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 in 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 common stock. 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 $30,830,364 at September 30, 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 September 30, 2022, the Company issued $25,000 of convertible
debentures.
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.
MEDIXALL GROUP, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) |
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 September 30, 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 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 November 14, 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.
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 (“ASC”) 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.
MEDIXALL GROUP, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) |
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 September 30,
2022. Accordingly, a valuation allowance was recorded against the net deferred tax asset.
Revenue Recognition
The Company accounts for revenue
in accordance with 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. 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.
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 periods, 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 and nine months periods ended September 30, 2022 and 2021:
Schedule of computation of basic and diluted net loss per share | |
| | | |
| | | |
| | | |
| | |
| |
Three Months Ended | | |
Nine Months Ended | |
| |
September 30, | | |
September 30, | |
| |
2022 | | |
2021 | | |
2022 | | |
2021 | |
Basic and Diluted LPS Computation | |
| | | |
| | | |
| | | |
| | |
Numerator: | |
| | | |
| | | |
| | | |
| | |
Net loss | |
$ | (1,083,878 | ) | |
$ | (1,391,171 | ) | |
$ | (5,047,974 | ) | |
$ | (4,382,688 | ) |
Series B Preferred Stock Dividends | |
| 78,995 | | |
| 65,636 | | |
| 234,410 | | |
| 214,414 | |
| |
| | | |
| | | |
| | | |
| | |
Loss available to common stockholders | |
$ | (1,162,873 | ) | |
$ | (1,456,807 | ) | |
$ | (5,282,384 | ) | |
$ | (4,597,102 | ) |
| |
| | | |
| | | |
| | | |
| | |
Denominator: | |
| | | |
| | | |
| | | |
| | |
Weighted average number of common shares outstanding | |
| 116,886,659 | | |
| 105,948,985 | | |
| 115,896,191 | | |
| 103,147,965 | |
| |
| | | |
| | | |
| | | |
| | |
Basic and diluted LPS | |
$ | (0.01 | ) | |
$ | (0.01 | ) | |
$ | (0.05 | ) | |
$ | (0.04 | ) |
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 | | |
| 24,900,000 | | |
| 24,900,000 | |
Series B Preferred stock (convertible) | |
| 15,637,440 | | |
| 14,734,440 | | |
| 15,637,440 | | |
| 14,734,440 | |
Senior Convertible Debentures and Warrants | |
| 2,693,425 | | |
| — | | |
| 2,693,425 | | |
| — | |
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
and nine months periods ended September 30, 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.
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 September 30, 2022 and December 31, 2021, the Company
has met the capitalization requirements and then began to amortize the assets. Amortization is calculated using the straight line method
over the estimated useful life of the assets, which management determined to be five years.
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, September 30, 2022 | |
| | |
Gross | |
$ | 236,000 | |
Accumulated amortization | |
| (25,287 | ) |
Net carrying amount | |
$ | 210,713 | |
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
(three months) |
|
|
$ |
8,429 |
|
2023 |
|
|
|
33,714 |
|
2024 |
|
|
|
33,714 |
|
2025 |
|
|
|
33,714 |
|
2026 |
|
|
|
33,714 |
|
Thereafter |
|
|
|
67,428 |
|
Total |
|
|
$ |
210,713 |
|
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.
MEDIXALL GROUP, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) |
(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 September 30, 2022, cumulative unpaid dividends on the
Series B Preferred Stock amounted to $525,956. No common stock has been issued as of September 30, 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 former Interim Chief Executive Officer and director, and a significant stockholder of the Company, and
Timothy Hart, the Company’s former Chief Financial Officer and director, and a significant stockholder of the Company.
Effective on June 14, 2022, Neil Swartz voluntarily resigned as CEO of MediXall Group, Inc. and the Company appointed Noel J.
Guillama-Alvarez as his successor. On September 15, 2022, Timothy Hart voluntarily resigned and the Company appointed Richard Paul as
his successor. On August 30, 2022, Noel J. Guillama Alvarez voluntarily resigned and the Company appointed Travis Jackson 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
September 30, 2022 and 2021, the Company expensed $240,000 for both periods for related party management fees related to these agreements.
During the nine months ended September 30, 2022 and 2021, the Company expensed $720,000 and
$600,000, respectively, of related party management fees related to these agreements.
R3
Accounting LLC (“R3”), owned by Mr. Hart, provides accounting, tax and bookkeeping services to the Company. During the
three and nine months ended September 30, 2022 and 2021, the Company expensed $50,100
and $40,000 and
$227,600 and
$451,038, 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.
MEDIXALL GROUP, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) |
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 September 30, 2022 | | |
At December 31, 2021 | |
TBG | |
$ | (200,613 | ) | |
$ | 276,043 | |
Turnkey | |
| (547,650 | ) | |
| (549,150 | ) |
R3 | |
| (60,547 | ) | |
| (18,052 | ) |
| |
$ | (808,810 | ) | |
$ | (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 that ranges from $0.75 to $1.50 per share expiring on April 30, 2027. Pursuant to this
agreement, the Company has received proceeds from convertible debentures totaling $2,214,462.
The interest rate is 8%
and the maturity date is September
30, 2023. Interest is due quarterly on January 1, April 1, July 1 and October 1 of each year during which the debentures are
outstanding. Interest is payable in shares of the Company’s common stock until December 1, 2022. Thereafter, the interest will
be paid 50% in cash and 50% in the Company’s common stock. The outstanding debentures are convertible into shares of common
stock at a price range from $1.00 to $2.00
per share. The debentures may be converted at any time after the issuance date until the debentures are paid off.
The Company’s common stock underlying the convertible
debentures and warrants is subject to a registration rights agreement. The Company is required to use its reasonable best efforts to comply
with the provisions of the registration rights agreement.
The Company issued warrants to acquire up to an aggregate
775,425 shares of the Company’s common stock at an exercise price ranging from $0.75 to $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 nine
months ended September 30, 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 |
|
$ |
0.75
- 1.50 |
|
Risk-free interest rate |
|
|
2.10
- 3.74 |
% |
Expected dividend yield |
|
|
— |
% |
Expected stock volatility |
|
|
153.31
- 508.05 |
% |
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 relative fair value of the warrants was 257,695
and was recorded as debt discount. During the nine-month ended September 30, 2022, the Company amortized $59,781,
of the debt discount to interest expense.