What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2023-07-14 compared with 2022-04-05 · 1051 added, 336 removed, 510 unchanged (73% of the section changed)

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INDEX TO THE CONSOLIDATED FINANCIAL STATEMENTS

REPORTS OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMS (PCAOB 587 )

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (PCAOB 587 )

CONSOLIDATED BALANCE SHEETS

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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.

and subsidiaries (the Company) for the two years then ended December 31, 2022 and 2021, and the related consolidated statements of operations, stockholders’ equity (deficit) and cash flows for the two years ended December 31, 2022, 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, 2022 and 2021, and the consolidated results of its operations and its cash flows for the two years ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America.

The Company's Ability to Continue as a Going Concern

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(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.

The critical audit matters communicated below 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 (i) relate to accounts or disclosures that are material to the financial statements and (ii) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Derivative liability on Convertible Promissory Notes – Refer to Note 9 and 12 of the financial statements

Critical Audit Matter Description

During the year ended December 31, 2022, the Company entered into five Securities Purchase Agreements with respect to the sale and issuance to the investors of (i) an initial commitment fee in the form of shares (Commitment Fee Shares) of the Company's common stock which Commitment Fee Shares can be decreased if the Company repays the notes on or prior to their maturity, (ii) a promissory note and (iii) common stock purchase warrant to purchase shares of common stock.

As described in Note 9 and 12 to the financial statements, as of December 31, 2022, the Company utilized a Monte Carlo Simulation and PWERM model to value a derivative liability relating to the "True-Up Share Obligations and Warrants", respectively in accordance with ASC 820, “Fair Value Measurement”.

A Monte Carlo simulation is used to model the probability of different outcomes in a process that cannot easily be predicted due to the intervention of random variables.

It is a technique used to understand the impact of risk and uncertainty and establishes a fair value based on the most likely outcome.

The PWERM Model develops an estimate based on the probability-weighted present value of various future outcomes.

We identified the valuation of the derivative liability relating to the above note payable as a critical audit matter because the results cannot be duplicated and requires a high degree of auditor judgment.

The principal considerations for our determination that performing procedures relating to the valuation of the note features as a critical audit matter are (1) there was a high degree of auditor judgment and subjectivity in applying procedures relating to the fair value of the derivative liability due to the significant judgments made by management when developing the estimates and (2) significant audit effort was required in evaluating the significant assumptions relating to the estimates, including the assumptions used in the simulations.

In addition, the audit effort involved the use of professionals with specialized skill and knowledge to assist in performing the following procedures and evaluating the audit evidence obtained.

How the Critical Audit Matter was Addressed in the Audit

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the financial statements.

These procedures included the following:

Performed an analysis of the Company's Convertible Note, Warrants and True-Up Obligation including various conversion and other provisions

Inquiry of management regarding the development of the assumptions used in the valuation of the derivative liability.

Testing management’s process included evaluating the appropriateness of the valuation models, testing the completeness, accuracy, and relevance of underlying data used in the model, and testing the reasonableness of significant assumptions, including the stock price, term, volatility, annual expected return, discount rate and dividend yield.

Professionals with specialized skill and knowledge were used to assist in evaluating the reasonableness of significant assumptions.

Evaluated the experience and qualifications of the Company’s external consultant assisting with the estimate of fair value.

Made inquiries of the Company’s external consultant to ascertain objectivity or bias of the external consultant.

Obtained an understanding of the nature of the work the Company’s external consultant performed, including the objectives and scope of the external consultant’s work and the methods or assumptions used.

Identified and evaluated assumptions utilized by the external consultant and the supporting evidence provided.

Identified and evaluated significant assumptions used by the Company’s external consultant for reasonableness.

We have served as the Company’s auditor since 2020.

Henderson, NV

April 4, 2022

Las Vegas, NV

July 14, 2023

MITESCO, INC.

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Construction in progress

Fixed assets, net of accumulated depreciation of $ 183,988 and $ 19,590

Fixed assets, net of accumulated depreciation of $ .06 million and $ 19,600

LIABILITIES AND (DEFICIENCY IN) STOCKHOLDERS' EQUITY

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Accrued interest

Accrued interest - related parties

Derivative liabilities

Lease liability - operating leases, current

Notes Payable, net of discount

Convertible notes payable, net of discount of $ 0 and $ 317,405

Convertible note payable, in default

Notes payable, net of discounts of $ 0.04 million and $ 0 million

Notes payable - related parties, net of discounts of $ 0.03 million and $ 0 million

SBA Loan Payable

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Preferred stock dividends payable

Preferred stock dividends payable - related parties

Total current liabilities

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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

10,000,000 shares designated Series D;

and 27,324 shares designated Series X:

Preferred stock, Series A, $ 0.01 par value, 0 shares issued and outstanding as of December 31, 2022 and 2021

Preferred stock, Series C, $ 0.01 par value, 1,038,708 and 940,644 shares issued and outstanding as of December 31, 2022 and 2021, respectively

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

Preferred stock, Series X, $ 0.01 par value, 24,227 and 26,227 shares issued and outstanding at December 31, 2021 and 2020, respectively

Preferred stock, Series D, $ 0.01 par value, 3,100,000 shares issued and outstanding as of December 31, 2022 and 2021

Preferred stock, Series X, $ 0.01 par value, 24,227 shares issued and outstanding at December 31, 2022 and 2021

Common stock subscribed

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CONSOLIDATED STATEMENTS OF OPERATIONS

Cost of goods sold

For the Years

Revenue-services

Revenue-products

Total revenue

Cost of goods sold - services

Cost of goods sold - products

Total cost of goods sold

Gross (loss) profit

Operating expenses:

General and administrative

Impairment of fixed assets

Total operating expenses

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Interest expense

Interest expense - related parties

Loss on legal settlement

Gain on settlement of accounts payable

Loss on true-up shares

Gain on waiver and commitment fee shares

Gain on waiver and commitment fee shares - related parties

Gain on settlement of accrued salary

(Loss) Gain on settlement of accounts payable

Gain on settlement of notes payable

Gain on settlement of warrants

(Loss) Gain on revaluation of derivative liabilities

Loss on revaluation of derivative liabilities

Total other expense

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Preferred stock dividends

Preferred stock dividends - related parties

Preferred stock deemed dividends

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Vesting of stock options issued to employees

Common stock issued for accrued salaries

Common stock issued for services

Settlement of derivative liabilities

Gain on settlement of stock payable

Common stock issued for conversion of notes payable and accrued interest

Issuance of Preferred A stock to consultants

Preferred stock dividends, $ 3.62 per share ( 10 % of stated value per year)

Issuance of Preferred X stock for dividends payable

Loss for the year ended December 31, 2020

Balance, December 31, 2020

Vesting of common stock issued to employees

Vesting of stock options issued to employees

Common stock issued for services

Common stock issued for conversion of notes payable and accrued interest

Sale of common stock in private placement

Sale of Preferred Stock Series C

Sales of Preferred Stock Series C

Warrants issued with Preferred Stock Series C

Sale of Preferred Stock Series D

Sales of Preferred Stock Series D

Warrants issued with Preferred Stock Series D

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Shares of common stock issued for conversion of Preferred Stock Series C

Common stock subscribed for accounts payable and accrued liabilities

Shares of common stock issued for accounts payable and accrued liabilities

Stock issued from common stock subscribed

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Balance, December 31, 2021

Vesting of common stock issued to employees

Vesting of stock options issued to employees

Common stock issued for services

Conversion of accounts payable to common stock

Commitment fee shares

Waiver fee shares

Shares issued for services

Warrants issued with note payable - Diamond 1

Warrants issued with note payable - Diamond 2

Warrants issued with notes payable

Gain on settlement of accrued payroll

Issuance of shares previously subscribed for conversion of accounts payable

Shares issued in connection with make-good agreement

Shares issued for Series X dividends

Series C Preferred Stock adjusted for prior conversions

Preferred stock dividends

Shares issued due to rounding in reverse split

Loss for the year ended December 31, 2022

Balance, December 31, 2022

The accompanying notes are an integral part of these audited consolidated financial statements.

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CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Years

CASH FLOWS FROM OPERATING ACTIVITIES

Adjustments to reconcile net loss to net cash used in operating activities:

Preferred A stock issued to consultants

Impairment of assets

Amortization of right-to-use asset

Net gain on settlement of notes payable

Gain on settlement of accounts payable

Financing cost - waiver fee shares

Gain on waiver fee shares

Loss on commitment shares

Gain on conversion of accrued salary

(Gain) on settlement of warrants

Loss on conversion of Pref Stock Series A to common stock

(Gain) loss on revaluation of derivative liabilities

Derivative expense

Amortization of loan fees

Loss on settlement of accounts payable

Amortization of discount on notes payable

Amortization of discount on notes payable - related parties

Share-based compensation

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Prepaid expenses

Due from related party

Accounts payable and accrued liabilities

Operating lease liability

Operating lease liability, net

Other current liabilities

Accrued interest

Accrued interest - related parties

Net cash used in operating activities

CASH FLOWS FROM INVESTING ACTIVITIES

Cash paid for acquisition of fixed assets

Cash paid for acquisition of fixed assets and construction in progress

Net cash used in investing activities

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Proceeds from sales of Series D Preferred Stock, net of fees

Proceeds from notes payable, net of discount

Proceeds from sale of common stock

Proceeds from landlord financing of leasehold improvements

Proceeds from convertible notes payable, net of discount

Proceeds from notes payable - related parties, net of discounts

Proceeds from notes payable, net of discounts

Principal payments on notes payable related parties

Principal payments on notes payable

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CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Years

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

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NON-CASH INVESTING AND FINANCING ACTIVITIES:

Stock issued for conversion of debt and accrued interest

Stock issued for common stock subscribed

Settlement of derivative liabilities

Discount on notes payable due to derivative liabilities

Preferred stock dividend

Deemed dividends on Preferred Stock

Settlement of derivative liabilities

Conversion of Series A Preferred stock to common stock

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Conversion of accounts payable to common stock subscribed

Cashless exercise of warrants

Discount on note payable due to warrants

Capital expenditures in accounts payable

Discount on notes payable due to warrants

(Decrease) Increase in capital expenditures included in accounts payable

The accompanying notes are an integral part of these audited consolidated financial statements.

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December 31, 2022 and 2021

Note 1 – Description of Business

Description of Business

Company Overview

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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.

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”).

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.

We opened our first The Good Clinic in Minneapolis, Minnesota in the first quarter of 2021 and had six operating clinics during the year ended December 31, 2022, with two additional sites under contract.

In the fourth quarter of fiscal 2022 we made the strategic decision to reduce our capital needs by closing our clinic operations and releasing a significant portion of our staff.

As we redevelop our new strategy for lower cost operations, we hope to slowly open clinics, using the same staffing approach, but with a wider range of services for a broader portion of the population with healthcare needs.

Reverse Stock Split

On December 12, 2022, the Company effected a one-for-fifty (1-for-50) reverse stock split of its common stock (the “Reverse Stock Split”).

All references to common stock, warrants to purchase common stock, options to purchase common stock, share data, per share data and related information contained in the consolidated financial statements have been retrospectively adjusted to reflect the effect of the Reverse Stock Split for all periods presented.

Going Concern

Effective December 8, 2022, we closed all of our clinic locations due to a lack of funding.

Subsequent to that date we have lost possession of all except one clinic location.

Due to difficulty in securing financing, we are uncertain of when or even if we will be able to resume operations at any clinic location.

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.

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.

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

The COVID-19 pandemic, decades-high inflation and concerns about an economic recession in the United States or other major markets has resulted in, among other things, volatility in the capital markets that may have the effect of 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 due to these factors could materially affect the Company’s business and the value of its common stock.

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”).

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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.

The Company had cash and cash equivalents of $ 36,000 and $ 1.2 million as of December 31, 2022 and 2021.

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.

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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.

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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

Recent Accounting Standards

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.

This ASU reduces the number of accounting models for convertible debt instruments and convertible Preferred Stock, and amends 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.

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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.

The adoption of this new guidance did not have a material effect 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 Shareholders

Net Loss per Share Applicable to Common Stockholders

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As of December 31, 2022 and 2021, the following shares were issuable and excluded from the calculation of diluted loss:

Convertible Notes

Preferred Stock

Accrued Interest

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.

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.

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.

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.

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.

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.

As of December 31, 2021, the shares of Series X Preferred Stock issued and outstanding is as follows:

Ronald Riewold, Director

Deferred Compensation

Larry Diamond, Director, and CEO

Deferred Compensation

James Crone, ex-Officer, and Director

Deferred Compensation

Louis Deluca, ex-Officer, and Director

Deferred Compensation

Irish Italian Retirement Fund

Consulting services, notes payable

Frank Lightmas

Note 6 – Accounts Payable and Accrued Liabilities

Related Party Transactions

The Company was involved in a significant number of fundraising transactions with related parties during the years ended December 31, 2022 and 2021.

See notes 10 and 12.

Accounts Payable and Accrued Liabilities

Accounts payable and accrued liabilities consisted of the following at December 31, 2022 and 2021:

2 unchanged sentences

Total accounts payable and accrued liabilities

Note 7 - Right to Use Assets and Lease Liabilities – Operating Leases

Accounts Payable Exchanged for Common Stock

On January 5, 2022, we entered into an exchange agreement with Gardner Builders Holdings, LLC (“Gardner”) (the “Gardner Agreement”).

Pursuant to the Gardner Agreement, we have authorized the issuance of shares of the Company’s restricted common stock to Gardner in exchange for the certain accounts payable and additional amounts due to Gardner as defined below.

The Gardner Agreement settles certain amounts owed by us to Gardner (the “Accounts Payable Amount”) as well as upcoming amounts that will become due between the date of the Gardner Agreement and April 1, 2022.

The Gardner Agreement also settled incurred interest and penalties on the amounts owed through January 5, 2022, as well as future interest payments on amounts to be incurred in the first quarter of 2022 (collectively, the “Additional Costs”, and combined with the Accounts Payable Amount, the “Company Debt Obligations”).

The Accounts Payable Amount is $ 500,000 , the Additional Costs is $ 294,913 and the conversion price is $ 12.50 .

As a result, 63,593 Restricted Shares were authorized to be issued.

Our Board of Directors approved the Gardner Agreement on January 5, 2022.

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.

1 unchanged sentence

Lease expense for the years ended December 31, 2022 and 2021 amounted to $ 860,705 and $ 351,854 , 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.

The Company’s RTU asset amortization for the years ended December 31, 2022 and 2021 was $ 357,700 and $ 162,276 , respectively.

During the year ended December 31, 2022, the Company recognized an impairment of RTU assets in the amount of $ 3,185,591 in connection with the closing of its clinics during the period.

The remaining difference between the lease expense and the associated RTU asset amortization consists of interest at a rate of 12 % for the years ended December 31, 2022 and 2021.

The weighted-average lease term outstanding was 84.0 and 92.1 months at December 31, 2022 and 2021, respectively.

Right to use assets – operating leases are summarized below:

12 unchanged sentences

Lease liability

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.