ITEM 1. BUSINESS.
Overview
MediXall Group, Inc. (OTCQB:MDXL)
is an innovation-driven technology company purposefully designed and structured around delivering products and services to help consumers
learn, decide, and pay for healthcare in ways that complement relationships with trusted doctors. The mission of MediXall Group is to
revolutionize the medical industry--improve communication, provide better technology and support services, and provide more efficient,
cost-effective healthcare for the consumer.
We started MediXall because
we saw the clear systemic flaws in the American health care system. We believe that these flaws made it too expensive and too inconvenient
for far too many Americans to obtain quality health care.
Partially because of inefficiency
combined with the effect of COVID-19, America’s health care system now consumes 19.7% of U.S. GDP, with health spending increasing
9.7% to reach $4.1 trillion in 2020 according to the Centers for Medicare & Medicaid Services (CMS). Per capita, America spends much
more on health care than any other country in the world—42% more than the next closest country Switzerland, and 92.5% more than
the Organisation for Economic Co-operation and Development (“OECD”) country average.
A crisis looms because the health
care spending growth rate exceeds the growth rate of the general economy. If the 5.4% CMS projected U.S. health care spending growth rate
continues, healthcare spending will consume over 20% of U.S. GDP by 2028, crowding out other equally important sectors such as education,
infrastructure and the nation’s defense.
Even with this looming crisis,
U.S. healthcare market remains opaque and highly fragmented for consumers. Even simple healthcare transactions, such as finding a doctor,
scheduling routine procedures or filling a prescription at an affordable price, can be difficult—resulting in inefficiency and higher
prices for consumers and the healthcare system.
Recognizing that these trends
are not sustainable, MediXall is focused on solutions to these problems. This is what led to the development and launch of Health Karma.
This is a robust digital healthcare platform providing a single place for healthcare consumers to turn for personalized information, programs,
and resources needed to understand, access, and manage their health and well-being. Focusing on the individual, Health Karma™ gives
people information they need to select the right doctor or the right care from the start, and provide ongoing support, such as telehealth
solutions, saving money for companies and their employees, while also improving care.
From day one, our vision has
been to take complexity out of healthcare. Recognizing this was no small task, we began executing our plan to build an online platform
for the consumer to learn, obtain and pay for healthcare without intruding on the trusting relationships with doctors. MediXall launched
the first generation of our product in 2019, under the name MediXall.com. Our initial assumption was that because so many were paying
more out of pocket with high deductibles, they would respond favorably to a service that would save them money in paying for services
in ways similar to those provided by Priceline or Expedia.
In our controlled launch of
MediXall.com we found that consumers’ greatest challenges were understanding healthcare costs, health insurance, and the navigation
necessary to find the right service providers and doctors. This was due to the average consumer not understanding the basic language of
healthcare and health insurance, which makes decision-making on treatments, products, and services difficult
We recognized the key was to
shift healthcare from a one-size-fits all model to a more personalized experience built around each individual—reducing and even
removing layers of complexity that health insurance brings. So instead of investing large amount on marketing our MediXall.com solution,
we decided to develop a more comprehensive product suite that empowers consumers with the tools and resources to navigate the confusion
of the healthcare system.
With Health Karma we have created
a unique membership model that provides consumers with convenient and affordable access to best-in-class care, whenever and wherever,
while driving down overall healthcare costs. We provide our members access to licensed healthcare providers across a wide and growing
spectrum of care through $0 copay virtual primary, urgent, and behavioral care, as well as significant discounts to prescriptions, dental
care, eye care, hearing and medical equipment. For employers, our Health Karma membership offers a comprehensive way for them to offer
supplemental health benefits to all of their employees, including part-time and gig workers who typically are not eligible for benefits.
The platform was purpose-built
to address the vast, unmet and growing demand for improved access to health care services of our members, serving our business-to-consumer
(“B2C”) channel, comprised of individual consumers who subscribe directly to our platform, and our business-to-business (“B2B”)
channel, comprised of small and midsize business clients as well as other regional and national organizations (collectively, our “clients”),
who offer their employees and members access to our platform for free or at discounted rates, respectively.
We deploy a multi-pronged go-to-market
strategy through a direct sales force, focused on large enterprises, and channel partners primarily for small
and medium businesses and organizations, which enables us to distribute the Services to the market efficiently. We believe we are building
a robust and extensive partnership network in the health insurance industry with distribution agreements with many leading insurance agencies
in their respective states, such as BHC Insurance, the third largest independent insurance agency in Arkansas, and Gem State Financial,
a leading Idaho-based General Agency. We have been able to increase the reach of our partnership network through an Affinity Marketing
Partnership agreement with the National Association of Health Underwriters, a professional association representing more than 100,000
health insurance agents, benefits professionals, consultants, and brokers, from both small and large health insurance companies throughout
the United States. The Partnership enables NAHU brokers to market the Health Membership in combination with various insurance products
or self-insured plans. This expands NAHU members’ ability to work with organizations to provide additional benefits for employees
with customized membership options to enhance existing benefits packages or to open the door to benefits for non-traditional, gig and
part-time workers. In addition to these distribution channels, we are also entering into arrangements with businesses, associations and
other organizations who offer our Platform to their own end-user customers or members as a benefit, a reward or a component of a loyalty
program.
We have engineered the Health
Karma Platform to be scalable and to grow beyond its current offerings. The flexibility of the Platform enables us to quickly launch new
services, expand service offerings or launch in new verticals in a cost- effective manner. In 2021, we launched the following as part
of the Health Karma Membership:
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Refined Behavioral health offering to add 24/7/365 behavioral health access to Masters level licensed therapists, providing members instant access to help anytime |
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Added a fully Spanish language experience to the Health Karma Membership - online, materials, videos, providers |
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Dental discount program through Careington |
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Vision discount program through VSP |
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Hearing discount program through Epic |
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Durable medical equipment and services discount program |
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Vitamin/Nutritional items discount program |
We believe the addition of these
new programs will help to further enrich our membership model by creating a comprehensive and interconnected offering that delivers a
virtuous circle of value for consumers, employers and partners.
We see exciting growth potential
as we continue to attract new members through our existing offerings, launch new offerings to address more of the healthcare needs of
consumers & employers, and improve Americans’ access to health while reducing what they pay for it. As we extend our platform,
we believe that we can create multiple monetization opportunities at different stages of the consumer healthcare journey, enabling us
to drive higher expected consumer lifetime value without significant additional consumer acquisition costs.
Our Market Opportunity
Since inception, we have been
focused on changing the way consumers access, interact with and consume healthcare. In the United States, healthcare spending grew to
$4.1 trillion in 2020 and is expected to reach $6.2 trillion by 2028, according to the CMS.
However, it is not always clear what the individual consumer receives in return for this massive spending. We believe that a new healthcare
model, one that places the consumer at the center of the healthcare ecosystem, can help to improve their health care access while reducing
what they pay for it.
The current healthcare system is broken
for most people in the U.S.
Despite the vast spending on
healthcare in the United States, the current system frequently fails the average consumer. According to the CMS, per capita spend on healthcare in the United States has doubled in the last 20 years with total spending surpassing
$4 trillion; however, United States life expectancy and health indicators are falling behind those of other developed nations. Despite
this significantly higher healthcare spending, America performed worst among developed nations in some common health metrics including
life expectancy, infant mortality, and unmanaged diabetes, according to the Organization for Economic Co-operation and Development.
The existing healthcare system
is highly fragmented and inefficient, lacks transparency, and is unfriendly to the consumer. In addition, myriad issues related to insurance
coverage and other cost barriers stand in the way of too many Americans getting the treatment they need and deserve. The legacy system
does not allow patients to receive proper care in a timely manner and ultimately drives poor health outcomes.
Evolving Attitudes among Consumers and Employers towards telehealth
Supported by increasing deregulation
and broad societal shifts, demand for and provision of telehealth services is surging. Telehealth enables more efficient allocation and
utilization of existing clinical resources that could otherwise go unused. With an aging population requiring more complex care and a
younger generation that is accustomed to digital technology, telehealth offers an efficient way to leverage finite resources. In the coming
years, the telehealth market is positioned for significant growth. The demand for telehealth services is clear among younger generations.
According to a survey by Harmony Healthcare IT, three out of four millennials would rather search for medical advice online versus seeing
a doctor in-person. These younger generations represent the future of the healthcare system, and telehealth can be at the center
of their care experience.
Healthcare is a Top Priority for Employers
To attract and retain staff,
employers are looking to make significant investments in health benefits; yet, as commercial insurance costs have reached record highs,
employers and employees remain frustrated. Barriers to accessing timely care during the day and after business hours cause employees to
miss work and lose productivity. As a result, many employees self-direct themselves to higher cost settings such as emergency rooms.
Rising health care costs are
causing many employers to question whether they can afford to offer health benefits to their employees. According to the Kaiser Family
Foundation’s 2021 Employer Health Benefits Survey, it costs up to $21,804 each year for employer-sponsored family health coverage
for covered workers in small firms.
As costs continue to rise, a
common way to offset them is to adjust benefits, such as increasing deductible or copays, lowering coinsurance and increasing out-of-pocket
limits. At a certain point, when the benefits become too lean, employees’ perception of their benefits deteriorates.
Health Insurance is Tailored to Large Enterprises not Small Businesses
In April 2021, about 4 million
people in the US quit their jobs, the most since the Bureau of Labor Statistics started publishing the data in 2000. In the "Great
Resignation," small businesses face an uphill battle for labor. Some employees are leaving for better pay and benefits, while some
are leaving the workforce and relying on government programs.
Small business owners are still
managing the reality that the number of job openings exceeds the number of unemployed workers, producing a tight labor market. In the
January 2022 Jobs Report survey from the National Federation of Independent Business (NFIB), 47% of independent businesses said they had
job openings they struggled to fill, which far exceeds the 48-year historical average of 23%. Moreover, 50% of small business owners reported
raising compensation in part to stay competitive as employers and attract applicants to their open position, which is another 48-year
record high reading.
Small businesses — defined
as 500 employees or less by the US Small Business Administration (SBA) — are a key part of economic growth and job creation in the
United States. economic rebound — the US Small Business Administration said in 2019 that they accounted for two-thirds of net new
jobs. In America, over 30 million firms are small businesses, and they provide employment for nearly half the private workforce. small
businesses make up 99.9% of all firms. According to the SBA 2021 Small Business Profile, there are over 32 million small business in the
US, making up 99.9% of all US businesses and providing employment for 61.2 million Americans. More jobs are also traditionally created
by small businesses and new company formation than by large corporations, with small companies create 1.5 million jobs annually and account
for 64% of new jobs, according to the Small Business Administration. But they struggle to raise their prices enough to compensate for
the rising costs of benefits and wages.
Small businesses, like their
larger counterparts, have not been shielded from the increasing cost of health care. Without advantages such as a larger pool of insured
employees, more bargaining power with health insurance companies, and the benefit of full-time human resources personnel, small-business
owners are often left with little recourse and few options when a health insurance carrier hikes costs. In addition, many small employers
have been hanging on during the pandemic and are just starting to rebound. They may not be able to afford full insurance, but they need
their employees to stay, as turnover is costly.
The Rise of the Gig Economy (Changing Workforce)
With the slow transition away
from traditional employment and rise of independent labor over the past decade, the U.S. economy has experienced a significant shift in
how employees choose to work. The pandemic has served as a catalyst for deeper change with respect to Americans’ embrace of the
gig economy. What seemed like a gradual uptick in interest for freelance and gig work up until 2019 has now exploded onto the mainstream.
While around 156 million Americans,
about half the U.S. population gets health insurance through an employer, now more than one-third of the workforce now works in the gig
economy full- or part-time, according to Upwork’s study of the U.S. independent workforce, “Freelance Forward:2020”.
Covid-19 only accelerated Upwork’s data also showed that 12% of workers started freelancing during the pandemic. And there may be
no turning back; 60% of people who had taken up freelancing reported that no amount of money would convince them to take a traditional
job again.
The pandemic also revealed fundamental
problems in the traditional employer benefit system. People who lost their jobs and took up independent work were forced to find their
own benefits or go without coverage during the pandemic. Today, nearly 70 million Americans, representing more than one-third of the total
U.S. workforce earn income as freelancers and that figure is expected to swell to 90 million by 2028, according to Statistica. Despite
the trend however, this group of people are underserved compared to W2 full-time employees. The challenge of accessing benefits isn’t
just limited to independent workers either. Many employees, particularly part-time employees, do not have access to benefits through their
employers. As of January 2022, the Bureau of Labor Statics reported over 25 million part-time workers are in the US. With this changing
workforce, the needs of independent and part-time workers will only become more central in the U.S.
We believe that favorable macro-economic
trends, in combination with the expansion of our capabilities, present significant opportunities for on-demand and consumer driven healthcare
to address the most pressing, universal healthcare challenges through solutions, such as ours. At the same time, the emergence of technology
platforms solving massive structural challenges in other industries has highlighted the need for similar solutions in healthcare. We believe
there is a significant opportunity to solve these challenges through an online solution, such as ours, that matches consumer demand and
physician supply in real-time, while offering health plans and employers an attractive, cost-effective healthcare alternative for their
beneficiaries. We believe that Health Karma offers a solution to address these challenges.
Health Karma Platform
At Health Karma, we
empower consumers—both individual consumers and small and midsize business (“SMB”)—to make smarter healthcare decisions
with confidence via our digital platform. Technology has changed the way consumers manage their healthcare, making them more
comfortable with comparing and accessing healthcare services online. This change has accelerated with the dramatic growth in
companies offering innovative healthcare products and services. At Health Karma, we are leveraging this transformation to improve
peoples’ access to health care while reducing what they pay for it—ultimately helping to improve the well-being of
consumers and the healthcare industry as a whole. As the healthcare industry becomes more fragmented and complex, our value
proposition as a trusted, independent platform for consumers increases.
Powered by our own differentiated
full stack technology platform, we have built a suite of services that enable us to earn our members’ trust, leverage the power
of personalized data, and help our members access quality care they can afford.
The Health Karma Platform was
purpose-built to seamlessly connect our existing and future health and wellness programs into one Platform to help drive real member and
customer outcomes. We have built our Platform from the ground up to solve the unique challenges of individual consumers as well as organizations
and their members.
Our Platform helps solve many
of the common pain points for both Consumers and Employers when launching, administering, and maintaining health and wellness-related
programs. By integrating many leading programs into one Platform, Users get the same, consistent user experience, without fumbling for
passwords across multiple programs or struggling to remember where to access each benefit. Built as a modular solution Health Karma can
scale up depending on the unique needs of each member or employer customer by adding programs over time.
As we continue to bring the
Health Karma experience to new members, new employers, and new markets, our goal will remain the same: to build engagement, earn trust,
and help our members stay healthy and well.
Complete Solution to Manage the Consumer Healthcare Journey
Health Karma offers a simple
and intuitive consumer experience that enables our users to take control of their health care decisions.
That experience begins
with trust and engagement, which we earn by providing our users with features that help them navigate the many disconnected elements of
the healthcare ecosystem. When our users adopt these tools, we not only streamline their day-to-day interactions with the healthcare system
and improve user satisfaction, we also obtain valuable data that lets us better understand their unique health care needs. Trust, engagement,
and personalized data allow us to help guide our users to the providers that can give them the right care, including virtual care, at
the right time and right cost. Our technology stack will also permit us to offer personalized insights and benefits. Our ability to deliver
a high-value product, in turn, creates more trust, engagement, and in time, enhances our ability to provide personalized, data-driven
insights.
An important aspect of
our approach to building trust and engaging members is to engage with them through whatever channel is most comfortable for them. Whether
it is a secure in-app message to answer coverage and benefit questions, a consultation with a licensed medical provider in the middle
of the night through our telehealth offering, talking with a licensed, professional therapist in as little as 24 hours to address common
behavioral health concerns, or finding the right in-network provider and scheduling an in-person appointment, we are there for our users
when they need us most. In this way, we are building a product experience more similar to what consumers experience from a best-in-class
technology or consumer products company than from a traditional health care organization.
Our management and team have
shared values in bringing our brand to life through materials, communications, content and interactions. From the first touchpoint our
members feel our commitment to delivering a service that focuses on their needs. In addition to employing A/B testing to increase engagement
and utilization, we simplify the often complex language used in health care and insurance so that our users feel confident and comfortable
with the choices they make.
Our Existing Programs
$0 Visit Virtual Care
Virtual Primary Care
- Our Primary Care team will manage our members’ health in many of the same ways as a traditional primary care physician –
just over the phone or through video chat, and without any charges outside of the monthly membership fee. With Virtual Primary Care members
can:
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Pick a dedicated provider from the Health Karma network that will see the member at every follow up visit. |
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Manage chronic conditions like asthma and diabetes with ongoing treatment plans. |
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Receive prescriptions for treatment as needed. |
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Make an appointment to connect by phone, computer, or tablet from any location that is convenient for the member. |
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Pay $0 when members have an appointment - all visits are included in the membership fee. |
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Request and get an appointment in as few as 24 hours! |
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Receive an annual wellness visit with a metabolic panel (see all tests included in the panel in the details) included for $0. |
Urgent Care - When care
can’t wait, members can request a $0 Virtual Urgent Care visit online 24/7/365, waiting only 21 minutes to see a provider on average.
Health Karma members can use Urgent Care when they have minor illnesses or injuries that can't wait to be treated or that can be fully
addressed in one or two visits.
Behavioral Health - Getting
help with emotional health can be difficult. Health Karma provides on-demand, in-the-moment support wherever members call from by connecting
them and their immediate family with a Master’s level therapist. The therapist can help our members with concerns like anxiety,
stress, depression, addiction, and any other life/work balance or emotional health issue. Consultations are available 24/7 for immediate,
in-the-moment help — no need for a call-back or to schedule a consultation. Consultations are confidential and are generally up
to 30 minutes in length. In addition, when appropriate, the therapist may provide our members guided solutions materials via email. The
clinician may also suggest additional steps and referrals to other resources and professional care. Health Karma’s Virtual Behavioral
Health Solution includes:
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24/7 immediate in-the-moment consultations with master’s level behavioral health clinicians |
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Secure, HIPAA compliant virtual consultations up to 30 minutes in duration |
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Intake and assessment of the member’s problems/concerns at the time |
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Personally directed clinically recommended, “guided solutions” addressing members concerns. |
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When an employee or family member calls in multiple times a year for the same specific issue, our clinicians may make recommendations for appropriate additional levels of care. |
Discount Programs
Health Karma Rx -
Dental - As part of the Health
Karma membership, members have access to discount saving program offered by an industry leader in dental care Careington International
Corporation. With one of the largest dental networks in the nation and its member-transparent pricing, Careington
International Corporation is one of the most recognized professional dental networks in the nation. With our dental program Health Karma
members can:
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Save 20% to 50% on most dental procedures including routine oral exams, unlimited cleanings, and major work such as dentures, root canals, and crowns |
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20% savings on orthodontics including braces and retainers for children and adults |
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20% reduction on specialist’s normal fees. Specialties include: Endodontics, Oral Surgery, Pediatric Dentistry, Periodontics, and Prosthodontics where available |
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Cosmetic dentistry such as bonding and veneers also included |
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All dentists must meet highly selective credentialing standards based on education, background, license standing and other requirements |
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Members may visit any participating dentist on the plan and change providers at any time |
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POS Sample Savings Chart |
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Procedure Description |
Regular
Cost* |
Plan
Cost** |
Savings
Amount |
Savings
Percent |
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Adult Cleaning |
$132 |
$63 |
$69 |
52% |
|
Child Cleaning |
$94 |
$46 |
$48 |
51% |
|
Routine Checkup |
$78 |
$33 |
$45 |
58% |
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Extensive Oral Exam |
$136 |
$56 |
$80 |
59% |
|
Four Bitewing X-Rays |
$89 |
$42 |
$47 |
53% |
|
Composite (White) Filling |
$210 |
$98 |
$112 |
53% |
|
Crown (porcelain fused to noble metal) |
$1,498 |
$804 |
$694 |
46% |
|
Complete Upper Denture |
$2,152 |
$1,067 |
$1,085 |
50% |
|
Molar Root Canal |
$1,459 |
$777 |
$682 |
47% |
|
Extraction (single tooth) |
$255 |
$109 |
$146 |
57% |
*Regular cost is based on the average of the 80th
percentile usual and customary rates as detailed in the 2018 FAIR Health Report in the Los Angeles, Orlando, Chicago & NYC metropolitan
areas.
**These fees represent the average of the assigned
POS fees in the Los Angeles, Orlando, Chicago & NYC metropolitan areas.
Prices subject to change.
Vision – Our discount
vision program offers Health Karma members savings on eye care and eyewear the VSP Vision Savings Pass. With the best choices in eyewear,
VSP makes it easy for our members to find the perfect frame. Members can choose from great brands like Anne Klein, bebe®, Calvin Klein,
Flexon®, Lacoste, Nike, Nine West, and more.* With the VSP Savings Pass, Health Karma members receive:
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Access to discounts through a trusted, private-practice VSP doctor |
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One rate of $50 for eye exams** |
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15% savings on contact lens exams*** |
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Special pricing on complete pairs of glasses and sunglasses |
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Unlimited use on materials throughout the year |
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Exclusive Member Extras and special offers |
*Brands subject to change
**This cost is only available with the purchase of a complete pair
of prescription glasses; otherwise members receive 20% off an eye exam only.
***Applies only to contact lens exam, not materials. Members are responsible
for 100% of the contact lens material cost.
Hearing – Health
Karma members have access to hearing aid discounts from 30% to 60% at over 5,500 network providers nationwide through EPIC Hearing. EPIC
also offers member a service satisfaction guarantee with a 45-day, no-obligation trial period on products purchased. Members will also
receive additional services at no extra charge:
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Routine hearing test |
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One-year to lifetime supply of batteries per hearing aid. Lifetime supply of batteries are for premium hearing aids only. |
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Extended, three-year manufacturer’s warranty including loss or damage |
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Follow up visits for one year |
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Pricing starting as low as $749 for digital, brand name hearing aids (including the professional services) |
Vitamins & Supplements
Durable Medical Equipment -
To provide discounts on supplies and medical equipment, Health Karma has partnered with HOMELINK, a leader in durable medical with more
than 30 million customers and a customer satisfaction rating of over 99%. With Health Karma, members can save 5-40% on a wide variety
of durable medical equipment and services and have them shipped directly to their home.
Our Go-to-Market Strategy for Health Karma
With Health Karma now fully
developed and launched into the market, we are leading a full-on roll-out of the Health Karma Platform by shifting the focus to member
growth through a multi-pronged go-to-market strategy:
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Health Karma Partner Program (B2B2C) - In late First Quarter of 2021, we introduced the Health Karma Partner Program which was is designed to provide additional multi-tiered sales channels to deliver our product offerings to employers and individuals, and in turn accelerate market awareness and adoption. The program provides Employer Groups, Insurance Agencies, Associations, Community Groups, Municipalities, and other organizations and sole proprietorships the opportunity to offer Health Karma to their clients while simultaneously building an additional residual revenue stream. |
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Health Karma Employer Program (B2B) – In mid-First Quarter of this 2021, we launched the Health Karma Employer Program in which contractual agreements with employers require them to offer Health Karma and associated products and services as part of their benefits packages. By focusing on the vastly underserved small employer market, Health Karma for Employers allows us to rapidly accelerate user acquisition and adoption of Health Karm to create a robust and engaged user base. Due to the accelerated roll out of the Health Karma for Employers program since the launch in mid-First Quarter of this year, we have expanded our in-house employer sales team and our client success team to actively manage these new accounts. |
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Health Karma Direct to Consumer Program (B2C) - As brand awareness has increased, we have been successful in our performance marketing initiatives to drive customer acquisition. Increased customer sign-ups have come from targeted social media campaigns, content marketing through its educational blog as well as customized task-based in-app messaging and email communications. The company has leveraged SEO & SEM to enhance Health Karma's search presence. Word of mouth is also taking hold as customers are being referred in from users that are recommending Health Karma as a solution to lower healthcare costs. |
We primarily generate revenue
from employer customers and consumer subscription fees, which are typically annual in nature, providing significant revenue visibility.
Through our per-Member-per-month (“PMPM”) subscription model, we enter into contracts with our employer customers that pay
a fixed monthly rate based on the total number of Members. In most cases, Members and their Dependents have unlimited access to our Platform
and do not pay extra fees for increased utilization, unless they wish to access Services outside the scope of those covered by the subscription.
Our Growth Opportunities
Continue expanding B2C user
base and increase engagement. Through our expanding network and customer adoption strategy, we will continue to focus on growing consumer
member adoption. We expect this strategy to be further complemented by sustained investment in our platform capabilities, as well as through
continuing to leverage our growing brand awareness. We believe our growth opportunity in both health and wellness to be substantial. In
addition, as a result of the end-to-end nature of our platform, we believe we are well-positioned to create care continuity for our members
across a broader range of health and wellness verticals. We plan to drive further engagement of our existing member base by expanding
our offerings beyond our current programs to include capabilities such as an enhanced behavioral offering, wearable integration, Wellness
challenges and rewards, and medical records transfer in order to drive higher member lifetime engagement and value. We use a strategic
and disciplined approach to building our marketing budget, and are able to achieve efficient spend levels on a per-customer basis by leveraging
our brand and strong relationships with outbound and inbound marketing channels.
Expand clients and B2B offering.
We expect to meaningfully expand our B2B channel through both the addition of new employer and group clients, as well as a focus on
driving deeper penetration rates within our existing clients. We plan to add new B2B clients by contracting with additional regional and
national agencies, accelerating our outbound marketing efforts, leveraging our broker and consultant relationships and continuing to penetrate
the massively underserved part-time and independent worker market. Additionally, we are focused on further developing our dedicated internal
B2B sales team solely focused on expanding our B2B client base as well as driving penetration within existing contracts–an effort
we expect to drive significant traction within the near-term. Within our existing employer base, we plan drive penetration and engagement
with an invested focus on client success. Additionally, because of our embedded position serving the B2B customer base, we believe we
are well-positioned to innovate and lay the groundwork for additional services that drive value for their members such as navigation across
the ever-changing health and wellness landscape.
Opportunistic M&A and
Product Development. We are well-positioned to further expand our solution set through opportunistic acquisitions or product development
responsive to the evolving and expanding needs of our client base. Our technology platform is built to easily integrate with non-native
technologies and to offer a single cohesive platform. We plan to use a disciplined approach to strategically acquire complementary capabilities
and service lines. These may include, but are not limited to, healthcare FinTech platforms, Third-party data providers, wellness and coaching
platforms, workers comp solutions, and other virtual care coordination platforms.
Technology
Health Karma’s underlying
technology is a highly scalable, integrated, application program interface or API-driven technology platform. The platform has been built
to accommodate the seamless and quick introduction of new services, technologies and functionality that we have introduced through strategic
partnerships.
Our platform is built on a modern
cloud-based technology stack, employing Agile development cycles and a DevOps approach to infrastructure. Unlike with traditional healthcare
IT, our technology platform is updated frequently, without long upgrade cycles. Our modular, service-oriented architecture utilizes API
standards for ease of implementing new functionalities and integrating with external systems. By designing our product as a platform,
we have created an overarching infrastructure where consumer data, preferences, and third-party partners can all interact through Health
Karma’s API. Data is the heart of our technology so because of this we have the potential integrate machine learning and natural
language processing to automate recommendations and workflows, uncovering insights that we can incorporate back into the design platform.
This enables our platform to
act as a sales channel for other companies. We don’t need to create internally the best tools and technology because we can deliver
other’s state of the art technology and applications through our platform. Similar to other two-sided marketplaces, the platform
can bring innovative new products to consumers and employers, while at the same time opening up distribution and revenue opportunities
for other health companies. Furthermore, we believe that this will generate a virtuous cycle, leveraging our growing customer base to
attract the best healthcare partners (and vice versa)--increasing value for all stakeholders.
Our proprietary technology platform
powers all aspects of our company: engaging members, supporting partners, and advancing business objectives. Our technology is grounded
in human-centered design thinking and leverages insights from behavioral interaction. Our product designers and engineers collaborate
closely with our operational team members, as well as healthcare advisors and partners in the Health Karma Network to observe and then
optimize workflows. We employ user testing and experiment-driven design (such as A/B testing) to enhance our member and partner experiences.
With the opportunities and growth trajectory in front of the company,
we believe our skilled internal development team is uniquely positioned to make critical real-time product development decisions, enabling
us to be responsive and stay ahead of the competition.
Sales & Marketing
Health Karma focuses on member
growth through two primary avenues: directly acquiring consumer members, and signing agreements with employers that will offer Health
Karma and associated products and services as part of their benefits packages. We use marketing and sales strategies to reach consumers
as well as employee benefits leaders. Employer marketing and sales strategies also include account-based marketing, business development
initiatives, and client service teams focused on customer acquisition, employee enrollment, and member engagement. We derive employer
sales through a direct sales force, focused on large enterprises, and channel partners primarily for small
and medium businesses and organizations, which enables us to distribute the Services to the market efficiently.
Consumer Sales & Marketing
When we market and sell directly
to individuals, we initially plan to focus on increasing brand awareness, followed by performance marketing targeted toward user acquisition,
activation and engagement.
Our
marketing strategy in new markets is primarily centered on increasing overall brand awareness, familiarity, consideration and ultimately
enrollment. We have carefully developed a robust marketing plan to achieve these objectives.
SEO, Social & Traditional
- We will drive brand awareness and conversions to our platform using social media marketing via Facebook, LinkedIn, Twitter, Instagram,
Snapchat, YouTube, and others. In addition, we plan to leverage SEO & SEM to enhance Health Karma’s search presence both organically
and paid.
Content Marketing -
We consistently release marketing content through our blog that aims to educate our audience about the value that our product provides.
We also develop thought leadership content such as whitepapers, eBooks, and infographics and use public relations to secure earned media
placements. Our content marketing efforts aim to influence and persuade readers without having to rely solely on conventional direct selling
tactics.
Influencer Marketing
- We will launch an initiative to guest blog articles and features in healthcare, personal finance, and startup tech publications
like TechCrunch, Wired, VentureBeat, and other outlets in our industry. Additionally, we participate in industry conferences, and may
partner with media outlets, event venues, local businesses, and social media influencers to increase brand awareness.
As brand awareness increases
in more established markets, we shift our efforts to performance marketing focused on both customer acquisition and engagement. Our performance
marketing initiatives include customized task-based in-app messages and email communications to drive engagement among members, in addition
to more targeted advertisements through direct mail, Google Search, YouTube and social media for member acquisition.
Employer Sales & Marketing
With the roll out of Health
Karma to employers, we are developing and expanding our in-house employer sales force to be comprised of sales professionals who will
be organized by geography, customer size, and industry. We support our sales force in several ways, including through account-based marketing
resources and the deployment of a business development team to educate employer decision makers on the benefits of offering Health Karma
to their employees. We also leverage sales analytics to further support lead generation. Additionally, our client success team actively
manages our customer accounts and provides in-depth support.
Through the Health Karma Partner
Program, we also work with channel partners such as payroll and professional employer organizations to reach small and medium businesses
and organizations. Additionally, we partner with select regional and national benefits brokers and consultants to educate and sell potential
customers on our offerings.
Customer and Partner Services and Support
We believe that many partners
and employer customers are not technical experts and that they bear an enormous responsibility to successfully run their businesses day
in and day out. Therefore, we aim to provide end-to-end customer support, including full profile data conversion and import, live onboarding
and technical support via telephone, email, and screen sharing; in-software self-service tools; advanced professional services; and educational
events. In addition, we also have a dedicated support team that is focused on seeking to ensure that Health Karma members are having the
best possible experience.
Customer & Partner Onboarding.
We typically onboard new customers and partners with live training sessions delivered via telephone and web conference. These trainings
are supplemented by self- service setup checklists, online help materials and webinars.
Customer & Partner Success.
To identify opportunities for greater adoption of our products and services and to further help our customers be more successful on our
platform, we engage with them to better understand their business goals and objectives; provide targeted education about relevant features,
products and services as well as business best practices; and develop a recommended success plan with periodic outreach to check in on
their progress.
Ongoing Customer Support.
Inclusive with being a member of the Health Karma Partner Program, we offer customer service and support via phone, chat, emails and self-help
knowledge centers. All customer service and support is provided by our in-house personnel who are invested in Health Karma’s core
values and closely connected to our Product, Technology and Experience team.
Regulatory Environment
Participants in the health care
industry are required to comply with extensive and complex laws and regulations in the United States at the federal and state levels as
well as applicable international laws. Although many regulatory and governmental requirements do not directly apply to our business, our
customers are required to comply with a variety of laws, and we may be affected by these laws as a result of our contractual obligations.
Similarly, there are a number of legislative proposals in the Unites States, both at the federal and state level, which could impose new
obligations in areas affecting our business. We have attempted to structure our operations to comply with applicable legal requirements,
but there can be no assurance that our operations will not be challenged or impacted by enforcement initiatives.
Healthcare Reform
Our business could be affected
by changes in health care laws, including without limitation, the Patient Protection and Affordable Care Act (the “ACA”),
which was enacted in March 2010. The ACA has changed how health care services are covered, delivered and reimbursed through expanded coverage
of individuals, changes in Medicare program spending and insurance market reforms. Ongoing government and legislative initiatives may
bring about other changes.
While most of the provisions
of the ACA and other health care reform legislation will not be directly applicable to us, they may affect the business of many of our
customers, which may in turn affect our business. Although we are unable to predict with any reasonable certainty or otherwise quantify
the likely impact of the ACA, any amendment or repeal of the ACA, or other health care reform on our business model, financial condition,
or results of operations, negative changes in the business of our customers and the number of individuals they insure may negatively impact
our business.
Requirements Regarding the Privacy and
Security of Personal Information
U.S.- HIPAA and Other
Privacy and Security Requirements. There are many U.S. federal and state laws and regulations related to the privacy and security
of personal health information. Additionally , regulations promulgated pursuant to the Health Insurance Portability and Accountability
Act of 1996 and its implementing regulations (collectively, “HIPAA”), establishes privacy and security standards that limit
the use and disclosure of protected health information and require the implementation of administrative, physical and technical safeguards
to ensure the confidentiality, integrity and availability of individually identifiable health information in electronic form. Any health
plan customers, as well as health care clearinghouses and certain providers with which we may have or may establish business relationships,
are covered entities that are regulated under HIPAA. The Health Information Technology for Economic and Clinical Health Act (“HITECH”),
which became effective on February 17, 2010, significantly expanded HIPAA’s privacy and security requirements. Among other
things, HITECH makes HIPAA’s privacy and security standards directly applicable to “business associates,” who are independent
contractors or agents of covered entities that create, receive, maintain, or transmit protected health information in connection with
providing a service for or on behalf of a covered entity. Under HIPAA and our contractual agreements with our customers, we are considered
a “business associate” to our customers and thus are directly subject to HIPAA’s privacy and security standards. In
order to provide our covered entity customers with services that involve the use or disclosure of protected health information, HIPAA
requires our customers to enter into business associate agreements with it. Such agreements must, among other things, require us to:
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limit how we will use and disclose the protected health information; |
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implement reasonable administrative, physical and technical safeguards to protect such information from misuse; |
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enter into similar agreements with our agents and subcontractors that have access to the information; |
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report security incidents, breaches and other inappropriate uses or disclosures of the information; and |
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assist the customer in question with certain duties under the privacy standards. |
In addition to HIPAA regulations,
we may be subject to other state and federal privacy laws, including laws that prohibit unfair or deceptive practices and laws that place
specific requirements on use of data. Such state laws can be similar to or even more protective than HIPAA, in which case we must comply
with the more stringent law. As a result, it may be necessary to modify our planned operations in order to ensure we are in compliance
with the stricter state laws.
Data Protection and Breaches.
In recent years, there have been a number of well-publicized data breaches involving the improper use and disclosure of individuals’
personal information. Many states have responded to these incidents by enacting laws requiring holders of personal information to maintain
safeguards and to take certain actions in response to a data breach, such as providing prompt notification of the breach to affected individuals
and state officials. In addition, under HIPAA, we must report breaches of unsecured protected health information to our contractual partners
within 60 days of discovery of the breach. Notification must also be made to HHS and, in certain circumstances involving large breaches,
to the media. Under the GDPR, the data controller is required to report personal data breaches to the supervisory authority within 72
hours of discovery of the breach.
We have implemented and maintained
physical, technical and administrative safeguards intended to protect all personal data, and have processes in place to assist it in complying
with all applicable laws, regulations and contractual requirements regarding the protection of these data and properly responding to any
security breaches or incidents. However, we cannot be sure that these safeguards are adequate to protect all personal data or to assist
us in complying with all applicable laws and regulations regarding the privacy and security of personal data and responding to any security
breaches or incidents. Furthermore, in many cases, applicable state laws, including breach notification requirements, are not preempted
by the HIPAA privacy and security standards and are subject to interpretation by various courts and other governmental authorities, thereby
complicating our compliance efforts. Additionally, state and federal laws regarding deceptive practices may apply to public assurances
we give to individuals about the security of services we provide on behalf of our contractual customers.
Other Healthcare Regulations
In addition to data privacy
laws, our operations and arrangements with healthcare professionals, clients, and third-party payors may subject us to various federal
and state healthcare laws and regulations, including without limitation fraud and abuse laws, such as the federal Anti-Kickback Statute;
civil and criminal false claims laws; physician transparency laws; and state laws regarding the corporate practice of medicine and fee-splitting
prohibitions. These laws may impact, among other things, our sales and marketing operations, and our interactions with healthcare professionals. We
continually monitor legislative, regulatory and judicial developments related to licensure and engagement arrangements with professionals;
however, new agency interpretations, federal or state legislation or regulations, or judicial decisions could require us to change how
we operate, may increase our costs of services and could have a material adverse impact on our business, results of operations or financial
condition.
Other Requirements.
In addition to HIPAA, numerous other U.S. state and federal laws govern the collection, dissemination, use, access to and confidentiality
of individually identifiable health information and health care provider information. Some states also are considering new laws and regulations
that further protect the confidentiality, privacy and security of medical records or other types of medical information. In many cases,
these state laws are not preempted by the HIPAA privacy standards and may be subject to interpretation by various courts and other governmental
authorities. Further, Congress and a number of states have considered or are considering prohibitions or limitations on the disclosure
of medical or other information to individuals or entities located outside of the United States.
In addition to HIPAA regulations,
we may be subject to other state and federal privacy laws, including laws that prohibit unfair or deceptive practices and laws that place
specific requirements on use of data. Such state laws can be similar to or even more protective than HIPAA, in which case we must comply
with the more stringent law. As a result, it may be necessary to modify our planned operations in order to ensure we are in compliance
with the stricter state laws.
Data Protection and Breaches.
In recent years, there have been a number of well-publicized data breaches involving the improper use and disclosure of individuals’
personal information. Many states have responded to these incidents by enacting laws requiring holders of personal information to maintain
safeguards and to take certain actions in response to a data breach, such as providing prompt notification of the breach to affected individuals
and state officials. In addition, under HIPAA, we must report breaches of unsecured protected health information to our contractual partners
within 60 days of discovery of the breach. Notification must also be made to HHS and, in certain circumstances involving large breaches,
to the media. Under the GDPR, the data controller is required to report personal data breaches to the supervisory authority within 72
hours of discovery of the breach.
We have implemented and maintained
physical, technical and administrative safeguards intended to protect all personal data, and have processes in place to assist it in complying
with all applicable laws, regulations and contractual requirements regarding the protection of these data and properly responding to any
security breaches or incidents. However, we cannot be sure that these safeguards are adequate to protect all personal data or to assist
us in complying with all applicable laws and regulations regarding the privacy and security of personal data and responding to any security
breaches or incidents. Furthermore, in many cases, applicable state laws, including breach notification requirements, are not preempted
by the HIPAA privacy and security standards and are subject to interpretation by various courts and other governmental authorities, thereby
complicating our compliance efforts. Additionally, state and federal laws regarding deceptive practices may apply to public assurances
we give to individuals about the security of services we provide on behalf of our contractual customers.
Other Healthcare Regulations
In addition to data privacy
laws, our operations and arrangements with healthcare professionals, clients, and third-party payors may subject us to various federal
and state healthcare laws and regulations, including without limitation fraud and abuse laws, such as the federal Anti-Kickback Statute;
civil and criminal false claims laws; physician transparency laws; and state laws regarding the corporate practice of medicine and fee-splitting
prohibitions. These laws may impact, among other things, our sales and marketing operations, and our interactions with healthcare professionals. We
continually monitor legislative, regulatory and judicial developments related to licensure and engagement arrangements with professionals;
however, new agency interpretations, federal or state legislation or regulations, or judicial decisions could require us to change how
we operate, may increase our costs of services and could have a material adverse impact on our business, results of operations or financial
condition.
Other Requirements.
In addition to HIPAA, numerous other U.S. state and federal laws govern the collection, dissemination, use, access to and confidentiality
of individually identifiable health information and health care provider information. Some states also are considering new laws and regulations
that further protect the confidentiality, privacy and security of medical records or other types of medical information. In many cases,
these state laws are not preempted by the HIPAA privacy standards and may be subject to interpretation by various courts and other governmental
authorities. Further, Congress and a number of states have considered or are considering prohibitions or limitations on the disclosure
of medical or other information to individuals or entities located outside of the United States.
Corporate History
MediXall Group, Inc. 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. 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.
Employees
As of December 31, 2021, we had 22 full-time
employees. We believe that we maintain a satisfactory working relationship with our employees and we have not experienced nor do we currently have any labor disputes.
We believe that a diverse workforce is important
to our success. As we grow our business, we will focus on the hiring, retention and advancement of women and underrepresented populations,
and to cultivate an inclusive and diverse corporate culture. In the future, we intend to evaluate our use of human capital measures or
objectives in managing our business such as the factors we employ or seek to employ in the development, attraction and retention of personnel
and maintenance of diversity in our workforce.
The success of our business is fundamentally connected
to the well-being of our people. Accordingly, we are committed to the health, safety and wellness of our employees. We provide our employees
and their families with access to a variety of innovative, flexible and convenient health and wellness programs, including benefits that
provide protection and security so they can have peace of mind concerning events that may require time away from work or that impact their
financial well-being; that support their physical and mental health by providing tools and resources to help them improve or maintain
their health status and encourage engagement in healthy behaviors; and that offer choice where possible so they can customize their benefits
to meet their needs and the needs of their families.
We also provide robust compensation and benefits
programs to help meet the needs of our employees.
Web Site
We maintain a website at gethealthkarma.com. This
website is not incorporated in this Annual Report on Form 10-K.
ITEM 1A. RISK FACTORS.
Before you invest in our securities, you should
be aware that there are various risks. You should consider carefully these risk factors, together with all of the other information included
in this Annual Report on Form 10-k before you decide to purchase our securities. If any of the following risks and uncertainties develop
into actual events, our business, financial condition or results of operations could be materially adversely affected.
RISKS RELATED TO OUR BUSINESS
The Company has no operating history and
has a new business model in an emerging and rapidly evolving market.
MediXall is an early-stage development
enterprise and lacks any operating history to evaluate in assessing our future prospects. Our business and prospects in light of the risks
and difficulties MediXall will encounter as a development stage company in a new and rapidly evolving market must be seriously considered.
We may not be able to successfully address these risks and difficulties, which could materially harm our business and operating results.
In addition, we do not know if our business model will operate effectively during the next economic downturn. Furthermore, we are unable
to predict the likely duration and severity of any potential adverse economic conditions in the U.S. and other countries, but the longer
the duration the greater risks we face in operating our business. There can be no assurance, therefore, that current economic conditions
or worsening economic conditions, or a prolonged or recurring recession, will not have a significant adverse impact on our operating and
financial results.
Our auditors have indicated that there is
a substantial doubt about our ability to continue as a going concern.
To date, we have not been profitable
and have incurred significant losses and cash flow deficits. For the fiscal years ended December 31, 2021 and 2020, we generated operating
revenues of $14,995 and $0, respectively, and reported net losses of $6,200,574 and $5,932,032, respectively, and negative cash flow from
operating activities of $4,685,270 and $4,126,869, respectively. As noted in our consolidated financial statements, as of December 31,
2021, we had an accumulated deficit of $25,782,390. We anticipate that we will continue to report losses and negative cash flow. Our auditors
have raised substantial doubt regarding our ability to continue as a going concern as a result of our historical recurring losses and
negative cash flows from operations as well as our dependence on private equity and financings.
Our consolidated financial statements
do not include any adjustments that might result from the outcome of this uncertainty. These adjustments would likely include substantial
impairment of the carrying amount of our assets and potential contingent liabilities that may arise if we are unable to fulfill various
operational commitments. In addition, the value of our securities, including common stock issued in this offering, would be greatly impaired.
Our ability to continue as a going concern is dependent upon generating sufficient cash flow from operations and obtaining additional
capital and financing, including funds to be raised in this offering. If our ability to generate cash flow from operations is delayed
or reduced and we are unable to raise additional funding from other sources, we may be unable to continue in business even if this offering
is successful. For further discussion about our ability to continue as a going concern and our plan for future liquidity, see “Management’s
Discussion and Analysis of Financial Condition and Results of Operations—Ability to Continue as a Going Concern.”
We cannot assure you that MediXall will
be able to develop the infrastructure necessary to achieve the potential sales growth.
Achieving revenue will require
that MediXall develop a functional platform and build the necessary infrastructure to support sales, technical and client support functions.
We cannot assure you that we can develop this infrastructure or will have the capital to do so and no commitments for needed capital are
in place. MediXall will continue to design plans to establish growth, adding sales and sales support resources as capital permits, but
at this time these plans are untested. If MediXall is unable to use any of its anticipated marketing initiatives or the cost of such initiatives
were to significantly increase or such initiatives or its efforts to satisfy existing clients are not successful, MediXall may not be
able to attract clients or retain existing clients on a cost-effective basis and, as a result, our revenue and results of operations would
be affected adversely.
The markets that MediXall is targeting for
revenue opportunities are emerging within a well-established healthcare industry, are rapidly developing and may change before we can
access them.
The markets for traditional
internet and mobile web products and services that MediXall is targeting for revenue opportunities are changing rapidly; and the barriers
to entry into the niche identified by MediXall are high and require unique experience and qualification. We cannot provide assurance that
MediXall will be able to realize these revenue opportunities before they change or before other companies enter or even dominate the market.
Furthermore, MediXall has based certain of its revenue opportunities on statistics provided by third party industry sources. Such statistics
are based on ever changing customer preferences due to our rapidly changing industry. With the introduction of new technologies and the
influx of new entrants to the market, we expect competition to emerge and intensify in the future, which could adversely affect our ability
to increase sales, limit client attrition and maintain our prices.
Our business depends on the development
and maintenance of the internet infrastructure.
The success of our services
will depend largely on the development and maintenance of the internet infrastructure. This includes maintenance of a reliable network
backbone with the necessary speed, data capacity and security, as well as timely development of complementary products, for providing
reliable internet access and services. The Internet has experienced, and is likely to continue to experience, significant growth in the
number of users and amount of traffic. The internet infrastructure may be unable to support such demands. In addition, increasing numbers
of users, increasing bandwidth requirements or problems caused by viruses, worms, malware and similar programs may harm the performance
of the internet. The backbone computers of the internet have been the targets of such programs. The internet has experienced a variety
of outages and other delays as a result of damage to portions of its infrastructure, and it could face outages and delays in the future.
These outages and delays could reduce the level of internet usage generally as well as the level of usage of our services, which could
adversely impact our business.
The nature of the MediXall platform requires
sophisticated encryption technology to defend against hacking due to the personal information as well as the financial transaction data
that will be utilized by a consumer/patient.
The art of hacking databases
for the purposes of obtaining personal information as well as financial information on individuals is increasing substantially. MediXall
is aware of these risks and will invest substantially in the development of its platform in accordance with the very latest data encryption/protection
technologies; however, there is a real risk that the MediXall platform could be compromised at some point in time exposing the company
to lawsuits and unfavorable attention that would adversely impact our business and affect our ability to add clients, consumer/patients
or manage attrition on the platform.
Our ability to offer MediXall products and
services may be affected by a variety of U.S. and foreign laws.
The laws relating to the liability
of providers of online and mobile marketing services for activities of their users are in their infancy and currently unsettled both within
the U.S. and abroad. Future regulations could affect our ability to provide current or future programming.
We will depend on the services of our executives.
We depend on the services of
our executive officers, director and outside contractors. To date we have not entered into any employment agreements with our executives.
The loss of the services of any of our executives could materially harm our business. In addition, we do not presently maintain a key-man
life insurance policy on any of our officers or directors.
Our future depends, in part,
on our ability to attract and retain key personnel. Our future also depends on the continued contributions of other key technical and
marketing personnel. The loss of key personnel and the process to replace any of our key personnel would involve significant time and
expense, may take longer than anticipated and may significantly delay or prevent the achievement of our business objectives.
Failure to properly maintain effective and
secure management information systems, update or expand processing capability or develop new capabilities to meet our business needs could
result in operational disruptions and possible loss of data critical to our operations.
Our business will depend significantly
on effective and secure information systems and the successful application of these continuously emerging technologies. In the future,
these systems could support online customer service functions, provider and member administrative functions and support tracking and extensive
analyses of medical expenses and outcome data.
These information systems and
applications will require continual investment for maintenance, upgrades and enhancement to meet our operational needs and to handle our
expansion and growth. Any inability or failure to properly maintain management information systems, successfully update or expand processing
capability or develop new capabilities to meet our business needs in a timely manner could result in operational disruptions, loss of
existing customers, difficulty in attracting new customers, impairment of the implementation of our growth strategies, delays in settling
disputes with customers and providers, regulatory problems, increases in administrative expenses, loss of our ability to produce timely
and accurate reports and other adverse consequences. To the extent a failure in maintaining effective information systems occurs, we may
need to contract for these services with third-party management companies, which may be on less favorable terms to us and significantly
disrupt our operations and information flow. Furthermore, our business requires the secure transmission of confidential information over
public networks. Because of the confidential information we store and transmit, security breaches could expose us to a risk of regulatory
action, litigation, possible liability and loss. Our security measures may prove inadequate to prevent security breaches and our business
operations and profitability would be adversely affected by cancellation of contracts, loss of members and potential criminal and civil
sanctions if security breaches occur.
General economic conditions, industry cycles,
financial, business and other factors affecting our operations, many of which are beyond our control, may affect our future performance.
General economic conditions,
industry cycles, financial, business and other factors may affect our operations. If we cannot generate sufficient cash flow from operations
in the future, we may, among other things, be required to take one or more of the following actions:
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seek additional financing in the debt or equity markets; |
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refinance or restructure all or a portion of our indebtedness; |
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reduce or delay planned capital expenditures; or |
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discontinue operations. |
In addition, any financing,
refinancing or sale of assets might not be available on economically favorable terms, which may prevent us from future expansion and growth
in new markets and, thus, negatively affect our business and financial condition.
Risks Related to Our Intellectual Property
If we are unable to prevent unauthorized
use or disclosure of our proprietary trade secrets and unpatented know-how, our ability to compete will be harmed.
Proprietary trade secrets, copyrights,
trademarks and unpatented know-how are also very important to our business. We will rely on a combination of patents, trade secrets, copyrights,
trademarks, confidentiality agreements, and other contractual provisions and technical security measures to protect certain aspects of
our intellectual property, especially where we do not believe that patent protection is appropriate or obtainable. We will require our
employees and consultants to execute confidentiality agreements in connection with their employment or consulting relationships with us.
We also will require our employees and consultants to disclose and assign to us all inventions conceived during the term of their employment
or engagement while using our property or which relate to our business; however, these measures may not be adequate to safeguard our proprietary
intellectual property and conflicts may, nonetheless, arise regarding ownership of inventions. Such conflicts may lead to the loss or
impairment of our intellectual property or to expensive litigation to defend our rights against competitors who may be better funded and
have superior resources. Our employees, consultants, contractors and other advisors may unintentionally or willfully disclose our confidential
information to competitors. In addition, confidentiality agreements may be unenforceable or may not provide an adequate remedy in the
event of unauthorized disclosure. Enforcing a claim, that a third party illegally obtained and is using our trade secrets, is expensive
and time consuming, and the outcome is unpredictable. Moreover, our competitors may independently develop equivalent knowledge, methods
and know-how. Unauthorized parties may also attempt to copy or reverse-engineer certain aspects of the MediXall platform that we consider
proprietary. As a result, third parties attempt to use our proprietary technology or information, and our ability to compete in the market
would be adversely affected.
COVID-19 Risks
The COVID-19 pandemic has adversely
affected the Company’s business and the ultimate effect of the COVID-19 pandemic on the Company’s operations and financial
condition will depend on future developments, which are highly uncertain and cannot be predicted.
On January 30, 2020, the World
Health Organization (“WHO”) announced a global health emergency because of a new strain of coronavirus (the “COVID-19
Outbreak”). In March 2020, the WHO classified the COVID-19 Outbreak as a pandemic, based on the rapid increase in exposure globally.
The Company’s operations and business have experienced disruption due to the unprecedented conditions surrounding the COVID-19 pandemic
spreading throughout world, including in the United States. The full impact of the COVID-19 Outbreak continues to evolve. The impact of
the COVID-19 Outbreak on the Company’s results of operations, financial position and cash flows will depend on future developments,
including the duration and spread of the outbreak and related advisories and restrictions. These developments and the impact of the COVID-19
Outbreak on the financial markets and the overall economy are highly uncertain and cannot be predicted. If the financial markets and/or
the overall economy are impacted for an extended period, the Company’s results of operations, financial position and cash flows
may be materially adversely affected.
RISKS RELATED TO OUR COMMON STOCK
Trading on the
OTC Markets is volatile and sporadic, which could depress the market price of our common stock and make it difficult for our stockholders
to resell their common stock.
Our
common stock is quoted on the OTCQB tier of the OTC Markets Group, Inc. (“OTC Markets”). Trading in securities quoted
on the OTC Markets is often thin and characterized by wide fluctuations in trading prices, due to many factors, some of which may have
little to do with our operations or business prospects. This volatility could depress the market price of our common stock for reasons
unrelated to operating performance. Moreover, the OTC Markets is not a stock exchange, and trading of securities on the OTC Markets is
often more sporadic than the trading of securities listed on a quotation system like Nasdaq Capital Market or a stock exchange like the
NYSE American. These factors may result in investors having difficulty reselling any shares of our common stock.
Our stock price is likely to be highly volatile
because of several factors, including a limited public float.
The market price of our common
stock has been volatile in the past and the market price of our common stock is likely to be highly volatile in the future. You may not
be able to resell shares of our common stock following periods of volatility because of the market’s adverse reaction to volatility.
Other factors that could cause such volatility may
include, among other things:
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actual or anticipated fluctuations in our operating results; |
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we may have a low trading volume for a number of reasons, including that a large portion of our stock is closely held; |
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overall stock market fluctuations; |
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announcements concerning our business or those of our competitors; |
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actual or perceived limitations on our ability to raise capital when we require it, and to raise such capital on favorable terms; |
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conditions or trends in the industry; |
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litigation; |
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changes in market valuations of other similar companies; |
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future sales of common stock; |
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departure of key personnel or failure to hire key personnel; and |
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general market conditions. |
Any of these factors could have
a significant and adverse impact on the market price of our common stock. In addition, the stock market in general has at times experienced
extreme volatility and rapid decline that has often been unrelated or disproportionate to the operating performance of particular companies.
These broad market fluctuations may adversely affect the trading price of our common stock, regardless of our actual operating performance.
Our common stock is a “penny stock”
under SEC rules, and our warrants may be subject to the “penny stock” rules. It may be more difficult to resell securities
classified as “penny stock.”
Our common stock is deemed to
be a “penny stock” under applicable SEC rules (generally defined as non-exchange traded stock with a per-share price below
$5.00). Unless we successfully list our common stock on a national stock exchange, or maintain a per-share price above $5.00, these rules
impose additional sales practice requirements on broker-dealers that recommend the purchase or sale of penny stocks to persons other than
those who qualify as “established customers” or “accredited investors.” For example, broker-dealers must determine
the appropriateness for non-qualifying persons of investments in penny stocks. Broker-dealers must also provide, prior to a transaction
in a penny stock not otherwise exempt from the rules, a standardized risk disclosure document that provides information about penny stocks
and the risks in the penny stock market. The broker-dealer also must provide the customer with current bid and offer quotations for the
penny stock, disclose the compensation of the broker-dealer and its salesperson in the transaction, furnish monthly account statements
showing the market value of each penny stock held in the customer’s account, provide a special written determination that the penny
stock is a suitable investment for the purchaser, and receive the purchaser’s written agreement to the transaction.
Legal remedies available to an investor in “penny
stocks” may include the following:
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If a “penny stock” is sold to the investor in violation of the requirements listed above, or other federal or states securities laws, the investor may be able to cancel the purchase and receive a refund of the investment. |
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If a “penny stock” is sold to the investor in a fraudulent manner, the investor may be able to sue the persons and firms that committed the fraud for damages. |
However, investors who have
signed arbitration agreements may have to pursue their claims through arbitration.
These requirements may have
the effect of reducing the level of trading activity, if any, in the secondary market for a security that becomes subject to the penny
stock rules. The additional burdens imposed upon broker-dealers by such requirements may discourage broker-dealers from effecting transactions
in our securities, which could severely limit the market price and liquidity of our securities. These requirements may restrict the ability
of broker-dealers to sell our common stock and may affect your ability to resell our common stock.
Many brokerage firms will discourage
or refrain from recommending investments in penny stocks. Most institutional investors will not invest in penny stocks. In addition, many
individual investors will not invest in penny stocks due, among other reasons, to the increased financial risk generally associated with
these investments.
For these reasons, penny stocks
may have a limited market and, consequently, limited liquidity. We can give no assurance at what time, if ever, our common stock will
not be classified as a “penny stock” in the future.
A sale of a substantial
number of shares of our common stock may cause the price of the common stock to decline.
If
our stockholders sell substantial amounts of our common stock in the public market, the market price of our common stock could fall. These
sales also may make it more difficult for us to sell our equity or equity-related securities in the future at a time and price that we
deem reasonable or appropriate. This risk is significant because of concentrated positions of our common stock held by a small group of
investors.
We have not paid
dividends on our common stock in the past and do not expect to pay dividends on our common stock in the future. Any return on investment
in our common stock may be limited to the value of our common stock.
We
have never paid cash dividends on our common stock and do not anticipate paying cash dividends on our common stock in the foreseeable
future. The payment of dividends on our common stock would depend on earnings, financial condition, and other business and economic factors
affecting us at such time as our board of directors may consider relevant. If we do not pay dividends on our common stock, our common
stock may be less valuable because a return on your investment will only occur if its stock price appreciates.
The ability of our principal stockholders,
including our Interim CEO and CFO, to control our business may limit or eliminate minority stockholders’ ability to influence corporate
affairs.
The principal holders of our
common stock, including TBG Holdings Corp. (“TBG”), our Interim CEO and our CFO, have approximately 34% voting control. 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. Because
of the stock ownership of our principal stockholders, our principal stockholders are in a position to significantly influence membership
of our board of directors, as well as all other matters requiring stockholder approval. The interests of our principal stockholders may
differ from the interests of other stockholders with respect to the issuance of shares, business transactions with or sales to other companies,
selection of other officers and directors and other business decisions. The minority stockholders have no way of overriding decisions
made by our principal stockholders. This level of control may also have an adverse impact on the market value of our shares because our
principal stockholders may institute or undertake transactions, policies or programs that result in losses may not take any steps to increase
our visibility in the financial community and / or may sell sufficient numbers of shares to significantly decrease our price per share.
Changes in accounting
principles and guidance, or their interpretation, could result in unfavorable accounting charges or effects, including changes to our
previously filed financial statements, which could cause our stock price to decline.
We
prepare our consolidated financial statements in accordance with accounting principles generally accepted in the United States (“GAAP”).
These principles are subject to interpretation by the Securities and Exchange Commission (the “SEC”) and various bodies formed
to interpret and create appropriate accounting principles and guidance. A change in these principles or guidance, or in their interpretations,
may have a significant effect on our reported results and retroactively affect previously reported results.
Being a public
company results in additional expenses, diverts management’s attention and could also adversely affect our ability to attract and
retain qualified directors.
As
a public reporting company, we are subject to the reporting requirements of the Securities Exchange Act of 1934, as amended (the “Exchange
Act”). These requirements generate significant accounting, legal and financial compliance costs and make some activities more difficult,
time consuming or costly and may place significant strain on our personnel and resources. The Exchange Act requires, among other things,
that we maintain effective disclosure controls and procedures and internal control over financial reporting. In order to establish the
requisite disclosure controls and procedures and internal control over financial reporting, significant resources and management oversight
are required.
As
a result, management’s attention may be diverted from other business concerns, which could have an adverse and even material effect
on our business, financial condition and results of operations. These rules and regulations may also make it more difficult and expensive
for us to obtain director and officer liability insurance. If we are unable to obtain appropriate director and officer insurance, our
ability to recruit and retain qualified officers and directors, especially those directors who may be deemed independent, could be adversely
impacted.
Failure to establish
and maintain effective internal controls in accordance with Section 404 of the Sarbanes-Oxley Act could have a material adverse effect
on our business and stock price.
We
are required to comply with the SEC’s rules implementing Sections 302 and 404 of the Sarbanes-Oxley Act, which require management
to certify financial and other information in our quarterly and annual reports and provide an annual management report on the effectiveness
of controls over financial reporting.
To
comply with the requirements of being a public company, we have undertaken various actions, and may need to take additional actions, such
as implementing new internal controls and procedures and hiring additional accounting or internal audit staff. Testing and maintaining
internal control can divert our management’s attention from other matters that are important to the operation of our business. Additionally,
when evaluating our internal control over financial reporting, we may identify material weaknesses that we may not be able to remediate
in time to meet the applicable deadline imposed upon us for compliance with the requirements of Section 404. If we identify any material
weaknesses in our internal control over financial reporting or are unable to comply with the requirements of Section 404 in a timely manner
or assert that our internal control over financial reporting is effective, investors may lose confidence in
the accuracy and completeness of our financial reports and the market price of our common stock could be negatively affected, and any
investigations by the Financial Industry Regulatory Agency, the SEC or other regulatory authorities, could require additional financial
and management resources.
RISKS RELATED TO HEALTHCARE INDUSTRY
The healthcare regulatory and political
framework is uncertain and evolving, and we cannot predict the effect that further healthcare reform and other changes in government programs
may have on our business, financial condition or results of operations.
Healthcare laws and regulations
are rapidly evolving and may change significantly in the future, which could adversely affect our financial condition and results of operations.
For example, the ACA, which includes a variety of healthcare reform provisions and requirements that may become effective at varying times
through 2022, substantially changes the way healthcare is financed by both governmental and private insurers, and may significantly impact
our industry. Further changes to the ACA and related healthcare regulation remain under consideration. In addition, current proposals
to implement a single payer or “Medicare for all” system in the U.S., if adopted would likely have a material adverse effect
on our business. The full impact of recent healthcare reform and other changes in the healthcare industry and in healthcare spending is
unknown, and we are unable to predict accurately what effect the ACA or other healthcare reform measures that may be adopted in the future
will have on our business.
The healthcare industry is rapidly evolving
and the market for technology-enabled services that empower healthcare consumers is relatively immature and unproven. If we are not successful
in promoting and improving the benefits of our platform, our growth may be limited and our business may be adversely affected.
The market for our products
and services is subject to rapid and significant change and competition. The market for technology-enabled services that empower healthcare
consumers is characterized by rapid technological change, new product and service introductions, evolving industry standards, changing
customer needs, existing competition and the entrance of non-traditional competitors. In addition, there may be a limited-time opportunity
to achieve and maintain a significant share of this market due in part to the rapidly evolving nature of the healthcare and technology
industries and the substantial resources available to our existing and potential competitors. The market for technology-enabled services
that empower healthcare consumers is relatively new and unproven, and it is uncertain whether this market will achieve and sustain high
levels of demand and market adoption.
Our success depends to a substantial
extent on the willingness of consumers to increase their use of technology platforms to manage their healthcare options, the ability of
our platform to increase consumer engagement, and our ability to demonstrate the value of our platform to our potential customers. If
customers do not recognize or acknowledge the benefits of our platform or our platform does not drive consumer engagement, then the market
for our products and services might develop more slowly than we expect, which could adversely affect our operating results. In addition,
we have limited insight into trends that might develop and affect our business. We might make errors in predicting and reacting to relevant
business, legal and regulatory trends, which could harm our business. If any of these events occur, it could materially adversely affect
our business, financial condition or results of operations.
Finally, our competitors may
have the ability to devote more financial and operational resources than we can to developing new technologies and services, including
services that provide improved operating functionality, and adding features to their existing service offerings. If successful, their
development efforts could render our services less desirable, resulting in the loss of our existing customers or a reduction in the fees
we earn from our products and services.
Failure to comply with extensive and complex
healthcare laws and regulations may have a material adverse effect on our business.
Healthcare is an extremely complex
and regulated industry in the U.S. There are many laws and regulations that could have a material effect on our business, including but
not limited to, the HIPAA, and federal and state regulations controlling patient, provider and intermediary relationships. We have taken,
and will continue to take, precautions to ensure compliance with applicable statutes and regulations; however there is no guarantee we
will be success in our efforts, and even an unintentional violation of law could have a material adverse effect on our operations and
business.
We are subject to privacy regulations regarding
the access, use and disclosure of personally identifiable information. If we or any of our third-party vendors experience a breach of
personally identifiable information, it could result in substantial financial and reputational harm, including possible criminal and civil
penalties.
State and federal laws and regulations
govern the collection, dissemination, access and use of personally identifiable information, including HIPAA and HITECH, which govern
the treatment of protected health information, and the Gramm-Leach Bliley Act, which governs the treatment of nonpublic personal information.
Privacy regulation has become a priority issue in many states, including California, which in 2018 enacted the California Consumer Privacy
Act broadly regulating the sale of California residents’ personal information and providing California residents with various rights
to access and delete data. In the provision of services to our customers, we and our third-party vendors may collect, access, use, maintain
and transmit personally identifiable information in ways that are subject to many of these laws and regulations. Although we have implemented
measures to comply with privacy laws, rules and regulations, we may experience data privacy incidents. Any unauthorized disclosure of
personally identifiable information experienced by us or our third-party vendors could result in substantial financial and reputational
harm, including possible criminal and civil penalties. In many cases, we are subject to HIPAA and other privacy regulations because we
are a business associate providing services to covered entities; as a result, the covered entities direct HIPAA compliance matters in
the event of a security breach, which complicates our ability to address harm caused by the breach. Additionally, we may be required to
report breaches to partners, regulators, state attorney generals, and impacted individuals depending on the severity of the breach, our
role, legal requirements and contractual obligations. Continued compliance with current and potential new privacy laws, rules and regulations
and meeting consumer expectations with respect to the control of personal data in a rapidly changing technology environment could result
in higher compliance and technology costs for us.
Although we do not provide medical care,
we could be a party to medical malpractice claims, which could have a material adverse effect on our business.
We do not provide medical care.
Rather, we help connect consumers and employers to providers of medical care, products and services. However, we could be a party to lawsuits
related to the service we provide, and that could include risk of medical malpractice claims which could increase our insurance premiums,
expose us to legal defense cost, and/or impact the brand of the Company, which could lead to a reduction in the number of customers we
have and could have a material adverse effect on our revenues and profits.