The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Note 1 - Organization and Nature of Operation
MediXall Group, Inc. (the "Company or MediXall or We) was incorporated on December 21, 1998 under the laws of the State of Nevada under the name of IP Gate, Inc. The Company had various name changes since, to reflect changes in the Companys operating strategies.
MediXall is a technology and innovation-driven organization that has developed a new generation healthcare marketplace platform to address the growing needs of self-pay and high deductible consumers for greater transparency and price competition in their healthcare costs. The cloud-based MediXall.com platform connects patients with healthcare providers and wellness services. The Companys targeted marketplace is Florida, with plans for a nationwide roll-out. Further discussion on our operations, mission, and initiatives can be found in the Managements Discussion and Analysis section of this report.
The Company has the following wholly-owned subsidiaries: (1) IHL of Florida, Inc., which is dormant, (2) Medixall Financial Group, which is dormant, (3) Medixaid, Inc., and (4) MediXall.com, Inc., which were established to carry out the development and operation of our healthcare marketplace platform.
Note 2 Going Concern
The Company generated no revenue in 2020 and nominal revenue in 2019. The Company has an accumulated deficit of $16,646,879 at June 30, 2020, and does not have sufficient operating cash flows. The accompanying condensed consolidated financial statements have been prepared in conformity with generally accepted accounting principles in the United States of America (GAAP), which contemplates continuation of the Company as a going concern, which is dependent upon the Companys ability to establish itself as a profitable business.
In its report with respect to the Companys consolidated financial statements for the years ended December 31, 2019 and 2018 as included in the Companys Annual Report on Form 10-K filed with the Securities and Exchange Commission (SEC) on May 14, 2020, the Companys independent auditors expressed substantial doubt about the Companys ability to continue as a going concern. Because the Company has generated minimal revenues from its planned operations, its ability to continue as a going concern is wholly dependent upon its ability to obtain additional financing. Since inception, the Company has funded operations through short-term borrowings, related party loans, and the proceeds from equity sales in order to meet its strategic objectives. The Company's future operations are dependent upon its ability to generate revenues along with additional external funding as needed. However, there can be no assurance that the Company will be able to obtain sufficient funds to continue the development of its business plan. Subsequent to June 30, 2020, the Company has issued 1,630,000 shares of its common stock for total proceeds of $408,000.
In view of these conditions, the ability of the Company to continue as a going concern is in substantial doubt and dependent upon achieving a profitable level of operations and on the ability of the Company to obtain necessary financing to fund ongoing operations. These condensed consolidated financial statements do not give effect to any adjustments which will be necessary should the Company be unable to continue as a going concern and therefore be required to realize its assets and discharge its liabilities in other than the normal course of business and at amounts different from those reflected in the accompanying condensed consolidated financial statements.
5
MEDIXALL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Note 3 - Summary of Significant Accounting Policies
Basis of Presentation
The accompanying unaudited, condensed consolidated financial statements of the Company have been prepared in accordance with GAAP for interim financial information, and the SEC rules for interim financial reporting. Certain information and footnote disclosures normally included in the condensed consolidated financial statements prepared in accordance with GAAP have been omitted pursuant to such rules and regulations. However, in the opinion of management, the accompanying interim condensed consolidated financial statements reflect all normal recurring adjustments necessary to present fairly the Companys condensed consolidated financial position as of June 30, 2020 and the condensed consolidated results of operations and cash flows for the periods presented. The condensed consolidated results of operations for interim periods are not necessarily indicative of the results of operations to be expected for any subsequent interim period or for the fiscal year ending December 31, 2020. The accompanying unaudited condensed consolidated financial statements and notes thereto should be read in conjunction with the audited consolidated financial statements for the year ended December 31, 2019 included in the Companys Annual Report on Form 10-K, which was filed with the SEC on May 14, 2020.
Principles of Consolidation
These condensed consolidated financial statements presented are those of the Company and its wholly owned subsidiaries. All significant intercompany balances and transactions have been eliminated.
Use of Estimates
The preparation of the condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods.
Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the condensed consolidated financial statements, which management considered in formulating its estimate could change in the near term due to one or more future non-conforming events. Accordingly, the actual results could differ significantly from estimates.
A material estimate that is particularly susceptible to significant change in the near-term relate to the determination of the impairment of website and development cost. The Company uses various assumptions and actuarial data it believes to be reasonable under the circumstances to make this estimate. Although considerable variability is likely to be inherent in this estimate, management believes that the amount provided is reasonable. This estimate is continually reviewed and adjusted if necessary. Such adjustment is reflected in current operations.
Subsequent Events
Management has evaluated events occurring subsequent to the condensed consolidated balance sheet date, through August 14, 2020, which is the date the condensed consolidated financial statements were issued, determining no events require disclosure in these condensed consolidated financial statements, with the exception of the matters described in Note 8.
6
MEDIXALL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Note 3 - Summary of Significant Accounting Policies, continued
Risks and Uncertainties
The Company's operations are subject to significant risks and uncertainties including financial, operational and regulatory risks, including the potential risk of business failure. Additionally, the Company faces risk and uncertainty related to the COVID-19 pandemic. Please see Note 8 for further discussion.
Income Taxes
The Company accounts for income taxes using the liability method prescribed by the Financial Accounting Standards Boards (FASB) Accounting Standards Codification 740, "Income Taxes". Under this method, deferred tax assets and liabilities are determined based on the difference between the financial reporting and tax bases of assets and liabilities using enacted tax rates that will be in effect in the year in which the differences are expected to reverse. The Company records a valuation allowance to offset deferred tax assets if based on the weight of available evidence, it is more-likely-than-not that some portion, or all, of the deferred tax assets will not be realized. The effect on deferred taxes of a change in tax rates is recognized as income or loss in the period that includes the enactment date.
Pursuant to accounting standards related to the accounting for uncertainty in income taxes, the evaluation of a tax position is a two-step process. The first step is to determine whether it is more likely than not that a tax position will be sustained upon examination, including the resolution of any related appeals or litigation based on the technical merits of that position. The second step is to measure a tax position that meets the more- likely-than-not threshold to determine the amount of benefit to be recognized in the financial statements. A tax position is measured at the largest amount of benefit that is greater than 50% likelihood of being realized upon ultimate settlement. Tax positions that previously failed to meet the more-likely-than -not recognition threshold should be recognized in the first subsequent period in which the threshold is met. Previously recognized tax positions that no longer meet the more-likely-than-not criteria should be de- recognized in the first subsequent financial reporting period in which the threshold is no longer met. The accounting standard also provides guidance on de- recognition, classification, interest and penalties, accounting in interim periods, disclosures, and transition.
The Company assessed its earnings history, trends, and estimates of future earnings, and determined that the deferred tax asset could not be realized as of June 30, 2020. Accordingly, a valuation allowance was recorded against the net deferred tax asset.
Revenue Recognition
The Company records revenue when all of the following have occurred; (1) persuasive evidence of an arrangement exists, (2) service delivery has occurred, (3) the sales price to the customer is fixed or determinable, and (4) collectability is reasonably assured.
Revenue is recognized at point of sale, with no further obligations.
Share Based Payment Arrangements
The Company applies the fair value method in accounting for its stock-based compensation. This standard states that compensation cost is measured at the grant date based on the fair value of the award and is recognized over the service period, which is usually the vesting period. The Company fair values the stock-based compensation at the market price for the Company's stock as of the date of issuance.
7
MEDIXALL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Note 3 - Summary of Significant Accounting Policies, continued
Loss Per Share
The computation of basic loss per share (LPS) is based on the weighted average number of shares that were outstanding during the period, including shares of common stock that are issuable at the end of the reporting period. The computation of diluted LPS is based on the number of basic weighted-average shares outstanding. The computation of diluted LPS does not assume conversion, exercise or contingent issuance of securities that would have an antidilutive effect on LPS. Therefore, when calculating LPS, there is no inclusion of dilutive securities as their inclusion in the LPS calculation is antidilutive.
Following is the computation of basic and diluted loss per share for the three and six month periods ended June 30, 2020 and 2019:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
Basic and Diluted LPS Computation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Numerator:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss available to common stockholders
|
|
$
|
(1,146,010
|
)
|
|
$
|
(670,365
|
)
|
|
$
|
(2,997,095
|
)
|
|
$
|
(1,414,763
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of common shares outstanding
|
|
|
87,751,941
|
|
|
|
72,929,763
|
|
|
|
86,211,828
|
|
|
|
71,977,253
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted LPS
|
|
$
|
(0.01
|
)
|
|
$
|
(0.01
|
)
|
|
$
|
(0.03
|
)
|
|
$
|
(0.02
|
)
|
Potentially dilutive securities not included in the calculation of diluted LPS attributable to common stockholders because to do so would be anti-dilutive are as follows (in common stock equivalent shares):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series A Preferred stock (convertible)
|
|
|
24,900,000
|
|
|
|
24,900,000
|
|
|
|
24,900,000
|
|
|
|
24,900,000
|
|
Series B Preferred stock (convertible)
|
|
|
2,000,000
|
|
|
|
|
|
|
|
2,000,000
|
|
|
|
|
|
Recent Accounting Pronouncements
On December 18, 2019, the FASB issued Accounting Standards Update (ASU 2019-12) Income taxes (Topic 740)Simplifying the accounting for income taxes. The amendments in this update simplify the accounting for income taxes by removing certain exceptions to the general principles and also improve consistent application by clarifying and amending existing guidance, such as franchise taxes and interim recognition of enactment of tax laws or rate changes. The amendments in this update are effective for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years. Early adoption is permitted. The Company is assessing the effects that the adoption of this accounting pronouncement may have on its condensed consolidated financial statements.
8
MEDIXALL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Note 3 - Summary of Significant Accounting Policies, continued
Recoverability of Long-Lived Assets
The Company assesses the recoverability of long-lived assets annually or whenever events or changes in circumstances indicate that expected future undiscounted cash flows might not be sufficient to support the carrying amount of an asset. The Company deems an asset to be impaired if a forecast of undiscounted future operating cash flows is less than the carrying amount. If an asset is determined to be impaired, the loss is measured as the amount by which the carrying value of the asset exceeds its fair value. There was no impairment of long-lived assets pertaining to the six month periods ended June 30, 2020 and 2019. However, there can be no assurances that future impairment tests will not result in a charge to operations.
Website and Development Costs
Internal and external costs incurred to develop, the internal-use computer software during the application and development stage shall be capitalized subsequent to the preliminary project stage and when it is probable that the project will be completed. As of June 30, 2020, the Company has met the capitalization requirements and has incurred $371,304 in costs related to the development of the MediXall platform.
Note 4 Related Party Transactions
Pursuant to an agreement dated June 2013 and amended on May 20, 2019, TBG Holdings Corp. (TBG) was engaged to provide business advisory services, manage and direct our public relations, provide recruiting services, develop and maintain material for market makers and investment bankers, provide general administrative services, and respond to incoming investor relations calls. TBG is owned in part by Neil Swartz, the Companys Interim Chief Executive Officer and director, and a significant stockholder of the Company, and Timothy Hart, the Companys Chief Financial Officer and director, and a significant stockholder of the Company. Neil Swartz and Timothy Hart are the Companys sole members of the Board of Directors. Under this agreement, we pay TBG a monthly fee of $40,000. During the three and six month periods ended June 30, 2020 and 2019, the Company expensed $120,000 and $240,000, respectively, of related party management fees related to this agreement.
R3 Accounting LLC (R3), owned by Mr. Hart, provides accounting, tax and bookkeeping services to the Company. During the three and six month periods ended June 30, 2020 and 2019, the Company expensed $103,500 and $37,550 and $141,000 and $130,550, respectively, related to R3 services.
Accounts receivable / (Accounts payable and accrued expenses) to related parties are as follows:
|
|
|
|
|
|
|
|
|
Related Party
|
|
At
June 30,
2020
|
|
|
At
December 31,
2019
|
|
TBG
|
|
$
|
45,430
|
|
|
$
|
(241,870
|
)
|
R3
|
|
|
(19,931
|
)
|
|
|
(19,931
|
)
|
|
|
$
|
25,499
|
|
|
$
|
(261,801
|
)
|
Note 5 Long Term Debt
During May 2020, the Company received a Paycheck Protection Program (PPP) loan in the amount of $165,720. The loan matures in May 2022 and bears an interest rate of 1%. Monthly payments on the loan are deferred for six months. The Small Business Administration will forgive the loan if certain employee retention criteria are met and the proceeds are used for eligible expenses.
9
MEDIXALL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Note 6 Preferred Stock
The 264,894 outstanding Series A preferred shares are convertible into 24,900,000 common shares. The preferred shares do not pay dividends. The number of votes for the preferred share shall be the same as the amount of shares of common shares that would be issued upon conversion.
On June 24, 2020, the Company filed with the Secretary of State of the State of Nevada (the Secretary of State) a certificate of designation (the Certificate of Designation) of Series B Convertible Preferred Stock, par value $0.001 per share (the Series B Preferred Stock). The Certificate of Designation was effective upon filing with the Secretary of State and designated a new series of preferred stock of the Company as Series B Convertible Preferred Stock with 4,000,000 shares authorized for issuance.
Upon the occurrence of the events as set forth in paragraph (a) or (b) below, each share of Series B Preferred Stock shall be converted into four (the Conversion Ratio) fully paid and non-assessable shares of common stock or any shares of capital stock or other securities of the Company into which such common stock shall hereafter be changed or reclassified (the Conversion Shares) as set forth in the Certificate of Designation.
(a) Automatic Conversion
Immediately upon the listing of the common stock for trading on the New York Stock Exchange or the Nasdaq Stock Market, all of the issued and outstanding shares of Series B Preferred Stock shall automatically be converted into Conversion Shares without any further action of any holder of Series B Preferred Stock (each, a Series B Holder and collectively, Series B Holders).
(b) Optional Conversion
A Series B Holder shall have the right at any time during the period beginning on the date which is six months following the date that the Series B Preferred Stock is initially issued and prior to any automatic conversion as provided in the Certificate of Designation, to convert all or any part of the outstanding Series B Preferred Stock held by such Series B Holder into Conversion Shares at the Conversion Ratio as provided in the Certificate of Designation, subject to limitations set forth in the Certificate of Designation.
Dividends
Series B Holders will be entitled to receive a quarterly dividend, until the conversion of the Series B Preferred Stock, at the rate of 8% per annum (the Series B Dividend). The Series B Dividend will be cumulative, shall accrue quarterly, and be paid via the issuance of a number of shares of common stock of the Company equal to (1) the dollar amount of the Series B Dividend being paid, divided by (2) $0.25 (the Stock Dividend). The Stock Dividend shall be paid via the issuance to the applicable Series B Holder of the applicable shares of common stock via book entry in the books and records of the Company. At June 30, 2020, cumulative unpaid dividends on the Series B Preferred Stock amounted to $767.
Voting Rights
Each share of Series B Preferred Stock shall have a number of votes on any matter submitted to the holders of the Companys common stock, or any class thereof, for a vote, equal to the number of Conversion Shares into which the Series B Preferred Stock is then convertible, and shall vote together with the common stock, or any class thereof, as applicable, as one class on such matter for as long as the share of Series B Preferred Stock is issued and outstanding.
10
MEDIXALL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Note 7 Pending Legal Matters
Various legal claims arise from time to time in the normal course of business which, in the opinion of management, will not have a material effect on the Company's condensed consolidated financial statements.
Note 8 Subsequent Events
COVID 19 Pandemic
On January 30, 2020, the World Health Organization (WHO) announced a global health emergency because of a new strain of coronavirus (the COVID-19 Outbreak). In March 2020, the WHO classified the COVID-19 Outbreak as a pandemic, based on the rapid increase in exposure globally. The full impact of the COVID-19 Outbreak continues to evolve. The impact of the COVID-19 Outbreak on the Companys results of operations, financial position and cash flows will depend on future developments, including the duration and spread of the outbreak and related advisories and restrictions. These developments and the impact of the COVID-19 Outbreak on the financial markets and the overall economy are highly uncertain and cannot be predicted. If the financial markets and/or the overall economy are impacted for an extended period, the Companys results of operations, financial position and cash flows may be materially adversely affected.
EGG Agreement
On September 13, 2019, TurnKey Capital, Inc. (TurnKey), a related party of the Company, entered into a Definitive Acquisition Agreement (the DAA) with Egg Health Hub, Inc. (EGG), pursuant to which EGG would become a wholly owned subsidiary of TurnKey. EGG has no employees, does not currently conduct operations and has no financial assets and liabilities.
EGG is a brand new model for healthcare and wellness that brings together top physicians and wellness professionals into co-practicing communities with shared access to a full-stack technology platform scheduling, billing, client acquisition, and telemedicine and flexible access to beautiful office space designed to optimize both the physician and client experience. The Company believes that this model creates a compelling new option for re-tenanting traditional shopping centers and mixed-use space that landlords see as a true traffic generator.
On July 27, 2020, the Company and TurnKey entered into an assignment of the DAA. As a result of the COVID-19 outbreak, TurnKey determined that the original opportunity that existed with EGG was no longer practical in the short-term. The Company and TurnKey believed, however, that the EGG concept remained a viable concept on a virtual basis, and the Company possesses the infrastructure and willingness to pursue this opportunity. In exchange for 1,000,000 shares of the Companys common stock, TurnKey assigned its interest in the DAA to the Company. The assignment of interest of the DAA from TurnKey to the Company will be accounted at historical cost as a transaction under common ownership that lacks commercial substance. Accordingly there will be no gain or loss recognized with respect to this transaction.
11
ITEM 2.