Core Points - TRxADE Health, Inc. has declared a special cash dividend of $1.50 per share of common stock [1] - The dividend will be paid using a portion of the proceeds from the sale of the Company's web-based market platform assets in May 2024 [1] - The dividend is payable to stockholders of record as of July 19, 2024, with payment expected on or about July 24, 2024 [1]

Core Viewpoint - TRxADE Health, Inc. has declared a special cash dividend of $1.50 per share, utilizing proceeds from the sale of its web-based market platform assets [3] Financial Summary - The special cash dividend is payable to stockholders of record as of July 19, 2024, with payment expected on or about July 24, 2024 [3]

Acquisition and Disposition - The Company acquired 100% of Superlatus for a total fair value of $225,000,169, consisting of 136,441 shares of common stock and 306,855 shares of Series B Preferred Stock[20]. - The Company recognized a gain on the disposition of business amounting to $29,685,946, included in income from discontinued operations[24]. - As of March 31, 2024, the total carrying amount of assets and liabilities acquired in the Superlatus transaction was $2,083,743[21]. - The Company issued a promissory note to Perfect Day, Inc. for $4,400,000 as part of the acquisition consideration[35]. - The Company sold all equity shares of Superlatus Inc. for a nominal price of $1.00, resulting in the loss of $2,083,742 included in income from discontinued operations[50]. - The company completed the acquisition of Superlatus on July 31, 2023, with a merger consideration valued at $12,500,089[135]. - The merger consideration for Superlatus shareholders was adjusted to 136,441 shares of common stock and 15,759 shares of Series B Preferred Stock, valued at $12,500,089 at the time of closing[200]. Financial Performance - Total product revenue for the three months ended March 31, 2024, was $476,356, with total service revenue of $16,960, resulting in total revenue of $493,316[53]. - Total revenues for Q1 2024 were $0, down from $493,316 in Q1 2023, representing a 100% decrease[122]. - Operating expenses surged to $5,496,471 in Q1 2024, a 525% increase from $879,309 in Q1 2023, driven by a 1902% increase in general and administrative expenses[122]. - Net loss from operations for Q1 2024 was $(6,636,922), compared to $(1,136,637) in Q1 2023, marking a 484% increase in losses[122]. - Net income from discontinued operations rose to $27,882,955 in Q1 2024, up from $458,684 in Q1 2023, reflecting a 5979% increase due to the disposal of Trxade, Inc.[125]. - The company reported no revenues for Q1 2024, a decrease of $493,316 compared to the same period in 2023[169]. - The company reported a net income of $21,246,033 for March 2024, contrasting with a net loss of $677,953 in the same period last year[215]. Cash Flow and Liquidity - Cash used in operations for Q1 2024 was $(10,189,673), a significant increase from $(931,531) in Q1 2023, primarily due to shares issued for services valued at $4,450,919 and increased expenses[121]. - Cash balance as of March 31, 2024, was $3,498,812, a dramatic increase of 968108% from $361 on December 31, 2023[139]. - Cash provided by investing activities for Q1 2024 was $27,432,589, a substantial increase from $333,197 in Q1 2023, primarily due to the disposition of Trxade, Inc. and Superlatus, Inc.[167]. - Cash used in financing activities for Q1 2024 was $(13,896,011), a decrease from cash provided of $681,257 in Q1 2023, largely due to repayment of contingent funding liability and dividend payments[144]. - The company declared a special cash dividend of $8.00 per share, totaling $12,671,072, to be paid on March 22, 2024, funded by proceeds from the sale of Trxade assets[118]. Expenses and Liabilities - General and administrative expenses rose to $4,700,840 in Q1 2024, compared to $248,021 in Q1 2023, mainly due to stock-based compensation[147]. - The company recorded total lease expenses of $20,925 for the three months ended March 31, 2024, compared to $81,024 for the same period in 2023[103]. - Current liabilities decreased by 74% to $2,951,387 as of March 31, 2024, down from $11,556,355 on December 31, 2023[139]. - The company has substantial doubt about its ability to continue as a going concern due to the need for additional capital, which may not be available on favorable terms[196]. Stock and Shareholder Information - The company issued 470,482 shares of common stock for services, with a fair value of $4,450,919 included in general and administrative expenses[40]. - The weighted average common shares outstanding increased to 1,036,756 from 670,716 year-over-year, reflecting potential dilution[215]. - The company has not repurchased any shares of common stock during the first quarter of 2024[192]. Internal Controls and Compliance - The company does not expect its disclosure controls and procedures to prevent or detect all errors and fraud, indicating a need for ongoing evaluation and improvement[155]. - The company has not fully implemented necessary internal controls, leading to material weaknesses in financial reporting processes[180]. - The company is currently not in compliance with Nasdaq's continued listing standards, which may affect its ability to maintain its listing on the Nasdaq Capital Market[198]. Future Outlook and Strategy - The company anticipates its future capital resources will primarily consist of cash generated from operations, remaining cash balances, borrowings, and additional funds raised through sales of debt and/or equity securities[115]. - The company plans to continue operational expansions on its Trxade Prime platforms and explore strategic transactions for its business-to-consumer subsidiaries[140]. - The company plans to continue using existing marketing and management strategies while exploring strategic transactions and potential acquisitions[165]. - The company may need to raise additional capital or secure debt funding to support ongoing operations, which could lead to significant dilution for existing stockholders[187].

Financial Performance - Total revenues for the year ended December 31, 2023, were $8,272,214, a decrease of $1,977,954 or 19.3% compared to $10,250,168 in 2022 [290]. - The cost of sales increased to $5,673,957 for the year ended December 31, 2023, up 19.9% from $4,730,897 in 2022, leading to a gross profit of $2,598,257, down 52.9% from $5,519,271 [290]. - The company recognized a net loss from operations of $13,720,546 for the year ended December 31, 2023, an increase of $11,317,104 or 470.9% compared to a net loss of $2,403,442 in 2022 [303]. - Net loss from continuing operations for the fiscal year ended December 31, 2023, was $13,720,546, an increase of 470.9% compared to $2,403,442 in 2022 [313]. Cash Flow and Working Capital - As of December 31, 2023, the company reported a working capital deficit of $8,803,293, a significant increase from a deficit of $53,668 as of December 31, 2022, reflecting a decrease in cash and an increase in liabilities [281]. - Cash decreased by approximately $943,000 from December 31, 2022, to December 31, 2023, primarily due to $250,000 in debt repayments and $733,694 paid for interest expenses related to future accounts receivable [283]. - Cash used in operating activities for the fiscal year ended December 31, 2023, was $2,073,601, compared to $1,564,668 in 2022, reflecting a 32.5% increase [314]. - Cash provided by financing activities for the fiscal year ended December 31, 2023, was $1,406,332, a significant increase from cash used in financing activities of $35,171 in 2022, representing a change of 4,098.6% [316]. - Cash and cash equivalents were $151,908 as of December 31, 2023, indicating a need for additional funding to sustain operations [305]. - The company estimates operating expenses and working capital requirements for 2024 to be approximately $4,800,000 [310]. Expenses and Liabilities - Technology, research, and development expenditures rose to $1,376,908 in 2023, a 38.6% increase from $993,185 in 2022, as the company focused on improving its platform technology [294]. - Professional fees surged by $999,832 to $1,466,567 in 2023, primarily due to costs associated with the merger with Superlatus and the acquisition of The Urgent Company [295]. - Current liabilities (excluding short-term debt) increased by $3,046,231 from $1,980,124 to $5,026,355 for the year ended December 31, 2023, driven by higher accounts payable and contingent funding liabilities [308]. - The company reported a goodwill impairment loss of $5,129,115 for the year ended December 31, 2023, related to the acquisition of Superlatus [302]. Strategic Plans and Future Funding - The company plans to explore strategic transactions, relationships, or acquisitions to grow operations, with potential funding sources including equity investments and notes payable [311]. - The company may require additional funding in the future, which could lead to significant dilution for existing stockholders if raised through equity [311]. Accounting and Reporting - Stock-based compensation is accounted for in accordance with ASC 718, recognizing compensation expense over the vesting period [337]. - The company adopted ASU 2018-07 for accounting of share-based payments granted to non-employees effective January 1, 2019 [337]. - The company is classified as a "smaller reporting company" and is not required to provide certain market risk disclosures [340]. - The company reviews all contingencies at least quarterly to assess potential loss estimates [336]. Investment Activities - Cash used in investing activities for the year ended December 31, 2023, was $275,717, a decrease of 35.6% from $427,845 in 2022 [315]. - Contractual obligations as of December 31, 2023, total $651,528, with $187,935 due within one year [318].

[CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS](index=4&type=section&id=CAUTIONARY%20NOTE%20REGARDING%20FORWARD-LOOKING%20STATEMENTS) The report contains forward-looking statements based on current expectations, estimates, forecasts, and projections, which are subject to various risks, uncertainties, and assumptions that are difficult to predict - The report contains forward-looking statements based on current expectations, estimates, forecasts, and projections, which are subject to various risks, uncertainties, and assumptions that are difficult to predict[10](index=10&type=chunk) - Key risk factors include limited cash, substantial doubt about the company's ability to continue as a going concern, risks of unprofitability, intellectual property claims, technical problems, acquisition strategy risks, negative effects from the opioid crisis, regulatory and licensing risks, changes in the U.S. healthcare environment, information system status, competition, regulatory changes, healthcare fraud, potential pandemic impact, inflation, rising interest rates, and dependence on current management[12](index=12&type=chunk) - The company disclaims any obligation to publicly update or revise forward-looking statements and cautions investors to review risk disclosures in this report and previous filings[11](index=11&type=chunk) [PART I: FINANCIAL INFORMATION](index=5&type=section&id=PART%20I%3A%20FINANCIAL%20INFORMATION) This section presents TRxADE HEALTH, INC.'s unaudited consolidated financial statements and management's analysis for Q3 2023 [ITEM 1. FINANCIAL STATEMENTS](index=5&type=section&id=ITEM%201.%20FINANCIAL%20STATEMENTS) This section presents TRxADE HEALTH, INC.'s unaudited consolidated financial statements for the quarter and nine months ended September 30, 2023, including balance sheets, statements of operations, changes in stockholders' equity, and cash flows, along with detailed notes explaining the company's organization, significant accounting policies, acquisitions, dispositions, and financial instrument details [Consolidated Balance Sheets](index=5&type=section&id=Consolidated%20Balance%20Sheets) This section presents the consolidated balance sheets as of September 30, 2023, and December 31, 2022 Consolidated Balance Sheet Highlights (September 30, 2023 vs. December 31, 2022) | Metric | Sep 30, 2023 | Dec 31, 2022 | Change | % Change | | :-------------------------------- | :----------- | :----------- | :------- | :------- | | Cash | $34,031 | $1,094,891 | $(1,060,860) | -96.9% | | Total Current Assets | $5,547,829 | $2,093,121 | $3,454,708 | 165.1% | | Total Assets | $21,653,843 | $3,710,026 | $17,943,817 | 483.7% | | Total Current Liabilities | $9,092,289 | $2,146,791 | $6,945,498 | 323.5% | | Total Liabilities | $10,094,158 | $3,367,159 | $6,726,999 | 199.8% | | Total Stockholders' Equity | $11,559,685 | $342,867 | $11,216,818 | 3271.9% | | Retained Deficit | $(21,529,975) | $(19,719,536) | $(1,810,439) | 9.2% | - The significant increase in **Total Assets** and **Total Stockholders' Equity** is largely driven by the acquisition of Superlatus, Inc., which introduced substantial intangible assets and goodwill to the balance sheet[15](index=15&type=chunk)[16](index=16&type=chunk)[64](index=64&type=chunk)[65](index=65&type=chunk) [Consolidated Statements of Operations](index=7&type=section&id=Consolidated%20Statements%20of%20Operations) This section presents consolidated statements of operations for the three and nine months ended September 30, 2023 and 2022 Consolidated Statements of Operations Highlights (Three Months Ended Sep 30, 2023 vs. 2022) | Metric | Sep 30, 2023 | Sep 30, 2022 | Change | % Change | | :-------------------------------- | :----------- | :----------- | :------- | :------- | | Revenues | $2,058,028 | $2,055,803 | $2,225 | 0.1% | | Cost of sales | $353,450 | $683,375 | $(329,925) | -48.3% | | Gross profit | $1,704,578 | $1,372,428 | $332,150 | 24.2% | | Total operating expenses | $2,549,727 | $1,591,191 | $958,536 | 60.2% | | Operating loss | $(845,149) | $(218,763) | $(626,386) | 286.3% | | Net loss from continuing operations | $(171,607) | $(340,474) | $168,867 | -49.6% | | Net loss on discontinued operations | $(3,353,507) | $(188,268) | $(3,165,239) | 1681.3% | | Net loss | $(3,525,114) | $(528,742) | $(2,996,372) | 566.7% | | Basic EPS (Net loss attributable to common stockholders) | $(4.57) | $(0.91) | $(3.66) | 402.2% | | Diluted EPS (Net loss attributable to common stockholders) | $(1.49) | $(0.91) | $(0.58) | 63.7% | Consolidated Statements of Operations Highlights (Nine Months Ended Sep 30, 2023 vs. 2022) | Metric | Sep 30, 2023 | Sep 30, 2022 | Change | % Change | | :-------------------------------- | :----------- | :----------- | :------- | :------- | | Revenues | $5,919,786 | $7,993,805 | $(2,074,019) | -25.9% | | Cost of sales | $1,072,934 | $3,991,234 | $(2,918,300) | -73.1% | | Gross profit | $4,846,852 | $4,002,571 | $844,281 | 21.1% | | Total operating expenses | $5,917,419 | $5,856,284 | $61,135 | 1.0% | | Operating loss | $(1,070,567) | $(1,853,713) | $783,146 | -42.2% | | Net loss from continuing operations | $(2,004,581) | $(1,983,743) | $(20,838) | 1.1% | | Net loss on discontinued operations | $(4,123,028) | $(623,096) | $(3,499,932) | 561.7% | | Net loss | $(6,127,609) | $(2,606,839) | $(3,520,770) | 135.1% | | Basic EPS (Net loss attributable to common stockholders) | $(8.65) | $(4.66) | $(3.99) | 85.6% | | Diluted EPS (Net loss attributable to common stockholders) | $(2.66) | $(4.64) | $1.98 | -42.7% | - Gross profit margin significantly improved for both the three and nine months ended September 30, 2023, primarily due to a substantial decrease in cost of sales[18](index=18&type=chunk)[195](index=195&type=chunk)[203](index=203&type=chunk) - Net loss from discontinued operations dramatically increased, largely due to a non-cash pre-tax loss on disposal of **$3,209,776** from the sale of APS and CSP[18](index=18&type=chunk)[76](index=76&type=chunk)[200](index=200&type=chunk)[208](index=208&type=chunk) [Consolidated Statements of Changes in Stockholders' Equity](index=8&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Stockholders%27%20Equity) This section details changes in stockholders' equity for the nine months ended September 30, 2023 Key Changes in Stockholders' Equity (Nine Months Ended Sep 30, 2023) | Item | Amount (USD) | | :-------------------------------- | :----------- | | Balance at Dec 31, 2022 | $342,867 | | Common stock issued for services | $63,486 | | Warrants exercised for cash | $7 | | Disposition of assets, related party | $912,299 | | Options expense | $14,434 | | Net Loss (Q1 2023) | $(677,953) | | Common stock issued for services | $15,813 | | Warrants exercised for cash | $1,615 | | Options expense | $7,783 | | Net Loss (Q2 2023) | $(1,974,878) | | Options expense | $3,761 | | Disposition of assets | $3,875,476 | | Shares issued pursuant to merger agreement | $12,500,089 | | Net Loss (Q3 2023) | $(3,525,114) | | Balance at Sep 30, 2023 | $11,559,685 | - Total Stockholders' Equity increased significantly from **$342,867** at December 31, 2022, to **$11,559,685** at September 30, 2023, primarily due to shares issued pursuant to the Superlatus merger agreement (**$12,500,089**) and disposition of assets (**$3,875,476**), despite substantial net losses[16](index=16&type=chunk)[20](index=20&type=chunk)[21](index=21&type=chunk)[38](index=38&type=chunk)[64](index=64&type=chunk) [Consolidated Statements of Cash Flows](index=10&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) This section presents the consolidated statements of cash flows for the nine months ended September 30, 2023 and 2022 Consolidated Statements of Cash Flows Highlights (Nine Months Ended Sep 30, 2023 vs. 2022) | Cash Flow Activity | Sep 30, 2023 | Sep 30, 2022 | Change | % Change | | :-------------------------------- | :----------- | :----------- | :------- | :------- | | Net cash used in operating activities | $(1,206,077) | $(2,755,979) | $1,549,902 | -56.2% | | Net cash provided by (used in) investing activities | $74,283 | $(312,902) | $387,185 | -123.7% | | Net cash provided by (used in) financing activities | $70,934 | $268,018 | $(197,084) | -73.5% | | Net change in cash | $(1,060,860) | $(2,800,863) | $1,740,003 | -62.1% | | Cash at end of the period | $34,031 | $321,715 | $(287,684) | -89.4% | - Cash used in operating activities decreased by **56.2%** YoY, primarily due to increased professional fees and accounting/legal expenses related to the Superlatus merger and TUC acquisition, partially offset by decreased wage and salary expenses[189](index=189&type=chunk) - Investing activities shifted from a net cash outflow of **$(312,902)** in 2022 to a net cash inflow of **$74,283** in 2023, mainly due to cash received in acquisitions and proceeds from discontinued operations, partially offset by prior year investment in capitalized software[23](index=23&type=chunk)[190](index=190&type=chunk) - Financing activities saw a decrease in cash provided, from **$268,018** in 2022 to **$70,934** in 2023, primarily due to a decrease in the net balance of contingent funding liability[23](index=23&type=chunk)[191](index=191&type=chunk) [Notes to Consolidated Financial Statements](index=12&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) This section provides detailed notes to the consolidated financial statements, covering organization, policies, acquisitions, and financial instruments [NOTE 1 – ORGANIZATION AND BASIS OF PRESENTATION](index=12&type=section&id=NOTE%201%20%E2%80%93%20ORGANIZATION%20AND%20BASIS%20OF%20PRESENTATION) This note details recent acquisitions, divestitures, and a reverse stock split, along with accounting standard adoption - TRxADE HEALTH, INC. completed the acquisition of Superlatus, Inc. on July 31, 2023, and The Urgent Company, Inc. on September 27, 2023, marking a strategic shift towards food technology[25](index=25&type=chunk)[34](index=34&type=chunk)[69](index=69&type=chunk) - The company sold 100% of its membership interests in Community Specialty Pharmacy, LLC (CSP) and Alliance Pharma Solutions, LLC (APS) on August 22, 2023, and voluntarily withdrew from the SOSRx, LLC joint venture in February 2023, classifying these as discontinued operations[28](index=28&type=chunk)[30](index=30&type=chunk)[74](index=74&type=chunk)[75](index=75&type=chunk) - Effective June 21, 2023, the Company executed a **1:15 reverse stock split** to comply with Nasdaq listing rules[43](index=43&type=chunk) - The Company adopted ASU 2016-13 (Credit Losses) effective January 1, 2023, which applied to trade receivables but had no material impact on financial statements[44](index=44&type=chunk)[46](index=46&type=chunk) [NOTE 2 – GOING CONCERN](index=18&type=section&id=NOTE%202%20%E2%80%93%20GOING%20CONCERN) This note addresses the company's financial condition, raising substantial doubt about its ability to continue as a going concern - As of September 30, 2023, the Company had a retained deficit of **$21,529,975**, a working capital deficit of **$3,544,460**, and a cash balance of **$34,031**[63](index=63&type=chunk) - These financial conditions raise substantial doubt about the Company's ability to continue as a going concern for the next 12 months, necessitating additional capital or debt funding[63](index=63&type=chunk) [NOTE 3 – ACQUISITIONS AND DISPOSITIONS](index=18&type=section&id=NOTE%203%20%E2%80%93%20ACQUISITIONS%20AND%20DISPOSITIONS) This note details the acquisitions of Superlatus and TUC, and the dispositions of SOSRx, APS, and CSP - On July 31, 2023, TRxADE HEALTH acquired Superlatus, Inc. for an amended total fair value of **$12,500,089**, consisting of common stock and Series B Preferred Stock, resulting in the recognition of **$9,777,478** in intangible assets and **$5,129,116** in goodwill[38](index=38&type=chunk)[64](index=64&type=chunk)[68](index=68&type=chunk) - On September 27, 2023, the Company acquired assets from The Urgent Company, Inc. (TUC) for a **$3,150,000** promissory note, including inventory (**$2,960,235**), property and equipment (**$231,170**), and operating right-of-use assets (**$383,218**)[69](index=69&type=chunk)[71](index=71&type=chunk) - The Company disposed of SOSRx, LLC in February 2023, resulting in a recorded loss of **$352,244** from asset disposal and the forgiveness of a **$500,000** note payable[30](index=30&type=chunk)[73](index=73&type=chunk) - The sale of Alliance Pharma Solutions, LLC (APS) and Community Specialty Pharmacy, LLC (CSP) on August 22, 2023, for promissory notes totaling **$225,000**, led to a non-cash, pre-tax loss on disposal of **$3,209,776**, reflecting a strategic shift to food technology[74](index=74&type=chunk)[75](index=75&type=chunk)[76](index=76&type=chunk) [NOTE 4 – RELATED PARTY TRANSACTIONS](index=23&type=section&id=NOTE%204%20%E2%80%93%20RELATED%20PARTY%20TRANSACTIONS) This note describes transactions with related parties, including consulting agreements and the termination of a joint venture - The Company entered into an independent contractor agreement with Scietech, LLC for consulting services, with an annual fee of **$400,000**; Scietech is considered a related party due to the interim CFO's spouse being a **31%** investor[81](index=81&type=chunk) - The Company voluntarily withdrew from the SOSRx joint venture in February 2023, which involved the termination of a **$500,000** promissory note and waiver of **$15,000** in accounts payable to Exchange Health[84](index=84&type=chunk)[85](index=85&type=chunk) [NOTE 5 – REVENUE RECOGNITION](index=24&type=section&id=NOTE%205%20%E2%80%93%20REVENUE%20RECOGNITION) This note outlines the company's revenue recognition policies and disaggregated revenue by type for the reporting periods - Revenue is primarily derived from product resale (pharmaceuticals) and service fees (transaction, data, and SaaS)[86](index=86&type=chunk)[87](index=87&type=chunk)[88](index=88&type=chunk) Disaggregated Revenue (Three Months Ended Sep 30, 2023 vs. 2022) | Revenue Type | Sep 30, 2023 | Sep 30, 2022 | Change | % Change | | :-------------------------------- | :----------- | :----------- | :------- | :------- | | Pharmaceutical product resale income | $394,849 | $707,807 | $(312,958) | -44.2% | | Transaction fee income | $1,617,129 | $1,319,483 | $297,646 | 22.6% | | Data service fee income | $46,050 | $17,950 | $28,100 | 156.5% | | SaaS fee income | $0 | $10,563 | $(10,563) | -100.0% | | Total revenues | $2,058,028 | $2,055,803 | $2,225 | 0.1% | Disaggregated Revenue (Nine Months Ended Sep 30, 2023 vs. 2022) | Revenue Type | Sep 30, 2023 | Sep 30, 2022 | Change | % Change | | :-------------------------------- | :----------- | :----------- | :------- | :------- | | Pharmaceutical product resale income | $1,237,731 | $3,949,771 | $(2,712,040) | -68.7% | | Transaction fee income | $4,531,731 | $3,947,621 | $584,110 | 14.8% | | Data service fee income | $132,025 | $54,050 | $77,975 | 144.3% | | SaaS fee income | $18,299 | $42,363 | $(24,064) | -56.8% | | Total revenues | $5,919,786 | $7,993,805 | $(2,074,019) | -25.9% | [NOTE 6 – INVENTORY](index=24&type=section&id=NOTE%206%20%E2%80%93%20INVENTORY) This note details the composition and significant increase in inventory, primarily due to the acquisition of The Urgent Company, Inc Inventory Composition (September 30, 2023 vs. December 31, 2022) | Inventory Type | Sep 30, 2023 | Dec 31, 2022 | Change | % Change | | :-------------------------------- | :----------- | :----------- | :------- | :------- | | Raw materials | $1,895,406 | $68,448 | $1,826,958 | 2669.2% | | Finished goods | $1,131,512 | $0 | $1,131,512 | N/A | | Total Inventory | $3,026,918 | $68,448 | $2,958,470 | 4322.4% | - Inventory significantly increased from **$68,448** at December 31, 2022, to **$3,026,918** at September 30, 2023, primarily due to the acquisition of The Urgent Company, Inc. which included substantial inventory[15](index=15&type=chunk)[69](index=69&type=chunk)[71](index=71&type=chunk)[90](index=90&type=chunk) [NOTE 7 – NOTES RECEIVABLE](index=26&type=section&id=NOTE%207%20%E2%80%93%20NOTES%20RECEIVABLE) This note details the notes receivable balance from Wood Sage, LLC, issued as part of the sale of APS and CSP - As of September 30, 2023, the Company had a Notes Receivable balance of **$1,275,000** from Wood Sage, LLC, issued as part of the sale of APS and CSP[93](index=93&type=chunk) [NOTE 8 – INTANGIBLE ASSETS](index=26&type=section&id=NOTE%208%20%E2%80%93%20INTANGIBLE%20ASSETS) This note details the significant increase in intangible assets, net, primarily from the Superlatus acquisition Intangible Assets, Net (September 30, 2023) | Asset Type | Weighted Average Useful Life (years) | Cost | Accumulated Amortization | Net | | :-------------------------------- | :-------------------------------- | :----------- | :----------------------- | :----------- | | Developed technology | 5.0 | $9,777,478 | $(325,916) | $9,451,562 | - Intangible assets, net, significantly increased to **$9,451,562** as of September 30, 2023, primarily due to the acquisition of Superlatus, Inc., which included developed technology[15](index=15&type=chunk)[68](index=68&type=chunk)[94](index=94&type=chunk) [NOTE 9 – OTHER CURRENT LIABILITIES](index=26&type=section&id=NOTE%209%20%E2%80%93%20OTHER%20CURRENT%20LIABILITIES) This note details the composition and increase in other current liabilities, primarily due to a purchase price payable Other Current Liabilities (September 30, 2023 vs. December 31, 2022) | Liability Type | Sep 30, 2023 | Dec 31, 2022 | Change | % Change | | :-------------------------------- | :----------- | :----------- | :------- | :------- | | Purchase price payable | $350,000 | $0 | $350,000 | N/A | | Insurance refunds payable | $62,390 | $62,390 | $0 | 0.0% | | Deferred revenue | $0 | $5,127 | $(5,127) | -100.0% | | Total | $412,390 | $67,517 | $344,873 | 510.8% | - Other current liabilities increased significantly, primarily due to a **$350,000** purchase price payable as of September 30, 2023[95](index=95&type=chunk) [NOTE 10 – CONTINGENT FUNDING LIABILITIES](index=26&type=section&id=NOTE%2010%20%E2%80%93%20CONTINGENT%20FUNDING%20LIABILITIES) This note describes the company's non-recourse funding agreements for future receivables and the resulting contingent liabilities - The Company entered into multiple non-recourse funding agreements for the purchase and sale of future receivables, totaling **$1,250,000** (June 2023) and **$875,000** (March 2023) in the current year[96](index=96&type=chunk)[97](index=97&type=chunk) - As of September 30, 2023, the total contingent funding liability was **$452,348**, up from **$108,036** at December 31, 2022, with an effective interest rate of approximately **31%**[101](index=101&type=chunk) [NOTE 11 – NOTES PAYABLE](index=27&type=section&id=NOTE%2011%20%E2%80%93%20NOTES%20PAYABLE) This note details the significant increase in notes payable, primarily from the TUC acquisition and a secured debenture Notes Payable Balances (September 30, 2023) | Note | Current Portion | Noncurrent Portion | Total | Accrued Interest | | :-------------------------------- | :-------------- | :----------------- | :----------- | :--------------- | | Perfect Day Note | $3,150,000 | $0 | $3,150,000 | $0 | | Danam Note | $200,000 | $0 | $200,000 | $0 | | Eat Well June 2023 Note | $1,150,000 | $0 | $1,150,000 | $0 | | Eat Well February 2023 Note | $0 | $25,000 | $25,000 | $350 | | Eat Well September 2022 Note | $50,000 | $0 | $50,000 | $1,104 | | Eat Well July 26, 2022 Note | $35,000 | $0 | $35,000 | $798 | | Eat Well July 12, 2022 Note | $25,000 | $0 | $25,000 | $585 | | Eat Well March 2022 Note | $100,000 | $0 | $100,000 | $2,966 | | Eat Well February 2022 Note | $100,000 | $0 | $100,000 | $3,110 | | Eat Well January 2022 Note | $20,000 | $0 | $20,000 | $653 | | Eat Well December 2021 Note | $100,000 | $0 | $100,000 | $3,427 | | Eat Well November 2021 Note | $50,000 | $0 | $50,000 | $1,790 | | Eat Well August 2021 Note | $250,000 | $0 | $250,000 | $9,900 | | **Total** | **$5,230,000** | **$25,000** | **$5,255,000** | **$24,683** | - Total notes payable significantly increased to **$5,255,000** as of September 30, 2023, primarily due to a **$3,150,000** promissory note issued to Perfect Day, Inc. for the TUC acquisition and a **$1,150,000** secured debenture to Eat Well Investment Group, Inc. for Sapientia[102](index=102&type=chunk)[104](index=104&type=chunk)[115](index=115&type=chunk) [NOTE 12 – STOCKHOLDERS' EQUITY](index=29&type=section&id=NOTE%2012%20%E2%80%93%20STOCKHOLDERS%27%20EQUITY) This note details changes in stockholders' equity, including preferred stock designation, a reverse stock split, and common stock issuances - The Board of Directors designated **787,754** shares of Series B Preferred Stock on June 26, 2023[116](index=116&type=chunk) - A **1:15 reverse stock split** was executed on June 21, 2023, to maintain Nasdaq listing compliance[117](index=117&type=chunk) - In 2022, officers and employees received common stock in lieu of reduced cash salaries, and independent directors received common stock for services rendered[118](index=118&type=chunk)[119](index=119&type=chunk)[121](index=121&type=chunk)[122](index=122&type=chunk) [NOTE 13 – PREFUNDED AND PRIVATE PLACEMENT WARRANTS](index=30&type=section&id=NOTE%2013%20%E2%80%93%20PREFUNDED%20AND%20PRIVATE%20PLACEMENT%20WARRANTS) This note describes the company's pre-funded and private placement warrants, including their issuance and exercise activity - In October 2022, the Company entered into a securities purchase agreement for the sale of common stock, pre-funded warrants, and private placement warrants[124](index=124&type=chunk) - On January 4, 2023, an investor exercised **40,116** pre-funded warrants at an exercise price of **$0.00015** per share[125](index=125&type=chunk) [NOTE 14 – WARRANTS](index=30&type=section&id=NOTE%2014%20%E2%80%93%20WARRANTS) This note details the company's warrant activity, including outstanding warrants, exercises, and their weighted average exercise price - For the nine months ended September 30, 2023, **40,116** prefunded warrants and **1,795** granted warrants were exercised for a total purchase price of **$1,622**[126](index=126&type=chunk) Warrants Activity (Nine Months Ended Sep 30, 2023) | Item | Number Outstanding | Weighted Average Exercise Price | Contractual Life In Years | | :-------------------------------- | :----------------- | :------------------------------ | :------------------------ | | Warrants outstanding as of Dec 31, 2022 | 179,331 | $22.50 | 4.72 | | Warrants exercised | (1,795) | $22.50 | - | | Warrants outstanding as of Sep 30, 2023 | 177,536 | $22.50 | 4.02 | | Warrants exercisable as of Sep 30, 2023 | 177,536 | $22.50 | 4.02 | [NOTE 15 – OPTIONS](index=31&type=section&id=NOTE%2015%20%E2%80%93%20OPTIONS) This note details the company's stock option activity, including grants, forfeitures, expirations, and related compensation costs - For the nine months ended September 30, 2023, **603** options were granted, **140** forfeited, and **2,319** expired, with no options exercised[131](index=131&type=chunk) Stock Option Activity (Nine Months Ended Sep 30, 2023) | Item | Number Outstanding | Weighted Average Exercise Price | Weighted Average Contractual Life In Years | | :-------------------------------- | :----------------- | :------------------------------ | :--------------------------------------- | | Options outstanding as of Dec 31, 2022 | 19,708 | $66.00 | 3.92 | | Options granted | 603 | $6.08 | 4.51 | | Options forfeited | (140) | $82.33 | 2.00 | | Options expired | (2,319) | $89.88 | 0.08 | | Options outstanding as of Sep 30, 2023 | 17,852 | $66.10 | 3.95 | | Options exercisable as of Sep 30, 2023 | 17,252 | $62.43 | 2.99 | - Total compensation cost related to stock options was **$25,978** for the nine months ended September 30, 2023, a decrease from **$67,439** in the same period of 2022[131](index=131&type=chunk) [NOTE 16 – CONTINGENCIES](index=31&type=section&id=NOTE%2016%20%E2%80%93%20CONTINGENCIES) This note describes various legal contingencies, including ongoing lawsuits and settlement agreements with outstanding payments - In April 2023, IPS won a legal case against Studebaker Defense Group, LLC, with an order to pay **$550,000**, but no payment has been received as of the filing date[134](index=134&type=chunk) - The Company ceased pursuit of a lawsuit against Crecom Burj Group SDN BHD for **$581,250** due to Crecom being wound up[135](index=135&type=chunk) - A settlement was reached with GSG PPE, LLC and Gary Waxman in June 2022 for **$743,000**, but monthly installment payments have not been received since January 2023[136](index=136&type=chunk) [NOTE 17 – SEGMENT REPORTING](index=32&type=section&id=NOTE%2017%20%E2%80%93%20SEGMENT%20REPORTING) This note provides segment reporting, classifying the business into Trxade, IPS, Superlatus, and Unallocated - The Company classifies its business into four reportable segments: Trxade, Inc. (web-based pharmaceutical marketplace), IPS (licensed pharmaceutical wholesaler), Superlatus (food technology, including Sapientia and The Urgent Company), and Unallocated (corporate overhead, discontinued operations, Bonum Health)[138](index=138&type=chunk) Segment Revenue and Profit (Nine Months Ended Sep 30, 2023 vs. 2022) | Segment | Revenue 2023 | Revenue 2022 | Gross Profit 2023 | Gross Profit 2022 | Segment Profit (Loss) 2023 | Segment Profit (Loss) 2022 | | :-------------------------------- | :----------- | :----------- | :---------------- | :---------------- | :------------------------- | :------------------------- | | Trxade, Inc. | $4,663,756 | $4,001,670 | $4,663,756 | $4,001,670 | $1,570,796 | $1,320,138 | | IPS | $1,237,731 | $3,949,772 | $165,553 | $(41,462) | $(388,900) | $(493,203) | | Superlatus | $0 | $0 | $(756) | $0 | $(440,268) | $0 | | Unallocated | $18,299 | $42,363 | $18,299 | $42,363 | $(6,869,237) | $(3,433,774) | | **Total** | **$5,919,786** | **$7,993,805** | **$4,846,852** | **$4,002,571** | **$(6,127,609)** | **$(2,606,839)** | - Superlatus, a new segment in 2023, reported a segment loss of **$(440,268)** for the nine months ended September 30, 2023[139](index=139&type=chunk) - The Unallocated segment's loss significantly increased from **$(3,433,774)** in 2022 to **$(6,869,237)** in 2023, reflecting corporate overhead and discontinued operations[139](index=139&type=chunk) [NOTE 18 – SUBSEQUENT EVENTS](index=33&type=section&id=NOTE%2018%20%E2%80%93%20SUBSEQUENT%20EVENTS) This note details significant events occurring after the reporting period, including a stock swap, asset acquisition, and new funding agreements - The Stock Swap Transaction, contingent on stockholder approval of Series B preferred stock conversion, will result in Superlatus being the accounting acquirer and TRxADE's remaining operations consisting only of legacy Superlatus operations[140](index=140&type=chunk)[141](index=141&type=chunk) - On October 4, 2023, the Company entered into an all-cash asset purchase agreement to acquire Spero Foods, Inc. for **$500,000**[143](index=143&type=chunk) - On October 4, 2023, the Company sold **290** shares of Series C Convertible Preferred Stock and a warrant to purchase **41,193** shares of common stock to Hudson Global Ventures, LLC, generating gross proceeds of **$290,000**[144](index=144&type=chunk) - On October 25, 2023, the Company entered into a new non-recourse funding agreement for **$1,200,000** to purchase **$1,728,000** of future receivables[145](index=145&type=chunk) [ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS](index=35&type=section&id=ITEM%202.%20MANAGEMENT%27S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) This section provides management's perspective on the company's financial condition, results of operations, and cash flows for the three and nine months ended September 30, 2023, compared to the same periods in 2022. It covers the company's business overview, recent strategic events including mergers and divestitures, liquidity and capital resources, and critical accounting policies [Company Overview](index=35&type=section&id=Company%20Overview) This section provides an overview of TRxADE HEALTH's business, subsidiaries, and strategic shifts towards food technology - TRxADE HEALTH is a technology-enabled health services platform focused on digitalizing retail pharmacy and health services, with approximately **14,900+** registered members on its sales platform as of September 30, 2023[151](index=151&type=chunk)[152](index=152&type=chunk)[166](index=166&type=chunk) - The company's subsidiaries include Trxade, Inc. (web-based pharmaceutical marketplace), Integra Pharma Solutions, LLC (licensed pharmaceutical wholesaler), Bonum Health, LLC (telehealth services), Superlatus, Inc. (food products and distribution), and The Urgent Company, Inc. (sustainable, animal-free products)[153](index=153&type=chunk)[154](index=154&type=chunk)[165](index=165&type=chunk)[169](index=169&type=chunk)[172](index=172&type=chunk)[174](index=174&type=chunk)[175](index=175&type=chunk) - Strategic shifts include the acquisition of Superlatus and The Urgent Company, Inc. to enhance sustainable food product production, and the divestiture of Community Specialty Pharmacy, LLC (CSP) and Alliance Pharma Solutions, LLC (APS) to focus on food technology[154](index=154&type=chunk)[157](index=157&type=chunk)[158](index=158&type=chunk)[162](index=162&type=chunk)[171](index=171&type=chunk)[174](index=174&type=chunk)[175](index=175&type=chunk) [Recent Events](index=39&type=section&id=Recent%20Events) This section details recent corporate events, including Nasdaq compliance, mergers, and divestitures - The Company received a delist determination letter from Nasdaq in January 2023 for non-compliance with the minimum **$2,500,000** stockholders' equity requirement[178](index=178&type=chunk) - Nasdaq granted an extension until July 31, 2023, to regain compliance, which was achieved as a result of the Superlatus merger, bringing stockholders' equity above the minimum requirement[180](index=180&type=chunk)[181](index=181&type=chunk) - The Company completed the sale of Alliance Pharma Solutions, LLC and Community Specialty Pharmacy, LLC on August 22, 2023, and voluntarily withdrew from the SOSRx LLC joint venture on February 4, 2023[162](index=162&type=chunk)[164](index=164&type=chunk) [Liquidity and Capital Resources](index=40&type=section&id=Liquidity%20and%20Capital%20Resources) This section analyzes the company's liquidity, capital resources, and future funding requirements Liquidity Metrics (September 30, 2023 vs. December 31, 2022) | Metric | Sep 30, 2023 | Dec 31, 2022 | Change | % Change | | :-------------------------------- | :----------- | :----------- | :------- | :------- | | Cash | $34,031 | $1,094,891 | $(1,060,860) | -97% | | Current assets (excluding cash) | $5,513,798 | $988,230 | $4,515,568 | 452% | | Current liabilities (excluding short term debt) | $3,862,289 | $1,980,124 | $1,882,165 | 95% | | Short term debt (notes payable related party) | $5,230,000 | $166,667 | $5,063,333 | 3038% | | Working capital | $(3,544,460) | $(53,670) | $(3,490,790) | -6504% | - Cash decreased by **97%** to **$34,031** as of September 30, 2023, primarily due to increased operating expenses from the Superlatus merger and TUC acquisition, partially offset by increased revenues[182](index=182&type=chunk)[184](index=184&type=chunk) - The Company faces a working capital deficit of **$3,544,460** and will require additional funding through equity sales or debt to support ongoing operations and growth initiatives, including potential strategic transactions of its B2C subsidiaries[183](index=183&type=chunk)[185](index=185&type=chunk)[231](index=231&type=chunk) - Projected general and administrative expenses for October 2023 to September 2024 are estimated at **$8,000,000**[186](index=186&type=chunk) [Results of Operations](index=42&type=section&id=Results%20of%20Operations) This section discusses revenues, gross profit, operating expenses, and net loss for the three and nine months ended September 30, 2023 Revenue and Gross Profit (Three Months Ended Sep 30, 2023 vs. 2022) | Metric | Sep 30, 2023 | Sep 30, 2022 | Change | % Change | | :-------------------------------- | :----------- | :----------- | :------- | :------- | | Revenues | $2,058,028 | $2,055,803 | $2,225 | 0% | | Cost of sales | $353,450 | $683,375 | $(329,925) | -48% | | Gross profit | $1,704,578 | $1,372,428 | $332,150 | 24% | | Gross profit as % of sales | 83% | 67% | 16% | 23.9% | Operating Expenses (Three Months Ended Sep 30, 2023 vs. 2022) | Expense Type | Sep 30, 2023 | Sep 30, 2022 | Change | % Change | | :-------------------------------- | :----------- | :----------- | :------- | :------- | | Technology, research & development | $410,612 | $238,577 | $172,035 | 72% | | Wages and salary expense | $698,030 | $849,371 | $(151,341) | -18% | | Accounting and legal | $408,957 | $191,007 | $217,950 | 114% | | Professional fees | $418,294 | $82,710 | $335,584 | 406% | | Other general and administrative | $610,074 | $200,310 | $409,764 | 205% | | Total operating expenses | $2,549,727 | $1,591,191 | $958,536 | 60% | - Net loss from continuing operations improved by **50%** for the three months ended September 30, 2023, to **$(171,607)**, despite increased operating costs from the merger and TUC acquisition, due to higher gross profit and a **$925,320** gain on warrant liability fair value change[193](index=193&type=chunk)[198](index=198&type=chunk)[199](index=199&type=chunk) - For the nine months ended September 30, 2023, revenues decreased by **26%** to **$5,919,786**, primarily due to decreased sales in Trxade Prime, while gross profit increased by **21%** to **$4,846,852** due to a **73%** decrease in cost of sales[201](index=201&type=chunk)[202](index=202&type=chunk)[203](index=203&type=chunk) - Net loss from discontinued operations significantly increased by **562%** to **$(4,123,028)** for the nine months ended September 30, 2023, mainly due to the disposal of APS and CSP[201](index=201&type=chunk)[208](index=208&type=chunk) [Critical Accounting Policies](index=44&type=section&id=Critical%20Accounting%20Policies) This section outlines critical accounting policies, including revenue recognition and stock-based compensation - Revenue recognition for Trxade, Inc. (marketplace) is based on transaction fees recognized upon supplier fulfillment, with the company acting as an agent[211](index=211&type=chunk) - Integra Pharma Solutions, LLC (wholesaler) recognizes product revenue when the customer receives the product[212](index=212&type=chunk) - Bonum, LLC (telehealth) recognizes subscription-based service revenue monthly as services are provided, for both B2B and B2C models[214](index=214&type=chunk) - Stock-based compensation is measured at grant date fair value and recognized as expense over the vesting period, with forfeitures recognized at employee termination[215](index=215&type=chunk) [ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK](index=46&type=section&id=ITEM%203.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) As a smaller reporting company, TRxADE HEALTH, INC. is not required to provide quantitative and qualitative disclosures about market risk - The Company is exempt from providing quantitative and qualitative disclosures about market risk due to its status as a smaller reporting company[217](index=217&type=chunk) [ITEM 4. CONTROLS AND PROCEDURES](index=46&type=section&id=ITEM%204.%20CONTROLS%20AND%20PROCEDURES) Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were not effective as of September 30, 2023, due to material weaknesses in accounting policies and period-end financial reporting processes. The company is committed to improving its financial organization and internal controls - As of September 30, 2023, the Company's disclosure controls and procedures were deemed ineffective[218](index=218&type=chunk) - Material weaknesses identified include insufficient written policies and procedures for U.S. GAAP and SEC disclosure requirements, and ineffective controls over period-end financial disclosure and reporting processes[219](index=219&type=chunk) - Management believes these weaknesses did not affect the reported financial results and is implementing improvements, including increased personnel resources, technical accounting expertise, and written policies/checklists[220](index=220&type=chunk)[221](index=221&type=chunk)[222](index=222&type=chunk) - There were no material changes in internal control over financial reporting during the quarter ended September 30, 2023[224](index=224&type=chunk) [PART II. OTHER INFORMATION](index=48&type=section&id=PART%20II.%20OTHER%20INFORMATION) This section covers legal proceedings, risk factors, equity sales, and other disclosures for the reporting period [ITEM 1. LEGAL PROCEEDINGS](index=48&type=section&id=ITEM%201.%20LEGAL%20PROCEEDINGS) The Company is involved in various lawsuits in the ordinary course of business, with details incorporated by reference from the Notes to Consolidated Financial Statements. Management believes the ultimate resolution of current proceedings will not materially adversely affect the company's financial position, results of operations, or cash flows, though litigation outcomes are inherently uncertain - The Company is a party to lawsuits, the impact and outcome of which are subject to inherent uncertainties[227](index=227&type=chunk) - Management believes current legal matters will not have a material adverse effect on financial condition or results of operations, but acknowledges that assessments could change[228](index=228&type=chunk)[229](index=229&type=chunk) [ITEM 1A. RISK FACTORS](index=48&type=section&id=ITEM%201A.%20RISK%20FACTORS) This section updates previously disclosed risk factors, highlighting the company's need for additional capital, which creates substantial doubt about its ability to continue as a going concern. It also addresses risks related to inflationary pressures, potential adverse effects on cash flows from receivables agreements, and the ongoing non-compliance with Nasdaq's listing standards - The Company has an accumulated deficit of **$21.5 million**, a working capital deficit of **$3.5 million**, and a cash balance of approximately **$34,000** as of September 30, 2023, raising substantial doubt about its ability to continue as a going concern[231](index=231&type=chunk) - Additional capital may not be available on commercially acceptable terms, leading to potential delays in development activities, scaling down operations, or cessation of business, with any equity financing being dilutive to stockholders[232](index=232&type=chunk)[233](index=233&type=chunk) - Ongoing inflationary pressures, supply chain disruptions, and labor shortages could materially and adversely affect the business, results of operations, and cash flows[234](index=234&type=chunk) - An event of default under the Receivables Agreements could require **100%** of future sales revenue to be paid to the third-party funder, severely impacting cash flows and liquidity[235](index=235&type=chunk) - The Company is not currently in compliance with Nasdaq's minimum stockholders' equity requirement and faces risks of delisting, which could negatively impact stock price, liquidity, and ability to raise capital[236](index=236&type=chunk)[242](index=242&type=chunk)[244](index=244&type=chunk) [ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS](index=51&type=section&id=ITEM%202.%20UNREGISTERED%20SALES%20OF%20EQUITY%20SECURITIES%20AND%20USE%20OF%20PROCEEDS) This section details the unregistered sales of equity securities during the reporting period, including the exercise of pre-funded warrants, issuance of commitment shares, and shares issued as part of the Superlatus merger agreement. All issuances were made to accredited investors without public offering - On January 6, 2023, an investor exercised **601,740** pre-funded warrants for an aggregate purchase price of **$6.02**, resulting in the issuance of **601,740** shares of common stock[245](index=245&type=chunk) - In the first quarter of 2023, **50,000** shares of common stock were issued to White Lion Capital, LLC as commitment shares[246](index=246&type=chunk) - As part of the Superlatus merger, shareholders received **136,441** shares of common stock and **306,855** shares of Series B Preferred Stock[247](index=247&type=chunk) - All these issuances were unregistered sales to accredited investors, exempt from public offering[248](index=248&type=chunk) - The Company did not repurchase any shares of common stock during the first two quarters of 2023[249](index=249&type=chunk) [ITEM 3. DEFAULTS UPON SENIOR SECURITIES](index=51&type=section&id=ITEM%203.%20DEFAULTS%20UPON%20SENIOR%20SECURITIES) The Company reported no defaults upon senior securities during the period - There were no defaults upon senior securities[250](index=250&type=chunk) [ITEM 4. MINE SAFETY DISCLOSURES](index=51&type=section&id=ITEM%204.%20MINE%20SAFETY%20DISCLOSURES) The Company reported no mine safety disclosures - There were no mine safety disclosures[251](index=251&type=chunk) [ITEM 5. OTHER INFORMATION](index=51&type=section&id=ITEM%205.%20OTHER%20INFORMATION) During the quarter ended September 30, 2023, there was no information required to be disclosed in a Form 8-K that was not disclosed, and no material changes to procedures for recommending board nominees - No information required to be disclosed in a Form 8-K was omitted during the quarter ended September 30, 2023[252](index=252&type=chunk) - There were no material changes to the procedures for stockholders to recommend nominees to the board of directors[252](index=252&type=chunk) [ITEM 6. EXHIBITS](index=52&type=section&id=ITEM%206.%20EXHIBITS) This section lists all exhibits filed with the Form 10-Q, including certifications from the Principal Executive Officer and Principal Financial Officer, and Inline XBRL documents - Exhibits include certifications from the Principal Executive Officer and Principal Financial Officer (pursuant to Sections 302 and 906 of Sarbanes-Oxley Act of 2002) and various Inline XBRL documents[254](index=254&type=chunk)

Financial Performance - Total revenues for Q2 2023 were $2,251,076, a decrease of 31.2% compared to $3,278,729 in Q2 2022[14] - Gross profit for the first half of 2023 was $3,201,807, up 27.7% from $2,506,617 in the same period of 2022[14] - Operating loss for Q2 2023 was $(345,625), an improvement from $(1,103,106) in Q2 2022[14] - Net loss attributable to TRxADE Health, Inc. for the first half of 2023 was $(2,652,831), compared to $(2,043,910) in the first half of 2022[14] - For the six-month period ended June 30, 2023, the company reported no revenue from discontinued operations, with a net loss of $146 compared to a net loss of $11,611 for the same period in 2022[43] - For the six months ended June 30, 2023, the company reported a net loss of $2,300,587, an increase of 11% compared to a net loss of $2,078,097 for the same period in 2022[134] - Revenues for the six months ended June 30, 2023, were $4,498,826, down 31% from $6,519,001 in the same period in 2022[144] - Gross profit for the six months ended June 30, 2023, was $3,201,807, representing a gross margin of 71%, compared to 38% for the same period in 2022[145] - Operating expenses decreased by 14.9% to $3,894,838 for the six months ended June 30, 2023, from $4,578,295 in the same period in 2022[144] Cash Flow and Liquidity - Cash decreased to $745,561 as of June 30, 2023, down from $1,111,156 at the end of 2022[12] - Cash flows from operating activities resulted in a net cash used of $602,965 for the six months ended June 30, 2023, compared to $2,179,054 for the same period in 2022, indicating a significant reduction in cash outflow[19] - Cash at the end of the period was $745,561, down from $962,227 at the end of the same period in 2022, a decrease of approximately 22.6%[19] - The company had a cash balance of $745,561 as of June 30, 2023, indicating limited financial resources[175] - The company’s cash paid for interest increased to $243,126 for the six months ended June 30, 2023, compared to $3,328 for the same period in 2022[19] - Cash provided by investing activities for the six months ended June 30, 2023, was $281,394, compared to cash used of $257,172 in the same period in 2022[135] Liabilities and Equity - Total current liabilities increased significantly to $4,262,947 as of June 30, 2023, from $2,146,791 at the end of 2022[12] - As of June 30, 2023, the company had an accumulated deficit of $21.9 million and a working capital deficit of $2.2 million, with a cash balance of $746,000[40] - Current liabilities increased by 115% to $4,262,947 as of June 30, 2023, compared to $1,980,124 at the end of 2022[129] - Working capital deficit expanded to $(2,167,902) as of June 30, 2023, a 3939% increase from $(53,670) at the end of 2022[129] - The company recognized the fair value of its contingent obligation to the funding source as a current liability in its consolidated balance sheet[53] Compliance and Regulatory Matters - The company executed a 1:15 reverse stock split effective June 21, 2023, to comply with Nasdaq Listing Rule 5550(a)(2)[29] - The Company received a notice from Nasdaq indicating non-compliance with the minimum stockholders' equity requirement of $2,500,000, with an extension granted until January 25, 2023, to regain compliance[82] - A public offering plan was presented to regain compliance, including an underwritten offering of up to $15,000,000, which was approved by Nasdaq[83] - The Company demonstrated compliance with the $2,500,000 minimum stockholders' equity requirement following a merger, as confirmed by Nasdaq[84] - The company is at risk of delisting from Nasdaq if it fails to meet compliance requirements, which could adversely affect stock liquidity and trading[189] - The company must maintain a stock price over $1.00 per share to comply with Nasdaq listing requirements[188] Strategic Initiatives and Acquisitions - The company completed the acquisition of Superlatus on July 31, 2023, making it a wholly owned subsidiary[88] - Shareholders of Superlatus received 136,441 shares of common stock, representing 19.9% of the total issued and outstanding common stock post-merger[89] - The company entered into Membership Interest Purchase Agreements to sell subsidiaries for a total consideration of $225,000, with an additional estimated amount of $266,000 owed as part of a Master Service Agreement[24] - The company is exploring strategic alternatives for its business-to-consumer subsidiaries, including potential sales or spin-offs[111][113] Operational Highlights - The company reported a significant increase in accounts payable, rising to $863,579 from $682,653 at the end of 2022[12] - The company granted 603 stock options during the six-month period ended June 30, 2023, with a total compensation cost of $22,217, down from $51,875 in the same period of 2022, reflecting a decrease of approximately 57.3%[68] - The company experienced a 30.3% reduction in wages and salary expenses, totaling $1,726,858 for the six months ended June 30, 2023, compared to $2,248,082 in 2022[144] - The company implemented expense reduction initiatives starting in July 2022, leading to a reduction in salary and wages expense of approximately $521,000 for the six months ended June 30, 2023[148] - The company has expanded significantly since 2015, with a total of 14,100+ registered members on its sales platform[102] - The company’s services focus on optimizing drug procurement and enhancing the retail pharmacy experience for approximately 19,397 independent pharmacies with an annual purchasing power of $67.1 billion[102] Challenges and Risks - The company may face challenges in obtaining additional capital, which could adversely affect its ability to continue as a going concern[175] - There are no commitments for additional financing, and any equity financing will be dilutive to existing stockholders[177] - The company has not fully implemented necessary internal controls, which were identified as material weaknesses[162] - The company experienced significant inflationary pressures in 2022 and the first half of 2023, impacting operating costs due to supply chain disruptions and increased demand[178]

Financial Data and Key Metrics Changes - Consolidated revenues for Q1 2023 decreased by 31% to $2.2 million compared to $3.2 million in Q1 2022, primarily due to a 70% decrease in TRxADE Prime revenue [24][26] - TRxADE Platform revenue increased by 4% year-over-year, while Community Specialty Pharmacy revenue rose by 16% [24] - Gross margin improved by 70% for the same three-month periods, with TRxADE Prime reporting a gross margin of 12% in Q1 2023 compared to 1% in Q1 2022 [25] - Net loss for Q1 2023 was $678,000 or $0.07 per share, an improvement from a net loss of $960,000 or $0.12 per share in Q1 2022 [26] - Cash increased to $1.2 million as of March 31, 2023, from $1.1 million at the end of 2022, driven by an $850,000 accounts receivable advance [27] Business Line Data and Key Metrics Changes - TRxADE Prime revenue saw a significant decline, while the TRxADE Platform and Community Specialty Pharmacy revenues experienced growth [24] - The gross margin for Community Specialty Pharmacy improved from a negative 30.7% in 2022 to 13.1% in 2023 [25] Market Data and Key Metrics Changes - The company has over 14,500 registered members on its platform, with approximately 1,100 new members added in Q1 2023 compared to the same period in 2022 [37] - There was a 7% increase in the volume of sales processed across the TRxADE platform year-over-year [38] Company Strategy and Development Direction - The company is focusing on innovation and partnerships to enhance its B2B strategy while diversifying its revenue base [28] - Plans to sell subsidiary companies, Community Specialty Pharmacy and Alliance Pharma Solutions, to concentrate on core B2B operations [39] - The strategy includes improving TRxADE Prime revenues through better catalog and pricing, while also negotiating better contracts with suppliers [44][62] Management's Comments on Operating Environment and Future Outlook - Management noted the importance of providing independent pharmacies with transparency and competitive pricing to enhance their purchasing power [61] - The company aims to reduce operational expenses and improve gross margins moving forward, with a focus on technology and analytics to support pharmacies [66] Other Important Information - The company is working towards completing the sale of its subsidiary companies by June 30, 2023, which is expected to alleviate some financial burdens [39][58] - Operating expenses in Q1 2023 were $1.9 million, down from $2.3 million in Q1 2022, reflecting reductions in various costs [52] Q&A Session Summary Question: What is the current state of independent pharmacies and their needs? - Management emphasized the need for transparency and competitive pricing from suppliers to support independent pharmacies [49] Question: What is the strategy regarding TRxADE Prime and its revenue? - Management indicated that the decline in TRxADE Prime revenue is strategic, focusing on improving the catalog and pricing to enhance margins [43][45] Question: Can you elaborate on the sale of subsidiary companies and its impact? - The sale is part of a strategy to focus on core B2B operations, with an expected reduction in financial burdens from these consumer-focused businesses [58] Question: How is the company addressing competition from larger wholesalers? - Management stated that the goal is to provide independent pharmacies with better visibility and options to compete with larger wholesalers [61] Question: What are the expectations for future transaction volumes on the platform? - Management expressed optimism about increasing transaction volumes due to the growing number of registered members and improved service offerings [74]

Financial Performance - Total revenues for Q1 2023 were $2,247,750, a decrease of 30.7% compared to $3,240,272 in Q1 2022[17] - Gross profit for Q1 2023 increased to $1,557,080, up 16.6% from $1,335,703 in Q1 2022[17] - Operating expenses decreased to $1,904,486 in Q1 2023, down 17.4% from $2,304,275 in Q1 2022[17] - Net loss attributable to TRxADE Health, Inc. for Q1 2023 was $677,953, compared to a net loss of $960,147 in Q1 2022, representing a 29.4% improvement[17] - The company reported a basic and diluted net loss per common share of $0.07 for Q1 2023, compared to $0.12 for Q1 2022[17] - Net loss from continuing operations for Q1 2023 was $325,709, a decrease from a loss of $965,836 in Q1 2022, indicating an improvement of approximately 66.3%[39] - Total net cash used in operating activities for Q1 2023 was $931,531, compared to $1,000,771 in Q1 2022, reflecting a reduction of about 6.9%[22] - Cash at the end of Q1 2023 was $1,194,079, down from $1,870,682 at the end of Q1 2022, representing a decline of approximately 36.1%[22] - The company recorded a bad debt recovery of $32,074 in Q1 2023, compared to a bad debt expense of $1,317 in Q1 2022[34] - Basic and diluted loss per common share for Q1 2023 was $0.07, compared to $0.12 in Q1 2022, showing an improvement of approximately 41.7%[39] - The company reported a working capital deficit of $164,035 as of March 31, 2023, raising concerns about its ability to continue as a going concern[41] - The company estimates operating expenses and working capital requirements for the next 12 months to be approximately $8,000,000[118] Assets and Liabilities - Total assets increased to $4,037,771 as of March 31, 2023, up 8.8% from $3,710,026 at the end of 2022[15] - Total current liabilities rose to $2,550,148 as of March 31, 2023, an increase of 18.8% from $2,146,791 at the end of 2022[15] - Stockholders' equity increased to $655,140 as of March 31, 2023, compared to $342,867 at the end of 2022, reflecting a significant improvement[15] - Cash and cash equivalents increased to $1,194,079 as of March 31, 2023, up from $1,111,156 at the end of 2022[15] - The company has a total minimum lease payment obligation of $1,260,835 as of March 31, 2023, with long-term lease obligations amounting to $820,346[78] - Current assets (excluding cash) rose by 24% to $1,192,034 as of March 31, 2023, compared to $959,490 at December 31, 2022[116] - Current liabilities (excluding short-term debt) increased by 29% to $2,550,148 as of March 31, 2023, from $1,980,124 at December 31, 2022[116] - Working capital decreased to $(164,035) as of March 31, 2023, reflecting a 206% decline from $(53,668) at December 31, 2022[116] Strategic Initiatives - The company plans to raise additional capital or secure debt funding to support ongoing operations, which may not be available on favorable terms[41] - The company is actively developing new products, including a telehealth platform expected to launch in Q3 2023, aimed at enhancing user engagement[191] - TRxADE HEALTH, INC. is pursuing market expansion strategies, targeting new geographic regions, particularly in the Southeast Asian market[191] - The company plans to invest approximately $5 million in research and development for new technologies in the upcoming fiscal year[191] - The company plans to increase its client base and operational revenue on its platforms and may pursue strategic transactions, including potential sales or fundraising[117] Operational Challenges - The company has an accumulated deficit of $19.9 million as of March 31, 2023, indicating significant financial challenges[41] - The company faces risks related to obtaining additional capital, which may not be available on commercially acceptable terms, raising doubts about its ability to continue as a going concern[157] - Inflationary pressures and supply chain disruptions have increased operating costs, potentially affecting the company's financial condition and results of operations[160] - The company has not experienced significant negative impacts from COVID-19 but has faced supply chain interruptions affecting wholesalers and technology outsourcing[106] Compliance and Regulatory Issues - The company is currently prohibited from filing new registration statements on Form S-3 until at least October 2023 due to compliance issues with the SEC[164] - The company reported stockholders' equity of $1,804,533 as of June 30, 2022, which is below the Nasdaq minimum requirement of $2,500,000 for continued listing[167] - The company is required to maintain a stock price over $1.00 per share to comply with Nasdaq listing requirements[174] - If the company fails to demonstrate compliance with Nasdaq requirements, it may face delisting from the Nasdaq Capital Market[170] - The company has not repurchased any shares of common stock during the first quarter of 2023[179] User and Revenue Growth - TRxADE HEALTH, INC. reported a significant increase in revenue, with a year-over-year growth of 25% in Q1 2023[191] - The company has expanded its user base, reaching over 1 million registered users, which represents a 30% increase compared to the previous quarter[191] - TRxADE HEALTH, INC. anticipates continued growth, projecting a revenue increase of 15% to 20% for the next quarter[191] - For the three months ended March 31, 2023, processed sales volume increased by 7%, and total revenue grew by 4% compared to the same period in 2022[99] - Trxade Inc. revenue from platform sales increased by 6%, while revenue from Trxade Prime decreased by approximately 11% for the three months ended March 31, 2023[126] Internal Controls and Governance - Management identified material weaknesses in internal controls, including insufficient written policies for accounting and financial reporting[144] - The company has committed to improving its financial organization by increasing personnel resources and technical accounting expertise[146] - The company recognizes that any controls and procedures can only provide reasonable assurance of achieving desired control objectives due to resource constraints[149] - The company believes that the resolution of current legal proceedings will not have a material adverse effect on its financial condition or results of operations[153]

Financial Data and Key Metrics Changes - Consolidated revenue for 2022 increased by 16% to $11.4 million compared to $9.9 million in 2021, driven by improved revenue on the TRxADE platform and TRxADE Prime [39] - TRxADE platform revenue increased by 10%, while TRxADE Prime revenue grew by 46% in 2022 compared to 2021 [39] - Net loss for 2022 was $3.9 million or $0.41 loss per share, an improvement from a net loss of $5.3 million or $0.65 loss per share in 2021 [41] - Gross profit improved by $700,000 but remained consistent at 48% as a percentage of revenue year-over-year [40] Business Line Data and Key Metrics Changes - TRxADE Prime saw a gross margin improvement from a negative 12% in 2021 to a positive 1% in 2022, reflecting a 13% improvement [15] - Community specialty pharmacy revenue decreased by 29% in 2022 compared to 2021 [39] Market Data and Key Metrics Changes - The company has over 14,400 registered members on its platform, with approximately 1,212 new members added in fiscal 2022 compared to 790 in fiscal 2021 [12] - The independent pharmacy market maintains an estimated annual purchasing power of approximately $67 billion [10] Company Strategy and Development Direction - The company is focusing on innovation and partnerships to drive its core business-to-business strategy while diversifying its revenue base [18] - Plans to sell subsidiary companies are part of the strategy to concentrate on the core business model [13] Management's Comments on Operating Environment and Future Outlook - Management highlighted the importance of technology and product development to support local pharmacies and enhance customer service [9] - The company aims to improve gross margins and reduce overhead costs moving forward [39] Other Important Information - Cash and cash equivalents decreased to $1.1 million as of December 31, 2022, from $3.1 million in 2021, primarily due to inventory purchases and legal settlements [17] Q&A Session Summary Question: Status of speaking with group purchasing organizations related to TRxADE Prime - Management indicated that they are working with approximately 1,300 new pharmacies and aim to increase this to 1,500 [21][23] Question: Future liability for the SOSRx partnership - Management confirmed there are no future liabilities related to the SOSRx partnership [25][45] Question: Mix between branded and generics on the TRxADE platform - The current mix is approximately 60% generics and 40% brand, with a goal to shift towards 70%-75% generics [54] Question: Constraints with overseas manufacturing - Management stated that supply chain issues have returned to normal post-COVID [55] Question: Streamlining of operating expenses - Management indicated that streamlining will focus on technology and professional fees [56]

Financial Performance - Revenues for the year ended December 31, 2022, increased by $1,558,832 or 15.8% to $11,448,265, compared to $9,889,433 for 2021[355] - Gross profit for the year ended December 31, 2022, was $5,451,216, representing a 14.9% increase from $4,745,965 in 2021[355] - Integra Pharma Solutions' revenue increased by $1,503,506 or 46% due to increased sales volume and pricing changes[356] - Net loss decreased by $1,406,015 to $3,909,868 for the year ended December 31, 2022, compared to a net loss of $5,315,883 for the year ended December 31, 2021, representing a 26% improvement[366][378] Operating Expenses - Total operating expenses decreased by 1.6% to $9,875,511 for the year ended December 31, 2022, compared to $10,038,258 in 2021[355] - Loss on inventory investment was $875,520 for the year ended December 31, 2022, compared to $1,225,141 in 2021[362] - Interest expense increased significantly to $315,217 for the year ended December 31, 2022, from $23,590 in 2021, due to funding agreements[365] Cash Flow and Capital - Cash and cash equivalents were $1,133,633 at December 31, 2022, down from $3,122,578 at the end of 2021[368] - Cash used by operations decreased to $1,525,929 in 2022 from $2,566,226 in 2021, a reduction of 41%[379] - Cash flows from operating activities improved by $1,040,297, reflecting a 41% decrease in cash used compared to the previous year[378] - Cash used in investing activities increased significantly to $427,845 in 2022 from $22,596 in 2021, primarily for capitalized software investments[380] - The company raised approximately $1.3 million in 2022 through the exercise of warrants and a stock placement of 920,000 shares at $1.15 per share[375] - The company anticipates the need for additional funding in the next 12 months to maintain operations and support potential acquisitions[346] - The company anticipates needing additional capital or debt funding to support ongoing operations and expansion efforts[373][376] Liabilities and Current Position - Working capital decreased by $3,501,886 to negative $53,668 as of December 31, 2022, compared to $3,448,218 as of December 31, 2021[344] - Current liabilities increased by $1,220,765 to $2,146,791 for the year ended December 31, 2022, primarily due to increased notes payable related to a joint venture[372] Taxation and Legal Matters - The company is subject to income taxes in the U.S., requiring significant judgments and estimates for the consolidated income tax provision[397] - Deferred income taxes arise from temporary differences between tax and financial statement recognition of revenue and expense, with considerations of past operating results and future taxable income forecasts[398] - Changes in tax laws and rates could materially impact the company's tax expense and cash flows in the future[399] - The company may face various claims and legal actions, with liabilities recorded when a loss is probable and reasonably estimable[400] - The likelihood of loss from contingencies is reviewed quarterly, and meaningful estimates can be complex due to dependence on future negotiations[401] Research and Development - Technology, research, and development expenditures were $1,160,856 for 2022, a decrease from $1,367,895 in 2021[359] - The company plans to continue developing information technology used in its subsidiaries and will rely on customer feedback for product improvements[346] Stock-Based Compensation - Stock-based compensation is accounted for based on the grant date fair value, recognized as compensation expense over the vesting period[402] - The company adopted ASU 2018-07 for accounting of share-based payments granted to non-employees effective January 1, 2019[402] Reporting and Compliance - The company is classified as a "smaller reporting company" and is not required to provide certain market risk disclosures[405] - The company has no outstanding off-balance sheet arrangements as of December 31, 2022[384]