, which was related to the change in the payor mix. There
increase was also attributed to an increase in share-based compensation and
prepaid balance during the three months ended March 31, 2022.



Net cash used in investing activities during the three months ended March 31,
2022 and 2021 was approximately $216,000 and $683,000, respectively. This was
primarily driven by the acquisitions made during the quarter ended March 31,
2021 totaling approximately $564,000.



Net cash used in financing activities during the three months ended March 31,
2021
was approximately $184,000, which mostly consisted of debt payments of
approximately $179,000.

Reconciliation of Non-GAAP Financial Measures

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



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



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



A reconciliation of adjusted EBITDA to the most directly comparable GAAP measure
is set forth below.



                                                     Three Months Ended
                                                 March 31,        March 31,
                                                    2022             2021
GAAP loss attributable to IMAC Holdings, Inc.   $ (3,162,000 )   $ (2,229,000 )
Interest expense                                       4,000          176,000
Other expense                                         13,000                -
Share-based compensation expense                     189,000          

111,000

Depreciation and amortization                        447,000          

422,000

Loss on disposition and impairment of assets          47,000            4,000
Adjusted EBITDA                                 $ (2,462,000 )   $ (1,516,000 )



Liquidity and Capital Resources

As of March 31, 2022, we had $4 million in cash and working capital of $1.4
million. As of December 31, 2021, we had cash of $7.1 million and working
capital of $4.1 million. The decrease in working capital was primarily due to
the use of cash for operating expenses during the three months ended March
31,
2022.


We believe our cash at March 31, 2022 along with ongoing operations will be
sufficient to meet our cash, operational and liquidity requirements for at least
12 months.



As of March 31, 2022, we had approximately $5.2 million in current liabilities.
Operating leases represent $1.5 million of our current liabilities. Of our
remaining current liabilities as of March 31, 2022, approximately $1.2 million
in current liabilities outstanding to our vendors, which we have historically
paid down in the normal course of our business and accrued expenses represent
approximately $806,000 of the balance. Lastly, accrued wages, taxes, 401k
contributions and paid time off represent approximately $1.1 million of the
remaining current liabilities.



27






On October 29, 2020, the Company entered into the October Purchase Agreement
with Iliad Research & Trading, L.P., pursuant to which the Company agreed to
issue and sell to the Holder a secured promissory note in an initial principal
amount of $2,690,000, which is payable on or before April 29, 2022. The October
Principal Amount includes an original discount of $175,000 and $15,000 that the
Company agreed to pay to the Holder to cover the Holder's legal fees, accounting
costs, due diligence and other transaction costs. In exchange for the October
Note, the Holder paid a purchase price of $2,500,000. The October Purchase
Agreement also provides for indemnification of the Holder and its affiliates in
the event that they incur loss or damage related to, amount other things, breach
by the Company of any of its representations, warranties or covenants under the
October Purchase Agreement. In connection with the October Purchase Agreement
and the October Note, the Company entered into a Security Agreement with the
Holder, pursuant to which the obligations of the Company is secured by all of
the assets of the Company, excluding the Company's accounts receivable and
intellectual property. Upon an event of default under the October Note, the
October Security Agreement entitles the Holder to take possession of such
collateral; provided that the Holder's security interest and remedies with
respect to the collateral are junior in priority to the security interest
previously granted by the Company to the Holder in connection with a separate
financing entered into by them on March 25, 2020, for which the Holder holds a
senior, first-priority security interest in the same collateral.



On March 26, 2021, the Company completed a public offering by issuing 10,625,000
shares of common stock for gross proceeds of $17 million. The Company used
approximately $1.8 million for the repayment of certain indebtedness and is
using the remaining proceeds for the repayment of certain other indebtedness, to
finance the costs of developing and acquiring additional outpatient medical
clinics and healthcare centers as part of the Company's growth and expansion
strategy and for working capital.



These events served to mitigate the conditions that historically raised
substantial doubt about the Company’s ability to continue as a going concern.



Contractual Obligations



The following table summarizes our contractual obligations by period as of March
31, 2022:



                                             Payments Due by Period
                                            Less Than                                       More Than
                              Total          1 Year         1-3 Years       4-5 Years        5 Years
Short-term obligations     $    80,921     $    80,921     $         -     $         -     $         -
Long-term obligations,
including interest             111,498               -         101,748           9,750               -
Finance lease
obligations, including
interest                        49,980          18,171          31,809               -               -
Operating lease
obligations                  5,723,844       1,274,383       3,705,414     
   662,356          81,691
                           $ 5,966,243     $ 1,373,475     $ 3,838,971     $   672,106     $    81,691



Off-Balance Sheet Arrangements

As of March 31, 2022, the Company did not have any off-balance sheet
arrangements.

28

© Edgar Online, source Glimpses

Source

Similar Posts