Item 1. Business
ITEM 1. BUSINESS
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. On April 24, 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 5 to 7 clinics in the Twin Cities area of Minnesota and then continue expansion in the Denver, Colorado area. We target to open clinics in residential concentrations of population to enhance the convenience, 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. 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.
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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:
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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.
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Rebecca Hafner-Fogarty , MD, MBA, FAAFP is the Chief Medical Officer. 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.
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Kevin Lee Smith DNP, FNP, FAANP is the Chief Nurse Practitioner Officer 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
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Jim “ Woody ” Woodburn , MD, MS is the President & Chief Operating Officer 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
On February 1, 2021, we opened our first clinic in Northeast Minneapolis, Minnesota.
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 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.
Target Locations
We are in the process of identifying strategic new locations for The Good Clinic TM facilities. We anticipate initial expansion of 5 to 8 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.
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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 3 sizes. They are planned to be 3,000 – 3,500 square feet with 3 to 5 nurse practitioners, 1,250 – 2,000 square feet with 2 to 3 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:
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Full-spectrum family practice services;
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Flu and other vaccines;
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Advanced Electronic Medical Records (EMR) that enables rapid, accurate and consistent medical documentation and protocols, safety features, follow-up planning and billing information;
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Drug Testing;
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Wellness programs and lifestyle education;
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Nutritional planning and weight control programs;
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Laboratory services including on-site testing and referral testing to major outsource lab companies;
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Blood pressure, temperature, pulse rates, EKG and pulmonary testing;
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Women’s Health; and
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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 client’s 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.
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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.
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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.
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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 in “Item 10. Directors, Executive Officers, and Corporate Governance” of this Annual Report on Form 10-K.
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 and Phillip Keller serves as our Chief Financial Officer. Our subsidiary, The Good Clinic, LLC, employs three people in professional positions and 4 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.
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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 heavily 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 Annual Report.
Other Corporate Information
Our website is located at www.mitescoinc.com. 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 Annual Report.
Our filings are 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.