UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended SeptemberJune 30, 20212022
OR
☐ 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 000-53601
MITESCO, INC.
(Exact Name of Registrant as Specified in its Charter)
Delaware | 87-0496850 | |
(State Other Jurisdiction of Incorporation or Organization) | (I.R.S. Employer Identification Number) |
1660 Highway 100 South, Suite 432
St. Louis Park, MN 55416
(Address of principal executive offices) (Zip code)
844-383-8689(844) 383-8689
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
N/A | N/A | N/A |
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. YES ☐ NO ☒
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. ☐
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. YESYes ☒ 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). YESYes ☒ NO ☐
Indicate by check mark whether the registrant is a large, accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large, accelerated filer,”filer”, “accelerated filer,”filer”, “smaller reporting company,”company”, and “emerging growth 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 ☒
As of November 8, 2021,August 10, 2022, the registrant had outstanding 212,853,706225,523,273 shares of common stock issued and outstanding.
Table of Contents
PART I –FINANCIAL INFORMATION | |||
Item 1. |
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Condensed Consolidated Balance Sheets as of |
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Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations. |
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Item 3. |
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Item 4. |
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PART II –OTHER INFORMATION | |||
Item 1. |
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Item 1A. |
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Item 2. |
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Item 3. |
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Item 4. |
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Item 5. |
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Item 6. |
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CAUTIONARY STATEMENT ON FORWARD-LOOKING INFORMATION
This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are based upon our current assumptions, expectations, and beliefs concerning future developments and their potential effect on our business. In some cases, you can identify forward-looking statements by the following words: “may,” “will,” “could,” “would,” “should,” “expect,” “intend,” “plan,” “anticipate,” “believe,” “approximately,” “estimate,” “predict,” “project,” “potential,” “continue,” “ongoing,” or the negative of these terms or other comparable terminology, although the absence of these words does not necessarily mean that a statement is not forward-looking. This information may involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to be materially different from the future results, performance or achievements expressed or implied by any forward-looking statements.
Factors that may cause or contribute actual results to differ from these forward-looking statements include, but are not limited to:
● adverse economic conditions;
● the Company’s ability to raise capital to fund its operations
● industry competition
● the Company’s ability to integrate its acquisitions
● the Company’s ability to attract and retain qualified senior management and technical personnel;
● the continued effect of the Covid-19 pandemic on the Company’s operations; and
These forward-looking statements represent our intentions, plans, expectations, assumptions, and beliefs about future events and are subject to risks, uncertainties and other factors. Considering these risks, uncertainties, and assumptions, the events described in the forward-looking statements may not occur or may occur to a different extent or at a different time than we have described.
All forward-looking statements speak only as of the date of this Report. Except to the extent required by law, we undertake no obligation to update or revise any forward-looking statements, or other information contained herein, whether as a result of new information, future events, a change in events, conditions, circumstances or assumptions underlying such statements, or otherwise. We caution you therefore that you should not rely on any of these forward-looking statements as statements of historical fact or as guarantees or assurances of future performance.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
MITESCO, INC.
CONDENSED CONSOLIDATED BALANCE SHEETSHEETS
Unaudited | ||||||||||||||||
September 30, | December 31, | June 30, | December 31, | |||||||||||||
ASSETS | 2021 | 2020 | 2022 | 2021 | ||||||||||||
(unaudited) | ||||||||||||||||
Current assets | ||||||||||||||||
Cash and cash equivalents | $ | 441,506 | $ | 64,789 | $ | 35,821 | $ | 1,164,483 | ||||||||
Accounts Receivable | 7,319 | - | 114,064 | 44,313 | ||||||||||||
Inventory | 22,794 | - | 33,420 | 25,314 | ||||||||||||
Prepaid expenses | 28,844 | - | 125,762 | 72,985 | ||||||||||||
Total current assets | 500,463 | 64,789 | 309,067 | 1,307,095 | ||||||||||||
Right to use operating leases, net | 3,052,351 | 310,361 | 3,883,529 | 3,886,866 | ||||||||||||
Construction in progress | 297,097 | 417,082 | 943,689 | 1,984,701 | ||||||||||||
Fixed assets, net of accumulated depreciation of $19,590 and $1,572 | 2,347,651 | 6,282 | ||||||||||||||
Fixed assets, net of accumulated depreciation of $594,051 and $19,590 | 5,683,497 | 3,476,164 | ||||||||||||||
Total Assets | $ | 6,197,562 | $ | 798,514 | $ | 10,819,782 | $ | 10,654,826 | ||||||||
LIABILITIES AND (DEFICIENCY IN) STOCKHOLDERS' EQUITY | ||||||||||||||||
Current liabilities | ||||||||||||||||
Accounts payable and accrued liabilities | 2,376,577 | 1,069,331 | $ | 5,788,713 | $ | 3,976,064 | ||||||||||
Accrued interest | 5,309 | 137,522 | 79,530 | 7,657 | ||||||||||||
Derivative liabilities | - | 807,682 | 265,962 | - | ||||||||||||
Lease liability - operating leases, current | 102,133 | 8,905 | 260,700 | 161,838 | ||||||||||||
Convertible notes payable, net of discount of $0 and $756,795 | - | 317,405 | ||||||||||||||
Convertible note payable, in default | - | 122,166 | ||||||||||||||
Notes payable, net of discounts of $1,620,263 and $411,568 | 3,317,203 | 588,432 | ||||||||||||||
SBA Loan Payable | 460,406 | 460,406 | 460,406 | 460,406 | ||||||||||||
Other current liabilities | 96,136 | 95,256 | 96,136 | 169,422 | ||||||||||||
Preferred stock dividends payable | 125,014 | 9,967 | 268,200 | 195,169 | ||||||||||||
Total current liabilities | 3,165,575 | 3,028,640 | 10,536,850 | 5,558,988 | ||||||||||||
Lease Liability- operating leases, non-current | 3,092,130 | 312,099 | 4,132,964 | 3,972,964 | ||||||||||||
Total Liabilities | $ | 6,257,705 | $ | 3,340,739 | 14,669,814 | 9,531,952 | ||||||||||
Commitments and contingencies | - | - | - | - | ||||||||||||
Stockholders' equity (deficit) | ||||||||||||||||
Preferred stock, $0.01 par value, 100,000,000 shares authorized; 500,000 shares designated Series A; 3,000,000 shares designated Series C; and 400,000 shares designated Series X: | - | |||||||||||||||
Preferred stock, Series A, $0.01 par value, 0 and 4,800 shares issued and outstanding as of September 30, 2021 and December 31, 2020 | - | 48 | ||||||||||||||
Preferred stock, Series C, $0.01 par value, 940,644 and 0 shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively | 9,406 | - | ||||||||||||||
Preferred stock, Series X, $0.01 par value, 24,227 shares issued and outstanding at September 30, 2021; 26,227 shares issued and outstanding at December 31, 2020 | 242 | 262 | ||||||||||||||
Preferred stock, $0.01 par value, 100,000,000 shares authorized; 500,000 shares designated Series A; 3,000,000 shares designated Series C; 10,000,000 shares designated Series D; and 400,000 shares designated Series X: | - | - | ||||||||||||||
Preferred stock, Series A, $0.01 par value, 0 and 4,800 shares issued and outstanding as of June 30, 2022 and December 31, 2021, respectively | - | - | ||||||||||||||
Preferred stock, Series C, $0.01 par value, 940,644 and 940,644 shares issued and outstanding as of June 30, 2022 and December 31, 2021, respectively | 9,406 | 9,406 | ||||||||||||||
Preferred stock, Series D, $0.01 par value, 3,100,000 and 3,100,000 shares issued and outstanding as of June 30, 2022 and December 31, 2021, respectively | 31,000 | 31,000 | ||||||||||||||
Preferred stock, Series X, $0.01 par value, 24,227 shares issued and outstanding at June 30, 2022 and December 31, 2021 | 242 | 242 | ||||||||||||||
Common stock subscribed | 156,441 | - | 36,575 | 132,163 | ||||||||||||
Common stock, $0.01 par value, 500,000,000 shares authorized, 212,853,706 and 155,381,183 shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively | 2,128,537 | 1,553,812 | ||||||||||||||
Common stock, $0.01 par value, 500,000,000 shares authorized, 225,209,745 and 213,333,170 shares issued and outstanding as of June 30, 2022 and December 31, 2021, respectively | 2,257,880 | 2,133,332 | ||||||||||||||
Additional paid-in capital | 18,055,972 | 10,340,821 | 26,743,676 | 24,295,063 | ||||||||||||
Accumulated deficit | (20,410,741 | ) | (14,437,168 | ) | (32,928,811 | ) | (25,478,332 | ) | ||||||||
Total stockholders' equity (deficit) | (60,143 | ) | (2,542,225 | ) | (3,850,032 | ) | 1,122,874 | |||||||||
Total liabilities and stockholders' equity (deficit) | $ | 6,197,562 | $ | 798,514 | $ | 10,819,782 | $ | 10,654,826 |
TheSee accompanying notes are an integral part of the Condensed Consolidated Financial Statements.
MITESCO, INC.
STATEMENT OF OPERATIONS
Unaudited | Unaudited | |||||||||||||||
For the Three | For the Three | For the Nine | For the Nine | |||||||||||||
Months Ended | Months Ended | Months Ended | Months Ended | |||||||||||||
September 30, | September 30, | September 30, | September 30, | |||||||||||||
2021 | 2020 | 2021 | 2020 | |||||||||||||
Revenue | $ | 13,528 | $ | - | $ | 24,744 | $ | - | ||||||||
Cost of goods sold | 2,486 | - | 7,804 | - | ||||||||||||
Gross Profit (loss) | 11,042 | - | 16,940 | - | ||||||||||||
Operating expenses: | ||||||||||||||||
General and administrative | 1,780,456 | 607,704 | 4,136,574 | 1,730,036 | ||||||||||||
Total operating expenses | 1,780,456 | 607,704 | 4,136,574 | 1,730,036 | ||||||||||||
Net Operating Loss | (1,769,414 | ) | (607,704 | ) | (4,119,634 | ) | (1,730,036 | ) | ||||||||
Other income (expense): | ||||||||||||||||
Interest expense | - | (537,184 | ) | (966,123 | ) | (1,124,219 | ) | |||||||||
Loss on legal settlement | - | - | (70,000 | ) | - | |||||||||||
Gain on settlement of accounts payable | - | 49,351 | 6,045 | 397,962 | ||||||||||||
Gain on settlement of accrued salary | - | 6,988 | - | 6,988 | ||||||||||||
Gain on settlement of notes payable | - | - | 1,836 | - | ||||||||||||
Grant Income | (52 | ) | - | - | 3,000 | |||||||||||
(Loss) Gain on revaluation of derivative liabilities | - | 51,940 | (493,455 | ) | 498,095 | |||||||||||
Total other expense | (52 | ) | (428,905 | ) | (1,521,697 | ) | (218,174 | ) | ||||||||
Loss before provision for income taxes | (1,769,466 | ) | (1,036,609 | ) | (5,641,331 | ) | (1,948,210 | ) | ||||||||
Provision for income taxes | - | - | - | - | ||||||||||||
Net loss | $ | (1,769,466 | ) | $ | (1,036,609 | ) | $ | (5,641,331 | ) | $ | (1,948,210 | ) | ||||
Preferred stock dividends | (40,433 | ) | (19,392 | ) | (115,047 | ) | (56,143 | ) | ||||||||
Preferred stock deemed dividends | - | - | (332,242 | ) | - | |||||||||||
Net loss available to common shareholders | $ | (1,809,899 | ) | $ | (1,056,001 | ) | $ | (6,088,620 | ) | $ | (2,004,353 | ) | ||||
Net loss per share - basic and diluted | $ | (0.01 | ) | $ | (0.01 | ) | $ | (0.03 | ) | $ | (0.02 | ) | ||||
Weighted average shares outstanding - basic and diluted | 208,784,236 | 100,262,378 | 199,678,995 | 94,154,754 |
The accompanying notes are an integral part of the Condensed Consolidated Financial Statements.to these unaudited condensed consolidated financial statements.
MITESCO, INC.
STATEMENTCONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITYOPERATIONS
(UNAUDITED)
Preferred Stock Series A | Preferred Stock Series C | Preferred Stock Series X | Common Stock | Additional Paid-in | Stock | Stock | Accumulated | |||||||||||||||||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | capital | Subscribed | Payable | Deficit | Total | ||||||||||||||||||||||||||||||||||||||||
Balance, June 30, 2020 | 4,800 | $ | 48 | - | $ | - | 26,227 | $ | 262 | 98,796,144 | $ | 987,962 | $ | 9,058,332 | $ | - | $ | 37,186 | $ | (12,488,175 | ) | $ | (2,404,385 | ) | ||||||||||||||||||||||||||||
Vesting of common stock issued to employees | - | - | - | - | - | - | - | - | 7,792 | - | - | - | 7,792 | |||||||||||||||||||||||||||||||||||||||
Vesting of stock options issued to employees | - | - | - | - | - | - | - | - | 91,647 | - | - | - | 91,647 | |||||||||||||||||||||||||||||||||||||||
Common stock issued for services | - | - | - | - | - | - | 386,985 | 3,869 | 17,787 | - | - | - | 21,656 | |||||||||||||||||||||||||||||||||||||||
Common stock issued for conversion of notes payable and accrued interest | - | - | - | - | - | - | 22,269,785 | 222,698 | 508,066 | - | - | - | 730,764 | |||||||||||||||||||||||||||||||||||||||
Preferred stock dividends | - | - | - | - | - | - | - | - | (19,392 | ) | - | - | - | (19,392 | ) | |||||||||||||||||||||||||||||||||||||
Loss for the period ended September 30, 2020 | - | - | - | - | - | - | - | - | - | - | - | (1,036,609 | ) | (1,036,609 | ) | |||||||||||||||||||||||||||||||||||||
Balance, September 30, 2020 | 4,800 | $ | 48 | - | $ | - | 26,227 | $ | 262 | 121,452,914 | $ | 1,214,529 | $ | 9,664,232 | $ | - | $ | 37,186 | $ | (13,524,784 | ) | $ | (2,608,527 | ) | ||||||||||||||||||||||||||||
Balance, June 30, 2021 | - | $ | - | 1,940,644 | $ | 19,406 | 24,227 | $ | 242 | 208,188,705 | $ | 2,081,887 | 17,920,912 | $ | (41,000 | ) | $ | - | $ | (18,641,275 | ) | $ | 1,340,172 | |||||||||||||||||||||||||||||
Vesting of common stock issued to employees | - | - | - | - | - | - | - | - | 2,564 | - | - | - | 2,564 | |||||||||||||||||||||||||||||||||||||||
Vesting of stock options issued to employees | - | - | - | - | - | - | - | - | 199,079 | - | - | - | 199,079 | |||||||||||||||||||||||||||||||||||||||
Stock options exercised for cash | - | - | - | - | - | - | 350,000 | 3,500 | 7,000 | - | - | - | 10,500 | |||||||||||||||||||||||||||||||||||||||
Exercise of options by cashless conversion | - | - | - | - | - | - | 315,000 | 3,150 | (3,150 | ) | - | - | - | - | ||||||||||||||||||||||||||||||||||||||
Cash paid for common stock subscribed | - | - | - | - | - | - | - | - | - | 41,000 | - | - | 41,000 | |||||||||||||||||||||||||||||||||||||||
Shares of common stock issued for conversion of Preferred Stock Series C | - | - | (1,000,000 | ) | (10,000 | ) | - | - | 4,000,001 | 40,000 | (30,000 | ) | - | - | - | - | ||||||||||||||||||||||||||||||||||||
Common stock subscribed for accounts payable and accrued liabilities | - | - | - | - | - | - | - | - | - | 156,441 | - | - | 156,441 | |||||||||||||||||||||||||||||||||||||||
Preferred stock dividends | - | - | - | - | - | - | - | - | (40,433 | ) | - | - | - | (40,433 | ) | |||||||||||||||||||||||||||||||||||||
Loss for the period September 30, 2021 | - | - | - | - | - | - | - | - | - | - | - | (1,769,466 | ) | (1,769,466 | ) | |||||||||||||||||||||||||||||||||||||
Balance, September 30, 2021 | - | $ | - | 940,644 | $ | 9,406 | 24,227 | $ | 242 | 212,853,706 | $ | 2,128,537 | $ | 18,055,972 | $ | 156,441 | $ | - | $ | (20,410,741 | ) | $ | (60,143 | ) |
For the Three | For the Six | |||||||||||||||
Months Ended | Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2022 | 2021 | 2022 | 2021 | |||||||||||||
Revenue-services | $ | 180,375 | $ | 8,244 | $ | 272,836 | $ | 11,216 | ||||||||
Revenue-products | (11,290 | ) | - | 16,625 | - | |||||||||||
Total revenue | 169,085 | 8,244 | 289,461 | 11,216 | ||||||||||||
Cost of goods sold-services | $ | 605,706 | $ | 3,605 | $ | 1,183,262 | $ | 5,318 | ||||||||
Cost of goods sold-products | 481 | - | 11,248 | - | ||||||||||||
Total cost of goods sold | 606,187 | 3,605 | 1,194,510 | 5,318 | ||||||||||||
Gross (loss) profit | (437,102 | ) | 4,639 | (905,049 | ) | 5,898 | ||||||||||
Operating expenses: | ||||||||||||||||
General and administrative | $ | 2,340,929 | $ | 1,403,210 | $ | 4,904,758 | $ | 2,356,118 | ||||||||
Total operating expenses | 2,340,929 | 1,403,210 | 4,904,758 | 2,356,118 | ||||||||||||
Net Operating Loss | (2,778,031 | ) | (1,398,571 | ) | (5,809,807 | ) | (2,350,220 | ) | ||||||||
Other income (expense): | ||||||||||||||||
Interest expense | (862,211 | ) | (1,135 | ) | (1,690,536 | ) | (966,123 | ) | ||||||||
Loss on legal settlement | - | (70,000 | ) | - | (70,000 | ) | ||||||||||
(Loss) Gain on waiver and commitment fee shares | (11,619 | ) | - | 186,654 | - | |||||||||||
Gain on settlement of accrued salary | - | - | 15,032 | - | ||||||||||||
Loss (Gain) on settlement of accounts payable | - | - | (78,235 | ) | 6,045 | |||||||||||
Gain on settlement of notes payable | - | - | - | 1,836 | ||||||||||||
Grant income | - | 52 | - | 52 | ||||||||||||
Loss on revaluation of derivative liabilities | (153,424 | ) | - | (73,587 | ) | (493,455 | ) | |||||||||
Total other expense | (1,027,254 | ) | (71,083 | ) | (1,640,672 | ) | (1,521,645 | ) | ||||||||
Loss before provision for income taxes | (3,805,285 | ) | (1,469,654 | ) | (7,450,479 | ) | (3,871,865 | ) | ||||||||
Provision for income taxes | - | - | - | - | ||||||||||||
Net loss | $ | (3,805,285 | ) | $ | (1,469,654 | ) | $ | (7,450,479 | ) | $ | (3,871,865 | ) | ||||
Preferred stock dividends | (80,392 | ) | (54,115 | ) | (160,084 | ) | (74,614 | ) | ||||||||
Preferred stock deemed dividends | - | - | - | (332,242 | ) | |||||||||||
Net loss available to common shareholders | $ | (3,885,677 | ) | $ | (1,523,769 | ) | $ | (7,610,563 | ) | $ | (4,278,721 | ) | ||||
Net loss per share - basic and diluted | $ | (0.02 | ) | $ | (0.01 | ) | $ | (0.03 | ) | $ | (0.02 | ) | ||||
Weighted average shares outstanding - basic and diluted | 221,523,073 | 201,678,218 | 217,634,736 | 194,455,386 |
See accompanying notes to these unaudited condensed consolidated financial statements.
Preferred Stock Series A | Preferred Stock Series C | Preferred Stock Series X | Common Stock | Additional Paid-in | Stock | Stock | Accumulated | |||||||||||||||||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Paid-in capital | Subscribed | Payable | Deficit | Total | ||||||||||||||||||||||||||||||||||||||||
Balance, December 31, 2019 | - | $ | - | - | - | 26,227 | 262 | 81,268,443 | 812,684 | 8,407,977 | - | 37,186 | (11,576,574 | ) | (2,318,465 | ) | ||||||||||||||||||||||||||||||||||||
Vesting of common stock issued to employees | - | - | - | - | - | - | - | - | 60,842 | - | - | - | 60,842 | |||||||||||||||||||||||||||||||||||||||
Vesting of stock options issued to employees | - | - | - | - | - | - | - | - | 119,227 | - | - | - | 119,227 | |||||||||||||||||||||||||||||||||||||||
Common stock issued for services | - | - | - | - | - | - | 586,985 | 5,869 | 23,467 | - | - | - | 29,336 | |||||||||||||||||||||||||||||||||||||||
Settlement of derivative liabilities | - | - | - | - | - | - | - | - | 528,995 | - | - | - | 528,995 | |||||||||||||||||||||||||||||||||||||||
Common stock issued in warrant settlement agreement | - | - | - | - | - | - | 7,999,996 | 80,000 | 291 | - | - | - | 80,291 | |||||||||||||||||||||||||||||||||||||||
Common stock issued for conversion of notes payable and accrued interest | - | - | - | - | - | - | 31,597,490 | 315,976 | 508,066 | - | - | - | 824,042 | |||||||||||||||||||||||||||||||||||||||
Issuance of Preferred A stock to consultants | 4,800 | 48 | - | - | - | - | - | - | 71,510 | - | 71,558 | |||||||||||||||||||||||||||||||||||||||||
Preferred stock dividends | - | - | - | - | - | - | - | - | (56,143 | ) | - | - | - | (56,143 | ) | |||||||||||||||||||||||||||||||||||||
Loss for the period ended September 30, 2020 | - | - | - | - | - | - | - | - | - | - | - | (1,948,210 | ) | (1,948,210 | ) | |||||||||||||||||||||||||||||||||||||
Balance, September 30, 2020 | 4,800 | $ | 48 | - | $ | - | 26,227 | $ | 262 | 121,452,914 | $ | 1,214,529 | $ | 9,664,232 | $ | - | $ | 37,186 | $ | (13,524,784 | ) | $ | (2,608,527 | ) | ||||||||||||||||||||||||||||
Balance, December 31, 2020 | 4,800 | 48 | - | - | 26,227 | 262 | 155,381,183 | 1,553,812 | 10,340,821 | - | - | (14,437,168 | ) | (2,542,225 | ) | |||||||||||||||||||||||||||||||||||||
Vesting of common stock issued to employees | - | - | - | - | - | - | - | - | 7,897 | - | - | - | 7,897 | |||||||||||||||||||||||||||||||||||||||
Vesting of stock options issued to employees | - | - | - | - | - | - | - | - | 203,858 | - | - | - | 203,858 | |||||||||||||||||||||||||||||||||||||||
Common stock issued for services | - | - | - | - | - | - | 1,099,320 | 10,963 | 410,596 | - | - | - | 421,559 | |||||||||||||||||||||||||||||||||||||||
Common stock issued for conversion of notes payable and accrued interest | - | - | - | - | - | - | 33,944,157 | 339,442 | 2,314,353 | - | - | - | 2,653,795 | |||||||||||||||||||||||||||||||||||||||
Sale of common stock in private placement | - | - | - | - | - | - | 6,672,000 | 66,750 | 1,601,250 | - | - | - | 1,668,000 | |||||||||||||||||||||||||||||||||||||||
Sale of Preferred Stock Series C | - | - | 3,000,000 | 30,000 | - | - | - | - | 1,461,283 | - | - | - | 1,491,283 | |||||||||||||||||||||||||||||||||||||||
Warrants issued with Preferred Stock Series C | - | - | - | - | - | - | - | - | 1,268,717 | - | - | - | 1,268,717 | |||||||||||||||||||||||||||||||||||||||
Conversion of Preferred Stock Series A to common stock | (4,800 | ) | (48 | ) | - | - | - | - | 600,000 | 6,000 | (5,952 | ) | - | - | - | - | ||||||||||||||||||||||||||||||||||||
Shares issued for exercise of stock options | - | - | - | - | - | - | 8,281,668 | 82,816 | 156,184 | - | - | - | 239,000 | |||||||||||||||||||||||||||||||||||||||
Net shares issued in connection with settlement agreement | - | - | - | - | (2,000 | ) | (20 | ) | (1,362,047 | ) | (13,620 | ) | 141,550 | - | - | - | 127,910 | |||||||||||||||||||||||||||||||||||
Shares of common stock issued for conversion of Preferred Stock Series C | - | - | (2,059,356 | ) | (20,594 | ) | - | - | 8,237,425 | 82,374 | (61,780 | ) | - | - | - | - | ||||||||||||||||||||||||||||||||||||
Common stock subscribed for accounts payable and accrued liabilities | - | - | - | - | - | - | - | - | - | 156,441 | - | - | 156,441 | |||||||||||||||||||||||||||||||||||||||
Deemed dividend on conversion of Preferred Stock Series A to common stock | - | - | - | - | - | - | - | - | 206,242 | - | - | (206,242 | ) | - | ||||||||||||||||||||||||||||||||||||||
Deemed dividend on Preferred Stock Series C | - | - | - | - | - | - | - | - | 126,000 | - | - | (126,000 | ) | - | ||||||||||||||||||||||||||||||||||||||
Preferred stock dividends | - | - | - | - | - | - | - | - | (115,047 | ) | - | - | (115,047 | ) | ||||||||||||||||||||||||||||||||||||||
Loss for the period ended September 30, 2021 | - | - | - | - | - | (5,641,331 | ) | (5,641,331 | ) | |||||||||||||||||||||||||||||||||||||||||||
Balance, September 30, 2021 | - | $ | - | 940,644 | $ | 9,406 | 24,227 | $ | 242 | 212,853,706 | $ | 2,128,537 | $ | 18,055,972 | $ | 156,441 | $ | - | $ | (20,410,741 | ) | $ | (60,143 | ) |
MITESCO, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2022 and 2021
(UNAUDITED)
The accompanying notes are an integral part of the Condensed Consolidated Financial Statements.
Preferred Stock Series A | Preferred Stock Series C | Preferred Stock Series D | Preferred Stock Series X | Common Stock | Additional | Common Stock | Accumulated | |||||||||||||||||||||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Paid-in capital | Subscribed | Deficit | Total | |||||||||||||||||||||||||||||||||||||||||||
Balance, March 31, 2022 | - | $ | - | 940,644 | $ | 9,406 | 3,100,000 | $ | 31,000 | 24,227 | $ | 242 | 219,756,894 | $ | 2,197,570 | $ | 25,517,634 | $ | 128,015 | $ | (29,123,526 | ) | (1,239,659 | ) | ||||||||||||||||||||||||||||||||
Vesting of common stock issued to employees | - | - | - | - | - | - | - | - | 1,474 | - | - | 1,474 | ||||||||||||||||||||||||||||||||||||||||||||
Vesting of stock options issued to employees | - | - | - | - | - | - | - | - | 135,295 | - | - | 135,295 | ||||||||||||||||||||||||||||||||||||||||||||
Shares issued for services | - | - | - | - | - | - | - | - | 750,000 | 7,500 | 95,625 | - | - | 103,125 | ||||||||||||||||||||||||||||||||||||||||||
Waiver fee shares | - | - | - | - | - | - | - | - | 720,000 | 7,200 | 84,240 | (91,440 | ) | - | - | |||||||||||||||||||||||||||||||||||||||||
Commitment fee shares | - | - | - | - | - | - | - | - | 3,577,720 | 41,559 | 843,793 | - | - | 885,352 | ||||||||||||||||||||||||||||||||||||||||||
Warrants issued with notes payable - Insiders | - | - | - | - | - | - | - | - | 63,005 | - | - | 63,005 | ||||||||||||||||||||||||||||||||||||||||||||
Shares issued for Series X dividends | - | - | - | - | - | - | - | - | 405,131 | 4,051 | 83,002 | - | - | 87,053 | ||||||||||||||||||||||||||||||||||||||||||
Preferred stock dividends | - | - | - | - | - | - | - | - | (80,392 | ) | - | - | (80,392 | ) | ||||||||||||||||||||||||||||||||||||||||||
Loss for the period ended June 30, 2022 | - | - | - | - | - | - | - | - | - | (3,805,285 | ) | (3,805,285 | ) | |||||||||||||||||||||||||||||||||||||||||||
Balance, June 30, 2022 | - | $ | - | 940,644 | $ | 9,406 | 3,100,000 | $ | 31,000 | 24,227 | $ | 242 | 225,209,745 | $ | 2,257,880 | $ | 26,743,676 | $ | 36,575 | $ | (32,928,811 | ) | $ | (3,850,032 | ) | |||||||||||||||||||||||||||||||
Balance, December 31, 2021 | - | $ | - | 940,644 | $ | 9,406 | 3,100,000 | $ | 31,000 | 24,227 | $ | 242 | 213,333,170 | $ | 2,133,332 | $ | 24,295,063 | $ | 132,163 | $ | (25,478,332 | ) | 1,122,874 | |||||||||||||||||||||||||||||||||
Vesting of common stock issued to employees | - | - | - | - | - | - | - | - | 2,986 | 2,986 | ||||||||||||||||||||||||||||||||||||||||||||||
Vesting of stock options issued to employees | - | - | - | - | - | - | - | - | 302,310 | 302,310 | ||||||||||||||||||||||||||||||||||||||||||||||
Conversion of accounts payable to common stock | - | - | - | - | - | - | - | - | 3,179,650 | 31,797 | 546,438 | 578,235 | ||||||||||||||||||||||||||||||||||||||||||||
Commitment fee shares | - | - | - | - | - | - | - | - | 5,297,720 | 58,759 | 1,069,899 | 1,128,658 | ||||||||||||||||||||||||||||||||||||||||||||
Waiver fee shares | - | - | - | - | - | - | - | - | 2,261,721 | 22,617 | 344,541 | - | 367,158 | |||||||||||||||||||||||||||||||||||||||||||
Shares issued for services | - | - | - | - | - | - | - | - | 750,000 | 7,500 | 95,625 | 103,125 | ||||||||||||||||||||||||||||||||||||||||||||
Warrants issued with note payable - Diamond 1 | - | - | - | - | - | - | - | - | 2,914 | 2,914 | ||||||||||||||||||||||||||||||||||||||||||||||
Warrants issued with note payable - Diamond 2 | 2,213 | 2,213 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Gain on settlement of accrued payroll | (400,000 | ) | (4,000 | ) | 4,000 | - | ||||||||||||||||||||||||||||||||||||||||||||||||||
Issuance of shares previously subscribed for conversion of accounts payable | 382,353 | 3,824 | 91,764 | (95,588 | ) | - | ||||||||||||||||||||||||||||||||||||||||||||||||||
Warrants issued with notes payable - Insiders | - | - | - | - | - | - | - | - | 63,005 | 63,005 | ||||||||||||||||||||||||||||||||||||||||||||||
Shares issued for Series X dividends | - | - | - | - | - | - | - | - | 405,131 | 4,051 | 83,002 | 87,053 | ||||||||||||||||||||||||||||||||||||||||||||
Preferred stock dividends | - | - | - | - | - | - | - | - | (160,084 | ) | (160,084 | ) | ||||||||||||||||||||||||||||||||||||||||||||
Loss for the six months ended June 30, 2022 | - | - | - | - | - | - | - | - | (7,450,479 | ) | (7,450,479 | ) | ||||||||||||||||||||||||||||||||||||||||||||
Balance, June 30, 2022 | - | $ | - | 940,644 | $ | 9,406 | 3,100,000 | $ | 31,000 | 24,227 | $ | 242 | 225,209,745 | $ | 2,257,880 | $ | 26,743,676 | $ | 36,575 | $ | (32,928,811 | ) | $ | (3,850,032 | ) |
MITESCO, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)
STATEMENT OF CASH FLOWSFOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2022 and 2021
(UNAUDITED)
Unaudited | ||||||||
For the Nine | For the Nine | |||||||
Months Ended | Months Ended | |||||||
September 30, | September 30, | |||||||
2021 | 2020 | |||||||
CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
Net loss | $ | (5,641,331 | ) | $ | (1,948,210 | ) | ||
Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
Depreciation | 78,954 | 1,179 | ||||||
Preferred A stock issued to consultants | - | |||||||
Amortization of right-to-use asset | 71,349 | - | ||||||
Gain on settlement of notes payable | (1,836 | ) | - | |||||
Gain on settlement of accounts payable | - | (397,962 | ) | |||||
Gain on conversion of accrued salary | - | (6,988 | ) | |||||
Gain (Loss) on revaluation of derivative liabilities | 493,455 | (498,095 | ) | |||||
Derivative expense | - | 125,869 | ||||||
Amortization of loan fees | - | 18,000 | ||||||
Amortization of discount on notes payable | 756,795 | 785,724 | ||||||
Share-based compensation | 761,222 | 259,307 | ||||||
Changes in assets and liabilities: | ||||||||
Accounts receivables | (7,319 | ) | - | |||||
Prepaid expenses | (28,844 | ) | 5,937 | |||||
Due from related party | - | - | ||||||
Inventory | (22,794 | ) | - | |||||
Accounts payable and accrued liabilities | 1,651,191 | 371,972 | ||||||
Operating lease liability | 59,920 | - | ||||||
Other current liabilities | 880 | 1,634 | ||||||
Accrued interest | 203,447 | 89,642 | ||||||
Net cash used in operating activities | (1,624,911 | ) | (1,191,991 | ) | ||||
CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||
Cash paid for acquisition of fixed assets | (2,300,338 | ) | - | |||||
Net cash used in investing activities | (2,300,338 | ) | - | |||||
CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
Proceeds from private placement of common stock | 1,668,000 | - | ||||||
Proceeds from sales of Series C Preferred Stock, net of fees | 2,760,000 | - | ||||||
Proceeds from notes payable, net of discount | - | 1,381,406 | ||||||
Proceeds from sale of common stock | 51,500 | - | ||||||
Principal payments on notes payable | (177,534 | ) | (171,000 | ) | ||||
Net cash provided by financing activities | 4,301,966 | 1,210,406 | ||||||
Net increase in cash and cash equivalents | 376,717 | 18,415 | ||||||
Cash and cash equivalents at beginning of period | 64,789 | 83,245 | ||||||
Cash and cash equivalents at end of period | $ | 441,506 | $ | 101,660 |
Preferred Stock Series A | Preferred Stock Series C | Preferred Stock Series D | Preferred Stock Series X | Common Stock | Additional | Common Stock | Accumulated | |||||||||||||||||||||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Paid-in capital | Subscribed | Deficit | Total | |||||||||||||||||||||||||||||||||||||||||||
Balance, March 31, 2021 | - | 3,000,000 | $ | 30,000 | - | $ | - | 26,227 | $ | 262 | 197,694,698 | $ | 1,976,965 | $ | 17,513,684 | $ | - | $ | (17,171,621 | ) | $ | 2,349,290 | ||||||||||||||||||||||||||||||||||
Vesting of common stock issued to employees | - | - | - | - | - | - | - | - | - | 3,889 | - | - | 3,889 | |||||||||||||||||||||||||||||||||||||||||||
Vesting of stock options issued to employees | - | - | - | - | - | - | - | - | - | 195,352 | - | - | 195,352 | |||||||||||||||||||||||||||||||||||||||||||
Shares issued to directors for exercise of options | - | - | - | - | - | - | - | 7,616,668 | 76,166 | 152,334 | (41,000 | ) | - | 187,500 | ||||||||||||||||||||||||||||||||||||||||||
Net shares cancelled in connection with settlement agreement | - | - | - | - | - | (2,000 | ) | (20 | ) | (1,362,047 | ) | (13,620 | ) | 141,550 | - | - | 127,910 | |||||||||||||||||||||||||||||||||||||||
Shares issued for professional fees | - | - | - | - | - | - | - | 1,962 | 2 | (2 | ) | - | - | - | ||||||||||||||||||||||||||||||||||||||||||
Shares of common stock issued for conversion of Preferred Stock Series C | - | (1,059,356 | ) | (10,594 | ) | - | - | - | - | 4,237,424 | 42,374 | (31,780 | ) | - | - | - | ||||||||||||||||||||||||||||||||||||||||
Preferred stock dividends | - | - | - | - | - | - | - | - | - | (54,115 | ) | - | - | (54,115 | ) | |||||||||||||||||||||||||||||||||||||||||
Loss for the period ended June 30, 2021 | - | - | - | - | - | - | - | - | - | - | - | (1,469,654 | ) | (1,469,654 | ) | |||||||||||||||||||||||||||||||||||||||||
Balance, June 30, 2021 | - | 1,940,644 | $ | 19,406 | - | $ | - | 24,227 | $ | 242 | 208,188,705 | $ | 2,081,887 | $ | 17,920,912 | $ | (41,000 | ) | $ | (18,641,275 | ) | $ | 1,340,172 | |||||||||||||||||||||||||||||||||
Balance, December 31, 2020 | 4,800 | $ | 48 | - | $ | - | - | $ | - | 26,227 | $ | 262 | 155,381,183 | $ | 1,553,812 | $ | 10,340,821 | $ | - | $ | (14,437,168 | ) | $ | (2,542,225 | ) | |||||||||||||||||||||||||||||||
Vesting of common stock issued to employees | - | - | - | - | - | - | - | - | - | - | 7,897 | - | - | 7,897 | ||||||||||||||||||||||||||||||||||||||||||
Vesting of stock options issued to employees | - | - | - | - | - | - | - | - | - | - | 201,294 | - | - | 201,294 | ||||||||||||||||||||||||||||||||||||||||||
Common stock issued for services | - | - | - | - | - | - | - | - | 1,099,320 | 10,963 | 211,517 | - | - | 222,480 | ||||||||||||||||||||||||||||||||||||||||||
Common stock issued for conversion of notes payable and accrued interest | - | - | - | - | - | - | - | - | 33,944,157 | 339,442 | 2,314,353 | - | - | 2,653,795 | ||||||||||||||||||||||||||||||||||||||||||
Sale of common stock in private placement | - | - | - | - | - | - | - | - | 6,672,000 | 66,750 | 1,601,250 | - | - | 1,668,000 | ||||||||||||||||||||||||||||||||||||||||||
Sale of Preferred Stock Series C | - | - | 3,000,000 | 30,000 | - | - | - | - | - | - | 1,461,283 | - | - | 1,491,283 | ||||||||||||||||||||||||||||||||||||||||||
Warrants issued with Preferred Stock Series C | - | - | - | - | - | - | - | - | - | - | 1,268,717 | - | - | 1,268,717 | ||||||||||||||||||||||||||||||||||||||||||
Conversion of Preferred Stock Series A to common stock | (4,800 | ) | (48 | ) | - | - | - | - | - | - | 600,000 | 6,000 | (5,952 | ) | - | - | - | |||||||||||||||||||||||||||||||||||||||
Shares issued for exercise of stock options | - | - | - | - | - | - | - | - | 7,616,668 | 76,166 | 152,334 | (41,000 | ) | - | 187,500 | |||||||||||||||||||||||||||||||||||||||||
Net shares issued in connection with settlement agreement | - | - | - | - | - | - | (2,000 | ) | (20 | ) | (1,362,047 | ) | (13,620 | ) | 141,550 | - | - | 127,910 | ||||||||||||||||||||||||||||||||||||||
Shares of common stock issued for conversion of Preferred Stock Series C | - | - | (1,059,356 | ) | (10,594 | ) | - | - | - | - | 4,237,424 | 42,374 | (31,780 | ) | - | - | - | |||||||||||||||||||||||||||||||||||||||
Deemed dividend on conversion of Preferred Stock Series A to common stock | - | - | - | - | - | - | - | - | 206,242 | - | (206,242 | ) | - | |||||||||||||||||||||||||||||||||||||||||||
Deemed dividend on Preferred Stock Series C | - | - | - | - | - | - | - | - | - | - | 126,000 | - | (126,000 | ) | - | |||||||||||||||||||||||||||||||||||||||||
Preferred stock dividends | - | - | - | - | - | - | - | - | - | - | (74,614 | ) | - | (74,614 | ) | |||||||||||||||||||||||||||||||||||||||||
Loss for the period ended June 30, 2021 | - | - | - | - | - | - | - | - | (3,871,865 | ) | (3,871,865 | ) | ||||||||||||||||||||||||||||||||||||||||||||
Balance, June 30, 2021 | - | $ | - | 1,940,644 | $ | 19,406 | - | $ | - | 24,227 | $ | 242 | 208,188,705 | $ | 2,081,887 | $ | 17,920,912 | $ | (41,000 | ) | $ | (18,641,275 | ) | $ | 1,340,172 |
See accompanying notes to these unaudited condensed consolidated financial statements.
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | ||||||||
Interest paid | $ | 2,680 | $ | 2,680 | ||||
Income taxes paid | $ | - | $ | - | ||||
NON-CASH INVESTING AND FINANCING ACTIVITIES: | ||||||||
Stock issued for conversion of debt and accrued interest | $ | 2,653,795 | $ | - | ||||
Settlement of derivative liabilities | $ | (1,301,137 | ) | $ | 1,020,449 | |||
Cashless exercise of warrants | $ | - | $ | 50,986 | ||||
Issued of Series A Preferred Stock to consultants | $ | - | $ | 71,558 | ||||
Preferred stock dividend | $ | 115,047 | $ | 56,143 | ||||
Deemed dividends on Preferred Stock | $ | 332,242 | $ | - | ||||
Derivative discounts | $ | - | $ | 999,800 | ||||
Conversion of Series A Preferred stock to common stock | $ | 6,000 | $ | - | ||||
Conversion of Series C Preferred stock to common stock | $ | 61,781 | $ | - | ||||
Conversion of accounts payable to common stock | $ | 102,333 | $ | - | ||||
Conversion of accrued payroll to common stock | $ | 50,000 | $ | - | ||||
Conversion of accounts payable to common stock subscribed | $ | 156,441 | $ | - | ||||
Shares issued for debt conversion | $ | - | $ | 617,000 | ||||
Shares issued for accrued salary conversion | $ | - | $ | 17,787 | ||||
Accrued interest converted to equity | $ | - | $ | 36,983 |
MITESCO, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
For the Six | ||||||||
Months Ended | ||||||||
June 30, | ||||||||
2022 | 2021 | |||||||
CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
Net loss | $ | (7,450,479 | ) | $ | (3,871,865 | ) | ||
Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
Depreciation | 417,340 | 36,456 | ||||||
Amortization of right-to-use asset | 292,292 | 24,692 | ||||||
Net gain on settlement of notes payable | - | (1,836 | ) | |||||
Financing cost - waiver fee shares | 565,431 | - | ||||||
Gain on waiver fee shares | (198,273 | ) | - | |||||
Commitment shares | - | - | ||||||
Loss on commitment shares | 11,619 | - | ||||||
Gain on conversion of accrued salary | (15,032 | ) | - | |||||
(Gain) loss on revaluation of derivative liabilities | 73,587 | 493,455 | ||||||
Loss on settlement of accounts payable | 78,235 | - | ||||||
Amortization of discount on notes payable | 1,017,861 | 756,795 | ||||||
Share-based compensation | 305,296 | 559,579 | ||||||
Changes in assets and liabilities: | ||||||||
Accounts receivables | (69,751 | ) | (1,133 | ) | ||||
Prepaid expenses | 50,348 | (28,843 | ) | |||||
Due from related party | - | (26,163 | ) | |||||
Inventory | (8,106 | ) | (2,109 | ) | ||||
Accounts payable and accrued liabilities | 934,220 | (291,463 | ) | |||||
Operating lease liability, net | (30,093 | ) | 14,082 | |||||
Other current liabilities | (73,286 | ) | 880 | |||||
Accrued interest | 71,873 | 203,447 | ||||||
Net cash used in operating activities | (4,026,918 | ) | (2,134,026 | ) | ||||
CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||
Cash paid for acquisition of fixed assets and construction in progress | (190,200 | ) | (495,359 | ) | ||||
Net cash used in investing activities | (190,200 | ) | (495,359 | ) | ||||
CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
Proceeds from private placement of common stock | - | 1,668,000 | ||||||
Proceeds from sales of Series C Preferred Stock, net of fees | - | 2,760,000 | ||||||
Proceeds from notes payable - related parties, net of discounts | 1,511,250 | - | ||||||
Proceeds from notes payable, net of discounts | 1,812,500 | - | ||||||
Principal payments on notes payable related parties | (235,294 | ) | - | |||||
Principal payments on notes payable | - | (177,534 | ) | |||||
Net cash provided by financing activities | 3,088,456 | 4,250,466 | ||||||
Net increase in cash and cash equivalents | (1,128,662 | ) | 1,621,081 | |||||
Cash and cash equivalents at beginning of period | 1,164,483 | 64,789 | ||||||
Cash and cash equivalents at end of period | $ | 35,821 | $ | 1,685,870 |
TheSee accompanying notes are an integral part of the Condensed Consolidated Financial Statements.to these unaudited condensed consolidated financial statements.
MITESCO, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
For the Six | ||||||||
Months Ended | ||||||||
June 30, | ||||||||
2022 | 2021 | |||||||
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | ||||||||
Interest paid | $ | 2,680 | $ | - | ||||
NON-CASH INVESTING AND FINANCING ACTIVITIES: | ||||||||
Stock issued for conversion of debt and accrued interest | $ | - | $ | 2,653,795 | ||||
Settlement of derivative liabilities | $ | - | $ | (1,301,137 | ) | |||
Discount on notes payable due to derivative liabilities | $ | - | $ | - | ||||
Preferred stock dividend | $ | 160,084 | $ | 74,614 | ||||
Deemed dividends on Preferred Stock | $ | - | $ | 332,242 | ||||
Conversion of Series A Preferred stock to common stock | $ | - | $ | 6,000 | ||||
Conversion of Series C Preferred stock to common stock | $ | - | $ | 31,781 | ||||
Conversion of accounts payable to common stock | $ | 500,000 | $ | 102,333 | ||||
Conversion of accrued payroll to common stock | $ | - | $ | 50,000 | ||||
Capital expenditures included in accounts payable | $ | 4,289,816 | $ | - |
See accompanying notes to these unaudited condensed consolidated financial statements.
MITESCO, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2022 AND 2021
(Unaudited)
Note 1 – Description of Business
Company Overview
Mitesco, Inc. (the “Company,” “we,” “us,” or “our”) was formed in the state of Delaware on January 18, 2012. On December 9, 2015, wethe Company restructured ourits operations and acquired Newco4pharmacy, LLC, a development stage company which sought to acquire compounding pharmacy businesses. As a part of the restructuring, wethe Company completed a “spin out” of ourits former business line. On April 24, 2020, wethe Company changed ourits name to Mitesco, Inc.
Since 2020, ourthe Company’s operations have focused on establishing medical clinics utilizing nurse practitioners under The Good Clinic name and development and acquisition of telemedicine technology. In March of 2020, wethe Company formed a wholly owned subsidiary, Mitesco N.A. LLC, which holds The Good Clinic LLC, a Colorado limited liability company for ourits clinic business. We also have a subsidiary in Dublin, Ireland, Acelerar Healthcare Holdings, LTD, with a view toward technology acquisitions, operations and potentially investments from the European marketplace.
WeThe Company opened ourits first The Good Clinic in Minneapolis, Minnesota in the first quarter of 2021 and have three (3)six operating at the time of this filing. We have four (4) additional sites under contract with build-out underway and anticipate having seven (7) more in operationThe Company intends on opening up to 50 new clinics in the greater Minneapolis and Denver metropolitan areas before the end of 2022. We are making plans for upnext three years, in addition to fifty (50) operating units before the end of 2023 from internal growth, and we may entertain acquisition ofany existing clinics as well.sites it might acquire.
Note 2 - Financial Condition, Going Concern and Management Plans
On November 19, 2021, the Company closed a bridge financing round totaling $3.1 million of a Series D preferred stock sold to investors in a private placement. Each Series D Unit will have a purchase price of $1.00 per Unit, with each Unit consisting of (a) one share of a newly formed Series D Convertible Preferred Stock, par value $0.01 per share (the “Series D Preferred Stock”), (b) one warrant (the “Series A Warrants”) to purchase 2.1 shares of the Company’s Common Stock at a purchase price of $0.50 per whole share of Common Stock, and (c) one warrant (the “Series B Warrants” and together with the Series A Warrants, the “Warrants”) to purchase 2.1 shares of Common Stock at a purchase price of $0.75 per whole share.
Pursuant to the Certificate of Designations, Preferences and Rights of the Series D Convertible Preferred Stock of the Company, Inc., filed with the Secretary of State of the State of Delaware on October 18, 2021 (the “COD”), there are 10,000,000 shares of the Company’s preferred stock that have been designated as the Series D Preferred Stock and each share of the Series D Preferred Stock is convertible at the option of the holder thereof, or automatically upon the request of the Company’s underwriters that the Series D Preferred Stock convert to shares of Common Stock or upon listing of the Company’s Common Stock on a national securities exchange. The number of shares of Common Stock issuable upon the conversion of each share of Series D Preferred Stock is calculated by dividing the Conversion Amount (defined in the COD as the Stated Value, $1.05 per share, plus accrued and unpaid dividends) by the $0.25 conversion price (the “Conversion Price”).
On November 11, 2021, the Company filed a registration statement on form S-1 in connection with a planned up-list to a national exchange; on June 30, 2022 the Company its third amendment to the S-1; and on August 3, 2022, the Company files its fourth amendment to the S-1.
As of Septemberthe date of this filing, the Company has closed on $3,100,000 of its Series D Preferred stock. To achieve its growth strategy, the Company will need to raise additional financing prior to up listing on Nasdaq. The Company will not proceed with this offering in the event its Common Stock is not approved for listing on the Nasdaq Capital Market though it will continue to seek financing for its expansion and operating needs in the debt or equity markets.
Between December 30, 2021 through the date of this filing, the Company has entered into a total $5.0 million of promissory notes with certain related parties and other note holders. All notes carry a 10% interest rate per annum, accruing in monthly installments. These notes have been used to fund 2022 operations to date.
The Company entered into a debt-for-equity exchange agreement with Gardner Builders Holdings, LLC (the “Creditor”) on January 7, 2022 (the “Agreement”). Pursuant to the Agreement, the Company issued shares of restricted common stock, par value $0.01 per share, of MITI (the “Restricted Shares”) to the Creditor in exchange for the Company Debt Obligations, as defined below.
The Agreement settles for certain accounts payable amounts owed by the Company to the Creditor (the “Accounts Payable Amount”) as well as upcoming amounts that will become due between the date of the Agreement and April 1, 2022. The Agreement also settles incurred interest and penalties on the amounts due through January 5, 2022, as well as future interest payments on amounts incurred in the first quarter of 2022 (collectively, the “Additional Costs”, and combined with the Accounts Payable Amount, the “Company Debt Obligations”). The Accounts Payable Amount is $500,000, the Additional Costs is $294,912.56 and the conversion price is $0.25. As a result, 3,179,650 Restricted Shares were authorized to be issued.
As of June 30, 2022, the Company had cash and cash equivalents of $442,000,$36,000, current liabilities of $3,166,000,$10.5 million, and has incurred a loss from operations and has generated minimal revenue. The Company’s principal operation is the development and operation of primary care health and wellness clinics operated by nurse practitioners. In addition, the Company develops and deploys software and systems for the healthcare marketplace.operations. The Company intends to a) develop and own primary care clinics operated by nurse practitioners, b) develop and acquire telemedical technologies, and b)c) evaluate other healthcare related opportunities both domestically and on an international basis.opportunities. The Company’s activities are subject to significant risks and uncertainties, including failing to secure additional funding to execute its business plan.
As a result of these factors, there is substantial doubt about the ability of the Company to continue as a going concern for one year from the date the financial statements are issued. The Company’s continuance is dependent on raising capital and generating revenues sufficient to sustain operations. During the nine months ended September 30, 2021, the Company closed on a $3,000,000 Series C Preferred Stock and warrants offering and $1,668,000 restricted common stock offering. To continue its expansion plans, theThe Company believes that additionalthe necessary capital will need to be raised and has entered discussions to do so with certain individuals and companies. However, as of the date of these condensed consolidated financial statements, no formal agreement exists.
The accompanying condensed consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts classified as liabilities that might be necessary should the Company be forced to take any such actions.
PPP Loan
During March 2020, in response to the COVID-19 crisis, the federal government announced plans to offer loans to small businesses in various forms, including the Payroll Protection Program, or "PPP"“PPP”, established as part of the Corona Virus Aid, Relief and Economic Security Act (“CARES Act”) and administered by the U.S. Small Business Administration. On April 25, 2020, the Company entered an unsecured Promissory Note (the “Note”) with Bank of America for a loan in the original principal amount of approximately $460,000,$460,400, and the Company received the full amount of the loan proceeds on May 4, 2020. The currentJune 30, 2022 balance, is $460,406 and the Company is currently in discussions for a) a partial forgiveness and b) the conversion of any remaining balance into a term note.including accrued interest, was approximately $470,400.
COVID -19 Impact
The Company has had some impact on its operations because of the effects of the COVID-19 pandemic, primarily with accessibility to staffing, consultants and in the capital markets, and it is adjusting as needed within its available resources. The Company will continue to assess the effect of the pandemic on its operations. The extent to which the COVID-19 pandemic will continue to impact the Company’s business and operations will depend on future developments that are highly uncertain and cannot be predicted with confidence, such as the ultimate geographic spread of the disease, the duration of the outbreak, the duration and effect of possible business disruptions and the short-term effects and ultimate effectiveness of the travel restrictions, quarantines, social distancing requirements and business closures in the United States and other countries to contain and treat the disease. While the potential economic impact brought by, and the duration of, COVID-19 may be difficult to assess or predict, a widespread pandemic could result in significant disruption of global financial markets, reducing the Company’s ability to access capital, which could in the future negatively affect the Company’s liquidity. In addition, a recession or market correction resulting from the spread of COVID-19 could materially affect the Company’s business and the value of its securities.
Note 3 – Basis of Presentation and Summary of Significant Accounting Policies
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and pursuant to the instructions to Form 10-Q and Article 8 of Regulation S-X of the Securities and Exchange Commission (“SEC”) and on the same basis as the Company prepares its annual audited consolidated financial statements. In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments, consisting of normal recurring adjustments, considered necessary for a fair presentation of such interim results.
The results for the condensed consolidated statement of operations are not necessarily indicative of results to be expected for the year ending December 31, 2022 or for any future interim period. The condensed consolidated balance sheet at June 30, 2022 has been derived from unaudited financial statements; however, it does not include all of the information and notes required by U.S. GAAP for complete financial statements. The accompanying condensed consolidated financial statements should be read in conjunction with the consolidated financial statements for the year ended December 31, 2021 and notes thereto included in the Company’s annual report on Form 10-K filed on April 5, 2022.
Principles of Consolidation – The accompanying condensed consolidated financial statements include the accounts of Mitesco, Inc., and its wholly owned subsidiaries MitescoNA, LLC, The Good Clinic, LLC, and Acelerar Healthcare Holdings, LTD. In addition, we anticipate that we will rely onmanage two entities under a variable interest entity arrangement and have control over the operating activities of certainthese legal entities in which we willdo not maintain a controlling ownership interest but over which we will have indirectdirect influence over the operations and of which we will be consideredare the primary beneficiary. We expect that these entities will typically be subject to nominee ownership and transfer restriction agreements that effectively transfer the majority of the economic risks and rewards of their ownership to the Company. The Company’s management, restriction and other agreements concerning such nominee-owned entities typically includes both financial terms and protective and participating rights to the entities’ operating, strategic and non-clinical governance decisions which transfer substantial powers over and economic responsibility for these entities to the Company. As such, the Company applies the guidance of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 810 – Consolidation (“ASC 810”), to determine when an entity that is insufficiently capitalized or not controlled through its voting interests, referred to as a variable interest entity should be consolidated. All intercompany balances and transactions have been eliminated.
Use of Estimates - The preparation of these financial statements requires our management to make estimates and assumptions about future events that affect the amounts reported in the financial statements and related notes. Future events and their effects cannot be determined with absolute certainty. Therefore, the determination of estimates requires the exercise of judgment.
Cash - The Company considers all highly liquid investments with maturities of three months or less to be cash equivalents. The Company had cash and cash equivalents of approximately $442,000$36,000 as of SeptemberJune 30, 2021,2022, and $65,000$1.2 million as of December 31, 2020.2021.
Property, Plant, and Equipment - Property and equipment is recorded at the lower of cost or estimated net recoverable amount and is depreciated using the straight-line method over its estimated useful life. Property acquired in a business combination is recorded at estimated initial fair value. Property, plant, and equipment are depreciated using the straight-line method based on the lesser of the estimated useful lives of the assets or the lease term based upon the following life expectancy:
Years | |||
Office equipment | 3 to 5 | ||
Furniture & fixtures | 3 to 7 | ||
Machinery & equipment | 3 to 10 | ||
Leasehold improvements | Term of lease |
In 2020, the Company entered into a lease for a clinic facility in Minneapolis, Minnesota. In connection with the facility, the Company incurred costs to design, engineer, build and install furniture and equipment in the facility. $417,000 was recorded in construction in progress on the balance sheet as of December 31, 2020. The facility was completed, and the Company received its certificate of occupancy, in the first quarter of 2021. During the three months ended March 31, 2021, the costs previously recorded as construction in progress were recorded to fixed assets and are being depreciated over their useful lives or lease term as appropriate. During the three months ended September 30, 2021, no additional fixed assets were acquired. During the three months ended June 30, 2021, the Company entered into three additional leases, two leases are for two new clinics and one lease was for the new corporate headquarters. During the three months ended September 30, 2021 the Company entered into three new clinic leases. With the signing of the three additional leases late in the second quarter we anticipate additional expenditures for fixed assets and leasehold improvements. During the fourth quarter of 2021 we expect to have expenditures of approximately $3 million related to construction and equipment related to these new clinic locations.
Revenue Recognition – On January 1, 2018, wethe Company adopted Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (Topic 606), which supersedes the revenue recognition requirements in Accounting Standards Codification (ASC) Topic 605, Revenue Recognition (Topic 605). Results for reporting periods beginning after January 1, 2018, are presented under Topic 606. The impact of adopting the new revenue recognition accounting standard was not materialissued by the Financial Accounting Standards Board (“FASB”) and codified in the ASC as Topic 606 (“ASC 606”). The revenue recognition standard in ASC 606 outlines a single comprehensive model for recognizing revenue as performance obligations, defined in a contract with a customer as goods or services transferred to our financial statementsthe customer in exchange for consideration, are satisfied. The standard also requires expanded disclosures regarding the Company’s revenue recognition policies and there was no adjustment to beginning retained earnings on January 1, 2018.significant judgments employed in the determination of revenue.
Under TopicThe Company applied the modified retrospective approach to all contracts when adopting ASC 606. As a result, at the adoption of ASC 606 what was previously classified as the provision for bad debts in the statement of operations is now reflected as implicit price concessions (as defined in ASC 606). For changes in credit issues not assessed at the date of service, the Company will prospectively recognize those amounts in other operating expenses on the statement of operations. For periods prior to the adoption of ASC 606, the provision for bad debts has been presented consistent with the previous revenue is recognized when control of the promised goods or services is transferred to our customers, in an amountrecognition standards that reflects the consideration we expectrequired it to be entitled to in exchange for those goods or services.
We determine revenue recognition through the following steps:presented separately as a component of net operating revenues.
Our revenues generally relate to net patient fees received from various payers and patients themselves under contracts in which our performance obligations are to provide services to the patients. Revenues are recorded during the period our obligations to provide services are satisfied. The contractual relationships with patients, in most cases, also involve a third-party payer (Medicare, Medicaid, managed care health plans and commercial insurance companies, including plans offered through the health insurance exchanges) and the transaction prices for the services provided are dependent upon the terms provided by (Medicare and Medicaid) or negotiated with (managed care health plans and commercial insurance companies) the third-party payers. The payment arrangements with third-party payers for the services we provide to the related patients typically specify payments at amounts less than our standard charges and generally provide for payments based upon predetermined rates for services or discounted fee-for-service rates. Management continually reviews the contractual estimation process to consider and incorporate updates to laws and regulations and the frequent changes in managed care contractual terms resulting from contract renegotiations and renewals. |
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Stock-Based Compensation-We recognize the compensation costs of share-based compensation arrangements based on the grant-date fair value and recognize the costs in the financial statements over the period during which employees are required to provide services. Share-based compensation cost for stock options is estimated at the grant date based on each option’s fair-value as calculated by the Black-Scholes-Merton (“BSM”) option-pricing model. Share-based compensation arrangements may include stock options, restricted share plans, performance-based awards, share appreciation rights and employee share purchase plans. Such compensation amounts, if any, are amortized over the respective vesting periods of the option grant.
Equity instruments issued to those other than employees are recognized pursuant to FASB issued ASU 2018-07, Compensation – Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting. This ASU relates to the accounting for non-employee share-based payments. The amendment in this update expands the scope of Topic 718 to include all share-based payment transactions in which a grantor acquired goods or services to be used or consumed in a grantor’s own operations by issuing share-based payment awards. The ASU excludes share-based payment awards that relate to: (1) financing to the issuer; or (2) awards granted in conjunction with selling goods or services to customers as part of a contract accounted for under Topic 606, Revenue from Contracts from Customers. The share-based payments are to be measured at grant-date fair value of the equity instruments that the entity is obligated to issue when the goods or service has been delivered or rendered and all other conditions necessary to earn the right to benefit from the equity instruments have been satisfied. This standard became effective for public business entities for fiscal years beginning after December 15, 2018, including interim periods within that fiscal year. We adopted the provisions of this ASU on January 1, 2019. The adoption had no impact on our results of operations, cash flows, or financial condition.
Convertible Instruments-The Company reviews the terms of convertible debt and equity instruments to determine whether there are conversion features or embedded derivative instruments including embedded conversion options that are required to be bifurcated and accounted for separately as a derivative financial instrument. In circumstances where the convertible instrument contains more than one embedded derivative instrument, including conversion options that are required to be bifurcated, the bifurcated derivative instruments are accounted for as a single compound instrument. Also, in connection with the sale of convertible debt and equity instruments, the Company may issue free standing warrants that may, depending on their terms, be accounted for as derivative instrument liabilities, rather than as equity. When convertible debt or equity instruments contain embedded derivative instruments that are to be bifurcated and accounted for separately, the total proceeds allocated to the convertible host instruments are first allocated to the fair value of the bifurcated derivative instrument. The remaining proceeds, if any, are then allocated to the convertible instruments themselves, usually resulting in those instruments being recorded at a discount from their face amount. When the Company issues debt securities, which bear interest at rates that are lower than market rates, the Company recognizes a discount, which is offset against the carrying value of the debt. Such discount from the face value of the debt, together with the stated interest on the instrument, is amortized over the life of the instrument through periodic charges to income. In addition, certain conversion features are recognized as beneficial conversion features to the extent the conversion price as defined in the convertible note is less than the closing stock price on the issuance of the convertible notes.
Derivative Financial Instruments- Derivatives are recorded on the consolidated balance sheet at fair value. The conversion features of the convertible notes are embedded derivatives and are separately valued and accounted for on the consolidated balance sheet with changes in fair value recognized during the period of change as a separate component of other income/expense. Fair values for exchange-traded securities and derivatives are based on quoted market prices. The pricing model the Company uses for determining the fair value of its derivatives is the Lattice Model. Valuations derived from this model are subject to ongoing internal and external verification and review. The model uses market-sourced inputs such as interest rates and stock price volatilities. As of September 30, 2021, the Company had retired all derivative instruments.
Common Stock Purchase Warrants-The Company accounts for common stock purchase warrants in accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 815, Accounting for Derivative Instruments and Hedging Activities. As is consistent with its handling of stock compensation and embedded derivative instruments, the Company’s cost for stock warrants is estimated at the grant date based on each warrant’s fair-value as calculated by the Black Sholes option-pricing model value method for valuing the impact of the expense associated with these warrants.
Stockholders’ Equity-Shares of common stock issued for other than cash have been assigned amounts equivalent to the fair value of the service or assets received in exchange.
Per Share Data-Basic loss per share is computed by dividing net loss by the weighted average number of common shares outstanding for the year. Diluted loss per share is computed by dividing net loss by the weighted average number of common shares outstanding plus common stock equivalents (if dilutive) related to warrants, options, and convertible instruments.
Income Taxes- The Company accounts for income taxes under the asset and liability method which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in the Company’s condensed consolidated financial statements or tax returns. In estimating future tax consequences, the Company generally considers all expected future events other than possible enactments of changes in the tax laws or rates.
Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all the deferred tax assets will not be realized. The Company has determined that a valuation allowance is needed due to recent taxable net operating losses, the sale of profitable divisions and the limited taxable income in the carry back periods. The effect on deferred tax assets and liabilities of a change in tax rates is recognized as income or expense in the period that includes the enactment date. Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes and certain tax loss carryforwards, less any valuation allowance.
The Company accounts for uncertain tax positions as required in that a position taken or expected to be taken in a tax return is recognized in the consolidated financial statements when it is more likely than not (i.e., a likelihood of more than fifty percent) that the position would be sustained upon examination by tax authorities. A recognized tax position is then measured at the largest amount of benefit that is greater than fifty percent likely of being realized upon ultimate settlement. The Company does not have any material unrecognized tax benefits. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as components of interest expense and other expense, respectively, in arriving at pretax income or loss. The Company does not have any interest and penalties accrued. The Company is generally no longer subject to U.S. federal, state, and local income tax examinations for the years before 2018.
Business Combinations- The Company accounts for business combinations by recognizing the assets acquired, liabilities assumed, contractual contingencies, and contingent consideration at their fair values on the acquisition date. The purchase price allocation process requires management to make significant estimates and assumptions, especially with respect to intangible assets, estimated contingent consideration payments and pre-acquisition contingencies. Examples of critical estimates in valuing certain of the intangible assets we have acquired or may acquire in the future include but are not limited to:
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Unanticipated events and circumstances may occur that may affect the accuracy or validity of such assumptions, estimates or actual results. Additionally, any change in the fair value of the acquisition-related contingent consideration subsequent to the acquisition date, including changes from events after the acquisition date, such as changes in our estimates of relevant revenue or other targets, will be recognized in earnings in the period of the estimated fair value change. A change in fair value of the acquisition-related contingent consideration or the occurrence of events that cause results to differ from our estimates or assumptions could have a material effect on the consolidated financial position, statements of operations or cash flows in the period of the change in the estimate.
Impairment of Long-Lived Assets-Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized in the amount by which the carrying amount of the asset exceeds the fair value of the asset. Assets to be disposed would be separately presented in the consolidated balance sheet and reported at the lower of the carrying amount or fair value less costs to sell and are no longer depreciated. The assets and liabilities of a disposal group classified as held-for-sale would be presented separately in the appropriate asset and liability sections of the consolidated balance sheet, if material. The Company had no impairment charges.
Financial Instruments and Fair Values-The fair value of a financial instrument represents the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. Fair value estimates are made at a specific point in time, based upon relevant market information about the financial instrument. In determining fair value, we use various valuation methodologies and prioritize the use of observable inputs. We assess the inputs used to measure fair value using a three-tier hierarchy based on the extent to which inputs used in measuring fair value are observable in the market:
Level 1 – inputs include exchange quoted prices for identical instruments and are the most observable.
Level 2 – inputs include brokered and/or quoted prices for similar assets and observable inputs such as interest rates.
Level 3 – inputs include data not observable in the market and reflect management judgment about the assumptions market participants would use in pricing the asset or liability.
The use of observable and unobservable inputs and their significance in measuring fair value are reflected in our hierarchy assessment. The carrying amount of cash, prepaid assets, accounts payable and accrued liabilities approximate fair value due to the short-term maturities of these instruments. Because cash and cash equivalents are readily liquidated, management classifies these values as Level 1. The fair value of the derivative liabilities approximates their book value as the instruments are short-term in nature and contain market rates of interest. Because there is no ready market or observable transactions, management classifies the derivative liabilities as Level 3.
New Accounting Standards
From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (“FASB”) or other standard setting bodies that the Company adopts as of the specified effective date. Unless otherwise discussed, the Company does not believe that the impact of recently issued standards that are not yet effective will have a material impact on its financial position or results of operations upon adoption.
Recent Accounting Standards Adopted in the Year
In June 2018, the FASB issued ASU 2018-07 “Improvements to Non-employee Share-Based Payment Accounting”, which simplifies the accounting for share-based payments granted to non-employees for goods and services. Under the ASU, most of the guidance on such payments to non-employees would be aligned with the requirements for share-based payments granted to employees. The amendments are effective for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020.
In December 2019, the FASB issued ASU No. 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“ASU 2019-12”), which is intended to simplify various aspects related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and clarifies and amends existing guidance to improve consistent application. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020, with early adoption permitted. The Company has adopted ASU No. 2019-12, “Income Taxes (Topic 740) however giving the Company’s historical losses and full valuation allowance it did not have an impact on its condensed consolidated financial statements and related disclosures.
Recent Accounting Standards Not Yet Adopted
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)”. This ASU reduces the number of accounting models for convertible debt instruments and convertible Preferred Stock. As well as amend the guidance for the derivatives scope exception for contracts in an entity’s own equity to reduce form-over-substance-based accounting conclusions. In addition, this ASU improves and amends the related EPS guidance. This standard is effective for us on January 1, 2022, including interim periods within those fiscal years. Adoption is either a modified retrospective method or a fully retrospective method of transition. We are currently assessing the impact the new guidance will have on our condensed consolidated financial statements.
There are various other updates recently issued, most of which represent technical corrections to the accounting literature or application to specific industries and are not expected to a have a material impact on the Company’s consolidated financial position, results of operations or cash flows.
Note 4 – Net Loss Per Share Applicable to Common Shareholders
Net Loss per Share Applicable to Common Stockholders
Basic loss per common share is computed by dividing net loss by the weighted average number of common shares outstanding during the reporting period. Diluted loss per common share is computed similarly to basic loss per common share except that it reflects the potential dilution that could occur if dilutive securities or other obligations to issue common stock were exercised or converted into common stock.
The following table sets forth the computation of loss per share for the three and ninesix months ended SeptemberJune 30, 2021,2022, and 2020,2021, respectively:
For the three months ended September 30, | For the nine months ended September 30, | |||||||||||||||
2021 | 2020 | 2021 | 2020 | |||||||||||||
Numerator | ||||||||||||||||
Net loss applicable to common shareholders | $ | (1,809,899 | ) | $ | (1,056,001 | ) | $ | (6,088,620 | ) | $ | (2,004,353 | ) | ||||
Denominator | ||||||||||||||||
Weighted Average shares outstanding | 208,784,236 | 100,262,378 | 199,678,995 | 94,154,754 | ||||||||||||
Net loss per share | ||||||||||||||||
Basic and diluted | $ | (0.01 | ) | $ | (0.01 | ) | $ | (0.03 | ) | $ | (0.02 | ) |
For the Three Months Ended | For the Six Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2022 | 2021 | 2022 | 2021 | |||||||||||||
Numerator: | ||||||||||||||||
Net loss applicable to common shareholders | $ | (3,885,677 | ) | $ | (1,523,769 | ) | $ | (7,610,563 | ) | $ | (4,278,721 | ) | ||||
Denominator: | ||||||||||||||||
Weighted average common shares outstanding | 221,523,073 | 201,678,218 | 217,634,736 | 194,455,386 | ||||||||||||
Net loss per share: | ||||||||||||||||
Basic and diluted | $ | (0.02 | ) | $ | (0.01 | ) | $ | (0.03 | ) | $ | (0.02 | ) |
The Company excluded all common equivalent shares outstanding for warrants, options, and convertible instruments to purchase common stock from the calculation of diluted net loss per share because all such securities are antidilutive for the periods presented. As of SeptemberJune 30, 2021,2022, and 2020,2021, the following shares were issuable and excluded from the calculation of diluted loss:
For the Six Months Ended | ||||||||||||||||
For the nine months ended September 30, | June 30, | |||||||||||||||
2021 | 2020 | 2022 | 2021 | |||||||||||||
Common stock options | 18,386,211 | 67,689 | 16,354,961 | 11,696,211 | ||||||||||||
Common stock purchase warrants | 12,600,000 | - | 33,290,673 | 12,600,000 | ||||||||||||
Convertible Preferred Stock Series C | 8,237,425 | - | 4,362,575 | 8,150,705 | ||||||||||||
Accrued interest on Preferred Stock | 494,883 | 32,784 | 480,056 | 376,803 | ||||||||||||
Potentially dilutive securities | 39,718,519 | 100,663 | 54,488,265 | 32,823,719 |
Note 5 – Related Party Transactions
For the threesix months ended SeptemberJune 30, 2021:2022:
On July 21, 2021, the CompanyMitesco, Inc. (the “Company”) issued a total of 3,000,000 stock option awards10% Promissory Note due June 30, 2022, dated December 30, 2021, to the Company’s executive officers: 1,500,000 to itsMichael C. Howe Living Trust (the “Lender”). Michael C. Howe is the Chief Executive Officer 750,000 to its Chief Financial Officer and 750,000 to its Chief Legal Officer. The options will expire on the ten- year anniversary of the grant date and will vest following the Company’s achievementGood Clinic LLC, one of a total of $30 million of revenues over four consecutive quarters, as recorded under generally accepted accounting principlesour subsidiaries. The principal amount of the United StatesNote is $1,000,000, carries a 10% interest rate per annum, payable in monthly installments, and had a maturity date that is the earlier of America.(i) six months from the date of execution (on July 19, 2022 this date was extended to September 10, 2022) or (ii) the date on which the Company successfully lists its shares of common stock on Nasdaq or NYSE. The options have a strike price of $0.25 the amount was based on thepurchase price of the lowest investmentNote payable to the Company for the Note was $850,000 and was funded on December 30, 2021. An original issue discount in the amount offeredof $150,000 was recorded. The amount payable at maturity will be $1,000,000 plus 10% of that amount plus any accrued and unpaid interest. Following an event of default, as defined in the Note, the principal amount shall bear interest for each day until paid, at a rate per annum equal to outside investorsthe lesser of the maximum interest permitted by applicable law and 18%. The Note contains a “most favored nations” clause that provides that, so long as the Note is outstanding, if the Company issues any new security, which the Lender reasonably believes contains a term that is more favorable than those in 2021the Note, the Company shall notify the Lender of such term, and is higher thansuch term, at the closing price onoption of the date they were granted.Lender, shall become a part of the Note. At June 30, 2022, the principal balance of this note was $1,000,000; $116,507 of the original issue discount was amortized to interest expense during the six months ended June 30, 2022, and the remaining original issue discount at June 30, 2022 was $33,493.
On August 26, 2021, theThe Company issued 312,800 restricted shares ofa 10% Promissory Note due August 14, 2022, dated February 14, 2022 (the “Diamond Note 1”), to Lawrence Diamond (the “Lender”). Mr. Diamond is the Company’s common stock priced at $0.25, vesting immediately, in lieu of $78,200 of cash compensation owed to the Company’s Chief Executive Officer for services renderedof the Company and a member of its Board of Directors. The principal amount of the Note is $175,000, carries a 10% interest rate per annum, payable in monthly installments, and has a maturity date that is the earlier of (i) six (6) months from the date of execution, or (ii) the date on which the Company successfully lists its shares of common stock on Nasdaq or NYSE. The purchase price of the Note payable to the Company priorfor the Note was $148,750 and was funded on February 14, 2022. The amount payable at maturity will be $175,000 plus 10% of that amount plus accrued and unpaid interest. Following an event of default, as defined in the Note, the principal amount shall bear interest for each day until paid, at a rate per annum equal to 2021.the lesser of the maximum interest permitted by applicable law and 18%. The Note contains a “most favored nations” clause that provides that, so long as the Note is outstanding, if the Company issues any new security, which the Lender believes contains a term that is more favorable than those in the Note, the Company shall notify the Lender of such term, and such term, at the option of the Lender, shall become a part of the Note. In addition to the Note and Lender will be issued 367,500 5-year warrants that may be exercised at $.50 per share and 367,500 5-year warrants that may be exercised at $.75 per share. These warrants have all of the same terms as those previously issued in conjunction with the Company’s Series C Preferred shares and its Series D Preferred shares. The warrants have an aggregate commitment date fair value of $2,914. At June 30, 2022, the principal balance of this note was $175,000; $20,877 of the original issue discount was amortized to interest expense during the six months ended June 30, 2022, and the remaining original issue discount at June 30, 2022 was $5,373.
During the three months ended September 30, 2021, the Company accrued dividends on its Series X Preferred Stock in the total amount of $15,141. Of this amount, a total of $2,000 was payable to officers and directors, $7,816 was payable to a related party shareholder, and $5,325 was payable to non-related parties.
For the nine months ended September 30, 2021:
On July 21, 2021, theThe Company issued a total of 3,000,000 stock option awards10% Promissory Note due June 18, 2022 (the “Diamond Note 2”), dated March 18, 2022, to Lawrence Diamond (the “Lender”), which was subsequently amended. Lawrence Diamond is the Company’s executive officers: 1,500,000 to its Chief Executive Officer 750,000 to its Chief Financial Officer and 750,000 to its Chief Legal Officer. The options will expire on the ten-year anniversary of the grant date and will vest following the Company’s achievement of a total of $30 million of revenues over four consecutive quarters, as recorded under generally accepted accounting principlesCompany. The principal amount of the United StatesDiamond Note is $235,294, carries a 10% interest rate per annum, payable in monthly installments, and has a maturity date that is the earlier of America.(i) April 4, 2022, (ii) the date on which the Company successfully lists its shares of common stock on Nasdaq or NYSE, or (iii) the date of receipt of the Company of the next round of debt or equity financing in an amount of at least $1,000,000. The options have a strike price of $0.25 the amount was based on thepurchase price of the lowest investment amount offered to outside investors in 2021 and is higher than the closing price on the date they were granted.
On August 26, 2021, the Company issued 312,800 restricted shares of the Company’s common stock priced at $0.25, vesting immediately, in lieu of $78,200 of cash compensation owed to the Company’s Chief Executive Officer for services renderedDiamond Note payable to the Company priorfor the Diamond Note was $200,000 and was funded on March 18, 2022. The amount payable at maturity will be $235,294 plus 10% of that amount plus any accrued and unpaid interest. Following an event of default, as defined in the Diamond Note, the principal amount shall bear interest for each day until paid, at a rate per annum equal to 2021.
During the nine months ended September 30, 2021,lesser of the maximum interest permitted by applicable law and 18%. The Diamond Note contains a “most favored nations” clause that provides that, so long as the Note is outstanding, if the Company accrued dividends on its Series X Preferred Stockissues any new security, which the Lender reasonably believes contains a term that is more favorable than those in the total amount of $46,677. Of this amount, a total of $6,000 was payable to officers and directors, $23,444 was payable to a related party shareholder, and $17,233 was payable to non-related parties.
For the three months ended September 30, 2020:
On August 1, 2020,Diamond Note, the Company agreed to issue 1,000,000 ten-year options toshall notify the Lender of such term, and such term, at the option of the Lender, shall become a non-management director. These optionspart of the Note. In addition, the Lender will be issued 200,000 5-year warrants that may be exercised on substantially the same terms as the Series A warrant issued in connection with the Company’s Series D Convertible Preferred Stock. The warrants have aan aggregate commitment date fair value of $56,037, an exercise price$2,213. All amounts due for The Diamond Note, with the exception of $0.05 per share, and vest over a three-year period. The Company valued these options using the Black-Scholes valuation model. During the nine months ended September$23,529, was paid on April 8, 2022. $23,529 remained outstanding as of June 30, 2020, the amount of $11,595 was charged to operations in connection these options.
For the nine months ended September 30, 2020:
On February 27, 2020, the Company agreed to issue 1,000,000 ten-year options to its 2 non-management directors (a total of 2,000,000 options). These options have a fair value at issuance of $39,162 per director (a total of $78,324), an exercise price of $0.05 per share, and vest over a three-year period. The Company valued these options using the Black-Scholes valuation model. During the three- months ended September 30, 2020, the amount of $3,264 was charged to operations in connection with each 1,000,000-option grant (a total of $6,528 for all 2,000,000 options).2022.
On March 2, 2020,22, 2022, the Company agreedissued 168,221 shares of common stock with a contract price of $0.25 per share or $42,055 and a grant date market value of $0.127 per share or $21,364 were issued to issue 1,500,000 ten-year options to each ofLarry Diamond, its Chief Executive Officer, its President,as compensation for the waiver of certain covenants as set forth and defined in Diamond Note 1.
On April 27, 2022, the Company issued 96,471 shares of common stock with a contract price of $0.25 per share or $24,118 and a consultant (a totalgrant date market value of 4,500,000 options). These options have$0.16 or $15,434 to Larry Diamond, its Chief Executive Officer, as commitment shares as set forth and defined in Diamond Note 2. The Company also issued five-year warrants to purchase 92,942 shares of common stock at a fair value at issuance of $58,743 per individual (a total of $176,229), an exercise price of $0.05 per share, and vest over$0.50 to Mr. Diamond pursuant to a three-year period. The Company valued these options using the Black-Scholes valuation model. Julie Smith, the Company’s President, Chief Operating Officer, and a Board member resigned effective September 30, 2020; the 1,500,000 options that the Company agreed to issue to Ms. Smith were cancelled, and no vesting of these options was recorded during the three months ended September 30, 2020. During the three months ended September 30, 2020, the amount of $4,896 was charged to operations in connection with each of the remaining 1,500,000 option grants (a total of $9,792 for all 3,000,000 remaining options).promissory note.
On June 1, 2020,April 27, 2022, the Company agreedissued a 10% Promissory Note due June 30, 2022 (the “Diamond Note 3”) to issue 1,000,000 ten-year optionsLawrence Diamond (the “Lender”). Lawrence Diamond is the Chief Executive Officer of the Company. The principal amount of the Diamond Note 3 is $235,294, carries a 10% interest rate per annum, payable in monthly installments, and has a maturity date that is the earlier of (i) April 4, 2022 (on July 12, 2022 this date was extended to a non-management director. These options have a fair valueSeptember 10, 2022) (ii) the date on which the Company successfully lists its shares of $28,460,common stock on Nasdaq or NYSE, or (iii) the date of receipt of the Company of the next round of debt or equity financing in an exerciseamount of at least $1,000,000. The purchase price of $0.03the Diamond Note 3 payable to the Company for the Diamond Note 3 was $200,000 and was funded on April 27, 2022. The amount payable at maturity will be $235,294 plus 10% of that amount plus any accrued and unpaid interest. Following an event of default, as defined in the Diamond Note 3, the principal amount shall bear interest for each day until paid, at a rate per share,annum equal to the lesser of the maximum interest permitted by applicable law and vest over18%. The Diamond Note 3 contains a three-year period. “most favored nations” clause that provides that, so long as the Note is outstanding, if the Company issues any new security, which the Lender reasonably believes contains a term that is more favorable than those in the Diamond Note 3, the Company shall notify the Lender of such term, and such term, at the option of the Lender, shall become a part of the Note. At June 30, 2022, the principal balance of this note was $235,294; $13,858 of the original issue discount was amortized to interest expense during the six months ended June 30, 2022, and the remaining original issue discount at June 30, 2022 was $21,436.
The Company valued these options usingissued a 10% Promissory Note due as described below (the “Diamond Note 4���), dated May 18, 2022, to Lawrence Diamond. The principal amount of the Black-Scholes valuation model. DuringDiamond Note 4 is $47,059.00, carries a 10% interest rate per annum, payable in monthly installments, and had an initial maturity date that was the nineearlier of (i) four business days after the date on which we successfully lists its shares of common stock on Nasdaq or NYSE, or (ii) two business days after the date of receipt of the Company of the next round of debt or equity financing in a net amount of at least $600,000. On August 3, 2022, the maturity date was amended to (i) September 10, 2022 or (ii) five days after the date on which we successfully list our shares of common stock on any of the NYSE American, the Nasdaq Global Select Market, the Nasdaq Global Market, or the Nasdaq Capital Market. The purchase price of the Diamond Note 4 payable to us for the Diamond Note 4was $40,000 and was funded on May 18, 2022. The amount payable at maturity will be $47,059 plus 10% of that amount plus any accrued and unpaid interest. Following an event of default, as defined in the Diamond Note 4, the principal amount shall bear interest for each day until paid, at a rate per annum equal to the lesser of the maximum interest permitted by applicable law and 18%. The Diamond Note 4 contains a “most favored nations” clause that provides that, so long as the Diamond Note 4is outstanding, if we issue any new security, which the Lender reasonably believes contains a term that is more favorable than those in the Diamond Note 4, we shall notify Mr. Diamond of such term, and such term, at the option of Mr. Diamond, shall become a part of the Note. In addition, Mr. Diamond will be issued (1) 19,294 five-year warrants (the “May 18 Diamond Warrants”) that may be exercised on substantially the same terms as the Series A warrant issued in connection with our Series D Convertible Preferred Stock and (2) 19,294 shares of Common Stock as commitment shares. At June 30, 2022, the principal balance of this note was $47,059; $1,862 of the original issue discount was amortized to interest expense during the six months ended SeptemberJune 30, 2020,2022, and the amount of $9,487remaining original issue discount at June 30, 2022 was charged to operations in connection these options.$5,197.
On August 1, 2020,May 23, 2022, the Company agreedissued a 10% Promissory Note due as described below (the “Finnegan Note 1”) to Jessica Finnegan. The principal amount of the Finnegan Note 1 is $47,059, carries a 10% interest rate per annum, payable in monthly installments, and has a maturity date that is the earlier of (i) four business days after the date on which we successfully lists its shares of common stock on Nasdaq or NYSE, or (ii) two business days after the date of receipt of the Company of the next round of debt or equity financing in a net amount of at least $600,000. The purchase price of the Finnegan Note 1 was $40,000 resulting in an original issue 1,000,000 ten-year optionsdiscount of $7,059 and was funded on May 18, 2022. The amount payable at maturity will be $47,059 plus 10% of that amount plus any accrued and unpaid interest, resulting in a premium and related discount in the amount of $4,706. Following an event of default, as defined in the Finnegan Note 1, the principal amount shall bear interest for each day until paid, at a rate per annum equal to the lesser of the maximum interest permitted by applicable law and 18%. The Finnegan Note 1 contains a non-management director. These options have“most favored nations” clause that provides that, so long as the Finnegan Note 1 is outstanding, if we issue any new security, which the Lender reasonably believes contains a term that is more favorable than those in the Finnegan Note 1, we shall notify Ms. Finnegan of such term, and such term, at the option of Ms. Finnegan, shall become a part of the Note. In addition, Ms. Finnegan will be issued (1) 19,295 five-year warrants with a fair value of $56,037,$2,000 (the “May 18 Finnegan Warrants”) that may be exercised on substantially the same terms as the Series A warrant issued in connection with our Series D Convertible Preferred Stock and (2) 19,295 shares of Common Stock with a value of $3,240 as commitment shares; these amounts were charged to discount on the note, resulting in a total discount on this note in the amount of $17,005. At June 30, 2022, the principal balance of this note was $47,059; $3,843 of the discounts were amortized to interest expense during the six months ended June 30, 2022, and the remaining discounts at June 30, 2022 were $13,162.
The Company issued five 10% Promissory Notes due as described below (collectively, the “May 26 Notes”), dated May 26, 2022, to Larry Diamond, Jenny Lindstrom, and other related parties (the “May 26 Lenders”), in respect of which we received proceeds of $175,000. Jenny Lindstrom is the Chief Legal Officer of the Company.
The May 26 Notes carry a 10% interest rate per annum, payable in monthly installments, and has a maturity date that is the earlier of (i) November 30, 2022, or (ii) the date on which we successfully lists our shares of common stock on Nasdaq or NYSE. The aggregate amount payable at maturity will be $205,883 plus 10% of that amount plus any accrued and unpaid interest. Following an event of default, as defined in the May 26 Notes, the principal amount shall bear interest for each day until paid, at a rate per annum equal to the lesser of the maximum interest permitted by applicable law and 18%. The May 26 Notes contain a “most favored nations” clause that provides that, so long as the May 26 Notes are outstanding, if we issue any new security, which the May 26 Lenders reasonably believe contains a term that is more favorable than those in the May 26 Notes, we shall notify the May 26 Lenders of such term, and such term, at the option of the May 26 Lenders, shall become a part of the May 26 Notes. In addition, the May 26 Lenders will be issued in the aggregate (1) 84,412 five-year warrants (the “May 26 Warrants”) and (2) 84,412 shares of Common Stock as commitment shares. The May 26 Warrants have an initial exercise price of $0.50 per share. The May 26 Warrants are not exercisable for six months following their issuance. The May 26 Lenders may exercise the May 26 Warrants on a cashless basis if after the six-month anniversary of date of issuance, the shares of Common Stock underlying the May 26 Warrants are not then registered pursuant to an effective registration statement. At June 30, 2022, the principal balance of these notes were $205,883; $6,631 of the original issue discounts were amortized to interest expense during the six months ended June 30, 2022, and the remaining original issue discounts at June 30, 2022 were $24,252.
The Company issued a 10% Promissory Note due as described below ( the “Howe Note”), dated June 9, 2022, to Michael C. Howe Living Trust and in respect of which we received proceeds of $255,000. Michael C. Howe is the Chief Executive Officer of the Good Clinic LLC, one of the Company’s subsidiaries.
The Howe Note carries a 10% interest rate per annum, payable in monthly installments. The Howe Note has a maturity date that is the earlier of (i) September 10, 2022, or (ii) the date on which we successfully list our shares of common stock on Nasdaq or NYSE. The amount payable at maturity will be $300,000 plus 10% of that amount plus any accrued and unpaid interest. In addition, the Company issued (1) 123,000 five-year warrants with a fair value of $21,500 and (2) 123,000 shares of Common Stock with a market value of $44,000 as commitment shares. The Warrants have an initial exercise price of $0.50 per share and are not exercisable for six months following their issuance. At June 30, 2022, the principal balance of this note was $300,000; $5,798 of the original issue discounts were amortized to interest expense during the six months ended June 30, 2022, and the remaining original issue discount at June 30, 2022 were $39,202.
On June 13, 2022, the Company issued 200,000 ten-year options with an exercise price of $0.05 per share, and vest over a three-year period. The Company valued these options using the Black-Scholes valuation model. During the nine months ended September 30, 2020, the amount of $11,595 was charged to operations in connection these options.
During the nine months ended September 30, 2020, the Company charged the amount of $69,342 to operations in connection with the vesting of restricted common stock as follows: $27,196 for shares issued to management; $26,511 for shares issued to board members; and $15,635 related to shares issued to an employee. Julie Smith, our former President, Chief Operating Officer,$0.25 and a Board member, resigned effective June 30, 2020; atfair value of $23,316 to Tom Brodmerkel, its Chairman, to the timeposition of her resignation, a total of 1,000,000 shares of the Company’s common stock issued to Ms. Smith for compensation as a board member were vested, and remain outstanding; an additional 250,000 shares of common stock issued to Ms. Smith for compensation as an officer were vested, and also remain outstanding; 750,000 shares of common stock to be issued to Ms. Smith for compensation as an officer had not vested, and these shares were cancelled.
During the nine months ended September 30, 2020, the Company accrued dividends on its Series X Preferred stock in the total amount of $49,176. Of this amount, a total of $9,750 was payable to officers and directors, ,$23,443 was payable to a related party shareholder, and $15,983 was payable to non-related parties.Chief Financial Officer.
Note 6– Accounts Payable and Accrued Liabilities
Accounts payable and accrued liabilities consisted of the following at June 30, 2022 and 2021:
June 30, | December 31, | |||||||
2022 | 2021 | |||||||
Trade accounts payable | $ | 5,447,673 | $ | 3,933,305 | ||||
Accrued payroll and payroll taxes | 341,040 | 23,554 | ||||||
Other | - | 19,205 | ||||||
Total accounts payable and accrued liabilities | $ | 5,788,713 | $ | 3,976,064 |
Note 7 - Right to Use Assets and Lease Liabilities – Operating Leases
The Company leases clinic and administrative facilities under operating leases. The Company evaluates its contracts to determine if an arrangement is a lease at inception and classify it as a finance or operating lease. Currently, all the Company’s leases are classified as operating leases. Leased assets and corresponding liabilities are recognized based on the present value of the lease payments over the lease term. The lease terms may include options to extend when it is reasonably certain that the Company will exercise that option.
Topic ASC 842 requires the Company to recognize in the statement of financial position a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term. Right-of-use assets are recorded in other assets on the Company’s condensed consolidated balance sheets. Current and non-current lease liabilities are recorded in other accruals within current liabilities and other non-current liabilities, respectively, on its condensed consolidated balance sheets. Costs associated withhas operating leases are recognized onfor its clinic with a straight-line basis within operating expenses over theremaining lease term of the lease.
On November 1, 2020, the Company entered into an agreement to open a clinic in Minneapolis, Minnesota. The initial lease term is 8approximately 7.2 years. Fixed rent payments under the initial term are approximately $511,000.
On May 24, 2021, the Company entered into an agreement to open a clinic in St. Louis Park, Minnesota, which is expected to begin operations in the third quarter of 2021. The initial lease term is seven years. Fixed rent payments under the initial term are approximately $673,000.
Additionally, on June 8, 2021, the Company entered into an agreement to open a clinic in Eden Prairie, Minnesota, which is expected to begin operation in the third quarter of 2021. The initial lease term is eight years. Fixed rent payments under the initial term are approximately $620,000.
On June 24, 2021, the Company entered into an agreement to open an administrative office in St. Louis Park, Minnesota. The initial lease term is 2.5 years. Fixed rent payments under the initial term are approximately $244,000.
On August 31, 2021, the Company entered into an agreement to open a clinic in St. Paul, Minnesota, which is expected to begin operation in the fourth quarter of 2021. The initial lease term is for 114 months. Fixed rent payments under the initial term are approximately $663,000.
On September 9, 2021, the Company entered into an agreement to open a clinic in Minneapolis, Minnesota, which is expected to begin operation in the fourth quarter of 2021. The initial lease term is for 90 months. Fixed rent payments under the initial term are approximately $489,000.
On September 28, 2021, the Company entered into an agreement to open a clinic in Denver, Colorado, which is expected to begin operation in the first quarter of 2022. The initial lease term is for 96 months. Fixed rent payments under the initial term are approximately $640,000.
As of September 30, 2021, the Company had total operating lease liabilities of approximately $3.2 million and right-of-use assets of approximately $3.1 million, which were included in the condensed consolidated balance sheet.
Right to use assets – operating leases are summarized below: | September 30, 2021 | December 31, 2020 | ||||||
Clinics | $ | 2,869,719 | $ | 310,361 | ||||
Administrative office | 182,632 | - | ||||||
Right to use assets, net | $ | 3,052,351 | $ | 310,361 |
Operating lease liabilities are summarized below: | September 30, 2021 | December 31, 2020 | ||||||
Clinics | $ | 2,988,118 | $ | 321,004 | ||||
Administrative office | 206,145 | - | ||||||
Lease liability | $ | 3,194,263 | $ | 321,004 | ||||
Less: current portion | (102,133 | ) | (8,905 | ) | ||||
Lease liability, non-current | $ | 3,092,130 | $ | 312,099 |
The Company’s lease expense was entirely comprised of operating leases. Lease expense for the three months ended SeptemberJune 30, 2022 and 2021 was $153,300amounted to approximately $199,800 and $38,500, respectively. Lease expense for 2020 was $0. For the ninesix months ended SeptemberJune 30, 2021,2022 and 20202021 amounted to $212,500approximately $389,300 and $0,$59,200, respectively.
The Company’s ROU asset amortization for the three months ended SeptemberJune 30, 2022 and 2021 was approximately $85,200 and 2020 was $18,500, and $0, respectively. The Company’s ROU asset amortization for the ninesix months ended SeptemberJune 30, 2022 and 2021 was approximately $165,700 and 2020 was $71,349 and $0, respectively the$24,700, respectively.
The difference between the lease expense and the associated ROU asset amortization consists of interest at a rate of 12% per annum.
Maturity analysis under these
As of June 30, 2022, the Company had total operating lease agreements are as follows:liabilities of approximately $4.4 million and right-of-use assets of approximately $3.9 million, which were included in the condensed consolidated balance sheet.
For the twelve months ended September 30, 2022 | $ | 529,095 | ||
For the twelve months ended September 30, 2023 | 779,150 | |||
For the twelve months ended September 30, 2024 | 636,721 | |||
For the twelve months ended September 30, 2025 | 638,386 | |||
For the twelve months ended September 30, 2026 | 652,302 | |||
Thereafter | 1,772,151 | |||
Total | $ | 5,007,805 | ||
Less: Present value discount | (1,813,542 | ) | ||
Lease liability | $ | 3,194,263 |
Right to use assets – operating leases are summarized below: | ||||||||
June 30, | December 31, | |||||||
2022 | 2021 | |||||||
Right to use assets, net | $ | 3,883,529 | $ | 3,886,866 |
Right to use assets – operating leases are summarized below: | ||||||||
June 30, | December 31, | |||||||
2022 | 2021 | |||||||
Lease liability | $ | 4,393,664 | $ | 4,134,802 | ||||
Less: current portion | (260,700 | ) | (161,838 | ) | ||||
Lease liability, non-current | $ | 4,132,964 | $ | 3,972,964 |
Maturity analysis under these lease agreements are as follows: | ||||
For the twelve months ended June 30, 2023 | $ | 746,876 | ||
For the twelve months ended June 30, 2024 | 907,369 | |||
For the twelve months ended June 30, 2025 | 897,472 | |||
For the twelve months ended June 30, 2026 | 916,801 | |||
For the twelve months ended June 30, 2027 | 937,074 | |||
Thereafter | 2,361,735 | |||
Total | 6,767,327 | |||
Less: Present value discount | (2,373,663 | ) | ||
Lease liability | $ | 4,393,664 |
Note 78 – Debt
All obligations disclosedHowe Note 1
Mitesco, Inc. (the “Company”) issued a 10% Promissory Note (the “Howe Note 1”) due June 30, 2022, dated December 30, 2021, to the Michael C. Howe Living Trust (the “Lender”). Michael C. Howe is the Chief Executive Officer of the Good Clinic LLC, one of our subsidiaries. The principal amount of the Note is $1,000,000, carries a 10% interest rate per annum, payable in this section haves been fully satisfied asmonthly installments, and has a maturity date that is the earlier of (i) six months from the date of execution (on July 19, 2022 this filingdate was extended to September 10, 2022), or (ii) the date on which the Company successfully lists its shares of common stock on Nasdaq or NYSE. The purchase price of the Note payable to the Company for the Note was $850,000 and was funded on December 30, 2021. An original issue discount in the amount of $150,000 was recorded. The amount payable at maturity will be $1,000,000 plus 10% of that amount plus any accrued and unpaid interest. Following an event of default, as defined in the Note, the principal amount shall bear interest for each day until paid, at a rate per annum equal to the lesser of the maximum interest permitted by applicable law and 18%. The Note contains a “most favored nations” clause that provides that, so long as the Note is outstanding, if the Company issues any new security, which the Lender reasonably believes contains a term that is more favorable than those in the Note, the Company shall notify the Lender of such term, and such term, at the option of the Lender, shall become a part of the Note. At June 30, 2022, the principal balance of this note was $1,000,000; $116,507 of the original issue discount was amortized to interest expense during the six months ended June 30, 2022, and the Company has no further requirements related to these notes except for the Company’s PPP Loan which remains outstanding.remaining original issue discount at June 30, 2022 was $33,493.
August 2014Warrants. As further consideration for the Purchase Price payable hereunder, promptly following the Issue Date, the Borrower shall issue to the Lender two common stock purchase warrants, entitling the Lender to purchase (i) 2,100,000 shares of the Borrower’s common stock on substantially the same terms as the Series C andA warrant issued in connection with the Borrower’s Series D Convertible Debenture
On March 30, 2021, the Company issued 272,837Preferred Stock, and (ii) 2,100,000 shares of the Borrower’s common stock and paid cash inon substantially the amount of $122,166same terms as settlement of principal and accrued interest in the amounts of $110,833 and $71,526, respectively, due under the Series C DebentureB warrant issued in connection with the Borrower’s Series D Convertible Preferred Stock. one warrant (the “Series A Warrants”) to purchase 2.1 shares of the Company’s common stock, par value $0.01 per share (the “Common Stock”) at a purchase price of $0.50 per whole share of Common Stock, and principalone warrant (the “Series B Warrants” and accrued interest in the amounts of $11,333 and $8,722 due undertogether with the Series C Debenture. The Company recognizedA Warrants, the “Warrants”) to purchase 2.1 shares of Common Stock at a gain inpurchase price of $0.75 per whole share. Given the amount of $3,035 on this transaction. These obligations have been fully satisfied ascurrent stock price is less than the exercise price of the date of this filing andwarrants, the Company haswarrants have no further requirements related to these matters.value.
March 2016 ConvertibleDiamond Note A1
The Company issued a 10% Promissory Note due August 14, 2022, dated February 14, 2022 (the “Diamond Note 1”), to Lawrence Diamond (the “Lender”). Mr. Diamond is the Chief Executive Officer of the Company and a member of its Board of Directors. The principal amount of the Diamond Note 1 is $175,000, carries a 10% interest rate per annum, payable in monthly installments, and has a maturity date that is the earlier of (i) six (6) months from the date of execution, or (ii) the date on which the Company successfully lists its shares of common stock on Nasdaq or NYSE. The purchase price of the Note payable to the Company for the Note was $148,750 and was funded on February 14, 2022. The amount payable at maturity will be $175,000 plus 10% of that amount plus accrued and unpaid interest. Following an event of default, as defined in the Note, the principal amount shall bear interest for each day until paid, at a rate per annum equal to the lesser of the maximum interest permitted by applicable law and 18%. The Note contains a “most favored nations” clause that provides that, so long as the Note is outstanding, if the Company issues any new security, which the Lender believes contains a term that is more favorable than those in the Note, the Company shall notify the Lender of such term, and such term, at the option of the Lender, shall become a part of the Note. In addition to the Note and Lender will be issued 367,500 5-year warrants that may be exercised at $.50 per share and 367,500 5-year warrants that may be exercised at $.75 per share. These warrants have all of the same terms as those previously issued in conjunction with the Company’s Series C Preferred shares and its Series D Preferred shares. The warrants have an aggregate commitment date fair value of $2,914. At June 30, 2022, the principal balance of this note was $175,000; $20,877 of the original issue discount was amortized to interest expense during the six months ended June 30, 2022, and the remaining original issue discount at June 30, 2022 was $5,373.
On March 24, 2021,22, 2022, the Company paid cashissued 168,221 shares of common stock with a contract price of $0.25 per share of $42,055 and a grant date market value of $0.127 per share or $21,364 were issued to Larry Diamond, its Chief Executive Officer, as compensation for the waiver of certain covenants as set forth and defined in the amount of $55,368 as settlement of principal and accrued interest in the amount of $41,000 and $13,167, respectively, due under the March 2016 ConvertibleDiamond Note A. The Company recognized a loss in the amount of $1,201 on this transaction. This obligation has been fully satisfied as of the date of this filing and the Company has no further requirements related to this matter.1.
Eagle EquitiesDiamond Note 2
The Company issued a 10% Promissory Note due June 18, 2022 (the “Diamond Note 2”), dated March 18, 2022, to Lawrence Diamond (the “Lender”), which was subsequently amended. Lawrence Diamond is the Chief Executive Officer of the Company. The principal amount of the Diamond Note 2 is $235,294, carries a 10% interest rate per annum, payable in monthly installments, and has a maturity date that is the earlier of (i) April 4, 2022 (on July 12, 2022 this date was extended to September 10, 2022), (ii) the date on which the Company successfully lists its shares of common stock on Nasdaq or NYSE, or (iii) the date of receipt of the Company of the next round of debt or equity financing in an amount of at least $1,000,000. The purchase price of the Diamond Note payable to the Company for the Diamond Note was $200,000 and was funded on March 18, 2022. The amount payable at maturity will be $235,294 plus 10% of that amount plus any accrued and unpaid interest. Following an event of default, as defined in the Diamond Note, the principal amount shall bear interest for each day until paid, at a rate per annum equal to the lesser of the maximum interest permitted by applicable law and 18%. The Diamond Note contains a “most favored nations” clause that provides that, so long as the Note is outstanding, if the Company issues any new security, which the Lender reasonably believes contains a term that is more favorable than those in the Diamond Note, the Company shall notify the Lender of such term, and such term, at the option of the Lender, shall become a part of the Note. In addition, the Lender will be issued 200,000 5-year warrants that may be exercised on substantially the same terms as the Series A warrant issued in connection with the Company’s Series D Convertible Preferred Stock. The warrants have an aggregate commitment date fair value of $2,213. All amounts due for The Diamond Note, with the exception of $23,529, was paid on April 8, 2022. $23,529 remained outstanding as of June 30, 2022.
On January 4, 2021,April 27, 2022, the Company issued 4,123,75096,471 shares of common stock with a contract price of $0.25 per share or $24,118 and a grant date market value of $0.16 or $15,434 to Larry Diamond, it’s Chief Executive Officer, as commitment shares as set forth and defined in Diamond Note 2. The Company also issued five-year warrants to purchase 92,942 shares of common stock at a price of $0.012 per share$0.50 to Mr. Diamond pursuant to the conversion of $45,000 of principal and $4,485 of accrued interest in Eagle Equities Note 4. On January 6, 2021, the Company issued 3,505,964 shares of common stock at a price of $0.01224 per share pursuant to the conversion of $39,000 of principal and $3,913 of accrued interest in Eagle Equities Note 4. This obligation has been fully satisfied as of the date of this filing and the Company has no further requirements related to this matter.
Eagle Equities Note 5
On January 11, 2021, the Company issued 4,463,507 shares of common stock at a price of $0.01224 per share pursuant to the conversion of $50,000 of principal and $4,633 of accrued interest in Eagle Equities Note 5. On January 14, 2021, the Company issued 4,319,378 shares of common stock at a price of $0.01266 per share pursuant to the conversion of $50,000 of principal and $4,683 of accrued interest in Eagle Equities Note 5. This obligation has been fully satisfied as of the date of this filing and the Company has no further requirements related to this matter.
Eagle Equities Note 6
On January 21, 2021, the Company issued 6,449,610 shares of common stock at a price of $0.0154 per share pursuant to the conversion of $93,000 of principal and $6,324 of accrued interest in Eagle Equities Note 6. On January 28, 2021, the Company issued 7,285,062 shares of common stock at a price of $0.01575 per share pursuant to the conversion of $107,200 of principal and $7,540 of accrued interest in Eagle Equities Note 6. This obligation has been fully satisfied as of the date of this filing and the Company has no further requirements related to this matter.
Eagle Equities Note 7
On February 5, 2021, the Company entered into a settlement agreement with the holders of the Eagle Equities Note 7 whereby the Company issued 1,184,148 shares of common stock at a price of $0.24984 per share in satisfaction of $200,200 of principal and all accrued interest and prepayment penalties due under thispromissory note. This obligation has been fully satisfied as of the date of this filing and the Company has no further requirements related to this matter.
Eagle Equities Note 8
On February 5, 2021, the Company entered into a settlement agreement with the holders of the Eagle Equities Note 8 whereby the Company issued 639,593 shares of common stock at a price of $0.23851 per share in satisfaction of $114,400 of principal and all accrued interest and prepayment penalties due under this note. This obligation has been fully satisfied as of the date of this filing and the Company has no further requirements related to this matter.
Eagle Equities Note 9
On February 5, 2021, the Company entered into a settlement agreement with the holders of the Eagle Equities Note 9 whereby the Company issued 605,177 shares of common stock at a price of $0.24984 per share in satisfaction of $114,400 of principal and all accrued interest and prepayment penalties due under this note. This obligation has been fully satisfied as of the date of this filing and the Company has no further requirements related to this matter.
Eagle Equities Note 10
On February 5, 2021, the Company entered into a settlement agreement with the holders of the Eagle Equities Note 10 whereby the Company issued 1,095,131 shares of common stock at a price of $0.23748 per share in satisfaction of $200,200 of principal and all accrued interest and prepayment penalties due under this note. This obligation has been fully satisfied as of the date of this filing and the Company has no further requirements related to this matter.
AJB Capital Note
On March 18, 2022, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with AJB Capital Investments, LLC (the “Investor”) with respect to the sale and issuance to the Investor of: (i) an initial commitment fee in the amount of $430,000 in the form of 1,720,000 shares (the “Commitment Fee Shares”) of the Company’s common stock (the “Common Stock”), which Commitment Fee Shares can be decreased to 720,000 shares ($180,000) if the Company repays the Note on or prior to its maturity (the “True-Up Provision”), (ii) a promissory note in the aggregate principal amount of $750,000, and (iii) Common Stock Purchase Warrants to purchase up to an aggregate of 750,000 shares of the Common Stock (the “Warrants”). The Note and Warrants were issued on March 17, 2022 (the “Original Issue Date”) and were held in escrow pending effectiveness of the Purchase Agreement. Pursuant to the terms of the Purchase Agreement, the initial Commitment Fee Shares were issued at a value of $430,000, the Note was issued in a principal amount of $750,000 for a purchase price of $675,000, resulting in an original issue discount of $75,000; the warrants had a commitment date fair value of $24,952; and the commitment fee shares had a commitment date fair value of $324,962, resulting in a total discount in the amount of $424,914. The Warrants were issued, with an initial exercise price of $0.50 per share, subject to adjustment as described herein. The aggregate cash subscription amount received by the Company from the Investor for the issuance of the Commitment Fee Shares, Note and Warrants was $616,250, due to a reduction in the $675,000 purchase price as a result of broker, legal, and transaction fees. $194,656 of the discount was amortized to interest expense during the six months ended June 30, 2022, and the remaining discount at June 30, 2022 was $230,258. At June 30, 2022, the principal balance of this note was $750,000.
Anson East Master Fund LP and Anson Investments Master Fund LP
On April 6, 2022, the Company entered into separate Securities Purchase Agreement with each of Anson East Master Fund LP and Anson Investments Master Fund LP with respect to the sale and issuance to AEMF and AIMF of: (i) an aggregate initial commitment fee in the amount of $430,000 in the form of 1,720,000 shares (the “Commitment Fee Shares”) of the Company’s common stock (the “Common Stock”), which Commitment Fee Shares can be decreased to 722,400 shares ($180,000) if the Company repays the Notes on or prior their maturity, (ii) promissory notes in the aggregate principal amount of $750,000 (the “Notes”), and (iii) Common Stock Purchase Warrants to purchase up to an aggregate of 750,000 shares of the Common Stock (the “Warrants”) at an initial exercise price of $0.50 per share, subject to adjustment. The Notes and Warrants were issued on April 6, 2022 (the “Original Issue Date”) and were held in escrow pending effectiveness of the Purchase Agreements. The notes were issued in a total principal amount of $750,000 for a total purchase price of $675,000, resulting in an original issue discount of $75,000; the warrants had an aggregate commitment date fair value of $168,130; and the commitment shares had an aggregate commitment date fair value of $563,665, resulting in a total discount in the amount of $638,665. $160,121 of the discount was amortized to interest expense during the six months ended June 30, 2022, and the remaining discount at June 30, 2022 was $478,544. At June 30, 2022, the principal balance of this note was $750,000.
GS Capital Partners
On April 18, 2022, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with GS Capital Partners (the “Investor”) with respect to the sale and issuance to the Investor of: (i) an initial commitment fee in the amount of $159,259 in the form of 637,036 shares (the “Commitment Fee Shares”) of the Company’s common stock (the “Common Stock”), which Commitment Fee Shares can be decreased to 266,280 shares ($66,570) if the Company repays the Note on or prior to their maturity, (ii) promissory note in the principal amount of $277,777, and (iii) Common Stock Purchase Warrants to purchase up to 277,777 shares of the Common Stock (the “Warrants”) at an initial exercise price of $0.50 per share, subject to adjustment. The Note and Warrants were issued on April 18, 2022 (the “Original Issue Date”) and were held in escrow pending effectiveness of the Purchase Agreement. The notes were issued in a total principal amount of $277,777 for a total purchase price of $250,000, resulting in an original issue discount of $27,777; the warrants had an aggregate commitment date fair value of $26,846; and the commitment shares had an aggregate commitment date fair value of $135,312. The Company also recorded a discount in the amount of $22,500 for the costs of financing, resulting in a total discount in the amount of $212,435. $54,386 of the discount was amortized to interest expense during the six months ended June 30, 2022, and the remaining discount at June 30, 2022 was $159,049. At June 30, 2022, the principal balance of this note was $277,777.
Diamond Note 3
On April 27, 2022, the Company issued a 10% Promissory Note due June 30, 2022 (the “Diamond Note 3”) to Lawrence Diamond (the “Lender”). Lawrence Diamond is the Chief Executive Officer of the Company. The principal amount of the Diamond Note 3 is $235,294, carries a 10% interest rate per annum, payable in monthly installments, and has a maturity date that is the earlier of (i) April 4, 2022 (on July 12, 2022 this date was extended to September 10, 2022), (ii) the date on which the Company successfully lists its shares of common stock on Nasdaq or NYSE, or (iii) the date of receipt of the Company of the next round of debt or equity financing in an amount of at least $1,000,000. The purchase price of the Diamond Note 3 payable to the Company for the Diamond Note 3 was $200,000 resulting in an original issue discount of $35,294 and was funded on April 27, 2022. The amount payable at maturity will be $235,294 plus 10% of that amount plus any accrued and unpaid interest, resulting in a premium and related discount in the amount of $23,529. The Company also issued 96,471 shares of stock with a value of $16,200 as a commitment fee and five-year warrants with a fair value of $8,800 to purchase 96,471 shares of common stock at a price of $0.50 per share; these amounts were charged to discount on the note, resulting in a total discount on this note in the amount of $83,823. Following an event of default, as defined in the Diamond Note 3, the principal amount shall bear interest for each day until paid, at a rate per annum equal to the lesser of the maximum interest permitted by applicable law and 18%. The Diamond Note 3 contains a “most favored nations” clause that provides that, so long as the Note is outstanding, if the Company issues any new security, which the Lender reasonably believes contains a term that is more favorable than those in the Diamond Note 3, the Company shall notify the Lender of such term, and such term, at the option of the Lender, shall become a part of the Note. At June 30, 2022, the principal balance of this note was $235,294; $34,861 of the discounts were amortized to interest expense during the six months ended June 30, 2022, and the remaining discounts at June 30, 2022 were $48,962.
Kishon Investments, LLC
On May 10, 2022, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with Kishon Investments, LLC (the “Investor”) with respect to the sale and issuance to the Investor of: (i) an initial commitment fee in the amount of $159,259 in the form of 637,036 shares (the “Commitment Fee Shares”) of the Company’s common stock (the “Common Stock”), (ii) promissory note in the principal amount of $277,777 due on November 10, 2022, and (iii) Common Stock Purchase Warrants to purchase up to 277,777 shares of the Common Stock (the “Warrants”) at an initial exercise price of $0.50 per share, subject to adjustment. The Note and Warrants were issued on May 10, 2022 (the “Original Issue Date”) and were held in escrow pending effectiveness of the Purchase Agreement. The note was issued in a total principal amount of $277,777 for a total purchase price of $250,000, resulting in an original issue discount of $27,777; the warrants had an aggregate commitment date fair value of $15,780; and the commitment shares had an aggregate commitment date fair value of $122,712, resulting in a total discount in the amount of $166,269. $32,463 of the discount was amortized to interest expense during the six months ended June 30, 2022, and the remaining discount at June 30, 2022 was $133,806. At June 30, 2022, the principal balance of this note was $277,777.
Diamond Note 4
The Company issued a 10% Promissory Note due as described below (the “Diamond Note 4”), dated May 18, 2022, to Lawrence Diamond. The principal amount of the Diamond Note 4 is $47,059, carries a 10% interest rate per annum, payable in monthly installments, and had a maturity date that was the earlier of (i) four business days after the date on which we successfully lists its shares of common stock on Nasdaq or NYSE, or (ii) two business days after the date of receipt of the Company of the next round of debt or equity financing in a net amount of at least $600,000. On August 3, 2022, the maturity date was amended to (i) September 10, 2022 or (ii) five days after the date on which we successfully list our shares of common stock on any of the NYSE American, the Nasdaq Global Select Market, the Nasdaq Global Market, or the Nasdaq Capital Market. The purchase price of the Diamond Note 4payable to us for the Diamond Note 4was $40,000, resulting in an original issue discount of $7,059, and was funded on May 18, 2022. The amount payable at maturity will be $47,059 plus 10% of that amount plus any accrued and unpaid interest, resulting in a premium and related discount in the amount of $4,706. Following an event of default, as defined in the Diamond Note 4, the principal amount shall bear interest for each day until paid, at a rate per annum equal to the lesser of the maximum interest permitted by applicable law and 18%. The Diamond Note 4contains a “most favored nations” clause that provides that, so long as the Diamond Note 4is outstanding, if we issue any new security, which the Lender reasonably believes contains a term that is more favorable than those in the Diamond Note 4, we shall notify Mr. Diamond of such term, and such term, at the option of Mr. Diamond, shall become a part of the Note. In addition, Mr. Diamond will be issued (1) 19,294 five-year warrants (the “May 18 Diamond Warrants”) with a fair value of $2,960 that may be exercised on substantially the same terms as the Series A warrant issued in connection with our Series D Convertible Preferred Stock and (2) 19,294 shares of Common Stock with a value of $3,160 as commitment shares; these amounts were charged to discount on the note, resulting in a total discount on this note in the amount of $17,885. At June 30, 2022, the principal balance of this note was $47,059; $5,392 of the discounts were amortized to interest expense during the six months ended June 30, 2022, and the remaining discount at June 30, 2022 were $12,493.
Finnegan Note 1
On May 23, 2022, the Company issued a 10% Promissory Note due as described below (the “Finnegan Note 1”) to Jessica Finnegan. The principal amount of the Finnegan Note 1 is $47,059, carries a 10% interest rate per annum, payable in monthly installments, and has a maturity date that is the earlier of (i) four business days after the date on which we successfully lists its shares of common stock on Nasdaq or NYSE, or (ii) two business days after the date of receipt of the Company of the next round of debt or equity financing in a net amount of at least $600,000. The purchase price of the Finnegan Note 1 was $40,000 resulting in an original issue discount of $7,059 and was funded on May 18, 2022. The amount payable at maturity will be $47,059 plus 10% of that amount plus any accrued and unpaid interest, resulting in a premium and related discount in the amount of $4,706. Following an event of default, as defined in the Finnegan Note 1, the principal amount shall bear interest for each day until paid, at a rate per annum equal to the lesser of the maximum interest permitted by applicable law and 18%. The Finnegan Note 1 contains a “most favored nations” clause that provides that, so long as the Finnegan Note 1 is outstanding, if we issue any new security, which the Lender reasonably believes contains a term that is more favorable than those in the Finnegan Note 1, we shall notify Ms. Finnegan of such term, and such term, at the option of Ms. Finnegan, shall become a part of the Note. In addition, Ms. Finnegan will be issued (1) 19,295 five-year warrants with a fair value of $2,000 (the “May 18 Finnegan Warrants”) that may be exercised on substantially the same terms as the Series A warrant issued in connection with our Series D Convertible Preferred Stock and (2) 19,295 shares of Common Stock with a value of $3,240 as commitment shares; these amounts were charged to discount on the note, resulting in a total discount on this note in the amount of $17,005. At June 30, 2022, the principal balance of this note was $47,059; $3,843 of the discounts were amortized to interest expense during the six months ended June 30, 2022, and the remaining discounts at June 30, 2022 were $13,162.
May 26, 2022 Notes
The Company issued five 10% Promissory Notes due as described below (collectively, the “May 26 Notes”), dated May 26, 2022, to Larry Diamond, Jenny Lindstrom, and other related parties (the “May 26 Lenders”), in the aggregate principal amount of $205,883.
The May 26 Notes carry a 10% interest rate per annum, payable in monthly installments, and has a maturity date that is the earlier of (i) November 30, 2022, or (ii) the date on which we successfully lists our shares of common stock on Nasdaq or NYSE. The aggregate principal amount payable at maturity will be $205,883 plus 10% of that amount plus any accrued and unpaid interest, resulting in an aggregate premium and related discount in the amount of $20,588. The aggregate amount funded was $175,000 resulting in an original issue discount of $30,883. Following an event of default, as defined in the May 26 Notes, the principal amount shall bear interest for each day until paid, at a rate per annum equal to the lesser of the maximum interest permitted by applicable law and 18%. The May 26 Notes contain a “most favored nations” clause that provides that, so long as the May 26 Notes are outstanding, if we issue any new security, which the May 26 Lenders reasonably believe contains a term that is more favorable than those in the May 26 Notes, we shall notify the May 26 Lenders of such term, and such term, at the option of the May 26 Lenders, shall become a part of the May 26 Notes. In addition, the May 26 Lenders were issued in the aggregate (1) 84,412 five-year warrants (the “May 26 Warrants”) with an aggregate fair value of $8,750 and (2) 84,412 shares of Common Stock as commitment shares with an aggregate value of $14,175; these amounts were charged to discount on the note, resulting in an aggregate discount on these notes in the amount of $74,396. The May 26 Warrants have an initial exercise price of $0.50 per share. The May 26 Warrants are not exercisable for six months following their issuance. The May 26 Lenders may exercise the May 26 Warrants on a cashless basis if after the six-month anniversary of date of issuance, the shares of Common Stock underlying the May 26 Warrants are not then registered pursuant to an effective registration statement. At June 30, 2022, the principal balance of these notes was $205,883; $6,631 of the discounts were amortized to interest expense during the six months ended June 30, 2022, and the remaining discounts at June 30, 2022 were $24,252.
June 9, 2022 Notes
The Company issued two 10% Promissory Notes due as described below (individually, the “Howe Note” and the “Dragon Note”, and collectively, the “June 9 Notes”), dated June 9, 2022, to Michael C. Howe Living Trust and Dragon Dynamic Funds Platform Ltd. (the “June 9 Lenders”) in the aggregate principal amount of $888,235. Michael C. Howe is the Chief Executive Officer of the Good Clinic LLC, one of the Company’s subsidiaries.
The June 9 Notes carry a 10% interest rate per annum, payable in monthly installments. The Howe Note has a maturity date that is the earlier of (i) September 10, 2022, or (ii) the date on which we successfully list our shares of common stock on Nasdaq or NYSE. The Dragon Note has a maturity date that is the earlier of (i) December 9, 2022, or (ii) the date on which we successfully list our shares of common stock on Nasdaq or NYSE. The aggregate amount payable at maturity will be $888,235 plus 10% of that amount plus any accrued and unpaid interest, resulting in a premium and related discount in the aggregate amount of $58,824. The aggregate amount funded was $755,000 resulting in an original issue discount of $133,235. In addition, the June 9 Lenders will be issued in the aggregate (1) 364,176 five-year warrants (the “June 9 Warrants”) with a fair value of $32,465 and (2) 364,176 shares of Common Stock with a value of $66,440 as commitment shares; these amounts were charged to discount on the note. The Company also paid issuance costs related to these notes in the aggregate amount of $77,500 which were charged to discount on the notes, resulting in an aggregate discount on these notes in the amount of $368,464. The June 9 Warrants have an initial exercise price of $0.50 per share. The June 9 Warrants are not exercisable for six months following their issuance. At June 30, 2022, the principal balance of these notes were $888,235; $45,607 of the discounts were amortized to interest expense during the six months ended June 30, 2022, and the remaining discounts at June 30, 2022 were $322,857.
PPP Loan
During March 2020, in response to the COVID-19 crisis, the federal government announced plans to offer loans to small businesses in various forms, including the Payroll Protection Program, or "PPP"“PPP”, established as part of the Corona Virus Aid, Relief and Economic Security Act (“CARES Act”) and administered by the U.S. Small Business Administration. On April 25, 2020, the Company entered an unsecured Promissory Note (the “Note”) with Bank of America for a loan in the original principal amount of approximately $460,000,$460,400, and the Company received the full amount of the loan proceeds on May 4, 2020. The currentJune 30, 2022 balance, is $460,406 and the Company is currently in discussions for a) a partial forgiveness and b) the conversion of any remaining balance into a term note. including accrued interest, was $470,375.
These amounts are reflected in the table below:
Notes Payable Table 1:
September 30, 2021 | December 31, 2020 | |||||||
Total notes payable | $ | 460,406 | $ | 1,656,772 | ||||
Less: Discount | - | (756,795 | ) | |||||
Notes payable - net of discount | $ | 460,406 | $ | 899,977 | ||||
Current Portion, net of discount | $ | 460,406 | $ | 899,977 | ||||
Long-term portion, net of discount | $ | - | $ | - |
Note 8 – Derivative Liabilities
Certain of the Company’s convertible notes and warrants contain features that create derivative liabilities. The pricing model the Company uses for determining fair value of its derivatives is the Lattice Model. Valuations derived from this model are subject to ongoing internal and external verification and review. The model uses market-sourced inputs such as interest rates and stock price volatilities. Selection of these inputs involves management’s judgment and may impact net income. The derivative components of these notes are valued at issuance, at conversion, at restructure, and at each period end.
Derivative liability activity for the nine months ended September 30, 2021, are summarized in the table below:
December 31, 2020 | $ | 807,682 | ||
Settled upon conversion or exercise | (1,301,137 | ) | ||
Gain on revaluation | 493,455 | |||
September 30, 2021 | $ | - |
June 30, | December 31, | |||||||
2022 | 2021 | |||||||
Notes Payable | $ | 4,937,466 | $ | 1,000,000 | ||||
PPP Loan | 460,406 | 460,406 | ||||||
5,397,872 | 1,460,406 | |||||||
Less: Discounts | (1,620,263 | ) | (411,568 | ) | ||||
Notes payable - net of discounts | $ | 3,777,609 | $ | 1,048,838 | ||||
Current Portion, net of discounts | $ | 3,777,609 | $ | 1,048,838 | ||||
Long-term portion, net of discounts | $ | - | $ | - |
Note 9 – Stockholders’ Equity (Deficit)
Common Stock
The Company has authorized 500,000,000 shares of common stock, par value $0.01; 212,853,706225,209,745 shares were issued and outstanding on SeptemberJune 30, 2021.2022.
Common Stock Transactions During the NineSix Months Ended SeptemberJune 30, 2022
On January 12, 2022, the Company entered into a settlement agreement with an ex-employee. Pursuant to the terms of this agreement, the Company agreed to pay the amount of $19,032 for accrued salary, and the employee returned to the Company for cancellation 400,000 shares of common stock previously issued as compensation. These shares were valued at par value of $0.01 or a total value of $4,000; the Company recorded a gain on cancellation of these shares in the amount of $15,032.
The Company entered into a debt-for-equity exchange agreement with Gardner Builders Holdings, LLC (“Gardner”) on January 7, 2022 (the “Debt for Equity Agreement”). Pursuant to the Debt for Equity Agreement, the Company issued shares of restricted common stock to Gardner in exchange for the Company Debt Obligations, as defined below.
The Agreement settled for certain accounts payable amounts owed by the Company to the Creditor (the “Accounts Payable Amount”) as well as upcoming amounts that will become due between the date of the Agreement and April 1, 2022. The Agreement also settled accrued interest and penalties on the amounts due through January 5, 2022, as well as interest payments on amounts incurred in the first quarter of 2022 (collectively, the “Additional Costs”, and combined with the Accounts Payable Amount, the “Company Debt Obligations”). The Accounts Payable Amount was $500,000, the Additional Costs were $294,912 and the conversion price was $0.25. As a result, 3,179,650 Restricted Shares were authorized to be issued.
On March 22, 2022 and March 31, 2022, the Company issued an aggregate 1,541,721 shares of common stock as waiver fees to holders of the Series C and Series D Preferred Stock for their waivers of certain covenants as set forth and defined in the Series C and Series D Certificates of Designations. The Company valued these shares at their contractual price of $0.25 per share and recorded the amount of $385,431 as waiver fees during the six months ended June 30, 2022. The Company recorded an aggregate gain upon issuance of these shares in the amount of $198,273 based on the market price of the Company’s common stock on the date of issuance.
On March 31, 2022, the Company issued 1,720,000 Commitment Fee Shares to AJB Capital Investors, LLC. A Monte Carlo model was used to value the warrants and call features, and a probability weighted expected return model was used to value the True-Up Provision. The contractual price of the common stock $0.25 per share; valuation purposes, the common stock was valued at the market price on the date of the transaction of $0.127 per share. The derivative liability was valued at $106,608 on the date of the transaction and was revalued at $75,158 on June 30, 2022. The discount on the notes due to the Commitment Fee Shares and warrants was valued at $349,914. The Company recorded the amount of $226,106 to additional paid-in capital pursuant to this transaction.
On March 31, 2022, the Company issued 382,353 shares of common stock at a price of $0.25 per share which were previously subscribed for the conversion of accounts payable in the amount of $95,558.
On April 18, 2022, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with GS Capital Partners (the “Investor”) with respect to the sale and issuance to the Investor of: (i) an initial commitment fee in the amount of $159,259 in the form of 637,036 shares (the “Commitment Fee Shares”) of the Company’s common stock (the “Common Stock”), which Commitment Fee Shares can be decreased to 266,280 shares ($66,570) if the Company repays the Note on or prior to their maturity, (ii) promissory note in the principal amount of $277,777, and (iii) Common Stock Purchase Warrants to purchase up to 277,777 shares of the Common Stock (the “Warrants”). The Note and Warrants were issued on April 18, 2022 (the “Original Issue Date”) and were held in escrow pending effectiveness of the Purchase Agreement.
Pursuant to the terms of the Purchase Agreement, the initial Commitment Fee Shares were issued at a value of $159,259, the Note was issued in the principal amount of $277,777 for a purchase price of $250,000, resulting in the original issue discount of $27,777; and the Warrants were issued, with an initial exercise price of $0.50 per share, subject to adjustment.
On April 27, 2022, the Company issued 720,000 shares of stock to Cavalry Fund 1 LP as compensation for the waiver of certain covenants as set forth in the Series C Certificate of Designation.
On April 27, 2022, the Company issued 96,471 shares of common stock with a contract price of $0.25 per share or $24,118 and a grant date market value of $0.16 or $15,434 to Larry Diamond, its Chief Executive Office, as commitment shares as set forth and defined in Diamond Note 3. The Company recorded these shares at their relative fair value of the components of Diamond Note 3, or $16,200, and recorded a loss in the amount of $765 on this transaction. The Company also issued five-year warrants to purchase 96,471 shares of common stock at a price of $0.50 to Mr. Diamond pursuant to Diamond Note 3. See Note 8.
On May 10, 2022, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with Kishon Investments, LLC (the “Investor”) with respect to the sale and issuance to the Investor of: (i) an initial commitment fee in the amount of $159,259 in the form of 637,036 shares (the “Commitment Fee Shares”) of the Company’s common stock (the “Common Stock”), (ii) promissory note in the principal amount of $277,777 due on November 10, 2022, and (iii) Common Stock Purchase Warrants to purchase up to 277,777 shares of the Common Stock (the “Warrants”). The Note and Warrants were issued on May 10, 2022 (the “Original Issue Date”) and were held in escrow pending effectiveness of the Purchase Agreement.
Pursuant to the terms of the Purchase Agreement, the initial Commitment Fee Shares were issued at a value of $159,259, the Note was issued in the principal amount of $277,777 for a purchase price of $250,000, resulting in the original issue discount of $27,777; and the Warrants were issued, with an initial exercise price of $0.50 per share, subject to adjustment. See Note 8.
On May 18, 2022, the Company issued 19,294 shares of common stock to Larry Diamond, it’s Chief Executive Officer at a contractual price of $0.25 per share and a market price at issuance date of $0.1517 per share as commitment shares as set forth and defined in Diamond Note 4. The Company recorded these shares at their relative fair value of the components of Diamond Note 4, or $3,160, and recorded a loss in the amount of $249 on this transaction. The Company also issued five-year warrants to purchase 19,294 shares of common stock at a price of $0.50 to Mr. Diamond pursuant to Diamond Note 4. See Note 8.
On May 23, 2022, the Company issued 19,295 shares of common stock to Jessica Finnegan at a contractual price of $0.25 per share and a market price at issuance date of $0.1794 per share as commitment shares as set forth and defined in Finnegan Note 1. The Company recorded these shares at their relative fair value of the components of Finnegan Note 1, or $3,240, and recorded a gain in the amount of $222 on this transaction. The Company also issued five-year warrants to purchase 19,295 shares of common stock at a price of $0.50 to Ms. Finnegan pursuant to Finnegan Note 1. See Note 8.
On May 26, 2022, the Company issued 84,412 shares of common stock to the May 26 Lenders at a contractual price of $0.25 per share and a market price at issuance date of $0.1517 per share as commitment shares as set forth and defined in the May 26, 2022 Notes. The Company recorded these shares at their relative fair value of the components of the May 26 Note, or $14,175, and recorded a loss in the amount of $1,369 on these transactions. The Company also issued five-year warrants to purchase 84,412 shares of common stock at a price of $0.50 to the May 26 Lenders pursuant to the May 26, 2022. See Note 8.
On June 9, 2022, the Company issued 364,176 shares of common stock to the June 9 Lenders at a contractual price of $0.25 per share and a market price at issuance date of $0.1485 per share as commitment shares as set forth and defined in the June 9 Notes. The Company recorded these shares at the relative fair value of the components of June 9 Notes, or $66,400, and recorded an aggregate loss in the amount of $9,356 on these transactions. The Company also issued five-year warrants to purchase 364,176 shares of common stock at a price of $0.50 to the May 26 Lenders pursuant to the June 9 notes. See Note 8.
Common Stock Transactions During the Six Months Ended June 30, 2021
On January 4, 2021, the Company issued 4,123,750 shares of common stock at a price of $0.012 per share pursuant to the conversion of $45,000 of principal and $4,485 of accrued interest in Eagle Equities Note 4.
On January 6, 2021, the Company issued 3,505,964 shares of common stock at a price of $0.01224 per share pursuant to the conversion of $39,000 of principal and $3,913 of accrued interest in Eagle Equities Note 4.
On January 11, 2021, the Company issued 4,463,507 shares of common stock at a price of $0.01224 per share pursuant to the conversion of $50,000 of principal and $4,633 of accrued interest in Eagle Equities Note 5.
On January 14, 2021, the Company issued 4,319,378 shares of common stock at a price of $0.01266 per share pursuant to the conversion of $50,000 of principal and $4,683 of accrued interest in Eagle Equities Note 5.
On January 21, 2021, the Company issued 6,449,610 shares of common stock at a price of $0.0154 per share pursuant to the conversion of $93,000 of principal and $6,324 of accrued interest in Eagle Equities Note 6.
On January 28, 2021, the Company issued 7,285,062 shares of common stock at a price of $0.01575 per share pursuant to the conversion of $107,200 of principal and $7,540 of accrued interest in Eagle Equities Note 6.
On February 1, 2021, the Company issued 6,672,000 shares of common stock in a private placement (the “2021 Private Placement”) at a price of $0.25 per share for cash proceeds of $1,668,000.
On February 5, 2021, the Company entered into a settlement agreement with the holders of the Eagle Equities Note 7 whereby the Company issued 1,184,148 shares of common stock at a price of $0.24984 per share in satisfaction of $200,200 of principal and all accrued interest and prepayment penalties due under this note.
On February 5, 2021, the Company entered into a settlement agreement with the holders of the Eagle Equities Note 8 whereby the Company issued 639,593 shares of common stock at a price of $0.23851 per share in satisfaction of $114,400 of principal and all accrued interest and prepayment penalties due under this note.
On February 5, 2021, the Company entered into a settlement agreement with the holders of the Eagle Equities Note 9 whereby the Company issued 605,177 shares of common stock at a price of $0.24984 per share in satisfaction of $114,400 of principal and all accrued interest and prepayment penalties due under this note.
On February 5, 2021, the Company entered into a settlement agreement with the holders of the Eagle Equities Note 10 whereby the Company issued 1,095,131 shares of common stock at a price of $0.23748 per share in satisfaction of $200,200 of principal and all accrued interest and prepayment penalties due under this note.
On February 22, 2021, the Company issued 336,000 shares of common stock for the exercise of options at a price of $0.03 per share.
On March 11, 2021, the Company issued 600,000 shares of common stock to 4 officers of The Good Clinic in exchange for 4,800 shares of Series A Preferred Stock. The 4,800 shares of Series A Preferred Stock were cancelled.
On March 17, 2021, the Company issued 300,000 shares of common stock at a price of $0.31 per share to a service provider.
On March 23, 2021, the Company issued 461,358 shares of common stock at a price of $0.26 per share to the underwriters of the 2021 Private Placement.
On April 19, 2021, the Company issued 1,962 shares of common stock for professional fees which had been performed in a prior period. The Company recorded these shares at the par value of $0.01 per share.
On May 4 through May 26, 2021, the Company issued 4,237,424 shares of common stock for the conversion of 1,059,356 shares of Series C Preferred Stock at a price of $0.25 per share.
On May 12, 2021, the Company issued 2,500,000 shares of common stock at a price of $0.03 per share for the exercise of stock options by an investor.
On June 10 through June 29, 2021, the Company issued 5,116,668 shares of common stock at a price of $0.03 per share for the exercise of stock options by officers and directors.
On June 23, 2021, the Company cancelled 2,000,000 shares of common stock held by an ex-officer in connection with a settlement agreement. The cancellation of these shares was recorded at the par value of $0.01 per share. Also, in connection with the settlement agreement, the Company issued 637,953 shares to the ex-officer at the market price of $.20 per share.
On August 26, 2021, the Company issued 312,800 restricted shares of the Company’s common stock priced at $0.25, vesting immediately, in lieu of $78,200 of cash compensation owed to the Company’s Chief Executive Officer for services rendered to the Company prior to 2021.
Between August 11, 2021 and September 2, 2021 the Company issued 4,000,001 shares of the Company common stock in connection with the conversion of Series C preferred stock issued in the first quarter.
Also, during the ninesix months ended SeptemberJune 30, 2021, the Company charged the amount of $7,897 to operations in connection with the vesting of stock granted to its officers and board members; the Company also charged the amount of $201,292$201,294 to operations in connection with the vesting of options granted to its officers and board members
Common Stock Transactions During the Nine Months Ended September 30, 2020
During the nine months ended September 30, 2020, the Company issued 2,901,440 shares of common stock for the cashless exercise of warrants. These warrants were issued pursuant to a settlement agreement with a note holder regarding the effective price of warrants issued with regard to a variable conversion price feature which resulted in the issuance of 1,011,967 more shares than would have been issued prior to the settlement agreement. The Company recorded a loss in the amount of $24,894 on this transaction based upon the additional shares issued at the market price of the Company’s common stock.
Also, during the nine months ended September 30, 2020, the holder of the Eagle Equities Note 1 converted the following amounts of principal and accrued interest to common stock: On June 5, 2020, principal of $25,000 and accrued interest of $1,608 were converted at a price of $0.0132 per share into 2,015,783 shares of common stock; On June 17, 2020, principal of $25,000 and accrued interest of $1,708 were converted at a price of $0.0132 per share into 2,023,358 shares of common stock; On June 23, 2020, principal of $40,000 and accrued interest of $2,813 were converted at a price of $0.0132 per share into 3,243,434 shares of common stock; and on June 26, 2020, principal of $26,000 and accrued interest of $1,855 were converted at a price of $0.01362 per share into 2,045,130 shares of common stock. There were no gains or losses recorded, as these conversions were made pursuant to the terms of the agreement.
Also, during the nine months ending September 30, 2020, the Company issued 200,000 restricted shares of the Company’s common stock at valued $7,680 in exchange for services conducted on behalf of the Company. The value of these shares was based on the closing market price on the respective date of grant.
Also, during the nine months ended September 30, 2020, the Company charged the amount of $53,050 to operations in connection with the vesting of stock granted to its officers and board members; the Company also charged the amount of $27,580 to operations in connection with the vesting of options granted to officers and board members.
Also, during the nine months ended September 30, 2020, the Company entered into agreements to issue 500,000 options to each of 4 consultants (a total of 2,000,000 options). The options have a fair value of $20,930 per consultant (a total of $83,720). These agreements will become effective April 6, 2020, at which time the Company will begin to charge the value of these options to operations. The Company valued these options using the Black-Scholes valuation model.
Also, during the nine months ended September 30, 2020, the Company entered into agreements with two note holders regarding the exercise price of warrants held by the note holders. These agreements resulted in the following: (i) the Company issued 1,000,000 shares of common stock, and the note holders agreed to cancel 2,769,482 warrants; the Company recorded a gain in the amount of $77,652 on this transaction; (ii) the Company issued 4,098,556 shares of common stock for the exercise of 4,480,938 warrants in a cashless transaction; the Company recorded a gain in the amount of $259,947 on this transaction, which is included in gain on derivative liabilities.
Also, during the nine months ended September 30, 2020, the Company issued 386,985 shares of common stock at a price of $0.034 per share to an ex-employee for accrued compensation. A gain in the amount of $6,988 was recognized on this transaction.
Preferred Stock
We have authorized to issue 100,000,000 shares of Preferred Stock with such rights designations and preferences as determined by our Board of Directors. We have designated 500,000 shares of series A stock, 3,000,000 shares of Series C Preferred, 10,000,000 shares of Series D Preferred and we have designated 400,000 shares as Series X Preferred Stock.
Series A Preferred Stock
Series A Preferred Stock Transactions During the NineSix Months Ended SeptemberJune 30, 2022
None.
Series A Preferred Stock Transactions During the Six Months Ended June 30, 2021
During the ninesix months ended SeptemberJune 30, 2021, the Company accrued dividends in the amount of $1,000 on the Series A Preferred Stock. On March 11, 2021, the Company issued 600,000 shares of common stock to the four officers of The Good Clinic in exchange for the previously issued Series A Preferred Stock and accrued dividends. The Series A preferred stock was canceledcanceled. The Preferred Stock was valued at cost of $71,558, and there are no Seriesthe common stock was valued at the market price of $0.463 per share or a total value of $277,800. This transaction resulted in a deemed dividend to the Preferred A Preferred shares outstanding at this time.shareholders in the amount of $206,242.
Series A Preferred Stock Transactions During the Nine Months Ended September 30, 2020
On March 2, 2020, the Company issued 4,800 shares of its Series A Preferred Stock to 4 individuals with certain skills and know-how to assist the Company in the development of its newly formed subsidiary My Care, LLC. The Company had valued these shares at $71,558 or approximately $14.91 per share based upon an analysis performed by an independent valuation consultant. During the nine months ended September 30, 2020, the Company accrued dividends in the amount of $3,967 on the Series A Preferred Stock. On September 30, 2020, dividend payable on the Series A Preferred Stock was $3,967. On September 30, 2020, if management determined to pay these dividends in shares of the Company’s common stock, this would result in the issuance of 98,780 shares of common stock based upon the average price of $0.0402 per share for the five-day period ended September 30, 2020.
Series C Preferred Stock
Series C Preferred Stock Transactions During the NineSix Months Ended SeptemberJune 30, 2022
During the six months ended June 30, 2022, the Company accrued dividends on the Series C Preferred Stock in the amount of $32,955.
Series C Preferred Stock Transactions During the Six Months Ended June 30, 2021
On March 25, 2021, the Company entered into Securities Purchase Agreements (the “SPAs”) with four institutional investors (the “Investors” and each an “Investor”) pursuant to which the Company sold to the Investors in a private placement an aggregate3,000,000 shares of 3,000,000 units (the “Units” and each a “Unit”) with a purchase price of $1.00 per Unit, with each Unit consisting of (a) one share of a newly formedits Series C Convertible Preferred Stock par value $0.01 per share (the “Series C Preferred Stock”), (b) one warrant (the “Series A Warrants”)along with (i) five-year warrants to purchase 2.16,300,000 shares of the Company’s common stock par value $0.01 per share (the “Common Stock”) at a purchase price of $0.50 per whole share, of Common Stock, and (c) one warrant (the “Series B Warrants” and together with the Series A Warrants, the “Warrants”)(ii) five-year warrants to purchase 2.16,300,000 shares of Common Stockthe Company’s common stock at a purchase price of $0.75 per whole share. The aggregate grossshare for proceeds to the Company were $3,000,000 and the number of shares of Common Stock initially issuable upon conversion of the Series C Preferred Stock is 12,600,000 shares of Common stock and the aggregate number of shares of Common Stock initially issuable upon exercise of the Warrants is 12,600,000 shares of Common Stock.$3,000,000.
OnBetween May 4 throughand May 26, 2021, 1,059,356 shares of Series C Preferred Stock were converted at a price of $0.25 per share to 4,237,424 shares of common stock. During the ninesix months ended SeptemberJune 30, 2021, the Company accrued dividends on the Series C Preferred Stock in the amount of $42,078.
On August 11, 2021 through September 2, 2021, 1,000,000The Series C Preferred Stock has the following terms:
Ranking. The Series C Preferred Stock and the Series D Preferred, discussed below, ranks senior to all other preferred stock of the Company except in relation to the Series X Cumulative Redeemable Perpetual Preferred Stock, which ranks Pari passu to the Series C Preferred Stock, with respect to the preferences as to dividends, distributions and payments upon the liquidation, dissolution and winding up of the Company.
Voting Rights. Holders of the Series C Preferred Stock have the right to vote on any matter presented to holders of our Common Stock for their action or consideration at any meeting of the stockholders (or by written consent of stockholders in lieu of meeting), each holder of our Series C Preferred Stock shall be entitled to cast the number of votes equal to the number of whole shares of Common Stock into which the shares of Series C preferred Stock held by such holder, as described below, are convertible as of the record date for determining stockholders entitled to vote on (or consent to) such matter, voting with the Common Stock as a single class.
Conversion. Each holder of our Series C Preferred Stock is entitled to convert their shares of Series C Preferred Stock, werein whole or in part, at the Conversion Rate, which is determined by dividing the Conversion Amount (the Stated Value of $1.05, plus any accrued but unpaid dividends) by the Conversion Price ($0.25 per share). In addition, upon certain triggering events, the holders of our Series C Preferred Stock have the right to convert their Series C Preferred Stock at the lesser of the Conversion Price or 75% of the average VWAP for the five trading days prior to the date of the notice of conversion. The Conversion Price is subject to adjustment upon certain stock splits and recapitalization as well as upon the sale of Common Stock or Common Stock Equivalents. Each share of the Series C Preferred Stock is convertible at the option of the holder thereof, or automatically or upon the closing of an underwritten offering of at least $10 million of the Company’s securities or upon listing of the Company’s Common Stock on a national securities exchange.
Dividends. Each share of Series C Preferred Stock accrues dividends on a quarterly basis in arrears, at the rate of 6% per annum of the Stated Value ($1.05 per share plus any accrued but unpaid dividends) and is to be paid within 15 days after the end of each of our fiscal quarters. Each holder of the Series C Preferred Stock is entitled to receive dividends or distributions on each share of the Series C Preferred Stock on an as converted into Common Stock basis when and if dividends are declared on the Common Stock by our Board of Directors.
Liquidation Rights. The holders of our Series C Preferred stock are entitled to receive in cash out of our assets, whether from capital or from earnings available for distribution to our stockholders (the “Liquidation Funds”), before any amount shall be paid to the holders of any of shares of capital stock that rank junior to the Series C Preferred Stock, but Pari passu with any shares of capital stock that have a parity ranking with the Series C Preferred stock (“Parity Stock”) then outstanding, an amount per share of Series C Preferred Stock equal to the greater of (A) the Conversion Amount on the date of such payment or (B) the amount per share such holder of the Series C Preferred Stock would receive if such holder converted their Series C Preferred Stock into Common Stock immediately prior to the date of such payment, provided that if the Liquidation Funds are insufficient to pay the full amount due to the holders of the Series C Preferred Stock and holders of shares of Parity Stock, then each holder Series C Preferred Stock and each holder of Parity Stock shall receive a percentage of the Liquidation Funds equal to the full amount of Liquidation Funds payable to such holder and such holder of Parity Stock as a liquidation preference, in accordance with their respective certificate of designations (or equivalent), as a percentage of the full amount of Liquidation Funds payable to all holders of Series C Preferred Stock and all holders of shares of Parity Stock. All such amounts shall be paid or set apart for payment before the payment or setting apart for payment of any amount for, or the distribution of any Liquidation Funds of the Corporation to the holders of shares of capital stock that may rank junior to that of the Series C Preferred Stock Junior Stock.
Rights and Preferences. The rights, preferences, and privileges of holders of our Series C Preferred Stock are subject to, and may be adversely affected by, the rights of holders of shares of any series of Preferred Stock that we may designate and issue in the future that may rank senior to the Series C Preferred Stock.
Redemption Rights. Upon receipt of a conversion notice, we have the right (but not the obligation) to redeem all or part of the Series C Preferred Stock (which the applicable holder of the Series C Preferred Stock is seeking to convert) at a price of $0.25 per share equal to 4,000,001the product of 125% of the (1) Stated Value plus (2) the Additional Amount (the “Redemption Price”). If we decide to exercise the redemption right, within one trading day, we shall deliver written notice to such holder(s) of Series C Preferred Stock that the Series C Preferred Stock will be redeemed (the “Redemption Notice”) on the date that is three trading days following the date of the Redemption Notice (such date, the “Redemption Date”). On the Redemption Date, we shall redeem the shares of commonSeries C Preferred Stock specified in such request by paying in cash therefor a sum per share equal to the Redemption Price. In no event shall a Redemption Notice be given if we may not lawfully redeem our capital stock. On or before the Redemption Date, the Redemption Price for such shares shall be paid by wire transfer of immediately available funds to an account designated in writing by the applicable holder.
Price Adjustments Protection. The conversion price is subject to appropriate adjustment in the event of share dividends, share splits, reorganizations or similar events affecting our shares of Common Stock. Other than for certain exempt issuances, in the event we issue or sell any securities, including options or convertible securities, or amend outstanding securities, at an effective price, with an exercise price or at a conversion price less than the Conversion Price, then the Conversion Price shall be reduced to such lower price.
Preemptive or Similar Rights Additionally, except for a public offering or certain exempt issuances of our securities, holders of the Series C Preferred Stock shall have the right to participate in any offering of our Common Stock or Common Stock Equivalents (as defined in the COD) in a transaction exempt from registration under the Securities Act in an amount equal to an aggregate of 30% of the financing on the same terms, conditions and price provided to investors in such an offering, such right shall expire on the 15 month anniversary of the issuance date of the Series C Preferred Stock. Further, until the earlier of 18 months from the issuance date of the Series C Preferred Stock and the date that there are less than 20% of the shares of Series C Preferred Stock outstanding, the Investors have most favored nations protection in the event we issue or sell Common Stock or Common Stock Equivalents that the Investors believe are more favorable than the terms and conditions under the Private Placement.
Fully Paid and Nonassessable. All our issued and outstanding shares of Series C Preferred Stock are fully paid and nonassessable.
Series D Preferred Stock
Pursuant to the Certificate of Designations, Preferences and Rights of the Series D Preferred Stock of the Company, Inc., filed with the Secretary of State of the State of Delaware on October 18, 2021 (the “COD”), there are 10,000,000 shares of our preferred stock that have been designated as the Series D Preferred Stock and each share of the Series D Preferred Stock is convertible at the option of the holder thereof, or automatically upon the request of the our underwriters that the Series D Preferred Stock convert to shares of Common Stock or upon listing of the our Common Stock on a national securities exchange. The number of shares of Common Stock issuable upon the conversion of each share of Series D Preferred Stock is calculated by dividing the Conversion Amount (defined in the COD as the Stated Value, $1.05 per share, plus accrued and unpaid dividends) by the $0.25 conversion price.
Series D Preferred Stock Transactions During the Six Months Ended June 30, 2022
During the ninesix months ended SeptemberJune 30, 2021,2022, the Company accrued dividends on the Series CD Preferred Stock in the amount of $67,370.$96,847.
Series CD Preferred Stock Transactions During the NineSix Months ended SeptemberEnded June 30, 20202021
None.
Series X Preferred Stock
The Company has 24,227 shares of its 10% Series X Cumulative Redeemable Perpetual Preferred Stock (the “Series X Preferred Stock”) outstanding as of June 30, 2022 and December 31, 2021. The Series X Preferred Stock has a par value of $0.01 per share, no stated maturity, a liquidation preference of $25.00 per share, and will not be subject to any sinking fund or mandatory redemption and will remain outstanding indefinitely unless the Company decides to redeem or otherwise repurchase the Series X Preferred Stock; the Series X Preferred Stock is not redeemable prior to November 4, 2020. The Series X Preferred Stock will rank senior to all classes of the Company’s common and preferred stock and accrues dividends at the rate of 10% on $25.00 per share. The Company reserves the right to pay the dividends in shares of the Company’s common stock at a price equal to the average closing price over the five days prior to the date of the dividend declaration. Each one share of the Series X Preferred Stock is entitled to 20,000 votes on all matters submitted to a vote of our shareholders.
Series X Preferred Stock Transactions During the Nine MonthsSix Month Ended SeptemberJune 30, 20212022
On June 7, 2022, the Company issued 405,131 shares of common stock at an average price of $0.2149 per share as payment for dividends payable on the Series X Preferred Stock in the amount of $87,053.
During the ninesix months ended SeptemberJune 30, 2021,2022, the Company accrued dividends in the amount of $30,282 on itsthe Series X Preferred Stock in the total amount of $46,677. Of this amount, a total of $6,000 was payable to officers and directors, $23,444 was payable to a related party shareholder, and $17,233 was payable to non-related parties.Stock.
Series X Preferred Stock Transactions During the NineSix Months Ended SeptemberJune 30, 20202021
None.During the six months ended June 30, 2021, the Company accrued dividends in the amount of $31,536 on the Series X Preferred Stock.
Stock Options
The following table summarizes the options outstanding on Septemberat June 30, 2021,2022 and the related prices for the options to purchase shares of the Company’s common stock:
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average | exercise | exercise | ||||||||||||||||||
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exercise | options | contractual | outstanding | options | exercisable | |||||||||||||||
Prices | outstanding | life (years) | options | exercisable | options | |||||||||||||||
$0.03-$0.39 | 18,386,211 | 9.32 | $ | 0.20 | 5,052,000 | $ | 0.10 |
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| 8.78 |
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| $ | 0.213 |
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| 5,469,961 |
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| $ | 0.161 |
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Transactions involving stock options are summarized as follows:
Shares | Weighted- Average Exercise Price ($) | |||||||
Outstanding on December 31, 2020 | 13,453,879 | $ | 0.03 | |||||
Granted | 13,585,000 | 0.27 | ||||||
Exercised | (8,652,668 | ) | 0.03 | |||||
Outstanding on September 30, 2021 | 18,386,211 | $ | 0.20 |
Aggregate intrinsic value of options outstanding and exercisable on September 30, 2021, and 2020 was $789,500 and $0, respectively. Aggregate intrinsic value represents the difference between the Company’s closing stock price on the last trading day of the fiscal period, which was $0.28 and $0.04 as of September 30, 2021, and 2020, respectively, and the exercise price multiplied by the number of options outstanding and exercisable.
Shares | Weighted- Average Exercise Price ($) | |||||||
Outstanding at December 31, 2021 | 18,329,543 | $ | 0.206 | |||||
Granted | 200,000 | $ | 0.25 | |||||
Expired | (2,174,582 | ) | 0.155 | |||||
Outstanding at June 30, 2022 | 16,354,961 | $ | 0.213 | |||||
Options vested and exercisable | 5,469,961 | $ | 0.161 |
On SeptemberJune 13, 2022, the Company issued 200,000 ten-year options with an exercise price of $0.25 and a fair value of $23,316 to Tom Brodmerkel, its Chairman, to the position of Chief Financial Officer.
During the three months ended June 30, 2022 and 2021, the Company charged the amount of approximately $135,295 and $195,000, respectively, for the vesting of stock options. During the six months ended June 30, 2022 and 2021, the Company charged the amount of approximately $302,310 and $201,000, respectively, for the vesting of stock options.
At June 30, 2022, the total stock-based compensation cost related to unvested awards not yet recognized was $1,205,961.$2.2 million.
The Black-Scholes option pricing model is used to estimate the fair value ofCompany valued stock options granted underduring the Company’s share-based compensation plans. The weighted average assumptions used in calculatingsix months ended June 30, 2022 and 2021 using the fair values of stock options as of September 30, 2021, was as follows:Black-Scholes valuation model utilizing the following variables:
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June 30, | June 30, | |||||||
2022 | 2021 | |||||||
Volatility | 143.6 | % | 167.8% to 183.5 | % | ||||
Dividends | $ | - | $ | - | ||||
Risk-free interest rates | 3.04 | % | 0.82% to 1.69 | % | ||||
Term (years) | 5.00 | 5.00 to 10.00 |
Warrants
The following table summarizes the warrants outstanding on SeptemberJune 30, 2021,2022, and the related prices for the warrants to purchase shares of the Company’s common stock:stock (see note 8):
Shares | Weighted- Average Exercise Price ($) | |||||||
Outstanding on December 31, 2020 | - | $ | - | |||||
Granted | 12,600,000 | $ | 0.63 | |||||
Exercised | - | $ | - | |||||
Outstanding on September 30, 2021 | 12,600,000 | $ | 0.63 |
Note 10 – Fair Value of Financial Instruments
Shares | Weighted- Average Exercise Price ($) | |||||||
Outstanding on December 31, 2021 | 29,820,000 | $ | 0.625 | |||||
Granted | 3,470,673 | $ | 0.526 | |||||
Exercised | - | $ | - | |||||
Outstanding on June 30, 2022 | 33,290,673 | $ | 0.615 |
The Company valued warrants during the six months ended June 30, 2022 and 2021 using the Black-Scholes valuation model utilizing the following summarizes the Company’s derivative financial liabilities that are recorded at fair value on a recurring basis on September 30, 2021, and December 31, 2020.variables:
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Fair value measured at December 31, 2020 | ||||||||||||||||
Quoted prices in active | Significant other | Significant | ||||||||||||||
markets | observable inputs | unobservable inputs | Fair value at | |||||||||||||
(Level 1) | (Level 2) | (Level 3) | December 31, 2020 | |||||||||||||
Derivative liability | $ | - | $ | - | $ | 807,682 | $ | 807,682 |
June 30, | June 30, | |||||||
2022 | 2021 | |||||||
Volatility | 143.6 to 150.7 | % | 171.6% to 183.5 | % | ||||
Dividends | $ | - | $ | - | ||||
Risk-free interest rates | 0.76% to 3.04 | % | 1.15% to 1.63 | % | ||||
Term (years) | 0.25 to 5.00 | 5.00 to 6.50 |
Note 1110 – Commitments and Contingencies
Legal
There isare no pending or anticipated legal actions at this time.
PPP LoanNote 11 – Subsequent Events
During March 2020, in responseOn July 7, 2022, the Company issued 2 10% Promissory Notes due as described below (individually, the “Schrier Note” and the “William Mackay Note”, and collectively, the “Notes”), to Charles Schrier and William Mackay Investments LLC, (together, the COVID-19 crisis, the federal government announced plans to offer loans to small businesses in various forms, including the Payroll Protection Program, or "PPP", established as part of the Corona Virus Aid, Relief and Economic Security Act (“CARES Act”“Lenders”) and administered by the U.S. Small Business Administration. On April 25, 2020, the Company entered an unsecured Promissory Note (the “Note”) with Bankin respect of America for a loan in the original principal amount of approximately $460,000, andwhich the Company received the full amountproceeds of the loan proceeds on May 4, 2020. The current balance is $460,406 and the Company is currently in discussions for a) a partial forgiveness and b) the conversion of any remaining balance into a term note.
Note 12 -- Subsequent Events$270,000.
Subsequent to September 30, 2021,The Notes carry a 10% interest rate per annum, accrued monthly and payable at maturity. The Schrier Note has a maturity date that is the earlier of (i) January 8, 2023, or (ii) five business days after the date on which the Company initiated a bridge financing round ahead ofsuccessfully lists its anticipated-up listing to a national exchange. The Company intends to raise between 5 and 6 million dollars of a series D preferred stock sold to investors in a private placement. Each series D unit will have a purchase price of $1.00 per Unit, with each Unit consisting of (a) one share of a newly formed Series D Convertible Preferred Stock, par value $0.01 per share (the “Series D Preferred Stock”), (b) one warrant (the “Series A Warrants”) to purchase 2.1 shares of the Company’s common stock par value $0.01 per share (the “Common Stock”)on Nasdaq or NYSE. The William Mackay Note has a maturity date that is the earlier of (i) August 8, 2022, or (ii) five business days after the date on which the Company successfully lists its shares of common stock on Nasdaq or NYSE.
The aggregate amount payable at maturity will be $317,647 plus 10% of that amount plus any accrued and unpaid interest. Following an event of default, as defined in the Notes, the principal amount shall bear interest for each day until paid, at a purchaserate per annum equal to the lesser of the maximum interest permitted by applicable law and 18%. The Notes contain a “most favored nations” clause that provides that, so long as the Notes are outstanding, if the Company issues any new security, which the Lenders reasonably believe contains a term that is more favorable than those in the Notes, the Company shall notify the Lenders of such term, and such term, at the option of the Lenders, shall become a part of the Notes. In addition, the Lenders will be issued in the aggregate (1) 130,235 five-year warrants (the “Warrants”) and (2) 130,235 shares of Common Stock as commitment shares (“Commitment Shares”). The Commitment Shares are priced at $0.25. The Warrants have an initial exercise price of $0.50 per whole shareshare. The Warrants are not exercisable for six months following their issuance. The Lenders may exercise the Warrants on a cashless basis if after the six-month anniversary of Common Stock, and (c) one warrant (the “Series B Warrants” and together withdate of issuance, the Series A Warrants, the “Warrants”) to purchase 2.1 shares of Common Stock underlying the Warrants are not then registered pursuant to an effective registration statement.
On July 21, 2022, the Company issued a 10% Promissory Notes due to Michael C Howe Living Trust (the “Lender”) and in respect of which the Company received proceeds of $255,000.
The Note carries a 10% interest rate per annum, accrued monthly and payable at maturity. The note has a maturity date that is the earlier of (i) September 10, 2022, or (ii) five business days after the date on which the Company successfully lists its shares of common stock on Nasdaq or NYSE
The amount payable at maturity will be $300,000 plus 10% of that amount plus any accrued and unpaid interest. Following an event of default, as defined in the Notes, the principal amount shall bear interest for each day until paid, at a purchaserate per annum equal to the lesser of the maximum interest permitted by applicable law and 18%. The Note contains a “most favored nations” clause that provides that, so long as the Note is outstanding, if the Company issues any new security, which the Lender reasonably believes contains a term that is more favorable than those in the Note, the Company shall notify the Lender of such term, and such term, at the option of the Lender, shall become a part of the Note. In addition, the Lender will be issued (1) 123,000 five-year warrants (the “Warrants”) and (2) 123,000 shares of Common Stock as commitment shares (“Commitment Shares”). The Commitment Shares are priced at $0.25. The Warrants have an initial exercise price of $0.75$0.50 per whole share. AsThe Warrants are not exercisable for six months following their issuance. The Lender may exercise the Warrants on a cashless basis if after the six-month anniversary of date of issuance, the shares of Common Stock underlying the Warrants are not then registered pursuant to an effective registration statement.
On July 21, 2022, the Company issued a 10% Promissory Notes due to Juan Carlos Iturregui (the “Lender”) and in respect of which the Company received proceeds of $25,000. Mr. Iturregui is a member of the Company’s Board of Directors.
The Note carries a 10% interest rate per annum, accrued monthly and payable at maturity. The note has a maturity date that is the earlier of (i) January 21, 2023, or (ii) five business days after the date on which the Company successfully lists its shares of common stock on Nasdaq or NYSE.
The amount payable at maturity will be $29,412 plus 10% of that amount plus any accrued and unpaid interest. Following an event of default, as defined in the Notes, the principal amount shall bear interest for each day until paid, at a rate per annum equal to the lesser of the maximum interest permitted by applicable law and 18%. The Note contains a “most favored nations” clause that provides that, so long as the Note is outstanding, if the Company issues any new security, which the Lender reasonably believes contains a term that is more favorable than those in the Note, the Company shall notify the Lender of such term, and such term, at the option of the Lender, shall become a part of the Note. In addition, the Lender will be issued (1) 12,059 five-year warrants (the “Warrants”) and (2) 12,059 shares of Common Stock as commitment shares (“Commitment Shares”). The Commitment Shares are priced at $0.25. The Warrants have an initial exercise price of $0.50 per share. The Warrants are not exercisable for six months following their issuance. The Lender may exercise the Warrants on a cashless basis if after the six-month anniversary of date of this filing this filingissuance, the shares of Common Stock underlying the Warrants are not then registered pursuant to an effective registration statement.
On July 26, 2022, the Company issued a 10% Promissory Notes due to Erik Scott Nommsen (the “Lender”) and in respect of which the Company received proceeds of $50,000.
The Note carries a 10% interest rate per annum, accrued monthly and payable at maturity. The note has closeda maturity date that is the earlier of (i) September 10, 2022, or (ii) five business days after the date on $3,100,000.which the Company successfully lists its shares of common stock on Nasdaq or NYSE.
The amount payable at maturity will be $58,823 plus 10% of that amount plus any accrued and unpaid interest. Following an event of default, as defined in the Notes, the principal amount shall bear interest for each day until paid, at a rate per annum equal to the lesser of the maximum interest permitted by applicable law and 18%. The Note contains a “most favored nations” clause that provides that, so long as the Note is outstanding, if the Company issues any new security, which the Lender reasonably believes contains a term that is more favorable than those in the Note, the Company shall notify the Lender of such term, and such term, at the option of the Lender, shall become a part of the Note. In addition, the Lender will be issued (1) 24,117 five-year warrants (the “Warrants”) and (2) 24,117 shares of Common Stock as commitment shares (“Commitment Shares”). The Commitment Shares are priced at $0.25. The Warrants have an initial exercise price of $0.50 per share. The Warrants are not exercisable for six months following their issuance. The Lender may exercise the Warrants on a cashless basis if after the six-month anniversary of date of issuance, the shares of Common Stock underlying the Warrants are not then registered pursuant to an effective registration statement.
On July 27, 2022, the Company issued a 10% Promissory Notes due to James H. Caplan (the “Lender”) and in respect of which the Company received proceeds of $50,000.
The Note carries a 10% interest rate per annum, accrued monthly and payable at maturity. The note has a maturity date that is the earlier of (i) January 21, 2023, or (ii) five business days after the date on which the Company successfully lists its shares of common stock on Nasdaq or NYSE.
The amount payable at maturity will be $58,823 plus 10% of that amount plus any accrued and unpaid interest. Following an event of default, as defined in the Notes, the principal amount shall bear interest for each day until paid, at a rate per annum equal to the lesser of the maximum interest permitted by applicable law and 18%. The Note contains a “most favored nations” clause that provides that, so long as the Note is outstanding, if the Company issues any new security, which the Lender reasonably believes contains a term that is more favorable than those in the Note, the Company shall notify the Lender of such term, and such term, at the option of the Lender, shall become a part of the Note. In addition, the Lender will be issued (1) 24,117 five-year warrants (the “Warrants”) and (2) 24,117 shares of Common Stock as commitment shares (“Commitment Shares”). The Commitment Shares are priced at $0.25. The Warrants have an initial exercise price of $0.50 per share. The Warrants are not exercisable for six months following their issuance. The Lender may exercise the Warrants on a cashless basis if after the six-month anniversary of date of issuance, the shares of Common Stock underlying the Warrants are not then registered pursuant to an effective registration statement.
On August 3, 2022, the Company amended the maturity date of the Diamond Note 4 to the earlier of (i) September 10, 2022 or (ii) five days after the date on which we successfully list our shares of common stock on any of the NYSE American, the Nasdaq Global Select Market, the Nasdaq Global Market, or the Nasdaq Capital Market.
On August 4, 2022, the Company issued a 10% Promissory Notes due to Jack Enright (the “Lender”) and in respect of which the Company received proceeds of $102,000.
The Note carries a 10% interest rate per annum, accrued monthly and payable at maturity. The note has a maturity of February 3, 2023.
The amount payable at maturity will be $120,000 plus 10% of that amount plus any accrued and unpaid interest. Following an event of default, as defined in the Notes, the principal amount shall bear interest for each day until paid, at a rate per annum equal to the lesser of the maximum interest permitted by applicable law and 18%. The Note contains a “most favored nations” clause that provides that, so long as the Note is outstanding, if the Company issues any new security, which the Lender reasonably believes contains a term that is more favorable than those in the Note, the Company shall notify the Lender of such term, and such term, at the option of the Lender, shall become a part of the Note. In addition, the Lender will be issued 49,200 shares of Common Stock as commitment shares (“Commitment Shares”). The Commitment Shares are priced at $0.25.
On August 4, 2022, the Company issued a 10% Promissory Notes due to Jessica, Kevin C., Brody, Isabella and Jack Finnegan (collectively, the “Lenders”) and in respect of which the Company received proceeds of $25,000.
The Note carries a 10% interest rate per annum, accrued monthly and payable at maturity. The note has a maturity of February 3, 2023.
The amount payable at maturity will be $29,412 plus 10% of that amount plus any accrued and unpaid interest. Following an event of default, as defined in the Notes, the principal amount shall bear interest for each day until paid, at a rate per annum equal to the lesser of the maximum interest permitted by applicable law and 18%. The Note contains a “most favored nations” clause that provides that, so long as the Note is outstanding, if the Company issues any new security, which the Lender reasonably believes contains a term that is more favorable than those in the Note, the Company shall notify the Lenders of such term, and such term, at the option of the Lenders, shall become a part of the Note. In addition, the Lenders will be issued in aggregate (1) 12,059 five-year warrants (the “Warrants”) and (2) 12,059 shares of Common Stock as commitment shares (“Commitment Shares”). The Commitment Shares are priced at $0.25. The Warrants have an initial exercise price of $0.50 per share. The Warrants are not exercisable for six months following their issuance. The Lenders may exercise the Warrants on a cashless basis if after the six-month anniversary of date of issuance, the shares of Common Stock underlying the Warrants are not then registered pursuant to an effective registration statement.
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with the financial statements and notes thereto appearing elsewhere herein.
We are working to open primary care clinics around the US that are in residential centers and leverage the expertise, training, and license of Nurse Practitioners. We are focusing on wellness as a core of the practice. Mitesco’s miss ionmission is to increase convenience and access to care, improve the quality of care, and reduce its cost. Technology is a key part to our approach to deliver on these three goals. We recognize the essential nature of the clinician client relationship and its importance to achieving these superior outcomes. Our view is that technology must enhance these human interactions, not operate independently. As such, we are seeking innovative technologies that enable both consumers and clinicians to achieve more convenient and better outcomes with greater efficiency.
We opened our flagshipfirst primary care clinic “The Good Clinic” in Northeast Minneapolis, Minnesota in February 2021, and have added twofive additional operating clinics as of the date of this filing.filing for a total of six clinics open and operating. We announced leases for four (4) plan additional clinics in the Twin Cities area of Minnesota and two (2) new clinics in the greater Denver, Colorado area. These new locations, and a new location in Wayzata, Minnesota are expected to open in Q4 of 2021 and Q1the fourth quarter of 2022. We plan to open clinics in residential concentrations of population to enhance the convenience, especially timely due to the changes in community travel patterns resulting from the pandemic. Our clinicians use both telehealth (virtual) and in-person visits to treat and coach the clients along their journey to better health and quality of life. Our clinics are led by Nurse Practitioners that use their license, extensive training, expertise, and empathy to help people remain stable or improve their health. We emphasize wellness, beginning with a clients’ co-developed plan that identifies from where a person is starting and constructs a plan for how they can achieve their goals. The practice uses an integrated health approach that includes an assessment of both the individual’s behavioral and physical health and combines this with their activation level and their goals. The clinic offers wellness coaching, behavioral health care, episodic care, dermatologic services, and supplements. We seek to care for the whole person’s needs.
Like the first clinic, we seek to locate clinics convenient to residential centers. In pursuit of this approach, we intend to continue to expand our relationship with Lennar Corporation and other large scalelarge-scale developers. Already, our clinic is being viewed as an amenity for the high-rise development in which we are located. We plan to mirror this approach within the two Lennar locations with whichWhile we have signed letters of intentno formal relationship with these developers other than as a tenant, we believe such relationships give us an advantage in recruiting and retaining clients in close proximity to build clinics in these residential developments in Denver. We may also seek to grow through the acquisition of existing clinic operations which would be converted into our operating approach.locations
Additionally, we have implemented a corporate structure that we believe allows us to expand into international markets. We have a wholly owned subsidiary in Dublin, Ireland, Acelerar Healthcare Holdings, Ltd. We intend to use this location as a base for European operations. In the European community the investment in healthcare technology has been significant. In many cases, even more robust than in the North American markets. We believe that as a result of expected low economic growth in the European community, several technology businesses based there may become our targets for acquisition at attractive valuations. We believe that these businesses may benefit from the larger markets found in North America and elsewhere in the world.Business Summary
We also see the European community as an opportunity for capital as we expand our business.Our operating subsidiary, The interest rates in this area of the world are currently very low or even at zero. As such, raising fundsGood ClinicTM, produced increased operational results in the European market may prove attractive whensecond quarter of 2022 as compared to local alternatives. Further, therethe first quarter of 2022.
During the first quarter of 2022, The Good Clinic client visits were driven mainly by the demand for COVID-19 testing and vaccinations, which generally require shorter appointments. Even though the visits are equitybriefer, these interactions with new clients allow us to demonstrate our differentiating clinic experience. As a result, we converted first-time customers into ongoing clients.
Metrics from the three months ended June 30, 2022:
• The Good Clinic recorded a 45% quarter-over-quarter increase in unique (i.e., first-time) clients.
• The total number of visits in the second quarter of 2022 increased by 11%, as compared to the first quarter of 2022.
• The average length of appointment times increased during the second quarter of 2022, which we measure as minutes of care. There was a 112% increase in total care minutes during the second quarter of 2022, as compared to the first quarter of 2022, with the average minutes per visit increasing by 91%.
These metrics indicate the client’s adoption of our primary care concept focused on preventive care and debt markets based in Europeimproved well-being. Moreover, the quarterly results illustrate that may provide liquidity to our investors, should we be able to listThe Good Clinic providers are delivering more complex care and trade our financial instruments in those marketplaces. We may seek a dual listing for our common stock to trade there. We believe this avenue may increase both the size and liquidity of the shareholder base.are therefore receiving higher per-visit reimbursements.
Results of Operations
The following period-to-period comparisons of our financial results are not necessarily indicative of results for the current period of any future periods. Further, as a result of any acquisitions of other businesses, and any additional pharmacy acquisitions or other such transactions we may pursue, we may experience large expenditures specific to the transactions that are not incident to our operations.
Comparison of the Three Months Ended SeptemberJune 30, 20212022 and 20202021
Revenue
The Company recognized revenue of approximately $13,500$0.2 million for the three months ended SeptemberJune 30, 2021,2022, compared to $0$8,200 for the three months ended SeptemberJune 30, 2020.2021. The increase in revenue is the result of the opening ofservice and product revenue from The Good Clinic’s three location.six locations.
Cost of Sales
The Company incurred approximately $2,500$0.6 million of cost of goods sold for the three months ended SeptemberJune 30, 2021,2022, compared to $0$3,600 for the three months ended SeptemberJune 30, 2020.2021. During the first quarter of 2021 there were only a few direct clinical services performed due to the lack of in force payer contracts and the newness of the clinic. As such, the allocation of the expenses related to clinical staff were attributed to operating expenses and not cost of sales. The increase in cost of goods sold is the result of the opening and operating of The Good Clinic’s third location.six locations and having in force payer relationships.
Gross (Loss) Profit
Our gross profitloss was approximately $11,000$0.4 million for the three months ended SeptemberJune 30, 2021,2022, compared to $0gross profit of $4,600 for the three months ended SeptemberJune 30, 2020.2021.
Operating Expenses
Our total operating expenses for the three months ended SeptemberJune 30, 2021,2022, were approximately $1,780,000.$2.3 million. For the comparable period in 2020,2021, the operating expenses were approximately $608,000.$1.4 million.
Operating expenses for the three months ended SeptemberJune 30, 2021,2022, were comprised primarily of $581,000$1.4 million of payroll, payroll taxes and payroll taxes; $202,000 of non-cash compensation, $313,000employee benefit expenses, $0.2 million in rent and utilities, $0.1 million in legal and professional fees; $143,000$0.1 million in marketing; $423,000$0.2 million in depreciation, $0.2 million in stock-based compensation expenses and $0.1 million in other operation costs and $147,000 in consulting fees.operating costs.
Operating expenses for the three months ended SeptemberJune 30, 2020 was $608,000. Operating expenses for the three months ended September 30, 20202021 were comprised primarily of $183,000 in$0.4 million of payroll and payroll taxes, including $99,000 intaxes; $0.3 million of non-cash compensation; $139,000compensation, $0.2 million in legal and professional fees; $123,000$0.1 million in marketing, $0.1 million in consulting fees $40,000and $0.3 million in board of director fees; $81,000 in marketing and public relations; $31,000 in office and facilities costs; and $10,000 in insuranceother operation costs.
Other Income and Expenses
Interest expense was approximately $0$0.9 million for the three months ended SeptemberJune 30, 2021,2022, compared to approximately $537,000$1,100 for the ninethree months ended SeptemberJune 30, 2020.2021.
During the three months ended SeptemberJune 30, 2022, we recorded a loss on waiver and commitment fee shares of approximately $11,600.
During the three months ended June 30, 2022, we recorded a loss on the revaluation of derivative liabilities of approximately $0.2 million
During the three months ended June 30, 2021, we recorded a loss on legal settlement of $70,000.
During the three months ended June 30, 2022, the Company declared Preferred Stock dividends of approximately $40,000$0.1 million compared to approximately $19,000$0.1 million for the three months ended SeptemberJune 30, 2020.2021.
Net loss
For the three months ended SeptemberJune 30, 2021,2022, we had a net loss available to common shareholders of approximately $1,810,000$3.9 million, or a net loss per share, basic and diluted of ($0.01)0.02) compared to a net loss available to common shareholders of approximately $1,056,000,$1.5 million, or a net loss per share, basic and diluted of ($0.01), for the three months ended SeptemberJune 30, 2020.2021.
Comparison of the NineSix Months Ended SeptemberJune 30, 20212022 and 20202021
Revenue
DuringThe Company recognized revenue of approximately $0.3 million for the ninesix months ended SeptemberJune 30, 2021, the Company recognized $25,000 of revenue2022, compared to $0$11,200 for the ninesix months end Septemberended June 30, 2020.2021. The Increaseincrease in revenue is the result of openingthe service and product revenue from The Good Clinic’s three location.six locations.
Cost of Sales
The Company incurred approximately $8,000$1.2 million of cost of goods sold for the ninesix months ended SeptemberJune 30, 2021,2022, compared to $0$5,300 for the ninesix months ended SeptemberJune 30, 2020.2021. During the first and second quarters of 2021 there were only a few direct clinical services performed due to the lack of in force payer contracts and the newness of the clinic. As such, the allocation of the expenses related to clinical staff were attributed to operating expenses and not cost of sales. The increase in cost of goods sold is the result of the opening and operating of The Good Clinic’s three location.six locations and having in force payer relationships.
Gross (Loss) Profit
Our gross profitloss was approximately $17,000$0.9 million for the ninesix months ended SeptemberJune 30, 2021,2022, compared to $0gross profit of $5,900 for the ninesix months ended SeptemberJune 30, 2020.2021.
Operating Expenses
Our total operating expenses for the ninesix months ended SeptemberJune 30, 2022, were approximately $4.9 million. For the comparable period in 2021, the operating expenses were $4,137,000 compared to $1,730,000 for the nine months ended September 30, 2020approximately $2.4 million.
Operating Expenseexpenses for the ninesix months ended SeptemberJune 30, 2022, were comprised primarily of $2.4 million of payroll, payroll taxes and employee benefit expenses, $0.5 million in rent and utilities, $0.4 million in legal and professional fees, $0.2 million in marketing; $0.3 million in consulting fees, $0.4 million in depreciation, $0.4 million in stock-based compensation expenses and $0.3 million in other operating costs.
Operating expenses for the six months ended June 30, 2021 were comprised primarily of $1,056,000$0.5 million of payroll and payroll taxes; $539,000$0.3 million of non-cash compensation, $920,000$0.6 million in legal and professional fees; $445,000fees, $0.3 million in marketing; $764,000marketing, $0.3 million in consulting fees and $0.4 million in other operation costs $413,000 in consulting fees.
Our total operating expenses for the nine months ended September 30, 2020 were $1,730,000. Operating expenses for the nine months ended September 30, 2020 were composed primarily of $648,000 in payroll and payroll taxes, including $259,000 in non-cash compensation; $373,000 in legal and professional fees; $309,000 in consulting fees, $85,000 in board of director and advisory board fees; $218,000 in marketing and public relations; $42,000 in insurance costs; $40,000 in office and facilities costs; and $15,000 in travel costs.
Other Income and Expenses
Interest expense was approximately $966,000$1.7 million for the ninesix months ended SeptemberJune 30, 2021,2022, compared to approximately $1,124,000$1.0 million for the ninesix months ended SeptemberJune 30, 2020.2021.
During the ninesix months ended SeptemberJune 30, 2021,2022, we recorded a gain on waiver and commitment fee shares of approximately $0.2 million.
During the six months ended June 30, 2022, we recorded a gain on settlement of accrued salary of approximately $15,000.
During the six months ended June 30, 2022, we recorded a loss on settlement of accounts payable of $0.1 million as compared to a gain on settlement of accounts payable of approximately $6,000 compared to a gain on settlement of accounts payable infor the amount of $397,000 in the prior period.six months ended June 30, 2021.
During the ninesix months ended SeptemberJune 30, 2020,2022, we recorded a loss on the revaluation of derivative liabilities of approximately $0.1 million, compared to a loss of approximately $0.5 million for the six months ended June 30, 2021.
During the six months ended June 30, 2021, we recorded a loss on legal settlement of $0.1 million.
During the six months ended June 30, 2021, we recorded a gain on the settlement of notes payable of approximately $1,800. There was not an equivalent gain or loss in the comparable prior period.
During the ninesix months ended SeptemberJune 30, 2021,2022, the Company declared Preferred Stock dividends of approximately $115,000$0.2 million compared to approximately $56,000$0.1 million for the ninesix months ended SeptemberJune 30, 2020.2021.
During the ninesix months ended SeptemberJune 30, 2021, wethe Company recorded aPreferred Stock deemed dividends of approximately $0.3 million.
Net loss on a legal settlement of $70,000. There was not an equivalent gain or loss in the comparable prior period.
For the ninesix months ended SeptemberJune 30, 2021,2022, we had a net loss available to common shareholders of approximately $6,089,000,$7.6 million, or a net loss per share, basic and diluted of ($0.03) compared to a net loss available to common shareholders of approximately $2,004,000,$4.3 million, or a net loss per share, basic and diluted of ($0.02), for the ninesix months ended SeptemberJune 30, 2020.2021.
Liquidity and Capital Resources
To date, we have not generated sufficient revenue from operations to support our operations. We have financed our operations through the sale of equity securities and short-term borrowings. As of SeptemberJune 30, 2021,2022, we had cash of approximately $442,000$36,000 compared to cash of approximately $65,000$1.2 million as of December 31, 2020.2021.
Net cash used in operating activities was approximately $1,625,000$4.0 million for the ninesix months ended SeptemberJune 30, 2021.2022. This is the result of our business development efforts pertaining to the start-up of the first threesix clinics. Cash used in operations for the ninesix months ended SeptemberJune 30, 2020,2021, was approximately $1,192,000.$2.1 million.
Net cash used in investing activities was approximately $2,300,000$0.2 million for the ninesix months ended SeptemberJune 30, 2021.2022. The amounts relate to the purchase of fixed assets and leasehold improvement on our first clinic. Noclinics. Net cash was used for investing activities for the ninesix months ended SeptemberJune 30, 2020.2021 was $0.5 million.
Net cash provided by financing activities for the ninesix months ended SeptemberJune 30, 2022, was approximately $3.1 million, consisting of proceeds from notes payable, net of discounts, of $3.3 million offset by principal payment on related party notes payable of $0.2 million. Net cash provided by financing activities for the six months ended June 30, 2021, was approximately $4,302,000,$4.3 million consisting of proceeds from a private placement offering of common stock of $1,668,000$1.7 million and $2,760,000$2.8 million from the sale of Series C Preferred Stock and warrants. Partially offsetting the proceeds was approximately $178,000$0.2 million of payment on notes payable. Net cash provided by financing activities for the nine months ended September 30, 2020, was approximately $1,210,000 consisting of approximately $1,381,000 of proceeds from notes payable offset by payments on notes payable of approximately $171,000.
ITEM3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not applicable.
ITEM 4. CONTROLS AND PROCEDURES.
(a) Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer and our Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this report. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in the reports we file or submit under the Exchange Act is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. Based on such evaluation, the Company’s management has identified what it believes are material weaknesses in the Company’s disclosure controls and procedures and concluded that we did not have effective disclosure controls and procedures.
The deficiencies in our disclosure controls and procedures included (i) lack of segregation of duties and (ii) lack of sufficient resources to ensure that information required to be disclosed by the Company in the reports that the Company files or submits to the SEC are recorded, processed, summarized, and reported, within the time periods specified in the SEC’s rules and forms, and (iii) lack of formal Control procedures related to the approval of related party transactions.
The Company intends to take corrective action to ensure that information required to be disclosed by the Company pursuant to the reports that the Company files or submits to the SEC is accumulated and communicated to the Company’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
(b) Changes in Internal Control Over Financial Reporting
There have been no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) that occurred during our thirdsecond quarter ended SeptemberJune 30, 2021,2022, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
PPP Loan
During March 2020, in response to the COVID-19 crisis, the federal government announced plans to offer loans to small businesses in various forms, including the Payroll Protection Program, or "PPP", established as part of the Corona Virus Aid, Relief and Economic Security Act (“CARES Act”) and administered by the U.S. Small Business Administration. On April 25, 2020, the Company entered an unsecured Promissory Note (the “Note”) with Bank of America for a loan in the original principal amount of approximately $460,000, and the Company received the full amount of the loan proceeds on May 4, 2020. The current balance is $460,406 and the Company is currently in discussions for a) a partial forgiveness and b) the conversion of any remaining balance into a term note.None.
ITEM 1A. RISK FACTORS
Special Notice Regarding the Worldwide Covid-19 Crisis
The world economyOur business is facing significant uncertainties as a result of the worldwide COVID-19 crisis. While we are a small companysubject to risks and have a limited workforce, it is likely we will face increased risk in the caseevents that, if they occur, could adversely affect our financing needs are delayed; our acquisition targets face liquidity issues; or if our professional relationships are challenged from limited staff availability or access. We cannot predict with any certainty whetherfinancial condition and to what degree the disruption caused by the COVID-19 pandemic and reactions thereto will continue and expect to face difficulty in developing our business and building our planned clinics. It is not possible for us to accurately predict the duration or magnitude of the adverse results of the outbreak and its effects on our business, results of operations or financial condition at this time, but such effects may be material. The COVID-19 pandemic may also have the effect of heightening many of the other risks identified elsewhere in this section.
Investing in our common stock involves a high degree of risk You should carefully consider the following risks, together with all the other information in this Quarterly Report on Form 10-Q, including our condensed consolidated financial statements and notes thereto. If any of the following risks materializes, our operating results, financial condition and liquidity could be materially adversely affected. As a result, the trading price of our common stock could decline, andsecurities. In addition to the other information set forth in this quarterly report on Form 10-Q, you could lose part or all your investment. The following information updates, and should be read in conjunction with,carefully consider the information disclosedfactors described in Part I, Item1A, “Risk Factors,” contained inItem 1A. “Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2020,2021, filed with the Securities and Exchange Commission on March 25, 2021 . Except as disclosed below, thereApril 5, 2022. There have been no material changes fromto the risk factors discloseddescribed in our Annual Report on Form 10-K for the year ended December 31, 2020, filed with the Securities and Exchange Commission on March 25, 2021. If any of the following risks materializes, our operating results, financial condition and liquidity could be materially adversely
There is substantial doubt about our ability to continue as a going concern as a result of our limited operating history, history of losses and financial resources, and if we are unable to generate significant revenue or secure financing, we may be required to cease or curtail our operations.
We have a long history of losses and incurred net losses of approximately $2.9 million and $3.9 million for the years ended December 31, 2020, and 2019, respectively and net losses of approximately $5.6 million and $2.0 million for the nine months ended September 30, 2021, and 2020, respectively. We have nominal revenues from our operations. The Report of our Independent Registered Public Accounting Firm issued in connection with our audited financial statements for the calendar year ended December 31, 2020, expressed substantial doubt about our ability to continue as a going concern, due to the fact that we have recurring operating losses and our lack of liquidity and working capital. The Company’s continuance is dependent on raising capital and generating revenues sufficient to sustain operations. We have not generated revenues from our present business plan. If we generate revenue more slowly than we anticipate, or if our operating expenses are higher than we expect, we may not be able to pay our operating expenses or achieve profitability and our financial condition could suffer. Whether we can achieve cash flow levels sufficient to support our operations cannot be accurately predicted. Unless such cash flow levels are achieved, we will need to borrow additional funds or sell debt or equity securities, or some combination thereof, to obtain funding for our operations. Such additional funding may not be available on commercially reasonable terms, or at all. As of the nine months ended September 30, 2021, we have only generated revenues of $25,000.
The issuance of additional shares of our common stock, convertible notes, convertible Preferred Stock, and other convertible securities may dilute the percentage ownership of the then-existing stockholders and may make it more difficult to raise additional equity capital.
As of September 30, 2021, there are outstanding options and warrants to purchase 18,386,211and 12,600,000 shares of common stock, respectively. In addition, we have outstanding Series C Preferred Stock that converts into 8,237,425 shares of common stock, and dividends on Preferred Stock is convertible into an additional 494,883 shares of common stock. The exercise of such options and warrants and conversion of convertible securities would dilute the then-existing stockholders’ percentage ownership of our stock, and any sales in the public market of common stock underlying such securities could adversely affect prevailing market prices for the common stock. Moreover, the terms upon which we would be able to obtain additional equity capital could be adversely affected because the holders of our options and warrants can be expected to exercise them at a time when we would, likely, be able to obtain any needed capital on terms more favorable to us than those provided by such securities.
We may become involved in legal proceedings that could have a material adverse impact on our business, results of operations and financial condition.
By operating in the health care industry, we will face an inherent business risk of exposure to personal injury claims. We plan to obtain liability insurance in the future; however, we do not have liability insurance coverage to protect us from such claims. A successful personally liability claim, or series of claims brought against us, more than our insurance coverage, would negatively impact our financial condition.
From time to time and in the ordinary course of our business, we and certain of our subsidiaries may become involved in various legal proceedings and claims, including for example, employment disputes and litigation; client disputes and litigation alleging solution and implementation defects, personal injury, intellectual property infringement, violations of law and breaches of contract and warranties; and other third party disputes and litigation alleging personal injury, intellectual property infringement, violations of law, and breaches of contracts and warranties.
PPP Loan
During March 2020, in response to the COVID-19 crisis, the federal government announced plans to offer loans to small businesses in various forms, including the Payroll Protection Program, or "PPP", established as part of the Corona Virus Aid, Relief and Economic Security Act (“CARES Act”) and administered by the U.S. Small Business Administration. On April 25, 2020, the Company entered an unsecured Promissory Note (the “Note”) with Bank of America for a loan in the original principal amount of approximately $460,000, and the Company received the full amount of the loan proceeds on May 4, 2020.
All such legal proceedings are inherently unpredictable and, regardless of the merits of the claims, litigation may be expensive, time-consuming, and disruptive to our operations and distracting to management. If resolved against us, such legal proceedings could result in excessive verdicts, injunctive relief or other equitable relief that may affect how we operate our business. Similarly, if we settle such legal proceedings, it may affect how we operate our business. Future court decisions, alternative dispute resolution awards, business expansion or legislative activity may increase our exposure to litigation and regulatory investigations. In some cases, substantial non-economic remedies or punitive damages may be sought. Although we maintain liability insurance coverage, there can be no assurance that such coverage will cover any verdict, judgment or settlement that may be entered against us, that such coverage will prove to be adequate or that such coverage will continue to remain available on acceptable terms, if at all. If we incur liability that exceeds our insurance coverage or that is not within the scope of the coverage in legal proceedings brought against us, it could have a material adverse effect on our business, results of operations and financial condition.
The terms of our outstanding Series C Preferred Stock may limit our ability to raise additional equity capital or pursue acquisitions, which may impact funding of our ongoing operations and cause significant dilution to existing stockholders.
On March 25, 2021, we entered into Securities Purchase Agreements with four institutional pursuant to which the Company sold to the Investors in a private placement an aggregate of 3,000,000 units (the “Units” and each a “Unit”) with a purchase price of $1.00 per Unit, with each Unit consisting of (a) one share of a newly formed Series C Convertible Preferred Stock, par value $0.01 per share (the “Series C Preferred Stock”), (b) one warrant (the “Series A Warrants”) to purchase 2.1 shares of the Company’s common stock, at a purchase price of $0.50 per whole share of common stock, and (c) one warrant (the “Series B Warrants”) to purchase 2.1 shares of common stock at a purchase price of $0.75 per whole share. The aggregate gross proceeds to the Company were $3,000,000 and the number of shares of Common Stock initially issuable upon conversion of the Series C Preferred Stock is 12,600,000 shares of Common stock and the aggregate number of shares of common stock initially issuable upon exercise of the warrants is 12,600,000 shares of Common Stock.
Holders of the Series C Preferred Stock were provided price protections for the $0.25 conversion price (the “Conversion Price”), pursuant to which, in the event the company issues or sells any securities, including options or convertible securities, or amends outstanding securities, at an effective price, with an exercise price or at a conversion price less than the Conversion Price, then the Conversion Price shall be reduced to such lower price, which shall not apply to any Exempt Issuance (as defined in the Certificate of Designations of the Series C Preferred Stock (the “COD”)). Further, holders of the Series C Preferred Stock shall have the right to participate in any offering by the Company of its Common Stock or Common Stock Equivalents in a transaction exempt from registration under the Securities Act of 1933, as amended, in an amount equal to an aggregate of 30% of the financing on the same terms, conditions and price provided to investors in such an offering, such right shall expire on the 15 month anniversary of the issuance date of the Series C Preferred Stock by the Company and shall not apply to any Exempt Issuance or a public offering. report.
ITEM 2. SALE OF UNREGISTERED SECURITIES
During the nine months ended September 30, 2021, we offered and sold securities below.
On January 4, 2021, we12, 2022, the Company entered into a settlement agreement with an ex-employee. Pursuant to the terms of this agreement, the Company agreed to pay the amount of $19,032 for accrued salary, and the employee returned to the Company for cancellation 400,000 shares of common stock previously issued 4,123,750as compensation. These shares were valued at par value of $0.01 or a total value of $4,000; the Company recorded a gain on cancellation of these shares in the amount of $15,032.
The Company entered into a debt-for-equity exchange agreement with Gardner Builders Holdings, LLC (“Gardner”) on January 7, 2022 (the “Debt for Equity Agreement”). Pursuant to the Debt for Equity Agreement, the Company issued shares of restricted common stock to Gardner in exchange for the Company Debt Obligations, as defined below.
The Agreement settled for certain accounts payable amounts owed by the Company to the Creditor (the “Accounts Payable Amount”) as well as upcoming amounts that will become due between the date of the Agreement and April 1, 2022. The Agreement also settled accrued interest and penalties on the amounts due through January 5, 2022, as well as interest payments on amounts incurred in the first quarter of 2022 (collectively, the “Additional Costs”, and combined with the Accounts Payable Amount, the “Company Debt Obligations”). The Accounts Payable Amount was $500,000, the Additional Costs were $294,912 and the conversion price was $0.25. As a result, 3,179,650 Restricted Shares were authorized to be issued.
On March 22, 2022 and March 31, 2022, the Company issued an aggregate 1,541,721 shares of common stock as waiver fees to holders of the Series C and Series D Preferred Stock for their waivers of certain covenants as set forth and defined in the Series C and Series D Certificates of Designations. The Company valued these shares at their contractual price of $0.25 per share and recorded the amount of $385,431 as waiver fees during the six months ended June 30, 2022. The Company recorded an aggregate gain upon issuance of these shares in the amount of $198,273 based on the market price of the Company’s common stock on the date of issuance.
On March 31, 2022, the Company issued 1,720,000 Commitment Fee Shares to AJB Capital Investors, LLC; see note 8. A Monte Carlo model was used to value the warrants and call features, and a probability weighted expected return model was used to value the True-Up Provision. The contractual price of the common stock $0.25 per share; valuation purposes, the common stock was valued at the market price on the date of the transaction of $0.12695 per share. The derivative liability was valued at $106,608 on the date of the transaction. The discount on the notes due to the Commitment Fee Shares and warrants was valued at $349,914. The Company recorded the amount of $226,106 to additional paid-in capital pursuant to this transaction.
On March 31, 2022, the Company issued 382,353 shares of common stock at a price of $0.012$0.25 per share pursuant towhich were previously subscribed for the conversion of $45,000accounts payable in the amount of principal and $4,485 of accrued interest in Eagle Equities Note 4.
On January 6, 2021, we issued 3,505,964 shares of common stock at a price of $0.01224 per share pursuant to the conversion of $39,000 of principal and $3,913 of accrued interest in Eagle Equities Note 4.
On January 11, 2021, we issued 4,463,507 shares of common stock at a price of $0.01224 per share pursuant to the conversion of $50,000 of principal and $4,633 of accrued interest in Eagle Equities Note 5.
On January 14, 2021, we issued 4,319,378 shares of common stock at a price of $0.01266 per share pursuant to the conversion of $50,000 of principal and $4,683 of accrued interest in Eagle Equities Note 5.
On January 21, 2021, we issued 6,449,610 shares of common stock at a price of $0.0154 per share pursuant to the conversion of $93,000 of principal and $6,324 of accrued interest in Eagle Equities Note 6.
On January 28, 2021, we issued 7,285,062 shares of common stock at a price of $0.01575 per share pursuant to the conversion of $107,200 of principal and $7,540 of accrued interest in Eagle Equities Note 6.
On February 1, 2021, we issued 6,672,000 shares of common stock in a private placement (the “2021 Private Placement”) at a price of $0.25 per share for cash proceeds of $1,668,000.
On February 5, 2021, we entered into a settlement agreement with the holders of the Eagle Equities Note 7 whereby we issued 1,184,148 shares of common stock at a price of $0.24984 per share in satisfaction of $200,200 of principal and all accrued interest and prepayment penalties due under this note.
On February 5, 2021, we entered into a settlement agreement with the holders of the Eagle Equities Note 8 whereby we issued 639,593 shares of common stock at a price of $0.23851 per share in satisfaction of $114,400 of principal and all accrued interest and prepayment penalties due under this note.
On February 5, 2021, the Company entered into a settlement agreement with the holders of the Eagle Equities Note 9 whereby the Company issued 605,177 shares of common stock at a price of $0.24984 per share in satisfaction of $114,400 of principal and all accrued interest and prepayment penalties due under this note.
On February 5, 2021, we entered into a settlement agreement with the holders of the Eagle Equities Note 10 whereby we issued 1,095,131 shares of common stock at a price of $0.23748 per share in satisfaction of $200,200 of principal and all accrued interest and prepayment penalties due under this note.
On February 22, 2021, we issued 336,000 shares of common stock for the exercise of options at a price of $0.03 per share.
On March 11, 2021, was issued 600,000 shares of common stock to four officers of The Good Clinic in exchange for 4,800 shares of Series A Preferred Stock.
On March 17, 2021, we issued 300,000 shares of common stock at a price of $0.31 per share to a service provider.$95,558.
On March 23, 2021, weApril 6, 2022, the Company issued 461,358an aggregate of 1,720,000 shares of commitment fee shares and Common Stock Purchase Warrants to purchase up to an aggregate of 750,000 shares of the Common Stock to Anson East Master Fund LP and Anson Investments Master Fund LP. The commitment fee shares were issued at an aggregate value of $359,480. The initial exercise price for the warrants is $0.50 per share.
On April 18, 2022, the Company issued 637,036 shares of commitment fee shares and Common Stock Purchase Warrants to purchase up to 277,777 shares of the Common Stock to GS Capital Partners. The commitment fee shares were issued at an aggregate value of $113,392. The initial exercise price for the warrants is $0.50 per share.
On April 27, 2022, the Company issued 96,471 shares of common stock with a contract price of $0.25 per share or $24,118 and a grant date market value of $0.16 or $15,434 to Larry Diamond, its Chief Executive Officer, as commitment fee shares as set forth and defined in Diamond Note 3. The Company recorded these shares at their relative fair value of the components of Diamond Note 3, or $16,200, and recorded a loss in the amount of $765 on this transaction. The Company also issued five-year warrants to purchase up to 96,471 shares of the Common Stock to Lawrence Diamond. The initial exercise price for the warrants is $0.50 per share.
On May 10, 2022, the Company issued 637,036 shares of commitment fee shares and Common Stock Purchase Warrants to purchase up to 277,777 shares of the Common Stock to Kishon Investments, LLC. The commitment fee shares were issued at an aggregate value of $94,918. The initial exercise price for the warrants is $0.50 per share.
On May 18, 2022, the Company issued 19,294 shares of common stock to Larry Diamond, it’s Chief Executive Officer at a contractual price of $0.25 per share and a market price at issuance date of $0.1517 per share as commitment shares as set forth and defined in Diamond Note 4. The Company recorded these shares at their relative fair value of the components of Diamond Note 4, or $3,160, and recorded a loss in the amount of $249 on this transaction. The Company also issued five-year warrants to purchase 19,294 shares of common stock at a price of $0.26 per share$0.50 to the underwriters of the 2021 Private Placement.Mr. Diamond pursuant to Diamond Note 4.
On March 25, 2021, we entered into Securities Purchase Agreements (the “SPAs”) with four institutional investors (the “Investors” and each an “Investor”) pursuant to which we sold to the Investors in a private placement an aggregate of 3,000,000 units (the “Units” and each a “Unit”) with a purchase price of $1.00 per Unit, with each Unit consisting of (a) one share of a newly formed Series C Convertible Preferred Stock, par value $0.01 per share (the “Series C Preferred Stock”), (b) one warrant (the “Series A Warrants”) to purchase 2.1 shares of the Company’s common stock, par value $0.01 per share (the “Common Stock”) at a purchase price of $0.50 per whole share of Common Stock, and (c) one warrant (the “Series B Warrants” and together with the Series A Warrants, the “Warrants”) to purchase 2.1 shares of Common Stock at a purchase price of $0.75 per whole share. The aggregate gross proceeds toMay 23, 2022, the Company were $3,000,000 and the number of shares of Common Stock initially issuable upon conversion of the Series C Preferred Stock is 12,600,000 shares of Common stock and the aggregate number of shares of Common Stock initially issuable upon exercise of the Warrants is 12,600,000 shares of Common Stock. We also issued to the placement agent and its designee 463,320 shares of Common Stock.
In addition, on March 29, 2021, we issued 300,00019,295 shares of common stock to Jessica Finnegan at a contractual price of $0.25 per share and a market price at issuance date of $0.1794 per share as payment for services to be rendered for investor relations services having a value of $.2830 per share.
On March 30, 2021, we issued 272,837commitment shares of common stock as settlement for amount sowed under the Series D Convertibleset forth and defined in Finnegan Note share to the underwriters of the 2021 Private Placement.
On March 31, 2021, we completed the private offering previously reported on February 10, 2021, by issuing an aggregate of 6,672,000 shares of our restricted common stock to investors for $1,668,000 in proceeds pursuant to a Securities Purchase Agreement (“SPA”). The transaction was executed directly with us, and no brokers, dealers or representatives were involved.
On April 19, 2021, the Company issued 1,962 shares of common stock for professional fees which had been performed in a prior period.1. The Company recorded these shares at the partheir relative fair value of $0.01 per share.
On May 4 through May 26, 2021, the components of Finnegan Note 1, or $3,240, and recorded a gain in the amount of $222 on this transaction. The Company also issued 4,237,424 shares of common stock for the conversion of 1,059,356 shares of Series C Preferred Stock at a price of $0.25 per share.
On May 12, 2021, the Company issued 2,500,000five-year warrants to purchase 24,118 shares of common stock at a price of $0.03 per share for the exercise of stock options by a consultant.$0.50 to Ms. Finnegan pursuant to Finnegan Note 1.
Between June 10, 2021, and June 29, 2021,On May 26, 2022, the Company issued 5,116,66884,412 shares of common stock to the May 26 Lenders at a contractual price of $0.25 per share and a market price at issuance date of $0.1517 per share as commitment shares as set forth and defined in the May 26, 2022 Notes. The Company recorded these shares at their relative fair value of the components of the May 26 Note, or $14,175, and recorded a loss in the amount of $1,369 on these transactions. The Company also issued five-year warrants to purchase 84,412 shares of common stock at a price of $0.03 per share for$0.50 to the exercise of stock options by officers and directors.May 26 Lenders pursuant to the May 26, 2022.
On June 23, 2021,9, 2022, the Company cancelled 2,000,000issued 364,176 shares of common stock held by an ex-officerto the June 9 Lenders at a contractual price of $0.25 per share and a market price at issuance date of $0.1485 per share as commitment shares as set forth and defined in connection with a settlement agreement.the June 9 Notes. The cancellation ofCompany recorded these shares was recorded at the parrelative fair value of $0.01 per share. Also,the components of June 9 Notes, or $66,400, and recorded an aggregate loss in connection with the settlement agreement, the Company issued 637,953 shares to the ex-officer at the market price of $.20 per share.
On August 26, 2021, the Company issued 312,800 restricted shares of the Company’s common stock priced at $0.25, vesting immediately, in lieu of $78,200 of cash compensation owed to the Company’s Chief Executive Officer for services rendered to the Company prior to 2021.
Also, during the nine months ended September 30, 2021, the Company charged the amount of $7,897 to operations in connection with the vesting of stock granted to its officers and board members; the$9,356 on these transactions. The Company also charged the amount of $201,292issued five-year warrants to operations in connection with the vesting of options granted to its officers and board members.
Except for the issuances of common stock upon conversion of notes or the exchange of Common Stock for Series A Preferred Stock or notes which were effected relying on Section 3(a)(9) of the Securities Act as the common stock was exchanged by us with our existing security holders exclusively and no commission or other remuneration was paid or given directly or indirectly for soliciting such exchange, the securities issued in each of the transactions described above were issued relying on Section 4(a)(2) of the Securities Act and/or Rule 506 promulgated thereunder. The recipients of the securities in each of these transactions relying on Section 4(a)(2) of the Securities Act and/or Rule 506 promulgated thereunder represented their intentions to acquire the securities for investment only and not with a view to or for sale in connection with any distribution thereof, and appropriate legends were placed upon the stock certificates issued in these transactions. All recipients had adequate access, through their employment or other relationship with us or through other access to information provided by us, to information about us. The sales of these securities were made without any general solicitation or advertising.
Thepurchase 364,176 shares of common stock issuedat a price of $0.50 to the May 26 Lenders pursuant to the SPA and to the investor relations services were issued in a transaction exempt from registration under the Securities Act of 1933, as amended (the “Securities Act”) in reliance on Section 4(a)(2) thereof. Accordingly, the shares of common stock have not been registered under the Securities Act and may not be offered or sold in the United States absent registration or an exemption from registration under the Securities Act and any applicable state securities laws.June 9 notes.
ITEM 3. DEFAULTS ON SENIOR SECURED SECURITIES
Not Applicable.
ITEM 4. MINE SAFETY DISCLOSURES
Not Applicable.
ITEM 5. OTHER INFORMATION
Not Applicable.
ITEM 6. EXHIBITS
The following exhibits are included with this Quarterly Report on Form 10Q
Form Type | Exhibit Number | Date Filed | Filed Herewith | |||||||
3.1 | Certificate of Incorporation of Trunity Holdings, Inc., dated January 18, 2012. | 8-K | 10.1 | 1/31/2012 | ||||||
3.2 | 8-K | 10.2 | 1/31/2012 | |||||||
3.3 | 10-K | 3.3 | 4/16/2013 | |||||||
3.4 | 8-K | 3.1(i) | 1/06/2016 | |||||||
3.5 | Certificate of Designations of Series X Preferred Stock of True Nature Holding, Inc. | 8-K | 3.6 | 1/06/2020 | ||||||
3.6 | 8-K | 3.07 | 3/13/2020 | |||||||
3.7 | 10-Q | 3.7 | 8/14/2020 | |||||||
3.8 | 10-Q | 3.8 | 11/13/2020 | |||||||
3.9 | Bylaws of Mitesco, Inc., as amended, dated November 10, 2020 | 10-Q | 3.9 | 11/13/2020 |
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| Certificate of Incorporation of Trunity Holdings, Inc., dated January 18, 2012. |
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3.5 |
| Certificate of Designations of Series X Preferred Stock of True Nature Holding, Inc. |
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| 10-Q |
| 3.7 |
| 8/14/2020 |
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3.8 |
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| 10-Q |
| 3.8 |
| 11/13/2020 |
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3.9 |
| Bylaws of Mitesco, Inc., as amended, dated November 10, 2020 |
| 10-Q |
| 3.9 |
| 11/13/2020 |
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3.10 |
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| 8-K |
| 3.1 |
| 03/26/2021 |
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3.11 |
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| 8-K |
| 3.2 |
| 03/26/2021 |
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3.12 |
| Certificate of Incorporation of Trunity Holdings, Inc., as amended |
| S-1 |
| 3.12 |
| 2/10/2022 |
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3.13 |
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| 8-K |
| 3.1 |
| 10/22/2021 |
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4.1 |
| Promissory Note in the principal amount of $750,000 dated March 17, 2022 |
| 8-K |
| 4.1 |
| 03/24/2022 |
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4.2 |
| Promissory Note in the principal amount of $235,294 dated March 18, 2022 |
| 8-K |
| 4.2 |
| 03/24/2022 |
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Form Type | Exhibit Number | Date Filed | Filed Herewith | |||||||
3.10 | 8-K | 3.1 | 03/26/2021 | |||||||
3.11 | 8-K | 3.2 | 03/26/2021 | |||||||
4.1# | Mitesco, Inc. 2021 Omnibus Securities and Incentive Plan (File No. 333-252293) | 8-K | 10.1 | 01/27/2021 | ||||||
4.2 | 8-K | 4.1 | 03/26/2021 | |||||||
4.3 | 8-K | 4.2 | 03/26/2021 | |||||||
10.1 | Form of Securities Purchase Agreement used for private placement of restricted common stock | 8-K | 10.01 | 02/10/2021 | ||||||
10.2 | 8-K | 10.02 | 02/10/2021 | |||||||
10.3 | 8-K | 10.03 | 02/10/2021 | |||||||
10.4 | 8-K | 10.04 | 02/10/2021 | |||||||
10.5 | 8-K | 10.05 | 02/10/2021 | |||||||
10.6 | Form of Exchange Agreement for Restricted Common Stock with Four (4) Parties Regarding Clinic Assets | 8-K | 10.06 | 02/10/2021 | ||||||
10.7# | 8-K | 10.1 | 03/17/2021 | |||||||
10.8 | 8-K | 10.1 | 03/26/2021 | |||||||
10.9 | 8-K | 10.2 | 03/26/2021 | |||||||
10.10 | Engagement Letter, by and between Carter, Terry & Company and Mitesco, Inc., dated January 6, 2021 | 8-K | 10.3 | 03/26/2021 | ||||||
10.11 | 8-K | 10.4 | 03/26/2021 | |||||||
10.12# | Employment Agreement by and between Jenny Lindstrom and Mitesco, Inc., dated as of April 6, 2021 | 8-K | 10.1 | 04/12/2021 |
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10.1 |
| Promissory Note between the Company and Michael C. Howe Living Trust, dated December 30, 2021 |
| 8-K |
| 10.1 |
| 01/05/2022 |
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10.2 |
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| 10.1 |
| 02/02/2022 |
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10.3 |
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| 10.1 |
| 02/17/2022 |
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10.4 |
| Employment Agreement for Ms. Finnegan Dated January 12, 2022 |
| 8-K |
| 10.1 |
| 03/03/2022 |
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10.5 |
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| 10.1 |
| 03/24/2022 |
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10.6 |
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| 10.2 |
| 03/24/2022 |
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31.1 |
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31.2 |
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32.1 |
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32.2 |
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99.1 |
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| 99.3 |
| 03/03/2022 |
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101.INS ** |
| INLINE XBRL INSTANCE DOCUMENT |
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101.SCH ** |
| INLINE XBRL TAXONOMY EXTENSION SCHEMA |
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101.CAL ** |
| INLINE XBRL TAXONOMY EXTENSION CALCULATION LINKBASE |
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101.DEF ** |
| INLINE XBRL TAXONOMY EXTENSION DEFINITION LINKBASE |
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101.LAB ** |
| INLINE XBRL TAXONOMY EXTENSION LABEL LINKBASE |
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101.PRE ** |
| INLINE XBRL TAXONOMY EXTENSION PRESENTATION LINKBASE |
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104 |
| Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) |
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# |
| Management contract or compensatory plan or arrangement required to be identified pursuant to Item 15(a)(3) of this report. |
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SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Quarterly Report on Form 10-Q for the three monthsperiod ended SeptemberJune 30, 2021,2022, to be signed on its behalf by the undersigned, thereunto duly authorized.
MITESCO, INC. F/K/A TRUE NATURE HOLDING, INC. | ||||
Dated: | By: | /s/ | ||
| Thomas Brodmerkel | |||
Chief Financial Officer and Principal Financial Officer |