IMAC HOLDINGS, INC. The following discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth previously under the caption "Risk Factors." This Management's Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with our audited consolidated financial statements and related notes included elsewhere in this report.
The results of operations for the periods reflected herein are not necessarily indicative of results that may be expected for future periods.
References in this MD&A to "we," "us," "our," "our company," "our business" and "IMAC Holdings " are toIMAC Holdings, Inc. , aDelaware corporation and prior to the Corporate Conversion (defined below),IMAC Holdings, LLC , aKentucky limited liability company, and the following entities which are consolidated due to direct ownership of a controlling voting interest or other rights granted to us as the sole general partner or managing member of the entity:IMAC Regeneration Center of St. Louis , LLC ("IMAC St. Louis"),IMAC Management Services, LLC ("IMAC Management"),IMAC Regeneration Management, LLC ("IMAC Texas")IMAC Regeneration Management ofNashville, LLC ("IMAC Nashville")IMAC Management of Illinois, LLC ("IMAC Illinois"),Advantage Hand Therapy and Orthopedic Rehabilitation, LLC ("Advantage Therapy"),IMAC Management of Florida, LLC ("IMAC Florida"), Louisiana Orthopaedic & Sports Rehab ("IMAC Louisiana") andThe Back Space, LLC ("BackSpace"); the following entity which is consolidated with IMAC Regeneration Management ofNashville, LLC due to control by contract:IMAC Regeneration Center of Nashville , PC ("IMAC Nashville PC"); the following entities which are consolidated withIMAC Management of Illinois, LLC due to control by contract:Progressive Health and Rehabilitation, Ltd. ,Illinois Spine and Disc Institute, Ltd. andRicardo Knight, P.C. ; the following entities which are consolidated withIMAC Management Services, LLC due to control by contract: Integrated Medicine and Chiropractic Regeneration Center PSC (Kentucky PC) and IMAC Medical ofKentucky , PSC (Kentucky PSC) ; the following entities which are consolidated with IMAC Florida due to control by contract:Willmitch Chiropractic, P.A . andIMAC Medical of Florida, P.A .; the following entity which is consolidated with Louisiana Orthopaedic & Sports Rehab due to control by contract: IMAC Medical ofLouisiana , aMedical Corporation ; and the following entities which are consolidated with BackSpace due to control by contract:ChiroMart LLC ,ChiroMart Florida LLC , andChiroMart Missouri LLC . Overview We are a provider of movement and orthopedic therapies and minimally invasive procedures performed through our regenerative and rehabilitative medical treatments to improve the physical health of our patients at our chain ofIMAC Regeneration Centers and BackSpace clinics which we own or manage. Our outpatient medical clinics provide conservative, minimally invasive medical treatments to help patients with back pain, knee pain, joint pain, ligament and tendon damage, and other related soft tissue conditions. Our licensed healthcare professionals evaluate each patient and provide a custom treatment plan that integrates traditional medical procedures and innovative regenerative medicine procedures in combination with physical medicine. We do not use or offer opioid-based prescriptions as part of our treatment options in order to help our patients avoid the dangers of opioid abuse and addiction. The originalIMAC Regeneration Center opened inKentucky inAugust 2000 and remains the flagship location of our current business, which was formally organized inMarch 2015 . As ofDecember 31, 2022 , we have ten outpatient medical clinics inFlorida ,Illinois ,Kentucky ,Louisiana andMissouri . We have partnered with former professional athletes in the branding of our IMAC Regeneration Centers. Our outpatient medical clinics emphasize our focus around treating sports and orthopedic injuries as an alternative to traditional surgeries for repair or joint replacement. As ofDecember 31, 2022 ,The BackSpace, LLC had opened ten retail clinic locations inFlorida ,Missouri andTennessee . The BackSpace operated healthcare centers specializing in chiropractic and spinal care services inside Walmart retail locations. Given the Company's current financial position, during the first quarter of 2023 the Company decided to close four underperforming locations and in addition sold its Louisiana Orthopedic practice as well asThe BackSpace, LLC operations in an effort to raise sufficient capital to support on-going operations. Management has been actively exploring various strategic alternatives in an effort to support operations in 2023 and beyond. We own our medical clinics directly or have entered into long-term management services agreements to operate and control certain of our medical clinics by contract. Our preference is to own the clinics; however, some state laws restrict the corporate practice of medicine and require a licensed medical practitioner to own the clinic. Accordingly, our managed clinics are owned exclusively by a medical professional within a professional service corporation (formed as a limited liability company or corporation) and are under common control with us in order to comply with state laws regulating the ownership of medical practices. We are compensated under management services agreements through service fees based on the cost of the services provided, plus a specified markup percentage, and a discretionary annual bonus determined in the sole discretion of each professional service corporation. 44 Significant financial metrics
Our significant financial metrics of the Company for the year ended
? Net loss of
? Adjusted EBITDA1 of (
compared to (
? The Company incurred
? Operating expenses increased
impairment loss on intangible assets and goodwill and
incremental salary expense from the additional BackSpace clinics opened
between
to our
? The Company had one-time expenses of
to the Company's intangible assets and goodwill.
(1) Adjusted EBITDA is a non-GAAP financial measure most closely comparable to
the GAAP measure of net loss. See "Reconciliation of Non-GAAP Financial
Matters" below for a full reconciliation of the GAAP and non-GAAP measures.
45
Matters that May or Are Currently Affecting Our Business
We believe that the growth of our business and our future success depend on various opportunities, challenges, trends and other factors, including the following:
? Our ability to identify, contract with, install equipment and operate a large
number of outpatient medical clinics and attract new patients to them;
? Our need to hire additional healthcare professionals in order to operate the
large number of clinics we intend to open;
? Our ability to enhance revenue at each facility on an ongoing basis through
additional patient volume and new services;
? Our ability to obtain additional financing for the projected costs associated
with the acquisition, management and development of new clinics, and the
personnel involved, if and when needed;
? Our ability to attract competent, skilled medical and sales personnel for our
operations at acceptable prices to manage our overhead; and
? Our ability to control our operating expenses as we expand our organization
into neighboring states.
On March 20, 2023 , we announced an executed letter of intent for a strategic
merger-of-equals with Brain Scientific, Inc. (OTCQB:BRSFD), a Florida -based
applied science technology company. Together, the companies will provide
patients with true end-to-end neurological solutions using Brain Scientific's
diagnostic and motion technologies and IMAC's regenerative rehabilitation
medical services. Hassan Kotob , Chief Executive Officer of Brain Scientific, is
expected to serve as Chairman and CEO of the combined company. The details
related to this merger-of-equals are still being negotiated and have not been
finalized.
The Company believes, although there can be no assurance, that, when reported,
the revenues and net earnings for the year ended December 2023 of the combined
Companies will exceed those reported for 2022. Consummation of the transactions
contemplated by the letter of intent (collectively, the "Brain Scientific
Acquisition") is subject to the execution and delivery of a definitive Share and
Asset Purchase Agreement and the satisfaction of the closing conditions which
will be contained therein. It is contemplated that the Brain Scientific
Acquisition will be consummated in 2023, but there can be no assurance that a
definitive Share and Asset Purchase Agreement will be entered into, or that the
Brain Scientific Acquisition will be consummated upon the terms set forth in the
letter of intent or otherwise. Additionally, there will be a number of risks
attendant upon the Brain Scientific Acquisition. See "Risk Factors - Risks
Related to the Brain Scientific Acquisition", "Management's Discussion and
Analysis of Financial Condition and Results of Operations - The Brain Scientific
Acquisition" and "Business - Brain Scientific Acquisitions".
Critical Accounting Policies and Estimates
The preparation of consolidated financial statements in conformity with accounting principles generally accepted inthe United States requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses at the date and for the periods that the consolidated financial statements are prepared. On an ongoing basis, we evaluate our estimates, including those related to insurance adjustments and provisions for doubtful accounts, useful lives of intangibles, property and equipment, and valuation of goodwill. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. Actual results could materially differ from those estimates. We believe that, of the significant accounting policies discussed in our Notes to the Consolidated Financial Statements, the following accounting policies require our most difficult, subjective or complex judgments in the preparation of our financial statements. 46 Intangible Assets The Company capitalizes the fair value of intangible assets acquired in business combinations. Intangible assets are amortized on a straight-line basis over their estimated economic useful lives, generally the contract term. The Company performs valuations of assets acquired and liabilities assumed on each acquisition accounted for as a business combination and allocates the purchase price of each acquired business to its respective net tangible and intangible assets. Acquired intangible assets include trade names, non-compete agreements, customer relationships and contractual agreements. Intangible assets are subject to annual impairment tests. An impairment loss of$3.8 million was recorded inSeptember 2022 related to ourIllinois andKentucky acquisitions.
Our goodwill represents the excess of the purchase price over the fair value of the net identifiable assets acquired in business combinations. The goodwill generated from the business combinations is primarily related to the value placed on the employee workforce and expected synergies. Judgment is involved in determining if an indicator or change in circumstances relating to impairment has occurred. Such changes may include, among others, a significant decline in expected future cash flows, a significant adverse change in the business climate, and unforeseen competition. The goodwill test is performed at least annually, or more frequently if events or changes in circumstances indicate that the asset might be impaired. The annual impairment test includes an option to perform a qualitative assessment of whether it is more likely than not that a reporting unit's fair value is less than its carrying value; the qualitative test may be performed prior to, or as an alternative to, performing a quantitative goodwill impairment test. If, after assessing the totality of events or circumstances, the Company determines that it is more likely than not that the fair value of a reporting unit is less than its carrying value, then the Company is required to perform the quantitative goodwill impairment test. Otherwise, no further analysis is required. A goodwill impairment loss of$4.5 million was recorded inDecember 2022 related to ourFlorida ,Tennessee ,Missouri andLouisiana acquisitions. Revenue Recognition
The Company's patient service revenue is derived from non-surgical procedures performed at our outpatient medical clinics. The fees for such services are billed either to the patient or a third-party payer, including Medicare.
The Company recognizes service revenues based upon the estimated amounts the Company expects to be entitled to receive from patients and third-party payers. Estimates of contractual adjustments are based upon the payment terms specified in the related contractual agreements. The Company also records estimated implicit price concessions (based primarily on historical collection experience) related to uninsured accounts to record these revenues at the estimated amounts expected to be collected. Starting inJanuary 2020 , the Company implemented wellness maintenance programs on a subscription basis. There are currently four membership plans offered with different levels of service for each plan. The Company recognizes membership revenue on a monthly basis. Enrollment in the wellness maintenance program can occur at any time during the month and can be dis-enrolled at any time. Starting inJune 2021 , the Company introduced BackSpace and began offering outpatient chiropractic and spinal care services as well as memberships services in Walmart retail locations. The fees for such services are paid and recognized as incurred. 47 Starting inSeptember 2022 , the Company introduced hormone replacement therapy "HRT" and medical weight loss programs. The Company recognizes HRT and medical weight loss revenue as the services are provided. Other management service fees are derived from management services where the Company provides billings and collections support to the clinics and where management services are provided based on state specific regulations known as the corporate practice of medicine ("CPM"). Under the CPM, a business corporation is precluded from practicing medicine or employing a physician to provide professional medical services. In these circumstances, the Company provides all administrative support to the physician-owned PC through a LLC. The PC is consolidated due to control by contract (an "MSA" - Management Services Agreement). The fees we derive from these management arrangements are either based on a predetermined percentage of the revenue of each clinic or a percentage mark up on the costs of the LLC. The company recognizes other management service revenue in the period in which services are rendered. These revenues are earned by IMAC Nashville, IMAC Management, IMAC Illinois,IMAC Florida , IMAC Louisiana and the Back Space and are eliminated in consolidation to the extent owned. Accounts Receivable Accounts receivable primarily consists of amounts due from third-party payers (non-governmental), governmental payers and private pay patients and is recorded net of allowances for doubtful accounts and contractual discounts. Our ability to collect outstanding receivables is critical to our results of operations and cash flows. Accordingly, accounts receivable reported in our consolidated financial statements are recorded at the net amount expected to be received. Our primary collection risks are (i) the risk of overestimation of net revenues at the time of billing that may result in our receiving less than the recorded receivable, (ii) the risk of non-payment as a result of commercial insurance companies' denial of claims, (iii) the risk that patients will fail to remit insurance payments to us when the commercial insurance company pays out-of-network claims directly to the patient, (iv) resource and capacity constraints that may prevent us from handling the volume of billing and collection issues in a timely manner, (v) the risk that patients do not pay us for their self-pay balances (including co-pays, deductibles and any portion of the claim not covered by insurance), and (vi) the risk of non-payment from uninsured patients. Our accounts receivable from third-party payers are recorded net of estimated contractual adjustments and allowances from third-party payers, which are estimated based on the historical trend of our facilities' cash collections and contractual write-offs, accounts receivable aging, established fee schedules, relationships with payers and procedure statistics. While changes in estimated reimbursement from third-party payers remain a possibility, we expect that any such changes would be minimal and, therefore, would not have a material effect on our financial condition or results of operations. Our collection policies and procedures are based on the type of payor, size of claim and estimated collection percentage for each patient account. The operating systems used to manage our patient accounts provide for an aging schedule in 30-day increments, by payer, physician and patient. We analyze accounts receivable at each of the facilities to ensure the proper collection and aged category. The operating systems generate reports that assist in the collection efforts by prioritizing patient accounts. Collection efforts include direct contact with insurance carriers or patients and written correspondence. Income Taxes Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis and operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Deferred tax assets are required to be reduced by a valuation allowance to the extent that, based on the weight of available evidence, it is more likely than not that the deferred tax assets will not be realized. These are based on estimates of future taxable income which are highly subjective and subject
to changes. 48
Results of Operations for the Twelve Months Ended
We own our medical clinics directly or have entered into long-term management services agreements to operate and control these medical clinics by contract. Our preference is to own the clinics; however, some state laws restrict the corporate practice of medicine and require a licensed medical practitioner to own the clinic. Accordingly, our managed clinics are owned exclusively by a medical professional within a professional service corporation (formed as a limited liability company or corporation) under common control with us or eligible members of our company in order to comply with state laws regulating the ownership of medical practices. We are compensated under management services agreements through service fees based on the cost of the services provided, plus a specified markup percentage, and a discretionary annual bonus determined in the sole discretion of each professional service corporation. See Note 15 for previously reported financial information that has been revised. Revenues
Our revenue mix is diversified between medical treatments and physiological treatments. Our medical treatments are further segmented into traditional medical and regenerative medicine practices. We are an in-network provider for traditional physical medical treatments, such as physical therapy, chiropractic services and medical evaluations, with most private health insurance carriers. Regenerative medical treatments are typically not covered by insurance, but paid by the patient. For more information on our revenue recognition policies, see "Critical Accounting Policies and Estimates - Revenue Recognition."
Revenues for the years ended
Year Ended
December 31,
2022 2021
(in thousands)
Revenues:
Outpatient facility services $ 14,824 $ 13,475
Memberships 684 656
Retail clinics 678 33
Total revenues $ 16,186 $ 14,164
49
See the table below for more information regarding our revenue breakdown by
service type.
Year Ended December 31,
2022 2021
Revenues:
Medical treatments 71.9 % 67.0 %
Physical therapy 22.1 % 28.1 %
Chiropractic care 4.8 % 2.8 %
Memberships 1.3 % 2.1 %
100 % 100 %
Visits to our clinics are an indication of business activity. The following
table is a breakdown of visits by type for the year ended December 31, 2022 and
2021.
Year Ended December 31,
2022 2021
Visits:
Physical therapy 35,342 56,261
Chiropractic care 26,998 20,265
Medical treatments 39,916 39,036
Other 3,552 262
Membership 48,029 52,684
153,837 168,508
50
Consolidated Results
Total revenues increased
IMAC Clinics
The revenue increase attributed to
Retail Clinics
The Company began opening retail clinics in Walmart inJune 2021 and as ofDecember 31, 2022 had ten clinics opened inFlorida ,Tennessee andMissouri . The retail clinics provides outpatient chiropractic and spinal care services. The revenue increase attributed to these retail clinics was$678,000 of which$367,000 was from new clinics opened in 2022. Memberships A wellness membership program was implemented atIMAC Clinics inJanuary 2020 and this wellness program has different plan levels that include services for chiropractic care and medical treatments on a monthly subscription basis. Therefore, memberships could have multiple visits in one month, however only one payment is received for these visits.IMAC Clinics had 1,089 and 1,189 active members for the years ended inDecember 31, 2022 and 2021, respectively. BackSpace also has a membership plan for chiropractic care on a monthly subscription basis. As ofDecember 31, 2022 , 85% of the BackSpace revenue was related to memberships. Operating Expenses
Operating expenses consist of patient expenses, salaries and benefits, share based compensation, advertising and marketing, general and administrative expenses and depreciation expenses.
Patient expenses consist of medical supplies for services rendered.
Percent
Change from Change from
Patient Expenses 2022 2021 Prior Year Prior Year
Year Ended December 31 $ 1,508,000 $ 1,628,000 $ (120,000 ) (7.4 )%
Cost of revenues (patient expense) decreased for the year ended December 31,
2022 as compared to December 31, 2021 although patient revenue increased 14%.
The rotation of service mix also reduced supply costs, for example cell therapy
visits which is a higher cost procedure.
Salaries and benefits consist of payroll, benefits and related party contracts.
Percent
Change from Change from
Salaries and Benefits 2022 2021 Prior Year Prior Year
Year Ended December 31 $ 14,517,000 $ 13,310,000 $ 1,207,000 9.1 %
Salaries and benefits expenses for the year ended December 31, 2022 , as compared
to the year ended December 31, 2021 , increased by 9.1%. An increase would have
been expected considering the Company added six BackSpace locations during the
first quarter of 2022. These new BackSpace clinics attributed to $1.3 million of
the increase. The Louisiana market was acquired October 2021 and contributed an
additional $2.2 million in salaries for the year ended December 31, 2022 as
compared to year ended December 31, 2021 . The same store IMAC clinics had a
decrease of $2.1 million in salaries for the year ended December 31, 2022 as
compared to year ended December 31, 2021 .
51
Advertising and marketing consist of marketing, business promotion and brand
recognition.
Percent
Change from Change from
Advertising and Marketing 2022 2021 Prior Year Prior Year
Year Ended December 31 $ 1,100,000 $ 1,325,000 $ (255,000 ) (17.0 %)
Advertising and marketing expenses decreased $255,000 for the year ended
December 31, 2022 , as compared to the year ended December 31, 2021 . Endorsements
were the majority of the decrease as the decision was made to end select
endorsement deals in addition to the ones that ended with the closure or sale of
clinics.
General and administrative expense ("G&A") consist of all other costs than
advertising and marketing, salaries and benefits, patient expenses and
depreciation.
Percent
Change from Change from
General and Administrative 2022 2021 Prior Year Prior Year
Year Ended December 31 $ 7,188,000 $ 6,423,000 $ 765,000 11.9 %
G&A increased in the year ended December 31, 2022 as compared to the year ended
December 31, 2021 . Bad Debt expense increased $135,000 year over year. Insurance
increased $188,000 due to the increase in equipment and employees. Rent and
Utilities increased $394,000 due to the IMAC and BackSpace clinics that were
added in 2021.
52
FDA Clinical Trial
InAugust 2020 , theUnited States Food and Drug Administration (the "FDA") approved the Company's investigational new drug application. The Company has begun Phase 1 of the clinical trial, which will be conducted over a 12-month period. The Company incurred$360,000 in expenses related to consultants, supplies, software and travel for the clinical trial during 2022, which is included in the G&A totals above. This is compared to$574,000 that was incurred for the trial in 2021. Depreciation is related to our property and equipment purchases to use in the course of our business activities. Amortization is related to our business acquisitions. Percent Change from Change from
Depreciation and Amortization 2022 2021 Prior
Year Prior Year
Year Ended December 31$ 1,627,000 $ 1,649,000 $ (22,000 ) (1.3 )%
Depreciation and amortization stayed relatively the same for the year ended
Analysis of Cash Flows
The primary source of our operating cash flow is the collection of accounts receivable from patients, private insurance companies, government programs, self-insured employers and other payers.
During the year endedDecember 31, 2022 , net cash used in operations increased to$10.3 million compared to$7.6 million for the year endedDecember 31, 2021 . This increase was primarily attributable to our net loss .
Net cash used in investing activities during the years ended
Net cash provided by financing activities during the year endedDecember 31, 2022 was$4.2 million , which was primarily proceeds from the sale of common stock, net of related fees, which totaled$4.4 million , reduced by principal repayments of$0.3 million . Net cash provided by financing activities during the year endedDecember 31, 2021 was$14.5 million , including proceeds from the sale of common stock, net of related fees, which totaled$20.2 million , reduced by principal repayments of$4.4 million . 53
Reconciliation of Non-GAAP Financial Measures
This report contains certain non-GAAP financial measures, including non-GAAP net income and adjusted EBITDA, which are used by management in analyzing our financial results and ongoing operational performance.
In order to better assess the Company's financial results, management believes
that net income before interest, income taxes, stock based compensation, and
depreciation and amortization ("adjusted EBITDA") is a useful measure for
evaluating the operating performance of the Company because adjusted EBITDA
reflects net income adjusted for certain non-cash and/or non-operating items. We
also believe that adjusted EBITDA is useful to many investors to assess the
Company's ongoing results from current operations. Adjusted EBITDA is a non-GAAP
financial measure and should not be considered a measure of financial
performance under GAAP. Because adjusted EBITDA is not a measurement determined
in accordance with GAAP, such non-GAAP financial measures are susceptible to
varying calculations. Accordingly, adjusted EBITDA, as presented, may not be
comparable to other similarly titled measures of other companies.
This non-GAAP financial measure should not be considered as a substitute for, or
superior to, measures of financial performance which are prepared in accordance
with US GAAP and may be different from non-GAAP financial measures used by other
companies and have limitations as analytical tools.
A reconciliation of adjusted EBITDA to the most directly comparable GAAP measures is set forth below.
2022 2021
GAAP loss attributable to IMAC Holdings, Inc. $ (18,313,000 ) $ (10,542,000 )
Interest income (11,000 ) (3,000 )
Interest expense 14,000 504,000
Share-based compensation expense 445,000 571,000
Loss on disposal of assets - 149,000
Loss on impairment 8,432,000 -
Depreciation and amortization 1,627,000 1,649,000
Adjusted EBITDA $ (7,806,000 ) $ (7,672,000 )
54
Liquidity and Capital Resources
As ofDecember 31, 2022 , we had$0.8 million in cash and working capital of$0.5 million . As ofDecember 31, 2021 , we had cash of$7.1 million and working capital of$4.1 million . The decrease in working capital was primarily due to a$6.4 million decrease in cash, a$1.7 million increase in accounts receivable and a$1.2 million decrease in current liabilities. As ofDecember 31, 2022 , we had approximately$3.7 million in current liabilities. Approximately$1.7 million of our current liabilities outstanding were to our vendors, which we have historically paid down in the normal course of our business and accrued payroll. Patient deposits accounted for approximately$242,000 of our current liabilities. The current portion of notes payable by us accounted for approximately$52,000 of our current liabilities. The current portion of our finance lease obligations accounted for approximately$20,000 of our current liabilities. The current portion of our liability to issue common stock accounted for approximately$330,000 of our current liabilities. The current portion of our operating lease liability accounted for approximately$1.4 million of our current liabilities. As ofDecember 31, 2022 , we had an accumulated deficit of$46.5 million . We anticipate that we will need to raise additional capital to fund future operations. However, we may be unable to raise additional funds or enter into such arrangements when needed or favorable terms, or at all, which would have a negative impact on our financial condition and could force us to delay, limit, reduce or terminate our development or acquisition activity. Failure to receive additional funding could also cause us to cease operations, in part or in full. Furthermore, even if we believe we have sufficient funds for our current of future operating plans, we may seek additional capital due to favorable market conditions or strategic considerations. Our management team has determined that our financial condition raises substantial doubt as to our ability to continue as a going concern. 55 Iliad Note OnOctober 29, 2020 , the Company entered into the Note Purchase Agreement with Iliad pursuant to which the Company agreed to issue and sell to Iliad a secured promissory note in an initial principal amount of$2,690,000 , which is payable on or beforeApril 29, 2022 . The October Principal Amount includes an original discount of$175,000 and$15,000 that the Company agreed to pay to Iliad to cover legal fees, accounting costs, due diligence and other transaction costs. In exchange for the October Note, Iliad paid a purchase price of$2,500,000 . The October Purchase Agreement also provides for indemnification of Iliad and its affiliates in the event that they incur loss or damage related to, amount other things, breach by the Company of any of its representations, warranties or covenants under the October Purchase Agreement. In connection with the October Purchase Agreement and the October Note, the Company entered into a Security Agreement with Iliad, pursuant to which the obligations of the Company is secured by all of the assets of the Company, excluding the Company's accounts receivable and intellectual property. Upon an event of default under the October Note, the October Security Agreement entitles the Holder to take possession of such collateral; provided that Iliad's security interest and remedies with respect to the collateral are junior in priority to the security interest previously granted by the Company to Iliad in connection with a separate financing entered into by them onMarch 25, 2020 , for which Iliad holds a senior, first-priority security interest in the same collateral. The Company repaid the note inJanuary 2022 . Public Offering OnMarch 26, 2021 , the Company completed a public offering by issuing 10,625,000 shares of common stock for gross proceeds of$17 million . The Company used approximately$1.8 million for the repayment of certain indebtedness and is using the remaining proceeds for the repayment of certain other indebtedness, to finance the costs of developing and acquiring additional outpatient medical clinics and healthcare centers as part of the Company's growth and expansion strategy and for working capital. OnApril 7, 2021 the Company closed on the sale of an additional 1,193,750 shares of common stock at the then public offering price of$1.60 per share, pursuant to the 15% over-allotment option exercised in full by the underwriters in connection with its public offering that closedMarch 2021 . OnAugust 16, 2022 , the Company entered into a securities purchase agreement (the "Securities Purchase Agreement") with institutional accredited investors (the "Purchasers") pursuant to which the Company offered for sale to the Purchasers an aggregate of 5,164,474 shares (the "Shares") of its common stock at a purchase price of$0.76 , in a registered direct offering (the "Registered Direct Offering"). In a concurrent private placement, the Company also agreed to issue to the investors Series 1 warrants to purchase 5,164,474 shares of common stock that will become exercisable on the date that is six months following the date of issuance of the shares of common stock in the Registered Direct Offering (the "Exercise Date") and expire on the five year anniversary of the Exercise Date, at an exercise price of$0.95 per share, and Series 2 warrants to purchase 5,164,474 shares of common stock that will become exercisable on the Exercise Date and expire on the one year anniversary of the Exercise Date, at an exercise price of$0.95 per share. The Shares were offered by the Company pursuant to its shelf registration statement on Form S-3 (File No. 333-237455) originally filed with theSEC onMarch 27, 2020 (as amended, the "Registration Statement"), which was declared effective onApril 3, 2020 . The Company received gross proceeds of both transactions of$3.9 million . The Company intends to use the net proceeds from this offering for working capital and other general corporate purposes, including financing the costs of implementing the Company's strategic alternative activities. 56 Contractual Obligations The following table summarizes our contractual obligations by period as ofDecember 31, 2022 : Payments Due by Period Less Than Total 1 Year 1-3 Years 4-5 Years Short-term obligations$ 55,528 $ 55,528 $ - $ - Long-term obligations, including interest 55,971 - 55,971 - Finance lease obligations, including interest 31,809 21,806 10,003 - Operating lease obligations, including interest 4,432,675 1,545,103 2,668,498 219,074$ 4,575,983 $ 1,622,437 $ 2,734,472 $ 219,074 Impact of Inflation We believe that inflation had a material impact on our results of operations for the years endedDecember 31, 2022 . Inflation was evident in staffing and supply costs related to the delivery of patient care. We cannot assure you that future inflation will not have an adverse impact on our operating results and financial condition.
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