This quarterly report on Form 10-Q and other reports filed by TurnKey Capital,
Inc. (the "Company," "we," "us" or "our") from time to time with the U.S.
Securities and Exchange Commission ("SEC") (collectively, the "Filings") contain
or may contain forward-looking statements and information that are based upon
beliefs of, and information currently available to, the Company's management as
well as estimates and assumptions made by Company's management. Readers are
cautioned not to place undue reliance on these forward-looking statements, which
are only predictions and speak only as of the date hereof. When used in the
Filings, the words "anticipate," "believe," "estimate," "expect," "future,"
"intend," "plan," or the negative of these terms and similar expressions as they
relate to the Company or the Company's management identify forward-looking
statements. Such statements reflect the current view of the Company with respect
to future events and are subject to risks, uncertainties, assumptions, and other
factors, including the factors, risks, and uncertainties contained in Part I,
Item 1A, "Risk Factors" of the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 2019. Should one or more of these risks or
uncertainties materialize, or should the underlying assumptions prove incorrect,
actual results may differ significantly from those anticipated, believed,
estimated, expected, intended, or planned.
Overview
We are a shell company as defined in Rule 12b-2 of the Securities Exchange Act
of 1934, as amended (the "Exchange Act"). Our wholly owned subsidiaries are
Remote Office Management, Inc. ("ROM"), which was formed in 2016 and was
inactive in 2020 and 2019, and Turnkey Home Buyers USA, Inc., which was formed
in 2014 and was inactive in 2020 and 2019. The Company does not have any paid
employees; however, the officers and directors continue to work to further the
Company's business objectives.
As of September 30, 2020, we had an accumulated deficit of $2,664,231, negative
working capital of $1,462,991 and cash of $267. Based upon current and near-term
anticipated level of operations and expenditures, we believe that our lack of
cash precludes us from continuing operations for the next twelve months. We
expect TBG Holdings, Inc. ("TBG"), a related party, will continue to provide
support services until sufficient capital is raised. Management recognizes that
in order for us to meet our capital requirements, and continue to operate,
additional financing will be necessary. We may seek to raise additional funds
through private or public equity investment in order to expand the range and
scope of our business operations. We may seek access to private or public equity
but there is no assurance that such additional funds will be available for us to
finance our operations on acceptable terms, if at all. If we are unable to raise
additional capital or generate positive cash flow, it is unlikely that we will
be able to continue as a going concern. The unaudited condensed consolidated
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
Recent Developments
COVID-19 Pandemic
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 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.
Equity Investment - related party
On September 13, 2019, the Company entered into a Definitive Acquisition
Agreement (the "DAA") with Egg Health Hub, Inc. ("EGG"), a related party.
Pursuant to the terms of the DAA, EGG and the Company agreed to commence the
negotiation and preparation of a definitive share exchange agreement (the
"Definitive Agreement") pursuant to which EGG would exchange all of its issued
and outstanding shares of common stock for shares of the Company's common stock
on a one-for-one basis which, upon the closing of the transactions contemplated
by the Definitive Agreement, would constitute 70,000,000 shares of EGG's issued
and outstanding common stock. EGG has no employees, does not currently conduct
operations and has no financial assets and liabilities.
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EGG is a brand new model for healthcare and wellness that brings together top
physicians and wellness professionals into co-practicing communities with shared
access to a full-stack technology platform - scheduling, billing, client
acquisition, and telemedicine - and flexible access to office space designed to
optimize both the physician and client experience. This model creates a
compelling new option for re-tenanting traditional shopping centers and
mixed-use space.
On July 27, 2020, the Company and MediXall Group, Inc. ("MediXall"), a related
party, entered into an assignment of the DAA. As a result of the COVID-19
Outbreak, the Company determined that the original opportunity that existed with
EGG was no longer practical in the short-term. The Company and MediXall
believed, however, that the EGG concept remained a viable concept on a virtual
basis, and MediXall possesses the infrastructure and willingness to pursue this
opportunity. In exchange for 1,000,000 shares of MediXall's common stock, the
Company assigned its interest in the DAA to MediXall. The receipt of MediXall's
common stock was accounted for as a transaction between entities with common
ownership that lacks economic substance. As such, the receipt of MediXall's
common stock was recorded at its historic carrying amount of $1,000.
Appointment of Company President
On September 16, 2020, the Company announced the appointment of Alan A. Tucker
as President of the Company. Mr. Tucker brings significant experience working
directly with business startups and micro-cap companies. The Company is in the
process of finalizing an employment agreement with Mr. Tucker.
Results of Operations
Three Month Period Ended September 30, 2020 Compared to the Three Month Period
Ended September 30, 2019
Revenue
During the three month periods ended September 30, 2020 and 2019, we did not
generate any revenue.
Operating Expenses
A summary of our operating expenses for the three month periods ended September
30, 2020 and 2019 follows:
Three Months Ended
September 30,
2020 2019 Increase
General and administrative $ 7,302 $ 1,851 $ 5,451
Professional fees - related party 90,000 90,000
-
Legal and professional 6,600 2,332 4,268
Total operating expenses $ 103,902 $ 94,183 $ 9,719
General and administrative ("G&A") costs include costs related to public company
costs and other office related costs.
Professional fees - related party costs primarily include costs for management
services provided by TBG and costs related to R3.
Legal and professional expenses related to amounts incurred by the external
audit firm and lawyers.
Nine Month Period Ended September 30, 2020 Compared to the Nine Month Period
Ended September 30, 2019
Revenue
During the nine month periods ended September 30, 2020 and 2019, we did not
generate any revenue.
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Operating Expenses
A summary of our operating expenses for the nine month periods ended September
30, 2020 and 2019 follows:
Nine Months Ended
September 30, Increase/
2020 2019 (Decrease)
General and administrative $ 21,345 $ 14,975 $ 6,370
Professional fees - related party 270,000 180,000 90,000
Legal and professional
25,938 29,620 (3,682 )
Total operating expenses $ 317,283 $ 224,595 $ 92,688
G&A costs include costs related to public company costs and other office related
costs.
Professional fees - related party costs primarily include costs for management
services provided by TBG and costs related to R3. The increase in costs resulted
due to the increase in the fees being charged by TBG.
Legal and professional expenses related to amounts incurred by the external
audit firm and lawyers.
Liquidity and Capital Resources
Our available working capital and capital requirements will depend upon numerous
factors, including our ability to make accretive acquisitions, and our ability
to attract and retain key employees.
During the nine month period ended September 30, 2020, because of our operating
losses, we did not generate positive operating cash flows. As of September 30,
2020, we had an accumulated deficit of $2,664,231, cash on hand of $267 and
negative working capital of $1,462,991. As a result, we have significant
short-term cash needs. These needs historically have been satisfied through
proceeds from the sales of our securities and advances from TBG, a related
party. We are expecting to reduce the need for such short-term financing as we
work to establish a sustainable business. (See "Plan of Operation and Funding"
below). In order to repay our obligations in full or in part when due, we will
be required to raise capital from other sources. There is no assurance, however,
that we will be successful in these efforts.
Cash used in operating activities was $49,136 for the nine month period ended
September 30, 2020, as compared to cash used of $54,967 during the nine month
period ended September 30, 2019.
Cash provided by financing activities was $48,150 for the nine month period
ended September 30, 2020 as compared to cash provided by financing activities of
$51,890 for the nine month period ended September 30, 2019.
We expect TBG will continue to provide support services until sufficient capital
is raised.
Plan of Operation and Funding
We expect that working capital requirements will continue to be funded through
further related party advances and issuances of securities until we establish
business activities that can generate positive cash flow. Our working capital
requirements are expected to increase in line with the growth of our business.
We have negative working capital, and we do not have any lines of credit or
other bank financing arrangements. Generally, we have financed operations to
date through the proceeds of the private placement of equity and debt
instruments and related party advances. In connection with our business plan,
management anticipates additional increases in operating expenses and capital
expenditures. We intend to finance these expenses with further issuances of
securities, and debt issuances. Thereafter, we expect we will need to raise
additional capital and generate revenues to meet short-term operating
requirements. Additional issuances of equity or convertible debt securities will
result in dilution to our current shareholders. Further, such securities might
have rights, preferences or privileges senior to our common stock. Additional
financing may not be available upon acceptable terms, or at all. If adequate
funds are not available or are not available on acceptable terms, we may not be
able to take advantage of prospective new business endeavors or opportunities,
which could significantly and materially restrict our business operations.
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Going Concern
The accompanying unaudited condensed consolidated financial statements have been
prepared assuming the Company will continue as a going concern. As of September
30, 2020, the Company had $267 of cash and an accumulated deficit of $2,664,231
and further losses are anticipated in the development of its business raising
substantial doubt about the Company's ability to continue as a going concern.
The ability to continue as a going concern is dependent upon the Company
generating profitable operations in the future and, or, obtaining the necessary
financing to meet its obligations and repay its liabilities arising from normal
business operations when they come due. There is no assurance that these events
will be satisfactorily completed. We expect TBG to continue to provide
supporting services and advances until sufficient capital is raised. The
advances are due on demand and are non-interest bearing. The unaudited condensed
consolidated financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
Critical Accounting Policies and Estimates
The preparation of condensed consolidated financial statements and related
disclosures in conformity with accounting principles generally accepted in the
United States of America ("GAAP") requires us to make judgments, assumptions and
estimates that have a significant impact on the results that we report in our
condensed consolidated financial statements. Some of our accounting policies
require us to make difficult and subjective judgments, often as a result of the
need to make estimates regarding matters that are inherently uncertain. Note 1
of the notes to condensed consolidated financial statements describes the
significant accounting policies used in the preparation of the condensed
consolidated financial statements. Certain of these significant accounting
policies require us to make critical accounting estimates, as defined below.
A critical accounting estimate is defined as one that is both material to the
presentation of our condensed consolidated financial statements and requires
management to make difficult, subjective or complex judgments that could have a
material effect on our financial condition and results of operations.
Specifically, critical accounting estimates have the following attributes:
· we are required to make assumptions about matters that are highly
uncertain at the time of the estimate; and
· different estimates we could reasonably have used, or changes in the
estimate that are reasonably likely to occur, would have a material
effect on our financial condition or results of operations.
Estimates and assumptions about future events and their effects cannot be
determined with certainty. We base our estimates on historical experience and on
various other assumptions believed to be applicable and reasonable under the
circumstances. These estimates may change as new events occur, as additional
information is obtained and as our operating environment changes. These changes
have historically been minor and have been included in the condensed
consolidated financial statements as soon as they became known. Based on a
critical assessment of our accounting policies and the underlying judgments and
uncertainties affecting the application of those policies, management believes
that our condensed consolidated financial statements are fairly stated in
accordance with GAAP and present a meaningful presentation of our financial
condition and results of operations.
Our most critical accounting estimates include:
· the recognition and measurement of current and deferred income taxes,
which impact our provision for taxes.
Below, we discuss these policies further, as well as the estimates and judgments
involved.
Income Taxes
The Company accounts for income taxes using the liability method. Under this
method, deferred tax assets and liabilities are determined based on the
difference between the financial reporting and tax bases of assets and
liabilities using enacted tax rates that will be in effect in the year in which
the differences are expected to reverse. The Company records a valuation
allowance to offset the deferred tax assets if based on the weight of available
evidence, it is more-likely-than-not that some portion, or all, of the deferred
tax assets will not be realized. The effect on deferred taxes of a change in tax
rates is recognized as income or loss in the period that includes the enactment
date.
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Pursuant to accounting standards related to the accounting for uncertainty in
income taxes, the evaluation of a tax position is a two-step process. The first
step is to determine whether it is more likely than not that a tax position will
be sustained upon examination, including the resolution of any related appeals
or litigation based on the technical merits of that position. The second step is
to measure a tax position that meets the more-likely-than-not threshold to
determine the amount of benefit to be recognized in the financial statements. A
tax position is measured at the largest amount of benefit that is greater than
50% likelihood of being realized upon ultimate settlement. Tax positions that
previously failed to meet the more-likely-than-not recognition threshold should
be recognized in the first subsequent period in which the threshold is met.
Previously recognized tax positions that no longer meet the more-likely-than-not
criteria should be de-recognized in the first subsequent financial reporting
period in which the threshold is no longer met. The accounting standard also
provides guidance on de-recognition, classification, interest and penalties,
accounting in interim periods, disclosures and transition.
The Company assessed its earning history, trends and estimates of future
earnings and determined that the deferred tax asset could not be realized as of
September 30, 2020. Accordingly, a valuation allowance was recorded against the
net deferred tax asset.
Off-Balance Sheet Arrangements
As of September 30, 2020, we do not have any off-balance sheet arrangements that
have or are reasonably likely to have a current or future effect on our
financial condition, changes in financial condition, revenues or expenses,
results of operations, liquidity, capital expenditures or capital resources that
are material to investors.
ITEM 3.
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