As filed with the Securities and Exchange Commission on October 3, 2022.
Registration No. 333-261375
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Amendment No. 6)
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
(Exact name of Registrant as specified in its charter)
| | | | ||
| (State or other jurisdiction of | (Primary Standard Industrial | (I.R.S. Employer | ||
| incorporation or organization) | Classification Code Number) | Identification Number) |
(Address, including zip code, and telephone number, including area code, of Registrant’s principal executive offices)
Lawrence Diamond
Chief Executive Officer
Mitesco, Inc.
1660 Highway 100 South, Suite 432
St. Louis Park, MN 55416
(
(Name, address, including zip code, and telephone number, including area code, of agent for service)
Copies to:
|
Joseph Lucosky, Esq. 101 Wood Avenue South Woodbridge, NJ 08830 (732) 395-4400 |
Alexander R. McClean, Esq. C. Christopher Murillo, Esq. Harter Secrest & Emery LLP 1600 Bausch & Lomb Place Rochester, NY 14604 |
Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this registration statement.
If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. ☒
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act of 1933, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act of 1933, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act of 1933, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
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 of 1934.
| Large accelerated filer | ☐ | 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 7(a)(2)(B) of the Securities Act. ☐
The registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment that specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act, or until the Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.
The information in this preliminary prospectus is not complete and may be changed. We may not sell these securities until the registration statement related to these securities filed with the Securities and Exchange Commission is declared effective. This prospectus is not an offer to sell or a solicitation of an offer to buy these securities and we are not soliciting offers to buy these securities in any state where the offer or sale is not permitted.
|
PRELIMINARY PROSPECTUS |
SUBJECT TO COMPLETION |
DATED October 3, 2022 |
Units
Each Unit Consisting of
One Share of Common Stock
and
One Series A Warrant to Purchase One Share of Common Stock and
One Series B Warrant to Purchase One Share of Common Stock
This is a firm commitment public offering of our Units (each a “Unit” and collectively, the “Units”) of Mitesco, Inc. with each Unit consisting of one share of Common Stock, par value $0.0001 per share (the “Common Stock”), a Series A Warrant (the “Series A Warrant”) and a Series B Warrant (the “Series B Warrant”, together with the Series A Warrant the “Warrants”), each Warrant to purchase one share of our Common Stock (and the shares issuable from time to time upon exercise of the Warrants) based on an assumed offering price of $ , the midpoint of the range of the offering price per Unit. The Series A Warrant will have an exercise price of $ per share, will be exercisable upon issuance and will expire five years from the date of issuance. The Series B Warrant will have an exercise price of $ per share, will be exercisable upon issuance and will expire fifteen from the date of issuance.
The Units will not be certificated and the shares of Common Stock and the Series A Warrant and Series B Warrant comprising such Units are immediately separable and will be issued separately in this offering.
We currently anticipate that the public offering price per Unit will be between $ and $ . The assumed offering price used throughout this prospectus has been included for illustration purposes only. The actual public offering price may differ materially from the assumed price used in the prospectus and will be determined through negotiation between us and the underwriters in the offering and will consider the recent market price of our Common Stock, the general condition of the securities market at the time of the offering, the history of, and the prospects for, the industry in which we compete, and our past and present operations and our prospects for future revenues.
Our Common Stock is currently traded on the OTCQB Market under the symbol “MITI.” On September 8, 2022, the last reported sale price of our Common Stock on the OTCQB Market was $0.1175. The final offering price may be at a discount to the trading price of our Common Stock on the OTCQB. There is no established trading market for the Series A Warrants or Series B Warrants. We have applied to list our Common Stock on the Nasdaq Capital Market under the symbol “MITI”. We are applying to list the Series A Warrants and Series B Warrants for trading on the Nasdaq Capital Market, but we cannot assure you that we will meet all of the required listing standards. The Common Stock, Series A Warrants and Series B Warrants comprising the Units will begin separate trading immediately upon issuance of the Units. No assurance can be given that our application will be approved or that an active trading market will develop. We will not proceed with this offering in the event our Common Stock and Series A Warrants and Series B Warrants are not approved for listing on the Nasdaq Capital Market though we will continue to seek financing for our expansion and operating needs in the debt or equity markets.
The share and per share information in this prospectus, unless otherwise noted and other than in our historical financial statements and the notes thereto, reflects a proposed reverse stock split of the outstanding Common Stock and treasury stock of the Company at an assumed 1-for-50 ratio to occur prior to the closing of the offering.
Investing in our securities involves risks. See “Risk Factors” beginning on page 19 of this prospectus for a discussion of the risks that you should consider in connection with an investment in our securities.
|
Per Unit |
Total |
|||||||
|
Initial public offering price (1) |
$ |
$ |
||||||
|
Underwriting discounts and commissions (2) |
$ |
$ |
||||||
|
Proceeds, before expenses, to us (3) |
$ |
$ |
||||||
| (1) | The public offering price and underwriting discount corresponds to in respect of the Units (a) a public offering price per share of common stock of $ and (b) a public offering price per Series A Warrant of $0.01 and Series B Warrant of $0.01. This is an offering price of $ per Unit. |
|
(2) |
We have also agreed to reimburse the underwriters for certain expenses and to issue warrants to the representative of the underwriters as a portion of the underwriting compensation payable to the underwriters in connection with this offering. See the section titled “Underwriting” beginning on page 103 of this prospectus for additional disclosure regarding underwriter compensation and offering expenses. |
|
(3) |
We estimate the total expenses of this offering will be approximately $ . Assumes no exercise of the over-allotment option we have granted to the underwriters as described below. |
Neither the Securities and Exchange Commission (the “SEC”) nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
We have granted a 45-day option to the underwriters, exercisable one or more times in whole or in part, to purchase up to 15% additional shares of Common Stock and/or Series A Warrants and/or Series B Warrants to cover over-allotments. The securities issuable upon exercise of this over-allotment option are identical to those offered by this prospectus and have been registered under the registration statement of which this prospectus forms a part.
The underwriters expect to deliver our shares of Common Stock and Warrants to purchasers in the offering on or about , 2022.
Sole Bookrunner
Maxim Group LLC
The date of this prospectus is October , 2022
Table of Contents
|
1 |
|
|
1 |
|
| 15 | |
| 19 | |
| CAUTIONARY NOTE REGARDING FORWARD LOOKING STATEMENTS | 36 |
| 37 | |
| MARKET FOR OUR COMMON STOCK | 38 |
| 38 | |
| 39 | |
| 41 | |
|
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
44 |
| 66 | |
| 77 | |
| 82 | |
| 85 | |
| 86 | |
| 88 | |
| 96 | |
| 98 | |
|
MATERIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS FOR NON-U.S. HOLDERS OF OUR COMMON STOCK |
99 |
| 103 | |
| 111 | |
| 111 | |
| 111 | |
| F-1 |
You should rely only on the information contained in this prospectus or in any free writing prospectus that we may provide to you in connection with this offering. Neither we nor any of the underwriters has authorized anyone to provide you with information different from, or in addition to, that contained in this prospectus or in any such free writing prospectus. If anyone provides you with different or inconsistent information, you should not rely on it. We can provide no assurance as to the reliability of any other information that others may give you. Neither we nor any of the underwriters is making an offer to sell or seeking offers to buy these securities in any jurisdiction where or to any person to whom the offer or sale is not permitted. The information in this prospectus is accurate only as of the date on the front cover of this prospectus, and the information in any free writing prospectus that we may provide you in connection with this offering is accurate only as of the date of such free writing prospectus. Our business, financial condition, results of operations and prospects may have changed since those dates.
INDUSTRY AND MARKET DATA
This prospectus contains estimates and other statistical data made by independent parties and by us relating to market size and growth and other data about our industry. We obtained the industry and market data in this prospectus from our own research as well as from industry and general publications, surveys and studies conducted by third parties. This data involves a number of assumptions and limitations and contains projections and estimates of the future performance of the industries in which we operate that are subject to a high degree of uncertainty, including those discussed in “Risk Factors.” Information that is based on estimates, forecasts, projections, market research or similar methodologies is inherently subject to uncertainties. Actual events or circumstances may differ materially from events and circumstances that are assumed in this prospectus.
PROSPECTUS SUMMARY
This summary highlights selected information contained elsewhere in this prospectus and is qualified in its entirety by the more detailed information and financial statements included elsewhere in this prospectus. It does not contain all the information that may be important to you and your investment decision. You should carefully read this entire prospectus, including the matters set forth under the sections titled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our financial statements and related notes. In this prospectus, unless context requires otherwise, references to “we,” “us,” “our,” or “the Company” refer to Mitesco, Inc. and its subsidiaries. Unless otherwise noted and other than in our historical financial statements and the notes thereto, the share and per share information in this prospectus reflects a proposed reverse stock split of the outstanding Common Stock and treasury stock of the Company at an assumed 1-for-50 ratio to occur prior to the closing of the offering.
Company Overview
The following discussion and analysis should be read in conjunction with the financial statements and notes thereto appearing elsewhere herein.
We intend 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”). Our clinics provide complete primary care, basic behavioral healthcare including care in the areas of depression, anxiety and attention deficit hyperactivity disorder and basic dermatological services in the areas of Botox injections, skin procedures, biopsies, cancer screening and acne treatment for our consumers. The medical practice focuses on whole person health and prevention. We seek to create a jointly developed longitudinal care plan with each individual that focuses on the patient’s individual quality of life goals. We personalize care interactions based upon the individuals care style as identified by University of Oregon’s “Patient Activation Measure” a peer reviewed, validated tool also in use by the Centers for Medicare and Medicaid. We pursue health equity in our practices and are a member of the National Minority Health Association. Our practice accepts most major commercial insurances, Medicare, Medicaid, and self-pay patients. We support pricing transparency and maintain a published price list for self-pay patients.
In addition to the traditional fee-for-service medical care, we offer a variety of services focused on wellness for both individuals and self-funded employers. Our wellness offerings include dermatological services, weight management, nutritional and diabetes coaching as well as offering products such as educational books, vitamins, and essential oils. Most of our wellness products and services are not covered by insurance and are paid for by the consumer at the time of service. We offer our services both in the clinics as well as via telehealth and seek to facilitate same day and next day appointments for client convenience. Mitesco’s mission is to increase convenience and access to care, improve the quality of care, and reduce cost.
We opened our first primary care clinic “The Good Clinic” in Northeast Minneapolis, Minnesota in February 2021, and have added five additional operating clinics as of the date of this filing for a total of six clinics open and operating at September 8, 2022. We have three additional leases for new clinics, two in Denver, Colorado and one additional in Minneapolis, Minnesota. These new locations are expected to open in the first quarter of 2023. We also plan to open clinics in additional states that allow practice by Nurse Practitioners and are experiencing a shortage of available primary care providers, including Arizona and Florida. We plan to open clinics in residential concentrations of population to enhance the convenience, especially timely due to the changes in community travel patterns resulting from the pandemic based on the availability of funding. Our clinicians use both telehealth (virtual) and in-person visits to treat and coach the clients along their journey to better health and quality of life. Our clinics are led by Nurse Practitioners that use their license, extensive training, expertise, and empathy to help people remain stable or improve their health. We emphasize wellness, beginning with a clients’ co-developed plan that identifies from where a person is starting and constructs a plan for how they can achieve their goals. The practice uses an integrated health approach that includes an assessment of both the individual’s behavioral and physical health and combines this with their activation level and their goals. The clinic offers wellness coaching, behavioral health care, episodic care, dermatologic services, and supplements. We seek to care for the whole person’s needs.
Like the first clinic we opened, we will continue to seek to locate clinics convenient to residential centers. In pursuit of this approach, we intend to continue to expand our relationships with large-scale developers. While we have no formal relationship with these developers, other than as a tenant, we believe such relationships give us an advantage in recruiting and retaining clients in close proximity to our locations. We believe that our clinics will be viewed as an amenity for the high-rise developments in which we are located. We plan to mirror this approach in residential developments in Denver, Colorado and in other markets as we expand. We may also seek to grow through the acquisition of existing clinic operations which would be integrated into our operating approach.
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 prospectus, we are not subject 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. See the sections titled “Government Regulation,” “The Affordable Care Act,” “Federal Anti-Kickback Statutes,” “Federal Stark Law,” “Health Information Privacy and Security Standards,” “Environmental and Occupational Safety and Health Administration Regulations,” and “Federal and State Healthcare Laws” beginning on page 73 of this prospectus for additional disclosure regarding the laws and regulations applicable to our operations.
We can give no assurance that its 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.
Corporate Organizational Chart
| (1) |
Due to the prohibition of corporate medicine in Minnesota and Colorado, these entities are owned by licensed nurse practitioners and are managed and controlled under contract by The Good Clinic LLC using a variable interest entity structure. A prohibition on the corporate practice of medicine by statute, regulation, board of medicine or attorney general guidance, or case law, exists in certain of the U.S. states in which we operate. These laws generally prohibit the practice of medicine by lay persons or entities and are intended to prevent unlicensed persons or entities from interfering with or inappropriately influencing providers’ professional judgment. We do not own the Good Clinic MN PLLC or the Good Clinic CO PLLC (together, the “Good Clinic PLLCs”). The Good Clinic LLC manages all administrative services. All clinical decisions are the purview of the Good Clinic PLLCs. Please see Note 3 to the condensed consolidated financial statements and Note 3 to the consolidated financial statements for a discussion of the principles of consolidation. |
Competition
The market for healthcare solutions including walk in clinics and telehealth services is competitive. We compete in a fragmented primary care market with direct and indirect competitors that offer varying levels of impact to our stakeholders such as insurance companies, patients, and employers. Our competitive success is contingent on our ability to simultaneously address the needs of key stakeholders efficiently and with superior outcomes at scale compared with competitors. We compete with walk-in clinics, traditional healthcare providers, and primary care medical practices, care management and coordination, digital health, and telehealth companies. Competition in our market involves rapidly changing technologies, evolving regulatory requirements and industry expectations, frequent new product and service introductions and changes in customer and patient requirements. If we are unable to keep pace with the evolving needs of our clients, members and partners and continue to develop and introduce new applications and services in a timely and efficient manner, demand for our solutions and services may be reduced and our business and results of operations would be harmed.
Our business is dependent on completing our clinics and gaining patients and customers in our target markets. However, the healthcare market is competitive, which could make it difficult for us to succeed. We face competition in the healthcare industry for our solutions and services from a range of companies and providers, including traditional healthcare providers and medical practices that offer similar services. These competitors primarily include primary care providers who are employed by or affiliated with health networks. Our indirect competitors also include episodic consumer-driven point solutions such as telemedicine as well as urgent care providers. Generally, urgent care providers in the local communities will provide services similar to those we intend to offer, and our competitors (1) are more established than we are, (2) may offer a broader array of services or more desirable facilities to patients and providers than ours, and (3) may have larger or more specialized medical staffs to admit and refer patients, among other things. Our competition varies by state but generally includes local health systems, primary care physician offices and urgent care centers.
Our competitors may have greater name recognition, longer operating histories and significantly greater financial and other resources than we do. Further, our competitors may be acquired by third parties with greater available resources. As a result, our competitors may be able to respond more quickly and effectively than we can to new or changing opportunities, technologies, standards, or patient requirements and may have the ability to initiate or withstand substantial price competition. In addition, our competitors have established, and may in the future establish, cooperative relationships with vendors of complementary technologies or services to increase the availability of their solutions in the marketplace. Accordingly, new competitors or alliances may emerge that have greater market share, a larger member or patient base, more widely adopted proprietary technologies, greater marketing expertise, greater financial resources, and larger sales forces than we have, which could put us at a competitive disadvantage. Our competitors could also be better positioned to serve certain segments of the healthcare market, which would limit our member and patient growth. In light of these factors, even if our solution is more effective than those of our competitors, current members, health network partners and enterprise clients may accept alternative competitive solutions in lieu of purchasing our solution. If we are unable to compete in the healthcare market, our business would be harmed.
We may encounter increased competition from system-affiliated hospitals and healthcare companies, health insurers and private equity companies seeking to acquire providers in specific geographic markets. We also may face competition from primary care providers, and outpatient centers for market share and for providers and personnel. Furthermore, some of the clinics and medical offices that compete with us may be government agencies or not-for-profit organizations supported by endowments and charitable contributions and can finance capital expenditures and operations on a tax-exempt basis. Competitors may also be better positioned to contract with leading health network partners in our target markets. If our competitors are better able to attract patients, contract with health network partners, recruit providers, expand services or obtain favorable managed care contracts at their facilities than we are, we may experience an overall decline in member volumes and net revenue. We cannot assure we will be able to compete in the markets in which we operate which could cause you to lose your investment.
Our Competitive Strengths
We believe the following strengths and market dynamics provide us a competitive advantage in opening three or more clinics in 2022. As additional capital is available to the Company, we will pursue opening 50 new clinics in the next three years:
|
● |
Experienced management team - with a proven track record of growing healthcare services companies, including companies operating in our current space. |
|
● |
Experienced Board of Directors - that have been recruited for their specific expertise in business strategy, operations, healthcare, business development, accounting, public company management, information systems and technology, investment banking, merger & acquisitions, regulatory affairs, state, federal, and international law, political process & lobbying, and investment fund management and securities research. |
|
● |
Cost Advantage - Based on Bureau of Labor Statistics for primary care providers, the 2021 median annual pay for a Nurse Practitioner (NP) was $120,680 compared to the median annual pay for Family Medicine Physicians was $235,930. CMS established NP reimbursement at 85% of physician reimbursement for the same medical, surgical, and diagnostic procedure or service. Based on these considerations we believe we will have approximately a forty percent (40%) labor cost advantage over the traditional primary care service provider by employing Nurse Practitioners as the primary healthcare professional as compared to a traditional physician-employed primary care model. |
|
|
● |
Diversified product line including |
|
o |
Insurance paid (Commercial, Medicare and Medicaid) and cash paid primary care and behavioral services |
|
o |
Urgent care |
|
o |
Preventative care |
|
o |
Wellness care |
|
o |
Nutrition coaching |
|
o |
Population health services management |
|
o |
Telehealth care |
|
o |
Department of Transportation annual exams and First Responder Exams |
|
| o | In-clinic product sales of books, vitamins, supplements, and essential oils |
|
● |
Large healthcare market opportunity |
|
o |
U.S.’s total spend on healthcare equaled 19.7% of GDP at about $4.1 Trillion in 2020 according to the Centers for Medicare & Medicaid Services. Assuming that consumers want to lower their health care costs, we believe we can provide lower health care costs to consumers by utilizing primary care and Nurse Practitioners versus specialists. |
|
o |
Grandview Research values the US primary care market at $260.1 billion in 2021 and expects it to expand at a compound rate (CAGR) of 3.2% from 2022 to 2030. The WHO calls primary health care “the most inclusive, equitable, cost-effective and efficient approach to enhance people’s physical and mental health, as well as their social well-being.” CMS in their Primary Care First Model brief notes, “Primary care is central to a high-functioning healthcare system and thus, there is an urgent need to preserve and strengthen primary care.” The Advisory Board noted in their February 24, 2022, daily briefing that “investors are also pouring billions into primary care companies, amounting to $16 billion in 2021 alone.” The Good Clinic locations provide net new primary care access for the US healthcare consumer. |
|
o |
U.S. skin care market is large and growing. According to an October 2021 report by Statista, the U.S. skin care market was estimated at $17.5 billion in 2020. |
|
o |
The North America dietary supplements market is estimated $48.4 billion in 2021, and expected to grow at a compound annual growth rate (CAGR) of 5.6% from 2022 to 2030 according to a report from Grand View Research. |
|
● |
Shortage of primary care providers - We believe there is a primary care physician shortage in America. The Association of American Medical Colleges in a June 21, 2021 report, states that there is a 17,800 to as much as 48,000 shortfall of primary care physicians by 2034. The Good Clinic is just one of a few organizations providing net new capacity to serve the people impacted by the shortage. |
Listing on the Nasdaq Capital Market
Our Common Stock is currently quoted on the OTCQB Market. There is no established trading market for the Series A Warrants and Series B Warrants. We are applying to list the Series A Warrants and Series B Warrants for trading on the Nasdaq Capital Market, but we cannot assure you that we will meet all of the required listing standards. In connection with this offering, we have applied to list our Common Stock offered in the offering on the Nasdaq Capital Market (“Nasdaq”) under the symbol “MITI”. If our application to Nasdaq is not approved or we otherwise determine that we will not be able to secure the listing of our Common Stock, Series A Warrants and Series B Warrants on Nasdaq we will not complete this offering and we will then revise our approach and continue to seek financing for our expansion and operating needs in the debt and equity markets.
If our application is approved, we expect to list our Common Stock, Series A Warrants and Series B Warrants offered in the offering on Nasdaq upon consummation of the offering, at which point our Common Stock will cease to be traded on the OTCQB Market. The Common Stock and Series A Warrants and Series B Warrants comprising the Units will begin separate trading immediately upon issuance of the Units. No assurance can be given that our listing application will be approved. Nasdaq listing requirements include, among other things, a stock price threshold. As a result, prior to effectiveness, we will need to take the necessary steps to meet Nasdaq listing requirements, including but not limited to a reverse split of our outstanding Common Stock.
Reverse Stock Split
Our stockholders of record as of December 15, 2021 approved a reverse stock split within the range of 1:2 to 1:50 of our issued and outstanding shares of Common Stock and authorized the Board, in its discretion, at any time during the next year, to determine a) if a reverse split would be beneficial, and b) if desirable to then determine the final ratio, effective date, and date of filing of the certificate of amendment to our certificate of incorporation, as amended, in connection with the reverse stock split. The reverse stock split will not impact the number of authorized shares of Common Stock that will remain at 500,000,000 shares. Unless otherwise noted, the share and per share information in this prospectus reflects, other than in our financial statements and the notes thereto, a proposed reverse stock split of the outstanding Common Stock and treasury stock of the Company at an assumed 1-for-50 ratio to occur immediately following the effective date but prior to the closing of the offering.
Bridge Financings
Series D Preferred Stock
On November 19, 2021, we closed a bridge financing round totaling $3.1 million of a series D preferred stock sold to investors in a private placement. Each series D Unit will have a purchase price of $1.00 per Unit, with each Unit consisting of (a) one share of a newly formed Series D Preferred Stock, par value $0.01 per share (the “Series D Preferred Stock”), (b) one warrant (the “Series A Warrants”) to purchase 2.1 shares of our Common Stock at a purchase price of $25.00 per whole share of Common Stock, and (c) one warrant (the “Series B Warrants”) to purchase 2.1 shares of Common Stock at a purchase price of $37.50 per whole share.
Pursuant to the Certificate of Designations, Preferences and Rights of the Series D Preferred Stock of the Company, Inc., filed with the Secretary of State of the State of Delaware on October 18, 2021 (the “COD”), there are 10,000,000 shares of our preferred stock that have been designated as the Series D Preferred Stock and each share of the Series D Preferred Stock is convertible at the option of the holder thereof, or automatically upon the request of our underwriters that the Series D Preferred Stock convert to shares of Common Stock or upon listing of our Common Stock on a national securities exchange. The number of shares of Common Stock issuable upon the conversion of each share of Series D Preferred Stock is calculated by dividing the Conversion Amount (defined in the COD as the Stated Value, $52.50 per share, plus accrued and unpaid dividends) by the $12.50 conversion price.
10% Promissory Note and Warrants to Michael C. Howe Living Trust
Howe Note 1 – We issued a 10% Promissory Note due October 10, 2022 (the “Howe Note 1”), dated December 30, 2021, to the Michael C. Howe Living Trust, which was subsequently amended. Michael C. Howe is the Chief Executive Officer of the Good Clinic LLC, one of our subsidiaries. The principal amount of the Howe Note 1 is $1,000,000, carries a 10% interest rate per annum, accrued monthly, and has a maturity date that is the earlier of (i) October 10, 2022, or (ii) five (5) business days after the date on which we successfully lists its shares of common stock on Nasdaq or NYSE. The purchase price of the Howe Note 1 payable to us for the Howe Note 1 was $850,000 and was funded on December 30, 2021. The amount payable at maturity will be $1,000,000 plus 10% of that amount plus any accrued and unpaid interest. Following an event of default, as defined in the 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 contains a “most favored nations” clause that provides that, so long as the Howe Note 1 is outstanding, if we issue 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 will be issued 8,200 of common stock as commitment shares. As further consideration for the purchase price of the Howe Note 1, promptly following the issue of the Howe Note 1, we shall issue to Mr. Howe two common stock purchase warrants, entitling Mr. Howe to purchase (i) 42,000 shares of our common stock on substantially the same terms as the Series A warrant issued in connection with the Company’s Series D Convertible Preferred Stock, and (ii) 42,000 shares of our common stock on substantially the same terms as the Series B warrant issued in connection with our Series D Convertible Preferred Stock, one Series A Warrant, and one Series B Warrant. The Series A and Series B Warrants issued to Mr. Howe under the Howe Note 1 had a fair value of $261,568 at the date of issuance, which was recorded as a discount to the Howe Note 1.
Debt for Equity Exchange with Gardner Builders Holdings, LLC
We entered into a debt-for-equity exchange agreement with Gardner Builders Holdings, LLC (“Gardner”) on January 5, 2022 (the “Gardner Agreement”). Pursuant to the Gardner Agreement, we have authorized the issuance of shares of restricted common stock, par value $0.01 per share, of MITI (the “Restricted Shares”) to Gardner in exchange for the Company Debt Obligations, as defined below.
The Gardner Agreement settles certain amounts owed by us to Gardner (the “Accounts Payable Amount”) as well as upcoming amounts that will become due between the date of the Gardner Agreement and April 1, 2022. The Gardner Agreement also settles incurred interest and penalties on the amounts owed through January 5, 2022, as well as future interest payments on amounts to be incurred in the first quarter of 2022 (collectively, the “Additional Costs”, and combined with the Accounts Payable Amount, the “Company Debt Obligations”). The Accounts Payable Amount is $500,000, the Additional Costs is $294,912.56 and the conversion price is $12.50. As a result, 63,593 Restricted Shares were authorized to be issued. Our Board of Directors approved the Gardner Agreement on January 5, 2022.
10% Promissory Notes to Lawrence Diamond
Diamond Note 1 - We issued a 10% Promissory Note due August 14, 2022 (the “Diamond Note 1”), dated February 14, 2022, to Lawrence Diamond, which was subsequently amended. Mr. Diamond is our Chief Executive Officer and a member of our Board of Directors. The principal amount of the Diamond Note 1 is $175,000, carries a 10% interest rate per annum, accrued monthly, and has a maturity date that is the earlier of (i) October 10, 2022, or (ii) five business days after the date on which we successfully list our shares of common stock on Nasdaq or NYSE. The purchase price of the Diamond Note 1 payable to us for the Diamond Note 1 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 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 contains a “most favored nations” clause that provides that, so long as the Diamond Note 1 is outstanding, if we issue any new security, which Mr. Diamond believes contains a term that is more favorable than those in the Diamond Note 1, we shall notify Mr. Diamond of such term, and such term, at the option of Mr. Diamond, shall become a part of the Diamond Note 1. In addition to the Diamond Note 1 Mr. Diamond will be issued (i) 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; and (ii) 1,435 shares of common stock as commitment shares. These warrants have all of the same terms as those previously issued in conjunction with our Series C Preferred shares and its Series D Preferred shares.
Diamond Note 2 - We issued a 10% Promissory Note due October 10, 2022 (the “Diamond Note 2”), dated March 18, 2022, to Lawrence Diamond, which was subsequently amended. The principal amount of the Diamond Note 2 is $235,294, carries a 10% interest rate per annum, accrued monthly, and has a maturity date that is the earlier of (i) October 10, 2022, (ii) five (5) business days after the date on which we successfully list its shares of common stock on Nasdaq or NYSE. The purchase price of the Diamond Note 2 payable to us for the Diamond Note 2 was $200,000 and was funded on March 18, 2022. The amount payable at maturity will be $235,294 plus 10% of that amount plus any accrued and unpaid interest. Following an event of default, as defined in the Diamond Note 2, the principal amount shall bear interest for each day until paid, at a rate per annum equal to the lesser of the maximum interest permitted by applicable law and 18%. The Diamond Note 2 contains a “most favored nations” clause that provides that, so long as the Diamond Note 2 is outstanding, if we issue 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 will be issued 4,000 5-year warrants at a price of $25.00 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, and 1,929 shares as commitment shares. All but $23,529 of the Diamond Note 2 was paid off on April 8, 2022.
Diamond Note 3 - We issued a 10% Promissory Note due October 10, 2022 (the “Diamond Note 3”), dated April 27, 2022, to Lawrence Diamond, which was subsequently amended. The principal amount of the Diamond Note 3 is $235,294.00, carries a 10% interest rate per annum, accrued monthly, and has a maturity date that is the earlier of (i) October 10, 2022, or (ii) five (5) business days after the date on which we successfully lists its shares of common stock on Nasdaq or NYSE. The purchase price of the Diamond Note 3 payable to us 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 Diamond Note 3 is outstanding, if we issue 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 will be issued (i) 1,929 5-year warrants at a price of $25.00 that may be exercised on substantially the same terms as the Series A warrant issued in connection with our Series D Convertible Preferred Stock and (ii) 1,929 shares of Common Stock as commitment shares.
Diamond Note 4 - We 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, accrued monthly, and has a maturity date that is the earlier of (i) five business days after the date on which we successfully lists its shares of common stock on Nasdaq or NYSE, or (ii) October 10, 2022. The purchase price of the Diamond Note 4 payable to us for the Diamond Note 4 was $40,000 and was funded on May 18, 2022. The amount payable at maturity will be $47,059 plus 10% of that amount plus any accrued and unpaid interest. Following an event of default, as defined in the Diamond Note 4, the principal amount shall bear interest for each day until paid, at a rate per annum equal to the lesser of the maximum interest permitted by applicable law and 18%. The Diamond Note 4 contains a “most favored nations” clause that provides that, so long as the Diamond Note 4 is outstanding, if we issue any new security, which the Mr. Diamond reasonably believes contains a term that is more favorable than those in the Diamond Note 4, we shall notify the 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”) at a price of $25.00 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.
May 26, 2022 Notes - We 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 is the Chief Legal Officer of the Company.
The May 26 Notes carry a 10% interest rate 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 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.
Securities Purchases Agreement with AJB Capital Investments, LLC
On March 18, 2022, we 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 Common Stock, which AJB Commitment Fee Shares can be decreased to 14,400 shares ($180,000) if the Company repays the AJB Note on or prior its maturity, (ii) a promissory note in the aggregate principal amount of $750,000 (the “AJB Note”), and (iii) Common Stock Purchase Warrants to purchase up to an aggregate of 15,000 shares of the 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.
Pursuant to the terms of the AJB Agreement, the initial AJB Commitment Fee Shares were issued at a value of $430,000, the AJB Note was issued in a principal amount of $750,000 for a purchase price of $675,000, resulting in an original issue discount of $75,000; and the AJB Warrants were issued, with an initial exercise price of $25.00 per share, subject to adjustment as described herein. The aggregate cash subscription amount received by the Company from AJB for the issuance of the AJB Commitment Fee Shares, AJB Note and AJB Warrants was $616,250, due to a reduction in the $675,000 purchase price as a result of broker, legal, and transaction fees.
As previously disclosed on our Form 8-K filed on March 26, 2021 and October 22, 2021, we issued the Series C Convertible Preferred Stock and Series D Convertible Preferred Stock to the investors named therein (the “Series C Investors” and “Series D Investors”). We obtained consents and waivers from the Series C and Series D Investors to allow the Company to enter into the AJB Agreement. We issued 8,220 shares of Common Stock to the Series C Investors and 25,420 shares of Common Stock to the Series D Investors in connection with obtaining their consents and waivers.
Securities Purchase Agreement with Anson Investment Master Fund and Anson East Master Fund
On April 6, 2022, we entered into separate Securities Purchase Agreement with each of Anson East Master Fund LP (“AEMF”) (the “AEMF Purchase Agreement”) and Anson Investments Master Fund LP (“AIMF”, and collectively with AEMF, the “Anson Investors”) (the “AIMF Purchase Agreement, together with the AEMF Purchase Agreement, the “Anson Agreements”) with respect to the sale and issuance to AEMF and AIMF of: (i) an aggregate initial commitment fee in the amount of $430,000 in the form of 34,400 shares (the “Anson Commitment Fee Shares”) of the Common Stock, which Anson Commitment Fee Shares can be decreased to 14,448 shares ($180,000) if we repay the Anson Notes on or prior their maturity, (ii) promissory notes in the aggregate principal amount of $750,000 (the “Anson Notes”), and (iii) Common Stock Purchase Warrants to purchase up to an aggregate of 15,000 shares of the Common Stock (the “Anson Warrants”). The Anson Notes and Anson Warrants were issued on April 6, 2022 and were held in escrow pending effectiveness of the Anson Agreements.
Pursuant to the terms of the Anson Agreements, the initial Anson Commitment Fee Shares were issued at an aggregate value of $430,000, the Anson Notes were issued in an aggregate principal amount of $750,000 for an aggregate purchase price of $675,000, resulting in an aggregate original issue discount of $75,000; and the Anson Warrants were issued, with an initial exercise price of $25.00 per share, subject to adjustment as described herein. The aggregate cash subscription amount received by the Company from the Anson Investors for the issuance of the Anson Commitment Fee Shares, Anson Notes and Anson Warrants was $629,500, due to a reduction in the $675,000 aggregate purchase price as a result of broker, legal, and transaction fees.
Securities Purchase Agreement with GS Capital Partners
On April 18, 2022, we entered into a Securities Purchase Agreement (the “GS Agreement”) with GS Capital Partners, 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 Commitment Fee Shares”) of the Common Stock, which GS Commitment Fee Shares can be decreased to 5,326 shares ($66,570) if the Company repays the GS Note on or prior to its maturity, (ii) a promissory note in the aggregate principal amount of $277,777 (the “GS Note”), and (iii) Common Stock Purchase Warrants to purchase up to an aggregate of 5,556 shares of the Common Stock (the “GS Warrants”). The GS Note and GS Warrants were issued on April 18, 2022.
Pursuant to the terms of the GS Agreement, the initial GS Commitment Fee Shares were issued at a value of $159,259, the GS Note was issued in a principal amount of $277,777 for a purchase price of $250,000, resulting in an original issue discount of $27,777; and the GS Warrants were issued, with an initial exercise price of $25.00 per share, subject to adjustment as described herein. The aggregate cash subscription amount received by us from GS Capital for the issuance of the GS Commitment Fee Shares, GS Note, and GS Warrants was $227,500, due to a reduction in the $250,000 purchase price as a result of broker, legal, and transaction fees.
Securities Purchase Agreement with Kishon Investments
On May 10, 2022, we 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 our Common Stock, (ii) promissory note in the principal amount of $277,777 due on November 10, 2022 (the “Kishon Note”), and (iii) Common Stock Purchase Warrants to purchase up to 5,556 shares of the Common Stock (the “Kishon Warrants”). The Kishon Note and Kishon Warrants were issued on May 10, 2022 and were held in escrow pending effectiveness of the Kishon Agreement.
Pursuant to the terms of the Kishon Agreement, the initial Kishon Commitment Fee Shares were issued at a value of $159,259, the Kishon 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 Kishon Warrants were issued, with an initial exercise price of $25.00 per share, subject to adjustment.
10% Promissory Notes Issued on June 9, 2022
We issued two 10% Promissory Notes due as described below (individually, the “Howe Note 2” and the “Dragon Note”, and collectively, the “June 9 Notes”), dated June 9, 2022, to Michael C. Howe Living Trust and Dragon Dynamic Funds Platform Ltd. (the “June 9 Lenders”) and in respect of which we received proceeds of $755,000. Michael C. Howe is the Chief Executive Officer of the Good Clinic LLC, one of the Company’s subsidiaries.
The June 9 Notes carry a 10% interest rate per annum, accrued monthly. The Howe Note 2 has a maturity date that is the earlier of (i) October 10, 2022, or (ii) five business days after the date on which we successfully list our shares of common stock on Nasdaq or NYSE. The Dragon Note has a maturity date that is the earlier of (i) December 9, 2022, or (ii) the date on which we successfully list our shares of common stock on Nasdaq or NYSE. The aggregate amount payable at maturity will be $888,235 plus 10% of that amount plus any accrued and unpaid interest. In addition, the June 9 Lenders will be issued in the aggregate (1) 7,284 five-year warrants (the “June 9 Warrants”) and (2) 7,284 shares of Common Stock as commitment shares. The June 9 Warrants have an initial exercise price of $25.00 per share. The June 9 Warrants are not exercisable for six months following their issuance.
10% Promissory Notes Issued on July 7, 2022
On July 7, 2022, the Company issued two 10% Promissory Notes due as described below (individually, the “Schrier Note” and the “William Mackay Note”, and collectively, the “July 7 Notes”), to Charles Schrier and William Mackay Investments LLC, (together, the “July 7 Lenders”) and in respect of which the Company received proceeds of $270,000.
The July 7 Notes carry a 10% interest rate per annum, accrued monthly and payable at maturity. The Schrier Note 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 William Mackay Note has a maturity date that is the earlier of (i) August 8, 2022, or (ii) five business days after the date on which the Company successfully lists its shares of common stock on Nasdaq or NYSE.
The aggregate amount payable at maturity will be $317,647 plus 10% of that amount plus any accrued and unpaid interest. Following an event of default, as defined in the July 7 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 July 7 Notes contain a “most favored nations” clause that provides that, so long as the July 7 Notes are outstanding, if the Company issues any new security, which the July 7 Lenders reasonably believe contains a term that is more favorable than those in the July 7 Notes, the Company shall notify the July 7 Lenders of such term, and such term, at the option of the July 7 Lenders, shall become a part of the July 7 Notes. In addition, the July 7 Lenders will be issued in the aggregate (1) 2,605 five-year warrants (the “Warrants”) and (2) 2,605 shares of Common Stock as commitment shares (“Commitment Shares”). The Commitment Shares are priced at $12.50. The Warrants have an initial exercise price of $25.00 per share. The Warrants are not exercisable for six months following their issuance. The July 7 Lenders may exercise the Warrants on a cashless basis if after the six-month anniversary of date of issuance, the shares of Common Stock underlying the Warrants are not then registered pursuant to an effective registration statement.
10% Promissory Note and Warrants to Michael C. Howe Living Trust
On July 21, 2022, the Company issued a 10% Promissory Notes due to Michael C Howe Living Trust (the “Howe Note 3”) and in respect of which the Company received proceeds of $255,000. The Howe Note 3 carries a 10% interest rate per annum, accrued monthly and payable at maturity. The Howe Note 3 has a maturity date that is the earlier of (i) October 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 amount payable at maturity will be $300,000 plus 10% of that amount plus any accrued and unpaid interest. Following an event of default, as defined in the Howe Note 3, the principal amount shall bear interest for each day until paid, at a rate per annum equal to the lesser of the maximum interest permitted by applicable law and 18%. The Howe Note 3 contains a “most favored nations” clause that provides that, so long as the Howe Note 3 is outstanding, if the Company issues any new security, which Mr. Howe reasonably believes contains a term that is more favorable than those in the Note, the Company shall notify Mr. Howe of such term, and such term, at the option of Mr. Howe, shall become a part of the Howe Note 3. In addition, Mr. Howe will be issued (1) 2,460 five-year warrants (the “Warrants”) and (2) 2,460 shares of Common Stock as commitment shares (“Commitment Shares”). The Commitment Shares are priced at $12.50. The Warrants have an initial exercise price of $25.00 per share. The Warrants are not exercisable for six months following their issuance. Mr. Howe may exercise the Warrants on a cashless basis if after the six-month anniversary of date of issuance, the shares of Common Stock underlying the Warrants are not then registered pursuant to an effective registration statement.
10% Promissory Note and Warrants to Juan Carlos Iturregui
On July 21, 2022, the Company issued a 10% Promissory Notes due to Juan Carlos Iturregui (the “Iturregui Note”) and in respect of which the Company received proceeds of $25,000. Mr. Iturregui is a member of the Company’s Board of Directors. The Iturregui Note carries a 10% interest rate per annum, accrued monthly and payable at maturity. The Iturregui Note has a maturity date that is the earlier of (i) January 21, 2023, or (ii) five business days after the date on which the Company successfully lists its shares of common stock on Nasdaq or NYSE. The amount payable at maturity will be $29,412 plus 10% of that amount plus any accrued and unpaid interest. Following an event of default, as defined in The Iturregui Note, the principal amount shall bear interest for each day until paid, at a rate per annum equal to the lesser of the maximum interest permitted by applicable law and 18%. The Iturregui Note contains a “most favored nations” clause that provides that, so long as The Iturregui Note is outstanding, if the Company issues any new security, which Mr. Iturregui reasonably believes contains a term that is more favorable than those in The Iturregui Note, the Company shall notify Mr. Iturregui of such term, and such term, at the option of Mr. Iturregui, shall become a part of The Iturregui Note. In addition, Mr. Iturregui will be issued (1) 2,460 five-year warrants (the “Warrants”) and (2) 2,460 shares of Common Stock as commitment shares (“Commitment Shares”). The Commitment Shares are priced at $12.50. The Warrants have an initial exercise price of $25.00 per share. The Warrants are not exercisable for six months following their issuance. Mr. Iturregui may exercise the Warrants on a cashless basis if after the six-month anniversary of date of issuance, the shares of Common Stock underlying the Warrants are not then registered pursuant to an effective registration statement.
10% Promissory Note and Warrants to Erik Scott Nommsen
On July 26, 2022, the Company issued a 10% Promissory Notes due to Erik Scott Nommsen (the “Nommsen Note”) and in respect of which the Company received proceeds of $50,000. The Nommsen Note carries a 10% interest rate per annum, accrued monthly and payable at maturity. The Nommsen Note has a maturity date that is the earlier of (i) October 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 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 contains a “most favored nations” clause that provides that, so long as the Nommsen 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 will be issued (1) 482 five-year warrants (the “Warrants”) and (2) 482 shares of Common Stock as commitment shares (“Commitment Shares”). The Commitment Shares are priced at $12.50. The Warrants have an initial exercise price of $25.00 per share. The Warrants are not exercisable for six months following their issuance. Mr. Nommsen may exercise the Warrants on a cashless basis if after the six-month anniversary of date of issuance, the shares of Common Stock underlying the Warrants are not then registered pursuant to an effective registration statement.
10% Promissory Note and Warrants to James H. Caplan
On July 27, 2022, the Company issued a 10% Promissory Notes due to James H. Caplan (the “Caplan Note”) and in respect of which the Company received proceeds of $50,000. The Caplan Note carries a 10% interest rate per annum, accrued monthly and payable at maturity. The Caplan Note has a maturity date that is the earlier of (i) January 21, 2023, or (ii) five business days after the date on which the Company successfully lists its shares of common stock on Nasdaq or NYSE. The amount payable at maturity will be $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 Caplan 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 will be issued (1) 482 five-year warrants (the “Warrants”) and (2) 482 shares of Common Stock as commitment shares (“Commitment Shares”). The Commitment Shares are priced at $12.50. The Warrants have an initial exercise price of $25.00 per share. The Warrants are not exercisable for six months following their issuance. Mr. Caplan may exercise the Warrants on a cashless basis if after the six-month anniversary of date of issuance, the shares of Common Stock underlying the Warrants are not then registered pursuant to an effective registration statement.
10% Promissory Note and Warrants to Jack Enright
On August 4, 2022, the Company issued a 10% Promissory Notes due to Jack Enright (the “Enright Note”) and in respect of which the Company received proceeds of $102,000. The Enright Note carries a 10% interest rate per annum, accrued monthly and payable at maturity. The note has a maturity of February 3, 2023. 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 Enright 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 will be issued 984 shares of Common Stock as commitment shares (“Commitment Shares”). The Commitment Shares are priced at $12.50.
10% Promissory Note and Warrants to the Finnegan Family
On August 4, 2022, the Company issued a 10% Promissory Notes due to Jessica, Kevin C., Brody, Isabella and Jack Finnegan (the “Finnegan Note 3”) and in respect of which the Company received proceeds of $25,000. Jessica Finnegan is VP of Human Resources of the Company. The Finnegan Note 3 carries a 10% interest rate per annum, accrued monthly and payable at maturity. The Finnegan Note 3 has a maturity of February 3, 2023. The amount payable at maturity will be $29,412 plus 10% of that amount plus any accrued and unpaid interest. Following an event of default, as defined in the Finnegan Note 3, the principal amount shall bear interest for each day until paid, at a rate per annum equal to the lesser of the maximum interest permitted by applicable law and 18%. The Finnegan Note 3 contains a “most favored nations” clause that provides that, so long as the Finnegan Note 3 is outstanding, if the Company issues any new security, which the Finnegans reasonably believes contains a term that is more favorable than those in the Finnegan Note 3, the Company shall notify the Finnegans of such term, and such term, at the option of the Finnegans, shall become a part of the Finnegan Note 3. In addition, the Finnegans will be issued in aggregate (1) 241 five-year warrants (the “Warrants”) and (2) 241 shares of Common Stock as commitment shares (“Commitment Shares”). The Commitment Shares are priced at $12.50. The Warrants have an initial exercise price of $25.00 per share. The Warrants are not exercisable for six months following their issuance. The Finnegans may exercise the Warrants on a cashless basis if after the six-month anniversary of date of issuance, the shares of Common Stock underlying the Warrants are not then registered pursuant to an effective registration statement.
10% Promissory Note and Warrants to Michael C. Howe Living Trust
On August 18, 2022, the Company issued a 10% Promissory Note due to Michael C Howe Living Trust (the “Howe Note 4”) and in respect of which the Company received proceeds of $170,000. The Howe Note 4 carries a 10% interest rate per annum, accrued monthly and payable at maturity. The Howe Note 4 has a maturity date that is the earlier of (i) November 30, 2022, or (ii) five business days after the date on which the Company successfully lists its shares of common stock on Nasdaq or NYSE. The aggregate amount payable at maturity will be $200,000 plus 10% of that amount plus any accrued and unpaid interest. Following an event of default, as defined in the Howe Note 4, the principal amount shall bear interest for each day until paid, at a rate per annum equal to the lesser of the maximum interest permitted by applicable law and 18%. The Howe Note 4 contains a “most favored nations” clause that provides that, so long as the Howe Note 4 is outstanding, if the Company issues any new security, which Mr. Howe reasonably believes contains a term that is more favorable than those in the Howe Note 4, the Company shall notify Mr. Howe of such term, and such term, at the option of Mr. Howe, shall become a part of the Howe Note 4. In addition, Mr. Howe will be issued 1,640 shares of Common Stock as commitment shares (the “Howe Note 4 Commitment Shares”). The Howe Note 4 Commitment Shares are priced at $12.50.
10% Promissory Notes Issued on September 2, 2022
On September 2, 2022, the Company issued four 10% Promissory Notes (the “September 2 Notes”) due to Sharon Goff, Lisa Lewis, Frank Lightmas and John Mitchell (the “September 2 Lenders”) and in respect of which the Company received proceeds of $162,350. The September 2 Notes carry a 10% interest rate per annum, accrued monthly and payable at maturity. The September 2 Notes have a maturity date that is the earlier of (i) November 30, 2022, or (ii) five business days after the date on which the Company successfully lists its shares of common stock on Nasdaq or NYSE. The aggregate amount payable at maturity will be $191,000 plus 10% of that amount plus any accrued and unpaid interest. Following an event of default, as defined in the September 2 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 September 2 Notes contain a “most favored nations” clause that provides that, so long as the September 2 Notes are outstanding, if the Company issues any new security, which the September 2 Lenders reasonably believe contains a term that is more favorable than those in the September 2 Notes, the Company shall notify the September 2 Lenders of such term, and such term, at the option of the September 2 Lenders, shall become a part of the September 2 Notes. In addition, the September 2 Lenders will be issued in the aggregate 1,567 shares of Common Stock as commitment shares (the “September 2 Notes Commitment Shares”). The September 2 Notes Commitment Shares are priced at $12.50.
10% Promissory Note to Cliff Hagan
On September 9, 2022, the Company issued a 10% Promissory Note (the “Hagan Note”) due to Cliff Hagan in respect of which the Company received proceeds of $85,000. The Hagan Note carries a 10% interest rate per annum, accrued monthly and payable at maturity. The Hagan Note 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 aggregate 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 contains a “most favored nations” clause that provides that, so long as the Hagan 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 will be issued in the aggregate 41,000 shares of Common Stock as commitment shares (the “Hagan Note Commitment Shares”). The Hagan Note Commitment Shares are priced at $0.25.
10% Promissory Note to Darling Capital, LLC
On September 14, 2022, the Company issued a 10% Promissory Note (the “Darling Note”) due to Darling Capital, LLC in respect of which the Company received proceeds of $170,000. The Darling Note carries a 10% interest rate per annum, accrued monthly and payable at maturity. The Darling Note 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 aggregate amount payable at maturity will be $200,000 plus 10% of that amount plus any accrued and unpaid interest. Following an event of default, as defined in the 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 contains a “most favored nations” clause that provides that, so long as the Darling Note is outstanding, if the Company issues any new security, which Darling Capital, LLC reasonably believes contains a term that is more favorable than those in the Darling Note, the Company shall notify Darling Capital, LLC of such term, and such term, at the option of Darling Capital, LLC, shall become a part of the Darling Note. In addition, Darling Capital, LLC will be issued in the aggregate 82,000 shares of Common Stock as commitment shares (the “Darling Note Commitment Shares”). The Darling Note Commitment Shares are priced at $0.25.
10% Promissory Note to Mack Leath
On September 15, 2022, the Company issued a 10% Promissory Note (the “Leath Note”) due to Mack Leath in respect of which the Company received proceeds of $42,500. The Leath Note carries a 10% interest rate per annum, accrued monthly and payable at maturity. The Leath Note 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 aggregate amount payable at maturity will be $50,000 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 contains a “most favored nations” clause that provides that, so long as the Leath 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 will be issued in the aggregate 41,000 shares of Common Stock as commitment shares (the “Leath Note Commitment Shares”). The Leath Note Commitment Shares are priced at $0.25.
Summary Risk Factors
Our business and our ability to execute our business strategy are subject to a number of risks of which you should be aware of before you decide to invest in our Company. The following is a summary of our key risks. A more detailed description of each of the risks can be found below under the heading “Risk Factors.”
Risks Related to our Financial Condition
|
● |
We are in the initial stages of our business plan and have limited or no historical performance on which to base an investment decision and may never become profitable. |
|
● |
There is substantial doubt about our ability to continue as a going concern. |
|
● |
If we are unable to generate significant revenue, we may need to raise additional capital which may not be available to us on acceptable terms or at all. |
|
● |
We may incur additional debt in the future which may contain restrictive covenants. |
|
● |
We have identified weaknesses in our internal controls, and we cannot provide assurances that these weaknesses will be effectively remediated, or that additional material weaknesses will not occur in the future. |
|
● |
The issuance of additional shares of our Common Stock and Warrants, or securities convertible into shares of our Common Stock, may dilute the percentage ownership of our existing stockholders and may make it more difficult to raise additional capital. |
|
|
● |
Our operating results and liquidity needs could be negatively affected by market fluctuations and economic downturns. |
|
| ● | Mechanic’s liens were placed on five of our clinics that could have a material adverse impact on our business, results of operations, and financial condition. |
Risks Related to our Business
|
● |
We are currently focused on a new business model and have extremely limited operating history and limited information and therefore our business may be difficult to evaluate. |
|
● |
Our business expansion is dependent upon us finding suitable locations for additional clients. |
|
● |
We may be unable to attract and retain sufficient numbers of qualified personnel. |
|
● |
Our business is also dependent upon the various insurance companies agreeing to reimburse patients for our services. |
|
● |
Our industry is highly competitive and there is no assurance we will successfully compete with our competitors who may have greater resources and experience than us. |
|
● |
We do not have any registered trademarks or trade names. |
|
● |
We are dependent on the successful development, marketing and advertising efforts of our clinics and telehealth services. |
|
● |
The telehealth market is immature and volatile and may never develop, or may develop more slowly than we expect, may encounter negative publicity or we may be unable to compete effectively. |
|
● |
Rapid technological change in our industry present us with significant risks and challenges. |
|
● |
Any damage to our reputation may materially and adversely affect our business, financial condition, and results of operations. |
Risks Related to Government Regulation
|
● |
If the statutes and regulations in our industry change, we could be negatively impacted. |
|
● |
The impact on our planned operations by recent and future healthcare legislation and other changes in the healthcare industry and in healthcare spending is unpredictable and volatile. |
|
● |
We are subject to federal Anti-Kickback Statutes and Federal Stark Law. |
|
● |
We must comply with Health Information Privacy and Security Standards. |
|
● |
A breach in our cyber security could cause a violation of our obligations under HIPAA, a breach of customer and patient privacy or may have other negative consequences. |
|
|
● |
We are subject to Environmental and Occupational Safety and Health Administration Regulations and other federal and state healthcare laws. |
|
● |
Changes in healthcare laws could create an uncertain environment. |
|
● |
Our operations are subject to the nation’s healthcare laws, as amended, repealed, or replaced from time to time. |
|
● |
Our revenues may depend on our patients’ receipt of adequate reimbursement from private issuers and government sponsored healthcare programs. |
Risks Related to Acquisitions
|
● |
Acquisitions may subject us to liability with regard to the creditors, customers, and shareholders of the sellers. |
|
● |
We may be unable to implement our strategy of acquiring companies. |
|
● |
Future acquisitions may result in potentially dilutive issuances of equity securities, incurrence of additional indebtedness and increased amortization expenses. |
|
● |
We face risks arising from acquisitions that we may pursue in the future. |
Risks Related to our Management
|
● |
A sizable portion of our voting securities is owned and controlled by our executive officer and certain key stockholders, and they therefore maintain significant control over the company and the outcome of matters put to a stockholder vote. |
Risks Related to this Offering and Ownership of our Common Stock
|
● |
We have broad discretion in the use of the net proceeds from this offering and may not use them effectively. |
|
| ● | Shares eligible for future sale may have adverse effects on our share price. | |
| ● | If securities or industry analysts do not publish research or publish inaccurate or unfavorable research about our business, our stock price and trading volume could decline. | |
| ● | Our stock price has fluctuated in the past, has recently been volatile and may be volatile in the future, and as a result, investors in our Common Stock, and Warrants could incur substantial losses. |
| ● | There can be no assurances that our Common Stock, Series A Warrants and Series B Warrants once listed on the Nasdaq will not be subject to potential delisting if we do not continue to maintain the listing requirements of the Nasdaq Capital Market. | |
| ● | Our reverse stock split may not result in a proportional increase in the per share price of our Common Stock. | |
|
● |
Because we may issue preferred stock without the approval of our shareholders and have other anti-takeover defenses, it may be more difficult for a third party to acquire us and could depress our stock price. | |
|
● |
Offers or availability for sale of a substantial number of shares of our Common Stock may cause the price of our Common Stock to decline. |
|
● |
Until recently, our Common Stock was thinly traded and may prevent you from selling at or near asking prices, if at all. |
Corporate Information
Mitesco, Inc., previously known as True Nature Holding, Inc., which was previously known as Trunity Holdings, Inc., a Delaware corporation, incorporated on January 18, 2012. Effective April 22, 2020, we changed our name to Mitesco, Inc.
Since 2020, our operations have focused on establishing medical clinics utilizing Nurse Practitioners under The Good Clinic name and development and acquisition of telemedicine technology. In March of 2020, we formed a wholly owned subsidiary, Mitesco NA LLC, which holds The Good Clinic LLC, a Minnesota limited liability company for our clinic business.
We opened our first primary care clinic “The Good Clinic” in Northeast Minneapolis, Minnesota in February 2021, and have added five additional operating clinics as of the date of this filing for a total of six clinics open and operating at September 8, 2022. We have three additional leases for new clinics, two in Denver, Colorado and one additional in Minneapolis, Minnesota. These new locations are expected to open in the first quarter of 2023. We are targeting to open 50 new clinics in the next three years, in addition to any existing clinics we may acquire. The pursuit of this goal is dependent upon securing the necessary financing to fund the growth beyond the six operating clinics and the three clinics leased and commencing construction.
Our website is www.mitescoinc.com and our principal executive offices is located at 1660 Highway 100 South, Suite 432, St. Louis Park, MN 55416. Our telephone number is (844) 383-8689. We make available on our website our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports, as soon as practicable after we electronically file such materials to the SEC. Our website and the information contained therein or connected thereto are not intended to be incorporated into this prospectus. Our filings are also available through the SEC website www.sec.gov.
Implications of Being a Smaller Reporting Company
We are a “smaller reporting company” as defined in the Exchange Act. We may take advantage of certain of the scaled disclosures available to smaller reporting companies so long as the market value of our voting and non-voting Common Stock held by non-affiliates is less than $250.0 million measured on the last business day of our most recently completed second fiscal quarter, or our annual revenue is less than $100.0 million during the most recently completed fiscal year and the market value of our Common Stock held by non-affiliates is less than $700.0 million measured on the last business day of our most recently completed second fiscal quarter.
SUMMARY OF THE OFFERING
|
Issuer |
Mitesco, Inc. |
|
|
Securities Offered by the Company |
Units at $ per Unit, each Unit consisting of: • One share of Common Stock; • One Series A Warrant to purchase one share of Common Stock; and • One Series B Warrant to purchase one share of Common Stock. |
|
|
|
||
|
Over-allotment option |
We have granted to the representative of the underwriters a 45-day option to purchase up to 15% additional shares of our Common Stock and/or Series A Warrants and/or Series B Warrants solely to cover over-allotments, if any. |
|
|
Common Stock outstanding before this offering (1) |
4,524,245 shares |
|
|
Common Stock outstanding after the offering (1) |
shares |
|
|
Number of Units outstanding before this offering |
0 shares |
|
|
Number of Units outstanding after this offering |
shares |
|
|
Use of proceeds |
We estimate that the net proceeds to us from this offering for the sale of Units by the Company will be approximately $ million, or approximately $ million if the underwriters exercise their over-allotment option in full, assuming an offering price of $ per share (the midpoint of the range set forth on the cover page of this prospectus). We intend to use the net proceeds of this offering primarily for general corporate purposes, including repayment of debt and working capital. See “Use of Proceeds” for additional information. |
|
Description of Warrant |
Exercise Price: 1. The exercise price of the Series A Warrant is $ per share ([ ]% of the public offering price of the Units). 2. The exercise price of the Series B Warrant is $ per share ([ ]% of the public offering price of the Units).
Each Warrant is exercisable for one share of our Common Stock, subject to adjustment in the event of stock dividends, stock splits, stock combinations, reclassifications, reorganizations or similar events affecting our Common Stock as described herein. The Units will not be certificated or issued in stand-alone form.
Expiration: 1. The Series A Warrant will expire five years from the date of issuance. 2. The Series B Warrant will expire 15 months from the date of issuance.
Reset For the Series A Warrant: On the ninety (90) day anniversary of the issuance date of the Series A Warrants, the exercise price of the Series A Warrants will adjust to be equal to the greater of $ per share (which shall equal 50% of the exercise price of the Series A Warrants on the issuance date) and 100% of the last volume weighted average price per share of common stock immediately preceding the 90th day following the issuance date of the Series A Warrant, provided that such value is less than the exercise price in effect on that date.
Price Adjustment For the Series A Warrant. Subject to certain exemptions outlined in the Series A Warrant, for a period of two years from the date of issuance of the Series A Warrant, if the Company shall sell, enter into an agreement to sell, or grant any option to purchase, or sell, enter into an agreement to sell, or grant any right to reprice, or otherwise dispose of or issue (or announce any offer, sale, grant or any option to purchase or other disposition) any shares of common stock or convertible security (as defined in the Series A Warrant), at an effective price per share less than the exercise price of the Series A Warrant then in effect, the exercise price of the Series A Warrant shall be reduced to equal the effective price per share in such issuance; provided, however, in no event shall the exercise price of the Series A Warrant be reduced to an exercise price lower than 50% of public offering price per Unit in this offering.
Participation Rights For the Series A Warrant. Subject to certain exceptions, for a period of two years from the date of issuance of the Series A Warrant, a holder of at least [ ] Series A Warrants as of the time the Company engages in a subsequent placement (as defined in the Series A Warrant) will be entitled to participate in such subsequent placement subject to the terms and conditions set forth in the Series A Warrant.
Alternative Cashless Exercise only on the Series B Warrant. If on any applicable date after the seventy-fifth (75th) calendar day immediately following the issuance date of the Series B Warrant and prior to the exercise termination date of the Series B Warrant, the Market Price (as defined in the Series B Warrant) is less than the Exercise Price on the issuance date of the Series B Warrant (as adjusted for any stock dividend, stock split, stock combination, recapitalization or other similar transaction occurring after the issuance date of the Series B Warrant), then the holder may, in its sole discretion exercise the Series B Warrant in whole or in part and, in lieu of making any cash payment otherwise contemplated to be made to the Company upon such exercise in payment of the aggregate Exercise Price, elect instead to receive upon such exercise a number of shares of Common Stock equal to the Alternate Net Number (as defined in the Series B Warrant).
Beneficial Ownership Limitation: A holder may not exercise any portion of a Warrant to the extent that the holder, together with its affiliates and any other person or entity acting as a group, would own more than 4.99% of our outstanding shares of common stock after exercise, as such ownership percentage is determined in accordance with the terms of the Warrants, except that upon notice from the holder to us, the holder may waive such limitation up to a percentage, not in excess of 9.99%.
Warrant Agreement: The terms of the Warrants will be governed by a warrant agreement, dated as of the effective date of this offering, between us and Transhare Corporation, as the Warrant Agent. This prospectus also relates to the offering of the Common Stock issuable upon exercise of the Warrants. For more information regarding the Warrants, you should carefully read the section titled “Description of Securities — Unit Offered Hereby” in this prospectus. |
|
|
Representative’s Warrants |
The registration statement of which this prospectus is a part also registers for sale warrants (the “Representative’s Warrants”) to purchase shares of our Common Stock ( shares of Common Stock if the over-allotment option is exercised in full) to Maxim Group LLC (the “Representative”), as the representative of the several underwriters, as a portion of the underwriting compensation payable to the underwriters in connection with this offering. The Representative’s Warrants will be exercisable commencing six months following the effective date of the registration statement of which this prospectus is a part and expiring on the fifth anniversary of the commencement of sales of this offering at an exercise price of $ ( % of the public offering price of the Units). Please see “Underwriting - Representative’s Warrants” for a description of these warrants. |
|
|
Proposed Nasdaq Capital Market Trading Symbol and Listing |
Our Common Stock is currently quoted on the OTCQB Market. There is no established trading market for the Series A Warrants or Series B Warrants. We have applied to list our Common Stock on the Nasdaq Capital Market under the symbol “MITI”. We are applying to list the Series A Warrants and Series B Warrants for trading on the Nasdaq Capital Market. The Common Stock and Series A Warrants and Series B Warrants comprising the Units will begin separate trading immediately upon issuance of the Units. We will not proceed with this offering in the event our Common Stock, Series A Warrants and Series B Warrants are not approved for listing on the Nasdaq Capital Market though we will continue to seek financing for our expansion and operating needs in the debt and equity markets. |
|
|
Risk Factors |
See “Risk Factors” beginning on page 19 and the other information contained in this prospectus for a discussion of factors you should carefully consider before investing in our securities. |
|
|
Lock-up |
We, our directors, executive officers, and stockholders who own 5% or more of our outstanding Common Stock have agreed with the underwriters not to offer for sale, issue, sell, contract to sell, pledge or otherwise dispose of any of our Common Stock or securities convertible into Common Stock for a period of 90 days, commencing on the date of this prospectus. See “Underwriting” for additional information. |
|
(1) |
The total number of shares of Common Stock that will be outstanding after this offering is based on 4,524,245 shares of Common Stock outstanding as of September 8, 2022. Unless otherwise indicated, the shares of our Common Stock outstanding after this offering excludes the following: |
|
● |
327,099 shares of Common Stock issuable upon exercise of outstanding stock options as of September 8, 2022, with a weighted-average exercise price of $10.67 per share; |
|
|
● |
673,311 shares of Common Stock issuable upon exercise of outstanding warrants as of September 8, 2022, with a weighted-average exercise price of $30.67 per share; |
|
|
● |
97,760 shares of Common Stock issuable upon conversion of outstanding shares of Series C Preferred Stock as of September 8, 2022; | |
|
● |
264,570 shares of Common Stock issuable upon conversion of outstanding shares of Series D Preferred Stock as of September 8, 2022; | |
|
● |
600,000 shares of Common Stock reserved for future issuance under our equity incentive plan as of September 8, 2022; and |
|
|
● |
no exercise of the underwriter’s over-allotment option; |
|
|
● |
no exercise of the Warrants issued as part of the Unit; and |
|
|
● |
no exercise of the Representative’s Warrants. |
Except for historical financial information or as otherwise indicated herein, all information in this prospectus, including the number of shares to be outstanding after the offering assumes of gives effect to:
|
● |
no exercise of outstanding options or warrants; |
|
● |
the conversion of all outstanding shares of our Series C Preferred Stock into shares of Common Stock which will occur automatically on the first day of trading of our Common Stock on Nasdaq; |
|
● |
that the assumed offering price is $ which is the midpoint of the range of the estimated offering price described on the cover page of this prospectus; |
|
● |
a reverse stock split effected at a ratio of 1-for-50; |
|
● |
no exercise of the Representative’s Warrant to be issued upon consummation of this offering; and |
|
● |
no exercise by the underwriters of their over-allotment option. |
SUMMARY FINANCIAL DATA
The following tables summarize our financial data for the periods and as of the dates indicated. We have derived the statements of operations data for the years ended December 31, 2021 from our audited financial statements and related notes included elsewhere in this prospectus. You should read the following summary financial data together with our financial statements and the related notes appearing elsewhere in this prospectus and the information in the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
|
Six Months Ended |
||||||||
|
June 30, |
||||||||
|
2022 |
2021 |
|||||||
|
Statement of Operations Data: |
||||||||
|
Net sales |
$ | 289,461 | $ | 11,216 | ||||
|
Cost of products sold |
1,194,510 | 5,318 | ||||||
|
Gross (loss) profit |
(905,049 |
) |
5,898 | |||||
|
Total operating expenses |
4,904,758 | 2,356,118 | ||||||
|
Loss from operations |
(5,809,807 |
) |
(2,350,220 |
) |
||||
|
Total other expenses |
(1,640,672 |
) |
(1,521,645 |
) |
||||
|
Net loss |
(7,450,479 |
) |
(3,871,865 |
) |
||||
|
Basic and dilutive income (loss) per share of Common Stock |
$ | (1.75 |
) |
$ | (1.10 |
) |
||
|
Weighted average number of shares of Common Stock outstanding |
4,352,695 | 3,889,108 | ||||||
|
Year Ended |
||||||||
|
December 31, |
||||||||
|
2021 |
2020 |
|||||||
|
Statement of Operations Data: |
||||||||
|
Net sales |
$ | 115,994 | -- | |||||
|
Cost of products sold |
455,587 | -- | ||||||
|
Gross profit |
(339,593 |
) |
-- | |||||
|
Total operating expenses |
6,058,996 | 2,533,569 | ||||||
|
Income (loss) from operations |
(6,398,589 |
) |
2,533,569 | |||||
|
Total other income (expenses) |
(1,524,045 |
) |
327,025 | |||||
|
Net income (loss) |
(7,922,634 |
) |
2,860,594 | |||||
|
Basic and dilutive income (loss) per share of Common Stock |
$ | (3.00 |
) |
$ | (1.50 |
) |
||
|
Weighted average number of shares of Common Stock outstanding |
4,040,004 | 2,103,545 | ||||||
(1) Basic earnings per share (“EPS”) is computed based on the weighted average number of shares of Common Stock outstanding during the period. Diluted EPS is computed based on the weighted average number of shares of Common Stock plus the effect of dilutive potential common shares outstanding during the period using the treasury stock method and as if converted method. In all periods presented, the Company did not have any dilutive securities.
|
As of June 30, 2022 |
||||||||||||
|
Actual |
Proforma |
As Adjusted(1) |
||||||||||
|
Balance Sheet Data: |
||||||||||||
|
Cash |
$ | 35,821 | $ | - | $ | - | ||||||
|
Total assets |
10,819,782 | - | - | |||||||||
|
Total liabilities |
14,669,814 | - | - | |||||||||
|
Accumulated deficit |
(32,928,811 |
) |
- | - | ||||||||
|
Total stockholders’ equity |
(3,850,031 |
) |
- | - | ||||||||
|
Total liabilities and stockholders’ equity |
10,819,782 | - | - | |||||||||
(1) The as adjusted balance sheet data in the table above reflects the sale and issuance by us of shares of our Common Stock in this offering at the assumed public offering price of $__ per share (the midpoint of the range set forth on the cover page of this prospectus), after deducting the underwriting discounts and commissions and estimated offering expenses payable by us.
RISK FACTORS
Investing in our securities involves a high degree of risk. You should carefully consider the risks described below, as well as the other information in this prospectus, including our financial statements and the related notes and the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this prospectus, before deciding whether to invest in our securities. The occurrence of any of the events or developments described below could harm our business, financial condition, results of operations and growth prospects. In such an event, the market price of our securities could decline, and you may lose all or part of your investment. Additional risks and uncertainties not presently known to us or that we currently deem immaterial also may impair our business operations. Some statements in this prospectus, including such statements in the following risk factors, constitute forward-looking statements. See the section entitled “Cautionary Note Regarding Forward-Looking Statements.”
Special Notice Regarding the Worldwide Covid-19 Crisis
The world economy is facing significant uncertainties as a result of the worldwide COVID-19 crisis. While we are a small company and have a limited workforce, it is likely we will face increased risk in the case that our financing needs are delayed; our acquisition targets face liquidity issues; or if our professional relationships are challenged from limited staff availability or access. We cannot predict with any certainty whether and to what degree the disruption caused by the COVID-19 pandemic and reactions thereto will continue and expect to face difficulty in developing our business and building our planned clinics. It is not possible for us to accurately predict the duration or magnitude of the adverse results of the outbreak and its effects on our business, results of operations or financial condition at this time, but such effects may be material. The COVID-19 pandemic may also have the effect of heightening many of the other risks identified elsewhere in this section.
Risks Related to our Financial Condition
We are in the initial stages of our present business plan and have a limited historical performance for you to base an investment decision upon, and we may never become profitable.
We have only a limited history and a new business plan upon which an evaluation of our prospects and future performance can be made. Our planned operations are subject to all business risks associated with new companies. The likelihood of our success must be considered considering the problems, expenses, difficulties, complications, and delays frequently encountered in connection with the establishment of a new business, operation in a competitive industry. There is a possibility that we could sustain losses in the future. There can be no assurances that we will ever operate profitably.
There is substantial doubt about our ability to continue as a going concern because of our limited operating history, history of losses and financial resources, and if we are unable to generate significant revenue or secure financing, we may be required to cease or curtail our operations.
We have a history of losses. We have nominal revenues from our operations. The Report of our Independent Registered Public Accounting Firm issued in connection with our audited financial statements for the calendar year ended December 31, 2021, expressed substantial doubt about our ability to continue as a going concern, since we have had recurring operating losses and our lack of liquidity and working capital. The Company’s continuance is dependent on raising capital and generating revenues sufficient to sustain operations. We have generated only minimal revenues from our present business plan. If we generate revenue more slowly than we anticipate, or if our operating expenses are higher than we expect, we may not be able to pay our operating expenses or achieve profitability and our financial condition could suffer. Whether we can achieve cash flow levels sufficient to support our operations cannot be accurately predicted. Unless such cash flow levels are achieved, we will need to borrow additional funds or sell debt or equity securities, or some combination thereof, to obtain funding for our operations. Such additional funding may not be available on commercially reasonable terms, or at all.
We need additional capital to fund our operations and cannot assure you that we will be able to obtain sufficient capital on reasonable terms or at all, and we may be forced to limit the scope of our operations.
We need additional capital to implement and fund our operations. We estimate we will require approximate net proceeds of $1,000,000 to open each clinic and up to an additional $250,000 to operate the clinic for a period of one year. If we are not able to obtain adequate financing on reasonable terms or if it is not available at all, we will be unable to open and acquire medical clinics and we would have to modify our business plans accordingly. The extent of our capital needs will depend on numerous factors, including (i) the availability and terms of any financing available to us; (ii) the opening of medical clinics by our competitors in the geographic areas where we plan to operate; (iii) the level of our investment in research and development; (iv) the amount of our capital expenditures, including acquisitions; and (v) regulations applicable to our operations. We cannot assure you that we will be able to obtain capital in the future to meet our needs. Even if we do find a source of additional capital, we may not be able to negotiate terms and conditions for receiving the additional capital that are acceptable to us. Any future capital investments could dilute or otherwise materially and adversely affect the holdings or rights of our existing stockholders. In addition, new equity or convertible debt securities issued by us to obtain financing could have rights, preferences, and privileges senior to our Common Stock. We cannot give you any assurance that any additional financing will be available to us, or if available, will be on terms favorable to us.
We may incur additional debt in the future which may contain restrictive covenants and impair our operating flexibility.
Because we currently have no significant revenue and limited cash on hand, we must seek funds for our operational plans. If we incur additional indebtedness in the future, a portion of the cash flow we generate, if any, will be dedicated to the payment of principal and interest on outstanding indebtedness. Typical loan agreements also might contain restrictive covenants, which may impair our operating flexibility. Such loan agreements would also provide for default under certain circumstances, such as failure to meet certain financial covenants. A default under a loan agreement could result in the loan becoming immediately due and payable and, if unpaid, a judgment in favor of such lender which would be senior to the rights of our stockholders. A judgment creditor would have the right to foreclose on our limited assets resulting in a material adverse effect on our business, operating results, and financial condition.
We have identified weaknesses in our internal controls, and we cannot provide assurances that these weaknesses will be effectively remediated, or that additional material weaknesses will not occur in the future.
As a public company, we are subject to the reporting requirements of the Exchange Act, and the Sarbanes-Oxley Act. We expect that the requirements of these rules and regulations will continue to increase our legal, accounting, and financial compliance costs, make some activities more difficult, time consuming and costly, and place significant strain on our personnel, systems, and resources.
The Sarbanes-Oxley Act requires, among other things, that we maintain effective disclosure controls and procedures, and internal control over financial reporting.
We do not yet have effective disclosure controls and procedures, or internal controls over all aspects of our financial reporting. We are continuing to develop and refine our disclosure controls and other procedures that are designed to ensure that information required to be disclosed by us in the reports that we will file with the SEC is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms. Our management is responsible for establishing and maintaining adequate internal control over our financial reporting, as defined in Rule 13a-15(f) under the Exchange Act.
We have identified material weaknesses in our internal control over financial reporting. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our financial statements will not be prevented or detected on a timely basis. The material weaknesses identified to date include (i) lack of segregation of duties, (ii) lack of sufficient resources to ensure that information required to be disclosed by us in the reports that we file or submit 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. As such, our internal controls over financial reporting was not designed or operating effectively.
We will be required to expend time and resources to further improve our internal controls over financial reporting, including by expanding our staff. However, we cannot assure you that our internal control over financial reporting, as modified, will enable us to identify or avoid material weaknesses in the future.
We have not yet retained sufficient staff or engaged sufficient outside consultants with appropriate experience in GAAP presentation to devise and implement effective disclosure controls and procedures, or internal controls. We will be required to expend time and resources hiring and engaging additional staff and outside consultants with the appropriate experience to remedy these weaknesses. We cannot assure you that management will be successful in locating and retaining appropriate candidates; that newly engaged staff or outside consultants will be successful in remedying material weaknesses thus far identified or identifying material weaknesses in the future; or that appropriate candidates will be located and retained prior to these deficiencies resulting in material and adverse effects on our business. Our ability to retain staff with appropriate experience in GAAP presentation will also be dependent upon the revenue we generate from operations and our ability to raise sufficient funding.
Our current controls and any new controls that we develop may become inadequate because of changes in conditions in our business. Further, weaknesses in our disclosure controls or our internal controls over financial reporting may be discovered in the future. Any failure to develop or maintain effective controls, or any difficulties encountered in their implementation or improvement, could harm our operating results, or cause us to fail to meet our reporting obligations and may result in a restatement of our financial statements for prior periods. Any failure to implement and maintain effective internal controls over financial reporting could also adversely affect the results of management reports and independent registered public accounting firm audits of our internal controls over financial reporting that we will eventually be required to include in our periodic reports that will be filed with the SEC. Ineffective disclosure controls and procedures, and ineffective internal controls over financial reporting could also cause investors to lose confidence in our reported financial and other information, which would likely have a negative effect on the market price of our Common Stock and Warrants.
Our independent registered public accounting firm is not required to audit the effectiveness of our internal control over financial reporting until after we are no longer a “smaller reporting company” as defined in the Jumpstart Our Business Startups (JOBS) Act of 2012. At such time, our independent registered public accounting firm may issue a report that is adverse in the event it is not satisfied with the level at which our internal control over financial reporting is documented, designed, or operating. Any failure to maintain effective disclosure controls and internal control over financial reporting could have a material and adverse effect on our business and operating results and cause a decline in the market price of our Common Stock and Warrants.
The issuance of additional shares of our Common Stock, Warrants, convertible Preferred Stock and other convertible securities may dilute the percentage ownership of the then-existing stockholders and may make it more difficult to raise additional equity capital.
As of September 8, 2022, there were outstanding options and warrants to purchase 327,099 and 673,311 shares of Common Stock, respectively. The exercise of such options and warrants and conversion of convertible securities would dilute the then-existing stockholders’ percentage ownership of our stock, and any sales in the public market of Common Stock underlying such securities could adversely affect prevailing market prices for the Common Stock. Moreover, the terms upon which we would be able to obtain additional equity capital could be adversely affected because the holders of our options and warrants could exercise them at a time when we would likely be able to obtain any needed capital on terms more favorable to us than those provided by such securities.
Our operating results and liquidity needs could be negatively affected by market fluctuations and economic downturn.
Our operating results and liquidity could be negatively affected by economic conditions generally, both in the United States and elsewhere around the world. The market for clinics and services we provide may be particularly vulnerable to unfavorable economic conditions. Some customers may consider certain of our services to be discretionary, and if full reimbursement for such services is not available, demand for these services may be tied to the discretionary spending levels of our targeted patient populations. Domestic and international equity and debt markets have experienced and may continue to experience heightened volatility and turmoil based on domestic and international economic conditions and concerns. In the event these economic conditions and concerns continue or worsen, and the markets continue to remain volatile, our operating results and liquidity could be adversely affected by those factors in many ways, including weakening demand for certain of our services and making it more difficult for us to raise funds if necessary, and our stock price may decline. Additionally, although we plan to market our services primarily in the United States, our endeavors involve opening clinic in the European, exposing us to risk.
Mechanic’s liens were placed on five of our clinics that could have a material adverse impact on our business, results of operations, and financial condition.
In 2022, eight mechanic’s liens for a total of $1,857,353 were filed by several contractors against five of our clinics.
All liens were filed pursuant to Minnesota’s and Colorado’s Mechanic’s statutes and relate to past due obligations for construction and related work on certain of our clinics. Pursuant to Minnesota’s and Colorado’s Mechanic’s statutes, the contractor-creditors may have the ability to commence a mechanic’s lien foreclosure action against the real properties in question to recover amounts due, costs, legal fees, and interest.
Additionally, the mechanic’s liens could result in defaults under our leases for the affected clinic locations. If that occurs, the leases for the affected clinic locations allow for acceleration of amounts due under the lease, among other damages and remedies. If that happens, we would have to cease our operations at the affected clinic locations and we may lose some or all of our customers.
We are attempting to negotiate modifications to our agreements with the contractor-creditors. However, we cannot assure you that our efforts will be successful. If we are unable to timely clear the mechanic’s liens filed against our clinics or otherwise negotiate modifications to our agreements with the contractor-creditors, it will have a material adverse impact on our business, results of operations, and financial condition.
Risks Related to our Business
Our business is difficult to evaluate because we are currently focused on a new business model and have extremely limited operating history and limited information.
We recently engaged in a new business model for our clinics in the United States. We opened our first primary care clinic “The Good Clinic” in Northeast Minneapolis, Minnesota in February 2021, and have added five additional operating clinics as of the date of this filing for a total of six clinics open and operating at September 8, 2022. We announced leases for two new clinics in the greater Denver, Colorado area and one new clinic in Minneapolis. We are targeting to open 50 new clinics in the next three years based upon available capital, in addition to any existing clinics we may acquire.
There is a risk that we will be unable to successfully generate significant revenue from this new business model and that we will be unable to enter into additional clinics or that any additional clinics that we enter will be on favorable terms. We are subject to many risks associated with this new business model. There is no assurance that our activities will be successful or will result in any revenues or profit. Even if we generate revenue, there can be no assurance that we will be profitable. We are subject to the risks inherent to the operation of a new business enterprise and cannot assure you that we will be able to successfully address these risks.
Our business expansion is dependent upon us finding suitable locations for additional clinics.
We plan to establish approximately 10 clinics in the Minneapolis /St. Paul Metropolitan area of Minnesota and then continue expansion of five clinics in the Denver, Colorado area, subject to receipt of adequate funding. We target to open clinics in residential concentrations of population to enhance the convenience. There can be no assurance that we will be successful in finding suitable locations at affordable prices.
Our estimate of our required funding is based upon certain estimates for our lease payments which if incorrect will require us to raise more funding than anticipated to fulfill our goals and objectives.
Failure to attract and retain sufficient numbers of qualified personnel could also impede our future plans.
We must attract and retain sufficient medical professional employees to operate and execute our service model and growth plan even though there is a limited number of qualified medical professionals. Each clinic that we open will need to be staffed with enough Nurse Practitioners to properly run the clinics. We will face competition for Nurse Practitioners from a range of companies and providers, including traditional healthcare providers and medical practices that offer similar services.
Our business is also dependent upon the various insurance companies agreeing to reimburse patients for our services.
Currently, we only have insurance companies that have approved us as a service provider and have agreed to reimburse patients for use of our services. For us to attract patients, we will need to be approved as a service provider by multiple service providers as patients typically do not want to pay out of pocket for the services we provide. Our failure to be approved by additional insurance companies as a service provider will result in a material adverse impact on our business. The evolving nature of our business and rapid changes in the healthcare industry make it difficult to anticipate the nature and amount of medical reimbursements, third-party private payments, and participation in certain government programs and thus to reliably predict our operating results. Our strategy may incur significant costs, which could adversely affect our financial condition. Our plan to enter strategic transactions involves significant costs, including financial advisory, legal, and accounting fees, and may include additional costs for items such as fairness opinions and severance payments. We currently do not have significant revenue to pay these costs which could adversely affect our overall financial condition. If we fail to do so, performance of the business will be adversely impacted. If we are unable to implement our plan of operations effectively, it will have a material adverse effect on our ability to generate revenue.
We may become involved in legal proceedings that could have a material adverse impact on our business, results of operations and financial condition.
By operating in the health care industry, we will face an inherent business risk of exposure to personal injury claims. Effective on April 19, 2021, we obtained malpractice insurance however, there can be no assurance that such insurance will adequately protect us from such claims. A successful personally liability claim, or series of claims brought against us, more than our insurance coverage, would negatively impact our financial condition.
From time to time and in the ordinary course of our business, we and certain of our subsidiaries may become involved in various legal proceedings and claims, including for example, employment disputes and litigation; client disputes and litigation alleging solution and implementation defects, personal injury, intellectual property infringement, violations of law and breaches of contract and warranties; and other third party disputes and litigation alleging personal injury, intellectual property infringement, violations of law, and breaches of contracts and warranties.
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 18, 2020, the Company’s former President and COO completed and applied on behalf of the Company to Bank of America, NA (“Bank of America”) for a PPP loan, which was subsequently approved. On April 25, 2020, the Company entered into an unsecured Promissory Note (the “Note”) with Bank of America for a loan in the original principal amount of approximately $460,000, and the Company received the full amount of the loan proceeds on May 4, 2020.
On July 21, 2020, Bank of America notified the Company in writing that it should not have received $440,000 of the loan proceeds disbursed under the Note. The Company investigated the terms of the application and discovered its former President had erroneously represented it was refinancing an Economic Injury Disaster Loan when no such loan had been received. Bank of America requested that the Company remit the funds received back to Bank of America. The Company is currently working with Bank of America on a repayment plan. If we are not successful in negotiating repayment terms, it could have a material adverse effect on our financial condition.
All such legal proceedings are inherently unpredictable and, regardless of the merits of the claims, litigation may be expensive, time-consuming, and disruptive to our operations and distracting to management. If resolved against us, such legal proceedings could result in excessive verdicts, injunctive relief or other equitable relief that may affect how we operate our business. Similarly, if we settle such legal proceedings, it may affect how we operate our business. Future court decisions, alternative dispute resolution awards, business expansion or legislative activity may increase our exposure to litigation and regulatory investigations. In some cases, substantial non-economic remedies or punitive damages may be sought. Although we maintain liability insurance coverage, there can be no assurance that such coverage will cover any verdict, judgment or settlement that may be entered against us, that such coverage will prove to be adequate or that such coverage will continue to remain available on acceptable terms, if at all. If we incur liability that exceeds our insurance coverage or that is not within the scope of the coverage in legal proceedings brought against us, it could have a material adverse effect on our business, results of operations and financial condition.
We are in an intensely competitive industry and there is no assurance we will be able to compete with our competitors who have greater resources than us.
While the telehealth market is in an early stage of development, it is competitive and we expect it to attract increased competition, which could make it difficult for us to succeed. We also expect to face competition for our planned medical clinics using Nurse Practitioners. We currently face competition in the telehealth industry from a range of companies, including specialized software and solution providers that offer similar solutions, often at substantially lower prices, and that are continuing to develop additional products and becoming more sophisticated and effective. In addition, large, well-financed health systems have in some cases developed their own telehealth tools and may provide these solutions to their customers and patients at discounted prices. The surge in interest in telehealth, and in particular the relaxation of HIPAA privacy and security requirements, has also attracted new competition from providers who utilize consumer-grade video conferencing platforms such as Zoom and Twilio. Competition from large software companies or other specialized solution providers, communication tools and other parties could result in continued pricing pressures, which is likely to lead to price declines in certain product segments, which could negatively impact our sales, profitability, and market share.
The market for healthcare solutions including walk-in clinics and services is intensely competitive. We compete in a highly fragmented primary care market with direct and indirect competitors that offer varying levels of impact to key stakeholders such as patients and employers. Our competitive success is contingent on our ability to simultaneously address the needs of key stakeholders efficiently and with superior outcomes at scale compared with competitors. We compete with walk-in clinics, traditional healthcare providers and medical practices, technology platforms, care management and coordination, digital health, telehealth and telemedicine and health information exchange. These competitors primarily include primary care providers who are employed by or affiliated with health networks. Our indirect competitors also include episodic consumer-driven point solutions such as telemedicine as well as urgent care providers. Generally, urgent care providers in the local communities we will serve provide services like those we intend to offer, and our competitors (1) are more established than we are, (2) may offer a broader array of services or more desirable facilities to patients and providers than ours and (3) may have larger or more specialized medical staffs to admit and refer patients, among other things. In the future, we expect to encounter increased competition from system-affiliated hospitals and healthcare companies, as well as health insurers and private equity companies seeking to acquire providers, in specific geographic markets. We also face competition from specialty hospitals (some of which are physician-owned), primary care providers and outpatient centers for market share in high margin services and for quality providers and personnel. Furthermore, some of the clinics and medical offices that compete with us may be supported by government agencies or not-for-profit organizations supported by endowments and charitable contributions and can finance capital expenditures and operations on a tax-exempt basis.
Competition in our market involves rapidly changing technologies, evolving regulatory requirements and industry expectations, frequent new product and service introductions and changes in customer and patient requirements. If we are unable to keep pace with the evolving needs of patients and continue to develop and introduce new applications and services in a timely and efficient manner, demand for our solutions and services may be reduced and our business and results of operations would be harmed.
Because we are a new business, our competitors may have greater name recognition, longer operating histories and significantly greater resources than we do. Further, our current or potential competitors may be acquired by third parties with greater available resources. As a result, our competitors may be able to respond more quickly and effectively than we can to new or changing opportunities, technologies, standards or customer and patient requirements and may have the ability to initiate or withstand substantial price competition. In addition, current and potential competitors have established, and may in the future establish, cooperative relationships with vendors of complementary services, technologies, or services to increase the availability of their solutions in the marketplace. Accordingly, new competitors or alliances may emerge that have greater market share, a larger customer base, more widely adopted proprietary technologies, greater marketing expertise, greater financial resources, and larger sales forces than we have, which could put us at a competitive disadvantage.
Our competitors could also be better positioned to serve certain segments of the telehealth market and medical clinic markets, which could create additional price pressure. In addition, many healthcare provider organizations are consolidating to create integrated healthcare delivery systems with greater market power. As provider networks and managed care organizations consolidate, thus decreasing the number of market participants, competition to provide products and services like ours could become more intense, and the importance of establishing and maintaining relationships with key industry participants could increase. These industry participants may try to use their market power to negotiate price reductions for our products and services. Considering these factors, even if our solution is more effective than those of our competitors, current or potential clients may accept competitive solutions in lieu of purchasing our solution. If we are unable to successfully compete in the telehealth market, our business, financial condition, and results of operations could be materially adversely affected.
Competitors may also be better positioned to contract with leading health network partners in our target markets. If our competitors are better able to attract patients, contract with health network partners, recruit providers, expand services or obtain favorable managed care contracts at their facilities than we are, we may experience an overall decline in member volumes and net revenue. There is no assurance we will be able to successfully compete in the markets in which we plan to operate which could cause you to lose your investment.
Our lack of registered trademarks and trade names could potentially harm our business.
Our federal trademark registration for the mark THE GOOD CLINIC is on the Supplemental Register, not the Principal Register. The Supplemental Register does not confer the same rights and benefits as the Principal Register. Registration on the Supplemental Register is not useful for challenging third parties who may infringe our trademark rights, and we would need to rely on our common law rights to pursue enforcement. The Supplemental Register also does not confer nationwide priority of rights. As we expand our business, we may encounter third parties with common law rights in certain geographic markets with trademark rights that prevent us from using the mark THE GOOD CLINIC in those markets.
The success of our planned business depends on our ability to develop, market, and advertise our clinics and telehealth services.
Our ability to establish effective marketing and advertising campaigns for any clinics and telemarketing services we develop is important to our success. If we are unable to establish awareness of our brands and services, we may not be able to attract customers and generate revenue, which would have a material adverse effect on our financial condition and results of operations.
The telehealth market is immature and volatile, and if it does not develop, if it develops more slowly than we expect, if it encounters negative publicity or if our services are not competitive, the growth of our business will be harmed.
We opened our first primary care clinic “The Good Clinic” in Northeast Minneapolis, Minnesota in February 2021, and have added five additional operating clinics as of the date of this filing for a total of six clinics open and operating as of September 8, 2022. We have three additional leases for new clinics, two in Denver, Colorado and one additional in Minneapolis, Minnesota. These new locations are expected to open in the first quarter of 2023. We are targeting to open 50 new clinics in the next three years based on available capital, in addition to any existing clinics we may acquire.
We are new to this marketplace and there is no assurance we will be successful in our efforts. The telehealth market is relatively new and unproven, and it is uncertain whether it will achieve and sustain high levels of demand, consumer acceptance and market adoption. Our success will depend to a substantial extent on the willingness of patients to use, and to increase the frequency and extent of their utilization of, our services, including our telehealth services, as well as on our ability to demonstrate the value of telehealth to employers, health plans, government agencies and other purchasers of healthcare for beneficiaries. Negative publicity concerning us, or the telehealth market could limit market acceptance of our services. If our patients do not perceive the benefits of our services, or if our services are not competitive, then our business may not develop at all and we may not generate significant revenue, or it may develop more slowly than we expect. Similarly, individual and healthcare industry concerns or negative publicity regarding patient confidentiality and privacy in the context of telehealth could limit market acceptance of our healthcare services. If any of these events occur, it could have a material adverse effect on our business, financial condition, or results of operations.
Rapid technological change in our industry presents us with significant risks and challenges.
The telehealth market is characterized by rapid technological change, changing consumer requirements, short product lifecycles and evolving industry standards. Our success will depend on our ability to enhance our solution with next-generation technologies and to develop or to acquire and market new services to access new consumer populations. There is no guarantee that we will possess the resources, either financial or personnel, for the research, design and development of new applications or services, or that we will be able to utilize these resources successfully and avoid technological or market obsolescence. Further, there can be no assurance that technological advances by one or more of our competitors or future competitors will not result in our present or future software-based products and services becoming uncompetitive or obsolete.
If we do not manage our strategy effectively, our revenue, business and operating results may be harmed.
We have not yet generated significant revenues from our present operations and may not do so for an indefinite period of time. Our strategy is to operate walk-in clinics, provide telemedicine and acquire complimentary business in the future. Our future revenues and profitability depend upon our ability to successfully implement our growth strategy. There can be no assurance given that we will be successful in executing our growth strategy, and even if we achieve our strategic plan, that we will realize, in full or in part, the anticipated benefits we expect our strategy will achieve. The failure to realize those benefits could have a material adverse effect on our business, financial condition, and results of operations. Acquisitions may require greater than anticipated investment of operational and financial resources. Acquisitions and related growth may also require the integration of different services, assimilation of new employees, diversion of management and IT resources, increases in administrative costs and other additional costs associated with any debt or equity financings undertaken in connection with such acquisitions. We may not be able to effectively manage this expansion in any one or more of these areas, and any failure to do so could significantly harm our business, financial condition, and results of operations. We cannot assure you that any acquisition we undertake will be successful. Future growth will also place additional demands on our resources and may require us to hire and train additional employees. We will need to expand and acquire systems and infrastructure to accommodate our planned operations. The failure to implement our plan of operations and manage any future growth effectively will materially and adversely affect our business.
Any damage to our reputation may materially and adversely affect our business, financial condition, and results of operations.
We believe that developing and maintaining our brand is critical and that our financial success is directly dependent on consumer perception of our brand. Furthermore, the importance of our brand recognition may become even greater as competitors offer more services similar to ours. We believe that our customers view our brand as one that is trusted, respected and effective. Many factors, some of which are beyond our control, are important to maintaining our reputation and brand. These factors include our ability to comply with ethical, social, medical, labor, and environmental standards. Any actual or perceived failure in compliance with such standards could damage our reputation and brand.
The success of our brand may also suffer if our marketing strategy or services do not have the desired impact on our company’s image or its ability to attract consumers. Further, our brand value could diminish significantly due to a number of factors, including consumer perception that we have acted in an irresponsible manner, adverse publicity about our clinics, our failure to maintain the integrity of our products, the failure of our services to deliver consistently positive customer experiences, or the services becoming unavailable to consumers.
Risks Related to Government Regulation
If the statutes and regulations in our industry change, our business could be adversely affected.
The U.S. healthcare industry has undergone significant changes designed to improve patient safety, improve clinical outcomes, and increase access to medical care. These changes include enactments and repeals of various healthcare related laws and regulation. Our operations and economic viability may be adversely affected by the changes in such regulations, including: (i) federal and state fraud and abuse laws; (ii) federal and state anti-kickback statutes; (iii) federal and state false claims laws; (iv) federal and state self-referral laws; (v) state restrictions on fee splitting; (vi) laws regarding the privacy and confidentiality of patient information; and (vii) other laws and government regulations.
If there are changes in laws, regulations, or administrative or judicial interpretations, we may have to change our future business practices, or our business practices could be challenged as unlawful, which could have a material adverse effect on our business, financial condition, and results of operations.
The impact on our planned operations of recent healthcare legislation and other changes in the healthcare industry and in healthcare spending is currently unknown, but may adversely affect our business, financial condition, and results of operations.
The impact on us of healthcare reform legislation and other changes in the healthcare industry and in healthcare spending is currently unknown, but may adversely affect our business, financial condition, and results of operations. Our revenue is dependent on the healthcare industry and could be affected by changes in healthcare spending, reimbursement, and policy. The healthcare industry is subject to changing political, regulatory, and other influences. The Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act (the “Affordable Care Act” or the “ACA”) in 2010 made major changes in how healthcare is delivered and reimbursed and increased access to health insurance benefits to the uninsured and underinsured population of the United States.
Since its enactment, there have been judicial and Congressional challenges to certain aspects of the ACA as well as recent efforts by the current administration to repeal or replace certain aspects of the ACA. For example, the Tax Cuts and Jobs Act of 2017 was enacted, which includes a provision repealing, effective January 1, 2019, the tax-based shared responsibility payment imposed by the ACA on certain individuals who fail to maintain qualifying health coverage for all or part of a year that is commonly referred to as the “individual mandate.” Since the enactment of the Tax Cuts and Jobs Act of 2017, there have been additional amendments to certain provisions of the ACA, and we expect the current administration and Congress will likely continue to seek to modify all, or certain provisions of, the ACA. It is uncertain the extent to which any such changes may impact our business or financial condition. Congress may consider other legislation to repeal and replace elements of the ACA. In December 2019, a federal appeals court held that the individual mandate portion of the ACA was unconstitutional and left open the question whether the remaining provisions of the ACA would be valid without the individual mandate. We continue to evaluate the effect that the ACA and its possible modification or repeal and replacement has on our business. It is uncertain the extent to which any such changes may impact our business or financial condition.
Other legislative changes have been proposed and adopted since the ACA was enacted. These changes include aggregate reductions to Medicare payments to providers of up to 2% per fiscal year pursuant to the Budget Control Act of 2011 and subsequent laws, which began in 2013 and will remain in effect through 2029 unless additional Congressional action is taken. In January 2013, the American Taxpayer Relief Act of 2012 was signed into law, which, among other things, further reduced Medicare payments to several types of providers, including hospitals, imaging centers and cancer treatment centers, and increased the statute of limitations period for the government to recover overpayments to providers from three to five years. New laws may result in additional reductions in Medicare and other healthcare funding, which may materially adversely affect customer demand and affordability for our products and services and, accordingly, the results of our financial operations. Additional changes that may affect our business include the expansion of new programs such as Medicare payment for performance initiatives for physicians under the Medicare Access and CHIP Reauthorization Act of 2015 (“MACRA”) which first affected physician payment in 2019. At this time, it is unclear how the introduction of the Medicare quality payment program will impact overall physician reimbursement.
Such changes in the regulatory environment may also result in changes to our payor mix that may affect our operations and revenue. In addition, certain provisions of the ACA authorize voluntary demonstration projects, which include the development of bundling payments for acute, inpatient hospital services, physician services and post-acute services for episodes of hospital care. Further, the ACA may adversely affect payors by increasing medical costs generally, which could influence the industry and potentially impact our business and revenue as payors seek to offset these increases by reducing costs in other areas. Certain of these provisions are still being implemented and the full impact of these changes on us cannot be determined at this time.
Uncertainty regarding future amendments to the ACA as well as new legislative proposals to reform healthcare and government insurance programs, along with the trend toward managed healthcare in the United States, could result in reduced demand and prices for our services. We expect that additional federal and state healthcare reform measures will be adopted in the future, any of which could limit the amounts that federal and state governments and other third-party payors will pay for healthcare products and services, which could adversely affect our business, financial condition, and results of operations.
We are regulated by Federal Anti-Kickback Statutes.
The federal Anti-Kickback Statute is a provision of the Social Security Act of 1972 that prohibits as a felony offense the knowing and willful offer, payment, solicitation or receipt of any form of remuneration in return for, or to induce, (1) the referral of a patient for items or services for which payment may be made in whole or part under Medicare, Medicaid, or other federal healthcare programs, (2) the furnishing or arranging for the furnishing of items or services reimbursable under Medicare, Medicaid, or other federal healthcare programs or (3) the purchase, lease, or order or arranging or recommending the purchasing, leasing or ordering of any item or service reimbursable under Medicare, Medicaid or other federal healthcare programs. The Patient Protection and Affordable Care Act (“ACA”) amended section 1128B of the Social Security Act of 1935, as amended to make it clear that a person need not have actual knowledge of the statute, or specific intent to violate the statute, as a predicate for a violation. The Office of the Inspector General (the “OIG”), which has the authority to impose administrative sanctions for violation of the statute, has adopted as its standard for review a judicial interpretation which concludes that the statute prohibits any arrangement where even one purpose of the remuneration is to induce or reward referrals. A violation of the Anti-Kickback Statute is a felony punishable by imprisonment, criminal fines of up to $25,000, civil fines of up to $50,000 per violation, and three times the amount of the unlawful remuneration. A violation also can result in exclusion from Medicare, Medicaid, or other federal healthcare programs. In addition, pursuant to the changes of the ACA, a claim that includes items or services resulting from a violation of the Anti-Kickback Statute is a false claim for purposes of the False Claims Act.
We cannot assure that the applicable regulatory authorities will not determine that some of our arrangements with physicians violate the federal Anti-Kickback Statute or other applicable laws. An adverse determination could subject us to different liabilities, including criminal penalties, civil monetary penalties, and exclusion from participation in Medicare, Medicaid, or other health care programs, any of which could have a material adverse effect on our business, financial condition, or results of operations.
We are regulated by the Federal Stark Law.
The federal Stark Law, 42 U.S.C. 1395nn, also known as the physician self-referral law, generally prohibits a provider from referring Medicare and Medicaid patients to an entity (including hospitals) providing ‘‘designated health services,’’ if the physician or a member of the physician’s immediate family has a ‘‘financial relationship’’ with the entity, unless a specific exception applies. Designated health services include, among other services, inpatient hospital services, outpatient prescription drug services, clinical laboratory services, certain imaging services (e.g., MRI, CT, ultrasound), and other services that our affiliated physicians may order for their patients. The prohibition applies regardless of the reasons for the financial relationship and the referral; and therefore, unlike the federal Anti-Kickback Statute, intent to violate the law is not required. Like the Anti-Kickback Statute, the Stark Law contains statutory and regulatory exceptions intended to protect certain types of transactions and arrangements. Unlike safe harbors under the Anti-Kickback Statute with which compliance is voluntary, an arrangement must comply with every requirement of a Stark Law exception, or the arrangement is in violation of the Stark Law.
Because the Stark Law and implementing regulations continue to evolve and are detailed and complex, while we attempt to structure our relationships to meet an exception to the Stark Law, there can be no assurance that the arrangements entered into by us with affiliated physicians and facilities will be found to be in compliance with the Stark Law, as it ultimately may be implemented or interpreted. The penalties for violating the Stark Law can include the denial of payment for services ordered in violation of the statute, mandatory refunds of any sums paid for such services, and civil penalties of up to $15,000 for each violation, double damages, and possible exclusion from future participation in the governmental healthcare programs. A person who engages in a scheme to circumvent the Stark Law’s prohibitions may be fined up to $100,000 for each applicable arrangement or scheme.
Some states have enacted statutes and regulations against self-referral arrangements similar to the federal Stark Law, but which may be applicable to the referral of patients regardless of their payor source and which may apply to different types of services. These state laws may contain statutory and regulatory exceptions that are different from those of the federal law and that may vary from state to state. An adverse determination under these state laws and/or the federal Stark Law could subject us to different liabilities, including criminal penalties, civil monetary penalties, and exclusion from participation in Medicare, Medicaid, or other health care programs, any of which could have a material adverse effect on our business, financial condition, or results of operations.
We must comply with Health Information Privacy and Security Standards.
The Health Insurance Portability and Accountability Act of 1996 (“HIPAA”), as amended, contain detailed requirements concerning the use and disclosure of individually identifiable patient health information (“PHI”) by various healthcare providers, such as medical groups. HIPAA covered entities must implement certain administrative, physical, and technical security standards to protect the integrity, confidentiality and availability of certain electronic health information received, maintained, or transmitted. HIPAA also implemented standard transaction code sets and standard identifiers that covered entities must use when submitting or receiving certain electronic healthcare transactions, including billing and claim collection activities. Violations of the HIPAA privacy and security rules may result in civil and criminal penalties, including a tiered system of civil money penalties that range from $100 to $50,000 per violation, with a cap of $1.5 million per year for identical violations. A HIPAA covered entity must also promptly notify affected individuals where a breach affects more than 500 individuals and report breaches affecting fewer than 500 individuals annually. State attorneys general may bring civil actions on behalf of state residents for violations of the HIPAA privacy and security rules, obtain damages on behalf of state residents, and enjoin further violations.
Many states also have laws that protect the privacy and security of confidential, personal information, which may be similar to or even more stringent than HIPAA. Some of these state laws may impose fines and penalties on violators and may afford private rights of action to individuals who believe their personal information has been misused. We expect increased federal and state privacy and security enforcement efforts.
A cyber security incident could cause a violation of HIPAA, breach of customer and patient privacy, or other negative impacts.
We will rely extensively on our information technology (“IT”) systems to manage scheduling and financial data, communicate with our future customers and their patients, vendors, and other third parties, and summarize and analyze operating results. In addition, we have made significant investments in technology, including the engagement of a third-party IT provider. A cyber-attack that bypasses our IT security systems could cause an IT security breach, a loss of protected health information, or other data subject to privacy laws, a loss of proprietary business information, or a material disruption of our IT business systems. This in turn could have a material adverse impact on our business and result of operations. In addition, our future results of operations, as well as our reputation, could be adversely impacted by theft, destruction, loss, or misappropriation of public health information, other confidential data, or proprietary business information.
Computer malware, viruses, and hacking and phishing attacks by third parties have become more prevalent in our industry, have occurred on our systems in the past, and may occur on our systems in the future. Because techniques used to obtain unauthorized access to or sabotage systems change frequently and generally are not recognized until successfully launched against a target, we may be unable to anticipate these techniques or to implement adequate preventative measures. As cyber-security threats develop and grow, it may be necessary to make significant further investments to protect data and infrastructure. Due to the significant military action against Ukraine launched by Russia, the risk of such cyber-security threats has increased. If an actual or perceived breach of our security occurs, (i) we could suffer severe reputational damage adversely affecting customer or investor confidence, (ii) the market perception of the effectiveness of our security measures could be harmed, (iii) we could lose potential sales, our ability to deliver our services or operate our business may be impaired, (iv) we may be subject to litigation or regulatory investigations or orders and (v) we may incur significant liabilities. Our insurance coverage may not be adequate to cover the potentially significant losses that may result from security breaches.
We must comply with Environmental and Occupational Safety and Health Administration Regulations.
We are subject to federal, state, and local regulations governing the storage, use and disposal of waste materials and products. Although we believe that our safety procedures for storing, handling, and disposing of these materials and products comply with the standards prescribed by law and regulation, we cannot eliminate the risk of accidental contamination or injury from those hazardous materials. In the event of an accident, we could be held liable for any damages that result and any liability could exceed the limits or fall outside the coverage of our insurance coverage, which we may not be able to maintain on acceptable terms, or at all. We could incur significant costs and attention of our management could be diverted to comply with current or future environmental laws and regulations. Federal regulations promulgated by the Occupational Safety and Health Administration impose additional requirements on us, including those protecting employees from exposure to elements such as blood-borne pathogens. We cannot predict the frequency of compliance, monitoring, or enforcement actions to which we may be subject to as those regulations are being implemented, which could adversely affect our operations.
We must comply with a range of other Federal and State Healthcare Laws.
We are subject to other federal and state healthcare laws that could have a material adverse effect on our business, financial condition, or results of operations. The Health Care Fraud Statute prohibits any person from knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program, which can be either a government or private payor plan. Violation of this statute, even in the absence of actual knowledge of or specific intent to violate the statute, may be charged as a felony offense and may result in fines, imprisonment, or both. The Health Care False Statement Statute prohibits, in any matter involving a federal health care program, anyone from knowingly and willfully falsifying, concealing, or covering up, by any trick, scheme or device, a material fact, or making any materially false, fictitious, or fraudulent statement or representation, or making or using any materially false writing or document knowing that it contains a materially false or fraudulent statement. A violation of this statute may be charged as a felony offense and may result in fines, imprisonment, or both. Under the Civil Monetary Penalties Law of the Social Security Act, a person (including an organization) is prohibited from knowingly presenting or causing to be presented to any United States officer, employee, agent, or department, or any state agency, a claim for payment for medical or other items or services where the person knows or should know (a) the items or services were not provided as described in the coding of the claim, (b) the claim is a false or fraudulent claim, (c) the claim is for a service furnished by an unlicensed physician, (d) the claim is for medical or other items or service furnished by a person or an entity that is in a period of exclusion from the program, or (e) the items or services are medically unnecessary items or services. Violations of the law may result in penalties of up to $10,000 per claim, treble damages, and exclusion from federal healthcare programs.
In addition, the OIG may impose civil monetary penalties against any physician who knowingly accepts payment from a hospital (as well as against the hospital making the payment) as an inducement to reduce or limit medically necessary services provided to Medicare or Medicaid program beneficiaries. Further, except as permitted under the Civil Monetary Penalties Law, a person who offers or transfers to a Medicare or Medicaid beneficiary any remuneration that the person knows or should know is likely to influence the beneficiary’s selection of a particular provider of Medicare or Medicaid payable items or services may be liable for civil money penalties of up to $10,000 for each wrongful act.
In addition to the state laws previously described, we may also be subject to other state fraud and abuse statutes and regulations if we expand our operations nationally. Many states have adopted a form of anti-kickback law, self-referral prohibition, and false claims and insurance fraud prohibition. The scope of these laws and the interpretations of them vary from state to state and are enforced by state courts and regulatory authorities, each with broad discretion. Generally, state laws reach to all healthcare services and not just those covered under a governmental healthcare program. A determination of liability under any of these laws could result in fines and penalties and restrictions on our ability to operate in these states. We cannot assure that our arrangements or business practices will not be subject to government scrutiny or be found to violate applicable fraud and abuse laws.
Changes in healthcare laws could create an uncertain environment and materially impact us.
We cannot predict the effect that the ACA and its implementation, amendment, or repeal and replacement, may have on our business, results of operations or financial condition. Any changes in healthcare laws or regulations that reduce, curtail, or eliminate payments, government-subsidized programs, government-sponsored programs, and/or the expansion of Medicare or Medicaid, among other actions, could have a material adverse effect on our business, results of operations and financial condition. For example, the ACA dramatically changed how healthcare services are covered, delivered, and reimbursed. The ACA requires insurers to accept all applicants, regardless of pre-existing conditions, cover an extensive list of conditions and treatments, and charge the same rates, regardless of pre-existing condition or gender.
The ACA and the Health Care and Education Reconciliation Act of 2010 (collectively, the “Health Care Reform Acts”) also mandated changes specific to home health and hospice benefits under Medicare. In 2012, the U.S. Supreme Court upheld the constitutionality of the ACA, including the “individual mandate” provisions of the ACA that generally require all individuals to obtain healthcare insurance or pay a penalty. However, the U.S. Supreme Court also held that the provision of the ACA that authorized the Secretary of the U.S. Department of Health and Human Services to penalize states that choose not to participate in the expansion of the Medicaid program by removing all its existing Medicaid funding was unconstitutional. In response to the ruling, several state governors opposed its state’s participation in the expanded Medicaid program, which resulted in the ACA not providing coverage to some low-income persons in those states. In addition, several bills have been, and are continuing to be, introduced in U.S. Congress to amend all or significant provisions of the ACA, or repeal and replace the ACA with another law. In December 2017, the individual mandate was repealed via the Tax Cuts and Jobs Act of 2017. Afterwards, legal, and political challenges as to the constitutionality of the remaining provisions of the ACA resumed.
Our operations are subject to the nation’s healthcare laws, as amended, repealed, or replaced from time to time.
The net effect of the ACA on our business is subject to numerous variables, including the law’s complexity, lack of complete implementing regulations and interpretive guidance, gradual and potentially delayed implementation, or possible amendment, as well as the uncertainty as to the extent to which states will choose to participate in the expanded Medicaid program. The continued implementation of provisions of the ACA, the adoption of new regulations thereunder and ongoing challenges thereto, also added uncertainty about the current state of U.S. healthcare laws and could negatively impact our business, results of operations and financial condition. Healthcare providers could be subject to federal and state investigations and payor audits.
Due to our participation in government and private healthcare programs, we are from time to time involved in inquiries, reviews, audits, and investigations by governmental agencies and private payors of our business practices, including assessments of our compliance with coding, billing, and documentation requirements. Federal and state government agencies have active civil and criminal enforcement efforts against healthcare companies, and their executives and managers. The Deficit Reduction Act, which provides a financial incentive to states to enact their own false claims acts, and similar laws encourage investigations against healthcare companies by different agencies. These investigations could also be initiated by private whistleblowers.
Responding to audit and investigative activities are costly and disruptive to our business operations, even when the allegations are without merit. If we are subject to an audit or investigation, a finding could be made that we or our affiliates erroneously billed or were incorrectly reimbursed, and we may be required to repay such agencies or payors, may be subjected to pre-payment reviews, which can be time-consuming and result in non-payment or delayed payments for the services we or our affiliates provide, and may be subject to financial sanctions or required to modify our operations.
Our revenues may depend on our patients’ receipt of adequate reimbursement from private insurers and government sponsored healthcare programs.
Political, economic, and regulatory influences continue to change the healthcare industry in the United States. If and when we start receiving reimbursements from third parties, the ability of patients to pay fees for our products will partially depend on the extent to which reimbursement for the costs of such materials and related treatments will continue to be available from private health coverage insurers and other similar organizations. We may have difficulty gaining market acceptance for the products we sell if third-party payors do not provide adequate coverage and reimbursement to hospitals. Major third-party payors of hospitals, such as private healthcare insurers, periodically revise their payment methodologies based, in part, upon changes in government sponsored healthcare programs. We cannot predict these periodic revisions with certainty, and such revisions may result in stricter standards for reimbursement of hospital charges for certain specified products, potentially adversely impacting our business, results of operations, and financial conditions when we start receiving reimbursement from third party payors.
When we start receiving reimbursement from third party payors, the sales of our therapies will depend in part on the availability of reimbursement by third-party payors, such as government health administration authorities, private health insurers and other organizations. Third-party payors often challenge the price and cost-effectiveness of medical treatments and services. Governmental approval of health care products does not guarantee that these third-party payors will pay for the products. Even if third-party payors do accept our therapeutic treatments, the amounts they pay may not be adequate to enable us to realize a profit. Legislation and regulations affecting the pricing of therapies may change before our products and services are approved for marketing, and any such changes could further limit reimbursement, if any.
Future regulatory action remains uncertain.
We operate in a highly regulated and evolving environment with rigorous regulatory enforcement. Any legal or regulatory action could be time-consuming and costly. If we or the manufacturers or distributors that supply our products fail to comply with all applicable laws, standards, and regulations, action by the FDA or other regulatory agencies could result in significant restrictions, including restrictions on the marketing or use of the products we sell or the withdrawal of the products we sell from the market. Any such restrictions or withdrawals could materially affect our reputation, business, and operations.
Risks Related to Acquisitions
Acquisitions may subject us to liability with regard to the creditors, customers, and shareholders of the sellers.
While we intend that any acquisitions that we consummate will typically be structured as asset purchase agreements in which we attempt to limit our risk and exposure relative to the respective sellers’ liabilities, we cannot guarantee that we will be successful in avoiding all liability. Creditors may seek to hold us accountable for seller debt and customers and for seller breaches of contract prior to our transactions. Occasionally, disaffected shareholders may attempt to interfere with our business acquisitions. We will attempt to minimize all of these risks through thorough due diligence, negotiating indemnities and holdbacks, obtaining relevant representations from sellers, and leveraging experienced professionals when appropriate; however, there can be no assurance that we will be able to mitigate all risks.
We may be unable to implement our strategy of acquiring companies.
Although we expect that one or more acquisition opportunities will become available in the future, we may not be able to acquire companies at all or on terms favorable to us. We will likely need additional financing for such acquisitions, but there is no assurance that we will be able to borrow funds or raise capital through the issuance of our equity on favorable terms. Certain of our larger, better capitalized competitors may seek to acquire some of the companies we may be interested in. Competition for acquisitions would likely increase acquisition prices and result in us having fewer acquisition opportunities. Depending on the type of businesses we acquire, we may have varying cost saving and/or cross-selling opportunities with the acquired business. However, there is no assurance that we will achieve anticipated cost savings and cross-selling on our acquisitions, and failure to do so may mean we overpaid for such acquisitions. In completing any acquisitions, we will rely upon the representations and warranties and indemnities made by the sellers with respect to each acquisition as well as our own due diligence investigation. We cannot be assured that such representations and warranties will be true and correct or that our due diligence will uncover all materially adverse facts relating to the operations and financial condition of the acquired companies or their customers. To the extent that we are required to pay for obligations of an acquired company, or if material misrepresentations exist, we may not realize the expected benefit from such acquisition, and we will have overpaid in cash, stock, assumed debt, seller notes, and/or earnouts for the value received in that acquisition.
Future acquisitions may result in potentially dilutive issuances of equity securities, the incurrence of indebtedness and increased amortization expense.
Future acquisitions may result in dilutive issuances of equity securities, the incurrence of debt, the assumption of known and unknown liabilities, the write-off of software development costs and the amortization of expenses related to intangible assets, all of which could have an adverse effect on our business, financial condition, and results of operations.
We face risks arising from acquisitions that we pursue in the future.
We may pursue strategic acquisitions in the future. Risks in acquisition transactions include difficulties in the integration of acquired businesses into our operations and control environment, difficulties in assimilating and retaining employees and intermediaries, difficulties in retaining the existing clients of the acquired entities, assumed or unforeseen liabilities that arise in connection with the acquired businesses, the failure of counter parties to satisfy any obligations to indemnify us against liabilities arising from the acquired businesses, and unfavorable market conditions that could negatively impact our growth expectations for the acquired businesses. Fully integrating an acquired company or business into our operations may take a significant amount of time. We cannot assure you that we will be successful in overcoming these risks or any other problems encountered with acquisitions and other strategic transactions. These risks may prevent us from realizing the expected benefits from acquisitions and could result in the failure to realize he full economic value of a strategic transaction or the impairment of goodwill and/or intangible assets recognized at the time of an acquisition. These risks could be heightened if we complete a large acquisition or multiple acquisitions within a short period of time.
Risks Related to Our Management
Our future success depends, in part, on the performance and continued service of our officers and directors
We presently depend to a great extent upon the experience, abilities, and continued services of our management team, particularly our Chief Executive Officer. The loss of our management team’s services could have a material adverse effect on our business, financial condition, or results of operation. Failure to maintain our management team could prove disruptive to our daily operations, require a disproportionate amount of resources and management attention, and could have a material adverse effect on our business, financial condition, and results of operations. We do not maintain key person insurance on any member of our management team.
Our executive officers, directors and certain key stockholders own and control a significant number of voting securities and so long as they do, they are able to control the outcome of stockholder voting.
Our executive officers, directors as well as certain other key shareholders are the owners of approximately 83% of the voting shares of the Company as of September 8, 2022 as a result of their ownership over our Series X Cumulative Redeemable Perpetual Preferred Stock (the “Series X Preferred Stock”), and Common Stock. The Series X Preferred stock votes with our outstanding shares of Common Stock at the rate of 400 votes for each share owned, one (1) vote for each common holder. As such, our management can determine the outcome of all matters submitted to our stockholders for approval, including the election of directors. Our management’s control of our voting securities may make it impossible to complete some corporate transactions without its support and may prevent a change in our control. In addition, this ownership could discourage the acquisition of our Common Stock by potential investors and could have an anti-takeover effect, possibly depressing the trading price of our Common Stock. However, subject to effectiveness of this registration statement, the holders of the Series X Preferred Stock have agreed to exchange their shares for newly issued Series D Preferred Stock. This event will create an additional [___] shares of Series D Preferred Stock, and as a result all outstanding shares of Series X Preferred Stock will be extinguished, along with their voting rights. In this event, the executive officers, directors, and other key shareholders will not be able to control the outcome of all matters submitted to our stockholders for approval and we will need our stockholders approval for certain corporate transactions which may involve more time and expense.
Risks Relating to this Offering and Ownership of our Units
We have broad discretion in the use of the net proceeds from this offering and may not use them effectively.
Our management will have broad discretion in the application of the net proceeds from this offering, including for any of the purposes described in the section entitled “Use of Proceeds,” and you will not have the opportunity as part of your investment decision to assess whether the net proceeds will be used appropriately. Because of the number and variability of factors that will determine our use of the net proceeds from this offering, their ultimate use may vary substantially from their currently intended use. Our management might not apply our net proceeds in ways that ultimately increase the value of your investment. We currently intend to use the net proceeds of this offering primarily for general corporate purposes and clinic expansion.
Our expected use of net proceeds from this offering represents our current intentions based upon our present plans and business condition. As of the date of this prospectus, we cannot predict with certainty all the particular uses for the net proceeds to be received upon the completion of this offering, or the amounts that we will actually spend on the uses set forth above. The amounts and timing of our actual use of the net proceeds will vary depending on numerous factors, including the commercial success of our systems and the costs of our research and development activities, as well as the amount of cash used in our operations. As a result, our management will have broad discretion in the application of the net proceeds, and investors will be relying on our judgment regarding the application of the net proceeds of this offering.
The failure by our management to apply these funds effectively could harm our business. Pending their use, we may invest the net proceeds from this offering in short-term, investment-grade, interest-bearing securities. These investments may not yield a favorable return to our stockholders. If we do not invest or apply the net proceeds from this offering in ways that enhance stockholder value, we may fail to achieve expected financial results, which could cause our stock price to decline.
Shares eligible for future sale may have adverse effects on our share price.
Sales of substantial amounts of shares or the perception that such sales could occur may adversely affect the prevailing market price for our shares. We may issue additional shares in subsequent public offerings or private placements to make new investments or for other purposes. We are not required to offer any such shares to existing shareholders on a preemptive basis. Therefore, it may not be possible for existing shareholders to participate in such future share issuances, which may dilute the existing shareholders’ interests in us.
Investors in this offering will experience immediate and substantial dilution in net tangible book value.
The public offering price per share is substantially higher than the net tangible book value per share of our outstanding shares of Common Stock. As a result, investors in this offering will incur immediate dilution of $ per share, based on the assumed public offering price of $ per share which is the midpoint of the estimated offering price range set forth on the cover page of this prospectus. Investors in this offering will pay a price per share that substantially exceeds the book value of our assets after subtracting our liabilities. See “Dilution” for a more complete description of how the value of your investment will be diluted upon the completion of this offering.
We do not anticipate paying any cash dividends on our Common Stock in the foreseeable future.
We currently intend to retain all our future earnings to finance the growth and development of our business, and therefore, we do not anticipate paying any cash dividends on our Common Stock in the foreseeable future. We believe it is likely that our Board will continue to conclude, that it is in our best interests to retain all earnings (if any) for the development of our business. In addition, the terms of any future debt agreements may preclude us from paying dividends. As a result, capital appreciation, if any, of our Common Stock will be your sole source of gain for the foreseeable future.
If securities or industry analysts do not publish research or publish inaccurate or unfavorable research about our business, our stock price and trading volume could decline.
The trading market for our Common Stock, Series A Warrants and Series B Warrants will depend in part on the research and reports that securities or industry analysts publish about us or our business. Securities and industry analysts do not currently, and may never, publish research on our company. If no securities or industry analysts commence coverage of our company, the trading price for our stock would likely be negatively impacted. In the event securities or industry analysts initiate coverage, if one or more of the analysts who covers us downgrades our stock or publishes inaccurate or unfavorable research about our business, our stock price may decline. If one or more of these analysts ceases coverage of our company or fails to publish reports on us regularly, demand for our stock could decrease, which might cause our stock price and trading volume to decline.
Our stock price has fluctuated in the past, has recently been volatile and may be volatile in the future, and as a result, investors in our Common Stock and Warrants could incur substantial losses.
Our stock price has fluctuated in the past, has recently been volatile and may be volatile in the future. On August 12, 2022, the reported low sale price of our Common Stock was $0.12, while the reported high sales price was $0.13, with a closing price of $0.13. For comparison purposes, on December 31, 2020, our stock price closed at $0.03. The increase in stock price is believed to be related to the opening of six clinics in 2021. We may incur rapid and substantial decreases in our stock price in the foreseeable future that are unrelated to our operating performance or prospects. The stock market in general and the market for telehealth companies in particular have experienced extreme volatility that has often been unrelated to the operating performance of particular companies. For example, the recent outbreak of the COVID-19 coronavirus has caused broad stock market and industry fluctuations. In addition, sales of substantial amounts of our Common Stock and Warrants, or the perception that such sales might occur, could adversely affect prevailing market prices of our Common Stock and Warrants and our stock price may decline substantially in a short period of time. As a result, our stockholders could suffer losses or be unable to liquidate holdings. As a result of this volatility, investors may experience losses on their investment in our Common Stock and Warrants. The market price for our Common Stock and Warrants may be influenced by many factors, including the following:
|
● |
sale of our Common Stock Warrants by our stockholders, executives, and directors; |
|
|
● |
volatility and limitations in trading volumes of our securities; |
|
|
● |
our ability to obtain financings to implement our business plans; |
|
|
● |
the timing and success of introductions of new clinics; |
|
|
● |
our ability to attract new customers; |
|
|
● |
the impact of COVID-19; |
|
|
● |
changes in our capital structure or dividend policy, future issuances of securities and sales of large blocks of securities by our stockholders; |
|
|
● |
our cash position; |
|
|
● |
announcements and events surrounding financing efforts, including debt and equity securities; |
|
|
● |
our inability to enter new markets or develop new products; |
|
|
● |
reputational issues; |
|
|
● |
our inability to successfully manage our business or achieve profitability; |
|
|
● |
announcements of acquisitions, partnerships, collaborations, joint ventures, new products, capital commitments, or other events by us or our competitors; |
|
|
● |
changes in general economic, political and market conditions in any of the regions in which we conduct our business; |
|
|
● |
changes in industry conditions or perceptions; |
|
|
● |
analyst research reports, recommendation and changes in recommendations, price targets, and withdrawals of coverage; |
|
|
● |
departures and additions of key personnel; |
|
|
● |
disputes and litigation related to intellectual properties, proprietary rights, and contractual obligations; |
|
|
● |
changes in applicable laws, rules, regulations, or accounting practices and other dynamics; |
|
|
● |
market conditions or trends in our industry; and |
|
|
● |
other events or factors, many of which may be out of our control. |
These broad market and industry factors may seriously harm the market price of our Common Stock and Warrants, regardless of our operating performance. Since the stock price of our Common Stock has fluctuated in the past, has been recently volatile and may be volatile in the future, investors in our Common Stock and Warrants could incur substantial losses. In the past, following periods of volatility in the market, securities class-action litigation has often been instituted against companies. Such litigation, if instituted against us, could result in substantial costs and diversion of management’s attention and resources, which could materially and adversely affect our business, financial condition, results of operations and growth prospects. There can be no guarantee that our stock price will remain at current prices or that future sales of our Common Stock and Warrants will not be at prices lower than those sold to investors.
Additionally, securities of certain companies have recently experienced significant and extreme volatility in stock price due to short sellers of shares of Common Stock, known as a “short squeeze.” These short squeezes have caused extreme volatility in those companies and in the market and have led to the price per share of those companies to trade at a significantly inflated rate that is disconnected from the underlying value of the company. Many investors who have purchased shares in those companies at an inflated rate face the risk of losing a significant portion of their original investment as the price per share has declined steadily as interest in those stocks have abated. While we have no reason to believe our shares would be the target of a short squeeze, there can be no assurance that we won’t be in the future, and you may lose a significant portion or all your investment if you purchase our shares at a rate that is significantly disconnected from our underlying value.
There can be no assurances that our Common Stock, Series A Warrants and Series B Warrants, once listed on the Nasdaq Capital Market will not be subject to potential delisting if we do not continue to maintain the listing requirements of the Nasdaq Capital Market.
We have applied to list the shares of our Common Stock on the Nasdaq Capital Market, under the symbol “MITI”. We are applying to list the Series A Warrants and Series B Warrants for trading on the Nasdaq Capital Market, but we cannot assure you that we will meet all of the required listing standards. An approval of our listing application by Nasdaq will be subject to, among other things, our fulfilling all the listing requirements of Nasdaq. In addition, Nasdaq has rules for continued listing, including, without limitation, minimum market capitalization and other requirements. Failure to maintain our listing (i.e., being de-listed from Nasdaq), would make it more difficult for stockholders to sell our Common Stock, Series A Warrants and Series B Warrants and more difficult to obtain accurate price quotations on our Common Stock and Warrants. This could have an adverse effect on the price of our Common Stock, Series A Warrants and Series B Warrants. Our ability to issue additional securities for financing or other purposes, or otherwise to arrange for any financing we may need in the future, may also be materially and adversely affected if our Common Stock, Series A Warrants and Series B Warrants are not traded on a national securities exchange.
Our Common Stock is thinly traded, so you may be unable to sell at or near asking prices, or at all.
Our Common Stock is quoted on the OTCQB under the symbol “MITI.” Shares of our Common Stock have, until recently, been thinly traded, meaning that the number of persons interested in purchasing shares of our Common Stock, Series A Warrants and Series B Warrants at or near asking prices at any given time may be relatively small or non-existent. This situation is attributable to a number of factors. We are a small company that is relatively unknown to stock analysts, stockbrokers, institutional investors, and others in the investment community that generate or influence sales volume; and stock analysts, stockbrokers and institutional investors may be risk-averse and be reluctant to follow an unproven, early-stage company such as ours or purchase or recommend the purchase of our shares until such time as we become more seasoned and viable. As a result, our stock price may not reflect an actual or perceived value. Also, there may be periods of several days or more when trading activity in our shares is minimal, as compared to a seasoned issuer that has a large and steady volume of trading activity that will generally support continuous sales without an adverse effect on share price. A broader or more active public trading market for our Common Stock, Series A Warrants and Series B Warrants may not develop or if developed, may not be sustained. Due to these conditions, you may not be able to sell your shares at or near asking prices or at all should you attempt to sell your common shares.
Our reverse stock split may not result in a proportional increase in the per share price of our Common Stock.
The effect of the reverse stock split on the market price for our Common Stock cannot be accurately predicted. In particular, we cannot assure you that the prices for shares of the Common Stock after the reverse stock split will increase proportionately to prices for shares of our Common Stock immediately before the reverse stock split. The market price of our Common Stock may also be affected by other factors which may be unrelated to the reverse stock split, or the number of shares issued and outstanding.
Furthermore, even if the market price of our Common Stock does rise following the reverse stock split, we cannot assure you that the market price of our Common Stock immediately after the proposed reverse stock split will be maintained for any period of time. Moreover, because some investors may view the reverse stock split negatively, we cannot assure you that the reverse stock split will not adversely impact the market price of our Common Stock. There is also the possibility that liquidity may be adversely affected by the reduced number of shares which would be issued and outstanding when the reverse stock split is effected, particularly if the price per share of our Common Stock begins a declining trend after the reverse stock split is affected. Accordingly, our total market capitalization after the reverse stock split may be lower than the market capitalization before the reverse stock split.
Because we may issue preferred stock without the approval of our shareholders and have other anti-takeover defenses, it may be more difficult for a third party to acquire us and could depress our stock price.
In general, our Board may issue, without a vote of our shareholders, one or more additional series of preferred stock that have more than one vote per share, although our ability to designate and issue preferred stock is currently restricted by covenants in the Certificate of Designation for the Series C Preferred Stock. Without these restrictions, our Board could issue preferred stock to investors who support us and our management and give effective control of our business to our management. Additionally, issuance of preferred stock could block an acquisition resulting in both a drop in our stock price and a decline in interest of our Common Stock, Series A Warrants and Series B Warrants. This could make it more difficult for shareholders to sell their Common Stock, Series A Warrants and Series B Warrants. This could also cause the market price of our Common Stock, Series A Warrants and Series B Warrants to drop significantly, even if our business is performing well.
Offers or availability for sale of a substantial number of shares of our Common Stock, Series A Warrants and Series B Warrants may cause the price of our Common Stock, Series A Warrants and Series B Warrants to decline.
Sales of large blocks of our Common Stock, Series A Warrants and Series B Warrants could depress the price of our Common Stock, Series A Warrants and Series B Warrants. The existence of these shares and shares of Common Stock that may be issuable upon conversion or exercise, as applicable, of outstanding shares of convertible preferred stock, warrants and options create a circumstance commonly referred to as an “overhang” which can act as a depressant to the price of our Common Stock, Series A Warrants and Series B Warrants. The existence of an overhang, whether sales have occurred or are occurring, also could make our ability to raise additional financing through the sale of equity or equity-linked securities more difficult in the future at a time and price that we deem reasonable or appropriate. If our existing shareholders and investors seek to convert or exercise such securities or sell a substantial number of shares of our Common Stock, such selling efforts may cause significant declines in the market price of our Common Stock and Warrants. In addition, the shares of our Common Stock, Series A Warrants and Series B Warrants sold in the offering will be freely tradable without restriction or further registration under the Securities Act of 1933, as amended (the “Securities Act”). As a result, a substantial number of shares of our Common Stock, Series A Warrants and Series B Warrants may be sold in the public market following this offering. If there are significantly more shares of Common Stock, Series A Warrants and Series B Warrants offered for sale than buyers are willing to purchase, then the market price of our Common Stock, Series A Warrants and Series B Warrants may decline to a market price at which buyers are willing to purchase the offered Common Stock Warrants and sellers remain willing to sell our Common Stock, Series A Warrants and Series B Warrants.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains, in addition to historical information, certain forward-looking statements within the meaning of Section 27A of the Securities Act that includes information relating to future events, future financial performance, strategies, expectations, competitive environment, regulation and availability of resources. Such forward-looking statements include those that express plans, anticipation, intent, contingency, goals, targets, or future development and/or otherwise are not statements of historical fact. These forward-looking statements are based on our current expectations and projections about future events, and they are subject to risks and uncertainties known and unknown that could cause actual results and developments to differ materially from those expressed or implied in such statements.
In some cases, you can identify forward-looking statements by terminology, such as “may,” “should,” “would,” “will”, “expect,” “intend,” “anticipate,” “believe,” “estimate,” “continue,” “plan,” “potential”, “seek”, “target” and similar expressions. Accordingly, these statements involve estimates, assumptions and uncertainties that could cause actual results to differ materially from those expressed in them. Any forward-looking statements are qualified in their entirety by reference to the factors discussed throughout this prospectus or incorporated herein by reference.
You should read this prospectus and the documents we have filed as exhibits to the registration statement, of which this prospectus is part, completely and with the understanding that our actual future results may be materially different from what we expect. You should not assume that the information contained in this prospectus, or any prospectus supplement is accurate as of any date other than the date on the front cover of those documents.
Risks, uncertainties, and other factors that may cause our actual results, performance, or achievements to be different from those expressed or implied in our written or oral forward-looking statements may be found in this prospectus under the heading “Risk Factors.”
Forward-looking statements speak only as of the date they are made. You should not put undue reliance on any forward-looking statements. We assume no obligation to update forward-looking statements to reflect actual results, changes in assumptions or changes in other factors affecting forward-looking information, except to the extent required by applicable securities laws. If we do update one or more forward-looking statements, no inference should be drawn that we will make additional updates with respect to those or other forward-looking statements.
New factors emerge from time to time, and it is not possible for us to predict which factors will arise. In addition, we cannot assess the impact of each factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. We qualify all the information presented in this prospectus particularly our forward-looking statements, by these cautionary statements.
USE OF PROCEEDS
We estimate that the net proceeds from our issuance and sale of all of the Units sold by the Company in this offering will be approximately $ million (or approximately $ million if the underwrites exercises its over-allotment option in full), based on an assumed public offering price of $ per share, after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us, and excluding the proceeds, if any, from the exercise of the Warrants issued as part of the Units. The use of proceeds chart below is dated as of September 8, 2022.
|
Use of Proceeds |
|||||||||
|
Estimated Offering Fees and Expenses |
|||||||||
|
Underwriting commissions (7% of gross proceeds from shares offered by us to public) |
$ | 700,000 | |||||||
|
Reimbursement of underwriter for expenses |
$ | 125,000 | |||||||
|
NASDAQ and FINRA listing fees |
$ | 11,225 | |||||||
|
Printing expenses |
$ | 8,000 | |||||||
|
Legal fees |
$ | 150,000 | |||||||
|
Estimated Offering Fees and Expenses |
$ | 994,225 | |||||||
|
Proceeds To Be Used Toward Opening Additional Clinics |
|||||||||
|
Proceeds To Be Used Toward General Working Capital |
|||||||||
For debt that will be discharged that was incurred within one year, the use of such debt was for payroll and operating expenses. We currently intend to use the net proceeds from this offering to continue to grow and expand our existing clinics in our targeted markets.
Changing circumstances may cause us to consume capital significantly faster than we currently anticipate. The amounts and timing of our actual expenditures will depend upon numerous factors, including the progress of our global marketing and sales efforts, with development efforts, economic and political effects of COVID-19 and government responses to it, and the overall economic environment. Therefore, our management will retain broad discretion over the use of the proceeds from this offering. We may ultimately use the proceeds for different purposes than what we currently intend. Pending any ultimate use of any portion of the proceeds from this offering, if the anticipated proceeds will not be sufficient to fund all the proposed purposes, our management will determine the order of priority for using the proceeds, as well as the amount and sources of other funds needed.
A $1.00 increase (decrease) in the assumed public offering price of $ per share would increase (decrease) the aggregate net proceeds to us from this offering by approximately $ million, assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting underwriting discounts and commissions and estimated offering expenses payable by us. Similarly, each increase (decrease) of 500,000 shares in the number of shares offered by us would increase (decrease) the net proceeds to us from this offering by approximately $ million, if the assumed public offering price remains the same, and after deducting the underwriting discounts and commissions and estimated offering expenses payable by us.
MARKET FOR OUR COMMON STOCK
Our Common Stock is quoted on the OTCQB under the symbol “MITI.”
On September 8, 2022, the price of our Common Stock as reported on the OTCQB was $0.1175 and we have approximately 574 holders of record of our Common Stock, and approximately 8,000 shareholders including smaller holders and those with restricted shares not currently in the market.
Listing
Our Common Stock is traded on the OTCQB under the symbol MITI. There is no established trading market for the Series A Warrants and Series B Warrants.
We have applied to list our Common Stock on the Nasdaq Capital Market under the symbol “MITI”. We are applying to list the Series A Warrants and Series B Warrants for trading on the Nasdaq Capital Market. We will not proceed with this offering in the event our Common Stock, Series A Warrants and Series B Warrants are not approved for listing on the Nasdaq Capital Market though we will continue to seek financing for our expansion and operating needs in the debt and equity markets.
DIVIDEND POLICY
We have never declared or paid any cash dividends on our Common Stock. Under the Delaware law, we may declare and pay dividends on our capital stock either out of our surplus, as defined in the relevant Delaware statutes, or if there is no such surplus, out of our net profits for the fiscal year in which the dividend is declared and/or the preceding fiscal year. If, however, the capital of our company, computed in accordance with the relevant Delaware statutes, has been diminished by depreciation in the value of our property, or by losses, or otherwise, to an amount less than the aggregate amount of the capital represented by the issued and outstanding stock of all classes having a preference upon the distribution of assets, we are prohibited from declaring and paying out of such net profits and dividends upon any shares of our capital stock until the deficiency in the amount of capital represented by the issued and outstanding stock of all classes having a preference upon the distribution of assets shall have been repaired. The Company does not intend to declare or pay any cash dividends on its Common Stock in the foreseeable future. The holders of our Common Stock are entitled to receive only such dividends (cash or otherwise) as may be declared by our Board of Directors.
On December 31, 2019, we issued 26,227 shares of its Series X Preferred stock in order to settle certain of the Company’s obligations. The Series X Preferred shares have a liquidation preference of $25.00 per share and will pay a 10% per year dividend based upon the liquidation value. The dividend may be paid in cash or in the issuance of restricted Common Stock. If the Company chooses to pay the dividend in restricted Common Stock the number of shares issued to fulfill the dividend payment shall be determined based on the stock price on the date the dividend award is made by the Board of Directors. The Series X has 400 votes per share and votes with our Common Stock. As of September 8, 2022, the outstanding Series X Preferred shares was 24,227.
Each share of Series C Preferred Stock accrues dividends on a quarterly basis in arrears, at the rate of 6% per annum of the Stated Value and to be paid within 15 days after the end of each of our fiscal quarters. The Series C Preferred Stock along with the Series D Preferred stock ranks senior to all other preferred stock of the Company except in relation to the Company’s Series X Preferred Stock, which ranks pari passu to the Series C Preferred Stock, with respect to the preferences as to dividends, distributions and payments upon the liquidation, dissolution and winding up of the Company.
Each share of Series D Preferred Stock accrues dividends on a quarterly basis in arrears, at the rate of 6% per annum of the Stated Value and to be paid within 15 days after the end of each of our fiscal quarters. The Series D Preferred Stock along with the Series C Preferred Stock ranks senior to all other preferred stock of the Company except in relation to the Company’s Series X Preferred Stock, which ranks pari passu to the Series C Preferred Stock, with respect to the preferences as to dividends, distributions and payments upon the liquidation, dissolution and winding up of the Company.
Exchange and extinguishment of the Series X Preferred Stock
Subject to effectiveness of this registration statement the holders of the Series X Preferred Stock have agreed to exchange their shares and super voting rights for newly issued Series D Preferred Stock. This event will create an additional 717,013 shares of Series D Preferred Stock, and as a result all outstanding shares of Series X Preferred Stock will be extinguished, along with their “super” voting rights and the Company will no longer accrue the dividends associated with the Series X Preferred Stock.
Pursuant to the Certificate of Designations, Preferences and Rights of the Series D Preferred Stock of the Company, Inc., as the Series D Preferred Stock and each share of Series D Preferred Stock is convertible at the option of the holder thereof, or automatically upon the request of the Company’s underwriters that the Series D Preferred Stock convert to shares of Common Stock or upon listing of our Common Stock on a national securities exchange. The number of shares of Common Stock issuable upon the conversion of each share of Series D Preferred Stock is calculated by dividing the Conversion Amount (defined in the COD as the Stated Value, $52.50 per share, plus accrued and unpaid dividends) by the $12.50 conversion price (the “Conversion Price”).
All shares of Series D Preferred Stock will be extinguished in favor of Common Stock upon the upon listing of our Common Stock on a national securities exchange at the request of the underwriter, along with any outstanding Series C share holdings.
CAPITALIZATION
The following table sets forth our cash and capitalization as of June 30, 2022, as follows:
|
● |
on an accrual basis; and |
|
● |
on a pro forma basis to reflect (i) the automatic conversion of the Series C Preferred Stock into 84,000 shares of Common Stock, (ii) conversion of the Series X Preferred Stock into approximately 717,013 shares of Series D Preferred Stock based upon an assumed valuation of $0.17; (iii) conversion of the Series D Preferred Stock into approximately 320,629 shares of common stock, based upon 4.2 times 3,817,013 shares of Series D Preferred Stock and (iv) the planned reverse stock split as a ratio of 1 to 50; and |
|
● |
on a pro forma as adjusted basis to reflect and the issuance and sale of Units by us in this offering at the assumed public offering price of $ per Unit (the midpoint of the range set forward on the cover page of this prospectus), after deducting the estimated underwriting discounts and the estimated offering expenses payable by us. |
|
June 30, 2022 |
||||||||||||
|
Pro Forma |
Pro Forma As (unaudited) |
|||||||||||
|
Cash |
$ | 35,821 | $ | - | $ | - | ||||||
|
Total liabilities |
14,699,814 | - | - | |||||||||
|
Total stockholders’ equity: |
||||||||||||
|
Common Stock, $0.01 par value, 500,000,000 shares authorized, and 4,504,195 shares issued and outstanding as of June 30, 2022, and [___] shares issued and outstanding, as adjusted; |
2,197,500 | - | - | |||||||||
|
Additional paid-in capital |
25,517,634 | - | - | |||||||||
|
Accumulated (deficit) |
(32,928,811 |
) |
- | - | ||||||||
|
Total liabilities and stockholders’ equity |
10,819,782 | - | - | |||||||||
|
Capitalization |
$ | 52,741,655 | $ | - | $ | - | ||||||
The as adjusted information below is illustrative only, and our capitalization following the closing of this offering will change based on the actual public offering price and other terms of this offering determined at pricing. You should read the information in this table, together with our consolidated financial statements and the related notes appearing elsewhere in this prospectus and the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” that are included elsewhere in this prospectus by us.
Each $1.00 increase (decrease) in the assumed offering price of $ per Unit, would increase (decrease) our as adjusted cash, additional paid-in capital, total stockholders’ equity (deficit) and total capitalization by approximately $ million, assuming the number of shares offered by us, as set forth on the cover page of this offering remains the same, and after deducting underwriting discounts and commissions and estimated offering expenses payable by us. Each increase (decrease) of 500,000 shares in the number of Units offered by us would increase (decrease) our as adjusted cash, additional paid-in capital, total stockholders’ equity (deficit) and total capitalization by approximately $ million, assuming the assumed offering price of $ per Unit, remains the same, and after deducting underwriting discounts and commissions and estimated offering expenses payable by us. The as adjusted information discussed above is illustrative only and will be adjusted based on the actual public offering price and other terms of this offering determined at pricing.
The total number of shares of Common Stock that will be outstanding after this offering is based on 4,524,245 shares of Common Stock outstanding as of September 8, 2022. Unless otherwise indicated, the shares of our Common Stock outstanding after this offering excludes the following:
|
● |
327,099 shares of Common Stock issuable upon exercise of outstanding stock options as of September 8, 2022, with a weighted-average exercise price of $10.68 per share; |
|
|
● |
673,311 shares of Common Stock issuable upon exercise of outstanding warrants as of September 8, 2022, with a weighted-average exercise price of $28.33 per share; |
|
|
● |
97,760 shares of Common Stock issuable upon conversion of outstanding shares of Series C Preferred Stock and accrued interest as of September 8, 2022; | |
|
● |
264,570 shares of Common Stock issuable upon conversion of outstanding shares of Series D Preferred Stock and accrued interest as of September 8, 2022; | |
|
● |
600,000 shares of Common Stock reserved for future issuance under our equity incentive plan as of September 8, 2022; |
|
|
● |
no exercise of the underwriter’s over-allotment option; |
|
|
● |
shares of Common Stock underlying the Unit Warrants issued as part of the Unit; |
|
|
● |
no exercise of the Unit Warrants issued as part of the Unit; and |
|
|
● |
no exercise of the Representative’s Warrants. |
The capitalization table below is dated as of September 8, 2022.
|
Mitesco Inc. Capitalization Table |
||||
|
Common Shares |
||||
|
Outstanding per transfer agent |
4,524,245 | |||
|
Employee Stock Options Issued |
327,099 | |||
|
Preferred C Issuable |
97,760 | |||
|
Preferred D Issuable |
264,570 | |||
|
Warrants Outstanding |
673,311 | |||
|
Commitment shares issuable |
4,190 | |||
|
Restricted common stock subscribed |
2,926 | |||
|
Fully Diluted |
5,894,101 | |||
The as adjusted information below is illustrative only, and our capitalization following the closing of this offering will change based on the actual public offering price and other terms of this offering determined at pricing. You should read the information in this table, together with our consolidated financial statements and the related notes appearing elsewhere in this prospectus and the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” that are included elsewhere in this prospectus by us.
Each $1.00 increase (decrease) in the assumed offering price of $ per, would increase (decrease) our as adjusted cash, additional paid-in capital, total stockholders’ equity (deficit) and total capitalization by approximately $ million, assuming the number of shares offered by us, as set forth on the cover page of this offering remains the same, and after deducting underwriting discounts and commissions and estimated offering expenses payable by us. Each increase (decrease) of 500,000 shares in the number of shares of Common Stock offered by us would increase (decrease) our as adjusted cash, additional paid-in capital, total stockholders’ equity (deficit) and total capitalization by approximately $ million, assuming the assumed offering price of $ per share, remains the same, and after deducting underwriting discounts and commissions and estimated offering expenses payable by us. The as adjusted information discussed above is illustrative only and will be adjusted based on the actual public offering price and other terms of this offering determined at pricing.
DILUTION
If you invest in our Units in this offering, your ownership interest will be diluted immediately to the extent of the difference between the initial public offering price per share of our stock (attributing no value to the Warrants) and the as adjusted net tangible book value per share of our Common Stock immediately after this offering.
Our historical net tangible book value (deficit) as of June 30, 2022 was $(3.9) million, or $(0.00) per share of our Common Stock. Our historical net tangible book value is the amount of our total tangible assets less our total liabilities. Historical net tangible book value per share represents historical net tangible book value (deficit) divided by the number of shares of our Common Stock outstanding as of December 31, 2021.
After giving further effect to the (i) automatic conversion of the Series C Preferred Stock into 88,000 shares of Common Stock; (ii) conversion of the Series X Preferred Stock into approximately 717,013 shares of Series D Preferred Stock based upon an assumed valuation of $717,000; (iii) conversion of the Series D Preferred Stock into approximately 320,629 shares of common stock; and (iv) the planned reverse stock split as a ratio of our pro forma net tangible book value as of December 31, 2021 would have been approximately , or approximately $ per share. This represents an immediate increase in as adjusted net tangible book value per share of $ to our existing stockholders and an immediate dilution in as adjusted net tangible book value per share of approximately $ to new investors purchasing Common Stock in this offering. Dilution per share to new investors purchasing Common Stock in this offering is determined by subtracting pro forma net tangible book value per share after this offering from the assumed public offering price per share of $ to be paid by new investors.
Simultaneously with this offering the Company’s Series X Preferred Stock will automatically convert into Series D Preferred Stock with the same rights and warrants as all other holders.
After giving further effect to the issuance and sale of shares of Common Stock in this offering (attributing no value to the Unit Warrants) at the assumed public offering price of $ per Unit, and after deducting underwriting discounts and commissions, estimated offering expenses payable by, our pro forma as adjusted net tangible book us value as of December 31, 2021 would have been approximately $ , or approximately $ per share. This represents an immediate increase in pro forma as adjusted net tangible book value per share of $ to our existing stockholders and an immediate dilution in pro forma as adjusted net tangible book value per share of approximately $ to new investors purchasing Common Stock in this offering. Dilution per share to new investors purchasing Common Stock in this offering is determined by subtracting pro forma as adjusted net tangible book value per share after this offering from the assumed public offering price per share ($____) to be paid by new investors.
The following table illustrates this dilution on a per share basis:
|
Assumed public offering price per share |
$ | |||
|
Pro forma net tangible book value (deficit) per share as of December 31, 2021 |
$ | |||
|
Increase in pro forma as adjusted net tangible book value per share as of December 31, 2021 |
||||
|
Pro Forma as adjusted net tangible book value per share after this offering |
||||
|
Dilution per share to new investors purchasing shares in this offering |
$ |
The dilution information discussed above is illustrative only and will change based on the actual public offering price and other terms of this offering to be determined at pricing. A $1.00 increase or decrease in the assumed public offering price of $ per Unit of Common Stock would increase or decrease our pro forma as adjusted net tangible book value per share of Common Stock after this offering by $ and the dilution per share of Common Stock to new investors by $ , assuming the number of Common Stock offered by us, as set forth on the cover page of this prospectus, remains the same, after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us. We may also increase or decrease the number of Common Stock we are offering.
An increase or decrease of in the number of shares of Common Stock offered by us would increase or decrease our pro forma as adjusted net tangible book value after this offering by approximately $ million and the as adjusted net tangible book value per share of Common Stock after this offering by $ per share of Common Stock and would increase or decrease the dilution per share of Common Stock to new investors by $ , assuming the assumed public offering price remains the same, after deducting estimated underwriting discounts and estimated offering expenses payable by us.
The following table summarizes, on an as adjusted basis as of December 31, 2021, the differences between the number of Common Stock acquired from us, the total amount paid and the average price per share of Common Stock paid by the existing holders of our Common Stock and by investors in this offering and based upon an assumed public offering price of $ per share of Common Stock, the midpoint of the estimated price range set forth on the cover page of this prospectus.
If the representative of the underwriters exercises its option to purchase additional shares of Common Stock in this offering in full at the assumed public offering price of $ per share, and after deducting underwriting discounts and commissions and estimated offering expenses payable by us, the net tangible book value per share after this offering would be $ per share, and the dilution in net tangible book value per share to new investors purchasing Common Stock in this offering would be $ per share.
The following table summarizes, as of December 31, 2021, on the as adjusted basis described above:
|
● |
the total consideration paid to us by our existing stockholders and by new investors purchasing Common Stock in this offering, assuming a public offering price of $ per share (the midpoint of the range set forth on the cover page of this prospectus), before deducting underwriting discounts and commissions and estimated offering expenses payable by us in connection with this offering; and |
|
|
● |
the average price per share paid by existing stockholders and by new investors purchasing shares in this offering. |
|
Shares |
Total Consideration (*) |
Average Price Per Share of Common |
||||||||||||||||||
|
Number |
Percent |
Amount |
Percent |
Stock |
||||||||||||||||
|
Existing stockholders (**) |
$ |
% |
$ |
|||||||||||||||||
|
New investors |
$ |
% |
$ |
|||||||||||||||||
|
Total |
$ |
% |
$ |
|||||||||||||||||
(*) Total consideration refers to all amounts received in cash.
A $1.00 increase (decrease) in the assumed public offering price of $ per share would increase (decrease) total consideration paid by new investors by $ million and increase (decrease) the total consideration paid to us by new investors by %, assuming the number of Units offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting underwriting discounts and commissions and estimated offering expenses payable by us.
If the underwriters’ option to purchase additional shares to cover over-allotments is exercised in full, the number of shares held and the percentage of total consideration paid by the existing stockholders after this offering would be reduced to % and %, respectively, and the number of shares held and the percentage of total consideration paid by new investors would increase to % and %, respectively.
The foregoing table and calculations are based on 4,524,245 shares of Common Stock outstanding as of September 8, 2022, and excludes the following:
|
● |
327,099 shares of Common Stock issuable upon exercise of outstanding stock options as of September 8, 2022, with a weighted-average exercise price of $10.68 per share; |
|
● |
673,311 shares of Common Stock issuable upon exercise of outstanding warrants as September 8, 2022, with a weighted-average exercise price of $28.33 per share; |
|
● |
97,760 shares of Common Stock issuable upon conversion of outstanding shares of Series C Preferred Stock as of September 8, 2022; |
|
● |
264,570 shares of Common Stock issuable upon conversion of outstanding shares of Series D Preferred Stock as of September 8, 2022; |
|
● |
600,000 shares of Common Stock reserved for future issuance under our equity incentive plan as of September 8, 2022; |
|
● |
no exercise of the underwriter’s over-allotment option; |
|
● |
shares of Common Stock underlying the Unit Warrants issued as part of the Unit; |
|
● |
no exercise of the Unit Warrants issued as part of the Unit; and |
|
● |
no exercise of the Representative’s Warrants. |
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with and is qualified in its entirety by and should be read together with our financial statements and the related notes thereto appearing elsewhere in this prospectus. This discussion contains certain forward-looking statements that involve risks and uncertainties, as described under the heading “Cautionary Note Regarding Forward-Looking Statements.” Actual results could differ materially from those projected in the forward-looking statements.
We are working to open primary care clinics around the US that are in residential centers and leverage the expertise, training, and license of Nurse Practitioners. We are focusing on wellness as a core of the practice. Our mission is to increase convenience and access to care, improve the quality of care, and reduce its cost.
We opened our first primary care clinic “The Good Clinic” in Northeast Minneapolis, Minnesota in February 2021, and have added five additional operating clinics as of the date of this filing for a total of six clinics open and operating at September 8, 2022. We have three additional leases for new clinics, two in Denver, Colorado and one additional in Minneapolis, Minnesota. These new locations are expected to open in the first quarter of 2023. We also plan to open clinics in additional states that allow practice by Nurse Practitioners and are experiencing a shortage of available primary care providers, including Arizona and Florida. We plan to open clinics in residential concentrations of population to enhance the convenience, especially timely due to the changes in community travel patterns resulting from the pandemic. Our clinicians use both telehealth (virtual) and in-person visits to treat and coach the clients along their journey to better health and quality of life. Our clinics are led by Nurse Practitioners that use their license, extensive training, expertise, and empathy to help people remain stable or improve their health. We emphasize wellness, beginning with a clients’ co-developed plan that identifies from where a person is starting and constructs a plan for how they can achieve their goals. The practice uses an integrated health approach that includes an assessment of both the individual’s behavioral and physical health and combines this with their activation level and their goals. The clinic offers wellness coaching, behavioral health care, episodic care, dermatologic services, and supplements. We seek to care for the whole person’s needs.
Like the first clinic, we seek to locate clinics convenient to residential centers. In pursuit of this approach, we intend to continue to expand our relationship with Lennar Corporation and other large-scale developers. While we have no formal relationship with these developers other that as a tenant, we believe such relationships give us an advantage in recruiting and retaining clients in close proximity to our locations.
Business Summary
Our operating subsidiary, The Good Clinic, produced improved operational results in the second quarter of 2022 as compared to the first quarter of 2022.
During the first quarter of 2022, The Good Clinic client visits were driven mainly by the demand for COVID-19 testing and vaccinations, which generally require shorter appointments. Even though the visits are briefer, these interactions with new clients allow us to demonstrate our differentiating clinic experience. We expect to convert these first-time customers into ongoing clients.
Metrics from the three months ended June 30, 2022:
• The Good Clinic recorded a 45% quarter-over-quarter increase in unique (i.e., first-time) clients.
• The total number of visits in the second quarter of 2022 increased by 11%, as compared to the first quarter of 2022.
• The average length of appointment times increased during the second quarter of 2022, which we measure as minutes of care. There was a 112% increase in total minutes of care during the second quarter of 2022, as compared to the first quarter of 2022, with the average minutes per visit increasing by 91%.
We believe these metrics indicate our clients’ adoption of our primary care concept focused on preventive care and improved well-being. Moreover, we believe these results illustrate that The Good Clinic providers are delivering more complex care and are therefore receiving higher per-visit reimbursements.
Recent Developments
Series D Preferred Stock
On November 19, 2021, we closed a bridge financing round totaling $3.1 million of a series D preferred stock sold to investors in a private placement. Each series D Unit will have a purchase price of $1.00 per Unit, with each Unit consisting of (a) one share of a newly formed Series D Preferred Stock, par value $0.01 per share (the “Series D Preferred Stock”), (b) one warrant (the “Series A Warrants”) to purchase 2.1 shares of our Common Stock at a purchase price of $25.00 per whole share of Common Stock, and (c) one warrant (the “Series B Warrants”) to purchase 2.1 shares of Common Stock at a purchase price of $37.50 per whole share.
Pursuant to the Certificate of Designations, Preferences and Rights of the Series D Preferred Stock of the Company, Inc., filed with the Secretary of State of the State of Delaware on October 18, 2021 (the “COD”), there are 10,000,000 shares of our preferred stock that have been designated as the Series D Preferred Stock and each share of the Series D Preferred Stock is convertible at the option of the holder thereof, or automatically upon the request of the our underwriters that the Series D Preferred Stock convert to shares of Common Stock or upon listing of the our Common Stock on a national securities exchange. The number of shares of Common Stock issuable upon the conversion of each share of Series D Preferred Stock is calculated by dividing the Conversion Amount (defined in the COD as the Stated Value, $52.50 per share, plus accrued and unpaid dividends) by the $12.50 conversion price.
10% Promissory Note and Warrants to Michael C. Howe Living Trust
Howe Note 1 – We issued a 10% Promissory Note due October 10, 2022 (the “Howe Note 1”), dated December 30, 2021, to the Michael C. Howe Living Trust, which was subsequently amended. Michael C. Howe is the Chief Executive Officer of the Good Clinic LLC, one of our subsidiaries. The principal amount of the Howe Note 1 is $1,000,000, carries a 10% interest rate per annum, accrued monthly, and has a maturity date that is the earlier of (i) October 10, 2022, or (ii) five (5) business days after the date on which we successfully lists its shares of common stock on Nasdaq or NYSE. The purchase price of the Howe Note 1 payable to us for the Howe Note 1 was $850,000 and was funded on December 30, 2021. The amount payable at maturity will be $1,000,000 plus 10% of that amount plus any accrued and unpaid interest. Following an event of default, as defined in the 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 contains a “most favored nations” clause that provides that, so long as the Howe Note 1 is outstanding, if we issue 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 will be issued 8,200 of common stock as commitment shares. As further consideration for the purchase price of the Howe Note 1, promptly following the issue of the Howe Note 1, we shall issue to Mr. Howe two common stock purchase warrants, entitling Mr. Howe to purchase (i) 42,000 shares of our common stock on substantially the same terms as the Series A warrant issued in connection with the Company’s Series D Convertible Preferred Stock, and (ii) 42,000 shares of our common stock on substantially the same terms as the Series B warrant issued in connection with our Series D Convertible Preferred Stock, one Series A Warrant, and one Series B Warrant. The Series A and Series B Warrants issued to Mr. Howe under the Howe Note 1 had a fair value of $261,568 at the date of issuance, which was recorded as a discount to the Howe Note 1.
Debt for Equity Exchange with Gardner Builders Holdings, LLC
We entered into a debt-for-equity exchange agreement with Gardner Builders Holdings, LLC (“Gardner”) on January 5, 2022 (the “Gardner Agreement”). Pursuant to the Gardner Agreement, we have authorized the issuance of shares of restricted common stock, par value $0.01 per share, of MITI (the “Restricted Shares”) to Gardner in exchange for the Company Debt Obligations, as defined below.
The Gardner Agreement settles certain amounts owed by us to Gardner (the “Accounts Payable Amount”) as well as upcoming amounts that will become due between the date of the Gardner Agreement and April 1, 2022. The Gardner Agreement also settles incurred interest and penalties on the amounts owed through January 5, 2022, as well as future interest payments on amounts to be incurred in the first quarter of 2022 (collectively, the “Additional Costs”, and combined with the Accounts Payable Amount, the “Company Debt Obligations”). The Accounts Payable Amount is $500,000, the Additional Costs is $294,912.56 and the conversion price is $12.50. As a result, 63,593 Restricted Shares were authorized to be issued. Our Board of Directors approved the Gardner Agreement on January 5, 2022.
10% Promissory Notes to Lawrence Diamond
Diamond Note 1 - We issued a 10% Promissory Note due August 14, 2022 (the “Diamond Note 1”), dated February 14, 2022, to Lawrence Diamond, which was subsequently amended. Mr. Diamond is our Chief Executive Officer and a member of our Board of Directors. The principal amount of the Diamond Note 1 is $175,000, carries a 10% interest rate per annum, accrued monthly, and has a maturity date that is the earlier of (i) October 10, 2022, or (ii) five business days after the date on which we successfully list our shares of common stock on Nasdaq or NYSE. The purchase price of the Diamond Note 1 payable to us for the Diamond Note 1 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 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 contains a “most favored nations” clause that provides that, so long as the Diamond Note 1 is outstanding, if we issue any new security, which Mr. Diamond believes contains a term that is more favorable than those in the Diamond Note 1, we shall notify Mr. Diamond of such term, and such term, at the option of Mr. Diamond, shall become a part of the Diamond Note 1. In addition to the Diamond Note 1 Mr. Diamond will be issued (i) 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; and ( ii) 1,435 shares of common stock as commitment shares. These warrants have all of the same terms as those previously issued in conjunction with our Series C Preferred shares and its Series D Preferred shares.
Diamond Note 2 - We issued a 10% Promissory Note due October 10, 2022 (the “Diamond Note 2”), dated March 18, 2022, to Lawrence Diamond, which was subsequently amended. The principal amount of the Diamond Note 2 is $235,294, carries a 10% interest rate per annum, accrued monthly, and has a maturity date that is the earlier of (i) October 10, 2022, (ii) five (5) business days after the date on which we successfully list its shares of common stock on Nasdaq or NYSE. The purchase price of the Diamond Note 2 payable to us for the Diamond Note 2 was $200,000 and was funded on March 18, 2022. The amount payable at maturity will be $235,294 plus 10% of that amount plus any accrued and unpaid interest. Following an event of default, as defined in the Diamond Note 2, the principal amount shall bear interest for each day until paid, at a rate per annum equal to the lesser of the maximum interest permitted by applicable law and 18%. The Diamond Note 2 contains a “most favored nations” clause that provides that, so long as the Diamond Note 2 is outstanding, if we issue 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 will be issued 4,000 5-year warrants at a price of $25.00 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, and 1,929 shares as commitment shares. All but $23,529 of the Diamond Note 2 was paid off on April 8, 2022.
Diamond Note 3 - We issued a 10% Promissory Note due October 10, 2022 (the “Diamond Note 3”), dated April 27, 2022, to Lawrence Diamond, which was subsequently amended. The principal amount of the Diamond Note 3 is $235,294.00, carries a 10% interest rate per annum, accrued monthly, and has a maturity date that is the earlier of (i) October 10, 2022, or (ii) five (5) business days after the date on which we successfully lists its shares of common stock on Nasdaq or NYSE. The purchase price of the Diamond Note 3 payable to us 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 Diamond Note 3 is outstanding, if we issue 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 will be issued (i) 1,929 5-year warrants at a price of $25.00 that may be exercised on substantially the same terms as the Series A warrant issued in connection with our Series D Convertible Preferred Stock and (ii) 1,929 shares of Common Stock as commitment shares.
Diamond Note 4 - We 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, accrued monthly, and has a maturity date that is the earlier of (i) five business days after the date on which we successfully lists its shares of common stock on Nasdaq or NYSE, or (ii) October 10, 2022. The purchase price of the Diamond Note 4 payable to us for the Diamond Note 4 was $40,000 and was funded on May 18, 2022. The amount payable at maturity will be $47,059 plus 10% of that amount plus any accrued and unpaid interest. Following an event of default, as defined in the Diamond Note 4, the principal amount shall bear interest for each day until paid, at a rate per annum equal to the lesser of the maximum interest permitted by applicable law and 18%. The Diamond Note 4 contains a “most favored nations” clause that provides that, so long as the Diamond Note 4 is outstanding, if we issue any new security, which the Mr. Diamond reasonably believes contains a term that is more favorable than those in the Diamond Note 4, we shall notify the 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”) at a price of $25.00 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.
May 26, 2022 Notes - We 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 is the Chief Legal Officer of the Company.
The May 26 Notes carry a 10% interest rate 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 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.
Securities Purchases Agreement with AJB Capital Investments, LLC
On March 18, 2022, we 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 Common Stock, which AJB Commitment Fee Shares can be decreased to 14,400 shares ($180,000) if the Company repays the AJB Note on or prior its maturity, (ii) a promissory note in the aggregate principal amount of $750,000 (the “AJB Note”), and (iii) Common Stock Purchase Warrants to purchase up to an aggregate of 15,000 shares of the 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.
Pursuant to the terms of the AJB Agreement, the initial AJB Commitment Fee Shares were issued at a value of $430,000, the AJB Note was issued in a principal amount of $750,000 for a purchase price of $675,000, resulting in an original issue discount of $75,000; and the AJB Warrants were issued, with an initial exercise price of $25.00 per share, subject to adjustment as described herein. The aggregate cash subscription amount received by the Company from AJB for the issuance of the AJB Commitment Fee Shares, AJB Note and AJB Warrants was $616,250, due to a reduction in the $675,000 purchase price as a result of broker, legal, and transaction fees.
As previously disclosed on our Form 8-K filed on March 26, 2021 and October 22, 2021, we issued the Series C Convertible Preferred Stock and Series D Convertible Preferred Stock to the investors named therein (the “Series C Investors” and “Series D Investors”). We obtained consents and waivers from the Series C and Series D Investors to allow the Company to enter into the AJB Agreement. We issued 8,220 shares of Common Stock to the Series C Investors and 25,420 shares of Common Stock to the Series D Investors in connection with obtaining their consents and waivers.
Securities Purchase Agreement with Anson Investment Master Fund and Anson East Master Fund
On April 6, 2022, we entered into separate Securities Purchase Agreement with each of Anson East Master Fund LP (“AEMF”) (the “AEMF Purchase Agreement”) and Anson Investments Master Fund LP (“AIMF”, and collectively with AEMF, the “Anson Investors”) (the “AIMF Purchase Agreement, together with the AEMF Purchase Agreement, the “Anson Agreements”) with respect to the sale and issuance to AEMF and AIMF of: (i) an aggregate initial commitment fee in the amount of $430,000 in the form of 34,400 shares (the “Anson Commitment Fee Shares”) of the Common Stock, which Anson Commitment Fee Shares can be decreased to 14,448 shares ($180,000) if we repay the Anson Notes on or prior their maturity, (ii) promissory notes in the aggregate principal amount of $750,000 (the “Anson Notes”), and (iii) Common Stock Purchase Warrants to purchase up to an aggregate of 15,000 shares of the Common Stock (the “Anson Warrants”). The Anson Notes and Anson Warrants were issued on April 6, 2022 and were held in escrow pending effectiveness of the Anson Agreements.
Pursuant to the terms of the Anson Agreements, the initial Anson Commitment Fee Shares were issued at an aggregate value of $430,000, the Anson Notes were issued in an aggregate principal amount of $750,000 for an aggregate purchase price of $675,000, resulting in an aggregate original issue discount of $75,000; and the Anson Warrants were issued, with an initial exercise price of $25.00 per share, subject to adjustment as described herein. The aggregate cash subscription amount received by the Company from the Anson Investors for the issuance of the Anson Commitment Fee Shares, Anson Notes and Anson Warrants was $629,500, due to a reduction in the $675,000 aggregate purchase price as a result of broker, legal, and transaction fees.
Securities Purchase Agreement with GS Capital Partners
On April 18, 2022, we entered into a Securities Purchase Agreement (the “GS Agreement”) with GS Capital Partners, 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 Commitment Fee Shares”) of the Common Stock, which GS Commitment Fee Shares can be decreased to 5,326 shares ($66,570) if the Company repays the GS Note on or prior to its maturity, (ii) a promissory note in the aggregate principal amount of $277,777 (the “GS Note”), and (iii) Common Stock Purchase Warrants to purchase up to an aggregate of 5,556 shares of the Common Stock (the “GS Warrants”). The GS Note and GS Warrants were issued on April 18, 2022.
Pursuant to the terms of the GS Agreement, the initial GS Commitment Fee Shares were issued at a value of $159,259, the GS Note was issued in a principal amount of $277,777 for a purchase price of $250,000, resulting in an original issue discount of $27,777; and the GS Warrants were issued, with an initial exercise price of $25.00 per share, subject to adjustment as described herein. The aggregate cash subscription amount received by us from GS Capital for the issuance of the GS Commitment Fee Shares, GS Note, and GS Warrants was $227,500, due to a reduction in the $250,000 purchase price as a result of broker, legal, and transaction fees.
Securities Purchase Agreement with Kishon Investments
On May 10, 2022, we 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 our Common Stock, (ii) promissory note in the principal amount of $277,777 due on November 10, 2022 (the “Kishon Note”), and (iii) Common Stock Purchase Warrants to purchase up to 5,556 shares of the Common Stock (the “Kishon Warrants”). The Kishon Note and Kishon Warrants were issued on May 10, 2022 and were held in escrow pending effectiveness of the Kishon Agreement.
Pursuant to the terms of the Kishon Agreement, the initial Kishon Commitment Fee Shares were issued at a value of $159,259, the Kishon 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 Kishon Warrants were issued, with an initial exercise price of $25.00 per share, subject to adjustment.
10% Promissory Notes Issued on June 9, 2022
We issued two 10% Promissory Notes due as described below (individually, the “Howe Note 2” and the “Dragon Note”, and collectively, the “June 9 Notes”), dated June 9, 2022, to Michael C. Howe Living Trust and Dragon Dynamic Funds Platform Ltd. (the “June 9 Lenders”) and in respect of which we received proceeds of $755,000. Michael C. Howe is the Chief Executive Officer of the Good Clinic LLC, one of the Company’s subsidiaries.
The June 9 Notes carry a 10% interest rate per annum, accrued monthly. The Howe Note 2 has a maturity date that is the earlier of (i) October 10, 2022, or (ii) five business days after the date on which we successfully list our shares of common stock on Nasdaq or NYSE. The Dragon Note has a maturity date that is the earlier of (i) December 9, 2022, or (ii) the date on which we successfully list our shares of common stock on Nasdaq or NYSE. The aggregate amount payable at maturity will be $888,235 plus 10% of that amount plus any accrued and unpaid interest. In addition, the June 9 Lenders will be issued in the aggregate (1) 7,284 five-year warrants (the “June 9 Warrants”) and (2) 7,284 shares of Common Stock as commitment shares. The June 9 Warrants have an initial exercise price of $25.00 per share. The June 9 Warrants are not exercisable for six months following their issuance.
10% Promissory Notes Issued on July 7, 2022
On July 7, 2022, the Company issued two 10% Promissory Notes due as described below (individually, the “Schrier Note” and the “William Mackay Note”, and collectively, the “July 7 Notes”), to Charles Schrier and William Mackay Investments LLC, (together, the “July 7 Lenders”) and in respect of which the Company received proceeds of $270,000.
The July 7 Notes carry a 10% interest rate per annum, accrued monthly and payable at maturity. The Schrier Note 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 William Mackay Note has a maturity date that is the earlier of (i) August 8, 2022, or (ii) five business days after the date on which the Company successfully lists its shares of common stock on Nasdaq or NYSE.
The aggregate amount payable at maturity will be $317,647 plus 10% of that amount plus any accrued and unpaid interest. Following an event of default, as defined in the July 7 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 July 7 Notes contain a “most favored nations” clause that provides that, so long as the July 7 Notes are outstanding, if the Company issues any new security, which the July 7 Lenders reasonably believe contains a term that is more favorable than those in the July 7 Notes, the Company shall notify the July 7 Lenders of such term, and such term, at the option of the July 7 Lenders, shall become a part of the July 7 Notes. In addition, the July 7 Lenders will be issued in the aggregate (1) 2,605 five-year warrants (the “Warrants”) and (2) 2,605 shares of Common Stock as commitment shares (“Commitment Shares”). The Commitment Shares are priced at $12.50. The Warrants have an initial exercise price of $25.00 per share. The Warrants are not exercisable for six months following their issuance. The July 7 Lenders may exercise the Warrants on a cashless basis if after the six-month anniversary of date of issuance, the shares of Common Stock underlying the Warrants are not then registered pursuant to an effective registration statement.
10% Promissory Note and Warrants to Michael C. Howe Living Trust
On July 21, 2022, the Company issued a 10% Promissory Notes due to Michael C Howe Living Trust (the “Howe Note 3”) and in respect of which the Company received proceeds of $255,000. The Howe Note 3 carries a 10% interest rate per annum, accrued monthly and payable at maturity. The Howe Note 3 has a maturity date that is the earlier of (i) October 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 amount payable at maturity will be $300,000 plus 10% of that amount plus any accrued and unpaid interest. Following an event of default, as defined in the Howe Note 3, the principal amount shall bear interest for each day until paid, at a rate per annum equal to the lesser of the maximum interest permitted by applicable law and 18%. The Howe Note 3 contains a “most favored nations” clause that provides that, so long as the Howe Note 3 is outstanding, if the Company issues any new security, which Mr. Howe reasonably believes contains a term that is more favorable than those in the Note, the Company shall notify Mr. Howe of such term, and such term, at the option of Mr. Howe, shall become a part of the Howe Note 3. In addition, Mr. Howe will be issued (1) 2,460 five-year warrants (the “Warrants”) and (2) 2,460 shares of Common Stock as commitment shares (“Commitment Shares”). The Commitment Shares are priced at $12.50. The Warrants have an initial exercise price of $25.00 per share. The Warrants are not exercisable for six months following their issuance. Mr. Howe may exercise the Warrants on a cashless basis if after the six-month anniversary of date of issuance, the shares of Common Stock underlying the Warrants are not then registered pursuant to an effective registration statement.
10% Promissory Note and Warrants to Juan Carlos Iturregui
On July 21, 2022, the Company issued a 10% Promissory Notes due to Juan Carlos Iturregui (the “Iturregui Note”) and in respect of which the Company received proceeds of $25,000. Mr. Iturregui is a member of the Company’s Board of Directors. The Iturregui Note carries a 10% interest rate per annum, accrued monthly and payable at maturity. The Iturregui Note has a maturity date that is the earlier of (i) January 21, 2023, or (ii) five business days after the date on which the Company successfully lists its shares of common stock on Nasdaq or NYSE. The amount payable at maturity will be $29,412 plus 10% of that amount plus any accrued and unpaid interest. Following an event of default, as defined in The Iturregui Note, the principal amount shall bear interest for each day until paid, at a rate per annum equal to the lesser of the maximum interest permitted by applicable law and 18%. The Iturregui Note contains a “most favored nations” clause that provides that, so long as The Iturregui Note is outstanding, if the Company issues any new security, which Mr. Iturregui reasonably believes contains a term that is more favorable than those in The Iturregui Note, the Company shall notify Mr. Iturregui of such term, and such term, at the option of Mr. Iturregui, shall become a part of The Iturregui Note. In addition, Mr. Iturregui will be issued (1) 2,460 five-year warrants (the “Warrants”) and (2) 2,460 shares of Common Stock as commitment shares (“Commitment Shares”). The Commitment Shares are priced at $12.50. The Warrants have an initial exercise price of $25.00 per share. The Warrants are not exercisable for six months following their issuance. Mr. Iturregui may exercise the Warrants on a cashless basis if after the six-month anniversary of date of issuance, the shares of Common Stock underlying the Warrants are not then registered pursuant to an effective registration statement.
10% Promissory Note and Warrants to Erik Scott Nommsen
On July 26, 2022, the Company issued a 10% Promissory Notes due to Erik Scott Nommsen (the “Nommsen Note”) and in respect of which the Company received proceeds of $50,000. The Nommsen Note carries a 10% interest rate per annum, accrued monthly and payable at maturity. The Nommsen Note has a maturity date that is the earlier of (i) October 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 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 contains a “most favored nations” clause that provides that, so long as the Nommsen 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 will be issued (1) 482 five-year warrants (the “Warrants”) and (2) 482 shares of Common Stock as commitment shares (“Commitment Shares”). The Commitment Shares are priced at $12.50. The Warrants have an initial exercise price of $25.00 per share. The Warrants are not exercisable for six months following their issuance. Mr. Nommsen may exercise the Warrants on a cashless basis if after the six-month anniversary of date of issuance, the shares of Common Stock underlying the Warrants are not then registered pursuant to an effective registration statement.
10% Promissory Note and Warrants to James H. Caplan
On July 27, 2022, the Company issued a 10% Promissory Notes due to James H. Caplan (the “Caplan Note”) and in respect of which the Company received proceeds of $50,000. The Caplan Note carries a 10% interest rate per annum, accrued monthly and payable at maturity. The Caplan Note has a maturity date that is the earlier of (i) January 21, 2023, or (ii) five business days after the date on which the Company successfully lists its shares of common stock on Nasdaq or NYSE. The amount payable at maturity will be $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 Caplan 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 will be issued (1) 482 five-year warrants (the “Warrants”) and (2) 482 shares of Common Stock as commitment shares (“Commitment Shares”). The Commitment Shares are priced at $12.50. The Warrants have an initial exercise price of $25.00 per share. The Warrants are not exercisable for six months following their issuance. Mr. Caplan may exercise the Warrants on a cashless basis if after the six-month anniversary of date of issuance, the shares of Common Stock underlying the Warrants are not then registered pursuant to an effective registration statement.
10% Promissory Note and Warrants to Jack Enright
On August 4, 2022, the Company issued a 10% Promissory Notes due to Jack Enright (the “Enright Note”) and in respect of which the Company received proceeds of $102,000. The Enright Note carries a 10% interest rate per annum, accrued monthly and payable at maturity. The note has a maturity of February 3, 2023. 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 Enright 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 will be issued 984 shares of Common Stock as commitment shares (“Commitment Shares”). The Commitment Shares are priced at $12.50.
10% Promissory Note and Warrants to the Finnegan Family
On August 4, 2022, the Company issued a 10% Promissory Notes due to Jessica, Kevin C., Brody, Isabella and Jack Finnegan (the “Finnegan Note 3”) and in respect of which the Company received proceeds of $25,000. The Finnegan Note 3 carries a 10% interest rate per annum, accrued monthly and payable at maturity. The Finnegan Note 3 has a maturity of February 3, 2023. The amount payable at maturity will be $29,412 plus 10% of that amount plus any accrued and unpaid interest. Following an event of default, as defined in the Finnegan Note 3, the principal amount shall bear interest for each day until paid, at a rate per annum equal to the lesser of the maximum interest permitted by applicable law and 18%. The Finnegan Note 3 contains a “most favored nations” clause that provides that, so long as the Finnegan Note 3 is outstanding, if the Company issues any new security, which the Finnegans reasonably believes contains a term that is more favorable than those in the Finnegan Note 3, the Company shall notify the Finnegans of such term, and such term, at the option of the Finnegans, shall become a part of the Finnegan Note 3. In addition, the Finnegans will be issued in aggregate (1) 241 five-year warrants (the “Warrants”) and (2) 241 shares of Common Stock as commitment shares (“Commitment Shares”). The Commitment Shares are priced at $12.50. The Warrants have an initial exercise price of $25.00 per share. The Warrants are not exercisable for six months following their issuance. The Finnegans may exercise the Warrants on a cashless basis if after the six-month anniversary of date of issuance, the shares of Common Stock underlying the Warrants are not then registered pursuant to an effective registration statement.
10% Promissory Note and Warrants to Michael C. Howe Living Trust
On August 18, 2022, the Company issued a 10% Promissory Note due to Michael C Howe Living Trust (the “Howe Note 4”) and in respect of which the Company received proceeds of $170,000. The Howe Note 4 carries a 10% interest rate per annum, accrued monthly and payable at maturity. The Howe Note 4 has a maturity date that is the earlier of (i) November 30, 2022, or (ii) five business days after the date on which the Company successfully lists its shares of common stock on Nasdaq or NYSE. The aggregate amount payable at maturity will be $200,000 plus 10% of that amount plus any accrued and unpaid interest. Following an event of default, as defined in the Howe Note 4, the principal amount shall bear interest for each day until paid, at a rate per annum equal to the lesser of the maximum interest permitted by applicable law and 18%. The Howe Note 4 contains a “most favored nations” clause that provides that, so long as the 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 will be issued 1,640 shares of Common Stock as commitment shares (the “Howe Note 4 Commitment Shares”). The Howe Note 4 Commitment Shares are priced at $12.50.
10% Promissory Notes Issued on September 2, 2022
On September 2, 2022, the Company issued four 10% Promissory Notes (the “September 2 Notes”) due to Sharon Goff, Lisa Lewis, Frank Lightmas and John Mitchell (the “September 2 Lenders”) and in respect of which the Company received proceeds of $162,350. The September 2 Notes carry a 10% interest rate per annum, accrued monthly and payable at maturity. The September 2 Notes have a maturity date that is the earlier of (i) November 30, 2022, or (ii) five business days after the date on which the Company successfully lists its shares of common stock on Nasdaq or NYSE. The aggregate amount payable at maturity will be $191,000 plus 10% of that amount plus any accrued and unpaid interest. Following an event of default, as defined in the September 2 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 September 2 Notes contain a “most favored nations” clause that provides that, so long as the September 2 Notes are outstanding, if the Company issues any new security, which the September 2 Lenders reasonably believe contains a term that is more favorable than those in the September 2 Notes, the Company shall notify the September 2 Lenders of such term, and such term, at the option of the September 2 Lenders, shall become a part of the September 2 Notes. In addition, the September 2 Lenders will be issued in the aggregate 1,567 shares of Common Stock as commitment shares (the “September 2 Notes Commitment Shares”). The September 2 Notes Commitment Shares are priced at $12.50.
10% Promissory Note to Cliff Hagan
On September 9, 2022, the Company issued a 10% Promissory Note (the “Hagan Note”) due to Cliff Hagan in respect of which the Company received proceeds of $85,000. The Hagan Note carries a 10% interest rate per annum, accrued monthly and payable at maturity. The Hagan Note 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 aggregate 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 contains a “most favored nations” clause that provides that, so long as the Hagan 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 will be issued in the aggregate 41,000 shares of Common Stock as commitment shares (the “Hagan Note Commitment Shares”). The Hagan Note Commitment Shares are priced at $0.25.
10% Promissory Note to Darling Capital, LLC
On September 14, 2022, the Company issued a 10% Promissory Note (the “Darling Note”) due to Darling Capital, LLC in respect of which the Company received proceeds of $170,000. The Darling Note carries a 10% interest rate per annum, accrued monthly and payable at maturity. The Darling Note 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 aggregate amount payable at maturity will be $200,000 plus 10% of that amount plus any accrued and unpaid interest. Following an event of default, as defined in the 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 contains a “most favored nations” clause that provides that, so long as the Darling Note is outstanding, if the Company issues any new security, which Darling Capital, LLC reasonably believes contains a term that is more favorable than those in the Darling Note, the Company shall notify Darling Capital, LLC of such term, and such term, at the option of Darling Capital, LLC, shall become a part of the Darling Note. In addition, Darling Capital, LLC will be issued in the aggregate 82,000 shares of Common Stock as commitment shares (the “Darling Note Commitment Shares”). The Darling Note Commitment Shares are priced at $0.25.
10% Promissory Note to Mack Leath
On September 15, 2022, the Company issued a 10% Promissory Note (the “Leath Note”) due to Mack Leath in respect of which the Company received proceeds of $42,500. The Leath Note carries a 10% interest rate per annum, accrued monthly and payable at maturity. The Leath Note 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 aggregate amount payable at maturity will be $50,000 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 contains a “most favored nations” clause that provides that, so long as the Leath 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 will be issued in the aggregate 41,000 shares of Common Stock as commitment shares (the “Leath Note Commitment Shares”). The Leath Note Commitment Shares are priced at $0.25.
Special Notice Regarding the Worldwide Covid-19 Crisis
The world economy is facing significant uncertainties as a result of the worldwide COVID-19 crisis. In parts of our operation, we are experiencing adverse impact from pandemic. We are consistently monitoring and following Centers for Disease Control and Prevention (“CDC”) guidelines. These adverse impacts relate to supply chain issues. We have had difficulty obtaining all the supplies that a clinic needs to open including exam tables, otoscopes, and medical supplies as well as some medical supplies currently being distribution of allocation. We have been able to share amongst the clinics to meet the demand for services and continue to open clinics close to schedule. If the supply chain issues continue or worsen for an extended period, we could be adversely impacted in our ability to deliver services and to open clinics on schedule. Because we operate primary care clinics, we are experiencing benefits as well as heightened risk and demand for services related to COVID-19. We are currently experiencing fast growing demand versus our forecasted rate of appointments at our new clinics due to the greater demand for the for services related to the virus including COVID-19 testing, COVID- 19 vaccination, and treatment for the symptoms related to COVID-19. Although we have experienced few of our clinic staff contracting the virus and needing to stay home, this can change at any point and result in our inability to fully staff the clinic and service the demand for services. Therefore, revenue could be impacted adversely if our staff becomes ill and is unable to work. Even though we follow CDC guidelines to prevent cross contamination, a broader infection of the staff will impact our ability operate the clinics and maintain the accelerating growth in clients and revenue. In our commitment to protect our clients and staff, we have a requirement for all staff to be vaccinated and tested at the first sign of symptoms. This may limit our ability to hire staff in the future, as there are still many Americans that are not vaccinated. It is not possible for us to predict the duration or magnitude of adverse impacts of the outbreak and its effects on our business, results of operations, or the resulting financial condition. The COVID-19 pandemic may also have the effect of heightening other risks identified elsewhere in this section. We continuously monitor, review, and endeavor to comply with federal, CDC, and state requirements for health care workers. These requirements continue to evolve and we will continue to adhere to federal, CDC, and state requirements. Currently, all clinic workers are required to be vaccinated or qualify for not needing to be vaccinated as specified by federal and state regulations.
Results of Operations
The following period-to-period comparisons of our financial results are not necessarily indicative of results for the current period of any future periods. Further, as a result of any acquisitions of other businesses, we may experience large expenditures specific to the transactions that are not incident to our operations. All share and per share numbers have been adjusted to assume a 1-for-50 reverse stock split.
Comparison of the Three Months Ended June 30, 2022 and 2021
Revenue
The Company recognized revenue of approximately $0.2 million for the three months ended June 30, 2022, compared to $8,200 for the three months ended June 30, 2021. The increase in revenue is the result of the service and product revenue from The Good Clinic’s six locations.
Cost of Sales
The Company incurred approximately $0.6 million of cost of goods sold for the three months ended June 30, 2022, compared to $3,600 for the three months ended June 30, 2021. During the first quarter of 2021 there were only a few direct clinical services performed due to the lack of in force payer contracts and the newness of the clinic. As such, the allocation of the expenses related to clinical staff were attributed to operating expenses and not cost of sales. The increase in cost of goods sold is the result of the opening and operating of The Good Clinic’s six locations and having in force payer relationships.
Gross (Loss) Profit
Our gross loss was approximately $0.4 million for the three months ended June 30, 2022, compared to gross profit of $4,600 for the three months ended June 30, 2021.
Operating Expenses
Our total operating expenses for the three months ended June 30, 2022, were approximately $2.3 million. For the comparable period in 2021, the operating expenses were approximately $1.4 million.
Operating expenses for the three months ended June 30, 2022, were comprised primarily of $1.4 million of payroll, payroll taxes and employee benefit expenses, $0.2 million in rent and utilities, $0.1 million in legal and professional fees; $0.1 million in marketing; $0.2 million in depreciation, $0.2 million in stock-based compensation expenses and $0.1 million in other operating costs.
Operating expenses for the three months ended June 30, 2021 were comprised primarily of $0.4 million of payroll and payroll taxes; $0.3 million of non-cash compensation, $0.2 million in legal and professional fees; $0.1 million in marketing, $0.1 million in consulting fees and $0.3 million in other operation costs.
Other Income and Expenses
Interest expense was approximately $0.9 million for the three months ended June 30, 2022, compared to approximately $1,100 for the three months ended June 30, 2021.
During the three months ended June 30, 2022, we recorded a loss on waiver and commitment fee shares of approximately $11,600.
During the three months ended June 30, 2022, we recorded a loss on the revaluation of derivative liabilities of approximately $0.2 million
During the three months ended June 30, 2021, we recorded a loss on legal settlement of $70,000.
During the three months ended June 30, 2022, the Company declared Preferred Stock dividends of approximately $0.1 million compared to approximately $0.1 million for the three months ended June 30, 2021.
Net loss
For the three months ended June 30, 2022, we had a net loss available to common shareholders of approximately $3.9 million, or a net loss per share, basic and diluted of ($0.02) compared to a net loss available to common shareholders of approximately $1.5 million, or a net loss per share, basic and diluted of ($0.01), for the three months ended June 30, 2021.
Comparison of the Six Months Ended June 30, 2022 and 2021
Revenue
The Company recognized revenue of approximately $0.3 million for the six months ended June 30, 2022, compared to $11,200 for the six months ended June 30, 2021. The increase in revenue is the result of the service and product revenue from The Good Clinic’s six locations.
Cost of Sales
The Company incurred approximately $1.2 million of cost of goods sold for the six months ended June 30, 2022, compared to $5,300 for the six months ended June 30, 2021. During the first and second quarters of 2021 there were only a few direct clinical services performed due to the lack of in force payer contracts and the newness of the clinic. As such, the allocation of the expenses related to clinical staff were attributed to operating expenses and not cost of sales. The increase in cost of goods sold is the result of the opening and operating of The Good Clinic’s six locations and having in force payer relationships.
Gross (Loss) Profit
Our gross loss was approximately $0.9 million for the six months ended June 30, 2022, compared to gross profit of $5,900 for the six months ended June 30, 2021.
Operating Expenses
Our total operating expenses for the six months ended June 30, 2022, were approximately $4.9 million. For the comparable period in 2021, the operating expenses were approximately $2.4 million.
Operating expenses for the six months ended June 30, 2022, were comprised primarily of $2.4 million of payroll, payroll taxes and employee benefit expenses, $0.5 million in rent and utilities, $0.4 million in legal and professional fees, $0.2 million in marketing; $0.3 million in consulting fees, $0.4 million in depreciation, $0.4 million in stock-based compensation expenses and $0.3 million in other operating costs.
Operating expenses for the six months ended June 30, 2021 were comprised primarily of $0.5 million of payroll and payroll taxes; $0.3 million of non-cash compensation, $0.6 million in legal and professional fees, $0.3 million in marketing, $0.3 million in consulting fees and $0.4 million in other operation costs.
Other Income and Expenses
Interest expense was approximately $1.7 million for the six months ended June 30, 2022, compared to approximately $1.0 million for the six months ended June 30, 2021.
During the six months ended June 30, 2022, we recorded a gain on waiver and commitment fee shares of approximately $0.2 million.
During the six months ended June 30, 2022, we recorded a gain on settlement of accrued salary of approximately $15,000.
During the six months ended June 30, 2022, we recorded a loss on settlement of accounts payable of $0.1 million as compared to a gain on settlement of accounts payable of approximately $6,000 for the six months ended June 30, 2021.
During the six months ended June 30, 2022, we recorded a loss on the revaluation of derivative liabilities of approximately $0.1 million, compared to a loss of approximately $0.5 million for the six months ended June 30, 2021.
During the six months ended June 30, 2021, we recorded a loss on legal settlement of $0.1 million.
During the six months ended June 30, 2021, we recorded a gain on the settlement of notes payable of approximately $1,800.
During the six months ended June 30, 2022, the Company declared Preferred Stock dividends of approximately $0.2 million compared to approximately $0.1 million for the six months ended June 30, 2021.
During the six months ended June 30, 2021, the Company recorded Preferred Stock deemed dividends of approximately $0.3 million.
Net loss
For the six months ended June 30, 2022, we had a net loss available to common shareholders of approximately $7.6 million, or a net loss per share, basic and diluted of ($1.75) compared to a net loss available to common shareholders of approximately $4.3 million, or a net loss per share, basic and diluted of ($1.10), for the six months ended June 30, 2021.
Liquidity and Capital Resources
To date, we have not generated sufficient revenue from operations to support our operations. We have financed our operations through the sale of equity securities and short-term borrowings. As of June 30, 2022, we had cash of approximately $36,000 compared to cash of approximately $1.2 million as of December 31, 2021.
Net cash used in operating activities was approximately $4.0 million for the six months ended June 30, 2022. This is the result of our business development efforts pertaining to the start-up of the first six clinics. Cash used in operations for the six months ended June 30, 2021, was approximately $2.1 million.
Net cash used in investing activities was approximately $0.2 million for the six months ended June 30, 2022. The amounts relate to the purchase of fixed assets and leasehold improvement on our clinics. Net cash used for investing activities for the six months ended June 30, 2021 was $0.5 million.
Net cash provided by financing activities for the six months ended June 30, 2022, was approximately $3.1 million, consisting of proceeds from notes payable, net of discounts, of $3.3 million offset by principal payment on related party notes payable of $0.2 million. Net cash provided by financing activities for the six months ended June 30, 2021, was $4.3 million consisting of proceeds from a private placement offering of common stock of $1.7 million and $2.8 million from the sale of Series C Preferred Stock and warrants. Partially offsetting the proceeds was approximately $0.2 million of payment on notes payable.
Comparison of the Twelve Months Ended December 31, 2021 and 2020
Revenue
The Company recognized revenue of $0.1 million for the year ended December 31, 2021, compared to $0 for the year ended December 31, 2020. The increase in revenue is the result of the opening of The Good Clinic’s four locations. The clinics generate revenue from two sources: insurance billings on behalf of our customers which totaled approximately $79,000 and revenue and product sales which totaled approximately $37,000 of revenue.
Cost of Sales
The Company incurred approximately $0.4 million of cost of goods sold for the year ended December 31, 2021, compared to $0 for the year ended December 31, 2020. The increase in cost of goods sold is the result of the opening of The Good Clinic’s four locations. The cost of goods sold consists of approximately $378,000 of labor primarily related to insurance billings and approximately $22,000 of costs associated with product sales.
Gross Loss
Our gross loss was $0.3 million for the year ended December 31, 2021, compared to $0 for the year ended December 31, 2020.
Operating Expenses
Our total operating expenses for the year ended December 31, 2021, were $6.1 million compared to $2.5 million for the year ended December 31, 2020.
Operating Expense for the year ended December 31, 2021 were comprised primarily of $1.4 million payroll and payroll taxes, $0.8 million of non-cash compensation, $1.1 million in legal and professional fees, $0.6 million in marketing expenses, $1.0 million in office and facilities expenses, $0.6 million in consulting fees and $1.3 million in other operation costs.
Our total operating expenses for the year ended December 31, 2020 were approximately $2.5 million.
Operating expenses for the year ended December 31, 2020 were comprised primarily of $1.0 million in payroll and payroll taxes, including $0.6 million in non-cash compensation; $0.5 million in legal and professional fees; $0.4 million in consulting fees, $0.3 million in marketing and public relations; $0.1 million in Board of Director and Advisory Board fees; $0.1 million in insurance costs and $0.1 million in office and facilities costs.
Other Income and Expenses
Interest expense was approximately $1.0 million for the year ended December 31, 2021, compared to approximately $1.5 million for the year ended December 31, 2020.
During the year ended December 31, 2021, we recorded a gain on settlement of accounts payable of approximately $6,000, compared to a gain on settlement of accounts payable in the amount of $0.4 million in the prior period.
During the year ended December 31, 2021, we recorded a gain on the settlement of notes payable of approximately $1,800, compared to a gain on settlement on notes payable in the amount of $35,000 in the prior period.
During the year ended December 31, 2021, the Company declared Preferred Stock dividends of approximately $3.3 million compared to approximately $0.1 million the year ended December 31, 2020.
During the year ended December 31, 2021, we recorded a loss on a legal settlement of $0.1 million. There was not an equivalent gain or loss in the comparable prior period.
For the year ended December 31, 2021, we had a net loss available to common shareholders of approximately $11.2 million, or a net loss per share, basic and diluted of ($3.00) compared to a net loss available to common shareholders of approximately $2.9 million, or a net loss per share, basic and diluted of ($1.50), for the year ended December 31, 2020.
Liquidity and Capital Resources
As of December 31, 2021, we had cash and cash equivalents of approximately $1.2 million compared to cash of approximately $0.1 million as of December 31, 2020.
Net cash used in operating activities was approximately $5.0 million for the year ended December 31, 2021. This is the result of our business development efforts pertaining to the start-up of the first three clinics. Cash used in operations for the year ended December 31, 2020, was approximately $1.5 million.
Net cash used in investing activities was approximately $1.9 million for the year ended December 31, 2021. This amount does not include approximately $3.3 million of capital expenditures included in accounts payable at December 31, 2021. The amounts relate to the purchase of fixed assets and leasehold improvement on our first clinic. No cash was used for investing activities for the year ended December 31, 2020.
Net cash provided by financing activities for the year ended December 31, 2021, was approximately $8.0 million, consisting of proceeds from a private placement offering of Common Stock of $1.7 million, $2.8 million from the sale of Series C Preferred Stock, $2.9 million from the sale of Series D Preferred Stock and $0.9 million in proceeds from a convertible note. Partially offsetting the proceeds was approximately $0.2 million of payment on notes payable. Net cash provided by financing activities for the year ended December 31, 2020, was approximately $1.5 million, consisting of proceeds from notes payable in the amount of $1.7 million, offset by principal payments on notes payable in the amount of $0.2 million.
Critical Accounting Policies
We believe that the accounting policies described below are critical to understanding our business, results of operations and financial condition because they involve the use of more significant judgments and estimates in the preparation of our consolidated financial statements. An accounting policy is deemed to be critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time the estimate is made, and any changes in the assumptions used in making the accounting estimates that are reasonably likely to occur could materially impact our consolidated financial statements.
Revenue Recognition
On January 1, 2018, the Company adopted the new revenue recognition accounting standard issued by the Financial Accounting Standards Board (“FASB”) and codified in the ASC as Topic 606 (“ASC 606”). The revenue recognition standard in ASC 606 outlines a single comprehensive model for recognizing revenue as performance obligations, defined in a contract with a customer as goods or services transferred to the customer in exchange for consideration, are satisfied. The standard also requires expanded disclosures regarding the Company’s revenue recognition policies and significant judgments employed in the determination of revenue.
The Company applied the modified retrospective approach to all contracts when adopting ASC 606. As a result, at the adoption of ASC 606 what was previously classified as the provision for bad debts in the statement of operations is now reflected as implicit price concessions (as defined in ASC 606) and therefore included as a reduction to net operating revenues in 2018. For changes in credit issues not assessed at the date of service, the Company will prospectively recognize those amounts in other operating expenses on the statement of operations. For periods prior to the adoption of ASC 606, the provision for bad debts has been presented consistent with the previous revenue recognition standards that required it to be presented separately as a component of net operating revenues.
Patient Service Revenue
Our revenues generally relate to net patient fees received from various payors and patients themselves under contracts in which our performance obligations are to provide services to the patients. Revenues are recorded during the period our obligations to provide services are satisfied. The contractual relationships with patients, in most cases, also involve a third-party payor (Medicare, Medicaid, managed care health plans and commercial insurance companies, including plans offered through the health insurance exchanges) and the transaction prices for the services provided are dependent upon the terms provided by (Medicare and Medicaid) or negotiated with (managed care health plans and commercial insurance companies) the third-party payors. The payment arrangements with third-party payors for the services we provide to the related patients typically specify payments at amounts less than our standard charges and generally provide for payments based upon predetermined rates for services or discounted fee-for-service rates. Management continually reviews the contractual estimation process to consider and incorporate updates to laws and regulations and the frequent changes in managed care contractual terms resulting from contract renegotiations and renewals.
We determine revenue recognition through the following steps:
|
● |
Identification of the contract, or contracts, with a customer; |
|
● |
Identification of the performance obligations in the contract; |
|
● |
Determination of the transaction price; |
|
● |
Allocation of the transaction price to the performance obligations in the contract; and |
|
● |
Recognition of revenue when, or as, we satisfy a performance obligation. |
Stock-Based Compensation
We recognize compensation costs to employees under FASB ASC Topic 718, Compensation – Stock Compensation (“ASC 718”). Under FASB ASC 718, companies are required to measure the compensation costs of share-based compensation arrangements based on the grant-date fair value and recognize the costs in the financial statements over the period during which employees are required to provide services. Share-based compensation cost for stock options is estimated at the grant date based on each option’s fair-value as calculated by the Black-Scholes-Merton (“BSM”) option-pricing model. Share-based compensation arrangements may include stock options, restricted share plans, performance-based awards, share appreciation rights and employee share purchase plans. Such compensation amounts, if any, are amortized over the respective vesting periods of the option grant.
Equity instruments issued to other than employees are recorded pursuant to the guidance contained in ASU 2018-07 (“ASU 2018-07”), Improvements to Non-employee Share-Based Payment Accounting, which simplified the accounting for share-based payments granted to non-employees for goods and services. Under the ASU 2018-07, most of the guidance on such payments to non-employees would be aligned with the requirements for share-based payments granted to employees.
Common Stock Purchase Warrants
We account for Common Stock purchase warrants in accordance with FASB ASC Topic 815, Accounting for Derivative Instruments and Hedging Activities (“ASC 815”). As is consistent with its handling of stock compensation and embedded derivative instruments, the Company’s cost for stock warrants is estimated at the grant date based on each warrant’s fair-value as calculated by the Black-Scholes-Merton (“BSM”) option-pricing model value method for valuing the impact of the expense associated with these warrants. All warrants our have been canceled at this time.
Income Taxes
We account for income taxes under ASC 740 Income Taxes. Under the asset and liability method of ASC 740, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statements carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period the enactment occurs. A valuation allowance is provided for certain deferred tax assets if it is more likely than not that we will not realize tax assets through future operations. No deferred tax assets or liabilities were recognized as of December 31, 2021 and 2020.
As part of the process of preparing our consolidated financial statements, we must estimate our actual current tax liabilities and assess temporary differences resulting from differing treatment of items for tax and accounting purposes. These differences result in deferred tax assets and liabilities, which are included within the balance sheet. We must assess the likelihood that the deferred tax assets will be recovered from future taxable income and, to the extent we believe that recovery is not likely, a valuation allowance must be established. To the extent we establish a valuation allowance or increase or decrease this allowance in a period, the impact will be included in income tax expense in the statement of operations.
Impairment of Long-Lived Assets
Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized in the amount by which the carrying amount of the asset exceeds the fair value of the asset. Assets to be disposed would be separately presented in the consolidated balance sheet and reported at the lower of the carrying amount or fair value less costs to sell and are no longer depreciated. The assets and liabilities of a disposal group classified as held-for-sale would be presented separately in the appropriate asset and liability sections of the consolidated balance sheet, if material.
Business Combinations
We account for business combinations by recognizing the assets acquired, liabilities assumed, contractual contingencies, and contingent consideration at their fair values on the acquisition date. The purchase price allocation process requires management to make significant estimates and assumptions, especially with respect to intangible assets, estimated contingent consideration payments and pre-acquisition contingencies. Examples of critical estimates in valuing certain of the intangible assets we have acquired or may acquire in the future include but are not limited to:
●future expected cash flows from product sales, support agreements, consulting contracts, other customer contracts, and acquired developed technologies and patents
●discount rates utilized in valuation estimates
●Unanticipated events and circumstances may occur that may affect the accuracy or validity of such assumptions, estimates or actual results.
Additionally, any change in the fair value of the acquisition-related contingent consideration subsequent to the acquisition date, including changes from events after the acquisition date, such as changes in our estimates of relevant revenue or other targets, will be recognized in earnings in the period of the estimated fair value change. A change in fair value of the acquisition-related contingent consideration or the occurrence of events that cause results to differ from our estimates or assumptions could have a material effect on the consolidated financial position, statements of operations or cash flows in the period of the change in the estimate.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to stockholders.
Series X Preferred Stock
On December 31, 2019, we issued a total of 26,227 of our Series X Preferred Stock in satisfaction of certain liabilities. The Series X Preferred Stock has a liquidation value of $25.00 per share and a fair value of $31.73 per share at the issuance date of December 31, 2019. Each share of Series X Preferred Stock has voting rights equivalent to 400 shares of Common Stock. Our former director and president, Julie R. Smith, was issued 2,000 shares of our Series X Preferred Stock, which were subsequently cancelled after she resigned effective July 1, 2020.
As of December 31, 2021, the shares of Series X Preferred Stock issued and outstanding are as follows:
|
Type of |
Share |
Liability |
|||||||||||||||||
|
Name |
Liability |
# shares |
Value |
Amount |
Loss |
||||||||||||||
|
Ronald Riewold, Director |
Deferred Compensation |
1,200 | $ | 41,675 | $ | 30,000 | $ | (11,675 |
) |
||||||||||
|
Larry Diamond, Director, and CEO |
Deferred Compensation |
2,000 | $ | 69,458 | $ | 50,000 | $ | (19,458 |
) |
||||||||||
|
James Crone, ex-Officer, and Director |
Deferred Compensation |
2,884 | $ | 100,158 | $ | 72,089 | $ | (28,069 |
) |
||||||||||
|
Louis Deluca, ex-Officer, and Director |
Deferred Compensation |
2,400 | $ | 83,350 | $ | 60,000 | $ | (23,350 |
) |
||||||||||
|
Irish Italian Retirement Fund |
Consulting services, notes payable (a) |
12,503 | $ | 434,216 | $ | 312,572 |
(a) |
$ | (121,644 |
) |
|||||||||
|
Frank Lightmas |
Legal fees (b) |
3,240 | $ | 112,522 | $ | 81,000 |
(b) |
$ | (31,522 |
) |
|||||||||
|
Total |
24,227 | $ | 841,379 | $ | 625,661 | $ | (235,718 |
) |
|||||||||||
(a) Amount consists of accounts payable for consulting services of $174,813, and principal plus interest due on notes payable in the amount of $137,759. These holdings were subsequently transferred to the Anglo-Irish Management, LLC.
(b) Amount consists of $71,279 in legal fees due and $9,721 in prepaid legal fees.
Series A Preferred Stock
On March 2, 2020, we issued 4,800 shares of its Series A Preferred Stock to four individuals with certain skills and know-how to assist us in the development of its newly formed subsidiary The Good Clinic, LLC. The Company has valued these shares at $71,558 or approximately $14.91 per share. On March 8, 2021, the 4,800 shares of Series A Preferred Stock were exchanged for 12,000 shares of our Common Stock. No shares of Series A Preferred Stock were outstanding as of the date of this filing.
Securities Purchase Agreements
From January 29, 2021 through September 15, 2022, we entered into Securities Purchase Agreements with 46 investors for the sale of up to 163,840 shares of our restricted Common Stock at a price of $12.50 per share in the aggregate amount of $2,048,000. The price was determined based on the prior day ten-day average closing price, less a 20% discount for the risk associated with restricted stock. As of the date of this filing, a total of 133,440 shares have been issued, generating $1,668,000 in proceeds. These transactions were executed directly by us, and no brokers, dealers or representatives were involved.
On March 25, 2021, we entered into Securities Purchase Agreements (the “March 25 SPAs”) with four institutional investors (the “March 25 Investors” and each a “March 25 Investor”) pursuant to which we sold to the March 25 Investors in a private placement an aggregate of 3,000,000 units (the “March 25 Units” and each a “March 25 Unit”) with a purchase price of $1.00 per March 25 Unit, with each March 25 Unit consisting of (a) one share of a newly formed Series C Convertible Preferred Stock, par value $0.01 per share (the “Series C Preferred Stock”), (b) one warrant (the “Series A Warrants”) to purchase .042 shares of the Company’s Common Stock at a purchase price of $25.00 per whole share of Common Stock, and (c) one warrant (the “Series B Warrants” and together with the Series A Warrants, the “Warrants”) to purchase .042 shares of Common Stock at a purchase price of $37.50 per whole share. The aggregate gross proceeds to the Company were $3,000,000 and the number of shares of Common Stock initially issuable upon conversion of the Series C Preferred Stock is 252,000 shares of Common stock and the aggregate number of shares of Common Stock initially issuable upon exercise of the Warrants is 252,000 shares of Common Stock. We also issued to the placement agent and its designee 9,227 shares of Common Stock.
On October 18, 2021, we entered into a Securities Purchase Agreement (the “October 18 SPA”) with two institutional and two individual investors (the “October 18 Investors” and each an “October 18 Investor”) pursuant to which the Company sold to the October 18 Investors in a private placement an aggregate of 2,025,000 units (the “October 18 Units” and each a “October 18 Unit”) with a purchase price of $1 per October 18 Unit, with each October 18 Unit consisting of (a) one share of a newly formed Series D Convertible Preferred Stock, par value $0.01 per share (the “Series D Preferred Stock”), (b) one warrant (the “Series A Warrants”) to purchase .042 shares of the Company’s Common Stock at a purchase price of $25.00 per whole share of Common Stock, and (c) one warrant (the “Series B Warrants” and together with the Series A Warrants, the “Warrants”) to purchase .042 shares of Common Stock at a purchase price of $37.50 per whole share. The aggregate gross proceeds to the Company were $2,025,000 and the number of shares of Common Stock initially issuable upon conversion of the Series D Preferred Stock is 170,100 shares of Common stock and the aggregate number of shares of Common Stock initially issuable upon exercise of the Warrants is 170,100 shares of Common Stock. Pursuant to the terms of the SPA the Company, may sell up to an additional 7,975,000 Units (for an aggregate 10,000,000 October 18 Units) in subsequent closings on the same terms offered to the Investors.
On November 12, 2021, we, consummated the second closing (“Second Closing”) of a private placement offering pursuant to a Securities Purchase Agreement (the “November 12 SPA”, together with the March 25, October 18, the “Security Purchase Agreements”) with four accredited investors (the “November 12 Investors” and each an “November 12 Investor”) pursuant to which the Company sold to the Investors an aggregate of 1,075,000 units (the “November 12 Units” and each a “November 12 Unit”) with a purchase price of $1 per November 12 Unit, with each November 12 Unit consisting of (a) one share of Series D Convertible Preferred Stock of the Company, par value $0.01 per share (the “Series D Preferred Stock”), (b) one warrant (the “Series A Warrants”) to purchase .042shares of the Company’s Common Stock at a purchase price of $25.00 per whole share of Common Stock, and (c) one warrant (the “Series B Warrants” and together with the Series A Warrants, the “Warrants”) to purchase .042 shares of Common Stock at a purchase price of $37.50 per whole share. The aggregate gross proceeds to the Company were $1,075,000 and the number of shares of Common Stock initially issuable upon conversion of the Series D Preferred Stock is 90,300 shares of Common stock and the aggregate number of shares of Common Stock initially issuable upon exercise of the Warrants is 90,300 shares of Common Stock. Pursuant to the terms of the November 12 SPA the Company, may sell up to an additional 6,900,000 November 12 Units (for an aggregate 10,000,000 November 12 Units) in subsequent closings on the same terms offered to the Investors.
Debt for Equity Exchange Agreement with Gardner Builders Holdings, LLC
We entered into a debt-for-equity exchange agreement with Gardner Builders Holdings, LLC (“Gardner”) on January 5, 2022 (the “Gardner Agreement”). Pursuant to the Gardner Agreement, we have authorized the issuance of shares of restricted common stock, par value $0.01 per share, of MITI (the “Restricted Shares”) to Gardner in exchange for the Company Debt Obligations, as defined below.
The Gardner Agreement settles certain amounts owed by us to Gardner (the “Accounts Payable Amount”) as well as upcoming amounts that will become due between the date of the Gardner Agreement and April 1, 2022. The Gardner Agreement also settles incurred interest and penalties on the amounts owed through January 5, 2022, as well as future interest payments on amounts to be incurred in the first quarter of 2022 (collectively, the “Additional Costs”, and combined with the Accounts Payable Amount, the “Company Debt Obligations”). The Accounts Payable Amount is $500,000, the Additional Costs is $294,912.56 and the conversion price is $12.50. As a result, 63,593 Restricted Shares were authorized to be issued. Our Board of Directors approved the Gardner Agreement on January 5, 2022.
10% Promissory Notes with Lawrence Diamond
Diamond Note 1 - We issued a 10% Promissory Note due August 14, 2022 (the “Diamond Note 1”), dated February 14, 2022, to Lawrence Diamond, which was subsequently amended. Mr. Diamond is our Chief Executive Officer and a member of our Board of Directors. The principal amount of the Diamond Note 1 is $175,000, carries a 10% interest rate per annum, accrued monthly, and has a maturity date that is the earlier of (i) October 10, 2022, or (ii) five business days after the date on which we successfully list our shares of common stock on Nasdaq or NYSE. The purchase price of the Diamond Note 1 payable to us for the Diamond Note 1 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 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 contains a “most favored nations” clause that provides that, so long as the Diamond Note 1 is outstanding, if we issue any new security, which Mr. Diamond believes contains a term that is more favorable than those in the Diamond Note 1, we shall notify Mr. Diamond of such term, and such term, at the option of Mr. Diamond, shall become a part of the Diamond Note 1. In addition to the Diamond Note 1 Mr. Diamond will be issued (i) 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; and ( ii) 1,435 shares of common stock as commitment shares. These warrants have all of the same terms as those previously issued in conjunction with our Series C Preferred shares and its Series D Preferred shares.
Diamond Note 2 - We issued a 10% Promissory Note due October 10, 2022 (the “Diamond Note 2”), dated March 18, 2022, to Lawrence Diamond, which was subsequently amended. The principal amount of the Diamond Note 2 is $235,294, carries a 10% interest rate per annum, accrued monthly, and has a maturity date that is the earlier of (i) October 10, 2022, (ii) five (5) business days after the date on which we successfully list its shares of common stock on Nasdaq or NYSE. The purchase price of the Diamond Note 2 payable to us for the Diamond Note 2 was $200,000 and was funded on March 18, 2022. The amount payable at maturity will be $235,294 plus 10% of that amount plus any accrued and unpaid interest. Following an event of default, as defined in the Diamond Note 2, the principal amount shall bear interest for each day until paid, at a rate per annum equal to the lesser of the maximum interest permitted by applicable law and 18%. The Diamond Note 2 contains a “most favored nations” clause that provides that, so long as the Diamond Note 2 is outstanding, if we issue 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 will be issued 4,000 5-year warrants at a price of $25.00 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, and 1,929 shares as commitment shares. All but $23,529 of the Diamond Note 2 was paid off on April 8, 2022.
Diamond Note 3 - We issued a 10% Promissory Note due October 10, 2022 (the “Diamond Note 3”), dated April 27, 2022, to Lawrence Diamond, which was subsequently amended. The principal amount of the Diamond Note 3 is $235,294.00, carries a 10% interest rate per annum, accrued monthly, and has a maturity date that is the earlier of (i) October 10, 2022, or (ii) five (5) business days after the date on which we successfully lists its shares of common stock on Nasdaq or NYSE. The purchase price of the Diamond Note 3 payable to us 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 Diamond Note 3 is outstanding, if we issue 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 will be issued (i) 1,929 5-year warrants at a price of $25.00 that may be exercised on substantially the same terms as the Series A warrant issued in connection with our Series D Convertible Preferred Stock and (ii) 1,929 shares of Common Stock as commitment shares.
Diamond Note 4 - We 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, accrued monthly, and has a maturity date that is the earlier of (i) five business days after the date on which we successfully lists its shares of common stock on Nasdaq or NYSE, or (ii) October 10, 2022. The purchase price of the Diamond Note 4 payable to us for the Diamond Note 4 was $40,000 and was funded on May 18, 2022. The amount payable at maturity will be $47,059 plus 10% of that amount plus any accrued and unpaid interest. Following an event of default, as defined in the Diamond Note 4, the principal amount shall bear interest for each day until paid, at a rate per annum equal to the lesser of the maximum interest permitted by applicable law and 18%. The Diamond Note 4 contains a “most favored nations” clause that provides that, so long as the Diamond Note 4 is outstanding, if we issue any new security, which the Mr. Diamond reasonably believes contains a term that is more favorable than those in the Diamond Note 4, we shall notify the 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”) at a price of $25.00 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.
May 26, 2022 Notes - We 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 is the Chief Legal Officer of the Company.
The May 26 Notes carry a 10% interest rate 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 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.
Securities Purchases Agreement with AJB Capital Investments, LLC
On March 18, 2022, we 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 Common Stock, which AJB Commitment Fee Shares can be decreased to 14,400 shares ($180,000) if the Company repays the AJB Note on or prior its maturity, (ii) a promissory note in the aggregate principal amount of $750,000 (the “AJB Note”), and (iii) Common Stock Purchase Warrants to purchase up to an aggregate of 15,000 shares of the 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.
Pursuant to the terms of the AJB Agreement, the initial AJB Commitment Fee Shares were issued at a value of $430,000, the AJB Note was issued in a principal amount of $750,000 for a purchase price of $675,000, resulting in an original issue discount of $75,000; and the AJB Warrants were issued, with an initial exercise price of $25.00 per share, subject to adjustment as described herein. The aggregate cash subscription amount received by the Company from AJB for the issuance of the AJB Commitment Fee Shares, AJB Note and AJB Warrants was $616,250, due to a reduction in the $675,000 purchase price as a result of broker, legal, and transaction fees.
As previously disclosed on our Form 8-K filed on March 26, 2021 and October 22, 2021, we issued the Series C Convertible Preferred Stock and Series D Convertible Preferred Stock to the investors named therein (the “Series C Investors” and “Series D Investors”). We obtained consents and waivers from the Series C and Series D Investors to allow the Company to enter into the AJB Agreement. We issued 8,220 shares of Common Stock to the Series C Investors and 25,420 shares of Common Stock to the Series D Investors in connection with obtaining their consents and waivers.
Securities Purchase Agreement with Anson Investment Master Fund and Anson East Master Fund
On April 6, 2022, we entered into separate Securities Purchase Agreement with each of Anson East Master Fund LP (“AEMF”) (the “AEMF Purchase Agreement”) and Anson Investments Master Fund LP (“AIMF”, and collectively with AEMF, the “Anson Investors”) (the “AIMF Purchase Agreement, together with the AEMF Purchase Agreement, the “Anson Agreements”) with respect to the sale and issuance to AEMF and AIMF of: (i) an aggregate initial commitment fee in the amount of $430,000 in the form of 34,400 shares (the “Anson Commitment Fee Shares”) of the Common Stock, which Anson Commitment Fee Shares can be decreased to 14,448 shares ($180,000) if we repay the Anson Notes on or prior their maturity, (ii) promissory notes in the aggregate principal amount of $750,000 (the “Anson Notes”), and (iii) Common Stock Purchase Warrants to purchase up to an aggregate of 15,000 shares of the Common Stock (the “Anson Warrants”). The Anson Notes and Anson Warrants were issued on April 6, 2022 and were held in escrow pending effectiveness of the Anson Agreements.
Pursuant to the terms of the Anson Agreements, the initial Anson Commitment Fee Shares were issued at an aggregate value of $430,000, the Anson Notes were issued in an aggregate principal amount of $750,000 for an aggregate purchase price of $675,000, resulting in an aggregate original issue discount of $75,000; and the Anson Warrants were issued, with an initial exercise price of $25.00 per share, subject to adjustment as described herein. The aggregate cash subscription amount received by the Company from the Anson Investors for the issuance of the Anson Commitment Fee Shares, Anson Notes and Anson Warrants was $629,500, due to a reduction in the $675,000 aggregate purchase price as a result of broker, legal, and transaction fees.
Securities Purchase Agreement with GS Capital Partners
On April 18, 2022, we entered into a Securities Purchase Agreement (the “GS Agreement”) with GS Capital Partners, 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 Commitment Fee Shares”) of the Common Stock, which GS Commitment Fee Shares can be decreased to 5,326 shares ($66,570) if the Company repays the GS Note on or prior to its maturity, (ii) a promissory note in the aggregate principal amount of $277,777 (the “GS Note”), and (iii) Common Stock Purchase Warrants to purchase up to an aggregate of 5,556 shares of the Common Stock (the “GS Warrants”). The GS Note and GS Warrants were issued on April 18, 2022.
Pursuant to the terms of the GS Agreement, the initial GS Commitment Fee Shares were issued at a value of $159,259, the GS Note was issued in a principal amount of $277,777 for a purchase price of $250,000, resulting in an original issue discount of $27,777; and the GS Warrants were issued, with an initial exercise price of $25.00 per share, subject to adjustment as described herein. The aggregate cash subscription amount received by us from GS Capital for the issuance of the GS Commitment Fee Shares, GS Note, and GS Warrants was $227,500, due to a reduction in the $250,000 purchase price as a result of broker, legal, and transaction fees.
Securities Purchase Agreement with Kishon Investments
On May 10, 2022, we 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 our Common Stock, (ii) promissory note in the principal amount of $277,777 due on November 10, 2022 (the “Kishon Note”), and (iii) Common Stock Purchase Warrants to purchase up to 5,556 shares of the Common Stock (the “Kishon Warrants”). The Kishon Note and Kishon Warrants were issued on May 10, 2022 and were held in escrow pending effectiveness of the Kishon Agreement.
Pursuant to the terms of the Kishon Agreement, the initial Kishon Commitment Fee Shares were issued at a value of $159,259, the Kishon 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 Kishon Warrants were issued, with an initial exercise price of $25.00 per share, subject to adjustment.
10% Promissory Notes Issued on June 9, 2022
We issued two 10% Promissory Notes due as described below (individually, the “Howe Note 2” and the “Dragon Note”, and collectively, the “June 9 Notes”), dated June 9, 2022, to Michael C. Howe Living Trust and Dragon Dynamic Funds Platform Ltd. (the “June 9 Lenders”) and in respect of which we received proceeds of $755,000. Michael C. Howe is the Chief Executive Officer of the Good Clinic LLC, one of the Company’s subsidiaries.
The June 9 Notes carry a 10% interest rate per annum, accrued monthly. The Howe Note 2 has a maturity date that is the earlier of (i) October 10, 2022, or (ii) five business days after the date on which we successfully list our shares of common stock on Nasdaq or NYSE. The Dragon Note has a maturity date that is the earlier of (i) December 9, 2022, or (ii) the date on which we successfully list our shares of common stock on Nasdaq or NYSE. The aggregate amount payable at maturity will be $888,235 plus 10% of that amount plus any accrued and unpaid interest. In addition, the June 9 Lenders will be issued in the aggregate (1) 7,284 five-year warrants (the “June 9 Warrants”) and (2) 7,284 shares of Common Stock as commitment shares. The June 9 Warrants have an initial exercise price of $25.00 per share. The June 9 Warrants are not exercisable for six months following their issuance.
10% Promissory Notes Issued on July 7, 2022
On July 7, 2022, the Company issued two 10% Promissory Notes due as described below (individually, the “Schrier Note” and the “William Mackay Note”, and collectively, the “July 7 Notes”), to Charles Schrier and William Mackay Investments LLC, (together, the “July 7 Lenders”) and in respect of which the Company received proceeds of $270,000.
The July 7 Notes carry a 10% interest rate per annum, accrued monthly and payable at maturity. The Schrier Note 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 William Mackay Note has a maturity date that is the earlier of (i) August 8, 2022, or (ii) five business days after the date on which the Company successfully lists its shares of common stock on Nasdaq or NYSE.
The aggregate amount payable at maturity will be $317,647 plus 10% of that amount plus any accrued and unpaid interest. Following an event of default, as defined in the July 7 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 July 7 Notes contain a “most favored nations” clause that provides that, so long as the July 7 Notes are outstanding, if the Company issues any new security, which the July 7 Lenders reasonably believe contains a term that is more favorable than those in the July 7 Notes, the Company shall notify the July 7 Lenders of such term, and such term, at the option of the July 7 Lenders, shall become a part of the July 7 Notes. In addition, the July 7 Lenders will be issued in the aggregate (1) 2,605 five-year warrants (the “Warrants”) and (2) 2,605 shares of Common Stock as commitment shares (“Commitment Shares”). The Commitment Shares are priced at $12.50. The Warrants have an initial exercise price of $25.00 per share. The Warrants are not exercisable for six months following their issuance. The July 7 Lenders may exercise the Warrants on a cashless basis if after the six-month anniversary of date of issuance, the shares of Common Stock underlying the Warrants are not then registered pursuant to an effective registration statement.
10% Promissory Note and Warrants to Michael C. Howe Living Trust
On July 21, 2022, the Company issued a 10% Promissory Notes due to Michael C Howe Living Trust (the “Howe Note 3”) and in respect of which the Company received proceeds of $255,000. The Howe Note 3 carries a 10% interest rate per annum, accrued monthly and payable at maturity. The Howe Note 3 has a maturity date that is the earlier of (i) October 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 amount payable at maturity will be $300,000 plus 10% of that amount plus any accrued and unpaid interest. Following an event of default, as defined in the Howe Note 3, the principal amount shall bear interest for each day until paid, at a rate per annum equal to the lesser of the maximum interest permitted by applicable law and 18%. The Howe Note 3 contains a “most favored nations” clause that provides that, so long as the Howe Note 3 is outstanding, if the Company issues any new security, which Mr. Howe reasonably believes contains a term that is more favorable than those in the Note, the Company shall notify Mr. Howe of such term, and such term, at the option of Mr. Howe, shall become a part of the Howe Note 3. In addition, Mr. Howe will be issued (1) 2,460 five-year warrants (the “Warrants”) and (2) 2,460 shares of Common Stock as commitment shares (“Commitment Shares”). The Commitment Shares are priced at $12.50. The Warrants have an initial exercise price of $25.00 per share. The Warrants are not exercisable for six months following their issuance. Mr. Howe may exercise the Warrants on a cashless basis if after the six-month anniversary of date of issuance, the shares of Common Stock underlying the Warrants are not then registered pursuant to an effective registration statement.
10% Promissory Note and Warrants to Juan Carlos Iturregui
On July 21, 2022, the Company issued a 10% Promissory Notes due to Juan Carlos Iturregui (the “Iturregui Note”) and in respect of which the Company received proceeds of $25,000. Mr. Iturregui is a member of the Company’s Board of Directors. The Iturregui Note carries a 10% interest rate per annum, accrued monthly and payable at maturity. The Iturregui Note has a maturity date that is the earlier of (i) January 21, 2023, or (ii) five business days after the date on which the Company successfully lists its shares of common stock on Nasdaq or NYSE. The amount payable at maturity will be $29,412 plus 10% of that amount plus any accrued and unpaid interest. Following an event of default, as defined in The Iturregui Note, the principal amount shall bear interest for each day until paid, at a rate per annum equal to the lesser of the maximum interest permitted by applicable law and 18%. The Iturregui Note contains a “most favored nations” clause that provides that, so long as The Iturregui Note is outstanding, if the Company issues any new security, which Mr. Iturregui reasonably believes contains a term that is more favorable than those in The Iturregui Note, the Company shall notify Mr. Iturregui of such term, and such term, at the option of Mr. Iturregui, shall become a part of The Iturregui Note. In addition, Mr. Iturregui will be issued (1) 2,460 five-year warrants (the “Warrants”) and (2) 2,460 shares of Common Stock as commitment shares (“Commitment Shares”). The Commitment Shares are priced at $12.50. The Warrants have an initial exercise price of $25.00 per share. The Warrants are not exercisable for six months following their issuance. Mr. Iturregui may exercise the Warrants on a cashless basis if after the six-month anniversary of date of issuance, the shares of Common Stock underlying the Warrants are not then registered pursuant to an effective registration statement.
10% Promissory Note and Warrants to Erik Scott Nommsen
On July 26, 2022, the Company issued a 10% Promissory Notes due to Erik Scott Nommsen (the “Nommsen Note”) and in respect of which the Company received proceeds of $50,000. The Nommsen Note carries a 10% interest rate per annum, accrued monthly and payable at maturity. The Nommsen Note has a maturity date that is the earlier of (i) October 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 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 contains a “most favored nations” clause that provides that, so long as the Nommsen 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 will be issued (1) 482 five-year warrants (the “Warrants”) and (2) 482 shares of Common Stock as commitment shares (“Commitment Shares”). The Commitment Shares are priced at $12.50. The Warrants have an initial exercise price of $25.00 per share. The Warrants are not exercisable for six months following their issuance. Mr. Nommsen may exercise the Warrants on a cashless basis if after the six-month anniversary of date of issuance, the shares of Common Stock underlying the Warrants are not then registered pursuant to an effective registration statement.
10% Promissory Note and Warrants to James H. Caplan
On July 27, 2022, the Company issued a 10% Promissory Notes due to James H. Caplan (the “Caplan Note”) and in respect of which the Company received proceeds of $50,000. The Caplan Note carries a 10% interest rate per annum, accrued monthly and payable at maturity. The Caplan Note has a maturity date that is the earlier of (i) January 21, 2023, or (ii) five business days after the date on which the Company successfully lists its shares of common stock on Nasdaq or NYSE. The amount payable at maturity will be $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 Caplan 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 will be issued (1) 482 five-year warrants (the “Warrants”) and (2) 482 shares of Common Stock as commitment shares (“Commitment Shares”). The Commitment Shares are priced at $12.50. The Warrants have an initial exercise price of $25.00 per share. The Warrants are not exercisable for six months following their issuance. Mr. Caplan may exercise the Warrants on a cashless basis if after the six-month anniversary of date of issuance, the shares of Common Stock underlying the Warrants are not then registered pursuant to an effective registration statement.
10% Promissory Note and Warrants to Jack Enright
On August 4, 2022, the Company issued a 10% Promissory Notes due to Jack Enright (the “Enright Note”) and in respect of which the Company received proceeds of $102,000. The Enright Note carries a 10% interest rate per annum, accrued monthly and payable at maturity. The note has a maturity of February 3, 2023. 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 Enright 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 will be issued 984 shares of Common Stock as commitment shares (“Commitment Shares”). The Commitment Shares are priced at $12.50.
10% Promissory Note and Warrants to the Finnegan Family
On August 4, 2022, the Company issued a 10% Promissory Notes due to Jessica, Kevin C., Brody, Isabella and Jack Finnegan (the “Finnegan Note 3”) and in respect of which the Company received proceeds of $25,000. The Finnegan Note 3 carries a 10% interest rate per annum, accrued monthly and payable at maturity. The Finnegan Note 3 has a maturity of February 3, 2023. The amount payable at maturity will be $29,412 plus 10% of that amount plus any accrued and unpaid interest. Following an event of default, as defined in the Finnegan Note 3, the principal amount shall bear interest for each day until paid, at a rate per annum equal to the lesser of the maximum interest permitted by applicable law and 18%. The Finnegan Note 3 contains a “most favored nations” clause that provides that, so long as the Finnegan Note 3 is outstanding, if the Company issues any new security, which the Finnegans reasonably believes contains a term that is more favorable than those in the Finnegan Note 3, the Company shall notify the Finnegans of such term, and such term, at the option of the Finnegans, shall become a part of the Finnegan Note 3. In addition, the Finnegans will be issued in aggregate (1) 241 five-year warrants (the “Warrants”) and (2) 241 shares of Common Stock as commitment shares (“Commitment Shares”). The Commitment Shares are priced at $12.50. The Warrants have an initial exercise price of $25.00 per share. The Warrants are not exercisable for six months following their issuance. The Finnegans may exercise the Warrants on a cashless basis if after the six-month anniversary of date of issuance, the shares of Common Stock underlying the Warrants are not then registered pursuant to an effective registration statement.
10% Promissory Note and Warrants to Michael C. Howe Living Trust
On August 18, 2022, the Company issued a 10% Promissory Note due to Michael C Howe Living Trust (the “Howe Note 4”) and in respect of which the Company received proceeds of $170,000. The Howe Note 4 carries a 10% interest rate per annum, accrued monthly and payable at maturity. The Howe Note 4 has a maturity date that is the earlier of (i) November 30, 2022, or (ii) five business days after the date on which the Company successfully lists its shares of common stock on Nasdaq or NYSE. The aggregate amount payable at maturity will be $200,000 plus 10% of that amount plus any accrued and unpaid interest. Following an event of default, as defined in the Howe Note 4, the principal amount shall bear interest for each day until paid, at a rate per annum equal to the lesser of the maximum interest permitted by applicable law and 18%. The Howe Note 4 contains a “most favored nations” clause that provides that, so long as the 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 will be issued 1,640 shares of Common Stock as commitment shares (the “Howe Note 4 Commitment Shares”). The Howe Note 4 Commitment Shares are priced at $12.50.
10% Promissory Notes Issued on September 2, 2022
On September 2, 2022, the Company issued four 10% Promissory Notes (the “September 2 Notes”) due to Sharon Goff, Lisa Lewis, Frank Lightmas and John Mitchell (the “September 2 Lenders”) and in respect of which the Company received proceeds of $162,350. The September 2 Notes carry a 10% interest rate per annum, accrued monthly and payable at maturity. The September 2 Notes have a maturity date that is the earlier of (i) November 30, 2022, or (ii) five business days after the date on which the Company successfully lists its shares of common stock on Nasdaq or NYSE. The aggregate amount payable at maturity will be $191,000 plus 10% of that amount plus any accrued and unpaid interest. Following an event of default, as defined in the September 2 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 September 2 Notes contain a “most favored nations” clause that provides that, so long as the September 2 Notes are outstanding, if the Company issues any new security, which the September 2 Lenders reasonably believe contains a term that is more favorable than those in the September 2 Notes, the Company shall notify the September 2 Lenders of such term, and such term, at the option of the September 2 Lenders, shall become a part of the September 2 Notes. In addition, the September 2 Lenders will be issued in the aggregate 1,567 shares of Common Stock as commitment shares (the “September 2 Notes Commitment Shares”). The September 2 Notes Commitment Shares are priced at $12.50.
10% Promissory Note to Cliff Hagan
On September 9, 2022, the Company issued a 10% Promissory Note (the “Hagan Note”) due to Cliff Hagan in respect of which the Company received proceeds of $85,000. The Hagan Note carries a 10% interest rate per annum, accrued monthly and payable at maturity. The Hagan Note 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 aggregate 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 contains a “most favored nations” clause that provides that, so long as the Hagan 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 will be issued in the aggregate 41,000 shares of Common Stock as commitment shares (the “Hagan Note Commitment Shares”). The Hagan Note Commitment Shares are priced at $0.25.
10% Promissory Note to Darling Capital, LLC
On September 14, 2022, the Company issued a 10% Promissory Note (the “Darling Note”) due to Darling Capital, LLC in respect of which the Company received proceeds of $170,000. The Darling Note carries a 10% interest rate per annum, accrued monthly and payable at maturity. The Darling Note 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 aggregate amount payable at maturity will be $200,000 plus 10% of that amount plus any accrued and unpaid interest. Following an event of default, as defined in the 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 contains a “most favored nations” clause that provides that, so long as the Darling Note is outstanding, if the Company issues any new security, which Darling Capital, LLC reasonably believes contains a term that is more favorable than those in the Darling Note, the Company shall notify Darling Capital, LLC of such term, and such term, at the option of Darling Capital, LLC, shall become a part of the Darling Note. In addition, Darling Capital, LLC will be issued in the aggregate 82,000 shares of Common Stock as commitment shares (the “Darling Note Commitment Shares”). The Darling Note Commitment Shares are priced at $0.25.
10% Promissory Note to Mack Leath
On September 15, 2022, the Company issued a 10% Promissory Note (the “Leath Note”) due to Mack Leath in respect of which the Company received proceeds of $42,500. The Leath Note carries a 10% interest rate per annum, accrued monthly and payable at maturity. The Leath Note 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 aggregate amount payable at maturity will be $50,000 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 contains a “most favored nations” clause that provides that, so long as the Leath 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 will be issued in the aggregate 41,000 shares of Common Stock as commitment shares (the “Leath Note Commitment Shares”). The Leath Note Commitment Shares are priced at $0.25.
BUSINESS
Overview
We intend to open primary care clinics around the United States in select markets utilizing the experience, expertise, and training of licensed, advanced degreed Nurse Practitioners. Our clinics provide complete primary care, basic behavioral healthcare including care in the areas of depression, anxiety and attention deficit hyperactivity disorder and basic dermatological services in the areas of Botox injections, skin procedures, biopsies, cancer screening and acne treatment for our consumers. The medical practice focuses on whole person health and prevention. We seek to create a jointly developed longitudinal care plan with each individual that focuses on the patient’s individual quality of life goals. We personalize care interactions based upon the individuals care style as identified by University of Oregon’s “Patient Activation Measure” a peer reviewed, validated tool also in use by the Centers for Medicare and Medicaid. We pursue health equity in our practices and are a member of the National Minority Health Association. The practice accepts most major commercial insurances, Medicare, Medicaid, and self-pay patients. We support pricing transparency and maintain a published price list for self-pay patients.
In addition to the traditional fee-for-service medical care, we offer a variety of services focused on wellness for both individuals and self-funded employers. Our wellness offerings include dermatological services, weight management, nutritional and diabetes coaching as well as offering products such as educational books, vitamins, and essential oils. Most of our wellness products and services are not covered by insurance and are paid for by the consumer at the time the of service. We offer our services both in the clinics and well as via telehealth and seek to facilitate same day and next day appointments for client convenience. Our mission is to increase convenience and access to care, improve the quality of care, and reduce cost.
We opened our first primary care clinic “The Good Clinic” in Northeast Minneapolis, Minnesota in February 2021, and have added five additional operating clinics for a total of six clinics open and operating at September 8, 2022. We have three additional leases for new clinics, two in Denver, Colorado and one additional in Minneapolis, Minnesota. These new locations are expected to open in the first quarter of 2023. We also plan to open clinics in additional states that allow practice by Nurse Practitioners and are experiencing a shortage of available primary care providers, including Arizona and Florida We plan to open clinics in residential concentrations of population to enhance the convenience, which we believe will be well received by customers due to the changes in community travel patterns resulting from the pandemic. Our clinicians use both telehealth (virtual) and in-person visits to treat and coach the clients along their journey to better health and quality of life. Our clinics are led by Nurse Practitioners that use their license, extensive training, expertise, and empathy to try to help people remain stable or improve their health. We emphasize wellness, beginning with a clients’ co-developed plan that identifies from where a person is starting and constructs a plan for how they can achieve their goals. The practice uses an integrated health approach that includes an assessment of both the individual’s behavioral and physical health and combines this with their activation level and their goals. The primary care clinic offers wellness coaching, behavioral health care, episodic care, dermatologic services, and supplements. We seek to care for the whole person’s needs.
Like the first clinic we opened, we seek to locate clinics convenient to residential centers. In pursuit of this approach, we intend to continue to expand our relationship with Lennar Corporation and other large-scale developers. While we have no formal relationship with these developers other that as a tenant, we believe such relationships give us an advantage in recruiting and retaining clients in close proximity to our locations. We believe that our clinics will be viewed as an amenity for the high-rise development in which we are located. We plan to mirror this approach in residential developments in Denver, and in other markets as we expand. We may also seek to grow through the acquisition of existing clinic operations which would be converted into our operating approach.
We had previously established a strategy to address opportunities in Europe generally seeking technology solutions, or financing situations, through a Dublin based subsidiary, Acelerar Healthcare Holdings Ltd. After a review of its near-term opportunities in North America, the Board of Directors has determined that any efforts in the European community should be discontinued so that it can best focus on its North American operations. In conjunction with this decision the Company for the period ending December 31, 2021 it took a one-time charge of $12,500 related to the discontinuation and wind down of its European entity.
Operational Overview
We began operations in 2012 with a strategy of acquiring compounding pharmacy businesses. Beginning in 2020, we ceased that line of business and have since focused on establishing medical clinics utilizing Nurse Practitioners and telemedicine technology under “The Good Clinic” name. 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.
Corporate Organizational Chart
|
1. |
Due to the prohibition of corporate medicine in Minnesota and Colorado, these entities are owned by licensed nurse practitioners and are managed and controlled under contract by The Good Clinic LLC using a variable interest entity structure. A prohibition on the corporate practice of medicine by statute, regulation, board of medicine or attorney general guidance, or case law, exists in certain of the U.S. states in which we operate. These laws generally prohibit the practice of medicine by lay persons or entities and are intended to prevent unlicensed persons or entities from interfering with or inappropriately influencing providers’ professional judgment. We do not own the Good Clinic MN PLLC or the Good Clinic CO PLLC (together, the “Good Clinic PLLCs”). The Good Clinic LLC manages all administrative services. All clinical decisions are the purview of the Good Clinic PLLCs. Please see Note 3 to the condensed consolidated financial statements and Note 3 to the consolidated financial statements for a discussion of the principles of consolidation. |
Our Business and Related Matters
In March 2020, we formed The Good Clinic LLC, a limited liability company for our clinic business. We entered into an agreement with James Woodburn, Kevin Lee Smith, Michael Howe, and Rebecca Hafner-Fogarty to establish a series of clinics utilizing Nurse Practitioners and telemedicine technology in states where full practice authority for Nurse Practitioners is supported. Full practice authority is the authorization of Nurse Practitioners to evaluate patients, diagnose, order, and interpret diagnostic tests and initiate and manage treatments, including prescribe medications. We issued 4,800 shares of our Series A Preferred Stock to these individuals as compensation. Subsequent to December 31, 2020, these shares were cancelled in consideration of an issuance of 12,000 shares of restricted Common Stock in aggregate, and as a result there are no shares of Series A Preferred Stock outstanding as of the date of this filing. Dr. Woodburn and Dr. Hafner are no longer contracted or associated with us. Mr. Howe and Mr. Smith are employees with the Good Clinic LLC. Mr. Smith oversees the clinical operations of the Good Clinic. Mr. Howe is currently responsible for business development and expansion of The Good Clinic, LLC. His duties include locating, negotiating set-up, launch and marketing of each new clinic location. Mr. Smith is responsible for clinic operations and services as well as management and supervision of clinical staff. Neither Mr. Howe nor Mr. Smith provide patient care and as such do not receive fees for medical services.
Target Locations
We are in the process of identifying strategic new locations for The Good Clinic facilities. We currently have six clinics operating in the Minneapolis / St. Paul metropolitan area. We have three additional leases signed for sites in Colorado and one additional site in Minnesota. We then expect, subject to adequate funding, to further expand in Colorado and then Arizona and Florida. We are targeting expanding in states experiencing a shortage of available primary care providers, including Arizona and Florida, with a goal of having 50 units operating in the next three years, subject to availability of funding.
Consumer research has clearly identified that consumers want convenience (Becker’s Hospital Review, “What Do You Really Know About Patient Loyalty?”). As such, we are seeking to locate clinics within more residential urban and suburban locations with higher density of population. Like the first clinic, we seek to locate clinics convenient to residential centers. In pursuit of this approach, we intend to continue to expand our relationship with Lennar Corporation and other large-scale developers. While we have no formal relationship with these developers other than as a tenant, we believe such relationships give us an advantage in recruiting and retaining clients in close proximity to our locations.
The Good Clinic facilities are expected to be developed in two sizes. They are planned to be 3,000 to 3,500 square feet with three to five Nurse Practitioners. The Nurse Practitioners practicing will be the primary care providers at these clinics. The Good Clinic will offer the following medical services:
|
▪ |
Full-spectrum family practice services; |
|
▪ |
Flu and other vaccines; |
|
▪ |
Advanced Electronic Medical Records (EMR) that enables rapid, accurate and consistent medical documentation and protocols, safety features, follow-up planning and billing information; |
|
▪ |
Drug Testing; |
|
▪ |
Wellness programs and lifestyle education; |
|
▪ |
Nutritional planning and weight control programs; |
|
▪ |
Laboratory services including on-site testing and referral testing to major outsource lab companies; |
|
▪ |
Blood pressure, temperature, pulse rates, EKG, and pulmonary testing; |
|
▪ |
Women’s Health; and |
|
▪ |
Occupational health services including treatment of work injuries, pre-employment exams, drug testing, company sponsored flu shots and education programs for workers. |
Patient Scheduling
We offer scheduling protocols to facilitate our clients’ ability to schedule appointments that meet their busy schedules or to come without appointment when unplanned sickness or injuries occur. For sudden sickness and minor injuries, we provide an alternative to hospital emergency rooms which often have long waits and excessive costs. The Good Clinics is open Monday through Friday from 8 am to 4 pm. The Good Clinics will provide its patients with the ability to access their practitioners seven days a week through clinic and virtual visits. We plan to offer customized hours and open access as alternatives for business clients seeking occupational services for their employees. We plan to own and lease certain medical equipment.
Connectivity Between Locations
We have connectivity between the clinics so that patients can access their information for treatment or prescriptions at any of our facilities and online via telehealth. When patients utilize The Good Clinic for their healthcare needs, we seek to know who they are and what they want and need.
Serving the Market
We believe there is a looming shortage of primary care providers in the United States. Approximately 27 States in the U.S. allow Nurse Practitioners to operate as fully independent primary care providers. Another 13 allow Nurse Practitioners broad autonomy in providing primary care services. By using Nurse Practitioners, we plan to focus on direct patient care, patient education and helping people to manage their health more effectively. The Good Clinics are designed to improve access to basic affordable primary care and empower Nurse Practitioners to function as healthcare providers. According to a American Association of Colleges of Nursing report from April 2022, there are more than 355,000 Nurse practitioners practicing in the US making the necessary expertise readily available. This is a significant increase from the approximately 91,000 practicing in 2010. According to the Bureau of Labor Statistics 2021 data, Nurse Practitioners median annual pay was 48% less than their physician counterparts.
Like any consumer-focused business, locating a clinic is one-part art and one-part science. We evaluate concentration of primary care practices within the zip code and examine average wait-times for appointments and ensure the local markets are already using Nurse Practitioners as primary care providers. We focus on convenience that includes locations near residential centers, adequate parking, good retail visibility in higher traffic areas and the presence of other retail businesses close by.
Billing and Payment
The Good Clinics bills health insurance companies for allowed medical services and accepts payment in cash or credit cards for client selected and non-covered services. We will also explore partnering with local small to mid-size businesses of all types to provide near-site employer clinics for wellness exams, chronic disease management, department of transportation exams, physicals, virus testing, occupational health services and other healthcare related services traditionally offered by primary care providers.
Marketing
We plan to generate business for The Good Clinics through a combination of partnerships with residential developers and local marketing and advertising, direct sales of occupational medical services to companies (flu shots, workers injury treatment services, drug testing, and health promotion programs), public relations efforts with local charities, city and county organizations, hospitals and medical providers, networking and promotional events and open houses. We are using internal marketing including brochures, posters, magazines, health promotion articles, and educational materials that point to our services. Upon having a new patient, we plan to initiate client follow-up and schedule return visits. To assure broad access of insured clients in the medical service area, we plan to participate in contracts with health insurance providers, and the Medicare program, making The Good Clinics services fully reimbursable for its clients.
The Good Clinic is about delivering a convenient individualized care experience built on education, expertise, and empathy. We are the patient’s partner in obtaining quality and affordable medical care. The Good Clinic supports patient care with both in-clinic and telehealth visits.
Healthcare Industry Insight
According to a recent report published by Centers for Medicare and Medicaid Services (“CMS”) which examined the market for 2020, health care expenditures continue to consume an increasing portion of most economies. In the U.S., health care spending increased 9.7 percent to $4.1 trillion in 2020, and now represents 19.7 percent of the U.S.’ Gross Domestic Product (“GDP”). An aging population and high levels of chronic conditions are contributing to expectations that health care expenditures will continue growing faster than the economy. The CMS estimates annual U.S. healthcare spending will grow at an average rate of 5.1 percent through 2030 and reach $6.8 trillion, or 19.6 percent of U.S. GDP, by 2030 We believe this trajectory is unsustainable and support the wide spread call for investment in expanding access to primary care. Establishing a longitudinal primary care relationship has significant value to the individual and the overall healthcare system as detailed in an Eden Health May 2021 posting.
|
● |
Adults in the U.S. who have a primary care provider have 19% lower odds of premature death than those who only see specialists for their care. |
|
● |
Patients with a primary care provider save 33% on healthcare costs compared to those who only see specialists. |
|
● |
Access to primary care helps avoid unnecessary trips to the emergency room, where care can cost as much as 4x that of other outpatient care. |
|
● |
Catching and treating problems during regular check-ups is far less expensive than treating an advanced illness — in fact, if everyone saw a primary care provider first for their care, it would save the U.S. an estimated $67 billion every year. |
|
● |
Patients report a 10% increase in patient satisfaction with healthcare when they have a primary care provider. |
Competition
The market for healthcare solutions including walk-in clinics and telehealth services is intensely competitive. We compete in a highly fragmented primary care market with direct and indirect competitors that offer varying levels of impact to key stakeholders such as patients and employers. Our competitive success is contingent on our ability to simultaneously address the needs of key stakeholders efficiently and with superior outcomes at scale compared with competitors. Competition in our market involves rapidly changing technologies, evolving regulatory requirements and industry expectations, frequent new product and service introductions and changes in customer and patient requirements. If we are unable to keep pace with the evolving needs of patients and continue to develop and introduce new applications and services in a timely and efficient manner, demand for our solutions and services may be reduced and our business and results of operations would be harmed.
We currently face competition in the telehealth industry from a range of companies, including specialized software and solution providers that offer similar solutions, often at substantially lower prices, and that are continuing to develop additional products and becoming more sophisticated and effective. In addition, large, well-financed health systems have in some cases developed their own telehealth tools and may provide these solutions to their customers and patients at discounted prices. The surge in interest in telehealth, and in particular the relaxation of HIPAA privacy and security requirements, has also attracted new competition from providers who utilize consumer-grade video conferencing platforms such as Zoom and Twilio. Competition from large software companies or other specialized solution providers, communication tools and other parties could result in continued pricing pressures, which is likely to lead to price declines in certain product segments, which could negatively impact our sales, profitability, and market share.
We compete with walk-in clinics, such as the CVS Minute Clinic, traditional healthcare providers and medical practices, care management and coordination, digital health, telehealth and telemedicine and health information exchange. Competition in our market involves rapidly changing technologies, evolving regulatory requirements and industry expectations, frequent new product and service introductions and changes in customer and patient requirements. If we are unable to keep pace with the evolving needs of our clients, members and partners and continue to develop and introduce new applications and services in a timely and efficient manner, demand for our solutions and services may be reduced and our business and results of operations would be harmed.
Our business is highly dependent on completing our clinics and gaining patients and customers in our target markets. However, the healthcare market is competitive, which could make it difficult for us to succeed. We face competition in the healthcare industry for our solutions and services from a range of companies and providers, including traditional healthcare providers and medical practices that offer similar services. These competitors primarily include primary care providers who are employed by or affiliated with health networks. Our indirect competitors also include episodic consumer-driven point solutions such as telemedicine as well as urgent care providers. Generally, urgent care providers in the local communities we will provide services similar to those we offer, and our competitors (1) are more established than we are, (2) may offer a broader array of services or more desirable facilities to patients and providers than ours, and (3) may have larger or more specialized medical staffs to admit and refer patients, among other things. In the future, we expect to encounter increased competition from system-affiliated hospitals and healthcare companies, as well as health insurers and private equity companies seeking to acquire providers, in specific geographic markets. We also face competition from specialty hospitals (some of which are physician-owned), primary care providers and outpatient centers for market share in high margin services and for quality providers and personnel. Furthermore, some of the clinics and medical offices that compete with us may be supported by government agencies or not-for-profit organizations supported by endowments and charitable contributions and can finance capital expenditures and operations on a tax-exempt basis.
Our competitors in Minnesota for primary care services include Fairview Health Systems, Health Partners, Allina Medical Group, University of Minnesota Physicians, and Park Nicollet Clinics. Our competitors in Denver, Colorado for primary care services include UCHealth, Rocky Mountain Family Medicine, SCL Health Medical Group, Denver Primary Health Care, CHPG Primary Care Highlands, Denver Health, Denver Family Medicine, HealthOne, Summit Primary Care, Porter Primary Care, New West Physicians, and CU Medicine.
Our competitors may have greater name recognition, longer operating histories and significantly greater financial and other resources than we do. Further, our current or potential competitors may be acquired by third parties with greater available resources. As a result, our competitors may be able to respond more quickly and effectively than we can to new or changing opportunities, technologies, standards, or patient requirements and may have the ability to initiate or withstand substantial price competition. In addition, current and potential competitors have established, and may in the future establish, cooperative relationships with vendors of complementary technologies or services to increase the availability of their solutions in the marketplace. Accordingly, new competitors or alliances may emerge that have greater market share, a larger member or patient base, more widely adopted proprietary technologies, greater marketing expertise, greater financial resources, and larger sales forces than we have, which could put us at a competitive disadvantage. Our competitors could also be better positioned to serve certain segments of the healthcare market, which would limit our member and patient growth. Considering these factors, even if our solution is more effective than those of our competitors, current or potential members, health network partners and enterprise clients may accept competitive solutions in lieu of purchasing our solution. If we are unable to compete in the healthcare market, our business would be harmed.
Competitors may also be better positioned to contract with leading health network partners in our target markets, including existing markets after our current contracts expire. If our competitors are better able to attract patients, contract with health network partners, recruit providers, expand services or obtain favorable managed care contracts at their facilities than we are, we may experience an overall decline in member volumes and net revenue. There is no assurance we will be able to compete in the markets in which we plan to operate which could cause you to lose your investment.
Management/Human Capital
We believe that the Company’s management team will remain relatively small in the near term and should consist of a team with experience in 1) public company accounting and finance, 2) software and systems, 3) brand marketing, and 4) public equities financing. Biographical and other information on our executive officers and directors is set forth under the section entitled Management of this prospectus.
We anticipate maintaining a relatively small corporate staff and employ the majority of our human capital in our subsidiaries. As of September 8, 2022, Lawrence Diamond serves as our Chief Executive Officer and director, Tom Brodmerkel serves as our Chief Financial Officer and Jenny Lindstrom serves as our Chief Legal Officer. As of September 8, 2022, our subsidiary, The Good Clinic, LLC, employs 31 people in professional positions. We are currently recruiting additional clinical staff to serve the anticipated expanding clinic client demand.
We have partnered with several key vendors that are national in scope to meet the anticipated growth rate for building and opening clinics, including RSP Architects Ltd, Gardner Builders, and Dirtt Environmental Solutions Ltd.
The Good Clinic has developed an extensive employee training program based on the American Academy of Family Physicians clinical best practice guidelines that aims to facilitate compliance with all federal, state, and local regulations as well as enable the team to have the expertise, knowledge, and skills to deliver the full scope of services offered to clients at the clinic, in person and virtually. This internal training content will be reviewed and updated on a periodic basis to reflect the latest published enhancements for clinical care best practice.
Our innovative approach towards delivering primary care is attracting many clinicians wanting to join the team. Additionally, we believe that the reputation of the founders from their work growing Quick Medix (fka MinuteClinic) and their work at schools of nursing and industry and trade associations is helping to deliver many experienced potential employees.
We also use the services of additional advisors and consultants on an as needed basis to perform outsourced tasks. As of September 8, 2022, none of our employees were represented by a union or covered by a collective bargaining agreement. We have not experienced any work stoppages and we consider our relationship with our employees to be good.
Research and Development
The research to date for The Good Clinic was primarily conducted by founders of The Good Clinic, Michael C. Howe, Rebecca Hafner-Fogarty, Kevin Lee Smith, and Jim “Woody” Woodburn. Our Board of Directors and management also conducted research and development including accessing third party research reports, competitor analyses, review of prior professional experiences, and interviews with industry experts and potential partners. We did not incur any research and development costs during the six months ended June 30, 2022 or the years ended December 31, 2021 and 2020.
Intellectual Property
In August 2020, we applied for trademark protection of “The Good Clinic”, with the United States Patent & Trademark Office (USPTO). Our federal trademark registration for the mark THE GOOD CLINIC is on the Supplemental Register, not the Principal Register. The Supplemental Register does not confer the same rights and benefits as the Principal Register. After a period of five years of use, or sooner based upon our marketing resources and our use of the name, we intend to apply to have the name transferred to the Principle Register.
Property
On November 1, 2020, we entered into an agreement to open a clinic in Minneapolis, Minnesota. The initial lease term is eight years. Fixed rent payments under the initial term are approximately $511,000.
On May 24, 2021, we entered into an agreement to open a clinic in St. Louis Park, Minnesota, which began operations in the third quarter of 2021. The initial lease term is seven years. Fixed rent payments under the initial term are approximately $673,000.
Additionally, on June 8, 2021, we entered into an agreement to open a clinic in Eden Prairie, Minnesota, which began operation in the third quarter of 2021. The initial lease term is eight years. Fixed rent payments under the initial term are approximately $620,000.
On June 24, 2021, we entered into an agreement to open an administrative office in St. Louis Park, Minnesota. The initial lease term is 2.5 years. Fixed rent payments under the initial term are approximately $244,000.
On August 31, 2021, we entered into an agreement to open a clinic in St. Paul, Minnesota, which began operations in the fourth quarter of 2021. The initial lease term is for 114 months. Fixed rent payments under the initial term are approximately $1,153,000.
On September 9, 2021, we entered into an agreement to open a clinic in Denver, Colorado, which is expected to begin operation in the first quarter of 2023. The initial lease term is for 90 months. Fixed rent payments under the initial term are approximately $782,000.
On September 28, 2021, we entered into an agreement to open a clinic in Denver, Colorado, which is expected to begin operation in the first quarter of 2023. The initial lease term is for 96 months. Fixed rent payments under the initial term are approximately $1,079,000.
On October 8, 2021, we entered into an agreement to open a clinic in Maple Grove, Minnesota which began operation in the fourth quarter of 2021. The initial lease term is for 108 months. Fixed rent payments under the initial term are approximately $1,153,127.
On October 14, 2021, we entered into an agreement to open a clinic in Eagan, Minnesota, which began operations in the fourth quarter of 2021. The initial lease term is for 96 months. Fixed rent payments under the initial term are approximately $767,000.
On April 4, 2022, we entered into an agreement to open a clinic in Wayzata, Minnesota, which is expected to begin operations in the first quarter of 2023. The initial lease term is for 90 months. Fixed rent payments under the initial term are approximately $407,000.
On July 25 and July 29, 2022 two mechanic’s lien in the total amount of $373,396 were placed on our St. Paul, MN The Grove clinic.
On July 29, 2022 a mechanic’s lien in the amount of $136,210 was placed on our Eagan, MN Vikings Parkway clinic.
On July 29, 2022 a mechanic’s lien in the amount of $137,800 was placed on our Maple Grove, MN Arbor Lakes clinic.
On August 22 and August 26, 2022 two mechanic’s lien in the total amount of $616,785 was placed on our Denver, CO Quincy clinic.
On August 22 and August 26, 2022 two mechanic’s lien in the amount of $593,162 was placed on our Denver, CO Radiant clinic.
The mechanic’s liens described above on five of our clinics total $1,857,353.
All liens were filed pursuant to Minnesota’s and Colorado’s Mechanic’s statutes and relate to past due obligations for construction and related work on certain of our clinics. Pursuant to Minnesota’s and Colorado’s Mechanic’s statutes, the contractor-creditors may have the ability to commence a mechanic’s lien foreclosure action against the real properties in question to recover amounts due, costs, legal fees, and interest.
Additionally, the mechanic’s liens could result in defaults under our leases for the affected clinic locations. If that occurs, the leases for the affected clinic locations allow for acceleration of amounts due under the lease, among other damages and remedies. If that happens, we would have to cease our operations at the affected clinic locations and we may lose some or all of our customers.
We are attempting to negotiate modifications to our agreements with the contractor-creditors. However, we cannot assure you that our efforts will be successful. If we are unable to timely clear the mechanic’s liens filed against our clinics or otherwise negotiate modifications to our agreements with the contractor-creditors, it will have a material adverse impact on our business, results of operations, and financial condition.
Government Regulation
The healthcare industry is a highly regulated industry by both federal and state governments. We are subject to other federal and state healthcare laws that could have a material adverse effect on our business, financial condition, or results of operations. We operate in a highly regulated and evolving environment with rigorous regulatory enforcement. Any legal or regulatory action could be time-consuming and costly. If we or the manufacturers or distributors that supply our products fail to comply with all applicable laws, standards, and regulations, action by regulatory agencies could result in significant restrictions. Any regulatory action could have a negative impact on us and materially affect our reputation, business, and operations. The U.S. healthcare industry has undergone significant changes designed to improve patient safety, improve clinical outcomes, and increase access to medical care. These changes include enactments and repeals of various healthcare related laws and regulation. Our operations and economic viability may be adversely affected by the changes in such regulations, including: (i) federal and state fraud and abuse laws; (ii) federal and state anti-kickback statutes; (iii) federal and state false claims laws; (iv) federal and state self-referral laws; (v) state restrictions on fee splitting; (vi) laws regarding the privacy and confidentiality of patient information; and (vii) other laws and government regulations.
If there are changes in laws, regulations, or administrative or judicial interpretations, we may have to change our future business practices, or our business practices could be challenged as unlawful, which could have a material adverse effect on our business, financial condition, and results of operations. See the description below for certain of the laws, regulations, or administrative or judicial interpretations that we are currently subject to and the “Risk Factors” section of this prospectus.
The Affordable Care Act
The Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act (the “Affordable Care Act” or the “ACA”) in 2010 made major changes in how healthcare is delivered and reimbursed and increased access to health insurance benefits to the uninsured and underinsured population of the United States.
Since its enactment, there have been judicial and Congressional challenges to certain aspects of the ACA as well as recent efforts by the current administration to repeal or replace certain aspects of the ACA. For example, the Tax Cuts and Jobs Act of 2017 was enacted, which includes a provision repealing, effective January 1, 2019, the tax-based shared responsibility payment imposed by the ACA on certain individuals who fail to maintain qualifying health coverage for all or part of a year that is commonly referred to as the “individual mandate.” Since the enactment of the Tax Cuts and Jobs Act of 2017, there have been additional amendments to certain provisions of the ACA, and we expect the current administration and Congress will likely continue to seek to modify all, or certain provisions of, the ACA. It is uncertain the extent to which any such changes may impact our business or financial condition. Congress may consider other legislation to repeal and replace elements of the ACA. In December 2019, a federal appeals court held that the individual mandate portion of the ACA was unconstitutional and left open the question whether the remaining provisions of the ACA would be valid without the individual mandate. We continue to evaluate the effect that the ACA and its possible modification or repeal and replacement has on our business. It is uncertain the extent to which any such changes may impact our business or financial condition.
Other legislative changes have been proposed and adopted since the ACA was enacted. These changes include aggregate reductions to Medicare payments to providers of up to 2% per fiscal year pursuant to the Budget Control Act of 2011 and subsequent laws, which began in 2013 and will remain in effect through 2029 unless additional Congressional action is taken. In January 2013, the American Taxpayer Relief Act of 2012 was signed into law, which, among other things, further reduced Medicare payments to several types of providers, including hospitals, imaging centers and cancer treatment centers, and increased the statute of limitations period for the government to recover overpayments to providers from three to five years. New laws may result in additional reductions in Medicare and other healthcare funding, which may materially adversely affect customer demand and affordability for our products and services and, accordingly, the results of our financial operations. Additional changes that may affect our business include the expansion of new programs such as Medicare payment for performance initiatives for physicians under the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) which first affected physician payment in 2019. At this time, it is unclear how the introduction of the Medicare quality payment program will impact overall physician reimbursement.
Such changes in the regulatory environment may also result in changes to our payor mix that may affect our operations and revenue. In addition, certain provisions of the ACA authorize voluntary demonstration projects, which include the development of bundling payments for acute, inpatient hospital services, physician services and post-acute services for episodes of hospital care. Further, the ACA may adversely affect payors by increasing medical costs generally, which could have an effect on the industry and potentially impact our business and revenue as payors seek to offset these increases by reducing costs in other areas. Certain of these provisions are still being implemented and the full impact of these changes on us cannot be determined at this time.
Uncertainty regarding future amendments to the ACA as well as new legislative proposals to reform healthcare and government insurance programs, along with the trend toward managed healthcare in the United States, could result in reduced demand and prices for our services. We expect that additional state and federal healthcare reform measures will be adopted in the future, any of which could limit the amounts that federal and state governments and other third-party payors will pay for healthcare products and services, which could adversely affect our business, financial condition, and results of operations.
Federal Anti-Kickback Statutes
The federal Anti-Kickback Statute is a provision of the Social Security Act of 1972 that prohibits as a felony offense the knowing and willful offer, payment, solicitation or receipt of any form of remuneration in return for, or to induce, (1) the referral of a patient for items or services for which payment may be made in whole or part under Medicare, Medicaid, or other federal healthcare programs, (2) the furnishing or arranging for the furnishing of items or services reimbursable under Medicare, Medicaid, or other federal healthcare programs or (3) the purchase, lease, or order or arranging or recommending the purchasing, leasing or ordering of any item or service reimbursable under Medicare, Medicaid or other federal healthcare programs. The Patient Protection and Affordable Care Act (“ACA”) amended section 1128B of the Social Security Act to make it clear that a person need not have actual knowledge of the statute, or specific intent to violate the statute, as a predicate for a violation. The OIG, which has the authority to impose administrative sanctions for violation of the statute, has adopted as its standard for review a judicial interpretation which concludes that the statute prohibits any arrangement where even one purpose of the remuneration is to induce or reward referrals. A violation of the Anti-Kickback Statute is a felony punishable by imprisonment, criminal fines of up to $25,000, civil fines of up to $50,000 per violation, and three times the amount of the unlawful remuneration. A violation also can result in exclusion from Medicare, Medicaid, or other federal healthcare programs. In addition, pursuant to the changes of the ACA, a claim that includes items or services resulting from a violation of the Anti-Kickback Statute is a false claim for purposes of the False Claims Act.
Federal Stark Law
The federal Stark Law, 42 U.S.C. 1395nn, also known as the physician self-referral law, generally prohibits a provider from referring Medicare and Medicaid patients to an entity (including hospitals) providing ‘‘designated health services,’’ if the physician or a member of the physician’s immediate family has a ‘‘financial relationship’’ with the entity, unless a specific exception applies. Designated health services include, among other services, inpatient hospital services, outpatient prescription drug services, clinical laboratory services, certain imaging services (e.g., MRI, CT, ultrasound), and other services that our affiliated physicians may order for their patients. The prohibition applies regardless of the reasons for the financial relationship and the referral; and therefore, unlike the federal Anti-Kickback Statute, intent to violate the law is not required. Like the Anti-Kickback Statute, the Stark Law contains statutory and regulatory exceptions intended to protect certain types of transactions and arrangements. Unlike safe harbors under the Anti-Kickback Statute with which compliance is voluntary, an arrangement must comply with every requirement of a Stark Law exception, or the arrangement is in violation of the Stark Law.
Because the Stark Law and implementing regulations continue to evolve and are detailed and complex, while we attempt to structure our relationships to meet an exception to the Stark Law, there can be no assurance that the arrangements entered into by us with affiliated physicians and facilities will be found to be in compliance with the Stark Law, as it ultimately may be implemented or interpreted. The penalties for violating the Stark Law can include the denial of payment for services ordered in violation of the statute, mandatory refunds of any sums paid for such services, and civil penalties of up to $15,000 for each violation, double damages, and possible exclusion from future participation in the governmental healthcare programs. A person who engages in a scheme to circumvent the Stark Law’s prohibitions may be fined up to $100,000 for each applicable arrangement or scheme.
Some states have enacted statutes and regulations against self-referral arrangements similar to the federal Stark Law, but which may be applicable to the referral of patients regardless of their payor source and which may apply to different types of services. These state laws may contain statutory and regulatory exceptions that are different from those of the federal law and that may vary from state to state. An adverse determination under these state laws and/or the federal Stark Law could subject us to different liabilities, including criminal penalties, civil monetary penalties, and exclusion from participation in Medicare, Medicaid, or other health care programs, any of which could have a material adverse effect on our business, financial condition, or results of operations.
Health Information Privacy and Security Standards
The Health Insurance Portability and Accountability Act of 1996 (“HIPAA”), as amended, contain detailed requirements concerning the use and disclosure of individually identifiable patient health information (“PHI”) by various healthcare providers, such as medical groups. HIPAA covered entities must implement certain administrative, physical, and technical security standards to protect the integrity, confidentiality and availability of certain electronic health information received, maintained, or transmitted. HIPAA also implemented standard transaction code sets and standard identifiers that covered entities must use when submitting or receiving certain electronic healthcare transactions, including billing and claim collection activities. Violations of the HIPAA privacy and security rules may result in civil and criminal penalties, including a tiered system of civil money penalties that range from $100 to $50,000 per violation, with a cap of $1.5 million per year for identical violations. A HIPAA covered entity must also promptly notify affected individuals where a breach affects more than 500 individuals and report breaches affecting fewer than 500 individuals annually. State attorneys general may bring civil actions on behalf of state residents for violations of the HIPAA privacy and security rules, obtain damages on behalf of state residents, and enjoin further violations.
Many states also have laws that protect the privacy and security of confidential, personal information, which may be similar to or even more stringent than HIPAA. Some of these state laws may impose fines and penalties on violators and may afford private rights of action to individuals who believe their personal information has been misused. We expect increased federal and state privacy and security enforcement efforts.
Environmental and Occupational Safety and Health Administration Regulations
We are subject to federal, state, and local regulations governing the storage, use and disposal of waste materials and products. Although we believe that our safety procedures for storing, handling, and disposing of these materials and products comply with the standards prescribed by law and regulation, we cannot eliminate the risk of accidental contamination or injury from those hazardous materials. In the event of an accident, we could be held liable for any damages that result and any liability could exceed the limits or fall outside the coverage of our insurance coverage, which we may not be able to maintain on acceptable terms, or at all. We could incur significant costs and attention of our management could be diverted to comply with current or future environmental laws and regulations. Federal regulations promulgated by the Occupational Safety and Health Administration impose additional requirements on us, including those protecting employees from exposure to elements such as blood-borne pathogens. We cannot predict the frequency of compliance, monitoring, or enforcement actions to which we may be subject as those regulations are being implemented, which could adversely affect our operations.
Federal and State Healthcare Laws
We are subject to other federal and state healthcare laws that could have a material adverse effect on our business, financial condition, or results of operations. The Health Care Fraud Statute prohibits any person from knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program, which can be either a government or private payor plan. Violation of this statute, even in the absence of actual knowledge of or specific intent to violate the statute, may be charged as a felony offense and may result in fines, imprisonment, or both. The Health Care False Statement Statute prohibits, in any matter involving a federal health care program, anyone from knowingly and willfully falsifying, concealing, or covering up, by any trick, scheme or device, a material fact, or making any materially false, fictitious, or fraudulent statement or representation, or making or using any materially false writing or document knowing that it contains a materially false or fraudulent statement. A violation of this statute may be charged as a felony offense and may result in fines, imprisonment, or both. Under the Civil Monetary Penalties Law of the Social Security Act, a person (including an organization) is prohibited from knowingly presenting or causing to be presented to any United States officer, employee, agent, or department, or any state agency, a claim for payment for medical or other items or services where the person knows or should know (a) the items or services were not provided as described in the coding of the claim, (b) the claim is a false or fraudulent claim, (c) the claim is for a service furnished by an unlicensed physician, (d) the claim is for medical or other items or service furnished by a person or an entity that is in a period of exclusion from the program, or (e) the items or services are medically unnecessary items or services. Violations of the law may result in penalties of up to $10,000 per claim, treble damages, and exclusion from federal healthcare programs.
In addition, the office of inspector general (“OIG”) may impose civil monetary penalties against any physician who knowingly accepts payment from a hospital (as well as against the hospital making the payment) as an inducement to reduce or limit medically necessary services provided to Medicare or Medicaid program beneficiaries. Further, except as permitted under the Civil Monetary Penalties Law, a person who offers or transfers to a Medicare or Medicaid beneficiary any remuneration that the person knows or should know is likely to influence the beneficiary’s selection of a particular provider of Medicare or Medicaid payable items or services may be liable for civil money penalties of up to $10,000 for each wrongful act.
In addition to the laws previously described, we may also be subject to other state fraud and abuse statutes and regulations if we expand our operations nationally. For example, Minnesota imposes a provider tax on healthcare providers and Colorado mandates that all patient facing providers are COVID-19 vaccinated. Generally, we operationalize our policies and procedures to be uniform across all jurisdictions in a manner that also complies with all local and state requirements.
Many states have adopted a form of anti-kickback law, self-referral prohibition, and false claims and insurance fraud prohibition. The scope of these laws and the interpretations of them vary from state to state and are enforced by state courts and regulatory authorities, each with broad discretion. Generally, state laws reach to all healthcare services and not just those covered under a governmental healthcare program. A determination of liability under any of these laws could result in fines and penalties and restrictions on our ability to operate in these states. We cannot assure that our arrangements or business practices will not be subject to government scrutiny or be found to violate applicable fraud and abuse laws.
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.
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 18, 2020, the Company’s former President and COO completed and applied on behalf of the Company to Bank of America, NA (“Bank of America”) for a PPP loan, which was subsequently approved. On April 25, 2020, the Company entered into an unsecured Promissory Note (the “Note”) with Bank of America for a loan in the original principal amount of approximately $460,000, and the Company received the full amount of the loan proceeds on May 4, 2020.
On July 21, 2020, Bank of America notified the Company in writing that it should not have received $440,000 of the loan proceeds disbursed under the Note. The Company investigated the terms of the application and discovered its former President had erroneously represented it was refinancing an Economic Injury Disaster Loan when no such loan had been received. Bank of America requested that the Company remit the funds received back to Bank of America. The Company is currently working with Bank of America on a repayment plan. If we are not successful in negotiating repayment terms, it could have a material adverse effect on our financial condition.
Corporate Information
Mitesco, Inc. (the “Company,” “we,” “us,” or “our”), previously known as True Nature Holding, Inc., which was previously known as Trunity Holdings, Inc., a Delaware corporation, incorporated in January 18, 2012. Effective April 22, 2020, we changed our name to Mitesco, Inc.
Our website is www.mitescoinc.com and our principal executive offices is located at 1660 Highway 100 South, Suite 432, St. Louis Park, Minnesota 55416. Our telephone number is (844) 383-8689. We make available free of charge on our website our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports, as soon as reasonably practicable after we electronically file or furnish such materials to the SEC. Our website and the information contained therein or connected thereto are not intended to be incorporated into this prospectus. Our filings are also available through the SEC website www.sec.gov.
MANAGEMENT AND BOARD OF DIRECTORS
The following table and biographical summaries set forth information, including principal occupation and business experience about our directors and executive officers as of the date of this prospectus:
|
Name |
Age |
Board of Directors |
Appointed |
||||
|
Lawrence Diamond |
59 |
Director |
10/07/2019 |
||||
|
Thomas Brodmerkel |
65 |
Chairman of the Board of Directors |
12/31/2019 |
||||
|
Dr. H. Faraz Naqvi |
57 |
Director |
07/13/2020 |
||||
|
Juan Carlos Iturregui, Esq. |
57 |
Director |
07/31/2020 |
||||
|
Shelia Schweitzer |
74 |
Director |
06/01/2021 |
|
Name |
Age |
Executive Officers |
Appointed |
||||
|
Lawrence Diamond |
59 |
Chief Executive Officer |
11/01/2019 |
||||
| Thomas Brodmerkel |
65 |
Chief Financial Officer |
06/13/2022 |
||||
|
Ingrid Jenny Lindstrom |
47 |
Chief Legal Officer |
04/12/2021 |
Lawrence Diamond
Mr. Diamond has served as our Chief Executive Officer since November 2019 and Director since October 2019. Mr. Diamond also served as our and Interim Chief Financial Officer from November 2019 until March 17, 2021. He has also served as the Chief Executive Officer and Principal of Diamond Consulting, a consulting firm focused on enhancing the performance for healthcare businesses. Prior to that, from June 2018 to May 2019, he served as the chief executive officer of Intelligere Inc., a supplier of interpretation and translation for 73 languages to healthcare providers. From October 2014 to September 2017, Mr. Diamond served as the Executive Vice President and the Chief Operating Officer of PointRight, Inc. (“PointRight”), a leading healthcare analytics firm specializing in long-term and post-acute care using predictive analytics for skilled nursing, home health, Medicare & Medicaid payors, hospitals, and ACOs. Additionally, Mr. Diamond served as the Vice President of Insignia Health from January 2013 to October 2014, where he grew their business internationally and domestically providing population health engagement via their validated program (Patient Activation Measure, PAM) and SaaS-based population health-coaching. He also led strategic planning and telehealth sales at American Telecare from 2004 to 2012, an innovator of telemedicine enabled clinical services and medical devices that improve cost and quality. He also served as Vice President of Ubiquio Corporation, Inc. from 2000 to 2003, an innovator in mobile technology and services which was acquired by Mobile Planet, after an eight-year stint at UnitedHealth Group, where he also served as Vice President, driving their Medicare Advantage, pharmacy products, health plan operations, and mergers and acquisitions. He began his career at Merrill Lynch in private client banking in 1985 and earned his M.B.A. at the University of Minnesota, and his B.S., Business Administration, at the University of Richmond.
Mr. Diamond brings to the Board significant strategic, business, and financial experience specifically applicable to healthcare and telehealth companies. Mr. Diamond has a broad understanding of the financial markets, financial statements as well as generally accepted accounting principles. Through his services as our Chief Executive Officer and Interim Chief Financial Officer, he developed extensive knowledge of our business and the challenges that we face.
Thomas Brodmerkel
Mr. Brodmerkel has served as a Chair of the Board since May 2021 and was appointed as our Chief Financial Officer on June 13, 2022. He also currently serves on the board of directors of Xact Laboratories, LLC, a healthcare technology company; as the Chief Executive Officer and Chair of Wave Health Technologies LLC., a healthcare technology company focused on computer assisted coding and medical record analysis, since January 2017; and as the Executive Vice President and Chief Operating Officer of Medical Card System, Inc. since April 2013. Mr. Brodmerkel has also served as the Vice Chairman of the Board of CareSource since September 2018, a not for Profit $10 billion health plan primarily focused on serving patients under Medicaid, and as the President and Chief Executive officer of KMA Holdings LLC, an investment and consulting firm in the health care industry, since January 2009. Additionally, Mr. Brodmerkel has served on the board of PointRight since May 2014. Previously, Mr. Brodmerkel served on the board of directors of Pulse8 Inc. from September 2015 through January 2017 and Peak Risk Adjustment Solutions from October 2015 through December 2016. He also served as Executive Vice President of Matrix Medical Network, Inc. (“Matrix”) from January 2009 through November 2012. While at Matrix, a company based in Scottsdale, AZ, he was responsible for Corporate and Business Development, Client Services, Sales, and Marketing. Matrix was sold to a private equity group in April 2012. From May 2007 through December 2008, Mr. Brodmerkel served as President, Medicare Programs for the Bethesda, Maryland based Coventry Healthcare, Inc. As President, he was fully responsible for profit and loss for the over $2 billion Medicare Programs division. Products included Medicare Advantage Part C, Prescription Drugs Part D, Private-Fee-For-Service, Special Needs Plans, and Medicare Medical Savings Accounts. Mr. Brodmerkel also served as President, United Health Advisors, SVP, Ovations, Senior Retiree Services at UnitedHealth Group Incorporated, where he was responsible for over $1.5 billion of sales, marketing, and business development for products targeted to individuals aged 50 and older, from 2004 to 2006. These products include Medicare Advantage, Medicare Supplements, Medicare Pharmacy-Part D, and Special Needs Plans for individuals and groups.
While serving as Executive Vice President of American Telecare, Inc in 2004, Mr. Brodmerkel was responsible for all field operations, customer service, sales, marketing, and business development. Mr. Brodmerkel also served as Executive Vice President of Lumenous, Inc. (2003-2004), Stanton Group, Inc. as its Executive Vice President (2002-2003), Definity Health, Inc. as its Executive Vice President (2001-2002), United Healthcare, Inc. in various capacities and roles (1994-2001), Old Northwest Agents, Inc. (1990-1994) as Vice President (1990-1994), Mutual of New York (1988-1990) as its District Manager, and Ward Financial Services, Inc. (1986-1988) as its Vice President. After graduating from college, he began his career at the Three Star Drilling Corporation in 1985 as its General Manager.
Mr. Brodmerkel’s military service includes five years in the United States Navy (1980–1985) as a Supply Officer based in San Diego, CA, Panama Canal, Panama, and in Charleston, South Carolina. Mr. Brodmerkel graduated from the United States Naval Academy, Annapolis, Maryland with a Bachelor of Science in 1980.
Mr. Brodmerkel was appointed to the board due to his extensive experience, leadership and managerial expertise in healthcare, healthcare technology, insurance, and healthcare consulting companies.
Dr. H. Faraz Naqvi
Dr. Naqvi has served as a director on the Board since July 2020. Since February 2021, he has served as a portfolio manager for Pectet & Cie., a private bank in Switzerland. He has also served as the Co-founder and Chief Executive Officer of Crossover Capital Partners LLC since 2015, whose mission is to invest in healthcare companies. He also joined the Board of Directors of UCHealth, a not-for-profit healthcare system based in Colorado. Since 2016 he has served as a member of the Board for the Health District of Northern Larimer County, Colorado, and in 2012 he co-founded Remote Health Access, whose mission is elderly care and telemedicine. Dr. Naqvi has also served as the Medical Director or Miramont Lifestyle Fitness since 2012.
In May 2016, Dr. Naqvi founded Front Range Geriatric Medicine, a medical practice firm, and operated that practice from 2016 through 2019. Previously, Dr. Naqvi was founder of Avicenna Capital Limited, a healthcare investment firm and an affiliate of Brevan Howard Asset Management LLP in London, UK, from 2007 through 2009. Prior to founding Avicenna, Dr. Naqvi was a Managing Director at Pequot Capital Management, Inc. from 2001 until 2007, where he served as the manager of their $1.3 billion healthcare fund, about $1 billion of the firm’s healthcare allocation, and a $250 million emerging markets healthcare fund. From 1991 until 2001, Faraz managed roughly $4 billion in healthcare funds at Allianz Global Investors/Dresdner RCM capital. He also served as an analyst with Bank of America/Montgomery Securities from 1997 to 1998. He began his finance career as a healthcare consultant with McKinsey & Company from 1995 until 1997.
Dr. Naqvi is a Boettcher Scholar graduate of Colorado College (1986), studied economics at Trinity College, Cambridge University (1989) where he was a Marshall Scholar, received his M.D. from Harvard Medical School/M.I.T. (1993), where he performed angiogenesis research with Drs. Judah Folkman, Robert Langer, and Marsha Moses. Faraz is board certified in internal medicine and geriatrics and licensed in California, New York, and Colorado.
Dr. Naqvi was appointed to the Board due to his experience as a physician, strategic business consultant, an investment portfolio manager and as a leader of multiple healthcare related companies.
Juan Carlos Iturregui, Esq.
Mr. Iturregui has served as a director of our Board since July 31, 2020. He is engaged in several businesses including in 2005, he founded Milan Americas, LLC (“Milan Americas”), in Washington D.C., a business consultancy practice specializing in commercial, regulatory and project development engagements with a focus on infrastructure and renewable energy projects in Latin America, the Caribbean and Hispanic markets and currently serves as a Managing Director. He has also had a focus on healthcare where he played a key role as an advisor in the expansion of a major US regional healthcare provider into a new marketplace. He also co-developed and co-owned the largest solar farm in the Caribbean Basin (27MW) in 2015.
From 2019 until June 2020 Mr. Iturregui was a Partner and a Member of Nelson Mullins’ Government Relations and Infrastructure & Energy practices in its Washington, D.C. office. Nelson Mullins is an AM Law 100 firm with 122 years of operations and with significant presence in Washington, D.C., and offices in 25 cities across the U.S. Additionally, in 2015, then U.S. President Barack Obama nominated Mr. Iturregui as a board member to the Inter-American Foundation to serve a six-year term which ended in 2020. He also currently serves as a board member and Vice Chair of the American Red Cross, National Campaign Region, and has been in that role since 2013.
From 2007 to 2018, Mr. Iturregui was a Senior Advisor and Counsel to the Global Chairman at Dentons, LLP, based in Washington, D.C., a global law firm with significant presence in Washington, D.C., and offices in 85 cities across 58 countries. He worked with the international team and leadership on expanding practices and services and advised on issues/structures related to the global combination (merger) with SNR Denton in 2010.
From 2003 to 2005 Mr. Iturregui was with Quinn Gillespie & Associates, in Washington, D.C., a leading DC bipartisan public policy and communications lobbying firm where he was a director. While there, he advocated public policy positions and initiatives regarding trade, tax, finance, health care, infrastructure development and appropriations on behalf of various entities, including Fortune 500 corporations, trade associations and local governments.
Mr. Iturregui is a licensed attorney and is qualified to serve on the Board due to his extensive experience in mergers and acquisitions, international and domestic business development, and funding and expertise in the Central and South America markets. He is adept in working with the US Congress and executive branch, and foreign governments; he has an in-depth understanding of multilateral entities, stakeholders, and special interests in formulation of projects and policies.
Mr. Iturregui was appointed to the Board due to his international healthcare experience and his legal background.
Sheila Schweitzer
Ms. Schweitzer has served as a director of our Board since June 1, 2021. Ms. Schweitzer founded Blue Ox Healthcare Partners in 2009, a private equity firm investing growth capital in commercial-stage healthcare companies. Blue Ox has demonstrated a long and substantial track record of accomplishments and has led over $100 million of equity investments, including nearly $40 million invested directly by Blue Ox. Since 2012 she was CEO and Senior Advisor for Patient Matters, Inc. a healthcare Revenue Cycle Management (RCM) solutions provider. Patient Matters unifies disparate registration, bill estimation, and financial services with intelligent workflows and eligibility services, improving revenue realization for hospitals. Patient Matters was recently acquired by Firstsource Solutions Limited (NSE: FSL, BSE:532809), a global provider of Business Process Management (BPM) services and a RP-Sanjiv Goenka Group company (www.firstsource.com). She was Senior Vice President from 2009 through 2011 for Optum Insight, a part of United Healthcare Group, which provides data, analytics, research, consulting, technology and managed services solutions to hospitals, physicians, health plans, governments, and life sciences companies. From 2003 through 2009 she was CEO for CareMedic Systems, an industry leader in proactive financial management for hospitals and providers and delivers the most comprehensive suite of revenue cycle management solutions available. She was COO for MedUnite from 2001 through 2003, a provider of electronic healthcare transaction processing services. The company facilitates the exchange of medical claim and clinical information among doctors, hospitals, medical laboratories, and insurance payors. She had leadership positions in other healthcare technology companies since graduating from Western Kentucky University.
Ms. Schweitzer was appointed to the Board due to her experience in the healthcare and investment industries, including as an investor in numerous healthcare related companies.
Jenny Lindstrom
Ms. Lindstrom has served as our Chief Legal Officer since April 12, 2021. Prior to joining us Ms. Lindstrom, served in various roles and positions at Radisson Hospitality, Inc. and its subsidiaries and affiliates (“Radisson”), one of the world’s largest international hotel groups, since 2010. Most recently, since 2017, Ms. Lindstrom served as the Executive Vice President and General Counsel for Radisson Hospitality, Inc. From 2015 to 2017, Ms. Lindstrom served as the Executive Vice President and General Counsel for Radisson Hospitality, AB, a European publicly listed subsidiary of Radisson Hospitality, Inc. Prior to joining Radisson, Ms. Lindstrom was an attorney at Dorsey & Whitney, a national law firm based in Minneapolis, for 6 years. Her practice included: Commercial and Corporate Litigation, Internal Investigations, and Regulatory Affairs and Tax Litigation. Ms. Lindstrom holds a Juris Doctor degree from the University of Minnesota Law School, Minneapolis, Minnesota (Juris Doctor, cum laude, 2004), and holds a Master of Laws, with dissertation from Uppsala University, Uppsala, Sweden, 2001.
Arrangements for Nomination as Directors and Changes in Procedures for Nomination; Election of Directors
No arrangement or understanding exists between any director or nominee and any other persons pursuant to which any individual was or is to be selected or serve as a director. No director or executive officer has any family relationship with any other director or with any of the Company’s executive officers. Holders of our Common Stock are entitled to one vote for each share held on all matters submitted to a vote of the stockholders, including the election of directors. Cumulative voting with respect to the election of directors is not permitted by our Certificate of Incorporation. Our Board of Directors shall be elected at the annual meeting of the shareholders or at a special meeting called for that purpose. Each director shall hold office until the next annual meeting of shareholders and until the director’s successor is elected and qualified.
Composition of our Board of Directors
Our board of directors currently consists of five members. Our directors hold office until their successors have been elected and qualified or until the earlier of their death, resignation, or removal.
Director Independence
Except for Mr. Diamond, our Board determined that all our present directors are independent, in accordance with standards under the Nasdaq Listing Rules. Our Board determined that, Lawrence Diamond under the Nasdaq Listing Rules, is not an independent director as a result of being an executive officer to the Company.
Our Board has determined that Mr. Iturregui, Dr. Naqvi, and Ms. Schweitzer, are independent under the Nasdaq Listing Rules’ independence standards for audit committee members. Our Board has also determined that Mr. Iturregui, Dr. Naqvi, and Ms. Schweitzer, are independent under the Nasdaq Listing Rules independence standards for compensation committee members and Ms. Schweitzer and Mr. Iturregui are independent under the Nasdaq Listing Rules independence standards for nominating and governance committee members.
Board of Directors Leadership Structure
As a general policy, our board of directors believes that separation of the positions of Chairperson and Chief Executive Officer reinforces the independence of our board of directors from management, creates an environment that encourages objective oversight of management’s performance and enhances the effectiveness of our board of directors. As such, Mr. Diamond serves as our President and Chief Executive Officer and Mr. Brodmerkel serves as the Chairman of the Board and as our Chief Financial Officer.
Board of Directors Committees
The board of directors has established three standing committees of the board consisting of an audit committee, a compensation committee and a corporate nominating and governance committee, each of which will have the composition and the responsibilities described below.
Audit Committee
Our audit committee is comprised of Mr. Mr. Iturregui, Dr. Naqvi, and Ms. Schweitzer. Dr. Naqvi is the chair of our audit committee, and is our audit committee financial expert, as that term is defined under the applicable SEC rules, and possesses financial sophistication, as defined under the rules of Nasdaq. All the members of our audit committee are independent, as that term is defined under the rules of Nasdaq. Our audit committee is responsible for overseeing our corporate accounting and financial reporting process, assisting our board of directors in monitoring our financial systems, and overseeing legal, healthcare, and regulatory compliance. Our audit committee also:
|
• |
selects and hires the independent registered public accounting firm to audit our financial statements; |
|
• |
helps to ensure the independence and performance of the independent registered public accounting firm; |
|
• |
approves audit and non-audit services and fees; |
|
• |
reviews financial statements and discusses with management and the independent registered public accounting firm our annual audited and quarterly financial statements, the results of the independent audit and the quarterly reviews and the reports and certifications regarding internal controls over financial reporting and disclosure controls; |
|
• |
prepares the audit committee report that the SEC requires to be included in our annual proxy statement; |
|
• |
reviews reports and communications from the independent registered public accounting firm; |
|
• |
reviews the adequacy and effectiveness of our internal controls and procedure; |
|
• |
reviews our policies on risk assessment and risk management; |
|
• |
reviews related party transactions; and |
|
• |
establishes and oversees procedures for the receipt, retention and treatment of accounting related complaints and the confidential submission by our employees of concerns regarding questionable accounting or auditing matters. |
Our audit committee operates under a written charter, which satisfies the applicable rules of the SEC and the listing standards of Nasdaq.
Compensation Committee
Our compensation committee is comprised of Mr. Iturregui, Dr. Naqvi, and Ms. Schweitzer. Ms. Schweitzer is the chair of our compensation committee. All the members of our compensation committee are independent, as that term is defined under the rules of Nasdaq. Our compensation committee oversees our compensation policies, plans and benefits programs. The compensation committee also:
|
• |
oversees our overall compensation policies, plans and benefit programs; |
|
• |
reviews and recommends to our board of directors for approval compensation for our executive officers and directors; |
|
• |
prepares the compensation committee report that the SEC would require to be included in our annual proxy statement if we were no longer deemed to be an emerging growth company or a smaller reporting company; and |
|
• |
administers our equity compensation plans. |
Our compensation committee operates under a written charter, which satisfies the applicable rules of the SEC and the listing standards of Nasdaq.
Nominating and Governance Committee
Our nominating and governance committee is comprised of Ms. Schweitzer and Mr. Iturregui. Mr. Iturregui is the chair of our nominating and governance committee. All members are independent, as that term is defined under the rules of Nasdaq. Our nominating and governance committee oversees and assists our board of directors in reviewing and recommending nominees for election as directors. Specifically, the nominating and governance committee:
|
• |
identifies, evaluates, and makes recommendations to our board of directors regarding nominees for election to our board of directors and its committees; |
|
• |
considers and makes recommendations to our board of directors regarding the composition of our board of directors and its committees; |
|
• |
advises the board of directors and makes recommendations regarding appropriate corporate governance practices and assists the board of director in implementing those practices; |
|
• |
directs all matters relating to the succession planning of our Chief Executive Officer; |
|
• |
evaluates the performance of our board of directors and of individual directors. |
|
• |
makes a recommendation to the board of directors concerning the selection and designation of a "Lead Director" to preside over the meetings of the independent directors in executive session; |
|
• |
reviews the board of directors’ policy regarding the structure of the offices of Chairman of the Board and Chief Executive Officer; and |
|
• |
reviews and recommends to the board of directors proposed changes to our Certificate of Incorporation and bylaws. |
Our corporate governance and nominating committee operate under a written charter, which satisfies the applicable rules of the SEC and the listing standards of Nasdaq.
EXECUTIVE AND DIRECTOR COMPENSATION
We are a “smaller reporting company” under applicable SEC rules and are providing disclosure regarding our executive compensation arrangements pursuant to the rules applicable to emerging growth companies, which means that we are not required to provide a compensation discussion and analysis and certain other disclosures regarding our executive compensation. The following discussion relates to the compensation of our named executive officers for 2021, consisting of Lawrence Diamond, our Chief Executive Officer, Phillip Keller, our former Chief Financial Officer, Jenny Lindstrom, our Chief Legal Officer, and Julie Smith our former President and Chief Operating Officer.
Summary of Executive Compensation
The following summary compensation table sets forth all compensation awarded to, earned by, or paid to the named executive officers paid by us during the periods ended December 31, 2021 and 2020.
Summary Compensation Table
|
Nonqualified |
||||||||||||||||||||||||||||||||||
|
Non-Equity |
Deferred |
All |
||||||||||||||||||||||||||||||||
|
Stock |
Options |
Incentive Plan |
Compensation |
Other |
||||||||||||||||||||||||||||||
|
Name and Principal |
Salary |
Bonus |
Awards |
Awards |
Compensation |
Earnings |
Compensation |
Total |
||||||||||||||||||||||||||
|
Position |
Year |
($) | ($) | ($) | ($) | ($) | ($) | ($) | ($) | |||||||||||||||||||||||||
|
Lawrence Diamond |
2021 |
264,180 | - | - | 263,422 | (a) | - | - | 78,200 | (b) | 605,802 | |||||||||||||||||||||||
|
2020 |
(c)(d) | 130,000 | - | - | 83,387 | (e) | - | - | - | 213,387 | ||||||||||||||||||||||||
|
Phillip Keller (g) |
2021 |
207,847 | - | - | 430,030 | (f) | - | - | - | 637,877 | ||||||||||||||||||||||||
|
Jenny Lindstrom (h) |
2021 |
186,689 | - | - | 428,921 | (f) | - | - | - | 615,610 | ||||||||||||||||||||||||
|
(a) |
Consists of fair value of stock options to acquire 30,000 shares. |
|
(b) |
Consists of the fair value of 6,256 shares that were issued in lieu of monies owed Mr. Diamond |
|
(c) |
Does not include compensation as a Director |
|
(d) |
Does not include $120,000 of salary accrued but not paid during the year |
|
(e) |
Consists of the fair value of 50,000 stock options which were granted and vested during the year |
|
(f) |
Consists of the fair value of options to acquire 35,000 shares |
|
(g) |
Mr. Keller was appointed as our Chief Financial Officer on March 17, 2021 and resigned as our Chief Financial Officer effective on June 12, 2022 |
|
(h) |
Ms. Lindstrom was appointed as our Chief Legal Officer on April 12, 2021 |
Executive Employment, Termination and Change of Control Arrangements
We have the following employment agreements with our executive officer:
Lawrence Diamond, Chief Executive Officer, and Director
On November 4, 2019, we entered into a Senior Executive Employment Agreement with Mr. Diamond for his services as our Chief Executive Officer (the “Diamond Agreement”). Pursuant to the Diamond Agreement, Mr. Diamond is paid an annual base salary of $250,000. In addition, Mr. Diamond is eligible to receive a bonus target of 25% of base compensation based upon the attainment of performance-based goals, to be approved by the Compensation Committee. Mr. Diamond also received an initial grant of 20,000 shares of restricted Common Stock which vests according to the following schedule: (i) 25% upon the 90th day anniversary of the Diamond Agreement, (ii) 25% upon the completion of a capital raise of at least $2 million, (iii) 25% upon the one-year anniversary of the Diamond Agreement (iv) 25% upon our filing of our Annual Report on Form 10-K that reports $20 million in gross revenue. All unvested shares shall immediately vest in the event of a change of control of the Company. The term of Mr. Diamond’s employment agreement is from November 1, 2019 through Mr. Diamond’s resignation or termination by us under the following circumstances (i) upon the recommendation by the Board; (ii) a violation of the securities laws, or (iii) upon his incapacity or inability to perform all the duties set forth in this Agreement due to mental or physical disability. In the event of termination by us, Mr. Diamond will only be entitled to compensation owed through the date of termination and all Options that have not yet vested will be cancelled.
Thomas Brodmerkel, Chief Financial Officer
Effective June 13, 2022, we entered into an employment agreement with Mr. Brodmerkel (the “Brodmerkel Agreement”). The Brodmerkel Agreement is effective from June 13, 2022 until the earlier of Mr. Brodmerkel resignation or termination by us under the following circumstances (i) a vote of the majority of our directors; (ii) a violation of the securities laws, or (iii) upon his incapacity or inability to perform all the duties set forth in this Agreement due to mental or physical disability. Mr. Brodmerkel will be paid a base salary of $120,000 with a performance and salary review to be conducted annually. Additionally, pursuant to the Brodmerkel Agreement, Mr. Brodmerkel has been awarded 10-year options to purchase up to 4,000 shares of the Company’s Common Stock at an exercise price equal to $12.50, which was above the closing stock price as of June 13, 2022 and were vested upon issuance. In the event of termination by us, Mr. Brodmerkel will only be entitled to compensation owed through the date of termination and all options that have not yet vested will be cancelled. The Employment Agreement also contains customary non-disclosure, non-compete and confidentiality provisions. Either we or Mr. Brodmerkel may terminate the Brodmerkel Agreement on ten (10) days written notice with no further obligations.
Jenny Lindstrom, Chief Legal Officer
Effective April 12, 2021, the Company entered into an employment agreement with Ms. I. Jenny Lindstrom for her services as our Chief Legal Officer (the “Lindstrom Agreement”). Pursuant to the Lindstrom Agreement the Company has agreed to pay Ms. Lindstrom a base salary of $250,000, payable in accordance with the Company’s standard payroll procedures. In addition, Ms. Lindstrom will be eligible to receive a bonus target of 25% of her base salary, at the sole discretion of the Compensation Committee of the Board. Ms. Lindstrom’s base compensation shall accrue until such time as the Company has sufficient funding. Additionally, pursuant to the Lindstrom Agreement, Ms. Lindstrom has been awarded options to purchase up to 1 million shares of the Company’s Common Stock at an exercise price equal to $15.50, which was the closing stock price as of April 12, 2021, and issued pursuant to the Mitesco, Inc. 2021 Omnibus Securities and Incentive Plan. The Options vest pursuant to the following schedule: (a) 5,000 of the options shall vest upon the 90-day anniversary of the effective date of the Lindstrom Agreement, (b) 5,000 of the options shall vest upon the Company’s completion of a $10 million raise, (c) 5,000 of the options shall vest on the one-year anniversary of the effective date of the Lindstrom Agreement, and (d) 5,000 of the options shall vest once the Company files an Annual Report on Form 10-K that reports $20 million in gross revenue. Upon a change of control of the Company, any unvested options shall immediately vest.
The Lindstrom Agreement is effective from April 12, 2021 until the earlier of Ms. Lindstrom’s resignation or termination by us under the following circumstances (i) a vote of the majority of our directors; (ii) a violation of the securities laws, or (iii) upon his incapacity or inability to perform all the duties set forth in this Agreement due to mental or physical disability. In the event of termination by us, Ms. Lindstrom will only be entitled to compensation owed through the date of termination and all Options that have not yet vested will be cancelled. The Lindstrom Agreement also contains customary non-disclosure, non-compete and confidentiality provisions.
Pension Benefits; Nonqualified Defined Contribution and Other Nonqualified Deferred Compensation Plans
We do not offer pension benefits, non-qualified contribution, or other deferred compensation plans to our executive officers.
Outstanding Equity Awards at December 31, 2021
The following table shows for the fiscal year ended December 31, 2021, certain information regarding outstanding equity awards at fiscal year-end for the Named Executive Officers.
|
Securities |
Securities |
||||||||||||||||
|
Underlying |
Underlying |
||||||||||||||||
|
Unexercised |
Unexercised |
Options |
|||||||||||||||
|
Name and Principal |
Options (#) |
Options (#) |
Exercise |
Option |
|||||||||||||
|
Position |
Grant Date |
Exercisable |
Unexercisable |
Price ($) |
Expiry Date |
||||||||||||
|
Lawrence Diamond |
July 21, 2021 |
- |
30,000 |
$ |
12.50 |
July 21, 2031 |
|||||||||||
|
Phillip Keller (a) |
March 17, 2021 |
5,000 |
15,000 |
$ |
15.50 |
March 17, 2031 |
|||||||||||
|
July 21, 2021 |
- |
15,000 |
$ |
12.50 |
July 21, 2031 |
||||||||||||
|
Jenny Lindstrom |
April 12, 2021 |
5,000 |
15,000 |
$ |
15.50 |
April 11, 2031 |
|||||||||||
|
July 21, 2021 |
- |
15,000 |
$ |
12.50 |
July 21, 2031 |
||||||||||||
|
a. |
Mr. Keller resigned as our Chief Financial Officer effective as of June 12, 2022 |
Director Compensation
The following table sets forth, for the year ended December 31, 2021, information relating to the compensation of each director who served on our Board of Directors during the fiscal year and who was not a named executive officer. This compensation was for their role as Director of the Company within the fiscal year.
|
Fees |
Nonqualified |
|||||||||||||||||||||||||||
|
Earned or |
Non-Equity |
Deferred |
All |
|||||||||||||||||||||||||
|
Paid in |
Stock |
Options |
Incentive Plan |
Compensation |
Other |
|||||||||||||||||||||||
|
Name and Principal |
Cash ($) |
Awards |
Awards |
Compensation |
Earnings |
Compensation |
Total |
|||||||||||||||||||||
|
Position |
($) |
($) |
($) |
($) |
($) |
($) |
($) |
|||||||||||||||||||||
|
Thomas Brodmerkel |
30,000 | - | 52,430 | - | - | - | 82,430 | |||||||||||||||||||||
|
Dr. H. Faraz Naqvi |
30,000 | - | 41,944 | - | - | - | 71,944 | |||||||||||||||||||||
|
Juan Carlos Iturregui |
30,000 | - | 38,798 | - | - | - | 68,798 | |||||||||||||||||||||
|
Sheila Schweitzer |
(a) | 17,500 | - | 255,205 | - | - | - | 272,705 | ||||||||||||||||||||
|
Ron Riewold |
(b) | 12,500 | - | - | - | - | - | 12,500 | ||||||||||||||||||||
|
(a) |
Ms. Sheila Schweitzer was appointed to the Board of Directors on June 1, 2021. |
|
(b) |
Mr. Ron Riewold resigned from the Board of Directors effective June 1, 2021. |
The table below shows the aggregate number of option awards outstanding at fiscal year-end for each of our current and former non-employee directors.
|
Number of |
||
|
Outstanding Options |
||
|
Name and Principal |
As of |
|
|
Position |
December 31, 2021 |
|
|
Thomas Brodmerkel |
27,000 |
|
|
Dr. H. Faraz Naqvi |
4,000 |
|
|
Juan Carlos Iturregui |
3,700 |
|
|
Sheila Schweitzer |
(a) |
20,700 |
|
Ron Riewold |
(b) |
13,667 |
|
(a) |
Ms. Sheila Schweitzer was appointed to the Board of Directors on June 1, 2021. |
|
(b) |
Mr. Ron Riewold resigned from the Board of Directors effective June 1, 2021. |
Equity Compensation Plans
On December 31, 2020, the Compensation Committee of the Board approved the Mitesco Inc. 2021 Omnibus Securities and Incentive Plan, or the “2021 Plan”. The 2021 Plan provides for the grant of incentive stock options, non-statutory stock options, restricted stock awards, restricted stock unit awards, stock appreciation rights, performance stock awards, performance cash awards, and other stock-based awards, collectively, the “stock awards.” Stock awards may be granted under the 2021 Plan to our employees, directors, and consultants. Up to 365,900 shares of stock awards have been approved for issuance under the 2021 Plan. In December of 2021, the Company adopted the 2022 Omnibus Securities and Incentive Plan which allows for issuance of up to 600,000 awards, none have been issued under the 2022 plan.
|
Plan Category |
Number of securities to be issued upon exercise of outstanding options, warrants and rights |
Weighted-average exercise price of outstanding options, warrants and rights |
Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) |
|||||||||
|
Equity compensation plans not approved by security holders |
89,024 | $ | 1.50 | |||||||||
|
Equity compensation plans approved by security holders |
285,900 | $ | 25.50 | 600,000 | ||||||||
|
Total |
374,924 | $ | 25.00 | 600,000 | ||||||||
CERTAIN RELATIONSHIPS AND RELATED PERSON TRANSACTIONS
The following is a summary of transactions since January 1, 2019 and all currently proposed transactions, to which we have been a participant, in which:
|
● |
the amounts exceeded or will exceed the lesser of $120,000 or one percent of the average of our total assets at year-end for the last two completed fiscal years; and |
|
● |
any of the directors, executive officers, or holders of more than 5% of the respective capital stock, or any member of the immediate family of the foregoing persons, had or will have a direct or indirect material interest other than as set forth under “Executive Compensation.” |
On December 31, 2019, the Company issued a total of 26,227 shares of Series X Preferred Stock in settlement of various liabilities. The shares of Series X Preferred Stock were issued as follows:
|
● |
1,200 shares to Mr. Ronald Riewold, issued in lieu of deferred compensation in the aggregate amount of $41,675. |
|
● |
2,000 shares to Mr. Larry Diamond, issued in lieu of deferred compensation in the aggregate amount of $69,458. |
|
● |
2,000 shares to Ms. Julie R. Smith, issued in lieu of deferred compensation in the aggregate amount of $69,458. NOTE: These shares have subsequently been cancelled. |
|
● |
2,884 shares to Mr. James Crone, issued in lieu of deferred compensation in the aggregate amount of $100,158. |
|
● |
2,400 shares to Mr. Louis Deluca, issued in lieu of deferred compensation in the aggregate amount of $83,350. |
On December 31, 2020, the Company issued 43,024 shares of Common Stock as payment for dividends accrued on its Series X Preferred Stock in the amount of $65,568. Of this amount, a total of 5,250 shares in the amount of $8,000 were issued to officers and directors; 20,510 shares in the amount of $31,528 were issued to a consultant; and 17,244 shares in the amount of $26,310 were issued to non-related parties.
Director Independence
Our Board of Directors has determined that Juan Carlos Iturregui, Faraz Naqvi and Sheila Schweitzer are all “independent” as that term is defined under applicable SEC rules and regulations.
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information as of September 8, 2022, regarding the beneficial ownership of our Common Stock, Series C Preferred Stock and Series X Preferred Stock by (i) each person (including any “group” as such term is used in Section 13(d)(3) of the Exchange Act) known by us to be a beneficial owner of more than 5% of our common stock, (ii) each of our directors and “named executive officers;” and (iii) all of our directors and executive officers as a group. At September 8, 2022, we had 4,524,245 shares of Common Stock issued and outstanding, 1,047,619 Series C Preferred Stock issued and outstanding having an aggregate of 5,500 votes, and 24,227 shares of Series X Preferred Stock issued and outstanding, having an aggregate of 9,210,800 votes. Unless otherwise indicated, the address of each of the stockholders listed is 1660 Highway 100 South, Suite 432, Saint Louis Park, Minnesota 55416. Beneficial ownership is determined in accordance with the rules of the SEC and includes general voting power and/or investment power with respect to securities. Shares of Common Stock issuable upon exercise of options or warrants that are currently exercisable or exercisable within 60 days of September 8, 2022 and shares of Common Stock issuable upon conversion of other securities currently convertible or convertible within 60 days, are deemed outstanding for computing the beneficial ownership percentage of the person holding such securities but are not deemed outstanding for computing the beneficial ownership percentage of any other person. Under the applicable SEC rules, each person’s beneficial ownership is calculated by dividing the total number of shares with respect to which they possess beneficial ownership by the total number of outstanding shares. In any case where an individual has beneficial ownership over securities that are not outstanding but are issuable upon the exercise of options or warrants or similar rights within the next 60 days, that same number of shares is added to the denominator in the calculation described above. Because the calculation of each person’s beneficial ownership set forth in the “Percentage Class” column of the table may include shares that are not presently outstanding, the sum total of the percentages set forth in such column may exceed 100%.
|
Name of Beneficial Owner |
Amount and Nature of Beneficial Ownership of Common Stock |
Percentage of Common Stock Beneficially Owned |
Number of Shares of Series X Preferred Stock |
Percentage of Series X Preferred Stock |
Number of Shares of Series C Preferred Stock |
Percent of Series C Preferred Stock |
Number of Shares of Series D Preferred Stock |
Percent of Series D Preferred Stock |
||||||||||||||||||||||||
|
Directors and Officers |
||||||||||||||||||||||||||||||||
|
Tom Brodmerkel (Director)(1) |
31,000 | 0.7 |
% |
- | - | |||||||||||||||||||||||||||
|
Larry Diamond (Director, Officer)(2) |
157,443 | 3.5 |
% |
2,000 | 8.2 |
% |
||||||||||||||||||||||||||
|
Juan Carlos Iturregui (Director)(3) |
26,182 | 0.6 |
% |
- | ||||||||||||||||||||||||||||
|
Jenny Lindstrom (7) |
18,481 | 0.4 |
% |
- | - | 25,000 | 0.8 |
% |
||||||||||||||||||||||||
|
Faraz Naqvi (Director)(8) |
26,000 | 0.6 |
% |
- | - | |||||||||||||||||||||||||||
|
Sheila Schweitzer (Director)(9) |
20,700 | 0.5 |
% |
- | - | |||||||||||||||||||||||||||
|
Current Executive Officers and Directors as a group (8 Persons) |
279,806 | 6.0 |
% |
2,000 | 8.2 |
% |
25,000 | 0.8 |
% |
|||||||||||||||||||||||
|
5% or more shareholders |
||||||||||||||||||||||||||||||||
|
James Crone |
- | 2,884 | 11.9 |
% |
||||||||||||||||||||||||||||
|
Louis DeLuca |
- | 2,400 | 9.9 |
% |
||||||||||||||||||||||||||||
|
Anglo-Irish Management LLC (4) |
24,691 | 0.5 | % | 12,503 | 51.5 |
% |
||||||||||||||||||||||||||
|
Frank Lightmas |
5,315 | 0.1 | % | 3,204 | 13.2 |
% |
||||||||||||||||||||||||||
|
Cavalry Fund I, LLP(5) |
262,237 | 5.5 |
% |
1,000,000 | 95.5 | % | 750,000 | 24.2 |
% |
|||||||||||||||||||||||
|
Mercer Street Global Opportunity Fund (6) |
172,754 | 3.7 |
% |
47,619 | 4.5 | % | 750,000 | 24.2 |
% |
|||||||||||||||||||||||
|
Michael Howe Living Trust (10) |
158,560 | 3.4 |
% |
500,000 | 16.1 |
% |
||||||||||||||||||||||||||
|
Anson Investments Master Fund LP |
163,163 | 3.5 |
% |
562,500 | 18.1 |
% |
||||||||||||||||||||||||||
|
Anson East Master Fund LP |
54,388 | 1.2 |
% |
187,500 | 6.0 |
% |
||||||||||||||||||||||||||
|
(1) |
Consists of 8,333 shares of common stock and options to purchase 22,667 shares of common stock. |
|
(2) |
Consists of 138,016 shares of common stock and warrants to purchase an additional 19,427 shares of common stock. |
|
(3) |
Consists of 22,241 shares of common stock, options to purchase an additional 3,700 shares and warrants to purchase an additional 241 shares of common stock. |
|
(4) |
Based solely on a Schedule 13D filed by Anglo-Irish Management LLC (“Anglo”), Anglo received 24,691 shares of common stock as interest earned on shares of the Series X Preferred Stock and owns 12,503 shares of Series X Preferred. Upon the conversion of Series X Preferred Stock to Series D Preferred Stock and the subsequent conversion to Common Stock the 12,503 of Series X Preferred Stock will be extinguished and will get an additional 39,212 of Common Stock. Daniel Hollis is the Manager of Anglo-Irish Management LLC, and its business address is 9057A Selbourne Lane, Chatt Hills, GA 30268. |
|
(5) |
Cavalry Fund I LP owns 14,400 shares of common stock and 1,000,000 shares of Series C Preferred Stock. Includes 85, 837 shares of common stock issuable upon conversion of the Series C Preferred Stock, 42,000shares of common stock issuable exercise of the Series A Warrants and 42,000 shares of common stock issuable upon exercise of Series B Warrants, without giving effect to the blocker described in the next sentence. The fund also owns 750,000 shares of Series D Preferred Stock. Includes 15,000shares of common stock issuable upon conversion of the Series D Preferred Stock and 31,500 shares of common stock issuable exercise of the Series A Warrants and 31,500 shares of common stock issuable upon exercise of Series B Warrants, without giving effect to the blocker described in the next sentence. The beneficial ownership limitation is initially set at 4.99% but may be increased to 9.99% upon 61 days’ notice to the Company. Thomas P. Walsh is the manager of Cavalry Fund I LP and its principal business address is 82 E, Allendale Rd., Suite 5B, Saddle River, NJ 07458. |
|
(6) |
Mercer Street Global Opportunity Fund owns 6,150 shares of common stock and 47,619 shares of Series C Preferred Stock. This includes 4,604shares of common stock issuable upon conversion of the Series C Preferred Stock and 42,000shares of common stock issuable exercise of the Series A Warrants and 42,000 shares of common stock issuable upon exercise of Series B Warrants, without giving effect to the blocker described in the next sentence. The fund also owns 15,000 shares of common stock issuable upon conversion of 750,000 shares of Series D Preferred Stock,31,500 shares of common stock issuable exercise of the Series A Warrants and 31,500 shares of common stock issuable upon exercise of Series B Warrants, without giving effect to the blocker described in the next sentence. The beneficial ownership limitation is initially set at 4.99% but may be increased to 9.99% upon 61 days’ notice to the Company. Jonathan Juchno is the Chair of the Investment Committee of Mercer Street Global Opportunity Fund, LLC, and its principal business address is 107 Grand Street, 7th Floor, New York, New York 10013. |
|
(7) |
Consists of 543 shares of common stock, options to purchase an additional 15,000 shares of common stock and warrants to purchase 2,438 shares of common stock. Further includes 500 shares of common stock issuable upon conversion of 25,000 shares of Series D Preferred Stock. |
|
(8) |
Consists of 22,000 shares of common stock and options to purchase 4,000 shares of common stock. |
|
(9) |
Consists of options to purchase 20,700 shares of common stock. |
|
(10) |
Consists of 40,000 shares of common stock and options to purchase 18,000 shares of common stock. This further includes 10,000shares of common stock issuable upon conversion of 500,000 shares of Series D Preferred Stock, 1,640 commitment fee shares, 67,920 shares of common stock issuable exercise of the Series A Warrants and 21,000 shares of common stock issuable upon exercise of Series B Warrants, without giving effect to the blocker described in the next sentence. The beneficial ownership limitation is initially set at 4.99% but may be increased to 9.99% upon 61 days’ notice to the Company. |
DESCRIPTION OF OUR CAPITAL STOCK
General
The total number of shares of all classes of shares which we have authority to issue is 600,000,000 of which 500,000,000 shares are designated as “Common Stock” with a par value of $0.01 per share, and 100,000,000 shares are designated as “preferred stock.”
As of September 8, 2022, we had 4,524,245 issued and outstanding shares of Common Stock, no shares of our Series A Preferred Stock issued or outstanding, 24,227 shares of our Series X Preferred Stock issued and outstanding and 1,047,619 shares of our Series C Preferred Stock issued, and 3,100,000 of our Series D Preferred Stock outstanding preferred stock issued and outstanding. Upon completion of this offering and up listing to NASDAQ there will no longer be any preferred shares in the Company outstanding as all classes of preferred stock will be exchanged for common stock and the preferred shares extinguished.
Description of Common Stock
Authorized Shares of Common Stock. We currently have authorized 500,000,000 shares of Common Stock.
Voting Rights. Holders of our Common Stock are entitled to one vote per share on all matters to be voted upon by our stockholders, and do not have cumulative voting rights. Accordingly, holders of a majority of the shares of our Common Stock entitled to vote in the election of directors can elect all the directors standing for election.
Dividends. Subject to preferences that may be applicable to shares of Preferred Stock then outstanding, if any, the holders of our Common Stock are entitled to receive ratably such dividends, if any, as may be declared from time to time by our Board of Directors out of funds legally available for dividends.
Liquidation Rights. Upon our liquidation, dissolution or winding up, the holders of our Common Stock will be entitled to share ratably in all assets remaining after payment of liabilities, subject to prior distribution rights of Preferred Stock then outstanding, if any.
Rights and Preferences. The rights, preferences, and privileges of holders of our Common Stock are subject to, and may be adversely affected by, the rights of holders of shares of any series of Preferred Stock that we may designate and issue in the future.
Preemptive or Similar Rights. Our Common Stock has no preemptive or conversion rights or other subscription rights, nor are there any redemption or sinking fund provisions applicable to our Common Stock.
Fully Paid and Nonassessable. All our issued and outstanding shares of Common Stock are fully paid and nonassessable.
Description of our Preferred Stock
General
We currently have authorized 100,000,000 shares of preferred stock, of which (a) 500,000 shares have been designated as 10% Series A Cumulative Redeemable Perpetual Preferred Stock (the “Series A Preferred Stock”), of which none are currently issued or outstanding; (b) 400,000 shares have been designated as 10% Series X Cumulative Redeemable Perpetual Preferred Stock (the “Series X Preferred Stock”), of which 24,227 are currently issued our outstanding; and (c) 3,000,000 shares have been designated as 6% Series C Preferred Stock (the “Series C Preferred Stock”), of which 940,644 are currently issued or outstanding and (d) 6% Series D Preferred Stock (the “Series D Preferred Stock”) 10,000,000 authorized and 3,100,000 outstanding.
Series A Preferred Stock
There are no Series A Preferred shares issued at this time.
Ranking. The Series A Preferred Stock ranks senior to any series or class of Common Stock of the Company but junior to each of the Series X Preferred Stock, Series B and Series C Preferred Stock.
Voting Rights. Other than requiring the consent of two-thirds of the then outstanding Series A Preferred Stock, voting as a single class, on certain matters that may be impede on the rights and privileges of the holders of our Series A Preferred Stock, and as otherwise required by law, the holders of our Series A Preferred Stock have no voting rights.
Dividends. Subject to preferences that may be applicable to shares of Series C Preferred Stock and Series X Preferred Stock then outstanding, if any, the holders of our Series A Preferred stock are entitled to receive dividends at a rate of 10% on $25.00 per share of the Series A Preferred Stock per annum (equivalent to $2.50 per share, per annum). Such dividend shall accrue and shall be cumulative from the issue date and shall be payable in monthly arrears on the 15th day of each month.
Liquidation Rights. Upon our liquidation, dissolution or winding up, the holders of our Series A Preferred stock will be entitled to share ratably in all assets remaining after payment of liabilities, subject to prior distribution rights of Preferred Stock then outstanding, if any, with a $25.00 liquidation preference per share, plus an amount equal to any accumulated and unpaid dividends prior to any distributions to our Common Stock holders or any other class or series of capital stock that may rank junior to the Series A Preferred Stock. Such liquidation preference is subject to adjustments for stock splits, combinations, or similar events.
Rights and Preferences. The rights, preferences, and privileges of holders of our Series A Preferred Stock are subject to, and may be adversely affected by, the rights of holders of shares of any series of Preferred Stock, including the Series C Preferred Stock and Series X Preferred Stock that we may designate and issue in the future.
Redemption Rights. The Series A Preferred Stock is not redeemable by the company prior to March 3, 2023. On or after March 23, 2023, we may, at our option, upon at least 30 days’ but not more than 60 days’ notice, redeem the Series A Preferred Stock, in whole or in part for cash at a redemption price of $25.00 per share of Series A Preferred Stock, plus any accumulated and unpaid dividends thereon. If such a redemption is due to a change of control, then such redemption price can only be paid with cash, otherwise, the redemption price may be paid out of cash or issuance of other equity at our option.
Preemptive or Similar Rights. Our Series A Preferred Stock has no preemptive or conversion rights or other subscription rights, nor are there any redemption or sinking fund provisions applicable to our Common Stock.
Fully Paid and Nonassessable. All our issued and outstanding shares of Series A Preferred Stock are fully paid and nonassessable.
Series X Preferred Stock
Simultaneously with this offering all Series X Preferred shared will automatically convert to Series D Preferred shares. There will be no Series X Preferred shares outstanding upon completion of this offering and a listing on NASDAQ and as a result the “super” voting rights of the Series X Preferred shares will not exist.
As of the date of this filing there are 24,277 shares of Series X Preferred Stock outstanding.
Ranking. The Series X Preferred Stock ranks pari passu with the Series C Preferred Stock, senior to the Series A Preferred Stock and senior to all classes or series of Common Stock.
Voting Rights. Holders of the Series X Preferred Stock have “super” voting rights such that on each matter on which holders of the our stock are entitled to vote, each share of Series X Preferred Stock will be entitled to twenty thousand (20,000) votes, subject to any adjustment for stock splits or dividends subsequent to issuance, except that when shares of any other class or series of Preferred Stock we may issue have the right to vote with the Series X Preferred Stock as a single class on any matter, the Series X Preferred Stock and the shares of each such other class or series will have twenty thousand (20,000) votes for each $25.00 of liquidation preference (excluding accumulated dividends).
Dividends. Holders of shares of the Series X Preferred Stock are entitled to receive, when, as and if declared by the Board of Directors, out of funds legally available for the payment of dividends, or at our option through the issuance of shares of restricted Common Stock, cumulative cash, or Common Stock, at the rate of 10% on $25.00 per share of each Series X Preferred Stock, per annum (equivalent to $2.50 per share per annum). Such dividends shall accrue daily and be cumulative as of the issuance date of such Series X Preferred Stock and shall be payable monthly in arrears on the 15th day of each month.
Liquidation Rights. Upon our liquidation, dissolution or winding up, the holders of our Series X Preferred stock will be entitled to share ratably in all assets remaining after payment of liabilities, subject to prior distribution rights of Preferred Stock then outstanding, if any, with a $25.00 liquidation preference per share, plus an amount equal to any accumulated and unpaid dividends prior to any distributions to our Common Stock holders or any other class or series of capital stock that may rank junior to the Series X Preferred Stock. Such liquidation preference is subject to adjustments for stock splits, combinations, or similar events.
Rights and Preferences. The rights, preferences, and privileges of holders of our Series X Preferred Stock are subject to, and may be adversely affected by, the rights of holders of shares of any series of Preferred Stock that we may designate and issue in the future that may rank senior to the Series X Preferred Stock.
Redemption Rights. On or after December 31, 2022, or the occurrence of a change of control, we may, at our option, upon at least 30 days’ but not more than 60 days’ notice, redeem the Series X Preferred Stock, in whole or in part for cash at a redemption price of $25.00 per share of Series A Preferred Stock, plus any accumulated and unpaid dividends thereon. If such a redemption is due to a change of control, then such redemption price can only be paid with cash, otherwise, the redemption price may be paid out of cash or issuance of other equity at our option.
Preemptive or Similar Rights. Our Series X Preferred Stock has no preemptive or conversion rights or other subscription rights, nor are there any redemption or sinking fund provisions applicable to our Common Stock.
Fully Paid and Nonassessable. All our issued and outstanding shares of Series X Preferred Stock are fully paid and nonassessable.
Upon completion of this offering the holders of the Series X Preferred stock have agreed to convert their holdings into [ ] shares of Series D Preferred stock, which will immediately be exchanged for [ ] shares of common stock, in aggregate. They will also hold five (5) year warrants for [ ] shares of common stock with a price of $25.00 per share, and [ ] shares of common stock at $37.50 per share in total. The existing shares of Series X Preferred stock will then be extinguished, along with their voting rights, and there will be no shares of Series X Preferred stock issued or outstanding.
Series C Preferred Stock
Upon completion of this offering and a listing on NASDAQ there will be no shares of Series C Preferred stock issued or outstanding.
As of the date of this filing there are 1,047,619 shares of Series C Preferred Stock outstanding.
Ranking. The Series C Preferred Stock and the Series D Preferred, discussed below, ranks senior to all other preferred stock of the Company except in relation to the Series X Cumulative Redeemable Perpetual Preferred Stock, which ranks pari passu to the Series C Preferred Stock, with respect to the preferences as to dividends, distributions and payments upon the liquidation, dissolution and winding up of the Company.
Voting Rights. Holders of the Series C Preferred Stock have the right to vote on any matter presented to holders of our Common Stock for their action or consideration at any meeting of the stockholders (or by written consent of stockholders in lieu of meeting), each holder of our Series C Preferred Stock shall be entitled to cast the number of votes equal to the number of whole shares of Common Stock into which the shares of Series C preferred Stock held by such holder, as described below, are convertible as of the record date for determining stockholders entitled to vote on (or consent to) such matter, voting with the Common Stock as a single class.
Conversion. Each holder of our Series C Preferred Stock is entitled to convert their shares of Series C Preferred Stock, in whole or in part, at the Conversion Rate, which is determined by dividing the Conversion Amount (the Stated Value of $52.50, plus any accrued but unpaid dividends) by the Conversion Price ($12.50 per share). In addition, upon certain triggering events, the holders of our Series C Preferred Stock have the right to convert their Series C Preferred Stock at the lesser of the Conversion Price or 75% of the average VWAP for the five trading days prior to the date of the notice of conversion. The Conversion Price is subject to adjustment upon certain stock splits and recapitalization as well as upon the sale of Common Stock or Common Stock Equivalents. Each share of the Series C Preferred Stock is convertible at the option of the holder thereof, or automatically or upon the closing of an underwritten offering of at least $10 million of the Company’s securities or upon listing of the Company’s Common Stock on a national securities exchange.
Dividends. Each share of Series C Preferred Stock accrues dividends on a quarterly basis in arrears, at the rate of 6% per annum of the Stated Value ($52.50 per share plus any accrued but unpaid dividends) and is to be paid within 15 days after the end of each of our fiscal quarters. Each holder of the Series C Preferred Stock is entitled to receive dividends or distributions on each share of the Series C Preferred Stock on an as converted into Common Stock basis when and if dividends are declared on the Common Stock by our Board of Directors.
Liquidation Rights. The holders of our Series C Preferred stock are entitled to receive in cash out of our assets, whether from capital or from earnings available for distribution to our stockholders (the “Liquidation Funds”), before any amount shall be paid to the holders of any of shares of capital stock that rank junior to the Series C Preferred Stock, but pari passu with any shares of capital stock that have a parity ranking with the Series C Preferred stock (“Parity Stock”) then outstanding, an amount per share of Series C Preferred Stock equal to the greater of (A) the Conversion Amount on the date of such payment or (B) the amount per share such holder of the Series C Preferred Stock would receive if such holder converted their Series C Preferred Stock into Common Stock immediately prior to the date of such payment, provided that if the Liquidation Funds are insufficient to pay the full amount due to the holders of the Series C Preferred Stock and holders of shares of Parity Stock, then each holder Series C Preferred Stock and each holder of Parity Stock shall receive a percentage of the Liquidation Funds equal to the full amount of Liquidation Funds payable to such holder and such holder of Parity Stock as a liquidation preference, in accordance with their respective certificate of designations (or equivalent), as a percentage of the full amount of Liquidation Funds payable to all holders of Series C Preferred Stock and all holders of shares of Parity Stock. All such amounts shall be paid or set apart for payment before the payment or setting apart for payment of any amount for, or the distribution of any Liquidation Funds of the Corporation to the holders of shares of capital stock that may rank junior to that of the Series C Preferred Stock Junior Stock.
Rights and Preferences. The rights, preferences, and privileges of holders of our Series C Preferred Stock are subject to, and may be adversely affected by, the rights of holders of shares of any series of Preferred Stock that we may designate and issue in the future that may rank senior to the Series C Preferred Stock.
Redemption Rights. Upon receipt of a conversion notice, we have the right (but not the obligation) to redeem all or part of the Series C Preferred Stock (which the applicable holder of the Series C Preferred Stock is seeking to convert) at a price per share equal to the product of 125% of the (1) Stated Value plus (2) the Additional Amount (the “Redemption Price”). If we decide to exercise the redemption right, within one trading day, we shall deliver written notice to such holder(s) of Series C Preferred Stock that the Series C Preferred Stock will be redeemed (the “Redemption Notice”) on the date that is three trading days following the date of the Redemption Notice (such date, the “Redemption Date”). On the Redemption Date, we shall redeem the shares of Series C Preferred Stock specified in such request by paying in cash therefor a sum per share equal to the Redemption Price. In no event shall a Redemption Notice be given if we may not lawfully redeem our capital stock. On or before the Redemption Date, the Redemption Price for such shares shall be paid by wire transfer of immediately available funds to an account designated in writing by the applicable holder.
Price Adjustments Protection. The conversion price is subject to appropriate adjustment in the event of share dividends, share splits, reorganizations or similar events affecting our shares of Common Stock. Other than for certain exempt issuances, in the event we issue or sell any securities, including options or convertible securities, or amend outstanding securities, at an effective price, with an exercise price or at a conversion price less than the Conversion Price, then the Conversion Price shall be reduced to such lower price.
Preemptive or Similar Rights Additionally, except for a public offering or certain exempt issuances of our securities, holders of the Series C Preferred Stock shall have the right to participate in any offering of our Common Stock or Common Stock Equivalents (as defined in the COD) in a transaction exempt from registration under the Securities Act in an amount equal to an aggregate of 30% of the financing on the same terms, conditions and price provided to investors in such an offering, such right shall expire on the 15 month anniversary of the issuance date of the Series C Preferred Stock. Further, until the earlier of 18 months from the issuance date of the Series C Preferred Stock and the date that there are less than 20% of the shares of Series C Preferred Stock outstanding, the Investors have most favored nations protection in the event we issue or sell Common Stock or Common Stock Equivalents that the Investors believe are more favorable than the terms and conditions under the Private Placement.
Fully Paid and Nonassessable. All our issued and outstanding shares of Series C Preferred Stock are fully paid and nonassessable.
Upon completion of this offering the holders of the Series C Preferred stock will be required to convert their holdings into [ ] shares of common stock in aggregate. They will also hold five (5) year warrants for [ ] shares of common stock with a price of $25.00 per share, and [ ] shares of common stock at $37.50 per share in total. The existing shares of Series C Preferred stock will then be extinguished and there will be no shares of Series C Preferred stock issued or outstanding.
Series D Preferred Stock
Upon completion of this offering and a listing on NASDAQ there will be no shares of Series D Preferred stock issued or outstanding.
As of the date of this filing there are 10,000,000 authorized and 3,100,000 shares of Series D Preferred Stock outstanding.
Ranking. The Series D Preferred Stock and the Series C Preferred Stock ranks senior to all other preferred stock of the Company except in relation to the Series X Cumulative Redeemable Perpetual Preferred Stock, which ranks pari passu to the Series D Preferred Stock, with respect to the preferences as to dividends, distributions and payments upon the liquidation, dissolution and winding up of the Company.
Voting Rights. Holders of the Series D Preferred Stock have the right to vote on any matter presented to holders of our Common Stock for their action or consideration at any meeting of the stockholders (or by written consent of stockholders in lieu of meeting), each holder of our Series C Preferred Stock shall be entitled to cast the number of votes equal to the number of whole shares of Common Stock into which the shares of Series D preferred Stock held by such holder, as described below, are convertible as of the record date for determining stockholders entitled to vote on (or consent to) such matter, voting with the Common Stock as a single class.
Conversion. Each holder of our Series D Preferred Stock is entitled to convert their shares of Series D Preferred Stock, in whole or in part, at the Conversion Rate, which is determined by dividing the Conversion Amount (the Stated Value of $52.50, plus any accrued but unpaid dividends) by the Conversion Price ($12.50 per share). In addition, upon certain triggering events, the holders of our Series C Preferred Stock have the right to convert their Series D Preferred Stock at the lesser of the Conversion Price or 75% of the average VWAP for the five trading days prior to the date of the notice of conversion. The Conversion Price is subject to adjustment upon certain stock splits and recapitalization as well as upon the sale of Common Stock or Common Stock Equivalents. Each share of the Series D Preferred Stock is convertible at the option of the holder thereof, or automatically or upon the closing of an underwritten offering of at least $10 million of the Company’s securities or upon listing of the Company’s Common Stock on a national securities exchange.
Dividends. Each share of Series D Preferred Stock accrues dividends on a quarterly basis in arrears, at the rate of 6% per annum of the Stated Value ($52.50 per share plus any accrued but unpaid dividends) and is to be paid within 15 days after the end of each of our fiscal quarters. Each holder of the Series C Preferred Stock is entitled to receive dividends or distributions on each share of the Series D Preferred Stock on an as converted into Common Stock basis when and if dividends are declared on the Common Stock by our Board of Directors.
Liquidation Rights. The holders of our Series D Preferred stock are entitled to receive in cash out of our assets, whether from capital or from earnings available for distribution to our stockholders (the “Liquidation Funds”), before any amount shall be paid to the holders of any of shares of capital stock that rank junior to the Series C Preferred Stock, but pari passu with any shares of capital stock that have a parity ranking with the Series D Preferred stock (“Parity Stock”) then outstanding, an amount per share of Series D Preferred Stock equal to the greater of (A) the Conversion Amount on the date of such payment or (B) the amount per share such holder of the Series C Preferred Stock would receive if such holder converted their Series C Preferred Stock into Common Stock immediately prior to the date of such payment, provided that if the Liquidation Funds are insufficient to pay the full amount due to the holders of the Series C Preferred Stock and holders of shares of Parity Stock, then each holder Series D Preferred Stock and each holder of Parity Stock shall receive a percentage of the Liquidation Funds equal to the full amount of Liquidation Funds payable to such holder and such holder of Parity Stock as a liquidation preference, in accordance with their respective certificate of designations (or equivalent), as a percentage of the full amount of Liquidation Funds payable to all holders of Series D Preferred Stock and all holders of shares of Parity Stock. All such amounts shall be paid or set apart for payment before the payment or setting apart for payment of any amount for, or the distribution of any Liquidation Funds of the Corporation to the holders of shares of capital stock that may rank junior to that of the Series C Preferred Stock Junior Stock.
Rights and Preferences. The rights, preferences, and privileges of holders of our Series D Preferred Stock are subject to, and may be adversely affected by, the rights of holders of shares of any series of Preferred Stock that we may designate and issue in the future that may rank senior to the Series D Preferred Stock.
Redemption Rights. Upon receipt of a conversion notice, we have the right (but not the obligation) to redeem all or part of the Series D Preferred Stock (which the applicable holder of the Series D Preferred Stock is seeking to convert) at a price per share equal to the product of 125% of the (1) Stated Value plus (2) the Additional Amount (the “Redemption Price”). If we decide to exercise the redemption right, within one trading day, we shall deliver written notice to such holder(s) of Series D Preferred Stock that the Series D Preferred Stock will be redeemed (the “Redemption Notice”) on the date that is three trading days following the date of the Redemption Notice (such date, the “Redemption Date”). On the Redemption Date, we shall redeem the shares of Series D Preferred Stock specified in such request by paying in cash therefor a sum per share equal to the Redemption Price. In no event shall a Redemption Notice be given if we may not lawfully redeem our capital stock. On or before the Redemption Date, the Redemption Price for such shares shall be paid by wire transfer of immediately available funds to an account designated in writing by the applicable holder.
Price Adjustments Protection. The conversion price is subject to appropriate adjustment in the event of share dividends, share splits, reorganizations or similar events affecting our shares of Common Stock. Other than for certain exempt issuances, in the event we issue or sell any securities, including options or convertible securities, or amend outstanding securities, at an effective price, with an exercise price or at a conversion price less than the Conversion Price, then the Conversion Price shall be reduced to such lower price.
Preemptive or Similar Rights Additionally, except for a public offering or certain exempt issuances of our securities, holders of the Series D Preferred Stock shall have the right to participate in any offering of our Common Stock or Common Stock Equivalents (as defined in the COD) in a transaction exempt from registration under the Securities Act in an amount equal to an aggregate of 30% of the financing on the same terms, conditions and price provided to investors in such an offering, such right shall expire on the 15 month anniversary of the issuance date of the Series D Preferred Stock. Further, until the earlier of 18 months from the issuance date of the Series D Preferred Stock and the date that there are less than 20% of the shares of Series D Preferred Stock outstanding, the Investors have most favored nations protection in the event we issue or sell Common Stock or Common Stock equivalents that the Investors believe are more favorable than the terms and conditions under the Private Placement.
Upon completion of this offering the holders of the Series D Preferred stock will be required to convert their holdings into [ ] shares of common stock in aggregate. They will also hold five (5) year warrants for [ ] shares of common stock with a price of $25.00 per share, and [ ] shares of common stock at $37.50 per share, in total. The existing shares of Series D Preferred stock will then be extinguished and there will be no shares of Series C Preferred stock issued or outstanding.
Existing Warrants
We currently have warrants outstanding to purchase a total of 673,550 shares of our Common Stock, exercisable until various dates ranging from 3/24/27 to 7/27/27 at exercise prices ranging from $25.00 per share to $37.50 per share. The following table presents the number of warrants outstanding, their exercise prices, and expiration dates at September 8, 2022:
|
Warrants Issued |
Exercise Price |
Expiration Date |
||||
| 126,000 | $ | 25.00 |
3/24/2026 |
|||
| 126,000 | $ | 37.50 |
3/24/2026 |
|||
| 85,050 | $ | 25.00 |
10/17/2026 |
|||
| 85,050 | $ | 37.50 |
10/17/2026 |
|||
| 45,150 | $ | 25.00 |
11/9/2026 |
|||
| 45,150 | $ | 37.50 |
11/9/2026 |
|||
| 42,000 | $ | 25.00 |
12/29/2026 |
|||
| 8,000 | $ | 37.50 |
12/29/2026 |
|||
| 8,000 | $ | 37.50 |
12/29/2026 |
|||
| 8,000 | $ | 37.50 |
12/29/2026 |
|||
| 8,000 | $ | 37.50 |
12/29/2026 |
|||
| 10,000 | $ | 37.50 |
12/29/2026 |
|||
| 7,350 | $ | 25.00 |
2/13/2027 |
|||
| 7,350 | $ | 37.50 |
2/13/2027 |
|||
| 1,929 | $ | 25.00 |
3/17/2027 |
|||
| 15,000 | $ | 25.00 |
3/17/2027 |
|||
| 3,750 | $ | 25.00 |
4/5/2027 |
|||
| 11,250 | $ | 25.00 |
4/5/2027 |
|||
| 5,556 | $ | 25.00 |
4/18/2027 |
|||
| 5,556 | $ | 25.00 |
5/10/2027 |
|||
| 1,929 | $ | 25.00 |
4/27/2027 |
|||
| 386 | $ | 25.00 |
5/18/2027 |
|||
| 482 | $ | 25.00 |
5/26/2027 |
|||
| 482 | $ | 25.00 |
5/26/2027 |
|||
| 386 | $ | 25.00 |
5/23/2027 |
|||
| 241 | $ | 25.00 |
5/26/2027 |
|||
| 338 | $ | 25.00 |
5/26/2027 |
|||
| 145 | $ | 25.00 |
5/26/2027 |
|||
| 2,460 | $ | 25.00 |
6/9/2027 |
|||
| 4,824 | $ | 25.00 |
6/9/2027 |
|||
| 2,412 | $ | 25.00 |
7/7/2027 |
|||
| 193 | $ | 25.00 |
7/7/2027 |
|||
| 2,460 | $ | 25.00 |
7/21/2022 |
|||
| 241 | $ | 25.00 |
7/21/2022 |
|||
| 482 | $ | 25.00 |
7/26/2022 |
|||
| 482 | $ | 25.00 |
7/27/2022 |
|||
| 984 | $ | 25.00 |
8/4/2022 |
|||
| 482 | $ | 25.00 |
8/4/2022 |
|||
| 673,550 | ||||||
Anti-Takeover Effects of Our Charter Documents and Some Provisions of Delaware Law
Delaware Law
We are incorporated in the State of Delaware. As a result, we are subject to Section 203 of the Delaware General Corporation Law, which prohibits a Delaware corporation from engaging in any business combination with any interested stockholder for a period of three years after the date that such stockholder became an interested stockholder, with the following exceptions:
|
• |
before such date, the Board of directors of the corporation approved either the business combination or the transaction that resulted in the stockholder becoming an interested stockholder; |
|
• |
upon completion of the transaction that resulted in the stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of the voting stock of the corporation outstanding at the time the transaction began, excluding for purposes of determining the voting stock outstanding (but not the outstanding voting stock owned by the interested stockholder) those shares owned (1) by persons who are directors and also officers and (2) employee stock plans in which employee participants do not have the right to determine confidentially whether shares held subject to the plan will be tendered in a tender or exchange offer; or |
|
• |
on or after such date, the business combination is approved by the Board of Directors and authorized at an annual or special meeting of the stockholders, and not by written consent, by the affirmative vote of at least 66 2/3% of the outstanding voting stock that is not owned by the interested stockholder. |
In general, Section 203 defines a “business combination” to include the following:
|
• |
any merger or consolidation involving the corporation and the interested stockholder; |
|
• |
any sale, transfer, pledge, or other disposition of 10% or more of the assets of the corporation involving the interested stockholder; |
|
• |
subject to certain exceptions, any transaction that results in the issuance or transfer by the corporation of any stock of the corporation to the interested stockholder; |
|
• |
any transaction involving the corporation that has the effect of increasing the proportionate share of the stock or any class or series of the corporation beneficially owned by the interested stockholder; or |
|
• |
the receipt by the interested stockholder of the benefit of any loans, advances, guarantees, pledges, or other financial benefits by or through the corporation. |
In general, Section 203 defines an “interested stockholder” as an entity or person who, together with the person’s affiliates and associates, beneficially owns, or within three years prior to the time of determination of interested stockholder status did own, 15% or more of the outstanding voting stock of the corporation. A Delaware corporation may “opt out” of these provisions with an express provision in its certificate of incorporation. We have not opted out of these provisions, which may as a result, discourage or prevent mergers or other takeover or change of control attempts of us.
Certificate of Incorporation and Bylaws
Because our stockholders do not have cumulative voting rights, stockholders holding a majority of the shares of Common Stock outstanding are able to elect all our directors.
In addition, our Certificate of Incorporation provides that at any regularly scheduled meeting of our stockholders, only such business shall be conducted, and only such proposals shall be acted upon, as shall have been brought before the meeting (a) by, or at the direction of, the Board of Directors, or (b) by any stockholder of the corporation who complies with the advance notice procedures set forth in writing.
The combination of these provisions makes it more difficult for our existing stockholders to replace our Board of Directors as well as for another party to obtain control of us by replacing our Board of Directors. Since our Board of Directors has the power to retain and discharge our officers, these provisions could also make it more difficult for existing stockholders or another party to effect a change in management.
Our Board of Directors is authorized to issue up to 100,000,000 shares of Preferred Stock. Our Board of Directors has the power to establish the dividend rates, liquidation preferences, voting rights, redemption and conversion terms and privileges with respect to any series of Preferred Stock. The issuance of any series of Preferred Stock having rights superior to those of our Common Stock may result in a decrease in the value or market price of the Common Stock and could further be used by the Board as a device to prevent a change in control favorable to us. Holders of Preferred Stock to be issued in the future may have the right to receive dividends and certain preferences in liquidation and conversion rights. The issuance of such Preferred Stock could make the possible takeover of us or the removal of management more difficult, and adversely affect the voting and other rights of the holder of our Common Stock or depress the market price of the Common Stock.
These provisions are intended to enhance the likelihood of continued stability in the composition of our Board of Directors and its policies and to discourage coercive takeover practices and inadequate takeover bids. These provisions are also designed to reduce our vulnerability to hostile takeovers and to discourage certain tactics that may be used in proxy fights. However, such provisions could have the effect of discouraging others from making tender offers for our shares and may have the effect of delaying changes in our control or management. Therefore, these provisions may also inhibit fluctuations in the market price of our stock that could result from actual or rumored takeover attempts. We believe that the benefits of these provisions, including increased protection of our potential ability to negotiate with the proponent of an unfriendly or unsolicited proposal to acquire or restructure our company, outweigh the disadvantages of discouraging takeover proposals, because negotiation of takeover proposals could result in an improvement of their terms.
Transfer Agent and Registrant
Our transfer agent is Transhare Corporation located at 2849 Executive Dr., Suite 200, Clearwater, Florida 33762. Their phone number is (303) 662-1112.
Trading Market
Our Common Stock is quoted on the OTCQB with the symbol “MITI.” We have applied to list our Common Stock on the Nasdaq Capital Market under the symbol “MITI”. We are applying to list the Series A Warrants and Series B Warrants for trading on the Nasdaq Capital Market. We will not proceed with this offering in the event our Common Stock, Series A Warrants and Series B Warrants are not approved for listing on the Nasdaq Capital Market though we will continue to seek financing for our expansion and operating needs in the equity market, or with debt instruments.
DESCRIPTION OF SECURITIES WE ARE OFFERING
Units Offered Hereby
We are offering Units, each Unit consists of one share of Common Stock, a Series A Warrant and a Series B Warrant, each Warrant to purchase one share of our Common Stock, each as described further below. The Common Stock, Series A Warrants and Series B Warrants will be immediately separable and will be issued separately. Each Warrant is immediately exercisable for one share of Common Stock at an exercise price of $ per share in the case of the Series A Warrant and $ per share in the case of the Series B Warrant (or [ ]% of the price of each Unit sold in the offering in the case of the Series A Warrant and 100% of the price of each Unit sold in the offering in the case of the Series B Warrant). The Units will not be certificated and the shares of Common Stock, Series A Warrants and Series B Warrants comprising such Units are immediately separable and will be issued separately in this offering. We currently anticipate that the public offering price per Unit will be between $ and $ .
Common Stock Included in the Units Offered Hereby
The material terms and provisions of our Common Stock and each other class of our securities which qualifies or limits our Common Stock are described under the caption “Description of our Capital Stock” in this prospectus.
Series A Warrants and Series B Warrants Included in the Units Offered Hereby
The following summary of certain terms and provisions of the Series A Warrants and Series B Warrants offered hereby is not complete and is subject to, and qualified in its entirety by, the provisions of the form of the Series A Warrants, Series B Warrants and warrant agent agreement, which are filed as exhibits to the registration statement of which this prospectus is a part of. Prospective investors should carefully review the terms and provisions set forth in the applicable form of warrant and the warrant agent agreement.
Exercisability. The Series A Warrants are exercisable immediately upon issuance and at any time up to the date that is five years from the date of issuance. The Series B Warrants are exercisable immediately upon issuance and at any time up to the date that is fifteen months from the date of issuance The Warrants will be exercisable, at the option of each holder, in whole or in part, by delivering to us a duly executed exercise notice accompanied by payment in full for the number of shares of our common stock purchased upon such exercise (except in the case of a cashless exercise as discussed below). Warrants are not exercisable for a fraction of a share and may only be exercised into whole numbers of shares. In lieu of fractional shares, we will round up to the nearest whole share. Unless otherwise specified in the warrant, the holder will not have the right to exercise any portion of the Warrant if the holder (together with its affiliates) would beneficially own in excess of 4.99% of the number of shares of our common stock outstanding immediately after giving effect to the exercise (or, upon election by a holder prior to the issuance of any Warrants, 9.99%), as such percentage ownership is determined in accordance with the terms of the Warrants.
Exercise Price Adjustment on the Series A Warrant. Subject to certain exemptions outlined in the Series A Warrant, for a period of two years from the date of issuance of the Series A Warrant, if the Company shall sell, enter into an agreement to sell, or grant any option to purchase, or sell, enter into an agreement to sell, or grant any right to reprice, or otherwise dispose of or issue (or announce any offer, sale, grant or any option to purchase or other disposition) any shares of common stock or convertible security (as defined in the Warrant), at an effective price per share less than the exercise price of the Series A Warrant then in effect, the exercise price of the Unit shall be reduced to equal the effective price per share in such issuance; provided, however, in no event shall the exercise price of the Series A Warrant be reduced to an exercise price lower than 50% of public offering price per Unit in this offering.
Price Reset only on the Series A Warrant. On the ninety (90) day anniversary of the issuance date of the Series A Warrants, the exercise price of the Series A Warrants will adjust to be equal to the greater of $ per share (which shall equal 50% of the exercise price of the Series A Warrants on the issuance date) and 100% of the last volume weighted average price per share of common stock immediately preceding the 90th day following the issuance date of the Series A Warrant, provided that such value is less than the exercise price in effect on that date.
Cashless Exercise. In the event that a registration statement covering shares of common stock underlying the Warrants, is not available for the issuance of such shares of common stock underlying the Warrants, the holder may, in its sole discretion, exercise the warrant in whole or in part and, in lieu of making the cash payment otherwise contemplated to be made to us upon such exercise in payment of the aggregate exercise price, elect instead to receive upon such exercise the net number of shares of common stock determined according to the formula set forth in the warrant. In no event shall we be required to make any cash payments or net cash settlement to the registered holder in lieu of issuance of Common Stock underlying the Warrants.
Alternative Cashless Exercise only on the Series B Warrant. Notwithstanding the description of cashless exercise described above, if on any applicable date after the seventy-fifth (75th) calendar day immediately following the issuance date of the Series B Warrant and prior to the exercise termination date of the Series B Warrant, the Market Price (as defined in the Series B Warrant) is less than the Exercise Price on the issuance date of the Series B Warrant (as adjusted for any stock dividend, stock split, stock combination, recapitalization or other similar transaction occurring after the issuance date of the Series B Warrant), then the holder may, in its sole discretion exercise the Series B Warrant in whole or in part and, in lieu of making any cash payment otherwise contemplated to be made to the Company upon such exercise in payment of the aggregate Exercise Price, elect instead to receive upon such exercise a number of shares of Common Stock equal to the Alternate Net Number (as defined in the Series B Warrant).
Certain Adjustments. The exercise price and the number of shares of Common Stock purchasable upon the exercise of the Warrants are subject to adjustment upon the occurrence of specific events, including stock dividends, stock splits, combinations and reclassifications of our common stock. In addition, the exercise price is also subject to an anti-dilution adjustment if we issue or are deemed to have issued securities at a price lower than the then applicable exercise price.
Participation Rights only on the Series A Warrants. Subject to certain exceptions, for a period of two years from the date of issuance of the Series A Warrant, a holder of at least Series A Warrants as of the time the Company engages in a subsequent placement (as defined in the Warrant) will be entitled to participate in such subsequent placement subject to the terms and conditions set forth in the Series A Warrant.
Transferability. Subject to applicable laws, the Warrants may be transferred at the option of the holders upon surrender of the Unit Warrants to our Transfer Agent together with the appropriate instruments of transfer.
Exchange Listing. We are applying to list the Series A Warrants and Series B Warrants for trading on the Nasdaq Capital Market, but we cannot assure you that we will meet all of the required listing standards. No assurance can be given that a trading market will develop.
Warrant Agent. The Warrants will be issued in registered form under a warrant agency agreement between Transhare Corporation, as warrant agent, and us. The Warrants will initially be represented only by one or more global warrants deposited with the warrant agent, as custodian on behalf of The Depository Trust Company, or DTC, and registered in the name of Cede & Co., a nominee of DTC, or as otherwise directed by DTC.
Fundamental Transactions. If, at any time while the Unit Warrants are outstanding, (1) we consolidate or merge with or into another corporation and we are not the surviving corporation, (2) we sell, lease, license, assign, transfer, convey or otherwise dispose of all or substantially all of our assets, (3) any purchase offer, tender offer or exchange offer (whether by us or another individual or entity) is completed pursuant to which holders of our shares of common stock are permitted to sell, tender or exchange their shares of common stock for other securities, cash or property and has been accepted by the holders of 50% or more of our outstanding shares of common stock, (4) we effect any reclassification or recapitalization of our shares of common stock or any compulsory share exchange pursuant to which our shares of common stock are converted into or exchanged for other securities, cash or property, or (5) we consummate a stock or share purchase agreement or other business combination with another person or entity whereby such other person or entity acquires more than 50% of our outstanding shares of common stock (each a “Fundamental Transaction”), then upon any subsequent exercise of the Unit Warrants, the holder thereof will have the right to receive the same amount and kind of securities, cash or property as it would have been entitled to receive upon the occurrence of such Fundamental Transaction if it had been, immediately prior to such Fundamental Transaction, the holder of the number of warrant shares then issuable upon exercise of the warrant, and any additional consideration payable as part of the Fundamental Transaction. Additionally, as more fully described in the warrant, in the event of certain Fundamental Transactions, the holders of the Unit Warrants will be entitled to receive consideration in an amount equal to the Black Scholes value of the Unit Warrants on the date of consummation of such transaction.
Rights as a Stockholder. Except as otherwise provided in the Warrants or by virtue of such holder’s ownership of shares of our common stock, the holder of a Warrant does not have the rights or privileges of a holder of our Common Stock, including any voting rights, until the holder exercises the Warrant.
Beneficial Ownership Limitation. Holder’s exercise shall be limited 4.99% of the Company’s outstanding common stock (or, upon election by a Holder prior to the issuance of any Unit Warrants, 9.99%) of the number of shares of the common stock outstanding immediately after giving effect to the issuance of shares of common stock issuable upon exercise. The Holder, upon notice to the Company, may increase or decrease the beneficial ownership limitation provided that the beneficial ownership limitation in no event exceeds 9.99% of the number of shares of the common stock outstanding immediately after giving effect to the issuance of shares of common stock upon exercise of the warrant held by the Holder. Any increase in the beneficial ownership limitation will not be effective until the 61st day after such notice is delivered to the Company.
Governing Law. The Warrants and the warrant agency agreement are governed by New York law.
Representative’s Warrants
We have agreed to issue to the Representative or its designees, at the closing of this offering, warrants to purchase up to a total of shares of Common Stock (5% of the number of shares of Units sold in this offering). The Representative’s Warrants will be exercisable at any time, and from time to time, in whole or in part, during the four and a half-year period commencing six months from the effective date of the offering, which period shall not extend further than five years from the effective date of the offering in compliance with FINRA Rule 5110(g)(8)(A). The Representative’s Warrants are exercisable at a per share price equal to 150% of the public offering price per share in the offering. The Representative’s Warrants have been deemed compensation by FINRA and are therefore subject to a 180-day lock-up pursuant to Rule 5110(e)(1) of FINRA. The Representative (or permitted assignees under Rule 5110(e)(1)) will not sell, transfer, assign, pledge, or hypothecate these warrants or the securities underlying these warrants, nor will they engage in any hedging, short sale, derivative, put, or call transaction that would result in the effective economic disposition of the warrants or the underlying securities for a period of 180 days from the date of this prospectus. The Representative’s Warrants will provide for cashless exercise and customary anti-dilution provisions (for share dividends, splits and recapitalizations and the like) consistent with FINRA Rule 5110, and the number of shares underlying the Representative’s Warrants shall be reduced, or the exercise price increased, if necessary, to comply with FINRA rules or regulations. The Representative’s warrants will contain provisions for one demand registration of the sale of the underlying securities at the Company’s expense, one additional demand registration of the sale of the underlying securities at the warrant holder’s expense, and unlimited piggyback registration rights for a period of seven (7) years from the commencement of sales of this offering at the Company’s expense. The demand registration rights provided will not be greater than five years from the commencement of sales of the offering in compliance with FINRA Rule 5110(g)(8)(C). Notwithstanding the foregoing, on the expiration date of such warrants, they shall be automatically exercised via cashless exercise pursuant to the terms of such warrants.
SHARES ELIGIBLE FOR FUTURE SALE
Overview
As of the date of this offering our Common Stock has only been traded on the OTCQB Market. In connection with this offering, we have applied to apply to list our Common Stock Warrants on the Nasdaq Capital Market. No assurance can be given that our application will be approved. Sales of substantial amounts of our Common Stock in the public market, including shares issued upon the exercise of outstanding options or warrants, or the perception that such sales could occur, could adversely affect prevailing market prices of our Common Stock. Upon completion of this offering, we will have an aggregate of shares of Common Stock issued and outstanding, assuming no exercise of outstanding options or warrants (including the Warrants included in the Units sold in this offering) and the underwriter does not exercise its over-allotment option. All the Common Stock sold in this offering, including the shares of Common Stock issuable upon exercise of the Warrants included in the Units sold in this offering and the Representative’s Warrants, will be freely transferable without restriction or further registration under the Securities Act by persons other than by our affiliates. Certain of the shares of Common Stock after the offering will be held by our existing shareholders. Upon consummation of the offering, approximately % of our issued and outstanding Common Stock will be subject to lock-up agreements as described below.
Lock-up Agreements
We, all of our directors and executive officers and holders of greater than 5% of our outstanding shares of Common Stock on a fully diluted basis (including shares underlying options, warrants and convertible securities) have signed lock-up agreements in connection with this offering, pursuant to which, subject to certain exceptions, they agreed not to sell or otherwise dispose of their shares of Common Stock or any securities convertible into or exchangeable for Common Stock for a period of at least 90 days after the date of the pricing of our initial public offering without the prior written consent of the underwriter.
Form S-8 Registration Statement
Following the completion of this offering, we intend to file one or more registration statements on Form S-8 under the Securities Act to register up the Common Stock issued or reserved for issuance under our 2022 Plan. The registration statement on Form S-8 will become effective automatically upon filing. Common Stock issued upon exercise of a share option and registered under the Form S-8 registration statement will, subject to vesting and lock-up provisions and Rule 144 volume limitations applicable to our affiliates, be available for sale in the open market immediately unless they are subject to a lock-up, in which case, immediately after the term of the lock-up expires.
THE DISCUSSION ABOVE IS A GENERAL SUMMARY. IT DOES NOT COVER ALL SHARE TRANSFER RESTRICTION MATTERS THAT MAY BE OF IMPORTANCE TO A PROSPECTIVE INVESTOR. EACH PROSPECTIVE INVESTOR SHOULD CONSULT ITS OWN LEGAL ADVISOR REGARDING THE PARTICULAR SECURITIES LAWS AND TRANSFER RESTRICTION CONSEQUENCES OF PURCHASING, HOLDING, AND DISPOSING OF THE COMMON STOCK INCLUDING THE CONSEQUENCES OF ANY PROPOSED CHANGE IN APPLICABLE LAWS.
MATERIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS
The following is a summary of some of the possible U.S. tax consequences that should be anticipated in connection with an investment in the Units, Common Stock and Warrants, which might also be referred to generically as securities. This discussion is based on the U.S. Internal Revenue Code of 1986, as amended (the “Code”), the U.S. Treasury regulations promulgated thereunder and administrative and judicial interpretations thereof, all as in effect on the date hereof and all of which are subject to change, possibly with retroactive effect. There can be no assurance that the Internal Revenue Service (the “IRS”) will not challenge one or more of the tax consequences described herein, and we have not obtained, and do not intend to obtain, an opinion of counsel or ruling from the IRS with respect to the U.S. federal income tax considerations relating to the purchase, ownership or disposition of our Common Stock and Warrants. EACH PROSPECTIVE INVESTOR IS URGED TO CONSULT THEIR OWN TAX ADVISOR ABOUT THE TAX CONSEQUENCES TO IT OF AN INVESTMENT IN OUR UNITS IN LIGHT OF THE INVESTOR’S OWN CIRCUMSTANCES. For United States federal income and other applicable tax purposes, a purchaser of Units must allocate their purchase price between each component (i.e., the Common Stock and Warrants) based on the relative fair market value of each at the time of issuance. These allocated amounts will be the holder’s tax basis in each component. Because each investor must make their own determination of the relative value of each component, we urge investors to consult their tax advisors in connection with this analysis.
Consequences For U.S. Holders
The following discussion describes the material U.S. federal income tax consequences relating to the ownership and disposition of Common Stock and Warrants by U.S. Holders. As used in this discussion, the term “U.S. Holder” means a beneficial owner of our Common Stock and Warrants that is, for U.S. federal income tax purposes, (1) an individual who is a citizen or resident of the United States, (2) a corporation (or entity treated as a corporation for U.S. federal income tax purposes) created or organized in or under the laws of the United States, any state thereof, or the District of Columbia, (3) an estate the income of which is subject to U.S. federal income tax regardless of its source or (4) a trust (i) with respect to which a court within the United States is able to exercise primary supervision over its administration and one or more United States persons have the authority to control all of its substantial decisions, or (ii) that has elected to be treated as a domestic trust for U.S. federal income tax purposes. This discussion applies to U.S. Holders that purchase our Common Stock and Warrants pursuant to this prospectus and hold such Common Stock and Warrants as capital assets. This discussion does not address all of the U.S. federal income tax consequences that may be relevant to specific U.S. Holders in light of their particular circumstances or to U.S. Holders subject to special treatment under U.S. federal income tax law (such as certain financial institutions, insurance companies, broker-dealers and traders in securities or other persons that generally mark their securities to market for U.S. federal income tax purposes, tax-exempt entities, retirement plans, regulated investment companies, real estate investment trusts, certain former citizens or residents of the United States, persons who hold our Common Stock and Warrants as part of a “straddle”, “hedge”, “conversion transaction”, “synthetic security” or integrated investment, persons that have a “functional currency” other than the U.S. dollar, persons that own directly, indirectly or through attribution 10% or more of the voting power of our Common Stock, corporations that accumulate earnings to avoid U.S. federal income tax, persons subject to special tax accounting rules under Section 451(b) of the Code, partnerships and other pass-through entities, and investors in such pass-through entities). This discussion does not address any U.S. state or local or non-U.S. tax consequences or any U.S. federal estate, gift or alternative minimum tax consequences. If an entity treated as a partnership for U.S. federal income tax purposes holds our Common Stock and Warrants, the U.S. federal income tax consequences relating to an investment in our Common Stock and Warrants will depend in part upon the status and activities of such entity and the particular partner. Any such entity should consult its own tax advisor regarding the U.S. federal income tax consequences applicable to it and its partners of the purchase, ownership and disposition of our Common Stock and Warrants.
Distributions
A U.S. Holder that receives a distribution with respect to our Common Stock generally will be required to include the gross amount of such distribution in income as a dividend when actually or constructively received, to the extent of the U.S. Holder’s pro rata share of our current and/or accumulated earnings and profits (as determined under U.S. federal income tax principles). To the extent a distribution received by a U.S. Holder is not a dividend because it exceeds the U.S. Holder’s pro rata share of our current and accumulated earnings and profits, it will be treated first as a tax-free return of capital and reduce (but not below zero) the adjusted tax basis of the U.S. Holder’s Common Stock. To the extent the distribution exceeds the adjusted tax basis of the U.S. Holder’s Common Stock, the remainder will be taxed as capital gain.
Sale, Exchange or Other Disposition of our Common Stock and Warrants
A U.S. Holder generally will recognize capital gain or loss for U.S. federal income tax purposes upon the sale, exchange or other disposition of our Common Stock or Unit Warrants in an amount equal to the difference, if any, between the amount realized (i.e., the amount of cash plus the fair market value of any property received) on the sale, exchange or other disposition, and such U.S. Holder’s adjusted tax basis in the securities that were transferred. Such capital gain or loss generally will be long-term capital gain or long-term capital loss if, on the date of sale, exchange or other disposition, the transferred securities were held by the U.S. Holder for more than one year. Long-term capital gains of individual investors are generally subject to lower tax rates than those imposed on ordinary income. Any capital gain of a non-corporate U.S. Holder that is not long-term capital gain is taxed at ordinary income rates. Capital losses might not be permitted to offset the full amount of an individual’s ordinary income.
Exercise or Lapse of a Warrant
Except as discussed below with respect to the cashless exercise of a warrant, a U.S. Holder generally will not recognize gain or loss on the exercise of a warrant and related receipt of a common share, except to the extent cash is received in lieu of the issuance of a fractional common share. A U.S. Holder’s initial tax basis in the common share received on the exercise of a warrant should be equal to the sum of (i) the U.S. Holder’s tax basis in the warrant plus (ii) the exercise price paid by the U.S. Holder on the exercise of the warrant. A U.S. Holder’s holding period for common shares received on exercise of a warrant will commence on the date following the date of exercise of the warrant and will not include the period during which the U.S. Holder held the warrant. The U.S. federal income tax treatment of a cashless exercise of warrants into common shares is unclear, and the tax consequences of a cashless exercise could differ from the consequences upon the exercise of a warrant described in the preceding paragraph. Due to the absence of clear authority on the U.S. federal income tax treatment of a cashless exercise, there can be no assurance as to the tax treatment that would be adopted by the IRS or a court of law. Accordingly, U.S. Holders should consult their own tax advisors regarding the U.S. federal income tax consequences of a cashless exercise of our warrants.
Medicare Tax on Net Investment Income
Certain U.S. Holders who are individuals, estates or trusts are subject to an additional 3.8% U.S. federal income tax on all or a portion of their “net investment income,” which generally includes dividends (and constructive dividends) on the securities and net gains from the disposition of common shares or warrants. U.S. Holders that are individuals, estates or trusts should consult their tax advisors regarding the applicability of the Medicare tax to them.
Information Reporting and Backup Withholding
Dividends on and proceeds from the sale or other disposition of our Common Stock and Warrants may be reported to the IRS unless the U.S. Holder establishes a basis for exemption. Backup withholding may apply to amounts subject to reporting if the holder (1) fails to provide an accurate United States taxpayer identification number or otherwise establish a basis for exemption, or (2) is described in certain other categories of persons. However, U.S. Holders that are corporations generally are excluded from these information reporting and backup withholding tax rules. Backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules generally will be allowed as a refund or a credit against a U.S. Holder’s U.S. federal income tax liability if the required information is furnished by the U.S. Holder on a timely basis to the IRS.
Foreign Account Tax Compliance Act
The Foreign Account Tax Compliance Act (“FATCA”) generally imposes withholding tax at a rate of 30% on dividends on and gross proceeds from the sale or other disposition of our securities that are beneficially owned by certain U.S. persons where held in a “foreign financial institution” (as specially defined under those rules), unless such institution enters into an agreement with the U.S. government to, among other things, withhold on certain payments and to collect and provide to the U.S. tax authorities substantial information regarding the U.S. account holders of such institution (which includes certain equity and debt holders of such institution, as well as certain account holders that are foreign entities with U.S. owners), or otherwise establishes an exemption. If a U.S. Holder holds Common Stock or warrants in a foreign financial institution, they should obtain specific advice from an expert on the implications of FATCA.
Consequences to Non-U.S. Holders
The following is a summary of the material U.S. federal income tax considerations for non-U.S. holders relating to the purchase, ownership and disposition of the Common Stock and Warrants comprising the Units purchased in this offering. A “non-U.S. holder” is a beneficial owner of our securities (other than a partnership or an entity or arrangement treated as a partnership for U.S. federal income tax purposes) that, for U.S. federal income tax purposes, is not a U.S. holder. This summary is for general information purposes only and does not purport to be a complete analysis of all the potential tax considerations.
Distributions
Subject to the discussion below regarding effectively connected income, any dividend (including any taxable constructive stock dividend) paid to a non-U.S. holder generally will be subject to U.S. withholding tax either at a rate of 30% of the gross amount of the dividend, or such lower rate as may be specified by an applicable income tax treaty. In order to receive a reduced treaty rate, a non-U.S. holder must provide us with an IRS Form W-8BEN, IRS Form W-8BEN-E or other applicable IRS Form W-8 properly certifying qualification for the reduced rate. These forms must be updated periodically. A non-U.S. holder eligible for a reduced rate of U.S. withholding tax pursuant to an income tax treaty may obtain a refund of any excess amounts withheld by timely filing an appropriate claim for refund with the IRS. If a non-U.S. holder holds our securities through a financial institution or other agent acting on the non-U.S. holder’s behalf, the non-U.S. holder will be required to provide appropriate documentation to the agent, which then may be required to provide certification to us or our paying agent, either directly or through other intermediaries. Dividends received by a non-U.S. holder that are effectively connected with its conduct of a U.S. trade or business (and, if required by an applicable income tax treaty, attributable to a permanent establishment or fixed base maintained by the non-U.S. holder in the United States) are generally exempt from such withholding tax if the non-U.S. holder satisfies certain certification and disclosure requirements. In order to obtain this exemption, the non-U.S. holder must provide us with an IRS Form W-8ECI or other applicable IRS Form W-8 properly certifying such exemption. Such effectively connected dividends, although not subject to withholding tax, are taxed at the same graduated U.S. federal income tax rates applicable to U.S. holders, net of certain deductions and credits. In addition, dividends received by a corporate non-U.S. holder that are effectively connected with its conduct of a U.S. trade or business may also be subject to a branch profits tax at a rate of 30% or such lower rate as may be specified by an applicable income tax treaty. Non-U.S. holders should consult their own tax advisors regarding any applicable tax treaties that may provide for different rules.
Gain on Sale, Exchange or Other Taxable Disposition of Common Stock or Unit Warrants
Subject to the discussion below regarding backup withholding and foreign accounts, a non-U.S. holder generally will not be required to pay U.S. federal income tax on any gain realized upon the sale, exchange or other taxable disposition of our Common Stock or Unit Warrants unless: · the gain is effectively connected with the non-U.S. holder’s conduct of a U.S. trade or business (and, if required by an applicable income tax treaty, the gain is attributable to a permanent establishment or fixed base maintained by the non-U.S. holder in the United States); · the non-U.S. holder is a non-resident alien individual who is present in the United States for a period or periods aggregating 183 days or more during the calendar year in which the sale or disposition occurs, and certain other conditions are met; or shares of our Common Stock or our Unit Warrants, as applicable, constitute U.S. real property interests by reason of our status as a “United States real property holding corporation” (a USRPHC) for U.S. federal income tax purposes at any time within the shorter of the five-year period preceding the non-U.S. holder’s disposition of, or the non- U.S. holder’s holding period for, our Common Stock or Unit Warrants, as applicable. We believe that we are not currently and will not become a USRPHC for U.S. federal income tax purposes, and the remainder of this discussion so assumes. However, because the determination of whether we are a USRPHC depends on the fair market value of our U.S. real property relative to the fair market value of our other business assets, there can be no assurance that we will not become a USRPHC in the future. Even if we become a USRPHC, however, as long as our Common Stock is regularly traded on an established securities market, such Common Stock will be treated as U.S. real property interests only if the non-U.S. holder actually or constructively holds more than five percent of such regularly traded Common Stock at any time during the shorter of the five-year period preceding the non-U.S. holder’s disposition of, or the non-U.S. holder’s holding period for, our Common Stock. In addition, provided that our Common Stock is regularly traded on an established securities market, a warrant will not be treated as a U.S. real property interest with respect to a non-U.S. holder if such holder did not own, actually or constructively, Unit Warrants whose total fair market value on the date they were acquired (and on the date or dates any additional warrants were acquired) exceeded the fair market value on that date (and on the date or dates any additional warrants were acquired) of 5% of all our Common Stock. If the non-U.S. holder is described in the first bullet above, they will be required to pay tax on the net gain derived from the sale, exchange or other taxable disposition under regular graduated U.S. federal income tax rates, and a corporate non-U.S. holder described in the first bullet above also may be subject to the branch profits tax at a rate of 30%, or such lower rate as may be specified by an applicable income tax treaty. An individual non-U.S. holder described in the second bullet above will be required to pay a flat 30% tax (or such lower rate specified by an applicable income tax treaty) on the gain derived from the sale, exchange or other taxable disposition, which gain may be offset by U.S. source capital losses for the year (provided the non-U.S. holder has timely filed U.S. federal income tax returns with respect to such losses). Non-U.S. holders should consult their own tax advisors regarding any applicable income tax or other treaties that may provide for different rules.
Backup Withholding and Information Reporting
Generally, we must report annually to the IRS the amount of dividends paid to you, your name and address, and the amount of tax withheld, if any. A similar report will be sent to you. Pursuant to applicable income tax treaties or other agreements, the IRS may make these reports available to tax authorities in your country of residence. Payments of dividends on or of proceeds from the disposition of our securities made to you may be subject to backup withholding unless you establish an exemption, for example, by properly certifying your non-U.S. status on an IRS Form W-8BEN or IRS Form W-8BEN-E or other applicable IRS Form W-8. Notwithstanding the foregoing, backup withholding may apply if either we or our paying agent has actual knowledge, or reason to know, that you are a U.S. person. Backup withholding is not an additional tax; rather, the U.S. federal income tax liability of persons subject to backup withholding will be reduced by the amount of tax withheld. If withholding results in an overpayment of taxes, a refund or credit may generally be obtained from the IRS, provided that the required information is furnished to the IRS in a timely manner.
The preceding discussion of U.S. federal tax considerations is for general information only. It is not tax advice to investors in their circumstances. Each prospective investor should consult its own tax advisor regarding the U.S. federal, state, and local and non-U.S. tax consequences of purchasing, holding, and disposing of our Common Stock, including the consequences of any proposed change in applicable laws.
UNDERWRITING
Maxim Group LLC is acting as the representative of the underwriters of the offering (the “Representative”). We intend to enter into an underwriting agreement dated , 2022 with the Representative. We plan to list on the Nasdaq Capital Market our Common Stock under the symbol “MITI” and Series A Warrants and Series B Warrants in connection with this offering, and if necessary, to effect a reverse stock split of our common stock in order for our common stock to be approved for listing on Nasdaq, although there is no assurance that such reverse stock split will occur based on any specific ratio, that such reverse stock split will be necessary or will occur in connection with the uplisting to Nasdaq, or that Nasdaq will approve our initial listing application for our common stock upon such reverse stock split. If we fail to effect such reverse stock split of our common stock if necessary to obtain such Nasdaq approval, or if we are not able to uplist our common stock for any other reason, we will not be able to consummate the offering and will terminate this offering. Subject to the terms and conditions of the underwriting agreement, we have agreed to sell to each underwriter named below and each underwriter named below has severally and not jointly agreed to purchase from us, at the public offering price less the underwriting discounts set forth on the cover page of this prospectus, the number of Units listed next to its name in the following table:
|
Underwriter |
Number of |
||
|
Maxim Group LLC |
|||
|
Total |
A copy of the underwriting agreement will be filed as an exhibit to the registration statement of which this prospectus is part.
The underwriting agreement provides that the obligation of the underwriters to purchase all of the Units being offered to the public is subject to specific conditions, including the absence of any material adverse change in our business or in the financial markets and the receipt of certain legal opinions, certificates and letters from us, our counsel and the independent auditors. The underwriting agreement also provides that if an underwriter defaults, the purchase commitments of non-defaulting underwriters may be increased or the offering may be terminated. Subject to the terms of the underwriting agreement, the underwriters will purchase all of the Units being offered to the public, other than those securities covered by the over-allotment option described below if any Units are purchased.
The underwriters are offering the Units, subject to prior sale, when, as and if issued to and accepted by them, subject to approval of legal matters by their counsel and other conditions specified in the underwriting agreement. The underwriters reserve the right to withdraw, cancel or modify offers to the public and to reject orders in whole or in part.
Over-Allotment Option
We have granted to the Representative an option, exercisable one or more times in whole or in part, not later than 45 days after the date of this prospectus, to purchase from us up to additional shares of Common Stock and/or Series A Warrants and/or Series B Warrants (15% of the number of Units sold in this offering) at the public offering price for the Common Stock, less the underwriting discounts and commissions, set forth on the cover of this prospectus and at a price of $0.01 per Series A Warrant or Series B Warrant to cover over-allotments, if any. We will be obligated, pursuant to the option, to sell these additional shares of Common Stock and/or Series A Warrants and/or Series B Warrants to the underwriters to the extent the option is exercised. If any additional shares of Common Stock and/or Series A Warrants and/or Series B Warrants are purchased, the underwriters will offer the additional shares of Common Stock and/or Series A Warrants and/or Series B Warrants on the same terms as those on which the other shares of Common Stock and/or Series A Warrants and/or Series B Warrants are being offered hereunder.
Discounts and Commissions; Expenses
The following table shows the public offering price, underwriting discount and proceeds, before expenses, to us. The information assumes either no exercise or full exercise by the Representative of the over-allotment option.
|
Per Unit |
Total |
Total With |
||||||||||
|
Public offering price |
$ | $ | $ | |||||||||
|
Underwriting discount (7.0%) |
$ | $ | $ | |||||||||
|
Proceeds, before expenses, to us |
$ | $ | $ | |||||||||
We estimate the total expenses payable by us for this offering to be approximately $ , which amount includes (i) the underwriting discount of $ (7.0%) assuming no exercise by the underwriters of their over-allotment options, (ii) reimbursement of the accountable expenses of the Representative up to $125,000 including legal expenses of Representative’s counsel and (iii) other estimated expenses of approximately $ , which includes legal, accounting, printing costs and various fees associated with the registration of the shares of common stock offered hereby.
We have been advised by the Representative that it proposes to offer the securities offered by us to the public at the public offering price per Unit set forth on the cover of this prospectus. In addition, the underwriters may offer some of the Units to other securities dealers at such price less a concession of $ per Unit. After the initial offering, the public offering price and concession to dealers may be changed.
We have paid an expense deposit of $15,000 to the Representative, which will be applied against the $125,000 accountable expenses that will be paid by us to the Representative in connection with this offering. The underwriting agreement also provides that in the event the offering is terminated, the $15,000 expense deposit paid to the Representative will be returned to us to the extent that offering expenses are not actually incurred by the Representative in accordance with Financial Industry Regulation Authority (“FINRA”) Rule 5110(g)(4)(A).
Discretionary Accounts
The Representative has advised us that the underwriters do not intend to confirm sales of the securities offered hereby to any accounts over which they have discretionary authority.
Indemnification
We have agreed to indemnify the underwriters against specified liabilities, including liabilities under the Securities Act, and to contribute to payments the underwriters may be required to make in respect thereof.
Lock-Up Agreements
We and our officers and directors, and the holders of 5% or more of the outstanding shares of our common stock as of the effective date of the Registration Statement, have agreed, subject to limited exceptions, for a period of 90 days after the closing of this offering, not to offer, sell, contract to sell, pledge, grant any option to purchase, make any short sale or otherwise dispose of, directly or indirectly any shares of our common stock or any securities convertible into or exchangeable for our common stock either owned as of the date of the underwriting agreement or thereafter acquired without the prior written consent of the Representative. The Representative may, in its sole discretion and at any time or from time to time before the termination of the lock-up period, without notice, release all or any portion of the securities subject to lock-up agreements.
Pricing of this Offering
Prior to this offering, there has not been an active market for our common stock and there has been no public market for our Series A Warrants or Series B Warrants. The public offering price for our Units will be determined through negotiations between us and the underwriters. Among the factors to be considered in these negotiations will be prevailing market conditions, our financial information, market valuations of other companies that we and the underwriters believe to be comparable to us, estimates of our business potential, the present state of our development and other factors deemed relevant.
We offer no assurances that the public offering price of Units will correspond to the price at which our common stock will trade in the public market subsequent to this offering or that an active trading market for our common stock will develop and continue after this offering.
Representative’s Warrants
We have agreed to issue to the Representative (or its permitted assignees) warrants to purchase up to a total of shares of common stock (5% of the shares of common stock included in the Units offered hereby, excluding the over-allotment, if any) subject to a 9.99% beneficial ownership limitation. The warrants will be exercisable at any time, and from time to time, in whole or in part, during the four and one-half year period commencing 180 days from the commencement of sale of securities in connection with this offering, which period is in compliance with FINRA Rule 5110(e)(1)(A). The warrants are exercisable at a per share price equal to $ per share, or 125% of the public offering price per share of common stock in the offering or $25.00, whichever is higher. The Representative’s warrants will contain a cashless exercise feature and are not redeemable by the Company. The warrants have been deemed compensation by FINRA and are therefore subject to a 180-day lock-up pursuant to Rule 5110(e) of FINRA. The Representative (or permitted assignees under Rule 5110(e)(2)(B)) will not sell, transfer, assign, pledge, or hypothecate these warrants or the securities underlying these warrants, nor will they engage in any hedging, short sale, derivative, put, or call transaction that would result in the effective economic disposition of the warrants or the underlying securities for a period of 180 days from the commencement of sales of the securities issued in connection with this offering. The exercise price and number of shares issuable upon exercise of the warrants may be adjusted in certain circumstances including in the event of a stock dividend, extraordinary cash dividend or our recapitalization, reorganization, merger or consolidation. The Representative’s warrants will contain provisions for one demand registration of the sale of the underlying securities at the Company’s expense, one additional demand registration of the sale of the underlying securities at the warrant holder’s expense, and unlimited piggyback registration rights for a period of seven (7) years from the commencement of sales of this offering at the Company’s expense. The demand registration rights provided will not be greater than five years from the commencement of sales of the offering in compliance with FINRA Rule 5110(g)(8)(C). Notwithstanding the foregoing, on the expiration date of such warrants, they shall be automatically exercised via cashless exercise pursuant to the terms of such warrants.
Right of First Refusal and Certain Post-Offering Investments
Subject to the closing of this offering and certain conditions set forth in the underwriting agreement, for a period of 24 months after the commencement of sales of the offering, the Representative shall have a right of first refusal to act as lead managing underwriter and book-runner and/or placement agent for any and all future public or private equity, equity-linked or debt (excluding commercial bank debt) offerings undertaken during such period by us, or any of our successors or subsidiaries, on terms customary to the Representative. The Representative in conjunction with us, shall have the sole right to determine whether or not any other broker-dealer shall have the right to participate in any such offering and the economic terms of any such participation.
Subsequent Equity Sales; Capital Changes
Pursuant to the underwriting agreement, subject to certain exceptions, from the date of such agreement until 90 days after the closing date of the offering, neither the Company nor any of its subsidiaries shall issue, or solicit, negotiate with, or enter into any agreement with any source of financing (whether equity, debt or otherwise) other than the Representative, in connection with an offering or proposed offering of the Company’s debt or equity securities or any other financing by the Company, and the Company shall be prohibited from effecting or entering into an agreement to effect any issuance by the Company or any of its subsidiaries of common stock or common stock equivalents (or a combination of units thereof) involving a Variable Rate Transaction (as defined in such underwriting agreement). In addition, until 90 days after the closing of this offering and except for the proposed reverse stock split, the Company shall not undertake a reverse or forward stock split or reclassification of its common stock without the prior written consent of the Representative.
Trading; Nasdaq Capital Market Listing
Our Common Stock is currently quoted on the OTCQB Market under the symbol “MITI.” In connection with this offering, we have applied to list our Common Stock on the Nasdaq Capital Market under the symbol “MITI”. We are applying to list the Series A Warrants and Series B Warrants for trading on the Nasdaq Capital Market, but we cannot assure you that we will meet all of the required listing standards. If our application to the Nasdaq is not approved or we otherwise determine that we will not be able to secure the listing of our common stock or warrants on Nasdaq, we will not complete this offering and we will then revise our approach and continue to seek financing for our expansion and operating needs in the debt and equity markets.
If our application is approved, we expect to list our Common Stock, Series A Warrants and Series B Warrants on Nasdaq upon consummation of the offering, at which point our common stock will cease to be traded on the OTCQB Market. No assurance can be given that our listing application will be approved. Nasdaq listing requirements include, among other things, a stock price threshold. As a result, prior to effectiveness, we will need to take the necessary steps to meet Nasdaq listing requirements, including but not limited to a reverse split of our outstanding common stock.
Price Stabilization, Short Positions and Penalty Bids
In connection with this offering the underwriters may engage in stabilizing transactions, over-allotment transactions, syndicate covering transactions and penalty bids in accordance with Regulation M under the Exchange Act:
|
● |
Stabilizing transactions permit bids to purchase securities so long as the stabilizing bids do not exceed a specified maximum. |
|
● |
Over-allotment involves sales by the underwriters of securities in excess of the number of securities the underwriters are obligated to purchase, which creates a syndicate short position. The short position may be either a covered short position or a naked short position. In a covered short position, the number of securities over-allotted by the underwriters is not greater than the number of securities that they may purchase in the over-allotment option. In a naked short position, the number of securities involved is greater than the number of securities in the over-allotment option. The underwriters may close out any covered short position by either exercising their over-allotment option and/or purchasing securities in the open market. |
|
● |
Syndicate covering transactions involve purchases of the securities in the open market after the distribution has been completed in order to cover syndicate short positions. In determining the source of securities to close out the short position, the underwriters will consider, among other things, the price of securities available for purchase in the open market as compared to the price at which they may purchase securities through the over-allotment option. A naked short position occurs if the underwriters sell more securities than could be covered by the over-allotment option. This position can only be closed out by buying securities in the open market. A naked short position is more likely to be created if the underwriters are concerned that there could be downward pressure on the price of the securities in the open market after pricing that could adversely affect investors who purchase in this offering. |
|
● |
Penalty bids permit the underwriters to reclaim a selling concession from a syndicate member when securities originally sold by the syndicate member is purchased in a stabilizing or syndicate covering transaction to cover syndicate short positions. |
These stabilizing transactions, syndicate covering transactions and penalty bids may have the effect of raising or maintaining the market price of our securities or preventing or retarding a decline in the market price of the securities. As a result, the price of our shares of Common Stock and Warrants may be higher than the price that might otherwise exist in the open market. These transactions may be discontinued at any time.
Neither we nor the underwriters make any representation or prediction as to the direction or magnitude of any effect that the transactions described above may have on the price of our shares of Common Stock and Warrants. In addition, neither we nor the underwriters make any representation that the underwriters will engage in these transactions or that any transaction, if commenced, will not be discontinued without notice.
Electronic Offer, Sale and Distribution of Securities
This prospectus in electronic format may be made available on websites or through other online services maintained by the underwriters, or by their affiliates. Other than this prospectus in electronic format, the information on the underwriters’ websites and any information contained in any other websites maintained by the underwriters is not part of this prospectus or the registration statement of which this prospectus forms a part, has not been approved and/or endorsed by us or the underwriters in their capacity as underwriters, and should not be relied upon by investors.
Other Relationships
From time to time, the underwriters and/or their affiliates have provided, and may in the future provide, various investment banking and other financial services for us for which services it has received and, may in the future receive, customary fees. Except for the services provided in connection with this offering and other than as described below, the underwriters have not provided any investment banking or other financial services during the 180-day period preceding the date of this prospectus.
Offers Outside the United States
Other than in the United States, no action has been taken by us or the underwriters that would permit a public offering of the securities offered by this prospectus in any jurisdiction where action for that purpose is required. The securities offered by this prospectus may not be offered or sold, directly or indirectly, nor may this prospectus or any other offering material or advertisements in connection with the offer and sale of any such securities be distributed or published in any jurisdiction, except under circumstances that will result in compliance with the applicable rules and regulations of that jurisdiction. Persons into whose possession this prospectus comes are advised to inform themselves about and to observe any restrictions relating to the offering and the distribution of this prospectus. This prospectus does not constitute an offer to sell or a solicitation of an offer to buy any securities offered by this prospectus in any jurisdiction in which such an offer or a solicitation is unlawful.
Notice to Prospective Investors in Australia
This prospectus is not a disclosure document under Chapter 6D of the Australian Corporations Act, has not been lodged with the Australian Securities and Investments Commission and does not purport to include the information required of a disclosure document under Chapter 6D of the Australian Corporations Act. Accordingly, (i) the offer of the securities under this prospectus is only made to persons to whom it is lawful to offer the securities without disclosure under Chapter 6D of the Australian Corporations Act under one or more exemptions set out in section 708 of the Australian Corporations Act, (ii) this prospectus is made available in Australia only to those persons as set forth in clause (i) above, and (iii) the offeree must be sent a notice stating in substance that by accepting this offer, the offeree represents that the offeree is such a person as set forth in clause (i) above, and, unless permitted under the Australian Corporations Act, agrees not to sell or offer for sale within Australia any of the securities sold to the offeree within 12 months after its transfer to the offeree under this prospectus.
Notice to Prospective Investors in Canada
This prospectus constitutes an “exempt offering document” as defined in and for the purposes of applicable Canadian securities laws. No prospectus has been filed with any securities commission or similar regulatory authority in Canada in connection with the offer and sale of the shares. No securities commission or similar regulatory authority in Canada has reviewed or in any way passed upon this prospectus or on the merits of the shares and any representation to the contrary is an offence.
Canadian investors are advised that this prospectus has been prepared in reliance on section 3A.3 of National Instrument 33-105 Underwriting Conflicts (“NI 33-105”). Pursuant to section 3A.3 of NI 33-105, this prospectus is exempt from the requirement that the Company and the underwriter(s) provide Canadian investors with certain conflicts of interest disclosure pertaining to “connected issuer” and/or “related issuer” relationships that may exist between the Company and the underwriter(s) as would otherwise be required pursuant to subsection 2.1(1) of NI 33-105.
Resale Restrictions
The offer and sale of the shares in Canada is being made on a private placement basis only and is exempt from the requirement that the Company prepares and files a prospectus under applicable Canadian securities laws. Any resale of shares acquired by a Canadian investor in this offering must be made in accordance with applicable Canadian securities laws, which may vary depending on the relevant jurisdiction, and which may require resales to be made in accordance with Canadian prospectus requirements, pursuant to a statutory exemption from the prospectus requirements, in a transaction exempt from the prospectus requirements or otherwise under a discretionary exemption from the prospectus requirements granted by the applicable local Canadian securities regulatory authority. These resale restrictions may under certain circumstances apply to resales of the shares outside of Canada.
Representations of Purchasers
Each Canadian investor who purchases shares will be deemed to have represented to the Company, the underwriters and to each dealer from whom a purchase confirmation is received, as applicable, that the investor is (i) purchasing as principal, or is deemed to be purchasing as principal in accordance with applicable Canadian securities laws, for investment only and not with a view to resale or redistribution; (ii) an “accredited investor” as such term is defined in section 1.1 of National Instrument 45-106 Prospectus Exemptions or, in Ontario, as such term is defined in section 73.3(1) of the Securities Act (Ontario); and (iii) is a “permitted client” as such term is defined in section 1.1 of National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations.
Taxation and Eligibility for Investment
Any discussion of taxation and related matters contained in this prospectus does not purport to be a comprehensive description of all of the tax considerations that may be relevant to a Canadian investor when deciding to purchase the shares and, in particular, does not address any Canadian tax considerations. No representation or warranty is hereby made as to the tax consequences to a resident, or deemed resident, of Canada of an investment in the shares or with respect to the eligibility of the shares for investment by such investor under relevant Canadian federal and provincial legislation and regulations.
Rights of Action for Damages or Rescission
Securities legislation in certain of the Canadian jurisdictions provides certain purchasers of securities pursuant to an offering memorandum (such as this prospectus), including where the distribution involves an “eligible foreign security” as such term is defined in Ontario Securities Commission Rule 45-501 Ontario Prospectus and Registration Exemptions and in Multilateral Instrument 45-107 Listing Representation and Statutory Rights of Action Disclosure Exemptions, as applicable, with a remedy for damages or rescission, or both, in addition to any other rights they may have at law, where the offering memorandum, or other offering document that constitutes an offering memorandum, and any amendment thereto, contains a “misrepresentation” as defined under applicable Canadian securities laws. These remedies, or notice with respect to these remedies, must be exercised or delivered, as the case may be, by the purchaser within the time limits prescribed under, and are subject to limitations and defenses under, applicable Canadian securities legislation. In addition, these remedies are in addition to and without derogation from any other right or remedy available at law to the investor.
Language of Documents
Upon receipt of this document, each Canadian investor hereby confirms that it has expressly requested that all documents evidencing or relating in any way to the sale of the securities described herein (including for greater certainty any purchase confirmation or any notice) be drawn up in the English language only. Par la réception de ce document, chaque investisseur canadien confirme par les présentes qu’il a expressément exigé que tous les documents faisant foi ou se rapportant de quelque manière que ce soit à la vente des valeurs mobilières décrites aux présentes (incluant, pour plus de certitude, toute confirmation d’achat ou tout avis) soient rédigés en anglais seulement.
Notice to Prospective Investors in China
The information in this document does not constitute a public offer of the securities, whether by way of sale or subscription, in the People’s Republic of China (the “PRC”) (excluding, for purposes of this paragraph, Hong Kong Special Administrative Region, Macau Special Administrative Region and Taiwan). The securities may not be offered or sold directly or indirectly in the PRC to legal or natural persons other than directly to “qualified domestic institutional investors.”
Notice to Prospective Investors in European Economic Area — Belgium, Germany, Luxembourg, and Netherlands
The information in this document has been prepared on the basis that all offers of securities will be made pursuant to an exemption under the Directive 2003/71/EC (“Prospectus Directive”), as implemented in Member States of the European Economic Area (each, a “Relevant Member State”), from the requirement to produce a prospectus for offers of securities.
An offer to the public of securities has not been made, and may not be made, in a Relevant Member State except pursuant to one of the following exemptions under the Prospectus Directive as implemented in that Relevant Member State:
|
● |
to legal entities that are authorized or regulated to operate in the financial markets or, if not so authorized or regulated, whose corporate purpose is solely to invest in securities; |
|
● |
to any legal entity that has two or more of (i) an average of at least 250 employees during its last fiscal year; (ii) a total balance sheet of more than €43,000,000 (as shown on its last annual unconsolidated or consolidated financial statements) and (iii) an annual net turnover of more than €50,000,000 (as shown on its last annual unconsolidated or consolidated financial statements); |
|
● |
to fewer than 100 natural or legal persons (other than qualified investors within the meaning of Article 2(1)(e) of the Prospectus Directive) subject to obtaining the prior consent of our Company or any underwriter for any such offer; or |
|
● |
in any other circumstances falling within Article 3(2) of the Prospectus Directive, provided that no such offer of securities shall result in a requirement for the publication by our Company of a prospectus pursuant to Article 3 of the Prospectus Directive. |
Notice to Prospective Investors in France
This document is not being distributed in the context of a public offering of financial securities (offre au public de titres financiers) in France within the meaning of Article L.411-1 of the French Monetary and Financial Code (Code monétaire et financier) and Articles 211-1, et seq. of the General Regulation of the French Autorité des marchés financiers (“AMF”). The securities have not been offered or sold and will not be offered or sold, directly or indirectly, to the public in France.
This document and any other offering material relating to the securities have not been, and will not be, submitted to the AMF for approval in France and, accordingly, may not be distributed or caused to distributed, directly or indirectly, to the public in France.
Such offers, sales and distributions have been and shall only be made in France to (i) qualified investors (investisseurs qualifiés) acting for their own account, as defined in and in accordance with Articles L.411-2-II-2° and D.411-1 to D.411-3, D.744-1, D.754-1 and D.764-1 of the French Monetary and Financial Code and any implementing regulation and/or (ii) a restricted number of non-qualified investors (cercle restreint d’investisseurs non-qualifiés)) acting for their own account, as defined in and in accordance with Articles L.411-2-II-2° and D.411-4, D.744-1, D.754-1 and D.764-1 of the French Monetary and Financial Code and any implementing regulation.
Pursuant to Article 211-3 of the General Regulation of the AMF, investors in France are informed that the securities cannot be distributed (directly or indirectly) to the public by the investors otherwise than in accordance with Articles L.411-1, L.411-2, L.412-1 and L.621-8 to L.621-8-3 of the French Monetary and Financial Code.
Notice to Prospective Investors in Ireland
The information in this document does not constitute a prospectus under any Irish laws or regulations and this document has not been filed with or approved by any Irish regulatory authority as the information has not been prepared in the context of a public offering of securities in Ireland within the meaning of the Irish Prospectus (Directive 2003/71/EC) Regulations 2005 (the “Prospectus Regulations”). The securities have not been offered or sold, and will not be offered, sold, or delivered directly or indirectly in Ireland by way of a public offering, except to (i) qualified investors as defined in Regulation 2(l) of the Prospectus Regulations and (ii) fewer than 100 natural or legal persons who are not qualified investors.
Notice to Prospective Investors in Israel
The securities offered by this prospectus have not been approved or disapproved by the Israeli Securities Authority (the “ISA”), nor have such securities been registered for sale in Israel. The shares may not be offered or sold, directly or indirectly, to the public in Israel, absent the publication of a prospectus. The ISA has not issued permits, approvals, or licenses in connection with the offering or publishing the prospectus; nor has it authenticated the details included herein, confirmed their reliability or completeness, or rendered an opinion as to the quality of the securities being offered. Any resale in Israel, directly or indirectly, to the public of the securities offered by this prospectus is subject to restrictions on transferability and must be effected only in compliance with the Israeli securities laws and regulations.
Notice to Prospective Investors in Italy
The offering of the securities in the Republic of Italy has not been authorized by the Italian Securities and Exchange Commission (Commissione Nazionale per le Societá e la Borsa, “CONSOB”) pursuant to the Italian securities legislation and, accordingly, no offering material relating to the securities may be distributed in Italy and such securities may not be offered or sold in Italy in a public offer within the meaning of Article 1.1(t) of Legislative Decree No. 58 of 24 February 1998 (“Decree No. 58”), other than:
|
● |
to Italian qualified investors, as defined in Article 100 of Decree No. 58 by reference to Article 34-ter of CONSOB Regulation no. 11971 of 14 May 1999 (“Regulation no. 11971”) as amended (“Qualified Investors”); and |
|
● |
in other circumstances that are exempt from the rules on public offer pursuant to Article 100 of Decree No. 58 and Article 34-ter of Regulation No. 11971 as amended. |
Any offer, sale or delivery of the securities or distribution of any offer document relating to the securities in Italy (excluding placements where a Qualified Investor solicits an offer from the issuer) under the paragraphs above must be:
|
● |
made by investment firms, banks or financial intermediaries permitted to conduct such activities in Italy in accordance with Legislative Decree No. 385 of 1 September 1993 (as amended), Decree No. 58, CONSOB Regulation No. 16190 of 29 October 2007 and any other applicable laws; and |
|
● |
in compliance with all relevant Italian securities, tax and exchange controls and any other applicable laws. |
Any subsequent distribution of the securities in Italy must be made in compliance with the public offer and prospectus requirement rules provided under Decree No. 58 and the Regulation No. 11971 as amended unless an exception from those rules applies. Failure to comply with such rules may result in the sale of such securities being declared null and void and in the liability of the entity transferring the securities for any damages suffered by the investors.
Notice to Prospective Investors in Japan
The securities have not been and will not be registered under Article 4, paragraph 1 of the Financial Instruments and Exchange Law of Japan (Law No. 25 of 1948), as amended (the “FIEL”), pursuant to an exemption from the registration requirements applicable to a private placement of securities to Qualified Institutional Investors (as defined in and in accordance with Article 2, paragraph 3 of the FIEL and the regulations promulgated thereunder). Accordingly, the securities may not be offered or sold, directly or indirectly, in Japan or to, or for the benefit of, any resident of Japan other than Qualified Institutional Investors. Any Qualified Institutional Investor who acquires securities may not resell them to any person in Japan that is not a Qualified Institutional Investor, and acquisition by any such person of securities is conditional upon the execution of an agreement to that effect.
Notice to Prospective Investors in Portugal
This document is not being distributed in the context of a public offer of financial securities (oferta pública de valores mobiliários) in Portugal, within the meaning of Article 109 of the Portuguese Securities Code (Código dos Valores Mobiliários). The securities have not been offered or sold and will not be offered or sold, directly or indirectly, to the public in Portugal. This document and any other offering material relating to the securities have not been, and will not be, submitted to the Portuguese Securities Market Commission (Comissão do Mercado de Valores Mobiliários) for approval in Portugal and, accordingly, may not be distributed or caused to distributed, directly or indirectly, to the public in Portugal, other than under circumstances that are deemed not to qualify as a public offer under the Portuguese Securities Code. Such offers, sales, and distributions of securities in Portugal are limited to persons who are “qualified investors” (as defined in the Portuguese Securities Code). Only such investors may receive this document and they may not distribute it, or the information contained in it to any other person.
Notice to Prospective Investors in Sweden
This document has not been, and will not be, registered with or approved by Finansinspektionen (the Swedish Financial Supervisory Authority). Accordingly, this document may not be made available, nor may the securities be offered for sale in Sweden, other than under circumstances that are deemed not to require a prospectus under the Swedish Financial Instruments Trading Act (1991:980) (Sw. lag (1991:980) om handel med finansiella instrument). Any offering of securities in Sweden is limited to persons who are “qualified investors” (as defined in the Financial Instruments Trading Act). Only such investors may receive this document and they may not distribute it, or the information contained in it to any other person.
Notice to Prospective Investors in Switzerland
The securities may not be publicly offered in Switzerland and will not be listed on the SIX Swiss Exchange (“SIX”) or on any other stock exchange or regulated trading facility in Switzerland. This document has been prepared without regard to the disclosure standards for issuance prospectuses under art. 652a or art. 1156 of the Swiss Code of Obligations or the disclosure standards for listing prospectuses under art. 27 ff. of the SIX Listing Rules or the listing rules of any other stock exchange or regulated trading facility in Switzerland. Neither this document nor any other offering material relating to the securities may be publicly distributed or otherwise made publicly available in Switzerland.
Neither this document nor any other offering material relating to the securities have been or will be filed with or approved by any Swiss regulatory authority. In particular, this document will not be filed with, and the offer of securities will not be supervised by, the Swiss Financial Market Supervisory Authority.
This document is personal to the recipient only and not for general circulation in Switzerland.
Notice to Prospective Investors in United Arab Emirates
Neither this document nor the securities have been approved, disapproved, or passed on in any way by the Central Bank of the United Arab Emirates or any other governmental authority in the United Arab Emirates, nor have we received authorization or licensing from the Central Bank of the United Arab Emirates or any other governmental authority in the United Arab Emirates to market or sell the securities within the United Arab Emirates. This document does not constitute and may not be used for the purpose of an offer or invitation. No services relating to the securities, including the receipt of applications and/or the allotment or redemption of such shares, may be rendered within the United Arab Emirates by our Company.
No Offer or invitation to subscribe for securities is valid or permitted in the Dubai International Financial Centre.
Notice to Prospective Investors in United Kingdom
Neither the information in this document nor any other document relating to the offer has been delivered for approval to the Financial Services Authority in the United Kingdom and no prospectus (within the meaning of section 85 of the Financial Services and Markets Act 2000, as amended (“FSMA”)) has been published or is intended to be published in respect of the securities. This document is issued on a confidential basis to “qualified investors” (within the meaning of section 86(7) of FSMA) in the United Kingdom, and the securities may not be offered or sold in the United Kingdom by means of this document, any accompanying letter, or any other document, except in circumstances which do not require the publication of a prospectus pursuant to section 86(1) FSMA. This document should not be distributed, published, or reproduced, in whole or in part, nor may its contents be disclosed by recipients to any other person in the United Kingdom.
Any invitation or inducement to engage in investment activity (within the meaning of section 21 of FSMA) received in connection with the issue or sale of the securities has only been communicated or caused to be communicated and will only be communicated or caused to be communicated in the United Kingdom in circumstances in which section 21(1) of FSMA does not apply to our company.
In the United Kingdom, this document is being distributed only to, and is directed at, persons (i) who have professional experience in matters relating to investments falling within Article 19(5) (investment professionals) of the Financial Services and Markets Act 2000 (Financial Promotions) Order 2005 (“FPO”), (ii) who fall within the categories of persons referred to in Article 49(2)(a) to (d) (high net worth companies, unincorporated associations, etc.) of the FPO or (iii) to whom it may otherwise be lawfully communicated (together “relevant persons”). The investments to which this document relates are available only to, and any invitation, offer or agreement to purchase will be engaged in only with, relevant persons. Any person who is not a relevant person should not act or rely on this document or any of its contents.
Transfer Agent and Registrar
Our transfer agent is Transhare Corporation located at 2849 Executive Dr., Suite 200, Clearwater, Florida 33762. Their phone number is (303) 662-1112.
LEGAL MATTERS
The validity of the securities being offered by this prospectus will be passed upon for us by Lucosky Brookman LLP, Woodbridge, New Jersey. Certain legal matters in connection with this offering will be passed upon for the underwriters by Harter Secrest & Emery LLP, Rochester, New York.
EXPERTS
The financial statements of Mitesco, Inc. as of December 31, 2021 and 2020 and for the two years ended December 31, 2021 included in this registration statement, of which this prospectus forms a part, have been so included in reliance on the report of RBSM LLP, an independent registered public accounting firm appearing elsewhere herein, given on the authority of said firm as experts in auditing and accounting.
WHERE YOU CAN FIND MORE INFORMATION
This prospectus, which constitutes a part of the registration statement on Form S-1 that we have filed with the SEC under the Securities Act, does not contain all the information in the registration statement and its exhibits. For further information with respect to us and the securities offered by this prospectus, you should refer to the registration statement and the exhibits filed as part of that document. Statements contained in this prospectus as to the contents of any contract or any other document referred to are not necessarily complete, and in each instance, we refer you to the copy of the contract or other document filed as an exhibit to the registration statement. Each of these statements is qualified in all respects by this reference.
We are subject to the reporting requirements of the Securities Exchange Act of 1934, as amended, and file annual, quarterly, and current reports, proxy statements and other information with the SEC. Our SEC filings, including the registration statement, are publicly available through the SEC’s website at www.sec.gov. We also maintain a website at www.mitescoinc.com, at which you may access these materials free of charge as soon as reasonably practicable after they are electronically filed with, or furnished to, the SEC. The information contained in, or that can be accessed through, our website is not part of this prospectus.
INDEX TO THE CONSOLIDATED FINANCIAL STATEMENTS
|
PAGE |
|
|
UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED JUNE 30, 2022 AND 2021 |
|
|
F-2 |
CONSOLIDATED BALANCE SHEETS as of June 30, 2022 and December 31, 2021 |
|
F-3 |
CONSOLIDATED STATEMENTS OF OPERATIONS for the three and six months ended June 30, 2022 and 2021 |
|
F-4 |
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT) for the three and six months ended June 30, 2022 and 2021 |
|
F-6 |
CONSOLIDATED STATEMENTS OF CASH FLOWS for the six months ended June 30, 2022 and 2021 |
|
F-8 |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
|
AUDITED CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2021 AND 2020 |
|
|
F-31 |
REPORTS OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMS (PCAOB 587) |
|
F-32 |
CONSOLIDATED BALANCE SHEETS |
|
F-33 |
CONSOLIDATED STATEMENTS OF OPERATIONS |
|
F-34 |
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT) |
|
F-35 |
CONSOLIDATED STATEMENTS OF CASH FLOWS |
|
F-37 |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
MITESCO, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
|
June 30, |
December 31, |
|||||||
|
ASSETS |
2022 |
2021 |
||||||
|
(unaudited) |
||||||||
|
Current assets |
||||||||
|
Cash and cash equivalents |
$ | $ | ||||||
|
Accounts Receivable |
||||||||
|
Inventory |
||||||||
|
Prepaid expenses |
||||||||
|
Total current assets |
||||||||
|
Right to use operating leases, net |
||||||||
|
Construction in progress |
||||||||
|
Fixed assets, net of accumulated depreciation of $ |
||||||||
|
Total Assets |
$ | $ | ||||||
|
LIABILITIES AND (DEFICIENCY IN) STOCKHOLDERS' EQUITY |
||||||||
|
Current liabilities |
||||||||
|
Accounts payable and accrued liabilities |
$ | $ | ||||||
|
Accrued interest |
||||||||
|
Derivative liabilities |
||||||||
|
Lease liability - operating leases, current |
||||||||
|
Notes payable, net of discounts of $ |
||||||||
|
SBA Loan Payable |
||||||||
|
Other current liabilities |
||||||||
|
Preferred stock dividends payable |
||||||||
|
Total current liabilities |
||||||||
|
Lease Liability- operating leases, non-current |
||||||||
|
Total Liabilities |
||||||||
|
Commitments and contingencies |
- | |||||||
|
Stockholders' equity (deficit) |
||||||||
|
Preferred stock, $0.01 par value, |
- | - | ||||||
|
Preferred stock, Series A, $ |
||||||||
|
Preferred stock, Series C, $ |
||||||||
|
Preferred stock, Series D, $ |
||||||||
|
Preferred stock, Series X, $ |
||||||||
|
Common stock subscribed |
||||||||
|
Common stock, $ |
||||||||
|
Additional paid-in capital |
||||||||
|
Accumulated deficit |
( |
) |
( |
) |
||||
|
Total stockholders' equity (deficit) |
( |
) |
||||||
|
Total liabilities and stockholders' equity (deficit) |
$ | $ | ||||||
See accompanying notes to these unaudited condensed consolidated financial statements.
MITESCO, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
|
For the Three |
For the Six |
|||||||||||||||
|
Months Ended |
Months Ended |
|||||||||||||||
|
June 30, |
June 30, |
|||||||||||||||
|
2022 |
2021 |
2022 |
2021 |
|||||||||||||
|
Revenue-services |
$ | $ | $ | $ | ||||||||||||
|
Revenue-products |
( |
) |
||||||||||||||
|
Total revenue |
||||||||||||||||
|
Cost of goods sold-services |
$ | $ | $ | $ | ||||||||||||
|
Cost of goods sold-products |
||||||||||||||||
|
Total cost of goods sold |
||||||||||||||||
|
Gross (loss) profit |
( |
) |
( |
) |
||||||||||||
|
Operating expenses: |
||||||||||||||||
|
General and administrative |
$ | $ | $ | $ | ||||||||||||
|
Total operating expenses |
||||||||||||||||
|
Net Operating Loss |
( |
) |
( |
) |
( |
) |
( |
) |
||||||||
|
Other income (expense): |
||||||||||||||||
|
Interest expense |
( |
) |
( |
) |
( |
) |
( |
) |
||||||||
|
Loss on legal settlement |
( |
) |
( |
) |
||||||||||||
|
(Loss) Gain on waiver and commitment fee shares |
( |
) |
||||||||||||||
|
Gain on settlement of accrued salary |
||||||||||||||||
|
Loss (Gain) on settlement of accounts payable |
( |
) |
||||||||||||||
|
Gain on settlement of notes payable |
||||||||||||||||
|
Grant income |
||||||||||||||||
|
Loss on revaluation of derivative liabilities |
( |
) |
( |
) |
( |
) |
||||||||||
|
Total other expense |
( |
) |
( |
) |
( |
) |
( |
) |
||||||||
|
Loss before provision for income taxes |
( |
) |
( |
) |
( |
) |
( |
) |
||||||||
|
Provision for income taxes |
||||||||||||||||
|
Net loss |
$ | ( |
) |
$ | ( |
) |
$ | ( |
) |
$ | ( |
) |
||||
|
Preferred stock dividends |
( |
) |
( |
) |
( |
) |
( |
) |
||||||||
|
Preferred stock deemed dividends |
( |
) |
||||||||||||||
|
Net loss available to common shareholders |
$ | ( |
) |
$ | ( |
) |
$ | ( |
) |
$ | ( |
) |
||||
|
Net loss per share - basic and diluted |
$ | ( |
) |
$ | ( |
) |
$ | ( |
) |
$ | ( |
) |
||||
|
Weighted average shares outstanding - basic and diluted |
||||||||||||||||
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, 2022 and 2021
(UNAUDITED)
|
|
Preferred Stock Series A |
Preferred Stock Series C |
Preferred Stock Series D |
Preferred Stock Series X |
Common Stock |
Additional |
Common Stock |
Accumulated |
||||||||||||||||||||||||||||||||||||||||||||||||
|
|
Shares |
Amount |
Shares |
Amount |
Shares |
Amount |
Shares |
Amount |
Shares |
Amount |
Paid-in capital |
Subscribed |
Deficit |
Total |
||||||||||||||||||||||||||||||||||||||||||
|
Balance, March 31, 2022 |
- |
$ |
- |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
$ |
|
$ |
|
$ |
( |
) |
( |
) |
||||||||||||||||||||||||||||||||
|
Vesting of common stock issued to employees |
- |
- |
- |
- |
- |
- |
- |
- |
|
- |
- |
|
||||||||||||||||||||||||||||||||||||||||||||
|
Vesting of stock options issued to employees |
- |
- |
- |
- |
- |
- |
- |
- |
|
- |
- |
|
||||||||||||||||||||||||||||||||||||||||||||
|
Shares issued for services |
- |
- |
- |
- |
- |
- |
- |
- |
|
|
|
- |
- |
|
||||||||||||||||||||||||||||||||||||||||||
|
Waiver fee shares |
- |
- |
- |
- |
- |
- |
- |
- |
|
|
|
( |
) |
- |
- |
|||||||||||||||||||||||||||||||||||||||||
|
Commitment fee shares |
- |
- |
- |
- |
- |
- |
- |
- |
|
|
|
- |
- |
|
||||||||||||||||||||||||||||||||||||||||||
|
Warrants issued with notes payable - Insiders |
- |
- |
- |
- |
- |
- |
- |
- |
|
- |
- |
|
||||||||||||||||||||||||||||||||||||||||||||
|
Shares issued for Series X dividends |
- |
- |
- |
- |
- |
- |
- |
- |
|
|
|
- |
- |
|
||||||||||||||||||||||||||||||||||||||||||
|
Preferred stock dividends |
- |
- |
- |
- |
- |
- |
- |
- |
( |
) |
- |
- |
( |
) |
||||||||||||||||||||||||||||||||||||||||||
|
Loss for the period ended June 30, 2022 |
- |
- |
- |
- |
- |
- |
- |
- |
- |
( |
) |
( |
) |
|||||||||||||||||||||||||||||||||||||||||||
|
Balance, June 30, 2022 |
- |
$ |
- |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
$ |
|
$ |
|
$ |
( |
) |
$ |
( |
) |
|||||||||||||||||||||||||||||||
|
Balance, December 31, 2021 |
- |
$ |
- |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
$ |
|
$ |
|
$ |
( |
) |
|
|||||||||||||||||||||||||||||||||
|
Vesting of common stock issued to employees |
- |
- |
- |
- |
- |
- |
- |
- |
|
|
||||||||||||||||||||||||||||||||||||||||||||||
|
Vesting of stock options issued to employees |
- |
- |
- |
- |
- |
- |
- |
- |
|
|
||||||||||||||||||||||||||||||||||||||||||||||
|
Conversion of accounts payable to common stock |
- |
- |
- |
- |
- |
- |
- |
- |
|
|
|
|
||||||||||||||||||||||||||||||||||||||||||||
|
Commitment fee shares |
- |
- |
- |
- |
- |
- |
- |
- |
|
|
|
|
||||||||||||||||||||||||||||||||||||||||||||
|
Waiver fee shares |
- |
- |
- |
- |
- |
- |
- |
- |
|
|
|
- |
|
|||||||||||||||||||||||||||||||||||||||||||
|
Shares issued for services |
- |
- |
- |
- |
- |
- |
- |
- |
|
|
|
|
||||||||||||||||||||||||||||||||||||||||||||
|
Warrants issued with note payable - Diamond 1 |
- |
- |
- |
- |
- |
- |
- |
- |
|
|
||||||||||||||||||||||||||||||||||||||||||||||
|
Warrants issued with note payable - Diamond 2 |
|
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
Gain on settlement of accrued payroll |
( |
) |
( |
) |
|
- |
||||||||||||||||||||||||||||||||||||||||||||||||||
|
Issuance of shares previously subscribed for conversion of accounts payable |
|
|
|
( |
) |
- |
||||||||||||||||||||||||||||||||||||||||||||||||||
|
Warrants issued with notes payable - Insiders |
- |
- |
- |
- |
- |
- |
- |
- |
|
|
||||||||||||||||||||||||||||||||||||||||||||||
|
Shares issued for Series X dividends |
- |
- |
- |
- |
- |
- |
- |
- |
|
|
|
|
||||||||||||||||||||||||||||||||||||||||||||
|
Preferred stock dividends |
- |
- |
- |
- |
- |
- |
- |
- |
( |
) |
( |
) |
||||||||||||||||||||||||||||||||||||||||||||
|
Loss for the six months ended June 30, 2022 |
- |
- |
- |
- |
- |
- |
- |
- |
( |
) |
( |
) |
||||||||||||||||||||||||||||||||||||||||||||
|
Balance, June 30, 2022 |
- |
$ |
- |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
$ |
|
$ |
|
$ |
( |
) |
$ |
( |
) |
|||||||||||||||||||||||||||||||
MITESCO, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2022 and 2021
(UNAUDITED)
|
|
Preferred Stock Series A |
Preferred Stock Series C |
Preferred Stock Series D |
Preferred Stock Series X |
Common Stock |
Additional |
Common Stock |
Accumulated |
||||||||||||||||||||||||||||||||||||||||||||||||
|
|
Shares |
Amount |
Shares |
Amount |
Shares |
Amount |
Shares |
Amount |
Shares |
Amount |
Paid-in capital |
Subscribed |
Deficit |
Total |
||||||||||||||||||||||||||||||||||||||||||
|
Balance, March 31, 2021 |
- |
|
$ |
|
- |
$ |
- |
|
$ |
|
|
$ |
|
$ |
|
$ |
- |
$ |
( |
) |
$ |
|
||||||||||||||||||||||||||||||||||
|
Vesting of common stock issued to employees |
- |
- |
- |
- |
- |
- |
- |
- |
- |
|
- |
- |
|
|||||||||||||||||||||||||||||||||||||||||||
|
Vesting of stock options issued to employees |
- |
- |
- |
- |
- |
- |
- |
- |
- |
|
- |
- |
|
|||||||||||||||||||||||||||||||||||||||||||
|
Shares issued to directors for exercise of options |
- |
- |
- |
- |
- |
- |
- |
|
|
|
( |
) |
- |
|
||||||||||||||||||||||||||||||||||||||||||
|
Net shares cancelled in connection with settlement agreement |
- |
- |
- |
- |
- |
( |
) |
( |
) |
( |
) |
( |
) |
|
- |
- |
|
|||||||||||||||||||||||||||||||||||||||
|
Shares issued for professional fees |
- |
- |
- |
- |
- |
- |
- |
|
|
( |
) |
- |
- |
- |
||||||||||||||||||||||||||||||||||||||||||
|
Shares of common stock issued for conversion of Preferred Stock Series C |
- |
( |
) |
( |
) |
- |
- |
- |
- |
|
|
( |
) |
- |
- |
- |
||||||||||||||||||||||||||||||||||||||||
|
Preferred stock dividends |
- |
- |
- |
- |
- |
- |
- |
- |
- |
( |
) |
- |
- |
( |
) |
|||||||||||||||||||||||||||||||||||||||||
|
Loss for the period ended June 30, 2021 |
- |
- |
- |
- |
- |
- |
- |
- |
- |
- |
- |
( |
) |
( |
) |
|||||||||||||||||||||||||||||||||||||||||
|
Balance, June 30, 2021 |
- |
|
$ |
|
- |
$ |
- |
|
$ |
|
|
$ |
|
$ |
|
$ |
( |
) |
$ |
( |
) |
$ |
|
|||||||||||||||||||||||||||||||||
|
Balance, December 31, 2020 |
|
$ |
|
- |
$ |
- |
- |
$ |
- |
|
$ |
|
|
$ |
|
$ |
|
$ |
- |
$ |
( |
) |
$ |
( |
) |
|||||||||||||||||||||||||||||||
|
Vesting of common stock issued to employees |
- |
- |
- |
- |
- |
- |
- |
- |
- |
- |
|
- |
- |
|
||||||||||||||||||||||||||||||||||||||||||
|
Vesting of stock options issued to employees |
- |
- |
- |
- |
- |
- |
- |
- |
- |
- |
|
- |
- |
|
||||||||||||||||||||||||||||||||||||||||||
|
Common stock issued for services |
- |
- |
- |
- |
- |
- |
- |
- |
|
|
|
- |
- |
|
||||||||||||||||||||||||||||||||||||||||||
|
Common stock issued for conversion of notes payable and accrued interest |
- |
- |
- |
- |
- |
- |
- |
- |
|
|
|
- |
- |
|
||||||||||||||||||||||||||||||||||||||||||
|
Sale of common stock in private placement |
- |
- |
- |
- |
- |
- |
- |
- |
|
|
|
- |
- |
|
||||||||||||||||||||||||||||||||||||||||||
|
Sale of Preferred Stock Series C |
- |
- |
|
|
- |
- |
- |
- |
- |
- |
|
- |
- |
|
||||||||||||||||||||||||||||||||||||||||||
|
Warrants issued with Preferred Stock Series C |
- |
- |
- |
- |
- |
- |
- |
- |
- |
- |
|
- |
- |
|
||||||||||||||||||||||||||||||||||||||||||
|
Conversion of Preferred Stock Series A to common stock |
( |
) |
( |
) |
- |
- |
- |
- |
- |
- |
|
|
( |
) |
- |
- |
- |
|||||||||||||||||||||||||||||||||||||||
|
Shares issued for exercise of stock options |
- |
- |
- |
- |
- |
- |
- |
- |
|
|
|
( |
) |
- |
|
|||||||||||||||||||||||||||||||||||||||||
|
Net shares issued in connection with settlement agreement |
- |
- |
- |
- |
- |
- |
( |
) |
( |
) |
( |
) |
( |
) |
|
- |
- |
|
||||||||||||||||||||||||||||||||||||||
|
Shares of common stock issued for conversion of Preferred Stock Series C |
- |
- |
( |
) |
( |
) |
- |
- |
- |
- |
|
|
( |
) |
- |
- |
- |
|||||||||||||||||||||||||||||||||||||||
|
Deemed dividend on conversion of Preferred Stock Series A to common stock |
- |
- |
- |
- |
- |
- |
- |
- |
|
- |
( |
) |
- |
|||||||||||||||||||||||||||||||||||||||||||
|
Deemed dividend on Preferred Stock Series C |
- |
- |
- |
- |
- |
- |
- |
- |
- |
- |
|
- |
( |
) |
- |
|||||||||||||||||||||||||||||||||||||||||
|
Preferred stock dividends |
- |
- |
- |
- |
- |
- |
- |
- |
- |
- |
( |
) |
- |
( |
) |
|||||||||||||||||||||||||||||||||||||||||
|
Loss for the period ended June 30, 2021 |
- |
- |
- |
- |
- |
- |
- |
- |
( |
) |
( |
) |
||||||||||||||||||||||||||||||||||||||||||||
|
Balance, June 30, 2021 |
- |
$ |
- |
|
$ |
|
- |
$ |
- |
|
$ |
|
|
$ |
|
$ |
|
$ |
( |
) |
$ |
( |
) |
$ |
|
|||||||||||||||||||||||||||||||
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, |
||||||||
|
2022 |
2021 |
|||||||
|
CASH FLOWS FROM OPERATING ACTIVITIES |
||||||||
|
Net loss |
$ | ( |
) |
$ | ( |
) |
||
|
Adjustments to reconcile net loss to net cash used in operating activities: |
||||||||
|
Depreciation |
||||||||
|
Amortization of right-to-use asset |
||||||||
|
Net gain on settlement of notes payable |
( |
) |
||||||
|
Financing cost - waiver fee shares |
||||||||
|
Gain on waiver fee shares |
( |
) |
||||||
|
Commitment shares |
- | - | ||||||
|
Loss on commitment shares |
||||||||
|
Gain on conversion of accrued salary |
( |
) |
||||||
|
(Gain) loss on revaluation of derivative liabilities |
||||||||
|
Loss on settlement of accounts payable |
||||||||
|
Amortization of discount on notes payable |
||||||||
|
Share-based compensation |
||||||||
|
Changes in assets and liabilities: |
||||||||
|
Accounts receivables |
( |
) |
( |
) |
||||
|
Prepaid expenses |
( |
) |
||||||
|
Due from related party |
( |
) |
||||||
|
Inventory |
( |
) |
( |
) |
||||
|
Accounts payable and accrued liabilities |
( |
) |
||||||
|
Operating lease liability, net |
( |
) |
||||||
|
Other current liabilities |
( |
) |
||||||
|
Accrued interest |
||||||||
|
Net cash used in operating activities |
( |
) |
( |
) |
||||
|
CASH FLOWS FROM INVESTING ACTIVITIES |
||||||||
|
Cash paid for acquisition of fixed assets and construction in progress |
( |
) |
( |
) |
||||
|
Net cash used in investing activities |
( |
) |
( |
) |
||||
|
CASH FLOWS FROM FINANCING ACTIVITIES |
||||||||
|
Proceeds from private placement of common stock |
||||||||
|
Proceeds from sales of Series C Preferred Stock, net of fees |
||||||||
|
Proceeds from notes payable - related parties, net of discounts |
||||||||
|
Proceeds from notes payable, net of discounts |
||||||||
|
Principal payments on notes payable related parties |
( |
) |
||||||
|
Principal payments on notes payable |
( |
) |
||||||
|
Net cash provided by financing activities |
||||||||
|
Net increase in cash and cash equivalents |
( |
) |
||||||
|
Cash and cash equivalents at beginning of period |
||||||||
|
Cash and cash equivalents at end of period |
$ | $ | ||||||
See accompanying notes to these unaudited condensed consolidated financial statements.
MITESCO, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
|
For the Six |
||||||||
|
Months Ended |
||||||||
|
June 30, |
||||||||
|
2022 |
2021 |
|||||||
|
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: |
||||||||
|
Interest paid |
$ | $ | ||||||
|
NON-CASH INVESTING AND FINANCING ACTIVITIES: |
||||||||
|
Stock issued for conversion of debt and accrued interest |
$ | $ | ||||||
|
Settlement of derivative liabilities |
$ | $ | ( |
) |
||||
|
Discount on notes payable due to derivative liabilities |
$ | - | $ | - | ||||
|
Preferred stock dividend |
$ | $ | ||||||
|
Deemed dividends on Preferred Stock |
$ | $ | ||||||
|
Conversion of Series A Preferred stock to common stock |
$ | $ | ||||||
|
Conversion of Series C Preferred stock to common stock |
$ | $ | ||||||
|
Conversion of accounts payable to common stock |
$ | $ | ||||||
|
Conversion of accrued payroll to common stock |
$ | $ | ||||||
|
Capital expenditures included in accounts payable |
$ | $ | ||||||
See accompanying notes to these unaudited condensed consolidated financial statements.
MITESCO, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2022 AND 2021
(Unaudited)
Note 1 – Description of Business
Company Overview
Mitesco, Inc. (the “Company,” “we,” “us,” or “our”) was formed in the state of Delaware on January 18, 2012. On December 9, 2015, the Company restructured its operations and acquired Newco4pharmacy, LLC, a development stage company which sought to acquire compounding pharmacy businesses. As a part of the restructuring, the Company completed a “spin out” of its former business line. On April 24, 2020, the Company changed its name to Mitesco, Inc.
Since 2020, the Company’s operations have focused on establishing medical clinics utilizing nurse practitioners under The Good Clinic name and development and acquisition of telemedicine technology. In March of 2020, the Company formed a wholly owned subsidiary, The Good Clinic LLC, a Colorado limited liability company for its clinic business.
The Company opened its first The Good Clinic in Minneapolis, Minnesota in the first quarter of 2021 and have six operating at the time of this filing. The Company intends on opening up to 50 new clinics in the next three years, in addition to any existing sites it might acquire.
Note 2 - Financial Condition, Going Concern and Management Plans
On November 19, 2021, the Company closed a bridge financing round totaling $
Pursuant to the Certificate of Designations, Preferences and Rights of the Series D Convertible Preferred Stock of the Company, Inc., filed with the Secretary of State of the State of Delaware on October 18, 2021 (the “COD”), there are
On November 11, 2021, the Company filed a registration statement on form S-1 in connection with a planned up-list to a national exchange; on June 30, 2022 the Company its third amendment to the S-1; and on August 3, 2022, the Company files its fourth amendment to the S-1.
As of the date of this filing, the Company has closed on $
Between December 30, 2021 through the date of this filing, the Company has entered into a total $
The Company entered into a debt-for-equity exchange agreement with Gardner Builders Holdings, LLC (the “Creditor”) on January 7, 2022 (the “Agreement”). Pursuant to the Agreement, the Company issued shares of restricted common stock, par value $
The Agreement settles for certain accounts payable amounts owed by the Company to the Creditor (the “Accounts Payable Amount”) as well as upcoming amounts that will become due between the date of the Agreement and April 1, 2022. The Agreement also settles incurred interest and penalties on the amounts due through January 5, 2022, as well as future interest payments on amounts incurred in the first quarter of 2022 (collectively, the “Additional Costs”, and combined with the Accounts Payable Amount, the “Company Debt Obligations”). The Accounts Payable Amount is $
As of June 30, 2022, the Company had cash and cash equivalents of $
As a result of these factors, there is substantial doubt about the ability of the Company to continue as a going concern for one year from the date the financial statements are issued. The Company’s continuance is dependent on raising capital and generating revenues sufficient to sustain operations. The Company believes that the necessary capital will be raised and has entered discussions to do so with certain individuals and companies. However, as of the date of these condensed consolidated financial statements, no formal agreement exists.
The accompanying condensed consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts classified as liabilities that might be necessary should the Company be forced to take any such actions.
PPP Loan
During March 2020, in response to the COVID-19 crisis, the federal government announced plans to offer loans to small businesses in various forms, including the Payroll Protection Program, or “PPP”, established as part of the Corona Virus Aid, Relief and Economic Security Act (“CARES Act”) and administered by the U.S. Small Business Administration. On April 25, 2020, the Company entered an unsecured Promissory Note with Bank of America for a loan in the original principal amount of approximately $
COVID -19 Impact
The Company has had some impact on its operations because of the effects of the COVID-19 pandemic, primarily with accessibility to staffing, consultants and in the capital markets, and it is adjusting as needed within its available resources. The Company will continue to assess the effect of the pandemic on its operations. The extent to which the COVID-19 pandemic will continue to impact the Company’s business and operations will depend on future developments that are highly uncertain and cannot be predicted with confidence, such as the ultimate geographic spread of the disease, the duration of the outbreak, the duration and effect of possible business disruptions and the short-term effects and ultimate effectiveness of the travel restrictions, quarantines, social distancing requirements and business closures in the United States and other countries to contain and treat the disease. While the potential economic impact brought by, and the duration of, COVID-19 may be difficult to assess or predict, a widespread pandemic could result in significant disruption of global financial markets, reducing the Company’s ability to access capital, which could in the future negatively affect the Company’s liquidity. In addition, a recession or market correction resulting from the spread of COVID-19 could materially affect the Company’s business and the value of its securities.
Note 3 – Basis of Presentation and Summary of Significant Accounting Policies
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and pursuant to the instructions to Form 10-Q and Article 8 of Regulation S-X of the Securities and Exchange Commission (“SEC”) and on the same basis as the Company prepares its annual audited consolidated financial statements. In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments, consisting of normal recurring adjustments, considered necessary for a fair presentation of such interim results.
The results for the condensed consolidated statement of operations are not necessarily indicative of results to be expected for the year ending December 31, 2022 or for any future interim period. The condensed consolidated balance sheet at June 30, 2022 has been derived from unaudited financial statements; however, it does not include all of the information and notes required by U.S. GAAP for complete financial statements. The accompanying condensed consolidated financial statements should be read in conjunction with the consolidated financial statements for the year ended December 31, 2021 and notes thereto included in the Company’s annual report on Form 10-K filed on April 5, 2022.
Principles of Consolidation – The accompanying condensed consolidated financial statements include the accounts of Mitesco, Inc., and its wholly owned subsidiaries Mitesco NA, LLC, The Good Clinic, LLC, and Acelerar Healthcare Holdings, LTD. In addition, we manage two entities under a variable interest entity arrangement and have control over the operating activities of these legal entities in which we do not maintain a controlling ownership interest but over which we will have direct influence over the operations and are the primary beneficiary. We expect that these entities will typically be subject to nominee ownership and transfer restriction agreements that effectively transfer the majority of the economic risks and rewards of their ownership to the Company. The Company’s management, restriction and other agreements concerning such nominee-owned entities typically includes both financial terms and protective and participating rights to the entities’ operating, strategic and non-clinical governance decisions which transfer substantial powers over and economic responsibility for these entities to the Company. As such, the Company applies the guidance of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 810 – Consolidation (“ASC 810”), to determine when an entity that is insufficiently capitalized or not controlled through its voting interests, referred to as a variable interest entity should be consolidated. All intercompany balances and transactions have been eliminated.
Use of Estimates - The preparation of these financial statements requires our management to make estimates and assumptions about future events that affect the amounts reported in the financial statements and related notes. Future events and their effects cannot be determined with absolute certainty. Therefore, the determination of estimates requires the exercise of judgment.
Cash - The Company considers all highly liquid investments with maturities of three months or less to be cash equivalents. The Company had cash and cash equivalents of approximately $
Property, Plant, and Equipment - Property and equipment is recorded at the lower of cost or estimated net recoverable amount and is depreciated using the straight-line method over its estimated useful life. Property acquired in a business combination is recorded at estimated initial fair value. Property, plant, and equipment are depreciated using the straight-line method based on the lesser of the estimated useful lives of the assets or the lease term based upon the following life expectancy:
|
Years |
|||
|
Office equipment |
|
||
|
Furniture & fixtures |
|
||
|
Machinery & equipment |
|
||
|
Leasehold improvements |
|
||
Revenue Recognition – On January 1, 2018, the Company adopted the new revenue recognition accounting standard issued by the Financial Accounting Standards Board (“FASB”) and codified in the ASC as Topic 606 (“ASC 606”). The revenue recognition standard in ASC 606 outlines a single comprehensive model for recognizing revenue as performance obligations, defined in a contract with a customer as goods or services transferred to the customer in exchange for consideration, are satisfied. The standard also requires expanded disclosures regarding the Company’s revenue recognition policies and significant judgments employed in the determination of revenue.
The Company applied the modified retrospective approach to all contracts when adopting ASC 606. As a result, at the adoption of ASC 606 what was previously classified as the provision for bad debts in the statement of operations is now reflected as implicit price concessions (as defined in ASC 606). For changes in credit issues not assessed at the date of service, the Company will prospectively recognize those amounts in other operating expenses on the statement of operations. For periods prior to the adoption of ASC 606, the provision for bad debts has been presented consistent with the previous revenue recognition standards that required it to be presented separately as a component of net operating revenues.
Our revenues generally relate to net patient fees received from various payers and patients themselves under contracts in which our performance obligations are to provide services to the patients. Revenues are recorded during the period our obligations to provide services are satisfied. The contractual relationships with patients, in most cases, also involve a third-party payer (Medicare, Medicaid, managed care health plans and commercial insurance companies, including plans offered through the health insurance exchanges) and the transaction prices for the services provided are dependent upon the terms provided by (Medicare and Medicaid) or negotiated with (managed care health plans and commercial insurance companies) the third-party payers. The payment arrangements with third-party payers for the services we provide to the related patients typically specify payments at amounts less than our standard charges and generally provide for payments based upon predetermined rates for services or discounted fee-for-service rates. Management continually reviews the contractual estimation process to consider and incorporate updates to laws and regulations and the frequent changes in managed care contractual terms resulting from contract renegotiations and renewals.
Stock-Based Compensation-We recognize the compensation costs of share-based compensation arrangements based on the grant-date fair value and recognize the costs in the financial statements over the period during which employees are required to provide services. Share-based compensation cost for stock options is estimated at the grant date based on each option’s fair-value as calculated by the Black-Scholes-Merton (“BSM”) option-pricing model. Share-based compensation arrangements may include stock options, restricted share plans, performance-based awards, share appreciation rights and employee share purchase plans. Such compensation amounts, if any, are amortized over the respective vesting periods of the option grant.
Equity instruments issued to those other than employees are recognized pursuant to FASB issued ASU 2018-07, Compensation – Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting. This ASU relates to the accounting for non-employee share-based payments. The amendment in this update expands the scope of Topic 718 to include all share-based payment transactions in which a grantor acquired goods or services to be used or consumed in a grantor’s own operations by issuing share-based payment awards. The ASU excludes share-based payment awards that relate to: (1) financing to the issuer; or (2) awards granted in conjunction with selling goods or services to customers as part of a contract accounted for under Topic 606, Revenue from Contracts from Customers. The share-based payments are to be measured at grant-date fair value of the equity instruments that the entity is obligated to issue when the goods or service has been delivered or rendered and all other conditions necessary to earn the right to benefit from the equity instruments have been satisfied. This standard became effective for public business entities for fiscal years beginning after December 15, 2018, including interim periods within that fiscal year. We adopted the provisions of this ASU on January 1, 2019. The adoption had no impact on our results of operations, cash flows, or financial condition.
Convertible Instruments-The Company reviews the terms of convertible debt and equity instruments to determine whether there are conversion features or embedded derivative instruments including embedded conversion options that are required to be bifurcated and accounted for separately as a derivative financial instrument. In circumstances where the convertible instrument contains more than one embedded derivative instrument, including conversion options that are required to be bifurcated, the bifurcated derivative instruments are accounted for as a single compound instrument. Also, in connection with the sale of convertible debt and equity instruments, the Company may issue free standing warrants that may, depending on their terms, be accounted for as derivative instrument liabilities, rather than as equity. When convertible debt or equity instruments contain embedded derivative instruments that are to be bifurcated and accounted for separately, the total proceeds allocated to the convertible host instruments are first allocated to the fair value of the bifurcated derivative instrument. The remaining proceeds, if any, are then allocated to the convertible instruments themselves, usually resulting in those instruments being recorded at a discount from their face amount. When the Company issues debt securities, which bear interest at rates that are lower than market rates, the Company recognizes a discount, which is offset against the carrying value of the debt. Such discount from the face value of the debt, together with the stated interest on the instrument, is amortized over the life of the instrument through periodic charges to income. In addition, certain conversion features are recognized as beneficial conversion features to the extent the conversion price as defined in the convertible note is less than the closing stock price on the issuance of the convertible notes.
Common Stock Purchase Warrants-The Company accounts for common stock purchase warrants in accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 815, Accounting for Derivative Instruments and Hedging Activities. As is consistent with its handling of stock compensation and embedded derivative instruments, the Company’s cost for stock warrants is estimated at the grant date based on each warrant’s fair-value as calculated by the Black Sholes option-pricing model value method for valuing the impact of the expense associated with these warrants.
Stockholders’ Equity-Shares of common stock issued for other than cash have been assigned amounts equivalent to the fair value of the service or assets received in exchange.
Per Share Data-Basic loss per share is computed by dividing net loss by the weighted average number of common shares outstanding for the year. Diluted loss per share is computed by dividing net loss by the weighted average number of common shares outstanding plus common stock equivalents (if dilutive) related to warrants, options, and convertible instruments.
Financial Instruments and Fair Values-The fair value of a financial instrument represents the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. Fair value estimates are made at a specific point in time, based upon relevant market information about the financial instrument. In determining fair value, we use various valuation methodologies and prioritize the use of observable inputs. We assess the inputs used to measure fair value using a three-tier hierarchy based on the extent to which inputs used in measuring fair value are observable in the market:
Level 1 – inputs include exchange quoted prices for identical instruments and are the most observable.
Level 2 – inputs include brokered and/or quoted prices for similar assets and observable inputs such as interest rates.
Level 3 – inputs include data not observable in the market and reflect management judgment about the assumptions market participants would use in pricing the asset or liability.
The use of observable and unobservable inputs and their significance in measuring fair value are reflected in our hierarchy assessment. The carrying amount of cash, prepaid assets, accounts payable and accrued liabilities approximate fair value due to the short-term maturities of these instruments. Because cash and cash equivalents are readily liquidated, management classifies these values as Level 1. The fair value of the derivative liabilities approximates their book value as the instruments are short-term in nature and contain market rates of interest. Because there is no ready market or observable transactions, management classifies the derivative liabilities as Level 3.
New Accounting Standards
From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (“FASB”) or other standard setting bodies that the Company adopts as of the specified effective date. Unless otherwise discussed, the Company does not believe that the impact of recently issued standards that are not yet effective will have a material impact on its financial position or results of operations upon adoption.
Recent Accounting Standards Not Yet Adopted
In August 2020, the FASB issued ASU 2020-06, “Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40)”. This ASU reduces the number of accounting models for convertible debt instruments and convertible Preferred Stock. As well as amend the guidance for the derivatives scope exception for contracts in an entity’s own equity to reduce form-over-substance-based accounting conclusions. In addition, this ASU improves and amends the related EPS guidance. This standard is effective for us on January 1, 2022, including interim periods within those fiscal years. Adoption is either a modified retrospective method or a fully retrospective method of transition. We are currently assessing the impact the new guidance will have on our condensed consolidated financial statements.
There are various other updates recently issued, most of which represent technical corrections to the accounting literature or application to specific industries and are not expected to a have a material impact on the Company’s consolidated financial position, results of operations or cash flows.
Note 4 – Net Loss Per Share Applicable to Common Shareholders
Net Loss per Share Applicable to Common Stockholders
Basic loss per common share is computed by dividing net loss by the weighted average number of common shares outstanding during the reporting period. Diluted loss per common share is computed similarly to basic loss per common share except that it reflects the potential dilution that could occur if dilutive securities or other obligations to issue common stock were exercised or converted into common stock.
The following table sets forth the computation of loss per share for the three and six months ended June 30, 2022, and 2021, respectively:
|
For the Three Months Ended |
For the Six Months Ended |
|||||||||||||||
|
June 30, |
June 30, |
|||||||||||||||
|
2022 |
2021 |
2022 |
2021 |
|||||||||||||
|
Numerator: |
||||||||||||||||
|
Net loss applicable to common shareholders |
$ |
( |
) |
$ |
( |
) |
$ |
( |
) |
$ |
( |
) |
||||
|
Denominator: |
||||||||||||||||
|
Weighted average common shares outstanding |
|
|
|
|
||||||||||||
|
Net loss per share: |
||||||||||||||||
|
Basic and diluted |
$ |
( |
) |
$ |
( |
) |
$ |
( |
) |
$ |
( |
) |
||||
The Company excluded all common equivalent shares outstanding for warrants, options, and convertible instruments to purchase common stock from the calculation of diluted net loss per share because all such securities are antidilutive for the periods presented.
As of June 30, 2022, and 2021, the following shares were issuable and excluded from the calculation of diluted loss:
|
For the Six Months Ended |
||||||||
|
June 30, |
||||||||
|
2022 |
2021 |
|||||||
|
Common stock options |
|
|
||||||
|
Common stock purchase warrants |
|
|
||||||
|
Convertible Preferred Stock Series C |
|
|
||||||
|
Accrued interest on Preferred Stock |
|
|
||||||
|
Potentially dilutive securities |
|
|
||||||
Note 5 – Related Party Transactions
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 $
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 $
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 $
On March 22, 2022, the Company issued
On April 27, 2022, the Company issued
On April 27, 2022, the Company issued a 10% Promissory Note due June 30, 2022 (the “Diamond Note 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 $
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 $
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 $
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 $
The May 26 Notes carry a
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
On June 13, 2022, the Company issued
Note 6 – Accounts Payable and Accrued Liabilities
Accounts payable and accrued liabilities consisted of the following at June 30, 2022 and 2021:
|
June 30, |
December 31, |
|||||||
|
2022 |
2021 |
|||||||
|
Trade accounts payable |
$ |
|
$ |
|
||||
|
Accrued payroll and payroll taxes |
|
|
||||||
|
Other |
- |
|
||||||
|
Total accounts payable and accrued liabilities |
$ |
|
$ |
|
||||
Note 7 - Right to Use Assets and Lease Liabilities – Operating Leases
The Company has operating leases for its clinic with a remaining lease term of approximately
The Company’s ROU asset amortization for the three months ended June 30, 2022 and 2021 was approximately $
The difference between the lease expense and the associated ROU asset amortization consists of interest at a rate of
As of June 30, 2022, the Company had total operating lease liabilities of approximately $
|
Right to use assets – operating leases are summarized below: |
||||||||
|
June 30, |
December 31, |
|||||||
|
2022 |
2021 |
|||||||
|
Right to use assets, net |
$ |
|
$ |
|
||||
|
Right to use assets – operating leases are summarized below: |
||||||||
|
June 30, |
December 31, |
|||||||
|
2022 |
2021 |
|||||||
|
Lease liability |
$ |
|
$ |
|
||||
|
Less: current portion |
( |
) |
( |
) |
||||
|
Lease liability, non-current |
$ |
|
$ |
|
||||
|
Maturity analysis under these lease agreements are as follows: |
||||
|
For the twelve months ended June 30, 2023 |
$ |
|
||
|
For the twelve months ended June 30, 2024 |
|
|||
|
For the twelve months ended June 30, 2025 |
|
|||
|
For the twelve months ended June 30, 2026 |
|
|||
|
For the twelve months ended June 30, 2027 |
|
|||
|
Thereafter |
|
|||
|
Total |
|
|||
|
Less: Present value discount |
( |
) |
||
|
Lease liability |
$ |
|
||
Note 8 – Debt
Howe Note 1
Mitesco, Inc. (the “Company”) issued a 10% Promissory Note (the “Howe Note 1”) due June 30, 2022, dated December 30, 2021, to the Michael C. Howe Living Trust (the “Lender”). Michael C. Howe is the Chief Executive Officer of the Good Clinic LLC, one of our subsidiaries. The principal amount of the Note is $
Warrants.
Diamond Note 1
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 Diamond Note 1 is $
On March 22, 2022, the Company issued
Diamond Note 2
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 2 is $
On April 27, 2022, the Company issued
AJB Capital Note
On March 18, 2022, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with AJB Capital Investments, LLC (the “Investor”) with respect to the sale and issuance to the Investor of: (i) an initial commitment fee in the amount of $
Anson East Master Fund LP and Anson Investments Master Fund LP
On April 6, 2022, the Company entered into separate Securities Purchase Agreement with each of Anson East Master Fund LP and Anson Investments Master Fund LP with respect to the sale and issuance to AEMF and AIMF of: (i)
GS Capital Partners
On April 18, 2022, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with GS Capital Partners (the “Investor”) with respect to the sale and issuance to the Investor of: (i)
Diamond Note 3
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 $
Kishon Investments, LLC
On May 10, 2022, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with Kishon Investments, LLC (the “Investor”) with respect to the sale and issuance to the Investor of: (i) an
Diamond Note 4
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 $
Finnegan Note 1
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 $
May 26, 2022 Notes
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 the aggregate principal amount of $
The May 26 Notes carry a
June 9, 2022 Notes
The Company issued two 10% Promissory Notes due as described below (individually, the “Howe Note” and the “Dragon Note”, and collectively, the “June 9 Notes”), dated June 9, 2022, to Michael C. Howe Living Trust and Dragon Dynamic Funds Platform Ltd. (the “June 9 Lenders”) in the aggregate principal amount of $
The June 9 Notes carry a
PPP Loan
During March 2020, in response to the COVID-19 crisis, the federal government announced plans to offer loans to small businesses in various forms, including the Payroll Protection Program, or “PPP”, established as part of the Corona Virus Aid, Relief and Economic Security Act (“CARES Act”) and administered by the U.S. Small Business Administration. On April 25, 2020, the Company entered an unsecured Promissory Note with Bank of America for a loan in the original principal amount of approximately $
These amounts are reflected in the table below:
Notes Payable Table 1:
|
June 30, |
December 31, |
|||||||
|
2022 |
2021 |
|||||||
|
Notes Payable |
$ |
|
$ |
|
||||
|
PPP Loan |
|
|
||||||
| |
|
|||||||
|
Less: Discounts |
( |
) |
( |
) |
||||
|
Notes payable - net of discounts |
$ |
|
$ |
|
||||
|
Current Portion, net of discounts |
$ |
|
$ |
|
||||
|
Long-term portion, net of discounts |
$ |
- |
$ |
- |
||||
Note 9 – Stockholders’ Equity (Deficit)
Common Stock
The Company has authorized
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 $
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 interest payments on amounts incurred in the first quarter of 2022 (collectively, the “Additional Costs”, and combined with the Accounts Payable Amount, the “Company Debt Obligations”). The Accounts Payable Amount was $
On March 22, 2022 and March 31, 2022, the Company issued an aggregate
On March 31, 2022, the Company issued
On March 31, 2022, the Company issued
On April 18, 2022, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with GS Capital Partners (the “Investor”) with respect to the sale and issuance to the Investor of: (i) an initial commitment fee in the amount of $
Pursuant to the terms of the Purchase Agreement, the initial Commitment Fee Shares were issued at a value of $159,259, the Note was issued in the principal amount of $277,777 for a purchase price of $
On April 27, 2022, the Company issued
On April 27, 2022, the Company issued
On May 10, 2022, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with Kishon Investments, LLC (the “Investor”) with respect to the sale and issuance to the Investor of: (i) an initial commitment fee in the amount of $
Pursuant to the terms of the Purchase Agreement, the initial Commitment Fee Shares were issued at a value of $159,259, the Note was issued in the principal amount of $277,777 for a purchase price of $
On May 18, 2022, the Company issued
On May 23, 2022, the Company issued
On May 26, 2022, the Company issued
On June 9, 2022, the Company issued
Common Stock Transactions During the Six Months Ended June 30, 2021
On January 4, 2021, the Company issued
On January 6, 2021, the Company issued
On January 11, 2021, the Company issued
On January 14, 2021, the Company issued
On January 21, 2021, the Company issued
On January 28, 2021, the Company issued
On February 1, 2021, the Company issued
On February 5, 2021, the Company entered into a settlement agreement with the holders of the Eagle Equities Note 7 whereby the Company issued
On February 5, 2021, the Company entered into a settlement agreement with the holders of the Eagle Equities Note 8 whereby the Company issued
On February 5, 2021, the Company entered into a settlement agreement with the holders of the Eagle Equities Note 9 whereby the Company issued
On February 5, 2021, the Company entered into a settlement agreement with the holders of the Eagle Equities Note 10 whereby the Company issued
On February 22, 2021, the Company issued
On March 11, 2021, the Company issued
On March 17, 2021, the Company issued
On March 23, 2021, the Company issued
On April 19, 2021, the Company issued
On May 4 through May 26, 2021, the Company issued
On May 12, 2021, the Company issued
On June 10 through June 29, 2021, the Company issued
On June 23, 2021, the Company cancelled
Also, during the six months ended June 30, 2021, the Company charged the amount of $
Preferred Stock
We have authorized to issue
Series A Preferred Stock
Series A Preferred Stock Transactions During the Six Months Ended June 30, 2022
None.
Series A Preferred Stock Transactions During the Six Months Ended June 30, 2021
During the six months ended June 30, 2021, the Company accrued dividends in the amount of $
Series C Preferred Stock
Series C Preferred Stock Transactions During the Six Months Ended June 30, 2022
During the six months ended June 30, 2022, the Company accrued dividends on the Series C Preferred Stock in the amount of $
Series C Preferred Stock Transactions During the Six Months Ended June 30, 2021
On March 25, 2021, the Company sold
Between May 4 and May 26, 2021,
The Series C Preferred Stock has the following terms:
Ranking. The Series C Preferred Stock and the Series D Preferred, discussed below, ranks senior to all other preferred stock of the Company except in relation to the Series X Cumulative Redeemable Perpetual Preferred Stock, which ranks Pari passu to the Series C Preferred Stock, with respect to the preferences as to dividends, distributions and payments upon the liquidation, dissolution and winding up of the Company.
Voting Rights. Holders of the Series C Preferred Stock have the right to vote on any matter presented to holders of our Common Stock for their action or consideration at any meeting of the stockholders (or by written consent of stockholders in lieu of meeting), each holder of our Series C Preferred Stock shall be entitled to cast the number of votes equal to the number of whole shares of Common Stock into which the shares of Series C preferred Stock held by such holder, as described below, are convertible as of the record date for determining stockholders entitled to vote on (or consent to) such matter, voting with the Common Stock as a single class.
Conversion. Each holder of our Series C Preferred Stock is entitled to convert their shares of Series C Preferred Stock, in whole or in part, at the Conversion Rate, which is determined by dividing the Conversion Amount (the Stated Value of $1.05, plus any accrued but unpaid dividends) by the Conversion Price ($0.25 per share). In addition, upon certain triggering events, the holders of our Series C Preferred Stock have the right to convert their Series C Preferred Stock at the lesser of the Conversion Price or 75% of the average VWAP for the five trading days prior to the date of the notice of conversion. The Conversion Price is subject to adjustment upon certain stock splits and recapitalization as well as upon the sale of Common Stock or Common Stock Equivalents. Each share of the Series C Preferred Stock is convertible at the option of the holder thereof, or automatically or upon the closing of an underwritten offering of at least $10 million of the Company’s securities or upon listing of the Company’s Common Stock on a national securities exchange.
Dividends. Each share of Series C Preferred Stock accrues dividends on a quarterly basis in arrears, at the rate of
Liquidation Rights. The holders of our Series C Preferred stock are entitled to receive in cash out of our assets, whether from capital or from earnings available for distribution to our stockholders (the “Liquidation Funds”), before any amount shall be paid to the holders of any of shares of capital stock that rank junior to the Series C Preferred Stock, but Pari passu with any shares of capital stock that have a parity ranking with the Series C Preferred stock (“Parity Stock”) then outstanding, an amount per share of Series C Preferred Stock equal to the greater of (A) the Conversion Amount on the date of such payment or (B) the amount per share such holder of the Series C Preferred Stock would receive if such holder converted their Series C Preferred Stock into Common Stock immediately prior to the date of such payment, provided that if the Liquidation Funds are insufficient to pay the full amount due to the holders of the Series C Preferred Stock and holders of shares of Parity Stock, then each holder Series C Preferred Stock and each holder of Parity Stock shall receive a percentage of the Liquidation Funds equal to the full amount of Liquidation Funds payable to such holder and such holder of Parity Stock as a liquidation preference, in accordance with their respective certificate of designations (or equivalent), as a percentage of the full amount of Liquidation Funds payable to all holders of Series C Preferred Stock and all holders of shares of Parity Stock. All such amounts shall be paid or set apart for payment before the payment or setting apart for payment of any amount for, or the distribution of any Liquidation Funds of the Corporation to the holders of shares of capital stock that may rank junior to that of the Series C Preferred Stock Junior Stock.
Rights and Preferences. The rights, preferences, and privileges of holders of our Series C Preferred Stock are subject to, and may be adversely affected by, the rights of holders of shares of any series of Preferred Stock that we may designate and issue in the future that may rank senior to the Series C Preferred Stock.
Redemption Rights. Upon receipt of a conversion notice, we have the right (but not the obligation) to redeem all or part of the Series C Preferred Stock (which the applicable holder of the Series C Preferred Stock is seeking to convert) at a price per share equal to the product of 125% of the (1) Stated Value plus (2) the Additional Amount (the “Redemption Price”). If we decide to exercise the redemption right, within one trading day, we shall deliver written notice to such holder(s) of Series C Preferred Stock that the Series C Preferred Stock will be redeemed (the “Redemption Notice”) on the date that is three trading days following the date of the Redemption Notice (such date, the “Redemption Date”). On the Redemption Date, we shall redeem the shares of Series C Preferred Stock specified in such request by paying in cash therefor a sum per share equal to the Redemption Price. In no event shall a Redemption Notice be given if we may not lawfully redeem our capital stock. On or before the Redemption Date, the Redemption Price for such shares shall be paid by wire transfer of immediately available funds to an account designated in writing by the applicable holder.
Price Adjustments Protection. The conversion price is subject to appropriate adjustment in the event of share dividends, share splits, reorganizations or similar events affecting our shares of Common Stock. Other than for certain exempt issuances, in the event we issue or sell any securities, including options or convertible securities, or amend outstanding securities, at an effective price, with an exercise price or at a conversion price less than the Conversion Price, then the Conversion Price shall be reduced to such lower price.
Preemptive or Similar Rights Additionally, except for a public offering or certain exempt issuances of our securities, holders of the Series C Preferred Stock shall have the right to participate in any offering of our Common Stock or Common Stock Equivalents (as defined in the COD) in a transaction exempt from registration under the Securities Act in an amount equal to an aggregate of 30% of the financing on the same terms, conditions and price provided to investors in such an offering, such right shall expire on the 15 month anniversary of the issuance date of the Series C Preferred Stock. Further, until the earlier of 18 months from the issuance date of the Series C Preferred Stock and the date that there are less than 20% of the shares of Series C Preferred Stock outstanding, the Investors have most favored nations protection in the event we issue or sell Common Stock or Common Stock Equivalents that the Investors believe are more favorable than the terms and conditions under the Private Placement.
Fully Paid and Nonassessable. All our issued and outstanding shares of Series C Preferred Stock are fully paid and nonassessable.
Series D Preferred Stock
Pursuant to the Certificate of Designations, Preferences and Rights of the Series D Preferred Stock of the Company, Inc., filed with the Secretary of State of the State of Delaware on October 18, 2021 (the “COD”), there are
Series D Preferred Stock Transactions During the Six Months Ended June 30, 2022
During the six months ended June 30, 2022, the Company accrued dividends on the Series D Preferred Stock in the amount of $
Series D Preferred Stock Transactions During the Six Months Ended June 30, 2021
None.
Series X Preferred Stock
The Company has
Series X Preferred Stock Transactions During the Six Month Ended June 30, 2022
On June 7, 2022, the Company issued
During the six months ended June 30, 2022, the Company accrued dividends in the amount of $
Series X Preferred Stock Transactions During the Six Months Ended June 30, 2021
During the six months ended June 30, 2021, the Company accrued dividends in the amount of $
Stock Options
The following table summarizes the options outstanding at June 30, 2022 and the related prices for the options to purchase shares of the Company’s common stock:
|
Weighted |
Weighted |
||||||||||||||||||||||
|
Weighted |
average |
average |
|||||||||||||||||||||
|
average |
exercise |
exercise |
|||||||||||||||||||||
|
Range of |
Number of |
remaining |
price of |
Number of |
price of |
||||||||||||||||||
|
exercise |
options |
contractual |
outstanding |
options |
exercisable |
||||||||||||||||||
|
prices |
outstanding |
life (years) |
options |
exercisable |
options |
||||||||||||||||||
|
$ |
|
|
|
$ |
|
|
$ |
|
|||||||||||||||
| |
|
$ |
|
|
$ |
|
|||||||||||||||||
Transactions involving stock options are summarized as follows:
|
Shares |
Weighted- Average Exercise Price ($) |
|||||||
|
Outstanding at December 31, 2021 |
|
$ |
|
|||||
|
Granted |
|
$ |
|
|||||
|
Expired |
( |
) |
|
|||||
|
Outstanding at June 30, 2022 |
|
$ |
|
|||||
|
Options vested and exercisable |
|
$ |
|
|||||
On June 13, 2022, the Company issued
During the three months ended June 30, 2022 and 2021, the Company charged the amount of approximately $
At June 30, 2022, the total stock-based compensation cost related to unvested awards not yet recognized was $
The Company valued stock options during the six months ended June 30, 2022 and 2021 using the Black-Scholes valuation model utilizing the following variables:
|
June 30, |
June 30, |
|||||||
|
2022 |
2021 |
|||||||
|
Volatility |
|
% |
|
% |
||||
|
Dividends |
$ |
- |
$ |
|
||||
|
Risk-free interest rates |
|
% |
|
% |
||||
|
Term (years) |
|
|
||||||
Warrants
The following table summarizes the warrants outstanding on June 30, 2022, and the related prices for the warrants to purchase shares of the Company’s common stock (see note 8):
|
Shares |
Weighted- Average Exercise Price ($) |
|||||||
|
Outstanding on December 31, 2021 |
|
$ |
|
|||||
|
Granted |
|
$ |
|
|||||
|
Exercised |
- |
$ |
- |
|||||
|
Outstanding on June 30, 2022 |
|
$ |
|
|||||
The Company valued warrants during the six months ended June 30, 2022 and 2021 using the Black-Scholes valuation model utilizing the following variables:
|
June 30, |
June 30, |
|||||||
|
2022 |
2021 |
|||||||
|
Volatility |
|
% |
|
% |
||||
|
Dividends |
$ |
|
$ |
|
||||
|
Risk-free interest rates |
|
% |
|
% |
||||
|
Term (years) |
|
|
||||||
Note 10 – Commitments and Contingencies
Legal
There are no pending or anticipated legal actions at this time.
Note 11 – Subsequent Events
On July 7, 2022, the Company issued
The Notes carry a
The aggregate amount payable at maturity will be $
On July 21, 2022, the Company issued a 10% Promissory Notes due to Michael C Howe Living Trust (the “Lender”) and in respect of which the Company received proceeds of $
The Note carries a
The amount payable at maturity will be $
On July 21, 2022, the Company issued a 10% Promissory Notes due to Juan Carlos Iturregui (the “Lender”) and in respect of which the Company received proceeds of $
The Note carries a
The amount payable at maturity will be $
On July 26, 2022, the Company issued a 10% Promissory Notes due to Erik Scott Nommsen (the “Lender”) and in respect of which the Company received proceeds of $
The Note carries a
The amount payable at maturity will be $
On July 27, 2022, the Company issued a 10% Promissory Notes due to James H. Caplan (the “Lender”) and in respect of which the Company received proceeds of $
The Note carries a
The amount payable at maturity will be $
On August 3, 2022, the Company amended the
On August 4, 2022, the Company issued a 10% Promissory Note due to Jack Enright and in respect of which the Company received proceeds of $
The Note carries a
The amount payable at maturity will be $
On August 4, 2022, the Company issued a 10% Promissory Notes due to Jessica, Kevin C., Brody, Isabella and Jack Finnegan (collectively, the “Lenders”) and in respect of which the Company received proceeds of $
The Note carries a
The amount payable at maturity will be $
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of
Mitesco, Inc. and subsidiaries
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Mitesco, Inc. and subsidiaries (the Company) as of December 31, 2021 and 2020, and the related consolidated statements of operations, stockholders’ equity (deficit) and cash flows for the two years ended December 31, 2021, and the related notes (collectively referred to as the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the consolidated results of its operations and its cash flows for the two years then ended December 31, 2021, in conformity with accounting principles generally accepted in the United States of America.
The Company's Ability to Continue as a Going Concern
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the consolidated financial statements, the Company has an accumulated deficit, recurring losses, and expects continuing future losses that raises substantial doubt about the Company’s ability to continue as a going concern. Management's evaluation of the events and conditions and management’s plans regarding these matters are also described in Note 2. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters:
Critical audit matters are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements, and (2) involved our especially challenging, subjective, or complex judgments.
We determined that there are no critical audit matters.
RBSM LLP
We have served as the Company’s auditor since 2020.
Henderson, NV
April 4, 2022
MITESCO, INC.
CONSOLIDATED BALANCE SHEETS
|
December 31, |
December 31, |
|||||||
|
ASSETS |
2021 |
2020 |
||||||
|
Current assets |
||||||||
|
Cash and cash equivalents |
$ | $ | ||||||
|
Accounts receivable |
||||||||
|
Inventory |
||||||||
|
Prepaid expenses |
||||||||
|
Total current assets |
||||||||
|
Right to use operating leases, net |
||||||||
|
Construction in progress |
||||||||
| Fixed assets, net of accumulated depreciation of $ |
||||||||
|
Total Assets |
$ | $ | ||||||
|
LIABILITIES AND (DEFICIENCY IN) STOCKHOLDERS' EQUITY |
||||||||
|
Current liabilities |
||||||||
|
Accounts payable and accrued liabilities |
||||||||
|
Accrued interest |
||||||||
|
Derivative liabilities |
||||||||
|
Lease liability - operating leases, current |
||||||||
|
Notes Payable, net of discount |
||||||||
| Convertible notes payable, net of discount of $ |
||||||||
|
Convertible note payable, in default |
||||||||
|
SBA Loan Payable |
||||||||
|
Other current liabilities |
||||||||
|
Preferred stock dividends payable |
||||||||
|
Total current liabilities |
||||||||
|
Lease Liability- operating leases, non-current |
||||||||
|
Total Liabilities |
$ | $ | ||||||
|
Commitments and contingencies |
- | |||||||
|
Stockholders' equity (deficit) |
||||||||
| Preferred stock, $0.01 par value, |
- | |||||||
| Preferred stock, Series A, $ |
||||||||
| Preferred stock, Series C, $ |
||||||||
| Preferred stock, Series D, $ |
||||||||
| Preferred stock, Series X, $ |
||||||||
|
Common stock subscribed |
||||||||
| Common stock, $ |
||||||||
|
Additional paid-in capital |
||||||||
|
Accumulated deficit |
( |
) |
( |
) |
||||
|
Total stockholders' equity (deficit) |
( |
) |
||||||
|
Total liabilities and stockholders' equity (deficit) |
$ | $ | ||||||
The accompanying notes are an integral part of these audited consolidated financial statements.
MITESCO, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
|
For the Year |
For the Year |
|||||||
|
Ended |
Ended |
|||||||
|
December 31, |
December 31, |
|||||||
|
2021 |
2020 |
|||||||
|
Revenue |
$ | $ | ||||||
|
Cost of goods sold |
||||||||
|
Gross loss |
( |
) |
||||||
|
Operating expenses: |
||||||||
|
General and administrative |
||||||||
|
Total operating expenses |
||||||||
|
Net Operating Loss |
( |
) |
( |
) |
||||
|
Other income (expense): |
||||||||
|
Interest expense |
( |
) |
( |
) |
||||
|
Loss on legal settlement |
( |
) |
- | |||||
|
Gain on settlement of accounts payable |
||||||||
|
Gain on settlement of accrued salary |
||||||||
|
Gain on settlement of notes payable |
||||||||
|
Gain on settlement of warrants |
||||||||
|
Grant Income |
||||||||
|
(Loss) Gain on revaluation of derivative liabilities |
( |
) |
||||||
|
Total other expense |
( |
) |
( |
) |
||||
|
Loss before provision for income taxes |
( |
) |
( |
) |
||||
|
Provision for income taxes |
||||||||
|
Net loss |
$ | ( |
) |
$ | ( |
) |
||
|
Preferred stock dividends |
( |
) |
( |
) |
||||
|
Preferred stock deemed dividends |
( |
) |
||||||
|
Net loss available to common shareholders |
$ | ( |
) |
$ | ( |
) |
||
|
Net loss per share - basic and diluted |
$ | ( |
) |
$ | ( |
) |
||
|
Weighted average shares outstanding - basic and diluted |
||||||||
The accompanying notes are an integral part of these audited consolidated financial statements.
MITESCO, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 2021 and 2020
|
Preferred Stock Series A |
Preferred Stock Series C |
Preferred Stock Series D |
Preferred Stock Series X |
Common Stock |
Additional Paid-in |
Common Stock |
Accumulated |
|||||||||||||||||||||||||||||||
|
Shares |
Amount |
Shares |
Amount |
Shares |
Amount |
Shares |
Amount |
Shares |
Amount |
capital |
Subscribed |
Deficit |
Total |
|||||||||||||||||||||||||
|
Balance, December 31, 2019 |
- |
$ |
- |
- |
$ |
- |
- |
$ |
- |
|
$ |
|
|
$ |
|
$ |
|
$ |
|
$ |
( |
) |
$ |
( |
) |
|||||||||||||
|
Vesting of common stock issued to employees |
- |
- |
- |
- |
- |
- |
- |
- |
- |
- |
|
- |
- |
|
||||||||||||||||||||||||
|
Vesting of stock options issued to employees |
- |
- |
- |
- |
- |
- |
- |
- |
- |
- |
|
- |
- |
|
||||||||||||||||||||||||
|
Common stock issued for accrued salaries |
- |
- |
- |
- |
- |
- |
- |
- |
|
|
|
- |
- |
|
||||||||||||||||||||||||
|
Common stock issued for services |
- |
- |
- |
- |
- |
- |
- |
- |
|
|
|
- |
- |
|
||||||||||||||||||||||||
|
Settlement of derivative liabilities |
- |
- |
- |
- |
- |
- |
- |
- |
|
|
|
- |
- |
|
||||||||||||||||||||||||
|
Gain on settlement of stock payable |
- |
- |
- |
- |
- |
- |
- |
- |
- |
- |
- |
( |
) |
- |
( |
) |
||||||||||||||||||||||
|
Common stock issued for conversion of notes payable and accrued interest |
- |
- |
- |
- |
- |
- |
- |
- |
|
|
|
- |
- |
|
||||||||||||||||||||||||
|
Issuance of Preferred A stock to consultants |
|
|
- |
- |
- |
- |
- |
- |
- |
- |
|
|
||||||||||||||||||||||||||
| Preferred stock dividends, $ |
- |
- |
- |
- |
- |
- |
- |
- |
- |
- |
( |
) |
- |
- |
( |
) |
||||||||||||||||||||||
|
Issuance of Preferred X stock for dividends payable |
- |
- |
- |
- |
- |
- |
- |
- |
|
|
|
- |
- |
|
||||||||||||||||||||||||
|
Loss for the year ended December 31, 2020 |
- |
- |
- |
- |
- |
- |
- |
- |
- |
- |
- |
- |
( |
) |
( |
) |
||||||||||||||||||||||
|
Balance, December 31, 2020 |
|
$ |
|
- |
$ |
- |
- |
$ |
- |
|
$ |
|
|
$ |
|
$ |
|
$ |
- |
$ |
( |
) |
$ |
( |
) |
|||||||||||||
|
Balance, December 31, 2020 |
|
$ |
|
- |
$ |
- |
- |
$ |
- |
|
|
|
|
|
- |
( |
) |
( |
) |
|||||||||||||||||||
|
Vesting of common stock issued to employees |
- |
- |
- |
- |
- |
- |
- |
- |
- |
- |
|
- |
- |
|
||||||||||||||||||||||||
|
Vesting of stock options issued to employees |
- |
- |
- |
- |
- |
- |
- |
- |
- |
- |
|
- |
- |
|
||||||||||||||||||||||||
|
Common stock issued for services |
- |
- |
- |
- |
- |
- |
- |
- |
|
|
|
- |
- |
|
||||||||||||||||||||||||
|
Common stock issued for conversion of notes payable and accrued interest |
- |
- |
- |
- |
- |
- |
- |
- |
|
|
|
- |
- |
|
||||||||||||||||||||||||
|
Sale of common stock in private placement |
- |
- |
- |
- |
- |
- |
- |
- |
|
|
|
- |
- |
|
||||||||||||||||||||||||
|
Sale of Preferred Stock Series C |
- |
- |
|
|
- |
- |
- |
- |
- |
- |
|
- |
- |
|
||||||||||||||||||||||||
|
Warrants issued with Preferred Stock Series C |
- |
- |
- |
- |
- |
- |
- |
- |
- |
- |
|
- |
- |
|
||||||||||||||||||||||||
|
Sale of Preferred Stock Series D |
- |
- |
- |
- |
|
|
- |
- |
- |
- |
|
- |
- |
|
||||||||||||||||||||||||
|
Warrants issued with Preferred Stock Series D |
- |
- |
- |
- |
- |
- |
- |
- |
- |
- |
|
- |
- |
|
||||||||||||||||||||||||
|
Conversion of Preferred Stock Series A to common stock |
( |
) |
( |
) |
- |
- |
- |
- |
- |
- |
|
|
( |
) |
- |
- |
- |
|||||||||||||||||||||
|
Shares issued for exercise of stock options |
- |
- |
- |
- |
- |
- |
- |
- |
|
|
|
- |
- |
|
||||||||||||||||||||||||
|
Net shares issued in connection with settlement agreement |
- |
- |
- |
- |
- |
- |
( |
) |
( |
) |
( |
) |
( |
) |
|
- |
- |
|
||||||||||||||||||||
|
Shares of common stock issued for conversion of Preferred Stock Series C |
- |
- |
( |
) |
( |
) |
- |
- |
- |
- |
|
|
( |
) |
- |
- |
- |
|||||||||||||||||||||
|
Common stock subscribed for accounts payable and accrued liabilities |
- |
- |
- |
- |
- |
- |
- |
- |
- |
- |
- |
|
- |
|
||||||||||||||||||||||||
|
Stock issued from common stock subscribed |
- |
- |
- |
- |
- |
- |
- |
- |
|
|
|
( |
) |
- |
- |
|||||||||||||||||||||||
|
Deemed dividend on conversion of Preferred Stock Series A to common stock |
- |
- |
- |
- |
- |
- |
- |
- |
- |
- |
|
- |
( |
) |
- |
|||||||||||||||||||||||
|
Deemed dividend on Preferred Stock Series C |
- |
- |
- |
- |
- |
- |
- |
- |
- |
- |
|
- |
( |
) |
- |
|||||||||||||||||||||||
|
Deemed dividend on Preferred Stock Series D |
- |
- |
- |
- |
- |
- |
- |
- |
- |
- |
|
- |
( |
) |
- |
|||||||||||||||||||||||
| Preferred stock dividends, $ |
- |
- |
- |
- |
- |
- |
- |
- |
- |
- |
( |
) |
- |
- |
( |
) |
||||||||||||||||||||||
|
Warrants issued with note payable |
- |
- |
- |
- |
- |
- |
- |
- |
- |
- |
|
- |
- |
|
||||||||||||||||||||||||
|
Loss for the year ended December 31, 2021 |
- |
- |
- |
- |
- |
- |
- |
- |
- |
- |
- |
- |
( |
) |
( |
) |
||||||||||||||||||||||
|
Balance, December 31, 2021 |
- |
$ |
- |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
$ |
|
$ |
|
$ |
( |
) |
$ |
|
||||||||||||||
The accompanying notes are an integral part of these audited consolidated financial statements.
MITESCO, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
For the Year |
For the Year |
|||||||
|
Ended |
Ended |
|||||||
|
December 31, |
December 31, |
|||||||
|
2021 |
2020 |
|||||||
|
CASH FLOWS FROM OPERATING ACTIVITIES |
||||||||
|
Net loss |
$ | ( |
) |
$ | ( |
) |
||
|
Adjustments to reconcile net loss to net cash used in operating activities: |
||||||||
|
Depreciation |
||||||||
|
Preferred A stock issued to consultants |
||||||||
|
Amortization of right-to-use asset |
||||||||
|
Net gain on settlement of notes payable |
( |
) |
||||||
|
Gain on settlement of accounts payable |
( |
) |
||||||
|
Gain on conversion of accrued salary |
( |
) |
||||||
|
(Gain) on settlement of warrants |
( |
) |
||||||
|
Loss on conversion of Pref Stock Series A to common stock |
||||||||
|
Gain (Loss) on revaluation of derivative liabilities |
( |
) |
||||||
|
Derivative expense |
||||||||
|
Amortization of loan fees |
||||||||
|
Amortization of discount on notes payable |
||||||||
|
Share-based compensation |
||||||||
|
Changes in assets and liabilities: |
||||||||
|
Accounts receivables |
( |
) |
||||||
|
Prepaid expenses |
( |
) |
||||||
|
Due from related party |
||||||||
|
Inventory |
( |
) |
||||||
|
Accounts payable and accrued liabilities |
||||||||
|
Operating lease liability |
||||||||
|
Other current liabilities |
||||||||
|
Accrued interest |
||||||||
|
Net cash used in operating activities |
( |
) |
( |
) |
||||
|
CASH FLOWS FROM INVESTING ACTIVITIES |
||||||||
|
Cash paid for acquisition of fixed assets |
( |
) |
||||||
|
Net cash used in investing activities |
( |
) |
||||||
|
CASH FLOWS FROM FINANCING ACTIVITIES |
||||||||
|
Proceeds from private placement of common stock |
||||||||
|
Proceeds from sales of Series C Preferred Stock, net of fees |
||||||||
|
Proceeds from sales of Series D Preferred Stock, net of fees |
||||||||
|
Proceeds from notes payable, net of discount |
||||||||
|
Proceeds from sale of common stock |
||||||||
|
Proceeds from convertible notes payable, net of discount |
||||||||
|
Principal payments on notes payable |
( |
) |
( |
) |
||||
|
Net cash provided by financing activities |
||||||||
|
Net increase in cash and cash equivalents |
( |
) |
||||||
|
Cash and cash equivalents at beginning of period |
||||||||
|
Cash and cash equivalents at end of period |
$ | $ | ||||||
The accompanying notes are an integral part of these audited consolidated financial statements.
MITESCO, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
For the Year |
For the Year |
|||||||
|
Ended |
Ended |
|||||||
|
December 31, |
December 31, |
|||||||
|
2021 |
2020 |
|||||||
|
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: |
||||||||
|
Interest paid |
$ | $ | ||||||
|
NON-CASH INVESTING AND FINANCING ACTIVITIES: |
||||||||
|
Stock issued for conversion of debt and accrued interest |
$ | $ | ||||||
|
Settlement of derivative liabilities |
$ | ( |
) |
$ | - | |||
|
Discount on notes payable due to derivative liabilities |
$ | $ | ||||||
|
Preferred stock dividend |
$ | $ | ||||||
|
Deemed dividends on Preferred Stock |
$ | $ | ||||||
|
Settlement of derivative liabilities |
$ | - | $ | |||||
|
Conversion of Series A Preferred stock to common stock |
$ | $ | ||||||
|
Conversion of Series C Preferred stock to common stock |
$ | $ | ||||||
|
Conversion of accounts payable to common stock |
$ | $ | ||||||
|
Conversion of accrued payroll to common stock |
$ | $ | ||||||
|
Conversion of accounts payable to common stock subscribed |
$ | $ | ||||||
|
Cashless exercise of warrants |
$ | $ | ||||||
|
Discount on note payable due to warrants |
$ | $ | ||||||
|
Capital expenditures in accounts payable |
$ | $ | ||||||
The accompanying notes are an integral part of these audited consolidated financial statements.
MITESCO, INC.
Notes to Consolidated Financial Statements
December 31, 2021 and 2020
Note 1 – Description of Business
Company Overview
Mitesco, Inc. (the “Company,” “we,” “us,” or “our”) was formed in the state of Delaware on January 18, 2012. On December 9, 2015, we restructured our operations and acquired Newco4pharmacy, LLC, a development stage company which sought to acquire compounding pharmacy businesses. As a part of the restructuring, we completed a “spin out” of our former business line. On April 24, 2020, we changed our name to Mitesco, Inc.
Since 2020, our operations have focused on establishing medical clinics utilizing Nurse Practitioners under The Good Clinic name and development and acquisition of telemedicine technology. In March of 2020, we formed an owned subsidiary, Mitesco NA LLC, which holds The Good Clinic LLC, a Colorado limited liability company for our clinic business. The Company had previously established a strategy to address opportunities in Europe seeking technology solutions, or financing situations, through a Dublin based subsidiary, Acelerar Healthcare Holdings Ltd. After a review of its near-term opportunities in North America, the Board of Directors has determined that any efforts in the European community should be discontinued so that it can best focus on its North American operations. In conjunction with this decision the Company for the period ending December 31, 2021, we will take a one-time charge of $12,500 related to the discontinuation and wind down of our European efforts.
We opened our first The Good Clinic in Minneapolis, Minnesota in the first quarter of 2021 and have six operating at the time of this filing. We have two additional sites under contract with build-out underway in the Denver metropolitan areas before the end of 2022. We are making plans for up to opening up to 50 new clinics in the next three years, in addition to any existing sites we might acquire.
Note 2 - Financial Condition, Going Concern and Management Plans
On November 19, 2021, the Company closed a bridge financing round totaling $
Pursuant to the Certificate of Designations, Preferences and Rights of the Series D Convertible Preferred Stock of the Company, Inc., filed with the Secretary of State of the State of Delaware on October 18, 2021 (the “COD”), there are
As of the date of this filing the Company has closed on $
Mitesco, Inc. (the “Company”) issued a 10% Promissory Note due June 30, 2022 (the “Note”), dated December 30, 2021, to the Michael C. Howe Living Trust (the “Lender”). Michael C. Howe is the Chief Executive Officer of the Good Clinic LLC, one of our subsidiaries. The principal amount of the Note is $
The Company entered into a debt-for-equity exchange agreement with Gardner Builders Holdings, LLC (the “Creditor”) on January 7, 2022 (the “Agreement”). Pursuant to the Agreement, the Company issued shares of restricted common stock, par value $
The Agreement settles for certain accounts payable amounts owed by the Company to the Creditor (the “Accounts Payable Amount”) as well as upcoming amounts that will become due between the date of the Agreement and April 1, 2022. The Agreement also settles incurred interest and penalties on the amounts due through January 5, 2022, as well as future interest payments on amounts to be incurred in the first quarter of 2022 (collectively, the “Additional Costs”, and combined with the Accounts Payable Amount, the “Company Debt Obligations”). The Accounts Payable Amount is $
As of December 31, 2021, the Company had cash and cash equivalents of $
As a result of these factors, there is substantial doubt about the ability of the Company to continue as a going concern for one year from the date the financial statements are issued. The Company’s continuance is dependent on raising capital and generating revenues sufficient to sustain operations. The Company believes that the necessary capital will be raised and has entered discussions to do so with certain individuals and companies. However, as of the date of these consolidated financial statements, no formal agreement exists.
The accompanying consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts classified as liabilities that might be necessary should the Company be forced to take any such actions.
PPP Loan
During March 2020, in response to the COVID-19 crisis, the federal government announced plans to offer loans to small businesses in various forms, including the Payroll Protection Program, or "PPP", established as part of the Corona Virus Aid, Relief and Economic Security Act (“CARES Act”) and administered by the U.S. Small Business Administration. On April 25, 2020, the Company entered an unsecured Promissory Note (the “Note”) with Bank of America for a loan in the original principal amount of approximately $
COVID -19 Impact
The Company has had some impact on its operations because of the effects of the COVID-19 pandemic, primarily with accessibility to staffing, consultants and in the capital markets, and it is adjusting as needed within its available resources. The Company will continue to assess the effect of the pandemic on its operations. The extent to which the COVID-19 pandemic will continue to impact the Company’s business and operations will depend on future developments that are highly uncertain and cannot be predicted with confidence, such as the ultimate geographic spread of the disease, the duration of the outbreak, the duration and effect of possible business disruptions and the short-term effects and ultimate effectiveness of the travel restrictions, quarantines, social distancing requirements and business closures in the United States and other countries to contain and treat the disease. While the potential economic impact brought by, and the duration of, COVID-19 may be difficult to assess or predict, a widespread pandemic could result in significant disruption of global financial markets, reducing the Company’s ability to access capital, which could in the future negatively affect the Company’s liquidity. In addition, a recession or market correction resulting from the spread of COVID-19 could materially affect the Company’s business and the value of its securities.
Note 3 – Summary of Significant Accounting Policies
Basis of Accounting – The consolidated financial statements are prepared in conformity with accounting principles accepted in the United States of America (“GAAP”).
Principles of Consolidation – The accompanying consolidated financial statements include the accounts of Mitesco, Inc., and its owned subsidiaries Mitesco NA, LLC, The Good Clinic, LLC, and Acelerar Healthcare Holdings, LTD. 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. These entities are typically subject to nominee ownership and transfer restriction agreements that effectively transfer the majority of the economic risks and rewards of their ownership to the Company. The Company’s management, restriction and other agreements concerning such nominee-owned entities typically includes both financial terms and protective and participating rights to the entities’ operating, strategic and non-clinical governance decisions which transfer substantial powers over and economic responsibility for these entities to the Company. As such, the Company applies the guidance of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 810 – Consolidation (“ASC 810”), to determine when an entity that is insufficiently capitalized or not controlled through its voting interests, referred to as a variable interest entity should be consolidated. All intercompany balances and transactions have been eliminated.
Use of Estimates - The preparation of these financial statements requires our management to make estimates and assumptions about future events that affect the amounts reported in the financial statements and related notes. Future events and their effects cannot be determined with absolute certainty. Therefore, the determination of estimates requires the exercise of judgment.
Cash - The Company considers all highly liquid investments with maturities of three months or less to be cash equivalents. The Company had cash and cash equivalents of $
Property, Plant, and Equipment - Property and equipment is recorded at the lower of cost or estimated net recoverable amount and is depreciated using the straight-line method over its estimated useful life. Property acquired in a business combination is recorded at estimated initial fair value.
|
Years |
|||
|
Office equipment |
|
||
|
Furniture & fixtures |
|
||
|
Machinery & equipment |
|
||
|
Leasehold improvements |
|
||
Construction in Progress - Costs for capital assets not yet placed into service are capitalized as construction in progress on the consolidated balance sheets and will be depreciated once placed into service.
Revenue Recognition – On January 1, 2018, the Company adopted the new revenue recognition accounting standard issued by the Financial Accounting Standards Board (“FASB”) and codified in the ASC as Topic 606 (“ASC 606”). The revenue recognition standard in ASC 606 outlines a single comprehensive model for recognizing revenue as performance obligations, defined in a contract with a customer as goods or services transferred to the customer in exchange for consideration, are satisfied. The standard also requires expanded disclosures regarding the Company’s revenue recognition policies and significant judgments employed in the determination of revenue.
The Company applied the modified retrospective approach to all contracts when adopting ASC 606. As a result, at the adoption of ASC 606 what was previously classified as the provision for bad debts in the statement of operations is now reflected as implicit price concessions (as defined in ASC 606) and therefore included as a reduction to net operating revenues in 2018. For changes in credit issues not assessed at the date of service, the Company will prospectively recognize those amounts in other operating expenses on the statement of operations. For periods prior to the adoption of ASC 606, the provision for bad debts has been presented consistent with the previous revenue recognition standards that required it to be presented separately as a component of net operating revenues.
Our revenues generally relate to net patient fees received from various payers and patients themselves under contracts in which our performance obligations are to provide services to the patients. Revenues are recorded during the period our obligations to provide services are satisfied. The contractual relationships with patients, in most cases, also involve a third-party payer (Medicare, Medicaid, managed care health plans and commercial insurance companies, including plans offered through the health insurance exchanges) and the transaction prices for the services provided are dependent upon the terms provided by (Medicare and Medicaid) or negotiated with (managed care health plans and commercial insurance companies) the third-party payers. The payment arrangements with third-party payers for the services we provide to the related patients typically specify payments at amounts less than our standard charges and generally provide for payments based upon predetermined rates for services or discounted fee-for-service rates. Management continually reviews the contractual estimation process to consider and incorporate updates to laws and regulations and the frequent changes in managed care contractual terms resulting from contract renegotiations and renewals.
Stock-Based Compensation-We recognize the compensation costs of share-based compensation arrangements based on the grant-date fair value and recognize the costs in the financial statements over the period during which employees are required to provide services. Share-based compensation cost for stock options are estimated at the grant date based on each option’s fair-value as calculated by the Black-Scholes-Merton (“BSM”) option-pricing model. Share-based compensation arrangements may include stock options, restricted share plans, performance-based awards, share appreciation rights and employee share purchase plans. Such compensation amounts, if any, are amortized over the respective vesting periods of the option grant.
Equity instruments issued to those other than employees are recognized pursuant to FASB issued ASU 2018-07, Compensation – Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting. This ASU relates to the accounting for non-employee share-based payments. The amendment in this update expands the scope of Topic 718 to include all share-based payment transactions in which a grantor acquired goods or services to be used or consumed in a grantor’s own operations by issuing share-based payment awards. The ASU excludes share-based payment awards that relate to: (1) financing to the issuer; or (2) awards granted in conjunction with selling goods or services to customers as part of a contract accounted for under Topic 606, Revenue from Contracts from Customers. The share-based payments are to be measured at grant-date fair value of the equity instruments that the entity is obligated to issue when the goods or service has been delivered or rendered and all other conditions necessary to earn the right to benefit from the equity instruments have been satisfied. This standard will be effective for public business entities for fiscal years beginning after December 15, 2018, including interim periods within that fiscal year. We adopted the provisions of this ASU on January 1, 2019. The adoption had no impact on our results of operations, cash flows, or financial condition.
Convertible Instruments-The Company reviews the terms of convertible debt and equity instruments to determine whether there are conversion features or embedded derivative instruments including embedded conversion options that are required to be bifurcated and accounted for separately as a derivative financial instrument. In circumstances where the convertible instrument contains more than one embedded derivative instrument, including conversion options that are required to be bifurcated, the bifurcated derivative instruments are accounted for as a single compound instrument. Also, in connection with the sale of convertible debt and equity instruments, the Company may issue free standing warrants that may, depending on their terms, be accounted for as derivative instrument liabilities, rather than as equity. When convertible debt or equity instruments contain embedded derivative instruments that are to be bifurcated and accounted for separately, the total proceeds allocated to the convertible host instruments are first allocated to the fair value of the bifurcated derivative instrument. The remaining proceeds, if any, are then allocated to the convertible instruments themselves, usually resulting in those instruments being recorded at a discount from their face amount. When the Company issues debt securities, which bear interest at rates that are lower than market rates, the Company recognizes a discount, which is offset against the carrying value of the debt. Such discount from the face value of the debt, together with the stated interest on the instrument, is amortized over the life of the instrument through periodic charges to income. In addition, certain conversion features are recognized as beneficial conversion features to the extent the conversion price as defined in the convertible note is less than the closing stock price on the issuance of the convertible notes.
Derivative Financial Instruments- Derivatives are recorded on the consolidated balance sheet at fair value. The conversion features of the convertible notes are embedded derivatives and are separately valued and accounted for on the consolidated balance sheet with changes in fair value recognized during the period of change as a separate component of other income/expense. Fair values for exchange-traded securities and derivatives are based on quoted market prices. The pricing model the Company uses for determining the 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.
Common Stock Purchase Warrants-The Company accounts for common stock purchase warrants in accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 815, Accounting for Derivative Instruments and Hedging Activities. As is consistent with its handling of stock compensation and embedded derivative instruments, the Company’s cost for stock warrants is estimated at the grant date based on each warrant’s fair-value as calculated by the BSM option-pricing model value method for valuing the impact of the expense associated with these warrants.
Stockholders’ Equity-Shares of common stock issued for other than cash have been assigned amounts equivalent to the fair value of the service or assets received in exchange.
Per Share Data-Basic loss per share is computed by dividing net loss by the weighted average number of common shares outstanding for the year. Diluted loss per share is computed by dividing net loss by the weighted average number of common shares outstanding plus common stock equivalents (if dilutive) related to warrants, options, and convertible instruments.
Income Taxes- The Company accounts for income taxes under the asset and liability method which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in the Company’s condensed consolidated financial statements or tax returns. In estimating future tax consequences, the Company considers all expected future events other than enactments of changes in the tax laws or rates.
Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all the deferred tax assets will not be realized. The Company has determined that a valuation allowance is needed due to recent taxable net operating losses and the limited taxable income in the carry back periods. The effect on deferred tax assets and liabilities of a change in tax rates is recognized as income or expense in the period that includes the enactment date. Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes and certain tax loss carryforwards, less any valuation allowance.
The Company accounts for uncertain tax positions as required in that a position taken or expected to be taken in a tax return is recognized in the consolidated financial statements when it is more likely than not (i.e., a likelihood of more than 50%) that the position would be sustained upon examination by tax authorities. A recognized tax position is then measured at the largest amount of benefit that is greater than 50% of being realized upon ultimate settlement. The Company does not have any material unrecognized tax benefits. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as components of interest expense and other expense, respectively, in arriving at pretax income or loss. The Company does not have any interest and penalties accrued. The Company is no longer subject to U.S. federal, state, and local income tax examinations for the years before 2012.
Business Combinations- The Company accounts for business combinations by recognizing the assets acquired, liabilities assumed, contractual contingencies, and contingent consideration at their fair values on the acquisition date. The purchase price allocation process requires management to make significant estimates and assumptions, especially with respect to intangible assets, estimated contingent consideration payments and pre-acquisition contingencies. Examples of critical estimates in valuing certain of the intangible assets we have acquired or may acquire in the future include but are not limited to:
|
● |
future expected cash flows from product sales, support agreements, consulting contracts, other customer contracts, and acquired developed technologies and patents; and |
|
● |
discount rates utilized in valuation estimates. |
Unanticipated events and circumstances may occur that may affect the accuracy or validity of such assumptions, estimates or actual results. Additionally, any change in the fair value of the acquisition-related contingent consideration subsequent to the acquisition date, including changes from events after the acquisition date, such as changes in our estimates of relevant revenue or other targets, will be recognized in earnings in the period of the estimated fair value change. A change in fair value of the acquisition-related contingent consideration or the occurrence of events that cause results to differ from our estimates or assumptions could have a material effect on the consolidated financial position, statements of operations or cash flows in the period of the change in the estimate.
Impairment of Long-Lived Assets-Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized in the amount by which the carrying amount of the asset exceeds the fair value of the asset. Assets to be disposed would be separately presented in the consolidated balance sheet and reported at the lower of the carrying amount or fair value less costs to sell and are no longer depreciated. The assets and liabilities of a disposal group classified as held-for-sale would be presented separately in the appropriate asset and liability sections of the consolidated balance sheet, if material.
Financial Instruments and Fair Values-The fair value of a financial instrument represents the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. Fair value estimates are made at a specific point in time, based upon relevant market information about the financial instrument. In determining fair value, we use various valuation methodologies and prioritize the use of observable inputs. We assess the inputs used to measure fair value using a three-tier hierarchy based on the extent to which inputs used in measuring fair value are observable in the market:
Level 1 – inputs include exchange quoted prices for identical instruments and are the most observable.
Level 2 – inputs include brokered and/or quoted prices for similar assets and observable inputs such as interest rates.
Level 3 – inputs include data not observable in the market and reflect management judgment about the assumptions market participants would use in pricing the asset or liability.
The use of observable and unobservable inputs and their significance in measuring fair value are reflected in our hierarchy assessment. The carrying amount of cash, prepaid assets, accounts payable and accrued liabilities approximate fair value due to the short-term maturities of these instruments. Because cash and cash equivalents are readily liquidated, management classifies these values as Level 1. The fair value of the derivative liabilities approximates their book value as the instruments are short-term in nature and contain market rates of interest. Because there is no ready market or observable transactions, management classifies the derivative liabilities as Level 3.
Recently Issued Accounting Standards
In June 2018, the FASB issued ASU 2018-07 "Improvements to Non-employee Share-Based Payment Accounting”, which simplifies the accounting for share-based payments granted to non-employees for goods and services. Under the ASU, most of the guidance on such payments to non-employees would be aligned with the requirements for share-based payments granted to employees. The amendments are effective for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020.
In December 2019, the FASB issued ASU No. 2019-12, "Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes ("ASU 2019-12”), which is intended to simplify various aspects related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and clarifies and amends existing guidance to improve consistent application. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020, with early adoption permitted. The Company has adopted ASU No. 2019-12, "Income Taxes (Topic 740) however giving the Company’s historical losses and full valuation allowance it did not have an impact on its condensed consolidated financial statements and related disclosures.
Recent Accounting Standards Not Yet Adopted
In August 2020, the FASB issued ASU 2020-06, "Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40)”. This ASU reduces the number of accounting models for convertible debt instruments and convertible Preferred Stock. As well as amend the guidance for the derivatives scope exception for contracts in an entity’s own equity to reduce form-over-substance-based accounting conclusions. In addition, this ASU improves and amends the related EPS guidance. This standard is effective for us on January 1, 2022, including interim periods within those fiscal years. Adoption is either a modified retrospective method or a fully retrospective method of transition. We are currently assessing the impact the new guidance will have on our consolidated financial statements.
There are various other updates recently issued, most of which represent technical corrections to the accounting literature or application to specific industries and are not expected to a have a material impact on the Company’s consolidated financial position, results of operations or cash flows.
Note 4 – Net Loss Per Share Applicable to Common Shareholders
Net Loss per Share Applicable to Common Stockholders
Basic loss per common share is computed by dividing net loss by the weighted average number of common shares outstanding during the reporting period. Diluted loss per common share is computed similarly to basic loss per common share except that it reflects the potential dilution that could occur if dilutive securities or other obligations to issue common stock were exercised or converted into common stock.
The following table sets forth the computation of loss per share for the years ended December 31, 2021 and 2020, respectively:
|
For the Years Ended |
||||||||
|
December 31, |
||||||||
|
2021 |
2020 |
|||||||
|
Numerator: |
||||||||
|
Net loss applicable to common shareholders |
$ | ( |
) |
$ | ( |
) |
||
|
Denominator: |
||||||||
|
Weighted average common shares outstanding |
||||||||
|
Net loss per share: |
||||||||
|
Basic and diluted |
$ | ( |
) |
$ | ( |
) |
||
The Company excluded all common equivalent shares for warrants, options, and convertible instruments from the calculation of diluted net loss per share because all such securities are antidilutive for the periods presented.
|
December 31, |
||||||||
|
2021 |
2020 |
|||||||
|
Convertible Notes |
||||||||
|
Options |
||||||||
|
Warrants |
||||||||
|
Preferred Stock |
||||||||
|
Accrued Interest |
||||||||
|
Total |
||||||||
Note 5 – Related Party Transactions
For the year ended December 31, 2021:
On July 21, 2021, the Company issued a total of
On August 26, 2021, the Company issued
On December 30, 2021, the Company issued a
During the year ended December 31, 2021, the Company accrued dividends on its Series X Preferred Stock in the total amount of $
For the year ended December 31, 2020:
On February 27, 2020, the Company agreed to issue
On March 2, 2020, the Company agreed to issue
On June 1, 2020, the Company agreed to issue
On August 1, 2020, the Company agreed to issue
On December 28, 2020, the Company agreed to issue
On December 28, 2020, the Company agreed to issue
During the year ended December 31, 2020, the Company charged the amount of $
During the year ended December 31, 2020, the Company accrued dividends on its Series X Preferred Stock in the total amount of $
On December 31, 2020, the Company issued
On December 31, 2019, the Company issued a total of
As of December 31, 2021, the shares of Series X Preferred Stock issued and outstanding is as follows:
|
Type of |
||||||
|
Name |
Liability |
# shares |
||||
|
Ronald Riewold, Director |
Deferred Compensation |
|
||||
|
Larry Diamond, Director, and CEO |
Deferred Compensation |
|
||||
|
James Crone, ex-Officer, and Director |
Deferred Compensation |
|
||||
|
Louis Deluca, ex-Officer, and Director |
Deferred Compensation |
|
||||
|
Irish Italian Retirement Fund |
Consulting services, notes payable |
|
||||
|
Frank Lightmas |
Legal fees |
|
||||
|
Total |
|
|||||
Note 6 – Accounts Payable and Accrued Liabilities
Accounts payable and accrued liabilities consisted of the following at December 31, 2021 and 2020:
|
December 31, |
December 31, |
|||||||
|
2021 |
2020 |
|||||||
|
Trade accounts payable |
||||||||
|
Accrued payroll and payroll taxes |
||||||||
|
Other |
||||||||
|
Total accounts payable and accrued liabilities |
||||||||
Note 7 - Right to Use Assets and Lease Liabilities – Operating Leases
The Company has an operating lease for its clinic with a remaining lease term of approximately
Right to use assets – operating leases are summarized below:
|
December 31, 2021 |
December 31, 2020 |
|||||||
|
Right to use assets, net |
$ | $ | ||||||
Operating lease liabilities are summarized below:
|
December 31, 2021 |
December 31, 2020 |
|||||||
|
Lease liability |
$ | $ | ||||||
|
Less: current portion |
( |
) |
( |
) |
||||
|
Lease liability, non-current |
$ | $ | ||||||
Maturity analysis under these lease agreements are as follows:
|
For the period ended December 31, 2022 |
$ | |||
|
For the period ended December 31, 2023 |
||||
|
For the period ended December 31, 2024 |
||||
|
For the period ended December 31, 2025 |
||||
|
For the period ended December 31, 2026 |
||||
|
Thereafter |
||||
|
Total |
$ | |||
|
Less: Present value discount |
( |
) |
||
|
Lease liability |
$ |
Note 8 – Debt
August 2014 Series C Convertible Debenture
On March 30, 2021, the Company issued
March 2016 Convertible Note A
On March 24, 2021, the Company paid cash in the amount of $
Eagle Equities Note 4
On January 4, 2021, the Company issued
Eagle Equities Note 5
On January 11, 2021, the Company issued
Eagle Equities Note 6
On January 21, 2021, the Company issued
Eagle Equities Note 7
On February 5, 2021, the Company entered into a settlement agreement with the holders of the Eagle Equities Note 7 whereby the Company issued
Eagle Equities Note 8
On February 5, 2021, the Company entered into a settlement agreement with the holders of the Eagle Equities Note 8 whereby the Company issued
Eagle Equities Note 9
On February 5, 2021, the Company entered into a settlement agreement with the holders of the Eagle Equities Note 9 whereby the Company issued
Eagle Equities Note 10
On February 5, 2021, the Company entered into a settlement agreement with the holders of the Eagle Equities Note 10 whereby the Company issued
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 (the "Note”) with Bank of America for a loan in the original principal amount of approximately $
Howe Note
Mitesco, Inc. (the “Company”) issued a 10% Promissory Note due June 30, 2022 (the “Note”), dated December 30, 2021, to the Michael C. Howe Living Trust (the “Lender”). Michael C. Howe is the Chief Executive Officer of the Good Clinic LLC, one of our subsidiaries. The principal amount of the Note is $
Warrants.
These amounts are reflected in the table below:
Notes Payable Table 1:
|
December 31, 2021 |
December 31, 2020 |
|||||||
|
Notes Payable |
$ | $ | ||||||
|
PPP Loan |
$ | $ | ||||||
| $ | $ | |||||||
|
Less: Discount |
( |
) |
( |
) |
||||
|
Notes payable - net of discount |
$ | $ | ||||||
|
Current Portion, net of discount |
$ | $ | ||||||
|
Long-term portion, net of discount |
$ | $ | ||||||
Note 9 – 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 restructure, and at each period end.
Derivative liability activity for the year ended December 31, 2021 was $
|
Conversion features issued |
||||
|
Settled upon conversion or exercise |
( |
) |
||
|
Settled upon payment of note |
( |
) |
||
|
Gain on revaluation |
( |
) |
||
|
December 31, 2020 |
$ |
Note 10 – Stockholders’ Equity (Deficit)
Common Stock
The Company has authorized
Common Stock Transactions During the Year Ended December 31, 2021
On January 4, 2021, the Company issued
On January 6, 2021, the Company issued
On January 11, 2021, the Company issued
On January 14, 2021, the Company issued
On January 21, 2021, the Company issued
On January 28, 2021, the Company issued
On February 1, 2021, the Company issued
On February 5, 2021, the Company entered into a settlement agreement with the holders of the Eagle Equities Note 7 whereby the Company issued
On February 5, 2021, the Company entered into a settlement agreement with the holders of the Eagle Equities Note 8 whereby the Company issued
On February 5, 2021, the Company entered into a settlement agreement with the holders of the Eagle Equities Note 9 whereby the Company issued
On February 5, 2021, the Company entered into a settlement agreement with the holders of the Eagle Equities Note 10 whereby the Company issued
On February 22, 2021, the Company issued
On March 11, 2021, the Company issued
On March 17, 2021, the Company issued
On March 23, 2021, the Company issued
On April 19, 2021, the Company issued
On May 4 through May 26, 2021, the Company issued
On May 12, 2021, the Company issued
On June 10 through June 29, 2021, the Company issued
On June 23, 2021, the Company cancelled
On August 17, 2021, accrued liabilities in the amount of $
Between August 11, 2021 and September 2, 2021, the Company issued
Also, during the year ended December 31, 2021, the Company charged the amount of $
Common Stock Transactions During the Year Ended December 31, 2020
The Company entered into agreements with
On May 27, 2020, the Company issued
The Company issued, in
On January 2, 2020, the Company issued
On August 27, 2020, the Company issued
The Company charged the amount of $
The Company charged the amount of $
On December 31, 2020, the Company issued
Preferred Stock
We have authorized to issue
Series A Preferred Stock Transactions During the Year Ended December 31, 2021
During the year ended December 31, 2021, the Company accrued dividends in the amount of $
Series A Preferred Stock Transactions During the Year Ended December 31, 2020
On March 2, 2020, the Company issued
Series C Preferred Stock
On March 25, 2021, the Company entered into Securities Purchase Agreements with four institutional investors (the “Investors” and each an “Investor”) pursuant to which the Company sold to the Investors in a private placement an aggregate of
The Series C Preferred Stock has the following terms:
Ranking. The Series C Preferred Stock and the Series D Preferred, discussed below, ranks senior to all other preferred stock of the Company except in relation to the Series X Cumulative Redeemable Perpetual Preferred Stock, which ranks Pari passu to the Series C Preferred Stock, with respect to the preferences as to dividends, distributions and payments upon the liquidation, dissolution and winding up of the Company.
Voting Rights.
Conversion.
Dividends.
Liquidation Rights. The holders of our Series C Preferred stock are entitled to receive in cash out of our assets, whether from capital or from earnings available for distribution to our stockholders (the “Liquidation Funds”), before any amount shall be paid to the holders of any of shares of capital stock that rank junior to the Series C Preferred Stock, but Pari passu with any shares of capital stock that have a parity ranking with the Series C Preferred stock (“Parity Stock”) then outstanding, an amount per share of Series C Preferred Stock equal to the greater of (A) the Conversion Amount on the date of such payment or (B) the amount per share such holder of the Series C Preferred Stock would receive if such holder converted their Series C Preferred Stock into Common Stock immediately prior to the date of such payment, provided that if the Liquidation Funds are insufficient to pay the full amount due to the holders of the Series C Preferred Stock and holders of shares of Parity Stock, then each holder Series C Preferred Stock and each holder of Parity Stock shall receive a percentage of the Liquidation Funds equal to the full amount of Liquidation Funds payable to such holder and such holder of Parity Stock as a liquidation preference, in accordance with their respective certificate of designations (or equivalent), as a percentage of the full amount of Liquidation Funds payable to all holders of Series C Preferred Stock and all holders of shares of Parity Stock. All such amounts shall be paid or set apart for payment before the payment or setting apart for payment of any amount for, or the distribution of any Liquidation Funds of the Corporation to the holders of shares of capital stock that may rank junior to that of the Series C Preferred Stock Junior Stock.
Rights and Preferences. The rights, preferences, and privileges of holders of our Series C Preferred Stock are subject to, and may be adversely affected by, the rights of holders of shares of any series of Preferred Stock that we may designate and issue in the future that may rank senior to the Series C Preferred Stock.
Redemption Rights.
Price Adjustments Protection. The conversion price is subject to appropriate adjustment in the event of share dividends, share splits, reorganizations or similar events affecting our shares of Common Stock. Other than for certain exempt issuances, in the event we issue or sell any securities, including options or convertible securities, or amend outstanding securities, at an effective price, with an exercise price or at a conversion price less than the Conversion Price, then the Conversion Price shall be reduced to such lower price.
Preemptive or Similar Rights Additionally, except for a public offering or certain exempt issuances of our securities, holders of the Series C Preferred Stock shall have the right to participate in any offering of our Common Stock or Common Stock Equivalents (as defined in the COD) in a transaction exempt from registration under the Securities Act in an amount equal to an aggregate of 30% of the financing on the same terms, conditions and price provided to investors in such an offering, such right shall expire on the 15 month anniversary of the issuance date of the Series C Preferred Stock. Further, until the earlier of 18 months from the issuance date of the Series C Preferred Stock and the date that there are less than 20% of the shares of Series C Preferred Stock outstanding, the Investors have most favored nations protection in the event we issue or sell Common Stock or Common Stock Equivalents that the Investors believe are more favorable than the terms and conditions under the Private Placement.
Fully Paid and Nonassessable. All our issued and outstanding shares of Series C Preferred Stock are fully paid and nonassessable.
Series C Preferred Stock Transactions During the Year Ended December 31, 2021
On March 25, 2021, the Company sold
On May 4 through May 26, 2021,
Between August 11,2021 through September 2, 2021,
During the year ended December 31, 2021, the Company accrued dividends on the Series C Preferred Stock in the amount of $
Series C Preferred Stock Transactions During the Year Ended December 31, 2020
None.
Series D Preferred Stock
On November 19, 2021, the Company closed a bridge financing round totaling $
The Series D Preferred Stock has the following terms:
Ranking. The Series D Preferred Stock and the Series C Preferred Stock ranks senior to all other preferred stock of the Company except in relation to the Series X Cumulative Redeemable Perpetual Preferred Stock, which ranks Pari passu to the Series D Preferred Stock, with respect to the preferences as to dividends, distributions and payments upon the liquidation, dissolution and winding up of the Company.
Voting Rights.
Conversion. Each holder of our Series D Preferred Stock is entitled to convert their shares of Series D Preferred Stock, in whole or in part, at the Conversion Rate, which is determined by dividing the Conversion Amount (the Stated Value of $1.05, plus any accrued but unpaid dividends) by the Conversion Price ($0.25 per share). In addition, upon certain triggering events, the holders of our Series C Preferred Stock have the right to convert their Series D Preferred Stock at the lesser of the Conversion Price or 75% of the average VWAP for the five trading days prior to the date of the notice of conversion. The Conversion Price is subject to adjustment upon certain stock splits and recapitalization as well as upon the sale of Common Stock or Common Stock Equivalents. Each share of the Series D Preferred Stock is convertible at the option of the holder thereof, or automatically or upon the closing of an underwritten offering of at least $10 million of the Company’s securities or upon listing of the Company’s Common Stock on a national securities exchange.
Dividends. Each share of Series D Preferred Stock accrues dividends on a quarterly basis in arrears, at the rate of
Liquidation Rights. The holders of our Series D Preferred stock are entitled to receive in cash out of our assets, whether from capital or from earnings available for distribution to our stockholders (the “Liquidation Funds”), before any amount shall be paid to the holders of any of shares of capital stock that rank junior to the Series C Preferred Stock, but Pari passu with any shares of capital stock that have a parity ranking with the Series D Preferred stock (“Parity Stock”) then outstanding, an amount per share of Series D Preferred Stock equal to the greater of (A) the Conversion Amount on the date of such payment or (B) the amount per share such holder of the Series C Preferred Stock would receive if such holder converted their Series C Preferred Stock into Common Stock immediately prior to the date of such payment, provided that if the Liquidation Funds are insufficient to pay the full amount due to the holders of the Series C Preferred Stock and holders of shares of Parity Stock, then each holder Series D Preferred Stock and each holder of Parity Stock shall receive a percentage of the Liquidation Funds equal to the full amount of Liquidation Funds payable to such holder and such holder of Parity Stock as a liquidation preference, in accordance with their respective certificate of designations (or equivalent), as a percentage of the full amount of Liquidation Funds payable to all holders of Series D Preferred Stock and all holders of shares of Parity Stock. All such amounts shall be paid or set apart for payment before the payment or setting apart for payment of any amount for, or the distribution of any Liquidation Funds of the Corporation to the holders of shares of capital stock that may rank junior to that of the Series C Preferred Stock Junior Stock.
Rights and Preferences. The rights, preferences, and privileges of holders of our Series D Preferred Stock are subject to, and may be adversely affected by, the rights of holders of shares of any series of Preferred Stock that we may designate and issue in the future that may rank senior to the Series D Preferred Stock.
Redemption Rights.
Price Adjustments Protection. The conversion price is subject to appropriate adjustment in the event of share dividends, share splits, reorganizations or similar events affecting our shares of Common Stock. Other than for certain exempt issuances, in the event we issue or sell any securities, including options or convertible securities, or amend outstanding securities, at an effective price, with an exercise price or at a conversion price less than the Conversion Price, then the Conversion Price shall be reduced to such lower price.
Preemptive or Similar Rights Additionally, except for a public offering or certain exempt issuances of our securities, holders of the Series D Preferred Stock shall have the right to participate in any offering of our Common Stock or Common Stock Equivalents (as defined in the COD) in a transaction exempt from registration under the Securities Act in an amount equal to an aggregate of 30% of the financing on the same terms, conditions and price provided to investors in such an offering, such right shall expire on the 15 month anniversary of the issuance date of the Series D Preferred Stock. Further, until the earlier of 18 months from the issuance date of the Series D Preferred Stock and the date that there are less than 20% of the shares of Series D Preferred Stock outstanding, the Investors have most favored nations protection in the event we issue or sell Common Stock or Common Stock equivalents that the Investors believe are more favorable than the terms and conditions under the Private Placement.
Series D Preferred Stock Transactions During the Year Ended December 31, 2021
On October 18, 2021, the Company sold
On November 10, 2021, the Company sold
During the year ended December 31, 2021, the Company accrued dividends on the Series D Preferred Stock in the amount of $
Series D Preferred Stock Transactions During the Year Ended December 31, 2020
None.
Series X Preferred Stock
The Company has
Series X Preferred Stock Transactions During the Year Ended December 31, 2021
On June 23, 2021,
Series X Preferred Stock Transactions During the Year Ended December 31, 2020
During the year ended December 31, 2020, the Company accrued dividends in the amount of $
Stock Options
The following table summarizes the options outstanding at December 31, 2021 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 |
||||||||||||||||||
|
$ |
|
|
|
$ |
|
|
$ |
|
|||||||||||||||
| |
|
$ |
|
|
$ |
|
|||||||||||||||||
Transactions involving stock options are summarized as follows:
|
Shares |
Weighted- Average Exercise Price ($) (A) |
|||||||
|
Outstanding at January 1, 2020 |
|
$ |
|
|||||
|
Granted |
|
|
||||||
|
Cancelled/Expired |
( |
) |
|
|||||
|
Outstanding at December 31, 2020 |
|
$ |
|
|||||
|
Granted |
|
$ |
|
|||||
|
Cancelled/Expired |
( |
) |
$ |
|
||||
|
Exercised |
( |
) |
|
|||||
|
Outstanding at December 31, 2021 |
|
$ |
|
|||||
|
Options vested and exercisable |
|
$ |
|
|||||
| (A) | |
| (B) | On December 28, 2020, the Company accelerated the vesting of certain of its options issued to Board members, management, and consultants, resulting in a charge to operations in the amount of $ |
At December 31, 2021, the total stock-based compensation cost related to unvested awards not yet recognized was $
The Company valued stock options during the years ended December 31, 2021 and 2020 using the Black-Scholes valuation model utilizing the following variables:
|
December 31, |
December 31, |
|||||||
|
2021 |
2020 |
|||||||
|
Volatility |
|
% |
|
% |
||||
|
Dividends |
$ |
|
$ |
|
||||
|
Risk-free interest rates |
|
% |
|
% |
||||
|
Term (years) |
|
|
||||||
Warrants
The following table summarizes the warrants outstanding at December 30, 2021 and the related prices for the warrants to purchase shares of the Company’s common stock:
|
Shares |
Weighted- Average Exercise Price ($) |
|||||||
|
Outstanding at December 31, 2019 |
$ | |||||||
|
Granted |
$ | |||||||
|
Exercised |
( |
) |
$ | |||||
|
Outstanding at December 31, 2020 |
$ | |||||||
|
Granted |
$ | |||||||
|
Exercised |
$ | |||||||
|
Outstanding at December 31, 2021 |
$ | |||||||
Note 11 – Income Taxes
Deferred income taxes result from the temporary differences primarily attributable to amortization of intangible assets and debt discount and an accumulation of net operating loss carryforwards for income tax purposes with a valuation allowance against the carryforwards for book purposes.
In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. Included in deferred tax assets are Federal and State net operating loss carryforwards of approximately $
The provision (benefit) for income taxes for the years ended December 31, 2021 and 2020 consist of the following:
|
2021 |
2020 |
|||||||
|
Current |
$ | $ | ||||||
|
Deferred |
||||||||
|
Total |
$ | $ | ||||||
For the years ended December 31, 2021 and 2020, the expected tax expense (benefit) based on the U. S. federal statutory rate is reconciled with the actual tax provision (benefit) as follows:
|
For the Years Ended December 31, |
||||||||||||||||
|
2021 |
2020 |
|||||||||||||||
|
Expected tax at statutory rates |
$ | ( |
) |
% |
$ | ( |
) |
% |
||||||||
|
Permanent Differences |
% |
( |
) |
% |
||||||||||||
|
State Income Tax, Net of Federal benefit |
( |
) |
% |
% |
||||||||||||
|
Current Year Change in Valuation Allowance |
% |
% |
||||||||||||||
|
Prior Year True-Ups |
( |
) |
% |
% |
||||||||||||
|
Income tax expense |
$ |
% |
$ |
% |
||||||||||||
Deferred income taxes reflect the tax impact of temporary differences between the amounts of assets and liabilities for financial reporting purposes and such amounts as measured by tax laws and regulations.
Deferred income taxes include the net tax effects of net operating loss (NOL) carryforwards and the temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.
|
For the Years Ended December 31, |
||||||||
|
2021 |
2020 |
|||||||
|
Deferred Tax Assets (Liabilities): |
||||||||
|
Accrued payroll |
$ | $ | ||||||
|
ASC842-ROU Asset |
( |
) |
||||||
|
ASC842-ROU (Liability) |
( |
) |
||||||
|
Gain from derivatives |
( |
) |
( |
) |
||||
|
Stock based compensation |
||||||||
|
Depreciation |
( |
) |
( |
) |
||||
|
Net operating loss |
||||||||
|
Net deferred tax assets (liabilities) |
||||||||
|
Valuation allowance |
( |
) |
( |
) |
||||
|
Net deferred tax assets (liabilities) |
$ | $ | ||||||
Note 12 – Fair Value of Financial Instruments
The following summarizes the Company’s derivative financial liabilities that are recorded at fair value on a recurring basis at December 31, 2021 and 2020.
|
December 31, 2021 |
||||||||||||||||
|
Level 1 |
Level 2 |
Level 3 |
Total |
|||||||||||||
|
Liabilities |
||||||||||||||||
|
Derivative liabilities |
$ | $ | $ | $ | ||||||||||||
|
December 31, 2020 |
||||||||||||||||
|
Level 1 |
Level 2 |
Level 3 |
Total |
|||||||||||||
|
Liabilities |
||||||||||||||||
|
Derivative liabilities |
$ | $ | $ | $ | ||||||||||||
Note 13 – Commitments and Contingencies
Legal
There is no pending or anticipated legal actions at this time except as noted below in “Other.”
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 (the "Note”) with Bank of America for a loan in the original principal amount of approximately $
As of December 31, 2021, based on communication with Bank of America, it is expected that approximately $
Note 14 – Subsequent Events
The Company entered into a debt-for-equity exchange agreement with Gardner Builders Holdings, LLC (the “Creditor”) on January 7, 2022 (the “Agreement”). Pursuant to the Agreement, the Company issued shares of restricted common stock, par value $
The Agreement settles for certain accounts payable amounts owed by the Company to the Creditor (the “Accounts Payable Amount”) as well as upcoming amounts that will become due between the date of the Agreement and April 1, 2022. The Agreement also settles incurred interest and penalties on the amounts due through January 5, 2022, as well as future interest payments on amounts to be incurred in the first quarter of 2022 (collectively, the “Additional Costs”, and combined with the Accounts Payable Amount, the “Company Debt Obligations”). The Accounts Payable Amount is $
The Company issued a 10% Promissory Note due August 14, 2022 (the “Note”), dated February 14, 2022, to Lawrence Diamond (the “Lender”). Mr. Diamond is the Chief Executive Officer of the Company and a member of its Board of Directors. The principal amount of the Note is $
The Company issued a 10% Promissory Note due June 18, 2022 (the “Diamond Note”), dated March 18, 2022, to Lawrence Diamond (the “Lender”), which was subsequently amended. Lawrence Diamond is the Chief Executive Officer of the Company. The principal amount of the Diamond Note is $
On March 18, 2022, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with AJB Capital Investments, LLC (the “Investor”) with respect to the sale and issuance to the Investor of: (i) an initial commitment fee in the amount of $
Pursuant to the terms of the Purchase Agreement, the initial Commitment Fee Shares were issued at a value of $430,000, the Note was issued in a principal amount of $750,000 for a purchase price of $
As previously disclosed on the Company’s form 8-K filed on March 26, 2021 and October 22, 2021, the Company issued the Series C Convertible Preferred Stock and Series D Convertible Preferred Stock to the investors named therein (the “Series C Investors” and “Series D Investors”). The Company obtained consents and waivers (the “Consents”) from the Series D and Series D Investors to allow the Company to enter into the Purchase Agreement. The Company issued
Units
Each Unit Consisting of
One Share of Common Stock
and
One Series A Warrant to Purchase One Share of Common Stock and
One Series B Warrant to Purchase One Share of Common Stock
Sole Bookrunner
Maxim Group LLC
The date of this prospectus is October [ ], 2022
Through and including , 2022 (25 days after commencement of this offering), all dealers that effect transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the dealer’s obligation to deliver a prospectus when acting as an underwriter and with respect to their unsold allotments or subscriptions.
PART II - INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
We estimate that expenses in connection with the distribution described in this registration statement (other than brokerage commissions, discounts) will be as set forth below. We will pay all of the expenses with respect to the distribution, and such amounts, with the exception of the SEC registration fee, are estimates.
|
Accounting fees and expenses |
$ | 110,000 | ||
|
Legal fees and expenses |
$ | 275,000 | ||
|
Transfer agent fees and expenses |
$ | 1,000 | ||
|
FINRA filing fees |
$ | 6,225 | ||
|
NASDAQ |
$ | 5,000 | ||
|
SEC registration fee |
$ | 1,265 | ||
|
Miscellaneous |
$ | 8,735 | ||
|
Total |
$ | 407,225 |
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Our Certificate of Incorporation requires us to indemnify our officers and directors to the fullest extent permitted by Delaware law, which generally permits indemnification for actions taken by officers or directors as our representatives if the officer or director acted in good faith and in a manner he or she reasonably believed to be in the best interest of the corporation. We have entered into indemnification agreements with our officers and directors to specify the terms of our indemnification obligations. In general, these indemnification agreements provide that we will:
|
· |
indemnify our directors and officers to the fullest extent now permitted under current law and to the extent the law later is amended to increase the scope of permitted indemnification; |
|
· |
advance payment of expenses to a director or officer incurred in connection with an indemnifiable claim, subject to repayment if it is later determined that the director or officer was not entitled to be indemnified; |
|
· |
reimburse the director or officer for any expenses incurred by the director or officer in seeking to enforce the indemnification agreement; and |
|
· |
have the opportunity to participate in the defense of any indemnifiable claims against the director or officer. |
As permitted under Delaware law, our bylaws contain a provision indemnifying directors, officers, employee or agent of ours against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by them in connection with an action, suit or proceeding if they acted in good faith and in a manner they reasonably believed to be in or not opposed to the best interests of us, and, with respect to any criminal action or proceeding, had no reasonable cause to believe their conduct was unlawful.
In any underwriting agreement we enter into in connection with the sale of the securities being registered hereby, the underwriters will agree to indemnify, under certain conditions, us, our directors, our officers, and persons who control us, within the meaning of the Securities Act, against certain liabilities.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
Other than as set forth below or as previously disclosed in our filings with the Securities and Exchange Commission, we did not sell any equity securities within the past three years that were not registered under the Securities Act.
Year Ended December 31, 2019
On January 2, 2019, the Company entered into a stock purchase agreement with Power Up, pursuant to which Power Up agreed to purchase a note in the aggregate principal amount of $53,000.00. On or about January 3, 2019, the Company received $50,000.00 in net proceeds for the sale of the note to Power Up. The note entitled Power Up to 12% interest per annum and matured on October 30, 2019. In the event the Company had not paid loan in full prior to 180 days from the issuance date, Power Up could convert all or a portion of the outstanding principal and interest of the note into shares of Common Stock at a price per share equal to 61% of the lowest closing bid price of the Common Stock during the 20-trading day period ending on the last complete trading day prior to the date of conversion. Power Up could not convert the note to the extent that such conversion would result in beneficial ownership by Power Up and its affiliates of more than 4.99% of the issued and outstanding Common Stock.
On February 11, 2019, the Company entered into a stock purchase agreement with Power Up, pursuant to which Power Up agreed to purchase a note in the aggregate principal amount of $48,000.00. On or about February 13, 2019, the Company received approximately $45,000.00 in net proceeds in exchange for the sale of the note to Power Up. The note entitled Power Up to 12% interest per annum and matured on November 30, 2019. In the event the Company has not paid the Power Up loan in full prior to 180 days from the issuance date, Power Up could convert all or a portion of the outstanding principal of the Power Up note into shares of Common Stock at a price per share equal to 55% of the lowest closing price of the Common Stock during the 25 trading-day period ending on the last complete trading day prior to the date of conversion. Power Up could not convert the Power Up note to the extent that such conversion would result in beneficial ownership by Power Up and its affiliates of more than 4.99% of the issued and outstanding Common Stock.
On March 4, 2019, the Company entered into a stock purchase agreement with Crown whereby Crown be purchased from the Company, for a purchase price of $36,000 (i) a convertible promissory note of the Company, in the principal amount of $40,000.00, with an original issuance discount of $4,000; and (ii) a Common Stock purchase warrant for 400,000 shares of the Common Stock with an exercise price of $0.10 per share and expiring five years from the date of issuance). On March 8, 2019, the Purchase Price was paid by Crown to the Company. The Crown note was issued on March 4, 2019 and it was due and payable on December 4, 2019. The note entitled Crown to 12% interest per annum.
On February 14, 2019, the Company entered into a Conversion of Debt Agreement with Mr. Kevin Novack, the holder of that certain promissory note issued by the Company on or about March 16, 2016. Pursuant to the Conversion of Debt Agreement, 120,000 shares of the Common Stock were delivered to Novack in partial satisfaction of $15,000 of the outstanding principal due under the note.
On March 18, 2019, the Company entered into a stock purchase agreement with Power Up, pursuant to which Power Up agreed to purchase a convertible promissory note in the principal amount of $43,000.00. On or about March 18, 2019, the Company received an aggregate of approximately $40,000.00 in net proceeds in exchange for the sale of the note to Power Up. The note entitled Power Up to 12% interest per annum and matures on January 30, 2020. In the event the Company had not paid the loan in full prior to 180 days from the issuance sate, Power Up could convert all or a portion of the outstanding principal of the note into shares of Common Stock at a price per share equal to 61% of the lowest closing price of the Common Stock during the 20 trading-day period ending on the last complete trading day prior to the date of conversion. Power Up could not convert the note to the extent that such conversion would result in beneficial ownership by Power Up and its affiliates of more than 4.99% of the issued and outstanding Common Stock.
On March 27, 2019, the Company entered into a stock purchase agreement with Power Up, pursuant to which Power Up agreed to purchase a convertible promissory note in the principal amount of $53,000.00. On or about March 27, 2019, the Company received an aggregate of approximately $50,000.00 in net proceeds in exchange for the sale of the note to Power Up. The note entitled Power Up to 12% interest per annum and matured on January 30, 2020. Power In the event the Company has not paid the loan in full prior to 180 days from the issuance date, Power Up could convert all or a portion of the outstanding principal of the note into Common Stock at a price per share equal to 61% of the lowest closing price of the Common Stock during the 20 trading-day period ending on the last complete trading day prior to the date of conversion. Power Up could not convert the note to the extent that such conversion would result in beneficial ownership by Power Up and its affiliates of more than 4.99% of the issued and outstanding Common Stock.
On May 1, 2019, the Company entered into a stock purchase agreement with Power Up, pursuant to which Power Up agreed to purchase a convertible promissory note in the principal amount of $30,000.00. On or about May 1, 2019, the Company received an aggregate of approximately $50,000.00 in net proceeds in exchange for the sale of the note to Power Up. The note entitled Power Up to 12% interest per annum and matured on February 28, 2020. Power In the event the Company has not paid the loan in full prior to 180 days from the issuance date, Power Up could convert all or a portion of the outstanding principal of the note into shares of Common Stock at a price per share equal to 61% of the lowest closing price of the Common Stock during the 20-trading day period ending on the last complete trading day prior to the date of conversion. Power Up could not convert the note to the extent that such conversion would result in beneficial ownership by Power Up and its affiliates of more than 4.99% of the issued and outstanding Common Stock.
On June 10, 2019 (the “Armanda Issuance Date”), the Company entered into a stock purchase agreement with Armada Investment Fund LLC (“Armanda”), pursuant to which Armanda agreed to purchase a convertible promissory note in the principal amount of $38,500.00. On or about June 13, 2019, the Company received an aggregate of approximately $35,000.00 in net proceeds in exchange for the sale of the note. The note entitled Armanda to 10% interest per annum and matured on March 10, 2020. In the event the Company has not paid the note in full prior to 180 days from the Armanda Issuance Date, Armanda could convert all or a portion of the outstanding principal of the note into shares of the Common Stock at a price per share equal to 55% of the lowest closing price of the Common Stock during the 25-trading day period ending on the last complete trading day prior to the date of conversion. Armanda could not convert the note to the extent that such conversion would result in beneficial ownership by Armanda and its affiliates of more than 4.99% of the issued and outstanding Common Stock.
On June 4, 2019, the Company entered into a stock purchase agreement with BHP Capital NY, Inc., a New York corporation (“BHP”), pursuant to which BHP agreed to purchase a note in the principal amount of $38,500.00. On or about June 13, 2019, the Company received an aggregate of approximately $35,000.00 in net proceeds in exchange for the sale of the note to BHP. The note entitled BHP to 10% interest per annum and matured on March 10, 2020. In the event the Company has not paid the note in full prior to 180 days from the BHP Issuance Date, BHP could convert all or a portion of the outstanding principal of the note into shares of the Common Stock at a price per share equal to 55% of the lowest closing price of the Common Stock during the 25 trading-day period ending on the last complete trading day prior to the date of conversion. BHP could not convert the note to the extent that such conversion would result in beneficial ownership by BHP and its affiliates of more than 4.99% of the issued and outstanding Common Stock.
On April 24, 2019, the Company entered into a senior executive employment agreement with Peyton Jackson, pursuant to which Mr. Jackson was granted 500,000 shares of restricted Common Stock of the Company.
On April 24, 2019, the Company entered into a senior executive employment agreement with Elliot Fantino, pursuant to which Mr. Fantino was granted 500,000 shares of restricted Common Stock of the Company.
On July 2, 2019, the Company entered into a stock purchase agreement with Crown, pursuant to which Crown agreed to purchase a note in the principal amount of $40,000.00 and a Common Stock warrant to purchase 400,000 shares of Common Stock having an exercise price of $0.10 per share. On or about July 11, 2019, the Company received an aggregate of approximately $40,000.00 in net proceeds in exchange for the sale of the note to BHP. The note entitled BHP to 12% interest per annum and matured on April 2, 2020.
On July 11, 2019, the Company entered into a stock purchase agreement with Power Up, pursuant to which Power Up agreed to purchase a convertible promissory note in the principal amount of $38,000.00. On or about July 15, 2019, the Company received an aggregate of approximately $30,000.00 in net proceeds in exchange for the sale of the note to Power Up. The note entitled Power Up to 12% interest per annum and matured on April 30, 2020.
On August 15, 2019, the Board approved Director Advisory Agreements for each Company Director and issued 1,000,000 fully vested shares of restricted Common Stock. A total of 1,975,000 additional shares were issued in consideration of this commitment.
On September 12, 2019, the Company entered into a stock purchase agreement with Power Up, pursuant to which Power Up agreed to purchase a convertible promissory note in the principal amount of $45,000.00. On or about September 14, 2019, the Company received an aggregate of approximately $42,000.00 in net proceeds in exchange for the sale of the note. The note entitled Power Up to 12% interest per annum and matured on July 15, 2020. In the event the Company has not paid the Power Up note in full prior to 180 days from the Issuance Date, Power Up could convert all or a portion of the outstanding principal of the note into shares of Common Stock at a price per share equal to 61% of the lowest closing price of the Common Stock during the 20 trading-day period ending on the last complete trading day prior to the date of conversion. Power Up could not convert the note to the extent that such conversion would result in beneficial ownership by Power Up and its affiliates of more than 4.99% of the issued and outstanding Common Stock.
On October 7, 2019, the Company entered into a stock purchase agreement with Power Up, pursuant to which Power Up agreed to purchase a convertible promissory note in the principal amount of $45,000.00. On or about October 15, 2019, the Company received an aggregate of approximately $50,000.00 in net proceeds in exchange for the sale of the note. The note entitled Power Up to 12% interest per annum and matured on August 15, 2020. In the event the Company has not paid the Power Up note in full prior to 180 days from the Issuance Date, Power Up could convert all or a portion of the outstanding principal of the note into shares of Common Stock at a price per share equal to 61% of the lowest closing price of the Common Stock during the 20 trading-day period ending on the last complete trading day prior to the date of conversion. Power Up could not convert the note to the extent that such conversion would result in beneficial ownership by Power Up and its affiliates of more than 4.99% of the issued and outstanding Common Stock.
The Company entered into a stock purchase agreement and convertible promissory note dated November 22, 2019 and funded on November 25, 2020 in the net amount of $256,000. The lender was Eagle Equities, LLC. The note carried an 12% interest rate and had a maturity date of twelve (12) months from the date of execution. The Company may prepay the note, and management intends to fulfill this option, at a premium of 110% to 140% of principal and interest between the date of issuance and 180 days thereafter. Should the note not be paid in full, any remaining balance, at any time after 180 days after issuance maybe convertible into the Company’s Common Stock at a conversion price for each share of Common Stock equal to 60% of the lowest traded price of the Company's Common Stock for the 20 prior trading days including the day upon which the Company receives a notice of conversion.
The Company entered into a stock purchase agreement and convertible promissory note dated November 11, 2019 and funded on November 13, 2019 in the net amount of $73,000. The lender was Power Up. The note carried an 12% interest rate and had a maturity date of twelve (12) months from the date of execution. Should the note not be repaid in full any balance may be converted into the Common Stock, at any time after 180 days after issuance at a 45% discount to the market price.
The Company issued 300,000 restricted shares of the Company’s Common Stock with a fair value of $22,005 in exchange for services conducted on behalf of the Company. The value of these shares was based on the closing market price on the respective date of grants.
The Company issued 38,179,083 shares of Common Stock with a fair value of $788,937 for the conversion of convertible debt and accrued interest in the amount of $627,479. The Company recorded a loss in the amount of $161,458 on these transactions.
The Company issued 1,401,224 shares of Common Stock for the conversion of a note payable and accrued interest pursuant to a legal settlement; the Company had a liability on its balance sheet in the amount of $74,104 in connection with this matter and recorded a loss in the amount of $26,924 on this transaction.
The Company issued 6,975,000 shares of Common Stock with a fair value at the date of the grant of $273,300 to employees, officer, and directors, subject to vesting requirements; the par value in the amount of $69,750 was charged to additional paid-in capital and the remaining fair value will be charged to operations over the term of the vesting period.
The Company issued 3,514,900 shares of Common Stock in connection with the cashless exercise of warrants and credited the amount of $35,149 from additional paid-in capital.
Year Ended December 31, 2020
On January 2, 2020, the Company issued 200,000 restricted shares of the Company’s Common Stock valued $7,680 in exchange for services conducted on behalf of the Company. The value of these shares was based on the closing market price on the respective date of grant.
The Company entered into an SPA and convertible promissory note dated January 24, 2020 and funded on January 27, 2020 in the net amount of $256,000. The lender was Eagle Equities, LLC. The note carried an 12% interest rate and had a maturity date of twelve (12) months from the date of execution. Should the note not be paid in full, any remaining balance, at any time after 180 days after issuance could be convertible into the Common Stock at a conversion price for each share of Common Stock equal to 60% of the lowest traded price of the Common Stock for the 20 prior trading days including the day upon which a notice of conversion is received by the Company.
The Company entered into an SPA and convertible promissory note dated January 24, 2020 and funded on January 27, 2020 in the net amount of $256,000. The lender was Eagle Equities, LLC. The note carried an 12% interest rate and had a maturity date of twelve (12) months from the date of execution. Should the note not be paid in full, any remaining balance, at any time after 180 days after issuance could be convertible into the Common Stock at a conversion price for each share of Common Stock equal to 60% of the lowest traded price of the Common Stock for the 20 prior trading days including the day upon which a notice of conversion is received by the Company.
On March 3, 2020, the Company entered into a consulting agreement with each of the four (4) individuals. The compensation for the individuals included the issuance of 500,000 Common Stock options to each individual, vesting based on time and performance over three (3) years. The Common Stock options are priced at $0.05.
The Company entered into an SPA and convertible promissory note dated March 9, 2020 and funded on March 11, 2020 in the net amount of $129,000. The lender was Eagle Equities, LLC. The note carried an 12% interest rate and had a maturity date of twelve (12) months from the date of execution. Should the note not be paid in full, any remaining balance, at any time after 180 days after issuance could be convertible into the Common Stock at a conversion price for each share of Common Stock equal to 60% of the lowest traded price of the Common Stock for the 20 prior trading days including the day upon which a notice of conversion is received by the Company.
On March 13, 2020, the Company issued 4,800 shares of Series A Preferred Stock to four (4) individuals in association with its The Good Clinic, LLC business unit.
The Company entered into a stock purchase agreement and convertible promissory note dated April 8, 2020, in the net amount of $100,000. The lender was Eagle Equities, LLC. The note carried an 12% interest rate and had a maturity date of twelve (12) months from the date of execution. Should the note not be paid in full, any remaining balance, at any time after 180 days after issuance could be convertible into the Common Stock at a conversion price for each share of Common Stock equal to 60% of the lowest traded price of the Common Stock for the 20 prior trading days including the day upon which a notice of conversion is received by the Company.
On May 4, 2020, the Company received loan proceeds in the amount of approximately $460,000 under the Paycheck Protection Program.
The Company entered into a stock purchase agreement and convertible promissory note dated July 1, 2020, in the net amount of $200,200. The lender was Eagle Equities, LLC. The note carried an 12% interest rate and had a maturity date of twelve (12) months from the date of execution. Should the note not be paid in full, any remaining balance, at any time after 180 days after issuance could be convertible into the Common Stock at a conversion price for each share of Common Stock equal to 60% of the lowest traded price of the Common Stock for the 20 prior trading days including the day upon which a notice of conversion is received by the Company.
The Company entered into a stock purchase agreement and convertible promissory note dated August 21, 2020, in the net amount of $200,200. The lender was Eagle Equities, LLC. The note carried an 12% interest rate and had a maturity date of twelve (12) months from the date of execution. Should the note not be paid in full, any remaining balance, at any time after 180 days after issuance could be convertible into the Common Stock at a conversion price for each share of Common Stock equal to 60% of the lowest traded price of the Common Stock for the 20 prior trading days including the day upon which a notice of conversion is received by the Company.
The Company entered into a stock purchase agreement and convertible promissory note dated September 30, 2020, in the net amount of $114,400. The lender was Eagle Equities, LLC. The note carried an 12% interest rate and had a maturity date of twelve (12) months from the date of execution. Should the note not be paid in full, any remaining balance, at any time after 180 days after issuance could be convertible into the Common Stock at a conversion price for each share of Common Stock equal to 60% of the lowest traded price of the Common Stock for the 20 prior trading days including the day upon which a notice of conversion is received by the Company.
The Company entered into a stock purchase agreement and convertible promissory note dated October 29, 2020, in the net amount of $114,400. The lender was Eagle Equities, LLC. The note carried an 12% interest rate and had a maturity date of twelve (12) months from the date of execution. Should the note not be paid in full, any remaining balance, at any time after 180 days after issuance could be convertible into the Common Stock at a conversion price for each share of Common Stock equal to 60% of the lowest traded price of the Common Stock for the 20 prior trading days including the day upon which a notice of conversion is received by the Company.
The Company entered into a stock purchase agreement and convertible promissory note dated December 9, 2020, in the net amount of $220,000. The lender was Eagle Equities, LLC. The note carried an 12% interest rate and had a maturity date of twelve (12) months from the date of execution. Should the note not be paid in full, any remaining balance, at any time after 180 days after issuance could be convertible into the Common Stock at a conversion price for each share of Common Stock equal to 60% of the lowest traded price of the Common Stock for the 20 prior trading days including the day upon which a notice of conversion is received by the Company.
The Company entered into agreements with two note holders regarding the exercise price of warrants held by the note holders. These agreements resulted in the following: (i) on January 29, 2020, the Company issued 1,000,000 shares of Common Stock, and the note holders agreed to cancel 2,769,482 warrants; the Company recorded a gain in the amount of $77,652 on this transaction; (ii) on February 19, 2020, the Company issued 4,098,556 shares of Common Stock for the exercise of 4,480,938 warrants in a cashless transaction; the Company recorded a gain in the amount of $182,295 on this transaction, which is included in gain on derivative liabilities.
On May 27, 2020, the Company issued 2,901,440 shares of Common Stock for the cashless exercise of warrants. These warrants were issued pursuant to a settlement agreement with a note holder regarding the effective price of warrants issued with regard to a variable conversion price feature which resulted in the issuance of 1,011,967 more shares than would have been issued prior to the settlement agreement. The Company recorded a loss in the amount of $24,894 on this transaction based upon the additional shares issued at the market price of the Company’s Common Stock.
The Company issued, in nineteen transactions and at prices ranging from $0.0108 to $0.0210 per share, a total of 63,374,555 shares in connection with the conversion of principal and interest of convertible notes payable in the aggregate amounts of $813,000 and $70,658. No gain or loss was recognized on these transactions. See note 8 to our consolidated financial statements.
On August 27, 2020, the Company issued 386,985 shares of Common Stock at a price of $0.034 per share to an ex-employee for accrued compensation. A gain in the amount of $6,988 was recognized on this transaction.
On December 31, 2020. the Company issued 2,151,204 shares of Common Stock at a price of $0.0305 per share as payment of accrued dividends on the Series X Preferred Stock pursuant to the Series X Preferred Stock Certificate of Designations.
Year Ended December 31, 2021
On January 4, 2021, we issued 4,123,750 shares of common stock at a price of $0.012 per share pursuant to the conversion of $45,000 of principal and $4,485 of accrued interest in Eagle Equities Note 4.
On January 6, 2021, we issued 3,505,964 shares of common stock at a price of $0.01224 per share pursuant to the conversion of $39,000 of principal and $3,913 of accrued interest in Eagle Equities Note 4.
On January 11, 2021, we issued 4,463,507 shares of common stock at a price of $0.01224 per share pursuant to the conversion of $50,000 of principal and $4,633 of accrued interest in Eagle Equities Note 5.
On January 14, 2021, we issued 4,319,378 shares of common stock at a price of $0.01266 per share pursuant to the conversion of $50,000 of principal and $4,683 of accrued interest in Eagle Equities Note 5.
On January 21, 2021, we issued 6,449,610 shares of common stock at a price of $0.0154 per share pursuant to the conversion of $93,000 of principal and $6,324 of accrued interest in Eagle Equities Note 6.
On January 28, 2021, we issued 7,285,062 shares of common stock at a price of $0.01575 per share pursuant to the conversion of $107,200 of principal and $7,540 of accrued interest in Eagle Equities Note 6.
On February 1, 2021, we issued 6,672,000 shares of common stock in a private placement (the “2021 Private Placement”) at a price of $0.25 per share for cash proceeds of $1,668,000.
On February 5, 2021, we entered into a settlement agreement with the holders of the Eagle Equities Note 7 whereby we issued 1,184,148 shares of common stock at a price of $0.24984 per share in satisfaction of $200,200 of principal and all accrued interest and prepayment penalties due under this note.
On February 5, 2021, we entered into a settlement agreement with the holders of the Eagle Equities Note 8 whereby we issued 639,593 shares of common stock at a price of $0.23851 per share in satisfaction of $114,400 of principal and all accrued interest and prepayment penalties due under this note.
On February 5, 2021, the Company entered into a settlement agreement with the holders of the Eagle Equities Note 9 whereby the Company issued 605,177 shares of common stock at a price of $0.24984 per share in satisfaction of $114,400 of principal and all accrued interest and prepayment penalties due under this note.
On February 5, 2021, we entered into a settlement agreement with the holders of the Eagle Equities Note 10 whereby we issued 1,095,131 shares of common stock at a price of $0.23748 per share in satisfaction of $200,200 of principal and all accrued interest and prepayment penalties due under this note.
On February 22, 2021, we issued 336,000 shares of common stock for the exercise of options at a price of $0.03 per share.
On March 11, 2021, was issued 600,000 shares of common stock to four officers of The Good Clinic in exchange for 4,800 shares of Series A Preferred Stock.
On March 17, 2021, we issued 300,000 shares of common stock at a price of $0.31 per share to a service provider.
On March 23, 2021, we issued 461,358 shares of common stock at a price of $0.26 per share to the underwriters of the 2021 Private Placement.
On March 25, 2021, we entered into Securities Purchase Agreements (the “SPAs”) with four institutional investors (the “Investors” and each an “Investor”) pursuant to which we sold to the Investors in a private placement an aggregate of 3,000,000 units (the “Units” and each a “Unit”) with a purchase price of $1.00 per Unit, with each Unit consisting of (a) one share of a newly formed Series C Convertible Preferred Stock, par value $0.01 per share (the “Series C Preferred Stock”), (b) one warrant (the “Series A Warrants”) to purchase 2.1 shares of the Company’s common stock, par value $0.01 per share (the “Common Stock”) at a purchase price of $0.50 per whole share of Common Stock, and (c) one warrant (the “Series B Warrants” and together with the Series A Warrants, the “Warrants”) to purchase 2.1 shares of Common Stock at a purchase price of $0.75 per whole share. The aggregate gross proceeds to the Company were $3,000,000 and the number of shares of Common Stock initially issuable upon conversion of the Series C Preferred Stock is 12,600,000 shares of Common stock and the aggregate number of shares of Common Stock initially issuable upon exercise of the Warrants is 12,600,000 shares of Common Stock. We also issued to the placement agent and its designee 463,320 shares of Common Stock.
In addition, on March 29, 2021, we issued 300,000 shares of common stock as payment for services to be rendered for investor relations services having a value of $.283 per share.
On March 30, 2021, we issued 272,837 shares of common stock as settlement for amount sowed under the Series D Convertible Note share to the underwriters of the 2021 Private Placement.
On March 31, 2021, we completed the private offering previously reported on February 10, 2021, by issuing an aggregate of 6,672,000 shares of our restricted common stock to investors for $1,668,000 in proceeds pursuant to a Securities Purchase Agreement (“SPA”). The transaction was executed directly with us, and no brokers, dealers or representatives were involved.
On April 19, 2021, the Company issued 1,962 shares of common stock for professional fees which had been performed in a prior period. The Company recorded these shares at the par value of $0.01 per share.
On May 4 through May 26, 2021, the Company issued 4,237,424 shares of common stock for the conversion of 1,059,356 shares of Series C Preferred Stock at a price of $0.25 per share.
On May 12, 2021, the Company issued 2,500,000 shares of common stock at a price of $0.03 per share for the exercise of stock options by a consultant.
Between June 10, 2021, and June 29, 2021, the Company issued 5,116,668 shares of common stock at a price of $0.03 per share for the exercise of stock options by officers and directors.
On June 23, 2021, the Company cancelled 2,000,000 shares of common stock held by an ex-officer in connection with a settlement agreement. The cancellation of these shares was recorded at the par value of $0.01 per share. Also, in connection with the settlement agreement, the Company issued 637,953 shares to the ex-officer at the market price of $.20 per share.
On August 26, 2021, the Company issued 312,800 restricted shares of the Company’s common stock priced at $0.25, vesting immediately, in lieu of $78,200 of cash compensation owed to the Company’s Chief Executive Officer for services rendered to the Company prior to 2021.
On December 31, 2021, the Company issued 166,664 restricted shares of the Company’s common stock priced at $0.25, vesting immediately, in lieu of $41,666 of accounts payable owed to a related party consultant for services rendered to the Company.
Also, during the year ended December 31, 2021, the Company charged the amount of $13,032 to operations in connection with the vesting of stock granted to its officers, employees, and board members; the Company also charged the amount of $675,906 to operations in connection with the vesting of options granted to its officers, employees, and board members.
During the year ended December 31, 2021, the Company issued the following shares of Series C Preferred Stock in private placement transactions:
On May 4 through May 26, 2021, 1,059,356 shares of Series C Preferred Stock were converted at a price of $0.25 per share to 4,237,424 shares of common stock.
On August 11, 2021, through September 2, 2021, 1,000,000 shares of Series C Preferred Stock were converted at a price of $0.25 per share to 4,000,001 shares of common stock.
During the year ended December 31, 2021, the Company issued the following shares of Series D Preferred Stock in private placement transactions:
On October 18, 2021, the Company sold 20,250 shares of Series D Preferred Stock and (i) five-year warrants to acquire 4,252,500 shares of the Company’s common stock at a price of $0.50 per shares, and (ii) five-year warrants to acquire 4,252,500 shares of the Company’s common stock at a price of $0.75 per share for proceeds of $1,874,450, net of costs in the amount of $125,500.
On November 10, 2021, the Company sold 10,750 shares of Series D Preferred Stock and (i) five-year warrants to acquire 2,257,500 shares of the Company’s common stock at a price of $0.50 per shares, and (ii) five-year warrants to acquire 2,257,500 shares of the Company’s common stock at a price of $0.75 per share for proceeds of $999,250, net of costs in the amount of $75,750.
Except for the issuances of Common Stock upon exercise of warrants on a cashless basis or conversion of notes or the exchange of Common Stock for Series A Preferred Stock or notes which were effected relying on Section 3(a)(9) of the Securities Act as the Common Stock was exchanged by us with our existing security holders exclusively and no commission or other remuneration was paid or given directly or indirectly for soliciting such exchange, the securities issued in each of the transactions described above were issued relying on Section 4(a)(2) of the Securities Act and/or Rule 506 promulgated thereunder. The recipients of the securities in each of these transactions relying on Section 4(a)(2) of the Securities Act and/or Rule 506 promulgated thereunder represented their intentions to acquire the securities for investment only and not with a view to or for sale in connection with any distribution thereof, and appropriate legends were placed upon the stock certificates issued in these transactions. All recipients had adequate access, through their employment or other relationship with us or through other access to information provided by us, to information about us. The sales of these securities were made without any general solicitation or advertising.
For the Period January 1, 2022 Through October [*], 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 400,000 shares of common stock previously issued as compensation. These shares were valued at par value of $0.01 or a total value of $4,000; the Company recorded a gain on cancellation of these shares in the amount of $15,032.
The Company entered into a debt-for-equity exchange agreement with Gardner Builders Holdings, LLC (“Gardner”) on January 7, 2022 (the “Debt for Equity Agreement”). Pursuant to the Debt for Equity Agreement, the Company issued shares of restricted common stock to Gardner in exchange for the Company Debt Obligations, as defined below.
The Agreement settled for certain accounts payable amounts owed by the Company to the Creditor (the “Accounts Payable Amount”) as well as upcoming amounts that will become due between the date of the Agreement and April 1, 2022. The Agreement also settled accrued interest and penalties on the amounts due through January 5, 2022, as well as future interest payments on amounts to be accrued in the first quarter of 2022 (collectively, the “Additional Costs”, and combined with the Accounts Payable Amount, the “Company Debt Obligations”). The Accounts Payable Amount was $500,000, the Additional Costs were $294,912 and the conversion price was $0.25. As a result, 3,179,650 Restricted Shares were authorized to be issued. The Company’s Board of Directors approved the Agreement on January 5, 2022.
On March 22, 2022 and March 31, 2022, the Company issued an aggregate 1,541,721 shares of common stock as waiver fees to holders of the Series C and Series D Preferred Stock for their waivers of certain covenants as set forth and defined in the Series C and Series C Certificates of Designations. The Company valued these shares at their contractual price of $0.25 per share and recorded the amount of $385,431 as waiver fees during the three months ended March 31, 2022. The Company recorded an aggregate gain upon issuance of these shares in the amount of $198,273 based on the market price of the Company’s common stock on the date of issuance.
On March 31, 2022, the Company issued 1,720,000 Commitment Fee Shares to AJB Capital Investors, LLC; see note 8. A Monte Carlo model was used to value the warrants and call features, and a probability weighted expected return model was used to value the True-Up Provision. The contractual price of the common stock $0.25 per share; valuation purposes, the common stock was valued at the market price on the date of the transaction of $0.12695 per share. The derivative liability was valued at $106,608 on the date of the transaction. The discount on the notes due to the Commitment Fee Shares and warrants was valued at $349,914. The Company recorded the amount of $226,106 to additional paid-in capital pursuant to this transaction.
On March 31, 2022, the Company issued 382,353 shares of common stock at a price of $0.25 per share which were previously subscribed for the conversion of accounts payable in the amount of $95,558.
On April 6, 2022, the Company issued an aggregate of 1,720,000 shares of commitment fee shares and Common Stock Purchase Warrants to purchase up to an aggregate of 750,000 shares of the Common Stock to Anson East Master Fund LP and Anson Investments Master Fund LP. The commitment fee shares were issued at an aggregate value of $430,000. The initial exercise price for the warrants is $0.50 per share.
On April 18, 2022, the Company issued 637,036 shares of commitment fee shares and Common Stock Purchase Warrants to purchase up to 277,777 shares of the Common Stock to GS Capital Partners. The commitment fee shares were issued at an aggregate value of $159,259. The initial exercise price for the warrants is $0.50 per share.
On April 27, 2022, the Company issued 96,471 shares of commitment fee shares and Common Stock Purchase Warrants to purchase up to 96,471 shares of the Common Stock to Lawrence Diamond. The initial exercise price for the warrants is $0.50 per share.
On May 10, 2022, the Company issued 637,036 shares of commitment fee shares and Common Stock Purchase Warrants to purchase up to 277,777 shares of the Common Stock to Kishon Investments, LLC. The commitment fee shares were issued at an aggregate value of $159,259. The initial exercise price for the warrants is $0.50 per share.
On May 18, 2022, the Company issued 19,294 shares of commitment fee shares and Common Stock Purchase Warrants to purchase up to 19,294 shares of the Common Stock to Lawrence Diamond. The initial exercise price for the warrants is $0.50 per share.
On May 26, 2022, the Company issued an aggregate of 84,412 shares of commitment fee shares and Common Stock Purchase Warrants to purchase up to an aggregate of 84,412 shares of the Common Stock to Lawrence Diamond, Jenny Lindstrom and other related parties. The initial exercise price for the warrants is $0.50 per share.
On June 9, 2022, the Company issued an aggregate of 364,176 shares of commitment fee shares and Common Stock Purchase Warrants to purchase up to an aggregate of 364,176 shares of the Common Stock to Michael C. Howe Living Trust and Dragon Dynamic Funds Platform Ltd. The initial exercise price for the warrants is $0.50 per share.
On July 7, 2022, the Company issued an aggregate of 130,235 shares of commitment fee shares and Common Stock Purchase Warrants to purchase up to an aggregate of 130,235 shares of the Common Stock to Charles Schrier and William Mackay Investments LLC. The initial exercise price for the warrants is $0.50 per share.
On July 21, 2022 and July 26, 2022, the Company issued an aggregate of 159,176 shares of commitment fee shares and Common Stock Purchase Warrants to purchase up to an aggregate of 159,176 shares of the Common Stock to Michael C. Howe Living Trust, Juan Carols Iturregui and Erik Scott Nommsen. The initial exercise price for the warrants is $0.50 per share.
On July 27, 2022, the Company issued an aggregate of 24,117 shares of commitment fee shares and Common Stock Purchase Warrants to purchase up to an aggregate of 24,117 shares of the Common Stock to Caplan. The initial exercise price for the warrants is $0.50 per share.
On August 4, 2022, the Company issued 984 shares of commitment fee shares to Jack Enright.
On August 4, 2022, the Company issued an aggregate of 241 shares of commitment fee shares and Common Stock Purchase Warrants to purchase up to an aggregate of 241 shares of the Common Stock to Jessica, Kevin C., Brody, Isabella and Jack Finnegan. The initial exercise price for the warrants is $25.00 per share.
On August 18, 2022, the Company issued 1,640 shares of commitment fee shares to Michael C. Howe Living Trust.
On September 2, 2022, the Company issued an aggregate of 1,567 shares of commitment fee shares to Sharon Goff, Lisa Lewis, Frank Lightmas and John Mitchell.
On September 9, 2022, the Company issued 41,000 shares of commitment fee shares to Cliff Hagan.
On September 14, 2022, the Company issued 82,000 shares of commitment fee shares to Darling Capital, LLC.
On September 15, 2022, the Company issued 41,000 shares of commitment fee shares to Mack Leath.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
Unless otherwise indicated, each of the following exhibits have been previously filed with the Securities and Exchange Commission by the Company under File No. 000-53601.
|
Incorporated by Reference |
Filed or Furnished |
|||||||||
|
Exhibit Number |
Exhibit Description |
Form |
Exhibit |
Filing Date |
Herewith |
|||||
| 1.1+ | Form of Underwriting Agreement and Lock up Agreement | |||||||||
|
3.1 |
Certificate of Incorporation of Trunity Holdings, Inc., dated January 18, 2012. |
8-K |
10.1 |
1/31/2012 |
||||||
|
3.2 |
8-K |
10.2 |
1/31/2012 |
|||||||
|
3.3 |
10-K |
3.3 |
4/16/2013 |
|||||||
|
3.4 |
8-K |
3.1(i) |
1/06/2016 |
|||||||
|
3.5 |
Certificate of Designations of Series X Preferred Stock of True Nature Holding, Inc. |
8-K |
3.6 |
1/06/2020 |
||||||
|
3.6 |
8-K |
3.07 |
3/13/2020 |
|||||||
|
3.7 |
10-Q |
3.7 |
8/14/2020 |
|||||||
|
3.8 |
10-Q |
3.8 |
11/13/2020 |
|||||||
|
3.9 |
Bylaws of Mitesco, Inc., as amended, dated November 10, 2020 |
10-Q |
3.9 |
11/13/2020 |
||||||
|
3.10 |
8-K |
3.1 |
03/26/2021 |
|||||||
|
3.11 |
8-K |
3.2 |
03/26/2021 |
|||||||
| 3.12 | Certificate of Incorporation of Trunity Holdings, Inc., as amended | S-1 | 3.12 | 02/10/2022 | ||||||
| 3.13 | Certificate of Designations, Preferences and Rights of the Series D Convertible Preferred Stock of Mitesco, Inc. | 8-K | 3.1 | 10/22/2021 | ||||||
|
4.1* |
Trunity Holdings, Inc. 2012 Employee, Director and Consultant Stock Option Plan. |
10-K |
10.4 |
04/16/2013 |
||||||
|
4.2 |
8-K |
4.1 |
7/13/2018 |
|||||||
|
4.3 |
8-K |
4.1 |
9/28/2018 |
|||||||
|
4.4 |
8-K |
4.1 |
1/14/2019 |
|||||||
|
4.5 |
8-K |
4.2 |
01/14/2019 |
|||||||
|
4.28 |
Kishon Investments Promissory Note in the principal amount of $277,777 dated May 10, 222 |
8-K |
4.1 |
05/17/2022 |
||||||
|
4.29 |
Kishon Investments Common Stock Purchase Warrant dated May 10, 2022 |
8-K |
4.2 |
05/17/2022 |
||||||
|
4.30 |
Diamond Promissory Note in the principal amount of $47,059 dated May 18, 222 |
8-K |
4.1 |
05/18/2022 |
||||||
|
4.31 |
8-K |
4.2 |
05/18/2022 |
|||||||
|
4.32 |
8-K |
4.1 |
06/02/2022 |
|||||||
|
4.33 |
8-K |
4.2 |
06/02/2022 |
|||||||
|
4.34 |
8-K |
4.1 |
06/15/2022 |
|||||||
|
4.35 |
8-K |
4.3 |
06/15/2022 |
|||||||
|
4.36 |
Dragon Dynamic Funds Platform Ltd. Promissory Note dated June 9, 2022 |
8-K |
4.2 |
06/15/2022 |
||||||
|
4.37 |
8-K |
4.4 |
06/15/2022 |
|||||||
|
4.38 |
8-K |
4.1 |
07/13/2022 |
|||||||
|
4.39 |
8-K |
4.2 |
07/13/2022 |
|||||||
|
4.40 |
8-K |
4.3 |
07/13/2022 |
|||||||
|
4.41 |
William Mackay Common Stock Purchase Warrant dated July 7, 2022 |
8-K |
4.4 |
07/13/2022 |
||||||
|
4.42 |
8-K |
4.1 |
07/27/2022 |
|||||||
|
4.43 |
8-K |
4.2 |
07/27/2022 |
|||||||
|
4.44 |
8-K |
4.3 |
07/27/2022 |
|||||||
|
4.45 |
8-K |
4.4 |
07/27/2022 |
|||||||
|
4.46 |
8-K |
4.5 |
07/27/2022 |
|||||||
|
4.47 |
8-K |
4.6 |
07/27/2022 |
|||||||
|
4.48 |
8-K | 4.1 | 08/02/2022 | |||||||
|
4.49 |
8-K | 4.2 | 08/02/2022 |
|
21.1 |
10-K |
21.1 |
03/25/2021 |
|||||||
|
23.1 |
X |
|||||||||
|
23.2+ |
Consent of Lucosky Brookman, LLP (contained in Exhibit 5.1) |
|
||||||||
|
101.INS |
Inline XBRL Instance Document |
X |
||||||||
|
101.SCH |
Inline XBRL Taxonomy Extension Schema Document |
X |
||||||||
|
101.CAL |
Inline XBRL Taxonomy Extension Calculation Linkbase Document |
X |
||||||||
|
101.DEF |
Inline XBRL Taxonomy Extension Definition Linkbase Document |
X |
||||||||
|
101.LAB |
Inline XBRL Taxonomy Extension Label Linkbase Document |
X |
||||||||
|
101.PRE |
Inline XBRL Taxonomy Extension Presentation Linkbase Document |
X |
||||||||
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) | X | ||||||||
| 107 | Filing Fee Table | X |
* Management contract or compensatory plan or arrangement required to be identified pursuant to Item 15(a)(3) of this report.
+To be filed by amendment
ITEM 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes:
|
(1) |
To file, during any period in which offers, or sales are being made, a post-effective amendment to this registration statement: |
|
(i) |
to include any prospectus required by Section 10(a)(3) of the Securities Act of 1933, as amended (the “Securitas Act”); |
|
(ii) |
to reflect in the prospectus any acts or events arising after the effective date of this registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in this registration statement (notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of a prospectus filed with the Commission pursuant to Rule 424(b) under the Securities Act if, in the aggregate, the changes in volume and price represent no more than a 20% change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement); and |
|
|
(iii) |
to include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement; |
|
(2) |
That, for the purpose of determining any liability under the Securities Act, each such post-effective amendment shall be deemed to be a first-time registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. |
|
(3) |
To remove from registration, by means of a post-effective amendment, any of the securities being registered which remain unsold at the termination of the offering. |
|
|
(4) |
That, for the purpose of determining liability under the Securities Act of 1933 to any purchaser in the initial distribution of the securities, the undersigned registrant undertakes that in a primary offering of securities of the undersigned registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser: |
|
(i) |
Any preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be filed pursuant to Rule 424 (§230.424 of this chapter); |
|
|
(ii) |
Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred to by the undersigned registrant; |
|
|
(iii) |
The portion of any other free writing prospectus relating to the offering containing material information about the undersigned registrant or its securities provided by or on behalf of the undersigned registrant; and |
|
|
(iv) |
Any other communication that is an offer in the offering made by the undersigned registrant to the purchaser. |
|
(5) |
The undersigned registrant hereby undertakes to provide to the underwriter at the closing specified in the underwriting agreements certificates in such denominations and registered in such names as required by the underwriter to permit prompt delivery to each purchaser. |
|
|
(6) |
Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer, or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question of whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue. |
|
|
(7) |
The undersigned Registrant hereby undertakes that: |
|
(i) |
For purposes of determining any liability under the Securities Act, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective. |
|
(ii) |
For the purpose of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a first-time registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. |
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized in the City of St. Louis Park in the State of Minnesota on October 3, 2022.
|
MITESCO, INC. |
|||
|
Dated: October 3, 2022 |
By: |
/s/ Larry Diamond |
|
|
Larry Diamond Chief Executive Officer and Director |
|||
Pursuant to the requirements of the Securities Act of 1933, as amended, this registration statement has been signed by the following persons in the capacities and on the dates indicated.
|
Signature |
Title |
Date |
||
|
/s/ Larry Diamond |
Chief Executive Officer and Director |
|||
|
Larry Diamond |
(Principal Executive Officer) |
October 3, 2022 | ||
|
* |
Principal Financial and Accounting Officer and Chairman of the Board of Directors |
|||
|
Thomas Brodmerkel |
October 3, 2022 | |||
|
* |
Member of the Board of Directors |
|||
|
Juan Carlos Iturregui |
October 3, 2022 | |||
|
* |
Member of the Board of Directors |
|||
| Dr. H. Faraz Naqvi | October 3, 2022 | |||
|
* |
Member of the Board of Directors |
|||
|
Shelia Schweitzer |
October 3, 2022 | |||
| /s/ Larry Diamond | ||||
| Larry Diamond | ||||
| Attorney-in Fact |
