UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended June 30, 2023
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 000-53601
MITESCO, INC.
(Exact Name of Registrant as Specified in its Charter)
| Nevada | | 87-0496850 |
| (State Other Jurisdiction of Incorporation or Organization) | | (I.R.S. Employer Identification Number) |
18202 Minnetonka Blvd., Suite 100
Deephaven, MN 55391
(Address of principal executive offices) (Zip code)
844-383-8689
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
| N/A | N/A | N/A |
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☐ No ☒
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ NO ☐
Indicate by check mark whether the registrant is a large, accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large, accelerated filer”, “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large, accelerated filer ☐ | Accelerated filer ☐ |
| Non-accelerated filer ☒ | Smaller reporting company ☒ |
| | Emerging growth company ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act. YES ☐ No ☒
As of December 4, 2023, the registrant had outstanding 5,567,957 shares of common stock issued and outstanding.
Table of Contents
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
MITESCO, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
| |
|
June 30,
|
|
|
December 31,
|
|
|
ASSETS
|
|
2023
|
|
|
2022
|
|
| |
|
|
|
|
|
|
|
|
|
Current assets
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$ |
255,891 |
|
|
$ |
35,623 |
|
|
Accounts Receivable
|
|
|
- |
|
|
|
30,943 |
|
|
Prepaid expenses
|
|
|
59,830 |
|
|
|
113,722 |
|
|
Total current assets
|
|
|
315,721 |
|
|
|
180,288 |
|
| |
|
|
|
|
|
|
|
|
|
Right to use operating leases, net
|
|
|
- |
|
|
|
544,063 |
|
| Fixed assets, net of accumulated depreciation of $1.1 million and $.06 million |
|
|
- |
|
|
|
1,877,629 |
|
| |
|
|
|
|
|
|
|
|
|
Total Assets
|
|
$ |
315,721 |
|
|
$ |
2,601,980 |
|
| |
|
|
|
|
|
|
|
|
|
LIABILITIES AND (DEFICIENCY IN) STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities
|
|
$ |
8,295,208 |
|
|
$ |
7,353,215 |
|
|
Accrued interest
|
|
|
569,149 |
|
|
|
362,094 |
|
|
Accrued interest - related parties
|
|
|
228,622 |
|
|
|
198,753 |
|
|
Derivative liabilities
|
|
|
138,212 |
|
|
|
568,912 |
|
|
Lease liability - operating leases, current
|
|
|
544,143 |
|
|
|
442,866 |
|
| Notes payable, net of discounts of $0 and $0.4 million |
|
|
1,598,765 |
|
|
|
5,112,701 |
|
| Notes payable - related parties, net of discounts of $0 and $22,670 |
|
|
2,799,632 |
|
|
|
2,776,962 |
|
|
SBA Loan Payable
|
|
|
460,406 |
|
|
|
460,406 |
|
|
Other current liabilities
|
|
|
96,136 |
|
|
|
96,136 |
|
|
Preferred stock dividends payable
|
|
|
490,439 |
|
|
|
395,407 |
|
|
Preferred stock dividends payable - related parties
|
|
|
30,052 |
|
|
|
35,019 |
|
|
Total current liabilities
|
|
|
15,250,764 |
|
|
|
17,802,471 |
|
| |
|
|
|
|
|
|
|
|
|
Lease Liability- operating leases, non-current
|
|
|
3,522,684 |
|
|
|
3,936,858 |
|
| |
|
|
|
|
|
|
|
|
|
Total Liabilities
|
|
|
18,773,448 |
|
|
|
21,739,329 |
|
| |
|
|
|
|
|
|
|
|
|
Commitments and contingencies
|
|
|
- |
|
|
|
- |
|
| |
|
|
|
|
|
|
|
|
|
Stockholders' equity (deficit)
|
|
|
|
|
|
|
|
|
|
Preferred stock, $0.01 par value, 100,000,000 shares authorized; 500,000 shares designated Series A; 3,000,000 shares designated Series C; 10,000,000 shares designated Series D; 10,000 shares designated as Series E; 140,000 shares designated as Series F, and 27,324 shares designated Series X.
|
|
|
- |
|
|
|
- |
|
| Preferred stock, Series A, $0.01 par value, 0 shares issued and outstanding as of June 30, 2023 and December 31, 2022 |
|
|
- |
|
|
|
- |
|
| Preferred stock, Series C, $0.01 par value, 0 and 1,047,619 shares issued and outstanding as of June 30, 2023 and December 31, 2022 |
|
|
- |
|
|
|
10,476 |
|
| Preferred stock, Series D, $0.01 par value, 750,000 and 3,100,000 shares issued and outstanding as of June 30, 2023 and December 31, 2022 |
|
|
7,500 |
|
|
|
31,000 |
|
| Preferred stock, Series F, $0.01 par value, 16,353 and 0 shares issued and outstanding as of June 30, 2023 and December 31, 2022 |
|
|
163 |
|
|
|
- |
|
| Preferred stock, Series X, $0.01 par value, 24,227 shares issued and outstanding at June 30, 2023 and December 31, 2022 |
|
|
242 |
|
|
|
242 |
|
|
Common stock subscribed
|
|
|
- |
|
|
|
36,575 |
|
| Common stock, $0.01 par value, 500,000,000 shares authorized, 5,138,575 and 4,630,372 shares issued and outstanding as of June 30, 2023 and December 31, respectively |
|
|
51,388 |
|
|
|
46,305 |
|
|
Additional paid-in capital
|
|
|
43,355,536 |
|
|
|
29,452,514 |
|
|
Accumulated deficit
|
|
|
(61,872,556 |
) |
|
|
(48,714,461 |
) |
|
Total stockholders' deficit
|
|
|
(18,457,727 |
) |
|
|
(19,137,349 |
) |
| |
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders' equity (deficit)
|
|
$ |
315,721 |
|
|
$ |
2,601,980 |
|
See accompanying notes to these unaudited condensed consolidated financial statements.
MITESCO, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
| |
|
For the Three Months
|
|
|
For the Six Months
|
|
| |
|
Ended
|
|
|
Ended
|
|
| |
|
June 30,
|
|
|
June 30,
|
|
| |
|
2023
|
|
|
2022
|
|
|
2023
|
|
|
2022
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue-services
|
|
$ |
- |
|
|
$ |
180,375 |
|
|
$ |
- |
|
|
$ |
272,836 |
|
|
Revenue-products
|
|
|
- |
|
|
|
(11,290 |
) |
|
|
- |
|
|
|
16,625 |
|
|
Total revenue
|
|
|
- |
|
|
|
169,085 |
|
|
|
- |
|
|
|
289,461 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of goods sold-services
|
|
$ |
5,601 |
|
|
$ |
605,706 |
|
|
$ |
8,020 |
|
|
$ |
1,183,262 |
|
|
Cost of goods sold-products
|
|
|
- |
|
|
|
481 |
|
|
|
- |
|
|
|
11,248 |
|
|
Total cost of goods sold
|
|
|
5,601 |
|
|
|
606,187 |
|
|
|
8,020 |
|
|
|
1,194,510 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross (loss)
|
|
|
(5,601 |
) |
|
|
(437,102 |
) |
|
|
(8,020 |
) |
|
|
(905,049 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative
|
|
$ |
774,681 |
|
|
$ |
2,340,929 |
|
|
$ |
2,786,085 |
|
|
$ |
4,904,758 |
|
|
Impairment of fixed assets
|
|
|
71,569 |
|
|
|
- |
|
|
|
2,343,462 |
|
|
|
- |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
846,250 |
|
|
|
2,340,929 |
|
|
|
5,129,547 |
|
|
|
4,904,758 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Operating Loss
|
|
|
(851,851 |
) |
|
|
(2,778,031 |
) |
|
|
(5,137,567 |
) |
|
|
(5,809,807 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
(110,819 |
) |
|
|
(862,211 |
) |
|
|
(1,486,885 |
) |
|
|
(1,690,536 |
) |
|
Interest expense - related parties
|
|
|
(113,674 |
) |
|
|
- |
|
|
|
(242,836 |
) |
|
|
- |
|
|
Equity investment incentives
|
|
|
(6,429,107 |
) |
|
|
- |
|
|
|
(6,429,107 |
) |
|
|
- |
|
|
Financing cost
|
|
|
(18,617 |
) |
|
|
- |
|
|
|
(18,617 |
) |
|
|
- |
|
|
Gain on termination of operating lease
|
|
|
- |
|
|
|
- |
|
|
|
287,897 |
|
|
|
- |
|
|
Gain on forgiveness of debt
|
|
|
25,000 |
|
|
|
- |
|
|
|
25,000 |
|
|
|
- |
|
|
Gain on sale of assets
|
|
|
20,097 |
|
|
|
- |
|
|
|
20,097 |
|
|
|
- |
|
|
Gain on issuance of shares to service provider
|
|
|
33,092 |
|
|
|
- |
|
|
|
33,092 |
|
|
|
- |
|
|
Loss on settlement of true-up obligation
|
|
|
(119,370 |
) |
|
|
- |
|
|
|
(119,370 |
) |
|
|
- |
|
|
(Loss) Gain on waiver and commitment fee shares
|
|
|
- |
|
|
|
(11,619 |
) |
|
|
- |
|
|
|
186,654 |
|
|
Loss on legal settlement
|
|
|
(18,759 |
) |
|
|
- |
|
|
|
(18,759 |
) |
|
|
- |
|
|
Gain on settlement of accrued salary
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
15,032 |
|
|
Loss on settlement of accounts payable
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(78,235 |
) |
|
(Loss) Gain on revaluation of derivative liabilities
|
|
|
39,738 |
|
|
|
(153,424 |
) |
|
|
(71,040 |
) |
|
|
(73,587 |
) |
|
Total other expense
|
|
|
(6,692,419 |
) |
|
|
(1,027,254 |
) |
|
|
(8,020,528 |
) |
|
|
(1,640,672 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss before provision for income taxes
|
|
|
(7,544,270 |
) |
|
|
(3,805,285 |
) |
|
|
(13,158,095 |
) |
|
|
(7,450,479 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for income taxes
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$ |
(7,544,270 |
) |
|
$ |
(3,805,285 |
) |
|
$ |
(13,158,095 |
) |
|
$ |
(7,450,479 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock dividends
|
|
|
(409,420 |
) |
|
|
(18,070 |
) |
|
|
(471,243 |
) |
|
|
(36,051 |
) |
|
Preferred stock dividends - related parties
|
|
|
(59,125 |
) |
|
|
(62,322 |
) |
|
|
(77,121 |
) |
|
|
(124,033 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss available to common shareholders
|
|
$ |
(8,012,815 |
) |
|
$ |
(3,885,677 |
) |
|
$ |
(13,706,459 |
) |
|
$ |
(7,610,563 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per share - basic and diluted
|
|
$ |
(1.55 |
) |
|
$ |
(0.88 |
) |
|
$ |
(2.76 |
) |
|
$ |
(1.75 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding - basic and diluted
|
|
|
5,157,610 |
|
|
|
4,430,461 |
|
|
|
4,963,755 |
|
|
|
4,352,695 |
|
See accompanying notes to these unaudited condensed consolidated financial statements.
MITESCO, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2023 and 2022
(UNAUDITED)
| |
|
Preferred Stock
Series A
|
|
Preferred Stock
Series C
|
|
Preferred Stock
Series D
|
|
Preferred Stock
Series F
|
|
Preferred Stock
Series X
|
|
Common Stock
|
|
Additional
Paid-in
|
|
Common Stock
|
|
Accumulated
|
|
|
|
| |
|
Shares
|
|
Amount
|
|
Shares
|
|
Amount
|
|
Shares
|
|
Amount
|
|
Shares
|
|
Amount
|
|
Shares
|
|
Amount
|
|
Shares
|
|
Amount
|
|
capital
|
|
Subscribed
|
|
Deficit
|
|
Total
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2021
|
|
|
- |
|
$ |
- |
|
|
940,644 |
|
$ |
9,406 |
|
|
3,100,000 |
|
$ |
31,000 |
|
|
- |
|
|
|
|
|
24,227 |
|
$ |
242 |
|
|
4,266,669 |
|
$ |
42,667 |
|
$ |
26,385,728 |
|
$ |
132,163 |
|
$ |
(25,478,332 |
) |
$ |
1,122,874 |
|
|
Vesting of common stock issued to employees
|
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
1,512 |
|
|
- |
|
|
- |
|
|
1,512 |
|
|
Vesting of stock options issued to employees
|
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
167,015 |
|
|
- |
|
|
- |
|
|
167,015 |
|
|
Conversion of accounts payable to common stock
|
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
63,593 |
|
|
636 |
|
|
577,599 |
|
|
- |
|
|
- |
|
|
578,235 |
|
|
Commitment fee shares
|
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
34,400 |
|
|
344 |
|
|
242,962 |
|
|
- |
|
|
- |
|
|
243,306 |
|
|
Waiver fee shares
|
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
30,835 |
|
|
308 |
|
|
275,410 |
|
|
91,440 |
|
|
- |
|
|
367,158 |
|
|
Warrants issued with note payable
|
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
|
|
|
|
|
|
5,127 |
|
|
- |
|
|
- |
|
|
5,127 |
|
|
Gain on settlement of accrued payroll
|
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
(8,000 |
) |
|
(80 |
) |
|
80 |
|
|
- |
|
|
- |
|
|
- |
|
|
Issuance of shares previously subscribed for conversion of accounts payable
|
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
7,648 |
|
|
76 |
|
|
95,512 |
|
|
(95,588 |
) |
|
- |
|
|
- |
|
|
Preferred stock dividends
|
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
(79,692 |
) |
|
- |
|
|
- |
|
|
(79,692 |
) |
|
Loss for the three months ended March 31, 2022
|
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
(3,645,194 |
) |
|
(3,645,194 |
) |
|
Balance, March 31, 2022
|
|
|
- |
|
|
- |
|
|
940,644 |
|
$ |
9,406 |
|
|
3,100,000 |
|
$ |
31,000 |
|
|
- |
|
$ |
- |
|
|
24,227 |
|
$ |
242 |
|
|
4,395,145 |
|
$ |
43,951 |
|
$ |
27,671,253 |
|
$ |
128,015 |
|
$ |
(29,123,526 |
) |
$ |
(1,239,659 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vesting of common stock issued to employees
|
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
1,474 |
|
|
- |
|
|
- |
|
|
1,474 |
|
|
Vesting of stock options issued to employees
|
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
135,295 |
|
|
- |
|
|
- |
|
|
135,295 |
|
|
Shares issued for services
|
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
15,000 |
|
|
150 |
|
|
102,975 |
|
|
- |
|
|
- |
|
|
103,125 |
|
|
Issuance of waiver fee shares
|
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
14,400 |
|
|
144 |
|
|
91,296 |
|
|
(91,440 |
) |
|
- |
|
|
- |
|
|
Issuance of commitment fee shares
|
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
71,555 |
|
|
716 |
|
|
884,636 |
|
|
- |
|
|
- |
|
|
885,352 |
|
|
Warrants issued with notes payable - Insiders
|
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
63,005 |
|
|
- |
|
|
- |
|
|
63,005 |
|
|
Shares issued for Series X dividends
|
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
8,103 |
|
|
82 |
|
|
86,971 |
|
|
- |
|
|
- |
|
|
87,053 |
|
|
Preferred stock dividends
|
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
(80,392 |
) |
|
- |
|
|
- |
|
|
(80,392 |
) |
|
Loss for the three months ended June 30, 2022
|
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
|
|
|
- |
|
|
(3,805,285 |
) |
|
(3,805,285 |
) |
|
Balance, June 30, 2022
|
|
|
- |
|
|
- |
|
|
940,644 |
|
$ |
9,406 |
|
|
3,100,000 |
|
$ |
31,000 |
|
|
- |
|
$ |
- |
|
|
24,227 |
|
$ |
242 |
|
|
4,504,203 |
|
$ |
45,043 |
|
$ |
28,956,513 |
|
$ |
36,575 |
|
$ |
(32,928,811 |
) |
$ |
(3,850,032 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2021
|
|
|
- |
|
$ |
- |
|
|
940,644 |
|
$ |
9,406 |
|
|
3,100,000 |
|
$ |
31,000 |
|
|
- |
|
|
|
|
|
24,227 |
|
$ |
242 |
|
|
4,266,669 |
|
$ |
42,667 |
|
$ |
26,385,728 |
|
$ |
132,163 |
|
|
(25,478,332 |
) |
|
1,122,874 |
|
|
Vesting of common stock issued to employees
|
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
2,986 |
|
|
- |
|
|
- |
|
|
2,986 |
|
|
Vesting of stock options issued to employees
|
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
302,310 |
|
|
- |
|
|
- |
|
|
302,310 |
|
|
Shares issued for services
|
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
15,000 |
|
|
150 |
|
|
102,975 |
|
|
- |
|
|
- |
|
|
103,125 |
|
|
Conversion of accounts payable to common stock
|
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
63,593 |
|
|
636 |
|
|
577,599 |
|
|
- |
|
|
- |
|
|
578,235 |
|
|
Issuance of commitment fee shares
|
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
105,955 |
|
|
1,060 |
|
|
1,127,598 |
|
|
- |
|
|
- |
|
|
1,128,658 |
|
|
Issuance of waiver fee shares
|
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
45,235 |
|
|
452 |
|
|
366,706 |
|
|
- |
|
|
- |
|
|
367,158 |
|
|
Warrants issued with note payable
|
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
68,132 |
|
|
- |
|
|
- |
|
|
68,132 |
|
|
Gain on settlement of accrued payroll
|
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
(8,000 |
) |
|
(80 |
) |
|
80 |
|
|
- |
|
|
- |
|
|
- |
|
|
Issuance of shares previously subscribed for conversion of accounts payable
|
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
7,648 |
|
|
76 |
|
|
95,512 |
|
|
(95,588 |
) |
|
- |
|
|
- |
|
|
Shares issued for Series X dividends
|
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
8,103 |
|
|
82 |
|
|
86,971 |
|
|
- |
|
|
- |
|
|
87,053 |
|
|
Preferred stock dividends
|
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
(160,084 |
) |
|
- |
|
|
- |
|
|
(160,084 |
) |
|
Loss for the six months ended June 30, 2022
|
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
(7,450,479 |
) |
|
(7,450,479 |
) |
|
Balance, June 30, 2022
|
|
|
- |
|
|
- |
|
|
940,644 |
|
$ |
9,406 |
|
|
3,100,000 |
|
$ |
31,000 |
|
|
- |
|
$ |
- |
|
|
24,227 |
|
$ |
242 |
|
|
4,504,203 |
|
$ |
45,043 |
|
$ |
28,956,513 |
|
$ |
36,575 |
|
$ |
(32,928,811 |
) |
$ |
(3,850,032 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2022
|
|
|
- |
|
$ |
- |
|
|
1,047,619 |
|
$ |
10,476 |
|
|
3,100,000 |
|
$ |
31,000 |
|
|
- |
|
|
- |
|
|
24,227 |
|
$ |
242 |
|
|
4,630,372 |
|
$ |
46,305 |
|
$ |
29,452,514 |
|
$ |
36,575 |
|
$ |
(48,714,461 |
) |
$ |
(19,137,349 |
) |
|
Shares issued for conversion of note payable
|
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
57,138 |
|
|
571 |
|
|
82,885 |
|
|
- |
|
|
- |
|
|
83,456 |
|
|
Vesting of stock options issued to employees
|
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
933 |
|
|
- |
|
|
- |
|
|
933 |
|
|
Issuance of common stock to service providers
|
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
300,000 |
|
|
3,000 |
|
|
894,000 |
|
|
- |
|
|
- |
|
|
897,000 |
|
|
Preferred stock dividends
|
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
(79,818 |
) |
|
- |
|
|
- |
|
|
(79,818 |
) |
|
Shares issued for dividends on Series X Preferred Stock
|
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
8,063 |
|
|
81 |
|
|
35,248 |
|
|
- |
|
|
- |
|
|
35,329 |
|
|
Loss for the three months ended March 31, 2023
|
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
(5,613,825 |
) |
|
(5,613,825 |
) |
|
Balance, March 31, 2023
|
|
|
- |
|
$ |
- |
|
|
1,047,619 |
|
$ |
10,476 |
|
|
3,100,000 |
|
$ |
31,000 |
|
|
- |
|
$ |
- |
|
|
24,227 |
|
$ |
242 |
|
|
4,995,573 |
|
$ |
49,957 |
|
|
30,385,762 |
|
$ |
36,575 |
|
$ |
(54,328,286 |
) |
$ |
(23,814,274 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares issued as commission for fundraising
|
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
2,952 |
|
|
30 |
|
|
3,778 |
|
|
- |
|
|
- |
|
|
3,808 |
|
|
Shares issued for true-up agreement
|
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
94,738 |
|
|
947 |
|
|
118,423 |
|
|
- |
|
|
- |
|
|
119,370 |
|
|
Shares issued for legal settlement
|
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
22,174 |
|
|
222 |
|
|
18,537 |
|
|
- |
|
|
- |
|
|
18,759 |
|
|
Shares issued previously subscribed
|
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
2,926 |
|
|
30 |
|
|
36,545 |
|
|
(36,575 |
) |
|
- |
|
|
- |
|
|
Vesting of stock options issued to employees
|
|
|
|
|
|
|
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
933 |
|
|
- |
|
|
- |
|
|
933 |
|
|
Series A dividends previously satisfied
|
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
10,967 |
|
|
- |
|
|
- |
|
|
10,967 |
|
|
Preferred stock dividends
|
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
(468,545 |
) |
|
- |
|
|
- |
|
|
(468,545 |
) |
|
Shares issued for dividends on Series X Preferred Stock
|
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
20,212 |
|
|
202 |
|
|
25,033 |
|
|
- |
|
|
- |
|
|
25,235 |
|
|
Shares issued for conversion of accounts payable
|
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
147 |
|
|
2 |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
146,212 |
|
|
- |
|
|
- |
|
|
146,214 |
|
|
Shares sold for cash
|
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
1,746 |
|
|
17 |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
1,655,483 |
|
|
- |
|
|
- |
|
|
1,655,500 |
|
|
Conversion of Series C Preferred Stock to Series F Preferred Stock
|
|
|
- |
|
|
- |
|
|
(1,047,619 |
) |
|
(10,476 |
) |
|
- |
|
|
- |
|
|
2,289 |
|
|
22 |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
1,198,450 |
|
|
- |
|
|
- |
|
|
1,187,996 |
|
|
Conversion of Series D Preferred Stock to Series F Preferred Stock
|
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
(2,350,000 |
) |
|
(23,500 |
) |
|
4,055 |
|
|
41 |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
1,610,965 |
|
|
- |
|
|
- |
|
|
1,587,506 |
|
|
Conversion of Debt to Series F Preferred Stock
|
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
8,116 |
|
|
81 |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
8,612,993 |
|
|
- |
|
|
- |
|
|
8,613,074 |
|
|
Loss for the three months ended June 30, 2023
|
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
(7,544,270 |
) |
|
(7,544,270 |
) |
|
Balance, June 30, 2023
|
|
|
- |
|
$ |
- |
|
|
- |
|
$ |
- |
|
|
750,000 |
|
$ |
7,500 |
|
|
16,353 |
|
$ |
163 |
|
|
24,227 |
|
$ |
242 |
|
|
5,138,575 |
|
$ |
51,388 |
|
$ |
43,355,536 |
|
$ |
- |
|
$ |
(61,872,556 |
) |
$ |
(18,457,727 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2022
|
|
|
- |
|
$ |
- |
|
|
1,047,619 |
|
$ |
10,476 |
|
|
3,100,000 |
|
$ |
31,000 |
|
|
- |
|
|
- |
|
|
24,227 |
|
$ |
242 |
|
|
4,630,372 |
|
$ |
46,305 |
|
$ |
29,452,514 |
|
$ |
36,575 |
|
|
(48,714,461 |
) |
|
(19,137,349 |
) |
|
Shares issued as commission for fundraising
|
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
2,952 |
|
|
30 |
|
|
3,778 |
|
|
- |
|
|
- |
|
|
3,808 |
|
|
Shares issued for true-up agreement
|
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
94,738 |
|
|
947 |
|
|
118,423 |
|
|
- |
|
|
- |
|
|
119,370 |
|
|
Shares issued for legal settlement
|
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
22,174 |
|
|
222 |
|
|
18,537 |
|
|
- |
|
|
- |
|
|
18,759 |
|
|
Shares issued previously subscribed
|
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
2,926 |
|
|
30 |
|
|
36,545 |
|
|
(36,575 |
) |
|
- |
|
|
- |
|
|
Shares issued to service providers
|
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
300,000 |
|
|
3,000 |
|
|
894,000 |
|
|
- |
|
|
- |
|
|
897,000 |
|
|
Vesting of stock options issued to employees
|
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
1,866 |
|
|
- |
|
|
- |
|
|
1,866 |
|
|
Series A dividends previously satisfied
|
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
10,967 |
|
|
- |
|
|
- |
|
|
10,967 |
|
|
Preferred stock dividends
|
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
(548,363 |
) |
|
- |
|
|
- |
|
|
(548,363 |
) |
|
Shares issued for dividends on Series X Preferred Stock
|
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
28,275 |
|
|
283 |
|
|
60,281 |
|
|
- |
|
|
- |
|
|
60,564 |
|
|
Shares issued for conversion of accounts payable
|
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
147 |
|
|
2 |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
146,212 |
|
|
- |
|
|
- |
|
|
146,214 |
|
|
Shares issued for conversion of note payable
|
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
57,138 |
|
|
571 |
|
|
82,885 |
|
|
- |
|
|
- |
|
|
83,456 |
|
|
Shares sold for cash
|
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
1,746 |
|
|
17 |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
1,655,483 |
|
|
- |
|
|
- |
|
|
1,655,500 |
|
|
Conversion of Series C Preferred Stock to Series F Preferred Stock
|
|
|
- |
|
|
- |
|
|
(1,047,619 |
) |
|
(10,476 |
) |
|
- |
|
|
- |
|
|
2,289 |
|
|
22 |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
1,198,450 |
|
|
- |
|
|
- |
|
|
1,187,996 |
|
|
Conversion of Series D Preferred Stock to Series F Preferred Stock
|
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
(2,350,000 |
) |
|
(23,500 |
) |
|
4,055 |
|
|
41 |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
1,610,965 |
|
|
- |
|
|
- |
|
|
1,587,506 |
|
|
Conversion of Debt to Series F Preferred Stock
|
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
8,116 |
|
|
81 |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
8,612,993 |
|
|
- |
|
|
- |
|
|
8,613,074 |
|
|
Loss for the six months ended June 30, 2023
|
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
(13,158,095 |
) |
|
(13,158,095 |
) |
|
Balance, June 30, 2023
|
|
|
- |
|
$ |
- |
|
|
- |
|
$ |
- |
|
|
750,000 |
|
$ |
7,500 |
|
|
16,353 |
|
$ |
163 |
|
|
24,227 |
|
$ |
242 |
|
|
5,138,575 |
|
$ |
51,388 |
|
$ |
43,355,536 |
|
$ |
- |
|
$ |
(61,872,556 |
) |
$ |
(18,457,727 |
) |
See accompanying notes to these unaudited condensed consolidated financial statements.
MITESCO, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
| |
|
For the Six Months
|
|
| |
|
Ended
|
|
| |
|
June 30,
|
|
| |
|
2023
|
|
|
2022
|
|
|
CASH FLOWS FROM OPERATING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
(13,158,095 |
) |
|
$ |
(7,450,479 |
) |
|
Adjustments to reconcile net loss to net cash used in operating activities:
|
|
|
|
|
|
|
|
|
|
Impairment of assets
|
|
|
2,343,462 |
|
|
|
- |
|
|
Depreciation
|
|
|
78,230 |
|
|
|
417,340 |
|
|
Penalties on notes payable
|
|
|
1,027,778 |
|
|
|
- |
|
|
Amortization of right-to-use asset
|
|
|
- |
|
|
|
292,292 |
|
|
Amortization of discount on notes payable
|
|
|
32,011 |
|
|
|
1,017,861 |
|
|
Amortization of discount on notes payable - related parties
|
|
|
22,670 |
|
|
|
- |
|
|
Share-based compensation
|
|
|
898,866 |
|
|
|
305,296 |
|
|
Shares issued as compensation for fundraising
|
|
|
36,900 |
|
|
|
- |
|
|
Shares issued for true-up liability
|
|
|
119,370 |
|
|
|
- |
|
|
Conversion fees on notes payable
|
|
|
75,000 |
|
|
|
- |
|
|
Equity investment incentive on notes payable
|
|
|
3,195,374 |
|
|
|
- |
|
|
Incentive on conversion of Series C to Series F Preferred Stock
|
|
|
1,016,887 |
|
|
|
- |
|
|
Incentive on conversion of Series D to Series F Preferred Stock
|
|
|
1,371,846 |
|
|
|
- |
|
|
Investment incentive on cash sales of Series F Preferred Stock
|
|
|
845,000 |
|
|
|
- |
|
|
Commissions on sales of Series F Preferred Stock
|
|
|
72,000 |
|
|
|
- |
|
|
Gain on forgiveness of note payable
|
|
|
(25,000 |
) |
|
|
- |
|
|
Financing cost - waiver fee shares
|
|
|
- |
|
|
|
565,431 |
|
|
Gain on waiver fee shares
|
|
|
- |
|
|
|
(198,273 |
) |
|
Loss on commitment shares
|
|
|
- |
|
|
|
11,619 |
|
|
Gain on conversion of accrued salary
|
|
|
- |
|
|
|
(15,032 |
) |
|
Gain on lease terminations
|
|
|
(287,897 |
) |
|
|
- |
|
|
Loss on revaluation of derivative liabilities
|
|
|
71,040 |
|
|
|
73,587 |
|
|
Gain on shares issued to service provider
|
|
|
(33,092 |
) |
|
|
- |
|
|
Gain on sale of equipment
|
|
|
(8,876 |
) |
|
|
- |
|
|
Loss on legal settlement
|
|
|
18,759 |
|
|
|
- |
|
|
Loss on settlement of accounts payable
|
|
|
- |
|
|
|
78,235 |
|
| |
|
|
|
|
|
|
|
|
|
Changes in assets and liabilities:
|
|
|
|
|
|
|
|
|
|
Accounts receivables
|
|
|
30,943 |
|
|
|
(69,751 |
) |
|
Prepaid expenses
|
|
|
53,892 |
|
|
|
50,348 |
|
|
Inventory
|
|
|
- |
|
|
|
(8,106 |
) |
|
Accounts payable and accrued liabilities
|
|
|
1,202,357 |
|
|
|
934,220 |
|
|
Operating lease liability, net
|
|
|
- |
|
|
|
(30,093 |
) |
|
Other current liabilities
|
|
|
- |
|
|
|
(73,286 |
) |
|
Accrued interest
|
|
|
452,474 |
|
|
|
71,873 |
|
|
Accrued interest - related parties
|
|
|
29,869 |
|
|
|
- |
|
|
Net cash used in operating activities
|
|
|
(518,232 |
) |
|
|
(4,026,918 |
) |
|
CASH FLOWS FROM INVESTING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
Cash paid for acquisition of fixed assets and construction in progress
|
|
|
- |
|
|
|
(190,200 |
) |
|
Net cash used in investing activities
|
|
|
- |
|
|
|
(190,200 |
) |
|
CASH FLOWS FROM FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
Proceeds from sale of Series F Preferred Stock, net of costs
|
|
|
738,500 |
|
|
|
- |
|
|
Proceeds from notes payable - related parties, net of discounts
|
|
|
- |
|
|
|
1,511,250 |
|
|
Proceeds from notes payable, net of discounts
|
|
|
- |
|
|
|
1,812,500 |
|
|
Principal payments on notes payable related parties
|
|
|
- |
|
|
|
(235,294 |
) |
|
Net cash provided by financing activities
|
|
|
738,500 |
|
|
|
3,088,456 |
|
|
Net increase (decrease) in cash and cash equivalents
|
|
|
220,268 |
|
|
|
(1,128,662 |
) |
| |
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at beginning of period
|
|
|
35,623 |
|
|
|
1,164,483 |
|
|
Cash and cash equivalents at end of period
|
|
$ |
255,891 |
|
|
$ |
35,821 |
|
See accompanying notes to these unaudited condensed consolidated financial statements.
MITESCO, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
| |
|
For the Six
|
|
| |
|
Months Ended
|
|
| |
|
June 30,
|
|
| |
|
2023
|
|
|
2022
|
|
| |
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
|
|
|
|
|
|
|
|
|
|
Interest paid
|
|
$ |
- |
|
|
$ |
2,680 |
|
| |
|
|
|
|
|
|
|
|
|
NON-CASH INVESTING AND FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
Stock issued for common stock subscribed
|
|
$ |
82,885 |
|
|
$ |
- |
|
|
Preferred stock dividend
|
|
$ |
548,363 |
|
|
$ |
160,084 |
|
| Conversion of accounts payable to Series F Preferred Stock |
|
$ |
146,214 |
|
|
$ |
- |
|
|
Conversion of Series C Preferred stock to Series F Preferred Stock
|
|
$ |
181,563 |
|
|
$ |
- |
|
|
Conversion of Series D Preferred stock to Series F Preferred Stock
|
|
$ |
239,118 |
|
|
$ |
- |
|
|
Conversion of notes payable and accrued interest to Series F Preferred Stock
|
|
$ |
8,111,253 |
|
|
$ |
- |
|
|
Conversion of accounts payable to common stock
|
|
$ |
- |
|
|
$ |
500,000 |
|
|
Capital expenditures included in accounts payable
|
|
$ |
110,511 |
|
|
$ |
4,289,816 |
|
See accompanying notes to these unaudited condensed consolidated financial statements.
MITESCO, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2023 AND 2022
(Unaudited)
Note 1: Description of Business
Company Overview
Mitesco, Inc. (the “Company,” “we,” “us,” or “our”) was formed in the state of Delaware on January 18, 2012. On December 9, 2015, we restructured our operations and acquired Newco4pharmacy, LLC, a development stage company which sought to acquire compounding pharmacy businesses. As a part of the restructuring, we completed a “spin out” of our former business line. On April 24, 2020, we changed our name to Mitesco, Inc.
We are a holding company with current operating plans to participate in the healthcare industry through the development of healthcare services, and with a view toward additional services and technology that may find a ready market in the healthcare industry. During early 2022 we continued on our plan to open primary care clinics around the United States in select markets, utilizing the experience, expertise, and training of licensed, advanced degreed nurse practitioners (“Nurse Practitioners”). During 2022 our clinics provided complete primary care, as well as a limited set of offerings addressing more specific needs for the general public. The medical practice focuses on whole person health and prevention. During late 2022 we decided to close our clinics due to a lack of funding for their operations and growth plans.
We have always had a view toward additional healthcare technology and services offerings and are committing more time to that effort going forward. We have a number of near-term opportunities that we hope to pursue, assuming the capital markets make sufficient funding available at reasonable rates.
Our operations are subject to comprehensive federal, state, and local laws and regulations in the jurisdictions in which it does business. There also continues to be a heightened level of review and/or audit by federal and state regulators of the health and related benefits industry’s business and reporting practices. As of the date of this filing, we are not subject to any actual or anticipated regulatory reviews or audits relating to our operations.
The laws and rules governing our businesses and interpretations of those laws and rules continue to evolve each year and are subject to frequent change. The application of these complex legal and regulatory requirements to the detailed operation of our businesses creates areas of uncertainty. Further, there are numerous proposed health care, financial services and other laws and regulations at the federal and state level some of which could adversely affect our businesses if they are enacted. We cannot predict whether pending or future federal or state legislation will have an adverse effect on our business.
We can give no assurance that the businesses, financial condition, operating results and/or cash flows will not be materially adversely affected, or that we will not be required to materially change its business practices, based on: (i) future enactment of new health care or other laws or regulations; (ii) the interpretation or application of existing laws or regulations, including the laws and regulations described in this Government Regulation section, as they may relate to one or more of our businesses, one or more of the industries in which we compete and/or the health care industry generally; (iii) our pending or future federal or state governmental investigations.
Reverse Stock Split
On December 12, 2022, our board of directors approved the filing of a certificate of amendment to our amended and restated certificate of incorporation (the “Amendment”) with the Secretary of State of the State of Delaware to affect the one-for-fifty. The Amendment became effective at 5:00 p.m. Eastern Time on December 12, 2022.
Pursuant to the Amendment, at the effective time of the Amendment, every fifty (50) shares of our issued and outstanding common stock was automatically combined into one (1) issued and outstanding share of common stock. The Reverse Stock Split affected all shares of our common stock outstanding immediately prior to the effective time of the Amendment. No fractional shares were issued as a result of the Reverse Stock Split. Stockholders of record who would otherwise be entitled to receive a fractional share received a full share thereof. As a result of the Reverse Stock Split, proportionate adjustments were made to the per share exercise price and/or the number of shares issuable upon the exercise or vesting of all stock options and warrants issued by us and outstanding immediately prior to the effective time of the Amendment, which resulted in a proportionate decrease in the number of shares of our common stock reserved for issuance upon exercise or vesting of such stock options and warrants and a proportionate increase in the exercise price of all such stock options and warrants. In addition, the number of shares reserved for issuance under our equity compensation plans immediately prior to the effective time of the Amendment were reduced proportionately. All share and per share amounts of common stock presented in this Quarterly Report on Form 10-Q have been retroactively adjusted to reflect the Reverse Stock Split.
Note 2: Financial Condition, Going Concern and Management Plans
As of June 30, 2023, the Company had cash and cash equivalents of $0.3 million, current liabilities of $15.3 million, and has incurred significant losses from the previous clinic operations, now discontinued. Our strategy is to utilize a mix of nurse practitioners and telemedicine technology in clinics to improve patient experiences and outcomes and reduce healthcare costs as compared to other available treatment options. As previously noted, we made a strategic decision to reduce our capital needs by closing our clinic operations in the fourth quarter of 2022 and releasing a significant portion of our staff. As we redevelop our new strategy for lower cost operations, we expect to focus on acquisitions of existing healthcare technology and services businesses. The Company’s activities are subject to significant risks and uncertainties, including failing to secure additional funding to execute its business plan.
Effective December 8, 2022, we closed all of our clinic locations due to a lack of funding. Subsequent to that date we have lost possession of all clinic locations. Due to difficulty in securing financing, we are uncertain of when or even if we will be able to resume operations at any clinic location.
As a result of these factors, there is substantial doubt about the ability of the Company to continue as a going concern for one year from the date the financial statements are issued. The Company’s continuance is dependent on raising capital and generating revenues sufficient to sustain operations. However, as of the date of these consolidated financial statements, no formal agreement exists.
The accompanying consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts classified as liabilities that might be necessary should the Company be forced to take any such actions.
The COVID-19 pandemic, decades-high inflation and concerns about an economic recession in the United States or other major markets has resulted in, among other things, volatility in the capital markets that may have the effect of reducing the Company’s ability to access capital, which could in the future negatively affect the Company’s liquidity. In addition, a recession or market correction due to these factors could materially affect the Company’s business and the value of its common stock.
Note 3: Summary of Significant Accounting Policies
Principles of Consolidation – The accompanying condensed consolidated financial statements include the accounts of Mitesco, Inc., and its wholly owned subsidiaries Mitesco NA, LLC, and The Good Clinic, LLC. In addition, we anticipate that we will rely on the operating activities of certain legal entities in which we will not maintain a controlling ownership interest but over which we will have indirect influence and of which we will be considered the primary beneficiary. We expect that these entities will typically be subject to nominee ownership and transfer restriction agreements that effectively transfer the majority of the economic risks and rewards of their ownership to the Company. The Company’s management, restriction and other agreements concerning such nominee-owned entities typically includes both financial terms and protective and participating rights to the entities’ operating, strategic and non-clinical governance decisions which transfer substantial powers over and economic responsibility for these entities to the Company. As such, the Company applies the guidance of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 810 – Consolidation (“ASC 810”), to determine when an entity that is insufficiently capitalized or not controlled through its voting interests, referred to as a variable interest entity should be consolidated. All intercompany balances and transactions have been eliminated.
Use of Estimates - The preparation of these financial statements requires our management to make estimates and assumptions about future events that affect the amounts reported in the financial statements and related notes. Future events and their effects cannot be determined with absolute certainty. Therefore, the determination of estimates requires the exercise of judgment.
Significant Accounting Policies
There have been no material changes in the Company’s significant accounting policies from those previously disclosed in the 2022 Annual Report.
New Accounting Standards
From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (“FASB”) or other standard setting bodies that the Company adopts as of the specified effective date. Unless otherwise discussed, the Company does not believe that the impact of recently issued standards that are not yet effective will have a material impact on its financial position or results of operations upon adoption.
Note 4: Net Loss Per Share Applicable to Common Shareholders
Net Loss per Share Applicable to Common Stockholders
Basic loss per common share is computed by dividing net loss by the weighted average number of common shares outstanding during the reporting period. Diluted loss per common share is computed similarly to basic loss per common share except that it reflects the potential dilution that could occur if dilutive securities or other obligations to issue common stock were exercised or converted into common stock.
The following table sets forth the computation of loss per share for the three and six months ended June 30, 2023, and 2022, respectively:
| |
|
For the Three
Months Ended
|
|
|
For the Six
Months Ended
|
|
| |
|
June 30,
|
|
|
June 30,
|
|
| |
|
2023
|
|
|
2022
|
|
|
2023
|
|
|
2022
|
|
|
Numerator:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss applicable to common shareholders
|
|
$ |
(8,012,815 |
)
|
|
$ |
(3,885,677 |
)
|
|
$ |
(13,706,459 |
)
|
|
$ |
(7,610,563 |
)
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding
|
|
|
5,157,610 |
|
|
|
4,430,461 |
|
|
|
4,963,755 |
|
|
|
4,352,695 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted
|
|
$ |
(1.55 |
)
|
|
$ |
(0.88 |
)
|
|
$ |
(2.76 |
)
|
|
$ |
(1.75 |
)
|
The Company excluded all common equivalent shares outstanding for warrants, options, and convertible instruments to purchase common stock from the calculation of diluted net loss per share because all such securities are antidilutive for the periods presented. As of June 30, 2023, and 2022, the following shares were issuable and excluded from the calculation of diluted loss:
| |
|
For the Six Months Ended
|
|
| |
|
June 30,
|
|
| |
|
2023
|
|
|
2022
|
|
|
Common stock options
|
|
|
209,381 |
|
|
|
327,099 |
|
|
Common stock purchase warrants
|
|
|
673,208 |
|
|
|
665,813 |
|
|
Convertible Preferred Stock
|
|
|
63,000 |
|
|
|
87,252 |
|
|
Accrued interest on Preferred Stock
|
|
|
11,057 |
|
|
|
9,601 |
|
|
Potentially dilutive securities
|
|
|
956,646 |
|
|
|
1,089,765 |
|
Note 5: Related Party Transactions
For the six months ended June 30, 2023:
During the six months ended June 30, 2023, the Company accrued dividends on its Series X Preferred Stock in the total amount of $30,283. Of this amount, a total of $3,937 was payable to officers and directors, $15,747 was payable to a related party shareholder, and $10,599 was payable to non-related parties.
During the six months ended June 30, 2023, the Company issued a total of 28,275 shares of common stock for accrued dividends on its Series X Preferred Stock. Of this amount, a total of 3,739 shares were issued to officers and directors, 14,586 were issued to a related party shareholder, and 9,950 were issued to non-related parties.
For the six months ended June 30, 2022:
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 $1,000,000, carries a 10% interest rate per annum, payable in monthly installments, and had a maturity date that is the earlier of (i) six months from the date of execution (on July 19, 2022 this date was extended to September 10, 2022) or (ii) the date on which the Company successfully lists its shares of common stock on Nasdaq or NYSE. The purchase price of the Note payable to the Company for the Note was $850,000 and was funded on December 30, 2021. An original issue discount in the amount of $150,000 was recorded. The amount payable at maturity will be $1,000,000 plus 10% of that amount plus any accrued and unpaid interest. Following an event of default, as defined in the Note, the principal amount shall bear interest for each day until paid, at a rate per annum equal to the lesser of the maximum interest permitted by applicable law and 18%. The Note contains a “most favored nations” clause that provides that, so long as the Note is outstanding, if the Company issues any new security, which the Lender reasonably believes contains a term that is more favorable than those in the Note, the Company shall notify the Lender of such term, and such term, at the option of the Lender, shall become a part of the Note. At June 30, 2022, the principal balance of this note was $1,000,000; $116,507 of the original issue discount was amortized to interest expense during the six months ended June 30, 2022, and the remaining original issue discount at June 30, 2022 was $33,493.
The Company issued a 10% Promissory Note due August 14, 2022, dated February 14, 2022 (the “Diamond Note 1”), to Lawrence Diamond (the “Lender”). Mr. Diamond is the Chief Executive Officer of the Company and a member of its Board of Directors. The principal amount of the Note is $175,000, carries a 10% interest rate per annum, payable in monthly installments, and has a maturity date that is the earlier of (i) six (6) months from the date of execution, or (ii) the date on which the Company successfully lists its shares of common stock on Nasdaq or NYSE. The purchase price of the Note payable to the Company for the Note was $148,750 and was funded on February 14, 2022. The amount payable at maturity will be $175,000 plus 10% of that amount plus accrued and unpaid interest. Following an event of default, as defined in the Note, the principal amount shall bear interest for each day until paid, at a rate per annum equal to the lesser of the maximum interest permitted by applicable law and 18%. The Note contains a “most favored nations” clause that provides that, so long as the Note is outstanding, if the Company issues any new security, which the Lender believes contains a term that is more favorable than those in the Note, the Company shall notify the Lender of such term, and such term, at the option of the Lender, shall become a part of the Note. In addition to the Note and Lender will be issued 7,350 5-year warrants that may be exercised at $25.00 per share and 7.350 5-year warrants that may be exercised at $37.50 per share. These warrants have all of the same terms as those previously issued in conjunction with the Company’s Series C Preferred shares and its Series D Preferred shares. The warrants have an aggregate commitment date fair value of $2,914. At June 30, 2022, the principal balance of this note was $175,000; $20,877 of the original issue discount was amortized to interest expense during the six months ended June 30, 2022, and the remaining original issue discount at June 30, 2022 was $5,373.
The Company issued a 10% Promissory Note due June 18, 2022 (the “Diamond Note 2”), 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 $235,294, carries a 10% interest rate per annum, payable in monthly installments, and has a maturity date that is the earlier of (i) April 4, 2022, (ii) the date on which the Company successfully lists its shares of common stock on Nasdaq or NYSE, or (iii) the date of receipt of the Company of the next round of debt or equity financing in an amount of at least $1,000,000. The purchase price of the Diamond Note payable to the Company for the Diamond Note was $200,000 and was funded on March 18, 2022. The amount payable at maturity will be $235,294 plus 10% of that amount plus any accrued and unpaid interest. Following an event of default, as defined in the Diamond Note, the principal amount shall bear interest for each day until paid, at a rate per annum equal to the lesser of the maximum interest permitted by applicable law and 18%. The Diamond Note contains a “most favored nations” clause that provides that, so long as the Note is outstanding, if the Company issues any new security, which the Lender reasonably believes contains a term that is more favorable than those in the Diamond Note, the Company shall notify the Lender of such term, and such term, at the option of the Lender, shall become a part of the Note. In addition, the Lender will be issued 4,000 5-year warrants that may be exercised on substantially the same terms as the Series A warrant issued in connection with the Company’s Series D Convertible Preferred Stock. The warrants have an aggregate commitment date fair value of $2,213. All amounts due for The Diamond Note, with the exception of $23,529, was paid on April 8, 2022. $23,529 remained outstanding as of June 30, 2022.
On March 22, 2022, the Company issued 3,364 shares of common stock with a contract price of $12.50 per share or $42,055 and a grant date market value of $6.35 per share or $21,364 were issued to Larry Diamond, its Chief Executive Officer, as compensation for the waiver of certain covenants as set forth and defined in Diamond Note 1.
On April 27, 2022, the Company issued 1,929 shares of common stock with a contract price of $12.50 per share or $24,118 and a grant date market value of $8.00 or $15,434 to Larry Diamond, its Chief Executive Officer, as commitment shares as set forth and defined in Diamond Note 2. The Company also issued five-year warrants to purchase 1,859 shares of common stock at a price of $25.00 to Mr. Diamond pursuant to a promissory note.
On April 27, 2022, the Company issued a 10% Promissory Note due June 30, 2022 (the “Diamond Note 3”) to Lawrence Diamond (the “Lender”). Lawrence Diamond is the Chief Executive Officer of the Company. The principal amount of the Diamond Note 3 is $235,294, carries a 10% interest rate per annum, payable in monthly installments, and has a maturity date that is the earlier of (i) April 4, 2022 (on July 12, 2022 this date was extended to September 10, 2022) (ii) the date on which the Company successfully lists its shares of common stock on Nasdaq or NYSE, or (iii) the date of receipt of the Company of the next round of debt or equity financing in an amount of at least $1,000,000. The purchase price of the Diamond Note 3 payable to the Company for the Diamond Note 3 was $200,000 and was funded on April 27, 2022. The amount payable at maturity will be $235,294 plus 10% of that amount plus any accrued and unpaid interest. Following an event of default, as defined in the Diamond Note 3, the principal amount shall bear interest for each day until paid, at a rate per annum equal to the lesser of the maximum interest permitted by applicable law and 18%. The Diamond Note 3 contains a “most favored nations” clause that provides that, so long as the Note is outstanding, if the Company issues any new security, which the Lender reasonably believes contains a term that is more favorable than those in the Diamond Note 3, the Company shall notify the Lender of such term, and such term, at the option of the Lender, shall become a part of the Note. At June 30, 2022, the principal balance of this note was $235,294; $13,858 of the original issue discount was amortized to interest expense during the six months ended June 30, 2022, and the remaining original issue discount at June 30, 2022 was $21,436.
The Company issued a 10% Promissory Note due as described below (the “Diamond Note 4”), dated May 18, 2022, to Lawrence Diamond. The principal amount of the Diamond Note 4 is $47,059, carries a 10% interest rate per annum, payable in monthly installments, and had an initial maturity date that was the earlier of (i) four business days after the date on which we successfully lists its shares of common stock on Nasdaq or NYSE, or (ii) two business days after the date of receipt of the Company of the next round of debt or equity financing in a net amount of at least $600,000. On August 3, 2022, the maturity date was amended to (i) September 10, 2022 or (ii) five days after the date on which we successfully list our shares of common stock on any of the NYSE American, the Nasdaq Global Select Market, the Nasdaq Global Market, or the Nasdaq Capital Market. The purchase price of the Diamond Note 4 payable to us for the Diamond Note 4was $40,000 and was funded on May 18, 2022. The amount payable at maturity will be $47,059 plus 10% of that amount plus any accrued and unpaid interest. Following an event of default, as defined in the Diamond Note 4, the principal amount shall bear interest for each day until paid, at a rate per annum equal to the lesser of the maximum interest permitted by applicable law and 18%. The Diamond Note 4 contains a “most favored nations” clause that provides that, so long as the Diamond Note 4is outstanding, if we issue any new security, which the Lender reasonably believes contains a term that is more favorable than those in the Diamond Note 4, we shall notify Mr. Diamond of such term, and such term, at the option of Mr. Diamond, shall become a part of the Note. In addition, Mr. Diamond will be issued (1) 386 five-year warrants (the “May 18 Diamond Warrants”) that may be exercised on substantially the same terms as the Series A warrant issued in connection with our Series D Convertible Preferred Stock and (2) 386 shares of Common Stock as commitment shares. At June 30, 2022, the principal balance of this note was $47,059; $1,862 of the original issue discount was amortized to interest expense during the six months ended June 30, 2022, and the remaining original issue discount at June 30, 2022 was $5,197.
On May 23, 2022, the Company issued a 10% Promissory Note due as described below (the “Finnegan Note 1”) to Jessica Finnegan. The principal amount of the Finnegan Note 1 is $47,059, carries a 10% interest rate per annum, payable in monthly installments, and has a maturity date that is the earlier of (i) four business days after the date on which we successfully lists its shares of common stock on Nasdaq or NYSE, or (ii) two business days after the date of receipt of the Company of the next round of debt or equity financing in a net amount of at least $600,000. The purchase price of the Finnegan Note 1 was $40,000 resulting in an original issue discount of $7,059 and was funded on May 18, 2022. The amount payable at maturity will be $47,059 plus 10% of that amount plus any accrued and unpaid interest, resulting in a premium and related discount in the amount of $4,706. Following an event of default, as defined in the Finnegan Note 1, the principal amount shall bear interest for each day until paid, at a rate per annum equal to the lesser of the maximum interest permitted by applicable law and 18%. The Finnegan Note 1 contains a “most favored nations” clause that provides that, so long as the Finnegan Note 1 is outstanding, if we issue any new security, which the Lender reasonably believes contains a term that is more favorable than those in the Finnegan Note 1, we shall notify Ms. Finnegan of such term, and such term, at the option of Ms. Finnegan, shall become a part of the Note. In addition, Ms. Finnegan will be issued (1) 386 five-year warrants with a fair value of $2,000 (the “May 18 Finnegan Warrants”) that may be exercised on substantially the same terms as the Series A warrant issued in connection with our Series D Convertible Preferred Stock and (2) 386 shares of Common Stock with a value of $3,240 as commitment shares; these amounts were charged to discount on the note, resulting in a total discount on this note in the amount of $17,005. At June 30, 2022, the principal balance of this note was $47,059; $3,843 of the discounts were amortized to interest expense during the six months ended June 30, 2022, and the remaining discounts at June 30, 2022 were $13,162.
The Company issued five 10% Promissory Notes due as described below (collectively, the “May 26 Notes”), dated May 26, 2022, to Larry Diamond, Jenny Lindstrom, and other related parties (the “May 26 Lenders”), in respect of which we received proceeds of $175,000. Jenny Lindstrom was the Chief Legal Officer of the Company.
The May 26 Notes carry a 10% interest rate per annum, payable in monthly installments, and has a maturity date that is the earlier of (i) November 30, 2022, or (ii) the date on which we successfully lists our shares of common stock on Nasdaq or NYSE. The aggregate amount payable at maturity will be $205,883 plus 10% of that amount plus any accrued and unpaid interest. Following an event of default, as defined in the May 26 Notes, the principal amount shall bear interest for each day until paid, at a rate per annum equal to the lesser of the maximum interest permitted by applicable law and 18%. The May 26 Notes contain a “most favored nations” clause that provides that, so long as the May 26 Notes are outstanding, if we issue any new security, which the May 26 Lenders reasonably believe contains a term that is more favorable than those in the May 26 Notes, we shall notify the May 26 Lenders of such term, and such term, at the option of the May 26 Lenders, shall become a part of the May 26 Notes. In addition, the May 26 Lenders will be issued in the aggregate (1) 1,688 five-year warrants (the “May 26 Warrants”) and (2) 1,688 shares of Common Stock as commitment shares. The May 26 Warrants have an initial exercise price of $25.00 per share. The May 26 Warrants are not exercisable for six months following their issuance. The May 26 Lenders may exercise the May 26 Warrants on a cashless basis if after the six-month anniversary of date of issuance, the shares of Common Stock underlying the May 26 Warrants are not then registered pursuant to an effective registration statement. At June 30, 2022, the principal balance of these notes were $205,883; $6,631 of the original issue discounts were amortized to interest expense during the six months ended June 30, 2022, and the remaining original issue discounts at June 30, 2022 were $24,252.
The Company issued a 10% Promissory Note due as described below (the “Howe Note”), dated June 9, 2022, to Michael C. Howe Living Trust and in respect of which we received proceeds of $255,000. Michael C. Howe is the Chief Executive Officer of the Good Clinic LLC, one of the Company’s subsidiaries.
The Howe Note carries a 10% interest rate per annum, payable in monthly installments. The Howe Note has a maturity date that is the earlier of (i) September 10, 2022, or (ii) the date on which we successfully list our shares of common stock on Nasdaq or NYSE. The amount payable at maturity will be $300,000 plus 10% of that amount plus any accrued and unpaid interest. In addition, the Company issued (1) 2,460 five-year warrants with a fair value of $21,500 and (2) 2,460 shares of Common Stock with a market value of $44,000 as commitment shares. The Warrants have an initial exercise price of $25.00 per share and are not exercisable for six months following their issuance. At June 30, 2022, the principal balance of this note was $300,000; $5,798 of the original issue discounts were amortized to interest expense during the six months ended June 30, 2022, and the remaining original issue discount at June 30, 2022 were $39,202.
On June 13, 2022, the Company issued 4,000 ten-year options with an exercise price of $12.50 and a fair value of $23,316 to Tom Brodmerkel, its then Chairman, to the position of Chief Financial Officer.
Note 6: Accounts Payable and Accrued Liabilities
Accounts payable and accrued liabilities consisted of the following at June 30, 2023 and December 31, 2022:
| |
|
June 30,
|
|
|
December 31,
|
|
| |
|
2023
|
|
|
2022
|
|
|
Trade accounts payable
|
|
$ |
7,373,434 |
|
|
$ |
6,761,793 |
|
|
Accrued payroll and payroll taxes
|
|
|
921,774 |
|
|
|
590,915 |
|
|
Other
|
|
|
- |
|
|
|
507 |
|
|
Total accounts payable and accrued liabilities
|
|
$ |
8,295,208 |
|
|
$ |
7,353,215 |
|
Note 7: Right to Use Assets and Lease Liabilities – Operating Leases
During the year ended December 31, 2022, the Company recognized an impairment of Right-to-Use (RTU) assets in the amount of $3.2 million in connection with the closing of its clinics during the period. During the six months ended June 30, 2023, the Company recognized an additional impairment in the amount of $0.5 million in connection with its remaining leased properties. This amount is included in Impairment of Fixed Assets on the Company’s statement of operations for the three and six months ended June 30, 2023.
As of June 30, 2023, the Company had total operating lease liabilities of approximately $4.1 million and right-of-use assets of $0, which were included in the condensed consolidated balance sheet.
Right to use assets – operating leases are summarized below:
| |
|
June 30,
2023
|
|
|
December 31,
2022
|
|
|
Right to use assets, net
|
|
$ |
- |
|
|
$ |
544,063 |
|
Operating lease liabilities are summarized below:
| |
|
June 30,
2023
|
|
|
December 31,
2022
|
|
|
Lease liability
|
|
$ |
4,066,827 |
|
|
$ |
4,379,724 |
|
|
Less: current portion
|
|
|
(544,143 |
)
|
|
|
(442,866 |
)
|
|
Lease liability, non-current
|
|
$ |
3,522,684 |
|
|
$ |
3,936,858 |
|
Maturity analysis under these lease agreements are as follows:
|
For the twelve months ended June 30, 2024
|
|
$ |
1,290,393 |
|
|
For the twelve months ended June 30, 2025
|
|
|
830,040 |
|
|
For the twelve months ended June 30, 2026
|
|
|
847,998 |
|
|
For the twelve months ended June 30, 2027
|
|
|
866,899 |
|
|
For the twelve months ended June 30, 2028
|
|
|
884,275 |
|
|
Thereafter
|
|
|
1,364,396 |
|
|
Total
|
|
$ |
6,084,001 |
|
|
Less: Present value discount
|
|
|
(2,017,174 |
)
|
|
Lease liability
|
|
$ |
4,066,827 |
|
Note 8: SBA Loan Payable
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 $460,400, and the Company received the full amount of the loan proceeds on May 4, 2020 (the “PPP Loan”). The PPP Loan bears interest at the rate of 1% per year. During the year ended December 31, 2022, the Company accrued interest in the amount of $4,632.
During the three and six months ended June 30, 2023, the Company accrued interest in the amount of $1,135 and $2,270, respectively, on the PPP Loan; at June 30, 2023, the balance due on this loan was principal in the amount of $460,400 and accrued interest in the amount of $13,559. This loan was in default at June 30, 2023. See note 15.
Note 9: Notes Payable
AJB Note
On March 18, 2022, the Company entered into a Securities Purchase Agreement (the “AJB Agreement”) with AJB Capital Investments, LLC (“AJB”) with respect to the sale and issuance to AJB of: (i) an initial commitment fee in the amount of $430,000 in the form of 34,400 shares (the “AJB Commitment Fee Shares”) of the Company’s Common Stock, (ii) a promissory note in the aggregate principal amount of $750,000 (the “AJB Note”), and (iii) Common Stock Purchase Warrants to purchase 15,000 shares of the Company’s Common Stock (the “AJB Warrants”). The AJB Note and AJB Warrants were issued on March 17, 2022 and were held in escrow pending effectiveness of the AJB Agreement. Should AJB receive net proceeds of less than $430,000 from the sale of the AJB Commitment Fee Shares, the Company will issue additional shares to AJB or pay the shortfall amount to AJB in cash (the “AJB True-up Obligation”. The terms of the AJB Agreement resulted in the Company recording a derivative liability in the initial amount of $106,608. On November 18, 2022, the Company issued 91,328 shares of common stock to AJB and recorded a loss in the amount of $9,007 in connection with the settlement of the AJB True-up Obligation. See notes 11 and 12.
The AJB Note was issued in the principal amount of $750,000 for a purchase price of $675,000, resulting in an original issue discount of $75,000, and has a due date, as extended, of March 17, 2023. The AJB Note bears interest at the rate of 10% per year for the first six months and 12% thereafter. In the event of default as defined in the AJB Note this rate will increase to 18% and the AJB Note will become convertible at a price per share equal to the lowest trading price during the previous twenty trading days prior to the conversion date. The AJB Note entered default status on October 6, 2022. The AJB Commitment Fee Shares and AJB Warrants resulted in a discount to the AJB Note in the amount of $349,914. The Company charged the amount of $62,000 to interest on the AJB Note during the year ended December 31, 2022. Discounts in the amount of $424,914 were amortized to interest expense during the year ended December 31, 2022, and total discounts in the amount of $0 remained outstanding at December 31, 2022. Principal and accrued interest in the amounts $750,000 and $22,833, respectively, were due on the AJB Note at December 31, 2022.
During the six months ended June 30, 2023, a default penalty in the amount of $375,000 and an additional fee in the amount of $15,000 were added to the principal amount of the AJB note. During the three and six months ended June 30, 2023, interest in the amounts of $6,270 and $62,897, respectively, was accrued on the AJB Note.
On April 11, 2023, an equity investment incentive in the amount of $800,800 representing 65% of the total amount due under the AJB Note, along with original principal of $750,000, the default penalty of $375,000, the fee of $15,000, and accrued interest of $92,000 (a total of $2,032,800) was converted to 2,033 shares of the Company’s Series F Preferred Stock. Other than the equity investment incentive of $800,800, there was no additional gain or loss recognized on this transaction as the Series F Preferred Stock was issued at its face value of $1,000 per share. At June 30, 2023, there were no amounts due under the AJB Note.
Anson Investments Note
On April 6, 2022, the Company entered into a Securities Purchase Agreement (the “Anson Investments Agreement”) with Anson Investments Master Fund LP (“Anson Investments”) with respect to the sale and issuance to Anson Investments of: (i) an initial commitment fee in the amount of $322,500 in the form of 25,800 shares (the “Anson Investments Commitment Fee Shares”) of the Company’s Common Stock, (ii) a promissory note in the aggregate principal amount of $562,500 (the “Anson Investments Note”), and (iii) Common Stock Purchase Warrants to purchase 11,250 shares of the Common Stock (the “Anson Investments Warrants”). Should Anson Investments receive net proceeds of less than $322,500 from the sale of the Anson Investments Commitment Fee Shares, the Company will issue additional shares to Anson Investments or pay the shortfall amount to Anson Investments in cash. The terms of the Anson Investments Agreement resulted in the Company recording a derivative liability in the initial amount of $27,040.
The Anson Investments Note was issued in the principal amount of $562,500 for a purchase price of $506,250 resulting in an original issue discount of $56,250. The Anson Investments Note has a due date of October 6, 2022 and bears interest at the rate of 10% per year for the first six months and 12% thereafter. In the event of default as defined in the Anson Investments Note this rate will increase to 18% and the Anson Investment Note will become convertible at a price per share equal to the lowest trading price during the previous twenty trading days prior to the conversion date. The Anson Investments Note entered default status on October 6, 2022. The Anson Investments Commitment Fee Shares and Anson Investments Warrants resulted in a discount to the Anson Investments Note in the amount of $416,375. The Company charged the amount of $68,844 to interest on the Anson Investments note during the year ended December 31, 2022. Discounts in the amount of $472,625 were amortized to interest expense during the year ended December 31, 2022, and total discounts in the amount of $0 remained outstanding at December 31, 2022. Principal and accrued interest in the amounts $562,500 and $41,500, respectively, were due on the AJB Note at December 31, 2022.
During the six months ended June 30, 2023, a default penalty in the amount of $281,250 and an additional fee in the amount of $15,000 were added to the principal amount of the Anson Investments Note. During the three and six months ended June 30, 2023, interest in the amounts of $4,724 and $27,157, respectively, was accrued on the Anson Investments Note.
On April 11, 2023, an equity investment incentive in the amount of $602,815 representing 65% of the total amount due under the Anson Investments Note, along with original principal of $562,500, the default penalty of $281,250, the fee of $15,000, and accrued interest of $68,657 (a total of $1,530,222) was converted to 1,531 shares of the Company’s Series F Preferred Stock. Other than the equity investment incentive of $602,815, there was no gain or loss recognized on this transaction as the Series F Preferred Stock was issued at its face value of $1,000 per share. At June 30, 2023, there were no amounts due under the Anson Investments Note.
Anson East Note
On April 6, 2022, the Company entered into a Securities Purchase Agreement (the “Anson East Agreement”) with Anson East Master Fund LP (“Anson East”) with respect to the sale and issuance to Anson East of: (i) an initial commitment fee in the amount of $107,500 in the form of 8,600 shares (the “Anson East Commitment Fee Shares”) of the Company’s Common Stock, (ii) a promissory note in the aggregate principal amount of $187,500 (the “Anson East Note”), and (iii) Common Stock Purchase Warrants to purchase 3,750 shares of the Company’s common stock (the “Anson East Warrants”). Should Anson East receive net proceeds of less than $107,500 from the sale of the Anson East Commitment Fee Shares, the Company will issue additional shares to Anson East or pay the shortfall amount to Anson East in cash. The terms of the Anson East Agreement resulted in the Company recording a derivative liability in the initial amount of $9,014.
The Anson East Note was issued in the principal amount of $187,500 for a purchase price of $168,750 resulting in an original issue discount of $18,750. The Anson East Note has a due date of October 6, 2022 and bears interest at the rate of 10% per year for the first six months and 12% thereafter. In the event of default as defined in the Anson East Note this rate will increase to 18%, and the Anson East Note will become convertible at a price per share equal to the lowest trading price during the previous twenty trading days prior to the conversion date. The Anson East Note entered default status on October 6, 2022. The Anson East Commitment Fee Shares and Anson East Warrants resulted in a discount to the Anson East Note in the amount of $147,290. The Company charged the amount of $22,948 to interest on the Anson Investments note during the year ended December 31, 2022. Discounts in the amount of $166,040 were amortized to interest expense during the year ended December 31, 2022, and total discounts in the amount of $0 remained outstanding at December 31, 2022. Principal and accrued interest in the amounts $187,500 and $13,833, respectively, were due on the Anson East Note at December 31, 2022.
During the six months ended June 30, 2023, a default penalty in the amount of $93,750 and an additional fee in the amount of $15,000 were added to the principal amount of the Anson East Note. During the three and six months ended June 30, 2023, the amounts of $9,552 and $23,385, respectively, was accrued on the Anson East Note.
On April 11, 2023, an equity investment incentive in the amount of $207,763 representing 65% of the total amount due under the Anson East Note, along with original principal of $187,500, the default penalty of $93,750, the fee of $15,000, and accrued interest of $23,385 (a total of $527,398) was converted to 528 shares of the Company’s Series F Preferred Stock. Other than the equity investment incentive of $207,763, there was no gain or loss recognized on this transaction as the Series F Preferred Stock was issued at its face value of $1,000 per share. At June 30, 2023, there were no amounts due under the Anson East Note.
GS Capital Note
On April 18, 2022, the Company entered into a Securities Purchase Agreement (the “GS Capital Agreement”) with GS Capital Investments, LLC (“GS Capital”) with respect to the sale and issuance to GS Capital of: (i) an initial commitment fee in the amount of $159,259 in the form of 12,741 shares (the “GS Capital Commitment Fee Shares”) of the Company’s Common Stock, (ii) a promissory note in the aggregate principal amount of $277,777 (the “GS Capital Note”), and (iii) Common Stock Purchase Warrants to purchase 5,556 shares of the Company’s common stock (the “GS Capital Warrants”). Should GS Capital receive net proceeds of less than $159,259 from the sale of the GS Capital Commitment Fee Shares, the Company will issue additional shares to GS Capital or pay the shortfall amount to GS Capital in cash. The terms of the GS Capital Agreement resulted in the Company recording a derivative liability in the initial amount of $21,920.
The GS Capital Note was issued in the principal amount of $277,777 for a purchase price of $250,000 resulting in an original issue discount of $27,777. The GS Capital Note has a due date of November 10, 2022 and bears interest at the rate of 10% per year for the first six months and 12% thereafter. In the event of default as defined in the GS Capital Note this rate will increase to 18%, and the GS Capital Note will become convertible at a price per share equal to the lowest trading price during the previous twenty trading days prior to the conversion date. The GS Capital Note entered default status on October 19, 2022. The GS Capital Commitment Fee Shares and GS Capital Warrants resulted in a discount to the GS Capital Note in the amount of $162,158. The Company charged the amount of $32,155 to interest on the GS Capital Note during the year ended December 31, 2022. Discounts in the amount of $212,435 were amortized to interest expense during the year ended December 31, 2022, and total discounts in the amount of $0 remained outstanding at December 31, 2022. Principal and accrued interest in the amounts $277,777 and $19,578, respectively, were due on the GS Capital Note at December 31, 2022.
During the six months ended June 30, 2023, GS Capital converted an aggregate amount of $72,777 of principal and $8,679 of accrued interest in the GS Capital Note into an aggregate of 57,140 shares of the Company’s common stock at an average price of $1.46 per share. These conversions were made pursuant to the terms of the GS Capital Note, and no gain or loss was recorded on these transactions. During the six months ended June 30, 2023, a default penalty in the amount of $138,889 and an additional fee in the amount of $15,000 were added to the principal amount of the GS Capital Note. During the three and six months ended June 30, 2023, interest in the amount of $2,374 and $13,965, respectively, was accrued on the GS Capital Note.
On April 11, 2023, an equity investment incentive in the amount of $249,439 representing 65% of the total amount due under the GS Capital Note, along with original principal of $205,000, the default penalty of $138,889, the fee of $15,000, and accrued interest of $24,864 (a total of $633,192) was converted to 634 shares of the Company’s Series F Preferred Stock. Other than the equity investment incentive of $249,439, there was no gain or loss recognized on this transaction as the Series F Preferred Stock was issued at its face value of $1,000 per share. At June 30, 2023, there were no amounts due under the GS Capital Note.
Kishon Note
On May 10, 2022, the Company entered into a Securities Purchase Agreement (the “Kishon Agreement”) with Kishon Investments, LLC (“Kishon”) with respect to the sale and issuance to Kishon of: (i) an initial commitment fee in the amount of $159,259 in the form of 12,741 shares (the “Kishon Commitment Fee Shares”) of the Company’s Common Stock, (ii) a promissory note in the aggregate principal amount of $277,777 (the “Kishon Note”), and (iii) Common Stock Purchase Warrants to purchase 5,556 shares of the Company’s common stock (the “Kishon Warrants”). Should Kishon receive net proceeds of less than $159,259 from the sale of the Kishon Commitment Fee Shares, the Company will issue additional shares to Kishon or pay the shortfall amount to Kishon in cash. The terms of the Kishon Agreement resulted in the Company recording a derivative liability in the initial amount of $27,793.
The Kishon Note was issued in the principal amount of $277,777 for a purchase price of $250,000 resulting in an original issue discount of $27,777. The Kishon Note has a due date of November 10, 2022 and bears interest at the rate of 10% per year for the first six months and 12% thereafter. In the event of default as defined in the Kishon Note this rate will increase to 18%, and the Kishon Note will become convertible at a price per share equal to the lowest trading price during the previous twenty trading days prior to the conversion date. The Kishon Note entered default status on November 11, 2022. The Kishon Commitment Fee Shares and Kishon Warrants resulted in a discount to the Kishon Note in the amount of $138,492. The Company charged the amount of $28,624 to interest on the Kishon Note during the year ended December 31, 2022. Discounts in the amount of $181,269 were amortized to interest expense during the year ended December 31, 2022, and total discounts in the amount of $0 remained outstanding at December 31, 2022. Principal and accrued interest in the amounts $277,777 and $17,822, respectively, were due on the Kishon Note at December 31, 2022.
During the six months ended June 30, 2023, a default penalty in the amount of $138,889 and an additional fee in the amount of $15,000 were added to the principal amount of the Kishon Note. During the three and six months ended June 30, 2023, interest in the amounts of $19,641 and $31,645 was accrued on the Kishon Note. At June 30, 2023, principal and interest in the amount of $431,666 and $49,467, respectively, were due on the Kishon Note. This note was in default at December 31, 2022 and June 30, 2023.
Finnegan Note 1
On May 23, 2022, the Company issued a 10% Promissory Note in the principal amount of $47,059 to Jessica Finnegan (the “Finnegan Note 1”). The Finnegan Note 1 bears interest at the rate of 10% per annum accrued monthly and has a maturity date that is the earlier of (i) November 20, 2022, as extended, or (ii) five (5) business days after the date on which the Company successfully lists its shares of common stock on Nasdaq or NYSE. The purchase price of the Finnegan Note 1 was $40,000; the amount payable at maturity will be $47,059 plus 10% of that amount plus any accrued and unpaid interest. Following an event of default as defined in the Finnegan Note 1, the principal amount shall bear interest for each day until paid at a rate per annum equal to the lesser of the maximum interest permitted by applicable law and 18%. The Finnegan Note 1 entered default status on November 21, 2022, and the interest rate increased to 18%. The Finnegan Note 1 contains a “most favored nations” clause that provides that, so long as the note is outstanding, if the Company issues any new security which Ms. Finnegan reasonably believes contains a term that is more favorable than those in the Finnegan Note 1, the Company shall notify Ms. Finnegan of such term, and such term, at the option of Ms. Finnegan, shall become a part of the Finnegan Note 1. In addition, Ms. Finnegan received five-year warrants to purchase 386 shares of common stock at a price of $25.00 per share with a fair value of $2,000 at the date of issuance, and 1,930 shares of common stock with a value of $3,240; these amounts were recorded as discounts to the Finnegan Note 1. Interest in the amount of $3,285 was accrued on the Finnegan Note 1 during the year ended December 31, 2022. Discounts in the amount of $17,005 were amortized to interest expense during the year ended December 31, 2022, and total discounts in the amount of $0 remained outstanding at December 31, 2022. Principal and accrued interest in the amounts $51,765 and $3,285, respectively, were due on the Finnegan Note 1 at December 31, 2022.
During the three and six months ended June 30, 2023, interest in the amount of $2,142 and $4,260, respectively, was accrued on the Finnegan Note 1; principal and accrued interest in the amount of $51,765 and $7,590, respectively, were due on this note at June 30, 2023. This note was in default at June 30, 2023.
M Diamond Note
On May 26, 2022, the Company issued a 10% Promissory Note in the principal amount of $58,823 to Melissa Diamond (the “M Diamond Note”). The M Diamond Note bears interest at the rate of 10% per annum accrued monthly and has a maturity date that is the earlier of (i) November 30, 2022, or (ii) five business days after the date on which the Company successfully lists its shares of common stock on Nasdaq or NYSE. The purchase price of the M Diamond Note was $50,000; the amount payable at maturity will be $58,823 plus 10% of that amount plus any accrued and unpaid interest. Following an event of default as defined in the M Diamond Note, the principal amount shall bear interest for each day until paid at a rate per annum equal to the lesser of the maximum interest permitted by applicable law and 18%. The M Diamond Note entered default status on December 1, 2022, and the interest rate increased to 18%. The M Diamond Note contains a “most favored nations” clause that provides that, so long as the note is outstanding, if the Company issues any new security which Ms. Diamond reasonably believes contains a term that is more favorable than those in the M Diamond Note, the Company shall notify Ms. Diamond of such term, and such term, at the option of Ms. Diamond, shall become a part of the M Diamond Note. In addition, Ms. Diamond received five-year warrants to purchase 483 shares of common stock at a price of $25.00 per share with a fair value of $2,500 at the date of issuance, and 483 shares of common stock with a value of $4,050; these amounts were recorded as discounts to the M Diamond Note. Interest in the amount of $3,929 was accrued on the M Diamond Note during the year ended December 31, 2022. Discounts in the amount of $21,256 were amortized to interest expense during the year ended December 31, 2022, and total discounts in the amount of $0 remained outstanding at December 31, 2022. Principal and accrued interest in the amounts $64,705 and $3,929, respectively, were due on the M Diamond Note at December 31, 2022.
During the three and six months ended June 30, 2023, interest in the amount of $2,676 and $5,323, respectively, was accrued on the M Diamond Note; principal and accrued interest in the amount of $64,705 and $9,307, respectively, were due on this note at June 30, 2023. This note was in default at June 30, 2023.
Finnegan Note 2
On May 26, 2022, the Company issued a 10% Promissory Note in the principal amount of $29,412 to Jessica Finnegan (the “Finnegan Note 2”). The Finnegan Note 2 bears interest at the rate of 10% per annum accrued monthly and has a maturity date that is the earlier of (i) November 30, 2022, or (ii) five business days after the date on which the Company successfully lists its shares of common stock on Nasdaq or NYSE. The purchase price of the Finnegan Note 2 was $25,000; the amount payable at maturity will be $29,412 plus 10% of that amount plus any accrued and unpaid interest. Following an event of default as defined in the Finnegan Note 2, the principal amount shall bear interest for each day until paid at a rate per annum equal to the lesser of the maximum interest permitted by applicable law and 18%. The Finnegan Note 2 entered default status on December 1, 2022, and the interest rate increased to 18%. The Finnegan Note 2 contains a “most favored nations” clause that provides that, so long as the note is outstanding, if the Company issues any new security which Ms. Finnegan reasonably believes contains a term that is more favorable than those in the Finnegan Note 2, the Company shall notify Ms. Finnegan of such term, and such term, at the option of Ms. Finnegan, shall become a part of the Finnegan Note 2. In addition, Ms. Finnegan received five-year warrants to purchase 242 shares of common stock at a price of $25.00 per share with a fair value of $1,250 at the date of issuance, and 242 shares of common stock with a value of $2,025; these amounts were recorded as discounts to the Finnegan Note 2. Interest in the amount of $1,965 was accrued on the Finnegan Note 2 during the year ended December 31, 2022. Discounts in the amount of $10,625 were amortized to interest expense during the year ended December 31, 2022, and total discounts in the amount of $0 remained outstanding at December 31, 2022. Principal and accrued interest in the amounts $32,353 and $1,965, respectively, were due on the Finnegan Note 2 at December 31, 2022.
During the three and six months ended June 30, 2023, interest in the amount of $1,339 and $2,663, respectively, was accrued on the Finnegan Note 2; principal and accrued interest in the amount of $32,353 and $4,564, respectively, were due on this note at June 30, 2023. This note was in default at June 30, 2023.
Dragon Note
On June 9, 2022, the Company issued a 10% Promissory Note in the principal amount of $588,235 (the “Dragon Note”) to Dragon Dynamic Funds Platform Ltd (“Dragon Dynamic”). The Dragon Note bears interest at the rate of 10% per annum accrued monthly and has a maturity date that is the earlier of (i) December 9, 2022, or (ii) five business days after the date on which the Company successfully lists its shares of common stock on Nasdaq or NYSE. The purchase price of the Dragon Note was $500,000; the amount payable at maturity will be $588,235 plus 10% of that amount plus any accrued and unpaid interest. Costs in the amount of $47,500 were charged to discount on the Dragon Note. Following an event of default as defined in the Dragon Note, the principal amount shall bear interest for each day until paid at a rate per annum equal to the lesser of the maximum interest permitted by applicable law and 18%. The Dragon Note entered default status on December 10, 2022, and the interest rate increased to 18%. The Dragon Note contains a “most favored nations” clause that provides that, so long as the note is outstanding, if the Company issues any new security which Dragon Dynamic reasonably believes contains a term that is more favorable than those in the Dragon Note, the Company shall notify Dragon Dynamic of such term, and such term, at the option of Dragon Dynamic, shall become a part of the Dragon Note. In addition, Dragon Dynamic received five-year warrants to purchase 4,824 shares of common stock at a price of $25.00 per share with a fair value of $21,500 at the date of issuance, and 4,824 shares of common stock with a value of $44,000; these amounts were recorded as discounts to the Dragon Note. Interest in the amount of $35,874 was accrued on the Dragon Note during the year ended December 31, 2022. Discounts in the amount of $260,059 were amortized to interest expense during the year ended December 31, 2022, and total discounts in the amount of $0 remained outstanding at December 31, 2022. Principal and accrued interest in the amounts $647,059 and $35,874, respectively, were due on the Dragon Note at December 31, 2022.
During the three and six months ended June 30, 2023, interest in the amount of $3,235 and $29,706, respectively, was accrued on the Dragon Note.
On April 11, 2023, an equity investment incentive in the amount of $463,539 representing 65% of the total amount due under the Dragon Note, along with original principal of $647,059 and accrued interest of $66,078 (a total of $1,176,676) was converted to 1,177 shares of the Company’s Series F Preferred Stock. Other than the equity investment incentive of $463,539, there was no gain or loss recognized on this transaction as the Series F Preferred Stock was issued at its face value of $1,000 per share. At June 30, 2023, there were no amounts due under the Dragon Note.
Mackay Note
On July 7, 2022, the Company issued a 10% Promissory Note in the principal amount of $294,118 to Mackay Investments, LLC (the “Mackay Note”). The Mackay Note bears interest at the rate of 10% per annum accrued monthly and has a maturity date that is the earlier of (i) August 10, 2022, or (ii) five business days after the date on which the Company successfully lists its shares of common stock on Nasdaq or NYSE. The purchase price of the Mackay Note was $250,000; the amount payable at maturity will be $294,118 plus 10% of that amount plus any accrued and unpaid interest. Following an event of default as defined in the Mackay Note, the principal amount shall bear interest for each day until paid at a rate per annum equal to the lesser of the maximum interest permitted by applicable law and 18%. The Mackay Note entered default status on August 11, 2022, and the interest rate increased to 18%. The Mackay Note contains a “most favored nations” clause that provides that, so long as the note is outstanding, if the Company issues any new security which Mackay Investments, LLC reasonably believes contains a term that is more favorable than those in the Mackay Note, the Company shall notify Mackay Investments, LLC of such term, and such term, at the option of Mackay Investments, LLC , shall become a part of the Mackay Note. In addition, Mackay Investments, LLC received five-year warrants to purchase 2,412 shares of common stock at a price of $25.00 per share with a fair value of $10,250 at the date of issuance, and 2,412 shares of common stock with a value of $44,118; these amounts were recorded as discounts to the Mackay Note. Interest in the amount of $20,193 was accrued on the Mackay Note during the year ended December 31, 2022. Discounts in the amount of $96,280 were amortized to interest expense during the year ended December 31, 2022, and total discounts in the amount of $0 remained outstanding at December 31, 2022. Principal and accrued interest in the amounts $323,530 and $20,193, respectively, were due on the Mackay Note at December 31, 2022.
During the three and six months ended June 30, 2023, interest in the amount of $13,382 and $26,617, respectively was accrued on the Mackay Note; principal and accrued interest in the amount of $323,530 and $50,425 respectively, were due on this note at June 30, 2023. This note was in default at June 30, 2023.
Schrier Note
On July 7, 2022, the Company issued a 10% Promissory Note in the principal amount of $23,259 to Charles Schrier (the “Schrier Note”). The Schrier Note bears interest at the rate of 10% per annum accrued monthly and has a maturity date that is the earlier of (i) January 8, 2023, or (ii) five business days after the date on which the Company successfully lists its shares of common stock on Nasdaq or NYSE. The purchase price of the Schrier Note was $20,000; the amount payable at maturity will be $23,529 plus 10% of that amount plus any accrued and unpaid interest. Following an event of default as defined in the Schrier Note, the principal amount shall bear interest for each day until paid at a rate per annum equal to the lesser of the maximum interest permitted by applicable law and 18%. The Schrier Note contains a “most favored nations” clause that provides that, so long as the note is outstanding, if the Company issues any new security which Mr. Schrier reasonably believes contains a term that is more favorable than those in the Schrier Note, the Company shall notify Mr. Schrier of such term, and such term, at the option of Mr. Schrier, shall become a part of the Schrier Note. In addition, Mr. Schrier received five-year warrants to purchase 193 shares of common stock at a price of $25.00 per share with a fair value of $820 at the date of issuance, and 193 shares of common stock with a value of $1,000; these amounts were recorded as discounts to the Schrier Note. Interest in the amount of $1,141 was accrued on the Schrier Note during the year ended December 31, 2022. Discounts in the amount of $7,367 were amortized to interest expense during the year ended December 31, 2022, and total discounts in the amount of $335 remained outstanding at December 31, 2022. Principal and accrued interest in the amounts $25,882 and $1,141, respectively, were due on the Schrier Note at December 31, 2022.
During the three and six months ended June 30, 2023, interest in the amount of $1,070 and $2,087, respectively, was accrued on the Schrier Note; principal and accrued interest in the amount of $25,882 and $3,244, respectively, were due on this note at June 30, 2023. This note was in default at June 30, 2023.
Nommsen Note
On July 26, 2022, the Company issued a 10% Promissory Note in the principal amount of $58,823 to Eric S. Nommsen (the “Nommsen Note”). The Nommsen Note bears interest at the rate of 10% per annum accrued monthly and has a maturity date that is the earlier of (i) November 30, 2022, as extended, or (ii) five business days after the date on which the Company successfully lists its shares of common stock on Nasdaq or NYSE. The purchase price of the Nommsen Note was $50,000; the amount payable at maturity will be $58,823 plus 10% of that amount plus any accrued and unpaid interest. Following an event of default as defined in the Nommsen Note, the principal amount shall bear interest for each day until paid at a rate per annum equal to the lesser of the maximum interest permitted by applicable law and 18%. The Nommsen Note entered default status on December 1, 2022, and the interest rate increased to 18%. The Nommsen Note contains a “most favored nations” clause that provides that, so long as the note is outstanding, if the Company issues any new security which Mr. Nommsen reasonably believes contains a term that is more favorable than those in the Nommsen Note, the Company shall notify Mr. Nommsen of such term, and such term, at the option of Mr. Nommsen, shall become a part of the Nommsen Note. In addition, Mr. Nommsen received five-year warrants to purchase 483 shares of common stock at a price of $25.00 per share with a fair value of $1,850 at the date of issuance, and 483 shares of common stock with a value of $2,350; these amounts were recorded as discounts to the Nommsen Note. Interest in the amount of $2,946 was accrued on the Nommsen Note during the year ended December 31, 2022. Discounts in the amount of $18,905 were amortized to interest expense during the year ended December 31, 2022, and total discounts in the amount of $0 remained outstanding at December 31, 2022. Principal and accrued interest in the amounts $64,705 and $2,946, respectively, were due on the Nommsen Note at December 31, 2022.
During the three and six months ended June 30, 2023, interest in the amount of $2,676 and $5,323 was accrued on the Nommsen Note; principal and accrued interest in the amount of $64,705 and $8,310, respectively, were due on this note at June 30, 2023. This note was in default at June 30, 2023.
Caplan Note
On July 27, 2022, the Company issued a 10% Promissory Note in the principal amount of $58,823 to James H. Caplan (the “Caplan Note”). The Caplan Note bears interest at the rate of 10% per annum accrued monthly and has a maturity date that is the earlier of (i) January 21, 2023, or (ii) five business days after the date on which the Company successfully lists its shares of common stock on Nasdaq or NYSE. The purchase price of the Caplan Note was $50,000; the amount payable at maturity will be $58,823 plus 10% of that amount plus any accrued and unpaid interest. Following an event of default as defined in the Caplan Note, the principal amount shall bear interest for each day until paid at a rate per annum equal to the lesser of the maximum interest permitted by applicable law and 18%. The Caplan Note contains a “most favored nations” clause that provides that, so long as the note is outstanding, if the Company issues any new security which Mr. Caplan reasonably believes contains a term that is more favorable than those in the Caplan Note, the Company shall notify Mr. Caplan of such term, and such term, at the option of Mr. Caplan, shall become a part of the Caplan Note. In addition, Mr. Caplan received five-year warrants to purchase 483 shares of common stock at a price of $25.00 per share with a fair value of $1,850 at the date of issuance, and 483 shares of common stock with a value of $2,350; these amounts were recorded as discounts to the Caplan Note. Interest in the amount of $2,531 was accrued on the Caplan Note during the year ended December 31, 2022. Discounts in the amount of $16,675 were amortized to interest expense during the year ended December 31, 2022, and total discounts in the amount of $2,230 remained outstanding at December 31, 2022. Principal and accrued interest in the amounts $64,705 and $2,531, respectively, were due on the Caplan Note at December 31, 2022.
During the three and six months ended June 30, 2023, interest in the amount of $2,677 and $5,049, respectively, was accrued on the Caplan Note; principal and accrued interest in the amount of $64,705 and $7,614, respectively, were due on this note at June 30, 2023. This note was in default at June 30, 2023.
Finnegan Note 3
On August 4, 2022, the Company issued a 10% Promissory Note in the principal amount of $29,412 (the “Finnegan Note 3”) to Jessica, Kevin C., Brody, Isabella and Jack Finnegan (collectively, the “Finnegans”). The Finnegan Note 3 bears interest at the rate of 10% per annum accrued monthly and has a maturity date that is the earlier of (i) February 3, 2023, or (ii) five business days after the date on which the Company successfully lists its shares of common stock on Nasdaq or NYSE. The purchase price of the Finnegan Note 3 was $25,000; the amount payable at maturity will be $29,412 plus 10% of that amount plus any accrued and unpaid interest. Following an event of default as defined in the Finnegan Note 3, the principal amount shall bear interest for each day until paid at a rate per annum equal to the lesser of the maximum interest permitted by applicable law and 18%. The Finnegan Note 3 contains a “most favored nations” clause that provides that, so long as the note is outstanding, if the Company issues any new security which The Finnegans reasonably believes contains a term that is more favorable than those in the Finnegan Note 3, the Company shall notify The Finnegans of such term, and such term, at the option of The Finnegans, shall become a part of the Finnegan Note 3. In addition, The Finnegans received five-year warrants to purchase 242 shares of common stock at a price of $25.00 per share with a fair value of $850 at the date of issuance, and 242 shares of common stock with a value of $1,100; these amounts were recorded as discounts to the Finnegan Note 3. Interest in the amount of $1,200 was accrued on the Finnegan Note 3 during the year ended December 31, 2022. Discounts in the amount of $7,575 were amortized to interest expense during the year ended December 31, 2022, and total discounts in the amount of $1,728 remained outstanding at December 31, 2022. Principal and accrued interest in the amounts $32,353 and $1,200, respectively, were due on the Finnegan Note 3 at December 31, 2022.
During the three and six months ended June 30, 2023, interest in the amount of $1,338 and $2,440, respectively, was accrued on the Finnegan Note 3; principal and accrued interest in the amount of $32,353 and $3,663, respectively, were due on this note at June 30, 2023. This note was in default at June 30, 2023.
Enright Note
On August 4, 2022, the Company issued a 10% Promissory Note in the principal amount of $120,000 to Jack Enright (the “Enright Note”). The Enright Note bears interest at the rate of 10% per annum accrued monthly and has a maturity date that is the earlier of (i) February 3, 2023, or (ii) five business days after the date on which the Company successfully lists its shares of common stock on Nasdaq or NYSE. The purchase price of the Enright Note was $102,000; the amount payable at maturity will be $120,000 plus 10% of that amount plus any accrued and unpaid interest. Following an event of default as defined in the Enright Note, the principal amount shall bear interest for each day until paid at a rate per annum equal to the lesser of the maximum interest permitted by applicable law and 18%. The Enright Note contains a “most favored nations” clause that provides that, so long as the note is outstanding, if the Company issues any new security which Mr. Enright reasonably believes contains a term that is more favorable than those in the Enright Note, the Company shall notify Mr. Enright of such term, and such term, at the option of Mr. Enright, shall become a part of the Enright Note. In addition, Mr. Enright received 984 shares of common stock with a value of $6,317; this amount was recorded as a discount to the Enright Note. Interest in the amount of $4,899 was accrued on the Enright Note during the year ended December 31, 2022. Discounts in the amount of $29,571 were amortized to interest expense during the year ended December 31, 2022, and total discounts in the amount of $6,746 remained outstanding at December 31, 2022. Principal and accrued interest in the amounts $132,000 and $4,899, respectively, were due on the Enright Note at December 31, 2022.
During the three and six months ended June 30, 2023, interest in the amount of $5,460 and $9,953, respectively, was accrued on the Enright Note; principal and accrued interest in the amount of $132,000 and $14,920, respectively, were due on this note at June 30, 2023. This note was in default at June 30, 2023.
Mitchell Note
On September 2, 2022, the Company issued a 10% Promissory Note in the principal amount of $71,000 to John Mitchell (the “Mitchell Note”). The Mitchell Note bears interest at the rate of 10% per annum accrued monthly and has a maturity date that is the earlier of (i) November 30, 2022, or (ii) five business days after the date on which the Company successfully lists its shares of common stock on Nasdaq or NYSE. The purchase price of the Mitchell Note was $60,350; the amount payable at maturity will be $71,000 plus 10% of that amount plus any accrued and unpaid interest. Following an event of default as defined in the Mitchell Note, the principal amount shall bear interest for each day until paid at a rate per annum equal to the lesser of the maximum interest permitted by applicable law and 18%. The Mitchell Note entered default status on December 1, 2022, and the interest rate increased to 18%. The Mitchell Note contains a “most favored nations” clause that provides that, so long as the note is outstanding, if the Company issues any new security which Mr. Mitchell reasonably believes contains a term that is more favorable than those in the Mitchell Note, the Company shall notify Mr. Mitchell of such term, and such term, at the option of Mr. Mitchell, shall become a part of the Mitchell Note. In addition, Mr. Mitchell received 582 shares of common stock with a value of $3,124; this amount was recorded as a discount to the Mitchell Note. Interest in the amount of $2,817 was accrued on the Mitchell Note during the year ended December 31, 2022. Discounts in the amount of $20,874 were amortized to interest expense during the year ended December 31, 2022, and total discounts in the amount of $0 remained outstanding at December 31, 2022. Principal and accrued interest in the amounts $78,100 and $2,817, respectively, were due on the Mitchell Note at December 31, 2022. The Mitchell Note was in default at December 31, 2022.
During the three and six months ended June 30, 2023, interest in the amount of $3,230 and $6,425, respectively, was accrued on the Mitchell Note; principal and accrued interest in the amount of $78,100 and $9,281, respectively, were due on this note at June 30, 2023. This note was in default at June 30, 2023.
Lightmas Note
On September 2, 2022, the Company issued a 10% Promissory Note in the principal amount of $60,000 to Frank Lightmas (the “Lightmas Note”). The Lightmas Note bears interest at the rate of 10% per annum accrued monthly and has a maturity date that is the earlier of (i) November 30, 2022, or (ii) five business days after the date on which the Company successfully lists its shares of common stock on Nasdaq or NYSE. The purchase price of the Lightmas Note was $51,000; the amount payable at maturity will be $60,000 plus 10% of that amount plus any accrued and unpaid interest. Following an event of default as defined in the Lightmas Note, the principal amount shall bear interest for each day until paid at a rate per annum equal to the lesser of the maximum interest permitted by applicable law and 18%. The Lightmas Note entered default status on December 1, 2022, and the interest rate increased to 18%. The Lightmas Note contains a “most favored nations” clause that provides that, so long as the note is outstanding, if the Company issues any new security which Mr. Lightmas reasonably believes contains a term that is more favorable than those in the Lightmas Note, the Company shall notify Mr. Lightmas of such term, and such term, at the option of Mr. Lightmas, shall become a part of the Lightmas Note. In addition, Mr. Lightmas received 492 shares of common stock with a value of $2,640; this amount was recorded as a discount to the Lightmas Note. Interest in the amount of $2,380 was accrued on the Lightmas Note during the year ended December 31, 2022. Discounts in the amount of $17,640 were amortized to interest expense during the year ended December 31, 2022, and total discounts in the amount of $0 remained outstanding at December 31, 2022. Principal and accrued interest in the amounts $66,000 and $2,380, respectively, were due on the Lightmas Note at December 31, 2022.
During the three and six months ended June 30, 2023, interest in the amount of $2,730 and $5,430, respectively, was accrued on the Lightmas Note; principal and accrued interest in the amount of $66,000 and $7,843, respectively, were due on this note at June 30, 2023. This note was in default at June 30, 2023.
Lewis Note
On September 2, 2022, the Company issued a 10% Promissory Note in the principal amount of $30,000 to Lisa Lewis (the “Lewis Note”). The Lewis Note bears interest at the rate of 10% per annum accrued monthly and has a maturity date that is the earlier of (i) November 30, 2022, or (ii) five business days after the date on which the Company successfully lists its shares of common stock on Nasdaq or NYSE. The purchase price of the Lewis Note was $25,500; the amount payable at maturity will be $30,000 plus 10% of that amount plus any accrued and unpaid interest. Following an event of default as defined in the Lewis Note, the principal amount shall bear interest for each day until paid at a rate per annum equal to the lesser of the maximum interest permitted by applicable law and 18%. The Lewis Note entered default status on December 1, 2022, and the interest rate increased to 18%. The Lewis Note contains a “most favored nations” clause that provides that, so long as the note is outstanding, if the Company issues any new security which Ms. Lewis reasonably believes contains a term that is more favorable than those in the Lewis Note, the Company shall notify Ms. Lewis of such term, and such term, at the option of Ms. Lewis, shall become a part of the Lewis Note. In addition, Ms. Lewis received 246 shares of common stock with a value of $1,320; this amount was recorded as a discount to the Lewis Note. Interest in the amount of $1,190 was accrued on the Lewis Note during the year ended December 31, 2022. Discounts in the amount of $8,820 were amortized to interest expense during the year ended December 31, 2022, and total discounts in the amount of $0 remained outstanding at December 31, 2022. Principal and accrued interest in the amounts $33,000 and $1,190, respectively, were due on the Lewis Note at December 31, 2022.
During the three and six months ended June 30, 2023, interest in the amount of $1,365 and $2,715 was accrued on the Lewis Note; principal and accrued interest in the amount of $33,000 and $3,922, respectively, were due on this note at June 30, 2023. This note was in default at June 30, 2023.
Goff Note
On September 2, 2022, the Company issued a 10% Promissory Note in the principal amount of $30,000 to Sharon Goff (the “Goff Note”). The Goff Note bears interest at the rate of 10% per annum accrued monthly and has a maturity date that is the earlier of (i) November 30, 2022, or (ii) five business days after the date on which the Company successfully lists its shares of common stock on Nasdaq or NYSE. The purchase price of the Goff Note was $25,500; the amount payable at maturity will be $30,000 plus 10% of that amount plus any accrued and unpaid interest. Following an event of default as defined in the Goff Note, the principal amount shall bear interest for each day until paid at a rate per annum equal to the lesser of the maximum interest permitted by applicable law and 18%. The Goff Note entered default status on December 1, 2022, and the interest rate increased to 18%. The Goff Note contains a “most favored nations” clause that provides that, so long as the note is outstanding, if the Company issues any new security which Ms. Goff reasonably believes contains a term that is more favorable than those in the Goff Note, the Company shall notify Ms. Goff of such term, and such term, at the option of Ms. Goff, shall become a part of the Goff Note. In addition, Ms. Goff received 246 shares of common stock with a value of $1,320; this amount was recorded as a discount to the Goff Note. Interest in the amount of $1,190 was accrued on the Goff Note during the year ended December 31, 2022. Discounts in the amount of $8,820 were amortized to interest expense during the year ended December 31, 2022, and total discounts in the amount of $0 remained outstanding at December 31, 2022. Principal and accrued interest in the amounts $33,000 and $1,190, respectively, were due on the Goff Note at December 31, 2022.
During the three and six months ended June 30, 2023, interest in the amount of $1,365 and $2,715, respectively, was accrued on the Goff Note; principal and accrued interest in the amount of $30,000 and $3,922, respectively, were due on this note at June 30, 2023. This note was in default at June 30, 2023.
Hagan Note
On September 2, 2022, the Company issued a 10% Promissory Note in the principal amount of $100,000 to Cliff Hagan (the “Hagan Note”). The Hagan Note bears interest at the rate of 10% per annum accrued monthly and has a maturity date that is the earlier of (i) December 10, 2022, or (ii) five business days after the date on which the Company successfully lists its shares of common stock on Nasdaq or NYSE. The purchase price of the Hagan Note was $85,000; the amount payable at maturity will be $100,000 plus 10% of that amount plus any accrued and unpaid interest. Following an event of default as defined in the Hagan Note, the principal amount shall bear interest for each day until paid at a rate per annum equal to the lesser of the maximum interest permitted by applicable law and 18%. The Hagan Note entered default status on December 11, 2022, and the interest rate increased to 18%. The Hagan Note contains a “most favored nations” clause that provides that, so long as the note is outstanding, if the Company issues any new security which Mr. Hagan reasonably believes contains a term that is more favorable than those in the Hagan Note, the Company shall notify Mr. Hagan of such term, and such term, at the option of Mr. Hagan, shall become a part of the Hagan Note. In addition, Mr. Hagan received 820 shares of common stock with a value of $4,715; this amount was recorded as a discount to the Hagan Note. Interest in the amount of $3,556 was accrued on the Hagan Note during the year ended December 31, 2022. Discounts in the amount of $29,715 were amortized to interest expense during the year ended December 31, 2022, and total discounts in the amount of $0 remained outstanding at December 31, 2022. Principal and accrued interest in the amounts $110,000 and $3,556, respectively, were due on the Hagan Note at December 31, 2022.
During the three and six months ended June 30, 2023, interest in the amount of $4,550 and $9,050, respectively, was accrued on the Hagan Note; principal and accrued interest in the amount of $110,000 and $12,656, respectively, were due on this note at June 30, 2023. This note was in default at June 30, 2023.
Darling Note
On September 14, 2022, the Company issued a 10% Promissory Note in the principal amount of $200,000 to Darling Capital, LLC (“Darling”), (the “Darling Note”). The Darling Note bears interest at the rate of 10% per annum accrued monthly and has a maturity date that is the earlier of (i) December 15, 2022, or (ii) five business days after the date on which the Company successfully lists its shares of common stock on Nasdaq or NYSE. The purchase price of the Darling Note was $170,000; the amount payable at maturity will be $200,000 plus 10% of that amount plus any accrued and unpaid interest. Following an event of default as defined in the Darling Note, the principal amount shall bear interest for each day until paid at a rate per annum equal to the lesser of the maximum interest permitted by applicable law and 18%. The Darling Note entered default status on December 15, 2022, and the interest rate increased to 18%. The Darling Note contains a “most favored nations” clause that provides that, so long as the note is outstanding, if the Company issues any new security which Darling reasonably believes contains a term that is more favorable than those in the Darling Note, the Company shall notify Darling of such term, and such term, at the option of Darling shall become a part of the Darling Note. In addition, Darling received 1,640 shares of common stock with a value of $10,824; this amount was recorded as a discount to the Darling Note. Interest in the amount of $6,619 was accrued on the Darling Note during the year ended December 31, 2022. Discounts in the amount of $60,824 were amortized to interest expense during the year ended December 31, 2022, and total discounts in the amount of $0 remained outstanding at December 31, 2022. Principal and accrued interest in the amounts $220,000 and $6,619, respectively, were due on the Darling Note at December 31, 2022.
During the three and six months ended June 30, 2023, interest in the amount of $1,100 and $10,100, respectively, was accrued on the Darling Note. On April 11, 2023, an equity investment incentive in the amount of $153,927 representing 65% of the total amount due under the Darling Note, along with original principal of $220,000 and accrued interest of $16,811 (a total of $390,738) was converted to 391 shares of the Company’s Series F Preferred Stock. Other than the equity investment incentive of $153,927, there was no gain or loss recognized on this transaction as the Series F Preferred Stock was issued at its face value of $1,000 per share. At June 30, 2023, there were no amounts due under the Darling Note.
Leath Note
On September 15, 2022, the Company issued a 10% Promissory Note in the principal amount of $50,000 to Mack Leath (the “Leath Note”). The Leath Note bears interest at the rate of 10% per annum accrued monthly and has a maturity date that is the earlier of (i) December 15, 2022, or (ii) five business days after the date on which the Company successfully lists its shares of common stock on Nasdaq or NYSE. The purchase price of the Leath Note was $42,500; the amount payable at maturity will be $55,000 plus 10% of that amount plus any accrued and unpaid interest. Following an event of default as defined in the Leath Note, the principal amount shall bear interest for each day until paid at a rate per annum equal to the lesser of the maximum interest permitted by applicable law and 18%. The Leath Note entered default status on December 16, 2022, and the interest rate increased to 18%. The Leath Note contains a “most favored nations” clause that provides that, so long as the note is outstanding, if the Company issues any new security which Mr. Leath reasonably believes contains a term that is more favorable than those in the Leath Note, the Company shall notify Mr. Leath of such term, and such term, at the option of Mr. Leath, shall become a part of the Leath Note. In addition, Mr. Leath received 410 shares of common stock with a value of $2,868; this amount was recorded as a discount to the Leath Note. Interest in the amount of $1,641 was accrued on the Leath Note during the year ended December 31, 2022. Discounts in the amount of $15,368 were amortized to interest expense during the year ended December 31, 2022, and total discounts in the amount of $0 remained outstanding at December 31, 2022. Principal and accrued interest in the amounts $55,000 and $1,641, respectively, were due on the Leath Note at December 31, 2022.
During the three and six months ended June 30, 2023, interest in the amount of $2,275 and $4,525 was accrued on the Leath Note; principal and accrued interest in the amount of $55,000 and $6,189, respectively, were due on this note at June 30, 2023. This note was in default at June 30, 2023.
Cavalry Note
On October 5, 2022, the Company issued a 10% Promissory Note in the principal amount of $500,000 to the Cavalry Fund LLP (“Cavalry”), (the “Cavalry Note”) with a due date of December 31, 2022. The Cavalry Note is subject to an exchange agreement (the “Series E Exchange Agreement”) whereby Cavalry will exchange (a) amounts due under the Cavalry Note, (b) 1,000,000 shares of the Company’s Series C Convertible Preferred Stock, and (c) 750,000 shares of the Company’s Series D Convertible Preferred Stock for a number of shares of the Company’s Series E Convertible Preferred Stock equal to 150% of the principal amount of the Cavalry Note plus 150% of the stated value of the Series C and Series D convertible Preferred Stock. See note 12. The Cavalry Note bears interest at the rate of 10% per annum which will accrue from the date of the note only if the Cavalry Note is not converted pursuant to the Series E Exchange Agreement by December 10, 2022. Following an event of default as defined in the Cavalry Note, the principal amount shall bear interest for each day until paid at a rate per annum equal to the lesser of the maximum interest permitted by applicable law and 18%. The Cavalry Note contains a “most favored nations” clause that provides that, so long as the note is outstanding, if the Company issues any new security which Cavalry reasonably believes contains a term that is more favorable than those in the Cavalry Note, the Company shall notify the Cavalry of such term, and such term, at the option of Cavalry, shall become a part of the Cavalry Note. In addition, Cavalry received five-year warrants to purchase 750 shares of common stock at a price equal to the price of any warrant included in an offering in connection with listing at the Nasdaq Global Market. These warrants are not deemed issued at December 31, 2022 because the exercise price was not yet determined. Costs in the amount of $7,500 were also charged to discount on the Cavalry Note. Discounts in the amount of $10,500 were amortized to interest expense during the year ended December 31, 2022, and total discounts in the amount of $0 remained outstanding at December 31, 2022. Principal and accrued interest in the amounts $500,000 and $11,918, respectively, were due on the Cavalry Note at December 31, 2022.
Concurrent with the Cavalry Note, the Company entered into an exchange agreement (the “Cavalry Exchange Agreement”). Pursuant to the Cavalry Exchange Agreement, Cavalry shall exchange (a) 1,000,000 shares of the Company’s Series C Convertible Preferred Stock (b) 750,000 shares of the Company’s Series D Convertible Preferred Stock and (c) amounts owing under the Cavalry Note, for a number of Series E Convertible Preferred Stock (the “Series E Shares”) equal to 150% of the principal amount of the Cavalry Note, plus 150% of the stated value of the Series C Shares and Series D Shares (the “Series E Exchange Value”). No transactions occurred pursuant to the Cavalry Exchange Agreement during the year ended December 31, 2022. See notes 12 and 16.
During the three and six months ended June 30, 2023, interest in the amount of $2,750 and $25,415 was accrued on the Cavalry Note. On April 11, 2023, an equity investment incentive in the amount of $349,266 representing 65% of the total amount due under the Cavalry Note, along with original principal of $500,000 and accrued interest of $37,333 (a total of $886,599) was converted to 887 shares of the Company’s Series F Preferred Stock. Other than the equity investment incentive of $349,266, there was no gain or loss recognized on this transaction as the Series F Preferred Stock was issued at its face value of $1,000 per share. At June 30, 2023, there were no amounts due under the Cavalry Note.
Mercer Note 1
On October 7, 2022, the Company issued a 10% Promissory Note in the principal amount of $300,000 to the Mercer Street Global Opportunity Fund (“Mercer”), (the “Mercer Note 1”) with a due date of December 31, 2022. The Mercer Note 1 is subject to the Series E Exchange Agreement whereby Mercer will exchange (a) amounts due under the Mercer Note 1, (b) 47,619 shares of the Company’s Series C Convertible Preferred Stock, and (c) 750,000 shares of the Company’s Series D Convertible Preferred Stock for a number of shares of the Company’s Series E Convertible Preferred Stock equal to 150% of the principal amount of the Mercer Note 1 plus 150% of the stated value of the Series C and Series D convertible Preferred Stock. See note 12. The Mercer Note 1 bears interest at the rate of 10% per annum which will accrue from the date of the note only if the Mercer Note 1 is not converted pursuant to the Series E Exchange Agreement by December 10, 2022. Following an event of default as defined in the Mercer Note 1, the principal amount shall bear interest for each day until paid at a rate per annum equal to the lesser of the maximum interest permitted by applicable law and 18%. The Mercer Note 1 contains a “most favored nations” clause that provides that, so long as the note is outstanding, if the Company issues any new security which Mercer reasonably believes contains a term that is more favorable than those in the Mercer Note 1, the Company shall notify Mercer of such term, and such term, at the option of Mercer, shall become a part of the Mercer Note 1. In addition, Mercer received five-year warrants to purchase 750 shares of common stock at a price equal to the price of any warrant included in an offering in connection with listing at the Nasdaq Global Market. These warrants are not deemed issued at December 31, 2022 because the exercise price was not yet determined. Interest in the amount of $6,986 was accrued on the Mercer Note 1 during the year ended December 31, 2022. Discounts in the amount of $10,500 were amortized to interest expense during the year ended December 31, 2022, and total discounts in the amount of $0 remained outstanding at December 31, 2022. Principal and accrued interest in the amounts $300,000 and $6,986, respectively, were due on the Mercer Note 1 at December 31, 2022.
Concurrent with the Mercer Note 1, the Company entered into an exchange agreement (the “Mercer Exchange Agreement”). Pursuant to the Mercer Exchange Agreement, Mercer shall exchange (a) 47,619 shares of the Company’s Series C Convertible Preferred Stock, (b) 750,000 shares of the Company’s Series D Convertible Preferred Stock, and (c) amounts owing under the Mercer Note, for a number of Series E Convertible Preferred Stock (the “Series E Shares”) equal to 150% of the principal amount of the Mercer Note, plus 150% of the stated value of the Series C Shares and Series D Shares (the “Series E Exchange Value”). No transactions occurred pursuant to the Cavalry Exchange Agreement during the year ended December 31, 2022. See note 12 and 16.
During the three and six months ended June 30, 2023, interest in the amount of $1,650 and $15,247, respectively, was accrued on the Mercer Note 1. On April 11, 2023, an equity investment incentive in the amount of $209,452 representing 65% of the total amount due under the Mercer Note 1, along with original principal of $300,000 and accrued interest of $22,233 (a total of $531,685) was converted to 531 shares of the Company’s Series F Preferred Stock. Other than the equity investment incentive of $209,452, there was no gain or loss recognized on this transaction as the Series F Preferred Stock was issued at its face value of $1,000 per share. At June 30, 2023, there were no amounts due under the Mercer Note 1.
Pinz Note
On October 10, 2022, the Company issued a 10% Promissory Note in the principal amount of $30,000 to the Pinz Capital Special Opportunities Fund (“Pinz”), (the “Pinz Note”) with a due date of December 31, 2022. The Pinz Note is subject to the Series E Exchange Agreement whereby Pinz will exchange (a) amounts due under the Pinz Note, (b) 100,000 shares of the Company’s Series D Convertible Preferred Stock for a number of shares of the Company’s Series E Convertible Preferred Stock equal to 150% of the principal amount of the Pinz Note plus 150% of the stated value of the Series D convertible Preferred Stock. See note 12. The Pinz Note bears interest at the rate of 10% per annum which will accrue from the date of the note only if the Pinz Note is not converted pursuant to the Series E Exchange Agreement by December 10, 2022. Following an event of default as defined in the Pinz Note, the principal amount shall bear interest for each day until paid at a rate per annum equal to the lesser of the maximum interest permitted by applicable law and 18%. The Pinz Note contains a “most favored nations” clause that provides that, so long as the note is outstanding, if the Company issues any new security which the Pinz Fund LLP reasonably believes contains a term that is more favorable than those in the Pinz Note, the Company shall notify the Pinz Fund LLP of such term, and such term, at the option of the Pinz Fund, LLP, shall become a part of the Pinz Note. In Interest in the amount of $6,986 was accrued on the Pinz Note during the year ended December 31, 2022. Discounts in the amount of $2,100 were amortized to interest expense during the year ended December 31, 2022, and total discounts in the amount of $0 remained outstanding at December 31, 2022. Principal and accrued interest in the amounts $30,000 and $674, respectively, were due on the Pinz Note at December 31, 2022.
Concurrent with the Pinz Note, the Company entered into an exchange agreement (the “Pinz Exchange Agreement”). Pursuant to the Pinz Exchange Agreement, Pinz shall exchange (a) 100,000 shares of the Company’s Series D Convertible Preferred Stock, and (b) amounts owing under the Pinz Note, for a number of Series E Convertible Preferred Stock equal to 150% of the principal amount of the Pinz Note, plus 150% of the stated value of the Series D Shares. No transactions occurred pursuant to the Pinz Exchange Agreement during the year ended December 31, 2022. See note 12 and 16.
During the three and six months ended June 30, 2023, interest in the amount of $1,650 and $15,247, respectively, was accrued on the Pinz Note. On April 11, 2023, an equity investment incentive in the amount of $20,929 representing 65% of the total amount due under the Pinz Note, along with original principal of $30,000 and accrued interest of $2,198 (a total of $53,127) was converted to 54 shares of the Company’s Series F Preferred Stock. Other than the equity investment incentive of $20,929, there was no gain or loss recognized on this transaction as the Series F Preferred Stock was issued at its face value of $1,000 per share. At June 30, 2023, there were no amounts due under the Pinz Note.
Mercer Note 2
On October 24, 2022, the Company issued a 10% Promissory Note in the principal amount of $100,000 to Mercer (the “Mercer Note 2”) with a due date of December 31, 2022. The Mercer Note 2 is subject to the Series E Exchange Agreement whereby Mercer will exchange (a) amounts due under the Mercer Note 2 for a number of shares of the Company’s Series E Convertible Preferred Stock equal to 150% of the principal amount of the Mercer Note 2. See note 122. The Mercer Note 2 bears interest at the rate of 10% per annum which will accrue from the date of the note only if the Mercer Note 2 is not converted pursuant to the Series E Exchange Agreement by December 10, 2022. Following an event of default as defined in the Mercer Note 2, the principal amount shall bear interest for each day until paid at a rate per annum equal to the lesser of the maximum interest permitted by applicable law and 18%. The Mercer Note 2 contains a “most favored nations” clause that provides that, so long as the note is outstanding, if the Company issues any new security which Mercer reasonably believes contains a term that is more favorable than those in the Mercer Note 2, the Company shall notify Mercer of such term, and such term, at the option of Mercer, shall become a part of the Mercer Note 2. In addition, Mercer received five-year warrants to purchase 750 shares of common stock at a price equal to the price of any warrant included in an offering in connection with listing at the Nasdaq Global Market. These warrants are not deemed issued at December 31, 2022 because the exercise price was not yet determined. Interest in the amount of $1,863 was accrued on the Mercer Note 2 during the year ended December 31, 2022. Discounts in the amount of $1,900 were amortized to interest expense during the year ended December 31, 2022, and total discounts in the amount of $0 remained outstanding at December 31, 2022. Principal and accrued interest in the amounts $100,000 and $1,863, respectively, were due on the Mercer Note 2 at December 31, 2022.
During the three and six months ended June 30, 2023, interest in the amount of $550 and $5,076, respectively, was accrued on the Mercer Note 2. On April 11, 2023, an equity investment incentive in the amount of $69,510 representing 65% of the total amount due under the Mercer Note 2, along with original principal of $100,000 and accrued interest of $6,939 (a total of $176,449) was converted to 177 shares of the Company’s Series F Preferred Stock. Other than the equity investment incentive of $69,510, there was no gain or loss recognized on this transaction as the Series F Preferred Stock was issued at its face value of $1,000 per share. At June 30, 2023, there were no amounts due under the Mercer Note 2.
Mercer Note 3
On December 2, 2022, the Company issued a 10% Promissory Note in the principal amount of $125,000 to Mercer (the “Mercer Note 3”) with a due date of May 21, 2023. The Mercer Note 3 is subject to the Series E Exchange Agreement whereby Mercer will exchange amounts due under the Mercer Note 3 for a number of shares of the Company’s Series E Convertible Preferred Stock equal to 150% of the principal amount of the Mercer Note 3. See note 12. The Mercer Note 3 bears interest at the rate of 10% per annum which will accrue from the date of the note only if the Mercer Note 3 is not converted pursuant to the Series E Exchange Agreement by May 10, 2023. Following an event of default as defined in the Mercer Note 3, the principal amount shall bear interest for each day until paid at a rate per annum equal to the lesser of the maximum interest permitted by applicable law and 18%. The Mercer Note 3 contains a “most favored nations” clause that provides that, so long as the note is outstanding, if the Company issues any new security which Mercer reasonably believes contains a term that is more favorable than those in the Mercer Note 3, the Company shall notify Mercer of such term, and such term, at the option of Mercer, shall become a part of the Mercer Note 3. In addition, Mercer received five-year warrants to purchase 750 shares of common stock at a price equal to the price of any warrant included in an offering in connection with listing at the Nasdaq Global Market. These warrants are not deemed issued at December 31, 2022 because the exercise price was not yet. determined. Discounts in the amount of $4,028 were amortized to interest expense during the year ended December 31, 2022, and total discounts in the amount of $20,972 remained outstanding at December 31, 2022. Principal and accrued interest in the amounts $125,000 and $993, respectively, were due on the Mercer Note 3 at December 31, 2022.
During the three and six months ended June 30, 2023, interest in the amount of $382 and $3,521, respectively, was accrued on the Mercer Note 3. Also during the three and six months ended June 30, 2023, discounts in the amount of $12,500 and $20,972, respectively, were amortized to interest expense. On April 11, 2023, an equity investment incentive in the amount of $67,934 representing 65% of the total amount due under the Mercer Note 3, along with original principal of $100,000 and accrued interest of $4,514 (a total of $172,448) was converted to 173 shares of the Company’s Series F Preferred Stock. The premium on the Mercer Note 3 in the amount of $25,000 was forgiven by Mercer, and the Company recognized a gain on forgiveness of debt in the amount of $25,000. Other than the equity investment incentive of $67,934, there was no other gain or loss recognized on this transaction as the Series F Preferred Stock was issued at its face value of $1,000 per share. At June 30, 2023, there were no amounts due under the Mercer Note 3.
These amounts are reflected in the table below:
| |
|
June 30,
2023
|
|
|
December 31,
2022
|
|
|
Notes Payable
|
|
$ |
1,598,765 |
|
|
$ |
5,144,742 |
|
|
Less: Discount
|
|
|
- |
|
|
|
(32,040 |
)
|
|
Notes payable - net of discount
|
|
$ |
1,598,765 |
|
|
$ |
5,112,702 |
|
| |
|
|
|
|
|
|
|
|
|
Current Portion, net of discount
|
|
$ |
1,598,765 |
|
|
$ |
5,112,702 |
|
|
Long-term portion, net of discount
|
|
$ |
- |
|
|
$ |
- |
|
Interest expense on notes payable was $93,881 and $50,321 for the three months ended June 30, 2023 and 2022, respectively; interest expense on notes payable was $343,612 and $86,438 for the six months ended June 30, 2023 and 2022, respectively. Accrued interest on notes payable was $203,007 and $362,094 at June 30, 2023 and December 31, 2022, respectively.
Note 10: Notes Payable – Related Parties
Howe Note 1
On December 30, 2021, we issued a 10% Promissory Note in the principal amount of $1,000,000 in a related party transaction to the Michael C. Howe Living Trust (the “Howe Note 1”). Michael C. Howe is the Chief Executive Officer of the Good Clinic LLC, one of our subsidiaries. The Howe Note 1 bears interest at the rate of 10% interest rate per annum and has a maturity date that is the earlier of (i) November 30, 2022, as extended, or (ii) five (5) business days after the date on which the Company successfully lists its shares of common stock on Nasdaq or NYSE. The purchase price of the Howe Note 1 was $850,000; the amount payable at maturity will be $1,000,000 plus 10% of that amount plus any accrued and unpaid interest. Following an event of default, as defined in the Howe Note 1, the principal amount shall bear interest for each day until paid at a rate per annum equal to the lesser of the maximum interest permitted by applicable law and 18%. The Howe Note 1 entered delinquent status on December 1, 2022, and the interest rate increased to 18%. The Howe Note 1 contains a “most favored nations” clause that provides that, so long as the note is outstanding, if the Company issues any new security, which Mr. Howe reasonably believes contains a term that is more favorable than those in the Howe Note 1, we shall notify Mr. Howe of such term, and such term, at the option of Mr. Howe, shall become a part of the Howe Note 1. In addition, Mr. Howe five-year warrants to purchase 42,000 shares of common stock at a price of $25.00 per share, and five-year warrants to purchase 42,000 shares of common stock at $37.50 per share with an aggregate fair value of $261,568 at the date of issuance, which was recorded as a discount to this note. Interest in the amount of $106,795 was accrued on the Howe Note 1 during the year ended December 31, 2022. Discounts in the amount of $511,568 were amortized to interest expense during the year ended December 31, 2022, and total discounts in the amount of $0 remained outstanding at December 31, 2022. Principal and accrued interest in the amounts $1,100,000 and $106,795, respectively, were due on the Howe Note 1 at December 31, 2022.
During the three and six months ended June 30, 2023, interest in the amount of $45,500 and $92,261, respectively, was accrued on the Howe Note 1; principal and accrued interest in the amount of $1,100,000 and $199,056, respectively, were due on this note at June 30, 2023. This note was in default at June 30, 2023.
Diamond Note 1
On February 24, 2022, the Company issued a 10% Promissory Note in the principal amount of $175,000 in a related party transaction to Lawrence Diamond, our Chief Executive Officer and a member of our Board of Directors (the “Diamond Note 1”). The Diamond Note 1 bears interest at the rate of 10% per annum accrued monthly and has a maturity date that is the earlier of (i) November 30, 2022, as extended, or (ii) five business days after the date on which the Company successfully lists its shares of common stock on Nasdaq or NYSE. The purchase price of the Diamond Note 1 was $148,750; the amount payable at maturity will be $175,000 plus 10% of that amount plus any accrued and unpaid interest. Following an event of default as defined in the Diamond Note 1, the principal amount shall bear interest for each day until paid at a rate per annum equal to the lesser of the maximum interest permitted by applicable law and 18%. The Diamond Note 1 entered default status on December 1, 2022, and the interest rate increased to 18%. The Diamond Note 1 contains a “most favored nations” clause that provides that, so long as the note is outstanding, if the Company issues any new security which Mr. Diamond reasonably believes contains a term that is more favorable than those in the Diamond Note 1, the Company shall notify Mr. Diamond of such term, and such term, at the option of Mr. Diamond, shall become a part of the Diamond Note 2. In addition, Mr. Diamond received five-year warrants to purchase 7,350 shares of common stock at a price of $25.00 per share, and five-year warrants to purchase 7,350 shares of common stock at $37.50 per share with an aggregate fair value of $2,914 at the date of issuance, which was recorded as a discount to this note. Interest in the amount of $16,052 was accrued on the Diamond Note 1 during the year ended December 31, 2022. Discounts in the amount of $46,664 were amortized to interest expense during the year ended December 31, 2022, and total discounts in the amount of $0 remained outstanding at December 31, 2022. Principal and accrued interest in the amounts $192,500 and $16,052, respectively, were due on the Diamond Note 1 at December 31, 2022.
During the three and six months ended June 30, 2023, interest in the amount of $7,962 and $16,061, respectively, was accrued on the Diamond Note 1; principal and accrued interest in the amount of $192,500 and $32,113, respectively, were due on this note at June 30, 2023. This note was in default at June 30, 2023.
Diamond Note 2
On March 18, 2022, the Company issued a 10% Promissory Note in the principal amount of $235,294 in a related party transaction to Lawrence Diamond, our Chief Executive Officer and a member of our Board of Directors (the “Diamond Note 2). The Diamond Note 2 bears interest at the rate of 10% per annum accrued monthly and has a maturity date that is the earlier of (i) November 30, 2022, as extended, or (ii) five business days after the date on which the Company successfully lists its shares of common stock on Nasdaq or NYSE. The purchase price of the Diamond Note 2 was $200,000; the amount payable at maturity will be $235,294 plus 10% of that amount plus any accrued and unpaid interest. Following an event of default as defined in the Diamond Note 2, the principal amount shall bear interest for each day until paid at a rate per annum equal to the lesser of the maximum interest permitted by applicable law and 18%. The Diamond Note 2 entered default status on December 1, 2022, and the interest rate increased to 18%. The Diamond Note 2 contains a “most favored nations” clause that provides that, so long as the note is outstanding, if the Company issues any new security which Mr. Diamond reasonably believes contains a term that is more favorable than those in the Diamond Note 2, the Company shall notify Mr. Diamond of such term, and such term, at the option of Mr. Diamond, shall become a part of the Diamond Note 2. In addition, Mr. Diamond received five-year warrants to purchase 1,930 shares of common stock at a price of $25.00 per share a fair value of $2,213 at the date of issuance, which was recorded as a discount to this note. Interest in the amount of $1,676 was accrued on the Diamond Note 2 during the year ended December 31, 2022. Principal in the amount of $235,294 was paid on the Diamond Note 2 during the year ended December 31, 2022. Discounts in the amount of $61,036 were amortized to interest expense during the year ended December 31, 2022, and total discounts in the amount of $0 remained outstanding at December 31, 2022. Principal and accrued interest in the amounts $23,529 and $1,676, respectively, were due on the Diamond Note 2 at December 31, 2022.
During the three and six months ended June 30, 2023, interest in the amount of $0 was accrued on the Diamond Note 2; principal and accrued interest in the amount of $23,529 and $1,699, respectively, were due on this note at June 30, 2023. This note was in default at June 30, 2023.
Diamond Note 3
On April 27, 2022, the Company issued a 10% Promissory Note in the principal amount of $235,294 in a related party transaction to Lawrence Diamond, our Chief Executive Officer and a member of our Board of Directors (the “Diamond Note 3”). The Diamond Note 3 bears interest at the rate of 10% per annum accrued monthly and has a maturity date that is the earlier of (i) November 30, 2022, as extended, or (ii) five business days after the date on which the Company successfully lists its shares of common stock on Nasdaq or NYSE. The purchase price of the Diamond Note 3 was $200,000; the amount payable at maturity will be $235,294 plus 10% of that amount plus any accrued and unpaid interest. Following an event of default as defined in the Diamond Note 3, the principal amount shall bear interest for each day until paid at a rate per annum equal to the lesser of the maximum interest permitted by applicable law and 18%. The Diamond Note 3 entered default status on December 1, 2022, and the interest rate increased to 18%. The Diamond Note 3 contains a “most favored nations” clause that provides that, so long as the note is outstanding, if the Company issues any new security which Mr. Diamond reasonably believes contains a term that is more favorable than those in the Diamond Note 3, the Company shall notify Mr. Diamond of such term, and such term, at the option of Mr. Diamond, shall become a part of the Diamond Note 3. In addition, Mr. Diamond received five-year warrants to purchase 1,930 shares of common stock at a price of $25.00 per share with a fair value of $8,800 at the date of issuance, and 1,930 shares of common stock with a value of $16,200; these amounts were recorded as discounts on the Diamond Note 3. Interest in the amount of $17,586 was accrued on the Diamond Note 3 during the year ended December 31, 2022. Discounts in the amount of $83,823 were amortized to interest expense during the year ended December 31, 2022, and total discounts in the amount of $0 remained outstanding at December 31, 2022. Principal and accrued interest in the amounts $258,823 and $17,586, respectively, were due on the Diamond Note 3 at December 31, 2022.
During the three and six months ended June 30, 2023, interest in the amount of $10,706 and $21,538, respectively, was accrued on the Diamond Note 3; principal and accrued interest in the amount of $258,823 and $39,124, respectively, were due on this note at June 30, 2023. This note was in default at June 30, 2023.
Diamond Note 4
On May 18, 2022, the Company issued a 10% Promissory Note in the principal amount of $47,059 in a related party transaction to Lawrence Diamond, our Chief Executive Officer and a member of our Board of Directors (the “Diamond Note 4”). The Diamond Note 4 bears interest at the rate of 10% per annum accrued monthly and has a maturity date that is the earlier of (i) November 30, 2022, as extended, or (ii) five business days after the date on which the Company successfully lists its shares of common stock on Nasdaq or NYSE. The purchase price of the Diamond Note 4 was $40,000; the amount payable at maturity will be $47,059 plus 10% of that amount plus any accrued and unpaid interest. Following an event of default as defined in the Diamond Note 4, the principal amount shall bear interest for each day until paid at a rate per annum equal to the lesser of the maximum interest permitted by applicable law and 18%. The Diamond Note 4 entered default status on December 1, 2022, and the interest rate increased to 18%. The Diamond Note 4 contains a “most favored nations” clause that provides that, so long as the note is outstanding, if the Company issues any new security which Mr. Diamond reasonably believes contains a term that is more favorable than those in the Diamond Note 4, the Company shall notify Mr. Diamond of such term, and such term, at the option of Mr. Diamond, shall become a part of the Diamond Note 4. In addition, Mr. Diamond received five-year warrants to purchase 386 shares of common stock at a price of $25.00 per share with a fair value of $2,960 at the date of issuance, and 1,930 shares of common stock with a value of $3,160; these amounts were recorded as discounts on the Diamond Note 4. Interest in the amount of $3,245 was accrued on the Diamond Note 4 during the year ended December 31, 2022. Discounts in the amount of $17,885 were amortized to interest expense during the year ended December 31, 2022, and total discounts in the amount of $0 remained outstanding at December 31, 2022. Principal and accrued interest in the amounts $51,765 and $3,245, respectively, were due on the Diamond Note 4 at December 31, 2022.
During the three and six months ended June 30, 2023, interest in the amount of $2,141 and $4,305 was accrued on the Diamond Note 4; principal and accrued interest in the amount of $51,765 and $7,550, respectively, were due on this note at June 30, 2023. This note was in default at June 30, 2023.
Diamond Note 5
On May 26, 2022, the Company issued a 10% Promissory Note in the principal amount of $58,823 in a related party transaction to Lawrence Diamond, our Chief Executive Officer and a member of our Board of Directors (the “Diamond Note 5”). The Diamond Note 5 bears interest at the rate of 10% per annum accrued monthly and has a maturity date that is the earlier of (i) November 30, 2022, or (ii) five business days after the date on which the Company successfully lists its shares of common stock on Nasdaq or NYSE. The purchase price of the Diamond Note 5 was $50,000; the amount payable at maturity will be $58,823 plus 10% of that amount plus any accrued and unpaid interest. Following an event of default as defined in the Diamond Note 5, the principal amount shall bear interest for each day until paid at a rate per annum equal to the lesser of the maximum interest permitted by applicable law and 18%. The Diamond Note 5 entered default status on December 1, 2022, and the interest rate increased to 18%. The Diamond Note 5 contains a “most favored nations” clause that provides that, so long as the note is outstanding, if the Company issues any new security which Mr. Diamond reasonably believes contains a term that is more favorable than those in the Diamond Note 5, the Company shall notify Mr. Diamond of such term, and such term, at the option of Mr. Diamond, shall become a part of the Diamond Note 5. In addition, Mr. Diamond received five-year warrants to purchase 483 shares of common stock at a price of $25.00 per share with a fair value of $2,500 at the date of issuance, and 483 shares of common stock with a value of $4,050; these amounts were recorded as discounts to the Diamond Note 5. Interest in the amount of $3,929 was accrued on the Diamond Note 5 during the year ended December 31, 2022. Discounts in the amount of $21,256 were amortized to interest expense during the year ended December 31, 2022, and total discounts in the amount of $0 remained outstanding at December 31, 2022. Principal and accrued interest in the amounts $64,705 and $3,929, respectively, were due on the Diamond Note 5 at December 31, 2022.
During the three and six months ended June 30, 2023, interest in the amount of $2,676 and $5,378, respectively, was accrued on the Diamond Note 5; principal and accrued interest in the amount of $64,705 and $9,307, respectively, were due on this note at June 30, 2023. This note was in default at June 30, 2023.
Lindstrom Note 1
On May 26, 2022, the Company issued a 10% Promissory Note in the principal amount of $41,176 in a related party transaction to Jenny Lindstrom, the Company’s Chief Legal Officer (the “Lindstrom Note 1”). The Lindstrom Note 1 bears interest at the rate of 10% per annum accrued monthly and has a maturity date that is the earlier of (i) November 30, 2022, or (ii) five business days after the date on which the Company successfully lists its shares of common stock on Nasdaq or NYSE. The purchase price of the Lindstrom Note 1 was $35,000; the amount payable at maturity will be $41,176 plus 10% of that amount plus any accrued and unpaid interest. Following an event of default as defined in the Lindstrom Note 1, the principal amount shall bear interest for each day until paid at a rate per annum equal to the lesser of the maximum interest permitted by applicable law and 18%. The Lindstrom Note 1 entered default status on December 1, 2022, and the interest rate increased to 18%. The Lindstrom Note 1 contains a “most favored nations” clause that provides that, so long as the note is outstanding, if the Company issues any new security which Ms. Lindstrom reasonably believes contains a term that is more favorable than those in the Lindstrom Note 1, the Company shall notify Ms. Lindstrom of such term, and such term, at the option of Ms. Lindstrom, shall become a part of the Lindstrom Note 1. In addition, Ms. Lindstrom received five-year warrants to purchase 338 shares of common stock at a price of $25.00 per share with a fair value of $1,750 at the date of issuance, and 338 shares of common stock with a value of $2,835; these amounts were recorded as discounts to the Lindstrom Note 1. Interest in the amount of $2,750 was accrued on the Lindstrom Note 1 during the year ended December 31, 2022. Discounts in the amount of $14,879 were amortized to interest expense during the year ended December 31, 2022, and total discounts in the amount of $0 remained outstanding at December 31, 2022. Principal and accrued interest in the amounts $45,294 and $2,750, respectively, were due on the Lindstrom Note 1 at December 31, 2022.
During the three and six months ended June 30, 2023, interest in the amount of $1,874 and $3,765, respectively, was accrued on the Lindstrom Note; principal and accrued interest in the amount of $45,294 and $6,515, respectively, were due on this note at June 30, 2023. This note was in default at June 30, 2023.
Dobbertin Note
On May 26, 2022, the Company issued a 10% Promissory Note in the principal amount of $17,647 in a related party transaction to Alexander Dobbertin (the “Dobbertin Note”). Mr. Dobbertin is the spouse of Jenny Lindstrom, the Company’s Chief Legal Officer. The Dobbertin Note bears interest at the rate of 10% per annum accrued monthly and has a maturity date that is the earlier of (i) November 30, 2022, or (ii) five business days after the date on which the Company successfully lists its shares of common stock on Nasdaq or NYSE. The purchase price of the Dobbertin Note was $15,000; the amount payable at maturity will be $17,647 plus 10% of that amount plus any accrued and unpaid interest. Following an event of default as defined in the Dobbertin Note, the principal amount shall bear interest for each day until paid at a rate per annum equal to the lesser of the maximum interest permitted by applicable law and 18%. The Dobbertin Note entered default status on December 1, 2022, and the interest rate increased to 18%. The Dobbertin Note contains a “most favored nations” clause that provides that, so long as the note is outstanding, if the Company issues any new security which Mr. Dobbertin reasonably believes contains a term that is more favorable than those in the Dobbertin Note, the Company shall notify Mr. Dobbertin of such term, and such term, at the option of Mr. Dobbertin, shall become a part of the Dobbertin Note. In addition, Mr. Dobbertin received five-year warrants to purchase 145 shares of common stock at a price of $25.00 per share with a fair value of $750 at the date of issuance, and 145 shares of common stock with a value of $1,215; these amounts were recorded as discounts to the Dobbertin Note. Interest in the amount of $1,179 was accrued on the Dobbertin Note during the year ended December 31, 2022. Discounts in the amount of $6,377 were amortized to interest expense during the year ended December 31, 2022, and total discounts in the amount of $0 remained outstanding at December 31, 2022. Principal and accrued interest in the amounts $19,412 and $1,179, respectively, were due on the Dobbertin Note at December 31, 2022.
During the three and six months ended June 30, 2023, interest in the amount of $803 and $1,614 was accrued on the Dobbertin Note; principal and accrued interest in the amount of $19,412 and $2,793, respectively, were due on this note at June 30, 2023. This note was in default at June 30, 2023.
Howe Note 2
On June 9, 2022, the Company issued a 10% Promissory Note in the principal amount of $300,000 in a related party transaction to the Michael C. Howe Living Trust (the “Howe Note 2”). Michael C. Howe is the Chief Executive Officer of the Good Clinic LLC, one of our subsidiaries. The Howe Note 2 bears interest at the rate of 10% per annum accrued monthly and has a maturity date that is the earlier of (i) November 30, 2022, or (ii) five business days after the date on which the Company successfully lists its shares of common stock on Nasdaq or NYSE. The purchase price of the Howe Note 2 was $255,000; the amount payable at maturity will be $300,000 plus 10% of that amount plus any accrued and unpaid interest. Following an event of default as defined in the Howe Note 2, the principal amount shall bear interest for each day until paid at a rate per annum equal to the lesser of the maximum interest permitted by applicable law and 18%. The Howe Note 2 entered default status on December 1, 2022, and the interest rate increased to 18%. The Howe Note 2 contains a “most favored nations” clause that provides that, so long as the note is outstanding, if the Company issues any new security which Mr. Howe reasonably believes contains a term that is more favorable than those in the Howe Note 2, the Company shall notify Mr. Howe of such term, and such term, at the option of Mr. Howe, shall become a part of the Howe Note 2. In addition, Mr. Howe received five-year warrants to purchase 2,460 shares of common stock at a price of $25.00 per share with a fair value of $10,965 at the date of issuance, and 2,460 shares of common stock with a value of $22,440; these amounts were recorded as discounts to the Howe Note 2. Interest in the amount of $18,888 was accrued on the Howe Note 2 during the year ended December 31, 2022. Discounts in the amount of $108,405 were amortized to interest expense during the year ended December 31, 2022, and total discounts in the amount of $0 remained outstanding at December 31, 2022. Principal and accrued interest in the amounts $330,000 and $18,888, respectively, were due on the Howe Note 2 at December 31, 2022.
During the three and six months ended June 30, 2023, interest in the amount of $13,650 and $27,412, respectively, was accrued on the Howe Note 2; principal and accrued interest in the amount of $330,000 and $46,300, respectively, were due on this note at June 30, 2023. This note was in default at June 30, 2023.
Howe Note 3
On July 21, 2022, the Company issued a 10% Promissory Note in the principal amount of $300,000 in a related party transaction to the Michael C. Howe Living Trust (the “Howe Note 3”). Michael C. Howe is the Chief Executive Officer of the Good Clinic LLC, one of our subsidiaries. The Howe Note 3 bears interest at the rate of 10% per annum accrued monthly and has a maturity date that is the earlier of (i) November 30, 2022, as extended, or (ii) five business days after the date on which the Company successfully lists its shares of common stock on Nasdaq or NYSE. The purchase price of the Howe Note 3 was $255,000; the amount payable at maturity will be $300,000 plus 10% of that amount plus any accrued and unpaid interest. Following an event of default as defined in the Howe Note 3, the principal amount shall bear interest for each day until paid at a rate per annum equal to the lesser of the maximum interest permitted by applicable law and 18%. The Howe Note 3 entered default status on December 1, 2022, and the interest rate increased to 18%. The Howe Note 3 contains a “most favored nations” clause that provides that, so long as the note is outstanding, if the Company issues any new security which Mr. Howe reasonably believes contains a term that is more favorable than those in the Howe Note 3, the Company shall notify Mr. Howe of such term, and such term, at the option of Mr. Howe, shall become a part of the Howe Note 3. In addition, Mr. Howe received five-year warrants to purchase 2,460 shares of common stock at a price of $25.00 per share with a fair value of $9,945 at the date of issuance, and 2,460 shares of common stock with a value of $12,495; these amounts were recorded as discounts to the Howe Note 3. Interest in the amount of $15,436 was accrued on the Howe Note 3 during the year ended December 31, 2022. Discounts in the amount of $97,440 were amortized to interest expense during the year ended December 31, 2022, and total discounts in the amount of $0 remained outstanding at December 31, 2022. Principal and accrued interest in the amounts $330,000 and $15,436, respectively, were due on the Howe Note 3 at December 31, 2022.
During the three and six months ended June 30, 2023, interest in the amount of $13,650 and $27,364, respectively, was accrued on the Howe Note 3; principal and accrued interest in the amount of $330,000 and $42,800, respectively, were due on this note at June 30, 2023. This note was in default at June 30, 2023.
Iturregui Note 1
On July 21, 2022, the Company issued a 10% Promissory Note in the principal amount of $29,412 in a related party transaction to Juan Carlos Iturregui, a member of the Company’s Board of Directors (the “Iturregui Note 1”). The Iturregui Note 1 bears interest at the rate of 10% per annum accrued monthly and has a maturity date that is the earlier of (i) January 21, 2023, or (ii) five business days after the date on which the Company successfully lists its shares of common stock on Nasdaq or NYSE. The purchase price of the Iturregui Note 1 was $25,000; the amount payable at maturity will be $29,412 plus 10% of that amount plus any accrued and unpaid interest. Following an event of default as defined in the Iturregui Note 1, the principal amount shall bear interest for each day until paid at a rate per annum equal to the lesser of the maximum interest permitted by applicable law and 18%. The Iturregui Note 1 contains a “most favored nations” clause that provides that, so long as the note is outstanding, if the Company issues any new security which Mr. Iturregui reasonably believes contains a term that is more favorable than those in the Iturregui Note 1, the Company shall notify Mr. Iturregui of such term, and such term, at the option of Mr. Iturregui, shall become a part of the Iturregui Note 1. In addition, Mr. Iturregui received five-year warrants to purchase 242 shares of common stock at a price of $25.00 per share with a fair value of $975 at the date of issuance, and 242 shares of common stock with a value of $1,225; these amounts were recorded as discounts to the Iturregui Note 1. Interest in the amount of $1,313 was accrued on the Iturregui Note 1 during the year ended December 31, 2022. Discounts in the amount of $8,464 were amortized to interest expense during the year ended December 31, 2022, and total discounts in the amount of $1,089 remained outstanding at December 31, 2022. Principal and accrued interest in the amounts $32,353 and $1,313, respectively, were due on the Iturregui Note 1 at December 31, 2022.
During the three and six months ended June 2023, interest in the amount of $1,338 and $2,543, respectively, was accrued on the Iturregui Note 1; principal and accrued interest in the amount of $32,353 and $3,856, respectively, were due on this note at June 30, 2023. This note was in default at June 30, 2023.
Howe Note 4
On August 18, 2022, the Company issued a 10% Promissory Note in the principal amount of $200,000 in a related party transaction to the Michael C. Howe Living Trust (the “Howe Note 4”). Michael C. Howe is the Chief Executive Officer of the Good Clinic LLC, one of our subsidiaries. The Howe Note 4 bears interest at the rate of 10% per annum accrued monthly and has a maturity date that is the earlier of (i) November 30, 2022, or (ii) five business days after the date on which the Company successfully lists its shares of common stock on Nasdaq or NYSE. The purchase price of the Howe Note 4 was $170,000; the amount payable at maturity will be $200,000 plus 10% of that amount plus any accrued and unpaid interest. Following an event of default as defined in the Howe Note 4, the principal amount shall bear interest for each day until paid at a rate per annum equal to the lesser of the maximum interest permitted by applicable law and 18%. The Howe Note 4 entered default status on December 1, 2022, and the interest rate increased to 18%. The Howe Note 4 contains a “most favored nations” clause that provides that, so long as the note is outstanding, if the Company issues any new security which Mr. Howe reasonably believes contains a term that is more favorable than those in the Howe Note 4, the Company shall notify Mr. Howe of such term, and such term, at the option of Mr. Howe, shall become a part of the Howe Note 4. In addition, Mr. Howe received 1,640 shares of common stock with a value of $10,775; this amount was recorded as a discount to the Howe Note 4. Interest in the amount of $8,756 was accrued on the Howe Note 4 during the year ended December 31, 2022. Discounts in the amount of $60,775 were amortized to interest expense during the year ended December 31, 2022, and total discounts in the amount of $0 remained outstanding at December 31, 2022. Principal and accrued interest in the amounts $220,000 and $8,756, respectively, were due on the Howe Note 4 at December 31, 2022.
During the three and six months ended June 30, 2023, interest in the amount of $9,100 and $18,777, respectively, was accrued on the Howe Note 4; principal and accrued interest in the amount of $220,000 and $27,533, respectively, were due on this note at June 30, 2023. This note was in default at June 30, 2023.
November 29, 2022 Notes
On November 29, 2022, the Company issued seven identical promissory notes (the “November 29 Notes”) in related party transactions to the following individuals: (1) Thomas Brodmerkel, the Company’s CFO and Board Member; (2) Lawrence Diamond, the Company’s Chief Executive Officer and Board Member; (3) Sheila Schweitzer, Board Member; (4) Faraz Naqvi, a former Board Member; (5) Juan Carlos Iturregui, Board Member; (6) Jenny Lindstrom, the Company’s former Vice President and Chief Legal Officer; and (7) Michael C. Howe, Chief Executive Officer of The Good Clinic, one of our subsidiaries (collectively, the “November 29 Lenders”).
The November 29 notes have due dates of May 28, 2023. The November 29 Notes are subject to the Series E Exchange Agreement whereby each of the November 29 Lenders will exchange (a) amounts due under the November 29 Notes for a number of shares of the Company’s Series E Convertible Preferred Stock equal to 150% of the principal amount of each November 29 Note. See note 12. The November 29 Notes bear interest at the rate of 10% per annum which will accrue from the date of the note only if the November 29 Notes are not converted pursuant to the Series E Exchange Agreement by May 10, 2023. Following an event of default as defined in the November 29 Notes, the principal amount shall bear interest for each day until paid at a rate per annum equal to the lesser of the maximum interest permitted by applicable law and 18%. The November 29 Notes contain a “most favored nations” clause that provides that, so long as the note is outstanding, if the Company issues any new security which November 29 Lender reasonably believes contains a term that is more favorable than those in the November 29 Note, the Company shall notify the November 29 Lenders of such term, and such term, at the option of the November 29 Lenders, shall become a part of the November 29 Note. In addition, each of the November 29 Lenders will receive five-year warrants to purchase 750 shares of the Company’s common stock at a price equal to the price of any warrant included in an offering in connection with listing at the Nasdaq Global Market. These warrants are not deemed issued at December 31, 2022 because the exercise price was not yet determined. Discounts in the amount of $667 were amortized to interest expense for each of the November 29 Notes during the year ended December 31, 2022, and discounts in the amount of $3,083 remained outstanding for each of the November 29 Notes at December 31, 2022. Principal and accrued interest in the amounts $18,750 and $164, respectively, were due on each of the seven November 29 Note at December 31, 2022.
Concurrent with the November 29 Notes, the Company entered into separate exchange agreements (the “November 29 Notes Exchange Agreements”). Pursuant to the November 29 Notes Exchange Agreements, amounts due under the November 29 Notes will be exchanged for a number Series E Convertible Preferred Stock equal to 150% of the principal amount of the Notes. No transactions occurred pursuant to the November 29 Notes Exchange Agreements during the year ended December 31, 2022.
During the three and six months ended June 30, 2023, interest in the amount of $612 and $1,083, respectively, was accrued on each of the November 29 Notes; principal and accrued interest in the amount of $18,750 and $1,247, respectively, were due on each of these notes at June 30, 2023. These notes were in default at June 30, 2023.
These amounts are reflected in the table below:
| |
|
June 30,
2023
|
|
|
December 31,
2022
|
|
|
Notes Payable
|
|
$ |
2,799,632 |
|
|
$ |
2,799,632 |
|
|
Less: Discount
|
|
$ |
- |
|
|
$ |
(22,670 |
)
|
|
Notes payable – net of discounts
|
|
$ |
2,799,632 |
|
|
$ |
2,776,962 |
|
| |
|
|
|
|
|
|
|
|
|
Current Portion, net of discount
|
|
$ |
2,799,632 |
|
|
$ |
2,776,962 |
|
|
Long-term portion, net of discount
|
|
$ |
- |
|
|
$ |
- |
|
Interest expense on notes payable – related parties was $113,684 and $37,667 for the three months ended June 30, 2023 and 2022, respectively; interest expense on notes payable – related parties was $228,622 and $64,841 for the six months ended June 30, 2023 and 2022, respectively. Accrued interest on notes payable – related parties was $427,375 and $198,753 at June 30, 2023 and December 31, 2022, respectively.
Note 11: Derivative Liabilities
Certain of the Company’s convertible notes and warrants contain features that create derivative liabilities. The pricing model the Company uses for determining fair value of its derivatives is the Lattice Model. Valuations derived from this model are subject to ongoing internal and external verification and review. The model uses market-sourced inputs such as interest rates and stock price volatilities. Selection of these inputs involves management’s judgment and may impact net income. The derivative components of these notes are valued at issuance, at conversion, at restructuring, and at each period end.
Derivative liability activity for the for the periods ended June 30, 2023, December 31, 2022 and 2021 is summarized in the table below:
|
December 31, 2020
|
|
$ |
807,683 |
|
|
Settled upon conversion or exercise
|
|
|
(1,302,138 |
)
|
|
Loss on revaluation
|
|
|
494,455 |
|
|
December 31, 2021
|
|
$ |
- |
|
|
True-up features issued
|
|
|
192,375 |
|
|
Settled upon conversion or exercise
|
|
|
(310,641 |
)
|
|
Loss on revaluation
|
|
|
687,178 |
|
|
December 31, 2022
|
|
$ |
568,912 |
|
|
Settled upon conversion or exercise
|
|
|
(501,740 |
)
|
|
Loss on revaluation
|
|
|
71,040 |
|
|
June 30, 2023
|
|
$ |
138,212 |
|
The Company uses a Monte Carlo model to value certain features of its notes payable that create derivative liabilities. The following table summarizes the assumptions for the valuations:
| |
|
December 31,
|
|
| |
|
2022
|
|
|
Volatility
|
|
|
95.1% to 123.2 |
% |
|
Stock Price
|
|
$ |
1.06 to 3.50 |
|
|
Risk-free interest rates
|
|
|
4.35% to 4.37 |
% |
|
Term (years)
|
|
|
0.73 to 0.86 |
|
| |
|
June 30,
|
|
| |
|
2023
|
|
|
Volatility
|
|
|
159.6% to 172.6 |
% |
|
Stock Price
|
|
$ |
1.24 to 1.44 |
|
|
Risk-free interest rates
|
|
|
4.35 to 5.05 |
% |
|
Term (years)
|
|
|
0.36 to 0.61 |
|
Certain of our notes payable contain a commitment fee obligation with a true-up feature. The following assumptions were used for the valuation of the derivative liability associated with this obligation:
|
|
●
|
The stock price would fluctuate with the Company projected volatility.
|
|
|
●
|
The projected volatility curve from an annualized analysis for each valuation date was based on the historical volatility of the Company and the term remaining for the True-Up obligation.
|
|
|
●
|
The Company expected the note would be repaid 90% of the time by the maturity date, at which point the Company would redeem the 1,000,000 redeemable commitment fee shares for $1.
|
|
|
●
|
In the event the Company did not repay the note in time, the shareholders would sell their shares subject to volume restrictions.
|
|
|
●
|
Discount rates were based on risk free rates in effect based on the remaining term. 50,000 simulations were run for each Monte Carlo simulation.
|
Note 12: Stockholders’ Equity (Deficit)
Common Stock
The Company has authorized 500,000,000 shares of common stock, par value $0.01; 5,138,575 shares were issued and outstanding on June 30, 2023.
Common Stock Transactions During the Six Months Ended June 30, 2023
On January 23, 2023, the Company issued 150,000 shares of common stock at the market price of $3.45 per share to a service provider. The aggregate value of $517,500 was charged to operations during the six months ended June 30, 2023.
On February 21, 2023, the Company issued 150,000 shares of common stock at the market price of $2.53 per share to a service provider. The aggregate value of $379,500 was charged to operations during the six months ended June 30, 2023.
During the six months ended June 30, 2023, GS Capital converted principal and accrued interest in a convertible note payable into shares of common stock as follows: On February 14, 2023, principal of $15,000 and accrued interest of $1,632 were converted at a price of $1.74 per share into 9,846 shares of common stock; on February 28, 2023, principal of $17,777 and accrued interest of $2,057 were converted at a price of $1.50 per share into 13,555 shares of common stock; on March 9, 2023, principal of $20,000 and accrued interest of $2,399 were converted at a price of $1.50 per share into 15,265 shares of common stock; and on March 28, 2023, principal of $20,000 and accrued interest of $2,581 were converted at a price of $1.25 per share into 18,472 shares of common stock. These conversions were made pursuant to the terms of the convertible note agreement and no gain or loss was recognized on these transactions.
On March 31, 2023, the Company issued a total of 8,063 shares of common stock for accrued dividends on its Series X Preferred Stock. Of this amount, a total of 1,066 shares were issued to officers and directors, 4,160 were issued to a related party shareholder, and 2,837 were issued to non-related parties.
On April 4, 2023, the Company issued 2,952 shares of common stock to a consultant at a price of $1.29 per share as a commission on funds previously raised. The Company recorded a gain in the amount of $33,092 on this transaction.
On April 4, 2023, the Company issued 94,738 shares of common stock to GS Capital at an average price of pursuant to a make-whole agreement entered into in connection with the GS Capital Warrants. See note 9. A gain in the amount of $21,506 was recorded on the settlement of this derivative liability. See note 11.
On May 5, 2023, the Company issued 2,552 shares of common stock to a vendor at a price of $0.85 per share, and on May 9, 2023, the Company issued 19,622 shares of common stock at a price of $0.85 per share to the Michael C. Howe Living Trust (the “Howe Trust”), an entity controlled by a related party. These shares were issued in satisfaction of a vendor dispute. The shares issued to the Howe Trust were reimbursement for shares previously issued to the vendor by the Howe Trust with regard to this dispute. There was no gain or loss recorded on these transactions.
On June 29, 2023, the Company issued a total of 20,212 shares of common stock for accrued dividends on its Series X Preferred Stock.
Of this amount, a total of 2,673 shares were issued to officers and directors, 10,426 were issued to a related party shareholder, and 7,113 were issued to non-related parties.
Effective June 30, 2023, the Company issued 2,926 shares of common stock at a price of $12.50 to a previous board member for the conversion of accounts payable in the amount of $36,575. These shares had been carried on the Company balance sheet as Common Stock Subscribed.
Common Stock Transactions During the Six Months Ended June 30, 2022
On January 12, 2022, the Company entered into a settlement agreement with an ex-employee. Pursuant to the terms of this agreement, the Company agreed to pay the amount of $19,032 for accrued salary, and the employee returned to the Company for cancellation 8,000 shares of common stock previously issued as compensation. These shares were valued at par value of $0.01 or a total value of $4,000; the Company recorded a gain on cancellation of these shares in the amount of $15,032.
The Company entered into a debt-for-equity exchange agreement with Gardner Builders Holdings, LLC (“Gardner”) on January 7, 2022 (the “Debt for Equity Agreement”). Pursuant to the Debt for Equity Agreement, the Company issued shares of restricted common stock to Gardner in exchange for the Company Debt Obligations, as defined below.
The Agreement settled for certain accounts payable amounts owed by the Company to the Creditor (the “Accounts Payable Amount”) as well as upcoming amounts that will become due between the date of the Agreement and April 1, 2022. The Agreement also settled accrued interest and penalties on the amounts due through January 5, 2022, as well as future interest payments on amounts to be accrued in the first quarter of 2022 (collectively, the “Additional Costs”, and combined with the Accounts Payable Amount, the “Company Debt Obligations”). The Accounts Payable Amount was $500,000, the Additional Costs were $294,912 and the conversion price was $12.50. As a result, 63,593 Restricted Shares were authorized to be issued. The Company’s Board of Directors approved the Agreement on January 5, 2022.
On March 22, 2022 and March 31, 2022, the Company issued an aggregate 30,834 shares of common stock as waiver fees to holders of the Series C and Series D Preferred Stock for their waivers of certain covenants as set forth and defined in the Series C and Series C Certificates of Designations. The Company valued these shares at their contractual price of $12.50 per share and recorded the amount of $385,431 as waiver fees during the three months ended March 31, 2022. The Company recorded an aggregate gain upon issuance of these shares in the amount of $198,273 based on the market price of the Company’s common stock on the date of issuance.
On March 31, 2022, the Company issued 34,400 Commitment Fee Shares to AJB Capital Investors, LLC; see note 8. The Company utilized an outside valuation consultant to value the commitment fee shares, the True-Up Provision, and warrants. A Monte Carlo model was used to value the warrants and call features, and a probability weighted expected return model was used to value the True-Up Provision. The contractual price of the common stock $12.50 per share; valuation purposes, the common stock was valued at the market price on the date of the transaction of $6.14 per share. The derivative liability was valued at $106,608 on the date of the transaction. The discount on the notes due to the Commitment Fee Shares and warrants was valued at $349,914. The Company recorded the amount of $226,106 to additional paid-in capital pursuant to this transaction.
On March 31, 2022, the Company issued 7,647 shares of common stock at a price of $12.50 per share which were previously subscribed for the conversion of accounts payable in the amount of $95,558.
On April 27, 2022, the Company issued 14,400 shares of stock to Cavalry Fund 1 LP at a price of $6.35 per share for a total value of $91,440 as compensation for the waiver of certain covenants as set forth in the Series C Certificate of Designation. The Company recorded a gain in the amount of $88,560 on this transaction.
On April 27, 2022, the Company issued 1,929 shares of common stock with a contract price of $12.50 per share or $24,118 and a grant date market value of $8.00 or $15,434 to Larry Diamond, its Chief Executive as commitment shares as set forth and defined in Diamond Note 3. The Company recorded these shares at their relative fair value of the components of Diamond Note 3, or $16,200, and recorded a loss in the amount of $765 on this transaction. The Company also issued five-year warrants to purchase 1,929 shares of common stock at a price of $12.50 to Mr. Diamond pursuant to Diamond Note 3.
On May 1, 2022, the Company issued 15,000 shares of common stock to a service provider at a price of $6.88 per share.
On May 10, 2022, the Company entered into a securities purchase agreement with Kishon Investments, LLC with respect to the sale and issuance of: (i) an initial commitment fee in the amount of $159,259 in the form of 12,741 shares of the Company’s common stock, (ii) promissory note in the principal amount of $277,777 due on November 10, 2022, and (iii) warrants to purchase up to 5,556 shares of the common stock. The note and warrants were issued on May 10, 2022 and were held in escrow pending effectiveness of the Purchase Agreement. Pursuant to the terms of the purchase agreement, the initial shares were issued at a value of $159,259, the note was issued in the principal amount of $277,777 for a purchase price of $250,000, resulting in the original issue discount of $27,777; and the warrants were issued, with an initial exercise price of $12.50 per share, subject to adjustment.
On May 18, 2022, the Company issued 386 shares of common stock to Larry Diamond, its Chief Executive Officer at a contractual price of $12.50 per share and a market price at issuance date of $7.585 per share as commitment shares as set forth and defined in Diamond Note 4. The Company recorded these shares at their relative fair value of the components of Diamond Note 4, or $3,160 and recorded a loss in the amount of $249 on this transaction. The Company also issued five-year warrants to purchase 386 shares of common stock at a price of $12.50 to Mr. Diamond pursuant to Diamond Note 4.
On May 23, 2022, the Company issued 386 shares of common stock to Jessica Finnegan at a contractual price of $12.50 per share and a market price at issuance date of $8.97 per share as commitment shares as set forth and defined in Finnegan Note 1. The Company recorded these shares at their relative fair value of the components of Finnegan Note 1, or $3,240, and recorded a gain in the amount of $222 on this transaction. The Company also issued five-year warrants to purchase 386 shares of common stock at a price of $12.50 to Ms. Finnegan pursuant to Finnegan Note 1.
On May 26, 2022, the Company issued 1,688 shares of common stock to the May 26 Lenders at a contractual price of $12.50 per share and a market price at issuance date of $7.585 per share as commitment shares as set forth and defined in the May 26, 2022 Notes. The Company recorded these shares at their relative fair value of the components of the May 26 Note, or $14,175, and recorded a loss in the amount of $1,369 on these transactions. The Company also issued five-year warrants to purchase 1,688 shares of common stock at a price of $25.00 to the May 26 Lenders pursuant to the May 26, 2022.
On June 7, 2022, the Company issued 8,103 shares of common stock at a price of $12.50 per share to investors for accumulated dividends on Series X Preferred Stock. See Note 12.
On June 9, 2022, the Company issued 7,284 shares of common stock to the June 9 Lenders at a contractual price of $12.50 per share and a market price at issuance date of $7,425 per share as commitment shares as set forth and defined in the June 9 Notes. The Company recorded these shares at the relative fair value of the components of June 9 Notes, or $66,400, and recorded an aggregate loss in the amount of $9,356 on these transactions. The Company also issued five-year warrants to purchase 7,284 shares of common stock at a price of $25.00 to the May 26 Lenders pursuant to the June 9 notes.
On June 22, 2022, the Company issued 4,824 shares of common stock at fair value of $10.45 per share to Dragon Dynamic at a fair value of $10.45 per share as a commitment fee.
On June 22, 2022, the Company issued 12,741 shares of common stock at fair value of $10.45 per share to GS Capital at a fair value of $10.45 per share as a commitment fee.
On June 22, 2022, the Company issued 8,600 shares of common stock at fair value of $10.45 per share to Anson East and an additional 25,800 shares of common stock at a fair value of $10.45 per share to Anson Investments as a commitment fee.
Preferred Stock
We have authorized to issue 100,000,000 shares of Preferred Stock with such rights designations and preferences as determined by our Board of Directors. We have designated 500,000 shares as series A Preferred, 3,000,000 shares as Series C Preferred, 10,000,000 shares as Series D Preferred, 10,000 shares as Series E Preferred, 140,000 as Series F Preferred, and 27,324 shares as Series X Preferred.
Series A Preferred Stock Transactions During the Six Months Ended June 30, 2023
None.
Series A Preferred Stock Transactions During the Six Months Ended June 30, 2022
None.
Series C Preferred Stock
Series C Preferred Stock Transactions During the Six Months Ended June 30, 2023
The Company accrued dividends in the amount of $17,603 on the Series C Preferred Stock.
On April 11, 2023, a total of 1,047,619 shares of Series C Preferred Stock with a stated value of $1,100,000, accrued dividends in the amount $171,109, and equity investment incentives in the amount of $1,016,888 were exchanged for 2,289 shares of Series F Preferred Stock.
Series C Preferred Stock Transactions During the Six Months Ended June 30, 2022
The Company accrued dividends in the amount of $32,955 on the Series C Preferred Stock.
Series D Preferred Stock
Series D Preferred Stock Transactions During the Six Months Ended June 30, 2023
The Company accrued dividends in the amount of $64,397 on the Series D Preferred Stock.
On April 11, 2023, a total of 2,350,000 shares of Series D Preferred Stock with a stated value of $2,467,500, accrued dividends in the amount $215,659, and equity investment incentives in the amount of $1,371,846 were exchanged for 4,055 shares of Series F Preferred Stock. There was no gain or loss recorded in connection with these transactions.
Series D Preferred Stock Transactions During the Six Months Ended June 30, 2022
The Company accrued dividends in the amount of $96,847 on the Series D Preferred Stock.
Series F Preferred Stock
On March 23, 2023, the Company filed a Certificate of Designations, Preferences and Rights of Series F 12% PIK $0.01 par value Convertible Perpetual Preferred Stock with the Delaware Secretary of State. The number of shares of Series F Preferred Stock designated is 140,000 and each share of Series F Preferred Stock has a liquidation preference of $1,000. The Series F Preferred Stock will rank senior to the Corporation’s Common Stock and on parity with all Preferred Stock of the Corporation with terms specifically providing that such Preferred Stock rank on parity with the Series F Preferred Stock with respect to rights to the distribution of assets upon any liquidation, dissolution or winding up of the Corporation; and (iii) junior to all Preferred Stock of the Corporation with terms specifically providing that such Preferred Stock rank senior to the Series F Preferred Stock with respect to rights to the distribution of assets upon any liquidation, dissolution or winding up of the Company.
Holders of shares of the Series F Preferred Stock are entitled to receive payment-in-kind dividends payable only in additional shares of Series F Preferred Stock (“PIK Dividends”) at rate of 12% per annum.
The Series F Preferred Stock will be convertible into common stock of the Company upon the listing of the Company’s stock on any of the following trading markets: the NYSE, the NYSE American, the Nasdaq Capital Market, the Nasdaq Global Market, or the Nasdaq Global Select Market. The conversion price will be calculated as 65% of the volume-weighted average price of the Company’s common stock on the conversion date. The number of shares issuable upon conversion will be calculated as the liquidation preference of the Series F Preferred stock plus any accrued but unpaid dividends divided by the conversion price.
Series F Preferred Stock Transactions During the Six Months Ended June 30, 2023
On April 11, 2023, the Company issued a total of 8,116 shares of Series F Preferred Stock at its liquidation value of $1,000 per share to nine investors upon the conversion of notes payable. The total amount converted was $8,111,334, consisting of principal $3,602,059, default penalties of $888,889, fees of $60,000, accrued interest of $365,012, and equity investment incentives of $3,195,374. There were no gains or losses recorded in connection with these transactions. See note 9.
On April 11, 2023, the Company issued a total of 2,289 shares of Series F Preferred Stock at its liquidation value of $1,000 per share to two investors upon the conversion of Series C Preferred Stock. The total amount converted was $2,287,997, consisting of the Series C Preferred Stock stated value of $1,100,000, accrued dividends of $171,109, and equity investment incentives of $1,016,888. There were no gains or losses recorded in connection with these transactions.
On April 11, 2023, the Company issued a total of 4,055 shares of Series F Preferred Stock to two investors at its liquidation value of $1,000 per share upon the conversion of Series D Preferred Stock. The total amount converted was $4,055,005 consisting of the Series D Preferred Stock stated value of $2,467,500, accrued dividends of $215,659, and equity investment incentives of $1,371,846. There were no gains or losses recorded in connection with these transactions.
On April 11, 2023, the Company sold a total of 1,746 shares of Series F Preferred Stock to three investors at its liquidation value of $1,000 per share for cash. The total value of Series F Preferred Stock of issued was $1,745,000 consisting of cash proceeds of $900,000 and an equity investment incentive of $845,000. There were no gains or losses recorded in connection with these transactions.
On April 11, 2023, the Company issued a total of 147 shares of Series F Preferred Stock at its liquidation value of $1,000 per share to two service providers for accounts payable in the amount of $146,214. There was no gain or loss recorded on these transactions.
The Company accrued dividends in the amount of $436,080 on the Series F Preferred Stock.
Series F Preferred Stock Transactions During the Six Months Ended June 30, 2022
None.
Series X Preferred Stock
The Company has 24,227 shares of its 10% Series X Cumulative Redeemable Perpetual Preferred Stock (the “Series X Preferred Stock”) outstanding as of June 30, 2023 and December 31, 2022. The Series X Preferred Stock has a par value of $0.01 per share, no stated maturity, a liquidation preference of $25.00 per share, and will not be subject to any sinking fund or mandatory redemption and will remain outstanding indefinitely unless the Company decides to redeem or otherwise repurchase the Series X Preferred Stock; the Series X Preferred Stock is not redeemable prior to November 4, 2020. The Series X Preferred Stock will rank senior to all classes of the Company’s common and preferred stock and accrues dividends at the rate of 10% on $25.00 per share. The Company reserves the right to pay the dividends in shares of the Company’s common stock at a price equal to the average closing price over the five days prior to the date of the dividend declaration. Each one share of the Series X Preferred Stock is entitled to 20,000 votes on all matters submitted to a vote of our shareholders.
Series X Preferred Stock Transactions During the Six Months Ended June 30, 2023
During the six months ended June 30, 2023, the Company accrued dividends on its Series X Preferred Stock in the total amount of $30,283. Of this amount, a total of $3,937 was payable to officers and directors, $15,747 was payable to a related party shareholder, and $10,599 was payable to non-related parties.
During the six months ended June 30, 2023, the Company issued a total of 28,275 shares of common stock for accrued dividends on its Series X Preferred Stock. Of this amount, a total of 3,739 shares were issued to officers and directors, 14,586 were issued to a related party shareholder, and 9,950 were issued to non-related parties.
Series X Preferred Stock Transactions During the Six Months Ended June 30, 2022
On June 7, 2022, the Company issued 405,131 shares of common stock at an average price of $0.2149 per share as payment for dividends payable on the Series X Preferred Stock in the amount of $87,053.
During the six months ended June 30, 2022, the Company accrued dividends in the amount of $30,282 on the Series X Preferred Stock.
Stock Options
The following table summarizes the options outstanding at June 30, 2023 and the related prices for the options to purchase shares of the Company’s common stock:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
average
|
|
|
|
|
|
|
average
|
|
|
|
|
|
|
|
|
|
|
|
average
|
|
|
exercise
|
|
|
|
|
|
|
exercise
|
|
|
|
Range of
|
|
|
Number of
|
|
|
remaining
|
|
|
price of
|
|
|
Number of
|
|
|
price of
|
|
|
|
exercise
|
|
|
options
|
|
|
contractual
|
|
|
outstanding
|
|
|
options
|
|
|
exercisable
|
|
|
|
prices
|
|
|
outstanding
|
|
|
life (years)
|
|
|
options
|
|
|
exercisable
|
|
|
options
|
|
| |
$
|
1.50 - 16.00 |
|
|
|
209,381 |
|
|
|
7.69 |
|
|
$
|
9.64 |
|
|
|
129,248 |
|
|
$
|
7.74 |
|
| |
|
|
|
|
|
209,381 |
|
|
|
7.69 |
|
|
$
|
9.64 |
|
|
|
129,248 |
|
|
$
|
7.74 |
|
Transactions involving stock options are summarized as follows:
| |
|
Shares
|
|
|
Weighted- Average
Exercise Price ($) (A)
|
|
|
Outstanding at December 31, 2022
|
|
|
310,692 |
|
|
$ |
10.01 |
|
|
Granted
|
|
|
- |
|
|
|
- |
|
|
Expired
|
|
|
(101,311 |
)
|
|
|
10.80 |
|
|
Outstanding at June 30, 2023
|
|
|
209,381 |
|
|
$ |
9.64 |
|
|
Options vested and exercisable
|
|
|
129,248 |
|
|
$ |
7.74 |
|
At June 30, 2023, the total stock-based compensation cost related to unvested awards not yet recognized was $2.1 million.
Warrants
The following table summarizes the warrants outstanding on June 30, 2023, and the related prices for the warrants to purchase shares of the Company’s common stock:
| |
|
Shares
|
|
|
Weighted- Average
Exercise Price ($)
|
|
| |
|
|
|
|
|
|
|
|
|
Outstanding on December 31, 2022
|
|
|
672,334 |
|
|
$ |
30.68 |
|
|
Granted
|
|
|
874 |
|
|
$ |
2.50 |
|
|
Exercised
|
|
|
- |
|
|
$ |
- |
|
|
Outstanding on June 30, 2023
|
|
|
673,208 |
|
|
$ |
30.64 |
|
Note 13: Fair Value Measurements
The following summarizes the Company’s derivative financial liabilities that are recorded at fair value on a recurring basis at June 30, 2023 and December 31, 2022.
| |
|
June 30, 2023
|
|
| |
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative liabilities
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
138,212 |
|
|
$ |
138,212 |
|
| |
|
December 31, 2022 |
|
| |
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative liabilities
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
568,912 |
|
|
$ |
568,912 |
|
Note 14: Commitments and Contingencies
Legal
From time to time, we may become involved in legal proceedings or be subject to claims arising in the ordinary course of our business.
On June 23, 2022, The Good Clinic LLC was notified that a former employee had filed a lawsuit for wrongful termination. The Good Clinic believes the lawsuit is without merit. Mitesco (Company) was not named in the suit. The Company expects to resolve it for nominal consideration. Mediation has been scheduled for January 30, 2024.
On October 25, 2022, the Company was notified that a vendor filed a lawsuit related to a contract dispute naming both The Good Clinic and The CEO of the Good Clinic. This suit was settled on May 5, 2023, and dismissed with prejudice on May 12, 2023. The settlement included the issuance of the Company’s restricted common stock. As a part of the settlement the Company issued 2,552 shares of its restricted common stock to the plaintiff and it issued to the CEO of The Good Clinic 19,622 of its restricted common stock, plus $3,000 in cash for reimbursement of expenses related to settling the suit with the vendor.
The Company has a number of legal situations involved with the winding down of its clinic business activities. These include claims regarding certain construction contracts and cancellation of leases. The following is a summary as of this filing:
| | ● | The Wayzata, MN clinic leases was terminated for a commitment to pay $25,000. This amount has not been paid as of June 30, 2023. |
| | | |
| | ● | The two Denver, Colorado clinic leases, known as Quincy and Radiant, possession has been relinquished to the landlords. The lease obligations remain in negotiations as does the handling of the mechanics liens placed on the property. The Company has verbally accepted a stipulated settlement to the Quincy lease obligation which has not been entered into the record or signed by either party. This settlement calls for (i) a stipulated judgment of $231,353, which includes all back rent and front rent through November 2023; (i) Interest of $16,700;(iii) Late fees of $22,434; (iv) attorney fees of $24,888; (v) Costs of $2,300. Claims for rent beyond November, and any defenses thereto, are preserved. |
| | | |
| | ● | The Eagan clinic, aka Vikings clinic, the Good Clinic gave up possession in January of 2023. The mechanics lien has been placed on the property and was settled by the landlord in a confidential settlement. The Landlord terminated the lease as of March 3, 2023. Mitesco is now in settlement negotiations with the landlord for the handling of lease obligations. The Landlord filed suit against the Company on July 21, 2023 for unpaid rent, expenses related to unpaid lease obligations and the settled construction lien. The Company has received discovery requests and a renewed request to agree to a stipulated judgement. The discovery is onerous and not feasible for the Company to comply with given the current staff and limited resources. Negotiations are underway. |
| | | |
| | ● | The St. Paul clinic possession was relinquished in March 2023. The handling of lease obligations remains in negotiation as does the handling of the mechanics liens placed on the properties. Our existing legal counsel has agreed to represent Mitesco, Inc. and The Good Clinic in these matters. In Ramsey County, Continental 560 Fund LLC (Case No. 62-CV-23-2910) initiated a lawsuit. The Company’s attorney will prepare a Notice of Appearance and draft Answer in the Continental 560 Fund matter. The deadline under the Minnesota Rules of Civil Procedure for filing an answer has passed. Accordingly, the plaintiff could seek a default judgment at any time. |
| | | |
| | ● | The St. Louis Park clinic possession was relinquished in April 2023. The handling of lease obligations remains in negotiations as does the handling of the mechanics liens placed on the properties. The plaintiff’s counsel reached out to our attorney to reinitiate negotiations. We proposed to our attorney a settlement approach using a zero coupon note with common stock used as collateral. On November 1, 2023, were notified that the landlord had rejected our settlement proposal and wishes to proceed with the lawsuit. At that time, plaintiff Excelsior & Grand Apartments, LLC submitted interrogatories and request for the production of documents. |
| | | |
| | ● | The Maple Grove clinic eviction occurred in April 2023. The handling of lease obligations remains in negotiations as does the handling of the mechanics liens placed on the properties. On August 22, 2023 the landlord filed a lawsuit related to alleged unmet lease obligations and related to a construction lien on the property by the general contractor related to alleged non-payment of construction expenses. We have been told the facility has been re-leased but have not received notice of such or cancelation of the lease. |
| | | |
| | ● | The Northeast Minneapolis clinic, aka Nordhaus clinic, possession was relinquished in May 2023. There is no lien on the property. The handling of lease obligations remains in negotiations with the landlord. |
Note 15: Subsequent Events
Issuance of Common Stock
On August 21, 2023, the Company issued 131,362 shares of common stock to a service provider at a price of $0.80 per share for accounts payable in the amount of $105,089.
On August 29, 2023, the Company issued 43,750 shares of common stock to a service provider at a price of $0.80 per share for accounts payable in the amount of $35,000.
On September 28, 2023, the Company issued 49,226 shares of common stock to a service provider at a price of $0.80 per share for accounts payable in the amount of $39,380.
On October 10, 2023, the Company issued 23,438 shares of common stock to a service provider at a price of $0.80 per share for accounts payable in the amount of $18,750.
On November 17, 2023, the Company issued 181,606 shares of common stock at a price of $0.80 per share to its Chief Operating Officer and Board Member for notes payable, accrued interest, conversion premium, payoff bonus, accrued salary, and board fees in the aggregate amount of $145,285.
Issuance of Series F Preferred Stock
On September 29, 2023, the Company issued 1,510 shares of Series F Preferred Stock at a price of $1,000 per share to Larry Diamond, its CEO and a Board Member, for notes payable, accrued interest, conversion premium, payoff bonus, and accrued salary in the aggregate amount of $1,509,586.
On September 29, 2023, the Company issued 286 shares of Series F Preferred Stock at a price of $1,000 per share to Tom Brodmerkel, its CFO and a Board Member, for notes payable, accrued interest, conversion premium, payoff bonus, accrued salary, and accrued board fees in the aggregate amount of $285,698.
On September 29, 2023, the Company issued 210 shares of Series F Preferred Stock at a price of $1,000 per share to Juan Carlos Iturregui, a Board Member, for notes payable, accrued interest, conversion premium, payoff bonus, and accrued board fees in the aggregate amount of $209,970.
On September 29, 2023, the Company issued 656 shares of Series F Preferred Stock at a price of $1,000 per share to an investor for notes payable, conversion premium, accrued interest, payoff bonus, and accrued fees in the aggregate amount of $655,606.
On September 29, 2023, the Company issued 50 shares of Series F Preferred Stock at a price of $1,000 per share to an investor for notes payable, conversion premium, accrued interest, and payoff bonus in the aggregate amount of $49,825.
On September 29, 2023, the Company issued 255 shares of Series F Preferred Stock at a price of $1,000 per share to an investor for notes payable, conversion premium, accrued interest, and payoff bonus in the aggregate amount of $254,496.
Appointment of Director
On July 17, 2023, Mr. Allen Plunk was appointed to the Board of Directors of the Company.
Payment Plan for SBA Loan
On July 12, 2023, the Company received a restructured payment plan for the SBA Loan. The terms of the plan call for payments in the amount of $2,595 each month until the loan is paid in full.
Redomestication from Delaware to Nevada
On August 29, 2023, the Company’s shareholders approved the Redomestication of the Company from Delaware to Nevada, and on October 13, 2023, the Company effected the Redomestication by filing (i) a certificate of conversion with the Secretary of State of the State of Delaware (the “Delaware Certificate of Conversion”); (ii) articles of conversion with the Secretary of State of the State of Nevada (the “Nevada Articles of Conversion”); and (iii) articles of incorporation with the Secretary of State of the State of Nevada (the “Nevada Articles of Incorporation”). Pursuant to the Plan of Conversion, the Company also adopted new Bylaws (the “Nevada Bylaws”).
Resignation of Director
On November 7, 2023, Mr. Juan Carlos Iturregui resigned from his position as a director effective November 5, 2023. The decision by Mr. Iturregui to resign was not the result of any disagreement with the Company on any matter relating to the operations, internal controls, policies or practices of the Company but related to his transition to public service on a full-time basis.
Court Order Stipulating Judgment
On November 14, 2023, the District Court, City and County of Denver, Colorado, in Case Number 2022CV33173 consolidated with Case Number 2022cv33653, stipulated an entry of judgment against the Company’s subsidiary The Good Clinic, LLC, and in favor of Gardner Builders Minneapolis, LLC, in the amount of $348,764 and interest at the rate of 12% per annum until the amount is paid in full.
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
References to the “Company,” “Mitesco, Inc.,” “our,” “us” or “we” refer to Mitesco, Inc. The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the unaudited interim financial statements and the notes thereto contained elsewhere in this report. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.
Cautionary Note Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Exchange Act. We have based these forward-looking statements on our current expectations and projections about future events. These forward-looking statements are subject to known and unknown risks, uncertainties and assumptions about us that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may,” “should,” “could,” “would,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “continue,” or the negative of such terms or other similar expressions. Factors that might cause or contribute to such a discrepancy include, but are not limited to, those described in our other SEC filings.
History and Outlook
Mitesco Inc. is a holding company with plans to participate in the healthcare technology, services and/or delivery industries. From 2020 through 2022, the Company was executing against a strategic plan to open primary care clinics utilizing advanced degreed nurse practitioners in select markets. The clinics operated under the name The Good Clinic. The Company performed on the strategy and began implementing growth plans for The Good Clinic with limited funding. The Company believed that upon execution of the business plan additional capital would be available on acceptable terms. However, the markets were not favorable to funding and as the Covid-19 pandemic lingered on, the Company was unsuccessful accessing adequate capital when needed, therefore in late 2022 the decision was made to close the clinics. As a result, Mitesco currently has no operating business.
Since the beginning of 2023, the Company has focused on winding down operations of The Good Clinic along with reducing other costs. To that purpose the Company has terminated all but 4 employees; management and the Board members are not taking cash compensation, and there are ongoing discussions to convert amounts owed to equity. We are also selling the remaining assets consisting of furniture, equipment, and supplies; the funds generated from the sale of assets will be used primarily to cover the costs of our SEC filings. We have also completed the process of redomiciling from Delaware to Nevada.
Results of Operations
The following period-to-period comparisons of our financial results are not necessarily indicative of results for the current period of any future periods. Further, as a result of any acquisitions of other businesses, and any additional pharmacy acquisitions or other such transactions we may pursue, we may experience large expenditures specific to the transactions that are not incident to our operations.
Comparison of the Three Months Ended June 30, 2023 and 2022
Revenue
The Company recognized revenue of $0 for the three months ended June 30, 2023, compared to approximately $0.2 million for the three months ended June 30, 2022. The decrease is the result of the discontinuation of the Company’s clinic operations.
Cost of Sales
The Company incurred $5,601 of cost of goods sold for the three months ended June 30, 2023, compared to $0.6 million for the three months ended June 30, 2022. The decrease is the result of the discontinuation of the Company’s clinic operations.
Gross Profit/(Loss)
Our gross loss was $5,601 for the three months ended June 30, 2023, compared to gross loss of $0.4 million for the three months ended June 30, 2022. The decrease is the result of the discontinuation of the Company’s clinic operations.
Operating Expenses
Our total operating expenses for the three months ended June 30, 2023, were approximately $0.8 million. For the comparable period in 2022, the operating expenses were approximately $2.3 million. The decrease is the result of the discontinuation of the Company’s clinic operations.
During the current period we fully impaired our remaining fixed assets in the amount of $71,569.
General and administrative expenses for the three months ended June 30, 2023 were comprised primarily of share based payments to service providers of $0.9, payroll and related costs of $0.3 million, building and facility costs of $0.3 million, vendor finance charges of $0.1 million, advertising and marketing costs of $0.07 million, and IT/website costs of $0.07 million.
General and administrative expenses for the three months ended June 30, 2022 were comprised primarily of $0.8 million in payroll and payroll taxes, $0.4 office and clinic supplies and services, $0.3 million in legal and professional fees, $0.2 million in non-cash compensation, and $0.2 million in depreciation.
Other Income and Expenses
Interest expense was approximately $0.1 million for the three months ended June 30, 2023, compared to approximately $0.9 million for the three months ended June 30, 2022.
Interest expense – related parties was approximately $0.1 million for the three months ended June 30, 2023, compared to approximately $0 in the prior period.
During the three months ended June 30, 2023, we recorded equity investment incentives of approximately $6.4 million. There were no comparable transactions in the prior period.
During the three months ended June 30, 2023, we recorded financing costs of $18,617. There were no comparable transactions in the prior period.
During the three months ended June 30, 2023, we recorded a gain on forgiveness of debt of $25,000. There were no comparable transactions in the prior period.
During the three months ended June 30, 2023, we recorded a gain on sale of assets of $20,097. There were no comparable transactions in the prior period.
During the three months ended June 30, 2023, we recorded a gain on issuance of shares to a service provider of $33,092. There were no comparable transactions in the prior period.
During the three months ended June 30, 2023, we recorded a loss on settlement of true-up obligation of $119,370. There were no comparable transactions in the prior period.
During the three months ended June 30, 2022, we recorded a loss on waiver and commitment fee shares of $11,619. There were no comparable transactions in the current period.
During the three months ended June 30, 2023, we recorded a loss on legal settlement of $18,759. There were no comparable transactions in the prior period.
During the three months ended June 30, 2023, we recorded a gain on revaluation of derivative liabilities of $39,738 compared to a loss of $153,424 in the prior period.
The Company accrued Preferred Stock dividends of approximately $0.5 million including $59,125 to related parties compared to $80,392 including $62,322 to related parties for the three months ended June 30, 2022. The increase was due to accrued dividends on the Series F Preferred Stock.
For the three months ended June 30, 2023, we had a net loss available to common shareholders of approximately $8.0 million, or a net loss per share, basic and diluted of ($1.55) compared to a net loss available to common shareholders of approximately $3.9 million, or a net loss per share, basic and diluted of ($0.88), for the three months ended June 30, 2022.
Comparison of the Six Months Ended June 30, 2023 and 2022
Revenue
The Company recognized revenue of $0 for the six months ended June 30, 2023, compared to approximately $0.3 million for the six months ended June 30, 2022. The decrease is the result of the discontinuation of the Company’s clinic operations.
Cost of Sales
The Company incurred $8,020 of cost of goods sold for the six months ended June 30, 2023, compared to approximately $1.2 million for the six months ended June 30, 2022. The decrease is the result of the discontinuation of the Company’s clinic operations.
Gross Profit/(Loss)
Our gross loss was approximately $8,000 for the six months ended June 30, 2023, compared to gross loss of approximately $0.9 million for the six months ended June 30, 2022. The decrease is the result of the discontinuation of the Company’s clinic operations.
Operating Expenses
Our total operating expenses for the six months ended June 30, 2023, were approximately $2.8 million. For the comparable period in 2022, the operating expenses were approximately $4.9 million. The increase is the result of the discontinuation of the Company’s clinic operations.
During the current period we fully impaired our remaining operating assets in the amount of approximately $2.3 million.
General and administrative expenses for the six months ended June 30, 2023 were comprised primarily of share based payments to service providers of $0.9 million, payroll and related costs of $0.5 million, building and facility costs of $0.5 million, legal, professional, and accounting costs of $0.2 million, advertising and marketing costs of $0.1 million, vendor finance charges of $0.1 million, advertising and marketing costs of $0.1 million, and IT/website costs of $0.1 million.
General and administrative expenses for the six months ended June 30, 2022 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 $1.5 million for the six months ended June 30, 2023, compared to approximately $1.7 million for the six months ended June 30, 2022.
Interest expense – related parties was approximately $0.2 million for the six months ended June 30, 2023, compared to $0 in the prior period.
During the six months ended June 30, 2023, we recorded equity investment incentives of approximately $6.4 million. There were no comparable transactions in the prior period.
During the six months ended June 30, 2023, we recorded financing costs of $18,617. There were no comparable transactions in the prior period.
During the six months ended June 30, 2023, we recorded a gain on termination of operating lease of approximately $0.3 million. There were no comparable transactions in the prior period.
During the six months ended June 30, 2023, we recorded a gain on forgiveness of debt of $25,000. There were no comparable transactions in the prior period.
During the six months ended June 30, 2023, we recorded a gain on sale of assets of $20,097. There were no comparable transactions in the prior period.
During the six months ended June 30, 2023, we recorded a gain on issuance of shares to a service provider of $33,092. There were no comparable transactions in the prior period.
During the six months ended June 30, 2023, we recorded a loss on settlement of true-up obligation of $119,370. There were no comparable transactions in the prior period.
During the six months ended June 30, 2022, we recorded a loss on waiver and commitment fee shares of $186,654. There were no comparable transactions in the current period.
During the six months ended June 30, 2023, we recorded a loss on legal settlement of $18,759. There were no comparable transactions in the prior period.
During the six months ended June 30, 2022, we recorded a gain on settlement of accrued salary of $15,032. There were no comparable transactions in the current period.
During the six months ended June 30, 2022, we recorded a loss on settlement of accounts payable of $78,235. There were no comparable transactions in the current period.
During the six months ended June 30, 2023, we recorded a loss on revaluation of derivative liabilities of $71,040 compared to a loss of $73,587 in the prior period.
The Company accrued Preferred Stock dividends of approximately $0.5 million including $59,125 to related parties compared to $80,392 including $62,322 to related parties for the three months ended June 30, 2022. The increase was due to accrued dividends on the Series F Preferred Stock.
For the six months ended June 30, 2023, we had a net loss available to common shareholders of approximately $13.7 million, or a net loss per share, basic and diluted of ($2.76) compared to a net loss available to common shareholders of approximately $7.6 million, or a net loss per share, basic and diluted of ($1.75), for the six months ended June 30, 2022.
Liquidity and Capital Resources
To date, we have not generated sufficient revenue from operations to support our operations. We have financed our operations through the sale of equity securities and short-term borrowings. As of November 30, 2023, we had cash of approximately $45,000 compared to cash of approximately $36,000 as of December 31, 2022.
Net cash used in operating activities was approximately $0.5 million for the six months ended June 30, 2023. This is the result of the discontinuation of the Company’s clinic operations. Cash used in operations for the six months ended June 30, 2022, was approximately $4.0 million.
Net cash used in investing activities was $0 for the six months ended June 30, 2023 compared to approximately $190,000 for the six months ended June 30, 2022.
Net cash provided by financing activities for the six months ended June 30, 2023, was $0.7 million, compared to $3.1 million for the three months ended June 30, 2022.
At June 30, 2023, we had the following current liabilities which are payable in cash: Accounts payable and accrued liabilities of $8.3 million; notes payable of $1.6 million; notes payable to related parties of $2.8 million; SBA Loan Payable of $0.5 million; lease liabilities of $0.5 million; accrued interest payable of $0.6 million; accrued interest payable to related parties of $0.2 million; and other current liabilities of $0.1 million. We also have the following liabilities which are payable in stock: derivative liabilities of $0.1 million, preferred stock dividends of $0.5, and preferred stock dividends payable to related parties of $30,000.
We have undertaken the following action plan to improve our liquidity: (i) We have raised approximately $194,000 from the sale of office equipment, supplies, and other assets; (ii) several institutional investors have invested in our Seres F Preferred Stock; (iii) we have restructured our SBA Loan; (iv) we are negotiating with vendors to convert our accounts payable into common stock or Series F Preferred stock, (iv) We are negotiating with lenders to convert our notes payable into Series F Preferred Stock, or revise the terms of the notes; (v) We are negotiating with landlords to resolve the amounts due under the leases by offering to convert these amounts to equity or promissory notes. See below for details regarding the progress we have made in the implementation of this plan.
Initial funds raised via the above efforts will be used primarily to complete the Company’s SEC filings.
SBA Loan
On July 12, 2023, the Company entered into a payment plan arrangement with the U.S. Small Business Administration regarding PPP Loan. The terms of the payment plan call for monthly payments of approximately $2,595 for 180 months beginning July 1, 2023 resulting in total payments in the amount of $0.5 million.
Sale of Series F Preferred Stock Sold for Cash
On April 11, 2023, the Company entered into securities purchase agreements (each a “Purchase Agreement”) with investors providing for the sale and issuance of (i) Series F 12% PIK Convertible Perpetual Preferred Stock, par value $0.01 per share (the “Series F Shares”) and (ii) warrants to purchase shares of Common Stock (the “Warrants,” and together with the Series F Shares, the “Securities”). The Warrants have an initial exercise price of $2.50 per share and the final number of shares of Common Stock the warrant is exercisable for will equal the number of shares of Common Stock into which the Series F Shares convert divided by 2. The Series F can be converted, at the option of the Series F shareholder into shares of the Company’s common stock at a price equal to 65% of the Volume Weighted Average Price ("VWAP”) on the conversion date. No conversions can occur until the Company has successfully completed an uplist to NASDAQ.
From April 11 through November 30, 2023, we have raised a total of $0.9 million through the sale of Series F Securities as follows:
On April 11, 2023, the Company entered into a Purchase Agreement for the sale of 863 Securities at a price of $1,000 per Security for cash in the amount of $0.4 million plus incentives in the amount of $0.5 million, calculated at the rate of 130% of the cash invested.
On April 11, 2023, the Company entered into a Purchase Agreement for the sale of 288 Securities at a price of $1,000 per Security for cash in the amount of $0.1 million plus incentives in the amount of $0.2 million calculated at the rate of 130% of the cash invested.
On April 11, 2023, the Company entered into a Purchase Agreement for the sale of 345 Securities at a price of $1,000 per Security for cash in the amount of $0.1 million plus incentives in the amount of $0.2 million calculated at the rate of 130% of the cash invested.
On June 30, 2023, the Company entered into a Purchase Agreement for the sale of 250 Securities at a price of $1,000 per Security for cash in the amount of $0.3 million.
Also in connection with the Purchase Agreements, the Company entered into separate exchange agreements pursuant to which the investors in the Series F Preferred Stock exchanged certain securities, as defined in each individual Exchange Agreement, for a number Series F Shares (based on their liquidation preference of $1,000) equal to 120%, 165% or 230%, depending on whether the investor is investing additional funds into the bridge financing, of the “Principal Amount,” “Stated Value” and/or liquidation preference of the Exchange Securities (including any payoff bonus, accrued dividends or interest).
Series F Preferred Stock Issued for Conversion of notes payable and accrued interest
Through November 30, 2023, we have converted a total of $4.9 million in debt and accrued interest to Series F Preferred Stock as follows:
On April 11, 2023, in transactions with nine investors, the Company issued an aggregate 8,116 shares of Series F Preferred Stock at a price of $1,000 per share in exchange for debt and accrued interest in the amount of $4.0 million, default fees of $0.9 million, and payoff incentives of $3.2 million. Payoff incentives were calculated at the rate of 65% of principal, default charges, fees, and accrue interest.
On September 29, 2023, in transactions with three investors, we converted an additional $1.0 million in debt and accrued interest into 961 shares of Series F Preferred Stock.
Series F Preferred Stock Issued for Conversion of Debt, Accrued Salaries, and Accrued Fees by Officers and Directors
We have issued a total of 2,006 shares of Series F Preferred Stock to officers and directors for the satisfaction of liabilities in the aggregate amount of $2.0 million as follows:
On September 29, 2023, 1,510 shares of Series F Preferred Stock were issued to Larry Diamond, our CEO and a board member, for debt, accrued interest, and accrued salary in the aggregate amount of $1.5 million; 210 shares of Series F Preferred Stock were issued to Juan Carlos Iturregui, a former board member, for debt, accrued interest, and accrued board fees in the aggregate amount of $0.2 million; and 286 shares of Series F Preferred Stock were issued to Tom Brodmerkel, our CFO, for debt, accrued interest, and accrued salary in the aggregate amount of $0.3 million.
Series F Preferred Stock Issued for Conversion of Series C and Series D Preferred Stock
Through June 30, 2023, we have converted a total Series C and D Preferred Stock and accrued interest with a total stated value in the amount of $4.0 million to Series F Preferred Stock as follows:
On April 11, 2023, in transactions with two investors, the Company issued an aggregate 2,051 shares of Series F Preferred Stock at a price of $1,000 per share in exchange for Series C Preferred Stock and accrued dividends with a stated value of $1.3 million and conversion incentives in the aggregate amount of $0.8 million. Conversion incentives were calculated at the rate of 80% of stated value of the Series C Preferred Stock converted for those holders of the Series C Preferred Stock who purchased additional Series F Preferred Stock for cash.
On April 11, 2023, in transactions with five investors, the Company issued an aggregate 3,884 shares of Series F Preferred Stock at a price of $1,000 per share in exchange for Series D Preferred Stock and accrued dividends with a stated value of $2.6 million and incentives in the aggregate amount of $1.2 million.
Series F Preferred Stock Issued for Conversion of Accounts Payable
Through June 30, 2023, we have converted a total of $0.1 million of accounts payable to Series F Preferred Stock as follows:
On June 29, 2023, we issued an aggregate 147 shares of Series F Preferred Stock to two creditors in satisfaction of accounts payable in the aggregate amount of $0.1 million.
Common Stock issued for conversion of Accounts payable
Through June 30, 2023, we have converted a total of $0.2 million of accounts payable to common stock as follows:
On June 29, 2023, we issued 131,362 shares of common stock at a price of $0.80 per share to a vendor in satisfaction of accounts payable in the amount of $0.1 million.
On August 29, 2023, we issued 43,750 shares of common stock at a price of $0.80 per share to a vendor in satisfaction of accounts payable in the amount of approximately $44,000.
On September 28, 2023, we issued 49,226 shares of common stock at a price of $0.80 per share to a vendor in satisfaction of accounts payable in the amount of approximately $49,000
We expect to continue to convert existing liabilities to our Series F Preferred Stock or to common stock and to raise additional funds via the sale of our Series F Preferred Stock, though there can be no assurance that we will be successful in doing so.
Critical Accounting Estimates
Management uses various estimates and assumptions in preparing our financial statements in accordance with generally accepted accounting principles. These estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported revenues and expenses. Accounting estimates that are the most important to the presentation of our results of operations and financial condition, and which require the greatest use of judgment by management, are designated as our critical accounting estimates. We have the following critical accounting estimates:
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Estimates and assumptions used in the valuation of derivative liabilities: Management utilizes a lattice model to estimate the fair value of derivative liabilities. The model includes subjective assumptions that can materially affect the fair value estimates.
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not applicable.
ITEM 4. CONTROLS AND PROCEDURES.
(a) Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer and our Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this report. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in the reports we file or submit under the Exchange Act is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. Based on such evaluation, the Company’s management has identified what it believes are material weaknesses in the Company’s disclosure controls and procedures and concluded that we did not have effective disclosure controls and procedures.
The deficiencies in our disclosure controls and procedures included (i) lack of segregation of duties and (ii) lack of sufficient resources to ensure that information required to be disclosed by the Company in the reports that the Company files or submits to the SEC are recorded, processed, summarized, and reported, within the time periods specified in the SEC’s rules and forms, 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 second quarter ended June 30, 2023, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
From time to time, we may become involved in legal proceedings or be subject to claims arising in the ordinary course of our business.
On June 23, 2022, The Good Clinic LLC was notified that a former employee had filed a lawsuit for wrongful termination. The Good Clinic believes the lawsuit is without merit. Mitesco (Company) was not named in the suit. The Company expects to resolve it for nominal consideration. Mediation has been scheduled for January 30, 2024.
On October 25, 2022, the Company was notified that a vendor filed a lawsuit related to a contract dispute naming both The Good Clinic and The CEO of the Good Clinic. This suit was settled on May 5, 2023, and dismissed with prejudice on May 12, 2023. The settlement included the issuance of the Company’s restricted common stock. As a part of the settlement the Company issued 2,552 shares of its restricted common stock to the plaintiff and it issued to the CEO of The Good Clinic 19,622 of its restricted common stock, plus $3,000 in cash for reimbursement of expenses related to settling the suit with the vendor.
The Company has a number of legal situations involved with the winding down of its clinic business activities. These include claims regarding certain construction contracts and cancellation of leases. The following is a summary as of this filing:
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The Wayzata, MN clinic leases was terminated for a commitment to pay $25,000.
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The two Denver, Colorado clinic leases, known as Quincy and Radiant, possession has been relinquished to the landlords. The lease obligations remain in negotiations as does the handling of the mechanics liens placed on the property.
On December 1, 2023, a judgement was issued from the District Court of Denver County, Colorado against Mitesco, Inc. and The Good Clinic, LLC in favor of the landlord in the amount of $348,764. Claims for rent beyond November, and any defenses thereto, are preserved.
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The Eagan clinic, aka Vikings clinic, the Good Clinic gave up possession in January of 2023. The mechanics lien has been placed on the property and was settled by the landlord in a confidential settlement. The Landlord terminated the lease as of March 3, 2023. Mitesco is now in settlement negotiations with the landlord for the handling of lease obligations. The Landlord file suit against the Company on July 21, 2023 for unpaid rent, expenses related to unpaid lease obligations and the settled construction lien. The Company has received discovery requests and a renewed request to agree to a stipulated judgement. The discovery is onerous and not feasible for the Company to comply with given the current staff and limited resources. Negotiations are underway.
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The St. Paul clinic possession was relinquished in March 2023. The handling of lease obligations remains in negotiation as does the handling of the mechanics liens placed on the properties. Our existing legal counsel has agreed to represent Mitesco, Inc. and The Good Clinic in these matters.
In Ramsey County, Continental 560 Fund LLC (Case No. 62-CV-23-2910) initiated a lawsuit. The Company’s attorney will prepare a Notice of Appearance and draft Answer in the Continental 560 Fund matter. The deadline under the Minnesota Rules of Civil Procedure for filing an answer has passed. Accordingly, the plaintiff could seek a default judgment at any time.
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The St. Louis Park clinic possession was relinquished in April 2023. The handling of lease obligations remains in negotiations as does the handling of the mechanics liens placed on the properties. The plaintiff’s counsel reached out to our attorney to reinitiate negotiations. We proposed to our attorney a settlement approach using a zero coupon note with common stock used as collateral. We are awaiting reply.
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The Maple Grove clinic eviction occurred in April 2023. The handling of lease obligations remains in negotiations as does the handling of the mechanics liens placed on the properties. On August 22, 2023 the landlord filed a lawsuit related to alleged unmet lease obligations and related to a construction lien on the property by the general contractor related to alleged non-payment of construction expenses. We have been told the facility has been re-leased but have not received notice of such or cancelation of the lease.
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The Northeast Minneapolis clinic, aka Nordhaus clinic, possession was relinquished in May 2023. There is no lien on the property. The handling of lease obligations remains in negotiations with the landlord.
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ITEM 1A. RISK FACTORS
Our business is subject to risks and events that, if they occur, could adversely affect our financial condition and results of operations and the trading price of our securities. In addition to the other information set forth in this quarterly report on Form 10-Q, you should carefully consider the factors described in Part I, Item 1A. “Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, filed with the Securities and Exchange Commission on July 14, 2023. There have been no material changes to the risk factors described in that report.
ITEM 2. SALE OF UNREGISTERED SECURITIES
Common Stock
On January 23, 2023, the Company issued 150,000 shares of common stock at the market price of $3.19 per share to a service provider.
On February 21, 2023, the Company issued 150,000 shares of common stock at the market price of $2.27 per share to a service provider.
During the three months ended March 31, 2023, GS Capital converted principal and accrued interest in a convertible note payable into shares of common stock as follows: On February 14, 2023, 9,846 shares were issued at a price of $1.74 per share; on February 28, 2023, 13,555 shares were issued at a price of $1.50 per share; on March 9, 2023, 15,265 shares were issued at a price of $1.50 per share; and on March 28, 2023, 18,472 shares were issued at a price of $1.25 per share.
On March 31, 2023, the Company issued a total of 8,063 shares of common stock for accrued dividends on its Series X Preferred Stock. Of this amount, a total of 1,066 shares were issued to officers and directors, 4,160 were issued to a related party shareholder, and 2,837 were issued to non-related parties.
On April 4, 2023, the Company issued 2,952 shares of common stock to a consultant at a price of $1.29 per share as a commission on funds previously raised.
On April 4, 2023, the Company issued 94,738 shares of common stock to GS Capital at an average price of pursuant to a make-whole agreement entered into in connection with the GS Capital Warrants.
On May 5, 2023, the Company issued 2,552 shares of common stock to a vendor at a price of $0.85 per share, and on May 9, 2023, the Company issued 19,622 shares of common stock at a price of $0.85 per share to the Michael C. Howe Living Trust (the “Howe Trust”), an entity controlled by a related party. These shares were issued in satisfaction of a vendor dispute. The shares issued to the Howe Trust were reimbursement for shares previously issued to the vendor by the Howe Trust with regard to this dispute.
On June 29, 2023, the Company issued a total of 20,212 shares of common stock for accrued dividends on its Series X Preferred Stock. Of this amount, a total of 2,673 shares were issued to officers and directors, 10,426 were issued to a related party shareholder, and 7,113 were issued to non-related parties.
Effective June 30, 2023, the Company issued 2,926 shares of common stock at a price of $12.50 to a previous board member for the conversion of accounts payable in the amount of $36,575. These shares had been carried on the Company balance sheet as Common Stock Subscribed.
Series F Preferred Stock
On April 11, 2023, the Company issued a total of 8,116 shares of Series F Preferred Stock at its liquidation value of $1,000 per share to nine investors upon the conversion of notes payable. The total amount converted was $8,111,334, consisting of principal $3,602,059, default penalties of $888,889, fees of $60,000, accrued interest of $365,012, and equity investment incentives of $3,195,374.
On April 11, 2023, the Company issued a total of 2,289 shares of Series F Preferred Stock at its liquidation value of $1,000 per share to two investors upon the conversion of Series C Preferred Stock. The total amount converted was $2,287,997, consisting of the Series C Preferred Stock stated value of $1,100,000, accrued dividends of $171,109, and equity investment incentives of $1,016,888.
On April 11, 2023, the Company issued a total of 4,055 shares of Series F Preferred Stock to two investors at its liquidation value of $1,000 per share upon the conversion of Series D Preferred Stock. The total amount converted was $4,055,005 consisting of the Series D Preferred Stock stated value of $2,467,500, accrued dividends of $215,659, and equity investment incentives of $1,371,846.
On April 11, 2023, the Company sold a total of 1,746 shares of Series F Preferred Stock to three investors at its liquidation value of $1,000 per share for cash. The total value of Series F Preferred Stock of issued was $1,745,000 consisting of cash proceeds of $900,000 and an equity investment incentive of $845,000.
On April 11, 2023, the Company issued a total of 147 shares of Series F Preferred Stock at its liquidation value of $1,000 per share to two service providers for accounts payable in the amount of $146,214.
ITEM 3. DEFAULTS ON SENIOR SECURED SECURITIES
Not Applicable.
ITEM 4. MINE SAFETY DISCLOSURES
Not Applicable.
ITEM 5. OTHER INFORMATION
Not Applicable.
ITEM 6. EXHIBITS
The following exhibits are included with this Quarterly Report on Form 10Q
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Form
Type
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Exhibit
Number
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Date
Filed
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Filed
Herewith
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3.1
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Certificate of Incorporation of Trunity Holdings, Inc., dated January 18, 2012.
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8-K
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10.1
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1/31/2012
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3.2
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Bylaws of Trunity Holdings, Inc., dated January 18, 2012.
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8-K
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10.2
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1/31/2012
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3.3
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Certificate of Ownership Merging between Trunity Holdings, Inc. and Brain Tree International, Inc. dated January 24, 2012.
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10-K
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3.3
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4/16/2013
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3.4
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Certificate of Amendment to the Certificate of Incorporation of Trunity Holdings, Inc., dated December 24, 2015.
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8-K
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3.1(i)
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1/06/2016
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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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| |
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3.6
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|
Form of Amended and Restated Certificate of Designations of Series A Preferred Stock of True Nature Holding, Inc.
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8-K
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3.07
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|
3/13/2020
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| |
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3.7
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|
Certificate of Amendment of the Certificate of Incorporation of True Nature Holding, Inc. dated April 21, 2020.
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10-Q
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3.7
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8/14/2020
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| |
|
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3.8
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|
Certificate of Amendment of Certificate of Incorporation, dated as of November 5, 2020, correcting December 24, 2015, Certificate of Amendment.
|
|
10-Q
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|
3.8
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|
11/13/2020
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| |
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Form
Type
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|
Exhibit
Number
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Date
Filed
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Filed
Herewith
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| |
|
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| 3.9 |
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Bylaws of Mitesco, Inc., as amended, dated November 10, 2020 |
|
10-Q |
|
3.9 |
|
11/13/2020 |
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| |
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3.10
|
|
Certificate of Designations, Preferences and Rights of the Series C Convertible Preferred Stock of Mitesco, Inc.
|
|
8-K
|
|
3.1
|
|
03/26/2021
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|
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| |
|
|
|
|
|
|
|
|
|
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3.11
|
|
Certificate of Correction to the Certificate of Designations, Preferences and Rights of the Series C Convertible Preferred Stock of Mitesco, Inc.
|
|
8-K
|
|
3.2
|
|
03/26/2021
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31.1
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|
Certification by the Principal Executive Officer of the Registrant pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
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|
X
|
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|
31.2
|
|
Certification by the Principal Financial Officer of the Registrant pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
|
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|
|
|
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|
X
|
|
|
|
|
|
|
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|
|
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|
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|
32.1
|
|
Certification by the Principal Executive Officer of the Registrant pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
|
|
|
|
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|
X
|
|
|
|
|
|
|
|
|
|
|
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|
32.2
|
|
Certification by the Principal Financial Officer of the Registrant pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
|
|
|
|
|
|
X
|
|
|
|
|
|
|
|
|
|
|
|
|
|
101.INS **
|
|
XBRL INSTANCE DOCUMENT
|
|
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|
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|
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|
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|
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|
|
|
|
101.SCH **
|
|
XBRL TAXONOMY EXTENSION SCHEMA
|
|
|
|
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|
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|
|
|
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|
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|
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|
|
|
|
101.CAL **
|
|
XBRL TAXONOMY EXTENSION CALCULATION LINKBASE
|
|
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|
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|
|
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|
101.DEF **
|
|
XBRL TAXONOMY EXTENSION DEFINITION LINKBASE
|
|
|
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|
|
|
|
|
|
|
|
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|
|
|
101.LAB **
|
|
XBRL TAXONOMY EXTENSION LABEL LINKBASE
|
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|
101.PRE **
|
|
XBRL TAXONOMY EXTENSION PRESENTATION LINKBASE
|
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|
104
|
|
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
|
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#
|
|
Management contract or compensatory plan or arrangement required to be identified pursuant to Item 15(a)(3) of this report.
|
|
|
|
|
|
|
|
|
SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Quarterly Report on Form 10-Q for the period ended June 30, 2023, to be signed on its behalf by the undersigned, thereunto duly authorized.
|
|
|
|
|
|
|
MITESCO, INC.
|
|
|
|
|
|
|
Dated: December 13, 2023
|
By:
|
/s/ Tom Brodmerkel
|
|
|
|
|
Tom Brodmerkel
Chief Financial Officer and Principal Financial Officer
|
NONE
No
false
--12-31
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