10-K
1
form10-k.htm
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-K
For
the fiscal year ended December 31, 2020
OR
For
the transition period from: _____________to______________
001-39199
(Commission
File Number)
TRXADE
GROUP, INC.
(Exact
name of registrant as specified in its charter)
3840
Land O’ Lakes Boulevard
Land
O’ Lakes, Florida 34639
(Address
of Principal Executive Office) (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
Securities
registered pursuant to Section 12(g) of the Act:
None.
Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes [ ] No [X]
Indicate
by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes [ ] No [X]
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 [X] 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 and post such files). Yes [X] No [ ]
Indicate
by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting
company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated
filer” and “smaller reporting company” and “emerging growth company” in Rule 12b-2
of the Exchange Act.
Large accelerated filer [ ] Accelerated filer [ ]
Non-accelerated filer [X] Smaller reporting company [X]
Emerging growth [X]
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 has filed a report on and attestation to its management’s assessment of the effectiveness
of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered
public accounting firm that prepared or issued its audit report. [ ]
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X]
The
aggregate market value of the voting and non-voting common stock held by non-affiliates of the registrant as of the last business
day of the registrant’s most recently completed second fiscal quarter was approximately $21,541,008. For purposes of calculating
the aggregate market value of shares held by non-affiliates, we have assumed that all outstanding shares are held by non-affiliates,
except for shares held by each of our executive officers, directors and 5% or greater stockholders. In the case of 5% or greater
stockholders, we have not deemed such stockholders to be affiliates unless there are facts and circumstances which would indicate
that such stockholders exercise any control over our company, or unless they hold 10% or more of our outstanding common stock.
These assumptions should not be deemed to constitute an admission that all executive officers, directors and 5% or greater stockholders
are, in fact, affiliates of our company, or that there are no other persons who may be deemed to be affiliates of our company.
Further information concerning shareholdings of our officers, directors and principal stockholders is included or incorporated
by reference in Part III, Item 12 of this Annual Report on Form 10-K.
As
of March 26, 2021, there were 8,093,199 shares of common stock issued and outstanding.
DOCUMENTS
INCORPORATED BY REFERENCE
Portions
of the registrant’s definitive proxy statement relating to its 2021 annual meeting of stockholders (the “2021 Proxy
Statement”) are incorporated by reference into Part III of this Annual Report on Form 10-K where indicated. The 2021
Proxy Statement will be filed with the U.S. Securities and Exchange Commission within 120 days after the end of the fiscal year
to which this report relates.
TABLE
OF CONTENTS
Page
Glossary 3
Cautionary Statement Regarding Forward-Looking Information 5
PART I
Item 1. Business 7
Item 1A. Risk Factors 20
Item 1B. Unresolved Staff Comments 46
Item 2. Properties 46
Item 3. Legal Proceedings 46
Item 4. Mine Safety Disclosures 46
PART II
Item 6. Selected Financial Data 47
Item 7A. Quantitative and Qualitative Disclosures About Market Risk 55
Item 8. Financial Statements and Supplemental Data 56
Item 9A. Controls and Procedures 77
Item 9B. Other Information 79
PART III
Item 10. Directors, Executive Officers and Corporate Governance 80
Item 11. Executive Compensation 80
Item 14. Principal Accountant Fees and Services 80
PART IV
Item 15. Exhibits, Financial Statements and Schedules 81
Signatures 84
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GLOSSARY
The
following are abbreviations and definitions of certain terms used in this Report, which are commonly used in the pharmaceutical
industry:
“ACA”
means the Patient Protection and Affordable Care Act, often shortened to the Affordable Care Act, nicknamed Obamacare, which is
a U.S. federal statute which provides numerous rights and protections that make health coverage fairer and easier to understand,
along with subsidies (through “premium tax credits” and “cost-sharing reductions”) to make
it more affordable. The law also expands the Medicaid program to cover more people with low incomes.
“ADR”
means Authorized Distributor of Record. Under current federal law, an ADR means a distributor with whom a manufacturer has established
an ongoing relationship to distribute such manufacturer’s products.
“ANDA”
means an abbreviated new drug application which contains data which is submitted to the FDA for the review and potential approval
of a generic drug product.
“CMS”
means the Centers for Medicare & Medicaid Services, which is a federal agency within the HHS that administers the Medicare
program and works in partnership with state governments to administer Medicaid.
“CSA”
means the Controlled Substances Act, the statute establishing federal U.S. drug policy under which the manufacture, importation,
possession, use, and distribution of certain substances is regulated.
“DEA”
means the Drug Enforcement Administration, a United States federal law enforcement agency under the United States Department of
Justice, tasked with combating drug trafficking and distribution within the United States.
“DQSA”
means the Drug Quality and Security Act which is a law that amended the FFDCA to grant the FDA more authority to regulate and
monitor the manufacturing of compounded drugs.
“EUA”
means an Emergency Use Authorization filed with the FDA. Under section 564 of the FFDCA, the FDA Commissioner may allow unapproved
medical products or unapproved uses of approved medical products to be used in an emergency to diagnose, treat, or prevent serious
or life-threatening diseases or when there are no adequate, approved, and available alternatives.
“FDA”
means U.S. The Food and Drug Administration, which is a federal agency of the United States Department of Health and Human Services.
The FDA is responsible for protecting the public health by ensuring the safety, efficacy, and security of human and veterinary
drugs, biological products, and medical devices; and by ensuring the safety of U.S. food supply, cosmetics, and products that
emit radiation.
“FDAAA”
means the Food and Drug Administration Amendments Act of 2007 which reviewed, expanded, and reaffirmed several existing pieces
of legislation regulating the FDA.
“FFDCA”
means the Federal Food, Drug and Cosmetic Act, which is a set of U.S. laws passed by Congress in 1938 giving authority to the
FDA to oversee the safety of food, drugs, medical devices, and cosmetics.
“Generic
drugs” are copies of brand-name drugs that have exactly the same dosage, intended use, effects, side effects, route
of administration, risks, safety, and strength as the original drug.
“Health
plan” means health insurance coverage provided by an individual or group that provides or pays the cost of medical care.
Health plans can be provided by public (Medicaid) or private (an employer) entities.
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“HHS”,
the U.S. Department of Health and Human Services also known as the Health Department, is a cabinet-level department of the U.S.
federal government with the goal of protecting the health of all Americans and providing essential human services.
“HIPAA”
means the Health Insurance Portability and Accountability Act of 1996, which has the goal of making it easier for people to keep
health insurance, protect the confidentiality and security of healthcare information and help the healthcare industry control
administrative costs.
“Individually
identifiable health information” is defined by HIPPA to mean information that is a subset of health information, including
demographic information collected from an individual, and: (1) is created or received by a health care provider, health plan,
employer, or health care clearinghouse; and (2) relates to the past, present, or future physical or mental health or condition
of an individual; the provision of health care to an individual; or the past, present, or future payment for the provision of
health care to an individual; and (a) that identifies the individual; or (b) with respect to which there is reasonable basis to
believe the information can be used to identify the individual.
“Medicaid”
is a federal and state health insurance program in the U.S. that helps with medical costs for some people with limited income
and resources. Medicaid also offers benefits not normally covered by Medicare, including nursing home care and personal care services.
“Medicare”
is a national health insurance program in the U.S. It primarily provides health insurance for Americans aged 65 and older, but
also for some younger people with disability status as determined by the Social Security Administration, as well as people with
end stage renal disease and amyotrophic lateral sclerosis (ALS or Lou Gehrig’s disease).
“NDC”
means a National Drug Code, a unique 10-digit, 3-segment number. It is a universal product identifier for human drugs in the United
States. The code is present on all non-prescription (OTC) and prescription medication packages and inserts in the U.S.
The 3 segments of the NDC identify the labeler, the product, and the commercial package size.
“PBM”
means a Pharmacy Benefits Manager. In the United States, a PBM is a third-party administrator of prescription drug programs for
commercial health plans, self-insured employer plans, Medicare Part D plans (prescription drug plans), the Federal Employees Health
Benefits Program, and state government employee plans.
“PDMA”
means the Prescription Drug Marketing Act of 1987. The PDMA establishes legal safeguards for prescription drug distribution to
ensure safe and effective pharmaceuticals and is designed to discourage the sale of counterfeit, adulterated, misbranded, subpotent,
and expired prescription drugs.
“Pedigree
tracking laws” mean laws which help ensure the integrity of the U.S. drug supply chain through the use of drug pedigrees,
verifiable written or electronic documents that track each move in a drug’s journey from manufacturer to patient.
“PPE”
means personal protective equipment, which is worn to minimize exposure to hazards that cause serious workplace injuries and illnesses.
When used below, PPE typically refers to protective equipment used by medical personnel, including masks, sanitizers and gloves.
“Rebates”
these are provided by manufacturers and are typically based on the ability of a payer to move market share for the manufacturer’s
product. Rebates are confidential.
“SNI”
means Serialized Numerical Identifier. Pursuant to FDA requirements, a product’s SNI has to include the item’s NDC
and unique Serial Number (SN).
“Wholesaler”
typically, the wholesaler is the first purchaser of a drug product – direct from the manufacturer. Wholesalers buy large
quantities and then resell either direct to provider-purchasers (like a large health system, pharmacy or pharmacy chain), or resell
to smaller, regional distributors for regional or local distribution to retail pharmacies and hospitals.
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CAUTIONARY
STATEMENT REGARDING FORWARD-LOOKING INFORMATION
This
Annual Report on Form 10-K (this “Report”) contains forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. In some cases, you can identify forward-looking statements by the following words: “anticipate,”
“believe,” “continue,” “could,” “estimate,” “expect,”
“intend,” “may,” “ongoing,” “plan,” “potential,”
“predict,” “project,” “should,” or the negative of these terms or other
comparable terminology, although not all forward-looking statements contain these words. Forward-looking statements are not a
guarantee of future performance or results, and will not necessarily be accurate indications of the times at, or by, which such
performance or results will be achieved. Forward-looking statements are based on information available at the time the statements
are made and involve known and unknown risks, uncertainties and other factors that may cause our results, levels of activity,
performance or achievements to be materially different from the information expressed or implied by the forward-looking statements
in this Report. These factors include those set forth below under “Summary Risk Factors” and those disclosed under
“Risk Factors”, below.
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. Other than as required
by law, we undertake no obligation to update or revise these forward-looking statements, even though our situation may change
in the future.
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 may not be able to manage our future growth;
● We are dependent on our current management;
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● We may not be able to comply with NASDAQ’s continued listing standards;
● Cyber security attacks and website problems; and
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PART
I
ITEM 1. BUSINESS
INTRODUCTION
This
information included in this Annual Report on Form 10-K should be read in conjunction with the consolidated financial statements
and related notes in “Item 8. Financial Statements and Supplemental Data” of this Report.
Please
see the “Glossary” above for a list of abbreviations and definitions used throughout this Report.
Our
logo and some of our trademarks and tradenames are used in this Report. This Report also includes trademarks, tradenames and service
marks that are the property of others. Solely for convenience, trademarks, tradenames and service marks referred to in this Report
may appear without the ®, TM and SM symbols. References to our trademarks, tradenames and service marks are not intended
to indicate in any way that we will not assert to the fullest extent under applicable law our rights or the rights of the applicable
licensors if any, nor that respective owners to other intellectual property rights will not assert, to the fullest extent under
applicable law, their rights thereto. We do not intend the use or display of other companies’ trademarks and trade names
to imply a relationship with, or endorsement or sponsorship of us by, any other companies.
The
market data and certain other statistical information used throughout this Report are based on independent industry publications,
reports by market research firms or other independent sources that we believe to be reliable sources. Industry publications and
third-party research, surveys and studies generally indicate that their information has been obtained from sources believed to
be reliable, although they do not guarantee the accuracy or completeness of such information. We are responsible for all of the
disclosures contained in this Report, and we believe these industry publications and third-party research, surveys and studies
are reliable. While we are not aware of any misstatements regarding any third-party information presented in this Report, their
estimates, in particular, as they relate to projections, involve numerous assumptions, are subject to risks and uncertainties,
and are subject to change based on various factors, including those discussed under the section entitled “Risk Factors”
beginning on page 19 of this Report. These and other factors could cause our future performance to differ materially from our
assumptions and estimates. Some market and other data included herein, as well as the data of competitors as they relate to Trxade
Group, Inc., is also based on our good faith estimates.
Our
fiscal year ends on December 31st. Interim results are presented on a quarterly basis for the quarters ended March 31, June 30,
and September 30th, the first quarter, second quarter and third quarter, respectively, with the quarter ending December 31st being
referenced herein as our fourth quarter. Fiscal 2020 means the year ended December 31, 2020, whereas fiscal 2019 means the year
ended December 31, 2019.
Unless
the context requires otherwise, references to the “Company,” “we,” “us,”
“our,” “Trxade”, “Trxade Group” and “Trxade Group, Inc.”
refer specifically to Trxade Group, Inc. and its consolidated subsidiaries.
In
addition, unless the context otherwise requires and for the purposes of this Report only:
● “Exchange Act” refers to the Securities Exchange Act of 1934, as amended;
● “Securities Act” refers to the Securities Act of 1933, as amended.
Where
You Can Find Other Information
We
file annual, quarterly, and current reports, proxy statements and other information with the SEC. Our SEC filings are available
to the public over the Internet at the SEC’s website at www.sec.gov and are available for download, free of charge,
soon after such reports are filed with or furnished to the SEC, on the “NASDAQ: MEDS,” “SEC Filings”
page of our website at www.rx.trxade.com. Copies of documents filed by us
with the SEC are also available from us without charge, upon oral or written request to our Secretary, who can be contacted at
the address and telephone number set forth on the cover page of this Report. Our website
address is www.rx.trxade.com. The information on, or that may be accessed
through, our website is not incorporated by reference into this Report and should not be considered a part of this Report.
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CORPORATE
AND ORGANIZATIONAL HISTORY
Background
of XCEL
Our
Company was incorporated in Delaware on July 15, 2005, as “Bluebird Exploration Company” (“Bluebird”).
Bluebird was originally formed to engage in the exploitation of mineral properties. In December 2008, Bluebird changed its name
to “Xcellink International, Inc.” (“XCEL”), and subsequently announced that its business
plan was being expanded to include the development and marketing of platform-independent customer-centric payment systems and
methodologies. XCEL was unable to raise the funds necessary to implement its business strategy, never generated any revenue and
was reporting as a “shell” corporation. On January 9, 2014, Trxade Group, Inc., a privately held Nevada corporation,
merged with and into XCEL, and XCEL changed its name to “Trxade Group, Inc.”
Background
of Trxade
PharmaCycle
LLC, a Nevada limited liability company (“PharmaCycle”), was formed in August 2010 by Prashant Patel, our President,
to serve as a web-based market platform designed to enable trading among healthcare buyers and sellers of pharmaceuticals, accessories
and services. In January 2013, PharmaCycle converted into a Florida corporation and changed its name to Trxade, Inc. (“Trxade
Florida”). In May 2013, Trxade Florida created a new wholly-owned subsidiary, Trxade Group, Inc., a Nevada corporation
(“Trxade Nevada”). Trxade Nevada acquired Trxade Florida pursuant to a reverse triangular merger, resulting
in Trxade Florida becoming a wholly-owned subsidiary of Trxade Nevada (the “Nevada-Florida Merger”). The sole
purpose of the Nevada-Florida Merger was to provide for a holding company to own Trxade Florida, the operating company. At all
times, up to the Nevada-Florida Merger, Trxade Florida was capitalized exclusively by cash capital contributions from Messrs.
Suren Ajjarapu and Patel, our Chief Executive Officer and President, respectively. Immediately following the Nevada-Florida Merger,
Messrs. Ajjarapu and Patel collectively owned 99% of Trxade Nevada. After the Nevada-Florida Merger (but prior to the merger with
XCEL), Trxade Nevada raised $670,000 through the sale of its preferred stock in private placements made to third party investors.
Reverse
Merger with Trxade
On
September 26, 2008, Mark Fingarson, the former President, sole Director and controlling shareholder of XCEL, sold 80,000,000 shares
of XCEL (prior to the reverse split discussed below and the Reverse Stock Split (defined below)) to XCEL’s then attorney,
Ron McIntyre. On November 22, 2013, Trxade Nevada acquired Mr. McIntyre’s controlling interest of 80,000,000 shares in XCEL
pursuant to a Purchase and Sale Agreement dated November 7, 2013. At the time of the sale, XCEL had 104,160,000 shares of common
stock issued and outstanding, including the 80,000,000 shares of stock acquired by Trxade Nevada (prior to the reverse split discussed
below and the Reverse Stock Split).
On
December 16, 2013, Trxade Nevada and XCEL entered into a definitive merger agreement (the “Merger Agreement”)
providing for the merger (the “Merger”) of Trxade Nevada with and into XCEL, with XCEL continuing as the surviving
corporation. The Merger closed on January 8, 2014. Under the terms of the Merger Agreement, we amended our certificate of incorporation
and changed our name to “Trxade Group, Inc.,” and changed our trading symbol to “TRXD”.
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Recapitalization
of Common Stock by a Reverse Split and Increase of Authorized Shares of Stock
We
also reversed our issued and outstanding stock at the ratio of one for one thousand (1:1,000) shares effective upon the closing
of the Merger (the “Merger Reverse Split”). In connection with the Merger Reverse Split, 104,160,000 outstanding
shares of our common stock, including the 80,000,000 shares held by Trxade Nevada, were exchanged for 104,160 post-Merger Reverse
Split shares of common stock. As a result of the Merger, Trxade Nevada stockholders holding 28,800,000 shares of common stock
and 670,000 shares of Series A Preferred Stock converted their shares on a one-to-one basis into 28,800,000 shares of our common
stock and 670,000 shares of our Series A Preferred Stock, for an aggregate total of 29,470,000 shares. Further, 100,000 shares
of our common stock (on a post-Reverse Split basis and taking into account the Reverse Stock Split (discussed below)) were issued
following the Merger in connection with the conversion of our promissory notes. The 80,000,000 pre-Merger shares held by Trxade
Nevada, which amounted to 13,334 shares (on a post-Reverse Split basis and taking into account the Reverse Stock Split), reverted
to treasury stock of the Company. Except as otherwise disclosed, the share amounts in the paragraph above have not been adjusted
for the Merger Reverse Split or the Reverse Stock Split.
February
2020 Reverse Stock Split and NASDAQ Capital Market Listing
On
October 9, 2019, our Board of Directors, and on October 15, 2019, stockholders holding a majority of our outstanding voting shares,
approved resolutions authorizing a reverse stock split of the outstanding shares of our common stock in the range from one-for-two
(1-for-2) to one-for-ten (1-for-10), and provided authority to our Board of Directors to select the ratio of the reverse stock
split in their discretion (the “Stockholder Authority”). On February 12, 2020, the Board of Directors of the
Company approved a stock split ratio of 1-for-6 (“Reverse Stock Split”) in connection with the Stockholder
Authority and the Company filed a Certificate of Amendment with the Secretary of Delaware to affect the Reverse Stock Split. The
Reverse Stock Split became effective at 12:01 a.m. Eastern Standard Time on February 13, 2020. The Reverse Stock Split was completed
in order to allow us to meet the initial criteria of The NASDAQ Capital Market.
Our
common stock was approved for listing on The NASDAQ Capital Market under the symbol “MEDS”, on February 13,
2020.
Subsidiaries
We
own 100% of Trxade Florida. This subsidiary is included in our attached consolidated financial statements and is engaged in the
same line of business as Trxade. Trxade Florida is a web-based market platform that enables commerce among healthcare buyers and
sellers of pharmaceuticals, accessories and services.
We
own 100% of Integra Pharma Solutions, LLC (formerly Pinnacle Tek, Inc., a Florida corporation) founded by Mr. Suren Ajjarapu,
our CEO, in 2011 (“Integra”). Until the end of 2016, Integra served as our technology consultant provider,
but we discontinued that line of business in 2016. Integra now serves as our logistics company for pharmaceutical distribution.
We
own 100% of Community Specialty Pharmacy, LLC, an independent retail specialty pharmacy with a focus on specialty medications.
We
own 100% of Alliance Pharma Solutions, LLC, a Florida limited liability company, which was founded in January 2018 (“Alliance”).
Alliance previously owned 30% of SyncHealth MSO, LLC (“SyncHealth”) which was part of a joint venture formed
in January 2019 with PanOptic Health, LLC (“PanOptic”) with the goal of enabling independent retail pharmacies
to better compete with large national pharmacies on pricing, distribution and logistics. We did not realize any income from the
joint venture and we terminated the joint venture agreements pursuant to their terms effective as of January 31, 2020 and assigned
the 30% ownership of SyncHealth back to PanOptic. As of February 1, 2020, we own no equity in SyncHealth and only the terms of
the agreements relating to confidentiality, non-solicitation and each party’s obligation to cease use of the other party’s
intellectual property survive the termination.
We
own 100% of Bonum Health, LLC, a Delaware limited liability company which owns our “Bonum Health Hub” assets
and operations as discussed in further detail below.
We
previously owned 100% of PharmCentrix, LLC, a Delaware limited liability company which had no revenue in 2020 and was dissolved
in December 2020.
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We
own 100% of MedCheks, LLC, a Delaware limited liability company which was formed in January 2021 and is
a patient-centered, digital, precision healthcare platform that lets patients consolidate and control their health data via a
digital Health Passport. The digital Health Passport allows users to share their health profile, tests and vaccinations simply
and safely. Secured in a blockchain, the Health Passport includes health and vaccination status verification via a QR code (a
two-dimensional machine-readable optical label), which is available for travel, entry into stadiums, concert venues, events, offices,
industrial plants, warehouses, and other physical access points. MedCheks Health Passport stores all of a user’s health
records securely in one place.
Acquisition
of Community Specialty Pharmacy, LLC
On
October 15, 2018, the Company entered into and consummated the purchase of 100% of the equity interests of Community Specialty
Pharmacy, LLC, a Florida limited liability company, (“CSP”), pursuant to the terms and conditions of the Membership
Interest Purchase Agreement, entered into by and among the Company as the buyer, and CSP, and Nikul Panchal, the equity owner
of CSP, a non-executive officer of the Company (collectively, the “Seller”). The purchase price for the 100%
equity interest in CSP was $300,000 in cash, a promissory note issued by the Company in the amount of $300,000, and warrants to
purchase 67,585 shares of common stock of the Company (on a post-Reverse Split basis and taking into account the Reverse Stock
Split) of which 33% of such warrants were revocable by the Company prior to October 15, 2019 (but were not revoked); 33% were
revocable by the Company prior to October 15, 2020 (but were not revoked); and the remaining 33% of such warrants are revocable
by the Company prior to October 15, 2021, which are exercisable for eight (8) years from the issuance date at a strike price of
$0.06 per share.
SyncHealth
MSO, LLC Joint Venture
On
January 17, 2019, the Company and Alliance Pharma Solutions, LLC, a Delaware limited liability company and wholly-owned subsidiary
of the Company (hereafter “Alliance,” with Alliance and Trxade referred to collectively herein as the “Trxade
Parties”), entered into a transaction effective as of January 17, 2019 with PanOptic Health, LLC, a Delaware limited
liability company (“PanOptic”), to create a new entity, SyncHealth MSO, LLC (“SyncHealth”)
as part of a joint venture to enable independent retail pharmacies to better compete with large national pharmacies on pricing,
distribution and logistics. As part of the transaction Alliance owned 30% of SyncHealth. We did not realize any income from the
joint venture and we terminated the joint venture agreements pursuant to their terms effective as of January 31, 2020 and assigned
the 30% ownership of SyncHealth back to PanOptic. As of February 1, 2020, we own no equity in SyncHealth and only the terms of
the agreements relating to confidentiality, non-solicitation and each party’s obligation to cease use of the other party’s
intellectual property survive the termination.
Bonum
Health Asset Acquisition
On
October 23, 2019 (the “Closing Date”), Bonum Health, LLC, a Delaware limited liability company, and a then
newly formed wholly-owned subsidiary of the Company (“Bonum Health”) entered into an Asset Purchase Agreement
with Bonum Health, LLC, a Florida limited liability company (“Seller”) and Hardikkumar Patel, the sole member
of the Seller (the “Member”). Pursuant to the Asset Purchase Agreement, the Company (through Bonum Health)
acquired from the Seller, certain specified assets and certain specified contracts associated with the assets of the Seller’s
operation as a telehealth service provider (the Tele Meds Platform)(the “Assets”). Included with the acquisition
of the Assets, were contracts (relating to the Assets), intellectual property for the Bonum Health Tele Medicine software &
Technology and personal computers. The Company agreed to provide the Seller consideration equal to 41,667 shares of restricted
common stock of the Company at the closing (the “Closing Shares”), and the Seller had the right to earn up
to an additional 108,334 shares of restricted common stock of the Company in the event certain milestones were met within the
first anniversary of the Closing date, none of which were met.
The
Asset Purchase Agreement includes a three year non-compete requirement, prohibiting the Seller and the Member from competing against
the Assets, customary representations and indemnification obligations, subject to a $25,000 minimal claim amount and certain limitations
on liability disclosed in the Asset Purchase Agreement.
Subsequent
to the acquisition, the Company determined that the assets were not usable and wrote off the value of the assets amounting to
approximately $369,000.
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BUSINESS
OF TRXADE
Our
Principal Products and Services and their Markets.
Trxade.com
is a web-based pharmaceutical marketplace engaged in promoting and enabling commerce among independent pharmacies and large
pharmaceutical suppliers nationally. Our marketplace has hundreds of suppliers providing over 20,000 branded and generic drugs
available for purchase by pharmacists. We serve approximately 11,800 registered independent pharmacies, providing access to Trxade’s
proprietary pharmaceutical database, data analytics regarding medication pricing, and manufacturer return policies. We generate
revenue from these services by charging a transaction fee to the seller of the products for sales conducted via the Trxade platform.
The buyers do not bear the cost of transaction fees for the purchases that they make, nor do they pay a fee to join or register
with our platform. Substantially all of our revenues during the years ended December 31, 2020, and 2019, were from platform revenue
generated on www.rx.trxade.com and product sales through Integra Pharma Solutions, LLC. For additional information, please
visit us at www.trxadegroup.com, www.rx.trxade.com, www.bonumhealth.com, www.comsprx.com, and www.rxintegra.com.
Information on our websites is not incorporated by reference into this Form 10-K.
Status
of any publicly announced new products or services.
We
have a number of products and services still in development, which are described below.
InventoryRx.com.
InventoryRx, launched in the first quarter of 2014, is a web-based pharmaceutical exchange platform where wholesalers can buy
and sell pharmaceuticals or over-the-counter medications with each other in a systematized online sales platform. The site offers
these trading partners greater product availability and pricing transparency. The site may also substantially improve our customers
buying efficiency and lower their cost of goods on a continuous basis. This product is built into the Trxade.com platform
and, accordingly, we have not generated any independent revenue from this product.
Pharmabayonline.
We formed Pharmabayonline to provide proprietary pharmaceutical data analytics and governmental reimbursement benchmarks analysis
to United States based independent pharmacies and pharmaceutical databases.
RxGuru.
Our RxGuru application was launched in the first quarter of 2014 and underscores our commitment to deliver timely information
to our customers at the moment before purchase. Our industry leading price prediction model “RxGuru” integrates
product insight into pharmacy acquisition benchmarks (“PAC”) to ascertain trends and pricing variances which
result in significant purchasing opportunities. “RX Guru” helps to predict prices and affords our members an
opportunity continuously to benefit from real price purchasing opportunities that are often concealed from the rest of the industry.
This product is built into the Trxade.com platform and, accordingly, this application works in conjunction with the Trxade
platform but, to date, has not generated any independent revenue.
Integra
Pharma Solutions, LLC. Integra is intended to serve as our logistics company for pharmaceutical distribution.
Community
Specialty Pharmacy, LLC. We acquired Community Specialty Pharmacy, LLC, a Florida limited liability company (“CSP”),
on October 15, 2018. CSP is an accredited pharmacy located in St. Petersburg, Florida. CSP has a focus on specialty medications.
The company operates with an innovative pharmacy model which offers home delivery services to any patient thereby providing convenience.
Delivmeds.com.
Delivmeds.com was launched in late 2018 as a consumer-based app to provide delivery of pharmaceutical products associated
with Alliance Pharma Solutions, LLC. To date, we have not generated any revenue from this product.
Trxademso.
Trxademso technology was developed in early 2019 as part of the SyncHealth MSO, LLC joint venture to develop technology that could
potentially assist independent retail pharmacies to compete better with large national pharmacies on prescription generation workflow
optimization, pricing, distribution and logistics. We did not realize any income from the joint venture and we terminated the
joint venture agreements pursuant to their terms effective as of January 31, 2020 and assigned the 30% ownership of SyncHealth
back to PanOptic. As of February 1, 2020, we own no equity in SyncHealth and only the terms of the agreements relating to confidentiality,
non-solicitation and each party’s obligation to cease use of the other party’s intellectual property survive the termination.
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Trxade
Prime. Trxade Prime allows pharmacy members on the Trxade platform to process, consolidate
and ship purchase orders that are placed directly with Trxade suppliers via the Trxade Prime service. This is at no cost, with
the goal of offering a single tool with one low order minimum, one invoice, one package and one delivery from multiple quality
wholesalers and distributors. Revenue has been generated from this service though our Integra subsidiary, which provides the consolidation
of the orders.
Bonum
Health Hub. The “Bonum Health Hub”, a self-enclosed, free standing virtual examination room, was launched
by the Company’s wholly-owned Bonum Health, LLC subsidiary, in November 2019 and was expected to be operational in April
2020; however, due to the COVID-19 pandemic, at present the Company does not anticipate installations moving forward until 2021
at the earliest. The hub is a Health Insurance Portability and Accountability Act (HIPPA)-compliant booth planned to be placed
in various independent retail pharmacies in rural and urban areas to provide care for patients that otherwise would not be able
to afford primary or collaborative care. Each “Bonum Health Hub” is expected to feature an online interface
that will expand the power of the Bonum Health application into a digital, face-to-face platform that brings patients and physicians
eye-to-eye in a fully secure, private setting. This will allow for more substantial and effective dialogue about sensitive conditions
and other collaborative care concerns. The “Bonum Health Hubs” is planned to include a screen for two-way video
communication, the necessary medical equipment for the services available, and a table and chair for in-person consultations.
The Health Hubs will be compatible with the “Bonum Health app”, which provides an overall healthcare experience
comparable to a Primary Care practitioner, and an online portal as a personal electronic medical record and scheduling system.
Following the results of the Company’s initial pilot program of the “Bonum Health Hub” and the effects
of the COVID-19 pandemic, the Company is developing new plans to expand such hubs into its network of independent pharmacies.
To date, we have not generated any revenue from this product.
Bonum+
Business to Business (B2B). Bonum+ bundles telehealth, a COVID-19 risk assessment tool and a Personal Protective Equipment
(PPE) purchasing tool, through a secure mobile dashboard for corporate clients. The B2B platform eases pressure on employees who
are required to report any relevant health issues daily, centralizing communication and contact tracing to deliver risk scores.
This allows employers to monitor employee COVID-19 risk profiles and streamlines the ordering of new PPE as needed. An integrated
artificial intelligence (AI) tool offers health recommendations and connects employees with board certified physicians, as needed.
To date, we have not generated any revenue from this product.
MedCheks
Health Passport. The Health Passport is a patient-centered, digital, precision healthcare
platform that lets patients consolidate and control their health data via a digital Health Passport and allows them to share their
health profile, tests and vaccinations simply and safely. Secured in a blockchain, the Health Passport includes health and vaccination
status verification via a QR code, which is available for travel, entry into stadiums, concert venues, events, offices, industrial
plants, warehouses, and other physical access points. The Passport stores all of a user’s health records securely in one
place. The platform is under development and we have not generated any revenue from this product to date.
All
of our product offerings are focused on the United States markets. Some products are restricted just to certain states, depending
upon the various applicable state regulations and guidelines pertaining to pharmaceuticals, particularly, and drug businesses,
generally. Our services are distributed through our online platform.
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Organizational
Structure
The
diagram below depicts our current organizational structure:
Trxade
Group, Inc.
The
Pharmaceutical Industry
According
to the NCPA 2020 Digest Report, United States pharmaceutical companies comprise a burgeoning estimated $685 billion industry
by 2023, consisting of over 65,000 pharmacy facilities. Management believes that few platforms are currently in place to bring
these participants together to share market knowledge, product pricing transparency and product availability. According to this,
the pharmaceutical market is comprised primarily of three wholesalers that control an estimated approximately 92% of the market.
Our management believes that this concentration has, over the years, led to a lack of price and cost transparency, thereby resulting
in severe limitations on the purchasing choices of industry participants. These market dynamics have enabled these large wholesalers
(McKesson, Cardinal Health and AmerisourceBergen), known as ADR distributors, to dominate the industry with respect to both generic
and brand pharmaceuticals. The increasing concentration of generic medications (ANDA or Abbreviated New Drug Application), however,
with many more expected to go to market in the near future (approximately $80 billion in branded medications lost their patent
protection from 2008 to 2018, according to an article in Drug Topics from August 2004, called “Big Pharma uses effective
strategies to battle generic competitors”, by Martin Sipkoff), have enabled smaller suppliers’ access to an increasing
number of medications at highly discounted prices. The market is slowly changing towards one where medications will become commoditized
and influenced by price rather than the business relationships imposed by the dominant participants of the past.
To
fuel this change, insurance companies (Pharmacy Benefits Management (“PBM”) and private health payers) and
the federal government have recently initiated lower medication reimbursement payments to healthcare providers. We believe that
pharmacies in due course will face increasing pressure to source medications as inexpensively as possible and improve operational
efficiency. Trxade seeks to be in the forefront of solving these transparency and pricing concerns by providing independent, retail
pharmacies with real-time, pharmacy acquisition cost (“PAC”) benchmarks to the National Drug Code (the “NDC”)
standard. The NDC mark is a unique product identifier used in the United States for drugs intended for human use.
Competitive
Business Conditions, Our competitive position in our Industry, and our Methods of Competition.
We
expect to face competition from the three large ADR distributors (McKesson, Cardinal Health and AmerisourceBergen), other pharmaceutical
distributors, buying groups, software products, and other start-up companies. Most of our competitors’ operations have substantially
greater financial- and manufacturer-backed resources, longer operating histories, greater name recognition, and more established
relationships in the industry.
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Other
Start-up Companies Which Provide Competitive Services.
We
have identified start-ups that provide for supplier-pharmacy trading such as PharmaBid, RxCherrypick, PharmSaver, MatchRx and
GenericBid, and provide web-based services similar to ours, allowing pharmacies to buy from several suppliers. Trxade differentiates
itself from these exchanges by providing our pharmacies with both brand and generic pharmaceutical products. Additional companies
target “direct-to-consumer” pharmacy deliveries, including Amazon.com’s PillPack, Capsule
and GetRoman.com.
Buying
Groups.
Buying
Groups provide discounted prices to their members by negotiating better pricing with one primary wholesaler, while charging administrative
fees generally ranging from 3 to 5 percent. Some Buying Groups are structured like co-operatives (such as Independent Pharmacy
Cooperative (IPC) and American Pharmacy Cooperative, Inc. (APCI)) and offer their members monthly or quarterly rebates. Although
they can function well to bring pricing competition to the industry, they often offer rebates only after the purchase. Management
does not believe Buying Groups will provide long-term savings to customers with this model given the increased transparency and
competition in the industry.