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”) 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 Group, Inc. (OTCQB:MDXL)
is an innovation-driven technology company purposefully designed and structured around delivering products and services to help consumers
learn, decide, and pay for healthcare in ways that complement relationships with trusted doctors. The mission of MediXall Group is to
revolutionize the medical industry--improve communication, provide better technology and support services, and provide more efficient,
cost-effective healthcare for the consumer. The Company generated minimal revenue in 2022 and 2021 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, (5) Health Karma, Inc. which was established in 2020 to increase functionality of the MediXall platform.
Note 2 – Asset Acquisition
On January 17, 2022, the
Company entered into an agreement to acquire the right to use the intellectual property of 24 Hr Virtual Clinic, LLC (“Virtual
Clinic”). In connection with the transaction, the Company issued 500,000
shares of common stock of MediXall. In accordance with Accounting Standards Codifiation (“ASC”) 805, the value of the
stock issued was measured based on an independent appraisal of the rights to use the intellectual property valued at $236,000,
which was determined to be the more clearly determinable measure of fair value.
Pursuant to the agreement, the Company has the right
to buyout the existing members of the Virtual Clinic for an additional 500,000 shares of MediXall. If this transaction occurs
the Virtual Clinic will be renamed to “Wellcare First” and become a wholly-owned subsidiary of the Company.
Note 3 – Going Concern
The Company had an accumulated
deficit of $28,192,492 at
March 31, 2022, 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 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, 2022, the Company has issued 1,800,000 common
shares for total proceeds of $720,000.
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. The condensed consolidated financial statements do not
include any adjustments that might result from the outcome of this uncertainty.
Note 4 - 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 Securities and Exchange Commission (“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
unaudited condensed consolidated financial statements reflect all normal recurring adjustments necessary to present fairly the
Company’s condensed consolidated financial position as of March 31, 2022 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,
2022. 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, 2021 included in the Company’s Annual Report on
Form 10-K, which was filed with the SEC on April 19, 2022.
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 1, 2022, which is the
date the unaudited condensed consolidated financial statements were issued, determining all subsequent events have been
disclosed.
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, 2022.
Accordingly, a valuation allowance was recorded against the net deferred tax asset.
Revenue Recognition
The Company accounts for revenue
in accordance with Accounting Standards Updated ("ASU") ASU 2014-09 Revenue from Contracts with Customers and all subsequent
amendments to the ASU (collectively, "ASC 606"). The Company had minimal revenues in 2022 and in 2021. The Company recognizes
revenue in accordance with ASC 606, the core principle of which is that an entity should recognize 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.
In 2022 and 2021, the Company generated revenues from selling bundle medical
and wellness services to individuals, employer groups, or third-party administrators from the Company’s Health Karma platform. The Company
primarily generates revenue from employer customers and consumer subscription fees, which are typically a 12-month commitment in nature.
Through our per-Member-per-month (“PMPM”) subscription model, we enter into contracts with our employer customers that pay
a fixed monthly rate based on the total number of members. In most cases, members and their dependents have unlimited access to our platform
and do not pay extra fees for increased utilization, unless they wish to access services outside the scope of those covered by the subscription.
Our performance obligations are satisfied overtime as we provide access to the Health Karma portal and associated benefits. We recognize
revenue monthly as the services are rendered and performance obligations are satisfied.
Senior Convertible Debentures and Warrants
The senior convertible debentures (Convertible Debt)
is recorded at its fair value, limited to a relative fair value based upon the percentage of its fair value to the total fair value including
the fair value of the warrant.
Warrants issued with the Convertible Debt are
accounted for under the fair value and relative fair value method. The warrant is first analyzed per its terms as to whether it has
derivative features or not. The warrant was determined to not have derivative features, and was recorded into equity at its
fair value using the Black Scholes option model, however, limited to a relative fair value based upon the percentage of its fair
value to the total fair value including the fair value of the Convertible Debt. The warrants relative fair values is recorded as a
discount to the Convertible Debt and as additional paid-in-capital. Discount on the Convertible Debt is amortized to interest
expense over the life of the debt.
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.
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 due to net loss for the periods.
Following is the computation of
basic and diluted loss per share for the three month periods ended March 31, 2022 and 2021:
Schedule of computation of basic and diluted net loss per share | |
| | | |
| | |
| |
Three Months Ended | |
| |
March 31, | |
| |
2022 | | |
2021 | |
Basic and Diluted LPS Computation | |
| | | |
| | |
Numerator: | |
| | | |
| | |
Net loss | |
$ | (2,410,102 | ) | |
$ | (1,332,301 | ) |
Series B Preferred Stock Dividends | |
| 72,840 | | |
| 46,969 | |
| |
| | | |
| | |
Loss available to common stockholders | |
$ | (2,482,942 | ) | |
$ | (1,379,270 | ) |
| |
| | | |
| | |
Denominator: | |
| | | |
| | |
Weighted average number of common shares outstanding | |
$ | (0.02 | ) | |
$ | (0.01 | ) |
| |
| | | |
| | |
Basic and diluted LPS | |
| 114,625,809 | | |
| 100,242,517 | |
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):
Schedule of potentially dilutive securities not included in the calculation of diluted net loss per share | |
| | | |
| | |
Series A Preferred stock (convertible) | |
| 24,900,000 | | |
| 24,900,000 | |
Series B Preferred stock (convertible) | |
| 15,637,440 | | |
| 11,937,440 | |
Senior Convertible Debentures and Warrants | |
| 382,500 | | |
| — | |
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
periods ended March 31, 2022 and 2021. However, there can be no assurances that future impairment tests will not result in a charge to
operations.
Rights-to-use Intellectual Property
The rights-to-use intellectual property
(“Intellectual Property”) is an intangible asset arising from the Company’s right to use the proprietary
technology and programs of the Virtual Clinic. The Intellectual Property was initially measured at fair value and will be amortized on a
straightline basis over its estimated useful life as the economic benefits are consumed or otherwise realized. Management has
determined the estimated useful life to be seven years.
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, 2022 and December 31,
2021, the Company has met the capitalization requirements and has incurred $453,084
and $451,404, respectively, in costs related to the development of the MediXall platform. Upon completion, the related assets will be amortized over the estimated
useful life of the underlying product. The Company will amortize the cost of the intangible asset using amortization methods that reflect
the pattern in which the economic benefits of the intangible asset are consumed or otherwise realized.
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.
Recent Accounting Pronouncements
Management does not believe that any recently issued,
but not effective, accounting standards, if currently adopted, would have a material effect on the Company’s consolidated financial
statements.
NOTE
5 - Right-to-use Intellectual Property
Right-to-use Intellectual Property consists of the following:
Schedule of Right-to-use Intellectual Property |
| |
| | |
Balances, March 31, 2022 | |
| | |
Gross | |
$ | 236,000 | |
Accumulated amortization | |
| (8,429 | ) |
Net carrying amount | |
$ | 227,571 | |
Estimated amortization expense for the right-to-use
intellectual property for each of the future years ending December 31, is as follows:
Schedule of amortization expense for right-to-use intellectual property | | |
| | |
2022 (nine months) | | |
$ | 25,286 | |
2023 | | |
| 33,714 | |
2024 | | |
| 33,714 | |
2025 | | |
| 33,714 | |
2026 | | |
| 33,714 | |
Thereafter | | |
| 67,429 | |
Total | | |
$ | 227,571 | |
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 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.
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, 2022, cumulative unpaid dividends on the Series
B Preferred Stock amounted to $361,712. No common stock has been issued as of March 31, 2022 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 7 – Related Party Transactions
Pursuant to an agreement
dated June 2013 and amended in July 2021, 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. Effective on June 14,
2022, Neil Swartz voluntarily resigned as CEO at MediXall Group, Inc. and the Company appointed Noel J. Guillama-Alvarez as his
successor. Under this agreement, we pay TBG a monthly fee of $40,000.
In April 2021, we entered into an additional agreement with TBG to provide management services specifically to our Health Karma
subsidiary. Under this new agreement, we pay TBG an additional monthly fee of $40,000.
During the three months ended March 31, 2022 and 2021, the Company expensed $240,000
and $120,000,
respectively, of related party management fees related to these agreements. At March 31, 2022 and December 31, 2021, the Company had
prepaid management fees related to the aforementioned agreement with TBG amounting to $116,413
and $276,043,
respectively.
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 former president
of Turnkey a related party. There was no such fee during the three month period ended March 31, 2022.
R3 Accounting LLC (“R3”),
owned by Mr. Hart, provides accounting, tax and bookkeeping services to the Company. During the three months ended March 31, 2022 and
2021, the Company expensed $120,000 and $70,038, respectively, related to R3 services.
The Company received short term
cash advances during 2021 from Turnkey. The advances are due on demand, unsecured, and do not bear any interest.
Prepaid expenses (accounts payable and accrued expenses)
to related parties are as follows:
Schedule of prepaid expenses (accounts payable and accrued expenses) to related parties | |
| | |
| |
Related Party | |
At March 31, 2022 | | |
At December 31, 2021 | |
TBG | |
$ | 116,413 | | |
$ | 276,043 | |
Turnkey | |
| (549,150 | ) | |
| (549,150 | ) |
R3 | |
| (40,052 | ) | |
| (18,052 | ) |
| |
$ | (472,789 | ) | |
$ | (291,159 | ) |
Note
8 – Senior Convertible Debentures and Warrants
In
March 2022, the Company entered into a securities purchase agreement in which the Company maximum offering amount is $5,000,000. For
every $1,000 invested in the offering, the Investors will receive a Debenture with a face amount of $1,000 and Warrants to purchase
350 Common Shares at an exercise price of $1.50 per share expiring on April 30, 2027. Pursuant to this agreement, the Company has
entered into three convertible debentures totaling $450,000
with an interest rate of 8%
maturing on September
30, 2023. The outstanding debentures are convertible into shares of common stock at $2.00
per share. The debentures may be converted at any time after the issuance date until the debentures are paid off.
The
Company issued warrants to acquire up to an aggregate 157,500 shares of the Company’s common stock at an exercise price of $1.50
per share. Each Warrant is exercisable by the Investor beginning on the effective date through the fifth-year anniversary thereof.
The fair value of each warrant issued during the three
months ended March 31, 2022 was estimated on the date of issuance using the Black-Scholes option-pricing model with the following assumptions:
Schedule of assumptions | |
| | |
Stock price | |
$ | 0.40 | |
Exercise price | |
$ | 1.50 | |
Risk-free interest rate | |
| 2.10 | % |
Expected dividend yield | |
| — | % |
Expected stock volatility | |
| 81.03 | % |
Expected life in years | |
| 5.00 | |
The expected life was based on the average life of
the warrants. Expected volatility is based on historical volatility of Company's common stock. The risk-free rate for periods within the
contractual life of the warrants is based on the U.S. Treasury yield curve in effect at the time of issuance. The dividend yield assumption
is based on the Company's expectation of dividend payments.
The result was a fair value of $0.16
per warrant or $25,129 in aggregate. This fair
value was reduced with the relative fair value to $23,800.
During the three-month ended March 31, 2022, the Company amortized $680,
of the debt discount to interest expense.