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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

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

For the Quarterly Period Ended September 30, 2023

OR

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

Commission File Number: 001-39199

TRxADE HEALTH, INC.

(Exact name of registrant as specified in its charter)

Delaware |  | 46-3673928
(State or other jurisdiction of |  | (I.R.S. Employer
incorporation or organization) |  | Identification No.)
2420 Brunello Trace |  |
Lutz, Florida |  | 33558
(Address of principal executive offices) |  | (Zip code)

(800) 261-0281

(Registrant’s telephone number, including area code)

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

Title of each class |  | Trading Symbol(s) |  | Name of each exchange on which registered
Common Stock, $0.00001 Par Value Per Share |  | MEDS |  | The NASDAQ Stock Market LLC (The NASDAQ Capital Market)

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

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

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

Large accelerated filer | ☐ | Accelerated filer | ☐
Non-accelerated filer | ☒ | Smaller reporting company | ☒
Emerging growth company | ☒ |  |

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

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

There were 1,205,008 shares of the registrant’s common stock outstanding on January 16, 2024 and 307,145 shares of preferred stock outstanding.

TRxADE HEALTH, INC.

FORM 10-Q

For the Quarter Ended September 30, 2023

TABLE OF CONTENTS

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS | 3
PART I: FINANCIAL INFORMATION | 4
ITEM 1. FINANCIAL STATEMENTS | 4
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS | 26
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK | 36
ITEM 4. CONTROLS AND PROCEDURES | 36
PART II. OTHER INFORMATION | 38
ITEM 1. LEGAL PROCEEDINGS | 38
ITEM 1A. RISK FACTORS | 38
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS | 41
ITEM 3. DEFAULTS UPON SENIOR SECURITIES | 41
ITEM 4. MINE SAFETY DISCLOSURES | 41
ITEM 5. OTHER INFORMATION | 41
ITEM 6. EXHIBITS | 42

2

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q (“Report”), including without limitation, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” contains forward-looking statements, within the meaning of the federal securities laws, including the Private Securities Litigation Reform Act of 1995, regarding future events and the future results of the Company that are based on current expectations, estimates, forecasts, and projections about the industry in which the Company operates and the beliefs and assumptions of the management of the Company. Words such as “expects,” “anticipates,” “targets,” “goals,” “projects,” “intends,” “plans,” “believes,” “seeks,” “estimates,” variations of such words, and similar expressions are intended to identify such forward-looking statements. These forward-looking statements are only predictions and are subject to risks, uncertainties and assumptions that are difficult to predict. These factors include, but are not limited to:

| ● | Our limited amount of cash;
| ● | The negative effect on our business and our ability to raise capital that is created by the fact that there is a substantial doubt about our ability to continue as a going concern;
| ● | Risks of our operations not being profitable;
| ● | Claims relating to alleged violations of intellectual property rights of others;
| ● | Technical problems with our websites;
| ● | Risks relating to implementing our acquisition strategies;
| ● | Negative effects on our operations associated with the opioid pain medication health crisis;
| ● | Regulatory and licensing requirement risks;
| ● | Risks related to changes in the U.S. healthcare environment;
| ● | The status of our information systems, facilities and distribution networks;
| ● | Risks associated with the operations of our more established competitors;
| ● | Regulatory changes;
| ● | Healthcare fraud;
| ● | The potential impact of some future pandemic;
| ● | Inflation, rising interest rates, governmental responses thereto and possible recessions caused thereby.
| ● | Changes in laws or regulations relating to our operations;
| ● | Privacy laws;
| ● | System errors;
| ● | Dependence on current management;
| ● | Our growth strategy;
| ● | Risks related to the disruption of management’s attention from ongoing business operations due to pursuit of requirements related to being a listed company; and
| ● | Other factors discussed in this Quarterly Report on Form 10-Q and in Part I, Item 1A. “Risk Factors” in Part I, Item 1A. “Risk Factors” and Part II, Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Form 10-K.

While forward-looking statements reflect our good faith beliefs, assumptions and expectations, they are not guarantees of future performance. The forward-looking statements speak only as of the date of this Quarterly Report on Form 10-Q. Furthermore, we disclaim any obligation to publicly update or revise any forward-looking statement to reflect changes in underlying assumptions or factors, of new information, data or methods, future events or other changes. Moreover, because we operate in a very competitive and rapidly changing environment, new risk factors are likely to emerge from time to time. We caution investors not to place undue reliance on these forward-looking statements and urge you to carefully review the disclosures we make concerning risks in this Quarterly Report and in Part I, Item 1A. “Risk Factors” and Part II, Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K and Part II, Item 1A. “Risk Factors” in the Quarterly Report for the period ending June 30, 2023, filed with the Securities and Exchange Commission (SEC) on August 18, 2023. Readers of this Quarterly Report on Form 10-Q should also read our other periodic filings made with the SEC and other publicly filed documents for further discussion regarding such factors.

3

PART I: FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

TRxADE HEALTH, INC.

Consolidated Balance Sheets

September 30, 2023 and December 31, 2022

(Unaudited)

|  | September 30, |  |  | December 31, |
|  |  | 2023 |  |  |  | 2022 |
Assets |  |  |  |  |  |  |  |
Current Assets |  |  |  |  |  |  |  |
Cash |  | $ | 34,031 |  |  | $ | 1,094,891 |
Accounts receivable, net |  |  | 850,103 |  |  |  | 649,263 |
Inventory |  |  | 3,026,918 |  |  |  | 68,448 |
Prepaid assets |  |  | 246,093 |  |  |  | 104,462 |
Notes receivable |  |  | 1,275,000 |  |  |  | - |
Other receivables |  |  | 115,684 |  |  |  | - |
Current assets of discontinued operations |  |  | - |  |  |  | 176,057 |
Total Current Assets |  |  | 5,547,829 |  |  |  | 2,093,121 |
Property plant and equipment, net |  |  | 287,920 |  |  |  | 65,214 |
Deposits |  |  | 49,031 |  |  |  | 49,031 |
Intangible assets, net |  |  | 9,451,562 |  |  |  | - |
Goodwill |  |  | 5,129,116 |  |  |  | - |
Other assets |  |  | - |  |  |  | - |
Operating lease right-of-use assets |  |  | 1,188,385 |  |  |  | 1,051,815 |
Noncurrent assets of discontinued operations |  |  | - |  |  |  | 450,845 |
Total Assets |  | $ | 21,653,843 |  |  | $ | 3,710,026 |
Liabilities and Shareholders’ Equity |  |  |  |  |  |  |  |
Current Liabilities |  |  |  |  |  |  |  |
Accounts payable |  |  | 1,328,599 |  |  |  | 527,984 |
Accrued liabilities |  |  | 386,024 |  |  |  | 271,230 |
Other current liabilities |  |  | 412,390 |  |  |  | 67,517 |
Contingent funding liabilities |  |  | 452,348 |  |  |  | 108,036 |
Current portion of operating lease liabilities |  |  | 251,087 |  |  |  | 196,872 |
Notes payable, current portion |  |  | 5,230,000 |  |  |  | - |
Notes payable— related party, current portion |  |  | - |  |  |  | 166,667 |
Warrant liability |  |  | 1,031,841 |  |  |  | 588,533 |
Current liabilities of discontinued operations |  |  | - |  |  |  | 219,952 |
Total Current Liabilities |  |  | 9,092,289 |  |  |  | 2,146,791 |
Long Term Liabilities |  |  |  |  |  |  |  |
Operating lease liabilities, net of current portion |  |  | 976,869 |  |  |  | 887,035 |
Notes payable, net of current portion |  |  | 25,000 |  |  |  | - |
Notes payable- related party, net of current portion |  |  | - |  |  |  | 333,333 |
Total Liabilities |  |  | 10,094,158 |  |  |  | 3,367,159 |
Stockholders’ Equity |  |  |  |  |  |  |  |
Series A preferred stock, $0.00001 par value; 9,212,246 shares authorized; none issued and outstanding, as of September 30, 2023 and December 31, 2022. |  |  | - |  |  |  | - |
Series B preferred stock, $0.00001 par value; 787,754 shares authorized; 306,855 issued and outstanding, as of September 30, 2023 and December 31, 2022. |  |  | - |  |  |  | - |
Preferred stock, value |  |  | - |  |  |  | - |
Common stock, $0.00001 par value; 6,666,667 shares authorized; 818,961 and 626,247 shares issued and outstanding, as of September 30, 2023 and December 31, 2022, respectively |  |  | 8 |  |  |  | 6 |
Additional paid-in capital |  |  | 33,089,652 |  |  |  | 20,482,666 |
Retained deficit |  |  | (21,529,975 | ) |  |  | (19,719,536 | )
Total TRxADE Health Inc. Stockholders’ Equity |  |  | 11,559,685 |  |  |  | 763,136 |
Non-controlling interest in subsidiary |  |  | - |  |  |  | (420,269 | )
Total Stockholders’ Equity |  |  | 11,559,685 |  |  |  | 342,867 |
Total Liabilities and Stockholders’ Equity |  | $ | 21,653,843 |  |  | $ | 3,710,026 |

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

4

TRxADE HEALTH, INC.

Consolidated Statements of Operations

For the Three and Nine Months Ended September 30, 2023 and 2022

(Unaudited)

|  | 2023 |  |  | 2022 |  |  | 2023 |  |  | 2022 |
|  | Three Months Ended September 30, |  |  | Nine Months Ended September 30, |
|  | 2023 |  |  | 2022 |  |  | 2023 |  |  | 2022 |
Revenues |  | $ | 2,058,028 |  |  | $ | 2,055,803 |  |  | $ | 5,919,786 |  |  | $ | 7,993,805 |
Cost of sales |  |  | 353,450 |  |  |  | 683,375 |  |  |  | 1,072,934 |  |  |  | 3,991,234 |
Gross profit |  |  | 1,704,578 |  |  |  | 1,372,428 |  |  |  | 4,846,852 |  |  |  | 4,002,571 |
Operating expenses: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Wage and salary expense |  |  | 698,030 |  |  |  | 849,371 |  |  |  | 2,077,362 |  |  |  | 2,949,386 |
Professional fees |  |  | 418,294 |  |  |  | 82,710 |  |  |  | 782,286 |  |  |  | 256,807 |
Accounting and legal expense |  |  | 408,957 |  |  |  | 191,007 |  |  |  | 782,495 |  |  |  | 567,086 |
Technology expense |  |  | 410,612 |  |  |  | 238,577 |  |  |  | 1,010,374 |  |  |  | 690,875 |
General and administrative expense |  |  | 613,834 |  |  |  | 229,526 |  |  |  | 1,264,902 |  |  |  | 1,392,130 |
Total operating expenses |  |  | 2,549,727 |  |  |  | 1,591,191 |  |  |  | 5,917,419 |  |  |  | 5,856,284 |
Operating loss |  |  | (845,149 | ) |  |  | (218,763 | ) |  |  | (1,070,567 | ) |  |  | (1,853,713 | )
Nonoperating income (expense) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Change in fair value of warrant liability |  |  | 925,320 |  |  |  | - |  |  |  | (443,308 | ) |  |  | - |
Interest income |  |  | - |  |  |  | 8,396 |  |  |  | 4,198 |  |  |  | 8,396 |
Gain (loss) on disposal of assets |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 2,200 |
Interest expense |  |  | (251,778 | ) |  |  | (130,107 | ) |  |  | (494,904 | ) |  |  | (140,626 | )
Total nonoperating income (expense) |  |  | 673,542 |  |  |  | (121,711 | ) |  |  | (934,014 | ) |  |  | (130,030 | )
Net loss from continuing operations |  |  | (171,607 | ) |  |  | (340,474 | ) |  |  | (2,004,581 | ) |  |  | (1,983,743 | )
Net loss on discontinued operations |  |  | (3,353,507 | ) |  |  | (188,268 | ) |  |  | (4,123,028 | ) |  |  | (623,096 | )
Net loss |  | $ | (3,525,114 | ) |  | $ | (528,742 | ) |  | $ | (6,127,609 | ) |  | $ | (2,606,839 | )
Net loss attributable to TRxADE Health, Inc. |  | $ | (3,525,114 | ) |  | $ | (503,003 | ) |  | $ | (6,127,609 | ) |  | $ | (2,546,913 | )
Net loss attributable to non-controlling interests |  |  | - |  |  |  | (25,739 | ) |  |  | - |  |  |  | (59,926 | )
Net loss per common share from continuing operations |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Basic |  | $ | (0.22 | ) |  | $ | (0.57 | ) |  | $ | (2.83 | ) |  | $ | (3.52 | )
Diluted |  | $ | (0.07 | ) |  | $ | (0.57 | ) |  | $ | (0.87 | ) |  | $ | (3.51 | )
Net loss per common share from discontinued operations |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Basic |  | $ | (4.35 | ) |  | $ | (0.34 | ) |  | $ | (5.82 | ) |  | $ | (1.14 | )
Diluted |  | $ | (1.42 | ) |  | $ | (0.34 | ) |  | $ | (1.79 | ) |  | $ | (1.14 | )
Net loss attributable to common stockholders |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Basic |  | $ | (4.57 | ) |  | $ | (0.91 | ) |  | $ | (8.65 | ) |  | $ | (4.66 | )
Diluted |  | $ | (1.49 | ) |  | $ | (0.91 | ) |  | $ | (2.66 | ) |  | $ | (4.64 | )
Weighted average common shares outstanding |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Basic |  |  | 771,192 |  |  |  | 549,977 |  |  |  | 708,116 |  |  |  | 546,879 |
Diluted |  |  | 2,363,233 |  |  |  | 551,724 |  |  |  | 2,300,157 |  |  |  | 548,626 |

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

5

TRxADE HEALTH, INC.

Consolidated Statements of Changes in Stockholders’ Equity

For the Three and Nine Months Ended September 30, 2023, and 2022

(Unaudited)

|  | Series B |  |  | Series A |  |  |  |  |  |  |  |  | Additional |  |  |  |  |  | Noncontrolling |  |  | Total |
|  | Preferred Stock |  |  | Preferred Stock |  |  | Common Stock |  |  | Paid-In |  |  | Accumulated |  |  | Interests in |  |  | Stockholders’ |
|  | Shares |  |  | Amount |  |  | Shares |  |  | Amount |  |  | Shares |  |  | Amount |  |  | Capital |  |  | Deficit |  |  | Subsidiaries |  |  | Equity |
Balance at December 31, 2022 |  |  | - |  |  | $ | - |  |  |  | - |  |  | $ | - |  |  |  | 626,247 |  |  | $ | 6 |  |  | $ | 20,482,666 |  |  | $ | (19,719,536 | ) |  | $ | (420,269 | ) |  | $ | 342,867 |
Common stock issued for services |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 14,362 |  |  |  | - |  |  |  | 63,486 |  |  |  | - |  |  |  | - |  |  |  | 63,486 |
Warrants exercised for cash |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 40,116 |  |  |  | 1 |  |  |  | 6 |  |  |  | - |  |  |  | - |  |  |  | 7 |
Disposition of assets, related party |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 492,030 |  |  |  | 420,269 |  |  |  | 912,299 |
Options expense |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 14,434 |  |  |  | - |  |  |  | - |  |  |  | 14,434 |
Net Loss |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  | $ | (677,953 | ) |  |  | - |  |  |  | (677,953 | )
Balance at March 31, 2023 |  |  | - |  |  | $ | - |  |  |  | - |  |  | $ | - |  |  |  | 680,725 |  |  | $ | 7 |  |  |  | 20,560,592 |  |  | $ | (19,905,459 | ) |  | $ | - |  |  | $ | 655,140 |
Common stock issued for services |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 15,813 |  |  |  | - |  |  |  | - |  |  |  | 15,813 |
Warrants exercised for cash |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 1,795 |  |  |  | - |  |  |  | 1,615 |  |  |  | - |  |  |  | - |  |  |  | 1,615 |
Options expense |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 7,783 |  |  |  | - |  |  |  | - |  |  |  | 7,783 |
Net Loss |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (1,974,878 | ) |  |  | - |  |  |  | (1,974,878 | )
Balance at June 30, 2023 |  |  | - |  |  | $ | - |  |  |  | - |  |  | $ | - |  |  |  | 682,520 |  |  | $ | 7 |  |  | $ | 20,585,803 |  |  | $ | (21,880,337 | ) |  | $ | - |  |  | $ | (1,294,527 | )
Options expense |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 3,761 |  |  |  | - |  |  |  | - |  |  |  | 3,761 |
Disposition of assets |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 3,875,476 |  |  |  | - |  |  |  | 3,875,476 |
Shares issued pursuant to merger agreement |  |  | - |  |  |  | - |  |  |  | 15,759 |  |  |  | - |  |  |  | 136,441 |  |  |  | 1 |  |  |  | 12,500,088 |  |  |  | - |  |  |  | - |  |  |  | 12,500,089 |
Net Loss |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (3,525,114 | ) |  |  | - |  |  | $ | (3,525,114 | )
Balance at September 30, 2023 |  |  | - |  |  | $ | - |  |  |  | 15,759 |  |  | $ | - |  |  |  | 818,961 |  |  | $ | 8 |  |  |  | 33,089,652 |  |  | $ | (21,529,975 | ) |  | $ | - |  |  | $ | 11,559,685 |
Balance at December 31, 2021 |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 544,430 |  |  |  | 5 |  |  |  | 20,017,605 |  |  |  | (16,247,437 | ) |  |  | - |  |  |  | 3,770,173 |
Capital contributions |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 792,500 |  |  |  | 792,500 |
Common stock issued for services |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 32,083 |  |  |  | - |  |  |  | - |  |  |  | 32,083 |
Capital distributions |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (775,000 | ) |  | $ | (775,000 | )
Warrants exercised for cash |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 972 |  |  |  | - |  |  |  | 875 |  |  |  | - |  |  |  | - |  |  |  | 875 |
Options expense |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 32,783 |  |  |  | - |  |  |  | - |  |  |  | 32,783 |
Net Loss |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  | $ | (960,147 | ) |  | $ | (5,689 | ) |  | $ | (965,836 | )
Balance at March 31, 2022 |  |  | - |  |  | $ | - |  |  |  | - |  |  | $ | - |  |  |  | 545,402 |  |  | $ | 5 |  |  | $ | 20,083,346 |  |  | $ | (17,207,584 | ) |  | $ | 11,811 |  |  | $ | 2,887,578 |
Common stock issued for services |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 12,222 |  |  |  | - |  |  |  | - |  |  |  | 12,222 |
Options expense |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 16,994 |  |  |  | - |  |  |  | - |  |  |  | 16,994 |
Net Loss |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  | $ | (1,083,763 | ) |  |  | (28,498 | ) |  | $ | (1,112,261 | )
Balance at June 30, 2022 |  |  | - |  |  | $ | - |  |  |  | - |  |  | $ | - |  |  |  | 545,402 |  |  | $ | 5 |  |  | $ | 20,112,562 |  |  | $ | (18,291,347 | ) |  | $ | (16,687 | ) |  | $ | 1,804,533 |
Balance |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 545,402 |  |  |  | 5 |  |  |  | 20,112,562 |  |  | $ | (18,291,347 | ) |  |  | (16,687 | ) |  |  | 1,804,533 |
Common stock issued for services |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 14,511 |  |  |  | 1 |  |  |  | 63,125 |  |  |  | - |  |  |  | - |  |  |  | 63,126 |
Warrants exercised for cash |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Options expense |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 17,661 |  |  |  | - |  |  |  | - |  |  |  | 17,661 |
Net Loss |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  | $ | (503,003 | ) |  | $ | (25,739 | ) |  | $ | (528,742 | )
Balance at September 30, 2022 |  |  | - |  |  | $ | - |  |  |  | - |  |  | $ | - |  |  |  | 559,913 |  |  | $ | 6 |  |  | $ | 20,193,348 |  |  | $ | (18,794,350 | ) |  | $ | (42,426 | ) |  | $ | 1,356,578 |
Balance |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 559,913 |  |  |  | 6 |  |  |  | 20,193,348 |  |  | $ | (18,794,350 | ) |  | $ | (42,426 | ) |  |  | 1,356,578 |

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

6

TRxADE HEALTH, INC.

Consolidated Statements of Cash Flows

For The Nine Months Ended September 30, 2023 and 2022

(Unaudited)

|  |  | 2023 |  |  |  | 2022 |
|  | Nine months Ended September 30, |
|  |  | 2023 |  |  |  | 2022 |
Cash flows from operating activities: |  |  |  |  |  |  |  |
Net loss from continuing operations |  | $ | (2,004,581 | ) |  | $ | (1,983,743 | )
Adjustments to reconcile net loss to net cash used in operating activities: |  |  |  |  |  |  |  |
Depreciation expense |  |  | 8,464 |  |  |  | 11,815 |
Options expense |  |  | 25,978 |  |  |  | 67,439 |
Common stock issued for services |  |  | 79,299 |  |  |  | 107,430 |
Bad debt recovery |  |  | - |  |  |  | (98,841 | )
Gain on disposal of asset |  |  | - |  |  |  | (4,100 | )
Amortization of intangible assets |  |  | 325,916 |  |  |  | 29,400 |
Changes in operating assets and liabilities: |  |  |  |  |  |  |  |
Accounts receivable, net |  |  | (212,292 | ) |  |  | 227,508 |
Prepaid assets and deposits |  |  | (138,450 | ) |  |  | 198,088 |
Inventory |  |  | (39,013 | ) |  |  | (19,671 | )
Other receivables |  |  | - |  |  |  | (875,250 | )
Operating lease right-of-use assets |  |  | 152,121 |  |  |  | 132,847 |
Other assets |  |  | - |  |  |  | - |
Operating lease liabilities |  |  | (145,707 | ) |  |  | (120,401 | )
Accounts payable |  |  | 854,171 |  |  |  | 267,384 |
Accrued liabilities |  |  | 43,729 |  |  |  | (178,714 | )
Inventory deposits |  |  | - |  |  |  | - |
Current liabilities |  |  | (5,127 | ) |  |  | 105,926 |
Warrant liability |  |  | 443,308 |  |  |  | - |
Net cash used in operating activities from continuing operations |  |  | (612,184 | ) |  |  | (2,132,883 | )
Net cash used in operating activities from discontinued operations |  |  | (593,893 | ) |  |  | (623,096 | )
Net cash used in operating activities |  |  | (1,206,077 | ) |  |  | (2,755,979 | )
Cash flows from investing activities: |  |  |  |  |  |  |  |
Proceeds from sale of fixed assets |  |  | - |  |  |  | 23,000 |
Cash received in acquisitions |  |  | 5,546 |  |  |  | - |
Investment in capitalized software |  |  | - |  |  |  | (335,902 | )
Net cash provided by (used in) investing activities from continuing operations |  |  | 5,546 |  |  |  | (312,902 | )
Net cash provided by investing activities from discontinued operations |  |  | 68,737 |  |  |  | - |
Net cash provided by (used in) investing activities |  |  | 74,283 |  |  |  | (312,902 | )
Cash flows from financing activities: |  |  |  |  |  |  |  |
Proceeds from the issuance of debt |  |  | 200,000 |  |  |  | - |
Proceeds from repayment of notes receivable |  |  | 25,000 |  |  |  | - |
Repayment of contingent liability |  |  | (1,755,688 | ) |  |  | (282,857 | )
Proceeds from sale of future revenue |  |  | 2,100,000 |  |  |  | 825,000 |
Distributions to non-controlling interest |  |  | - |  |  |  | (275,000 | )
Proceeds from exercise of warrants |  |  | 1,622 |  |  |  | 875 |
Net cash provided by financing activities from continuing operations |  |  | 570,934 |  |  |  | 268,018 |
Net cash used in financing activities from discontinued operations |  |  | (500,000 | ) |  |  | - |
Net cash provided by financing activities |  |  | 70,934 |  |  |  | 268,018 |
Net change in cash |  |  | (1,060,860 | ) |  |  | (2,800,863 | )
Cash at beginning of the year |  |  | 1,094,891 |  |  |  | 3,122,578 |
Cash at end of the period |  | $ | 34,031 |  |  | $ | 321,715 |
Supplemental disclosure of cash flow information |  |  |  |  |  |  |  |
Cash paid for interest |  | $ | 494,408 |  |  | $ | 3,328 |
Cash paid for income taxes |  | $ | - |  |  | $ | - |
Non-cash Transactions |  |  |  |  |  |  |  |
Insurance premium financed |  | $ | 306,152 |  |  | $ | 220,354 |
Note cancelled from SOSRx agreement termination |  | $ | 500,000 |  |  | $ | - |
Note issued as SOSRx contribution |  | $ | - |  |  | $ | 500,000 |
Intangible asset contribution from non-controlling interest |  | $ | - |  |  | $ | 792,500 |
Disposition of assets, related party |  | $ | 492,030 |  |  | $ | - |
Issuance of notes receivable |  | $ | 1,300,000 |  |  | $ | - |

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

7

NOTE 1 – ORGANIZATION AND BASIS OF PRESENTATION

Overview

TRxADE HEALTH, INC. (“we”, “our”, “Trxade”, and the “Company”) owns 100% of Trxade, Inc., Integra Pharma Solutions, LLC, Community Specialty Pharmacy, LLC, Alliance Pharma Solutions, LLC, Bonum Health, LLC, Superlatus, Inc. and its wholly-owned subsidiary, Sapientia Technologies, LLC (“Sapientia”), and The Urgent Company, Inc. On July 31, 2023, the Company merged with Superlatus, Inc. (see “Merger”, below). On September 27, 2023, the Company acquired The Urgent Company, Inc. (see Note 3).

Trxade, Inc., operates a web-based market platform that enables commerce among healthcare buyers and sellers of pharmaceuticals, accessories and services.

Integra Pharma Solutions, LLC (“IPS”, d.b.a. Trxade Prime), is a licensed pharmaceutical wholesaler and sells brand, generic and non-drug products to customers. IPS customers include all healthcare markets including government organizations, hospitals, clinics and independent pharmacies nationwide.

Community Specialty Pharmacy, LLC, (“CSP”) is an accredited independent retail pharmacy with a focus on a community-based model offering home delivery services to patients.

Alliance Pharma Solutions, LLC (“APS”, d.b.a. DelivMeds) is currently being rebranded and the consumer-based app is still being developed. To date, we have not generated any revenue from this product.

On January 20, 2023, the Company entered into Membership Interest Purchase Agreements to sell 100% of the outstanding membership interests of the Company’s subsidiaries, CSP and APS. The Company will receive consideration in the amount of $125,000 for APS and $100,000 for CSP. The Company also agreed to enter into a Master Service Agreement to operate the businesses prior to closing. Additional amounts owed to the Company as a result of this Master Service Agreement totaled $1,075,000 as of the closing date of August 22, 2023 (see Note 3 and Note 6).

Bonum Health, LLC (“Bonum Health”), was formed to hold certain telehealth assets acquired in October 2019. The “Bonum Health Hub” was launched in February 2020; however, due to the COVID-19 pandemic, the Company does not anticipate installations moving forward. The Bonum Health mobile application 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.

SOSRx, LLC (“SOSRx”) was formed on February 15, 2022. The Company entered into a relationship with Exchange Health, LLC (“Exchange Health”), a technology company providing an online platform for manufacturers and suppliers to sell and purchase pharmaceuticals. SOSRx, a Delaware limited liability company, was formed, which was owned 51% by the Company and 49% by Exchange Health. SOSRx did not generate material revenue and in February of 2023, the Company voluntarily withdrew from the joint venture agreement. As part of the voluntary withdrawal the Company has recorded a loss of $352,244 from disposal of assets, which is included in net loss on discontinued operations in the unaudited consolidated statement of operations in the amount of for the nine-month period ended September 30, 2023.

Merger

On July 14, 2023, the Company entered into an Amended and Restated Agreement and Plan of Merger (the “Merger Agreement”) with Superlatus, Inc., a U.S.-based holding company of food products and distribution capabilities (“Superlatus”) and Foods Merger Sub, Inc., a Delaware corporation and wholly owned subsidiary of the Company (“Merger Sub”).

8

Superlatus is a diversified food technology company with distribution capabilities and systems to optimize food security and population health via innovative Consumer Packaged Goods (“CPG”) products, agritech, foodtech, plant-based proteins and alt-protein and includes wholly-owned subsidiary, Sapientia, Inc. (“Sapientia”), a food tech business.

On July 31, 2023 (the “Closing Date”), the Company completed its acquisition of Superlatus in accordance with the terms and conditions of the Merger Agreement (the “Merger”), pursuant to which the Company acquired Superlatus by way of a merger of the Merger Sub with and into Superlatus, with Superlatus being a wholly owned subsidiary of the Company and the surviving entity in the Merger.

Under the terms of the Merger Agreement, at the closing of the Merger (the “Closing”), shareholders of Superlatus received in aggregate 136,441 shares of common stock of the Company, representing 19.99% of the total issued and outstanding common stock of the Company after the consummation of the Merger and 306,855 shares of Company’s Series B Preferred Stock, par value $0.00001 per share (the “Series B Preferred Stock”), with a conversion ratio of 100 shares of Series B Preferred Stock to one share of common stock. At Closing, the value of the common stock was $7.30 per share, resulting in a total value of $225,000,169. Upon consummation of the Merger, the Company continued to trade under the current ticker symbol “MEDS.”

As a condition and inducement to Superlatus’ willingness to enter into the Merger Agreement, on June 28, 2023, Suren Ajjarapu and Prashant Patel (the “Principal Stockholders”) entered into an agreement with TRxADE (the “Stock Swap Agreement”), pursuant to which, TRxADE will transfer all of the shares or membership interest of the operating subsidiaries currently owned by TRxADE to Principal Stockholders, in exchange for Suran Ajjarapu to surrender 85,000 share of common stock of TRxADE and Prashant Patel to surrender 81,666 shares of the common stock of TRxADE (the “Stock Swap Transaction”). The closing of the Stock Swap Transaction shall take place simultaneously with the approval of TRxADE stockholders of the conversion of the Series B preferred stock into common stock. The closing of the Stock Swap Transaction is subject to the simultaneous condition that the Merger. As of the date of this filing, TRxADE stockholders have not approved the conversion. The Company is in the process of preparing a proxy merger, which is expected to occur in 2024. This will complete all contingencies of Merger Agreement and Stock Swap Agreement and result in a reverse capitalization.

In connection with the Merger, on July 31, 2023, certain Superlatus shareholders as of immediately prior to the Merger, and certain directors and officers of MEDS as of immediately prior to the Merger, entered into lock-up agreements with the Company, pursuant to which each such stockholder will be subject to a 360 day lockup on the sale or transfer of shares of common stock or securities convertible into or exercisable for or exchangeable for common stock held by each such stockholder at the closing of the Merger (the “Lock-up Agreements”).

In connection with the Merger, effective one (1) business day immediately prior to the Closing Date (the “MEDS Rights Record Date”), the Company issued to the shareholders of the Company as of the MEDS Rights Record Date, including the independent directors who are entitled to certain amount of common stock of the Company in connection with their 2023 annual compensation and regardless of whether the common stock has been issued or vest before the MEDS Rights Records Date (collectively, the “MEDS Rights Shareholders”) a non-transferrable right to receive one share of common stock of the Company at no cost (the “MEDS Rights”), with seven (7) MEDS Rights issued per share of common stock of the Company held as of the MEDS Rights Record Date, conditioned upon their execution of a Registration Rights Agreement. Such issuances will be made in reliance on the exemption from registration pursuant to Section 3(a)(9) or Section 4(a)(2) of the Securities Act, Regulation D under the Securities Act promulgated thereunder, and corresponding provisions of state securities or “blue sky” laws. The MEDS Rights are not actionable or transferable until registration; provided they become transferable one year after the date of the Merger if no registration has occurred. As of the date of this filing, no MEDS Rights shares have been issued.

Not all of the closing conditions of the Merger Agreement were met. As a result, the Company entered into Amendment No. 1 to the Amended and Restated Agreement and Plan of Merger (the “Amendment”) on January 8, 2024.Under the terms of the Amendment, the merger consideration to the shareholders of Superlatus was adjusted to the aggregate of 136,441 shares of common stock of the Company, representing 19.99% of the total issued and outstanding common stock of the Company after the consummation of the Merger and 15,759 shares of Company’s Series B Preferred Stock, par value $0.00001 per share (the “Series B Preferred Stock”), with a conversion ratio of 100 shares of Series B Preferred Stock to one share of common stock. At Closing, the value of the common stock was $7.30 per share, resulting in a total value of $12,500,089. Additionally, the shareholders of Superlatus agreed to surrender back to the Company 289,731 shares of the Company’s Series B Preferred Stock. Upon consummation of the Amended Merger Agreement, the Company continues to trade under the current ticker symbol “MEDS.”

Basis of Presentation and Principles of Consolidation

The accompanying unaudited interim consolidated financial statements of TRxADE HEALTH, Inc. have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and the rules of the SEC and should be read in conjunction with the audited financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022, as filed with the SEC on March 27, 2023.

9

In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the interim periods presented have been reflected herein. All significant intercompany balances and transactions have been eliminated in consolidation. The results of operations for the interim periods are not necessarily indicative of the results to be expected for the full year. Notes to the financial statements that would substantially duplicate the disclosures contained in the audited financial statements for the year ended December 31, 2022, as reported in the Company’s Annual Report on Form 10-K have been omitted.

Use of Estimates

The preparation of condensed consolidated financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses in the reporting period. The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from its estimates. To the extent there are material differences between estimates and the actual results, future results of operations will be affected. Significant estimates for the nine months ended September 30, 2023 and 2022 include the valuation of intangible assets, including goodwill.

Fair value of financial instruments

The carrying amounts for cash, accounts receivable, accounts payable, accrued liabilities, and other current liabilities approximate their fair value because of their short-term maturity.

Stock Split

Effective June 21, 2023, the Company executed a 1:15 reverse stock split for stockholders of record on that date. This was executed to comply with the Nasdaq Listing Rule 5550(a)(2) to have the price of the stock above $1.

Recently Issued Accounting Pronouncements

In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments” (“ASU 2016-13”). ASU 2016-13 requires companies to measure credit losses utilizing a methodology that reflects expected credit losses and requires a consideration of a broader range of reasonable and supportable information to inform credit loss estimates. ASU 2016-13 is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The Company adopted ASU 2016-13 effective January 1, 2023. The Company determined that the update applied to trade receivables, but that there was no material impact to the consolidated financial statements from the adoption of ASU 2016-13.

In August 2020, the FASB issued ASU 2020-06, “Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40)”. This ASU reduces the number of accounting models for convertible debt instruments and convertible preferred stock and amends the guidance for the derivatives scope exception for contracts in an entity’s own equity to reduce form-over-substance-based accounting conclusions. In addition, this ASU improves and amends the related earnings per share guidance. This standard is effective for us on January 1, 2022, including interim periods within those fiscal years. Adoption is either a modified retrospective method or a fully retrospective method of transition. The adoption of ASU 2020-06 did not have a material impact on our financial statements.

Accounts Receivable, net

On January 1, 2023, the Company adopted ASU 2016-13 “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments” and its related amendments using the prospective method. The new standard requires the use of a current expected credit loss impairment model to develop and recognize credit losses for financial instruments at amortized cost when the asset is first originated or acquired, and each subsequent reporting period.

The Company’s receivables are from customers and are typically collected within 90 days. The Company determines the allowance based on known troubled accounts, historical experience, and other currently available evidence.

The Company had an account receivable with a single customer, GSG PPE, LLC (“GSG”), for the amount of $630,000, which was past due. The Company had obtained a Note Receivable which was due on September 30, 2021 and remained unpaid. The Company did not believe the amount to be collectible without legal actions, and therefore, recorded bad debt expense reflected on the consolidated statement of operations during the year ended December 31, 2021. The note was not paid pursuant to its terms and the Company had filed a suit to collect on the note and the personal guaranty securing the note. The Company settled the lawsuit in June of 2022. During the nine months ended September 30, 2023, and 2022, there was a bad debt recovery from the GSG lawsuit of $32,074 and $98,841 respectively.

Other Receivables, net

The Company’s other receivables balance is from one vendor. On May 20, 2022, effective as of May 18, 2022, Community Specialty Pharmacy, LLC (“CSP”) entered into an agreement to acquire COVID-19 testing kits from a third-party vendor for an aggregate of $1,200,000, of which $875,000 was paid on May 23, 2022. The Company received the COVID-19 testing kits in July 2022. On August 18, 2022 the Company was informed by the vendor that the vendor had received a letter from the U.S. Food and Drug Administration (“FDA”) that the COVID-19 test kits were misbranded under Section 502(o) of the Federal Food, Drug, and Cosmetic Act (“FDC Act”) (21 USC 352(o)) and adulterated under Section 501(f) of the FDC Act (21 USC 351(f)). Furthermore, the vendor informed the Company that the letter from the FDA also stated that because of the FDA’s prohibition on the distribution of adulterated and/or misbranded devices applies to all parties along the distribution chain, the FDA was advising the vendor against furthering the distribution of the COVID-19 test kits in interstate commerce. The company wrote the amount off as a loss of inventory as of December 31, 2022. As of September 30, 2023 and December 31, 2022, the balance of this receivable was $0.

On August 22, 2023, the Company completed the sale of CSP and APS (see Note 3). The net balance due to the Company from these entities, in excess of the Note Receivable (see Note 6), was $115,684 as of September 30, 2023.

10

Acquisitions

The Company accounts for acquisitions and investments in businesses as business combinations if the target meets the definition of a business and (a) the target is a variable interest entity (“VIE”) and the Company is the target’s primary beneficiary, and therefore the Company must consolidate its financial statements, or (b) the Company acquires more than 50% of the voting interest of the target and it was not previously consolidated. The Company records business combinations using the acquisition method of accounting, which requires all the assets acquired and liabilities assumed to be recorded at fair value as of the acquisition date. The excess of the purchase price over the estimated fair values of the net tangible and intangible assets acquired is recorded as goodwill.

The application of the acquisition method of accounting for business combinations requires management to make significant estimates and assumptions in the determination of the fair value of assets acquired and liabilities assumed in order to properly allocate purchase price consideration between assets that are depreciated and amortized from goodwill. The fair value assigned to tangible and intangible assets acquired and liabilities assumed are based on management’s estimates and assumptions, as well as other information compiled by management, including valuations that utilize customary valuation procedures and techniques. Significant assumptions and estimates include, but are not limited to, the cash flows that an asset is expected to generate in the future, the appropriate weighted-average cost of capital, and the cost savings expected to be derived from acquiring an asset, if applicable.

If the actual results differ from the estimates and judgments used in these estimates, the amounts recorded in the Company’s financial statements may be exposed to potential impairment of the intangible assets and goodwill.

If the Company’s investment involves the acquisition of an asset or group of assets that does not meet the definition of a business, the transaction is accounted for as an asset acquisition. An asset acquisition is recorded at cost, which includes capitalizing transaction costs, and does not result in the recognition of goodwill.

Intangible Assets and Goodwill

The Company tests indefinite-lived intangible assets for impairment on an annual basis or whenever events or changes occur that would more-likely-than not reduce the fair value of the indefinite-lived intangible asset below its carrying value between annual impairment tests. Any indefinite-lived intangible asset assessment is performed at the Company level.

The Company did not record an indefinite-lived intangible asset impairment charge for the three and nine months ended September 30, 2023 and 2022.

Income (loss) Per Common Share

Basic net income per common share is computed by dividing net income available to common stockholders by the weighted average number of common shares outstanding. Diluted net income per common share is computed similar to basic net income per common share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive. The dilutive effect of the Company’s options and warrants is computed using the treasury stock method. As of September 30, 2023, we had 177,536 outstanding warrants to purchase shares of common stock and 17,852 options to purchase shares of common stock. As part of the termination of the White Lion deal, White Lion was issued 50,000 shares of stock per the agreement on March 1, 2023. Armistice Capital executed its pre-funded warrants on January 4, 2023, and purchased 601,740 shares of stock with a purchase price of $6.02.

The following table sets forth the computation of basic and diluted loss per share:

SCHEDULE OF BASIC AND DILUTIVE INCOME (LOSS) PER SHARE

|  | 2023 |  |  | 2022 |  |  | 2023 |  |  | 2022 |
|  | For the Three Months Ended September 30, |  |  | For the Nine Months Ended September 30, |
|  | 2023 |  |  | 2022 |  |  | 2023 |  |  | 2022 |
Numerator: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Net loss from continuing operations |  | $ | (171,607 | ) |  | $ | (314,735 | ) |  | $ | (2,004,581 | ) |  | $ | (1,923,817 | )
Net loss from discontinued operations |  | $ | (3,353,507 | ) |  | $ | (188,268 | ) |  |  | (4,123,028 | ) |  | $ | (623,096 | )
Numerator for basic and diluted EPS - income available to common stockholders |  |  | (3,525,114 | ) |  | $ | (503,003 | ) |  |  | (6,127,609 | ) |  | $ | (2,546,913 | )
Denominator: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Denominator for EPS – weighted average shares |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Basic |  |  | 771,192 |  |  |  | 549,977 |  |  |  | 708,116 |  |  |  | 546,879 |
Diluted |  |  | 2,363,233 |  |  |  | 551,724 |  |  |  | 2,300,157 |  |  |  | 548,626 |
Net loss per common share attributable to common stockholders |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Basic |  | $ | (4.57 | ) |  | $ | (0.91 | ) |  | $ | (8.65 | ) |  | $ | (4.66 | )
Diluted |  | $ | (1.49 | ) |  | $ | (0.91 | ) |  | $ | (2.66 | ) |  | $ | (4.64 | )
Net loss per common share from continuing operations |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Basic |  | $ | (0.22 | ) |  | $ | (0.57 | ) |  | $ | (2.83 | ) |  | $ | (3.52 | )
Diluted |  | $ | (0.07 | ) |  | $ | (0.57 | ) |  | $ | (0.87 | ) |  | $ | (3.51 | )
Net loss per common share from discontinued operations |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Basic |  | $ | (4.35 | ) |  | $ | (0.34 | ) |  | $ | (5.82 | ) |  | $ | (1.14 | )
Diluted |  | $ | (1.42 | ) |  | $ | (0.34 | ) |  | $ | (1.79 | ) |  | $ | (1.14 | )

11

Income taxes

The Company’s provision for income taxes was $0 for the three and nine months ended September 30, 2023, and $0 for the three and nine months ended September 30, 2022, respectively. The income tax provisions for these three and nine month periods are based upon estimates of annual income (loss), annual permanent differences and statutory tax rates in the various jurisdictions in which the Company operates. For all periods presented, the Company utilized net operating loss carryforwards to offset the impact of any taxable income. The Company’s tax rate differs from the applicable statutory rates due primarily to establishment of a valuation allowance, utilization of deferred and the effect of permanent differences and adjustments.

NOTE 2 – GOING CONCERN

The accompanying interim consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates realization of assets and the satisfaction of liabilities in the normal course of business within one year after the date the consolidated financial statements are issued. In accordance with Financial Accounting Standards Board, or the FASB, Accounting Standards Update No. 2014-15, Presentation of Financial Statements - Going Concern (Subtopic 205-40), our management evaluates whether there are conditions or events, considered in aggregate, that raise substantial doubt about our ability to continue as a going concern within one year after the date that the financial statements are issued.

As of September 30, 2023, the Company had a retained deficit of $21,529,975. The Company has limited financial resources. As of September 30, 2023, the Company had a working capital deficit of $3,544,460 and a cash balance of $34,031. The Company will need to raise additional capital or secure debt funding to support on-going operations. The sources of this capital are expected to be the sale of equity and debt, which may not be available on favorable terms, if at all, and may, if sold, cause significant dilution to existing stockholders. If the Company is unable to access additional capital moving forward, it may hurt the Company’s ability to grow and to generate future revenues, financial position, and liquidity. These factors raise substantial doubt about the ability of the Company to continue as a going concern. Unless Management is able to obtain additional financing, it is unlikely that the Company will be able to meet its funding requirements during the next 12 months. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

NOTE 3 – ACQUISITIONS AND DISPOSITIONS

Acquisitions - Provisional

Superlatus, Inc.

On July 31, 2023, the Company entered into the Merger Agreement (see Note 1) with Superlatus (“Seller”) whereby the Company acquired 100% of the stock of the Seller (the “Acquisition”). Superlatus includes a wholly-owned subsidiary, Sapientia. Consideration for the Acquisition consisted of (i) 136,441 shares of the Company’s common stock at a fair value of $7.30 per share, representing 19.99% of the total issued and outstanding share of the Company’s common stock at Closing, and (ii) 306,855 shares of the Company’s Series B Preferred Stock, a new class of the Company’s non-voting convertible preferred stock with a conversion ratio of 100 to one. The total fair value of the common stock and Series B Preferred Stock on the Closing Date was $225,000,169 (“Purchase Price”). On January 8, 2024, the Company entered into Amendment No. 1 to the Agreement and Plan of Merger (the “Amendment”). Under the terms of the Amendment, the merger consideration to the shareholders of Superlatus was adjusted to an aggregate of 136,441 shares of common stock of the Company, representing 19.99% of the total issued and outstanding common stock of the Company after the consummation of the Merger and 15,759 shares of Company’s Series B Preferred Stock, par value $0.00001 per share, with a conversion ratio of 100 shares of Series B Preferred Stock to one share of common stock. The total fair value of the common stock and Series B Preferred Stock on the Closing Date was adjusted to $12,500,089 (“Amended Purchase Price”). Additionally, the shareholders of Superlatus agreed to surrender back to the Company 289,731 shares of the Company’s Series B Preferred Stock previously received before the amendment.

The acquisition of Superlatus was accounted for as a business combination using the acquisition method pursuant to FASB ASC Topic 805. As the acquirer for accounting purposes, the Company had estimated the Purchase Price, assets acquired and liabilities assumed as of the acquisition date, with the excess of the Purchase Price over the fair value of net assets acquired recognized as goodwill. An independent valuation expert assisted the Company in determining these fair values.

Accounting guidance provides that an acquirer must recognize adjustments to provisional amounts that are identified during the measurement period, which runs through July 31, 2024, in the measurement period in which the adjustment amounts are determined. The acquirer must record in the financial statements, the effect on earnings of changes in depreciation, amortization or other income effects, if any, as a result of the changes to the provisional amounts, calculated as if the accounting had been completed at the acquisition date. Items that could be subject to adjustment include credit fair value adjustments on loans, core deposit intangible and the deferred income tax assets resulting from the acquisition.

The provisional Amended Purchase Price allocation as of the acquisition date is presented as follows:

SCHEDULE OF PURCHASE PRICE ALLOCATION

|  | July 31, 2023 |
Purchase consideration: |  |  |  |
Common Stock, at fair value |  | $ | 996,019 |
Series B Preferred Stock, at fair value |  |  | 11,504,070 |
Total purchase consideration |  | $ | 12,500,089 |
Purchase price allocation: |  |  |  |
Cash |  | $ | 5,546 |
Prepaid expenses |  |  | 3,705 |
Inventory |  |  | 122,792 |
Intangible assets, net |  |  | 9,777,478 |
Goodwill |  |  | 5,129,116 |
Assets acquired |  |  | 15,038,637 |
Accounts payable and other current liabilities |  |  | (633,548 | )
Notes payable |  |  | (1,905,000 | )
Liabilities assumed |  |  | (2,538,548 | )
Net assets acquired |  | $ | 12,500,089 |

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The Urgent Company, Inc.

On September 27, 2023, the Company entered into an Asset Purchase Agreement (“APA”) with The Urgent Company, Inc. (“TUC”) and its wholly owned subsidiaries, pursuant to which, the Company was assigned certain inventory and property and equipment and assumed certain operating leases for consideration of a $3,150,000 promissory note (“Purchase Price”, see Note 11). This acquisition is expected to enhance the Company’s production of sustainable food products and enable the expansion of market share.

The transaction was accounted for as an asset acquisition pursuant to FASB ASC Topic 805. As the acquirer for accounting purposes, the Company allocated the cost of the asset acquisition to the assets acquired and liabilities assumed as of the acquisition date based on their respective relative fair value as of the date of the transaction.

The following summarizes the provisional relative fair values of the assets acquired as of the acquisition date based on the allocation of the cost of the asset acquisition:

SCHEDULE OF FAIR VALUES OF ASSETS ACQUIRED

|  | September 27, 2023 |
Purchase consideration: |  |  |  |
Promissory note |  | $ | 3,150,000 |
Total purchase consideration |  | $ | 3,150,000 |
Allocation of cost of assets acquired: |  |  |  |
Inventory |  | $ | 2,960,235 |
Property and equipment |  |  | 231,170 |
Operating right-of-use assets |  |  | 383,218 |
Assets acquired |  |  | 3,574,623 |
Liabilities assumed |  |  | (424,623 | )
Net assets acquired |  | $ | 3,150,000 |

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Dispositions and Divestitures

SOSRx, LLC

On and effective on, February 1, 2023, the Company, Exchange Health and SOSRx, entered into a Voluntary Withdrawal and Release Agreement, which was replaced in its entirety, corrected, and became effective on February 4, 2023 (as replaced and corrected, the “Release Agreement”).

As part of the Release Agreement, a note payable to Exchange Health was forgiven in the amount of $500,000 and $15,000 in accounts payable was waived. Effective February 4, 2023, the operations of SOSRx were discontinued and operations were shut down. As a result of this, the assets and liabilities of SOSRx have been reflected as assets and liabilities of discontinued operations in the Company’s consolidated balance sheets. As of September 30, 2023 and December 31, 2022 as follows:

SCHEDULE OF FINANCIAL STATEMENTS OF DISCONTINUED OPERATIONS

|  | September 30, 2023 |  |  | December 31, 2022 |
Cash |  | $ | - |  |  | $ | 22,474 |
Accounts receivable |  |  | - |  |  |  | 363 |
Total assets of discontinued operations |  | $ | - |  |  | $ | 22,837 |
Accounts payable |  | $ | - |  |  | $ | 46,500 |
Total liabilities of discontinued operations |  | $ | - |  |  | $ | 46,500 |

The terms of the Release Agreement qualifies the transaction as a discontinued operation in accordance with U.S. GAAP. As a result, operating results and cash flows related to the SOSRx operations have been reflected as discontinued operations in the Company’s consolidated statements of operations, consolidated statements of cash flows and consolidated statements of shareholders’ equity.

Alliance Pharma Solutions, LLC and Community Specialty Pharmacy, LLC

On August 22, 2023, the Company and Wood Sage, LCC (“Wood Sage”) entered into a Membership Interest Purchase Agreement, pursuant to which the Company sold 100% of the membership interest in Alliance Pharma Solutions, LLC (“ASP MIPA”) for consideration of a $125,000 promissory note (“ASP Sale Price”) and a Membership Interest Purchase Agreement, pursuant to which the Company sold 100% of the membership interest in Community Specialty Pharmacy, LLC (“CSP MIPA”) in exchange for a $100,000 promissory note (“CSP Sale Price”).

The divestiture of APS and CSP represents an intentional strategic shift in the Company’s operations and will allow the Company to become focused on food technology As a result, the results of APS and CSP were classified as discontinued operations in our condensed statements of operations and excluded from both continuing operations and segment results for the three and nine months ended September 30, 2022.

As part of recognizing the business as held for sale in accordance with U.S. GAAP, the Company was required to measure APS and CSP at the lower of its carrying amount or fair value less cost to sell. As a result of this analysis, during the three and nine months ended September 30, 2023, the Company recognized a non-cash, pre-tax loss on disposal of $3,209,776. The loss is included in “Net loss from discontinued operations” in the consolidated statements of operations. The loss was determined by comparing the fair value of the consideration received for the sale of a 100% interest in APS and CSP with the net assets of APS and CSP, respectively, immediately prior to the transaction.

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As a result of the transactions, the following assets and liabilities of APS and CSP were transferred to Wood Sage as of August 22, 2023:

SCHEDULE OF ASSETS AND LIABILITIES

|  | Alliance Pharma Solutions, LLC |  |  | Community Specialty Pharmacy, LLC |
Cash |  | $ | 1,050 |  |  | $ | 61,988 |
Accounts receivable, net |  |  | - |  |  |  | 11,452 |
Inventory |  |  | - |  |  |  | 123,230 |
Prepaid assets |  |  | - |  |  |  | 525 |
Intangible assets and capitalized software, net |  |  | 739,337 |  |  |  | - |
Accounts payable |  |  | (23,982 | ) |  |  | (231,876 | )
Accrued liabilities |  |  | - |  |  |  | (10,182 | )
Net assets sold |  | $ | 716,405 |  |  | $ | (44,863 | )

Discontinued Operations

The results of operations from discontinued operations for the three and nine months ended September 30, 2023 and 2022, have been reflected as discontinued operations in the consolidated statements of operations and consist of the following:

SCHEDULE OF DISCONTINUED OPERATIONS

|  | 2023 |  |  | 2022 |  |  | 2023 |  |  | 2022 |  |  | 2023 |  |  | 2022 |  |  | 2023 |  |  | 2022 |
|  | SOSRx |  |  | APS |  |  | CSP |  |  | Total |
|  | Three Months Ended September 30, |  |  | Three Months Ended September 30, |  |  | Three Months Ended September 30, |  |  | Three Months Ended September 30, |
|  | 2023 |  |  | 2022 |  |  | 2023 |  |  | 2022 |  |  | 2023 |  |  | 2022 |  |  | 2023 |  |  | 2022 |
Revenue |  | $ | - |  |  | $ | 3,368 |  |  | $ | - |  |  | $ | - |  |  | $ | 124,238 |  |  | $ | 341,140 |  |  | $ | 124,238 |  |  | $ | 344,508 |
Cost of sales |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 127,671 |  |  |  | 314,945 |  |  |  | 127,671 |  |  |  | 314,945 |
Gross profit |  |  | - |  |  |  | 3,368 |  |  |  | - |  |  |  | - |  |  |  | (3,433 | ) |  |  | 26,195 |  |  |  | (3,433 | ) |  |  | 29,563 |
Operating expenses |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Wage and salary expense |  |  | - |  |  |  | 17,689 |  |  |  | - |  |  |  | - |  |  |  | 108,772 |  |  |  | 70,002 |  |  |  | 108,772 |  |  |  | 87,691 |
Professional fees |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 10,471 |  |  |  | 18,079 |  |  |  | 2,094 |  |  |  | 18,079 |  |  |  | 12,565 |
Accounting and legal expense |  |  | - |  |  |  | - |  |  |  | 1,948 |  |  |  | 104 |  |  |  | 700 |  |  |  | 500 |  |  |  | 2,648 |  |  |  | 604 |
Technology expense |  |  | - |  |  |  | 23,000 |  |  |  | 4,177 |  |  |  | 31,564 |  |  |  | 2,231 |  |  |  | 5,445 |  |  |  | 6,408 |  |  |  | 60,009 |
General and administrative |  |  | - |  |  |  | 29,907 |  |  |  | 134 |  |  |  | 3,527 |  |  |  | 4,257 |  |  |  | 25,428 |  |  |  | 4,391 |  |  |  | 58,862 |
Total operating expense |  |  | - |  |  |  | 70,596 |  |  |  | 6,259 |  |  |  | 45,666 |  |  |  | 134,039 |  |  |  | 103,469 |  |  |  | 140,298 |  |  |  | 219,731 |
Operating loss from discontinued operations |  |  | - |  |  |  | (67,228 | ) |  |  | (6,259 | ) |  |  | (45,666 | ) |  |  | (137,472 | ) |  |  | (77,274 | ) |  |  | (143,731 | ) |  |  | (190,168 | )
Other income (expense) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Gain (loss) on disposal of assets |  |  | - |  |  |  | - |  |  |  | (1,783,209 | ) |  |  | 1,900 |  |  |  | (1,426,567 | ) |  |  | - |  |  |  | (3,209,776 | ) |  |  | 1,900 |
Total other income (expense) |  |  | - |  |  |  | - |  |  |  | (1,783,209 | ) |  |  | 1,900 |  |  |  | (1,426,567 | ) |  |  | - |  |  |  | (3,209,776 | ) |  |  | 1,900 |
Loss from discontinued operations |  | $ | - |  |  | $ | (67,228 | ) |  | $ | (1,789,468 | ) |  | $ | (43,766 | ) |  | $ | (1,564,039 | ) |  | $ | (77,274 | ) |  | $ | (3,353,507 | ) |  | $ | (188,268 | )
Loss per common share from discontinued operations |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Basic |  | $ | - |  |  | $ | (0.12 | ) |  | $ | (2.32 | ) |  | $ | (0.08 | ) |  | $ | (2.03 | ) |  | $ | (0.14 | ) |  | $ | (4.35 | ) |  | $ | (0.34 | )
Diluted |  | $ | - |  |  | $ | (0.12 | ) |  | $ | (0.76 | ) |  | $ | (0.08 | ) |  | $ | (0.66 | ) |  | $ | (0.14 | ) |  | $ | (1.42 | ) |  | $ | (0.34 | )

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|  | 2023 |  |  | 2022 |  |  | 2023 |  |  | 2022 |  |  | 2023 |  |  | 2022 |  |  | 2023 |  |  | 2022 |
|  | SOSRx |  |  | ASP |  |  | CSP |  |  | Total |
|  | Nine months ended September 30, |  |  | Nine months ended September 30, |  |  | Nine months ended September 30, |  |  | Nine months ended September 30, |
|  | 2023 |  |  | 2022 |  |  | 2023 |  |  | 2022 |  |  | 2023 |  |  | 2022 |  |  | 2023 |  |  | 2022 |
Revenue |  | $ | - |  |  | $ | 20,424 |  |  | $ | - |  |  | $ | - |  |  | $ | 761,306 |  |  | $ | 905,083 |  |  | $ | 761,306 |  |  | $ | 925,507 |
Cost of sales |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 705,206 |  |  |  | 1,019,470 |  |  |  | 705,206 |  |  |  | 1,019,470 |
Gross profit |  |  | - |  |  |  | 20,424 |  |  |  | - |  |  |  | - |  |  |  | 56,100 |  |  |  | (114,387 | ) |  |  | 56,100 |  |  |  | (93,963 | )
Operating expenses |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Wage and salary expense |  |  | - |  |  |  | 54,939 |  |  |  | - |  |  |  | - |  |  |  | 456,297 |  |  |  | 180,819 |  |  |  | 456,297 |  |  |  | 235,758 |
Professional fees |  |  | - |  |  |  | - |  |  |  | 3,125 |  |  |  | 44,962 |  |  |  | 20,246 |  |  |  | 5,572 |  |  |  | 23,371 |  |  |  | 50,534 |
Accounting and legal expense |  |  | - |  |  |  | - |  |  |  | 7,773 |  |  |  | 104 |  |  |  | 63,000 |  |  |  | 500 |  |  |  | 70,773 |  |  |  | 604 |
Technology expense |  |  | - |  |  |  | 53,910 |  |  |  | 20,611 |  |  |  | 83,659 |  |  |  | 9,464 |  |  |  | 13,989 |  |  |  | 30,075 |  |  |  | 151,558 |
General and administrative |  |  | - |  |  |  | 33,873 |  |  |  | 3,762 |  |  |  | 10,761 |  |  |  | 32,830 |  |  |  | 47,945 |  |  |  | 36,592 |  |  |  | 92,579 |
Total operating expense |  |  | - |  |  |  | 142,722 |  |  |  | 35,271 |  |  |  | 139,486 |  |  |  | 581,837 |  |  |  | 248,825 |  |  |  | 617,108 |  |  |  | 531,033 |
Operating loss from discontinued operations |  |  | - |  |  |  | (122,298 | ) |  |  | (35,271 | ) |  |  | (139,486 | ) |  |  | (525,737 | ) |  |  | (363,212 | ) |  |  | (561,008 | ) |  |  | (624,996 | )
Other income (expense) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Gain (loss) on disposal of assets |  |  | (352,244 | ) |  |  | - |  |  |  | (1,783,209 | ) |  |  | 1,900 |  |  |  | (1,426,567 | ) |  |  | - |  |  |  | (3,562,020 | ) |  |  | 1,900 |
Total other income (expense) |  |  | (352,244 | ) |  |  | - |  |  |  | (1,783,209 | ) |  |  | 1,900 |  |  |  | (1,426,567 | ) |  |  | - |  |  |  | (3,562,020 | ) |  |  | 1,900 |
Loss from discontinued operations |  | $ | (352,244 | ) |  | $ | (122,298 | ) |  | $ | (1,818,480 | ) |  | $ | (137,586 | ) |  | $ | (1,952,304 | ) |  | $ | (363,212 | ) |  | $ | (4,123,028 | ) |  | $ | (623,096 | )
Loss per common share from discontinued operations |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Basic |  | $ | (0.50 | ) |  | $ | (0.22 | ) |  | $ | (2.57 | ) |  | $ | (0.25 | ) |  | $ | (2.76 | ) |  | $ | (0.66 | ) |  | $ | (5.82 | ) |  | $ | (1.14 | )
Diluted |  | $ | (0.15 | ) |  | $ | (0.22 | ) |  | $ | (0.79 | ) |  | $ | (0.25 | ) |  | $ | (0.85 | ) |  | $ | (0.66 | ) |  | $ | (1.79 | ) |  | $ | (1.14 | )

NOTE 4- RELATED PARTY TRANSACTIONS

On April 1, 2023 and July 1, 2023 the Company entered into a relationship with Scietech, LLC (“Scietech”) in an independent contractor agreement to consult on increasing sales on the IPS and Trxade Inc. platforms. The agreement was for an annual fee of $400,000 to be split equally between IPS and Trxade Inc. A 31% investor in Scietech is the spouse of the interim CFO, Prashant Patel, which qualifies as a related party. The company was chosen because they were the most qualified to perform the desired qualifications.

On February 15, 2022, the Company entered into a relationship with Exchange Health, a technology company providing an online platform for manufacturers and suppliers to sell and purchase pharmaceuticals. In connection therewith, SOSRx was formed in February 2022, which is owned 51% by the Company and 49% by Exchange Health. On February 15, 2022, the Company contributed cash to SOSRx in the amount of $325,000, issued a promissory note to SOSRx in the amount of $500,000, which was immediately assigned to Exchange Health (the “Promissory Note”), and agreed to make an earn out payment of up to $400,000, payable, at the Company’s discretion, in cash or common stock of the Company, based on SOSRx achieving certain revenue targets of SOSRx (the “Earn Out Payments”); and entered into a Distribution Services Agreement with SOSRx (the “Distribution Agreement”). Exchange Health contributed $792,000 in software and contracts which was recorded as an intangible asset on the balance sheet of SOSRx. The intangible asset was determined to be impaired and was written off on December 31, 2022.

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At September 30, 2023, total related party debt was $0.

On and effective on, February 1, 2023, the Company, Exchange Health and SOSRx, entered into a Voluntary Withdrawal and Release Agreement, which was replaced in its entirety and corrected on February 4, 2023 and effective February 4, 2023 (as replaced and corrected, the “Release Agreement”). Pursuant to the Release Agreement, the Company voluntarily withdrew as a member of SOSRx pursuant to the terms of the Operating Agreement of SOSRx, which provided that the Company would withdraw from SOSRx if certain revenue targets were not met, which targets have not been met.

Also pursuant to the Withdrawal Agreement, (a) the Company agreed to the termination of its interests in SOSRx and its withdrawal as a member thereof for no consideration (the “Withdrawal”); (b) the Promissory Note, and all of the Company’s obligations under such Promissory Note were terminated; and (c) the parties agreed that no Earn Out Payments will be due. The Release Agreement also (i) provides that all accumulated losses of SOSRx through December 20, 2022, will be allocated 51% to the Company and 49% to Exchange Health; (ii) provides for a total of approximately $15,000 in outstanding invoices owed by the Company to SOSRx to be waived; (iii) includes certain indemnification obligations of SOSRx and Exchange Health; (iv) requires SOSRx to pay certain pre-agreed outstanding invoices of SOSRx; (v) includes mutual releases of the Company and SOSRx and Exchange Health; and (vi) includes customary representations and warranties of the parties.

NOTE 5 – REVENUE RECOGNITION

The Company derives revenue from two primary sources—product revenue and service revenue.

Product revenue consists of shipments of:

| ● | Resale of pharmaceutical products to pharmacies; and

Revenues for our products are recognized and invoiced when the product is shipped to the customer.

Service revenue consists primarily of:

| ● | Transaction fees from the facilitation of buyer generated purchase orders to suppliers, billed monthly;
| ● | Data service fees associated with providing vendors of pharmaceutical products with data analysis of their catalogues and branding of their products or company to the Company’s registered buyers, billed monthly or as a one-time fee; and
| ● | Software-as-a-Service (“SaaS”) fees for a platform for virtual healthcare provider visits, billed monthly.

Revenues for the Company’s services that are billed monthly are recognized and invoiced when the at the beginning of the month. Revenues for one-time services are recognized at the point in time when services are rendered.

Payment terms for products and services are generally 0 to 60 days and the Company has no contract assets or liabilities.

The following table presents disaggregated revenue by major product and service categories during the three and nine months ended September 30, 2023 and 2022:

SCHEDULE OF DISAGGREGATED REVENUE

|  | 2023 |  |  | 2022 |  |  | 2023 |  |  | 2022 |
|  | Three months ended September 30, |  |  | Nine months ended September 30, |
|  | 2023 |  |  | 2022 |  |  | 2023 |  |  | 2022 |
Product revenues |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pharmaceutical product resale income |  | $ | 394,849 |  |  | $ | 707,807 |  |  | $ | 1,237,731 |  |  | $ | 3,949,771 |
Total product revenues |  | $ | 394,849 |  |  | $ | 707,807 |  |  | $ | 1,237,731 |  |  | $ | 3,949,771 |
Service revenues |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Transaction fee income |  | $ | 1,617,129 |  |  | $ | 1,319,483 |  |  | $ | 4,531,731 |  |  | $ | 3,947,621 |
Data service fee income |  |  | 46,050 |  |  |  | 17,950 |  |  |  | 132,025 |  |  |  | 54,050 |
SaaS fee income |  |  | - |  |  |  | 10,563 |  |  |  | 18,299 |  |  |  | 42,363 |
Total service revenues |  | $ | 1,663,179 |  |  | $ | 1,347,996 |  |  | $ | 4,682,055 |  |  | $ | 4,044,034 |
Total revenues |  | $ | 2,058,028 |  |  | $ | 2,055,803 |  |  | $ | 5,919,786 |  |  | $ | 7,993,805 |

NOTE 6 – INVENTORY

Inventory value is determined using the weighted average cost method and is stated at the lower of cost or net realizable value. As of September 30, 2023 and December 31, 2022, inventory was comprised of the following:

SCHEDULE OF INVENTORY

As of |  | September 30, 2023 |  |  | December 31, 2022 |
Raw materials |  | $ | 1,895,406 |  |  | $ | 68,448 |
Finished goods |  |  | 1,131,512 |  |  |  | - |
Inventory |  | $ | 3,026,918 |  |  | $ | 68,448 |

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NOTE 7 – NOTES RECEIVABLE

On August 22, 2023, issued a Promissory Note Agreement (the “Wood Sage Note”) in the amount of $1,300,000 to Wood Sage, LLC and entered into the APS MIPA and CSP MIPA for the Company to sell APS and CSP and entered into a Master Service Agreement (“Wood Sage MSA”). The Wood Sage Note bears no interest and is due and payable within thirty days of a change in control, as defined by the Wood Sage Note, of the borrower. As of September 30, 2023, the outstanding balance of the Wood Sage Note was $1,275,000.

NOTE 8 – INTANGIBLE ASSETS

As of September 30, 2023, intangible assets, net consisted of the following:

SCHEDULE OF INTANGIBLE ASSETS NET

|  | Weighted Average |  |  |  |  |  |  |  |  |  |
|  | Useful Life |  |  |  |  |  | Accumulated |  |  |  |
|  | (years) |  |  | Cost |  |  | Amortization |  |  | Net |
Developed technology |  |  | 5.0 |  |  | $ | 9,777,478 |  |  | $ | (325,916 | ) |  | $ | 9,451,562 |

NOTE 9 – OTHER CURRENT LIABILITIES

As of September 30, 2023 and December 31, 2022, other current liabilities consisted of the following:

SCHEDULE OF OTHER CURRENT LIABILITIES

|  | September 30, 2023 |  |  | December 31, 2022 |
Purchase price payable |  | $ | 350,000 |  |  | $ | - |
Insurance refunds payable |  |  | 62,390 |  |  |  | 62,390 |
Deferred revenue |  |  | - |  |  |  | 5,127 |
Other current liabilities |  | $ | 412,390 |  |  | $ | 67,517 |

NOTE 10 – CONTINGENT FUNDING LIABILITIES

On June 27, 2023, the Company entered into a non-recourse funding agreement with a third-party for the purchase and sale of future receivables (the “Receivables Agreement”). Pursuant to the Receivables Agreement, the third-party agreed to fund the Company $1,250,000 to purchase $1,800,000 of future receivables. Under the funding agreement, the third-party receives a priority interest in the receivables of Trxade Inc. The Company also paid $62,500 as a one-time origination fee in connection with the Receivables Agreement. The Receivables Agreement also allows for the third-party funder to file UCCs securing their interest in the receivables and includes customary events of default. As of September 30, 2023, the Company owed $452,348 under this agreement.

On March 14, 2023, the Company entered into a non-recourse funding agreement with a third-party for the purchase and sale of future receivables (the “Receivables Agreement”). Pursuant to the Receivables Agreement, the third-party agreed to fund the Company $875,000 to purchase $1,224,000 of future receivables. Under the funding agreement, the third-party receives a priority interest in the receivables of Trxade Inc. The Company also paid $42,500 as a one-time origination fee in connection with the Receivables Agreement. The Receivables Agreement also allows for the third-party funder to file UCCs securing their interest in the receivables and includes customary events of default.

On September 14, 2022, the Company entered into a non-recourse funding agreement with a third-party for the purchase and sale of future receivables (the “Receivables Agreement”). Pursuant to the Receivables Agreement, the third-party agreed to fund the Company $275,000 to purchase $396,000 of future receivables. Under the funding agreement, the third-party receives a priority interest in the receivables of Trxade Inc. The Company also paid $15,000 as a one-time origination fee in connection with the Receivables Agreement. The Receivables Agreement also allows for the third-party funder to file UCCs securing their interest in the receivables and includes customary events of default. This agreement was fully paid off in January 2023.

On June 27, 2022, the Company entered into a non-recourse funding agreement with a third-party funder for the purchase and sale of future receivables. Pursuant to the Receivables Agreement, the third-party agreed to fund the Company $550,000 to purchase $792,000 of future receivables. Under the funding agreement, the third-party receives a priority interest in the receivables of Trxade Inc. The Company also paid $27,500 as a one-time origination fee in connection with the Receivables Agreement. The Receivables Agreement also allows for the third-party funder to file UCCs securing their interest in the receivables and includes customary events of default. This agreement was fully paid off in January 2023.

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The Company’s relationship with the funding source meets the criteria in ASC 470-10-25 – Sales of Future Revenues or Various Other Measures of Income (“ASC 470”), which relates to cash received from a funding source in exchange for a specified percentage or amount of revenue or other measure of income of a particular product line, business segment, trademark, patent or contractual right for a defined period. Under this guidance, the Company recognized the fair value of its contingent obligation to the funding source, as of the acquisition date, as a current liability in its consolidated balance sheet.

Under ASC 470, amounts recorded as debt are to be amortized under the interest method. The Company made an accounting policy election to utilize the prospective method when there is a change in the estimated future cash flows, whereby a new effective interest rate is determined based on the revised estimate of remaining cash flows. The new rate is the discount rate that equates the present value of the revised estimate of remaining cash flows with the carrying amount of the debt, and it will be used to recognize interest expense for the remaining period. Under this method, the effective interest rate is not constant, and any change in expected cash flows is recognized prospectively as an adjustment to the effective yield. As of September 30, 2023 and December 31, 2022 the total contingent funding liability was $452,348 and $108,036, respectively, and the effective interest rate was approximately 31% and 31%, respectively. This rate represents the discount rate that equates the estimated future cash flows with the fair value of the debt and is used to compute the amount of interest to be recognized each period. Any future payments made to the funding source will decrease the contingent funding liability balance accordingly.

NOTE 11 – NOTES PAYABLE

On September 27, 2023, the Company issued a promissory note to Perfect Day, Inc. (the “Perfect Day Note”) in the amount of $3,150,000 as consideration for the TUC APA (see Note 3). The promissory note does not accrue interest and is payable upon demand at any time after October 31, 2023. The entire aggregate, unpaid principal sum of the note is immediately due and payable upon the occurrence of a change in control, as defined in the agreement.

On September 14, 2023, the Company issued a promissory note to Danam Health, Inc. (the “Danam Note”) in the amount of $300,000. The Company received a deposit of $200,000 on September 14, 2023 and an additional deposit of $100,000 on October 13, 2023. The Danam Note accrues interest at 0% per annum and is due and payable no later than 30 days after a change in control of borrower, as defined in the note agreement. As of September 30, 2023, the balance of the Danam Note is $200,000. The Company repaid $250,000 on the loan in October 2023. As of the date of this filing, the balance on the loan is $50,000.

On June 16, 2023, the Company issued a secured debenture to Eat Well Investment Group, Inc. (the “Eat Well June 2023 Note”) in the amount of $1,150,000 for the purchase of Sapientia, a wholly-owned subsidiary of Superlatus. The Eat Well June 2023 Note is secured by 100% of the membership interests in Sapientia. The Eat Well June 2023 Note began accruing interest at 12% per annum, compounded monthly, as of October 31, 2023. The Eat Well June 2023 matured on December 31, 2023. As of September 30, 2023, the balance of the Eat Well June 2023 Note is $1,150,000. As of the date of this filing, the parties are working on an amendment for an extension.

On February 8, 2023, Sapientia, a wholly-owned subsidiary of Superlatus, entered into a Loan Agreement with Eat Well Investment Group, Inc. (the “Eat Well February 2023 Note”) in the amount of $25,000. The Eat Well February 2023 Note is unsecured, accrues interest at a rate of 1.87% per annum, and matures February 7, 2025. As of September 30, 2023, the balance of the Eat Well February 2023 Note is $25,000. The Company has accrued interest of $350 as of September 30, 2023.

On September 14, 2022, Sapientia entered into a Loan Agreement with Eat Well Investment Group, Inc. (the “Eat Well September 2022 Note”) in the amount of $50,000. The Eat Well September 2022 Note is unsecured, accrues interest at a rate of 1.87% per annum, and matures September 13, 2024. As of September 30, 2023, the balance of the Eat Well September 2022 Note is $50,000. The Company has accrued interest of $1,140 as of September 30, 2023.

On July 26, 2022, Sapientia entered into a Loan Agreement with Eat Well Investment Group, Inc. (the “Eat Well July 26, 2022 Note”) in the amount of $35,000. The Eat Well July 26, 2022 Note is unsecured, accrues interest at a rate of 1.87% per annum, and matures July 25, 2024. As of September 30, 2023, the balance of the Eat Well July 26, 2022 Note is $35,000. The Company has accrued interest of $798 as of September 30, 2023.

On July 12, 2022, Sapientia entered into a Loan Agreement with Eat Well Investment Group, Inc. (the “Eat Well July 12, 2022 Note”) in the amount of $25,000. The Eat Well July 12, 2022 Note is unsecured, accrues interest at a rate of 1.87% per annum, and matures July 11, 2024. As of September 30, 2023, the balance of the Eat Well July 12, 2022 Note is $25,000. The Company has accrued interest of $585 as of September 30, 2023.

On March 15, 2022, Sapientia entered into a Loan Agreement with Eat Well Investment Group, Inc. (the “Eat Well March 2022 Note”) in the amount of $100,000. The Eat Well March 2022 Note is unsecured, accrues interest at a rate of 1.87% per annum, and matures March 14, 2024. As of September 30, 2023, the balance of the Eat Well March 2022 Note is $100,000. The Company has accrued interest of $2,966 as of September 30, 2023.

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On February 1, 2022, Sapientia entered into a Loan Agreement with Eat Well Investment Group, Inc. (the “Eat Well February 2022 Note”) in the amount of $100,000. The Eat Well February 2022 Note is unsecured, accrues interest at a rate of 1.87% per annum, and matures February 1, 2024. As of September 30, 2023, the balance of the Eat Well February 2022 Note is $100,000. The Company has accrued interest of $3,110 as of September 30, 2023.

On January 20, 2022, Sapientia entered into a Loan Agreement with Eat Well Investment Group, Inc. (the “Eat Well January 2022 Note”) in the amount of $20,000. The Eat Well January 2022 Note is unsecured, accrues interest at a rate of 1.87% per annum, and matures January 20, 2024. As of September 30, 2023, the balance of the Eat Well January 2022 Note is $20,000. The Company has accrued interest of $653 as of September 30, 2023.

On December 24, 2021, Sapientia entered into a Loan Agreement with Eat Well Investment Group, Inc. (the “Eat Well December 2021 Note”) in the amount of $100,000. The Eat Well December 2021 Note is unsecured, accrues interest at a rate of 1.87% per annum, and matured December 24, 2023. As of September 30, 2023, the balance of the Eat Well December 2021 Note is $100,000. The Company has accrued interest of $3,427 as of September 30, 2023. As of the date of this filing, the parties are working on an amendment for an extension.

On November 10, 2021, Sapientia entered into a Loan Agreement with Eat Well Investment Group, Inc. (the “Eat Well November 2021 Note”) in the amount of $50,000. The Eat Well Novemer 2021 Note is unsecured, accrues interest at a rate of 1.87% per annum, and matured November 10, 2023. As of September 30, 2023, the balance of the Eat Well November 2021 Note is $50,000. The Company has accrued interest of $1,790 as of September 30, 2023. As of the date of this filing, the parties are working on an amendment for an extension.

On August 18, 2021, Sapientia entered into a Loan Agreement with Eat Well Investment Group, Inc. (the “Eat Well August 2021 Note”) in the amount of $250,000. The Eat Well August 2021 Note is unsecured, accrues interest at a rate of 1.87% per annum, and matured August 18, 2023. As of September 30, 2023, the balance of the Eat Well August 2021 Note is $250,000. The Company has accrued interest of $9,900 as of September 30, 2023. As of the date of this filing, the parties are working on an amendment for an extension.

The following table summarizes notes payable balances as of September 30, 2023:

SCHEDULE OF NOTES PAYABLE BALANCES

|  | Current |  |  | Noncurrent |  |  |  |  |  | Accrued |
|  | Portion |  |  | Portion |  |  | Total |  |  | Interest |
|  | Current Portion |  |  | Non current Portion |  |  | Note Payable Total |  |  | Accrued Interest |
Perfect Day Note |  | $ | 3,150,000 |  |  | $ | - |  |  | $ | 3,150,000 |  |  | $ | - |
Danam Note |  |  | 200,000 |  |  |  | - |  |  |  | 200,000 |  |  |  | - |
Eat Well June 2023 Note |  |  | 1,150,000 |  |  |  | - |  |  |  | 1,150,000 |  |  |  | - |
Eat Well February 2023 Note |  |  | - |  |  |  | 25,000 |  |  |  | 25,000 |  |  |  | 350 |
Eat Well September 2022 Note |  |  | 50,000 |  |  |  | - |  |  |  | 50,000 |  |  |  | 1,104 |
Eat Well July 26, 2022 Note |  |  | 35,000 |  |  |  | - |  |  |  | 35,000 |  |  |  | 798 |
Eat Well July 12, 2022 Note |  |  | 25,000 |  |  |  | - |  |  |  | 25,000 |  |  |  | 585 |
Eat Well March 2022 Note |  |  | 100,000 |  |  |  | - |  |  |  | 100,000 |  |  |  | 2,966 |
Eat Well February 2022 Note |  |  | 100,000 |  |  |  | - |  |  |  | 100,000 |  |  |  | 3,110 |
Eat Well January 2022 Note |  |  | 20,000 |  |  |  | - |  |  |  | 20,000 |  |  |  | 653 |
Eat Well December 2021 Note |  |  | 100,000 |  |  |  | - |  |  |  | 100,000 |  |  |  | 3,427 |
Eat Well November 2021 Note |  |  | 50,000 |  |  |  | - |  |  |  | 50,000 |  |  |  | 1,790 |
Eat Well August 2021 Note |  |  | 250,000 |  |  |  | - |  |  |  | 250,000 |  |  |  | 9,900 |
|  | $ | 5,230,000 |  |  | $ | 25,000 |  |  | $ | 5,255,000 |  |  | $ | 24,683 |

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NOTE 12 – STOCKHOLDERS’ EQUITY

Designation of Series B Preferred Stock

Effective June 26, 2023 the Company’s Board of Directors issued a Certificate of Designation, which designated 787,754 shares of the Company’s authorized and unissued preferred stock as convertible Series B Preferred Stock at a par value of $0.00001 per share.

2023 1:15 Stock Split

Effective June 21, 2023 the Company executed a 1:15 reverse stock split for stockholders of record on that date. This was executed to comply with the Nasdaq Listing Rule 5550(a)(2) to have the price of the stock above $1.

2022 Equity Compensation Awards

Effective September 1, 2022, the Board of Directors and Compensation Committee of the Company, with the approval of each of the following officers, agreed to reduce the annual cash compensation payable to Suren Ajjarapu, the Company’s Chief Executive Officer; Prashant Patel, the Company’s President and Chief Operating Officer and Janet Huffman, the Company’s former Chief Financial Officer, in an effort to conserve cash.

In lieu of the reduced cash salary payable to each officer, the Board and Compensation Committee agreed to issue such officers shares of the Company’s common stock equal to the amount of reduced cash salary, divided by the closing sales price of the Company’s common stock on the NASDAQ Capital Market on August 31, 2022, the date approved by the Board of Directors. The total amount of shares of common stock issued on August 31, 2022 to the officers was 5,460.

The shares of common stock issuable to the officers vested at the rate of 1/4th of such shares on each of September 30, 2022, October 31, 2022, November 30, 2022, and December 31, 2022, subject to each applicable Officer’s continued service to the Company on such dates and subject to the restricted stock award agreements entered into as evidence of such awards.

Separately, certain employees of the Company agreed to reduce their cash salaries by an aggregate of $37,000 in consideration for an aggregate of 2,126 shares of the Company’s restricted common stock, with the same vesting terms as the officer shares discussed above.

Effective on August 31, 2022, the Board of Directors approved the issuance of 3,635 shares of common stock of the Company to each independent member of the Board of Directors, for services rendered to the Company during fiscal 2022, which shares were valued at $63,250, based on the closing sales price of the Company’s common stock on the date approved by the Board of Directors. The shares vested at the rate of 1/4th of such shares immediately on the grant date, and 1/4th of such shares on each of October 1, 2022, January 1, 2023 and April 1, 2023, subject to each applicable independent director’s continued service to the Company on such dates.

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All of the awards discussed above were issued under the Company’s Second Amended and Restated 2019 Equity Incentive Plan (the “Plan”) and all restricted stock awards discussed above were evidenced by Restricted Stock Grant Agreements.

NOTE 13 – PREFUNDED AND PRIVATE PLACEMENT WARRANTS

On October 4, 2022 the Company entered into a securities purchase agreement (the “Purchase Agreement”) with a certain institutional investor (the “Purchaser”) which provided for the sale and issuance by the Company of (i) the Company’s common stock (the “Common Stock”), (ii) pre-funded warrants (the “Pre-Funded Warrants”) and (iii) warrants (the “Private Placement Warrants” and, together with the Shares and the Pre-Funded Warrants, the “Securities”). The Private Placement Warrants were sold in a concurrent private placement (the “Private Placement”), exempt from registration pursuant to Section 4(a)(2) and/or Rule 506 of the Securities Act of 1933, as amended (the “Securities Act”).

Simultaneously with the closing of the stock placement, the investor pre-purchased 40,116 Private Warrants at a purchase price of $17.25 per warrant. The Pre-Funded Warrants are immediately exercisable into one share of common stock per warrant, have an exercise price of $0.00015 per share, and may be exercised at any time until all of the Pre-Funded Warrants are exercised in full. On January 4, 2023, the investor exercised the 40,116 warrants for a purchase price of $6.02. The investor was issued the shares on this date. Each Private Warrant has an exercise price of $22.50 per share, will be exercisable following Stockholder Approval, which was obtained in December 2022, and will expire on the fifth anniversary of the date on which the Private Warrants become exercisable. The Private Warrants contain standard adjustments to the exercise price including for stock splits, stock dividend, rights offerings and pro rata distributions, and include full ratchet anti-dilutive rights in the event the Company issues shares of Common Stock or Common Stock equivalents within fifteen months of the initial exercise date, with a value less than the then exercise price of such Private Warrants, subject to certain customary exceptions, and further subject to a minimum exercise price of $3.48 per share. The Private Warrants also include certain rights upon ‘fundamental transactions’ as described in the Private Warrants, including allowing the holders thereof to require that the Company re-purchase such Private Warrants at the Black Scholes Value of such securities.

NOTE 14 – WARRANTS

For the nine-month period ended September 30, 2023, no warrants were granted, and none expired. For the nine-month period ended September 30, 2023, 40,116 prefunded warrants and 1,795 granted warrants to purchase shares of common stock were exercised for a total purchase price of $1,622. See Note 13- Prefunded and Private Placement Warrants for further description.

The Company uses the Black-Scholes pricing model to estimate the fair value of stock-based awards on the date of the grant.

There was no compensation cost related to the warrants for the nine months ended September 30, 2023, and 2022, respectively.

The Company’s outstanding and exercisable warrants As of September 30, 2023, are presented below:

SCHEDULE OF OUTSTANDING AND EXERCISABLE WARRANTS

|  | Number Outstanding |  |  | Weighted Average Exercise Price |  |  | Contractual Life In Years |  |  | Intrinsic Value |
Warrants outstanding as of December 31, 2022 |  |  | 179,331 |  |  |  | 22.50 |  |  |  | 4.72 |  |  |  | 6,731 |
Warrants granted |  |  |  |  |  |  | - |  |  |  | - |  |  |  | - |
Warrants forfeited, expired, cancelled |  |  |  |  |  |  | - |  |  |  | - |  |  |  | - |
Warrants exercised |  |  | (1,795 | ) |  |  | 22.50 |  |  |  | - |  |  |  | - |
Warrants outstanding as of September 30, 2023 |  |  | 177,536 |  |  |  | 22.50 |  |  |  | 4.02 |  |  |  | 0 |
Warrants exercisable as of September 30, 2023 |  |  | 177,536 |  |  |  | 22.50 |  |  |  | 4.02 |  |  |  | - |

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NOTE 15 – OPTIONS

The Company maintains stock option plans under which certain employees are awarded option grants based on a combination of performance and tenure. The stock option plans provide for the grant of up to 155,556 shares, and the Company’s Second Amended and Restated 2019 Equity Incentive Plan provides for automatic increases in the number of shares available under such plan (currently 133,333 shares) on April 1st of each calendar year, beginning in 2021 and ending in 2029 (each a “Date of Determination”), in each case subject to the approval and determination of the administrator of the plan (the Board of Directors or Compensation Committee) on or prior to the applicable Date of Determination, equal to the lesser of (A) ten percent (10%) of the total shares of common stock of the Company outstanding on the last day of the immediately preceding fiscal year and (B) such smaller number of shares as determined by the administrator. The administrator as a result of the annual meeting shareholder vote increased the number of shares available to grant to employees under the 2019 incentive plan by 2 million. The administrator did not approve an increase in the number of shares covered under the plan as of April 1, 2022.

For the nine-month period ended September 30, 2023, 603 options to purchase shares were granted, 140 options to purchase shares were forfeited and 2,319 options expired. For the nine-month period ended September 30, 2023, no options to purchase shares of common stock were exercised.

Total compensation cost related to stock options granted was $25,978 and $67,439 for the nine-months ended September 30, 2023, and 2022, respectively.

The following table represents stock option activity for the nine-month period ended September 30, 2023:

SCHEDULE OF STOCK OPTION ACTIVITY

|  | Number Outstanding |  |  | Weighted- Average Exercise Price |  |  | Weighted- Average Contractual Life in Years |  |  | Intrinsic Value |
Options outstanding as of December 31, 2022 |  |  | 19,708 |  |  | $ | 66.00 |  |  |  | 3.92 |  |  | $ | - |
Options exercisable as of December 31, 2022 |  |  | 17,167 |  |  |  | 66.30 |  |  |  | 3.89 |  |  |  | - |
Options granted |  |  | 603 |  |  |  | 6.08 |  |  |  | 4.51 |  |  |  | 59,976 |
Options forfeited |  |  | (140 | ) |  |  | 82.33 |  |  |  | 2.00 |  |  |  | - |
Options expired |  |  | (2,319 | ) |  |  | 89.88 |  |  |  | 0.08 |  |  |  | - |
Options exercised |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Options outstanding As of September 30, 2023 |  |  | 17,852 |  |  |  | 66.10 |  |  |  | 3.95 |  |  |  | 112,073 |
Options exercisable As of September 30, 2023 |  |  | 17,252 |  |  |  | 62.43 |  |  |  | 2.99 |  |  |  | 52,097 |

NOTE 16 – CONTINGENCIES

Studebaker Defense Group, LLC

In July 2020, the Company’s wholly-owned subsidiary, IPS, entered into an agreement with Studebaker Defense Group, LLC (“Studebaker”) wherein IPS would pay Studebaker a down payment of $550,000 and Studebaker would deliver 180,000 boxes of nitrile gloves by August 14, 2020. IPS wired the $550,000 to Studebaker, but to date, Studebaker has not delivered the gloves or provided a refund of the deposit. In December 2020, we filed a complaint against Studebaker in Florida state court, Case No. 20-CA-010118 in the Circuit Court for the Thirteenth Judicial Circuit in Hillsborough County, for among other things, breach of contract. Studebaker did not answer the complaint, nor did counsel for Studebaker file an appearance. Accordingly, in February 2021, the Company filed for a default judgment; however, on March 22, 2021, counsel for Studebaker filed an appearance and shortly thereafter filed a motion totion vacate the default judgment and dismiss the complaint on jurisdictional grounds. The court granted Studebaker’s motion to set aside the default judgment but denied the motion to dismiss. The Company has filed several pretrial motions; the next step in the litigation after the pre-trial motions are resolved will be a motion for summary judgment. The Company believes it will prevail on the merits but cannot determine the timing of the judgment or the amount ultimately collected. At June 30, 2021, the $500,000 was recorded as Loss on Inventory Investment. The Company won this case but has not collected any settlement yet, another lawsuit has been filed to collect.

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On April 13, 2023, a settlement was reached in the Studebaker Defense Group LLC. and IPS legal case. The court found in favor of IPS and ordered Studebaker Defense Group, LLC. to pay $550,000 IPS. The payments were to commence on May 1, 2023 and continue monthly in 17 installments until the full amount is paid in full but as of the filing date, no payment has been received by IPS.

Sandwave Group Dsn Bhd and Crecom Burj Group SDN BHD

In August 2020, IPS entered into an agreement with Sandwave Group Dsn Bhd (“Sandwave”), wherein IPS would pay Sandwave a down payment of $581,250 and Sandwave’s supplier, Crecom Burj Group SDN BHD (“Crecom”), would deliver 150,000 boxes of nitrile gloves within 45 days. IPS wired the $581,250 to Sandwave, which in turn wired the purchase price to Crecom, which Crecom accepted; however, to date, Crecom has not delivered the nitrile gloves. IPS demanded return of its $581,250 and Crecom acknowledged that IPS was entitled to a refund. As of February 2021, Crecom had not returned any funds and IPS filed a complaint against Crecom in Malaysia: Case No. WA-22NCC-55-02/2021 in the High Court of Malaysia at Kuala Lumpur in the Federal Territory, Malaysia for the Malaysian equivalent of breach of contract. On September 1, 2022 counsel for Crecom informed the court that Crecom had been wound up on August 23, 2022; under Section 471 of the Malaysian Companies Act 2016, the suit filed by IPS was stayed until leave of the court is obtained to proceed. Given this new information regarding Crecom the Company has decided at this time to stop its pursuit of this lawsuit until or unless additional information is obtained by counsel for IPS. At June 30, 2021, the $581,250 was recorded as Loss on Inventory Investment.

GSG PPE, LLC

On November 19, 2021, IPS filed a complaint against GSG PPE, LLC (“GSG”) and Gary Waxman (“Waxman”), the owner, alleging three counts of breach of contract for a purchase agreement, a promissory note, and a personal guaranty. Collectively, the company alleges that GSG and Waxman have materially breached all three contracts. In late 2020, GSG and IPS executed a valid initial contract setting the terms of a business transaction. GSG failed to pay IPS approximately 75% of the amount owed to IPS. GSG acknowledged it owed the money and executed a promissory note in favor of IPS in the amount of $630,000 which matured on September 30, 2021. The note provides for attorney fees and interest in addition to the $630,000. Waxman’s personal guaranty confirmed that GSG owed IPS $630,000. On September 30, 2021, the $630,000 was recorded as Bad Debt Expense. A settlement was entered into between the parties in June 2022, whereby GSG and Waxman agreed to pay $743,000 which included attorney fees and interest, which is required to be paid to the Company in monthly installments over 17 months. The Company received additional monthly installment payments as part of the agreement through January 2023. As of September 30, 2023, and through the date of this filing, the Company has not received the monthly installment payments due to the Company from GSG since January of 2023.

NOTE 17 – SEGMENT REPORTING

Operating segments are defined as the components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision makers in deciding how to allocate resources and in assessing performance. The Company’s chief operating decision makers direct the allocation of resources to operating segments based on the profitability, cash flows, and growth opportunities of each respective segment.

The Company classifies its business interests into reportable segments which are:

| ● | Trxade, Inc. - Web based pharmaceutical marketplace platform – B2B sales
| ● | IPS - Integra Pharma, LLC - Licensed wholesaler of brand, generic and non-drug products – B2B sales
| ● | Superlatus – holds Sapientia’s intellectual property for advanced food extrusion technology and The Urgent Company – Manufacturer of ice cream that is animal product-free, vegan, lactose-free, and made with plants – B2B sales
| ● | Unallocated - Other – corporate overhead expense, discontinued operations and Bonum Health, LLC.

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SCHEDULE OF BUSINESS INTERESTS INTO REPORTABLE SEGMENTS

Nine months ended September 30, 2023 |  | Trxade, Inc. |  |  | IPS |  |  | Superlatus |  |  | Unallocated |  |  | Total |
Revenue |  | $ | 4,663,756 |  |  | $ | 1,237,731 |  |  | $ | - |  |  | $ | 18,299 |  |  | $ | 5,919,786 |
Gross Profit |  |  | 4,663,756 |  |  |  | 165,553 |  |  |  | (756 | ) |  |  | 18,299 |  |  |  | 4,846,852 |
Segment Assets |  |  | - |  |  |  | - |  |  |  | 18,029,077 |  |  |  | 3,624,766 |  |  |  | 21,653,843 |
Segment Profit (Loss) |  |  | 1,570,796 |  |  |  | (388,900 | ) |  |  | (440,268 | ) |  |  | (6,869,237 | ) |  |  | (6,127,609 | )
Cost of Sales |  |  | - |  |  |  | 1,072,178 |  |  |  | 756 |  |  |  | - |  |  |  | 1,072,934 |

Nine months ended September 30, 2022 |  | Trxade, Inc. |  |  | IPS |  |  | Superlatus |  |  | Unallocated |  |  | Total |
Revenue |  | $ | 4,001,670 |  |  | $ | 3,949,772 |  |  | $ | - |  |  | $ | 42,363 |  |  | $ | 7,993,805 |
Gross Profit |  |  | 4,001,670 |  |  |  | (41,462 | ) |  |  | - |  |  |  | 42,363 |  |  |  | 4,002,571 |
Segment Assets |  |  | 1,853,474 |  |  |  | 454,783 |  |  |  | - |  |  |  | 2,172,060 |  |  |  | 4,480,317 |
Segment Profit (Loss) |  |  | 1,320,138 |  |  |  | (493,203 | ) |  |  | - |  |  |  | (3,433,774 | ) |  |  | (2,606,839 | )
Cost of Sales |  |  | - |  |  |  | 3,991,234 |  |  |  | - |  |  |  | - |  |  |  | 3,991,234 |

NOTE 18 – SUBSEQUENT EVENTS

Stock Swap Agreement

Upon conclusion of the Stock Swap Transaction and Merger (see Note 1), the remaining operations within TRxADE will only consist of legacy Superlatus operations. Management has determined that Superlatus will be the accounting acquirer in the merger based upon a detailed analysis of the relevant U.S. GAAP guidance and the facts and circumstances outlined above. Consequently, Superlatus will apply acquisition accounting to the assets and liabilities of TRxADE that are acquired or assumed upon the consummation of the merger. The historical financial statements of Superlatus for periods ended prior to the consummation of the merger will reflect only the operations and financial condition of Superlatus. Subsequent to the consummation of the merger, the financial statements of Superlatus will include the combined operations and financial condition of Superlatus and remaining TRxADE operations.

As a condition and inducement to Superlatus’s willingness to enter into the Merger Agreement, on June 28, 2023, Suren Ajjarapu and Prashant Patel (the “Principal Stockholders”) entered into an agreement with the Company (the “Stock Swap Agreement”), pursuant to which, the Company will transfer all of the shares or membership interest of a variety of operating subsidiaries currently owned by the Company to Principal Stockholders, in exchange for Suren Ajjarapu to surrender 85,000 shares of the common stock of the Company and Prashant Patel to surrender 81,666 shares of the common stock of the Company (the “Stock Swap Transaction”). The closing of the Stock Swap Transaction shall take place simultaneously with the approval by the Company’s stockholders of the conversion of the Series B preferred Stock into common stock. As of the date of this filing, the stockholders have not approved the conversion.

As discussed in Note 1 and Note 3, the closing conditions were not met and the Merger Agreement was amended on January 8, 2024.

Spero Asset Purchase Agreement

On October 4, 2023, the Company entered into an all-cash asset purchase agreement to acquire the assets of Spero Foods, Inc. for $500,000. As of the date of this filing, the Company is still working to complete the purchase.

Unregistered Sales of Equity Securities Hudson Global Ventures, LLC

On October 4, 2023, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with Hudson Global Ventures, LLC (the “Purchaser”), pursuant to which the Company sold, in a private placement, (i) 290 shares of the Company’s Series C Convertible Preferred Stock (the “Series C Preferred Stock”), stated value $1,000 per share (the “Stated Value”), at a price of $1,000 per share, convertible into shares (the “Conversion Shares”) of the Company’s common stock, par value $0.00001 per share (the “Common Stock”) and (ii) a warrant (the “Warrant”) to purchase up to 41,193 shares of Common Stock. As additional consideration for entering into the Purchase Agreement, the Company issued to the Purchaser an additional 40,000 shares of Common Stock to be delivered to the Purchaser at the closing (the “Commitment Shares,” together with the Series C Preferred Shares and the Warrant, the “Securities”). The offering resulted in gross proceeds to the company of $290,000.

Non-recourse funding agreement

On October 25, 2023, the Company entered into a non-recourse funding agreement with a third-party for the purchase and sale of future receivables (the “Receivables Agreement”). Pursuant to the Receivables Agreement, the third-party agreed to fund the Company $1,200,000 to purchase $1,728,000 of future receivables. Under the funding agreement, the third-party receives a priority interest in the receivables of Trxade Inc. The Company also paid $60,000 as a one-time origination fee in connection with the Receivables Agreement. The Receivables Agreement also allows for the third-party funder to file UCCs securing their interest in the receivables and includes customary events of default.

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

General Information

This information should be read in conjunction with the interim unaudited financial statements and the notes thereto included in this Quarterly Report on Form 10-Q, and the audited financial statements and notes thereto and “Part II. Other Information – Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations”, contained in our Annual Report on Form 10-K for the year ended December 31, 2022, filed with the SEC on March 27, 2023 (the “Annual Report”).

Certain capitalized terms used below and otherwise defined below, have the meanings given to such terms in the footnotes to our unaudited consolidated financial statements included above under “Part I – Financial Information” – “Item 1. Financial Statements”.

Please see the section entitled “Glossary” in our Annual Report for a list of abbreviations and definitions used throughout this Report.

Unless the context requires otherwise, references to the “Company,” “we,” “us,” “our,” and “Trxade”, refer specifically to TRxADE HEALTH, INC. and its consolidated subsidiaries. References to “Q1”, “Q2”, “Q3”, and “Q4” refer to the first, second, third, and fourth quarter, respectively, of the applicable year. Unless otherwise stated or the context otherwise requires, comparisons from one period to another are to the same period of the prior fiscal year.

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.

Summary of The Information Contained in Management’s Discussion and Analysis of Financial Condition and Results of Operations

Our Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) is provided in addition to the accompanying consolidated financial statements and notes to assist readers in understanding our results of operations, financial condition, and cash flows. MD&A is organized as follows:

| ● | Company Overview. Discussion of our business and overall analysis of financial and other highlights affecting us, to provide context for the remainder of MD&A.
| ● | Recent Events. Summary of material transactions occurring during the three and nine months ended September 30, 2023.
| ● | Liquidity and Capital Resources. An analysis of changes in our consolidated balance sheets and cash flows and discussion of our financial condition.
| ● | Results of Operations. An analysis of our financial results comparing the three and nine months ended September 30, 2023, and 2022.
| ● | Critical Accounting Policies. Accounting estimates that we believe are important to understanding the assumptions and judgments incorporated in our reported financial results and forecasts.

Company Overview

TRxADE HEALTH is a technology-enabled health services platform. Through our subsidiary companies we focus on digitalizing the retail pharmacy and health services experience by optimizing drug procurement, the prescription journey, access to physicians in the patient’s home and patient engagement in the U.S.

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 are able to fulfill orders on our platform in real-time and provide pharmacies with cost-saving payment terms and next-day delivery capabilities in unrestrictive states under the Model State Pharmacy Act and Model Rules of the National Association of Boards of Pharmacy (Model Act). We have expanded significantly since 2015 and now have around 14,100+ registered members on our sales platform.

The Company changed its name on June 1, 2021, from “Trxade Group, Inc” to “TRxADE HEALTH, INC.”. TRxADE HEALTH, INC. owns 100% of Trxade, Inc., Integra Pharma Solutions, LLC (formerly Pinnacle Tek, Inc.), Alliance Pharma Solutions, LLC, Community Specialty Pharmacy, LLC, Bonum Health, LLC, Superlatus, Inc. and The Urgent Company, Inc. Trxade, Inc. is a web-based market platform that enables commerce among healthcare buyers and sellers of pharmaceuticals, accessories and services.

On September 27, 2023, the Company entered into an Asset Purchase Agreement (“APA”) with The Urgent Company, Inc. (“TUC”) and its wholly owned subsidiaries, pursuant to which, the Company was assigned certain inventory and property and equipment for consideration of a $3,150,000 promissory note. This acquisition is expected to enhance the Company’s production of sustainable food products and enable the expansion of market share.

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On July 14, 2023, the Company entered into an Amended and Restated Agreement and Plan of Merger (the “Merger Agreement”) with Superlatus, Inc., a U.S.-based holding company of food products and distribution capabilities (“Superlatus”) and Foods Merger Sub, Inc., a Delaware corporation and wholly owned subsidiary of the Company (“Merger Sub”).

On July 31, 2023 (the “Closing Date”), the Company completed its acquisition of Superlatus in accordance with the terms and conditions of the Merger Agreement (the “Merger”), pursuant to which the Company acquired Superlatus by way of a merger of the Merge Sub with and into Superlatus, with Superlatus being a wholly owned subsidiary of the Company and the surviving entity in the Merger.

Under the terms of the Merger Agreement, at the closing of the Merger (the “Closing”), shareholders of Superlatus received in aggregate 136,441 shares of common stock of the Company, representing 19.9% of the total issued and outstanding common stock of the Company after the consummation of the Merger and 306,855 shares of Company’s Series B Preferred Stock, par value $0.00001 per share (the “Series B Preferred Stock”), with a conversion ratio of 100 to one. Upon consummation of the Merger, the Company will continue to trade under the current ticker symbol “MEDS.”

As a condition and inducement to Superlatus’ willingness to enter into the Merger Agreement, on June 28, 2023, Suren Ajjarapu and Prashant Patel (the “Principal Stockholders”) entered into an agreement with TRxADE (the “Stock Swap Agreement”), pursuant to which, TRxADE will transfer all of the shares or membership interest of a variety of operating subsidiaries currently own by TRxADE to Principal Stockholders, in exchange for Suran Ajjarapu to surrender 85,000 share of common stock of TRxADE and Prashant Patel to surrender 81,666 shares of the common stock of TRxADE (the “Stock Swap Transaction”). The closing of the Stock Swap Transaction shall take place simultaneously with the approval of TRxADE stockholders of the conversion of the Series B preferred Stock into common stock. The closing of the Stock Swap Transaction is subject to the simultaneous condition that the Merger is successfully closed. As of the date of this filing, TRxADE stockholders have not approved the conversion.

In connection with the Merger, on July 31, 2023, certain Superlatus shareholders as of immediately prior to the Merger, and certain directors and officers of TRxADE as of immediately prior to the Merger, entered into lock-up agreements with the Company, pursuant to which each such stockholder will be subject to a 360 day lockup on the sale or transfer of shares of common stock or securities nued into or exercisable for or exchangeable for common stock held by each such stockholder at the closing of the Merger (the “Lock-up Agreements”).

In connection with the Merger, effective one (1) business day immediately prior to the Closing Date (the “MEDS Rights Record Date”), the Company issued to the shareholders of the Company as of the MEDS Rights Record Date, including the independent directors who are entitled to certain amount of common stock of the Company in connection with their 2023 annual compensation and regardless of whether the common stock has been issued or vest before the MEDS Rights Records Date (collectively, the “MEDS Rights Shareholders”) a non-transferrable right to receive one share of common stock of the Company at no cost (the “MEDS Rights”), with seven (7) MEDS Rights issued per share of common stock of the Company held as of the MEDS Rights Record Date, conditioned upon their execution of a Registration Rights Agreement. Such issuances will be made in reliance on the exemption from registration pursuant to Section 3(a)(9) or Section 4(a)(2) of the Securities Act, Regulation D under the Securities Act promulgated thereunder, and corresponding provisions of state securities or “blue sky” laws. The MEDS Rights are not actionable or transferable until registration; provided they become transferable one year after the date of the Merger if no registration has occurred. As of the date of this filing, no shares of common stock were issued to MEDS Rights Shareholders.

On January 20, 2023, the Company entered into Membership Interest Purchase Agreements to sell 100% of the outstanding membership interests of Alliance Pharma Solutions, LLC and Community Specialty Pharmacy, LLC. The transactions closed on August 22, 2023.

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, the created entity relating to the relationship, a Delaware limited liability company, was formed in February 2022, and was owned 51% by the Company and 49% by Exchange Health (“SOSRx”).

On February 4, 2023, and effective as of February 1, 2023, the Company entered into a Voluntary Withdrawal and Release Agreement, (the “Release Agreement”). Pursuant to the Release Agreement, (a) the Company voluntarily withdrew as a member of SOSRx pursuant to the terms of the Operating Agreement of SOSRx, (b) the Company’s interests in SOSRx were terminated; (c) the Company’s promissory note in favor of SOSRx was canceled; and (d) the parties agreed that no earn out payments will be due.

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TRxADE Inc

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 72 national and regional pharmaceutical suppliers providing over 120,000 branded and generic drugs, including over the counter drugs and drugs available for purchase by pharmacists. We generate revenue from these services by charging a transaction fee to the seller of the products for sales conducted on 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. Our core service has the goal of bringing the nation’s independent pharmacies and accredited national suppliers of pharmaceuticals together to provide efficient and transparent buying and selling opportunities.

As of September 30, 2023, the TRxADE platform increased its registered users by 870 or 6.17% compared to September 30, 2022. For the nine months ended September 30, 2023, new registrations were 196 compared to 296 for the same period in 2022. As of September 30, 2023, total registered users were approximately 14,900+ compared to 14,100+ at September 30, 2022.

The table below summarizes the key metrics that management evaluated in relation to the activity on the Trxade platform for the nine-month period ended September 30, 2023 compared to the same period in 2022:

Processed Sales Volume |  |  | 19 | % |  |
Total Revenue |  |  | 21 | % |  |
Registered Users |  |  | 6 | % |  |

Integra Pharma Solutions, LLC

Integra Pharma Solutions, LLC (“Trxade Prime”) is a licensed wholesaler of brand, generic and non-drug products to customers. Trxade Prime takes orders for products, creates invoices for each order and recognizes revenue at the time the customer receives the product. We utilize “just in time” inventory and drop ship partnerships to ship orders to customers. The focus of Trxade Prime is to be the pharmaceutical supplier of choice for healthcare organizations of all sizes. Our expertise in the distribution of products extends to all healthcare markets including government organizations, hospitals, clinics, and independent pharmacies nationwide.

Community Specialty Pharmacy, LLC

Community Specialty Pharmacy, LLC (“CSP”) is a licensed retail pharmacy. CSP was founded in 2010 with a goal of providing customer care at a level above and beyond anything the market had experienced before. CSP has carved a niche in the competitive independent pharmacy industry with its patient-driven approach. As discussed below, we have started a process to explore strategic alternatives for CSP, as well as our other business-to-consumer (B2C) subsidiaries.

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Alliance Pharma Solutions, LLC

Alliance Pharma Solutions, LLC, a.k.a. DelivMeds, (“APS”) was established in 2018 as a digital option to traditional prescription delivery. APS is currently being rebranded and the digital technology continues to be developed. APS has generated no revenue and we continue to incur significant technology expenses. As discussed above, we entered into a Membership Purchase Agreement in January of 2023 to sell 100% of the outstanding membership interests of Alliance Pharma Solutions, LLC and Community Specialty Pharmacy, LLC. The sale closed on August 22, 2023. The financial results of APS and CSP are presented in discontinued operations on the Consolidated Balance Sheets and Consolidated Statements of Operations.

Bonum Health, LLC

Our Bonum Health, LLC (“Bonum”) operations were acquired in October of 2019. Bonum is a digital healthcare technology platform focused on making healthcare affordable, accessible and convenient through Telehealth services. Patients can use the Bonum Health mobile app or website to access board-certified medical providers, for non-emergent services. As of May 2022, Bonum also announced agreements to offer telehealth veterinary services. Additional services also available include Men’s and Women’s Health, Dermatology, Pediatrics and Ophthalmology in the comfort of their home or from anywhere. These services can be affordably accessed by the under-insured, non-insured and under-served communities seeking access to essential healthcare services. For employers, Bonum provides Telehealth solutions allowing employers to provide convenient and affordable health coverage to their employees without requiring health insurance. Our Bonum health subsidiary provides affordable access to medical professionals in the patient’s home. As discussed below, we have started a process to explore strategic alternatives for Bonum, as well as our other business-to-consumer (B2C) subsidiaries.

SOSRx, LLC

On February 15, 2022, the Company entered into a relationship with Exchange Health, LLC. On February 4, 2023, a voluntary withdrawal agreement was signed by both parties.

Superlatus, Inc.

On July 31, 2023, the Company merged with Superlatus, Inc. (see above), a U.S.-based holding company of food products and distribution capabilities. With its subsidiary, Sapientia, Inc. (“Sapientia”), a food tech business, Superlatus is a diversified food technology company with distribution capabilities and systems to optimize food security and population health via innovative Consumer Packaged Goods (“CPG”) products, agritech, foodtech, plant-based proteins and alt-proteins. Superlatus provides industry-leading processing and forming technologies that create high nutrition, high taste, and textured foods.

The Urgent Company, Inc.

The Urgent Company and its consumer brands focus on creating sustainable, animal-free products.

Recent Events

Nasdaq Listing Rule 5550(b)

As previously disclosed in the Current Report on Form 8-K, filed by the Company with the SEC on August 1, 2022, on July 29, 2022, the Company received a letter from Nasdaq notifying the Company that it was not in compliance with the minimum $2,500,000 stockholders’ equity requirement in Nasdaq Listing Rule 5550(b)(1) (the “Rule”) for continued listing on the Nasdaq Capital Market, and did not meet the alternative listing requirements under Nasdaq Listing Rule 5550(b). On October 17, 2022, Nasdaq granted the Company’s request for an extension until January 25, 2023, to regain compliance with this requirement.

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On January 30, 2023, the Company received a delist determination letter from Nasdaq advising the Company that Nasdaq had determined that the Company did not meet the terms of the extension. Specifically, the Company did not complete its proposed transactions and was unable to file a Current Report on Form 8-K by January 25, 2023, evidencing compliance with the Rule.

On February 6, 2023, the Company submitted a hearing request to the Nasdaq Hearings Panel (the “Panel”), which request stayed any delisting action by Nasdaq at least until the hearing process concludes and any extension granted by the Panel expires.

A hearing before the Panel was held on March 23, 2023, at which the Company presented a plan to regain compliance with the Rule that included an underwritten public offering of Company securities of up to $15,000,000 and expense reductions. On April 5, 2023, the Company received a letter from Nasdaq advising the Company that the Panel was granting the Company’s request for an exception to permit the continued listing of the Company’s stock on the Nasdaq Capital Market while it completes a public offering of its Company securities up to $15,000,000. The Panel’s grant of the Company’s request for continued listing is subject to the conditions that (i) on or before April 15, 2023, the Company must advise the Panel on the status of the filing of an S-1 registration statement for the offering, and (ii) on or before June 21, 2023, the Company must demonstrate compliance with the Rule.

The Company received a notice from the Panel that the Panel had granted the Company an extension until July 31, 2023, to demonstrate compliance with the $2,500,000 minimum stockholders’ equity requirement, as outlined in the Nasdaq’s listing rule 5550(b)(1). As a result of the Merger as described below, the Company now has stockholders’ equity above the minimum stockholders’ equity requirement for continued listing of $2,500,000.

Liquidity and Capital Resources

Cash

Cash was $34,031 as of September 30, 2023, compared to $1,094,891 as of December 31, 2022. The decrease in cash was mainly due to the increased operating expenses as a result of the Merger and the TUC acquisition, partially offset by cash generated from increased revenues. We expect that our future available capital resources will consist primarily of cash generated from operations, remaining cash balances, borrowings, and additional funds raised through sales of debt and/or equity securities.

Liquidity

Cash, current assets, current liabilities, short term debt and working capital at the end of each period were as follows:

|  | September 30, 2023 |  |  | December 31, 2022 |  |  | Change |  |  | Percent Change |
Cash |  | $ | 34,031 |  |  | $ | 1,094,891 |  |  | $ | (1,060,860 | ) |  |  | (97 | )%
Current assets (excluding cash) |  |  | 5,513,798 |  |  |  | 988,230 |  |  |  | 4,515,568 |  |  |  | 452 | %
Current liabilities (excluding short term debt) |  |  | 3,862,289 |  |  |  | 1,980,124 |  |  |  | 1,882,165 |  |  |  | 95 | %
Short term debt (notes payable related party) |  |  | 5,230,000 |  |  |  | 166,667 |  |  |  | 5,063,333 |  |  |  | 3,038 | %
Working capital |  |  | (3,544,460 | ) |  |  | (53,670 | ) |  |  | (3,490,790 | ) |  |  | (6,504 | )%

Our principal sources of liquidity have historically been cash provided by operations, sales of equity, and borrowings under various debt arrangements. Our principal uses of cash have been for operating expenses, technology development, and acquisitions. We anticipate these uses will continue to be our principal sources of, and uses of, cash in the future.

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The decrease in cash as of September 30, 2023, compared to December 31, 2022, was primarily due to increases in professional fees and accounting and legal expense of $525,479 and $215,409, respectively, from the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022. Increased expenses were mainly the result of the Merger and the TUC acquisition. Additionally, technology expense increased as a result of an increase in the primary vendor’s rates. The effect of these increases was partially offset by decreases in wage and salary expense as a result of the departure of two members of management during the nine months ended September 30, 2023.

Liquidity Outlook cash explanation

Cash Requirements

Our primary objectives for the remainder of 2023 are to take steps in an effort to increase our client base and operational revenue on our Trxade Inc. and Trxade Prime platforms, and to complete potential strategic transactions of our business-to-consumer subsidiaries, which may include a potential sale, spin-off, fund raising, combination or other strategic transaction, and also include the winding down of such entities. There can be no assurance that our operations will generate significant positive cash flow, or that additional funds will be available to us, through borrowings or otherwise, on favorable terms if required in the future, or at all. We may also raise additional funding in the future through the sale of equity.

We estimate our operating expenses and working capital requirements for the next 12 months to be approximately as follows:

Projected Expenses from October 2023 to September 2024 |  | Amount |
General and administrative (1) |  | $ | 8,000,000 |
Total |  | $ | 8,000,000 |

(1) Includes estimated wages and payroll, legal and accounting, marketing, rent and web development.

We will still require additional funding in the future to support our operations.

Cash Flows

The following table summarizes our Consolidated Statements of Cash Flows for the following periods:

|  | Nine Months Ended September 30, |  |  |  |  |  | Percent |
|  | 2023 |  |  | 2022 |  |  | Change |  |  | Change |
Net loss from continuing operations |  | $ | (2,004,581 | ) |  | $ | (1,983,743 | ) |  | $ | (20,838 | ) |  |  | (1 | )%
Net cash provided by (used in): |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Net cash used in operating activities from continuing operations |  |  | (612,184 | ) |  |  | (2,132,883 | ) |  |  | 1,520,699 |  |  |  | 73 | %
Net cash used in (provided by) operating activities from discontinued operations |  |  | (593,893 | ) |  |  | (623,096 | ) |  |  | 29,203 |  |  |  | 5 | %
Operating Activities |  |  | (1,206,077 | ) |  |  | (2,755,979 | ) |  |  | 1,549,902 |  |  |  | 56 | %
Net cash used in investing activities from continuing operations |  |  | 5,546 |  |  |  | (312,902 | ) |  |  | 318,448 |  |  |  | (102 | )%
Net cash provided by investing activities from discontinued operations |  |  | 68,737 |  |  |  | - |  |  |  | 68,737 |  |  |  | 100 | %
Investing Activities |  |  | 74,283 |  |  |  | (312,902 | ) |  |  | 387,185 |  |  |  | 124 | %
Net cash used in (provided by) financing activities from continuing operations |  |  | 570,934 |  |  |  | 268,018 |  |  |  | 302,916 |  |  |  | 113 | %
Net cash used in financing activities from discontinued operations |  |  | (500,000 | ) |  |  | - |  |  |  | (500,000 | ) |  |  | 100 | %
Financing Activities |  |  | 70,934 |  |  |  | 268,018 |  |  |  | (197,084 | ) |  |  | (74 | )%
Net change in cash |  | $ | (1,060,860 | ) |  | $ | (2,800,863 | ) |  | $ | 1,740,003 |  |  |  | 62 | %

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Cash used in operations for the nine months ended September 30, 2023, was $(1,206,077), compared to cash used in operations for the nine months ended September 30, 2022, of $(2,755,979). The decrease in cash used in operations for the nine months ended September 30, 2023, compared to September 30, 2022, was mainly due to increased professional fees and accounting and legal expense for the comparable periods as a result of the Merger and the purchase of TUC, partially offset by decreased wage and salary expense due to the departure of two members of management during the nine months ended September 30, 2023.

Cash provided by investing activities for the nine months ended September 30, 2023, was $74,283 and cash used in investing activities was $(312,902) for the nine months ended September 30, 2022. The decrease in cash provided by investing activities is related to the discontinuation of SOSRx.

Cash provided by financing activities for the nine months ended September 30, 2023, was $70,934 compared to cash provided by financing activities for the nine months ended September 30, 2022, which was $268,018. The decrease was mainly due to a decrease in the net balance of the contingent funding liability.

Results of Operations

The following selected consolidated financial data should be read in conjunction with the unaudited consolidated financial statements and the notes to these statements included above.

Three Month Period Ended September 30, 2023, compared to Three Month Period Ended September 30, 2022

|  | Three Months Ended September 30, |  |  |  |  |  | Percentage |
|  | 2023 |  |  | 2022 |  |  | Change |  |  | Change |
Revenues |  | $ | 2,058,028 |  |  | $ | 2,055,803 |  |  | $ | 2,225 |  |  |  | 0 | %
Cost of sales |  |  | 353,450 |  |  |  | 683,375 |  |  |  | (329,925 | ) |  |  | (48 | )%
Gross profit |  |  | 1,704,578 |  |  |  | 1,372,428 |  |  |  | 332,150 |  |  |  | 24 | %
Operating expenses: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Technology, research & development |  |  | 410,612 |  |  |  | 238,577 |  |  |  | 172,035 |  |  |  | 72 | %
Wages and salary expense |  |  | 698,030 |  |  |  | 849,371 |  |  |  | (151,341 | ) |  |  | (18 | )%
Accounting and legal |  |  | 408,957 |  |  |  | 191,007 |  |  |  | 217,950 |  |  |  | 114 | %
Professional fees |  |  | 418,294 |  |  |  | 82,710 |  |  |  | 335,584 |  |  |  | 406 | %
Other general and administrative (less stock-based compensation expense) |  |  | 610,074 |  |  |  | 200,310 |  |  |  | 409,764 |  |  |  | 205 | %
Warrants and options expense |  |  | 3,760 |  |  |  | 29,216 |  |  |  | (25,456 | ) |  |  | (87 | )%
Total operating expenses |  |  | 2,549,727 |  |  |  | 1,591,191 |  |  |  | 958,536 |  |  |  | 60 | %
Change in fair value of warrant liability |  |  | 925,320 |  |  |  | - |  |  |  | 925,320 |  |  |  | 100 | %
Interest, net |  |  | (251,778 | ) |  |  | (121,711 | ) |  |  | (130,067 | ) |  |  | 107 | %
Gain (loss) on disposal of asset |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 0 | %
Net loss from operations |  | $ | (171,607 | ) |  | $ | (340,474 | ) |  | $ | 168,867 |  |  |  | (50 | )%
Loss on discontinued operations |  |  | (3,353,507 | ) |  |  | (188,268 | ) |  |  | (3,165,239 | ) |  |  | (1,681 | )%
Net loss attributable to TRxADE Health, Inc. |  |  | (3,525,114 | ) |  |  | (503,003 | ) |  |  | (3,022,111 | ) |  |  | (601 | )%
Net loss attributable to non-controlling interests |  |  | - |  |  |  | (25,739 | ) |  |  | 25,739 |  |  |  | 100 | %

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Our revenues for the three months ended September 30, 2023, were from the Trxade platform and Integra Pharma Solutions. Revenues increased by $2,225, compared to the same period ended September 30, 2022. Revenue generated by Trxade Inc from platform sales and Trxade Prime increase approximately 0% for the three months ended September 30, 2023 compared to the same period ended September 30, 2022.

For the three-month period ended September 30, 2023, cost of goods sold and gross profit were $353,450 and $1,704,578 respectively, and $683,375 and $1,372,428, respectively for the same period in 2022. Gross profit as a percentage of sales was 83% for the three months ended September 30, 2023, compared to 67% for the three months ended September 30, 2022.

Accounting and legal expenses increased $217,950 for the three months ended September 30, 2023 to $408,957 compared to $191,007 for the comparable period in 2022 and professional fees increased $335,584 to $418,294 compared to $82,710 for the comparable period in 2022. These increases were due to the Merger and purchase of TUC. General and administrative expenses (less stock-based compensation expense) increased $409,764 for the three months ended September 30, 2023, to $610,074 compared to $200,310 for the comparable period in 2022. The increase was mainly due to increased operations as a result of the Merger. Technology, research and development increased $172,035 for the three months ended September 30, 2023 to $410,612 compared to $238,577 for the comparable period in 2022. The increase was mainly due to increased billing rates from the primary vendor. These increases were partially offset by decreases in wages and salary expense as a result of the departure of two members of management as well as the effects of other cost-cutting efforts.

We had interest expense, net, of $251,778 for the three months ended September 30, 2023, compared to interest expense, net, of $121,711 for the three months ended September 30, 2022. The increase is due to the increase balance of the accounts receivable advances as a result of advances taken in 2023 and 2022.

We recognized a gain on the change in the fair value of the warrant liability of $925,320 for the three months ended September 30, 2023. As the warrants were issued in October 2022, no gain or loss was recognized during the three months ended September 30, 2022.

During the three months ended September 30, 2023, the Company generated a net loss from operations of $171,607 compared to a net loss from operations of $340,474 for the three months ended September 30, 2023. The increase in net loss is mainly driven by the increased operating costs as a result of the Merger, partially offset by an increase in gross profit.

Net loss from discontinued operations increased $3,165,239 to a net loss of $3,353,507 for the three months ended September 30, 2023, compared to a net loss from discontinued operations of $188,268 for the three months ended September 30, 2022. The increase was due to the disposal of APS and CSP during the three months ended September 30, 2023.

Nine Month Period Ended September 30, 2023, compared to Three Month Period Ended September 30, 2022

|  | Nine Months Ended September 30, |  |  |  |  |  | Percentage |
|  | 2023 |  |  | 2022 |  |  | Change |  |  | Change |
Revenues |  | $ | 5,919,786 |  |  | $ | 7,993,805 |  |  | $ | (2,074,019 | ) |  |  | (26 | )%
Cost of sales |  |  | 1,072,934 |  |  |  | 3,991,234 |  |  |  | (2,918,300 | ) |  |  | (73 | )%
Gross profit |  |  | 4,846,852 |  |  |  | 4,002,571 |  |  |  | 844,281 |  |  |  | 21 | %
Operating expenses: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Technology, research & development |  |  | 1,010,374 |  |  |  | 690,875 |  |  |  | 319,499 |  |  |  | 46 | %
Wages and salary expense |  |  | 2,077,362 |  |  |  | 2,949,386 |  |  |  | (872,024 | ) |  |  | (30 | )%
Accounting and legal |  |  | 782,495 |  |  |  | 567,086 |  |  |  | 215,409 |  |  |  | 38 | %
Professional fees |  |  | 782,286 |  |  |  | 256,807 |  |  |  | 525,479 |  |  |  | 205 | %
Other general and administrative (less stock-based compensation expense) |  |  | 1,238,924 |  |  |  | 1,324,691 |  |  |  | (85,767 | ) |  |  | (6 | )%
Warrants and options expense |  |  | 25,978 |  |  |  | 67,439 |  |  |  | (41,461 | ) |  |  | (61 | )%
Total operating expenses |  |  | 5,917,419 |  |  |  | 5,856,284 |  |  |  | 61,135 |  |  |  | 1 | %
Change in fair value of warrant liability |  |  | (443,308 | ) |  |  | - |  |  |  | (443,308 | ) |  |  | (100 | )%
Interest, net |  |  | (490,706 | ) |  |  | (132,230 | ) |  |  | (358,476 | ) |  |  | 271 | %
Loss on disposal of asset |  |  | - |  |  |  | 2,220 |  |  |  | (2,220 | ) |  |  | (100 | )%
Net loss from operations |  | $ | (2,004,581 | ) |  | $ | (1,983,743 | ) |  | $ | (20,838 | ) |  |  | 1 | %
Loss on discontinued operations |  |  | (4,123,028 | ) |  |  | (623,096 | ) |  |  | (3,499,932 | ) |  |  | 562 | %
Net loss attributable to TRxADE Health, Inc. |  | $ | (6,127,609 | ) |  |  | (2,546,913 | ) |  |  | (3,580,696 | ) |  |  | (141 | )%
Net loss attributable to non-controlling interests |  |  | - |  |  |  | (59,926 | ) |  |  | 59,926 |  |  |  | 100 | %

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Our revenues for the nine months ended September 30, 2023, were from the Trxade platform and Integra Pharma Solutions. Revenues decreased by $2,074,019 compared to the same period ended September 30, 2022. Trxade Inc revenue generated from platform sales and Trxade Prime decreased approximately 26% for the nine months ended September 30, 2023 compared to the same period ended September 30, 2022. The decrease in revenue for Trxade Prime is related to decreased sales, see “Company Overview - Integra Pharma Solutions”.

For the nine-month period ended September 30, 2023, cost of goods sold and gross profit were $1,072,934 and $4,846,852 respectively, and $3,991,234 and $4,002,571, respectively for the same period in 2022. Gross profit as a percentage of sales was 82% for the nine months ended September 30, 2023, compared to 50% for the nine months ended September 30, 2022.

Accounting and legal expenses increased $215,409 for the nine months ended September 30, 2023 to $782,495 compared to $567,086 for the comparable period in 2022 and professional fees increased $525,479 to $782,286 compared to $256,807 for the comparable period in 2022. These increases were due to the Merger and purchase of TUC. Technology, research and development increased $319,499 for the nine months ended September 30, 2023 to $1,010,374 compared to $690,875 for the comparable period in 2022. The increase was mainly due to increased billing rates from the primary vendor. These increases were partially offset by decreases in wages and salary expense as a result of the departure of two members of management.

We had interest expense, net of $490,706 for the nine months ended September 30, 2023, compared to interest expense of $132,230 for the nine months ended September 30, 2022. The reason for the increase was the increase in the balance of the contingent funding liability due to the accounts receivable advances taken in 2023 and 2022, off set by interest income from the GSG legal settlement (see discussion above under “Recent Events”).

During the nine months ended September 30, 2023, the Company recognized a loss the change in the fair value of warrants of $443,308. As the warrants were issued in October 2022, no gain or loss was recognized during the three months ended September 30, 2022.

Net loss from operations increased $20,838 to a net loss of $2,004,581 for the nine months ended September 30, 2023, compared to a net loss of $1,983,743 for the nine months ended September 30, 2022. The increase in net loss is mainly due to an increase in gross profit, partially offset but increases in spending related to the Merger and purchase of TUC.

Net loss from discontinued operations increased $3,499,932 to a net loss of $4,123,028 for the nine months ended September 30, 2023, compared to a net loss from discontinued operations of $623,096 for the nine months ended September 30, 2022.

Critical Accounting Policies

Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of net sales and expenses for each period. The following represents a summary of our critical accounting policies, defined as those policies that we believe are the most important to the portrayal of our financial condition and results of operations and that require management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effects of matters that are inherently uncertain.

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Revenue Recognition

In general, the Company accounts for revenue recognition in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 606, “Revenue from Contracts with Customers.”

Trxade, Inc. provides an online web-based buying and selling platform for licensed pharmaceutical wholesalers (“Suppliers”) to sell products and services to licensed pharmacies (“Customers”). Trxade, Inc. charges Suppliers a transaction fee, a percentage of the purchase price of the prescription drugs and other products sold through its website service. Fulfillment of confirmed orders, including delivery and shipment of prescription drugs and other products, is the responsibility of the Supplier, not Trxade, Inc. Trxade, Inc. holds no inventory and assumes no responsibility for the shipment or delivery of any products or services from our website. Trxade, Inc. considers itself an agent for this revenue stream and as such, reports revenue as net. Step One: Identify the contract with the Customers – Trxade, Inc.’s Terms and Use “Agreement,” which outlines the terms and conditions between Trxade, Inc. and the Supplier, is acknowledged and agreed to by the Supplier. Collection is probable based on a credit evaluation of the Supplier. Step Two: Identify the performance obligations in the Agreement – Trxade, Inc. provides the Supplier access to the online website, ability to upload catalogs of products and Dashboard access to review status of inventory as well as posted and processed orders. The Agreement requires the Supplier to post a catalog of pharmaceuticals on the platform, deliver the pharmaceuticals and, upon shipment, remit the stated platform fee. Step Three: Determine the transaction price – the Agreement outlines the fee, which is based on the type of product: generic, brand or non-drug. There are no discounts for volume transactions or early payment of invoices. Step Four: Allocate the transaction price – the Agreement details the fee. There is no difference between contract price and “stand-alone selling price”. Step Five: Recognize revenue when or as the entity satisfies a performance obligation – revenue is recognized upon Supplier’s fulfillment of the applicable order.

Integra Pharma Solutions, LLC (“Trxade Prime”) is a licensed wholesaler of brand, generic and non-drug products to Customers. Integra LLC takes orders for products, creates invoices for each order and recognizes revenue at the time the Customer receives the product. Customer returns are not material. Step One: Identify the contract with the Customer – Integra LLC requires that an application and a credit card for payment be completed by the Customer prior to the first order. Each transaction is evidenced by an order form sent by the Customer and an invoice for the product is sent by Integra LLC. The collection is probable based on the application and credit card information provided prior to the first order. Step Two: Identify the performance obligations in the contract – Each order is distinct and evidenced by the shipping order and invoice. Step Three: Determine the transaction price – The consideration is variable if product is returned. The variability is determined based on the return policy of the product manufacturer. There are no sales or volume discounts. The transaction price is determined at the time of the order evidenced by the invoice. Step Four: Allocate the transaction price – There is no difference between contract price and “stand-alone selling price”. Step Five: Recognize revenue when or as the entity satisfies a performance obligation – The Revenue is recognized when the Customer receives the product.

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Bonum, LLC is a telehealth company that provides services to its subscribers. We derive our revenues from subscription-based services through our mobile application on a business-to-business or business-to-customer models. Business-to-business – Organizations contract with Bonum to provide tele-health services to their members on a per-member basis. Organizations are invoiced by Bonum, and revenue is recognized as services are provided each month. Bonum also generates revenues through business-to-customer relationships, where customers can download and subscribe to the Bonum mobile application on their digital device. Subscriptions can be monthly, annual or per encounter. Revenue is recognized as it is earned. Deferred revenue is recorded for unearned subscriptions income and recognized in the financial statements in the period earned.

Stock-Based Compensation

The Company accounts for stock-based compensation to employees in accordance with ASC 718, “Compensation-Stock Compensation”. ASC 718 requires companies to measure the cost of employee services received in exchange for an award of equity instruments, including stock options, based on the grant date fair value of the award and to recognize it as compensation expense over the period the employee is required to provide service in exchange for the award, usually the vesting period. Stock option forfeitures are recognized at the date of employee termination. Effective January 1, 2019, the Company adopted ASU 2018-07 for the accounting of share-based payments granted to non-employees for goods and services.

Recently Issued Accounting Standards

For more information on recently issued accounting standards, see “NOTE 1 – ORGANIZATION AND BASIS OF PRESENTATION”, to the Notes to Consolidated Financial Statements included herein under “PART I. - ITEM 1. FINANCIAL STATEMENTS”.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Because we are a smaller reporting company, we are not required to provide the information required by this Item.

ITEM 4. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including our Chief Executive Officer and our Chief Financial Officer (our principal executive officer and principal accounting/financial officer), Mr. Ajjarapu and Mr Patel, respectively, we conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, as of the end of the period covered by this Quarterly Report. Based on this evaluation, our Chief Executive Officer and our Chief Financial Officer concluded that as of September 30, 2023, our disclosure controls and procedures were not effective to provide reasonable assurance that information required to be disclosed in our reports filed with the SEC pursuant to the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC and that such information is accumulated and communicated to our management, including our CEO and CFO, as appropriate, to allow timely decisions regarding required disclosures.

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As a result of the formative stage of our development, the Company has not fully implemented the necessary internal controls. The matters involving internal controls and procedures that the Company’s management considered to be material weaknesses under the standards of the Committee of Sponsoring Organizations of the Treadway Commission (COSO) were: (1) insufficient written policies and procedures for accounting and financial reporting with respect to the requirements and application of accounting principles generally accepted in the United States of America (“U.S. GAAP”) and SEC disclosure requirements; and (2) ineffective controls over period end financial disclosure and reporting processes.

Management believes that the material weaknesses set forth above did not have an effect on the Company’s financial results reported herein. We are committed to improving our financial organization. As part of this commitment, we have increased our personnel resources and technical accounting expertise as we develop the internal and financial resources of the Company. In addition, the Company will prepare and implement sufficient written policies and checklists which will set forth procedures for accounting and financial reporting with respect to the requirements and application of U.S. GAAP and SEC disclosure requirements.

Management believes that preparing and implementing sufficient written policies and checklists will remedy the following material weaknesses (i) insufficient written policies and procedures for accounting and financial reporting with respect to the requirements and application of U.S. GAAP and SEC disclosure requirements; and (ii) ineffective controls over period end financial close and reporting processes.

We have improved our financial organization as we have increased our personnel resources and technical accounting expertise. We will continue to monitor and evaluate the effectiveness of our internal controls and procedures and our internal controls over financial reporting on an ongoing basis.

Limitations on Effectiveness of Controls and Procedures

In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs.

Changes in Internal Control over Financial Reporting

There has not been any change in our internal control over financial reporting that occurred during the quarter ended September 30, 2023, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

In the ordinary course of business, we may become a party to lawsuits involving various matters. The impact and outcome of litigation, if any, is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business. We believe the ultimate resolution of any such current proceeding will not have a material adverse effect on our continued financial position, results of operations or cash flows.

Such current litigation or other legal proceedings are described in, and incorporated by reference in, this “ITEM 1. LEGAL PROCEEDINGS” of this Quarterly Report on Form 10-Q from, “PART I – ITEM 1. FINANCIAL STATEMENTS” in the Notes to Consolidated Financial Statements in “NOTE 8 – CONTINGENCIES”. The Company believes that the resolution of currently pending matters will not individually or in the aggregate have a material adverse effect on our financial condition or results of operations. However, assessment of the current litigation or other legal claims could change in light of the discovery of facts not presently known to the Company or by judges, juries or other finders of fact, which are not in accord with management’s evaluation of the possible liability or outcome of such litigation or claims.

Additionally, the outcome of litigation is inherently uncertain. If one or more legal matters were resolved against the Company in a reporting period for amounts in excess of management’s expectations, the Company’s financial condition and operating results for that reporting period could be materially adversely affected.

ITEM 1A. RISK FACTORS

There have been no material changes from the risk factors previously disclosed in Part I, Item 1A of the Company’s Annual Report on Form 10-K for the year ended December 31, 2022, filed with the SEC on March 27, 2023 (the “Form 10-K”), under the heading “Risk Factors”, except as set forth below, and investors should review the risks provided in the Form 10-K and below, prior to making an investment in the Company. The business, financial condition and operating results of the Company can be affected by a number of factors, whether currently known or unknown, including but not limited to those described in the Form 10-K for the year ended December 31, 2022, under “Risk Factors”, and below, any one or more of which could, directly or indirectly, cause the Company’s actual financial condition and operating results to vary materially from past, or from anticipated future, financial condition and operating results. Any of these factors, in whole or in part, could materially and adversely affect the Company’s business, financial condition, operating results and stock price.

Risks Relating to Our Business:

We need additional capital which may not be available on commercially acceptable terms, if at all, which creates substantial doubt about our ability to continue as a going concern.

Our historical financial statements have been prepared under the assumption that we will continue as a going concern. As of September 30, 2023, the Company had an accumulated deficit of $21.5 million. We have limited financial resources, As of September 30, 2023, we had a working capital deficit of $3.5 million and a cash balance of approximately $34,000. We will need to raise additional capital or secure debt funding to support on-going operations. The sources of this capital are expected to be the sale of equity and debt, which may not be available on favorable terms, if at all, and may, if sold, cause significant dilution to existing stockholders. If we are unable to access additional capital moving forward, it may hurt our ability to grow and to generate future revenues, our financial position, and liquidity. These matters, when considered in the aggregate, raise substantial doubt about the Company’s ability to continue as a going concern for a reasonable period of time, which is defined as within one year after the date that our condensed financial statements are issued. The financial herein do not contain any adjustments to reflect the possible future effects on the classification of assets or the amounts and classification of liabilities that might result from the outcome of this uncertainty. The doubt regarding our potential ability to continue as a going concern may adversely affect our ability to obtain new financing on reasonable terms or at all. Additionally, if we are unable to continue as a going concern, our stockholders may lose some or all of their investment in the Company.

Additional financing may not be available to us when needed or, if available, it may not be obtained on commercially reasonable terms. If we are not able to obtain the necessary additional financing on a timely or commercially reasonable basis, we will be forced to delay or scale down some or all of our development activities (or perhaps even cease the operation of our business). Our access to additional capital may be negatively affected by future recessions, downturns in the economy or the markets as a whole, or inflation.

We have no commitments for any additional financing and such commitments may not be obtained on favorable terms, if at all. Any additional equity financing will be dilutive to our stockholders, and debt financing, if available, may involve restrictive covenants with respect to dividends, raising future capital, and other financial and operational matters. If we are unable to obtain additional financing as needed, we may be required to reduce the scope of our operations or our anticipated expansion, which could have a material adverse effect on us.

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Our industry and the broader US economy have experienced higher than expected inflationary pressures in 2022 and the first half of 2023, related to continued supply chain disruptions, labor shortages and geopolitical instability. Should these conditions persist our business, results of operations and cash flows could be materially and adversely affected.

The first three quarters of 2022 and the first three quarters of 2023 have seen significant increases in the costs of certain materials, products and shipping costs, as a result of availability constraints, supply chain disruption, increased demand, labor shortages associated with a fully employed US labor force, high inflation and other factors. Supply and demand fundamentals have been further aggravated by disruptions in global energy supply caused by multiple geopolitical events, including the ongoing conflict between Russia and Ukraine. Service, materials and shipping costs have also increased accordingly with general supply chain and inflation issues seen throughout the United States leading to increased operating costs. Recent supply chain constraints and inflationary pressures may continue to adversely impact our operating costs and may negatively impact our ability to procure and ship products in a timely and cost-effective manner, if at all, which could result in reduced margins and lack of products and, as a result, our business, financial condition, results of operations and cash flows could be materially and adversely affected.

Upon the occurrence of an event of default under our Receivables Agreement, our cash flows may be adversely affected.

On June 27, 2023, March 14, 2023, June 27, 2022 and September 14, 2022, the Company entered into non-recourse funding agreements with the same third-party funder for the purchase and sale of future receivables (the “Receivables Agreements”), Pursuant to the Receivables Agreements, the third-party agreed to fund the Company on June 27, 2022 $550,000 to purchase $792,000 of future receivables; and fund the Company again on September 14, 2022 $275,000 to purchase $396,000 of future receivables, again on March 14, 2023 $875,000 to purchase $1,224,000 and again on June 27, 2023 $1,250,000 to purchase $1,800,000 of future receivables. Under the Receivables Agreements, the third-party receives a priority interest in the receivables of Trxade Inc. The Company also paid $62,500, $42,500, $27,500, and $15,000 as origination fees in connection with the Receivables Agreements. The Receivables Agreements also allows for the third-party funder to file UCCs securing their interest in the receivables and includes customary events of default,

Upon the occurrence of an event of default under the Receivables Agreement, we are required to pay the third-party funder 100% of future receivables equal to the entire purchased amount. While the Receivables Agreement is in place, we are prohibited from selling any other receivables. As a result, if an event of default occurs under the Receivables Agreement, 100% of our sales revenue would be required to be paid until such time as the amount owed under the Receivables Agreement is paid in full. If this were to occur, our cash flows would be adversely affected and we may not have sufficient liquidity to pay our debt obligations and expenses, may be forced to raise additional funds which may not be available on favorable terms, if at all, and may be forced to curtail certain of our business activities, any of which may cause the value of our securities to decline in value.

Risks Relating to our Securities:

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

Our common stock was approved for listing on The Nasdaq Capital Market under the symbol “MEDS”, in February 2020. On July 29, 2022, the Company received a letter from The Nasdaq Stock Market LLC (“Nasdaq”) notifying us that we are not in compliance with the minimum stockholders’ equity requirement for continued listing on the Nasdaq Capital Market. Nasdaq Listing Rule 5550(b)(1) requires companies listed on the Nasdaq Capital Market to maintain stockholders’ equity of at least $2,500,000. In the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2022, we reported stockholders’ equity of $1,356,578, which is below the minimum stockholders’ equity required for continued listing pursuant to Nasdaq Listing Rule 5550(b)(1) (the “Rule”). Nasdaq gave us until September 12, 2022 to submit to Nasdaq a plan to regain compliance, and we submitted a compliance plan prior to that deadline.

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We submitted the plan to regain compliance in a timely manner, and on October 17, 2022, Nasdaq advised the Company that it has determined to grant the Company an extension to regain compliance with the Rule.

The terms of the extension are as follows: on or before January 25, 2023, the Company must complete certain contemplated transactions which the Company has advised Nasdaq will allow it to re-meet the requirements of the Rule (including the public sale of $1.75 million of common stock (or pre-funded warrants), which transaction was completed on October 7, 2022), and opt for one of the two following alternatives to evidence compliance with the Rule: Alternative 1, completion of a transaction or event that enabled the Company to satisfy the stockholders’ equity requirement for continued listing, and disclosure of that event, along with certain other information, in a public filing with the SEC, including that as of the date of the report, the Company believes it has regained compliance with the stockholders’ equity requirement and a disclosure stating that Nasdaq will continue to monitor the Company’s ongoing compliance with the stockholders’ equity requirement; or Alternative 2, completion of a transaction or event that enabled the Company to satisfy the stockholders’ equity requirement for continued listing, and disclosure of that event, along with certain other information, in a public filing with the SEC, including pro forma adjustments and a pro forma balance sheet must evidence compliance with the Rule, and disclosure that the Company believes it has regained compliance with the stockholders’ equity requirement and a disclosure stating that Nasdaq will continue to monitor the Company’s ongoing compliance with the stockholders’ equity requirement. Additionally, in either case the Company is required to disclose that if at the time of its next periodic report, the Company does not evidence compliance, that it may be subject to delisting.

Regardless of which alternative the Company chooses, if the Company fails to evidence compliance upon filing its next periodic report with the SEC and Nasdaq, the Company may be subject to delisting. In the event the Company does not satisfy these terms, Nasdaq will provide written notification that its securities will be delisted. At that time, the Company may appeal Nasdaq’s determination to a Hearings Panel.

There is also no guarantee that we will be able to maintain our listing on The Nasdaq Capital Market for any period of time by perpetually satisfying Nasdaq’s continued listing requirements. Our failure to continue to meet these requirements may result in our securities being delisted from Nasdaq.

Among the conditions required for continued listing on The Nasdaq Capital Market, Nasdaq requires us to maintain at least $2.5 million in stockholders’ equity or $500,000 in net income over the prior two years or two of the prior three years. As discussed above of June 30, 2022, September 30, 2022 and December 31, 2022, our stockholders’ equity was below $2.5 million and we did not otherwise meet the net income requirements described above, and as such, we are not currently in compliance with Nasdaq’s continue listing standards. If we fail to timely remedy our compliance with the applicable requirements, our stock may be delisted.

Additional requirements we must meet to continue our listing on The Nasdaq Capital Market include the requirement that we maintain a stock price over $1.00 per share.

Even if we demonstrate compliance with the requirements of Nasdaq, we will have to continue to meet other objective and subjective listing requirements to continue to be listed on The Nasdaq Capital Market. Delisting from The Nasdaq Capital Market could make trading our common stock more difficult for investors, potentially leading to declines in our share price and liquidity. Without a Nasdaq Capital Market listing, stockholders may have a difficult time getting a quote for the sale or purchase of our stock, the sale or purchase of our stock would likely be made more difficult, and the trading volume and liquidity of our stock could decline. Delisting from The Nasdaq Capital Market could also result in negative publicity and could also make it more difficult for us to raise additional capital. The absence of such a listing may adversely affect the acceptance of our common stock as currency or the value accorded by other parties. Further, if we are delisted, we would also incur additional costs under state blue sky laws in connection with any sales of our securities. These requirements could severely limit the market liquidity of our common stock and the ability of our stockholders to sell our common stock in the secondary market. If our common stock is delisted by Nasdaq, our common stock may be eligible to trade on an over-the-counter quotation system, such as the OTCQB Market or the OTC Pink market, where an investor may find it more difficult to sell our stock or obtain accurate quotations as to the market value of our common stock. In the event our common stock is delisted from The Nasdaq Capital Market, we may not be able to list our common stock on another national securities exchange or obtain quotation on an over-the counter quotation system.

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

Recent Sales of Unregistered Securities

On January 6, 2023, an investor exercised 601,740 “pre-funded warrants” for an aggregate purchase price of $6.02 and was issued 601,740 shares of common stock on that date. The terms of these warrants were previously described in our Current Report on Form 8-K dated October 4, 2022.

In the first quarter of 2023, we issued 50,000 shares of common stock to White Lion Capital, LLC as the “commitment shares” pursuant to the terms of a Common Stock Purchase Agreement dated September 7, 2022, as described in our Current Report on Form 8-K dated September 7, 2022.

Under the terms of the Merger Agreement, at the closing of the Merger (the “Closing”), shareholders of Superlatus received in aggregate 136,441 shares of common stock of the Company, representing 19.9% of the total issued and outstanding common stock of the Company after the consummation of the Merger and 306,855 shares of Company’s Series B Preferred Stock, par value $0.00001 per share (the “Series B Preferred Stock”), with a conversion ratio of 100 to one.

In each case, the issuance did not involve a public offering and was made without general solicitation or general advertising, and the recipient of the shares was an accredited investor.

Purchases of Equity Securities by the Issuer and Affiliated Purchasers

The Company repurchased no shares of common stock during the first two quarters of 2023.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

None.

ITEM 5. OTHER INFORMATION

(a) During the quarter ended September 30, 2023, there was no information required to be disclosed in a report on Form 8-K which was not disclosed in a report on Form 8-K.

(b) During the quarter ended September 30, 2023, there were no material changes to the procedures by which stockholders may recommend nominees to our board of directors.

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ITEM 6. EXHIBITS

Exhibit No. |  | Description
31.1 |  | Certification of Principal Executive Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2 |  | Certification of Principal Financial Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1 |  | Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2 |  | Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS |  | Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document)
101.SCH |  | Inline XBRL Taxonomy Extension Schema Document
101.CAL |  | Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF |  | Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB |  | Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE |  | Inline XBRL Taxonomy Extension Presentation Linkbase Document
104 |  | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

* Filed herewith.

** Furnished herewith.

+ Certain information has been redacted pursuant to Item 601(a)(6) of Regulation S-K, as the disclosure of such information would constitute a clearly unwarranted invasion of personal privacy.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

| TRxADE HEALTH, INC.
| By: | /s/ Suren Ajjarapu
|  | Suren Ajjarapu
|  | Chief Executive Officer (Principal Executive Officer)
|  | Date: January 16, 2024
| By: | /s/ Prashant Patel
|  | Prashant Patel
|  | Interim Chief Financial Officer (Principal Accounting/Financial Officer)
|  | Date: January 16, 2024

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