As filed with the Securities and Exchange Commission on April 26, 2021

Registration No. 333-[ ]



UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 


 

FORM S-1

REGISTRATION STATEMENT

UNDER THE SECURITIES ACT OF 1933

 


 

Mitesco, Inc.

(Exact name of Registrant as specified in its charter)

 

Delaware

 

8000

 

87-0496850

(State or other jurisdiction of

 

(Primary Standard Industrial

 

(I.R.S. Employer

incorporation or organization)

 

Classification Code Number)

 

Identification Number)

 

601 Carlson Parkway

Suite 1050

Minnetonka, MN 55305

(Address, including zip code, and telephone number, including area code, of Registrants principal executive offices)

 

Lawrence Diamond

Chief Executive Officer

Mitesco, Inc.

601 Carlson Parkway

Suite 1050

Minnetonka, MN 55305

(844) 383 8689

(Name, address, including zip code, and telephone number, including area code, of agent for service)

 

Copies to:

 

Leslie Marlow, Esq.

Hank Gracin, Esq.

Patrick J. Egan, Esq.
Gracin & Marlow, LLP

The Chrysler Building

405 Lexington Avenue, 26th Floor

New York, New York 10174

(212) 907-6457

 

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

Non-accelerated filer

 

Smaller reporting company

     

Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act. ☐

 

 

 

CALCULATION OF REGISTRATION FEE

 

Title of each class of securities to be registered

 

Amount to be Registered(4)

   

Proposed Maximum Offering Price Per Share(5)(6)

   

Proposed Maximum Aggregate Offering Price

   

Amount of

Registration Fee(7)

 

Shares of common stock, par value $0.01 per share, issuable upon conversion of Series C Convertible Preferred Stock(1)

    12,600,000     $ 0.2848     $ 3,588,480     $ 391.51  
                                 

Shares of common stock, par value $0.01 per share, issuable upon exercise of Series A Warrants(2)

    6,300,000     $ 0.75     $ 4,725,000     $ 515.50  
                                 

Shares of common stock, par value $0.01 per share, issuable upon exercise of Series B Warrants(2)

    6,300,000     $ 0.50     $ 3,150,000     $ 343.67  
                                 

Shares of common stock, par value $0.01 per share, issuable to the Placement Agent(3)

    463,320     $ 0.2848     $ 131,954     $ 14.40  
                                 

Total

    25,663,320           $ 11,595,434     $ 1,265.08  

   

(1)

Represents shares of the registrant’s common stock issuable upon conversion of the registrant’s previously issued Series C Convertible Preferred Stock.

(2)

Represents shares of the registrant’s common stock issuable upon exercise of warrants previously issued to the selling stockholders named in this registration statement.

(3)

Represents shares of common stock previously issued to Carter, Terry & Company (the “Placement Agent”), acting as placement agent in the private placement described elsewhere in this registration statement.

(4)

Represents the maximum number of shares of common stock offered by the selling stockholders named in this registration statement. Includes such indeterminate number of additional shares of common stock issuable by reason of any stock dividend, stock split, recapitalization or other similar transaction.

(5)

Pursuant to Rule 457(c) under the Securities Act of 1933, as amended (the “Securities Act”), and solely for the purpose of calculating the registration fee, the proposed maximum offering price per share of the common stock issuable upon conversion of the Series C Convertible Preferred Stock and the shares of common stock issued to the Placement Agent, is $0.2848, which is the closing sale price of the shares of common stock on April 19, 2021 as reported on the OTCQB.

(6)

Pursuant to Rule 457(g) under the Securities Act and solely for the purpose of calculating the registration fee, the proposed maximum offering price per share of the common stock issuable upon exercise of the warrants is based upon: (i) for the Series A Warrants, the higher of (A) the price at which the Series A Warrants may be exercised ($0.50), and (B) $0.2848, which was the closing sale price of the shares of common stock on April 19, 2021 as reported on the OTCQB; and (ii) for the Series B Warrants, the higher of (A) the price at which the Series B Warrants may be exercised ($0.75) and (B) $0.2848, which was the closing sale price of the shares of common stock on April 19, 2021 as reported on the OTCQB.

(7)

Calculated by multiplying the estimated aggregate offering price of securities to be registered by 0.00010910.

 

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 which 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 Section 8(a), may determine. 

 

 

 

 

The information in this prospectus is not complete and may be changed. The selling stockholders may not sell these securities until the registration statement filed with the Securities and Exchange Commission is declared effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.

 

SUBJECT TO COMPLETION DATED April 26, 2021

 

PRELIMINARY PROSPECTUS

 

25,663,320 Shares of Common Stock 

 

This prospectus relates to the offering and resale by the selling stockholders (the “Selling Stockholders”) identified herein of up to 25,661,538 shares (the “Shares”) of the common stock, par value $0.01 (the “common stock”) of Mitesco, Inc. (“Mitesco,” the “Company,” “we,” “our,” or “us”), a Delaware corporation, which includes (i) 12,600,000 shares of common stock (the “Conversion Shares”) issuable upon conversion of our Series C Convertible Preferred Stock, par value $0.01 per share (the “Series C Preferred Stock”), (ii) 6,300,000 shares of common stock (the “Series A Warrant Shares”) issuable upon exercise of five-year warrants, with each warrant entitling the holder thereof to a share of our common stock at a purchase price of $0.50 per share (the “Series A Warrants”), (iv) 6,300,000 shares of common stock (the “Series B Warrant Shares” and together with the Series A Warrant Shares, the “Warrant Shares” and collectively, with the Conversion Shares, the “Investor Shares”) issuable upon exercise of five-year warrants, with each such warrant entitling the holder thereof to purchase a share of our common stock at a purchase price of $0.75 per share (the “Series B Warrants” and together with the Series A Warrants, the “Warrants”) and (iv) 461,538 shares of common stock (the “PA Shares”) issued to Carter, Terry and Company as compensation for acting as the placement agent in connection with the private placement as described elsewhere in this registration statement,. We are registering the Investor Shares pursuant to securities purchase agreements (the “Securities Purchase Agreements” or “SPAs”) and the registration rights agreements (“Registration Rights Agreements” or “RRAs”) that we entered into with certain investors on March 25, 2021. We are registering the PA Shares pursuant to the Engagement Letter, dated January 6, 2021 (the “Engagement Letter”) entered into with Carter, Terry & Company (the “Placement Agent”), who acted as the placement agent in the private placement. See the section of this prospectus entitled “The Private Placement” for a description of the Private Placement, and the section of this prospectus entitled “Selling Stockholders” for additional information regarding the Selling Stockholders. The Investor Shares and the PA Shares are hereinafter referred to collectively as the “Shares.”

 

We are not selling any of the Shares in this offering. We, therefore, will not receive any proceeds from the sale of the Shares by the Selling Stockholders. However, we may receive gross proceeds upon the exercise of the Warrants, if exercised for cash.

 

The Selling Stockholders may sell the Shares described in this prospectus in a number of different ways and at varying prices. The prices at which the Selling Stockholders may sell the Shares in this offering will be determined by the prevailing market price for the shares of our common stock or in privately negotiated transactions. See “Plan of Distribution” for more information about how the Selling Stockholders may sell the Shares being registered pursuant to this prospectus. The Selling Stockholders each may be deemed an “underwriter” within the meaning of Section 2(a)(11) of the Securities Act of 1933, as amended (the “Securities Act”). The Selling Stockholders have informed us that they do not currently have any agreement or understanding, directly or indirectly, with any person to distribute the Shares.

 

We have agreed to pay the expenses of the registration of the Shares of common stock offered and sold under this registration statement by the Selling Stockholders. The Selling Stockholders will pay any underwriting discounts, commissions and transfer taxes applicable to the shares of common stock sold by them.

 

Our common stock is traded on the OTCQB under the symbol “MITI”. On April 19, 2021, the last reported sale price of our common stock on the OTCQB was $0.2848.

 

Investing in our securities involves various risks. SeeRisk Factorsbeginning on page 7 of this prospectus for a discussion of information that should be considered in connection with an investment in our securities.

 

Neither the Securities and Exchange Commission 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.

 

The date of this prospectus is , 2021

 

 

 

 

Table of Contents

 

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

1

INDUSTRY AND MARKET DATA

1

PROSPECTUS SUMMARY

2

THE OFFERING

4

RISK FACTORS

7

USE OF PROCEEDS

22

DIVIDEND POLICY

22

DETERMINATION OF OFFERING PRICE

22

THE PRIVATE PLACEMENT

23

SELLING STOCKHOLDERS

25

PLAN OF DISTRIBUTION

27

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

29

BUSINESS

47

MANAGEMENT

55

CORPORATE GOVERNANCE

 

EXECUTIVE COMPENSATION

60

MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

64

CERTAIN RELATIONSHIPS AND RELATED PERSON TRANSACTIONS

65

PRINCIPAL STOCKHOLDERS

66

DESCRIPTION OF SECURITIES TO BE REGISTERED

68

DESCRIPTION OF OUR CAPITAL STOCK

70

LEGAL MATTERS

75

EXPERTS

75

WHERE YOU CAN FIND MORE INFORMATION

75

DISCLOSURE OF THE SECURITIES AND EXCHANGE COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES ACT LIABILITIES

75

CONSOLIDATED FINANCIAL STATEMENTS OF MITESCO, INC.

F-1

 

The registration statement containing this prospectus, including the exhibits to the registration statement, provides additional information about us and the common stock offered under this prospectus. The registration statement, including the exhibits, can be read on our website and the website of the Securities and Exchange Commission. SeeWhere You Can Find More Information.

 

Information contained in, and that can be accessed through, our web site www.mitescoinc.com shall not be deemed to be part of this prospectus or incorporated herein by reference and should not be relied upon by any prospective investors for the purposes of determining whether to purchase the Shares offered hereunder.

 

 

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,” “expect,” “intend,” “anticipate,” “believe,” “estimate,” “continue,” “plan,” “potential” 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 of the information presented in this prospectus particularly our forward-looking statements, by these cautionary statements.

 

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.” We caution you not to give undue weight to such projections, assumptions and estimates. Further, industry and general publications, studies and surveys generally state that they have been obtained from sources believed to be reliable, although they do not guarantee the accuracy or completeness of such information. While we believe that these publications, studies and surveys are reliable, we have not independently verified the data contained in them. In addition, while we believe that the results and estimates from our internal research are reliable, such results and estimates have not been verified by any independent source.

 

 

PROSPECTUS SUMMARY

 

Company Overview

 

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, and since 2016 known as True Nature Holding, Inc., became a publicly traded company through a reverse triangular merger with Brain Tree International, Inc., a Utah corporation (“BTI”) in 2012. Trunity Holdings, Inc. was the parent company of our educational business, named Trunity, Inc., which was formed on July 28, 2009 through the acquisition of certain intellectual property from its three founders. On December 9, 2015, the Company made a decision to restructure Trunity Holdings, Inc., having acquired Newco4pharmacy, LLC, a development stage business aimed at a roll-up of compounding pharmacy businesses. As a part of such restructuring, we completed a “spin out” transaction of our educational business line to our shareholders as of December 31, 2015. Effective April 22, 2020, we changed our name to Mitesco, Inc.

 

We are working to open primary care clinics around the US that are located 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. 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 in North East Minneapolis, MN. We plan to open an additional five to seven 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, 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 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 plan to continue to expand our relationship with Lennar Corporation and other developers. We plan to mirror this approach within the two Lennar locations with which we have signed letters of intent to build clinics in the residential developments in Denver, Colorado . By locating in close proximity, we expect to be able to build the client panel more quickly than typical for primary care practices.

 

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, a number of 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.

 

Operational Overview

 

During the year ended December 31, 2020, we have 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 Information

 

We were organized on January 2012 under the name Trunity Holdings, Inc. which name was changed in 2016 known as True Nature Holding, Inc., when we engaged in a reverse triangular merger with Brain Tree International, Inc., a Utah corporation (“BTI”) in 2012. Trunity Holdings, Inc. was the parent company of our educational business, named Trunity, Inc., which was formed on July 28, 2009 through the acquisition of certain intellectual property from its three founders. On December 9, 2015, we made a decision to restructure Trunity Holdings, Inc., having acquired Newco4pharmacy, LLC, a development stage business aimed at a roll-up of compounding pharmacy businesses. As a part of such restructuring, we completed a “spin out” transaction of our educational business line to our shareholders as of December 31, 2015. Effective April 22, 2020, we changed our name to Mitesco, Inc.

 

Other Corporate Information

 

Our website is www.mitescoinc.com and our principal executive offices is located at 601 Carlson Parkway, Suite 1050, Minnetonka, MN 55305. Our telephone number is (844) 383 8689.

 

 

THE OFFERING

 

Issuer:

 

Mitesco, Inc., a Delaware corporation

     

Securities offered by the Selling Stockholders

 

25,663,320 shares of our common stock; including 12,600,000 shares of common stock issuable upon conversion of the Series C Preferred Stock, 6,300,000 shares of common stock issuable upon exercise of Series A Warrants, 6,300,000 shares of common stock issuable upon exercise of the Series B Warrants and 461,538 shares of common stock issued to the Placement Agent.

     

Total Common Stock outstanding after this offering

 

229,088,660 shares of common stock; assuming all of the Shares offered in this offering are issued upon conversion of the Series C Preferred Stock and exercise of the Warrants

     

Use of Proceeds

 

We will not receive any proceeds from the sale of the Shares covered by this prospectus. However, we may receive gross proceeds upon the exercise of the Warrants if exercised for cash. See “Use of Proceeds”.

     

Risk Factors

 

Investing in our securities involves a high degree of risk. For a discussion of factors to consider before deciding to invest in our securities, you should carefully review and consider the “Risk Factors” section of this prospectus beginning on page 7 of this prospectus.

 

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 early 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 do not have sufficient cash flow to support our future operations and capital requirements.

 

 

The issuance of additional shares of our common stock, 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.

 

Risks Related to our Business

 

 

We are currently focused on a new business model and have very limited operating history and limited information and therefore our business may be difficult to evaluate.

 

 

We may become involved in legal proceedings.

 

 

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 e publicity or we may be unable to compete effectively.

 

 

Rapid technological change in our industry present us with significant risks and challenges.

 

 

We may be unable to attract and retain sufficient numbers of qualified personnel.

 

 

We may not manage our strategy effectively.

 

 

We have identified weaknesses in our internal controls, and it cannot be assured that these weaknesses will be effectively remediated or that we will not have additional material weaknesses in the future.

 

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 revenues may depend on our patients’ receipt of adequate reimbursement from private issuers and government sponsored healthcare programs.

 

 

Future regulatory programs remain uncertain.

 

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

 

 

We have a limited number of full-time employees, which may negatively impact our operation, the implementation of our business plan and our profitability.

 

 

We do not have a segregated audit or compensation committee, which may force shareholders to rely on our Board of Directors who are not independent to perform those functions.

 

 

Our success is dependent, in part, on the performance and continued service of certain of our officers and directors.

 

 

A significant 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 our Common Stock

 

 

Our common stock is a penny stock and therefore trading may be restricted under current securities rules and regulations.

 

 

Because our common stock is considered a penny stock the protections provided by the federal securities laws relating to forward-looking statements does not apply to us.

 

 

We are subject to ongoing SEC reporting requirement and any deficiencies in our financial reporting or internal controls could adversely affect us.

 

 

Until recently, our common stock was thinly traded and may prevent you from selling at or near asking prices, if at all.

 

 

We do not intend to pay any cash dividends on our common stock in the near future, therefore investors will not be able to receive a return on their shares unless they sell them at a higher price than their purchase price.

 

 

FINRA sales practice requirements may limit a stockholder’s ability to buy and sell our common stock or Series B Preferred Stock.

 

 

Our officers and directors have voting control over all matters submitted to a vote of our common stockholder, which limits or prevents minority stockholders from controlling any of our future operations.

 

 

RISK FACTORS

 

Investing in our common stock involves a high degree of risk, and you should be able to bear the complete loss of your investment. You should carefully consider the risks described below, the other information in this prospectus and the documents incorporated by reference herein when evaluating our company and our business. If any of the following risks actually occur, our business could be harmed. In such case, the trading price of our common stock could decline, and investors could lose all or a part of the money paid to buy our common stock.

 

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 early stages of our present business plan and have a limited or no 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 in light of 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 as a result 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 and incurred net losses of $2.9 million and $3.9 million for the years ended December 31, 2020 and 2019, respectively. 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, 2020 expressed substantial doubt about our ability to continue as a going concern, due to the fact that we have 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 not generated 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 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 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 $750,000 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 have negative cash flow to support our future operations and capital requirements.

 

We have negative cash flow from operations. Whether we can achieve cash flow to support our operations in the future cannot be accurately predicted. Unless such cash flow levels are achieved, we may need to borrow additional funds or sell debt or equity securities, or some combination thereof, to provide funding for our operations. Such additional funding may not be available on commercially reasonable terms, or at all. If adequate funds are not available when needed, our financial condition and operating results would be materially and adversely affected and we may not be able to operate our business without significant changes in our operations, or at all.

 

The issuance of additional shares of our common stock, 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 April 17, 2021, there are outstanding options and warrants to purchase 15,453,879 and 12,600,000 shares of common stock, respectively. In addition, we have dividends on the Preferred X stock convertible into an additional 32,477 shares of common stock and our Series C Preferred Stock which is convertible into 12,600,000 shares of common stock. 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 can be expected to exercise them at a time when we would, in all likelihood, be able to obtain any needed capital on terms more favorable to us than those provided by such securities.

 

Our failure to fulfill all of our registration requirements may cause us to suffer liquidated damages, which may be very costly.

 

Pursuant to the terms of the Registration Rights Agreements that we entered into in connection with the Private Placement, we are required to file a registration statement with respect to the Shares within 45 days following the closing of the Private Placement and use all commercially reasonable efforts to have the registration statement declared effective by the SEC within 90 days following the closing of the Private Placement. The failure to meet such obligations would result in the payment of damages by us. There can be no assurance as to when this registration statement will be declared effective or that we will be able to maintain the effectiveness of any registration statement, and therefore there can be no assurance that we will not incur damages under the Registration Rights Agreements.

 

Risks Related to our Business.

 

Our business is difficult to evaluate because we are currently focused on a new business model and have very 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 clinic in March 2021 in Minneapolis and if successful, we intend to expand and open new clinics. 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 into 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.

 

 

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 the Company 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, in excess of 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 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 $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 has requested that the Company remit the funds received back to Bank of America. The Company is attempting to negotiate a payment 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.

 

During management's review of the Company’s 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 accurate. After consulting with legal counsel, the Board of Directors of the Company (the “Board” or 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.

 

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 particular 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. 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. In light of 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.

 

Our business and future growth are highly dependent on completing our clinics and gaining patients in our target markets. However, the healthcare market is competitive, which could make it difficult for us to succeed. We will 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 serve 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.

 

 

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. 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.

 

We have applied for trademark protection of “The Good Clinic” name but such protection is pending and not yet granted. Trademarks and trade names distinguish the various companies from each other. If our potential future customers are unable to distinguish our future clinics and telehealth services from those of other companies, we could lose sales and distributors to our competitors. We do not have any registered trademarks and trade names, so we only have common law rights with respect to infractions or infringements on our products. Many subtleties exist in product descriptions, offering and names that can easily confuse distributors and customers. This presents a risk of losing potential customers looking for our products and buying someone else’s because they cannot differentiate between them.

 

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 recently opened our first clinic in Minneapolis and plan to open additional clinics and there is no assurance we will successfully do this. 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, 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 as a whole 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.

 

The business model’s success requires location of clinics that are convenient to consumers both physically and virtually. Performance of the business can be adversely affected by locating clinic in less-than-ideal locations relative to their convenience to consumers or due to unavailability of reliable internet services to support telehealth. 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.

 

 

Failure to attract and retain sufficient numbers of qualified personnel could also impede our future plans.

 

If we are unable to implement our plan of operations effectively, it will have a material adverse effect on our ability to generate revenue. 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 cause us to incur significant costs, which could adversely affect our financial condition. Our plan to enter into 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.

 

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. 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. 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 into 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 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. Acquisitions may require greater than anticipated investment of operational and financial resources. Acquisitions 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 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.

 

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 and (ii) lack of sufficient resources to ensure that information required to be disclosed by the Company in the reports that the Company files or submits to the SEC are recorded, processed, summarized, and reported, within the time periods specified in the SEC’s rules and forms, and (iii) lack of formal control procedures related to the approval of related party transactions. As such, our internal controls over financial reporting were 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, especially of complex instruments, 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 current controls and any new controls that we develop may become inadequate because of changes in conditions in our business, including increased complexity resulting from our international expansion. Further, weaknesses in our disclosure controls or our internal control 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 control over financial reporting could also adversely affect the results of management reports and independent registered public accounting firm audits of our internal control 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 internal control 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.

 

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.

 

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 payer 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 payers by increasing medical costs generally, which could have an effect on the industry and potentially impact our business and revenue as payers 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 payers 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 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.

 

 

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 (or 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. 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 are currently reviewing our needs for cybersecurity policy as we continue our research and development on L-CYTE-01 and medical services for COPD patients.

 

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 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 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 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 of its existing Medicaid funding was unconstitutional. In response to the ruling, a number of 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 nations 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 patientsreceipt 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 hospitals 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 payers will pay for the products. Even if third-party payers 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 our acquisitions are typically 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 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.

 

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

 

Because we do not have a segregated audit or compensation committee, shareholders will be required to rely on the members of our Board of Directors, who are not all independent, to perform these functions.

 

We do not have an audit or compensation committee or Board of Directors as a whole that is composed of independent directors. There is a potential conflict between their or our interests and our shareholders’ interests.

 

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. 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 maintain key man 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 72% of the voting shares of the Company 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 20,000 votes for each share owned, one (1) vote for each common holder. As such, our management has the ability to 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.

 

 

Risks Related to our Common Stock

 

Our common stock is a penny stock. Trading of our stock may be restricted by the SECs penny stock regulations which may limit a stockholders ability to buy and sell our stock.

 

Our stock is a penny stock. The SEC has adopted Rule 15g-9 which generally defines “penny stock” to be any equity security that has a market price (as defined) less than $5.00 per share or an exercise price of less than $5.00 per share, subject to certain exceptions. Our securities are covered by the penny stock rules, which impose additional sales practice requirements on broker-dealers who sell to persons other than established customers and “accredited investors”. The term “accredited investor” refers generally to institutions with assets in excess of $5,000,000 or individuals with a net worth in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 jointly with their spouse. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document in a form prepared by the SEC which provides information about penny stocks and the nature and level of risks in the penny stock market. The broker-dealer also must provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction and monthly account statements showing the market value of each penny stock held in the customer’s account. The bid and offer quotations, and the broker-dealer and salesperson compensation information, must be given to the customer orally or in writing prior to effecting the transaction and must be given to the customer in writing before or with the customer’s confirmation. In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from these rules; the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written agreement to the transaction. These disclosure requirements may have the effect of reducing the level of trading activity in the secondary market for the stock that is subject to these penny stock rules. Consequently, these penny stock rules may affect the ability of broker-dealers to trade our securities. We believe that the penny stock rules discourage investor interest in and limit the marketability of our common stock.

 

As an issuer ofpenny stockthe protection provided by the federal securities laws relating to forward looking statements does not apply to us.

 

Although the federal securities law provides a safe harbor for forward-looking statements made by a public company that files reports under the federal securities laws, this safe harbor is not available to issuers of penny stocks. As a result, if we are an issuer of a penny stock, we will not have the benefit of this safe harbor protection in the event of any claim that the material provided by us contained a material misstatement of fact or was misleading in any material respect because of our failure to include any statements necessary to make the statements not misleading.

 

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 could incur substantial losses.

 

Our stock price has fluctuated in the past, has recently been volatile and may be volatile in the future. On January 26, 2021, the reported low sale price of our common stock was $0.43, while the reported high sales price was $0.60, with a closing price of $0.49. For comparison purposes, on December 31, 2020, our stock price closed at $0.03. There have been no discernable announcements or developments by the company or third parties between December 31, 2020 and January 26, 2021 that could account for this fluctuation. 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, or the perception that such sales might occur, could adversely affect prevailing market prices of our common stock 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. The market price for our common stock may be influenced by many factors, including the following:

 

 

sale of our common stock 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 into 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, 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 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 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 of your investment if you purchase our shares at a rate that is significantly disconnected from our underlying value.

 

As a public company with a class of securities registered under the Securities Exchange Act of 1934, as amended, we are subject to ongoing SEC reporting requirements and any deficiencies in our financial reporting or internal controls could adversely affect us.

 

As a public company with a class of securities registered under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), we are required to maintain internal control over financial reporting and to report any material weaknesses in such internal controls. Section 404 of the Sarbanes-Oxley Act requires that we evaluate and determine the effectiveness of our internal control over financial reporting. In the future, if we have a material weakness in our internal control over financial reporting, we may not detect errors on a timely basis and our financial statements may be materially misstated. In addition, our internal control over financial reporting would not prevent or detect all errors and fraud. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud will be detected.

 

If there are material weaknesses or failures in our ability to meet any of the requirements related to the maintenance and reporting of our internal controls, investors may lose confidence in the accuracy and completeness of our financial reports, which in turn could cause the price of our common stock to decline. Moreover, effective internal controls are necessary to produce reliable financial reports and to prevent fraud. If we have deficiencies in our internal controls, it may negatively impact our business, results of operations and reputation. In addition, we could become subject to investigations by OTC Markets, Nasdaq, the SEC or other regulatory authorities, which could require additional management attention, and which could adversely affect our business.

 

 

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 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 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.

 

Because we do not intend to pay any cash dividends on the common stock in the near future, investors will not be able to receive a return on their shares unless they sell them.

 

For the foreseeable future, proceeds from any financings or earnings generated from our operations will be retained for use in our planned business and not to pay dividends, subject to our obligations to the holders of our Series X Preferred Stock and Series C Preferred Stock. Additionally, we have no funds available for dividends and have debt obligations that are senior to our obligation to pay dividends. We do not anticipate paying any cash dividends on our common stock in the near future. The declaration, payment and amount of any future dividends will be made at the discretion of the Board of Directors, and will depend upon, among other things, the results of operations, cash flows and financial condition, operating and capital requirements, and other factors as the Board of Directors considers relevant. There is no assurance that future dividends will be paid, and if dividends are paid, there is no assurance with respect to the amount of any such dividend. For the foreseeable future, earnings generated from our operations will be retained for use in implementing our business plan and not to pay dividends.

 

Financial Industry Regulatory Authority (FINRA) sales practice requirements may also limit a stockholders ability to buy and sell the common stock it is successful in being quoted on the OTC Markets.

 

FINRA has adopted rules that require that in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending speculative low-priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer’s financial status, tax status, investment objectives and other information. Under interpretations of these rules, FINRA believes that there is a high probability that speculative low-priced securities will not be suitable for at least some customers. The FINRA requirements make it more difficult for broker-dealers to recommend that their customers buy our common stock, which may limit your ability to buy and sell the common stock.

 

USE OF PROCEEDS

 

This prospectus relates to shares of our common stock that may be offered and sold from time to time by the Selling Stockholders. We will not receive any proceeds upon the sale of the Shares by the Selling Stockholders in this offering. However, we may receive gross proceeds upon the exercise of the Warrants issued to the Selling Stockholders only if exercised for cash. See “Plan of Distribution” elsewhere in this prospectus for more information. 

 

DIVIDEND POLICY

 

We have never declared nor paid any cash dividends on our common stock, and currently intend to retain all of our cash and any earnings for use in our business and, therefore, do not anticipate paying any cash dividends in the foreseeable future, subject to our obligations to the holders of our Series X Preferred Stock and Series C Preferred Stock. Any future determination to pay cash dividends on our common stock will be at the discretion of the Board of Directors and will be dependent upon our consolidated financial condition, results of operations, capital requirements and such other factors as the Board of Directors deems relevant.

 

DETERMINATION OF OFFERING PRICE

 

The Selling Stockholders will determine at what price it may sell the offered Shares (if any), and such sales may be made at prevailing market prices, or at privately negotiated prices.

 

 

THE PRIVATE PLACEMENT

 

On March 25, 2021, we entered into the following private placement transaction (the “Private Placement”).

 

On March 25, 2021, we entered into a Securities Purchase Agreement (the “SPA”) with Anson Investments Master Fund LP, Anson East Master Fund LP, Cavalry Fund I LP and Mercer Street Global Opportunity Fund, LLC (the “Investors”) pursuant to which we received an aggregate of $3,000,000 in exchange for the issuance of:

 

 

3,000,000 shares of a newly designated Series C Convertible Preferred Stock, convertible into 12,600,000 shares of our common stock;

 

6,300,000 five-year warrants (the “Series A Warrants”), to purchase an aggregate of 6,300,000 shares of our common stock (the “Series A Warrant Shares”) at an exercise price of $0.50 per share; and

 

6,300,000 five-year warrants (the “Series B Warrants” and together with the Series A Warrants, the “Warrants”) to purchase 6,300,000 shares of our common stock (the “Series B Warrant Shares” and together with the Series A Warrant Shares, the “Warrant Shares”) at an exercise price of $0.75 per share.

 

Each of the Warrants is exercisable for one share of our common stock and are exercisable for a period of five years from the date of issuance. The Investors may exercise the Warrants on a cashless basis if after the six-month anniversary of date of issuance, the Warrant Shares are not then registered pursuant to an effective registration statement. Each Investor has contractually agreed to restrict its ability to exercise the Warrants such that the number of shares of the Company’s Common Stock held by the Investor and its affiliates after such exercise does not exceed the beneficial ownership limitation set forth in the Warrants which may not exceed initially 4.99% or 9.99% upon notice to us, of our then issued and outstanding shares of common stock. The exercise price of the Warrants is subject to adjustment upon certain stock splits and recapitalization. We have the right to cause the holder of the Warrants to exercise their Warrant upon certain conditions, including that the last closing sale price of the common stock has been equal to or greater than $2.00 per share (subject to adjustments for splits, dividends, recapitalizations and similar events) for 10 consecutive trading days.

 

Pursuant to the Certificate of Designations, Preferences and Rights of the Series C Convertible Preferred Stock of Mitesco, Inc., filed with the Secretary of State of the State of Delaware on March 22, 2021 (the “Certificate of Designation”), as amended by the Certificate of Correction to the Certificate of Designations, Preferences and Rights of the Series C Convertible Preferred Stock of Mitesco, Inc., filed with the Secretary of State of the State of Delaware on March 23, 2021 (the “Certificate of Correction, and together with the Certificate of Designation, the “COD”), 3,000,000 shares of our preferred stock have been designated as the Series C Preferred Stock and each share of Series C Preferred Stock is convertible at the option of the holder thereof, or automatically upon the closing of an underwritten offering of at least $10 million of our securities or upon listing of our common stock on a national securities exchange. The number of shares of common stock issuable upon the conversion of the Series C Preferred Stock is calculated by dividing the Conversion Amount (defined in the COD as $1.05 per share (the “Stated Value”), plus accrued and unpaid dividends) by the $0.25 conversion price (the “Conversion Price”). In addition, upon certain triggering events, the holder has the right to convert the 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 Series C Preferred Stock ranks senior to all our other preferred stock 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 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 the Company’s fiscal quarters. Additionally, we may redeem the Series C Preferred Stock at our option at the Corporation Redemption Price (125% of the Stated Value plus accrued dividends). 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 (as defined in the COD) below the Conversion Price.

 

Additionally, the Series C Preferred Stock contains a beneficial ownership limitation pursuant to which holders of such Series C Preferred Stock may not convert their Series C Preferred Stock if such conversion would lead to such holder to beneficially own more than an initial 4.99%, or 9.99% upon notice, of our then issued and outstanding shares of common stock after giving effect to such conversion. Further, holders of the Series C Preferred Stock were provided price protections for the Conversion Price, pursuant to which, 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, which shall not apply to any Exempt Issuance (as defined in the COD). Further, holders of the Series C Preferred Stock shall have the right to participate in any offering of our common stock or Common Stock Equivalents 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, which right shall not apply to any Exempt Issuance (as defined in the COD) or a public offering. The holder of such Series C Preferred Stock shall vote on any matter presented to the stockholders of the Company on an as converted basis, voting as a single class and the consent of a majority of such holders, voting as a separate class, is required for the Company to take certain corporate actions that may adversely affect the rights and privileges of the holders of the Series C Preferred Stock and prior to the creation of any other series of preferred stock that may be ranked senior to or pari passu with the Series C Preferred Stock.

 

 

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 the Company issues or sells common stock or Common Stock Equivalents that the Investors believe are more favorable than the terms and conditions under the current transaction.

 

In connection with the SPAs, we entered into Registration Rights Agreements (“RRAs”), dated March 25, 2021, with each of the Investors pursuant to which we are obligated to file a registration statement with the SEC to register for resale the shares of Common Stock issuable upon conversion of the Series C Preferred Stock and the Warrant Shares within forty-five (45) days following the closing of the transaction, and use all commercially reasonable efforts to have the registration statement declared effective by the SEC within ninety (90) days after the closing of the transaction (or within five trading days following the receipt by us of a no review of the Registration Statement). We will be obligated to pay certain liquidated damages to the Investors if we fail to file the registration statement when required, fails to cause the registration statement to be declared effective by the SEC when required, of if we fail to maintain the effectiveness of the registration statement.

 

The SPAs and the RRAs contain customary representations, warranties, conditions, and indemnification obligations of the parties, which were made only for purposes of such SPAs and RRAs as of specific dates and solely for the benefit of the parties. The SPAs and RRAs may be subject to limitations agreed upon by the contracting parties.

 

Additionally, on January 6, 2021, the Company entered into an engagement letter (the “Engagement Letter”) with Carter, Terry & Company (the “Placement Agent” and together with the Investors, the “Selling Stockholders”), the Company engaged the Placement Agent to act as the Company’s exclusive placement agent in connection with a private placement. Pursuant to the Engagement Letter, the Company agreed to pay the Placement Agent a cash fee of 8% of the gross proceeds raised by the Company in a private placement and to issue to the Placement Agent restricted shares of the Company’s common stock in an amount equal to 4% of the gross proceeds raised in a private placement divided by the last reported closing price of the Company’s stock on the day of closing of the private placement (the “PA Shares”). The Engagement Letter provides piggyback registration rights, and should the PA Shares not be registered within six months of the closing date of the Private Placement, the Company has agreed to approve and pay for the opinion for the resale of the PA Shares under Rule 144 of the Securities Act. The Engagement Letter also contains customary indemnification provisions. In connection with the Private Placement, the Company issued the Placement Agent 461,538 PA Shares.

 

 

SELLING STOCKHOLDERS

 

This prospectus covers the possible resale by the Selling Stockholders identified below. The shares of common stock being offered by the Selling Stockholders include the PA Shares, and the shares of common stock issuable upon conversion of the Series C Preferred Stock and exercise of the Warrants (collectively, the “Shares”). For additional information regarding the issuance of the Series C Preferred Stock, the Warrants and the PA Shares, see the section of this prospectus entitled “The Private Placements” above. We are registering the Shares in order to permit the Selling Stockholders to offer the Shares for resale from time-to-time. Except as otherwise noted and except for the ownership of the Series C Preferred Stock and Warrants issued pursuant to the Securities Purchase Agreements and the issuance of the PA Shares pursuant to the Engagement Letter, as disclosed in the section “The Private Placements,” the Selling Stockholders have not had any material relationship with us within the past three years.

 

The table below lists information regarding the ownership of the shares of common stock by the Selling Stockholders. The first column lists the shares beneficially owned by the Selling Stockholder prior to this offering. The second column lists the number of shares of common stock being offered by the Selling Stockholders in this offering. Under the terms of the Series C Preferred Stock and Warrants, the Selling Stockholders may not convert the Series C Preferred Stock or exercise the Warrants to the extent (but only to the extent) the Selling Stockholders or any of its affiliates would beneficially own a number of shares of our common stock which would exceed 4.99%. A holder may increase or decrease its beneficial ownership limitation upon notice to us provided that in no event such limitation exceeds 9.99%, and that any increase shall not be effective until the 61st day after such notice. The selling stockholders may sell all, some or none of its shares in this offering. 

 

The third column lists the number of shares of common stock beneficially owned by the Selling Stockholders after the offering assuming the sale of all of the shares being offered.

 

The fourth column lists the percent of the class to be owned to be beneficially owned by the Selling Stockholders after the offering. The fourth column assumes the sale of all the shares offered by the Selling Stockholders pursuant to this prospectus and is based on 203,888,660 shares of common stock outstanding on April 16, 2021

 

In accordance with the terms of RRAs, this prospectus generally covers the resale of at least 25,663,320 shares of common stock issued or issuable to the Selling Stockholders in connection with the Private Placement. Because the conversion price of the Series C Preferred Stock and Warrants may be adjusted, the number of shares that will actually be issued may be more or less than the number of shares being offered by this prospectus.

 

Under the terms of the Series C Preferred Stock and the Warrants, a Selling Stockholders may not convert the Series C Preferred Stock or exercise the Warrants to the extent such conversion or exercise would cause such Selling Stockholders, together with its affiliates, to beneficially own a number of shares of common stock which would exceed 4.99% of our then outstanding shares of common stock following such conversion or exercise, which may be increased to 9.99% upon notice to the Company. The number of shares in the second column does not reflect this limitation. The Selling Stockholders may sell all, some or none of their shares in this offering. See “Plan of Distribution.”

 

Name of Selling Stockholders

 

Number of Shares Owned Prior to Offering

   

Maximum Number of Shares to be Offered for Resale Pursuant to this Prospectus

   

Number of Shares Beneficially Owned
After Offering(1)

   

Percent of the Class to be Owned After Offering(1)

 
                                 

Adam Cabibi(2)

    398,822       398,822       -0-       *  
Anson Investments Master Fund LP(3)     6,300,000       6,300,000       -0-        

Anson East Master Fund LP(4)

    2,100,000       2,100,000       -0-        

Carter, Terry & Company (5)

    64,498       64,498       -0-        

Cavalry Fund I LP(6)

    8,400,000       8,400,000       -0-        

Mercer Street Global Opportunity Fund, LLC(7)

    8,400,000       8,400,000       -0-        

*Less than 1%

 

 

(1)

Assumes the conversion and exercise in full of the Series C Preferred Stock and Warrants, respectively, and sale of all the PA Shares and the shares of common stock underlying the Series C Preferred Stock and the Warrants registered pursuant to this prospectus, although the Selling Stockholders are under no obligation known to us to sell any shares of common stock at this time.

 

(2)

Adam Cabibi is a Managing Director of Carter, Terry & Company, and received 398,822 PA Shares pursuant to the Engagement Letter with Carter Terry, as a designee of Carter Terry, in connection with the Private Placement. The principal business address of the Selling Stockholder is 4310 Hammerstone Ct., Narcoss, Georgia 30092. Carter, Terry & Company is a registered broker-dealer and as an employee of Carter, Terry & Company, Mr. Cabibi is an affiliate of a broker-dealer.

 

(3)

Anson Advisors Inc and Anson Funds Management LP, the Co-Investment Advisers of Anson Investments Master Fund LP, hold voting and dispositive power over the Common Shares held by Anson. Bruce Winson is the managing member of Anson Management GP LLC, which is the general partner of Anson Funds Management LP. Moez Kassam and Amin Nathoo are directors of Anson Advisors Inc. Mr. Winson, Mr. Kassam and Mr. Nathoo each disclaim beneficial ownership of these shares of common stock except to the extent of their pecuniary interest therein. The principal business address of the Selling Stockholder is Walkers Corporate Limited, Cayman Corporate Centre, 27 Hospital Road, George Town, Grand Cayman KY1-9008, Cayman Islands. Includes 3,150,000 shares of common stock issuable upon conversion of the Series C Preferred Stock, 1,575,000 shares of common stock issuable exercise of the Series A Warrants and 1,575,000 shares of common stock issuable upon exercise of Series B Warrants, without giving effect to the blocker described in the next sentence. The Series C Preferred Stock and Warrants held by the Selling Stockholder are subject to beneficial ownership limitations such that the Series C Preferred Stock and Warrants may not be converted or exercised, respectively, if it would result in the holder exceeding the beneficial ownership limitation. The beneficial ownership limitation is initially set at 4.99% but may be increased to 9.99% upon 61 days’ notice to the Company.

 

(4)

Anson Advisors Inc and Anson Funds Management LP, the Co-Investment Advisers of Anson East Master Fund LP, hold voting and dispositive power over the Common Shares held by Anson. Bruce Winson is the managing member of Anson Management GP LLC, which is the general partner of Anson Funds Management LP. Moez Kassam and Amin Nathoo are directors of Anson Advisors Inc. Mr. Winson, Mr. Kassam and Mr. Nathoo each disclaim beneficial ownership of these shares of common stock except to the extent of their pecuniary interest therein. The principal business address of the Selling Stockholder is Walkers Corporate Limited, Cayman Corporate Centre, 27 Hospital Road, George Town, Grand Cayman KY1-9008, Cayman Islands. Includes 1,050,000 shares of common stock issuable upon conversion of the Series C Preferred Stock, 525,000 shares of common stock issuable exercise of the Series A Warrants and 525,000 shares of common stock issuable upon exercise of Series B Warrants, without giving effect to the blocker described in the next sentence. The Series C Preferred Stock and Warrants held by the Selling Stockholder are subject to beneficial ownership limitations such that the Series C Preferred Stock and Warrants may not be converted or exercised, respectively, if it would result in the holder exceeding the beneficial ownership limitation. The beneficial ownership limitation is initially set at 4.99% but may be increased to 9.99% upon notice to the Company.

   

(5)

Timothy J. Terry is the President of Carter, Terry & Company and its principal business address is 3060 Peachtree Road, NW, 5-1200, Atlanta, Georgia 30305. Includes 64,498 shares of common stock issued pursuant to the Engagement Letter and in connection with the Private Placement. Carter, Terry & Company is a registered broker-dealer.

   

(6)

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. Includes 4,200,000 shares of common stock issuable upon conversion of the Series C Preferred Stock and 2,100,000 shares of common stock issuable exercise of the Series A Warrants and 2,100,000 shares of common stock issuable upon exercise of Series B Warrants, without giving effect to the blocker described in the next sentence. The Series C Preferred Stock and Warrants held by the Selling Stockholder are subject to beneficial ownership limitations such that the Series C Preferred Stock and Warrants may not be converted or exercised, respectively, if it would result in the holder exceeding the beneficial ownership limitation. The beneficial ownership limitation is initially set at 4.99% but may be increased to 9.99% upon 61 days’ notice to the Company.

   

(7)

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. Includes 4,200,000 shares of common stock issuable upon conversion of the Series C Preferred Stock and 2,100,000 shares of common stock issuable exercise of the Series A Warrants and 2,100,000 shares of common stock issuable upon exercise of Series B Warrants, without giving effect to the blocker described in the next sentence. The Series C Preferred Stock and Warrants held by the Selling Stockholder are subject to beneficial ownership limitations such that the Series C Preferred Stock and Warrants may not be converted or exercised, respectively, if it would result in the holder exceeding the beneficial ownership limitation. The beneficial ownership limitation is initially set at 4.99% but may be increased to 9.99% upon 61 days’ notice to the Company.

 

 

PLAN OF DISTRIBUTION

 

The Selling Stockholders and any of their pledgees, assignees and successors-in-interest may, from time-to-time, sell any or all of their shares of common stock on the OTCQB or any other stock exchange, market or trading facility on which the shares are traded or in private transactions. These sales may be at fixed or negotiated prices. The Selling Stockholders may use any one or more of the following methods when selling shares:

 

 

ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers;

 

 

block trades in which the broker-dealer will attempt to sell the shares as agent but may position and resell a portion of the block as principal to facilitate the transaction;

 

 

purchases by a broker-dealer as principal and resale by the broker-dealer for its account;

 

 

an exchange distribution in accordance with the rules of the applicable exchange;

 

 

privately negotiated transactions;

 

 

settlement of short sales;

 

 

in transactions through broker-dealers that agree with the Selling Stockholders to sell a specified number of such securities at a stipulated price per security;

 

 

broker-dealers may agree with the Selling Stockholders to sell a specified number of the Shares at a stipulated price per share;

 

 

through the writing or settlement of options or other hedging transactions, whether through an options exchange or otherwise;

 

 

a combination of any such methods of sale; or

 

 

any other method permitted pursuant to applicable law.

 

The Selling Stockholders may also sell the Shares under Rule 144 under the Securities Act, if available, rather than under this prospectus.

 

Broker-dealers engaged by the Selling Stockholders may arrange for other brokers-dealers to participate in sales. Broker-dealers may receive commissions or discounts from the Selling Stockholders (or, if any broker-dealer acts as agent for the purchaser of the Shares, from the purchaser) in amounts to be negotiated, but except as set forth in a supplement to this prospectus, in the case of an agency transaction not in excess of a customary brokerage commission in compliance with FINRA Rule 2440; and in the case of a principal transaction a markup or markdown in compliance with FINRA IM-2440.

 

In connection with the sale of the common stock or interests therein, the Selling Stockholders may enter into hedging transactions with broker-dealers or other financial institutions, which may in turn engage in short sales of the common stock in the course of hedging the positions they assume. The Selling Stockholders may also sell securities short and deliver these securities to close out their short positions, or loan or pledge the securities to broker-dealers that in turn may sell these securities. The Selling Stockholders may also enter into option or other transactions with broker-dealers or other financial institutions or create one or more derivative securities which require the delivery to such broker-dealer or other financial institution of the Shares offered by this prospectus, which Shares such broker-dealer or other financial institution may resell pursuant to this prospectus (as supplemented or amended to reflect such transaction).

 

The Selling Stockholders and any broker-dealers or agents that are involved in selling the Shares may be deemed to be “underwriters” within the meaning of the Securities Act in connection with such sales. In such event, any commissions received by such broker-dealers or agents and any profit on the resale of the Shares purchased by them may be deemed to be underwriting commissions or discounts under the Securities Act. The Selling Stockholders have informed us that they do not have any written or oral agreement or understanding, directly or indirectly, with any person to distribute the common stock.

 

We are required to pay certain fees and expenses incurred by us incident to the registration of the Shares. We have agreed to indemnify the Selling Stockholders against certain losses, claims, damages and liabilities, including liabilities under the Securities Act.

 

 

Because each of the Selling Stockholders may be deemed to be an “underwriter” within the meaning of the Securities Act, they will be subject to the prospectus delivery requirements of the Securities Act including Rule 172 thereunder. In addition, any securities covered by this prospectus which qualify for sale pursuant to Rule 144 under the Securities Act may be sold under Rule 144 rather than under this prospectus. There is no underwriter or coordinating broker acting in connection with the proposed sale of the Shares by the Selling Stockholders.

 

We agreed to keep this prospectus effective until the earlier of (i) the date on which the Shares may be resold by the Selling Stockholders without registration and without regard to any volume limitations by reason of Rule 144 under the Securities Act or any other rule of similar effect or (ii) all the Shares have been sold pursuant to this prospectus or Rule 144 under the Securities Act or any other rule of similar effect. The Shares covered hereby will be sold only through registered or licensed brokers or dealers if required under applicable state securities laws. In addition, in certain states, the Shares may not be sold unless they have been registered or qualified for sale in the applicable state or an exemption from the registration or qualification requirement is available and is complied with.

 

Pursuant to applicable rules and regulations under the Exchange Act, any person engaged in the distribution of the Shares may not simultaneously engage in market making activities with respect to the common stock for the applicable restricted period, as defined in Regulation M, prior to the commencement of the distribution. In addition, the Selling Stockholders will be subject to applicable provisions of the Exchange Act and the rules and regulations thereunder, including Regulation M, which may limit the timing of purchases and sales of the Shares by the Selling Stockholders or any other person. We will make copies of this prospectus available to the Selling Stockholders and have informed them of the need to deliver a copy of this prospectus to each purchaser at or prior to the time of the sale (including by compliance with Rule 172 under the Securities Act).

 

 

MANAGEMENTS 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 headingNote 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 located 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 thee 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 in North East Minneapolis, MN. We plan to open an additional five to seven clinics in the Twin Cities area of Minnesota and then continue expansion in the Denver, Colorado area. We target to open clinic 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 will 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. By locating in in close proximity we expect to be able to build the client panel more quickly than typical for primary care practices.

 

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, a number of 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.

 

Recent Developments

 

On January 30, 2020 we announced a change in our corporate headquarters from Atlanta, Georgia to Denver, Colorado. In February 2021, the Company relocated its headquarters to Minnetonka, Minnesota to be closer to its clinic operations.

 

On March 14, 2021, the Board of Directors appointed Phillip Keller its Chief Financial Officer. In connection with Mr. Keller’s appointment as Chief Financial Officer, Mr. Lawrence Diamond will no longer serve as the Company’s Interim Chief Financial Officer. Mr. Diamond will continue to lead the Company’s growth and development as Chief Executive Officer and as a Director of the Board.

 

 

On March 24, 2021, we entered into a debt settlement agreement (the “Debt Settlement Agreement”) with a certain noteholder of the Convertible Note A for the settlement of a note with an original principal amount of $60,000. Pursuant to the Debt Settlement Agreement, the Company paid $55,367.66 in exchange for the extinguishment and cancellation of the note and all the Company’s obligations thereunder.

 

On March 25, 2021, we entered into the SPA with the Investors and issued the Series C Preferred Stock and Warrants described above under the section entitled “The Private Placement.”

 

On April 5, 2021, the Board of Directors appointed Ingrid Jenny Lindstrom its Chief Legal Officer effective April 12, 2021.

 

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.

 

Years ended December 31, 2020 and 2019

 

Revenue

 

The Company recognized revenue in the amount of $0 for the year ended December 31, 2020, compared to $3,500 for the year ended December 31, 2019. Revenue for the year ended December 31, 2019, consisted of fees in connection with the licensing of the Company’s Simple HIPAA Script Ordering System.

 

Cost of Sales

 

There was no material direct cost of sales related to the Company’s revenue during the year ended December 31, 2020 or 2019.

 

Operating Expenses

 

Our total operating expenses for the year ended December 31, 2020 were approximately $2,534,000. For the comparable period in 2019, the operating expenses were approximately $1,448,000. Operating expenses for the year ended December 31, 2020 were comprised primarily of $1,049,000 in payroll and payroll taxes, including $566,000 in non-cash compensation; $493,000 in legal and professional fees; $449,000 in consulting fees, $275,000 in marketing and public relations; $115,000 in Board of director and advisory Board fees; $67,000 in insurance costs, $71,000 in office and facilities costs, and $15,000 in travel expenses. Operating expenses for the year ended December 31, 2019 were comprised primarily of $685,000 in payroll, including $234,000 in non-cash compensation; $297,000 in legal and professional fees; $280,000 in consulting fees, $64,000 in travel expenses; $46,000 in insurance costs; $45,000 in marketing and public relations; and $31,000 in office and facilities costs.

 

Grant income was $3,000 for the year ended December 31, 2020 in connection with the PPP Loan; there was no comparable transaction during the prior period.

 

Interest expense was $1,516,000 for the year ended December 31, 2020, compared to $1,610,000 for the year ended December 31, 2019. Interest expense consisted of $1,125,000 amortization of the discount on convertible notes payable; $138,000 accrued on notes payable; $130,000 of excess value of derivatives; $90,000 of prepayment penalties related to notes payable; $30,000 in financing costs; and $3,000 of interest on a credit card. Interest expense for the year ended December 31, 2019 consisted of $1,160,000 of amortization of the discount on convertible debt, $260,000 of excess value of derivative, $83,000 of prepayment penalties related to notes payable; $78,000 of accrued interest on notes payable; $15,000 of interest accrued on related party debt, $9,000 of interest imputed on related party debt, and $5,000 of conversion fees on notes payable.

 

During the year ended December 31, 2020, we recorded a gain on settlement of accounts payable in the amount of $400,000, compared to a gain on settlement of accounts payable in the amount of $251,000 in the prior period.

 

During the year ended December 31, 2020, we recorded a gain on revaluation of derivative liabilities in the amount of $509,000, compared to a loss on revaluation of derivative liabilities in the amount of $709,000 in the prior period.

 

During the year ended December 31, 2020, we did not recognize any gain or losses on legal settlements, compared to a loss on legal settlement of $27,000 in the prior period.

 

 

During the year ended December 31, 2020, we did not recognize any gains or losses on the conversion of notes payable, compared to a loss on conversion of notes payable of $161,000 in the prior period.

 

During the year ended December 31, 2020, we recognized a gain on settlement of warrants in the amount of $235,000; there were no comparable transactions in the prior period.

 

During the year ended December 31, 2020, we recognized a gain on the conversion of accrued salary in the amount of $7,000; there was no comparable transaction in the prior period.

 

During the year ended December 31, 2020, we recognized government grant income in the amount of $3,000; there was no comparable transaction in the prior period.

 

During the year ended December 31, 2020, we did not recognize any gains or losses on the conversion of liabilities to Preferred Stock, compared to a loss of $255,000 in the prior period.

 

During the year ended December 31, 2020, we recorded a gain on settlement of notes in the amount of $35,000, compared to a gain of $70,000 in the prior period.

 

For the year ended December 31, 2020, the Company had a net loss of $2,861,000 compared to a net loss of $3,885,000 for the year ended December 31, 2019.

 

During the year ended December 31, 2020, the Company declared Preferred Stock dividends in the amount of $76,000 compared to $0 in the year ended December 31, 2019.

 

For the year ended December 31, 2020, the Company had a net loss available to common shareholders of $2,936,000, or a net loss per share, basic and diluted of ($0.03) compared to a net loss available to common shareholders of $3,885,000, or a net loss per share, basic and diluted of ($0.09), for the year ended December 31, 2019.

 

Liquidity and Capital Resources

 

We have financed our operations through the sale of equity securities and short-term borrowings. As of December 31, 2020, we had cash of $65,000 and a working capital deficit of $2,964,000. Our working capital deficit is attributable to the fact that the Company began implementing its business plan in 2019 and has generated only minimal revenue to date.

 

Net cash used in operating activities was $1,521,000 for the year ended December 31, 2020. This is the result of our business development efforts pertaining to acquiring a series of businesses which specialize in compounding pharmacy activities, primarily direct to consumers, doctors and veterinary professionals.

 

Net cash provided by financing activities for the year ended December 31, 2020 was $1,502,000, consisting of proceeds from notes payable in the amount of $1,673,000, offset by principal payments on notes payable in the amount of $171,000.

 

Business Development Agreement

 

On March 2, 2020, the Company entered into agreements with four former senior executives from Minute Clinic James Woodburn, Kevin Lee Smith, Michael Howe and Rebecca Hafner-Fogarty (the “Sellers”) with the skills and know-how to assist the Company in the establishment of a series of clinics utilizing nurse practitioners and telemedicine technology in States where full practice authority for nurse practitioners is supported (the “Business Development Agreement”). We issued 4,800 shares of our Series A Preferred Stock to these individuals as compensation. We valued the 4,800 shares of the Series A Preferred Stock at $71,558 or approximately $14.91 per share based upon an analysis performed by an independent valuation consultant. Subsequent to year end the Company exchanged the Series A Preferred Shares for an aggregate of 600,000 shares of restricted stock to satisfy this obligation.

 

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, 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;

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 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 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

 

The Company accounts 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 for the Company have been canceled at this time.

 

Income Taxes

 

The Company accounts 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 the Company will not realize tax assets through future operations. No deferred tax assets or liabilities were recognized as of December 31, 2020 and 2019.

 

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.

 

August 2014 Series C Convertible Debenture

 

This obligation has been fully satisfied as of the date of this filing and the Company has no further requirements related to this matter. As part of the restructuring, all debentures issued by Trunity Holdings, Inc., to fund the former, educational business, were eligible to participate in a debt conversion; however, one debenture holder that was issued a Series C Convertible Debenture (the “Series C Debenture”) in August 2014 with an aggregate face value of $100,000 in exchange for the cancellation of Series B Convertible Debentures with a carrying value of $110,833 did not convert such debenture. The Series C Convertible Debenture accrues interest at an annual rate of 10%, matured November 2015, and is convertible into our common stock at a conversion rate of $20.20 per share. The holders of the Series C Debenture also received five-year warrants to acquire up to 4,950 shares post-split of common stock for an exercise price of $20.20 per share. The former educational business allocated the face value of the Series C Debenture to the warrants and the debentures based on its relative fair values, and allocated to the warrants, which was recorded as a discount against the Series C Debenture, with an offsetting entry to additional paid-in capital. The discount was fully expensed upon execution of the new debentures as debt extinguishment costs within discontinued operations. The Series C Debenture was in default at 12/31/2020. Details of activity for the year ended December 31, 2020 are presented in Notes Payable Table 1, below.

 

 

November 2014 Series D Convertible Debenture

 

This obligation has been fully satisfied as of the date of this filing and the Company has no further requirements related to this matter.

As part of the restructuring all debentures issued by Trunity Holdings, Inc., to fund the former, educational business were eligible to participate in a debt conversion; however, one debenture holder that was issued a Series D Convertible Debenture (the “Series D Debenture”) in November 2014 with an aggregate face value of $10,000 in exchange for the cancellation of Series B Convertible Debenture with a carrying value of $11,333 did not participate in the debt conversion restructuring. The Series D Debenture accrues interest at an annual rate of 12%, matured November 2015, and is convertible into our common stock at a conversion rate of $16.67 per share. The holders of the Series D Debenture also received five-year warrants to acquire up to 495 shares of common stock for an exercise price of $20.20 per share on a post-split basis. The former educational business allocated the face value of the Series D Debenture to the warrants and the debentures based on their relative fair values, and allocated to the warrants, which was recorded as a discount against the Series D Debenture, with an offsetting entry to additional paid-in capital. The discount was fully expensed upon execution of the new debentures as debt extinguishment costs within discontinued operations. The Series D Debenture was in default at 12/31/2020. Details of activity for the year ended December 31, 2020 are presented in Notes Payable Table 1, below.

 

March 2016 Convertible Note A

 

This obligation has been fully satisfied as of the date of this filing and the Company has no further requirements related to this matter. On March 18, 2016, the Company issued a 12% Convertible Promissory Note (the “Convertible Note A”) in the principal amount of $60,000 to a lender. Pursuant to the terms of the Convertible Note A, the Company is obligated to pay monthly installments of not less than $1,000 the first of each month commencing the month following the execution of the Convertible Note A until its maturity on September 16, 2016 at which time the Company was obligated to repay the full principal amount of the Convertible Note A. The Convertible Note A is convertible by the holder at any time into shares of the Company’s common stock at price of $1.00 per share, and throughout the duration of the note, the holder has the right to participate in any financing the Company may engage in upon the same terms and conditions as all other investors. The Company allocated the face value of the Convertible Note A to the shares and the note based on relative fair values, and the amount allocated to the shares of $18,750 was recorded as a discount against the note. The beneficial conversion feature of $9,375 was recorded as a debt discount with an offsetting entry to additional paid-in capital decreasing the note payable and increasing debt discount. The debt discount was amortized to interest expense during the year ended December 31, 2016. This note was paid in full on March 24, 2021.

 

Upon issuance of the Convertible Note A, the lender was awarded 15,000 restricted common stock as an origination fee which includes piggy-back registration rights. On September 19, 2016, the Company issued the lender an additional 15,000 restricted common stock at a price of $0.30 per share to extend the term of the loan agreement indefinitely. The cost to the Company was $4,050 in interest expense. On August 10, 2017, the Company issued 25,000 shares of common stock with a fair value of $3,750 for accrued interest through August 1, 2017 in the amount of $7,860. In April 2018, the Company issued 75,000 shares of common stock with a value of $7,500 as consideration for an extension of the term of the loan to July 1, 2018, and on August 13, 2018, the Company issued an additional 75,000 shares of common stock with a value of $6,750 for an extension of the term of the loan to October 31, 2018. During the year ended December 31, 2019, the lender converted principal in the amount of $15,000 into 120,000 shares of common stock. The Company recorded a loss in the amount of $13,867 on this conversion. Also, during the year ended December 31, 2019, the Company made a principal payment in the amount of $4,000 on this note. Details of activity for the year ended December 31, 2020 are presented in Notes Payable Table 1, below.

 

 

Power Up Note 11

 

This obligation has been fully satisfied as of the date of this filing and the Company has no further requirements related to this matter.

On September 12, 2019, the Company entered into a Securities Purchase Agreement with Power Up pursuant to which Power Up agreed to purchase a convertible promissory note (the “Power Up Note 11”) in the aggregate principal amount of $45,000. The Power Up Note 11 entitled the holder to 12% interest per annum and matured on July 15, 2020. Under the Power Up Note 11, Power Up had the right to convert all or a portion of the outstanding principal of the Power Up Note 11 into shares of common stock beginning on the date which was 180 days from the issuance date of the Power Up Note 11, at a price equal to the higher of the variable conversion price or $0.00006 per share. The variable conversion price meant 55% of lowest trading price during the 25-trading day period ending on the last complete trading date prior to the date of conversion, provided, however, that Power Up could not convert the Power Up Note 11 to the extent that such conversion would result in beneficial ownership by Power Up and its affiliates of more than 4.99% of the Company’s issued and outstanding common stock. If the Company prepaid the Power Up Note 11 within 30 days of its issuance, the Company must pay all of the principal at a cash redemption premium of 115%; if such prepayment was made between the 31st day and the 60th day after the issuance of the Power Up Note 11, then such redemption premium was 120%; if such prepayment was made from the sixty first 61st to the 90th day after issuance, then such redemption premium was 125%; and if such prepayment was made from the 91st to the 120th day after issuance, then such redemption premium was 130%; and if such prepayment was made from the 121st to the 150th day after issuance, then such redemption premium was 135%; and if such prepayment was made from the 151st to the 180th day after issuance, then such redemption premium was 140%. After the 180th day following the issuance of the Power Up Note 11, there was no further right of prepayment. The Company recorded an original issue discount in the amount of $3,000 in connection with the Power Up Note 11; $3,000 was amortized to interest expense during the year ended December 31, 2019. The Company accrued interest in the amount of $1,642 on the Power Up Note 11 during the year ended December 31, 2019. During the year ended December 31, 2019, the Company determined that a derivative liability in the amount of $47,187 existed in connection with the variable rate conversion feature of the Power Up Note 11. $45,000 of this amount was charged to discount on the Power Up Note 11, and $2,187 was charged to interest expense.

 

During the year ended December 31, 2020, the Company made a cash payment in the amount of $74,195 on the Power Up Note 11 which fully satisfied this obligation. This amount consisted of $45,000 of principal, $2,680 of accrued interest, and $23,815 of prepayment penalty. The Company revalued the derivative liability associated with the Power Up Note 11 at the time of payment and recorded a gain on revaluation in the amount of $35,420. The Company credited the fair value of the derivative liability at the time of payment in the amount of $21,266 to additional paid-in capital. Details of additional activity for the year ended December 31, 2020 are presented in Notes Payable Table 1, below.

 

Power Up Note 12

 

This obligation has been fully satisfied as of the date of this filing and the Company has no further requirements related to this matter.

On October 7, 2019, the Company entered into a Securities Purchase Agreement with Power Up pursuant to which Power Up agreed to purchase a convertible promissory note (the “Power Up Note 12”) in the aggregate principal amount of $53,000 and an original issue discount of $3,000. The Power Up Note 12 entitled the holder to 12% interest per annum and matured on August 15, 2020. Under the Power Up Note 12, Power Up had the right to convert all or a portion of the outstanding principal of the Power Up Note 12 into shares of common stock beginning on the date which was 180 days from the issuance date of the Power Up Note 12, at a price equal to the higher of the variable conversion price or $0.00006 per share. The variable conversion price meant 55% of lowest trading price during the 25-trading day period ending on the last complete trading date prior to the date of conversion, provided, however, that Power Up could not convert the Power Up Note 12 to the extent that such conversion would result in beneficial ownership by Power Up and its affiliates of more than 4.99% of the Company’s issued and outstanding common stock. If the Company prepaid the Power Up Note 12 within 30 days of its issuance, the Company must pay all of the principal at a cash redemption premium of 115%; if such prepayment was made between the 31st day and the 60th day after the issuance of the Power Up Note 12, then such redemption premium was 120%; if such prepayment was made from the sixty first 61st to the 90th day after issuance, then such redemption premium was 125%; and if such prepayment was made from the 91st to the 120th day after issuance, then such redemption premium was 130%; and if such prepayment was made from the 121st to the 150th day after issuance, then such redemption premium was 135%; and if such prepayment was made from the 151st to the 180th day after issuance, then such redemption premium was 140%. After the 180th day following the issuance of the Power Up Note 12, there was no further right of prepayment. The Company accrued interest in the amount of $1,499 on the Power Up Note 12 during the year ended December 31, 2019. During the year ended December 31, 2019, the Company determined that a derivative liability in the amount of $54,969 existed in connection with the variable rate conversion feature of the Power Up Note 12. $53,000 of this amount was charged to discount on the Power Up Note 12, and $2,187 was charged to interest expense. $6,502 of the discount was charged to operations during the year ended December 31, 2019.

 

 

During the year ended December 31, 2020, the Company made a cash payment in the amount of $84,231 on the Power Up Note 12 which fully satisfied this obligation. This amount consisted of $53,000 of principal, $3,312 of accrued interest, and $27,919 of prepayment penalty. The Company revalued the derivative liability associated with the Power Up Note 12 at the time of payment and recorded a gain on revaluation in the amount of $4,247. The Company credited the fair value of the derivative liability at the time of payment in the amount of $62,569 to additional paid-in capital. Details of additional activity for the year ended December 31, 2020 are presented in Notes Payable Table 1, below.

 

Power Up Note 13

 

This obligation has been fully satisfied as of the date of this filing and the Company has no further requirements related to this matter.

On November 11, 2019, the Company entered into a Securities Purchase Agreement with Power Up pursuant to which Power Up agreed to purchase a convertible promissory note (the “Power Up Note 13”) in the aggregate principal amount of $73,000 and an original issue discount of $3,000. The Power Up Note 13 entitled the holder to 12% interest per annum and matures on August 30, 2020. Under the Power Up Note 13, Power Up had the right to convert all or a portion of the outstanding principal of the Power Up Note 13 into shares of common stock beginning on the date which was 180 days from the issuance date of the Power Up Note 12, at a price equal to the higher of the variable conversion price or $0.00006 per share. The variable conversion price meant 55% of lowest trading price during the 25-trading day period ending on the last complete trading date prior to the date of conversion, provided, however, that Power Up may not convert the Power Up Note 13 to the extent that such conversion would result in beneficial ownership by Power Up and its affiliates of more than 4.99% of the Company’s issued and outstanding common stock. If the Company prepaid the Power Up Note 13 within 30 days of its issuance, the Company must pay all of the principal at a cash redemption premium of 115%; if such prepayment was made between the 31st day and the 60th day after the issuance of the Power Up Note 13, then such redemption premium was 120%; if such prepayment was made from the sixty first 61st to the 90th day after issuance, then such redemption premium was 125%; and if such prepayment was made from the 91st to the 120th day after issuance, then such redemption premium was 130%; and if such prepayment was made from the 121st to the 150th day after issuance, then such redemption premium was 135%; and if such prepayment was made from the 151st to the 180th day after issuance, then such redemption premium was 140%. After the 180th day following the issuance of the Power Up Note 13, there was no further right of prepayment. The Company accrued interest in the amount of $1,414 on the Power Up Note 13 during the year ended December 31, 2019. During the year ended December 31, 2019, the Company determined that a derivative liability in the amount of $73,529 existed in connection with the variable rate conversion feature of the Power Up Note 13. $73,000 of this amount was charged to discount on the Power Up Note 13, and $529 was charged to interest expense. $6,091 of the discount was charged to operations during the year ended December 31, 2019.

 

During the year ended December 31, 2020, the Company made a cash payment in the amount of $115,980 on the Power Up Note 13 which fully satisfied this obligation. This amount consisted of $73,000 of principal, $4,728 of accrued interest, and $38,252 of prepayment penalty. The Company revalued the derivative liability associated with the Power Up Note 13 at the time of payment and recorded a gain on revaluation in the amount of $4,882. The Company credited the fair value of the derivative liability at the time of payment in the amount of $86,380 to additional paid-in capital. Details of additional activity for the year ended December 31, 2020 are presented in Notes Payable Table 1, below.

 

Eagle Equities Note 1

 

This obligation has been fully satisfied as of the date of this filing and the Company has no further requirements related to this matter.

On November 22, 2019, the Company entered into a Securities Purchase Agreement with Eagle Equities, LLC (“Eagle Equities”) pursuant to which Eagle Equities agreed to purchase a convertible promissory note (the “Eagle Equities Note 1”) in the aggregate principal amount of $256,000 and an original issue discount of $6,000. The Eagle Equities Note 1 entitled the holder to 12% interest per annum and matures on November 22, 2020. Under the Eagle Equities Note 1, Eagle Equities had the right to convert all or a portion of the outstanding principal of the Eagle Equities Note 1 into shares of common stock beginning on the date which was 180 days from the issuance date of the Eagle Equities Note 1, at a price equal to 60% of lowest traded price during the 20 day trading period ending on the day the conversion notice was received by the Company, provided, however, that Eagle Equities may not convert the Eagle Equities Note 1 to the extent that such conversion would result in beneficial ownership by Eagle Equities and its affiliates of more than 4.99% of the Company’s issued and outstanding common stock. If the Company prepaid the Eagle Equities Note 1 during the 30 days of its issuance, the Company must pay all of the principal at a cash redemption premium of 110%; if such prepayment was made between the 31st day and the 60th day after the issuance of the Eagle Equities Note 1, then such redemption premium was 116%; if such prepayment was made from the sixty first 61st to the 90th day after issuance, then such redemption premium was 122%; and if such prepayment was made from the 91st to the 120th day after issuance, then such redemption premium was 128%; and if such prepayment was made from the 121st to the 150th day after issuance, then such redemption premium was 134%; and if such prepayment was made from the 151st to the 180th day after issuance, then such redemption premium was 140%. After the 180th day following the issuance of the Eagle Equities Note 1, there was no further right of prepayment. The Company accrued interest in the amount of $3,367 on the Eagle Equities Note 1 during the year ended December 31, 2019. During the year ended December 31, 2019, the Company determined that a derivative liability in the amount of $271,694 existed in connection with the variable rate conversion feature of the Eagle Equities Note 1. $256,000 of this amount was charged to discount on the Eagle Equities Note 1, and $15,694 was charged to interest expense. $7,784 of the discount was charged to operations during the year ended December 31, 2019.

 

 

During the year ended December 31, 2020, the holder of the Eagle Equities Note 1 converted the following amounts of principal and accrued interest to common stock: On June 5, 2020, principal of $25,000 and accrued interest of $1,608 were converted at a price of $0.0132 per share into 2,015,783 shares of common stock; On June 17, 2020, principal of $25,000 and accrued interest of $1,708 were converted at a price of $0.0132 per share into 2,023,358 shares of common stock; On June 23, 2020, principal of $40,000 and accrued interest of $2,813 were converted at a price of $0.0132 per share into 3,243,434 shares of common stock; on June 26, 2020, principal of $26,000 and accrued interest of $1,855 were converted at a price of $0.01362 per share into 2,045,130 shares of common stock; on July 9, 2020, principal of $45,000 and accrued interest of $3,405 were converted at a price of $0.01518 per share into 3,188,735 shares of common stock; on July 17, 2020, principal of $50,000 and accrued interest of $3,917 were converted at a price of $0.01572 per share into 3,429,814 shares of common stock; and on July 30, 2020, principal of $45,000 and accrued interest of $3,720 were converted at a price of $0.021 per share into 2,320,000 shares of common stock. There were no gains or losses recorded, as these conversions were made pursuant to the terms of the agreement. Details of activity for the year ended December 31, 2020 are presented in Notes Payable Table 1, below.

 

Eagle Equities Note 2

 

This obligation has been fully satisfied as of the date of this filing and the Company has no further requirements related to this matter.

On December 19, 2019, the Company entered into a Securities Purchase Agreement with Eagle Equities pursuant to which Eagle Equities agreed to purchase a convertible promissory note (the “Eagle Equities Note 2”) in the aggregate principal amount of $256,000 and an original issue discount of $6,000. The Eagle Equities Note 2 entitled the holder to 12% interest per annum and matures on December 19, 2020. Under the Eagle Equities Note 2, Eagle Equities had the right to convert all or a portion of the outstanding principal of the Eagle Equities Note 2 into shares of common stock beginning on the date which was 180 days from the issuance date of the Eagle Equities Note 2, at a price equal to 60% of lowest traded price during the 20 day trading period ending on the day the conversion notice was received by the Company, provided, however, that Eagle Equities may not convert the Eagle Equities Note 2 to the extent that such conversion would result in beneficial ownership by Eagle Equities and its affiliates of more than 4.99% of the Company’s issued and outstanding common stock. If the Company prepaid the Eagle Equities Note 2 during the 30 days of its issuance, the Company must pay all of the principal at a cash redemption premium of 110%; if such prepayment was made between the 31st day and the 60th day after the issuance of the Eagle Equities Note 2, then such redemption premium was 116%; if such prepayment was made from the sixty first 61st to the 90th day after issuance, then such redemption premium was 122%; and if such prepayment was made from the 91st to the 120th day after issuance, then such redemption premium was 128%; and if such prepayment was made from the 121st to the 150th day after issuance, then such redemption premium was 134%; and if such prepayment was made from the 151st to the 180th day after issuance, then such redemption premium was 140%. After the 180th day following the issuance of the Eagle Equities Note 2, there was no further right of prepayment. The Company accrued interest in the amount of $1,094 on the Eagle Equities Note 2 during the year ended December 31, 2019. During the year ended December 31, 2019, the Company determined that a derivative liability in the amount of $277,476 existed in connection with the variable rate conversion feature of the Eagle Equities Note 2. $256,000 of this amount was charged to discount on the Eagle Equities Note 2, and $21,476 was charged to interest expense. $8,393 of the discount was charged to operations during the year ended December 31, 2019.

 

During the year ended December 31, 2020, the holder of the Eagle Equities Note 2 converted the following amounts of principal and accrued interest to common stock: On August 20, 2020, principal of $56,000 and accrued interest of $4,573 were converted at a price of $0.01896 per share into 3,194,796 shares of common stock; On September 1, 2020, principal of $50,000 and accrued interest of $4,283 were converted at a price of $0.01806 per share into 3,005,721 shares of common stock; On September 9, 2020, principal of $50,000 and accrued interest of $4,417 were converted at a price of $0.0153 per share into 3,556,645 shares of common stock; on September 25, 2020, principal of $50,000 and accrued interest of $4,683 were converted at a price of $0.0153 per share into 3,574,074 shares of common stock; and on October 6, 2020, principal of $50,000 and accrued interest of $4,867 were converted at a price of $0.0153 per share into 3,586,078 shares of common stock. Details of activity for the year ended December 31, 2020 are presented in Notes Payable Table 1, below.

 

 

Eagle Equities Note 3

 

This obligation has been fully satisfied as of the date of this filing and the Company has no further requirements related to this matter.

On January 24, 2020, the Company entered into a Securities Purchase Agreement with Eagle Equities pursuant to which Eagle Equities agreed to purchase a convertible promissory note (the “Eagle Equities Note 3”) in the aggregate principal amount of $256,000 and an original issue discount of $6,000. The Eagle Equities Note 3 entitled the holder to 12% interest per annum and matures on January 24, 2021. Under the Eagle Equities Note 3, Eagle Equities had the right to convert all or a portion of the outstanding principal of the Eagle Equities Note 3 into shares of common stock beginning on the date which was 180 days from the issuance date of the Eagle Equities Note 3, at a price equal to 60% of lowest traded price during the 20 day trading period ending on the day the conversion notice was received by the Company, provided, however, that Eagle Equities may not convert the Eagle Equities Note 3 to the extent that such conversion would result in beneficial ownership by Eagle Equities and its affiliates of more than 4.99% of the Company’s issued and outstanding common stock. If the Company prepaid the Eagle Equities Note 3 during the 30 days of its issuance, the Company must pay all of the principal at a cash redemption premium of 110%; if such prepayment was made between the 31st day and the 60th day after the issuance of the Eagle Equities Note 3, then such redemption premium was 116%; if such prepayment was made from the sixty first 61st to the 90th day after issuance, then such redemption premium was 122%; and if such prepayment was made from the 91st to the 120th day after issuance, then such redemption premium was 128%; and if such prepayment was made from the 121st to the 150th day after issuance, then such redemption premium was 134%; and if such prepayment was made from the 151st to the 180th day after issuance, then such redemption premium was 140%. After the 180th day following the issuance of the Eagle Equities Note 3, there was no further right of prepayment. During the three months ended March 31, 2020, the Company determined that a derivative liability in the amount of $272,412 existed in connection with the variable rate conversion feature of the Eagle Equities Note 3. $250,000 of this amount was charged to discount on the Eagle Equities Note 3, and $22,412 was charged to interest expense.

 

During the year ended December 31, 2020, the holder of the Eagle Equities Note 3 converted the following amounts of principal and accrued interest to common stock: On October 15, 2020, principal of $50,000 and accrued interest of $4,367 were converted at a price of $0.01566 per share into 3,471,711 shares of common stock; On October 29, 2020, principal of $50,000 and accrued interest of $4,600 were converted at a price of $0.023 per share into 4,439,024 shares of common stock; On November 11, 2020, principal of $33,000 and accrued interest of $3,179 were converted at a price of $0.011 per share into 3,259,369 shares of common stock; on November 17, 2020, principal of $35,000 and accrued interest of $3,442 were converted at a price of $0.011 per share into 3,482,065 shares of common stock; on November 25, 2020, principal of $44,000 and accrued interest of $4,444 were converted at a price of $0.0108 per share into 4,485,556 shares of common stock; and on December 4, 2020, principal of $44,000 and accrued interest of $4,576 were converted at a price of $0.0108 per share into 4,497,778 shares of common stock. Details of activity for the year ended December 31, 2020 are presented in Notes Payable Table 1, below.

 

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.

On March 10, 2020, the Company entered into a Securities Purchase Agreement with Eagle Equities pursuant to which Eagle Equities agreed to purchase a convertible promissory note (the “Eagle Equities Note 4”) in the aggregate principal amount of $129,000 and an original issue discount of $4,000. The Eagle Equities Note 4 entitled the holder to 12% interest per annum and matures on March 10, 2021. Under the Eagle Equities Note 4, Eagle Equities had the right to convert all or a portion of the outstanding principal of the Eagle Equities Note 4 into shares of common stock beginning on the date which was 180 days from the issuance date of the Eagle Equities Note 4, at a price equal to 60% of lowest traded price during the 20 day trading period ending on the day the conversion notice was received by the Company, provided, however, that Eagle Equities may not convert the Eagle Equities Note 4 to the extent that such conversion would result in beneficial ownership by Eagle Equities and its affiliates of more than 4.99% of the Company’s issued and outstanding common stock. If the Company prepaid the Eagle Equities Note 4 during the 30 days of its issuance, the Company must pay all of the principal at a cash redemption premium of 110%; if such prepayment was made between the 31st day and the 60th day after the issuance of the Eagle Equities Note 4, then such redemption premium was 116%; if such prepayment was made from the sixty first 61st to the 90th day after issuance, then such redemption premium was 122%; and if such prepayment was made from the 91st to the 120th day after issuance, then such redemption premium was 128%; and if such prepayment was made from the 121st to the 150th day after issuance, then such redemption premium was 134%; and if such prepayment was made from the 151st to the 180th day after issuance, then such redemption premium was 140%. After the 180th day following the issuance of the Eagle Equities Note 4, there was no further right of prepayment. During the three months ended March 31, 2020, the Company determined that a derivative liability in the amount of $139,021 existed in connection with the variable rate conversion feature of the Eagle Equities Note 4. $125,000 of this amount was charged to discount on the Eagle Equities Note 4, and $14,021 was charged to interest expense.

 

 

During the year ended December 31, 2020, the holder of the Eagle Equities Note 4 converted the following amounts of principal and accrued interest to common stock: On December 16, 2020, principal of $45,000 and accrued interest of $4,200 were converted at a price of $0.0108 per share into 4,555,556 shares of common stock. Details of additional activity for the year ended December 31, 2020 are presented in Notes Payable Table 1, below.

 

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.

On April 8, 2020, the Company entered into a Securities Purchase Agreement with Eagle Equities pursuant to which Eagle Equities agreed to purchase a convertible promissory note (the “Eagle Equities Note 5”) in the aggregate principal amount of $100,000 and an original issue discount of $4,000. The Eagle Equities Note 5 entitled the holder to 12% interest per annum and matures on April 8, 2021. Under the Eagle Equities Note 5, Eagle Equities had the right to convert all or a portion of the outstanding principal of the Eagle Equities Note 5 into shares of common stock beginning on the date which was 180 days from the issuance date of the Eagle Equities Note 5, at a price equal to 60% of lowest traded price during the 20 day trading period ending on the day the conversion notice was received by the Company, provided, however, that Eagle Equities may not convert the Eagle Equities Note 5 to the extent that such conversion would result in beneficial ownership by Eagle Equities and its affiliates of more than 4.99% of the Company’s issued and outstanding common stock. If the Company prepaid the Eagle Equities Note 5 during the 30 days of its issuance, the Company must pay all of the principal at a cash redemption premium of 110%; if such prepayment was made between the 31st day and the 60th day after the issuance of the Eagle Equities Note 5, then such redemption premium was 116%; if such prepayment was made from the sixty first 61st to the 90th day after issuance, then such redemption premium was 122%; and if such prepayment was made from the 91st to the 120th day after issuance, then such redemption premium was 128%; and if such prepayment was made from the 121st to the 150th day after issuance, then such redemption premium was 134%; and if such prepayment was made from the 151st to the 180th day after issuance, then such redemption premium was 140%. After the 180th day following the issuance of the Eagle Equities Note 5, there shall was further right of prepayment. During the three months ended June 30, 2020, the Company determined that a derivative liability in the amount of $106,576 existed in connection with the variable rate conversion feature of the Eagle Equities Note 5. $100,000 of this amount was charged to discount on the Eagle Equities Note 5, and $6,576 was charged to interest expense. Details of additional activity for the year ended December 31, 2020 are presented in Notes Payable Table 1, below.

 

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.

On July 1, 2020, the Company entered into a Securities Purchase Agreement with Eagle Equities pursuant to which Eagle Equities agreed to purchase a convertible promissory note (the “Eagle Equities Note 6”) in the aggregate principal amount of $200,200 with an original issue discount of $18,200. The amount received was also net of fees in the amount of $7,000, which were charged to interest expense during the period. The Eagle Equities Note 6 entitled the holder to 12% interest per annum and matures on July 1, 2021. Under the Eagle Equities Note 6, Eagle Equities had the right to convert all or a portion of the outstanding principal of the Eagle Equities Note 6 into shares of common stock beginning on the date which was 180 days from the issuance date of the Eagle Equities Note 6, at a price equal to 60% of lowest traded price during the 20 day trading period ending on the day the conversion notice was received by the Company, provided, however, that Eagle Equities may not convert the Eagle Equities Note 6 to the extent that such conversion would result in beneficial ownership by Eagle Equities and its affiliates of more than 4.99% of the Company’s issued and outstanding common stock. If the Company prepaid the Eagle Equities Note 6 during the 30 days of its issuance, the Company must pay all of the principal at a cash redemption premium of 110%; if such prepayment was made between the 31st day and the 60th day after the issuance of the Eagle Equities Note 6, then such redemption premium was 116%; if such prepayment was made from the sixty first 61st to the 90th day after issuance, then such redemption premium was 122%; and if such prepayment was made from the 91st to the 120th day after issuance, then such redemption premium was 128%; and if such prepayment was made from the 121st to the 150th day after issuance, then such redemption premium was 134%; and if such prepayment was made from the 151st to the 180th day after issuance, then such redemption premium was 140%. After the 180th day following the issuance of the Eagle Equities Note 6, there was no further right of prepayment. The Company determined that a derivative liability in the amount of $218,148 existed in connection with the variable rate conversion feature of the Eagle Equities Note 6. $200,200 of this amount was charged to discount on the Eagle Equities Note 6, and $17,948 was charged to interest expense. Details of additional activity for the year ended December 31, 2020 are presented in Notes Payable Table 1, below.

 

 

Eagle Equities Note 7

 

This obligation has been fully satisfied as of the date of this filing and the Company has no further requirements related to this matter.

On August 20, 2020, the Company entered into a Securities Purchase Agreement with Eagle Equities pursuant to which Eagle Equities agreed to purchase a convertible promissory note (the “Eagle Equities Note 7”) in the aggregate principal amount of $200,200 with an original issue discount of $18,200. The amount received was also net of fees in the amount of $7,000, which were charged to interest expense during the period. The Eagle Equities Note 7 entitled the holder to 12% interest per annum and matures on August 20, 2021. Under the Eagle Equities Note 7, Eagle Equities may had the right to all or a portion of the outstanding principal of the Eagle Equities Note 7 into shares of common stock beginning on the date which was 180 days from the issuance date of the Eagle Equities Note 7, at a price equal to 70% of lowest traded price during the 20 day trading period ending on the day the conversion notice was received by the Company, provided, however, that Eagle Equities may not convert the Eagle Equities Note 7 to the extent that such conversion would result in beneficial ownership by Eagle Equities and its affiliates of more than 4.99% of the Company’s issued and outstanding common stock. If the Company prepaid the Eagle Equities Note 7 during the 30 days of its issuance, the Company must pay all of the principal at a cash redemption premium of 110%; if such prepayment was made between the 31st day and the 60th day after the issuance of the Eagle Equities Note 7, then such redemption premium was 116%; if such prepayment was made from the sixty first 61st to the 90th day after issuance, then such redemption premium was 122%; and if such prepayment was made from the 91st to the 120th day after issuance, then such redemption premium was 128%; and if such prepayment was made from the 121st to the 150th day after issuance, then such redemption premium was 134%; and if such prepayment was made from the 151st to the 180th day after issuance, then such redemption premium was 140%. After the 180th day following the issuance of the Eagle Equities Note 7, there was no further right of prepayment. The Company determined that a derivative liability in the amount of $215,403 existed in connection with the variable rate conversion feature of the Eagle Equities Note 7. $200,200 of this amount was charged to discount on the Eagle Equities Note 7, and $15,203 was charged to interest expense. Details of additional activity for the year ended December 31, 2020 are presented in Notes Payable Table 1, below.

 

Eagle Equities Note 8

 

This obligation has been fully satisfied as of the date of this filing and the Company has no further requirements related to this matter.

On September 30, 2020, the Company entered into a Securities Purchase Agreement with Eagle Equities pursuant to which Eagle Equities agreed to purchase a convertible promissory note (the “Eagle Equities Note 8”) in the aggregate principal amount of $114,400 with an original issue discount of $10,400. The amount received was also net of fees in the amount of $4,000, which were charged to interest expense during the period. The Eagle Equities Note 8 entitled the holder to 12% interest per annum and matures on September 30, 2021. Under the Eagle Equities Note 8, Eagle Equities had the right to convert all or a portion of the outstanding principal of the Eagle Equities Note 8 into shares of common stock beginning on the date which was 180 days from the issuance date of the Eagle Equities Note 8, at a price equal to 70% of lowest traded price during the 20 day trading period ending on the day the conversion notice was received by the Company, provided, however, that Eagle Equities may not convert the Eagle Equities Note 8 to the extent that such conversion would result in beneficial ownership by Eagle Equities and its affiliates of more than 4.99% of the Company’s issued and outstanding common stock. If the Company prepaid the Eagle Equities Note 8 during the 30 days of its issuance, the Company must pay all of the principal at a cash redemption premium of 110%; if such prepayment was made between the 31st day and the 60th day after the issuance of the Eagle Equities Note 8, then such redemption premium was 116%; if such prepayment was made from the sixty first 61st to the 90th day after issuance, then such redemption premium was 122%; and if such prepayment was made from the 91st to the 120th day after issuance, then such redemption premium was 128%; and if such prepayment was made from the 121st to the 150th day after issuance, then such redemption premium was 134%; and if such prepayment was made from the 151st to the 180th day after issuance, then such redemption premium was 140%. After the 180th day following the issuance of the Eagle Equities Note 8, was no further right of prepayment. The Company determined that a derivative liability in the amount of $117,309 existed in connection with the variable rate conversion feature of the Eagle Equities Note 8. $114,400 of this amount was charged to discount on the Eagle Equities Note 8, and $2,909 was charged to interest expense. Details of additional activity for the year ended December 31, 2020 are presented in Notes Payable Table 1, below.

 

 

Eagle Equities Note 9

 

This obligation has been fully satisfied as of the date of this filing and the Company has no further requirements related to this matter.

On October 29, 2020, the Company entered into a Securities Purchase Agreement with Eagle Equities pursuant to which Eagle Equities agreed to purchase a convertible promissory note (the “Eagle Equities Note 9”) in the aggregate principal amount of $114,400 with an original issue discount of $10,400. The amount received was also net of fees in the amount of $4,000, which were charged to discount on convertible notes during the period. The Eagle Equities Note 9 entitled the holder to 12% interest per annum and matures on October 29, 2021. Under the Eagle Equities Note 9, Eagle Equities had the right to convert all or a portion of the outstanding principal of the Eagle Equities Note 9 into shares of common stock beginning on the date which was 180 days from the issuance date of the Eagle Equities Note 9, at a price equal to 70% of lowest traded price during the 20 day trading period ending on the day the conversion notice was received by the Company, provided, however, that Eagle Equities may not convert the Eagle Equities Note 9 to the extent that such conversion would result in beneficial ownership by Eagle Equities and its affiliates of more than 4.99% of the Company’s issued and outstanding common stock. If the Company prepaid the Eagle Equities Note 9 during the 30 days of its issuance, the Company must pay all of the principal at a cash redemption premium of 110%; if such prepayment was made between the 31st day and the 60th day after the issuance of the Eagle Equities Note 9, then such redemption premium was 116%; if such prepayment was made from the sixty first 61st to the 90th day after issuance, then such redemption premium was 122%; and if such prepayment was made from the 91st to the 120th day after issuance, then such redemption premium was 128%; and if such prepayment was made from the 121st to the 150th day after issuance, then such redemption premium was 134%; and if such prepayment was made from the 151st to the 180th day after issuance, then such redemption premium was 140%. After the 180th day following the issuance of the Eagle Equities Note 9, there shall be no further right of prepayment. The Company determined that a derivative liability in the amount of $86,432 existed in connection with the variable rate conversion feature of the Eagle Equities Note 9; this amount was charged to discount on the Eagle Equities Note 9. Details of additional activity for the year ended December 31, 2020 are presented in Notes Payable Table 1, below.

 

Eagle Equities Note 10

 

This obligation has been fully satisfied as of the date of this filing and the Company has no further requirements related to this matter.

On December 9, 2020, the Company entered into a Securities Purchase Agreement with Eagle Equities pursuant to which Eagle Equities agreed to purchase a convertible promissory note (the “Eagle Equities Note 10”) in the aggregate principal amount of $220,000 with an original issue discount of $20,000. The amount received was also net of fees in the amount of $8,000, which were charged to discount on convertible notes during the period. The Eagle Equities Note 10 entitled the holder to 12% interest per annum and matures on December 9, 2021. Under the Eagle Equities Note 10, Eagle Equities had the right to convert all or a portion of the outstanding principal of the Eagle Equities Note 8 into shares of common stock beginning on the date which was 180 days from the issuance date of the Eagle Equities Note 9, at a price equal to 70% of lowest traded price during the 20 day trading period ending on the day the conversion notice was received by the Company, provided, however, that Eagle Equities may not convert the Eagle Equities Note 10 to the extent that such conversion would result in beneficial ownership by Eagle Equities and its affiliates of more than 4.99% of the Company’s issued and outstanding common stock. If the Company prepaid the Eagle Equities Note 10 during the 30 days of its issuance, the Company must pay all of the principal at a cash redemption premium of 110%; if such prepayment was made between the 31st day and the 60th day after the issuance of the Eagle Equities Note 10, then such redemption premium was 116%; if such prepayment was made from the sixty first 61st to the 90th day after issuance, then such redemption premium was 122%; and if such prepayment was made from the 91st to the 120th day after issuance, then such redemption premium was 128%; and if such prepayment was made from the 121st to the 150th day after issuance, then such redemption premium was 134%; and if such prepayment was made from the 151st to the 180th day after issuance, then such redemption premium was 140%. After the 180th day following the issuance of the Eagle Equities Note 9, there was no further right of prepayment. The Company determined that a derivative liability in the amount of $118,160 existed in connection with the variable rate conversion feature of the Eagle Equities Note 10; this amount was charged to discount on the Eagle Equities Note 10. Details of additional activity for the year ended December 31, 2020 are presented in Notes Payable Table 1, below.

 

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 PPP Loan. 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 year ended December 31, 2020 are presented in Notes Payable Table 1, below.

 

Notes Payable Table 1:

 

                                   

Interest

   

Amortization

         
                                   

Expense

   

of Discount

    Discount    
   

Principal Balance

   

Accrued Interest

   

Year Ended

   

Year Ended

   

Balance

 
   

12/31/2020

   

12/31/2019

   

12/31/2020

   

12/31/2019

   

12/31/2020

   

12/31/2020

   

12/31/2020

 

Series C Convertible Debenture(h)

  $ 110,833     $ 110,833     $ 68,823     $ 57,709     $ 11,114     $ -     $ -  
                                                         

Series D Convertible Debenture(h)

    11,333       11,333       8,390       7,026       1,364       -       -  
                                                         

Convertible Note A(i)

    41,000       41,000       12,035       7,101       4,934       -       -  
                                                         

Power Up Note 11

    -       45,000       -       1,805       875       34,498       -  
                                                         

Power Up Note 12

    -       53,000       -       1,499       1,813       46,014       -  
                                                         

Power Up Note 13

    -       73,000       -       1,488       3,240       66,554       -  
                                                         

Eagle Equity Note 1

    -       256,000       -       3,367       15,660       248,216       -  
                                                         

Eagle Equity Note 2

    -       256,000       -       1,010       21,813       247,605       -  
                                                         

Eagle Equity Note 3

    -       -       -       -       24,608       256,000       -  
                                                         

Eagle Equity Note 4(a)

    84,000       -       8,132       -       12,332       93,097       35,903  
                                                         

Eagle Equity Note 5(b)

    100,000       -       8,779       -       8,779       44,747       55,253  
                                                         

Eagle Equity Note 6(c)

    200,200       -       12,112       -       12,112       51,473       148,727  
                                                         

Eagle Equity Note 7(d)

    200,200       -       8,754       -       8,754       20,161       180,039  
                                                         

Eagle Equity Note 8(e)

    114,400       -       3,498       -       3,498       1,380       113,020  
                                                         

Eagle Equity Note 9(f)

    114.400               2,369               2,369       6,053       90,779  
                                                         

Eagle Equity Note 10(g)

    220.000               1,591               1,591       5,087       133,074  
                                                         

PPP Loan

    460,406       -       3,039       -       3,037       -       -  
                                                         

Other

    -       -       -       1,865       3,269       8,000       -  
                                                         

Total

  $ 1,656,772     $ 846,166     $ 137,522     $ 82,870     $ 141,162     $ 1,128,885     $ 756,795  

 

(a) Subsequent to December 31, 2020, $84,000 of principal and $8,398 of accrued interest of this note were converted to a total of 7,629,714 shares of the Company’s common stock. As of the date of this filing this note is fully satisfied and there are no further obligations.

 

(b) Subsequent to December 31, 2020, $100,000 of principal and $9,317 of accrued interest of this note were converted to a total of 8,782,885 shares of the Company’s common stock. As of the date of this filing this note is fully satisfied and there are no further obligations.

 

 

(c) Subsequent to December 31, 2020, $200,200 of principal and $13,864 of accrued interest of this note were converted to a total of 13,734,672shares of the Company’s common stock. As of the date of this filing this note is fully satisfied and there are no further obligations.

 

(d) Subsequent to December 31, 2020, the Company entered into a settlement agreement whereby principal of $200,200 and all accrued interest and prepayment penalties due under this note were converted to a total of 1,184,148 shares of the Company’s common stock. As of the date of this filing this note is fully satisfied and there are no further obligations.

 

(e) Subsequent to December 31, 2020, the Company entered into a settlement agreement whereby principal of $114,400 and all accrued interest and prepayment penalties due under this note were converted to a total of 639,593 shares of the Company’s common stock. As of the date of this filing this note is fully satisfied and there are no further obligations.

 

(f) Subsequent to December 31, 2020, the Company entered into a settlement agreement whereby principal of $114,400 and all accrued interest and prepayment penalties due under this note were converted to a total of 605,177 shares of the Company’s common stock. As of the date of this filing this note is fully satisfied and there are no further obligations.

 

(g) Subsequent to December 31, 2020, the Company entered into a settlement agreement whereby principal of $200,200 and all accrued interest and prepayment penalties due under this note were converted to a total of 1,095,131 shares of the Company’s common stock. As of the date of this filing this note is fully satisfied and there are no further obligations.

 

(h) Subsequent to December 31, 2020, note C and D with an aggregate principal of $122,166 of principal and aggregate accrued interest of $77,213 on these notes were paid via a settlement agreement. As of the date of this filing this note is fully satisfied and there are no further obligations.

 

(i) Subsequent to December 31, 2020, $60,000 of principal and $8,309 of accrued interest of this note were paid via a settlement agreement. In consideration of the sum of $55,367.66 USD, the debt holder released and forever discharged the Company, its owners, directors, officers, employees, agents, assigns, legal representatives and successors from all manner of actions, causes of action, debts, accounts, bonds, contracts, claims and demands which have been or may be sustained as a consequence of the failure of the Company to repay in full.

 

Series X Preferred Stock

 

On December 31, 2019, the Company issued a total of 26,227 of its 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 20,000 shares of common stock.

 

The shares of Series X Preferred stock were issued 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 )

Julie R. Smith, Director and President*

 

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 )

Anglo Irish Management Fund, LLC

 

Consulting services, notes payable (a)

    12,503     $ 434,216     $ 312,572  

(a)

  $ (121,644 )

Frank Lightmas

 

Legal fees

    3,240     $ 112,522     $ 81,000  

(b)

  $ (31,522 )

Total

    26,227     $ 910,837     $ 655,661       $ (255,176 )

 

* Resigned effective July 1, 2020.

 

 

(a) amount consists of accounts payable for a) consulting services of $174,813, and b) principal plus interest due on notes payable in the amount of $137,759.

 

(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, 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 The Good Clinic, LLC. The Company has valued these shares at $71,558 or approximately $14.91 per share based upon an analysis performed by an independent valuation consultant. On March 8, 2021, the 4,800 shares of Series A Preferred Stock were exchanged for 600,000 shares of the Company’s common stock. No shares of Series A Preferred Stock were outstanding as of the date of this filing.

 

Securities Purchase AgreementsRestricted Common Stock

 

From January 29, 2021 through March 21, 2021, the Company entered into Securities Purchase Agreements with 46 investors for the sale of up to 8,192,000 shares of the Company’s restricted common stock at a price of $0.25 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 6,192,000 shares have been issued, generating $1,548,000 in proceeds. The Company is continuing to process and qualify the paperwork for the remaining transactions. These transactions were executed directly by the Company and no brokers, dealers or representatives were involved.

 

Plan of Operations

 

We intend to acquire a series of early-stage companies in the healthcare industry into a portfolio using a “incubator” model. These will feature proven technology and services that generally has not yet scaled to size and needs resources to do so. We expect that these will be both domestic, and international and will see growth primarily from expanded marketing into new marketplaces. There is a small universe of healthcare providers. For all these people to get the services and products they need, the cost must come down, the quality must improve and access to care must increase. Core to achieving these three targets are:

 

 

1)

As efficiency and accuracy of information-sharing for an individual’s healthcare status, diagnostics and maintenance improves, the correct care will be delivered the first time and, therefore, reduce costs;

     
 

2)

Innovative technology needs to be developed and funded in order to improve care quality to treat people with a fewer number of interactions within the health care system;

     
 

3)

Increasing the scope of care for a provider, allowing them to serve up to their full training, expertise and license, and then make those services available via in-person visits, by phone, by text, by email and by video, all to increase access to services with the least amount of delay.

 

We are seeing many excellent examples of how technology can improve healthcare:

 

 

Empowering people to manage their own care so that they need fewer resources from the shrinking pool of healthcare professionals;

     
 

Gathering and sharing data about a person’s healthcare needs more effectively among the relevant healthcare professionals and suppliers;

     
 

Utilizing Artificial Intelligence (AI) and data analytics to allow the healthcare professionals to work more effectively, spreading their talents across a larger pool of those who need their insights.

 

Many available innovative healthcare technology companies are small. Recently founded startups lack marketing and operational knowledge to grow. We believe our technology can be applicable, but are short in teams who can scale, integrate and deploy the new technology and services. This is our opportunity.

 

We have assembled a team with deep experience in the application of healthcare, technology and service, to find, evaluate, integrate and grow selected businesses that fit our demanding requirements. First, they must have proof of results; tangible and measurable. Second, their technology or services must be appropriate for a segment of the population that is sizeable, and in many cases, where the population is underserved. Lastly, the companies must show an ability to grow their capabilities and their market reach, including geographically. Integrated solutions are most always more effective than those that can only operate stand-alone.

 

 

We are seeking to start with 5 or 6 in the near term and create sufficient cash flows to support both our public company overhead, and to fund operations and growth from acquired businesses.

 

All of our plans are contingent on recruiting sufficient capital to provide for both our public company overhead, and to fund the acquisitions and growth needs of the target acquisitions. If we are unsuccessful in our funding efforts, the plans may stall, and even the limited overhead of the Company may require reductions.

 

The 2020 Directors Advisory Agreement

 

Effective as of December 26, 2019, the Board of Directors of the Company entered into a Director Advisory Agreements with each Company Director (each a “Board Advisory Agreement,” collectively the “Board Advisory Agreements”). The term of the Board Advisory Agreements is three (3) years, or until terminated pursuant to the terms of the Board Advisory Agreement.

 

Each Board Advisory Agreement has three (3) components: (i) each Director shall receive a cash stipend of $2,000 per month for professional fees for directors, except that Dr. H. Faraz Naqvi, Mr. Juan Carlos Iturregui, Esq, and, pursuant to an amendment to Mr. Riewold’s Board Advisory Agreement which decreased the regular monthly stipend from $5,000 per month to $2,500 per month, Mr. Riewold, each receives a cash fee of $2,500 per month, except that in any month in which there is a physical meeting of all the Board of Directors, it shall be $5,000; (ii) each Director will receive a restricted stock allocation of 1 million shares that shall be immediately issued to the Director on his appointment (or to his assignee(s)) with certain reverse vesting provisions subject to the Directors continued standing as a Board member. The restricted common stock issuances are considered appropriate additional annual compensation for active Board duties. All share grants will be subject to Rule 144 and will have a six-month holding period according to the Securities Act. If the Director leaves the Board during this 6-month holding period, then any shares not previously relieved of the reverse vesting provisions will be rescinded. The Company retains the right to issue these shares via a Stock Option program upon filing of a Registration Statement on Form S-8 rather than issue restricted stock.

 

Name Change

 

On February 4, 2020, the Board by written consent approved changing the name of the Company from “True Nature Holding, Inc.” to “Mitesco, Inc.” and to change the stock symbol from “TNTY” to “MITI”, which change was subsequently approved by FINRA and effective April 22, 2020.

 

Business Development Agreement

 

On March 2, 2020, the Company entered into an agreement with four senior executives from Minute Clinic James Woodburn, Kevin Lee Smith, Michael Howe and Rebecca Hafner-Fogarty (the “Sellers”) with the skills and know-how to assist the Company in the establishment of a series of clinics utilizing nurse practitioners and telemedicine technology in States where full practice authority for nurse practitioners is supported (the “Business Development Agreement”). We issued 4,800 shares of our Series A Preferred Stock to these individuals as compensation. We valued the 4,800 shares of the Series A Preferred Stock at $71,558 or approximately $14.91 per share based upon an analysis performed by an independent valuation consultant. Subsequent to year end the Company cancelled the Series A Preferred share issued in this transaction and instead issued a total of 600,000 shares of restricted stock to satisfy this obligation.

 

Redemption of Certain Previously Issued Convertible Notes

 

On March 11, 2020, the Company paid in full a previously issued convertible notes with Power Up Lending Group, LTD. The Power Up Convertible Bridge Note dated September 12, 2019, in the amount of $45,000 was paid in full for $71,494.52, including all accrued interest.

 

Amendment to Warrants Previously Issued

 

On March 10, 2020, the Company completed an amendment with Crown Bridge Partners, LLC related to three warrants previously issued in conjunction with certain convertible notes. As a result of the agreement: (i) the first note was fully exercised through the issuance of 4,098,556 shares of common stock, and is now fully extinguished, (ii) the second note has been modified such that exactly 2,901,444 shares will be issued to fully satisfy the warrant, and (iii) the third warrant was fully extinguished with no shares issued and none to be issued.

 

 

Compensatory Arrangements

 

On March 9, 2020, the Board of Directors agreed to implement the 2020 Employee Stock Option Plan (the “2020 Plan”). The 2020 Plan calls for the issuance of up to 8,500,000 stock options, all subject to certain vesting and performance requirements. In conjunction with the Plan, it has agreed to issue the following options to the two (2) officers and two (2) Directors of the Company.

 

The four outside Directors, Ronald Riewold, Tom Brodmerkel, Dr. H. Faraz Naqvi and Juan Carlos Iturregui received options to purchase up to 1,000,000 shares each, priced at $0.03, which all vested during fiscal 2020. Mr. Larry Diamond received options to purchase 2,500,000 shares, priced at $0.03, which were all vested during fiscal 2020.

 

Newly Formed Wholly Owned Subsidiaries and International Operations

 

The Company has formed Mitesco N. A., LLC, a Colorado corporation which will house all North American operations. For European acquisitions, the Company has formed Acelerar Healthcare Holdings, LTD., which is based in Dublin, Ireland and will house all European acquisitions.

 

The Private Placement

 

On March 25, 2021, we entered into the SPAs with the Investors, pursuant to which the Investors agreed to purchase 3,000,000 Units, consisting of the Warrants and the Series C Preferred Stock for a total purchase price of $3,000,000. Pursuant to the RRAs, we have agreed to file a registration statement for the Shares within 45 days of closing the Private Placement and to have the registration statement declared effective by the SEC within 90 days of closing the Private Placement. For more information relating to the Private Placement, please see the section herein entitled “The Private Placements”.

 

Debt Settlement Agreement

 

On March 24, 2021, we entered into a debt settlement agreement (the “Debt Settlement Agreement”) with a certain noteholder of the Convertible Note A for the settlement of a note with an original principal amount of $60,000. Pursuant to the Debt Settlement Agreement, the Company paid $55,367.66 in exchange for the extinguishment and cancellation of the note and all the Company’s obligations thereunder.

 

 

BUSINESS

 

Overview

 

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, and since 2016 known as True Nature Holding, Inc., became a publicly traded company through a reverse triangular merger with Brain Tree International, Inc., a Utah corporation (“BTI”) in 2012. Trunity Holdings, Inc. was the parent company of our educational business, named Trunity, Inc., which was formed on July 28, 2009 through the acquisition of certain intellectual property from its three founders. On December 9, 2015, the Company made a decision to restructure Trunity Holdings, Inc., having acquired Newco4pharmacy, LLC, a development stage business aimed at a roll-up of compounding pharmacy businesses. As a part of such restructuring, we completed a “spin out” transaction of our educational business line to our shareholders as of December 31, 2015. Effective April 22, 2020, we changed our name to Mitesco, Inc.

 

We are working to open primary care clinics around the US that are located 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. 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 in North East Minneapolis, MN. We plan to open an additional five to seven 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, 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 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 plan to continue to expand our relationship with Lennar Corporation and other developers. We plan to mirror this approach within the two Lennar locations with which we have signed letters of intent to build clinics in the residential developments in Denver. By locating in close proximity, we expect to be able to build the client panel more quickly than typical for primary care practices.

 

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, a number of 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.

 

Operational Overview

 

During the year ended December 31, 2020, we have 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.

 

Our Business and Related Matters

 

In March 2020, we formed The Good Clinic LLC, a Colorado 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. 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 600,000 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.

 

 

We entered into service agreements with each of these individuals and appointed them to serve as management of The Good Clinic, LLC:

 

 

Michael C. Howe is the Chief Executive Officer of The Good Clinic, LLC. Mr. Howe has successfully grown consumer facing businesses, including the business now known as MinuteClinic, acquired by CVS in 2006. As CEO of the new business unit, Mr. Howe brings 30+ years of consumer and healthcare experience including Minute Clinic, Arby’s Restaurants and Verify Brand.

 

 

Rebecca Hafner-Fogarty, MD, MBA, FAAFP is the Chief Medical Officer of The Good Clinic, LLC. Dr. Hafner brings valuable consumer health experience including senior roles at MinuteClinic as well as Zipnosis. Dr. Hafner-Fogarty is an experienced primary care physician, served on the Minnesota Board of Medical Practice for many years, and has deep expertise in regulatory and policy issues in telemedicine and other healthcare innovation.

 

 

Kevin Lee Smith DNP, FNP, FAANP is the Chief Nurse Practitioner Officer of The Good Clinic, LLC with previous experiences include founding MinuteClinic and providing early-stage informatics leadership at Zipnosis. Mr. Smith has also been an active primary care Nurse Practitioner and served in faculty positions at the University of Minnesota throughout his career

 

 

JimWoody” Woodburn, MD, MS is the President & Chief Operating Officer of The Good Clinic, LLC and has been key to the success of organizations including MinuteClinic, Applied Pathways (Acquired by Anthem AIM in 2017) and several other venture capital-funded companies. In addition to his experience as an Emergency and Occupational Medicine physician leader, he was Medical Director at BCBS of MN and led employee health and wellness programs for over 12 years. Mr. Woodburn led the successful clinical expansion for MinuteClinic including the scalable provider ownership model and clinical quality management.

 

Recent Developments

 

In August 2020, we identified our first clinic location in Minneapolis, Minnesota. From May to December 2020, we entered into various business commitments including construction, lease of space, marketing and technology development for this location. Our total cost for the development of this location was approximately $750,000. This location is an approximately 3,000 square foot facility located in a 600-unit high rise residential development managed by Lennar Corporation. This location of The Good Clinic plans to employ 8 persons including 3 nurse practitioners. This location opened to patients on February 1, 2021.

 

On February 1, 2021, we opened our first clinic in Northeast Minneapolis, Minnesota.

 

On March 14, 2021, the Board of Directors appointed Philip Keller its Chief Financial Officer. In connection with Mr. Keller’s appointment as Chief Financial Officer, Mr. Lawrence Diamond will no longer serve as the Company’s Interim Chief Financial Officer. Mr. Diamond will continue to lead the Company’s growth and development as Chief Executive Officer and as a Director of the Board.

 

On March 24, 2021, we entered into a debt settlement agreement (the “Debt Settlement Agreement”) with a certain noteholder of the Convertible Note A for the settlement of a note with an original principal amount of $60,000. Pursuant to the Debt Settlement Agreement, the Company paid $55,367.66 in exchange for the extinguishment and cancellation of the note and all the Company’s obligations thereunder.

 

On March 25, 2021, we entered into the SPA with the Investors and issued the Series C Preferred Stock and Warrants described above under the section entitled “The Private Placement.”

 

On April 5, 2021, the Board of Directors appointed Ingrid Jenny Lindstrom its Chief Legal Officer effective April 12, 2021.

 

Target Locations

 

We are in the process of identifying strategic new locations for The Good Clinic facilities. We anticipate initial expansion of five to seven clinics in The Twin Cities of Minnesota. We then expect to expand in Colorado and then Florida with a goal of having 50 units operating by 2024. We are targeting expansion states experiencing a shortage of available primary care providers within the 36 states that support near or fully independent practice by nurse practitioners.

 

 

Consumer research has clearly identified that consumers want convenience. As such, we are seeking to locate clinics within more residential urban and suburban locations with higher density of population. We plan to initially target locations in partnership with larger national residential developers and narrow network insurance providers.

 

The Good Clinic facilities are expected to be developed in three sizes. They are planned to be 3,000 – 3,500 square feet with three to five nurse practitioners, 1,250 – 2,000 square feet with two to three nurse practitioners, and small telehealth hubs staffed by a single nurse practitioner. 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 will open Monday through Friday from 8 am to 7 pm and Saturday from 9 am to 2 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

 

Upon having multiple locations, we plan to have connectivity between the clinics so that our future patients can access their information for treatment or prescriptions at any of our available facilities and online via telehealth. When you work with The Good Clinic, we will know who you are and what you want and need.

 

Serving the Market

 

We believe there is a looming shortage of primary care providers in the United States. Approximately 23 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 the American Association of Colleges of Nursing, Nurse Practitioners are compensated 40% less than their physician counterparts. Additionally, 30,000 Nurse Practitioners graduate each year making the necessary expertise readily available.

 

 

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 are seeking the previous measures to be present in cities with higher population concentrations. We focus on convenience that includes locations in close proximity to 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 businesses to provide near-site employer clinics for physicals, virus testing, and occupational health services.

 

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 Deloitte which examined the market for 2020 and forward (found here: https://www2.deloitte.com/global/en/pages/life-sciences-and-healthcare/articles/global-health-care-sector-outlook.html) health care expenditures continue to consume an increasing portion of most economies. In the U.S., health care spending increased 3.9 percent to $3.5 trillion in 2017, and now represents 17.9 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 Centers for Medicare and Medicaid Services (“CMS”) estimates annual U.S. healthcare spending will grow at an average rate of 5.5 percent through 2026 and reach $5.7 trillion, or 19.7 percent of U.S. GDP, by 2026. We believe this trajectory is unsustainable and that health care IT (“HCIT”) may play an important role in facilitating a shift from a high-cost health care system that incents volume to a proactive system that incents health, quality and efficiency.

 

For this change to occur, we believe traditional fee-for-service (“FFS”) reimbursement models must continue to shift to value-based approaches that are more aligned with quality, outcomes, and efficiency. The shift away from traditional FFS is evident in growth of lives covered under Accountable Care Organizations (“ACOs”). ACOs are groups of hospitals and providers that focus on providing coordinated, high-quality care to Medicare, Medicaid or commercially insured populations, then share in savings created by lowering the cost of care. According to Leavitt Partners, lives covered under ACOs grew from approximately 5 million in 2011 to more than 32 million in 2018.

 

In addition to the increasing number of lives covered under ACOs, the structure of ACOs is evolving to where providers are expected to assume more risk. Currently, most ACO contracts are upside only, which means providers can receive bonuses for good performance, but they assume no downside for underperformance. In 2018, CMS released a rule called “Pathways to Success” that accelerates the time frame during which providers need to move to ACOs that include both upside bonuses and downside penalties. We believe this shift is important as assumption of risk by providers creates a strong incentive for them to improve care coordination and deliver high quality care at a lower cost.

 

Another step towards a value-based reimbursement occurred with the passage of The Medicare Access and CHIP Reauthorization Act (“MACRA”), which enacts significant reforms to the payment programs under the Medicare Physician Fee Schedule and consolidated three current value-based programs into one.

 

 

While each of the different approaches to aligning reimbursement with value will continue to evolve, we believe the trend away from traditional FFS will continue. We believe this growth in government and private models aligning payment with value, quality and outcomes will drive major changes in the way health care is provided in the next decade, expect a much greater focus on patient engagement, wellness and prevention. As health care providers become accountable for proactively managing the health of the populations they serve, we expect them to need ongoing investment in sophisticated information technology solutions that will enable them to predict when intervention is needed so they can improve outcomes and lower the cost of providing care.

 

The increasingly complex and more clinical outcomes-based reimbursement environment, we believe is also contributing to a heightened demand for revenue cycle solutions and services and a desire for these solutions and services to be more closely aligned with clinical solutions. Over the past several years, there has been a shift in the U.S. marketplace towards a preference for a single platform across inpatient and ambulatory settings. The number of physicians employed by hospitals has increased as hospitals have acquired physician groups, and health systems are recognizing the benefit of having a single patient record at the hospital and the physician office. We believe the smaller providers and regional networks of healthcare providers will be the newest users of the technologies we seek to develop.

 

While health care providers are showing a preference for a single platform across multiple venues, there is also an increased push for interoperability across disparate systems to address the reality that no patient's record will only have information from a single health care IT system. We believe health information should be shareable and accessible among primary care physicians, specialists, and hospital physicians.

 

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. 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. 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 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 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. In light of 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.

 

 

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 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, 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

 

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.

 

Human Capital

 

We anticipate maintaining a relatively small corporate staff and employ the majority of our human capital in our subsidiaries. As of March 22, 2021, Lawrence Diamond serves as our Chief Executive Officer and director, Phillip Keller serves as our Chief Financial Officer and Jenny Lindstrom serves as our Chief Legal Officer. Our subsidiary, The Good Clinic, LLC, employs three people in professional positions and four consultants serve in managerial and development capacities for the clinic business. We have partnered with several key vendors that are national in scope to meet the anticipated growth rate for building and opening clinics. We are currently recruiting additional clinical staff to serve the anticipated expanding clinic client demand. The Good Clinic continues to develop an extensive employee training program that will ensure compliance with all federal, state and local regulations as well as enable the team all have the expertise, knowledge, skills, and training to deliver the full scope of services offered to clients at the clinic, in person and virtually.

 

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 Quickmedix (aka 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. None of our employees are 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 present management 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 years ended December 31, 2020 and 2019.

 

Intellectual Property

 

In August 2020, we applied for trademark protection of “The Good Clinic”, with the United States Patent & Trademark Office (USPTO).

 

Property

 

We lease office and conference room space on an as needed basis under a month-to-month agreement. We believe this is sufficient for our present needs.

 

 

On October 19, 2020, we entered into a lease agreement for approximately 3,038 square feet of retail space located at 307 1st Avenue, NE, Minneapolis, Minnesota for the establishment of the first location of The Good Clinic (the “Nordhaus Lease”). The Nordhaus Lease is for a term of 90 months commencing May 1, 2021; pursuant to the terms of the Nordhaus Lease, the Company took possession of the leased premises on November 3, 2020. The average monthly base rent over the 90-month term of the Nordhaus Lease is $5,321. The Nordhaus Lease contains one option for the Company to extend the term for a period of 60 months. As the Company moves forward in its expansion plans it expects to have similar lease commitments for each of its clinic sites.

 

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 “Risk Factors” section of this prospectus.

 

Other Corporate Information

 

Our website is www.mitescoinc.com and our principal executive offices is located at 601 Carlson Parkway, Suite 1050, Minnetonka, MN 55305. 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, and at the SEC Public Reference Room at 100 F Street, NE Washington DC 20549. For more information about the SEC Public Reference Room, you can call the SEC at 1-800-SEC-0330.

 

Legal Proceedings

 

From time to time, we may become involved in legal proceedings or be subject to claims arising in the ordinary course of our business.

 

On 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 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 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, we have 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.

 

Corporate Information

 

We were organized on July 28, 2009 under the name Trunity Holdings, Inc. which name was changed in 2016 known as True Nature Holding, Inc., when we engaged in a reverse triangular merger with Brain Tree International, Inc., a Utah corporation (“BTI”) in 2012. Trunity Holdings, Inc. was the parent company of our educational business, named Trunity, Inc., which was formed on July 28, 2009 through the acquisition of certain intellectual property from its three founders. On December 9, 2015, we made a decision to restructure Trunity Holdings, Inc., having acquired Newco4pharmacy, LLC, a development stage business aimed at a roll-up of compounding pharmacy businesses. As a part of such restructuring, we completed a “spin out” transaction of our educational business line to our shareholders as of December 31, 2015. Effective April 22, 2020, we changed our name to Mitesco, Inc.

 

Other Corporate Information

 

Our website is www.mitescoinc.com and our principal executive offices is located at 601 Carlson Parkway, Suite 1050, Minnetonka, Minnesota 55305. Our telephone number is (844) 383 8689.

 

 

MANAGEMENT

 

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

 

Ronald Riewold

 

73

 

Chairman of the Board

 

11/27/2018

 

Lawrence Diamond

 

57

 

Director

 

10/07/2019

 

Tom Brodmerkel

 

63

 

Director

 

12/31/2019

 

Dr. H. Faraz Naqvi

 

55

 

Director

 

07/13/2020

 

Juan Carlos Iturregui Esq

 

55

 

Director

 

07/31/2020

 

 

Name

 

Age

 

Executive Officers

 

Appointed

 

Lawrence Diamond

 

57

 

Chief Executive Officer and Interim Chief Financial Officer

 

11/01/2019

 
               

Phillip J. Keller

 

54

 

Chief Financial Officer

 

03/17/2021

 

Ingrid Jenny Lindstrom

 

46

 

Chief Legal Officer

 

04/12/2021

 

 

Ronald Riewold

 

Mr. Ronald Riewold, our Chairman, joined the Board of Directors on November 27, 2018. Since 2011, Mr. Riewold founded and has served as President and CEO of Averlent Corporation, a national medication management initiative. In a few short months after its founding, the company added several new clients including Accountable Care Organizations, larger group practices and over 500 Independent Physician Associations. Additionally, Mr. Riewold has served as the President of Virtual Physicians Network since January 2010, a virtual engagement and experience company. In 2008, Mr. Riewold started Dynamic Real Estate Development, where he continues to serve as its Chief Executive Officer. Dynamic Real Estate Development focuses on development of medical buildings while partnering with physician groups and/or providing his expertise as a fee developer. His firm’s projects included surgery suites, urgent care facilities, and orthopedic offices.

 

From 2001 to 2008 Mr. Riewold served as President, Co-Chief Executive Officer and as a director of PainCare Holdings (“PainCare”), he was also one of its original investors. During his tenure, Mr. Riewold helped PainCare rise from a start-up to an $80 million-dollar company that developed a process that monitors patients including residents in nursing home/rehabilitation facilities and hospitals. From 1999 to 2001 Mr. Riewold was a consultant for American Enterprise Solutions, Inc., a healthcare delivery system and Internet utility focusing on connectivity in the healthcare industry. After successfully, a financial services company and real estate development company as Chief Executive Officer, Riewold entered the healthcare arena full time in 1996, as Vice President of Corporate Development with Heart Labs of America, which became Medical Industries of America, and later, Cyber Care.

 

Mr. Riewold was selected to join our Board due to his extensive experience in operating and developing both public (NYSE and NASDAQ) and private companies. Specifically, his expertise is in field or practice-level health care company operations. He was a top executive of six companies since 1978, three in the finance and real estate sector, and three in the health care and technology arena. Mr. Riewold has completed over fifty mergers in the health care industry.

 

 

Lawrence Diamond

 

Mr. Lawrence Diamond has served as our Chief Executive Officer and Interim Chief Financial Officer since November 2019 and Director since October 2019. 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 payers, 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. Thomas Brodmerkel has served as a director of the Board since April 2020. 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, 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 1982. 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. H. Faraz Naqvi has served as a director on the Board since July 2020. 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. Juan Carlos 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 Mullin’s 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.

 

 

Phillip J. Keller

 

Mr. Phillip J. Keller has served as our Chief Financial Officer since March 17, 2021. Prior to joining us, Mr. Keller was the Chief Financial Officer, Secretary and Treasurer of First Choice Health Care Solutions, Inc. since July 2017, a $50 million integrated care platform of non-physician owned orthopedic and spinal care medical centers. He has also served as a member of the board of directors of CryoPoint, LLC, a leader in biorepository services and cryopreservation since April 2012, and as a member of the board of directors of Your Community Bank from May 2013 through December 2017. From November 2015 through July 2017, he was employed by Solution Management Corp, a specialty advisory firm focused on providing financial and operational consulting, as Managing Director. Additionally, from August 2014 through November 2015 he served as the Chief Financial Officer and Senior Vice President of Finance at RehabCare Inc., a $1.5 billion provider of physical, occupational, and speech-language rehabilitation services to hospitals, skilled nursing facilities and home care settings in 47 states. From September 2011 through June 2013, he was Senior Vice President of Finance at PharMerica, Inc. (NYSE: PMC), a $1.8 billion institutional pharmacy, servicing skilled nursing and assisted living facilities, hospitals, and other long-term alternative care facilities. He also served as the Senior Vice President and Chief Accounting Officer of BioScrip, Inc. (NASDAQ: BIOS), a $1.6 billion specialty pharmaceuticals and homecare company providing comprehensive cost-effective solutions to patients, insurance payers and drug manufacturers, from February 2007 through April 2011. From 2000 through 2007 he served as Vice President of Finance, Chief Financial Officer and Treasurer for DMI Furniture Inc. (NASDAQ: DMIF) a $150 million vertically integrated manufacturer, importer and designer of commercial office and residential furniture sold through mass-market retails, wholesalers, and independent retailers. Mr. Keller received his Bachelor of Science in Accountancy from Loyola University of Chicago and is a Certified Public Accountant and Chartered Global Management Accountant.

 

Jenny Lindstrom

 

Ms. Jenny 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 also holds a Sv. Juris Kandidat (Master of Laws, with dissertation) from Uppsala University, Uppsala, Sweden, 2001. There are no familial relationships between Ms. Lindstrom or any of the Company’s current directors or executive officers.

 

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.

 

 

Involvement in Certain Legal Proceedings

 

During the last ten years, none of our Directors, persons nominated to become Directors, or executive officers were subject to any of the following event’s material to an evaluation of the ability or integrity of any such person:

 

 

A petition under the Federal bankruptcy laws or any state insolvency law was filed by or against, or a receiver, fiscal agent or similar officer was appointed by a court for the business or property of such person, or any partnership in which he was a general partner at or within two years before the time of such filing, or any corporation or business association of which he was an executive officer at or within two years before the time of such filing;

     
 

convicted in a criminal proceeding or is a named subject of a pending criminal proceeding (excluding traffic violations and other minor offenses);

       
 

the subject of any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining him from, or otherwise limiting, the following activities:

       
   

Acting as a futures commission merchant, introducing broker, commodity trading advisor, commodity pool operator, floor broker, leverage transaction merchant, any other person regulated by the Commodity Futures Trading Commission, or an associated person of any of the foregoing, or as an investment adviser, underwriter, broker or dealer in securities, or as an affiliated person, director or employee of any investment company, bank, savings and loan association or insurance company, or engaging in or continuing any conduct or practice in connection with such activity;

       
   

Engaging in any type of business practice; or

       
   

Engaging in any activity in connection with the purchase or sale of any security or commodity or in connection with any violation of Federal or State securities laws or Federal commodities laws;

     
 

the subject of any order, judgment or decree, not subsequently reversed, suspended or vacated, of any Federal or State authority barring, suspending or otherwise limiting for more than 60 days the right of such person to engage in any activity described in paragraph (f)(3)(i) Item 401 of Regulation S-K, or to be associated with persons engaged in any such activity;

       
 

found by a court of competent jurisdiction in a civil action or by the SEC to have violated any Federal or State securities law, and the judgment in such civil action or finding by the Commission has not been subsequently reversed, suspended, or vacated;

       
 

found by a court of competent jurisdiction in a civil action or by the Commodity Futures Trading Commission to have violated any Federal commodities law, and the judgment in such civil action or finding by the Commodity Futures Trading Commission has not been subsequently reversed, suspended or vacated;

       
 

the subject of, or a party to, any Federal or State judicial or administrative order, judgment, decree, or finding, not subsequently reversed, suspended or vacated, relating to an alleged violation of:

       
   

Any Federal or State securities or commodities law or regulation; or

       
   

Any law or regulation respecting financial institutions or insurance companies including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease-and-desist order, or removal or prohibition order; or

       
   

Any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or

       
 

the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization (as defined in Section 3(a)(26) of the Exchange Act (15 U.S.C. 78c(a)(26))), any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act (7 U.S.C. 1(a)(29))), or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member.

 

 

Board Committees

 

Our full Board of Directors acts as our Audit Committee. Our Board of Directors has determined that Ronald Riewold, Tom Brodmerkel, Juan Carlos Iturregui and Faraz Naqvi are all “independent” as that term is defined under applicable SEC rules and under the NYSE MKT regulations. Our Board has also determined that each of our independent directors meets the qualifications of an “audit committee financial expert” in accordance with the SEC rules.

 

Our Audit Committee’s responsibilities include: (i) reviewing the independence, qualifications, services, fees, and performance of the independent auditors, (ii) appointing, replacing and discharging the independent auditor, (iii) pre-approving the professional services provided by the independent auditor, (iv) reviewing the scope of the annual audit and reports and recommendations submitted by the independent auditor, and (v) reviewing our financial reporting and accounting policies, including any significant changes, with management and the independent auditor.

 

Our full Board of Directors acts as our Compensation/Stock Option Committee.

 

Our Compensation Committee has responsibility for assisting the Board of Directors with, among other things, evaluating and making recommendations regarding the compensation of our executive officers and directors, assuring that the executive officers are compensated effectively in a manner consistent with our stated compensation strategy, producing an annual report on executive compensation in accordance with the rules and regulations promulgated by the SEC, periodically evaluating the terms and administration of our incentive plans and benefit programs and monitoring of compliance with the legal prohibition on loans to our directors and executive officers.

 

EXECUTIVE COMPENSATION

 

Summary Compensation Table

 

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, 2020 and 2019.

 

Summary Compensation Table

 

                                                         

Nonqualified

                   
                                                 

Non-Equity

   

Deferred

   

All

           
                             

Stock

     

Options

     

Incentive Plan

   

Compensation

   

Other

           

Name and Principal

Position

 

Year

   

Salary

($)

     

Bonus

($)

     

Awards

($)

     

Awards

($)

     

Compensation

($)

   

Earnings

($)

   

Compensation

($)

     

Total

($)

 

Lawrence Diamond

 

2020

(a) (h)

    130,000         -         -         83,387  

(i)

    -       -       -         213,387  
   

2019

(a)

    61,500  

(d)

    17,346  

(e)

    5,693  

(f)

    -         -       -       2,472  

(g)

    87,011  
                                                                                 

Julie R. Smith

 

2020

(b)

    79,700         -         -         -         -       -       51,500  

(c)

    131,200  
   

2019

(a)

    61,500  

(d)

    17,346  

(e)

    5,693  

(f)

    -         -       -       2,472  

(g)

    87,011  

 

(a)

Does not include compensation as a Director.

(b)

Resigned effective July 1, 2020.

(c)

Consists of an overpayment as part of final payroll settlement for which the Company is seeking reimbursement.

(d)

Includes $28,846 paid in cash and $32,654 paid in Series X Preferred Stock.

(e)

Paid by the issuance of Series X Preferred Stock.

(f)

Represents the pro-rata amount charged to operations during the period in connection with the vesting of 1,000,000 shares of common stock with an aggregate market value of $27,400 on the date of the grant.

(g)

Consists of the employee portion of payroll tax paid by the Company on behalf of the officer. These amounts were accrued during the year ended December 31, 2019 and paid in January 2020.

(h)

Does not include $120,000 of salary accrued but not paid during the year.

(i)

Consists of the fair value of 2,500,000 stock options which were granted and vested during the year.

 

 

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 1,000,000 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.

 

Phillip J. Keller, Chief Financial Officer

 

Effective March 17, 2021, the Company entered into an employment agreement with Mr. Phillip J. Keller for his services as our Chief Financial Officer (the “Keller Agreement”). Pursuant to the Keller Agreement the Company has agreed to pay Mr. Keller a base salary of $250,000, payable in accordance with the Company’s standard payroll procedures. In addition, Mr. Keller will be eligible to receive a bonus target of 25% of his base salary, at the sole discretion of the Compensation Committee of the Board. Mr. Keller’s base compensation shall accrue until such time as the Company has sufficient funding. Additionally, pursuant to the Keller Agreement, Mr. Keller has been awarded options to purchase up to 1 million shares of the Company’s common stock at an exercise price equal to $0.31, which was the closing stock price as of March 17, 2021, and issued pursuant to the Mitesco, Inc. 2021 Omnibus Securities and Incentive Plan. The Options vest pursuant to the following schedule: (a) 250,000 of the options shall vest upon the 90-day anniversary of the effective date of the Keller Agreement, (b) 250,000 of the options shall vest upon the Company’s completion of a $10 million raise, (c) 250,000 of the options shall vest on the one-year anniversary of the effective date of the Keller Agreement, and (d) 250,000 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 Keller Agreement is effective from March 17, 2021 until the earlier of Mr. Keller’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, Mr. Keller will only be entitled to compensation owed through the date of termination and all Options that have not yet vested will be cancelled. The Keller Agreement also contains customary non-disclosure, non-compete and confidentiality provisions.

 

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 $0.31, 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) 250,000 of the options shall vest upon the 90-day anniversary of the effective date of the Lindstrom Agreement, (b) 250,000 of the options shall vest upon the Company’s completion of a $10 million raise, (c) 250,000 of the options shall vest on the one-year anniversary of the effective date of the Lindstrom Agreement, and (d) 250,000 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 as of December 31, 2020

 

The following table shows for the fiscal year ended December 31, 2020, certain information regarding outstanding equity awards at fiscal year-end for the Named Executive Officers.

 

Name

 

Grant Date

 

Securities Underlying Unexercised Options (#) Exercisable

   

Number of Securities Underlying Unexercised Options (#) Unexercisable

   

Option Exercise Price ($)

   

Option Exercise Date

 

Lawrence Diamond (a)

 

February 27, 2020

   

1,500,000

     

-

   

$0.03

   

February 27, 2030

 
   

December 27, 2020

   

1,000,000

     

-

   

$0.03

   

December 27, 2030

 

Julie R. Smith (b)

 

February 27, 2020

   

-

     

-

     

-

   

-

 

 

(a) On December 28, 2020, the vesting of Mr. Diamond’s options was accelerated to December 31, 2020.

(b) On February 27, 2020, Ms. Julie R. Smith was granted options to purchase an aggregate of 1.5 million shares of common stock all of which have been forfeited pursuant to the terms of Ms. Smith’s option awards, upon her resignation effective July 1, 2020.

 

Director Compensation

 

The following table sets forth, for the year ended December 31, 2020, 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.

 

Name

   

Fees Earned or

Paid in Cash

($)

   

Stock Awards

($)

   

Options Awards

($)

     

Non-Equity Incentive Plan Compensation

($)

   

Nonqualified Deferred Compensation Earnings

($)

   

All Other

Compensation

($)

   

Total

($)

 

Ronald Riewold

    50,000       -       41,627  

(a)

    -       --               91,627  

Thomas Brodmerkel

    30,000       -       41,627  

(a)

    -       -       -       71,627  

Dr. H. Faraz Naqvi

(b)

    12,500       -       30,925  

(a)

    -       -       -       43,425  

Juan Carlos Iturregui

(c)

    12,500       -       58,802  

(a)

    -       -       -       71,302  

 

(a)

Consists of options to purchase 1,100,000 shares of common stock.

(b)

Dr. H. Faraz Naqvi was appointed to the Board of Directors on July 13, 2020.

(c)

Mr. Juan Carlos Iturregui Esq was appointed to the Board of Directors on July 31, 2020.

(d)

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.

 

 

Name

 

Number of Subject to Outstanding Options as of December 31, 2020

 

Ronald Riewold

   

1,100,000

 

Thomas Brodmerkel

   

1,100,000

 

Dr. H. Faraz Naqvi

   

1,100,000

 

Juan Carlos Iturregui

   

1,100,000

 

 

Outstanding Equity Awards at Fiscal Year-Ended December 31, 2020

 

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 25,000,000 shares of stock awards have been approved for issuance under the 2021 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 approved by security holders

    -       -       -  

Equity compensation plans not approved by security holders

    14,648,879     $ 0.053       10,351,121  

Total

    14,648,879     $ 0.053       10,351,121  

 

 

MARKET FOR REGISTRANTS COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

 

Our common stock is quoted on the Over-the-Counter Bulletin Board (“OTCBB”) and the OTCQB under the symbol “MITI”.

 

On April 19, 2021, the price of our common stock as reported on the OTCQB was $0.2848 and we have approximately 552 holders of record of our common stock, and a total of 9,460 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.

 

Dividends

 

The Company has never declared or paid any cash dividends on its common stock. We have never paid cash dividends on our common stock. Under 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 the Company’s common stock are entitled to receive only such dividends (cash or otherwise) as may be declared by the Company’s Board of Directors.

 

On December 31, 2020, the Company 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 20,000 votes per share and votes with the Company’s common stock.

 

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 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. 

 

Equity Compensation Plans

 

For information on the Company’s equity compensation plans, see “Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.”

 

 

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 $120,000; 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.

 

 

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 2,151,204 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 262,478 shares in the amount of $8,000 were issued to officers and directors; 1,025,514 shares in the amount of $31,528 were issued to a consultant; and 863,212 shares in the amount of $26,310 were issued to non-related parties.

 

Director Independence

 

Our Board of Directors has determined that Ronald Riewold, Tom Brodmerkel, Juan Carlos Iturregui, and Faraz Naqvi are all “independent” as that term is defined under applicable SEC rules and regulations.

 

Potential Conflicts of Interest

 

Since we did not have an Audit Committee or Compensation Committee comprised of independent directors, the functions that would have been performed by such committees were performed by our directors. Thus, there was an inherent conflict of interest.

 

 

PRINCIPAL STOCKHOLDERS

 

The following table sets forth certain information as of April 16, 2021, regarding the beneficial ownership of our common 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. The table below also includes the total voting power controlled by each such group of our voting stock. On April 16, 2021, we had 203,888,660 shares of common stock issued and outstanding, 26,227 shares of Series X Preferred Stock issued and outstanding and 3,000,000 shares of Series C Preferred Stock, with each share of Series C Preferred Stock entitling the holder thereof to . Unless otherwise indicated, the address of each of the stockholders listed is 7535 East Hampden Avenue, Suite 400, Denver, CO 80231.

 

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

   

Percentage of Total Voting Power (10)

 

Directors and Officers

                                                       

Ronald Riewold (Director)(1)

    2,198,431       1.1

%

    1,200       4.6

%

                    3.53

%

Tom Brodmerkel (Director)(2)

    1,100,000       *

%

    -       --                       *  

Larry Diamond (Director, Officer)(3)

    4,664,047       2.3

%

    2,000       7.6

%

                    6.00

%

Juan Carlos Iturregui (Director)(4)(5)

    2,125,514       1.04

%

    12,503       47.6

%

                    33.98

%

Faraz Naqvi (Director)(2)

    1,100,000       *       --       --                       *

%

Julie R. Smith**

    1,959,163       1.0

%

    2,000       7.6

%

                    5.65

%

Current Executive Officers and Directors as a group (7 Persons)(6)

    11,437,992       5.4

%

    15,703       59.9

%

                    43.5

%