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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the Quarterly Period Ended: June 30, 2021

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from ______________ to ______________

 

Commission File Number: 000-52218

 

Theralink Technologies, Inc.

(Exact name of registrant as specified in its charter)

 

Nevada   20-2590810

(State or other jurisdiction

of incorporation or organization)

 

(IRS Employer

Identification No.)

     

15000 W. 6th Avenue, Suite 400

Golden, CO 80401

 

 

(720) 420-0074

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

 

(Former name, former address and former fiscal year, if changed since last report)

 

Securities registered pursuant to Section 12(b) of the Act: None

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

 

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

 

Large accelerated filer   Accelerated filer   Non-accelerated filer   Smaller reporting company   Emerging growth company
       

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No ☒

 

The registrant had 5,555,474,594 shares of its common stock, $0.0001 par value per share, outstanding as of September 22, 2021.

 

 

 

   

 

 

THERALINK TECHNOLOGIES, INC. AND SUBSIDIARIES

FORM 10-Q

JUNE 30, 2021

 

TABLE OF CONTENTS

 

  Page
  PART I - FINANCIAL INFORMATION  
     
Item 1. Financial Statements  
  Condensed Consolidated Balance Sheets - As of June 30, 2021 (unaudited) and September 30, 2020 4
  Condensed Consolidated Statements of Operations for the Three and Nine Months Ended June 30, 2021 and 2020 (unaudited) 5
  Condensed Consolidated Statements of Changes in Stockholder’s Deficit for the Three and Nine Months Ended June 30, 2021 and 2020 (unaudited) 6
  Condensed Consolidated Statements of Cash Flows for the Nine Months Ended June 30, 2021 and 2020 (unaudited) 8
  Condensed Notes to Condensed Consolidated Financial Statements 9
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 26
Item 3. Quantitative and Qualitative Disclosures About Market Risk 34
Item 4. Controls and Procedures 34
     
  PART II - OTHER INFORMATION  
     
Item 1. Legal Proceedings 35
Item 1A. Risk Factors 35
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 36
Item 3. Defaults Upon Senior Securities 36
Item 4. Mine Safety Disclosures 36
Item 5. Other Information 36
Item 6. Exhibits 37
     
Signatures 38

 

2
 

 

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

 

This Quarterly Report on Form 10-Q contains statements reflecting assumptions, expectations, projections, intentions or beliefs about future events that are intended as “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. All statements included or incorporated by reference in this report, other than statements of historical fact, that address activities, events or developments that we expect, believe or anticipate will or may occur in the future are forward-looking statements. These statements appear in a number of places, including “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” These statements represent our reasonable judgment about the future based on various factors and using numerous assumptions and are subject to known and unknown risks, uncertainties and other factors that could cause our actual results and financial position to differ materially from those contemplated by the statements. You can identify these statements by the fact that they do not relate strictly to historical or current facts, and use words such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “future,” “intend,” “may,” “should,” “plan,” “potential,” “project,” “will,” “would” and other words of similar meaning, or the negatives of such terms or other variations. These include, but are not limited to, statements relating to the following:

 

projected operating or financial results, including anticipated cash flows used in operations;
expectations regarding capital expenditures, research and development expenses and other payments;
our beliefs and assumptions relating to our liquidity position, including our ability to obtain additional financing; and
our beliefs, assumptions and expectations about the regulatory approval for our technology including, but not limited to our ability to obtain regulatory approval in a timely manner. Or at all.

 

Any or all of our forward-looking statements may turn out to be wrong. They may be affected by inaccurate assumptions or by known or unknown risks, uncertainties and other factors including, among others:

 

our ability to continue as a going concern;
our ability to become current in filing all reports required to be filed by us under Section 13 or 15(d) of the Securities Exchange Act of 1934;
our ability to maintain pricing;
our ability to employ skilled and qualified workers;
the fact that we have incurred significant losses since inception, expect to incur net losses for at least the next several years and may never achieve or sustain profitability;
the loss of key management personnel upon whom we depend;
our ability to fund our operations;
inadequate insurance coverage for certain losses or liabilities;
our ability to navigate the regulatory approval process in the U.S. and other countries, and our success in obtaining required regulatory approvals on a timely basis;
commercial developments of technologies that compete with our technology;
the actual and perceived effectiveness of our technology, and how the technology compares to competitive technologies;
the rate and degree of market acceptance and clinical utility of our technology;
adverse effects of the recent and ongoing COVID-19 pandemic;
the strength of our intellectual property protection, and our success in avoiding infringement of the intellectual property rights of others;
regulations affecting the health care industry;
adverse developments in our research and development activities;
potential liability if our technology causes illness, injury or death, or adverse publicity from any such events;
our ability to operate our business efficiently, manage capital expenditures and costs (including general and administrative expenses) and obtain financing when required; and
our expectations with respect to future licensing, partnering or acquisition activity.

 

In addition, there may be other factors that could cause our actual results to be materially different from the results referenced in the forward-looking statements, some of which are included elsewhere in this report, including “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” We have included important factors in the cautionary statements included in this Quarterly Report on Form 10-, in our Annual Report on Form 10-K filed on September 27, 2021 with the Securities and Exchange Commission (“SEC”), particularly in the ‘Risk Factors” section of such report, that could cause results or events to differ materially from the forward-looking statements that we make herein. Many of these factors will be important in determining our actual future results. Consequently, no forward-looking statement should be relied upon. Our actual future results may vary materially from those expressed or implied in any forward-looking statements. All forward-looking statements contained in this report are qualified in their entirety by this cautionary statement. Forward-looking statements apply only as of the date they are made, and we disclaim any obligation to update any forward-looking statements to reflect events or circumstances after the date of this report, except as otherwise required by applicable law.

 

This Quarterly Report on Form 10-Q includes trademarks for Theralink, which are protected under applicable intellectual property laws and are our property. Solely for convenience, our trademarks and trade names referred to in this Quarterly Report on Form 10-Q may appear without the ® or TM symbols, but such references are not intended to indicate in any way that we will not assert, to the fullest extent under applicable law, our rights to these trademarks and trade names.

 

3
 

 

PART I - FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS

 

THERALINK TECHNOLOGIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

 

   June 30,   September 30 
   2021   2020 
    (Unaudited)      
ASSETS          
CURRENT ASSETS:          
Cash  $79,677   $1,779,283 
Accounts receivable   149,938    - 
Other receivable   18,854    15,000 
Prepaid expenses and other current assets   141,534    191,253 
Marketable securities   7,500    11,100 
Laboratory supplies   34,868    71,335 
Deferred financing cost   333,333    - 
           
Total Current Assets   765,704    2,067,971 
           
OTHER ASSETS:          
Property and equipment, net   725,830    744,822 
Finance right-of-use assets, net   122,915    157,691 
Operating right-of-use asset, net   178,458    206,203 
Security deposits   20,909    19,464 
           
Total Assets  $1,813,816   $3,196,151 
           
LIABILITIES AND STOCKHOLDERS’ DEFICIT          
           
CURRENT LIABILITIES:          
Accounts payable  $869,601   $617,218 
Accrued liabilities   93,342    56,728 
Accrued compensation   143,309    32,791 
Accrued director compensation   117,500    72,500 
Deferred revenue   148,550    - 
Convertible debt - related party, net of discount   14,116    - 
Notes payable - related party   100,000    - 
Notes payable - current   1,000    1,000 
Financing lease liability - current   46,289    42,234 
Operating lease liability - current   40,716    35,943 
Insurance payable   6,654    63,675 
Subscription payable   1,350,000    - 
Contingent liabilities   69,440    64,040 
Assumed liabilities of discontinued operations   -    204,608 
           
Total Current Liabilities   3,000,517    1,190,737 
           
LONG-TERM LIABILITIES:          
Financing lease liability   100,873    136,116 
Operating lease liability   145,757    176,893 
           
Total Liabilities   3,247,147    1,503,746 
           
Series E preferred stock; $0.0001 par value; 2,000 authorized; 1,000 issued and outstanding at June 30, 2021 and September 30, 2020   2,000,000    2,000,000 
           
STOCKHOLDERS’ DEFICIT:          
Preferred stock: $0.0001 par value; 26,667 authorized;          
Series A Preferred stock: $0.0001 par value; 1,333 shares authorized; 667 issued and outstanding at June 30, 2021 and September 30, 2020   -    - 
Series C-1 Preferred stock: $0.0001 par value; 3,000 shares authorized; 2,966 issued and outstanding at June 30, 2021 and September 30, 2020   -    - 
Series C-2 Preferred stock: $0.0001 par value; 6,000 shares authorized; 4,917 issued and outstanding at June 30, 2021 and September 30, 2020   -    - 
Series D-1 Preferred stock: $0.0001 par value; 1,000 shares authorized; nil issued and outstanding at June 30, 2021 and September 30, 2020   -    - 
Series D-2 Preferred stock: $0.0001 par value; 4,360 shares authorized; nil issued and outstanding at June 30, 2021 and September 30, 2020   -    - 
Common stock: $0.0001 par value, 12,000,000,000 shares authorized; 5,124,164,690 issued and outstanding at June 30, 2021 and September 30, 2020   512,416    512,416 
Additional paid-in capital   43,368,077    42,367,577 
Accumulated deficit   (47,313,824)   (43,187,588)
           
Total Stockholders’ Deficit   (3,433,331)   (307,595)
           
Total Liabilities and Stockholders’ Deficit  $1,813,816   $3,196,151 

 

See accompanying notes to the unaudited condensed consolidated financial statements.

 

4
 

 

THERALINK TECHNOLOGIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

 

   2021   2020   2021   2020 
   For the Three Months Ended   For the Nine Months Ended 
   June 30,   June 30, 
   2021   2020   2021   2020 
                 
REVENUES, NET  $278,925   $24,886   $415,029   $75,896 
                     
COST OF REVENUE   69,253    7,422    99,298    23,421 
                     
GROSS PROFIT   209,672    17,464    315,731    52,475 
                     
OPERATING EXPENSES:                    
Professional fees   243,517    322,921    654,736    470,638 
Consulting fee - related party   -    8,650    -    64,125 
Compensation expense   532,414    372,610    1,654,693    822,329 
Licensing fees   39,172    12,750    100,364    38,920 
General and administrative expenses   589,463    258,277    2,069,942    636,838 
                     
Total Operating Expenses   1,404,566    975,208    4,479,735    2,032,850 
                     
LOSS FROM OPERATIONS   (1,194,894)   (957,744)   (4,164,004)   (1,980,375)
                     
OTHER INCOME (EXPENSE):                    
Interest expense   (26,993)   (7,844)   (43,679)   (23,715)
Gain on debt extinguishment, net   -    108,060    227,294    108,060 
Unrealized loss on marketable securities   (3,900)   (4,900)   (3,600)   (11,200)
Unrealized (gain) loss on exchange rate   -    60,075    (22,686)   60,075 
Other income   -    10,000    -    10,000 
                     
Total Other Income (Expense), net   (30,893)   165,391    157,329    143,220 
                     
NET LOSS   (1,225,787)   (792,353)   (4,006,675)   (1,837,155)
                     
Series E preferred stock dividend   39,890    -    119,561    - 
                     
NET LOSS ATTRIBUTABLE TO COMMON SHAREHOLDERS  $(1,185,897)  $(792,353)  $(3,887,114)  $(1,837,155)
                     
NET LOSS PER COMMON SHARE:                    
Basic and Diluted  $(0.00)  $(2.04)  $(0.00)  $(19.19)
                     
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:                    
Basic and Diluted   5,550,559,312    388,333    5,306,754,829    95,753 

 

See accompanying notes to the unaudited condensed consolidated financial statements.

 

5
 

 

THERALINK TECHNOLOGIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ DEFICIT

FOR THE THREE AND NINE MONTHS ENDED JUNE 30, 2021

(UNAUDITED)

 

                                             
   Preferred Stock   Common Stock             
   Series A
# of Shares
   Series C-1
# of Shares
   Series C-2
# of Shares
   Series D-1
# of Shares
   Series D-2
# of Shares
   Amount   # of Shares   Amount  

Additional

Paid-in Capital

  

Accumulated

Deficit

  

Total

Stockholders’ Deficit

 
                                             
Balance at September 30, 2020   667    2,966    4,917    -    -   $-    5,124,164,690   $512,416   $42,367,577   $(43,187,588)  $(307,595)
                                                        
Adjustment related to Series A preferred prior period redemption payment   -    -    -    -    -    -    -    -    500         500 
                                                        
Series E preferred stock dividend   -    -    -    -    -    -    -    -    -    (40,219)   (40,219)
                                                        
Net loss   -    -    -    -    -    -    -    -    -    (1,419,775)   (1,419,775)
                                                        
Balance at December 31, 2020   667    2,966    4,917    -    -    -    5,124,164,690    512,416    42,368,077    (44,647,582)   (1,767,089)
                                                        
Series E preferred stock dividend   -    -    -    -    -    -    -    -    -    (39,452)   (39,452)
                                                        
Net loss   -    -    -    -    -    -    -    -    -    (1,361,113)   (1,361,113)
                                                        
Balance at March 31, 2021   667    2,966    4,917    -    -    -    5,124,164,690    512,416    42,368,077    (46,048,147)   (3,167,654)
                                                        
Beneficial conversion feature related to a convertible note - related party recorded as debt discount   -    -    -    -    -    -    -    -    15,800    -    15,800 
                                                        
Relative fair value of warrant issued in connection with a convertible note - related party recorded as debt discount   -    -    -    -    -    -    -    -    984,200    -    984,200 
                                                        
Series E preferred stock dividend   -    -    -    -    -    -    -    -    -    (39,890)   (39,890)
                                                        
Net loss   -    -    -    -    -    -    -    -    -    (1,225,787)   (1,225,787)
                                                        
Balance at June 30, 2021   667    2,966    4,917    -    -   $-    5,124,164,690   $512,416   $43,368,077   $(47,313,824)  $(3,433,331)

 

See accompanying notes to the unaudited condensed consolidated financial statements.

 

6
 

 

THERALINK TECHNOLOGIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ DEFICIT

FOR THE THREE AND NINE MONTHS ENDED JUNE 30, 2020

(UNAUDITED)

 

   Preferred Stock   Common Stock          
   Series A
# of Shares
   Series C-1
# of Shares
   Series C-2
# of Shares
   Series D-1
# of Shares
   Series D-2
# of Shares
   Amount   # of Shares   Amount  

Additional

Paid-in Capital

  

Accumulated

Deficit

  

Total

Stockholders’ Deficit

 
                                             
Balance at September 30, 2019   -    -    -    992    -   $-    -   $-   $37,378,841   $(38,011,201)  $(632,360)
                                                        
Preferred stock issued for cash   -    -    -    6    -    -    -    -    2,200,000    -    2,200,000 
                                                        
Preferred stock issued upon debt conversions   -    -    -    -    -    -    -    -    217,215    -    217,215 
                                                        
Preferred stock issued upon conversion of accounts payable and accrued liabilities   -    -    -    1    -    -    -    -    299,154    -    299,154 
                                                        
Net loss   -    -    -    -    -    -    -    -    -    (541,372)   (541,372)
                                                        
Balance at December 31, 2019   -    -    -    999    -    -    -    -    40,095,210    (38,552,573)   1,542,637 
                                                        
Preferred stock issued for cash   -    -    -    1    -    -    -    -    390,000    -    390,000 
                                                        
Preferred stock issued upon conversion of accrued liabilities - related party   -    -    -    -    -    -    -    -    160,000    -    160,000 
                                                        
Net loss   -    -    -    -    -    -    -    -    -    (503,430)   (503,430)
                                                        
Balance at March 31, 2020   -    -    -    1,000    -    -    -    -    40,645,210    (39,056,003)   1,589,207 
                                                        
Recapitalization resulting from the Asset Sale Transaction (see Note 3)   667    2,966    4,917    -    4,121    -    1,398,070    140    246,516         246,656 
                                                        
Net loss   -    -    -    -    -    -    -    -    -    (792,353)   (792,353)
                                                        
Balance at June 30, 2020   667    2,966    4,917    1,000    4,121   $-    1,398,070   $140   $40,891,726   $(39,848,356)   1,043,510 

  

See accompanying notes to the unaudited condensed consolidated financial statements.

 

7
 

 

THERALINK TECHNOLOGIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

 

   2021   2020 
   For the Nine Months Ended 
   June 30, 
   2021   2020 
CASH FLOWS USED IN OPERATING ACTIVITIES          
Net loss  $(4,006,675)  $(1,837,155)
Adjustments to reconcile net loss to net cash used in operating activities:          
Depreciation   138,632    57,060 
Lease cost   1,382    5,975 
Amortization of debt discount   14,116    - 
Gain on debt extinguishment, net   (227,294)   (108,060)
Unrealized (gain) loss on exchange rate   22,686    (60,075)
Unrealized loss on marketable securities   3,600    11,200 
Change in operating assets and liabilities:          
Accounts receivable   (149,938)   (20,975)
Laboratory supplies   36,467    - 
Prepaid expenses and other current assets   44,420    (116,219)
Accounts payable   252,383    (212,840)
Accrued liabilities and other liabilities   20,950    (70,734)
Deferred revenue   148,550    - 
           
NET CASH USED IN OPERATING ACTIVITIES   (3,700,721)   (2,351,823)
           
CASH FLOWS FROM INVESTING ACTIVITIES          
Adjustment related to Series A preferred prior period redemption payment   500    - 
Cash acquired from the Asset Sale Transaction (see Note 3)   -    675,928 
Purchase of property and equipment   (116,052)   (495,557)
           
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES   (115,552)   180,371 
           
CASH FLOWS FROM FINANCING ACTIVITIES          
Proceeds from sale of preferred stock   -