EDGAR 10-K Filing

Company CIK: 802257
Filing Year: 2023
Filename: 802257_10-K_2023_0001185185-23-000727.json

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ITEM 1. BUSINESS
ITEM 1. BUSINESS
Company Overview
The following discussion and analysis should be read in conjunction with the financial statements and notes thereto appearing elsewhere herein.
Mitesco, Inc. (the “Company,” “we,” “us,” or “our”), previously known as True Nature Holding, Inc., which was previously known as Trunity Holdings, Inc., a Delaware corporation, incorporated on January 18, 2012. Effective April 22, 2020, we changed our name to Mitesco, Inc.
We are a holding company with current operating plans to participate in the healthcare industry through the development of healthcare services, and with a view toward additional services and technology that may find a ready market in the healthcare industry. During early 2022 we continued on our plan to open primary care clinics around the United States in select markets, utilizing the experience, expertise, and training of licensed, advanced degreed nurse practitioners (“Nurse Practitioners”). During 2022 our clinics provided complete primary care, as well as a limited set of offerings addressing more specific needs for the general public. The medical practice focuses on whole person health and prevention. During late 2022 we decided to close our clinics due to a lack of funding for their operations and growth plans.
We have always had a view toward additional healthcare technology and services offerings and are committing more time to that effort going forward. We have a number of near-term opportunities that we hope to pursue, assuming the capital markets make sufficient funding available at reasonable rates.
Our operations are subject to comprehensive federal, state, and local laws and regulations in the jurisdictions in which it does business. There also continues to be a heightened level of review and/or audit by federal and state regulators of the health and related benefits industry’s business and reporting practices. As of the date of this filing, we are not subject any actual or anticipated regulatory reviews or audits relating to our operations.
The laws and rules governing our businesses and interpretations of those laws and rules continue to evolve each year and are subject to frequent change. The application of these complex legal and regulatory requirements to the detailed operation of our businesses creates areas of uncertainty. Further, there are numerous proposed health care, financial services and other laws and regulations at the federal and state level some of which could adversely affect our businesses if they are enacted. We cannot predict whether pending or future federal or state legislation will have an adverse effect on our business.
We can give no assurance that its businesses, financial condition, operating results and/or cash flows will not be materially adversely affected, or that we will not be required to materially change its business practices, based on: (i) future enactment of new health care or other laws or regulations; (ii) the interpretation or application of existing laws or regulations, including the laws and regulations described in this Government Regulation section, as they may relate to one or more of our businesses, one or more of the industries in which we compete and/or the health care industry generally; (iii) our pending or future federal or state governmental investigations.
Corporate Organizational Chart
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Due to the prohibition of corporate medicine in Minnesota and Colorado, these entities are owned by licensed nurse practitioners and are managed and controlled under contract by The Good Clinic LLC using a variable interest entity structure. A prohibition on the corporate practice of medicine by statute, regulation, board of medicine or attorney general guidance, or case law, exists in certain of the U.S. states in which we operate. These laws generally prohibit the practice of medicine by lay persons or entities and are intended to prevent unlicensed persons or entities from interfering with or inappropriately influencing providers’ professional judgment. We do not own the Good Clinic MN PLLC or the Good Clinic CO PLLC (together, the “Good Clinic PLLCs”). The Good Clinic LLC manages all administrative services. All clinical decisions are the purview of the Good Clinic PLLCs.
Competition
The market for healthcare solutions including walk in clinics and telehealth services is competitive. We compete in a fragmented primary care market with direct and indirect competitors that offer varying levels of impact to our stakeholders such as insurance companies, patients, and employers. Our competitive success is contingent on our ability to simultaneously address the needs of key stakeholders efficiently and with superior outcomes at scale compared with competitors. We expect to compete with walk-in clinics, traditional healthcare providers, and primary care medical practices, care management and coordination, digital health, and telehealth companies. Competition in our market involves rapidly changing technologies, evolving regulatory requirements and industry expectations, frequent new product and service introductions and changes in customer and patient requirements. If we are unable to keep pace with the evolving needs of our clients, members and partners and continue to develop and introduce new applications and services in a timely and efficient manner, demand for our solutions and services may be reduced and our business and results of operations would be harmed.
Our business is dependent on completing our clinics and gaining patients and customers in our target markets. However, the healthcare market is competitive, which could make it difficult for us to succeed. We face competition in the healthcare industry for our solutions and services from a range of companies and providers, including traditional healthcare providers and medical practices that offer similar services. These competitors primarily include primary care providers who are employed by or affiliated with health networks. Our indirect competitors also include episodic consumer-driven point solutions such as telemedicine as well as urgent care providers. Generally, urgent care providers in the local communities will provide services similar to those we intend to offer, and our competitors (1) are more established than we are, (2) may offer a broader array of services or more desirable facilities to patients and providers than ours, and (3) may have larger or more specialized medical staffs to admit and refer patients, among other things. Our competition varies by state but generally includes local health systems, primary care physician offices and urgent care centers.
Our competitors may have greater name recognition, longer operating histories and significantly greater financial and other resources than we do. Further, our competitors may be acquired by third parties with greater available resources. As a result, our competitors may be able to respond more quickly and effectively than we can to new or changing opportunities, technologies, standards, or patient requirements and may have the ability to initiate or withstand substantial price competition. In addition, our competitors have established, and may in the future establish, cooperative relationships with vendors of complementary technologies or services to increase the availability of their solutions in the marketplace. Accordingly, new competitors or alliances may emerge that have greater market share, a larger member or patient base, more widely adopted proprietary technologies, greater marketing expertise, greater financial resources, and larger sales forces than we have, which could put us at a competitive disadvantage. Our competitors could also be better positioned to serve certain segments of the healthcare market, which would limit our member and patient growth. In light of these factors, even if our solution is more effective than those of our competitors, current members, health network partners and enterprise clients may accept alternative competitive solutions in lieu of purchasing our solution. If we are unable to compete in the healthcare market, our business would be harmed.
We may encounter increased competition from system-affiliated hospitals and healthcare companies, health insurers and private equity companies seeking to acquire providers in specific geographic markets. We also may face competition from primary care providers, and outpatient centers for market share and for providers and personnel. Furthermore, some of the clinics and medical offices that compete with us may be government agencies or not-for-profit organizations supported by endowments and charitable contributions and can finance capital expenditures and operations on a tax-exempt basis. Competitors may also be better positioned to contract with leading health network partners in our target markets. If our competitors are better able to attract patients, contract with health network partners, recruit providers, expand services or obtain favorable managed care contracts at their facilities than we are, we may experience an overall decline in member volumes and net revenue. We cannot assure we will be able to compete in the markets in which we operate which could cause you to lose your investment.
Our Competitive Strengths
We believe the following strengths and market dynamics provide us a competitive advantage. As additional capital is available to the Company, we will pursue the acquisition of existing healthcare services and technology business, and we may consider opening new clinics using our revised and less capital-intensive approach going forward:
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Experienced management team - with a proven track record of growing healthcare services companies.
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Experienced Board of Directors - that have been recruited for their specific expertise in business strategy, operations, healthcare, business development, accounting, public company management, information systems and technology, investment banking, merger & acquisitions, regulatory affairs, state, federal, and international law, political process lobbying,
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Cost Advantage - Based on Bureau of Labor Statistics for Physician providers, the 2022 median annual pay for a Nurse Practitioner (NP) was $121,610 compared to the median annual pay for Family Medicine Physicians was $225,190. CMS established NP reimbursement at 85% of physician reimbursement for the same medical, surgical, and diagnostic procedure or service. Based on these considerations we believe we will have approximately a forty percent (40%) labor cost advantage over the traditional primary care service provider by employing Nurse Practitioners as the primary healthcare professional as compared to a traditional physician-employed care models.
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Diversified product line including
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Insurance paid (Commercial, Medicare and Medicaid) and cash paid primary care and behavioral services
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Urgent care
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Preventative care
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Wellness care
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Nutrition coaching
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Population health services management
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Telehealth care
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Department of Transportation annual exams and First Responder Exams
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In-clinic product sales of books, vitamins, supplements, and essential oils
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Large healthcare market opportunity
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U.S.’s total spending on healthcare equaled 19.7% of GDP at about $4.1 Trillion in 2020 according to the Centers for Medicare & Medicaid Services. Assuming that consumers want to lower their health care costs, we believe we can provide lower health care costs to consumers by utilizing primary care and Nurse Practitioners versus specialists.
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Grandview Research values the US primary care market at $260.1 billion in 2021 and expects it to expand at a compound rate (CAGR) of 3.2% from 2022 to 2030. The WHO calls primary health care “the most inclusive, equitable, cost-effective and efficient approach to enhance people’s physical and mental health, as well as their social well-being.” CMS in their Primary Care First Model brief notes, “Primary care is central to a high-functioning healthcare system and thus, there is an urgent need to preserve and strengthen primary care.” The Advisory Board noted in their February 24, 2022, daily briefing that “investors are also pouring billions into primary care companies, amounting to $16 billion in 2021 alone.” The Good Clinic locations provide net new primary care access for the US healthcare consumer.
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U.S. skin care market is large and growing. According to an October 2021 report by Statista, the U.S. skin care market was estimated at $17.5 billion in 2020.
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The North America dietary supplements market is estimated $48.4 billion in 2021 and is expected to grow at a compound annual growth rate (CAGR) of 5.6% from 2022 to 2030 according to a report from Grand View Research.
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Shortage of primary care providers - We believe there is a primary care physician shortage in America. The Association of American Medical Colleges in a June 21, 2021 report, states that there is a 17,800 to as much as 48,000 shortfall of primary care physicians by 2034. The Good Clinic is just one of a few organizations providing net new capacity to serve the people impacted by the shortage.
Operational Overview
During the year ended December 31, 2022, we have focused on establishing medical clinics utilizing nurse practitioners and telemedicine technology under “The Good Clinic” name. Our strategy is to utilize a mix of nurse practitioners and telemedicine technology in clinics to improve patient experiences and outcomes and reduce healthcare costs as compared to other available treatment options. As previously noted, we made a strategic decision to reduce our capital needs by closing our clinic operations in the fourth quarter of 2022, and releasing a significant portion of our staff. As we redevelop our new strategy for lower cost operations, we expect to focus on acquisition of existing healthcare technology and services businesses.
Serving the Market
We believe there is a looming shortage of primary care providers in the United States. Approximately 27 States in the U.S. allow Nurse Practitioners to operate as fully independent primary care providers. Another 13 allow Nurse Practitioners broad autonomy in providing primary care services. By using Nurse Practitioners, we plan to focus on direct patient care, patient education and helping people to manage their health more effectively. The Good Clinics are designed to improve access to basic affordable primary care and empower Nurse Practitioners to function as healthcare providers. According to an American Association of Colleges of Nursing report from April 2022, there are more than 355,000 Nurse practitioners practicing in the US making the necessary expertise readily available. This is a significant increase from the approximately 91,000 practicing in 2010. According to the Bureau of Labor Statistics 2021 data, Nurse Practitioners median annual pay was 48% less than their physician counterparts.
Like any consumer-focused business, locating a clinic is one-part art and one-part science. We evaluate concentration of primary care practices within the zip code and examine average wait-times for appointments and ensure the local markets are already using Nurse Practitioners as primary care providers. We focus on convenience that includes locations near residential centers, adequate parking, good retail visibility in higher traffic areas and the presence of other retail businesses close by.
Billing and Payment
The Good Clinics bills health insurance companies for allowed medical services and accepts payment in cash or credit cards for client selected and non-covered services. We will also explore partnering with local small to mid-size businesses of all types to provide near-site employer clinics for wellness exams, chronic disease management, department of transportation exams, physicals, virus testing, occupational health services and other healthcare related services traditionally offered by primary care providers.
Marketing
We plan to generate business for The Good Clinics through a combination of partnerships with residential developers and local marketing and advertising, direct sales of occupational medical services to companies (flu shots, workers injury treatment services, drug testing, and health promotion programs), public relations efforts with local charities, city and county organizations, hospitals and medical providers, networking and promotional events and open houses. We have used internal marketing including brochures, posters, magazines, health promotion articles, and educational materials that point to our services. Upon having a new patient, we plan to initiate client follow-up and schedule return visits. To assure broad access of insured clients in the medical service area, we plan to participate in contracts with health insurance providers, and the Medicare program, making The Good Clinics services fully reimbursable for its clients.
The Good Clinic is about delivering a convenient individualized care experience built on education, expertise, and empathy. We are the patient’s partner in obtaining quality and affordable medical care. The Good Clinic supports patient care with both in-clinic and telehealth visits.
Healthcare Industry Insight
According to a recent report published by Centers for Medicare and Medicaid Services (“CMS”) which examined the market for 2020, health care expenditures continue to consume an increasing portion of most economies. In the U.S., health care spending increased 9.7 percent to $4.1 trillion in 2020, and now represents 19.7 percent of the U.S.’ Gross Domestic Product (“GDP”). An aging population and high levels of chronic conditions are contributing to expectations that health care expenditures will continue growing faster than the economy. The CMS estimates annual U.S. healthcare spending will grow at an average rate of 5.1 percent through 2030 and reach $6.8 trillion, or 19.6 percent of U.S. GDP, by 2030. We believe this trajectory is unsustainable and support the widespread call for investment in expanding access to primary care. Establishing a longitudinal primary care relationship has significant value to the individual and the overall healthcare system as detailed in an Eden Health May 2021 posting.
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Adults in the U.S. who have a primary care provider have 19% lower odds of premature death than those who only see specialists for their care.
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Patients with a primary care provider save 33% on healthcare costs compared to those who only see specialists.
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Access to primary care helps avoid unnecessary trips to the emergency room, where care can cost as much as 4x that of other outpatient care.
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Catching and treating problems during regular check-ups is far less expensive than treating an advanced illness - in fact, if everyone saw a primary care provider first for their care, it would save the U.S. an estimated $67 billion every year.
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Patients report a 10% increase in patient satisfaction with healthcare when they have a primary care provider.
Management/Human Capital
We believe that the Company’s management team will remain relatively small in the near term and should consist of a team with experience in 1) public company accounting and finance, 2) software and systems, 3) brand marketing, and 4) public equities financing.
We also use the services of additional advisors and consultants on an as needed basis to perform outsourced tasks including accounting, SEC reporting, corporate finance and investor relations. As of December 31, 2022, none of our employees were represented by a union or covered by a collective bargaining agreement. We have not experienced any work stoppages and we consider our relationship with our employees to be good.
Intellectual Property
In August 2020, we applied for trademark protection of “The Good Clinic”, with the United States Patent & Trademark Office (USPTO). Our federal trademark registration for the mark THE GOOD CLINIC is on the Supplemental Register, not the Principal Register. The Supplemental Register does not confer the same rights and benefits as the Principal Register. After a period of five years of use, or sooner based upon our marketing resources and our use of the name, we intend to apply to have the name transferred to the Principle Register.
Government Regulation
The healthcare industry is a highly regulated industry by both federal and state governments. We are subject to other federal and state healthcare laws that could have a material adverse effect on our business, financial condition, or results of operations. We operate in a highly regulated and evolving environment with rigorous regulatory enforcement. Any legal or regulatory action could be time-consuming and costly. If we or the manufacturers or distributors that supply our products fail to comply with all applicable laws, standards, and regulations, action by regulatory agencies could result in significant restrictions. Any regulatory action could have a negative impact on us and materially affect our reputation, business, and operations. The U.S. healthcare industry has undergone significant changes designed to improve patient safety, improve clinical outcomes, and increase access to medical care. These changes include enactments and repeals of various healthcare related laws and regulation. Our operations and economic viability may be adversely affected by the changes in such regulations, including: (i) federal and state fraud and abuse laws; (ii) federal and state anti-kickback statutes; (iii) federal and state false claims laws; (iv) federal and state self-referral laws; (v) state restrictions on fee splitting; (vi) laws regarding the privacy and confidentiality of patient information; and (vii) other laws and government regulations.
If there are changes in laws, regulations, or administrative or judicial interpretations, we may have to change our future business practices, or our business practices could be challenged as unlawful, which could have a material adverse effect on our business, financial condition, and results of operations. See the description below for certain of the laws, regulations, or administrative or judicial interpretations that we are currently subject to and the “Risk Factors” section.
The Affordable Care Act
The Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act (the “Affordable Care Act” or the “ACA”) in 2010 made major changes in how healthcare is delivered and reimbursed and increased access to health insurance benefits to the uninsured and underinsured population of the United States.
Since its enactment, there have been judicial and Congressional challenges to certain aspects of the ACA as well as recent efforts by the current administration to repeal or replace certain aspects of the ACA. For example, the Tax Cuts and Jobs Act of 2017 was enacted, which includes a provision repealing, effective January 1, 2019, the tax-based shared responsibility payment imposed by the ACA on certain individuals who fail to maintain qualifying health coverage for all or part of a year that is commonly referred to as the “individual mandate.” Since the enactment of the Tax Cuts and Jobs Act of 2017, there have been additional amendments to certain provisions of the ACA, and we expect the current administration and Congress will likely continue to seek to modify all, or certain provisions of, the ACA. It is uncertain the extent to which any such changes may impact our business or financial condition. Congress may consider other legislation to repeal and replace elements of the ACA. In December 2019, a federal appeals court held that the individual mandate portion of the ACA was unconstitutional and left open the question whether the remaining provisions of the ACA would be valid without the individual mandate. We continue to evaluate the effect that the ACA and its possible modification or repeal and replacement has on our business. It is uncertain the extent to which any such changes may impact our business or financial condition.
Other legislative changes have been proposed and adopted since the ACA was enacted. These changes include aggregate reductions to Medicare payments to providers of up to 2% per fiscal year pursuant to the Budget Control Act of 2011 and subsequent laws, which began in 2013 and will remain in effect through 2029 unless additional Congressional action is taken. In January 2013, the American Taxpayer Relief Act of 2012 was signed into law, which, among other things, further reduced Medicare payments to several types of providers, including hospitals, imaging centers and cancer treatment centers, and increased the statute of limitations period for the government to recover overpayments to providers from three to five years. New laws may result in additional reductions in Medicare and other healthcare funding, which may materially adversely affect customer demand and affordability for our products and services and, accordingly, the results of our financial operations. Additional changes that may affect our business include the expansion of new programs such as Medicare payment for performance initiatives for physicians under the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) which first affected physician payment in 2019. At this time, it is unclear how the introduction of the Medicare quality payment program will impact overall physician reimbursement.
Such changes in the regulatory environment may also result in changes to our payor mix that may affect our operations and revenue. In addition, certain provisions of the ACA authorize voluntary demonstration projects, which include the development of bundling payments for acute, inpatient hospital services, physician services and post-acute services for episodes of hospital care. Further, the ACA may adversely affect payors by increasing medical costs generally, which could have an effect on the industry and potentially impact our business and revenue as payors seek to offset these increases by reducing costs in other areas. Certain of these provisions are still being implemented and the full impact of these changes on us cannot be determined at this time.
Uncertainty regarding future amendments to the ACA as well as new legislative proposals to reform healthcare and government insurance programs, along with the trend toward managed healthcare in the United States, could result in reduced demand and prices for our services. We expect that additional state and federal healthcare reform measures will be adopted in the future, any of which could limit the amounts that federal and state governments and other third-party payors will pay for healthcare products and services, which could adversely affect our business, financial condition, and results of operations.
Federal Anti-Kickback Statutes
The federal Anti-Kickback Statute is a provision of the Social Security Act of 1972 that prohibits as a felony offense the knowing and willful offer, payment, solicitation or receipt of any form of remuneration in return for, or to induce, (1) the referral of a patient for items or services for which payment may be made in whole or part under Medicare, Medicaid, or other federal healthcare programs, (2) the furnishing or arranging for the furnishing of items or services reimbursable under Medicare, Medicaid, or other federal healthcare programs or (3) the purchase, lease, or order or arranging or recommending the purchasing, leasing or ordering of any item or service reimbursable under Medicare, Medicaid or other federal healthcare programs. The Patient Protection and Affordable Care Act (“ACA”) amended section 1128B of the Social Security Act to make it clear that a person need not have actual knowledge of the statute, or specific intent to violate the statute, as a predicate for a violation. The OIG, which has the authority to impose administrative sanctions for violation of the statute, has adopted as its standard for review a judicial interpretation which concludes that the statute prohibits any arrangement where even one purpose of the remuneration is to induce or reward referrals. A violation of the Anti-Kickback Statute is a felony punishable by imprisonment, criminal fines of up to $25,000, civil fines of up to $50,000 per violation, and three times the amount of the unlawful remuneration. A violation also can result in exclusion from Medicare, Medicaid, or other federal healthcare programs. In addition, pursuant to the changes of the ACA, a claim that includes items or services resulting from a violation of the Anti-Kickback Statute is a false claim for purposes of the False Claims Act.
Federal Stark Law
The federal Stark Law, 42 U.S.C. 1395nn, also known as the physician self-referral law, generally prohibits a provider from referring Medicare and Medicaid patients to an entity (including hospitals) providing ‘‘designated health services,’’ if the physician or a member of the physician’s immediate family has a ‘‘financial relationship’’ with the entity, unless a specific exception applies. Designated health services include, among other services, inpatient hospital services, outpatient prescription drug services, clinical laboratory services, certain imaging services (e.g., MRI, CT, ultrasound), and other services that our affiliated physicians may order for their patients. The prohibition applies regardless of the reasons for the financial relationship and the referral; and therefore, unlike the federal Anti-Kickback Statute, intent to violate the law is not required. Like the Anti-Kickback Statute, the Stark Law contains statutory and regulatory exceptions intended to protect certain types of transactions and arrangements. Unlike safe harbors under the Anti-Kickback Statute with which compliance is voluntary, an arrangement must comply with every requirement of a Stark Law exception, or the arrangement is in violation of the Stark Law.
Because the Stark Law and implementing regulations continue to evolve and are detailed and complex, while we attempt to structure our relationships to meet an exception to the Stark Law, there can be no assurance that the arrangements entered into by us with affiliated physicians and facilities will be found to be in compliance with the Stark Law, as it ultimately may be implemented or interpreted. The penalties for violating the Stark Law can include the denial of payment for services ordered in violation of the statute, mandatory refunds of any sums paid for such services, and civil penalties of up to $15,000 for each violation, double damages, and possible exclusion from future participation in the governmental healthcare programs. A person who engages in a scheme to circumvent the Stark Law’s prohibitions may be fined up to $100,000 for each applicable arrangement or scheme.
Some states have enacted statutes and regulations against self-referral arrangements similar to the federal Stark Law, but which may be applicable to the referral of patients regardless of their payor source and which may apply to different types of services. These state laws may contain statutory and regulatory exceptions that are different from those of the federal law and that may vary from state to state. An adverse determination under these state laws and/or the federal Stark Law could subject us to different liabilities, including criminal penalties, civil monetary penalties, and exclusion from participation in Medicare, Medicaid, or other health care programs, any of which could have a material adverse effect on our business, financial condition, or results of operations.
Health Information Privacy and Security Standards
The Health Insurance Portability and Accountability Act of 1996 (“HIPAA”), as amended, contain detailed requirements concerning the use and disclosure of individually identifiable patient health information (“PHI”) by various healthcare providers, such as medical groups. HIPAA covered entities must implement certain administrative, physical, and technical security standards to protect the integrity, confidentiality and availability of certain electronic health information received, maintained, or transmitted. HIPAA also implemented standard transaction code sets and standard identifiers that covered entities must use when submitting or receiving certain electronic healthcare transactions, including billing and claim collection activities. Violations of the HIPAA privacy and security rules may result in civil and criminal penalties, including a tiered system of civil money penalties that range from $100 to $50,000 per violation, with a cap of $1.5 million per year for identical violations. A HIPAA covered entity must also promptly notify affected individuals where a breach affects more than 500 individuals and report breaches affecting fewer than 500 individuals annually. State attorneys general may bring civil actions on behalf of state residents for violations of the HIPAA privacy and security rules, obtain damages on behalf of state residents, and enjoin further violations.
Many states also have laws that protect the privacy and security of confidential, personal information, which may be similar to or even more stringent than HIPAA. Some of these state laws may impose fines and penalties on violators and may afford private rights of action to individuals who believe their personal information has been misused. We expect increased federal and state privacy and security enforcement efforts.
Environmental and Occupational Safety and Health Administration Regulations
We are subject to federal, state, and local regulations governing the storage, use and disposal of waste materials and products. Although we believe that our safety procedures for storing, handling, and disposing of these materials and products comply with the standards prescribed by law and regulation, we cannot eliminate the risk of accidental contamination or injury from those hazardous materials. In the event of an accident, we could be held liable for any damages that result and any liability could exceed the limits or fall outside the coverage of our insurance coverage, which we may not be able to maintain on acceptable terms, or at all. We could incur significant costs and attention of our management could be diverted to comply with current or future environmental laws and regulations. Federal regulations promulgated by the Occupational Safety and Health Administration impose additional requirements on us, including those protecting employees from exposure to elements such as blood-borne pathogens. We cannot predict the frequency of compliance, monitoring, or enforcement actions to which we may be subject as those regulations are being implemented, which could adversely affect our operations.
Federal and State Healthcare Laws
We are subject to other federal and state healthcare laws that could have a material adverse effect on our business, financial condition, or results of operations. The Health Care Fraud Statute prohibits any person from knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program, which can be either a government or private payor plan. Violation of this statute, even in the absence of actual knowledge of or specific intent to violate the statute, may be charged as a felony offense and may result in fines, imprisonment, or both. The Health Care False Statement Statute prohibits, in any matter involving a federal health care program, anyone from knowingly and willfully falsifying, concealing, or covering up, by any trick, scheme or device, a material fact, or making any materially false, fictitious, or fraudulent statement or representation, or making or using any materially false writing or document knowing that it contains a materially false or fraudulent statement. A violation of this statute may be charged as a felony offense and may result in fines, imprisonment, or both. Under the Civil Monetary Penalties Law of the Social Security Act, a person (including an organization) is prohibited from knowingly presenting or causing to be presented to any United States officer, employee, agent, or department, or any state agency, a claim for payment for medical or other items or services where the person knows or should know (a) the items or services were not provided as described in the coding of the claim, (b) the claim is a false or fraudulent claim, (c) the claim is for a service furnished by an unlicensed physician, (d) the claim is for medical or other items or service furnished by a person or an entity that is in a period of exclusion from the program, or (e) the items or services are medically unnecessary items or services. Violations of the law may result in penalties of up to $10,000 per claim, treble damages, and exclusion from federal healthcare programs.
In addition, the office of inspector general (“OIG”) may impose civil monetary penalties against any physician who knowingly accepts payment from a hospital (as well as against the hospital making the payment) as an inducement to reduce or limit medically necessary services provided to Medicare or Medicaid program beneficiaries. Further, except as permitted under the Civil Monetary Penalties Law, a person who offers or transfers to a Medicare or Medicaid beneficiary any remuneration that the person knows or should know is likely to influence the beneficiary’s selection of a particular provider of Medicare or Medicaid payable items or services may be liable for civil money penalties of up to $10,000 for each wrongful act.
In addition to the laws previously described, we may also be subject to other state fraud and abuse statutes and regulations if we expand our operations nationally. For example, Minnesota imposes a provider tax on healthcare providers and Colorado mandates that all patient facing providers are COVID-19 vaccinated. Generally, we operationalize our policies and procedures to be uniform across all jurisdictions in a manner that also complies with all local and state requirements.
Many states have adopted a form of anti-kickback law, self-referral prohibition, and false claims and insurance fraud prohibition. The scope of these laws and the interpretations of them vary from state to state and are enforced by state courts and regulatory authorities, each with broad discretion. Generally, state laws reach to all healthcare services and not just those covered under a governmental healthcare program. A determination of liability under any of these laws could result in fines and penalties and restrictions on our ability to operate in these states. We cannot assure that our arrangements or business practices will not be subject to government scrutiny or be found to violate applicable fraud and abuse laws.
Recent Developments
We are a holding company with current operating plans to participate in the healthcare industry through the development of healthcare services, and with a view toward additional services and technology that may find a ready market in the healthcare industry. We have made a strategic decision to reduce our capital needs by closing our clinic operations in the fourth quarter of 2022, and releasing a significant portion of our staff. As we redevelop our new strategy for lower cost operations, we hope to slowly open clinics, using the same staffing approach, but with a wider range of services for a broader portion of the population with healthcare needs.
The clinics closed and leases lost include the clinic in 1) Eagan, MN, 2) St. Paul MN, 3) St. Louis Park, MN, 4) Maple Grove, MN, 5) NE Minneapolis, 6) Wayzata, MN (under construction), and 7) two clinics in Denver, CO (under construction).
Reverse Stock Split
On December 12, 2022, the Company effected one-for-fifty reverse-split of its common stock. The number of shares of common stock outstanding immediately before the reverse-split was 231,427,580; the number of shares of common stock immediately following the reverse-split was 4,631,437, a decrease of 226,796,143 shares. This reverse stock split was effected as of December 12, 2022.
Gardner Debt for Equity Agreement
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 settled certain accounts payable amounts owed by the Company to the Creditor (the “Accounts Payable Amount”) as well as then upcoming amounts that would become due between the date of the Agreement and April 1, 2022. The Agreement also settled incurred interest and penalties on the amounts due through January 5, 2022, as well as future interest payments on amounts to be 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 $12.50. As a result, 63,593 Restricted Shares were authorized to be issued. The Company’s Board of Directors approved the Agreement on January 5, 2022. As of the date of this filing the Company has begun an effort to negotiate the remaining obligations with Gardner and hopes to have a complete resolution during the third quarter of fiscal 2023.
Other Corporate Information
Our website is www.mitescoinc.com and our principal executive offices is located at 18202 Minnetonka Blvd, Suite 100, Deephaven, MN 55391. Our telephone number is (844) 383 8689. We make available free of charge on our website our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports, as soon as reasonably practicable after we electronically file or furnish such materials to the SEC. Our website and the information contained therein or connected thereto are not intended to be incorporated into this Form 10-K. Our filings are also available through the SEC website www.sec.gov.

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ITEM 1A. RISK FACTORS
ITEM 1A. RISK FACTORS
RISK FACTORS
Investing in our securities involves a high degree of risk. You should carefully consider the risks described below, as well as the other information in this Form 10-K, including our financial statements and the related notes and the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this Form 10-K, before deciding whether to invest in our securities. The occurrence of any of the events or developments described below could harm our business, financial condition, results of operations and growth prospects. In such an event, the market price of our securities could decline, and you may lose all or part of your investment. Additional risks and uncertainties not presently known to us or that we currently deem immaterial also may impair our business operations. Some statements in this Form 10-K, including such statements in the following risk factors, constitute forward-looking statements. See the section entitled “Cautionary Note Regarding Forward-Looking Statements.”
Special Notice Regarding the Worldwide Covid-19 Crisis
The world economy is facing significant uncertainties as a result of the worldwide COVID-19 crisis. While we are a small company and have a limited workforce, it is likely we will face increased risk in the case that 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 whether 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.
Risks Related to our Financial Condition
We are in the initial stages of our present business plan and have a limited historical performance for you to base an investment decision upon, and we may never become profitable.
We have only a limited history and a new business plan upon which an evaluation of our prospects and future performance can be made. Our planned operations are subject to all business risks associated with new companies. The likelihood of our success must be considered considering the problems, expenses, difficulties, complications, and delays frequently encountered in connection with the establishment of a new business, operation in a competitive industry. There is a possibility that we could sustain losses in the future. There can be no assurances that we will ever operate profitably.
There is substantial doubt about our ability to continue as a going concern because 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 history of losses. 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, 2022, expressed substantial doubt about our ability to continue as a going concern, since we have had 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 generated only minimal 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.
We need additional capital to fund our operations and cannot assure you that we will be able to obtain sufficient capital on reasonable terms or at all, and we may be forced to limit the scope of our operations.
We need additional capital to implement and fund our operations. The extent of our capital needs will depend on numerous factors, including (i) the availability and terms of any financing available to us; (ii) the opening of medical clinics by our competitors in the geographic areas where we plan to operate; (iii) the level of our investment in research and development; (iv) the amount of our capital expenditures, including acquisitions; and (v) regulations applicable to our operations. We cannot assure you that we will be able to obtain capital in the future to meet our needs. Even if we do find a source of additional capital, we may not be able to negotiate terms and conditions for receiving the additional capital that are acceptable to us. Any future capital investments could dilute or otherwise materially and adversely affect the holdings or rights of our existing stockholders. In addition, new equity or convertible debt securities issued by us to obtain financing could have rights, preferences, and privileges senior to our Common Stock. We cannot give you any assurance that any additional financing will be available to us, or if available, will be on terms favorable to us.
We may incur additional debt in the future which may contain restrictive covenants and impair our operating flexibility.
Because we currently have no significant revenue and limited cash on hand, we must seek funds for our operational plans. If we incur additional indebtedness in the future, a portion of the cash flow we generate, if any, will be dedicated to the payment of principal and interest on outstanding indebtedness. Typical loan agreements also might contain restrictive covenants, which may impair our operating flexibility. Such loan agreements would also provide for default under certain circumstances, such as failure to meet certain financial covenants. A default under a loan agreement could result in the loan becoming immediately due and payable and, if unpaid, a judgment in favor of such lender which would be senior to the rights of our stockholders. A judgment creditor would have the right to foreclose on our limited assets resulting in a material adverse effect on our business, operating results, and financial condition.
We have identified weaknesses in our internal controls, and we cannot provide assurances that these weaknesses will be effectively remediated, or that additional material weaknesses will not occur in the future.
As a public company, we are subject to the reporting requirements of the Exchange Act, and the Sarbanes-Oxley Act. We expect that the requirements of these rules and regulations will continue to increase our legal, accounting, and financial compliance costs, make some activities more difficult, time consuming and costly, and place significant strain on our personnel, systems, and resources.
The Sarbanes-Oxley Act requires, among other things, that we maintain effective disclosure controls and procedures, and internal control over financial reporting.
We do not yet have effective disclosure controls and procedures, or internal controls over all aspects of our financial reporting. We are continuing to develop and refine our disclosure controls and other procedures that are designed to ensure that information required to be disclosed by us in the reports that we will file with the SEC is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms. Our management is responsible for establishing and maintaining adequate internal control over our financial reporting, as defined in Rule 13a-15(f) under the Exchange Act.
We have identified material weaknesses in our internal control over financial reporting. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our financial statements will not be prevented or detected on a timely basis. The material weaknesses identified to date include (i) lack of segregation of duties, (ii) lack of sufficient resources to ensure that information required to be disclosed by us in the reports that we file or submit 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. As such, our internal controls over financial reporting were not designed or operating effectively.
We will be required to expend time and resources to further improve our internal controls over financial reporting, including by expanding our staff. However, we cannot assure you that our internal control over financial reporting, as modified, will enable us to identify or avoid material weaknesses in the future.
We have not yet retained sufficient staff or engaged sufficient outside consultants with appropriate experience in GAAP presentation to devise and implement effective disclosure controls and procedures, or internal controls. We will be required to expend time and resources hiring and engaging additional staff and outside consultants with the appropriate experience to remedy these weaknesses. We cannot assure you that management will be successful in locating and retaining appropriate candidates; that newly engaged staff or outside consultants will be successful in remedying material weaknesses thus far identified or identifying material weaknesses in the future; or that appropriate candidates will be located and retained prior to these deficiencies resulting in material and adverse effects on our business. Our ability to retain staff with appropriate experience in GAAP presentation will also be dependent upon the revenue we generate from operations and our ability to raise sufficient funding.
Our current controls and any new controls that we develop may become inadequate because of changes in conditions in our business. Further, weaknesses in our disclosure controls or our internal controls over financial reporting may be discovered in the future. Any failure to develop or maintain effective controls, or any difficulties encountered in their implementation or improvement, could harm our operating results, or cause us to fail to meet our reporting obligations and may result in a restatement of our financial statements for prior periods. Any failure to implement and maintain effective internal controls over financial reporting could also adversely affect the results of management reports and independent registered public accounting firm audits of our internal controls over financial reporting that we will eventually be required to include in our periodic reports that will be filed with the SEC. Ineffective disclosure controls and procedures, and ineffective internal controls over financial reporting could also cause investors to lose confidence in our reported financial and other information, which would likely have a negative effect on the market price of our Common Stock and Warrants.
Our independent registered public accounting firm is not required to audit the effectiveness of our internal control over financial reporting until after we are no longer a “smaller reporting company” as defined in the Jumpstart Our Business Startups (JOBS) Act of 2012. At such time, our independent registered public accounting firm may issue a report that is adverse in the event it is not satisfied with the level at which our internal control over financial reporting is documented, designed, or operating. Any failure to maintain effective disclosure controls and internal control over financial reporting could have a material and adverse effect on our business and operating results and cause a decline in the market price of our Common Stock and Warrants.
The issuance of additional shares of our Common Stock, Warrants, 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 June 8, 2023, there were outstanding options and warrants to purchase 310,692 and 672,334 shares of Common Stock, respectively. 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 could 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.
Our operating results and liquidity needs could be negatively affected by market fluctuations and economic downturn.
Our operating results and liquidity could be negatively affected by economic conditions generally, both in the United States and elsewhere around the world. The market for clinics and services we provide may be particularly vulnerable to unfavorable economic conditions. Some customers may consider certain of our services to be discretionary, and if full reimbursement for such services is not available, demand for these services may be tied to the discretionary spending levels of our targeted patient populations. Domestic and international equity and debt markets have experienced and may continue to experience heightened volatility and turmoil based on domestic and international economic conditions and concerns. In the event these economic conditions and concerns continue or worsen, and the markets continue to remain volatile, our operating results and liquidity could be adversely affected by those factors in many ways, including weakening demand for certain of our services and making it more difficult for us to raise funds if necessary, and our stock price may decline.
Mechanic’s liens were placed on six of our clinics that could have a material adverse impact on our business, results of operations, and financial condition.
In 2022, nine mechanic’s liens for an approximate total of $3.9 million were filed by several contractors against 7 of our 9 clinics. In 2023, the landlord for the Eagan clinic and the landlord for the St. Paul clinic reached confidential settlements with the contractors related to the liens. The other landlords are continuing to negotiate with the contractors to resolve the liens. We are currently in negotiations with landlords to settle the impact of the liens and the ongoing lease obligations related to the clinic properties. There are no filed liens on the NE Minneapolis or Eden Prairie locations. We are negotiating with the NE Minneapolis a settlement regarding our lease obligations that still remain after we relinquished possession of the property. We are currently paying rent on the Eden Prairie clinic location with the intent to either reopen as capital comes available or to sell the location with The Good Clinic brand and assets.
All liens were filed pursuant to Minnesota’s and Colorado’s Mechanic’s statutes and relate to past due obligations for construction and related work on certain of our clinics. Pursuant to Minnesota’s and Colorado’s Mechanic’s statutes, the contractor-creditors may have the ability to commence a mechanic’s lien foreclosure action against the real properties in question to recover amounts due, costs, legal fees, and interest.
We are attempting to negotiate modifications to our agreements with the contractor-creditors. However, we cannot assure you that our efforts will be successful. If we are unable to timely clear the mechanic’s liens filed against our clinics or otherwise negotiate modifications to our agreements with the contractor-creditors, it will have a material adverse impact on our business, results of operations, and financial condition.
Risks Related to our Business
Failure to attract and retain sufficient numbers of qualified personnel could also impede our future plans.
We must attract and retain sufficient medical professional employees to operate and execute our service model and growth plan even though there is a limited number of qualified medical professionals. Each clinic that we open will need to be staffed with enough Nurse Practitioners to properly run the clinics. We will face competition for Nurse Practitioners from a range of companies and providers, including traditional healthcare providers and medical practices that offer similar services.
Our business is also dependent upon the various insurance companies agreeing to reimburse patients for our services.
Currently, we only have insurance companies that have approved us as a service provider and have agreed to reimburse patients for use of our services. For us to attract patients, we will need to be approved as a service provider by multiple service providers as patients typically do not want to pay out of pocket for the services we provide. Our failure to be approved by additional insurance companies as a service provider will result in a material adverse impact on our business. The evolving nature of our business and rapid changes in the healthcare industry make it difficult to anticipate the nature and amount of medical reimbursements, third-party private payments, and participation in certain government programs and thus to reliably predict our operating results. Our strategy may incur significant costs, which could adversely affect our financial condition. Our plan to enter strategic transactions involves significant costs, including financial advisory, legal, and accounting fees, and may include additional costs for items such as fairness opinions and severance payments. We currently do not have significant revenue to pay these costs which could adversely affect our overall financial condition. If we fail to do so, performance of the business will be adversely impacted. If we are unable to implement our plan of operations effectively, it will have a material adverse effect on our ability to generate revenue.
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. Effective on April 19, 2021, we obtained malpractice insurance however, there can be no assurance that such insurance will adequately 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.
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 18, 2020, the Company’s former President and COO completed and applied on behalf of the Company to Bank of America, NA (“Bank of America”) for a PPP loan, which was subsequently approved. On April 25, 2020, the Company entered into an unsecured Promissory Note (the “Note”) with Bank of America for a loan in the original principal amount of $460,406, and the Company received the full amount of the loan proceeds on May 4, 2020.
On July 21, 2020, Bank of America notified the Company in writing that it should not have received $440,000 of the loan proceeds disbursed under the Note. The Company investigated the terms of the application and discovered its former President had erroneously represented it was refinancing an Economic Injury Disaster Loan when no such loan had been received. Bank of America requested that the Company remit the funds received back to Bank of America. The Company is currently working with Bank of America on a repayment plan. If we are not successful in negotiating repayment terms, it could have a material adverse effect on our financial condition.
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.
We are in an intensely competitive industry and there is no assurance we will be able to compete with our competitors who have greater resources than us.
While the telehealth market is in an early stage of development, it is competitive and we expect it to attract increased competition, which could make it difficult for us to succeed. We also expect to face competition for our planned medical clinics using Nurse Practitioners. We currently face competition in the telehealth industry from a range of companies, including specialized software and solution providers that offer similar solutions, often at substantially lower prices, and that are continuing to develop additional products and becoming more sophisticated and effective. In addition, large, well-financed health systems have in some cases developed their own telehealth tools and may provide these solutions to their customers and patients at discounted prices. The surge in interest in telehealth, and in particular the relaxation of HIPAA privacy and security requirements, has also attracted new competition from providers who utilize consumer-grade video conferencing platforms such as Zoom and Twilio. Competition from large software companies or other specialized solution providers, communication tools and other parties could result in continued pricing pressures, which is likely to lead to price declines in certain product segments, which could negatively impact our sales, profitability, and market share.
The market for healthcare solutions including walk-in clinics and services is intensely competitive. We compete in a highly fragmented primary care market with direct and indirect competitors that offer varying levels of impact to key stakeholders such as patients and employers. Our competitive success is contingent on our ability to simultaneously address the needs of key stakeholders efficiently and with superior outcomes at scale compared with competitors. We compete with walk-in clinics, traditional healthcare providers and medical practices, technology platforms, care management and coordination, digital health, telehealth and telemedicine and health information exchange. These competitors primarily include primary care providers who are employed by or affiliated with health networks. Our indirect competitors also include episodic consumer-driven point solutions such as telemedicine as well as urgent care providers. Generally, urgent care providers in the local communities we will serve provide services like those we intend to offer, and our competitors (1) are more established than we are, (2) may offer a broader array of services or more desirable facilities to patients and providers than ours and (3) may have larger or more specialized medical staffs to admit and refer patients, among other things. In the future, we expect to encounter increased competition from system-affiliated hospitals and healthcare companies, as well as health insurers and private equity companies seeking to acquire providers, in specific geographic markets. We also face competition from specialty hospitals (some of which are physician-owned), primary care providers and outpatient centers for market share in high margin services and for quality providers and personnel. Furthermore, some of the clinics and medical offices that compete with us may be supported by government agencies or not-for-profit organizations supported by endowments and charitable contributions and can finance capital expenditures and operations on a tax-exempt basis.
Competition in our market involves rapidly changing technologies, evolving regulatory requirements and industry expectations, frequent new product and service introductions and changes in customer and patient requirements. If we are unable to keep pace with the evolving needs of patients and continue to develop and introduce new applications and services in a timely and efficient manner, demand for our solutions and services may be reduced and our business and results of operations would be harmed.
Because we are a new business, our competitors may have greater name recognition, longer operating histories and significantly greater resources than we do. Further, our current or potential competitors may be acquired by third parties with greater available resources. As a result, our competitors may be able to respond more quickly and effectively than we can to new or changing opportunities, technologies, standards or customer and patient requirements and may have the ability to initiate or withstand substantial price competition. In addition, current and potential competitors have established, and may in the future establish, cooperative relationships with vendors of complementary services, technologies, or services to increase the availability of their solutions in the marketplace. Accordingly, new competitors or alliances may emerge that have greater market share, a larger customer base, more widely adopted proprietary technologies, greater marketing expertise, greater financial resources, and larger sales forces than we have, which could put us at a competitive disadvantage.
Our competitors could also be better positioned to serve certain segments of the telehealth market and medical clinic markets, which could create additional price pressure. In addition, many healthcare provider organizations are consolidating to create integrated healthcare delivery systems with greater market power. As provider networks and managed care organizations consolidate, thus decreasing the number of market participants, competition to provide products and services like ours could become more intense, and the importance of establishing and maintaining relationships with key industry participants could increase. These industry participants may try to use their market power to negotiate price reductions for our products and services. Considering these factors, even if our solution is more effective than those of our competitors, current or potential clients may accept competitive solutions in lieu of purchasing our solution. If we are unable to successfully compete in the telehealth market, our business, financial condition, and results of operations could be materially adversely affected.
Competitors may also be better positioned to contract with leading health network partners in our target markets. If our competitors are better able to attract patients, contract with health network partners, recruit providers, expand services or obtain favorable managed care contracts at their facilities than we are, we may experience an overall decline in member volumes and net revenue. There is no assurance we will be able to successfully compete in the markets in which we plan to operate which could cause you to lose your investment.
Our lack of registered trademarks and trade names could potentially harm our business.
Our federal trademark registration for the mark THE GOOD CLINIC is on the Supplemental Register, not the Principal Register. The Supplemental Register does not confer the same rights and benefits as the Principal Register. Registration on the Supplemental Register is not useful for challenging third parties who may infringe our trademark rights, and we would need to rely on our common law rights to pursue enforcement. The Supplemental Register also does not confer nationwide priority of rights. As we expand our business, we may encounter third parties with common law rights in certain geographic markets with trademark rights that prevent us from using the mark THE GOOD CLINIC in those markets.
The success of our planned business depends on our ability to develop, market, and advertise our clinics and telehealth services.
Our ability to establish effective marketing and advertising campaigns for any clinics and telemarketing services we develop is important to our success. If we are unable to establish awareness of our brands and services, we may not be able to attract customers and generate revenue, which would have a material adverse effect on our financial condition and results of operations.
Rapid technological change in our industry presents us with significant risks and challenges.
The telehealth market is characterized by rapid technological change, changing consumer requirements, short product lifecycles and evolving industry standards. Our success will depend on our ability to enhance our solution with next-generation technologies and to develop or to acquire and market new services to access new consumer populations. There is no guarantee that we will possess the resources, either financial or personnel, for the research, design and development of new applications or services, or that we will be able to utilize these resources successfully and avoid technological or market obsolescence. Further, there can be no assurance that technological advances by one or more of our competitors or future competitors will not result in our present or future software-based products and services becoming uncompetitive or obsolete.
If we do not manage our strategy effectively, our revenue, business and operating results may be harmed.
We have not yet generated significant revenues from our present operations and may not do so for an indefinite period of time. Our strategy is to operate walk-in clinics, provide telemedicine and acquire complimentary business in the future. Our future revenues and profitability depend upon our ability to successfully implement our growth strategy. There can be no assurance given that we will be successful in executing our growth strategy, and even if we achieve our strategic plan, that we will realize, in full or in part, the anticipated benefits we expect our strategy will achieve. The failure to realize those benefits could have a material adverse effect on our business, financial condition, and results of operations. Acquisitions may require greater than anticipated investment of operational and financial resources. Acquisitions and related growth may also require the integration of different services, assimilation of new employees, diversion of management and IT resources, increases in administrative costs and other additional costs associated with any debt or equity financings undertaken in connection with such acquisitions. We may not be able to effectively manage this expansion in any one or more of these areas, and any failure to do so could significantly harm our business, financial condition, and results of operations. We cannot assure you that any acquisition we undertake will be successful. Future growth will also place additional demands on our resources and may require us to hire and train additional employees. We will need to expand and acquire systems and infrastructure to accommodate our planned operations. The failure to implement our plan of operations and manage any future growth effectively will materially and adversely affect our business.
Any damage to our reputation may materially and adversely affect our business, financial condition, and results of operations.
We believe that developing and maintaining our brand is critical and that our financial success is directly dependent on consumer perception of our brand. Furthermore, the importance of our brand recognition may become even greater as competitors offer more services similar to ours. We believe that our customers view our brand as one that is trusted, respected and effective. Many factors, some of which are beyond our control, are important to maintaining our reputation and brand. These factors include our ability to comply with ethical, social, medical, labor, and environmental standards. Any actual or perceived failure in compliance with such standards could damage our reputation and brand.
The success of our brand may also suffer if our marketing strategy or services do not have the desired impact on our company’s image or its ability to attract consumers. Further, our brand value could diminish significantly due to a number of factors, including consumer perception that we have acted in an irresponsible manner, adverse publicity about our clinics, our failure to maintain the integrity of our products, the failure of our services to deliver consistently positive customer experiences, or the services becoming unavailable to consumers.
Risks Related to Government Regulation
If the statutes and regulations in our industry change, our business could be adversely affected.
The U.S. healthcare industry has undergone significant changes designed to improve patient safety, improve clinical outcomes, and increase access to medical care. These changes include enactments and repeals of various healthcare related laws and regulation. Our operations and economic viability may be adversely affected by the changes in such regulations, including: (i) federal and state fraud and abuse laws; (ii) federal and state anti-kickback statutes; (iii) federal and state false claims laws; (iv) federal and state self-referral laws; (v) state restrictions on fee splitting; (vi) laws regarding the privacy and confidentiality of patient information; and (vii) other laws and government regulations.
If there are changes in laws, regulations, or administrative or judicial interpretations, we may have to change our future business practices, or our business practices could be challenged as unlawful, which could have a material adverse effect on our business, financial condition, and results of operations.
The impact on our planned operations of recent healthcare legislation and other changes in the healthcare industry and in healthcare spending is currently unknown, but may adversely affect our business, financial condition, and results of operations.
The impact on us of healthcare reform legislation and other changes in the healthcare industry and in healthcare spending is currently unknown, but may adversely affect our business, financial condition, and results of operations. Our revenue is dependent on the healthcare industry and could be affected by changes in healthcare spending, reimbursement, and policy. The healthcare industry is subject to changing political, regulatory, and other influences. The Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act (the “Affordable Care Act” or the “ACA”) in 2010 made major changes in how healthcare is delivered and reimbursed and increased access to health insurance benefits to the uninsured and underinsured population of the United States.
Since its enactment, there have been judicial and Congressional challenges to certain aspects of the ACA as well as recent efforts by the current administration to repeal or replace certain aspects of the ACA. For example, the Tax Cuts and Jobs Act of 2017 was enacted, which includes a provision repealing, effective January 1, 2019, the tax-based shared responsibility payment imposed by the ACA on certain individuals who fail to maintain qualifying health coverage for all or part of a year that is commonly referred to as the “individual mandate.” Since the enactment of the Tax Cuts and Jobs Act of 2017, there have been additional amendments to certain provisions of the ACA, and we expect the current administration and Congress will likely continue to seek to modify all, or certain provisions of, the ACA. It is uncertain the extent to which any such changes may impact our business or financial condition. Congress may consider other legislation to repeal and replace elements of the ACA. In December 2019, a federal appeals court held that the individual mandate portion of the ACA was unconstitutional and left open the question whether the remaining provisions of the ACA would be valid without the individual mandate. We continue to evaluate the effect that the ACA and its possible modification or repeal and replacement has on our business. It is uncertain the extent to which any such changes may impact our business or financial condition.
Other legislative changes have been proposed and adopted since the ACA was enacted. These changes include aggregate reductions to Medicare payments to providers of up to 2% per fiscal year pursuant to the Budget Control Act of 2011 and subsequent laws, which began in 2013 and will remain in effect through 2029 unless additional Congressional action is taken. In January 2013, the American Taxpayer Relief Act of 2012 was signed into law, which, among other things, further reduced Medicare payments to several types of providers, including hospitals, imaging centers and cancer treatment centers, and increased the statute of limitations period for the government to recover overpayments to providers from three to five years. New laws may result in additional reductions in Medicare and other healthcare funding, which may materially adversely affect customer demand and affordability for our products and services and, accordingly, the results of our financial operations. Additional changes that may affect our business include the expansion of new programs such as Medicare payment for performance initiatives for physicians under the Medicare Access and CHIP Reauthorization Act of 2015 (“MACRA”) which first affected physician payment in 2019. At this time, it is unclear how the introduction of the Medicare quality payment program will impact overall physician reimbursement.
Such changes in the regulatory environment may also result in changes to our payor mix that may affect our operations and revenue. In addition, certain provisions of the ACA authorize voluntary demonstration projects, which include the development of bundling payments for acute, inpatient hospital services, physician services and post-acute services for episodes of hospital care. Further, the ACA may adversely affect payors by increasing medical costs generally, which could influence the industry and potentially impact our business and revenue as payors seek to offset these increases by reducing costs in other areas. Certain of these provisions are still being implemented and the full impact of these changes on us cannot be determined at this time.
Uncertainty regarding future amendments to the ACA as well as new legislative proposals to reform healthcare and government insurance programs, along with the trend toward managed healthcare in the United States, could result in reduced demand and prices for our services. We expect that additional federal and state healthcare reform measures will be adopted in the future, any of which could limit the amounts that federal and state governments and other third-party payors will pay for healthcare products and services, which could adversely affect our business, financial condition, and results of operations.
We are regulated by Federal Anti-Kickback Statutes.
The federal Anti-Kickback Statute is a provision of the Social Security Act of 1972 that prohibits as a felony offense the knowing and willful offer, payment, solicitation or receipt of any form of remuneration in return for, or to induce, (1) the referral of a patient for items or services for which payment may be made in whole or part under Medicare, Medicaid, or other federal healthcare programs, (2) the furnishing or arranging for the furnishing of items or services reimbursable under Medicare, Medicaid, or other federal healthcare programs or (3) the purchase, lease, or order or arranging or recommending the purchasing, leasing or ordering of any item or service reimbursable under Medicare, Medicaid or other federal healthcare programs. The Patient Protection and Affordable Care Act (“ACA”) amended section 1128B of the Social Security Act of 1935, as amended to make it clear that a person need not have actual knowledge of the statute, or specific intent to violate the statute, as a predicate for a violation. The Office of the Inspector General (the “OIG”), which has the authority to impose administrative sanctions for violation of the statute, has adopted as its standard for review a judicial interpretation which concludes that the statute prohibits any arrangement where even one purpose of the remuneration is to induce or reward referrals. A violation of the Anti-Kickback Statute is a felony punishable by imprisonment, criminal fines of up to $25,000, civil fines of up to $50,000 per violation, and three times the amount of the unlawful remuneration. A violation also can result in exclusion from Medicare, Medicaid, or other federal healthcare programs. In addition, pursuant to the changes of the ACA, a claim that includes items or services resulting from a violation of the Anti-Kickback Statute is a false claim for purposes of the False Claims Act.
We cannot assure that the applicable regulatory authorities will not determine that some of our arrangements with physicians violate the federal Anti-Kickback Statute or other applicable laws. An adverse determination could subject us to different liabilities, including criminal penalties, civil monetary penalties, and exclusion from participation in Medicare, Medicaid, or other health care programs, any of which could have a material adverse effect on our business, financial condition, or results of operations.
We are regulated by the Federal Stark Law.
The federal Stark Law, 42 U.S.C. 1395nn, also known as the physician self-referral law, generally prohibits a provider from referring Medicare and Medicaid patients to an entity (including hospitals) providing ‘‘designated health services,’’ if the physician or a member of the physician’s immediate family has a ‘‘financial relationship’’ with the entity, unless a specific exception applies. Designated health services include, among other services, inpatient hospital services, outpatient prescription drug services, clinical laboratory services, certain imaging services (e.g., MRI, CT, ultrasound), and other services that our affiliated physicians may order for their patients. The prohibition applies regardless of the reasons for the financial relationship and the referral; and therefore, unlike the federal Anti-Kickback Statute, intent to violate the law is not required. Like the Anti-Kickback Statute, the Stark Law contains statutory and regulatory exceptions intended to protect certain types of transactions and arrangements. Unlike safe harbors under the Anti-Kickback Statute with which compliance is voluntary, an arrangement must comply with every requirement of a Stark Law exception, or the arrangement is in violation of the Stark Law.
Because the Stark Law and implementing regulations continue to evolve and are detailed and complex, while we attempt to structure our relationships to meet an exception to the Stark Law, there can be no assurance that the arrangements entered into by us with affiliated physicians and facilities will be found to be in compliance with the Stark Law, as it ultimately may be implemented or interpreted. The penalties for violating the Stark Law can include the denial of payment for services ordered in violation of the statute, mandatory refunds of any sums paid for such services, and civil penalties of up to $15,000 for each violation, double damages, and possible exclusion from future participation in the governmental healthcare programs. A person who engages in a scheme to circumvent the Stark Law’s prohibitions may be fined up to $100,000 for each applicable arrangement or scheme.
Some states have enacted statutes and regulations against self-referral arrangements similar to the federal Stark Law, but which may be applicable to the referral of patients regardless of their payor source and which may apply to different types of services. These state laws may contain statutory and regulatory exceptions that are different from those of the federal law and that may vary from state to state. An adverse determination under these state laws and/or the federal Stark Law could subject us to different liabilities, including criminal penalties, civil monetary penalties, and exclusion from participation in Medicare, Medicaid, or other health care programs, any of which could have a material adverse effect on our business, financial condition, or results of operations.
We must comply with Health Information Privacy and Security Standards.
The Health Insurance Portability and Accountability Act of 1996 (“HIPAA”), as amended, contain detailed requirements concerning the use and disclosure of individually identifiable patient health information (“PHI”) by various healthcare providers, such as medical groups. HIPAA covered entities must implement certain administrative, physical, and technical security standards to protect the integrity, confidentiality and availability of certain electronic health information received, maintained, or transmitted. HIPAA also implemented standard transaction code sets and standard identifiers that covered entities must use when submitting or receiving certain electronic healthcare transactions, including billing and claim collection activities. Violations of the HIPAA privacy and security rules may result in civil and criminal penalties, including a tiered system of civil money penalties that range from $100 to $50,000 per violation, with a cap of $1.5 million per year for identical violations. A HIPAA covered entity must also promptly notify affected individuals where a breach affects more than 500 individuals and report breaches affecting fewer than 500 individuals annually. State attorneys general may bring civil actions on behalf of state residents for violations of the HIPAA privacy and security rules, obtain damages on behalf of state residents, and enjoin further violations.
Many states also have laws that protect the privacy and security of confidential, personal information, which may be similar to or even more stringent than HIPAA. Some of these state laws may impose fines and penalties on violators and may afford private rights of action to individuals who believe their personal information has been misused. We expect increased federal and state privacy and security enforcement efforts.
A cyber security incident could cause a violation of HIPAA, breach of customer and patient privacy, or other negative impacts.
We will rely extensively on our information technology (“IT”) systems to manage scheduling and financial data, communicate with our future customers and their patients, vendors, and other third parties, and summarize and analyze operating results. In addition, we have made significant investments in technology, including the engagement of a third-party IT provider. A cyber-attack that bypasses our IT security systems could cause an IT security breach, a loss of protected health information, or other data subject to privacy laws, a loss of proprietary business information, or a material disruption of our IT business systems. This in turn could have a material adverse impact on our business and result of operations. In addition, our future results of operations, as well as our reputation, could be adversely impacted by theft, destruction, loss, or misappropriation of public health information, other confidential data, or proprietary business information.
Computer malware, viruses, and hacking and phishing attacks by third parties have become more prevalent in our industry, have occurred on our systems in the past, and may occur on our systems in the future. Because techniques used to obtain unauthorized access to or sabotage systems change frequently and generally are not recognized until successfully launched against a target, we may be unable to anticipate these techniques or to implement adequate preventative measures. As cyber-security threats develop and grow, it may be necessary to make significant further investments to protect data and infrastructure. Due to the significant military action against Ukraine launched by Russia, the risk of such cyber-security threats has increased. If an actual or perceived breach of our security occurs, (i) we could suffer severe reputational damage adversely affecting customer or investor confidence, (ii) the market perception of the effectiveness of our security measures could be harmed, (iii) we could lose potential sales, our ability to deliver our services or operate our business may be impaired, (iv) we may be subject to litigation or regulatory investigations or orders and (v) we may incur significant liabilities. Our insurance coverage may not be adequate to cover the potentially significant losses that may result from security breaches.
We must comply with Environmental and Occupational Safety and Health Administration Regulations.
We are subject to federal, state, and local regulations governing the storage, use and disposal of waste materials and products. Although we believe that our safety procedures for storing, handling, and disposing of these materials and products comply with the standards prescribed by law and regulation, we cannot eliminate the risk of accidental contamination or injury from those hazardous materials. In the event of an accident, we could be held liable for any damages that result and any liability could exceed the limits or fall outside the coverage of our insurance coverage, which we may not be able to maintain on acceptable terms, or at all. We could incur significant costs and attention of our management could be diverted to comply with current or future environmental laws and regulations. Federal regulations promulgated by the Occupational Safety and Health Administration impose additional requirements on us, including those protecting employees from exposure to elements such as blood-borne pathogens. We cannot predict the frequency of compliance, monitoring, or enforcement actions to which we may be subject to as those regulations are being implemented, which could adversely affect our operations.
We must comply with a range of other Federal and State Healthcare Laws.
We are subject to other federal and state healthcare laws that could have a material adverse effect on our business, financial condition, or results of operations. The Health Care Fraud Statute prohibits any person from knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program, which can be either a government or private payor plan. Violation of this statute, even in the absence of actual knowledge of or specific intent to violate the statute, may be charged as a felony offense and may result in fines, imprisonment, or both. The Health Care False Statement Statute prohibits, in any matter involving a federal health care program, anyone from knowingly and willfully falsifying, concealing, or covering up, by any trick, scheme or device, a material fact, or making any materially false, fictitious, or fraudulent statement or representation, or making or using any materially false writing or document knowing that it contains a materially false or fraudulent statement. A violation of this statute may be charged as a felony offense and may result in fines, imprisonment, or both. Under the Civil Monetary Penalties Law of the Social Security Act, a person (including an organization) is prohibited from knowingly presenting or causing to be presented to any United States officer, employee, agent, or department, or any state agency, a claim for payment for medical or other items or services where the person knows or should know (a) the items or services were not provided as described in the coding of the claim, (b) the claim is a false or fraudulent claim, (c) the claim is for a service furnished by an unlicensed physician, (d) the claim is for medical or other items or service furnished by a person or an entity that is in a period of exclusion from the program, or (e) the items or services are medically unnecessary items or services. Violations of the law may result in penalties of up to $10,000 per claim, treble damages, and exclusion from federal healthcare programs.
In addition, the OIG may impose civil monetary penalties against any physician who knowingly accepts payment from a hospital (as well as against the hospital making the payment) as an inducement to reduce or limit medically necessary services provided to Medicare or Medicaid program beneficiaries. Further, except as permitted under the Civil Monetary Penalties Law, a person who offers or transfers to a Medicare or Medicaid beneficiary any remuneration that the person knows or should know is likely to influence the beneficiary’s selection of a particular provider of Medicare or Medicaid payable items or services may be liable for civil money penalties of up to $10,000 for each wrongful act.
In addition to the state laws previously described, we may also be subject to other state fraud and abuse statutes and regulations if we expand our operations nationally. Many states have adopted a form of anti-kickback law, self-referral prohibition, and false claims and insurance fraud prohibition. The scope of these laws and the interpretations of them vary from state to state and are enforced by state courts and regulatory authorities, each with broad discretion. Generally, state laws reach to all healthcare services and not just those covered under a governmental healthcare program. A determination of liability under any of these laws could result in fines and penalties and restrictions on our ability to operate in these states. We cannot assure that our arrangements or business practices will not be subject to government scrutiny or be found to violate applicable fraud and abuse laws.
Changes in healthcare laws could create an uncertain environment and materially impact us.
We cannot predict the effect that the ACA and its implementation, amendment, or repeal and replacement, may have on our business, results of operations or financial condition. Any changes in healthcare laws or regulations that reduce, curtail, or eliminate payments, government-subsidized programs, government-sponsored programs, and/or the expansion of Medicare or Medicaid, among other actions, could have a material adverse effect on our business, results of operations and financial condition. For example, the ACA dramatically changed how healthcare services are covered, delivered, and reimbursed. The ACA requires insurers to accept all applicants, regardless of pre-existing conditions, cover an extensive list of conditions and treatments, and charge the same rates, regardless of pre-existing condition or gender.
The ACA and the Health Care and Education Reconciliation Act of 2010 (collectively, the “Health Care Reform Acts”) also mandated changes specific to home health and hospice benefits under Medicare. In 2012, the U.S. Supreme Court upheld the constitutionality of the ACA, including the “individual mandate” provisions of the ACA that generally require all individuals to obtain healthcare insurance or pay a penalty. However, the U.S. Supreme Court also held that the provision of the ACA that authorized the Secretary of the U.S. Department of Health and Human Services to penalize states that choose not to participate in the expansion of the Medicaid program by removing all its existing Medicaid funding was unconstitutional. In response to the ruling, several state governors opposed its state’s participation in the expanded Medicaid program, which resulted in the ACA not providing coverage to some low-income persons in those states. In addition, several bills have been, and are continuing to be, introduced in U.S. Congress to amend all or significant provisions of the ACA, or repeal and replace the ACA with another law. In December 2017, the individual mandate was repealed via the Tax Cuts and Jobs Act of 2017. Afterwards, legal, and political challenges as to the constitutionality of the remaining provisions of the ACA resumed.
Our operations are subject to the nation’s healthcare laws, as amended, repealed, or replaced from time to time.
The net effect of the ACA on our business is subject to numerous variables, including the law’s complexity, lack of complete implementing regulations and interpretive guidance, gradual and potentially delayed implementation, or possible amendment, as well as the uncertainty as to the extent to which states will choose to participate in the expanded Medicaid program. The continued implementation of provisions of the ACA, the adoption of new regulations thereunder and ongoing challenges thereto, also added uncertainty about the current state of U.S. healthcare laws and could negatively impact our business, results of operations and financial condition. Healthcare providers could be subject to federal and state investigations and payor audits.
Due to our participation in government and private healthcare programs, we are from time to time involved in inquiries, reviews, audits, and investigations by governmental agencies and private payors of our business practices, including assessments of our compliance with coding, billing, and documentation requirements. Federal and state government agencies have active civil and criminal enforcement efforts against healthcare companies, and their executives and managers. The Deficit Reduction Act, which provides a financial incentive to states to enact their own false claims acts, and similar laws encourage investigations against healthcare companies by different agencies. These investigations could also be initiated by private whistleblowers.
Responding to audit and investigative activities are costly and disruptive to our business operations, even when the allegations are without merit. If we are subject to an audit or investigation, a finding could be made that we or our affiliates erroneously billed or were incorrectly reimbursed, and we may be required to repay such agencies or payors, may be subjected to pre-payment reviews, which can be time-consuming and result in non-payment or delayed payments for the services we or our affiliates provide, and may be subject to financial sanctions or required to modify our operations.
Our revenues may depend on our patients’ receipt of adequate reimbursement from private insurers and government sponsored healthcare programs.
Political, economic, and regulatory influences continue to change the healthcare industry in the United States. If and when we start receiving reimbursements from third parties, the ability of patients to pay fees for our products will partially depend on the extent to which reimbursement for the costs of such materials and related treatments will continue to be available from private health coverage insurers and other similar organizations. We may have difficulty gaining market acceptance for the products we sell if third-party payors do not provide adequate coverage and reimbursement to hospitals. Major third-party payors of hospitals, such as private healthcare insurers, periodically revise their payment methodologies based, in part, upon changes in government sponsored healthcare programs. We cannot predict these periodic revisions with certainty, and such revisions may result in stricter standards for reimbursement of hospital charges for certain specified products, potentially adversely impacting our business, results of operations, and financial conditions when we start receiving reimbursement from third party payors.
When we start receiving reimbursement from third party payors, the sales of our therapies will depend in part on the availability of reimbursement by third-party payors, such as government health administration authorities, private health insurers and other organizations. Third-party payors often challenge the price and cost-effectiveness of medical treatments and services. Governmental approval of health care products does not guarantee that these third-party payors will pay for the products. Even if third-party payors do accept our therapeutic treatments, the amounts they pay may not be adequate to enable us to realize a profit. Legislation and regulations affecting the pricing of therapies may change before our products and services are approved for marketing, and any such changes could further limit reimbursement, if any.
Future regulatory action remains uncertain.
We operate in a highly regulated and evolving environment with rigorous regulatory enforcement. Any legal or regulatory action could be time-consuming and costly. If we or the manufacturers or distributors that supply our products fail to comply with all applicable laws, standards, and regulations, action by the FDA or other regulatory agencies could result in significant restrictions, including restrictions on the marketing or use of the products we sell or the withdrawal of the products we sell from the market. Any such restrictions or withdrawals could materially affect our reputation, business, and operations.
Risks Related to Acquisitions
Acquisitions may subject us to liability with regard to the creditors, customers, and shareholders of the sellers.
While we intend that any acquisitions that we consummate will typically be structured as asset purchase agreements in which we attempt to limit our risk and exposure relative to the respective sellers’ liabilities, we cannot guarantee that we will be successful in avoiding all liability. Creditors may seek to hold us accountable for seller debt and customers and for seller breaches of contract prior to our transactions. Occasionally, disaffected shareholders may attempt to interfere with our business acquisitions. We will attempt to minimize all of these risks through thorough due diligence, negotiating indemnities and holdbacks, obtaining relevant representations from sellers, and leveraging experienced professionals when appropriate; however, there can be no assurance that we will be able to mitigate all risks.
We may be unable to implement our strategy of acquiring companies.
Although we expect that one or more acquisition opportunities will become available in the future, we may not be able to acquire companies at all or on terms favorable to us. We will likely need additional financing for such acquisitions, but there is no assurance that we will be able to borrow funds or raise capital through the issuance of our equity on favorable terms. Certain of our larger, better capitalized competitors may seek to acquire some of the companies we may be interested in. Competition for acquisitions would likely increase acquisition prices and result in us having fewer acquisition opportunities. Depending on the type of businesses we acquire, we may have varying cost saving and/or cross-selling opportunities with the acquired business. However, there is no assurance that we will achieve anticipated cost savings and cross-selling on our acquisitions, and failure to do so may mean we overpaid for such acquisitions. In completing any acquisitions, we will rely upon the representations and warranties and indemnities made by the sellers with respect to each acquisition as well as our own due diligence investigation. We cannot be assured that such representations and warranties will be true and correct or that our due diligence will uncover all materially adverse facts relating to the operations and financial condition of the acquired companies or their customers. To the extent that we are required to pay for obligations of an acquired company, or if material misrepresentations exist, we may not realize the expected benefit from such acquisition, and we will have overpaid in cash, stock, assumed debt, seller notes, and/or earnouts for the value received in that acquisition.
Future acquisitions may result in potentially dilutive issuances of equity securities, the incurrence of indebtedness and increased amortization expense.
Future acquisitions may result in dilutive issuances of equity securities, the incurrence of debt, the assumption of known and unknown liabilities, the write-off of software development costs and the amortization of expenses related to intangible assets, all of which could have an adverse effect on our business, financial condition, and results of operations.
We face risks arising from acquisitions that we pursue in the future.
We may pursue strategic acquisitions in the future. Risks in acquisition transactions include difficulties in the integration of acquired businesses into our operations and control environment, difficulties in assimilating and retaining employees and intermediaries, difficulties in retaining the existing clients of the acquired entities, assumed or unforeseen liabilities that arise in connection with the acquired businesses, the failure of counter parties to satisfy any obligations to indemnify us against liabilities arising from the acquired businesses, and unfavorable market conditions that could negatively impact our growth expectations for the acquired businesses. Fully integrating an acquired company or business into our operations may take a significant amount of time. We cannot assure you that we will be successful in overcoming these risks or any other problems encountered with acquisitions and other strategic transactions. These risks may prevent us from realizing the expected benefits from acquisitions and could result in the failure to realize he full economic value of a strategic transaction or the impairment of goodwill and/or intangible assets recognized at the time of an acquisition. These risks could be heightened if we complete a large acquisition or multiple acquisitions within a short period of time.
Risks Related to Our Management
Our executive officers, directors and certain key stockholders own and control a significant number of voting securities and so long as they do, they are able to control the outcome of stockholder voting.
Our executive officers, directors as well as certain other key shareholders are the owners of approximately 68% of the voting shares of the Company as of June 18, 2022 as a result of their ownership over our Series X Cumulative Redeemable Perpetual Preferred Stock (the “Series X Preferred Stock”), and Common Stock. The Series X Preferred stock votes with our outstanding shares of Common Stock at the rate of 400 votes for each share owned, one (1) vote for each common holder. As such, our management can determine the outcome of all matters submitted to our stockholders for approval, including the election of directors. Our management’s control of our voting securities may make it impossible to complete some corporate transactions without its support and may prevent a change in our control. In addition, this ownership could discourage the acquisition of our Common Stock by potential investors and could have an anti-takeover effect, possibly depressing the trading price of our Common Stock.
Risks Relating to Ownership of our Units
We completed a reverse stock split of our shares of common stock, which may reduce and may limit the market trading liquidity of the shares due to the reduced number of shares outstanding and may potentially have an anti-takeover effect.
We completed a reverse stock split, or the Reverse Stock Split, of our common stock by a ratio of one-for-fifty (1:50) effective December 12, 2022. The liquidity of our common stock may be adversely affected by the Reverse Stock Split as a result of the reduced number of shares outstanding following the Reverse Stock Split. In addition, the Reverse Stock Split may increase the number of stockholders who own odd lots of our common stock, creating the potential for such stockholders to experience an increase in the cost of selling their shares and greater difficulty affecting such sales. Reducing the number of outstanding shares of our common stock through the Reverse Stock Split is intended, absent other factors, to increase the per share market price of our common stock. However, other factors, such as our financial results, market conditions and the market perception of our business may adversely affect the market price of our common stock. As a result, there can be no assurance that the Reverse Stock Split will result in the intended benefits, that the market price of our common stock will remain higher following the Reverse Stock Split or that the market price of our common stock will not decrease in the future.
Shares eligible for future sale may have adverse effects on our share price.
Sales of substantial amounts of shares or the perception that such sales could occur may adversely affect the prevailing market price for our shares. We may issue additional shares in subsequent public offerings or private placements to make new investments or for other purposes. We are not required to offer any such shares to existing shareholders on a preemptive basis. Therefore, it may not be possible for existing shareholders to participate in such future share issuances, which may dilute the existing shareholders’ interests in us.
We do not anticipate paying any cash dividends on our Common Stock in the foreseeable future.
We currently intend to retain all our future earnings to finance the growth and development of our business, and therefore, we do not anticipate paying any cash dividends on our Common Stock in the foreseeable future. We believe it is likely that our Board will continue to conclude, that it is in our best interests to retain all earnings (if any) for the development of our business. In addition, the terms of any future debt agreements may preclude us from paying dividends. As a result, capital appreciation, if any, of our Common Stock will be your sole source of gain for the foreseeable future.
If securities or industry analysts do not publish research or publish inaccurate or unfavorable research about our business, our stock price and trading volume could decline.
The trading market for our Common Stock, Series A Warrants and Series B Warrants will depend in part on the research and reports that securities or industry analysts publish about us or our business. Securities and industry analysts do not currently, and may never, publish research on our company. If no securities or industry analysts commence coverage of our company, the trading price for our stock would likely be negatively impacted. In the event securities or industry analysts initiate coverage, if one or more of the analysts who covers us downgrades our stock or publishes inaccurate or unfavorable research about our business, our stock price may decline. If one or more of these analysts ceases coverage of our company or fails to publish reports on us regularly, demand for our stock could decrease, which might cause our stock price and trading volume to decline.
Our stock price has fluctuated in the past, has recently been volatile and may be volatile in the future, and as a result, investors in our Common Stock and Warrants could incur substantial losses.
Our stock price has fluctuated in the past, has recently been volatile and may be volatile in the future. On June 8, 2023, the reported low sale price of our Common Stock was $0.92, while the reported high sales price was $1.02, with a closing price of $0.94. For comparison purposes, on December 31, 2021, our stock price closed at $8.20. The decrease in stock price is believed to be related to the closing of our clinics in 2022. We may incur rapid and substantial decreases in our stock price in the foreseeable future that are unrelated to our operating performance or prospects. The stock market in general and the market for telehealth companies in particular have experienced extreme volatility that has often been unrelated to the operating performance of particular companies. For example, the recent outbreak of the COVID-19 coronavirus has caused broad stock market and industry fluctuations. In addition, sales of substantial amounts of our Common Stock and Warrants, or the perception that such sales might occur, could adversely affect prevailing market prices of our Common Stock and Warrants and our stock price may decline substantially in a short period of time. As a result, our stockholders could suffer losses or be unable to liquidate holdings. As a result of this volatility, investors may experience losses on their investment in our Common Stock and Warrants. The market price for our Common Stock and Warrants may be influenced by many factors, including the following:
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sale of our Common Stock Warrants by our stockholders, executives, and directors;
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volatility and limitations in trading volumes of our securities;
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our ability to obtain financings to implement our business plans;
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the timing and success of introductions of new clinics;
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our ability to attract new customers;
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changes in our capital structure or dividend policy, future issuances of securities and sales of large blocks of securities by our stockholders;
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our cash position;
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announcements and events surrounding financing efforts, including debt and equity securities;
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our inability to enter new markets or develop new products;
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reputational issues;
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our inability to successfully manage our business or achieve profitability;
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announcements of acquisitions, partnerships, collaborations, joint ventures, new products, capital commitments, or other events by us or our competitors;
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changes in general economic, political and market conditions in any of the regions in which we conduct our business;
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changes in industry conditions or perceptions;
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analyst research reports, recommendation and changes in recommendations, price targets, and withdrawals of coverage;
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departures and additions of key personnel;
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disputes and litigation related to intellectual properties, proprietary rights, and contractual obligations;
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changes in applicable laws, rules, regulations, or accounting practices and other dynamics;
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market conditions or trends in our industry; and
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other events or factors, many of which may be out of our control.
These broad market and industry factors may seriously harm the market price of our Common Stock and Warrants, regardless of our operating performance. Since the stock price of our Common Stock has fluctuated in the past, has been recently volatile and may be volatile in the future, investors in our Common Stock and Warrants could incur substantial losses. In the past, following periods of volatility in the market, securities class-action litigation has often been instituted against companies. Such litigation, if instituted against us, could result in substantial costs and diversion of management’s attention and resources, which could materially and adversely affect our business, financial condition, results of operations and growth prospects. There can be no guarantee that our stock price will remain at current prices or that future sales of our Common Stock and Warrants will not be at prices lower than those sold to investors.
Additionally, securities of certain companies have recently experienced significant and extreme volatility in stock price due to short sellers of shares of Common Stock, known as a “short squeeze.” These short squeezes have caused extreme volatility in those companies and in the market and have led to the price per share of those companies to trade at a significantly inflated rate that is disconnected from the underlying value of the company. Many investors who have purchased shares in those companies at an inflated rate face the risk of losing a significant portion of their original investment as the price per share has declined steadily as interest in those stocks have abated. While we have no reason to believe our shares would be the target of a short squeeze, there can be no assurance that we won’t be in the future, and you may lose a significant portion or all your investment if you purchase our shares at a rate that is significantly disconnected from our underlying value.
Because we may issue preferred stock without the approval of our shareholders and have other anti-takeover defenses, it may be more difficult for a third party to acquire us and could depress our stock price.
In general, our Board may issue, without a vote of our shareholders, one or more additional series of preferred stock that have more than one vote per share, although our ability to designate and issue preferred stock is currently restricted by covenants in the Certificate of Designation for the Series C Preferred Stock. Without these restrictions, our Board could issue preferred stock to investors who support us and our management and give effective control of our business to our management. Additionally, issuance of preferred stock could block an acquisition resulting in both a drop in our stock price and a decline in interest of our Common Stock, Series A Warrants and Series B Warrants. This could make it more difficult for shareholders to sell their Common Stock, Series A Warrants and Series B Warrants. This could also cause the market price of our Common Stock, Series A Warrants and Series B Warrants to drop significantly, even if our business is performing well.
Offers or availability for sale of a substantial number of shares of our Common Stock, Series A Warrants and Series B Warrants may cause the price of our Common Stock, Series A Warrants and Series B Warrants to decline.
Sales of large blocks of our Common Stock, Series A Warrants and Series B Warrants could depress the price of our Common Stock, Series A Warrants and Series B Warrants. The existence of these shares and shares of Common Stock that may be issuable upon conversion or exercise, as applicable, of outstanding shares of convertible preferred stock, warrants and options create a circumstance commonly referred to as an “overhang” which can act as a depressant to the price of our Common Stock, Series A Warrants and Series B Warrants. The existence of an overhang, whether sales have occurred or are occurring, also could make our ability to raise additional financing through the sale of equity or equity-linked securities more difficult in the future at a time and price that we deem reasonable or appropriate. If our existing shareholders and investors seek to convert or exercise such securities or sell a substantial number of shares of our Common Stock, such selling efforts may cause significant declines in the market price of our Common Stock and Warrants. In addition, the shares of our Common Stock, Series A Warrants and Series B Warrants sold in the offering will be freely tradable without restriction or further registration under the Securities Act of 1933, as amended (the “Securities Act”). As a result, a substantial number of shares of our Common Stock, Series A Warrants and Series B Warrants may be sold in the public market following this offering. If there are significantly more shares of Common Stock, Series A Warrants and Series B Warrants offered for sale than buyers are willing to purchase, then the market price of our Common Stock, Series A Warrants and Series B Warrants may decline to a market price at which buyers are willing to purchase the offered Common Stock Warrants and sellers remain willing to sell our Common Stock, Series A Warrants and Series B Warrants.
Risks Related to Cybersecurity
If our information technology systems or data, or those of third parties upon which we rely, are or were compromised, or are perceived to have been compromised, we could experience adverse consequences, including but not limited to regulatory investigations or actions; litigation; fines and penalties; disruptions of our business operations; reputational harm; loss of revenue or profits; loss of customers or sales; and other adverse consequences.
In the ordinary course of our business, we and the third parties upon which we rely, may collect, receive, store, use, transmit, disclose, transfer, disclose, make accessible, protect, secure, dispose of, transmit, share, or otherwise process proprietary, confidential, and sensitive data, including personal data (such as health-related data regarding clinical trial subjects), intellectual property, and trade secrets.
Cyberattacks, malicious internet-based activity, and online and offline fraud and other similar activities threaten the confidentiality, integrity, and availability of our sensitive information and information technology systems, and those of the third parties upon which we rely. Such threats are prevalent and continue to rise, are increasingly difficult to detect, and come from a variety of sources, including traditional computer “hackers,” threat actors, “hacktivists,” organized criminal threat actors, personnel (such as through theft or misuse), sophisticated nation-states, and nation-state-supported actors. Some actors now engage and are expected to continue to engage in cyber-attacks, including without limitation nation-state actors for geopolitical reasons and in conjunction with military conflicts and defense activities. During times of war and other major conflicts, we, the third parties upon which we rely, may be vulnerable to a heightened risk of these attacks, including retaliatory cyber-attacks, that could materially disrupt our systems and operations, supply chain, and ability to produce, sell and distribute our goods and services. We and the third parties upon which we rely may be subject to a variety of threats, including, but not limited to, malicious code (such as viruses and worms), social engineering attacks (including through phishing attacks), malware (including as a result of advanced persistent threat intrusions), denial of service attacks (such as credential stuffing), credential harvesting, software bugs, server malfunctions, software or hardware failures, unauthorized access, natural disasters, fire, terrorism, successful breaches, personnel misconduct or error, or human or technological error, war and telecommunication and electrical failures.
In particular, severe ransomware attacks are becoming increasingly prevalent and severe, and can lead to significant interruptions in our operations, loss of sensitive data, reputational harm, and diversion of funds. Extortion payments may alleviate some of the negative impact of a ransomware attack, but we may be unwilling or unable to make such payments due to, for example, applicable laws or regulations prohibiting such payments. Additionally, the COVID-19 pandemic poses increased risks to our information technology systems and data, as more of our employees work from home, utilizing network connections outside our premises. Future or past business transactions (such as acquisitions or integrations) could expose us to additional cybersecurity risks and vulnerabilities, as our systems could be negatively affected by vulnerabilities present in acquired or integrated entities’ systems and technologies. Furthermore, we may discover security issues that were not found during due diligence of such acquired or integrated entities, and it may be difficult to integrate companies into our information technology environment and security program.
We rely on third parties (such as service providers and technologies) to process sensitive information in a variety of contexts, including without limitation third-party providers of cloud-based infrastructure, encryption and authentication technology, employee email, and other functions. Our ability to monitor these third parties’ cybersecurity practices is limited, and these third parties may not have adequate information security measures in place. If our third-party service providers experience a security incident or other interruption, we could experience adverse consequences. While we may be entitled to damages if our third-party service providers fail to satisfy their privacy or security-related obligations to us, any award may be insufficient to cover our damages, or we may be unable to recover such award. In addition, supply-chain attacks have increased in frequency and severity, and we cannot guarantee that third parties’ infrastructure in our supply chain or our third-party partners’ supply chains have not been compromised. Any of the previously identified or similar threats could cause a security incident or other incident during which our information technology systems or data could be compromised, which could result in unauthorized, unlawful, or accidental acquisition, modification, destruction, loss, alteration, encryption, disclosure of, or access to our data; it could also disrupt our ability (and that of third parties upon which we rely) to operate our business.
We may expend significant resources or modify our business activities in an effort to protect against the compromise of our information technology systems and data. Further, certain data privacy and security obligations may require us to implement and maintain specific security measures, industry-standard or reasonable security measures to protect our information technology systems and data.
If we (or a third party upon whom we rely) experience a security incident or are perceived to have experienced a security incident, we may experience adverse consequences, including: government enforcement actions (for example, investigations, fines, penalties, audits, and inspections); additional reporting requirements and/or oversight; restrictions on processing data (including personal data); litigation (including class actions); indemnification obligations; negative publicity; reputational harm; monetary fund diversions; interruptions in our operations (including availability of data); financial loss; and other similar harms. Additionally, applicable data privacy and security obligations may require us to notify relevant stakeholders; such disclosures are costly, and the disclosures or the failure to comply with such requirements could lead to adverse consequences.
Market and Industry Data
This Annual Report may contain market, industry and government data and forecasts that have been obtained from publicly available information, various industry publications and other published industry sources. We have not independently verified the information and cannot make any representation as to the accuracy or completeness of such information. None of the reports and other materials of third-party sources referred to in this Annual Report were prepared for use in, or in connection with, this Annual Report.

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ITEM 1B. UNRESOLVED STAFF COMMENTS
ITEM 1B. UNRESOLVED STAFF COMMENTS
Not applicable.

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ITEM 2. PROPERTIES
ITEM 2. PROPERTIES
The following lists the rental agreements we had in place as of December 31, 2022. As a result of our revised plans for The Good Clinic, and because of the limited availability of additional capital, we are in the process of negotiating the termination of most of these sites. As noted below our limited capital has caused some of our relationships with vendors and landlords to include some litigation, further noted in other parts of this document.
On November 1, 2020, we entered into an agreement to open a clinic in Minneapolis, Minnesota. The initial lease term is eight years. Fixed rent payments under the initial term are approximately $511,000.
On May 24, 2021, we entered into an agreement to open a clinic in St. Louis Park, Minnesota, which began 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, we entered into an agreement to open a clinic in Eden Prairie, Minnesota, which began 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, we 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, we entered into an agreement to open a clinic in St. Paul, Minnesota, which began operations in the fourth quarter of 2021. The initial lease term is for 114 months. Fixed rent payments under the initial term are approximately $1,153,000.
On September 9, 2021, we entered into an agreement to open a clinic in Denver, Colorado, which was expected to begin operation in the first quarter of 2023 but possession of which has been relinquished to the landlords. The initial lease term is for 90 months. Fixed rent payments under the initial term are approximately $782,000.
On September 28, 2021, we entered into an agreement to open a clinic in Denver, Colorado, which was expected to begin operation in the first quarter of 2023 but possession of which has been relinquished to the landlords. The initial lease term is for 94 months. Fixed rent payments under the initial term are approximately $1,079,000.
On October 8, 2021, we entered into an agreement to open a clinic in Maple Grove, Minnesota which began operation in the fourth quarter of 2021. The initial lease term is for 108 months. Fixed rent payments under the initial term are approximately $1,153,127.
On October 14, 2021, we entered into an agreement to open a clinic in Eagan, Minnesota, which began operations in the fourth quarter of 2021. The initial lease term is for 96 months. Fixed rent payments under the initial term are approximately $767,000.
On April 4, 2022, we entered into an agreement to open a clinic in Wayzata, Minnesota, which was expected to begin operations in the first quarter of 2023. The initial lease term is for 90 months. Fixed rent payments under the initial term are approximately $407,000. As of February 3, 2023 this lease obligation was terminated. We agreed to pay a $25,000 termination fee.
On July 25 and July 29, 2022 two mechanic’s lien in the total amount of $373,396 were placed on our St. Paul, MN The Grove clinic.
On July 29, 2022 a mechanic’s lien in the amount of $136,210 was placed on our Eagan, MN Vikings Parkway clinic.
On July 29, 2022 a mechanic’s lien in the amount of $137,800 was placed on our Maple Grove, MN Arbor Lakes clinic. This amount has since been paid in full and we are in the process of removing the lien.
On August 22 and August 26, 2022 two mechanic’s lien in the total amount of $616,785 was placed on our Denver, CO Quincy clinic.
On August 22 and August 26, 2022 two mechanic’s lien in the amount of $593,162 was placed on our Denver, CO Radiant clinic.
On October 4, 2022 a mechanic’s lien in the amount of $334,508 was placed on our St. Louis Park, MN clinic.
On November 16, 2022 a mechanic’s lien in the amount of $961,577 was placed on our Eagan, MN Vikings Parkway clinic.
On or about December 20, 2022 a mechanic’s lien in the amount of $27,951 was placed on the Wayzata, MN.
All liens were filed pursuant to Minnesota’s and Colorado’s Mechanic’s statutes and relate to past due obligations for construction and related work on certain of our clinics. Pursuant to Minnesota’s and Colorado’s Mechanic’s statutes, the contractor-creditors may have the ability to commence a mechanic’s lien foreclosure action against the real properties in question to recover amounts due, costs, legal fees, and interest.
Additionally, the mechanic’s liens could result in defaults under our leases for the affected clinic locations. If that occurs, the leases for the affected clinic locations allow for acceleration of amounts due under the lease, among other damages and remedies.
We are attempting to negotiate modifications to our agreements with the contractor-creditors. However, we cannot assure you that our efforts will be successful. If we are unable to timely clear the mechanic’s liens filed against our clinics or otherwise negotiate modifications to our agreements with the contractor-creditors, it will have a material adverse impact on our business, results of operations, and financial condition.

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ITEM 3. LEGAL PROCEEDINGS
ITEM 3. LEGAL PROCEEDINGS
From time to time, we may become involved in legal proceedings or be subject to claims arising in the ordinary course of our business.
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 18, 2020, the Company’s former President and COO completed and applied on behalf of the Company to Bank of America, NA (“Bank of America”) for a PPP loan, which was subsequently approved. On April 25, 2020, the Company entered into an unsecured Promissory Note (the “Note”) with Bank of America for a loan in the original principal amount of $460,406, and the Company received the full amount of the loan proceeds on May 4, 2020.
On July 21, 2020, Bank of America notified the Company in writing that it should not have received $440,000 of the loan proceeds disbursed under the Note. The Company investigated the terms of the application and discovered its former President had erroneously represented it was refinancing an Economic Injury Disaster Loan when no such loan had been received. Bank of America requested that the Company remit the funds received back to Bank of America. The Company negotiated the conversion of this to a 60 month note at 1% interest. We are currently in default on this note. If we are not successful bring it current, it could have a material adverse effect on our financial condition.
On June 23, 2022, The Good Clinic LLC was notified that a former employee had filed a lawsuit for wrongful termination. The Good Clinic believes the lawsuit is without merit. The Company was not named in the suit. The Company expects to resolve it for nominal consideration.
On October 25, 2022, the company was notified that a vendor filed suit related to a contract dispute naming both The Good Clinic and The CEO of the Good Clinic. This suit was settled on May 5, 2023, and dismissed with prejudice on May 12, 2023. The settlement included the issuance of the Company’s restricted common stock. As a part of the settlement the Company issued 2,552 shares of its restricted common stock to the plaintiff and it issued to the CEO of The Good Clinic 19,622 of its restricted common stock, plus $3,000 in cash for reimbursement of expenses related to settling the suit with the vendor.
The Company has a number of legal situations involved with the winding down of its clinic business activities including claims regarding certain construction contracts and as a part of the process of cancellation of leases. See “Properties” for additional details. The following is a summary as of the date of this filing:
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The Wayzata, MN clinic leases was terminated for a commitment to pay $25,000.
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The two Denver, Colorado clinic lease, known as Quincy and Radiant, possession has been relinquished to the landlords. The lease obligations remain in negotiations as does the handling of the mechanics liens placed on the properties.
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The Eagan clinic, aka Vikings clinic, gave up possession in January of 2023. The mechanics lien has been placed on the property and was settled by the landlord in a confidential settlement with the lien holder. Mitesco is now in settlement negotiations with the landlord for the handling of lease obligations.
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The St. Paul clinic possession was relinquished in March 2023. The handling of lease obligations remain in negotiations as does the handling of the mechanics liens placed on the properties.
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The St. Louis Park clinic possession was relinquished in April 2023. The handling of lease obligations remain in negotiations as does the handling of the mechanics liens placed on the properties.
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The Maple Grove clinic eviction occurred in April 2023. The handling of lease obligations remain in negotiations as does the handling of the mechanics liens placed on the properties.
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The Northeast Minneapolis clinic, aka Nordhaus clinic, possession was relinquished in May 2023. There is no lien on the property. The handling of lease obligations remains in negotiations with the landlord.

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ITEM 4. MINE SAFETY DISCLOSURE
ITEM 4. MINE SAFETY DISCLOSURES
Not Applicable.
PART II

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ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Our Common Stock is quoted on the OTCQB under the symbol “MITI.”
On June 8, 2023, the price of our Common Stock as reported on the OTCQB was $0.94 and we have approximately 578 holders of record of our Common Stock, and approximately 7,000 shareholders including smaller holders and those with restricted shares not currently in the market.
Listing
Our Common Stock is traded on the OTCQB under the symbol MITI. There is no established trading market for the Series A Warrants and Series B Warrants or any of our Preferred Shares.
DIVIDEND POLICY
We have never declared or paid any cash dividends on our Common Stock. Under the Delaware law, we may declare and pay dividends on our capital stock either out of our surplus, as defined in the relevant Delaware statutes, or if there is no such surplus, out of our net profits for the fiscal year in which the dividend is declared and/or the preceding fiscal year. If, however, the capital of our company, computed in accordance with the relevant Delaware statutes, has been diminished by depreciation in the value of our property, or by losses, or otherwise, to an amount less than the aggregate amount of the capital represented by the issued and outstanding stock of all classes having a preference upon the distribution of assets, we are prohibited from declaring and paying out of such net profits and dividends upon any shares of our capital stock until the deficiency in the amount of capital represented by the issued and outstanding stock of all classes having a preference upon the distribution of assets shall have been repaired. The Company does not intend to declare or pay any cash dividends on its Common Stock in the foreseeable future. The holders of our Common Stock are entitled to receive only such dividends (cash or otherwise) as may be declared by our Board of Directors.
On December 31, 2019, we issued 26,227 shares of its Series X Preferred stock in order to settle certain of the Company’s obligations. The Series X Preferred shares have a liquidation preference of $25.00 per share and will pay a 10% per year dividend based upon the liquidation value. The dividend may be paid in cash or in the issuance of restricted Common Stock. If the Company chooses to pay the dividend in restricted Common Stock the number of shares issued to fulfill the dividend payment shall be determined based on the stock price on the date the dividend award is made by the Board of Directors. The Series X has 400 votes per share and votes with our Common Stock. As of June 8, 2023, the outstanding Series X Preferred shares was 24,227.
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 and to be paid within 15 days after the end of each of our fiscal quarters. The Series C Preferred Stock along with the Series D Preferred stock ranks senior to all other preferred stock of the Company except in relation to the Company’s Series X 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.
Each share of Series D Preferred Stock accrues dividends on a quarterly basis in arrears, at the rate of 6% per annum of the Stated Value and to be paid within 15 days after the end of each of our fiscal quarters. The Series D Preferred Stock along with the Series C Preferred Stock ranks senior to all other preferred stock of the Company except in relation to the Company’s Series X 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.
Equity Compensation Plans
For information on the Company’s equity compensation plans, see “Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.”
Recent Sales of Unregistered Shares
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 8,000 shares of common stock previously issued as compensation. These shares were valued at par value of $0.01 or a total value of $80; 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 “Gardner Equity Agreement”). Pursuant to Gardner Equity Agreement, the Company issued shares of restricted common stock to Gardner in exchange for the Company Debt Obligations, as defined below.
The Gardner Equity Agreement settled for certain accounts payable amounts owed by the Company to Gardner. The Gardner Equity 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 $12,50. As a result, 63,593 Restricted Shares were authorized to be issued.
On March 22, 2022 and March 31, 2022, the Company issued an aggregate 30,835 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 $12,50 per share and recorded the amount of $385,431 as waiver fees. 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 34,400 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 $12.50 per share; valuation purposes, the common stock was valued at the market price on the date of the transaction of $6.35 per share. 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 7,648 shares of common stock at a price of $12,50 per share which were previously subscribed for the conversion of accounts payable in the amount of $95,558.
On April 27, 2022, the Company issued 14,400 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 1,929 shares of common stock with a contract price of $12.50 per share or $24,118 and a grant date market value of $8.00 or $15,434 to Larry Diamond, it’s Chief Executive 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 1,929 shares of common stock at a price of $12.50 to Mr. Diamond pursuant to Diamond Note 3.
On May 1, 2022, the Company issued 15,000 shares of common stock to a service provider at a price of $6.88 per share.
On May 10, 2022, the Company entered into a securities purchase agreement with Kishon Investments, LLC with respect to the sale and issuance of: (i) an initial commitment fee in the amount of $159,259 in the form of 12,741 shares of the Company’s common stock, (ii) promissory note in the principal amount of $277,777 due on November 10, 2022, and (iii) warrants to purchase up to 5,556 shares of the common stock. The note and warrants were issued on May 10, 2022 and were held in escrow pending effectiveness of the Purchase Agreement.
Pursuant to the terms of the purchase agreement, the initial 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 $12.50 per share, subject to adjustment.
On May 18, 2022, the Company issued 386 shares of common stock to Larry Diamond, it’s Chief Executive Officer at a contractual price of $12.50 per share and a market price at issuance date of $7.585 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 386 shares of common stock at a price of $12.50 to Mr. Diamond pursuant to Diamond Note 4.
On May 23, 2022, the Company issued 386 shares of common stock to Jessica Finnegan at a contractual price of $12.50 per share and a market price at issuance date of $8.97 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 386 shares of common stock at a price of $12.50 to Ms. Finnegan pursuant to Finnegan Note 1.
On May 26, 2022, the Company issued 1,688 shares of common stock to the May 26 Lenders at a contractual price of $12.50 per share and a market price at issuance date of $7.585 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 1,688 shares of common stock at a price of $25.00 to the May 26 Lenders pursuant to the May 26, 2022.
On June 7, 2022, the Company issued 8,103 shares of common stock at a price of $12.50 per share to investors for accumulated dividends on Series X Preferred Stock. See note 12.
On June 9, 2022, the Company issued 7,284 shares of common stock to the June 9 Lenders at a contractual price of $12.50 per share and a market price at issuance date of $7,425 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 7,284 shares of common stock at a price of $25.00 to the May 26 Lenders pursuant to the June 9 notes.
On June 22, 2022, the Company issued 12,741 shares of common stock at fair value of $10.45 per share to GS Capital at a fair value of $10.45 per share as a commitment fee.
On June 22, 2022, the Company issued 8,600 shares of common stock at fair value of $10.45 per share to Anson East and an additional 25,800 shares of common stock at a fair value of $10.45 per share to Anson Investments as a commitment fee.
On July 7, 2022, the Company issued 2,412 shares of common stock to William Mackay at a contractual price of $12.50 per share and a market price at issuance date of $7.445 per share as commitment shares as set forth and defined in the Mackay Note. The Company recorded these shares at their relative fair value of the components of Mackay Note, or $12,500, and recorded a gain in the amount of $5,456 on this transaction. The Company also issued five-year warrants to purchase 2,412 shares of common stock at a price of $12.50 to Mr. Mackay pursuant to the Mackay Note.
On July 7, 2022, the Company issued 193 shares of common stock to Charlies Schrier at a contractual price of $12.50 per share and a market price at issuance date of $7.445 per share as commitment shares as set forth and defined in the Schrier Note. The Company recorded these shares at their relative fair value of the components of Schrier Note, or $1,000, and recorded a gain in the amount of $436 on this transaction. The Company also issued five-year warrants to purchase 193 shares of common stock at a price of $25.00 to Mr. Schrier pursuant to the Schrier Note.
On July 21, 2022, the Company issued 241 shares of common stock to Juan Carlos Iturregui, a related party, at a contractual price of $12.50 per share and a market price at issuance date of $7.225 per share as commitment shares as set forth and defined in the Iturregui Note. The Company recorded these shares at their relative fair value of the components of Schrier Note, or $1,225, and recorded a gain in the amount of $518 on this transaction. The Company also issued five-year warrants to purchase 241 shares of common stock at a price of $25.00 to Mr. Iturregui pursuant to the Iturregui Note.
On July 21, 2022, the Company issued 2,460 shares of common stock to the Michael C. Howe Living Trust, a related party, at a contractual price of $12.50 per share and a market price at issuance date of $7.225 per share as commitment shares as set forth and defined in the Howe Note 3. The Company recorded these shares at their relative fair value of the components of Howe Note 3, or $12,495, and recorded a gain in the amount of $5,729 on this transaction. The Company also issued five-year warrants to purchase 2,460 shares of common stock at a price of $25.00 to the Michael C. Howe Living Trust pursuant to the Howe Note 3.
On July 26, 2022, the Company issued 482 shares of common stock to Eric S. Nommsen at a contractual price of $12.50 per share and a market price at issuance date of $6.84 per share as commitment shares as set forth and defined in the Nommsen Note. The Company recorded these shares at their relative fair value of the components of Nommsen Note, or $2,350, and recorded a gain in the amount of $949 on this transaction. The Company also issued five-year warrants to purchase 482 shares of common stock at a price of $25.00 to Mr. Nommsen pursuant to the Nommsen Note.
On July 27, 2022, the Company issued 482 shares of common stock to James H. Caplan at a contractual price of $12.50 per share and a market price at issuance date of $6.935 per share as commitment shares as set forth and defined in the Caplan Note. The Company recorded these shares at their relative fair value of the components of the Caplan Note, or $2,350, and recorded a gain in the amount of $995 on this transaction. The Company also issued five-year warrants to purchase 482 shares of common stock at a price of $25.00 to Mr. Caplan pursuant to the Caplan Note.
On August 4, 2022, the Company issued a total of 241 shares of common stock to Jessica, Kevin C., Brody, Isabella, and Jack Finnegan at a contractual price of $25.00 per share and a market price at issuance date of $6.42 per share as commitment shares as set forth and defined in the Finnegan Note 3. The Company recorded these shares at their relative fair value of the components of the Finnegan Note 3, or $1,000, and recorded a gain in the amount of $448 on this transaction. The Company also issued five-year warrants to purchase a total of 241 shares of common stock at a price of $25.00 to the holders of the Finnegan Note 3.
On August 4, 2022, the Company issued 984 shares of common stock to Jack Enright at a contractual price of $12.50 per share and a market price at issuance date of $6.42 per share as commitment shares as set forth and defined in the Caplan Note. The Company recorded these shares at their fair value of $6,317.
On August 4, 2022, the Company issued 12,064 shares of common stock to a service provider as payment for investor relations services. The transaction was effective August 1, 2022 and has a six month term. The shares were valued at the closing price of the Company’s common stock on August 4, 2022, of $6.42 per share or $77,448.
On August 18, 2022, the Company issued 1,640 shares of common stock to the Michael C. Howe Living Trust, a related party, at a contractual price of $12.50 per share and a market price at issuance date of $6.57 per share as commitment shares as set forth and defined in the Howe Note 4. The Company recorded these shares at their fair value of $10,775.
On September 2, 2022, the Company issued 582 shares of common stock to John Mitchell at a contractual price of $12.50 per share and a market price at issuance date of $5.365 per share as commitment shares as set forth and defined in the Mitchell Note. The Company recorded these shares at their fair value of $3,124.
On September 2, 2022, the Company issued 492 shares of common stock to Frank Lightmas at a contractual price of $12.50 per share and a market price at issuance date of $5.365 per share as commitment shares as set forth and defined in the Lightmas Note. The Company recorded these shares at their fair value of $2,640.
On September 2, 2022, the Company issued 246 shares of common stock to Lisa Lewis at a contractual price of $12.50 per share and a market price at issuance date of $5.365 per share as commitment shares as set forth and defined in the Lewis Note. The Company recorded these shares at their fair value of $1,320.
On September 2, 2022, the Company issued 246 shares of common stock to Sharon Goff at a contractual price of $12.50 per share and a market price at issuance date of $5.65 per share as commitment shares as set forth and defined in the Goff Note. The Company recorded these shares at their fair value of $1,320.
On September 9, 2022, the Company issued 820 shares of common stock to Cliff Hagan at a contractual price of $12.50 per share and a market price at issuance date of $5.75 per share as commitment shares as set forth and defined in the Hagan Note. The Company recorded these shares at their fair value of $4,715.
On September 14, 2022, the Company issued 1,640 shares of common stock to Darling Capital at a contractual price of $12.50 per share and a market price at issuance date of $6.60 per share as commitment shares as set forth and defined in the Darling Capital Note. The Company recorded these shares at their fair value of $10,824.
On September 15, 2022, the Company issued 410 shares of common stock to Mack Leath at a contractual price of $12.50 per share and a market price at issuance date of $6.995 per share as commitment shares as set forth and defined in the Leath Note. The Company recorded these shares at their fair value of $2,868.
On October 1, 2022, the Company issued 6,329 shares of common stock at a price of $16.00 per share to a service provider.
On November 18, 2022, the Company issued 91,328 shares of common stock to AJB pursuant to a commitment fee agreement.

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ITEM 6. SELECTED FINANCIAL DATA
ITEM 6. SELECTED FINANCIAL DATA
The Company is a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and is not required to provide the information required under this item.

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with and is qualified in its entirety by and should be read together with our financial statements and the related notes thereto appearing elsewhere in this Form 10-K. This discussion contains certain forward-looking statements that involve risks and uncertainties, as described under the heading “Cautionary Note Regarding Forward-Looking Statements.” Actual results could differ materially from those projected in the forward-looking statements.
We are a holding company with current operating plans to participate in the healthcare industry through the development of healthcare services, and with a view toward additional services and technology that may find a ready market in the healthcare industry. During 2022 we continued on our plan to open primary care clinics around the United States in select markets, utilizing the experience, expertise, and training of licensed, advanced degreed nurse practitioners (“Nurse Practitioners”). In late 2022 we made a decision to discontinue our clinic businesses due to a lack of available capital required for their continued operation and growth.
We have always had a view toward additional healthcare technology and services offerings, and are committing more time to that effort going forward. We have a number of near term opportunities that we hope to pursue, assuming the capital markets make sufficient funding available at reasonable rates.
Our operations are subject to comprehensive federal, state, and local laws and regulations in the jurisdictions in which it does business. There also continues to be a heightened level of review and/or audit by federal and state regulators of the health and related benefits industry’s business and reporting practices. As of the date of this Form 10-K, we are not subject to any actual or anticipated regulatory reviews or audits relating to our operations.
The laws and rules governing our businesses and interpretations of those laws and rules continue to evolve each year and are subject to frequent change. The application of these complex legal and regulatory requirements to the detailed operation of our businesses creates areas of uncertainty. Further, there are numerous proposed health care, financial services and other laws and regulations at the federal and state level some of which could adversely affect our businesses if they are enacted. We cannot predict whether pending or future federal or state legislation will have an adverse effect on our business.
We can give no assurance that its businesses, financial condition, operating results and/or cash flows will not be materially adversely affected, or that we will not be required to materially change its business practices, based on: (i) future enactment of new health care or other laws or regulations; (ii) the interpretation or application of existing laws or regulations, including the laws and regulations described in this Government Regulation section, as they may relate to one or more of our businesses, one or more of the industries in which we compete and/or the health care industry generally; (iii) our pending or future federal or state governmental investigations.
Reverse Stock Split
On December 12, 2022, our board of directors approved the filing of a certificate of amendment to our amended and restated certificate of incorporation (the “Amendment”) with the Secretary of State of the State of Delaware to affect the one-for-fifty. The Amendment became effective at 5:00 p.m. Eastern Time on December 12, 2022.
Pursuant to the Amendment, at the effective time of the Amendment, every fifty (50) shares of our issued and outstanding common stock was automatically combined into one (1) issued and outstanding share of common stock The Reverse Stock Split affected all shares of our common stock outstanding immediately prior to the effective time of the Amendment. No fractional shares were issued as a result of the Reverse Stock Split. Stockholders of record who would otherwise be entitled to receive a fractional share received a full share thereof. As a result of the Reverse Stock Split, proportionate adjustments were made to the per share exercise price and/or the number of shares issuable upon the exercise or vesting of all stock options and warrants issued by us and outstanding immediately prior to the effective time of the Amendment, which resulted in a proportionate decrease in the number of shares of our common stock reserved for issuance upon exercise or vesting of such stock options and warrants and a proportionate increase in the exercise price of all such stock options and warrants. In addition, the number of shares reserved for issuance under our equity compensation plans immediately prior to the effective time of the Amendment were reduced proportionately. All share and per share amounts of common stock presented in this Annual Report on Form 10-K have been retroactively adjusted to reflect the Reverse Stock Split.
Business Summary
We opened our first primary care clinic “The Good Clinic” in Northeast Minneapolis, Minnesota in February 2021, and added five additional operating clinics during 2022 for a total of six clinics open and operating at October 14, 2022 and three under construction (one in Wayzata, MN and two in Denver Colorado). In December of 2022 we decided to close the clinics due to a lack of available capital to fund their ongoing operation and growth.
We have always had a view toward additional healthcare technology and services offerings, and are committing more time to that effort going forward. We have a number of near term opportunities that we hope to pursue, assuming the capital markets make sufficient funding available at reasonable rates.
Results of Operations
The following period-to-period comparisons of our financial results are not necessarily indicative of results for the current period or 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.
Years ended December 31, 2022 and 2021
Revenue
The Company recognized revenue of $0.7 million for the year ended December 31, 2022, compared to $0.1 for the year ended December 31, 2021. The increase in revenue is the result of the opening of The Good Clinic’s four locations.
Cost of Sales
The Company incurred approximately $2.1 million of cost of goods sold for the year ended December 31, 2022, compared to $0.5 for the year ended December 31, 2021. The increase in cost of goods sold is the result of the opening of The Good Clinic’s four locations.
Gross Loss
Our gross loss was $1.4 million for the year ended December 31, 2022, compared to $0.4 for the year ended December 31, 2021.
Operating Expenses
Our total operating expenses for the year ended December 31, 2022, were $18.2 million compared to $6.1 million for the year ended December 31, 2021.
Operating Expense for the year ended December 31, 2022 included $7.6 million for the impairment of fixed assets in connection with the closing of our clinics; there was no comparable transaction during the year ended December 31, 2021. Other operating expense for the year ended December 31, 2022 were comprised primarily of $3.3 million payroll and payroll taxes, $1.3 million in legal and professional fees, $1.1 million in office and facilities expenses, $0.9 million in depreciation, $0.5 million of stock-based compensation, $0.5 million in consulting fees, $0.4 million in advertising, marketing, and investor relations expenses, and $1.2 million in other operating costs.
Client acquisition costs were significantly below target at $60 per new client versus the budgeted $200 per new client. This was achieved due to the high rate of patient referrals of friends and family as well as lower than plan funding of advertising due to a lack of available capital. In April of 2022 paid advertising was suspended. For the remainder of 2022 operations, after advertising was suspended, approximately 50% of appointments were for new clients to the clinics.
Operating Expense for the year ended December 31, 2021 were comprised primarily of $1.4 million payroll and payroll taxes, $0.8 million of non-cash compensation, $1.1 million in legal and professional fees, $0.6 million in marketing expenses, $1.0 million in office and facilities expenses, $0.6 million in consulting fees and $1.3 million in other operation costs.
Other Income and Expenses
Interest expense was approximately $3.2 million for the year ended December 31, 2022, compared to approximately $1.0 million for the year ended December 31, 2021. Interest expense - related parties was approximately $1.2 million for the year ended December 31, 2022 compared to $0 for the year ended December 31, 2021. The increase in interest expense was a result of the increased level of debt during fiscal 2022.
During the year ended December 31, 2021, we recorded a loss on a legal settlement of $0.1 million. There was not an equivalent gain or loss during the year ended December 31, 2021 prior period.
During the year ended December 31, 2022, we recorded a loss on true-up shares issued with notes payable in the amount of $9,007. There were no comparable transactions during the prior period.
During the year ended December 31, 2022, we recorded a gain on commitment fee shares in the amount of $0.1 and a gain on commitment fee shares issued to related parties in the amount of $0.1. There were no comparable transactions during the year ended December 31, 2021.
During the year ended December 31, 2022, we recorded a loss on settlement of accrued salary in the amount of $15,032. There were no comparable transaction during the year ended December 31, 2021.
During the year ended December 31, 2021, we recorded a gain on settlement of notes payable of approximately $1,836. There was no comparable transaction during the current period.
During the year ended December 31, 2022, we recorded a loss on revaluation of derivative liabilities in the amount of $687,178 compared to a loss on revaluation of derivative liabilities in the amount of $493,455 during the year ended December 31, 2021.
For the year ended December 31, 2022, we had a net loss available to common shareholders of approximately $23.6 million, or a net loss per share, basic and diluted of ($5.29) compared to a net loss available to common shareholders of approximately $7.9 million, or a net loss per share, basic and diluted of ($2.77), for the year ended December 31, 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 December 31, 2022, we had cash and cash equivalents of approximately $36,000 compared to cash of approximately $1.2 million as of December 31, 2021.
Net cash used in operating activities was approximately $5.2 million for the year ended December 31, 2022. This is the result of our business development efforts pertaining to the start-up our operations. Cash used in operations for the year ended December 31, 2021, was approximately $5.0 million.
Net cash used in investing activities was approximately $1.7 million for the year ended December 31, 2022 compared to approximately $1.9 million for the year ended December 31, 2021. This amount does not include approximately $4.5 million of capital expenditures included in accounts payable at December 31, 2022. The amounts relate to the purchase of fixed assets and leasehold improvement on our first clinic.
Net cash provided by financing activities for the year ended December 31, 2022, was approximately $5.8 million, consisting of proceeds from a notes payable of approximately $4.4 million and notes payable - related parties of approximately $1.5 million. We also received landlord financing of leasehold improvements of approximately $0.2 million. Partially offsetting the proceeds were principal payments on a note payable to a related party of was approximately $0.2 million.
We have made a strategic decision to reduce our capital needs by closing our clinic operations in the fourth quarter of 2022, and releasing a significant portion of our staff. As we redevelop our new strategy for lower cost operations, we hope to slowly open clinics, using the same staffing approach, but with a wider range of services for a broader portion of the population with healthcare needs.
As of the date of this filing:
●
The Wayzata, MN clinic leases was terminated for a commitment to pay $25,000.
●
The two Denver, Colorado clinic leases, known as Quincy and Radiant, possession has been relinquished to the landlords. The lease obligations remain in negotiations as does the handling of the mechanics liens placed on the properties.
●
The Eagan clinic, aka Vikings clinic, gave up possession in January of 2023. The mechanics lien has been placed on the property was settled by the landlord in a confidential settlement with the lien holder. Mitesco is now in settlement negotiations with the landlord for the handling of lease obligations.
●
The St. Paul clinic possession was relinquished in March 2023. The handling of lease obligations remain in negotiations as does the handling of the mechanics liens placed on the properties.
●
The St. Louis Park clinic possession was relinquished in April 2023. The handling of lease obligations remain in negotiations as does the handling of the mechanics liens placed on the properties.
●
The Maple Grove clinic eviction occurred in April 2023. The handling of lease obligations remain in negotiations as does the handling of the mechanics liens placed on the properties.
●
The Northeast Minneapolis clinic, aka Nordhaus clinic, possession was relinquished in May 2023. There is no lien on the property. The handling of lease obligations remains in negotiations with the landlord.
●
Currently, we have the Eden Prairie, MN clinic. It is closed. If capital becomes available, we will work to reopen this facility.
If capital is available, we may reopen this location of The Good Clinic using a modified approach that emphasizes care for chronic illnesses and consumer direct services. We may explore the sale of the Good Clinic concept as well. The Company is refocusing its strategy on Mitesco’s original business focus of acquiring smaller health care technology companies that are at or approaching cashflow positive operations and can benefit from the expertise of the board and management, Mitesco’s access to public market capital, and the efficiency of purchasing services achievable within a holding company structure.
Our financial statements as presented in this filing reflect total liabilities of over $20 million, including certain reserves for potential liabilities related to ceased operations related largely to long term lease obligations and costs related to the construction of our facilities. A substantial amount of these liabilities may be reversed on negotiations, and it is our goal to settle the remaining amounts with non -cash consideration as noted above.
There can be no assurance that all of these vendors will be willing to settle their obligations with the Company on the proposed terms, or in amounts acceptable to the Company. We remain undercapitalized and until we have resolved most of these obligations it is unlikely that we will be able to attract sufficient capital on reasonable terms to execute our business strategy. We remain committed to resolution of these outstanding items in a fair and timely manner.
Critical Accounting Policies
We believe that the accounting policies described below are critical to understanding our business, results of operations and financial condition because they involve the use of more significant judgments and estimates in the preparation of our consolidated financial statements. An accounting policy is deemed to be critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time the estimate is made, and any changes in the assumptions used in making the accounting estimates that are likely to occur could materially impact our consolidated financial statements.
Revenue Recognition
On January 1, 2018, the Company adopted the new revenue recognition accounting standard issued 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 the customer in exchange for consideration, are satisfied. The standard also requires expanded disclosures regarding the Company’s revenue recognition policies and significant judgments employed in the determination of revenue.
The 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) and therefore included as a reduction to net operating revenues in 2018. 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 recognition standards that required it to be 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.
Stock-Based Compensation
We recognize compensation costs to employees under FASB ASC Topic 718, Compensation - Stock Compensation (“ASC 718”). Under FASB ASC 718, companies are required to measure 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 are 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 other than employees are recorded pursuant to the guidance contained in ASU 2018-07 (“ASU 2018-07”), Improvements to Non-employee Share-Based Payment Accounting, which simplified the accounting for share-based payments granted to non-employees for goods and services. Under the ASU 2018-07, most of the guidance on such payments to non-employees would be aligned with the requirements for share-based payments granted to employees.
Common Stock Purchase Warrants
The Company accounts for common stock purchase warrants in accordance with FASB ASC Topic 815, Accounting for Derivative Instruments and Hedging Activities (“ASC 815”). 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-Scholes-Merton (“BSM”) option-pricing model value method for valuing the impact of the expense associated with these warrants.
Income Taxes
The Company accounts for income taxes under ASC 740 Income Taxes. Under the asset and liability method of ASC 740, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statements carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period the enactment occurs. A valuation allowance is provided for certain deferred tax assets if it is more likely than not that the Company will not realize tax assets through future operations. No deferred tax assets or liabilities were recognized as of December 31, 2022 and 2021.
As part of the process of preparing our consolidated financial statements, we must estimate our actual current tax liabilities and assess temporary differences resulting from differing treatment of items for tax and accounting purposes. These differences result in deferred tax assets and liabilities, which are included within the balance sheet. We must assess the likelihood that the deferred tax assets will be recovered from future taxable income and, to the extent we believe that recovery is not likely, a valuation allowance must be established. To the extent we establish a valuation allowance or increase or decrease this allowance in a period, the impact will be included in income tax expense in the statement of operations.
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.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements that have or are likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to stockholders.

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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and is not required to provide the information required under this item.

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
MITESCO, INC.
INDEX TO THE CONSOLIDATED FINANCIAL STATEMENTS
PAGE
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (PCAOB 587)
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED STATEMENTS OF OPERATIONS
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)
CONSOLIDATED STATEMENTS OF CASH FLOWS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of
Mitesco, Inc. and subsidiaries
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Mitesco, Inc. and subsidiaries (the Company) for the two years then ended December 31, 2022 and 2021, and the related consolidated statements of operations, stockholders’ equity (deficit) and cash flows for the two years ended December 31, 2022, and the related notes (collectively referred to as the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the consolidated results of its operations and its cash flows for the two years ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America.
The Company's Ability to Continue as a Going Concern
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the consolidated financial statements, the Company has an accumulated deficit, recurring losses, and expects continuing future losses that raises substantial doubt about the Company’s ability to continue as a going concern. Management's evaluation of the events and conditions and management’s plans regarding these matters are also described in Note 2. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters:
Critical audit matters are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements, and (2) involved our especially challenging, subjective, or complex judgments.
The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (i) relate to accounts or disclosures that are material to the financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
Derivative liability on Convertible Promissory Notes - Refer to Note 9 and 12 of the financial statements
Critical Audit Matter Description
During the year ended December 31, 2022, the Company entered into five Securities Purchase Agreements with respect to the sale and issuance to the investors of (i) an initial commitment fee in the form of shares (Commitment Fee Shares) of the Company's common stock which Commitment Fee Shares can be decreased if the Company repays the notes on or prior to their maturity, (ii) a promissory note and (iii) common stock purchase warrant to purchase shares of common stock. As described in Note 9 and 12 to the financial statements, as of December 31, 2022, the Company utilized a Monte Carlo Simulation and PWERM model to value a derivative liability relating to the "True-Up Share Obligations and Warrants", respectively in accordance with ASC 820, “Fair Value Measurement”. A Monte Carlo simulation is used to model the probability of different outcomes in a process that cannot easily be predicted due to the intervention of random variables. It is a technique used to understand the impact of risk and uncertainty and establishes a fair value based on the most likely outcome. The PWERM Model develops an estimate based on the probability-weighted present value of various future outcomes.
We identified the valuation of the derivative liability relating to the above note payable as a critical audit matter because the results cannot be duplicated and requires a high degree of auditor judgment. The principal considerations for our determination that performing procedures relating to the valuation of the note features as a critical audit matter are (1) there was a high degree of auditor judgment and subjectivity in applying procedures relating to the fair value of the derivative liability due to the significant judgments made by management when developing the estimates and (2) significant audit effort was required in evaluating the significant assumptions relating to the estimates, including the assumptions used in the simulations. In addition, the audit effort involved the use of professionals with specialized skill and knowledge to assist in performing the following procedures and evaluating the audit evidence obtained.
How the Critical Audit Matter was Addressed in the Audit
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the financial statements. These procedures included the following:
●
Performed an analysis of the Company's Convertible Note, Warrants and True-Up Obligation including various conversion and other provisions
●
Inquiry of management regarding the development of the assumptions used in the valuation of the derivative liability.
●
Testing management’s process included evaluating the appropriateness of the valuation models, testing the completeness, accuracy, and relevance of underlying data used in the model, and testing the reasonableness of significant assumptions, including the stock price, term, volatility, annual expected return, discount rate and dividend yield.
●
Professionals with specialized skill and knowledge were used to assist in evaluating the reasonableness of significant assumptions.
●
Evaluated the experience and qualifications of the Company’s external consultant assisting with the estimate of fair value. Made inquiries of the Company’s external consultant to ascertain objectivity or bias of the external consultant.
●
Obtained an understanding of the nature of the work the Company’s external consultant performed, including the objectives and scope of the external consultant’s work and the methods or assumptions used. Identified and evaluated assumptions utilized by the external consultant and the supporting evidence provided.
●
Identified and evaluated significant assumptions used by the Company’s external consultant for reasonableness.
RBSM LLP
We have served as the Company’s auditor since 2020.
Las Vegas, NV
July 14, 2023
MITESCO, INC.
CONSOLIDATED BALANCE SHEETS
December 31,
December 31,
ASSETS
Current assets
Cash and cash equivalents
$ 35,623
$ 1,164,483
Accounts Receivable
30,943
44,313
Inventory
-
25,314
Prepaid expenses
113,722
72,985
Total current assets
180,288
1,307,095
Right to use operating leases, net
544,063
3,886,866
Construction in progress
-
1,984,701
Fixed assets, net of accumulated depreciation of $.06 million and $19,600
1,877,629
3,476,164
Total Assets
$ 2,601,980
$ 10,654,826
LIABILITIES AND (DEFICIENCY IN) STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued liabilities
$ 7,353,215
$ 3,976,064
Accrued interest
362,094
7,657
Accrued interest - related parties
198,753
-
Derivative liabilities
568,912
-
Lease liability - operating leases, current
442,866
161,838
Notes payable, net of discounts of $0.04 million and $0 million
5,112,701
-
Notes payable - related parties, net of discounts of $0.03 million and $0 million
2,776,962
588,432
SBA Loan Payable
460,406
460,406
Other current liabilities
96,136
169,422
Preferred stock dividends payable
395,407
145,539
Preferred stock dividends payable - related parties
35,019
49,630
Total current liabilities
17,802,471
5,558,988
Lease Liability- operating leases, non-current
3,936,858
3,972,964
Total Liabilities
21,739,329
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; 10,000,000 shares designated Series D; and 27,324 shares designated Series X:
-
-
Preferred stock, Series A, $0.01 par value, 0 shares issued and outstanding as of December 31, 2022 and 2021
-
-
Preferred stock, Series C, $0.01 par value, 1,038,708 and 940,644 shares issued and outstanding as of December 31, 2022 and 2021, respectively
10,476
9,406
Preferred stock, Series D, $0.01 par value, 3,100,000 shares issued and outstanding as of December 31, 2022 and 2021
31,000
31,000
Preferred stock, Series X, $0.01 par value, 24,227 shares issued and outstanding at December 31, 2022 and 2021
Common stock subscribed
36,575
132,163
Common stock, $0.01 par value, 500,000,000 shares authorized, 4,630,372 and 4,266,669 shares issued and outstanding as of December 31, 2022 and 2021, respectively
46,305
42,667
Additional paid-in capital
29,452,514
26,385,728
Accumulated deficit
(48,714,461
)
(25,478,332
)
Total stockholders' equity (deficit)
(19,137,349
)
1,122,874
Total liabilities and stockholders' equity (deficit)
$ 2,601,980
$ 10,654,826
The accompanying notes are an integral part of these audited consolidated financial statements.
MITESCO, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Years
Ended
December 31,
Revenue-services
$ 673,385
$ 115,994
Revenue-products
17,149
-
Total revenue
690,534
115,994
Cost of goods sold - services
$ 1,979,688
$ 455,587
Cost of goods sold - products
76,530
-
Total cost of goods sold
2,056,218
455,587
Gross (loss) profit
(1,365,684
)
(339,593
)
Operating expenses:
General and administrative
$ 9,221,670
$ 6,058,996
Impairment of fixed assets
7,597,558
-
Total operating expenses
16,819,228
6,058,996
Net Operating Loss
(18,184,912
)
(6,398,589
)
Other income (expense):
Interest expense
(3,210,763
)
(968,471
)
Interest expense - related parties
(1,243,639
)
-
Loss on legal settlement
-
(70,000
)
Loss on true-up shares
(9,007
)
-
Gain on waiver and commitment fee shares
91,444
-
Gain on waiver and commitment fee shares - related parties
81,129
-
Gain on settlement of accrued salary
15,032
-
(Loss) Gain on settlement of accounts payable
(88,235
)
6,045
Gain on settlement of notes payable
-
1,836
Loss on revaluation of derivative liabilities
(687,178
)
(493,455
)
Total other expense
(5,051,217
)
(1,524,045
)
Loss before provision for income taxes
(23,236,129
)
(7,922,634
)
Provision for income taxes
-
-
Net loss
$ (23,236,129
)
$ (7,922,634
)
Preferred stock dividends
(249,868
)
(185,202
)
Preferred stock dividends - related parties
(72,442
)
-
Preferred stock deemed dividends
-
(3,118,530
)
Net loss available to common shareholders
$ (23,558,439
)
$ (11,226,366
)
Net loss per share - basic and diluted
$ (5.29
)
$ (2.77
)
Weighted average shares outstanding - basic and diluted
4,451,962
4,060,005
The accompanying notes are an integral part of these audited consolidated financial statements.
MITESCO, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 2022 and 2021
Preferred Stock Series A
Preferred Stock Series C
Preferred Stock Series D
Preferred Stock Series X
Common Stock
Additional
Common
Paid-in
Stock
Accumulated
Shares
Amount
Shares
Amount
Shares
Amount
Shares
Amount
Shares
Amount
capital
Subscribed
Deficit
Total
Balance, December 31, 2020
4,800
$
-
$ -
-
$ -
26,227
$
3,107,624
$ 31,076
$ 11,863,557
$ -
$ (14,437,168 ) $ (2,542,225 )
Vesting of common stock issued to employees
-
-
-
-
-
-
-
-
-
13,032
-
-
13,032
Vesting of stock options issued to employees
-
-
-
-
-
-
-
-
-
676,423
-
-
676,423
Common stock issued for services
-
-
-
-
-
-
-
21,988
222,259
-
-
222,480
Common stock issued for conversion of notes payable and accrued interest
-
-
-
-
-
-
-
678,884
6,789
2,647,006
-
-
2,653,795
Sale of common stock in private placement
-
-
-
-
-
-
-
133,440
1,334
1,666,666
-
-
1,668,000
Sales 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
Sales of Preferred Stock Series D
-
-
-
3,100,000
31,000
-
-
-
-
1,722,282
-
-
1,753,282
Warrants issued with Preferred Stock Series D
-
-
-
-
-
-
-
-
1,145,418
-
-
1,145,418
Conversion of Preferred Stock Series A to common stock
(4,800 )
(48 )
-
-
-
-
-
12,000
(72 )
-
-
-
Shares issued for exercise of stock options
-
-
-
-
-
-
-
165,634
1,656
237,344
-
-
239,000
Net shares issued in connection with settlement agreement
-
-
-
-
-
(2,000 )
(20 )
(27,241 )
(272 )
128,202
-
-
127,910
Shares of common stock issued for conversion of Preferred Stock Series C
-
-
(2,059,356 )
(20,594 )
-
-
-
-
164,750
1,647
18,947
-
-
-
Shares of common stock issued for accounts payable and accrued liabilities
-
-
-
-
-
-
-
-
-
-
252,029
-
252,029
Stock issued from common stock subscribed
-
-
-
-
-
-
-
9,590
119,770
(119,866 )
-
-
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 )
-
Deemed dividend on Preferred Stock Series D
-
-
-
-
2,786,288
-
(2,786,288 )
-
Preferred stock dividends, $3.62 per share (10% of stated value per year)
-
-
-
-
-
-
-
-
-
-
(185,204 )
-
-
(185,204 )
Warrants issued with note payable
-
-
-
-
261,568
-
-
261,568
Loss for the year ended December 31, 2021
-
-
-
-
-
-
-
-
-
-
-
(7,922,634 )
(7,922,634 )
Balance, December 31, 2021
-
$ -
940,644
$ 9,406
3,100,000
$ 31,000
24,227
$
4,266,669
$ 42,667
$ 26,385,728
$ 132,163
$ (25,478,332 ) $ 1,122,874
Balance, December 31, 2021
-
$ -
940,644
$ 9,406
3,100,000
$ 31,000
24,227
$
4,266,669
$ 42,667
$ 26,385,728
$ 132,163
(25,478,332 )
1,122,874
Vesting of common stock issued to employees
-
-
-
-
4,387
-
-
4,387
Vesting of stock options issued to employees
-
-
-
-
345,578
-
-
345,578
Common stock issued for services
-
-
6,329
101,187
-
-
101,250
Conversion of accounts payable to common stock
-
-
63,593
577,599
-
-
578,235
Commitment fee shares
-
-
119,527
1,196
1,218,466
-
-
1,219,662
Waiver fee shares
-
-
45,235
366,706
-
-
367,158
Shares issued for services
-
-
27,064
180,302
-
-
180,573
Warrants issued with note payable - Diamond 1
-
-
-
-
2,914
-
-
2,914
Warrants issued with note payable - Diamond 2
-
-
-
-
2,213
-
-
2,213
Warrants issued with notes payable
-
-
-
-
89,545
-
-
89,545
Gain on settlement of accrued payroll
-
-
(8,000 )
(80 )
-
-
-
Issuance of shares previously subscribed for conversion of accounts payable
-
-
7,648
95,512
(95,588 )
-
-
Shares issued in connection with make-good agreement
-
-
91,329
318,735
-
-
319,648
Shares issued for Series X dividends
-
-
8,103
86,971
-
-
87,053
Series C Preferred Stock adjusted for prior conversions
106,975
1,070
-
-
-
-
(1,070 )
-
-
-
Preferred stock dividends
-
-
-
-
(322,310 )
-
-
(322,310 )
Shares issued due to rounding in reverse split
-
-
2,875
(29 )
-
-
-
Loss for the year ended December 31, 2022
-
-
-
-
-
-
-
-
-
-
-
-
(23,236,129 )
(23,236,129 )
Balance, December 31, 2022
-
$ -
1,047,619
$ 10,476
3,100,000
$ 31,000
24,227
$
4,630,372
$ 46,305
$ 29,452,514
$ 36,575
(48,714,461 )
(19,137,349 )
The accompanying notes are an integral part of these audited consolidated financial statements.
MITESCO, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years
Ended
December 31,
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss
$ (23,236,129
)
$ (7,922,634
)
Adjustments to reconcile net loss to net cash used in operating activities:
Impairment of assets
7,597,558
-
Depreciation
868,508
182,426
Amortization of right-to-use asset
357,700
162,276
Net gain on settlement of notes payable
-
-
Financing cost - waiver fee shares
565,431
-
Gain on waiver fee shares
(198,273
)
-
Loss on commitment shares
34,707
-
Gain on conversion of accrued salary
(15,032
)
-
(Gain) loss on revaluation of derivative liabilities
687,178
493,455
Loss on settlement of accounts payable
88,235
-
Amortization of discount on notes payable
2,116,194
756,795
Amortization of discount on notes payable - related parties
1,043,240
-
Share-based compensation
451,215
1,039,843
Changes in assets and liabilities:
Accounts receivables
13,370
(44,313
)
Prepaid expenses
139,836
(47,985
)
Inventory
25,314
(25,314
)
Accounts payable and accrued liabilities
3,933,770
54,527
Operating lease liability, net
(126,566 )
75,017
Other current liabilities
(73,286
)
74,166
Accrued interest
354,437
205,795
Accrued interest - related parties
198,753
-
Net cash used in operating activities
(5,173,840
)
(4,995,946
)
CASH FLOWS FROM INVESTING ACTIVITIES
Cash paid for acquisition of fixed assets and construction in progress
(1,748,826
)
(1,928,192
)
Net cash used in investing activities
(1,748,826
)
(1,928,192
)
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 sales of Series D Preferred Stock, net of fees
-
2,873,700
Proceeds from sale of common stock
-
51,500
Proceeds from landlord financing of leasehold improvements
171,000
-
Proceeds from convertible notes payable, net of discount
-
850,000
Proceeds from notes payable - related parties, net of discounts
1,498,750
-
Proceeds from notes payable, net of discounts
4,359,350
-
Principal payments on notes payable related parties
(235,294
)
-
Principal payments on notes payable
-
(179,368
)
Net cash provided by financing activities
5,793,806
8,023,832
Net increase in cash and cash equivalents
(1,128,860
)
1,099,694
Cash and cash equivalents at beginning of period
1,164,483
64,789
Cash and cash equivalents at end of period
$ 35,623
$ 1,164,483
The accompanying notes are an integral part of these audited consolidated financial statements.
MITESCO, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years
Ended
December 31,
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid
$ -
$ 2,680
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Stock issued for common stock subscribed
$ 95,512
$ -
Settlement of derivative liabilities
$ -
$ (1,301,137 )
Preferred stock dividend
$ 322,310
$ -
Deemed dividends on Preferred Stock
$ -
$ 3,118,530
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
$ 578,235
$ 102,333
Conversion of accrued payroll to common stock
$ -
$ 50,000
Conversion of accounts payable to common stock subscribed
$ -
$ 252,029
Discount on notes payable due to warrants
$ 94,672
$ 261,568
(Decrease) Increase in capital expenditures included in accounts payable
$ (51,587 )
$ 3,291,735
The accompanying notes are an integral part of these audited consolidated financial statements.
MITESCO, INC.
Notes to Consolidated Financial Statements
December 31, 2022 and 2021
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, we restructured our operations and acquired Newco4pharmacy, LLC, a development stage company which sought to acquire compounding pharmacy businesses. As a part of the restructuring, we completed a “spin out” of our former business line. On April 24, 2020, we changed our name to Mitesco, Inc.
Since 2020, our 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, we formed an owned subsidiary, Mitesco NA LLC, which holds The Good Clinic LLC, a Colorado limited liability company for our clinic business. The Company had previously established a strategy to address opportunities in Europe seeking technology solutions, or financing situations, through a Dublin based subsidiary, Acelerar Healthcare Holdings Ltd. After a review of its near-term opportunities in North America, the Board of Directors has determined that any efforts in the European community should be discontinued so that it can best focus on its North American operations.
We opened our first The Good Clinic in Minneapolis, Minnesota in the first quarter of 2021 and had six operating clinics during the year ended December 31, 2022, with two additional sites under contract. In the fourth quarter of fiscal 2022 we made the strategic decision to reduce our capital needs by closing our clinic operations and releasing a significant portion of our staff. As we redevelop our new strategy for lower cost operations, we hope to slowly open clinics, using the same staffing approach, but with a wider range of services for a broader portion of the population with healthcare needs.
Reverse Stock Split
On December 12, 2022, the Company effected a one-for-fifty (1-for-50) reverse stock split of its common stock (the “Reverse Stock Split”). All references to common stock, warrants to purchase common stock, options to purchase common stock, share data, per share data and related information contained in the consolidated financial statements have been retrospectively adjusted to reflect the effect of the Reverse Stock Split for all periods presented.
Note 2: Going Concern
Effective December 8, 2022, we closed all of our clinic locations due to a lack of funding. Subsequent to that date we have lost possession of all except one clinic location. Due to difficulty in securing financing, we are uncertain of when or even if we will be able to resume operations at any clinic location.
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. However, as of the date of these consolidated financial statements, no formal agreement exists.
The accompanying 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.
The COVID-19 pandemic, decades-high inflation and concerns about an economic recession in the United States or other major markets has resulted in, among other things, volatility in the capital markets that may have the effect of 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 due to these factors could materially affect the Company’s business and the value of its common stock.
Note 3: Summary of Significant Accounting Policies
Basis of Accounting - The consolidated financial statements are prepared in conformity with accounting principles accepted in the United States of America (“GAAP”).
Principles of Consolidation - The accompanying consolidated financial statements include the accounts of Mitesco, Inc., and its owned subsidiaries Mitesco NA, LLC, The Good Clinic, LLC, and Acelerar Healthcare Holdings, LTD. In addition, we anticipate that we will rely on the operating activities of certain legal entities in which we will not maintain a controlling ownership interest but over which we will have indirect influence and of which we will be considered the primary beneficiary. These entities are typically 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 $36,000 and $1.2 million as of December 31, 2022 and 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
Construction in Progress - Costs for capital assets not yet placed into service are capitalized as construction in progress on the consolidated balance sheets and will be depreciated once placed into service.
Revenue Recognition - On January 1, 2018, the Company adopted the new revenue recognition accounting standard issued 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 the customer in exchange for consideration, are satisfied. The standard also requires expanded disclosures regarding the Company’s revenue recognition policies and significant judgments employed in the determination of revenue.
The 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) and therefore included as a reduction to net operating revenues in 2018. 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 recognition standards that required it to be 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.
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 are 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 will be 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.
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 BSM 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 consolidated financial statements or tax returns. In estimating future tax consequences, the Company considers all expected future events other than 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 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 50%) 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 50% 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 no longer subject to U.S. federal, state, and local income tax examinations for the years before 2012.
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:
●
future expected cash flows from product sales, support agreements, consulting contracts, other customer contracts, and acquired developed technologies and patents; and
●
discount rates utilized in valuation estimates.
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.
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.
Recent Accounting Standards
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, and amends 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. The adoption of this new guidance did not have a material effect on our 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 years ended December 31, 2022 and 2021, respectively:
For the Years Ended
December 31,
Numerator:
Net loss applicable to common shareholders
$ (23,558,439
)
$ (11,226,366
)
Denominator:
Weighted average common shares outstanding
4,451,962
4,060,005
Net loss per share:
Basic and diluted
$ (5.29
)
$ (2.77
)
The Company excluded all common equivalent shares for warrants, options, and convertible instruments from the calculation of diluted net loss per share because all such securities are antidilutive for the periods presented. As of December 31, 2022 and 2021, the following shares were issuable and excluded from the calculation of diluted loss:
December 31,
Options
310,692
374,924
Warrants
672,334
596,400
Preferred Stock
347,652
347,652
Accrued Interest
42,002
17,443
Total
1,372,680
1,336,419
Note 5: Related Party Transactions
The Company was involved in a significant number of fundraising transactions with related parties during the years ended December 31, 2022 and 2021. See notes 10 and 12.
Note 6: Accounts Payable and Accrued Liabilities
Accounts payable and accrued liabilities consisted of the following at December 31, 2022 and 2021:
December 31,
December 31,
Trade accounts payable
$ 6,761,793
$ 3,933,305
Accrued payroll and payroll taxes
590,915
23,554
Other
19,205
Total accounts payable and accrued liabilities
$ 7,353,215
$ 3,976,064
Accounts Payable Exchanged for Common Stock
On January 5, 2022, we entered into an exchange agreement with Gardner Builders Holdings, LLC (“Gardner”) (the “Gardner Agreement”). Pursuant to the Gardner Agreement, we have authorized the issuance of shares of the Company’s restricted common stock to Gardner in exchange for the certain accounts payable and additional amounts due to Gardner as defined below.
The Gardner Agreement settles certain amounts owed by us to Gardner (the “Accounts Payable Amount”) as well as upcoming amounts that will become due between the date of the Gardner Agreement and April 1, 2022. The Gardner Agreement also settled incurred interest and penalties on the amounts owed through January 5, 2022, as well as future interest payments on amounts to be 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 $294,913 and the conversion price is $12.50. As a result, 63,593 Restricted Shares were authorized to be issued. Our Board of Directors approved the Gardner Agreement on January 5, 2022.
Note 7: Right to Use Assets and Lease Liabilities - Operating Leases
The Company has an operating lease for its clinic with a remaining lease term of approximately 7.5 years. The Company’s lease expense was entirely comprised of operating leases. Lease expense for the years ended December 31, 2022 and 2021 amounted to $860,705 and $351,854, respectively. The Company’s RTU asset amortization for the years ended December 31, 2022 and 2021 was $357,700 and $162,276, respectively. During the year ended December 31, 2022, the Company recognized an impairment of RTU assets in the amount of $3,185,591 in connection with the closing of its clinics during the period. The remaining difference between the lease expense and the associated RTU asset amortization consists of interest at a rate of 12% for the years ended December 31, 2022 and 2021. The weighted-average lease term outstanding was 84.0 and 92.1 months at December 31, 2022 and 2021, respectively.
Right to use assets - operating leases are summarized below:
December 31,
December 31,
Right to use assets, net
$
544,063
$
3,886,866
Operating lease liabilities are summarized below:
December 31,
December 31,
Lease liability
$ 4,379,724
$ 4,134,802
Less: current portion
(442,866
)
(161,838
)
Lease liability, non-current
$ 3,936,858
$ 3,972,964
Maturity analysis under these lease agreements are as follows:
For the period ended December 31, 2023
$
945,102
For the period ended December 31, 2024
884,990
For the period ended December 31, 2025
906,666
For the period ended December 31, 2026
926,988
For the period ended December 31, 2027
946,745
Thereafter
1,939,476
Total
$
6,549,967
Less: Present value discount
(2,170,243
)
Lease liability
$
4,379,724
Note 8: SBA Loan Payable
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 $460,400, and the Company received the full amount of the loan proceeds on May 4, 2020 (the “PPP Loan”). The PPP Loan bears interest at the rate of 1% per year. During the year ended December 31, 2022, the Company accrued interest in the amount of $4,632. The current balance is $460,406. The PPP Loan is in default at December 31, 2022.
Note 9: Notes Payable
AJB Note
On March 18, 2022, the Company entered into a Securities Purchase Agreement (the “AJB Agreement”) with AJB Capital Investments, LLC (“AJB”) with respect to the sale and issuance to AJB of: (i) an initial commitment fee in the amount of $430,000 in the form of 34,400 shares (the “AJB Commitment Fee Shares”) of the Company’s Common Stock, (ii) a promissory note in the aggregate principal amount of $750,000 (the “AJB Note”), and (iii) Common Stock Purchase Warrants to purchase 15,000 shares of the Company’s Common Stock (the “AJB Warrants”). The AJB Note and AJB Warrants were issued on March 17, 2022 and were held in escrow pending effectiveness of the AJB Agreement. Should AJB receive net proceeds of less than $430,000 from the sale of the AJB Commitment Fee Shares, the Company will issue additional shares to AJB or pay the shortfall amount to AJB in cash (the “AJB True-up Obligation”. The terms of the AJB Agreement resulted in the Company recording a derivative liability in the initial amount of $106,608. On November 18, 2022, the Company issued 91,328 shares of common stock to AJB and recorded a loss in the amount of $9,007 in connection with the settlement of the AJB True-up Obligation. See notes 11 and 12.
The AJB Note was issued in the principal amount of $750,000 for a purchase price of $675,000, resulting in an original issue discount of $75,000, and has a due date, as extended, of March 17, 2023. The AJB Note bears interest at the rate of 10% per year for the first six months and 12% thereafter. In the event of default as defined in the AJB Note this rate will increase to 18% and the AJB Note will become convertible at a price per share equal to the lowest trading price during the previous twenty trading days prior to the conversion date. The AJB Note entered default status on October 6, 2022. The AJB Commitment Fee Shares and AJB Warrants resulted in a discount to the AJB Note in the amount of $349,914. The Company charged the amount of $62,000 to interest on the AJB Note during the year ended December 31, 2022. Discounts in the amount of $424,914 were amortized to interest expense during the year ended December 31, 2022, and total discounts in the amount of $0 remained outstanding at December 31, 2022. Principal and accrued interest in the amounts $750,000 and $22,833, respectively, were due on the AJB Note at December 31, 2022. The AJB Note was in default at December 31, 2022.
Anson Investments Note
On April 6, 2022, the Company entered into a Securities Purchase Agreement (the “Anson Investments Agreement”) with Anson Investments Master Fund LP (“Anson Investments”) with respect to the sale and issuance to Anson Investments of: (i) an initial commitment fee in the amount of $322,500 in the form of 25,800 shares (the “Anson Investments Commitment Fee Shares”) of the Company’s Common Stock, (ii) a promissory note in the aggregate principal amount of $562,500 (the “Anson Investments Note”), and (iii) Common Stock Purchase Warrants to purchase 11,250 shares of the Common Stock (the “Anson Investments Warrants”). Should Anson Investments receive net proceeds of less than $322,500 from the sale of the Anson Investments Commitment Fee Shares, the Company will issue additional shares to Anson Investments or pay the shortfall amount to Anson Investments in cash. The terms of the Anson Investments Agreement resulted in the Company recording a derivative liability in the initial amount of $27,040.
The Anson Investments Note was issued in the principal amount of $562,500 for a purchase price of $506,250 resulting in an original issue discount of $56,250. The Anson Investments Note has a due date of October 6, 2022 and bears interest at the rate of 10% per year for the first six months and 12% thereafter. In the event of default as defined in the Anson Investments Note this rate will increase to 18% and the Anson Investment Note will become convertible at a price per share equal to the lowest trading price during the previous twenty trading days prior to the conversion date. The Anson Investments Note entered default status on October 6, 2022. The Anson Investments Commitment Fee Shares and Anson Investments Warrants resulted in a discount to the Anson Investments Note in the amount of $416,375. The Company charged the amount of $68,844 to interest on the Anson Investments note during the year ended December 31, 2022. Discounts in the amount of $472,625 were amortized to interest expense during the year ended December 31, 2022, and total discounts in the amount of $0 remained outstanding at December 31, 2022. Principal and accrued interest in the amounts $562,500 and $41,500, respectively, were due on the AJB Note at December 31, 2022. The Anson Investments Note was in default at December 31, 2022.
Anson East Note
On April 6, 2022, the Company entered into a Securities Purchase Agreement (the “Anson East Agreement”) with Anson East Master Fund LP (“Anson East”) with respect to the sale and issuance to Anson East of: (i) an initial commitment fee in the amount of $107,500 in the form of 8,600 shares (the “Anson East Commitment Fee Shares”) of the Company’s Common Stock, (ii) a promissory note in the aggregate principal amount of $187,500 (the “Anson East Note”), and (iii) Common Stock Purchase Warrants to purchase 3,750 shares of the Company’s common stock (the “Anson East Warrants”). Should Anson East receive net proceeds of less than $107,500 from the sale of the Anson East Commitment Fee Shares, the Company will issue additional shares to Anson East or pay the shortfall amount to Anson East in cash. The terms of the Anson East Agreement resulted in the Company recording a derivative liability in the initial amount of $9,014.
The Anson East Note was issued in the principal amount of $187,500 for a purchase price of $168,750 resulting in an original issue discount of $18,750. The Anson East Note has a due date of October 6, 2022 and bears interest at the rate of 10% per year for the first six months and 12% thereafter. In the event of default as defined in the Anson East Note this rate will increase to 18%, and the Anson East Note will become convertible at a price per share equal to the lowest trading price during the previous twenty trading days prior to the conversion date. The Anson East Note entered default status on October 6, 2022. The Anson East Commitment Fee Shares and Anson East Warrants resulted in a discount to the Anson East Note in the amount of $147,290. The Company charged the amount of $22,948 to interest on the Anson Investments note during the year ended December 31, 2022. Discounts in the amount of $166,040 were amortized to interest expense during the year ended December 31, 2022, and total discounts in the amount of $0 remained outstanding at December 31, 2022. Principal and accrued interest in the amounts $187,500 and $13,833, respectively, were due on the Anson East Note at December 31, 2022. The Anson East Note was in default at December 31, 2022.
GS Capital Note
On April 18, 2022, the Company entered into a Securities Purchase Agreement (the “GS Capital Agreement”) with GS Capital Investments, LLC (“GS Capital”) with respect to the sale and issuance to GS Capital of: (i) an initial commitment fee in the amount of $159,259 in the form of 12,741 shares (the “GS Capital Commitment Fee Shares”) of the Company’s Common Stock, (ii) a promissory note in the aggregate principal amount of $277,777 (the “GS Capital Note”), and (iii) Common Stock Purchase Warrants to purchase 5,556 shares of the Company’s common stock (the “GS Capital Warrants”). Should GS Capital receive net proceeds of less than $159,259 from the sale of the GS Capital Commitment Fee Shares, the Company will issue additional shares to GS Capital or pay the shortfall amount to GS Capital in cash. The terms of the GS Capital Agreement resulted in the Company recording a derivative liability in the initial amount of $21,920.
The GS Capital Note was issued in the principal amount of $277,777 for a purchase price of $250,000 resulting in an original issue discount of $27,777. The GS Capital Note has a due date of November 10, 2022 and bears interest at the rate of 10% per year for the first six months and 12% thereafter. In the event of default as defined in the GS Capital Note this rate will increase to 18%, and the GS Capital Note will become convertible at a price per share equal to the lowest trading price during the previous twenty trading days prior to the conversion date. The GS Capital Note entered default status on October 19, 2022. The GS Capital Commitment Fee Shares and GS Capital Warrants resulted in a discount to the GS Capital Note in the amount of $162,158. The Company charged the amount of $32,155 to interest on the GS Capital Note during the year ended December 31, 2022. Discounts in the amount of $212,435 were amortized to interest expense during the year ended December 31, 2022, and total discounts in the amount of $0 remained outstanding at December 31, 2022. Principal and accrued interest in the amounts $277,777 and $19,578, respectively, were due on the GS Capital Note at December 31, 2022. The GS Capital Note was in default at December 31, 2022.
Kishon Note
On May 10, 2022, the Company entered into a Securities Purchase Agreement (the “Kishon Agreement”) with Kishon Investments, LLC (“Kishon”) with respect to the sale and issuance to Kishon of: (i) an initial commitment fee in the amount of $159,259 in the form of 12,741 shares (the “Kishon Commitment Fee Shares”) of the Company’s Common Stock, (ii) a promissory note in the aggregate principal amount of $277,777 (the “Kishon Note”), and (iii) Common Stock Purchase Warrants to purchase 5,556 shares of the Company’s common stock (the “Kishon Warrants”). Should Kishon receive net proceeds of less than $159,259 from the sale of the Kishon Commitment Fee Shares, the Company will issue additional shares to Kishon or pay the shortfall amount to Kishon in cash. The terms of the Kishon Agreement resulted in the Company recording a derivative liability in the initial amount of $27,793.
The Kishon Note was issued in the principal amount of $277,777 for a purchase price of $250,000 resulting in an original issue discount of $27,777. The Kishon Note has a due date of November 10, 2022 and bears interest at the rate of 10% per year for the first six months and 12% thereafter. In the event of default as defined in the Kishon Note this rate will increase to 18%, and the Kishon Note will become convertible at a price per share equal to the lowest trading price during the previous twenty trading days prior to the conversion date. The Kishon Note entered default status on November 11, 2022. The Kishon Commitment Fee Shares and Kishon Warrants resulted in a discount to the Kishon Note in the amount of $138,492. The Company charged the amount of $28,624 to interest on the Kishon Note during the year ended December 31, 2022. Discounts in the amount of $181,269 were amortized to interest expense during the year ended December 31, 2022, and total discounts in the amount of $0 remained outstanding at December 31, 2022. Principal and accrued interest in the amounts $277,777 and $17,822, respectively, were due on the Kishon Note at December 31, 2022. The Kishon Note was in default at December 31, 2022.
Finnegan Note 1
On May 23, 2022, the Company issued a 10% Promissory Note in the principal amount of $47,059 to Jessica Finnegan (the “Finnegan Note 1”). The Finnegan Note 1 bears interest at the rate of 10% per annum accrued monthly and has a maturity date that is the earlier of (i) November 20, 2022, as extended, or (ii) five (5) business days after the date on which the Company successfully lists its shares of common stock on Nasdaq or NYSE. The purchase price of the Finnegan Note 1 was $40,000; 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 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 entered default status on November 21, 2022, and the interest rate increased to 18%. The Finnegan Note 1 contains a “most favored nations” clause that provides that, so long as the note is outstanding, if the Company issues any new security which Ms. Finnegan reasonably believes contains a term that is more favorable than those in the Finnegan Note 1, the Company shall notify Ms. Finnegan of such term, and such term, at the option of Ms. Finnegan, shall become a part of the Finnegan Note 1. In addition, Ms. Finnegan received five-year warrants to purchase 386 shares of common stock at a price of $25.00 per share with a fair value of $2,000 at the date of issuance, and 1,930 shares of common stock with a value of $3,240; these amounts were recorded as discounts to the Finnegan Note 1. Interest in the amount of $3,285 was accrued on the Finnegan Note 1 during the year ended December 31, 2022. Discounts in the amount of $17,005 were amortized to interest expense during the year ended December 31, 2022, and total discounts in the amount of $0 remained outstanding at December 31, 2022. Principal and accrued interest in the amounts $51,765 and $3,285, respectively, were due on the Finnegan Note 1 at December 31, 2022. The Finnegan Note 1 was in default at December 31, 2022.
M Diamond Note
On May 26, 2022, the Company issued a 10% Promissory Note in the principal amount of $58,823 to Melissa Diamond (the “M Diamond Note”). The M Diamond Note bears interest at the rate of 10% per annum accrued monthly and has a maturity date that is the earlier of (i) November 30, 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 purchase price of the M Diamond Note was $50,000; 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 M 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 M Diamond Note entered default status on December 1, 2022, and the interest rate increased to 18%. The M 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 Ms. Diamond reasonably believes contains a term that is more favorable than those in the M Diamond Note, the Company shall notify Ms. Diamond of such term, and such term, at the option of Ms. Diamond, shall become a part of the M Diamond Note. In addition, Ms. Diamond received five-year warrants to purchase 483 shares of common stock at a price of $25.00 per share with a fair value of $2,500 at the date of issuance, and 483 shares of common stock with a value of $4,050; these amounts were recorded as discounts to the M Diamond Note. Interest in the amount of $3,929 was accrued on the M Diamond Note during the year ended December 31, 2022. Discounts in the amount of $21,256 were amortized to interest expense during the year ended December 31, 2022, and total discounts in the amount of $0 remained outstanding at December 31, 2022. Principal and accrued interest in the amounts $64,705 and $3,929, respectively, were due on the M Diamond Note at December 31, 2022. The M Diamond Note was in default at December 31, 2022.
Finnegan Note 2
On May 26, 2022, the Company issued a 10% Promissory Note in the principal amount of $29,412 to Jessica Finnegan (the “Finnegan Note 2”). The Finnegan Note 2 bears interest at the rate of 10% per annum accrued monthly and has a maturity date that is the earlier of (i) November 30, 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 purchase price of the Finnegan Note 2 was $25,000; 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 Finnegan Note 2, 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 2 entered default status on December 1, 2022, and the interest rate increased to 18%. The Finnegan Note 2 contains a “most favored nations” clause that provides that, so long as the note is outstanding, if the Company issues any new security which Ms. Finnegan reasonably believes contains a term that is more favorable than those in the Finnegan Note 2, the Company shall notify Ms. Finnegan of such term, and such term, at the option of Ms. Finnegan, shall become a part of the Finnegan Note 2. In addition, Ms. Finnegan received five-year warrants to purchase 242 shares of common stock at a price of $25.00 per share with a fair value of $1,250 at the date of issuance, and 242 shares of common stock with a value of $2,025; these amounts were recorded as discounts to the Finnegan Note 2. Interest in the amount of $1,965 was accrued on the Finnegan Note 2 during the year ended December 31, 2022. Discounts in the amount of $10,625 were amortized to interest expense during the year ended December 31, 2022, and total discounts in the amount of $0 remained outstanding at December 31, 2022. Principal and accrued interest in the amounts $32,353 and $1,965, respectively, were due on the Finnegan Note 2 at December 31, 2022. The Finnegan Note 2 was in default at December 31, 2022.
Dragon Note
On June 9, 2022, the Company issued a 10% Promissory Note in the principal amount of $588,235 (the “Dragon Note”) to Dragon Dynamic Funds Platform Ltd (“Dragon Dynamic”). The Dragon Note bears interest at the rate of 10% per annum accrued monthly and has a maturity date that is the earlier of (i) December 9, 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 purchase price of the Dragon Note was $500,000; the amount payable at maturity will be $588,235 plus 10% of that amount plus any accrued and unpaid interest. Costs in the amount of $47,500 were charged to discount on the Dragon Note. Following an event of default as defined in the Dragon 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 Dragon Note entered default status on December 10, 2022, and the interest rate increased to 18%. The Dragon 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 Dragon Dynamic reasonably believes contains a term that is more favorable than those in the Dragon Note, the Company shall notify Dragon Dynamic of such term, and such term, at the option of Dragon Dynamic, shall become a part of the Dragon Note. In addition, Dragon Dynamic received five-year warrants to purchase 4,824 shares of common stock at a price of $25.00 per share with a fair value of $21,500 at the date of issuance, and 4,824 shares of common stock with a value of $44,000; these amounts were recorded as discounts to the Dragon Note. Interest in the amount of $35,874 was accrued on the Dragon Note during the year ended December 31, 2022. Discounts in the amount of $260,059 were amortized to interest expense during the year ended December 31, 2022, and total discounts in the amount of $0 remained outstanding at December 31, 2022. Principal and accrued interest in the amounts $647,059 and $35,874, respectively, were due on the Dragon Note at December 31, 2022. The Dragon Note was in default at December 31, 2022.
Mackay Note
On July 7, 2022, the Company issued a 10% Promissory Note in the principal amount of $294,118 to Mackay Investments, LLC (the “Mackay Note”). The Mackay Note bears interest at the rate of 10% per annum accrued monthly and has a maturity date that is the earlier of (i) August 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 purchase price of the Mackay Note was $250,000; the amount payable at maturity will be $294,118 plus 10% of that amount plus any accrued and unpaid interest. Following an event of default as defined in the Mackay 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 Mackay Note entered default status on August 11, 2022, and the interest rate increased to 18%. The Mackay 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 Mackay Investments, LLC reasonably believes contains a term that is more favorable than those in the Mackay Note, the Company shall notify Mackay Investments, LLC of such term, and such term, at the option of Mackay Investments, LLC , shall become a part of the Mackay Note. In addition, Mackay Investments, LLC received five-year warrants to purchase 2,412 shares of common stock at a price of $25.00 per share with a fair value of $10,250 at the date of issuance, and 2,412 shares of common stock with a value of $44,118; these amounts were recorded as discounts to the Mackay Note. Interest in the amount of $20,193 was accrued on the Mackay Note during the year ended December 31, 2022. Discounts in the amount of $96,280 were amortized to interest expense during the year ended December 31, 2022, and total discounts in the amount of $0 remained outstanding at December 31, 2022. Principal and accrued interest in the amounts $323,530 and $20,193, respectively, were due on the Mackay Note at December 31, 2022. The Mackay Note was in default at December 31, 2022.
Schrier Note
On July 7, 2022, the Company issued a 10% Promissory Note in the principal amount of $23,259 to Charles Schrier (the “Schrier Note”). The Schrier Note bears interest at the rate of 10% per annum accrued monthly and 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 successfully lists its shares of common stock on Nasdaq or NYSE. The purchase price of the Schrier Note was $20,000; the amount payable at maturity will be $23,529 plus 10% of that amount plus any accrued and unpaid interest. Following an event of default as defined in the Schrier 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 Schrier 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 Mr. Schrier reasonably believes contains a term that is more favorable than those in the Schrier Note, the Company shall notify Mr. Schrier of such term, and such term, at the option of Mr. Schrier, shall become a part of the Schrier Note. In addition, Mr. Schrier received five-year warrants to purchase 193 shares of common stock at a price of $25.00 per share with a fair value of $820 at the date of issuance, and 193 shares of common stock with a value of $1,000; these amounts were recorded as discounts to the Schrier Note. Interest in the amount of $1,141 was accrued on the Schrier Note during the year ended December 31, 2022. Discounts in the amount of $7,367 were amortized to interest expense during the year ended December 31, 2022, and total discounts in the amount of $335 remained outstanding at December 31, 2022. Principal and accrued interest in the amounts $25,882 and $1,141, respectively, were due on the Schrier Note at December 31, 2022.
Nommsen Note
On July 26, 2022, the Company issued a 10% Promissory Note in the principal amount of $58,823 to Eric S. Nommsen (the “Nommsen Note”). The Nommsen Note bears interest at the rate of 10% per annum accrued monthly and has a maturity date that is the earlier of (i) November 30, 2022, as extended, or (ii) five business days after the date on which the Company successfully lists its shares of common stock on Nasdaq or NYSE. The purchase price of the Nommsen Note was $50,000; 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 Nommsen 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 Nommsen Note entered default status on December 1, 2022, and the interest rate increased to 18%. The Nommsen 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 Mr. Nommsen reasonably believes contains a term that is more favorable than those in the Nommsen Note, the Company shall notify Mr. Nommsen of such term, and such term, at the option of Mr. Nommsen, shall become a part of the Nommsen Note. In addition, Mr. Nommsen received five-year warrants to purchase 483 shares of common stock at a price of $25.00 per share with a fair value of $1,850 at the date of issuance, and 483 shares of common stock with a value of $2,350; these amounts were recorded as discounts to the Nommsen Note. Interest in the amount of $2,946 was accrued on the Nommsen Note during the year ended December 31, 2022. Discounts in the amount of $18,905 were amortized to interest expense during the year ended December 31, 2022, and total discounts in the amount of $0 remained outstanding at December 31, 2022. Principal and accrued interest in the amounts $64,705 and $2,946, respectively, were due on the Nommsen Note at December 31, 2022. The Nommsen Note was in default at December 31, 2022.
Caplan Note
On July 27, 2022, the Company issued a 10% Promissory Note in the principal amount of $58,823 to James H. Caplan (the “Caplan Note”). The Caplan Note bears interest at the rate of 10% per annum accrued monthly and 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 purchase price of the Caplan Note was $50,000; 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 Caplan 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 Caplan 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 Mr. Caplan reasonably believes contains a term that is more favorable than those in the Caplan Note, the Company shall notify Mr. Caplan of such term, and such term, at the option of Mr. Caplan, shall become a part of the Caplan Note. In addition, Mr. Caplan received five-year warrants to purchase 483 shares of common stock at a price of $25.00 per share with a fair value of $1,850 at the date of issuance, and 483 shares of common stock with a value of $2,350; these amounts were recorded as discounts to the Caplan Note. Interest in the amount of $2,531 was accrued on the Caplan Note during the year ended December 31, 2022. Discounts in the amount of $16,675 were amortized to interest expense during the year ended December 31, 2022, and total discounts in the amount of $2,230 remained outstanding at December 31, 2022. Principal and accrued interest in the amounts $64,705 and $2,531, respectively, were due on the Caplan Note at December 31, 2022.
Finnegan Note 3
On August 4, 2022, the Company issued a 10% Promissory Note in the principal amount of $29,412 (the “Finnegan Note 3”) to Jessica, Kevin C., Brody, Isabella and Jack Finnegan (collectively, the “Finnegans”). The Finnegan Note 3 bears interest at the rate of 10% per annum accrued monthly and has a maturity date that is the earlier of (i) February 3, 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 purchase price of the Finnegan Note 3 was $25,000; 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 Finnegan 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 Finnegan 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 Finnegans reasonably believes contains a term that is more favorable than those in the Finnegan Note 3, the Company shall notify The Finnegans of such term, and such term, at the option of The Finnegans, shall become a part of the Finnegan Note 3. In addition, The Finnegans received five-year warrants to purchase 242 shares of common stock at a price of $25.00 per share with a fair value of $850 at the date of issuance, and 242 shares of common stock with a value of $1,100; these amounts were recorded as discounts to the Finnegan Note 3. Interest in the amount of $1,200 was accrued on the Finnegan Note 3 during the year ended December 31, 2022. Discounts in the amount of $7,575 were amortized to interest expense during the year ended December 31, 2022, and total discounts in the amount of $1,728 remained outstanding at December 31, 2022. Principal and accrued interest in the amounts $32,353 and $1,200, respectively, were due on the Finnegan Note 3 at December 31, 2022.
Enright Note
On August 4, 2022, the Company issued a 10% Promissory Note in the principal amount of $120,000 to Jack Enright (the “Enright Note”). The Enright Note bears interest at the rate of 10% per annum accrued monthly and has a maturity date that is the earlier of (i) February 3, 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 purchase price of the Enright Note was $102,000; 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 Enright 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 Enright 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 Mr. Enright reasonably believes contains a term that is more favorable than those in the Enright Note, the Company shall notify Mr. Enright of such term, and such term, at the option of Mr. Enright, shall become a part of the Enright Note. In addition, Mr. Enright received 984 shares of common stock with a value of $6,317; this amount was recorded as a discount to the Enright Note. Interest in the amount of $4,899 was accrued on the Enright Note during the year ended December 31, 2022. Discounts in the amount of $29,571 were amortized to interest expense during the year ended December 31, 2022, and total discounts in the amount of $6,746 remained outstanding at December 31, 2022. Principal and accrued interest in the amounts $132,000 and $4,899, respectively, were due on the Enright Note at December 31, 2022.
Mitchell Note
On September 2, 2022, the Company issued a 10% Promissory Note in the principal amount of $71,000 to John Mitchell (the “Mitchell Note”). The Mitchell Note bears interest at the rate of 10% per annum accrued monthly and has a maturity date that is the earlier of (i) November 30, 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 purchase price of the Mitchell Note was $60,350; the amount payable at maturity will be $71,000 plus 10% of that amount plus any accrued and unpaid interest. Following an event of default as defined in the Mitchell 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 Mitchell Note entered default status on December 1, 2022, and the interest rate increased to 18%. The Mitchell 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 Mr. Mitchell reasonably believes contains a term that is more favorable than those in the Mitchell Note, the Company shall notify Mr. Mitchell of such term, and such term, at the option of Mr. Mitchell, shall become a part of the Mitchell Note. In addition, Mr. Mitchell received 582 shares of common stock with a value of $3,124; this amount was recorded as a discount to the Mitchell Note. Interest in the amount of $2,817 was accrued on the Mitchell Note during the year ended December 31, 2022. Discounts in the amount of $20,874 were amortized to interest expense during the year ended December 31, 2022, and total discounts in the amount of $0 remained outstanding at December 31, 2022. Principal and accrued interest in the amounts $78,100 and $2,817, respectively, were due on the Mitchell Note at December 31, 2022. The Mitchell Note was in default at December 31, 2022.
Lightmas Note
On September 2, 2022, the Company issued a 10% Promissory Note in the principal amount of $60,000 to Frank Lightmas (the “Lightmas Note”). The Lightmas Note bears interest at the rate of 10% per annum accrued monthly and has a maturity date that is the earlier of (i) November 30, 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 purchase price of the Lightmas Note was $51,000; the amount payable at maturity will be $60,000 plus 10% of that amount plus any accrued and unpaid interest. Following an event of default as defined in the Lightmas 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 Lightmas Note entered default status on December 1, 2022, and the interest rate increased to 18%. The Lightmas 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 Mr. Lightmas reasonably believes contains a term that is more favorable than those in the Lightmas Note, the Company shall notify Mr. Lightmas of such term, and such term, at the option of Mr. Lightmas, shall become a part of the Lightmas Note. In addition, Mr. Lightmas received 492 shares of common stock with a value of $2,640; this amount was recorded as a discount to the Lightmas Note. Interest in the amount of $2,380 was accrued on the Lightmas Note during the year ended December 31, 2022. Discounts in the amount of $17,640 were amortized to interest expense during the year ended December 31, 2022, and total discounts in the amount of $0 remained outstanding at December 31, 2022. Principal and accrued interest in the amounts $66,000 and $2,380, respectively, were due on the Lightmas Note at December 31, 2022. The Lightmas Note was in default at December 31, 2022.
Lewis Note
On September 2, 2022, the Company issued a 10% Promissory Note in the principal amount of $30,000 to Lisa Lewis (the “Lewis Note”). The Lewis Note bears interest at the rate of 10% per annum accrued monthly and has a maturity date that is the earlier of (i) November 30, 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 purchase price of the Lewis Note was $25,500; the amount payable at maturity will be $30,000 plus 10% of that amount plus any accrued and unpaid interest. Following an event of default as defined in the Lewis 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 Lewis Note entered default status on December 1, 2022, and the interest rate increased to 18%. The Lewis 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 Ms. Lewis reasonably believes contains a term that is more favorable than those in the Lewis Note, the Company shall notify Ms. Lewis of such term, and such term, at the option of Ms. Lewis, shall become a part of the Lewis Note. In addition, Ms. Lewis received 246 shares of common stock with a value of $1,320; this amount was recorded as a discount to the Lewis Note. Interest in the amount of $1,190 was accrued on the Lewis Note during the year ended December 31, 2022. Discounts in the amount of $8,820 were amortized to interest expense during the year ended December 31, 2022, and total discounts in the amount of $0 remained outstanding at December 31, 2022. Principal and accrued interest in the amounts $33,000 and $1,190, respectively, were due on the Lewis Note at December 31, 2022. The Lewis Note was in default at December 31, 2022.
Goff Note
On September 2, 2022, the Company issued a 10% Promissory Note in the principal amount of $30,000 to Sharon Goff (the “Goff Note”). The Goff Note bears interest at the rate of 10% per annum accrued monthly and has a maturity date that is the earlier of (i) November 30, 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 purchase price of the Goff Note was $25,500; the amount payable at maturity will be $30,000 plus 10% of that amount plus any accrued and unpaid interest. Following an event of default as defined in the Goff 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 Goff Note entered default status on December 1, 2022, and the interest rate increased to 18%. The Goff 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 Ms. Goff reasonably believes contains a term that is more favorable than those in the Goff Note, the Company shall notify Ms. Goff of such term, and such term, at the option of Ms. Goff, shall become a part of the Goff Note. In addition, Ms. Goff received 246 shares of common stock with a value of $1,320; this amount was recorded as a discount to the Goff Note. Interest in the amount of $1,190 was accrued on the Goff Note during the year ended December 31, 2022. Discounts in the amount of $8,820 were amortized to interest expense during the year ended December 31, 2022, and total discounts in the amount of $0 remained outstanding at December 31, 2022. Principal and accrued interest in the amounts $33,000 and $1,190, respectively, were due on the Goff Note at December 31, 2022. The Goff Note was in default at December 31, 2022.
Hagan Note
On September 2, 2022, the Company issued a 10% Promissory Note in the principal amount of $100,000 to Cliff Hagan (the “Hagan Note”). The Hagan Note bears interest at the rate of 10% per annum accrued monthly and has a maturity date that is the earlier of (i) December 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 purchase price of the Hagan Note was $85,000; the amount payable at maturity will be $100,000 plus 10% of that amount plus any accrued and unpaid interest. Following an event of default as defined in the Hagan 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 Hagan Note entered default status on December 11, 2022, and the interest rate increased to 18%. The Hagan 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 Mr. Hagan reasonably believes contains a term that is more favorable than those in the Hagan Note, the Company shall notify Mr. Hagan of such term, and such term, at the option of Mr. Hagan, shall become a part of the Hagan Note. In addition, Mr. Hagan received 820 shares of common stock with a value of $4,715; this amount was recorded as a discount to the Hagan Note. Interest in the amount of $3,556 was accrued on the Hagan Note during the year ended December 31, 2022. Discounts in the amount of $29,715 were amortized to interest expense during the year ended December 31, 2022, and total discounts in the amount of $0 remained outstanding at December 31, 2022. Principal and accrued interest in the amounts $110,000 and $3,556, respectively, were due on the Hagan Note at December 31, 2022. The Hagan Note was in default at December 31, 2022.
Darling Note
On September 14, 2022, the Company issued a 10% Promissory Note in the principal amount of $200,000 to Darling Capital, LLC (“Darling”), (the “Darling Note”). The Darling Note bears interest at the rate of 10% per annum accrued monthly and has a maturity date that is the earlier of (i) December 15, 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 purchase price of the Darling Note was $170,000; the amount payable at maturity will be $200,000 plus 10% of that amount plus any accrued and unpaid interest. Following an event of default as defined in the Darling 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 Darling Note entered default status on December 15, 2022, and the interest rate increased to 18%. The Darling 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 Darling reasonably believes contains a term that is more favorable than those in the Darling Note, the Company shall notify Darling of such term, and such term, at the option of Darling shall become a part of the Darling Note. In addition, Darling received 1,640 shares of common stock with a value of $10,824; this amount was recorded as a discount to the Darling Note. Interest in the amount of $6,619 was accrued on the Darling Note during the year ended December 31, 2022. Discounts in the amount of $60,824 were amortized to interest expense during the year ended December 31, 2022, and total discounts in the amount of $0 remained outstanding at December 31, 2022. Principal and accrued interest in the amounts $220,000 and $6,619, respectively, were due on the Darling Note at December 31, 2022. The Darling Note was in default at December 31, 2022.
Leath Note
On September 15, 2022, the Company issued a 10% Promissory Note in the principal amount of $50,000 to Mack Leath (the “Leath Note”). The Leath Note bears interest at the rate of 10% per annum accrued monthly and has a maturity date that is the earlier of (i) December 15, 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 purchase price of the Leath Note was $42,500; the amount payable at maturity will be $55,000 plus 10% of that amount plus any accrued and unpaid interest. Following an event of default as defined in the Leath 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 Leath Note entered default status on December 16, 2022, and the interest rate increased to 18%. The Leath 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 Mr. Leath reasonably believes contains a term that is more favorable than those in the Leath Note, the Company shall notify Mr. Leath of such term, and such term, at the option of Mr. Leath, shall become a part of the Leath Note. In addition, Mr. Leath received 410 shares of common stock with a value of $2,868; this amount was recorded as a discount to the Leath Note. Interest in the amount of $1,641 was accrued on the Leath Note during the year ended December 31, 2022. Discounts in the amount of $15,368 were amortized to interest expense during the year ended December 31, 2022, and total discounts in the amount of $0 remained outstanding at December 31, 2022. Principal and accrued interest in the amounts $55,000 and $1,641, respectively, were due on the Leath Note at December 31, 2022. The Leath Note was in default at December 31, 2022.
Cavalry Note
On October 5, 2022, the Company issued a 10% Promissory Note in the principal amount of $500,000 to the Cavalry Fund LLP (“Cavalry”), (the “Cavalry Note”) with a due date of December 31, 2022. The Cavalry Note is subject to an exchange agreement (the “Series E Exchange Agreement”) whereby Cavalry will exchange (a) amounts due under the Cavalry Note, (b) 1,000,000 shares of the Company’s Series C Convertible Preferred Stock, and (c) 750,000 shares of the Company’s Series D Convertible Preferred Stock for a number of shares of the Company’s Series E Convertible Preferred Stock equal to 150% of the principal amount of the Cavalry Note plus 150% of the stated value of the Series C and Series D convertible Preferred Stock. See note 12. The Cavalry Note bears interest at the rate of 10% per annum which will accrue from the date of the note only if the Cavalry Note is not converted pursuant to the Series E Exchange Agreement by December 10, 2022. Following an event of default as defined in the Cavalry 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 Cavalry 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 Cavalry reasonably believes contains a term that is more favorable than those in the Cavalry Note, the Company shall notify the Cavalry of such term, and such term, at the option of Cavalry, shall become a part of the Cavalry Note. In addition, Cavalry received five-year warrants to purchase 750 shares of common stock at a price equal to the price of any warrant included in an offering in connection with listing at the Nasdaq Global Market. These warrants are not deemed issued at December 31, 2022 because the exercise price was not yet determined. Costs in the amount of $7,500 were also charged to discount on the Cavalry Note. Discounts in the amount of $10,500 were amortized to interest expense during the year ended December 31, 2022, and total discounts in the amount of $0 remained outstanding at December 31, 2022. Principal and accrued interest in the amounts $500,000 and $11,918, respectively, were due on the Cavalry Note at December 31, 2022.
Concurrent with the Cavalry Note, the Company entered into an exchange agreement (the “Cavalry Exchange Agreement”). Pursuant to the Calvary Exchange Agreement, Cavalry shall exchange (a) 1,000,000 shares of the Company’s Series C Convertible Preferred Stock (b) 750,000 shares of the Company’s Series D Convertible Preferred Stock and (c) amounts owing under the Cavalry Note, for a number of Series E Convertible Preferred Stock (the “Series E Shares”) equal to 150% of the principal amount of the Cavalry Note, plus 150% of the stated value of the Series C Shares and Series D Shares (the “Series E Exchange Value”). No transactions occurred pursuant to the Cavalry Exchange Agreement during the year ended December 31, 2022. See notes 12 and 16.
Mercer Note 1
On October 7, 2022, the Company issued a 10% Promissory Note in the principal amount of $300,000 to the Mercer Street Global Opportunity Fund (“Mercer”), (the “Mercer Note 1”) with a due date of December 31, 2022. The Mercer Note 1 is subject to the Series E Exchange Agreement whereby Mercer will exchange (a) amounts due under the Mercer Note 1, (b) 47,619 shares of the Company’s Series C Convertible Preferred Stock, and (c) 750,000 shares of the Company’s Series D Convertible Preferred Stock for a number of shares of the Company’s Series E Convertible Preferred Stock equal to 150% of the principal amount of the Mercer Note 1 plus 150% of the stated value of the Series C and Series D convertible Preferred Stock. See note 12. The Mercer Note 1 bears interest at the rate of 10% per annum which will accrue from the date of the note only if the Mercer Note 1 is not converted pursuant to the Series E Exchange Agreement by December 10, 2022. Following an event of default as defined in the Mercer 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 Mercer Note 1 contains a “most favored nations” clause that provides that, so long as the note is outstanding, if the Company issues any new security which Mercer reasonably believes contains a term that is more favorable than those in the Mercer Note 1, the Company shall notify Mercer of such term, and such term, at the option of Mercer, shall become a part of the Mercer Note 1. In addition, Mercer received five-year warrants to purchase 750 shares of common stock at a price equal to the price of any warrant included in an offering in connection with listing at the Nasdaq Global Market. These warrants are not deemed issued at December 31, 2022 because the exercise price was not yet determined. Interest in the amount of $6,986 was accrued on the Mercer Note 1 during the year ended December 31, 2022. Discounts in the amount of $10,500 were amortized to interest expense during the year ended December 31, 2022, and total discounts in the amount of $0 remained outstanding at December 31, 2022. Principal and accrued interest in the amounts $300,000 and $6,986, respectively, were due on the Mercer Note 1 at December 31, 2022.
Concurrent with the Mercer Note 1, the Company entered into an exchange agreement (the “Mercer Exchange Agreement”). Pursuant to the Mercer Exchange Agreement, Mercer shall exchange (a) 47,619 shares of the Company’s Series C Convertible Preferred Stock, (b) 750,000 shares of the Company’s Series D Convertible Preferred Stock, and (c) amounts owing under the Mercer Note, for a number of Series E Convertible Preferred Stock (the “Series E Shares”) equal to 150% of the principal amount of the Mercer Note, plus 150% of the stated value of the Series C Shares and Series D Shares (the “Series E Exchange Value”). No transactions occurred pursuant to the Cavalry Exchange Agreement during the year ended December 31, 2022. See note 12 and 16.
Pinz Note
On October 10, 2022, the Company issued a 10% Promissory Note in the principal amount of $30,000 to the Pinz Capital Special Opportunities Fund (“Pinz”), (the “Pinz Note”) with a due date of December 31, 2022. The Pinz Note is subject to the Series E Exchange Agreement whereby Pinz will exchange (a) amounts due under the Pinz Note, (b) 100,000 shares of the Company’s Series D Convertible Preferred Stock for a number of shares of the Company’s Series E Convertible Preferred Stock equal to 150% of the principal amount of the Pinz Note plus 150% of the stated value of the Series D convertible Preferred Stock. See note 12. The Pinz Note bears interest at the rate of 10% per annum which will accrue from the date of the note only if the Pinz Note is not converted pursuant to the Series E Exchange Agreement by December 10, 2022. Following an event of default as defined in the Pinz 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 Pinz 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 Pinz Fund LLP reasonably believes contains a term that is more favorable than those in the Pinz Note, the Company shall notify the Pinz Fund LLP of such term, and such term, at the option of the Pinz Fund, LLP, shall become a part of the Pinz Note. In Interest in the amount of $6,986 was accrued on the Pinz Note during the year ended December 31, 2022. Discounts in the amount of $2,100 were amortized to interest expense during the year ended December 31, 2022, and total discounts in the amount of $0 remained outstanding at December 31, 2022. Principal and accrued interest in the amounts $30,000 and $674, respectively, were due on the Pinz Note at December 31, 2022.
Concurrent with the Pinz Note, the Company entered into an exchange agreement (the “Pinz Exchange Agreement”). Pursuant to the Pinz Exchange Agreement, Pinz shall exchange (a) 100,000 shares of the Company’s Series D Convertible Preferred Stock, and (b) amounts owing under the Pinz Note, for a number of Series E Convertible Preferred Stock equal to 150% of the principal amount of the Pinz Note, plus 150% of the stated value of the Series D Shares. No transactions occurred pursuant to the Pinz Exchange Agreement during the year ended December 31, 2022. See note 12 and 16.
Mercer Note 2
On October 24, 2022, the Company issued a 10% Promissory Note in the principal amount of $100,000 to Mercer (the “Mercer Note 2”) with a due date of December 31, 2022. The Mercer Note 2 is subject to the Series E Exchange Agreement whereby Mercer will exchange (a) amounts due under the Mercer Note 2 for a number of shares of the Company’s Series E Convertible Preferred Stock equal to 150% of the principal amount of the Mercer Note 2. See note 122. The Mercer Note 2 bears interest at the rate of 10% per annum which will accrue from the date of the note only if the Mercer Note 2 is not converted pursuant to the Series E Exchange Agreement by December 10, 2022. Following an event of default as defined in the Mercer Note 2, 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 Mercer Note 2 contains a “most favored nations” clause that provides that, so long as the note is outstanding, if the Company issues any new security which Mercer reasonably believes contains a term that is more favorable than those in the Mercer Note 2, the Company shall notify Mercer of such term, and such term, at the option of Mercer, shall become a part of the Mercer Note 2. In addition, Mercer received five-year warrants to purchase 750 shares of common stock at a price equal to the price of any warrant included in an offering in connection with listing at the Nasdaq Global Market. These warrants are not deemed issued at December 31, 2022 because the exercise price was not yet determined. Interest in the amount of $1,863 was accrued on the Mercer Note 2 during the year ended December 31, 2022. Discounts in the amount of $1,900 were amortized to interest expense during the year ended December 31, 2022, and total discounts in the amount of $0 remained outstanding at December 31, 2022. Principal and accrued interest in the amounts $100,000 and $1,863, respectively, were due on the Mercer Note 2 at December 31, 2022.
Amounts due under the Mercer Note 2 will convert pursuant to the terms of the Mercer Exchange Agreement into shares of the Company’s series E Preferred Stock. See note 12 and 16.
Mercer Note 3
On December 2, 2022, the Company issued a 10% Promissory Note in the principal amount of $125,000 to Mercer (the “Mercer Note 3”) with a due date of May 21, 2023. The Mercer Note 3 is subject to the Series E Exchange Agreement whereby Mercer will exchange amounts due under the Mercer Note 3 for a number of shares of the Company’s Series E Convertible Preferred Stock equal to 150% of the principal amount of the Mercer Note 3. See note 12. The Mercer Note 3 bears interest at the rate of 10% per annum which will accrue from the date of the note only if the Mercer Note 3 is not converted pursuant to the Series E Exchange Agreement by May 10, 2023. Following an event of default as defined in the Mercer 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 Mercer 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 Mercer reasonably believes contains a term that is more favorable than those in the Mercer Note 3, the Company shall notify Mercer of such term, and such term, at the option of Mercer, shall become a part of the Mercer Note 3. In addition, Mercer received five-year warrants to purchase 750 shares of common stock at a price equal to the price of any warrant included in an offering in connection with listing at the Nasdaq Global Market. These warrants are not deemed issued at December 31, 2022 because the exercise price was not yet. determined. Discounts in the amount of $4,028 were amortized to interest expense during the year ended December 31, 2022, and total discounts in the amount of $20,972 remained outstanding at December 31, 2022. Principal and accrued interest in the amounts $125,000 and $993, respectively, were due on the Mercer Note 3 at December 31, 2022.
These amounts are reflected in the table below:
December 31,
December 31,
Notes Payable
$ 5,144,742
$ -
Less: Discount
(32,040
)
Notes payable - net of discount
$ 5,112,702
$ -
Current Portion, net of discount
$ 5,112,702
$ -
Long-term portion, net of discount
$ -
$ -
Interest expense on notes payable was $3,210,763 and $968,471 for the years ended December 31, 2022 and 2021, respectively. Accrued interest on notes payable was $362,094 and $7,657 at December 31, 2022 and 2021, respectively.
Note 10: Notes Payable - Related Parties
Howe Note 1
On December 30, 2021, we issued a 10% Promissory Note in the principal amount of $1,000,000 in a related party transaction to the Michael C. Howe Living Trust (the “Howe Note 1”). Michael C. Howe is the Chief Executive Officer of the Good Clinic LLC, one of our subsidiaries. The Howe Note 1 bears interest at the rate of 10% interest rate per annum and has a maturity date that is the earlier of (i) November 30, 2022, as extended, or (ii) five (5) business days after the date on which the Company successfully lists its shares of common stock on Nasdaq or NYSE. The purchase price of the Howe Note 1 was $850,000; 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 Howe 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 Howe Note 1 entered delinquent status on December 1, 2022, and the interest rate increased to 18%. The Howe Note 1 contains a “most favored nations” clause that provides that, so long as the note is outstanding, if the Company issues any new security, which Mr. Howe reasonably believes contains a term that is more favorable than those in the Howe Note 1, we shall notify Mr. Howe of such term, and such term, at the option of Mr. Howe, shall become a part of th e Howe Note 1. In addition, Mr. Howe five-year warrants to purchase 42,000 shares of common stock at a price of $25.00 per share, and five-year warrants to purchase 42,000 shares of common stock at $37.50 per share with an aggregate fair value of $261,568 at the date of issuance, which was recorded as a discount to this note. Interest in the amount of $106,795 was accrued on the Howe Note 1 during the year ended December 31, 2022. Discounts in the amount of $511,568 were amortized to interest expense during the year ended December 31, 2022, and total discounts in the amount of $0 remained outstanding at December 31, 2022. Principal and accrued interest in the amounts $1,100,000 and $106,795, respectively, were due on the Howe Note 1 at December 31, 2022. The Howe Note 1 was in default at December 31, 2022.
Diamond Note 1
On February 24, 2022, the Company issued a 10% Promissory Note in the principal amount of $175,000 in a related party transaction to Lawrence Diamond, our Chief Executive Officer and a member of our Board of Directors (the “Diamond Note 1”). The Diamond Note 1 bears interest at the rate of 10% per annum accrued monthly and has a maturity date that is the earlier of (i) November 30, 2022, as extended, or (ii) five business days after the date on which the Company successfully lists its shares of common stock on Nasdaq or NYSE. The purchase price of the Diamond Note 1 was $148,750; the amount payable at maturity will be $175,000 plus 10% of that amount plus any accrued and unpaid interest. Following an event of default as defined in the Diamond 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 Diamond Note 1 entered default status on December 1, 2022, and the interest rate increased to 18%. The Diamond Note 1 contains a “most favored nations” clause that provides that, so long as the note is outstanding, if the Company issues any new security which Mr. Diamond reasonably believes contains a term that is more favorable than those in the Diamond Note 1, the Company shall notify Mr. Diamond of such term, and such term, at the option of Mr. Diamond, shall become a part of the Diamond Note 2. In addition, Mr. Diamond received five-year warrants to purchase 7,350 shares of common stock at a price of $25.00 per share, and five-year warrants to purchase 7,350 shares of common stock at $37.50 per share with an aggregate fair value of $2,914 at the date of issuance, which was recorded as a discount to this note. Interest in the amount of $16,052 was accrued on the Diamond Note 1 during the year ended December 31, 2022. Discounts in the amount of $46,664 were amortized to interest expense during the year ended December 31, 2022, and total discounts in the amount of $0 remained outstanding at December 31, 2022. Principal and accrued interest in the amounts $192,500 and $16,052, respectively, were due on the Diamond Note 1 at December 31, 2022. The Diamond Note 1 was in default at December 31, 2022.
Diamond Note 2
On March 18, 2022, the Company issued a 10% Promissory Note in the principal amount of $235,294 in a related party transaction to Lawrence Diamond, our Chief Executive Officer and a member of our Board of Directors (the “Diamond Note 2). The Diamond Note 2 bears interest at the rate of 10% per annum accrued monthly and has a maturity date that is the earlier of (i) November 30, 2022, as extended, or (ii) five business days after the date on which the Company successfully lists its shares of common stock on Nasdaq or NYSE. The purchase price of the Diamond Note 2 was $200,000; 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 2, 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 2 entered default status on December 1, 2022, and the interest rate increased to 18%. The Diamond Note 2 contains a “most favored nations” clause that provides that, so long as the note is outstanding, if the Company issues any new security which Mr. Diamond reasonably believes contains a term that is more favorable than those in the Diamond Note 2, the Company shall notify Mr. Diamond of such term, and such term, at the option of Mr. Diamond, shall become a part of the Diamond Note 2. In addition, Mr. Diamond received five-year warrants to purchase 1,930 shares of common stock at a price of $25.00 per share a fair value of $2,213 at the date of issuance, which was recorded as a discount to this note. Interest in the amount of $1,676 was accrued on the Diamond Note 2 during the year ended December 31, 2022. Principal in the amount of $235,294 was paid on the Diamond Note 2 during the year ended December 31, 2022. Discounts in the amount of $61,036 were amortized to interest expense during the year ended December 31, 2022, and total discounts in the amount of $0 remained outstanding at December 31, 2022. Principal and accrued interest in the amounts $23,529 and $1,676, respectively, were due on the Diamond Note 2 at December 31, 2022. The Diamond Note 2 was in default at December 31, 2022.
Diamond Note 3
On April 27, 2022, the Company issued a 10% Promissory Note in the principal amount of $235,294 in a related party transaction to Lawrence Diamond, our Chief Executive Officer and a member of our Board of Directors (the “Diamond Note 3”). The Diamond Note 3 bears interest at the rate of 10% per annum accrued monthly and has a maturity date that is the earlier of (i) November 30, 2022, as extended, or (ii) five business days after the date on which the Company successfully lists its shares of common stock on Nasdaq or NYSE. The purchase price of the Diamond Note 3 was $200,000; 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 annum equal to the lesser of the maximum interest permitted by applicable law and 18%. The Diamond Note 3 entered default status on December 1, 2022, and the interest rate increased to 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 Mr. Diamond reasonably believes contains a term that is more favorable than those in the Diamond Note 3, the Company shall notify Mr. Diamond of such term, and such term, at the option of Mr. Diamond, shall become a part of the Diamond Note 3. In addition, Mr. Diamond received five-year warrants to purchase 1,930 shares of common stock at a price of $25.00 per share with a fair value of $8,800 at the date of issuance, and 1,930 shares of common stock with a value of $16,200; these amounts were recorded as discounts on the Diamond Note 3. Interest in the amount of $17,586 was accrued on the Diamond Note 3 during the year ended December 31, 2022. Discounts in the amount of $83,823 were amortized to interest expense during the year ended December 31, 2022, and total discounts in the amount of $0 remained outstanding at December 31, 2022. Principal and accrued interest in the amounts $258,823 and $17,586, respectively, were due on the Diamond Note 3 at December 31, 2022. The Diamond Note 3 was in default at December 31, 2022.
Diamond Note 4
On May 18, 2022, the Company issued a 10% Promissory Note in the principal amount of $47,059 in a related party transaction to Lawrence Diamond, our Chief Executive Officer and a member of our Board of Directors (the “Diamond Note 4”). The Diamond Note 4 bears interest at the rate of 10% per annum accrued monthly and has a maturity date that is the earlier of (i) November 30, 2022, as extended, or (ii) five business days after the date on which the Company successfully lists its shares of common stock on Nasdaq or NYSE. The purchase price of the Diamond Note 4 was $40,000; 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 entered default status on December 1, 2022, and the interest rate increased to 18%. The Diamond Note 4 contains a “most favored nations” clause that provides that, so long as the note is outstanding, if the Company issues any new security which Mr. Diamond reasonably believes contains a term that is more favorable than those in the Diamond Note 4, the Company shall notify Mr. Diamond of such term, and such term, at the option of Mr. Diamond, shall become a part of the Diamond Note 4. In addition, Mr. Diamond received five-year warrants to purchase 386 shares of common stock at a price of $25.00 per share with a fair value of $2,960 at the date of issuance, and 1,930 shares of common stock with a value of $3,160; these amounts were recorded as discounts on the Diamond Note 4. Interest in the amount of $3,245 was accrued on the Diamond Note 4 during the year ended December 31, 2022. Discounts in the amount of $17,885 were amortized to interest expense during the year ended December 31, 2022, and total discounts in the amount of $0 remained outstanding at December 31, 2022. Principal and accrued interest in the amounts $51,765 and $3,245, respectively, were due on the Diamond Note 4 at December 31, 2022. The Diamond Note 4 was in default at December 31, 2022.
Diamond Note 5
On May 26, 2022, the Company issued a 10% Promissory Note in the principal amount of $58,823 in a related party transaction to Lawrence Diamond, our Chief Executive Officer and a member of our Board of Directors (the “Diamond Note 5”). The Diamond Note 5 bears interest at the rate of 10% per annum accrued monthly and has a maturity date that is the earlier of (i) November 30, 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 purchase price of the Diamond Note 5 was $50,000; 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 Diamond Note 5, 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 5 entered default status on December 1, 2022, and the interest rate increased to 18%. The Diamond Note 5 contains a “most favored nations” clause that provides that, so long as the note is outstanding, if the Company issues any new security which Mr. Diamond reasonably believes contains a term that is more favorable than those in the Diamond Note 5, the Company shall notify Mr. Diamond of such term, and such term, at the option of Mr. Diamond, shall become a part of the Diamond Note 5. In addition, Mr. Diamond received five-year warrants to purchase 483 shares of common stock at a price of $25.00 per share with a fair value of $2,500 at the date of issuance, and 483 shares of common stock with a value of $4,050; these amounts were recorded as discounts to the Diamond Note 5. Interest in the amount of $3,929 was accrued on the Diamond Note 5 during the year ended December 31, 2022. Discounts in the amount of $21,256 were amortized to interest expense during the year ended December 31, 2022, and total discounts in the amount of $0 remained outstanding at December 31, 2022. Principal and accrued interest in the amounts $64,705 and $3,929, respectively, were due on the Diamond Note 5 at December 31, 2022. The Diamond Note 5 was in default at December 31, 2022.
Lindstrom Note 1
On May 26, 2022, the Company issued a 10% Promissory Note in the principal amount of $41,176 in a related party transaction to Jenny Lindstrom, the Company’s Chief Legal Officer (the “Lindstrom Note 1”). The Lindstrom Note 1 bears interest at the rate of 10% per annum accrued monthly and has a maturity date that is the earlier of (i) November 30, 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 purchase price of the Lindstrom Note 1 was $35,000; the amount payable at maturity will be $41,176 plus 10% of that amount plus any accrued and unpaid interest. Following an event of default as defined in the Lindstrom 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 Lindstrom Note 1 entered default status on December 1, 2022, and the interest rate increased to 18%. The Lindstrom Note 1 contains a “most favored nations” clause that provides that, so long as the note is outstanding, if the Company issues any new security which Ms. Lindstrom reasonably believes contains a term that is more favorable than those in the Lindstrom Note 1, the Company shall notify Ms. Lindstrom of such term, and such term, at the option of Ms. Lindstrom, shall become a part of the Lindstrom Note 1. In addition, Ms. Lindstrom received five-year warrants to purchase 338 shares of common stock at a price of $25.00 per share with a fair value of $1,750 at the date of issuance, and 338 shares of common stock with a value of $2,835; these amounts were recorded as discounts to the Lindstrom Note 1. Interest in the amount of $2,750 was accrued on the Lindstrom Note 1 during the year ended December 31, 2022. Discounts in the amount of $14,879 were amortized to interest expense during the year ended December 31, 2022, and total discounts in the amount of $0 remained outstanding at December 31, 2022. Principal and accrued interest in the amounts $45,294 and $2,750, respectively, were due on the Lindstrom Note 1 at December 31, 2022. The Lindstrom Note 1 was in default at December 31, 2022.
Dobbertin Note 1
On May 26, 2022, the Company issued a 10% Promissory Note in the principal amount of $17,647 in a related party transaction to Alexander Dobbertin (the “Dobbertin Note”). Mr. Dobbertin is the spouse of Jenny Lindstrom, the Company’s Chief Legal Officer. The Dobbertin Note bears interest at the rate of 10% per annum accrued monthly and has a maturity date that is the earlier of (i) November 30, 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 purchase price of the Dobbertin Note was $15,000; the amount payable at maturity will be $17,647 plus 10% of that amount plus any accrued and unpaid interest. Following an event of default as defined in the Dobbertin 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 Dobbertin Note entered default status on December 1, 2022, and the interest rate increased to 18%. The Dobbertin 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 Mr. Dobbertin reasonably believes contains a term that is more favorable than those in the Dobbertin Note, the Company shall notify Mr. Dobbertin of such term, and such term, at the option of Mr. Dobbertin, shall become a part of the Dobbertin Note. In addition, Mr. Dobbertin received five-year warrants to purchase 145 shares of common stock at a price of $25.00 per share with a fair value of $750 at the date of issuance, and 145 shares of common stock with a value of $1,215; these amounts were recorded as discounts to the Dobbertin Note. Interest in the amount of $1,179 was accrued on the Dobbertin Note during the year ended December 31, 2022. Discounts in the amount of $6,377 were amortized to interest expense during the year ended December 31, 2022, and total discounts in the amount of $0 remained outstanding at December 31, 2022. Principal and accrued interest in the amounts $19,412 and $1,179, respectively, were due on the Dobbertin Note at December 31, 2022. The Dobbertin Note was in default at December 31, 2022.
Howe Note 2
On June 9, 2022, the Company issued a 10% Promissory Note in the principal amount of $300,000 in a related party transaction to the Michael C. Howe Living Trust (the “Howe Note 2”). Michael C. Howe is the Chief Executive Officer of the Good Clinic LLC, one of our subsidiaries. The Howe Note 2 bears interest at the rate of 10% per annum accrued monthly and has a maturity date that is the earlier of (i) November 30, 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 purchase price of the Howe Note 2 was $255,000; 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 Howe Note 2, 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 Howe Note 2 entered default status on December 1, 2022, and the interest rate increased to 18%. The Howe Note 2 contains a “most favored nations” clause that provides that, so long as the note is outstanding, if the Company issues any new security which Mr. Howe reasonably believes contains a term that is more favorable than those in the Howe Note 2, the Company shall notify Mr. Howe of such term, and such term, at the option of Mr. Howe, shall become a part of the Howe Note 2. In addition, Mr. Howe received five-year warrants to purchase 2,460 shares of common stock at a price of $25.00 per share with a fair value of $10,965 at the date of issuance, and 2,460 shares of common stock with a value of $22,440; these amounts were recorded as discounts to the Howe Note 2. Interest in the amount of $18,888 was accrued on the Howe Note 2 during the year ended December 31, 2022. Discounts in the amount of $108,405 were amortized to interest expense during the year ended December 31, 2022, and total discounts in the amount of $0 remained outstanding at December 31, 2022. Principal and accrued interest in the amounts $330,000 and $18,888, respectively, were due on the Howe Note 2 at December 31, 2022. The Howe Note 2 was in default at December 31, 2022.
Howe Note 3
On July 21, 2022, the Company issued a 10% Promissory Note in the principal amount of $300,000 in a related party transaction to the Michael C. Howe Living Trust (the “Howe Note 3”). Michael C. Howe is the Chief Executive Officer of the Good Clinic LLC, one of our subsidiaries. The Howe Note 3 bears interest at the rate of 10% per annum accrued monthly and has a maturity date that is the earlier of (i) November 30, 2022, as extended, or (ii) five business days after the date on which the Company successfully lists its shares of common stock on Nasdaq or NYSE. The purchase price of the Howe Note 3 was $255,000; 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 Howe 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 Howe Note 3 entered default status on December 1, 2022, and the interest rate increased to 18%. The Howe 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 Mr. Howe reasonably believes contains a term that is more favorable than those in the Howe Note 3, the Company shall notify Mr. Howe of such term, and such term, at the option of Mr. Howe, shall become a part of the Howe Note 3. In addition, Mr. Howe received five-year warrants to purchase 2,460 shares of common stock at a price of $25.00 per share with a fair value of $9,945 at the date of issuance, and 2,460 shares of common stock with a value of $12,495; these amounts were recorded as discounts to the Howe Note 3. Interest in the amount of $15,436 was accrued on the Howe Note 3 during the year ended December 31, 2022. Discounts in the amount of $97,440 were amortized to interest expense during the year ended December 31, 2022, and total discounts in the amount of $0 remained outstanding at December 31, 2022. Principal and accrued interest in the amounts $330,000 and $15,436, respectively, were due on the Howe Note 3 at December 31, 2022. The Howe Note 3 was in default at December 31, 2022.
Iturregui Note 1
On July 21, 2022, the Company issued a 10% Promissory Note in the principal amount of $29,412 in a related party transaction to Juan Carlos Iturregui, a member of the Company’s Board of Directors (the “Iturregui Note 1”). The Iturregui Note 1 bears interest at the rate of 10% per annum accrued monthly and 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 purchase price of the Iturregui Note 1 was $25,000; 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 Iturregui 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 Iturregui Note 1 contains a “most favored nations” clause that provides that, so long as the note is outstanding, if the Company issues any new security which Mr. Iturregui reasonably believes contains a term that is more favorable than those in the Iturregui Note 1, the Company shall notify Mr. Iturregui of such term, and such term, at the option of Mr. Iturregui, shall become a part of the Iturregui Note 1. In addition, Mr. Iturregui received five-year warrants to purchase 242 shares of common stock at a price of $25.00 per share with a fair value of $975 at the date of issuance, and 242 shares of common stock with a value of $1,225; these amounts were recorded as discounts to the Iturregui Note 1. Interest in the amount of $1,313 was accrued on the Iturregui Note 1 during the year ended December 31, 2022. Discounts in the amount of $8,464 were amortized to interest expense during the year ended December 31, 2022, and total discounts in the amount of $1,089 remained outstanding at December 31, 2022. Principal and accrued interest in the amounts $32,353 and $1,313, respectively, were due on the Iturregui Note 1 at December 31, 2022.
Howe Note 4
On August 18, 2022, the Company issued a 10% Promissory Note in the principal amount of $200,000 in a related party transaction to the Michael C. Howe Living Trust (the “Howe Note 4”). Michael C. Howe is the Chief Executive Officer of the Good Clinic LLC, one of our subsidiaries. The Howe Note 4 bears interest at the rate of 10% per annum accrued monthly and has a maturity date that is the earlier of (i) November 30, 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 purchase price of the Howe Note 4 was $170,000; the amount payable at maturity will be $200,000 plus 10% of that amount plus any accrued and unpaid interest. Following an event of default as defined in the Howe 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 Howe Note 4 entered default status on December 1, 2022, and the interest rate increased to 18%. The Howe Note 4 contains a “most favored nations” clause that provides that, so long as the note is outstanding, if the Company issues any new security which Mr. Howe reasonably believes contains a term that is more favorable than those in the Howe Note 4, the Company shall notify Mr. Howe of such term, and such term, at the option of Mr. Howe, shall become a part of the Howe Note 4. In addition, Mr. Howe received 1,640 shares of common stock with a value of $10,775; this amount was recorded as a discount to the Howe Note 4. Interest in the amount of $8,756 was accrued on the Howe Note 4 during the year ended December 31, 2022. Discounts in the amount of $60,775 were amortized to interest expense during the year ended December 31, 2022, and total discounts in the amount of $0 remained outstanding at December 31, 2022. Principal and accrued interest in the amounts $220,000 and $8,756, respectively, were due on the Howe Note 4 at December 31, 2022. The Howe Note 4 was in default at December 31, 2022.
November 29, 2022 Notes
On November 29, 2022, the Company issued seven identical promissory notes (the “November 29 Notes”) in related party transactions to the following individuals: (1) Thomas Brodmerkel, the Company’s CFO and Board Member; (2) Lawrence Diamond, the Company’s Chief Executive Officer and Board Member; (3) Sheila Schweitzer, Board Member; (4) Faraz Naqvi, a former Board Member; (5) Juan Carlos Iturregui, Board Member; (6) Jenny Lindstrom, the Company’s former Vice President and Chief Legal Officer; and (7) Michael C. Howe, Chief Executive Officer of The Good Clinic, one of our subsidiaries (collectively, the “November 29 Lenders”).
The November 29 notes have due dates of May 28, 2023. The November 29 Notes are subject to the Series E Exchange Agreement whereby each of the November 29 Lenders will exchange (a) amounts due under the November 29 Notes for a number of shares of the Company’s Series E Convertible Preferred Stock equal to 150% of the principal amount of each November 29 Note. See note 12. The November 29 Notes bear interest at the rate of 10% per annum which will accrue from the date of the note only if the November 29 Notes are not converted pursuant to the Series E Exchange Agreement by May 10, 2023. Following an event of default as defined in the November 29 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 November 29 Notes contain a “most favored nations” clause that provides that, so long as the note is outstanding, if the Company issues any new security which November 29 Lender reasonably believes contains a term that is more favorable than those in the November 29 Note, the Company shall notify the November 29 Lenders of such term, and such term, at the option of the November 29 Lenders, shall become a part of the November 29 Note. In addition, each of the November 29 Lenders will receive five-year warrants to purchase 750 shares of the Company’s common stock at a price equal to the price of any warrant included in an offering in connection with listing at the Nasdaq Global Market. These warrants are not deemed issued at December 31, 2022 because the exercise price was not yet determined. Discounts in the amount of $667 were amortized to interest expense for each of the November 29 Notes during the year ended December 31, 2022, and discounts in the amount of $3,083 remained outstanding for each of the November 29 Notes at December 31, 2022. Principal and accrued interest in the amounts $18,750 and $164, respectively, were due on each of the seven November 29 Note at December 31, 2022.
Concurrent with the November 29 Notes, the Company entered into separate exchange agreements (the “November 29 Notes Exchange Agreements”). Pursuant to the November 29 Notes Exchange Agreements, amounts due under the November 29 Notes will be exchanged for a number Series E Convertible Preferred Stock equal to 150% of the principal amount of the Notes. No transactions occurred pursuant to the November 29 Notes Exchange Agreements during the year ended December 31, 2022. See notes 12 and 16.
These amounts are reflected in the table below:
December 31,
December 31,
Notes Payable
$ 2,799,632
$ 1,100,000
Less: Discount
$ (22,670
)
$ (511,568
)
Notes payable - net of discounts
$ 2,776,962
$ 588,432
Current Portion, net of discount
$ 2,776,962
$ 588,432
Long-term portion, net of discount
$ -
$ -
Interest expense on notes payable - related parties was $1,243,639 and $0 for the years ended December 31, 2022 and 2021, respectively Accrued interest on notes payable - related parties was $198,753 and $0 at December 31, 2022 and 2021, respectively.
Note 11: 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 years ended December 31, 2022 and 2021 is summarized in the table below:
December 31, 2020
$ 807,683
Settled upon conversion or exercise
(1,302,138
)
Loss on revaluation
494,455
December 31, 2021
$ -
True-up features issued
192,375
Settled upon conversion or exercise
(310,641
)
Loss on revaluation
687,178
December 31, 2022
$ 568,912
The Company uses a Monte Carlo model to value certain features of its notes payable that create derivative liabilities. The following table summarizes the assumptions for the valuations:
December 31,
Volatility
95.1% to 123.2 %
Stock Price
$ 1.06 to 3.50
Risk-free interest rates
4.35% to 4.37 %
Term (years)
0.73 to 0.86
Certain of our notes payable contain a commitment fee obligation with a true-up feature. The following assumptions were used for the valuation of the derivative liability associated with this obligation:
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The stock price would fluctuate with the Company projected volatility.
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The projected volatility curve from an annualized analysis for each valuation date was based on the historical volatility of the Company and the term remaining for the True-Up obligation.
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The Company expected the note would be repaid 90% of the time by the maturity date, at which point the Company would redeem the 1,000,000 redeemable commitment fee shares for $1.
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In the event the Company did not repay the note in time, the shareholders would sell their shares subject to volume restrictions.
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Discount rates were based on risk free rates in effect based on the remaining term. 50,000 simulations were run for each Monte Carlo simulation.
Note 12: Stockholders’ Equity (Deficit)
Common Stock
The Company has authorized 500,000,000 shares of common stock, par value $0.01; 4,630,372 and 4,266,669 shares were issued and outstanding at December 31, 2022 and December 31, 2021, respectively. On December 12, 2022, the Company effected one-for-fifty reverse-split of its common stock. The number of shares of common stock outstanding immediately before the reverse-split was 231,374,330; the number of shares of common stock immediately following the reverse-split was 4,630,372, a decrease of 226,743,958 shares.
Common Stock Transactions During the Year Ended December 31, 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 8,000 shares of common stock previously issued as compensation. These shares were valued at par value of $0.01 or a total value of $80; 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 “Gardner Equity Agreement”). Pursuant to Gardner Equity Agreement, the Company issued shares of restricted common stock to Gardner in exchange for the Company Debt Obligations, as defined below.
The Gardner Equity Agreement settled for certain accounts payable amounts owed by the Company to Gardner. The Gardner Equity 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 $12.50. As a result, 63,593 Restricted Shares were authorized to be issued.
On March 22, 2022 and March 31, 2022, the Company issued an aggregate 30,835 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 $12.50 per share and recorded the amount of $385,431 as waiver fees. 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 34,400 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 $12.50 per share; valuation purposes, the common stock was valued at the market price on the date of the transaction of $6.35 per share. 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 7,648 shares of common stock at a price of $12.50 per share which were previously subscribed for the conversion of accounts payable in the amount of $95,558.
On April 27, 2022, the Company issued 14,400 shares of stock to Cavalry Fund 1 LP at a price of $6.35 per share for a total value of $91,440 as compensation for the waiver of certain covenants as set forth in the Series C Certificate of Designation. The Company recorded a gain in the amount of $88,560 on this transaction.
On April 27, 2022, the Company issued 1,929 shares of common stock with a contract price of $12.50 per share or $24,118 and a grant date market value of $8.00 or $15,434 to Larry Diamond, it’s Chief Executive 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 1,929 shares of common stock at a price of $12.50 to Mr. Diamond pursuant to Diamond Note 3.
On May 1, 2022, the Company issued 15,000 shares of common stock to a service provider at a price of $6.88 per share.
On May 10, 2022, the Company entered into a securities purchase agreement with Kishon Investments, LLC with respect to the sale and issuance of: (i) an initial commitment fee in the amount of $159,259 in the form of 12,741 shares of the Company’s common stock , (ii) promissory note in the principal amount of $277,777 due on November 10, 2022, and (iii) warrants to purchase up to 5,556 shares of the common stock . The note and warrants were issued on May 10, 2022 and were held in escrow pending effectiveness of the Purchase Agreement.
Pursuant to the terms of the purchase agreement, the initial 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 $12.50 per share, subject to adjustment.
On May 18, 2022, the Company issued 386 shares of common stock to Larry Diamond, it’s Chief Executive Officer at a contractual price of $12.50 per share and a market price at issuance date of $7.585 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 386 shares of common stock at a price of $12.50 to Mr. Diamond pursuant to Diamond Note 4.
On May 23, 2022, the Company issued 386 shares of common stock to Jessica Finnegan at a contractual price of $12.50 per share and a market price at issuance date of $8.97 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 386 shares of common stock at a price of $12.50 to Ms. Finnegan pursuant to Finnegan Note 1.
On May 26, 2022, the Company issued 1,688 shares of common stock to the May 26 Lenders at a contractual price of $12.50 per share and a market price at issuance date of $7.585 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 1,688 shares of common stock at a price of $25.00 to the May 26 Lenders pursuant to the May 26, 2022.
On June 7, 2022, the Company issued 8,103 shares of common stock at a price of $12.50 per share to investors for accumulated dividends on Series X Preferred Stock. See Note 12.
On June 9, 2022, the Company issued 7,284 shares of common stock to the June 9 Lenders at a contractual price of $12.50 per share and a market price at issuance date of $7,425 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 7,284 shares of common stock at a price of $25.00 to the May 26 Lenders pursuant to the June 9 notes.
On June 22, 2022, the Company issued 4,824 shares of common stock at fair value of $10.45 per share to Dragon Dynamic at a fair value of $10.45 per share as a commitment fee.
On June 22, 2022, the Company issued 12,741 shares of common stock at fair value of $10.45 per share to GS Capital at a fair value of $10.45 per share as a commitment fee.
On June 22, 2022, the Company issued 8,600 shares of common stock at fair value of $10.45 per share to Anson East and an additional 25,800 shares of common stock at a fair value of $10.45 per share to Anson Investments as a commitment fee.
On July 7, 2022, the Company issued 2,412 shares of common stock to William Mackay at a contractual price of $12.50 per share and a market price at issuance date of $7.445 per share as commitment shares as set forth and defined in the Mackay Note. The Company recorded these shares at their relative fair value of the components of Mackay Note, or $12,500, and recorded a gain in the amount of $5,456 on this transaction. The Company also issued five-year warrants to purchase 2,412 shares of common stock at a price of $12.50 to Mr. Mackay pursuant to the Mackay Note.
On July 7, 2022, the Company issued 193 shares of common stock to Charlies Schrier at a contractual price of $12.50 per share and a market price at issuance date of $7.445 per share as commitment shares as set forth and defined in the Schrier Note. The Company recorded these shares at their relative fair value of the components of Schrier Note, or $1,000, and recorded a gain in the amount of $436 on this transaction. The Company also issued five-year warrants to purchase 193 shares of common stock at a price of $25.00 to Mr. Schrier pursuant to the Schrier Note.
On July 21, 2022, the Company issued 241 shares of common stock to Juan Carlos Iturregui, a related party, at a contractual price of $12.50 per share and a market price at issuance date of $7.225 per share as commitment shares as set forth and defined in the Iturregui Note. The Company recorded these shares at their relative fair value of the components of Schrier Note, or $1,225, and recorded a gain in the amount of $518 on this transaction. The Company also issued five-year warrants to purchase 241 shares of common stock at a price of $25.00 to Mr. Iturregui pursuant to the Iturregui Note.
On July 21, 2022, the Company issued 2,460 shares of common stock to the Michael C. Howe Living Trust, a related party, at a contractual price of $12.50 per share and a market price at issuance date of $7.225 per share as commitment shares as set forth and defined in the Howe Note 3. The Company recorded these shares at their relative fair value of the components of Howe Note 3, or $12,495, and recorded a gain in the amount of $5,729 on this transaction. The Company also issued five-year warrants to purchase 2,460 shares of common stock at a price of $25.00 to the Michael C. Howe Living Trust pursuant to the Howe Note 3.
On July 26, 2022, the Company issued 482 shares of common stock to Eric S. Nommsen at a contractual price of $12.50 per share and a market price at issuance date of $6.84 per share as commitment shares as set forth and defined in the Nommsen Note. The Company recorded these shares at their relative fair value of the components of Nommsen Note, or $2,350, and recorded a gain in the amount of $949 on this transaction. The Company also issued five-year warrants to purchase 482 shares of common stock at a price of $25.00 to Mr. Nommsen pursuant to the Nommsen Note.
On July 27, 2022, the Company issued 482 shares of common stock to James H. Caplan at a contractual price of $12.50 per share and a market price at issuance date of $6.935 per share as commitment shares as set forth and defined in the Caplan Note. The Company recorded these shares at their relative fair value of the components of the Caplan Note, or $2,350, and recorded a gain in the amount of $995 on this transaction. The Company also issued five-year warrants to purchase 482 shares of common stock at a price of $25.00 to Mr. Caplan pursuant to the Caplan Note.
On August 4, 2022, the Company issued a total of 241 shares of common stock to Jessica, Kevin C., Brody, Isabella, and Jack Finnegan at a contractual price of $25.00 per share and a market price at issuance date of $6.42 per share as commitment shares as set forth and defined in the Finnegan Note 3. The Company recorded these shares at their relative fair value of the components of the Finnegan Note 3, or $1,000, and recorded a gain in the amount of $448 on this transaction. The Company also issued five-year warrants to purchase a total of 241 shares of common stock at a price of $25.00 to the holders of the Finnegan Note 3.
On August 4, 2022, the Company issued 984 shares of common stock to Jack Enright at a contractual price of $12.50 per share and a market price at issuance date of $6.42 per share as commitment shares as set forth and defined in the Caplan Note. The Company recorded these shares at their fair value of $6,317.
On August 4, 2022, the Company issued 12,064 shares of common stock to a service provider as payment for investor relations services. The transaction was effective August 1, 2022 and has a six month term. The shares were valued at the closing price of the Company’s common stock on August 4, 2022, of $6.42 per share or $77,448.
On August 18, 2022, the Company issued 1,640 shares of common stock to the Michael C. Howe Living Trust, a related party, at a contractual price of $12.50 per share and a market price at issuance date of $6.57 per share as commitment shares as set forth and defined in the Howe Note 4. The Company recorded these shares at their fair value of $10,775.
On September 2, 2022, the Company issued 582 shares of common stock to John Mitchell at a contractual price of $12.50 per share and a market price at issuance date of $5.365 per share as commitment shares as set forth and defined in the Mitchell Note. The Company recorded these shares at their fair value of $3,124.
On September 2, 2022, the Company issued 492 shares of common stock to Frank Lightmas at a contractual price of $12.50 per share and a market price at issuance date of $5.365 per share as commitment shares as set forth and defined in the Lightmas Note. The Company recorded these shares at their fair value of $2,640.
On September 2, 2022, the Company issued 246 shares of common stock to Lisa Lewis at a contractual price of $12.50 per share and a market price at issuance date of $5.365 per share as commitment shares as set forth and defined in the Lewis Note. The Company recorded these shares at their fair value of $1,320.
On September 2, 2022, the Company issued 246 shares of common stock to Sharon Goff at a contractual price of $12.50 per share and a market price at issuance date of $5.65 per share as commitment shares as set forth and defined in the Goff Note. The Company recorded these shares at their fair value of $1,320.
On September 9, 2022, the Company issued 820 shares of common stock to Cliff Hagan at a contractual price of $12.50 per share and a market price at issuance date of $5.75 per share as commitment shares as set forth and defined in the Hagan Note. The Company recorded these shares at their fair value of $4,715.
On September 14, 2022, the Company issued 1,640 shares of common stock to Darling Capital at a contractual price of $12.50 per share and a market price at issuance date of $6.60 per share as commitment shares as set forth and defined in the Darling Capital Note. The Company recorded these shares at their fair value of $10,824.
On September 15, 2022, the Company issued 410 shares of common stock to Mack Leath at a contractual price of $12.50 per share and a market price at issuance date of $6.995 per share as commitment shares as set forth and defined in the Leath Note. The Company recorded these shares at their fair value of $2,868.
On October 1, 2022, the Company issued 6,329 shares of common stock at a price of $16.00 per share to a service provider.
On November 18, 2022, the Company issued 91,328 shares of common stock to AJB in settlement of the AJB True-up Obligation. See note 9.
Common Stock Transactions During the Year Ended December 31, 2021
On January 4, 2021, the Company issued 82,475 shares of common stock at a price of $0.60 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 70,119 shares of common stock at a price of $0.612 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 89,270 shares of common stock at a price of $0.612 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 86,388 shares of common stock at a price of $0.633 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 128,992 shares of common stock at a price of $0.77 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 145,702 shares of common stock at a price of $0.7875 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 133,440 shares of common stock in a private placement (the "2021 Private Placement”) at a price of $12.50 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 23,683 shares of common stock at a price of $12.492 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 12,792 shares of common stock at a price of $11.926 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 12,104 shares of common stock at a price of $12,492 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 21,903 shares of common stock at a price of $11,874 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 6,720 shares of common stock for the exercise of options at a price of $15.00 per share.
On March 11, 2021, the Company issued 12,000 shares of common stock to four 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 6,000 shares of common stock at a price of $15.50 per share to a service provider.
On March 23, 2021, the Company issued 9,227 shares of common stock at a price of $13.00 per share to the underwriters of the 2021 Private Placement.
On April 19, 2021, the Company issued 39 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 84,748 shares of common stock for the conversion of 1,059,356 shares of Series C Preferred Stock at a price of $12.50 per share.
On May 12, 2021, the Company issued 50,000 shares of common stock at a price of $15.00 per share for the exercise of stock options by an investor.
On June 10 through June 29, 2021, the Company issued 102,333 shares of common stock at a price of $15.00 per share for the exercise of stock options by officers and directors.
On June 23, 2021, the Company cancelled 40,000 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 12,759 shares to the ex-officer at the market price of $10.00 per share.
On August 17, 2021, accrued liabilities in the amount of $156,441 were converted to 12,515 shares of common stock. 9,589 shares were issued during December 2021 and the remaining 2,926 shares was not issued and recorded in common stock subscribed as of December 31, 2021. Among the 12,515 shares, 6,256 restricted shares of the Company’s common stock was issued to settled $78,200 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 80,000 shares of the Company common stock in connection with the conversion of Series C preferred stock issued in the first quarter.
Also, during the year ended December 31, 2021, the Company charged the amount of $13,032 to operations in connection with the vesting of stock granted to its officers, employees, and board members; the Company also charged the amount of $676,423 to operations in connection with the vesting of options granted to its officers, employees, and board members.
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, 10,000 shares of Series E Preferred, and 27,324 shares as Series X Preferred Stock.
Series A Preferred Stock
The Series A Preferred Stock has a par value of $0.01 per share, no stated maturity, a liquidation preference of $25.00 per share and accrued dividends at the rate of 12% on $25.00 per share. The Company had no shares of Series A Preferred Stock outstanding at December 31, 2022 and 2021.
Series A Preferred Stock Transactions During the Year Ended December 31, 2022
None.
Series A Preferred Stock Transactions During the Year Ended December 31, 2021
During the year ended December 31, 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 canceled and there are no Series A Preferred shares outstanding at December 31, 2021.
Series C Preferred Stock
The 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, in 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 per share equal to the 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 Series C Preferred Stock specified in such request by paying in cash therefore 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 C Preferred Stock Transactions During the Year Ended December 31, 2022
During the year ended December 31, 2022, the Company accrued dividends on the Series C Preferred Stock in the amount of $66,447. The Company also adjusted the number of shares of Series C Preferred Stock outstanding by an increase in the amount of 98,064 shares in connection with previous conversions of Series C Preferred Stock to common stock; the amount of $981 was charged to additional paid-in capital pursuant to this adjustment.
Series C Preferred Stock Transactions During the Year Ended December 31, 2021
On March 25, 2021, the Company sold 3,000,000 shares of its Series C Preferred Stock along with (i) five-year warrants to purchase 6,300,000 shares of the Company’s common stock at a price of $0.50 per share, and (ii) five-year warrants to purchase 6,300,000 shares of the Company’s common stock at a price of $0.75 per share for proceeds of $3,000,000.
On May 4 through 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.
Between August 11,2021 through September 2, 2021, 1,000,000 shares of Series C Preferred Stock were converted at a price of $0.25 per share to 4,000,001 shares of common stock.
During the year ended December 31, 2021, the Company accrued dividends on the Series C Preferred Stock in the amount of $87,059.
Series D Preferred Stock
The Series D Preferred Stock has the following terms:
Ranking. The Series D Preferred Stock and the Series C Preferred Stock 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 D 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 D 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 D 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 D Preferred Stock is entitled to convert their shares of Series D Preferred Stock, in 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 D 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 D 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 D 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 D 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 D 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 D Preferred stock (“Parity Stock”) then outstanding, an amount per share of Series D 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 D 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 D 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 D 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 D 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 D Preferred Stock (which the applicable holder of the Series D Preferred Stock is seeking to convert) at a price per share equal to the 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 D Preferred Stock that the Series D 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 Series D Preferred Stock specified in such request by paying in cash therefore 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 D 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 D Preferred Stock. Further, until the earlier of 18 months from the issuance date of the Series D Preferred Stock and the date that there are less than 20% of the shares of Series D 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.
Series D Preferred Stock Transactions During the Year Ended December 31, 2022
During the year ended December 31, 2022, the Company accrued dividends on the Series D Preferred Stock in the amount of $195,299.
Series D Preferred Stock Transactions During the Year Ended December 31, 2021
On October 18, 2021, the Company sold 2,050,000 shares of Series D Preferred Stock and (i) five-year warrants to acquire 85,050 shares of the Company’s common stock at a price of $25.00 per shares, and (ii) five-year warrants to acquire 85,050 shares of the Company’s common stock at a price of $37.50 per share for proceeds of $1,874,450, net of costs in the amount of $125,500.
On November 10, 2021, the Company sold 1,075,000 shares of Series D Preferred Stock and (i) five-year warrants to acquire 45,150 shares of the Company’s common stock at a price of $25.00 per shares, and (ii) five-year warrants to acquire 45,150 shares of the Company’s common stock at a price of $37.50 per share for proceeds of $999,250, net of costs in the amount of $75,750.
During the year ended December 31, 2021, the Company accrued dividends on the Series D Preferred Stock in the amount of $35,327.
Series E Preferred Stock
On November 7, 2022, the Company filed a Certificate of Designations, Preferences and Rights of Series E Convertible Perpetual Preferred Stock (the “Series E”) with the Delaware Secretary of State. The number of shares of Series E designated is 10,000 and each share of Series E has a stated value equal to $1,000. Each share of Series E Preferred Stock shall have a par value of $0.01. There are 0 shares of Series E Preferred Stock outstanding at December 31, 2022 and 2021.
As long as any shares of Series E are outstanding, the Company shall not, without the affirmative vote of the holders of a majority of the then outstanding shares of the Series E, (a) alter or change the preferences, rights, privileges or powers given to the Series E or alter or amend the Certificate of Incorporation or bylaws, (b) increase or decrease (other than by conversion) the number of authorized shares of Series E, or (c) create or authorize any new class of shares that has a preference over Series E.
Unless previously converted into shares of Common Stock, any shares of Series E issued and outstanding, shall be redeemable at the option of the Company for cash at a redemption price per share equal to 110% of the initial issuance price, or $1,100, plus all dividends declared thereon.
Each share of Series E shall become convertible, at the option of the holder, commencing on the date of issuance, into such number of fully paid and non-assessable shares of Common Stock. The conversion price shall be, as of the conversion date, (a) prior to the date of the qualified offering the average VWAP per share of the Common Stock for the five (5) trading days prior to the date of conversion and (b) on or following the date of the qualified offering, the qualified offering price (the “Conversion Price”). Immediately following the 120th day following the qualified offering, the Conversion Price shall be adjusted to the lesser of (a) the average VWAP per share of the Common Stock for the five (5) trading days immediately following the 120th day following the qualified offering and (b) the Conversion Price on such date, which shall in no event be less than $0.05.
Series E Exchange Agreements
During the year ended December 31, 2022, the Company entered into the following agreements to exchange certain debt and equity amounts for shares of Series E Preferred Stock (see notes 9, 10, and 16):
On October 5, 2022, the Company entered into the Cavalry Exchange Agreement, pursuant to which Cavalry shall exchange (a) 1,000,000 shares of the Company’s Series C Convertible Preferred Stock (b) 750,000 shares of the Company’s Series D Convertible Preferred Stock and (c) amounts owing under the Cavalry Note, for a number of Series E Convertible Preferred Stock (the “Series E Shares”) equal to 150% of the principal amount of the Cavalry Note, plus 150% of the stated value of the Series C Shares and Series D Shares (the “Series E Exchange Value”). No transactions occurred pursuant to the Cavalry Exchange Agreement during the year ended December 31, 2022. See note 9 and 16.
On October 7, 2022, the Company entered into the Mercer Exchange Agreement whereby Mercer shall exchange (a) 47,619 shares of the Company’s Series C Convertible Preferred Stock, (b) 750,000 shares of the Company’s Series D Convertible Preferred Stock, and (c) amounts owing under the Mercer Note, for a number of Series E Convertible Preferred Stock (the “Series E Shares”) equal to 150% of the principal amount of the Mercer Note, plus 150% of the stated value of the Series C Shares and Series D Shares (the “Series E Exchange Value”). No transactions occurred pursuant to the Mercer Exchange Agreement during the year ended December 31, 2022. See note 9. Amounts due under the Mercer Note 2 will also convert pursuant to the terms of the Mercer Exchange Agreement into shares of the Company’s series E Preferred Stock. See note 9 and 16.
On October 10, 2022, the Company entered into the Pinz Exchange Agreement whereby Pinz shall exchange (a) 100,000 shares of the Company’s Series D Convertible Preferred Stock, and (b) amounts owing under the Pinz Note, for a number of Series E Convertible Preferred Stock equal to 150% of the principal amount of the Pinz Note, plus 150% of the stated value of the Series D Shares. No transactions occurred pursuant to the Pinz Exchange Agreement during the year ended December 31, 2022. See note 9 and 16.
On October 18, 2022, the Company entered into separate exchange agreements with each of Anson East Master Fund LP and Anson Investments Master Fund LP (collectively, “Ansons”), (the “Ansons Exchange Agreements”). Pursuant to the Ansons Exchange Agreements, Ansons shall exchange an aggregate of 750,000 shares of the Company’s Series D Stock for a number of Series E Convertible Preferred Stock (the “Series E Shares”) equal to 150% of the stated value of the Series D Shares (the "Series E Exchange Value"), and the Funds have agreed to invest no less than an aggregate amount of $375,000 into the uplisting offering. No transactions occurred pursuant to the terms of the Ansons Exchange Agreements during the year ended December 31, 2022. See notes 9 and 16.
On November 29, 2022, the Company entered into the November 29 Notes Exchange Agreements whereby amounts due under the November 29 Notes will be exchanged for a number Series E Convertible Preferred Stock equal to 150% of the principal amount of the Notes. No transactions occurred pursuant to the November 29 Notes Exchange Agreements during the year ended December 31, 2022. See notes 10 and 16.
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 December 31, 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 400 votes on all matters submitted to a vote of our shareholders.
Series X Preferred Stock Transactions During the Year Ended December 31, 2022
During the year ended December 31, 2022, the Company accrued dividends on the Series X Preferred Stock in the amount of $60,564.
Series X Preferred Stock Transactions During the Year Ended December 31, 2021
On June 23, 2021, 2,000 shares of Series X Preferred Stock were cancelled pursuant to a settlement agreement with an ex-officer. During the year ended December 31, 2021, the Company accrued dividends on the Series X Preferred Stock in the amount of $61,818.
Stock Options
The following table summarizes the options outstanding at December 31, 2022 and the related prices for the options to purchase shares of the Company’s common stock:
Weighted
Weighted
Weighted
average
average
average
exercise
exercise
Range of
Number of
remaining
price of
Number of
price of
exercise
options
contractual
outstanding
options
exercisable
prices
outstanding
life (years)
options
exercisable
options
$
1.50-16.00
310,692
7.97
$
10.01
136,303
$
7.89
310,692
7.97
$
10.01
136,303
$
7.89
Transactions involving stock options are summarized as follows:
Shares
Weighted- Average
Exercise Price ($) (A)
Outstanding at December 31, 2020
269,078
$
1.50
Granted
285,900
13.00
Cancelled/Expired
(7,000
)
1.50
Outstanding at December 31, 2021
366,591
$
10.29
Granted
4,000
$
12.50
Cancelled/Expired
(59,899
)
$
12.18
Exercised
-
-
Outstanding at December 31, 2022
310,692
$
10.01
Options vested and exercisable
136,303
$
7.89
At December 31, 2022, the total stock-based compensation cost related to unvested awards not yet recognized was $2,152,786.
The Company valued stock options during the years ended December 31, 2022 and 2021 using the Black-Scholes valuation model utilizing the following variables:
December 31,
December 31,
Volatility
134.9% to 149.9
%
153.5% to 183.5
%
Dividends
$
-
$
-
Risk-free interest rates
2.82% to 4.25
%
0.820% to 1.69
%
Term (years)
5.00
5.00-6.5
Warrants
The following table summarizes the warrants outstanding at December 30, 2022 and the related prices for the warrants to purchase shares of the Company’s common stock:
Shares
Weighted- Average
Exercise Price ($)
Outstanding at December 31, 2020
-
$
-
Granted
596,400
$
31.25
Exercised
-
$
-
Outstanding at December 31, 2021
596,400
$
31.25
Granted
75,934
$
26.21
Exercised
-
$
-
Outstanding at December 31, 2022
672,334
$
30.68
Note 13: Income Taxes
Deferred income taxes result from the temporary differences primarily attributable to amortization of intangible assets and debt discount and an accumulation of net operating loss carryforwards for income tax purposes with a valuation allowance against the carryforwards for book purposes.
In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. Included in deferred tax assets are Federal and State net operating loss carryforwards of approximately $9.7 million, which will expire through 2040. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. Due to significant changes in the Company’s ownership, the Company’s future use of its existing net operating losses may be limited.
The provision (benefit) for income taxes for the years ended December 31, 2022 and 2021 consist of the following:
Current
$ -
$ -
Deferred
-
-
Total
$ -
$ -
For the years ended December 31, 2022 and 2021, the expected tax expense (benefit) based on the U. S. federal statutory rate is reconciled with the actual tax provision (benefit) as follows:
For the Years Ended
December 31,
Expected tax at statutory rates
$ (4,879,000
)
%
$ (2,351,000
)
%
Permanent Differences
1,610,000
%
692,000
%
State Income Tax, Net of Federal benefit
380,000
%
(612,000
)
%
Current Year Change in Valuation Allowance
2,137,000
%
2,291,000
%
Prior Year True-Ups
752,000
%
(20,000
)
%
Income tax expense
$ -
%
$ -
%
Deferred income taxes reflect the tax impact of temporary differences between the amounts of assets and liabilities for financial reporting purposes and such amounts as measured by tax laws and regulations.
Deferred income taxes include the net tax effects of net operating loss (NOL) carryforwards and the temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. As of December 31, 2022, and 2021 significant components of the Company’s deferred tax assets are as follows:
For the Years Ended
December 31,
Deferred Tax Assets (Liabilities):
Accrued payroll
$ 112,000
$ 22,000
ASC842-ROU Asset
(68,000
)
(1,117,000
)
ASC842-ROU (Liability)
830,000
1,189,000
Loss from derivatives
(130,000
)
(4,000
)
Waiver and commitment fee shares
(32,000
)
-
Stock based compensation
(85,000
)
398,000
Depreciation
33,000
(764,000
)
Net operating loss
9,679,000
8,478,000
Net deferred tax assets (liabilities)
10,339,000
8,202,000
Valuation allowance
(10,339,000
)
(8,202,000
)
Net deferred tax assets (liabilities)
$ -
$ -
Note 14: Fair Value of Financial Instruments
The following summarizes the Company’s derivative financial liabilities that are recorded at fair value on a recurring basis at December 31, 2022 and 2021.
December 31, 2022
Level 1
Level 2
Level 3
Total
Liabilities
Derivative liabilities
$
-
$
-
$
568,912
$
568,912
December 31, 2021
Level 1
Level 2
Level 3
Total
Liabilities
Derivative liabilities
$
-
$
-
$
-
$
-
Note 15: Commitments and Contingencies
Legal
From time to time, we may become involved in legal proceedings or be subject to claims arising in the ordinary course of our business.
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 18, 2020, the Company’s former President and COO completed and applied on behalf of the Company to Bank of America, NA (“Bank of America”) for a PPP loan, which was subsequently approved. On April 25, 2020, the Company entered into an unsecured Promissory Note (the “Note”) with Bank of America for a loan in the original principal amount of $460,406, and the Company received the full amount of the loan proceeds on May 4, 2020.
On July 21, 2020, Bank of America notified the Company in writing that it should not have received $440,000 of the loan proceeds disbursed under the Note. The Company investigated the terms of the application and discovered its former President had erroneously represented it was refinancing an Economic Injury Disaster Loan when no such loan had been received. Bank of America requested that the Company remit the funds received back to Bank of America. The Company negotiated the conversion of this to a 60 month note at 1% interest. We are currently in default on this note. If we are not successful in bringing this liability current, it could have a material adverse effect on our financial condition.
On October 25, 2022, the company was notified that a vendor filed suit related to a contract dispute naming both The Good Clinic and The CEO of the Good Clinic. This suit was settled on May 5, 2023, and dismissed with prejudice on May 12, 2023. The settlement included the issuance of the Company’s restricted common stock. As a part of the settlement the Company issued 2,552 shares of its restricted common stock to the plaintiff and it issued to the CEO of The Good Clinic 19,622 shares of its restricted common stock, plus $3,000 in cash for reimbursement of expenses related to settling the suit with the vendor.
The Company has a number of legal situations involved with the winding down of its clinic business activities including claims regarding certain construction contracts and as a part of the process of cancellation of leases. The following is a summary as of the date of this filing:
●
The Wayzata, MN clinic leases was terminated for a commitment to pay $25,000.
●
The two Denver, Colorado clinic lease, known as Quincy and Radiant, possession has been relinquished to the landlords. The lease obligations remain in negotiations as does the handling of the mechanics liens placed on the properties.
●
The Eagan clinic, aka Vikings clinic, gave up possession in January of 2023. The mechanics lien has been placed on the property was settled by the landlord in a confidential settlement with the lien holder. Mitesco is now in settlement negotiations with the landlord for the handling of lease obligations.
●
The St. Paul clinic possession was relinquished in March 2023. The handling of lease obligations remain in negotiations as does the handling of the mechanics liens placed on the properties.
●
The St. Louis Park clinic possession was relinquished in April 2023. The handling of lease obligations remain in negotiations as does the handling of the mechanics liens placed on the properties.
●
The Maple Grove clinic eviction occurred in April 2023. The handling of lease obligations remain in negotiations as does the handling of the mechanics liens placed on the properties.
●
The Northeast Minneapolis clinic, aka Nordhaus clinic, possession was relinquished in May 2023. There is no lien on the property. The handling of lease obligations remains in negotiations with the landlord.
Note 16: Subsequent Events
Common Stock Issued
On January 23, 2023, the Company issued 150,000 shares of common stock at a price of $3.45 per share to a service provider.
On January 23, 2023, the Company issued a total of 8,063 shares of common stock at a price of $4.33 per share to holders of the Series X Preferred Stock for accrued dividends. Larry Diamond, the Company’s Chief Executive Officer, received 666 of these shares.
On February 15, 2023, the Company issued 9,846 shares of common stock to an investor at a price of $1.32 per share pursuant to a true-up agreement.
On February 21, 2023, the Company issued 150,000 shares of common stock at a price of $2.63 per share to a service provider.
On March 1, 2023, the Company issued 13,555 shares of common stock to an investor at a price of $1.32 per share pursuant to a true-up agreement.
On March 9, 2023, the Company issued 15,265 shares of common stock to an investor at a price of $1.32 per share pursuant to a true-up agreement.
On March 28, 2023, the Company issued 18,472 shares of common stock to an investor at a price of $1.32 per share pursuant to a true-up agreement.
On April 4, 2023, the Company issued 94,738 shares of common stock to an investor at a price of $1.32 per share pursuant to a true-up agreement.
On May 5, 2023, the Company issued 2,952 shares of common stock at a price of $1.05 per share to a service provider.
On May 5, 2023, the Company issued 2,552 shares of common stock to an investor at a price of $1.05 per share for satisfaction of accounts payable.
On May 9, 2023, the Company issued 19,622 shares of common stock to Michael C. Howe, a related party, at a price of $0.94 per share to reimburse Mr. Howe for costs incurred in connection with a settlement agreement with a vendor.
Spartan Capital Advisory Agreement
On January 12, 2023 the Company entered into an advisory agreement with Spartan Capital (“Spartan”) pursuant to which Spartan will act as exclusive financial advisor in providing general financial advisory services to the Company. In consideration for the financial advisory services to be rendered thereunder, the Company will issue to Spartan 150,000 restricted common shares of the Company (“Common Stock”). In addition, the Company will issue to Spartan an additional 50,000 Common Stock within three business days of completion of a gross raise of at least $2,000,000.
Sale of Series F Preferred Stock
On March 23, 2023, the Company filed a Certificate of Designations, Preferences and Rights of Series F 12% PIK Convertible Perpetual Preferred Stock (the “Series F”) with the Delaware Secretary of State. The number of shares of Series F designated is 140,000 and each share of Series F has a stated value equal to $1,000. Each share of Series F Preferred Stock shall have a par value of $0.01.Holders of the Series F are entitled to receive payment in kind dividends (“PIK Dividends”) at the quarterly rate of three-hundredths of one share outstanding per Series F Share. The Series F can be converted at the option of the Series F shareholder into shares of the Company’s common stock at a price equal to 65% of the Volume Weighted Average Price (“VWAP”) on the conversion date.
Purchase Agreement
On April 11, 2023, the Company entered into securities purchase agreements (each a “Purchase Agreement”) with investors providing for the sale and issuance of (i) Series F 12% PIK Convertible Perpetual Preferred Stock, par value $0.01 per share (the “Series F Shares”) and (ii) warrants to purchase shares of Common Stock (the “Warrants,” and together with the Series F Shares, the “Securities”).
The closing on the first tranche of the offering resulted in gross proceeds to the Company of $650,000. The net proceeds to the Company from the first tranche of the offering were $511,000, after deducting placement agent fees and expenses and estimated offering expenses payable by the Company. The Company intends to use the net proceeds from the offering for general operating expenses. In connection with the Purchase Agreement, the Company also entered into a registration rights agreement.
Exchange Agreements
Also in connection with the Purchase Agreement, the Company entered into separate exchange agreements pursuant to which the investors in the Series E Preferred Stock exchanged certain securities, as defined in each individual Exchange Agreement, for a number Series F Shares (based on their liquidation preference of $1,000) equal to 120%, 165% or 230%, depending on whether the investor is investing additional funds into the bridge financing, of the “Principal Amount,” “Stated Value” and/or liquidation preference of the Exchange Securities (including any payoff bonus, accrued dividends or interest).
Appointment of Ms. Sheila Schweitzer as Chairperson of the Board of Directors and President, Chief Operating Officer
Effective June 1, 2023, the Board of Directors appointed Ms. Sheila Schweitzer to the position of President and Chief Operating Officer. Ms. Schweitzer will receive a salary in the amount of $200,000 per year. Her employment agreement is for a period of one year.
Effective June 06, 2023, the Board of Directors of the Company appointed Ms. Schweitzer who has been a member of the Board of Directors since 2021, to the position of Chairperson, replacing Mr. Tom Brodmerkel, who has completed his term as Chair. Mr. Brodmerkel will remain as Chief Financial Officer and continue to serve as a member of the Company’s Board of Directors.

---

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.

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ITEM 9A. CONTROLS AND PROCEDURES
ITEM 9A. CONTROLS AND PROCEDURES.
Evaluation of Disclosure Controls and Procedures
We maintain “disclosure controls and procedures” as such term is defined in Rule 13a-15(e) under the Securities Exchange. In designing and evaluating our disclosure controls and procedures, our management recognized that disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of disclosure controls and procedures are met. Additionally, in designing disclosure controls and procedures, our management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of disclosure controls and procedures. The design of any disclosure controls and procedures also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Based on their evaluation as of the end of the period covered by this Annual Report, the Board has determined these were deemed not effective and has undertaken to address the shortcomings by:
a. adding additional and more qualified staff;
b. asking for specific direction from the company’s accountants and auditors;
c. reviewing structure and procedures implemented by similarly situated publicly held companies; and
d. changes in process prior to any further acquisition or financing activity.
Management’s Annual Report on Internal Control over Financial Reporting
Management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. In making this assessment, management used the criteria set forth by the committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control - Integrated Framework (2013 Framework). The Company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external reporting purposes in accordance with accounting principles accepted in the United States of America. Internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on the interim or annual financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with policies or procedures may deteriorate.
The Company’s management notes that the Company’s internal control over financial reporting was not effective as of December 31, 2022.
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis.
The material weaknesses identified during our annual audit for 2022 were (i) lack of segregation of duties, and (ii) lack of sufficient resources with appropriate accounting experience ), especially with regards to equity-based transactions and tax accounting expertise.
Because of these material weaknesses, management concluded that the Company did not maintain effective internal control over financial reporting as of December 31, 2022. This Annual Report does not include an attestation report of our registered public accounting firm regarding our internal controls over financial reporting. The disclosure contained under this Item 9A was not subject to attestation by our registered public accounting firm pursuant to temporary rules of the SEC that permit us to provide only the disclosure under this Item 8A in this annual report.
We believe that the material weaknesses as reported will eventually be fully remediated, upon being properly capitalized to hire the proper personnel for segregation of duties and SEC and GAAP accounting knowledge.
Management’s Report on Disclosure Controls and Procedures
The Company’s management has identified what it believes are material weaknesses in the Company’s 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.
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.
Cybersecurity
We utilize information technology for internal and external communications with vendors, clinical sites, banks, investors and shareholders. Loss, disruption or compromise of these systems could significantly impact operations and results.
We are not aware of any material cybersecurity violation or occurrence. We believe our efforts toward prevention of such violation or occurrence, including system design and controls, processes and procedures, training and monitoring of system access, limit, but may not prevent unauthorized access to our systems.
Changes in Internal Control Over Financial Reporting
There has been no change 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 fourth quarter ended December 31, 2022 that has materially affected, or is likely to materially affect, our internal control over financial reporting.

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ITEM 9B. OTHER INFORMATION
ITEM 9B. OTHER INFORMATION
None.

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ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE
The following table and biographical summaries set forth information, including principal occupation and business experience about our directors and executive officers as December 31, 2022:
Name
Age
Board of Directors
Appointed
Lawrence Diamond
Director
10/07/2019
Thomas Brodmerkel (a)
Chairman of the Board of Directors
12/31/2019
Dr. H. Faraz Naqvi (b)
Director
07/13/2020
Juan Carlos Iturregui Esq
Director
07/31/2020
Shelia Schweitzer (c)
Director
06/01/2021
a.
Mr. Brodmerkel’s term as Chairman concluded on June 6, 2023.
b.
Dr. Nazvi resigned from the Board of Directors on April 14, 2023.
c.
Ms. Schweitzer became Board Chairperson on June 6, 2023.
Name
Age
Executive Officers
Appointed
Lawrence Diamond
Chief Executive Officer
11/01/2019
Thomas Brodmerkel
Chief Financial Officer
04/14/2022
Ingrid Jenny Lindstrom (d)
Chief Legal Officer
04/12/2021
Shelia Schweitzer
Chief Operating Office
06/01/2021
d.
Ms. Lindstrom resigned on May 19, 2023.
Lawrence Diamond
Mr. Diamond has served as our Chief Executive Officer since November 2019 and Director since October 2019. Mr. Diamond also served as our Interim Chief Financial Officer from November 2019 until March 17, 2021. He has also served as the Chief Executive Officer and Principal of Diamond Consulting, a consulting firm focused on enhancing the performance for healthcare businesses. Prior to that, from June 2018 to May 2019, he served as the chief executive officer of Intelligere Inc., a supplier of interpretation and translation for 73 languages to healthcare providers. From October 2014 to September 2017, Mr. Diamond served as the Executive Vice President and the Chief Operating Officer of PointRight, Inc. (“PointRight”), a leading healthcare analytics firm specializing in long-term and post-acute care using predictive analytics for skilled nursing, home health, Medicare & Medicaid payers, hospitals, and ACOs. Additionally, Mr. Diamond served as the Vice President of Insignia Health from January 2013 to October 2014, where he grew their business internationally and domestically providing population health engagement via their validated program (Patient Activation Measure, PAM) and SaaS-based population health-coaching. He also led strategic planning and telehealth sales at American Telecare from 2004 to 2012, an innovator of telemedicine enabled clinical services and medical devices that improve cost and quality. He also served as Vice President of Ubiquio Corporation, Inc. from 2000 to 2003, an innovator in mobile technology and services which was acquired by Mobile Planet, after an eight-year stint at UnitedHealth Group, where he also served as Vice President, driving their Medicare Advantage, pharmacy products, health plan operations, and mergers and acquisitions. He began his career at Merrill Lynch in private client banking in 1985 and earned his M.B.A. at the University of Minnesota, and his B.S., Business Administration, at the University of Richmond.
Mr. Diamond brings to the Board significant strategic, business, and financial experience specifically applicable to healthcare and telehealth companies. Mr. Diamond has a broad understanding of the financial markets, financial statements as well as accepted accounting principles. Through his services as our Chief Executive Officer and Interim Chief Financial Officer, he developed extensive knowledge of our business and the challenges that we face.
Thomas Brodmerkel
Mr. Brodmerkel has served as a Chair of the Board from April 2020 to June 2023. He also currently serves on the board of directors of Xact Laboratories, LLC, a healthcare technology company; as the Chief Executive Officer and Chair of Wave Health Technologies LLC., a healthcare technology company focused on computer assisted coding and medical record analysis, since January 2017; and as the Executive Vice President and Chief Operating Officer of Medical Card System, Inc. since April 2013. Mr. Brodmerkel has also served as the Vice Chairman of the Board of CareSource since September 2018, a not for profit $10 billion health plan primarily focused on serving patients under Medicaid, and as the President and Chief Executive officer of KMA Holdings LLC, an investment and consulting firm in the health care industry, since January 2009. Additionally, Mr. Brodmerkel has served on the board of PointRight since May 2014. Previously, Mr. Brodmerkel served on the board of directors of Pulse8 Inc. from September 2015 through January 2017 and Peak Risk Adjustment Solutions from October 2015 through December 2016. He also served as Executive Vice President of Matrix Medical Network, Inc. (“Matrix”) from January 2009 through November 2012. While at Matrix, a company based in Scottsdale, AZ, he was responsible for Corporate and Business Development, Client Services, Sales, and Marketing. Matrix was sold to a private equity group in April 2012. From May 2007 through December 2008, Mr. Brodmerkel served as President, Medicare Programs for the Bethesda, Maryland based Coventry Healthcare, Inc. As President, he was fully responsible for profit and loss for the over $2 Billion Medicare Programs division. Products included Medicare Advantage Part C, Prescription Drugs Part D, Private-Fee-For-Service, Special Needs Plans, and Medicare Medical Savings Accounts. Mr. Brodmerkel also served as President, United Health Advisors, SVP, Ovations, Senior Retiree Services at UnitedHealth Group Incorporated, where he was responsible for over $1.5 billion of sales, marketing, and business development for products targeted to individuals aged 50 and older, from 2004 to 2006. These products include Medicare Advantage, Medicare Supplements, Medicare Pharmacy-Part D, and Special Needs Plans for individuals and groups.
While serving as Executive Vice President of American Telecare, Inc in 2004, Mr. Brodmerkel was responsible for all field operations, customer service, sales, marketing, and business development. Mr. Brodmerkel also served as Executive Vice President of Lumenous, Inc. (2003-2004), Stanton Group, Inc. as its Executive Vice President (2002-2003), Definity Health, Inc. as its Executive Vice President (2001-2002), United Healthcare, Inc. in various capacities and roles (1994-2001), Old Northwest Agents, Inc. (1990-1994) as Vice President (1990-1994), Mutual of New York (1988-1990) as its District Manager, and Ward Financial Services, Inc. (1986-1988) as its Vice President. After graduating from college, he began his career at the Three Star Drilling Corporation in 1985 as its General Manager.
Mr. Brodmerkel’s military service includes five years in the United States Navy (1980-1985) as a Supply Officer based in San Diego, CA, Panama Canal, Panama, and in Charleston, South Carolina. Mr. Brodmerkel graduated from the United States Naval Academy, Annapolis, Maryland with a Bachelor of Science in 1982.
Mr. Brodmerkel was appointed to the board due to his extensive experience, leadership and managerial expertise in healthcare, healthcare technology, insurance, and healthcare consulting companies.
On June 13, 2022, the Board appointed Mr. Tom Brodmerkel, age 64, its Chairman, as the Company’s Chief Financial Officer. Mr. Brodmerkel’s term as Chairman concluded on June 6, 2023.
Dr. H. Faraz Naqvi
Dr. Naqvi has served as a director on the Board since July 2020. He has also served as the Co-founder and Chief Executive Officer of Crossover Capital Partners LLC since 2015, whose mission is to invest in healthcare companies. He also joined the Board of Directors of UCHealth, a not-for-profit healthcare system based in Colorado. Since 2016 he has served as a member of the Board for the Health District of Northern Larimer County, Colorado, and in 2012 he co-founded Remote Health Access, whose mission is elderly care and telemedicine. Dr. Naqvi has also served as the Medical Director of Miramont Lifestyle Fitness since 2012. Dr. Naqvi has resigned as of April 14, 2023.
In May 2016, Dr. Naqvi founded Front Range Geriatric Medicine, a medical practice firm, and operated that practice from 2016 through 2019. Previously, Dr. Naqvi was founder of Avicenna Capital Limited, a healthcare investment firm and an affiliate of Brevan Howard Asset Management LLP in London, UK, from 2007 through 2009. Prior to founding Avicenna, Dr. Naqvi was a Managing Director at Pequot Capital Management, Inc. from 2001 until 2007, where he served as the manager of their $1.3 billion healthcare fund, about $1 billion of the firm’s healthcare allocation, and a $250 million emerging markets healthcare fund. From 1991 until 2001, Faraz managed $4 billion in healthcare funds at Allianz Global Investors/Dresdner RCM capital. He also served as an analyst with Bank of America/Montgomery Securities from 1997 to 1998. He began his finance career as a healthcare consultant with McKinsey & Company from 1995 until 1997.
Dr. Naqvi is a Boettcher Scholar graduate of Colorado College (1986), studied economics at Trinity College, Cambridge University (1989) where he was a Marshall Scholar, received his M.D. from Harvard Medical School/M.I.T. (1993), where he performed angiogenesis research with Drs. Judah Folkman, Robert Langer, and Marsha Moses. Faraz is board certified in internal medicine and geriatrics and licensed in California, New York, and Colorado.
Dr. Naqvi was appointed to the Board due to his experience as a physician, strategic business consultant, an investment portfolio manager and as a leader of multiple healthcare-related companies. Effective April 14, 2023, Dr. H. Faraz Naqvi tendered his resignation as a director of the Company.
Juan Carlos Iturregui, Esq.
Mr. Iturregui has served as a director of our Board since July 31, 2020. He is engaged in several businesses including in 2005, he founded Milan Americas, LLC (“Milan Americas”), in Washington D.C., a business consultancy practice specializing in commercial, regulatory and project development engagements with a focus on infrastructure and renewable energy projects in Latin America, the Caribbean and Hispanic markets and currently serves as a Managing Director. He has also had a focus on healthcare where he played a key role as an advisor in the expansion of a major US regional healthcare provider into a new marketplace. He also co-developed and co-owned the largest solar farm in the Caribbean Basin (27MW) in 2015.
From 2019 until June 2020 Mr. Iturregui was a Partner and a Member of Nelson Mullins’ Government Relations and Infrastructure & Energy practices in its Washington, D.C. office. Nelson Mullins is an AM Law 100 firm with 122 years of operations and with significant presence in Washington, D.C., and offices in 25 cities across the U.S. Additionally, in 2015, then U.S. President Barack Obama nominated Mr. Iturregui as a board member to the Inter-American Foundation to serve a six-year term which ended in 2020. He also currently serves as a board member and Vice Chair of the American Red Cross, National Campaign Region, and has been in that role since 2013.
From 2007 to 2018, Mr. Iturregui was a Senior Advisor and Counsel to the Global Chairman at Dentons, LLP, based in Washington, D.C., a global law firm with significant presence in Washington, D.C., and offices in 85 cities across 58 countries. He collaborated with the international team and leadership on expanding practices and services and advised on issues/structures related to the global combination (merger) with SNR Denton in 2010.
From 2003 to 2005 Mr. Iturregui was with Quinn Gillespie & Associates, in Washington, D.C., a leading DC bipartisan public policy and communications lobbying firm where he was a director. While there, he advocated public policy positions and initiatives regarding trade, tax, finance, health care, infrastructure development and appropriations on behalf of various entities, including Fortune 500 corporations, trade associations and local governments.
Mr. Iturregui is a licensed attorney and is qualified to serve on the Board due to his extensive experience in mergers and acquisitions, international and domestic business development, and funding and expertise in the Central and South America markets. He is adept in working with the US Congress and executive branch, and foreign governments; he has an in-depth understanding of multilateral entities, stakeholders, and special interests in formulation of projects and policies.
Mr. Iturregui was appointed to the Board due to his international healthcare experience and his legal background.
Sheila Schweitzer
Ms. Schweitzer has served as a director of our Board since June 1, 2021. Ms. Schweitzer founded Blue Ox Healthcare Partners in 2009, a private equity firm investing growth capital in commercial-stage healthcare companies. Blue Ox has demonstrated a long and substantial track record of accomplishments and has led over $100 million of equity investments, including $40 million invested directly by Blue Ox. Since 2012 she was CEO and Senior Advisor for PatientMatters, Inc. a healthcare Revenue Cycle Management (RCM) solutions provider. PatientMatters unifies disparate registration, bill estimation, and financial services with intelligent workflows and eligibility services, improving revenue realization for hospitals. PatientMatters was recently acquired by Firstsource Solutions Limited (NSE: FSL, BSE:532809), a global provider of Business Process Management (BPM) services and a RP-Sanjiv Goenka Group company (www.firstsource.com). She was Senior Vice President from 2009 through 2011 for OptumInsight, a part of United Healthcare Group, which provides data, analytics, research, consulting, technology and managed services solutions to hospitals, physicians, health plans, governments, and life sciences companies. From 2003 through 2009 she was CEO for CareMedic Systems, an industry leader in proactive financial management for hospitals and providers and delivers the most comprehensive suite of revenue cycle management solutions available. She was COO for MedUnite from 2001 through 2003, a provider of electronic healthcare transaction processing services. The company facilitates the exchange of medical claim and clinical information among doctors, hospitals, medical laboratories, and insurance payers. She had leadership positions in other healthcare technology companies since graduating from Western Kentucky University.
Ms. Schweitzer was appointed to the Board due to her experience in the healthcare and investment industries, including as an investor in numerous healthcare related companies. Ms. Schweitzer was appointed Chief Operating Officer as of June 6, 2023, and assumed the position as Chairperson of the Board of Directors as of June 6, 2023.
Jenny Lindstrom
Ms. Lindstrom has served as our Chief Legal Officer since April 12, 2021. Prior to joining us Ms. Lindstrom, served in various roles and positions at Radisson Hospitality, Inc. and its subsidiaries and affiliates (“Radisson”), one of the world’s largest international hotel groups, since 2010. Most recently, since 2017, Ms. Lindstrom served as the Executive Vice President and General Counsel for Radisson Hospitality, Inc. From 2015 to 2017, Ms. Lindstrom served as the Executive Vice President and General Counsel for Radisson Hospitality, AB, a European publicly listed subsidiary of Radisson Hospitality, Inc. Prior to joining Radisson, Ms. Lindstrom was an attorney at Dorsey & Whitney, a national law firm based in Minneapolis, for six years. Her practice included: Commercial and Corporate Litigation, Internal Investigations, and Regulatory Affairs and Tax Litigation. Ms. Lindstrom holds a Juris Doctor degree from the University of Minnesota Law School, Minneapolis, Minnesota (Juris Doctor, cum laude, 2004), and holds a Master of Laws, with dissertation from Uppsala University, Uppsala, Sweden, 2001. Ms. Lindstrom resigned as of May 19, 2023.
Arrangements for Nomination as Directors and Changes in Procedures for Nomination; Election of Directors
No arrangement or understanding exists between any director or nominee and any other persons pursuant to which any individual was or is to be selected or serve as a director. No director or executive officer has any family relationship with any other director or with any of the Company’s executive officers. Holders of our Common Stock are entitled to one vote for each share held on all matters submitted to a vote of the stockholders, including the election of directors. Cumulative voting with respect to the election of directors is not permitted by our Certificate of Incorporation. Our Board of Directors shall be elected at the annual meeting of the shareholders or at a special meeting called for that purpose. Each director shall hold office until the next annual meeting of shareholders and until the director’s successor is elected and qualified.
Composition of our Board of Directors
Our board of directors currently consists of five members. Our directors hold office until their successors have been elected and qualified or until the earlier of their death, resignation, or removal.
Director Independence
Mr. Juan Carlos Iturregui is currently the only independent board member in accordance with standards under the Nasdaq Listing Rules. Our Board determined that Mr. Diamond, Mr. Brodmerkel, and Ms. Schweitzer under the Nasdaq Listing Rules, are not independent directors as a result of being an executive officer to the Company.
At this time, the Company has the full board serve on the audit committee. Mr. Iturregui is independent under the Nasdaq Listing Rules independence standards for nominating and governance committee members.
The Company plans to recreate the Board committees when we it applies up-listing to a senior exchange.
Board of Directors Leadership Structure
As a general policy, our board of directors believes that separation of the positions of Chairperson and Chief Executive Officer reinforces the independence of our board of directors from management, creates an environment that encourages objective oversight of management’s performance and enhances the effectiveness of our board of directors. As such, Mr. Diamond serves as our President and Chief Executive Officer and Mr. Brodmerkel serves as the Chairman of the Board. Mr. Brodmerkel’s term concluded on June 2023. Sheila Schweitzer assumed the role of Chairperson in June of 2023.
Board of Directors Committees
The board of directors has suspended its three standing committees of the board consisting of an audit committee, a compensation committee and a corporate nominating and governance committee. These committees will be reinstated when the restart plan is fully implemented and we are preparing to up list to a senior exchange. This step is necessary since Mr. Brodmerkel and Ms. Schweitzer are serving in senior executive positions in the company in addition to their board roles. The structure of the board committees will be as follows:
Audit Committee
Our audit committee is comprised of three independent board members. The chair of the audit committee will have the qualification of a financial expert as that term is defined under the applicable SEC rules and will possess financial sophistication as defined under the rules of Nasdaq. All the members of our audit committee are independent, as that term is defined under the rules of Nasdaq. Our audit committee is responsible for overseeing our corporate accounting and financial reporting process, assisting our board of directors in monitoring our financial systems, and overseeing legal, healthcare, and regulatory compliance. Our audit committee also:
•
selects and hires the independent registered public accounting firm to audit our financial statements;
•
helps to ensure the independence and performance of the independent registered public accounting firm;
•
approves audit and non-audit services and fees;
•
reviews financial statements and discusses with management and the independent registered public accounting firm our annual audited and quarterly financial statements, the results of the independent audit and the quarterly reviews and the reports and certifications regarding internal controls over financial reporting and disclosure controls;
•
prepares the audit committee report that the SEC requires to be included in our annual proxy statement;
•
reviews reports and communications from the independent registered public accounting firm;
•
reviews the adequacy and effectiveness of our internal controls and procedure;
•
reviews our policies on risk assessment and risk management;
•
reviews related party transactions; and
•
establishes and oversees procedures for the receipt, retention and treatment of accounting related complaints and the confidential submission by our employees of concerns regarding questionable accounting or auditing matters.
Our audit committee operates under a written charter, which satisfies the applicable rules of the SEC and the listing standards of Nasdaq.
Compensation Committee
Our compensation committee will be comprised of a chair and members that will be independent as is defined under the rules of Nasdaq. Our compensation committee oversees our compensation policies, plans and benefits programs. The compensation committee also:
•
oversees our overall compensation policies, plans and benefit programs;
•
reviews and recommends to our board of directors for approval compensation for our executive officers and directors;
•
prepares the compensation committee report that the SEC would require to be included in our annual proxy statement if we were no longer deemed to be an emerging growth company or a smaller reporting company; and
•
administers our equity compensation plans.
Our compensation committee operates under a written charter, which satisfies the applicable rules of the SEC and the listing standards of Nasdaq.
Nominating and Governance Committee
Our nominating and governance committee will be comprised of a chair and members that will be independent as that term is defined under the rules of Nasdaq. Our nominating and governance committee oversees and assists our board of directors in reviewing and recommending nominees for election as directors. Specifically, the nominating and governance committee:
•
identifies, evaluates, and makes recommendations to our board of directors regarding nominees for election to our board of directors and its committees;
•
considers and makes recommendations to our board of directors regarding the composition of our board of directors and its committees;
•
advises the board of directors and makes recommendations regarding appropriate corporate governance practices and assists the board of director in implementing those practices;
•
directs all matters relating to the succession planning of our Chief Executive Officer;
•
evaluates the performance of our board of directors and of individual directors.
•
makes a recommendation to the board of directors concerning the selection and designation of a "Lead Director" to preside over the meetings of the independent directors in executive session;
•
reviews the board of directors’ policy regarding the structure of the offices of Chairman of the Board and Chief Executive Officer; and
•
reviews and recommends to the board of directors proposed changes to our Certificate of Incorporation and bylaws.
Our corporate governance and nominating committee operate under a written charter, which satisfies the applicable rules of the SEC and the listing standards of Nasdaq.
Delinquent Section 16(a) Reports.
Section 16(a) of the Exchange Act requires the Company’s directors, executive officers and persons who beneficially own 10% or more of a class of securities registered under Section 12 of the Exchange Act to file reports of beneficial ownership and changes in beneficial ownership with the SEC. Directors, executive officers and greater than 10% stockholders are required by the rules and regulations of the SEC to furnish the Company with copies of all reports filed by them in compliance with Section 16(a).
Based solely on the written representation of our executive officers and directors and copies of the reports they have filed with the Commission, there were no late filings by the officers and directors of the Company.
Code of Ethics
We have adopted a Code of Business Conduct and Ethics, which applies to our Board of Directors, our executive officers, and our employees, and outlines the broad principles of ethical business conduct we adopted, covering subject areas such as:
●Compliance with applicable laws and regulations
●Handling of books and records
●Public disclosure reporting
●Insider trading
●Discrimination and harassment
●Health and safety
●Conflicts of interest
●Competition and fair dealings
●Protection of Company asset
A copy of our Code of Business Conduct and Ethics will be provided without charge to any person submitting a written request to the attention of the Chief Executive Officer at our principal executive office.

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ITEM 11. EXECUTIVE COMPENSATION
ITEM 11. EXECUTIVE COMPENSATION
Summary of Executive Compensation
The following summary compensation table sets forth all compensation awarded to, earned by, or paid to the named executive officers paid by us during the periods ended December 31, 2022 and 2021.
Summary Compensation Table
Salary
Salary
Non-Equity
Nonqualified
earned and
earned and
Incentive
Deferred
All
paid in
unpaid in
Stock
Option
Plan
Compensation
Other
Name and Principal
cash
cash
Bonus
Awards
Awards
Compensation
Earnings
Compensation
Total
Position
Year
($)
($)
($)
($)
($)
($)
($)
($)
($)
Lawrence Diamond
177,885
77,460
-
-
-
-
-
14,384
(a)
269,729
264,180
-
-
-
263,422
(b)
-
-
78,200
(c)
605,802
Phillip Keller
122,434
-
-
-
-
-
-
27,360
(d)
149,794
208,847
-
-
-
430,030
(e)
-
-
-
638,877
Thomas Brodmerkel
28,846
38,792
-
-
23,316
(f)
-
-
6,291
(a)
97,245
Jenny Lindstrom
182,693
77,183
-
-
-
-
-
14,394
(a)
274,260
186,689
-
-
-
428,921
(f)
-
-
-
615,610
(a)
Consists of reimbursement for health insurance and cell phone costs.
(b)
Consists of the fair value of 30,000 stock options granted during the period.
(c)
Consists of the fair value of 6,256 shares of common stock granted in lieu of monies owed to Mr. Diamond.
(d)
Consists of severance pay in the amount of $19,230 and reimbursement for health insurance and cell phone costs in the Amount of $8,130.
(e)
Consists of the fair value of 35,000 stock options granted during the period.
(f)
Consists of the fair value of 4,000 stock options granted during the period.
Executive Employment, Termination and Change of Control Arrangements
We have the following employment agreements with our executive officer:
Lawrence Diamond, Chief Executive Officer, and Director
On November 4, 2019, we entered into a Senior Executive Employment Agreement with Mr. Diamond for his services as our Chief Executive Officer (the “Diamond Agreement”). Pursuant to the Diamond Agreement, Mr. Diamond is paid an annual base salary of $250,000. In addition, Mr. Diamond is eligible to receive a bonus target of 25% of base compensation based upon the attainment of performance-based goals, to be approved by the Compensation Committee. Mr. Diamond also received an initial grant of 1,000,000 shares of restricted common stock which vests according to the following schedule: (i) 25% upon the 90th day anniversary of the Diamond Agreement, (ii) 25% upon the completion of a capital raise of at least $2 million, (iii) 25% upon the one-year anniversary of the Diamond Agreement (iv) 25% upon our filing of our Annual Report on Form 10-K that reports $20 million in gross revenue. All unvested shares shall immediately vest in the event of a change of control of the Company. The term of Mr. Diamond’s employment agreement is from November 1, 2019 through Mr. Diamond’s resignation or termination by us under the following circumstances (i) upon the recommendation by the Board; (ii) a violation of the securities laws, or (iii) upon his incapacity or inability to perform all the duties set forth in this Agreement due to mental or physical disability. In the event of termination by us, Mr. Diamond will only be entitled to compensation owed through the date of termination and all Options that have not yet vested will be cancelled.
Pension Benefits; Nonqualified Defined Contribution and Other Nonqualified Deferred Compensation Plans
We do not offer pension benefits, non-qualified contribution, or other deferred compensation plans to our executive officers.
Outstanding Equity Awards at December 31, 2022
The following table shows for the fiscal year ended December 31, 2022, certain information regarding outstanding equity awards at fiscal year-end for the Named Executive Officers.
Securities
Securities
Underlying
Underlying
Unexercised
Unexercised
Options
Name and Principal
Options (#)
Options (#)
Exercise
Option
Position
Grant Date
Exercisable
Unexercisable
Price ($)
Expiry Date
Lawrence Diamond, CEO
July 21, 2021
-
30,000
(a)
$ 12.50
July 21, 2031
Thomas Brodmerkel, CFO
February 27, 2020
11,667
-
$ 1.50
February 27, 2030
December 28, 2020
2,000
-
$ 1.50
December 28, 2020
Jenny Lindstrom, Chief Legal Officer
April 12, 2021
15,000
5,000
(a)
$ 15.50
March 17, 2031
July 21, 2021
-
15,000
(a)
$ 12.50
July 21, 2031
Michael Howe, Chief Executive Officer, The Good Clinic LLC
June 1, 2021
4,000
16,000
(a)
$ 13.00
June 17, 2031
July 21, 2021
-
10,000
(a)
$ 12.50
July 21, 2031
Director Compensation
The following table sets forth, for the year ended December 31, 2022, information relating to the compensation of each director who served on our Board of Directors during the fiscal year and who was not a named executive officer. This compensation was for their role as Director of the Company within the fiscal year.
Fees
Non-Equity
Nonqualified
Earned or
Incentive
Deferred
All
Paid in
Stock
Options
Plan
Compensation
Other
Name and Principal
Cash ($)
Awards
Awards
Compensation
Earnings
Compensation
Total
Position
($)
($)
($)(a)
($)
($)
($)
($)
Thomas Brodmerkel (b)
30,000
-
52,430
-
-
-
82,430
Dr. H. Faraz Naqvi (c)
30,000
-
41,944
-
-
-
71,944
Juan Carlos Iturregui
30,000
-
38,798
-
-
-
68,798
Sheila Schweitzer (d)
30,000
-
255,205
-
-
-
285,205
(a)
Amount represents the fair value of stock options granted during the period.
(b) Mr. Brodmerkel’s term as Chairman concluded on June 6, 2023.
(c) Effective April 14, 2023, Dr. H. Faraz Naqvi resigned as a director of the Company.
(d) On June 6, 2023, Sheila Schweitzer assumed the position as Chairperson of the Board.
The table below shows the aggregate number of option awards outstanding at fiscal year-end for each of our current and former non-employee directors.
Number of
Outstanding Options
Name and Principal
As of
Position
December 31, 2022
Thomas Brodmerkel
22,667
Dr. H. Faraz Naqvi
4,000
Juan Carlos Iturregui
3,700
Sheila Schweitzer
20,700

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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The following table sets forth certain information as of June 26, 2023, regarding the beneficial ownership of our Common Stock, Series C Preferred Stock and Series X Preferred Stock by (i) each person (including any “group” as such term is used in Section 13(d)(3) of the Exchange Act) known by us to be a beneficial owner of more than 5% of our common stock, (ii) each of our directors and “named executive officers;” and (iii) all of our directors and executive officers as a group. At June 13, 2023, we had 5,115,437 shares of Common Stock issued and outstanding,1,940,644 shares of Series C Preferred Stock issued and outstanding having an aggregate of 12,600,000 votes, and 24,227 shares of Series X Preferred Stock issued and outstanding, having an aggregate of 484,540,000 votes. Unless otherwise indicated, the address of each of the stockholders listed is 1660 Highway 100 South, Suite 432, Saint Louis Park, Minnesota 55416. Beneficial ownership is determined in accordance with the rules of the SEC and includes general voting power and/or investment power with respect to securities. Shares of Common Stock issuable upon exercise of options or warrants that are currently exercisable or exercisable within 60 days of the Record Date and shares of Common Stock issuable upon conversion of other securities currently convertible or convertible within 60 days, are deemed outstanding for computing the beneficial ownership percentage of the person holding such securities but are not deemed outstanding for computing the beneficial ownership percentage of any other person. Under the applicable SEC rules, each person’s beneficial ownership is calculated by dividing the total number of shares with respect to which they possess beneficial ownership by the total number of outstanding shares. In any case where an individual has beneficial ownership over securities that are not outstanding but are issuable upon the exercise of options or warrants or similar rights within the next 60 days, that same number of shares is added to the denominator in the calculation described above. Because the calculation of each person’s beneficial ownership set forth in the “Percentage Class” column of the table may include shares that are not presently outstanding, the sum total of the percentages set forth in such column may exceed 100%.
Name of Beneficial Owner
Amount and Nature of Beneficial Ownership of Common Stock
Percentage of Common Stock Beneficially Owned
Number of Shares of Series X Preferred Stock
Percentage of Series X Preferred Stock
Number of Shares of Series C Preferred Stock
Percent of Series C Preferred Stock
Number of Shares of Series D Preferred Stock
Percent of Series D Preferred Stock
Directors and Officers
Ronald Riewold (Director)(1)
36,438
0.7 %
1,200
5.0 %
-
-
-
-
Tom Brodmerkel (Director)(2)
31,001
0.6 %
-
-
-
-
-
-
Larry Diamond (Director, Officer)(3)
126,462
2.5 %
2,000
8.3 %
-
-
-
-
Juan Carlos Iturregui (Director)(4)
26,184
0.5 %
-
-
-
-
-
-
Phillip Keller (5)
-
0.0 %
-
-
-
-
Jenny Lindstrom (6)
20,288
0.4 %
-
-
-
-
25,000
0.8 %
Faraz Naqvi (Director) (7)
26,000
0.5 %
-
-
-
-
Sheila Schweitzer (8)
20,700
0.4 %
-
-
-
-
Current Executive Officers and Directors as a group (8 Persons)
287,073
5.5 %
3,200
13.3 %
-
-
25,000
0.8 %
5% or more shareholders
James Crone
26,657
0.5 %
2,884
11.9 %
-
-
-
-
Louis DeLuca
5,539
0.1 %
2,400
9.9 %
-
-
-
-
Anglo Irish Management LLC (9)
28,852
0.6 %
12,503
51.5 %
-
-
-
-
Frank Lightmas
5,316
0.1 %
3,240
13.4 %
-
-
-
-
Cavalry Fund I, LLP(10)
311,309
5.7 %
-
-
1,000,000
95.5 %
750,000
24.2 %
Mercer Street Global Opportunity Fund (11)
228,937
4.3 %
-
-
47,619
4.5 %
750,000
24.2 %
Michael C. Howe Living Trust (12)
218,771
4.1 %
-
-
-
-
500,000
16.1 %
Anson Investment
203,630
3.8 %
-
-
-
-
562,500
18.1 %
Anson East
67,877
1.3 %
-
-
-
-
187,500
6.0 %
(1)
Consists of 22,772 shares of common stock and options to purchase an additional 13,667 shares of common stock.
(2)
Consists of 8,334 shares of common stock and options to purchase 22,667 shares of common stock.
(3)
Consists of 107,034 shares of warrants to purchase 19,428 shares of common stock.
(4)
Consists of 22,242 shares of common stock, options to purchase 3,700 shares of common stock, and warrants to purchase 242 shares of common stock.
(5)
Mr. Keller resigned from his position as CFO of the Company effective June 12, 2022.
(6)
Consists of 543 shares of common stock, options to purchase 15,000 shares of common stock, warrants to purchase 2,438 shares of common stock, and 2,307 shares of common stock issuable upon conversion of Series D Preferred Stock.
(7)
Consists of 22,000 shares of common stock and options to purchase 4,000 shares of common stock.
(8)
Consists of options to purchase 20,700 shares of common stock.
(9)
Based solely on a Schedule 13D filed by Anglo Irish Management LLC (“Anglo”), Anglo received 28,852 shares of common stock as interest earned on shares of the Series X Preferred Stock and owns 12,503 shares of Series X Preferred. Daniel Hollis is the Manager of Anglo-Irish Management LLC, and its business address is 9057A Selborne Lane, Chatt Hills, GA 30268.
(10) Cavalry Fund I LP owns 1,000,000 shares of Series C Preferred Stock. Amount of common stock includes 95,116 shares of common stock issuable upon conversion of the Series C Preferred Stock and accrued dividends, 42,000 shares of common stock issuable upon exercise of the Series A Warrants and 42,000 shares of common stock issuable upon exercise of Series B Warrants issued in connection with the Series C Preferred Stock, without giving effect to the blocker described in the next sentence. The fund also owns 750,000 shares of Series D Preferred Stock. Amount of common stock also includes 69,193 shares of common stock issuable upon conversion of the Series D Preferred Stock and accrued dividends, 31,500 shares of common stock issuable upon exercise of the Series A Warrants and 31,500 shares of common stock issuable upon exercise of Series B Warrants, without giving effect t the blocker described in the next sentence. The beneficial ownership limitation is initially set at 4.99% but may be increased to 9.99% upon 61 days’ notice to the Company. Thomas P. Walsh is the manager of Cavalry Fund I LP and its principal business address is 82 E, Allendale Rd., Suite 5B, Saddle River, NJ 07458.
(11) Mercer Street Global Opportunity Fund owns 47,619 shares of Series C Preferred Stock. Amount of common stock includes 6,594 shares issuable upon conversion of the Series C Preferred Stock and accrued dividends, 42,000 shares of common stock issuable upon exercise of the Series A Warrants and 42,000 shares of common stock issuable upon exercise of the Series B Warrants issued in connection with the Series C Preferred Stock, without giving effect to the blocker described in the next sentence. The fund also owns 750,000 shares of Series D. Amount of common stock also includes 69,193 shares of common stock issuable upon exercise of the Series D Preferred stock and accrued dividends, 31,500 shares of common stock issuable upon exercise of the Series A Warrants and 31,500 shares of common stock issuable upon exercise of Series B Warrants without giving effect to the blocker described in the next sentence. The beneficial ownership limitation is initially set at 4.99% but may be increased to 9.99% upon 61 days’ notice to the Company. Jonathan Juchno is the Chair of the Investment Committee of Mercer Street Global Opportunity Fund, LLC, and its principal business address is 107 Grand Street, 7th Floor, New York, New York 10013.
(12) Amount consist of 23,722 shares of common stock, options to purchase 18,000 shares of common stock, warrants to purchase 130,920 shares of common stock, and 46,129 shares of common stock issuable upon the conversion of Series D Preferred Stock and accrued dividends.
Equity Compensation Plan Information
On December 31, 2021, the Compensation Committee of the Board approved the Mitesco Inc. 2021 Omnibus Securities and Incentive Plan, or the “2021 Plan”. The 2021 Plan provides for the grant of incentive stock options, non-statutory stock options, restricted stock awards, restricted stock unit awards, stock appreciation rights, performance stock awards, performance cash awards, and other stock-based awards, collectively, the “stock awards.” Stock awards may be granted under the 2021 Plan to our employees, directors, and consultants. Up to 25,000,000 shares of stock awards have been approved for issuance under the 2021 Plan.
Plan Category
Number of securities to be issued upon exercise of outstanding options, warrants and rights
Weighted-average exercise price of outstanding options, warrants and rights
Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
Equity compensation plans not approved by security holders
77,691
$ 0.04
N/A
Equity compensation plans approved by security holders
233,001
$ 0.25
417,909
Total
310,692
$ 0.20
417,909

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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
Related Party Transactions
Common Stock Issued
On January 23, 2023, the Company issued 150,000 shares of common stock at a price of $3.45 per share to a service provider.
On January 23, 2023, the Company issued a total of 8,063 shares of common stock at a price of $4.33 per share to holders of the Series X Preferred Stock for accrued dividends. Larry Diamond, the Company’s Chief Executive Officer, received 666 of these shares.
On February 15, 2023, the Company issued 9,846 shares of common stock to an investor at a price of $1.32 per share pursuant to a true-up agreement.
On February 21, 2023, the Company issued 150,000 shares of common stock at a price of $2.63 per share to a service provider.
On March 1, 2023, the Company issued 13,555 shares of common stock to an investor at a price of $1.32 per share pursuant to a true-up agreement.
On March 9, 2023, the Company issued 15,265 shares of common stock to an investor at a price of $1.32 per share pursuant to a true-up agreement.
On March 28, 2023, the Company issued 18,472 shares of common stock to an investor at a price of $1.32 per share pursuant to a true-up agreement.
On April 4, 2023, the Company issued 94,738 shares of common stock to an investor at a price of $1.32 per share pursuant to a true-up agreement.
On May 5, 2023, the Company issued 2,952 shares of common stock at a price of $1.05 per share to a service provider.
On May 5, 2023, the Company issued 2,552 shares of common stock to an investor at a price of $1.05 per share for satisfaction of accounts payable.
On May 9, 2023, the Company issued 19,622 shares of common stock to Michael C. Howe, a related party, at a price of $0.94 per share to reimburse Mr. Howe for costs incurred in connection with a settlement agreement with a vendor.
Spartan Capital Advisory Agreement
On January 12, 2023 the Company entered into an advisory agreement with Spartan Capital (“Spartan”) pursuant to which Spartan will act as exclusive financial advisor in providing general financial advisory services to the Company. In consideration for the financial advisory services to be rendered thereunder, the Company will issue to Spartan 150,000 restricted common shares of the Company (“Common Stock”). In addition, the Company will issue to Spartan an additional 50,000 Common Stock within three business days of completion of a gross raise of at least $2,000,000.
Sale of Series F Preferred Stock
On March 23, 2023, the Company filed a Certificate of Designations, Preferences and Rights of Series F 12% PIK Convertible Perpetual Preferred Stock (the “Series F”) with the Delaware Secretary of State. The number of shares of Series E designated is 140,000 and each share of Series F has a stated value equal to $1,000. Each share of Series E Preferred Stock shall have a par value of $0.01. Holders of the Series F are entitled to receive payment in kind dividends (“PIK Dividends”) at the quarterly rate of three-hundredths of one share outstanding per Series F Share. The Series F can be converted at the option of the Series F shareholder into shares of the Company’s common stock at a price equal to 65% of the Volume Weighted Average Price (“VWAP”) on the conversion date.
Purchase Agreement
On April 11, 2023, the Company entered into securities purchase agreements (each a “Purchase Agreement”) with investors providing for the sale and issuance of (i) Series F 12% PIK Convertible Perpetual Preferred Stock, par value $0.01 per share (the “Series F Shares”) and (ii) warrants to purchase shares of Common Stock (the “Warrants,” and together with the Series F Shares, the “Securities”).
The closing on the first tranche of the offering resulted in gross proceeds to the Company of $650,000. The net proceeds to the Company from the first tranche of the offering were $511,000, after deducting placement agent fees and expenses and estimated offering expenses payable by the Company. The Company intends to use the net proceeds from the offering for general operating expenses. In connection with the Purchase Agreement, the Company also entered into a registration rights agreement.
Exchange Agreements
Also in connection with the Purchase Agreement, the Company entered into separate exchange agreements pursuant to which the investors in the Series E Preferred Stock exchanged certain securities, as defined in each individual Exchange Agreement, for a number Series F Shares (based on their liquidation preference of $1,000) equal to 120%, 165% or 230%, depending on whether the investor is investing additional funds into the bridge financing, of the “Principal Amount,” “Stated Value” and/or liquidation preference of the Exchange Securities (including any payoff bonus, accrued dividends or interest).
Appointment of Ms. Sheila Schweitzer as Chairman of the Board of Directors and Chief Operating Officer
Effective June 06, 2023, the Board of Directors of the Company appointed Ms. Sheila Schweitzer who has been a member of the Board of Directors since 2021, to the position of Chairman, replacing Mr. Tom Brodmerkel, who has completed his term as Chair. Mr. Brodmerkel will remain as Chief Financial Officer and continue to serve as a member of the Company’s Board of Directors. Ms. Schweitzer was also appointed to the newly created position of Chief Operating Officer.
Director Independence
Our Board of Directors has determined that Ronald Riewold, Tom Brodmerkel, Juan Carlos Iturregui, and Faraz Naqvi are all “independent” as that term is defined under applicable SEC rules and regulations.

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ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The following table represents aggregate fees billed to the Company for the fiscal years ended December 31, 2022 and 2021 by RBSM, LLP, the Company’s current principal accountant.
Audit fees
$ 139,500
$ 67,500
Audit-related fees
-
-
Tax fees
28,000
-
All other fees
-
-
Total
$ 167,500
$ 67,500
Audit Fees - This category includes the audit of our annual financial statements, review of financial statements included in our Quarterly Reports on Form 10-Q and services such as regulatory filings that are normally provided by the independent registered public accounting firm in connection with engagements for those fiscal years. This category also includes advice on audit and accounting matters that arose during, or as a result of, the audit or the review of interim financial statements.
Audit-Related Fees - This category consists of assurance and related services by the independent registered public accounting firm that are related to the performance of the audit or review of our financial statements and are not reported above under “Audit Fees.” The services for the fees disclosed under this category include consultation regarding our correspondence with the Securities and Exchange Commission and other accounting consulting.
Tax Fees - This category consists of professional services rendered by our independent registered public accounting firm for tax compliance and tax advice. The services for the fees disclosed under this category include tax return preparation and technical tax advice.
All Other Fees - This category consists of fees for other miscellaneous items.
In accordance with existing requirements of the Sarbanes-Oxley Act, the Company’s Board of Directors has adopted a procedure for pre-approval of all fees charged by our independent registered public accounting firm. Under the procedure, the Board of Directors approves the engagement letter with respect to audit, tax, and review services. Other fees are subject to pre-approval by the Board of Directors, or, in the period between meetings, by a designated member of Board of Directors. Any such approval by the designated member is disclosed to the entire Board of Directors at the next Board meeting. This includes audit services, audit-related services, tax services and other services. All of the fees listed above have been approved by the Board of Directors.
PART IV

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ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a)(1)
The following financial statements are included in this Annual Report on Form 10-K for the fiscal years ended December 31, 2022 and 2021:
1.
Report of Independent Registered Public Accounting Firm
2.
Consolidated Balance Sheets as of December 31, 2022 and 2021
3.
Consolidated Statements of Operations and Comprehensive Loss for the years ended December 31, 2022 and 2021
4.
Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2022 and 2021
5.
Consolidated Statements of Cash Flows for the years ended December 31, 2022 and 2021
6.
Notes to Consolidated Financial Statements
(a)(2)
All financial statement schedules have been omitted as the required information is either inapplicable or included in the Consolidated Financial Statements or related notes.
(a)(3)
The exhibits set forth in the accompanying exhibit index below are either filed as part of this report or are incorporated herein by reference:
Unless otherwise indicated, each of the following exhibits have been previously filed with the Securities and Exchange Commission by the Company under File No. 000-53601.
Incorporated by
Exhibit
Reference
Filed or Furnished
Number
Exhibit Description
Form
Exhibit
Filing Date
Herewith
3.1
Certificate of Incorporation of Trunity Holdings, Inc., dated January 18, 2012.
8-K
10.1
1/31/2012
3.2
Bylaws of Trunity Holdings, Inc., dated January 18, 2012.
8-K
10.2
1/31/2012
3.3
Certificate of Ownership Merging between Trunity Holdings, Inc. and Brain Tree International, Inc. dated January 24, 2012.
10-K
3.3
4/16/2013
3.4
Certificate of Designation of Series X Preferred Stock of Trunity Holdings, Inc., dated December 9, 2015.
8-K
3.1
12/15/2015
3.5
Certificate of Amendment to the Certificate of Incorporation of Trunity Holdings, Inc., dated December 24, 2015.
8-K
3.1(i)
1/06/2016
3.6
Certificate of Designations of Series X Preferred Stock of True Nature Holding, Inc.
8-K
3.6
1/06/2020
3.7
Form of Amended and Restated Certificate of Designations of Series A Preferred Stock of True Nature Holding, Inc.
8-K
3.07
3/13/2020
3.8
Certificate of Amendment of the Certificate of Incorporation of True Nature Holding, Inc. dated April 21, 2020.
10-Q
3.7
8/14/2020
3.9
Certificate of Amendment of Certificate of Incorporation, dated as of November 5, 2020, correcting December 24, 2015 Certificate of Amendment.
10-Q
3.8
11/13/2020
3.10
Bylaws of Mitesco, Inc., as amended, dated November 10, 2020.
10-Q
3.9
11/13/2020
4.1*
Trunity Holdings, Inc. 2012 Employee, Director, and Consultant Stock Option Plan.
10-K
10.4
4/16/2013
4.2
Convertible Promissory Note issued by True Nature Holding, Inc. on November 26, 2018 to Auctus Fund, LLC.
8-K
4.2
1/14/2019
4.3
Convertible Promissory Note issued by True Nature Holding, Inc. on December 19, 2018 to Crown Bridge Partners, LLC.
8-K
4.3
1/14/2019
4.4
Convertible Promissory Note issued by True Nature Holding, Inc. on January 2, 2019 to Power Up Lending Group Ltd.
8-K
4.4
1/14/2019
4.5*
Mitesco, Inc. 2021 Omnibus Securities and Incentive Plan (File No. 333-252293)
S-8
4.1
01/21/2021
4.6
Description of Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934, as amended
10-K
4.6
04/05/2022
10.1
Agreement and Plan of Merger, dated as of January 24, 2011 by and among Trunity Holdings, Inc., Trunity Acquisitions Corp. and Trunity, Inc.
8-K
10.5
1/31/2012
10.2
Stock Purchase Agreement between dated as of January 24, 2012 by and among George Norman, Donna Norman, Lane Clissold, Trunity Holdings, Inc. and Trunity, Inc.
8-K
10.3
1/31/2012
10.3
Agreement and Plan of Merger, dated as of January 24, 2012 by and among Brain Tree International, Inc. and Trunity Holdings, Inc.
8-K
10.4
1/31/2012
10.4
Investment Project Contract dated as of March 18, 2013, among Trunity, Inc., InnSoluTech LLP and Educom Ltd.
10-K
10.5
4/16/2013
10.5
Trunity Holdings, Inc. 2012 Employee, Director, and Consultant Stock Option Plan.
10-K
10.4
4/16/2013
10.6
License Agreement dated as of March 20, 2013, between Trunity, Inc. and Educom Ltd.
10-K
10.7
4/16/2013
10.7
Share Purchase Agreement dated as of March 20, 2013, between Trunity, Inc. and InnSoluTech LLP.
10-K
10.6
4/16/2013
10.8
Memorandum of Understanding Regarding Trunity Holdings, Inc. and PIC Partners dated as of April 17, 2013 by and between Pan-African Investment Company and Trunity Holdings, Inc.
10-K
10.13
4/15/2014
10.9
Subscription Agreement dated May 28, 2013 between Trunity Holdings, Inc., and Pan African Investment Company.
10-K
10.9
4/15/2014
10.10*
Form of Indemnification Agreement between Trunity Holdings, Inc., and its Directors.
10-K
10.8
4/16/2013
10.11
Indemnification Agreement dated May 30, 2013 between Trunity Holdings, Inc., and Dana M. Reed.
10-K
10.12
4/15/2014
10.12
Voting Agreement dated May 30, 2013 by and among Trunity Holdings, Inc., Terry Anderton, RRM Ventures, LLC, Aureus Investments, LLC and Pan-African Investment Company, LLC.
10-K
10.11
4/15/2014
10.13
Investors Rights Agreement dated May 30, 2013 between Trunity Holdings, Inc., and Pan African Investment Company.
10-K
10.10
4/15/2014
10.14
Voting Agreement dated June 5, 2013 by and among Trunity Holdings, Inc., Terry Anderton, RRM Ventures, LLC, Aureus Investments, LLC and Pan-African Investment Company, LLC. (File No. 005-86722)
13D
C
7/25/2013
10.15
Investors Rights Agreement dated June 5, 2013 between Trunity Holdings, Inc., and Pan African Investment Company.
13D
D
7/25/2013
10.16
Non-Qualified Stock Option Agreement dated as of December 23, 2013 by and between Arol Buntzman and Trunity Holdings, Inc.
10-K
10.14
4/15/2014
10.17
Securities Purchase Agreement dated as of November 5, 2014 by and between Trunity Holdings, Inc. and Peak One Opportunity Fund, L.P.
10-Q
10.15
11/25/2014
10.18
Consulting Agreement dated as of December 1, 2015 by and between Trunity Holdings, Inc., and Stephen Keaveney.
8-K
10.2
12/15/2015
10.19
Securities Exchange Agreement dated as of December 9, 2015 by and among Trunity Holdings, Inc., and the Members of Newco4Pharmacy, LLC.
8-K
10.1
12/15/2015
10.20
Spin-off and Asset Transfer Agreement dated as of December 31, 2015, by and among Trunity Holdings, Inc., Trunity, Inc., a Delaware corporation, and Trunity, Inc., a Florida corporation.
8-K
10.1
1/06/2016
10.21
Asset Purchase Agreement, dated September 30, 2016, by and among True Nature Holding, Inc., P3 Compounding Of Georgia, LLC, and ICP Holdings, LLC
8-K
10.1
10/05/2016
10.22
Consulting Agreement, dated June 8, 2017, by and between True Nature Holding, Inc. and Resources Unlimited NW LLC.
8-K
10.1
6/15/2017
10.23
Note Payable by True Nature Holding, Inc. to Stephen Keaveney, dated July 10, 2017.
10-Q
10.1
8/18/2017
10.24
Convertible Promissory Note issued by True Nature Holding, Inc. on July 5, 2018 to Power Up Lending Group Ltd.
8-K
4.1
7/13/2018
10.25
Securities Purchase Agreement, dated July 5, 2018, by and between True Nature Holding, Inc. and Power Up Lending Group Ltd.
8-K
4.2
7/13/2018
10.26
Equity Financing Agreement, August 9, 2018, between True Nature Holding, Inc. and GHS Investments, LLC.
8-K
10.1
8/16/2018
10.27
Registration Rights Agreement, dated August 9, 2018 between True Nature Holding, Inc. and GHS Investments, LLC
8-K
10.2
8/16/2018
10.28
Convertible Promissory Note issued by True Nature Holding, Inc. on September 18, 2018 to Power Up Lending Group Ltd.
8-K
4.1
9/28/2018
10.29
Securities Purchase Agreement, dated September 18, 2018, by and between True Nature Holding, Inc. and Power Up Lending Group Ltd.
8-K
10.1
9/28/2018
10.30
Convertible Promissory Note issued by True Nature Holding, Inc. on November 9, 2018 to Power Up Lending Group Ltd.
8-K
4.1
1/14/2019
10.31
Securities Purchase Agreement, dated November 9, 2018, by and between True Nature Holding, Inc. and Power Up Lending Group Ltd.
8-K
10.1
1/14/2019
10.32
Securities Purchase Agreement, dated November 26, 2018, by and between True Nature Holding, Inc. and Auctus Fund, LLC.
8-K
10.2
1/14/2019
10.33
Common Stock Purchase Warrant issued by True Nature Holding, Inc. on November 26, 2018 to Auctus Fund, LLC.
8-K
10.5
1/14/2019
10.34
Securities Purchase Agreement, dated December 19, 2018, by and between True Nature Holding, Inc. and Crown Bridge Partners, LLC.
8-K
10.3
1/14/2019
10.35
Common Stock Purchase Warrant issued by True Nature Holding, Inc. on December 19, 2018 to Crown Bridge Partners, LLC.
8-K
10.6
1/14/2019
10.36
Securities Purchase Agreement, dated January 2, 2019, by and between True Nature Holding, Inc. and Power Up Lending Group Ltd.
8-K
10.4
1/14/2019
10.37*
Senior Executive Employment Agreement effective as of October 1, 2019, between True Nature Holding Inc. and M. Lawrence Diamond
8-K
10.3
10/16/2019
10.38*
Senior Executive Employment Agreement effective as of November 4, 2019, between True Nature Holding Inc. and Julie R. Smith
8-K
10.2
10/16/2019
10.39*
Form of Board of Directors Advisory Agreement, dated as of December 26, 2019, by and between True Nature Holding Inc. and its Board Members
8-K
10.03
1/06/2020
10.40
Asset Purchase Agreement, dated as of March 2, 2020, by and among My Care, LLC and True Nature Holding, Inc.
8-K
10.1
3/13/2020
10.41
Convertible Redeemable Promissory Note issued by True Nature Holding, Inc. on April 8, 2020 to Eagle Equities, LLC.
8-K
4.01
4/17/2020
10.42
Securities Purchase Agreement, dated April 8, 2020, by and between True Nature Holding, Inc. and Eagle Equities, LLC.
8-K
4.02
4/17/2020
10.43
Promissory Note issued by Bank of America, NA on April 25, 2020 to True Nature Holding, Inc.
8-K
10.1
5/11/2020
10.44*
Board of Directors Advisory Agreement, dated June 1, 2020, between Mitesco, Inc. and Faraz Paqvi.
8-K
5.01
7/13/2020
10.45
Convertible Redeemable Note, dated July 1, 2020, between Mitesco, Inc. and Eagle Equities, LLC Inc.
8-K
4.01
8/05/2020
10.46
Securities Purchase Agreement, dated July 1, 2020, between Mitesco, Inc. and Eagle Equities, LLC.
8-K
10.01
8/05/2020
10.47
Consulting Advisor Agreement, dated July 8, 2020, between Mitesco, Inc. and Michael Loiacono.
8-K
10.1
7/08/2020
10.48*
Board of Directors Advisory Agreement, dated August 1, 2020, between Mitesco, Inc. and Juan Carlos Iturregui.
8-K
10.02
8/05/2020
10.49
Securities Purchase Agreement, dated August 20, 2020, between Mitesco, Inc. and Eagle Equities, Inc.
8-K
10.01
8/27/2020
10.50
Convertible Redeemable Promissory Note, dated August 20, 2020, between Mitesco, Inc. and Eagle Equities Inc.
8-K
4.01
8/27/2020
10.51
Securities Purchase Agreement, dated September 30, 2020, between Mitesco, Inc. and Eagle Equities, Inc.
8-K
10.01
10/06/2020
10.52
Convertible Redeemable Promissory Note, dated September 30, 2020, between Mitesco, Inc. and Eagle Equities Inc.
8-K
4.01
10/06/2020
10.53
Form of lease agreement between The Good Clinic, LLC, and LMC NE Minneapolis Holdings, LLC, dated October 19, 2020.
10-Q
10.4
11/13/2020
10.54
Securities Purchase Agreement, dated October 29, 2020, between Mitesco, Inc. and Eagle Equities, Inc.
8-K
10.01
11/06/2020
10.55
Convertible Redeemable Promissory Note, dated October 29, 2020, between Mitesco, Inc. and Eagle Equities Inc.
8-K
4.01
11/06/2020
10.56
Securities Purchase Agreement, dated December 9, 2020 between Mitesco, Inc. and Eagle Equities, Inc.
8-K
10.01
12/15/2020
10.57
Convertible Redeemable Promissory Note, dated December 9, 2020, between Mitesco, Inc. and Eagle Equities Inc.
8-K
4.01
12/15/2020
10.61
Employment Agreement by and between Phillip Keller and Mitesco, Inc., dated as of March 17, 2021.
8-K
10.1
03/17/2021
21.1
Subsidiaries of the Registrant
X
31.1
Certification by the Principal Executive Officer of the Registrant pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
X
31.2
Certification by the Principal Financial Officer of the Registrant pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
X
32.1
Certification by the Principal Executive Officer and Principal Financial Officer of the Registrant pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
X
32.2
Certification by the Principal Financial Officer of the Registrant pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
X
101.INS
Inline XBRL Instance Document
X
101.SCH
Inline XBRL Taxonomy Extension Schema Document
X
101.CAL
Inline XBRL Taxonomy Extension Calculation Linkbase Document
X
101.DEF
Inline XBRL Taxonomy Extension Definition Linkbase Document
X
101.LAB
Inline XBRL Taxonomy Extension Label Linkbase Document
X
101.PRE
Inline XBRL Taxonomy Extension Presentation Linkbase Document
X
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
* Management contract or compensatory plan or arrangement required to be identified pursuant to Item 15(a)(3) of this report.