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

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


References in this MD&A to "we," "us," "our," "our company," "our business" and
"IMAC Holdings" are to IMAC Holdings, Inc., a Delaware corporation and prior to
the Corporate Conversion (defined below), IMAC Holdings, LLC, a Kentucky limited
liability company, and the following entities which are consolidated due to
direct ownership of a controlling voting interest or other rights granted to us
as the sole general partner or managing member of the entity: IMAC Management
Services, LLC ("IMAC Management"), IMAC Regeneration Management, LLC ("IMAC
Texas") IMAC Regeneration Management of Nashville, LLC ("IMAC Nashville") IMAC
Management of Illinois, LLC ("IMAC Illinois") and IMAC Management of Florida,
LLC ("IMAC Florida"); the following entity which is consolidated with IMAC
Regeneration Management of Nashville, LLC due to control by contract: IMAC
Regeneration Center of Nashville, PC ("IMAC Nashville PC"); and the following
which prior to June 1, 2018 was held as a minority interest, IMAC Regeneration
Center of St. Louis, LLC ("IMAC St. Louis").



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 fast-growing
chain of IMAC Regeneration Centers which we own or manage. Our outpatient
medical clinics provide conservative, minimally invasive medical treatments to
help patients with back pain, knee pain, joint pain, ligament and tendon damage,
and other related soft tissue conditions. Our licensed healthcare professionals
evaluate each patient and provide a custom treatment plan that integrates
traditional medical procedures and innovative regenerative medicine procedures
in combination with physical medicine. We do not use or offer opioid-based
prescriptions as part of our treatment options in order to help our patients
avoid the dangers of opioid abuse and addiction. The original IMAC Regeneration
Center opened in Kentucky in August 2000 and remains the flagship location of
our current business, which was formally organized in March 2015. To date, we
have opened seven, acquired eight and manage one outpatient medical clinics in
Kentucky, Missouri, Tennessee, Illinois and Florida, and plan to further expand
the reach of our facilities to other strategic locations throughout the United
States. We have partnered with several active and former professional athletes,
including Ozzie Smith, David Price, Tony Delk and Mike Ditka, 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.



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 or 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.



Corporate Conversion



Prior to June 1, 2018, we were a Kentucky limited liability company named IMAC
Holdings, LLC. Effective June 1, 2018, we converted into a Delaware corporation
pursuant to a statutory merger (the "Corporate Conversion") and changed our name
to IMAC Holdings, Inc. All of our outstanding membership interests were
exchanged on a proportional basis into shares of common stock of IMAC Holdings,
Inc.



  21







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



Initial Public Offering



On February 15, 2019, we completed our initial public offering of 850,000 units,
with each unit consisting one share of our common stock and two warrants each to
purchase one share of our common stock, at a combined initial public offering
price of $5.125 per unit. The exercise price of the warrants is $5.00 per
warrant. The units immediately and automatically separated upon issuance, and
the common stock and warrants trade on The NASDAQ Capital Market under the
ticker symbols "IMAC" and "IMACW," respectively.



We received aggregate gross proceeds of $4,356,250 from our initial public
offering, before deducting underwriting discounts, commissions and other related
expenses. Proceeds from the offering have been used for financing the costs of
leasing, developing and acquiring new clinic locations, funding research and new
product development activities, and for working capital and general corporate
purposes.



In addition, upon the closing of our initial public offering, we issued unit
purchase options to Dawson James Securities, Inc., as representative of the
several underwriters, and its affiliates entitling them to purchase a number of
our securities equal to 4% of the securities sold in the initial public
offering. The unit purchase options have an exercise price equal to 120% of the
public offering price of the units (or $6.15 per share and two warrants) and may
be exercised on a cashless basis. The unit purchase options are not redeemable
by us.

Impacts of and Response to COVID-19 Outbreak





In March 2020, federal, state and local government authorities issued orders and
guidance in order to combat the spread of the COVID-19 outbreak. 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 outbreak 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 outbreak presents to our business, including the following:

? Launched telemedicine communications for remote patient engagement;

? Suspended operations in three Kentucky clinics to comply with government orders

until we were allowed to resume operations on May 4, 2020; and

? Suspended operations at one clinic in Cook County, Illinois to comply with


   government orders until such order is lifted.




The COVID-19 outbreak appears likely to cause significant economic harm across
the United States, and the negative economic conditions that may result in
reduced patient demand in our industry. We may experience a material loss of
patients, revenue and market share as a result of the suspension of any
operations. Initiatives to implement telehealth engagement with patients may not
be adopted by existing and new patients. Patient habits may also be altered in
the medium to long term. Negative economic conditions, a decrease in our revenue
and consequent longer term trends harmful to our business may all exert pressure
on our company during the pendency of emergency restrictions on our operations
and beyond. 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. Additional furloughs were conducted through March 31, 2020, resulting
in a 19% reduction in staff and company-wide salary reductions of approximately
10%.



  22








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 COVID-19 outbreak, and the consequent
loss of revenue and cash flow during this period may make it difficult for us to
obtain capital necessary to fund our operations.

Matters that May or Are Currently Affecting Our Business

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

? Our ability to identify, contract with, install equipment and operate a large

number of outpatient medical clinics and attract new patients to them;

? Our need to hire additional healthcare professionals in order to operate the

large number of clinics we intend to open;

? Our ability to enhance revenue at each facility on an ongoing basis through

additional patient volume and new services;

? Our ability to obtain additional financing for the projected costs associated

with the acquisition, management and development of new clinics, and the

personnel involved, if and when needed;

? Our ability to attract competent, skilled medical and sales personnel for our

operations at acceptable prices to manage our overhead; and

? Our ability to control our operating expenses as we expand our organization


    into neighboring states.

Critical Accounting Policies and Estimates





The preparation of our condensed consolidated financial statements in conformity
with GAAP requires management to make estimates and assumptions that affect the
reported amounts of assets, liabilities, revenues and expenses at the date and
for the periods that the condensed consolidated financial statements are
prepared. On an ongoing basis, we evaluate our estimates, including those
related to insurance adjustments and provisions for doubtful accounts. We base
our estimates on historical experience and on various other assumptions that are
believed to be reasonable under the circumstances. Actual results could
materially differ from those estimates.



We believe that, of the significant accounting policies discussed in our Notes
to the Condensed Consolidated Financial Statements (Unaudited), the following
accounting policies require our most difficult, subjective or complex judgments
in the preparation of our financial statements.



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.



  23







Goodwill



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. There was no goodwill impairment for the
years presented.



The Company tests goodwill for impairment on an annual basis, or when events or
circumstances indicate the fair value of a reporting unit is below its carrying
value. No impairments of goodwill were recorded for the three months ended
March
31, 2020.



Revenue Recognition



Our patient service revenue is derived from minimally invasive procedures
performed at our outpatient medical clinics and patient visits to physicians.
The fees for such services are billed either to the patient or a third-party
payer, including Medicare. Starting in January 2020, we implemented wellness
maintenance programs on a subscription basis. There are three membership plans
offered with different levels of service for each plan. We recognize patient
service revenue, net of contractual adjustments, which we estimate based on the
historical trend of our cash collections and contractual write-offs in the
period in which services are performed. Contractual adjustments represent
discounts offered for patients serviced within a negotiated third-party payer
contract.




Other management service fees are derived from management services where we
provide billings and collections support to the clinics and where management
services are provided based on state specific regulations known as the corporate
practice of medicine ("CPM"). Under the CPM, a business corporation is precluded
from practicing medicine or employing a physician to provide professional
medical services. In these circumstances, we provide all administrative support
to the physician-owned professional corporation ("PC") through a limited
liability company. The PC is consolidated due to control by contract (an "SMA"
or Service Management Agreement). The fees we derive from these management
arrangements are based on a percentage mark-up on the costs of the LLC. We
recognize other management service revenue in the period in which services are
rendered. These revenues are eliminated in consolidation.



Patient Deposits



Patient deposits are derived from patient payments in advance of services
delivered. Our service lines include traditional and regenerative medicine.
Regenerative medicine procedures are not paid by insurance carriers; therefore,
we typically require up-front payment from the patient for regenerative services
and any co-pays and deductibles as required by the patient specific insurance
carrier. For some patients, credit is provided through an outside vendor. In
this case, we are paid from the outsourced credit vendor and the risk is
transferred to the credit vendor for collection from the patient. These funds
are accounted for as patient deposits until the procedures are performed at
which point the patient deposit is recognized as patient service revenue.



Accounts Receivable



Accounts receivable primarily consists of amounts due from third-party payers
(non-governmental), governmental payers and private pay patients and is recorded
net of allowances for doubtful accounts and contractual discounts. Our ability
to collect outstanding receivables is critical to our results of operations and
cash flows. Accordingly, accounts receivable reported in our consolidated
financial statements 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.



  24







Our accounts receivables from third-party payers are recorded net of estimated
contractual adjustments and allowances from third-party payers, which are
estimated based on the historical trend of our facilities' cash collections and
contractual write-offs, accounts receivable aging, established fee schedules,
relationships with payers and procedure statistics. While changes in estimated
reimbursement from third-party payers remain a possibility, we expect that any
such changes would be minimal and, therefore, would not have a material effect
on our financial condition or results of operations. Our collection policies and
procedures are based on the type of 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



IMAC Holdings was taxed as a partnership through May 31, 2018. As a result,
income tax liabilities were passed through to the individual members.
Accordingly, no provision for income taxes were reflected in the consolidated
financial statements for periods prior to May 31, 2018, at which time the
Company converted from a limited liability company to a Delaware corporation.
Subsequent to the Company converting to a Delaware corporation, IMAC Nashville,
IMAC Texas, IMAC St. Louis continued as single-member limited liability
companies that are disregarded entities for tax purposes and do not file
separate returns. Their activity is included as part of IMAC Holdings Inc.
Advantage Therapy, IMAC Illinois and IMAC Florida are also disregarded entities
for tax purposes. BioFirma was a limited liability company taxed as a
partnership. Effective October 1, 2019, BioFirma became wholly owned by IMAC
Holdings and is a disregarded entity for tax purposes. IMAC Management is a
C-corporation and is included in the consolidated return of IMAC Holdings as a
subsidiary.



Any future benefit arising from losses have been offset by a valuation
allowance. Accordingly, no provision for income taxes is reflected in the
consolidated financial statements. The Company records a liability for uncertain
tax positions when it is probable that a loss has been incurred and the amount
can be reasonably estimated. Interest and penalties related to income tax
matters, if any, would be recognized as a component of income tax expense. At
March 31, 2020 and December 31, 2019, the Company had no liabilities for
uncertain tax positions. The Company continually evaluates expiring statutes of
limitations, audits, proposed settlements, changes in tax law and new
authoritative rulings. Currently, the tax years subsequent to 2017 are open and
subject to examination by the taxing authorities.

Results of Operations for the Three Months Ended March 31, 2020 Compared to the Three Months Ended March 31, 2019





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.



  25

The following table sets forth a summary of IMAC Holdings, Inc.'s statements of operations for the three months ended March 31, 2020 and 2019:





                                                              Three Months Ended
                                                                   March 31,
                                                             2020             2019

Patient revenues                                         $  7,151,942     $  7,289,022
Contractual adjustments                                    (3,842,873 )     (4,519,194 )
Total patient revenue, net                                  3,309,069        2,769,828

Management fees                                                12,487                -
Total revenue                                               3,321,556        2,769,828

Operating expenses:
Patient expenses                                              379,817          436,129
Salaries and benefits                                       2,926,150        2,064,623
Share-based compensation                                       81,084            3,749
Advertising and marketing                                     241,817          347,016
General and administrative                                  1,236,138          977,369

Depreciation and amortization                                 450,495      

   285,567
Total operating expenses                                    5,315,501        4,114,453

Operating loss                                             (1,993,945 )     (1,344,626 )

Other expense:
Other expenses                                                      -          (15,955 )

Beneficial conversion interest expense                              -      

  (639,159 )
Interest expense                                              (76,204 )        (30,671 )
Total other expenses                                          (76,204 )       (685,785 )


Net loss before income taxes                               (2,070,149 )    

(2,030,411 )

Income taxes                                                        -                -

Net loss                                                   (2,070,149 )     (2,030,411 )

Net loss attributable to the non-controlling interest 336,604

431,223


Net loss attributable to IMAC Holdings, Inc.             $ (1,733,545 )   $

(1,599,188 )



Net loss per share attributable to common stockholders
Basic and diluted                                        $      (0.18 )   $

(0.27 )



Weighted average common shares outstanding
Basic and diluted                                           9,611,252        5,919,856




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."



  26







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



                        Three Months Ended
                             March 31,
                       2020            2019

Revenues:
Medical treatments          67 %            64 %
Physical therapy            30 %            33 %
Chiropractic care            3 %             3 %
                           100 %           100 %





Patient service revenues increased 19% to $3.3 million for the three months
ended March 31, 2020, compared to $2.8 million for the three months ended March
31, 2019. These increases were primarily due to the 2019 acquisitions of ISDI
Holdings II and PHR Holdings. We expect to see a negative impact on patient
service revenue due to the COVID-19 outbreak in the quarter, ending June 30,
2020.



Visits to our clinics are an indication of business activity. Visits increased
2% for the three months ended March 31, 2020 compared to the three months ended
March 31, 2019. Visits increased from 30,824 in the three months ended March 31,
2019 to 31,603 in the three months ended March 31, 2020. Charges per visit also
increased from $89.86 per visit to $109.54 per visit from March 31, 2019 to
March 31, 2020, respectively. We expect to see a negative impact on patient
service revenue due to the COVID-19 outbreak in the quarter ending June 30,
2020.



Starting in January 2020, we implemented wellness maintenance programs on a
subscription basis. As of March 31, 2020, the following markets had active
memberships: 320 memberships at IMAC Management (Kentucky), 32 memberships at
IMAC Nashville, 127 memberships at IMAC St. Louis and eight memberships at IMAC
Illinois. All active memberships at IMAC Management were paused in April 2020
due to an order of the governor of Kentucky to close all elective care
facilities in Kentucky.



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. Cost of revenues (patient expense) decreased $56,000 to
$380,000 for the three months ended March 31, 2020, as compared to the three
months ended March 31, 2019, driven by improvements in supply management and
changes in the patient mix of services provided.



Salaries and benefits consist of payroll, benefits and related party contracts.
Salaries and benefits expenses for the three months ended March 31, 2020, as
compared to the three months ended March 31, 2019, increased $0.9 million to
$2.9 million, which was attributable to our 2019 acquisitions in the Chicago and
Rockford, Illinois areas.

Share-based compensation. Share-based compensation increased from $4,000 to $81,000 for the three months ended March 31, 2020, as compared to the three months ended March 31, 2019.

Advertising and marketing. Advertising and marketing expenses decreased $105,000, or 30%, to $242,000 for the three months ended March 31, 2020, as compared to $347,000 for the three months ended March 31, 2019. The decrease was due to reduced marketing spending as a result of the impact of the COVID-19 outbreak on consumer engagement.





General and administrative expense. General and administrative expense ("G&A")
consists of all other costs other than advertising and marketing, salaries and
wages, patient expenses and depreciation. G&A increased 26% from $977,000 to
$1.2 million in the three months ended March 31, 2020 and 2019, respectively.
G&A increase was primarily due to travel, rent, insurance and service fees
related to the April 2019 acquisition of the clinics managed by IMAC of Illinois
and the January 2020 acquisition of CHSF. The aggregate average monthly rent of
our clinics for the three months ended March 31, 2020 and 2019 was $111,200

and
$78,200, respectively.




Depreciation and amortization. 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. Depreciation and
amortization increased from $286,000 for the three months ended March 31, 2019
to $450,000 for the three months ended March 31, 2020. The increase in
depreciation and amortization expense resulted from the 2019 acquisition of the
clinics managed by IMAC of Illinois and the January 2020 acquisition of CHSF.



  27







Net loss attributable to the non-controlling interest. Net loss attributable to
the non-controlling interest is the amount of net income (loss) for the period
allocated to non-controlling partners of IMAC Holdings, Inc. that is included in
the entity's consolidated financial statements.



Analysis of Cash Flows

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





During the three months ended March 31, 2020, net cash used in operations
increased to $1.2 million compared to $0.9 million for the three months ended
March 31, 2019. This difference was primarily attributable to lower beneficial
conversion interest expense during the three months ended March 31, 2019.



Net cash used in investing activities during the three months ended March 31,
2020 and 2019 was $207,000 and $42,000, respectively. This was primarily driven
by the acquisition of CHSF in January 2020.



Net cash provided by financing activities during the three months ended March
31, 2020 was $2.3 million, including proceeds from notes payable, net of related
fees, which totaled $1.2 million, and proceeds from the issuance of common stock
of $1.1 million. Net cash provided by financing activities during the three
months ended March 31, 2019 was $3.8 million, including proceeds from our
initial public offering, net of related fees.

Reconciliation of Non-GAAP Financial Measures

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





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



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



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



                                                 March 31, 2020       March 31, 2019

GAAP loss attributable to IMAC Holdings, Inc.   $     (1,733,545 )   $     (1,599,187 )
Interest expense                                          76,204

30,671


Beneficial conversion interest expense                         -

639,159


Share-based compensation expense                          81,084           

    3,749
Depreciation and amortization                            450,495              285,567
Adjusted EBITDA                                 $     (1,125,762 )   $       (640,041 )




  28

Liquidity and Capital Resources


As of March 31, 2020, we had $1.3 million in cash and deficiency in working
capital of $5.7 million. As of December 31, 2019, we had cash of $373,689 and
deficiency in working capital of $3.5 million. The increase in working capital
deficiency was primarily due to the increase in the current portion of notes
payable for 2020.

We believe our cash at March 31, 2020, proceeds from the Iliad Note and offerings of securities anticipated to be made pursuant our effective registration statement on Form S-3, will be sufficient to meet our cash, operational and liquidity requirements for at least 12 months.





As of March 31, 2020, we had approximately $9.2 million in current liabilities.
The Iliad Note represents $935,000 of our current liabilities. Of our remaining
current liabilities as of March 31, 2020, approximately $1.2 million represents
a mortgage on our Lexington, Kentucky property, and $1.8 million owed under the
note payable to The Edward S. Bredniak Trust. Lastly, we have approximately $2.1
million in current liabilities outstanding to our vendors and under operating
lines of credit, which we have historically paid down in the normal course

of
our business.




As of March 31, 2020, we had an accumulated deficit of $11.8 million. Prior to
our initial public offering, we funded our operations primarily through the sale
and issuance of convertible notes, bridge loans, and the use of funds from
operations. Accordingly, 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 independent
registered public accounting firm has indicated that our financial condition
raises substantial doubt as to our ability to continue as a going concern.



On July 15, 2019, we signed the $10 million Purchase Agreement with Lincoln
Park. We also entered into a registration rights agreement (the "Registration
Agreement") with Lincoln Park in which we agreed to file a registration
statement related to the transaction with the SEC covering the shares of our
common stock that may be issued to Lincoln Park under the Purchase Agreement.



Pursuant to the Purchase Agreement, we have the right, in our sole discretion,
over a 36-month period to sell shares of common stock to Lincoln Park, subject
to certain limitations contained in the Purchase Agreement, in amounts up to
50,000 shares per regular sale, which may be increased to up to 100,000 shares
depending on certain conditions as set forth in the Purchase Agreement (and
subject to adjustment for any reorganization, recapitalization, non-cash
dividend, stock split, reverse stock split or other similar transaction as
provided in the Purchase Agreement), up to the aggregate commitment of $10
million ("Regular Purchases"). In addition to Regular Purchases and subject to
the terms and conditions of the Purchase Agreement, we in our sole discretion
may direct Lincoln Park on each purchase date to make "accelerated purchases"
and "additional accelerated purchases" on the following business day as provided
in the Purchase Agreement. However, in no event may we sell any number of shares
that would result in Lincoln Park beneficially owning more than 4.99% of our
outstanding common stock.



There are no upper limits on the per share price Lincoln Park may pay to
purchase our common stock; however, we may not sell more than $1,000,000 in
shares of common stock to Lincoln Park per Regular Purchase. The purchase price
of the shares related to the $10 million of future funding will be based on the
prevailing market prices of our shares without any fixed discount. Furthermore,
we control the timing and amount of any future sales, if any, of shares of
common stock to Lincoln Park.



The Purchase Agreement limits our sales of shares of common stock to Lincoln
Park to 1,669,359 shares of common stock, representing 19.99% of the shares of
common stock outstanding on the date of the Purchase Agreement unless (a)
stockholder approval is obtained to issue more than such amount or (b) the
average price of all applicable sales of our common stock to Lincoln Park under
the Purchase Agreement equals or exceeds the lower of (i) the closing price of
our common stock on the Nasdaq Capital Market immediately preceding July 15,
2019 or (ii) the average of the closing price of our common stock on the Nasdaq
Capital Market for the five Business Days immediately preceding July 15, 2019.



  29







The Purchase Agreement contains customary representations, warranties,
covenants, closing conditions and indemnification and termination provisions by,
among and for the benefit of the parties. Additionally, Lincoln Park has agreed
not to cause or engage in any manner whatsoever, any direct or indirect short
selling or hedging of our common stock. The Purchase Agreement does not limit
our ability to raise capital from other sources at our sole discretion, provided
that we have agreed not to enter into any "variable rate" transactions with any
third party for the 36-month period following the execution of the Purchase
Agreement.

In consideration for entering into the $10 million agreement, we issued to Lincoln Park 60,006 shares of our common stock as a commitment fee and will issue up to an additional 60,006 shares pro rata, when and if Lincoln Park purchases, at the Company's sole discretion, the $10 million aggregate commitment. The Purchase Agreement may be terminated by us at any time at our discretion without any cost to us. The proceeds received by us under the Purchase Agreement may be used for any corporate purpose at our sole discretion.


As of March 31, 2020, pursuant to the Purchase Agreement, the Company sold an
aggregate of 1,602,294 shares of common stock of the Company to Lincoln Park for
aggregate proceeds to the Company of $2,424,053 (excluding the 60,006 shares
previously issued to Lincoln Park as a commitment fee).



On March 25, 2020, the Company entered into a note purchase agreement with Iliad
Research & Trading, L.P., pursuant to which the Company agreed to issue and sell
to the Holder a secured promissory note in an aggregate initial principal amount
of $1,115,000, which is payable on or before the date that is 18 months from the
issuance date. The Initial Principal Amount includes an original issue discount
of $100,000 and $15,000 that the Company agreed to pay to the Holder to cover
the Holder's legal fees, accounting costs, due diligence and other transaction
costs. In exchange for the Note, the Holder paid an aggregate purchase price of
$1,000,000. Interest on the Note accrues at a rate of 10% per annum and is
payable on the Maturity Date or otherwise in accordance with the Note. The Note
may be prepaid by the Company (with the payment of a premium), may be required
by the Holder to be redeemed by the Company for up to $200,000 per month after
the six-month anniversary of the issuance of the Note (subject to certain
deferral rights), and is subject to customary events of default (with a default
interest rate of up to 22%). The Note transaction documents also give the Holder
a right of first refusal to future debt issuances and a right to the first
$250,000 of every $1 million of proceeds from future sales of equity by the
Company. The Note is secured by the assets of the Company, other than the
Company's owned real property, intellectual property and accounts receivable,
pursuant to a security agreement. The Company will use the proceeds of the Note
for certain growth initiatives including an IND filing with the FDA.



Contractual Obligations



The following table summarizes our contractual obligations by period as of March
31, 2020:



                                                           Payments Due by Period
                                                  Less Than 1                                     More Than 5
                                   Total              Year          1-3 Years      4-5 Years         Years
Short-term obligations         $    2,440,412     $  2,440,412     $         -     $        -     $         -
Long-term obligations,
including interest                  2,637,126                -       2,581,149         46,221           9,756
Finance lease obligations,
including interest                     91,774           16,354          65,417         10,003               -
Operating lease obligations         5,056,297          887,150       2,979,432        901,837         287,878
                               $   10,225,609     $  3,343,916     $ 5,625,998     $  958,061     $   297,634

Off-Balance Sheet Arrangements

As of March 31, 2020, the Company did not have any off-balance sheet arrangements.





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Impact of Inflation

We believe that inflation has not had a material impact on our results of operations for the three months ended March 31, 2020 and 2019. We cannot assure you that future inflation will not have an adverse impact on our operating results and financial condition.

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