MEDIXALL GROUP, INC. The following Management's Discussion and Analysis ("MD&A") is intended to help the reader understand the results of operations and financial condition of the Company and its subsidiaries. The MD&A is provided as a supplement to, and should be read in conjunction with consolidated financial statements and the accompanying notes to the consolidated financial statements included in this Annual Report on Form 10-K.
Our discussion and analysis of our financial condition and results of operations
is based on our consolidated financial statements, which have been prepared in
accordance with accounting principles generally accepted in
Overview
Going Concern
We have incurred net losses of
Results of Operations
Year Ended
Revenue
We generated
Operating Expenses A summary of our operating expense for the years endedDecember 31, 2021 and 2020 follows: Years Ended December 31, Increase/ 2021 2020 (Decrease) Operating expense Professional fees$ 1,277,975 $ 1,539,082 $ (261,107 ) Professional fees - related party 496,038 369,950 126,088 Management fees - related party 840,000 480,000 360,000 Personnel related expenses 3,066,406 2,530,315 536,091 Other selling, general, and administrative 717,369 389,105 328,264 (Credit) / provision for uncollectible prepaid expense - related party (16,500 ) 623,580 (640,080 ) Total operating expense$ 6,381,288 $ 5,932,032 $ 449,256 27 Operating expenses increased$449,256 or 8% to$6,381,288 in 2021 compared to$5,932,032 in 2020. The increase in total operating expenses is primarily due to: 1. The decrease in professional fees of$261,107 primarily resulted from fewer shares of stock issued for services for the year endDecember 31, 2021 compared toDecember 31, 2020 . 2. The increase in Professional fees - related party by$126,088 due to marketing and consulting expenses to two companies which are owned by the president of Turnkey, a related party, during the year endedDecember 31, 2021 . There was no such expense for year endedDecember 31, 2020 . This increase is slightly offset by a decrease in R3 service fees during the year endedDecember 31, 2021 compared to the same period in 2020. 3. The increase in management fees - related party of$360,000 is due to an additional contract entered into with TBG to provide management services to our wholly-owned subsidiary,Health Karma, Inc. There was no such contract during the year endedDecember 31, 2020 . 4. The increase in personnel related expenses of$536,091 is due to issuing shares of restricted common stock for employee services during the year endedDecember 31, 2021 in excess of that issued in the same period of 2020. 5. The$328,264 increase in other selling, general, and administrative is due to an increase in business development and marketing expenses during the year endedDecember 31, 2021 . 6. The decrease of$640,080 in the provision for uncollectible prepaid expense - related party is primarily due to no provision recorded during 2021. This is slightly offset by a$16,500 credit recognized during 2021. The prepaid expense - related party consists of cash advances to TBG. The advances are due on demand, unsecured, and do not bear any interest. As ofDecember 31, 2020 , the Company determined these advances to be uncollectible. As such, the Company recorded a provision for uncollectible related party accounts receivable totaling$623,580 .
Liquidity and Capital Resources
We have an accumulated deficit of
These conditions raise substantial doubt about our ability to continue as a going concern. Management recognizes that in order for us to meet our capital requirements, and continue to operate, additional financing will be necessary. We expect to raise additional funds through private or public equity investment in order to maintain and/or expand the range and scope of our business operations; however, there is no assurance that such additional funds will be available for us on acceptable terms, if at all. If we are unable to raise additional capital when needed or generate positive cash flow, it is unlikely that we will be able to continue as a going concern. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Net cash used in operating activities was
Net cash used in investing activities was
Net cash provided by financing activities was
Other Contractual Obligations
None. 28
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
Our discussion and analysis of our financial condition and results of operations
are based upon our audited and unaudited consolidated financial statements,
which have been prepared in accordance with accounting principles generally
accepted in
Basis of Presentation
The accompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. The accounting and reporting practices of the Company conform to GAAP. The following summarizes the more significant of these policies and practices.
Use of Estimates
In preparing consolidated financial statements in conformity with GAAP, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and reported amounts of revenues and expenses during the reporting year. Actual results could differ from those 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 are reflected in operations.
Risks and Uncertainties
The Company's operations are subject to significant risks and uncertainties including financial, operational and regulatory risks, including the potential risk of business failure. Additionally, the Company faces significant risk and uncertainty related to the COVID-19 pandemic.
29 Fair Value Measurement
The Company measures fair value as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the reporting date. The Company utilizes a three-tier hierarchy which prioritizes the inputs used in the valuation methodologies in measuring fair value as follows:
Level 1. Valuations based on quoted prices in active markets for identical
assets or liabilities that an entity has the ability to access. The
Company has no assets or liabilities valued with Level 1 inputs.
Level 2. Valuations based on quoted prices for similar assets or liabilities,
quoted prices for identical assets or liabilities in markets that
are not active, or other inputs that are observable or can be
corroborated by observable data for substantially the full term of
the assets or liabilities. The Company has no assets or liabilities
valued with Level 2 inputs.
Level 3. Valuations based on inputs that are supported by little or no market
activity and that are significant to the fair value of the assets or
liabilities. The Company's website and development costs are the
only assets or liabilities valued with Level 3 inputs.
Fair Value of Financial Instruments
The carrying value of cash, accounts payable and accrued expenses, accounts payable and accrued expenses - related party, and note payable approximates its fair value because of the short-term nature of these instruments and their liquidity. Management is of the opinion that the Company is not exposed to significant interest or credit risks arising from these financial instruments.
Income Taxes
The Company accounts for income taxes using the liability method prescribed by 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.
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
Revenue Recognition
The Company accounts for revenue under Accounting Standards Updated ("ASU")
30
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 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 fair value of 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. Based on impairment tests performed there was no write-down of long-lived assets required during 2021 and 2020. There can be no assurances that future impairment tests will not result in further charge to operations.
Website and Development Costs
Internal and external costs incurred to develop, the internal-use computer
software during the application and development stage shall be capitalized
subsequent to the preliminary project stage and when it is probable that the
project will be completed. During the years ended
Allowance for Uncollectible Accounts Receivable
An allowance for uncollectible accounts receivable is recorded when management believes the uncollectability of the accounts receivable is confirmed. Subsequent recoveries, if any, are credited to the allowance. The allowance is determined based on management's review of the debtor's ability to repay and repayment history, aging history, and estimated value of collateral, if any.
Recently Issued Accounting Pronouncements
See Note 3 to our consolidated financial statements for more information regarding recent accounting pronouncements and their impact to our consolidated results of operations and financial position.
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