10-Q 1 mitesco20220930_10q.htm FORM 10-Q mitesco20220930_10q.htm


UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549 

 


 

FORM 10-Q 

 


 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarter ended September 30, 2022

 

OR

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from                     to                     

 

Commission File Number 000-53601

 

logo_1.jpg
 

MITESCO, INC.

(Exact Name of Registrant as Specified in its Charter)

 

Delaware

 

87-0496850

(State Other Jurisdiction of Incorporation or Organization)

 

(I.R.S. Employer Identification Number)

 

1660 Highway 100 South, Suite 432

St. Louis Park, MN 55416

(Address of principal executive offices) (Zip code)

 

(844) 383-8689

(Registrant’s telephone number, including area code)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

N/A

N/A

N/A

 

 

 

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. YES ☐ NO ☒

 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. ☐

 

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ NO ☐

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ NO ☐

 

Indicate by check mark whether the registrant is a large, accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large, accelerated filer”, “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large, accelerated filer ☐

Accelerated filer ☐

Non-accelerated filer

Smaller reporting company

 

Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act. YES ☐ NO

 

As of November 11, 2022, the registrant had outstanding 226,807,925 shares of common stock issued and outstanding.

 

 

 

 

Table of Contents

 

PART I – FINANCIAL INFORMATION

   
       

Item 1.

Financial Statements (Unaudited)

 

5

 

Condensed Consolidated Balance Sheets as of September 30, 2022 and December 31, 2021

 

5

 

Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2022 and 2021

 

6

  Condensed Consolidated Statements of Stockholder’s Deficit for the three and nine months ended September 30, 2022 and 2021  

7

 

Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2022 and 2021

 

9

 

Notes to Condensed Consolidated Financial Statements

 

11

       

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations.

 

42

       

Item 3.

Quantitative and Qualitative Disclosures About Market Risk.

 

46

       

Item 4.

Controls and Procedures.

 

46

       

PART II – OTHER INFORMATION

   
       

Item 1.

Legal Proceedings.

 

47

       

Item 1A.

Risk Factors.

 

47

       

Item 2.

Sale of Unregistered Securities.

 

47

       

Item 3.

Defaults Upon Senior Secured Securities.

 

51

       

Item 4.

Mine Safety Disclosures.

 

51

       

Item 5.

Other Information.

 

51

       

Item 6.

Exhibits.

 

52

       

Signatures

 

54

 

 

 

 

CAUTIONARY STATEMENT ON FORWARD-LOOKING INFORMATION

 

This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are based upon our current assumptions, expectations, and beliefs concerning future developments and their potential effect on our business. In some cases, you can identify forward-looking statements by the following words: “may,” “will,” “could,” “would,” “should,” “expect,” “intend,” “plan,” “anticipate,” “believe,” “approximately,” “estimate,” “predict,” “project,” “potential,” “continue,” “ongoing,” or the negative of these terms or other comparable terminology, although the absence of these words does not necessarily mean that a statement is not forward-looking. This information may involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to be materially different from the future results, performance or achievements expressed or implied by any forward-looking statements.

 

Factors that may cause or contribute actual results to differ from these forward-looking statements include, but are not limited to:

 

● adverse economic conditions;

 

● the Company’s ability to raise capital to fund its operations

 

● industry competition

 

● the Company’s ability to integrate its acquisitions

 

● the Company’s ability to attract and retain qualified senior management and technical personnel;

 

● the continued effect of the Covid-19 pandemic on the Company’s operations; and

 

These forward-looking statements represent our intentions, plans, expectations, assumptions, and beliefs about future events and are subject to risks, uncertainties and other factors. Considering these risks, uncertainties, and assumptions, the events described in the forward-looking statements may not occur or may occur to a different extent or at a different time than we have described.

 

All forward-looking statements speak only as of the date of this Report. Except to the extent required by law, we undertake no obligation to update or revise any forward-looking statements, or other information contained herein, whether as a result of new information, future events, a change in events, conditions, circumstances or assumptions underlying such statements, or otherwise. We caution you therefore that you should not rely on any of these forward-looking statements as statements of historical fact or as guarantees or assurances of future performance.

 

 

PART I. FINANCIAL INFORMATION

 

Item 1. Financial Statements

 

MITESCO, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

 

   

September 30,

   

December 31,

 

ASSETS

 

2022

   

2021

 
   

(unaudited)

         

Current assets

               

Cash and cash equivalents

  $ 6,236     $ 1,164,483  

Accounts Receivable

    123,354       44,313  

Inventory

    55,976       25,314  

Prepaid expenses

    138,723       72,985  

Total current assets

    324,289       1,307,095  
                 

Right to use operating leases, net

    3,805,757       3,886,866  

Construction in progress

    998,553       1,984,701  

Fixed assets, net of accumulated depreciation of $0.8 million and $19,600

    5,520,096       3,476,164  
                 

Total Assets

  $ 10,648,695     $ 10,654,826  
                 

LIABILITIES AND (DEFICIENCY IN) STOCKHOLDERS' EQUITY

               

Current liabilities

               

Accounts payable and accrued liabilities

  $ 6,469,928     $ 3,976,064  

Accrued interest

    169,916       7,657  

Derivative liabilities

    303,939       -  

Lease liability - operating leases, current

    325,358       161,838  

Notes payable, net of discounts of $1.6 million and $0.4 million

    6,191,692       588,432  

SBA Loan Payable

    460,406       460,406  

Other current liabilities

    96,136       169,422  

Preferred stock dividends payable

    349,312       195,169  

Total current liabilities

    14,366,687       5,558,988  
                 

Lease Liability- operating leases, non-current

    4,071,832       3,972,964  
                 

Total Liabilities

    18,438,519       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 400,000 shares designated Series X:

    -       -  

Preferred stock, Series A, $0.01 par value, 0 and 4,800 shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively

    -       -  

Preferred stock, Series C, $0.01 par value, 1,038,708 and 940,644 shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively

    10,387       9,406  

Preferred stock, Series D, $0.01 par value, 3,100,000 and 3,100,000 shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively

    31,000       31,000  

Preferred stock, Series X, $0.01 par value, 24,227 shares issued and outstanding at September 30, 2022 and December 31, 2021

    242       242  

Common stock subscribed

    36,575       132,163  

Common stock, $0.01 par value, 500,000,000 shares authorized, 226,491,519 and 213,333,170 shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively

    2,270,698       2,133,332  

Additional paid-in capital

    26,873,836       24,295,063  

Accumulated deficit

    (37,012,562 )     (25,478,332 )

Total stockholders' equity (deficit)

    (7,789,824 )     1,122,874  
                 

Total liabilities and stockholders' equity (deficit)

  $ 10,648,695     $ 10,654,826  

 

See accompanying notes to these unaudited condensed consolidated financial statements.

 

 

MITESCO, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

 

   

For the Three

   

For the Nine

 
   

Months Ended

   

Months Ended

 
   

September 30,

   

September 30,

 
   

2022

   

2021

   

2022

   

2021

 
                                 

Revenue-services

  $ 197,525     $ 13,528     $ 470,361     $ 24,744  

Revenue-products

    524       -       17,149       -  

Total revenue

    198,049       13,528       487,510       24,744  
                                 

Cost of goods sold-services

  $ 503,749     $ 2,486     $ 1,687,011     $ 7,804  

Cost of goods sold-products

    2,262       -       13,510       -  

Total cost of goods sold

    506,011       2,486       1,700,522       7,804  
                                 

Gross (loss) profit

    (307,962

)

    11,042       (1,213,012

)

    16,940  
                                 

Operating expenses:

                               

General and administrative

  $ 2,000,854     $ 1,780,456     $ 6,905,611     $ 4,136,574  
                                 

Total operating expenses

    2,000,854       1,780,456       6,905,611       4,136,574  
                                 

Net Operating Loss

    (2,308,816

)

    (1,769,414

)

    (8,118,623

)

    (4,119,634

)

                                 

Other income (expense):

                               

Interest expense

    (1,712,877

)

    -       (3,403,413

)

    (966,123

)

Loss on legal settlement

    -       -       -       (70,000

)

(Loss) Gain on waiver and commitment fee shares

    (14,081

)

    -       172,573       -  

Gain on settlement of accrued salary

    -       -       15,032       -  

Loss (Gain) on settlement of accounts payable

    (10,000

)

    -       (88,235

)

    6,045  

Gain on settlement of notes payable

    -       -       -       1,836  

Grant income

    -       (52

)

    -       -  

Loss on revaluation of derivative liabilities

    (37,977

)

    -       (111,564

)

    (493,455

)

Total other expense

    (1,774,935

)

    (52

)

    (3,415,607

)

    (1,521,697

)

                                 

Loss before provision for income taxes

    (4,083,751

)

    (1,769,466

)

    (11,534,230

)

    (5,641,331

)

                                 

Provision for income taxes

    -       -       -       -  
                                 

Net loss

  $ (4,083,751

)

  $ (1,769,466

)

  $ (11,534,230

)

  $ (5,641,331

)

                                 

Preferred stock dividends

    (81,112

)

    (40,433

)

    (241,196

)

    (115,047

)

Preferred stock deemed dividends

    -       -       -       (332,242

)

                                 

Net loss available to common shareholders

  $ (4,164,863

)

  $ (1,809,899

)

  $ (11,775,426

)

  $ (6,088,620

)

                                 

Net loss per share - basic and diluted

  $ (0.02

)

  $ (0.01

)

  $ (0.05

)

  $ (0.03

)

                                 

Weighted average shares outstanding - basic and diluted

    228,455,759       208,784,236       220,444,547       199,678,995  

 

See accompanying notes to these unaudited condensed consolidated financial statements.

 

 

MITESCO, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERSEQUITY (DEFICIT)

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2022 and 2021

(UNAUDITED)

 

   

Preferred Stock Series A

   

Preferred Stock Series C

   

Preferred Stock Series D

   

Preferred Stock Series X

   

Common Stock

   

Additional

Paid-in

   

Common Stock

   

Accumulated

         
   

Shares

    Amount    

Shares

    Amount    

Shares

    Amount    

Shares

    Amount     

Shares

    Amount     

capital

   

Subscribed

   

Deficit

   

Total

 

Balance, June 30, 2022

    -     $ -       940,644     $ 9,406       3,100,000     $ 31,000       24,227     $ 242       225,209,745     $ 2,257,880     $ 26,743,676     $ 36,575     $ (32,928,811 )     (3,850,032 )

Vesting of common stock issued to employees

    -       -       -       -       -       -       -       -                       699       -       -       699  

Vesting of stock options issued to employees

    -       -       -       -       -       -       -       -                       29,380       -       -       29,380  

Shares issued for services

    -       -       -       -       -       -       -       -       603,177       6,032       71,416       -       -       77,448  

Commitment fee shares

    -       -       -       -       -       -       -       -       678,597       6,786       84,218       -       -       91,004  

Warrants issued with notes payable - Insiders

    -       -       -       -       -       -       -       -                       26,540       -       -       26,540  
Series C Preferred Stock adjusted for prior conversions     -       -       98,064       981       -       -       -       -       -       -       (981 )                        

Preferred stock dividends

    -       -       -       -       -       -       -       -                       (81,112 )     -       -       (81,112 )

Loss for the period ended September 30, 2022

    -       -       -       -       -       -       -       -                               -       (4,083,751 )     (4,083,751 )

Balance, September 30, 2022

    -     $ -       1,038,708     $ 10,387       3,100,000     $ 31,000       24,227     $ 242       226,491,519     $ 2,270,698     $ 26,873,836     $ 36,575     $ (37,012,562 )   $ (7,789,824 )
                                                                                                                 
                                                                                                                 

Balance, December 31, 2021

    -     $ -       940,644     $ 9,406       3,100,000     $ 31,000       24,227     $ 242       213,333,170     $ 2,133,332     $ 24,295,063     $ 132,163     $ (25,478,332 )     1,122,874  

Vesting of common stock issued to employees

    -       -       -       -       -       -       -       -       -       -       3,685       -       -       3,685  

Vesting of stock options issued to employees

    -       -       -       -       -       -       -       -       -       -       331,690       -       -       331,690  

Conversion of accounts payable to common stock

    -       -       -       -       -       -       -       -       3,179,650       31,797       546,438       -       -       578,235  

Commitment fee shares

    -       -       -       -       -       -       -       -       5,976,317       65,547       1,154,117       -       -       1,219,664  

Waiver fee shares

    -       -       -       -       -       -       -       -       2,261,721       22,617       344,541       -       -       367,158  

Shares issued for services

    -       -       -       -       -       -       -       -       1,353,177       13,532       167,041       -       -       180,573  

Warrants issued with note payable - Diamond 1

    -       -       -       -       -       -       -       -       -               2,914       -       -       2,914  

Warrants issued with note payable - Diamond 2

    -       -       -       -       -       -       -       -       -               2,213       -       -       2,213  

Gain on settlement of accrued payroll

    -       -       -       -       -       -       -       -       (400,000 )     (4,000 )     4,000       -       -       -  
Series C Preferred Stock adjusted for prior conversions     -       -       98,064       981       -       -       -       -                       (981 )     -       -       -  

Issuance of shares previously subscribed for conversion of accounts payable

    -       -       -       -       -       -       -       -       382,353       3,824       91,764       (95,588 )     -       -  

Warrants issued with notes payable - Insiders

    -       -       -       -       -       -       -       -                       89,545       -       -       89,545  

Shares issued for Series X dividends

    -       -       -       -       -       -       -       -       405,131       4,049       83,002       -       -       87,051  

Preferred stock dividends

    -       -       -       -       -       -       -       -                       (241,196 )                     (241,196 )

Loss for the nine months ended September 30, 2022

    -       -       -       -       -       -       -       -       -       -       -       -       (11,534,230 )     (11,534,230 )

Balance, September 30, 2022

    -     $ -       1,038,708     $ 10,387       3,100,000     $ 31,000       24,227     $ 242       226,491,519     $ 2,270,698     $ 26,873,836     $ 36,575     $ (37,012,562 )   $ (7,789,824 )

 

 

MITESCO, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2022 and 2021

(UNAUDITED)

 

   

Preferred Stock Series A

   

Preferred Stock Series C

   

Preferred Stock Series D

   

Preferred Stock Series X

   

Common Stock

   

Additional

Paid-in

   

Common Stock

   

Accumulated

         
   

Shares

    Amount    

Shares

    Amount    

Shares

    Amount    

Shares

    Amount     

Shares

    Amount    

capital

   

Subscribed

   

Deficit

   

Total

 

Balance, June 30, 2021

    -     $ -       1,940,644     $ 19,406       -     $ -       24,227     $ 242       208,188,705     $ 2,081,887     $ 17,920,912     $ (41,000 )   $ (18,641,275 )   $ 1,340,172  

Vesting of common stock issued to employees

    -       -       -       -       -       -       -       -       -       -       2,564       -       -       2,564  

Vesting of stock options issued to employees

    -       -       -       -       -       -       -       -       -       -       199,079       -       -       199,079  

Stock options exercised for cash

    -       -       -       -       -       -       -       -       350,000       3,500       7,000       -       -       10,500  

Exercise of options by cashless conversion

    -       -       -       -       -       -       -       -       315,000       3,150       (3,150 )     -       -       -  

Cash paid for common stock subscribed

    -       -       -       -       -       -       -       -       -       -       -       41,000       -       41,000  

Common stock subscribed for accounts payable and accrued liabilities

    -       -       -       -       -       -       -       -       -       -       -       156,441       -       156,441  

Shares of common stock issued for conversion of Preferred Stock Series C

    -       -       (1,000,000 )     (10,000 )     -       -       -       -       4,000,001       40,000       (30,000 )     -       -       -  

Preferred stock dividends

    -       -       -       -       -       -       -       -       -       -       (40,433 )     -       -       (40,433 )

Loss for the period ended September 30, 2021

    -       -       -       -       -       -       -       -       -       -       -       -       (1,769,466 )     (1,769,466 )

Balance, September 30, 2021

    -     $ -       940,644     $ 9,406       -     $ -       24,227     $ 242       212,853,706     $ 2,128,537     $ 18,055,972     $ 156,441     $ (20,410,741 )   $ (60,143 )
                                                                                                                 
                                                                                                                 

Balance, December 31, 2020

    4,800     $ 48       -     $ -       -     $ -       26,227     $ 262       155,381,183     $ 1,553,812     $ 10,340,821     $ -     $ (14,437,168 )   $ (2,542,225 )

Vesting of common stock issued to employees

    -       -       -       -       -       -       -       -       -       -       7,897       -       -       7,897  

Vesting of stock options issued to employees

    -       -       -       -       -       -       -       -       -       -       203,858       -       -       203,858  

Stock options exercised for cash

    -       -       -       -       -       -       -       -       350,000       3,500       7,000       -       -       10,500  

Exercise of options by cashless conversion

    -       -       -       -       -       -       -       -       315,000       3,150       (3,150 )     -       -       -  

Shares issued for exercise of stock options

    -       -       -       -       -       -       -       -       7,616,668       76,166       152,334       (41,000 )     -       187,500  

Common stock issued for services

    -       -       -       -       -       -       -       -       1,099,320       10,963       410,596       -       -       421,559  

Common stock issued for conversion of notes payable and accrued interest

    -       -       -       -       -       -       -       -       33,944,157       339,442       2,314,353       -       -       2,653,795  

Sale of common stock in private placement

    -       -       -       -       -       -       -       -       6,672,000       66,750       1,601,250       -       -       1,668,000  

Sale of Preferred Stock Series C

    -       -       3,000,000       30,000       -       -       -       -       -       -       1,461,283       -       -       1,491,283  

Warrants issued with Preferred Stock Series C

    -       -       -       -       -       -       -       -       -       -       1,268,717       -       -       1,268,717  

Conversion of Preferred Stock Series A to common stock

    (4,800 )     (48 )     -       -       -       -       -       -       600,000       6,000       (5,952 )     -       -       -  

Net shares issued in connection with settlement agreement

    -       -       -       -       -       -       (2,000 )     (20 )     (1,362,047 )     (13,620 )     141,550       -       -       127,910  

Cash paid for common stock subscribed

    -       -       -       -       -       -       -       -       -       -       -       41,000       -       41,000  

Common stock subscribed for accounts payable and accrued liabilities

    -       -       -       -       -       -       -       -       -       -       -       156,441       -       156,441  

Shares of common stock issued for conversion of Preferred Stock Series C

    -       -       (2,059,356 )     (20,594 )     -       -       -       -       8,237,425       82,374       (61,780 )     -       -       -  

Deemed dividend on conversion of Preferred Stock Series A to common stock

    -       -       -       -       -       -       -       -       -       -       206,242       -       (206,242 )     -  

Deemed dividend on Preferred Stock Series C

    -       -       -       -       -       -       -       -       -       -       126,000       -       (126,000 )     -  

Preferred stock dividends

    -       -       -       -       -       -       -       -       -       -       (115,047 )             -       (115,047 )

Loss for the period ended September 30, 2021

    -       -               -       -       -                       -       -       -       -       (5,641,331 )     (5,641,331 )

Balance, September 30, 2021

    -     $ -       940,644     $ 9,406       -     $ -       24,227     $ 242       212,853,706     $ 2,128,537     $ 18,055,972     $ 156,441     $ (20,410,741 )   $ (60,143 )

 

See accompanying notes to these unaudited condensed consolidated financial statements.

 

 

MITESCO, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

 

   

For the Nine

 
   

Months Ended

 
   

September 30,

 
   

2022

   

2021

 

CASH FLOWS FROM OPERATING ACTIVITIES

               

Net loss

  $ (11,534,230 )   $ (5,641,331 )

Adjustments to reconcile net loss to net cash used in operating activities:

               

Depreciation

    639,455       78,954  

Amortization of right-to-use asset

    370,064       71,349  

Net gain on settlement of notes payable

    -       (1,836 )

Financing cost - waiver fee shares

    565,431       -  

Gain on waiver fee shares

    (198,273 )     -  

Loss on commitment shares

    25,700       -  

Gain on conversion of accrued salary

    (15,032 )     -  

(Gain) loss on revaluation of derivative liabilities

    111,564       493,455  

Loss on settlement of accounts payable

    78,235       -  

Amortization of discount on notes payable

    2,588,963       756,795  

Share-based compensation

    335,375       761,222  

Changes in assets and liabilities:

               

Accounts receivables

    (79,041 )     (7,319 )

Prepaid expenses

    114,836       (28,844 )

Inventory

    (30,662 )     (22,794 )

Accounts payable and accrued liabilities

    1,501,904       1,651,191  

Operating lease liability, net

    (26,567 )     59,920  

Other current liabilities

    (73,286 )     880  

Accrued interest

    162,259       203,447  

Net cash used in operating activities

    (5,463,305 )     (1,624,911 )

CASH FLOWS FROM INVESTING ACTIVITIES

               

Cash paid for acquisition of fixed assets and construction in progress

    (190,248 )     (2,300,338 )

Net cash used in investing activities

    (190,248 )     (2,300,338 )

CASH FLOWS FROM FINANCING ACTIVITIES

               

Proceeds from private placement of common stock

    -       1,668,000  

Proceeds from sales of Series C Preferred Stock, net of fees

    -       2,760,000  

Proceeds from sale of common stock

    -       51,500  

Proceeds from notes payable - related parties, net of discounts

    2,918,100       -  

Proceeds from notes payable, net of discounts

    1,812,500       -  

Principal payments on notes payable related parties

    (235,294 )     -  

Principal payments on notes payable

    -       (177,534 )

Net cash provided by financing activities

    4,495,306       4,301,966  

Net increase in cash and cash equivalents

    (1,158,247 )     376,717  
                 

Cash and cash equivalents at beginning of period

    1,164,483       64,789  

Cash and cash equivalents at end of period

  $ 6,236     $ 441,506  

 

See accompanying notes to these unaudited condensed consolidated financial statements.

 

 

MITESCO, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

 

   

For the Nine

 
   

Months Ended

 
   

September 30,

 
   

2022

   

2021

 
                 

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

               

Interest paid

  $ -     $ 2,680  
                 

NON-CASH INVESTING AND FINANCING ACTIVITIES:

               

Stock issued for conversion of debt and accrued interest

  $ -     $ 2,653,795  

Settlement of derivative liabilities

  $ -     $ (1,301,137 )

Discount on notes payable due to derivative liabilities

  $ -     $ -  

Preferred stock dividend

  $ 241,196     $ 115,047  

Deemed dividends on Preferred Stock

  $ -     $ 332,242  

Conversion of Series A Preferred stock to common stock

  $ -     $ 6,000  

Conversion of Series C Preferred stock to common stock

  $ -     $ 61,781  
Adjustment of Series C Preferred stock to common stock   $ 981     $ -  

Conversion of accounts payable to common stock

  $ 500,000     $ 102,333  

Conversion of accrued payroll to common stock

  $ -     $ 50,000  

Conversion of accounts payable to common stock subscribed

  $ -     $ 156,441  

Capital expenditures included in accounts payable

  $ 4,403,346     $ -  

 

See accompanying notes to these unaudited condensed consolidated financial statements.

 

 

MITESCO, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2022 AND 2021

(Unaudited)

 

Note 1 Description of Business

 

Company Overview

 

Mitesco, Inc. (the “Company,” “we,” “us,” or “our”) was formed in the state of Delaware on January 18, 2012. On December 9, 2015, the Company restructured its operations and acquired Newco4pharmacy, LLC, a development stage company which sought to acquire compounding pharmacy businesses. As a part of the restructuring, the Company completed a “spin out” of its former business line. On April 24, 2020, the Company changed its name to Mitesco, Inc.

 

Since 2020, the Company’s operations have focused on establishing medical clinics utilizing nurse practitioners under The Good Clinic name and development and acquisition of telemedicine technology. In March of 2020, the Company formed a wholly owned subsidiary, The Good Clinic LLC, a Colorado limited liability company for its clinic business.

 

The Company opened its first The Good Clinic in Minneapolis, Minnesota in the first quarter of 2021 and have six operating at the time of this filing. The Company intends on opening up to 50 new clinics in the next three years, in addition to any existing sites it might acquire.

 

Note 2 - Financial Condition, Going Concern and Management Plans

 

On November 19, 2021, the Company closed a bridge financing round totaling $3.1 million of a Series D preferred stock sold to investors in a private placement. Each Series D Unit will have a purchase price of $1.00 per Unit, with each Unit consisting of (a) one share of a newly formed Series D Convertible Preferred Stock, par value $0.01 per share (the “Series D Preferred Stock”), (b) one warrant (the “Series A Warrants”) to purchase 2.1 shares of the Company’s Common Stock at a purchase price of $0.50 per whole share of Common Stock, and (c) one warrant (the “Series B Warrants” and together with the Series A Warrants, the “Warrants”) to purchase 2.1 shares of Common Stock at a purchase price of $0.75 per whole share.

 

Pursuant to the Certificate of Designations, Preferences and Rights of the Series D Convertible Preferred Stock of the Company, Inc., filed with the Secretary of State of the State of Delaware on October 18, 2021 (the “COD”), there are 10,000,000 shares of the Company’s preferred stock that have been designated as the Series D Preferred Stock and each share of the Series D Preferred Stock is convertible at the option of the holder thereof, or automatically upon the request of the Company’s underwriters that the Series D Preferred Stock convert to shares of Common Stock or upon listing of the Company’s Common Stock on a national securities exchange. The number of shares of Common Stock issuable upon the conversion of each share of Series D Preferred Stock is calculated by dividing the Conversion Amount (defined in the COD as the Stated Value, $1.05 per share, plus accrued and unpaid dividends) by the $0.25 conversion price (the “Conversion Price”).

 

On November 11, 2021, the Company filed a registration statement on form S-1 in connection with a planned up-list to a national exchange, and on August 3, 2022 the Company filed its fourth amendment to the S-1.

 

As of the date of this filing, the Company has closed on $3,100,000 of its Series D Preferred stock. To achieve its growth strategy, the Company will need to raise additional financing prior to up listing on Nasdaq. The Company will not proceed with this offering in the event its Common Stock is not approved for listing on the Nasdaq Capital Market though it will continue to seek financing for its expansion and operating needs in the debt or equity markets.

 

Between December 30, 2021 through the date of this filing, the Company has entered into a total $6.6 million face amount of promissory notes for cash proceeds of $5.6 million with certain related parties and other note holders. These notes have been used to fund 2022 operations to date.

 

 

The Company entered into a debt-for-equity exchange agreement with Gardner Builders Holdings, LLC (the “Creditor”) on January 7, 2022 (the “Agreement”). Pursuant to the Agreement, the Company issued shares of restricted common stock, par value $0.01 per share, of MITI (the “Restricted Shares”) to the Creditor in exchange for the Company Debt Obligations, as defined below.

 

The Agreement settled certain accounts payable amounts owed by the Company to the Creditor (the “Accounts Payable Amount”) as well as amounts that became 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 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 was $294,913 and the conversion price was $0.25. As a result, 3,179,650 Restricted Shares were authorized to be issued.

 

As of September 30, 2022, the Company had cash and cash equivalents of $6,000, current liabilities of $14.4 million, and has incurred a loss from operations. The Company intends to a) develop and own primary care clinics operated by nurse practitioners, b) develop and acquire telemedical technologies, and c) evaluate other healthcare related opportunities. The Company’s activities are subject to significant risks and uncertainties, including failing to secure additional funding to execute its business plan.

 

As a result of these factors, there is substantial doubt about the ability of the Company to continue as a going concern for one year from the date the financial statements are issued. The Company’s continuance is dependent on raising capital and generating revenues sufficient to sustain operations. The Company believes that the necessary capital will be raised and has entered discussions to do so with certain individuals and companies. However, as of the date of these condensed consolidated financial statements, no formal agreement exists.

 

The accompanying condensed consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts classified as liabilities that might be necessary should the Company be forced to take any such actions.

 

PPP Loan

 

During March 2020, in response to the COVID-19 crisis, the federal government announced plans to offer loans to small businesses in various forms, including the Payroll Protection Program, or “PPP”, 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 with Bank of America for a loan in the original principal amount of approximately $460,400, and the Company received the full amount of the loan proceeds on May 4, 2020. The September 30, 2022 balance, including accrued interest, was approximately $471,500.

 

COVID -19 Impact

 

The Company has had some impact on its operations because of the effects of the COVID-19 pandemic, primarily with accessibility to staffing, consultants and in the capital markets, and it is adjusting as needed within its available resources. The Company will continue to assess the effect of the pandemic on its operations. The extent to which the COVID-19 pandemic will continue to impact the Company’s business and operations will depend on future developments that are highly uncertain and cannot be predicted with confidence, such as the ultimate geographic spread of the disease, the duration of the outbreak, the duration and effect of possible business disruptions and the short-term effects and ultimate effectiveness of the travel restrictions, quarantines, social distancing requirements and business closures in the United States and other countries to contain and treat the disease. While the potential economic impact brought by, and the duration of, COVID-19 may be difficult to assess or predict, a widespread pandemic could result in significant disruption of global financial markets, reducing the Company’s ability to access capital, which could in the future negatively affect the Company’s liquidity. In addition, a recession or market correction resulting from the spread of COVID-19 could materially affect the Company’s business and the value of its securities.

 

Note 3 Basis of Presentation and Summary of Significant Accounting Policies

 

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and pursuant to the instructions to Form 10-Q and Article 8 of Regulation S-X of the Securities and Exchange Commission (“SEC”) and on the same basis as the Company prepares its annual audited consolidated financial statements. In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments, consisting of normal recurring adjustments, considered necessary for a fair presentation of such interim results.

 

 

The results for the condensed consolidated statement of operations are not necessarily indicative of results to be expected for the year ending December 31, 2022 or for any future interim period. The condensed consolidated balance sheet at September 30, 2022 has been derived from unaudited financial statements; however, it does not include all of the information and notes required by U.S. GAAP for complete financial statements. The accompanying condensed consolidated financial statements should be read in conjunction with the consolidated financial statements for the year ended December 31, 2021 and notes thereto included in the Company’s annual report on Form 10-K filed on April 5, 2022.

 

Principles of Consolidation The accompanying condensed consolidated financial statements include the accounts of Mitesco, Inc., and its wholly owned subsidiaries MitescoNA, LLC, The Good Clinic, LLC, and Acelerar Healthcare Holdings, LTD. In addition, we manage two entities under a variable interest entity arrangement and have control over the operating activities of these legal entities in which we do not maintain a controlling ownership interest but over which we will have direct influence over the operations and are  the primary beneficiary. We expect that these entities will typically be subject to nominee ownership and transfer restriction agreements that effectively transfer the majority of the economic risks and rewards of their ownership to the Company. The Company’s management, restriction and other agreements concerning such nominee-owned entities typically includes both financial terms and protective and participating rights to the entities’ operating, strategic and non-clinical governance decisions which transfer substantial powers over and economic responsibility for these entities to the Company. As such, the Company applies the guidance of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 810 – Consolidation (“ASC 810”), to determine when an entity that is insufficiently capitalized or not controlled through its voting interests, referred to as a variable interest entity should be consolidated. All intercompany balances and transactions have been eliminated.

 

Use of Estimates - The preparation of these financial statements requires our management to make estimates and assumptions about future events that affect the amounts reported in the financial statements and related notes. Future events and their effects cannot be determined with absolute certainty. Therefore, the determination of estimates requires the exercise of judgment.

 

Cash - The Company considers all highly liquid investments with maturities of three months or less to be cash equivalents. The Company had cash and cash equivalents of approximately $6,000 as of September 30, 2022, and $1.2 million as of December 31, 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

 

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). 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 is estimated at the grant date based on each option’s fair-value as calculated by the Black-Scholes-Merton (“BSM”) option-pricing model. Share-based compensation arrangements may include stock options, restricted share plans, performance-based awards, share appreciation rights and employee share purchase plans. Such compensation amounts, if any, are amortized over the respective vesting periods of the option grant.

 

Equity instruments issued to those other than employees are recognized pursuant to FASB issued ASU 2018-07, Compensation – Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting. This ASU relates to the accounting for non-employee share-based payments. The amendment in this update expands the scope of Topic 718 to include all share-based payment transactions in which a grantor acquired goods or services to be used or consumed in a grantor’s own operations by issuing share-based payment awards. The ASU excludes share-based payment awards that relate to: (1) financing to the issuer; or (2) awards granted in conjunction with selling goods or services to customers as part of a contract accounted for under Topic 606, Revenue from Contracts from Customers. The share-based payments are to be measured at grant-date fair value of the equity instruments that the entity is obligated to issue when the goods or service has been delivered or rendered and all other conditions necessary to earn the right to benefit from the equity instruments have been satisfied. This standard became effective for public business entities for fiscal years beginning after December 15, 2018, including interim periods within that fiscal year. We adopted the provisions of this ASU on January 1, 2019. The adoption had no impact on our results of operations, cash flows, or financial condition.

 

Convertible Instruments-The Company reviews the terms of convertible debt and equity instruments to determine whether there are conversion features or embedded derivative instruments including embedded conversion options that are required to be bifurcated and accounted for separately as a derivative financial instrument. In circumstances where the convertible instrument contains more than one embedded derivative instrument, including conversion options that are required to be bifurcated, the bifurcated derivative instruments are accounted for as a single compound instrument. Also, in connection with the sale of convertible debt and equity instruments, the Company may issue free standing warrants that may, depending on their terms, be accounted for as derivative instrument liabilities, rather than as equity. When convertible debt or equity instruments contain embedded derivative instruments that are to be bifurcated and accounted for separately, the total proceeds allocated to the convertible host instruments are first allocated to the fair value of the bifurcated derivative instrument. The remaining proceeds, if any, are then allocated to the convertible instruments themselves, usually resulting in those instruments being recorded at a discount from their face amount. When the Company issues debt securities, which bear interest at rates that are lower than market rates, the Company recognizes a discount, which is offset against the carrying value of the debt. Such discount from the face value of the debt, together with the stated interest on the instrument, is amortized over the life of the instrument through periodic charges to income. In addition, certain conversion features are recognized as beneficial conversion features to the extent the conversion price as defined in the convertible note is less than the closing stock price on the issuance of the convertible notes.

 

Common Stock Purchase Warrants-The Company accounts for common stock purchase warrants in accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 815, Accounting for Derivative Instruments and Hedging Activities. As is consistent with its handling of stock compensation and embedded derivative instruments, the Company’s cost for stock warrants is estimated at the grant date based on each warrant’s fair-value as calculated by the Black Sholes option-pricing model value method for valuing the impact of the expense associated with these warrants.

 

Stockholders Equity-Shares of common stock issued for other than cash have been assigned amounts equivalent to the fair value of the service or assets received in exchange.

 

 

Per Share Data-Basic loss per share is computed by dividing net loss by the weighted average number of common shares outstanding for the year. Diluted loss per share is computed by dividing net loss by the weighted average number of common shares outstanding plus common stock equivalents (if dilutive) related to warrants, options, and convertible instruments.

 

Financial Instruments and Fair Values-The fair value of a financial instrument represents the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. Fair value estimates are made at a specific point in time, based upon relevant market information about the financial instrument. In determining fair value, we use various valuation methodologies and prioritize the use of observable inputs. We assess the inputs used to measure fair value using a three-tier hierarchy based on the extent to which inputs used in measuring fair value are observable in the market:

 

Level 1 – inputs include exchange quoted prices for identical instruments and are the most observable.

 

Level 2 – inputs include brokered and/or quoted prices for similar assets and observable inputs such as interest rates.

 

Level 3 – inputs include data not observable in the market and reflect management judgment about the assumptions market participants would use in pricing the asset or liability.

 

The use of observable and unobservable inputs and their significance in measuring fair value are reflected in our hierarchy assessment. The carrying amount of cash, prepaid assets, accounts payable and accrued liabilities approximate fair value due to the short-term maturities of these instruments. Because cash and cash equivalents are readily liquidated, management classifies these values as Level 1. The fair value of the derivative liabilities approximates their book value as the instruments are short-term in nature and contain market rates of interest. Because there is no ready market or observable transactions, management classifies the derivative liabilities as Level 3.

 

New Accounting Standards

 

From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (“FASB”) or other standard setting bodies that the Company adopts as of the specified effective date. Unless otherwise discussed, the Company does not believe that the impact of recently issued standards that are not yet effective will have a material impact on its financial position or results of operations upon adoption.

 

Recent Accounting Standards Not Yet Adopted

 

In August 2020, the FASB issued ASU 2020-06, “Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40)”. This ASU reduces the number of accounting models for convertible debt instruments and convertible Preferred Stock. As well as amend the guidance for the derivatives scope exception for contracts in an entity’s own equity to reduce form-over-substance-based accounting conclusions. In addition, this ASU improves and amends the related EPS guidance. This standard is effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. Adoption is either a modified retrospective method or a fully retrospective method of transition. We are currently assessing the impact the new guidance will have on our condensed consolidated financial statements.

 

There are various other updates recently issued, most of which represent technical corrections to the accounting literature or application to specific industries and are not expected to a have a material impact on the Company’s consolidated financial position, results of operations or cash flows.

 

Note 4 Net Loss Per Share Applicable to Common Shareholders

 

Net Loss per Share Applicable to Common Stockholders

 

Basic loss per common share is computed by dividing net loss by the weighted average number of common shares outstanding during the reporting period. Diluted loss per common share is computed similarly to basic loss per common share except that it reflects the potential dilution that could occur if dilutive securities or other obligations to issue common stock were exercised or converted into common stock.

 

 

The following table sets forth the computation of loss per share for the three and nine months ended September 30, 2022, and 2021, respectively:

 

   

For the Three Months Ended

   

For the Six Months Ended

 
   

September 30,

   

September 30,

 
   

2022

   

2021

   

2022

   

2021

 

Numerator:

                               

Net loss applicable to common shareholders

  $ (4,164,863 )   $ (1,809,899 )   $ (11,775,426 )   $ (6,088,620 )
                                 

Denominator:

                               

Weighted average common shares outstanding

    228,455,759       208,784,236       220,444,547       199,678,995  
                                 

Net loss per share:

                               

Basic and diluted

  $ (0.02 )   $ (0.01 )   $ (0.05 )   $ (0.03 )

 

The Company excluded all common equivalent shares outstanding for warrants, options, and convertible instruments to purchase common stock from the calculation of diluted net loss per share because all such securities are antidilutive for the periods presented. As of September 30, 2022, and 2021, the following shares were issuable and excluded from the calculation of diluted loss:

 

   

September 30,

 
   

2022

   

2021

 

Common stock options

    16,354,961       18,386,211  

Common stock purchase warrants

    33,616,260       12,600,000  

Convertible Preferred Stock Series C

    4,362,575       8,237,425  

Convertible Preferred Stock Series D

    13,020,000       -  

Accrued interest on Preferred Stock

    1,522,561       494,883  

Potentially dilutive securities

    68,876,357       39,718,519  

 

Note 5 Related Party Transactions

 

For the nine months ended September 30, 2022:

 

Mitesco, Inc. (the “Company”) issued a 10% Promissory Note due, as extended, November 30, 2022, dated December 30, 2021, to the Michael C. Howe Living Trust (“Howe Note 1”) (the “Lender”). Michael C. Howe is the Chief Executive Officer of the Good Clinic LLC, one of our subsidiaries. The principal amount of the Howe Note 1 is $1,000,000, carries a 10% interest rate per annum, payable in monthly installments, and had a maturity date, as extended, 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 1 payable to the Company for the Howe Note 1 was $850,000 and was funded on December 30, 2021.  An original issue discount in the amount of $150,000 was recorded. In addition, the Lender was issued (i) 2,100,000 5-year warrants at a price of $0.50 with a fair value of $261,568 that may be exercised on substantially the same terms as the Series A warrant issued in connection with our Series D Convertible Preferred Stock and (ii) 96,471 shares of Common Stock as commitment shares. The amount payable at maturity will be $1,000,000 plus 10% of that amount plus any accrued and unpaid interest. Following an event of default, as defined in the note, the principal amount shall bear interest for each day until paid, at a rate per annum equal to the lesser of the maximum interest permitted by applicable law and 18%. The 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 the Lender reasonably believes contains a term that is more favorable than those in the note, the Company shall notify the Lender of such term, and such term, at the option of the Lender, shall become a part of the note.  At September 30, 2022, the principal balance of this note was $1,000,000; $150,000 of the original issue discount was amortized to interest expense during the nine months ended September 30, 2022, and the remaining original issue discount at September 30, 2022 was $0.

 

 

The Company issued a 10% Promissory Note due, as extended, November 30, 2022, dated February 14, 2022 (the “Diamond Note 1”), to Lawrence Diamond (the “Lender”). Mr. Diamond is the Chief Executive Officer of the Company and a member of its Board of Directors. The principal amount of the Diamond Note 1 is $175,000, carries a 10% interest rate per annum, payable in monthly installments, and has a maturity date, as extended, 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 note payable to the Company for the note was $148,750 and was funded on February 14, 2022. The amount payable at maturity will be $175,000 plus 10% of that amount plus accrued and unpaid interest. Following an event of default, as defined in the Note, the principal amount shall bear interest for each day until paid, at a rate per annum equal to the lesser of the maximum interest permitted by applicable law and 18%. The note contains a “most favored nations” clause that provides that, so long as the note is outstanding, if the Company issues any new security, which the Lender believes contains a term that is more favorable than those in the Diamond Note 1, the Company shall notify the Lender of such term, and such term, at the option of the Lender, shall become a part of the Diamond Note 1. In addition to the Diamond Note 1 Lender will be issued 367,500 5-year warrants that may be exercised at $.50 per share and 367,500 5-year warrants that may be exercised at $.75 per share. These warrants have all of the same terms as those previously issued in conjunction with the Company’s Series C Preferred shares and its Series D Preferred shares.  The warrants have an aggregate commitment date fair value of $2,914. At September 30, 2022, the principal balance of this note was $175,000; $26,250 of the original issue discount was amortized to interest expense during the nine months ended September 30, 2022, and the remaining original issue discount at September 30, 2022 was $0.

 

The Company issued a 10% Promissory Note due, as amended, June 18, 2022 (the “Diamond Note 2”), dated March 18, 2022, to Lawrence Diamond (the “Lender”). Lawrence Diamond is the Chief Executive Officer of the Company. The principal amount of the Diamond Note 2 is $235,294, carries a 10% interest rate per annum, payable in monthly installments, and has a maturity date, as amended, that is the earlier of (i) November 30, 2022, (ii) five business days after the date on which the Company successfully lists its shares of common stock on Nasdaq or NYSE, or (iii) the date of receipt of the Company of the next round of debt or equity financing in an amount of at least $1,000,000. The purchase price of the Diamond Note 2 payable to the Company for the Diamond Note 2 was $200,000 and was funded on March 18, 2022. The amount payable at maturity will be $235,294 plus 10% of that amount plus any accrued and unpaid interest. Following an event of default, as defined in the Diamond Note 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 contains a “most favored nations” clause that provides that, so long as the note is outstanding, if the Company issues any new security, which the Lender reasonably believes contains a term that is more favorable than those in the Diamond Note 2, the Company shall notify the Lender of such term, and such term, at the option of the Lender, shall become a part of the note. In addition, the Lender will be issued 200,000 5-year warrants that may be exercised on substantially the same terms as the Series A warrant issued in connection with the Company’s Series D Convertible Preferred Stock. The warrants have an aggregate commitment date fair value of $2,213. All amounts due for The Diamond Note 2, with the exception of $23,529, was paid on April 8, 2022. $23,529 remained outstanding as of September 30, 2022.

 

On March 22, 2022, the Company issued 168,221 shares of common stock with a contract price of $0.25 per share or $42,055 and a grant date market value of $0.127 per share or $21,364 were issued to Larry Diamond, it’s Chief Executive Officer, as compensation for the waiver of certain covenants as set forth and defined in Diamond Note 1.

 

On April 27, 2022, the Company issued 96,471 shares of common stock with a contract price of $0.25 per share or $24,118 and a grant date market value of $0.16 or $15,434 to Larry Diamond, it’s Chief Executive Officer, as compensation for the waiver of certain covenants as set forth and defined in Diamond Note 2. The Company also issued five-year warrants to purchase 92,942 shares of common stock at a price of $0.50 to Mr. Diamond pursuant to a promissory note.

 

On April 27, 2022, the Company issued a 10% Promissory Note due, as extended, November 30, 2022 (the “Diamond Note 3”) to Lawrence Diamond (the “Lender”). Lawrence Diamond is the Chief Executive Officer of the Company. The principal amount of the Diamond Note 3 is $235,294, carries a 10% interest rate per annum, payable in monthly installments, and has a maturity date, as extended, 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 3 payable to the Company for the Diamond Note was $200,000 and was funded on April 27, 2022. The amount payable at maturity will be $235,294 plus 10% of that amount plus any accrued and unpaid interest. Following an event of default, as defined in the Diamond Note 3, the principal amount shall bear interest for each day until paid, at a rate per annum equal to the lesser of the maximum interest permitted by applicable law and 18%. The Diamond Note 3 contains a “most favored nations” clause that provides that, so long as the note is outstanding, if the Company issues any new security, which the Lender reasonably believes contains a term that is more favorable than those in the Diamond Note 3, the Company shall notify the Lender of such term, and such term, at the option of the Lender, shall become a part of the note. At September 30, 2022, the principal balance of this note was $235,294; $35,294 of the original issue discount was amortized to interest expense during the nine months ended September 30, 2022, and the remaining original issue discount at September 30, 2022 was $0.

 

 

The Company issued a 10% Promissory Note due as described below (the “Diamond Note 4”), dated May 18, 2022, to Lawrence Diamond. The principal amount of the Diamond Note 4 is $47,059.00, carries a 10% interest rate per annum, payable in monthly installments, and has a maturity date, as extended, that is the earlier of (i) November 30, 2022 or (ii) five days after the date on which we successfully list our shares of common stock on any of the NYSE American, the Nasdaq Global Select Market, the Nasdaq Global Market, or the Nasdaq Capital Market. The purchase price of the Diamond Note 4 payable to us for the Diamond Note 4 was $40,000 and was funded on May 18, 2022. The amount payable at maturity will be $47,059 plus 10% of that amount plus any accrued and unpaid interest. Following an event of default, as defined in the Diamond Note 4, the principal amount shall bear interest for each day until paid, at a rate per annum equal to the lesser of the maximum interest permitted by applicable law and 18%. The Diamond Note 4 contains a “most favored nations” clause that provides that, so long as the Diamond Note 4 is outstanding, if we issue any new security, which the Lender reasonably believes contains a term that is more favorable than those in the Diamond Note 4, we shall notify Mr. Diamond of such term, and such term, at the option of Mr. Diamond, shall become a part of the note. In addition, Mr. Diamond will be issued (1) 19,294 five-year warrants (the “May 18 Diamond Warrants”) that may be exercised on substantially the same terms as the Series A warrant issued in connection with our Series D Convertible Preferred Stock and (2) 19,294 shares of Common Stock as commitment shares. At September 30, 2022, the principal balance of this note was $47,059; discounts in the amount of $14,778 were amortized to interest expense during the nine months ended September 30, 2022, and total discounts in the amount of $6,478 remained outstanding at September 30, 2022.

 

On May 23, 2022, the Company issued a 10% Promissory Note due as described below (the “Finnegan Note 1”) to Jessica Finnegan. Jessica Finnegan is VP of Human Resources of the Company. The principal amount of the Finnegan Note 1 is $47,059, carries a 10% interest rate per annum, payable in monthly installments, and has a maturity date that is November 20, 2022. The purchase price of the Finnegan Note 1 was $40,000 resulting in an original issue discount of $7,059 and was funded on May 18, 2022. The amount payable at maturity will be $47,059 plus 10% of that amount plus any accrued and unpaid interest, resulting in a premium and related discount in the amount of $4,706. Following an event of default, as defined in the Finnegan Note 1, the principal amount shall bear interest for each day until paid, at a rate per annum equal to the lesser of the maximum interest permitted by applicable law and 18%. The Finnegan Note 1 contains a “most favored nations” clause that provides that, so long as the Finnegan Note 1 is outstanding, if we issue any new security, which the Lender reasonably believes contains a term that is more favorable than those in the Finnegan Note 1, we shall notify Ms. Finnegan of such term, and such term, at the option of Ms. Finnegan, shall become a part of the note. In addition, Ms. Finnegan will be issued (1) 19,295 five-year warrants with a fair value of $2,000 (the “May 18 Finnegan Warrants”) that may be exercised on substantially the same terms as the Series A warrant issued in connection with our Series D Convertible Preferred Stock and (2) 19,295 shares of Common Stock with a value of $3,240 as commitment shares; these amounts were charged to discount on the note, resulting in a total discount on this note in the amount of $17,005. Discounts in the amount of $12,478 were amortized to interest expense during the nine months ended September 30, 2022, and total discounts in the amount of $4,518 remained outstanding at September 30, 2022.

 

The Company issued five 10% Promissory Notes due as described below (collectively, the “May 26 Notes”), dated May 26, 2022, to Larry Diamond, Jenny Lindstrom, and other related parties (the “May 26 Lenders”), in respect of which we received proceeds of $175,000. Jenny Lindstrom is the Chief Legal Officer of the Company.

 

The May 26 Notes carry a 10% interest rate per annum, payable in monthly installments, and has a maturity date that is the earlier of (i) November 30, 2022, or (ii) the date on which we successfully lists our shares of common stock on Nasdaq or NYSE. The aggregate amount payable at maturity will be $205,883 plus 10% of that amount plus any accrued and unpaid interest. Following an event of default, as defined in the May 26 Notes, the principal amount shall bear interest for each day until paid, at a rate per annum equal to the lesser of the maximum interest permitted by applicable law and 18%. The May 26 Notes contain a “most favored nations” clause that provides that, so long as the May 26 Notes are outstanding, if we issue any new security, which the May 26 Lenders reasonably believe contains a term that is more favorable than those in the May 26 Notes, we shall notify the May 26 Lenders of such term, and such term, at the option of the May 26 Lenders, shall become a part of the May 26 Notes. In addition, the May 26 Lenders will be issued in the aggregate (1) 84,412 five-year warrants (the “May 26 Warrants”) and (2) 84,412 shares of Common Stock as commitment shares. The May 26 Warrants have an initial exercise price of $0.50 per share. The May 26 Warrants are not exercisable for nine months following their issuance. The May 26 Lenders may exercise the May 26 Warrants on a cashless basis if after the six-month anniversary of date of issuance, the shares of Common Stock underlying the May 26 Warrants are not then registered pursuant to an effective registration statement. At September 30, 2022, the principal balance of these notes were $205,883. Discounts in the amount of $51,724 were amortized to interest expense during the nine months ended September 30, 2022, and total discounts in the amount of $22,672 remained outstanding at September 30, 2022.

 

 

The Company issued a 10% Promissory Note due as described below (the “Howe Note 2”), dated June 9, 2022, to Michael C. Howe Living Trust and in respect of which we received proceeds of $255,000. Michael C. Howe is the Chief Executive Officer of the Good Clinic LLC, one of the Company’s subsidiaries.

 

The Howe Note 2 carries a 10% interest rate per annum, payable in monthly installments. The Howe Note 2 has a maturity date, as extended, that is the earlier of (i) November 30, 2022, or (ii) five business days after the date on which we successfully list our shares of common stock on Nasdaq or NYSE. The amount payable at maturity will be $300,000 plus 10% of that amount plus any accrued and unpaid interest. In addition, the Company issued (1) 123,000 five-year warrants with a fair value of $21,500 and (2) 123,000 shares of Common Stock with a market value of $44,000 as commitment shares. The warrants have an initial exercise price of $0.50 per share and are not exercisable for nine months following their issuance. At September 30, 2022, the principal balance of this note was $300,000. Discounts in the amount of $71,012 were amortized to interest expense during the nine months ended September 30, 2022, and total discounts in the amount of $37,393 remained outstanding at September 30, 2022.

 

On June 13, 2022, the Company issued 200,000 ten-year stock options with an exercise price of $0.25 and a fair value of $23,316 to Tom Brodmerkel, its Chairman, for taking on the position of Chief Financial Officer.

 

On July 21, 2022, the Company issued a 10% Promissory Notes due to Michael C Howe Living Trust (the “Howe Note 3”) and in respect of which the Company received proceeds of $255,000. The Howe Note 3 carries a 10% interest rate per annum, accrued monthly and payable at maturity. The Howe Note 3 has a maturity date, as extended, 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 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 contains a “most favored nations” clause that provides that, so long as the Howe Note 3 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 Note, 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 will be issued (1) 123,000 five-year warrants and (2) 123,000 shares of Common Stock as commitment shares. The Commitment Shares are priced at $0.25. The Warrants have an initial exercise price of $0.50 per share. The Warrants are not exercisable for six months following their issuance. Mr. Howe may exercise the Warrants on a cashless basis if after the six-month anniversary of date of issuance, the shares of Common Stock underlying the Warrants are not then registered pursuant to an effective registration statement. Discounts in the amount of $97,440 were amortized to interest expense during the nine months ended September 30, 2022, and total discounts in the amount of $0 remained outstanding at September 30, 2022.

 

On July 21, 2022, the Company issued a 10% Promissory Note due to Juan Carlos Iturregui (the “Iturregui Note”) and in respect of which the Company received proceeds of $25,000. Mr. Iturregui is a member of the Company’s Board of Directors. The Iturregui Note carries a 10% interest rate per annum, accrued monthly and payable at maturity. The Iturregui Note has a maturity date that is the earlier of (i) January 21, 2023, or (ii) five business days after the date on which the Company successfully lists its shares of common stock on Nasdaq or NYSE. The amount payable at maturity will be $29,412 plus 10% of that amount plus any accrued and unpaid interest. Following an event of default, as defined in The Iturregui 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 Iturregui Note contains a “most favored nations” clause that provides that, so long as The Iturregui 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, 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. In addition, Mr. Iturregui will be issued (1) 12,059 five-year warrants (the “Warrants”) and (2) 12,059 shares of Common Stock as commitment shares (“Commitment Shares”). The Commitment Shares are priced at $0.25. The Warrants have an initial exercise price of $0.50 per share. The Warrants are not exercisable for six months following their issuance. Mr. Iturregui may exercise the Warrants on a cashless basis if after the six-month anniversary of date of issuance, the shares of Common Stock underlying the Warrants are not then registered pursuant to an effective registration statement. Discounts in the amount of $