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MediXall Group, Inc. - Quarter Report: 2022 September (Form 10-Q)

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

 

 QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended September 30, 2022

 

or

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from _______________________to__________________________

 

Commission File Number: 333-194337

 

MediXall Group, Inc.

 (Exact name of registrant as specified in its charter)

 

Nevada 33-0864127
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification Number)
   

2929 East Commercial Blvd., PH-D,

Ft. Lauderdale, Florida

33308
(Address of principal executive offices) (Zip Code)

 

954-440-4678

(Registrant’s telephone number, including area code)

 

Not applicable

 (Former name, former address and former fiscal year, if changed since last report)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class   Trading Symbol(s)   Name of each exchange on which registered
N/A   N/A   N/A

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes  No ¨

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes  No ¨

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer   ¨ Accelerated filer   ¨
Non-accelerated filer     Smaller reporting company
  Emerging growth company  ¨

 

If an emerging growth company, indicate by checkmark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  No 

 

As of November 14, 2022, the issuer had 117,350,039 shares of its common stock issued and outstanding.

 

 

 
 

 

MEDIXALL GROUP, INC. AND SUBSIDIARIES

 

INDEX

 

    Page No.
PART I FINANCIAL INFORMATION  
     
ITEM 1. FINANCIAL STATEMENTS: 1
  Condensed Consolidated Balance Sheets at September 30, 2022 (unaudited) and December 31, 2021 1
  Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2022 and 2021 (unaudited) 2
  Condensed Consolidated Statements of Changes in Stockholders’ Equity (Deficit) for the three and nine months ended September 30, 2022 and 2021 (unaudited) 3
  Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2022 and 2021 (unaudited) 4
  Notes to Condensed Consolidated Financial Statements (unaudited) 5
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 12
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 16
ITEM 4. CONTROLS AND PROCEDURES 16
     
PART II OTHER INFORMATION  
     
ITEM 1. LEGAL PROCEEDINGS 18
ITEM 1A. RISK FACTORS 18
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS 18
ITEM 3. DEFAULTS UPON SENIOR SECURITIES 18
ITEM 4. MINE SAFETY DISCLOSURES 18
ITEM 5. OTHER INFORMATION 18
ITEM 6. EXHIBITS 19
SIGNATURES 20

 

 

 

 

 
 

 

PART I.  FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS

 

MEDIXALL GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

 

           
   September 30,   December 31, 
   2022   2021 
   (Unaudited)     
ASSETS          
CURRENT ASSETS:          
Cash  $75,578   $63,418 
Prepaid expenses - related party       276,043 
Other assets   20,524    3,484 
Total current assets   96,102    342,945 
           
Furniture and equipment, net   21,755    23,376 
Rights-to-use intellectual property   210,713     
Right-of-use-operating lease asset   260,177    313,856 
Website and development costs   431,993    451,404 
           
Total assets  $1,020,740   $1,131,581 
           
LIABILITIES AND STOCKHOLDERS' DEFICIT          
           
CURRENT LIABILITIES:          
Accounts payable and accrued expenses  $846,508   $588,870 
Accounts payable and accrued expenses - related party   808,810    567,202 
Operating lease liability   20,326    69,258 
Senior Convertible Debentures, net of discount of 197,914   2,016,547     
           
Total current liabilities   3,692,191    1,225,330 
           
Operating lease liability, net of current portion   244,822    246,373 
           
Total liabilities   3,937,013    1,471,703 
           
STOCKHOLDERS' DEFICIT:          
Convertible Preferred Series A stock, $0.001 par value, 1,000,000 authorized; 264,894 issued and outstanding   265    265 
Convertible Preferred Series B stock, $0.001 par value, 4,000,000 authorized; 3,909,360 issued and outstanding   3,909    3,909 
Common Stock, $0.001 par value 750,000,000 shares authorized; 116,873,039 and 110,864,595 shares issued and outstanding   116,873    110,864 
Additional paid-in capital   27,793,044    25,327,230 
Accumulated deficit   (30,830,364)   (25,782,390)
           
Total stockholders' deficit   (2,916,273)   (340,122)
           
Total liabilities and stockholders' deficit  $1,020,740   $1,131,581 

 

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

 

1 
 

MEDIXALL GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

 

                     
   Three Months Ended   Nine Months Ended 
   September 30,   September 30, 
   2022   2021   2022   2021 
                 
Revenue  $20,766   $3,773   $39,025   $173,686 
                     
Operating Expenses                    
Professional fees   227,914    323,316    824,527    1,004,976 
Professional fees - related party   50,100    40,000    227,600    451,038 
Management fees - related party   240,000    240,000    720,000    600,000 
Personnel related expenses   273,120    533,130    2,587,035    1,817,042 
Other selling, general and administrative   313,510    258,498    727,837    683,318 
Total Operating Expenses   1,104,644    1,394,944    5,086,999    4,556,374 
Loss before income taxes   (1,083,878)   (1,391,171)   (5,047,974   (4,382,688)
Income taxes                
Net loss   (1,083,878)   (1,391,171)   (5,047,974   (4,382,688)
                     
Less preferred stock dividends   78,995    65,636    234,410    214,414 
                     
Net loss available to common shareholders  $(1,162,873)  $(1,456,807)  $(5,282,384)  $(4,597,102)
                     
Net loss per common share                    
Basic  $(0.01)  $(0.01)  $(0.05)  $(0.04)
Diluted  $(0.01)  $(0.01)  $(0.05)  $(0.04)
                     
Weighted average number of common shares outstanding during the periods                    
Basic   116,886,659    105,948,985    115,896,191    103,147,965 
Diluted   116,886,659    105,948,985    115,896,191    103,147,965 

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

 

 

2 
 

 

 

MEDIXALL GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)

 

                                              
   Series A Voting   Series B Voting                     
   Preferred Stock   Preferred Stock   Common Stock   Additional       Total 
   $0.001 Par Value   $0.001 Par Value   $0.001 Par Value   Paid-in   Accumulated   Stockholders' 
   Shares   Amount   Shares   Amount   Shares   Amount   Capital   Deficit   Equity 
                                     
Balance, December 31, 2020   264,894   $265    1,639,360   $1,639    98,898,130   $98,898   $19,862,918   $(19,581,816)  $381,904 
                                              
Proceeds received pursuant to Private Placement Memorandum, net of $0 offering costs- (Unaudited)                   2,487,550    2,488    619,387        621,875 
Proceeds received from sale of Preferred Stock- (Unaudited)           1,345,000    1,345            1,343,655        1,345,000 
Net loss- (Unaudited)                               (1,332,301)   (1,332,301)
Balance, March 31, 2021- (Unaudited)   264,894    265    2,984,360    2,984    101,385,680    101,386    21,825,960    (20,914,117)   1,016,478 
                                              
Proceeds received pursuant to Private Placement Memorandum, net of $0 offering costs- (Unaudited)                   1,290,000    1,289    326,211        327,500 
Common stock issued for services- (Unaudited)                   2,713,500    2,714    675,661        678,375 
Net loss- (Unaudited)                               (1,659,216)   (1,659,216)
Balance, June 30, 2021- (Unaudited)   264,894    265    2,984,360    2,984    105,389,180    105,389    22,827,832    (22,573,333)   363,137 
                                              
Proceeds received pursuant to Private Placement Memorandum, net of $0 offering costs- (Unaudited)                   1,444,040    1,444    411,972        413,416 
Proceeds received from sale of Preferred Stock- (Unaudited)           700,000    700              699,275        699,975 
Common stock issued for services- (Unaudited)                   40,000    40    9,960        10,000 
Net loss- (Unaudited)                               (1,391,171)   (1,391,171)
Balance, September 30, 2021- (Unaudited)   264,894   $265    3,684,360   $3,684    106,873,220   $106,873   $23,949,039   $(23,964,504)  $95,357 
                                              
                                              
Balance, December 31, 2021   264,894   $265    3,909,360   $3,909    110,864,595   $110,864   $25,327,230   $(25,782,390)  $(340,122)
Proceeds received pursuant to Private Placement Memorandum, net of $0 offering costs- (Unaudited)                   1,800,000    1,800    718,200        720,000 
Common stock issued for services- (Unaudited)                   2,737,325    2,737    1,092,192        1,094,929 
Common stock issued in exchange for right-to-use intellectual property- (Unaudited)                   500,000    500    235,500        236,000 
Fair value of Warrants issued with Convertible Debentures- (Unaudited)                           23,800        23,800 
Net loss- (Unaudited)                               (2,410,102)   (2,410,102)
Balance, March 31, 2022- (Unaudited)   264,894    265    3,909,360    3,909    115,901,920    115,901    27,396,922    (28,192,492)   (675,495)
                                              
Proceeds received pursuant to Private Placement Memorandum, net of $0 offering cost- (Unaudited)                   101,250    102    40,398        40,500 
Common stock issued for services- (Unaudited)                   1,231,869    1,232    364,166        365,398 
Fair Value of warrants Issued with Convertible Debentures- (Unaudited)                           59,146        59,146 
Net loss- (Unaudited)                               (1,553,994)   (1,553,994)
Balance, June 30, 2022- (Unaudited)   264,894    265    3,909,360    3,909    117,235,039    117,235    27,860,632    (29,746,486)   (1,764,445)
                                              
Fair Value of warrants Issued with Convertible Debentures- (Unaudited)                           174,750        174,750 
Common stock issued for services- (Unaudited)                   182,000    182   72,618        72,800 
Retirement of common shares issued for services- (Unaudited)                   (544,000)   (544)   (314,956)       (315,500)
Net loss- (Unaudited)                               (1,083,878)   (1,083,878)
Balance, September 30, 2022- (Unaudited)   264,894   $265    3,909,360   $3,909    116,873,039   $116,873   $27,793,044   $(30,830,364)  $(2,916,273)

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

 

 

3 
 

 

MEDIXALL GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

 

           
   Nine Months Ended 
   September  30, 
   2022   2021 
CASH FLOWS FROM OPERATING ACTIVITIES:          
Net loss  $(5,047,974)  $(4,382,688)
Adjustments to reconcile net loss to net cash used in operating activities:          
Depreciation   1,621    3,840 
Common stock issued as compensation for services   1,217,627    688,375 
Amortization of debenture discounts   59,781     
Gain from forgiveness of note payable       (165,719)
Changes in operating assets and liabilities:          
Other assets   (17,040)   4,516 
Prepaid expenses- related party   276,043    174,304 
Accounts payable and accrued expenses   257,638    (94,335)
Accounts payable and accrued expenses - related party   241,608    83,350 
Amortization of right-of-use operating lease asset   53,679    36,754 
Amortization of right-to-use intellectual property   25,287     
Amortization of website and development   19,411     
Operating lease liability   (50,483)   (38,707)
Net cash used in operating activities   (2,962,802)   (3,690,310)
           
CASH FLOWS FROM INVESTING ACTIVITY:          
Website development costs       (13,680)
Net cash provided by investing activities       (13,680)
           
CASH FLOWS FROM FINANCING ACTIVITIES:          
Proceeds from the sale of common stock, net of offering costs   760,500    1,362,791 
Proceeds from the sale of preferred stock       2,044,975 
Proceeds from issuance of convertible debentures   2,214,462     
Net cash provided by financing activities   2,974,962    3,407,766 
           
Net increase (decrease) in cash   12,160    (296,224)
Cash at beginning of period   63,418    645,762 
           
Cash at end of period  $75,578   $349,538 
           
Supplemental disclosures of non-cash information          
Issuance of Common Stock in exchange for the Right-to-Use Intellectual Property  $236,000   $ 
Discount issued with Convertible Debentures  $257,695   $ 
Decrease in note payable resulting from gain on forgiveness of note payable  $   $(165,719)
Right-of-use lease assets obtained in exchange for operating lease liabilities  $   $324,589 
Retirement of common shares issued for services  $315,500   $ 

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

 

4 
 

 

MEDIXALL GROUP, INC. AND SUBSIDIARIES

 

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.

  

5 

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.

 

6 

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.

 

7 

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:

 

                    
   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):

 

                    
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.

 

8 

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:

 

     
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:

 

         
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.

 

9 

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.

 

10 

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:

 

          
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:

 

       
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.

 

 

 

11 
 

 

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

 

FORWARD-LOOKING STATEMENTS

 

This report contains forward-looking statements. Forward-looking statements discuss matters that are not historical facts. Because they discuss future events or conditions, forward-looking statements may include words such as “anticipate,” “believe,” “estimate,” “intend,” “could,” “should,” “would,” “may,” “seek,” “plan,” “might,” “will,” “expect,” “predict,” “project,” “forecast,” “potential,” “continue” negatives thereof or similar expressions. Forward-looking statements contained in this report speak only as of the date of this report, are based on various underlying assumptions and current expectations about the future and are not guarantees. Such statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, level of activity, performance or achievement to be materially different from the results of operations or plans expressed or implied by such forward-looking statements. Such forward-looking statements include statements regarding, among other things, matters associated with:

 

  · our ability to continue as a going concern,
  · our history of losses which we expect to continue,
  · the significant amount of liabilities due to related parties,
  · our ability to raise sufficient capital to fund our company,
  · our ability to integrate acquisitions and the operations of acquired companies,
  · the limited experience of our management in the operations of a public company,
  · potential weaknesses in our internal control over financial reporting,
  · increased costs associated with reporting obligations as a public company,
  · a limited market for our common stock and limitations resulting from our common stock being designated as a penny stock,
  · the ability of our board of directors to issue preferred stock without the consent of our stockholders,
  · our management controls the voting of our outstanding securities,
  · the conversion of shares of Series A and B preferred stock will be very dilutive to our existing common stockholders,
  · risks associated with and unique to health care, and
  · risks associated with stability of the internet, data security, exposure to data breach.

 

You should read thoroughly this report and the documents that we refer to herein with the understanding that our actual future results may be materially different from and/or worse than what we expect. We qualify all of our forward-looking statements by these cautionary statements, including those made in this report, in Part I. Item 1A. Risk Factors appearing in our Annual Report on Form 10-K for the year ended December 31, 2021 and our other filings with the Securities and Exchange Commission. Other sections of this report include additional factors which could adversely impact our business and financial performance. New risk factors emerge from time to time and it is not possible for our management to predict all risk factors, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. Except for our ongoing obligations to disclose material information under the Federal securities laws, we undertake no obligation to release publicly any revisions to any forward-looking statements, to report events or to report the occurrence of unanticipated events. These forward-looking statements speak only as of the date of this report, and you should not rely on these statements without also considering the risks and uncertainties associated with these statements and our business.

 

OTHER PERTINENT INFORMATION

 

Unless specifically set forth to the contrary, when used in this report the terms “MediXall Group”, the “Company,” “we”, “us”, “our” and similar terms refer to MediXall Group, Inc., a Nevada corporation, and its wholly-owned subsidiaries.

 

GENERAL

 

The following Management’s Discussion and Analysis (“MD&A”) is intended to help the reader understand the Company’s results of operations and financial condition. The MD&A is provided as a supplement to, and should be read in conjunction with the unaudited condensed consolidated financial statements and the accompanying notes included in this Quarterly Report on Form 10-Q.

 

12 
 

 

The MD&A is based on our unaudited condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). The preparation of these unaudited condensed consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities and expenses and related disclosure of contingent assets and liabilities. Management bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

 

OVERVIEW

 

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.

 

Going Concern

 

We have incurred net losses of approximately $30.8 million since inception through September 30, 2022. The report of our independent registered public accounting firm on our consolidated financial statements for the year ended December 31, 2021 contains an explanatory paragraph regarding our ability to continue as a going concern based upon the fact that we are dependent upon our ability to increase revenues along with raising additional external capital as needed. These factors, among others, raise substantial doubt about our ability to continue as a going concern. Our condensed consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. There are no assurances we will be successful in our efforts to generate revenues or report profitable operations or to continue as a going concern, in which event investors would lose their entire investment in our company.

 

Results of Operations

 

Three Month Period Ended September 30, 2022 Compared to the Three Month Period Ended September 30, 2021

 

Revenue

 

We had nominal revenue for the three months ended September 30, 2022 and 2021.

 

Operating Expenses

 

A summary of our operating expense for the three month periods ended September 30, 2022 and 2021 follows:

 

   Three Months Ended     
   September 30,   (Decrease) / 
   2022   2021   Increase 
Operating expense               
Professional fees  $227,914   $323,316   $(95,402)
Professional fees – related party   50,100    40,000    10,100 
Management fee – related party   240,000    240,000     
Personnel related expenses   273,120    533,130    (260,010)
Other selling, general, and administrative   313,510    258,498    55,012 
Total operating expense  $1,104,644   $1,394,944   $(290,300)

 

13 
 

 

Operating expenses decreased $290,300, or 21%, to $1,104,644 during the three months ended September 30, 2022 compared to $1,394,944 during the same period in 2021. The decrease in total operating expenses is primarily due to:

 

  1. The decrease in professional fees of $95,402 primarily resulted from the Company issuing fewer shares of its restricted common stock for consulting services during the three month period ended September 30, 2022 compared the three month period ended September 30, 2021.

 

  2. The increase in professional fees – related party of 10,100 is primarily due to an increase R3 service fees for the three months ended period September 30, 2022 compared to the three months ended period September 30, 2021.

 

  3. The decrease in personnel related expenses of $260,010 is due to a decrease of payroll costs during the three month period ended September 30, 2022 compared to September 30, 2021.

 

  4. The increase of $55,012 in other selling, general, and administrative is due to a increase in business development and marketing expenses during the three month period ended September 30, 2022.

 

We expect expenses to increase as we move forward with further enhancing the platform.

 

Nine Month Period Ended September 30, 2022 Compared to the Nine Month Period Ended September 30, 2021

 

Revenue

 

We had nominal revenue for the nine months ended September 30, 2022 and 2021. The revenue in 2021, was mainly from Paycheck Protection Program loan forgiveness.

 

Operating Expenses

 

A summary of our operating expense for the nine month periods ended September 30, 2022 and 2021 follows:

 

   Nine Months Ended     
   September 30,   (Decrease) / 
   2022   2021   Increase 
Operating expense               
Professional fees  $824,527   $1,004,976   $(180,449)
Professional fees – related party   227,600    451,038    (223,438)
Management fee – related party   720,000    600,000    120,000 
Personnel related expenses   2,587,035    1,817,042    769,993 
Other selling, general, and administrative   727,837    683,318    44,519 
Total operating expense  $5,086,999   $4,556,374   $530,625 

 

Operating expenses increase $530,625 or 12%, to $5,086,999 during the nine months ended September 30, 2022 compared to $4,556,374 during the same period in 2021. The increase in total operating expenses is primarily due to:

 

1.The decrease in professional fees of $180,449 primarily resulted from the Company issuing fewer shares of restricted common stock for consulting services during the nine month period ended September 30, 2022 compared to the nine month period ended September 30, 2021.

 

2.The decrease in Professional fees – related party of $223,438 is primarily due to a decrease in marketing and consulting expenses from a related party, partially offset by an increase in R3 service fees for the nine months period ended September 30, 2022.

 

3.The increase in management fees - related party of $120,000 is due to an additional contract entered into with TBG to provide management services to our wholly-owned subsidiary, Health Karma, Inc during the nine month period ended September 30, 2022. There was no such contract during the nine month period ended September 30, 2021.

 

14 
 

 

4.The increase in personnel related expenses of $769,993 is due to more personnel needed for business operations and issuing shares of restricted common stock for employee services during the nine month period ended September 30, 2022, in excess of that issued in the same period 2021.

 

5.The increase of $44,519 in other selling, general, and administrative is due to an increase in business development and marketing expenses during the nine month period ended September 30, 2022.

 

We expect expenses to increase as we move forward with further enhancing the platform.

 

Liquidity and capital resources

 

Liquidity is the ability of a company to generate sufficient cash to satisfy its needs. At September 30, 2022, we had $75,578 in cash and a net working capital deficit of $3,596,089.

 

For the nine month period ended September 30, 2022, we raised $760,500 and $2,214,462 from sales of our restricted common stock and issuance of convertible debt, respectively. For the nine month period ended September 30, 2021, we raised $3,407,766 from sales of our restricted common stock and preferred stock.

 

Net cash used in operating activities for nine month period ended September 30, 2022 was $2,962,802, as compared to $3,690,310 for the nine month period ended September 30, 2021. This change primarily results from our increased net loss, offset by fluctuations in accounts payable and accrued expenses, accounts payable and accrued expenses-related party and the issuance of common stock for services rendered.

 

Our primary source of capital to develop and implement our business plan has been from sales of common, preferred stock and proceeds from convertible debentures.

  

Other Contractual Obligations

 

None.

 

Off-Balance Sheet Arrangements

  

We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors. The term "off-balance sheet arrangement" generally means any transaction, agreement or other contractual arrangement to which an entity unconsolidated with us is a party, under which we have any obligation arising under a guarantee contract, derivative instrument or variable interest or a retained or contingent interest in assets transferred to such entity or similar arrangement that serves as credit, liquidity or market risk support for such assets.

 

Critical Accounting Policies

 

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.

 

15 
 

 

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.

 

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.

 

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 nine month 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.

   

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.

 

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

 

As a “smaller reporting company” as defined by Item 10 of Regulation S-K, we are not required to provide information required by this Item.

 

ITEM 4. CONTROLS AND PROCEDURES.

 

Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures

  

We carried out an evaluation as required by paragraph (b) of Rule 13a-15 and 15d-15 of the Exchange Act, under the supervision and with the participation of our management, including our Interim Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, as of September 30, 2022.

  

A material weakness can be defined as an insufficiency of internal controls that may result in a more than remote likelihood that a material misstatement will not be prevented, detected or corrected in a company’s condensed consolidated financial statements.

 

 

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Based upon that evaluation, our Interim Chief Executive Officer and Chief Financial Officer concluded that as of September 30, 2022, our disclosure controls and procedures were not effective, based on the following deficiencies:

  

  · Weaknesses in accounting and finance personnel: We have a small accounting staff and we do not have the robust employee resources and expertise needed to meet complex and intricate GAAP and SEC reporting requirements of a U.S. public company. Additionally, numerous adjustments and proposed adjustments have been noted by our auditors. This is deemed by management to be a material weakness in preparing condensed consolidated financial statements.
     
  · We have written accounting policies and control procedures, but we do not have sufficient staff to implement the related controls. Management had determined that this lack of the implantation of segregation of duties, as required by our written procedures, represents a material weakness in our internal controls.
     
  · Internal control has as its core a basic tenant of segregation of duties. Due to our limited size and economic constraints, the Company is not able to segregate for control purposes various asset control and recording duties and functions to different employees. This lack of segregation of duties had been evaluated by management, and has been deemed to be a material control deficiency.

  

The Company has determined that the above internal control weaknesses and deficiencies could result in a reasonable possibility for the condensed consolidated financial statements that a material misstatement will not be prevented or detected on a timely basis by the Company’s internal controls.

  

Management is currently evaluating what steps can be taken in order to address these material weaknesses. As a growing small business, the Company continuously devotes resources to the improvement of our internal control over financial reporting. Due to budget constraints, the staffing size, proficiency and specific expertise in the accounting department is below requirements for the operation. The Company is anticipating correcting deficiencies as funds become available.

 

Changes in Internal Control Over Financial Reporting

 

There were no changes during our last fiscal quarter that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

 

 

  

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PART II - OTHER INFORMATION

 

ITEM 1. LEGAL PROCEEDINGS.

 

The Company has received a Subpoena from the SEC requesting certain documents in connection with an investigation styled, “In the Matter of TBG Holdings Corporation”. This investigation is a non-public, fact-finding inquiry and does not require disclosure by the Company. The Company has decided to disclose this matter in order to more fully keep our shareholders apprised of matters affecting the Company and its shareholders. The investigation in no way has made a conclusion that anyone has violated any securities laws or regulations. Also, this investigation does not mean the SEC has a negative opinion of any person, entity, or security. All SEC investigations are conducted privately.

 

As part of its investigation, the SEC has requested certain financial documents and information related to the Company, as well as documents related to transactions with R3, TBG, Turnkey and other entities.

 

All transactions between the Company and each of R3, TBG and Turnkey are routinely updated and disclosed in the Company’s Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q, each as filed with the SEC. These filings can be found on the SEC’s public web site at https://www.sec.gov/cgi-bin/browse-edgar?CIK=1601280&owner=exclude.

 

The Company cooperated fully with the SEC in its investigation and supplied, the SEC with all documents requested in a timely fashion.

 

The SEC has informed the Company that it has concluded its investigation and it will not be opening an investigation into the Company.

 

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.

 

ITEM 1A. RISK FACTORS.

 

As a “smaller reporting company” as defined by Item 10 of Regulation S-K, we are not required to provide information required by this Item.

 

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

 

None during the three month period ended September 30, 2022.

  

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

 

None.

 

ITEM 4. MINE SAFETY DISCLOSURES.

 

Not applicable to our Company.

 

ITEM 5. OTHER INFORMATION.

 

None.

 

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ITEM 6. EXHIBITS.

 

Exhibit No.   Description
31.1   Rule 13a-14(a)/ 15d-14(a) Certification of Chief Executive Officer *
31.2   Rule 13a-14(a)/ 15d-14(a) Certification of Chief Financial Officer *
32.1   Section 1350 Certification of Chief Executive Officer *
32.2   Section 1350 Certification of Chief Financial Officer *
101.INS   Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document) *
101.SCH   Inline XBRL Taxonomy Extension Schema Document *
101.CAL   Inline XBRL Taxonomy Extension Calculation Linkbase Document *
101.DEF   Inline XBRL Taxonomy Extension Definition Linkbase Document *
101.LAB   Inline XBRL Taxonomy Extension Label Linkbase Document *
101.PRE   Inline XBRL Taxonomy Extension Presentation Linkbase Document *
104   Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

———————

* Filed herewith.

 

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SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

  MediXall Group, Inc.
     
Dated: November 14, 2022 By: /s/ Richard Paull
    Richard Paull
    Chief Financial Officer (Principal Financial and Accounting Officer)
     
     
Dated: November 14, 2022 By: /s/ Travis Jackson
    Travis Jackson
    Chief Executive Officer (Principal Executive Officer)

 

 

 

 

 

 

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