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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

(Mark One)

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the Quarterly Period Ended September 30, 2023

 

OR

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

Commission File Number: 001-39199

 

 

 

TRxADE HEALTH, INC.

(Exact name of registrant as specified in its charter)

 

Delaware   46-3673928
(State or other jurisdiction of   (I.R.S. Employer
incorporation or organization)   Identification No.)
     
2420 Brunello Trace    
Lutz, Florida   33558
(Address of principal executive offices)   (Zip code)

 

(800) 261-0281

(Registrant’s telephone number, including area code)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class   Trading Symbol(s)   Name of each exchange on which registered
Common Stock, $0.00001 Par Value Per Share   MEDS  

The NASDAQ Stock Market LLC

(The NASDAQ Capital Market)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer Accelerated filer
       
Non-accelerated filer Smaller reporting company
       
Emerging growth company    

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No

 

There were 1,205,008 shares of the registrant’s common stock outstanding on January 16, 2024 and 307,145 shares of preferred stock outstanding.

 

 

 

   

 

 

TRxADE HEALTH, INC.

FORM 10-Q

For the Quarter Ended September 30, 2023

 

TABLE OF CONTENTS

 

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS 3
   
PART I: FINANCIAL INFORMATION 4
   
ITEM 1. FINANCIAL STATEMENTS 4
   
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 26
   
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 36
   
ITEM 4. CONTROLS AND PROCEDURES 36
   
PART II. OTHER INFORMATION 38
   
ITEM 1. LEGAL PROCEEDINGS 38
   
ITEM 1A. RISK FACTORS 38
   
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS 41
   
ITEM 3. DEFAULTS UPON SENIOR SECURITIES 41
   
ITEM 4. MINE SAFETY DISCLOSURES 41
   
ITEM 5. OTHER INFORMATION 41
   
ITEM 6. EXHIBITS 42

 

2

 

 

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

 

This Quarterly Report on Form 10-Q (“Report”), including without limitation, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” contains forward-looking statements, within the meaning of the federal securities laws, including the Private Securities Litigation Reform Act of 1995, regarding future events and the future results of the Company that are based on current expectations, estimates, forecasts, and projections about the industry in which the Company operates and the beliefs and assumptions of the management of the Company. Words such as “expects,” “anticipates,” “targets,” “goals,” “projects,” “intends,” “plans,” “believes,” “seeks,” “estimates,” variations of such words, and similar expressions are intended to identify such forward-looking statements. These forward-looking statements are only predictions and are subject to risks, uncertainties and assumptions that are difficult to predict. These factors include, but are not limited to:

 

  Our limited amount of cash;
  The negative effect on our business and our ability to raise capital that is created by the fact that there is a substantial doubt about our ability to continue as a going concern;
  Risks of our operations not being profitable;
  Claims relating to alleged violations of intellectual property rights of others;
  Technical problems with our websites;
  Risks relating to implementing our acquisition strategies;
  Negative effects on our operations associated with the opioid pain medication health crisis;
  Regulatory and licensing requirement risks;
  Risks related to changes in the U.S. healthcare environment;
  The status of our information systems, facilities and distribution networks;
  Risks associated with the operations of our more established competitors;
  Regulatory changes;
  Healthcare fraud;
  The potential impact of some future pandemic;
  Inflation, rising interest rates, governmental responses thereto and possible recessions caused thereby.
  Changes in laws or regulations relating to our operations;
  Privacy laws;
  System errors;
  Dependence on current management;
  Our growth strategy;
  Risks related to the disruption of management’s attention from ongoing business operations due to pursuit of requirements related to being a listed company; and
  Other factors discussed in this Quarterly Report on Form 10-Q and in Part I, Item 1A. “Risk Factors” in Part I, Item 1A. “Risk Factors” and Part II, Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Form 10-K.

 

While forward-looking statements reflect our good faith beliefs, assumptions and expectations, they are not guarantees of future performance. The forward-looking statements speak only as of the date of this Quarterly Report on Form 10-Q. Furthermore, we disclaim any obligation to publicly update or revise any forward-looking statement to reflect changes in underlying assumptions or factors, of new information, data or methods, future events or other changes. Moreover, because we operate in a very competitive and rapidly changing environment, new risk factors are likely to emerge from time to time. We caution investors not to place undue reliance on these forward-looking statements and urge you to carefully review the disclosures we make concerning risks in this Quarterly Report and in Part I, Item 1A. “Risk Factors” and Part II, Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K and Part II, Item 1A. “Risk Factors” in the Quarterly Report for the period ending June 30, 2023, filed with the Securities and Exchange Commission (SEC) on August 18, 2023. Readers of this Quarterly Report on Form 10-Q should also read our other periodic filings made with the SEC and other publicly filed documents for further discussion regarding such factors.

 

3

 

 

PART I: FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS

 

TRxADE HEALTH, INC.

Consolidated Balance Sheets

September 30, 2023 and December 31, 2022

(Unaudited)

 

   September 30,   December 31, 
    2023    2022 
Assets          
Current Assets          
Cash  $34,031   $1,094,891 
Accounts receivable, net   850,103    649,263 
Inventory   3,026,918    68,448 
Prepaid assets   246,093    104,462 
Notes receivable   1,275,000    - 
Other receivables   115,684    - 
Current assets of discontinued operations   -    176,057 
Total Current Assets   5,547,829    2,093,121 
           
Property plant and equipment, net   287,920    65,214 
Deposits   49,031    49,031 
Intangible assets, net   9,451,562    - 
Goodwill   5,129,116    - 
Other assets   -    - 
Operating lease right-of-use assets   1,188,385    1,051,815 
Noncurrent assets of discontinued operations   -    450,845 
Total Assets  $21,653,843   $3,710,026 
           
Liabilities and Shareholders’ Equity          
Current Liabilities          
Accounts payable   1,328,599    527,984 
Accrued liabilities   386,024    271,230 
Other current liabilities   412,390    67,517 
Contingent funding liabilities   452,348    108,036 
Current portion of operating lease liabilities   251,087    196,872 
Notes payable, current portion   5,230,000    - 
Notes payable— related party, current portion   -    166,667 
Warrant liability   1,031,841    588,533 
Current liabilities of discontinued operations   -    219,952 
Total Current Liabilities   9,092,289    2,146,791 
           
Long Term Liabilities          
Operating lease liabilities, net of current portion   976,869    887,035 
Notes payable, net of current portion   25,000    - 
Notes payable- related party, net of current portion   -    333,333 
           
Total Liabilities   10,094,158    3,367,159 
           
Stockholders’ Equity          
           
Series A preferred stock, $0.00001 par value; 9,212,246 shares authorized; none issued and outstanding, as of September 30, 2023 and December 31, 2022.   -    - 
Series B preferred stock, $0.00001 par value; 787,754 shares authorized; 306,855 issued and outstanding, as of September 30, 2023 and December 31, 2022.   -    - 
Common stock, $0.00001 par value; 6,666,667 shares authorized; 818,961 and 626,247 shares issued and outstanding, as of September 30, 2023 and December 31, 2022, respectively   8    6 
Additional paid-in capital   33,089,652    20,482,666 
Retained deficit   (21,529,975)   (19,719,536)
Total TRxADE Health Inc. Stockholders’ Equity   11,559,685    763,136 
Non-controlling interest in subsidiary   -    (420,269)
Total Stockholders’ Equity   11,559,685    342,867 
           
Total Liabilities and Stockholders’ Equity  $21,653,843   $3,710,026 

 

The accompanying notes are an integral part of the unaudited consolidated financial statements.

 

4

 

 

TRxADE HEALTH, INC.

Consolidated Statements of Operations

For the Three and Nine Months Ended September 30, 2023 and 2022

(Unaudited)

 

   2023   2022   2023   2022 
   Three Months Ended
September 30,
   Nine Months Ended
September 30,
 
   2023   2022   2023   2022 
                     
Revenues  $2,058,028   $2,055,803   $5,919,786   $7,993,805 
                     
Cost of sales   353,450    683,375    1,072,934    3,991,234 
Gross profit   1,704,578    1,372,428    4,846,852    4,002,571 
                     
Operating expenses:                    
Wage and salary expense   698,030    849,371    2,077,362    2,949,386 
Professional fees   418,294    82,710    782,286    256,807 
Accounting and legal expense   408,957    191,007    782,495    567,086 
Technology expense   410,612    238,577    1,010,374    690,875 
General and administrative expense   613,834    229,526    1,264,902    1,392,130 
Total operating expenses   2,549,727    1,591,191    5,917,419    5,856,284 
                     
Operating loss   (845,149)   (218,763)   (1,070,567)   (1,853,713)
                     
Nonoperating income (expense)                    
Change in fair value of warrant liability   925,320    -    (443,308)   - 
Interest income   -    8,396    4,198    8,396 
Gain (loss) on disposal of assets   -    -    -    2,200 
Interest expense   (251,778)   (130,107)   (494,904)   (140,626)
Total nonoperating income (expense)   673,542    (121,711)   (934,014)   (130,030)
Net loss from continuing operations   (171,607)   (340,474)   (2,004,581)   (1,983,743)
                     
Net loss on discontinued operations   (3,353,507)   (188,268)   (4,123,028)   (623,096)
                     
Net loss  $(3,525,114)  $(528,742)  $(6,127,609)  $(2,606,839)
Net loss attributable to TRxADE Health, Inc.  $(3,525,114)  $(503,003)  $(6,127,609)  $(2,546,913)
                     
Net loss attributable to non-controlling interests   -    (25,739)   -    (59,926)
                     
Net loss per common share from continuing operations                    
Basic  $(0.22)  $(0.57)  $(2.83)  $(3.52)
Diluted  $(0.07)  $(0.57)  $(0.87)  $(3.51)
Net loss per common share from discontinued operations                    
Basic  $(4.35)  $(0.34)  $(5.82)  $(1.14)
Diluted  $(1.42)  $(0.34)  $(1.79)  $(1.14)
Net loss attributable to common stockholders                    
Basic  $(4.57)  $(0.91)  $(8.65)  $(4.66)
Diluted  $(1.49)  $(0.91)  $(2.66)  $(4.64)
Weighted average common shares outstanding                    
Basic   771,192    549,977    708,116    546,879 
Diluted   2,363,233    551,724    2,300,157    548,626 

 

The accompanying notes are an integral part of the unaudited consolidated financial statements.

 

5

 

 

TRxADE HEALTH, INC.

Consolidated Statements of Changes in Stockholders’ Equity

For the Three and Nine Months Ended September 30, 2023, and 2022

(Unaudited)

 

 

                                                   
   Series B   Series A           Additional       Noncontrolling   Total 
   Preferred Stock   Preferred Stock   Common Stock   Paid-In   Accumulated   Interests in   Stockholders’ 
   Shares   Amount   Shares   Amount   Shares   Amount   Capital   Deficit   Subsidiaries   Equity 
Balance at December 31, 2022   -   $-    -   $-    626,247   $6   $20,482,666   $(19,719,536)  $(420,269)  $           342,867 
Common stock issued for services   -    -    -    -    14,362    -    63,486    -    -    63,486 
Warrants exercised for cash   -    -    -    -    40,116    1    6    -    -    7 
Disposition of assets, related party   -    -    -    -    -    -    -    492,030    420,269    912,299 
Options expense   -    -    -    -    -    -    14,434    -    -    14,434 
Net Loss   -    -    -    -    -    -    -   $(677,953)   -    (677,953)
Balance at March 31, 2023   -   $-    -   $-    680,725   $7    20,560,592   $(19,905,459)  $-   $655,140 
Common stock issued for services   -    -    -    -    -    -    15,813    -    -    15,813 
Warrants exercised for cash   -    -    -    -    1,795    -    1,615    -    -    1,615 
Options expense   -    -    -    -    -    -    7,783    -    -    7,783 
Net Loss   -    -    -    -    -    -    -    (1,974,878)   -    (1,974,878)
Balance at June 30, 2023   -   $-    -   $-    682,520   $7   $20,585,803   $(21,880,337)  $-   $(1,294,527)
Options expense   -    -    -    -    -    -    3,761    -    -    3,761 
Disposition of assets   -    -    -    -    -    -    -    3,875,476    -    3,875,476 
Shares issued pursuant to merger agreement   -    -    15,759    -    136,441    1    12,500,088    -    -    12,500,089 
Net Loss   -    -    -    -    -    -    -    (3,525,114)   -   $(3,525,114)
Balance at September 30, 2023   -   $-    15,759   $-    818,961   $8    33,089,652   $(21,529,975)  $-   $11,559,685 
                                                   
Balance at December 31, 2021   -    -    -    -    544,430    5    20,017,605    (16,247,437)   -    3,770,173 
Capital contributions   -    -    -    -    -    -    -    -    792,500    792,500 
Common stock issued for services   -    -    -    -    -    -    32,083    -    -    32,083 
Capital distributions   -    -    -    -    -    -    -    -    (775,000)  $(775,000)
Warrants exercised for cash   -    -    -    -    972    -    875    -    -    875 
Options expense   -    -    -    -    -    -    32,783    -    -    32,783 
Net Loss   -    -    -    -    -    -    -   $(960,147)  $(5,689)  $(965,836)
Balance at March 31, 2022   -   $-    -   $-    545,402   $5   $20,083,346   $(17,207,584)  $11,811   $2,887,578 
Common stock issued for services   -    -    -    -    -    -    12,222    -    -    12,222 
Options expense   -    -    -    -    -    -    16,994    -    -    16,994 
Net Loss   -    -    -    -    -    -    -   $(1,083,763)   (28,498)  $(1,112,261)
Balance at June 30, 2022   -   $-    -   $-    545,402   $5   $20,112,562   $(18,291,347)  $(16,687)  $1,804,533 
Common stock issued for services   -    -    -    -    14,511    1    63,125    -    -    63,126 
Warrants exercised for cash   -    -    -    -    -    -    -    -    -    - 
Options expense   -    -    -    -    -    -    17,661    -    -    17,661 
Net Loss   -    -    -    -    -    -    -   $(503,003)  $(25,739)  $(528,742)
Balance at September 30, 2022   -   $-    -   $-    559,913   $6   $20,193,348   $(18,794,350)  $(42,426)  $1,356,578 

 

The accompanying notes are an integral part of the unaudited consolidated financial statements

 

6

 


 

TRxADE HEALTH, INC.

Consolidated Statements of Cash Flows

For The Nine Months Ended September 30, 2023 and 2022

(Unaudited)

 

    2023    2022 
   Nine months Ended September 30, 
    2023    2022 
Cash flows from operating activities:          
Net loss from continuing operations  $(2,004,581)  $(1,983,743)
Adjustments to reconcile net loss to net cash used in operating activities:          
Depreciation expense   8,464    11,815 
Options expense   25,978    67,439 
Common stock issued for services   79,299    107,430 
Bad debt recovery   -    (98,841)
Gain on disposal of asset   -    (4,100)
Amortization of intangible assets   325,916    29,400 
           
Changes in operating assets and liabilities:          
Accounts receivable, net   (212,292)   227,508 
Prepaid assets and deposits   (138,450)   198,088 
Inventory   (39,013)   (19,671)
Other receivables   -    (875,250)
Operating lease right-of-use assets   152,121    132,847 
Other assets   -    - 
Operating lease liabilities   (145,707)   (120,401)
Accounts payable   854,171    267,384 
Accrued liabilities   43,729    (178,714)
Inventory deposits   -    - 
Current liabilities   (5,127)   105,926 
Warrant liability   443,308    - 
           
Net cash used in operating activities from continuing operations   (612,184)   (2,132,883)
Net cash used in operating activities from discontinued operations   (593,893)   (623,096)
Net cash used in operating activities   (1,206,077)   (2,755,979)
           
Cash flows from investing activities:          
Proceeds from sale of fixed assets   -    23,000 
Cash received in acquisitions   5,546    - 
Investment in capitalized software   -    (335,902)
Net cash provided by (used in) investing activities from continuing operations   5,546    (312,902)
Net cash provided by investing activities from discontinued operations   68,737    - 
Net cash provided by (used in) investing activities   74,283    (312,902)
           
Cash flows from financing activities:          
Proceeds from the issuance of debt   200,000    - 
Proceeds from repayment of notes receivable   25,000    - 
Repayment of contingent liability   (1,755,688)   (282,857)
Proceeds from sale of future revenue   2,100,000    825,000 
Distributions to non-controlling interest   -    (275,000)
Proceeds from exercise of warrants   1,622    875 
Net cash provided by financing activities from continuing operations   570,934    268,018 
Net cash used in financing activities from discontinued operations   (500,000)   - 
Net cash provided by financing activities   70,934    268,018 
           
Net change in cash   (1,060,860)   (2,800,863)
Cash at beginning of the year   1,094,891    3,122,578 
Cash at end of the period  $34,031   $321,715 
           
Supplemental disclosure of cash flow information          
Cash paid for interest  $494,408   $3,328 
Cash paid for income taxes  $-   $- 
Non-cash Transactions          
Insurance premium financed  $306,152   $220,354 
Note cancelled from SOSRx agreement termination  $500,000   $- 
Note issued as SOSRx contribution  $-   $500,000 
Intangible asset contribution from non-controlling interest  $-   $792,500 
Disposition of assets, related party  $492,030   $- 
Issuance of notes receivable  $1,300,000   $- 

 

The accompanying notes are an integral part of the unaudited consolidated financial statements.

 

7

 

 

NOTE 1 – ORGANIZATION AND BASIS OF PRESENTATION

 

Overview

 

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, Superlatus, Inc. and its wholly-owned subsidiary, Sapientia Technologies, LLC (“Sapientia”), and The Urgent Company, Inc. On July 31, 2023, the Company merged with Superlatus, Inc. (see “Merger”, below). On September 27, 2023, the Company acquired The Urgent Company, Inc. (see Note 3).

 

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 (“IPS”, d.b.a. Trxade Prime), is a licensed pharmaceutical wholesaler and sells brand, generic and non-drug products to customers. IPS customers include all healthcare markets including government organizations, hospitals, clinics and independent pharmacies nationwide.

 

Community Specialty Pharmacy, LLC, (“CSP”) is an accredited independent retail pharmacy with a focus on a community-based model offering home delivery services to patients.

 

Alliance Pharma Solutions, LLC (“APS”, d.b.a. DelivMeds) is currently being rebranded and the consumer-based app is still being developed. To date, we have not generated any revenue from this product.

 

On January 20, 2023, the Company entered into Membership Interest Purchase Agreements to sell 100% of the outstanding membership interests of the Company’s subsidiaries, CSP and APS. The Company will receive consideration in the amount of $125,000 for APS and $100,000 for CSP. The Company also agreed to enter into a Master Service Agreement to operate the businesses prior to closing. Additional amounts owed to the Company as a result of this Master Service Agreement totaled $1,075,000 as of the closing date of August 22, 2023 (see Note 3 and Note 6).

 

Bonum Health, LLC (“Bonum Health”), was formed to hold certain telehealth assets acquired in October 2019. The “Bonum Health Hub” was launched in February 2020; however, due to the COVID-19 pandemic, the Company does not anticipate installations moving forward. The Bonum Health mobile application is available on a subscription basis, primarily as a stand-alone telehealth software application that can be licensed on a business-to-business (B2B) model to clients as an employment health benefit for the clients’ employees.

 

SOSRx, LLC (“SOSRx”) was formed on February 15, 2022. The Company entered into a relationship with Exchange Health, LLC (“Exchange Health”), a technology company providing an online platform for manufacturers and suppliers to sell and purchase pharmaceuticals. SOSRx, a Delaware limited liability company, was formed, which was owned 51% by the Company and 49% by Exchange Health. SOSRx did not generate material revenue and in February of 2023, the Company voluntarily withdrew from the joint venture agreement. As part of the voluntary withdrawal the Company has recorded a loss of $352,244 from disposal of assets, which is included in net loss on discontinued operations in the unaudited consolidated statement of operations in the amount of for the nine-month period ended September 30, 2023.

 

Merger

 

On July 14, 2023, the Company entered into an Amended and Restated Agreement and Plan of Merger (the “Merger Agreement”) with Superlatus, Inc., a U.S.-based holding company of food products and distribution capabilities (“Superlatus”) and Foods Merger Sub, Inc., a Delaware corporation and wholly owned subsidiary of the Company (“Merger Sub”).

 

8

 

 

Superlatus is a diversified food technology company with distribution capabilities and systems to optimize food security and population health via innovative Consumer Packaged Goods (“CPG”) products, agritech, foodtech, plant-based proteins and alt-protein and includes wholly-owned subsidiary, Sapientia, Inc. (“Sapientia”), a food tech business.

 

On July 31, 2023 (the “Closing Date”), the Company completed its acquisition of Superlatus in accordance with the terms and conditions of the Merger Agreement (the “Merger”), pursuant to which the Company acquired Superlatus by way of a merger of the Merger Sub with and into Superlatus, with Superlatus being a wholly owned subsidiary of the Company and the surviving entity in the Merger.

 

Under the terms of the Merger Agreement, at the closing of the Merger (the “Closing”), shareholders of Superlatus received in aggregate 136,441 shares of common stock of the Company, representing 19.99% of the total issued and outstanding common stock of the Company after the consummation of the Merger and 306,855 shares of Company’s Series B Preferred Stock, par value $0.00001 per share (the “Series B Preferred Stock”), with a conversion ratio of 100 shares of Series B Preferred Stock to one share of common stock. At Closing, the value of the common stock was $7.30 per share, resulting in a total value of $225,000,169. Upon consummation of the Merger, the Company continued to trade under the current ticker symbol “MEDS.”

 

As a condition and inducement to Superlatus’ willingness to enter into the Merger Agreement, on June 28, 2023, Suren Ajjarapu and Prashant Patel (the “Principal Stockholders”) entered into an agreement with TRxADE (the “Stock Swap Agreement”), pursuant to which, TRxADE will transfer all of the shares or membership interest of the operating subsidiaries currently owned by TRxADE to Principal Stockholders, in exchange for Suran Ajjarapu to surrender 85,000 share of common stock of TRxADE and Prashant Patel to surrender 81,666 shares of the common stock of TRxADE (the “Stock Swap Transaction”). The closing of the Stock Swap Transaction shall take place simultaneously with the approval of TRxADE stockholders of the conversion of the Series B preferred stock into common stock. The closing of the Stock Swap Transaction is subject to the simultaneous condition that the Merger. As of the date of this filing, TRxADE stockholders have not approved the conversion. The Company is in the process of preparing a proxy merger, which is expected to occur in 2024. This will complete all contingencies of Merger Agreement and Stock Swap Agreement and result in a reverse capitalization.

 

In connection with the Merger, on July 31, 2023, certain Superlatus shareholders as of immediately prior to the Merger, and certain directors and officers of MEDS as of immediately prior to the Merger, entered into lock-up agreements with the Company, pursuant to which each such stockholder will be subject to a 360 day lockup on the sale or transfer of shares of common stock or securities convertible into or exercisable for or exchangeable for common stock held by each such stockholder at the closing of the Merger (the “Lock-up Agreements”).

 

In connection with the Merger, effective one (1) business day immediately prior to the Closing Date (the “MEDS Rights Record Date”), the Company issued to the shareholders of the Company as of the MEDS Rights Record Date, including the independent directors who are entitled to certain amount of common stock of the Company in connection with their 2023 annual compensation and regardless of whether the common stock has been issued or vest before the MEDS Rights Records Date (collectively, the “MEDS Rights Shareholders”) a non-transferrable right to receive one share of common stock of the Company at no cost (the “MEDS Rights”), with seven (7) MEDS Rights issued per share of common stock of the Company held as of the MEDS Rights Record Date, conditioned upon their execution of a Registration Rights Agreement. Such issuances will be made in reliance on the exemption from registration pursuant to Section 3(a)(9) or Section 4(a)(2) of the Securities Act, Regulation D under the Securities Act promulgated thereunder, and corresponding provisions of state securities or “blue sky” laws. The MEDS Rights are not actionable or transferable until registration; provided they become transferable one year after the date of the Merger if no registration has occurred. As of the date of this filing, no MEDS Rights shares have been issued.

 

Not all of the closing conditions of the Merger Agreement were met. As a result, the Company entered into Amendment No. 1 to the Amended and Restated Agreement and Plan of Merger (the “Amendment”) on January 8, 2024.Under the terms of the Amendment, the merger consideration to the shareholders of Superlatus was adjusted to the aggregate of 136,441 shares of common stock of the Company, representing 19.99% of the total issued and outstanding common stock of the Company after the consummation of the Merger and 15,759 shares of Company’s Series B Preferred Stock, par value $0.00001 per share (the “Series B Preferred Stock”), with a conversion ratio of 100 shares of Series B Preferred Stock to one share of common stock. At Closing, the value of the common stock was $7.30 per share, resulting in a total value of $12,500,089. Additionally, the shareholders of Superlatus agreed to surrender back to the Company 289,731 shares of the Company’s Series B Preferred Stock. Upon consummation of the Amended Merger Agreement, the Company continues to trade under the current ticker symbol “MEDS.”

 

Basis of Presentation and Principles of Consolidation

 

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 (“U.S. GAAP”) and the rules of the SEC and should be read in conjunction with the audited financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022, as filed with the SEC on March 27, 2023.

 

9

 

 

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. All significant intercompany balances and transactions have been eliminated in consolidation. The results of operations for the interim periods are not necessarily indicative of the results to be expected for the full year. Notes to the financial statements that would substantially duplicate the disclosures contained in the audited financial statements for the year ended December 31, 2022, as reported in the Company’s Annual Report on Form 10-K have been omitted.

 

Use of Estimates

 

The preparation of condensed consolidated financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses in the reporting period. The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from its estimates. To the extent there are material differences between estimates and the actual results, future results of operations will be affected. Significant estimates for the nine months ended September 30, 2023 and 2022 include the valuation of intangible assets, including goodwill.

 

Fair value of financial instruments

 

The carrying amounts for cash, accounts receivable, accounts payable, accrued liabilities, and other current liabilities approximate their fair value because of their short-term maturity.

 

Stock Split

 

Effective June 21, 2023, the Company executed a 1:15 reverse stock split for stockholders of record on that date. This was executed to comply with the Nasdaq Listing Rule 5550(a)(2) to have the price of the stock above $1.

 

Recently Issued Accounting Pronouncements

 

In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments” (“ASU 2016-13”). ASU 2016-13 requires companies to measure credit losses utilizing a methodology that reflects expected credit losses and requires a consideration of a broader range of reasonable and supportable information to inform credit loss estimates. ASU 2016-13 is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The Company adopted ASU 2016-13 effective January 1, 2023. The Company determined that the update applied to trade receivables, but that there was no material impact to the consolidated financial statements from the adoption of ASU 2016-13.

 

In August 2020, the FASB issued ASU 2020-06, “Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40)”. This ASU reduces the number of accounting models for convertible debt instruments and convertible preferred stock and amends the guidance for the derivatives scope exception for contracts in an entity’s own equity to reduce form-over-substance-based accounting conclusions. In addition, this ASU improves and amends the related earnings per share guidance. This standard is effective for us on January 1, 2022, including interim periods within those fiscal years. Adoption is either a modified retrospective method or a fully retrospective method of transition. The adoption of ASU 2020-06 did not have a material impact on our financial statements.

 

Accounts Receivable, net

 

On January 1, 2023, the Company adopted ASU 2016-13 “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments” and its related amendments using the prospective method. The new standard requires the use of a current expected credit loss impairment model to develop and recognize credit losses for financial instruments at amortized cost when the asset is first originated or acquired, and each subsequent reporting period.

 

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.

 

The Company had an account receivable with a single customer, GSG PPE, LLC (“GSG”), for the amount of $630,000, which was past due. The Company had obtained a Note Receivable which was due on September 30, 2021 and remained unpaid. The Company did not believe the amount to be collectible without legal actions, and therefore, recorded bad debt expense reflected on the consolidated statement of operations during the year ended December 31, 2021. The note was not paid pursuant to its terms and the Company had filed a suit to collect on the note and the personal guaranty securing the note. The Company settled the lawsuit in June of 2022. During the nine months ended September 30, 2023, and 2022, there was a bad debt recovery from the GSG lawsuit of $32,074 and $98,841 respectively.

 

Other Receivables, net

 

The Company’s other receivables balance is from one vendor. On May 20, 2022, effective as of May 18, 2022, Community Specialty Pharmacy, LLC (“CSP”) entered into an agreement to acquire COVID-19 testing kits from a third-party vendor for an aggregate of $1,200,000, of which $875,000 was paid on May 23, 2022. The Company received the COVID-19 testing kits in July 2022. On August 18, 2022 the Company was informed by the vendor that the vendor had received a letter from the U.S. Food and Drug Administration (“FDA”) that the COVID-19 test kits were misbranded under Section 502(o) of the Federal Food, Drug, and Cosmetic Act (“FDC Act”) (21 USC 352(o)) and adulterated under Section 501(f) of the FDC Act (21 USC 351(f)). Furthermore, the vendor informed the Company that the letter from the FDA also stated that because of the FDA’s prohibition on the distribution of adulterated and/or misbranded devices applies to all parties along the distribution chain, the FDA was advising the vendor against furthering the distribution of the COVID-19 test kits in interstate commerce. The company wrote the amount off as a loss of inventory as of December 31, 2022. As of September 30, 2023 and December 31, 2022, the balance of this receivable was $0.

 

On August 22, 2023, the Company completed the sale of CSP and APS (see Note 3). The net balance due to the Company from these entities, in excess of the Note Receivable (see Note 6), was $115,684 as of September 30, 2023. 

 

10

 

 

Acquisitions

 

The Company accounts for acquisitions and investments in businesses as business combinations if the target meets the definition of a business and (a) the target is a variable interest entity (“VIE”) and the Company is the target’s primary beneficiary, and therefore the Company must consolidate its financial statements, or (b) the Company acquires more than 50% of the voting interest of the target and it was not previously consolidated. The Company records business combinations using the acquisition method of accounting, which requires all the assets acquired and liabilities assumed to be recorded at fair value as of the acquisition date. The excess of the purchase price over the estimated fair values of the net tangible and intangible assets acquired is recorded as goodwill.

 

The application of the acquisition method of accounting for business combinations requires management to make significant estimates and assumptions in the determination of the fair value of assets acquired and liabilities assumed in order to properly allocate purchase price consideration between assets that are depreciated and amortized from goodwill. The fair value assigned to tangible and intangible assets acquired and liabilities assumed are based on management’s estimates and assumptions, as well as other information compiled by management, including valuations that utilize customary valuation procedures and techniques. Significant assumptions and estimates include, but are not limited to, the cash flows that an asset is expected to generate in the future, the appropriate weighted-average cost of capital, and the cost savings expected to be derived from acquiring an asset, if applicable.

 

If the actual results differ from the estimates and judgments used in these estimates, the amounts recorded in the Company’s financial statements may be exposed to potential impairment of the intangible assets and goodwill.

 

If the Company’s investment involves the acquisition of an asset or group of assets that does not meet the definition of a business, the transaction is accounted for as an asset acquisition. An asset acquisition is recorded at cost, which includes capitalizing transaction costs, and does not result in the recognition of goodwill.

 

Intangible Assets and Goodwill

 

The Company tests indefinite-lived intangible assets for impairment on an annual basis or whenever events or changes occur that would more-likely-than not reduce the fair value of the indefinite-lived intangible asset below its carrying value between annual impairment tests. Any indefinite-lived intangible asset assessment is performed at the Company level.

 

The Company did not record an indefinite-lived intangible asset impairment charge for the three and nine months ended September 30, 2023 and 2022.

 

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 September 30, 2023, we had 177,536 outstanding warrants to purchase shares of common stock and 17,852 options to purchase shares of common stock. As part of the termination of the White Lion deal, White Lion was issued 50,000 shares of stock per the agreement on March 1, 2023. Armistice Capital executed its pre-funded warrants on January 4, 2023, and purchased 601,740 shares of stock with a purchase price of $6.02.

 

The following table sets forth the computation of basic and diluted loss per share:

 

   2023   2022   2023   2022 
   For the Three Months Ended
September 30,
   For the Nine Months Ended
September 30,
 
   2023   2022   2023   2022 
Numerator:                    
Net loss from continuing operations  $(171,607)  $(314,735)  $(2,004,581)  $(1,923,817)
Net loss from discontinued operations  $(3,353,507)  $(188,268)   (4,123,028)  $(623,096)
Numerator for basic and diluted EPS - income available to common stockholders   (3,525,114)  $(503,003)   (6,127,609)  $(2,546,913)
Denominator:                    
Denominator for EPS – weighted average shares                    
Basic   771,192    549,977    708,116    546,879 
Diluted   2,363,233    551,724    2,300,157    548,626 
Net loss per common share attributable to common stockholders                    
Basic  $(4.57)  $(0.91)  $(8.65)  $(4.66)
Diluted  $(1.49)  $(0.91)  $(2.66)  $(4.64)
Net loss per common share from continuing operations                    
Basic  $(0.22)  $(0.57)  $(2.83)  $(3.52)
Diluted  $(0.07)  $(0.57)  $(0.87)  $(3.51)
Net loss per common share from discontinued operations                    
Basic  $(4.35)  $(0.34)  $(5.82)  $(1.14)
Diluted  $(1.42)  $(0.34)  $(1.79)  $(1.14)

 

11

 

 

Income taxes

 

The Company’s provision for income taxes was $0 for the three and nine months ended September 30, 2023, and $0 for the three and nine months ended September 30, 2022, respectively. The income tax provisions for these three and nine month periods are based upon estimates of annual income (loss), annual permanent differences and statutory tax rates in the various jurisdictions in which the Company operates. For all periods presented, the Company utilized net operating loss carryforwards to offset the impact of any taxable income. The Company’s tax rate differs from the applicable statutory rates due primarily to establishment of a valuation allowance, utilization of deferred and the effect of permanent differences and adjustments.

 

NOTE 2 – GOING CONCERN

 

The accompanying interim consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates realization of assets and the satisfaction of liabilities in the normal course of business within one year after the date the consolidated financial statements are issued. In accordance with Financial Accounting Standards Board, or the FASB, Accounting Standards Update No. 2014-15, Presentation of Financial Statements - Going Concern (Subtopic 205-40), our management evaluates whether there are conditions or events, considered in aggregate, that raise substantial doubt about our ability to continue as a going concern within one year after the date that the financial statements are issued.

 

As of September 30, 2023, the Company had a retained deficit of $21,529,975. The Company has limited financial resources. As of September 30, 2023, the Company had a working capital deficit of $3,544,460 and a cash balance of $34,031. The Company will need to raise additional capital or secure debt funding to support on-going operations. The sources of this capital are expected to be the sale of equity and debt, which may not be available on favorable terms, if at all, and may, if sold, cause significant dilution to existing stockholders. If the Company is unable to access additional capital moving forward, it may hurt the Company’s ability to grow and to generate future revenues, financial position, and liquidity. These factors raise substantial doubt about the ability of the Company to continue as a going concern. Unless Management is able to obtain additional financing, it is unlikely that the Company will be able to meet its funding requirements during the next 12 months. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

NOTE 3 – ACQUISITIONS AND DISPOSITIONS

 

Acquisitions - Provisional

 

Superlatus, Inc.

 

On July 31, 2023, the Company entered into the Merger Agreement (see Note 1) with Superlatus (“Seller”) whereby the Company acquired 100% of the stock of the Seller (the “Acquisition”). Superlatus includes a wholly-owned subsidiary, Sapientia. Consideration for the Acquisition consisted of (i) 136,441 shares of the Company’s common stock at a fair value of $7.30 per share, representing 19.99% of the total issued and outstanding share of the Company’s common stock at Closing, and (ii) 306,855 shares of the Company’s Series B Preferred Stock, a new class of the Company’s non-voting convertible preferred stock with a conversion ratio of 100 to one. The total fair value of the common stock and Series B Preferred Stock on the Closing Date was $225,000,169 (“Purchase Price”). On January 8, 2024, the Company entered into Amendment No. 1 to the Agreement and Plan of Merger (the “Amendment”). Under the terms of the Amendment, the merger consideration to the shareholders of Superlatus was adjusted to an aggregate of 136,441 shares of common stock of the Company, representing 19.99% of the total issued and outstanding common stock of the Company after the consummation of the Merger and 15,759 shares of Company’s Series B Preferred Stock, par value $0.00001 per share, with a conversion ratio of 100 shares of Series B Preferred Stock to one share of common stock. The total fair value of the common stock and Series B Preferred Stock on the Closing Date was adjusted to $12,500,089 (“Amended Purchase Price”). Additionally, the shareholders of Superlatus agreed to surrender back to the Company 289,731 shares of the Company’s Series B Preferred Stock previously received before the amendment.

 

The acquisition of Superlatus was accounted for as a business combination using the acquisition method pursuant to FASB ASC Topic 805. As the acquirer for accounting purposes, the Company had estimated the Purchase Price, assets acquired and liabilities assumed as of the acquisition date, with the excess of the Purchase Price over the fair value of net assets acquired recognized as goodwill. An independent valuation expert assisted the Company in determining these fair values.

 

Accounting guidance provides that an acquirer must recognize adjustments to provisional amounts that are identified during the measurement period, which runs through July 31, 2024, in the measurement period in which the adjustment amounts are determined. The acquirer must record in the financial statements, the effect on earnings of changes in depreciation, amortization or other income effects, if any, as a result of the changes to the provisional amounts, calculated as if the accounting had been completed at the acquisition date. Items that could be subject to adjustment include credit fair value adjustments on loans, core deposit intangible and the deferred income tax assets resulting from the acquisition.

 

The provisional Amended Purchase Price allocation as of the acquisition date is presented as follows:

 

   July 31, 2023 
Purchase consideration:     
Common Stock, at fair value  $996,019 
Series B Preferred Stock, at fair value   11,504,070 
Total purchase consideration  $12,500,089 
      
Purchase price allocation:     
Cash  $5,546 
Prepaid expenses   3,705 
Inventory   122,792 
Intangible assets, net   9,777,478 
Goodwill   5,129,116 
Assets acquired   15,038,637 
Accounts payable and other current liabilities   (633,548)
Notes payable   (1,905,000)
Liabilities assumed   (2,538,548)
Net assets acquired  $12,500,089 

 

12

 

 

The Urgent Company, Inc.

 

On September 27, 2023, the Company entered into an Asset Purchase Agreement (“APA”) with The Urgent Company, Inc. (“TUC”) and its wholly owned subsidiaries, pursuant to which, the Company was assigned certain inventory and property and equipment and assumed certain operating leases for consideration of a $3,150,000 promissory note (“Purchase Price”, see Note 11). This acquisition is expected to enhance the Company’s production of sustainable food products and enable the expansion of market share.

 

The transaction was accounted for as an asset acquisition pursuant to FASB ASC Topic 805. As the acquirer for accounting purposes, the Company allocated the cost of the asset acquisition to the assets acquired and liabilities assumed as of the acquisition date based on their respective relative fair value as of the date of the transaction.

 

The following summarizes the provisional relative fair values of the assets acquired as of the acquisition date based on the allocation of the cost of the asset acquisition:

 

   September 27, 2023 
Purchase consideration:     
Promissory note  $3,150,000 
Total purchase consideration  $3,150,000 
      
Allocation of cost of assets acquired:     
Inventory  $2,960,235 
Property and equipment   231,170 
Operating right-of-use assets   383,218 
Assets acquired   3,574,623 
Liabilities assumed   (424,623)
Net assets acquired  $3,150,000 

 

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Dispositions and Divestitures

 

SOSRx, LLC

 

On and effective on, February 1, 2023, the Company, Exchange Health and SOSRx, entered into a Voluntary Withdrawal and Release Agreement, which was replaced in its entirety, corrected, and became effective on February 4, 2023 (as replaced and corrected, the “Release Agreement”).

 

As part of the Release Agreement, a note payable to Exchange Health was forgiven in the amount of $500,000 and $15,000 in accounts payable was waived. Effective February 4, 2023, the operations of SOSRx were discontinued and operations were shut down. As a result of this, the assets and liabilities of SOSRx have been reflected as assets and liabilities of discontinued operations in the Company’s consolidated balance sheets. As of September 30, 2023 and December 31, 2022 as follows:

 

   September 30, 2023   December 31, 2022 
         
Cash  $-   $22,474 
Accounts receivable   -    363 
Total assets of discontinued operations  $-   $22,837 
           
Accounts payable  $-   $46,500 
Total liabilities of discontinued operations  $-   $46,500 

 

The terms of the Release Agreement qualifies the transaction as a discontinued operation in accordance with U.S. GAAP. As a result, operating results and cash flows related to the SOSRx operations have been reflected as discontinued operations in the Company’s consolidated statements of operations, consolidated statements of cash flows and consolidated statements of shareholders’ equity.

 

Alliance Pharma Solutions, LLC and Community Specialty Pharmacy, LLC

 

On August 22, 2023, the Company and Wood Sage, LCC (“Wood Sage”) entered into a Membership Interest Purchase Agreement, pursuant to which the Company sold 100% of the membership interest in Alliance Pharma Solutions, LLC (“ASP MIPA”) for consideration of a $125,000 promissory note (“ASP Sale Price”) and a Membership Interest Purchase Agreement, pursuant to which the Company sold 100% of the membership interest in Community Specialty Pharmacy, LLC (“CSP MIPA”) in exchange for a $100,000 promissory note (“CSP Sale Price”).

 

The divestiture of APS and CSP represents an intentional strategic shift in the Company’s operations and will allow the Company to become focused on food technology As a result, the results of APS and CSP were classified as discontinued operations in our condensed statements of operations and excluded from both continuing operations and segment results for the three and nine months ended September 30, 2022.

 

As part of recognizing the business as held for sale in accordance with U.S. GAAP, the Company was required to measure APS and CSP at the lower of its carrying amount or fair value less cost to sell. As a result of this analysis, during the three and nine months ended September 30, 2023, the Company recognized a non-cash, pre-tax loss on disposal of $3,209,776. The loss is included in “Net loss from discontinued operations” in the consolidated statements of operations. The loss was determined by comparing the fair value of the consideration received for the sale of a 100% interest in APS and CSP with the net assets of APS and CSP, respectively, immediately prior to the transaction.

 

14

 

 

As a result of the transactions, the following assets and liabilities of APS and CSP were transferred to Wood Sage as of August 22, 2023:

 SCHEDULE OF ASSETS AND LIABILITIES

   Alliance Pharma Solutions, LLC   Community Specialty Pharmacy, LLC 
Cash  $1,050   $61,988 
Accounts receivable, net   -    11,452 
Inventory   -    123,230 
Prepaid assets   -    525 
Intangible assets and capitalized software, net   739,337    - 
Accounts payable   (23,982)   (231,876)
Accrued liabilities   -    (10,182)
Net assets sold  $716,405   $(44,863)

 

Discontinued Operations

 

The results of operations from discontinued operations for the three and nine months ended September 30, 2023 and 2022, have been reflected as discontinued operations in the consolidated statements of operations and consist of the following:

 

SCHEDULE OF DISCONTINUED OPERATIONS

 

   2023   2022   2023   2022   2023   2022   2023   2022 
   SOSRx   APS   CSP   Total 
   Three Months Ended September 30,   Three Months Ended September 30,   Three Months Ended September 30,   Three Months Ended September 30, 
   2023   2022   2023   2022   2023   2022   2023   2022 
Revenue  $-   $3,368   $-   $-   $124,238   $341,140   $124,238   $344,508 
Cost of sales   -    -    -    -    127,671    314,945    127,671    314,945 
Gross profit   -    3,368    -    -    (3,433)   26,195    (3,433)   29,563 
                                         
Operating expenses                                        
Wage and salary expense   -    17,689    -    -    108,772    70,002    108,772    87,691 
Professional fees   -    -    -    10,471    18,079    2,094    18,079    12,565 
Accounting and legal expense   -    -    1,948    104    700    500    2,648    604 
Technology expense   -    23,000    4,177    31,564    2,231    5,445    6,408    60,009 
General and administrative   -    29,907    134    3,527    4,257    25,428    4,391    58,862 
Total operating expense   -    70,596    6,259    45,666    134,039    103,469    140,298    219,731 
                                         
Operating loss from discontinued operations   -    (67,228)   (6,259)   (45,666)   (137,472)   (77,274)   (143,731)   (190,168)
                                         
Other income (expense)                                        
Gain (loss) on disposal of assets   -    -    (1,783,209)   1,900    (1,426,567)   -    (3,209,776)   1,900 
Total other income (expense)   -    -    (1,783,209)   1,900    (1,426,567)   -    (3,209,776)   1,900 
                                         
Loss from discontinued operations  $-   $(67,228)  $(1,789,468)  $(43,766)  $(1,564,039)  $(77,274)  $(3,353,507)  $(188,268)
                                         
Loss per common share from discontinued operations                                        
Basic  $-   $(0.12)  $(2.32)  $(0.08)  $(2.03)  $(0.14)  $(4.35)  $(0.34)
Diluted  $-   $(0.12)  $(0.76)  $(0.08)  $(0.66)  $(0.14)  $(1.42)  $(0.34)

 

15

 

 

   2023   2022   2023   2022   2023   2022   2023   2022 
   SOSRx   ASP   CSP   Total 
   Nine months ended September 30,   Nine months ended September 30,   Nine months ended September 30,   Nine months ended September 30, 
   2023   2022   2023   2022   2023   2022   2023   2022 
Revenue  $-   $20,424   $-   $-   $761,306   $905,083   $761,306   $925,507 
Cost of sales   -    -    -    -    705,206    1,019,470    705,206    1,019,470 
Gross profit   -    20,424    -    -    56,100    (114,387)   56,100    (93,963)
                                         
Operating expenses                                        
Wage and salary expense   -    54,939    -    -    456,297    180,819    456,297    235,758 
Professional fees   -    -    3,125    44,962    20,246    5,572    23,371    50,534 
Accounting and legal expense   -    -    7,773    104    63,000    500    70,773    604 
Technology expense   -    53,910    20,611    83,659    9,464    13,989    30,075    151,558 
General and administrative   -    33,873    3,762    10,761    32,830    47,945    36,592    92,579 
Total operating expense   -    142,722    35,271    139,486    581,837    248,825    617,108    531,033 
                                         
Operating loss from discontinued operations   -    (122,298)   (35,271)   (139,486)   (525,737)   (363,212)   (561,008)   (624,996)
                                         
Other income (expense)                                        
Gain (loss) on disposal of assets   (352,244)   -    (1,783,209)   1,900    (1,426,567)   -    (3,562,020)   1,900 
Total other income (expense)   (352,244)   -    (1,783,209)   1,900    (1,426,567)   -    (3,562,020)   1,900 
                                         
Loss from discontinued operations  $(352,244)  $(122,298)  $(1,818,480)  $(137,586)  $(1,952,304)  $(363,212)  $(4,123,028)  $(623,096)
                                         
Loss per common share from discontinued operations                                        
Basic  $(0.50)  $(0.22)  $(2.57)  $(0.25)  $(2.76)  $(0.66)  $(5.82)  $(1.14)
Diluted  $(0.15)  $(0.22)  $(0.79)  $(0.25)  $(0.85)  $(0.66)  $(1.79)  $(1.14)

 

 

NOTE 4- RELATED PARTY TRANSACTIONS

 

On April 1, 2023 and July 1, 2023 the Company entered into a relationship with Scietech, LLC (“Scietech”) in an independent contractor agreement to consult on increasing sales on the IPS and Trxade Inc. platforms. The agreement was for an annual fee of $400,000 to be split equally between IPS and Trxade Inc. A 31% investor in Scietech is the spouse of the interim CFO, Prashant Patel, which qualifies as a related party. The company was chosen because they were the most qualified to perform the desired qualifications.

 

On February 15, 2022, the Company entered into a relationship with Exchange Health, a technology company providing an online platform for manufacturers and suppliers to sell and purchase pharmaceuticals. In connection therewith, SOSRx was formed in February 2022, which is owned 51% by the Company and 49% by Exchange Health. On February 15, 2022, the Company contributed cash to SOSRx in the amount of $325,000, issued a promissory note to SOSRx in the amount of $500,000, which was immediately assigned to Exchange Health (the “Promissory Note”), and agreed to make an earn out payment of up to $400,000, payable, at the Company’s discretion, in cash or common stock of the Company, based on SOSRx achieving certain revenue targets of SOSRx (the “Earn Out Payments”); and entered into a Distribution Services Agreement with SOSRx (the “Distribution Agreement”). Exchange Health contributed $792,000 in software and contracts which was recorded as an intangible asset on the balance sheet of SOSRx. The intangible asset was determined to be impaired and was written off on December 31, 2022.

 

16

 

 

At September 30, 2023, total related party debt was $0.

 

On and effective on, February 1, 2023, the Company, Exchange Health and SOSRx, entered into a Voluntary Withdrawal and Release Agreement, which was replaced in its entirety and corrected on February 4, 2023 and effective February 4, 2023 (as replaced and corrected, the “Release Agreement”). Pursuant to the Release Agreement, the Company voluntarily withdrew as a member of SOSRx pursuant to the terms of the Operating Agreement of SOSRx, which provided that the Company would withdraw from SOSRx if certain revenue targets were not met, which targets have not been met.

 

Also pursuant to the Withdrawal Agreement, (a) the Company agreed to the termination of its interests in SOSRx and its withdrawal as a member thereof for no consideration (the “Withdrawal”); (b) the Promissory Note, and all of the Company’s obligations under such Promissory Note were terminated; and (c) the parties agreed that no Earn Out Payments will be due. The Release Agreement also (i) provides that all accumulated losses of SOSRx through December 20, 2022, will be allocated 51% to the Company and 49% to Exchange Health; (ii) provides for a total of approximately $15,000 in outstanding invoices owed by the Company to SOSRx to be waived; (iii) includes certain indemnification obligations of SOSRx and Exchange Health; (iv) requires SOSRx to pay certain pre-agreed outstanding invoices of SOSRx; (v) includes mutual releases of the Company and SOSRx and Exchange Health; and (vi) includes customary representations and warranties of the parties.

 

NOTE 5 REVENUE RECOGNITION

 

The Company derives revenue from two primary sources—product revenue and service revenue.

 

Product revenue consists of shipments of:

 

Resale of pharmaceutical products to pharmacies; and

 

Revenues for our products are recognized and invoiced when the product is shipped to the customer.

 

Service revenue consists primarily of:

 

Transaction fees from the facilitation of buyer generated purchase orders to suppliers, billed monthly;
Data service fees associated with providing vendors of pharmaceutical products with data analysis of their catalogues and branding of their products or company to the Company’s registered buyers, billed monthly or as a one-time fee; and
Software-as-a-Service (“SaaS”) fees for a platform for virtual healthcare provider visits, billed monthly.

 

Revenues for the Company’s services that are billed monthly are recognized and invoiced when the at the beginning of the month. Revenues for one-time services are recognized at the point in time when services are rendered.

 

Payment terms for products and services are generally 0 to 60 days and the Company has no contract assets or liabilities.

 

The following table presents disaggregated revenue by major product and service categories during the three and nine months ended September 30, 2023 and 2022:

 

   2023   2022   2023   2022 
   Three months ended September 30,   Nine months ended September 30, 
   2023   2022   2023   2022 
Product revenues                    
Pharmaceutical product resale income  $394,849   $707,807   $1,237,731   $3,949,771 
Total product revenues  $394,849   $707,807   $1,237,731   $3,949,771 
                     
Service revenues                    
Transaction fee income  $1,617,129   $1,319,483   $4,531,731   $3,947,621 
Data service fee income   46,050    17,950    132,025    54,050 
SaaS fee income   -    10,563    18,299    42,363 
Total service revenues  $1,663,179   $1,347,996   $4,682,055   $4,044,034 
Total revenues  $2,058,028   $2,055,803   $