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.
The accompanying notes are an integral part of these
unaudited condensed consolidated financial statements.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Note 1 - Organization and Nature of Operation
MediXall Group, Inc. (the "Company
“or “MediXall”) was incorporated on December 21, 1998 under the laws of the State of Nevada under the name of IP Gate,
Inc. The Company had various name changes since, to reflect changes in the Company’s operating strategies.
MediXall is a technology and
innovation-driven organization that has developed a new generation healthcare marketplace platform to address the growing needs of self-pay
and high deductible consumers for greater transparency and price competition in their healthcare costs. The cloud-based MediXall.com platform
connects patients with healthcare providers and wellness services. The Company’s targeted marketplace is Florida, with plans for
a nationwide roll-out. Thus far, MediXall has launched the MediXall platform marketplace throughout Florida beginning in 2019 in a controlled
launch and launched Health Karma throughout the U.S. in a beta release beginning in August 2020 and nationwide public launch in November
2020. The Company generated minimal revenue in 2021 and no revenue in 2020 as its online healthcare platform is still in the application
and development stage. The revenue recognized in 2021 was driven almost entirely from the Paycheck Protection Program loan forgiveness.
Further discussion on our operations, mission, and initiatives can be found in the Management’s Discussion and Analysis section
of this report.
The Company has the following
wholly-owned subsidiaries: (1) IHL of Florida, Inc., which is dormant, (2) Medixall Financial Group, which is dormant, (3) Medixaid, Inc.,
and (4) MediXall.com, Inc., which were established to carry out the development and operation of our healthcare marketplace platform,
and (5) Health Karma, Inc. which was established in 2020 to increase functionality of the MediXall platform.
Note 2 – Going Concern
The Company has an accumulated
deficit of $23,964,504 at September 30, 2021, and does not have sufficient operating cash flows. The accompanying unaudited condensed consolidated
financial statements have been prepared in conformity with generally accepted accounting principles in the United States of America (“GAAP”),
which contemplates continuation of the Company as a going concern, which is dependent upon the Company’s ability to establish itself
as a profitable business.
Since the Company has
generated minimal revenues from its planned operations, its ability to continue as a going concern is wholly dependent upon its
ability to obtain additional financing. Since inception, the Company has funded operations through short-term borrowings, related
party loans, and the proceeds from equity sales in order to meet its strategic objectives. The Company's future operations are
dependent upon its ability to generate revenues along with additional external funding as needed. However, there can be no assurance
that the Company will be able to obtain sufficient funds to continue the development of its business plan. Subsequent to September
30, 2021, the Company has issued 573,750
common shares for total proceeds of $202,500 and 150,000
shares of convertible preferred series B stock for total proceeds of
$150,000.
In view of these conditions,
the ability of the Company to continue as a going concern is in substantial doubt and dependent upon achieving a profitable level of
operations and on the ability of the Company to obtain necessary financing to fund ongoing operations. These unaudited condensed consolidated
financial statements do not give effect to any adjustments which will be necessary should the Company be unable to continue as a going
concern and therefore be required to realize its assets and discharge its liabilities in other than the normal course of business and
at amounts different from those reflected in the accompanying unaudited condensed consolidated financial statements. The unaudited condensed
consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
MEDIXALL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Note 3 - Summary of Significant Accounting Policies
Basis of Presentation
The accompanying unaudited,
condensed consolidated financial statements of the Company have been prepared in accordance with GAAP for interim financial
information, and the 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
condensed consolidated financial statements reflect all normal recurring adjustments necessary to present fairly the Company’s
condensed consolidated financial position as of September 30, 2021 and the condensed consolidated results of operations and cash
flows for the periods presented. The condensed consolidated results of operations for interim periods are not necessarily indicative
of the results of operations to be expected for any subsequent interim period or for the fiscal year ending December 31, 2021. The
accompanying unaudited condensed consolidated financial statements and notes thereto should be read in conjunction with the audited
consolidated financial statements for the year ended December 31, 2020 included in the Company’s Annual Report on Form 10-K,
which was filed with the SEC on June 17, 2021.
Principles of Consolidation
These unaudited condensed consolidated
financial statements presented are those of the Company and its wholly owned subsidiaries. All significant intercompany balances and transactions
have been eliminated.
Use of Estimates
The preparation of the unaudited
condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated
financial statements and the reported amounts of revenues and expenses during the reporting periods.
Making estimates requires management
to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set
of circumstances that existed at the date of the condensed consolidated financial statements, which management considered in formulating
its estimate could change in the near term due to one or more future non-conforming events. Accordingly, the actual results could differ
significantly from estimates.
A material estimate that is particularly
susceptible to significant change in the near-term relate to the determination of the impairment of website and development cost. The
Company uses various assumptions and actuarial data it believes to be reasonable under the circumstances to make this estimate. Although
considerable variability is likely to be inherent in this estimate, management believes that the amount provided is reasonable. This estimate
is continually reviewed and adjusted if necessary. Such adjustments are reflected in current operations.
Subsequent Events
Management has evaluated events
occurring subsequent to the unaudited condensed consolidated balance sheet date, through November 15, 2021, which is the date the unaudited
condensed consolidated financial statements were issued, determining all subsequent events have been disclosed. On November 10, 2021, the Company entered into an agreement with the Maxim
Group for sale of up to 20.0 million of units consisting of common stock and warrants to the Company's 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 coronavirus global pandemic (“COVID-19”)
pandemic.
MEDIXALL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Income
Taxes
The Company accounts for income
taxes using the liability method prescribed by the Financial Accounting Standards Board’s (the “FASB”) Accounting Standards
Codification 740, "Income Taxes". Under this method, deferred tax assets and liabilities are determined based on the
difference between the financial reporting and tax bases of assets and liabilities using enacted tax rates that will be in effect in the
year in which the differences are expected to reverse. The Company records a valuation allowance to offset deferred tax assets if based
on the weight of available evidence, it is more-likely-than-not that some portion, or all, of the deferred tax assets will not be realized.
The effect on deferred taxes of a change in tax rates is recognized as income or loss in the year that includes the enactment date.
Pursuant to accounting standards
related to the accounting for uncertainty in income taxes, the evaluation of a tax position is a two-step process. The first step is to
determine whether it is more likely than not that a tax position will be sustained upon examination, including the resolution of any related
appeals or litigation based on the technical merits of that position. The second step is to measure a tax position that meets the more-
likely-than-not threshold to determine the amount of benefit to be recognized in the financial statements. A tax position is measured
at the largest amount of benefit that is greater than 50% likelihood of being realized upon ultimate settlement. Tax positions that previously
failed to meet the more-likely-than -not recognition threshold should be recognized in the first subsequent period in which the threshold
is met. Previously recognized tax positions that no longer meet the more-likely-than-not criteria should be de- recognized in the first
subsequent financial reporting period in which the threshold is no longer met. The accounting standard also provides guidance on de- recognition,
classification, interest and penalties, accounting in interim periods, disclosures, and transition.
The Company assessed its earnings
history, trends, and estimates of future earnings, and determined that the deferred tax asset could not be realized as of September 30, 2021.
Accordingly, a valuation allowance was recorded against the net deferred tax asset.
Revenue Recognition
The Company had minimal revenues
in 2021 and no revenue in 2020. The Company recognizes revenue to depict the transfer of promised goods or services to customers in an
amount that reflects the consideration to which the entity expects to be entitled to receive in exchange for those goods or services.
To achieve this core principle, five basic criteria must be met before revenue can be recognized: (1) identify the contract with a customer;
(2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to performance
obligations in the contract; and (5) recognize revenue when or as the Company satisfies a performance obligation.
Share-Based Payment Arrangements
The Company applies the fair value
method in accounting for its stock-based compensation. This standard states that compensation cost is measured at the grant date based
on the fair value of the award and is recognized over the service period, which is usually the vesting period. The Company values the
stock-based compensation at the market price for the Company's stock as of the date of issuance.
Loss Per Share
The computation of basic loss
per share (“LPS”) is based on the weighted average number of shares that were outstanding during the period, including shares
of common stock that are issuable at the end of the reporting period. The computation of diluted LPS is based on the number of basic weighted-average
shares outstanding. The computation of diluted LPS does not assume conversion, exercise or contingent issuance of securities that would
have an antidilutive effect on LPS. Therefore, when calculating LPS, there is no inclusion of dilutive securities as their inclusion in
the LPS calculation is antidilutive.
MEDIXALL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Following is the computation
of basic and diluted loss per share for the three and month periods ended September 30, 2021 and 2020:
Schedule of computation of basic and diluted net loss per share
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Three Months Ended
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Nine Months Ended
|
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September 30,
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September 30,
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2021
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2020
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2021
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2020
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Basic and Diluted LPS Computation
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Numerator:
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|
|
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Loss available to common stockholders
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$
|
(1,456,807
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)
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$
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(966,631
|
)
|
|
$
|
(4,597,102
|
)
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|
$
|
(3,963,726
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)
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Denominator:
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Weighted average number of common shares outstanding
|
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105,948,985
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|
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93,506,088
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103,147,965
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|
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88,660,995
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Basic and diluted LPS
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$
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(0.01
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)
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$
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(0.01
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)
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$
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(0.04
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)
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|
$
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(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
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Series A Preferred stock (convertible)
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24,900,000
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24,900,000
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|
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24,900,000
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24,900,000
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Series B Preferred stock (convertible)
|
|
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14,737,440
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3,110,240
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14,737,440
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3,110,240
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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 month periods ended September 30, 2021 and 2020. However, there can be no assurances that future impairment tests will not result in
a 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. As of September 30, 2021, the Company has met the capitalization
requirements and has incurred $453,084 in costs related to the development of the MediXall platform.
Allowance for Uncollectible Accounts Receivable
An allowance for uncollectible
accounts receivable is recorded when management believes the uncollectability of the accounts receivable is confirmed. Subsequent recoveries,
if any, are credited to the allowance. The allowance is determined based on management’s review of the debtor’s ability to
repay and repayment history, aging history, and estimated value of collateral, if any.
Note 4 – Preferred Stock
The Series A preferred shares
are convertible into 24,900,000 common shares. The preferred shares do not pay dividends. The number of votes for the preferred shares
shall be the same as the amount of shares of common shares that would be issued upon conversion.
On June 24, 2020, the Company
filed with the Secretary of State of the State of Nevada (the “Secretary of State”) a certificate of designation (the “Certificate
of Designation”) of Series B Convertible Preferred Stock, par value $0.001 per share (the “Series B Preferred
Stock”). The Certificate of Designation was effective upon filing with the Secretary of State and designated a new series of preferred
stock of the Company as Series B Convertible Preferred Stock with 4,000,000 shares authorized for issuance.
Upon the occurrence of the events
as set forth in paragraph (a) or (b) below, each share of Series B Preferred Stock shall be converted into four (the “Conversion
Ratio”) fully paid and non-assessable shares of common stock or any shares of capital stock or other securities of the Company into
which such common stock shall hereafter be changed or reclassified (the “Conversion Shares”) as set forth in the Certificate
of Designation.
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”). There can be no assurance that
the Company will apply for listing of its common stock on the New York Stock Exchange or the Nasdaq Stock Market, that it would meet the
relevant listing standards if it did apply, or that a listing application would be accepted.
(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, 2021, cumulative unpaid dividends on the Series
B Preferred Stock amounted to $214,414. No common stock has been issued as of September 30, 2021 in satisfaction of the preferred stock dividend.
Voting Rights
Each share of Series B Preferred
Stock shall have a number of votes on any matter submitted to the holders of the Company’s common stock, or any class thereof, for
a vote, equal to the number of Conversion Shares into which the Series B Preferred Stock is then convertible, and shall vote together
with the common stock, or any class thereof, as applicable, as one class on such matter for as long as the share of Series B Preferred
Stock is issued and outstanding.
Note 5 – Related Party Transactions
Pursuant to an agreement dated
June 2013 and amended in June 2020, TBG Holdings Corp. (“TBG”), was engaged to provide business advisory services, manage
and direct our public relations, provide recruiting services, develop and maintain material for market makers and investment bankers,
provide general administrative services, and respond to incoming investor relations calls. TBG is owned in part by Neil Swartz, the Company’s
Interim Chief Executive Officer and director, and a significant stockholder of the Company, and Timothy Hart, the Company’s Chief
Financial Officer and director, and a significant stockholder of the Company. Under this agreement, we pay TBG a monthly fee of $40,000.
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, 2021 and 2020, the Company expensed $240,000
and $120,000,
respectively, of related party management fees related to these agreements. During the nine months ended September 30, 2021 and 2020, the Company
expensed $600,000 and $360,000,
respectively, of related party management fees related to these agreements.
At September 30, 2021 and
December 31, 2020, the Company had prepaid management fees related to the aforementioned agreement with TBG amounting to $305,696
and $480,000,
respectively.
MEDIXALL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
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, 2021 and 2020, the Company expensed $40,000
and $104,050
and $175,538
and $245,050,
respectively, related to R3 services.
At September 30, 2021 and December
31, 2020, the Company had short term cash advances outstanding due to Turnkey Capital, Inc. (“Turnkey”), a related party of
the Company. The advances are due on demand, are unsecured, and do not bear any interest.
During the three and nine month
period ended September 30, 2021, the Company paid $0 and $275,500, respectively, in marketing and consulting expenses to two companies which are owned
by the president of Turnkey, a related party. There was no such fee during the three and nine month period ended September 30, 2020.
(Accounts payable and accrued expenses) prepaid expenses
to related parties are as follows:
Schedule of prepaid expenses (accounts payable and accrued expenses) to related parties
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|
Related Party
|
|
At
September 30,
2021
|
|
At
December 31,
2020
|
TBG
|
|
$
|
305,696
|
|
|
$
|
480,000
|
|
Turnkey
|
|
|
(548,150
|
)
|
|
|
(457,300
|
)
|
R3
|
|
|
(12,431
|
)
|
|
|
(19,931
|
)
|
|
|
$
|
(254,885
|
)
|
|
$
|
2,769
|
|
EGG Agreement
On September 13, 2019, Turnkey
entered into a Definitive Acquisition Agreement with Healthspan Medical Systems, Inc., doing business as EGG Health Hub, Inc. (“EGG”).
On October 29, 2020, Turnkey and EGG executed a share exchange agreement in which EGG became a wholly owned subsidiary of Turnkey. Turnkey
and EGG are related parties of the Company. EGG does not currently conduct any operations.
EGG
is a brand new model for healthcare and wellness that brings together top physicians and wellness professionals into co-practicing communities
with shared access to a full-stack technology platform – scheduling, billing, client acquisition, and telemedicine – and flexible
access to office space designed to optimize both the physician and client experience. This model creates a compelling new option for re-tenanting
traditional shopping centers and mixed-use space.
On July 27, 2020, the Company
and Turnkey entered into an agreement in which the Company issued 1,000,000 shares of its common stock to Turnkey in exchange for the
exclusive technology rights to develop EGG’s business model (as described in the preceding paragraph) with the Company’s technological
infrastructure, including but not limited to the use of the Company’s healthcare website platform. The transaction was accounted
for at historical cost as a transaction under common ownership that lacks commercial substance. As such, the issuance of the Company’s
common stock to Turnkey was recorded as an increase of $1,000 to common stock, with a corresponding decrease to additional paid-in capital.
Note 6 – Long Term Debt
During May 2020, the Company received a Paycheck
Protection Program loan in the amount of $165,719.
The Small Business Administration forgave the full amount of the loan in June 2021. Accordingly, the Company has derecognized the
loan and recognized the revenue of $165,719 from loan forgiveness.
Note 7 – Legal Contingencies
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.
TBG Holdings Corp. (“TBG”) is owned
in part by Neil Swartz, the Company’s Interim Chief Executive Officer and Chairman of the Board, and a significant stockholder of
the Company, and Timothy Hart, the Company’s Chief Financial Officer, Treasurer, Secretary and director, and a significant stockholder
of the Company. Pursuant to an agreement dated June 2013 and amended on May 20, 2019, 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. In April, 2021 the Company entered into an
additional contract with TBG to provide management services to our wholly-owned subsidiary, Health Karma, Inc. Under these agreements,
the Company pays TBG a monthly fee of $80,000.
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 and other
entities.
All transactions between the Company and each
of TBG and R3 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 web site is not incorporated herein by reference and is not a part of this Quarterly Report on Form 10-Q.
The Company is cooperating fully with the SEC
in its investigation and has supplied, and if requested, will continue to supply, the SEC with all documents requested in a timely fashion.
To date, the SEC has not informed the Company
that it has opened an investigation into the Company and at this time, the Company is not aware of any investigation into the Company
by the SEC.
From time to time, the Company may be the subject
of pending or threatened legal actions and proceedings, including those that arise in the ordinary course of business. Management is
not aware of any material pending legal proceedings, other than ordinary routine litigation incidental to the business, or proceedings
known to be contemplated by governmental authorities, to which the Company or any of its subsidiaries is a party or of which any of their
property is the subject. As of the date of this Quarterly Report on Form 10-Q, there are no material proceedings to which any director,
officer or affiliate of the Company, any owner of record or beneficially of more than 5% of any class of voting securities of the Company,
or any associate of any such director, officer, affiliate of the Company, or security holder is a party adverse to the Company or any
of its subsidiaries or has a material interest adverse to the Company or any of its subsidiaries.