THERALINK TECHNOLOGIES, INC. - Quarter Report: 2021 December (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

For the Quarterly Period Ended: December 31, 2021

For the transition period from ______________ to ______________

Commission File Number: 000-52218

Theralink Technologies, Inc.

(Exact name of registrant as specified in its charter)

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.

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 5,555,473,158 shares of its common stock, $0.0001 par value per share, outstanding as of February 16, 2022.

THERALINK TECHNOLOGIES, INC.

FORM 10-Q

DECEMBER 31, 2021

TABLE OF CONTENTS

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:

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:

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.

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

THERALINK TECHNOLOGIES, INC.

CONSOLIDATED BALANCE SHEETS

See accompanying condensed notes to unaudited consolidated financial statements.

THERALINK TECHNOLOGIES, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

See accompanying condensed notes to unaudited consolidated financial statements.

THERALINK TECHNOLOGIES, INC.

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ DEFICIT

FOR THE THREE MONTHS ENDED DECEMBER 31, 2021 AND 2020

(UNAUDITED)

See accompanying condensed notes to unaudited consolidated financial statements.

THERALINK TECHNOLOGIES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

See accompanying condensed notes to unaudited consolidated financial statements.

THERALINK TECHNOLOGIES, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2021

(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 (see Note 3). All share and per share data in the accompanying unaudited consolidated 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 July 30, 2021, the Company filed a certificate of designation, preferences and rights of Series F Preferred Stock (the “Series F Certificate of Designation”), with the Nevada Secretary of State to designate 1,000 shares of its previously authorized preferred stock as Series F Preferred Stock, par value $0.0001 per share and a stated value of $2,000 per share. The Series F Certificate of Designation and its filing were approved by the Company’s Board of Directors without stockholder approval as provided for in the Company’s articles of incorporation and under Nevada law (see Note 9).

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation and Principles of Consolidation

The accompanying interim unaudited consolidated 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 consolidated financial statements of the Company and its wholly-owned, inactive subsidiaries, OncBioMune, LLC. (through dissolution date of July 11, 2021) and OncBioMune Sub, Inc. (through sale date of July 26, 2021), as of December 31, 2021. All intercompany transactions and balances have been eliminated. The interim unaudited consolidated 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 consolidated 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 consolidated 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.

THERALINK TECHNOLOGIES, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2021

(UNAUDITED)

Going Concern

These unaudited consolidated 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 consolidated financial statements, the Company had net loss and net cash used in operations of $1,512,267 and $1,494,792, respectively, for the three months ended December 31, 2021. Additionally, the Company had an accumulated deficit, stockholders’ deficit and working capital deficit of $51,398,615, $4,865,914 and $2,417,506 at December 31, 2021. 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 from 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 consolidated 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 consolidated 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 consolidated 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 three months ended December 31, 2021 and year ended September 30, 2021 include, but are not necessarily limited to, the valuation of assets and liabilities of discontinued operations, 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 December 31, 2021. Accordingly, the estimates presented in these financial statements are not necessarily indicative of the amounts that could be realized on 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:

THERALINK TECHNOLOGIES, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2021

(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 December 31, 2021 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 asset and reflected in the accompanying unaudited consolidated 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 consolidated 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 consolidated 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 consolidated financial statements.

THERALINK TECHNOLOGIES, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2021

(UNAUDITED)

Revenue Recognition

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. 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 revenue recognized from services provided to private individuals during the three months ended December 31, 2021 and year ended September 30, 2021 were minimal and therefore was not disaggregated for disclosure purposes.

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 December 31, 2021 and September 30, 2021, the cash balances were in excess of the FDIC insured limit by $244,456 and $68,122, respectively. The Company has not experienced any losses in such accounts through December 31, 2021.

Concentration of Revenues

For the three months ended December 31, 2021, the Company generated total revenue of $78,975 of which 56% and 35% were from two of the Company’s customers. For the three months ended December 31, 2020, the Company generated total revenue of $9,790 from one customer.

Concentration of Deferred Revenue

As of December 31, 2021, the Company had deferred revenue of $155,900 of which 49%, 24% and 21% were from three of the Company’s customers. As of September 30, 2021, the Company had deferred revenue 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 three months ended December 31, 2021 and 2020, the Company incurred $113,295 and $275,000, respectively, or 100% of it patient reporting and contract research (formerly called sample analysis) expense from one vendor.

THERALINK TECHNOLOGIES, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2021

(UNAUDITED)

Basic and Diluted Loss Per Share

Pursuant to ASC 260-10-45, basic loss per common share is computed by dividing 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 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 December 31, 2021 and 2020 were not included in the computation of dilutive loss per common share because the effect would have been anti-dilutive:

 SCHEDULE OF ANTI-DILUTIVE SHARES OUTSTANDING

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.

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 December 31, 2021 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 December 31, 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 consolidated statements of operations.

THERALINK TECHNOLOGIES, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2021

(UNAUDITED)

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:

Additionally, for convertible debt instruments with substantial premiums accounted for as paid-in capital, amendments in ASU 2020-06 added disclosures about (1) the fair value amount and the level of fair value hierarchy of the entire instrument for public business entities and (2) the premium amount recorded as paid-in capital.

The amendments in ASU 2020-06 are effective for public business entities, excluding entities eligible to be smaller reporting companies as defined by the SEC, for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. Entities should adopt the guidance as of the beginning of its annual fiscal year and are allowed to adopt the guidance through either a modified retrospective method of transition or a fully retrospective method of transition. In applying the modified retrospective method, entities should apply the guidance to transactions outstanding as of the beginning of the fiscal year in which the amendments are adopted. Transactions that were settled (or expired) during prior reporting periods are unaffected. The cumulative effect of the change should be recognized as an adjustment to the opening balance of retained earnings at the date of adoption. If an entity elects the fully retrospective method of transition, the cumulative effect of the change should be recognized as an adjustment to the opening balance of retained earnings in the first comparative period presented. The Company early adopted ASU 2020-06 and its adoption did not have any material impact on the Company’s consolidated financial statements.

In May 2021, the FASB issued ASU 2021-04, Earnings Per Share (Topic 260), Debt-Modifications and Extinguishments (Subtopic 470-50), Compensation-Stock Compensation (Topic 718), and Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic 815-40). The new ASU addresses issuer’s accounting for certain modifications or exchanges of freestanding equity-classified written call options. This amendment is effective for all entities, for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. Early adoption is permitted. The Company early adopted ASU 2020-06 and its adoption did not have any material impact on the Company’s consolidated financial statements.

Management does not believe that any other recently issued, but not yet effective accounting pronouncements, if adopted, would have a material effect on the Company’s consolidated financial statements.

NOTE 3 – DISPOSAL OF SUBSIDIARIES AND RECAPITALIZATION

Administrative Dissolution of OncBioMune, LLC

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 1). The Company deconsolidated OncBioMune, LLC on July 11, 2021 and recognized a gain of $9,916 which was recorded in the consolidated statement of operations as a gain on the dissolution of a subsidiary.

THERALINK TECHNOLOGIES, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2021

(UNAUDITED)

Exercise of Options to Purchase Shares of OncBioMune Sub Inc.

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 the option 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 aggregate proceeds of $1,000. The proceeds were recorded in the consolidated statement of operations as a gain on the disposal of a subsidiary (see Note 1).

Asset Sale and Recapitalization Transaction

Avant provided personalized medical data through its Theralink assays, initially for breast cancer, to assist treating physician in a data-driven process for treatment decision support and to help enable predictive biomarker-based patient therapy selection. Avant was a developer of phosphoproteomic technologies for measuring the activation state of therapeutic targets and signaling pathways, a key metric for biopharmaceuticals, with applications across multiple cancer types, including breast, non-small cell lung, gastrointestinal (“GI”), gynecologic and pancreatic, among others.

On June 5, 2020, the Company closed the Asset Purchase Agreement entered into with Avant on May 12, 2020. Pursuant to the Asset Purchase Agreement, the Company acquired substantially all of the assets and business of Avant and assumed certain of its liabilities in the Asset Sale Transaction. 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 of 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, Avant was issued 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 increase of the Company’s authorized shares of common stock from 6,666,667 shares to 12,000,000,000 shares effective September 24, 2020, 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 assets by Avant and a recapitalization of Avant as discussed in detail below under “Accounting for the Asset Sale Transaction”. Avant is considered the historical registrant and the historical operations presented are those of Avant since Avant obtained majority voting control (54.55%) of the Company.

On June 5, 2020, pursuant to the Asset Purchase Agreement, the Company: (i) entered into an employment agreement with Dr. Michael Ruxin to serve as the Company’s Chief Executive Officer, President and a director (see Note 10); (ii) entered into an employment agreement with Jeffery Busch to serve as the Company’s Chairman of the Board of Directors (see Note 10); and (iii) appointed Yvonne Fors to its Board of Directors.

Accounting for the Asset Sale Transaction

The Asset Sale Transaction was accounted for, in substance, as an asset acquisition of the Company’s net assets by Avant and a recapitalization of Avant as the Company did not meet the definition of a business under the framework provided in ASC 805-10-55-5D through 55-6 - Business Combination. Avant is considered the historical registrant and the historical operations presented are those of Avant since Avant obtained majority voting control (54.55%) of the Company where, in effect, the Company is the legal acquirer (accounting acquiree) and Avant is the accounting acquirer (legal acquiree).

The cost of the Asset Sale Transaction was determined in accordance with ASC 805-50-30-1 through 30-2 Business Combinations, which states in part that assets are recognized based on their cost to the acquiring entity, which generally includes the transaction costs of the asset acquisition, and no gain or loss is recognized unless the fair value of noncash assets given as consideration differs from the assets’ carrying amounts on the acquiring entity’s books. If the consideration given is not in the form of cash (that is, in the form of noncash assets, liabilities incurred, or equity interests issued), measurement is based on either the cost which shall be measured based on the fair value of the consideration given or the fair value of the assets (or net assets) acquired, whichever is more clearly evident and, thus, more reliably measurable.

In accordance with ASC 805-50-30-1, the fair value of the 1,000 shares of Series D-1 Preferred Stock, issued as consideration, was determined to be $246,656 which was the fair value of the Company’s net assets that were acquired by Avant as of the closing date of the transaction. The cost of the Asset Sale Transaction was allocated to the acquired assets and assumed liabilities based on their estimated fair values.

THERALINK TECHNOLOGIES, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2021

(UNAUDITED)

The following assets and liabilities were assumed in the transaction:

 SCHEDULE OF ASSETS AND LIABILITIES IN TRANSACTION

The functional currency of a former subsidiary which operated in Mexico was the Mexican Peso (“Peso”). The assumed liabilities of discontinued operations were translated to U.S. dollars using the period end rates of exchange for liabilities. Net gains and losses resulting from foreign exchange transactions are reflected as unrealized gain (loss) on exchange rate in the consolidated statements of operations and is a non-cash loss. As a result of foreign currency translations, which are a non-cash adjustment, the Company reported unrealized (loss) on exchange rate of $0 and $(22,686) during the three months ended December 31, 2021 and 2020, respectively.

During the three months ended December 31, 2021 and 2020, $0 and $227,294 of the assumed liabilities of discontinued operations were written-off, in accordance with ASC 405-20-40-1b and were recorded as a gain on debt extinguishment on the accompanying unaudited consolidated statement of operations.

NOTE 4 – MARKETABLE SECURITIES

During the fiscal year ended 2017, the Company acquired 1,000,000 shares of common stock of Amarantus BioScience Holdings, Inc. (“AMBS”) with a fair value of $40,980. The AMBS common stock is recorded as marketable securities in the accompanying unaudited consolidated balance sheets. Its fair value is adjusted every reporting period and the change in fair value is recorded in the unaudited consolidated statements of operations as unrealized gain or (loss) on marketable securities. During the three months ended December 31, 2021, and 2020, the Company recorded $5,400 and $(3,100) of unrealized gain (loss) on marketable securities, respectively. As of December 31, 2021 and September 30, 2021, the fair value of these shares was $16,400 and $11,000, respectively.

NOTE 5 – PROPERTY AND EQUIPMENT

Property and equipment are recorded at cost. Once placed in service, they are depreciated on the straight-line method over their estimated useful lives. Leasehold improvements are accreted over the shorter of the estimated economic life or related lease terms. Fixed assets consist of the following:

 SCHEDULE OF PROPERTY AND EQUIPMENT

For the three months ended December 31, 2021 and 2020, depreciation expense related to property and equipment amounted to $35,965 and $34,053, respectively.

Leased equipment was not included in the table above as it was accounted for in accordance to ASU 842 – Leases. These leases are discussed in Note 7 under financing lease right-of-use (“ROU”) assets and financing lease liabilities.

THERALINK TECHNOLOGIES, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2021

(UNAUDITED)

NOTE 6 – DEBT

At December 31, 2021, the convertible notes payable consisted of the following:

 SCHEDULE OF CONVERTIBLE NOTES PAYABLE

Convertible Debt – Related Party

On May 12, 2021, the Company entered into a Securities Purchase Agreement (the “SPA”) with a related party, who is an affiliate stockholder (the “Investor”) to purchase a convertible note (the “Note”) and accompanying warrant (the “Warrant”) for an aggregate investment amount of $1,000,000 (see Note 8). The Note has a principal value of $1,000,000 and bears an interest rate of 8% per annum (which shall increase to 10% per year upon the occurrence of an “Event of Default” (as defined in the Note)) and shall mature on May 12, 2026 (the “Maturity Date”). The Company received the proceeds in three tranches with the first tranche of $333,334 received in May 2021, the second tranche of $333,333 received in June 2021 and the third tranche of $333,333 received in July 2021. The Note is convertible at any time into shares of the Company’s common stock at a conversion price equal to $0.00313 per share for any amount of principal and accrued interest remaining outstanding (subject to adjustment as provided therein). The Company may prepay the Note at any time upon approval of the Company’s name change to Theralink Technologies, Inc. and the related ticker symbol change by FINRA in an amount equal to 110% of the outstanding principal balance and accrued interest. In connection with the Company’s obligations under the Note, the Company entered into a security agreement (the “Security Agreement”) with Ashton Capital Corporation as agent, pursuant to which the Company granted a lien on the laboratory equipment of the Company (the “Collateral”), for the benefit of the Investor, to secure the Company’s obligations under the Note. Upon an Event of Default (as defined in the Notes), the Investor may, among other things, collect or take possession of the Collateral, proceed with the foreclosure of the security interest in the Collateral or sell, lease or dispose of the Collateral. During the year ended September 30, 2021, the Company paid $19,142 of accrued interest. As of September 30, 2021, the Note had an outstanding principal balance of $1,000,000 and accrued interest of $6,575. It is reflected in the accompanying consolidated balance sheet at $64,981, as a long-term convertible note payable – related party, net of discount. As of December 31, 2021, the Note had an outstanding principal balance of $1,000,000 and accrued interest of $6,794. It is reflected in the accompanying unaudited consolidated balance sheet at $116,033 as a long-term convertible note payable – related party, net of discount in the amount of $883,967.

In connection with the Note, the Investor was issued a Warrant to purchase up to 63,897,764 shares of common stock at an exercise price of $0.00313 per share (subject to adjustment as provided therein) until May 12, 2026. The Warrants are exercisable for cash at any time. The Warrant was valued at $984,200 using the relative fair value method which was recorded as a debt discount which is being amortized over the life of the Note. In addition, the Note had a beneficial conversion feature (“BCF”) in the amount of $15,800 which was recorded as a debt discount which is being amortized over the life of the Note. The debt discount totaled $1,000,000. During the three months ended December 31, 2021, the Company amortized $51,052 of the debt discount which is included in interest expense in the accompanying unaudited consolidated statement of operations.

On November 1, 2021, the Company entered into a Securities Purchase Agreement with a related party, who is an affiliate stockholder (the “First Investor”), to purchase three convertible notes (collectively as “Notes”) and three accompanying warrants (collectively as “Warrants”), for an aggregate investment amount of $1,000,000. The first note issued on November 1, 2021, had a principal balance of $334,000 (“Note I”) and accompanying warrants to purchase up to 18,251,367 shares of common stock (“Warrant I”). The second note issued on December 1, 2021, had a principal balance of $333,000 (“Note II”) and accompanying warrants to purchase up to 18,196,722 shares of common stock (“Warrant II”). The third note and accompanying warrants were issued subsequent to December 31, 2021 (see Note 11). The Company received $667,000 in aggregate proceeds from the Notes. The Notes bear an interest rate of 8% per annum (which shall increase to 10% per year upon the occurrence of an “Event of Default” (as defined in the Notes)) and mature on November 1, 2026 (“Maturity Date”). The Warrants are exercisable at any time after the issue date and upon FINRA Approval (as defined below) and expire on November 1, 2026. The Warrants were valued at $661,088 using the relative fair value method and were recorded as debt discount which is being amortized over the life of the Notes. The Notes and Warrants are convertible and exercisable, respectively, into shares of the Company’s common stock at a price equal to $0.00366 per share (subject to adjustment as provided in the Notes and Warrants). The Company may prepay the Notes at any time upon approval of the Company’s name change to Theralink Technologies, Inc. and the related ticker symbol change by FINRA in an amount equal to 110% of the outstanding principal balance and accrued interest. At the election of the First Investor, the Notes can be converted in whole or in part at any time and from time to time, after FINRA Approval (as defined below). Further, upon maturity the Company may pay the outstanding balance of the Notes in cash or convert them into shares of common stock. Upon the listing by the Company or the trading of the common stock on a Qualified National Exchange (as defined in the Notes), the Conversion Amount shall automatically be converted into fully-paid and non-assessable shares of common stock. If the Financial Industry Regulatory Authority, Inc. (“FINRA”) fails to approve the Company’s name change to Theralink Technologies, Inc. and the related ticker symbol change (“FINRA Approval”) prior to November 1, 2022, then on such date the Company will pay a penalty fee equal to ten percent of the outstanding principal. If FINRA Approval is not received prior to May 1, 2023, then on such date the Company will pay a penalty fee equal to eight percent of the outstanding principal. Such fees will be added to the outstanding principal on their respective payment dates. If FINRA Approval is not received prior to June 1, 2023, then the First Investor may, upon five (5) business days written notice to the Company, call the Notes in default and immediately due and payable in full. As of December 31, 2021, the Notes had an outstanding principal of $667,000 and accrued interest of $4,386. The Notes are reflected in the accompanying unaudited consolidated balance sheet at $22,309 as a long-term convertible note payable – related party, net of discount in the amount of $644,691 (see Note 8).

THERALINK TECHNOLOGIES, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2021

(UNAUDITED)

Convertible Debt

On November 1, 2021, the Company entered into a Securities Purchase Agreement with an investor (“Second Investor”) to purchase two convertible notes (collectively as “Notes”) and two accompanying warrants (collectively as “Warrants”), for an aggregate investment amount of $500,000. The first note, issued on November 1, 2021, had a principal balance of $250,000 (“Note I”) and accompanying warrants to purchase up to 13,661,203 shares of common stock (“Warrant I”). The second note issued on December 1, 2021, had a principal balance of $250,000 (“Note II”) and accompanying warrants to purchase up to 13,661,203 shares of common stock (“Warrant II”). The Company received $500,000 in aggregate proceeds from the Notes. The Notes bear an interest rate of 8% per annum (which shall increase to 10% per year upon the occurrence of an “Event of Default” (as defined in the Notes)) and mature on November 1, 2026 (“Maturity Date”). The Warrants are exercisable at any time after the issue date and upon FINRA Approval (as defined below) and expire on November 1, 2026. The total warrants to purchase up to 27,322,406 shares of common stock was valued at $495,560 using the relative fair value method and were recorded as a debt discount which is being amortized over the life of the Notes. The Notes and Warrants are convertible and exercisable, respectively, into shares of the Company’s common stock at a price equal to $0.00366 per share (subject to adjustment as provided in the Notes and Warrants). The Company may prepay the Notes at any time upon approval of the Company’s name change to Theralink Technologies, Inc. and the related ticker symbol change by FINRA in an amount equal to 110% of the outstanding principal balance and accrued interest during the period between issue date until Maturity Date. At the election of the Second Investor, the Notes can be converted in whole or in part at any time and from time to time, after FINRA Approval (as defined below). Further, upon maturity the Company may pay the outstanding balance of the Note in cash or convert them into shares of common stock. Upon the listing by the Company or the trading of the common stock on a Qualified National Exchange (as defined in the Notes), the Conversion Amount shall automatically be converted into fully-paid and non-assessable shares of common stock. The Company shall not effect the conversion of any of the Note held by the Second Investor, and the Second Investor shall not have the right to convert any of the Note held by such Investor pursuant to the terms of this Note and any such conversion shall be null and void and treated as if never made, to the extent that after giving effect to such conversion, such Restricted Holder would beneficially own in excess of 4.99% of the shares of common stock outstanding immediately after giving effect to such conversion (which provision may be increased to a maximum of 9.9% by such Second Investor by written notice from the Second Investor to the Company, which notice shall be effective 61 calendar days after the date of such notice). If the Financial Industry Regulatory Authority, Inc. (“FINRA”) fails to approve the Company’s name change to Theralink Technologies, Inc. and the related ticker symbol change (“FINRA Approval”) prior to November 1, 2022, then on such date the Company will pay a penalty fee equal to ten percent of the outstanding principal. If FINRA Approval is not received prior to May 1, 2023, then on such date the Company will pay a penalty fee equal to eight percent of the outstanding principal. Such fees will be added to the outstanding principal on their respective payment dates. If FINRA Approval is not received prior to June 1, 2023, then the Second Investor may, upon five (5) business days written notice to the Company, call the Note in default and immediately due and payable in full. As of December 31, 2021, the Notes had an outstanding principal balance of $500,000 and accrued interest of $4,603. The Notes are reflected in the accompanying unaudited consolidated balance sheet at $16,725 as a long-term convertible note payable – related party, net of discount in the amount of $483,275.

On November 1, 2021, the Company entered into a Securities Purchase Agreement with an investor (“Third Investor”) to purchase two convertible notes (collectively as “Notes”) and two accompanying warrants (collectively as “Warrants”), for an aggregate investment amount of $500,000. The first note issued on November 1, 2021, had a principal balance of $250,000 (“Note I”) and accompanying warrants to purchase up to 13,661,203 shares of common stock (“Warrant I”). The second note issued on December 1, 2021, had a principal balance of $250,000 (“Note II”) and accompanying warrants to purchase up to 13,661,203 shares of common stock (“Warrant II”). The Company received $500,000 in aggregate proceeds from the Notes. The Notes bear an interest rate of 8% per annum (which shall increase to 10% per year upon the occurrence of an “Event of Default” (as defined in the Notes)) and mature on November 1, 2026 (“Maturity Date”). The Warrants are exercisable at any time after the issue date and upon FINRA Approval (as defined below) and expire on November 1, 2026. The total warrants to purchase up to 27,322,406 shares of common stock were valued at $495,560 using the relative fair value method and were recorded as a debt discount which is being amortized over the life of the Notes. The Notes and Warrants are convertible and exercisable, respectively, into shares of the Company’s common stock at a price equal to $0.00366 per share (subject to adjustment as provided in the Notes and Warrants). The Company may prepay the Notes at any time upon approval of the Company’s name change to Theralink Technologies, Inc. and the related ticker symbol change by FINRA in an amount equal to 110% of the outstanding principal balance and accrued interest. At the election of the Third Investor, the Notes can be converted in whole or in part at any time and from time to time, after FINRA Approval (as defined below). Further, upon maturity the Company may pay the outstanding balance of the Note in cash or convert it shares of common stock. Upon the listing by the Company or the trading of the common stock on a Qualified National Exchange (as defined in the Notes), the Conversion Amount shall automatically be converted into fully-paid and non-assessable shares of common stock. The Company shall not effect the conversion of any of the Note held by the Third Investor, and the Third Investor shall not have the right to convert any of the Note held by such Third Investor pursuant to the terms of this Note and any such conversion shall be null and void and treated as if never made, to the extent that after giving effect to such conversion, such Restricted Holder would beneficially own in excess of 4.99% of the shares of common stock outstanding immediately after giving effect to such conversion (which provision may be increased to a maximum of 9.9% by such Third Investor by written notice from the Third Investor to the Company, which notice shall be effective 61 calendar days after the date of such notice). If the Financial Industry Regulatory Authority, Inc. (“FINRA”) fails to approve the Company’s name change to Theralink Technologies, Inc. and the related ticker symbol change (“FINRA Approval”) prior to November 1, 2022, then on such date the Company will pay a penalty fee equal to ten percent of the outstanding principal. If FINRA Approval is not received prior to May 1, 2023, then on such date the Company will pay a penalty fee equal to eight percent of the outstanding principal. Such fees will be added to the outstanding principal on their respective payment dates. If FINRA Approval is not received prior to June 1, 2023, then the Third Investor may, upon five (5) business days written notice to the Company, call the Note in default and immediately due and payable in full. As of December 31, 2021, the Notes had an outstanding principal balance of $500,000 and accrued interest of $4,493. The Notes are reflected in the accompanying unaudited consolidated balance sheet at $16,725 as a long-term convertible note payable – related party, net of discount in the amount of $483,275.

THERALINK TECHNOLOGIES, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2021

(UNAUDITED)

Notes Payable - Related Party

On April 26, 2021, the Company entered into a Promissory Note Agreement (the “Note”) with Jeffrey Busch (“Lender”) who serves as a member of the Board of Directors and is considered a related party, for a principal amount of $100,000. The Company received proceeds of $100,000. The Note bears an annual interest rate of 1%, matures on April 1, 2022 and can be prepaid in whole or in part without penalty. Pursuant to the Note, the Company has a 90-day grace period following the maturity date after which the Lender shall charge a late payment fee equal to 1% of the outstanding principal balance and cost of collection, including legal fees. As of September 30, 2021, the Note had an outstanding principal balance of $100,000 and accrued interest of $428. As of December 31, 2021, the Note had an outstanding principal balance of $100,000 and accrued interest of $678 (see Note 8).

On October 21, 2021, the Company entered into a Promissory Note Agreement (the “Note”) with Jeffrey Busch (“Lender”) who serves as a member of the Board of Directors and considered a related party, for a principal amount of $150,000. The Company received proceeds of $150,000. The Note bore an annual interest rate of 1%, matured on December 1, 2021 and could have been prepaid in whole or in part without penalty. Pursuant to the Note, the Company has a 90-day grace period following the maturity date after which the Lender was permitted to charge a late payment fee equal to 1% of the outstanding principal balance and cost of collection, including legal fees. During the three months ended December 31, 2021, the Company fully paid the outstanding balance on the Note. As of December 31, 2021, the note had no outstanding balance (see Note 8).

Note Payable

In September 2017, the Company entered into a note agreement with a third-party investor (the “Note”). Pursuant to the Note, the Company borrowed a principal amount of $1,000. The Note bears an annual interest rate of 33.3%, is unsecured and in default due to non-payment of the balance pursuant to the repayment terms. As of December 31, 2021, the Note had principal and accrued interest balances of $1,000 and $1,439, respectively.

NOTE 7 –LEASE LIABILITIES

Financing Lease Right-of-Use (“ROU”) Assets and Financing Lease Liabilities

Effective November 2018, the Company entered into a financing agreement with the first lessor to finance the purchase of equipment. Pursuant to the financing agreement, the Company shall make a monthly payment of $379 for a period of 60 months commencing in November 2018 through October 2023. At the effective date of the financing agreement, the Company recorded a financing lease payable of $16,064.

Effective November 2018, the Company entered into a financing agreement with the second lessor to finance the purchase of equipment. Pursuant to the financing agreement, the Company shall make a monthly payment of $1,439 for a period of 60 months commencing in November 2018 through October 2023. At the effective date of the financing agreement, the Company recorded a financing lease payable of $62,394.

Effective March 2019, the Company entered into a financing agreement with the third lessor to finance the purchase of equipment. Pursuant to the financing agreement, the Company shall make a monthly payment of $1,496 for a period of 60 months commencing in March 2019 through February 2024. At the effective date of the financing agreement, the Company recorded a financing lease payable of $64,940.

Effective August 2019, the Company entered into a financing agreement with the fourth lessor to finance the purchase of equipment. Pursuant to the financing agreement, the Company shall make a monthly payment of $397 for a period of 60 months commencing in August 2019 through July 2024. At the effective date of the financing agreement, the Company recorded a financing lease payable of $19,622.

Effective January 2020, the Company entered into a financing agreement with the fifth lessor to finance the purchase of equipment. Pursuant to the financing agreement, the Company shall make a monthly payment of $1,395 for a period of 60 months commencing in January 2020 through December 2025. At the effective date of the financing agreement, the Company recorded a financing lease payable of $68,821.

The significant assumption used to determine the present value of the financing lease payables was discount rate which ranged from between 8% and 15% based on the Company’s estimated effective rate pursuant to the financing agreements.

Financing lease right-of-use assets (“Financing ROU”) is summarized below:

SCHEDULE OF FINANCIAL LEASE RIGHT-OF-USE ASSETS  

For the three months ended December 31 2021 and 2020, depreciation expense related to Financing ROU assets amounted to $11,592 for both periods.

THERALINK TECHNOLOGIES, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2021

(UNAUDITED)

Financing lease liability related to the Financing ROU assets is summarized below:

SCHEDULE OF FINANCIAL LEASE LIABILITY  

Future minimum lease payments under the financing lease agreements at December 31, 2021 are as follows:

SCHEDULE OF FUTURE MINIMUM LEASE PAYMENTS 

Operating Lease Right-of-Use (“ROU”) Asset and Operating Lease Liabilities

In December 2019, the Company entered into a lease agreement for its corporate and laboratory facility in Golden, Colorado. The lease is for a period of 61 months, with an option to extend, commencing in February 2020 and expiring in February 2025. Pursuant to the lease agreement, the lease requires the Company to pay a monthly base rent of; (i) $4,878 in the first year; (ii) $5,026 in the second year; (iii) $5,179 in the third year; (iv) $5,335 in the fourth year and; (v) $5,495 in the fifth year, plus a pro rata share of operating expenses beginning February 2020.

In February 2020, pursuant to ASC 842 – Leases, the Company the calculated the present value of the total lease payments using a discount rate of 12% which was based on the Company’s estimated incremental borrowing rate. The Company recorded an operating right-of-use asset and lease liability of $231,337 in connection with the lease.

On June 10, 2021, the Company entered into an amendment to its existing Warehouse Lease (the “Lease Amendment”), effective October 3, 2021, for its laboratory facility in Golden, CO (see Note 10). The Lease Amendment provided for: (i) an extension to the term of the original lease to five years following the completion of the Company’s improvements to the Expansion Premises (defined below); (ii) an expansion of the premises to include the premises located at Unit 404, Building F, 15000 West 6th Avenue, Golden, Colorado 80401, consisting of approximately 4,734 rentable square feet (the “Expansion Premises”); (iii) an annual base rent modification; (iv) an increase to the security deposit; (v) tenant improvement allowance; (vi) additional parking and; (vii) two renewal options, each for five year terms, for a total of ten years.

Pursuant to the Lease Amendment, the Company must pay a total annual base rent of; (1) $115,823 for year one; (2) $119,310 for year two; (3) $122,893 for year three; (4) $126,580 for year four; (5) $130,377 for year five; (6) $135,163 for year six; (7) $139,218 for year seven; (8) $143,394; (9) $147,696 for year nine; (10) $152,127 for year ten; (11) $156,331 for year eleven; (12) $161,391 for year twelve; (13) $166,233 for year thirteen; (14) $171,220 for year fourteen and; (15) $176,357 for year fifteen.

In October 2021, pursuant to ASC 842 – Leases, the Company wrote off the balances of the operating asset of $168,664 and operating liability of $176,893 related to the original lease and recognized a gain on lease modification in the amount of $8,229 which was included in general and administrative expense in the accompanying unaudited consolidated statement of operation. The Company calculated the present value of the total lease payments in the Lease Amendment using a discount rate of 8% which was based on the Company’s incremental borrowing rate at the effective date and recorded an operating right-of-use asset and an operating lease liability of $1,212,708.

For the three months ended December 31, 2021, lease costs amounted to $56,867 which included base lease costs of $28,690 and other expenses of $28,177, all of which were expensed during the period and included in general and administrative expenses on the accompanying unaudited consolidated statements of operations.

THERALINK TECHNOLOGIES, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2021

(UNAUDITED)

Operating Right-of-use asset (“ROU”) is summarized below:

SCHEDULE OF OPERATING RIGHT-OF-USE ASSET 

Operating lease liability related to the ROU asset is summarized below:

SCHEDULE OF OPERATING LEASE LIABILITY

Future base lease payments under the non-cancellable operating lease at December 31, 2021 are as follows:

SCHEDULE OF FUTURE BASE LEASE PAYMENTS 

NOTE 8 – RELATED-PARTY TRANSACTIONS

Effective January 1, 2021, the Company entered into a consulting agreement with Mr. Kucharchuk, a member of the Board of Directors, to serve as a strategic advisor. The agreement was effective for a period of twelve months, commencing on January 1, 2021 and shall renew on a month-to month basis, subject to the right of the Company and Mr. Kucharchuk to terminate the agreement pursuant to the agreement. Pursuant to the agreement, Mr. Kucharchuk shall be paid $2,000 per month. As of December 31, 2021 and September 30, 2021, the Company recorded accrued consulting fees in the amount of $0 and $18,000, respectively, reflected as accrued liabilities – related party in the accompanying unaudited consolidated balance sheet (see Note 10).

On April 26, 2021, the Company entered into a Promissory Note Agreement (“Note”) with Jeffrey Busch who serves as a member of the Board of Directors and is considered a related party, for a principal balance of $100,000. The Company received proceeds of $100,000. As of September 30, 2021, the Note had an outstanding principal balance of $100,000 and accrued interest of $428. As of December 31, 2021, the Note had an outstanding principal balance of $100,000 and accrued interest of $678 (see Note 6).

On May 12, 2021, the Company entered into a Securities Purchase Agreement with a related party, who is an affiliate shareholder, to purchase a convertible note (“Note”) and accompanying warrant (“Warrant”) for an aggregate investment amount of $1,000,000. The Note has a principal balance of $1,000,000 and bears an interest rate of 8% per annum (which shall increase to 10% per year upon the occurrence of an “Event of Default” (as defined in the Note)) and matures on May 12, 2026. In connection with the Company’s obligations under the Note, the Company entered into a security agreement with Ashton Capital Corporation as agent, pursuant to which the Company granted a lien on the laboratory equipment of the Company, for the benefit of the related party, to secure the Company’s obligations under the Note. As of December 31, 2021, the Note had an outstanding principal balance of $1,000,000 and accrued interest of $6,794. It’s reflected in the accompanying unaudited consolidated balance sheet at $116,033 as a long-term convertible notes payable – related party, net of discount in the amount of $883,967 (see Note 6).

THERALINK TECHNOLOGIES, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2021

(UNAUDITED)

On October 21, 2021, the Company entered into a Promissory Note Agreement (“Note”) with Jeffrey Busch who serves as a member of the Board of Directors and is considered a related party, for a principal balance of $150,000. The Company received the proceeds of $150,000. During the three months ended December 31, 2021, the Company fully paid the outstanding balance on the Note. As of December 31, 2021, the note had no outstanding balance (see Note 6).

On November 1, 2021, the Company entered into a Securities Purchase Agreement with a related party, who is an affiliate stockholder, to purchase three convertible notes (collectively as “Notes”) and three accompanying warrants (collectively as “Warrants”), for an aggregate investment amount of $1,000,000. The first note issued on November 1, 2021 had a principal balance of $334,000 (“Note I”) and accompanying warrants to purchase up to 18,251,367 shares of common stock (“Warrant I”). The second note issued on December 1, 2021, had a principal balance of $333,000 (“Note II”) and accompanying warrants to purchase up to 18,196,722 shares of common stock (“Warrant II”). The third note was issued subsequent to December 31, 2021 (see Note 11). The Company received $667,000 in aggregate proceeds from the Notes. The Notes bear an interest rate of 8% per annum (which shall increase to 10% per year upon the occurrence of an “Event of Default” (as defined in the Notes)) and mature on November 1, 2026. The Warrants are exercisable at any time after the issue date and upon FINRA Approval (as defined below) and expire on November 1, 2026. As of December 31, 2021, the Notes had an outstanding principal balance of $667,000 and accrued interest of $4,386. It’s reflected in the accompanying unaudited consolidated balance sheet at $22,309 as a long-term convertible notes payable – related party, net of discount in the amount of $644,691 (see Note 6).

During the three months ended December 31, 2021, the Company advanced a total of $3,883 to a related party, which is an affiliate entity. As of December 31, 2021 and September 30, 2021, the Company had related party receivable balances of $25,594 and $21,711, respectively, reflected in the accompanying unaudited consolidated balance sheets as other receivable.

As of December 31, 2021 and September 30, 2021, the Company owed several executives for expense reimbursements in the aggregate amount of $3,350 and $3,714, respectively, which is reflected on the accompanying unaudited consolidated balance sheet as accounts payable – related party.

At December 31, 2021 and September 30, 2021, net amount due to related parties consisted of the following:

SCHEDULE OF RELATED PARTIES TRANSACTION 

NOTE 9 – STOCKHOLDERS’ DEFICIT

Shares Authorized

On September 22, 2020, the Company filed with the Nevada Secretary of State an amendment to its Articles of Incorporation to change its name from “OncBioMune Pharmaceutical, Inc.” to “Theralink Technologies, Inc.” and increase its authorized shares of common stock from 6,666,667 shares of common stock at $0.0001 per share par value to 12,000,000,000 shares of common stock at $0.0001 per share par value, effective September 24, 2020.

Series A Preferred Stock

As of December 31, 2021 and September 30, 2021, there were 667 shares of the Company’s Series A Preferred Stock issued and outstanding held by a former member of the Board of Directors.

Series C-1 Preferred Stock

As of December 31, 2021 and September 30, 2021, the Company had 2,966.2212 shares of Series C-1 Preferred Stock issued and outstanding.

Series C-2 Preferred Stock

As of December 31, 2021 and September 30, 2021, the Company had 4,916.865 shares of Series C-2 Preferred Stock issued and outstanding.

THERALINK TECHNOLOGIES, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2021

(UNAUDITED)

Series E Preferred Stock

On September 15, 2020, the Company filed a certificate of designation, preferences and rights of Series E Preferred Stock (the “Series E Certificate of Designation”) with the Nevada Secretary of the State to designate 2,000 shares of its previously authorized preferred stock as Series E Preferred Stock, par value $0.0001 per share and a stated value of $2,000 per share. The Series E Certificate of Designation and its filing was approved by the Company’s board of directors without stockholder approval as provided for in the Company’s articles of incorporation and under Nevada law (see Note 1). The holders of shares of Series E Preferred Stock have the following preferences and rights:

During the three months ended December 31, 2021 and 2020, the Company also recorded dividends related to the Series E Preferred Stock in the amount of $40,329 and $40,219, respectively. As of December 31, 2021 and September 30, 2021, dividend payable balances were $13,589 and $13,151, respectively, reflected in the accompanying unaudited consolidated balance sheet in accrued liabilities instead of temporary equity.

During the year ended September 30, 2021, the issuance Series F Preferred Stock triggered the price protection clause in the Series E Preferred Stock. Thus, the conversion price of the Series E Preferred Stock was reduced from $0.00375 to $0.00313 on that date.

As of December 31, 2021 and September 30, 2021, the Company had 1,000 shares of Series E Preferred Stock issued and outstanding classified as temporary equity in the accompanying unaudited consolidated balance sheets.

THERALINK TECHNOLOGIES, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2021

(UNAUDITED)

Series F Preferred Stock

On July 30, 2021, the Company filed a certificate of designation, preferences and rights of Series F Preferred Stock (the “Series F Certificate of Designation”), with the Nevada Secretary of State to designate 1,000 shares of its previously authorized preferred stock as Series F Preferred Stock, par value $0.0001 per share and a stated value of $2,000 per share. The Series F Certificate of Designation and its filing was approved by the Company’s Board of Directors without stockholder approval as provided for in the Company’s articles of incorporation and under Nevada law (see Note 1). The holders of shares of Series F Preferred Stock have the following preferences and rights: