ITEM
1. FINANCIAL STATEMENTS
Trxade
Group, Inc.
Consolidated
Balance Sheets
March
31, 2021 and December 31, 2020
(unaudited)
|
|
March 31, 2021
|
|
|
December 31, 2020
|
|
Assets
|
|
|
|
|
|
|
|
|
Current Assets
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
5,209,280
|
|
|
$
|
5,919,578
|
|
Accounts Receivable, net
|
|
|
1,936,850
|
|
|
|
805,043
|
|
Inventory
|
|
|
470,122
|
|
|
|
1,257,754
|
|
Prepaid Assets
|
|
|
457,738
|
|
|
|
151,248
|
|
Other Receivables
|
|
|
1,081,250
|
|
|
|
1,087,675
|
|
Total Current Assets
|
|
|
9,155,240
|
|
|
|
9,221,298
|
|
|
|
|
|
|
|
|
|
|
Property Plant and Equipment, Net
|
|
|
160,647
|
|
|
|
162,397
|
|
|
|
|
|
|
|
|
|
|
Other Assets
|
|
|
|
|
|
|
|
|
Deposits
|
|
|
21,636
|
|
|
|
21,636
|
|
Right of use leased assets
|
|
|
355,693
|
|
|
|
387,371
|
|
|
|
|
|
|
|
|
|
|
Total Assets
|
|
$
|
9,693,216
|
|
|
$
|
9,792,702
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Stockholders’ Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Liabilities
|
|
|
|
|
|
|
|
|
Accounts Payable
|
|
$
|
366,471
|
|
|
$
|
256,829
|
|
Accrued Liabilities
|
|
|
519,179
|
|
|
|
219,256
|
|
Current Portion Lease Liabilities
|
|
|
117,030
|
|
|
|
131,153
|
|
Customer Deposits
|
|
|
10,000
|
|
|
|
10,000
|
|
Notes Payables– Related Party
|
|
|
225,000
|
|
|
|
225,000
|
|
Total Current Liabilities
|
|
|
1,237,680
|
|
|
|
842,238
|
|
|
|
|
|
|
|
|
|
|
Long Term Liabilities
|
|
|
|
|
|
|
|
|
Other Long-Term Liabilities — Leases
|
|
|
253,912
|
|
|
|
271,306
|
|
Total Liabilities
|
|
|
1,491,592
|
|
|
|
1,113,544
|
|
|
|
|
|
|
|
|
|
|
Stockholders’ Equity
|
|
|
|
|
|
|
|
|
Series A Preferred Stock, $0.00001 par value; 10,000,000 shares authorized; none issued and outstanding as of March 31, 2021 and December 31, 2020
|
|
|
-
|
|
|
|
-
|
|
Common Stock, $0.00001 par value; 100,000,000 shares authorized; 8,093,199 shares issued and outstanding as of March 31, 2021 and December 31, 2020
|
|
|
81
|
|
|
|
81
|
|
Additional Paid-in Capital
|
|
|
19,784,616
|
|
|
|
19,610,631
|
|
Accumulated Deficit
|
|
|
(11,583,073
|
)
|
|
|
(10,931,554
|
)
|
Total Stockholders’ Equity
|
|
|
8,201,624
|
|
|
|
8,679,158
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities and Stockholders’ Equity
|
|
$
|
9,693,216
|
|
|
$
|
9,792,702
|
|
The
accompanying notes are an integral part of the unaudited consolidated financial statements.
Trxade
Group, Inc.
Consolidated
Statements of Operations
For
the Three Months Ended March 31, 2021 and 2020
(unaudited)
|
|
2021
|
|
|
2020
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
3,053,235
|
|
|
$
|
2,203,320
|
|
|
|
|
|
|
|
|
|
|
Cost of Sales
|
|
|
1,669,924
|
|
|
|
563,184
|
|
Gross Profit
|
|
|
1,383,311
|
|
|
|
1,640,136
|
|
|
|
|
|
|
|
|
|
|
Operating Expenses
|
|
|
|
|
|
|
|
|
General and Administrative
|
|
|
2,027,566
|
|
|
|
1,451,909
|
|
|
|
|
|
|
|
|
|
|
Operating Income (Loss)
|
|
|
(644,255
|
)
|
|
|
188,227
|
|
|
|
|
|
|
|
|
|
|
Interest, net
|
|
|
(7,264
|
)
|
|
|
(7,924
|
)
|
Net Income (Loss)
|
|
$
|
(651,519
|
)
|
|
$
|
180,303
|
|
|
|
|
|
|
|
|
|
|
Net Income per Common Share – Basic:
|
|
$
|
(0.08
|
)
|
|
$
|
0.03
|
|
|
|
|
|
|
|
|
|
|
Net Income per Common Share – Diluted:
|
|
$
|
(0.08
|
)
|
|
$
|
0.02
|
|
|
|
|
|
|
|
|
|
|
Weighted average Common Shares Outstanding Basic
|
|
|
8,093,199
|
|
|
|
6,971,427
|
|
|
|
|
|
|
|
|
|
|
Weighted average Common Shares Outstanding Diluted
|
|
|
8,093,199
|
|
|
|
7,423,669
|
|
The
accompanying notes are an integral part of the unaudited consolidated financial statements.
Trxade
Group, Inc.
Consolidated
Statements of Changes in Stockholders’ Equity
For
the Three Months Ended March 31, 2021 and 2020
(unaudited)
|
|
Preferred Stock
|
|
|
Common Stock
|
|
|
Additional
Paid-in-
|
|
|
Accumulated
|
|
|
Total
Stockholders’
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Deficit
|
|
|
Equity
|
|
Balance at December 31, 2020
|
|
|
-
|
|
|
$
|
-
|
|
|
|
8,093,199
|
|
|
$
|
81
|
|
|
$
|
19,610,631
|
|
|
$
|
(10,931,554
|
)
|
|
$
|
8,679,158
|
|
Common Stock issued for Services
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
98,247
|
|
|
|
-
|
|
|
|
98,247
|
|
Options Expense
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
75,738
|
|
|
|
-
|
|
|
|
75,738
|
|
Net Income
(Loss)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(651,519
|
)
|
|
|
(651,519
|
)
|
Balance at March 31, 2021
|
|
|
-
|
|
|
$
|
-
|
|
|
|
8,093,199
|
|
|
$
|
81
|
|
|
$
|
19,784,616
|
|
|
$
|
(11,583,073
|
)
|
|
$
|
8,201,624
|
|
|
|
Preferred Stock
|
|
|
Common Stock
|
|
|
Additional
Paid-in-
|
|
|
Accumulated
|
|
|
Total
Stockholders’
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Deficit
|
|
|
Equity
|
|
Balance at December 31, 2019
|
|
|
-
|
|
|
$
|
-
|
|
|
|
6,539,415
|
|
|
$
|
65
|
|
|
$
|
12,535,655
|
|
|
$
|
(8,395,503
|
)
|
|
$
|
4,140,217
|
|
Common Stock issued from offering
|
|
|
-
|
|
|
|
-
|
|
|
|
922,219
|
|
|
|
10
|
|
|
|
5,994,414
|
|
|
|
-
|
|
|
|
5,994,424
|
|
Fractional shares issued due to reverse split
|
|
|
-
|
|
|
|
-
|
|
|
|
40
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Stock Issuance Costs
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(820,586
|
)
|
|
|
-
|
|
|
|
(820,586
|
)
|
Options Exercised for Cash
|
|
|
-
|
|
|
|
-
|
|
|
|
167
|
|
|
|
-
|
|
|
|
501
|
|
|
|
-
|
|
|
|
501
|
|
Warrants Exercised for Cash
|
|
|
-
|
|
|
|
-
|
|
|
|
22,529
|
|
|
|
-
|
|
|
|
1,352
|
|
|
|
-
|
|
|
|
1,352
|
|
Warrants Expense
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
79,089
|
|
|
|
-
|
|
|
|
79,089
|
|
Options Expense
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
61,997
|
|
|
|
-
|
|
|
|
61,997
|
|
Net Income
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
180,303
|
|
|
|
180,303
|
|
Balance at March 31, 2020
|
|
|
-
|
|
|
$
|
-
|
|
|
|
7,484,370
|
|
|
$
|
75
|
|
|
$
|
17,852,422
|
|
|
$
|
(8,215,200
|
)
|
|
$
|
9,637,297
|
|
The
accompanying notes are an integral part of the unaudited consolidated financial statements.
Trxade
Group, Inc.
Consolidated
Statements of Cash Flows
For
the Three months ended March 31, 2021 and 2020
(unaudited)
|
|
2021
|
|
|
2020
|
|
|
|
|
|
|
|
|
Operating Activities:
|
|
|
|
|
|
|
|
|
Net Income (Loss)
|
|
$
|
(651,519
|
)
|
|
$
|
180,303
|
|
Adjustments
to reconcile net income (loss) to net cash used in operating activities:
|
|
|
|
|
|
|
|
|
Depreciation Expense
|
|
|
1,750
|
|
|
|
1,250
|
|
Options expense
|
|
|
75,738
|
|
|
|
61,997
|
|
Warrant Expense
|
|
|
-
|
|
|
|
79,089
|
|
Common Stock Issued for Services
|
|
|
98,247
|
|
|
|
-
|
|
Bad Debt Expense
|
|
|
-
|
|
|
|
9,000
|
|
Amortization of right of use asset
|
|
|
31,678
|
|
|
|
23,635
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Accounts Receivable
|
|
|
(1,131,807
|
)
|
|
|
(94,047
|
)
|
Prepaid Assets and other Current Assets
|
|
|
(306,490
|
)
|
|
|
(184,923
|
)
|
Inventory
|
|
|
787,632
|
|
|
|
(311,640
|
)
|
Deposits for Inventory Purchases
|
|
|
-
|
|
|
|
(580,800
|
)
|
Other Receivables
|
|
|
6,425
|
|
|
|
-
|
|
Lease Liability
|
|
|
(31,517
|
)
|
|
|
(20,974
|
)
|
Accounts Payable
|
|
|
109,642
|
|
|
|
(14,376
|
)
|
Customer Deposits
|
|
|
-
|
|
|
|
305,972
|
|
Accrued Liabilities and Other Liabilities
|
|
|
299,923
|
|
|
|
134,708
|
|
Net Cash used in operating activities
|
|
|
(710,298
|
)
|
|
|
(410,806
|
)
|
|
|
|
|
|
|
|
|
|
Investing Activities:
|
|
|
|
|
|
|
|
|
Purchase of Fixed Assets
|
|
|
-
|
|
|
|
(23,505
|
)
|
Net Cash used in Investing activities
|
|
|
-
|
|
|
|
(23,505
|
)
|
|
|
|
|
|
|
|
|
|
Financing Activities:
|
|
|
|
|
|
|
|
|
Stock Issuance Costs
|
|
|
-
|
|
|
|
(732,355
|
)
|
Proceeds from exercise of Warrants
|
|
|
-
|
|
|
|
1,352
|
|
Proceeds from exercise of Stock Options
|
|
|
-
|
|
|
|
501
|
|
Proceeds from Issuance of Common Stock
|
|
|
-
|
|
|
|
5,994,424
|
|
Net Cash provided by financing activities
|
|
|
-
|
|
|
|
5,263,922
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in Cash
|
|
|
(710,298
|
)
|
|
|
4,829,611
|
|
Cash at
Beginning of the Period
|
|
|
5,919,578
|
|
|
|
2,871,694
|
|
Cash at End of the Period
|
|
$
|
5,209,280
|
|
|
$
|
7,701,305
|
|
|
|
|
|
|
|
|
|
|
Supplemental Cash Flow Information
|
|
|
|
|
|
|
|
|
Cash Paid for Interest
|
|
$
|
1,639
|
|
|
$
|
2,348
|
|
Cash Paid for Income Taxes
|
|
$
|
-
|
|
|
$
|
-
|
|
The
accompanying notes are an integral part of the unaudited consolidated financial statements.
Trxade
Group, Inc.
Notes
to Unaudited Consolidated Financial Statements
For
the Three months ended March 31, 2021 and 2020
NOTE
1 – ORGANIZATION AND BASIS OF PRESENTATION
Trxade
Group, Inc. (“we”, “our”, “Trxade”, and the “Company”) owns
100% of Trxade, Inc., Integra Pharma Solutions, LLC, Community Specialty Pharmacy, LLC, Alliance Pharma Solutions, LLC and Bonum Health,
LLC. The merger of Trxade, Inc. and Trxade Group, Inc. occurred in May 2013. Community Specialty Pharmacy was acquired in October 2018.
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, is a licensed pharmaceutical wholesaler and sells brand, generic and non-drug products.
Community
Specialty Pharmacy, LLC, is an accredited independent retail pharmacy with a focus on specialty medications and a community-based model
offering home delivery services to patients.
Alliance
Pharma Solutions, LLC, has developed a same-day pharmaceutical delivery software – Delivmeds.com, and invested in SyncHealth MSO,
LLC, a managed services organization during January 2019, which investment was divested in February 2020.
Bonum
Health, LLC was formed to hold certain telehealth assets acquired in October 2019. The “Bonum Health Hub” was launched
in November 2019 and was expected to be operational in April 2020; however, due to the COVID-19 pandemic, at present the Company does
not anticipate installations moving forward until later in 2021 at the earliest. The hub is a Health Insurance Portability and Accountability
Act (HIPPA)-compliant booth planned to be installed at select independent pharmacies, with technology that connects patients to board-certified
medical care through the Bonum Health mobile app and website portal. The Bonum Health mobile application is also 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. In August 2020, Bonum Health, LLC launched a business-to-business (B2B)
platform called Bonum+, which bundles telehealth, a COVID-19 risk assessment tool and a personal protective equipment (PPE) purchasing
tool, through a secure mobile dashboard for corporate clients.
MedCheks,
LLC was formed in January 2021 and is a patient-centered, digital, precision healthcare platform
that lets patients consolidate and control their health data via a digital Health Passport. The digital Health Passport allows users
to share their health profile, tests and vaccinations simply and safely. Secured in a blockchain, the Health Passport includes health
and vaccination status verification via a QR code (a two-dimensional machine-readable optical label), which is available for travel,
entry into stadiums, concert venues, events, offices, industrial plants, warehouses, and other physical access points. MedCheks Health
Passport stores all of a user’s health records securely in one place.
Basis
of Presentation - The accompanying unaudited interim consolidated financial statements of Trxade Group, Inc. have been prepared in
accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange
Commission 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, 2020, as filed with the Securities and Exchange Commission on March 29, 2021.
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, 2020 as reported
in the Company’s Annual Report on Form 10-K have been omitted.
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.
The
following table sets forth the computation of basic and diluted Income (Loss) per Share:
|
|
For three months ended
March 31,
|
|
|
|
2021
|
|
|
2020
|
|
Numerator:
|
|
|
|
|
|
|
|
|
Net Income (loss)
|
|
$
|
(651,519
|
)
|
|
$
|
180,303
|
|
|
|
|
|
|
|
|
|
|
Numerator for basic and diluted EPS - income available to common Shareholders
|
|
|
(651,519
|
)
|
|
$
|
180,303
|
|
|
|
|
|
|
|
|
|
|
Denominator:
|
|
|
|
|
|
|
|
|
Denominator for basic EPS – Weighted average shares
|
|
|
8,093,199
|
|
|
|
6,971,427
|
|
Dilutive Effect of Common Stock Equivalent
|
|
|
-
|
|
|
|
452,242
|
|
Denominator for diluted EPS – adjusted Weighted average shares and assumed Conversions
|
|
|
8,093,199
|
|
|
|
7,423,669
|
|
Basic income (loss) per common share
|
|
$
|
(0.08
|
)
|
|
$
|
0.03
|
|
Diluted income (loss) per common share
|
|
$
|
(0.08
|
)
|
|
$
|
0.02
|
|
NOTE
2– SHORT TERM DEBT – RELATED PARTIES
In
October 2018, in connection with the acquisition of Community Specialty Pharmacy, LLC, a $300,000 promissory note was issued to Nikul
Panchal, a non-executive officer of the Company, accruing simple interest at the rate of 10% per annum, payable annually, and having
a maturity date in October 15, 2021. In October 2019, $75,000 of the note was converted into 25,000 common shares at $3.00 per share,
leaving $225,000 of principal owed under the promissory note. There was a loss recognized on this conversion of $76,500.
At
March 31, 2021 and December 31, 2020, total related party debt was $225,000.
NOTE
3 – STOCKHOLDERS’ EQUITY
2020
Equity Compensation Awards
On
April 14, 2020, the Compensation Committee approved the grant of (a) 5,000 shares of restricted common stock to the Company’s legal
counsel; and (b) 12,500 shares of restricted common stock to Howard A. Doss, the Company’s Chief Financial Officer, which shares
vest at the rate of ¼th of such shares on July 1 and October 1, 2020 and January 1 and April 1, 2021. The shares have
a fair value of $107,100 and the Company recognized stock-based compensation expense of $53,550 for the three months ended March 31,
2021.
Independent
Director Compensation Plan
On
April 14, 2020, the three independent members of the Board of Directors (Mr. Donald G. Fell, Dr. Pamela Tenaerts, and Mr. Michael L.
Peterson), were each awarded 8,987 shares of restricted stock, which vest at the rate of ¼th of such shares on July
1 and October 1, 2020 and January 1 and April 1, 2021. The shares have a fair value of $165,000 and the Company recognized stock-based
compensation expense of $82,500 for the three months ended March 31, 2021.
NOTE
4 – WARRANTS
For
the three-month period ended March 31, 2021, no warrants were granted and none expired.
The
Company uses the Black-Scholes pricing model to estimate the fair value of stock-based awards on the date of the grant.
The
compensation cost related to the warrants granted was $0 and $79,089 for the three months ended March 31, 2021 and 2020,
respectively.
The
Company’s outstanding and exercisable warrants as of March 31, 2021 are presented below:
|
|
Number Outstanding
|
|
|
Weighted Average Exercise Price
|
|
|
Contractual Life in Years
|
|
|
Intrinsic Value
|
|
Warrants Outstanding as of December 31, 2020
|
|
|
82,751
|
|
|
$
|
1.33
|
|
|
|
2.73
|
|
|
$
|
352,951
|
|
Warrants granted
|
|
|
-
|
|
|
$
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Warrants expired or forfeited
|
|
|
-
|
|
|
$
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Warrants exercised
|
|
|
-
|
|
|
$
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrants Outstanding as of March 31, 2021
|
|
|
82,751
|
|
|
$
|
1.33
|
|
|
|
2.48
|
|
|
$
|
349,157
|
|
Warrants Exercisable as of March 31, 2021
|
|
|
60,223
|
|
|
$
|
1.81
|
|
|
|
1.34
|
|
|
$
|
232,462
|
|
NOTE
5 – OPTIONS
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 2,333,333 shares, and the Company’s 2019 Amended and Restated 2019
Equity Incentive Plan provides for automatic increases in the number of shares available under such plan (currently 2,000,000 shares)
on April 1st of each calendar year, beginning in 2021 and ending in 2029 (each a “Date of Determination”),
in each case subject to the approval and determination of the administrator of the plan (the Board of Directors or Compensation Committee)
on or prior to the applicable Date of Determination, equal to the lesser of (A) ten percent (10%) of the total shares of common stock
of the Company outstanding on the last day of the immediately preceding fiscal year and (B) such smaller number of shares as determined
by the administrator. The administrator did not approve an increase in the number of shares covered under the plan as of April 1, 2021.
For
the three-month period ended March 31, 2021, options to purchase 20,000 shares were granted, none were forfeited and none expired. The
options granted during the period vest over a four-year period, the exercise price was $6.55 per share and the options have a term of
5 years.
The
Company uses the Black-Scholes option pricing model to estimate the fair value of stock-based awards on the date of the grant. The following
table summarizes the assumptions used to estimate the fair value of the stock options granted during the quarter ended March 31, 2021:
Expected dividend yield
|
|
|
0
|
%
|
Weighted-average expected volatility
|
|
|
106-215
|
%
|
Weighted-average risk-free interest rate
|
|
|
0.25
|
%
|
Expected life of options
|
|
|
5 years
|
|
Total
compensation cost related to stock options granted was $75,738 and $61,997 for the three months ended March 31, 2021 and 2020, respectively.
The
following table represents stock option activity for the three-month period ended March 31, 2021:
|
|
Number Outstanding
|
|
|
Weighted Average Exercise Price
|
|
|
Contractual Life in Years
|
|
|
Intrinsic Value
|
|
Options Outstanding as of December 31, 2020
|
|
|
425,817
|
|
|
$
|
4.44
|
|
|
|
5.33
|
|
|
$
|
597,322
|
|
Options Exercisable as of December 31, 2020
|
|
|
282,167
|
|
|
$
|
4.52
|
|
|
|
4.56
|
|
|
$
|
384,226
|
|
Options granted
|
|
|
20,000
|
|
|
$
|
6.55
|
|
|
|
4.85
|
|
|
|
-
|
|
Options forfeited
|
|
|
-
|
|
|
$
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Options expired
|
|
|
-
|
|
|
$
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Options exercised
|
|
|
-
|
|
|
$
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options Outstanding as of March 31, 2021
|
|
|
445,817
|
|
|
$
|
4.53
|
|
|
|
5.07
|
|
|
$
|
586,080
|
|
Options Exercisable as of March 31, 2021
|
|
|
304,867
|
|
|
$
|
4.44
|
|
|
|
4.52
|
|
|
$
|
421,737
|
|
NOTE
6 – OTHER RECEIVABLES
In
July 2020, the Company’s wholly-owned subsidiary, Integra Pharma Solutions, Inc. (“Integra”), entered into an agreement
with Studebaker Defense Group, LLC (“Studebaker”) wherein Integra would pay Studebaker a down payment of $500,000 and Studebaker
would deliver 180,000 boxes of nitrile gloves by August 14, 2020. Integra wired the $500,000 to Studebaker, but to date, Studebaker has
not delivered the gloves or provided a refund of the deposit. In December 2020, we filed a complaint against Studebaker in Florida state
court, Case No. 20-CA-010118 in the Circuit Court for the Thirteenth Judicial Circuit in Hillsborough County, for among other things,
breach of contract. Studebaker did not answer the complaint, nor did counsel for Studebaker file an appearance. Accordingly, in February
2021 the Company filed for a default judgment; however, on March 22, 2021, counsel for Studebaker filed an appearance and shortly
thereafter filed a motion to vacate the default judgment. A hearing on our motion for a default judgment has been set for April 27,
2021. The Company anticipates that irrespective of the outcome of such hearing on April 27, 2021, the Company will prevail on the merits;
and believes Studebaker has the ability to satisfy a judgment.
In August 2020, Integra, entered into an agreement
with Sandwave Group Dsn Bhd (“Sandwave”), wherein Integra would pay Sandwave a down payment of $581,250 and Sandwave’s
supplier, Crecom Burj Group SDN BHD (“Crecom”), would deliver 150,000 boxes of nitrile gloves within 45 days. Integra wired
the $581,250 to Sandwave, which in turn wired the purchase price to Crecom, which Crecom accepted; however, to date, Crecom has not delivered
the nitrile gloves. Integra demanded return of its $581,250 and Crecom has acknowledged that Integra is entitled to a refund, but to
date Crecom has failed to return Integra’s money. In February 2021, Integra filed a complaint against Crecom in Malaysia: Case
No. WA-22NCC-55-02/2021 in the High Court of Malaysia at Kuala Lumpur in the Federal Territory, Malaysia for the Malaysian equivalent
of breach of contract. Crecom filed an appearance on March 1, 2021. In April 2021, an Application for Summary Judgement was filed
with the court, and on May 25, 2021, the Court will extract the sealed application and a copy thereof will be served on Crecom’s
attorneys and Crecom will have two weeks to file an Affidavit in Reply with the court to show that there are issues to be tried and that
this case must go to a full trial. We will be given 14 days thereafter to reply to that Affidavit in Reply (if there is a need to do
so). In this case, we will request for a longer time to reply, given the distance involved (the court has taken note of this fact). Also
at the May 25, 2021 hearing, the court will give directions on the timelines for both parties to file their written submissions/arguments
in relation to the application for summary judgment If a judgment is entered against Crecom, the process of executing the judgment,
and ultimately attempting to collect on the judgment, can take three to six months. The Company believes that it will prevail in the
lawsuit filed; and believes Crecom has the ability to satisfy a judgment, and the steps to enforce a judgment in Malaysia, if any, may
be cumbersome, time consuming or costly.
NOTE
7 – CONTINGENCIES
In
January 2020, we became aware of a complaint filed by Jitendra Jain, Manish Arora, Scariy Kumaramangalam, Harsh Datta and Balvant Arora
(collectively, plaintiffs), against our wholly-owned subsidiary, Trxade, Inc. and our Chief Executive Officer, Suren Ajjarapu as well
as certain unrelated persons, Annapurna Gundlapalli, Gajan Mahendiran and Nexgen Memantine (collectively, defendants), in the Circuit
Court of Madison County, Alabama (Case:47-CV-2019-902216.00). The complaint alleged causes of actions against the defendants including
fraud in the inducement, relating to certain investments alleged to have been made by plaintiffs in Nexgen Memantine, breach of fiduciary
duty, conversion and voidable transactions. The complaint related to certain investments alleged made by the plaintiffs in Nexgen Memantine
and certain alleged fraudulent transfers of assets and funds alleged to have been taken by the defendants which are unrelated to the
Company. The complaint sought $425,000 in compensatory damages and $1,275,000 in punitive damages. The Company and Mr. Ajjarapu denied
in their entirety the plaintiffs’ allegations and filed a motion to dismiss the plaintiffs’ claims against the Company and
Mr. Ajjarapu, which motion was granted in May 2020, due to the plaintiffs not being able to establish personal jurisdiction over the
defendants, which motion was successful as to all defendants. The Company and Mr. Ajjarapu further refute any connections for the purpose
of the suit to the other named defendants. To the Company’s and Mr. Ajjarapu’s knowledge, the complaint had no merit whatsoever.
The final date for the plaintiffs to appeal the ruling to dismiss the lawsuit passed in August 2020, and there was no appeal. As such,
the ruling is final.
However,
in September 2020, the plaintiffs filed a similar complaint (alleging substantially similar facts) in the United States District Court
for the Middle District of Florida, Tampa Division (Case 8:20-cv-02263), against the same defendants but adding Westminster Pharmaceuticals,
LLC, our former wholly-owned subsidiary (“Westminster”), and raising claims for alleged fraud under Section 10(b)
and Rule 10b-5 of the Exchange Act; joint and several liability under 15 U.S.C. Code 78t (against Trxade, Inc.); fraudulent transactions
of securities under the Florida Securities Act (against all of the defendants except Trxade); and sale of unregistered securities under
the Florida Securities Act (against all of the defendants except Trxade). The total amount of damages sought is unclear, but is thought
to be in excess of $425,000. To the Company’s and Mr. Ajjarapu’s knowledge, the complaint has no merit whatsoever and each
of the Company and Mr. Ajjarapu intend to defend themselves and oppose the relief sought in the complaint. The Company is not currently
accused of any direct misconduct; instead, the Company is alleged to be liable for the acts of certain or all of the other defendants.
The Company would likely only incur liability if some or all of the other defendants were found liable to plaintiffs and the Company
is found to be jointly and severally liable for the actions of such other defendant or defendants. The lawsuit claims approximately $450,000
in damages; however, based on facts currently known, the Company assesses the likelihood of any material loss as remote.
NOTE
8 – 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:
|
|
Lease 1
|
|
|
Lease 2
|
|
Initial Lease Term
|
|
|
December 2017 to December 2021
|
|
|
|
November 2018 to November 2023
|
|
Renewal Term
|
|
|
January 2021 to December 2024
|
|
|
|
November 2023 to November 2028
|
|
Initial Recognition of right-of-use assets at January 1, 2019
|
|
$
|
534,140
|
|
|
$
|
313,301
|
|
Incremental Borrowing Rate
|
|
|
10
|
%
|
|
|
10
|
%
|
The
Company decided not to renew the corporate office lease (Lease 1) on January 2021; however, the parties subsequently negotiated
a one-year lease at the same location. The Company determined that the decision to not renew Lease 1 changed the corresponding
lease term which required remeasurement of the lease liability resulting in the reduction of the right-of-use asset and the associated
lease liability by $384,110. The reassessment of the lease term did not change the existing classification and the lease is still
classified as an operating lease.
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 March 31, 2021.
Amounts due within twelve months of March 31
|
|
|
|
2021
|
|
$
|
146,218
|
|
2022
|
|
|
49,452
|
|
2023
|
|
|
50,949
|
|
2024
|
|
|
52,478
|
|
2025
|
|
|
54,052
|
|
Thereafter
|
|
|
147,046
|
|
Total minimum lease payments
|
|
|
500,195
|
|
Less: effect of discounting
|
|
|
(129,253
|
)
|
Present value of future minimum lease payments
|
|
|
370,942
|
|
Less: current obligations under leases
|
|
|
117,030
|
|
Long-term lease obligations
|
|
$
|
253,912
|
|
For
the three months ended March 31, 2021 and 2020, amortization of Right of Use Assets was $31,678 and $23,635, respectively.
For
the three months ended March 31, 2021 and 2020, amortization of Lease Liability was $31,517 and $20,974, respectively.
NOTE
9 – SEGMENT REPORTING
The
Company classifies its business interests into reportable segments which are Trxade, Inc., Community Specialty Pharmacy, LLC,
Integra Pharma, LLC and Other. 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.
Three Months Ended
March 31, 2021
|
|
Trxade, Inc.
|
|
|
Community Specialty Pharmacy, LLC
|
|
|
Integra Pharma, LLC
|
|
|
Other
|
|
|
Total
|
|
Revenue
|
|
$
|
1,236,650
|
|
|
$
|
397,896
|
|
|
$
|
1,402,586
|
|
|
$
|
16,103
|
|
|
$
|
3,053,235
|
|
Gross Profit
|
|
$
|
1,236,650
|
|
|
$
|
36,089
|
|
|
$
|
94,563
|
|
|
$
|
16,009
|
|
|
$
|
1,383,311
|
|
Segment Assets
|
|
$
|
2,053,494
|
|
|
$
|
(405,348
|
)
|
|
$
|
3,111,536
|
|
|
$
|
4,933,534
|
|
|
$
|
9,693,216
|
|
Segment Profit (Loss)
|
|
$
|
512,293
|
|
|
$
|
(31,251
|
)
|
|
$
|
(32,446
|
)
|
|
$
|
(1,100,115
|
)
|
|
$
|
(651,519
|
)
|
Three Months Ended
March 31, 2020
|
|
Trxade, Inc.
|
|
|
Community Specialty Pharmacy, LLC
|
|
|
Integra Pharma, LLC
|
|
|
Other
|
|
|
Total
|
|
Revenue
|
|
$
|
1,519,907
|
|
|
$
|
432,929
|
|
|
$
|
245,016
|
|
|
$
|
5,468
|
|
|
$
|
2,203,320
|
|
Gross Profit
|
|
$
|
1,519,907
|
|
|
$
|
36,108
|
|
|
$
|
78,653
|
|
|
$
|
5,468
|
|
|
$
|
1,640,136
|
|
Segment Assets
|
|
$
|
2,055,429
|
|
|
$
|
280,514
|
|
|
$
|
1,817,170
|
|
|
$
|
7,320,791
|
|
|
$
|
11,473,904
|
|
Segment Profit (Loss)
|
|
$
|
972,993
|
|
|
$
|
(41,245
|
)
|
|
$
|
(28,883
|
)
|
|
$
|
(722,562
|
)
|
|
$
|
180,303
|
|
NOTE
10 – SUBSEQUENT EVENTS
2021
Equity Compensation Awards
On
April 15, 2021, the Board of Directors, with the recommendation of the Compensation Committee, approved the grant of options
to purchase an aggregate of 17,500 shares of our common stock to certain employees of the Company, in consideration for services
to be rendered by such individuals through 2025. The options vest at the rate of ¼th of such options per year,
on the first, second, third and fourth anniversaries of the grant date, subject to such option holders continuing to provide services
to the Company on such dates, subject to the terms of the Company’s 2019 Amended and Restated Equity Incentive Plan (the
“Plan”) and the option agreements entered into evidence such grants. The options were granted pursuant to,
and are subject to the Plan, and have a term of five years from the grant date. The options have an exercise price of $4.76 per
share, the closing price of the Company’s common stock on the date of the grant of such options.
In
connection with and pursuant to the independent director compensation policy previously adopted by the Board of Directors, on
April 15, 2021, the three independent members of the Board of Directors (Mr. Donald G. Fell, Dr. Pamela Tenaerts, and Mr. Michael
L. Peterson), were each awarded 10,721 shares of restricted stock, valued at $55,000 ($5.13 per share) based on the closing sales
price of the Company’s common stock on the Nasdaq Capital Market on the effective date of the grant, April 1, 2021, which
vest at the rate of ¼th of such shares on July 1 and October 1, 2021 and January 1 and April 1, 2022, subject
to such persons continuing to provide services to the Company on such dates, subject to the terms of the Plan and the Restricted
Stock Grant Agreements entered into to evidence such awards.
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, 2020, filed with the
Securities and Exchange Commission on March 29, 2021 (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.
Our
logo and some of our trademarks and tradenames are used in this Report. This Report also includes trademarks, tradenames and service
marks that are the property of others. Solely for convenience, trademarks, tradenames and service marks referred to in this Report
may appear without the ®, ™ and SM symbols. References to our trademarks, tradenames and service marks are not intended
to indicate in any way that we will not assert to the fullest extent under applicable law our rights or the rights of the applicable
licensors if any, nor that respective owners to other intellectual property rights will not assert, to the fullest extent under
applicable law, their rights thereto. We do not intend the use or display of other companies’ trademarks and trade names
to imply a relationship with, or endorsement or sponsorship of us by, any other companies.
The
market data and certain other statistical information used throughout this Report are based on independent industry publications,
reports by market research firms or other independent sources that we believe to be reliable sources. Industry publications and
third-party research, surveys and studies generally indicate that their information has been obtained from sources believed to
be reliable, although they do not guarantee the accuracy or completeness of such information. We are responsible for all of the
disclosures contained in this Report, and we believe these industry publications and third-party research, surveys and studies
are reliable. While we are not aware of any misstatements regarding any third-party information presented in this Report, their
estimates, in particular, as they relate to projections, involve numerous assumptions, are subject to risks and uncertainties,
and are subject to change based on various factors, including those discussed under, and incorporated by reference in, the section
entitled “Item 1A. Risk Factors” of this Report. These and other factors could cause our future performance
to differ materially from our assumptions and estimates. Some market and other data included herein, as well as the data of competitors
as they relate to Trxade Group, Inc., is also based on our good faith estimates.
Unless
the context requires otherwise, references to the “Company,” “we,” “us,”
“our,” “Trxade”, “Trxade Group” and “Trxade Group, Inc.”
refer specifically to Trxade Group, Inc. and its consolidated subsidiaries.
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;
|
|
|
|
|
●
|
“SEC”
or the “Commission” refers to the United States Securities and Exchange Commission; and
|
|
|
|
|
●
|
“Securities
Act” refers to the Securities Act of 1933, as amended.
|
Effective
on February 12, 2020, the Company effected a stock split of its outstanding common stock in a ratio of 1-for-6 (“Reverse
Stock Split”). Proportional retroactive adjustments were made to the conversion and exercise prices of the Company’s
outstanding warrants and stock options, and to the number of shares issued and issuable under the Company’s stock incentive
plans in connection with the Reverse Stock Split in the disclosures below.
Where
You Can Find Other Information
We
file annual, quarterly, and current reports, proxy statements and other information with the SEC. Our SEC filings are available
to the public over the Internet at the SEC’s website at www.sec.gov and are available for download, free of charge,
soon after such reports are filed with or furnished to the SEC, on the “NASDAQ: MEDS,” “SEC Filings”
page of our corporate website at www.rx.trxade.com.
Copies of documents filed by us with the SEC are also available from us without charge, upon oral or written request to our Secretary,
who can be contacted at the address and telephone number set forth on the cover page of this Report. Our
corporate website address is www.rx.trxade.com. The information on, or that may be accessed through, our corporate website
is not incorporated by reference into this Report and should not be considered a part of this Report.
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:
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Overview.
Discussion of our business and overall analysis of financial and other highlights affecting us, to provide context for the
remainder of MD&A.
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Liquidity
and Capital Resources. An analysis of changes in our consolidated balance sheets and cash flows and discussion of our
financial condition.
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Results
of Operations. An analysis of our financial results comparing the three months ended March 31, 2021 and 2020.
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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
We
have designed and developed, and now own and operate, a business-to-business web-based marketplace focused on the US pharmaceutical
industry. Our core service brings the nation’s independent pharmacies and accredited national suppliers of pharmaceuticals
together to provide efficient and transparent buying and selling opportunities.
We
began operations as Trxade Group, Inc., a Nevada corporation (“Trxade Nevada”) in August of 2010 and spent
over two years creating and enhancing our web-based services. Our services provide pricing transparency, purchasing capabilities
and other value-added services on a single platform focused on serving the nation’s approximately 21,000 independent pharmacies
with annual purchasing power of $78 billion (according to the National Community of Pharmacists Association’s 2018 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 12,100+
registered members on our sales platform.
Company
Organization
Trxade
Group, Inc. owns 100 percent of Trxade, Inc., and Integra Pharma Solutions, LLC (formerly Pinnacle Tek, Inc.), Alliance Pharma
Solutions, LLC, Community Specialty Pharmacy, LLC, and Bonum Health, LLC. The reverse triangular merger of Trxade, Inc. and Trxade
Group, Inc. occurred in July 2013. Integra was acquired in July 2013. We acquired 100 percent of Community Specialty Pharmacy,
LLC, in October 2018. Alliance Pharma Solutions, LLC was formed in January 2018 and our joint venture with SyncHealth MSO, LLC,
which was terminated in February 2020, was formed in January 2019. We acquired our Bonum Health operations in October 2019. Trxade,
Inc. is a web-based market platform that enables commerce among healthcare buyers and sellers of pharmaceuticals, accessories
and services.
Novel
Coronavirus (COVID-19)
In
December 2019, a novel strain of coronavirus, which causes the infectious disease known as COVID-19, was reported in Wuhan, China.
The World Health Organization declared COVID-19 a “Public Health Emergency of International Concern” on January 30,
2020 and a global pandemic on March 11, 2020. In March and April, many U.S. states and local jurisdictions began issuing ‘stay-at-home’
orders. For example, the state of Florida, where the Company’s principal business operations are, issued a ‘stay-at-home’
order effective on April 1, 2020, which remained in place, subject to certain exceptions, through June 2020, when the order was
gradually lifted until September 2020, when the order was completely lifted. The U.S. in general and Florida specifically, has
recently seen decreases in total new COVID-19 infections, however, it is unknown whether such decreases will continue, new strains
of the virus will cause numbers to increase, currently projected vaccine efficacy numbers will hold, or new strains of the virus
will become dominate in the future, and/or whether the state of Florida, or other jurisdictions in which we operate, will issue
new or expanded ‘stay-at-home’ orders, or how those orders, or others, may affect our operations.
To
date, we have been deemed an essential healthcare technology provider under applicable governmental orders based on the critical
nature of the products we offer and the community we serve. As such, our business operations were not materially impacted by the
prior restrictions put in place by the State of Florida to slow the spread of COVID-19, which have since expired. Additionally,
as shown in our results of operations below, we have to date, not experienced any significant material negative impact to our
operations, revenues or gross profit due to COVID-19. We have however been adversely affected by reductions to, and interruptions
in, the delivery of supply chain pharmaceuticals that have had a negative impact on our wholesalers and certain technology outsourcing
in India and the Philippines due to the pandemic, which may become more frequent or material in the future. We are carefully managing
our inventory supply network while we work to overcome these hopefully temporary challenges. As a result of the above and other
unknown issues associated with the pandemic, our sales and operating results may be adversely impacted in the coming months. The
full extent of the impact of COVID-19 on our business and operations currently cannot be estimated and will depend on a number
of factors including the scope and duration of the global pandemic.
Since
the start of the pandemic, we have taken steps to prioritize the health and safety of our employees. The Company’s employees
started working remotely around March 17, 2020, and our corporate office is currently planned to be closed through May 31, 2021.
The office is expected to open for our management team beginning in June 2021, while our remaining employees will continue to
work remotely for the time being.
Currently
we believe that we have sufficient cash on hand and will generate sufficient cash through operations to support our operations
for the foreseeable future; however, we will continue to evaluate our business operations based on new information as it becomes
available and will make changes that we consider necessary in light of any new developments regarding the ongoing pandemic.
Although
COVID-19 has had a major impact on businesses around the world, to date, the pandemic has not had a significant negative impact
on our business. However, the future impact of COVID-19 on our business and operations is currently unknown. The pandemic is developing
rapidly and the full extent to which COVID-19 will ultimately impact us depends on future unknowable developments, including the
duration and spread of the virus, as well as potential new seasonal outbreaks.
Liquidity
and Capital Resources
Cash
Cash
was $5,209,280 at March 31, 2021. We expect that our future available capital resources will consist primarily of cash generated
from operations, remaining cash balances, borrowings, and additional funds raised through sales of debt and/or equity securities.
Liquidity
Cash,
current assets, current liabilities, short term debt and working capital at the end of each period were as follows:
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March 31, 2021
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December 31, 2020
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Cash
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$
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5,209,280
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$
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5,919,578
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Current assets (excluding cash)
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3,945,960
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3,301,720
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Current liabilities (excluding short term debt)
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1,012,680
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617,238
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Short Term Debt
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225,000
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225,000
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Working Capital
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7,917,560
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8,379,060
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Our
principal sources of liquidity have been cash provided by operations, sales of equity, and borrowings under various debt arrangements.
Our principal uses of cash have been for operating expenses and acquisitions. We anticipate these uses will continue to be our
principal uses of cash in the future.
The
decrease in cash as of March 31, 2021, compared to December 31, 2020, was primarily due to increased spending for the development
and marketing of Bonum TeleHealth and MedCheks Health Passport.
Liquidity
Outlook cash explanation.
Cash
Requirements
Our
primary objectives for the remainder of 2021 are to continue the development of the Trxade Platform, Bonum Health telehealth services
and MedCheks health passport, to increase our client base and operational revenue. As a result of our cash generated through operations
and the cash raised in the February 2020 underwritten offering, we believe we have sufficient cash to support our operations for
the foreseeable future. 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
estimate our operating expenses and working capital requirements for the next 12 months to be approximately as follows:
Projected Expenses for April 2021 to March 2022
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Amount
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General and administrative (1)
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$
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9,000,000
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Total
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$
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9,000,000
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(1)
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Includes
wages and payroll, legal and accounting, marketing, rent and web development.
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We
currently anticipate paying the estimated expenses described above through cash on hand and revenues generated from our operations.
Since inception, we have funded our operations primarily through debt and equity capital raises and operational revenue.
We
may require additional funding in the future to expand or complete acquisitions. The sources of this capital are expected to be
equity investments and notes payable. Our plan for the next twelve months is to continue using the same marketing and management
strategies and continue providing a quality product with excellent customer service while also seeking to expand our operations
organically or through acquisitions, as funding and opportunities arise. As our business continues to grow, customer feedback
will be integral in making small adjustments to improve our products and overall customer experience. If in the future we require
additional funding, we plan to raise such funds through the sale of debt or equity, 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.
We
believe that we have adequate cash to implement our plan to operate a business-to-business web-based marketplace focused on the
United States pharmaceutical industry. Our core service is designed to bring the nation’s independent pharmacies and accredited
national suppliers of pharmaceuticals together to provide efficient and transparent buying and selling opportunities.
As
of the date of this filing, there has been a global viral outbreak that world governments have responded to with travel and other
restrictions, including ‘stay-at-home’ orders, among other steps. The extent and duration of business disruptions
and related financial impacts from the COVID-19 coronavirus cannot be reasonably estimated at this time; however, our exposure
includes reductions to, and interruptions in, the delivery of supply chain pharmaceuticals that have had a negative impact on
our wholesalers and certain technology outsourcing in India and the Philippines. In addition, employee sicknesses and remote working
environments related to the coronavirus and the federal, state and local responses to such virus, could materially impact our
consolidated results for the full year 2021. See also “Novel Coronavirus (COVID-19)”, above.
Cash
Flows
The
following table summarizes our Consolidated Statements of Cash Flows for the three months ended March 31, 2021 and 2020:
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Three months Ended
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March 31, 2021
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March 31, 2020
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Change
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Percent Change
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Net (Loss) Income
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$
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(651,519
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$
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180,303
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$
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(831,822
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)
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(461
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%)
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Net Cash Provided by (used in):
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Operating Activities
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(710,298
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)
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(410,806
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)
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(299,492
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)
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(73
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%)
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Investing Activities
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-
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(23,505
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)
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23,505
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100
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%
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Financing Activities
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-
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5,263,922
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(5,263,922
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)
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(100
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)%
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Net increase (decrease) in cash
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$
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(710,298
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)
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$
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4,829,611
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$
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(5,539,909
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)
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$
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(115
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)%
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Cash
used in operations for the three months ended March 31, 2021 was $710,298, compared to cash used in operations for the three months
ended March 31, 2020 of $410,806. The decrease in cash as of March 31, 2021, compared to March 31, 2020, was due to increased
spending for the development and marketing of Bonum TeleHealth and MedCheks Health Passport and an increase in Accounts Receivables.
There
was no cash used in investing activities for the three months ended March 31, 2021, compared to cash used in investing activities
for the three months ended March 31, 2020 of $23,505. Cash used in investing activities for the three months ended March 31, 2020,
was associated with the purchase of fixed assets.
Cash provided by financing
activities for the three months ended March 31, 2021 was $0, compared to cash provided by financing activities for the three months
ended March 31, 2020 of $5,263,922. Cash provided by financing activities for the three months ended March 31, 2020, included
the sale of common stock in the February 2020 underwritten offering which generated $5,994,424 of proceeds and approximately $5.26
million in cash to the Company after expenses and the exercise of warrants and options which generated cash of $1,853.
Results
of Operations
The
following selected consolidated financial data should be read in conjunction with the unaudited consolidated financial statements
and the notes to these statements included above.
Three
Month Period Ended March 31, 2021 Compared to Three Month Period Ended March 31, 2020
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Three Months Ended
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Percent
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March 31, 2021
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March 31, 2020
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Change
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Change
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Revenues
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$
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3,053,235
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$
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2,203,320
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$
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849,915
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39
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%
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Cost of Sales
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1,669,924
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563,184
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1,106,740
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197
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%
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Gross Profit
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1,383,311
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1,640,136
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(256,825
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)
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(16
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)%
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Operating Expenses:
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|
|
|
|
|
|
|
|
|
|
|
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General and Administrative*
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1,853,581
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|
|
|
1,310,823
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|
|
|
542,758
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|
|
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41
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%
|
Warrants and Options Expense
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|
|
173,985
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|
|
|
141,086
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|
|
|
32,899
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|
|
|
23
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%
|
Total Operating Expense
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|
|
2,027,566
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|
|
|
1,451,909
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|
|
|
575,657
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|
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|
40
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%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest Expense
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|
|
(7,264
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)
|
|
|
(7,924
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)
|
|
|
660
|
|
|
|
(8
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)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income (loss)
|
|
$
|
(651,519
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)
|
|
$
|
180,303
|
|
|
$
|
(831,822
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)
|
|
|
(461
|
)%
|
*
Less warrants and options expense.
Our
revenues for the three months ended March 31, 2021 were from the Trxade platform, Community Specialty Pharmacy and Integra Pharma
Solutions. Revenues increased by $849,915, compared to the prior period. Integra Pharma Solutions revenue increased to $1,402,586
for the three months ended March 31, 2021, compared to $245,016, in the prior year’s period. The increase was mainly a result
of sourcing protective medical gowns. Cost of sales and gross profit for the three-month period ended March 31, 2021, were $1,669,924
and $1,383,311, respectively, and for the three-month period ended March 31, 2020, were $563,184 and $1,640,136, respectively.
As sales for PPE increased in 2021, the cost of sales increased. Revenue from the Trxade Platform decreased 19%, from $1,519,907
for the three months ended March 31, 2020, to $1,236,650 for the three months ended March 31, 2021. The decrease in 2021 related
to weather disruptions for shipping and supply chain issues for drugs selling on the platform and certain non-recurring large
purchases of additionally supplies by pharmacies in March 2020, at the start of the COVID-19 pandemic.
Gross
profit as a percentage of sales was 45% for the three months ended March 31, 2021, compared to 74% for the three months ended
March 31, 2020. The reason for the decrease in gross profit as a percentage of sales was the cost of the orders of PPE related
products in the current period. In 2020, a larger percentage of revenue was generated by the Trxade Platform, which carries no
cost of sales.
General
and administrative expenses (less stock-based compensation expense) increased for the three months ended March 31, 2021 to $1,853,581,
compared to $1,310,823 for the comparable period in 2019. The increase was mainly due to IT development, legal expenses and
marketing expenses relating to Bonum Health and MedCheks.
Total
stock-based compensation expense increased to $173,985 for the three months ended March 31, 2021, compared to $141,086 for the
prior year’s period, due to Board of Directors restricted stock grants.
We
had interest expense of $7,264 for the three months ended March 31, 2021, compared to interest expense of $7,924 for the three
months ended March 31, 2020, which decreased due to decreases in the amount of outstanding debt we had as of the current period.
Net
loss increased to $651,519 for the three months ended March 31, 2021, compared to net income of $180,303, for the three
months ended March 31, 2020, mainly due to increased development of the Trxade Platform, Bonum Health and MedCheks start up development.
Off-Balance
Sheet Arrangements
We
had no outstanding off-balance sheet arrangements as of March 31, 2021.
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.
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”). The Company 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 the Company. The Company holds no inventory and assumes no responsibility for the shipment or delivery of any products or
services from our website. The Company 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 the Company 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 –
the Company 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.
Integra
Pharma Solutions, LLC is a licensed wholesaler of brand, generic and non-drug products to Customers. The Company 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 – the Company 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 the Company. 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 is a licensed retail pharmacy. The Company 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 the Company. The prescription identifies the performance obligations in the contract. The Company
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 the Company prior to filling of 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.
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”.