UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-K
(Mark
One)
For
the fiscal year ended December 31, 2022
OR
For
the transition period from: _____________to______________
Commission
File Number: 001-39199
TRxADE
HEALTH, INC.
(Exact
name of registrant as specified in its charter)
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
(Address of principal executive offices) (Zip Code)
Registrant’s
telephone number, including area code: (800)261-0281
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 ☒
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 ☒
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 and post such files). Yes ☒ 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 ☒ 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 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. ☐
If
securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant
included in the filing reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of
those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s
executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
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 $16,921,890. 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 23, 2023, there were 10,110,878 shares of common stock issued and outstanding.
DOCUMENTS
INCORPORATED BY REFERENCE
Portions
of the registrant’s definitive proxy statement relating to its 2023 annual meeting of stockholders (the “2023 Proxy Statement”)
are incorporated by reference into Part III of this Annual Report on Form 10-K where indicated. The 2023 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 19
Item 1B. Unresolved Staff Comments 52
Item 2. Properties 52
Item 3. Legal Proceedings 53
Item 4. Mine Safety Disclosures 53
PART II
Item 6. [Reserved] 55
Item 7A. Quantitative and Qualitative Disclosures About Market Risk 63
Item 8. Financial Statements and Supplemental Data 64
Item 9A. Controls and Procedures 86
Item 9B. Other Information 87
Item 9C. Disclosure Regarding Foreign Jurisdictions That Prevent Inspections 87
PART III
Item 10. Directors, Executive Officers and Corporate Governance 88
Item 11. Executive Compensation 88
Item 14. Principal Accountant Fees and Services 88
PART IV
Item 15. Exhibits, Financial Statements and Schedules 89
Signatures 91
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.
“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.
CAUTIONARY
STATEMENT REGARDING FORWARD-LOOKING INFORMATION
This
Annual Report on Form 10-K (this “Report”) contains statements that constitute forward-looking statements which are
subject to the safe-harbor provisions of the Private Securities Litigation Reform Act of 1995. Statements that are not historical are
forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange
Act of 1934. Some of the statements in this Annual Report constitute forward-looking statements because they relate to future events
or our future performance or future financial condition. These forward-looking statements are not historical facts, but rather are based
on current expectations, estimates and projections about our company, our industry, our beliefs and our assumptions. Our forward-looking
statements include, but are not limited to, statements regarding our or our management team’s expectations, hopes, beliefs, intentions
or strategies regarding the future. In addition, any statements that refer to projections, forecasts or other characterizations of future
events or circumstances, including any underlying assumptions, are forward-looking statements. 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 similar expressions may identify forward-looking statements, but the absence of these words does
not mean that a statement is not forward-looking. These factors include those set forth below and those disclosed under “Risk
Factors”, below. Forward-looking statements in this Annual Report may include, for example, statements about:
● Risks of our operations not being profitable;
● Technical problems with our websites;
● Risks relating to implementing our acquisition strategies;
● Our ability to manage our growth;
● 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;
● Changes in laws or regulations relating to our operations;
● Privacy laws;
● System errors;
● Dependence on current management;
● Our growth strategy; and
The
forward-looking statements contained in this Annual Report are based on our current expectations and beliefs concerning future developments
and their potential effects on us. There can be no assurance that future developments affecting us will be those that we have anticipated.
These forward-looking statements involve a number of risks, uncertainties (some of which are beyond our control) or other assumptions
that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements.
These
risks and uncertainties include, but are not limited to, those factors described under the section of this Annual Report entitled “Risk
Factors”. Should one or more of these risks or uncertainties materialize, or should any of our assumptions prove incorrect, actual
results may vary in material respects from those projected in these forward-looking statements. We undertake no obligation to update
or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required
under applicable securities laws.
We
use words such as “anticipates,” “believes,” “expects,” “intends,” “seeks,”
“plans,” “estimates,” “targets” and similar expressions to identify forward-looking statements. The
forward-looking statements contained in this Annual Report involve risks and uncertainties. Our actual results could differ materially
from those implied or expressed in the forward-looking statements for any reason, including the factors set forth in “Part I —
Item 1A. Risk Factors” in this Annual Report.
Although
we believe that the assumptions on which these forward-looking statements are based are reasonable, any of those assumptions could prove
to be inaccurate, and as a result, the forward-looking statements based on those assumptions also could be inaccurate. Important assumptions
include our ability to originate new loans and investments, certain margins and levels of profitability and the availability of additional
capital. In light of these and other uncertainties, the inclusion of a projection or forward-looking statements in this Annual Report
should not be regarded as a representation by us that our plans and objectives will be achieved.
We
have based the forward-looking statements included in this Annual Report on information available to us on the date of this Annual Report,
and we assume no obligation to update any such forward-looking statements. Although we undertake no obligation to revise or update any
forward-looking statements in this Annual Report, whether as a result of new information, future events or otherwise, you are advised
to consult any additional disclosures that we may make directly to you or through reports that we may file in the future with the Securities
and Exchange Commission (the “SEC”), including Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports
on Form 8-K.
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 HEALTH, 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 31st, June 30th, 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 2022” means the Fiscal year ended December 31, 2022, whereas Fiscal 2021 means the
year ended December 31, 2021.
Unless
the context requires otherwise, references to the “Company,” “we,” “us,” “our,”
“Trxade”, “Trxade Group” and “TRxADE HEALTH, INC.” refer specifically to TRxADE
HEALTH, 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 http://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 addresses are www.rx.trxade.com 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.
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.
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.” On June 1, 2021, the Company changed its name from “Trxade Group, Inc” to “TRxADE
HEALTH, 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 Merger Reverse Split and Reverse Stock Split (each discussed and 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 Merger Reverse Split and Reverse Stock
Split (each discussed and defined below)).
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”.
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 considering 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 State 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 listing 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 Inc. (a Florida corporation). This subsidiary is included in our attached consolidated financial statements and is
engaged in the same line of business as Trxade. Trxade Inc. 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 (d.b.a. DelivMeds), 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 MedCheks, LLC, a Delaware limited liability company which was formed in January 2021, had no revenue in 2021
and was dissolved in December 2021.
We
previously owned 100% of PharmCentrix, LLC, a Delaware limited liability company which had no revenue in 2020 and was dissolved in December
2020.
In February of 2022 we entered
into an agreement with Exchange Health to own 51% of SOSRx, LLC a Delaware limited liability company. In December of 2022 management
determined that the subsidiary did not generate significant revenue and the assets were 100% impaired. In February of 2023 we voluntarily
withdrew from the agreement with Exchange Health.
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 were revoked on September
23, 2021), which are exercisable for eight (8) years from the issuance date at a strike price of $0.06 per share. As of the date of this
Report, there are no warrants to purchase shares of common stock remain outstanding in connection with the purchase.
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, Bonum Health, LLC, a Delaware limited liability company, and a 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 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, 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.
BUSINESS
OF TRXADE
Company
Overview
We
are a health services IT company focused on digitalizing the retail pharmacy experience by optimizing drug procurement, the prescription
journey and patient engagement in the U.S. and have designed and developed, and now own and operate, a business-to-business web-based
marketplace. Our core service brings the nation’s independent pharmacies, accredited national suppliers, and manufacturers of pharmaceuticals
together to provide efficient and transparent buying and selling opportunities.
We
began operations as Trxade Group, Inc., a Nevada corporation (“Trxade Nevada”) in August of 2010 and spent over two
years creating and enhancing our web-based services. The Company changed its name on June 1, 2021, from “Trxade Group, Inc”
to “TRxADE HEALTH, INC.” Our services provide pricing transparency, purchasing capabilities and other value-added services
on a single platform focused on serving the nation’s approximately 19,397 independent pharmacies with annual purchasing power of
$67.1 billion (according to the National Community of Pharmacists Association’s 2021 Digest). Our national wholesale supply partners
and manufacturers are able to fulfill orders on our platform in real-time and provide pharmacies and wholesale suppliers with cost-saving
payment terms and next-day delivery capabilities in unrestrictive states. We have expanded significantly since 2015 and now serve approximately
14,400+ registered members on our sales platform.
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, small chains,
hospitals, clinics, and alternate dispensing sites with large pharmaceutical suppliers nationally. Our marketplace has over 60 national
and regional pharmaceutical suppliers providing over 120,000 branded and generic drugs, including over-the-counter drugs (OTCs), and
drugs available for purchase by pharmacists. We serve approximately 14,400+ registered members, providing access to Trxade’s proprietary
pharmaceutical database and data analytics regarding medication pricing. 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 Fiscal
2022 and Fiscal 2021, were from platform revenue generated on www.rx.trxade.com, product sales through Integra Pharma Solutions,
LLC, and prescription sales through Community Specialty Pharmacy, LLC.
Status
of current and new or enhanced products and services
We
have a number of products and services in operation and others still under development, which are described below.
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, which focuses on
specialty medications and operates with an innovative pharmacy model that 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. We are currently working on reformulating the application from a prescription delivery portal to a fully
integrated, interoperable, end-to-end prescription delivery and medication adherence tool. The new product has been rebranded and is
targeted for consumer re-release and use in the near future. To date, we have not generated any revenue from this product.
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. This service is provided 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 and Application. 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, the Company does not anticipate installations moving forward, and has taken a write off
of the hubs purchased at June 30, 2021 in the amount of $143,891, which is included under loss on inventory investments in the statement
of operations for Fiscal 2021.
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 is available on a subscription basis, primarily as a stand-alone
telehealth software application that can be licensed on a business-to-business (B2B) model to clients as an employment health benefit
for the clients’ employees. Revenue has been generated from this service through our Bonum subsidiary.
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. We have not generated any revenue from this product
to date and the product was discontinued at the end of December 2021. We previously owned 100% of MedCheks, LLC, a Delaware limited liability
company which was formed in January 2021, had no revenue in 2021 and was dissolved in December 2021.
SOSRx,
LLC. On February 15, 2022, the Company entered into a relationship with Exchange Health, LLC, a technology company providing an online
platform for manufacturers and suppliers to sell and purchase pharmaceuticals (“Exchange Health”). SOSRx LLC, a Delaware
limited liability company (“SOSRx”), was formed, which is owned 51% by the Company and 49% by Exchange Health.
SOSRx did not generate material revenue and in February of 2023, subsequent to Fiscal 2022, the Company voluntarily withdrew from the
joint venture agreement. The asset impairment is reflected in the statement of operations for Fiscal 2022 as impairment of intangible
asset. Additionally, the Company contributed a cash investment of $275,000 in February of 2022 when the joint venture was formed. The
Company did not recover this investment as part of the withdrawal settlement.
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.
Organizational
Structure
The
diagram below depicts our current organizational structure:
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.
To
fuel this change, insurance companies (Pharmacy Benefits Management (“PBM”) and private health payers) and the federal
government have initiated lower medication reimbursement payments to healthcare providers. We believe that pharmacies 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.
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, Costplusdrugs, 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.