Confidential Draft Submission No. 2 submitted to the Securities and Exchange Commission on August 9 , 2018. This draft registration statement has not been publicly filed with the Securities and Exchange Commission and all information herein remains strictly confidential.

 

Registration No. 333-           

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

 

Confidential Draft Submission No. 2

FORM S-1

REGISTRATION STATEMENT

under the Securities Act of 1933

 

IMAC Holdings, Inc.

(Exact Name of Registrant as specified in its charter)

 

Delaware   8093   83-0784691
 (State or Other Jurisdiction of
Incorporation or Organization)
  (Primary Standard Industrial
Classification Number)
  (I.R.S. Employer
Identification No.)

 

IMAC Holdings, Inc.

1605 Westgate Circle

Brentwood, Tennessee 37027

(844) 266-4622

(Address, including zip code, and telephone number, including area code, of Registrant’s principal executive offices)

 

 

Jeffrey S. Ervin

Chief Executive Officer

IMAC Holdings, Inc.

1605 Westgate Circle

Brentwood, Tennessee 37027

(844) 266-4622

(Name, address, including zip code, and telephone number, including area code, of agent for service)

 

Copies to:

 

Spencer G. Feldman, Esq.
Olshan Frome Wolosky LLP
1325 Avenue of the Americas, 15th Floor
New York, New York 10019
(212) 451-2300

Ralph V. DeMartino, Esq.

F. Alec Orudjev, Esq.

Cavas Pavri, Esq.

Schiff Hardin LLP
901 K Street NW, Suite 700
Washington, D.C. 20001
(202) 778-6400

 

Approximate date of commencement of proposed sale to the public:

As soon as practicable after the effective date of this Registration Statement.

 

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. [X]

 

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [  ]

 

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [  ]

 

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [  ]

 

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

 

Large Accelerated Filer [  ] Accelerated Filer [  ] Non-Accelerated Filer [  ] Smaller Reporting Company [X]
    (Do not check if a
smaller reporting company)
Emerging Growth Company [X]

 

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 7(a)(2)(B) of the Securities Act. [  ]

 

 

CALCULATION OF REGISTRATION FEE

 

Title of Each Class of Securities
to be Registered
  Amount to be Registered   Proposed Maximum Offering Price Per Share   Proposed Maximum
Aggregate Offering Price(1)(2)
   Amount of
Registration Fee
 
Shares of Common Stock, par value $0.001 per share   -    -   $17,250,000   $2,147.63 
Underwriter Warrants (3) (5)   -    -    -    - 
Common Stock underlying Underwriter Warrants (3) (4)   -    -    828,000   $103.09 
Total   -    -    18,078,000   $2,250.72 

 

 

 

(1) Estimated solely for the purpose of computing the amount of the registration fee pursuant to Rule 457(o) under the Securities Act of 1933, as amended.
(2) Includes shares the underwriter has the option to purchase to cover over-allotments, if any.
(3) We have agreed to issue to the underwriter, upon closing of this offering, warrants exercisable for a period of five years from the effective date of this registration statement entitling the representative to purchase 4% of the number of common shares sold in this offering. Resales of shares of common stock issuable upon exercise of the underwriter warrants are being similarly registered on a delayed or continuous basis. See “Underwriting.”
(4) Estimated solely for the purposes of calculating the registration fee pursuant to Rule 457(g) under the Securities Act. We have calculated the proposed maximum aggregate offering price of the common stock underlying the underwriter’s warrants by assuming that such warrants are exercisable at a price per share equal to 120% of the price per share sold in this offering.
(5) No separate registration fee required pursuant to Rule 457(g) under the Securities Act.

 

 

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a) may determine.

 

 

 

 
 

 

The information in this preliminary prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

 

Subject to Completion—Dated August [ ], 2018

 

PRELIMINARY PROSPECTUS

 

[●] Shares of Common Stock

 

 

IMAC Holdings, Inc.

 

This is the initial public offering of shares of common stock of IMAC Holdings, Inc. We are offering [●] shares. We currently estimate that the initial public offering price will be $[●] per share.

 

Prior to this offering, no public market has existed for our common stock.

 

We intend to list our shares of common stock for trading on The NASDAQ Capital Market under the symbol “IMAC.” We believe that upon the completion of the offering contemplated by this prospectus, we will meet the standards for listing on The NASDAQ Capital Market.

 

An investment in our securities is highly speculative, involves a high degree of risk and should be considered only by persons who can afford the loss of their entire investment. See “Risk Factors” beginning on page 16 .

 

   Per Share   Total 
Initial public offering price  $   $ 
Underwriting discounts and commissions (1)  $          $    
Proceeds to us, before expenses  $        $ 

 

 

 

  (1) Represents underwriting discounts and commissions equal to 6.25% per share (or $[●] per share), which is the underwriting discount we have agreed to pay to the underwriter in this offering.
  (2) Does not include a non-accountable expense allowance equal to 0.75% of the gross proceeds of this offering, payable to the underwriters, or for the reimbursement of certain expenses of the underwriters.

 

In addition to the underwriting discounts listed above and the non-accountable expense allowance described in the footnote, we have agreed to issue upon the closing of this offering warrants to Cuttone & Co., LLC, as representative of the underwriters, entitling it to purchase 4% of the number of shares of common stock sold in this offering at 120% of the public offering price per share expiring five years from the effective date of the registration statement of which this prospectus forms a part. The registration statement of which this prospectus forms a part also covers these warrants and the shares of common stock issuable upon their exercise. For additional information regarding our arrangements with the underwriters, please see “Underwriting” beginning on page 77 . We have granted the underwriter the right to purchase up to [●] additional shares of common stock from us at the initial public offering price less underwriting discounts and commissions to cover over-allotments, if any. The underwriter can exercise this option within 45 days after the date of this prospectus.

 

We are an “emerging growth company” as defined under U.S. federal securities laws and, as such, may elect to comply with certain reduced public company reporting requirements after this offering.

 

Neither the Securities and Exchange Commission nor any other regulatory body has approved or disapproved these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

 

The underwriter expects to deliver the shares of our common stock to purchasers on or about [●], 2018.

 

 

CUTTONE & CO., LLC

 

 

The date of this prospectus is [●], 2018

 

 
 

 

TABLE OF CONTENTS

 

  Page
Prospectus Summary 2
Risk Factors 16
Cautionary Note Regarding Forward-Looking Statements 29
Corporate Conversion 30
Use of Proceeds 31
Dividend Policy 32
Capitalization 32
Dilution 33
Management’s Discussion and Analysis of Financial Condition and Results of Operations 34
Management 63
Executive Compensation 67
Certain Relationships and Related Transactions 68
Principal Stockholders 70
Description of Capital Stock 71
Shares Eligible for Future Sale 75
Underwriting 77
Indemnification for Securities Act Liabilities 84
Legal Matters 84
Experts 84
Where You Can Find Additional Information 84

 

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About this Prospectus

 

Neither we nor the underwriter has authorized anyone to provide you with information that is different from that contained in this prospectus or in any free writing prospectus we may authorize to be delivered or made available to you. We take no responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you. We and the underwriter are offering to sell shares of common stock and seeking offers to buy shares of common stock only in jurisdictions where offers and sales are permitted. The information contained in this prospectus is accurate only as of the date on the front of this prospectus, regardless of the time of delivery of this prospectus or any sale of shares of our common stock. Our business, financial condition, results of operations and prospects may have changed since that date.

 

For investors outside the United States: Neither we nor the underwriter has done anything that would permit this offering, or possession or distribution of this prospectus, in any jurisdiction where action for that purpose is required, other than in the United States. Persons outside the United States who come into possession of this prospectus must inform themselves about, and observe any restrictions relating to, the offering of the shares of common stock and the distribution of this prospectus outside of the United States. See “Underwriting.”

 

Unless otherwise indicated, information in this prospectus concerning economic conditions, our industry, our markets and our competitive position is based on a variety of sources, including information from third-party industry analysts and publications and our own estimates and research. Some of the industry and market data contained in this prospectus are based on third-party industry publications. This information involves a number of assumptions, estimates and limitations. The sources of the third-party industry publications referred to in this prospectus are:

 

  Orbis Research, an independent market research firm; and
     
  IBIS World, an independent industry research company.

 

The industry publications, surveys and forecasts and other public information generally indicate or suggest that their information has been obtained from sources believed to be reliable. None of the third-party industry publications used in this prospectus were prepared on our behalf. The industry in which we operate is subject to a high degree of uncertainty and risk due to a variety of factors, including those described in “Risk Factors.” These and other factors could cause results to differ materially from those expressed in these publications.

 

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PROSPECTUS SUMMARY

 

This summary highlights information contained in this prospectus and does not contain all of the information that you should consider in making your investment decision. Before investing in our common stock, you should carefully read this entire prospectus, including our consolidated financial statements and the related notes thereto and the information set forth under the sections “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and related notes thereto, in each case included in this prospectus. Some of the statements in this prospectus constitute forward-looking statements. See “Cautionary Note Regarding Forward-Looking Statements.”

 

References in this prospectus to “IMAC Group” represent IMAC Holdings, Inc. on a pro forma basis after consummation of business transactions involving companies owning or managing IMAC Regeneration Centers and the related issuance of shares of common stock, debt and/or cash payments in such transactions, which were completed in June 2018. The business transactions refer to the following three transactions with entities for which IMAC Holdings currently has either no ownership or control, or varying degrees of ownership or control : “Integrated Medicine and Chiropractic Regeneration Center PSC,” “IMAC of St. Louis, LLC” and “IMAC Regeneration Management of Nashville, LLC. ”

 

References in this prospectus to “we,” “us,” “our,” “our company,” “our business” or “IMAC Holdings” are to IMAC Holdings, Inc., a Delaware corporation, and prior to the Corporate Conversion discussed in this prospectus, IMAC Holdings, LLC, a Kentucky limited liability company, and in each case, their consolidated subsidiaries.

 

OUR COMPANY

 

We are a provider of a continuum of non-surgical orthopedic therapies 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, non-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. Since then, we have opened six new outpatient medical clinics in Kentucky, Missouri and Tennessee, and plan with the net proceeds of this offering 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, opening two Ozzie Smith IMAC Regeneration Centers and two David Price IMAC Regeneration Centers, and we recently opened a Tony Delk IMAC Regeneration Center in July 2018. Our outpatient medical clinics emphasize our focus around treating sports and orthopedic injuries. In 2017, IMAC Group recorded 81,256 total patient visits at our medical clinics.

 

We are focused on providing natural, non-opioid solutions to pain as consumers increasingly demand non-surgical treatments for an aging population. The demand for our services continues at a rapid rate fueling growth for organic healthcare solutions over traditionally invasive orthopedic practices. We believe that our regenerative rehabilitation treatments are provided to patients at a much lower price than our primary competitors including traditional orthopedic surgeons, pain management clinics and hospital systems targeting invasive joint reconstruction. Orbis Research, an independent market research firm, reported that the regenerative healthcare industry is estimated to be $67.6 billion by 2019, and independent industry research company IBIS World estimated that outpatient rehabilitation is an approximately $30 billion industry, with approximately 90% of that revenue generated from physical rehabilitation services, including orthopedic, sports, geriatric and other forms of physical medicine. Outpatient rehabilitation is anticipated to grow at a rate of 2% to 7% in the coming years, according to these industry research companies, due to the aging baby boomer generation, sustained high rates of obesity, healthcare reform and the continued economic recovery in the United States. We believe that as healthcare insurance providers seek to reduce medical costs and government regulation increases access to medical care, our outpatient medical clinics are poised to capture a larger share of healthcare spending.

 

We own our medical clinics directly or have entered into long-term management services agreements to operate and control these medical clinics by contract. The managed clinics are owned exclusively by a professional service corporation under common control with us or eligible members of our company in order to comply with state laws regulating the ownership of medical practices. We are compensated under management services agreements through service fees based on the cost of the services provided, plus a specified markup percentage, and a discretionary annual bonus determined in the sole discretion of each professional service corporation.

 

We also believe that we have positioned ourselves to take advantage of current trends in healthcare spending. According to the Centers for Medicare & Medicaid Services’ National Health Expenditure Projections 2017-2026, national healthcare expenditures continue to rise and are projected to grow from an estimated $3.5 trillion in 2017 to $5.7 trillion by 2026, representing an average annual rate of growth of 5.5%, reaching a projected 19.7% of U.S. gross domestic product in 2026 , as shown below.

 

 

 

 

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Our Operations

 

We currently operate six outpatient medical clinics in three states. Our original clinic opened in August 2000 and remains the flagship location of our current business, which was formally organized in March 2015 with the mission of expanding the reach of our facilities to other strategic locations throughout the United States. Our flagship medical clinic has been operated during the last 18 years by Matthew E. Wallis, DC and Jason Brame, DC, two of our co-founders, and, since March 2015, together with Jeffrey S. Ervin, our third co-founder and the current Chief Executive Officer of the company. This management team continues today throughout the organization incorporating the same strategies used to build and operate the company’s flagship location. During 2016 and 2017, we opened five more medical clinics, with one additional clinic this year.

 

Below is a list of our outpatient medical clinics and information about how we own or control our medical clinics:

 

Clinic Name   Location of Clinic   Date Opened   Form and Date of Control
             
IMAC Regeneration Center   Paducah, Kentucky   August 2000   Managed since June 28, 2018
             
Ozzie Smith Center   Chesterfield, Missouri   May 2016   Full ownership effective June 1, 2018, when remaining 64% interest was acquired
             
IMAC Regeneration Center   Murray, Kentucky   February 2017   Managed since June 28, 2018
             
David Price Center   Brentwood, Tennessee   May 2017   Managed since November 1, 2016
             
Ozzie Smith Center   St. Peters, Missouri   August 2017   Full ownership effective June 1, 2018, when remaining 64% interest was acquired
             
David Price Center   Murfreesboro, Tennessee   November 2017   Managed since November 1, 2016
             
Tony Delk Center   Lexington, Kentucky   July 2018   Managed since July 2, 2018

 

We own our medical clinics directly or have entered into long-term management services agreements to operate and control these medical clinics by contract . The managed clinics are owned exclusively by a professional service corporation under common control with us or eligible members of our company in order to comply with state laws regulating the ownership of medical practices. All employees who provide direct medical services to patients are employed by the professional service corporation. We employ the non-medical provider staff for the clinics and provide comprehensive management and administrative services to help the professional service corporation operate the clinics. We 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. Under our management services agreements, all obligations owed to us by the professional service corporations are secured by all accounts receivable, contract rights, revenues and general intangibles of the applicable professional service corporation. The management services agreements may be terminated by mutual agreement of the parties, by a non-breaching party after 30 days following an uncured breach by the other party, upon a bankruptcy of either party or by us upon 90 days’ prior written notice to the other party.

 

Our Services

 

The licensed healthcare professionals at our clinics work with each patient to create a protocol customized for each patient by utilizing a combination of the following traditional and innovative treatments:

 

Medical Treatments. Our specialized team of doctors work together to provide the latest non-surgical, prescription-free treatments for movement challenges or pain related to orthopedic conditions. The treatments are customized to treat the underlying condition instead of masking the challenge with prescriptions or surgeries.

 

Regenerative Medicine. Regenerative medicine utilizes cellular structures within one’s body to heal damaged cells. We use these cellular structures from the patient’s body (autologous cells) to heal a degenerative soft tissue condition causing pain or restricting one’s movement. Clinical studies have shown that autologous cell treatments from blood, stromal vascular fraction, and bone marrow improved function and decreased pain to joints, muscles, connective tissue and alleviate osteoarthritis and degenerative tissue.

 

Physical Medicine. Our team of sports medicine practitioners start by collaboratively building a personalized physical medicine treatment plan designed to help patients get back to living the life they deserve.

 

 

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● Physical Therapy. With a combination of biomechanical loading and tissue mobilization, our licensed physical rehabilitation therapists work with each patient to help the body restore skill within the joint or soft tissue.

 

● Spinal Decompression. During this treatment, the spine is stretched and relaxed intermittently in a controlled manner, creating a negative pressure in the disc area that can pull herniated or bulging tissue back into the disc. Whether caused by trauma or degeneration, we realize the impact a spinal injury can have on the quality of one’s life and seek to provide innovative, non-invasive medical technology and care to relieve back pain and restore function.

 

● Chiropractic. Although removing pain is an integral part of patient care, our chiropractic goals also include wellness, health and optimal performance. Our experienced chiropractors are committed to helping patients achieve better health without the need for surgery or prescription drugs.

 

Our Growth and Expansion Strategy

 

We have plans to open additional IMAC Regeneration Centers in the states in which we currently operate, as well as in other strategic locations throughout the United States, building on our familiarity with the demographic market and our reputation in the area to attract new patients and endorsements. Our strategic partnerships with regional and national sports stars have enabled us to increase our visibility in our markets and become known for providing innovative regenerative-based therapies. We continue to seek opportunities to work with more athletes to draw awareness to our services. In addition, we have enlisted a wide range of medical and alternative medicine professionals to continue providing innovative outpatient treatments to our patients without surgery or prescription pain medication. The key elements of our growth and expansion strategy are:

 

Open New Outpatient Locations and Facilities. We are in the process of identifying strategic new locations at which to lease and develop new IMAC Regeneration Centers. We anticipate initial expansion in the Midwest and southern United States, including in Illinois, Kansas, Oklahoma and Texas, followed by locations throughout the United States. By branching into states near the ones in which we already operate, we will be able to draw on our experience with the regional market, leverage regional patient familiarity with our outpatient clinics and focus our marketing efforts. We believe our strong regional operations will provide a foundation to grow into more states across the country.

 

Continue to Obtain Endorsements from Well-Known Sports Celebrities. We continue to attract celebrity sports endorsers for each market in which we operate and plan to expand. By collaborating and co-branding with well-known sports figures, patients become more familiar with our brand and associate our company with physical fitness and well-being. Working with sports celebrities that are well-known in our markets and personally recommend our treatments helps establish credibility with patients in those markets.

 

Expand Our Advertising and Marketing. We intend to increase our advertising and marketing efforts and reach throughout our primary service areas in order to grow patient volume at our existing facilities and spur interest in newer locations. We will expand our direct-to-patient marketing via traditional media and social media outlets, using our celebrity endorsers in all such marketing efforts. While we welcome patients that are referred to us by other healthcare providers, we believe that direct marketing will generate more new patients for our outpatient clinics than relying solely on antiquated medical referral practices.

 

Offer State-of-the-Art Orthopedic Treatments. Our regenerative medicine techniques are used to prevent arthritis, treat meniscus tears, defeat muscle deterioration and address other damaged tissue conditions. We will continue offering cutting-edge healthcare treatments, including alternative medicine treatments, and will adapt our treatment offerings as new treatments are developed and come to market. By bringing together a diverse array of medical specialists, we are able to treat more health conditions and attract a larger base of patients.

 

 

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Our Revenue Model

 

IMAC Holdings recorded consolidated patient billings of $532,872 (unaudited) and $1,378,313 and realized total net patient revenues, less allowances for contractual adjustments with third-party payers, of $234,253 (unaudited) and $654,625 for the three months ended March 31, 2018 and the year ended December 31, 2017, respectively, and had no revenues in 2016. No revenues were recorded in 2016 because IMAC Holdings did not own or manage any clinics in its name in 2016 and the clinics with which it had entered into management service agreements in 2016 did not open until early 2017. IMAC Holdings’ net loss for the three months ended March 31, 2018 and year ended December 31, 2017 were $665,865 and $916,532, respectively.

 

Integrated Medicine and Chiropractic Regeneration Center PSC recorded patient billings of $2,825,256 (unaudited), $13,258,419 and $14,990,042 and realized total net patient revenues of $980,209 (unaudited), $4,960,132 and $3,311,884 for the three months ended March 31, 2018 and the years ended December 31, 2017 and 2016, respectively. Integrated Medicine and Chiropractic Regeneration Center PSC’s net income/(loss) for the three months ended March 31, 2018 and year ended December 31, 2017 were $(117,170) and $444,177, respectively.

 

IMAC of St. Louis, LLC recorded patient billings of $1,726,631 (unaudited), $8,073,943 and $3,171,811 and realized total net patient revenues of $531,970 (unaudited), $2,709,928 and $913,654 for the three months ended March 31, 2018 and the years ended December 31, 2017 and 2016, respectively. IMAC of St. Louis, LLC’s net income/(loss) for the three months ended March 31, 2018 and year ended December 31, 2017 were $(243,095) and $14,609, respectively.

 

IMAC Group, which includes the acquisitions of Integrated Medicine and Chiropractic Regeneration Center PSC and IMAC of St. Louis, LLC in June 2018, as if they each occurred on January 1, 2017, had patient billings of $5,084,759 (unaudited) and $22,710,675 and total net patient revenues were $1,746,432 (unaudited) and $8,324,685 for the three months ended March 31, 2018 and the year ended December 31, 2017. IMAC Group’s pro forma net (loss) for the three months ended March 31, 2018 and year ended December 31, 2017 were $(1,287,293) and $(2,062,652), respectively. IMAC Group’s pro forma net assets as of March 31, 2018 totaled $13,394,728.

 

Our revenue model is diversified between medical treatments and physiological treatments. Our medical treatments are further segmented into traditional medical and regenerative medicine practices. For the last two full fiscal years and the first quarter of this year, traditional medical treatments comprised approximately 33% of IMAC Group’s total net patient revenues, while regenerative medicine accounted for approximately 31% of the total net patient revenues. Physiological treatments generated the remainder of the total net patient revenues as physical therapy amounted to 31% and chiropractic care amounted to 5% of such revenues. 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. Approximately 26% of IMAC Group’s total net patient revenues are attributable to insurance payments, 23% to payments from the Centers for Medicare & Medicaid Services (“CMS”) and 51% to cash payments from patients.

 

Our Competitive Advantages

 

While some of our competitors offer regenerative medical treatments like we do, we believe that few companies have the multi-disciplinary approach of combining physical therapy and medical professionals working together to generate optimal regenerative health outcomes. The internal survey results of IMAC Group conducted randomly with more than 120 patients during 2017 and 2016 reported that 91% of our patients experienced improvement in their health after treatments at our outpatient clinics.

 

Competitive factors affecting our business include quality of care, cost, treatment outcomes, convenience of location, and relationships with, and ability to meet the needs of, referral and payor sources. Our clinics compete, directly or indirectly, with many types of healthcare providers including the physical therapy departments of hospitals, private therapy clinics, physician-owned therapy clinics, and chiropractors. We may face more intense competition if consolidation of the therapy industry continues.

 

We believe that we differentiate ourselves from our competition and have been able to grow our business as a result of the following competitive strengths:

 

Our Non-invasive Approach to Traditional Orthopedic Care. We pay particular attention to rehabilitating our patients’ musculoskeletal system to reduce pain and enhance mobility without surgery or anesthesia. Combining physical therapy, platelet rich plasma treatments, spinal decompression and chiropractic care, we are able to treat a variety of physical conditions by using a patient’s own body to help heal itself.

 

We Do Not Prescribe Addictive Opioids. We do not use or offer opioid-based prescriptions as part of our treatment options in order to help our patients avoid the dangers of opioid abuse and addiction. We focus on preventing the potential for addiction through our regenerative-based therapies that help alleviate chronic pain.

 

We Utilize Diverse Medical Specialists for Customized Care. Our treatment protocols are customized by a team of medical doctors, nurse practitioners, chiropractors and physical therapists and are designed to heal damaged tissue without surgery or prescription pain medication.

 

 

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Our Management has Aligned Interests. We believe that a strong alignment of interests with investors exists through the ownership of a significant percentage of our outstanding shares by Jeffrey S. Ervin, our Chief Executive Officer, and Matthew C. Wallis, DC, our Chief Operating Officer. Mr. Ervin and Dr. Wallis acquired their ownership in March 2015 when they founded the company and have not sold any of their equity to date.

 

Our Beliefs

 

We believe that we garner significant patient satisfaction following our five fundamental beliefs:

 

● we believe that the body has the ability to heal itself, and better results occur with our solutions to unlock the body’s natural healing process;

 

● we believe in the power of doctors, from many different specializations, working together for the best patient care possible;

 

● we believe that employees should know patients by their face, not by a chart number;

 

● we believe consumers have a choice regardless of physician referral or insurance coverage; and

 

● we believe a medical setting should be comforting.

 

Our Leadership Team

 

We are led by senior executive officers who together have more than 70 years of combined experience in the healthcare service industry. Jeffrey S. Ervin, our Chief Executive Officer, co-founded our company in February 2015. Mr. Ervin has a history of managing private equity operations in the healthcare and other growth-oriented industries. Before co-founding our company, Mr. Ervin was the senior financial officer at Medx Publishing, an online healthcare marketing and technology firm and parent company of Medicare.com, where he was responsible for the disposition and ultimate sale of Medicare.com. Mr. Ervin earned an M.B.A. degree from Vanderbilt University.

 

Another co- founder of our company, Matthew C. Wallis, DC, a licensed chiropractor, is our Chief Operating Officer. Dr. Wallis has implemented strategies in the company to create consistent operating efficiencies for our sales, marketing and service delivery.

 

D. Anthony Bond, CPA, is the most recent addition to our leadership team, joining as our Chief Financial Officer in October 2017. Mr. Bond has a long history in senior financial roles within healthcare organizations and managing multi-state, multi-site healthcare operations for public and private companies.

 

Business Transactions

 

In June 2018, we completed the following transactions with IMAC Management Services, LLC (formerly Clinic Management Associates, LLC), IMAC Regeneration Center of St. Louis, LLC and IMAC Regeneration Management of Nashville, LLC (the “ Transactions ”). We intend to make additional acquisitions following this offering and, in the ordinary course of business, we frequently engage in discussions with potential acquisition candidates and/or their representatives. We have no commitments or agreements for any acquisitions. Information concerning our recent transactions is set forth below.

 

Integrated Medicine and Chiropractic Regeneration Center PSC. Our wholly-owned subsidiary, IMAC Management Services, LLC (formerly Clinic Management Associates, LLC), holds a long-term Management Services Agreement with Integrated Medicine and Chiropractic Regeneration Center PSC, a professional service corporation controlled by our co-founders Matthew C. Wallis, DC, and Jason Brame, DC, which operates two IMAC Regeneration Centers in Kentucky. On June 29, 2018, Clinic Management Associates, LLC, controlled by Drs. Wallis and Brame, merged with and into our subsidiary IMAC Management Services, LLC. IMAC Management Services, LLC provides exclusive comprehensive management and related administrative services to the IMAC Regeneration Centers under the Management Services Agreement. Pursuant to the merger agreement with Clinic Management Associates, LLC, we agreed to pay the sum of $4,598,576 to its former owners in a combination of cash and shares of common stock upon the closing of this offering. Under the Management Services Agreement, we will receive service fees based on the cost of the services we provide, plus a specified markup percentage, and a discretionary annual bonus. The Management Services Agreement is exclusive, extends through June 2048 and does not provide for renewal.

 

 

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IMAC of St. Louis, LLC. We entered into a Unit Purchase Agreement with the equity owners of IMAC Regeneration Center of St. Louis, LLC to acquire the remaining 64% of the outstanding units of the limited liability company membership interests we did not already own. This entity, doing business as the Ozzie Smith Center, operates two locations in Missouri. Pursuant to the terms of the Unit Purchase Agreement, we agreed to pay IMAC Regeneration Center of St. Louis, LLC’s former owners upon the closing of this offering an amount of cash and shares of common stock in the aggregate amount of $1,490,632. The effective date of the transaction was June 1, 2018.

 

IMAC Regeneration Management of Nashville, LLC. We entered into a Unit Purchase Agreement with the equity owners of IMAC Regeneration Management of Nashville, LLC to acquire the remaining 24% of the outstanding units of the limited liability company membership interests we did not already own for an amount equal to $120,000 in cash and $180,000 principal amount of 4% convertible notes (on the same terms as in our 2018 private placement described below). The effective date of this transaction was June 1, 2018. IMAC Regeneration Management of Nashville, LLC, now our 100%-owned subsidiary, and IMAC Regeneration Center of Nashville, P.C. previously agreed to a long-term, exclusive management services agreement on November 1, 2016.

 

Integrated Medicine and Chiropractic Regeneration Center PSC, IMAC Management Services, LLC, IMAC Regeneration Center of St. Louis, LLC and IMAC Regeneration Management of Nashville, LLC are related companies having common ownership with us and our controlling stockholders and have been operating together with us as a single group since 2015. See “Unaudited Pro Forma Condensed Consolidated Financial Information” to show the impact of these transactions on our financial statements.

 

2018 Private Placement

 

In the first five months of 2018, we received gross proceeds of $1,530,000 from a private placement of our 4% convertible promissory notes. The $1,530,000 and an additional $200,000 in existing equity and payments to sponsors is convertible into 270,313 shares of our common stock, pursuant to the terms of a Securities Purchase Agreement with 23 accredited investors. The principal amount of the promissory notes is convertible into shares of common stock automatically upon the closing of this offering. The conversion price of the promissory notes is $[●] per share, representing a 20% discount to the initial public offering price per share in this offering.

 

On May 31, 2018, we entered into a note payable to The Edward S. Bredniak Trust in the amount of up to $2,000,000. An existing note payable with this entity in the amount of $379,675.60 will be combined into the new note payable. The note carries an interest rate of 10% per annum and all outstanding balances are due and payable at the closing of this offering. The proceeds of this note are being used to satisfy ongoing working capital needs, expenses related to the preparation and execution of this offering, equipment and construction costs related to new clinic locations and potential business combination and transaction expenses.

 

Selected Risks Associated with Our Business

 

Despite our growth and expansion strategy and the competitive advantages we describe above, our business and prospects may be limited by a number of risks and uncertainties that we currently face, including:

 

  We operate in an intensely competitive market for healthcare solutions against a number of large, well-known hospital systems and outpatient medical clinics.
     
  We have a limited operating history and we cannot ensure the long-term successful operation of our business.
     
  IMAC Group had net losses of $1,287,293 (unaudited) and $2,062,652 for the three months ended March 31, 2018 and the year ended December 31, 2017. There can be no assurance we will have net income in future periods.

 

 

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  As part of our growth strategy following this offering, we intend to develop or acquire other outpatient medical clinics; however, there is no assurance that we will be able to identify appropriate acquisition targets, successfully acquire identified targets or successfully develop and integrate the businesses to realize their full benefits.
     
  Our business depends on the availability to us of Jeffrey S. Ervin, our Chief Executive Officer, who has unique knowledge regarding our roll-out of IMAC Regeneration Centers, and Matthew C. Wallis, DC, our Chief Operating Officer, who has business contacts that would be extremely difficult to replace, and our business would be materially and adversely affected if either of their services were to become unavailable to us.

 

Implications of Being an “Emerging Growth Company”

 

As a public reporting company with less than $1.07 billion in revenue during our last fiscal year, we qualify as an “emerging growth company” under the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. An emerging growth company may take advantage of specified reduced reporting requirements that are otherwise generally applicable to public companies. In particular, as an emerging growth company, we:

 

  are not required to obtain an attestation and report from our auditors on our management’s assessment of our internal control over financial reporting pursuant to the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”);
     
  are not required to provide a detailed narrative disclosure discussing our compensation principles, objectives and elements and analyzing how those elements fit with our principles and objectives (commonly referred to as “compensation discussion and analysis”);
     
 

are not required to obtain a non-binding advisory vote from our stockholders on executive compensation or golden parachute arrangements (commonly referred to as the “say-on-pay,” “say-on-frequency” and “say-on-golden-parachute” votes);

 

  are exempt from certain executive compensation disclosure provisions requiring a pay-for-performance graph and CEO pay ratio disclosure;
     
  may present only two years of audited financial statements and only two years of related Management’s Discussion and Analysis of Financial Condition and Results of Operations, or MD&A; and
     
  are eligible to claim longer phase-in periods for the adoption of new or revised financial accounting standards under §107 of the JOBS Act .

 

We intend to take advantage of all of these reduced reporting requirements and exemptions, including the longer phase-in periods for the adoption of new or revised financial accounting standards under §107 of the JOBS Act. Our election to use the phase-in periods may make it difficult to compare our financial statements to those of non-emerging growth companies and other emerging growth companies that have opted out of the phase-in periods under §107 of the JOBS Act. Please see “Risk Factors,” page 25 (“We are an ‘emerging growth company’. . . .”).

 

Certain of these reduced reporting requirements and exemptions were already available to us due to the fact that we also qualify as a “smaller reporting company” under the SEC’s rules. For instance, smaller reporting companies are not required to obtain an auditor attestation and report regarding management’s assessment of internal control over financial reporting, are not required to provide a compensation discussion and analysis, are not required to provide a pay-for-performance graph or CEO pay ratio disclosure, and may present only two years of audited financial statements and related MD&A disclosure.

 

 

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Under the JOBS Act, we may take advantage of the above-described reduced reporting requirements and exemptions for up to five years after our initial sale of common equity pursuant to a registration statement declared effective under the Securities Act, or such earlier time that we no longer meet the definition of an emerging growth company. In this regard, the JOBS Act provides that we would cease to be an “emerging growth company” if we have more than $1.07 billion in annual revenue, have more than $700 million in market value of our common stock held by non-affiliates, or issue more than $1 billion in principal amount of non-convertible debt over a three-year period. Under current SEC rules, however, we will continue to qualify as a “smaller reporting company” for so long as we have a public float (i.e., the market value of common equity held by non-affiliates) of less than $75 million as of the last business day of our most recently completed second fiscal quarter.

 

Corporate Information and Incorporation

 

The first IMAC Regeneration Center was organized in August 2000 as a Kentucky professional service corporation. That center was the forerunner to our current business and remains our flagship location. Matthew C. Wallis, DC and Jason Brame, DC, together with Jeffrey S. Ervin, became the founding members of IMAC Holdings, LLC, a Kentucky limited liability company organized in March 2015, to expand the company into new states while meeting the requirements of state healthcare practice guidelines and ownership laws.

 

The following chart reflects the corporate structure of our key operating units:

 

 

 

 

Percentages above refer to our ownership of subsidiaries’ limited liability company membership interests as of August 9 , 2018.

 

(1) As required by applicable state law, our medical clinics in Kentucky and Tennessee are held in professional service corporations owned entirely by licensed medical practitioners because the clinics are engaged in the practice of medicine through physicians and nurse practitioners. We are able to manage these medical clinics through limited liability companies that enter into management services agreements with the professional service corporations that own the clinics. Under these agreements, we provide exclusive comprehensive management and related administrative services to the professional service corporation and receive management fees. Due to this financial and operational control by contract, our financial statements consolidate the financial results of the professional service corporations. See “Prospectus Summary – Our Company; Our Operations.”

 

 

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(2) Our medical clinics in Kentucky are held in Integrated Medicine and Chiropractic Regeneration Center PSC, a professional service corporation owned by Matthew C. Wallis, DC and Jason Brame, DC. IMAC Management Services LLC, our 100%-owned subsidiary, and Integrated Medicine and Chiropractic Regeneration Center PSC agreed to a long-term, exclusive management services agreement on June 28, 2018. See “Prospectus Summary – Our Company; Business Transactions. ”
   
(3) We previously owned 36% of the outstanding limited liability company membership interests of IMAC of St. Louis, LLC, and acquired the remaining 64% of the outstanding units on June 1, 2018. See “Prospectus Summary – Our Company; Business Transactions. ”
   
(4) We previously owned 7 6% of the outstanding limited liability company membership interests of IMAC Regeneration Management of Nashville , LLC, and acquired the remaining 24% of the outstanding units on June 1, 2018. Our medical clinics in Tennessee are held in IMAC Regeneration Center of Nashville, P.C., a professional service corporation headed by David Smithson, M.D., our medical director. IMAC Regeneration Management of Nashville, LLC, now our 100%-owned subsidiary, and IMAC Regeneration Center of Nashville, P.C. agreed to a long-term, exclusive management services agreement on November 1, 2016. See “Prospectus Summary – Our Company; Business Transactions.”

 

Our consolidated financial statements include the accounts of IMAC Holdings, LLC 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 Management Services, LLC and IMAC Regeneration Management of Nashville, LLC; the following entity which is consolidated with IMAC Regeneration Management of Nashville, LLC due to control by contract: IMAC Regeneration Center of Nashville, PC; and the following entity which was held as a minority interest prior to June 1, 2018: IMAC of St. Louis, LLC.

 

Effective May 31, 2018, IMAC Holdings converted into a Delaware corporation and changed our name to IMAC Holdings, Inc., which is referred to herein as the Corporate Conversion. In conjunction with the conversion, all of our outstanding membership interests were exchanged on a proportional basis into shares of common stock. As a result of the Corporate Conversion, we are now a federal corporate taxpayer as opposed to a pass-through entity for tax purposes. For more information, see the section entitled “Corporate Conversion.”

 

Our principal executive offices are located at 1605 Westgate Circle, Brentwood, Tennessee 37027 and our telephone number is (844) 266-IMAC (4622). We maintain a corporate website at http://www.imacregeneration.com.

 

We do not incorporate the information on or accessible through our website into this prospectus, and you should not consider any information on, or that can be accessed through our website a part of this prospectus.

 

We own various U.S. federal trademark registrations and applications, and unregistered trademarks, including the registered mark “IMAC Regeneration Center.” All other trademarks or trade names referred to in this prospectus are the property of their respective owners. Solely for convenience, the trademarks and trade names in this prospectus are referred to without the symbols ® and ™, but such references should not be construed as any indicator that their respective owners will not assert, to the fullest extent possible under applicable law, their rights thereto.

 

Channels for Disclosure of Information

 

Investors and others should note that we use social media to communicate with all of our viewers and the public about our company, our services, new product developments and other matters. Any information that we consider to be material to an evaluation of our company will be included in filings on the SEC website, http://www.sec.gov, and may also be disseminated using our investor relations website, which can be found at http://www.imacregeneration.com, and press releases. However, we encourage investors, the media and others interested in our company to also review our social media channels. We do not incorporate the information on or accessible through our website into this prospectus, and you should not consider any information on, or that can be accessed through, our website a part of this prospectus.

 

 

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THE OFFERING

 

The summary below describes the principal terms of this offering. The “Description of Capital Stock” section of this prospectus contains a more detailed description of the common stock.

 

Common stock offered by us   [●] shares.
     
Proposed initial public offering price   $[●] per share
     
Underwriter’s over-allotment option   We have granted the underwriter a 45- day option to purchase up to an additional [●] shares of our common stock from us at the price to public less underwriting discounts and commissions to cover over-allotments, if any.
     
Common stock to be outstanding after this offering   [●] shares (or [●] shares if the underwriter’s option to purchase additional shares from us is exercised in full).(1)
     
Use of proceeds after expenses   We estimate that the net proceeds of the sale of our common stock in this offering will be approximately $[●] (or approximately $[●] if the underwriter exercises its option in full to purchase additional shares of our common stock), based on an assumed initial public offering price of $[●] per share, after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us.
     
    We intend to use the net proceeds of this offering (i) to pay the cash portion of the purchase price for the Transactions , (ii) to finance the costs of leasing and developing new IMAC Regeneration Center medical clinics, (iii) to repay an interim promissory note used for working capital, (iv) to spend on marketing and advertising to promote our clinics, and (v) for working capital and general corporate purposes. See “Use of Proceeds” for more information.
     
Dividend policy   We have never declared or paid any cash dividends on our common stock. We anticipate that we will retain any earnings to support operations and to finance the growth and development of our business. Accordingly, we do not expect to pay cash dividends on our common stock in the foreseeable future.
     
Ownership after this offering   Jeffrey S. Ervin, our Chief Executive Officer, Matthew C. Wallis, DC, our Chief Operating Officer, and our other executive officers and directors will beneficially own ___% of our outstanding shares of common stock following this offering.
     
Underwriter Warrants   Upon the closing of this offering, we will issue Cuttone & Co., LLC, as a representative of the underwriters, warrants entitling it to purchase 4% of the number of shares of common stock sold in this offering. The warrants will be exercisable for a period of five years from the effective date of this registration statement of which this prospectus forms a part.

 

 

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Risk factors   Investing in our common stock involves a high degree of risk. See “Risk Factors” and other information included in this prospectus for a discussion of factors you should carefully consider before deciding to invest in shares of our common stock.
     
Lock-up agreements   Our executive officers, directors, and stockholders, have agreed with the underwriters not to sell, transfer or dispose of any shares or similar securities for a period of 180 days following the closing of this offering. See “Underwriting.”
     
Nasdaq trading symbol   “IMAC”(2)

 

(1) In this prospectus, except as otherwise indicated, the number of shares of our common stock that will be outstanding immediately after this offering and the other information based thereon:

 

  assumes an initial public offering price of $[●] per share of common stock (the midpoint of the estimated public offering price range set forth on the cover page of this prospectus);
     
  includes the issuance of [●] shares of common stock upon the automatic conversion of our convertible promissory notes in the principal amount of $1,730,000 issued in the first five months of 2018;
     
  includes the issuance of (i) [●] shares of common stock under the terms of a merger agreement in connection with our acquisition of Clinic Management Associates, LLC and (ii) [●] shares of common stock under the terms of a unit purchase agreement in connection with our acquisition of IMAC of St. Louis, LLC;
     
  excludes 1,000,000 shares of our common stock reserved for future issuance under our 2018 Incentive Compensation Plan;
     
  excludes [●] shares of common stock reserved for issuance upon the exercise of the warrants to be issued to the underwriter in this offering; and
     
  no exercise of the underwriter’s option to purchase up to [●] additional shares from us in this offering to cover over-allotments, if any.

 

(2) We have reserved the trading symbol “IMAC” in connection with our application to have our common stock listed for trading on The Nasdaq Capital Market.

 

 

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SUMMARY CONSOLIDATED FINANCIAL DATA

 

We derived the summary consolidated statements of operations data for 2017 and 2016 and the summary consolidated balance sheet data as of December 31, 2017 from our audited consolidated financial statements included elsewhere in this prospectus. No revenues were recorded in 2016 because we did not own any clinics in our name in 2016 and the clinics with which we entered into management services agreements in 2016 did not open until early 2017. The summary consolidated statements of operations for the three months ended March 31, 2018 and 2017 and the summary consolidated balance sheet data as of March 31, 2018 are derived from our unaudited consolidated financial statements included elsewhere in this prospectus. We have prepared the unaudited condensed consolidated financial statements on the same basis as the audited consolidated financial statements and have included, in our opinion, all adjustments consisting only of normal recurring adjustments that we consider necessary for a fair statement of the financial information set forth in those statements. Our historical results are not necessarily indicative of the results that may be expected in the future. This summary of historical financial data should be read together with the financial statements and the related notes, as well as “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” appearing elsewhere in the prospectus.

 

   IMAC Holdings 
   Three Months ended   Years ended 
   March 31,   December 31, 
   2018   2017   2017   2016 
   (unaudited)   (unaudited)          
Consolidated Statements of Operations Data:                        
Patient revenues  $ 532,872    $ -    $1,378,313   $- 
Contractual adjustments    (298,619 )    -     (723,688)   - 
Total patient revenues, net    234,253      -     654,625    - 
                         
Management fees    33,600      30,600     131,400    15,000 
Total revenue     267,853      30,600      786,025      15,000  
                         
Total operating expenses    851,817      198,637      1,701,092      234,047  
Operating loss    (583,964 )    (168,037 )    (915,067 )    (219,047 )
Total other income (expenses)    (20,240 )    (191 )    (15,074 )    4  
Loss before equity in earnings(loss) of non-consolidated affiliates     (604,204 )    (168,228 )    (930,141 )     (219,043 )
Equity in earnings (loss) of non-consolidated affiliate    (85,651 )    9,587      13,609      (178,397 )
Net loss    (689,855 )    (158,641 )    (916,532)   (397,440)
                         
Net loss attributable to the non-controlling interest    285,191      250,389     859,351    16,643 
                         
Net loss attributable to IMAC Holdings, LLC members  $ (404,664 )  $ 91,748    $(57,181)  $(380,797)

 

 

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The pro forma financial information below reflects the completion of our transactions with Integrated Medicine and Chiropractic Regeneration Center PSC, IMAC of St. Louis, LLC and IMAC Regeneration Management of Nashville LLC (the “Transactions” ) in June 2018 as if they had occurred on January 1, 2017 . The pro forma operating data are not necessarily indicative of the actual results of our company had the Transactions occurred as of the beginning of 2017 or of our future operations.

 

   IMAC Group 
   Three Months ended
March 31,
   Year ended
December 31,
 
   2018   2017 
   (unaudited)      
IMAC Group Unaudited Pro Forma Condensed Consolidated Statements of Operations Data:          
Patient revenues   5,084,759    22,710,675 
Contractual adjustments   (3,338,327)   (14,385,990)
Total Revenue   1,746,432    8,324,685 
Total operating expenses   2,999,446    9,705,505 
Operating loss  $(1,253,014)  $ (1,380,820 )
Total other income (expenses)   (34,279)   (681,833)
Net loss  $(1,287,293)  $ (2,062,653 )
Net loss attributable to IMAC Holdings, LLC members  $(1,287,293)  $ (2,062,653 )

 

The following table summarizes the consolidated balance sheet data as of March 31, 2018, on an actual basis for IMAC Holdings and on a pro forma basis for IMAC Group, as adjusted to give effect to (a) the completion of the Transactions in June 2018, (b) the automatic conversion of our convertible promissory notes in the principal amount of $1,730,000 issued in the first five months of 2018 into [●] shares of our common stock upon the closing of this offering, and (c) the sale of [●] shares of our common stock in this offering at an assumed initial public offering price of $[●] per share, and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us, and the application of the net proceeds therefrom as described in “Use of Proceeds.”

 

 

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   As of March 31, 2018 
   IMAC   IMAC Group 
   Holdings   Pro Forma, 
   Actual   As Adjusted 
   (unaudited)      
Cash and cash equivalents  $550,509   $8,132,440 
Debt, current portion  $2,421,482   $2,832,624 
Long-term debt, net of current portion  $434,512   $797,903 
Equity  $(257,772)  $13,394,728 
Membership interest units, [365] units issued and outstanding, actual; 365 units issued and outstanding, pro forma and pro forma as adjusted          
Common stock, $0.001 par value, 30,000,000 shares authorized, __ shares issued and outstanding, actual; 30,000,000 shares authorized, pro forma and pro forma as adjusted; [●] shares issued and outstanding, pro forma; [●] shares issued and outstanding, pro forma as adjusted          
Additional paid-in capital          
Retained earnings          
Total stockholders’ equity  $(257,772)  $13,394,728 
Total capitalization          

 

 

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RISK FACTORS

 

An investment in our common stock involves a high degree of risk. In addition to the other information contained in this prospectus, prospective investors should carefully consider the following risks before investing in our common stock. If any of the following risks actually occur, as well as other risks not currently known to us or that we currently consider immaterial, our business, operating results and financial condition could be materially adversely affected. As a result, the trading price of our common stock could decline, and you may lose all or part of your investment in our common stock. The risks discussed below also include forward-looking statements, and our actual results may differ substantially from those discussed in these forward-looking statements. See “Cautionary Note Regarding Forward-looking Statements” in this prospectus. In assessing the risks below, you should also refer to the other information contained in this prospectus, including the financial statements and the related notes, before deciding to purchase any shares of our common stock.

 

Risks Relating to Our Company Business and Industry

 

We are in an early stage of development and have a limited operating history upon which to base an estimate of our future performance.

 

Our current business was formally organized in March 2015 and we have opened six new outpatient clinics since then. Accordingly, we have a limited operating history on which to base an estimate of our future performance. Because we lack a long operating history, you do not have either the type or amount of information that would be available to a purchaser of securities of a company with a more substantial operating history. Our growth and expansion strategy is in the early stages of implementation and there can be no assurance that we will be able to implement our strategy or that we will be commercially successful. Our ability to continue as a growing concern is contingent upon our ability to:

 

  raise sufficient capital, both through the sale of shares in this offering and through other debt and equity raises;
     
  hire and retain a number of highly skilled employees, including medical and chiropractic doctors, physical therapists and other practitioners;
     
  lease and develop acceptable premises for our IMAC Regeneration Centers;

 

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  build a consistent patient base within the areas of our medical clinics;
     
  secure and maintain arrangements with third-party payers, sports celebrity endorsers and other service providers, all on terms favorable or acceptable to our company;
     
  implement the other numerous necessary portions of our growth and expansion strategy; and
     
  attain profitable operations.

 

There can be no assurance that we will be able to accomplish any of the above objectives.

 

Further, because of our small size and limited to no operating history, our company is particularly susceptible to adverse effects from changes in the law, economic conditions, consumer tastes, competition and other contingencies or events beyond our control. It may be more difficult for us to prepare for and respond to these types of risks than it would be for a company with an established business and operating cash flow. Due to changing circumstances or an inability to implement any portion of our growth and expansion strategy, we may be forced to change dramatically our planned operations.

 

We may fail completely to implement key elements of our growth and expansion strategy, which could adversely affect our operations and financial performance.

 

If we cannot implement one or more key elements of our growth and expansion strategy, including raising sufficient capital, hiring and retaining qualified staff, leasing and developing acceptable premises for our medical clinics, securing necessary service contracts on favorable or adequate terms, generating sufficient revenue and achieving numerous other objectives, our projected financial performance may be materially adversely affected. Even if all of the key elements of our growth and expansion strategy are successfully implemented, we may not achieve the favorable results, operations and financial performance that we anticipate.

 

We have a history of annual net losses which may continue and which may negatively impact our ability to compete and achieve our growth and expansion strategy.

 

IMAC Holdings has a history of annual net losses. For the three months ended March 31, 2018 and the years ended December 31, 2017 and 2016, we had losses of $404,663 (unaudited) , $57,181, and $380,797, respectively. IMAC Group has a history of annual net losses. For the three months ended March 31, 2018 and the year ended December 31, 2017 , IMAC Group had unaudited pro forma net losses of $1,287,293 and $2,062,652 , respectively. Our growth and expansion strategy may be unsuccessful and no assurance can be given that we will ever have net income. Accordingly, our prospects must be considered in light of the competition, risks, expenses and difficulties frequently encountered by an emerging company. Our inability to effectively meet our competition could have an adverse effect on our prospects, operating results and financial condition.

 

We have a holding company ownership structure and will depend on distributions from our operating subsidiaries to meet our obligations. Contractual or legal restrictions applicable to our subsidiaries or controlled companies could limit payments or distributions from them.

 

We are a holding company and derive all of our operating income from, and hold substantially all of our assets through, our subsidiaries. The effect of this structure is that we will depend on the earnings of our subsidiaries, and the payment or other distributions to us of these earnings, to meet our obligations. Provisions of law, like those requiring that dividends be paid only out of surplus, and provisions of any future indebtedness, may limit the ability of our subsidiaries to make payments or other distributions to us. Our subsidiaries also control and manage the non-professional aspects of certain other professional service corporations under management services agreements, which could (although they do not currently) contain contractual restrictions on a professional service corporation’s ability to pay service fees to us. The assets of these professional service corporations are not included in our consolidated balance sheets. Additionally, in the event of the liquidation, dissolution or winding up of any of our subsidiaries, creditors of that subsidiary (including trade creditors) will generally be entitled to payment from the assets of that subsidiary before those assets can be distributed to us.

 

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We will incur substantial start-up expenses and do not expect to make a profit at any medical clinic until at least six months after opening each medical clinic.

 

We will incur substantial expenses to implement our growth and expansion strategy, including costs for leasing and developing the premises for each medical clinic, purchasing medical and office equipment, purchasing medical supplies and inventory, marketing and advertising, recruiting and hiring staff, and other expenses. We estimate that it will take at least $700,000 to open each clinic, with an additional $300,000 of operating capital and $200,000 credit line needed to purchase equipment and fund operating losses during the first six months of operation. These start-up costs may increase if there are any delays, problems or other events not currently anticipated. Although we expect each medical clinic to become profitable approximately six months after opening based on our experience with opening the Ozzie Smith Centers in Chesterfield, Missouri in May 2016 and in St. Peters, Missouri in August 2017, and the IMAC Regeneration Center in Murray, Kentucky in February 2017, no guarantee can be made that any of the clinics or our company overall will operate profitably. The David Price Center in Brentwood, Tennessee, which opened in May 2017, initially experienced unforeseen delays in staffing, construction and marketing launch. If we do not reach profitability and recover our start-up expenses and other accumulated operating losses, investors will likely suffer a significant decline in the value of their investment.

 

We may be unable to obtain debt financing on acceptable terms, or at all, which could materially adversely affect our operations and ability to successfully implement our growth and expansion strategy.

 

Our growth and expansion strategy relies on obtaining sufficient debt financing, including one or more equipment lines to purchase medical and office equipment and one or more lines of credit for operating and related expenses. We may not be able to obtain debt financing on acceptable terms or in the amount anticipated by our growth and expansion strategy. If unable to secure the amount of debt financing anticipated by our growth and expansion strategy, we may be unable to implement one or more portions of our growth and expansion strategy. If we accept less favorable terms for our debt financing than anticipated, we may incur additional expenses and restrictions on operations and may be less liquid and less profitable than expected. Should either of these events occur, we could suffer material adverse effects to our ability to implement our growth and expansion strategy and operate successfully.

 

We plan to incur indebtedness to implement our growth and expansion strategy and, as a consequence, may be unprofitable and unsuccessful in achieving our financial and operating goals.

 

We plan to finance some of our start-up and operating costs through debt leveraging, including one or more equipment lines and one or more lines of credit. This debt could adversely affect our financial performance and ability to:

 

  implement our growth and expansion strategy;
  recoup start-up costs;
  operate profitably;
  maintain acceptable levels of liquidity;
  obtain additional financing in the future for working capital, capital expenditures, development and other general business purposes;
  obtain additional financing on favorable terms; and
  compete effectively or operate successfully under adverse economic conditions.

 

The development and operation of our medical clinics will require more capital than we will raise in this offering, and we may not be able to obtain additional capital on favorable or even acceptable terms. We may also have to incur additional debt, which may adversely affect our liquidity and operating performance.

 

Our ability to successfully grow our business and implement our growth and expansion strategy depends in large part on the availability of adequate capital to finance operations. We can give no assurance that the funds raised in this offering will provide sufficient capital to support the continued operations of our company. Changes in our growth and expansion strategy, lower than anticipated revenue for the medical clinics, unanticipated and/or uncontrollable events in the credit or equity markets, changes to our liquidity, increased expenses, and other events may cause us to seek additional debt or equity financing. Financing may not be available on favorable or acceptable terms, or at all, and our failure to raise capital could adversely affect our operations and financial condition.

 

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Additional equity financing may result in a dilution of the pro rata ownership stake of the holders of shares sold in this offering. Further, we may be required to offer subsequent investors investment terms, such as preferred distributions and voting rights, that are superior to the rights of the holders of shares sold in this offering, which could have an adverse effect on the value of your investment.

 

Additional debt financing, if available, may involve significant cash payment obligations, covenants and financial ratios that restrict our ability to operate and grow our business, and would cause us to incur additional interest expense and financing costs. As a consequence, our operating performance may be materially adversely affected.

 

We will manage, but will not own, certain of the medical clinics or employ the medical service providers who will treat patients at the clinics.

 

Several of our medical clinics will be owned exclusively by a professional service corporation in order to comply with state laws regulating the ownership of medical practices. We will, in turn, through a contractual arrangement, provide long-term, exclusive management services to those professional service corporations and their medical professionals. All employees who provide direct medical services to patients will be employed by the professional service corporation. These management services agreements protect us from certain liability and provide a structured engagement to deliver non-medical, comprehensive management and administrative services to help the medical professionals operate the business. The management services agreements authorize us to act on behalf of the professional service corporation, but do not authorize the professional service corporations to act on our behalf or enter into contracts with third parties on our behalf. We will employ the non-medical provider staff for the clinics and provide comprehensive management and administrative services to help the professional service corporation operate the clinics. We may also loan money to the professional service corporation for certain payroll and development costs, although we have no obligation to do so. This arrangement makes our financial and operational success highly dependent on the professional service corporation. Under our management service agreements, we provide exclusive comprehensive management and related administrative services to the professional service corporation and receive management fees. Due to this financial and operational control by contract, our financial statements consolidate the financial results of the professional service corporations. However , we will have little, if any, tangible assets as to those operations. These characteristics increase the risk associated with an investment in our company.

 

We have no direct control over the medical care in any of our facilities. State medical boards govern the licensing and delivery of medical care within a state. For this reason, the medical practitioners are solely responsible for making medical decisions with their abilities and experience. We run the risk of being associated with a medical practitioner that performs poorly or does not comply with medical board legislation. When we are responsible for the recruitment or staffing of medical professionals, we may hire a professional that delivers care outside of medical protocols. Our inability to exercise control over the medical care and managed centers increases the risks associated with an investment in our company.

 

Potential conflicts of interest exist with respect to the management services agreement that we have entered into concerning our clinics in Kentucky, and it is possible our interests and the affiliated owners of those clinics may diverge.

 

Our medical clinics in Kentucky are held by a professional service corporation that is owned by Matthew C. Wallis, DC, our Chief Operating Officer, a director and co-founder of our company, and Jason Brame, DC, a co-founding member of our company, in order to comply with the state’s laws regulating the ownership of medical practices. The professional service corporation directs the provision of medical services to patients and employs the physicians and registered nurses at the clinics, we do not. Rather, pursuant to the terms of a long-term, exclusive management services agreement, we employ the non-medical provider staff for the clinics and provide comprehensive management and administrative services to help the professional service corporation operate the clinics. We believe that the service fees and other terms of our management services agreement are standard in the outpatient healthcare practice area. Nonetheless, the management services agreement presents the possibility of a conflict of interest in the event that issues arise with regard to the respective medical and non-medical services being provided at the clinics, including quality of care issues of which we become aware and billing and collection matters that we handle on behalf of the physician practices, where our interests may diverge from those of Drs. Wallis and Bram acting on behalf of the professional service corporation. No such issues, however, have occurred during this arrangement.

 

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The management services agreement provides that we will have the right to control the daily operations of the medical clinics subject, in the case of practicing medicine, to the direction of Drs. Wallis and Brame acting on behalf of the professional service corporation. Our interests with respect to such direction may be at odds with those of Drs. Wallis and Brame, requiring them to recuse themselves from our decisions relating to such matters, or even from further involvement with our company.

 

We comply with applicable state law with respect to transactions (including business opportunities and management services agreements) involving potential conflicts. Applicable state corporate law requires that all transactions involving our company and any director or executive officer (or other entities with which they are affiliated) are subject to full disclosure and approval of the majority of the disinterested independent members of our Board of Directors, approval of the majority of our stockholders or the determination that the contract or transaction is intrinsically fair to us. More particularly, our policy is to have any related party transactions (i.e., transactions involving a director, an officer or an affiliate of our company) be approved solely by a majority of the disinterested independent directors serving on the Board of Directors.

 

Upon completion of this offering, Drs. Wallis and Brame will beneficially own approximately ___% and ___% of our outstanding shares of common stock, respectively. They founded our original IMAC medical clinic in Paducah, Kentucky in August 2000 and, with Jeffrey S. Ervin, our Chief Executive Officer, founded our current company in February 2015. Dr. Wallis, working with Mr. Ervin, will be substantially responsible for selecting the business direction we take, the medical clinics we open in the future and the services we may provide. The management services agreement may present Drs. Wallis and Brame with conflicts of interest.

 

The loss of the services of Jeffrey S. Ervin or Matthew C. Wallis, DC for any reason would materially and adversely affect our business operations and prospects.

 

Our financial success is dependent to a significant degree upon the efforts of Jeffrey S. Ervin, our Chief Executive Officer, and Matthew C. Wallis, DC, our Chief Operating Officer. Mr. Ervin, who has unique knowledge regarding the roll-out of our IMAC Regeneration Centers, and Dr. Wallis, who has extensive business contacts, would be extremely difficult to replace. We have not entered into an employment arrangement with Mr. Ervin or Dr. Wallis, and there can be no assurance that Mr. Ervin or Dr. Wallis will continue to provide services to us. A voluntary or involuntary departure by either executive could have a materially adverse effect on our business operations if we were not able to attract a qualified replacement for him in a timely manner. We plan to obtain a $1.0 million key-man life insurance policy for our benefit on the life of each of Mr. Ervin and Dr. Wallis.

 

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We may fail to obtain the business licenses and any other licenses necessary to operate our medical clinics, or the necessary engineering, building, occupancy and other permits to develop the premises for the clinics, which would materially adversely affect our growth and expansion strategy.

 

If we cannot obtain approval for business licenses or any other licenses necessary to operate our medical clinics, it could materially adversely affect our growth and expansion strategy and could result in a failure to implement our growth and expansion strategy. Failure to obtain the necessary engineering, building, occupancy and other permits from applicable governmental authorities to develop the premises for our medical clinics could also materially adversely affect our growth and expansion strategy and could result in a failure to implement our growth and expansion strategy.

 

We may face strong competition from other providers in our primary service areas, and increased competition from new competitors, which may hinder our ability to obtain and retain customers.

 

We will be in competition with other more established companies using a variety of treatments for the conditions and ailments that our services are intended to treat, including traditional orthopedic surgeons, pain management clinics, hospital systems and outpatient surgery centers providing joint reconstruction and related surgeries. These companies may be better capitalized and have more established name recognition than us. We may face additional competition in the future if other providers enter our primary service areas. Competition from existing providers and providers that may begin competing with us in the future could materially adversely affect our operations and financial performance.

 

Further, the services provided by our company are relatively new and unique. We cannot be certain that our services will achieve or sustain market acceptance, or that a sufficient volume of patients in the Kentucky, Missouri and Tennessee areas will utilize our services. We will be in competition with alternative treatment methods, including those presently existing and those that may develop in the future. As such, our growth and expansion strategy carries many unknown factors that subject us and our investors to a high degree of uncertainty and risk.

 

We are competing in a dynamic market with risk of technological change.

 

The market for medical, physical therapy and chiropractic services is characterized by frequent technological developments and innovations, new product and service introductions, and evolving industry standards. The dynamic character of these products and services will require us to effectively use leading and new technologies, develop our expertise and reputation, enhance our current service offerings and continue to improve the effectiveness, feasibility and consistency of our services. There can be no assurance that we will be successful in responding quickly, cost-effectively and sufficiently to these and other such developments.

 

Our success will depend largely upon general economic conditions and consumer acceptance in our primary service areas.

 

Our current primary service areas are located in certain geographical areas in the states of Kentucky, Missouri and Tennessee. Our operations and profitability could be adversely affected by a local economic downturn, changes in local consumer acceptance of our approach to healthcare, and discretionary spending power, and other unforeseen or unexpected changes within those areas.

 

A decline in general economic conditions may adversely affect consumer behavior and spending, including the affordability of elective medical procedures, and as a result may adversely affect our revenue and operating results.

 

The country may experience an economic downturn or decline in general economic conditions. We are unable to predict the timing and severity of the next economic downturn. Any decline in general economic conditions may cause a decrease in consumer and commercial spending, especially spending on elective medical procedures, which could negatively impact our revenue and operating results.

 

We are required to comply with numerous government laws and regulations, which could change, increasing costs and adversely affecting our financial performance and operations.

 

Medical and chiropractic service providers are subject to extensive federal, state and local regulation, including but not limited to regulation by the U.S. Food and Drug Administration, Centers for Medicare & Medicaid Services (“CMS”), and other government entities. We are subject to regulation by these entities as well as a variety of other laws and regulations. Compliance with such laws and regulations could require substantial capital expenditures. Such regulations may be changed from time to time, or new regulations adopted, which could result in additional or unexpected costs of compliance.

 

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Changes to national health insurance policy and third-party insurance carrier fee schedules for traditional medical treatments could decrease patient revenue and adversely affect our financial performance and operations.

 

Political, economic and regulatory influences are subjecting medical and chiropractic service providers, health insurance providers and other participants in the healthcare industry in the United States to potential fundamental changes. Potential changes to nationwide health insurance policy are currently being debated. We cannot predict what impact the adoption of any federal or state healthcare reform or private sector insurance reform may have on our business.

 

We receive payment for the services we render to patients from their private health insurance providers and from Medicare and Medicaid. If third-party payers change the expected fee schedule (the amount paid by such payers for services rendered by us), we could experience a loss of revenue, which could adversely affect financial performance.

 

At the present time, most private health insurance providers do not cover the regenerative medical treatments provided at our medical clinics. However, traditional physical medical treatments provided at our medical clinics, such as physical therapy, chiropractic services and medical evaluations, are covered by most health insurance providers. Medicare and Medicaid take the same position as private insurers and reimburse patients for traditional physical medical treatments but not for regenerative medical treatments. If private health insurance providers and Medicare and Medicaid were to begin covering regenerative medical treatments, the revenue we would receive on a per-treatment basis would likely decline given their tighter fee schedules. Further, such a change might result in increased competition as additional healthcare providers begin offering our customized services.

 

We could be adversely affected by changes relating to the IMAC Regeneration Center brand name.

 

We are a holding company in which our medical clinics are formed in separate subsidiaries. Our subsidiaries are currently operating in Kentucky, Missouri and Tennessee. As a consequence of this entity structure, any adverse change to the brand, reputation, financial performance or other aspects of the IMAC Regeneration Center brand at any one location could adversely affect the operations and financial performance of the entire company.

 

We will depend heavily on the efforts of our key personnel, as well as sports celebrity endorsers.

 

Our success depends, to a significant extent, upon the efforts and abilities of our officers and key employees, including medical and chiropractic doctors and other practitioners, and our sports celebrity endorsers. Loss or abatement of the services of any of these persons, or any adverse change to the sports celebrity endorsers, could have a material adverse effect on us and our business, operations and financial performance.

 

Our success also will depend on our ability to identify, attract, hire, train and motivate highly skilled managerial personnel, medical doctors, chiropractors, licensed physical therapists, and other practitioners. Failure to attract and retain key personnel could have a material adverse effect on our business, prospects, financial condition and results of operation. Further, the quality, philosophy and performance of key personnel could adversely affect our operations and performance.

 

We may incur losses that are not covered by insurance.

 

We maintain insurance policies against professional liability, general commercial liability and other potential losses of our company. However, we or our medical clinics may incur losses that are not covered by such insurance policies. Poor patient outcomes for healthcare providers may result in legal actions and/or settlements outside of the scope of our insurance coverage. Furthermore, we offer non-traditional medical treatments and intend to innovate new medical treatments with approval from government authorities, and it is possible that insurance policy underwriters will not provide coverage for such non-traditional or new treatments offered by us and our practitioners. If an uninsured loss or a loss in excess of insured limits occurs, our financial performance and operation could suffer material adverse effects.

 

We are susceptible to risks relating to investigation or audit by the Centers for Medicare & Medicaid Services (“CMS”), health insurance providers and the IRS.

 

We may be audited by CMS or any health insurance provider that pays us for services provided to patients. Any such audit may result in reclaimed payments, which would decrease our revenue and adversely affect our financial performance. Our federal tax returns may be audited by the IRS and our state tax returns may be audited by applicable state government authorities. Any such audit may result in the challenge and disallowance of some of our deductions or an increase in our taxable income. No assurance can be made with regard to the deductibility of certain tax items or the position taken by us on our tax returns. Further, an audit or any litigation resulting from an audit could unexpectedly increase our expenses and adversely affect financial performance and operations.

 

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The Food and Drug Administration is actively pursuing bad actors in the regenerative medicine therapy industry, and we could be included in any broad investigation.

 

The U.S. Food and Drug Administration is actively pursuing bad actors in the regenerative medicine therapy industry. Since we provide regenerative medicine treatments, we may be subject to broad investigations from the FDA or state medical boards regarding the marketing and medical delivery of our treatments. In November 2017, we engaged a medical consulting group to advise us on current protocols in this area and to organize a clinical trial towards an investigational new drug application with the FDA, while pursuing a voluntary regenerative medicine advanced therapy (RMAT) designation under Section 3033 of the 21st Century Cures Act. If granted, we will pursue a trial utilizing autologous cellular structures to alleviate symptoms of debilitating neurological conditions and diseases. No assurance can be given that the FDA will find that our trial meets the criteria for RMAT designation. We believe that a RMAT designation may be helpful in differentiating our services.

 

Any significant disruption in our computer systems or those of third parties that we utilize in our operations could result in a loss or degradation of service and could adversely impact our business.

 

Our reputation and ability to attract, retain and serve our patients and users is dependent upon the reliable performance of our computer systems and those of third parties that we utilize in our operations. These systems may be subject to damage or interruption from earthquakes, adverse weather conditions, other natural disasters, terrorist attacks, power loss, telecommunications failures, computer viruses, computer denial of service attacks or other attempts to harm these systems. Interruptions in these systems, or to the internet in general, could make our service unavailable or impair our ability to deliver content to our customers. Service interruptions, errors in our software or the unavailability of computer systems used in our operations could diminish the overall attractiveness of our services to existing and potential patients.

 

Our servers and those of third parties we use in our operations are vulnerable to computer viruses, physical or electronic break-ins and similar disruptions and periodically experience directed attacks intended to lead to interruptions and delays in our service and operations as well as loss, misuse or theft of data. Any attempt by hackers to disrupt our service or otherwise access our systems, if successful, could harm our business, be expensive to remedy and damage our reputation. We have implemented certain systems and processes to thwart hackers and, to date, hackers have not had a material impact on our service or systems. However, this is no assurance that hackers may not be successful in the future. Efforts to prevent hackers from disrupting our service or otherwise accessing our systems are expensive to implement and may limit the functionality of or otherwise negatively impact our service offering and systems. Any significant disruption to our service or access to our systems could result in a loss of patients and adversely affect our business and results of operation.

 

We utilize our own communications and computer hardware systems located either in our facilities or in that of a third-party data center. In addition, we utilize third-party internet-based or “cloud” computing services in connection with our business operations. We also utilize third-party content delivery networks to help us stream content to our patients and other parties over the internet. Problems faced by us or our service providers, including technological or business-related disruptions, could adversely impact the experience of our audiences and users.

 

Our reputation and relationships with patients would be harmed if our patients’ data, particularly personally identifying data, were to be subject to a cyber-attack or otherwise accessed by unauthorized persons.

 

We maintain personal data regarding our patients, including their names and other information. With respect to personally identifying data, we rely on licensed encryption and authentication technology to secure such information. We also take measures to protect against unauthorized intrusion into our patients’ data. Despite these measures, we could experience, though we have not to date experienced, a cyber-attack or other unauthorized intrusion into our patients’ data. Our security measures could also be breached due to employee error, malfeasance, system errors or vulnerabilities, or otherwise. In the event our security measures are breached, or if our services are subject to attacks that impair or deny the ability of patients to access our services, current and potential patients may become unwilling to provide us the information necessary for them to become users of our services or may curtail or stop using our services. In addition, we could face legal claims for such a breach. The costs relating to any data breach could be material, and exceed the limits of the insurance we maintain against the risks of a data breach. For these reasons, should an unauthorized intrusion into our patients’ data occur, our business could be adversely affected. Changes to operating rules could increase our operating expenses and adversely affect our business and results of operations.

 

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Our business is subject to reporting requirements that continue to evolve and change, which could continue to require significant compliance effort and resources.

 

Following this offering, we will be subject to certain rules and regulations of federal, state and financial market exchange entities charged with the protection of investors and the oversight of companies whose securities are publicly traded. These entities, including the Public Company Accounting Oversight Board (PCAOB), the SEC and The Nasdaq Capital Market, periodically issue new requirements and regulations and legislative bodies also review and revise applicable laws. As interpretation and implementation of these laws and rules and promulgation of new regulations continues, we will continue to be required to commit significant financial and managerial resources and incur additional expenses to address such laws, rules and regulations, which could in turn reduce our financial flexibility and create distractions for management. Any of these events, in combination or individually, could disrupt our business and adversely affect our business, financial condition, results of operations and cash flows.

 

Changes in accounting principles or guidance, or in their interpretations, could result in unfavorable accounting charges or effects, including changes to our previously filed consolidated financial statements, which could cause our stock price to decline.

 

We prepare our consolidated financial statements in accordance with accounting principles generally accepted in the United States of America. These principles are subject to interpretation by the SEC and various bodies formed to interpret and create appropriate accounting principles and guidance. A change in these principles or guidance, or in their interpretations, may have a significant negative effect on our reported results and retrospectively affect previously reported results, which, in turn, could cause our stock price to decline.

 

We will incur increased costs as a result of being a public company and our management expects to devote substantial time to public company compliance programs.

 

As a public reporting company, we will incur significant legal, insurance, accounting and other expenses that we did not incur as a private company. The Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act, stock exchange listing requirements and other applicable securities rules and regulations impose various requirements on public companies. Our management and administrative staff will need to devote a substantial amount of time to compliance with these requirements. For example, in anticipation of becoming a public company, we will need to adopt additional internal controls and disclosure controls and procedures and bear all of the internal and external costs of preparing periodic and current public reports in compliance with our obligations under the securities laws. We intend to invest resources to comply with evolving laws, regulations and standards, and this investment will result in increased general and administrative expenses and may divert management’s time and attention away from product development activities. If for any reason our efforts to comply with new laws, regulations and standards differ from the activities intended by regulatory or governing bodies, regulatory authorities may initiate legal proceedings against us and our business may be harmed.

 

In connection with this offering, we intend to obtain directors’ and officers’ liability insurance coverage, which will increase our insurance cost. In the future, it may be more expensive for us to obtain directors’ and officers’ liability insurance, and we may be required to accept reduced coverage or incur substantially higher costs to obtain coverage. These factors could also make it more difficult for us to attract and retain qualified executive officers and qualified members of our board of directors, particularly to serve on our audit committee and compensation committee.

 

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In addition, in order to comply with the requirements of being a public company, we may need to undertake various actions, including implementing new internal controls and procedures and hiring new accounting or internal audit staff. The Sarbanes-Oxley Act requires that we maintain effective disclosure controls and procedures and internal control over financial reporting. We are continuing to develop and refine our disclosure controls and other procedures that are designed to ensure that information required to be disclosed by us in the reports that we file with the SEC is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that information required to be disclosed in reports under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is accumulated and communicated to our principal executive and financial officers. Any failure to develop or maintain effective controls could adversely affect the results of our periodic management evaluations. In the event that we are not able to demonstrate compliance with the Sarbanes-Oxley Act, that our internal control over financial reporting is perceived as inadequate, or that we are unable to produce timely or accurate consolidated financial statements, investors may lose confidence in our operating results and the price of our common stock could decline. In addition, if we are unable to continue to meet these requirements, we could be subject to sanctions or investigations by the stock exchange where we are listed, the SEC or other regulatory authorities, and we may not be able to remain listed on a national securities exchange.

 

We are not currently required to comply with the SEC’s rules that implement Section 404 of the Sarbanes-Oxley Act, and are therefore not yet required to make a formal assessment of the effectiveness of our internal control over financial reporting for that purpose. Upon becoming a public company, we will be required to comply with certain of these rules, which will require management to certify financial and other information in our quarterly and annual reports and provide an annual management report on the effectiveness of our internal control over financial reporting commencing with our second annual report. This assessment will need to include the disclosure of any material weaknesses in our internal control over financial reporting identified by our management or our independent registered public accounting firm. To achieve compliance with Section 404 within the prescribed period, we will be engaged in a costly and challenging process to document and evaluate our internal control over financial reporting. In this regard, we will need to continue to dedicate internal resources, potentially engage outside consultants and adopt a detailed work plan to assess and document the adequacy of our internal control over financial reporting. We will also need to continue to improve our control processes as appropriate, validate through testing that our controls are functioning as documented and implement a continuous reporting and improvement process for our internal control over financial reporting. Despite our efforts, there is a risk that we will not be able to conclude, within the prescribed timeframe or at all, that our internal control over financial reporting is effective as required by Section 404.

 

We are an “emerging growth company” and our election to delay adoption of new or revised accounting standards applicable to public companies may result in our consolidated financial statements not being comparable to those of some other public companies. As a result of this and other reduced disclosure requirements applicable to emerging growth companies, our securities may be less attractive to investors.

 

As a public reporting company with less than $1.07 billion in revenue during our last fiscal year, we qualify as an “emerging growth company” under the JOBS Act. An emerging growth company may take advantage of specified reduced reporting requirements that are otherwise generally applicable to public companies. In particular, as an emerging growth company, we:

 

  are not required to obtain an attestation and report from our auditors on our management’s assessment of our internal control over financial reporting pursuant to the Sarbanes-Oxley Act;
     
  are not required to provide a detailed narrative disclosure discussing our compensation principles, objectives and elements and analyzing how those elements fit with our principles and objectives (commonly referred to as “compensation discussion and analysis”);
     
  are not required to obtain a non-binding advisory vote from our stockholders on executive compensation or golden parachute arrangements (commonly referred to as the “say-on-pay,” “say-on-frequency” and “say-on-golden-parachute” votes);

 

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  are exempt from certain executive compensation disclosure provisions requiring a pay-for-performance graph and CEO pay ratio disclosure;
     
  may present only two years of audited financial statements and only two years of related Management’s Discussion & Analysis of Financial Condition and Results of Operations, or MD&A; and
     
  are eligible to claim longer phase-in periods for the adoption of new or revised financial accounting standards under §107 of the JOBS Act.

 

We intend to take advantage of all of these reduced reporting requirements and exemptions, including the longer phase-in periods for the adoption of new or revised financial accounting standards under §107 of the JOBS Act. Our election to use the phase-in periods may make it difficult to compare our consolidated financial statements to those of non-emerging growth companies and other emerging growth companies that have opted out of the phase-in periods under §107 of the JOBS Act.

 

Certain of these reduced reporting requirements and exemptions were already available to us due to the fact that we also qualify as a “smaller reporting company” under SEC rules. For instance, smaller reporting companies are not required to obtain an auditor attestation and report regarding management’s assessment of internal control over financial reporting, are not required to provide a compensation discussion and analysis, are not required to provide a pay-for-performance graph or CEO pay ratio disclosure, and may present only two years of audited financial statements and related MD&A disclosure.

 

Under the JOBS Act, we may take advantage of the above-described reduced reporting requirements and exemptions for up to five years after our initial sale of common equity pursuant to a registration statement declared effective under the Securities Act, or such earlier time that we no longer meet the definition of an emerging growth company. In this regard, the JOBS Act provides that we would cease to be an “emerging growth company” if we have more than $1.07 billion in annual revenue, have more than $700 million in market value of our common stock held by non-affiliates, or issue more than $1.0 billion in principal amount of non-convertible debt over a three-year period. Under current SEC rules, however, we will continue to qualify as a “smaller reporting company” for so long as we have a public float (i.e., the market value of common equity held by non-affiliates) of less than $75 million as of the last business day of our most recently completed second fiscal quarter.

 

We cannot predict if investors will find our securities less attractive due to our reliance on these exemptions. If investors were to find our securities less attractive as a result of our election, we may have difficulty raising all of the proceeds we seek in this offering.

 

Risks Related to Ownership of Our Common Stock and this Offering

 

Our stock price may be volatile and your investment could decline in value.

 

The market price of our common stock following this offering may fluctuate substantially as a result of many factors, some of which are beyond our control. These fluctuations could cause you to lose all or part of the value of your investment in our common stock. Factors that could cause fluctuations in the market price of our common stock include the following:

 

  quarterly variations in our results of operations;
     
  results of operations that vary from the expectations of securities analysts and investors;
     
  results of operations that vary from those of our competitors;
     
  changes in expectations as to our future financial performance, including financial estimates by securities analysts;

 

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  publication of research reports about us or the outpatient medical clinic business;
     
  announcements by us or our competitors of significant contracts, acquisitions or capital commitments;
     
  announcements by third parties of significant claims or proceedings against us;
     
  changes affecting the availability of financing in the outpatient medical services market;
     
  regulatory developments in the outpatient medical clinic business;
     
  significant future sales of our common stock, and additions or departures of key personnel;
     
  the realization of any of the other risk factors presented in this prospectus; and
     
  general economic, market and currency factors and conditions unrelated to our performance.

 

In addition, the stock market in general has experienced significant price and volume fluctuations that have often been unrelated or disproportionate to operating performance of individual companies. These broad market factors may seriously harm the market price of our common stock, regardless of our operating performance. In the past, following periods of volatility in the market price of a company’s securities, securities class action litigation has often been instituted. A class action suit against us could result in significant liabilities and, regardless of the outcome, could result in substantial costs and the diversion of our management’s attention and resources.

 

Our common stock has no prior market and our stock price may decline after the offering.

 

Before this offering, there has been no public market for shares of our common stock. Although we have applied to have our common stock listed on The Nasdaq Capital Market, an active trading market for our common stock may not develop or, if it develops, may not be sustained after this offering. Our company and the underwriters will negotiate to determine the initial public offering price. The initial public offering price may be higher than the market price of our common stock after the offering and you may not be able to sell your shares of our common stock at or above the price you paid in the offering. As a result, you could lose all or part of your investment.

 

Investors purchasing common stock in this offering will experience immediate dilution.

 

The initial public offering price of shares of our common stock is higher than the pro forma as adjusted net tangible book value per outstanding share of our common stock. You will incur immediate dilution of $[●] per share in the pro forma as adjusted net tangible book value of shares of our common stock, based on an assumed initial public offering price of $[●] per share. To the extent outstanding options are ultimately exercised, there will be further dilution of the common stock sold in this offering.

 

Future sales, or the perception of future sales, of a substantial amount of our shares of common stock could depress the trading price of our common stock.

 

If we or our stockholders sell substantial amounts of our shares of common stock in the public market following this offering or if the market perceives that these sales could occur, the market price of shares of our common stock could decline. These sales may make it more difficult for us to sell equity or equity-related securities in the future at a time and price that we deem appropriate, or to use equity as consideration for future acquisitions.

 

Immediately upon completion of this offering, based on the number of shares outstanding as of August 9 , 2018, we will have 30,000,000 shares of common stock authorized and [ ●] shares of common stock outstanding. Of these shares, the [●] shares to be sold in this offering (assuming the underwriter does not exercise its option to purchase additional shares in this offering to cover over-allotments, if any) will be freely tradable. We, our executive officers and directors, and all of our stockholders have entered into agreements with the underwriter not to sell or otherwise dispose of shares of our common stock for a period of 180 days following completion of this offering, with certain exceptions. Immediately upon the expiration of this lock-up period, [●] shares will be freely tradable pursuant to Rule 144 under the Securities Act of 1933, as amended (the “Securities Act”), by non-affiliates and another [●] shares will be eligible for resale pursuant to Rule 144 under the Securities Act, subject to the volume, manner of sale, holding period and other limitations of Rule 144.

 

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In addition, following the completion of this offering, we intend to file a registration statement on Form S-8 registering the issuance of approximately 1,000,000 shares of common stock subject to stock options or other equity awards issued or reserved for future issuance under our 2018 Incentive Compensation Plan. Shares registered under the registration statement on Form S-8 will be available for sale in the public market subject to vesting arrangements and exercise of options, the lock-up agreements described above and the restrictions of Securities Act Rule 144 in the case of our affiliates.

 

If securities or industry analysts do not publish or cease publishing research or reports about us, our business or our market, or if they change their recommendations regarding our stock adversely, or if our actual results differ significantly from our guidance, our stock price and trading volume could decline.

 

The trading market for our common stock will be influenced by the research and reports that industry or securities analysts may publish about us, our business, our market or our competitors. If any of the analysts who may cover us change their recommendation regarding our stock adversely, or provide more favorable relative recommendations about our competitors, our stock price would likely decline. If any analyst who may cover us were to cease coverage of our company or fail to regularly publish reports on us, we could lose visibility in the financial markets, which in turn could cause our stock price or trading volume to decline.

 

In addition, from time to time, we may release earnings guidance or other forward-looking statements in our earnings releases, earnings conference calls or otherwise regarding our future performance that represent our management’s estimates as of the date of release. Some or all of the assumptions of any future guidance that we furnish may not materialize or may vary significantly from actual future results. Any failure to meet guidance or analysts’ expectations could have a material adverse effect on the trading price or volume of our stock.

 

Anti-takeover provisions in our charter documents could discourage, delay or prevent a change in control of our company and may affect the trading price of our common stock.

 

Our corporate documents, to be effective upon completion of this offering, and the Delaware General Corporation Law contain provisions that may enable our board of directors to resist a change in control of our company even if a change in control were to be considered favorable by you and other stockholders. These provisions:

 

  authorize the issuance of “blank check” preferred stock that could be issued by our board of directors to help defend against a takeover attempt;
     
  establish advance notice requirements for nominating directors and proposing matters to be voted on by stockholders at stockholder meetings;
     
  provide that stockholders are only entitled to call a special meeting upon written request by 331/3% of the outstanding common stock; and
     
  require supermajority stockholder voting to effect certain amendments to our certificate of incorporation and bylaws.

 

In addition, Delaware law prohibits large stockholders, in particular those owning 15% or more of our outstanding voting stock, from merging or consolidating with us except under certain circumstances. These provisions and other provisions under Delaware law could discourage, delay or prevent a transaction involving a change in control of our company. These provisions could also discourage proxy contests and make it more difficult for you and other stockholders to elect directors of your choosing and cause us to take other corporate actions you desire.

 

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We have 5,000,000 authorized unissued shares of preferred stock, and our board has the ability to designate the rights and preferences of this preferred stock without your vote.

 

Our certificate of incorporation authorizes our board of directors to issue “blank check” preferred stock and to fix the rights, preferences, privileges and restrictions, including voting rights, of these shares, without further stockholder approval. The rights of the holders of common stock will be subject to and may be adversely affected by the rights of holders of any preferred stock that may be issued in the future. As indicated in the preceding risk factor, the ability to issue preferred stock without stockholder approval could have the effect of making it more difficult for a third party to acquire a majority of the voting stock of our company thereby discouraging, delaying or preventing a change in control of our company. We currently have no outstanding shares of preferred stock, or plans to issue any such shares in the future.

 

Concentration of ownership of our common stock among our existing executive officers and directors may limit new investors from influencing significant corporate decisions.

 

Upon completion of this offering, our executive officers, directors and current beneficial owners of 5% or more of our common stock and their respective affiliates will, in aggregate, beneficially own approximately [●]% of our outstanding shares of common stock. These persons, acting together, would be able to influence all matters requiring stockholder approval, including the election and removal of directors and any merger or other significant corporate transactions. The interests of this group of stockholders may not coincide with our interests or the interests of other stockholders.

 

We do not expect to pay any dividends on our common stock for the foreseeable future.

 

We currently expect to retain all future earnings, if any, for future operation, expansion and debt repayment and have no current plans to pay any cash dividends to holders of our common stock for the foreseeable future. Any decision to declare and pay dividends in the future will be made at the discretion of our board of directors and will depend on, among other things, our operating results, financial condition, cash requirements, contractual restrictions and other factors that our board of directors may deem relevant. In addition, we must comply with the covenants in our credit agreements in order to be able to pay cash dividends, and our ability to pay dividends generally may be further limited by covenants of any existing and future outstanding indebtedness we or our subsidiaries incur. As a result, you may not receive any return on an investment in our common stock unless you sell our common stock for a price greater than that which you paid for it.

 

We may invest or spend the proceeds of this offering in ways with which you may not agree or in ways that may not yield a return.

 

Our management will have considerable discretion in the application of the net proceeds of this offering, and you will not have the opportunity, as part of your investment decision, to assess whether the proceeds are being used appropriately. The net proceeds may be invested with a view towards long-term benefits for our stockholders and this may not increase our operating results or market value. Until the net proceeds are used, they may be placed in investments that do not produce significant income or that may lose value.

 

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

 

This prospectus contains forward-looking statements that involve substantial risks and uncertainties. The forward-looking statements are contained principally in the sections entitled “Prospectus Summary,” “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Business,” but are also contained in this prospectus. In some cases, you can identify forward-looking statements by the words “may,” “might,” “will,” “could,” “would,” “should,” “expect,” “intend,” “plan,” “aim,” “objective,” “anticipate,” “believe,” “estimate,” “predict,” “project,” “potential,” “continue,” “ongoing,” “target,” “seek” or the negative of these terms, or other comparable terminology intended to identify statements about the future. Forward-looking statements contained in this prospectus include, but are not limited to, statements about:

 

  our dependence upon external sources for the financing of our operations;
     
  our ability to effectively execute our growth and expansion strategy;
     
  changes in the outpatient medical services market;
     
  our limited operating history;
     
  the valuation of assets reflected in our consolidated financial statements;
     
  our reliance on continued access to financing;
     
  our reliance on information provided and obtained by third parties;
     
  federal, state, and local regulatory matters;

 

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  additional expenses, not reflected in our operating history, related to being a public reporting company;
     
  competition, not only in the outpatient medical clinic market, but also for traditional hospital and medical treatment generally; and
     
  covenants contained in our master services agreements.

 

We caution you that the foregoing list may not contain all of the forward-looking statements made in this prospectus.

 

These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from the information expressed or implied by these forward-looking statements. Although we believe that we have a reasonable basis for each forward-looking statement contained in this prospectus, we caution you that these statements are based on a combination of facts and factors currently known by us and our expectations of the future, about which we cannot be certain.

 

You should refer to the “Risk Factors” section of this prospectus for a discussion of important factors that may cause our actual results to differ materially from those expressed or implied by our forward-looking statements. As a result, of these factors, we cannot assure you that the forward-looking statements in this prospectus will prove to be accurate. Furthermore, if our forward-looking statements prove to be inaccurate, the inaccuracy may be material. In light of the significant uncertainties in these forward-looking statements, you should not regard these statements as a representation or warranty by us or any other person that we will achieve our objectives and plans in any specified time frame, or at all. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by federal securities law.

 

You should read this prospectus and the documents that we reference in this prospectus and have filed as exhibits to the registration statement, of which this prospectus is a part, completely and with the understanding that our actual future results may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements.

 

CORPORATE CONVERSION

 

Prior to May 31, 2018, we operated as a Kentucky limited liability company under the name IMAC Holdings, LLC. Effective May 31, 2018, we converted into a Delaware corporation pursuant to a statutory merger and changed our name to IMAC Holdings, Inc. In order to consummate the Corporate Conversion, a certificate of merger was filed with the Secretary of State of the State of Delaware and with the Secretary of State of the State of Kentucky. Holders of membership interests in IMAC Holdings, LLC received, on a proportional basis, an aggregate of [●] shares of common stock of IMAC Holdings, Inc.

 

Following the Corporate Conversion, IMAC Holdings, Inc. continues to hold all property and assets of IMAC Holdings, LLC and all of the debts and obligations of IMAC Holdings, LLC. We are now governed by a certificate of incorporation filed with the Secretary of State of the State of Delaware and bylaws, the material portions of which are described in the section of this prospectus entitled “Description of Capital Stock.” On the effective date of the Corporate Conversion, the officers of IMAC Holdings, LLC became the officers of IMAC Holdings, Inc. As a result of the Corporate Conversion, we are now a federal corporate taxpayer as opposed to a pass-through entity for tax purposes.

 

The purpose of the Corporate Conversion was to reorganize our corporate structure so that the top-tier entity in our corporate structure, the entity that is offering shares of common stock to the public in this offering, is a corporation rather than a limited liability company and so that our existing owners own shares of our common stock rather than membership interests in a limited liability company.

 

Except as otherwise noted herein, the consolidated financial statements included in this prospectus are those of IMAC Holdings, LLC and its consolidated subsidiaries.

 

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USE OF PROCEEDS

 

We estimate that the net proceeds from the sale of our common stock in this offering will be approximately $ [●] (or approximately $[●] if the underwriter exercises its option in full to purchase additional shares of our common stock), based upon an assumed initial public offering price of $[●] per share after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us.

 

We intend to use the net proceeds approximately as follows:

 

Application of Net Proceeds  Approximate Dollar
Amount
   Approximate
Percentage of
Net Proceeds
 
     
Paying the cash portion of the purchase price for the Transactions   $    %
Financing the costs of leasing and developing new clinic locations  $    %
Repaying an interim note used for working capital  $    %
Spending on advertising and marketing to promote our clinics  $    %
Working capital and general corporate purposes  $    %
Total  $    100.00%

 

Of the net proceeds, approximately $ [●] will be used to pay the cash portion of the purchase price for the Transactions .

 

Pursuant to the merger agreement with Clinic Management Associates, LLC, we agreed to pay the sum of $4,598,576 to its former owners in a combination of cash and shares of common stock upon the closing of this offering. As of the date of this prospectus, we have not determined the exact amount of cash proceeds from this offering to be applied to the transaction purchase price because we are currently in negotiations with such sellers, some of whom are related parties, involving, among other issues, our desire to retain an increased cash position to provide us with the ability to more effectively compete in our existing markets and in regard to future acquisition bid proposals where net cash is often required in order to succeed.

 

We entered into a Unit Purchase Agreement with the equity owners of IMAC Regeneration Center of St. Louis, LLC to acquire the remaining 64% of the outstanding units of the limited liability company membership interests we did not already own . Pursuant to the terms of the Unit Purchase Agreement, we agreed to pay IMAC Regeneration Center of St. Louis, LLC’s former owners upon the closing of this offering an amount of cash and shares of common stock in the aggregate amount of $1,490,632. As of the date of this prospectus, we have not determined the exact amount of cash proceeds from this offering to be applied to the transaction purchase price because we are currently in negotiations with such sellers, some of whom are related parties, involving, among other issues, our desire to retain an increased cash position to provide us with the ability to more effectively compete in our existing markets and in regard to future acquisition bid proposals where net cash is often required in order to succeed.

 

We entered into a Unit Purchase Agreement with the equity owners of IMAC Regeneration Management of Nashville, LLC to acquire the remaining 24% of the outstanding units of the limited liability company membership interests we did not already own for an amount equal to $120,000 in cash and $180,000 principal amount of 4% convertible notes (on the same terms as in our 2018 private placement).

 

The net proceeds will also be utilized to finance the costs for leasing and developing the premises for each medical clinic, purchasing medical and office equipment, purchasing medical supplies and inventory, spending on advertising and marketing, as well as recruiting and hiring staff, and other expenses. We estimate that it will take at least $700,000 to open each new clinic, with an additional $300,000 of operating capital and $200,000 credit line needed to purchase equipment and fund operating losses during the first six months of operation. These start-up costs may increase if there are any delays, problems or other events not currently anticipated. Although we expect each medical clinic to become profitable approximately six months after opening based on our experience with opening the Ozzie Smith Centers in Chesterfield, Missouri in May 2016 and in St. Peters, Missouri in August 2017, and with the IMAC Regeneration Center in Murray, Kentucky in February 2017, no guarantee can be made that any of the clinics or our company overall will operate profitably. For example, the David Price Center in Brentwood, Tennessee, which opened in May 2017, initially experienced unforeseen delays in staffing, construction and marketing launch.

 

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On May 31, 2018, we entered into a note payable to The Edward S. Bredniak Trust in the amount of up to $2,000,000. An existing note payable with this entity in the amount of $379,675.60 will be combined into the new note payable. The note carries an interest rate of 10% per annum and all outstanding balances are due and payable at the closing of this offering. The proceeds of this note are being used to satisfy ongoing working capital needs, expenses related to the preparation and execution of this offering, equipment and construction costs related to new clinic locations, and potential business combination and transaction expenses.

 

Funds for working capital and general corporate purposes include amounts required to pay officers’ salaries, consulting fees, professional fees, ongoing public reporting costs, computer equipment costs, data streaming transmission costs, office-related expenses and other corporate expenses.

 

We believe that, with the net proceeds of this offering, our current cash and our available lines of credit, we will have sufficient cash reserves available to cover expenses for at least 12 months following the closing of this offering. Given the volatility in U.S. equity markets and our normal working capital fluctuations, and depending on the actual level of net proceeds raised in this offering, we may seek to raise additional capital following this offering to supplement our operating cash flows to the extent we can do so on competitive market terms. In such event, an equity financing may dilute the ownership interests of our stockholders and investors in this offering. In all events, there can be no assurance that additional financing would be available to us when desired or needed and, if available, on terms acceptable to us.

 

The expected use of net proceeds from this offering represents our intention based upon our present plans and business conditions. We cannot predict with certainty all of the particular uses for the proceeds of this offering or the amounts that we will actually spend on the uses set forth above. Accordingly, our management will have significant flexibility in applying the net proceeds of this offering. The timing and amount of our actual expenditures will be based on many factors, including cash flows from operations and the anticipated growth of our business. Pending their use, we intend to invest the net proceeds of this offering in a variety of capital-preservation investments, including short- and intermediate-term, interest-bearing, investment-grade securities.

 

DIVIDEND POLICY

 

Our board of directors will determine our future dividend policy based on our result of operations, financial condition, capital requirements and other circumstances. We have not previously declared or paid any cash dividends on our common stock. We anticipate that we will retain earnings to support operations and finance the growth of our business, as described in this prospectus. Accordingly, it is not anticipated that any cash dividends will be paid on our common stock in the foreseeable future. Previously, as a limited liability company, we made periodic minimal distributions to our members, primarily to cover the members’ tax obligations.

 

CAPITALIZATION

 

The following table sets forth our cash and cash equivalents and capitalization as of March 31, 2018:

 

  on an actual basis without any adjustments to reflect subsequent or anticipated events;
     
  on a pro forma basis, giving effect to the Corporate Conversion; and
     
  on a pro forma, as adjusted basis reflecting (a) the receipt by us of the net proceeds from the sale of [●] shares of common stock in this offering at an assumed initial public offering price of $[●] per share, after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us and excluding the exercise of the over-allotment option held by the underwriter with respect to this offering, and (b) the automatic conversion of our convertible promissory notes in the principal amount of $1,730,000 issued in the first five months of 2018 into [●] shares of our common stock upon the closing of this offering, and the issuance of [●] shares of our common stock under the terms of a unit purchase agreement in connection with our acquisition of IMAC of St. Louis, LLC and [●] shares of common stock under the terms of a merger agreement in connection with our acquisition of Clinic Management Associates, LLC, as if each had occurred on March 31, 2018.

 

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The following information is illustrative only of our cash and cash equivalents and capitalization following the completion of this offering and will change based on the actual initial public offering price and other terms of this offering determined at pricing. You should read this table together with “Corporate Conversion,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our financial statements and the related footnotes notes appearing in this prospectus.

 

   As of March 31, 2018 
  

IMAC

Holdings

  

IMAC Group

Pro Forma,

 
   Actual   As Adjusted 
   ( unaudited )     
Cash and cash equivalents  $550,509   $ 
Debt, current portion  $2,421,482   $          
Long-term debt, net of current portion  $434,512   $     
Equity  $(257,772)  $  
Membership interest units, [365] units issued and outstanding, actual; 365 units issued and outstanding, pro forma and pro forma as adjusted          
Common stock, $0.001 par value, 30,000,000 shares authorized, __ shares issued and outstanding, actual; 30,000,000 shares authorized, pro forma and pro forma as adjusted; [●] shares issued and outstanding, pro forma; [●] shares issued and outstanding, pro forma as adjusted          
Additional paid-in capital          
Retained earnings          
Total stockholders’ equity  $(257,772)  $  
Total capitalization          

 

DILUTION

 

If you invest in our common stock in this offering, your ownership interest will be immediately diluted to the extent of the difference between the initial public offering price per share and the pro forma, as adjusted net tangible book value per share of our common stock immediately after this offering. Net tangible book value per share is determined by dividing our total tangible assets less total liabilities by the number of outstanding shares of common stock.

 

As of March 31, 2018, we had a net tangible book value of $(257,772) (unaudited) or $[●] per share of common stock. Our pro forma net tangible book value per share represents the amount of our total tangible assets reduced by the amount of our total liabilities and divided by the total number of shares of our common stock outstanding as of March 31, 2018, after giving effect to the Corporate Conversion.

 

Investors participating in this offering will incur immediate and substantial dilution. After giving effect to (a) the issuance and sale of [●] shares of our common stock in this offering at an assumed initial public offering price of $[●] per share, and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us, and (b) the automatic conversion of our convertible promissory notes in the principal amount of $1,730,000 issued in the first five months of 2018 into [270,313] shares of our common stock, upon the closing of this offering, and the issuance of [●] shares of our common stock under the terms of a unit purchase agreement in connection with our acquisition of IMAC of St. Louis, LLC and [●] shares of common stock under the terms of a merger agreement in connection with our acquisition of Clinic Management Associates, LLC , our as adjusted net tangible book value as of March 31, 2018, would have been approximately $[●] , or $[●] per share of common stock. This represents an immediate decrease in the pro forma net tangible book value of $[●] per share to existing stockholders and an immediate accretion of $[●] per share to investors purchasing shares of our common stock in this offering. The following table illustrates this per share dilution on a per share basis:

 

   Amount 
     
Assumed initial public offering price      
      
Pro forma net tangible book value (deficit) before offering     
      
Increase (Decrease) in pro form net tangible book value attributable to new investors     
      
Pro forma as adjusted net tangible book value after offering     
      
Dilution (Accretive) in pro form net tangible book value to new investors     

 

If the underwriter exercises its over-allotment option in full to purchase [●] additional shares of common stock from us in this offering to cover over-allotments, if any, the pro forma as adjusted net tangible book value per share after the offering would be $[●] per share, the increase in the pro forma net tangible book value per share to existing stockholders would be $[●] per share and the dilution per share to new investors purchasing common stock in this offering would be $[●] per share.

 

The following table illustrates, on a pro forma as adjusted basis as of March 31, 2018, after giving effect to the Corporate Conversion, the differences between the number of shares of common stock purchased from us, the total consideration paid, and the average price per share paid by existing stockholders and new investors purchasing shares of our common stock in this offering based on an assumed initial public offering price of $[●] per share, and before deducting underwriting discounts and commissions and estimated offering expenses.

 

   Shares
Purchased
   Total
Consideration
   Average
Price Per
 
   Number   Percent   Amount   Percent   Share 
Existing stockholders            %      %         
New investors        %   15,000,000    %  $ 
Total        100.0%        100.0%     

 

The number of shares of common stock shown above to be outstanding after this offering is based on [●] shares of our common stock outstanding as of March 31, 2018, assuming the sale of [●] shares of our common stock offered for sale in this offering and the automatic conversion of our convertible promissory notes in the principal amount of $1,730,000 issued in the first five months of 2018 into [●]shares of our common stock and the issuance of [●] shares of our common stock under the terms of a unit purchase agreement in connection with our acquisition of IMAC of St. Louis, LLC and [●] shares of common stock under the terms of a our merger agreement in connection with our acquisition of Clinic Management Associates, LLC , and excludes 1,000,000 shares of our common stock reserved for future issuance under our 2018 Incentive Compensation Plan.

 

In addition, if the underwriter exercises its over-allotment option to purchase additional shares in full, the number of shares held by new investors would increase to [●], or [●]% of the total number of shares of our common stock outstanding after this offering.

 

To the extent that new stock options are issued under our 2018 Incentive Compensation Plan or we issue additional shares of common stock in the future, there will be further dilution to investors participating in this offering. In addition, we may choose to raise additional capital because of market conditions or strategic considerations, even if we believe that we have sufficient funds for our current or future operating plans. If we raise additional capital through the sale of equity or convertible debt securities, the issuance of these securities could result in further dilution to our stockholders.

 

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

 

The following discussion should be read in conjunction with the consolidated financial statements and accompanying notes of IMAC Holdings Inc. as well as the Pro Forma Financial Statements of IMAC Group and the information contained in other sections of this prospectus, particularly under the headings “Risk Factors” and “Business.” It contains forward-looking statements that involve risks and uncertainties, and is based on the beliefs of our management, as well as assumptions made by, and information currently available to, our management. Our actual results could differ materially from those anticipated by our management in these forward-looking statements as a result of various factors, including those discussed below and in this prospectus, particularly under the heading “Risk Factors.”

 

Information contained in this Management’s Discussion and Analysis of Financial Condition and Results of Operations gives a financial perspective of IMAC Holdings Inc. and retrospective effect to the consummation of business transactions involving companies owning or managing IMAC Regeneration Centers and the related issuance of shares of common stock and/or cash payments in such transactions, each of which were completed in June 2018, the company herein referred to as “IMAC Group.” Management has used best efforts to clearly document the entities in correlation to the information presented below. References in this Management’s Discussion and Analysis of Financial Condition and Results of Operations 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 discussed in this prospectus, IMAC Holdings, LLC, a Kentucky limited liability company, and in each case, their consolidated subsidiaries. IMAC Holdings includes the financial condition and results of operations of IMAC of Tennessee. The business transactions referenced above are Integrated Medicine and Chiropractic Regeneration Center PSC and IMAC of St. Louis, LLC. A third acquisition relates to the buy-out of the minority ownership of other parties of IMAC Regeneration Management of Nashville, LLC.

 

Overview

 

We are a provider of a continuum of non-surgical orthopedic therapies 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, non-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. Since then, we have opened six new outpatient medical clinics in Kentucky, Missouri and Tennessee, and plan with the net proceeds of this offering 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, opening two Ozzie Smith IMAC Regeneration Centers and two David Price IMAC Regeneration Centers, and recently opened a Tony Delk IMAC Regeneration Center in July 2018. Our outpatient medical clinics emphasize our focus around treating sports and orthopedic injuries.

 

Revenue Model

 

IMAC Holdings, LLC recorded consolidated patient billings of $532,872 (unaudited) and $1,378,313 and realized total net patient revenues, less allowances for contractual adjustments with third-party payers, of $234,253 (unaudited) and $654,625 for the three months ended March 31, 2018 and the year ended December 31, 2017, respectively, and had no revenues in 2016. No revenues were recorded in 2016 because IMAC Holdings did not own any clinics in its name in 2016 and the clinics with which it had entered into management services agreements in 2016 did not open until early 2017. IMAC Holdings’ net loss for the three months ended March 31, 2018 and year ended December 31, 2017 were $665,865 and $916,532, respectively.

 

Integrated Medicine and Chiropractic Regeneration Center PSC recorded patient billings of $2,825,256 (unaudited) , $13,258,419 and $14,990,042 and realized total net patient revenues of $980,209 (unaudited), $4,960,132 and $3,311,884 for the three months ended March 31, 2018 and the years ended December 31, 2017 and 2016, respectively. IMAC of St. Louis, LLC recorded patient billings of $1,726,631 (unaudited) , $8,073,943 and $3,171,811 and realized total net patient revenues of $531,970 (unaudited) , $2,709,928 and $913,654 for the three months ended March 31, 2018 and the years ended December 31, 2017 and 2016, respectively. Integrated Medicine and Chiropractic Regeneration Center PSC’s net income/(loss) for the three months ended March 31, 2018 and year ended December 31, 2017 were $(117,170) and $444,177, respectively . On a pro forma basis to reflect the Integrated Medicine and Chiropractic Regeneration Center PSC and IMAC of St. Louis, LLC transactions , which occurred in June 2018, but as if they each occurred on January 1, 2017 , the patient billings of IMAC Group were $5,084,759 and $22,710,675 and total net patient revenues were $1,746,432 and $8,324,685 for the three months ended March 31, 2018 and the year ended December 31, 2017, respectively. Integrated Medicine and Chiropractic Regeneration Center PSC’s pro forma net income/(loss) for the three months ended March 31, 2018 and the year ended December 31, 2017 was $(2,062,652) and $(1,287,293), respectively.

 

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Our revenue model is diversified between medical treatments and physiological treatments. Our medical treatments are further segmented into traditional medical and regenerative medicine practices. For the last two full fiscal years and the first quarter of this year, traditional medical treatments comprised approximately 33% of total net patient revenues of IMAC Group, while regenerative medicine accounted for approximately 31% of IMAC Group total net patient revenues. Physiological treatments generated the remainder of our total net patient revenues as physical therapy amounted to 31% and chiropractic care at 5% of such revenues. 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. Approximately 26% of IMAC Group total net patient revenues are attributable to insurance payments, 23% to CMS payments and 51% to cash payments from patients. For more information on our revenue recognition policies, see “Critical Accounting Policies and Estimates - Revenue Recognition.”

 

Corporate Conversion

 

Through May 31, 2018, we were a Kentucky limited liability company named IMAC Holdings, LLC. Effective June 1, 2018, we converted into a Delaware corporation pursuant to a statutory merger, or the Corporate Conversion, and changed our name to IMAC Holdings, Inc. All of our outstanding membership interests were exchanged on a proportional basis into shares of common stock of IMAC Holdings, Inc. For more information, see “Corporate Conversion.”

 

Following the Corporate Conversion, IMAC Holdings, Inc. continues to hold all of the property and assets of IMAC Holdings, LLC and all of the debts and obligations of IMAC Holdings, LLC continue as the debts and obligations of IMAC Holdings, Inc. The purpose of the Corporate Conversion was to reorganize our corporate structure so that the top tier entity in our corporate structure, the entity that is offering common stock to the public in this offering, is a corporation rather than a limited liability company and so that our existing owners own shares of our common stock rather than membership interests in a limited liability company. Except as otherwise noted herein, the consolidated financial statements included in this prospectus are those of IMAC Holdings, LLC and its consolidated subsidiaries.

 

Business Transactions

 

IMAC Management Services, LLC (formerly Clinic Management Associates, LLC) holds a long-term Management Services Agreement with Integrated Medicine and Chiropractic Regeneration Center PSC, a professional service corporation controlled by our co-founders Matthew C. Wallis, DC, and Jason Brame, DC, which operates two IMAC Regeneration Centers in Kentucky. On June 29, 2018, Clinic Management Associates, LLC, controlled by Drs. Wallis and Brame, merged with and into our subsidiary IMAC Management Services, LLC. IMAC Management Services, LLC provides exclusive comprehensive management and related administrative services to the IMAC Regeneration Centers under the Management Services Agreement. Pursuant to the merger agreement with Clinic Management Associates, LLC, we agreed to pay the sum of $4,598,576 to its former owners in a combination of cash and shares of common stock upon the closing of this offering. We have not determined the breakdown of the consideration at this time. Dr. Wallis is an executive officer and greater than 5% beneficial owner in our company and will receive 75% of the sale price of Clinic Management Associates, LLC. Dr. Brame is a greater than 5% beneficial owner in our company and will receive 25% of the sale price of Clinic Management Associates, LLC. Under the Management Services Agreement, we will receive service fees based on the cost of the services we provide, plus a specified markup percentage, and a discretionary annual bonus. The Management Services Agreement is exclusive, extends through June 2048 and does not provide for renewal.

 

We entered into a Unit Purchase Agreement with the equity owners of IMAC Regeneration Center of St. Louis, LLC to acquire the remaining 64% of the outstanding units of the limited liability company membership interests we did not already own. This entity, doing business as the Ozzie Smith Center, operates two locations in Missouri. Pursuant to the terms of the Unit Purchase Agreement, we agreed to pay IMAC Regeneration Center of St. Louis, LLC’s former owners upon the closing of this offering an amount of cash and shares of common stock in the aggregate amount of $1,490,632. We have not determined the breakdown of the consideration at this time. The effective date of the transaction was June 1, 2018. Dr. Wallis is an executive officer and greater than 5% beneficial owner in our company and will receive cash and stock compensation of $372,658 of the sale price.

 

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We entered into a Unit Purchase Agreement with the equity owners of IMAC Regeneration Management of Nashville, LLC to acquire the remaining 24% of the outstanding units of the limited liability company membership interests we did not already own for an amount equal to $120,000 in cash and $180,000 principal amount of 4% convertible notes (on the same terms as in our 2018 private placement). The effective date of this transaction was June 1, 2018. IMAC Regeneration Management of Nashville, LLC, now our 100%-owned subsidiary, and IMAC Regeneration Center of Nashville, P.C. previously agreed to a long-term, exclusive management services agreement on November 1, 2016. Mr. Ervin is an executive officer and greater than 5% beneficial owner in our company and will receive $50,000 of the sale price.

 

We are compensated under each of our 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. Under our management services agreements, all obligations owed to us by the professional service corporations are secured by all accounts receivable, contract rights, revenues and general intangibles of the applicable professional service corporation. The management services agreements may be terminated by mutual agreement of the parties, by a non-breaching party after 30 days following an uncured breach by the other party, upon a bankruptcy of either party or by us upon 90 days’ prior written notice to the other party.

 

Integrated Medicine and Chiropractic Regeneration Center, PSC, IMAC Management Services, LLC, IMAC Regeneration Center of St. Louis, LLC and IMAC Regeneration Management of Nashville, LLC are related companies having common ownership with us and our controlling stockholders and have been operating together with us as a single group since 2015. We intend to make additional acquisitions following this offering and, in the ordinary course of business, we frequently engage in discussions with potential acquisition candidates and/or their representatives. We currently have no commitments or agreements for any acquisitions.

 

Matters that May or Are Currently Affecting Our Business

 

We believe that the growth of our business and our future success depend on various opportunities, challenges, trends and other factors, including the following:

 

  Our ability to identify, contract with, install equipment and operate a large number of outpatient medical clinics and attract new patients to them;
     
  Our need to hire additional healthcare professionals in order to operate the large number of clinics we intend to open;
     
  Our ability to enhance revenue at each facility on an ongoing basis through additional patient volume and new services;
     
  Our ability to obtain additional financing for the projected costs associated with the acquisition, management and development of new clinics, and the personnel involved, if and when needed;
     
  Our ability to attract competent, skilled medical and sales personnel for our operations at acceptable prices to manage our overhead; and
     
  Our ability to control our operating expenses as we expand our organization into neighboring states.

 

Critical Accounting Policies and Estimates

 

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses at the date and for the periods that the consolidated financial statements are prepared. On an ongoing basis, 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 Consolidated Financial Statements, the following accounting policies require our most difficult, subjective or complex judgments in the preparation of our financial statements.

 

Revenue Recognition

 

Our patient service revenue is derived from non-surgical procedures performed at our outpatient medical clinics and patient visits to physicians. The fees for such services are billed either to the patient or a third-party payer, including Medicare. We recognize patient service revenue, net of contractual allowances, which we estimate based on the historical trend of our cash collections and contractual write-offs.

 

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Other management service fees are derived from management services where we provide 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, we provide all administrative support to the physician-owned PC through an LLC. The PC is consolidated due to control by contract (an “SMA” or Service Management 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. We recognize other management service revenue in the period in which services are rendered. These revenues are earned by IMAC Management Services, LLC and are eliminated in consolidation.

 

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 not paid by insurance carriers; therefore, we typically require 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, we are 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.

 

Accounts Receivable

 

Accounts receivable primarily consists of amounts due from third-party payers (non-governmental), governmental payers and private pay patients and is recorded net of allowances for doubtful accounts and contractual discounts. Our ability to collect outstanding receivables is critical to our results of operations and cash flows. Accordingly, accounts receivable reported in our consolidated financial statements is recorded at the net amount expected to be received. Our primary collection risks are (i) the risk of overestimation of net revenues at the time of billing that may result in our receiving less than the recorded receivable, (ii) the risk of non-payment as a result of commercial insurance companies’ denial of claims, (iii) the risk that patients will fail to remit insurance payments to us when the commercial insurance company pays out-of-network claims directly to the patient, (iv) resource and capacity constraints that may prevent us from handling the volume of billing and collection issues in a timely manner, (v) the risk that patients do not pay us for their self-pay balances (including co-pays, deductibles and any portion of the claim not covered by insurance), and (vi) the risk of non-payment from uninsured patients.

 

Our accounts receivables from third-party payers are recorded net of estimated contractual adjustments and allowances from third-party payers, which are estimated based on the historical trend of our facilities’ cash collections and contractual write-offs, accounts receivable aging, established fee schedules, relationships with payers and procedure statistics. While changes in estimated reimbursement from third-party payers remain a possibility, we expect that any such changes would be minimal and, therefore, would not have a material effect on our financial condition or results of operations. Our collection policies and procedures are based on the type of payer, size of claim and estimated collection percentage for each patient account. The operating systems used to manage our patient accounts provide for an aging schedule in 30-day increments, by payer, physician and patient. We analyze accounts receivable at each of the facilities to ensure the proper collection and aged category. The operating systems generate reports that assist in the collection efforts by prioritizing patient accounts. Collection efforts include direct contact with insurance carriers or patients and written correspondence.

 

Income Taxes

 

IMAC Holdings, IMAC Management, IMAC Texas, and IMAC Nashville are limited liability companies and are taxed as partnerships. As a result, income tax liabilities are passed through to the individual members. Accordingly, no provision for income taxes is reflected in the consolidated financial statements.

 

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Results of Operations

 

We own our medical clinics directly or have entered into long-term management services agreements to operate and control these medical clinics by contract. The managed clinics are owned exclusively by a professional service corporation under common control with us or eligible members of our company in order to comply with state laws regulating the ownership of medical practices. We are compensated under management services agreements through service fees based on the cost of the services provided, plus a specified markup percentage, and a discretionary annual bonus determined in the sole discretion of each professional service corporation.

 

Year ended December 31, 2017 Compared to Year ended December 31, 2016

 

The following table sets forth a summary of IMAC Holdings, LLC’s statements of operations for the years ended December 31, 2017 and 2016, and the changes between those periods:

 

IMAC Holdings, LLC

Consolidated Statements of Operations

For the Years Ended December 31, 2017 and 2016

 

   2017   2016   Change 
             
Patient revenues  $1,378,313   $-   $1,378,313 
Contractual adjustments   (723,688)   -    (723,688)
Total patient revenue, net   654,625    -    654,625 
                
Management fees   131,400    15,000    116,400 
Total revenue    786,025      15,000      771,025  
                
Operating expenses:               
Patient expenses   63,216    4,266    58,950 
Salaries and benefits   967,627    33,589    934,037 
Share-based compensation: consulting fees     18,747       150,000       (131,253 )
Advertising and marketing   119,867    25,000    94,867 
General and administrative   465,740    21,192    444,548 
Depreciation   65,895    -    65,895 
Total operating expenses    1,701,092      234,047      1,467,045  
                
Operating loss   ( 915,067 )   ( 219,047 )   ( 696,020 )
                
Other income (expense):               
Interest income   14,821    4    14,816 
Loss on disposal of assets   (2,744)   -    (2,744)
Interest expense   (27,151)   -    (27,151)
Total other income (expenses)   ( 15,074 )     4     ( 15,079 )
                
Loss before equity in earnings(loss) of non-consolidated affiliates     (930,141 )     (219,043 )     (711,099 )
Equity in earnings (loss) of non-consolidated affiliate     13,609       (178,397 )     192,006  
Net Loss   (916,532)   (397,440)   (519,093)
                
Net loss attributable to the noncontrolling interest   859,351    16,643    842,708 
                
Net loss attributable to IMAC Holdings, LLC members  $(57,181)  $(380,797)  $323,615 

 

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Three Months ended March 31, 2018 Compared to Three Months ended March 31, 2017

 

The following table sets forth a summary of IMAC Holdings, LLC’s statements of operations for the three months ended March 31, 2018 and 2017, and the changes between those periods:

 

IMAC Holdings, LLC

Unaudited Condensed Consolidated Statements of Income and Members’ Equity

For the Three Months Ended March 31, 2018 and 2017

 

   2018   2017   Change 
   ( unaudited )   (unaudited)      
Patient revenues  $532,872   $-   $532,872 
Contractual adjustments   (298,619)   -    (298,619)
Total patient revenue, net   234,253    -    234,253 
                
Management fees   33,600    30,600    3,000 
                
Total Revenue    267,853      30,600      237,253  
                
Operating expenses:               
Patient expenses   37,134    9,800    27,334 
Salaries and related expenses   446,796    161,908    284,887 
Share-based compensation: consulting fees     3,749       -       3,749  
Advertising and marketing   93,178    11,759    81,418 
General and administrative   239,692    13,895    225,797 
Depreciation   31,268    1,274    29,994 
Total operating expenses    851,817     198,637     653,180  
                
Operating loss   (583,964)   (168,037)   (415,927)
                
Other income (expenses):               
Interest income   3,312    3,948    (636)
Interest expense   (23,552)   (4,140)   (19,412)
Total other income (expenses)   ( 20,240 )   (191)   ( 20,048 )
                
Loss before equity in earnings(loss) of non-consolidated affiliates     (604,203 )     (168,228 )     (435,975 )
Equity in earnings (loss) of non-consolidated affiliate     (85,651 )     9,587       (95,238 )
Net loss   ( 689,854 )   (158,641)   ( 531,213 )
                
Net loss attributable to the non-controlling interest   285,191    250,389    34,802 
                
Net loss attributable to the IMAC Holdings LLC members   (404,663)   91,748    (496,411)

 

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IMAC Holdings, LLC

Condensed Consolidated Statements of Operations

For the 12 Months Ended December 31, 2017 and 2016

 

The following table sets forth a summary of IMAC Holdings, LLC’s statements of operations for the 12 months ended December 31, 2017 and 2016, and the changes between those periods.

 

    December 31, 2017     December 31, 2016     $ Change     % Change  
Revenue                       
Holdings   1,378,313     -     1,378,313    0.00 %
Total Revenue   1,378,313     -     1,378,313    0.00 %
                        
Contractual                       
Holdings   (723,688)    -     (723,688)   0.00 %
Total Contractual   (723,688)    -     (723,688)   0.00 %
                        
Management Fees   131,400     15,000     116,400    776.00 %
Equity in earnings (loss) of non-consolidated affiliate   13,609     (178,397 )   192,006    -107.63 %
Total Revenue   799,634     (163,397 )   963,031    -589.38 %
                        
Operating Expenses                       
Holdings   1,682,345     234,047     1,448,298    618.81 %
Total Operating Expenses   1,682,345     234,047     1,448,298    618.81 %
                        
Loss from Operations                       
Holdings   (882,711)    (397,444 )   (485,267)   122.10 %
Total Loss from Operations   (882,711)    (397,444 )   (485,267)   122.10 %
                        
Other Income and Expense                       
Holdings   (33,821)    4     (33,825 )    -845635.50
Total Other Income and Expense   (33,821)    4     (33,825)    -845635.50 %
                        
Net Loss                       
Holdings   (916,532)    (397,440 )   (519,092)   130.61 %
Total Net Loss   (916,532)    (397,440 )   (519,092)   130.61 %

 

Revenues

 

The following revenue information and consolidated statement of operations is related to IMAC Holdings, LLC as referenced in the tables above.

 

Gross revenues for the twelve months ended December 31, 2017 were $1,378,313, compared to no revenues for the same period in 2016. Revenue increased solely due to revenues from IMAC Regeneration Management of Nashville, LLC, which opened in May 2017.

 

Gross revenues for the three months ended March 31, 2018 were $ 532,872 (unaudited), compared to no revenues for the same period in 2017. Revenue increased solely due to revenues from IMAC Regeneration Management of Nashville, LLC, which opened in May 2017.

 

Net revenue (gross revenues less contractual adjustments) for the twelve months ended December 31, 2017 was $654,625 as compared to no net revenue for the year ended December 31, 2016.

 

Net revenue (gross revenues less contractual adjustments) for the three months ended March 31, 2018 was $234,253 ( unaudited ) as compared to no net revenue for the three months ended March 31, 2017 ( unaudited ).

 

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IMAC Holdings, LLC had non-patient related revenues for the twelve months ended December 31, 2017 of $145,009. $131,400 of the revenue was related to billing services provided by IMAC Holdings, LLC to other IMAC facilities where the revenue to IMAC Holdings, LLC was eliminated in consolidation. Additionally , IMAC Holdings, LLC had $13,609 in revenue in the form of “equity in earnings of non-consolidated affiliate” related to the minority interest in IMAC of St. Louis, LLC.

 

IMAC Holdings, LLC had non-patient related revenues for the three months ended March 31, 2018 of ($52,051) ( unaudited ). $33,600 of the revenue was related to billing services provided by IMAC Holdings LLC to other IMAC facilities where the revenue to IMAC Holdings, LLC was eliminated in consolidation .

 

The following table reflects the pro forma revenue and operating expenses and gross profit margin for the IMAC Group for the year ended December 31, 2017 and the three months ended March 31, 2018.

 

IMAC Group

Unaudited Pro Forma Condensed Consolidated Statements of Operations

For the Year Ended December 31, 2017 and the Three Months Ended March 31, 2018

 

    Year Ended December 31,     Three Months Ended
March 31,
 
   2017   2018 
   Group   Group 
   Pro Forma   Pro Forma 
          
Patient revenues  $22,710,675   $ 5,084,759  
Contractual adjustments   (14,385,990)    (3,338,327 )
             
Total revenue    8,324,685     1,746,432  
             
Operating expenses:            
Patient expenses   1,021,622     277,748  
Salaries and related expenses   4,629,923     1,480,094  
Share-based compensation: consulting fees     18,747      3,749  
Advertising and marketing   465,050     210,484  
General and administrative   1,899,209     578,240  
Depreciation and amortization   1,689,700     452,880  
Total operating expenses    9,724,251      3,003,195  
             
Operating loss   ( 1,399,566 )    (1,256,763 )
             
Other income (expenses):            
Interest income   2,636     -  
Interest expense   (93,361)    (30,530 )
Loss on disposal of assets   (572,361)    -  
Total other income (expenses)   ( 663,086 )    (30,530 )
             
Net loss   ( 2,062,652 )    (1,287,293 )
             
Net loss attributable to the IMAC Holdings, LLC members    (2,062,652)    (1,287,293 )

 

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The following table breaks down the revenue, operating expenses and gross profit margin for IMAC Group for the twelve months ended December 31, 2017 as if the transactions occurred on January 1, 2017 .

 

IMAC Group

Pro Forma Statements of Operations

For the Twelve Months Ended December 31, 2017

 

   Twelve Months
Ended
December 31, 2017
 
Revenue     
Holdings   1,378,313 
IMAC Kentucky   13,258,419 
IMAC St. Louis   8,073,943 
Total Revenue   22,710,675 
      
Contractual     
Holdings   (723,688)
IMAC Kentucky   (8,298,287)
IMAC St. Louis   (5,364,015)
Total Contractual   (14,385,990)
      
Net Revenue     
Holdings   654,625 
IMAC Kentucky   4,960,132 
IMAC St. Louis   2,709,928 
Total Net Income   8,324,685 
      
Operating Expenses     
Holdings   2,842,242 
IMAC Kentucky   4,209,109 
IMAC St. Louis   2,654,153 
Total Operating Expenses   9,705,504 
      
Loss from Operations     
Holdings    1,360,344  
IMAC Kentucky    3,355,856  
IMAC St. Louis    1,402,863  
Total Loss from Operations    6,119,063  
      
Other Income and Expense     
Holdings   (33,821)
IMAC Kentucky   (606,846)
IMAC St. Louis   (41,166)
Total Other Income and Expense   (681,833)
      
Net Loss     
Holdings   (2,221,438)
IMAC Kentucky   144,177 
IMAC St. Louis   14,609 
Total Net Loss   (2,062,652)

 

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Revenues

 

The following revenue information is related to IMAC Group as referenced in the tables above. All comparisons of fiscal year 2017 to fiscal year 2016 as referenced below are based on management’s comparison of 2017 to 2016 on a pro forma basis incorporating the completion of the acquisitions and related transactions.

 

All revenue information in this Revenue section of Management’s Discussion and Analysis of Financial Condition and Results of Operations gives retrospective effect to the completion of two transactions involving companies operating IMAC Regeneration Centers and the related issuance of shares of our common stock and/or cash payments in such transactions, which transactions were completed in June 2018. References to “IMAC Group” represents IMAC Holdings, Inc. on a pro forma basis after completion of the transactions.

 

Gross revenues for the twelve months ended December 31, 2017 was $22,710,675, an increase of $4,548,823, or 25.05%, as compared with pro forma revenues of $18,161,852. Revenue increased primarily due to revenues from our Tennessee facility which opened in May 2017. Additionally, we had a full year of revenue in 2017 from our Missouri facility. IMAC of Kentucky experienced a decline in gross revenues due to a decline in Medicare volume. The decline in gross revenues was attributable to the maturity of the Kentucky facility and the facility experiencing a growing percentage of business in the regenerative area which is not reimbursed by Medicare. We do not view this as a concern because net revenue for the facility increased year-over-year.

 

Net revenue (gross revenues less contractual adjustments) for the twelve months ended December 31, 2017 increased by $4,099,148 or 97.01% compared to the year ended December 31, 2016. IMAC of Kentucky net revenue grew by 49.77% due to an increase in self -pay business, continued marketing, an increase in name recognition and the opening of a satellite site in Murray, Kentucky. The Missouri site had net revenue growth of 196.60% primarily due to the site being open for a full year, increased name recognition and marketing efforts. IMAC of Tennessee had net revenues of $654,625 and no revenues in 2016.

 

Operating Expenses - IMAC Holdings, LLC

 

The operating expense information is related to IMAC Holdings, LLC.

 

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

 

Total operating expenses for the twelve months ended December 31, 2017 increased by $1,467,045, or 1,902 %, compared to the same period in 2016. The increase was primarily attributable to increased costs in Tennessee and overhead costs at IMAC Holdings related to preparation for this offering.

 

Total operating expenses for the three months ended March 31, 2018 increased by $649,431 ( unaudited ), or 327%, compared to the same period in 2017. The increase was primarily attributable to increased costs in Tennessee and overhead costs at Holdings related to preparation for this offering.

 

Patient expenses consist of medical supplies for services rendered.

 

Patient expenses increased for the year ended December 31, 2017 compared to the year ended December 31, 2016 by $58,950. IMAC of Tennessee patient expenses were $63,216 in 2017 with no expense in 2016. IMAC Holdings had a reduction in patient expenses of $4,266.

 

Patient expenses increased for the three months ended March 31, 2018 compared to the same period in 2017 by $27,334 ( unaudited ). IMAC of Tennessee patient expenses were $37,134 ( unaudited ) for the three months ended March 31, 2018 with $9,800 ( unaudited ) in patient expense in the same period in 2017.

 

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

 

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Salaries and benefits increased for the year ended December 31, 2017 compared to the year ended December 31, 2016 by $934,037. IMAC of Tennessee had an increase in salaries and benefits of $760,873 due to being open seven and a half months in 2017 and only $21,111 in salaries and benefits cost in 2016. All facilities have startup costs attributable to the need to hire staff in advance of opening. Management services had an increase in salaries and wages of $173,164 attributable to billing and collection services cost for new facilities.

 

Salaries and benefits increased for the three months ended March 31, 2018 compared to the same period in 2017 by $284,887 (unaudited) . IMAC of Tennessee had an increase in salaries and benefits of $108,322 (unaudited) for the three month period ended March 31, 2018 compared to the same period in 2017. The additional expense was due to additional staff to support the facility and additional provider cost. IMAC Holdings had an increase in costs of $168,893 due to the additional cost related to the preparation for this offering . IMAC Management costs increased by $7,672 ( unaudited ) due to additional costs to support billing and operations for related facilities.

 

Advertising and marketing consists of physical therapy marketing, business promotion and brand recognition.

 

Advertising and marketing increased for the year ended December 31, 2017 compared to the prior year by $94,867. IMAC of Tennessee had an increase in advertising and marketing expense of $82,367 for the year ended December 31, 2017 compared to December 31, 2016. IMAC Holdings’ advertising and marketing expense increased by $12,500.

 

Advertising and marketing increased for the three months ended March 31, 2018 compared to the prior year by $81,418 (unaudited). IMAC of Tennessee had an increase in advertising and marketing expense of $38,650 ( unaudited ) for the three months ended March 31, 2018 compared to the same period in 2017. Holdings advertising and marketing expense increased by $42,769 ( unaudited ) in preparation for this offering.

 

General and administrative (G&A) consists of all other costs other than advertising and marketing, salaries and wages, patient expenses and depreciation.

 

General and administrative expense increased for the year ended December 31, 2017 compared to the prior year by $444,548. For the year ended December 31, 2017, IMAC of Tennessee G&A costs increased by $354,421 primarily due to rent, legal and professional fees. Management Services G&A increased by $285. IMAC Holdings’ G&A costs increased by $89,842 due to legal and accounting costs associated with the requirements for the public filing.

 

General and administrative expense increased for the three months ended March 31, 2018 compared to the prior period by $225,797 (unaudited). For the three months ended March 31, 2018, IMAC of Tennessee G&A costs increased by $110,700 (unaudited) primarily due to rent, legal and professional fees. Management Services G&A increased by $1,465 (unaudited). Holdings G&A costs increased by $113,632 (unaudited) due to legal and accounting costs associated with the requirements for the public filing.

 

A company purchases fixed assets, such as equipment or medical equipment, to use in the course of its business activities. When a company purchases a fixed asset, it capitalizes the full cost of the asset on its balance sheet. The company cannot expense this cost when purchasing the asset because it will benefit from the purchase for several years. Instead, the company records depreciation, or expenses a portion of the cost each year. Generally accepted accounting principles, or GAAP, provide specific rules for depreciating these assets.

 

Depreciation expense increased for the year ended December 31, 2017 compared to the prior year by $65,895. IMAC of Tennessee had depreciation of $65,895 as compared with 2016.

 

Depreciation expense increased for the three months ended March 31, 2018 compared to the prior period by $29,994 (unaudited) . IMAC of Tennessee had depreciation of $31,268 (unaudited) for the period ended March 31, 2018 with $1,274 (unaudited) in cost in the period ended March 31, 2017.

 

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Operating Expenses - IMAC Group

 

The following operating expense information is related to IMAC Group.

 

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

 

Total operating expenses for the twelve months ended December 31, 2017 increased by $3,586,441, or 59%, compared to the same period in 2016. The increase was primarily attributable to increased costs in Tennessee, a full year of costs in Missouri, increase costs related to additional revenue in Kentucky and overhead costs at Holdings related to preparation for this offering.

 

Patient expenses consist of medical supplies for services rendered.

 

Patient expenses increased for the year ended December 31, 2017 compared to the year ended December 31, 2016 by $224,794. IMAC of Kentucky patient expenses increased by $67,471 due to additional volume. IMAC of Missouri patient expenses increased by $98,373 due to the facility being open for a full year in 2017. IMAC of Tennessee patient expenses were $63,216 in 2017 with no offsetting cost in 2016. Holdings had a reduction in patient expenses of $4,266.

 

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

 

Salaries and benefits increased for the year ended December 31, 2017 compared to the year ended December 31, 2016 by $1,934,997. IMAC of Kentucky Salaries and benefits increased by $335,315 primarily due to the growth in volume. IMAC of Missouri Salaries and benefits increased by $665,645 due to the facility being opened a full year in 2017 compared to seven and a half months in 2016. IMAC of Tennessee had an increase in salaries and benefits of $760,872 due to being open seven and a half months in 2017 and only $21,111 in salaries and benefits cost in 2016. All facilities have startup costs attributable to the need to hire staff in advance of opening. Management Services had an increase in salaries and wages of $173,164 attributable to billing and collection services cost for new facilities.

 

Advertising and marketing consists of physical therapy marketing, business promotion and brand recognition.

 

Advertising and marketing increased for the year ended December 31, 2017 compared to the prior year by $192,591. IMAC of Tennessee had an increase in advertising and marketing expense of $82,367 for the year ended December 31, 2017 compared to December 31, 2016. IMAC of Missouri had an increase of $81,501 due to being open a full year. IMAC of Kentucky had an increase of $16,223. IMAC Holdings’ advertising and marketing expense increased by $12,500. Advertising and marketing expense reflects necessary cost increases attributable to a new market in Tennessee and a full year of marketing and advertising efforts in Missouri.

 

General and administrative consists of all other costs other than advertising and marketing, salaries and wages, patient expenses and depreciation.

 

General and administrative expense increased for the year ended December 31, 2017 compared to the prior year by $1,046,249. For the year ended December 31, 2017, IMAC of Kentucky G&A costs increased by $290,802. This was attributable to increased costs for insurance, licensure and professional services. A substantial amount of this was due to the on-boarding of the Murray, Kentucky site. IMAC of Missouri G&A costs increased by $297,187 primarily due to increases associated with being open a full year and incurring costs such as legal and professional fees, rent, utilities, and travel and entertainment. IMAC of Tennessee G&A costs increased by $376,022 primarily due to rent and legal and professional fees. Management Services G&A increased by $285. IMAC Holdings’ G&A costs increased by $89,842 due to legal and accounting costs associated with the requirements for this offering. G&A costs for OLM declined by $7,890. OLM was merged out of existence in December 2017.

 

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A company purchases fixed assets, such as equipment or medical equipment, to use in the course of its business activities. When a company purchases a fixed asset, it capitalizes the full cost of the asset on its balance sheet. The company cannot expense this cost when purchasing the asset because it will benefit from the purchase for several years. Instead, the company records depreciation, or expenses a portion of the cost each year. GAAP provides specific rules for depreciating these assets.

 

Depreciation expense increased for the year ended December 31, 2017 compared to the prior year by $187,810. Depreciation for IMAC of Kentucky increased by $58,331 for the year ended December 31, 2017 compared to December 31, 2016 primarily due to the additional capital expense related to the opening of the Murray facility. IMAC of Missouri had an increase in depreciation expense of $63,584 due to being open a full year in 2017. IMAC of Tennessee had depreciation of $65,895 with no offsetting cost in 2016.

 

Other Income (Expense) - IMAC Holdings, LLC

 

Other income (expense) consists of interest expense, interest income, share based compensation, minority interest, non-controlling interest in IMAC Tennessee and loss on disposal of an asset.

 

Total other income (expense) decreased for the year ended December 31, 2017 compared to December 31, 2016 by $116,174.

 

Total other income (expense) increased for the three months ended March 31, 2018 compared to March 31, 2017 by $23,798. This was primarily related to a note with Edward S. Bredniak, a director, as described under “Certain Relationships and Related Transactions – Related Party Transactions.”

 

Interest income (expense) during the twelve months ended December 31, 2017 increased by $12,335 from $12,330 in 2017 compared to $4 in expense in 2016 primarily due to the use of a line of credit and equipment loan at the IMAC of Missouri facility.

 

Interest income (expense) increased by $20,048 from $20,240 for the three months ended March 31, 2018 compared to $191 in expense for the same period in 2017 primarily due to interest on the convertible note for $1,730,000.

 

Share-based compensation fees declined by $131,253 for the period ended December 31, 2017 compared to the period ended December 31, 2016 due to share based compensation with an assigned value of $150,000 paid in 2016 to one shareholder with a smaller amount, $18,747, of share -based compensation paid in 2017 to two shareholders.

 

Share-based compensation in the three-month period ended March 31, 2018 was $3,749 with no offsetting expense in the same period in 2017.

 

Non-controlling interest in IMAC Tennessee decreased by $842,708 for the period ended December 31, 2017 compared to the period ended December 31, 2016. This was related to larger losses for the IMAC of Tennessee facility.

 

Non-controlling interest in IMAC Tennessee increased by $34,802 for the period ended March 31, 2018 compared to the period ended March 31, 2017. This was related to losses for the IMAC of Tennessee facility in the first quarter of 2018 compared to no losses in the same period in 2017.

 

Other Income (Expense)-IMAC Group

 

Other income (expense) consists of interest expense, interest income, minority interest, non-controlling interest in IMAC Tennessee and loss on disposal of an asset.

 

Total other income (expense) increased for the year ended December 31, 2017 compared to December 31, 2016 by $484,988.

 

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