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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, 2022

 

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)

 

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 6,151,499,919 shares of its common stock, $0.0001 par value per share, outstanding as of August 8, 2022.

 

 

 

 
 

 

THERALINK TECHNOLOGIES, INC.

FORM 10-Q

JUNE 30, 2022

 

TABLE OF CONTENTS

 

  Page
  PART I - FINANCIAL INFORMATION  
     
Item 1. Financial Statements  
  Balance Sheets - As of June 30, 2022 (unaudited) and September 30, 2021 4
  Statements of Operations for the Three and Nine Months Ended June 30, 2022 and 2021 (unaudited) 5
  Statements of Changes in Stockholder’s Deficit for the Three and Nine Months Ended June 30, 2022 and 2021 (unaudited) 6
  Statements of Cash Flows for the Nine Months Ended June 30, 2022 and 2021 (unaudited) 7
  Condensed Notes to Unaudited Financial Statements 8
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 36
Item 3. Quantitative and Qualitative Disclosures About Market Risk 46
Item 4. Controls and Procedures 46
     
  PART II - OTHER INFORMATION  
     
Item 1. Legal Proceedings 47
Item 1A. Risk Factors 47
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 47
Item 3. Defaults Upon Senior Securities 47
Item 4. Mine Safety Disclosures 47
Item 5. Other Information 47
Item 6. Exhibits 48
     
Signatures 49

 

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 remain 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 development 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-Q, in our Annual Report on Form 10-K filed on January 13, 2022 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.

BALANCE SHEETS

 

   June 30,   September 30, 
   2022   2021 
   (Unaudited)     
ASSETS          
CURRENT ASSETS:          
Cash  $125,417   $314,151 
Accounts receivable   109,380    - 
Other receivable (related party $35,594 in 2022 and $21,711 in 2021)   35,594    23,044 
Prepaid expenses and other current assets   181,258    219,496 
Marketable securities   2,400    11,000 
Laboratory supplies   -    71,062 
           
Total Current Assets   454,049    638,753 
           
OTHER ASSETS:          
Property and equipment, net   678,372    698,927 
Finance right-of-use assets, net   76,546    111,323 
Operating right-of-use asset, net   1,167,191    168,664 
Security deposits   18,715    20,909 
           
Total Assets  $2,394,873   $1,638,576 
           
LIABILITIES AND STOCKHOLDERS’ DEFICIT          
           
CURRENT LIABILITIES:          
Accounts payable  $546,411   $1,018,797 
Accounts payable - related party   6,000    3,714 
Accrued liabilities   145,194    71,077 
Accrued liabilities - related party   -    18,000 
Accrued compensation   343,865    186,177 
Accrued director compensation   177,500    132,500 
Contract liabilities   302,672    135,150 
Notes payable - related party   350,000    100,000 
Notes payable - current   1,000    1,000 
Financing lease liability - current   52,351    47,730 
Operating lease liability - current   24,181    42,411 
Insurance payable   12,271    118,294 
Subscriptions payable   -    1,350,000 
Contingent liabilities   76,640    71,240 
           
Total Current Liabilities   2,038,085    3,296,090 
           
LONG-TERM LIABILITIES:          
Financing lease liability   48,522    88,385 
Operating lease liability   1,164,538    134,482 
Convertible notes - related party, net of discount   974,762    64,981 
Convertible notes, net of discount   282,467    - 
           
Total Liabilities   4,508,374    3,583,938 
           
Commitments and Contingencies (Note 10)   -    - 
          
Series E preferred stock; $0.0001 par value; 2,000 shares designated; 1,000 issued and outstanding at June 30, 2022 and September 30, 2021; liquidation value of $2,013,151 and $2,013,151 at June 30, 2022 and September 30, 2021, respectively   2,000,000    2,000,000 
          
Series F preferred stock; $0.0001 par value; 2,000 shares designated; 500 and nil issued and outstanding at June 30, 2022 and September 30, 2021; liquidation value of $1,006,575 and $1,006,728 at June 30, 2022 and September 30, 2021, respectively   1,000,000    1,000,000 
           
STOCKHOLDERS’ DEFICIT:          
Preferred stock: $0.0001 par value; 26,667 authorized;          
Series A Preferred stock: $0.0001 par value; 1,333 shares designated; 667 issued and outstanding at June 30, 2022 and September 30, 2021   -    - 
Series C-1 Preferred stock: $0.0001 par value; 3,000 shares designated; 1,043 and 2,966 issued and outstanding at June 30, 2022 and September 30, 2021, respectively   -    - 
Series C-2 Preferred stock: $0.0001 par value; 6,000 shares designated; 3,037 and 4,917 issued and outstanding at June 30, 2022 and September 30, 2021, respectively   -    - 
Series D-1 Preferred stock: $0.0001 par value; 1,000 shares designated; nil issued and outstanding at June 30, 2022 and September 30, 2021   -    - 
Series D-2 Preferred stock: $0.0001 par value; 4,360 shares designated; nil issued and outstanding at June 30, 2022 and September 30, 2021   -    - 
Common stock: $0.0001 par value, 100,000,000,000 shares authorized; 6,151,499,919 and 5,124,164,690 issued and outstanding at June 30, 2022 and September 30, 2021, respectively   615,150    512,416 
Additional paid-in capital   49,333,767    44,368,077 
Accumulated deficit   (55,062,418)   (49,825,855)
           
Total Stockholders’ Deficit   (5,113,501)   (4,945,362)
           
Total Liabilities and Stockholders’ Deficit  $2,394,873   $1,638,576 

 

See accompanying condensed notes to unaudited financial statements.

 

4
 

 

THERALINK TECHNOLOGIES, INC.

 STATEMENTS OF OPERATIONS

(UNAUDITED)

 

   2022   2021   2022   2021 
   For the Three Months Ended   For the Nine Months Ended 
   June 30,   June 30, 
   2022   2021   2022   2021 
                 
REVENUES, NET  $164,213   $278,925   $262,688   $415,029 
                     
COST OF REVENUE   99,484    69,253    160,229    99,298 
                     
GROSS PROFIT   64,729    209,672    102,459    315,731 
                     
OPERATING EXPENSES:                    
Professional fees   162,164    243,517    677,740    654,736 
Compensation expense   703,267    532,414    2,031,755    1,654,693 
Licensing fees   30,377    39,172    105,432    100,364 
General and administrative expenses   545,254    589,463    1,606,174    2,069,942 
                     
Total Operating Expenses   1,441,062    1,404,566    4,421,101    4,479,735 
                     
LOSS FROM OPERATIONS   (1,376,333)   (1,194,894)   (4,318,642)   (4,164,004)
                     
OTHER INCOME (EXPENSE):                    
Interest expense, net   (326,961)   (26,993)   (729,814)   (43,679)
Gain on debt extinguishment, net   -    -    -    227,294 
Unrealized (loss) gain on marketable securities   (5,500)   (3,900)   (8,600)   (3,600)
Unrealized loss on exchange rate   -    -    -    (22,686)
                     
Total Other Income (Loss), net   (332,461)   (30,893)   (738,414)   157,329 
                     
NET LOSS   (1,708,794)   (1,225,787)   (5,057,056)   (4,006,675)
                     
Series E preferred stock dividend   (39,890)   (39,452)   (119,671)   (119,561)
Series F preferred stock dividend   (19,945)   -    (59,836)   - 
                     
NET LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS  $(1,768,629)  $(1,265,239)  $(5,236,563)  $(4,126,236)
                     
NET LOSS PER COMMON SHARE:                    
Basic and Diluted  $(0.00)  $(0.00)  $(0.00)  $(0.00)
                     
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:                    
Basic and Diluted   6,062,411,449    5,550,559,312    5,732,126,399    5,306,754,829 

 

See accompanying condensed notes to unaudited financial statements.

 

5
 

 

THERALINK TECHNOLOGIES, INC.

STATEMENT OF CHANGES IN STOCKHOLDERS’ DEFICIT

FOR THE THREE AND NINE MONTHS ENDED JUNE 30, 2022 AND 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, 2021   667    2,966    4,917    -    -   $-    5,124,164,690   $512,416   $44,368,077   $(49,825,855)  $(4,945,362)
                                                        
Relative fair value of warrant issued in connection with convertible notes - related party recorded as debt discount   -    -    -    -    -    -    -    -    661,088    -    661,088 
                                                        
Relative fair value of warrant issued in connection with convertible notes recorded as debt discount   -    -    -    -    -    -    -    -    991,120    -    991,120 
                                                        
Series E preferred stock dividend   -    -    -    -    -    -    -    -    -    (40,329)   (40,329)
                                                        
Series F preferred stock dividend   -    -    -    -    -    -    -    -    -    (20,164)   (20,164)
                                                        
Correction for rounding error   -    -    -    -    -    -    (1,436)   -    -    -    - 
                                                        
Net loss   -    -    -    -    -    -    -    -    -    (1,512,267)   (1,512,267)
                                                        
Balance at December 31 2021   667    2,966    4,917    -    -    -    5,124,163,254    512,416    46,020,285    (51,398,615)   (4,865,914)
                                                        
Issuance of common stock in connection with conversion of Series C-1 preferred stock   -    (1,090)   -    -    -    -    163,637,529    16,364    (16,364)   -    - 
                                                        
Issuance of common stock in connection with conversion of Series C-2 preferred stock   -    -    (1,880)   -    -    -    280,475,491    28,048    (28,048)   -    - 
                                                        
Issuance of common stock in connection with settlement of accounts payable   -    -    -    -    -    -    26,913,738    2,691    81,549    -    84,240 
                                                        
Issuance of common stock in connection with subscriptions payable   -    -    -    -    -    -    431,309,907    43,131    1,306,869    -    1,350,000 
                                                        
Relative fair value of warrants issued in connection with convertible notes - related party recorded as debt discount   -    -    -    -    -    -    -    -    331,969    -    331,969 
                                                        
Relative fair value of warrants issued in connection with convertible notes recorded as debt discount   -    -    -    -    -    -    -    -    996,708    -    996,708 
                                                        
Relative fair value of additional warrants issued in connection with modification of convertible notes - related party recorded as debt discount   -    -    -    -    -    -    -    -    34,620    -    34,620 
                                                        
Relative fair value of additional warrants issued in connection with modification of convertible notes recorded as debt discount   -    -    -    -    -    -    -    -    44,858    -    44,858 
                                                        
Series E preferred stock dividend   -    -    -    -    -    -    -    -    -    (39,452)   (39,452)
                                                        
Series F preferred stock dividend   -    -    -    -    -    -    -    -    -    (19,727)   (19,727)
                                                        
Net loss   -    -    -    -    -    -    -    -    -    (1,835,995)   (1,835,995)
                                                        
Balance at March 31, 2022   667    1,876    3,037    -    -    -    6,026,499,919    602,650    48,772,446    (53,293,789)   (3,918,693)
                                                        
Issuance of common stock in connection with conversion of Series C-1 preferred stock   -    (833)   -    -    -    -    125,000,000    12,500    (12,500)   -    - 
                                                        
Relative fair value of warrants issued in connection with convertible notes - related party recorded as debt discount   -    -    -    -    -    -    -    -    238,228    -    238,228 
                                                        
Relative fair value of warrants issued in connection with convertible notes - recorded as debt discount   -    -    -    -    -    -    -    -    335,593    -    335,593 
                                                        
Series E preferred stock dividend   -    -    -    -    -    -    -    -    -    (39,890)   (39,890)
                                                        
Series F preferred stock dividend   -    -    -    -    -    -    -    -    -    (19,945)   (19,945)
                                                        
Net loss                                                (1,708,794)   (1,708,794)
                                                        
Balance at June 30, 2022   667    1,043    3,037    -    -   $-    6,151,499,919   $615,150   $49,333,767   $(55,062,418)  $(5,113,501)

 

   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 condensed notes to unaudited financial statements.

 

6
 

 

THERALINK TECHNOLOGIES, INC.

STATEMENTS OF CASH FLOWS

(UNAUDITED)

 

   2022   2021 
   For the Nine Months Ended 
   June 30, 
   2022   2021 
CASH FLOWS USED IN OPERATING ACTIVITIES          
Net loss  $(5,057,056)  $(4,006,675)
Adjustments to reconcile net loss to net cash used in operating activities:          
Depreciation on property and equipment and finance ROU assets   143,531    138,632 
Non-cash lease cost   21,528    1,382 
Amortization of debt discount   501,432    14,116 
Gain on debt extinguishment   -    (227,294)
Unrealized loss on exchange rate   -    22,686 
Unrealized loss on marketable securities   8,600    3,600 
Gain on modification of operating lease   (8,229)   - 
Change in operating assets and liabilities:          
Accounts receivable   (109,380)   (149,938)
Prepaid expenses and other current assets   27,882    44,420 
Laboratory supplies   71,062    36,467 
Accounts payable   (385,860)   252,383 
Accrued liabilities and other liabilities   158,335    20,950 
Contract liabilities   167,522    148,550 
           
NET CASH USED IN OPERATING ACTIVITIES   (4,460,633)   (3,700,721)
           
CASH FLOWS FROM INVESTING ACTIVITIES          
Adjustment related to Series A preferred prior period redemption payment   -    500 
Purchase of property and equipment   (88,199)   (116,052)
           
NET CASH USED IN INVESTING ACTIVITIES   (88,199)   (115,552)
           
CASH FLOWS FROM FINANCING ACTIVITIES          
Proceeds from sale of common stock   -    1,350,000 
Proceeds from convertible debt - related party   1,900,000    666,667 
Proceeds from convertible debt   2,425,000    - 
Proceeds of notes payable - related party   400,000    100,000 
Repayment of notes payable - related party   (150,000)   - 
Repayment of financed lease   (35,242)   - 
Payments for preferred stock dividends   (179,660)   - 
           
NET CASH PROVIDED BY FINANCING ACTIVITIES   4,360,098    2,116,667 
           
NET CHANGE IN CASH   (188,734)   (1,699,606)
           
CASH, beginning of the period   314,151    1,779,283 
           
CASH, end of the period  $125,417   $79,677 
           
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:          
Cash paid during the period for:          
Interest  $100,025   $- 
Income taxes  $-   $- 
           
Non-cash investing and financing activities:          
Series E preferred stock dividend  $119,671   $119,561 
Series F preferred stock dividend  $59,836   $- 
Initial amount of operating ROU asset and related liability  $1,212,708   $- 
Relative fair value of warrant issued in connection with convertible notes - related party recorded as debt discount  $1,231,285   $984,200 
Relative fair value of warrant issued in connection with convertible notes recorded as debt discount  $2,323,421   $- 
Relative fair value of additional warrants issued in connection with modification of convertible notes - related party recorded as debt discount  $34,620   $15,800 
Relative fair value of additional warrants issued in connection with modification of convertible notes recorded as debt discount  $44,858   $- 

 

See accompanying condensed notes to unaudited financial statements.

 

7
 

 

THERALINK TECHNOLOGIES, INC.

CONDENSED NOTES TO UNAUDITED FINANCIAL STATEMENTS

JUNE 30, 2022

(UNAUDITED)

 

NOTE 1 - ORGANIZATION AND NATURE OF OPERATIONS

 

Theralink Technologies, Inc., formerly OncBioMune Pharmaceuticals, Inc. (the “Company”), was a clinical-stage biopharmaceutical company engaged in the development of novel cancer immunotherapy products, with a proprietary vaccine technology. On June 5, 2020, the Company acquired the assets (the “Asset Sale Transaction”) of Avant Diagnostics, Inc., a Nevada corporation established in 2009 (“Avant”) pursuant to the Asset Purchase Agreement dated May 12, 2020, between the Company and Avant (the “Asset Purchase Agreement”). Avant is a commercial-stage precision medicine and molecular data-generating company that focuses on the development and commercialization of a series of patented, proprietary data-generating assays that may provide important actionable information for physicians and patients, as well as biopharmaceutical companies, in the area of oncology.

 

Pursuant to the Asset Purchase Agreement, the Company acquired substantially all of the assets of Avant and assumed certain of its liabilities. Upon the terms and subject to the conditions of the Asset Purchase Agreement, Avant sold to the Company, all of Avant’s title and interest in all the assets, properties and rights of every kind and nature, whether real, personal or mixed, tangible or intangible (including goodwill), wherever located and whether existing or hereafter acquired, except for the specific excluded assets, which relate to, or are used or held for use in connection with, Avant’s business. The Company also hired Avant’s employees upon consummation of the Asset Sale Transaction. As consideration for the Asset Sale Transaction, the Company issued to Avant 1,000 shares of a newly created Series D-1 Preferred Stock which held 54.55% of all voting rights on an as-converted basis with the common stock. Upon the effectiveness of an increase of the Company’s authorized shares of common stock from 6,666,667 shares to 12,000,000,000 shares, all such shares of Series D-1 Preferred Stock issued to Avant automatically converted into 5,081,549,184 shares of the Company’s common stock. Avant possessed majority voting control of the Company immediately following the Asset Sale Transaction and controlled the Company’s Board of Directors after the termination of the ten-day waiting period required by Rule 14f-1 under the Exchange Act. Accordingly, the Asset Sale Transaction was accounted for, in substance, as an asset acquisition of the Company’s net asset by Avant and a recapitalization of Avant. Avant is considered the historical registrant and the historical operations presented are those of Avant since Avant obtained 54.55% majority voting control of the Company. All share and per share data in the accompanying unaudited financial statements and footnotes has been retrospectively adjusted for the recapitalization.

 

On July 11, 2021, the Company’s wholly-owned subsidiary, OncBioMune, LLC, was administratively dissolved by the Louisiana Secretary of State for failing to meet its filing requirements and pay the associated fees (see Note 3).

 

In connection with the Asset Sale Transaction, the Company entered into an Exchange Agreement, effective June 5, 2020, by and among OncBioMune Pharmaceuticals, Inc. and the investors named therein, whereby the Company agreed to exchange certain convertible promissory notes and warrants outstanding for shares of Series C-1 Convertible Preferred Stock of the Company and options to purchase shares of the Company’s wholly-owned subsidiary, OncBioMune Sub Inc. OncBioMune Sub Inc. holds the patents used in the prior business of OncBioMune Pharmaceuticals, Inc. In July 2021, certain of those investors exercised their options to purchase the shares of OncBioMune Sub Inc. On July 26, 2021, the Company transferred all 10,000 shares of OncBioMune Sub Inc. held by the Company to the various investors for gross proceeds of $1,000 (see Note 3).

 

On February 25, 2022, FINRA recognized the Company’s name change to Theralink Technologies, Inc. and the related ticker symbol change from “OBMP” to “THER” went into effect.

 

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Basis of Presentation

 

The accompanying interim unaudited financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules and regulations of the United States Securities and Exchange Commission (“SEC”) for interim financial information, which present the unaudited financial statements of the Company as of June 30, 2022. The interim unaudited financial statements do not include all the information and notes necessary for a comprehensive presentation of financial position and results of operations and should be read in conjunction with the audited financial statements of the Form 10-K filed on January 13, 2022. It is management’s opinion that all material adjustments (consisting of normal recurring adjustments and non-recurring adjustments) have been made for the fair presentation of the unaudited financial statements. The results for the interim period are not necessarily indicative of the results to be expected for the year ending September 30, 2022.

 

8
 

 

THERALINK TECHNOLOGIES, INC.

CONDENSED NOTES TO UNAUDITED FINANCIAL STATEMENTS

JUNE 30, 2022

(UNAUDITED)

 

Going Concern

 

These unaudited financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. As reflected in the accompanying unaudited financial statements, the Company had net loss and net cash used in operations of $5,057,056 and $4,460,633, respectively, for the nine months ended June 30, 2022. Additionally, the Company had an accumulated deficit, stockholders’ deficit and working capital deficit of $55,062,418, $5,113,501 and $1,584,036 at June 30, 2022. Management believes that these matters raise substantial doubt about the Company’s ability to continue as a going concern for twelve months from the issuance date of this report.

 

The Company cannot provide assurance that it will ultimately achieve profitable operations or become cash flow positive or raise additional debt or equity capital. Additionally, the current capital resources are not adequate to continue operating and maintaining the business strategy for a period of twelve months from the issuance date of this report. The Company will seek to raise capital through additional debt and equity financings to fund its operations in the future.

 

Although the Company has historically raised capital from sales of equity and the issuance of promissory notes, there is no assurance that it will be able to continue to do so. If the Company is unable to raise additional capital or secure additional lending in the near future, management expects that the Company will need to curtail or cease operations. These unaudited financial statements do not include any adjustments related to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

 

The global pandemic COVID-19, otherwise referred to as the Coronavirus, could impair our ability to raise additional funding or make such funding more costly. The ongoing global pandemic has caused cessation of normal business operations and initially caused capital markets to decline sharply. This could make it more difficult for the Company to access capital. It is currently difficult to estimate with any certainty how long the pandemic and resulting curtailment of business will continue, and its effect on capital markets and the Company’s ability to raise funds is, accordingly, difficult to quantify. In addition, to the extent that any of the Company’s personnel or consultants are affected by the virus, this could cause delays or disruption in our planned research and development activities.

 

Use of Estimates

 

The preparation of financial statements in conformity with U.S. GAAP requires management to make judgments, assumptions, and estimates that affect the amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. Management bases its estimates and assumptions on current facts, historical experience, and various other factors that it believes are reasonable under the circumstances, to determine the carrying values of assets and liabilities that are not readily apparent from other sources. Significant estimates during the nine months ended June 30, 2022 and year ended September 30, 2021 include, but are not necessarily limited to, estimates of contingent liabilities, valuation of marketable securities, useful life of property and equipment, valuation of right-of-use (“ROU”) assets and lease liabilities, assumptions used in assessing impairment of long-lived assets, allowances for accounts receivable, estimates of current and deferred income taxes and deferred tax valuation allowances and the fair value of non-cash equity transactions.

 

Fair Value of Financial Instruments and Fair Value Measurements

 

FASB ASC 820 - Fair Value Measurements and Disclosures, defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. FASB ASC 820 requires disclosures about the fair value of all financial instruments, whether or not recognized, for financial statement purposes. Disclosures about the fair value of financial instruments are based on pertinent information available to the Company on June 30, 2022. Accordingly, the estimates presented in these financial statements are not necessarily indicative of the amounts that could be realized on the disposition of the financial instruments. FASB ASC 820 specifies a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect market assumptions. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurement) and the lowest priority to unobservable inputs (Level 3 measurement). The three levels of the fair value hierarchy are as follows:

 

  Level 1—Inputs are unadjusted quoted prices in active markets for identical assets or liabilities available at the measurement date.

 

  Level 2—Inputs are unadjusted quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, inputs other than quoted prices that are observable, and inputs derived from or corroborated by observable market data.
   
  Level 3—Inputs are unobservable inputs which reflect the reporting entity’s own assumptions on what assumptions the market participants would use in pricing the asset or liability based on the best available information.

 

9
 

 

THERALINK TECHNOLOGIES, INC.

CONDENSED NOTES TO UNAUDITED FINANCIAL STATEMENTS

JUNE 30, 2022

(UNAUDITED)

 

Cash and Cash Equivalents

 

The Company considers all highly liquid instruments purchased with an original maturity of three months or less to be cash equivalents. The Company’s investment policy is to preserve principal and maintain liquidity. The Company periodically monitors its positions with, and the credit quality of, the financial institutions with which it invests.

 

Prepaid Assets

 

Prepaid assets are carried at amortized cost. Significant prepaid assets as of June 30, 2022 and September 30, 2021 include, but are not necessarily limited to, prepaid insurance, prepaid consulting fees, prepaid equipment maintenance fees and retainers for professional services.

 

Laboratory Supplies

 

Laboratory supplies are normally consumed within a year from purchase and any unused laboratory supplies are classified as current assets and reflected in the accompanying unaudited balance sheet as laboratory supplies.

 

Property and Equipment

 

Fixed assets are stated at cost and depreciated using the straight-line method over their estimated useful lives, which range from three to five years. Leasehold improvements are depreciated over the shorter of their useful life or the lease term including scheduled renewal terms. Maintenance and repairs are charged to expense as incurred. When assets are retired or disposed of, the cost and accumulated depreciation are removed from the accounts, and any resulting gains or losses are included in income in the year of disposition. The Company examines the possibility of decreases in the value of these assets when events or changes in circumstances reflect the fact that their recorded value may not be recoverable.

 

Impairment of Long-Lived Assets

 

In accordance with ASC Topic 360, the Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be fully recoverable, or at least annually. The Company recognizes an impairment loss when the sum of expected undiscounted future cash flows is less than the carrying amount of the asset. The amount of impairment is measured as the difference between the asset’s estimated fair value and its book value.

 

Stock-Based Compensation

 

Stock-based compensation is accounted for based on the requirements of the Share-Based Payment Topic of ASC 718 which requires recognition in the financial statements of the cost of employee and director services received in exchange for an award of equity instruments over the period the employee or director is required to perform the services in exchange for the award (presumptively, the vesting period). The ASC also requires measurement of the cost of employee and director services received in exchange for an award based on the grant-date fair value of the award.

 

Pursuant to ASC 505-50 - Equity-Based Payments to Non-Employees, all share-based payments to non-employees, including grants of stock options, were recognized in the financial statements as compensation expense over the service period of the consulting arrangement or until performance conditions are expected to be met. Using a Black Scholes valuation model, the Company periodically reassessed the fair value of non-employee options until service conditions are met, which generally aligns with the vesting period of the options, and the Company adjusts the expense recognized in the financial statements accordingly. In June 2018, the FASB issued ASU No. 2018-07, Improvements to Nonemployee Share-Based Payment Accounting, which simplifies several aspects of the accounting for nonemployee share-based payment transactions by expanding the scope of the stock-based compensation guidance in ASC 718 to include share-based payment transactions for acquiring goods and services from non-employees. ASU No. 2018-07 is effective for annual periods beginning after December 15, 2018, including interim periods within those annual periods. Early adoption is permitted, but entities may not adopt prior to adopting the new revenue recognition guidance in ASC 606. The Company early adopted ASU No. 2018-07 during the period September 30, 2018, and the adoption did not have any impact on its financial statements.

 

10
 

 

THERALINK TECHNOLOGIES, INC.

CONDENSED NOTES TO UNAUDITED FINANCIAL STATEMENTS

JUNE 30, 2022

(UNAUDITED)

 

Revenue Recognition and Contract Assets and Liabilities

 

In accordance with ASU Topic 606 - Revenue from Contracts with Customers, the Company recognizes revenue in accordance with that core principle by applying the following steps:

 

Step 1: Identify the contract(s) with a customer.

Step 2: Identify the performance obligations in the contract.

Step 3: Determine the transaction price.

Step 4: Allocate the transaction price to the performance obligations in the contract.

Step 5: Recognize revenue when (or as) the entity satisfies a performance obligation.

 

The Company provides research and development support to biopharmaceutical companies to assist their drug development programs. In January 2021, the Company began performing tumor profiling to support clinical patient therapeutic intervention. The services provided by the Company are performance obligations under services contracts. These contracts are completed over time and may lead to deferred revenue for services not completed at the end of a period which is reflected as contract liabilities on the accompanying unaudited balance sheet. The Company may include, in accounts receivable, amounts billed to customers in advance of services being initiated or completed. If the Company has a right to such consideration that is unconditional such as for contractually allowed billings, such amounts billed in advance would be offset by a contract liability. Management reviews the completion status of all jobs monthly to determine the appropriate amount of revenue to recognize. The Company offers these services to biopharmaceutical companies and to private individuals. The Company uses various output methods to recognize revenues. The revenue recognized from services provided to private individuals during the nine months ended June 30, 2022 and year ended September 30, 2021 were minimal and therefore was not disaggregated for disclosure purposes.

 

Contract Liabilities

 

Contract liabilities are cash deposits received from customers and advance billing included in accounts receivable on uncompleted contracts for which revenues have not been recognized as of the balance sheet date.

 

Contract liabilities as of June 30, 2022 and September 30, 2021 are as follows:

 

  

June 30,

2022

  

September 30,

2021

 
Contract liabilities beginning balance  $135,150   $ 
Billings and cash receipts on uncompleted contracts   325,048    281,012 
Less: revenues recognized during the period   (157,525)   (145,862)
Total contract liabilities  $302,672   $135,150 

 

During the nine months ended June 30, 2022, the Company recognized $157,525 of the contract liabilities, of which $22,250 was related to the uncompleted contracts from the prior period.

 

Cost of Revenue

 

The cost of revenue consists of the cost of labor, supplies and materials.

 

Accounts Receivable and Allowance for Doubtful Accounts

 

Trade receivables are carried at their estimated collectible amounts. Trade credit is generally extended on a short-term basis and does not bear interest. Trade accounts receivable are periodically evaluated for collectability based on past credit history with customers and their current financial condition.

 

Any charges to the allowance for doubtful accounts on accounts receivable are charged to operations in amounts sufficient to maintain the allowance for uncollectible accounts at a level management believes is adequate to cover any probable losses. Management determines the adequacy of the allowance based on historical write-off percentages and the current status of accounts receivable. Accounts receivable are charged off against the allowance when collectability is determined to be permanently impaired.

 

Concentrations

 

Concentration of Credit Risk

 

The Company maintains its cash in banks and financial institutions that at times may exceed the federally insured limit of $250,000. As of June 30, 2022 and September 30, 2021, the cash balances were in excess of the FDIC insured limit by $0 and $68,122, respectively. The Company has not experienced any losses in such accounts through June 30, 2022.

 

11
 

 

THERALINK TECHNOLOGIES, INC.

CONDENSED NOTES TO UNAUDITED FINANCIAL STATEMENTS

JUNE 30, 2022

(UNAUDITED)

 

Concentration of Revenues

 

For the three months ended June 30, 2022, the Company generated total revenue of $164,213 of which 52% and 13% were from two of the Company’s customers. For the three months ended June 30, 2021, the Company generated total revenue of $278,925 of which 56%, 18% and 14% were from three of the Company’s customers.

 

For the nine months ended June 30, 2022, the Company generated total revenue of $262,688 of which 32%, 23% and 17% were from three of the Company’s customers. For the nine months ended June 30, 2021, the Company generated total revenue of $415,029 of which 38%, 14% and 13% were from three of the Company’s customers.

 

Concentration of Accounts Receivable

 

As of June 30, 2022, the Company had accounts receivable of $109,380 of which 34%, 19%, 14%, 12%, 11% and 10% were from six of the Company’s customers, respectively. As of September 30, 2021, the Company did not have any accounts receivable.

 

Concentration of Contract Liabilities

 

As of June 30, 2022, the Company had deferred revenue reflected as contract liabilities of $302,672 of which 42%, 25%, 15% and 10% were from four of the Company’s customers. As of September 30, 2021, the Company had deferred revenue reflected as contract liabilities of $135,150 of which 56%, 24% and 16% were from three of the Company’s customers.

 

Concentration of Vendor

 

Generally, the Company relies on one vendor to perform the Company’s patient reporting and contract research (formerly called sample analysis) which is an integral part of the Company’s operation and revenue stream. Any disruption in this service could have a material adverse effect on the Company’s business, financial condition and results of operations.

 

During the nine months ended June 30, 2022 and 2021, the Company incurred $275,372 and $733,242, respectively, or 100% of it patient reporting and contract research (formerly called sample analysis) expense from one vendor.

 

Basic and Diluted Loss Per Share

 

Pursuant to ASC 260-10-45, basic loss per common share is computed by dividing the net loss by the weighted average number of shares of common stock outstanding for the periods presented. Diluted loss per share is computed by dividing the net loss by the weighted average number of shares of common stock, common stock equivalents and potentially dilutive securities outstanding during the period. Potentially dilutive common shares consist of common stock issuable for stock options and warrants (using the treasury stock method), convertible notes and common stock issuable. These common stock equivalents may be dilutive in the future. The following potentially dilutive equity securities outstanding as of June 30, 2022 and 2021 were not included in the computation of dilutive loss per common share because the effect would have been anti-dilutive:

 

   June 30, 
   2022   2021 
Stock warrants   1,876,207,963    920,572,535 
Series C-1 preferred stock   156,626,175    445,301,289 
Series C-2 preferred stock   453,067,129    733,542,619 
Series E preferred stock   638,977,636    533,333,333 
Series F preferred stock   319,488,818     
Convertible notes   1,417,522,294     
    4,861,890,015    2,632,749 

 

Income Taxes

 

The Company accounts for income tax using the liability method prescribed by ASC 740 - Income Taxes. Under this method, deferred tax assets and liabilities are determined based on the difference between the financial reporting and tax bases of assets and liabilities using enacted tax rates that will be in effect in the year in which the differences are expected to reverse. The Company records a valuation allowance to offset deferred tax assets if based on the weight of available evidence, it is more-likely-than-not that some portion, or all, of the deferred tax assets will not be realized. The effect on deferred taxes of a change in tax rates is recognized as income or loss in the period that includes the enactment date.

 

12
 

 

THERALINK TECHNOLOGIES, INC.

CONDENSED NOTES TO UNAUDITED FINANCIAL STATEMENTS

JUNE 30, 2022

(UNAUDITED)

 

The Company follows the accounting guidance for uncertainty in income taxes using the provisions of ASC 740 “Income Taxes”. Using that guidance, tax positions initially need to be recognized in the financial statements when it is more likely than not the position will be sustained upon examination by the tax authorities. As of June 30, 2022 and September 30, 2021, the Company had no uncertain tax positions that qualify for either recognition or disclosure in the financial statements. The Company recognizes interest and penalties related to uncertain income tax positions in other expense. However, no such interest and penalties were recorded as of June 30, 2022 and September 30, 2021.

 

Related Parties

 

Parties are considered to be related to the Company if the parties, directly or indirectly, through one or more intermediaries, control, are controlled by, or are under common control with the Company. Related parties also include principal owners of the Company, its management, members of the immediate families of principal owners of the Company and its management and other parties with which the Company may deal with if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests.

 

Leases

 

The Company accounts for its leases using the method prescribed by ASC 842 – Lease Accounting. The Company assess whether the contract is, or contains, a lease at the inception of a contract which is based on (i) whether the contract involves the use of a distinct identified asset, (ii) whether the Company obtains the right to substantially all the economic benefit from the use of the asset throughout the period, and (iii) whether the Company has the right to direct the use of the asset. The Company allocates the consideration in the contract to each lease component based on its relative stand-alone price to determine the lease payments. The Company has elected not to recognize right-of-use (“ROU”) assets and lease liabilities for short-term leases that have a term of 12 months or less.

 

Operating and financing lease ROU assets represents the right to use the leased asset for the lease term. Operating and financing lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at the commencement date. As most leases do not provide an implicit rate, the Company uses an incremental borrowing rate based on the information available at the adoption date in determining the present value of future payments. Lease expense for minimum lease payments is amortized on a straight-line basis over the lease term and is included in general and administrative expenses in the unaudited statements of operations.

 

Recent Accounting Pronouncements

 

In August 2020, the FASB issued ASU 2020-06—Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”) to simplify the accounting for convertible instruments by removing certain separation models in Subtopic 470- 20, Debt with Conversion and Other Options, for convertible instruments. Under the amendments in ASU 2020-06, the embedded conversion features no longer are separated from the host contract for convertible instruments with conversion features that are not required to be accounted for as derivatives under Topic 815, Derivatives and Hedging, or that do not result in substantial premiums accounted for as paid-in capital. Consequently, a convertible debt instrument will be accounted for as a single liability measured at its amortized cost and a convertible preferred stock will be accounted for as a single equity instrument measured at its historical cost, as long as no other features require bifurcation and recognition as derivatives. By removing those separation models, the interest rate of convertible debt instruments typically will be closer to the coupon interest rate when applying the guidance in Topic 835, Interest. The amendments in ASU 2020-06 provide financial statement users with a simpler and more consistent starting point to perform analyses across entities. The amendments also improve the operability of the guidance and reduce, to a large extent, the complexities in the accounting for convertible instruments and the difficulties with the interpretation and application of the relevant guidance. To further improve the decision usefulness and relevance of the information being provided to users of financial statements, amendments in ASU 2020-06 increased information transparency by making the following amendments to the disclosure for convertible instruments: