Note 2 - Financial Condition, Going Concern and Management Plans
As of March 31, 2021, the Company had cash of $2,756,000, current liabilities of $1,319,000, and has incurred a loss from operations and has generated minimal revenue. The Company’s principal operation is the development and operation of primary care health and wellness clinics operated by nurse practitioners. In addition, the Company develops and deploys software and systems for the healthcare marketplace. The Company intends to a) develop and acquire telemedical technologies, and b) evaluate other healthcare related opportunities both domestically and on an international basis. The Company’s activities are subject to significant risks and uncertainties, including failing to secure additional funding to execute its business plan.
As a result of these factors, there is substantial doubt about the ability of the Company to continue as a going concern for one year from the date the financial statements are issued. The Company’s continuance is dependent on raising capital and generating revenues sufficient to sustain operations. During the three months ended March 31, 2021, the Company closed on a $3,000,000 series C Preferred Stock and warrants offering and $1,668,000 restricted common stock offering. In order to continue its expansion plans the Company believes that additional capital will need to be raised and has entered discussions to do so with certain 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.
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 submitted an application 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.
During management's review of the loan application after the loan had been disbursed to the Company, it was determined that the information provided by its former President and COO in the application was not representative of the Company’s situation. After consulting with legal counsel and conferring with the Board of Directors, the Board of Directors, in executive session, voted to remove the Company’s former President and Chief Operating Officer (“COO”) from its Board of Directors, and all operating roles due to the inaccuracy of the loan application. After that decision, the former President & COO submitted a resignation from all positions with the Company, which was accepted by the Board and management.
In August 2020, the former President and COO filed a complaint alleging discrimination under certain provisions of the anti-discrimination laws of that state. The Company believes that the action is without merit and intends to vigorously defend itself. The Company does not believe it the action will have a material impact on the Company. As of the date of this filing the Company has been advised by the convening judicial organization that it has dismissed this matter, and as such the individual who initiated this action is open to pursue litigation in other venues if they desire.
The Company has had some impact on its operations as a result of the effects of the COVID-19 pandemic, primarily with accessibility to staffing, consultants and in the capital markets, and it is adjusting as needed within its available resources. The Company will continue to assess the effect of the pandemic on its operations. The extent to which the COVID-19 pandemic will continue to impact the Company’s business and operations will depend on future developments that are highly uncertain and cannot be predicted with confidence, such as the ultimate geographic spread of the disease, the duration of the outbreak, the duration and effect of possible business disruptions and the short-term effects and ultimate effectiveness of the travel restrictions, quarantines, social distancing requirements and business closures in the United States and other countries to contain and treat the disease. While the potential economic impact brought by, and the duration of, COVID-19 may be difficult to assess or predict, a widespread pandemic could result in significant disruption of global financial markets, reducing the Company’s ability to access capital, which could in the future negatively affect the Company’s liquidity. In addition, a recession or market correction resulting from the spread of COVID-19 could materially affect the Company’s business and the value of its securities.
Note 3 – Summary of Significant Accounting Policies
Principles of Consolidation – The accompanying consolidated financial statements include the accounts of Mitesco, Inc., and its wholly owned subsidiaries MitescoNA, LLC, The Good Clinic, LLC, and Acelerar Healthcare Holdings, LTD. In addition, we anticipate that we will rely on the operating activities of certain legal entities in which we will not maintain a controlling ownership interest but over which we will have indirect influence and of which we will be considered the primary beneficiary. We expect that these entities will typically be subject to nominee ownership and transfer restriction agreements that effectively transfer the majority of the economic risks and rewards of their ownership to the Company. The Company’s management, restriction and other agreements concerning such nominee-owned entities typically includes both financial terms and protective and participating rights to the entities’ operating, strategic and non-clinical governance decisions which transfer substantial powers over and economic responsibility for these entities to the Company. As such, the Company applies the guidance of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 810 – Consolidation (“ASC 810”), to determine when an entity that is insufficiently capitalized or not controlled through its voting interests, referred to as a variable interest entity should be consolidated. All intercompany balances and transactions have been eliminated.
Use of Estimates - The preparation of these financial statements requires our management to make estimates and assumptions about future events that affect the amounts reported in the financial statements and related notes. Future events and their effects cannot be determined with absolute certainty. Therefore, the determination of estimates requires the exercise of judgment.
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 $2,756,000 and $65,000 as of March 31, 2021 and 2020, respectively .
Property, Plant, and Equipment - Property and equipment is recorded at the lower of cost or estimated net recoverable amount and is depreciated using the straight-line method over its estimated useful life. Property acquired in a business combination is recorded at estimated initial fair value. Property, plant, and equipment are depreciated using the straight-line method based on the lesser of the estimated useful lives of the assets or the lease term based upon the following life expectancy:
|
|
Years
|
Office equipment
|
|
|
3 to 5
|
Furniture & fixtures
|
|
|
3 to 7
|
Machinery & equipment
|
|
|
3 to 10
|
Leasehold improvements
|
|
|
Term of lease
|
In 2020, the Company entered into a lease for a clinic facility in Minneapolis, Minnesota. In connection with the facility, the Company incurred costs to design, engineer, build and install furniture and equipment in the facility. $417,000 was recorded in construction in progress on the balance sheet as of December 31, 2020. The facility was completed, and the Company received its certificate of occupancy, in the first quarter of 2021. During the three months ended March 31, 2021, the costs previously recorded as construction in progress were recorded to fixed assets and are being depreciated over their useful lives or lease term as appropriate.
Revenue Recognition – On January 1, 2018, we adopted Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (Topic 606), which supersedes the revenue recognition requirements in Accounting Standards Codification (ASC) Topic 605, Revenue Recognition (Topic 605). Results for reporting periods beginning after January 1, 2018 are presented under Topic 606. The impact of adopting the new revenue standard was not material to our financial statements and there was no adjustment to beginning retained earnings on January 1, 2018.
Under Topic 606, revenue is recognized when control of the promised goods or services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services.
We determine revenue recognition through the following steps:
●
|
identification of the contract, or contracts, with a customer;
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●
|
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 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.
Beneficial Conversion Features and Deemed Dividends-The Company records a deemed dividend on Preferred Stock when, on the date of issuance, the conversion rate is less than the Company’s stock price. The Company also records, when necessary, deemed dividends for the exchange of Preferred Stock for common stock, based on the market price of common stock in excess of the carrying value of the Preferred Stock.
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. As of March 31, 2021 the Company had retired all derivative instruments.
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.
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 generally considers all expected future events other than possible 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, the sale of profitable divisions 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 fifty percent) 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 fifty percent likely 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 generally no longer subject to U.S. federal, state, and local income tax examinations for the years before 2018.
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. The Company had no impairment charges.
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. The Company does not anticipate that the adoption of this standard will have a material impact on the Company’s consolidated financial statements.
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 is currently evaluating the impact of this standard on its condensed consolidated financial statements and related disclosures.
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 three months ended March 31, 2021 and 2020, respectively:
|
|
March 31,
|
|
|
|
2021
|
|
|
2020
|
|
Numerator:
|
|
|
|
|
|
|
|
|
Net loss applicable to common shareholders
|
|
$
|
(2,754,952
|
)
|
|
$
|
(165,320
|
)
|
|
|
|
|
|
|
|
|
|
Denominator:
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding
|
|
|
187,152,300
|
|
|
|
83,983,177
|
|
|
|
|
|
|
|
|
|
|
Net loss per share data:
|
|
|
|
|
|
|
|
|
Basic and diluted
|
|
$
|
(0.01
|
)
|
|
$
|
(0.00
|
)
|
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 March 31, 2021 and 2020, the following shares were issuable and excluded from the calculation of diluted loss:
|
|
March 31,
|
|
|
|
2021
|
|
|
2020
|
|
Options
|
|
|
10,967,879
|
|
|
|
67,879
|
|
Warrants
|
|
|
12,600,000
|
|
|
|
2,901,444
|
|
Convertible Preferred Stock Series C
|
|
|
12,600,000
|
|
|
|
-
|
|
Accrued interest on Preferred Stock
|
|
|
72,657
|
|
|
|
709,692
|
|
Total
|
|
|
36,240,536
|
|
|
|
3,679,015
|
|
Note 5 – Related Party Transactions
For the three months ended March 31, 2021:
On March 17, 2021, the Company issued 1,000,000 ten-year options with an exercise price of $0.31 to its Chief Financial Officer. These options had a fair value at issuance of $301,910. The Company valued these options using the Black-Scholes valuation model. The options vest as follows: 250,000 options vest 90 days from issuance: 250,000 options vest one year from issuance; and 500,000 options vest based upon the Company’s achieving certain performance targets.
During the three months ended March 31, 2021, the Company accrued dividends on its Series X Preferred Stock in the total amount of $16,000. Of this amount, a total of $2,000 was payable to officers and directors, $8,000 was payable to a related party shareholder, and $6,000 was payable to non-related parties.
For the three months ended March 31, 2020:
On February 27, 2020, the Company agreed to issue 1,000,000 ten-year options to its two non-management directors (a total of 2,000,000 options). These options have a fair value at issuance of $39,000 per director (a total of $78,000), an exercise price of $0.05 per share, and vest over a three-year period. The Company valued these options using the Black-Scholes valuation model. On December 14, 2020, the exercise price of these options was rest to $0.03 per share reflecting the market price at the time (see note 10).
On March 2, 2020, the Company agreed to issue 1,500,000 ten-year options to each of its Chief Executive Officer, its President, and a consultant (a total of 4,500,000 options). These options had a total fair value at issuance of $176,000, an exercise price of $0.05 per share, and vest over a three-year period. The Company valued these options using the Black-Scholes valuation model. Julie R. Smith, the Company’s former President, Chief Operating Officer, and a Board member resigned effective June 30, 2020; the 1,500,000 options that the Company agreed to issue to Ms. Smith were cancelled; a total of $1,632 was charged to operations representing the fair value of these options through Ms. Smith’s resignation date. On December 14, 2020, the exercise price of the 1,500,000 options granted to each of its Chief Executive Officer and a consultant was changed to $0.03 per share reflecting the market price at the time (see Note 9).
Note 6 - 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 7.5 years. The Company’s lease expense was entirely comprised of operating leases. Lease expense for the three months ended March 31, 2021 and 2020 amounted to $16,000 and $0, respectively. The Company’s ROU asset amortization for the three months ended March 31, 2021 and 2020 was $6,000 and $0, respectively. The difference between the lease expense and the associated ROU asset amortization consists of interest at a rate of 12% per annum.
Right to use assets – operating leases are summarized below:
|
|
March 31,
2021
|
|
|
December 31,
2020
|
|
Clinic
|
|
$
|
304,124
|
|
|
$
|
310,361
|
|
Right to use assets, net
|
|
$
|
304,124
|
|
|
$
|
310,361
|
|
Operating lease liabilities are summarized below:
|
|
March 31,
2020
|
|
|
December 31,
2019
|
|
Clinic
|
|
$
|
330,730
|
|
|
$
|
321,004
|
|
Lease liability
|
|
$
|
330,730
|
|
|
$
|
321,004
|
|
Less: current portion
|
|
|
(25,284
|
)
|
|
|
(8,905
|
)
|
Lease liability, non-current
|
|
$
|
305,446
|
|
|
$
|
312,099
|
|
Maturity analysis under these lease agreements are as follows:
For the twelve months ended March 31, 2022
|
|
$
|
63,621
|
|
For the twelve months ended March 31, 2023
|
|
|
63,798
|
|
For the twelve months ended March 31, 2024
|
|
|
65,317
|
|
For the twelve months ended March 31, 2025
|
|
|
66,836
|
|
For the twelve months ended March 31, 2026
|
|
|
68,355
|
|
Thereafter
|
|
|
182,913
|
|
Total
|
|
$
|
510,840
|
|
Less: Present value discount
|
|
|
(180,110
|
)
|
Lease liability
|
|
$
|
330,730
|
|
Note 7 – Debt
August 2014 Series C and D Convertible Debentures
On March 30, 2021, the Company issued 272,837 shares of common stock and paid cash in the amount of $122,166 as settlement of principal and accrued interest in the amounts of $110,833 and $71,526, respectively, due under the Series C Debenture and principal and accrued interest in the amounts of $11,333 and $8,722 due under the Series C Debenture. The Company recognized a gain in the amount of $3,035 on this transaction. This obligation has been fully satisfied as of the date of this filing and the Company has no further requirements related to this matter.
March 2016 Convertible Note A
On March 24, 2021, the Company paid cash in the amount of $55,368 as settlement of principal and accrued interest in the amount of $41,000 and $13,167, respectively, due under the March 2016 Convertible Note A. The Company recognized a loss in the amount of $1,201 on this transaction. This obligation has been fully satisfied as of the date of this filing and the Company has no further requirements related to this matter.
Eagle Equities Note 4
On January 4, 2021, the Company issued 4,123,750 shares of common stock at a price of $0.012 per share pursuant to the conversion of $45,000 of principal and $4,485 of accrued interest in Eagle Equities Note 4. On January 6, 2021, the Company issued 3,505,964 shares of common stock at a price of $0.01224 per share pursuant to the conversion of $39,000 of principal and $3,913 of accrued interest in Eagle Equities Note 4. This obligation has been fully satisfied as of the date of this filing and the Company has no further requirements related to this matter.
Eagle Equities Note 5
On January 11, 2021, the Company issued 4,463,507 shares of common stock at a price of $0.01224 per share pursuant to the conversion of $50,000 of principal and $4,633 of accrued interest in Eagle Equities Note 5. On January 14, 2021, the Company issued 4,319,378 shares of common stock at a price of $0.01266 per share pursuant to the conversion of $50,000 of principal and $4,683 of accrued interest in Eagle Equities Note 5. This obligation has been fully satisfied as of the date of this filing and the Company has no further requirements related to this matter.
Eagle Equities Note 6
On January 21, 2021, the Company issued 6,449,610 shares of common stock at a price of $0.0154 per share pursuant to the conversion of $93,000 of principal and $6,324 of accrued interest in Eagle Equities Note 6. On January 28, 2021, the Company issued 7,285,062 shares of common stock at a price of $0.01575 per share pursuant to the conversion of $107,200 of principal and $7,540 of accrued interest in Eagle Equities Note 6. This obligation has been fully satisfied as of the date of this filing and the Company has no further requirements related to this matter.
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 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. This obligation has been fully satisfied as of the date of this filing and the Company has no further requirements related to this matter.
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 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. This obligation has been fully satisfied as of the date of this filing and the Company has no further requirements related to this matter.
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 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. This obligation has been fully satisfied as of the date of this filing and the Company has no further requirements related to this matter.
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 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. This obligation has been fully satisfied as of the date of this filing and the Company has no further requirements related to this matter.
PPP Loan
On May 4, 2020, the Company received loan proceeds from Bank of America in the amount of $460,406 under the Paycheck Protection Program (the “PPP Loan”).
On July 21, 2020, Bank of America notified the Company in writing that it should not have received $440,000 of the loan proceeds 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 the Company never applied for or received such a loan. Bank of America requested that the Company return the funds it received back to Bank of America. The Company is currently negotiating a repayment plan with Bank of America. If we are not successful in negotiating repayment terms, it could have a material adverse effect on our financial condition. Details of additional activity for the quarter ended March 31, 2021 are presented in Notes Payable Table 1, below.
Notes Payable Table 1:
|
|
March 31,
2021
|
|
|
December 31,
2020
|
|
Total notes payable
|
|
$
|
460,406
|
|
|
$
|
1,656,772
|
|
Less: Discount
|
|
|
-
|
|
|
|
(756,795
|
)
|
Notes payable - net of discount
|
|
$
|
460,406
|
|
|
$
|
899,977
|
|
|
|
|
|
|
|
|
|
|
Current Portion, net of discount
|
|
$
|
460,406
|
|
|
$
|
899,977
|
|
Long-term portion, net of discount
|
|
$
|
-
|
|
|
$
|
-
|
|
Note 8 – 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 three months ended March 31, 2021 are summarized in the table below:
December 31, 2020
|
|
$
|
807,682
|
|
Settled upon conversion or exercise
|
|
|
(1,301,137
|
)
|
Gain on revaluation
|
|
|
493,455
|
|
March 31, 2021
|
|
$
|
-
|
|
Note 9 – Stockholders’ Equity (Deficit)
Common Stock
The Company has authorized 500,000,000 shares of common stock, par value $0.01; 197,694,698 shares were issued and outstanding on March 31, 2021.
Common Stock Transactions During the three months Ended March 31, 2021
On January 4, 2021, the Company issued 4,123,750 shares of common stock at a price of $0.012 per share pursuant to the conversion of $45,000 of principal and $4,485 of accrued interest in Eagle Equities Note 4.
On January 6, 2021, the Company issued 3,505,964 shares of common stock at a price of $0.01224 per share pursuant to the conversion of $39,000 of principal and $3,913 of accrued interest in Eagle Equities Note 4.
On January 11, 2021, the Company issued 4,463,507 shares of common stock at a price of $0.01224 per share pursuant to the conversion of $50,000 of principal and $4,633 of accrued interest in Eagle Equities Note 5.
On January 14, 2021, the Company issued 4,319,378 shares of common stock at a price of $0.01266 per share pursuant to the conversion of $50,000 of principal and $4,683 of accrued interest in Eagle Equities Note 5.
On January 21, 2021, the Company issued 6,449,610 shares of common stock at a price of $0.0154 per share pursuant to the conversion of $93,000 of principal and $6,324 of accrued interest in Eagle Equities Note 6.
On January 28, 2021, the Company issued 7,285,062 shares of common stock at a price of $0.01575 per share pursuant to the conversion of $107,200 of principal and $7,540 of accrued interest in Eagle Equities Note 6.
On February 1, 2021, the Company issued 6,672,000 shares of common stock in a private placement (the “2021 Private Placement”) at a price of $0.25 per share for cash proceeds of $1,668,000.
On February 5, 2021, the Company entered into a settlement agreement with the holders of the Eagle Equities Note 7 whereby the Company issued 1,184,148 shares of common stock at a price of $0.24984 per share in satisfaction of $200,200 of principal and all accrued interest and prepayment penalties due under this note.
On February 5, 2021, the Company entered into a settlement agreement with the holders of the Eagle Equities Note 8 whereby the Company issued 639,593 shares of common stock at a price of $0.23851 per share in satisfaction of $114,400 of principal and all accrued interest and prepayment penalties due under this note.
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, the Company entered into a settlement agreement with the holders of the Eagle Equities Note 10 whereby the Company 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, the Company issued 336,000 shares of common stock for the exercise of options at a price of $0.03 per share.
On March 11, 2021, the Company 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. The 4,800 shares of Series A Preferred Stock were cancelled.
On March 17, 2021, the Company issued 300,000 shares of common stock at a price of $0.31 per share to a service provider.
On March 23, 2021, the Company issued 461,358 shares of common stock at a price of $0.26 per share to the underwriters of the 2021 Private Placement.
Common Stock Transactions During the Three Months Ended March 31, 2020
During the three months ending March 31, 2020, the Company issued 200,000 restricted shares of the Company’s common stock at 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.
Also, during the three months ended March 31, 2020, the Company charged the amount of $33,676 to operations in connection with the vesting of stock granted to its officers and board members; the Company also charged the amount of $7,072 to operations in connection with the vesting of options granted to officers and board members.
Also, during the three months ended March 31, 2020, the Company entered into agreements to issue 500,000 options to each of four consultants (a total of 2,000,000 options). The options have a fair value of $20,930 per consultant (a total of $83,720). These agreements will become effective April 6, 2020, at which time the Company will begin to charge the value of these options to operations. The Company valued these options using the Black-Scholes valuation model.
Preferred Stock
Series A Preferred Stock Transactions During the Three Months Ended March 31, 2021
During the three months ended March 31, 2020, the Company accrued dividends in the amount of $1,000 on the Series A Preferred Stock. On March 11, 2021, the Company issued 600,000 shares of common stock to the four officers of The Good Clinic in exchange for the previously issued Series A Preferred Stock and accrued dividends. The Series A preferred stock was canceled. The Preferred Stock was valued at cost of $71,558, and the common stock was valued at the market price of $0.463 per share or a total value of $277,800. This transaction resulted in a deemed dividend to the Preferred A shareholders in the amount of $206,242.
Series A Preferred Stock Transactions During the Three Months Ended March 31, 2020
On March 2, 2020, the Company issued 4,800 shares of its Series A Preferred Stock to four individuals with certain skills and know-how to assist the Company in the development of its newly formed subsidiary My Care, LLC. The Company had valued these shares at $71,558 or approximately $14.91 per share based upon an analysis performed by an independent valuation consultant. During the three months ended March 31, 2020, the Company accrued dividends in the amount of $967 on the Series A Preferred Stock. On March 31, 2020, dividend payable on the Series A Preferred Stock was $967. On March 31, 2020, if management determined to pay these dividends in shares of the Company’s common stock, this would result in the issuance of 39,534 shares of common stock based upon the average price of $0.02446 per share for the five-day period ended March 31, 2020.
Series C Preferred Stock
Series C Preferred Stock Transactions During the Three Months Ended March 31, 2021
On March 25, 2021, the Company entered into Securities Purchase Agreements (the “SPAs”) 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 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. The Company allocated the aggregate purchase price of the units in the amount of $3,000,000 as follows: $608,519 was allocated to the Series C Preferred Stock, and $2,391,481 was allocated to the warrants. The Company also recorded a deemed dividend to the Series C Preferred Stock shareholders in the amount of $126,000 based upon the difference between the conversion price of $0.25 per share and the market price of $0.26 per share on the date of issuance.
Series C Preferred Stock Transactions During the Three Months Ended March 31, 2020
None.
Series X Preferred Stock
The Series X Preferred Stock has a par value of $0.01 per share, no stated maturity, a liquidation preference of $25.00 per share, and will not be subject to any sinking fund or mandatory redemption and will remain outstanding indefinitely unless the Company decides to redeem or otherwise repurchase the Series X Preferred Stock; the Series X Preferred Stock is not redeemable prior to November 4, 2020. The Series X Preferred Stock will rank senior to all classes of the Company’s common and preferred stock and accrues dividends at the rate of 10% on $25.00 per share. The Company reserves the right to pay the dividends in shares of the Company’s common stock at a price equal to the average closing price over the five days prior to the date of the dividend declaration. Each one share of the Series X Preferred Stock is entitled to 20,000 votes on all matters submitted to a vote of our shareholders.
Series X Preferred Stock Transactions During the Three Months Ended March 31, 2021
During the three months ended March 31, 2021, the Company accrued dividends in the amount of approximately $16,392 on the Series X Preferred Stock. On March 31, 2021, dividend payable on the Series X Preferred Stock was $16,392.
Stock Options
The following table summarizes the options outstanding on December 31, 2020 and the related prices for the options to purchase shares of the Company’s common stock:
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
Weighted
|
|
|
average
|
|
|
|
|
|
|
average
|
|
|
|
|
|
|
|
average
|
|
|
exercise
|
|
|
|
|
|
|
exercise
|
|
Range of
|
|
Number of
|
|
|
remaining
|
|
|
price of
|
|
|
Number of
|
|
|
price of
|
|
exercise
|
|
options
|
|
|
contractual
|
|
|
outstanding
|
|
|
options
|
|
|
exercisable
|
|
Prices
|
|
outstanding
|
|
|
life (years)
|
|
|
options
|
|
|
exercisable
|
|
|
options
|
|
$0.03-$0.39
|
|
|
14,312,879
|
|
|
|
9.23
|
|
|
$
|
0.04
|
|
|
|
10,967,879
|
|
|
$
|
0.04
|
|
Transactions involving stock options are summarized as follows:
|
|
Shares
|
|
|
Weighted- Average
Exercise Price ($)
|
|
Outstanding on December 31, 2020
|
|
|
13,453,879
|
|
|
$
|
0.03
|
|
Granted
|
|
|
1,195,000
|
|
|
|
0.19
|
|
Cancelled
|
|
|
(336,000
|
)
|
|
|
0.03
|
|
|
|
|
|
|
|
|
|
|
Outstanding on March 31, 2021
|
|
|
14,312,879
|
|
|
$
|
0.04
|
|
On March 31, 2021, the total stock-based compensation cost related to unvested awards not yet recognized was $431,078.
The Black-Scholes option pricing model is used to estimate the fair value of stock options granted under the Company’s share-based compensation plans. The weighted average assumptions used in calculating the fair values of stock options as of March 31, 2021 was as follows:
|
|
March 31,
|
|
|
|
2021
|
|
Volatility
|
|
|
169.3% to 183.5
|
%
|
Dividends
|
|
$
|
-
|
|
Risk-free interest rates
|
|
|
0.82 % to 1.69
|
%
|
Term (years)
|
|
|
2.50 to 10.00
|
|
Warrants
The following table summarizes the warrants outstanding on March 31, 2021 and the related prices for the warrants to purchase shares of the Company’s common stock:
|
|
Shares
|
|
|
Weighted- Average
Exercise Price ($)
|
|
|
|
|
|
|
|
|
|
|
Outstanding on December 31, 2020
|
|
|
-
|
|
|
$
|
-
|
|
Granted
|
|
|
12,600,000
|
|
|
$
|
0.63
|
|
Exercised
|
|
|
-
|
|
|
$
|
-
|
|
Outstanding on March 31, 2021
|
|
|
12,600,000
|
|
|
$
|
0.63
|
|
Note 10 – Fair Value of Financial Instruments
The following summarizes the Company’s derivative financial liabilities that are recorded at fair value on a recurring basis on March 31, 2021 and December 31, 2020.
|
|
March 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
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
807,682
|
|
|
$
|
807,682
|
|
Note 11 – Commitments and Contingencies
Legal
There is no pending or anticipated legal actions at this time except as noted below in “Other”.
Other
On May 4, 2020, we received a loan in the amount of $460,406 from the United States Small Business Administration under the Payroll Protection Program. Subsequent to June 30, 2020, we determined that errors had been made in the application submitted to obtain the loan. On July 21, 2020, Bank of America notified the Company in writing that it should not have received $440,000 of the loan proceeds, representing an amount for the refinancing of an Economic Injury Disaster Loan which we did receive. Bank of America has requested that we remit such funds back to Bank of America. We are presently attempting to negotiate repayment of the loan. If we are not successful in negotiating repayment terms, it could have a material adverse effect on our financial condition.
During management's review of the Company’s recent PPP loan application after the loan had been disbursed to the Company, it was determined that the information provided by Ms. Julie R. Smith, the Company’s former President and COO, was not representative of the Company’s situation. After consulting with legal counsel, the Board of Directors voted to remove Ms. Smith from its Board of Directors, and all other capacities due to the misstatements she made in the loan application. Subsequent to that decision, effective July 1, 2020, Ms. Smith submitted a resignation from all positions with the Company, which was accepted by the Board and management. Ms. Smith subsequently retained counsel and has indicated her intent to file an administrative charge of discrimination in Colorado under certain provisions of the anti-discrimination laws of that state.
On August 18, 2020, the Company received formal notice that a complaint has been filed with the Colorado Civil Rights Division by Ms. Smith naming the Company as the Respondent. The Company believes the claims are frivolous and intends to vigorously defend against the allegations. As of the date of this filing the Company has been advised that the Colorado Civil Rights Division has dismissed this matter effective March 1, 2021. Ms. Smith requested a “Right-to-Sue” letter, which she received, giving her a right to sue in District Court for 90 days from the date of the dismissed action.
Note 12 – Subsequent Events
On April 12, 2021, the Board of Directors appointed Ingrid Jenny Lindstrom its Chief Legal Officer.
On April 12, 2021, the Company issued 1,000,000 ten-year options with an exercise price of $0.31 to its Chief Legal Officer. These options had a fair value at issuance of $301,480. The Company valued these options using the Black-Scholes valuation model. The options vest as follows: 250,000 options vest 90 days from issuance: 250,000 options vest one year from issuance; and 500,000 options vest based upon the Company’s achieving certain performance targets.
On April 20, 2021, the Company issued 1,962 shares of common stock due to the underwriters of the 2021 Private Placement.
On May 4, 2021, the Company issued 845,386 shares of common stock pursuant to the conversion of 201,282 shares Series C Preferred Stock.
On May 13, 2021, the Company announced that it had appointed Mr. Tom Brodmerkel to the position of Chairman of the Board of Directors. Mr. Ronald Riewold, the Company’s former Chairman, has asked to retire from his Board position when a replacement is identified. Mr. Riewold will continue as a strategic advisor to the Company.
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with the financial statements and notes thereto appearing elsewhere herein.
We are working to open primary care clinics around the US that are in residential centers and leverage the expertise, training and license of Nurse Practitioners. We are focusing on wellness as a core of the practice. Mitesco’s mission is to increase convenience and access to care, improve the quality of care, and reduce its cost. Technology is a key part to our approach to deliver on these three goals. We recognize the essential nature of the clinician client relationship and its importance to achieving these superior outcomes. Our view is that technology must enhance these human interactions, not operate independently. As such, we are seeking innovative technologies that enable both consumers and clinicians to achieve more convenient and better outcomes with greater efficiency.
We have opened our flagship primary care clinic “The Good Clinic” in North East Minneapolis, Minnesota. We plan to open an additional 5 to 7 clinics in the Twin Cities area of Minnesota and then continue expansion in the Denver, Colorado area. We target 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 client‘s 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 developers. Already, our clinic is being viewed as an amenity for the high-rise development in which we are located. We plan to mirror this approach within the two Lennar locations with which we have signed letters of intent to build clinics in these residential developments in Denver.
Additionally, we have implemented a corporate structure that we believe allows us to expand into international markets. We have a wholly owned subsidiary in Dublin, Ireland, Acelerar Healthcare Holdings, Ltd. We intend to use this location as a base for European operations. In the European community the investment in healthcare technology has been significant. In many cases, even more robust than in the North American markets. We believe that as a result of expected low economic growth in the European community, several technology businesses based there may become our targets for acquisition at attractive valuations. We believe that these businesses may benefit from the larger markets found in North America and elsewhere in the world.
We also see the European community as an opportunity for capital as we expand our business. The interest rates in this area of the world are currently very low or even at zero. As such, raising funds in the European market may prove attractive when compared to local alternatives. Further, there are equity and debt markets based in Europe that may provide liquidity to our investors, should we be able to list and trade our financial instruments in those marketplaces. We may seek a dual listing for our common stock to trade there. We believe this avenue may increase both the size and liquidity of the shareholder base.
Results of Operations
The following period-to-period comparisons of our financial results are not necessarily indicative of results for the current period of any future periods. Further, as a result of any acquisitions of other businesses, and any additional pharmacy acquisitions or other such transactions we may pursue, we may experience large expenditures specific to the transactions that are not incident to our operations.
Periods ended March 31, 2021 and 2020
Revenue
The Company recognized revenue of approximately $3,000 for the three months ended March 31, 2021, compared to $0 for the three months ended March 31, 2020. The increase in revenue is the result of the opening of The Good Clinic’s first location.
Cost of Sales
The Company incurred approximately $2,000 of cost of goods sold for the three months ended March 31, 2021, compared to $0 for the three months ended March 31, 2020. The increase in cost of goods sold is the result of the opening of The Good Clinic’s first location.
Gross Profit
Our gross profit was approximately $1,000 for the three months ended March 31, 2021, compared to $0 for the three months ended March 31, 2020.
Operating Expenses
Our total operating expenses for the three months ended March 31, 2021 were approximately $953,000. For the comparable period in 2020, the operating expenses were approximately $496,000.
Operating expenses for the three months ended March 31, 2021 were comprised primarily of $118,000 payroll and payroll taxes; $382,000 in legal and professional fees; $137,000 in consulting fees. Operating expenses for the three months ended March 31, 2020 were comprised primarily of $193,000 in payroll, including $120,000 in non-cash compensation; $90,000 in legal and professional fees and $64,000 in consulting fees.
Other Income and Expenses
Interest expense was approximately $965,000 for the three months ended March 31, 2021, compared to approximately $190,000 for the three months ended March 31, 2020. Interest expense consisted primarily of $757,000 amortization of the discount on convertible notes payable and $187,000 prepayment penalty. Interest expense for the three months ended March 31, 2020 consisted primarily of $98,000 of amortization of the discount on convertible debt, $31,000 accrued on notes payable, $36,000 of prepayment interest expense.
During the three months ended March 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 $42,000 in the prior period.
During the three months ended March 31, 2021, we recorded a gain on the settlement of notes payable of approximately $2,000. There was not an equivalent gain or loss in the comparable prior period.
During the three months ended March 31, 2021, the Company declared Preferred Stock dividends of approximately $20,000 compared to approximately $17,000 for the three months ended March 31, 2020.
For the three months ended March 31, 2021, we had a net loss available to common shareholders of approximately $2,755,000, or a net loss per share, basic and diluted of ($0.01) compared to a net loss available to common shareholders of approximately $165,000, or a net loss per share, basic and diluted of ($0.00), for the three months ended March 31, 2020.
Liquidity and Capital Resources
To date, we have not generated sufficient revenue from operations to support our operations. We have financed our operations through the sale of equity securities and short-term borrowings. As of March 31, 2021, we had cash of approximately $2,756,000 compared to cash of approximately $65,000 as of March 31, 2020.
Net cash used in operating activities was approximately $1,064,000 for the three months ended March 31, 2021. This is the result of our business development efforts pertaining to the start-up of the first clinic. Cash used in operations for the three months ended March 31, 2020 was approximately $402,000.
Net cash used in investing activities was approximately $495,000 for the three months ended March 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 three months ended March 31, 2020.
Net cash provided by financing activities for the three months ended March 31, 2021 was approximately $4,250,000, consisting of proceeds from a private placement offering of common stock of $1,668,000 and $2,760,000 from the sale of Series C Preferred Stock and warrants. Partially offsetting the proceeds was approximately $178,000 of payment on notes payable. Net cash provided by financing activities for the three months ended March 31, 2020 was approximately $330,000 consisting of approximately $475,000 of proceeds from notes payable offset by payments on notes payable of approximately $45,000.