Note 8 – Shareholders’ Equity (Deficit)

Preferred Stock 2023

On July 25, 2023, the Company entered into a definitive securities purchase agreement with several institutional and accredited investors, including existing significant investors of Theralink Technologies, Inc., its previously announced merger partner (OTC:THER) (“Theralink”), and Theralink’s Chairman, for the sale of its preferred stock and warrants. IMAC sold an aggregate of 2,500 shares of its Series A-1 Convertible Preferred Stock, stated value $1,000 per share, 1,800 shares of its Series A-2 Convertible Preferred Stock, stated value $1,000 per share, and Warrants to purchase up to 2,075,702 shares of its common stock for aggregate gross proceeds of $4.3 million before deducting placement agent fees and other offering expenses of $480,000. The shares of A-1 Convertible Preferred Stock, shall bear a 12% dividend based on stated, value have no voting rights, and are initially convertible into an aggregate of 763,126 shares of common stock of the Company, and the shares of Series A-2 Convertible Preferred Stock are initially convertible into an aggregate of 549,451 shares of common stock of the Company, in each case, at a conversion price of $3.276 per share. The Warrants have an exercise price of $3.276 per share, are exercisable immediately, and will expire five years from the date of shareholder approval of this private placement. The shares contain price protection provisions and beneficial ownership limitation provisions upon conversion as defined in the certificates of designation. Approximately $3.0 million of the proceeds of the offering was used to make two loans to Theralink for investment into sales and marketing efforts and general working capital purposes as the companies continue to take formal steps together in advancing their merger previously announced on May 23, 2023. As of December 31, 2023 dividends of approximately $130,000 have been declared and accrued on the Series A-1 Convertible Preferred Stock.

The Company also entered into a Registration Rights Agreement, pursuant to which it agreed to file a registration statement with the Securities and Exchange Commission (the “SEC”) covering the resale of the shares of the Company’s common stock underlying the Series A-1 Convertible Preferred Stock, Series A-2 Convertible Preferred Stock and Warrants no later than 45 days following the closing of the planned merger.

On December 20, 2023, the Company entered into a letter agreement with several institutional and accredited investors providing for the sale of an additional aggregate $250,000 of convertible preferred stock (the “Private Placement”) with offering expenses of approximately $25,000. Pursuant to the letter agreement, the Company exchanged its Series A-1 Convertible Preferred Stock and Series A-2 Convertible Preferred stock for a corresponding number of shares of the Company’s newly-created Series B-1 Convertible Preferred Stock and the Company’s newly-created Series B-2 Convertible Preferred Stock, respectively. Shares of the Series B-1 Convertible Preferred Stock and Series B-2 Convertible Preferred Stock are convertible into shares of common stock of the Company at a conversion price of $1.84 per share, which is above the most recent closing price of the Company’s common stock and represents a reduction in the conversion price from the Series A-1 Convertible Preferred Stock and Series A-2 Convertible Preferred Stock. Therefore, the Series B-1 and B-2 preferred stock is convertible into 1,437,500 and 1,035,326 common shares, respectively. In addition, the exercise price of the Warrants was reduced to $1.84 pursuant to the letter agreement. The reduction in the conversion price and the exercise price was made in consideration of the additional purchase amount, therefore there was no accounting effect of this exchange. It is expected that the proceeds of the Private Placement will be used for general working capital and general corporate purposes.

All terms other than the conversion price are the same as the Series A-1 and A-2.

In 2024, the Series B-1 and B-2 preferred shares were exchanged for Series C-1 and C-2 preferred shares.

Preferred Stock sold for cash

During the year ended December 31, 2024, the Company sold 1,276, 17,364, 24,172, 450 and 4,676 shares of Series C-2, Series D, Series E, Series F and Series G preferred stock, respectively, for gross proceeds of $5.09 million.

The Company used $2.2 million of the Series G proceeds to repay $2.2 million of outstanding promissory notes of the Company and accordingly, the Company had no debt outstanding after such repayments.

Series C-2, Series D, Series E, Series F and Series G preferred stock have dividends equal to 10% per annum.

In connection with the sale of preferred stock in 2024, the Company issued common stock purchase warrants of 5.7 million with a weighted average exercise price of $2.00. The warrants were accounted for in equity and have a value of $11.5 million.

Inputs associated with the value of those warrants is Contractual term of 5 years, Volatility of 149%, Dividend Yield of 0% and risk free rate of 4.43%.

Preferred stock exchanged

During the year ended December 31, 2024, certain investors exchanged 4,550 shares of Series B-1 and B-2 preferred stock for shares of Series C-1 preferred stock. The share exchange was accounted for as a modification; however, the difference in fair value was de minimis. The Series C-1 have dividends equal to 10% per annum.

Preferred stock converted

During the year ended December 31, 2024, 2,186 shares of preferred stock were converted into 864,846 shares of common stock.

Restricted Stock Units

On May 19, 2023, the Company granted an aggregate of 10,000 RSUs to Board members with these RSU’s vesting immediately with a fair value of $42,900 based on the grant date stock price.

 Schedule of Restricted Stock Units

Liquidation preference

Liquidation Value

Schedule of Liquidation Preference Value

Common Stock

In January 2023, the Company issued 2,725 common shares for cash of $16,650 under its At The Market (ATM) offering.

On December 27, 2023, issued an aggregate of 10,000 common shares for the Board members valued at $4.29 per share or $42,900 based on the quoted trading price on the grant date which was May 2023.