Registration No. 333-254183
We have granted a 45-day
option to the underwriters, exercisable one or more times in whole or in part, to purchase up to an additional 1,193,750
shares of our common stock from us and 400,000 shares of common stock from our co-founder and chief operating officer as a selling
stockholder to cover over-allotments, at the public offering price, less, in each case, the underwriting discount. The shares
issuable upon exercise of the over-allotment option are identical to those offered by this prospectus and have been registered
under the registration statement of which this prospectus forms a part.
The underwriters expect
to deliver the shares of common stock against payment in New York, New York on or about March 26, 2021.
PROSPECTUS
SUMMARY
This
summary highlights information contained in this prospectus, or incorporated by reference into 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 the information set forth under the section “Risk Factors,”
and our financial statements and the related notes thereto, in each case included in this prospectus or incorporated by reference
into this prospectus. Some of the statements in this prospectus constitute forward-looking statements. See “Cautionary Note
Regarding Forward-Looking Information.”
Unless
the context requires otherwise, the words “we,” “us,” “our,” “our company” and
“IMAC” refer collectively to IMAC Holdings, Inc., a Delaware corporation, and its subsidiaries.
Our
Company
Company
Overview
We
are a growing chain of Innovative Medical Advancements and Care (IMAC) Regeneration Centers, combining life science advancements
with traditional medical care for movement-restricting diseases and conditions. Our mix of medical and physical procedures is
designed to improve patient experiences and outcomes and reduce healthcare costs as compared to other available treatment options.
We own, manage or sublease 16 outpatient clinics that provide regenerative, orthopedic and minimally invasive procedures and therapies.
Our treatments are performed by licensed medical practitioners through our regenerative rehabilitation protocols designed to improve
the physical health, to advance the quality of life and to lessen the pain of our patients. We do not prescribe opioids, but instead
offer an alternative to conventional surgery or joint replacement surgery by delivering minimally invasive medical treatments
to help patients with sports injuries, back pain, knee pain, joint pain, ligament and tendon damage, and other related soft tissue
conditions. Our employees focus on providing exceptional customer service to give our patients a memorable and caring experience.
We believe that we have priced our treatments to be affordable by 95% of the population and are well positioned in the expanding
regenerative medical sector.
Our
licensed healthcare professionals provide each patient a custom treatment plan that integrates innovative regenerative medicine
protocols (representing 16% of our revenue) with traditional, minimally invasive (minimizing skin punctures) medical procedures
(representing 50% of our revenue) in combination with physical therapies (representing 31% of our revenue from physical therapy,
and remaining 3% of our revenue from chiropractic). 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 have successfully treated patients that
were previously addicted to opioids because of joint or soft tissue related pain. Further, our procedures comply with all professional
athletic league drug restriction policies, including the NFL, NBA, NHL and MLB.
Since
May 2016, IMAC has opened seven outpatient medical clinics, acquired nine physical medicine practices and subleased two outpatient
medical clinics for a total of 18 clinics in Kentucky, Missouri, Tennessee, Illinois and Florida. In 2020, we closed two acquired
facilities. We intend to further expand the reach of our facilities to other strategic locations throughout the United States.
In order to enhance our brand, we have partnered with several active and former professional athletes including Ozzie Smith (in
Missouri), David Price (in Tennessee), Tony Delk (in Kentucky) and Mike Ditka (in Chicago). Our brand ambassadors help deliver
awareness to our non-opioid services, emphasizing our ability to treat sports and orthopedic injuries as an alternative to traditional
surgeries for joint repair or replacement.
We
are focused on providing natural, non-opioid solutions to pain as consumers increasingly demand conservative treatments for an
aging population. The demand for our services continues to grow fueled by consumer preferences 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 orthopedic surgeons, pain management clinics and hospital systems
targeting invasive joint reconstruction. Surgical joint replacements cost several times more than our therapies initially treating
the same condition. The U.S. government has recently adopted strict surgery pre-approval initiatives to reduce the Centers for
Medicare & Medicaid Services (“CMS”) costs and limit the proliferation of opioids since they accompany substantially
all joint replacement surgeries.
We
believe patient satisfaction is driven by our five fundamental beliefs:
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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;
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We
believe in the power of doctors, from many different specializations, working together for the best patient care possible;
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We
believe that employees should know patients by their face, not by a chart number;
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We
believe consumers have a choice regardless of physician referral or insurance coverage; and
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We
believe a medical setting should be comforting.
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Matthew
C. Wallis, DC, our Chief Operating Officer, opened the first IMAC Regeneration Center in Paducah, Kentucky in August 2000, which
remains the flagship location of our current business. Jason Brame, DC joined Dr. Wallis in 2008. In 2015, Drs. Wallis and Brame
hired Jeffrey S. Ervin as our Chief Executive Officer to collectively create and implement their growth strategy. The result was
the formal creation of IMAC Holdings, LLC to expand IMAC clinics outside of western Kentucky, with such facilities to remain owned
or operated under the group using the IMAC Regeneration Center name and services. In June 2018, we effected a corporate conversion
in which IMAC Holdings, LLC was converted to IMAC Holdings, Inc. to consolidate ownership of existing clinics and implement our
growth strategy. In February 2019, we completed an initial public offering and our shares commenced trading on the Nasdaq Capital
Market.
Our
Operations
We
currently operate 16 outpatient medical clinics in five 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 for more than 20 years
by Matthew C. 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 our 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 medical clinics and expanded into two new states, Missouri and Tennessee. In 2018, we opened one medical clinic and acquired
four physical therapy clinics. In 2019, we acquired a management company that manages three clinics and entered into a management
agreement to manage a fourth clinic in Illinois. In 2020, we acquired a chiropractic clinic in Florida, acquired a chiropractic
clinic in Missouri and entered into a sublease in Kentucky for a shared space arrangement. During the second half of 2019, we
began the implementation of an updated medical and financial platform in our clinics with full integration of this platform during
2020.
Below
is a list of our outpatient medical clinics and information about how we own or control these medical clinics:
Clinic
Name
|
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Location
of Clinic
|
|
Date
Opened or
Acquired
|
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Form
and
Date of
Control
|
|
Primary
Services Performed
|
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IMAC
Regeneration Center
|
|
Paducah,
Kentucky
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August
2000
|
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Managed
since June 28, 2018
|
|
Regenerative
medicine, medical evaluations with x-ray, fluoroscopic spine, joint and appendage injections, and physical medicine
|
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Ozzie
Smith Center
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Chesterfield,
Missouri
|
|
May
2016
|
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Full
ownership effective June 1, 2018, when remaining 64% interest was acquired
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|
Regenerative
medicine, medical evaluations with x-ray, fluoroscopic spine, joint and appendage injections, and physical medicine
|
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IMAC
Regeneration Center
|
|
Murray,
Kentucky
|
|
February
2017
|
|
Managed
since June 28, 2018
|
|
Medical
evaluations with x-rays, fluoroscopic joint and appendage injections, and physical medicine
|
David
Price Center
|
|
Brentwood,
Tennessee
|
|
May
2017
|
|
Managed
since November 1, 2016
|
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Regenerative
medicine, medical evaluations with x-ray, fluoroscopic spine, joint and appendage injections, and physical medicine
|
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Ozzie
Smith Center
|
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St.
Peters, Missouri
|
|
August
2017
|
|
Full
ownership effective June 1, 2018, when remaining 64% interest was acquired
|
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Medical
evaluations with x-ray, fluoroscopic joint and appendage injections, and physical medicine
|
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David
Price Center
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Murfreesboro,
Tennessee
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|
November
2017
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Managed
since November 2017
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Medical
evaluations with x-ray, fluoroscopic joint and appendage injections, and physical medicine
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Tony
Delk Center
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Lexington,
Kentucky
|
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July
2018
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Managed
since July 2, 2018
|
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Medical
evaluations with x-ray, fluoroscopic joint and appendage injections, and physical medicine
|
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Advantage
Therapy
|
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South
Springfield, Missouri
|
|
August
2018 (originally opened August 2004)
|
|
Full
ownership effective August 1, 2018, when 100% interest was acquired
|
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Regenerative
medicine, medical evaluations with x-ray, fluoroscopic spine, joint and appendage injections, and physical medicine
|
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Advantage
Therapy
|
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North
Springfield, Missouri
|
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August
2018 (originally opened March 2013)
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Full
ownership effective August 1, 2018, when 100% interest was acquired
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Medical
evaluations, joint and appendage injections and physical medicine
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Advantage
Therapy
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Ozark,
Missouri
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August
2018 (originally opened November 2015)
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Full
ownership effective August 1, 2018, when 100% interest was acquired
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Occupational
and physical therapy
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Mike
Ditka Center
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Arlington
Heights, Illinois
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April
2019
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Managed
since April 19, 2019
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Regenerative
medicine, medical evaluations with x-ray, fluoroscopic spine, joint and appendage injections and physical medicine
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Mike
Ditka Center
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Elgin,
Illinois
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April
2019
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Managed
since April 19, 2019
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Medical
evaluations with x-ray, joint and appendage injections and physical medicine
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IMAC
Regeneration Center
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Rockford,
Illinois
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November
2019
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Managed
since November 7, 2019
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Regenerative
medicine, joint and appendage injections and physical medicine
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IMAC
Regeneration Center
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Bonita
Springs, Florida
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January
2020
|
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Full
ownership effective January 13, 2020
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Medical
evaluations, joint and appendage injections and physical medicine
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IMAC
Regeneration Center
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Richmond,
Kentucky
|
|
August
2020
|
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Sublease
arrangement effective August 18, 2020
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Medical
evaluations, joint and appendage injections and physical medicine
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Ozzie
Smith Center
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Webster
Groves, Missouri
|
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November
2020
|
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Full
ownership effective November 16, 2020
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Medical
evaluations, joint and appendage injections and physical medicine
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IMAC
Regeneration Center
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Tampa,
Florida
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February
2021
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Managed
since February 8, 2021
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Medical
evaluations, joint and appendage injections and physical medicine
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IMAC
Regeneration Center
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Orlando,
Florida
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March
2021
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Managed
since March 1, 2021
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Medical
evaluations, joint and appendage injections and physical medicine
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Below
is a description of each of our outpatient medical clinics:
Integrated
Medicine and Chiropractic Regeneration Center PSC. In November 2015, we relocated our Paducah, Kentucky operations
into a 10,200 square foot build-to-suit facility. This facility serves as an anchor clinic for the western Kentucky market of
roughly 50,000 residents. The clinic performs medical evaluations with x-ray, fluoroscopic spine, joint and appendage injections,
regenerative medicine and physical medicine. The lease term ended in December 2020 and is now month to month.
We
opened a 4,700 square foot facility in Murray, Kentucky, a town of nearly 15,000 residents near the Tennessee border. This facility
provides medical evaluations, fluoroscopic joint and appendage injections, and physical medicine and refers patients to Paducah
for regenerative PRP medical procedures. The lease is scheduled to expire in December 2023.
We
entered into a sublease agreement for a facility in Richmond, Kentucky in August 2020. The shared space arrangement allows us
full access to the space twice weekly. This facility provides chiropractic care and will allow collaboration opportunities in
the future.
IMAC
of St. Louis, LLC. In January 2016, IMAC of St. Louis, LLC, doing business as the Ozzie Smith Center, executed a lease
for a 13,300 square foot facility in Chesterfield, Missouri, a suburb 18 miles west of downtown St. Louis. The Ozzie Smith Center
opened in May 2016. The lease agreement runs until August 2026. Dr. Devin Bell, D.O. is the medical director. The clinic performs
medical evaluations with x-ray, fluoroscopic spine, joint and appendage injections, regenerative PRP medicine and physical medicine.
Namesake Ozzie Smith was inducted into the Major League Baseball Hall of Fame in 2002 and replicas of his 13 gold glove trophies
are in the lobby of the clinic.
The
Ozzie Smith Center opened a satellite facility in St. Peters, Missouri to assist with demand from suburbs west of the Missouri
River. The St. Peters clinic opened for business in July 2017. The lease expires in August 2022. The facility operates under the
direction of Dr. Bell and offers patient medical evaluations with x-ray, fluoroscopic joint and appendage injections, and physical
medicine.
The
Ozzie Smith Center acquired the chiropractic clinic of Lockwood Chiropractic in Webster Groves, Missouri, a suburb of St. Louis,
in November 2020. The facility will continue to operate under the direction of Sharon Whalen, DC and gives us the opportunity
to expand medical services to reach prospective patients while expanding into neighboring suburbs.
IMAC
Regeneration Center of Nashville, PC. The David Price Center opened in Brentwood, Tennessee in May 2017. Dr. Rachel Rome,
M.D. is an anesthesiologist and interventional pain management specialist and serves as its medical director. The 7,500 square
foot clinic is leased through July 2024. The clinic performs medical evaluations with x-ray, fluoroscopic spine, joint and appendage
injections, regenerative PRP medicine and physical medicine.
In
November 2017, we opened a 5,500 square foot facility in Murfreesboro, Tennessee, a southeastern suburb of Nashville with more
than 100,000 residents and hometown to David Price. Mr. Price, who was born and raised in middle Tennessee, was the first pick
of the 2007 Major League draft from Vanderbilt University. This facility performs patient medical evaluations with x-ray, fluoroscopic
joint and appendage injections, and physical medicine. We occupy 10% of the building and the lease expires in October 2022.
Tony
Delk Center. In March 2018, we purchased a medical practice building in Lexington, Kentucky, for $1.2 million. The Lexington,
Kentucky clinic was our seventh IMAC outpatient medical clinic, which we named the Tony Delk Center, and opened on July 2, 2018.
This building was sold in June 2020 and we then entered into a lease for the building that expires in July 2025.
Advantage
Therapy. In August 2018, we acquired the physical and occupational therapy provider, Advantage Therapy, which operated
four locations in the Springfield, Missouri metropolitan area. The South Springfield location originally occupied 5,000 square
feet, until it was relocated in September 2019 to a 7,520 square feet location which has a lease that expires in August 2024.
The North Springfield, Monett and Ozark locations function as satellite locations. The North Springfield location functions within
2,400 square feet with a lease that expires in May 2022. The Monett location occupied 2,200 square feet pursuant to a lease that
expired in February 2021. We negotiated with the landlord to exit the lease early and closed the facility in December 2020. The
Ozark location operated in approximately 1,000 square feet, until it was relocated in 2019 to a 2,740 square foot location with
a lease that expires in May 2024. Advantage Therapy is an established business with more than ten years of operations in the Springfield,
Missouri market.
Progressive
Health and ISDI. In April 2019, we acquired the non-medical assets of, and management agreements for, a regenerative medicine
and physical medicine practice operating in three locations in the Chicago, Illinois metropolitan area. The Arlington Heights
location occupies 3,390 square feet and has a lease which expires in July 2023. The Buffalo Grove location occupies 2,850 square
feet and has a lease which expired in July 2020 and was not renewed. The Elgin location occupies 3,880 square feet and has a lease
which expires in October 2023.
Integrative
RehabMedicine, SC. In November 2019, we entered into a management agreement for an occupational and physical therapy practice
in Rockford, Illinois. This location occupies 3,056 square feet and has a lease that expires in July 2023.
Chiropractic
Health of Southwest Florida. In January 2020, we acquired the assets and assumed the building lease liability of Chiropractic
Health of Southwest Florida, Inc. in Bonita Springs, Florida. The building lease expires in December 2024. The acquisition of
this practice expands our presence into a new market where we have extended our service offerings to incorporate medical procedures
to physical therapy, chiropractic care and soft tissue therapies.
Willmitch
Chiropractic, PA. In February 2021, we acquired the assets and assumed the building lease liability of Willmitch Chiropractic,
PA in Tampa, Florida. The building lease expires in June 2024. The acquisition of this practice expands our presence into a major
metropolitan area where we intend to extend our service offerings to incorporate medical procedures and physical therapy to the
existing chiropractic care offerings.
Synergy
Healthcare. In March 2021, we acquired the assets and assumed the building lease liability of NCH Chiropractic d/b/a Synergy
Healthcare in Orlando, Florida. The building lease expires in September 2023. The acquisition of this practice expands our presence
into a major metropolitan area where we have extended our service offerings to incorporate medical procedures to physical therapy,
chiropractic care and soft tissue therapies.
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 minimally invasive, prescription-free treatments
for movement challenges or pain related to orthopedic conditions. The treatments are customized to treat the underlying condition
instead of addressing the challenge with prescriptions or surgeries.
Regenerative
Medicine. Regenerative therapy at IMAC Regeneration Centers utilizes undifferentiated cellular tissue to regenerate damaged
tissue. The majority of our procedures utilize cells from the patient, harvested under minimal manipulation, and applied during
the same visit to the clinic. These autologous cells help to heal degenerative soft tissue conditions, which cause pain or compromise
the patient’s quality of life. Platelet therapies comprise the greatest percentage of regenerative procedures. Independent
studies in this area, including a recent safety and feasibility study published by Dr. Peter B. Fodor, “Adipose Derived
Stromal Cell Injections for Pain Management of Osteoarthritis in the Human Knee Joint” (Aesthetic Surgery Journal, February
2016), have supported claims that autologous cell treatments using adipose and bone marrow lead to improved function and decreased
pain within joints, muscles and connective tissue and can help alleviate osteoarthritis and degenerative disease. We believe that
we have followed the increasingly accepted protocols described in this and other similar studies in connection with our regenerative
therapies.
Physical
Medicine. Our team of medical practitioners start by collaboratively building a personalized physical medicine treatment plan
designed to help patients get back to living the life they deserve.
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 are committed to providing
the most innovative, minimally invasive medical technology and care to relieve back pain and restore function.
Chiropractic
Manipulation. Common for spine conditions, manual manipulation is used to increase range of motion, reduce nerve irritability
and improve function.
Development
of Potential New Treatments. In November 2017, we engaged an independent medical consulting group to advise us on the regenerative
medicine industry and to organize an investigational new drug application (“IND”) with the FDA. In December 2019,
we executed a technology transfer agreement with a research university to license an FDA Phase I approved mesenchymal stem cell
Human Cells, Tissues, and Cellular and Tissue-Based Product (“HCT/P”). We submitted an IND application with the FDA
for this HCT/P in May 2020, and the FDA Office of Tissues and Advanced Therapies authorized the Phase I clinical trial in August
2020, utilizing umbilical cord-derived allogenic mesenchymal stem cells for the treatment of bradykinesia due to Parkinson’s
disease. IMAC physicians were trained to administer HCT/P within IMAC facilities and the FDA approved opening enrollment for the
investigator-initiated trial in November 2020. The first enrollee was treated in December 2020.
The
Phase 1 clinical trial consists of a 15-patient dose escalation safety and tolerability study. The trial is being divided into
three groups: (1) five patients with bradykinesia due to Parkinson’s disease will receive a low dose, (2) five patients
will receive a medium intravenous dose, and (3) five patients will receive a high intravenous dose. Each trial participant will
receive an intravenous infusion of mesenchymal stem cells and be monitored for 12 months for data collection required within the
study. No assurance can be given that the FDA will approve continued trial advancement and we do not intend to advance the HCT/P
to commercialization. Failure to earn FDA approval for the treatment of bradykinesia due to Parkinson’s disease will result
in unfulfilled research expenses but should not have a materially negative effect on our operations or financial condition.
Our
Market Opportunity
Independent
industry research company IBIS World estimated that outpatient rehabilitation in the United States 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 industry research companies, due to the aging baby boomer generation, sustained high rates of obesity
and healthcare reform. We believe that as healthcare insurance providers seek to reduce medical costs and government regulation
restricts access to opioid pain prescriptions, our outpatient services are poised to capture a larger share of healthcare spending.
As the workforce continues to grow, employer-based insurance expenditures will increase. In addition, government spending on Medicare
will continue to be significant.
We
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.
Demand
for minimally invasive movement corrections and non-opioid pain management has surged with the growth of the baby boomer generation.
The U.S. Census estimates that the U.S. population over 65 years of age is projected to more than double from 47.8 million to
nearly 98.2 million persons and the 85 and older population is expected to more than triple, from 6.3 million to 19.7 million
persons, between 2015 and 2060. Additionally, according to the U.S. Census Bureau, the number of older Americans is increasing
as a percentage of the total U.S. population with the number of persons older than 65 estimated to have comprised 14.9% of the
total U.S. population in 2015 and projected to grow to 23.6% by 2060.
This
significant demographic shift is changing healthcare consumption patterns. At the same time, individuals who are not eligible
for Medicare have faced a significant rise in health insurance premiums. As consumers assume the burden of greater healthcare
costs, they are price shopping and considering second opinions from conservative treatment providers like our company.
Despite
ongoing consolidation in the outpatient rehabilitation services industry, the industry remains highly fragmented, which has allowed
many competitors to enter the market. In such an environment, reputable and successful outpatient clinics will be able to grow
through organic expansion and combining services with other providers. While there is significant competition in the industry,
we believe no single participant currently captures more than 10% of the market, which may allow existing market participants
to distinguish themselves from their competitors as they grow. The attractiveness of outpatient facilities to reduce medical costs
has also been seen in other medical areas. Insurer UnitedHealth Group recently purchased surgical care centers and medical practices,
with an apparent aim to reduce hospital spending.
Our
Growth and Expansion Strategy
We
have developed a comprehensive approach and well-defined model for new clinic openings ranging from site selection and staffing
to identification of acquisition targets and their performance metrics. Given current market valuations, we favor growth through
acquisitions of profitable physical medicine centers with a decade or more of operating history in a current location. We believe
these targets can be found with favorable long-term transaction pricing in current or contiguous geographical markets to capitalize
on operational and marketing efficiencies.
The
key elements of our strategy that we believe will continue to propel our growth and expansion are:
Open
New Outpatient Locations and Facilities. We are in the process of identifying new locations at which to lease, develop
or acquire operating practices to transition into new IMAC Regeneration Centers. We anticipate expansion by acquisition of operating
clinics in the Midwest and southern United States within the next 12 months. By branching into states with significant demand
and underserved populations, we anticipate broader brand recognition and early adoption by patients. We anticipate small expansions
within a two hour drive of existing markets will allow us to capitalize on our regional market familiarity and to leverage locally
established administrative infrastructure.
Launch
a Spinal Care and Wellness Clinic. We have substantial experience treating patients with back and neck pain and recognize
the underserved population for such a widely-impacted symptom. We intend to launch and test a retail healthcare concept focused
on treatments for back and neck pain, soft-tissue recovery, muscle tension and spinal wellness while providing chiropractic an
adjustments, nerve and muscle stimulation and percussion tool therapies.
Expand
Our Service Offerings to Employers, Government Programs, and Self-Insured Health Plans. We launched a corporate accounts
division in March 2019 to target employers researching conservative treatment options for their employees. The program is in place
to focus on minimizing employee time away from work due to injuries or occupational hazards and limit use of aggressive orthopedic
treatments and the threat of opioid abuse for employees enrolled in an employer health plan. Since the creation of this group,
we have not only obtained contracts directly with employers, but also achieved designations with federal programs expanding medical
access and service offerings for enrollees. In November 2019, we were accepted as a Veterans Affairs Community Care Network provider
making IMAC a certified medical center for the 20 million enrollees in a Veterans Affairs administered benefit plan. Additionally,
in 2020, most of our clinics achieved network credentialing to treat patients that receive U.S. Department of Labor medical benefits.
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.
Accelerate
Research and Development of New Regenerative Products. We have licensed a FDA Phase I approved stem cell product from
a research university. With this product, we gained FDA authorization to conduct a Phase I clinical trial for the purpose of researching
and developing regenerative medicine products for neurological diseases that restrict movement. We began a low-cost clinical trial
in December 2020 with the goal of identifying innovative treatments to deliver within IMAC Regeneration Centers.
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. Our current marketing
efforts include a combination of local television, digital and event advertising. We have introduced employer marketing initiatives
with help from our celebrity endorsers. 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 rehabilitation techniques are used to prevent arthritis, treat
meniscus tears, defeat muscle deterioration and address other damaged tissue conditions. We will continue offering innovative
therapies and recently approved medical technologies, 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.
Our
Competitive Advantages
The
outpatient physical therapy industry is highly competitive, with thousands of clinics across the country. While some of our competitors
offer regenerative medical treatments as an effective treatment for degenerative health conditions, 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. One of our major competitive advantages is the ability to deliver medical treatments alongside complementary
physical medicine and provide broadly affordable regenerative treatments.
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 insurance 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
Minimally Invasive Approach to Traditional Orthopedic Care. We pay particular attention to rehabilitating our patients’
musculoskeletal system to reduce pain and enhance mobility without major surgery or anesthesia. By combining physical therapy
and regenerative medicine, we are able to treat a variety of physical conditions by using a patient’s own body to help heal
itself.
Our
Strong Regional Presence. We own six and manage nine clinics in five states, providing us significant leverage for implementation
of our marketing strategies and utilization of our staff. We believe we offer a broader platform of regenerative therapies than
our regional competitors.
Addictive
Opioids are Not Prescribed. 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.
Use
of 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 major surgery or prescription
pain medication. This team approach delivers comprehensive service while avoiding the higher costs of major reconstructive surgery
by medical specialists.
Selected
Risks Related to our Business
Our
business is subject to numerous risks, including risks that may prevent us from achieving our business objectives or may adversely
affect our business, financial condition, results of operations, cash flows and prospects that you should consider before making
an investment decision. Below are the principal factors that make an investment in our company speculative or risky. These investment
factors are more fully described in the “Risk Factors” section of this prospectus immediately following this prospectus
summary, as well as in the documents incorporated by reference herein:
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We
operate in an intensely competitive market for healthcare solutions against a number of large, well-known hospital systems
and outpatient medical clinics.
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We
have a limited operating history and we cannot ensure the long-term successful operation of our business.
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We
had net losses of approximately $5.0 million and $6.5 million for the years ended December 31, 2020 and 2019, respectively.
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 and 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.
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Our
business depends on the availability to us of our senior management, who have unique knowledge regarding our IMAC Regeneration
Centers and business contacts that would be extremely difficult to replace, and our business would be materially and adversely
affected if their services were to become unavailable to us.
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Additional
risks and uncertainties not presently known to us or that we currently deem immaterial may also impair our business operations.
You should be able to bear a complete loss of your investment.
Implications
of Being an Emerging Growth Company
As
a company with less than $1.07 billion in revenue during our most recently completed fiscal year, we qualify as an “emerging
growth company” as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). An emerging
growth company may take advantage of specified reduced reporting and other burdens that are otherwise applicable generally to
public companies. These provisions include:
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A
requirement to have 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;
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An
exemption from the auditor attestation requirement on the effectiveness of our internal control over financial reporting under
Section 404(b) of the Sarbanes-Oxley Act of 2002, as amended (the “Sarbanes-Oxley Act”);
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An
extended transition period for complying with new or revised accounting standards;
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Reduced
disclosure about our executive compensation arrangements; and
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No
non-binding advisory votes on executive compensation or golden parachute arrangements.
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We
may take advantage of these provisions from the JOBS Act until the end of the fiscal year in which the fifth anniversary of our
initial public offering, or such earlier time when we no longer qualify as an emerging growth company. We would cease to be an
emerging growth company on the earlier of (i) the last day of the fiscal year (a) in which we have more than $1.07 billion in
annual revenue or (b) in which we have more than $700 million in market value of our capital stock held by non-affiliates, or
(ii) the date on which we issue more than $1.0 billion of non-convertible debt over a three-year period. We may choose to take
advantage of some but not all of these reduced burdens under the JOBS Act. We have irrevocably taken advantage of other reduced
reporting requirements in this prospectus, and we may choose to do so in future filings. To the extent we do, the information
that we provide stockholders may be different than you might get from other public companies in which you hold equity interests.
Corporate
Information
We
were organized as a Kentucky limited liability company in March 2015 and converted into a Delaware corporation in May 2018. 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 make our periodic and current reports
that are filed with the Securities and Exchange Commission (“SEC”) available, free of charge, on our website as soon
as reasonably practicable after such material is electronically filed with, or furnished to, the SEC. Information contained on,
or accessible through, our website is not a part of, and is not incorporated by reference into, this prospectus.
Note
on Covid-19
In
March 2020, federal, state and local government authorities issued orders and guidance in order to combat the spread of the Covid-19
pandemic. These actions have required or encouraged our patients to remain at home except for essential activities and may reduce
patient visits to our clinics. For example, the governor of Kentucky ordered all chiropractic facilities in the state of Kentucky
to close effective March 20, 2020, which caused us to close our Kentucky chiropractic facilities until such order was lifted on
May 4, 2020. The full extent and duration of such actions and their impacts over the longer term remain uncertain and dependent
on future developments that cannot be accurately predicted at this time, such as the severity and transmission rate of the Covid-19
pandemic and the extent and effectiveness of containment actions taken.
Our
response plan has multiple facets and continues to evolve as the pandemic unfolds. As a precautionary measure, we have taken steps
to enhance our operational and financial flexibility to react to the risks the Covid-19 pandemic presents to our business, including
the following:
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Launched
telemedicine communications for remote patient engagement;
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Suspended
operations in three Kentucky clinics to comply with government orders until we were allowed to resume operations on May 4,
2020; and
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Suspended
operations at one clinic in Cook County, Illinois to comply with government orders until such order is lifted. The lease for
this clinic expired on June 30, 2020 and was not renewed.
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The
Covid-19 pandemic appears likely to cause significant economic harm across the United States, and the negative economic conditions
that may result in reduced patient demand in our industry. We may experience a material loss of patients, revenue and market share
as a result of the suspension of any operations. Initiatives to implement telehealth engagement with patients may not be adopted
by existing and new patients. Patient habits may also be altered in the medium to long term. Negative economic conditions, a decrease
in our revenue and consequent longer term trends harmful to our business may all exert pressure on our company during the pendency
of emergency restrictions on our operations and beyond. Due to such conditions, beginning in the month of March 2020, we began
to terminate or furlough employees to reduce costs associated with non-essential personnel, which resulted in a 27% reduction
in workforce. As of December 31, 2020, 98% of our full and part-time workforce had returned to their on-site work locations.
RISK
FACTORS
An
investment in our common stock involves a high degree of risk. You should carefully consider the risk factors contained in our
periodic reports filed with the SEC, including the risks, uncertainties and assumptions discussed in Item 1A. of our Annual Report
on Form 10-K for the year ended December 31, 2020 and in other documents that we subsequently file with the SEC that update, supersede
or supplement such information, which are incorporated by reference into this prospectus. Before deciding to invest in our common
stock, you should carefully consider these risks, as well as the other information we include or incorporate by reference in this
prospectus. See “Where You Can Find More Information” and “Incorporation of Certain Documents by Reference”
of this prospectus.
If
any of the events described in these risk factors actually occurs, or if additional risks and uncertainties that are not presently
known to us or that we currently deem immaterial later materialize, then our business, prospects, results of operations and financial
condition could be materially adversely affected. In that event, 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 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 Information” of this prospectus.
Risks
Related to this Offering and Ownership of Our Common Stock
Our
stock price is volatile and any investment could decline in value.
The
market price of our common stock fluctuates substantially as a result of many factors, some of which are beyond our control. During
the 52-week period prior to March 23, 2021, the market price of our common stock ranged from a low of $0.64 per
share to a high of $4.95 per share and, as of March 23, 2021, was $1.73 per share. These fluctuations could cause
you to lose all or part of the value of your investment in our common stock and/or warrants. Factors that could cause fluctuations
in the market price of our common stock include the following:
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quarterly
variations in our results of operations;
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results
of operations that vary from the expectations of securities analysts and investors;
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results
of operations that vary from those of our competitors;
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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;
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announcements
by us or our competitors of significant contracts, acquisitions or capital commitments;
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announcements
by third parties of significant claims or proceedings against us;
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changes
affecting the availability of financing in the outpatient medical services market;
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regulatory
developments in the outpatient medical clinic business;
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significant
future sales of our common stock;
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additions
or departures of key personnel;
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the
realization of any of the other risk factors presented in this prospectus; and
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general
economic, market and currency factors and conditions unrelated to our performance.
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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.
If
our stock price falls below $1.00 per share, our common stock may be subject to delisting from the Nasdaq Capital Market.
If
the bid price of our common stock were to close below the required minimum $1.00 per share for 30 consecutive business days, we
may receive a deficiency notice from Nasdaq regarding our failure to comply with Nasdaq Marketplace Rule 5550(a)(2). If we receive
such a notice, pursuant to Marketplace Rule 5810(c)(3)(A), we may become subject to a period of 180 calendar days to regain compliance
with Rule 5550(a)(2). If at any time the bid price of our common stock closes at $1.00 per share or more for a minimum of 10 consecutive
business days, we will regain compliance with Rule 5550(a)(2). We received a deficiency notice from Nasdaq in October 2020 when
our stock price was below $1.00 for 30 consecutive days and subsequently received notice that we had regained compliance in November
2020. In the event we do not regain compliance with Rule 5550(a)(2) prior to the expiration of any Nasdaq compliance period, Nasdaq
may notify us that our common stock is subject to delisting. We may appeal such a delisting determination to a Nasdaq hearing
panel and the delisting may be stayed pending the panel’s determination. At such hearing, we would present a plan to regain
compliance and Nasdaq would then subsequently render a decision. We are currently evaluating our alternatives to resolve any listing
deficiency. To the extent that we are unable to resolve a listing deficiency, there is a risk that our common stock may be delisted
from Nasdaq, which would adversely impact liquidity of our common stock and potentially result in even lower bid prices for our
common stock.
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.
Investors
purchasing common stock in this offering will experience immediate dilution.
The
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 $0.96 per share in the pro forma as adjusted net tangible
book value of shares of our common stock, based on the public offering price of $1.60 per share.
To
the extent outstanding stock options, warrants and restricted stock units are ultimately exercised or vested, there will be further
dilution of the common stock sold in this offering. As of March 23, 2021, these stock options, warrants and restricted
stock units represent 2,606,652 additional shares of common stock that may be issued in the future.
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 for shares of our common stock could decline. These sales
may make it more difficult for us to sell equity or equity linked securities in the future at a time and price that we deem appropriate,
or to use equity as consideration for future acquisitions.
We
will have broad discretion as to the use of the proceeds from this offering, and we may not use the proceeds effectively.
Although
we intend to use the net proceeds in the offering to finance our growth strategy, and for working capital and general corporate
purposes, we will have broad discretion as to the application of the net proceeds and could use them for purposes other than those
contemplated at the time of this offering. Our stockholders may not agree with the manner in which our management chooses to allocate
and spend the net proceeds. Moreover, our management could use the net proceeds for corporate purposes that may not necessarily
increase our market value or improve our results of operations.
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 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:
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authorize
the issuance of “blank check” preferred stock that could be issued by our board of directors to help defend against
a takeover attempt;
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establish
advance notice requirements for nominating directors and proposing matters to be voted on by stockholders at stockholder meetings;
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provide
that stockholders are only entitled to call a special meeting upon written request by 331/3% of the
outstanding common stock;
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include
a forum selection clause, which means certain litigation can only be brought in Delaware; and
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require
supermajority stockholder voting to effect certain amendments to our certificate of incorporation and bylaws.
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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.
Our
certificate of incorporation provides that the Court of Chancery of the State of Delaware will be the sole and exclusive forum
for substantially all disputes between us and our stockholders, and federal district courts will be the sole and exclusive forum
for Securities Act claims, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes
with us or our directors, officers, or employees.
Our
certificate of incorporation provides that, unless we consent in writing to the selection of an alternative forum, the Court of
Chancery of the State of Delaware will be the sole and exclusive forum for (i) any derivative action or proceeding brought on
our behalf, (ii) any action asserting a claim of breach of a fiduciary duty owed by our directors, officers or other employees
to us or to our stockholders, (iii) any action asserting a claim arising pursuant to any provision of the Delaware General Corporation
Law, or (iv) any action asserting a claim governed by the internal affairs doctrine, in all cases to the fullest extent permitted
by law and subject to the court having personal jurisdiction over the indispensable parties named as defendants; provided that
these provisions of our certificate of incorporation will not apply to suits brought to enforce a duty or liability created by
the Exchange Act, or any other claim for which the federal courts have exclusive jurisdiction.
Our
certificate of incorporation further provides that the federal district courts of the United States of America will be the exclusive
forum for resolving any complaint asserting a cause of action arising under the Securities Act, unless we consent in writing to
the selection of an alternative forum. We note that investors cannot waive compliance with the federal securities laws and the
rules and regulations thereunder. Section 22 of the Securities Act creates concurrent jurisdiction for federal and state courts
over all suits brought to enforce any duty or liability created by the Securities Act or the rules and regulations thereunder.
The choice of forum provisions may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable
for disputes with us or our current or former directors, officers, or other employees or stockholders, which may discourage such
lawsuits against us and our current or former directors, officers, and other employees or stockholders. Alternatively, if a court
were to find the choice of forum provisions contained in our certificate of incorporation to be inapplicable or unenforceable
in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could harm our
business, financial condition and results of operations.
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 our other stockholders from influencing
significant corporate decisions.
Following
the closing of 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 approximately 10.2% of our outstanding shares of common stock (or 8.1% of our shares if the underwriters’ over-allotment
option is exercised in full). These persons, acting together, are 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 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.
Risks
Related to Our Company, Business and Industry
We
recorded a net loss for the twelve months ended December 31, 2020 and December 31, 2019 and there can be no assurance that our
future operations will result in net income.
For
the years ended December 31, 2020 and December 31, 2019, we had total revenue of $12,835,198 and $15,126,026, respectively, and
we had net losses attributable to IMAC of $(5,003,733) and $(6,497,230), respectively. As of December 31, 2020, we had stockholders’
equity of $7,813,154 and an accumulated deficit of $(15,045,783). As of December 31, 2019, we had stockholders’ equity of
$7,937,292 and an accumulated deficit of $(10,042,050). There can be no assurance that our future operations will result in net
income. Our failure to increase our revenues or improve our gross margins will harm our business. We may not be able to sustain
or increase profitability on a quarterly or annual basis in the future. If our revenues grow more slowly than we anticipate, our
gross margins fail to improve or our operating expenses exceed our expectations, our operating results will suffer. The fee we
charge for our management services may decrease, which would reduce our revenues and harm our business. If we are unable to sell
our services at acceptable prices relative to our costs, or if we fail to develop and introduce new services on a timely basis
and services from which we can derive additional revenues, our financial results will suffer.
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 currently have 16 outpatient clinics primarily opened since 2017.
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:
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raise
sufficient capital through debt and equity raises;
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hire
and retain a number of highly skilled employees, including medical and chiropractic doctors, physical therapists and other
practitioners;
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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;
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secure
and maintain arrangements with third-party payers, sports celebrity endorsers and other service providers, all on terms favorable
or acceptable to our company;
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implement
the other numerous necessary portions of our growth and expansion strategy; and
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attain
profitable operations.
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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 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
have suffered a disruption of the operation of our business as a result of the Covid-19 coronavirus in the United States. Closures
due to government orders or guidance and other related effects of the coronavirus pandemic may cause a material adverse effect
on our business.
In
March 2020, federal, state and local government authorities issued orders and guidance in order to combat the spread of the coronavirus
pandemic. These actions have required or encouraged our patients to remain at home except for essential activities and may reduce
patient visits to our clinics. For example, the governor of Kentucky ordered all chiropractic facilities in the state of Kentucky
to close effective March 20, 2020, which caused us to close our Kentucky chiropractic facilities until such order is lifted. The
full extent and duration of such actions and their impacts over the longer term remain uncertain and dependent on future developments
that cannot be accurately predicted at this time, such as the severity and transmission rate of the coronavirus and the extent
and effectiveness of containment actions taken.
The
coronavirus pandemic appears likely to cause significant economic harm across the United States, and the negative economic conditions
that may result in reduced patient demand in our industry. We may experience a material loss of patients and revenue as a result
of the suspension of any operations. Initiatives to implement telehealth engagement with patients may not be adopted by existing
and new patients. Patient habits may also be altered in the medium to long term. Negative economic conditions, a decrease in our
revenue and consequent longer term trends harmful to our business may all exert pressure on our company during the pendency of
emergency restrictions on our operations and beyond. Due to such conditions, we terminated the employment of 11% of our employees
on March 20, 2020, to reduce costs associated with non-essential personnel.
We
cannot predict with certainty when public health and economic conditions will return to normal. A decline in patient visits and/or
the possible suspension of operations mandated in response to the coronavirus, and the consequent loss of revenue and cash flow
during this period may make it difficult for us to obtain capital necessary to fund our operations.
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.
The
development and operation of our medical clinics will require additional capital, 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 we will continue to have 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.
Additional
equity financing may result in a dilution of the pro rata ownership stake of our stockholders. Further, we may be required to
offer subsequent investors investment terms, such as preferred distributions and voting rights, which are superior to the rights
of existing stockholders, which could have an adverse effect on the value of the investment of our existing stockholders.
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
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.
We
incur substantial start-up expenses for our medical clinics and do not expect to make a profit at any 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. By way of example, 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, stockholders will likely suffer a significant
decline in the value of their investment.
We
may be unable to obtain 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 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 financing
on acceptable terms or in the amount anticipated by our growth and expansion strategy. If unable to secure the amount of 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 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
may seek additional funding through a combination of equity offerings, debt financing, government or third-party funding, commercialization,
marketing and distribution arrangements and other collaborations, strategic alliances and licensing arrangements. Additional funding
may not be available to us on acceptable terms or at all. In addition, the terms of any financing may adversely affect the holdings
or rights of the stockholders. Any new equity securities we issue could have rights, preferences, and privileges superior to those
of holders of our existing capital stock. In addition, the issuance of additional shares by us, or the possibility of such issuance,
may cause the market price of our shares to decline. Any debt financing secured by us in the future could involve restrictive
covenants relating to our capital-raising activities and other financial and operational matter, which may make it more difficult
for us to obtain additional capital and the pursue business opportunities.
If
we are unable to obtain funding on a timely basis, we may be required to significantly curtail one or more of our efforts, our
ability to support our business growth and to respond to business challenges could be significantly limited, and we could be forced
to halt operations. Accordingly, our business may fail, in which case you would lose the entire amount of your investment in our
common stock.
Our
independent registered public accounting firm has indicated that our financial condition raises substantial doubt as to our ability
to continue as a going concern.
Our
financial statements have been prepared assuming that we will continue to operate as a going concern, which contemplates the realization
of assets and the satisfaction of liabilities in the normal course of business. However, our independent registered public accounting
firm has included in its audit opinion for the year ended December 31, 2020 a statement that there is substantial doubt as to
our ability to continue as a going concern as a result of losses and financial condition on December 31, 2020, unless we are able
to obtain additional financing, enter into strategic alliances or sell assets. The reaction of investors to the inclusion of a
going concern statement by our auditors, our current lack of cash resources and our potential inability to continue as a going
concern may adversely affect our share price and our ability to raise new capital or enter into strategic alliances. If we become
unable to obtain additional capital and to continue as a going concern, we may have to liquidate our assets and the values we
receive for our assets in liquidation or dissolution could be significantly lower than the values reflected in our financial statements.
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:
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implement
our growth and expansion strategy;
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recoup
start-up costs;
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operate
profitably;
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maintain
acceptable levels of liquidity;
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obtain
additional financing in the future for working capital, capital expenditures, development and other general business purposes;
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obtain
additional financing on favorable terms; and
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compete
effectively or operate successfully under adverse economic conditions.
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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.
Our
management services agreements may be terminated.
The
management services agreements we have with several of our clinics may be terminated by mutual agreement of us and the applicable
clinic, 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 clinic. The termination of a management services agreement would result
in the termination of payment of management fees from the applicable clinic, which could have an adverse effect on our operating
results and financial condition.
We
do not control the delivery of medical care at any of our facilities.
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.
State
medical boards may amend licensing requirements for medical service providers, service delivery oversight for midlevel practitioners,
and ownership or location requirements for the delivery of medical treatments.
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. Each state medical board controls the level of licensing required for each medical practitioner
and the requirements to obtain such a license to deliver medical care. Furthermore, the state medical board typically determines
the required practitioner oversight for medical practitioners based on their license achieved, earned degrees and continuing education.
The current requirements for these practitioners may change in the future and we run the risk of additional expenses necessary
to meet the state medical board requirements. The state medical board may also determine the location in which services are delivered.
We risk the loss of revenue or retrofitting expense if the state medical board amends location requirements for the delivery of
certain treatments. Similarly, state medical boards may amend ownership or management requirements for the operation of medical
clinics within their respective state. The board may also investigate or dispute the legal establishment of owned or managed medical
clinics. We risk a material loss of ownership of or management control and subsequent fee from medical clinics that are in our
possession or control.
Adverse
medical outcomes are possible with conservative and minimally invasive treatments.
Medical
practitioners performing services at our IMAC facilities run the risk of delivering treatments for which the patient may experience
a poor outcome. This is possible with non-invasive and minimally invasive services alike, including the use of autologous treatments
in which a patient’s own cells are used to regenerate damaged tissues. At our IMAC Regeneration Centers, a minimally invasive
treatment involves puncturing the skin with a needle or a minor incision which could lead to infection, bleeding, pain, nausea,
or other similar results. Non-invasive and conservative physical medicine treatments may possibly cause soft tissue tears, contusions,
heart conditions, stroke, and other physically straining conditions. The treatments or potential clinical research studies may
yield further patient risks. An adverse outcome may include but not be limited to a loss of feeling, chronic pain, long-term disability,
or death. We have obtained medical malpractice coverage in the event an adverse outcome occurs. However, the insurance limits
may be exceeded or liability outside of the coverage may adversely impact the financial performance of the business, including
any potential negative media coverage on patient volume.
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 Brame acting on behalf of the professional service corporation.
No such issues, however, have occurred during this arrangement.
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.
Drs.
Wallis and Brame are significant holders of our outstanding shares of common stock and we anticipate they will continue to own
a significant percentage of our outstanding shares. Dr. Wallis 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 March 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 entered into employment
arrangements with Mr. Ervin and Dr. Wallis, however 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 do not have a key-man life insurance
policy for our benefit on the life of either Mr. Ervin or Dr. Wallis.
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 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, Tennessee and Illinois 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, Tennessee, Illinois
and Florida. 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 FDA, 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.
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, Tennessee, Illinois and Florida. 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.
All of the regenerative, medical, physical therapy and chiropractic treatments performed at our clinics are covered by our malpractice
insurance; however, there is an upper limit to the payout allowable in the event of our malpractice. Poor patient outcomes for
healthcare providers may result in legal actions and/or settlements outside of the scope of our malpractice insurance coverage.
Regenerative medicine represents approximately 2% of our patient visits and 20% of our revenue. Future innovations in regenerative
medicine may require review or approval of such innovations by governmental regulators. During formal research studies performed
in collaboration with regulators, we may be required to obtain new insurance policies and there is no assurance that insurance
policy underwriters will provide coverage for such research initiatives. 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 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.
The
Food and Drug Administration has pursued bad actors in the regenerative medicine therapy industry, and we could be included in
any broad investigation.
The
U.S. Food and Drug Administration has pursued 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.
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. In addition, during the second half of 2019, we began the implementation
of an updated medical and financial platform in our clinics.
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.
During
the normal course of business, we may choose to pursue services with a different third-party vendor or pursue a change in systems
which could result in interruptions and delays in our service and operations as well as loss, misuse, or theft of data. We have
implemented systems and processes to mitigate these risks and, to date, have not experienced a material impact on our services
or systems due to change in systems or third-party. However, this is no assurance that a change in systems or services used by
us or a change in third-party vendors may not have a material impact in the future. 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 operations.
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.
Our
management has identified material weaknesses in our internal controls over our financial reporting.
Our
Chief Executive Officer and Chief Financial Officer carried out an evaluation of the effectiveness of the design and operation
of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act. Based on that evaluation,
our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are not effective
because of certain material weaknesses in our internal control over financial reporting. The material weaknesses relate to the
absence of in-house accounting personnel with the ability to properly account for complex transactions and a lack of separation
of duties between accounting and other functions.
We
hired a consulting firm to advise us on technical issues related to U.S. generally accepted accounting principles as related to
the maintenance of our accounting books and records and the preparation of our consolidated financial statements. Although we
are aware of the risks associated with not having dedicated accounting personnel, we are also at an early stage in the development
of our business. We anticipate expanding our accounting functions with dedicated staff and improving our internal accounting procedures
and separation of duties when we can absorb the costs of such expansion and improvement with additional capital resources. In
the meantime, management will continue to observe and assess our internal accounting function and make necessary improvements
whenever they may be required. If our remedial measures are insufficient to address the material weakness, or if additional material
weaknesses or significant deficiencies in our internal control over financial reporting are discovered or occur in the future,
our consolidated financial statements may contain material misstatements, and we could be required to restate our financial results.
In addition, if we are unable to successfully remediate this material weakness and if we are unable to produce accurate and timely
financial statements, our stock price may be adversely affected and we may be unable to maintain compliance with applicable stock
exchange listing requirements.
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:
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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;
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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”);
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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;
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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
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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 $250 million as of the last business day of our most recently completed second fiscal quarter.
UNDERWRITING
We
and the selling stockholder are offering the shares of common stock described in this prospectus through the underwriters listed
below. Kingswood Capital Markets, division of Benchmark Investments, Inc. (“Kingswood”) is acting as the sole bookrunning
manager of this offering. We have entered into an underwriting agreement with the underwriters. The underwriters named below
have agreed to buy, subject to the terms of the underwriting agreement, the number of shares of common stock listed opposite their
respective name below. The underwriters are committed to purchase and pay for all of the shares if any are purchased, other than
the shares covered by the over-allotment option described below unless and until this option is exercised.
Underwriter
|
|
Total
Number of
Shares
to
be Purchased
|
|
|
Number
of Shares to be Purchased if the Over-Allotment Option is Fully Exercised
|
|
Kingswood
Capital Markets, division of Benchmark Investments, Inc.
|
|
|
10,375,000
|
|
|
|
1,593,750
|
|
R. F. Lafferty &
Co., Inc.
|
|
|
250,000
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
TOTAL
|
|
|
10,625,000
|
|
|
|
1,593,750
|
|
Option
to Purchase Additional Shares
We
and the selling stockholder have granted the underwriters an option exercisable for 45 days after the date of this prospectus
to purchase, from time to time, in whole or in part, up to an aggregate of 1,193,750 shares from us and 400,000 shares
from the selling stockholder at the offering price less underwriting discounts and commissions. To the extent that this option
is exercised, each underwriter will be obligated, subject to certain conditions, to purchase its pro rata portion of these additional
shares based on the underwriter’s percentage underwriting commitment in this offering as indicated in the above table.
Underwriting
Discount
Shares
sold by the underwriters to the public will initially be offered at the initial offering price set forth on the cover of this
prospectus. Any shares sold by the underwriters to securities dealers may be sold at a discount of up to $0.048 per
share from the public offering price. The underwriters may offer the shares through one or more of their affiliates or selling
agents. If all the shares are not sold at the public offering price, Kingswood may change the offering price and the other selling
terms. Upon execution of the underwriting agreement, the underwriters will be obligated to purchase the shares at the prices and
upon the terms stated therein.
The
underwriting discount is equal to the public offering price per share, less the amount paid by the underwriters to us per share.
The underwriting discount was determined through an arm’s-length negotiation between us, the selling stockholder, and the
underwriters. We have agreed to sell the shares of common stock to the underwriters at the offering price of $1.504 per
share, which represents the public offering price of our shares set forth on the cover page of this prospectus less a 6.0% underwriting
discount.
Our
shares of common stock are offered subject to a number of conditions, including:
|
●
|
receipt
and acceptance of our shares of common stock by the underwriters; and
|
|
|
|
|
●
|
the
underwriters’ right to reject orders in whole or in part.
|
We
have been advised by Kingswood that the underwriters intend to make a market in our shares of common stock but that they are not
obligated to do so and may discontinue making a market at any time without notice.
The
following table shows the per share and total underwriting discount to be paid by us to the underwriters in this offering, assuming
both no exercise and full exercise of the over-allotment option.
|
|
|
Us
|
|
|
|
Selling
Stockholder(1)
|
|
|
|
|
No
Exercise
|
|
|
|
Full
Exercise
|
|
|
|
No
Exercise
|
|
|
|
Full
Exercise
|
|
Per
Share
|
|
$
|
0.096
|
|
|
$
|
0.096
|
|
|
$
|
—
|
|
|
$
|
0.096
|
|
Total
|
|
$
|
1,020,000
|
|
|
$
|
1,134,600
|
|
|
$
|
—
|
|
|
$
|
38,400
|
|
(1)
The underwriters have the option to purchase 400,000 shares of common stock from the selling stockholder named in this
prospectus.
We
estimate that the total expenses of this offering, excluding the underwriting discount, will be approximately $200,000. This includes
$100,000 of fees and expenses of the underwriters. In accordance with FINRA Rule 5110, this reimbursement fee described in the
preceding sentence is deemed underwriting compensation for this offering.
We
and the selling stockholder have also agreed to indemnify the underwriters against certain liabilities, including civil liabilities
under the Securities Act or to contribute to payments that the underwriters may be required to make in respect of those liabilities.
Except
as disclosed in this prospectus, the underwriters have not received, and will not receive, from us any other item of compensation
or expense in connection with this offering considered by FINRA to be underwriting compensation under its rule of fair price.
No
Sales of Similar Securities
We
have agreed not to offer, sell, agree to sell, directly or indirectly, or otherwise dispose of any shares of common stock or any securities
convertible into or exchangeable for shares of common stock without the prior written consent of Kingswood for a period of 90 days after
the date of the final prospectus. The underwriting agreement provides limited exceptions and the restrictions may
be waived at any time by Kingswood.
Price
Stabilization, Short Positions and Penalty Bids
To
facilitate this offering, the underwriters may engage in transactions that stabilize, maintain or otherwise affect the price of
our common stock during and after the offering. Specifically, the underwriters may over-allot or otherwise create a short position
in our common stock for their own account by selling more shares of common stock than we have sold to the underwriters. The underwriters
may close out any short position by either exercising their option to purchase additional shares or purchasing shares in the open
market.
In
addition, the underwriters may stabilize or maintain the price of our common stock by bidding for or purchasing shares in the
open market and may impose penalty bids. If penalty bids are imposed, selling concessions allowed to broker- dealers participating
in this offering are reclaimed if shares previously distributed in this offering are repurchased, whether in connection with stabilization
transactions or otherwise. The effect of these transactions may be to stabilize or maintain the market price of our common stock
at a level above that which might otherwise prevail in the open market. The imposition of a penalty bid may also affect the price
of our common stock to the extent that it discourages resales of our common stock. The magnitude or effect of any stabilization
or other transactions is uncertain. These transactions may be effected on the Nasdaq Capital Market or otherwise and, if commenced,
may be discontinued at any time.
In
connection with this offering, the underwriters and selling group members, if any, may also engage in passive market making transactions
in our common stock on the Nasdaq Capital Market. Passive market making consists of displaying bids on the Nasdaq Capital Market
by the prices of independent market makers and effecting purchases limited by those prices in response to order flow. Rule 103
of Regulation M promulgated by the SEC limits the amount of net purchases that each passive market maker may make and the displayed
size of each bid. Passive market making may stabilize the market price of our common stock at a level above that which might otherwise
prevail in the open market and, if commenced, may be discontinued at any time.
Neither
we nor the underwriters make any representation or prediction as to the direction or magnitude of any effect that the transactions
described above may have on the price of our common stock. In addition, neither we nor the underwriters make any representation
that the underwriters will engage in these transactions or that any transaction, if commenced, will not be discontinued without
notice.
Affiliations
The
underwriters and their respective affiliates are full service financial institutions engaged in various activities, which may
include securities trading, commercial and investment banking, financial advisory, investment management, investment research,
principal investment, hedging, financing and brokerage activities. Each of the underwriters may in the future engage in investment
banking and other commercial dealings in the ordinary course of business with us or our affiliates. The underwriters may in the
future receive customary fees and commissions for these transactions.
In
the ordinary course of their various business activities, the underwriters and their respective affiliates may make or hold a
broad array of investments and actively trade debt and equity securities (or related derivative securities) and financial instruments
(including bank loans) for their own account and for the accounts of their customers, and such investment and securities activities
may involve securities and/or instruments of the issuer. The underwriters and respective affiliates may also make investment recommendations
and/or publish or express independent research views in respect of such securities or instruments and may at any time hold, or
recommend to clients that they acquire, long and/or short positions in such securities and instruments.
Electronic
Offer, Sale and Distribution
In
connection with this offering, the underwriters or certain of the securities dealers may distribute prospectuses by electronic
means, such as e-mail. In addition, the underwriters may facilitate Internet distribution for this offering to certain of their
internet subscription customers. The underwriters may allocate a limited number of shares for sale to their online brokerage customers.
An electronic prospectus is available on the Internet websites maintained by any such underwriters. Other than the prospectus
in electronic format, the information on the websites of the underwriters are not part of this prospectus.
Listing
Our
common stock is traded on the Nasdaq Capital Market under the symbol IMAC.
Selling
Restrictions
Canada.
The securities may be sold in Canada only to purchasers purchasing, or deemed to be purchasing, as principal that are accredited
investors, as defined in National Instrument 45 106 Prospectus Exemptions or subsection 73.3(1) of the Securities Act (Ontario),
and are permitted clients, as defined in National Instrument 31 103 Registration Requirements, Exemptions and Ongoing Registrant
Obligations. Any resale of the securities must be made in accordance with an exemption from, or in a transaction not subject
to, the prospectus requirements of applicable securities laws.
Securities
legislation in certain provinces or territories of Canada may provide a purchaser with remedies for rescission or damages if this
prospectus (including any amendment thereto) contains a misrepresentation, provided that the remedies for rescission or damages
are exercised by the purchaser within the time limit prescribed by the securities legislation of the purchaser’s province
or territory. The purchaser should refer to any applicable provisions of the securities legislation of the purchaser’s province
or territory for particulars of these rights or consult with a legal advisor.
Pursuant
to section 3A.3 of National Instrument 33 105 Underwriting Conflicts (NI 33 105), the underwriter is not required to comply
with the disclosure requirements of NI 33 105 regarding underwriter conflicts of interest in connection with this offering.
European
Economic Area. In relation to each Member State of the European Economic Area which has implemented the Prospectus Directive
(each, a “Relevant Member State”) an offer to the public of any shares of our common stock may not be made in that
Relevant Member State, except that an offer to the public in that Relevant Member State of any shares of our common stock may
be made at any time under the following exemptions under the Prospectus Directive, if they have been implemented in that Relevant
Member State:
|
●
|
to
any legal entity which is a qualified investor as defined in the Prospectus Directive;
|
|
|
|
|
●
|
to
fewer than 100 or, if the Relevant Member State has implemented the relevant provision
of the 2010 PD Amending Directive, 150, natural or legal persons (other than qualified
investors as defined in the Prospectus Directive), as permitted under the Prospectus
Directive, subject to obtaining the prior consent of the representatives for any such
offer; or
|
|
|
|
|
●
|
in
any other circumstances falling within Article 3(2) of the Prospectus Directive, provided
that no such offer of shares of our common stock shall result in a requirement for the
publication by us or any underwriter of a prospectus pursuant to Article 3 of the Prospectus
Directive.
|
For
the purposes of this provision, the expression an “offer to the public” in relation to any shares of our common stock
in any Relevant Member State means the communication in any form and by any means of sufficient information on the terms of the
offer and any shares of our common stock to be offered so as to enable an investor to decide to purchase any shares of our common
stock, as the same may be varied in that Member State by any measure implementing the Prospectus Directive in that Member State,
the expression “Prospectus Directive” means Directive 2003/71/EC (and amendments thereto, including the 2010 PD Amending
Directive, to the extent implemented in the Relevant Member State), and includes any relevant implementing measure in the Relevant
Member State, and the expression “2010 PD Amending Directive” means Directive 2010/73/EU.
United
Kingdom. The underwriter has represented and agreed that:
|
●
|
it
has only communicated or caused to be communicated and will only communicate or cause
to be communicated an invitation or inducement to engage in investment activity (within
the meaning of Section 21 of the Financial Services and Markets Act 2000 (the “FSMA”))
received by it in connection with the issue or sale of the shares of our common stock
in circumstances in which Section 21(1) of the FSMA does not apply to us; and
|
|
|
|
|
●
|
it
has complied and will comply with all applicable provisions of the FSMA with respect
to anything done by it in relation to the shares of our common stock in, from or otherwise
involving the United Kingdom.
|
Switzerland.
The shares may not be publicly offered in Switzerland and will not be listed on the SIX Swiss Exchange (the “SIX”)
or on any other stock exchange or regulated trading facility in Switzerland. This document has been prepared without regard to
the disclosure standards for issuance prospectuses under art. 652a or art. 1156 of the Swiss Code of Obligations or the disclosure
standards for listing prospectuses under art. 27 ff. of the SIX Listing Rules or the listing rules of any other stock exchange
or regulated trading facility in Switzerland. Neither this document nor any other offering or marketing material relating to the
shares or the offering may be publicly distributed or otherwise made publicly available in Switzerland.
Neither
this document nor any other offering or marketing material relating to the offering, or the shares have been or will be filed
with or approved by any Swiss regulatory authority. In particular, this document will not be filed with, and the offer of shares
will not be supervised by, the Swiss Financial Market Supervisory Authority FINMA, and the offer of shares has not been and will
not be authorized under the Swiss Federal Act on Collective Investment Schemes (“CISA”). Accordingly, no public distribution,
offering or advertising, as defined in CISA, its implementing ordinances and notices, and no distribution to any non-qualified
investor, as defined in CISA, its implementing ordinances and notices, shall be undertaken in or from Switzerland, and the investor
protection afforded to acquirers of interests in collective investment schemes under CISA does not extend to acquirers of shares.
Australia.
No placement document, prospectus, product disclosure statement or other disclosure document has been lodged with the
Australian Securities and Investments Commission (“ASIC”), in relation to the offering.
This
prospectus does not constitute a prospectus, product disclosure statement or other disclosure document under the Corporations
Act 2001 (the “Corporations Act”), and does not purport to include the information required for a prospectus, product
disclosure statement or other disclosure document under the Corporations Act.
Any
offer in Australia of the shares may only be made to persons (the “Exempt Investors”) who are “sophisticated
investors” (within the meaning of section 708(8) of the Corporations Act), “professional investors” (within
the meaning of section 708(11) of the Corporations Act) or otherwise pursuant to one or more exemptions contained in section 708
of the Corporations Act so that it is lawful to offer the shares without disclosure to investors under Chapter 6D of the Corporations
Act.
The
shares applied for by Exempt Investors in Australia must not be offered for sale in Australia in the period of 12 months after
the date of allotment under the offering, except in circumstances where disclosure to investors under Chapter 6D of the Corporations
Act would not be required pursuant to an exemption under section 708 of the Corporations Act or otherwise or where the offer is
pursuant to a disclosure document which complies with Chapter 6D of the Corporations Act. Any person acquiring shares must observe
such Australian on-sale restrictions.
This
prospectus contains general information only and does not take account of the investment objectives, financial situation or particular
needs of any particular person. It does not contain any securities recommendations or financial product advice. Before making
an investment decision, investors need to consider whether the information in this prospectus is appropriate to their needs, objectives
and circumstances, and, if necessary, seek expert advice on those matters.
Israel.
In the State of Israel this prospectus shall not be regarded as an offer to the public to purchase securities under the
Israeli Securities Law, 5728 - 1968, which requires a prospectus to be published and authorized by the Israel Securities Authority,
if it complies with certain provisions of Section 15 of the Israeli Securities Law, 5728 - 1968, including, inter alia, if: (i)
the offer is made, distributed or directed to not more than 35 investors, subject to certain conditions, or the Addressed Investors;
or (ii) the offer is made, distributed or directed to certain qualified investors defined in the First Addendum of the Israeli
Securities Law, 5728 - 1968, subject to certain conditions, or the Qualified Investors. The Qualified Investors shall not be taken
into account in the count of the Addressed Investors and may be offered to purchase securities in addition to the 35 Addressed
Investors. Our company has not and will not take any action that would require it to publish a prospectus in accordance with and
subject to the Israeli Securities Law, 5728 - 1968. We have not and will not distribute this prospectus or make, distribute or
direct an offer to subscribe for our securities to any person within the State of Israel, other than to Qualified Investors and
up to 35 Addressed Investors.
Qualified
Investors may have to submit written evidence that they meet the definitions set out in of the First Addendum to the Israeli Securities
Law, 5728 - 1968. In particular, we may request, as a condition to be offered securities, that Qualified Investors will each represent,
warrant and certify to us or to anyone acting on our behalf: (i) that it is an investor falling within one of the categories listed
in the First Addendum to the Israeli Securities Law, 5728 - 1968; (ii) which of the categories listed in the First Addendum to
the Israeli Securities Law, 5728 - 1968 regarding Qualified Investors is applicable to it; (iii) that it will abide by all provisions
set forth in the Israeli Securities Law, 5728 - 1968 and the regulations promulgated thereunder in connection with the offer to
be issued securities; (iv) that the securities that it will be issued are, subject to exemptions available under the Israeli Securities
Law, 5728 - 1968: (a) for its own account; (b) for investment purposes only; and (c) not issued with a view to resale within the
State of Israel, other than in accordance with the provisions of the Israeli Securities Law, 5728 - 1968; and (v) that it is willing
to provide further evidence of its Qualified Investor status. Addressed Investors may have to submit written evidence in respect
of their identity and may have to sign and submit a declaration containing, inter alia, the Addressed Investor’s name, address
and passport number or Israeli identification number.