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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 March 31, 2024

 

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
incorporation or organization)
  (I.R.S. Employer
Identification No.)
     
6308 Benjamin Rd, Suite 708
Tampa, Florida
  33634
(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 1,406,348 shares of the registrant’s common stock outstanding on June 26, 2024 and 16,049 shares of preferred stock outstanding.

 

 

 

 

 

 

TRxADE HEALTH, INC.

FORM 10-Q

For the Quarter Ended March 31, 2024

 

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 24
   
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 31
   
ITEM 4. CONTROLS AND PROCEDURES 31
   
PART II. OTHER INFORMATION 33
   
ITEM 1. LEGAL PROCEEDINGS 33
   
ITEM 1A. RISK FACTORS 33
   
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS 35
   
ITEM 3. DEFAULTS UPON SENIOR SECURITIES 35
   
ITEM 4. MINE SAFETY DISCLOSURES 35
   
ITEM 5. OTHER INFORMATION 35
   
ITEM 6. EXHIBITS 36

 

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 Annual Report for the period ending December 31, 2023, filed with the Securities and Exchange Commission (SEC) on April 22, 2024. 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.

Condensed Consolidated Balance Sheets

March 31, 2024 and December 31, 2023

(Unaudited)

 

   March 31,   December 31, 
   2024   2023 
         
ASSETS          
Current assets:          
Cash  $3,498,812   $361 
Accounts receivable, net   6,937    8,492 
Inventory   5,372    968 
Prepaid expenses   174,230    50,724 
Notes receivable   

1,300,000

    

1,300,000

 
Other receivables   9,041,465    1,224,702 
Current assets of discontinued operations   -    167,816 
Total current assets   14,026,816    2,753,063 
Property, plant and equipment, net   7,000    7,500 
Deposits   22,039    10,531 
Investments   2,500,000    - 
Operating lease right-of-use assets   183,414    191,216 
Noncurrent assets of discontinued operations   -    9,570,603 
Total assets  $16,739,269   $12,532,913 
           
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)          
Current liabilities:          
Accounts payable  $953,098   $1,497,225 
Accrued liabilities   493,398    163,521 
Other current liabilities   5,441    67,831 
Contingent funding liabilities   -    1,246,346 
Lease liability - current   32,608    32,595 
Warrant liability   1,466,842    736,953 
Current liabilities of discontinued operations   -    7,811,884 
Total current liabilities   2,951,387    11,556,355 
Lease liability, net of current portion   168,976    176,909 
Noncurrent liabilities of discontinued operations   -    257,296 
Total liabilities   3,120,363    11,990,560 
           
Commitments and contingencies   -     -  
           
Stockholders’ equity (deficit):          
Series A preferred stock, $0.00001 par value; 9,211,246 shares authorized; none issued and outstanding as of both March 31, 2024 and December 31, 2023   -    - 
Series B preferred stock, $0.00001 par value; 787,754 shares authorized; 15,759 shares issued and outstanding as of both March 31, 2024 and December 31, 2023   -    - 
Series C preferred stock, $0.00001 par value; 1,000 shares authorized; 290 shares issued and outstanding as of both March 31, 2024 and December 31, 2023   -    - 
Common stock, $0.00001 par value; 100,000,000 shares authorized; 1,406,348 and 905,008 shares issued and outstanding as of March 31, 2024 and December 31, 2023, respectively   14    9 
Additional paid-in capital   38,289,871    33,788,284 
Accumulated deficit   (24,670,979)   (33,245,940)
Total stockholders’ equity   13,618,906    542,353 
Total liabilities and stockholders’ equity  $16,739,269   $12,532,913 

 

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

 

4

 

 

TRxADE HEALTH, INC.

Condensed Consolidated Statements Of Operations

For the Three Months Ended March 31, 2024 and 2023

(Unaudited)

 

   2024   2023 
   Three Months Ended 
   March 31, 
   2024   2023 
Revenues  $-   $493,316 
Cost of sales   -    420,097 
Gross profit   -    73,219 
           
Operating expenses:          
Wage and salary expense   223,172    203,401 
Professional fees   179,553    135,954 
Accounting and legal expense   339,047    248,216 
Technology expense   53,859    43,717 
General and administrative   4,700,840    248,021 
Total operating expenses   5,496,471    879,309 
Operating loss   (5,496,471)   (806,090)
           
Non-operating income (expense):          
Change in fair value of warrant liability   (729,889)   79,891 
Interest income   62,921    4,198 
Loss on disposal of asset   (374,968)   (352,244)
Interest expense   (98,515)   (62,392)
Total non-operating expense   (1,140,451)   (330,547)
Net loss from continuing operations   (6,636,922)   (1,136,637)
Net income on discontinued operations   27,882,955    458,684 
Net income(loss)  $21,246,033   $(677,953)
           
Net loss per common share from continuing operations          
Basic  $(6.40)  $(1.69)
Diluted  $(6.40)  $(1.69)
Net income per common share from discontinued operations          
Basic  $26.89   $0.68 
Diluted  $22.01   $0.68 
Net income/(loss)          
Basic  $20.49   $(1.01)
Diluted  $16.77   $(1.01)
Weighted average common shares outstanding          
Basic   1,036,756    670,716 
Diluted   1,266,977    670,716 

 

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

 

5

 

 

TRxADE HEALTH, INC.

Condensed Consolidated Statements of Changes in Stockholders’ Equity

For the Three Months Ended March 31, 2024, and 2023

(Unaudited)

 

                                                   
   Series B   Series C   Common   Additional       Non-controlling   Total 
   Preferred Stock   Preferred Stock   Stock   Paid-in   Accumulated   Interests in   Stockholders’ 
   Shares   Amount   Shares   Amount   Shares   Amount   Capital   Deficit   Subsidiaries   Equity 
Balances 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 
Disposition of assets, related party   -    -    -    -    -    -    -    492,030    420,269    912,299 
Warrants exercised for cash   -    -    -    -    40,116    1    6    -    -    7 
Options expense   -    -    -    -    -    -    14,434    -    -    14,434 
Net loss   -    -    -    -    -    -    -    (677,953)   -    (677,953)
Balances at March 31, 2023   -   $-    -   $-    680,725   $7   $20,560,592    (19,905,459)  $-   $655,140 
                                                   
Balances at December 31, 2023   15,759   $-    290   $-    905,008   $9   $33,788,284    (33,245,940)  $-   $542,353 
Cash dividends paid   -    -    -    -    -    -    -    (12,671,072)   -         (12,671,072)
Common stock issued for services   -    -    -    -    470,482    5    4,450,914    -    -    4,450,919 
Options exercised for cash   -    -    -    -    2,371    -    9,840    -    -    9,840 
Warrants exercised for cash   -    -    -    -    28,487    -    16,567    -    -    16,567 
Options expense   -    -    -    -    -    -    24,266    -    -    24,266 
Net income   -    -    -    -    -    -    -    21,246,033    -    21,246,033 
Balances at March 31, 2024   15,759   $-    290   $-    1,406,348   $14   $38,289,871   $(24,670,979)  $-   $13,618,906 

 

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

 

6

 

 

TRxADE HEALTH, INC.

Condensed Consolidated Statements of Cash Flows

For The Three Months Ended March 31, 2024 and 2023

(Unaudited)

 

   2024   2023 
   Three Months Ended 
   March 31, 
   2024   2023 
Cash flows from operating activities:          
Net loss from continuing operations  $(6,636,922)  $(1,136,637)
Adjustments to reconcile net loss to net cash used in
operating activities:
          
Depreciation expense   500    2,821 
Options expense   24,266    14,434 
Common stock issued for services   4,450,919    63,486 
Adjustment to allowance for bad debt   -    (32,074)
Amortization of right of use assets   7,803    49,498 
Changes in operating assets and liabilities:          
Accounts receivable, net   1,555    52,761 
Prepaid expenses and deposits   (135,013)   (22,866)
Inventory   (4,404)   (6,672)
Other receivables   (7,816,763)   - 
Lease liability   (7,920)   (47,359)
Accounts payable   (544,127)   (166,887)
Accrued liabilities   329,876    (210,844)
Current liabilities   (62,390)   161,648 
Warrant liability   729,889    (79,891)
Net cash used in operating activities from continuing operations   (9,662,731)   (1,358,582)
Net cash (used in) provided by operating activities from discontinued operations   (526,942)   427,051 
Net cash used in operating activities   (10,189,673)   (931,531)
Cash flows from investing activities:          
Investment in securities   (2,500,000)   (87,072)
Net cash used in investing activities from continuing operations   (2,500,000)   (87,072)
Net cash provided by investing activities from discontinued operations   29,932,589    420,269 
Net cash provided by investing activities   27,432,589    333,197 
Cash flows from financing activities:          
Repayment of contingent liability   (1,246,346)   (143,750)
Cash dividends paid   (12,671,072)   - 
Proceeds from sale of future revenue   -    825,000 
Proceeds from exercise of warrants   16,567    7 
Proceeds from exercise of options   9,840    - 
Net cash (used in) provided by financing activities from continuing operations   (13,891,011)   681,257 
Net cash used in financing activities from discontinued operations   (5,000)   - 
Net cash (used in) provided by financing activities   (13,896,011)   681,257 
Net change in cash   3,346,905    82,923 
Cash at beginning of period   151,907    1,111,156 
Cash at end of period  $3,498,812   $1,194,079 
           
Supplemental disclosure of cash flow information:          
Cash paid for interest  $-   $- 
Cash paid for taxes  $-   $- 
           
Non-Cash Transactions          
Other receivable pursuant to disposition  $7,500,000   $- 
Insurance premium financed  $-   $224,055 
Note issued as SOSRx contribution  $-   $500,000 
Disposition of assets, related party  $-   $492,030 

 

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, as of March 31, 2024, 100% of Trxade, Inc., Integra Pharma Solutions, LLC, Bonum Health, Inc., and Bonum Health, LLC.

 

During the year ended December 31, 2023 and a portion of the quarter ended March 31, 2024, Trxade, Inc., operated 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.

 

On January 20, 2023, the Company entered into Membership Interest Purchase Agreements to sell 100% of the outstanding membership interests of the Company’s former subsidiaries, Community Specialty Pharmacy, LLC (“CSP”) and Alliance Pharma Solutions, LLC (“APS” d.b.a DelivMeds). 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 7).

 

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, the Company does not anticipate installations moving forward.

 

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.

 

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 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 then 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.”

 

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, 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 291,096 shares of the Company’s Series B Preferred Stock. As described below, in March 2024 the Company divested of its interest in Superlatus.

 

Dispositions

 

On February 16, 2024, the Company, together with Trxade, Inc., and Micro Merchant Systems, Inc. (“MMS”) entered into an asset purchase agreement (the “APA”) under which MMS agreed to purchase for cash substantially all of the assets of Trxade, Inc. On February 16, 2024, the parties consummated the closing of the transactions contemplated by the APA. Trxade, Inc. operated a web-based market platform designed to enable trading among healthcare buyers and sellers of pharmaceuticals, accessories and services. The purchase price paid at closing was $22,660,182 Pursuant to the terms and conditions of the APA, because MMS received $1,600,000 or greater in certain collections from third parties resulting from any products or services sold, or provided, by the business assets and operations acquired from Trxade, Inc. during the period ending on the four-month anniversary of the closing date, Trxade, Inc. was due an additional $7,500,000 payment from MMS. The Company received the $7,500,000 in May 2024 (see Note 19).

 

On March 5, 2024, the Company entered in a Stock Purchase Agreement (“SPA”) with Superlatus Foods Inc. (the “Buyer”). Pursuant to the SPA, the Company sold all of the issued and outstanding stock of Superlatus Inc., to the Buyer. The $1.00 purchase price for the Stock was delivered to the Company at the closing, which occurred simultaneously with the execution of the SPA. As a result of the transaction Superlatus is no longer a subsidiary of the Company, and the rights and assets of Superlatus together with various liabilities and obligations that were specific to Superlatus became rights and obligations of Buyer.

 

See Note 3 for further detail on the dispositions.

 

Basis of Presentation and Principles of Consolidation

 

The accompanying unaudited interim condensed 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, 2023, as filed with the SEC on April 22, 2024.

 

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, 2023, 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 three months ended March 31, 2024 and 2023 include the valuation of intangible assets, including goodwill, and gain (losses) on dispositions.

 

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 $1.00.

 

Recently Issued Accounting Pronouncements

 

In November 2023, the FASB issued ASU 2023-07 Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. The new guidance requires enhanced disclosure of significant expenses that are regularly reported to the chief operating decision maker and the nature of segment expense information used to manage operations. The new guidance is effective for all public companies for annual reporting periods beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. The Company will adopt the new standard in annual reporting period beginning after December 15, 2023 and is currently evaluating the impacts of the new guidance on its disclosure within the financial statements.

 

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The new guidance requires disaggregated information about the effective tax rate reconciliation and additional information on taxes paid that meet a quantitative threshold. The new guidance is effective for public companies for annual reporting periods beginning after December 15, 2024, and for non-public companies for annual reporting periods beginning after December 15, 2025, with early adoption permitted for both. The Company will adopt the new standard in annual reporting period beginning after December 15, 2025, and is currently evaluating the impacts of the new guidance on its disclosures within the consolidated 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.

 

Other Receivables

 

As of March 31, 2024 and December 31, 2023, other receivables are $9,041,465 and $1,224,702. As of March 31, 2024, other receivables included the $7,500,000 payment due from MMS related to the Trxade disposition, which was received in May 2024.

 

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 months ended March 31, 2024 and 2023.

 

Investments

 

The Company accounts for investments that it does not control using the cost method, equity method or fair value method, as applicable. Investments in companies in which the Company owns less than a 20% equity interest and where it does not exercise significant influence over the operating and financial policies of the investee are accounted for using the cost method of accounting. The Company periodically reviews the carrying value of these investments to determine if there has been an other-than-temporary decline in fair value below carrying value. A variety of factors are considered when determining if a decline in fair value below carrying value is other-than-temporary, including, among others, the financial condition and business prospects of the investee, as well as the Company’s investment intent. Cost method investments are carried at cost, which approximates or is less than fair value. Dividends received by the Company are recognized in equity (losses) earnings of affiliates, net of tax on the consolidated statements of operations.

 

On February 29, 2024, the Company’s wholly owned subsidiary Trxade, Inc. entered into a Subscription Agreement (the “Subscription Agreement”) with Lafayette Energy Corp., a Delaware corporation (“Lafayette”). Pursuant to the Subscription Agreement, Trxade, Inc. will, in two equal tranches, invest a total of up to $5,000,000 in Lafayette in exchange for up to 2,000,000 shares of Lafayette’s newly created Series A Convertible Preferred Stock, with the second tranche becoming payable only upon Trxade, Inc.’s receipt of notice that Lafayette has successfully drilled its first oil and gas well and produced at least one hundred (100) barrels of oil. Mr. Michael Peterson is a director of the Company as well as the CEO of Lafayette and a member of Lafayette’s board of directors. This relationship was disclosed to the Company’s Board of Directors and the audit committee of the Board of Directors prior to, and at the time that the terms of the Subscription Agreement and the transaction effected thereby were approved by the Board of Directors as a whole and the members of the audit committee.

 

As of March 31, 2024, the Company’s investment in Lafayette was $2,500,000. The Company determined there was no impairment necessary as of March 31, 2024.

 

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 March 31, 2024, we had 190,242 outstanding warrants to purchase shares of common stock, 15,759 shares of Series B preferred stock, 290 shares of Series C preferred stock and 23,930 options to purchase shares of common stock.

 

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

 

   2024   2023 
   Three Months Ended 
   March 31, 
   2024   2023 
Numerator:        
Net loss from continuing operations  $(6,636,922)  $(1,136,637)
Net income on discontinued operations   27,882,955    458,684 
Net income/(loss)  $21,246,033   $(677,953)
Denominator:          
Denominator for EPS – weighted average shares          
Basic   1,036,756    670,716 
Diluted   1,266,977    670,716 
Net loss per common share from continuing operations          
Basic 

$

(6.40) 

$

(1.69)
Diluted  $(6.40) 

$

(1.69)
Net income per common share from discontinued operations          
Basic  $26.89   $0.68 
Diluted  $22.01   $0.68 
Net income/(loss)          
Basic  $20.49  

$

(1.01)
Diluted  $16.77   $(1.01)

 

11

 

 

Income taxes

 

The Company’s provision for income taxes was $0 for the three months ended March 31, 2024, and $0 for the three and months ended March 31, 2023, respectively. The income tax provisions for these three-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 the 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 March 31, 2024, the Company had an accumulated deficit of $24,670,979. However, after the Company’s MMS disposition, the Company had $3,498,812 in cash. Furthermore, the Company received $7,500,000 in May 2024 pertaining to the final payment of the MMS disposition. The Company believes that its cash as of the issuance date of these consolidated financial statements will be sufficient to meet its funding requirements during the next 12 months.

 

NOTE 3 – ACQUISITIONS AND DISPOSITIONS

 

Acquisitions

 

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

 

   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   9,777,479 
Goodwill   5,129,115 
Assets acquired   15,038,637 
Accounts payable and other current liabilities   (283,548)
Purchase price payable   (350,000)
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 $4,400,000 in promissory notes (“Purchase Price”, see Note 11). Subsequent to December 31, 2023, we divested our interest in The Urgent Company, LLC

 

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:

 

   September 27, 2023 
Purchase consideration:     
Promissory note  $4,400,000 
Total purchase consideration  $4,400,000 
      
Allocation of cost of assets acquired:     
Inventory  $4,168,830 
Property and equipment   231,170 
Assets acquired   4,400,000 
Net assets acquired  $4,400,000 

 

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Dispositions and Divestitures

 

Alliance Pharma Solutions, LLC and Community Specialty Pharmacy, LLC

 

On August 22, 2023, the Company and Wood Sage, LLC (“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”). 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 months ended March 31, 2023.

 

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 year ended December 31, 2023, the Company recognized a non-cash, pre-tax loss on disposal of $3,300,225. 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.

 

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:

    Alliance
Pharma
Solutions, LLC
    Community
Specialty
Pharmacy, LLC
 
Cash   $ 1,050     $ 61,988  
Accounts receivable, net     -       101,901  
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     $ 45,586  

 

Trxade, Inc.

 

On February 16, 2024, the Company, together with Trxade, Inc., a wholly owned subsidiary of the Company, and Micro Merchant Systems, Inc. (“MMS”) entered into an asset purchase agreement (the “APA”) under which MMS agreed to purchase for cash substantially all of the assets of Trxade, Inc. On February 16, 2024, the parties consummated the closing of the transactions contemplated by the APA. Trxade, Inc. The purchase price paid at closing was $22,660,182. Subject to the terms and conditions of the APA, if, during the period beginning on the closing date and ending on the four-month anniversary of the closing date, MMS receives $1,600,000 or greater in certain collections from third parties resulting from any products or services sold, or provided, by the business assets and operations acquired from Trxade, Inc., Trxade, Inc. would receive an additional $7,500,000 payment from MMS. The Company received $7,500,000 in May 2024.

 

The Trxade, Inc. APA was accounted for a business disposition in accordance with ASC 810-40-40-3A. As of February 16, 2024, the Company no longer consolidated the assets, liabilities, revenues and expenses of Trxade, Inc. The components of the disposition are as follows:

 

      
Cash received from MMS  $22,660,182 
Other receivable from MMS   7,500,000 
Total fair value of consideration received  $30,160,182 
      
Carrying amount of assets and liabilities     
Cash  $76,821 
Accounts receivable, net   719,876 
Prepaid expenses   55,397 
Property, plant and equipment, net   45,655 
Operating lease right-of-use assets   12,277 
Accounts payable   (347,000)
Accrued liabilities   (5,269)
Other current liabilities   (26,244)
Lease liability - current   (1,556)
Notes payable, current portion   (45,000)
Lease liability, net of current portion   (10,720)
Total carrying amount of assets and liabilities   474,236 
      
Gain on disposition of business  $29,685,946 

 

The gain on disposition of business of $29,685,946 was included in income from discontinued operations, net of tax in the consolidated statements of operations.

 

Superlatus Inc.

 

On March 5, 2024, the Company entered in a Stock Purchase Agreement (“SPA”) with Superlatus Foods Inc. (the “Buyer”). Pursuant to the SPA, the Company sold all of the issued and outstanding stock (the “Stock”) of Superlatus Inc., a Delaware corporation and wholly-owned subsidiary of the Company (“Superlatus”), to the Buyer. The purchase price for the Stock was $1.00 which was delivered to the Company at the closing, which occurred simultaneously with the execution of the SPA. As a result of the transaction Superlatus is no longer a subsidiary of the Company, and the rights and assets of Superlatus together with various liabilities and obligations that were specific to Superlatus became rights and obligations of Buyer.

 

The Superlatus Inc. SPA was accounted for a business disposition in accordance with ASC 810-40-40-3A. As of March 5, 2024, the Company no longer consolidated the assets, liabilities, revenues and expenses of Superlatus Inc.. The components of the disposition are as follows:

 

      
Fair value of consideration received  $1 
Total fair value of consideration received  $1 
      
Carrying amount of assets and liabilities     
Cash  $151,546 
Property, plant and equipment, net   223,080 
Intangible assets, net   8,962,688 
Operating lease right-of-use assets   325,995 
Purchase price payable   (350,000)
Accounts payable   (224,137)
Accrued liabilities   (173,436)
Notes payable, current portion   (6,480,000)
Lease liability - current   (105,567)
Lease liability, net of current portion   (221,428)
Notes payable   (25,000)
Total carrying amount of assets and liabilities   2,083,743 
      
Loss on disposition of business  $(2,083,742)

 

The loss of disposition of business of $2,083,742 was included in income from discontinued operations, net of tax in the consolidated statements of operations.

 

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Discontinued Operations

 

In accordance with the provisions of ASC 205-20, the Company has excluded the results of discontinued operations from its results of continuing operations in the accompanying consolidated statements of operations for the three months ended March 31, 2024 and 2023. The results of the discontinued operations for the three months ended March 31, 2024 and 2023 consist of the following:

 

   2024   2023    2024   2023   2024   2023   2024   2023   2024   2023   2024   2023 
   TRX    Superlatus   SOSRx   CSP   APS   Total 
   Three Months
Ended
    Three Months
Ended
   Three Months
Ended
   Three Months
Ended
   Three Months
Ended
   Three Months
Ended
 
   March 31,    March 31,   March 31,   March 31,   March 31,   March 31, 
   2024   2023    2024   2023   2024   2023   2024   2023   2024   2023   2024   2023 
Revenues  $970,808   $1,443,177    $-   $            -   $            -   $-   $-   $311,257   $          -   $-   $970,808   $1,754,434 
Cost of sales   -    -     -    -    -    -    -    270,573    -    -    -    270,573 
Gross profit   970,808    1,443,177     -    -    -    -    -    40,684    -    -    970,808    1,483,861 
                                                       -    - 
Operating expenses:                                                      -    - 
Wage and salary expense   551,983    529,327     -    -    -    -    -    173,171    -    -    551,983    702,498 
Professional fees   15,385    1,233     -    -    -    -    -    724    -    1,750    15,385    3,707 
Technology expense   86,660    180,824     -    -    -    -    -    3,567    -    5,177    86,660    189,568 
General and administrative   36,029    113,245     -    -    -    146    -    14,223    -    1,790    36,029    129,404 
Total operating expenses   690,057    824,629     -    -    -    146    -    191,685    -    8,717    690,057    1,025,177 
Operating income (loss)   280,751    618,548     -    -    -    (146)   -    (151,001)   -    (8,717)   280,751    458,684 
                                                       -    - 
Non-operating income (expense):                                                      -    - 
Gain (loss) on dispositions   29,685,946    -     (2,083,742)   -    -    -    -    -    -    -    27,602,204    - 
Total non-operating income (expense)   29,685,946    -     (2,083,742)   -    -    -    -    -    -    -    27,602,204    - 
Net income (loss) on discontinued operations  $29,966,697   $618,548    $(2,083,742)  $-   $-   $(146)  $-   $(151,001)  $-   $(8,717)  $27,882,955   $458,684 

 

NOTE 4- RELATED PARTY TRANSACTIONS

 

On November 21, 2023, but effective September 14, 2023, the Company issued a promissory note to Danam Health, Inc. (the “Danam Note”) in the amount of $300,000. Danam Health, Inc. prepaid $250,000 prior to the execution date. The Danam Note did not accrue interest. As of December 31, 2023, the balance of the Danam Note was $50,000. The Danam Note was fully paid off in February 2024.

 

On February 29, 2024, the Company’s wholly owned subsidiary Trxade, Inc. entered into a Subscription Agreement (the “Subscription Agreement”) with Lafayette Energy Corp., a Delaware corporation (“Lafayette”). Pursuant to the Subscription Agreement, Trxade, Inc. will, in two equal tranches, invest a total of up to $5.0 million in Lafayette in exchange for up to 2,000,000 shares of Lafayette’s newly created Series A Convertible Preferred Stock, with the second tranche becoming payable only upon Trxade, Inc.’s receipt of notice that Lafayette has successfully drilled its first oil and gas well and produced at least one hundred (100) barrels of oil.

 

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At March 31, 2024, total related party debt was $0.

 

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 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 months ended March 31, 2024 and 2023:

 

  2024   2023 
   Three Months Ended 
   March 31, 
  2024   2023 
Product revenues        
Pharmaceutical product resale  $-   $476,356 
Packaged food resale   -    - 
Total product revenue  $-   $476,356 
           
Service revenue          
Transaction fee income   -    - 
Data service fee income   -    - 
SaaS fee income   -    16,960 
Total service revenue  $-   $16,960 
           
Total revenue  $-   $493,316 

 

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 March 31, 2024 and December 31, 2023, inventory was comprised of the following:

 

   March 31,   December 31, 
   2024   2023 
Raw materials  $-   $- 
Finished goods   5,372    968 
Inventory  $5,372   $968 

 

NOTE 7 – NOTES RECEIVABLE

 

On August 22, 2023, the Company received a Promissory Note (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 both March 31, 2024 and December 31, 2023, the outstanding balance of the Wood Sage Note was $1,300,000 and $1,300,000, respectively.

 

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NOTE 8 – INTANGIBLE ASSETS

 

As of March 31, 2024 and December 31, 2023, intangible assets, net consisted of the following:

 

   March 31,   December 31, 
   2024   2023 
Developed technology  $-   $9,777,478 
Total Costs   -     9,777,478 
           
Accumulated amortization   -    (814,790)
Net  $-   $8,962,688 
           
Weighted average useful life (years) - 5          

  

The intangible assets were sold to Superlatus Foods Inc. on March 5, 2024 per a Stock Purchase Agreement (see Note 3).

 

NOTE 9 – OTHER CURRENT LIABILITIES

 

As of March 31, 2024 and December 31, 2023, other current liabilities consisted of the following:

 

   March 31,   December 31, 
   2024   2023 
Insurance refunds payable  $-   $62,390 
Other payables   5,441    5,441 
Other current liabilities  $5,441   $67,831 

 

NOTE 10 – CONTINGENT FUNDING LIABILITIES

 

On December 13, 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 $150,000 to purchase $214,500 of future receivables. The Company also paid $7,500 as a one-time origination fee in connection with the Receivables Agreement. This agreement was fully paid off in February 2024.

 

On November 22, 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 $275,000 to purchase $393,250 of future receivables. The Company also paid $13,750 as a one-time origination fee in connection with the Receivables Agreement. This agreement was fully paid off in February 2024.

 

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. The Company also paid $60,000 as a one-time origination fee in connection with the Receivables Agreement. This agreement was fully paid off in February 2024.

 

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 March 31, 2024, and December 31, 2023, the total contingent funding liability was $