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, 2021

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

For the Transition Period from _______ to _______

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.)

3840 Land O’ Lakes Blvd.
Land O’ Lakes, Florida		34639
(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 8,166,457 shares of the registrant’s common stock outstanding on October 25, 2021, and no shares of preferred stock outstanding.

TRxADE HEALTH, INC.

FORM 10-Q

For the Quarter Ended September 30, 2021

TABLE OF CONTENTS

		Page
Cautionary Note Regarding Forward-Looking Statements		3

PART I: FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)		6

Consolidated Balance Sheets		6
Consolidated Statements of Operations		7
Consolidated Statements of Changes in STOCKHOLDERS’ Equity		8
Consolidated Statements of Cash Flows		9
Notes to Unaudited Consolidated Financial Statements		10

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS		18

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK		26

ITEM 4. CONTROLS AND PROCEDURES		27

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS		28

ITEM 1A. RISK FACTORS		28

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS		32

ITEM 3. DEFAULTS UPON SENIOR SECURITIES		32

ITEM 4. MINE SAFETY DISCLOSURES		32

ITEM 5. OTHER INFORMATION		32

ITEM 6. EXHIBITS		32

SIGNATURES		33

Table of Contents

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q (“Report”), including this “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” contains forward-looking statements, within the meaning of 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. In particular, as discussed in greater detail below, our financial condition and results could be materially adversely affected by the continued impacts and disruptions caused by the novel coronavirus (COVID-19) global pandemic and governmental responses thereto. Therefore, actual results may differ materially and adversely from those expressed in any forward-looking statements. Factors that might cause or contribute to such differences include, but are not limited to, those discussed elsewhere in this Report, including under “Risk Factors”, and in other reports the Company files with the Securities and Exchange Commission (“SEC”), including the Company’s Annual Report on Form 10-K for the year ended December 31, 2020, as filed with the SEC on March 29, 2021 (under the heading “Risk Factors” and in other parts of that report).

The following discussion is based upon our unaudited Consolidated Financial Statements included elsewhere in this report, which have been prepared in accordance with U.S. generally accepted accounting principles. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingencies. In the course of operating our business, we routinely make decisions as to the timing of the payment of invoices, the collection of receivables, the shipment of products, the fulfillment of orders, the purchase of supplies, and the building of inventory, among other matters. Each of these decisions has some impact on the financial results for any given period. In making these decisions, we consider various factors including contractual obligations, customer satisfaction, competition, internal and external financial targets and expectations, and financial planning objectives. On an on-going basis, we evaluate our estimates, including those related to sales returns, pricing credits, warranty costs, allowance for doubtful accounts, impairment of long-term assets, especially goodwill and intangible assets, contract manufacturer exposures for carrying and obsolete material charges, assumptions used in the valuation of stock-based compensation, and litigation. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. Factors that could cause or contribute to these differences include those discussed below and elsewhere in this Report, and in other reports we file with the SEC, and in our most recent Annual Report on Form 10-K. All references to years relate to the calendar year ended December 31 of the particular year.

Table of Contents

Summary Risk Factors

We face risks and uncertainties related to our business, many of which are beyond our control. In particular, risks associated with our business include:

	●	We have in the past been adversely affected by COVID-19 and may continue to be adversely affected by COVID-19 and/or governmental responses thereto;

	●	We were recently unprofitable, we have recently generated net losses, and we may incur losses in the future;

	●	We may need additional financing in the future, which may not be available on favorable terms, if at all;

	●	We may not be able to manage our future growth;

	●	Many of our competitors are better established and have resources significantly greater than ours;

	●	We will need to expand our member base or our profit margins to attain profitability;

	●	We face risks associated with our operations within the pharmaceutical distribution market;

	●	We are dependent on our current management;

	●	We rely on third party contracts, which may not be renewed or may be terminated;

	●	We are currently facing and may in the future face difficulties in sourcing products and inventory due to a variety of causes;

	●	We have in the past, and may in the future, not be able to sell our inventory, at or above the price we acquired such inventory for, have in the past, and may in the future, be forced to write-down inventory;
	●	We may not receive products or receive refunds for deposited amounts and may experience losses in connection with such deposits;

	●	We may be subject to claims that we violated intellectual property rights of others, which are extremely costly to defend and could require us to pay significant damages and limit our ability to operate;

	●	Our business and operations depend on the proper functioning of information systems, critical facilities and distribution networks and a disruption, cyber-attack, failure or destruction of such networks, systems, or technologies may disrupt our business or result in liability;

	●	There may be losses or unauthorized access to or releases of confidential information, including personally identifiable information, that could subject the Company to significant reputational, financial, legal and operational consequences;

	●	We face risks associated with our business in the telehealth market, including risks associated with legal challenges, relationships with third parties and affiliated professionals, our network of qualified providers, competition for services; new technologies, failure to develop widespread brand awareness and regulatory risks;

	●	The health passport market may not achieve and sustain high levels of demand, consumer acceptance and market adoption;

	●	The health passport market is rapidly changing and the need for such services will continue to change; the Company’s health passport application and services may not be adopted, may not ultimately be needed, and may be incompatible with other offerings and/or more widely adopted products;

	●	Our certificate of incorporation limits the liability of our officers and directors and provides for indemnification rights;

Table of Contents

	●	We incur significant costs to ensure compliance with U.S. and NASDAQ Capital Market reporting and corporate governance requirements;

	●	We may not be able to comply with NASDAQ’s continued listing standards;

	●	Regulatory changes that affect our distribution channels could harm our business;

	●	Healthcare fraud laws are often vague and uncertain, exposing us to potential liability;

	●	New and expanded laws or regulations could have a material adverse effect on our business operations, cash flows or future prospects;

	●	The public health crisis involving the abuse of prescription opioid pain medication could have a material negative effect on our business;

	●	Consolidation in the U.S. healthcare industry may negatively impact our results of operations;

	●	We have identified material weaknesses in our internal control over financial reporting and controls and procedures;

	●	There may not be sufficient liquidity in the market for our securities in order for investors to sell their shares. The market price of our comment stock may continue to be volatile;

	●	Stockholders may experience dilution to future equity sales, the exercise or conversion of outstanding convertible securities or future transactions;

	●	Our Chief Executive Officer and President are our two largest stockholders and, as a result, they can exert control over us and have actual or potential interests that may differ from yours;

	●	Risks associated with the JOBS Act and our status as an emerging growth company;

	●	Risks associated with future acquisitions, including unknown liabilities and difficulty integrating such acquisitions;

	●	Cyber security attacks and website problems;

	●	Claims, litigation, government investigations, and other proceedings that may adversely affect our business and results of operations;

	●	Other risk factors included under “Risk Factors” in our latest Annual Report on Form 10-K and set forth below under “Risk Factors”.

All forward-looking statements speak only at the date of the filing of this Report. The reader should not place undue reliance on these forward-looking statements. Although we believe that our plans, intentions and expectations reflected in or suggested by the forward-looking statements we make in this Report are reasonable, we provide no assurance that these plans, intentions or expectations will be achieved. We disclose important factors that could cause our actual results to differ materially from our expectations under “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in this Report and our Annual Report on Form 10-K for the year ended December 31, 2020. These cautionary statements qualify all forward-looking statements attributable to us or persons acting on our behalf. We do not undertake any obligation to update or revise publicly any forward-looking statements except as required by law, including the securities laws of the United States and the rules and regulations of the SEC.

Table of Contents

PART I: FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

TRxADE HEALTH, INC.

Consolidated Balance Sheets

September 30, 2021, and December 31, 2020

(unaudited)

	September 30, 2021			December 31, 2020
Assets
Current Assets
Cash	$	3,571,889		$	5,919,578
Accounts Receivable, net		1,008,816			805,043
Inventory		94,822			1,257,754
Prepaid Assets		435,747			151,248
Deferred Offering Costs		78,000			-
Other Receivables		-			1,087,675
Total Current Assets		5,189,274			9,221,298

Property Plant and Equipment, Net		13,256			162,397

Other Assets
Deposits		21,636			21,636
Right of use leased assets		289,935			387,371

Total Assets	$	5,514,101		$	9,792,702

Liabilities and Stockholders’ Equity

Current Liabilities
Accounts Payable	$	275,220		$	256,829
Accrued Liabilities		316,081			219,256
Current Portion Lease Liabilities		63,560			131,153
Customer Deposits		-			10,000
Notes Payables– Related Party		-			225,000
Total Current Liabilities		654,861			842,238

Long Term Liabilities
Other Long-Term Liabilities — Leases		241,945			271,306
Total Liabilities		896,806			1,113,544

Stockholders’ Equity
Series A Preferred Stock, $0.00001 par value shares authorized; none issued and outstanding as of September 30, 2021, and December 31, 2020		-			-
Common Stock, $0.00001 par value; 100,000,000 shares authorized; 8,166,457 and 8,093,199 shares issued and outstanding as of September 30, 2021, and December 31, 2020, respectively		82			81
Additional Paid-in Capital		20,080,310			19,610,631
Accumulated Deficit		(15,463,097	)		(10,931,554	)
Total Stockholders’ Equity		4,617,295			8,679,158

Total Liabilities and Stockholders’ Equity	$	5,514,101		$	9,792,702

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

Table of Contents

TRxADE HEALTH, INC.

Consolidated Statements of Operations

For the Three and Nine Months Ended September 30, 2021, and 2020

(unaudited)

	2021			2020			2021			2020
	Three months ended						Nine months ended
	2021			2020			2021			2020

Revenues	$	2,550,046		$	6,332,269		$	7,501,535		$	15,128,226

Cost of Sales		1,269,005			4,402,967			3,995,792			9,554,016
Gross Profit		1,281,041			1,929,302			3,505,743			5,574,210

Operating Expenses
Loss on Inventory Investment		1,285			-			1,226,426			-
General and Administrative		2,575,882			1,783,481			6,789,286			5,775,439

Operating Income (Loss)		(1,296,126	)		145,821			(4,509,969	)		(201,229	)

Interest Expense		(5,622	)		(7,430	)		(21,574	)		(22,664	)
Net Income (Loss)	$	(1,301,748	)	$	138,391		$	(4,531,543	)	$	(223,893	)

Net (Loss) Income per Common Share – Basic and Diluted:	$	(0.16	)	$	0.02		$	(0.56	)	$	(0.03	)

Weighted average Common Shares Outstanding – Basic and Diluted		8,163,522			8,063,043			8,126,689			7,572,954

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

Table of Contents

TRxADE HEALTH, INC.

Consolidated Statements of Changes in Shareholders’ Equity

For the Three and Nine Months Ended September 30, 2021, and 2020

(unaudited)


	Preferred Stock				Common Stock				Additional Paid-in-		Accumulated			Total Shareholders’
	Shares		Amount		Shares		Amount		Capital		Deficit			Equity
Balance at December 31, 2020		-	$	-		8,093,199	$	81	$	19,610,631	$	(10,931,554	)	$	8,679,158
Common Stock issued for Services		-		-		-		-		98,247		-			98,247
Common Stock issued for Services, shares
Warrants Exercised for Cash
Warrants Exercised for Cash, Shares
Common Stock issued from offering
Common Stock issued from offering, Shares
Fractional shares issued due to reverse split
Fractional shares issued due to reverse split, Shares
Stock Issuance Costs
Options Exercised for Cash
Options Exercised for Cash, Shares
Warrants Expense
Options Expense		-		-		-		-		75,738		-			75,738
Net Income (Loss)		-		-		-		-		-		(651,519	)		(651,519	)
Balance at March 31, 2021		-	$	-		8,093,199	$	81	$	19,784,616	$	(11,583,073	)	$	8,201,624
Common Stock issued for Services		-		-		37,905		-		100,416		-			100,416
Options Exercised for Cash		-		-		30,353		-		1,821		-			1,821
Options Expense		-		-				-		61,392		-			61,392
Net Income (Loss)		-		-		-		-		-		(2,578,276	)		(2,578,276	)
Balance at June 30, 2021		-	$	-		8,161,457	$	81	$	19,948,245	$	(14,161,349	)	$	5,786,977
Common Stock issued for Services		-		-		-		-		41,250		-			41,250
Warrants Exercised for Cash		-		-		5,000		1		15,000		-			15,001

SEC Form 10-Q filed by Trxade Group, Inc.