Mitesco, Inc. 10-K

ITEM 1. 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. On October 13, 2023, the Company effected a re-domestication to Nevada. We are a holding company seeking to provide products, services and technology to make accessible higher quality, and more affordable healthcare solutions. We have recently discontinued the business activities within “The Good Clinic, LLC” healthcare subsidiary due to lack of profitability and limited funding. We have a number of near-term opportunities that we hope to pursue, assuming the capital markets make sufficient funding available at reasonable rates. Our operations are subject to comprehensive federal, state, and local laws and regulations in the jurisdictions in which it does business. There also continues to be a heightened level of review and/or audit by federal and state regulators of the health and related benefits industry’s business and reporting practices. As of the date of this filing, we are not subject to any actual or anticipated regulatory reviews or audits relating to our operations. The laws and rules governing our businesses and interpretations of those laws and rules continue to evolve each year and are subject to frequent change. The application of these complex legal and regulatory requirements to the detailed operation of our businesses creates areas of uncertainty. Further, there are numerous proposed health care, financial services and other laws and regulations at the federal and state level some of which could adversely affect our businesses if they are enacted. We cannot predict whether pending or future federal or state legislation will have an adverse effect on our business. We can give no assurance that the businesses, financial condition, operating results and/or cash flows will not be materially adversely affected, or that we will not be required to materially change its business practices, based on: (i) future enactment of new health care or other laws or regulations; (ii) the interpretation or application of existing laws or regulations, including the laws and regulations described in this Government Regulation section, as they may relate to one or more of our businesses, one or more of the industries in which we compete and/or the health care industry generally; (iii) our pending or future federal or state governmental investigations. Discontinued Operations and Debt Exchange Agreement We have discontinued business activities as a result of the closure of “The Good Clinic, LLC” healthcare subsidiary in late 2022. It has been permanently shuttered due to a lack of profitability. See note 4. On December 8, 2023, the Company sold the remaining assets of The Good Clinic, LLC to Leading Primary Care LLC, a company organized by Michael C. Howe, the former CEO of The Good Clinic, LLC for total consideration of approximately $2.5 million in the form of forgiveness of certain notes payable held by Howe. See note 16. As a result, the accounts of The Good Clinic, LLC have been included in “Net (loss) from discontinued operations” in our consolidated statements of operations. Additionally, these assets and liabilities have been presented as discontinued operations in our consolidated balance sheet as of December 31, 2023 and December 31, 2022. See Note 4 - Discontinued Operations for additional information. Reverse Stock Split On December 12, 2022, our board of directors approved the filing of a certificate of amendment to our amended and restated certificate of incorporation (the “Amendment”) with the Secretary of State of the State of Delaware to affect a one-for-fifty reverse stock split. The Amendment became effective at 5:00 p.m. Eastern Time on December 12, 2022. 7 Table of Contents Pursuant to the Amendment, at the effective time of the Amendment, every fifty (50) shares of our issued and outstanding common stock was automatically combined into one (1) issued and outstanding share of common stock. The Reverse Stock Split affected all shares of our common stock outstanding immediately prior to the effective time of the Amendment. No fractional shares were issued as a result of the Reverse Stock Split. Stockholders of record who would otherwise be entitled to receive a fractional share received a full share thereof. As a result of the Reverse Stock Split, proportionate adjustments were made to the per share exercise price and/or the number of shares issuable upon the exercise or vesting of all stock options and warrants issued by us and outstanding immediately prior to the effective time of the Amendment, which resulted in a proportionate decrease in the number of shares of our common stock reserved for issuance upon exercise or vesting of such stock options and warrants and a proportionate increase in the exercise price of all such stock options and warrants. In addition, the number of shares reserved for issuance under our equity compensation plans immediately prior to the effective time of the Amendment were reduced proportionately. All share and per share amounts of common stock presented in this Annual Report on Form 10k have been retroactively adjusted to reflect the Reverse Stock Split. On January 4, 2023, the Company disclosed in a DEF 14C filing with the SEC that its shareholders had authorized the Board of Directors to affect a reverse split of up to four (4) to one (1) reverse split. Authorization to be available until December 18, 2025. The SEC filing can be found at the following link: https://www.sec.gov/Archives/edgar/data/802257/000118518523000003/mitesco20230104_def14c.htm On February 20, 2024 the Board of Directors of Mitesco unanimously voted to terminate this previously approved authorization. Competition There is a large market for acquisitions by other holding companies, investors, private equity, venture capital and other existing businesses in the subject matter areas of the targets. Our competitors may have greater name recognition, longer operating histories and significantly greater financial and other resources than we do. Further, our competitors may be acquired by third parties with greater available resources. As a result, our competitors may be able to respond more quickly and effectively than we can to new or changing opportunities, technologies, standards, or patient requirements and may have the ability to initiate or withstand substantial price competition. In addition, our competitors have established, and may in the future establish, cooperative relationships with vendors of complementary technologies or services to increase the availability of their solutions in the marketplace. Accordingly, new competitors or alliances may emerge that have greater market share, a larger member or patient base, more widely adopted proprietary technologies, greater marketing expertise, greater financial resources, and larger sales forces than we have, which could put us at a competitive disadvantage. Our competitors could also be better positioned to serve certain segments of the healthcare market, which would limit our member and patient growth. In light of these factors, even if our solution is more effective than those of our competitors, current members, health network partners and enterprise clients may accept alternative competitive solutions in lieu of purchasing our solution. If we are unable to compete in the healthcare market, our business would be harmed. We cannot be assured that we will be able to compete any of the markets in which we intend to operate. This could cause you to lose your investment. Our Competitive Strengths We believe the following strengths and market dynamics provide us a competitive advantage. As additional capital is available to the Company, we will pursue the acquisition of existing healthcare services and technology business, and we may consider opening new clinics using our revised and less capital-intensive approach going forward: ● Experienced team - with a proven track record of growing businesses both organically and through acquisition. ● Public company experience – solid knowledge of the equity markets and participants in the financing of public companies. ● Compliance experience – extensive securities law experience and in SEC reporting. ● Knowledge of audit and accounting requirements – any acquisition into a publicly held company must be able to be fully audited according to PCOAB standards. 8 Table of Contents Operational Overview During 2021 and through the year ended December 31, 2022, we focused on establishing medical clinics utilizing nurse practitioners and telemedicine technology under “The Good Clinic” name. Our strategy was to utilize a mix of nurse practitioners and telemedicine technology in clinics to improve patient experiences and outcomes and reduce healthcare costs as compared to other available treatment options. As previously noted, we made a strategic decision to shutter the clinic in the fourth quarter of 2022 and released the entire staff. Our senior management team and the Board of Directors within the holding company was replaced in December 2023, adding individuals with greater knowledge of turnaround management, and acquisition development. As we redevelop our new strategy for lower cost operations, we expect to focus on the acquisition of existing technology and services businesses, or those with very near-term potential. Management/Human Capital We believe that the Company’s management team will remain relatively small in the near term and should consist of a team with experience in 1) public company accounting and finance, 2) software and systems, 3) brand marketing, and 4) public equities financing. We also use the services of additional advisors and consultants on an as needed basis to perform outsourced tasks including accounting, SEC reporting, corporate finance, and investor relations. As of December 31, 2023, none of our employees were represented by a union or covered by a collective bargaining agreement. We have not experienced any work stoppages and we consider our relationship with our employees to be good. Intellectual Property In August 2020, we applied for trademark protection of “The Good Clinic”, with the United States Patent & Trademark Office (USPTO). Our federal trademark registration for the mark THE GOOD CLINIC is on the Supplemental Register, not the Principal Register. The Supplemental Register does not confer the same rights and benefits as the Principal Register. After a period of five years of use, or sooner based upon our marketing resources and our use of the name, we intend to apply to have the name transferred to the Principle Register. These assets, along with remaining clinic equipment, operating documentation and computers were sold in exchange for cancellation of certain debts, as noted below. Debt Exchange Agreement On December 8, 2023, effective November 30, 2023, the Company sold the remaining assets of The Good Clinic, LLC to Leading Primary Care LLC, a company organized by Michael C. Howe, the former CEO of The Good Clinic, LLC for total consideration of approximately $2.5 million. Consideration consisted of cancelling existing notes payable and accrued interest owed to Mr. Howe in the amount of approximately $2.5 million. The Company recognized a contribution to capital on this transaction in the amount of approximately $2.5 million as Mr. Howe is a related party. On December 8, 2023, Mr. Howe also exchanged (i) 500,000 shares of Series D Preferred Stock with a stated value of approximately $0.5 million and accrued dividends of approximately $67,000, and (ii) accrued salary owed to Mr. Howe in the amount of approximately $38,000 or approximately $25,000 (the investment incentive of 65% applied only to the accrued salary portion), for 655 shares of the Company’s Series F Preferred Stock with a liquidation value of approximately $0.6 million. Other than the conversion of incentive of the approximately $25,000, there was no gain or loss recorded on this transaction. See the Form 8k filing of December 13, 2023, located here, for additional details: https://www.sec.gov/Archives/edgar/data/802257/000118518523001292/0001185185-23-001292-index.htm . Government Regulation Acquisitions of many businesses are subject to federal, state and local review and regulation. Any legal or regulatory action could be time-consuming and costly. If we or the manufacturers or distributors that supply our products fail to comply with all applicable laws, standards, and regulations, action by regulatory agencies could result in significant restrictions. Any regulatory action could have a negative impact on us and materially affect our reputation, business, and operations. Our operations and economic viability may be adversely affected by the changes in such regulations. 9 Table of Contents If there are changes in laws, regulations, or administrative or judicial interpretations, we may have to change our future business practices, or our business practices could be challenged as unlawful, which could have a material adverse effect on our business, financial condition, and results of operations. See the description below for certain of the laws, regulations, or administrative or judicial interpretations that we are currently subject to and the “Risk Factors” section. Environmental and Occupational Safety and Health Administration Regulations We have been subject to federal, state, and local regulations governing the storage, use and disposal of waste materials and products with regard to our previous clinic subsidiary operations. Although we believe that our safety procedures for storing, handling, and disposing of these materials and products comply with the standards prescribed by law and regulation, we cannot eliminate the risk of accidental contamination or injury from those hazardous materials. In the event of an accident, we could be held liable for any damages that result and any liability could exceed the limits or fall outside the coverage of our insurance coverage, which we may not be able to maintain on acceptable terms, or at all. We could incur significant costs and attention of our management could be diverted to comply with current or future environmental laws and regulations. Federal regulations promulgated by the Occupational Safety and Health Administration impose additional requirements on us, including those protecting employees from exposure to elements such as blood-borne pathogens. We cannot predict the frequency of compliance, monitoring, or enforcement actions to which we may be subject as those regulations are being implemented, which could adversely affect our operations. Recent Developments We are a holding company with current operating plans to acquire one or more existing businesses that may have the ability to scale i operations organically, or through additional acquisitions and capital from the public equity markets. While from late 2012 through late 2022 we did operate a subsidiary focused on primary care focused healthcare clinics, we made a strategic decision to close those clinic due to a lack of profitability. The clinics closed and leases cancelled include the clinics in: 1) Eagan, MN, 2) St. Paul MN, 3) St. Louis Park, MN, 4) Maple Grove, MN, 5) NE Minneapolis, 6) Wayzata, MN (under construction), and 7) two clinics in Denver, CO (under construction). We have settlements in place, or in process with the leaseholders and construction entities which participated in the clinic operation. We expect continued efforts to negotiate the settlement of any remaining liabilities during the first half of 2024. There were investments of over $15 million generated from the sale of certain securities, and debt instruments starting in 2021 and continuing through 2023. As we move forward, we expect to integrate those securities into common stock, or certain forms of preferred shares where we may find a path of liquidity in the public equity markets for their ultimate repayment. We currently operate with a three (3) person Board of Directors and a small number of advisors and consultants. Two (2) of our Board members have assumed operating roles in order to minimize operating expenses. They are not compensated for their operating roles and received only a small stock issuance in consideration of their role as a member of the Board. There is no source of cash revenue currently, instead we have relied on small debt offerings from existing institutional shareholders. We expect to continue our efforts to reduce our costs of carry from prior issuances of securities by renegotiating their terms. Our ability to attract acquisitions, and the capital necessary to grow those acquisitions, we depend on a liquid market for our common stock, continued compliance with all securities laws, and the availability for capital within the current investor base, and with new participants. Reverse Stock Split On December 12, 2022, the Company effected one-for-fifty reverse-split of its common stock. The number of shares of common stock outstanding immediately before the reverse-split was 231,427,580; the number of shares of common stock immediately following the reverse-split was 4,631,437, a decrease of 226,796,143 shares. This reverse stock split was effected as of December 12, 2022. On January 4, 2023, the Company disclosed in a DEF 14C filing with the SEC that its shareholders had authorized the Board of Directors to affect a reverse split of up to four (4) to one (1) reverse split. Authorization to be available until December 18, 2025. The SEC filing can be found at the following link: https://www.sec.gov/Archives/edgar/data/802257/000118518523000003/mitesco20230104_def14c.htm On February 20, 2024 the Board of Directors of Mitesco unanimously voted to terminate this previously approved authorization. 10 Table of Contents Legal Settlements on Sites Previously Operated by The Good Clinic, LLC Subsidiary Nordhaus Clinic On November 1, 2020, we entered into an agreement to open a clinic in Minneapolis, Minnesota. The initial lease term is eight years. Fixed rent payments under the initial term are approximately $511,000. On November 6, 2023, the Company received a termination notice from the landlord indicating the lease had been terminated. No additional claims have been received from the landlord and the Company believes no additional amounts are owed. Egan Clinic a.k.a. Vikings On October 14, 2021, we entered into an agreement to open a clinic in Eagan, Minnesota, which began operations in the fourth quarter of 2021. The initial lease term is for 96 months. Fixed rent payments under the initial term are approximately $767,000. A Summary Judgment was granted on December 4, 2023, in the amount of $488,491, and the entry of final judgment was entered on December 15, 2023 and the Company has released the property back to the leaseholder. St. Paul Clinic a.k.a. The Grove On August 31, 2021, we entered into an agreement to open a clinic in St. Paul, Minnesota, which began operations in the fourth quarter of 2021. The initial lease term is for 114 months. Fixed rent payments under the initial term are approximately $1,153,000. A stipulation for Judgment was filed on December 21, 2023 in the amount of $415,266. The stipulated judgment includes $178,542 in unpaid back rent, $172,124 in resolution of mechanics’ liens, and $64,600 in attorneys’ fees. Final entry of judgment by the Court was entered against the Company on January 19, 2024, and the Company has released the property back to the leaseholder. St. Louis Park Clinic a.k.a. Excelsior & Grand On May 24, 2021, we entered into an agreement to open a clinic in St. Louis Park, Minnesota, which began operations in the third quarter of 2021. The initial lease term is seven years. Fixed rent payments under the initial term are approximately $673,000. The Company agreed to and executed a Confession of Judgment in the amount of $425,351 on April 2, 2024 and has released the property back to the leaseholder. We received the fully executed and recorded judgement on April 10, 2024. Eden Prairie Clinic a.k.a. TP Elevate On June 8, 2021, we entered into an agreement to open a clinic in Eden Prairie, Minnesota, which began operation in the third quarter of 2021. The initial lease term is eight years. Fixed rent payments under the initial term are approximately $620,000. The Company has surrendered possession of the property and is currently in negotiations the amounts owed and is in the process of settling the remaining amounts owed. Maple Grove Clinic a.k.a. Arbor Lakes On October 8, 2021, we entered into an agreement to open a clinic in Maple Grove, Minnesota which began operation in the fourth quarter of 2021. The initial lease term is for 108 months. Fixed rent payments under the initial term are approximately $1,153,127. On October 22, 2022, the Company entered into a settlement agreement with the leaseholder for $219,576 and the Company has released the property back to the leaseholder. Radiant Clinic a.k.a. LMC Welton On September 9, 2021, we entered into an agreement to open a clinic in Denver, Colorado, which was expected to begin operation in the first quarter of 2023 but possession of which has been relinquished to the landlords. The initial lease term is for 90 months. Fixed rent payments under the initial term are approximately $782,000. As of April 10, 2024, the Company has settled the amounts owed to the leaseholder and full resolution of all liens for approximately $530,000 and the Company has released the property back to the leaseholder. Quincy Clinic a.k.a. 1776 Curtis On September 28, 2021, we entered into an agreement to open a clinic in Denver, Colorado, which was expected to begin operation in the first quarter of 2023 but possession of which has been relinquished to the landlords. The initial lease term is for 94 months. Fixed rent payments under the initial term are approximately $1,079,000. A Final Judgment was granted on November 14, 2023, in the amount of $348,764 including interest, fees and other costs. The Company has released the property back to the leaseholder. 11 Table of Contents The following table summarizes the status of our property settlements as noted above and the total settlement amounts as of the date of the filing: LOCATION ALSO KNOWN AS: PROPERTY NAME/OWNER ORIGINAL OBLIGATION (NOT INC. CAPX) SETTLEMENT AMOUNT TYPE OF SETTLEMENT MINNEAPOLIS, MN NORDHAUS LENNAR $ 511,000 $ - N.A. WAYZETTA, MN PROMINADE WAZETTA BAY $ 407,000 $ 25,000 CASH PAYMENT OBLIGATION EAGAN, MN EAGAN CLINIC VIKINGS $ 767,000 $ 488,491 DEFAULT JUDGEMENT ST. LOUIS PARK, MN EXCELSIOR & GRAND EXCELSIOR $ 673,000 $ 425,350 DEFAULT JUDGEMENT ST. PAUL, MN THE GROVE CONTINENTAL 560 $ 1,153,000 $ 415,606 DEFAULT JUDGEMENT EDEN PRARIE ELEVATE TP ELEVATE $ 620,000 $ - IN PROCESS MAPLE GROVE, MN ARBOR LAKES BUTTNICK $ 1,153,127 $ 219,575 SETTLEMENT AGREE DENVER, CO LMC WELTON RADIANT $ 782,000 $ 530,000 DEFAULT JUDGEMENT DENVER, CO 1776 CURTIS QUINCY $ 1,079,000 $ 348,764 DEFAULT JUDGEMENT TOTAL $ 7,145,127 $ 2,452,768 Administrative offices On June 24, 2021, we entered into an agreement to open an administrative office in St. Louis Park, Minnesota. The initial lease term is 2.5 years. Fixed rent payments under the initial term are approximately $244,000. We have not entered into a settlement agreement on this site as of the date of this filing but expect to shortly. Gardner Debt for Equity Agreement and other obligations 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 settled certain accounts payable amounts owed by the Company to the Creditor (the “Accounts Payable Amount”) as well as then upcoming amounts that would become due between the date of the Agreement and April 1, 2022. The Agreement also settled 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 was $500,000, the Additional Costs were $294,912 and the conversion price was $12.50. As a result, 63,593 Restricted Shares were authorized to be issued. The Company’s Board of Directors approved the Agreement on January 5, 2022. Much of the amounts claimed by Gardner has been resolved by the settlements with the various leaseholders where Gardner had filed liens. During 2021 and through 2022 a total of $2,305,155 was paid by the Company directly to Gardner for their services. As of the date of this filing the Company is continuing an effort to negotiate a settlement of any remaining obligations to this vendor. Smaller Reporting Company We are subject to the reporting requirements of Section 13 of the Exchange Act, and subject to the disclosure requirements of Regulation S-K of the SEC, as a “smaller reporting company.” That designation will relieve us of some of the informational requirements of Regulation S-K. 12 Table of Contents Sarbanes/Oxley Act Except for the limitations excluded by the JOBS Act discussed under the preceding heading “Smaller Reporting Company,” we are also subject to the Sarbanes-Oxley Act of 2002. The Sarbanes/Oxley Act created a strong and independent accounting oversight board to oversee the conduct of auditors of public companies and strengthens auditor independence. It also requires steps to enhance the direct responsibility of senior members of management for financial reporting and for the quality of financial disclosures made by public companies; establishes clear statutory rules to limit, and to expose to public view, possible conflicts of interest affecting securities analysts; creates guidelines for audit committee members’ appointment, compensation and oversight of the work of public companies’ auditors; management assessment of our internal controls; prohibits certain insiders from trading during pension fund blackout periods; requires companies and auditors to evaluate internal controls and procedures; and establishes a federal crime of securities fraud, among other provisions. Compliance with the requirements of the Sarbanes/Oxley Act will substantially increase our legal and accounting costs. Exchange Act Reporting Requirements Section 14(a) of the Exchange Act requires all companies with securities registered pursuant to Section 12(g) of the Exchange Act, like we are, to comply with the rules and regulations of the SEC regarding proxy solicitations, as outlined in Regulation 14A. Matters submitted to shareholders at a special or annual meeting thereof or pursuant to a written consent will require us to provide our shareholders with the information outlined in Schedules 14A (where proxies are solicited) or 14C (where consents in writing to the action have already been received or anticipated to be received) of Regulation 14, as applicable; and preliminary copies of this information must be submitted to the SEC at least 10 days prior to the date that definitive copies of this information are forwarded to our shareholders. We are also required to file annual reports on Form 10-K and quarterly reports on Form 10-Q with the SEC on a regular basis, and will be required to timely disclose certain material events (e.g., changes in corporate control; acquisitions or dispositions of a significant amount of assets other than in the ordinary course of business; and bankruptcy) in a Current Report on Form 8-K. Number of Total Employees and Number of Full Time Employees As of the date of this Annual Report, we have 3 full-time employees and no part-time employees. We do not now, or expect in the near term, to provide any benefits to our employees, advisors or consultants. We have historically provided incentive stock options and other equity incentives to officers, directors and key employees to provide ownership and alignment of interests with our shareholders. As a company, we seek diversity and inclusion in our workplace. Other Corporate Information Our website is www.mitescoinc.com and our principal executive offices is located at 505 Beachland Blvd, Vero Beach, Florida 32963. Our telephone number is (844) 383 8689. We make available free of charge on our website our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports, as soon as reasonably practicable after we electronically file or furnish such materials to the SEC. Our website (www.mitescoinc.com) and the information contained therein or connected thereto are not intended to be incorporated into this Form 10-K. Our filings are also available through the SEC website www.sec.gov. 13 Table of Contents