MITESCO, INC. – 10-K – 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
consolidated prospectus. 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 working to open primary care clinics around the US that are in
residential centers and leverage the expertise, training, and license of Nurse
Practitioners. We are focusing on wellness as a core of the practice.
mission is to increase convenience and access to care, improve the quality of
care, and reduce its cost.
We opened our first primary care clinic "
Minneapolis, Minnesota
operating clinics as of the date of this filing for a total of six clinics open
and operating at
the greater
the second quarter of 2022. We plan to open clinics in residential
concentrations of population to enhance the convenience, especially timely due
to the changes in community travel patterns resulting from the pandemic. Our
clinicians use both telehealth (virtual) and in-person visits to treat and coach
the clients along their journey to better health and quality of life. Our
clinics are led by Nurse Practitioners that use their license, extensive
training, expertise, and empathy to help people remain stable or improve their
health. We emphasize wellness, beginning with a clients' co-developed plan that
identifies from where a person is starting and constructs a plan for how they
can achieve their goals. The practice uses an integrated health approach that
includes an assessment of both the individual's behavioral and physical health
and combines this with their activation level and their goals. The clinic offers
wellness coaching, behavioral health care, episodic care, dermatologic services,
and supplements. We seek to care for the whole person's needs.
Like the first clinic, we seek to locate clinics convenient to residential
centers. In pursuit of this approach, we intend to continue to expand our
relationship with Lennar Corporation and other large-scale developers. While we
have no formal relationship with these developers other than as a tenant, we
believe such relationships give us an advantage in recruiting and retaining
clients in close proximity to our locations.
Results of Operations
The following period-to-period comparisons of our financial results are not
necessarily indicative of results for the current period of any future periods.
Further, as a result of any acquisitions of other businesses, and any additional
pharmacy acquisitions or other such transactions we may pursue, we may
experience large expenditures specific to the transactions that are not incident
to our operations.
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Table of Contents
Years ended
Revenue
The Company recognized revenue of
2021
revenue is the result of the opening of
Cost of Sales
The Company incurred approximately
year ended
2020
Good Clinic's
Gross Loss
Our gross loss was
to
Operating Expenses
Our total operating expenses for the year ended
million
Operating Expense for the year ended
of
compensation,
marketing expenses,
in consulting fees and
Our total operating expenses for the year ended
approximately
Operating expenses for the year ended
of
compensation;
consulting fees,
Board of director and advisory Board fees;
Other Income and Expenses
Interest expense was approximately
2021
2020
During the year ended
accounts payable of approximately
accounts payable in the amount of
During the year ended
notes payable of approximately
payable in the amount of
During the year ended
dividends of approximately
the year ended
During the year ended
settlement of
comparable prior period.
For the year ended
shareholders of approximately
diluted of (
approximately
(
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Table of Contents
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
cash equivalents of approximately
Net cash used in operating activities was approximately
year ended
efforts pertaining to the start-up of the first three clinics. Cash used in
operations for the year ended
Net cash used in investing activities was approximately
year ended
million
2021
improvement on our first clinic. No cash was used for investing activities for
the year ended
Net cash provided by financing activities for the year ended
was approximately
offering of Common Stock of
Preferred Stock,
million
was approximately
financing activities for the year ended
million
million
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
standard issued by the
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.
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Table of Contents 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
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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Table of Contents Series X Preferred Stock
On
Preferred Stock in satisfaction of certain liabilities. The Series X Preferred
Stock has a liquidation value of
share at the issuance date of
Preferred Stock has voting rights equivalent to 20,000 shares of common stock.
As ofDecember 31, 2021 , the shares of Series X Preferred stock issued and outstanding is as follows: Type of Name Liability # shares Ronald Riewold, Director Deferred Compensation 1,200 Larry Diamond, Director, and CEO Deferred Compensation 2,000James Crone , ex-Officer, and Director Deferred Compensation 2,884Louis Deluca , ex-Officer, and Director Deferred Compensation 2,400 Consulting services, notes Irish Italian Retirement Fund payable (a) 12,503 Frank Lightmas Legal fees 3,240 Total 24,227
(a) amount consists of accounts payable for a) consulting services of
and b) principal plus interest due on notes payable in the amount of
(b) Amount consists of
fees.
Series A Preferred Stock
On
Stock to four individuals with certain skills and know-how to assist the Company
in the development of its newly-formed subsidiary
Company has valued these shares at
based upon an analysis performed by an independent valuation consultant. On
600,000 shares of the Company's common stock. No shares of Series A Preferred
Stock were outstanding as of the date of this filing.
Securities Purchase Agreements - From
the Company entered into Securities Purchase Agreements with 46 investors for
the sale of 8,192,000 shares of the Company's restricted common stock at a price
of
determined based on the prior day 10-day average closing price, less a 20%
discount for the risk associated with restricted stock. As of the date of this
filing, a total of 6,272,000 shares have been issued, generating
proceeds and the balance was not funded. These transactions were executed
directly by the Company and no brokers, dealers or representatives were
involved.
On
with four institutional investors (the "Investors" and each an "Investor")
pursuant to which we sold to the Investors in a private placement an aggregate
of 3,000,000 units (the "Units" and each a "Unit") with a purchase price of
Series C Convertible Preferred Stock, par value
Preferred Stock"), (b) one warrant (the "Series A Warrants") to purchase 2.1
shares of the Company's common stock, par value
Stock") at a purchase price of
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
conversion of the Series C Preferred Stock is 12,600,000 shares of Common stock
and the aggregate number of shares of Common Stock initially issuable upon
exercise of the Warrants is 12,600,000 shares of Common Stock. We also issued to
the placement agent and its designee 461,358 shares of Common Stock.
On
Purchase Agreement (the "SPA") with two institutional and two individual
investors (the "Investors" and each an "Investor") pursuant to which the Company
sold to the Investors in a private placement an aggregate of 2,025,000 units
(the "Units" and each a "Unit") with a purchase price of
Unit consisting of (a) one share of a newly formed Series D Convertible
Preferred Stock, par value
one warrant (the "Series A Warrants") to purchase 2.1 shares of the Company's
common stock, par value
of
Warrants" and together with the Series A Warrants, the "Warrants") to purchase
2.1 shares of Common Stock at a purchase price of
aggregate gross proceeds to the Company were
of Common Stock initially issuable upon conversion of the Series D Preferred
Stock is 8,505,000 shares of Common stock and the aggregate number of shares of
Common Stock initially issuable upon exercise of the Warrants is 8,505,000
shares of Common Stock. Pursuant to the terms of the SPA the Company, may sell
up to an additional 7,975,000 Units (for an aggregate 10,000,000 Units) in
subsequent closings on the same terms offered to the Investors.
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On
closing ("Second Closing") of a private placement offering (the "Offering")
pursuant to a Securities Purchase Agreement (the "SPA") with four accredited
investors (the "Investors" and each an "Investor") pursuant to which the Company
sold to the Investors an aggregate of 1,075,000 units (the "Units" and each a
"Unit") with a purchase price of
one share of Series D Convertible Preferred Stock of the Company, par value
Warrants") to purchase 2.1 shares of the Company's common stock, par value
per share (the "Common Stock") at a purchase price 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
Company were
issuable upon conversion of the Series D Preferred Stock is 4,515,000 shares of
Common stock and the aggregate number of shares of Common Stock initially
issuable upon exercise of the Warrants is 4,515,000 shares of Common Stock.
Pursuant to the terms of the SPA the Company, may sell up to an additional
6,900,000 Units (for an aggregate 10,000,000 Units) in subsequent closings on
the same terms offered to the Investors.
Recent Developments
The Company entered into a debt-for-equity exchange agreement with
Builders Holdings, LLC
Pursuant to the Agreement, the Company issued shares of restricted common stock,
par value
exchange for the Company Debt Obligations, as defined below.
The Agreement settles for certain accounts payable amounts owed by the Company
to the Creditor (the "Accounts Payable Amount") as well as upcoming amounts that
will become due between the date of the Agreement and
Agreement also settles incurred interest and penalties on the amounts due
through
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
conversion price is
authorized to be issued. The Company's Board of Directors approved the Agreement
on
The Company issued a 10% Promissory Note due
Executive Officer of the Company and a member of its Board of Directors. The
principal amount of the Note is
payable in monthly installments, and has a maturity date that is the earlier of
(i) six (6) months from the date of execution, or (ii) the date on which the
Company successfully lists its shares of common stock on Nasdaq or NYSE. The
purchase price of the Note payable to the Company for the Note was
was funded on
plus 10% of that amount plus accrued and unpaid interest. Following an event of
default, as defined in the Note, the principal amount shall bear interest for
each day until paid, at a rate per annum equal to the lesser of the maximum
interest permitted by applicable law and 18%. The Note contains a "most favored
nations" clause that provides that, so long as the Note is outstanding, if the
Company issues any new security, which the Lender believes contains a term that
is more favorable than those in the Note, the Company shall notify the Lender of
such term, and such term, at the option of the Lender, shall become a part of
the Note. In addition to the Note and Lender will be issued 367,500 5-year
warrants that may be exercised at
that may be exercised at
terms as those previously issued in conjunction with the Company's Series C
Preferred shares and its Series D Preferred shares.
The Company issued a 10% Promissory Note due
dated
amended.
principal amount of the Diamond Note is
per annum, payable in monthly installments, and has a maturity date that is the
earlier of (i)
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
for the Diamond Note was
payable at maturity will be
and unpaid interest. Following an event of default, as defined in the Diamond
Note, the principal amount shall bear interest for each day until paid, at a
rate per annum equal to the lesser of the maximum interest permitted by
applicable law and 18%. The Diamond Note contains a "most favored nations"
clause that provides that, so long as the Note is outstanding, if the Company
issues any new security, which the Lender reasonably believes contains a term
that is more favorable than those in the Diamond Note, the Company shall notify
the Lender of such term, and such term, at the option of the Lender, shall
become a part of the Note. In addition, the Lender will be issued 200,000 5-year
warrants that may be exercised on substantially the same terms as the Series A
warrant issued in connection with the Company's Series D Convertible Preferred
Stock.
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On
"Purchase Agreement") with
respect to the sale and issuance to the Investor of: (i) an initial commitment
fee in the amount of
Commitment
Company repays the Note on or prior its maturity, (ii) a promissory note in the
aggregate principal amount of
Purchase Warrants to purchase up to an aggregate of 750,000 shares of the Common
Stock (the "Warrants"). The Note and Warrants were issued on
"Original Issue Date") and were held in escrow pending effectiveness of the
Purchase Agreement.
Pursuant to the terms of the Purchase Agreement, the initial Commitment
Shares
amount of
issue discount of
exercise price of
The aggregate cash subscription amount received by the Company from the Investor
for the issuance of the Commitment
broker, legal, and transaction fees.
As previously disclosed on the Company's form 8-K filed on
and Series D Convertible Preferred Stock to the investors named therein (the
"
and waivers (the "Consents") from the Series D and
the Company to enter into the Purchase Agreement. The Company issued 411,000
shares of Common Stock to the
Stock to the
The state got $8.1 billion in federal relief money
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