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”) 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 Company’s 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 Company’s targeted marketplace is Florida, with plans for a nationwide roll-out.
Thus far, MediXall has launched the MediXall platform marketplace throughout Florida beginning in 2019 in a controlled launch and launched
Health Karma throughout the U.S. in a beta release beginning in August 2020 and nationwide public launch in November 2020. The Company
generated minimal revenue in 2021 and no revenue in 2020 as its online healthcare platform is still in the application and development
stage. Further discussion on our operations, mission, and initiatives can be found in the Management’s 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, and (5) Health Karma, Inc. which was established in 2020 to increase functionality of the MediXall platform.
Note 2 – Going Concern
The Company has an accumulated deficit
of $20,914,117 at March 31, 2021, and does not have sufficient operating cash flows. The accompanying unaudited 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 Company’s ability to establish itself
as a profitable business.
Since 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 March 31, 2021, the Company has issued 1,624,665 common
shares for total proceeds of $406,166.
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 unaudited 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 unaudited condensed consolidated financial statements. The unaudited condensed consolidated financial
statements do not include any adjustments that might result from the outcome of this uncertainty.
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 Company’s condensed consolidated financial position as of March 31, 2021 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, 2021. 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, 2020 included in the Company’s Annual Report on Form 10-K, which was filed with the Securities
and Exchange Commission on June 17, 2021.
Principles of Consolidation
These unaudited 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 unaudited 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 adjustments are reflected in current operations.
Subsequent Events
Management has evaluated
events occurring subsequent to the unaudited condensed consolidated balance sheet date, through August 3, 2021, which is the date the
unaudited condensed consolidated financial statements were issued, determining all subsequent events have been disclosed.
MEDIXALL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
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 significant risk and uncertainty related to the coronavirus global pandemic (“COVID-19”) pandemic.
Income Taxes
The Company accounts for income
taxes using the liability method prescribed by the Financial Accounting Standards Board’s (the “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 year 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 March 31, 2021. Accordingly, a valuation
allowance was recorded against the net deferred tax asset.
Revenue Recognition
The Company had minimal revenues
in 2021 and no revenue in 2020. The Company recognizes revenue to depict the transfer of promised goods or services to customers in an
amount that reflects the consideration to which the entity expects to be entitled to receive in exchange for those goods or services.
To achieve this core principle, five basic criteria must be met before revenue can be recognized: (1) identify the contract with a customer;
(2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to performance
obligations in the contract; and (5) recognize revenue when or as the Company satisfies a performance obligation.
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 values the stock-based compensation
at the market price for the Company's stock as of the date of issuance.
MEDIXALL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
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 month periods ended March 31, 2021 and 2020:
|
|
Three Months Ended
|
|
|
|
March 31,
|
|
|
|
2021
|
|
|
2020
|
|
Basic and Diluted LPS Computation
|
|
|
|
|
|
|
|
|
Numerator:
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
(1,332,301
|
)
|
|
|
(1,851,085
|
)
|
Series B preferred stock dividends
|
|
|
46,969
|
|
|
|
—
|
|
Loss available to common stockholders
|
|
$
|
(1,379,270
|
)
|
|
$
|
(1,851,085
|
)
|
|
|
|
|
|
|
|
|
|
Denominator:
|
|
|
|
|
|
|
|
|
Weighted average number of common shares outstanding
|
|
|
100,242,517
|
|
|
|
84,671,714
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted LPS
|
|
$
|
(0.01
|
)
|
|
$
|
(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
|
|
Series B Preferred stock (convertible)
|
|
|
11,937,440
|
|
|
|
—
|
|
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 three month periods ended March
31, 2021 and 2020. However, there can be no assurances that future impairment tests will not result in a charge to operations.
MEDIXALL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
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 March 31, 2021, the Company has met the capitalization requirements
and has incurred $439,404 in costs related to the development of the MediXall platform.
Allowance for Uncollectible Accounts Receivable
An allowance for uncollectible accounts
receivable is recorded when management believes the uncollectability of the accounts receivable is confirmed. Subsequent recoveries, if
any, are credited to the allowance. The allowance is determined based on management’s review of the debtor’s ability to repay
and repayment history, aging history, and estimated value of collateral, if any.
Note 4 – Preferred Stock
The 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 shares 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.
MEDIXALL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
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 March 31, 2021, cumulative unpaid dividends on the Series
B Preferred Stock amounted to $89,091. No common stock has been issued as of March 31, 2021 in satisfaction of the preferred stock dividend.
Voting Rights
Each share of Series B Preferred
Stock shall have a number of votes on any matter submitted to the holders of the Company’s 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.
Note 5 – Related Party Transactions
Pursuant to an agreement dated June
2013 and amended in June 2020, 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 Company’s Interim
Chief Executive Officer and director, and a significant stockholder of the Company, and Timothy Hart, the Company’s Chief Financial
Officer and director, and a significant stockholder of the Company. Under this agreement, we pay TBG a monthly fee of $40,000. During
the three months ended March 31, 2021 and 2020, the Company expensed $120,000 of related party management fees related to this agreement.
At March 31, 2021 and December 31, 2020, the Company had prepaid management fees related to the aforementioned agreement with TBG amounting
to $480,000.
R3 Accounting LLC (“R3”),
owned by Mr. Hart, provides accounting, tax and bookkeeping services to the Company. During the three months ended March 31, 2021 and
2020, the Company expensed $70,038 and $37,350, respectively, related to R3 services.
At March 31, 2021 and December 31,
2020, the Company had short term cash advances outstanding due to Turnkey Capital, Inc. (“Turnkey”), a related party of the
Company. The advances are due on demand, are unsecured, and do not bear any interest.
During the three month period
ended March 31, 2021, the Company paid $94,000 in marketing and consulting expenses to two companies which are owned by the
president of Turnkey a related party. There was no such fee during the three month period ended March 31, 2020.
Prepaid expenses (accounts payable and accrued expenses)
to related parties are as follows:
Related Party
|
|
At
March 31,
2021
|
|
|
At
December 31,
2020
|
|
TBG
|
|
$
|
480,000
|
|
|
$
|
480,000
|
|
Turnkey
|
|
|
(457,300
|
)
|
|
|
(457,300
|
)
|
R3
|
|
|
(19,931
|
)
|
|
|
(19,931
|
)
|
|
|
$
|
2,769
|
|
|
$
|
2,769
|
|
MEDIXALL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
EGG Agreement
On September 13, 2019, Turnkey entered
into a Definitive Acquisition Agreement with Healthspan Medical Systems, Inc., doing business as EGG Health Hub, Inc. (“EGG”).
On October 29, 2020, Turnkey and EGG executed a share exchange agreement in which EGG became a wholly owned subsidiary of Turnkey. Turnkey
and EGG are related parties of the Company. EGG does not currently conduct any operations.
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 office space designed to optimize both the physician and client experience. This model creates a compelling new option for re-tenanting
traditional shopping centers and mixed-use space.
On July 27, 2020, the Company and
Turnkey entered into an agreement in which the Company issued 1,000,000 shares of its common stock to Turnkey in exchange for the exclusive
technology rights to develop EGG’s business model (as described in the preceding paragraph) with the Company’s technological
infrastructure, including but not limited to the use of the Company’s healthcare website platform. The transaction was accounted
for at historical cost as a transaction under common ownership that lacks commercial substance. As such, the issuance of the Company’s
common stock to Turnkey was recorded as an increase of $1,000 to common stock, with a corresponding decrease to additional paid-in capital.
Note 6 – Long Term Debt
During May 2020, the Company received a Paycheck Protection Program loan
in the amount of $165,719. The Small Business Administration forgave the loan in June 2021.