Scienture Holdings, Inc 10-Q for FY2023 Q2
Scienture Holdings, Inc. (SCNX)
About this 10-Q
Scienture Holdings, Inc filed this 10-Q on August 18, 2023, covering the quarter ended June 30, 2023 (FY2023 Q2).
Headline figures
Quarter ended June 30, 2023, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $2.25M
- down 31.3% from $3.28M a year earlier
- Net loss
- $1.97M
- compared with a net loss of $1.11M a year earlier
- Diluted EPS
- -$2.90
- compared with -$1.99 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
(Mark One)
For
the Quarterly Period Ended
OR
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There were shares of the registrant’s common stock outstanding on August 10, 2023 and no shares of preferred stock outstanding.
TRxADE HEALTH, INC.
FORM 10-Q
For the Quarter Ended June 30, 2023
TABLE OF CONTENTS
| 2 |
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q (“Report”), including without limitation, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” contains forward-looking statements, within the meaning of the federal securities laws, including the Private Securities Litigation Reform Act of 1995, regarding future events and the future results of the Company that are based on current expectations, estimates, forecasts, and projections about the industry in which the Company operates and the beliefs and assumptions of the management of the Company. Words such as “expects,” “anticipates,” “targets,” “goals,” “projects,” “intends,” “plans,” “believes,” “seeks,” “estimates,” variations of such words, and similar expressions are intended to identify such forward-looking statements. These forward-looking statements are only predictions and are subject to risks, uncertainties and assumptions that are difficult to predict. These factors include, but are not limited to:
| ● | Our limited amount of cash; | |
| ● | The negative effect on our business and our ability to raise capital that is created by the fact that there is a substantial doubt about our ability to continue as a going concern; | |
| ● | Risks of our operations not being profitable; | |
| ● | Claims relating to alleged violations of intellectual property rights of others; | |
| ● | Technical problems with our websites; | |
| ● | Risks relating to implementing our acquisition strategies; | |
| ● | Negative effects on our operations associated with the opioid pain medication health crisis; | |
| ● | Regulatory and licensing requirement risks; | |
| ● | Risks related to changes in the U.S. healthcare environment; | |
| ● | The status of our information systems, facilities and distribution networks; | |
| ● | Risks associated with the operations of our more established competitors; | |
| ● | Regulatory changes; | |
| ● | Healthcare fraud; | |
| ● | The potential impact of some future pandemic; | |
| ● | Inflation, rising interest rates, governmental responses thereto and possible recessions caused thereby. | |
| ● | Changes in laws or regulations relating to our operations; | |
| ● | Privacy laws; | |
| ● | System errors; | |
| ● | Dependence on current management; | |
| ● | Our growth strategy; |
● Risks related to the disruption of management’s attention from ongoing business operations due to pursuit of requirements related to being a listed company; and
● Other factors discussed in this Quarterly Report on Form 10-Q and in Part I, Item 1A. “Risk Factors” in Part I, Item 1A. “Risk Factors” and Part II, Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Form 10-K.
While forward-looking statements reflect our good faith beliefs, assumptions and expectations, they are not guarantees of future performance. The forward-looking statements speak only as of the date of this Quarterly Report on Form 10-Q. Furthermore, we disclaim any obligation to publicly update or revise any forward-looking statement to reflect changes in underlying assumptions or factors, of new information, data or methods, future events or other changes. Moreover, because we operate in a very competitive and rapidly changing environment, new risk factors are likely to emerge from time to time. We caution investors not to place undue reliance on these forward-looking statements and urge you to carefully review the disclosures we make concerning risks in this Quarterly Report and in Part I, Item 1A. “Risk Factors” and Part II, Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K and Part II, Item 1A. “Risk Factors” in the Quarterly Report for the period ending March 31, 2023, filed with the Securities and Exchange Commission (SEC) on May 15, 2023. Readers of this Quarterly Report on Form 10-Q should also read our other periodic filings made with the SEC and other publicly filed documents for further discussion regarding such factors.
| 3 |
PART I: FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
TRxADE HEALTH, INC.
Consolidated Balance Sheets
June 30, 2023 and December 31, 2022
(Unaudited)
| June 30, | December 31, | |||||||
| 2023 | 2022 | |||||||
| Assets | ||||||||
| Current Assets | ||||||||
| Cash | $ | $ | ||||||
| Accounts receivable, net | ||||||||
| Inventory | ||||||||
| Prepaid assets | ||||||||
| Current assets of discontinued operations | ||||||||
| Total Current Assets | ||||||||
| Property plant and equipment, net | ||||||||
| Intangible assets and capitalized software, net | ||||||||
| Deposits | ||||||||
| Operating lease right-of-use assets | ||||||||
| Total Assets | $ | $ | ||||||
| Liabilities and Shareholders’ Equity | ||||||||
| Current Liabilities | ||||||||
| Accounts payable | ||||||||
| Accrued liabilities | ||||||||
| Other current liabilities | ||||||||
| Contingent funding liabilities | ||||||||
| Current portion lease liabilities | ||||||||
| Warrant liability | ||||||||
| Notes payable— related party | ||||||||
| Current liabilities of discontinued operations | ||||||||
| Total Current liabilities | ||||||||
| Long Term Liabilities | ||||||||
| Other long-term liabilities — leases | ||||||||
| Notes payable- related party | ||||||||
| Total Liabilities | ||||||||
| Stockholders’ Equity | ||||||||
| Series A preferred stock, $ par value; shares authorized; issued and outstanding, as of June 30, 2023 and December 31, 2022. | ||||||||
| Common stock, $par value; shares authorized; and shares issued and outstanding, as of June 30, 2023 and December 31, 2022, respectively | ||||||||
| Additional paid-in capital | ||||||||
| Retained deficit | ( | ) | ( | ) | ||||
| Total | ( | ) | ||||||
| Non-controlling interest in subsidiary | ( | ) | ||||||
| Total Stockholders’ equity | ( | ) | ||||||
| Total Liabilities and Stockholders’ Equity | $ | $ | ||||||
The accompanying notes are an integral part of the unaudited consolidated financial statements.
| 4 |
TRxADE HEALTH, INC.
Consolidated Statements Of Operations
For the Three and Six Months Ended June 30, 2023 and 2022
(Unaudited)
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| For the Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Revenues | $ | $ | $ | $ | ||||||||||||
| Cost of sales | ||||||||||||||||
| Gross Profit | ||||||||||||||||
| Operating Expenses: | ||||||||||||||||
| Wage and salary expense | ||||||||||||||||
| Professional fees | ||||||||||||||||
| Accounting and legal expense | ||||||||||||||||
| Technology expense | ||||||||||||||||
| General and administrative | ||||||||||||||||
| Total operating expenses | ||||||||||||||||
| Operating Loss | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Nonoperating income (expense) | ||||||||||||||||
| Change in fair value of warrant liability | ( | ) | ( | ) | ||||||||||||
| Interest income | ||||||||||||||||
| Gain on disposal of asset | ||||||||||||||||
| Interest expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Total nonoperating expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Net Loss from continuing operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Net Loss on discontinued operations, net of tax | ( | ) | ||||||||||||||
| Net loss attributable to TRxADE Health, Inc. | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Net loss attributable to non-controlling interests | ( | ) | ( | ) | ||||||||||||
| Basic and diluted net loss per common share: | ||||||||||||||||
| Continuing operations | $ | ) | $ | ) | $ | ) | $ | ) | ||||||||
| Continuing operations, basic | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Discontinued operations | $ | $ | $ | ) | $ | |||||||||||
| Discontinued operations, basic | $ | $ | $ | ( | ) | $ | ||||||||||
| Net loss attributable to common stockholders | $ | ) | $ | ) | $ | ) | $ | ) | ||||||||
| Net loss attributable to common stockholders, basic | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Weighted average common shares outstanding - basic and diluted | ||||||||||||||||
The accompanying notes are an integral part of the unaudited consolidated financial statements.
| 5 |
TRxADE HEALTH, INC.
Consolidated Statements of Changes in Stockholders’ Equity
For the Three and Six Months Ended June 30, 2023, and 2022
(Unaudited)
| Preferred stock | Common Stock | Additional Paid-in | Accumulated | Non-Controlling Interest in | Total Stockholders’ | |||||||||||||||||||||||||||
| Shares | $ Amount | Shares | $ Amount | Capital | Deficit | Subsidiaries | Equity | |||||||||||||||||||||||||
| Balance at December 31, 2022 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||||||||||
| Common stock issued for services | ||||||||||||||||||||||||||||||||
| Warrants exercised for cash | ||||||||||||||||||||||||||||||||
| Disposition of assets, related party | - | - | ||||||||||||||||||||||||||||||
| Options expense | - | |||||||||||||||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||||||||||||||
| Balance at March 31, 2023 | $ | $ | $ | $ | ( | ) | $ | $ | ||||||||||||||||||||||||
| Common stock issued for services | - | |||||||||||||||||||||||||||||||
| Warrants exercised for cash | 1795 | |||||||||||||||||||||||||||||||
| Options expense | - | |||||||||||||||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||||||||||||||
| Balance at June 30, 2023 | $ | $ | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||||||||||||||||
| Balance at December 31, 2021 | $ | $ | $ | $ | ( | ) | $ | $ | ||||||||||||||||||||||||
| Capital contributions | - | |||||||||||||||||||||||||||||||
| Common stock issued for services | - | |||||||||||||||||||||||||||||||
| Capital distributions | - | ( | ) | ( | ) | |||||||||||||||||||||||||||
| Warrants exercised for cash | ||||||||||||||||||||||||||||||||
| Options expense | - | |||||||||||||||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||
| Balance at March 31, 2022 | $ | $ | $ | $ | ( | ) | $ | $ | ||||||||||||||||||||||||
| Common stock issued for services | - | |||||||||||||||||||||||||||||||
| Options expense | - | |||||||||||||||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||
| Balance at June 30, 2022 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||||||||||
The accompanying notes are an integral part of the unaudited consolidated financial statements
| 6 |
TRxADE HEALTH, INC.
Consolidated Statements of Cash Flows
For The Six Months Ended June 30, 2023 and 2022
(Unaudited)
| 2023 | 2022 | |||||||
| Six months Ended June 30, | ||||||||
| 2023 | 2022 | |||||||
| Cash flows from operating activities: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation expense | ||||||||
| Options expense | ||||||||
| Common stock issued for services | ||||||||
| Bad debt recovery | ( | ) | ( | ) | ||||
| Gain on sale of asset | ( | ) | ||||||
| Amortization of right of use assets | ||||||||
| Amortization of intangible assets | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable, net | ( | ) | ||||||
| Prepaid assets and deposits | ||||||||
| Inventory | ( | ) | ( | ) | ||||
| Lease liability | ( | ) | ( | ) | ||||
| Accounts payable | ||||||||
| Accrued liabilities | ( | ) | ( | ) | ||||
| Inventory deposits | ( | ) | ||||||
| Current liabilities | ||||||||
| Warrant liability | ||||||||
| Net cash used in operating activities from continuing operations | ( | ) | ( | ) | ||||
| Net cash (used in) provided by operating activities from discontinued operations | ( | ) | ||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Cash flows from investing activities: | ||||||||
| Sale of fixed assets | ||||||||
| Investment in capitalized software | ( | ) | ( | ) | ||||
| Net cash used in investing activities from continuing operations | ( | ) | ( | ) | ||||
| Net cash provided by investing activities from discontinued operations | ||||||||
| Net cash provided by (used in) investing activities | ( | ) | ||||||
| Cash flows from financing activities: | ||||||||
| Repayment of contingent liability | ( | ) | ||||||
| Proceeds from sale of future revenue | ||||||||
| Distributions to non-controlling interest | ( | ) | ||||||
| Proceeds from exercise of warrants | ||||||||
| Net cash (used in) provided by financing activities from continuing operations | ( | ) | ||||||
| Net cash used in financing activities from discontinued operations | ( | ) | ||||||
| Net cash (used in) provided by financing activities | ( | ) | ||||||
| Net change in cash | ( | ) | ( | ) | ||||
| Cash at beginning of the year | ||||||||
| Cash at end of the period | $ | $ | ||||||
| Supplemental disclosure of cash flow information | ||||||||
| Cash paid for interest | $ | $ | ||||||
| Cash paid for income taxes | $ | $ | ||||||
| Non-Cash Transactions | ||||||||
| Insurance premium financed | $ | $ | ||||||
| Note cancelled from SOSRx agreement termination | $ | $ | ||||||
| Note issued as SOSRx contribution | $ | $ | ||||||
| Intangible Asset Contribution from non-controlling interest | $ | $ | ||||||
| Disposition of assets, related party | $ | $ | ||||||
The accompanying notes are an integral part of the unaudited consolidated financial statements.
| 7 |
NOTE 1 – ORGANIZATION AND BASIS OF PRESENTATION
TRxADE
HEALTH, INC. (“we”, “our”, “Trxade”, and the “Company”) owns
Trxade, Inc., operates a web-based market platform that enables commerce among healthcare buyers and sellers of pharmaceuticals, accessories and services.
Integra Pharma Solutions, LLC (d.b.a. Trxade Prime), is a licensed pharmaceutical wholesaler and sells brand, generic and non-drug products to customers. Trxade Prime customers include all healthcare markets including government organizations, hospitals, clinics and independent pharmacies nationwide.
Alliance Pharma Solutions, LLC (d.b.a. DelivMeds) invested in SyncHealth MSO, LLC, a managed services organization, in January 2019, which investment was divested in February 2020. DelivMeds is currently being rebranded and the consumer-based app is still being developed. To date, we have not generated any revenue from this product.
Community Specialty Pharmacy, LLC, is an accredited independent retail pharmacy with a focus on a community-based model offering home delivery services to patients.
On
January 20, 2023, the Company entered into Membership Interest Purchase Agreements to sell
Bonum Health, LLC, was formed to hold certain telehealth assets acquired in October 2019. The “Bonum Health Hub” was launched in February 2020; however, due to the COVID-19 pandemic, the Company does not anticipate installations moving forward. The Bonum Health mobile application is available on a subscription basis, primarily as a stand-alone telehealth software application that can be licensed on a business-to-business (B2B) model to clients as an employment health benefit for the clients’ employees.
SOSRx,
LLC was formed on February 15, 2022. The Company entered into a relationship with Exchange Health, LLC, a technology company providing
an online platform for manufacturers and suppliers to sell and purchase pharmaceuticals (“Exchange Health”). SOSRx LLC, a
Delaware limited liability company (“SOSRx”), was formed, which was owned
Basis of Presentation - The accompanying unaudited interim consolidated financial statements of TRxADE HEALTH, Inc. have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the SEC and should be read in conjunction with the audited financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022, as filed with the SEC on March 27, 2023.
In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the interim periods presented have been reflected herein. The results of operations for the interim periods are not necessarily indicative of the results to be expected for the full year. Notes to the financial statements that would substantially duplicate the disclosures contained in the audited financial statements for the year ended December 31, 2022, as reported in the Company’s Annual Report on Form 10-K have been omitted.
Stock Split - All share and per share information included in these financial statements and notes thereto have been retroactively adjusted to give effect to the Reverse Stock Split, which became effective on June 21, 2023.
Recently Issued Accounting Pronouncements - In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments” (“ASU 2016-13”). ASU 2016-13 requires companies to measure credit losses utilizing a methodology that reflects expected credit losses and requires a consideration of a broader range of reasonable and supportable information to inform credit loss estimates. ASU 2016-13 is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The Company adopted ASU 2016-13 effective January 1, 2023. The Company determined that the update applied to trade receivables, but that there was no material impact to the consolidated financial statements from the adoption of ASU 2016-13.
From time to time, new accounting pronouncements are issued by the Financial Accounting Standard Board or other standard setting bodies that the Company adopts as of the specified effective date. The Company does not believe that the impact of recently issued standards that are not yet effective will have a material impact on the Company’s financial position or results of operations upon adoption.
Accounts
Receivable – The Company’s receivables are from customers and are typically collected within 90 days. The Company determines
the allowance based on known troubled accounts, historical experience, and other currently available evidence. During the six months
ended June 30, 2023, and 2022, bad debt expense was a recovery of $
The
Company had an Account Receivable with a single customer, GSG PPE, LLC (“GSG”), for the amount of $
| 8 |
Other
Receivables – The Company’s other receivables balance is from one vendor. On May 20, 2022, effective as of May 18, 2022,
Community Specialty Pharmacy, LLC (“CSP”) entered into an agreement to acquire COVID-19 testing kits from a third-party
vendor for an aggregate of $
Income
(loss) Per Common Share – Basic net income per common share is computed by dividing net income available to common stockholders
by the weighted average number of common shares outstanding. Diluted net income per common share is computed similar to basic net income
per common share except that the denominator is increased to include the number of additional common shares that would have been outstanding
if the potential common shares had been issued and if the additional common shares were dilutive. The dilutive effect of the Company’s
options and warrants is computed using the treasury stock method. As of June 30, 2023, we had
SCHEDULE OF BASIC AND DILUTIVE INCOME (LOSS) PER SHARE
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| For the Three Months Ended June 30, | For the Six Months Ended June 30, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Numerator: | ||||||||||||||||
| Net loss from continuing operations | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Net loss from discontinued operations | $ | $ | ( | ) | $ | |||||||||||
| Numerator for basic and diluted EPS - income available to common stockholders | ( | ) | $ | ( | ) | ( | ) | $ | ( | ) | ||||||
| Denominator: | ||||||||||||||||
| Denominator for basic and diluted EPS – weighted average shares | ||||||||||||||||
| Denominator for basic EPS – weighted average shares | ||||||||||||||||
| Basic and diluted loss per common share | $ | ) | $ | ) | $ | ) | $ | ) | ||||||||
| Basic loss per common share | $ | ( | $ | ( | $ | ( | ) | $ | ( | ) | ||||||
| Continuing operations | $ | ) | $ | ) | $ | ) | $ | ) | ||||||||
| Continuing operations, basic | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Discontinued operations | $ | $ | $ | ) | $ | |||||||||||
| Discontinued operations, basic | $ | $ | $ | ( | ) | $ | ||||||||||
| 9 |
NOTE 2 – GOING CONCERN
The accompanying interim consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates realization of assets and the satisfaction of liabilities in the normal course of business within one year after the date the consolidated financial statements are issued. In accordance with Financial Accounting Standards Board, or the FASB, Accounting Standards Update No. 2014-15, Presentation of Financial Statements - Going Concern (Subtopic 205-40), our management evaluates whether there are conditions or events, considered in aggregate, that raise substantial doubt about our ability to continue as a going concern within one year after the date that the financial statements are issued.
As
of June 30, 2023 the Company had an accumulated deficit of $
NOTE 3- DISPOSITION OF BUSINESS
On and effective on, February 1, 2023, the Company, Exchange Health and SOSRx, entered into a Voluntary Withdrawal and Release Agreement, which was replaced in its entirety and corrected on February 4, 2023 and effective February 4, 2023 (as replaced and corrected, the “Release Agreement”).
As
part of the withdrawal agreement, a note payable to Exchange Health was forgiven in the amount of $
SCHEDULE OF FINANCIAL STATEMENTS OF DISCONTINUED OPERATIONS
| June 30, 2023 | December 31, 2022 | |||||||
| Cash | $ | $ | | |||||
| Accounts receivable | ||||||||
| Total assets of discontinued operations | $ | $ | ||||||
| Accounts payable | $ | $ | ||||||
| Total liabilities of discontinued operations | $ | $ | ||||||
The Agreement qualifies as a discontinued operation in accordance with U.S. GAAP. As a result, operating results and cash flows related to the SOSRx operations have been reflected as discontinued operations in the Company’s consolidated statements of operations, consolidated statements of cash flows and consolidated statements of shareholders’ equity.
| June 30, 2023 | June 30, 2022 | |||||||
| Revenue | ||||||||
| Cost of sales | ||||||||
| General and administrative expense | ( | ) | ( | ) | ||||
| Operating loss | ( | ) | ( | ) | ||||
| Net loss from discontinued operations | ( | ) | ( | ) | ||||
| 10 |
NOTE 4- RELATED PARTY TRANSACTIONS
On April 1, 2023 and July 1,2023, the Company entered into a relationship
with Scietech LLC in an independent contractor agreement to consult on increasing sales on the IPS and Trxade Inc. platforms Per agreement,
on April 1, 2023 the compensation is $
On
February 15, 2022, the Company entered into a relationship with Exchange Health, a technology company providing an online platform for
manufacturers and suppliers to sell and purchase pharmaceuticals. In connection therewith, SOSRx LLC (“SOSRx”), was formed
in February 2022, which is owned
At
June 30, 2023, total related party debt was $
On and effective on, February 1, 2023, the Company, Exchange Health and SOSRx, entered into a Voluntary Withdrawal and Release Agreement, which was replaced in its entirety and corrected on February 4, 2023 and effective February 4, 2023 (as replaced and corrected, the “Release Agreement”). Pursuant to the Release Agreement, the Company voluntarily withdrew as a member of SOSRx pursuant to the terms of the Operating Agreement of SOSRx, which provided that the Company would withdraw from SOSRx if certain revenue targets were not met, which targets have not been met.
Also
pursuant to the Withdrawal Agreement, (a) the Company agreed to the termination of its interests in SOSRx and its withdrawal as a member
thereof for no consideration (the “Withdrawal”); (b) the Promissory Note, and all of the Company’s obligations under
such Promissory Note were terminated; and (c) the parties agreed that no Earn Out Payments will be due. The Release Agreement also
NOTE 5 – CONTINGENT FUNDING LIABILITIES
On
June 27, 2023, the Company entered into a non-recourse funding agreement with a third-party for the purchase and sale of future receivables
(the “Receivables Agreement”). Pursuant to the Receivables Agreement, the third-party agreed to fund the Company $
On
March 14, 2023, the Company entered into a non-recourse funding agreement with a third-party for the purchase and sale of future receivables
(the “Receivables Agreement”). Pursuant to the Receivables Agreement, the third-party agreed to fund the Company $
On
September 14, 2022, the Company entered into a non-recourse funding agreement with a third-party for the purchase and sale of future
receivables (the “Receivables Agreement”). Pursuant to the Receivables Agreement, the third-party agreed to fund the Company
$
| 11 |
On
June 27, 2022, the Company entered into a non-recourse funding agreement with a third-party funder for the purchase and sale of future
receivables. Pursuant to the Receivables Agreement, the third-party agreed to fund the Company $
The Company’s relationship with the funding source meets the criteria in ASC 470-10-25 – Sales of Future Revenues or Various Other Measures of Income (“ASC 470”), which relates to cash received from a funding source in exchange for a specified percentage or amount of revenue or other measure of income of a particular product line, business segment, trademark, patent or contractual right for a defined period. Under this guidance, the Company recognized the fair value of its contingent obligation to the funding source, as of the acquisition date, as a current liability in its consolidated balance sheet.
Under
ASC 470, amounts recorded as debt are to be amortized under the interest method. The Company made an accounting policy election to utilize
the prospective method when there is a change in the estimated future cash flows, whereby a new effective interest rate is determined
based on the revised estimate of remaining cash flows. The new rate is the discount rate that equates the present value of the revised
estimate of remaining cash flows with the carrying amount of the debt, and it will be used to recognize interest expense for the remaining
period. Under this method, the effective interest rate is not constant, and any change in expected cash flows is recognized prospectively
as an adjustment to the effective yield. As of June 30, 2023 the total contingent funding liability was $
NOTE 6 – STOCKHOLDERS’ EQUITY
2023 1:15 Stock Split
2022 Equity Compensation Awards
Effective September 1, 2022, the Board of Directors and Compensation Committee of the Company, with the approval of each of the following officers, agreed to reduce the annual cash compensation payable to Suren Ajjarapu, the Company’s Chief Executive Officer; Prashant Patel, the Company’s President and Chief Operating Officer and Janet Huffman, the Company’s former Chief Financial Officer, in an effort to conserve cash.
In lieu of the reduced cash salary payable to each officer, the Board and Compensation Committee agreed to issue such officers shares of the Company’s common stock equal to the amount of reduced cash salary, divided by the closing sales price of the Company’s common stock on the NASDAQ Capital Market on August 31, 2022, the date approved by the Board of Directors. The total amount of shares of common stock issued on August 31, 2022 to the officers was .
The shares of common stock issuable to the officers vest at the rate of 1/4th of such shares on each of September 30, 2022, October 31, 2022, November 30, 2022, and December 31, 2022, subject to each applicable Officer’s continued service to the Company on such dates and subject to the restricted stock award agreements entered into to evidence such awards.
Separately, certain employees of the Company agreed to reduce their cash salaries by an aggregate of $ in consideration for an aggregate of shares of the Company’s restricted common stock, with the same vesting terms as the officer shares discussed above.
Effective
on August 31, 2022, the Board of Directors approved the issuance of shares of common stock of the Company to each independent
member of the Board of Directors, for services rendered to the Company during fiscal 2022, which shares were valued at $
All of the awards discussed above were issued under the Company’s Second Amended and Restated 2019 Equity Incentive Plan (the “Plan”) and all restricted stock awards discussed above were evidenced by Restricted Stock Grant Agreements.
| 12 |
NOTE 7 – PREFUNDED AND PRIVATE PLACEMENT WARRANTS
Simultaneously
with the closing of the stock placement, the investor pre-purchased
NOTE 8 – WARRANTS
For
the six-month period ended June 30, 2023, warrants were granted, and expired. For the six-month period ended June 30, 2023,
prefunded warrants and granted warrants to purchase shares of common stock were exercised for a total purchase price of $
The Company uses the Black-Scholes pricing model to estimate the fair value of stock-based awards on the date of the grant.
There was compensation cost related to the warrants for the six months ended June 30, 2023, and 2022, respectively.
The Company’s outstanding and exercisable warrants as of June 30, 2023, are presented below:
SCHEDULE OF OUTSTANDING AND EXERCISABLE WARRANTS
| Number Outstanding
After Reverse Stock Split | Weighted Average Exercise Price | Contractual Life In Years | Intrinsic Value | |||||||||||||
| Warrants outstanding as of December 31, 2022 | ||||||||||||||||
| Warrants granted | - | - | ||||||||||||||
| Warrants forfeited, expired, cancelled | - | - | ||||||||||||||
| Warrants exercised | ( | ) | - | - | ||||||||||||
| Warrants outstanding as of June 30, 2023 | ||||||||||||||||
| Warrants exercisable as of June 30, 2023 | - | |||||||||||||||
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The Company maintains stock option plans under which certain employees are awarded option grants based on a combination of performance and tenure. The stock option plans provide for the grant of up to shares, and the Company’s Second Amended and Restated 2019 Equity Incentive Plan provides for automatic increases in the number of shares available under such plan (currently shares) on April 1st of each calendar year, .
For the six-month period ended June 30, 2023, options to purchase shares were granted, options to purchase shares were forfeited and options expired. For the six-month period ended June 30, 2023, options to purchase shares of common stock were exercised.
Total compensation cost related to stock options granted was $ and $ for the six-months ended June 30, 2023, and 2022, respectively.
SCHEDULE OF STOCK OPTION ACTIVITY
| Number Outstanding
After Reverse Stock Split | Weighted- Average Exercise Price | Weighted- Average Contractual Life in Years | Intrinsic Value | |||||||||||||
| Options outstanding as of December 31, 2022 | $ | $ | ||||||||||||||
| Options exercisable as of December 31, 2022 | ||||||||||||||||
| Options granted | - | |||||||||||||||
| Options forfeited | ( | ) | - | |||||||||||||
| Options expired | ( | ) | - | |||||||||||||
| Options exercised | - | - | ||||||||||||||
| Options outstanding as of June 30, 2023 | ||||||||||||||||
| Options exercisable as of June 30, 2023 | ||||||||||||||||
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NOTE 10 – CONTINGENCIES
Studebaker Defense Group, LLC
In
July 2020, the Company’s wholly-owned subsidiary, Integra Pharma Solutions, LLC (“Integra”), entered into an agreement
with Studebaker Defense Group, LLC (“Studebaker”) wherein Integra would pay Studebaker a down payment of $
Sandwave Group Dsn Bhd and Crecom Burj Group SDN BHD
In
August 2020, Integra, entered into an agreement with Sandwave Group Dsn Bhd (“Sandwave”), wherein Integra would pay Sandwave
a down payment of $
GSG PPE, LLC
On
November 19, 2021, Integra filed a complaint against GSG PPE, LLC (“GSG”) and Gary Waxman (“Waxman”), the owner,
alleging three counts of breach of contract for a purchase agreement, a promissory note, and a personal guaranty. Collectively, the company
alleges that GSG and Waxman have materially breached all three contracts. In late 2020, GSG and Integra executed a valid initial contract
setting the terms of a business transaction. GSG failed to pay Integra approximately 75% of the amount owed to Integra. GSG acknowledged
it owed the money and executed a promissory note in favor of Integra in the amount of $
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NOTE 11 – LEASES
The Company elected the practical expedient under Accounting Standards Update (ASU) 2018-11 “Leases: Targeted Improvements” which allows the Company to apply the transition provision for Topic 842 at the Company’s adoption date instead of at the earliest comparative period presented in the financial statements. Therefore, the Company recognized and measured leases existing at January 1, 2019, but without retrospective application. In addition, the Company elected the optional practical expedient permitted under the transition guidance which allows the Company to carry forward the historical accounting treatment for existing leases upon adoption. No impact was recorded to the beginning retained earnings for Topic 842. The Company has two operating leases for corporate offices. The following table outlines the details:
SCHEDULE OF OPERATING LEASES
| Lease 1 | Lease 2 | |||||||
| Initial Lease Term | ||||||||
| Renewal Term | ||||||||
| Initial Recognition of right-of-use assets at January 1, 2019 | $ | $ | ||||||
| Incremental Borrowing Rate | % | % | ||||||
The
Company entered into a new corporate office lease (Lease 1) on January 1, 2022. The Company determined that entering into a new lease
required remeasurement of the lease liability resulting in the increase of the right-of-use asset and the associated lease liability
by $
The table below reconciles the fixed component of the undiscounted cash flows for each of the first five years and the total remaining years to the operating lease liabilities recorded in the Consolidated Balance Sheet as of June 30, 2023.
SCHEDULE OF FUTURE MINIMUM PAYMENTS FOR OPERATING LEASE LIABILITIES
| Amounts due within twelve months of June 30, | ||||
| 2023 | ||||
| 2024 | ||||
| 2025 | ||||
| 2026 | ||||
| Thereafter | ||||
| Total minimum lease payments | ||||
| Less: effect of discounting | ( | ) | ||
| Present value of future minimum lease payments | ||||
| Less: current obligations under leases | ||||
| Long-term lease obligations | $ | |||
The
difference to the balance sheet above is due to the current and long-term remaining lease obligations of the copier operating lease not
included in the amount of $
For
the six-months ended June 30, 2023, and 2022, amortization of Right of Use Assets was $
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NOTE 12 – SEGMENT REPORTING
Operating segments are defined as the components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision makers in deciding how to allocate resources and in assessing performance. The Company’s chief operating decision makers direct the allocation of resources to operating segments based on the profitability, cash flows, and growth opportunities of each respective segment.
The Company classifies its business interests into reportable segments which are:
| ● | Trxade, Inc. - Web based pharmaceutical marketplace platform – B2B sales | |
| ● | CSP - Community Specialty Pharmacy, LLC – Licensed retail pharmacy – B2C sales | |
| ● | Integra - Integra Pharma, LLC - Licensed wholesaler of brand, generic and non-drug products – B2B sales | |
| ● | Unallocated - Other – corporate overhead expense, Alliance Pharma Solutions, LLC and Bonum Health, LLC |
SCHEDULE OF BUSINESS INTERESTS INTO REPORTABLE SEGMENTS
| Six Months Ended June 30, 2023 | Trxade, Inc. | CSP | Integra | Unallocated | Total | |||||||||||||||
| Revenue | $ | $ | $ | $ | $ | |||||||||||||||
| Gross Profit | ||||||||||||||||||||
| Segment Assets | ( | ) | ||||||||||||||||||
| Segment Profit/Loss | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||
| Cost of Sales | $ | $ | $ | $ | $ | |||||||||||||||
| Six Months Ended June 30, 2022 | Trxade, Inc. | CSP | Integra | Unallocated | Total | |||||||||||||||
| Revenue | $ | $ | $ | $ | $ | |||||||||||||||
| Gross Profit | ( | ) | ( | |||||||||||||||||
| Segment Assets | ||||||||||||||||||||
| Segment Profit/Loss | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||
| Cost of Sales | $ | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | |||||||||
NOTE 13 – SUBSEQUENT EVENTS
Nasdaq Listing Rule 5550(a)(2)
On July 7, 2023, the Company received written notice (the “Compliance Letter”) from the Listing Qualifications Department of The Nasdaq Stock Market LLC (“Nasdaq”) stating that the Company has regained compliance with Nasdaq Listing Rule 5550(a)(2) requiring maintenance of a minimum bid price of at least $ per share (the “Bid Price Requirement”). The Company previously disclosed in its Current Report on Form 8-K filed on December 1, 2022 that the Company received written notice from Nasdaq indicating that it no longer satisfied the Bid Price Requirement and providing the Company 180 days to regain compliance by maintaining a minimum bid price of at least $ per share for a minimum of 10 consecutive business days. The Compliance Letter states that Nasdaq determined that the closing bid price of the Company’s common stock was at or above $ for 10 consecutive business days (from June 22, 2023 to July 6, 2023) and considers the matter closed.
Nasdaq Listing Rule 5550(b)
As
previously disclosed in a Current Report on Form 8-K, filed by the Company with the Securities and Exchange Commission (the “SEC”)
on August 1, 2022, on July 29, 2022, the Company received a letter from “the Nasdaq” notifying
the Company that it was not in compliance with the minimum $
A
hearing before the Panel was held on March 23, 2023, at which the Company presented a plan to regain compliance with the Rule that included
an underwritten public offering of Company securities of up to $
The
Company received a notice from the Panel that the Panel had granted the Company an extension until July 31, 2023, to demonstrate compliance
with the $
Settlement between Studebaker Defense Group LLC. and Integra Pharma Solutions, LLC
On
April 13, 2023, a settlement was reached in the Studebaker Defense Group LLC. and Integra Pharma Solutions, LLC. legal case. The court
found in favor of Integra Pharma Solutions and ordered Studebaker Defense Group, LLC. to pay $
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The Merger Agreement and Related Transactions
On July 14, 2023, the Company entered into a certain Amended and Restated Agreement and Plan of Merger (the “Merger Agreement”) with Superlatus, Inc., a U.S.-based holding company of food products and distribution capabilities (“Superlatus”) and Foods Merger Sub, Inc., a Delaware corporation and wholly owned subsidiary of the Company (“Merger Sub”).
On July 31, 2023 (the “Closing Date”), the Company completed its acquisition of Superlatus in accordance with the terms and conditions of the Merger Agreement (the “Merger”), pursuant to which the Company acquired Superlatus by way of a merger of the Merge Sub with and into Superlatus, with Superlatus being a wholly owned subsidiary of the Company and the surviving entity in the Merger.
Under
the terms of the Merger Agreement, at the closing of the Merger (the “Closing”), shareholders of Superlatus received in aggregate
shares of common stock of the Company, representing
On July 28, 2023, TRxADE issued to the shareholders of TRxADE as of that date, including the independent directors who are entitled to certain amount of MEDS common stock in connection with their 2023 annual compensation and regardless of whether the common stock has been issued or vested before July 28, 2023 (collectively, the “MEDS Rights Shareholders”) a non-transferrable right to receive one share of MEDS common stock at no cost (the “MEDS Rights”), with seven (7) MEDS Rights issued per share of common stock of TRxADE held as of July 28, 2023, conditioned upon their execution of a registration rights agreement. The MEDS Rights are not actionable or transferable until registration; provided they become transferable one year after the date of the merger if no registration has occurred.
As a condition and inducement to Superlatus’ willingness to enter into the Merger Agreement, on June 28, 2023, Suren Aijarapu and Prashant Patel (the “Principal Stockholders”) entered into an agreement with TRxADE (the “Stock Swap Agreement”), pursuant to which, TRxADE will transfer all of the shares or membership interest of a variety of operating subsidiaries currently own by TRxADE to Principal Stockholders, in exchange for Suran Aijarapu to surrender share of common stock of TRxADE and Prashant Patel to surrender shares of the common stock of TRxADE (the “Stock Swap Transaction”). The closing of the Stock Swap Transaction shall take place simultaneously with the approval of TRxADE stockholders of the conversion of the Series B preferred Stock into common stock. The closing of the Stock Swap Transaction is subject to the simultaneous condition that the Merger is successfully closed.
Upon conclusion of the Stock Swap Transaction and Merger, the remaining operations within TRxADE will only consist of legacy Superlatus operations. Management has determined that Superlatus will be the accounting acquirer in the merger based upon a detailed analysis of the relevant US GAAP guidance and the facts and circumstances outlined above. Consequently, Superlatus will apply acquisition accounting to the assets and liabilities of TRxADE that are acquired or assumed upon the consummation of the merger. The historical financial statements of Superlatus for periods ended prior to the consummation of the merger will reflect only the operations and financial condition of Superlatus. Subsequent to the consummation of the merger, the financial statements of Superlatus will include the combined operations and financial condition of Superlatus and remaining TRxADE operations.
Stock Swap Agreement
As a condition and inducement to Superlatus’s willingness to enter into the Merger Agreement, on June 28, 2023, Suren Ajjarapu and Prashant Patel (the “Principal Stockholders”) entered into an agreement with the Company (the “Stock Swap Agreement”), pursuant to which, the Company will transfer all of the shares or membership interest of a variety of operating subsidiaries currently owned by the Company to Principal Stockholders, in exchange for Suren Ajjarapu to surrender shares of the common stock of the Company and Prashant Patel to surrender shares of the common stock of the Company (the “Stock Swap Transaction”). The closing of the Stock Swap Transaction shall take place simultaneously with the approval by the Company’s stockholders of the conversion of the Series B preferred Stock into common stock.
Lock-Up Agreement
In connection with the Merger, on July 31, 2023, certain Superlatus shareholders as of immediately prior to the Merger, and certain directors and officers of MEDS as of immediately prior to the Merger, entered into lock-up agreements with the Company, pursuant to which each such stockholder will be subject to a 360 day lockup on the sale or transfer of shares of common stock or securities convertible into or exercisable for or exchangeable for common stock held by each such stockholder at the closing of the Merger (the “Lock-up Agreements”).
MEDS Rights
In connection with the Merger, effective one (1) business day immediately prior to the Closing Date (the “MEDS Rights Record Date”), the Company issued to the shareholders of the Company as of the MEDS Rights Record Date, including the independent directors who are entitled to certain amount of common stock of the Company in connection with their 2023 annual compensation and regardless of whether the common stock has been issued or vest before the MEDS Rights Records Date (collectively, the “MEDS Rights Shareholders”) a non-transferrable right to receive one share of common stock of the Company at no cost (the “MEDS Rights”), with seven (7) MEDS Rights issued per share of common stock of the Company held as of the MEDS Rights Record Date, conditioned upon their execution of a Registration Rights Agreement. Such issuances will be made in reliance on the exemption from registration pursuant to Section 3(a)(9) or Section 4(a)(2) of the Securities Act, Regulation D under the Securities Act promulgated thereunder, and corresponding provisions of state securities or “blue sky” laws. The MEDS Rights are not actionable or transferable until registration; provided they become transferable one year after the date of the Merger if no registration has occurred.
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
General Information
This information should be read in conjunction with the interim unaudited financial statements and the notes thereto included in this Quarterly Report on Form 10-Q, and the audited financial statements and notes thereto and “Part II. Other Information – Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations”, contained in our Annual Report on Form 10-K for the year ended December 31, 2022, filed with the SEC on March 27, 2023 (the “Annual Report”).
Certain capitalized terms used below and otherwise defined below, have the meanings given to such terms in the footnotes to our unaudited consolidated financial statements included above under “Part I – Financial Information” – “Item 1. Financial Statements”.
Please see the section entitled “Glossary” in our Annual Report for a list of abbreviations and definitions used throughout this Report.
Unless the context requires otherwise, references to the “Company,” “we,” “us,” “our,” and “Trxade”, refer specifically to TRxADE HEALTH, INC. and its consolidated subsidiaries. References to “Q1”, “Q2”, “Q3”, and “Q4” refer to the first, second, third, and fourth quarter, respectively, of the applicable year. Unless otherwise stated or the context otherwise requires, comparisons from one period to another are to the same period of the prior fiscal year.
In addition, unless the context otherwise requires and for the purposes of this report only:
| ● | “Exchange Act” refers to the Securities Exchange Act of 1934, as amended; | |
| ● | “Securities Act” refers to the Securities Act of 1933, as amended. |
Summary of The Information Contained in Management’s Discussion and Analysis of Financial Condition and Results of Operations
Our Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) is provided in addition to the accompanying consolidated financial statements and notes to assist readers in understanding our results of operations, financial condition, and cash flows. MD&A is organized as follows:
| ● | Company Overview. Discussion of our business and overall analysis of financial and other highlights affecting us, to provide context for the remainder of MD&A. | |
| ● | Recent Events. Summary of material transactions occurring during the three and six months ended June 30, 2023. | |
| ● | Liquidity and Capital Resources. An analysis of changes in our consolidated balance sheets and cash flows and discussion of our financial condition. | |
| ● | Results of Operations. An analysis of our financial results comparing the three and six months ended June 30, 2023, and 2022. | |
| ● | Critical Accounting Policies. Accounting estimates that we believe are important to understanding the assumptions and judgments incorporated in our reported financial results and forecasts. |
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Company Overview
TRxADE HEALTH is a technology-enabled health services platform. Through our subsidiary companies we focus on digitalizing the retail pharmacy and health services experience by optimizing drug procurement, the prescription journey, access to physicians in the patient’s home and patient engagement in the U.S.
Our services provide pricing transparency, purchasing capabilities and other value-added services on a single platform focused on serving the nation’s approximately 19,397 independent pharmacies with annual purchasing power of $67.1 billion (according to the National Community of Pharmacists Association’s 2021 Digest). Our national wholesale supply partners are able to fulfill orders on our platform in real-time and provide pharmacies with cost-saving payment terms and next-day delivery capabilities in unrestrictive states under the Model State Pharmacy Act and Model Rules of the National Association of Boards of Pharmacy (Model Act). We have expanded significantly since 2015 and now have around 14,100+ registered members on our sales platform.
The Company changed its name on June 1, 2021, from “Trxade Group, Inc” to “TRxADE HEALTH, INC.”. TRxADE HEALTH, INC. owns 100% of Trxade, Inc., Integra Pharma Solutions, LLC (formerly Pinnacle Tek, Inc.), Alliance Pharma Solutions, LLC, Community Specialty Pharmacy, LLC, and Bonum Health, LLC. Trxade, Inc. is a web-based market platform that enables commerce among healthcare buyers and sellers of pharmaceuticals, accessories and services.
On January 20, 2023, the Company entered into Membership Interest Purchase Agreements to sell 100% of the outstanding membership interests of Alliance Pharma Solutions, LLC and Community Specialty Pharmacy, LLC.
On February 15, 2022, the Company entered into a relationship with Exchange Health, LLC, a technology company providing an online platform for manufacturers and suppliers to sell and purchase pharmaceuticals (“Exchange Health”). SOSRx LLC, the created entity relating to the relationship, a Delaware limited liability company, was formed in February 2022, and was owned 51% by the Company and 49% by Exchange Health (“SOSRx”).
On February 4, 2023, and effective as of February 1, 2023, the Company entered into a Voluntary Withdrawal and Release Agreement, (the “Release Agreement”). Pursuant to the Release Agreement, (a) the Company voluntarily withdrew as a member of SOSRx pursuant to the terms of the Operating Agreement of SOSRx, (b) the Company’s interests in SOSRx were terminated; (c) the Company’s promissory note in favor of SOSRx was canceled; and (d) the parties agreed that no earn out payments will be due.
TRxADE Inc
Trxade.com is a web-based pharmaceutical marketplace engaged in promoting and enabling commerce among independent pharmacies, small chains, hospitals, clinics and alternate dispensing sites with large pharmaceutical suppliers nationally. Our marketplace has over 72 national and regional pharmaceutical suppliers providing over 120,000 branded and generic drugs, including over the counter drugs and drugs available for purchase by pharmacists. We generate revenue from these services by charging a transaction fee to the seller of the products for sales conducted on the Trxade platform. The buyers do not bear the cost of transaction fees for the purchases that they make, nor do they pay a fee to join or register with our platform. Our core service has the goal of bringing the nation’s independent pharmacies and accredited national suppliers of pharmaceuticals together to provide efficient and transparent buying and selling opportunities.
As of June 30, 2023, the TRxADE platform increased its registered users by 1,149 or 8% compared to June 31, 2022. For the six months ended June 30, 2023, new registrations were 291 compared to 339 for the same period in 2022. As of June 30, 2023, total registered users were approximately 14,100+ compared to 12,962 at June 30, 2022.
| 20 |
The table below summarizes the key metrics that management evaluated in relation to the activity on the Trxade platform for the six-month period ended June 30, 2023 compared to the same period in 2022:
| Processed Sales Volume | 7 | % |  | ||
| Total Revenue | 4 | % | | ||
| Registered Users | 8 | % | |
Integra Pharma Solutions, LLC
Integra Pharma Solutions, LLC (“Trxade Prime”) is a licensed wholesaler of brand, generic and non-drug products to customers. Trxade Prime takes orders for products, creates invoices for each order and recognizes revenue at the time the customer receives the product. We utilize “just in time” inventory and drop ship partnerships to ship orders to customers. The focus of Trxade Prime is to be the pharmaceutical supplier of choice for healthcare organizations of all sizes. Our expertise in the distribution of products extends to all healthcare markets including government organizations, hospitals, clinics, and independent pharmacies nationwide.
Community Specialty Pharmacy, LLC
Community Specialty Pharmacy, LLC (“CSP”) is a licensed retail pharmacy. CSP was founded in 2010 with a goal of providing customer care at a level above and beyond anything the market had experienced before. CSP has carved a niche in the competitive independent pharmacy industry with its patient-driven approach. As discussed below, we have started a process to explore strategic alternatives for CSP, as well as our other business-to-consumer (B2C) subsidiaries.
Alliance Pharma Solutions, LLC
Alliance Pharma Solutions, LLC, a.k.a. DelivMeds, (“DelivMeds”) was established in 2018 as a digital option to traditional prescription delivery. DelivMeds is currently being rebranded and the digital technology continues to be developed. DelivMeds has generated no revenue and we continue to incur significant technology expenses. For fiscal 2022 we incurred approximately $450,845 of research and development expense which was capitalized beginning January 2022 in line with GAAP guidance. For the six-month period ended June 30, 2023 there was $87,072 in research and development expense capitalized. As discussed above, we entered into a Membership Purchase Agreement in January of 2023 to sell 100% of the outstanding membership interests of Alliance Pharma Solutions, LLC and Community Specialty Pharmacy, LLC.
Bonum Health, LLC
Our Bonum Health, LLC (“Bonum”) operations were acquired in October of 2019. Bonum is a digital healthcare technology platform focused on making healthcare affordable, accessible and convenient through Telehealth services. Patients can use the Bonum Health mobile app or website to access board-certified medical providers, for non-emergent services. As of May 2022, Bonum also announced agreements to offer telehealth veterinary services. Additional services also available include Men’s and Women’s Health, Dermatology, Pediatrics and Ophthalmology in the comfort of their home or from anywhere. These services can be affordably accessed by the under-insured, non-insured and under-served communities seeking access to essential healthcare services. For employers, Bonum provides Telehealth solutions allowing employers to provide convenient and affordable health coverage to their employees without requiring health insurance. Our Bonum health subsidiary provides affordable access to medical professionals in the patient’s home. As discussed below, we have started a process to explore strategic alternatives for Bonum, as well as our other business-to-consumer (B2C) subsidiaries.
SOSRx, LLC
On February 15, 2022, the Company entered into a relationship with Exchange Health, LLC. On February 4, 2023, a voluntary withdrawal agreement was signed by both parties.
| 21 |
Recent Events
Nasdaq Listing Rule 5550(b)
As previously disclosed in the Current Report on Form 8-K, filed by the Company with the SEC on August 1, 2022, on July 29, 2022, the Company received a letter from Nasdaq notifying the Company that it was not in compliance with the minimum $2,500,000 stockholders’ equity requirement in Nasdaq Listing Rule 5550(b)(1) (the “Rule”) for continued listing on the Nasdaq Capital Market, and did not meet the alternative listing requirements under Nasdaq Listing Rule 5550(b). On October 17, 2022, Nasdaq granted the Company’s request for an extension until January 25, 2023, to regain compliance with this requirement.
On January 30, 2023, the Company received a delist determination letter from Nasdaq advising the Company that Nasdaq had determined that the Company did not meet the terms of the extension. Specifically, the Company did not complete its proposed transactions and was unable to file a Current Report on Form 8-K by January 25, 2023, evidencing compliance with the Rule.
On February 6, 2023, the Company submitted a hearing request to the Nasdaq Hearings Panel (the “Panel”), which request stayed any delisting action by Nasdaq at least until the hearing process concludes and any extension granted by the Panel expires.
A hearing before the Panel was held on March 23, 2023, at which the Company presented a plan to regain compliance with the Rule that included an underwritten public offering of Company securities of up to $15,000,000 and expense reductions. On April 5, 2023, the Company received a letter from Nasdaq advising the Company that the Panel was granting the Company’s request for an exception to permit the continued listing of the Company’s stock on the Nasdaq Capital Market while it completes a public offering of its Company securities up to $15,000,000. The Panel’s grant of the Company’s request for continued listing is subject to the conditions that (i) on or before April 15, 2023, the Company must advise the Panel on the status of the filing of an S-1 registration statement for the offering, and (ii) on or before June 21, 2023, the Company must demonstrate compliance with the Rule.
The Company received a notice from the Panel that the Panel had granted the Company an extension until July 31, 2023, to demonstrate compliance with the $2,500,000 minimum stockholders’ equity requirement, as outlined in the Nasdaq’s listing rule 5550(b)(1). As a result of the Merger as described below, the Company now has stockholders’ equity above the minimum stockholders’ equity requirement for continued listing of $2,500,000.
The Merger Agreement and Related Transactions
On July 14, 2023, the Company entered into a certain Amended and Restated Agreement and Plan of Merger (the “Merger Agreement”) with Superlatus, Inc., a U.S.-based holding company of food products and distribution capabilities (“Superlatus”) and Foods Merger Sub, Inc., a Delaware corporation and wholly owned subsidiary of the Company (“Merger Sub”).
On July 31, 2023 (the “Closing Date”), the Company completed its acquisition of Superlatus in accordance with the terms and conditions of the Merger Agreement (the “Merger”), pursuant to which the Company acquired Superlatus by way of a merger of the Merge Sub with and into Superlatus, with Superlatus being a wholly owned subsidiary of the Company and the surviving entity in the Merger.
Under the terms of the Merger Agreement, at the closing of the Merger (the “Closing”), shareholders of Superlatus received in aggregate 136,441 shares of common stock of the Company, representing 19.9% of the total issued and outstanding common stock of the Company after the consummation of the Merger and 306,855 shares of Company’s Series B Preferred Stock, par value $0.00001 per share (the “Series B Preferred Stock”), with a conversion ratio of 100 to one. Such issuances will be made in reliance on the exemption from registration pursuant to Section 3(a)(9) or Section 4(a)(2) of the Securities Act, Regulation D under the Securities Act promulgated thereunder, and corresponding provisions of state securities or “blue sky” laws. Upon consummation of the Merger, the Company continues to trade under the current ticker symbol “MEDS.”
On July 28, 2023, TRxADE issued to the shareholders of TRxADE as of that date, including the independent directors who are entitled to certain amount of MEDS common stock in connection with their 2023 annual compensation and regardless of whether the common stock has been issued or vested before July 28, 2023 (collectively, the “MEDS Rights Shareholders”) a non-transferrable right to receive one share of MEDS common stock at no cost (the “MEDS Rights”), with seven (7) MEDS Rights issued per share of common stock of TRxADE held as of July 28, 2023, conditioned upon their execution of a registration rights agreement. The MEDS Rights are not actionable or transferable until registration; provided they become transferable one year after the date of the merger if no registration has occurred.
As a condition and inducement to Superlatus’ willingness to enter into the Merger Agreement, on June 28, 2023, Suren Aijarapu and Prashant Patel (the “Principal Stockholders”) entered into an agreement with TRxADE (the “Stock Swap Agreement”), pursuant to which, TRxADE will transfer all of the shares or membership interest of a variety of operating subsidiaries currently own by TRxADE to Principal Stockholders, in exchange for Suran Aijarapu to surrender 85,000 share of common stock of TRxADE and Prashant Patel to surrender 81,666 shares of the common stock of TRxADE (the “Stock Swap Transaction”). The closing of the Stock Swap Transaction shall take place simultaneously with the approval of TRxADE stockholders of the conversion of the Series B preferred Stock into common stock. The closing of the Stock Swap Transaction is subject to the simultaneous condition that the Merger is successfully closed.
Upon conclusion of the Stock Swap Transaction and Merger, the remaining operations within TRxADE will only consist of legacy Superlatus operations. Management has determined that Superlatus will be the accounting acquirer in the merger based upon a detailed analysis of the relevant US GAAP guidance and the facts and circumstances outlined above. Consequently, Superlatus will apply acquisition accounting to the assets and liabilities of TRxADE that are acquired or assumed upon the consummation of the merger. The historical financial statements of Superlatus for periods ended prior to the consummation of the merger will reflect only the operations and financial condition of Superlatus. Subsequent to the consummation of the merger, the financial statements of Superlatus will include the combined operations and financial condition of Superlatus and remaining TRxADE operations.
Nasdaq Listing Rule 5550(a)(4)
On June 23, 2023, the Nasdaq notified the Company that the Company was not in compliance with Nasdaq Listing Rule 5550(a)(4) given the Company’s failure to maintain a sufficient number of publicly held shares (the “Notice”). Citing the Company’s Event Form submitted to Nasdaq on June 7, 2023, Nasdaq calculated the Company’s publicly held shares as approximately 310,057 (which amount excludes shares held by officers, directors, or beneficial owners of 10 percent or more), on a post-split basis, effective as of June 22, 2023. To satisfy the requirement for continued listing on Nasdaq, the Company must maintain a minimum of 500,000 publicly held shares. The Notice states that the Company has until August 7, 2023 to submit a plan to regain compliance with Listing Rule 5550(a)(4). If Nasdaq does not accept the Company’s plan, the Company will have the opportunity to appeal the decision in front of a Nasdaq Hearings Panel.
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Liquidity and Capital Resources
Cash
Cash was $745,561 at June 30, 2023, compared to $1,111,156 as of December 31, 2022. The decrease in cash was mainly due to the repayment on future accounts receivable in the amount of $870,646, We expect that our future available capital resources will consist primarily of cash generated from operations, remaining cash balances, borrowings, and additional funds raised through sales of debt and/or equity securities.
Liquidity
Cash, current assets, current liabilities, short term debt and working capital at the end of each period were as follows:
| June 30, 2023 | December 31, 2022 | Change | Percent Change | |||||||||||||
| Cash | $ | 745,561 | $ | 1,111,156 | $ | (365,595 | ) | (33 | )% | |||||||
| Current assets (excluding cash) | 1,349,484 | 981,965 | 367,519 | 37 | % | |||||||||||
| Current liabilities (excluding short term debt) | 4,262,947 | 1,980,124 | 2,282,823 | 115 | % | |||||||||||
| Short term debt (notes payable related party) | - | 166,667 | (166,667 | ) | (100 | )% | ||||||||||
| Working capital | (2,167,902 | ) | (53,670 | ) | (2,114,232 | ) | 3939 | % | ||||||||
Our principal sources of liquidity have historically been cash provided by operations, sales of equity, and borrowings under various debt arrangements. Our principal uses of cash have been for operating expenses, technology development, and acquisitions. We anticipate these uses will continue to be our principal sources of, and uses of, cash in the future.
The decrease in cash as of June 30, 2023, compared to December 31, 2022, was primarily due to the repayment of future receivables that decreased cash by approximately $870,406, see NOTE 5 – CONTINGENT FUNDING LIABILITIES, that were partially offset by decreases in expenses as noted below:
| ● | Salaries and Wages of $521,224; | |
| ● | General and administrative expenses of $0.5 million; |
Liquidity Outlook cash explanation
Cash Requirements
Our primary objectives for the remainder of 2023 are to take steps in an effort to increase our client base and operational revenue on our Trxade Inc. and Trxade Prime platforms, and to complete potential strategic transactions of our business-to-consumer subsidiaries, which may include a potential sale, spin-off, fund raising, combination or other strategic transaction, and also include the winding down of such entities. There can be no assurance that our operations will generate significant positive cash flow, or that additional funds will be available to us, through borrowings or otherwise, on favorable terms if required in the future, or at all. We may also raise additional funding in the future through the sale of equity.
We estimate our operating expenses and working capital requirements for the next 12 months to be approximately as follows:
| Projected Expenses from July 2023 to June 2024 | Amount | |||
| General and administrative (1) | $ | 8,000,000 | ||
| Total | $ | 8,000,000 | ||
(1) Includes estimated wages and payroll, legal and accounting, marketing, rent and web development.
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We will still require additional funding in the future to support our operations.
Cash Flows
The following table summarizes our Consolidated Statements of Cash Flows for the following periods:
| Six Months Ended June 30, | Percent | |||||||||||||||
| 2023 | 2022 | Change | Change | |||||||||||||
| Net loss | $ | (2,300,587 | ) | $ | (2,078,097 | ) | $ | (222,490 | ) | (11 | )% | |||||
| Net cash provided by (used in): | ||||||||||||||||
| Net cash used in operating activities from continuing operations | (571,332 | ) | (2,180,664 | ) | 1,609,332 | (74 | )% | |||||||||
| Net cash used in (provided by) operating activities from discontinued operations | (31,633 | ) | 1,610 | (33,243 | ) | 2,065 | % | |||||||||
| Operating Activities | (602,965 | ) | (2,179,054 | ) | 1,576,089 | (72 | %) | |||||||||
| Net cash used in investing activities from continuing operations | (138,875 | ) | (257,172) | 118,297 | (46%) | |||||||||||
| Net cash provided by investing activities from discontinued operations | 420,269 | - | 420,269 | 0 | % | |||||||||||
| Investing Activities | 281,394 | (257,172 | ) | 538,566 | (209 | )% | ||||||||||
| Net cash used in (provided by) financing activities from continuing operations | (44,024 | ) | 550,875 | (594,899 | ) | (108 | %) | |||||||||
| Net cash used in financing activities from discontinued operations | - | (275,000 | ) | 275,000 | 100 | % | ||||||||||
| Financing Activities | (44,024 | ) | 275,875 | (319,899 | ) | (116 | )% | |||||||||
| Net change in cash | $ | (365,595 | ) | $ | (2,160,351 | ) | $ | 1,794,756 | 83 | % | ||||||
Cash used in operations for the six months ended June 30, 2023, was $602,965, compared to cash used in operations for the six months ended June 30, 2022, of $2,179,054. The decrease in cash used in operations for the six months ended June 30, 2023, compared to June 30, 2022, was mainly due to decreased salaries and wages and accounting and legal expenses for the comparable periods.
Cash provided by (used in) investing activities for the six months ended June 30, 2023, was $281,394 and $257,172 for the six months ended June 30, 2022. The increase in cash provided by investing activities is related to the capitalization of software and development costs and the discontinuation of SOSRx.
Cash used in financing activities for the six months ended June 30, 2023, was $44,024 compared to cash provided by financing activities for the six months ended June 30, 2022, which was $275,875. The difference was due to the $825,000 receivables funding obtained in March 2023; offset by repayments of $870,646, on the advance and the termination of the agreement with SOSRx.
Results of Operations
The following selected consolidated financial data should be read in conjunction with the unaudited consolidated financial statements and the notes to these statements included above.
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Three Month Period Ended June 30, 2023, compared to Three Month Period Ended June 30, 2022
| Three Months Ended June 30, | Percentage | |||||||||||||||
| 2023 | 2022 | Change | Change | |||||||||||||
| Revenues | $ | 2,251,076 | $ | 3,278,729 | (1,027,653 | ) | (31.3 | )% | ||||||||
| Cost of sales | 606,349 | 2,107,815 | (1,501,466 | ) | (71.2 | )% | ||||||||||
| Gross profit | 1,644,727 | 1,170,914 | 473,813 | 40.5 | % | |||||||||||
| Operating expenses: | ||||||||||||||||
| Technology, research & development | 441,376 | 298,062 | 143,314 | 48.1 | % | |||||||||||
| Wages and salary expense | 820,957 | 1,178,124 | (357,167 | ) | (30.3 | )% | ||||||||||
| Accounting and legal | 193,446 | 139,858 | 53,588 | 38.3 | % | |||||||||||
| Professional fees | 229,624 | 111,057 | 118,567 | 106.8 | % | |||||||||||
| Other general and administrative (less stock-based compensation expense) | 281,353 | 517,073 | (236,350 | ) | (45.7 | )% | ||||||||||
| Warrants and options expense | 23,596 | 29,216 | (5,620 | ) | (19.2 | )% | ||||||||||
| Total operating expenses | 1,990,352 | 2,274,020 | (283,668 | ) | (12.5 | )% | ||||||||||
| Change in fair value of warrant liability | (1,448,519 | ) | - | (1,448,519 | ) | 100 | % | |||||||||
| Interest, net | (180,734 | ) | (9,155 | ) | (171,579 | ) | 1874.2 | % | ||||||||
| Net Loss from operations | $ | (1,974,878 | ) | $ | (1,112,161 | ) | $ | (862,617 | ) | (77.6 | )% | |||||
| Net loss attributable to TRxADE Health, Inc. | (1,974,878 | ) | (1,083,763 | ) | (891,115 | ) | 82.2 | % | ||||||||
| Net loss attributable to non-controlling interests | - | (28,498 | ) | 28,498 | (100) | % | ||||||||||
Our revenues for the three months ended June 30, 2023, were from the Trxade platform, Community Specialty Pharmacy, Integra Pharma Solutions and Bonum Health. Revenues decreased by $1,027,653, compared to the same period ended June 30, 2022. Trxade Inc revenue generated from platform sales increased 6% and revenue generated by Trxade Prime decreased approximately 11% for the three months ended June 30, 2023 compared to the same period ended June 30, 2022. The decrease in revenue for Trxade Prime is related to decreased sales, see “Company Overview - Integra Pharma Solutions”.
For the three-month period ended June 30, 2023, cost of goods sold and gross profit were $606,349 and $1,644,727 respectively, and $2,107,815 and $1,170,914, respectively for the same period in 2022. Gross profit as a percentage of sales was 73% for the three months ended June 30, 2023, compared to 36% for the three months ended June 30, 2022. The increase in gross profit is a result of increased revenue generated by the Trxade platform that has no cost of goods expense and the improved gross margins generated by Trxade Prime in the three-month period ended June 30, 2023.
General and administrative expenses (less stock-based compensation expense) decreased for the three months ended June 30, 2023, to $281,353 compared to $517,703 for the comparable period in 2022. The decrease was mainly due to cost reductions in expenses to preserve cash.
We had interest expense, net of $180,734 for the three months ended June 30, 2023, compared to interest expense of $9,155 for the three months ended June 30, 2022. The reason for the increase was the repayments of the accounts receivable advances taken in 2023 and 2022, off set by interest income from the GSG legal settlement (see discussion above under “Recent Events”).
Net loss increased $862,617 to a net loss of $1.97 million for the three months ended June 30, 2023, compared to a net loss of $1,112,261 for the three months ended June 30, 2022. The decrease in net losses is mainly driven by expense reduction initiatives implemented by management starting in July of 2022. For the three-month period ended June 30, 2023, the following expenses were reduced:
| ● | Salary and wages expense of approximately $357,000; | |
| ● | Warrant and options expense of approximately $6,000. |
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| Six Months Ended June 30, | Percentage | |||||||||||||||
| 2023 | 2022 | Change | Change | |||||||||||||
| Revenues | $ | 4,498,826 | $ | 6,519,001 | (2,020,175 | ) | (31.00 | )% | ||||||||
| Cost of sales | 1,297,019 | 4,012,384 | (2,715,365 | ) | (67.7 | )% | ||||||||||
| Gross profit | 3,201,807 | 2,506,617 | 695,190 | 27.7 | % | |||||||||||
| Operating expenses: | ||||||||||||||||
| Technology, research & development | 674,662 | 543,847 | 130,815 | 24.1 | % | |||||||||||
| Wages and salary expense | 1,726,858 | 2,248,082 | (521,224 | ) | (23.2 | )% | ||||||||||
| Accounting and legal | 441,663 | 376,079 | 65,584 | 17.4 | % | |||||||||||
| Professional fees | 369,285 | 212,066 | 157,219 | 74.1 | % | |||||||||||
| Other general and administrative (less stock-based compensation expense) | 580,584 | 1,104,139 | (421,765 | ) | (38.2 | )% | ||||||||||
| Warrants and options expense | 101,516 | 94,082 | 7,434 | 7.9 | % | |||||||||||
| Total operating expenses | 3,894,838 | 4,578,295 | (683,457 | ) | (14.9 | )% | ||||||||||
| Change in fair value of warrant liability | (1,368,628 | ) | - | (1,368,628 | ) | 100.0 | % | |||||||||
| Interest, net | (238,928 | ) | (10,519 | ) | (228,409 | ) | 2171.4 | % | ||||||||
| Gain on disposal of asset | - | 4,100 | (4,100 | ) | (100 | )% | ||||||||||
| Net loss from operations | $ | (2,300,587 | ) | $ | (2,078,097 | ) | $ | (222,490 | ) | 10.7 | % | |||||
| Loss on discontinued operations | (352,244 | ) | - | (352,244 | ) | 100 | % | |||||||||
| Net loss attributable to TRxADE Health, Inc. | $ | (2,652,831 | ) | (2,043,910 | ) | (608,921 | ) | 29.8 | % | |||||||
| Net loss attributable to non-controlling interests | - | (34,187 | ) | 34,187 | (100.0 | )% | ||||||||||
Our revenues for the six months ended June 30, 2023, were from the Trxade platform, Community Specialty Pharmacy, Integra Pharma Solutions and Bonum Health. Revenues decreased by $2,020,175, compared to the same period ended June 30, 2022. Trxade Inc revenue generated from platform sales increased 6% and revenue generated by Trxade Prime decreased approximately 11% for the three months ended June 30, 2023 compared to the same period ended June 30, 2022. The decrease in revenue for Trxade Prime is related to decreased sales, see “Company Overview - Integra Pharma Solutions”.
For the six-month period ended June 30, 2023, cost of goods sold and gross profit were $1,297,019 and $3,201,807 respectively, and $4,012,384 and $2,506,617, respectively for the same period in 2022. Gross profit as a percentage of sales was 71% for the six months ended June 30, 2023, compared to 38% for the six months ended June 30, 2022. The increase in gross profit is a result of increased revenue generated by the Trxade platform that has no cost of goods expense and the improved gross margins generated by Trxade Prime in the six-month period ended June 30, 2023.
General and administrative expenses (less stock-based compensation expense) decreased for the three months ended June 30, 2023, to $580,854 compared to $1,104,139 for the comparable period in 2022. The decrease was mainly due to the expense cutting program of the company to reduce expenses.
We had interest expense, net of $238,928 for the six months ended June 30, 2023, compared to interest expense of $10,519 for the six months ended June 30, 2022. The reason for the increase was the repayments of the accounts receivable advances taken in 2023 and 2022, off set by interest income from the GSG legal settlement (see discussion above under “Recent Events”).
Net loss increased $218,390 to a net loss of $2,300,587 for the six months ended June 30, 2023, compared to a net loss of $2,078,097 for the six months ended June 30, 2022. The decrease in net losses is mainly driven by expense reduction initiatives implemented by management starting in July of 2022. For the six-month period ended June 30, 2023, the following expense was reduced:
| ● | Salary and wages expense of approximately $521,000. |
Critical Accounting Policies
Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of net sales and expenses for each period. The following represents a summary of our critical accounting policies, defined as those policies that we believe are the most important to the portrayal of our financial condition and results of operations and that require management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effects of matters that are inherently uncertain.
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Revenue Recognition
In general, the Company accounts for revenue recognition in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 606, “Revenue from Contracts with Customers.”
Trxade, Inc. provides an online web-based buying and selling platform for licensed pharmaceutical wholesalers (“Suppliers”) to sell products and services to licensed pharmacies (“Customers”). Trxade, Inc. charges Suppliers a transaction fee, a percentage of the purchase price of the prescription drugs and other products sold through its website service. Fulfillment of confirmed orders, including delivery and shipment of prescription drugs and other products, is the responsibility of the Supplier, not Trxade, Inc. Trxade, Inc. holds no inventory and assumes no responsibility for the shipment or delivery of any products or services from our website. Trxade, Inc. considers itself an agent for this revenue stream and as such, reports revenue as net. Step One: Identify the contract with the Customers – Trxade, Inc.’s Terms and Use “Agreement,” which outlines the terms and conditions between Trxade, Inc. and the Supplier, is acknowledged and agreed to by the Supplier. Collection is probable based on a credit evaluation of the Supplier. Step Two: Identify the performance obligations in the Agreement – Trxade, Inc. provides the Supplier access to the online website, ability to upload catalogs of products and Dashboard access to review status of inventory as well as posted and processed orders. The Agreement requires the Supplier to post a catalog of pharmaceuticals on the platform, deliver the pharmaceuticals and, upon shipment, remit the stated platform fee. Step Three: Determine the transaction price – the Agreement outlines the fee, which is based on the type of product: generic, brand or non-drug. There are no discounts for volume transactions or early payment of invoices. Step Four: Allocate the transaction price – the Agreement details the fee. There is no difference between contract price and “stand-alone selling price”. Step Five: Recognize revenue when or as the entity satisfies a performance obligation – revenue is recognized upon Supplier’s fulfillment of the applicable order.
SoSRx provides pharmaceutical manufacturers with an efficient platform in which to divest short-dated, overstock, and slow-moving products to direct purchasers. SoSrx’s proprietary method researches the current market, allowing the manufacturer to list the optimal selling price for their products. Manufacturers list their short-dated overstock and slow-moving products by lot with pictures and descriptions. The manufacturer then determines which vetted and registered customers can bid on or outright purchase their products.
Once products from a manufacturer have been entered into SoSRx’s platform, a bid cycle begins. Each bid cycle is 3 days. Each buyer (wholesaler, distributor or chain) will have 3 options. The options are buy now, bid, or pass. In the buy now option the manufacturer has an established price in which they would sell the product. The bid option allows the buyers to put in a price if they value the product and at the end of the bid cycle the manufacturer has several options. The manufacturer can accept the highest bidder if the buyer has met the minimum bid requirement, counter if the bid is below the minimum bid requirement or begin a negotiation to an agreed upon price or accepted bid, regardless of minimum bid requirement. The fourth option is to decline.
If one of the four options described above, except decline, have been selected a committed offer is generated in the system. The buyer then submits a purchase order to the manufacturer. The manufacturer then processes the purchase order and sends the product directly to the buyer. This is when revenue is recognized as a transaction fee. At no point does SoSRx take possession of the inventory. SoSRx bills the manufacturer per committed offer at a fee percentage of total offer value.
Integra Pharma Solutions, LLC (“Trxade Prime”) is a licensed wholesaler of brand, generic and non-drug products to Customers. Integra LLC takes orders for products, creates invoices for each order and recognizes revenue at the time the Customer receives the product. Customer returns are not material. Step One: Identify the contract with the Customer – Integra LLC requires that an application and a credit card for payment be completed by the Customer prior to the first order. Each transaction is evidenced by an order form sent by the Customer and an invoice for the product is sent by Integra LLC. The collection is probable based on the application and credit card information provided prior to the first order. Step Two: Identify the performance obligations in the contract – Each order is distinct and evidenced by the shipping order and invoice. Step Three: Determine the transaction price – The consideration is variable if product is returned. The variability is determined based on the return policy of the product manufacturer. There are no sales or volume discounts. The transaction price is determined at the time of the order evidenced by the invoice. Step Four: Allocate the transaction price – There is no difference between contract price and “stand-alone selling price”. Step Five: Recognize revenue when or as the entity satisfies a performance obligation – The Revenue is recognized when the Customer receives the product.
Community Specialty Pharmacy, LLC (“CSP”) is a licensed retail pharmacy. CSP fills prescriptions for drugs written by a doctor and recognizes revenue at the time the patient confirms delivery of the prescription. Customer returns are not material. Step One: Identify the contract with the Customer – The prescription is written by a doctor for a patient and presented by the patient to the Customer and is in turn delivered to CSP. The prescription identifies the performance obligations in the contract. CSP fills the prescription and delivers to the Customer the drugs, fulfilling the contract. The collection is probable because there is confirmation that the patient has insurance for reimbursement to CSP prior to filling the prescription. Step Two: Identify the performance obligations in the contract – Each prescription is distinct to the Customer. Step Three: Determine the transaction price – The consideration is not variable. The transaction price is determined to be the price of prescription at the time of delivery which considers the expected reimbursements from third party payors (e.g., pharmacy benefit managers, insurance companies and government agencies). Step Four: Allocate the transaction price – The price of the prescription invoiced represents the expected amount of reimbursement from third party payors. There is no difference between contract price and “stand-alone selling price”. Step Five: Recognize revenue when or as the entity satisfies a performance obligation – Revenue is recognized after the delivery of the prescription.
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Bonum, LLC is a telehealth company that provides services to its subscribers. We derive our revenues from subscription-based services through our mobile application on a business-to-business or business-to-customer models. Business-to-business – Organizations contract with Bonum to provide tele-health services to their members on a per-member basis. Organizations are invoiced by Bonum, and revenue is recognized as services are provided each month. Bonum also generates revenues through business-to-customer relationships, where customers can download and subscribe to the Bonum mobile application on their digital device. Subscriptions can be monthly, annual or per encounter. Revenue is recognized as it is earned. Deferred revenue is recorded for unearned subscriptions income and recognized in the financial statements in the period earned.
Stock-Based Compensation
The Company accounts for stock-based compensation to employees in accordance with ASC 718, “Compensation-Stock Compensation”. ASC 718 requires companies to measure the cost of employee services received in exchange for an award of equity instruments, including stock options, based on the grant date fair value of the award and to recognize it as compensation expense over the period the employee is required to provide service in exchange for the award, usually the vesting period. Stock option forfeitures are recognized at the date of employee termination. Effective January 1, 2019, the Company adopted ASU 2018-07 for the accounting of share-based payments granted to non-employees for goods and services.
Recently Issued Accounting Standards
For more information on recently issued accounting standards, see “NOTE 1 – ORGANIZATION AND BASIS OF PRESENTATION”, to the Notes to Consolidated Financial Statements included herein under “PART I. - ITEM 1. FINANCIAL STATEMENTS”.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Because we are a smaller reporting company, we are not required to provide the information required by this Item.
ITEM 4. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
Under the supervision and with the participation of our management, including our Chief Executive Officer and our Chief Financial Officer (our principal executive officer and principal accounting/financial officer), Mr. Ajjarapu and Mr Patel, respectively, we conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, as of the end of the period covered by this Quarterly Report. Based on this evaluation, our Chief Executive Officer and our Chief Financial Officer concluded that as of June 30, 2023, our disclosure controls and procedures were not effective to provide reasonable assurance that information required to be disclosed in our reports filed with the SEC pursuant to the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC and that such information is accumulated and communicated to our management, including our CEO and CFO, as appropriate, to allow timely decisions regarding required disclosures.
As a result of the formative stage of our development, the Company has not fully implemented the necessary internal controls. The matters involving internal controls and procedures that the Company’s management considered to be material weaknesses under the standards of the Committee of Sponsoring Organizations of the Treadway Commission (COSO) were: (1) insufficient written policies and procedures for accounting and financial reporting with respect to the requirements and application of accounting principles generally accepted in the United States of America (“GAAP”) and SEC disclosure requirements; and (2) ineffective controls over period end financial disclosure and reporting processes.
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Management believes that the material weaknesses set forth above did not have an effect on the Company’s financial results reported herein. We are committed to improving our financial organization. As part of this commitment, we have increased our personnel resources and technical accounting expertise as we develop the internal and financial resources of the Company. In addition, the Company will prepare and implement sufficient written policies and checklists which will set forth procedures for accounting and financial reporting with respect to the requirements and application of GAAP and SEC disclosure requirements.
Management believes that preparing and implementing sufficient written policies and checklists will remedy the following material weaknesses (i) insufficient written policies and procedures for accounting and financial reporting with respect to the requirements and application of GAAP and SEC disclosure requirements; and (ii) ineffective controls over period end financial close and reporting processes.
We have improved our financial organization as we have increased our personnel resources and technical accounting expertise. We will continue to monitor and evaluate the effectiveness of our internal controls and procedures and our internal controls over financial reporting on an ongoing basis.
Limitations on Effectiveness of Controls and Procedures
In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs.
Changes in Internal Control over Financial Reporting
There has not been any change in our internal control over financial reporting that occurred during the quarter ended June 30, 2023, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
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PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In the ordinary course of business, we may become a party to lawsuits involving various matters. The impact and outcome of litigation, if any, is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business. We believe the ultimate resolution of any such current proceeding will not have a material adverse effect on our continued financial position, results of operations or cash flows.
Such current litigation or other legal proceedings are described in, and incorporated by reference in, this “ITEM 1. LEGAL PROCEEDINGS” of this Quarterly Report on Form 10-Q from, “PART I – ITEM 1. FINANCIAL STATEMENTS” in the Notes to Consolidated Financial Statements in “NOTE 8 – CONTINGENCIES”. The Company believes that the resolution of currently pending matters will not individually or in the aggregate have a material adverse effect on our financial condition or results of operations. However, assessment of the current litigation or other legal claims could change in light of the discovery of facts not presently known to the Company or by judges, juries or other finders of fact, which are not in accord with management’s evaluation of the possible liability or outcome of such litigation or claims.
Additionally, the outcome of litigation is inherently uncertain. If one or more legal matters were resolved against the Company in a reporting period for amounts in excess of management’s expectations, the Company’s financial condition and operating results for that reporting period could be materially adversely affected.
ITEM 1A. RISK FACTORS
There have been no material changes from the risk factors previously disclosed in Part I, Item 1A of the Company’s Annual Report on Form 10-K for the year ended December 31, 2022, filed with the SEC on March 27, 2023 (the “Form 10-K”), under the heading “Risk Factors”, except as set forth below, and investors should review the risks provided in the Form 10-K and below, prior to making an investment in the Company. The business, financial condition and operating results of the Company can be affected by a number of factors, whether currently known or unknown, including but not limited to those described in the Form 10-K for the year ended December 31, 2022, under “Risk Factors”, and below, any one or more of which could, directly or indirectly, cause the Company’s actual financial condition and operating results to vary materially from past, or from anticipated future, financial condition and operating results. Any of these factors, in whole or in part, could materially and adversely affect the Company’s business, financial condition, operating results and stock price.
Risks Relating to Our Business:
We need additional capital which may not be available on commercially acceptable terms, if at all, which creates substantial doubt about our ability to continue as a going concern.
Our historical financial statements have been prepared under the assumption that we will continue as a going concern. As of June 30, 2023, the Company had an accumulated deficit of $21.9 million. We have limited financial resources, as of June 30, 2023, we had working capital deficit of $2.2 million and a cash balance of $745,561. We will need to raise additional capital or secure debt funding to support on-going operations. The sources of this capital are expected to be the sale of equity and debt, which may not be available on favorable terms, if at all, and may, if sold, cause significant dilution to existing stockholders. If we are unable to access additional capital moving forward, it may hurt our ability to grow and to generate future revenues, our financial position, and liquidity. These matters, when considered in the aggregate, raise substantial doubt about the Company’s ability to continue as a going concern for a reasonable period of time, which is defined as within one year after the date that our condensed financial statements are issued. The financial herein do not contain any adjustments to reflect the possible future effects on the classification of assets or the amounts and classification of liabilities that might result from the outcome of this uncertainty. The doubt regarding our potential ability to continue as a going concern may adversely affect our ability to obtain new financing on reasonable terms or at all. Additionally, if we are unable to continue as a going concern, our stockholders may lose some or all of their investment in the Company.
Additional financing may not be available to us when needed or, if available, it may not be obtained on commercially reasonable terms. If we are not able to obtain the necessary additional financing on a timely or commercially reasonable basis, we will be forced to delay or scale down some or all of our development activities (or perhaps even cease the operation of our business). Our access to additional capital may be negatively affected by future recessions, downturns in the economy or the markets as a whole, or inflation.
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We have no commitments for any additional financing and such commitments may not be obtained on favorable terms, if at all. Any additional equity financing will be dilutive to our stockholders, and debt financing, if available, may involve restrictive covenants with respect to dividends, raising future capital, and other financial and operational matters. If we are unable to obtain additional financing as needed, we may be required to reduce the scope of our operations or our anticipated expansion, which could have a material adverse effect on us.
Our industry and the broader US economy have experienced higher than expected inflationary pressures in 2022 and the first half of 2023, related to continued supply chain disruptions, labor shortages and geopolitical instability. Should these conditions persist our business, results of operations and cash flows could be materially and adversely affected.
The first three quarters of 2022 and the first half of 2023 have seen significant increases in the costs of certain materials, products and shipping costs, as a result of availability constraints, supply chain disruption, increased demand, labor shortages associated with a fully employed US labor force, high inflation and other factors. Supply and demand fundamentals have been further aggravated by disruptions in global energy supply caused by multiple geopolitical events, including the ongoing conflict between Russia and Ukraine. Service, materials and shipping costs have also increased accordingly with general supply chain and inflation issues seen throughout the United States leading to increased operating costs. Recent supply chain constraints and inflationary pressures may continue to adversely impact our operating costs and may negatively impact our ability to procure and ship products in a timely and cost-effective manner, if at all, which could result in reduced margins and lack of products and, as a result, our business, financial condition, results of operations and cash flows could be materially and adversely affected.
Upon the occurrence of an event of default under our Receivables Agreement, our cash flows may be adversely affected.
On June 27, 2023, March 14, 2023, June 27, 2022 and September 14, 2022, the Company entered into non-recourse funding agreements with the same third-party funder for the purchase and sale of future receivables (the “Receivables Agreements”), Pursuant to the Receivables Agreements, the third-party agreed to fund the Company on June 27, 2022 $550,000 to purchase $792,000 of future receivables; and fund the Company again on September 14, 2022 $275,000 to purchase $396,000 of future receivables, again on March 14, 2023 $875,000 to purchase $1,224,000 and again on June 27, 2023 $1,250,000 to purchase $1,800,000 of future receivables. Under the Receivables Agreements, the third-party receives a priority interest in the receivables of Trxade Inc. The Company also paid $62,500, $42,500, $27,500, and $15,000 as origination fees in connection with the Receivables Agreements. The Receivables Agreements also allows for the third-party funder to file UCCs securing their interest in the receivables and includes customary events of default,
Upon the occurrence of an event of default under the Receivables Agreement, we are required to pay the third-party funder 100% of future receivables equal to the entire purchased amount. While the Receivables Agreement is in place, we are prohibited from selling any other receivables. As a result, if an event of default occurs under the Receivables Agreement, 100% of our sales revenue would be required to be paid until such time as the amount owed under the Receivables Agreement is paid in full. If this were to occur, our cash flows would be adversely affected and we may not have sufficient liquidity to pay our debt obligations and expenses, may be forced to raise additional funds which may not be available on favorable terms, if at all, and may be forced to curtail certain of our business activities, any of which may cause the value of our securities to decline in value.
Risks Relating to our Securities:
We are not currently in compliance with Nasdaq’s continued listing standards and may not be able to maintain the listing of our common stock on the Nasdaq Capital Market.
Our common stock was approved for listing on The Nasdaq Capital Market under the symbol “MEDS”, in February 2020. On July 29, 2022, the Company received a letter from The Nasdaq Stock Market LLC (“Nasdaq”) notifying us that we are not in compliance with the minimum stockholders’ equity requirement for continued listing on the Nasdaq Capital Market. Nasdaq Listing Rule 5550(b)(1) requires companies listed on the Nasdaq Capital Market to maintain stockholders’ equity of at least $2,500,000. In the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2022, we reported stockholders’ equity of $1,804,533, which is below the minimum stockholders’ equity required for continued listing pursuant to Nasdaq Listing Rule 5550(b)(1) (the “Rule”). Nasdaq gave us until September 12, 2022 to submit to Nasdaq a plan to regain compliance, and we submitted a compliance plan prior to that deadline.
We submitted the plan to regain compliance in a timely manner, and on October 17, 2022, Nasdaq advised the Company that it has determined to grant the Company an extension to regain compliance with the Rule.
The terms of the extension are as follows: on or before January 25, 2023, the Company must complete certain contemplated transactions which the Company has advised Nasdaq will allow it to re-meet the requirements of the Rule (including the public sale of $1.75 million of common stock (or pre-funded warrants), which transaction was completed on October 7, 2022), and opt for one of the two following alternatives to evidence compliance with the Rule: Alternative 1, completion of a transaction or event that enabled the Company to satisfy the stockholders’ equity requirement for continued listing, and disclosure of that event, along with certain other information, in a public filing with the SEC, including that as of the date of the report, the Company believes it has regained compliance with the stockholders’ equity requirement and a disclosure stating that Nasdaq will continue to monitor the Company’s ongoing compliance with the stockholders’ equity requirement; or Alternative 2, completion of a transaction or event that enabled the Company to satisfy the stockholders’ equity requirement for continued listing, and disclosure of that event, along with certain other information, in a public filing with the SEC, including pro forma adjustments and a pro forma balance sheet must evidence compliance with the Rule, and disclosure that the Company believes it has regained compliance with the stockholders’ equity requirement and a disclosure stating that Nasdaq will continue to monitor the Company’s ongoing compliance with the stockholders’ equity requirement. Additionally, in either case the Company is required to disclose that if at the time of its next periodic report, the Company does not evidence compliance, that it may be subject to delisting.
Regardless of which alternative the Company chooses, if the Company fails to evidence compliance upon filing its next periodic report with the SEC and Nasdaq, the Company may be subject to delisting. In the event the Company does not satisfy these terms, Nasdaq will provide written notification that its securities will be delisted. At that time, the Company may appeal Nasdaq’s determination to a Hearings Panel.
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There is also no guarantee that we will be able to maintain our listing on The Nasdaq Capital Market for any period of time by perpetually satisfying Nasdaq’s continued listing requirements. Our failure to continue to meet these requirements may result in our securities being delisted from Nasdaq.
Among the conditions required for continued listing on The Nasdaq Capital Market, Nasdaq requires us to maintain at least $2.5 million in stockholders’ equity or $500,000 in net income over the prior two years or two of the prior three years. As discussed above of June 30, 2022, September 30, 2022 and December 31, 2022, our stockholders’ equity was below $2.5 million and we did not otherwise meet the net income requirements described above, and as such, we are not currently in compliance with Nasdaq’s continue listing standards. If we fail to timely remedy our compliance with the applicable requirements, our stock may be delisted.
Additional requirements we must meet to continue our listing on The Nasdaq Capital Market include the requirement that we maintain a stock price over $1.00 per share.
Even if we demonstrate compliance with the requirements of Nasdaq, we will have to continue to meet other objective and subjective listing requirements to continue to be listed on The Nasdaq Capital Market. Delisting from The Nasdaq Capital Market could make trading our common stock more difficult for investors, potentially leading to declines in our share price and liquidity. Without a Nasdaq Capital Market listing, stockholders may have a difficult time getting a quote for the sale or purchase of our stock, the sale or purchase of our stock would likely be made more difficult, and the trading volume and liquidity of our stock could decline. Delisting from The Nasdaq Capital Market could also result in negative publicity and could also make it more difficult for us to raise additional capital. The absence of such a listing may adversely affect the acceptance of our common stock as currency or the value accorded by other parties. Further, if we are delisted, we would also incur additional costs under state blue sky laws in connection with any sales of our securities. These requirements could severely limit the market liquidity of our common stock and the ability of our stockholders to sell our common stock in the secondary market. If our common stock is delisted by Nasdaq, our common stock may be eligible to trade on an over-the-counter quotation system, such as the OTCQB Market or the OTC Pink market, where an investor may find it more difficult to sell our stock or obtain accurate quotations as to the market value of our common stock. In the event our common stock is delisted from The Nasdaq Capital Market, we may not be able to list our common stock on another national securities exchange or obtain quotation on an over-the counter quotation system.
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ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Recent Sales of Unregistered Securities
On January 6, 2023, an investor exercised 601,740 “pre-funded warrants” for an aggregate purchase price of $6.02 and was issued 601,740 shares of common stock on that date. The terms of these warrants were previously described in our Current Report on Form 8-K dated October 4, 2022.
In the first quarter of 2023, we issued 50,000 shares of common stock to White Lion Capital, LLC as the “commitment shares” pursuant to the terms of a Common Stock Purchase Agreement dated September 7, 2022, as described in our Current Report on Form 8-K dated September 7, 2022.
Under the terms of the Merger Agreement, at the closing of the Merger (the “Closing”), shareholders of Superlatus received in aggregate 136,441 shares of common stock of the Company, representing 19.9% of the total issued and outstanding common stock of the Company after the consummation of the Merger and 306,855 shares of Company’s Series B Preferred Stock, par value $0.00001 per share (the “Series B Preferred Stock”), with a conversion ratio of 100 to one.
In each case, the issuance did not involve a public offering and was made without general solicitation or general advertising, and the recipient of the shares was an accredited investor.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
The Company repurchased no shares of common stock during the first two quarters of 2023.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
None.
ITEM 5. OTHER INFORMATION
(a) During the quarter ended June 30, 2023, there was no information required to be disclosed in a report on Form 8-K which was not disclosed in a report on Form 8-K.
(b) During the quarter ended June 30, 2023, there were no material changes to the procedures by which stockholders may recommend nominees to our board of directors.
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ITEM 6. EXHIBITS
| Incorporated by Reference | ||||||||||||
| Exhibit No. | Description | Form | File No. | Exhibit | Filing Date |
Filed Herewith | ||||||
| 2.1 | Agreement and Plan of Merger dated as of June 30, 2023, by and among TRxADE Health, Inc., Foods Merger Sub, Inc., and Superlatus Inc. | 8-K | 001-39199 | 2.1 | 06/30/2023 | |||||||
| 3.1 | Form of Certificate of Amendment to Second Amended and Restated Certificate of Incorporation | 8-K | 001-39199 | 3.1 | 06/15/2023 | |||||||
| 3.2 | Certificate of Designation of Series B Preferred Stock | 8-K | 001-39199 | 3.1 | 06/26/2023 | |||||||
| 4.1 | Form of Pre-Funded Common Stock Purchase Warrant | 8-K | 001-39199 | 4.1 | 10/7/2022 | |||||||
| 4.2 | Form of Common Stock Purchase Warrant | 8-K | 001-39199 | 4.2 | 10/7/2022 | |||||||
| 10.1 | Binding Letter of Intent, dated June 22, 2023 by and between TRxADE Health, Inc. and Superlatus, Inc. | 8-K | 001-39199 | 10.1 | 06/23/2023 | |||||||
| 10.2 | Amendment to Acquisition Letter, dated June 23, 2023 by and between TRxADE Health, Inc. and Superlatus, Inc. | 8-K | 001-39199 | 10.1 | 06/23/2023 | |||||||
| 10.3 | Stock Swap Agreement dated June 28, 2023, by and among TRxADE Health, Inc., Suren Ajjarapu and Prashant Patel. | 8-K | 001-39199 | 10.1 | 06/28/2023 | |||||||
| 31.1* | Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act | X | ||||||||||
| 31.2* | Certification of Principal Accounting Officer pursuant to Section 302 of the Sarbanes-Oxley Act | X | ||||||||||
| 32.1** | Certification of Principal Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act | X | ||||||||||
| 32.2** | Certification of Principal Accounting Officer Pursuant to Section 906 of the Sarbanes-Oxley Act | X | ||||||||||
| 101.INS* | Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. | X | ||||||||||
| 101.SCH* | Inline XBRL Taxonomy Extension Schema Document | X | ||||||||||
| 101.CAL* | Inline XBRL Taxonomy Extension Calculation Linkbase Document | X | ||||||||||
| 101.DEF* | Inline XBRL Taxonomy Extension Definition Linkbase Document | X | ||||||||||
| 101.LAB* | Inline XBRL Taxonomy Extension Label Linkbase Document | X | ||||||||||
| 101.PRE* | Inline XBRL Taxonomy Extension Presentation Linkbase Document | X | ||||||||||
| 104* | Inline XBRL for the cover page of this Quarterly Report on Form 10-Q, included in the Exhibit 101 Inline XBRL Document Set. | X | ||||||||||
* Filed herewith.
** Furnished herewith.
+ Certain information has been redacted pursuant to Item 601(a)(6) of Regulation S-K, as the disclosure of such information would constitute a clearly unwarranted invasion of personal privacy.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| TRxADE HEALTH, INC. | ||
| By: | /s/ Suren Ajjarapu | |
| Suren Ajjarapu | ||
Chief Executive Officer (Principal Executive Officer) | ||
| Date: August 18, 2023 | ||
| By: | /s/ Prashant Patel | |
| Prashant Patel | ||
Interim Chief Financial Officer (Principal Accounting/Financial Officer) | ||
| Date: August 18, 2023 | ||
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Exhibit 31.1
31.1 Certification of Chief Executive Officer
I, Suren Ajjarapu, certify that:
| 1. | I have reviewed this quarterly report on Form 10-Q of TRxADE HEALTH, INC. (the “registrant”); |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)), and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | |
| b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | |
| c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | |
| d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and | |
| b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| Date: August 18, 2023 | |
| /s/ Suren Ajjarapu | |
| Suren Ajjarapu | |
| Chief Executive Officer (Principal Executive Officer) |
Exhibit 31.2
Certification of Chief Financial Officer
I, Prashant Patel, certify that:
| 1. | I have reviewed this quarterly report on Form 10-Q of TRxADE HEALTH, INC. (the “registrant”); |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)), and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | |
| b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | |
| c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | |
| d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and | |
| b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| Date: August 18, 2023 | |
| /s/ Prashant Patel | |
| Prashant Patel | |
| Chief Financial Officer (Principal Accounting/Financial Officer) |
Exhibit 32.1
Certification of Chief Executive Officer
Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of The Sarbanes-Oxley Act of 2002
I, Suren Ajjarapu, Chief Executive Officer of TRxADE HEALTH, INC. (the “Company”), certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that:
| (i) | The Quarterly Report on Form 10-Q of TRxADE HEALTH, INC. for the quarter ended June 30, 2023 (the “Report”) fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, and | |
| (ii) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company at the dates and for the periods indicated. |
| Dated: August 18, 2023 | |
| /s/ SUREN AJJARAPU | |
| Suren Ajjarapu | |
| Chief Executive Officer (Principal Executive Officer) |
Exhibit 32.2
Certification of Chief Financial Officer
Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of The Sarbanes-Oxley Act of 2002
I, Prashant Patel, Chief Financial Officer of TRxADE HEALTH, INC. (the “Company”), certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that:
| (i) | The Quarterly Report on Form 10-Q of TRxADE HEALTH, INC. for the quarter ended June 30, 2023 (the “Report”) fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, and | |
| (ii) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company at the dates and for the periods indicated. |
| Dated: August 18, 2023 | |
| /s/ Prashant Patel | |
| Prashant Patel | |
| Chief Financial Officer (Principal Accounting/Financial Officer) |