UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended September 30, 2023
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 000-53601
MITESCO, INC.
(Exact Name of Registrant as Specified in its Charter)
| Nevada | | 87-0496850 |
| (State Other Jurisdiction of Incorporation or Organization) | | (I.R.S. Employer Identification Number) |
505 Beachland Blvd., Suite 1377
Vero Beach, Florida 32963
(Address of principal executive offices) (Zip code)
844-383-8689
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
| N/A | N/A | N/A |
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☐ No ☒
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large, accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large, accelerated filer”, “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large, accelerated filer ☐ | Accelerated filer ☐ |
| Non-accelerated filer ☒ | Smaller reporting company ☒ |
| | Emerging growth company ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act. Yes ☐ No ☒
As of February 12, 2024, the registrant had outstanding 5,609,014 shares of common stock issued and outstanding.
Table of Contents
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
MITESCO, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
| |
|
September 30,
|
|
|
December 31,
|
|
|
ASSETS
|
|
2023
|
|
|
2022
|
|
| |
|
|
|
|
|
|
|
|
|
Current assets
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$ |
24,642 |
|
|
$ |
6,191 |
|
|
Accounts Receivable
|
|
|
- |
|
|
|
- |
|
|
Prepaid expenses
|
|
|
- |
|
|
|
51,632 |
|
|
Current assets of discontinued operations
|
|
|
1,665 |
|
|
|
122,465 |
|
|
Total current assets
|
|
|
26,307 |
|
|
|
180,288 |
|
| |
|
|
|
|
|
|
|
|
|
Right to use operating leases, net
|
|
|
- |
|
|
|
83,810 |
|
| Fixed assets, net of accumulated depreciation of $1.1 million and $.06 million |
|
|
- |
|
|
|
44,655 |
|
|
Non-current assets of discontinued operations
|
|
|
- |
|
|
|
2,293,228 |
|
|
Total Assets
|
|
$ |
26,307 |
|
|
$ |
2,601,981 |
|
| |
|
|
|
|
|
|
|
|
|
LIABILITIES AND (DEFICIENCY IN) STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities
|
|
$ |
1,903,600 |
|
|
$ |
1,945,848 |
|
|
Accrued interest
|
|
|
164,722 |
|
|
|
185,732 |
|
|
Accrued interest - related parties
|
|
|
416,815 |
|
|
|
198,753 |
|
|
Derivative liabilities
|
|
|
152,937 |
|
|
|
568,912 |
|
|
Lease liability - operating leases, current
|
|
|
93,758 |
|
|
|
93,758 |
|
| Notes payable, net of discounts of $0 and $0.4 million |
|
|
1,143,265 |
|
|
|
5,112,702 |
|
| Notes payable - related parties, net of discounts of $0 and $22,670 |
|
|
2,100,956 |
|
|
|
2,776,962 |
|
|
SBA Loan Payable
|
|
|
428,507 |
|
|
|
460,406 |
|
|
Other current liabilities
|
|
|
96,136 |
|
|
|
96,136 |
|
|
Preferred stock dividends payable
|
|
|
973,872 |
|
|
|
395,407 |
|
|
Preferred stock dividends payable - related parties
|
|
|
78,357 |
|
|
|
35,019 |
|
|
Current liabilities of discontinued operations
|
|
|
9,955,164 |
|
|
|
5,932,838 |
|
|
Total current liabilities
|
|
|
17,508,089 |
|
|
|
17,802,473 |
|
| |
|
|
|
|
|
|
|
|
|
Lease Liability- operating leases, non-current
|
|
|
- |
|
|
|
- |
|
|
Long term liabilities of discontinued operations
|
|
|
- |
|
|
|
3,936,858 |
|
| |
|
|
|
|
|
|
|
|
|
Total Liabilities
|
|
|
17,508,089 |
|
|
|
21,739,331 |
|
| |
|
|
|
|
|
|
|
|
|
Commitments and contingencies
|
|
|
- |
|
|
|
- |
|
| |
|
|
|
|
|
|
|
|
|
Stockholders' equity (deficit)
|
|
|
|
|
|
|
|
|
|
Preferred stock, $0.01 par value, 100,000,000 shares authorized; 500,000 shares designated Series A; 3,000,000 shares designated Series C; 10,000,000 shares designated Series D; 10,000 shares designated as Series E; 140,000 shares designated as Series F, and 27,324 shares designated Series X.
|
|
|
- |
|
|
|
- |
|
| Preferred stock, Series A, $0.01 par value, 0 shares issued and outstanding as of September 30, 2023 and December 31, 2022 |
|
|
- |
|
|
|
- |
|
| Preferred stock, Series C, $0.01 par value, 0 and 1,047,619 shares issued and outstanding as of September 30, 2023 and December 31, 2022 |
|
|
- |
|
|
|
10,476 |
|
| Preferred stock, Series D, $0.01 par value, 750,000 and 3,100,000 shares issued and outstanding as of September 30, 2023 and December 31, 2022 |
|
|
7,500 |
|
|
|
31,000 |
|
| Preferred stock, Series F, $0.01 par value, 16,353 and 0 shares issued and outstanding as of September 30, 2023 and December 31, 2022 |
|
|
194 |
|
|
|
- |
|
| Preferred stock, Series X, $0.01 par value, 24,227 shares issued and outstanding at September 30, 2023 and December 31, 2022 |
|
|
242 |
|
|
|
242 |
|
|
Common stock subscribed
|
|
|
- |
|
|
|
36,575 |
|
| Common stock, $0.01 par value, 500,000,000 shares authorized, 5,544,519 and 4,630,372 shares issued and outstanding as of September 30, 2023 and December 31, respectively |
|
|
55,448 |
|
|
|
46,305 |
|
|
Additional paid-in capital
|
|
|
45,879,763 |
|
|
|
29,452,514 |
|
|
Accumulated deficit
|
|
|
(63,424,929 |
) |
|
|
(48,714,462 |
) |
|
Total stockholders' deficit
|
|
|
(17,481,782 |
) |
|
|
(19,137,350 |
) |
| |
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders' equity (deficit)
|
|
$ |
26,307 |
|
|
$ |
2,601,981 |
|
See accompanying notes to these unaudited condensed consolidated financial statements.
MITESCO, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
| |
|
For the Three Months
|
|
|
For the Nine Months
|
|
| |
|
Ended
|
|
|
Ended
|
|
| |
|
September 30,
|
|
|
September 30,
|
|
| |
|
2023
|
|
|
2022
|
|
|
2023
|
|
|
2022
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue-services
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
Revenue-products
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
Total revenue
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of goods sold-services
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
Cost of goods sold-products
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
Total cost of goods sold
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross (loss) profit
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative
|
|
|
321,752 |
|
|
|
851,528 |
|
|
|
2,218,835 |
|
|
|
3,055,703 |
|
|
Impairment of fixed assets
|
|
|
- |
|
|
|
- |
|
|
|
132,000 |
|
|
|
- |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
321,752 |
|
|
|
851,528 |
|
|
|
2,350,835 |
|
|
|
3,055,703 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Operating Loss
|
|
|
(321,752 |
) |
|
|
(851,528 |
) |
|
|
(2,350,835 |
) |
|
|
(3,055,703 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
(69,775 |
) |
|
|
(1,712,877 |
) |
|
|
(1,556,661 |
) |
|
|
(3,403,413 |
) |
|
Interest expense - related parties
|
|
|
(116,058 |
) |
|
|
- |
|
|
|
(358,894 |
) |
|
|
- |
|
|
Equity investment incentives
|
|
|
(1,214,970 |
) |
|
|
- |
|
|
|
(7,644,077 |
) |
|
|
- |
|
|
Financing cost
|
|
|
- |
|
|
|
- |
|
|
|
(18,617 |
) |
|
|
- |
|
|
Gain on forgiveness of debt
|
|
|
- |
|
|
|
- |
|
|
|
25,000 |
|
|
|
- |
|
|
Loss on settlement of true-up obligation
|
|
|
- |
|
|
|
- |
|
|
|
(119,370 |
) |
|
|
- |
|
|
(Loss) Gain on waiver and commitment fee shares
|
|
|
- |
|
|
|
(14,081 |
) |
|
|
- |
|
|
|
172,573 |
|
|
Gain (Loss) on issuance of shares to service provider
|
|
|
- |
|
|
|
- |
|
|
|
33,092 |
|
|
|
- |
|
|
Gain on sale of assets
|
|
|
- |
|
|
|
- |
|
|
|
8,876 |
|
|
|
- |
|
|
Gain – other
|
|
|
40,622 |
|
|
|
- |
|
|
|
40,622 |
|
|
|
- |
|
|
Loss on legal settlement
|
|
|
- |
|
|
|
- |
|
|
|
(18,759 |
) |
|
|
- |
|
|
Gain on settlement of accrued salary
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
15,032 |
|
|
Gain (Loss) on conversion of notes and accounts payable to common stock - related party
|
|
|
139,837 |
|
|
|
- |
|
|
|
139,837 |
|
|
|
- |
|
|
Gain (Loss) on conversion of notes and accounts payable to common stock
|
|
|
19,687 |
|
|
|
(10,000 |
) |
|
|
19,687 |
|
|
|
(88,235 |
) |
|
(Loss) Gain on revaluation of derivative liabilities
|
|
|
(14,725 |
) |
|
|
(37,977 |
) |
|
|
(85,765 |
) |
|
|
(111,564 |
) |
|
Total other expense
|
|
|
(1,215,382 |
) |
|
|
(1,774,935 |
) |
|
|
(9,535,029 |
) |
|
|
(3,415,607 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss before provision for income taxes
|
|
|
(1,537,134 |
) |
|
|
(2,626,463 |
) |
|
|
(11,885,864 |
) |
|
|
(6,471,310 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for income taxes
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss from continuing operations
|
|
$ |
(1,537,134 |
) |
|
$ |
(2,626,463 |
) |
|
$ |
(11,885,864 |
) |
|
|
(6,471,310 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss from discontinued operations
|
|
$ |
(15,239 |
) |
|
$ |
(1,457,288 |
) |
|
$ |
(2,824,604 |
) |
|
|
(5,062,920 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated net loss
|
|
$ |
(1,552,373 |
) |
|
$ |
(4,083,751 |
) |
|
$ |
(14,710,468 |
) |
|
$ |
(11,534,230 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock dividends
|
|
|
(530,502 |
) |
|
|
(52,723 |
) |
|
|
(1,001,745 |
) |
|
|
(186,219 |
) |
|
Preferred stock dividends - related parties
|
|
|
(1,236 |
) |
|
|
(28,389 |
) |
|
|
(78,357 |
) |
|
|
(54,977 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss available to common shareholders - continuing operations
|
|
|
(2,068,872 |
) |
|
|
(2,707,575 |
) |
|
|
(12,965,966 |
) |
|
|
(6,712,506 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss available to common shareholders - discontinued operations
|
|
$ |
(15,239 |
) |
|
$ |
(1,457,288 |
) |
|
$ |
(2,824,604 |
) |
|
$ |
(5,062,920 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per share from continuing operations - basic and diluted
|
|
$ |
(0.39 |
) |
|
$ |
(0.59 |
) |
|
$ |
(2.57 |
) |
|
$ |
(1.52 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per share from discontinued operations - basic and diluted
|
|
$ |
(0.00 |
) |
|
$ |
(0.32 |
) |
|
$ |
(0.56 |
) |
|
$ |
(1.15 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding - basic and diluted
|
|
|
5,329,816 |
|
|
|
4,569,115 |
|
|
|
5,048,070 |
|
|
|
4,408,891 |
|
See accompanying notes to these unaudited condensed consolidated financial statements.
MITESCO, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2023 and 2022
(UNAUDITED)
| |
|
Preferred Stock Series A
|
|
Preferred Stock Series C
|
|
Preferred Stock Series D
|
|
Preferred Stock Series F
|
|
Preferred Stock Series X
|
|
Common Stock
|
|
|
Additional
|
|
|
Common Stock
|
|
|
Accumulated
|
|
|
|
|
|
| |
|
Shares
|
|
Amount
|
|
Shares
|
|
|
Amount
|
|
Shares
|
|
|
Amount
|
|
Shares
|
|
|
Amount
|
|
Shares
|
|
|
Amount
|
|
Shares
|
|
|
Amount
|
|
|
Paid-in capital
|
|
|
Subscribed
|
|
|
Deficit
|
|
|
Total
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, June 30, 2022
|
|
|
- |
|
$ |
- |
|
|
940,644 |
|
|
$ |
9,406 |
|
|
3,100,000 |
|
|
$ |
31,000 |
|
|
- |
|
|
$ |
- |
|
|
24,227 |
|
|
$ |
242 |
|
|
4,504,203 |
|
|
$ |
45,043 |
|
|
$ |
28,956,513 |
|
|
$ |
36,575 |
|
|
$ |
(32,928,811 |
) |
|
$ |
(3,850,032 |
) |
|
Vesting of common stock issued to employees
|
|
|
- |
|
|
- |
|
|
- |
|
|
|
- |
|
|
- |
|
|
|
- |
|
|
- |
|
|
|
- |
|
|
- |
|
|
|
- |
|
|
- |
|
|
|
- |
|
|
|
699 |
|
|
|
- |
|
|
|
- |
|
|
|
699 |
|
|
Vesting of stock options issued to employees
|
|
|
- |
|
|
- |
|
|
- |
|
|
|
- |
|
|
- |
|
|
|
- |
|
|
- |
|
|
|
- |
|
|
- |
|
|
|
- |
|
|
- |
|
|
|
- |
|
|
|
29,380 |
|
|
|
- |
|
|
|
- |
|
|
|
29,380 |
|
|
Shares issued for services
|
|
|
- |
|
|
- |
|
|
- |
|
|
|
- |
|
|
- |
|
|
|
- |
|
|
- |
|
|
|
- |
|
|
- |
|
|
|
- |
|
|
603,177 |
|
|
|
6,032 |
|
|
|
71,416 |
|
|
|
- |
|
|
|
- |
|
|
|
77,448 |
|
|
Commitment fee shares
|
|
|
- |
|
|
- |
|
|
- |
|
|
|
- |
|
|
- |
|
|
|
- |
|
|
- |
|
|
|
- |
|
|
- |
|
|
|
- |
|
|
678,597 |
|
|
|
6,786 |
|
|
|
84,218 |
|
|
|
- |
|
|
|
- |
|
|
|
91,004 |
|
|
Warrants issued with notes payable
|
|
|
- |
|
|
- |
|
|
- |
|
|
|
- |
|
|
- |
|
|
|
- |
|
|
- |
|
|
|
- |
|
|
- |
|
|
|
- |
|
|
- |
|
|
|
- |
|
|
|
26,540 |
|
|
|
- |
|
|
|
- |
|
|
|
26,540 |
|
|
Preferred stock dividends
|
|
|
- |
|
|
- |
|
|
- |
|
|
|
- |
|
|
- |
|
|
|
- |
|
|
- |
|
|
|
- |
|
|
- |
|
|
|
- |
|
|
- |
|
|
|
- |
|
|
|
(81,112 |
) |
|
|
- |
|
|
|
- |
|
|
|
(81,112 |
) |
|
Loss for the three months ended September 30, 2022
|
|
|
- |
|
|
- |
|
|
- |
|
|
|
- |
|
|
- |
|
|
|
- |
|
|
- |
|
|
|
- |
|
|
- |
|
|
|
- |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(4,083,751 |
) |
|
|
(4,083,751 |
) |
|
Balance, September 30, 2022
|
|
|
- |
|
$ |
- |
|
|
940,644 |
|
|
$ |
9,406 |
|
|
3,100,000 |
|
|
$ |
31,000 |
|
|
- |
|
|
$ |
- |
|
|
24,227 |
|
|
$ |
242 |
|
|
5,785,977 |
|
|
$ |
57,861 |
|
|
$ |
29,087,654 |
|
|
$ |
36,575 |
|
|
$ |
(37,012,562 |
) |
|
$ |
(7,789,824 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2021
|
|
|
- |
|
$ |
- |
|
|
940,644 |
|
|
$ |
9,406 |
|
|
3,100,000 |
|
|
$ |
31,000 |
|
|
|
|
|
|
|
|
|
24,227 |
|
|
$ |
242 |
|
|
4,266,669 |
|
|
$ |
42,667 |
|
|
$ |
26,385,728 |
|
|
$ |
132,163 |
|
|
$ |
(25,478,332 |
) |
|
$ |
1,122,874 |
|
|
Vesting of common stock issued to employees
|
|
|
- |
|
|
- |
|
|
- |
|
|
|
- |
|
|
- |
|
|
|
- |
|
|
- |
|
|
|
- |
|
|
- |
|
|
|
- |
|
|
- |
|
|
|
- |
|
|
|
3,685 |
|
|
|
- |
|
|
|
- |
|
|
|
3,685 |
|
|
Vesting of stock options issued to employees
|
|
|
- |
|
|
- |
|
|
- |
|
|
|
- |
|
|
- |
|
|
|
- |
|
|
- |
|
|
|
- |
|
|
- |
|
|
|
- |
|
|
- |
|
|
|
- |
|
|
|
331,690 |
|
|
|
- |
|
|
|
- |
|
|
|
331,690 |
|
|
Issuance of shares for services
|
|
|
- |
|
|
- |
|
|
- |
|
|
|
- |
|
|
- |
|
|
|
- |
|
|
- |
|
|
|
- |
|
|
- |
|
|
|
- |
|
|
618,177 |
|
|
|
6,182 |
|
|
|
174,391 |
|
|
|
- |
|
|
|
- |
|
|
|
180,573 |
|
|
Conversion of accounts payable to common stock
|
|
|
- |
|
|
- |
|
|
- |
|
|
|
- |
|
|
- |
|
|
|
- |
|
|
- |
|
|
|
- |
|
|
- |
|
|
|
- |
|
|
742,190 |
|
|
|
7,422 |
|
|
|
661,817 |
|
|
|
- |
|
|
|
- |
|
|
|
669,239 |
|
|
Issuance of waiver fee shares
|
|
|
- |
|
|
- |
|
|
- |
|
|
|
- |
|
|
- |
|
|
|
- |
|
|
- |
|
|
|
- |
|
|
- |
|
|
|
- |
|
|
34,400 |
|
|
|
344 |
|
|
|
242,962 |
|
|
|
- |
|
|
|
- |
|
|
|
243,306 |
|
|
Issuance of Waiver fee shares
|
|
|
- |
|
|
- |
|
|
- |
|
|
|
- |
|
|
- |
|
|
|
- |
|
|
- |
|
|
|
- |
|
|
- |
|
|
|
- |
|
|
45,235 |
|
|
|
452 |
|
|
|
366,706 |
|
|
|
- |
|
|
|
- |
|
|
|
367,158 |
|
|
Commitment fee shares
|
|
|
- |
|
|
- |
|
|
- |
|
|
|
- |
|
|
- |
|
|
|
- |
|
|
- |
|
|
|
- |
|
|
- |
|
|
|
- |
|
|
71,555 |
|
|
|
716 |
|
|
|
884,636 |
|
|
|
- |
|
|
|
- |
|
|
|
885,352 |
|
|
Warrants issued with note payable
|
|
|
- |
|
|
- |
|
|
- |
|
|
|
- |
|
|
- |
|
|
|
- |
|
|
- |
|
|
|
- |
|
|
- |
|
|
|
- |
|
|
- |
|
|
|
- |
|
|
|
94,672 |
|
|
|
- |
|
|
|
- |
|
|
|
94,672 |
|
|
Shares issued for Series X dividends
|
|
|
- |
|
|
- |
|
|
- |
|
|
|
- |
|
|
- |
|
|
|
- |
|
|
- |
|
|
|
- |
|
|
- |
|
|
|
- |
|
|
8,103 |
|
|
|
82 |
|
|
|
86,971 |
|
|
|
- |
|
|
|
- |
|
|
|
87,053 |
|
|
Gain on settlement of accrued payroll
|
|
|
- |
|
|
- |
|
|
- |
|
|
|
- |
|
|
- |
|
|
|
- |
|
|
- |
|
|
|
- |
|
|
- |
|
|
|
- |
|
|
(8,000 |
) |
|
|
(80 |
) |
|
|
80 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
Issuance of shares previously subscribed for conversion of accounts payable
|
|
|
- |
|
|
- |
|
|
- |
|
|
|
- |
|
|
- |
|
|
|
- |
|
|
- |
|
|
|
- |
|
|
- |
|
|
|
- |
|
|
7,648 |
|
|
|
76 |
|
|
|
95,512 |
|
|
|
(95,588 |
) |
|
|
- |
|
|
|
- |
|
|
Preferred stock dividends
|
|
|
- |
|
|
- |
|
|
- |
|
|
|
- |
|
|
- |
|
|
|
- |
|
|
- |
|
|
|
- |
|
|
- |
|
|
|
- |
|
|
- |
|
|
|
- |
|
|
|
(241,196 |
) |
|
|
- |
|
|
|
- |
|
|
|
(241,196 |
) |
|
Loss for the nine months ended September 30, 2022
|
|
|
- |
|
|
- |
|
|
- |
|
|
|
- |
|
|
- |
|
|
|
- |
|
|
- |
|
|
|
- |
|
|
- |
|
|
|
- |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(11,534,230 |
) |
|
|
(11,534,230 |
) |
|
Balance, September 30, 2022
|
|
|
- |
|
$ |
- |
|
|
940,644 |
|
|
$ |
9,406 |
|
|
3,100,000 |
|
|
$ |
31,000 |
|
|
- |
|
|
$ |
- |
|
|
24,227 |
|
|
$ |
242 |
|
|
5,785,977 |
|
|
$ |
57,861 |
|
|
$ |
29,087,654 |
|
|
$ |
36,575 |
|
|
$ |
(37,012,562 |
) |
|
$ |
(7,789,824 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, June 30, 2023
|
|
|
- |
|
|
- |
|
|
- |
|
|
|
- |
|
|
750,000 |
|
|
|
7,500 |
|
|
16,353 |
|
|
|
163 |
|
|
24,227 |
|
|
|
242 |
|
|
5,138,575 |
|
|
|
51,388 |
|
|
|
43,355,536 |
|
|
|
- |
|
|
|
(61,872,556 |
) |
|
|
(18,457,727 |
) |
|
Conversion of accounts payable to common stock
|
|
|
- |
|
|
- |
|
|
- |
|
|
|
- |
|
|
- |
|
|
|
- |
|
|
- |
|
|
|
- |
|
|
- |
|
|
|
- |
|
|
224,338 |
|
|
|
2,244 |
|
|
|
76,275 |
|
|
|
- |
|
|
|
- |
|
|
|
78,519 |
|
|
Conversion of accrued salary, debt, and board fees to common stock by a related party
|
|
|
- |
|
|
- |
|
|
- |
|
|
|
- |
|
|
- |
|
|
|
- |
|
|
- |
|
|
|
- |
|
|
- |
|
|
|
- |
|
|
181,606 |
|
|
|
1,816 |
|
|
|
3,632 |
|
|
|
- |
|
|
|
- |
|
|
|
5,448 |
|
|
Conversion of debt to Series F Preferred Stock
|
|
|
- |
|
|
- |
|
|
- |
|
|
|
- |
|
|
- |
|
|
|
- |
|
|
911 |
|
|
|
9 |
|
|
- |
|
|
|
- |
|
|
- |
|
|
|
- |
|
|
|
910,093 |
|
|
|
- |
|
|
|
- |
|
|
|
910,102 |
|
|
Conversion of debt and accrued salaries to Series F Preferred Stock by related parties
|
|
|
- |
|
|
- |
|
|
- |
|
|
|
- |
|
|
- |
|
|
|
- |
|
|
2,138 |
|
|
|
22 |
|
|
- |
|
|
|
- |
|
|
- |
|
|
|
- |
|
|
|
2,137,032 |
|
|
|
- |
|
|
|
- |
|
|
|
2,137,054 |
|
|
Preferred stock dividends
|
|
|
- |
|
|
- |
|
|
- |
|
|
|
- |
|
|
- |
|
|
|
- |
|
|
- |
|
|
|
- |
|
|
- |
|
|
|
- |
|
|
- |
|
|
|
- |
|
|
|
(531,738 |
) |
|
|
- |
|
|
|
- |
|
|
|
(531,738 |
) |
| Transaction costs of sales of Series F Preferred Stock for cash |
|
|
- |
|
|
- |
|
|
- |
|
|
|
- |
|
|
- |
|
|
|
- |
|
|
- |
|
|
|
- |
|
|
- |
|
|
|
- |
|
|
- |
|
|
|
- |
|
|
|
(72,000 |
) |
|
|
- |
|
|
|
- |
|
|
|
(72,000 |
) |
|
Vesting of stock options issued to employees
|
|
|
- |
|
|
- |
|
|
- |
|
|
|
- |
|
|
- |
|
|
|
- |
|
|
- |
|
|
|
- |
|
|
- |
|
|
|
- |
|
|
- |
|
|
|
- |
|
|
|
933 |
|
|
|
- |
|
|
|
- |
|
|
|
933 |
|
|
Loss for the three months ended September 30, 2023
|
|
|
- |
|
|
- |
|
|
- |
|
|
|
- |
|
|
- |
|
|
|
- |
|
|
- |
|
|
|
- |
|
|
- |
|
|
|
- |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(1,552,373 |
) |
|
|
(1,552,373 |
) |
|
Balance - September 30, 2023
|
|
|
- |
|
$ |
- |
|
|
- |
|
|
$ |
- |
|
|
750,000 |
|
|
$ |
7,500 |
|
|
19,402 |
|
|
$ |
194 |
|
|
24,227 |
|
|
$ |
242 |
|
|
5,544,519 |
|
|
$ |
55,448 |
|
|
$ |
45,879,765 |
|
|
$ |
- |
|
|
$ |
(63,424,929 |
) |
|
$ |
(17,481,782 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2022
|
|
|
- |
|
$ |
- |
|
|
1,047,619 |
|
|
$ |
10,476 |
|
|
3,100,000 |
|
|
$ |
31,000 |
|
|
- |
|
|
$ |
- |
|
|
24,227 |
|
|
$ |
242 |
|
|
4,630,372 |
|
|
$ |
46,305 |
|
|
$ |
29,452,514 |
|
|
$ |
36,575 |
|
|
$ |
(48,714,461 |
) |
|
$ |
(19,137,350 |
) |
|
Shares issued for conversion of note payable
|
|
|
- |
|
|
- |
|
|
- |
|
|
|
- |
|
|
- |
|
|
|
- |
|
|
- |
|
|
|
- |
|
|
- |
|
|
|
- |
|
|
57,138 |
|
|
|
571 |
|
|
|
82,885 |
|
|
|
- |
|
|
|
- |
|
|
|
83,456 |
|
|
Shares issued as commission for fundraising
|
|
|
- |
|
|
- |
|
|
- |
|
|
|
- |
|
|
- |
|
|
|
- |
|
|
- |
|
|
|
- |
|
|
- |
|
|
|
- |
|
|
2,952 |
|
|
|
30 |
|
|
|
3,778 |
|
|
|
- |
|
|
|
- |
|
|
|
3,808 |
|
|
Shares issued for true-up agreement
|
|
|
- |
|
|
- |
|
|
- |
|
|
|
- |
|
|
- |
|
|
|
- |
|
|
- |
|
|
|
- |
|
|
- |
|
|
|
- |
|
|
94,738 |
|
|
|
947 |
|
|
|
118,423 |
|
|
|
- |
|
|
|
- |
|
|
|
119,370 |
|
|
Conversion of accrued salary, debt, and board fees to common stock by a related party
|
|
|
- |
|
|
- |
|
|
- |
|
|
|
- |
|
|
- |
|
|
|
- |
|
|
- |
|
|
|
- |
|
|
- |
|
|
|
- |
|
|
181,606 |
|
|
|
1,816 |
|
|
|
3,632 |
|
|
|
- |
|
|
|
- |
|
|
|
5,448 |
|
|
Conversion of accounts payable to common stock
|
|
|
- |
|
|
- |
|
|
- |
|
|
|
- |
|
|
- |
|
|
|
- |
|
|
- |
|
|
|
- |
|
|
- |
|
|
|
- |
|
|
224,338 |
|
|
|
2,244 |
|
|
|
76,275 |
|
|
|
- |
|
|
|
- |
|
|
|
78,519 |
|
|
Issuance of common stock to a service provider
|
|
|
- |
|
|
- |
|
|
- |
|
|
|
- |
|
|
- |
|
|
|
- |
|
|
- |
|
|
|
- |
|
|
- |
|
|
|
- |
|
|
300,000 |
|
|
|
3,000 |
|
|
|
894,000 |
|
|
|
- |
|
|
|
- |
|
|
|
897,000 |
|
|
Legal settlement - Pinnacle
|
|
|
- |
|
|
- |
|
|
- |
|
|
|
- |
|
|
- |
|
|
|
- |
|
|
- |
|
|
|
- |
|
|
- |
|
|
|
- |
|
|
2,552 |
|
|
|
26 |
|
|
|
2,133 |
|
|
|
- |
|
|
|
- |
|
|
|
2,159 |
|
|
Legal settlement - Howe
|
|
|
- |
|
|
- |
|
|
- |
|
|
|
- |
|
|
- |
|
|
|
- |
|
|
- |
|
|
|
- |
|
|
- |
|
|
|
- |
|
|
19,622 |
|
|
|
196 |
|
|
|
16,404 |
|
|
|
- |
|
|
|
- |
|
|
|
16,600 |
|
|
Shares issued previously subscribed
|
|
|
- |
|
|
- |
|
|
- |
|
|
|
- |
|
|
- |
|
|
|
- |
|
|
- |
|
|
|
- |
|
|
- |
|
|
|
- |
|
|
2,926 |
|
|
|
30 |
|
|
|
36,545 |
|
|
|
(36,575 |
) |
|
|
- |
|
|
|
- |
|
|
Vesting of stock options issued to employees
|
|
|
- |
|
|
- |
|
|
- |
|
|
|
- |
|
|
- |
|
|
|
- |
|
|
- |
|
|
|
- |
|
|
- |
|
|
|
- |
|
|
- |
|
|
|
- |
|
|
|
2,799 |
|
|
|
- |
|
|
|
- |
|
|
|
2,799 |
|
|
Series A Dividends previously satisfied
|
|
|
- |
|
|
- |
|
|
- |
|
|
|
- |
|
|
- |
|
|
|
- |
|
|
- |
|
|
|
- |
|
|
- |
|
|
|
- |
|
|
- |
|
|
|
- |
|
|
|
10,967 |
|
|
|
- |
|
|
|
- |
|
|
|
10,967 |
|
|
Preferred stock dividends
|
|
|
- |
|
|
- |
|
|
- |
|
|
|
- |
|
|
- |
|
|
|
- |
|
|
- |
|
|
|
- |
|
|
- |
|
|
|
- |
|
|
- |
|
|
|
- |
|
|
|
(1,080,102 |
) |
|
|
- |
|
|
|
- |
|
|
|
(1,080,102 |
) |
|
Shares issued for Series X dividends
|
|
|
- |
|
|
- |
|
|
- |
|
|
|
- |
|
|
- |
|
|
|
- |
|
|
- |
|
|
|
- |
|
|
- |
|
|
|
- |
|
|
28,275 |
|
|
|
283 |
|
|
|
60,281 |
|
|
|
- |
|
|
|
- |
|
|
|
60,564 |
|
|
Shares issued for conversion of accounts payable
|
|
|
- |
|
|
- |
|
|
- |
|
|
|
- |
|
|
- |
|
|
|
- |
|
|
147 |
|
|
|
2 |
|
|
- |
|
|
|
- |
|
|
- |
|
|
|
- |
|
|
|
146,212 |
|
|
|
- |
|
|
|
- |
|
|
|
146,214 |
|
|
Shares sold for cash, net of costs
|
|
|
- |
|
|
- |
|
|
- |
|
|
|
- |
|
|
- |
|
|
|
- |
|
|
1,746 |
|
|
|
17 |
|
|
- |
|
|
|
- |
|
|
- |
|
|
|
- |
|
|
|
1,583,483 |
|
|
|
- |
|
|
|
- |
|
|
|
1,583,500 |
|
|
Conversion of Series C Preferred Stock to Series F Preferred Stock
|
|
|
- |
|
|
- |
|
|
(1,047,619 |
) |
|
|
(10,476 |
) |
|
- |
|
|
|
- |
|
|
2,289 |
|
|
|
22 |
|
|
- |
|
|
|
- |
|
|
- |
|
|
|
- |
|
|
|
1,198,450 |
|
|
|
- |
|
|
|
- |
|
|
|
1,187,996 |
|
|
Conversion of Series D Preferred Stock to Series F Preferred Stock
|
|
|
- |
|
|
- |
|
|
- |
|
|
|
- |
|
|
(2,350,000 |
) |
|
|
(23,500 |
) |
|
4,055 |
|
|
|
41 |
|
|
- |
|
|
|
- |
|
|
- |
|
|
|
- |
|
|
|
1,610,965 |
|
|
|
- |
|
|
|
- |
|
|
|
1,587,506 |
|
|
Conversion of Debt to Series F Preferred Stock
|
|
|
- |
|
|
- |
|
|
- |
|
|
|
- |
|
|
- |
|
|
|
- |
|
|
9,027 |
|
|
|
90 |
|
|
- |
|
|
|
- |
|
|
- |
|
|
|
- |
|
|
|
9,523,088 |
|
|
|
- |
|
|
|
- |
|
|
|
9,523,178 |
|
|
Conversion of debt and accrued salaries to Series F Preferred Stock by related parties
|
|
|
- |
|
|
- |
|
|
- |
|
|
|
- |
|
|
- |
|
|
|
- |
|
|
2,138 |
|
|
|
22 |
|
|
- |
|
|
|
- |
|
|
- |
|
|
|
- |
|
|
|
2,137,033 |
|
|
|
- |
|
|
|
- |
|
|
|
2,137,055 |
|
|
Loss for the nine months ended September 30, 2023
|
|
|
- |
|
|
- |
|
|
- |
|
|
|
- |
|
|
- |
|
|
|
- |
|
|
- |
|
|
|
- |
|
|
- |
|
|
|
- |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(14,710,468 |
) |
|
|
(14,710,468 |
) |
|
Balance, September 30, 2023
|
|
|
- |
|
$ |
- |
|
|
- |
|
|
$ |
- |
|
|
750,000 |
|
|
$ |
7,500 |
|
|
19,402 |
|
|
$ |
194 |
|
|
24,227 |
|
|
$ |
242 |
|
|
5,544,519 |
|
|
$ |
55,448 |
|
|
$ |
45,879,765 |
|
|
$ |
- |
|
|
$ |
(63,424,929 |
) |
|
$ |
(17,481,782 |
) |
See accompanying notes to these unaudited condensed consolidated financial statements.
MITESCO, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
| |
|
For the Nine Months
|
|
| |
|
Ended
|
|
| |
|
September 30,
|
|
| |
|
2023
|
|
|
2022
|
|
|
CASH FLOWS FROM OPERATING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$ |
(14,710,468 |
) |
|
$ |
(11,534,230 |
) |
|
Adjustments to reconcile net loss to net cash used in operating activities:
|
|
|
|
|
|
|
|
|
|
Impairment of assets
|
|
|
2,343,462 |
|
|
|
- |
|
|
Depreciation
|
|
|
78,230 |
|
|
|
639,455 |
|
|
Penalties on notes payable
|
|
|
1,027,778 |
|
|
|
- |
|
|
Amortization of right-to-use asset
|
|
|
- |
|
|
|
370,064 |
|
|
Amortization of discount on notes payable
|
|
|
32,011 |
|
|
|
2,588,963 |
|
|
Amortization of discount on notes payable - related parties
|
|
|
22,670 |
|
|
|
- |
|
|
Share-based compensation
|
|
|
899,799 |
|
|
|
335,375 |
|
|
Shares issued as compensation for fundraising
|
|
|
36,900 |
|
|
|
- |
|
|
Shares issued for true-up liability
|
|
|
119,370 |
|
|
|
- |
|
|
Conversion fees on notes payable
|
|
|
75,000 |
|
|
|
- |
|
|
Equity investment incentive on notes payable
|
|
|
3,565,759 |
|
|
|
- |
|
|
Incentive on conversion of Series C to Series F Preferred Stock
|
|
|
1,016,887 |
|
|
|
- |
|
|
Incentive on conversion of Series D to Series F Preferred Stock
|
|
|
1,371,846 |
|
|
|
- |
|
|
Incentive on conversion of debt to Series F Preferred Stock - related parties
|
|
|
843,227 |
|
|
|
- |
|
|
Investment incentive cash sales of Series F Preferred Stock
|
|
|
845,000 |
|
|
|
- |
|
|
Investment incentive on conversion of debt to common stock - related parties
|
|
|
1,357 |
|
|
|
- |
|
|
Gain on forgiveness of note payable
|
|
|
(25,000 |
) |
|
|
- |
|
| Gain – other |
|
|
(40,622 |
) |
|
|
- |
|
|
Gain on conversion of notes payable and accrued liabilities to common stock - related party
|
|
|
(139,837 |
) |
|
|
- |
|
|
Gain on conversion of accounts payable to common stock
|
|
|
(100,950 |
) |
|
|
- |
|
|
Financing cost - waiver fee shares
|
|
|
- |
|
|
|
565,431 |
|
|
Gain on waiver fee shares
|
|
|
- |
|
|
|
(198,273 |
) |
|
Loss on commitment shares
|
|
|
- |
|
|
|
25,700 |
|
|
Gain on conversion of accrued salary
|
|
|
- |
|
|
|
(15,032 |
) |
|
Gain on lease terminations
|
|
|
(287,897 |
) |
|
|
- |
|
|
Loss on revaluation of derivative liabilities
|
|
|
85,765 |
|
|
|
111,564 |
|
|
Gain on shares issued to service provider
|
|
|
(33,092 |
) |
|
|
- |
|
|
Gain on sale of assets
|
|
|
(111,843 |
) |
|
|
- |
|
|
Loss on legal settlement
|
|
|
18,759 |
|
|
|
- |
|
|
Loss on settlement of accounts payable
|
|
|
- |
|
|
|
78,235 |
|
| |
|
|
|
|
|
|
|
|
|
Changes in assets and liabilities:
|
|
|
|
|
|
|
|
|
|
Accounts receivables
|
|
|
30,943 |
|
|
|
(79,041 |
) |
|
Prepaid expenses
|
|
|
113,722 |
|
|
|
114,836 |
|
|
Inventory
|
|
|
- |
|
|
|
(30,662 |
) |
|
Accounts payable and accrued liabilities
|
|
|
1,408,182 |
|
|
|
1,501,904 |
|
|
Operating lease liability, net
|
|
|
- |
|
|
|
(26,567 |
) |
|
Other current liabilities
|
|
|
- |
|
|
|
(73,286 |
) |
|
Accrued interest
|
|
|
621,566 |
|
|
|
162,259 |
|
|
Accrued interest - related parties
|
|
|
45,529 |
|
|
|
- |
|
|
Net cash used in operating activities
|
|
|
(845,947 |
) |
|
|
(5,463,305 |
) |
|
CASH FLOWS FROM INVESTING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
Cash received for the sale of assets
|
|
|
102,967 |
|
|
|
- |
|
|
Cash paid for acquisition of assets and construction in progress
|
|
|
- |
|
|
|
(190,248 |
) |
|
Net cash used in investing activities
|
|
|
102,967 |
|
|
|
(190,248 |
) |
|
CASH FLOWS FROM FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
Proceeds from sale of Series F Preferred Stock, net of fees
|
|
|
738,500 |
|
|
|
- |
|
|
Principal payments on PPP Loan
|
|
|
(4,836 |
) |
|
|
- |
|
|
Proceeds from notes payable - related parties, net of discounts
|
|
|
- |
|
|
|
2,918,100 |
|
|
Proceeds from notes payable, net of discounts
|
|
|
- |
|
|
|
1,812,500 |
|
|
Principal payments on notes payable related parties
|
|
|
- |
|
|
|
(235,294 |
) |
|
Net cash provided by financing activities
|
|
|
733,664 |
|
|
|
4,495,306 |
|
|
Net increase (decrease) in cash and cash equivalents
|
|
|
(9,316 |
) |
|
|
(1,158,247 |
) |
| |
|
|
|
|
|
|
|
|
| Cash and cash equivalents change – discontinued operations |
|
|
27,767 |
|
|
|
99,395 |
|
|
Cash and cash equivalents at beginning of period
|
|
|
6,191 |
|
|
|
1,160,465 |
|
|
Cash and cash equivalents at end of period
|
|
$ |
24,642 |
|
|
$ |
1,613 |
|
|
Cash and cash equivalents at end of period - discontinued operations
|
|
$ |
1,665 |
|
|
$ |
4,623 |
|
See accompanying notes to these unaudited condensed consolidated financial statements.
MITESCO, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
| |
|
For the Nine
|
|
| |
|
Months Ended
|
|
| |
|
September 30,
|
|
| |
|
2023
|
|
|
2022
|
|
| |
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
|
|
|
|
|
|
|
|
|
|
Interest paid
|
|
$ |
- |
|
|
$ |
2,680 |
|
| |
|
|
|
|
|
|
|
|
|
NON-CASH INVESTING AND FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
Stock issued for common stock subscribed
|
|
$ |
36,575 |
|
|
$ |
- |
|
|
Preferred stock dividend
|
|
$ |
1,080,102 |
|
|
$ |
241,196 |
|
|
Adjustment of Series C Preferred Stock to common stock
|
|
$ |
- |
|
|
$ |
981 |
|
|
Conversion of accounts payable to Series F Preferred Stock
|
|
$ |
146,214 |
|
|
$ |
- |
|
|
Conversion of Series C Preferred stock to Series F Preferred Stock
|
|
$ |
181,563 |
|
|
$ |
- |
|
|
Conversion of Series D Preferred stock to Series F Preferred Stock
|
|
$ |
239,118 |
|
|
$ |
- |
|
|
Conversion of notes payable and accrued interest to Series F Preferred Stock
|
|
$ |
11,158,379 |
|
|
$ |
- |
|
|
Conversion of accounts payable to common stock
|
|
$ |
78,519 |
|
|
$ |
500,000 |
|
|
Conversion of notes payable and accrued interest to common stock
|
|
$ |
83,456 |
|
|
$ |
- |
|
|
Change in capital expenditures included in accounts payable
|
|
$ |
110,511 |
|
|
$ |
4,403,346 |
|
|
Series A accrued dividends reclassified to APIC from prior transaction
|
|
$ |
10,967 |
|
|
$ |
- |
|
|
Shares issued for Series X dividends
|
|
$ |
60,564 |
|
|
$ |
83,002 |
|
See accompanying notes to these unaudited condensed consolidated financial statements.
MITESCO, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2023 AND 2022
(Unaudited)
Note 1: Description of Business
Company Overview
Mitesco, Inc. (the “Company,” “we,” “us,” or “our”) was formed in the state of Delaware on January 18, 2012. On December 9, 2015, we restructured our operations and acquired Newco4pharmacy, LLC, a development stage company which sought to acquire compounding pharmacy businesses. As a part of the restructuring, we completed a “spin out” of our former business line. On April 24, 2020, we changed our name to Mitesco, Inc. On October 13, 2023, the Company effected a Redomestication to Nevada.
We are a holding company seeking to provide products, services and technology to make accessible higher quality, and more affordable healthcare solutions. We have recently discontinued the business activities within “The Good Clinic, LLC” healthcare subsidiary due to lack of profitability and limited funding. We have a number of near-term opportunities that we hope to pursue, assuming the capital markets make sufficient funding available at reasonable rates.
Our operations are subject to comprehensive federal, state, and local laws and regulations in the jurisdictions in which it does business. There also continues to be a heightened level of review and/or audit by federal and state regulators of the health and related benefits industry’s business and reporting practices. As of the date of this filing, we are not subject to any actual or anticipated regulatory reviews or audits relating to our operations.
The laws and rules governing our businesses and interpretations of those laws and rules continue to evolve each year and are subject to frequent change. The application of these complex legal and regulatory requirements to the detailed operation of our businesses creates areas of uncertainty. Further, there are numerous proposed health care, financial services and other laws and regulations at the federal and state level some of which could adversely affect our businesses if they are enacted. We cannot predict whether pending or future federal or state legislation will have an adverse effect on our business.
We can give no assurance that the businesses, financial condition, operating results and/or cash flows will not be materially adversely affected, or that we will not be required to materially change its business practices, based on: (i) future enactment of new health care or other laws or regulations; (ii) the interpretation or application of existing laws or regulations, including the laws and regulations described in this Government Regulation section, as they may relate to one or more of our businesses, one or more of the industries in which we compete and/or the health care industry generally; (iii) our pending or future federal or state governmental investigations.
Discontinued Operations
We have recently discontinued business activities within “The Good Clinic, LLC” healthcare subsidiary due to lack of profitability and limited funding. See note 4. On December 8, 2023, the Company sold the remaining assets of The Good Clinic, LLC to Leading Primary Care LLC, a company organized by Michael C. Howe, the former CEO of The Good Clinic, LLC for total consideration of approximately $2.5 million. See note 16. As a result, the accounts of The Good Clinic, LLC have been included in “Net (loss) from discontinued operations” in our consolidated statements of operations. Additionally, these assets and liabilities have been presented as discontinued operations in our consolidated balance sheet as of September 30, 2023 and December 31, 2022. See Note 4 - Discontinued Operations for additional information.
Reverse Stock Split
On December 12, 2022, our board of directors approved the filing of a certificate of amendment to our amended and restated certificate of incorporation (the “Amendment”) with the Secretary of State of the State of Delaware to affect the one-for-fifty. The Amendment became effective at 5:00 p.m. Eastern Time on December 12, 2022.
Pursuant to the Amendment, at the effective time of the Amendment, every fifty (50) shares of our issued and outstanding common stock was automatically combined into one (1) issued and outstanding share of common stock. The Reverse Stock Split affected all shares of our common stock outstanding immediately prior to the effective time of the Amendment. No fractional shares were issued as a result of the Reverse Stock Split. Stockholders of record who would otherwise be entitled to receive a fractional share received a full share thereof. As a result of the Reverse Stock Split, proportionate adjustments were made to the per share exercise price and/or the number of shares issuable upon the exercise or vesting of all stock options and warrants issued by us and outstanding immediately prior to the effective time of the Amendment, which resulted in a proportionate decrease in the number of shares of our common stock reserved for issuance upon exercise or vesting of such stock options and warrants and a proportionate increase in the exercise price of all such stock options and warrants. In addition, the number of shares reserved for issuance under our equity compensation plans immediately prior to the effective time of the Amendment were reduced proportionately. All share and per share amounts of common stock presented in this Quarterly Report on Form 10-Q have been retroactively adjusted to reflect the Reverse Stock Split.
Note 2: Financial Condition, Going Concern and Management Plans
As of September 30, 2023, the Company had cash and cash equivalents of approximately $25,000, current liabilities of $17.5 million, and has incurred significant losses from the previous clinic operations. As previously noted, we made a strategic decision to reduce our capital needs by closing our clinic operations in the fourth quarter of 2022 and releasing a significant portion of our staff. The Company’s activities are subject to significant risks and uncertainties, including failing to secure additional funding to execute its business plan.
Effective December 8, 2022, we closed all of our clinic locations due to a lack of profitability and limited funding. Subsequent to that date we have given up possession of all clinic locations, and are in the process of negotiating settlements with leaseholders and other suppliers and contractors.
As a result of these factors, there is substantial doubt about the ability of the Company to continue as a going concern for one year from the date the financial statements are issued. The Company’s continuance is dependent on raising capital and generating revenues sufficient to sustain operations. However, as of the date of these consolidated financial statements, no formal agreement exists.
The accompanying consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts classified as liabilities that might be necessary should the Company be forced to take any such actions.
The COVID-19 pandemic, decades-high inflation and concerns about an economic recession in the United States or other major markets has resulted in, among other things, volatility in the capital markets that may have the effect of reducing the Company’s ability to access capital, which could in the future negatively affect the Company’s liquidity. In addition, a recession or market correction due to these factors could materially affect the Company’s business and the value of its common stock.
Note 3: Summary of Significant Accounting Policies
Principles of Consolidation – The accompanying condensed consolidated financial statements include the accounts of Mitesco, Inc., and its wholly owned subsidiaries Mitesco NA, LLC, and The Good Clinic, LLC. In addition, we rely on the operating activities of certain legal entities in which we do not maintain a controlling ownership interest but over which we have indirect influence and of which we are considered the primary beneficiary. We expect that these entities will typically be subject to nominee ownership and transfer restriction agreements that effectively transfer the majority of the economic risks and rewards of their ownership to the Company. The Company’s management, restriction and other agreements concerning such nominee-owned entities typically includes both financial terms and protective and participating rights to the entities’ operating, strategic and non-clinical governance decisions which transfer substantial powers over and economic responsibility for these entities to the Company. As such, the Company applies the guidance of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 810 – Consolidation (“ASC 810”), to determine when an entity that is insufficiently capitalized or not controlled through its voting interests, referred to as a variable interest entity should be consolidated. All intercompany balances and transactions have been eliminated.
Use of Estimates - The preparation of these financial statements requires our management to make estimates and assumptions about future events that affect the amounts reported in the financial statements and related notes. Future events and their effects cannot be determined with absolute certainty. Therefore, the determination of estimates requires the exercise of judgment.
Significant Accounting Policies
Discontinued Operations: The accompanying financial statements are prepared with the guidance of ASU 2014-08, “Reporting Discontinued Operations”, and ASC Topic 205, Presentation of Financial Statements, and ASC Topic 360, Property, Plant and Equipment.
New Accounting Standards
From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (“FASB”) or other standard setting bodies that the Company adopts as of the specified effective date. Unless otherwise discussed, the Company does not believe that the impact of recently issued standards that are not yet effective will have a material impact on its financial position or results of operations upon adoption.
Note 4: Discontinued Operations
On December 8, 2023, the Company sold the remaining assets of The Good Clinic, LLC to Leading Primary Care LLC, a company organized by Michael C. Howe, the former CEO of The Good Clinic, LLC for total consideration of approximately $2.5 million. ASC 360-10-45-9 requires that a long-lived asset (disposal group) to be sold shall be classified as held for sale in the period in which a set of criteria have been met, including criteria that the sale of the asset (disposal group) is probable and actions required to complete the plan indicate that it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn. This criteria was achieved on December 8, 2023. Additionally, the discontinued operations are comprised of the entirety of The Good Clinic, LLC. For comparability purposes certain prior period line items relating to the assets held for sale have been reclassified and presented as discontinued operations for all periods presented in the accompanying condensed consolidated statements of net loss and comprehensive loss and the condensed consolidated balance sheets.
The following information presents the major classes of line item of assets and liabilities included as part of discontinued operations in the consolidated balance sheets:
| |
|
September 30,
|
|
|
December 31,
|
|
| |
|
2023
|
|
|
2022
|
|
|
Current assets - discontinued operations:
|
|
|
|
|
|
|
|
|
|
Cash
|
|
$ |
1,665 |
|
|
$ |
29,432 |
|
|
Accounts receivable
|
|
|
- |
|
|
|
30,943 |
|
|
Prepaid expenses and deposits
|
|
|
- |
|
|
|
62,090 |
|
|
Total current assets - discontinued operations
|
|
$ |
1,665 |
|
|
$ |
122,465 |
|
| |
|
|
|
|
|
|
|
|
|
Noncurrent assets - discontinued operations:
|
|
|
|
|
|
|
|
|
|
Property and equipment
|
|
$ |
- |
|
|
$ |
1,832,974 |
|
|
Right-of-use assets
|
|
|
- |
|
|
|
460,254 |
|
|
Total noncurrent assets - discontinued operations
|
|
$ |
- |
|
|
$ |
2,293,228 |
|
| |
|
|
|
|
|
|
|
|
|
Current liabilities - discontinued operations:
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$ |
5,555,218 |
|
|
$ |
5,114,559 |
|
|
Accrued payroll and related liabilities
|
|
|
225,515 |
|
|
|
292,808 |
|
|
Other current liabilities
|
|
|
25,000 |
|
|
|
- |
|
|
Accrued interest
|
|
|
176,362 |
|
|
|
176,362 |
|
|
Operating lease liabilities
|
|
|
3,973,069 |
|
|
|
349,109 |
|
|
Total current liabilities - discontinued operations
|
|
$ |
9,955,164 |
|
|
$ |
5,932,838 |
|
| |
|
|
|
|
|
|
|
|
|
Long term liabilities - discontinued operations:
|
|
|
|
|
|
|
|
|
|
Operating lease liabilities
|
|
$ |
- |
|
|
$ |
3,936,858 |
|
|
Total long term liabilities - discontinued operations
|
|
$ |
- |
|
|
$ |
3,936,858 |
|
The following information presents the major classes of line items constituting the after-tax loss from discontinued operations in the consolidated statements of operations:
| |
|
Three Months Ended
|
|
| |
|
September 30,
|
|
|
September 30,
|
|
| |
|
2023
|
|
|
2022
|
|
|
Revenue
|
|
$ |
- |
|
|
$ |
198,049 |
|
|
Cost of goods sold
|
|
|
- |
|
|
|
2,262 |
|
|
Gross margin
|
|
|
- |
|
|
|
195,787 |
|
| |
|
|
|
|
|
|
|
|
|
Selling, general, and administrative expenses
|
|
|
(188,248 |
) |
|
|
(1,653,075 |
) |
| |
|
|
|
|
|
|
|
|
|
Other (income) expense:
|
|
|
|
|
|
|
|
|
|
Gain on sale of assets
|
|
|
91,746 |
|
|
|
- |
|
|
Gain on settlement of accounts payable
|
|
|
81,263 |
|
|
|
- |
|
|
Loss from discontinued operations, net of tax
|
|
$ |
(15,239 |
) |
|
$ |
(1,457,288 |
) |
| |
|
Nine Months Ended
|
|
| |
|
September 30,
|
|
|
September 30,
|
|
| |
|
2023
|
|
|
2022
|
|
|
Revenue
|
|
$ |
- |
|
|
$ |
487,510 |
|
|
Cost of goods sold
|
|
|
- |
|
|
|
13,510 |
|
|
Gross margin
|
|
|
- |
|
|
|
474,000 |
|
| |
|
|
|
|
|
|
|
|
|
Selling, general, and administrative expenses
|
|
|
(1,085,269 |
) |
|
|
(5,536,920 |
) |
| |
|
|
|
|
|
|
|
|
|
Other (income) expense:
|
|
|
|
|
|
|
|
|
|
Impairment of assets
|
|
|
(2,211,462 |
) |
|
|
- |
|
|
Gain on sale of assets
|
|
|
102,967 |
|
|
|
- |
|
|
Gain on settlement of accounts payable
|
|
|
81,263 |
|
|
|
- |
|
|
Gain on settlement of operating lease
|
|
|
287,897 |
|
|
|
- |
|
|
Loss from discontinued operations, net of tax
|
|
$ |
(2,824,604 |
) |
|
$ |
(5,062,920 |
) |
The following information presents the major classes of line items constituting significant operating and investing cash flow activities in the consolidated statements of cash flows relating to discontinued operations:
| |
|
Nine months Ended
|
|
| |
|
September 30,
|
|
|
September 30, |
|
| |
|
2023
|
|
|
2022
|
|
| |
|
|
|
|
|
|
|
|
|
Depreciation expense
|
|
$ |
78,230 |
|
|
$ |
587,222 |
|
|
Cash used for construction in progress
|
|
$ |
- |
|
|
$ |
(1,030,397 |
) |
|
Cash used for the purchase of fixed assets
|
|
$ |
- |
|
|
$ |
(29,771 |
) |
|
Impairment of RTU assets
|
|
$ |
544,063 |
|
|
$ |
- |
|
|
Impairment of property and equipment
|
|
$ |
1,799,399 |
|
|
|
- |
|
Note 5: Net Loss Per Share Applicable to Common Shareholders
Net Loss per Share Applicable to Common Stockholders
Basic loss per common share is computed by dividing net loss by the weighted average number of common shares outstanding during the reporting period. Diluted loss per common share is computed similarly to basic loss per common share except that it reflects the potential dilution that could occur if dilutive securities or other obligations to issue common stock were exercised or converted into common stock.
The following table sets forth the computation of loss per share for the three and nine months ended September 30, 2023 and 2022, respectively:
| | | For the Three Months Ended | | | For the Nine Months Ended | |
| | | September 30, | | | September 30, | |
| | | 2023 | | | 2022 | | | 2023 | | | 2022 | |
| Numerator: | | | | | | | | | | | | | | | | |
| Net loss applicable to common shareholders – continuing operations | | $ | (2,068,872 | ) | | $ | (2,707,575 | ) | | $ | (12,965,966 | ) | | $ | (6,712,506 | ) |
| Net loss applicable to common shareholders – discontinued operations | | $ | (15,239 | ) | | $ | (1,457,288 | ) | | $ | (2,824,604 | ) | | $ | (5,062,920 | ) |
| | | | | | | | | | | | | | | | | |
| Net loss per share: | | | | | | | | | | | | | | | | |
| Basic and diluted – continuing operations | | $ | (0.39 | ) | | $ | (0.59 | ) | | $ | (2.57 | ) | | $ | (1.52 | ) |
| Basic and diluted – discontinued operations | | $ | (0.00 | ) | | $ | (0.32 | ) | | $ | (0.56 | ) | | $ | (1.15 | ) |
| Denominator: | | | | | | | | | | | | | | | | |
| Weighted average common shares outstanding | | | 5,329,816 | | | | 4,569,115 | | | | 5,048,070 | | | | 4,408,891 | |
The Company excluded all common equivalent shares outstanding for warrants, options, and convertible instruments to purchase common stock from the calculation of diluted net loss per share because all such securities are antidilutive for the periods presented. As of September 30, 2023 and 2022, the following shares were issuable and excluded from the calculation of diluted loss:
| |
|
For the Nine Months Ended
|
|
| |
|
September 30,
|
|
| |
|
2023
|
|
|
2022
|
|
|
Common stock options
|
|
|
100,934 |
|
|
|
327,099 |
|
|
Common stock purchase warrants
|
|
|
673,208 |
|
|
|
672,325 |
|
|
Convertible Preferred Stock
|
|
|
63,000 |
|
|
|
847,652 |
|
|
Accrued interest on Preferred Stock
|
|
|
33,105 |
|
|
|
30,451 |
|
|
Potentially dilutive securities
|
|
|
870,247 |
|
|
|
1,377,527 |
|
Note 6: Related Party Transactions
For the Nine Months Ended September 30, 2023:
The Company accrued dividends on its Series X Preferred Stock in the total amount of $45,423. Of this amount, a total of $5,905 was payable to officers and directors, $23,620 was payable to a related party shareholder, and $15,898 was payable to non-related parties.
The Company issued a total of 28,275 shares of common stock for accrued dividends on its Series X Preferred Stock. Of this amount, a total of 3,739 shares were issued to officers and directors, 14,586 were issued to a related party shareholder, and 9,950 were issued to non-related parties.
The Company issued 1,610 shares of its Series F Preferred Stock to Larry Diamond, it’s CEO, for the conversion of notes payable in the principal amount of $534,927, premium on notes payable of $75,146, accrued interest of $115,381, accrued salary of $250,106, and equity investment incentive in the amount of $634,114 for a total amount of $1,609,674. See notes 11 and 13.
The Company issued 210 shares of its Series F Preferred Stock to Juan Carlos Iturregui, a board member, for the conversion of notes payable in the principal amount of $48,162, premium on notes payable of $2,941, accrued interest of $7,295, accrued board fees of $67,500, and equity investment incentive in the amount of $84,073 for a total amount of $209,971. See notes 11 and 13.
The Company issued 318 shares of its Series F Preferred Stock to Tom Brodmerkel, it’s CFO and a board member, for the conversion of notes payable in the principal amount of $18,750, accrued interest of $2,101, accrued board fees of $45,000, accrued salary of $126,519, and equity investment incentive in the amount of $125,041 for a total amount of $317,411. See notes 11 and 13.
The Company issued 181,606 shares of its restricted common stock to Sheila Schweitzer, it’s COO and a board member, for the conversion of notes payable in the principal amount of $18,750, accrued interest of $2,101, and accrued salary of $64,434 for a total amount of $145,285. Ms. Schweitzer did not receive any equity investment incentive for this, or any other, transactions. The Company recorded a gain in the amount of $139,837 on this transaction. See notes 11 and 13.
For the Nine Months Ended September 30, 2022:
Mitesco, Inc. (the “Company”) issued a 10% Promissory Note due, as extended, November 30, 2022, dated December 30, 2021, to the Michael C. Howe Living Trust (“Howe Note 1”) (the “Lender”). Michael C. Howe is the Chief Executive Officer of the Good Clinic LLC, one of our subsidiaries. The principal amount of the Howe Note 1 is $1,000,000, carries a 10% interest rate per annum, payable in monthly installments, and had a maturity date, as extended, that is the earlier of (i) November 30, 2022, or (ii) five business days after the date on which the Company successfully lists its shares of common stock on Nasdaq or NYSE. The purchase price of the Howe Note 1 payable to the Company for the Howe Note 1 was $850,000 and was funded on December 30, 2021. An original issue discount in the amount of $150,000 was recorded. In addition, the Lender was issued (i) 2,100,000 5-year warrants at a price of $0.50 with a fair value of $261,568 that may be exercised on substantially the same terms as the Series A warrant issued in connection with our Series D Convertible Preferred Stock and (ii) 96,471 shares of Common Stock as commitment shares. The amount payable at maturity will be $1,000,000 plus 10% of that amount plus any accrued and unpaid interest. Following an event of default, as defined in the note, the principal amount shall bear interest for each day until paid, at a rate per annum equal to the lesser of the maximum interest permitted by applicable law and 18%. The Howe Note 1 contains a “most favored nations” clause that provides that, so long as the note is outstanding, if the Company issues any new security, which the Lender reasonably believes contains a term that is more favorable than those in the note, the Company shall notify the Lender of such term, and such term, at the option of the Lender, shall become a part of the note. At September 30, 2022, the principal balance of this note was $1,000,000; $150,000 of the original issue discount was amortized to interest expense during the nine months ended September 30, 2022, and the remaining original issue discount at September 30, 2022 was $0.
The Company issued a 10% Promissory Note due, as amended, June 18, 2022 (the “Diamond Note 2”), dated March 18, 2022, to Lawrence Diamond (the “Lender”). Lawrence Diamond is the Chief Executive Officer of the Company. The principal amount of the Diamond Note 2 is $235,294, carries a 10% interest rate per annum, payable in monthly installments, and has a maturity date, as amended, that is the earlier of (i) November 30, 2022, (ii) five business days after the date on which the Company successfully lists its shares of common stock on Nasdaq or NYSE, or (iii) the date of receipt of the Company of the next round of debt or equity financing in an amount of at least $1,000,000. The purchase price of the Diamond Note 2 payable to the Company for the Diamond Note 2 was $200,000 and was funded on March 18, 2022. The amount payable at maturity will be $235,294 plus 10% of that amount plus any accrued and unpaid interest. Following an event of default, as defined in the Diamond Note 2, the principal amount shall bear interest for each day until paid, at a rate per annum equal to the lesser of the maximum interest permitted by applicable law and 18%. The Diamond Note 2 contains a “most favored nations” clause that provides that, so long as the note is outstanding, if the Company issues any new security, which the Lender reasonably believes contains a term that is more favorable than those in the Diamond Note 2, the Company shall notify the Lender of such term, and such term, at the option of the Lender, shall become a part of the note. In addition, the Lender will be issued 200,000 5-year warrants that may be exercised on substantially the same terms as the Series A warrant issued in connection with the Company’s Series D Convertible Preferred Stock. The warrants have an aggregate commitment date fair value of $2,213. All amounts due for The Diamond Note 2, with the exception of $23,529, was paid on April 8, 2022. $23,529 remained outstanding as of September 30, 2022.
On March 22, 2022, the Company issued 168,221 shares of common stock with a contract price of $0.25 per share or $42,055 and a grant date market value of $0.127 per share or $21,364 were issued to Larry Diamond, it’s Chief Executive Officer, as compensation for the waiver of certain covenants as set forth and defined in Diamond Note 1.
On April 27, 2022, the Company issued 96,471 shares of common stock with a contract price of $0.25 per share or $24,118 and a grant date market value of $0.16 or $15,434 to Larry Diamond, it’s Chief Executive Officer, as compensation for the waiver of certain covenants as set forth and defined in Diamond Note 2. The Company also issued five-year warrants to purchase 92,942 shares of common stock at a price of $0.50 to Mr. Diamond pursuant to a promissory note.
On April 27, 2022, the Company issued a 10% Promissory Note due, as extended, November 30, 2022 (the “Diamond Note 3”) to Lawrence Diamond (the “Lender”). Lawrence Diamond is the Chief Executive Officer of the Company. The principal amount of the Diamond Note 3 is $235,294, carries a 10% interest rate per annum, payable in monthly installments, and has a maturity date, as extended, that is the earlier of (i) November 30, 2022, or (ii) five business days after the date on which the Company successfully lists its shares of common stock on Nasdaq or NYSE. The purchase price of the Diamond Note 3 payable to the Company for the Diamond Note was $200,000 and was funded on April 27, 2022. The amount payable at maturity will be $235,294 plus 10% of that amount plus any accrued and unpaid interest. Following an event of default, as defined in the Diamond Note 3, the principal amount shall bear interest for each day until paid, at a rate per annum equal to the lesser of the maximum interest permitted by applicable law and 18%. The Diamond Note 3 contains a “most favored nations” clause that provides that, so long as the note is outstanding, if the Company issues any new security, which the Lender reasonably believes contains a term that is more favorable than those in the Diamond Note 3, the Company shall notify the Lender of such term, and such term, at the option of the Lender, shall become a part of the note. At September 30, 2022, the principal balance of this note was $235,294; $35,294 of the original issue discount was amortized to interest expense during the nine months ended September 30, 2022, and the remaining original issue discount at September 30, 2022 was $0.
The Company issued a 10% Promissory Note due as described below (the “Diamond Note 4”), dated May 18, 2022, to Lawrence Diamond. The principal amount of the Diamond Note 4 is $47,059.00, carries a 10% interest rate per annum, payable in monthly installments, and has a maturity date, as extended, that is the earlier of (i) November 30, 2022 or (ii) five days after the date on which we successfully list our shares of common stock on any of the NYSE American, the Nasdaq Global Select Market, the Nasdaq Global Market, or the Nasdaq Capital Market. The purchase price of the Diamond Note 4 payable to us for the Diamond Note 4 was $40,000 and was funded on May 18, 2022. The amount payable at maturity will be $47,059 plus 10% of that amount plus any accrued and unpaid interest. Following an event of default, as defined in the Diamond Note 4, the principal amount shall bear interest for each day until paid, at a rate per annum equal to the lesser of the maximum interest permitted by applicable law and 18%. The Diamond Note 4 contains a “most favored nations” clause that provides that, so long as the Diamond Note 4 is outstanding, if we issue any new security, which the Lender reasonably believes contains a term that is more favorable than those in the Diamond Note 4, we shall notify Mr. Diamond of such term, and such term, at the option of Mr. Diamond, shall become a part of the note. In addition, Mr. Diamond will be issued (1) 19,294 five-year warrants (the “May 18 Diamond Warrants”) that may be exercised on substantially the same terms as the Series A warrant issued in connection with our Series D Convertible Preferred Stock and (2) 19,294 shares of Common Stock as commitment shares. At September 30, 2022, the principal balance of this note was $47,059; discounts in the amount of $14,778 were amortized to interest expense during the nine months ended September 30, 2022, and total discounts in the amount of $6,478 remained outstanding at September 30, 2022.
On May 23, 2022, the Company issued a 10% Promissory Note due as described below (the “Finnegan Note 1”) to Jessica Finnegan. Jessica Finnegan is VP of Human Resources of the Company. The principal amount of the Finnegan Note 1 is $47,059, carries a 10% interest rate per annum, payable in monthly installments, and has a maturity date that is November 20, 2022. The purchase price of the Finnegan Note 1 was $40,000 resulting in an original issue discount of $7,059 and was funded on May 18, 2022. The amount payable at maturity will be $47,059 plus 10% of that amount plus any accrued and unpaid interest, resulting in a premium and related discount in the amount of $4,706. Following an event of default, as defined in the Finnegan Note 1, the principal amount shall bear interest for each day until paid, at a rate per annum equal to the lesser of the maximum interest permitted by applicable law and 18%. The Finnegan Note 1 contains a “most favored nations” clause that provides that, so long as the Finnegan Note 1 is outstanding, if we issue any new security, which the Lender reasonably believes contains a term that is more favorable than those in the Finnegan Note 1, we shall notify Ms. Finnegan of such term, and such term, at the option of Ms. Finnegan, shall become a part of the note. In addition, Ms. Finnegan will be issued (1) 19,295 five-year warrants with a fair value of $2,000 (the “May 18 Finnegan Warrants”) that may be exercised on substantially the same terms as the Series A warrant issued in connection with our Series D Convertible Preferred Stock and (2) 19,295 shares of Common Stock with a value of $3,240 as commitment shares; these amounts were charged to discount on the note, resulting in a total discount on this note in the amount of $17,005. Discounts in the amount of $12,478 were amortized to interest expense during the nine months ended September 30, 2022, and total discounts in the amount of $4,518 remained outstanding at September 30, 2022.
The Company issued five 10% Promissory Notes due as described below (collectively, the “May 26 Notes”), dated May 26, 2022, to Larry Diamond, Jenny Lindstrom, and other related parties (the “May 26 Lenders”), in respect of which we received proceeds of $175,000. Jenny Lindstrom was the Chief Legal Officer of the Company.
The May 26 Notes carry a 10% interest rate per annum, payable in monthly installments, and has a maturity date that is the earlier of (i) November 30, 2022, or (ii) the date on which we successfully lists our shares of common stock on Nasdaq or NYSE. The aggregate amount payable at maturity will be $205,883 plus 10% of that amount plus any accrued and unpaid interest. Following an event of default, as defined in the May 26 Notes, the principal amount shall bear interest for each day until paid, at a rate per annum equal to the lesser of the maximum interest permitted by applicable law and 18%. The May 26 Notes contain a “most favored nations” clause that provides that, so long as the May 26 Notes are outstanding, if we issue any new security, which the May 26 Lenders reasonably believe contains a term that is more favorable than those in the May 26 Notes, we shall notify the May 26 Lenders of such term, and such term, at the option of the May 26 Lenders, shall become a part of the May 26 Notes. In addition, the May 26 Lenders will be issued in the aggregate (1) 84,412 five-year warrants (the “May 26 Warrants”) and (2) 84,412 shares of Common Stock as commitment shares. The May 26 Warrants have an initial exercise price of $0.50 per share. The May 26 Warrants are not exercisable for nine months following their issuance. The May 26 Lenders may exercise the May 26 Warrants on a cashless basis if after the six-month anniversary of date of issuance, the shares of Common Stock underlying the May 26 Warrants are not then registered pursuant to an effective registration statement. At September 30, 2022, the principal balance of these notes were $205,883. Discounts in the amount of $51,724 were amortized to interest expense during the nine months ended September 30, 2022, and total discounts in the amount of $22,672 remained outstanding at September 30, 2022.
The Company issued a 10% Promissory Note due as described below (the “Howe Note 2”), dated June 9, 2022, to Michael C. Howe Living Trust and in respect of which we received proceeds of $255,000. Michael C. Howe was the Chief Executive Officer of the Good Clinic LLC, one of the Company’s subsidiaries.
The Howe Note 2 carries a 10% interest rate per annum, payable in monthly installments. The Howe Note 2 has a maturity date, as extended, that is the earlier of (i) November 30, 2022, or (ii) five business days after the date on which we successfully list our shares of common stock on Nasdaq or NYSE. The amount payable at maturity will be $300,000 plus 10% of that amount plus any accrued and unpaid interest. In addition, the Company issued (1) 123,000 five-year warrants with a fair value of $21,500 and (2) 123,000 shares of Common Stock with a market value of $44,000 as commitment shares. The warrants have an initial exercise price of $0.50 per share and are not exercisable for nine months following their issuance. At September 30, 2022, the principal balance of this note was $300,000. Discounts in the amount of $71,012 were amortized to interest expense during the nine months ended September 30, 2022, and total discounts in the amount of $37,393 remained outstanding at September 30, 2022.
On June 13, 2022, the Company issued 4,000 ten-year stock options with an exercise price of $12.50 and a fair value of $23,316 to Tom Brodmerkel, its Chairman, for taking on the position of Chief Financial Officer.
On July 21, 2022, the Company issued a 10% Promissory Notes due to Michael C Howe Living Trust (the “Howe Note 3”) and in respect of which the Company received proceeds of $255,000. The Howe Note 3 carries a 10% interest rate per annum, accrued monthly and payable at maturity. The Howe Note 3 has a maturity date, as extended, that is the earlier of (i) November 30, 2022, or (ii) five business days after the date on which the Company successfully lists its shares of common stock on Nasdaq or NYSE. The amount payable at maturity will be $300,000 plus 10% of that amount plus any accrued and unpaid interest. Following an event of default, as defined in the Howe Note 3, the principal amount shall bear interest for each day until paid, at a rate per annum equal to the lesser of the maximum interest permitted by applicable law and 18%. The Howe Note 3 contains a “most favored nations” clause that provides that, so long as the Howe Note 3 is outstanding, if the Company issues any new security, which Mr. Howe reasonably believes contains a term that is more favorable than those in the Note, the Company shall notify Mr. Howe of such term, and such term, at the option of Mr. Howe, shall become a part of the Howe Note 3. In addition, Mr. Howe will be issued (1) 2,460 five-year warrants and (2) 2,460 shares of Common Stock as commitment shares. The Commitment Shares are priced at $12.50. The Warrants have an initial exercise price of $25.00 per share. The Warrants are not exercisable for six months following their issuance. Mr. Howe may exercise the Warrants on a cashless basis if after the six-month anniversary of date of issuance, the shares of Common Stock underlying the Warrants are not then registered pursuant to an effective registration statement. Discounts in the amount of $97,440 were amortized to interest expense during the nine months ended September 30, 2022, and total discounts in the amount of $0 remained outstanding at September 30, 2022.
On July 21, 2022, the Company issued a 10% Promissory Note due to Juan Carlos Iturregui (the “Iturregui Note”) and in respect of which the Company received proceeds of $25,000. Mr. Iturregui is a member of the Company’s Board of Directors. The Iturregui Note carries a 10% interest rate per annum, accrued monthly and payable at maturity. The Iturregui Note has a maturity date that is the earlier of (i) January 21, 2023, or (ii) five business days after the date on which the Company successfully lists its shares of common stock on Nasdaq or NYSE. The amount payable at maturity will be $29,412 plus 10% of that amount plus any accrued and unpaid interest. Following an event of default, as defined in The Iturregui Note, the principal amount shall bear interest for each day until paid, at a rate per annum equal to the lesser of the maximum interest permitted by applicable law and 18%. The Iturregui Note contains a “most favored nations” clause that provides that, so long as The Iturregui Note is outstanding, if the Company issues any new security, which Mr. Iturregui reasonably believes contains a term that is more favorable than those in The Iturregui Note, the Company shall notify Mr. Iturregui of such term, and such term, at the option of Mr. Iturregui, shall become a part of The Iturregui Note. In addition, Mr. Iturregui will be issued (1) 241 five-year warrants (the “Warrants”) and (2) 242 shares of Common Stock as commitment shares (“Commitment Shares”). The Commitment Shares are priced at $12.50. The Warrants have an initial exercise price of $25.00 per share. The Warrants are not exercisable for six months following their issuance. Mr. Iturregui may exercise the Warrants on a cashless basis if after the six-month anniversary of date of issuance, the shares of Common Stock underlying the Warrants are not then registered pursuant to an effective registration statement. Discounts in the amount of $3,686 were amortized to interest expense during the nine months ended September 30, 2022, and total discounts in the amount of $5,867 remained outstanding at September 30, 2022.
On August 4, 2022, the Company issued a 10% Promissory Note due to Jessica, Kevin C., Brody, Isabella and Jack Finnegan (the “Finnegan Note 3”) and in respect of which the Company received proceeds of $25,000. The Finnegan Note 3 carries a 10% interest rate per annum, accrued monthly and payable at maturity. The Finnegan Note 3 has a maturity of February 3, 2023. The amount payable at maturity will be $29,412 plus 10% of that amount plus any accrued and unpaid interest. Following an event of default, as defined in the Finnegan Note 3, the principal amount shall bear interest for each day until paid, at a rate per annum equal to the lesser of the maximum interest permitted by applicable law and 18%. The Finnegan Note 3 contains a “most favored nations” clause that provides that, so long as the Finnegan Note 3 is outstanding, if the Company issues any new security, which the Finnegans reasonably believes contains a term that is more favorable than those in the Finnegan Note 3, the Company shall notify the Finnegans of such term, and such term, at the option of the Finnegans, shall become a part of the Finnegan Note 3. In addition, the Finnegans will be issued in aggregate (1) 241 five-year warrants and (2) 241 shares of Common Stock as Commitment Shares. The Commitment Shares are priced at $12.50. The Warrants have an initial exercise price of $25.00 per share. The Warrants are not exercisable for six months following their issuance. The Finnegans may exercise the Warrants on a cashless basis if after the six-month anniversary of date of issuance, the shares of Common Stock underlying the Warrants are not then registered pursuant to an effective registration statement. Discounts in the amount of $2,898 were amortized to interest expense during the nine months ended September 30, 2022, and total discounts in the amount of $6,405 remained outstanding at September 30, 2022.
On August 18, 2022, the Company issued a 10% Promissory Note due to Michael C Howe Living Trust (the “Howe Note 4”) and in respect of which the Company received proceeds of $170,000. The Howe Note 4 carries a 10% interest rate per annum, accrued monthly and payable at maturity. The Howe Note 4 has a maturity date that is the earlier of (i) November 30, 2022, or (ii) five business days after the date on which the Company successfully lists its shares of common stock on Nasdaq or NYSE. The aggregate amount payable at maturity will be $200,000 plus 10% of that amount plus any accrued and unpaid interest. Following an event of default, as defined in the Howe Note 4, the principal amount shall bear interest for each day until paid, at a rate per annum equal to the lesser of the maximum interest permitted by applicable law and 18%. The Howe Note 4 contains a “most favored nations” clause that provides that, so long as the Howe Note 4 is outstanding, if the Company issues any new security, which Mr. Howe reasonably believes contains a term that is more favorable than those in the Howe Note 4, the Company shall notify Mr. Howe of such term, and such term, at the option of Mr. Howe, shall become a part of the Howe Note 4. In addition, Mr. Howe will be issued 1,640 shares of Common Stock as commitment shares (the “Howe Note 4 Commitment Shares”). The Howe Note 4 Commitment Shares are priced at $12.50. Discounts in the amount of $25,128 were amortized to interest expense during the nine months ended September 30, 2022, and total discounts in the amount of $35,647 remained outstanding at September 30, 2022.
Note 7: Accounts Payable and Accrued Liabilities
Accounts payable and accrued liabilities consisted of the following at September 30, 2023 and December 31, 2022:
| |
|
September 30,
|
|
|
December 31,
|
|
| |
|
2023
|
|
|
2022
|
|
|
Trade accounts payable
|
|
$ |
1,466,337 |
|
|
$ |
1,647,233 |
|
|
Accrued payroll and payroll taxes
|
|
|
437,263 |
|
|
|
298,108 |
|
|
Other
|
|
|
- |
|
|
|
507 |
|
|
Total accounts payable and accrued liabilities
|
|
$ |
1,903,600 |
|
|
$ |
1,945,848 |
|
Note 8: Right to Use Assets and Lease Liabilities – Operating Leases
During the year ended December 31, 2022, the Company recognized an impairment of Right-to-Use (RTU) assets in the amount of $3.2 million in connection with the closing of its clinics during the period. During the nine months ended September 30, 2023, the Company recognized an additional impairment in the amount of $0.5 million in connection with its remaining leased properties. This amount is included in Net Loss from Discontinued Operations on the Company’s statement of operations for the three and nine months ended September 30, 2023.
As of September 30, 2023, the Company had total operating lease liabilities of approximately $94,000 and right-of-use assets of $0, which were included in the condensed consolidated balance sheet.
Right to use assets – operating leases are summarized below:
| |
|
September 30,
2023
|
|
|
December 31,
2022
|
|
|
Right to use assets, net
|
|
$ |
- |
|
|
$ |
83,810 |
|
Operating lease liabilities are summarized below:
| |
|
September 30,
2023
|
|
|
December 31,
2022
|
|
|
Lease liability
|
|
$ |
93,758 |
|
|
$ |
93,758 |
|
|
Less: current portion
|
|
|
(93,758 |
) |
|
|
(93,758 |
) |
|
Lease liability, non-current
|
|
$ |
- |
|
|
$ |
- |
|
Maturity analysis under these lease agreements are as follows:
|
For the twelve months ended September 30, 2024
|
|
$ |
99,477 |
|
|
For the twelve months ended September 30, 2025
|
|
|
- |
|
|
For the twelve months ended September 30, 2026
|
|
|
- |
|
|
For the twelve months ended September 30, 2027
|
|
|
- |
|
|
For the twelve months ended September 30, 2028
|
|
|
- |
|
|
Thereafter
|
|
|
- |
|
|
Total
|
|
$ |
99,477 |
|
|
Less: Present value discount
|
|
|
(5,719 |
) |
|
Lease liability
|
|
$ |
93,758 |
|
Note 9: SBA Loan Payable
PPP Loan Conversion to SBA Loan
During March 2020, in response to the COVID-19 crisis, the federal government announced plans to offer loans to small businesses in various forms, including the Payroll Protection Program, or “PPP”, established as part of the Corona Virus Aid, Relief and Economic Security Act (“CARES Act”) and administered by the U.S. Small Business Administration (the “SBA”). On April 25, 2020, the Company entered an unsecured Promissory Note with Bank of America for a loan in the original principal amount of $460,400, and the Company received the full amount of the loan proceeds on May 4, 2020 (the “PPP Loan”). The PPP Loan bears interest at the rate of 1% per year. During the year ended December 31, 2022, the Company accrued interest in the amount of $4,632.
On July 12, 2023, the Company received confirmation of a payment plan arrangement from the SBA. Pursuant to this payment plan, the Company agreed to pay a minimum of $2,595 each month until the loan is paid in full in July 2028. The SBA confirmed the balance due on the loan, including principal and interest, was $467,117. The Company will amortize the balance due on the loan including interest at the original PPP loan rate of 1% per annum; a gain on restructure of debt in the amount of $40,622 was recorded on this transaction during the three months ended September 30, 2023, and the balance of the loan was recorded at the amount of $433,343 representing the net cash flows discounted at 1%. During the three and nine months ended September 30, 2023, the Company made principal payments of $4,836 on this loan; during the three and nine months ended September 30, 2023, the Company recorded interest in the amount of $1,081 and $3,351, respectively, on this loan.
Note 10: Notes Payable
AJB Note
On March 18, 2022, the Company entered into a Securities Purchase Agreement (the “AJB Agreement”) with AJB Capital Investments, LLC (“AJB”) with respect to the sale and issuance to AJB of: (i) an initial commitment fee in the amount of $430,000 in the form of 34,400 shares (the “AJB Commitment Fee Shares”) of the Company’s Common Stock, (ii) a promissory note in the aggregate principal amount of $750,000 (the “AJB Note”), and (iii) Common Stock Purchase Warrants to purchase 15,000 shares of the Company’s Common Stock (the “AJB Warrants”). The AJB Note and AJB Warrants were issued on March 17, 2022 and were held in escrow pending effectiveness of the AJB Agreement. Should AJB receive net proceeds of less than $430,000 from the sale of the AJB Commitment Fee Shares, the Company will issue additional shares to AJB or pay the shortfall amount to AJB in cash (the “AJB True-up Obligation”. The terms of the AJB Agreement resulted in the Company recording a derivative liability in the initial amount of $106,608. On November 18, 2022, the Company issued 91,328 shares of common stock to AJB and recorded a loss in the amount of $9,007 in connection with the settlement of the AJB True-up Obligation. See notes 12 and 14.
The AJB Note was issued in the principal amount of $750,000 for a purchase price of $675,000, resulting in an original issue discount of $75,000, and has a due date, as extended, of March 17, 2023. The AJB Note bears interest at the rate of 10% per year for the first six months and 12% thereafter. In the event of default as defined in the AJB Note this rate will increase to 18% and the AJB Note will become convertible at a price per share equal to the lowest trading price during the previous twenty trading days prior to the conversion date. The AJB Note entered default status on October 6, 2022. The AJB Commitment Fee Shares and AJB Warrants resulted in a discount to the AJB Note in the amount of $349,914. The Company charged the amount of $62,000 to interest on the AJB Note during the year ended December 31, 2022. Discounts in the amount of $424,914 were amortized to interest expense during the year ended December 31, 2022, and total discounts in the amount of $0 remained outstanding at December 31, 2022. Principal and accrued interest in the amounts $750,000 and $22,833, respectively, were due on the AJB Note at December 31, 2022.
During the nine months ended September 30, 2023, a default penalty in the amount of $375,000 and an additional fee in the amount of $15,000 were added to the principal amount of the AJB note. During the three and nine months ended September 30, 2023, interest in the amounts of $6,270 and $62,897, respectively, was accrued on the AJB Note.
On April 11, 2023, an equity investment incentive in the amount of $800,800 representing 65% of the total amount due under the AJB Note, along with original principal of $750,000, the default penalty of $375,000, the fee of $15,000, and accrued interest of $92,000 (a total of $2,032,800) was converted to 2,033 shares of the Company’s Series F Preferred Stock. Other than the equity investment incentive of $800,800, there was no additional gain or loss recognized on this transaction as the Series F Preferred Stock was issued at its face value of $1,000 per share. At September 30, 2023, there were no amounts due under the AJB Note.
Anson Investments Note
On April 6, 2022, the Company entered into a Securities Purchase Agreement (the “Anson Investments Agreement”) with Anson Investments Master Fund LP (“Anson Investments”) with respect to the sale and issuance to Anson Investments of: (i) an initial commitment fee in the amount of $322,500 in the form of 25,800 shares (the “Anson Investments Commitment Fee Shares”) of the Company’s Common Stock, (ii) a promissory note in the aggregate principal amount of $562,500 (the “Anson Investments Note”), and (iii) Common Stock Purchase Warrants to purchase 11,250 shares of the Common Stock (the “Anson Investments Warrants”). Should Anson Investments receive net proceeds of less than $322,500 from the sale of the Anson Investments Commitment Fee Shares, the Company will issue additional shares to Anson Investments or pay the shortfall amount to Anson Investments in cash. The terms of the Anson Investments Agreement resulted in the Company recording a derivative liability in the initial amount of $27,040.
The Anson Investments Note was issued in the principal amount of $562,500 for a purchase price of $506,250 resulting in an original issue discount of $56,250. The Anson Investments Note has a due date of October 6, 2022 and bears interest at the rate of 10% per year for the first six months and 12% thereafter. In the event of default as defined in the Anson Investments Note this rate will increase to 18% and the Anson Investment Note will become convertible at a price per share equal to the lowest trading price during the previous twenty trading days prior to the conversion date. The Anson Investments Note entered default status on October 6, 2022. The Anson Investments Commitment Fee Shares and Anson Investments Warrants resulted in a discount to the Anson Investments Note in the amount of $416,375. The Company charged the amount of $68,844 to interest on the Anson Investments note during the year ended December 31, 2022. Discounts in the amount of $472,625 were amortized to interest expense during the year ended December 31, 2022, and total discounts in the amount of $0 remained outstanding at December 31, 2022. Principal and accrued interest in the amounts $562,500 and $41,500, respectively, were due on the AJB Note at December 31, 2022.
During the nine months ended September 30, 2023, a default penalty in the amount of $281,250 and an additional fee in the amount of $15,000 were added to the principal amount of the Anson Investments Note. During the three and nine months ended September 30, 2023, interest in the amounts of $4,724 and $27,157, respectively, was accrued on the Anson Investments Note.
On April 11, 2023, an equity investment incentive in the amount of $602,815 representing 65% of the total amount due under the Anson Investments Note, along with original principal of $562,500, the default penalty of $281,250, the fee of $15,000, and accrued interest of $68,657 (a total of $1,530,222) was converted to 1,531 shares of the Company’s Series F Preferred Stock. Other than the equity investment incentive of $602,815, there was no gain or loss recognized on this transaction as the Series F Preferred Stock was issued at its face value of $1,000 per share. At September 30, 2023, there were no amounts due under the Anson Investments Note.
Anson East Note
On April 6, 2022, the Company entered into a Securities Purchase Agreement (the “Anson East Agreement”) with Anson East Master Fund LP (“Anson East”) with respect to the sale and issuance to Anson East of: (i) an initial commitment fee in the amount of $107,500 in the form of 8,600 shares (the “Anson East Commitment Fee Shares”) of the Company’s Common Stock, (ii) a promissory note in the aggregate principal amount of $187,500 (the “Anson East Note”), and (iii) Common Stock Purchase Warrants to purchase 3,750 shares of the Company’s common stock (the “Anson East Warrants”). Should Anson East receive net proceeds of less than $107,500 from the sale of the Anson East Commitment Fee Shares, the Company will issue additional shares to Anson East or pay the shortfall amount to Anson East in cash. The terms of the Anson East Agreement resulted in the Company recording a derivative liability in the initial amount of $9,014.
The Anson East Note was issued in the principal amount of $187,500 for a purchase price of $168,750 resulting in an original issue discount of $18,750. The Anson East Note has a due date of October 6, 2022 and bears interest at the rate of 10% per year for the first six months and 12% thereafter. In the event of default as defined in the Anson East Note this rate will increase to 18%, and the Anson East Note will become convertible at a price per share equal to the lowest trading price during the previous twenty trading days prior to the conversion date. The Anson East Note entered default status on October 6, 2022. The Anson East Commitment Fee Shares and Anson East Warrants resulted in a discount to the Anson East Note in the amount of $147,290. The Company charged the amount of $22,948 to interest on the Anson Investments note during the year ended December 31, 2022. Discounts in the amount of $166,040 were amortized to interest expense during the year ended December 31, 2022, and total discounts in the amount of $0 remained outstanding at December 31, 2022. Principal and accrued interest in the amounts $187,500 and $13,833, respectively, were due on the Anson East Note at December 31, 2022.
During the nine months ended September 30, 2023, a default penalty in the amount of $93,750 and an additional fee in the amount of $15,000 were added to the principal amount of the Anson East Note. During the three and nine months ended September 30, 2023, the amounts of $9,552 and $23,385, respectively, was accrued on the Anson East Note.
On April 11, 2023, an equity investment incentive in the amount of $207,763 representing 65% of the total amount due under the Anson East Note, along with original principal of $187,500, the default penalty of $93,750, the fee of $15,000, and accrued interest of $23,385 (a total of $527,398) was converted to 528 shares of the Company’s Series F Preferred Stock. Other than the equity investment incentive of $207,763, there was no gain or loss recognized on this transaction as the Series F Preferred Stock was issued at its face value of $1,000 per share. At September 30, 2023, there were no amounts due under the Anson East Note.
GS Capital Note
On April 18, 2022, the Company entered into a Securities Purchase Agreement (the “GS Capital Agreement”) with GS Capital Investments, LLC (“GS Capital”) with respect to the sale and issuance to GS Capital of: (i) an initial commitment fee in the amount of $159,259 in the form of 12,741 shares (the “GS Capital Commitment Fee Shares”) of the Company’s Common Stock, (ii) a promissory note in the aggregate principal amount of $277,777 (the “GS Capital Note”), and (iii) Common Stock Purchase Warrants to purchase 5,556 shares of the Company’s common stock (the “GS Capital Warrants”). Should GS Capital receive net proceeds of less than $159,259 from the sale of the GS Capital Commitment Fee Shares, the Company will issue additional shares to GS Capital or pay the shortfall amount to GS Capital in cash. The terms of the GS Capital Agreement resulted in the Company recording a derivative liability in the initial amount of $21,920.
The GS Capital Note was issued in the principal amount of $277,777 for a purchase price of $250,000 resulting in an original issue discount of $27,777. The GS Capital Note has a due date of November 10, 2022 and bears interest at the rate of 10% per year for the first six months and 12% thereafter. In the event of default as defined in the GS Capital Note this rate will increase to 18%, and the GS Capital Note will become convertible at a price per share equal to the lowest trading price during the previous twenty trading days prior to the conversion date. The GS Capital Note entered default status on October 19, 2022. The GS Capital Commitment Fee Shares and GS Capital Warrants resulted in a discount to the GS Capital Note in the amount of $162,158. The Company charged the amount of $32,155 to interest on the GS Capital Note during the year ended December 31, 2022. Discounts in the amount of $212,435 were amortized to interest expense during the year ended December 31, 2022, and total discounts in the amount of $0 remained outstanding at December 31, 2022. Principal and accrued interest in the amounts $277,777 and $19,578, respectively, were due on the GS Capital Note at December 31, 2022.
During the nine months ended September 30, 2023, GS Capital converted an aggregate amount of $72,777 of principal and $8,679 of accrued interest in the GS Capital Note into an aggregate of 57,140 shares of the Company’s common stock at an average price of $1.46 per share. These conversions were made pursuant to the terms of the GS Capital Note, and no gain or loss was recorded on these transactions. During the nine months ended September 30, 2023, a default penalty in the amount of $138,889 and an additional fee in the amount of $15,000 were added to the principal amount of the GS Capital Note. During the three and nine months ended September 30, 2023, interest in the amount of $2,374 and $13,965, respectively, was accrued on the GS Capital Note.
On April 11, 2023, an equity investment incentive in the amount of $249,439 representing 65% of the total amount due under the GS Capital Note, along with original principal of $205,000, the default penalty of $138,889, the fee of $15,000, and accrued interest of $24,864 (a total of $633,192) was converted to 634 shares of the Company’s Series F Preferred Stock. Other than the equity investment incentive of $249,439, there was no gain or loss recognized on this transaction as the Series F Preferred Stock was issued at its face value of $1,000 per share. At September 30, 2023, there were no amounts due under the GS Capital Note.
Kishon Note
On May 10, 2022, the Company entered into a Securities Purchase Agreement (the “Kishon Agreement”) with Kishon Investments, LLC (“Kishon”) with respect to the sale and issuance to Kishon of: (i) an initial commitment fee in the amount of $159,259 in the form of 12,741 shares (the “Kishon Commitment Fee Shares”) of the Company’s Common Stock, (ii) a promissory note in the aggregate principal amount of $277,777 (the “Kishon Note”), and (iii) Common Stock Purchase Warrants to purchase 5,556 shares of the Company’s common stock (the “Kishon Warrants”). Should Kishon receive net proceeds of less than $159,259 from the sale of the Kishon Commitment Fee Shares, the Company will issue additional shares to Kishon or pay the shortfall amount to Kishon in cash. The terms of the Kishon Agreement resulted in the Company recording a derivative liability in the initial amount of $27,793.
The Kishon Note was issued in the principal amount of $277,777 for a purchase price of $250,000 resulting in an original issue discount of $27,777. The Kishon Note has a due date of November 10, 2022 and bears interest at the rate of 10% per year for the first six months and 12% thereafter. In the event of default as defined in the Kishon Note this rate will increase to 18%, and the Kishon Note will become convertible at a price per share equal to the lowest trading price during the previous twenty trading days prior to the conversion date. The Kishon Note entered default status on November 11, 2022. The Kishon Commitment Fee Shares and Kishon Warrants resulted in a discount to the Kishon Note in the amount of $138,492. The Company charged the amount of $28,624 to interest on the Kishon Note during the year ended December 31, 2022. Discounts in the amount of $181,269 were amortized to interest expense during the year ended December 31, 2022, and total discounts in the amount of $0 remained outstanding at December 31, 2022. Principal and accrued interest in the amounts $277,777 and $17,822, respectively, were due on the Kishon Note at December 31, 2022.
During the nine months ended September 30, 2023, a default penalty in the amount of $138,889 and an additional fee in the amount of $15,000 were added to the principal amount of the Kishon Note. During the three and nine months ended September 30, 2023, interest in the amounts of $19,641 and $51,502, respectively, was accrued on the Kishon Note. At September 30, 2023, principal and interest in the amount of $431,666 and $69,324, respectively, were due on the Kishon Note. This note was in default at December 31, 2022 and September 30, 2023.
Finnegan Note 1
On May 23, 2022, the Company issued a 10% Promissory Note in the principal amount of $47,059 to Jessica Finnegan (the “Finnegan Note 1”). The Finnegan Note 1 bears interest at the rate of 10% per annum accrued monthly and has a maturity date that is the earlier of (i) November 20, 2022, as extended, or (ii) five (5) business days after the date on which the Company successfully lists its shares of common stock on Nasdaq or NYSE. The purchase price of the Finnegan Note 1 was $40,000; the amount payable at maturity will be $47,059 plus 10% of that amount plus any accrued and unpaid interest. Following an event of default as defined in the Finnegan Note 1, the principal amount shall bear interest for each day until paid at a rate per annum equal to the lesser of the maximum interest permitted by applicable law and 18%. The Finnegan Note 1 entered default status on November 21, 2022, and the interest rate increased to 18%. The Finnegan Note 1 contains a “most favored nations” clause that provides that, so long as the note is outstanding, if the Company issues any new security which Ms. Finnegan reasonably believes contains a term that is more favorable than those in the Finnegan Note 1, the Company shall notify Ms. Finnegan of such term, and such term, at the option of Ms. Finnegan, shall become a part of the Finnegan Note 1. In addition, Ms. Finnegan received five-year warrants to purchase 386 shares of common stock at a price of $25.00 per share with a fair value of $2,000 at the date of issuance, and 1,930 shares of common stock with a value of $3,240; these amounts were recorded as discounts to the Finnegan Note 1. Interest in the amount of $3,285 was accrued on the Finnegan Note 1 during the year ended December 31, 2022. Discounts in the amount of $17,005 were amortized to interest expense during the year ended December 31, 2022, and total discounts in the amount of $0 remained outstanding at December 31, 2022. Principal and accrued interest in the amounts $51,765 and $3,285, respectively, were due on the Finnegan Note 1 at December 31, 2022.
During the three and nine months ended September 30, 2023, interest in the amount of $2,164 and $6,469, respectively, was accrued on the Finnegan Note 1; principal and accrued interest in the amount of $51,765 and $9,754, respectively, were due on this note at September 30, 2023. This note was in default at September 30, 2023.
M Diamond Note
On May 26, 2022, the Company issued a 10% Promissory Note in the principal amount of $58,823 to Melissa Diamond (the “M Diamond Note”). The M Diamond Note bears interest at the rate of 10% per annum accrued monthly and has a maturity date that is the earlier of (i) November 30, 2022, or (ii) five business days after the date on which the Company successfully lists its shares of common stock on Nasdaq or NYSE. The purchase price of the M Diamond Note was $50,000; the amount payable at maturity will be $58,823 plus 10% of that amount plus any accrued and unpaid interest. Following an event of default as defined in the M Diamond Note, the principal amount shall bear interest for each day until paid at a rate per annum equal to the lesser of the maximum interest permitted by applicable law and 18%. The M Diamond Note entered default status on December 1, 2022, and the interest rate increased to 18%. The M Diamond Note contains a “most favored nations” clause that provides that, so long as the note is outstanding, if the Company issues any new security which Ms. Diamond reasonably believes contains a term that is more favorable than those in the M Diamond Note, the Company shall notify Ms. Diamond of such term, and such term, at the option of Ms. Diamond, shall become a part of the M Diamond Note. In addition, Ms. Diamond received five-year warrants to purchase 483 shares of common stock at a price of $25.00 per share with a fair value of $2,500 at the date of issuance, and 483 shares of common stock with a value of $4,050; these amounts were recorded as discounts to the M Diamond Note. Interest in the amount of $3,929 was accrued on the M Diamond Note during the year ended December 31, 2022. Discounts in the amount of $21,256 were amortized to interest expense during the year ended December 31, 2022, and total discounts in the amount of $0 remained outstanding at December 31, 2022. Principal and accrued interest in the amounts $64,705 and $3,929, respectively, were due on the M Diamond Note at December 31, 2022.
During the three and nine months ended September 30, 2023, interest in the amount of $2,706 and $8,084, respectively, was accrued on the M Diamond Note; principal and accrued interest in the amount of $64,705 and $12,013, respectively, were due on this note at September 30, 2023. This note was in default at September 30, 2023.
Finnegan Note 2
On May 26, 2022, the Company issued a 10% Promissory Note in the principal amount of $29,412 to Jessica Finnegan (the “Finnegan Note 2”). The Finnegan Note 2 bears interest at the rate of 10% per annum accrued monthly and has a maturity date that is the earlier of (i) November 30, 2022, or (ii) five business days after the date on which the Company successfully lists its shares of common stock on Nasdaq or NYSE. The purchase price of the Finnegan Note 2 was $25,000; the amount payable at maturity will be $29,412 plus 10% of that amount plus any accrued and unpaid interest. Following an event of default as defined in the Finnegan Note 2, the principal amount shall bear interest for each day until paid at a rate per annum equal to the lesser of the maximum interest permitted by applicable law and 18%. The Finnegan Note 2 entered default status on December 1, 2022, and the interest rate increased to 18%. The Finnegan Note 2 contains a “most favored nations” clause that provides that, so long as the note is outstanding, if the Company issues any new security which Ms. Finnegan reasonably believes contains a term that is more favorable than those in the Finnegan Note 2, the Company shall notify Ms. Finnegan of such term, and such term, at the option of Ms. Finnegan, shall become a part of the Finnegan Note 2. In addition, Ms. Finnegan received five-year warrants to purchase 242 shares of common stock at a price of $25.00 per share with a fair value of $1,250 at the date of issuance, and 242 shares of common stock with a value of $2,025; these amounts were recorded as discounts to the Finnegan Note 2. Interest in the amount of $1,965 was accrued on the Finnegan Note 2 during the year ended December 31, 2022. Discounts in the amount of $10,625 were amortized to interest expense during the year ended December 31, 2022, and total discounts in the amount of $0 remained outstanding at December 31, 2022. Principal and accrued interest in the amounts $32,353 and $1,965, respectively, were due on the Finnegan Note 2 at December 31, 2022.
During the three and nine months ended September 30, 2023, interest in the amount of $1,353 and $4,042, respectively, was accrued on the Finnegan Note 2; principal and accrued interest in the amount of $32,353 and $6,007, respectively, were due on this note at September 30, 2023. This note was in default at September 30, 2023.
Dragon Note
On June 9, 2022, the Company issued a 10% Promissory Note in the principal amount of $588,235 (the “Dragon Note”) to Dragon Dynamic Funds Platform Ltd (“Dragon Dynamic”). The Dragon Note bears interest at the rate of 10% per annum accrued monthly and has a maturity date that is the earlier of (i) December 9, 2022, or (ii) five business days after the date on which the Company successfully lists its shares of common stock on Nasdaq or NYSE. The purchase price of the Dragon Note was $500,000; the amount payable at maturity will be $588,235 plus 10% of that amount plus any accrued and unpaid interest. Costs in the amount of $47,500 were charged to discount on the Dragon Note. Following an event of default as defined in the Dragon Note, the principal amount shall bear interest for each day until paid at a rate per annum equal to the lesser of the maximum interest permitted by applicable law and 18%. The Dragon Note entered default status on December 10, 2022, and the interest rate increased to 18%. The Dragon Note contains a “most favored nations” clause that provides that, so long as the note is outstanding, if the Company issues any new security which Dragon Dynamic reasonably believes contains a term that is more favorable than those in the Dragon Note, the Company shall notify Dragon Dynamic of such term, and such term, at the option of Dragon Dynamic, shall become a part of the Dragon Note. In addition, Dragon Dynamic received five-year warrants to purchase 4,824 shares of common stock at a price of $25.00 per share with a fair value of $21,500 at the date of issuance, and 4,824 shares of common stock with a value of $44,000; these amounts were recorded as discounts to the Dragon Note. Interest in the amount of $35,874 was accrued on the Dragon Note during the year ended December 31, 2022. Discounts in the amount of $260,059 were amortized to interest expense during the year ended December 31, 2022, and total discounts in the amount of $0 remained outstanding at December 31, 2022. Principal and accrued interest in the amounts $647,059 and $35,874, respectively, were due on the Dragon Note at December 31, 2022.
During the three and nine months ended September 30, 2023, interest in the amount of $3,235 and $29,706, respectively, was accrued on the Dragon Note.
On April 11, 2023, an equity investment incentive in the amount of $463,539 representing 65% of the total amount due under the Dragon Note, along with original principal of $647,059 and accrued interest of $66,078 (a total of $1,176,676) was converted to 1,177 shares of the Company’s Series F Preferred Stock. Other than the equity investment incentive of $463,539, there was no gain or loss recognized on this transaction as the Series F Preferred Stock was issued at its face value of $1,000 per share. At September 30, 2023, there were no amounts due under the Dragon Note.
Mackay Note
On July 7, 2022, the Company issued a 10% Promissory Note in the principal amount of $294,118 to Mackay Investments, LLC (the “Mackay Note”). The Mackay Note bears interest at the rate of 10% per annum accrued monthly and has a maturity date that is the earlier of (i) August 10, 2022, or (ii) five business days after the date on which the Company successfully lists its shares of common stock on Nasdaq or NYSE. The purchase price of the Mackay Note was $250,000; the amount payable at maturity will be $294,118 plus 10% of that amount plus any accrued and unpaid interest. Following an event of default as defined in the Mackay Note, the principal amount shall bear interest for each day until paid at a rate per annum equal to the lesser of the maximum interest permitted by applicable law and 18%. The Mackay Note entered default status on August 11, 2022, and the interest rate increased to 18%. The Mackay Note contains a “most favored nations” clause that provides that, so long as the note is outstanding, if the Company issues any new security which Mackay Investments, LLC reasonably believes contains a term that is more favorable than those in the Mackay Note, the Company shall notify Mackay Investments, LLC of such term, and such term, at the option of Mackay Investments, LLC , shall become a part of the Mackay Note. In addition, Mackay Investments, LLC received five-year warrants to purchase 2,412 shares of common stock at a price of $25.00 per share with a fair value of $10,250 at the date of issuance, and 2,412 shares of common stock with a value of $44,118; these amounts were recorded as discounts to the Mackay Note. Interest in the amount of $20,193 was accrued on the Mackay Note during the year ended December 31, 2022. Discounts in the amount of $96,280 were amortized to interest expense during the year ended December 31, 2022, and total discounts in the amount of $0 remained outstanding at December 31, 2022. Principal and accrued interest in the amounts $323,530 and $20,193, respectively, were due on the Mackay Note at December 31, 2022.
During the three and nine months ended September 30, 2023, interest in the amount of $13,382 and $43,614, respectively was accrued on the Mackay Note
On September 29, 2023, an equity investment incentive in the amount of $258,269 representing 65% of the total amount due under the Mackay Note, along with original principal of $294,118, premium of $29,412, accrued interest of $63,807, and fee of $10,000 (a total of $655,606) was converted to 656 shares of the Company’s Series F Preferred Stock. Other than the equity investment incentive of $258,269, there was no gain or loss recognized on this transaction as the Series F Preferred Stock was issued at its face value of $1,000 per share. At September 30, 2023, there were no amounts due under the Mackay Note.
Schrier Note
On July 7, 2022, the Company issued a 10% Promissory Note in the principal amount of $23,259 to Charles Schrier (the “Schrier Note”). The Schrier Note bears interest at the rate of 10% per annum accrued monthly and has a maturity date that is the earlier of (i) January 8, 2023, or (ii) five business days after the date on which the Company successfully lists its shares of common stock on Nasdaq or NYSE. The purchase price of the Schrier Note was $20,000; the amount payable at maturity will be $23,529 plus 10% of that amount plus any accrued and unpaid interest. Following an event of default as defined in the Schrier Note, the principal amount shall bear interest for each day until paid at a rate per annum equal to the lesser of the maximum interest permitted by applicable law and 18%. The Schrier Note contains a “most favored nations” clause that provides that, so long as the note is outstanding, if the Company issues any new security which Mr. Schrier reasonably believes contains a term that is more favorable than those in the Schrier Note, the Company shall notify Mr. Schrier of such term, and such term, at the option of Mr. Schrier, shall become a part of the Schrier Note. In addition, Mr. Schrier received five-year warrants to purchase 193 shares of common stock at a price of $25.00 per share with a fair value of $820 at the date of issuance, and 193 shares of common stock with a value of $1,000; these amounts were recorded as discounts to the Schrier Note. Interest in the amount of $1,141 was accrued on the Schrier Note during the year ended December 31, 2022. Discounts in the amount of $7,367 were amortized to interest expense during the year ended December 31, 2022, and total discounts in the amount of $335 remained outstanding at December 31, 2022. Principal and accrued interest in the amounts $25,882 and $1,141, respectively, were due on the Schrier Note at December 31, 2022.
During the three and nine months ended September 30, 2023, interest in the amount of $1,071 and $3,174, respectively, was accrued on the Schrier Note; principal and accrued interest in the amount of $25,882 and $4,315, respectively, were due on this note at September 30, 2023. This note was in default at September 30, 2023.
Nommsen Note
On July 26, 2022, the Company issued a 10% Promissory Note in the principal amount of $58,823 to Eric S. Nommsen (the “Nommsen Note”). The Nommsen Note bears interest at the rate of 10% per annum accrued monthly and has a maturity date that is the earlier of (i) November 30, 2022, as extended, or (ii) five business days after the date on which the Company successfully lists its shares of common stock on Nasdaq or NYSE. The purchase price of the Nommsen Note was $50,000; the amount payable at maturity will be $58,823 plus 10% of that amount plus any accrued and unpaid interest. Following an event of default as defined in the Nommsen Note, the principal amount shall bear interest for each day until paid at a rate per annum equal to the lesser of the maximum interest permitted by applicable law and 18%. The Nommsen Note entered default status on December 1, 2022, and the interest rate increased to 18%. The Nommsen Note contains a “most favored nations” clause that provides that, so long as the note is outstanding, if the Company issues any new security which Mr. Nommsen reasonably believes contains a term that is more favorable than those in the Nommsen Note, the Company shall notify Mr. Nommsen of such term, and such term, at the option of Mr. Nommsen, shall become a part of the Nommsen Note. In addition, Mr. Nommsen received five-year warrants to purchase 483 shares of common stock at a price of $25.00 per share with a fair value of $1,850 at the date of issuance, and 483 shares of common stock with a value of $2,350; these amounts were recorded as discounts to the Nommsen Note. Interest in the amount of $2,946 was accrued on the Nommsen Note during the year ended December 31, 2022. Discounts in the amount of $18,905 were amortized to interest expense during the year ended December 31, 2022, and total discounts in the amount of $0 remained outstanding at December 31, 2022. Principal and accrued interest in the amounts $64,705 and $2,946, respectively, were due on the Nommsen Note at December 31, 2022.
During the three and nine months ended September 30, 2023, interest in the amount of $2,706 and $8,070 was accrued on the Nommsen Note; principal and accrued interest in the amount of $64,705 and $11,016, respectively, were due on this note at September 30, 2023. This note was in default at September 30, 2023.
Caplan Note
On July 27, 2022, the Company issued a 10% Promissory Note in the principal amount of $58,823 to James H. Caplan (the “Caplan Note”). The Caplan Note bears interest at the rate of 10% per annum accrued monthly and has a maturity date that is the earlier of (i) January 21, 2023, or (ii) five business days after the date on which the Company successfully lists its shares of common stock on Nasdaq or NYSE. The purchase price of the Caplan Note was $50,000; the amount payable at maturity will be $58,823 plus 10% of that amount plus any accrued and unpaid interest. Following an event of default as defined in the Caplan Note, the principal amount shall bear interest for each day until paid at a rate per annum equal to the lesser of the maximum interest permitted by applicable law and 18%. The Caplan Note contains a “most favored nations” clause that provides that, so long as the note is outstanding, if the Company issues any new security which Mr. Caplan reasonably believes contains a term that is more favorable than those in the Caplan Note, the Company shall notify Mr. Caplan of such term, and such term, at the option of Mr. Caplan, shall become a part of the Caplan Note. In addition, Mr. Caplan received five-year warrants to purchase 483 shares of common stock at a price of $25.00 per share with a fair value of $1,850 at the date of issuance, and 483 shares of common stock with a value of $2,350; these amounts were recorded as discounts to the Caplan Note. Interest in the amount of $2,531 was accrued on the Caplan Note during the year ended December 31, 2022. Discounts in the amount of $16,675 were amortized to interest expense during the year ended December 31, 2022, and total discounts in the amount of $2,230 remained outstanding at December 31, 2022. Principal and accrued interest in the amounts $64,705 and $2,531, respectively, were due on the Caplan Note at December 31, 2022.
During the three and nine months ended September 30, 2023, interest in the amount of $2,706 and $7,789, respectively, was accrued on the Caplan Note; principal and accrued interest in the amount of $64,705 and $10,320, respectively, were due on this note at September 30, 2023. This note was in default at September 30, 2023.
Finnegan Note 3
On August 4, 2022, the Company issued a 10% Promissory Note in the principal amount of $29,412 (the “Finnegan Note 3”) to Jessica, Kevin C., Brody, Isabella and Jack Finnegan (collectively, the “Finnegans”). The Finnegan Note 3 bears interest at the rate of 10% per annum accrued monthly and has a maturity date that is the earlier of (i) February 3, 2023, or (ii) five business days after the date on which the Company successfully lists its shares of common stock on Nasdaq or NYSE. The purchase price of the Finnegan Note 3 was $25,000; the amount payable at maturity will be $29,412 plus 10% of that amount plus any accrued and unpaid interest. Following an event of default as defined in the Finnegan Note 3, the principal amount shall bear interest for each day until paid at a rate per annum equal to the lesser of the maximum interest permitted by applicable law and 18%. The Finnegan Note 3 contains a “most favored nations” clause that provides that, so long as the note is outstanding, if the Company issues any new security which The Finnegans reasonably believes contains a term that is more favorable than those in the Finnegan Note 3, the Company shall notify The Finnegans of such term, and such term, at the option of The Finnegans, shall become a part of the Finnegan Note 3. In addition, The Finnegans received five-year warrants to purchase 242 shares of common stock at a price of $25.00 per share with a fair value of $850 at the date of issuance, and 242 shares of common stock with a value of $1,100; these amounts were recorded as discounts to the Finnegan Note 3. Interest in the amount of $1,200 was accrued on the Finnegan Note 3 during the year ended December 31, 2022. Discounts in the amount of $7,575 were amortized to interest expense during the year ended December 31, 2022, and total discounts in the amount of $1,728 remained outstanding at December 31, 2022. Principal and accrued interest in the amounts $32,353 and $1,200, respectively, were due on the Finnegan Note 3 at December 31, 2022.
During the three and nine months ended September 30, 2023, interest in the amount of $1,353 and $3,816, respectively, was accrued on the Finnegan Note 3; principal and accrued interest in the amount of $32,353 and $5,016, respectively, were due on this note at September 30, 2023. This note was in default at September 30, 2023.
Enright Note
On August 4, 2022, the Company issued a 10% Promissory Note in the principal amount of $120,000 to Jack Enright (the “Enright Note”). The Enright Note bears interest at the rate of 10% per annum accrued monthly and has a maturity date that is the earlier of (i) February 3, 2023, or (ii) five business days after the date on which the Company successfully lists its shares of common stock on Nasdaq or NYSE. The purchase price of the Enright Note was $102,000; the amount payable at maturity will be $120,000 plus 10% of that amount plus any accrued and unpaid interest. Following an event of default as defined in the Enright Note, the principal amount shall bear interest for each day until paid at a rate per annum equal to the lesser of the maximum interest permitted by applicable law and 18%. The Enright Note contains a “most favored nations” clause that provides that, so long as the note is outstanding, if the Company issues any new security which Mr. Enright reasonably believes contains a term that is more favorable than those in the Enright Note, the Company shall notify Mr. Enright of such term, and such term, at the option of Mr. Enright, shall become a part of the Enright Note. In addition, Mr. Enright received 984 shares of common stock with a value of $6,317; this amount was recorded as a discount to the Enright Note. Interest in the amount of $4,899 was accrued on the Enright Note during the year ended December 31, 2022. Discounts in the amount of $29,571 were amortized to interest expense during the year ended December 31, 2022, and total discounts in the amount of $6,746 remained outstanding at December 31, 2022. Principal and accrued interest in the amounts $132,000 and $4,899, respectively, were due on the Enright Note at December 31, 2022.
During the three and nine months ended September 30, 2023, interest in the amount of $5,460 and $15,481, respectively, was accrued on the Enright Note.
On September 29, 2023, an equity investment incentive in the amount of $102,116 representing 65% of the total amount due under the Enright Note, along with original principal of $120,000, premium of $12,000, and accrued interest of $20,380 (a total of $254,496) was converted to 255 shares of the Company’s Series F Preferred Stock. Other than the equity investment incentive of $102,116, there was no gain or loss recognized on this transaction as the Series F Preferred Stock was issued at its face value of $1,000 per share. At September 30, 2023, there were no amounts due under the Enright Note.
Mitchell Note
On September 2, 2022, the Company issued a 10% Promissory Note in the principal amount of $71,000 to John Mitchell (the “Mitchell Note”). The Mitchell Note bears interest at the rate of 10% per annum accrued monthly and has a maturity date that is the earlier of (i) November 30, 2022, or (ii) five business days after the date on which the Company successfully lists its shares of common stock on Nasdaq or NYSE. The purchase price of the Mitchell Note was $60,350; the amount payable at maturity will be $71,000 plus 10% of that amount plus any accrued and unpaid interest. Following an event of default as defined in the Mitchell Note, the principal amount shall bear interest for each day until paid at a rate per annum equal to the lesser of the maximum interest permitted by applicable law and 18%. The Mitchell Note entered default status on December 1, 2022, and the interest rate increased to 18%. The Mitchell Note contains a “most favored nations” clause that provides that, so long as the note is outstanding, if the Company issues any new security which Mr. Mitchell reasonably believes contains a term that is more favorable than those in the Mitchell Note, the Company shall notify Mr. Mitchell of such term, and such term, at the option of Mr. Mitchell, shall become a part of the Mitchell Note. In addition, Mr. Mitchell received 582 shares of common stock with a value of $3,124; this amount was recorded as a discount to the Mitchell Note. Interest in the amount of $2,817 was accrued on the Mitchell Note during the year ended December 31, 2022. Discounts in the amount of $20,874 were amortized to interest expense during the year ended December 31, 2022, and total discounts in the amount of $0 remained outstanding at December 31, 2022. Principal and accrued interest in the amounts $78,100 and $2,817, respectively, were due on the Mitchell Note at December 31, 2022. The Mitchell Note was in default at December 31, 2022.
During the three and nine months ended September 30, 2023, interest in the amount of $3,266 and $9,730, respectively, was accrued on the Mitchell Note; principal and accrued interest in the amount of $78,100 and $12,547, respectively, were due on this note at September 30, 2023. This note was in default at September 30, 2023.
Lightmas Note
On September 2, 2022, the Company issued a 10% Promissory Note in the principal amount of $60,000 to Frank Lightmas (the “Lightmas Note”). The Lightmas Note bears interest at the rate of 10% per annum accrued monthly and has a maturity date that is the earlier of (i) November 30, 2022, or (ii) five business days after the date on which the Company successfully lists its shares of common stock on Nasdaq or NYSE. The purchase price of the Lightmas Note was $51,000; the amount payable at maturity will be $60,000 plus 10% of that amount plus any accrued and unpaid interest. Following an event of default as defined in the Lightmas Note, the principal amount shall bear interest for each day until paid at a rate per annum equal to the lesser of the maximum interest permitted by applicable law and 18%. The Lightmas Note entered default status on December 1, 2022, and the interest rate increased to 18%. The Lightmas Note contains a “most favored nations” clause that provides that, so long as the note is outstanding, if the Company issues any new security which Mr. Lightmas reasonably believes contains a term that is more favorable than those in the Lightmas Note, the Company shall notify Mr. Lightmas of such term, and such term, at the option of Mr. Lightmas, shall become a part of the Lightmas Note. In addition, Mr. Lightmas received 492 shares of common stock with a value of $2,640; this amount was recorded as a discount to the Lightmas Note. Interest in the amount of $2,380 was accrued on the Lightmas Note during the year ended December 31, 2022. Discounts in the amount of $17,640 were amortized to interest expense during the year ended December 31, 2022, and total discounts in the amount of $0 remained outstanding at December 31, 2022. Principal and accrued interest in the amounts $66,000 and $2,380, respectively, were due on the Lightmas Note at December 31, 2022.
During the three and nine months ended September 30, 2023, interest in the amount of $2,760 and $8,223, respectively, was accrued on the Lightmas Note; principal and accrued interest in the amount of $66,000 and $10,603, respectively, were due on this note at September 30, 2023. This note was in default at September 30, 2023.
Lewis Note
On September 2, 2022, the Company issued a 10% Promissory Note in the principal amount of $30,000 to Lisa Lewis (the “Lewis Note”). The Lewis Note bears interest at the rate of 10% per annum accrued monthly and has a maturity date that is the earlier of (i) November 30, 2022, or (ii) five business days after the date on which the Company successfully lists its shares of common stock on Nasdaq or NYSE. The purchase price of the Lewis Note was $25,500; the amount payable at maturity will be $30,000 plus 10% of that amount plus any accrued and unpaid interest. Following an event of default as defined in the Lewis Note, the principal amount shall bear interest for each day until paid at a rate per annum equal to the lesser of the maximum interest permitted by applicable law and 18%. The Lewis Note entered default status on December 1, 2022, and the interest rate increased to 18%. The Lewis Note contains a “most favored nations” clause that provides that, so long as the note is outstanding, if the Company issues any new security which Ms. Lewis reasonably believes contains a term that is more favorable than those in the Lewis Note, the Company shall notify Ms. Lewis of such term, and such term, at the option of Ms. Lewis, shall become a part of the Lewis Note. In addition, Ms. Lewis received 246 shares of common stock with a value of $1,320; this amount was recorded as a discount to the Lewis Note. Interest in the amount of $1,190 was accrued on the Lewis Note during the year ended December 31, 2022. Discounts in the amount of $8,820 were amortized to interest expense during the year ended December 31, 2022, and total discounts in the amount of $0 remained outstanding at December 31, 2022. Principal and accrued interest in the amounts $33,000 and $1,190, respectively, were due on the Lewis Note at December 31, 2022.
During the three and nine months ended September 30, 2023, interest in the amount of $1,380 and $4,112, respectively, was accrued on the Lewis Note; principal and accrued interest in the amount of $33,000 and $5,302, respectively, were due on this note at September 30, 2023. This note was in default at September 30, 2023.
Goff Note
On September 2, 2022, the Company issued a 10% Promissory Note in the principal amount of $30,000 to Sharon Goff (the “Goff Note”). The Goff Note bears interest at the rate of 10% per annum accrued monthly and has a maturity date that is the earlier of (i) November 30, 2022, or (ii) five business days after the date on which the Company successfully lists its shares of common stock on Nasdaq or NYSE. The purchase price of the Goff Note was $25,500; the amount payable at maturity will be $30,000 plus 10% of that amount plus any accrued and unpaid interest. Following an event of default as defined in the Goff Note, the principal amount shall bear interest for each day until paid at a rate per annum equal to the lesser of the maximum interest permitted by applicable law and 18%. The Goff Note entered default status on December 1, 2022, and the interest rate increased to 18%. The Goff Note contains a “most favored nations” clause that provides that, so long as the note is outstanding, if the Company issues any new security which Ms. Goff reasonably believes contains a term that is more favorable than those in the Goff Note, the Company shall notify Ms. Goff of such term, and such term, at the option of Ms. Goff, shall become a part of the Goff Note. In addition, Ms. Goff received 246 shares of common stock with a value of $1,320; this amount was recorded as a discount to the Goff Note. Interest in the amount of $1,190 was accrued on the Goff Note during the year ended December 31, 2022. Discounts in the amount of $8,820 were amortized to interest expense during the year ended December 31, 2022, and total discounts in the amount of $0 remained outstanding at December 31, 2022. Principal and accrued interest in the amounts $33,000 and $1,190, respectively, were due on the Goff Note at December 31, 2022.
During the three and nine months ended September 30, 2023, interest in the amount of $1,380 and $4,112, respectively, was accrued on the Goff Note; principal and accrued interest in the amount of $33,000 and $5,302, respectively, were due on this note at September 30, 2023. This note was in default at September 30, 2023.
Hagan Note
On September 2, 2022, the Company issued a 10% Promissory Note in the principal amount of $100,000 to Cliff Hagan (the “Hagan Note”). The Hagan Note bears interest at the rate of 10% per annum accrued monthly and has a maturity date that is the earlier of (i) December 10, 2022, or (ii) five business days after the date on which the Company successfully lists its shares of common stock on Nasdaq or NYSE. The purchase price of the Hagan Note was $85,000; the amount payable at maturity will be $100,000 plus 10% of that amount plus any accrued and unpaid interest. Following an event of default as defined in the Hagan Note, the principal amount shall bear interest for each day until paid at a rate per annum equal to the lesser of the maximum interest permitted by applicable law and 18%. The Hagan Note entered default status on December 11, 2022, and the interest rate increased to 18%. The Hagan Note contains a “most favored nations” clause that provides that, so long as the note is outstanding, if the Company issues any new security which Mr. Hagan reasonably believes contains a term that is more favorable than those in the Hagan Note, the Company shall notify Mr. Hagan of such term, and such term, at the option of Mr. Hagan, shall become a part of the Hagan Note. In addition, Mr. Hagan received 820 shares of common stock with a value of $4,715; this amount was recorded as a discount to the Hagan Note. Interest in the amount of $3,556 was accrued on the Hagan Note during the year ended December 31, 2022. Discounts in the amount of $29,715 were amortized to interest expense during the year ended December 31, 2022, and total discounts in the amount of $0 remained outstanding at December 31, 2022. Principal and accrued interest in the amounts $110,000 and $3,556, respectively, were due on the Hagan Note at December 31, 2022.
During the three and nine months ended September 30, 2023, interest in the amount of $4,600 and $13,700, respectively, was accrued on the Hagan Note; principal and accrued interest in the amount of $110,000 and $17,526, respectively, were due on this note at September 30, 2023. This note was in default at September 30, 2023.
Darling Note
On September 14, 2022, the Company issued a 10% Promissory Note in the principal amount of $200,000 to Darling Capital, LLC (“Darling”), (the “Darling Note”). The Darling Note bears interest at the rate of 10% per annum accrued monthly and has a maturity date that is the earlier of (i) December 15, 2022, or (ii) five business days after the date on which the Company successfully lists its shares of common stock on Nasdaq or NYSE. The purchase price of the Darling Note was $170,000; the amount payable at maturity will be $200,000 plus 10% of that amount plus any accrued and unpaid interest. Following an event of default as defined in the Darling Note, the principal amount shall bear interest for each day until paid at a rate per annum equal to the lesser of the maximum interest permitted by applicable law and 18%. The Darling Note entered default status on December 15, 2022, and the interest rate increased to 18%. The Darling Note contains a “most favored nations” clause that provides that, so long as the note is outstanding, if the Company issues any new security which Darling reasonably believes contains a term that is more favorable than those in the Darling Note, the Company shall notify Darling of such term, and such term, at the option of Darling shall become a part of the Darling Note. In addition, Darling received 1,640 shares of common stock with a value of $10,824; this amount was recorded as a discount to the Darling Note. Interest in the amount of $6,619 was accrued on the Darling Note during the year ended December 31, 2022. Discounts in the amount of $60,824 were amortized to interest expense during the year ended December 31, 2022, and total discounts in the amount of $0 remained outstanding at December 31, 2022. Principal and accrued interest in the amounts $220,000 and $6,619, respectively, were due on the Darling Note at December 31, 2022.
During the three and nine months ended September 30, 2023, interest in the amount of $0 and $10,192, respectively, was accrued on the Darling Note. On April 11, 2023, an equity investment incentive in the amount of $153,927 representing 65% of the total amount due under the Darling Note, along with original principal of $220,000 and accrued interest of $16,811 (a total of $390,738) was converted to 391 shares of the Company’s Series F Preferred Stock. Other than the equity investment incentive of $153,927, there was no gain or loss recognized on this transaction as the Series F Preferred Stock was issued at its face value of $1,000 per share. At September 30, 2023, there were no amounts due under the Darling Note.
Leath Note
On September 15, 2022, the Company issued a 10% Promissory Note in the principal amount of $50,000 to Mack Leath (the “Leath Note”). The Leath Note bears interest at the rate of 10% per annum accrued monthly and has a maturity date that is the earlier of (i) December 15, 2022, or (ii) five business days after the date on which the Company successfully lists its shares of common stock on Nasdaq or NYSE. The purchase price of the Leath Note was $42,500; the amount payable at maturity will be $55,000 plus 10% of that amount plus any accrued and unpaid interest. Following an event of default as defined in the Leath Note, the principal amount shall bear interest for each day until paid at a rate per annum equal to the lesser of the maximum interest permitted by applicable law and 18%. The Leath Note entered default status on December 16, 2022, and the interest rate increased to 18%. The Leath Note contains a “most favored nations” clause that provides that, so long as the note is outstanding, if the Company issues any new security which Mr. Leath reasonably believes contains a term that is more favorable than those in the Leath Note, the Company shall notify Mr. Leath of such term, and such term, at the option of Mr. Leath, shall become a part of the Leath Note. In addition, Mr. Leath received 410 shares of common stock with a value of $2,868; this amount was recorded as a discount to the Leath Note. Interest in the amount of $1,641 was accrued on the Leath Note during the year ended December 31, 2022. Discounts in the amount of $15,368 were amortized to interest expense during the year ended December 31, 2022, and total discounts in the amount of $0 remained outstanding at December 31, 2022. Principal and accrued interest in the amounts $55,000 and $1,641, respectively, were due on the Leath Note at December 31, 2022.
During the three and nine months ended September 30, 2023, interest in the amount of $2,300 and $6,848, respectively, was accrued on the Leath Note; principal and accrued interest in the amount of $55,000 and $8,489, respectively, were due on this note at September 30, 2023. This note was in default at September 30, 2023.
Cavalry Note
On October 5, 2022, the Company issued a 10% Promissory Note in the principal amount of $500,000 to the Cavalry Fund LLP (“Cavalry”), (the “Cavalry Note”) with a due date of December 31, 2022. The Cavalry Note is subject to an exchange agreement (the “Series E Exchange Agreement”) whereby Cavalry will exchange (a) amounts due under the Cavalry Note, (b) 1,000,000 shares of the Company’s Series C Convertible Preferred Stock, and (c) 750,000 shares of the Company’s Series D Convertible Preferred Stock for a number of shares of the Company’s Series E Convertible Preferred Stock equal to 150% of the principal amount of the Cavalry Note plus 150% of the stated value of the Series C and Series D convertible Preferred Stock. See note 13. The Cavalry Note bears interest at the rate of 10% per annum which will accrue from the date of the note only if the Cavalry Note is not converted pursuant to the Series E Exchange Agreement by December 10, 2022. Following an event of default as defined in the Cavalry Note, the principal amount shall bear interest for each day until paid at a rate per annum equal to the lesser of the maximum interest permitted by applicable law and 18%. The Cavalry Note contains a “most favored nations” clause that provides that, so long as the note is outstanding, if the Company issues any new security which Cavalry reasonably believes contains a term that is more favorable than those in the Cavalry Note, the Company shall notify the Cavalry of such term, and such term, at the option of Cavalry, shall become a part of the Cavalry Note. In addition, Cavalry received five-year warrants to purchase 750 shares of common stock at a price equal to the price of any warrant included in an offering in connection with listing at the Nasdaq Global Market. These warrants are not deemed issued at December 31, 2022 because the exercise price was not yet determined. Costs in the amount of $7,500 were also charged to discount on the Cavalry Note. Discounts in the amount of $10,500 were amortized to interest expense during the year ended December 31, 2022, and total discounts in the amount of $0 remained outstanding at December 31, 2022. Principal and accrued interest in the amounts $500,000 and $11,918, respectively, were due on the Cavalry Note at December 31, 2022.
Concurrent with the Cavalry Note, the Company entered into an exchange agreement (the “Cavalry Exchange Agreement”). Pursuant to the Cavalry Exchange Agreement, Cavalry shall exchange (a) 1,000,000 shares of the Company’s Series C Convertible Preferred Stock (b) 750,000 shares of the Company’s Series D Convertible Preferred Stock and (c) amounts owing under the Cavalry Note, for a number of Series E Convertible Preferred Stock (the “Series E Shares”) equal to 150% of the principal amount of the Cavalry Note, plus 150% of the stated value of the Series C Shares and Series D Shares (the “Series E Exchange Value”). No transactions occurred pursuant to the Cavalry Exchange Agreement during the year ended December 31, 2022. See note 13.
During the three and nine months ended September 30, 2023, interest in the amount of $0 and $25,415 was accrued on the Cavalry Note. On April 11, 2023, an equity investment incentive in the amount of $349,266 representing 65% of the total amount due under the Cavalry Note, along with original principal of $500,000 and accrued interest of $37,333 (a total of $886,599) was converted to 887 shares of the Company’s Series F Preferred Stock. Other than the equity investment incentive of $349,266, there was no gain or loss recognized on this transaction as the Series F Preferred Stock was issued at its face value of $1,000 per share. At September 30, 2023, there were no amounts due under the Cavalry Note.
Mercer Note 1
On October 7, 2022, the Company issued a 10% Promissory Note in the principal amount of $300,000 to the Mercer Street Global Opportunity Fund (“Mercer”), (the “Mercer Note 1”) with a due date of December 31, 2022. The Mercer Note 1 is subject to the Series E Exchange Agreement whereby Mercer will exchange (a) amounts due under the Mercer Note 1, (b) 47,619 shares of the Company’s Series C Convertible Preferred Stock, and (c) 750,000 shares of the Company’s Series D Convertible Preferred Stock for a number of shares of the Company’s Series E Convertible Preferred Stock equal to 150% of the principal amount of the Mercer Note 1 plus 150% of the stated value of the Series C and Series D convertible Preferred Stock. See note 13. The Mercer Note 1 bears interest at the rate of 10% per annum which will accrue from the date of the note only if the Mercer Note 1 is not converted pursuant to the Series E Exchange Agreement by December 10, 2022. Following an event of default as defined in the Mercer Note 1, the principal amount shall bear interest for each day until paid at a rate per annum equal to the lesser of the maximum interest permitted by applicable law and 18%. The Mercer Note 1 contains a “most favored nations” clause that provides that, so long as the note is outstanding, if the Company issues any new security which Mercer reasonably believes contains a term that is more favorable than those in the Mercer Note 1, the Company shall notify Mercer of such term, and such term, at the option of Mercer, shall become a part of the Mercer Note 1. In addition, Mercer received five-year warrants to purchase 750 shares of common stock at a price equal to the price of any warrant included in an offering in connection with listing at the Nasdaq Global Market. These warrants are not deemed issued at December 31, 2022 because the exercise price was not yet determined. Interest in the amount of $6,986 was accrued on the Mercer Note 1 during the year ended December 31, 2022. Discounts in the amount of $10,500 were amortized to interest expense during the year ended December 31, 2022, and total discounts in the amount of $0 remained outstanding at December 31, 2022. Principal and accrued interest in the amounts $300,000 and $6,986, respectively, were due on the Mercer Note 1 at December 31, 2022.
Concurrent with the Mercer Note 1, the Company entered into an exchange agreement (the “Mercer Exchange Agreement”). Pursuant to the Mercer Exchange Agreement, Mercer shall exchange (a) 47,619 shares of the Company’s Series C Convertible Preferred Stock, (b) 750,000 shares of the Company’s Series D Convertible Preferred Stock, and (c) amounts owing under the Mercer Note, for a number of Series E Convertible Preferred Stock (the “Series E Shares”) equal to 150% of the principal amount of the Mercer Note, plus 150% of the stated value of the Series C Shares and Series D Shares (the “Series E Exchange Value”). No transactions occurred pursuant to the Cavalry Exchange Agreement during the year ended December 31, 2022. See note 13.
During the three and nine months ended September 30, 2023, interest in the amount of $0 and $15,247, respectively, was accrued on the Mercer Note 1. On April 11, 2023, an equity investment incentive in the amount of $209,452 representing 65% of the total amount due under the Mercer Note 1, along with original principal of $300,000 and accrued interest of $22,233 (a total of $531,685) was converted to 531 shares of the Company’s Series F Preferred Stock. Other than the equity investment incentive of $209,452, there was no gain or loss recognized on this transaction as the Series F Preferred Stock was issued at its face value of $1,000 per share. At September 30, 2023, there were no amounts due under the Mercer Note 1.
Pinz Note
On October 10, 2022, the Company issued a 10% Promissory Note in the principal amount of $30,000 to the Pinz Capital Special Opportunities Fund (“Pinz”), (the “Pinz Note”) with a due date of December 31, 2022. The Pinz Note is subject to the Series E Exchange Agreement whereby Pinz will exchange (a) amounts due under the Pinz Note, (b) 100,000 shares of the Company’s Series D Convertible Preferred Stock for a number of shares of the Company’s Series E Convertible Preferred Stock equal to 150% of the principal amount of the Pinz Note plus 150% of the stated value of the Series D convertible Preferred Stock. See note 13. The Pinz Note bears interest at the rate of 10% per annum which will accrue from the date of the note only if the Pinz Note is not converted pursuant to the Series E Exchange Agreement by December 10, 2022. Following an event of default as defined in the Pinz Note, the principal amount shall bear interest for each day until paid at a rate per annum equal to the lesser of the maximum interest permitted by applicable law and 18%. The Pinz Note contains a “most favored nations” clause that provides that, so long as the note is outstanding, if the Company issues any new security which the Pinz Fund LLP reasonably believes contains a term that is more favorable than those in the Pinz Note, the Company shall notify the Pinz Fund LLP of such term, and such term, at the option of the Pinz Fund, LLP, shall become a part of the Pinz Note. In Interest in the amount of $6,986 was accrued on the Pinz Note during the year ended December 31, 2022. Discounts in the amount of $2,100 were amortized to interest expense during the year ended December 31, 2022, and total discounts in the amount of $0 remained outstanding at December 31, 2022. Principal and accrued interest in the amounts $30,000 and $674, respectively, were due on the Pinz Note at December 31, 2022.
Concurrent with the Pinz Note, the Company entered into an exchange agreement (the “Pinz Exchange Agreement”). Pursuant to the Pinz Exchange Agreement, Pinz shall exchange (a) 100,000 shares of the Company’s Series D Convertible Preferred Stock, and (b) amounts owing under the Pinz Note, for a number of Series E Convertible Preferred Stock equal to 150% of the principal amount of the Pinz Note, plus 150% of the stated value of the Series D Shares. No transactions occurred pursuant to the Pinz Exchange Agreement during the year ended December 31, 2022. See note 13.
During the three and nine months ended September 30, 2023, interest in the amount of $1,650 and $15,247, respectively, was accrued on the Pinz Note. On April 11, 2023, an equity investment incentive in the amount of $20,929 representing 65% of the total amount due under the Pinz Note, along with original principal of $30,000 and accrued interest of $2,198 (a total of $53,127) was converted to 54 shares of the Company’s Series F Preferred Stock. Other than the equity investment incentive of $20,929, there was no gain or loss recognized on this transaction as the Series F Preferred Stock was issued at its face value of $1,000 per share. At September 30, 2023, there were no amounts due under the Pinz Note.
Mercer Note 2
On October 24, 2022, the Company issued a 10% Promissory Note in the principal amount of $100,000 to Mercer (the “Mercer Note 2”) with a due date of December 31, 2022. The Mercer Note 2 is subject to the Series E Exchange Agreement whereby Mercer will exchange (a) amounts due under the Mercer Note 2 for a number of shares of the Company’s Series E Convertible Preferred Stock equal to 150% of the principal amount of the Mercer Note 2. See note 13. The Mercer Note 2 bears interest at the rate of 10% per annum which will accrue from the date of the note only if the Mercer Note 2 is not converted pursuant to the Series E Exchange Agreement by December 10, 2022. Following an event of default as defined in the Mercer Note 2, the principal amount shall bear interest for each day until paid at a rate per annum equal to the lesser of the maximum interest permitted by applicable law and 18%. The Mercer Note 2 contains a “most favored nations” clause that provides that, so long as the note is outstanding, if the Company issues any new security which Mercer reasonably believes contains a term that is more favorable than those in the Mercer Note 2, the Company shall notify Mercer of such term, and such term, at the option of Mercer, shall become a part of the Mercer Note 2. In addition, Mercer received five-year warrants to purchase 750 shares of common stock at a price equal to the price of any warrant included in an offering in connection with listing at the Nasdaq Global Market. These warrants are not deemed issued at December 31, 2022 because the exercise price was not yet determined. Interest in the amount of $1,863 was accrued on the Mercer Note 2 during the year ended December 31, 2022. Discounts in the amount of $1,900 were amortized to interest expense during the year ended December 31, 2022, and total discounts in the amount of $0 remained outstanding at December 31, 2022. Principal and accrued interest in the amounts $100,000 and $1,863, respectively, were due on the Mercer Note 2 at December 31, 2022.
During the three and nine months ended September 30, 2023, interest in the amount of $0 and $5,076, respectively, was accrued on the Mercer Note 2. On April 11, 2023, an equity investment incentive in the amount of $69,510 representing 65% of the total amount due under the Mercer Note 2, along with original principal of $100,000 and accrued interest of $6,939 (a total of $176,449) was converted to 177 shares of the Company’s Series F Preferred Stock. Other than the equity investment incentive of $69,510, there was no gain or loss recognized on this transaction as the Series F Preferred Stock was issued at its face value of $1,000 per share. At September 30, 2023, there were no amounts due under the Mercer Note 2.
Mercer Note 3
On December 2, 2022, the Company issued a 10% Promissory Note in the principal amount of $125,000 to Mercer (the “Mercer Note 3”) with a due date of May 21, 2023. The Mercer Note 3 is subject to the Series E Exchange Agreement whereby Mercer will exchange amounts due under the Mercer Note 3 for a number of shares of the Company’s Series E Convertible Preferred Stock equal to 150% of the principal amount of the Mercer Note 3. See note 13. The Mercer Note 3 bears interest at the rate of 10% per annum which will accrue from the date of the note only if the Mercer Note 3 is not converted pursuant to the Series E Exchange Agreement by May 10, 2023. Following an event of default as defined in the Mercer Note 3, the principal amount shall bear interest for each day until paid at a rate per annum equal to the lesser of the maximum interest permitted by applicable law and 18%. The Mercer Note 3 contains a “most favored nations” clause that provides that, so long as the note is outstanding, if the Company issues any new security which Mercer reasonably believes contains a term that is more favorable than those in the Mercer Note 3, the Company shall notify Mercer of such term, and such term, at the option of Mercer, shall become a part of the Mercer Note 3. In addition, Mercer received five-year warrants to purchase 750 shares of common stock at a price equal to the price of any warrant included in an offering in connection with listing at the Nasdaq Global Market. These warrants are not deemed issued at December 31, 2022 because the exercise price was not yet. determined. Discounts in the amount of $4,028 were amortized to interest expense during the year ended December 31, 2022, and total discounts in the amount of $20,972 remained outstanding at December 31, 2022. Principal and accrued interest in the amounts $125,000 and $993, respectively, were due on the Mercer Note 3 at December 31, 2022.
During the three and nine months ended September 30, 2023, interest in the amount of $0 and $3,521, respectively, was accrued on the Mercer Note 3. Also during the three and nine months ended September 30, 2023, discounts in the amount of $12,500 and $20,972, respectively, were amortized to interest expense. On April 11, 2023, an equity investment incentive in the amount of $67,934 representing 65% of the total amount due under the Mercer Note 3, along with original principal of $100,000 and accrued interest of $4,514 (a total of $172,448) was converted to 173 shares of the Company’s Series F Preferred Stock. The premium on the Mercer Note 3 in the amount of $25,000 was forgiven by Mercer, and the Company recognized a gain on forgiveness of debt in the amount of $25,000. Other than the equity investment incentive of $67,934, there was no other gain or loss recognized on this transaction as the Series F Preferred Stock was issued at its face value of $1,000 per share. At September 30, 2023, there were no amounts due under the Mercer Note 3.
These amounts are reflected in the table below:
| |
|
September 30,
2023
|
|
|
December 31,
2022
|
|
|
Notes Payable
|
|
$ |
1,143,235 |
|
|
$ |
5,144,741 |
|
|
Less: Discount
|
|
|
- |
|
|
|
(32,040 |
) |
|
Notes payable - net of discount
|
|
$ |
1,143,235 |
|
|
$ |
5,112,701 |
|
| |
|
|
|
|
|
|
|
|
|
Current Portion, net of discount
|
|
$ |
1,143,235 |
|
|
$ |
5,112,701 |
|
|
Long-term portion, net of discount
|
|
$ |
- |
|
|
$ |
- |
|
Interest expense on notes payable was $69,525 and $50,321 for the three months ended September 30, 2023 and 2022, respectively; interest expense on notes payable was $413,137 and $86,438 for the nine months ended September 30, 2023 and 2022, respectively. Accrued interest on notes payable was $187,264 and $362,094 at September 30, 2023 and December 31, 2022, respectively.
Note 11: Notes Payable – Related Parties
Howe Note 1
On December 30, 2021, we issued a 10% Promissory Note in the principal amount of $1,000,000 in a related party transaction to the Michael C. Howe Living Trust (the “Howe Note 1”). Michael C. Howe was the Chief Executive Officer of the Good Clinic LLC, one of our subsidiaries. The Howe Note 1 bears interest at the rate of 10% interest rate per annum and has a maturity date that is the earlier of (i) November 30, 2022, as extended, or (ii) five (5) business days after the date on which the Company successfully lists its shares of common stock on Nasdaq or NYSE. The purchase price of the Howe Note 1 was $850,000; the amount payable at maturity will be $1,000,000 plus 10% of that amount plus any accrued and unpaid interest. Following an event of default, as defined in the Howe Note 1, the principal amount shall bear interest for each day until paid at a rate per annum equal to the lesser of the maximum interest permitted by applicable law and 18%. The Howe Note 1 entered delinquent status on December 1, 2022, and the interest rate increased to 18%. The Howe Note 1 contains a “most favored nations” clause that provides that, so long as the note is outstanding, if the Company issues any new security, which Mr. Howe reasonably believes contains a term that is more favorable than those in the Howe Note 1, we shall notify Mr. Howe of such term, and such term, at the option of Mr. Howe, shall become a part of the Howe Note 1. In addition, Mr. Howe five-year warrants to purchase 42,000 shares of common stock at a price of $25.00 per share, and five-year warrants to purchase 42,000 shares of common stock at $37.50 per share with an aggregate fair value of $261,568 at the date of issuance, which was recorded as a discount to this note. Interest in the amount of $106,795 was accrued on the Howe Note 1 during the year ended December 31, 2022. Discounts in the amount of $511,568 were amortized to interest expense during the year ended December 31, 2022, and total discounts in the amount of $0 remained outstanding at December 31, 2022. Principal and accrued interest in the amounts $1,100,000 and $106,795, respectively, were due on the Howe Note 1 at December 31, 2022.
During the three and nine months ended September 30, 2023, interest in the amount of $46,000 and $138,261, respectively, was accrued on the Howe Note 1; principal and accrued interest in the amount of $1,100,000 and $245,056, respectively, were due on this note at September 30, 2023. This note was in default at September 30, 2023. See note 16.
Diamond Note 1
On February 24, 2022, the Company issued a 10% Promissory Note in the principal amount of $175,000 in a related party transaction to Lawrence Diamond, who was Chief Executive Officer and a member of our Board of Directors (the “Diamond Note 1”). The Diamond Note 1 bears interest at the rate of 10% per annum accrued monthly and has a maturity date that is the earlier of (i) November 30, 2022, as extended, or (ii) five business days after the date on which the Company successfully lists its shares of common stock on Nasdaq or NYSE. The purchase price of the Diamond Note 1 was $148,750; the amount payable at maturity will be $175,000 plus 10% of that amount plus any accrued and unpaid interest. Following an event of default as defined in the Diamond Note 1, the principal amount shall bear interest for each day until paid at a rate per annum equal to the lesser of the maximum interest permitted by applicable law and 18%. The Diamond Note 1 entered default status on December 1, 2022, and the interest rate increased to 18%. The Diamond Note 1 contains a “most favored nations” clause that provides that, so long as the note is outstanding, if the Company issues any new security which Mr. Diamond reasonably believes contains a term that is more favorable than those in the Diamond Note 1, the Company shall notify Mr. Diamond of such term, and such term, at the option of Mr. Diamond, shall become a part of the Diamond Note 2. In addition, Mr. Diamond received five-year warrants to purchase 7,350 shares of common stock at a price of $25.00 per share, and five-year warrants to purchase 7,350 shares of common stock at $37.50 per share with an aggregate fair value of $2,914 at the date of issuance, which was recorded as a discount to this note. Interest in the amount of $16,052 was accrued on the Diamond Note 1 during the year ended December 31, 2022. Discounts in the amount of $46,664 were amortized to interest expense during the year ended December 31, 2022, and total discounts in the amount of $0 remained outstanding at December 31, 2022. Principal and accrued interest in the amounts $192,500 and $16,052, respectively, were due on the Diamond Note 1 at December 31, 2022.
During the three and nine months ended September 30, 2023, interest in the amount of $7,963 and $24,024, respectively, was accrued on the Diamond Note 1
On September 29, 2023, an equity investment incentive in the amount of $151,174 representing 65% of the total amount due under the Diamond Note 1, along with original principal of $175,000, premium of $17,500, and accrued interest of $40,076 (a total of $383,750) was converted to 384 shares of the Company’s Series F Preferred Stock. Other than the equity investment incentive of $151,174, there was no gain or loss recognized on this transaction as the Series F Preferred Stock was issued at its face value of $1,000 per share. At September 30, 2023, there were no amounts due under the Diamond Note 1.
Diamond Note 2
On March 18, 2022, the Company issued a 10% Promissory Note in the principal amount of $235,294 in a related party transaction to Lawrence Diamond, who was Chief Executive Officer and a member of our Board of Directors (the “Diamond Note 2). The Diamond Note 2 bears interest at the rate of 10% per annum accrued monthly and has a maturity date that is the earlier of (i) November 30, 2022, as extended, or (ii) five business days after the date on which the Company successfully lists its shares of common stock on Nasdaq or NYSE. The purchase price of the Diamond Note 2 was $200,000; the amount payable at maturity will be $235,294 plus 10% of that amount plus any accrued and unpaid interest. Following an event of default as defined in the Diamond Note 2, the principal amount shall bear interest for each day until paid at a rate per annum equal to the lesser of the maximum interest permitted by applicable law and 18%. The Diamond Note 2 entered default status on December 1, 2022, and the interest rate increased to 18%. The Diamond Note 2 contains a “most favored nations” clause that provides that, so long as the note is outstanding, if the Company issues any new security which Mr. Diamond reasonably believes contains a term that is more favorable than those in the Diamond Note 2, the Company shall notify Mr. Diamond of such term, and such term, at the option of Mr. Diamond, shall become a part of the Diamond Note 2. In addition, Mr. Diamond received five-year warrants to purchase 1,930 shares of common stock at a price of $25.00 per share a fair value of $2,213 at the date of issuance, which was recorded as a discount to this note. Interest in the amount of $1,676 was accrued on the Diamond Note 2 during the year ended December 31, 2022. Principal in the amount of $235,294 was paid on the Diamond Note 2 during the year ended December 31, 2022. Discounts in the amount of $61,036 were amortized to interest expense during the year ended December 31, 2022, and total discounts in the amount of $0 remained outstanding at December 31, 2022. Principal and accrued interest in the amounts $23,529 and $1,676, respectively, were due on the Diamond Note 2 at December 31, 2022.
During the three and nine months ended September 30, 2023, interest in the amount of $0 was accrued on the Diamond Note 2
On September 29, 2023, an equity investment incentive in the amount of $16,398 representing 65% of the total amount due under the Diamond Note 2, along with the premium of $23,529 and accrued interest of $1,699 (a total of $41,626) was converted to 42 shares of the Company’s Series F Preferred Stock. Other than the equity investment incentive of $16,398, there was no gain or loss recognized on this transaction as the Series F Preferred Stock was issued at its face value of $1,000 per share. At September 30, 2023, there were no amounts due under the Diamond Note 2.
Diamond Note 3
On April 27, 2022, the Company issued a 10% Promissory Note in the principal amount of $235,294 in a related party transaction to Lawrence Diamond, who was Chief Executive Officer and a member of our Board of Directors (the “Diamond Note 3”). The Diamond Note 3 bears interest at the rate of 10% per annum accrued monthly and has a maturity date that is the earlier of (i) November 30, 2022, as extended, or (ii) five business days after the date on which the Company successfully lists its shares of common stock on Nasdaq or NYSE. The purchase price of the Diamond Note 3 was $200,000; the amount payable at maturity will be $235,294 plus 10% of that amount plus any accrued and unpaid interest. Following an event of default as defined in the Diamond Note 3, the principal amount shall bear interest for each day until paid at a rate per annum equal to the lesser of the maximum interest permitted by applicable law and 18%. The Diamond Note 3 entered default status on December 1, 2022, and the interest rate increased to 18%. The Diamond Note 3 contains a “most favored nations” clause that provides that, so long as the note is outstanding, if the Company issues any new security which Mr. Diamond reasonably believes contains a term that is more favorable than those in the Diamond Note 3, the Company shall notify Mr. Diamond of such term, and such term, at the option of Mr. Diamond, shall become a part of the Diamond Note 3. In addition, Mr. Diamond received five-year warrants to purchase 1,930 shares of common stock at a price of $25.00 per share with a fair value of $8,800 at the date of issuance, and 1,930 shares of common stock with a value of $16,200; these amounts were recorded as discounts on the Diamond Note 3. Interest in the amount of $17,586 was accrued on the Diamond Note 3 during the year ended December 31, 2022. Discounts in the amount of $83,823 were amortized to interest expense during the year ended December 31, 2022, and total discounts in the amount of $0 remained outstanding at December 31, 2022. Principal and accrued interest in the amounts $258,823 and $17,586, respectively, were due on the Diamond Note 3 at December 31, 2022.
During the three and nine months ended September 30, 2023, interest in the amount of $10,706 and $32,244, respectively, was accrued on the Diamond Note 3.
On September 29, 2023, an equity investment incentive in the amount of $200,624 representing 65% of the total amount due under the Diamond Note 3, along with original principal of $235,294, premium of $23,529, and accrued interest of $49,830 (a total of $509,277) was converted to 509 shares of the Company’s Series F Preferred Stock. Other than the equity investment incentive of $200,624, there was no gain or loss recognized on this transaction as the Series F Preferred Stock was issued at its face value of $1,000 per share. At September 30, 2023, there were no amounts due under the Diamond Note 3.
Diamond Note 4
On May 18, 2022, the Company issued a 10% Promissory Note in the principal amount of $47,059 in a related party transaction to Lawrence Diamond, who was Chief Executive Officer and a member of our Board of Directors (the “Diamond Note 4”). The Diamond Note 4 bears interest at the rate of 10% per annum accrued monthly and has a maturity date that is the earlier of (i) November 30, 2022, as extended, or (ii) five business days after the date on which the Company successfully lists its shares of common stock on Nasdaq or NYSE. The purchase price of the Diamond Note 4 was $40,000; the amount payable at maturity will be $47,059 plus 10% of that amount plus any accrued and unpaid interest. Following an event of default as defined in the Diamond Note 4, the principal amount shall bear interest for each day until paid at a rate per annum equal to the lesser of the maximum interest permitted by applicable law and 18%. The Diamond Note 4 entered default status on December 1, 2022, and the interest rate increased to 18%. The Diamond Note 4 contains a “most favored nations” clause that provides that, so long as the note is outstanding, if the Company issues any new security which Mr. Diamond reasonably believes contains a term that is more favorable than those in the Diamond Note 4, the Company shall notify Mr. Diamond of such term, and such term, at the option of Mr. Diamond, shall become a part of the Diamond Note 4. In addition, Mr. Diamond received five-year warrants to purchase 386 shares of common stock at a price of $25.00 per share with a fair value of $2,960 at the date of issuance, and 1,930 shares of common stock with a value of $3,160; these amounts were recorded as discounts on the Diamond Note 4. Interest in the amount of $3,245 was accrued on the Diamond Note 4 during the year ended December 31, 2022. Discounts in the amount of $17,885 were amortized to interest expense during the year ended December 31, 2022, and total discounts in the amount of $0 remained outstanding at December 31, 2022. Principal and accrued interest in the amounts $51,765 and $3,245, respectively, were due on the Diamond Note 4 at December 31, 2022.
During the three and nine months ended September 30, 2023, interest in the amount of $2,141 and $6,446 was accrued on the Diamond Note 4.
On September 29, 2023, an equity investment incentive in the amount of $39,946 representing 65% of the total amount due under the Diamond Note 4, along with original principal of $47,059, premium of $4,706, and accrued interest of $9,691 (a total of $101,402) was converted to 101 shares of the Company’s Series F Preferred Stock. Other than the equity investment incentive of $200,624, there was no gain or loss recognized on this transaction as the Series F Preferred Stock was issued at its face value of $1,000 per share. At September 30, 2023, there were no amounts due under the Diamond Note 4.
Diamond Note 5
On May 26, 2022, the Company issued a 10% Promissory Note in the principal amount of $58,823 in a related party transaction to Lawrence Diamond, who was Chief Executive Officer and a member of our Board of Directors (the “Diamond Note 5”). The Diamond Note 5 bears interest at the rate of 10% per annum accrued monthly and has a maturity date that is the earlier of (i) November 30, 2022, or (ii) five business days after the date on which the Company successfully lists its shares of common stock on Nasdaq or NYSE. The purchase price of the Diamond Note 5 was $50,000; the amount payable at maturity will be $58,823 plus 10% of that amount plus any accrued and unpaid interest. Following an event of default as defined in the Diamond Note 5, the principal amount shall bear interest for each day until paid at a rate per annum equal to the lesser of the maximum interest permitted by applicable law and 18%. The Diamond Note 5 entered default status on December 1, 2022, and the interest rate increased to 18%. The Diamond Note 5 contains a “most favored nations” clause that provides that, so long as the note is outstanding, if the Company issues any new security which Mr. Diamond reasonably believes contains a term that is more favorable than those in the Diamond Note 5, the Company shall notify Mr. Diamond of such term, and such term, at the option of Mr. Diamond, shall become a part of the Diamond Note 5. In addition, Mr. Diamond received five-year warrants to purchase 483 shares of common stock at a price of $25.00 per share with a fair value of $2,500 at the date of issuance, and 483 shares of common stock with a value of $4,050; these amounts were recorded as discounts to the Diamond Note 5. Interest in the amount of $3,929 was accrued on the Diamond Note 5 during the year ended December 31, 2022. Discounts in the amount of $21,256 were amortized to interest expense during the year ended December 31, 2022, and total discounts in the amount of $0 remained outstanding at December 31, 2022. Principal and accrued interest in the amounts $64,705 and $3,929, respectively, were due on the Diamond Note 5 at December 31, 2022.
During the three and nine months ended September 30, 2023, interest in the amount of $2,677 and $8,055, respectively, was accrued on the Diamond Note 5.
On September 29, 2023, an equity investment incentive in the amount of $49,849 representing 65% of the total amount due under the Diamond Note 5, along with original principal of $58,824, premium of $5,882, and accrued interest of $11,984 (a total of $126,539) was converted to 127 shares of the Company’s Series F Preferred Stock. Other than the equity investment incentive of $200,624, there was no gain or loss recognized on this transaction as the Series F Preferred Stock was issued at its face value of $1,000 per share. At September 30, 2023, there were no amounts due under the Diamond Note 5.
Lindstrom Note 1
On May 26, 2022, the Company issued a 10% Promissory Note in the principal amount of $41,176 in a related party transaction to Jenny Lindstrom, who was the Company’s Chief Legal Officer (the “Lindstrom Note 1”). The Lindstrom Note 1 bears interest at the rate of 10% per annum accrued monthly and has a maturity date that is the earlier of (i) November 30, 2022, or (ii) five business days after the date on which the Company successfully lists its shares of common stock on Nasdaq or NYSE. The purchase price of the Lindstrom Note 1 was $35,000; the amount payable at maturity will be $41,176 plus 10% of that amount plus any accrued and unpaid interest. Following an event of default as defined in the Lindstrom Note 1, the principal amount shall bear interest for each day until paid at a rate per annum equal to the lesser of the maximum interest permitted by applicable law and 18%. The Lindstrom Note 1 entered default status on December 1, 2022, and the interest rate increased to 18%. The Lindstrom Note 1 contains a “most favored nations” clause that provides that, so long as the note is outstanding, if the Company issues any new security which Ms. Lindstrom reasonably believes contains a term that is more favorable than those in the Lindstrom Note 1, the Company shall notify Ms. Lindstrom of such term, and such term, at the option of Ms. Lindstrom, shall become a part of the Lindstrom Note 1. In addition, Ms. Lindstrom received five-year warrants to purchase 338 shares of common stock at a price of $25.00 per share with a fair value of $1,750 at the date of issuance, and 338 shares of common stock with a value of $2,835; these amounts were recorded as discounts to the Lindstrom Note 1. Interest in the amount of $2,750 was accrued on the Lindstrom Note 1 during the year ended December 31, 2022. Discounts in the amount of $14,879 were amortized to interest expense during the year ended December 31, 2022, and total discounts in the amount of $0 remained outstanding at December 31, 2022. Principal and accrued interest in the amounts $45,294 and $2,750, respectively, were due on the Lindstrom Note 1 at December 31, 2022.
During the three and nine months ended September 30, 2023, interest in the amount of $1,894 and $5,659, respectively, was accrued on the Lindstrom Note; principal and accrued interest in the amount of $45,294 and $8,409, respectively, were due on this note at September 30, 2023. This note was in default at September 30, 2023.
Dobbertin Note
On May 26, 2022, the Company issued a 10% Promissory Note in the principal amount of $17,647 in a related party transaction to Alexander Dobbertin (the “Dobbertin Note”). Mr. Dobbertin is the spouse of Jenny Lindstrom, who was the Company’s Chief Legal Officer. The Dobbertin Note bears interest at the rate of 10% per annum accrued monthly and has a maturity date that is the earlier of (i) November 30, 2022, or (ii) five business days after the date on which the Company successfully lists its shares of common stock on Nasdaq or NYSE. The purchase price of the Dobbertin Note was $15,000; the amount payable at maturity will be $17,647 plus 10% of that amount plus any accrued and unpaid interest. Following an event of default as defined in the Dobbertin Note, the principal amount shall bear interest for each day until paid at a rate per annum equal to the lesser of the maximum interest permitted by applicable law and 18%. The Dobbertin Note entered default status on December 1, 2022, and the interest rate increased to 18%. The Dobbertin Note contains a “most favored nations” clause that provides that, so long as the note is outstanding, if the Company issues any new security which Mr. Dobbertin reasonably believes contains a term that is more favorable than those in the Dobbertin Note, the Company shall notify Mr. Dobbertin of such term, and such term, at the option of Mr. Dobbertin, shall become a part of the Dobbertin Note. In addition, Mr. Dobbertin received five-year warrants to purchase 145 shares of common stock at a price of $25.00 per share with a fair value of $750 at the date of issuance, and 145 shares of common stock with a value of $1,215; these amounts were recorded as discounts to the Dobbertin Note. Interest in the amount of $1,179 was accrued on the Dobbertin Note during the year ended December 31, 2022. Discounts in the amount of $6,377 were amortized to interest expense during the year ended December 31, 2022, and total discounts in the amount of $0 remained outstanding at December 31, 2022. Principal and accrued interest in the amounts $19,412 and $1,179, respectively, were due on the Dobbertin Note at December 31, 2022.
During the three and nine months ended September 30, 2023, interest in the amount of $811 and $2,425, respectively, was accrued on the Dobbertin Note; principal and accrued interest in the amount of $19,412 and $3,604, respectively, were due on this note at September 30, 2023. This note was in default at September 30, 2023.
Howe Note 2
On June 9, 2022, the Company issued a 10% Promissory Note in the principal amount of $300,000 in a related party transaction to the Michael C. Howe Living Trust (the “Howe Note 2”). Michael C. Howe was the Chief Executive Officer of the Good Clinic LLC, one of our subsidiaries. The Howe Note 2 bears interest at the rate of 10% per annum accrued monthly and has a maturity date that is the earlier of (i) November 30, 2022, or (ii) five business days after the date on which the Company successfully lists its shares of common stock on Nasdaq or NYSE. The purchase price of the Howe Note 2 was $255,000; the amount payable at maturity will be $300,000 plus 10% of that amount plus any accrued and unpaid interest. Following an event of default as defined in the Howe Note 2, the principal amount shall bear interest for each day until paid at a rate per annum equal to the lesser of the maximum interest permitted by applicable law and 18%. The Howe Note 2 entered default status on December 1, 2022, and the interest rate increased to 18%. The Howe Note 2 contains a “most favored nations” clause that provides that, so long as the note is outstanding, if the Company issues any new security which Mr. Howe reasonably believes contains a term that is more favorable than those in the Howe Note 2, the Company shall notify Mr. Howe of such term, and such term, at the option of Mr. Howe, shall become a part of the Howe Note 2. In addition, Mr. Howe received five-year warrants to purchase 2,460 shares of common stock at a price of $25.00 per share with a fair value of $10,965 at the date of issuance, and 2,460 shares of common stock with a value of $22,440; these amounts were recorded as discounts to the Howe Note 2. Interest in the amount of $18,888 was accrued on the Howe Note 2 during the year ended December 31, 2022. Discounts in the amount of $108,405 were amortized to interest expense during the year ended December 31, 2022, and total discounts in the amount of $0 remained outstanding at December 31, 2022. Principal and accrued interest in the amounts $330,000 and $18,888, respectively, were due on the Howe Note 2 at December 31, 2022.
During the three and nine months ended September 30, 2023, interest in the amount of $13,800 and $41,212, respectively, was accrued on the Howe Note 2; principal and accrued interest in the amount of $330,000 and $60,100, respectively, were due on this note at September 30, 2023. This note was in default at September 30, 2023.
Howe Note 3
On July 21, 2022, the Company issued a 10% Promissory Note in the principal amount of $300,000 in a related party transaction to the Michael C. Howe Living Trust (the “Howe Note 3”). Michael C. Howe was the Chief Executive Officer of the Good Clinic LLC, one of our subsidiaries. The Howe Note 3 bears interest at the rate of 10% per annum accrued monthly and has a maturity date that is the earlier of (i) November 30, 2022, as extended, or (ii) five business days after the date on which the Company successfully lists its shares of common stock on Nasdaq or NYSE. The purchase price of the Howe Note 3 was $255,000; the amount payable at maturity will be $300,000 plus 10% of that amount plus any accrued and unpaid interest. Following an event of default as defined in the Howe Note 3, the principal amount shall bear interest for each day until paid at a rate per annum equal to the lesser of the maximum interest permitted by applicable law and 18%. The Howe Note 3 entered default status on December 1, 2022, and the interest rate increased to 18%. The Howe Note 3 contains a “most favored nations” clause that provides that, so long as the note is outstanding, if the Company issues any new security which Mr. Howe reasonably believes contains a term that is more favorable than those in the Howe Note 3, the Company shall notify Mr. Howe of such term, and such term, at the option of Mr. Howe, shall become a part of the Howe Note 3. In addition, Mr. Howe received five-year warrants to purchase 2,460 shares of common stock at a price of $25.00 per share with a fair value of $9,945 at the date of issuance, and 2,460 shares of common stock with a value of $12,495; these amounts were recorded as discounts to the Howe Note 3. Interest in the amount of $15,436 was accrued on the Howe Note 3 during the year ended December 31, 2022. Discounts in the amount of $97,440 were amortized to interest expense during the year ended December 31, 2022, and total discounts in the amount of $0 remained outstanding at December 31, 2022. Principal and accrued interest in the amounts $330,000 and $15,436, respectively, were due on the Howe Note 3 at December 31, 2022.
During the three and nine months ended September 30, 2023, interest in the amount of $13,800 and $41,164, respectively, was accrued on the Howe Note 3; principal and accrued interest in the amount of $330,000 and $56,600, respectively, were due on this note at September 30, 2023. This note was in default at September 30, 2023.
Iturregui Note 1
On July 21, 2022, the Company issued a 10% Promissory Note in the principal amount of $29,412 in a related party transaction to Juan Carlos Iturregui, who was a member of the Company’s Board of Directors (the “Iturregui Note 1”). The Iturregui Note 1 bears interest at the rate of 10% per annum accrued monthly and has a maturity date that is the earlier of (i) January 21, 2023, or (ii) five business days after the date on which the Company successfully lists its shares of common stock on Nasdaq or NYSE. The purchase price of the Iturregui Note 1 was $25,000; the amount payable at maturity will be $29,412 plus 10% of that amount plus any accrued and unpaid interest. Following an event of default as defined in the Iturregui Note 1, the principal amount shall bear interest for each day until paid at a rate per annum equal to the lesser of the maximum interest permitted by applicable law and 18%. The Iturregui Note 1 contains a “most favored nations” clause that provides that, so long as the note is outstanding, if the Company issues any new security which Mr. Iturregui reasonably believes contains a term that is more favorable than those in the Iturregui Note 1, the Company shall notify Mr. Iturregui of such term, and such term, at the option of Mr. Iturregui, shall become a part of the Iturregui Note 1. In addition, Mr. Iturregui received five-year warrants to purchase 242 shares of common stock at a price of $25.00 per share with a fair value of $975 at the date of issuance, and 242 shares of common stock with a value of $1,225; these amounts were recorded as discounts to the Iturregui Note 1. Interest in the amount of $1,313 was accrued on the Iturregui Note 1 during the year ended December 31, 2022. Discounts in the amount of $8,464 were amortized to interest expense during the year ended December 31, 2022, and total discounts in the amount of $1,089 remained outstanding at December 31, 2022. Principal and accrued interest in the amounts $32,353 and $1,313, respectively, were due on the Iturregui Note 1 at December 31, 2022.
During the three and nine months ended September 2023, interest in the amount of $1,338 and $3,881, respectively, was accrued on the Iturregui Note 1.
On September 29, 2023, an equity investment incentive in the amount of $24,406 representing 65% of the total amount due under the Iturregui Note 1, along with original principal of $29,412, premium of $2,941, and accrued interest of $5,194 (a total of $61,953) was converted to 62 shares of the Company’s Series F Preferred Stock. Other than the equity investment incentive of $24,406, there was no gain or loss recognized on this transaction as the Series F Preferred Stock was issued at its face value of $1,000 per share. At September 30, 2023, there were no amounts due under the Iturregui Note 1.
Howe Note 4
On August 18, 2022, the Company issued a 10% Promissory Note in the principal amount of $200,000 in a related party transaction to the Michael C. Howe Living Trust (the “Howe Note 4”). Michael C. Howe was the Chief Executive Officer of the Good Clinic LLC, one of our subsidiaries. The Howe Note 4 bears interest at the rate of 10% per annum accrued monthly and has a maturity date that is the earlier of (i) November 30, 2022, or (ii) five business days after the date on which the Company successfully lists its shares of common stock on Nasdaq or NYSE. The purchase price of the Howe Note 4 was $170,000; the amount payable at maturity will be $200,000 plus 10% of that amount plus any accrued and unpaid interest. Following an event of default as defined in the Howe Note 4, the principal amount shall bear interest for each day until paid at a rate per annum equal to the lesser of the maximum interest permitted by applicable law and 18%. The Howe Note 4 entered default status on December 1, 2022, and the interest rate increased to 18%. The Howe Note 4 contains a “most favored nations” clause that provides that, so long as the note is outstanding, if the Company issues any new security which Mr. Howe reasonably believes contains a term that is more favorable than those in the Howe Note 4, the Company shall notify Mr. Howe of such term, and such term, at the option of Mr. Howe, shall become a part of the Howe Note 4. In addition, Mr. Howe received 1,640 shares of common stock with a value of $10,775; this amount was recorded as a discount to the Howe Note 4. Interest in the amount of $8,756 was accrued on the Howe Note 4 during the year ended December 31, 2022. Discounts in the amount of $60,775 were amortized to interest expense during the year ended December 31, 2022, and total discounts in the amount of $0 remained outstanding at December 31, 2022. Principal and accrued interest in the amounts $220,000 and $8,756, respectively, were due on the Howe Note 4 at December 31, 2022.
During the three and nine months ended September 30, 2023, interest in the amount of $9,200 and $27,977, respectively, was accrued on the Howe Note 4; principal and accrued interest in the amount of $220,000 and $36,733, respectively, were due on this note at September 30, 2023. This note was in default at September 30, 2023.
November 29, 2022 Notes
On November 29, 2022, the Company issued seven identical promissory notes (the “November 29 Notes”) in related party transactions to the following individuals: (1) Thomas Brodmerkel, who was the Company’s CFO and Board Member; (2) Lawrence Diamond, who was the Company’s Chief Executive Officer and Board Member; (3) Sheila Schweitzer, who was Board Member; (4) Faraz Naqvi, a former Board Member; (5) Juan Carlos Iturregui, who was a Board Member; (6) Jenny Lindstrom, who was the Company’s former Vice President and Chief Legal Officer; and (7) Michael C. Howe, who was the Chief Executive Officer of The Good Clinic, one of our subsidiaries (collectively, the “November 29 Lenders”).
The November 29 notes have due dates of May 28, 2023. The November 29 Notes are subject to the Series E Exchange Agreement whereby each of the November 29 Lenders will exchange (a) amounts due under the November 29 Notes for a number of shares of the Company’s Series E Convertible Preferred Stock equal to 150% of the principal amount of each November 29 Note. See note 13. The November 29 Notes bear interest at the rate of 10% per annum which will accrue from the date of the note only if the November 29 Notes are not converted pursuant to the Series E Exchange Agreement by May 10, 2023. Following an event of default as defined in the November 29 Notes, the principal amount shall bear interest for each day until paid at a rate per annum equal to the lesser of the maximum interest permitted by applicable law and 18%. The November 29 Notes contain a “most favored nations” clause that provides that, so long as the note is outstanding, if the Company issues any new security which November 29 Lender reasonably believes contains a term that is more favorable than those in the November 29 Note, the Company shall notify the November 29 Lenders of such term, and such term, at the option of the November 29 Lenders, shall become a part of the November 29 Note. In addition, each of the November 29 Lenders will receive five-year warrants to purchase 750 shares of the Company’s common stock at a price equal to the price of any warrant included in an offering in connection with listing at the Nasdaq Global Market. These warrants are not deemed issued at December 31, 2022 because the exercise price was not yet determined. Discounts in the amount of $667 were amortized to interest expense for each of the November 29 Notes during the year ended December 31, 2022, and discounts in the amount of $3,083 remained outstanding for each of the November 29 Notes at December 31, 2022. Principal and accrued interest in the amounts $18,750 and $164, respectively, were due on each of the seven November 29 Note at December 31, 2022.
Concurrent with the November 29 Notes, the Company entered into separate exchange agreements (the “November 29 Notes Exchange Agreements”). Pursuant to the November 29 Notes Exchange Agreements, amounts due under the November 29 Notes will be exchanged for a number Series E Convertible Preferred Stock equal to 150% of the principal amount of the Notes. No transactions occurred pursuant to the November 29 Notes Exchange Agreements during the year ended December 31, 2022.
During the three and nine months ended September 30, 2023, interest in the amount of $854 and $1,937, respectively, was accrued on each of the November 29 Notes.
On September 29, 2023, three of the November 29 Lenders (1) Thomas Brodmerkel, (2) Lawrence Diamond, and (3) Faraz Naqvi converted their November 29 Notes into shares of the Company’s Series F Preferred Stock as follows: Each of the noteholders converted an equity investment incentive in the amount of $13,553 representing 65% of the total amount due under the November 29 Note , along with original principal of $18,750 and accrued interest of $2,101 (a total of $34,404) into 34 shares of the Company’s Series F Preferred Stock. Other than the equity investment incentives of $13,553, there was no gain or loss recognized on this transaction as the Series F Preferred Stock was issued at its face value of $1,000 per share.
On September 29, 2023, one of the November 29 Lenders, Sheila Schweitzer, converted her November 29 Note into shares of the Company’s restricted common stock as follows: principal of $18,750 and accrued interest of $2,101 were converted at a price of $0.80 per share into 26,064 shares of the Company’s common stock.
At September 30, 2023, there were no amounts due under the converted notes; there was principal and interest in the aggregate amount of $56,250 and $6,303, respectively, due on the three November 29 Notes that were not converted.
These amounts are reflected in the table below:
| |
|
September 30,
2023
|
|
|
December 31,
2022
|
|
|
Notes Payable
|
|
$ |
2,100,956 |
|
|
$ |
2,799,632 |
|
|
Less: Discount
|
|
$ |
- |
|
|
$ |
(22,670 |
) |
|
Notes payable – net of discounts
|
|
$ |
2,100,956 |
|
|
$ |
2,776,962 |
|
| |
|
|
|
|
|
|
|
|
|
Current Portion, net of discount
|
|
$ |
2,100,956 |
|
|
$ |
2,776,962 |
|
|
Long-term portion, net of discount
|
|
$ |
- |
|
|
$ |
- |
|
Interest expense on notes payable – related parties was $116,308 and $27,174 for the three months ended September 30, 2023 and 2022, respectively; interest expense on notes payable – related parties was $358,894 and $120,866 for the nine months ended September 30, 2023 and 2022, respectively. Accrued interest on notes payable – related parties was $416,805 and $198,753 at September 30, 2023 and December 31, 2022, respectively.
Note 12: Derivative Liabilities
Certain of the Company’s convertible notes and warrants contain features that create derivative liabilities. The pricing model the Company uses for determining fair value of its derivatives is the Lattice Model. Valuations derived from this model are subject to ongoing internal and external verification and review. The model uses market-sourced inputs such as interest rates and stock price volatilities. Selection of these inputs involves management’s judgment and may impact net income. The derivative components of these notes are valued at issuance, at conversion, at restructuring, and at each period end.
Derivative liability activity for the for the periods ended September 30, 2023, December 31, 2022 and 2021 is summarized in the table below:
|
December 31, 2021
|
|
$ |
- |
|
|
True-up features issued
|
|
|
192,375 |
|
|
Settled upon conversion or exercise
|
|
|
(310,641 |
) |
|
Loss on revaluation
|
|
|
687,178 |
|
|
December 31, 2022
|
|
$ |
568,912 |
|
|
Settled upon conversion or exercise
|
|
|
(501,740 |
) |
|
Loss on revaluation
|
|
|
85,765 |
|
|
September 30, 2023
|
|
$ |
152,937 |
|
The Company uses a Monte Carlo model to value certain features of its notes payable that create derivative liabilities. The following table summarizes the assumptions for the valuations:
| |
|
December 31,
|
|
| |
|
2022
|
|
|
Volatility
|
|
|
95.1% to 123.2 |
% |
|
Stock Price
|
|
$ |
1.06 to 3.50 |
|
|
Risk-free interest rates
|
|
|
4.35% to 4.37 |
% |
|
Term (years)
|
|
|
0.73 to 0.86 |
|
| |
|
September 30,
|
|
| |
|
2023
|
|
|
Volatility
|
|
|
159.6% to 540.40 |
% |
|
Stock Price
|
|
$ |
0.025 to 1.44 |
|
|
Risk-free interest rates
|
|
|
4.35 to 5.24 |
% |
|
Term (years)
|
|
|
0.11 to 0.61 |
|
Certain of our notes payable contain a commitment fee obligation with a true-up feature. The following assumptions were used for the valuation of the derivative liability associated with this obligation:
|
|
●
|
The stock price would fluctuate with the Company projected volatility.
|
|
|
●
|
The projected volatility curve from an annualized analysis for each valuation date was based on the historical volatility of the Company and the term remaining for the True-Up obligation.
|
|
|
●
|
The Company expected the note would be repaid 90% of the time by the maturity date, at which point the Company would redeem the 1,000,000 redeemable commitment fee shares for $1.
|
|
|
●
|
In the event the Company did not repay the note in time, the shareholders would sell their shares subject to volume restrictions.
|
|
|
●
|
Discount rates were based on risk free rates in effect based on the remaining term. 50,000 simulations were run for each Monte Carlo simulation.
|
Note 13: Stockholders’ Equity (Deficit)
Common Stock
The Company has authorized 500,000,000 shares of common stock, par value $0.01; 5,544,519 shares were issued and outstanding on September 30, 2023.
Common Stock Transactions During the Nine Months Ended September 30, 2023
On January 23, 2023, the Company issued 150,000 shares of common stock at the market price of $3.45 per share to a service provider. The aggregate value of $517,500 was charged to operations during the nine months ended September 30, 2023.
On February 21, 2023, the Company issued 150,000 shares of common stock at the market price of $2.53 per share to a service provider. The aggregate value of $379,500 was charged to operations during the nine months ended September 30, 2023.
During the nine months ended September 30, 2023, GS Capital converted principal and accrued interest in a convertible note payable into shares of common stock as follows: On February 14, 2023, principal of $15,000 and accrued interest of $1,632 were converted at a price of $1.74 per share into 9,846 shares of common stock; on February 28, 2023, principal of $17,777 and accrued interest of $2,057 were converted at a price of $1.50 per share into 13,555 shares of common stock; on March 9, 2023, principal of $20,000 and accrued interest of $2,399 were converted at a price of $1.50 per share into 15,265 shares of common stock; and on March 28, 2023, principal of $20,000 and accrued interest of $2,581 were converted at a price of $1.25 per share into 18,472 shares of common stock. These conversions were made pursuant to the terms of the convertible note agreement and no gain or loss was recognized on these transactions.
On March 31, 2023, the Company issued a total of 8,063 shares of common stock for accrued dividends on its Series X Preferred Stock. Of this amount, a total of 1,066 shares were issued to officers and directors, 4,160 were issued to a related party shareholder, and 2,837 were issued to non-related parties.
On April 4, 2023, the Company issued 2,952 shares of common stock to a consultant at a price of $1.29 per share as a commission on funds previously raised. The Company recorded a gain in the amount of $33,092 on this transaction.
On April 4, 2023, the Company issued 94,738 shares of common stock to GS Capital at an average price of pursuant to a make-whole agreement entered into in connection with the GS Capital Warrants. See note 10. A gain in the amount of $21,506 was recorded on the settlement of this derivative liability. See note 12.
On May 5, 2023, the Company issued 2,552 shares of common stock to a vendor at a price of $0.85 per share, and on May 9, 2023, the Company issued 19,622 shares of common stock at a price of $0.85 per share to the Michael C. Howe Living Trust (the “Howe Trust”), an entity controlled by a related party. These shares were issued in satisfaction of a vendor dispute. The shares issued to the Howe Trust were reimbursement for shares previously issued to the vendor by the Howe Trust with regard to this dispute. There was no gain or loss recorded on these transactions.
On June 29, 2023, the Company issued a total of 20,212 shares of common stock for accrued dividends on its Series X Preferred Stock.
Of this amount, a total of 2,673 shares were issued to officers and directors, 10,426 were issued to a related party shareholder, and 7,113 were issued to non-related parties.
Effective June 30, 2023, the Company issued 2,926 shares of common stock at a price of $12.50 to a previous board member for the conversion of accounts payable in the amount of $36,575. These shares had been carried on the Company balance sheet as Common Stock Subscribed.
On August 21, 2023, the Company issued 131,362 shares of common stock at a price of $0.80 per share for accounts payable in the amount of $105,089. A gain in the amount of $59,112 was recorded on this transaction.
On August 21, 2023, the Company issued 43,750 shares of common stock at a price of $0.80 per share for accounts payable in the amount of $35,000. A gain in the amount of $19,687 was recorded on this transaction.
On August 21, 2023, the Company issued 49,226 shares of common stock at a price of $0.80 per share for accounts payable in the amount of $39,380. A gain in the amount of $22,151 was recorded on this transaction.
Effective September 29, 2023, the Company’s now former Chief Operating Officer and now former board member converted a note in the amount of $18,750, accrued interest of $2,101, accrued salary of $64,434, and board of director fees of $60,000 (a total of $145,285) at a price of $0.80 per share into 181,606 shares of the Company’s common stock. A gain in the amount of $138,531 was recorded on this transaction.
Common Stock Transactions During the Nine Months Ended September 30, 2022
On January 12, 2022, the Company entered into a settlement agreement with an ex-employee. Pursuant to the terms of this agreement, the Company agreed to pay the amount of $19,032 for accrued salary, and the employee returned to the Company for cancellation 8,000 shares of common stock previously issued as compensation. These shares were valued at par value of $0.01 or a total value of $4,000; the Company recorded a gain on cancellation of these shares in the amount of $15,032.
The Company entered into a debt-for-equity exchange agreement with Gardner Builders Holdings, LLC (“Gardner”) on January 7, 2022 (the “Debt for Equity Agreement”). Pursuant to the Debt for Equity Agreement, the Company issued shares of restricted common stock to Gardner in exchange for the Company Debt Obligations, as defined below.
The Agreement settled for certain accounts payable amounts owed by the Company to the Creditor (the “Accounts Payable Amount”) as well as upcoming amounts that will become due between the date of the Agreement and April 1, 2022. The Agreement also settled accrued interest and penalties on the amounts due through January 5, 2022, as well as 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 $12.50. As a result, 63,593 Restricted Shares were authorized to be issued. The Company’s Board of Directors approved the Agreement on January 5, 2022.
On March 22, 2022 and March 31, 2022, the Company issued an aggregate 30,834 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 C Certificates of Designations. The Company valued these shares at their contractual price of $12.50 per share and recorded the amount of $385,431 as waiver fees during the three months ended March 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.
On March 31, 2022, the Company issued 34,400 Commitment Fee Shares to AJB Capital Investors, LLC; see note 9. The Company utilized an outside valuation consultant to value the commitment fee shares, the True-Up Provision, and warrants. A Monte Carlo model was used to value the warrants and call features, and a probability weighted expected return model was used to value the True-Up Provision. The contractual price of the common stock $12.50 per share; valuation purposes, the common stock was valued at the market price on the date of the transaction of $6.14 per share. The derivative liability was valued at $106,608 on the date of the transaction. The discount on the notes due to the Commitment Fee Shares and warrants was valued at $349,914. The Company recorded the amount of $226,106 to additional paid-in capital pursuant to this transaction.
On March 31, 2022, the Company issued 7,647 shares of common stock at a price of $12.50 per share which were previously subscribed for the conversion of accounts payable in the amount of $95,558.
On April 27, 2022, the Company issued 14,400 shares of stock to Cavalry Fund 1 LP at a price of $6.35 per share for a total value of $91,440 as compensation for the waiver of certain covenants as set forth in the Series C Certificate of Designation. The Company recorded a gain in the amount of $88,560 on this transaction.
On April 27, 2022, the Company issued 1,929 shares of common stock with a contract price of $12.50 per share or $24,118 and a grant date market value of $8.00 or $15,434 to Larry Diamond, its Chief Executive as commitment shares as set forth and defined in Diamond Note 3. The Company recorded these shares at their relative fair value of the components of Diamond Note 3, or $16,200, and recorded a loss in the amount of $765 on this transaction. The Company also issued five-year warrants to purchase 1,929 shares of common stock at a price of $12.50 to Mr. Diamond pursuant to Diamond Note 3.
On May 1, 2022, the Company issued 15,000 shares of common stock to a service provider at a price of $6.88 per share.
On May 10, 2022, the Company entered into a securities purchase agreement with Kishon Investments, LLC with respect to the sale and issuance of: (i) an initial commitment fee in the amount of $159,259 in the form of 12,741 shares of the Company’s common stock, (ii) promissory note in the principal amount of $277,777 due on November 10, 2022, and (iii) warrants to purchase up to 5,556 shares of the common stock. The note and warrants were issued on May 10, 2022 and were held in escrow pending effectiveness of the Purchase Agreement. Pursuant to the terms of the purchase agreement, the initial shares were issued at a value of $159,259, the note was issued in the principal amount of $277,777 for a purchase price of $250,000, resulting in the original issue discount of $27,777; and the warrants were issued, with an initial exercise price of $12.50 per share, subject to adjustment.
On May 18, 2022, the Company issued 386 shares of common stock to Larry Diamond, its Chief Executive Officer at a contractual price of $12.50 per share and a market price at issuance date of $7.585 per share as commitment shares as set forth and defined in Diamond Note 4. The Company recorded these shares at their relative fair value of the components of Diamond Note 4, or $3,160 and recorded a loss in the amount of $249 on this transaction. The Company also issued five-year warrants to purchase 386 shares of common stock at a price of $12.50 to Mr. Diamond pursuant to Diamond Note 4.
On May 23, 2022, the Company issued 386 shares of common stock to Jessica Finnegan at a contractual price of $12.50 per share and a market price at issuance date of $8.97 per share as commitment shares as set forth and defined in Finnegan Note 1. The Company recorded these shares at their relative fair value of the components of Finnegan Note 1, or $3,240, and recorded a gain in the amount of $222 on this transaction. The Company also issued five-year warrants to purchase 386 shares of common stock at a price of $12.50 to Ms. Finnegan pursuant to Finnegan Note 1.
On May 26, 2022, the Company issued 1,688 shares of common stock to the May 26 Lenders at a contractual price of $12.50 per share and a market price at issuance date of $7.585 per share as commitment shares as set forth and defined in the May 26, 2022 Notes. The Company recorded these shares at their relative fair value of the components of the May 26 Note, or $14,175, and recorded a loss in the amount of $1,369 on these transactions. The Company also issued five-year warrants to purchase 1,688 shares of common stock at a price of $25.00 to the May 26 Lenders pursuant to the May 26, 2022.
On June 7, 2022, the Company issued 8,103 shares of common stock at a price of $12.50 per share to investors for accumulated dividends on Series X Preferred Stock. See Note 13.
On June 9, 2022, the Company issued 7,284 shares of common stock to the June 9 Lenders at a contractual price of $12.50 per share and a market price at issuance date of $7,425 per share as commitment shares as set forth and defined in the June 9 Notes. The Company recorded these shares at the relative fair value of the components of June 9 Notes, or $66,400, and recorded an aggregate loss in the amount of $9,356 on these transactions. The Company also issued five-year warrants to purchase 7,284 shares of common stock at a price of $25.00 to the May 26 Lenders pursuant to the June 9 notes.
On June 22, 2022, the Company issued 4,824 shares of common stock at fair value of $10.45 per share to Dragon Dynamic at a fair value of $10.45 per share as a commitment fee.
On June 22, 2022, the Company issued 12,741 shares of common stock at fair value of $10.45 per share to GS Capital at a fair value of $10.45 per share as a commitment fee.
On June 22, 2022, the Company issued 8,600 shares of common stock at fair value of $10.45 per share to Anson East and an additional 25,800 shares of common stock at a fair value of $10.45 per share to Anson Investments as a commitment fee.
On July 7, 2022, the Company issued 2,412 shares of common stock to William Mackay at a contractual price of $12.50 per share and a market price at issuance date of $7.45 per share as commitment shares as set forth and defined in the Mackay Note. The Company recorded these shares at their relative fair value of the components of Mackay Note, or $12,500, and recorded a gain in the amount of $5,456 on this transaction. The Company also issued five-year warrants to purchase 2,412 shares of common stock at a price of $25.00 to Mr. Mackay pursuant to the Mackay Note. See Note 10.
On July 7, 2022, the Company issued 193 shares of common stock to Charlies Schrier at a contractual price of $12.50 per share and a market price at issuance date of $7.45 per share as commitment shares as set forth and defined in the Schrier Note. The Company recorded these shares at their relative fair value of the components of Schrier Note, or $1,000, and recorded a gain in the amount of $436 on this transaction. The Company also issued five-year warrants to purchase 193 shares of common stock at a price of $12.50 to Mr. Schrier pursuant to the Schrier Note. See Note 10.
On July 21, 2022, the Company issued 241 shares of common stock to Juan Carlos Iturregui, a related party, at a contractual price of $12.50 per share and a market price at issuance date of $7.23 per share as commitment shares as set forth and defined in the Iturregui Note. The Company recorded these shares at their relative fair value of the components of Schrier Note, or $1,225, and recorded a gain in the amount of $518 on this transaction. The Company also issued five-year warrants to purchase 241 shares of common stock at a price of $12.50 to Mr. Iturregui pursuant to the Iturregui Note. See Note 11.
On July 21, 2022, the Company issued 2,460 shares of common stock to the Michael C. Howe Living Trust, a related party, at a contractual price of $12.50 per share and a market price at issuance date of $7.23 per share as commitment shares as set forth and defined in the Howe Note 3. The Company recorded these shares at their relative fair value of the components of Howe Note 3, or $12,495, and recorded a gain in the amount of $5,729 on this transaction. The Company also issued five-year warrants to purchase 2,460 shares of common stock at a price of $12.50 to the Michael C. Howe Living Trust pursuant to the Howe Note 3. See Note 11.
On July 26, 2022, the Company issued 482 shares of common stock to Eric S. Nommsen at a contractual price of $12.50 per share and a market price at issuance date of $6.84 per share as commitment shares as set forth and defined in the Nommsen Note. The Company recorded these shares at their relative fair value of the components of Nommsen Note, or $2,350, and recorded a gain in the amount of $949 on this transaction. The Company also issued five-year warrants to purchase 482 shares of common stock at a price of $12.50 to Mr. Nommsen pursuant to the Nommsen Note. See Note 10.
On July 27, 2022, the Company issued 482 shares of common stock to James H. Caplan at a contractual price of $12.50 per share and a market price at issuance date of $6.94 per share as commitment shares as set forth and defined in the Caplan Note. The Company recorded these shares at their relative fair value of the components of the Caplan Note, or $2,350, and recorded a gain in the amount of $995 on this transaction. The Company also issued five-year warrants to purchase 482 shares of common stock at a price of $12.50 to Mr. Caplan pursuant to the Caplan Note. See Note 10.
On August 4, 2022, the Company issued a total of 241 shares of common stock to Jessica, Kevin C., Brody, Isabella, and Jack Finnegan at a contractual price of $12.50 per share and a market price at issuance date of $6.42 per share as commitment shares as set forth and defined in the Finnegan Note 3. The Company recorded these shares at their relative fair value of the components of the Finnegan Note 3, or $1,000, and recorded a gain in the amount of $448 on this transaction. The Company also issued five-year warrants to purchase a total of 241 shares of common stock at a price of $12.50 to the holders of the Finnegan Note 3. See Note 10.
On August 4, 2022, the Company issued 984 shares of common stock to Jack Enright at a contractual price of $12.50 per share and a market price at issuance date of $6.42 per share as commitment shares as set forth and defined in the Caplan Note. The Company recorded these shares at their fair value of $6,317. See Note 10.
On August 4, 2022, the Company issued 12,064 shares of common stock to a service provider as payment for investor relations services. The transaction was effective August 1, 2022 and has a six month term. The shares were valued at the closing price of the Company’s common stock on August 4, 2022, of $6.42 per share or $77,448.
On August 18, 2022, the Company issued 1,640 shares of common stock to the Michael C. Howe Living Trust, a related party, at a contractual price of $12.50 per share and a market price at issuance date of $6.57 per share as commitment shares as set forth and defined in the Howe Note 4. The Company recorded these shares at their fair value of $10,775. See Note 11.
On September 2, 2022, the Company issued 582 shares of common stock to John Mitchell at a contractual price of $12.50 per share and a market price at issuance date of $5.37 per share as commitment shares as set forth and defined in the Mitchell Note. The Company recorded these shares at their fair value of $3,124. See Note 10.
On September 2, 2022, the Company issued 492 shares of common stock to Frank Lightmas at a contractual price of $12.50 per share and a market price at issuance date of $5.37 per share as commitment shares as set forth and defined in the Lightmas Note. The Company recorded these shares at their fair value of $2,640. See Note 10.
On September 2, 2022, the Company issued 246 shares of common stock to Lisa Lewis at a contractual price of $12.50 per share and a market price at issuance date of $5.37 per share as commitment shares as set forth and defined in the Lewis Note. The Company recorded these shares at their fair value of $1,320. See Note 10.
On September 2, 2022, the Company issued 246 shares of common stock to Sharon Goff at a contractual price of $12.50 per share and a market price at issuance date of $5.37 per share as commitment shares as set forth and defined in the Goff Note. The Company recorded these shares at their fair value of $1,320. See Note 10.
On September 9, 2022, the Company issued 820 shares of common stock to Cliff Hagan at a contractual price of $12.50 per share and a market price at issuance date of $5.75 per share as commitment shares as set forth and defined in the Hagan Note. The Company recorded these shares at their fair value of $4,715. See Note 10.
On September 14, 2022, the Company issued 1,640 shares of common stock to Darling Capital at a contractual price of $12.50 per share and a market price at issuance date of $6.60 per share as commitment shares as set forth and defined in the Darling Capital Note. The Company recorded these shares at their fair value of $10,824. See Note 10.
On September 15, 2022, the Company issued 410 shares of common stock to Mack Leath at a contractual price of $12.50 per share and a market price at issuance date of $7.00 per share as commitment shares as set forth and defined in the Leath Note. The Company recorded these shares at their fair value of $2,868. See Note 10.
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 as series A Preferred, 3,000,000 shares as Series C Preferred, 10,000,000 shares as Series D Preferred, 10,000 shares as Series E Preferred, 140,000 as Series F Preferred, and 27,324 shares as Series X Preferred.
Series A Preferred Stock Transactions During the Nine Months Ended September 30, 2023
None.
Series A Preferred Stock Transactions During the Nine Months Ended September 30, 2022
None.
Series C Preferred Stock
Series C Preferred Stock Transactions During the Nine Months Ended September 30, 2023
The Company accrued dividends in the amount of $17,603 on the Series C Preferred Stock.
On April 11, 2023, a total of 1,047,619 shares of Series C Preferred Stock with a stated value of $1,100,000, accrued dividends in the amount $171,109, and equity investment incentives in the amount of $1,016,888 were exchanged for 2,289 shares of Series F Preferred Stock.
Series C Preferred Stock Transactions During the Nine Months Ended September 30, 2022
The Company accrued dividends on the Series C Preferred Stock in the amount of $49,700. The Company also adjusted the number of shares of Series C Preferred Stock outstanding by an increase in the amount of 98,064 shares in connection with previous conversions of Series C Preferred Stock to common stock; the amount of $981 was charged to additional paid-in capital pursuant to this adjustment.
Series D Preferred Stock
Series D Preferred Stock Transactions During the Nine Months Ended September 30, 2023
The Company accrued dividends in the amount of $76,307 on the Series D Preferred Stock.
On April 11, 2023, a total of 2,350,000 shares of Series D Preferred Stock with a stated value of $2,467,500, accrued dividends in the amount $215,659, and equity investment incentives in the amount of $1,371,846 were exchanged for 4,055 shares of Series F Preferred Stock. There was no gain or loss recorded in connection with these transactions.
Series D Preferred Stock Transactions During the Nine Months Ended September 30, 2022
The Company accrued dividends in the amount of $96,847 on the Series D Preferred Stock.
Series F Preferred Stock
On March 23, 2023, the Company filed a Certificate of Designations, Preferences and Rights of Series F 12% PIK $0.01 par value Convertible Perpetual Preferred Stock with the Delaware Secretary of State. The number of shares of Series F Preferred Stock designated is 140,000 and each share of Series F Preferred Stock has a liquidation preference of $1,000. The Series F Preferred Stock will rank senior to the Corporation’s Common Stock and on parity with all Preferred Stock of the Corporation with terms specifically providing that such Preferred Stock rank on parity with the Series F Preferred Stock with respect to rights to the distribution of assets upon any liquidation, dissolution or winding up of the Corporation; and (iii) junior to all Preferred Stock of the Corporation with terms specifically providing that such Preferred Stock rank senior to the Series F Preferred Stock with respect to rights to the distribution of assets upon any liquidation, dissolution or winding up of the Company.
Holders of shares of the Series F Preferred Stock are entitled to receive payment-in-kind dividends payable only in additional shares of Series F Preferred Stock (“PIK Dividends”) at rate of 12% per annum.
The Series F Preferred Stock will be convertible into common stock of the Company upon the listing of the Company’s stock on any of the following trading markets: the NYSE, the NYSE American, the Nasdaq Capital Market, the Nasdaq Global Market, or the Nasdaq Global Select Market. The conversion price will be calculated as 65% of the volume-weighted average price of the Company’s common stock on the conversion date. The number of shares issuable upon conversion will be calculated as the liquidation preference of the Series F Preferred stock plus any accrued but unpaid dividends divided by the conversion price.
Series F Preferred Stock Transactions During the Nine Months Ended September 30, 2023
On April 11, 2023, the Company issued a total of 8,116 shares of Series F Preferred Stock at its liquidation value of $1,000 per share to nine investors upon the conversion of notes payable. The total amount converted was $8,111,334, consisting of principal $3,602,059, default penalties of $888,889, fees of $60,000, accrued interest of $365,012, and equity investment incentives of $3,195,374. Other than the equity investment incentive, there were no gains or losses recorded in connection with these transactions. See note 10.
On April 11, 2023, the Company issued a total of 2,289 shares of Series F Preferred Stock at its liquidation value of $1,000 per share to two investors upon the conversion of Series C Preferred Stock. The total amount converted was $2,287,997, consisting of the Series C Preferred Stock stated value of $1,100,000, accrued dividends of $171,109, and equity investment incentives of $1,016,888. Other than the equity investment incentive, there were no gains or losses recorded in connection with these transactions.
On April 11, 2023, the Company issued a total of 4,055 shares of Series F Preferred Stock to two investors at its liquidation value of $1,000 per share upon the conversion of Series D Preferred Stock. The total amount converted was $4,055,005 consisting of the Series D Preferred Stock stated value of $2,467,500, accrued dividends of $215,659, and equity investment incentives of $1,371,846. Other than the equity investment incentive, there were no gains or losses recorded in connection with these transactions.
On April 11, 2023, the Company sold a total of 1,746 shares of Series F Preferred Stock to three investors at its liquidation value of $1,000 per share for cash. The total value of Series F Preferred Stock of issued was $1,745,000 consisting of cash proceeds of $900,000 and an equity investment incentive of $845,000, less costs of $161,500. Other than the equity investment incentive, there were no gains or losses recorded in connection with these transactions.
On June 29, 2023, the Company issued a total of 147 shares of Series F Preferred Stock at its liquidation value of $1,000 per share to two service providers for accounts payable in the amount of $146,214. There was no gain or loss recorded on these transactions.
On September 29, 2023, the Company issued a total of 2,138 shares of Series F Preferred Stock to three related parties at its liquidation value of $1,000 per share upon the conversion of notes payable in the amount of $601,839, premium on notes payable of $78,087, accrued interest of $124,777, accrued salary of $376,625, accrued board fees of $112,500, and equity investment incentives of $843,228. Other than the equity investment incentives, there were no gains or losses recorded in connection with these transactions.
On September 29, 2023, the Company issued a total of 911 shares of Series F Preferred Stock to two investors at its liquidation value of $1,000 per share upon the conversion of notes payable in the aggregate amount of $414,118, premium on notes payable in the aggregate amount of $41,412, accrued interest in the aggregate amount of $84,187, and fees of $10,000, and equity investment incentive of $360,385. Other than the equity investment incentive, there were no gains or losses recorded in connection with these transactions.
The Company accrued dividends in the amount of $940,769 on the Series F Preferred Stock.
Series F Preferred Stock Transactions During the Nine Months Ended September 30, 2022
None.
Series X Preferred Stock
The Company has 24,227 shares of its 10% Series X Cumulative Redeemable Perpetual Preferred Stock (the “Series X Preferred Stock”) outstanding as of September 30, 2023 and December 31, 2022. The Series X Preferred Stock has a par value of $0.01 per share, no stated maturity, a liquidation preference of $25.00 per share, and will not be subject to any sinking fund or mandatory redemption and will remain outstanding indefinitely unless the Company decides to redeem or otherwise repurchase the Series X Preferred Stock; the Series X Preferred Stock is not redeemable prior to November 4, 2020. The Series X Preferred Stock will rank senior to all classes of the Company’s common and preferred stock and accrues dividends at the rate of 10% on $25.00 per share. The Company reserves the right to pay the dividends in shares of the Company’s common stock at a price equal to the average closing price over the five days prior to the date of the dividend declaration. Beginning in July 2023 the Company elected to use a price per share of $.80, a 20% discount to the average price of its common stock of $1.00, before the trading of its common stock was moved to the OTC Expert Market system. Each one share of the Series X Preferred Stock is entitled to 400 votes on all matters submitted to a vote of our shareholders.
Series X Preferred Stock Transactions During the Nine Months Ended September 30, 2023
During the nine months ended September 30, 2023, the Company accrued dividends on its Series X Preferred Stock in the total amount of $45,423. Of this amount, a total of $5,905 was payable to officers and directors, $23,620 was payable to a related party shareholder, and $15,898 was payable to non-related parties.
During the nine months ended September 30, 2023, the Company issued a total of 28,275 shares of common stock for accrued dividends on its Series X Preferred Stock. Of this amount, a total of 3,739 shares were issued to officers and directors, 14,586 were issued to a related party shareholder, and 9,950 were issued to non-related parties.
Series X Preferred Stock Transactions During the Nine Months Ended September 30, 2022
On June 7, 2022, the Company issued 8,103 shares of common stock at an average price of $10.75 per share as payment for dividends payable on the Series X Preferred Stock in the amount of $87,053.
During the nine months ended September 30, 2022, the Company accrued dividends in the amount of $45,423 on the Series X Preferred Stock.
Stock Options
The following table summarizes the options outstanding at September 30, 2023 and the related prices for the options to purchase shares of the Company’s common stock:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
average
|
|
|
|
|
|
|
average
|
|
|
|
|
|
|
|
|
|
|
|
average
|
|
|
exercise
|
|
|
|
|
|
|
exercise
|
|
|
|
Range of
|
|
|
Number of
|
|
|
remaining
|
|
|
price of
|
|
|
Number of
|
|
|
price of
|
|
|
|
exercise
|
|
|
options
|
|
|
contractual
|
|
|
outstanding
|
|
|
options
|
|
|
exercisable
|
|
|
|
prices
|
|
|
outstanding
|
|
|
life (years)
|
|
|
options
|
|
|
exercisable
|
|
|
options
|
|
|
|
$
|
1.50 - 16.00 |
|
|
|
100,934 |
|
|
|
7.41 |
|
|
$
|
10.05 |
|
|
|
15,767 |
|
|
$
|
15.48 |
|
|
|
|
|
|
|
|
100,934 |
|
|
|
7.41 |
|
|
$
|
10.05 |
|
|
|
15,767 |
|
|
$
|
15.48 |
|
Transactions involving stock options are summarized as follows:
| |
|
Shares
|
|
|
Weighted- Average
Exercise Price ($)
|
|
|
Outstanding at December 31, 2022
|
|
|
310,692 |
|
|
$ |
10.01 |
|
|
Granted
|
|
|
- |
|
|
|
- |
|
|
Expired
|
|
|
(209,758 |
) |
|
|
10.00 |
|
|
Outstanding at September 30, 2023
|
|
|
100,934 |
|
|
$ |
10.05 |
|
|
Options vested and exercisable
|
|
|
15,767 |
|
|
$ |
15.48 |
|
At September 30, 2023, the total stock-based compensation cost related to unvested awards not yet recognized was $0.8 million.
Warrants
The following table summarizes the warrants outstanding on September 30, 2023, and the related prices for the warrants to purchase shares of the Company’s common stock:
| |
|
Shares
|
|
|
Weighted- Average
Exercise Price ($)
|
|
| |
|
|
|
|
|
|
|
|
|
Outstanding on December 31, 2022
|
|
|
672,334 |
|
|
$ |
30.68 |
|
|
Granted
|
|
|
874 |
|
|
$ |
2.50 |
|
|
Exercised
|
|
|
- |
|
|
$ |
- |
|
|
Outstanding on September 30, 2023
|
|
|
673,208 |
|
|
$ |
30.64 |
|
Note 14: Fair Value Measurements
The following summarizes the Company’s derivative financial liabilities that are recorded at fair value on a recurring basis at September 30, 2023 and December 31, 2022.
| |
|
September 30, 2023
|
|
| |
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative liabilities
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
152,937 |
|
|
$ |
152,937 |
|
| |
|
December 31, 2022
|
|
| |
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative liabilities
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
568,912 |
|
|
$ |
568,912 |
|
Note 15: Commitments and Contingencies
Legal
From time to time, we may become involved in legal proceedings or be subject to claims arising in the ordinary course of our business.
On June 23, 2022, The Good Clinic LLC was notified that a former employee had filed a lawsuit for wrongful termination. The Good Clinic believes the lawsuit is without merit. Mitesco (Company) was not named in the suit. The Company expects to resolve it for nominal consideration.
On October 25, 2022, the Company was notified that a vendor filed a lawsuit related to a contract dispute naming both The Good Clinic and The CEO of the Good Clinic. This suit was settled on May 5, 2023, and dismissed with prejudice on May 12, 2023. The settlement included the issuance of the Company’s restricted common stock. As a part of the settlement the Company issued 2,552 shares of its restricted common stock to the plaintiff and it issued to the CEO of The Good Clinic 19,622 of its restricted common stock, plus $3,000 in cash for reimbursement of expenses related to settling the suit with the vendor.
The Company has a number of legal situations involved with the winding down of its clinic business activities. These include claims regarding certain construction contracts and cancellation of leases. The following is a summary as of this filing:
| | ● | The Wayzata, MN clinic leases was terminated for a commitment to pay $25,000. This amount has not been paid as of June 30, 2023. |
| | | |
| | ● | The two Denver, Colorado clinic leases, known as Quincy and Radiant, possession has been relinquished to the landlords. The lease obligations remain in negotiations as does the handling of the mechanics liens placed on the property. The Company has verbally accepted a stipulated settlement to the Quincy lease obligation which has not been entered into the record or signed by either party. This settlement calls for (i) a stipulated judgment of $231,353, which includes all back rent and front rent through November 2023; (i) Interest of $16,700;(iii) Late fees of $22,434; (iv) attorney fees of $24,888; (v) Costs of $2,300. Claims for rent beyond November, and any defenses thereto, are preserved. |
| | | |
| | ● | The Eagan clinic, aka Vikings clinic, the Good Clinic gave up possession in January of 2023. The mechanics lien has been placed on the property and was settled by the landlord in a confidential settlement. The Landlord terminated the lease as of March 3, 2023. Mitesco is now in settlement negotiations with the landlord for the handling of lease obligations. The Landlord filed suit against the Company on July 21, 2023 for unpaid rent, expenses related to unpaid lease obligations and the settled construction lien. The Company has received discovery requests and a renewed request to agree to a stipulated judgement. The discovery is onerous and not feasible for the Company to comply with given the current staff and limited resources. Negotiations are underway. See note 16. |
| | | |
| | ● | The St. Paul clinic possession was relinquished in March 2023. The handling of lease obligations remains in negotiation as does the handling of the mechanics liens placed on the properties. Our existing legal counsel has agreed to represent Mitesco, Inc. and The Good Clinic in these matters. In Ramsey County, Continental 560 Fund LLC (Case No. 62-CV-23-2910) initiated a lawsuit. The Company’s attorney will prepare a Notice of Appearance and draft Answer in the Continental 560 Fund matter. The deadline under the Minnesota Rules of Civil Procedure for filing an answer has passed. Accordingly, the plaintiff could seek a default judgment at any time See note 16. |
| | | |
| | ● | The St. Louis Park clinic possession was relinquished in April 2023. The handling of lease obligations remains in negotiations as does the handling of the mechanics liens placed on the properties. The plaintiff’s counsel reached out to our attorney to reinitiate negotiations. We proposed to our attorney a settlement approach using a zero coupon note with common stock used as collateral. On November 1, 2023, we were notified that the landlord had rejected our settlement proposal and wishes to proceed with the lawsuit. At that time, plaintiff Excelsior & Grand Apartments, LLC submitted interrogatories and request for the production of documents. See note 16. |
| | | |
| | ● | The Maple Grove clinic eviction occurred in April 2023. The handling of lease obligations remains in negotiations as does the handling of the mechanics liens placed on the properties. On August 22, 2023 the landlord filed a lawsuit related to alleged unmet lease obligations and related to a construction lien on the property by the general contractor related to alleged non-payment of construction expenses. We have been told the facility has been re-leased but have not received notice of such or cancelation of the lease. |
| | | |
| | ● | The Northeast Minneapolis clinic, aka Nordhaus clinic, possession was relinquished in May 2023. There is no lien on the property. The handling of lease obligations remains in negotiations with the landlord. |
Note 16: Subsequent Events
Issuance of Common Stock
On October 10, 2023, the Company issued 23,438 shares of common stock to a service provider at a price of $0.80 per share for accounts payable in the amount of $18,750.
On February 9, 2024, the Company issued 41,057 shares of common stock for dividends payable on its Series X Preferred Stock.
Court Order Stipulating Judgments
Gardner Builders
On November 14, 2023, the District Court, City and County of Denver, Colorado, in Case Number 2022CV33173 consolidated with Case Number 2022cv33653, stipulated an entry of judgment against the Company’s subsidiary The Good Clinic, LLC, and in favor of Gardner Builders Minneapolis, LLC, in the amount of $348,764 and interest at the rate of 12% per annum until the amount is paid in full.
Egan Clinic
A Summary Judgment was granted December 4, 2023 in the amount of $488,491. Plaintiff has submitted a separate request for attorneys’ fees, and we are awaiting entry of final judgment.
St. Paul Clinic
A Stipulation for Judgment was filed December 21, 2023 in the amount of $421,678. The stipulated judgment includes $178,542 in unpaid back rent, $172,124 in resolution of mechanics’ liens, and $64,600 in attorneys’ fees. We are awaiting a final entry of judgment by the Court.
St. Louis Park Clinic
Excelsior & Grand provided a proposed Settlement Agreement and Confession of Judgment in the amount of $421,678. We have countered with a redline of the proposed Settlement Agreement in the amount of $256,727 which includes amounts for unpaid rent, resolution of mechanics’ liens, and attorneys’ fees. Plaintiffs’ counsel has provided our counterproposal to Excelsior & Grand.
Debt Exchange Agreement
On December 8, 2023, the Company sold the remaining assets of The Good Clinic, LLC to Leading Primary Care LLC, a company organized by Michael C. Howe, the former CEO of The Good Clinic, LLC for total consideration of approximately $2.5 million. Consideration consisted of cancelling existing notes payable and accrued interest owed to Mr. Howe in the amount of approximately $2.5 million. The Company expects to recognize a gain on this transaction in the amount of approximately $2.5 million. Significant liabilities remain in The Good Clinic, LLC.
On December 8, 2023, Mr. Howe also exchanged (i) 500,000 shares of Series D Preferred Stock with a stated value of approximately $0.5 million and accrued dividends of approximately $67,000, and (ii) accrued salary owed to Mr. Howe in the amount of approximately $38,000 plus a conversion incentive of 65% or approximately $25,000 for 655 shares of the Company’s Series F Preferred Stock with a liquidation value of approximately $0.6 million. Other than the conversion of incentive of the approximately $25,000, there was no gain or loss recorded on this transaction.
On December 8, 2023, Mr. Howe also exchanged accrued salary in the amount of $39,300 plus a conversion premium in the amount of 65% or approximately $25,545 for 65 shares of the Company’s Series F Preferred Stock with a liquidation value of approximately $65,000. Other than the conversion of incentive of the approximately $25,554, there was no gain or loss recorded on this transaction.
Resignation of Directors
On November 7, 2023, Mr. Juan Carlos Iturregui resigned from his position as a director effective November 5, 2023. The decision by Mr. Iturregui to resign was not the result of any disagreement with the Company on any matter relating to the operations, internal controls, policies or practices of the Company but related to his transition to public service on a full-time basis.
On December 12, 2023, Mr. Allen Plunk resigned from his position as a director. The decision by Mr. Plunk to resign was not the result of any disagreement with the Company on any matter relating to the operations, internal controls, policies, or practices of the Company but related to personal matters.
On December 15, 2023, Mr. Larry Diamond resigned from all positions including the Board of Directors, CEO of Mitesco and all positions related to The Good Clinic, LLC and its sole member Mitesco N.A. LLC. The decision by Mr. Diamond to resign was not the result of any disagreement with the Company on any matter relating to the operations, internal controls, policies, or practices of the Company but related to personal matters.
On December 15, 2023, Mr. Tom Brodmerkel resigned from his position as Chief Financial Officer and a director. The decision by Mr. Brodmerkel to resign was not the result of any disagreement with the Company on any matter relating to the operations, internal controls, policies, or practices of the Company but related to personal matters.
On December 19, 2023, Ms. Sheila Schwartz resigned from her position as Chief Operating Officer and a director, citing a limited time availability to support the needs of the Company.
Appointment of Directors
During December 2023, the following appointments were made to the Board of Directors:
Mr. Mack Leath
Mr. Leath will serve as CEO, CFO and Chairman of the Board of Directors. Mr. Leath is a senior executive with 30 + years’ experience in business management, including a number of rapid growth and start-up situations. He has been a sales and marketing professional in Petro-chemical distribution, software and construction related products as well as healthcare. His roles include financial management and capital markets. He has previously served on the Board of the Company from September 2016 until May 2017 where he assisted in restructuring and evaluating various business situations. Mr. Leath provided bridge financing to the Company in September 2022 which remains unpaid.
Dr. Jordan Balencic
Mr. Balencic will serve as a board member. Mr. Balencic’s history includes positions in both the healthcare arena, and as an entrepreneur. His healthcare experience is as follows: From October 2016 until the present, he has served as the Service Chief, Medical Director, and a staff physician for Home Based Primary Care (HBPC) November for the U.S. Department of Veterans Affairs, Veterans Health Administration, Lebanon, PA (Lebanon VA Medical Center).
Mr. John Mitchell
Mr. Mitchell will serve as Secretary and Treasurer. Mr. Mitchell has been an independent business owner and advisor since 2001 until the present with an emphasis on the lighting and electrical products area in the yachting industry, as well as certain home improvement business activities. From 1997 until 2001 he was employed by Microsoft Corporation as a recruiter. From 1989 until 1997 Mr. Mitchell served in the U.S. Marine Corps, most recently as Sergeant E-5. Mr. Mitchell provided bridge financing to the Company in September 2022, which remains unpaid.
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
References to the “Company,” “Mitesco, Inc.,” “our,” “us” or “we” refer to Mitesco, Inc. The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the unaudited interim financial statements and the notes thereto contained elsewhere in this report. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.
Cautionary Note Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Exchange Act. We have based these forward-looking statements on our current expectations and projections about future events. These forward-looking statements are subject to known and unknown risks, uncertainties and assumptions about us that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may,” “should,” “could,” “would,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “continue,” or the negative of such terms or other similar expressions. Factors that might cause or contribute to such a discrepancy include, but are not limited to, those described in our other SEC filings.
History and Outlook
Mitesco Inc. is a holding company with plans to participate in the healthcare technology, services and/or delivery industries. From 2020 through 2022, the Company was executing against a strategic plan to open primary care clinics utilizing advanced degreed nurse practitioners in select markets. The clinics operated under the name The Good Clinic. However, the business failed to achieve profitability, and the markets were not favorable to additional funding, therefore in late 2022 the decision was made to close the clinics. As a result, Mitesco currently has no operating business other than the winding down of its previous operations.
Since the beginning of 2023, the Company has focused on winding down operations of The Good Clinic along with reducing other costs and there are ongoing discussions to convert amounts owed to equity. Through November 2023 we sold the majority of the remaining assets consisting of furniture, equipment, and supplies; the funds generated from the sale of assets will be used primarily to cover the costs of our SEC filings and legal costs related to the winding down of previous operations. On October 13, 2023, we completed our Redomestication from Delaware to Nevada.
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. Results of discontinued operations are excluded from the accompanying results of operations for all periods presented, unless otherwise noted. See Note 3 – discontinued operations in the accompanying notes to consolidated financial statements. Further, as a result of any acquisitions of other businesses, and any additional pharmacy acquisitions or other such transactions we may pursue, we may experience large expenditures specific to the transactions that are not incident to our operations.
Comparison of the Three Months Ended September 30, 2023 and 2022
Revenue
The Company recognized revenue of $0 for the three months ended September 30, 2023 and 2022 due to the winding down of the Company’s clinic operations with The Good Clinic, LLC subsidiary.
Cost of Sales
The Company incurred $0 of cost of goods sold for the three months ended September 30, 2023 and 2022 due to the winding down of the Company’s clinic operations with The Good Clinic, LLC subsidiary.
Gross Profit/(Loss)
Our gross loss was $0 for the three months ended September 30, 2023 and 2022 due to the winding down of the Company’s clinic operations with The Good Clinic, LLC subsidiary.
Operating Expenses
Our total operating expenses for the three months ended September 30, 2023, were approximately $0.3 million. For the comparable period in 2022, the operating expenses were approximately $0.9 million. The decrease is the result of the winding down of the Company’s clinic operations with The Good Clinic, LLC subsidiary.
General and administrative expenses for the three months ended September 30, 2023 were comprised primarily of payroll and related costs of approximately $0.2 million and legal and professional fees of approximately $0.1 million
General and administrative expenses for the three months ended September 30, 2022 were comprised primarily of payroll and related costs of approximately $0.4 million, legal and professional fees of approximately $0.2 million, and share based compensation of approximately $0.1 million.
Other Income and Expenses
Interest expense was approximately $70,000 for the three months ended September 30, 2023, compared to approximately $1.7 million for the three months ended September 30, 2022.
Interest expense – related parties was approximately $0.1 million for the three months ended September 30, 2023, compared to approximately $0 in the prior period.
During the three months ended September 30, 2023, we recorded equity investment incentives of approximately $1.2 million. There were no comparable transactions in the prior period.
During the three months ended September 30, 2022, we recorded a loss on waiver and commitment fee shares in the amount of approximately $14,000. There were no comparable transactions in the current period.
During the three months ended September 30, 2023, we recorded other income of $40,622. There were no comparable transactions in the prior period.
During the three months ended September 30, 2023, we recorded a gain on conversion of notes and accounts payable to common stock – related party in the amount of approximately $0.1 million. There were no comparable transactions in the current period.
During the three months ended September 30, 2023, we recorded a gain on conversion of notes and accounts payable to common stock in the amount of approximately $20,000 compared to a loss of approximately $10,000 in the prior period.
During the three months ended September 30, 2023, we recorded a loss on revaluation of derivative liabilities of $14,725 compared to a loss of $37,977 in the prior period.
The Company accrued Preferred Stock dividends of approximately $0.5 million including $1,236 to related parties compared to approximately $0.1 million including $28,389 to related parties for the three months ended September 30, 2022. The increase was due to accrued dividends on the Series F Preferred Stock.
For the three months ended September 30, 2023, we had a net loss available to common shareholders from continuing operations of approximately $1.5 million, or a net loss per share, basic and diluted of ($0.39) compared to a net loss available to common shareholders from continuing operations of approximately $2.6 million, or a net loss per share, basic and diluted of ($0.59), for the three months ended September 30, 2022.
For the three months ended September 30, 2023, we had a net loss available to common shareholders from discontinued operations of approximately $15,000 million, or a net loss per share, basic and diluted of ($0.00) compared to a net loss available to common shareholders from discontinued operations of approximately $1.5 million, or a net loss per share, basic and diluted of ($0.32), for the three months ended September 30, 2022.
Comparison of the Nine Months Ended September 30, 2023 and 2022
Revenue
The Company recognized revenue of $0 for the nine months ended September 30, 2023 and 2022 due to the winding down of the Company’s clinic operations.
Cost of Sales
The Company incurred $0 of cost of goods sold for the nine months ended September 30, 2023 and 2022 due to the winding down of the Company’s clinic operations.
Gross Profit/(Loss)
Our gross loss was $0 for the nine months ended September 30, 2023 and 2022 due to the winding down of the Company’s clinic operations with The Good Clinic, LLC subsidiary.
Operating Expenses
Our total operating expenses for the nine months ended September 30, 2023, were approximately $2.4 million. For the comparable period in 2022, the operating expenses were approximately $3.1 million. The decrease is the result of the winding down of the Company’s clinic operations with The Good Clinic, LLC subsidiary.
General and administrative expenses for the nine months ended September 30, 2023 were comprised primarily of share based compensation of approximately $0.9 million, payroll and related costs of approximately $0.7 million, and legal and professional costs of approximately $0.4 million.
General and administrative expenses for the nine months ended September 30, 2022 were comprised primarily of payroll and related costs of approximately $1.2 million, legal and professional costs of approximately $0.7 million, and share based compensation of approximately $0.5 million.
Other Income and Expenses
Interest expense was approximately $1.6 million for the nine months ended September 30, 2023, compared to approximately $3.4 million for the nine months ended September 30, 2022.
Interest expense – related parties was approximately $0.4 million for the nine months ended September 30, 2023, compared to approximately $0 million in the prior period.
During the nine months ended September 30, 2023, we recorded equity investment incentives of approximately $7.6 million. There were no comparable transactions in the prior period.
During the nine months ended September 30, 2023, we recorded a gain on forgiveness of debt of $25,000. There were no comparable transactions in the prior period.
During the nine months ended September 30, 2023, we recorded a loss on settlement of true-up obligation of $0.1 million. There were no comparable transactions in the prior period.
During the nine months ended September 30, 2022, we recorded a gain on waiver and commitment fee shares of $0.2 million. There were no comparable transactions in the current period.
During the nine months ended September 30, 2023, we recorded a gain on issuance of shares to a service provider of $33,092. There were no comparable transactions in the prior period.
During the nine months ended September 30, 2023, we recorded a gain on sale of assets in the amount of approximately $9,000. There were no comparable transactions in the prior period.
During the three months ended September 30, 2023, we recorded other income of $40,622. There were no comparable transactions in the prior period.
During the nine months ended September 30, 2023, we recorded a loss on legal settlement of $18,759. There were no comparable transactions in the prior period.
During the nine months ended September 30, 2022, we recorded a gain on settlement of accrued salary of $15,032. There were no comparable transactions in the current period.
During the nine months ended September 30, 2023, we recorded a gain on settlement of notes and accounts payable to a related party of approximately $0.1 million; there was no comparable transaction in the prior period.
During the nine months ended September 30, 2023, we recorded a gain on settlement of notes and accounts payable of approximately $20,000 compared to a loss of approximately $0.1 million in the prior period.
During the nine months ended September 30, 2023, we recorded a loss on revaluation of derivative liabilities of $0.1 million compared to a loss of approximately $0.1 million in the prior period.
The Company accrued Preferred Stock dividends of approximately $1.0 million including $78,357 to related parties in the nine months ended September 30, 2023, compared to approximately $0.2 million including $54,977 to related parties for the nine months ended September 30, 2022. The increase was due to accrued dividends on the Series F Preferred Stock.
For the nine months ended September 30, 2023, we had a net loss available to common shareholders of approximately $15.8 million, or a net loss per share, basic and diluted of ($3.14) compared to a net loss available to common shareholders of approximately $11.8 million, or a net loss per share, basic and diluted of ($2.67), for the nine months ended September 30, 2022.
Liquidity and Capital Resources
To date, we have not generated sufficient revenue from operations to support our operations. We have financed our operations through sale of equity securities and short-term borrowings. As of February 6, 2024, we had cash of approximately $12,000 compared to cash of approximately $36,000 as of December 31, 2022.
Net cash used in operating activities was approximately $0.8 million for the nine months ended September 30, 2023. This is the result of the winding down of the Company’s clinic operations. Cash used in operations for the nine months ended September 30, 2022, was approximately $5.5 million.
Net received from in investing activities was approximately $0.1 million for the nine months ended September 30, 2023 compared to approximately $0.2 million for the nine months ended September 30, 2022.
Net cash provided by financing activities for the nine months ended September 30, 2023, was approximately $0.7 million, compared to approximately $4.5 million for the three months ended September 30, 2022.
At September 30, 2023, we had the following current liabilities which are payable in cash: Accounts payable and accrued liabilities of $1.9 million; notes payable of $1.1 million; notes payable to related parties of $2.1 million; SBA Loan Payable of $0.4 million; lease liabilities of $0.1 million; accrued interest payable of $0.2 million; accrued interest payable to related parties of $0.4 million; and other current liabilities of $0.1 million. We also have the following liabilities which are payable in stock: derivative liabilities of $0.2 million, preferred stock dividends of $1.0 million, and preferred stock dividends payable to related parties of $0.1 million.
We have undertaken the following action plan to improve our liquidity: (i) We have raised approximately $194,000 from the sale of office equipment, supplies, and other assets; (ii) several institutional investors have invested in our Series F Preferred Stock; (iii) we have restructured our SBA Loan; (iv) we are negotiating with vendors to convert our accounts payable into common stock or Series F Preferred stock, (iv) We are negotiating with lenders to convert our notes payable into restricted common or preferred stock, or revise the terms of the notes; (v) We are negotiating with landlords to resolve the amounts due under the leases by offering to convert these amounts to equity or promissory notes. See below for details regarding the progress we have made in the implementation of this plan.
Initial funds raised via the above efforts will be used primarily to complete the Company’s SEC filings and to fund legal costs related to the winding down of our previous operations.
SBA Loan
On July 12, 2023, the Company entered into a payment plan arrangement with the U.S. Small Business Administration regarding PPP Loan. The terms of the payment plan call for monthly payments of approximately $2,595 for 180 months beginning July 1, 2023 resulting in total payments in the amount of $0.5 million.
Sale of Series F Preferred Stock Sold for Cash
On April 11, 2023, the Company entered into securities purchase agreements (each a “Purchase Agreement”) with investors providing for the sale and issuance of (i) Series F 12% PIK Convertible Perpetual Preferred Stock, par value $0.01 per share (the “Series F Shares”) and (ii) warrants to purchase shares of Common Stock (the “Warrants,” and together with the Series F Shares, the “Securities”). The Warrants have an initial exercise price of $2.50 per share and the final number of shares of Common Stock the warrant is exercisable for will equal the number of shares of Common Stock into which the Series F Shares convert divided by 2. The Series F can be converted, at the option of the Series F shareholder into shares of the Company’s common stock at a price equal to 65% of the Volume Weighted Average Price ("VWAP”) on the conversion date. No conversions can occur until the Company has successfully completed an uplist to NASDAQ.
From April 11 through November 30, 2023, we have raised a total of $0.9 million through the sale of Series F Securities as follows:
On April 11, 2023, the Company entered into a Purchase Agreement for the sale of 863 Securities at a price of $1,000 per Security for cash in the amount of $0.4 million plus incentives in the amount of $0.5 million, calculated at the rate of 130% of the cash invested.
On April 11, 2023, the Company entered into a Purchase Agreement for the sale of 288 Securities at a price of $1,000 per Security for cash in the amount of $0.1 million plus incentives in the amount of $0.2 million calculated at the rate of 130% of the cash invested.
On April 11, 2023, the Company entered into a Purchase Agreement for the sale of 345 Securities at a price of $1,000 per Security for cash in the amount of $0.1 million plus incentives in the amount of $0.2 million calculated at the rate of 130% of the cash invested.
On September 30, 2023, the Company entered into a Purchase Agreement for the sale of 250 Securities at a price of $1,000 per Security for cash in the amount of $0.3 million.
Also in connection with the Purchase Agreements, the Company entered into separate exchange agreements pursuant to which the investors in the Series F Preferred Stock exchanged certain securities, as defined in each individual Exchange Agreement, for a number Series F Shares (based on their liquidation preference of $1,000) equal to 120%, 165% or 230%, depending on whether the investor is investing additional funds into the bridge financing, of the “Principal Amount,” “Stated Value” and/or liquidation preference of the Exchange Securities (including any payoff bonus, accrued dividends or interest).
Series F Preferred Stock Issued for Conversion of notes payable and accrued interest
Through November 30, 2023, we have converted a total of $4.9 million in debt and accrued interest to Series F Preferred Stock as follows:
On April 11, 2023, in transactions with nine investors, the Company issued an aggregate 8,116 shares of Series F Preferred Stock at a price of $1,000 per share in exchange for debt and accrued interest in the amount of $4.0 million, default fees of $0.9 million, and payoff incentives of $3.2 million. Payoff incentives were calculated at the rate of 65% of principal, default charges, fees, and accrue interest.
On September 29, 2023, in transactions with three investors, we converted an additional $0.5 million in debt and accrued interest into 911 shares of Series F Preferred Stock.
Series F Preferred Stock Issued for Conversion of Debt, Accrued Salaries, and Accrued Fees by Officers and Directors
We have issued a total of 2,006 shares of Series F Preferred Stock to officers and directors for the satisfaction of liabilities in the aggregate amount of $2.0 million as follows:
On September 29, 2023, 1,610 shares of Series F Preferred Stock were issued to Larry Diamond, our now former CEO and a board member, for debt, accrued interest, and accrued salary and equity investment incentive in the aggregate amount of $1.6 million; 210 shares of Series F Preferred Stock were issued to Juan Carlos Iturregui, a former board member, for debt, accrued interest, accrued board fees and equity investment incentive in the aggregate amount of $0.2 million; and 318 shares of Series F Preferred Stock were issued to Tom Brodmerkel, our now former CFO, for debt, accrued interest, and accrued salary in the aggregate amount of $0.3 million.
Series F Preferred Stock Issued for Conversion of Series C and Series D Preferred Stock
Through September 30, 2023, we have converted a total Series C and D Preferred Stock and accrued interest with a total stated value in the amount of $4.0 million to Series F Preferred Stock as follows:
On April 11, 2023, in transactions with two investors, the Company issued an aggregate 2,051 shares of Series F Preferred Stock at a price of $1,000 per share in exchange for Series C Preferred Stock and accrued dividends with a stated value of $1.3 million and conversion incentives in the aggregate amount of $0.8 million. Conversion incentives were calculated at the rate of 80% of stated value of the Series C Preferred Stock converted for those holders of the Series C Preferred Stock who purchased additional Series F Preferred Stock for cash.
On April 11, 2023, in transactions with five investors, the Company issued an aggregate 3,884 shares of Series F Preferred Stock at a price of $1,000 per share in exchange for Series D Preferred Stock and accrued dividends with a stated value of $2.6 million and incentives in the aggregate amount of $1.2 million.
Series F Preferred Stock Issued for Conversion of Accounts Payable
Through September 30, 2023, we have converted a total of $0.1 million of accounts payable to Series F Preferred Stock as follows:
On September 29, 2023, we issued an aggregate 147 shares of Series F Preferred Stock to two creditors in satisfaction of accounts payable in the aggregate amount of $0.1 million.
Common Stock issued for conversion of Accounts payable
Through September 30, 2023, we have converted a total of $0.2 million of accounts payable to common stock as follows:
On September 29, 2023, we issued 131,362 shares of common stock at a price of $0.80 per share to a vendor in satisfaction of accounts payable in the amount of $0.1 million.
On August 29, 2023, we issued 43,750 shares of common stock at a price of $0.80 per share to a vendor in satisfaction of accounts payable in the amount of approximately $44,000.
On September 28, 2023, we issued 49,226 shares of common stock at a price of $0.80 per share to a vendor in satisfaction of accounts payable in the amount of approximately $49,000.
We expect to continue to convert existing liabilities to our Series F Preferred Stock or to common stock and to raise additional funds via the sale of our Series F Preferred Stock, though there can be no assurance that we will be successful in doing so.
Critical Accounting Estimates
Management uses various estimates and assumptions in preparing our financial statements in accordance with generally accepted accounting principles. These estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported revenues and expenses. Accounting estimates that are the most important to the presentation of our results of operations and financial condition, and which require the greatest use of judgment by management, are designated as our critical accounting estimates. We have the following critical accounting estimates:
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Estimates and assumptions used in the valuation of derivative liabilities: Management utilizes a lattice model to estimate the fair value of derivative liabilities. The model includes subjective assumptions that can materially affect the fair value estimates.
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not applicable.
ITEM 4. CONTROLS AND PROCEDURES.
(a) Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer and our Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this report. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in the reports we file or submit under the Exchange Act is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. Based on such evaluation, the Company’s management has identified what it believes are material weaknesses in the Company’s disclosure controls and procedures and concluded that we did not have effective disclosure controls and procedures.
The deficiencies in our disclosure controls and procedures included (i) lack of segregation of duties and (ii) lack of sufficient resources to ensure that information required to be disclosed by the Company in the reports that the Company files or submits to the SEC are recorded, processed, summarized, and reported, within the time periods specified in the SEC’s rules and forms.
The Company intends to take corrective action to ensure that information required to be disclosed by the Company pursuant to the reports that the Company files or submits to the SEC is accumulated and communicated to the Company’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
(b) Changes in Internal Control Over Financial Reporting
There have been no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) that occurred during our third quarter ended September 30, 2023, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
From time to time, we may become involved in legal proceedings or be subject to claims arising in the ordinary course of our business.
On June 23, 2022, The Good Clinic LLC was notified that a former employee had filed a lawsuit for wrongful termination. The Good Clinic believes the lawsuit is without merit. Mitesco (Company) was not named in the suit. We have settled this matter as of January 11, 2024 for total consideration consisting of a cash payment of $3,000.
On October 25, 2022, the Company was notified that a vendor filed a lawsuit related to a contract dispute naming both The Good Clinic and The CEO of the Good Clinic. This suit was settled on May 5, 2023, and dismissed with prejudice on May 12, 2023. The settlement included the issuance of the Company’s restricted common stock. As a part of the settlement the Company issued 2,552 shares of its restricted common stock to the plaintiff and it issued to the CEO of The Good Clinic 19,622 of its restricted common stock, plus $3,000 in cash for reimbursement of expenses related to settling the suit with the vendor.
The Company has a number of legal situations involved with the winding down of its clinic business activities. These include claims regarding certain construction contracts and cancellation of leases. The following is a summary as of this filing:
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The Wayzata, MN clinic leases was terminated for a commitment to pay $25,000.
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The two Denver, Colorado clinic leases, known as Quincy and Radiant, possession has been relinquished to the landlords. The lease obligations remain in negotiations as does the handling of the mechanics liens placed on the property.
On December 1, 2023, a judgement was issued from the District Court of Denver County, Colorado against Mitesco, Inc. and The Good Clinic, LLC in favor of the landlord in the amount of $348,764. Claims for rent beyond November, and any defenses thereto, are preserved.
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The Eagan clinic, aka Vikings clinic, the Good Clinic gave up possession in January of 2023. The mechanics lien has been placed on the property and was settled by the landlord in a confidential settlement. The Landlord terminated the lease as of March 3, 2023. Mitesco is now in settlement negotiations with the landlord for the handling of lease obligations. The Landlord file suit against the Company on July 21, 2023 for unpaid rent, expenses related to unpaid lease obligations and the settled construction lien. A Summary Judgment was granted December 4, 2023 in the amount of $488,491. Plaintiff has submitted a separate request for attorneys’ fees and we are awaiting entry of final judgment.
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The St. Paul clinic possession was relinquished in March 2023. The handling of lease obligations remains in negotiation as does the handling of the mechanics liens placed on the properties. Our existing legal counsel has agreed to represent Mitesco, Inc. and The Good Clinic in these matters.
In Ramsey County, Continental 560 Fund LLC (Case No. 62-CV-23-2910) initiated a lawsuit. The Company’s attorney will prepare a Notice of Appearance and draft Answer in the Continental 560 Fund matter. The deadline under the Minnesota Rules of Civil Procedure for filing an answer has passed. Accordingly, the plaintiff could seek a default judgment at any time. A Stipulation for Judgment was filed December 21, 2023 in the amount of $421,678. The stipulated judgment includes $178,542 in unpaid back rent, $172,124 in resolution of mechanics’ liens, and $64,600 in attorneys’ fees. We are awaiting a final entry of judgment by the Court.
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The St. Louis Park clinic possession was relinquished in April 2023. The handling of lease obligations remains in negotiations as does the handling of the mechanics liens placed on the properties. The plaintiff’s counsel reached out to our attorney to reinitiate negotiations. We proposed to our attorney a settlement approach using a zero coupon note with common stock used as collateral. We are awaiting reply.
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The Maple Grove clinic eviction occurred in April 2023. The handling of lease obligations remains in negotiations as does the handling of the mechanics liens placed on the properties. On August 22, 2023 the landlord filed a lawsuit related to alleged unmet lease obligations and related to a construction lien on the property by the general contractor related to alleged non-payment of construction expenses. We have been told the facility has been re-leased but have not received notice of such or cancelation of the lease.
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The Northeast Minneapolis clinic, aka Nordhaus clinic, possession was relinquished in May 2023. There is no lien on the property. The handling of lease obligations remains in negotiations with the landlord.
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ITEM 1A. RISK FACTORS
Our business is subject to risks and events that, if they occur, could adversely affect our financial condition and results of operations and the trading price of our securities. In addition to the other information set forth in this quarterly report on Form 10-Q, you should carefully consider the factors described in Part I, Item 1A. “Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, filed with the Securities and Exchange Commission on July 14, 2023. There have been no material changes to the risk factors described in that report.
ITEM 2. SALE OF UNREGISTERED SECURITIES
Common Stock
On January 23, 2023, the Company issued 150,000 shares of common stock at the market price of $3.19 per share to a service provider.
On February 21, 2023, the Company issued 150,000 shares of common stock at the market price of $2.27 per share to a service provider.
During the three months ended March 31, 2023, GS Capital converted principal and accrued interest in a convertible note payable into shares of common stock as follows: On February 14, 2023, 9,846 shares were issued at a price of $1.74 per share; on February 28, 2023, 13,555 shares were issued at a price of $1.50 per share; on March 9, 2023, 15,265 shares were issued at a price of $1.50 per share; and on March 28, 2023, 18,472 shares were issued at a price of $1.25 per share.
On March 31, 2023, the Company issued a total of 8,063 shares of common stock for accrued dividends on its Series X Preferred Stock. Of this amount, a total of 1,066 shares were issued to officers and directors, 4,160 were issued to a related party shareholder, and 2,837 were issued to non-related parties.
On April 4, 2023, the Company issued 2,952 shares of common stock to a consultant at a price of $1.29 per share as a commission on funds previously raised.
On April 4, 2023, the Company issued 94,738 shares of common stock to GS Capital at an average price of $1.26 per share pursuant to a make-whole agreement entered into in connection with the GS Capital Warrants.
On May 5, 2023, the Company issued 2,552 shares of common stock to a vendor at a price of $0.85 per share, and on May 9, 2023, the Company issued 19,622 shares of common stock at a price of $0.85 per share to the Michael C. Howe Living Trust (the “Howe Trust”), an entity controlled by a related party. These shares were issued in satisfaction of a vendor dispute. The shares issued to the Howe Trust were reimbursement for shares previously issued to the vendor by the Howe Trust with regard to this dispute.
On June 29, 2023, the Company issued a total of 20,212 shares of common stock for accrued dividends on its Series X Preferred Stock. Of this amount, a total of 2,673 shares were issued to officers and directors, 10,426 were issued to a related party shareholder, and 7,113 were issued to non-related parties.
Effective June 30, 2023, the Company issued 2,926 shares of common stock at a price of $12.50 to a previous board member for the conversion of accounts payable in the amount of $36,575. These shares had been carried on the Company balance sheet as Common Stock Subscribed.
On August 21, 2023, the Company issued 131,362 shares of common stock at a price of $0.80 per share for accounts payable in the amount of $105,089.
On August 21, 2023, the Company issued 43,750 shares of common stock at a price of $0.80 per share for accounts payable in the amount of $35,000.
On August 21, 2023, the Company issued 49,226 shares of common stock at a price of $0.80 per share for accounts payable in the amount of $39,380.
Effective September 29, 2023, the Company’s now former Chief Operating Officer and a board member converted a note in the amount of $18,750, accrued interest of $2,101, accrued salary of $64,434, and board of director fees of $60,000 (a total of $145,285) at a price of $0.80 per share into 181,606 shares of the Company’s common stock.
Series F Preferred Stock
On April 11, 2023, the Company issued a total of 8,116 shares of Series F Preferred Stock at its liquidation value of $1,000 per share to nine investors upon the conversion of notes payable. The total amount converted was $8,111,334, consisting of principal $3,602,059, default penalties of $888,889, fees of $60,000, accrued interest of $365,012, and equity investment incentives of $3,195,374.
On April 11, 2023, the Company issued a total of 2,289 shares of Series F Preferred Stock at its liquidation value of $1,000 per share to two investors upon the conversion of Series C Preferred Stock. The total amount converted was $2,287,997, consisting of the Series C Preferred Stock stated value of $1,100,000, accrued dividends of $171,109, and equity investment incentives of $1,016,888.
On April 11, 2023, the Company issued a total of 4,055 shares of Series F Preferred Stock to two investors at its liquidation value of $1,000 per share upon the conversion of Series D Preferred Stock. The total amount converted was $4,055,005 consisting of the Series D Preferred Stock stated value of $2,467,500, accrued dividends of $215,659, and equity investment incentives of $1,371,846.
On April 11, 2023, the Company sold a total of 1,746 shares of Series F Preferred Stock to three investors at its liquidation value of $1,000 per share for cash. The total value of Series F Preferred Stock of issued was $1,745,000 consisting of cash proceeds of $900,000 and an equity investment incentive of $845,000.
On June 29, 2023, the Company issued a total of 147 shares of Series F Preferred Stock at its liquidation value of $1,000 per share to two service providers for accounts payable in the amount of $146,214.
On September 29, 2023, the Company issued a total of 2,138 shares of Series F Preferred Stock at its liquidation value of $1,000 per share to three related party investors for notes payable of $601,839, premium on notes payable of $78,087, accrued interest of $124,777, accrued salaries and board fees of $489,125, and equity investment incentives of $844,238 or total consideration of $2,137,056.
On September 29, 2023, the Company issued a total of 911 shares of Series F Preferred Stock at its liquidation value of $1,000 per share to two investors for notes payable of $414,118, premium on notes payable of $41,412, accrued interest of $84,187, fees of $10,000, and equity investment incentives of $360,385 or total consideration of $910,102.
ITEM 3. DEFAULTS ON SENIOR SECURED SECURITIES
Not Applicable.
ITEM 4. MINE SAFETY DISCLOSURES
Not Applicable.
ITEM 5. OTHER INFORMATION
Not Applicable.
ITEM 6. EXHIBITS
The following exhibits are included with this Quarterly Report on Form 10Q
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Form
Type
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Exhibit
Number
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Date
Filed
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Filed
Herewith
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3.1
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Certificate of Incorporation of Trunity Holdings, Inc., dated January 18, 2012.
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8-K
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10.1
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1/31/2012
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3.2
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Bylaws of Trunity Holdings, Inc., dated January 18, 2012.
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8-K
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10.2
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1/31/2012
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3.3
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Certificate of Ownership Merging between Trunity Holdings, Inc. and Brain Tree International, Inc. dated January 24, 2012.
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10-K
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3.3
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4/16/2013
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3.4
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Certificate of Amendment to the Certificate of Incorporation of Trunity Holdings, Inc., dated December 24, 2015.
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8-K
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3.1(i)
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1/06/2016
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Form
Type
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Exhibit
Number
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Date
Filed
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Filed
Herewith
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3.5
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Certificate of Designations of Series X Preferred Stock of True Nature Holding, Inc.
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8-K
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3.6
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1/06/2020
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3.6
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Form of Amended and Restated Certificate of Designations of Series A Preferred Stock of True Nature Holding, Inc.
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8-K
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3.07
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3/13/2020
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3.7
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Certificate of Amendment of the Certificate of Incorporation of True Nature Holding, Inc. dated April 21, 2020.
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10-Q
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3.7
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8/14/2020
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3.8
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Certificate of Amendment of Certificate of Incorporation, dated as of November 5, 2020, correcting December 24, 2015, Certificate of Amendment.
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10-Q
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3.8
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11/13/2020
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3.9
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Bylaws of Mitesco, Inc., as amended, dated November 10, 2020
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10-Q
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3.9
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11/13/2020
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3.10
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Certificate of Designations, Preferences and Rights of the Series C Convertible Preferred Stock of Mitesco, Inc.
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8-K
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3.1
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03/26/2021
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3.11
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Certificate of Correction to the Certificate of Designations, Preferences and Rights of the Series C Convertible Preferred Stock of Mitesco, Inc.
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8-K
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3.2
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03/26/2021
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31.1
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Certification by the Principal Executive Officer of the Registrant pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
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X
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32.1
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Certification by the Principal Executive Officer of the Registrant pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
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X
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101.INS **
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XBRL INSTANCE DOCUMENT
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101.SCH **
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XBRL TAXONOMY EXTENSION SCHEMA
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101.CAL **
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XBRL TAXONOMY EXTENSION CALCULATION LINKBASE
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101.DEF **
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XBRL TAXONOMY EXTENSION DEFINITION LINKBASE
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101.LAB **
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XBRL TAXONOMY EXTENSION LABEL LINKBASE
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101.PRE **
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XBRL TAXONOMY EXTENSION PRESENTATION LINKBASE
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104
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Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
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#
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Management contract or compensatory plan or arrangement required to be identified pursuant to Item 15(a)(3) of this report.
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SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Quarterly Report on Form 10-Q for the period ended September 30, 2023, to be signed on its behalf by the undersigned, thereunto duly authorized.
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MITESCO, INC.
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Dated: February 13, 2024
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By:
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/s/ Mack Leath
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Mack Leath
Chief Executive Officer, Chief Financial Officer and Principal Financial Officer
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NONE
P5Y
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