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, 2022

☐ 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.)

2420 Brunello Trace
Lutz, Florida		33558
(Address of principal executive offices)		(Zip code)

(800) 261-0281

(Registrant’s telephone number, including area code)

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

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, $0.00001 Par Value Per Share

MEDS

The NASDAQ Stock Market LLC

(The NASDAQ Capital Market)

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

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

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

Large accelerated filer	☐	Accelerated filer	☐

Non-accelerated filer	☒	Smaller reporting company	☒

Emerging growth company	☒

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

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

There were 9,318,708 shares the registrant’s common stock outstanding on November 4, 2022 and no shares of preferred stock outstanding.

TRxADE HEALTH, INC.

FORM 10-Q

For the Quarter Ended September 30, 2022

TABLE OF CONTENTS

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS	3

PART I: FINANCIAL INFORMATION	5

ITEM 1. FINANCIAL STATEMENTS	5

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	19

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	35

ITEM 4. CONTROLS AND PROCEDURES	35

PART II. OTHER INFORMATION	37

ITEM 1. LEGAL PROCEEDINGS	37

ITEM 1A. RISK FACTORS	37

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	45

ITEM 3. DEFAULTS UPON SENIOR SECURITIES	46

ITEM 4. MINE SAFETY DISCLOSURES	46

ITEM 5. OTHER INFORMATION	46

ITEM 6. EXHIBITS	46

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q (“Report”), including “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” contains forward-looking statements, within the meaning of the federal securities laws, including the Private Securities Litigation Reform Act of 1995, regarding future events and the future results of the Company that are based on current expectations, estimates, forecasts, and projections about the industry in which the Company operates and the beliefs and assumptions of the management of the Company. Words such as “expects,” “anticipates,” “targets,” “goals,” “projects,” “intends,” “plans,” “believes,” “seeks,” “estimates,” variations of such words, and similar expressions are intended to identify such forward-looking statements. These forward-looking statements are only predictions and are subject to risks, uncertainties and assumptions that are difficult to predict. These factors include, but are not limited to:

●

Risks of our operations not being profitable;

●

Claims relating to alleged violations of intellectual property rights of others;

●

Technical problems with our websites;

●

Risks relating to implementing our acquisition strategies;

●

Our ability to manage our growth;

●

Negative effects on our operations associated with the opioid pain medication health crisis;

●

Regulatory and licensing requirement risks;

●

Risks related to changes in the U.S. healthcare environment;

●

The status of our information systems, facilities and distribution networks;

●

Risks associated with the operations of our more established competitors;

●

Regulatory changes;

●

Healthcare fraud;

●

The continued effects of COVID-19, governmental responses thereto, economic downturns and possible recessions caused thereby;

●

Inflation, rising interest rates, governmental responses thereto and possible recessions caused thereby;

●

Changes in laws or regulations relating to our operations;

●

Privacy laws;

●

System errors;

●

Dependence on current management;

●

Our growth strategy; and

●

Other risks disclosed below under, and incorporated by reference in, “Risk Factors”.

You should read the matters described and incorporated by reference in “Risk Factors” and the other cautionary statements made in this Report, and incorporated by reference herein, as being applicable to all related forward-looking statements wherever they appear in this Report. We cannot assure you that the forward-looking statements in this Report will prove to be accurate and therefore prospective investors are encouraged not to place undue reliance on forward-looking statements.

Forward-looking statements speak only as of the date of this Report or the date of any document incorporated by reference in this Report, as applicable. Except to the extent required by applicable law or regulation, we do not undertake any obligation to update forward-looking statements to reflect events or circumstances after the date of this Report or to reflect the occurrence of unanticipated events.

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.

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, as well as supply chain issues relating thereto;

●

We are currently unprofitable, have 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 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 and certain of our other assets which may have a material adverse effect on our balance sheet;

●

We have in the past, and may in the future, not receive products or receive refunds for deposited amounts and have experienced 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 from the Office of Inspector General, U.S. Department of Health and Human Services (OIG) and the United States Department of Justice (DOJ) around the practice of telehealth and expiring COVID-19 waivers;

●

Our certificate of incorporation limits the liability of our officers and directors and provides for indemnification rights, mandatory forum selection provisions and limits the ability of stockholders to call special meetings of stockholders;

●

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

●

We are not currently in compliance with NASDAQ’s continued listing requirements and may not be able to maintain the listing of our common stock on the NASDAQ Capital Market;

●

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 common 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 results of operations are subject to rising inflation, rising interest rates, governmental responses thereto and possible recessions caused thereby;

●

Our Chief Executive Officer and President are our two largest stockholders and, as a result, they can exert significant 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;

●

There is substantial doubt regarding our ability to continue as a going concern;

●

We may see a plateau in our Tele-Vet services offering due to a lack of providers as we are not marketing the service;

●

There may be changes in state law concerning the definition of “Tele-Vet” services which may hinder our ability to provide services without an in-person visit to establish care. This is known as establishing a veterinarian-client-patient relationship (VCPR);

●

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

●

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

PART I: FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

TRxADE HEALTH, INC.

Consolidated Balance Sheets

(Unaudited)

	September 30,			December 31,
	2022			2021

Current Assets
Cash	$	321,715		$	3,122,578
Accounts receivable, net		850,306			978,973
Inventory		75,950			56,279
Prepaid assets		249,785			216,414
Other receivable		875,250			-
Total Current Assets		2,373,006			4,374,244

Property plant and equipment, net		68,036			98,751
Intangible assets and capitalized software, net		1,099,002			-
Deposits		49,031			60,136
Operating lease right-of-use assets		1,100,186			1,233,033
Total Assets	$	4,689,261		$	5,766,164

Current Liabilities
Accounts payable		744,412			477,028
Accrued liabilities		312,077			270,437
Other current liabilities		105,926			-
Contingent funding liabilities		542,143			-
Current portion lease liabilities		190,127			178,561
Notes payable— related party		166,667			-
Total Current liabilities		2,061,352			926,026

Long Term Liabilities
Other long-term liabilities — leases		937,998			1,069,965
Notes payable- related party		333,333			-

Total Liabilities		3,332,683			1,995,991

Stockholders’ Equity

Series A preferred stock, $0.00001 par value; 10,000,000 shares authorized; none issued and outstanding, as of September 30, 2022 and December 31, 2021.		-			-
Common stock, $0.00001 par value; 100,000,000 shares authorized; 8,398,708 and 8,166,457 shares issued and outstanding, as of September 30, 2022 and December 31, 2021, respectively		83			82
Additional paid-in capital		20,193,271			20,017,528
Retained deficit		(18,794,350	)		(16,247,437	)
Total		1,399,004			3,770,173
Non-controlling interest in subsidiary		(42,426	)		-
Total stockholders’ equity		1,356,578			3,770,173

Total Liabilities and Stockholders’ Equity	$	4,689,261		$	5,766,164

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

TRxADE HEALTH, INC.

Consolidated Statements Of Operations

(Unaudited)

	2022			2021			2022			2021
	Three Months Ended September 30,						Nine Months Ended September 30,
	2022			2021			2022			2021

Revenues	$	2,400,311		$	2,550,046		$	8,919,312		$	7,501,535
Cost of Sales		998,320			1,269,005			5,010,704			3,995,792
Gross Profit		1,401,991			1,281,041			3,908,608			3,505,743

Operating Expenses:
Loss on inventory investment		-			1,285			-			1,226,426
Wage and salary expense		937,062			1,015,816			3,185,144			2,878,237
Professional fees		95,275			205,457			307,341			757,263
Accounting and legal expense		191,611			98,867			567,690			462,626
Technology expense		298,586			338,637			842,433			678,110
General and administrative		286,488			917,105			1,484,709			2,013,050
Total operating expenses		1,809,022			2,577,167			6,387,317			8,015,712
Operating Loss		(407,031	)		(1,296,126	)		(2,478,709	)		(4,509,969	)

Nonoperating income (expense)
Interest income		8,396			-			8,396			-
Gain on disposal of asset		-			-			4,100			-
Interest expense		(130,107	)		(5,622	)		(140,626	)		(21,574	)
Total nonoperating expense		(121,711	)		(5,622	)		(128,130	)		(21,574	)
Net Loss	$	(528,742	)	$	(1,301,748	)	$	(2,606,839	)	$	(4,531,543	)

Net loss attributable to TRxADE Health, Inc.		(503,003	)		(1,301,748	)		(2,546,913)			(4,531,543	)
Net loss attributable to non-controlling interests		(25,739	)		-			(59,926	)		-
Net loss attributable to TRxADE Health, Inc.		(503,003	)		(1,301,748	)		(2,546,913)			(4,531,543	)

Net loss per common share — basic and diluted	$	(0.06	)	$	(0.16	)	$	(0.31	)	$	(0.56	)

Weighted average common shares outstanding - basic and diluted		8,249,653			8,163,522			8,203,202			8,126,689

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

TRxADE HEALTH, INC.

Consolidated Statements Of Changes In Stockholders’ Equity

Three And Nine Months Ended September 30, 2022, and 2021

(Unaudited)

	Shares		$ Amount		Shares		$ Amount		Capital		(Deficit)			Subsidiaries			Equity
									Additional					Non-Controlling			Total
	Preferred stock				Common Stock				Paid-in		Accumulated			Interest			Stockholders’
	Shares		$Amount		Shares		$Amount		Capital		Deficit			in Subsidiaries			Equity
Balance at December 31, 2021		-	$	-		8,166,457	$	82	$	20,017,528	$	(16,247,437	)	$	-		$	3,770,173
Capital contributions				-		-		-		-		-			792,500			792,500
Capital distributions															(775,000	)		(775,000	)
Common stock issued for services				-		-		-		32,083		-			-			32,083
Warrants exercised for cash				-		14,584		-		875		-			-			875
Options expense				-		-		-		32,783		-			-			32,783
Net Loss				-		-		-		-		(960,147	)		(5,689	)		(965,836	)
Balance at March 31, 2022		-	$	-		8,181,041	$	82	$	20,083,269	$	(17,207,584	)	$	11,811		$	2,887,578
Capital Contributions				-		-		-		-		-						-
Common stock issued for services				-		-		-		12,222		-			-			12,222
Warrants exercised for cash				-		-		-		-		-						-
Options expense				-		-		-		16,994		-			-			16,994
Net loss				-		-		-		-		(1,083,763	)		(28,498	)		(1,112,261	)
Balance at June 30, 2022		-	$	-		8,181,041	$	82	$	20,112,485	$	(18,291,347	)	$	(16,687	)	$	1,804,533
Capital Contributions				-		-		-		-		-						-
Common stock issued for services				-		217,667		1		63,125		-			-			63,126
Warrants exercised for cash				-		-		-		-		-						-
Options expense				-		-		-		17,661		-			-			17,661
Net loss				-		-		-		-		(503,003	)		(25,739	)		(528,742	)
Balance at September 30, 2022		-	$	-		8,398,708	$	83	$	20,193,271	$	(18,794,350	)	$	(42,426	)	$	1,356,578

	Series A Preferred								Additional					Non-Controlling		Total
	Stock				Common Stock				Paid-in		Accumulated			Interest		Shareholders’
	Shares		$Amount		Shares		$Amount		Capital		Deficit			in Subsidiaries		Equity

Balance at December 31, 2020		-	$	-		8,093,199	$	81	$	19,610,631	$	(10,931,554	)	$	-	$	8,679,158
Common stock issued for services				-		-		-		98,247		-			-		98,247
Options expense				-		-		-		75,738		-			-		75,738
Net 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 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
Warrants expense		-		-		-		-		21,640		-			-		21,640
Options expense										54,175							54,175
Net loss		-		-		-		-				(1,301,748	)		-		(1,301,748	)
Balance at September 30, 2021		-	$	-		8,166,457	$	82	$	20,080,310	$	(15,463,097	)	$	-	$	4,617,295

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

TRxADE HEALTH, INC.

Consolidated Statements of Cash Flows

(Unaudited)

	2022			2021
	Nine Months Ended September 30,
	2022			2021
Cash flows from operating activities:
Net loss	$	(2,606,839	)	$	(4,531,543	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation expense		11,815			5,250
Options expense		67,439			191,305
Common stock issued for services		107,430			239,913
Bad debt expense		(98,841	)		616,215
Warrant Expense		-			21,640
Loss on inventory investments		-			1,226,426
Gain on sale of asset		(4,100	)		-
Amortization of right of use assets		132,847			97,436
Amortization of intangible assets		29,400			-
Changes in operating assets and liabilities:
Deferred offering costs		-			(78,000	)
Accounts receivable, net		227,508			(819,988	)
Prepaid assets and deposits		198,088			(284,499	)
Inventory		(19,671	)		1,162,932
Other receivables		(875,250	)		5,140
Lease liability		(120,401	)		(96,954	)
Accounts payable		267,384			18,391
Accrued liabilities		(178,714	)		96,825
Current liabilities		105,926			-

SEC Form 10-Q filed by TRxADE HEALTH Inc.