UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended March 31, 2017

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)

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 þ  No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted 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 and post such files). Yes þ  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  þ
(Do not check if a smaller reporting company)	Emerging growth company  ¨

If an emerging growth company, indicate by checkmark if the registrant has not elected to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act. ¨

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

As of May 11, 2017 the issuer had 52,221,258 shares of its common stock issued and outstanding.

 

 

 

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MEDIXALL GROUP, INC. AND SUBSIDIARY

INDEX

		Page No.
PART I	FINANCIAL INFORMATION
ITEM 1.	FINANCIAL STATEMENTS:	1
	Condensed Consolidated Balance Sheets (unaudited)
	Condensed Consolidated Statements of Operations (unaudited)	2
	Condensed Consolidated Statements of Cash Flows (unaudited)	3
	Notes to Unaudited Condensed Consolidated Financial Statements	4
ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	10
ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	11
ITEM 4.	CONTROLS AND PROCEDURES	12
PART II	OTHER INFORMATION
ITEM 1.	LEGAL PROCEEDINGS	13
ITEM 1A.	RISK FACTORS	13
ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	13
ITEM 3.	DEFAULTS UPON SENIOR SECURITIES	13
ITEM 4.	MINE SAFETY DISCLOSURES	13
ITEM 5.	OTHER INFORMATION	13
ITEM 6.	EXHIBITS	13

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 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 preferred stock will be very dilutive to our existing common stockholders, and
	·	risks associated with our status as an emerging growth company.

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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, 2016 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 subsidiary, IHL of Florida, Inc. a Florida corporation which we refer to as IHL.

 

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PART 1.  FINANCIAL INFORMATION

ITEM 1.

FINANCIAL STATEMENTS

MEDIXALL GROUP, INC. AND SUBSIDIARY

CONDENSED CONSOLIDATED BALANCE SHEETS

		March 31,				December 31,
		2017				2016
		(Unaudited)
ASSETS
CURRENT ASSETS:
Cash		$	309,939			$	114,971
Total Current Assets			309,939				114,971
Total Assets		$	309,939			$	114,971
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
Accounts payable and accrued expenses		$	435,924			$	472,341
Accounts payable and accrued expenses - related party			462,992				548,160
Total Current Liabilities			898,916				1,020,501
STOCKHOLDERS' DEFICIT:
Convertible Preferred Series A stock, $0.001 par value, 1,000.000 authorized; 264,894 issued and outstanding at March 31, 2017 and December 31 2016, respectively.			265				265
Common Stock, $0.001 Par Value 750,000,000 shares authorized; 50,654,712 and 2,595,379 shares issued and outstanding at March 31, 2017 and December 31, 2016, respectively.			50,655				2,595
Additional paid-in capital			5,443,899				4,030,459
Common stock payable			—				756,125
Accumulated deficit			(6,083,796	)			(5,694,974	)
Total Stockholders' Deficit			(588,977	)			(905,530	)
Total Liabilities and Stockholders' Deficit		$	309,939			$	114,971

(The accompanying notes are an integral part of these condensed consolidated financial statements)

1

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MEDIXALL GROUP, INC. AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

  

		For the Three Months Ended
		March 31,
		2017				2016
Revenue		$	—			$	—
Operating Expenses
Professional fees			140,550				18,047
Professional fees - related party			37,500				10,965
Management fee - related party			80,000				30,000
Personnel related expenses			121,284				—
Other selling, general and administrative			9,489				1,283
Total Operating Expenses			388,822				60,295
Net loss before provision for income tax			(388,822	)			(60,295	)
Provision for income tax			—				—
Net Loss		$	(388,822	)		$	(60,295	)
Net loss per common share - basic and diluted		$	(0.01	)		$	(0.02	)
Weighted average number of common shares outstanding during the periods - basic and diluted			47,140,271				2,595,379

(The accompanying notes are an integral part of these condensed consolidated financial statements)

2

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MEDIXALL GROUP, INC. AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

		For the Three Months Ended
		March 31,
		2017				2016
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss		$	(388,822	)		$	(60,295	)
Changes in operating assets and liabilities:
Accounts payable and accrued expenses			(36,417	)			(1,953	)
Accounts payable and accrued expenses - related party			(85,168	)			62,494
Net cash flows from operating activities			(510,407	)			246
CASH FLOWS FROM INVESTING ACTIVITIES:			—				—
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from the sale of common stock			705,375				—
Net cash flows from financing activities			705,375				—
Increase in cash and cash equivalents			194,968				246
Cash and cash equivalents at beginning of year			114,971				—
Cash and cash equivalents at end of year		$	309,939			$	246
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid in cash		$	—			$	—
Income taxes paid in cash		$	—			$	—
SUPPLEMENTAL DISCLOSURE OF NON-CASH TRANSACTIONS:
Value of common stock issued for services		$	—			$	—

(The accompanying notes are an integral part of these condensed consolidated financial statements)

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MEDIXALL GROUP, INC. AND SUBSIDIARY

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTH PERIOD ENDED MARCH 31, 2017 AND 2016

Note 1 - Organization and Nature of Operations

MediXall Group, Inc. (formerly Continental Rail Corp.) (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. In 2002, IP Gate, Inc. changed its name to Action Stocks, Inc. and on June 23, 2003, Action Stocks, Inc. changed its name to Specialized Home Medical Services, Inc. Through December 2006 the Company was in the durable medical equipment business through its subsidiary Classic Health, and from January 3, 2006 to June 30, 2009 was in the business of cataloguing and valuing stamps through its South East Stamp Sales subsidiary. On October 29, 2007, Specialized Home Medical Services, Inc. changed its name to IGSM Group, Inc. During 2011 and 2012 the Company focused on researching and identifying potential merger and acquisition opportunities for investment and operating. Late December 2012, the Company contracted the services of TBG Holdings Corporation ("TBG") who assisted with restructuring the Company into a short line and regional freight railroad holding company and on July 10, 2013 the Company changed its name to Continental Rail Corp.

On June 19, 2015, the Company entered into an agreement (“Agreement”) with Continental Rail, LLC (“LLC”), a Florida limited liability company, and the Series A Preferred Shareholders of the Company. The Company was actively seeking to secure financing for the purchase of the Delta Southern Railroad (“Delta”), a Class III short-line railroad headquartered in Tallulah, Louisiana. Delta was subsequently purchased by Golden Gate Capital (“Golden Gate”), a private equity firm in San Francisco, California. Golden Gate decided that it was in its best interest to utilize the railroad operations management skills of certain Preferred Shareholders of the Company to manage the daily operations of Delta (“the Manager”). By the terms of the Agreement, however the Delta Manager cannot be owned (more than 10%) or controlled by a public company. Consequently, the LLC was organized by the Preferred Shareholders as the vehicle to manage Delta and satisfy the conditions set forth in the agreement. In conjunction with this transaction the Company received a 10% interest in the LLC and the preferred shareholders returned their preferred shares to the Company for cancelation.

On June 24, 2016, the Company entered into a share exchange agreement with TBG where the Company exchanged 100% of its membership interest in the LLC in exchange for 66,667 shares of the Company held by TBG. The exchange of the LLC interest was facilitated for the Company’s pursuit of future acquisitions and/or mergers with other public and/or private entities that would expand its opportunities to create value for the Company’s shareholders. The 66,667 common shares were cancelled.

On November 22, 2016, the Company a) changed its name from Continental Rail Corp. to MediXall Group, Inc. to reflect a change in our business model to a Healthcare Incubator of development-stage healthcare technology companies; and b) effected a 1 for 15 reverse stock split of the Company’s issued and outstanding common stock, reducing the number of common shares outstanding from 38,921,911 to 2,595,379 of which approximately 85% was controlled by related parties. No preferred shares were outstanding at the time of the Merger discussed below.

On December 13, 2016 the Company, completed a Share Exchange Agreement and Plan of Reorganization (the “Merger”) with IHL of Florida, Inc., a Florida corporation (“IHL”) established in April, 2016 and under common control. Pursuant to the Merger, IHL shareholders transferred to the Company all their issued and outstanding shares of capital stock. In exchange, the Company agreed to issue 41,131,000 shares of common stock to IHL shareholders, including 18,599,750 shares issued to common control parties and 264,894 shares of Series A Preferred Stock, all issued to common control parties, and convertible into 24,900,000 shares of common stock. The share issuances represent approximately 94.1% of the total issued and outstanding shares of common stock of the Company post-closing. As a result, the Company (i) became the 100% parent of IHL; (ii) assumed the operations of IHL; and (iii) changed its name from Continental Rail Corp. to MediXall Group, Inc.

Due to the common control of IHL and the Company, pursuant to ASC 805-50-25, “Transactions Between Entities Under Common Control” and other SEC guidance including for lack of economic substance, the Merger was accounted for as a transfer of the carrying amounts of assets and liabilities under the predecessor value method of accounting. Financial statement presentation under the predecessor values method of accounting as a result of a business combination between entities under common control requires the receiving entity (i.e., the Company) to report the results of operations as if both entities had always been combined. The consolidated financial statements include both entities’ full results since the inception of IHL in April, 2016.

The Company has one wholly-owned subsidiary, IHL of Florida, Inc. (a Florida corporation).

4

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MEDIXALL GROUP, INC. AND SUBSIDIARY

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTH PERIOD ENDED MARCH 31, 2017 AND 2016

Note 2 – Going Concern

The Company has not generated any revenue during 2017 or 2016. The Company has an accumulated deficit of $6,083,796 as of March 31, 2017, 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, 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.

In its report with respect to the Company’s financial statements for the years ended December 31, 2016 and 2015, the Company’s independent auditors expressed substantial doubt about the Company’s ability to continue as a going concern. Because the Company has not yet generated revenues from its planned operations and does not expect to do so in the near future, 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.

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 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 consolidated financial statements.

Note 3 - Summary of Significant Accounting Policies

Principles of Consolidation

These condensed consolidated financial statements presented are those of the Company and its wholly owned subsidiary. All significant intercompany balances and transactions have been eliminated.

Use of Estimates

The preparation of 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 financial statements and the reported amounts of revenues and expenses during the reporting period.

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 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.

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.

Cash and Cash Equivalents

The Company maintains a cash balance at one financial institution. Cash and cash equivalents includes highly liquid investments with original maturities of three months or less. The Company has amounts deposited with financial institutions in excess of federally insured limits.

5

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MEDIXALL GROUP, INC. AND SUBSIDIARY

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTH PERIOD ENDED MARCH 31, 2017 AND 2016

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:

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 has no assets or liabilities valued with Level 3 inputs.

Fair Value of Financial Instruments

The carrying value of cash and cash equivalents, accounts payable and accrued expenses approximate their 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.

Basis of Presentation

The unaudited financial statements of Medixall Group, Inc. (the “Company”) as of March 31, 2017, and for the three months ended March 31, 2017 and 2016, have been prepared in accordance with generally accepted accounting principles (“GAAP”) in the United States for interim financial reporting and include the Company’s wholly-owned subsidiary, IHL of Florida, Inc. Accordingly, they do not include all of the disclosures required by accounting principles generally accepted in the United States for complete financial statements and should be read in conjunction with the audited consolidated financial statements and notes thereto for the year ended December 31, 2016, as filed with the Securities and Exchange Commission (the “SEC”) as part of the Company’s Form 10-K. In the opinion of management, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation of the interim financial information have been included. The Company did not record an income tax provision during the periods presented due to net taxable losses. The results of operations for any interim period are not necessarily indicative of the results of operations for the entire year.

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 period 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.

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MEDIXALL GROUP, INC. AND SUBSIDIARY

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTH PERIOD ENDED MARCH 31, 2017 AND 2016

Revenue Recognition

The Company follows the guidance of the Securities and Exchange Commission's Staff Accounting Bulletin No. 104 for revenue recognition.

The Company records revenue when all of the following have occurred; (1) persuasive evidence of an arrangement exists, (2) service delivery has occurred, (3) the sales price to the customer is fixed or determinable, and (4) collectability is reasonably assured.

Revenue is recognized at point of sale, with no further obligations.

Share Based Payment Arrangements

The Company applies the fair value method of ASC 718 "Share Based Payment", 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 market price for the Company's stock as of the date of issuance.

Net Loss Per Share

The computation of basic earnings per share (“EPS”) 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 EPS is based on the number of basic weighted-average shares outstanding plus the number of common shares that would be issued assuming the exercise of all potentially dilutive common shares outstanding using the treasury stock method. The computation of diluted net income per share does not assume conversion, exercise or contingent issuance of securities that would have an antidilutive effect on earnings per share. Therefore, when calculating EPS if the Company experienced a loss, there is no inclusion of dilutive securities as their inclusion in the EPS calculation is antidilutive. Furthermore, options and warrants will have a dilutive effect under the treasury stock method only when the average market price of the common stock during the period exceeds the exercise price of the options or warrants (they are in the money).

Following is the computation of basic and diluted net loss per share for the three months ended March 31, 2017 and 2016:

		Three Months Ended
		March 31,
		2017				2016
Basic and Diluted EPS Computation
Numerator:
Loss available to common stockholders'		$	(388,822	)		$	(60,295	)
Denominator:
Weighted average number of common shares outstanding			47,140,271				2,595,379
Basic and diluted EPS		$	(0.01	)		$	(0.02	)

Applicable Accounting Guidance

The Company reviews new accounting standards as issued. Although some of these accounting standards issued or effective after the end of the Company’s previous fiscal year may be applicable, the Company has not identified any standards that the Company believes merit discussion. The Company believes that none of the new standards will have a significant impact on the financial statements.

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MEDIXALL GROUP, INC. AND SUBSIDIARY

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTH PERIOD ENDED MARCH 31, 2017 AND 2016

Website development

 

Purchased website development are measured at cost and is expensed when incurred as its useful life is not determinable. For the three months ended March 31, 2017 the Company incurred $68,000 of website development expense which are included in professional fees on the condensed consolidated statement of operations.

Note 4 – Stockholders Equity (Deficit)

During the three months ended March 31, 2017, we entered into the following securities related transactions:

·

retired 66,667 shares of common stock that were returned to the Company and retired in exchange for the Company’s 10% ownership in Continental Rail, LLC (previously included in common stock payable);

·

issued 7,811,250 shares of restricted common stock payable valued at $781,125 from 2016 (previously included in common stock payable);

·

issued 34,761,000 shares of common stock in connection Share Exchange Agreement and Plan of Reorganization (the “Merger”) with IHL of Florida, Inc., a Florida corporation (“IHL”) which was established in April, 2016 and under common control. Pursuant to the Merger, IHL shareholders transferred to the Company all their issued and outstanding shares of capital stock. In exchange, the Company agreed to issue 41,131,000 (of which 6,370,000 shares were included in the restricted shares payable at December 31, 2016) of common stock to IHL shareholders, including 18,599,750 shares issued to common control parties and 264,894 shares of Series A Preferred Stock, all issued to common control parties, and convertible into 24,900,000 shares of common stock. The share issuances represented approximately 94.1% of the total issued and outstanding shares of common stock of the Company post-closing at the time of the transaction.

·

Received proceeds of $705,375 pursuant in a Private Placement Memorandum and for which 5,553,750 shares of restricted common stock were issued.

During the year ended December 31, 2016, we entered into the following securities related transactions:

·

recorded a $25,000 equity receivable for 66,667 shares of common stock to be returned to the Company and retired in exchange for the Company’s 10% ownership in Continental Rail, LLC (subsequently retired);

·

effected a one-for-fifteen reverse stock split reducing the number of common shares outstanding from 38,921,911 to 2,595,379;

·

Received proceeds of $781,125 of proceeds pursuant to a Private Placement Memorandum and for which 7,811,250 shares (valued at $.10 per share) of restricted common stock are payable (subsequently issued).

·

On December 13, 2016, in connection with the Merger, the company issued 264,894 shares of Series A Convertible Preferred stock, convertible into 24,900,000 shares of common stock, in equal amounts to each of Timothy Hart our CFO, Neil Swartz, our Interim President and Noel Guillama our Chairman.

Note 5 – Related Party Transactions

Pursuant to an agreement dated June 2013, TBG Holdings Corp., of which Timothy Hart our Chief Financial Officer and Neil Swartz our Interim Chief Executive Officer are principals, 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. Under this agreement, we agreed to pay TBG a first month’s fee of $25,000 and thereafter a monthly fee of $10,000. Additionally, TBG was providing similar services to IHL of Florida, Inc. prior to the Merger at a rate of $25,000 per month. The origianl agreement was suspended and the agreement with IHL of Florida, Inc. remains in effect. During the three months ended March 31, 2017 and 2016, the Company expensed $75,000 and $30,000, respectively, of related party management fees related to this agreement. Additionally, TBG has provided working capital to the Company to cover operating expenses.  As of March 31, 2017 and December 31, 2016, the Company owed TBG approximately $ $391,000 and $431,000, respectively. These amounts are included on the balance sheet under “Accounts payable and accrued expenses - related party”.

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MEDIXALL GROUP, INC. AND SUBSIDIARY

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTH PERIOD ENDED MARCH 31, 2017 AND 2016

On December 13, 2016, in connection with the Merger, the company issued 264,894 shares of Series A Convertible Preferred stock, convertible into 24,900,000 shares of common stock, in equal amounts to each of Timothy Hart, CFO; Neil Swartz, Interim CEO; and Noel Guillama, Chairman. Additionally, the Company agreed to issue 17,599,750 to TBG Holdings and 1,000,000 shares of common stock to Noel Guillama, respectively, as part of the Merger which were ultimately issued subsequent to December 31, 2016.

R3 Accounting LLC, owned by Mr. Hart our Chief Financial officer, provides accounting, tax and bookkeeping services to the Company. During the three months ended March 31, 2017 and 2016, R3 Accounting provided $37,500 and $10,965, respectively, of services. At March 31, 2017 and December 31, 2016, we owed R3 Accounting $71,031 and $117,530, respectively, and it is included on the balance sheet under “Accounts payable and accrued expenses - related party”.

Note 6 – Pending Legal Matters

In January 2014 the Company was named as a co-defendant in a civil law proceeding in Broward County Florida. The complaint alleges a contract dispute between the Company's major shareholders' and various parties that are unrelated to the Company. The plaintiffs alleged the Company engaged in a breach of fiduciary duty, tortious interference with business relations and a fraudulent transfer of assets. The management plans a vigorous defense and it believes there is no basis for these allegations. Management is also exploring possible counterclaims against the plaintiffs. The Company's legal counsel has opined that an unfavorable outcome of this case is deemed remote and any possible loss is deemed immaterial. No adjustment has been reflected on the financial statements regarding this matter.

As of March 31, 2017 there has been no new development in this matter.

Note 7 – Subsequent Events

Management has reviewed material events subsequent to the quarterly period ended March 31, 2917 and prior to the filing of financial statements in accordance with FASB ASC 855 “Subsequent Events”. There were no additional disclosures deemed nessecary.

9

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ITEM 2.

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

GENERAL

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

Our discussion and analysis of our financial condition and results of operations is based on our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these 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

We are an Incubator of development-stage healthcare technology companies. Our mission is to revolutionize the medical industry by improving communication; providing better technology and support services, and enabling more efficient, cost-effective healthcare for the consumer.

Through licensing agreements, we have created the MediXaid Platform (the “MediXaid Platform”), which has developed a region by region medical services and products e-Marketplace to allow purchasers of products and services, including but not limited to consumers, insurance companies, self-insured employers, at-risk providers (such as Accountable Care Organizations) and others, to solicit bids from vendors including diagnostic companies and product providers based on location, quality, customer satisfaction results and best value. This regional medical/healthcare e-marketplace will allow patients to confidentially (using coded profiles and encrypted member identification) solicit for the MRI services (and all other services and products) within a given radius of their location. The MediXaid Platform will have multiple providers for all services, reversed bidding for the product or service and a variety of conditions that may be selected by patients such as location, delivery time and insurance network affiliation to be bid on by the provider based on their cost structure, immediate capacity, availability and ability to meet the patient’s selections.

Going Concern

We have incurred net losses of $6.1 million since inception through March 31, 2017. The report of our independent registered public accounting firm on our consolidated financial statements for the year ended December 31, 2016 contains an explanatory paragraph regarding our ability to continue as a going concern based upon the fact that we are dependent upon its ability to increase revenues along with raising addition external capital as needed. These factors, among others, raise substantial doubt about our ability to continue as a going concern. Our 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 Months Ended March 31, 2017 Compared to the Three Months Ended March 31, 2016

Revenue

We did not generate any revenues during the three month ended March 31, 2017 and 2016, respectively.

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Operating Expenses

Operating expenses increased $328,527 or 545% to $388,822 in 2017 compared to $60,295 in 2016. The increase is primarily due to the inclusion of IHL of Florida, Inc. (established in April 2016) in the results of operations with no such inclusion in for the three months ended March 31, 2016.

Liquidity and capital resources

Liquidity is the ability of a company to generate sufficient cash to satisfy its needs for cash. At March 31, 2017 we had $309,939 in cash and a net working capital deficit of $588,977. Total current liabilities decreased 12% at March 31, 2017 from December 31, 2016 as a result of decreases in accounts payable – related party, accrued expenses – related party and accounts payable.

For the three months ended March 31, 2017 we raised $705,375 in sales of our common stock and for the three months ended March 31, 2016, we did not raise any additional funds.

Net cash provided by (used in) operating activities for three months ended March 31, 2017 was ($510,407) as compared to $246 for three months ended March 31, 2016. This change primarily results of our increased net loss coupled with decreases in accounts payable, and accounts payable – related parties.

Net cash provided by financing activities for the first three months of 2017 was $705,375 as compared to $0 in 2016.

At March 31, 2017 we had a net working capital deficit of $588,977 and cash on hand of $309,939. Our primary source of capital to develop and implement our business plan has been from sales of common stock.

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.

Recently Issued Accounting Pronouncements

See Note 2 to our Consolidated Financial Statements for more information regarding recent accounting pronouncements and their impact to our consolidated results of operations and financial position.

Critical Accounting Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amount of assets and liabilities, the disclosure of contingent assets and liabilities and the reported amounts of revenue and expenses during the reported periods. The more critical accounting estimates include estimates related to the allowance for doubtful accounts and the valuation of warrants that are deemed to be not indexed to our common stock. We also have other key accounting policies, which involve the use of estimates, judgments and assumptions that are significant to our results, which are described in Note 3 to our condensed consolidated financial statements appearing elsewhere in this report.

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.

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ITEM 4.

CONTROLS AND PROCEDURES.

Evaluation 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 President (Chief Executive Officer) and Chief Financial Officer, of the effectiveness of our financial disclosures, controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, as of March 31, 2017.

 

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 financial statements.

 

Based upon that evaluation, our President (Chief Executive Officer) and Chief Financial Officer concluded that 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 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 interim financial statements that a material misstatements 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.

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PART II - OTHER INFORMATION

ITEM 1.

LEGAL PROCEEDINGS.

Except for litigation described in the pending legal matters footnote there is no other litigation. Management is not aware of any legal proceedings contemplated by any governmental authority or any other party involving us or our properties. As of the date of this Quarterly Report, no director, officer or affiliate is (i) a party averse to us in any legal proceeding, or (ii) has an adverse interest to us in any legal proceedings. Management is not aware of any other legal proceedings pending or that have been threatened against us or our properties.

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.

During the three months ended March 31, 2017:

·

retired 66,667 shares of common stock that were returned to the Company and retired in exchange for the Company’s 10% ownership in Continental Rail, LLC (previously included in common stock payable);

·

issued 7,811,250 shares of restricted common stock payable from 2016 (previously included in common stock payable);

·

issued 34,761,000 shares of common stock in connection Share Exchange Agreement and Plan of Reorganization (the “Merger”) with IHL of Florida, Inc., a Florida corporation (“IHL”) which was established in April, 2016 and under common control. Pursuant to the Merger, IHL shareholders transferred to the Company all their issued and outstanding shares of capital stock. In exchange, the Company agreed to issue 41,131,000 (of which 6,370,000 shares were included in the restricted shares payable at December 31, 2016) of common stock to IHL shareholders, including 18,599,750 shares issued to common control parties and 264,894 shares of Series A Preferred Stock, all issued to common control parties, and convertible into 24,900,000 shares of common stock. The share issuances represented approximately 94.1% of the total issued and outstanding shares of common stock of the Company post-closing at the time of the transaction.

·

Received proceeds of $705,375 pursuant in a Private Placement Memorandum and for which 5,553,750 shares of restricted common stock were issued.

ITEM 3.

DEFAULTS UPON SENIOR SECURITIES.

None.

ITEM 4.

MINE SAFETY DISCLOSURES.

Not applicable to our Company.

ITEM 5.

OTHER INFORMATION.

None.

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		XBRL Instance Document *
101.PRE		XBRL Taxonomy Extension Presentation Linkbase *
101.LAB		XBRL Taxonomy Extension Label Linkbase *
101.DEF		XBRL Taxonomy Extension Definition Linkbase *
101.SCH		XBRL Taxonomy Extension Schema *
101.CAL		XBRL Taxonomy Extension Calculation Linkbase *

———————

*

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: May 22, 2017	By:	/s/ Timothy S. Hart
		Timothy S. Hart
		Chief Financial Officer, principal financial and accounting officer
Dated: May 22, 2017	By:	/s/ Neil Swartz
		Neil Swartz
		Interim Chief Executive Officer, principal executive officer

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