Mitesco, Inc. 10-K

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA MITESCO, INC. INDEX TO THE CONSOLIDATED FINANCIAL STATEMENTS PAGE 48 REPORTS OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMS (PCAOB 587 ) 49 CONSOLIDATED BALANCE SHEETS 50 CONSOLIDATED STATEMENTS OF OPERATIONS 51 CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT) 52 CONSOLIDATED STATEMENTS OF CASH FLOWS 54 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 47 Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Stockholders of Mitesco, Inc. and subsidiaries Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Mitesco, Inc. and subsidiaries (the Company) as of December 31, 2021 and 2020, and the related consolidated statements of operations, stockholders’ equity (deficit) and cash flows for the two years ended December 31, 2021, and the related notes (collectively referred to as the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the consolidated results of its operations and its cash flows for the two years then ended December 31, 2021, in conformity with accounting principles generally accepted in the United States of America. The Company's Ability to Continue as a Going Concern The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the consolidated financial statements, the Company has an accumulated deficit, recurring losses, and expects continuing future losses that raises substantial doubt about the Company’s ability to continue as a going concern. Management's evaluation of the events and conditions and management’s plans regarding these matters are also described in Note 2. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. Basis for Opinion These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matters: Critical audit matters are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements, and (2) involved our especially challenging, subjective, or complex judgments. We determined that there are no critical audit matters. RBSM LLP We have served as the Company’s auditor since 2020. Henderson, NV April 4, 2022 48 Table of Contents MITESCO, INC. CONSOLIDATED BALANCE SHEETS December 31, December 31, ASSETS 2021 2020 Current assets Cash and cash equivalents $ 1,164,483 $ 64,789 Accounts receivable 44,313 - Inventory 25,314 - Prepaid expenses 72,985 - Total current assets 1,307,095 64,789 Right to use operating leases, net 3,886,866 310,361 Construction in progress 1,984,701 417,082 Fixed assets, net of accumulated depreciation of $ 183,988 and $ 19,590 3,476,164 6,282 Total Assets $ 10,654,826 $ 798,514 LIABILITIES AND (DEFICIENCY IN) STOCKHOLDERS' EQUITY Current liabilities Accounts payable and accrued liabilities 3,976,064 1,069,331 Accrued interest 7,657 137,522 Derivative liabilities - 807,682 Lease liability - operating leases, current 161,838 8,905 Notes Payable, net of discount 588,432 - Convertible notes payable, net of discount of $ 0 and $ 317,405 - 317,405 Convertible note payable, in default - 122,166 SBA Loan Payable 460,406 460,406 Other current liabilities 169,422 95,256 Preferred stock dividends payable 195,169 9,967 Total current liabilities 5,558,988 3,028,640 Lease Liability- operating leases, non-current 3,972,964 312,099 Total Liabilities $ 9,531,952 $ 3,340,739 Commitments and contingencies - - Stockholders' equity (deficit) Preferred stock, $0.01 par value, 100,000,000 shares authorized; 500,000 shares designated Series A; 3,000,000 shares designated Series C; 10,000,000 shares designated as Series D Preferred Stock and 400,000 shares designated Series X: - Preferred stock, Series A, $ 0.01 par value, 0 and 4,800 shares issued and outstanding as of December 31, 2021 and 2020, respectively - 48 Preferred stock, Series C, $ 0.01 par value, 940,644 and 0 shares issued and outstanding as of December 31, 2021 and 2020, respectively 9,406 - Preferred stock, Series D, $ 0.01 par value, 3,100,000 and 0 shares issued and outstanding as of December 31, 2021 and 2020, respectively 31,000 - Preferred stock, Series X, $ 0.01 par value, 24,227 and 26,227 shares issued and outstanding at December 31, 2021 and 2020, respectively 242 262 Common stock subscribed 132,163 - Common stock, $ 0.01 par value, 500,000,000 shares authorized, 213,333,170 and 155,381,183 shares issued and outstanding as of December 31, 2021 and 2020, respectively 2,133,332 1,553,812 Additional paid-in capital 24,295,063 10,340,821 Accumulated deficit ( 25,478,332 ) ( 14,437,168 ) Total stockholders' equity (deficit) 1,122,874 ( 2,542,225 ) Total liabilities and stockholders' equity (deficit) $ 10,654,826 $ 798,514 The accompanying notes are an integral part of these audited consolidated financial statements. 49 Table of Contents MITESCO, INC. CONSOLIDATED STATEMENTS OF OPERATIONS For the Year For the Year Ended Ended December 31, December 31, 2021 2020 Revenue $ 115,994 $ - Cost of goods sold 455,587 - Gross loss ( 339,593 ) - Operating expenses: General and administrative 6,058,996 2,533,569 Total operating expenses 6,058,996 2,533,569 Net Operating Loss ( 6,398,589 ) ( 2,533,569 ) Other income (expense): Interest expense ( 968,471 ) ( 1,515,902 ) Loss on legal settlement ( 70,000 ) - Gain on settlement of accounts payable 6,045 399,761 Gain on settlement of accrued salary - 6,988 Gain on settlement of notes payable 1,836 35,236 Gain on settlement of warrants - 235,053 Grant Income - 3,000 (Loss) Gain on revaluation of derivative liabilities ( 493,455 ) 508,839 Total other expense ( 1,524,045 ) ( 327,025 ) Loss before provision for income taxes ( 7,922,634 ) ( 2,860,594 ) Provision for income taxes - - Net loss $ ( 7,922,634 ) $ ( 2,860,594 ) Preferred stock dividends ( 185,202 ) ( 75,535 ) Preferred stock deemed dividends ( 3,118,530 ) - Net loss available to common shareholders $ ( 11,226,366 ) $ ( 2,936,129 ) Net loss per share - basic and diluted $ ( 0.06 ) $ ( 0.03 ) Weighted average shares outstanding - basic and diluted 203,000,201 105,177,272 The accompanying notes are an integral part of these audited consolidated financial statements. 50 Table of Contents MITESCO, INC. CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS ’ EQUITY (DEFICIT) FOR THE TWELVE MONTHS ENDED DECEMBER 31, 2021 and 2020 Preferred Stock Series A Preferred Stock Series C Preferred Stock Series D Preferred Stock Series X Common Stock Additional Paid-in Common Stock Accumulated Shares Amount Shares Amount Shares Amount Shares Amount Shares Amount capital Subscribed Deficit Total Balance, December 31, 2019 - $ - - $ - - $ - 26,227 $ 262 81,268,443 $ 812,684 $ 8,407,977 $ 37,186 $ ( 11,576,574 ) $ ( 2,318,465 ) Vesting of common stock issued to employees - - - - - - - - - - 67,623 - - 67,623 Vesting of stock options issued to employees - - - - - - - - - - 421,502 - - 421,502 Common stock issued for accrued salaries - - - - - - - - 386,985 3,869 17,787 - - 21,656 Common stock issued for services - - - - - - - - 200,000 2,000 5,680 - - 7,680 Settlement of derivative liabilities - - - - - - - - 7,999,996 80,000 380,562 - - 460,562 Gain on settlement of stock payable - - - - - - - - - - - ( 37,186 ) - ( 37,186 ) Common stock issued for conversion of notes payable and accrued interest - - - - - - - - 63,374,555 633,748 999,658 - - 1,633,406 Issuance of Preferred A stock to consultants 4,800 48 - - - - - - - - 71,510 71,558 Preferred stock dividends, $ 3.62 per share ( 10 % of stated value per year) - - - - - - - - - - ( 75,535 ) - - ( 75,535 ) Issuance of Preferred X stock for dividends payable - - - - - - - - 2,151,204 21,511 44,057 - - 65,568 Loss for the year ended December 31, 2020 - - - - - - - - - - - - ( 2,860,594 ) ( 2,860,594 ) Balance, December 31, 2020 4,800 $ 48 - $ - - $ - 26,227 $ 262 155,381,183 $ 1,553,812 $ 10,340,821 $ - $ ( 14,437,168 ) $ ( 2,542,225 ) Balance, December 31, 2020 4,800 $ 48 - $ - - $ - 26,227 262 155,381,183 1,553,812 10,340,821 - ( 14,437,168 ) ( 2,542,225 ) Vesting of common stock issued to employees - - - - - - - - - - 13,032 - - 13,032 Vesting of stock options issued to employees - - - - - - - - - - 676,423 - - 676,423 Common stock issued for services - - - - - - - - 1,099,320 10,963 211,517 - - 222,480 Common stock issued for conversion of notes payable and accrued interest - - - - - - - - 33,944,157 339,442 2,314,353 - - 2,653,795 Sale of common stock in private placement - - - - - - - - 6,672,000 66,750 1,601,250 - - 1,668,000 Sale of Preferred Stock Series C - - 3,000,000 30,000 - - - - - - 1,461,283 - - 1,491,283 Warrants issued with Preferred Stock Series C - - - - - - - - - - 1,268,717 - - 1,268,717 Sale of Preferred Stock Series D - - - - 3,100,000 31,000 - - - - 1,688,018 - - 1,719,018 Warrants issued with Preferred Stock Series D - - - - - - - - - - 1,179,682 - - 1,179,682 Conversion of Preferred Stock Series A to common stock ( 4,800 ) ( 48 ) - - - - - - 600,000 6,000 ( 5,952 ) - - - Shares issued for exercise of stock options - - - - - - - - 8,281,668 82,816 156,184 - - 239,000 Net shares issued in connection with settlement agreement - - - - - - ( 2,000 ) ( 20 ) ( 1,362,047 ) ( 13,620 ) 141,550 - - 127,910 Shares of common stock issued for conversion of Preferred Stock Series C - - ( 2,059,356 ) ( 20,594 ) - - - - 8,237,425 82,374 ( 61,780 ) - - - Common stock subscribed for accounts payable and accrued liabilities - - - - - - - - - - - 252,029 - 252,029 Stock issued from common stock subscribed - - - - - - - - 479,464 4,795 115,071 ( 119,866 ) - - Deemed dividend on conversion of Preferred Stock Series A to common stock - - - - - - - - - - 206,242 - ( 206,242 ) - Deemed dividend on Preferred Stock Series C - - - - - - - - - - 126,000 - ( 126,000 ) - Deemed dividend on Preferred Stock Series D - - - - - - - - - - 2,786,288 - ( 2,786,288 ) - Preferred stock dividends, $ 3.62 per share ( 10 % of stated value per year) - - - - - - - - - - ( 185,202 ) - - ( 185,202 ) Warrants issued with note payable - - - - - - - - - - 261,568 - - 261,568 Loss for the year ended December 31, 2021 - - - - - - - - - - - - ( 7,922,634 ) ( 7,922,634 ) Balance, December 31, 2021 - $ - 940,644 $ 9,406 3,100,000 $ 31,000 24,227 $ 242 213,333,170 $ 2,133,332 $ 24,295,063 $ 132,163 $ ( 25,478,332 ) $ 1,122,874 The accompanying notes are an integral part of these audited consolidated financial statements. 51 Table of Contents MITESCO, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS For the Year For the Year Ended Ended December 31, December 31, 2021 2020 CASH FLOWS FROM OPERATING ACTIVITIES Net loss $ ( 7,922,634 ) $ ( 2,860,594 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation 182,426 1,572 Preferred A stock issued to consultants - Amortization of right-to-use asset 162,276 4,318 Net gain on settlement of notes payable - ( 35,236 ) Gain on settlement of accounts payable - ( 399,761 ) Gain on conversion of accrued salary - ( 6,988 ) (Gain) on settlement of warrants - ( 235,053 ) Loss on conversion of Pref Stock Series A to common stock - - Gain (Loss) on revaluation of derivative liabilities 493,455 ( 508,839 ) Derivative expense - 125,869 Amortization of loan fees - 30,000 Amortization of discount on notes payable 756,795 1,128,885 Share-based compensation 1,039,843 568,363 Changes in assets and liabilities: Accounts receivables ( 44,313 ) - Prepaid expenses ( 47,985 ) 9,721 Due from related party - - Inventory ( 25,314 ) - Accounts payable and accrued liabilities 54,527 522,758 Operating lease liability 75,017 6,325 Other current liabilities 74,166 2,488 Accrued interest 205,795 125,310 Net cash used in operating activities ( 4,995,946 ) ( 1,520,862 ) CASH FLOWS FROM INVESTING ACTIVITIES Cash paid for acquisition of fixed assets ( 1,928,192 ) - Net cash used in investing activities ( 1,928,192 ) - CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from private placement of common stock 1,668,000 - Proceeds from sales of Series C Preferred Stock, net of fees 2,760,000 - Proceeds from sales of Series D Preferred Stock, net of fees 2,873,700 - Proceeds from notes payable, net of discount - 1,673,406 Proceeds from sale of common stock 51,500 - Proceeds from convertible notes payable, net of discount 850,000 - Principal payments on notes payable ( 179,368 ) ( 171,000 ) Net cash provided by financing activities 8,023,832 1,502,406 Net increase in cash and cash equivalents 1,099,694 ( 18,456 ) Cash and cash equivalents at beginning of period 64,789 83,245 Cash and cash equivalents at end of period $ 1,164,483 $ 64,789 The accompanying notes are an integral part of these audited consolidated financial statements. 52 Table of Contents MITESCO, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS For the Year For the Year Ended Ended December 31, December 31, 2021 2020 SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Interest paid $ 2,680 $ 2,680 NON-CASH INVESTING AND FINANCING ACTIVITIES: Stock issued for conversion of debt and accrued interest $ - $ 1,633,406 Settlement of derivative liabilities $ ( 1,301,137 ) $ - Discount on notes payable due to derivative liabilities $ - $ 1,234,792 Preferred stock dividend $ - $ 65,568 Deemed dividends on Preferred Stock $ 3,118,530 $ - Settlement of derivative liabilities $ - $ 460,562 Conversion of Series A Preferred stock to common stock $ 6,000 $ - Conversion of Series C Preferred stock to common stock $ 61,781 $ - Conversion of accounts payable to common stock $ 102,333 $ - Conversion of accrued payroll to common stock $ 50,000 $ - Conversion of accounts payable to common stock subscribed $ 252,029 $ - Cashless exercise of warrants $ - $ 290,000 Discount on note payable due to warrants $ 261,568 $ - Capital expenditures in accounts payable $ 3,291,735 $ - The accompanying notes are an integral part of these audited consolidated financial statements. 53 Table of Contents MITESCO, INC. Notes to Consolidated Financial Statements December 31, 2021 and 2020 Note 1 – Description of Business Company Overview Mitesco, Inc. (the “Company,” “we,” “us,” or “our”) was formed in the state of Delaware on January 18, 2012. On December 9, 2015, we restructured our operations and acquired Newco4pharmacy, LLC, a development stage company which sought to acquire compounding pharmacy businesses. As a part of the restructuring, we completed a “spin out” of our former business line. On April 24, 2020, we changed our name to Mitesco, Inc. Since 2020, our operations have focused on establishing medical clinics utilizing Nurse Practitioners under The Good Clinic name and development and acquisition of telemedicine technology. In March of 2020, we formed an owned subsidiary, Mitesco NA LLC, which holds The Good Clinic LLC, a Colorado limited liability company for our clinic business. The Company had previously established a strategy to address opportunities in Europe seeking technology solutions, or financing situations, through a Dublin based subsidiary, Acelerar Healthcare Holdings Ltd. After a review of its near-term opportunities in North America, the Board of Directors has determined that any efforts in the European community should be discontinued so that it can best focus on its North American operations. In conjunction with this decision the Company for the period ending December 31, 2021, we will take a one-time charge of $12,500 related to the discontinuation and wind down of our European efforts. We opened our first The Good Clinic in Minneapolis, Minnesota in the first quarter of 2021 and have six operating at the time of this filing. We have two additional sites under contract with build-out underway in the Denver metropolitan areas before the end of 2022. We are making plans for up to opening up to 50 new clinics in the next three years, in addition to any existing sites we might acquire. Note 2 - Financial Condition, Going Concern and Management Plans On November 19, 2021, the Company closed a bridge financing round totaling $ 3.1 million of a Series D preferred stock sold to investors in a private placement. Each Series D Unit will have a purchase price of $ 1.00 per Unit, with each Unit consisting of (a) one share of a newly formed Series D Convertible Preferred Stock, par value $ 0.01 per share (the “Series D Preferred Stock”), (b) one warrant (the “Series A Warrants”) to purchase 2.1 shares of the Company’s Common Stock at a purchase price of $0.50 per whole share of Common Stock, and (c) one warrant (the “Series B Warrants” and together with the Series A Warrants, the “Warrants”) to purchase 2.1 shares of Common Stock at a purchase price of $0.75 per whole share . Pursuant to the Certificate of Designations, Preferences and Rights of the Series D Convertible Preferred Stock of the Company, Inc., filed with the Secretary of State of the State of Delaware on October 18, 2021 (the “COD”), there are 10,000,000 shares of the Company’s preferred stock that have been designated as the Series D Preferred Stock and each share of the Series D Preferred Stock is convertible at the option of the holder thereof, or automatically upon the request of the Company’s underwriters that the Series D Preferred Stock convert to shares of Common Stock or upon listing of the Company’s Common Stock on a national securities exchange. The number of shares of Common Stock issuable upon the conversion of each share of Series D Preferred Stock is calculated by dividing the Conversion Amount (defined in the COD as the Stated Value, $ 1.05 per share, plus accrued and unpaid dividends) by the $ 0.25 conversion price (the “Conversion Price”). As of the date of this filing the Company has closed on $ 3,100,000 of its Series D Preferred stock. To achieve our growth strategy, it is anticipated the Company will need to raise additional financing prior to up listing on Nasdaq. We will not proceed with this offering in the event our Common Stock is not approved for listing on the Nasdaq Capital Market though we will continue to seek financing for our expansion and operating needs in the debt or equity markets. 54 Table of Contents Mitesco, Inc. (the “Company”) issued a 10% Promissory Note due June 30, 2022 (the “Note”), dated December 30, 2021, to the Michael C. Howe Living Trust (the “Lender”). Michael C. Howe is the Chief Executive Officer of the Good Clinic LLC, one of our subsidiaries. The principal amount of the Note is $ 1,000,000 , carries a 10% interest rate per annum, payable in monthly installments, and has a maturity date that is the earlier of (i) six (6) months from the date of execution, or (ii) the date on which the Company successfully lists its shares of common stock on Nasdaq or NYSE. The purchase price of the Note payable to the Company for the Note was $ 850,000 and was funded on December 30, 2021. The amount payable at maturity will be $ 1,000,000 plus 10 % of that amount plus any accrued and unpaid interest. Following an event of default, as defined in the Note, the principal amount shall bear interest for each day until paid, at a rate per annum equal to the lesser of the maximum interest permitted by applicable law and 18 %. The Note contains a “most favored nations” clause that provides that, so long as the Note is outstanding, if the Company issues any new security, which the Lender believes contains a term that is more favorable than those in the Note, the Company shall notify the Lender of such term, and such term, at the option of the Lender, shall become a part of the Note. The Company entered into a debt-for-equity exchange agreement with Gardner Builders Holdings, LLC (the “Creditor”) on January 7, 2022 (the “Agreement”). Pursuant to the Agreement, the Company issued shares of restricted common stock, par value $ 0.01 per share, of MITI (the “Restricted Shares”) to the Creditor in exchange for the Company Debt Obligations, as defined below. The Agreement settles for certain accounts payable amounts owed by the Company to the Creditor (the “Accounts Payable Amount”) as well as upcoming amounts that will become due between the date of the Agreement and April 1, 2022. The Agreement also settles incurred interest and penalties on the amounts due through January 5, 2022, as well as future interest payments on amounts to be incurred in the first quarter of 2022 (collectively, the “Additional Costs”, and combined with the Accounts Payable Amount, the “Company Debt Obligations”). The Accounts Payable Amount is $ 500,000 , the Additional Costs is $ 294,912.56 and the conversion price is $ 0.25 . As a result, 3,179,650 Restricted Shares were authorized to be issued. The Company’s Board of Directors approved the Agreement on January 5, 2022. As of December 31, 2021, the Company had cash and cash equivalents of $ 1.2 million, current liabilities of $ 5.6 million, and has incurred a loss from operations. The Company’s principal operation is the development and deployment of software and systems for the healthcare marketplace. The Company intends to a) develop and own primary care clinics operated by nurse practitioners, b) develop and acquire telemedical technologies, and c) evaluate other healthcare related opportunities both domestically and on an international basis. The Company’s activities are subject to significant risks and uncertainties, including failing to secure additional funding to execute its business plan. As a result of these factors, there is substantial doubt about the ability of the Company to continue as a going concern for one year from the date the financial statements are issued. The Company’s continuance is dependent on raising capital and generating revenues sufficient to sustain operations. The Company believes that the necessary capital will be raised and has entered discussions to do so with certain individuals and companies. However, as of the date of these consolidated financial statements, no formal agreement exists. The accompanying consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts classified as liabilities that might be necessary should the Company be forced to take any such actions. PPP Loan During March 2020, in response to the COVID-19 crisis, the federal government announced plans to offer loans to small businesses in various forms, including the Payroll Protection Program, or "PPP", established as part of the Corona Virus Aid, Relief and Economic Security Act (“CARES Act”) and administered by the U.S. Small Business Administration. On April 25, 2020, the Company entered an unsecured Promissory Note (the “Note”) with Bank of America for a loan in the original principal amount of approximately $ 460,000 , and the Company received the full amount of the loan proceeds on May 4, 2020. The current balance is $ 460,406 and the Company is currently in discussions for a) a partial forgiveness and b) the conversion of any remaining balance into a term note. 55 Table of Contents COVID -19 Impact The Company has had some impact on its operations because of the effects of the COVID-19 pandemic, primarily with accessibility to staffing, consultants and in the capital markets, and it is adjusting as needed within its available resources. The Company will continue to assess the effect of the pandemic on its operations. The extent to which the COVID-19 pandemic will continue to impact the Company’s business and operations will depend on future developments that are highly uncertain and cannot be predicted with confidence, such as the ultimate geographic spread of the disease, the duration of the outbreak, the duration and effect of possible business disruptions and the short-term effects and ultimate effectiveness of the travel restrictions, quarantines, social distancing requirements and business closures in the United States and other countries to contain and treat the disease. While the potential economic impact brought by, and the duration of, COVID-19 may be difficult to assess or predict, a widespread pandemic could result in significant disruption of global financial markets, reducing the Company’s ability to access capital, which could in the future negatively affect the Company’s liquidity. In addition, a recession or market correction resulting from the spread of COVID-19 could materially affect the Company’s business and the value of its securities. Note 3 – Summary of Significant Accounting Policies Basis of Accounting – The consolidated financial statements are prepared in conformity with accounting principles accepted in the United States of America (“GAAP”). Principles of Consolidation – The accompanying consolidated financial statements include the accounts of Mitesco, Inc., and its owned subsidiaries Mitesco NA, LLC, The Good Clinic, LLC, and Acelerar Healthcare Holdings, LTD. In addition, we anticipate that we will rely on the operating activities of certain legal entities in which we will not maintain a controlling ownership interest but over which we will have indirect influence and of which we will be considered the primary beneficiary. These entities are typically subject to nominee ownership and transfer restriction agreements that effectively transfer the majority of the economic risks and rewards of their ownership to the Company. The Company’s management, restriction and other agreements concerning such nominee-owned entities typically includes both financial terms and protective and participating rights to the entities’ operating, strategic and non-clinical governance decisions which transfer substantial powers over and economic responsibility for these entities to the Company. As such, the Company applies the guidance of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 810 – Consolidation (“ASC 810”), to determine when an entity that is insufficiently capitalized or not controlled through its voting interests, referred to as a variable interest entity should be consolidated. All intercompany balances and transactions have been eliminated. Use of Estimates - The preparation of these financial statements requires our management to make estimates and assumptions about future events that affect the amounts reported in the financial statements and related notes. Future events and their effects cannot be determined with absolute certainty. Therefore, the determination of estimates requires the exercise of judgment. Cash - The Company considers all highly liquid investments with maturities of three months or less to be cash equivalents. The Company had cash and cash equivalents of $ 1.2 million and $ 0.1 million as of December 31, 2021 and 2020. Property, Plant, and Equipment - Property and equipment is recorded at the lower of cost or estimated net recoverable amount and is depreciated using the straight-line method over its estimated useful life. Property acquired in a business combination is recorded at estimated initial fair value. Property, plant, and equipment are depreciated using the straight-line method based on the lesser of the estimated useful lives of the assets or the lease term based upon the following life expectancy: Years Office equipment 3 to 5 Furniture & fixtures 3 to 7 Machinery & equipment 3 to 10 Leasehold improvements Term of lease Construction in Progress - Costs for capital assets not yet placed into service are capitalized as construction in progress on the consolidated balance sheets and will be depreciated once placed into service. Revenue Recognition – On January 1, 2018, the Company adopted the new revenue recognition accounting standard issued by the Financial Accounting Standards Board (“FASB”) and codified in the ASC as Topic 606 (“ASC 606”). The revenue recognition standard in ASC 606 outlines a single comprehensive model for recognizing revenue as performance obligations, defined in a contract with a customer as goods or services transferred to the customer in exchange for consideration, are satisfied. The standard also requires expanded disclosures regarding the Company’s revenue recognition policies and significant judgments employed in the determination of revenue. 56 Table of Contents The Company applied the modified retrospective approach to all contracts when adopting ASC 606. As a result, at the adoption of ASC 606 what was previously classified as the provision for bad debts in the statement of operations is now reflected as implicit price concessions (as defined in ASC 606) and therefore included as a reduction to net operating revenues in 2018. For changes in credit issues not assessed at the date of service, the Company will prospectively recognize those amounts in other operating expenses on the statement of operations. For periods prior to the adoption of ASC 606, the provision for bad debts has been presented consistent with the previous revenue recognition standards that required it to be presented separately as a component of net operating revenues. Our revenues generally relate to net patient fees received from various payers and patients themselves under contracts in which our performance obligations are to provide services to the patients. Revenues are recorded during the period our obligations to provide services are satisfied. The contractual relationships with patients, in most cases, also involve a third-party payer (Medicare, Medicaid, managed care health plans and commercial insurance companies, including plans offered through the health insurance exchanges) and the transaction prices for the services provided are dependent upon the terms provided by (Medicare and Medicaid) or negotiated with (managed care health plans and commercial insurance companies) the third-party payers. The payment arrangements with third-party payers for the services we provide to the related patients typically specify payments at amounts less than our standard charges and generally provide for payments based upon predetermined rates for services or discounted fee-for-service rates. Management continually reviews the contractual estimation process to consider and incorporate updates to laws and regulations and the frequent changes in managed care contractual terms resulting from contract renegotiations and renewals. Stock-Based Compensation - We recognize the compensation costs of share-based compensation arrangements based on the grant-date fair value and recognize the costs in the financial statements over the period during which employees are required to provide services. Share-based compensation cost for stock options are estimated at the grant date based on each option’s fair-value as calculated by the Black-Scholes-Merton (“BSM”) option-pricing model. Share-based compensation arrangements may include stock options, restricted share plans, performance-based awards, share appreciation rights and employee share purchase plans. Such compensation amounts, if any, are amortized over the respective vesting periods of the option grant. Equity instruments issued to those other than employees are recognized pursuant to FASB issued ASU 2018-07, Compensation – Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting. This ASU relates to the accounting for non-employee share-based payments. The amendment in this update expands the scope of Topic 718 to include all share-based payment transactions in which a grantor acquired goods or services to be used or consumed in a grantor’s own operations by issuing share-based payment awards. The ASU excludes share-based payment awards that relate to: (1) financing to the issuer; or (2) awards granted in conjunction with selling goods or services to customers as part of a contract accounted for under Topic 606, Revenue from Contracts from Customers. The share-based payments are to be measured at grant-date fair value of the equity instruments that the entity is obligated to issue when the goods or service has been delivered or rendered and all other conditions necessary to earn the right to benefit from the equity instruments have been satisfied. This standard will be effective for public business entities for fiscal years beginning after December 15, 2018, including interim periods within that fiscal year. We adopted the provisions of this ASU on January 1, 2019. The adoption had no impact on our results of operations, cash flows, or financial condition. Convertible Instruments -The Company reviews the terms of convertible debt and equity instruments to determine whether there are conversion features or embedded derivative instruments including embedded conversion options that are required to be bifurcated and accounted for separately as a derivative financial instrument. In circumstances where the convertible instrument contains more than one embedded derivative instrument, including conversion options that are required to be bifurcated, the bifurcated derivative instruments are accounted for as a single compound instrument. Also, in connection with the sale of convertible debt and equity instruments, the Company may issue free standing warrants that may, depending on their terms, be accounted for as derivative instrument liabilities, rather than as equity. When convertible debt or equity instruments contain embedded derivative instruments that are to be bifurcated and accounted for separately, the total proceeds allocated to the convertible host instruments are first allocated to the fair value of the bifurcated derivative instrument. The remaining proceeds, if any, are then allocated to the convertible instruments themselves, usually resulting in those instruments being recorded at a discount from their face amount. When the Company issues debt securities, which bear interest at rates that are lower than market rates, the Company recognizes a discount, which is offset against the carrying value of the debt. Such discount from the face value of the debt, together with the stated interest on the instrument, is amortized over the life of the instrument through periodic charges to income. In addition, certain conversion features are recognized as beneficial conversion features to the extent the conversion price as defined in the convertible note is less than the closing stock price on the issuance of the convertible notes. Derivative Financial Instruments - Derivatives are recorded on the consolidated balance sheet at fair value. The conversion features of the convertible notes are embedded derivatives and are separately valued and accounted for on the consolidated balance sheet with changes in fair value recognized during the period of change as a separate component of other income/expense. Fair values for exchange-traded securities and derivatives are based on quoted market prices. The pricing model the Company uses for determining the fair value of its derivatives is the Lattice Model. Valuations derived from this model are subject to ongoing internal and external verification and review. The model uses market-sourced inputs such as interest rates and stock price volatilities. 57 Table of Contents Common Stock Purchase Warrants- The Company accounts for common stock purchase warrants in accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 815, Accounting for Derivative Instruments and Hedging Activities. As is consistent with its handling of stock compensation and embedded derivative instruments, the Company’s cost for stock warrants is estimated at the grant date based on each warrant’s fair-value as calculated by the BSM option-pricing model value method for valuing the impact of the expense associated with these warrants. Stockholders ’ Equity- Shares of common stock issued for other than cash have been assigned amounts equivalent to the fair value of the service or assets received in exchange. Per Share Data- Basic loss per share is computed by dividing net loss by the weighted average number of common shares outstanding for the year. Diluted loss per share is computed by dividing net loss by the weighted average number of common shares outstanding plus common stock equivalents (if dilutive) related to warrants, options, and convertible instruments. Income Taxes- The Company accounts for income taxes under the asset and liability method which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in the Company’s condensed consolidated financial statements or tax returns. In estimating future tax consequences, the Company considers all expected future events other than enactments of changes in the tax laws or rates. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all the deferred tax assets will not be realized. The Company has determined that a valuation allowance is needed due to recent taxable net operating losses and the limited taxable income in the carry back periods. The effect on deferred tax assets and liabilities of a change in tax rates is recognized as income or expense in the period that includes the enactment date. Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes and certain tax loss carryforwards, less any valuation allowance. The Company accounts for uncertain tax positions as required in that a position taken or expected to be taken in a tax return is recognized in the consolidated financial statements when it is more likely than not (i.e., a likelihood of more than 50%) that the position would be sustained upon examination by tax authorities. A recognized tax position is then measured at the largest amount of benefit that is greater than 50% of being realized upon ultimate settlement. The Company does not have any material unrecognized tax benefits. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as components of interest expense and other expense, respectively, in arriving at pretax income or loss. The Company does not have any interest and penalties accrued. The Company is no longer subject to U.S. federal, state, and local income tax examinations for the years before 2012. Business Combinations- The Company accounts for business combinations by recognizing the assets acquired, liabilities assumed, contractual contingencies, and contingent consideration at their fair values on the acquisition date. The purchase price allocation process requires management to make significant estimates and assumptions, especially with respect to intangible assets, estimated contingent consideration payments and pre-acquisition contingencies. Examples of critical estimates in valuing certain of the intangible assets we have acquired or may acquire in the future include but are not limited to: ● future expected cash flows from product sales, support agreements, consulting contracts, other customer contracts, and acquired developed technologies and patents; and ● discount rates utilized in valuation estimates. Unanticipated events and circumstances may occur that may affect the accuracy or validity of such assumptions, estimates or actual results. Additionally, any change in the fair value of the acquisition-related contingent consideration subsequent to the acquisition date, including changes from events after the acquisition date, such as changes in our estimates of relevant revenue or other targets, will be recognized in earnings in the period of the estimated fair value change. A change in fair value of the acquisition-related contingent consideration or the occurrence of events that cause results to differ from our estimates or assumptions could have a material effect on the consolidated financial position, statements of operations or cash flows in the period of the change in the estimate. Impairment of Long-Lived Assets- Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized in the amount by which the carrying amount of the asset exceeds the fair value of the asset. Assets to be disposed would be separately presented in the consolidated balance sheet and reported at the lower of the carrying amount or fair value less costs to sell and are no longer depreciated. The assets and liabilities of a disposal group classified as held-for-sale would be presented separately in the appropriate asset and liability sections of the consolidated balance sheet, if material. 58 Table of Contents Financial Instruments and Fair Values- The fair value of a financial instrument represents the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. Fair value estimates are made at a specific point in time, based upon relevant market information about the financial instrument. In determining fair value, we use various valuation methodologies and prioritize the use of observable inputs. We assess the inputs used to measure fair value using a three-tier hierarchy based on the extent to which inputs used in measuring fair value are observable in the market: Level 1 – inputs include exchange quoted prices for identical instruments and are the most observable. Level 2 – inputs include brokered and/or quoted prices for similar assets and observable inputs such as interest rates. Level 3 – inputs include data not observable in the market and reflect management judgment about the assumptions market participants would use in pricing the asset or liability. The use of observable and unobservable inputs and their significance in measuring fair value are reflected in our hierarchy assessment. The carrying amount of cash, prepaid assets, accounts payable and accrued liabilities approximate fair value due to the short-term maturities of these instruments. Because cash and cash equivalents are readily liquidated, management classifies these values as Level 1. The fair value of the derivative liabilities approximates their book value as the instruments are short-term in nature and contain market rates of interest. Because there is no ready market or observable transactions, management classifies the derivative liabilities as Level 3. Recently Issued Accounting Standards In June 2018, the FASB issued ASU 2018-07 "Improvements to Non-employee Share-Based Payment Accounting”, which simplifies the accounting for share-based payments granted to non-employees for goods and services. Under the ASU, most of the guidance on such payments to non-employees would be aligned with the requirements for share-based payments granted to employees. The amendments are effective for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020. In December 2019, the FASB issued ASU No. 2019-12, "Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes ("ASU 2019-12”), which is intended to simplify various aspects related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and clarifies and amends existing guidance to improve consistent application. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020, with early adoption permitted. The Company has adopted ASU No. 2019-12, "Income Taxes (Topic 740) however giving the Company’s historical losses and full valuation allowance it did not have an impact on its condensed consolidated financial statements and related disclosures. Recent Accounting Standards Not Yet Adopted In August 2020, the FASB issued ASU 2020-06, "Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40)”. This ASU reduces the number of accounting models for convertible debt instruments and convertible Preferred Stock. As well as amend the guidance for the derivatives scope exception for contracts in an entity’s own equity to reduce form-over-substance-based accounting conclusions. In addition, this ASU improves and amends the related EPS guidance. This standard is effective for us on January 1, 2022, including interim periods within those fiscal years. Adoption is either a modified retrospective method or a fully retrospective method of transition. We are currently assessing the impact the new guidance will have on our consolidated financial statements. There are various other updates recently issued, most of which represent technical corrections to the accounting literature or application to specific industries and are not expected to a have a material impact on the Company’s consolidated financial position, results of operations or cash flows. Note 4 – Net Loss Per Share Applicable to Common Shareholders Net Loss per Share Applicable to Common Stockholders Basic loss per common share is computed by dividing net loss by the weighted average number of common shares outstanding during the reporting period. Diluted loss per common share is computed similarly to basic loss per common share except that it reflects the potential dilution that could occur if dilutive securities or other obligations to issue common stock were exercised or converted into common stock. 59 Table of Contents The following table sets forth the computation of loss per share for the years ended December 31, 2021 and 2020, respectively: For the Years Ended December 31, 2021 2020 Numerator: Net loss applicable to common shareholders $ ( 11,226,366 ) $ ( 2,936,129 ) Denominator: Weighted average common shares outstanding 203,000,201 105,177,272 Net loss per share: Basic and diluted $ ( 0.06 ) $ ( 0.03 ) The Company excluded all common equivalent shares for warrants, options, and convertible instruments from the calculation of diluted net loss per share because all such securities are antidilutive for the periods presented. As of December 31, 2021 and 2020, the following shares were issuable and excluded from the calculation of diluted loss: December 31, 2021 2020 Convertible Notes - 79,475,904 Options 18,746,211 13,453,879 Warrants 29,820,000 - Preferred Stock 17,382,575 - Accrued Interest 872,160 92,253 Total 66,820,946 93,022,036 Note 5 – Related Party Transactions For the year ended December 31, 2021: On July 21, 2021, the Company issued a total of 3,000,000 stock option awards to the Company’s executive officers: 1,500,000 to its Chief Executive Officer, 750,000 to its Chief Financial Officer and 750,000 to its Chief Legal Officer. The options will expire on the ten-year anniversary of the grant date and will vest following the Company’s achievement of a total of $30 million of revenues over four consecutive quarters, as recorded under accepted accounting principles of the United States of America. The options have a strike price of $ 0.25 the amount was based on the price of the lowest investment amount offered to outside investors in 2021 and is higher than the closing price on the date they were granted. On August 26, 2021, the Company issued 312,800 restricted shares of the Company’s common stock priced at $ 0.25 , vesting immediately, in lieu of $ 78,200 of cash compensation owed to the Company’s Chief Executive Officer for services rendered to the Company prior to 2021. On December 30, 2021, the Company issued a 10 % Promissory Note due June 30, 2022 to the Chief Executive Officer of the Good Clinic LLC, one of our subsidiaries. See Note 8. During the year ended December 31, 2021, the Company accrued dividends on its Series X Preferred Stock in the total amount of $ 61,818 . Of this amount, a total of $ 7,890 was payable to officers and directors, $ 30,827 was payable to a related party shareholder, and $ 23,101 was payable to non-related parties. 60 Table of Contents For the year ended December 31, 2020: On February 27, 2020, the Company agreed to issue 1,000,000 ten-year options to its two non-management directors (a total of 2,000,000 options). These options have a fair value at issuance of $ 39,162 per director (a total of $ 78,324 ), an exercise price of $ 0.05 per share, and vest over a three -year period. The Company valued these options using the Black-Scholes valuation model. On December 14, 2020, the exercise price of these options was changed to $ 0.03 per share reflecting the market price at the time (see note 10). On March 2, 2020, the Company agreed to issue 1,500,000 ten -year options to each of its Chief Executive Officer, its President, and a consultant (a total of 4,500,000 options). These options had a fair value at issuance of $ 58,743 per individual (a total of $ 176,229 ), an exercise price of $ 0.05 per share, and vest over a three-year period. The Company valued these options using the Black-Scholes valuation model. Julie R. Smith, the Company’s former President, Chief Operating Officer, and a Board member resigned effective June 30, 2020; the 1,500,000 options that the Company agreed to issue to Ms. Smith were cancelled; a total of $ 1,632 was charged to operations representing the fair value of these options through Ms. Smith’s resignation date. On December 14, 2020, the exercise price of the 1,500,000 options granted to each of its Chief Executive Officer and a consultant was changed to $ 0.03 per share reflecting the market price at the time (see note 10). On June 1, 2020, the Company agreed to issue 1,000,000 ten -year options to a non-management director. These options have a fair value of $ 28,460 , an exercise price of $ 0.03 per share, and vest over a three-year period. The Company valued these options using the Black-Scholes valuation model. On August 1, 2020, the Company agreed to issue 1,000,000 ten-year options to a non-management director. These options have a fair value of $ 56,037 , an exercise price of $ 0.05 per share, and vest over a three-year period. The Company valued these options using the Black-Scholes valuation model. On December 14, 2020, the exercise price of these options was changed to $ 0.03 per share reflecting the market price at the time (see note 10). During the year ended December 31, 2020, the amount of $ 56,067 was charged to operations in connection these options. On December 28, 2020, the Company agreed to issue 100,000 options with a fair value of $ 2,465 to each to its four non-management directors (a total of 400,000 options with a fair value of $ 9,860 ). These options have an exercise price of $ 0.03 per share and vested upon issuance. The Company valued these options using the Black-Scholes valuation model. During the year ended December 31, 2020, the amount of $ 2,465 was charged to operations in connection with each of these options grants (a total of $ 9,860 for 400,000 options). On December 28, 2020, the Company agreed to issue 1,000,000 options with a fair value of $ 24,645 to each to Chief Executive Officer and to a consultant (a total of 2,000,000 options with a fair value of $ 49,290 ). These options have an exercise price of $ 0.03 per share, and vested upon issuance. The Company valued these options using the Black-Scholes valuation model. During the year ended December 31, 2020, the amount of $ 24,645 was charged to operations in connection with each of these options grants (a total of $ 49,290 for 2,000,000 options). During the year ended December 31, 2020, the Company charged the amount of $ 67,623 to operations in connection with the vesting of restricted common stock as follows: $ 15,856 for shares issued to management; $ 32,614 for shares issued to Board members; and $ 7,135 related to shares issued to an employee. Julie R. Smith, our former President, Chief Operating Officer, and a Board member, resigned effective June 30, 2020; at the time of her resignation, a total of 1,000,000 shares of the Company’s common stock issued to Ms. Smith for compensation as a Board member were vested, and remain outstanding; an additional 250,000 shares of common stock issued to Ms. Smith for compensation as an officer were vested, and also remain outstanding; 750,000 shares of common stock to be issued to Ms. Smith for compensation as an officer had not vested, and these shares were cancelled. A total of $ 11,909 was charged to operations for the vesting of shares issued to Ms. Smith. During the year ended December 31, 2020, the Company accrued dividends on its Series X Preferred Stock in the total amount of $ 65,568 . Of this amount, a total of $ 8,000 was payable to officers and directors, $ 31,258 was payable to a related party shareholder, and $ 26,310 was payable to non-related parties. 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. On December 31, 2019, the Company issued a total of 26,227 shares of Series X Preferred Stock in settlement of various liabilities. All of the entities who received these shares were related parties, either because they were officer and or directors, or because the voting rights attached to these shares created a related party relationship. 61 Table of Contents As of December 31, 2021, the shares of Series X Preferred Stock issued and outstanding is as follows: Type of Name Liability # shares Ronald Riewold, Director Deferred Compensation 1,200 Larry Diamond, Director, and CEO Deferred Compensation 2,000 James Crone, ex-Officer, and Director Deferred Compensation 2,884 Louis Deluca, ex-Officer, and Director Deferred Compensation 2,400 Irish Italian Retirement Fund Consulting services, notes payable 12,503 Frank Lightmas Legal fees 3,240 Total 24,227 Note 6 – Accounts Payable and Accrued Liabilities Accounts payable and accrued liabilities consisted of the following at December 31, 2021 and 2020: December 31, December 31, 2021 2020 Trade accounts payable 3,933,305 824,405 Accrued payroll and payroll taxes 23,554 244,926 Other 19,205 - Total accounts payable and accrued liabilities 3,976,064 1,069,331 Note 7 - Right to Use Assets and Lease Liabilities – Operating Leases The Company has an operating lease for its clinic with a remaining lease term of approximately 7.5 years. The Company’s lease expense was entirely comprised of operating leases. Lease expense for the years ended December 31, 2021 and 2020 amounted to $ 351,854 and $ 10,642 , respectively. The Company’s ROU asset amortization for the years ended December 31, 2021 and 2020 was $ 162,276 and $ 4,318 , respectively. The difference between the lease expense and the associated ROU asset amortization consists of interest at a rate of 12 % per annum. Right to use assets – operating leases are summarized below: December 31, 2021 December 31, 2020 Right to use assets, net $ 3,886,866 $ 310,361 Operating lease liabilities are summarized below: December 31, 2021 December 31, 2020 Lease liability $ 4,134,802 $ 321,004 Less: current portion ( 161,838 ) ( 8,905 ) Lease liability, non-current $ 3,972,964 $ 312,099 Maturity analysis under these lease agreements are as follows: For the period ended December 31, 2022 $ 652,653 For the period ended December 31, 2023 888,152 For the period ended December 31, 2024 821,296 For the period ended December 31, 2025 841,600 For the period ended December 31, 2026 860,551 Thereafter 2,478,412 Total $ 6,542,664 Less: Present value discount ( 2,407,862 ) Lease liability $ 4,134,802 62 Table of Contents Note 8 – Debt August 2014 Series C Convertible Debenture On March 30, 2021, the Company issued 272,837 shares of common stock and paid cash in the amount of $ 122,166 as settlement of principal and accrued interest in the amounts of $ 110,833 and $ 71,526 , respectively, due under the Series C Debenture and principal and accrued interest in the amounts of $ 11,333 and $ 8,722 due under the Series C Debenture. The Company recognized a gain in the amount of $ 3,035 on this transaction. These obligations have been fully satisfied as of the date of this filing and the Company has no further requirements related to these matters. March 2016 Convertible Note A On March 24, 2021, the Company paid cash in the amount of $ 55,368 as settlement of principal and accrued interest in the amount of $ 41,000 and $ 13,167 , respectively, due under the March 2016 Convertible Note A. The Company recognized a loss in the amount of $ 1,201 on this transaction. This obligation has been fully satisfied as of the date of this filing and the Company has no further requirements related to this matter. Eagle Equities Note 4 On January 4, 2021, the Company issued 4,123,750 shares of common stock at a price of $ 0.012 per share pursuant to the conversion of $ 45,000 of principal and $ 4,485 of accrued interest in Eagle Equities Note 4. On January 6, 2021, the Company issued 3,505,964 shares of common stock at a price of $ 0.01224 per share pursuant to the conversion of $ 39,000 of principal and $ 3,913 of accrued interest in Eagle Equities Note 4. This obligation has been fully satisfied as of the date of this filing and the Company has no further requirements related to this matter. Eagle Equities Note 5 On January 11, 2021, the Company issued 4,463,507 shares of common stock at a price of $ 0.01224 per share pursuant to the conversion of $ 50,000 of principal and $ 4,633 of accrued interest in Eagle Equities Note 5. On January 14, 2021, the Company issued 4,319,378 shares of common stock at a price of $ 0.01266 per share pursuant to the conversion of $ 50,000 of principal and $ 4,683 of accrued interest in Eagle Equities Note 5. This obligation has been fully satisfied as of the date of this filing and the Company has no further requirements related to this matter. Eagle Equities Note 6 On January 21, 2021, the Company issued 6,449,610 shares of common stock at a price of $ 0.0154 per share pursuant to the conversion of $ 93,000 of principal and $ 6,324 of accrued interest in Eagle Equities Note 6. On January 28, 2021, the Company issued 7,285,062 shares of common stock at a price of $ 0.01575 per share pursuant to the conversion of $ 107,200 of principal and $ 7,540 of accrued interest in Eagle Equities Note 6. This obligation has been fully satisfied as of the date of this filing and the Company has no further requirements related to this matter. Eagle Equities Note 7 On February 5, 2021, the Company entered into a settlement agreement with the holders of the Eagle Equities Note 7 whereby the Company issued 1,184,148 shares of common stock at a price of $ 0.24984 per share in satisfaction of $ 200,200 of principal and all accrued interest and prepayment penalties due under this note. This obligation has been fully satisfied as of the date of this filing and the Company has no further requirements related to this matter. Eagle Equities Note 8 On February 5, 2021, the Company entered into a settlement agreement with the holders of the Eagle Equities Note 8 whereby the Company issued 639,593 shares of common stock at a price of $ 0.23851 per share in satisfaction of $ 114,400 of principal and all accrued interest and prepayment penalties due under this note. This obligation has been fully satisfied as of the date of this filing and the Company has no further requirements related to this matter. 63 Table of Contents Eagle Equities Note 9 On February 5, 2021, the Company entered into a settlement agreement with the holders of the Eagle Equities Note 9 whereby the Company issued 605,177 shares of common stock at a price of $ 0.24984 per share in satisfaction of $ 114,400 of principal and all accrued interest and prepayment penalties due under this note. This obligation has been fully satisfied as of the date of this filing and the Company has no further requirements related to this matter. Eagle Equities Note 10 On February 5, 2021, the Company entered into a settlement agreement with the holders of the Eagle Equities Note 10 whereby the Company issued 1,095,131 shares of common stock at a price of $ 0.23748 per share in satisfaction of $ 200,200 of principal and all accrued interest and prepayment penalties due under this note. This obligation has been fully satisfied as of the date of this filing and the Company has no further requirements related to this matter. PPP Loan During March 2020, in response to the COVID-19 crisis, the federal government announced plans to offer loans to small businesses in various forms, including the Payroll Protection Program, or "PPP", established as part of the Corona Virus Aid, Relief and Economic Security Act ("CARES Act”) and administered by the U.S. Small Business Administration. On April 25, 2020, the Company entered an unsecured Promissory Note (the "Note”) with Bank of America for a loan in the original principal amount of approximately $ 460,000 , and the Company received the full amount of the loan proceeds on May 4, 2020. The current balance is $ 460,406 and the Company is currently in discussions for a) a partial forgiveness and b) the conversion of any remaining balance into a term note. Howe Note Mitesco, Inc. (the “Company”) issued a 10% Promissory Note due June 30, 2022 (the “Note”), dated December 30, 2021, to the Michael C. Howe Living Trust (the “Lender”). Michael C. Howe is the Chief Executive Officer of the Good Clinic LLC, one of our subsidiaries. The principal amount of the Note is $ 1,000,000 , carries a 10 % interest rate per annum, payable in monthly installments, and has a maturity date that is the earlier of (i) six (6) months from the date of execution, or (ii) the date on which the Company successfully lists its shares of common stock on Nasdaq or NYSE . The purchase price of the Note payable to the Company for the Note was $ 850,000 and was funded on December 30, 2021. The amount payable at maturity will be $1,000,000 plus 10% of that amount plus any accrued and unpaid interest. Following an event of default, as defined in the Note, the principal amount shall bear interest for each day until paid, at a rate per annum equal to the lesser of the maximum interest permitted by applicable law and 18 %. The Note contains a “most favored nations” clause that provides that, so long as the Note is outstanding, if the Company issues any new security, which the Lender reasonably believes contains a term that is more favorable than those in the Note, the Company shall notify the Lender of such term, and such term, at the option of the Lender, shall become a part of the Note. Warrants. As further consideration for the Purchase Price payable hereunder, promptly following the Issue Date, the Borrower shall issue to the Lender two common stock purchase warrants, entitling the Lender to purchase (i) 2,100,000 shares of the Borrower’s common stock on substantially the same terms as the Series A warrant issued in connection with the Borrower’s Series D Convertible Preferred Stock, and (ii) 2,100,000 shares of the Borrower’s common stock on substantially the same terms as the Series B warrant issued in connection with the Borrower’s Series D Convertible Preferred Stock. one warrant (the “Series A Warrants”) to purchase 2.1 shares of the Company’s common stock, par value $0.01 per share (the “Common Stock”) at a purchase price of $0.50 per whole share of Common Stock, and one warrant (the “Series B Warrants” and together with the Series A Warrants, the “Warrants”) to purchase 2.1 shares of Common Stock at a purchase price of $0.75 per whole share . The Warrants had a fair value of $ 261,568 at the date of issuance, which was recorded as a discount to the Note. These amounts are reflected in the table below: Notes Payable Table 1: December 31, 2021 December 31, 2020 Notes Payable $ 738,432 $ 1,196,366 PPP Loan $ 460,406 $ 460,406 $ 1,198,838 $ 1,656,772 Less: Discount ( 150,000 ) ( 756,795 ) Notes payable - net of discount $ 1,048,838 $ 899,977 Current Portion, net of discount $ 1,048,838 $ 899,977 Long-term portion, net of discount $ - $ - 64 Table of Contents Note 9 – Derivative Liabilities Certain of the Company’s convertible notes and warrants contain features that create derivative liabilities. The pricing model the Company uses for determining fair value of its derivatives is the Lattice Model. Valuations derived from this model are subject to ongoing internal and external verification and review. The model uses market-sourced inputs such as interest rates and stock price volatilities. Selection of these inputs involves management’s judgment and may impact net income. The derivative components of these notes are valued at issuance, at conversion, at restructure, and at each period end. Derivative liability activity for the year ended December 31, 2021 was $ 0 . Derivative liability activity for the years ended December 31, 2020 is summarized in the table below: Conversion features issued 1,273,463 Settled upon conversion or exercise ( 1,296,416 ) Settled upon payment of note ( 148,949 ) Gain on revaluation ( 508,839 ) December 31, 2020 $ 807,682 Note 10 – Stockholders ’ Equity (Deficit) Common Stock The Company has authorized 500,000,000 shares of common stock, par value $ 0.01 ; 213,333,170 and 155,381,183 shares were issued and outstanding at December 31, 2021 and December 31, 2020, respectively. Common Stock Transactions During the Year Ended December 31, 2021 On January 4, 2021, the Company issued 4,123,750 shares of common stock at a price of $ 0.012 per share pursuant to the conversion of $ 45,000 of principal and $ 4,485 of accrued interest in Eagle Equities Note 4. On January 6, 2021, the Company issued 3,505,964 shares of common stock at a price of $ 0.01224 per share pursuant to the conversion of $ 39,000 of principal and $ 3,913 of accrued interest in Eagle Equities Note 4. On January 11, 2021, the Company issued 4,463,507 shares of common stock at a price of $ 0.01224 per share pursuant to the conversion of $ 50,000 of principal and $ 4,633 of accrued interest in Eagle Equities Note 5. On January 14, 2021, the Company issued 4,319,378 shares of common stock at a price of $0.01266 per share pursuant to the conversion of $ 50,000 of principal and $ 4,683 of accrued interest in Eagle Equities Note 5. On January 21, 2021, the Company issued 6,449,610 shares of common stock at a price of $ 0.0154 per share pursuant to the conversion of $ 93,000 of principal and $ 6,324 of accrued interest in Eagle Equities Note 6. On January 28, 2021, the Company issued 7,285,062 shares of common stock at a price of $ 0.01575 per share pursuant to the conversion of $ 107,200 of principal and $ 7,540 of accrued interest in Eagle Equities Note 6. On February 1, 2021, the Company issued 6,672,000 shares of common stock in a private placement (the "2021 Private Placement”) at a price of $ 0.25 per share for cash proceeds of $ 1,668,000 . On February 5, 2021, the Company entered into a settlement agreement with the holders of the Eagle Equities Note 7 whereby the Company issued 1,184,148 shares of common stock at a price of $ 0.24984 per share in satisfaction of $ 200,200 of principal and all accrued interest and prepayment penalties due under this note. On February 5, 2021, the Company entered into a settlement agreement with the holders of the Eagle Equities Note 8 whereby the Company issued 639,593 shares of common stock at a price of $ 0.23851 per share in satisfaction of $ 114,400 of principal and all accrued interest and prepayment penalties due under this note. 65 Table of Contents On February 5, 2021, the Company entered into a settlement agreement with the holders of the Eagle Equities Note 9 whereby the Company issued 605,177 shares of common stock at a price of $ 0.24984 per share in satisfaction of $ 114,400 of principal and all accrued interest and prepayment penalties due under this note. On February 5, 2021, the Company entered into a settlement agreement with the holders of the Eagle Equities Note 10 whereby the Company issued 1,095,131 shares of common stock at a price of $ 0.23748 per share in satisfaction of $ 200,200 of principal and all accrued interest and prepayment penalties due under this note. On February 22, 2021, the Company issued 336,000 shares of common stock for the exercise of options at a price of $ 0.03 per share. On March 11, 2021, the Company issued 600,000 shares of common stock to four officers of The Good Clinic in exchange for 4,800 shares of Series A Preferred Stock. The 4,800 shares of Series A Preferred Stock were cancelled. On March 17, 2021, the Company issued 300,000 shares of common stock at a price of $ 0.31 per share to a service provider. On March 23, 2021, the Company issued 461,358 shares of common stock at a price of $ 0.26 per share to the underwriters of the 2021 Private Placement. On April 19, 2021, the Company issued 1,962 shares of common stock for professional fees which had been performed in a prior period. The Company recorded these shares at the par value of $ 0.01 per share. On May 4 through May 26, 2021, the Company issued 4,237,424 shares of common stock for the conversion of 1,059,356 shares of Series C Preferred Stock at a price of $ 0.25 per share. On May 12, 2021, the Company issued 2,500,000 shares of common stock at a price of $ 0.03 per share for the exercise of stock options by an investor. On June 10 through June 29, 2021, the Company issued 5,116,668 shares of common stock at a price of $ 0.03 per share for the exercise of stock options by officers and directors. On June 23, 2021, the Company cancelled 2,000,000 shares of common stock held by an ex-officer in connection with a settlement agreement. The cancellation of these shares was recorded at the par value of $ 0.01 per share. Also, in connection with the settlement agreement, the Company issued 637,953 shares to the ex-officer at the market price of $.20 per share. On August 17, 2021, accrued liabilities in the amount of $ 156,441 were converted to 625,764 shares of common stock. 479,464 shares were issued during December 2021 and the remaining 146,300 shares was not issued and recorded in common stock subscribed as of December 31, 2021. Among the 625,764 shares, 312,800 restricted shares of the Company’s common stock was issued to settled $ 78,200 cash compensation owed to the Company’s Chief Executive Officer for services rendered to the Company prior to 2021. Between August 11, 2021 and September 2, 2021, the Company issued 4,000,001 shares of the Company common stock in connection with the conversion of Series C preferred stock issued in the first quarter. Also, during the year ended December 31, 2021, the Company charged the amount of $ 13,032 to operations in connection with the vesting of stock granted to its officers, employees, and board members; the Company also charged the amount of $ 676,423 to operations in connection with the vesting of options granted to its officers, employees, and board members. Common Stock Transactions During the Year Ended December 31, 2020 The Company entered into agreements with two note holders regarding the exercise price of warrants held by the note holders. These agreements resulted in the following: (i) on January 29, 2020, the Company issued 1,000,000 shares of common stock, and the note holders agreed to cancel 2,769,482 warrants; the Company recorded a gain in the amount of $ 77,652 on this transaction; (ii) on February 19, 2020, the Company issued 4,098,556 shares of common stock for the exercise of 4,480,938 warrants in a cashless transaction; the Company recorded a gain in the amount of $ 182,295 on this transaction, which is included in gain on derivative liabilities. 66 Table of Contents On May 27, 2020, the Company issued 2,901,440 shares of common stock for the cashless exercise of warrants. These warrants were issued pursuant to a settlement agreement with a note holder regarding the effective price of warrants issued with regard to a variable conversion price feature which resulted in the issuance of 1,011,967 more shares than would have been issued prior to the settlement agreement. The Company recorded a loss in the amount of $ 24,894 on this transaction based upon the additional shares issued at the market price of the Company’s common stock. The Company issued, in nineteen transactions and at prices ranging from $ 0.0108 to $ 0.0120 per share, a total of 63,374,555 shares in connection with the conversion of principal and interest of convertible notes payable in the aggregate amounts of $ 813,000 and $ 70,658 . No gain or loss was recognized on these transactions. See note 8. On January 2, 2020, the Company issued 200,000 restricted shares of the Company’s common stock at valued $ 7,680 in exchange for services conducted on behalf of the Company. The value of these shares was based on the closing market price on the respective date of grant. On August 27, 2020, the Company issued 386,985 shares of common stock at a price of $ 0.034 per share to an ex-employee for accrued compensation. A gain in the amount of $ 6,988 was recognized on this transaction. The Company charged the amount of $ 67,623 to operations in connection with the vesting of stock granted to its officers, Board members, and employees. The Company charged the amount of $ 421,502 to operations in connection with the vesting of stock options granted to its officers, Board members, consultants, and employees. On December 31, 2020, the Company issued 2,151,204 shares of common stock at a price of $ 0.0305 per share as payment of accrued dividends on the Series X Preferred Stock. Preferred Stock We have authorized to issue 100,000,000 shares of Preferred Stock with such rights designations and preferences as determined by our Board of Directors. We have designated 500,000 shares of series A stock, 3,000,000 shares of Series C Preferred, 10,000,000 shares of Series D Preferred and we have designated 27,324 shares as Series X Preferred Stock. Series A Preferred Stock Transactions During the Year Ended December 31, 2021 During the year ended December 31, 2021, the Company accrued dividends in the amount of $ 1,000 on the Series A Preferred Stock. On March 11, 2021, the Company issued 600,000 shares of common stock to the four officers of The Good Clinic in exchange for the previously issued Series A Preferred Stock and accrued dividends. The Series A preferred stock was canceled and there are no Series A Preferred shares outstanding at December 31, 2021. Series A Preferred Stock Transactions During the Year Ended December 31, 2020 On March 2, 2020, the Company issued 4,800 shares of its Series A Preferred Stock to four individuals with certain skills and know-how to assist the Company in the development of its newly-formed subsidiary 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. During the year ended December 31, 2020, the Company accrued dividends in the amount of $9,967 on the Series A Preferred Stock. At December 31, 2020, dividend payable on the Series A Preferred Stock was $ 9,967 . At December 31, 2020, if management determined to pay these dividends in shares of the Company’s common stock, this would result in the issuance of 755,076 shares of common stock based upon the average price of $0.0132 per share for the five-day period ended December 31, 2020 . Subsequent to year end the Company cancelled these shares and instead issued a total of 600,000 shares of restricted common stock to the holders. 67 Table of Contents Series C Preferred Stock On March 25, 2021, the Company entered into Securities Purchase Agreements with four institutional investors (the “Investors” and each an “Investor”) pursuant to which the Company sold to the Investors in a private placement an aggregate of 3,000,000 units (the “Units” and each a “Unit”) with a purchase price of $ 1.00 per Unit, with each Unit consisting of (a) one share of a newly formed Series C Convertible Preferred Stock, par value $0.01 per share (the “Series C Preferred Stock”), (b) one warrant (the “Series A Warrants”) to purchase 2.1 shares of the Company’s common stock, par value $0.01 per share (the “Common Stock”) at a purchase price of $0.50 per whole share of Common Stock, and (c) one warrant (the “Series B Warrants” and together with the Series A Warrants, the “Warrants”) to purchase 2.1 shares of Common Stock at a purchase price of $0.75 per whole share . The aggregate gross proceeds to the Company were $ 3,000,000 and the number of shares of Common Stock initially issuable upon conversion of the Series C Preferred Stock is 12,600,000 shares of Common stock and the aggregate number of shares of Common Stock initially issuable upon exercise of the Warrants is 12,600,000 shares of Common Stock. The Series C Preferred Stock has the following terms: Ranking . The Series C Preferred Stock and the Series D Preferred, discussed below, ranks senior to all other preferred stock of the Company except in relation to the Series X Cumulative Redeemable Perpetual Preferred Stock, which ranks Pari passu to the Series C Preferred Stock, with respect to the preferences as to dividends, distributions and payments upon the liquidation, dissolution and winding up of the Company. Voting Rights. Holders of the Series C Preferred Stock have the right to vote on any matter presented to holders of our Common Stock for their action or consideration at any meeting of the stockholders (or by written consent of stockholders in lieu of meeting), each holder of our Series C Preferred Stock shall be entitled to cast the number of votes equal to the number of whole shares of Common Stock into which the shares of Series C preferred Stock held by such holder, as described below, are convertible as of the record date for determining stockholders entitled to vote on (or consent to) such matter, voting with the Common Stock as a single class. Conversion. Each holder of our Series C Preferred Stock is entitled to convert their shares of Series C Preferred Stock, in whole or in part, at the Conversion Rate, which is determined by dividing the Conversion Amount (the Stated Value of $1.05, plus any accrued but unpaid dividends) by the Conversion Price ($0.25 per share). In addition, upon certain triggering events, the holders of our Series C Preferred Stock have the right to convert their Series C Preferred Stock at the lesser of the Conversion Price or 75% of the average VWAP for the five trading days prior to the date of the notice of conversion. The Conversion Price is subject to adjustment upon certain stock splits and recapitalization as well as upon the sale of Common Stock or Common Stock Equivalents. Each share of the Series C Preferred Stock is convertible at the option of the holder thereof, or automatically or upon the closing of an underwritten offering of at least $10 million of the Company’s securities or upon listing of the Company’s Common Stock on a national securities exchange . Dividends. Each share of Series C Preferred Stock accrues dividends on a quarterly basis in arrears, at the rate of 6 % per annum of the Stated Value ($1.05 per share plus any accrued but unpaid dividends) and is to be paid within 15 days after the end of each of our fiscal quarters. Each holder of the Series C Preferred Stock is entitled to receive dividends or distributions on each share of the Series C Preferred Stock on an as converted into Common Stock basis when and if dividends are declared on the Common Stock by our Board of Directors. Liquidation Rights. The holders of our Series C Preferred stock are entitled to receive in cash out of our assets, whether from capital or from earnings available for distribution to our stockholders (the “Liquidation Funds”), before any amount shall be paid to the holders of any of shares of capital stock that rank junior to the Series C Preferred Stock, but Pari passu with any shares of capital stock that have a parity ranking with the Series C Preferred stock (“Parity Stock”) then outstanding, an amount per share of Series C Preferred Stock equal to the greater of (A) the Conversion Amount on the date of such payment or (B) the amount per share such holder of the Series C Preferred Stock would receive if such holder converted their Series C Preferred Stock into Common Stock immediately prior to the date of such payment, provided that if the Liquidation Funds are insufficient to pay the full amount due to the holders of the Series C Preferred Stock and holders of shares of Parity Stock, then each holder Series C Preferred Stock and each holder of Parity Stock shall receive a percentage of the Liquidation Funds equal to the full amount of Liquidation Funds payable to such holder and such holder of Parity Stock as a liquidation preference, in accordance with their respective certificate of designations (or equivalent), as a percentage of the full amount of Liquidation Funds payable to all holders of Series C Preferred Stock and all holders of shares of Parity Stock. All such amounts shall be paid or set apart for payment before the payment or setting apart for payment of any amount for, or the distribution of any Liquidation Funds of the Corporation to the holders of shares of capital stock that may rank junior to that of the Series C Preferred Stock Junior Stock. 68 Table of Contents Rights and Preferences. The rights, preferences, and privileges of holders of our Series C Preferred Stock are subject to, and may be adversely affected by, the rights of holders of shares of any series of Preferred Stock that we may designate and issue in the future that may rank senior to the Series C Preferred Stock. Redemption Rights. Upon receipt of a conversion notice, we have the right (but not the obligation) to redeem all or part of the Series C Preferred Stock (which the applicable holder of the Series C Preferred Stock is seeking to convert) at a price per share equal to the product of 125% of the (1) Stated Value plus (2) the Additional Amount (the “Redemption Price”). If we decide to exercise the redemption right, within one trading day, we shall deliver written notice to such holder(s) of Series C Preferred Stock that the Series C Preferred Stock will be redeemed (the “Redemption Notice”) on the date that is three trading days following the date of the Redemption Notice (such date, the “Redemption Date”). On the Redemption Date, we shall redeem the shares of Series C Preferred Stock specified in such request by paying in cash therefor a sum per share equal to the Redemption Price. In no event shall a Redemption Notice be given if we may not lawfully redeem our capital stock. On or before the Redemption Date, the Redemption Price for such shares shall be paid by wire transfer of immediately available funds to an account designated in writing by the applicable holder. Price Adjustments Protection . The conversion price is subject to appropriate adjustment in the event of share dividends, share splits, reorganizations or similar events affecting our shares of Common Stock. Other than for certain exempt issuances, in the event we issue or sell any securities, including options or convertible securities, or amend outstanding securities, at an effective price, with an exercise price or at a conversion price less than the Conversion Price, then the Conversion Price shall be reduced to such lower price. Preemptive or Similar Rights Additionally, except for a public offering or certain exempt issuances of our securities, holders of the Series C Preferred Stock shall have the right to participate in any offering of our Common Stock or Common Stock Equivalents (as defined in the COD) in a transaction exempt from registration under the Securities Act in an amount equal to an aggregate of 30% of the financing on the same terms, conditions and price provided to investors in such an offering, such right shall expire on the 15 month anniversary of the issuance date of the Series C Preferred Stock. Further, until the earlier of 18 months from the issuance date of the Series C Preferred Stock and the date that there are less than 20% of the shares of Series C Preferred Stock outstanding, the Investors have most favored nations protection in the event we issue or sell Common Stock or Common Stock Equivalents that the Investors believe are more favorable than the terms and conditions under the Private Placement. Fully Paid and Nonassessable . All our issued and outstanding shares of Series C Preferred Stock are fully paid and nonassessable. Series C Preferred Stock Transactions During the Year Ended December 31, 2021 On March 25, 2021, the Company sold 3,000,000 shares of its Series C Preferred Stock along with (i) five-year warrants to purchase 6,300,000 shares of the Company’s common stock at a price of $ 0.50 per share, and (ii) five -year warrants to purchase 6,300,000 shares of the Company’s common stock at a price of $ 0.75 per share for proceeds of $ 3,000,000 . On May 4 through May 26, 2021, 1,059,356 shares of Series C Preferred Stock were converted at a price of $ 0.25 per share to 4,237,424 shares of common stock. Between August 11,2021 through September 2, 2021, 1,000,000 shares of Series C Preferred Stock were converted at a price of $ 0.25 per share to 4,000,001 shares of common stock. During the year ended December 31, 2021, the Company accrued dividends on the Series C Preferred Stock in the amount of $ 87,059 . Series C Preferred Stock Transactions During the Year Ended December 31, 2020 None. Series D Preferred Stock On November 19, 2021, the Company closed a bridge financing round totaling $ 3,100,000 of Series D preferred stock sold to investors in a private placement. Each Series D Unit will had a purchase price of $ 1.00 per Unit, with each Unit consisting of (a) one share of a newly formed Series D Convertible Preferred Stock, par value $ 0.01 per share (the “Series D Preferred Stock”), (b) one warrant (the “Series A Warrants”) to purchase 2.1 shares of the Company’s Common Stock at a purchase price of $0.50 per whole share of Common Stock, and (c) one warrant (the “Series B Warrants” and together with the Series A Warrants, the “Warrants”) to purchase 2.1 shares of Common Stock at a purchase price of $0.75 per whole share . 69 Table of Contents The Series D Preferred Stock has the following terms: Ranking . The Series D Preferred Stock and the Series C Preferred Stock ranks senior to all other preferred stock of the Company except in relation to the Series X Cumulative Redeemable Perpetual Preferred Stock, which ranks Pari passu to the Series D Preferred Stock, with respect to the preferences as to dividends, distributions and payments upon the liquidation, dissolution and winding up of the Company. Voting Rights. Holders of the Series D Preferred Stock have the right to vote on any matter presented to holders of our Common Stock for their action or consideration at any meeting of the stockholders (or by written consent of stockholders in lieu of meeting), each holder of our Series C Preferred Stock shall be entitled to cast the number of votes equal to the number of whole shares of Common Stock into which the shares of Series D preferred Stock held by such holder, as described below, are convertible as of the record date for determining stockholders entitled to vote on (or consent to) such matter, voting with the Common Stock as a single class. Conversion. Each holder of our Series D Preferred Stock is entitled to convert their shares of Series D Preferred Stock, in whole or in part, at the Conversion Rate, which is determined by dividing the Conversion Amount (the Stated Value of $1.05, plus any accrued but unpaid dividends) by the Conversion Price ($0.25 per share). In addition, upon certain triggering events, the holders of our Series C Preferred Stock have the right to convert their Series D Preferred Stock at the lesser of the Conversion Price or 75% of the average VWAP for the five trading days prior to the date of the notice of conversion. The Conversion Price is subject to adjustment upon certain stock splits and recapitalization as well as upon the sale of Common Stock or Common Stock Equivalents. Each share of the Series D Preferred Stock is convertible at the option of the holder thereof, or automatically or upon the closing of an underwritten offering of at least $10 million of the Company’s securities or upon listing of the Company’s Common Stock on a national securities exchange. Dividends. Each share of Series D Preferred Stock accrues dividends on a quarterly basis in arrears, at the rate of 6 % per annum of the Stated Value ($1.05 per share plus any accrued but unpaid dividends) and is to be paid within 15 days after the end of each of our fiscal quarters. Each holder of the Series C Preferred Stock is entitled to receive dividends or distributions on each share of the Series D Preferred Stock on an as converted into Common Stock basis when and if dividends are declared on the Common Stock by our Board of Directors. Liquidation Rights. The holders of our Series D Preferred stock are entitled to receive in cash out of our assets, whether from capital or from earnings available for distribution to our stockholders (the “Liquidation Funds”), before any amount shall be paid to the holders of any of shares of capital stock that rank junior to the Series C Preferred Stock, but Pari passu with any shares of capital stock that have a parity ranking with the Series D Preferred stock (“Parity Stock”) then outstanding, an amount per share of Series D Preferred Stock equal to the greater of (A) the Conversion Amount on the date of such payment or (B) the amount per share such holder of the Series C Preferred Stock would receive if such holder converted their Series C Preferred Stock into Common Stock immediately prior to the date of such payment, provided that if the Liquidation Funds are insufficient to pay the full amount due to the holders of the Series C Preferred Stock and holders of shares of Parity Stock, then each holder Series D Preferred Stock and each holder of Parity Stock shall receive a percentage of the Liquidation Funds equal to the full amount of Liquidation Funds payable to such holder and such holder of Parity Stock as a liquidation preference, in accordance with their respective certificate of designations (or equivalent), as a percentage of the full amount of Liquidation Funds payable to all holders of Series D Preferred Stock and all holders of shares of Parity Stock. All such amounts shall be paid or set apart for payment before the payment or setting apart for payment of any amount for, or the distribution of any Liquidation Funds of the Corporation to the holders of shares of capital stock that may rank junior to that of the Series C Preferred Stock Junior Stock. Rights and Preferences. The rights, preferences, and privileges of holders of our Series D Preferred Stock are subject to, and may be adversely affected by, the rights of holders of shares of any series of Preferred Stock that we may designate and issue in the future that may rank senior to the Series D Preferred Stock. Redemption Rights. Upon receipt of a conversion notice, we have the right (but not the obligation) to redeem all or part of the Series D Preferred Stock (which the applicable holder of the Series D Preferred Stock is seeking to convert) at a price per share equal to the product of 125% of the (1) Stated Value plus (2) the Additional Amount (the “Redemption Price”). If we decide to exercise the redemption right, within one trading day, we shall deliver written notice to such holder(s) of Series D Preferred Stock that the Series D Preferred Stock will be redeemed (the “Redemption Notice”) on the date that is three trading days following the date of the Redemption Notice (such date, the “Redemption Date”). On the Redemption Date, we shall redeem the shares of Series D Preferred Stock specified in such request by paying in cash therefor a sum per share equal to the Redemption Price. In no event shall a Redemption Notice be given if we may not lawfully redeem our capital stock. On or before the Redemption Date, the Redemption Price for such shares shall be paid by wire transfer of immediately available funds to an account designated in writing by the applicable holder. 70 Table of Contents Price Adjustments Protection . The conversion price is subject to appropriate adjustment in the event of share dividends, share splits, reorganizations or similar events affecting our shares of Common Stock. Other than for certain exempt issuances, in the event we issue or sell any securities, including options or convertible securities, or amend outstanding securities, at an effective price, with an exercise price or at a conversion price less than the Conversion Price, then the Conversion Price shall be reduced to such lower price. Preemptive or Similar Rights Additionally, except for a public offering or certain exempt issuances of our securities, holders of the Series D Preferred Stock shall have the right to participate in any offering of our Common Stock or Common Stock Equivalents (as defined in the COD) in a transaction exempt from registration under the Securities Act in an amount equal to an aggregate of 30% of the financing on the same terms, conditions and price provided to investors in such an offering, such right shall expire on the 15 month anniversary of the issuance date of the Series D Preferred Stock. Further, until the earlier of 18 months from the issuance date of the Series D Preferred Stock and the date that there are less than 20% of the shares of Series D Preferred Stock outstanding, the Investors have most favored nations protection in the event we issue or sell Common Stock or Common Stock equivalents that the Investors believe are more favorable than the terms and conditions under the Private Placement. Series D Preferred Stock Transactions During the Year Ended December 31, 2021 On October 18, 2021, the Company sold 2,050,000 shares of Series D Preferred Stock and (i) five-year warrants to acquire 4,252,500 shares of the Company’s common stock at a price of $ 0.50 per shares, and (ii) five -year warrants to acquire 4,252,500 shares of the Company’s common stock at a price of $ 0.75 per share for proceeds of $ 1,874,450 , net of costs in the amount of $ 125,500 . On November 10, 2021, the Company sold 1,075,000 shares of Series D Preferred Stock and (i) five-year warrants to acquire 2,257,500 shares of the Company’s common stock at a price of $ 0.50 per shares, and (ii) five-year warrants to acquire 2,257,500 shares of the Company’s common stock at a price of $ 0.75 per share for proceeds of $ 999,250 , net of costs in the amount of $ 75,750 . During the year ended December 31, 2021, the Company accrued dividends on the Series D Preferred Stock in the amount of $ 35,327 . Series D Preferred Stock Transactions During the Year Ended December 31, 2020 None. Series X Preferred Stock The Company has 24,227 and 26,227 shares of its 10 % Series X Cumulative Redeemable Perpetual Preferred Stock (the “Series X Preferred Stock”) outstanding as of December 31, 2021 and December 31, 2020, respectively. The Series X Preferred Stock has a par value of $ 0.01 per share, no stated maturity, a liquidation preference of $ 25.00 per share, and will not be subject to any sinking fund or mandatory redemption and will remain outstanding indefinitely unless the Company decides to redeem or otherwise repurchase the Series X Preferred Stock; the Series X Preferred Stock is not redeemable prior to November 4, 2020. The Series X Preferred Stock will rank senior to all classes of the Company’s common and preferred stock and accrues dividends at the rate of 10% on $25.00 per share. The Company reserves the right to pay the dividends in shares of the Company’s common stock at a price equal to the average closing price over the five days prior to the date of the dividend declaration. Each one share of the Series X Preferred Stock is entitled to 20,000 votes on all matters submitted to a vote of our shareholders. Series X Preferred Stock Transactions During the Year Ended December 31, 2021 On June 23, 2021, 2,000 shares of Series X Preferred Stock were cancelled pursuant to a settlement agreement with an ex-officer. During the year ended December 31, 2021, the Company accrued dividends on the Series X Preferred Stock in the amount of $ 61,818 . Series X Preferred Stock Transactions During the Year Ended December 31, 2020 During the year ended December 31, 2020, the Company accrued dividends in the amount of $ 65,568 on the Series X Preferred Stock. On December 31, 2020, the Company issued 2,151,204 shares of common stock at a price of $0.0305 per share in satisfaction of the accrued dividends on the Series X Preferred Stock. The price of the common stock issued was equal to the average closing price over the five days prior the date of conversion. At December 31, 2020, dividend payable on the Series X Preferred Stock was $ 0 . 71 Table of Contents Stock Options The following table summarizes the options outstanding at December 31, 2021 and the related prices for the options to purchase shares of the Company’s common stock: Weighted Weighted Weighted average average average exercise exercise Range of Number of remaining price of Number of price of exercise options contractual outstanding options exercisable prices outstanding life (years) options exercisable options $ 0.03 - 0.39 18,746,211 9.10 $ 0.20 5,502,877 $ 0.11 18,746,211 9.10 $ 0.20 5,502,877 $ 0.11 Transactions involving stock options are summarized as follows: Shares Weighted- Average Exercise Price ($) (A) Outstanding at January 1, 2020 67,879 $ 0.03 Granted 14,886,000 0.03 Cancelled/Expired ( 1,500,000 ) 0.03 Outstanding at December 31, 2020 13,453,879 $ 0.03 Granted 14,295,000 $ 0.26 Cancelled/Expired ( 350,000 ) $ 0.03 Exercised ( 8,652,668 ) 0.03 Outstanding at December 31, 2021 18,746,211 $ 0.20 Options vested and exercisable 5,502,877 $ 0.11 (A) On December 14, 2020, the Company reset the exercise price of all the options then outstanding options to $ 0.03 per share. This included 150,000 options previously priced at $ 0.04 per share; 7,450,000 options previously priced at $ 0.05 per share; 1,000,000 options previously priced at $ 0.06 per share; and 67,879 options previously prices at $ 21.40 per share. The Company valued these options as of December 14, 2020, at the original exercise price and at the new price of $0.03 per share and charged the increase in value in the amount of $ 4,113 to operations during the year ended December 31, 2020. The exercise prices of all options are shown at the restated price of $0.03 per share. (B) On December 28, 2020, the Company accelerated the vesting of certain of its options issued to Board members, management, and consultants, resulting in a charge to operations in the amount of $ 164,647 during the year ended December 31, 2020. At December 31, 2021, the total stock-based compensation cost related to unvested awards not yet recognized was $ 3,154,383 . The Company valued stock options during the years ended December 31, 2021 and 2020 using the Black-Scholes valuation model utilizing the following variables: December 31, December 31, 2021 2020 Volatility 153.5 % to 183.5 % 149.4 % to 209.6 % Dividends $ - $ - Risk-free interest rates 0.820 % to 1.69 % 0.55 % to 1.30 % Term (years) 5.00 - 6.5 5.00 72 Table of Contents Warrants The following table summarizes the warrants outstanding at December 30, 2021 and the related prices for the warrants to purchase shares of the Company’s common stock: Shares Weighted- Average Exercise Price ($) Outstanding at December 31, 2019 1,800,000 $ 0.00858 Granted 6,582,382 $ 0.00858 Exercised ( 8,382,382 ) $ 0.0561 Outstanding at December 31, 2020 - $ - Granted 29,820,000 $ 0.625 Exercised - $ - Outstanding at December 31, 2021 29,820,000 $ 0.625 Note 11 – Income Taxes Deferred income taxes result from the temporary differences primarily attributable to amortization of intangible assets and debt discount and an accumulation of net operating loss carryforwards for income tax purposes with a valuation allowance against the carryforwards for book purposes. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. Included in deferred tax assets are Federal and State net operating loss carryforwards of approximately $ 8.1 million, which will expire through 2040. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. Due to significant changes in the Company’s ownership, the Company’s future use of its existing net operating losses may be limited. The provision (benefit) for income taxes for the years ended December 31, 2021 and 2020 consist of the following: 2021 2020 Current $ - $ - Deferred - - Total $ - $ - For the years ended December 31, 2021 and 2020, the expected tax expense (benefit) based on the U. S. federal statutory rate is reconciled with the actual tax provision (benefit) as follows: For the Years Ended December 31, 2021 2020 Expected tax at statutory rates $ ( 2,351,000 ) 21 % $ ( 617,000 ) 21 % Permanent Differences 692,000 6 % ( 42,000 ) 1 % State Income Tax, Net of Federal benefit ( 612,000 ) 5 % - 0 % Current Year Change in Valuation Allowance 2,291,000 20 % 659,000 22 % Prior Year True-Ups ( 20,000 ) 0 % - 0 % Income tax expense $ - 0 % $ - 0 % 73 Table of Contents Deferred income taxes reflect the tax impact of temporary differences between the amounts of assets and liabilities for financial reporting purposes and such amounts as measured by tax laws and regulations. Deferred income taxes include the net tax effects of net operating loss (NOL) carryforwards and the temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. As of December 31, 2021, and 2020 significant components of the Company’s deferred tax assets are as follows: For the Years Ended December 31, 2021 2020 Deferred Tax Assets (Liabilities): Accrued payroll $ 22,000 $ 41,000 ASC842-ROU Asset ( 1,117,000 ) 65,000 ASC842-ROU (Liability) 1,189,000 ( 67,000 ) Gain from derivatives ( 4,000 ) ( 107,000 ) Stock based compensation 398,000 119,000 Depreciation ( 764,000 ) ( 1,000 ) Net operating loss 8,478,000 5,861,000 Net deferred tax assets (liabilities) 8,202,000 5,911,000 Valuation allowance ( 8,202,000 ) ( 5,911,000 ) Net deferred tax assets (liabilities) $ - $ - Note 12 – Fair Value of Financial Instruments The following summarizes the Company’s derivative financial liabilities that are recorded at fair value on a recurring basis at December 31, 2021 and 2020. December 31, 2021 Level 1 Level 2 Level 3 Total Liabilities Derivative liabilities $ - $ - $ - $ - December 31, 2020 Level 1 Level 2 Level 3 Total Liabilities Derivative liabilities $ - $ - $ 807,682 $ 807,682 Note 13 – Commitments and Contingencies Legal There is no pending or anticipated legal actions at this time except as noted below in “Other.” PPP Loan During March 2020, in response to the COVID-19 crisis, the federal government announced plans to offer loans to small businesses in various forms, including the Payroll Protection Program, or "PPP", established as part of the Corona Virus Aid, Relief and Economic Security Act ("CARES Act”) and administered by the U.S. Small Business Administration. On April 25, 2020, the Company entered an unsecured Promissory Note (the "Note”) with Bank of America for a loan in the original principal amount of approximately $ 460,000 , and the Company received the full amount of the loan proceeds on May 4, 2020. The current balance is $ 460,406 and the Company is currently in discussions for a) a partial forgiveness and b) the conversion of any remaining balance into a term note. As of December 31, 2021, based on communication with Bank of America, it is expected that approximately $ 25,000 of the PPP loan will be forgiven and we have received conditional approval to pay the loan off over sixty months . 74 Table of Contents Note 14 – Subsequent Events The Company entered into a debt-for-equity exchange agreement with Gardner Builders Holdings, LLC (the “Creditor”) on January 7, 2022 (the “Agreement”). Pursuant to the Agreement, the Company issued shares of restricted common stock, par value $ 0.01 per share, of MITI (the “Restricted Shares”) to the Creditor in exchange for the Company Debt Obligations, as defined below. The Agreement settles for certain accounts payable amounts owed by the Company to the Creditor (the “Accounts Payable Amount”) as well as upcoming amounts that will become due between the date of the Agreement and April 1, 2022. The Agreement also settles incurred interest and penalties on the amounts due through January 5, 2022, as well as future interest payments on amounts to be incurred in the first quarter of 2022 (collectively, the “Additional Costs”, and combined with the Accounts Payable Amount, the “Company Debt Obligations”). The Accounts Payable Amount is $ 500,000 , the Additional Costs is $ 294,912.56 and the conversion price is $ 0.25 . As a result, 3,179,650 Restricted Shares were authorized to be issued. The Company’s Board of Directors approved the Agreement on January 5, 2022. The Company issued a 10% Promissory Note due August 14, 2022 (the “Note”), dated February 14, 2022, to Lawrence Diamond (the “Lender”). Mr. Diamond is the Chief Executive Officer of the Company and a member of its Board of Directors. The principal amount of the Note is $ 175,000 , carries a 10 % interest rate per annum, payable in monthly installments, and has a maturity date that is the earlier of (i) six ( 6 ) months from the date of execution, or (ii) the date on which the Company successfully lists its shares of common stock on Nasdaq or NYSE. The purchase price of the Note payable to the Company for the Note was $ 148,750 and was funded on February 14, 2022. The amount payable at maturity will be $175,000 plus 10% of that amount plus accrued and unpaid interest. Following an event of default, as defined in the Note, the principal amount shall bear interest for each day until paid, at a rate per annum equal to the lesser of the maximum interest permitted by applicable law and 18 %. The Note contains a “most favored nations” clause that provides that, so long as the Note is outstanding, if the Company issues any new security, which the Lender believes contains a term that is more favorable than those in the Note, the Company shall notify the Lender of such term, and such term, at the option of the Lender, shall become a part of the Note. In addition to the Note and Lender will be issued 367,500 5 -year warrants that may be exercised at $.50 per share and 367,500 5 -year warrants that may be exercised at $ .75 per share. These warrants have all of the same terms as those previously issued in conjunction with the Company’s Series C Preferred shares and its Series D Preferred shares. The Company issued a 10% Promissory Note due June 18, 2022 (the “Diamond Note”), dated March 18, 2022, to Lawrence Diamond (the “Lender”), which was subsequently amended. Lawrence Diamond is the Chief Executive Officer of the Company. The principal amount of the Diamond Note is $ 235,294.00 , carries a 10 % interest rate per annum, payable in monthly installments, and has a maturity date that is the earlier of (i) April 4, 2022, (ii) the date on which the Company successfully lists its shares of common stock on Nasdaq or NYSE, or (iii) the date of receipt of the Company of the next round of debt or equity financing in an amount of at least $1,000,000 . The purchase price of the Diamond Note payable to the Company for the Diamond Note was $ 200,000 and was funded on March 18, 2022. The amount payable at maturity will be $235,294 plus 10% of that amount plus any accrued and unpaid interest. Following an event of default, as defined in the Diamond Note, the principal amount shall bear interest for each day until paid, at a rate per annum equal to the lesser of the maximum interest permitted by applicable law and 18 %. The Diamond Note contains a “most favored nations” clause that provides that, so long as the Note is outstanding, if the Company issues any new security, which the Lender reasonably believes contains a term that is more favorable than those in the Diamond Note, the Company shall notify the Lender of such term, and such term, at the option of the Lender, shall become a part of the Note. In addition, the Lender will be issued 200,000 5 -year warrants that may be exercised on substantially the same terms as the Series A warrant issued in connection with the Company’s Series D Convertible Preferred Stock. On March 18, 2022, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with AJB Capital Investments, LLC (the “Investor”) with respect to the sale and issuance to the Investor of: (i) an initial commitment fee in the amount of $ 430,000 in the form of 1,720,000 shares (the “Commitment Fee Shares”) of the Company’s common stock (the “Common Stock”), which Commitment Fee Shares can be decreased to 720,000 shares ($180,000) if the Company repays the Note on or prior its maturity , (ii) a promissory note in the aggregate principal amount of $ 750,000 (the “Note”), and (iii) Common Stock Purchase Warrants to purchase up to an aggregate of 750,000 shares of the Common Stock (the “Warrants”). The Note and Warrants were issued on March 17, 2022 (the “Original Issue Date”) and were held in escrow pending effectiveness of the Purchase Agreement. 75 Table of Contents Pursuant to the terms of the Purchase Agreement, the initial Commitment Fee Shares were issued at a value of $430,000, the Note was issued in a principal amount of $750,000 for a purchase price of $ 675,000 , resulting in an original issue discount of $ 75,000 ; and the Warrants were issued, with an initial exercise price of $ 0.50 per share, subject to adjustment as described herein. The aggregate cash subscription amount received by the Company from the Investor for the issuance of the Commitment Fee Shares, Note and Warrants was $ 616,250.00 , due to a reduction in the $675,000 purchase price as a result of broker, legal, and transaction fees. As previously disclosed on the Company’s form 8-K filed on March 26, 2021 and October 22, 2021, the Company issued the Series C Convertible Preferred Stock and Series D Convertible Preferred Stock to the investors named therein (the “Series C Investors” and “Series D Investors”). The Company obtained consents and waivers (the “Consents”) from the Series D and Series D Investors to allow the Company to enter into the Purchase Agreement. The Company issued 411,000 shares of Common Stock to the Series C Investors 1,271,000 shares of Common Stock to the Series D Investors in connection with obtaining the Consents. 76 Table of Contents ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None.