ITEM
1. FINANCIAL STATEMENTS
TRxADE
HEALTH, INC.
Consolidated
Balance Sheets
June
30, 2021, and December 31, 2020
(unaudited)
The
accompanying notes are an integral part of the unaudited consolidated financial statements.
TRxADE
HEALTH, INC.
Consolidated
Statements of Operations
For
the Three and Six Months Ended June 30, 2021, and 2020
(unaudited)
The
accompanying notes are an integral part of the unaudited consolidated financial statements.
TRxADE
HEALTH, INC.
Consolidated
Statements of Changes in Shareholders’ Equity
For
the Three and Six Months Ended June 30, 2021, and 2020
(unaudited)
|
|
Preferred Stock
|
|
|
Common Stock
|
|
|
Additional Paid-in-
|
|
|
Accumulated
|
|
|
Total Shareholders’
|
|
|
|
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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock Issued for Services
|
|
|
-
|
|
|
|
-
|
|
|
|
217,965
|
|
|
|
2
|
|
|
|
829,865
|
|
|
|
-
|
|
|
|
829,867
|
|
Warrants Exercised for Cash
|
|
|
-
|
|
|
|
-
|
|
|
|
360,002
|
|
|
|
4
|
|
|
|
21,596
|
|
|
|
-
|
|
|
|
21,600
|
|
Warrants Expense
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
21,294
|
|
|
|
-
|
|
|
|
21,294
|
|
Options Expense
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
183,906
|
|
|
|
-
|
|
|
|
183,906
|
|
Net Loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(542,587
|
)
|
|
|
(542,587
|
)
|
Balance at June 30, 2020
|
|
|
-
|
|
|
$
|
-
|
|
|
|
8,062,337
|
|
|
$
|
81
|
|
|
$
|
18,909,083
|
|
|
$
|
(8,757,787
|
)
|
|
$
|
10,151,377
|
|
The
accompanying notes are an integral part of the unaudited consolidated financial statements
TRxADE
HEALTH, INC.
Consolidated
Statements of Cash Flows
For
the Six months ended June 30, 2021, and 2020
(unaudited)
The
accompanying notes are an integral part of the unaudited consolidated financial statements.
TRxADE
HEALTH, INC.
Notes
to Unaudited Consolidated Financial Statements
For
the Six months ended June 30, 2021, and 2020
NOTE
1 – ORGANIZATION AND BASIS OF PRESENTATION
TRxADE
HEALTH, INC. (“we”, “our”, “Trxade”, and the “Company”) owns
100% of Trxade, Inc., Integra Pharma Solutions, LLC, Community Specialty Pharmacy, LLC, Alliance Pharma Solutions, LLC, Bonum Health,
LLC and MedCheks, 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 the Company does not anticipate
installations moving forward, and has taken a write off of the hubs purchased at June 30, 2021, in Loss on Inventory Investments
of $143,891.
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.
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. The Health Passport App has encountered head winds
as the governments…local, national and international…continue to change the requirements regarding COVID-19, which include
testing and mask mandates. We are evaluating the next steps needed for any additional roll-out.
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 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.
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, 2021, and 2020, bad debt expense was $0, and $9,000, collectively, and recovery of bad debt was $10,000 and $0, respectively.
The
Company has a concentration in Account Receivable with a single customer for the amount of $630,000 which has been owed for over 90 days.
The Company has obtained additional collateral and believes the amount is collectible, and no allowance has been recorded.
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, 2021, the number of warrants outstanding is 75,875
and the number of options outstanding is 432,164.
The
following table sets forth the computation of basic and diluted Income (Loss) per Share:
SCHEDULE OF BASIC AND DILUTIVE INCOME (LOSS) PER SHARE
|
|
2021
|
|
|
2020
|
|
|
2021
|
|
|
2020
|
|
|
|
For three months ended
June 30,
|
|
|
For six months ended
June 30,
|
|
|
|
2021
|
|
|
2020
|
|
|
2021
|
|
|
2020
|
|
Numerator:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (Loss) Income
|
|
$
|
(2,578,276
|
)
|
|
$
|
(542,587
|
)
|
|
$
|
(3,229,795
|
)
|
|
$
|
(362,284
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Numerator for basic and diluted EPS - income available to common Shareholders
|
|
|
(2,578,276
|
)
|
|
$
|
(542,587
|
)
|
|
|
(3,229,795
|
)
|
|
$
|
(362,284
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator for basic and diluted EPS – Weighted average shares
|
|
|
8,122,206
|
|
|
|
7,580,977
|
|
|
|
8,107,864
|
|
|
|
7,324,512
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and Diluted (Loss) Income per common share
|
|
$
|
(0.32
|
)
|
|
$
|
(0.07
|
)
|
|
$
|
(0.40
|
)
|
|
$
|
(0.05
|
)
|
NOTE
2– SHORT TERM DEBT – RELATED PARTIES
In
October 2018, in connection with the acquisition of Community Specialty Pharmacy, LLC, a $promissory note was issued to Nikul Panchal,
a non-executive officer of the Company, accruing simple interest at the rate of %
per annum, payable annually, and having a maturity date on . In October 2019, $of the note was converted into common shares at $per share, leaving $of principal owed under the promissory note.
There was a loss recognized on this conversion of $.
At
June 30, 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 $26,775
for the six months ended June 30, 2021.
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 $41,250
for the six months ended June 30, 2021.
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 Second Amended and Restated
2019 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 then 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. The shares have a fair value of $165,000
and the Company recognized stock-based compensation
expense of $41,250
for the six months ended June 30, 2021. Common
Shares totaling 16,082
were cancelled on May 27, 2021, when the
director services of Mr. Peterson and Ms. Tenaerts were terminated.
The
Board of Directors of the Company, on May 27, 2021, confirmed the vesting of 2,680 shares of common stock previously issued to each of
Michael L. Peterson and Dr. Pamela Tenaerts on July 1, 2021, which were subject to forfeiture subject to such persons continued service
on the Board of Directors prior to the vesting date.
In
connection with and pursuant to the independent director compensation policy previously adopted by the Board of Directors, on May 27,
2021, the Board of Directors awarded Charles L. Pope, and Christine L. Jennings, each independent members of the Board of Directors appointed
to the Board of Directors on May 27, 2021, 10,912 shares of restricted stock each, valued at $41,250 each ($3.78 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, May 27,
2021, which vest at the rate of 1/3rd of such shares on October 1, 2021 and January 1 and April 1, 2022, subject to such persons continuing
to provide services to the Company on such dates.
Employment
Agreement with Suren Ajjarapu, Chief Executive Officer
In
connection with our employment agreement with Mr. Suren Ajjarapu, our Chief Executive Officer, which was effective on April 14, 2020,
we granted 49,020 restricted shares of common stock which vest upon the Company reaching certain performance metrics established by the
Compensation Committee on the same date and further amended on May 5, 2020. The fair value of the shares at the grant date was determined
to be $300,000. The modification of the performance conditions resulted in an incremental value to the shares of $72,062. The Compensation
Committee subsequently determined that the performance conditions were met and the 49,020 bonus shares vested in full on December 31,
2020. The compensation expense of $391,841 was recognized for the year ended December 31, 2020.
Stock
Repurchase Program
On
May 27, 2021, the Board of Directors of the Company authorized and approved a share repurchase program for up to $1 million of the currently
outstanding shares of the Company’s common stock. There is no time frame for the repurchase program, and such program will remain
in place until a maximum of $1.0 million of the Company’s common stock has been repurchased or until such program is suspended
or discontinued by the Board of Directors. As of June 30, 2021, no shares have been repurchased.
NOTE
4 – WARRANTS
For
the six-month period ended June 30, 2021, no warrants were granted and warrants to purchase 6,876 shares of common stock 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 $100,383
for the six months ended June 30, 2021,
and 2020, respectively.
The
Company’s outstanding and exercisable warrants as of June 30, 2021, are presented below:
SCHEDULE OF OUTSTANDING AND EXERCISABLE WARRANTS
|
|
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
|
|
|
(6,876
|
)
|
|
$
|
9.00
|
|
|
|
-
|
|
|
|
-
|
|
Warrants exercised
|
|
|
-
|
|
|
$
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrants Outstanding as of June 30, 2021
|
|
|
75,875
|
|
|
$
|
0.64
|
|
|
|
2.45
|
|
|
$
|
286,939
|
|
Warrants Exercisable as of June 30, 2021
|
|
|
53,347
|
|
|
$
|
0.88
|
|
|
|
1.25
|
|
|
$
|
188,717
|
|
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 Second 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 six-month period ended June 30, 2021, options to purchase 36,700
shares were granted, none were forfeited, and
none expired. The options granted during the period vest over a four-year
period, the weighted average exercise price was
$5.74
per share and the options have a term of
5
years. For the six-month period ended June 30,
2021, options to purchase 30,353
shares of common stock were exercised, for 30,353
shares of common stocks resulting in proceeds of $1,821.
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 June 30, 2021:
SCHEDULE OF ESTIMATE FAIR VALUE OF STOCK OPTIONS
Expected dividend yield
|
|
|
0
|
%
|
Weighted-average expected volatility
|
|
|
102-207
|
%
|
Weighted-average risk-free interest rate
|
|
|
0.25
|
%
|
Expected life of options
|
|
|
5 years
|
|
Total
compensation cost related to stock options granted was $137,130
and $245,903
for the six-months ended June 30, 2021,
and 2020, respectively.
The
following table represents stock option activity for the six-month period ended June 30, 2021:
SCHEDULE OF STOCK OPTION ACTIVITY
|
|
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
|
|
|
36,700
|
|
|
$
|
5.74
|
|
|
|
4.69
|
|
|
|
-
|
|
Options forfeited
|
|
|
-
|
|
|
$
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Options expired
|
|
|
-
|
|
|
$
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Options exercised
|
|
|
(30,353
|
)
|
|
$
|
0.06
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options Outstanding as of June 30, 2021
|
|
|
432,164
|
|
|
$
|
4.86
|
|
|
|
5.15
|
|
|
$
|
267,985
|
|
Options Exercisable as of June 30, 2021
|
|
|
287,840
|
|
|
$
|
4.93
|
|
|
|
4.77
|
|
|
$
|
166,419
|
|
NOTE
6 – OTHER RECEIVABLES
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 $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 and dismiss the complaint on jurisdictional grounds. The court granted Studebaker’s
motion to set aside the default judgement but denied the motion to dismiss. Studebaker then filed an answer and affirmative defenses,
and we filed a motion to strike their affirmative defenses. The court has not yet ruled, but the discovery phase of the litigation has
commenced. The Company believes it will prevail on the merits but cannot determine the timing of the judgment or the amount ultimately
collected. At June 30, 2021, the $500,000
was recorded as Loss on Inventory Investment.
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 extracted the sealed application, and a copy thereof was served on Crecom’s
attorneys and Crecom, 14 days later, filed an Affidavit in Reply with the court alleging that there are issues to be tried and that this
case must go to a full trial. On June 28, 2021, the court directed both parties to file their written submissions/arguments in relation
to the application for summary judgment on or before July 12, 2021, and scheduled a hearing thereon for August 26, 2021. 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; but the steps to enforce a judgement in Malaysia,
if any, may be cumbersome, time consuming or costly. The Company cannot determine the timing of the judgement, nor the amount ultimately
collected. At June 30, 2021, the $581,250
was recorded as Loss on Inventory Investment.
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 the Company does not anticipate
installations moving forward and has taken a write off of the hubs purchased on June 30, 2021, in Loss on Inventory
Investments of $143,891.
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:
SCHEDULE OF OPERATING LEASES
|
|
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) in 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 June 30, 2021.
SCHEDULE OF FUTURE MINIMUM PAYMENTS FOR OPERATING LEASE LIABILITIES
|
|
2021
|
|
Amounts due within twelve months of June 30
|
|
|
|
2021
|
|
$
|
117,109
|
|
2022
|
|
|
49,824
|
|
2023
|
|
|
51,327
|
|
2024
|
|
|
52,866
|
|
2025
|
|
|
54,452
|
|
Thereafter
|
|
|
133,300
|
|
Total minimum lease payments
|
|
|
458,878
|
|
Less: effect of discounting
|
|
|
(120,248
|
)
|
Present value of future minimum lease payments
|
|
|
338,631
|
|
Less: current obligations under leases
|
|
|
90,628
|
|
Long-term lease obligations
|
|
$
|
248,003
|
|
For
the six months ended June 30, 2021, and 2020, amortization of Right of Use Assets was $64,150
and $47,799,
respectively.
For
the six months ended June 30, 2021, and 2020, amortization of Lease Liability was $63,829
and $42,477,
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.
SCHEDULE OF BUSINESS INTERESTS INTO REPORTABLE SEGMENTS
Six Months Ended June 30, 2021
|
|
Trxade, Inc.
|
|
|
Community Specialty Pharmacy,
LLC
|
|
|
Integra Pharma, LLC
|
|
|
Other
|
|
|
Total
|
|
Revenue
|
|
$
|
2,387,360
|
|
|
$
|
|
|
$
|
1,715,466
|
|
|
$
|
16,420
|
|
|
$
|
4,951,489
|
|
Gross Profit
|
|
$
|
2,387,048
|
|
|
$
|
|
|
$
|
(272,461
|
)
|
|
$
|
16,082
|
|
|
$
|
2,224,702
|
|
Segment Assets
|
|
$
|
1,587,888
|
|
|
$
|
)
|
|
$
|
1,301,196
|
|
|
$
|
4,424,677
|
|
|
$
|
6,896,030
|
|
Segment Profit (Loss)
|
|
$
|
980,562
|
|
|
$
|
)
|
|
$
|
(1,656,786
|
)
|
|
$
|
(2,505,670
|
)
|
|
$
|
(3,229,795
|
)
|
Six
Months Ended June 30, 2020
|
|
Trxade,
Inc.
|
|
|
Community Specialty Pharmacy,
LLC
|
|
|
Integra
Pharma, LLC
|
|
|
Other
|
|
|
Total
|
|
Revenue
|
|
$
|
2,914,537
|
|
|
$
|
|
|
$
|
5,003,523
|
|
|
$
|
7,260
|
|
|
$
|
8,795,957
|
|
Gross
Profit
|
|
$
|
2,914,537
|
|
|
$
|
|
|
$
|
648,276
|
|
|
$
|
7,260
|
|
|
$
|
3,644,908
|
|
Segment
Assets
|
|
$
|
1,793,747
|
|
|
$
|
|
|
$
|
5,041,989
|
|
|
$
|
4,652,944
|
|
|
$
|
11,732,283
|
|
Segment
Profit (Loss)
|
|
$
|
1,872,862
|
|
|
$
|
)
|
|
$
|
369,370
|
|
|
$
|
(2,531,561
|
)
|
|
$
|
(362,284
|
)
|
NOTE
10 – SUBSEQUENT EVENTS
On
July 18, 2021 the Board of Directors approved an “at-the-market” offering for the sale of up to $9
million in shares of the common stock under which
the Distribution Agent may sell the Offering shares in public market transactions reported on the consolidated tape or privately negotiated
transactions which may include block trades pursuant to and in connection with the Company’s previously filed Form S-3 Shelf Registration
Statement filed with the Securities and Exchange Commission on August 28, 2020 and declared effective by the Commission on September
3, 2020 (File Number: 333-248473) and the Prospectus Supplement has not been filed with the Commission under Rule 424(b)(5) as
of the date of this filing.
On
July 18, 2021, our Board of Directors paused the Stock Repurchase Program until the “at-the-market” offering is complete.
On July 22, 2021, our Board of Directors deferred
the filing of the “at-the market’ offering and reactivated the Stock Repurchase Program.
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 “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 HEALTH, INC., is also based on our good faith estimates.
Unless
the context requires otherwise, references to the “Company,” “we,” “us,” “our,” and “Trxade”,
refer specifically to TRxADE HEALTH, 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.
Effective
May 27, 2021, the Company filed a Certificate of Amendment to its Second Amended and Restated Certificate of Incorporation with the Secretary
of State of the State of Delaware, to change the Company’s name to “TRxADE HEALTH, INC.”, which amendment was effective
on June 1, 2021.
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:
|
●
|
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.
|
|
|
|
|
●
|
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, 2021, and 2020.
|
|
|
|
|
●
|
Critical
Accounting Policies. Accounting estimates that we believe are important to understanding the assumptions and judgments incorporated
in our reported financial results and forecasts.
|
Company
Overview
We
are a health services IT company focused on digitalizing the retail pharmacy experience by optimizing drug procurement, the prescription
journey and patient engagement in the U.S and have designed and developed, and now own and operate, a business-to-business web-based
marketplace. 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. The company changed its name on June 1, 2021, from “Trxade Group, Inc”
to “TRxADE HEALTH, INC.” 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 12,700+ registered members on our sales platform.
Company
Organization
TRxADE
HEALTH, INC. owns 100 percent of Trxade, Inc., and Integra Pharma Solutions, LLC (formerly Pinnacle Tek, Inc.), Alliance Pharma Solutions,
LLC, Community Specialty Pharmacy, LLC, Bonum Health, LLC and MedCheks, 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 2020, 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 as vaccines are now widely available and the number of individuals who have received vaccines has increased;
however, it is unknown whether such decreases will continue, new strains of the virus will cause current vaccines to be less effective
or whether numbers will increase, 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, certain technology outsourcing in India and the Philippines and finding qualified
staff 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 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 continued 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 was closed through June 30, 2021. The office is expected to open for
our management team beginning in July 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 and potential future equity sales,
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.
We may also raise additional funding in the future through sales of debt or equity through an at-the-market offering “SEE NOTE 10 – SUBSEQUENT EVENTS.
Liquidity
and Capital Resources
Cash
Cash
was $4,519,983 at June 30, 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:
|
|
Six months Ended
|
|
|
|
|
|
|
|
|
|
June 30, 2021
|
|
|
December 31, 2020
|
|
|
Change
|
|
|
Percent Change
|
|
Cash
|
|
$
|
4,519,983
|
|
|
$
|
5,919,578
|
|
|
$
|
(1,399,595
|
)
|
|
|
(24
|
%)
|
Current assets (excluding cash)
|
|
|
2,016,184
|
|
|
|
3,301,720
|
|
|
|
(1,285,536
|
)
|
|
|
(40
|
%)
|
Current liabilities (excluding short term debt)
|
|
|
636,051
|
|
|
|
617,238
|
|
|
|
18,813
|
|
|
|
3
|
%
|
Short Term Debt
|
|
|
225,000
|
|
|
|
225,000
|
|
|
|
-
|
|
|
|
-
|
|
Working Capital
|
|
|
5,675,116
|
|
|
|
8,379,060
|
|
|
|
(2,703,944
|
)
|
|
|
(32
|
)%
|
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
sources of, and uses of, cash in the future.
The
decrease in cash as of June 30, 2021, compared to December 31, 2020, was primarily due to increased spending for the IT development and
marketing of Bonum TeleHealth, MedCheks Health Passport, DelivMeds and TRxADE Prime.
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 may also raise
additional funding in the future through the sale of equity. An at-the-market offering was approved by the Board of Directors, SEE NOTE 10 – SUBSEQUENT EVENTS.
We
estimate our operating expenses and working capital requirements for the next 12 months to be approximately as follows:
Projected Expenses for July 2021 to June 2022
|
|
Amount
|
|
General and administrative (1)
|
|
$
|
9,000,000
|
|
Total
|
|
$
|
9,000,000
|
|
|
(1)
|
Includes
estimated wages and payroll, legal and accounting, marketing, rent and web development.
|
We
currently anticipate paying the estimated expenses described above through cash on hand and revenues generated from our operations.
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. An at-the-market offering was approved by the Board of Directors, SEE NOTE 10 – SUBSEQUENT EVENTS.
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.
Since
the first quarter of 2020 and through 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 continued 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 potential continued 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 the past and finding qualified
staff due to the pandemic 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; however, do not currently
forecast any material adverse effects on our 2021 operating results due to COVID-19; although the ultimate impact and duration of the
pandemic remains unknown. See also “Novel Coronavirus (COVID-19)”, above.
Cash
Flows
The
following table summarizes our Consolidated Statements of Cash Flows for the Six months ended June 30, 2021, and 2020:
|
|
Six months Ended
|
|
|
|
|
|
|
|
|
|
June 30, 2021
|
|
|
June 30, 2020
|
|
|
Change
|
|
|
Percent Change
|
|
Net (Loss) Income
|
|
$
|
(3,229,795
|
)
|
|
$
|
(362,284
|
)
|
|
$
|
(2,867,511
|
)
|
|
|
(792
|
%)
|
Net Cash Provided by (used in):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Activities
|
|
|
(1,401,416
|
)
|
|
|
(3,982,667
|
)
|
|
|
2,581,251
|
|
|
|
65
|
%
|
Investing Activities
|
|
|
-
|
|
|
|
(23,505
|
)
|
|
|
23,505
|
|
|
|
100
|
%
|
Financing Activities
|
|
|
1,821
|
|
|
|
5,285,522
|
|
|
|
(5,283,701
|
)
|
|
|
(100
|
)%
|
Net increase (decrease) in cash
|
|
$
|
(1,399,595
|
)
|
|
$
|
1,279,350
|
|
|
$
|
(2,678,945
|
)
|
|
$
|
(209
|
)%
|
Cash
used in operations for the six months ended June 30, 2021, was $1,401,416, compared to cash used in operations for the six months
ended June 30, 2020, of $3,982,667. The decrease in cash as of June 30, 2021, compared to June 30, 2020, was due to cash used
in operations for the IT development and marketing of Bonum TeleHealth and MedCheks Health Passport and a decrease in revenue.
There
was no cash used in investing activities for the six months ended June 30, 2021. Cash used in investing activities for the six months
ended June 30, 2020, was $23,505, which was associated with the purchase of fixed assets.
Cash
provided by financing activities for the six months ended June 30, 2021, was $1,821, which was solely due to the exercise of stock
options, compared to cash provided in financing activities for the six months ended June 30, 2020, which was $5,285,522. Cash
provided by financing activities for the six months ended June 30, 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 $23,453.
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 June 30, 2021, Compared to Three Month Period Ended June 30, 2020
|
|
Three Months Ended
|
|
|
|
|
|
|
|
|
|
June 30, 2021
|
|
|
June 30, 2020
|
|
|
Change
|
|
|
Percent Change
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
1,898,254
|
|
|
$
|
6,592,637
|
|
|
$
|
(4,694,383
|
)
|
|
|
(71.2
|
%)
|
Cost of Sales
|
|
|
1,056,863
|
|
|
|
4,587,865
|
|
|
|
(3,531,022
|
)
|
|
|
(77.0
|
%)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Profit
|
|
|
841,391
|
|
|
|
2,004,772
|
|
|
|
(1,163,381
|
)
|
|
|
(58.0
|
%)
|
Operating Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss on Inventory Investment
|
|
|
1,225,141
|
|
|
|
-
|
|
|
|
1,225,141
|
|
|
|
100
|
%
|
General and Administrative (less stock- based compensation expense)
|
|
|
2,024,030
|
|
|
|
1,504,676
|
|
|
|
519,354
|
|
|
|
34.5
|
%
|
Stock-Based Compensation Expense
|
|
|
161,808
|
|
|
|
1,035,373
|
|
|
|
(873,565
|
)
|
|
|
(84.4
|
%)
|
Total General and Administrative/Operating Expense
|
|
|
3,410,979
|
|
|
|
2,540,049
|
|
|
|
870,930
|
|
|
|
34.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest Expense
|
|
|
(8,688
|
)
|
|
|
(7,310
|
)
|
|
|
(1,378
|
)
|
|
|
18.9
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income (Loss)
|
|
$
|
(2,578,276
|
)
|
|
$
|
(542,587
|
)
|
|
$
|
(2,035,689
|
)
|
|
|
(375.2
|
%)
|
Our
revenues for the three months ended June 30, 2021, were from the Trxade platform, Community Specialty Pharmacy and Integra Pharma
Solutions. Revenues decreased by $4,694,383, compared to the prior period. The decrease was a result of non-recurring sales of personal
protective equipment (PPE) in 2020 related to the COVID-19 pandemic. In Trxade, Inc., revenue decreased by 17.5% to $1,150,710 for the
three months ended June 30, 2021, compared to $1,394,629, in the prior year’s period. The decrease was mainly as a result of supply
chain issues for generic drugs selling on the platform, which carry higher fee revenue than brands. The pandemic has created supply issues
for wholesalers and the generic product supply.
Cost
of goods sold, and gross profit were $1,056,863 and $841,391 for the three-month period ended June 30, 2021, respectively,
and for the three-month period ended June 30, 2020, were $4,587,865 and $2,004,772, respectively.
Gross
profit as a percentage of sales was 44% for the three months ended June 30, 2021, compared to 30% for the three months ended June 30,
2020. The reason for the increase in gross profit as a percentage of sales was a result of fewer lower margin Personal Protective
Equipment (“PPE”) sales in 2021. There was an inventory write down included in Cost of Sales of $383,000 of PPE related
product during the three months ending June 30, 2021, compared to no write-down during the three months ended June 30, 2020. Gross profit
decreased during the current period due to the decrease in sales discussed above, coupled with the decrease in cost of sales, also as
discussed above.
General
and administrative expenses (less stock-based compensation expense) increased for the three months ended June 30, 2021, to $2,024,030
compared to $1,504,676 for the comparable period in 2020. The increase was mainly due to IT development and marketing expenses relating
to Bonum Health and MedCheks.
Total
stock-based compensation expense decreased by 84.4% for the three months ended June 30, 2021, compared to the prior year’s period
due to no management stock bonuses being granted during the period, as described in greater detail above under “Part I. Financial Statements – Item 1. Financial Statements” – “NOTE 3 – SHAREHOLDERS’ EQUITY”.
We
had $1,225,141 of Loss on Inventory Investment for the quarter ended June 30, 2021, in connection with Inventory deposits and
write-downs of our Bonum Health Hubs as described in greater detail in “NOTE 6 – OTHER RECEIVABLE”,
We
had interest expense of $8,688 for the three months ended June 30, 2021, compared to interest expense of $7,310 for the three months
ended June 30, 2020, which decreased due to decreases in the amount of outstanding debt we had as of the current period.
Net
loss increased $2,035,689, to a net loss of $2,578,276 for the three months ended June 30, 2021, compared to a net loss of $542,587 for
the three months ended June 30, 2020, mainly due to the IT development and marketing of the Trxade Platform, Bonum Health and MedCheks
start-up development, loss on inventory investments, legal expenses and inventory write downs, as described in greater detail above
under “Part I. Financial Statements – Item 1. Financial Statements” –
“NOTE 6 – OTHER RECEIVABLE”, as well as the decrease in revenues, offset by the decrease in
cost of sales, each described in greater detail above.
Six
Month Period Ended June 30, 2021, Compared to Six Month Period Ended June 30, 2020
|
|
Six Months Ended
|
|
|
|
June 30, 2021
|
|
|
June 30, 2020
|
|
|
Change
|
|
|
Percent Change
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
4,951,489
|
|
|
$
|
8,795,957
|
|
|
$
|
(3,844,468
|
)
|
|
|
(43.7
|
%)
|
Cost of Sales
|
|
|
2,276,787
|
|
|
|
5,151,049
|
|
|
|
(2,424,262
|
)
|
|
|
(47.1
|
%)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Profit
|
|
|
2,224,702
|
|
|
|
3,644,908
|
|
|
|
(1,420,206
|
)
|
|
|
(39.0
|
%)
|
Operating Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss on Inventory Investment
|
|
|
1,225,141
|
|
|
|
-
|
|
|
|
1,225,141
|
|
|
|
100
|
%
|
General and Administrative (less stock-based compensation Expense)
|
|
|
3,877,611
|
|
|
|
2,815,805
|
|
|
|
1,061,806
|
|
|
|
37.7
|
%
|
Stock-Based compensation Expense
|
|
|
335,793
|
|
|
|
1,176,153
|
|
|
|
(840,360
|
)
|
|
|
(71.4
|
%)
|
Total General and Administrative/Operating Expense
|
|
|
5,438,545
|
|
|
|
3,991,958
|
|
|
|
1,446,587
|
|
|
|
36.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest Expense
|
|
|
(15,952
|
)
|
|
|
(15,234
|
)
|
|
|
(718
|
)
|
|
|
(4.7
|
%)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income (Loss)
|
|
$
|
(3,229,795
|
)
|
|
$
|
(362,284
|
)
|
|
$
|
(2,867,511
|
)
|
|
|
(791.5
|
%)
|
Our
revenues for the six months ended June 30, 2021, were from the Trxade platform, Community Specialty Pharmacy and Integra Pharma
Solutions. Revenues decreased by $3,844,468 compared to the prior period. Integra Pharma Solutions revenue decreased by 65.7% to $1,715,466
for the six months ended June 30, 2021, compared to $5,003,524 in the prior year’s period. The decrease was a result of non-recurring
sales of personal protective equipment (PPE) in 2020 related to the COVID-19 pandemic. In Trxade, Inc., revenue decreased by 18.1% to
$2,387,360 for the six months ended June 30, 2021, compared to $2,914,537, in the prior year’s period. The decrease was mainly
as a result of supply chain issues for generic drugs selling on the platform, which carry higher fee revenue than brands. The pandemic
has created supply issues for wholesalers and the generic product supply.
Cost
of sales and gross profit were $2,276,787 and $2,224,702 for the six months ended June 30, 2021, respectively, and $5,151,049 and $3,644,908
for the six months ended June 30, 2020, respectively. As sales for PPE decreased in 2021, the cost of sales also decreased.
Gross
profit as a percentage of sales was 45% for the six months ended June 30, 2021, compared to 41% for the six months ended June 30, 2020.
The reason for the increase in gross profit as a percentage of sales was a result of a greater amount of sales from the Trxade platform,
which carries a higher gross margin.
General
and administrative expenses (less stock-based compensation expense) increased for the six months ended June 30, 2021, to $3,877,611,
compared to $2,815,805 for the comparable period in 2020. The increase was mainly due to IT development and marketing expenses related
to Bonum Health and MedCheks and legal expenses.
Total
stock-based compensation expense decreased to $335,793 for the six months ended June 30, 2021, compared to $1,176,153 for the prior year’s
period, due to no management stock bonuses being granted in the current period. Stock-based compensation is described in greater detail
above under “Part I. Financial Statements – Item 1. Financial Statements”
– “NOTE 3 – SHAREHOLDERS’ EQUITY”.
We
had $1,225,141 of Loss on Inventory Investment for the six months ended June 30, 2021, in connection with Inventory deposits
and our write-down of our Bonum Health Hubs as described in greater detail in “NOTE 6 – OTHER
RECEIVABLES”.
We
had interest expense of $15,952 for the six months ended June 30, 2021, compared to interest expense of $15,234 for the six months ended
June 30, 2020.
Net
loss increased by $2,867,511, to a net loss of $3,229,795 for the six months ended June 30, 2021, compared to net loss of $362,284 for
the six months ended June 30, 2020, mainly due to the IT development and marketing of the Trxade Platform, Bonum Health and MedCheks
start-up development, loss on inventory investments, legal expenses and inventory write downs, as described in greater detail above
under “Part I. Financial Statements – Item 1. Financial Statements” –
“NOTE 6 – OTHER RECEIVABLES”, as well as the decrease in revenues, offset by
the decrease in cost of sales, each described in greater detail above.
Off-Balance
Sheet Arrangements
We
had no outstanding off-balance sheet arrangements as of June 30, 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”). 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.
Integra
Pharma Solutions, LLC (“Integra LLC”) 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 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”.