Note 2 – Financial Condition, Going Concern and Management Plans
OnNovember 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 theCompany, Inc. , filed with the Secretary of State of theState of Delaware onOctober 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
connection with a planned up list to a national exchange.
As of the date of this filing the Company has closed on$3,100,000 of its Series D Preferred stock. To achieve our growth strategy, it is anticipated the Company will need to raise additional financing prior to up listing on Nasdaq. We will not proceed with this offering in the event our Common Stock is not approved for listing on the Nasdaq Capital Market though we will continue to seek financing for our expansion and operating needs in the debt or equity markets. The Company) issued a 10% Promissory Note dueJune 30, 2022 , datedDecember 30, 2021 , to theMichael C. Howe Living Trust (the "Lender"). Michael C. Howe is the Chief Executive Officer of theGood Clinic LLC , one of our subsidiaries. The principal amount of the Note is$1,000,000 , carries a 10% interest rate per annum, payable in 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$850,000 and was funded onDecember 30, 2021 . The amount payable at maturity will be$1,000,000 plus 10% of that amount plus any accrued and unpaid interest. Following an event of default, as defined in the Note, the principal amount shall bear interest for each day until paid, at a rate per annum equal to the lesser of the maximum interest permitted by applicable law and 18%. The Note contains a "most favored nations" clause that provides that, so long as the Note is outstanding, if the Company issues any new security, which the Lender 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. 9
--------------------------------------------------------------------------------
Table of Contents
The Company entered into a debt-for-equity exchange agreement withGardner Builders Holdings, LLC (the "Creditor") onJanuary 7, 2022 (the "Agreement"). Pursuant to the Agreement, the Company issued shares of restricted common stock, par value$0.01 per share, of MITI (the "Restricted Shares") to the Creditor in exchange for the Company Debt Obligations, as defined below. The Agreement settles for certain accounts payable amounts owed by the Company to the Creditor (the "Accounts Payable Amount") as well as upcoming amounts that will become due between the date of the Agreement andApril 1, 2022 . The Agreement also settles incurred interest and penalties on the amounts due throughJanuary 5, 2022 , as well as future interest payments on amounts to be incurred in the first quarter of 2022 (collectively, the "Additional Costs", and combined with the Accounts Payable Amount, the "Company Debt Obligations"). The Accounts Payable Amount is$500,000 , the Additional Costs is$294,912.56 and the conversion price is$0.25 . As a result, 3,179,650 Restricted Shares were authorized to be issued. The Company's Board of Directors approved the Agreement onJanuary 5, 2022 . As ofMarch 31, 2022 , the Company had cash and cash equivalents of$0.3 million , current liabilities of$7.7 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 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 DuringMarch 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 theU.S. Small Business Administration . OnApril 25, 2020 , the Company entered an unsecured Promissory Note with Bank of America for a loan in the original principal amount of approximately$460,000 , and the Company received the full amount of the loan proceeds onMay 4, 2020 . The current balance is$460,406 and the Company is currently in discussions for a) a partial forgiveness and b) the conversion of any remaining balance into a term note. 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 inthe 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. 10
--------------------------------------------------------------------------------
Table of Contents
Note 3 - Summary of Significant Accounting Policies
Principles of Consolidation - The accompanying condensed consolidated financial statements include the accounts ofMitesco, Inc. , and its wholly owned subsidiariesMitescoNA, LLC ,The Good Clinic, LLC , andAcelerar 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 theFinancial 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$0.3 million as ofMarch 31, 2022 , and$1.2 million as ofDecember 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 - OnJanuary 1, 2018 , the Company adopted the new revenue recognition accounting standard issued by theFinancial Accounting Standards Board ("FASB") and codified in the ASC as Topic 606 ("ASC 606"). The revenue recognition standard in ASC 606 outlines a single comprehensive model for recognizing revenue as performance obligations, defined in a contract with a customer as goods or services transferred to the customer in exchange for consideration, are satisfied. The standard also requires expanded disclosures regarding the Company's revenue recognition policies and significant judgments employed in the determination of revenue. The Company applied the modified retrospective approach to all contracts when adopting ASC 606. As a result, at the adoption of ASC 606 what was previously classified as the provision for bad debts in the statement of operations is now reflected as implicit price concessions (as defined in ASC 606) and therefore included as a reduction to net operating revenues in 2018. For changes in credit issues not assessed at the date of service, the Company will prospectively recognize those amounts in other operating expenses on the statement of operations. For periods prior to the adoption of ASC 606, the provision for bad debts has been presented consistent with the previous revenue recognition standards that required it to be presented separately as a component of net operating revenues. Our revenues generally relate to net patient fees received from various payers and patients themselves under contracts in which our performance obligations are to provide services to the patients. Revenues are recorded during the period our obligations to provide services are satisfied. The contractual relationships with patients, in most cases, also involve a third-party payer (Medicare, Medicaid, managed care health plans and commercial insurance companies, including plans offered through the health insurance exchanges) and the transaction prices for the services provided are dependent upon the terms provided by (Medicare and Medicaid) or negotiated with (managed care health plans and commercial insurance companies) the third-party payers. The payment arrangements with third-party payers for the services we provide to the related patients typically specify payments at amounts less than our standard charges and generally provide for payments based upon predetermined rates for services or discounted fee-for-service rates. Management continually reviews the contractual estimation process to consider and incorporate updates to laws and regulations and the frequent changes in managed care contractual terms resulting from contract renegotiations and renewals. 11
--------------------------------------------------------------------------------
Table of Contents
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 afterDecember 15, 2018 , including interim periods within that fiscal year. We adopted the provisions of this ASU onJanuary 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 theFinancial 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.
12
--------------------------------------------------------------------------------
Table of Contents
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 theFinancial 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
InAugust 2020 , the FASB issued ASU 2020-06, "Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity's Own Equity (Subtopic 815-40)". This ASU reduces the number of accounting models for convertible debt instruments and convertible Preferred Stock. As well as amend the guidance for the derivatives scope exception for contracts in an entity's own equity to reduce form-over-substance-based accounting conclusions. In addition, this ASU improves and amends the related EPS guidance. This standard is effective for us onJanuary 1, 2024 , 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
months ended
For the Three Months EndedMarch 31, 2022 2021 Numerator:
Net loss applicable to common shareholders
Denominator:
Weighted average common shares outstanding 213,703,195 187,152,300 Net loss per share: Basic and diluted$ (0.02 ) $ (0.01 ) 13
--------------------------------------------------------------------------------
Table of Contents
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
following shares were issuable and excluded from the calculation of diluted
loss:
For the Three Months Ended March 31, 2022 2021 Common stock options 18,671,211 10,967,879 Common stock purchase warrants 31,405,000 12,600,000
Convertible Preferred Stock Series C 4,362,575 12,600,000
Convertible Preferred Stock Series D 13,020,000
- Accrued interest on Preferred Stock 1,230,858 72,657 Potentially dilutive securities 68,689,644 36,240,536
Note 5 - Related Party Transactions
For the three months ended
Mitesco, Inc. (the "Company") issued a 10% Promissory Note dueAugust 14, 2022 , datedFebruary 14, 2022 , toLawrence 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 Note is$175,000 , carries a 10% interest rate per annum, payable in monthly installments, and has a maturity date that is the earlier of (i) six (6) months from the date of execution, or (ii) the date on which the Company successfully lists its shares of common stock on Nasdaq or NYSE. The purchase price of the Note payable to the Company for the Note was$148,750 and was funded onFebruary 14, 2022 . The amount payable at maturity will be$175,000 plus 10% of that amount plus accrued and unpaid interest. Following an event of default, as defined in the Note, the principal amount shall bear interest for each day until paid, at a rate per annum equal to the lesser of the maximum interest permitted by applicable law and 18%. The Note contains a "most favored nations" clause that provides that, so long as the Note is outstanding, if the Company issues any new security, which the Lender reasonably believes contains a term that is more favorable than those in the Note, the Company shall notify the Lender of such term, and such term, at the option of the Lender, shall become a part of the Note. In addition to the Note and Lender will be issued 367,500 5-year warrants that may be exercised at$.50 per share and 367,500 5-year warrants that may be exercised at$.75 per share. These warrants have all of the same terms as those previously issued in conjunction with the Company's Series C Preferred shares and its Series D Preferred shares.
(the "Lender" and collectively with the Borrower, the "Parties") on the
Termination Date (as defined below), the principal amount of
"Principal Amount") plus an amount equal to ten percent of such Principal
Amount. The purchase price for this promissory note (this "Note") shall be
Borrower on the Issue Date.
As further consideration for the Purchase Price payable hereunder, promptly following the Issue Date, the Borrower shall issue to the Lender a common stock purchase warrants, entitling the Lender to purchase 200,000 shares of the Borrower's common stock on substantially the same terms as the Series A warrant issued in connection with the Borrower's Series D Convertible Preferred Stock. (b) As further consideration for the Purchase Price payable hereunder, promptly following the Issue Date, the Borrower shall also issue to the Lender 192,000 restricted shares. The Company shall instruct its transfer agent to issue one (1) certificate or book entry statement representing 192,000 shares promptly following the execution hereof.
Note 6 - Accounts Payable and Accrued Liabilities
Accounts payable and accrued liabilities consisted of the following atMarch 31, 2022 and 2021: March 31, December 31, 2022 2021 Trade accounts payable 4,890,066 3,933,305 Accrued payroll and payroll taxes 96,641
23,554
Other 17,928
19,205
Total accounts payable and accrued liabilities 5,004,635 3,976,064
14
--------------------------------------------------------------------------------
Table of Contents
Note 7 - Right to Use Assets and Lease Liabilities - Operating Leases
The Company has operating leases for its clinic with a remaining lease term of approximately 7.3 years. The Company's lease expense was entirely comprised of operating leases. Lease expense for the three months endedMarch 31, 2022 and 2021 amounted to$230,973 and$10,642 , respectively. The Company's ROU asset amortization for the three months endedMarch 31, 2022 and 2021 was$267,463 and$4,318 , respectively. The difference between the lease expense and the associated ROU asset amortization consists of interest at a rate of 12% per annum.
As of
approximately
million
Right to use assets - operating leases are summarized below:
March 31, December 31, 2022 2021 Right to use assets, net$ 3,619,403 $ 3,886,866
Operating lease liabilities are summarized below:
March 31, December 31, 2022 2021 Lease liability$ 4,146,960 $ 4,134,802 Less: current portion (276,639 ) (161,838 )
Lease liability, non-current
Maturity analysis under these lease agreements are as follows:
For the twelve months ended
For the twelve months ended
For the twelve months ended
For the twelve months ended
For the twelve months ended
Thereafter
2,251,381 Total$ 6,429,461 Less: Present value discount (2,282,501 ) Lease liability$ 4,146,960 Note 8 - DebtHowe Note Mitesco, Inc. (the "Company") issued a 10% Promissory Note dueJune 30, 2022 , datedDecember 30, 2021 , to theMichael C. Howe Living Trust (the "Lender"). Michael C. Howe is the Chief Executive Officer of theGood Clinic LLC , one of our subsidiaries. The principal amount of the Note is$1,000,000 , carries a 10% interest rate per annum, payable in 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$850,000 and was funded onDecember 30, 2021 . An original issue discount in the amount of$150,000 was recorded. The amount payable at maturity will be$1,000,000 plus 10% of that amount plus any accrued and unpaid interest. Following an event of default, as defined in the Note, the principal amount shall bear interest for each day until paid, at a rate per annum equal to the lesser of the maximum interest permitted by applicable law and 18%. The Note contains a "most favored nations" clause that provides that, so long as the Note is outstanding, if the Company issues any new security, which the Lender reasonably believes contains a term that is more favorable than those in the Note, the Company shall notify the Lender of such term, and such term, at the option of the Lender, shall become a part of the Note. AtMarch 31, 2022 , the principal balance of this note was$1,000,000 ;$74,176 of the original issue discount was amortized to interest expense during the three months endedMarch 31, 2022 , and the remaining original issue discount atMarch 31, 2022 was$75,824 . 15
--------------------------------------------------------------------------------
Table of Contents
Warrants. As further consideration for the Purchase Price payable hereunder, promptly following the Issue Date, the Borrower shall issue to the Lender two common stock purchase warrants, entitling the Lender to purchase (i) 2,100,000 shares of the Borrower's common stock on substantially the same terms as the Series A warrant issued in connection with the Borrower's Series D Convertible Preferred Stock, and (ii) 2,100,000 shares of the Borrower's common stock on substantially the same terms as the Series B warrant issued in connection with the Borrower's Series D Convertible Preferred Stock. one warrant (the "Series A Warrants") to purchase 2.1 shares of the Company's common stock, par value$0.01 per share (the "Common Stock") at a purchase price of$0.50 per whole share of Common Stock, and 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. Given the current stock price is less than the exercise price of the warrants, the warrants have no value.Diamond Note 1 The Company issued a 10% Promissory Note dueAugust 14, 2022 , datedFebruary 14, 2022 , toLawrence 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 Note is$175,000 , carries a 10% interest rate per annum, payable in monthly installments, and has a maturity date that is the earlier of (i) six (6) months from the date of execution, or (ii) the date on which the Company successfully lists its shares of common stock on Nasdaq or NYSE. The purchase price of the Note payable to the Company for the Note was$148,750 and was funded onFebruary 14, 2022 . The amount payable at maturity will be$175,000 plus 10% of that amount plus accrued and unpaid interest. Following an event of default, as defined in the Note, the principal amount shall bear interest for each day until paid, at a rate per annum equal to the lesser of the maximum interest permitted by applicable law and 18%. The Note contains a "most favored nations" clause that provides that, so long as the Note is outstanding, if the Company issues any new security, which the Lender believes contains a term that is more favorable than those in the Note, the Company shall notify the Lender of such term, and such term, at the option of the Lender, shall become a part of the Note. In addition to the Note and Lender will be issued 367,500 5-year warrants that may be exercised at$.50 per share and 367,500 5-year warrants that may be exercised at$.75 per share. These warrants have all of the same terms as those previously issued in conjunction with the Company's Series C Preferred shares and its Series D Preferred shares. The warrants have an aggregate commitment date fair value of$2,914 .Diamond Note 2 The Company issued a 10% Promissory Note dueJune 18, 2022 (the "Diamond Note"), datedMarch 18, 2022 , toLawrence Diamond (the "Lender"), which was subsequently amended.Lawrence Diamond is the Chief Executive Officer of the Company. The principal amount of the Diamond Note is$235,294.00 , carries a 10% interest rate per annum, payable in monthly installments, and has a maturity date that is the earlier of (i)April 4, 2022 , (ii) the date on which the Company successfully lists its shares of common stock on Nasdaq or NYSE, or (iii) the date of receipt of the Company of the next round of debt or equity financing in an amount of at least$1,000,000 . The purchase price of the Diamond Note payable to the Company for the Diamond Note was$200,000 and was funded onMarch 18, 2022 . The amount payable at maturity will be$235,294 plus 10% of that amount plus any accrued and unpaid interest. Following an event of default, as defined in the Diamond Note, the principal amount shall bear interest for each day until paid, at a rate per annum equal to the lesser of the maximum interest permitted by applicable law and 18%. The Diamond Note contains a "most favored nations" clause that provides that, so long as the Note is outstanding, if the Company issues any new security, which the Lender reasonably believes contains a term that is more favorable than those in the Diamond Note, the Company shall notify the Lender of such term, and such term, at the option of the Lender, shall become a part of the Note. In addition, the Lender will be issued 200,000 5-year warrants that may be exercised on substantially the same terms as the Series A warrant issued in connection with the Company's Series D Convertible Preferred Stock. The warrants have an aggregate commitment date fair value of$2,213 . AJB Capital Note OnMarch 18, 2022 , the Company entered into a Securities Purchase Agreement (the "Purchase Agreement") withAJB Capital Investments, LLC (the "Investor") with respect to the sale and issuance to the Investor of: (i) an initial commitment fee in the amount of$430,000 in the form of 1,720,000 shares (the "CommitmentFee Shares ") of the Company's common stock (the "Common Stock"), which CommitmentFee Shares can be decreased to 720,000 shares ($180,000 ) if the Company repays the Note on or prior its maturity (the "True-Up Provision"), (ii) a promissory note in the aggregate principal amount of$750,000 , and (iii) Common Stock Purchase Warrants to purchase up to an aggregate of 750,000 shares of the Common Stock (the "Warrants"). The Note and Warrants were issued onMarch 17, 2022 (the "Original Issue Date") and were held in escrow pending effectiveness of the Purchase Agreement. Pursuant to the terms of the Purchase Agreement, the initial CommitmentFee Shares were issued at a value of$430,000 , the Note was issued in a principal amount of$750,000 for a purchase price of$675,000 , resulting in an original issue discount of$75,000 ; and the Warrants were issued, with an initial exercise price of$0.50 per share, subject to adjustment as described herein. The aggregate cash subscription amount received by the Company from the Investor for the issuance of the CommitmentFee Shares , Note and Warrants was$616,250 , due to a reduction in the$675,000 purchase price as a result of broker, legal, and transaction fees. The warrants have a commitment date fair value of$24,952 . 16
--------------------------------------------------------------------------------
Table of Contents PPP Loan DuringMarch 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 theU.S. Small Business Administration . OnApril 25, 2020 , the Company entered an unsecured Promissory Note with Bank of America for a loan in the original principal amount of approximately$460,000 , and the Company received the full amount of the loan proceeds onMay 4, 2020 . The current balance is$460,406 and the Company is currently in discussions for a) a partial forgiveness and b) the conversion of any remaining balance into a term note.
These amounts are reflected in the table below:
Notes Payable Table 1: March 31, December 31, 2022 2021 Notes Payable$ 2,160,294 $ 1,000,000 PPP Loan$ 460,406 $ 460,406 $ 2,620,700 $ 1,460,406 Less: Discount (671,973 ) (411,568 )
Notes payable - net of discount
Current Portion, net of discount
Long-term portion, net of discount $ - $
-
Note 9 - Stockholders' Equity (Deficit)
Common Stock
The Company has authorized 500,000,000 shares of common stock, par value
219,756,894 shares were issued and outstanding on
Common Stock Transactions During the Three Months Ended
OnJanuary 12, 2022 , the Company entered into a settlement agreement with an ex-employee. Pursuant to the terms of this agreement, the Company agreed to pay the amount of$19,032 for accrued salary, and the employee returned to the Company for cancellation 400,000 shares of common stock previously issued as compensation. These shares were valued at par value of$0.01 or a total value of$4,000 ; the Company recorded a gain on cancellation of these shares in the amount of$15,032 .
The Company entered into a debt-for-equity exchange agreement with
Builders Holdings, LLC
Agreement"). Pursuant to the Debt for Equity Agreement, the Company issued
shares of restricted common stock to Gardner in exchange for the Company Debt
Obligations, as defined below.
The Agreement settled for certain accounts payable amounts owed by the Company to the Creditor (the "Accounts Payable Amount") as well as upcoming amounts that will become due between the date of the Agreement andApril 1, 2022 . The Agreement also settled accrued interest and penalties on the amounts due throughJanuary 5, 2022 , as well as future interest payments on amounts to be accrued in the first quarter of 2022 (collectively, the "Additional Costs", and combined with the Accounts Payable Amount, the "Company Debt Obligations"). The Accounts Payable Amount was$500,000 , the Additional Costs were$294,912 and the conversion price was$0.25 . As a result, 3,179,650 Restricted Shares were authorized to be issued. The Company's Board of Directors approved the Agreement onJanuary 5, 2022 . OnMarch 22, 2022 andMarch 31, 2022 , the Company issued an aggregate 1,541,721 shares of common stock as waiver fees to holders of the Series C and Series D Preferred Stock for their waivers of certain covenants as set forth and defined in the Series C and Series D Certificates of Designations. The Company valued these shares at their contractual price of$0.25 per share and recorded the amount of$385,431 as waiver fees during the three months endedMarch 31, 2022 . The Company recorded an aggregate gain upon issuance of these shares in the amount of$198,273 based on the market price of the Company's common stock on the date of issuance. 17
--------------------------------------------------------------------------------
Table of Contents
OnMarch 31, 2022 , the Company issued 1,720,000 CommitmentFee Shares toAJB Capital Investors, LLC ; see note 8.. AMonte Carlo model was used to value the warrants and call features, and a probability weighted expected return model was used to value the True-Up Provision. The contractual price of the common stock$0.25 per share; valuation purposes, the common stock was valued at the market price on the date of the transaction of$0.12695 per share. The derivative liability was valued at$106,608 on the date of the transaction, and was revalued at$26,771 onMarch 31, 2022 . The discount on the notes due to the CommitmentFee Shares and warrants was valued at$349,914 . The Company recorded the amount of$226,106 to additional paid-in capital pursuant to this transaction.
On
of
accounts payable in the amount of
Common Stock Transactions During the Three Months Ended
OnJanuary 4, 2021 , the Company issued 4,123,750 shares of common stock at a price of$0.012 per share pursuant to the conversion of$45,000 of principal and$4,485 of accrued interest in Eagle Equities Note 4. OnJanuary 6, 2021 , the Company issued 3,505,964 shares of common stock at a price of$0.01224 per share pursuant to the conversion of$39,000 of principal and$3,913 of accrued interest in Eagle Equities Note 4. OnJanuary 11, 2021 , the Company issued 4,463,507 shares of common stock at a price of$0.01224 per share pursuant to the conversion of$50,000 of principal and$4,633 of accrued interest in Eagle Equities Note 5. OnJanuary 14, 2021 , the Company issued 4,319,378 shares of common stock at a price of$0.01266 per share pursuant to the conversion of$50,000 of principal and$4,683 of accrued interest in Eagle Equities Note 5. OnJanuary 21, 2021 , the Company issued 6,449,610 shares of common stock at a price of$0.0154 per share pursuant to the conversion of$93,000 of principal and$6,324 of accrued interest in Eagle Equities Note 6. OnJanuary 28, 2021 , the Company issued 7,285,062 shares of common stock at a price of$0.01575 per share pursuant to the conversion of$107,200 of principal and$7,540 of accrued interest in Eagle Equities Note 6. OnFebruary 1, 2021 , the Company issued 6,672,000 shares of common stock in a private placement (the "2021 Private Placement") at a price of$0.25 per share for cash proceeds of$1,668,000 . OnFebruary 5, 2021 , the Company entered into a settlement agreement with the holders of the Eagle Equities Note 7 whereby the Company issued 1,184,148 shares of common stock at a price of$0.24984 per share in satisfaction of$200,200 of principal and all accrued interest and prepayment penalties due under this note. OnFebruary 5, 2021 , the Company entered into a settlement agreement with the holders of the Eagle Equities Note 8 whereby the Company issued 639,593 shares of common stock at a price of$0.23851 per share in satisfaction of$114,400 of principal and all accrued interest and prepayment penalties due under this note. OnFebruary 5, 2021 , the Company entered into a settlement agreement with the holders of the Eagle Equities Note 9 whereby the Company issued 605,177 shares of common stock at a price of$0.24984 per share in satisfaction of$114,400 of principal and all accrued interest and prepayment penalties due under this note.
On
holders of the Eagle Equities Note 10 whereby the Company issued 1,095,131
shares of common stock at a price of
under this note.
On
exercise of options at a price of
OnMarch 11, 2021 , the Company issued 600,000 shares of common stock to four officers ofThe Good Clinic in exchange for 4,800 shares of Series A Preferred Stock. The 4,800 shares of Series A Preferred Stock were cancelled.
On
of
On
of
18
--------------------------------------------------------------------------------
Table of Contents Preferred Stock We have authorized to issue 100,000,000 shares of Preferred Stock with such rights designations and preferences as determined by our Board of Directors. We have designated 500,000 shares of series A stock, 3,000,000 shares of Series C Preferred, 10,000,000 shares of Series D Preferred and we have designated 400,000 shares as Series X Preferred Stock.
Series A Preferred Stock Transactions During the Three Months Ended
2022
None.
Series A Preferred Stock Transactions During the Three Months Ended
2021
During the three months endedMarch 31, 2021 , the Company accrued dividends in the amount of$1,000 on the Series A Preferred Stock. OnMarch 11, 2021 , the Company issued 600,000 shares of common stock to the four officers ofThe Good Clinic in exchange for the previously issued Series A Preferred Stock and accrued dividends. The Series A preferred stock was canceled. The Preferred Stock was valued at cost of$71,558 , and the common stock was valued at the market price of$0.463 per share or a total value of$277,800 . This transaction resulted in a deemed dividend to the Preferred A shareholders in the amount of$206,242 . Series C Preferred Stock
Series C Preferred Stock Transactions During the Three Months Ended
2022
None.
Series C Preferred Stock Transactions During the Three Months Ended
2021
OnMarch 25, 2021 , the Company sold 3,000,000 shares of its Series C Preferred Stock along with (i) five-year warrants to purchase 6,300,000 shares of the Company's common stock at a price of$0.50 per share, and (ii) five-year warrants to purchase 6,300,000 shares of the Company's common stock at a price of$0.75 per share for proceeds of$3,000,000 .
The Series C Preferred Stock has the following terms:
Ranking. The Series C Preferred Stock and the Series D Preferred, discussed below, ranks senior to all other preferred stock of the Company except in relation to the Series X Cumulative Redeemable Perpetual Preferred Stock, which ranks Pari passu to the Series C Preferred Stock, with respect to the preferences as to dividends, distributions and payments upon the liquidation, dissolution and winding up of the Company. Voting Rights. Holders of the Series C Preferred Stock have the right to vote on any matter presented to holders of our Common Stock for their action or consideration at any meeting of the stockholders (or by written consent of stockholders in lieu of meeting), each holder of our Series C Preferred Stock shall be entitled to cast the number of votes equal to the number of whole shares of Common Stock into which the shares of Series C preferred Stock held by such holder, as described below, are convertible as of the record date for determining stockholders entitled to vote on (or consent to) such matter, voting with the Common Stock as a single class. Conversion. Each holder of our Series C Preferred Stock is entitled to convert their shares of Series C Preferred Stock, in whole or in part, at the Conversion Rate, which is determined by dividing the Conversion Amount (the Stated Value of$1.05 , plus any accrued but unpaid dividends) by the Conversion Price ($0.25 per share). In addition, upon certain triggering events, the holders of our Series C Preferred Stock have the right to convert their Series C Preferred Stock at the lesser of the Conversion Price or 75% of the average VWAP for the five trading days prior to the date of the notice of conversion. The Conversion Price is subject to adjustment upon certain stock splits and recapitalization as well as upon the sale of Common Stock or Common Stock Equivalents. Each share of the Series C Preferred Stock is convertible at the option of the holder thereof, or automatically or upon the closing of an underwritten offering of at least$10 million of the Company's securities or upon listing of the Company's Common Stock on a national securities exchange. Dividends. Each share of Series C Preferred Stock accrues dividends on a quarterly basis in arrears, at the rate of 6% per annum of the Stated Value ($1.05 per share plus any accrued but unpaid dividends) and is to be paid within 15 days after the end of each of our fiscal quarters. Each holder of the Series C Preferred Stock is entitled to receive dividends or distributions on each share of the Series C Preferred Stock on an as converted into Common Stock basis when and if dividends are declared on the Common Stock by our Board of Directors. 19
--------------------------------------------------------------------------------
Table of Contents
Liquidation Rights. The holders of our Series C Preferred stock are entitled to receive in cash out of our assets, whether from capital or from earnings available for distribution to our stockholders (the "Liquidation Funds"), before any amount shall be paid to the holders of any of shares of capital stock that rank junior to the Series C Preferred Stock, but Pari passu with any shares of capital stock that have a parity ranking with the Series C Preferred stock ("Parity Stock") then outstanding, an amount per share of Series C Preferred Stock equal to the greater of (A) the Conversion Amount on the date of such payment or (B) the amount per share such holder of the Series C Preferred Stock would receive if such holder converted their Series C Preferred Stock into Common Stock immediately prior to the date of such payment, provided that if the Liquidation Funds are insufficient to pay the full amount due to the holders of the Series C Preferred Stock and holders of shares of Parity Stock, then each holder Series C Preferred Stock and each holder of Parity Stock shall receive a percentage of the Liquidation Funds equal to the full amount of Liquidation Funds payable to such holder and such holder of Parity Stock as a liquidation preference, in accordance with their respective certificate of designations (or equivalent), as a percentage of the full amount of Liquidation Funds payable to all holders of Series C Preferred Stock and all holders of shares of Parity Stock. All such amounts shall be paid or set apart for payment before the payment or setting apart for payment of any amount for, or the distribution of any Liquidation Funds of the Corporation to the holders of shares of capital stock that may rank junior to that of the Series C Preferred StockJunior Stock . Rights and Preferences. The rights, preferences, and privileges of holders of our Series C Preferred Stock are subject to, and may be adversely affected by, the rights of holders of shares of any series of Preferred Stock that we may designate and issue in the future that may rank senior to the Series C Preferred Stock. Redemption Rights. Upon receipt of a conversion notice, we have the right (but not the obligation) to redeem all or part of the Series C Preferred Stock (which the applicable holder of the Series C Preferred Stock is seeking to convert) at a price per share equal to the product of 125% of the (1) Stated Value plus (2) the Additional Amount (the "Redemption Price"). If we decide to exercise the redemption right, within one trading day, we shall deliver written notice to such holder(s) of Series C Preferred Stock that the Series C Preferred Stock will be redeemed (the "Redemption Notice") on the date that is three trading days following the date of the Redemption Notice (such date, the "Redemption Date"). On the Redemption Date, we shall redeem the shares of Series C Preferred Stock specified in such request by paying in cash therefor a sum per share equal to the Redemption Price. In no event shall a Redemption Notice be given if we may not lawfully redeem our capital stock. On or before the Redemption Date, the Redemption Price for such shares shall be paid by wire transfer of immediately available funds to an account designated in writing by the applicable holder. Price Adjustments Protection. The conversion price is subject to appropriate adjustment in the event of share dividends, share splits, reorganizations or similar events affecting our shares of Common Stock. Other than for certain exempt issuances, in the event we issue or sell any securities, including options or convertible securities, or amend outstanding securities, at an effective price, with an exercise price or at a conversion price less than the Conversion Price, then the Conversion Price shall be reduced to such lower price. Preemptive or Similar Rights Additionally, except for a public offering or certain exempt issuances of our securities, holders of the Series C Preferred Stock shall have the right to participate in any offering of our Common Stock or Common Stock Equivalents (as defined in the COD) in a transaction exempt from registration under the Securities Act in an amount equal to an aggregate of 30% of the financing on the same terms, conditions and price provided to investors in such an offering, such right shall expire on the 15 month anniversary of the issuance date of the Series C Preferred Stock. Further, until the earlier of 18 months from the issuance date of the Series C Preferred Stock and the date that there are less than 20% of the shares of Series C Preferred Stock outstanding, the Investors have most favored nations protection in the event we issue or sell Common Stock or Common Stock Equivalents that the Investors believe are more favorable than the terms and conditions under the Private Placement.
Fully Paid and Nonassessable. All our issued and outstanding shares of Series C
Preferred Stock are fully paid and nonassessable.
Series X Preferred Stock The Company has 24,227 shares of its 10% Series X Cumulative Redeemable Perpetual Preferred Stock (the "Series X Preferred Stock") outstanding as ofMarch 31, 2022 andDecember 31, 2021 . The Series X Preferred Stock has a par value of$0.01 per share, no stated maturity, a liquidation preference of$25.00 per share, and will not be subject to any sinking fund or mandatory redemption and will remain outstanding indefinitely unless the Company decides to redeem or otherwise repurchase the Series X Preferred Stock; the Series X Preferred Stock is not redeemable prior toNovember 4, 2020 . The Series X Preferred Stock will rank senior to all classes of the Company's common and preferred stock and accrues dividends at the rate of 10% on$25.00 per share. The Company reserves the right to pay the dividends in shares of the Company's common stock at a price equal to the average closing price over the five days prior to the date of the dividend declaration. Each one share of the Series X Preferred Stock is entitled to 20,000 votes on all matters submitted to a vote of our shareholders. 20
--------------------------------------------------------------------------------
Table of Contents
Series X Preferred Stock Transactions During the Three Month Ended
2022
During the three months ended
the amount of approximately
Series X Preferred Stock Transactions During the Three Months Ended
2021
During the three months endedMarch 31, 2021 , the Company accrued dividends in the amount of approximately$16,392 on the Series X Preferred Stock. OnMarch 31, 2021 , dividend payable on the Series X Preferred Stock was$16,392 . Stock Options The following table summarizes the options outstanding atMarch 31, 2022 and the related prices for the options to purchase shares of the Company's common stock: Weighted Weighted Weighted average average average exercise exercise Range of Number of remaining price of Number of price of exercise options contractual outstanding options exercisable prices outstanding life (years) options exercisable options
$ 0.03 - 0.39 18,671,211 8.85$ 0.20 6,636,628$ 0.14 18,671,211 8.85$ 0.20 6,636,628$ 0.14
Transactions involving stock options are summarized as follows:
Weighted- Average Shares Exercise Price ($) (A) Outstanding at December 31, 2021 18,746,211 $ 0.20 Granted - $ - Expired (75,000 ) 0.03 Outstanding at March 31, 2022 18,671,211 $
0.20
Options vested and exercisable 6,636,628 $ 0.14
During the three months ended
amount of
At
awards not yet recognized was
The Company did not value any stock options during the three months endedMarch 31, 2022 . The Company valued stock options during the three months endedMarch 31, 2021 using the Black-Scholes valuation model utilizing the following variables: March 31, March 31, 2022 2021 Volatility - % 169.3% to 183.5 % Dividends $ - $ - Risk-free interest rates - % 0.82% to 1.69 % Term (years) - 2.50 to 10.00 21
--------------------------------------------------------------------------------
Table of Contents Warrants The following table summarizes the warrants outstanding onMarch 31, 2022 , and the related prices for the warrants to purchase shares of the Company's common stock: Weighted- Average Shares Exercise Price ($) Outstanding on December 31, 2021 29,820,000 $ 0.625 Granted 1,585,000 $ 0.558 Exercised - $ - Outstanding on March 31, 2022 31,405,000 $ 0.622 The Company valued warrants options during the three months endedMarch 31, 2022 and 2021 using the Black-Scholes valuation model utilizing the following variables: March 31, March 31, 2022 2021 Volatility 147.8 to 150.7 % 171.6% to 183.5 % Dividends $ - $ -
Risk-free interest rates 0.76% to 0.83 % 1.15% to 1.63 %
Term (years)
0.25 5.00 to 6.50
Note 10 - Commitments and Contingencies
Legal
There are no pending or anticipated legal actions at this time.
PPP Loan DuringMarch 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 theU.S. Small Business Administration . OnApril 25, 2020 , the Company entered an unsecured Promissory Note with Bank of America for a loan in the original principal amount of approximately$460,000 , and the Company received the full amount of the loan proceeds onMay 4, 2020 . The current balance is$460,406 and the Company is currently in discussions for a) a partial forgiveness and b) the conversion of any remaining balance into a term note.
Note 11 - Subsequent Events
On
Diamonds
certain covenants as set forth and defined in
OnApril 18, 2022 , the Company entered into a Securities Purchase Agreement (the "Purchase Agreement") withGS Capital Partners (the "Investor") with respect to the sale and issuance to the Investor of: (i) an initial commitment fee in the amount of$159,259 in the form of 637,036 shares (the "CommitmentFee Shares ") of the Company's common stock (the "Common Stock"), which CommitmentFee Shares can be decreased to 266,280 shares ($66,570 ) if the Company repays the Note on or prior to their maturity, (ii) promissory note in the principal amount of$277,777 , and (iii) Common Stock Purchase Warrants to purchase up to 277,777 shares of the Common Stock (the "Warrants"). The Note and Warrants were issued onApril 18, 2022 (the "Original Issue Date") and were held in escrow pending effectiveness of the Purchase Agreement. Pursuant to the terms of the Purchase Agreement, the initial CommitmentFee Shares were issued at a value of$159,259 , the Note was issued in the principal amount of$277,777 for a purchase price of$250,000 , resulting in the original issue discount of$27,777 ; and the Warrants were issued, with an initial exercise price of$0.50 per share, subject to adjustment. 22
--------------------------------------------------------------------------------
Table of Contents
OnApril 6, 2022 , the Company entered into separate Securities Purchase Agreement with each ofAnson East Master Fund LP andAnson Investments Master Fund LP with respect to the sale and issuance to AEMF and AIMF of: (i) an aggregate initial commitment fee in the amount of$430,000 in the form of 1,720,000 shares (the "CommitmentFee Shares ") of the Company's common stock (the "Common Stock"), which CommitmentFee Shares can be decreased to 722,400 shares ($180,000 ) if the Company repays the Notes on or prior their maturity, (ii) promissory notes in the aggregate principal amount of$750,000 (the "Notes"), and (iii) Common Stock Purchase Warrants to purchase up to an aggregate of 750,000 shares of the Common Stock (the "Warrants"). The Notes and Warrants were issued onApril 6, 2022 (the "Original Issue Date") and were held in escrow pending effectiveness of the Purchase Agreements.
On
LP as compensation for the waiver of certain covenants as set forth in the
Series C Certificate of Designation.
OnApril 27, 2022 , the Company issued 96,471 shares of common stock toLarry Diamonds , it's Chief Executive Officer, as compensation for the waiver of certain covenants as set forth and defined inDiamond Note 2. The Company also issued five year warrants to purchase 92,942 shares of common stock at a price of$0.50 toMr. Diamond pursuant to a promissory note. OnApril 27, 2022 , the Company issued a 10% Promissory Note dueJune 30, 2022 (the "Diamond Note") toLawrence Diamond (the "Lender").Lawrence Diamond is the Chief Executive Officer of the Company. The principal amount of the Diamond Note is$235,294.00 , carries a 10% interest rate per annum, payable in monthly installments, and has a maturity date that is the earlier of (i)April 4, 2022 , (ii) the date on which the Company successfully lists its shares of common stock on Nasdaq or NYSE, or (iii) the date of receipt of the Company of the next round of debt or equity financing in an amount of at least$1,000,000 . The purchase price of the Diamond Note payable to the Company for the Diamond Note was$200,000 and was funded onApril 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, 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. OnMay 10, 2022 , the Company entered into a Securities Purchase Agreement (the "Purchase Agreement") withKishon Investments, LLC (the "Investor") with respect to the sale and issuance to the Investor of: (i) an initial commitment fee in the amount of$159,259 in the form of 637,036 shares (the "CommitmentFee Shares ") of the Company's common stock (the "Common Stock"), (ii) promissory note in the principal amount of$277,777 due onNovember 10, 2022 , and (iii) Common Stock Purchase Warrants to purchase up to 277,777 shares of the Common Stock (the "Warrants"). The Note and Warrants were issued onMay 10, 2022 (the "Original Issue Date") and were held in escrow pending effectiveness of the Purchase Agreement. Pursuant to the terms of the Purchase Agreement, the initial CommitmentFee Shares were issued at a value of$159,259 , the Note was issued in the principal amount of$277,777 for a purchase price of$250,000 , resulting in the original issue discount of$27,777 ; and the Warrants were issued, with an initial exercise price of$0.50 per share, subject to adjustment. 23
--------------------------------------------------------------------------------
Table of Contents
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion and analysis should be read in conjunction with the
financial statements and notes thereto appearing elsewhere herein.
We are working to open primary care clinics around the US that are in residential centers and leverage the expertise, training, and license of Nurse Practitioners. We are focusing on wellness as a core of the practice.Mitesco's 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 "The Good Clinic " inNortheast Minneapolis, Minnesota inFebruary 2021 , and have added five additional operating clinics as of the date of this filing for a total of six clinics open and operating atMarch 31, 2022 . We announced leases for two new clinics in the greaterDenver, Colorado area. These new locations are expected to open in 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, we may experience large expenditures specific to the transactions that are not incident to our operations.
Comparison of the Three Months Ended
Revenue The Company recognized revenue of approximately$120,000 for the three months endedMarch 31, 2022 , compared to$3,000 for the three months endedMarch 31, 2021 . The increase in revenue is the result of the service and product revenue fromThe Good Clinic's six locations. Cost of Sales The Company incurred approximately$0.6 million of cost of goods sold for the three months endedMarch 31, 2022 , compared to$1,700 for the three months endedMarch 31, 2021 . During the first quarter of 2021 there were only a few direct clinical services performed due to the lack of in force payer contracts and the newness of the clinic. As such, the allocation of the expenses related to clinical staff were attributed to operating expenses and not cost of sales. The increase in cost of goods sold is the result of the opening and operating ofThe Good Clinic's six locations and having in force payer relationships. Gross Profit/(Loss) Our gross loss was approximately$0.5 million for the three months endedMarch 31, 2022 , compared to gross profit of$1,300 for the three months endedMarch 31, 2021 . 24
--------------------------------------------------------------------------------
Table of Contents Operating Expenses Our total operating expenses for the three months endedMarch 31, 2022 , were approximately$2.6 million . For the comparable period in 2021, the operating expenses were approximately$1.0 million . Operating expenses for the three months endedMarch 31, 2022 , were comprised primarily of$0.8 million of payroll and payroll taxes;$0.3 million in legal and professional fees;$0.1 million in marketing;$0.9 million in other operation costs and$0.1 million in consulting fees.
Operating expenses for the three months ended
primarily of
and professional fees and
Other Income and Expenses
Interest expense was approximately
31, 2022
During the three months ended
shares of approximately
During the three months ended
of accrued salary of approximately
During the three months endedMarch 31, 2022 , we recorded a loss on settlement of accounts payable of$0.3 million as compared to a gain on settlement of accounts payable of approximately$6,000 for the three months endedMarch 31, 2021 .
During the three months ended
settlement of notes payable of approximately
approximately
During the three months ended
revaluation of derivative liabilities of approximately
loss of approximately
During the three months endedMarch 31, 2022 , the Company declared Preferred Stock dividends of approximately$80,000 compared to approximately$20,000 for the three months endedMarch 31, 2021 .
During the three months ended
Stock deemed dividends of approximately
For the three months endedMarch 31, 2022 , we had a net loss available to common shareholders of approximately$3.7 million , or a net loss per share, basic and diluted of ($0.02 ) compared to a net loss available to common shareholders of approximately$2.8 million , or a net loss per share, basic and diluted of ($0.01 ), for the three months endedMarch 31, 2021 .
Liquidity and Capital Resources
To date, we have not generated sufficient revenue from operations to support our operations. We have financed our operations through the sale of equity securities and short-term borrowings. As ofMarch 31, 2022 , we had cash of approximately$0.3 million compared to cash of approximately$1.2 million as ofDecember 31, 2021 . Net cash used in operating activities was approximately$1.5 million for the three months endedMarch 31, 2022 . This is the result of our business development efforts pertaining to the start-up of the first three clinics. Cash used in operations for the three months endedMarch 31, 2021 , was approximately$1.1 million . Net cash used in investing activities was approximately$0.4 million for the three months endedMarch 31, 2022 . The amounts relate to the purchase of fixed assets and leasehold improvement on our clinics. Net cash used for investing activities for the three months endedMarch 31, 2021 was$0.5 million . Net cash provided by financing activities for the three months endedMarch 31, 2022 , was approximately$1.0 million , consisting of proceeds from convertible notes payable. Net cash provided by financing activities for the three months endedMarch 31, 2021 , was$4.3 million consisting of proceeds from a private placement offering of common stock of$1.7 million and$2.8 million from the sale of Series C Preferred Stock and warrants. Partially offsetting the proceeds was approximately$0.2 million of payment on notes payable. 25
--------------------------------------------------------------------------------
Table of Contents
CHINA UNITED INSURANCE SERVICE, INC. – 10-Q – MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS.
MIDWEST HOLDING INC. – 10-Q – MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
Advisor News
Annuity News
Health/Employee Benefits News
Life Insurance News