Mitesco, Inc 10-Q for FY2022 Q1
Mitesco, Inc. (MITI)
About this 10-Q
Mitesco, Inc filed this 10-Q on May 16, 2022, covering the quarter ended March 31, 2022 (FY2022 Q1).
Headline figures
Quarter ended March 31, 2022, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $120.38K
- up 3950.3% from $2972 a year earlier
- Net loss
- $3.65M
- compared with a net loss of $2.4M a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM
For the quarter ended
OR
For the transition period from _________ to _________
Commission File Number
(Exact Name of Registrant as Specified in its Charter)
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| (State Other Jurisdiction of Incorporation or Organization) |
| (I.R.S. Employer Identification Number) |
(Address of principal executive offices) (Zip code)
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(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 |
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Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. YES ☐ No ☒
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. ☐
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
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).
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 ☐ |
| | Smaller reporting company |
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| 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 ☐
As of May 11, 2022, the registrant had outstanding
Table of Contents
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PART I – FINANCIAL INFORMATION |
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Item 1. |
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Condensed Consolidated Balance Sheets as of March 31, 2022 and December 31, 2021 |
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Condensed Consolidated Statements of Operations for the three months ended March 31, 2022 and 2021 |
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Condensed Consolidated Stockholder’s Deficit for the three months ended March 31, 2022 and 2021 |
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Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2022 and 2021 |
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Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations. |
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Item 3. |
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Item 4. |
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PART II – OTHER INFORMATION |
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Item 1. |
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Item 1A. |
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Item 2. |
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Item 3. |
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Item 4. |
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Item 5. |
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28 |
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Item 6. |
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CAUTIONARY STATEMENT ON FORWARD-LOOKING INFORMATION
This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are based upon our current assumptions, expectations, and beliefs concerning future developments and their potential effect on our business. In some cases, you can identify forward-looking statements by the following words: “may,” “will,” “could,” “would,” “should,” “expect,” “intend,” “plan,” “anticipate,” “believe,” “approximately,” “estimate,” “predict,” “project,” “potential,” “continue,” “ongoing,” or the negative of these terms or other comparable terminology, although the absence of these words does not necessarily mean that a statement is not forward-looking. This information may involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to be materially different from the future results, performance or achievements expressed or implied by any forward-looking statements.
Factors that may cause or contribute actual results to differ from these forward-looking statements include, but are not limited to:
● adverse economic conditions;
● the Company’s ability to raise capital to fund its operations
● industry competition
● the Company’s ability to integrate its acquisitions
● the Company’s ability to attract and retain qualified senior management and technical personnel;
● the continued effect of the Covid-19 pandemic on the Company’s operations; and
These forward-looking statements represent our intentions, plans, expectations, assumptions, and beliefs about future events and are subject to risks, uncertainties and other factors. Considering these risks, uncertainties, and assumptions, the events described in the forward-looking statements may not occur or may occur to a different extent or at a different time than we have described.
All forward-looking statements speak only as of the date of this Report. Except to the extent required by law, we undertake no obligation to update or revise any forward-looking statements, or other information contained herein, whether as a result of new information, future events, a change in events, conditions, circumstances or assumptions underlying such statements, or otherwise. We caution you therefore that you should not rely on any of these forward-looking statements as statements of historical fact or as guarantees or assurances of future performance.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
MITESCO, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
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March 31, |
December 31, |
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ASSETS |
2022 |
2021 |
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(unaudited) |
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Current assets |
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Cash and cash equivalents |
$ | $ | ||||||
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Accounts receivable |
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Inventory |
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Prepaid expenses |
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Total current assets |
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Right to use operating leases, net |
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Construction in progress |
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| Fixed assets, net of accumulated depreciation of $ |
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Total Assets |
$ | $ | ||||||
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LIABILITIES AND (DEFICIENCY IN) STOCKHOLDERS' EQUITY |
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Current liabilities |
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Accounts payable and accrued liabilities |
$ | $ | ||||||
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Accrued interest |
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Derivative liabilities |
- | |||||||
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Lease liability - operating leases, current |
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| Notes payable, net of discounts of $ |
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SBA Loan Payable |
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Other current liabilities |
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Preferred stock dividends payable |
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Total current liabilities |
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Lease Liability- operating leases, non-current |
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Total Liabilities |
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Commitments and contingencies |
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Stockholders' equity (deficit) |
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Preferred stock, $0.01 par value, 100,000,000 shares authorized; 500,000 shares designated Series A; 3,000,000 shares designated Series C; 10,000,000 shares designated Series D; and 400,000 shares designated Series X: |
- | - | ||||||
| Preferred stock, Series A, $ |
- | |||||||
| Preferred stock, Series C, $ |
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| Preferred stock, Series D, $ |
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| Preferred stock, Series X, $ |
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Common stock subscribed |
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| Common stock, $ |
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Additional paid-in capital |
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Accumulated deficit |
( |
) | ( |
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Total stockholders' equity (deficit) |
( |
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Total liabilities and stockholders' equity (deficit) |
$ | $ | ||||||
See accompanying notes to these unaudited condensed consolidated financial statements.
MITESCO, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
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For the Three |
For the Three |
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Months Ended |
Months Ended |
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March 31, |
March 31, |
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2022 |
2021 |
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Revenue-services |
$ | $ | ||||||
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Revenue-products |
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Total revenue |
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Cost of goods sold-services |
$ | $ | ||||||
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Cost of goods sold-products |
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Total cost of goods sold |
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Gross profit (loss) |
( |
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Operating expenses: |
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General and administrative |
$ | $ | ||||||
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Total operating expenses |
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Net Operating Loss |
( |
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Other income (expense): |
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Interest expense |
( |
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Gain (loss) on waiver fee shares |
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Gain (loss) on settlement of accrued salary |
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Gain (loss) on settlement of accounts payable |
( |
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Gain (loss) on settlement of notes payable |
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Gain (loss) on revaluation of derivative liabilities |
( |
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Total other expense |
( |
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Loss before provision for income taxes |
( |
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Provision for income taxes |
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Net loss |
$ | ( |
) | $ | ( |
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Preferred stock dividends |
( |
) | ( |
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Preferred stock deemed dividends |
( |
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Net loss available to common shareholders |
$ | ( |
) | $ | ( |
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Net loss per share - basic and diluted |
$ | ( |
) | $ | ( |
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Weighted average shares outstanding - basic and diluted |
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See accompanying notes to these unaudited condensed consolidated financial statements.
MITESCO, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)
FOR THE THREE MONTHS ENDED MARCH 31, 2022 and 2021
(UNAUDITED)
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Preferred Stock Series A |
Preferred Stock Series C |
Preferred Stock Series D |
Preferred Stock Series X |
Common Stock |
Additional Paid-in |
Common Stock |
Accumulated |
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Shares |
Amount |
Shares |
Amount |
Shares |
Amount |
Shares |
Amount |
Shares |
Amount |
capital |
Subscribed |
Deficit |
Total |
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Balance, December 31, 2020 |
$ | - | $ | - | - | $ | - | $ | $ | $ | $ | - | $ | ( |
) | $ | ( |
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Vesting of common stock issued to employees |
- | - | - | - | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||
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Vesting of stock options issued to employees |
- | - | - | - | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||
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Common stock issued for services |
- | - | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||||
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Common stock issued for conversion of notes payable and accrued interest |
- | - | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||||
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Sale of common stock in private placement |
- | - | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||||
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Sales of Preferred Stock Series C |
- | - | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||||
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Warrants issued with Preferred Stock Series C |
- | - | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||||||||
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Conversion of Preferred Stock Series A to common stock |
( |
) | ( |
) | - | - | - | - | - | - | ( |
) | - | - | - | |||||||||||||||||||||||||||||||||||||||||
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Deemed dividend on conversion of Preferred Stock Series A to common stock |
- | - | - | - | - | - | - | - | - | - | - | ( |
) | - | ||||||||||||||||||||||||||||||||||||||||||
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Deemed dividend on Preferred Stock Series C |
- | - | - | - | - | - | - | - | - | - | - | ( |
) | - | ||||||||||||||||||||||||||||||||||||||||||
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Preferred stock dividends |
- | - | - | - | - | - | - | - | - | - | ( |
) | - | - | ( |
) | ||||||||||||||||||||||||||||||||||||||||
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Loss for the period ended March 31, 2021 |
- | - | - | - | - | - | - | - | - | - | - | - | ( |
) | ( |
) | ||||||||||||||||||||||||||||||||||||||||
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Balance, March 31, 2021 |
- | $ | - | $ | - | $ | - | $ | $ | $ | $ | - | $ | ( |
) | $ | ||||||||||||||||||||||||||||||||||||||||
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Balance, December 31, 2021 |
- | $ | - | $ | $ | $ | $ | $ | $ | $ | ( |
) | ||||||||||||||||||||||||||||||||||||||||||||
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Vesting of common stock issued to employees |
- | - | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||||
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Vesting of stock options issued to employees |
- | - | - | - | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||
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Conversion of accounts payable to common stock |
- | - | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||||
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Commitment fee shares |
- | - | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||||
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Waiver fee shares |
- | - | - | - | - | - | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||||
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Warrants issued with note payable - Diamond 1 |
- | - | - | - | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||
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Warrants issued with note payable - Diamond 2 |
- | - | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||||
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Gain on settlement of accrued payroll |
- | - | - | - | - | - | - | - | ( |
) | ( |
) | - | - | - | |||||||||||||||||||||||||||||||||||||||||
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Issuance of shares previously subscribed for conversion of accounts payable |
- | - | - | - | - | - | - | - | ( |
) | - | - | ||||||||||||||||||||||||||||||||||||||||||||
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Preferred stock dividends |
- | - | - | - | - | - | - | - | - | - | ( |
) | - | ( |
) | |||||||||||||||||||||||||||||||||||||||||
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Loss for the period ended March 31, 2022 |
- | - | - | - | - | - | ( |
) | ( |
) | ||||||||||||||||||||||||||||||||||||||||||||||
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Balance, March 31, 2022 |
- | $ | - | $ | $ | $ | $ | $ | $ | $ | ( |
) | $ | ( |
) | |||||||||||||||||||||||||||||||||||||||||
See accompanying notes to these unaudited condensed consolidated financial statements.
MITESCO, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
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For the Three |
For the Three |
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Months Ended |
Months Ended |
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March 31, |
March 31, |
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2022 |
2021 |
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CASH FLOWS FROM OPERATING ACTIVITIES |
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Net loss |
$ | ( |
) | $ | ( |
) | ||
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Adjustments to reconcile net loss to net cash used in operating activities: |
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Depreciation |
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Amortization of right-to-use asset |
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Net gain on settlement of notes payable |
( |
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Financing cost - waiver fee shares |
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Gain on waiver fee shares |
( |
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Gain on conversion of accrued salary |
( |
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(Gain) loss on revaluation of derivative liabilities |
( |
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Loss on settlement of accounts payable |
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Amortization of discount on notes payable |
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Share-based compensation |
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Changes in assets and liabilities: |
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Accounts receivables |
( |
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Prepaid expenses |
( |
) | ( |
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Inventory |
( |
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Accounts payable and accrued liabilities |
( |
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Operating lease liability |
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Other current liabilities |
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Accrued interest |
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Net cash used in operating activities |
( |
) | ( |
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CASH FLOWS FROM INVESTING ACTIVITIES |
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Cash paid for acquisition of fixed assets |
( |
) | ( |
) | ||||
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Net cash used in investing activities |
( |
) | ( |
) | ||||
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CASH FLOWS FROM FINANCING ACTIVITIES |
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Proceeds from private placement of common stock |
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Proceeds from sales of Series C Preferred Stock, net of fees |
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Proceeds from notes payable - related parties, net of discount |
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Proceeds from notes payable, net of discount |
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Principal payments on notes payable |
( |
) | ||||||
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Net cash provided by financing activities |
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Net increase in cash and cash equivalents |
( |
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Cash and cash equivalents at beginning of period |
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Cash and cash equivalents at end of period |
$ | $ | ||||||
See accompanying notes to these unaudited condensed consolidated financial statements.
MITESCO, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
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For the Three |
For the Three |
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Months Ended |
Months Ended |
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March 31, |
March 31, |
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2022 |
2021 |
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SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: |
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Interest paid |
$ | $ | ||||||
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NON-CASH INVESTING AND FINANCING ACTIVITIES: |
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Stock issued for conversion of debt and accrued interest |
$ | $ | ||||||
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Settlement of derivative liabilities |
$ | $ | ( |
) | ||||
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Preferred stock dividend |
$ | $ | ||||||
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Deemed dividends on Preferred Stock |
$ | $ | ||||||
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Conversion of Series A Preferred stock to common stock |
$ | $ | ||||||
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Capital expenditures included in accounts payable |
$ | $ | ||||||
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Conversion of accounts payable to common stock |
$ | $ | ||||||
See accompanying notes to these unaudited condensed consolidated financial statements.
MITESCO, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2022 AND 2021
(Unaudited)
Note 1 – Description of Business
Company Overview
Mitesco, Inc. (the “Company,” “we,” “us,” or “our”) was formed in the state of Delaware on January 18, 2012. On December 9, 2015, we restructured our operations and acquired Newco4pharmacy, LLC, a development stage company which sought to acquire compounding pharmacy businesses. As a part of the restructuring, we completed a “spin out” of our former business line. On April 24, 2020, we changed our name to Mitesco, Inc.
Since 2020, our operations have focused on establishing medical clinics utilizing nurse practitioners under The Good Clinic name and development and acquisition of telemedicine technology. In March of 2020, we formed a wholly owned subsidiary, The Good Clinic LLC, a Colorado limited liability company for our clinic business.
We opened our first The Good Clinic in Minneapolis, Minnesota in the first quarter of 2021 and have six operating at the time of this filing. We intend on opening up to 50 new clinics in the next three years, in addition to any existing sites we might acquire.
Note 2 - Financial Condition, Going Concern and Management Plans
On November 19, 2021, the Company closed a bridge financing round totaling $
Pursuant to the Certificate of Designations, Preferences and Rights of the Series D Convertible Preferred Stock of the Company, Inc., filed with the Secretary of State of the State of Delaware on October 18, 2021 (the “COD”), there are
On November 11, 2021, the Company filed a registration statement on form S/1 in connection with a planned up list to a national exchange.
As of the date of this filing the Company has closed on $
The Company) issued a 10% Promissory Note due June 30, 2022, dated December 30, 2021, to the Michael C. Howe Living Trust (the “Lender”). Michael C. Howe is the Chief Executive Officer of the Good Clinic LLC, one of our subsidiaries. The principal amount of the Note is $
The Company entered into a debt-for-equity exchange agreement with Gardner Builders Holdings, LLC (the “Creditor”) on January 7, 2022 (the “Agreement”). Pursuant to the Agreement, the Company issued shares of restricted common stock, par value $
The Agreement settles for certain accounts payable amounts owed by the Company to the Creditor (the “Accounts Payable Amount”) as well as upcoming amounts that will become due between the date of the Agreement and April 1, 2022. The Agreement also settles incurred interest and penalties on the amounts due through January 5, 2022, as well as future interest payments on amounts to be incurred in the first quarter of 2022 (collectively, the “Additional Costs”, and combined with the Accounts Payable Amount, the “Company Debt Obligations”). The Accounts Payable Amount is $
As of March 31, 2022, the Company had cash and cash equivalents of $
As a result of these factors, there is substantial doubt about the ability of the Company to continue as a going concern for one year from the date the financial statements are issued. The Company’s continuance is dependent on raising capital and generating revenues sufficient to sustain operations. The Company believes that the necessary capital will be raised and has entered discussions to do so with certain individuals and companies. However, as of the date of these condensed consolidated financial statements, no formal agreement exists.
The accompanying consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts classified as liabilities that might be necessary should the Company be forced to take any such actions.
PPP Loan
During March 2020, in response to the COVID-19 crisis, the federal government announced plans to offer loans to small businesses in various forms, including the Payroll Protection Program, or “PPP”, established as part of the Corona Virus Aid, Relief and Economic Security Act (“CARES Act”) and administered by the U.S. Small Business Administration. On April 25, 2020, the Company entered an unsecured Promissory Note with Bank of America for a loan in the original principal amount of approximately $
COVID -19 Impact
The Company has had some impact on its operations because of the effects of the COVID-19 pandemic, primarily with accessibility to staffing, consultants and in the capital markets, and it is adjusting as needed within its available resources. The Company will continue to assess the effect of the pandemic on its operations. The extent to which the COVID-19 pandemic will continue to impact the Company’s business and operations will depend on future developments that are highly uncertain and cannot be predicted with confidence, such as the ultimate geographic spread of the disease, the duration of the outbreak, the duration and effect of possible business disruptions and the short-term effects and ultimate effectiveness of the travel restrictions, quarantines, social distancing requirements and business closures in the United States and other countries to contain and treat the disease. While the potential economic impact brought by, and the duration of, COVID-19 may be difficult to assess or predict, a widespread pandemic could result in significant disruption of global financial markets, reducing the Company’s ability to access capital, which could in the future negatively affect the Company’s liquidity. In addition, a recession or market correction resulting from the spread of COVID-19 could materially affect the Company’s business and the value of its securities.
Note 3 – 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 MitescoNA, LLC, The Good Clinic, LLC, and Acelerar Healthcare Holdings, LTD. In addition, we manage two entities under a variable interest entity arrangement and have control over the operating activities of these legal entities in which we do not maintain a controlling ownership interest but over which we will have direct influence over the operations and are the primary beneficiary. We expect that these entities will typically be subject to nominee ownership and transfer restriction agreements that effectively transfer the majority of the economic risks and rewards of their ownership to the Company. The Company’s management, restriction and other agreements concerning such nominee-owned entities typically includes both financial terms and protective and participating rights to the entities’ operating, strategic and non-clinical governance decisions which transfer substantial powers over and economic responsibility for these entities to the Company. As such, the Company applies the guidance of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 810 – Consolidation (“ASC 810”), to determine when an entity that is insufficiently capitalized or not controlled through its voting interests, referred to as a variable interest entity should be consolidated. All intercompany balances and transactions have been eliminated.
Use of Estimates - The preparation of these financial statements requires our management to make estimates and assumptions about future events that affect the amounts reported in the financial statements and related notes. Future events and their effects cannot be determined with absolute certainty. Therefore, the determination of estimates requires the exercise of judgment.
Cash - The Company considers all highly liquid investments with maturities of three months or less to be cash equivalents. The Company had cash and cash equivalents of approximately $
Property, Plant, and Equipment - Property and equipment is recorded at the lower of cost or estimated net recoverable amount and is depreciated using the straight-line method over its estimated useful life. Property acquired in a business combination is recorded at estimated initial fair value.
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Years |
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Office equipment |
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|
Furniture & fixtures |
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|
Machinery & equipment |
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Leasehold improvements |
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|
Revenue Recognition – On January 1, 2018, the Company adopted the new revenue recognition accounting standard issued by the Financial Accounting Standards Board (“FASB”) and codified in the ASC as Topic 606 (“ASC 606”). The revenue recognition standard in ASC 606 outlines a single comprehensive model for recognizing revenue as performance obligations, defined in a contract with a customer as goods or services transferred to the customer in exchange for consideration, are satisfied. The standard also requires expanded disclosures regarding the Company’s revenue recognition policies and significant judgments employed in the determination of revenue.
The Company applied the modified retrospective approach to all contracts when adopting ASC 606. As a result, at the adoption of ASC 606 what was previously classified as the provision for bad debts in the statement of operations is now reflected as implicit price concessions (as defined in ASC 606) and therefore included as a reduction to net operating revenues in 2018. For changes in credit issues not assessed at the date of service, the Company will prospectively recognize those amounts in other operating expenses on the statement of operations. For periods prior to the adoption of ASC 606, the provision for bad debts has been presented consistent with the previous revenue recognition standards that required it to be presented separately as a component of net operating revenues.
Our revenues generally relate to net patient fees received from various payers and patients themselves under contracts in which our performance obligations are to provide services to the patients. Revenues are recorded during the period our obligations to provide services are satisfied. The contractual relationships with patients, in most cases, also involve a third-party payer (Medicare, Medicaid, managed care health plans and commercial insurance companies, including plans offered through the health insurance exchanges) and the transaction prices for the services provided are dependent upon the terms provided by (Medicare and Medicaid) or negotiated with (managed care health plans and commercial insurance companies) the third-party payers. The payment arrangements with third-party payers for the services we provide to the related patients typically specify payments at amounts less than our standard charges and generally provide for payments based upon predetermined rates for services or discounted fee-for-service rates. Management continually reviews the contractual estimation process to consider and incorporate updates to laws and regulations and the frequent changes in managed care contractual terms resulting from contract renegotiations and renewals.
Stock-Based Compensation-We recognize the compensation costs of share-based compensation arrangements based on the grant-date fair value and recognize the costs in the financial statements over the period during which employees are required to provide services. Share-based compensation cost for stock options is estimated at the grant date based on each option’s fair-value as calculated by the Black-Scholes-Merton (“BSM”) option-pricing model. Share-based compensation arrangements may include stock options, restricted share plans, performance-based awards, share appreciation rights and employee share purchase plans. Such compensation amounts, if any, are amortized over the respective vesting periods of the option grant.
Equity instruments issued to those other than employees are recognized pursuant to FASB issued ASU 2018-07, Compensation – Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting. This ASU relates to the accounting for non-employee share-based payments. The amendment in this update expands the scope of Topic 718 to include all share-based payment transactions in which a grantor acquired goods or services to be used or consumed in a grantor’s own operations by issuing share-based payment awards. The ASU excludes share-based payment awards that relate to: (1) financing to the issuer; or (2) awards granted in conjunction with selling goods or services to customers as part of a contract accounted for under Topic 606, Revenue from Contracts from Customers. The share-based payments are to be measured at grant-date fair value of the equity instruments that the entity is obligated to issue when the goods or service has been delivered or rendered and all other conditions necessary to earn the right to benefit from the equity instruments have been satisfied. This standard became effective for public business entities for fiscal years beginning after December 15, 2018, including interim periods within that fiscal year. We adopted the provisions of this ASU on January 1, 2019. The adoption had no impact on our results of operations, cash flows, or financial condition.
Convertible Instruments-The Company reviews the terms of convertible debt and equity instruments to determine whether there are conversion features or embedded derivative instruments including embedded conversion options that are required to be bifurcated and accounted for separately as a derivative financial instrument. In circumstances where the convertible instrument contains more than one embedded derivative instrument, including conversion options that are required to be bifurcated, the bifurcated derivative instruments are accounted for as a single compound instrument. Also, in connection with the sale of convertible debt and equity instruments, the Company may issue free standing warrants that may, depending on their terms, be accounted for as derivative instrument liabilities, rather than as equity. When convertible debt or equity instruments contain embedded derivative instruments that are to be bifurcated and accounted for separately, the total proceeds allocated to the convertible host instruments are first allocated to the fair value of the bifurcated derivative instrument. The remaining proceeds, if any, are then allocated to the convertible instruments themselves, usually resulting in those instruments being recorded at a discount from their face amount. When the Company issues debt securities, which bear interest at rates that are lower than market rates, the Company recognizes a discount, which is offset against the carrying value of the debt. Such discount from the face value of the debt, together with the stated interest on the instrument, is amortized over the life of the instrument through periodic charges to income. In addition, certain conversion features are recognized as beneficial conversion features to the extent the conversion price as defined in the convertible note is less than the closing stock price on the issuance of the convertible notes.
Common Stock Purchase Warrants-The Company accounts for common stock purchase warrants in accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 815, Accounting for Derivative Instruments and Hedging Activities. As is consistent with its handling of stock compensation and embedded derivative instruments, the Company’s cost for stock warrants is estimated at the grant date based on each warrant’s fair-value as calculated by the Black Sholes option-pricing model value method for valuing the impact of the expense associated with these warrants.
Stockholders’ Equity-Shares of common stock issued for other than cash have been assigned amounts equivalent to the fair value of the service or assets received in exchange.
Per Share Data-Basic loss per share is computed by dividing net loss by the weighted average number of common shares outstanding for the year. Diluted loss per share is computed by dividing net loss by the weighted average number of common shares outstanding plus common stock equivalents (if dilutive) related to warrants, options, and convertible instruments.
Financial Instruments and Fair Values-The fair value of a financial instrument represents the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. Fair value estimates are made at a specific point in time, based upon relevant market information about the financial instrument. In determining fair value, we use various valuation methodologies and prioritize the use of observable inputs. We assess the inputs used to measure fair value using a three-tier hierarchy based on the extent to which inputs used in measuring fair value are observable in the market:
Level 1 – inputs include exchange quoted prices for identical instruments and are the most observable.
Level 2 – inputs include brokered and/or quoted prices for similar assets and observable inputs such as interest rates.
Level 3 – inputs include data not observable in the market and reflect management judgment about the assumptions market participants would use in pricing the asset or liability.
The use of observable and unobservable inputs and their significance in measuring fair value are reflected in our hierarchy assessment. The carrying amount of cash, prepaid assets, accounts payable and accrued liabilities approximate fair value due to the short-term maturities of these instruments. Because cash and cash equivalents are readily liquidated, management classifies these values as Level 1. The fair value of the derivative liabilities approximates their book value as the instruments are short-term in nature and contain market rates of interest. Because there is no ready market or observable transactions, management classifies the derivative liabilities as Level 3.
New Accounting Standards
From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (“FASB”) or other standard setting bodies that the Company adopts as of the specified effective date. Unless otherwise discussed, the Company does not believe that the impact of recently issued standards that are not yet effective will have a material impact on its financial position or results of operations upon adoption.
Recent Accounting Standards Not Yet Adopted
In August 2020, the FASB issued ASU 2020-06, “Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40)”. This ASU reduces the number of accounting models for convertible debt instruments and convertible Preferred Stock. As well as amend the guidance for the derivatives scope exception for contracts in an entity’s own equity to reduce form-over-substance-based accounting conclusions. In addition, this ASU improves and amends the related EPS guidance. This standard is effective for us on January 1, 2024, including interim periods within those fiscal years. Adoption is either a modified retrospective method or a fully retrospective method of transition. We are currently assessing the impact the new guidance will have on our condensed consolidated financial statements.
There are various other updates recently issued, most of which represent technical corrections to the accounting literature or application to specific industries and are not expected to a have a material impact on the Company’s consolidated financial position, results of operations or cash flows.
Note 4 – Net Loss Per Share Applicable to Common Shareholders
Net Loss per Share Applicable to Common Stockholders
Basic loss per common share is computed by dividing net loss by the weighted average number of common shares outstanding during the reporting period. Diluted loss per common share is computed similarly to basic loss per common share except that it reflects the potential dilution that could occur if dilutive securities or other obligations to issue common stock were exercised or converted into common stock.
The following table sets forth the computation of loss per share for the three months ended March 31, 2022, and 2021, respectively:
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For the Three Months Ended |
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|
March 31, |
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2022 |
2021 |
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|
Numerator: |
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|
Net loss applicable to common shareholders |
$ | ( |
) | $ | ( |
) | ||
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Denominator: |
||||||||
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Weighted average common shares outstanding |
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|
Net loss per share: |
||||||||
|
Basic and diluted |
$ | ( |
) | $ | ( |
) | ||
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.
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For the Three Months Ended |
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March 31, |
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2022 |
2021 |
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Common stock options |
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Common stock purchase warrants |
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Convertible Preferred Stock Series C |
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Convertible Preferred Stock Series D |
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Accrued interest on Preferred Stock |
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Potentially dilutive securities |
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Note 5 – Related Party Transactions
For the three months ended March 31, 2022:
Mitesco, Inc. (the “Company”) issued a 10% Promissory Note due August 14, 2022, dated February 14, 2022, to Lawrence Diamond (the “Lender”). Mr. Diamond is the Chief Executive Officer of the Company and a member of its Board of Directors. The principal amount of the Note is $
Mitesco, Inc., issued a promissory notes to pay to the order of Lawrence Diamond (the “Lender” and collectively with the Borrower, the “Parties”) on the Termination Date (as defined below), the principal amount of $235,294 (the “Principal Amount”) plus an amount equal to
As further consideration for the Purchase Price payable hereunder, promptly following the Issue Date, the Borrower shall issue to the Lender a common stock purchase warrants, entitling the Lender to purchase
Note 6 – Accounts Payable and Accrued Liabilities
Accounts payable and accrued liabilities consisted of the following at March 31, 2022 and 2021:
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March 31, |
December 31, |
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2022 |
2021 |
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Trade accounts payable |
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Accrued payroll and payroll taxes |
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Other |
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Total accounts payable and accrued liabilities |
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Note 7 - Right to Use Assets and Lease Liabilities – Operating Leases
The Company has operating leases for its clinic with a remaining lease term of approximately
As of March 31, 2022, the Company had total operating lease liabilities of approximately $
Right to use assets – operating leases are summarized below:
|
March 31, 2022 |
December 31, 2021 |
|||||||
|
Right to use assets, net |
$ | $ | ||||||
Operating lease liabilities are summarized below:
|
March 31, 2022 |
December 31, 2021 |
|||||||
|
Lease liability |
$ | $ | ||||||
|
Less: current portion |
( |
) |
( |
) |
||||
|
Lease liability, non-current |
$ | $ | ||||||
Maturity analysis under these lease agreements are as follows:
|
For the twelve months ended March 31, 2023 |
$ | |||
|
For the twelve months ended March 31, 2024 |
||||
|
For the twelve months ended March 31, 2025 |
||||
|
For the twelve months ended March 31, 2026 |
||||
|
For the twelve months ended March 31, 2027 |
||||
|
Thereafter |
||||
|
Total |
$ | |||
|
Less: Present value discount |
( |
) |
||
|
Lease liability |
$ |
Note 8 – Debt
Howe Note
Mitesco, Inc. (the “Company”) issued a 10% Promissory Note due June 30, 2022, dated December 30, 2021, to the Michael C. Howe Living Trust (the “Lender”). Michael C. Howe is the Chief Executive Officer of the Good Clinic LLC, one of our subsidiaries. The principal amount of the Note is $
Warrants. As further consideration for the Purchase Price payable hereunder, promptly following the Issue Date, the Borrower shall issue to the Lender
Diamond Note 1
The Company issued a 10% Promissory Note due August 14, 2022, dated February 14, 2022, to Lawrence Diamond (the “Lender”). Mr. Diamond is the Chief Executive Officer of the Company and a member of its Board of Directors. The principal amount of the Note is $
Diamond Note 2
The Company issued a 10% Promissory Note due June 18, 2022 (the “Diamond Note”), dated March 18, 2022, to Lawrence Diamond (the “Lender”), which was subsequently amended. Lawrence Diamond is the Chief Executive Officer of the Company. The principal amount of the Diamond Note is $
AJB Capital Note
On March 18, 2022, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with AJB Capital Investments, LLC (the “Investor”) with respect to the sale and issuance to the Investor of: (i) an initial commitment fee in the amount of $
PPP Loan
During March 2020, in response to the COVID-19 crisis, the federal government announced plans to offer loans to small businesses in various forms, including the Payroll Protection Program, or “PPP”, established as part of the Corona Virus Aid, Relief and Economic Security Act (“CARES Act”) and administered by the U.S. Small Business Administration. On April 25, 2020, the Company entered an unsecured Promissory Note with Bank of America for a loan in the original principal amount of approximately $
These amounts are reflected in the table below:
Notes Payable Table 1:
|
March 31, 2022 |
December 31, 2021 |
|||||||
|
Notes Payable |
$ | $ | ||||||
|
PPP Loan |
$ | $ | ||||||
| $ | $ | |||||||
|
Less: Discount |
( |
) | ( |
) |
||||
|
Notes payable - net of discount |
$ | $ | ||||||
|
Current Portion, net of discount |
$ | $ | ||||||
|
Long-term portion, net of discount |
$ | $ | ||||||
Note 9 – Stockholders’ Equity (Deficit)
Common Stock
The Company has authorized
Common Stock Transactions During the Three Months Ended March 31, 2022
On January 12, 2022, the Company entered into a settlement agreement with an ex-employee. Pursuant to the terms of this agreement, the Company agreed to pay the amount of $
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 $
On March 22, 2022 and March 31, 2022, the Company issued an aggregate
On March 31, 2022, the Company issued
On March 31, 2022, the Company issued
Common Stock Transactions During the Three Months Ended March 31, 2021
On January 4, 2021, the Company issued
On January 6, 2021, the Company issued
On January 11, 2021, the Company issued
On January 14, 2021, the Company issued
On January 21, 2021, the Company issued
On January 28, 2021, the Company issued
On February 1, 2021, the Company issued
On February 5, 2021, the Company entered into a settlement agreement with the holders of the Eagle Equities Note 7 whereby the Company issued
On February 5, 2021, the Company entered into a settlement agreement with the holders of the Eagle Equities Note 8 whereby the Company issued
On February 5, 2021, the Company entered into a settlement agreement with the holders of the Eagle Equities Note 9 whereby the Company issued
On February 5, 2021, the Company entered into a settlement agreement with the holders of the Eagle Equities Note 10 whereby the Company issued
On February 22, 2021, the Company issued
On March 11, 2021, the Company issued
On March 17, 2021, the Company issued
On March 23, 2021, the Company issued
Preferred Stock
We have authorized to issue
Series A Preferred Stock Transactions During the Three Months Ended March 31, 2022
None.
Series A Preferred Stock Transactions During the Three Months Ended March 31, 2021
During the three months ended March 31, 2021, the Company accrued dividends in the amount of $
Series C Preferred Stock
Series C Preferred Stock Transactions During the Three Months Ended March 31, 2022
None.
Series C Preferred Stock Transactions During the Three Months Ended March 31, 2021
On March 25, 2021, the Company sold
The Series C Preferred Stock has the following terms:
Ranking. The Series C Preferred Stock and the Series D Preferred, discussed below, ranks senior to all other preferred stock of the Company except in relation to the Series X Cumulative Redeemable Perpetual Preferred Stock, which ranks Pari passu to the Series C Preferred Stock, with respect to the preferences as to dividends, distributions and payments upon the liquidation, dissolution and winding up of the Company.
Conversion. Each holder of our Series C Preferred Stock is entitled to convert their shares of Series C Preferred Stock, in whole or in part, at the Conversion Rate, which is determined by dividing the Conversion Amount (the Stated Value of $1.05, plus any accrued but unpaid dividends) by the Conversion Price ($0.25 per share). In addition, upon certain triggering events, the holders of our Series C Preferred Stock have the right to convert their Series C Preferred Stock at the lesser of the Conversion Price or 75% of the average VWAP for the five trading days prior to the date of the notice of conversion. The Conversion Price is subject to adjustment upon certain stock splits and recapitalization as well as upon the sale of Common Stock or Common Stock Equivalents. Each share of the Series C Preferred Stock is convertible at the option of the holder thereof, or automatically or upon the closing of an underwritten offering of at least $10 million of the Company’s securities or upon listing of the Company’s Common Stock on a national securities exchange.
Dividends. Each share of Series C Preferred Stock accrues dividends on a quarterly basis in arrears, at the rate of
Liquidation Rights. The holders of our Series C Preferred stock are entitled to receive in cash out of our assets, whether from capital or from earnings available for distribution to our stockholders (the “Liquidation Funds”), before any amount shall be paid to the holders of any of shares of capital stock that rank junior to the Series C Preferred Stock, but Pari passu with any shares of capital stock that have a parity ranking with the Series C Preferred stock (“Parity Stock”) then outstanding, an amount per share of Series C Preferred Stock equal to the greater of (A) the Conversion Amount on the date of such payment or (B) the amount per share such holder of the Series C Preferred Stock would receive if such holder converted their Series C Preferred Stock into Common Stock immediately prior to the date of such payment, provided that if the Liquidation Funds are insufficient to pay the full amount due to the holders of the Series C Preferred Stock and holders of shares of Parity Stock, then each holder Series C Preferred Stock and each holder of Parity Stock shall receive a percentage of the Liquidation Funds equal to the full amount of Liquidation Funds payable to such holder and such holder of Parity Stock as a liquidation preference, in accordance with their respective certificate of designations (or equivalent), as a percentage of the full amount of Liquidation Funds payable to all holders of Series C Preferred Stock and all holders of shares of Parity Stock. All such amounts shall be paid or set apart for payment before the payment or setting apart for payment of any amount for, or the distribution of any Liquidation Funds of the Corporation to the holders of shares of capital stock that may rank junior to that of the Series C Preferred Stock Junior Stock.
Rights and Preferences. The rights, preferences, and privileges of holders of our Series C Preferred Stock are subject to, and may be adversely affected by, the rights of holders of shares of any series of Preferred Stock that we may designate and issue in the future that may rank senior to the Series C Preferred Stock.
Redemption Rights. Upon receipt of a conversion notice, we have the right (but not the obligation) to redeem all or part of the Series C Preferred Stock (which the applicable holder of the Series C Preferred Stock is seeking to convert) at a price per share equal to the product of 125% of the (1) Stated Value plus (2) the Additional Amount (the “Redemption Price”). If we decide to exercise the redemption right, within one trading day, we shall deliver written notice to such holder(s) of Series C Preferred Stock that the Series C Preferred Stock will be redeemed (the “Redemption Notice”) on the date that is three trading days following the date of the Redemption Notice (such date, the “Redemption Date”). On the Redemption Date, we shall redeem the shares of Series C Preferred Stock specified in such request by paying in cash therefor a sum per share equal to the Redemption Price. In no event shall a Redemption Notice be given if we may not lawfully redeem our capital stock. On or before the Redemption Date, the Redemption Price for such shares shall be paid by wire transfer of immediately available funds to an account designated in writing by the applicable holder.
Price Adjustments Protection. The conversion price is subject to appropriate adjustment in the event of share dividends, share splits, reorganizations or similar events affecting our shares of Common Stock. Other than for certain exempt issuances, in the event we issue or sell any securities, including options or convertible securities, or amend outstanding securities, at an effective price, with an exercise price or at a conversion price less than the Conversion Price, then the Conversion Price shall be reduced to such lower price.
Preemptive or Similar Rights Additionally, except for a public offering or certain exempt issuances of our securities, holders of the Series C Preferred Stock shall have the right to participate in any offering of our Common Stock or Common Stock Equivalents (as defined in the COD) in a transaction exempt from registration under the Securities Act in an amount equal to an aggregate of 30% of the financing on the same terms, conditions and price provided to investors in such an offering, such right shall expire on the 15 month anniversary of the issuance date of the Series C Preferred Stock. Further, until the earlier of 18 months from the issuance date of the Series C Preferred Stock and the date that there are less than 20% of the shares of Series C Preferred Stock outstanding, the Investors have most favored nations protection in the event we issue or sell Common Stock or Common Stock Equivalents that the Investors believe are more favorable than the terms and conditions under the Private Placement.
Fully Paid and Nonassessable. All our issued and outstanding shares of Series C Preferred Stock are fully paid and nonassessable.
Series X Preferred Stock
The Company has
Series X Preferred Stock Transactions During the Three Month Ended March 31, 2022
During the three months ended March 31, 2022, the Company accrued dividends in the amount of approximately $
Series X Preferred Stock Transactions During the Three Months Ended March 31, 2021
During the three months ended March 31, 2021, the Company accrued dividends in the amount of approximately $
Stock Options
The following table summarizes the options outstanding at March 31, 2022 and the related prices for the options to purchase shares of the Company’s common stock:
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Weighted |
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Weighted |
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Weighted |
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average |
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average |
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average |
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exercise |
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exercise |
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Range of |
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Number of |
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remaining |
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price of |
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Number of |
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price of |
|
||||||
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|
exercise |
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|
options |
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|
contractual |
|
|
outstanding |
|
|
options |
|
|
exercisable |
|
||||||
|
|
prices |
|
|
outstanding |
|
|
life (years) |
|
|
options |
|
|
exercisable |
|
|
options |
|
||||||
|
|
$ |
|
|
|
|
|
|
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$ |
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$ |
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|
|
|
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|
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|
$ |
|
|
|
|
|
|
|
$ |
|
|
Transactions involving stock options are summarized as follows:
|
Shares |
Weighted- Average Exercise Price ($) (A) |
|||||||
|
Outstanding at December 31, 2021 |
$ | |||||||
|
Granted |
- | $ | ||||||
|
Expired |
( |
) |
||||||
|
Outstanding at March 31, 2022 |
$ | |||||||
|
Options vested and exercisable |
$ | |||||||
During the three months ended March 31, 2022 and 2021, the Company charged the amount of $
At March 31, 2022, the total stock-based compensation cost related to unvested awards not yet recognized was $
The Company did not value any stock options during the three months ended March 31, 2022. The Company valued stock options during the three months ended March 31, 2021 using the Black-Scholes valuation model utilizing the following variables:
|
March 31, |
March 31, |
|||||||
|
2022 |
2021 |
|||||||
|
Volatility |
- |
% |
% |
|||||
|
Dividends |
$ | $ | ||||||
|
Risk-free interest rates |
- |
% |
% |
|||||
|
Term (years) |
- | |||||||
Warrants
The following table summarizes the warrants outstanding on March 31, 2022, 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, 2021 |
$ | |||||||
|
Granted |
$ | |||||||
|
Exercised |
$ | |||||||
|
Outstanding on March 31, 2022 |
$ | |||||||
The Company valued warrants options during the three months ended March 31, 2022 and 2021 using the Black-Scholes valuation model utilizing the following variables:
|
March 31, |
March 31, |
|||||||
|
2022 |
2021 |
|||||||
|
Volatility |
% |
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Note 10 – Commitments and Contingencies
Legal
There are no pending or anticipated legal actions at this time.
PPP Loan
During March 2020, in response to the COVID-19 crisis, the federal government announced plans to offer loans to small businesses in various forms, including the Payroll Protection Program, or “PPP”, established as part of the Corona Virus Aid, Relief and Economic Security Act (“CARES Act”) and administered by the U.S. Small Business Administration. On April 25, 2020, the Company entered an unsecured Promissory Note with Bank of America for a loan in the original principal amount of approximately $
Note 11 – Subsequent Events
On April 1, 2022, the Company issued
On April 18, 2022, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with GS Capital Partners (the “Investor”) with respect to the sale and issuance to the Investor of: (i) an initial commitment fee in the amount of $
Pursuant to the terms of the Purchase Agreement, the initial Commitment Fee 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 $
On April 6, 2022, the Company entered into separate Securities Purchase Agreement with each of Anson East Master Fund LP and Anson Investments Master Fund LP with respect to the sale and issuance to AEMF and AIMF of: (i)
On April 27, 2022, the Company issued
On April 27, 2022, the Company issued
On April 27, 2022, the Company issued a 10% Promissory Note due June 30, 2022 (the “Diamond Note”) to Lawrence Diamond (the “Lender”). Lawrence Diamond is the Chief Executive Officer of the Company. The principal amount of the Diamond Note is $
On May 10, 2022, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with Kishon Investments, LLC (the “Investor”) with respect to the sale and issuance to the Investor of: (i) an initial commitment fee in the amount of $
Pursuant to the terms of the Purchase Agreement, the initial Commitment Fee 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 $
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with the financial statements and notes thereto appearing elsewhere herein.
We are working to open primary care clinics around the US that are in residential centers and leverage the expertise, training, and license of Nurse Practitioners. We are focusing on wellness as a core of the practice. Mitesco’s mission is to increase convenience and access to care, improve the quality of care, and reduce its cost.
We opened our first primary care clinic “The Good Clinic” in Northeast Minneapolis, Minnesota in February 2021, and have added five additional operating clinics as of the date of this filing for a total of six clinics open and operating at March 31, 2022. We announced leases for two new clinics in the greater Denver, Colorado area. These new locations are expected to open in the second quarter of 2022. We plan to open clinics in residential concentrations of population to enhance the convenience, especially timely due to the changes in community travel patterns resulting from the pandemic. Our clinicians use both telehealth (virtual) and in-person visits to treat and coach the clients along their journey to better health and quality of life. Our clinics are led by Nurse Practitioners that use their license, extensive training, expertise, and empathy to help people remain stable or improve their health. We emphasize wellness, beginning with a clients’ co-developed plan that identifies from where a person is starting and constructs a plan for how they can achieve their goals. The practice uses an integrated health approach that includes an assessment of both the individual’s behavioral and physical health and combines this with their activation level and their goals. The clinic offers wellness coaching, behavioral health care, episodic care, dermatologic services, and supplements. We seek to care for the whole person’s needs.
Like the first clinic, we seek to locate clinics convenient to residential centers. In pursuit of this approach, we intend to continue to expand our relationship with Lennar Corporation and other large-scale developers. While we have no formal relationship with these developers other than as a tenant, we believe such relationships give us an advantage in recruiting and retaining clients in close proximity to our locations.
Results of Operations
The following period-to-period comparisons of our financial results are not necessarily indicative of results for the current period of any future periods. Further, as a result of any acquisitions of other businesses, we may experience large expenditures specific to the transactions that are not incident to our operations.
Comparison of the Three Months Ended March 31, 2022 and 2021
Revenue
The Company recognized revenue of approximately $120,000 for the three months ended March 31, 2022, compared to $3,000 for the three months ended March 31, 2021. The increase in revenue is the result of the service and product revenue from The Good Clinic’s six locations.
Cost of Sales
The Company incurred approximately $0.6 million of cost of goods sold for the three months ended March 31, 2022, compared to $1,700 for the three months ended March 31, 2021. During the first quarter of 2021 there were only a few direct clinical services performed due to the lack of in force payer contracts and the newness of the clinic. As such, the allocation of the expenses related to clinical staff were attributed to operating expenses and not cost of sales. The increase in cost of goods sold is the result of the opening and operating of The Good Clinic’s six locations and having in force payer relationships.
Gross Profit/(Loss)
Our gross loss was approximately $0.5 million for the three months ended March 31, 2022, compared to gross profit of $1,300 for the three months ended March 31, 2021.
Operating Expenses
Our total operating expenses for the three months ended March 31, 2022, were approximately $2.6 million. For the comparable period in 2021, the operating expenses were approximately $1.0 million.
Operating expenses for the three months ended March 31, 2022, were comprised primarily of $0.8 million of payroll and payroll taxes; $0.3 million in legal and professional fees; $0.1 million in marketing; $0.9 million in other operation costs and $0.1 million in consulting fees.
Operating expenses for the three months ended March 31, 2021 were comprised primarily of $0.1 million in payroll and payroll taxes, $0.4 million in legal and professional fees and $0.1 million in consulting fees.
Other Income and Expenses
Interest expense was approximately $0.8 million for the three months ended March 31, 2022, compared to approximately $1.0 million for the three months ended March 31, 2021.
During the three months ended March 31, 2022, we recorded a gain on waiver fee shares of approximately $0.2 million.
During the three months ended March 31, 2022, we recorded a gain on settlement of accrued salary of approximately $15,000.
During the three months ended March 31, 2022, we recorded a loss on settlement of accounts payable of $0.3 million as compared to a gain on settlement of accounts payable of approximately $6,000 for the three months ended March 31, 2021.
During the three months ended March 31, 2022, we recorded a gain on the settlement of notes payable of approximately $0.2 million, compared to a gain of approximately $1,800 for the three months ended March 31, 2021.
During the three months ended March 31, 2022, we recorded a gain on the revaluation of derivative liabilities of approximately $79,800, compared to a loss of approximately $0.5 million for the three months ended March 31, 2021.
During the three months ended March 31, 2022, the Company declared Preferred Stock dividends of approximately $80,000 compared to approximately $20,000 for the three months ended March 31, 2021.
During the three months ended March 31, 2021, the Company recorded Preferred Stock deemed dividends of approximately $0.3 million.
For the three months ended March 31, 2022, we had a net loss available to common shareholders of approximately $3.7 million, or a net loss per share, basic and diluted of ($0.02) compared to a net loss available to common shareholders of approximately $2.8 million, or a net loss per share, basic and diluted of ($0.01), for the three months ended March 31, 2021.
Liquidity and Capital Resources
To date, we have not generated sufficient revenue from operations to support our operations. We have financed our operations through the sale of equity securities and short-term borrowings. As of March 31, 2022, we had cash of approximately $0.3 million compared to cash of approximately $1.2 million as of December 31, 2021.
Net cash used in operating activities was approximately $1.5 million for the three months ended March 31, 2022. This is the result of our business development efforts pertaining to the start-up of the first three clinics. Cash used in operations for the three months ended March 31, 2021, was approximately $1.1 million.
Net cash used in investing activities was approximately $0.4 million for the three months ended March 31, 2022. The amounts relate to the purchase of fixed assets and leasehold improvement on our clinics. Net cash used for investing activities for the three months ended March 31, 2021 was $0.5 million.
Net cash provided by financing activities for the three months ended March 31, 2022, was approximately $1.0 million, consisting of proceeds from convertible notes payable. Net cash provided by financing activities for the three months ended March 31, 2021, was $4.3 million consisting of proceeds from a private placement offering of common stock of $1.7 million and $2.8 million from the sale of Series C Preferred Stock and warrants. Partially offsetting the proceeds was approximately $0.2 million of payment on notes payable.
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, and (iii) lack of formal Control procedures related to the approval of related party transactions.
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 first quarter ended March 31, 2022, 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
PPP Loan
On May 4, 2020, we received a loan in the amount of $460,406 from the United States Small Business Administration under the Payroll Protection Program. Subsequent to September 30, 2020, we determined that errors had been made in the application submitted to obtain the loan. On July 21, 2020, Bank of America notified the Company in writing that it should not have received $440,000 of the loan proceeds, representing an amount for the refinancing of an Economic Injury Disaster Loan which we did receive. Bank of America has requested that we remit such funds back to Bank of America. We are presently attempting to negotiate repayment of the loan. If we are not successful in negotiating repayment terms, it could have a material adverse effect on our financial condition.
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, 2021, filed with the Securities and Exchange Commission on April 5, 2022. There have been no material changes to the risk factors described in that report.
ITEM 2. SALE OF UNREGISTERED SECURITIES
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 400,000 shares of common stock previously issued as compensation. These shares were valued at par value of $0.01 or a total value of $4,000; the Company recorded a gain on cancellation of these shares in the amount of $15,032.
The Company entered into a debt-for-equity exchange agreement with 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 $0.25. As a result, 3,179,650 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 1,541,721 shares of common stock as waiver fees to holders of the Series C and Series D Preferred Stock for their waivers of certain covenants as set forth and defined in the Series C and Series C Certificates of Designations. The Company valued these shares at their contractual price of $0.25 per share and recorded the amount of $385,431 as waiver fees during the three months 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 1,720,000 Commitment Fee Shares to AJB Capital Investors, LLC; see note 8. 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 $0.25 per share; valuation purposes, the common stock was valued at the market price on the date of the transaction of $0.12695 per share. The derivative liability was valued at $106,608 on the date of the transaction. 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 382,353 shares of common stock at a price of $0.25 per share which were previously subscribed for the conversion of accounts payable in the amount of $95,558.
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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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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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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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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8-K |
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3.1(i) |
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1/06/2016 |
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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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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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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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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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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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8-K |
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3.2 |
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03/26/2021 |
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| 3.12 | Certificate of Incorporation of Trunity Holdings, Inc., as amended | S-1 | 3.12 | 2/10/2022 | ||||||
| 3.13 | Certificate of Designations, Preferences and Rights of the Series D Convertible Preferred Stock of Mitesco, Inc. | 8-K | 3.1 | 10/22/2021 |
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Form Type |
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Filed Herewith |
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4.1 |
Promissory Note in the principal amount of $750,000 dated March 17, 2022 |
8-K |
4.1 |
03/24/2022 |
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4.2 |
Promissory Note in the principal amount of $235,294 dated March 18, 2022 |
8-K |
4.2 |
03/24/2022 |
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10.1 |
Promissory Note between the Company and Michael C. Howe Living Trust, dated December 30, 2021 |
8-K |
10.1 |
01/05/2022 |
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10.2 |
8-K |
10.1 |
02/02/2022 |
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10.3 |
8-K |
10.1 |
02/17/2022 |
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10.4 |
Employment Agreement for Ms. Finnegan Dated January 12, 2022 |
8-K |
10.1 |
03/03/2022 |
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10.5 |
8-K |
10.1 |
03/24/2022 |
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10.6 |
8-K |
10.2 |
03/24/2022 |
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31.1 |
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X |
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31.2 |
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X |
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32.1 |
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X |
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32.2 |
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X |
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| 99.1 | Investor Presentation | 8-K | 99.3 | 03/03/2022 | ||||||
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101.INS ** |
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INLINE XBRL INSTANCE DOCUMENT |
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101.SCH ** |
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INLINE XBRL TAXONOMY EXTENSION SCHEMA |
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101.CAL ** |
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INLINE XBRL TAXONOMY EXTENSION CALCULATION LINKBASE |
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101.DEF ** |
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INLINE XBRL TAXONOMY EXTENSION DEFINITION LINKBASE |
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101.LAB ** |
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INLINE XBRL TAXONOMY EXTENSION LABEL LINKBASE |
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101.PRE ** |
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INLINE 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 three months ended March 31, 2022, to be signed on its behalf by the undersigned, thereunto duly authorized.
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MITESCO, INC. F/K/A TRUE NATURE HOLDING, INC. |
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Dated: May 16, 2022 |
By: |
/s/ Phillip J. Keller |
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Phillip J. Keller |
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Chief Financial Officer and Principal Financial Officer |
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EXHIBIT 31.1
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
AND PRINCIPAL FINANCIAL OFFICER
PURSUANT TO RULE 13a-14 OR RULE 15d-14 OF THE SECURITIES EXCHANGE ACT OF 1934,
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Lawrence Diamond, certify that:
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1. |
I have reviewed this quarterly report on Form 10-Q of Mitesco, Inc.; |
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2. |
Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report; |
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3. |
Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report; |
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4. |
I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
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a) |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared; |
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b) |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
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c) |
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this annual report based on such evaluation; and |
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d) |
Disclosed in this annual report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
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5. |
I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s Board of Directors (or persons performing the equivalent functions): |
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a) |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
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b) |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: May 16, 2022
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/s/ Lawrence Diamond |
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Lawrence Diamond Chief Executive Officer and Principal Executive Officer |
EXHIBIT 31.2
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
AND PRINCIPAL FINANCIAL OFFICER
PURSUANT TO RULE 13a-14 OR RULE 15d-14 OF THE SECURITIES EXCHANGE ACT OF 1934,
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Phillip J. Keller, certify that:
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1. |
I have reviewed this quarterly report on Form 10-Q of Mitesco, Inc.; |
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2. |
Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report; |
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3. |
Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report; |
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4. |
I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
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a) |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared; |
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b) |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
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c) |
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this annual report based on such evaluation; and |
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d) |
Disclosed in this annual report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
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5. |
I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s Board of Directors (or persons performing the equivalent functions): |
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a) |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
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b) |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: May 16, 2022
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/s/ Phillip J. Keller |
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Phillip J. Keller Chief Financial Officer and Principal Financial Officer |
EXHIBIT 32.1
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the quarterly report of Mitesco, Inc. (the “Company”) on Form 10-Q for the three months ended March 31, 2022, as filed with the Securities and Exchange Commission on the date hereof, I, Lawrence Diamond, Chief Executive Officer and Director of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:
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1. |
The quarterly report on Form 10-Q fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
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2. |
The information contained in the report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Date: May 16, 2022
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/s/ Lawrence Diamond |
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Lawrence Diamond Chief Executive Officer and Principal Executive Officer |
EXHIBIT 32.2
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the quarterly report of Mitesco, Inc. (the “Company”) on Form 10-Q for the three months ended March 31, 2022, as filed with the Securities and Exchange Commission on the date hereof, I, Phillip J. Keller, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:
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1. |
The quarterly report on Form 10-Q fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
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2. |
The information contained in the report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Date: May 16, 2022
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/s/ Phillip J. Keller |
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Phillip J. Keller Chief Financial Officer and Principal Financial Officer |