Mitesco, Inc. 10-K

ITEM 5. MARKET FOR REGISTRANT ’ S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Our Common Stock is quoted on the OTC Market (“OTC”) under the symbol “MITI.” On April 2, 2024, the price of our Common Stock as reported on the OTC was $0.43 and we have approximately 500 holders of record of our Common Stock, and approximately 7,000 shareholders including smaller holders and those with restricted shares not currently in the market. Listing Our Common Stock is traded on the OTC and the symbol MITI. There is no established trading market for any of our Preferred Shares. DIVIDEND POLICY We have never declared or paid any cash dividends on our Common Stock. Under the Delaware law, we may declare and pay dividends on our capital stock either out of our surplus, as defined in the relevant Delaware statutes, or if there is no such surplus, out of our net profits for the fiscal year in which the dividend is declared and/or the preceding fiscal year. If, however, the capital of our company, computed in accordance with the relevant Delaware statutes, has been diminished by depreciation in the value of our property, or by losses, or otherwise, to an amount less than the aggregate amount of the capital represented by the issued and outstanding stock of all classes having a preference upon the distribution of assets, we are prohibited from declaring and paying out of such net profits and dividends upon any shares of our capital stock until the deficiency in the amount of capital represented by the issued and outstanding stock of all classes having a preference upon the distribution of assets shall have been repaired. The Company does not intend to declare or pay any cash dividends on its Common Stock in the foreseeable future. The holders of our Common Stock are entitled to receive only such dividends (cash or otherwise) as may be declared by our Board of Directors. On December 31, 2019, we issued 26,227 shares of its Series X Preferred stock in order to settle certain of the Company’s obligations. The Series X Preferred shares have a liquidation preference of $25.00 per share and will pay a 10% per year dividend based upon the liquidation value. The dividend may be paid in cash or in the issuance of restricted Common Stock. If the Company chooses to pay the dividend in restricted Common Stock the number of shares issued to fulfill the dividend payment shall be determined based on the stock price on the date the dividend award is made by the Board of Directors. The Series X has 400 votes per share and votes with our Common Stock. As of April 2, 2024 the number of X Preferred shares issued and outstanding was 33,589. From late July 2023 until February 2024 the Company’s common stock was trading on the OTC “Expert Market” instead of the traditional OTC Quote system. This change came as a result of late SEC filings creating non-compliance with certain standards. Since the move to the OTC Expert Market trading volume and prices have been a fraction of the historical results for the Company’s common stock. Because of the substantially lower price realized on the OTC Expert Market the holders of the Series X Preferred shares modified their policy on pricing of the restricted common stock used for the dividend payments retroactive to July 2023. Until further notice the number of dividend shares will be determined using a price per share of $.80 in computing the number of shares to be issued. This represents a 20% discount to the average closing price immediately before the trading of the common stock was moved onto the OTC Expert Market. This change was approved by a unanimous vote of the holders of the Series X Preferred shares as of January 17, 2024. Effective April 1, 2024 the Company intends to return to the dividend payment terms as defined in the Certificate of Designation for the Series X Preferred stock, as such the share price used in future dividend payment shall be determined using the closing price of the common stock on the 15 th day of each month, and the shares shall be issued quarterly to reduce administrative costs. 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 and to be paid within 15 days after the end of each of our fiscal quarters. The Series D Preferred Stock along with the Series C Preferred Stock ranks senior to all other preferred stock of the Company except in relation to the Company’s Series X Preferred Stock, which ranks pari passu to the Series C Preferred Stock, with respect to the preferences as to dividends, distributions and payments upon the liquidation, dissolution and winding up of the Company. Holders of shares of the Series F Preferred Stock are entitled to receive, on each Dividend Payment Date, whether or not declared, set aside for payment or otherwise authorized by the Board of Directors, payment-in-kind dividends payable to the holder(s) of Series F Preferred Stock only in additional shares of Series F Preferred Stock (“PIK Dividends”) at the quarterly rate of three-hundredths (3/100th) of one share per outstanding Series F Share (equivalent to one-quarter (1/4) of 12% per annum per Series F Share) (the “Quarterly Dividend Rate”). 28 Table of Contents Equity Compensation Plans For information on the Company’s equity compensation plans, see “Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.” Recent Sales of Unregistered Shares Common Stock Issuances in 2023 On January 23, 2023, the Company issued 150,000 shares of common stock at the market price of $3.19 per share to a service provider. On February 21, 2023, the Company issued 150,000 shares of common stock at the market price of $2.27 per share to a service provider. During the three months ended March 31, 2023, GS Capital converted principal and accrued interest in a convertible note payable into shares of common stock as follows: On February 14, 2023, 9,846 shares were issued at a price of $1.74 per share; on February 28, 2023, 13,555 shares were issued at a price of $1.50 per share; on March 9, 2023, 15,265 shares were issued at a price of $1.50 per share; and on March 28, 2023, 18,472 shares were issued at a price of $1.25 per share. On March 31, 2023, the Company issued a total of 8,063 shares of common stock for accrued dividends on its Series X Preferred Stock. Of this amount, a total of 1,066 shares were issued to officers and directors, 4,160 were issued to a related party shareholder, and 2,837 were issued to non-related parties. On April 4, 2023, the Company issued 2,952 shares of common stock to a consultant at a price of $1.29 per share as a commission on funds previously raised. On April 4, 2023, the Company issued 94,738 shares of common stock to GS Capital at an average price of $1.26 per share pursuant to a make-whole agreement entered into in connection with the GS Capital Warrants. On May 5, 2023, the Company issued 2,552 shares of common stock to a vendor at a price of $0.85 per share, and on May 9, 2023, the Company issued 19,622 shares of common stock at a price of $0.85 per share to the Michael C. Howe Living Trust (the “Howe Trust”), an entity controlled by a related party. These shares were issued in satisfaction of a vendor dispute. The shares issued to the Howe Trust were reimbursement for shares previously issued to the vendor by the Howe Trust with regard to this dispute. On June 29, 2023, the Company issued a total of 20,212 shares of common stock for accrued dividends on its Series X Preferred Stock. Of this amount, a total of 2,673 shares were issued to officers and directors, 10,426 were issued to a related party shareholder, and 7,113 were issued to non-related parties. Effective June 30, 2023, the Company issued 2,926 shares of common stock at a price of $12.50 to a previous board member for the conversion of accounts payable in the amount of $36,575. These shares had been carried on the Company balance sheet as Common Stock Subscribed. On August 21, 2023, the Company issued 131,362 shares of common stock at a price of $0.80 per share for accounts payable in the amount of $105,089. On August 21, 2023, the Company issued 43,750 shares of common stock at a price of $0.80 per share for accounts payable in the amount of $35,000. On August 21, 2023, the Company issued 49,226 shares of common stock at a price of $0.80 per share for accounts payable in the amount of $39,380. Effective September 29, 2023, the Company’s now former Chief Operating Officer and a board member converted a note in the amount of $18,750, accrued interest of $2,101, accrued salary of $64,434, and board of director fees of $60,000 (a total of $145,285) at a price of $0.80 per share into 181,606 shares of the Company’s common stock. 29 Table of Contents On October 10, 2023, the Company issued 23,438 shares of common stock to a service provider at a price of $0.80 per share for accounts payable in the amount of $18,750. On February 9, 2024, the Company issued 41,057 shares of common stock for dividends payable on its Series X Preferred Stock for the period from July 2023 through December 31, 2023. On March 20, 2024, the Company issued a total of 25,013 shares of restricted common stock for the payment of dividends due for its Series X Preferred stock during the first quarter of 2024 using the $.80 price per share as noted above. Common Stock Issuances in 2022 On January 12, 2022, the Company entered into a settlement agreement with an ex-employee. Pursuant to the terms of this agreement, the Company agreed to pay the amount of $19,032 for accrued salary, and the employee returned to the Company for cancellation 8,000 shares of common stock previously issued as compensation. These shares were valued at par value of $0.01 or a total value of $80; the Company recorded a gain on cancellation of these shares in the amount of $15,032. The Company entered into a debt-for-equity exchange agreement with Gardner Builders Holdings, LLC (“Gardner”) on January 7, 2022 (the “Gardner Equity Agreement”). Pursuant to Gardner Equity Agreement, the Company issued shares of restricted common stock to Gardner in exchange for the Company Debt Obligations, as defined below. The Gardner Equity Agreement settled for certain accounts payable amounts owed by the Company to Gardner. The Gardner Equity Agreement also settled accrued interest and penalties on the amounts due through January 5, 2022, as well as interest payments on amounts 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. On March 22, 2022 and March 31, 2022, the Company issued an aggregate 30,835 shares of common stock as waiver fees to holders of the Series C and Series D Preferred Stock for their waivers of certain covenants as set forth and defined in the Series C and Series D Certificates of Designations. The Company valued these shares at their contractual price of $12.50 per share and recorded the amount of $385,431 as waiver fees. The Company recorded an aggregate gain upon issuance of these shares in the amount of $198,273 based on the market price of the Company’s common stock on the date of issuance. On March 31, 2022, the Company issued 34,400 Commitment Fee Shares to AJB Capital Investors, LLC. A Monte Carlo model was used to value the warrants and call features, and a probability weighted expected return model was used to value the True-Up Provision. The contractual price of the common stock $12.50 per share; valuation purposes, the common stock was valued at the market price on the date of the transaction of $6.35 per share. The discount on the notes due to the Commitment Fee Shares and warrants was valued at $349,914. The Company recorded the amount of $226,106 to additional paid-in capital pursuant to this transaction. On March 31, 2022, the Company issued 7,648 shares of common stock at a price of $12.50 per share which were previously subscribed for the conversion of accounts payable in the amount of $95,558. On April 27, 2022, the Company issued 14,400 shares of stock to Cavalry Fund 1 LP at a price of $6.35 per share for a total value of $91,440 as compensation for the waiver of certain covenants as set forth in the Series C Certificate of Designation. The Company recorded a gain in the amount of $88,560 on this transaction. On April 27, 2022, the Company issued 1,929 shares of common stock with a contract price of $12.50 per share or $24,118 and a grant date market value of $8.00 or $15,434 to Larry Diamond, its Chief Executive as commitment shares as set forth and defined in Diamond Note 3. The Company recorded these shares at their relative fair value of the components of Diamond Note 3, or $16,200, and recorded a loss in the amount of $765 on this transaction. The Company also issued five-year warrants to purchase 1,929 shares of common stock at a price of $12.50 to Mr. Diamond pursuant to Diamond Note 3. On May 1, 2022, the Company issued 15,000 shares of common stock to a service provider at a price of $6.88 per share. On May 10, 2022, the Company entered into a securities purchase agreement with Kishon Investments, LLC with respect to the sale and issuance of: (i) an initial commitment fee in the amount of $159,259 in the form of 12,741 shares of the Company’s common stock, (ii) promissory note in the principal amount of $277,777 due on November 10, 2022, and (iii) warrants to purchase up to 5,556 shares of the common stock. The note and warrants were issued on May 10, 2022 and were held in escrow pending effectiveness of the Purchase Agreement. 30 Table of Contents Pursuant to the terms of the purchase agreement, the initial shares were issued at a value of $159,259, the note was issued in the principal amount of $277,777 for a purchase price of $250,000, resulting in the original issue discount of $27,777; and the warrants were issued, with an initial exercise price of $12.50 per share, subject to adjustment. On May 18, 2022, the Company issued 386 shares of common stock to Larry Diamond, its Chief Executive Officer at a contractual price of $12.50 per share and a market price at issuance date of $7.585 per share as commitment shares as set forth and defined in Diamond Note 4. The Company recorded these shares at their relative fair value of the components of Diamond Note 4, or $3,160 and recorded a loss in the amount of $249 on this transaction. The Company also issued five-year warrants to purchase 386 shares of common stock at a price of $12.50 to Mr. Diamond pursuant to Diamond Note 4. On May 23, 2022, the Company issued 386 shares of common stock to Jessica Finnegan at a contractual price of $12.50 per share and a market price at issuance date of $8.97 per share as commitment shares as set forth and defined in Finnegan Note 1. The Company recorded these shares at their relative fair value of the components of Finnegan Note 1, or $3,240, and recorded a gain in the amount of $222 on this transaction. The Company also issued five-year warrants to purchase 386 shares of common stock at a price of $12.50 to Ms. Finnegan pursuant to Finnegan Note 1. On May 26, 2022, the Company issued 1,688 shares of common stock to the May 26 Lenders at a contractual price of $12.50 per share and a market price at issuance date of $7.585 per share as commitment shares as set forth and defined in the May 26, 2022 Notes. The Company recorded these shares at their relative fair value of the components of the May 26 Note, or $14,175, and recorded a loss in the amount of $1,369 on these transactions. The Company also issued five-year warrants to purchase 1,688 shares of common stock at a price of $25.00 to the May 26 Lenders pursuant to the May 26, 2022. On June 7, 2022, the Company issued 8,103 shares of common stock at a price of $12.50 per share to investors for accumulated dividends on Series X Preferred Stock. See note 12. On June 9, 2022, the Company issued 7,284 shares of common stock to the June 9 Lenders at a contractual price of $12.50 per share and a market price at issuance date of $7,425 per share as commitment shares as set forth and defined in the June 9 Notes. The Company recorded these shares at the relative fair value of the components of June 9 Notes, or $66,400, and recorded an aggregate loss in the amount of $9,356 on these transactions. The Company also issued five-year warrants to purchase 7,284 shares of common stock at a price of $25.00 to the May 26 Lenders pursuant to the June 9 notes. On June 22, 2022, the Company issued 4,824 shares of common stock at a fair value of $10.45 per share to Dragon Dynamic at a fair value of $10.45 per share as a commitment fee. On June 22, 2022, the Company issued 12,741 shares of common stock at fair value of $10.45 per share to GS Capital at a fair value of $10.45 per share as a commitment fee. On June 22, 2022, the Company issued 8,600 shares of common stock at fair value of $10.45 per share to Anson East and an additional 25,800 shares of common stock at a fair value of $10.45 per share to Anson Investments as a commitment fee. On July 7, 2022, the Company issued 2,412 shares of common stock to William Mackay at a contractual price of $12.50 per share and a market price at issuance date of $7.445 per share as commitment shares as set forth and defined in the Mackay Note. The Company recorded these shares at their relative fair value of the components of Mackay Note, or $12,500, and recorded a gain in the amount of $5,456 on this transaction. The Company also issued five-year warrants to purchase 2,412 shares of common stock at a price of $12.50 to Mr. Mackay pursuant to the Mackay Note. On July 7, 2022, the Company issued 193 shares of common stock to Charlies Schrier at a contractual price of $12.50 per share and a market price at issuance date of $7.445 per share as commitment shares as set forth and defined in the Schrier Note. The Company recorded these shares at their relative fair value of the components of Schrier Note, or $1,000, and recorded a gain in the amount of $436 on this transaction. The Company also issued five-year warrants to purchase 193 shares of common stock at a price of $25.00 to Mr. Schrier pursuant to the Schrier Note. On July 21, 2022, the Company issued 241 shares of common stock to Juan Carlos Iturregui, a related party, at a contractual price of $12.50 per share and a market price at issuance date of $7.225 per share as commitment shares as set forth and defined in the Iturregui Note. The Company recorded these shares at their relative fair value of the components of Schrier Note, or $1,225, and recorded a gain in the amount of $518 on this transaction. The Company also issued five-year warrants to purchase 241 shares of common stock at a price of $25.00 to Mr. Iturregui pursuant to the Iturregui Note. 31 Table of Contents On July 21, 2022, the Company issued 2,460 shares of common stock to the Michael C. Howe Living Trust, a related party, at a contractual price of $12.50 per share and a market price at issuance date of $7.225 per share as commitment shares as set forth and defined in the Howe Note 3. The Company recorded these shares at their relative fair value of the components of Howe Note 3, or $12,495, and recorded a gain in the amount of $5,729 on this transaction. The Company also issued five-year warrants to purchase 2,460 shares of common stock at a price of $25.00 to the Michael C. Howe Living Trust pursuant to the Howe Note 3. On July 26, 2022, the Company issued 482 shares of common stock to Eric S. Nommsen at a contractual price of $12.50 per share and a market price at issuance date of $6.84 per share as commitment shares as set forth and defined in the Nommsen Note. The Company recorded these shares at their relative fair value of the components of Nommsen Note, or $2,350, and recorded a gain in the amount of $949 on this transaction. The Company also issued five-year warrants to purchase 482 shares of common stock at a price of $25.00 to Mr. Nommsen pursuant to the Nommsen Note. On July 27, 2022, the Company issued 482 shares of common stock to James H. Caplan at a contractual price of $12.50 per share and a market price at issuance date of $6.935 per share as commitment shares as set forth and defined in the Caplan Note. The Company recorded these shares at their relative fair value of the components of the Caplan Note, or $2,350, and recorded a gain in the amount of $995 on this transaction. The Company also issued five-year warrants to purchase 482 shares of common stock at a price of $25.00 to Mr. Caplan pursuant to the Caplan Note. On August 4, 2022, the Company issued a total of 241 shares of common stock to Jessica, Kevin C., Brody, Isabella, and Jack Finnegan at a contractual price of $25.00 per share and a market price at issuance date of $6.42 per share as commitment shares as set forth and defined in the Finnegan Note 3. The Company recorded these shares at their relative fair value of the components of the Finnegan Note 3, or $1,000, and recorded a gain in the amount of $448 on this transaction. The Company also issued five-year warrants to purchase a total of 241 shares of common stock at a price of $25.00 to the holders of the Finnegan Note 3. On August 4, 2022, the Company issued 984 shares of common stock to Jack Enright at a contractual price of $12.50 per share and a market price at issuance date of $6.42 per share as commitment shares as set forth and defined in the Caplan Note. The Company recorded these shares at their fair value of $6,317. On August 4, 2022, the Company issued 12,064 shares of common stock to a service provider as payment for investor relations services. The transaction was effective August 1, 2022 and has a six month term. The shares were valued at the closing price of the Company’s common stock on August 4, 2022, of $6.42 per share or $77,448. On August 18, 2022, the Company issued 1,640 shares of common stock to the Michael C. Howe Living Trust, a related party, at a contractual price of $12.50 per share and a market price at issuance date of $6.57 per share as commitment shares as set forth and defined in the Howe Note 4. The Company recorded these shares at their fair value of $10,775. On September 2, 2022, the Company issued 582 shares of common stock to John Mitchell at a contractual price of $12.50 per share and a market price at issuance date of $5.365 per share as commitment shares as set forth and defined in the Mitchell Note. The Company recorded these shares at their fair value of $3,124. On September 2, 2022, the Company issued 492 shares of common stock to Frank Lightmas at a contractual price of $12.50 per share and a market price at issuance date of $5.365 per share as commitment shares as set forth and defined in the Lightmas Note. The Company recorded these shares at their fair value of $2,640. On September 2, 2022, the Company issued 246 shares of common stock to Lisa Lewis at a contractual price of $12.50 per share and a market price at issuance date of $5.365 per share as commitment shares as set forth and defined in the Lewis Note. The Company recorded these shares at their fair value of $1,320. On September 2, 2022, the Company issued 246 shares of common stock to Sharon Goff at a contractual price of $12.50 per share and a market price at issuance date of $5.65 per share as commitment shares as set forth and defined in the Goff Note. The Company recorded these shares at their fair value of $1,320. On September 9, 2022, the Company issued 820 shares of common stock to Cliff Hagan at a contractual price of $12.50 per share and a market price at issuance date of $5.75 per share as commitment shares as set forth and defined in the Hagan Note. The Company recorded these shares at their fair value of $4,715. 32 Table of Contents On September 14, 2022, the Company issued 1,640 shares of common stock to Darling Capital at a contractual price of $12.50 per share and a market price at issuance date of $6.60 per share as commitment shares as set forth and defined in the Darling Capital Note. The Company recorded these shares at their fair value of $10,824. On September 15, 2022, the Company issued 410 shares of common stock to Mack Leath at a contractual price of $12.50 per share and a market price at issuance date of $6.995 per share as commitment shares as set forth and defined in the Leath Note. The Company recorded these shares at their fair value of $2,868. On October 1, 2022, the Company issued 6,329 shares of common stock at a price of $16.00 per share to a service provider. On November 18, 2022, the Company issued 91,328 shares of common stock to AJB pursuant to a commitment fee agreement. ITEM 6. SELECTED FINANCIAL DATA The Company is a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and is not required to provide the information required under this item. ITEM 7. MANAGEMENT ’ S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS MANAGEMENT ’ S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis should be read in conjunction with and is qualified in its entirety by and should be read together with our financial statements and the related notes thereto appearing elsewhere in this Form 10-K. This discussion contains certain forward-looking statements that involve risks and uncertainties, as described under the heading “Cautionary Note Regarding Forward-Looking Statements .” Actual results could differ materially from those projected in the forward-looking statements. 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. 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 Form 10-K, 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 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 its 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. 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 the one-for-fifty. The Amendment became effective at 5:00 p.m. Eastern Time on December 12, 2022. 33 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 10-K have been retroactively adjusted to reflect the Reverse Stock Split. Business Summary We opened our first primary care clinic “The Good Clinic” in Northeast Minneapolis, Minnesota in February 2021, and added five additional operating clinics during 2022 for a total of six clinics open and operating at October 14, 2022 and three under construction (one in Wayzata, MN and two in Denver Colorado). In December of 2022 we decided to close the clinics due to a lack of profitability. 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. 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. 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 We have always had a view toward additional technology and services offerings and are committing more time to that effort going forward. We have a number of near-term opportunities that we hope to pursue, assuming the capital markets make sufficient funding available at reasonable rates. Results of Operations The following period-to-period comparisons of our financial results are not necessarily indicative of results for the current period or any future periods. Further, as a result of any acquisitions of other businesses, and any additional pharmacy acquisitions or other such transactions we may pursue, we may experience large expenditures specific to the transactions that are not incident to our operations. Years ended December 31, 2023 and 2022 Revenue and Cost of Sales As a result of the Company closing the clinics in December 2022 and subsequently selling the related assets, all revenue and cost of sales have been reclassified to income(loss) from discontinued operations. Operating Expenses Our total operating expenses for the year ended December 31, 2023, were $2.6 million compared to $4.3 million for the year ended December 31, 2022. Operating Expense for the year ended December 31, 2023 included $0.1 million for the impairment of fixed assets in connection with the closing of our clinics; there was no comparable transaction during the year ended December 31, 2022. Other operating expense for the year ended December 31, 2023 were comprised primarily of $.9 million payroll and payroll taxes, $.4 million in legal and professional fees, $0.9 million of stock-based compensation, $0.2 million in advertising, marketing, and investor relations expenses, and $.1 million in other operating costs. Operating Expense for the year ended December 31, 2022 were comprised primarily of $1.2 million payroll and payroll taxes, $0.6 million of non-cash compensation, $1.1 million in legal and professional fees, $0.2 million in marketing expenses, and $1.2 million in other operation costs. 34 Table of Contents Other Income and Expenses Interest expense was approximately $1.6 million for the year ended December 31, 2023, compared to approximately $3.0 million for the year ended December 31, 2022. Interest expense – related parties was approximately $0.4 million for the year ended December 31, 2023 compared to $1.2 for the year ended December 31, 2022. The decrease in interest expense was a result of the decreased level of debt during fiscal 2023. During the year ended December 31, 2023, we recorded equity investment incentives of approximately $7.6 million. There were no comparable transactions in the prior period. During the year ended December 31, 2023, we recorded a loss on a legal settlement of $18,759. There was not an equivalent gain or loss during the year ended December 31, 2022 prior period. During the year ended December 31, 2023, we recorded a loss on true-up shares issued with notes payable in the amount of $119,370 compared to $9,007 for the year ended December 31, 2023. During the year ended December 31, 2022, we recorded a gain on commitment fee shares in the amount of $0.1 and a gain on commitment fee shares issued to related parties in the amount of $0.1. There were no comparable transactions during the year ended December 31, 2023. During the year ended December 31, 2022, we recorded a loss on settlement of accrued salary in the amount of $15,032. There was no comparable transaction during the year ended December 31, 2023. During the year ended December 31, 2023 we recorded a gain on settlement of notes payable of $25,000. There was no comparable transaction in the prior period. During the year ended December 31, 2023, we recorded a gain on sale of assets in the amount of approximately $9,000. There were no comparable transactions in the prior period. During the year ended December 31, 2023, we recorded other income of $40,622. There were no comparable transactions in the prior period. During the year ended December 31, 2023, we recorded a gain on issuance of shares to a service provider of $33,092. There were no comparable transactions in the prior period. During the year ended December 31, 2023, we recorded a gain on settlement of notes and accounts payable of $37,453 compared to a loss of $88,235 in the prior period. During the year ended December 31, 2023, we recorded a gain on settlement of notes and accounts payable to a related party of approximately $0.1 million; there was no comparable transaction in the prior period. During the year ended December 31, 2023, we recorded a gain $25,000 for the conversion of accrued salaries and Series D Preferred stock into shares of Series F preferred stock. There were no comparable transactions in the prior period. During the year ended December 31, 2023, we recorded a loss on revaluation of derivative liabilities in the amount of $85,773 compared to a loss on revaluation of derivative liabilities in the amount of $687,178 during the year ended December 31, 2022. Net Loss from Discontinued operations During the year ended December 31, 2023, we recorded a net loss from discontinued operations of $4,221,334 compared to a net loss of $14,030,539 for the year ended December 31, 2022. The net loss from discontinued operations were lower in the current period as the Company closed all of its clinics as of December 2022. Net Loss Available to Common Shareholders The Company accrued Preferred Stock dividends of approximately $1.7 million including approximately $0.1 million to related parties for the year ended December 31, 2023, compared to approximately $0.3 million including approximately $0.1 million to related parties for the year ended December 31, 2022. The increase was due to accrued dividends on the Series F Preferred Stock. 35 Table of Contents For the year ended December 31, 2023, we had a net loss available to common shareholders of approximately $18.2 million, or a net loss per share, basic and diluted of ($1.26) compared to a net loss available to common shareholders of approximately $23.6 million, or a net loss per share, basic and diluted of ($5.29), for the year ended December 31, 2022. Liquidity and Capital Resources To date, we have not generated sufficient revenue from operations to support our operations. We have financed our operations through the sale of equity securities and short-term borrowings. As of December 31, 2023, we had cash and cash equivalents of approximately $3,000 compared to cash of approximately $36,000 as of December 31, 2022. Net cash used in operating activities was approximately $0.8 million for the year ended December 31, 2023. Cash used in operations for the year ended December 31, 2022, was approximately $5.2 million. The decrease in cash used in operations was a result of closing our clinical facilities in December 2022. Net cash used in investing activities was $0 million for the year ended December 31, 2023 compared to approximately $1.7 million for the year ended December 31, 2022. The amounts relate to the purchase of fixed assets and leasehold improvement on our first clinics. Net cash provided by financing activities for the year ended December 31, 2023, was approximately $0.7 million, consisting of net cash proceeds of approximately 0.7 million from the sale of Series F preferred stock, offset by principal payments on the SBA loan of approximately $11,500. Net cash provided by financing activities for the year ended December 31, 2022, was approximately $5.8 million, consisting of proceeds from a notes payable of approximately $4.4 million and notes payable – related parties of approximately $1.5 million. We also received landlord financing of leasehold improvements of approximately $0.2 million. Partially offsetting the proceeds were principal payments on a note payable to a related party of was approximately $0.2 million. We have made a strategic decision to reduce our capital needs by closing our clinic operations in the fourth quarter of 2022, and releasing our staff. 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 $ 2,452,786 36 Table of Contents Our financial statements as presented in this filing reflect total liabilities of over $14 million, including certain reserves for potential liabilities related to ceased operations related largely to long term lease obligations and costs related to the construction of our facilities. A substantial amount of these liabilities may be reversed on negotiations, and it is our goal to settle the remaining amounts with non -cash consideration as noted above. There can be no assurance that all of these vendors will be willing to settle their obligations with the Company on the proposed terms, or in amounts acceptable to the Company. We remain undercapitalized and until we have resolved most of these obligations it is unlikely that we will be able to attract sufficient capital on reasonable terms to execute our business strategy. We remain committed to resolution of these outstanding items in a fair and timely manner. Critical Accounting Policies We believe that the accounting policies described below are critical to understanding our business, results of operations and financial condition because they involve the use of more significant judgments and estimates in the preparation of our consolidated financial statements. An accounting policy is deemed to be critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time the estimate is made, and any changes in the assumptions used in making the accounting estimates that are likely to occur could materially impact our consolidated financial statements. Revenue Recognition during previous periods The Company had no sources of revenue during 2023. The following reflects its revenue policy during the periods from 2021 until the end of 2022. 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. 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 compensation costs to employees under FASB ASC Topic 718, Compensation – Stock Compensation (“ASC 718”). Under FASB ASC 718, companies are required to measure the compensation costs of share-based compensation arrangements based on the grant-date fair value and recognize the costs in the financial statements over the period during which employees are required to provide services. Share-based compensation cost for stock options are estimated at the grant date based on each option’s fair-value as calculated by the Black-Scholes-Merton (“BSM”) option-pricing model. Share-based compensation arrangements may include stock options, restricted share plans, performance-based awards, share appreciation rights and employee share purchase plans. Such compensation amounts, if any, are amortized over the respective vesting periods of the option grant. 37 Table of Contents Equity instruments issued to other than employees are recorded pursuant to the guidance contained in ASU 2018-07 (“ASU 2018-07”), Improvements to Non-employee Share-Based Payment Accounting, which simplified the accounting for share-based payments granted to non-employees for goods and services. Under the ASU 2018-07, most of the guidance on such payments to non-employees would be aligned with the requirements for share-based payments granted to employees. Common Stock Purchase Warrants The Company accounts for common stock purchase warrants in accordance with FASB ASC Topic 815, Accounting for Derivative Instruments and Hedging Activities (“ASC 815”). As is consistent with its handling of stock compensation and embedded derivative instruments, the Company’s cost for stock warrants is estimated at the grant date based on each warrant’s fair-value as calculated by the Black-Scholes-Merton (“BSM”) option-pricing model value method for valuing the impact of the expense associated with these warrants. Income Taxes The Company accounts for income taxes under ASC 740 Income Taxes. Under the asset and liability method of ASC 740, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statements carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period the enactment occurs. A valuation allowance is provided for certain deferred tax assets if it is more likely than not that the Company will not realize tax assets through future operations. No deferred tax assets or liabilities were recognized as of December 31, 2023 and 2022. As part of the process of preparing our consolidated financial statements, we must estimate our actual current tax liabilities and assess temporary differences resulting from differing treatment of items for tax and accounting purposes. These differences result in deferred tax assets and liabilities, which are included within the balance sheet. We must assess the likelihood that the deferred tax assets will be recovered from future taxable income and, to the extent we believe that recovery is not likely, a valuation allowance must be established. To the extent we establish a valuation allowance or increase or decrease this allowance in a period, the impact will be included in income tax expense in the statement of operations. Impairment of Long-Lived Assets Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized in the amount by which the carrying amount of the asset exceeds the fair value of the asset. Assets to be disposed would be separately presented in the consolidated balance sheet and reported at the lower of the carrying amount or fair value less costs to sell and are no longer depreciated. The assets and liabilities of a disposal group classified as held-for-sale would be presented separately in the appropriate asset and liability sections of the consolidated balance sheet, if material. Off-Balance Sheet Arrangements We have no off-balance sheet arrangements that have or are likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to stockholders. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Company is a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and is not required to provide the information required under this item. 38 Table of Contents