Company Quick10K Filing
Quick10K
Trxade Group
10-Q 2019-06-30 Quarter: 2019-06-30
S-1 2019-05-06 Public Filing
10-Q 2019-03-31 Quarter: 2019-03-31
10-K 2018-12-31 Annual: 2018-12-31
10-Q 2018-09-30 Quarter: 2018-09-30
10-Q 2018-06-30 Quarter: 2018-06-30
10-Q 2018-03-31 Quarter: 2018-03-31
10-K 2017-12-31 Annual: 2017-12-31
10-Q 2017-09-30 Quarter: 2017-09-30
10-Q 2017-06-30 Quarter: 2017-06-30
10-Q 2017-03-31 Quarter: 2017-03-31
10-K 2016-12-31 Annual: 2016-12-31
10-Q 2016-09-30 Quarter: 2016-09-30
10-Q 2016-06-30 Quarter: 2016-06-30
10-Q 2016-03-31 Quarter: 2016-03-31
10-K 2015-12-31 Annual: 2015-12-31
10-Q 2015-09-30 Quarter: 2015-09-30
10-Q 2015-06-30 Quarter: 2015-06-30
10-Q 2015-03-31 Quarter: 2015-03-31
10-K 2014-12-31 Annual: 2014-12-31
10-Q 2014-09-30 Quarter: 2014-09-30
10-Q 2014-06-30 Quarter: 2014-06-30
8-K 2019-10-02 Enter Agreement, Leave Agreement, Sale of Shares, Exhibits
8-K 2019-07-11 Enter Agreement, Sale of Shares, Exhibits
8-K 2019-01-22 Enter Agreement, Sale of Shares, Exhibits
8-K 2018-11-19 Shareholder Vote
8-K 2018-11-13 Enter Agreement, Sale of Shares, Exhibits
8-K 2018-10-16 Enter Agreement, M&A, Sale of Shares, Other Events, Exhibits
8-K 2018-07-11 Enter Agreement, Sale of Shares, Exhibits
DBB Invesco DB Base Metals Fund 156
INMB INmune Bio 65
CYBF Cyberfort Software 55
CBDS Cannabis Sativa 37
AIKO Alternative Investment 2
ESES Eco-Stim 0
CPFH Capital Financial Holdings 0
FES Forbes Energy Services 0
DJO DJO Finance 0
RRI GenOn Energy 0
TRXD 2019-06-30
Part 1: Financial Information
Item 1: Financial Statements
Note 1 - Organization and Basis of Presentation
Note 2 - Short-Term Debt and Related Parties Debt
Note 3 - Long Term Debt - Related Parties
Note 4 - Shareholders' Equity
Note 5 - Warrants
Note 6 - Options
Note 7 - Leases
Note 8 - Segment Reporting
Note 9 - Business Combination
Note 10 - Equity Method Investment
Note 11 - Subsequent Events
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II. Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Mine Safety Disclosures
Item 5. Other Information
Item 6. Exhibits
EX-31.A ex31-a.htm
EX-31.B ex31-b.htm
EX-32.A ex32-a.htm
EX-32.B ex32-b.htm

Trxade Group Earnings 2019-06-30

TRXD 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

10-Q 1 form10-q.htm

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

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

 

For the Quarterly Period Ended June 30, 2019

 

OR

 

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

 

For the Transition Period from _______ to _______

 

Commission File Number: 000-55218

 

TRXADE GROUP, INC.

(Exact name of registrant as specified in its charter)

 

Delaware   46-3673928

(State or other jurisdiction of

incorporation or organization)

  (Identification
Number)
     

 

3840 Land O’ Lakes Blvd.    
Land O’ Lakes, Florida   34639
(Address of principal executive offices)   (Zip code)

 

Registrant’s telephone number, including area code: (800)-261-0281

 

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

 

Title of each class   Name of each exchange on which registered
Common Stock   OTCQB

 

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

 

None

(Title of Class)

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes [  ] No [X]

 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes [  ] No [X]

 

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

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [X] No [  ]

 

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of the Form 10-K or any amendment to the Form 10-K. [  ]

 

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 [X] Smaller reporting company [X]
       
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 Act). Yes [  ] No [X]

 

There were 35,726,489 shares of the registrant’s common stock outstanding on July 26, 2019, and no shares of preferred stock outstanding.

 

DOCUMENTS INCORPORATED BY REFERENCE

 

List hereunder the following documents if incorporated by reference and the Part of the Form 10-K (e.g., Part I, Part II, etc.) into which the document is incorporated: (1) Any annual report to security holders; (2) Any proxy or information statement; and (3) Any prospectus filed pursuant to Rule 424(b) or (c) under the Securities Act of 1933. The listed documents should be clearly described for identification purposes (e.g., annual report to security holders for fiscal year ended December 31, 2018).

 

 

 

 
 

 

TRXADE GROUP, INC.

FORM 10-Q

For the Quarter Ended June 30, 2019

INDEX

 

    Page
PART I. FINANCIAL INFORMATION  
     
Item 1. Financial Statements  
     
  a) Consolidated Balance Sheets as of June 30, 2019 and December 31, 2018 (unaudited) 3
     
  b) Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2019 and 2018 (unaudited) 4
     
  c) Consolidated Statements of Changes in Shareholders’ Equity for the Three and Six Months Ended June 30, 2019 and 2018 (unaudited) 5
     
  d) Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2019 and 2018 (unaudited) 6
     
  Notes to Unaudited Consolidated Financial Statements 7
     
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 13
     
Item 3. Quantitative and Qualitative Disclosures About Market Risk 17
     
Item 4. Controls and Procedures 18
     
PART II. OTHER INFORMATION  
     
Item 1. Legal Proceedings 18
     
Item 1A. Risk Factors 18
     
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 18
     
Item 3. Defaults Upon Senior Securities 19
     
Item 4. Mine Safety Disclosures 19
     
Item 5. Other Information 19
     
Item 6. Exhibits 19
     
SIGNATURES 20

 

2
 

 

PART 1: FINANCIAL INFORMATION

 

Item 1: Financial Statements

 

Trxade Group, Inc.

Consolidated Balance Sheets

June 30, 2019 and December 31, 2018

(unaudited)

 

   June 30, 2019   December 31, 2018 
Assets          
Current Assets          
Cash  $540,034   $869,557 
Accounts Receivable, net   713,479    433,627 
Inventory   546,816    79,966 
Prepaid Assets   151,941    82,927 
Total Current Assets   1,952,270    1,466,077 
           
Property Plant and Equipment, Net   12,506    15,006 
           
Other Assets          
Deposits   21,636    20,531 
Equity method investment   162,178    - 
Right of use leased assets   803,502    - 
Goodwill   725,973    725,973 
           
Total Assets  $3,678,065   $2,227,587 
           
Liabilities and Shareholders’ Equity          
           
Current Liabilities          
Accounts Payable  $763,143   $400,544 
Accrued Liabilities   101,188    138,323 
Current Portion Lease Liabilities   80,832    - 
Short Term Convertible Notes Payable   -    181,500 
Short Term Convertible Notes Payable – Related Parties   140,000    140,000 
Total Current Liabilities   1,085,163    860,367 
           
Long Term Liabilities          
Notes Payable – Related Parties   522,552    522,552 
Other Long-term Liabilities – Leases   730,333    - 
Total Liabilities   2,338,048    1,382,919 
           
Shareholders’ Equity          
Series A Preferred Stock, $0.00001 par value; 10,000,000 shares authorized; none issued and outstanding as of June 30, 2019 and December 31, 2018, respectfully   -    - 
Common Stock, $0.00001 par value; 100,000,000 shares authorized; 33,726,489 and 33,285,827 shares issued and outstanding, as of June 30, 2019 and December 31, 2018, respectively   337    332 
Additional Paid-in Capital   9,267,545    8,955,411 
Retained Deficit   (7,927,865)   (8,111,075)
Total Shareholders’ Equity   1,340,017    844,668 
           
Total Liabilities and Shareholders’ Equity  $3,678,065   $2,227,587 

 

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

 

3
 

 

Trxade Group, Inc.
Consolidated Statements of Operations
Three and Six Months Ended June 30, 2019 and 2018

(unaudited)

 

   Three months ended   Six months ended 
   2019   2018   2019   2018 
                 
Revenues  $1,916,414   $837,688   $3,428,935   $1,690,611 
                     
Cost of Sales   753,138    -    1,118,977    - 
Gross Profit   1,163,276    837,688    2,309,958    1,690,611 
                     
Operating Expenses                    
General and Administrative   1,030,571    806,242    2,005,494    1,560,437 
                     
Operating Income   132,705    31,446    304,464    130,174 
                     
Share in Equity Losses in Investment   (58,850)   -    (87,822)   - 
Interest Expense   (15,874)   (10,933)   (33,432)   (27,392)
Net Income  $57,981   $20,513   $183,210   $102,782 
                     
Net Income per Common Share
– Basic:
  $0.00   $0.00   $0.01   $0.00 
                     
Net Income per Common Share
– Diluted:
  $0.00   $0.00   $0.01   $0.00 
                     
Weighted average Common Shares Outstanding Basic   33,726,489    31,985,827    33,546,329    31,985,827 
                     
Weighted average Common Shares Outstanding Diluted   36,353,751    34,479,406    36,353,751    34,472,811 

 

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

 

4
 

 

Trxade Group, Inc.

Consolidated Statements of Changes in Shareholders’ Equity

Three and Six Months Ended June 30, 2019 and 2018

(unaudited)

 

   Preferred Stock   Common Stock   Additional
Paid-in-
   Accumulated   Total
Shareholders’
 
   Shares   Amount   Shares   Amount   Capital   Deficit   Equity 
Balance at December 31, 2018   -   $-    33,285,827   $332   $8,955,411   $(8,111,075)  $844,668 
Common Stock issued for convertible debt and accrued interest   -    -    423,996    4    211,979    -    211,983 
Warrants exercised   -    -    16,666    1    165    -    166 
Options Expense   -    -    -    -    35,979    -    35,979 
Net Income   -    -    -    -    -    125,229    125,229 
Balance at March 31, 2019   -    -    33,726,489    337    9,203,534    (7,985,846)   1,218,025 
                                    
Options Expense   -    -    -    -    64,011    -    64,011 
Net Income   -    -    -    -    -    57,981    57,981 
Balance at June 30, 2019   -   $-    33,726,489   $337   $9,267,545   $(7,927,865)  $1,340,017 

 

   Preferred Stock   Common Stock   Additional
Paid-in-
   Accumulated   Total
Shareholders’
 
   Shares   Amount   Shares   Amount   Capital   Deficit   Equity 
Balance at December 31, 2017   -   $-    31,985,827   $320   $7,807,860   $(8,120,113)  $(311,933)
                                    
Options Expense   -    -    -    -    37,456    -    37,456 
Net Income   -    -    -    -    -    82,269    82,269 
Balance at March 31, 2018   -    -    31,985,827    320    7,845,316    (8,037,844)   (192,208)
                                    
Options Expense   -    -    -    -    50,616    -    50,616 
Net Income   -    -    -    -    -    20,513    20,513 
Balance at June 30, 2018   -    -    31,985,827   $320   $7,895,932   $(8,017,331)  $(121,079)

 

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

 

5
 

 

Trxade Group, Inc.

Consolidated Statements of Cash Flows

Six-months ended June 30, 2019 and 2018

(unaudited)

 

   2019   2018 
Operating Activities:          
Net Income  $183,210   $102,782 
           
Adjustments to reconcile net income to net cash provided by (used in) operating activities:          
Depreciation Expense   2,500    - 
Options expense   99,990    88,072 
Share in Equity Losses in Investment   87,822    - 
Amortization of right to use asset   43,939    - 
Amortization of Debt Discount   -    152 
Changes in operating assets and liabilities:          
Accounts Receivable   (279,852)   (5,875)
Prepaid Assets and other Current Assets   (70,119)   (64,831)
Inventory   (466,850)   - 
Lease Liability   (36,276)   - 
Accounts Payable   362,599    22,671 
Accrued Liabilities and Other Liabilities   (6,652)   3,485 
Net Cash provided by (used in) operating activities   (79,689)   146,456 
           
Investing Activities:          
Purchase of equity method investment   (250,000)   - 
Net cash Used in Investing activities   (250,000)   - 
           
Financing Activities:          
Repayments of Short-Term Convertible Debt – Related Parties   -    (111,725)
Repayments of Short-Term Promissory Notes   -    (10,739)
Proceeds from exercise of Warrants   166    - 
Net Cash provided by (used in) financing activities   166    (122,464)
           
Net increase (decrease) in Cash   (329,523)   23,992 
Cash at Beginning of the Year   869,557    183,914 
Cash at June 30, 2019 and 2018  $540,034   $207,906 
           
Supplemental Cash Flow Information          
Cash Paid for Interest  $2,997   $27,392 
Cash Paid for Income Taxes  $-   $- 
           
Non-Cash Transactions          
Common Stock Issued for Conversion of Note and Accrued Interest  $211,983   $- 
ROU assets and operating lease obligations recognized  $847,441   $- 

 

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

 

6
 

 

Trxade Group, Inc.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
For the six-months ended June 30, 2019 and 2018

 

NOTE 1 – ORGANIZATION AND BASIS OF PRESENTATION

 

Trxade Group, Inc. (“we”, “our”, “Trxade”, the “Company”) owns 100% of Trxade, Inc., Integra Pharma Solutions, LLC, Community Specialty Pharmacy, LLC and Alliance Pharma Solutions, LLC. The merger of Trxade, Inc. and Trxade Group, Inc. occurred in May 2013. Community Specialty Pharmacy was acquired in October 2018.

 

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 is a licensed pharmaceutical wholesaler and sells brand, generic and non-drug products.

 

Community Specialty Pharmacy, LLC is an accredited independent retail pharmacy with a focus on specialty medications. The company operates with innovative pharmacy model which offers home delivery services to any patient thereby providing convenience.

 

Alliance Pharma Solutions, LLC has developed same day Pharma delivery software – Delivmeds.com and invested in SyncHealth MSO, LLC a managed services organization during January 2019.

 

Basis of Presentation - The accompanying unaudited interim consolidated financial statements of Trxade Group, Inc. have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission and should be read in conjunction with the audited financial statements and notes thereto contained in the Company’s Form 10K.

 

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. 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, 2018 as reported in the Company’s Annual Report on Form 10K have been omitted.

 

Equity Investments – If the investments are less than 50% owned and more than 20% owned the entities use the equity method of accounting in accordance with ASC 323-10 – Investments – Equity Method and Joint Ventures.

 

The share of income (loss) of such entities is recorded as a single amount as share in equity income (loss) of investments. Dividends, if any, are recorded as a reduction of the investment. 

 

Income 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 while the dilutive effect of our convertible notes is computed using the if-converted method.

 

The following table sets forth the computation of basic and diluted Income per Share:

 

   For three months ended June 30,   For six months ended June 30, 
   2019   2018   2019   2018 
Numerator:                    
Net Income  $57,981   $20,513   $183,210   $102,782 
                     
Numerator for basic and diluted EPS - income available to common Shareholders   57,981   $20,513    183,210   $102,782 
                     
Denominator:                    
Denominator for basic EPS – Weighted average shares   33,726,489    31,985,827    33,546,329    31,985,827 
Dilutive Effect of Warrants, Options and Convertible Debt   2,627,262    2,493,579    2,807,422    2,486,984 
Denominator for diluted EPS – adjusted Weighted average shares and assumed Conversions   36,353,751    34,479,406    36,353,751    34,472,811 
Basic and Diluted income per common share  $0.00   $0.00   $0.01   $0.00 

 

Recent Accounting Pronouncements – The Company has implemented all new relevant accounting pronouncements that are in effect through the date of these financial statements. The pronouncements did not have any material impact on the financial statements unless otherwise disclosed, and the Company does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its consolidated financial position or results of operations.

 

7
 

 

Effective January 1, 2019, the Company adopted ASU No. 2016-02, Leases (Topic 842) (“ASU 2016-02”) using the required modified retrospective approach. The most significant changes under the new guidance include clarification of the definition of a lease, and the requirements for lessees to recognize a Right of Use (“ROU”) asset and a lease liability for all qualifying leases with terms longer than twelve months in the consolidated balance sheet. In addition, under Topic 842, additional disclosures are required to meet the objective of enabling users of financial statements to assess the amount, timing and uncertainty of cash flows arising from leases. See Footnote #7 below for more detail on the Company’s accounting with respect to leases.

 

Effective January 1, 2019, the Company adopted ASU No. 2018-07, Compensation – Stock Based Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting (“ASU 2018-7”), which aligns accounting for share-based payments issued to nonemployees to that of employees under the existing guidance of Topic 718, with certain exceptions. This update supersedes previous guidance for equity-based payments to nonemployees under Subtopic 505-50, Equity – Equity-Based Payments to Non-Employees. The adoption of ASU 2018-07 did not have a material impact on the Company’s consolidated financial statements.

 

NOTE 2 – SHORT-TERM DEBT AND RELATED PARTIES DEBT

 

Convertible Promissory Note

 

In February 2019, convertible promissory notes issued in 2015 for $181,500 were amended to a conversion price of $0.50 and the principal and accrued interest total of $211,983 were then converted to 423,966 common shares.

 

As of June 30, 2019 and December 31, 2018, short-tern convertible notes payable has a balance of $0 and $181,500 respectively, net of $0 unamortized debt discount.

 

Related Party Convertible Promissory Notes

 

As of June 30, 2019, $40,000 in convertible promissory notes were due to Mr. Shilpa Patel, a relative of Mr. Prashant Patel. Simple interest of 10% is payable at the maturity date of the note, which is August 8, 2019. Prior to maturity the note may be converted for common stock at a conversion price of $1.50.

 

As of June 30, 2019, $100,000 in convertible promissory notes were due to Mr. Nitel Patel, the brother of Mr. Prashant Patel. Simple interest of 10% is payable at the maturity date of the notes, which is July 7, 2019. Prior to maturity the notes may be converted for common stock at a conversion price of $0.62. In July 2019, the note was extended to October 15, 2019.

 

NOTE 3 – LONG TERM DEBT – RELATED PARTIES

 

In October 2018 in connection with the acquisition of Community Specialty Pharmacy, LLC a $300,000 promissory note was issued to Nikul Panchal, accruing interest a simple interest of 10%, interest payable annually, and principal payable at maturity in October 2021.

 

As of June 30, 2019, $122,552 and $100,000 in promissory notes was due to Mr. Prashant Patel and Mr. Suren Ajjarapu, respectively. The notes are due July 1, 2020 and each bear an interest rate of 6%.

 

NOTE 4 – SHAREHOLDERS’ EQUITY

 

In February 2019, convertible promissory notes issued in 2015 for $181,500 were amended to a conversion price of $0.50 and the principal and accrued interest total of $211,983 were then converted to 423,966 common shares.

 

In February 2019, 16,666 of warrants issued in 2014 at $0.01 per share were exercised for 16,666 of common shares. $166 was received in cash.

 

In April and May 2019, 505,000 options were granted with exercise prices ranging from $0.41 to $0.44 and a term of 10 years from the grant date. The options vest over a period ranging from four to five years.

 

8
 

 

NOTE 5 - WARRANTS

 

For the six-month period ended June 30, 2019, 16,666 warrants were exercised, See NOTE 4 – SHAREHOLDERS’ EQUITY, none were granted or forfeited.

 

The Company’s outstanding and exercisable warrants as of June 30, 2019 are presented below:

 

  

Number

Outstanding

  

Weighted

Average

Exercise Price

  

Contractual Life

in Years

   Intrinsic Value 
Warrants Outstanding as of December 31, 2018   2,880,141   $0.08    3.74   $782,385 
Warrants granted   -   $-    -    - 
Warrants forfeited   -    -    -    - 
Warrants exercised   (16,666)  $0.01    -    - 
                     
Warrants Outstanding as of June 30, 2019   2,863,475   $0.08    3.08   $1,448,356 

 

NOTE 6 – OPTIONS

 

The Company maintains a stock option plan under which certain employees are awarded option grants based on a combination of performance and tenure. The stock option plan provides for the grant of up to 2,000,000 shares. All options may be exercised for a period up to four 1/2 years following the grant date, after which they expire. Options are vested up to 5 years from the grant date.

 

For the six-month period ended June 30, 2019, 505,000 options were issued, none were forfeited or expired due to employee resignation.

 

The Company uses the Black-Sholes option pricing model to estimate the fair value of stock-based awards on the date of the grant. The following table summarizes the assumptions used to estimate the fair value of the stock options granted during the quarter ended June 30, 2019.

 

   2019 
Expected dividend yield   0% 
Weighted-average expected volatility   209-250% 
Weighted-average risk-free interest rate   2.08-2.55% 
Expected life of options   5-7 years 

 

Total compensation cost related to stock options was $99,990 and $88,072 for the six-months ended June 30, 2019 and 2018 respectively.

 

The following table represents stock option activity for the six-month period ended June 30, 2019:

 

  

Number

Outstanding

  

Weighted

Average

Exercise Price

  

Contractual Life

in Years

  

Intrinsic

Value

 
Options Outstanding as of December 31, 2018   1,732,846   $1.19    6.98   $- 
Options Exercisable as of December 31, 2018   1,107,259   $0.96    5.91      
Options granted   505,000   $0.43    9.86    - 
Options forfeited   -    -    -    - 
Options expired   -    -    -    - 
                     
Options Outstanding as of June 30, 2019   2,237,846   $0.73    7.27   $88,350 
Options Exercisable as of June 30, 2019   1,239,384   $0.91    5.77   $8,809 

 

9
 

 

NOTE 7 – LEASES

 

The Company elected the practical expedient under ASU 2018-11 “Leases: Targeted Improvements” which allows the Company to apply the transition provision for Topic 842 at the Company’s adoption date instead of at the earliest comparative period presented in the financial statements. Therefore, the Company recognized and measured leases existing at January 1, 2019 but without retrospective application. In addition, the Company elected the optional practical expedient permitted under the transition guidance which allows the Company to carry forward the historical accounting treatment for existing leases upon adoption. No impact was recorded to the beginning retained earnings for Topic 842. The Company has two operating leases for corporate offices. The following table outlines the details:

 

   Lease 1   Lease 2 
Initial Lease Term   December 2017 to December 2021    November 2018 to November 2023 
Renewal Term   January 2021 to December 2024    November 2023 to November 2028 
Initial Recognition of Right to use assets at January 1, 2019  $534,140   $313,301 
Incremental Borrowing Rate   10%   10%

 

The table below reconciles the fixed component of the undiscounted cash flows for each of the first five years and the total remaining years to the operating lease liabilities recorded in the Consolidated Balance Sheet as of June 30, 2019

 

Amounts due within twelve months of June 30    
2019  $158,366 
2020   163,102 
2021   167,984 
2022   173,038 
2023   178,237 
Thereafter   305,012 
Total minimum lease payments   1,145,739 
Less: effect of discounting   (334,574)
Present value of future minimum lease payments   811,165 
Less: current obligations under leases   80,832 
Long-term lease obligations  $730,333 

 

For the three-months and six-months ended June 30, 2019 amortization of assets were $22,195 and $43,939, respectively.

 

For the three-months and six-months ended June 30, 2019, amortization of liabilities were $18,363 and 36,276, respectively.

 

10
 

 

NOTE 8 – SEGMENT REPORTING

 

The Company classifies its business interests into reportable segments which are Trxade, Community and Other.

 

Six Months Ended June 30, 2019  Trxade, Inc.   Community Specialty Pharmacy, LLC   Other   Total 
Revenue  $2,182,668   $892,357   $353,910   $3,428,935 
Segment Assets  $1,401,724   $224,863   $2,051,478   $3,678,065 
Segment Profit/Loss  $1,166,543   $(61,628)  $(921,705)  $183,210 

 

The Company had no reportable segments for six months ended June 30, 2018. See NOTE 9 – BUSINESS COMBINATION

 

NOTE 9 – BUSINESS COMBINATION

 

On October 15, 2018, the Trxade Group, Inc. (“Company”) entered into and consummated the purchase of 100% of the equity interests of Community Specialty Pharmacy, LLC, a Florida limited liability company, (“CSP”), pursuant to the terms and conditions of the Membership Interest Purchase Agreement, entered into by and among the Company as the buyer, and CSP, and Nikul Panchal, the equity owner of CSP (collectively, the “Seller”). The purchase price for the 100% equity interest in CSP was $300,000 in cash, a promissory note from the Company of $300,000 (see Note 3), and warrants to purchase 405,507 shares of the Common Stock of the Company which vested at the acquisition date, are exercisable for eight (8) years from the issuance date at a strike price of $0.01 per share, and subject to exercise restrictions which lapse over three (3) years.

 

The Company recorded the acquisition under ASC 805 “Business Combination. All the assets acquired and liabilities assumed are recorded at their corresponding fair values. The excess of the purchase price over the net assets acquired resulted in goodwill of $725,973. The following table is a summary of the allocation of the purchase price of $770,291 consisting of $300,000 in cash, a promissory note from the Company of $300,000, and the fair value of the warrants issued calculated under the Black-Scholes calculation at $170,291.

 

   Purchase Price Allocation 
Purchase Price  $770,291 
Cash   (49,728)
Accounts Receivable   (114,899)
Inventory   (76,156)
Prepaid   (3,000)
Accounts Payable   199,312 
Accrued Expenses   153 
Goodwill  $725,973 

 

The accompanying unaudited pro forma statements of operations presents the accounts of Trxade and CSP for the six- months ended June 30, 2018, assuming the acquisition occurred on January 1, 2018.

 

2018 Summary Statement of Operations  Trxade   CSP   Combined 
             
Revenue  $1,690,611   $1,323,117   $3,013,723 
                
Net Income  $102,782   $64,800   $167,582 
                
Net Income per common share – basic  $0.00        $0.01 
                
Net Income per common share - diluted  $0.00        $0.00 
                
Weighted average common shares - basic   31,985,827         31,985,827 
                
Weighted average common shares - diluted   34,472,811         34,472,811 

 

The accompanying unaudited pro forma statements of operations presents the accounts of Trxade and CSP for the three- months ended June 30, 2018, assuming the acquisition occurred on January 1, 2018.

 

2018 Summary Statement of Operations  Trxade   CSP   Combined 
             
Revenue  $837,688   $677,900   $1,515,588 
                
Net Income (Loss)  $20,513   $(12,185)  $8,328 
                
Net Income per common share – basic  $0.00        $0.00 
                
Net Income per common share - diluted  $0.00        $0.00 
                
Weighted average common shares - basic   31,985,827         31,985,827 
                
Weighted average common shares - diluted   34,479,406         34,479,406 

 

11
 

 

NOTE 10 – EQUITY METHOD INVESTMENT

 

In January 2019, Trxade Group, Inc. through its wholly owned subsidiary Alliance Pharma Solution, LLC (Alliance) entered into a transaction to form SyncHealth MSO, LLC (“SyncHealth”). SyncHealth is owned by PanOptic Health, LLC (PanOptic) and Alliance. Alliance contributed $250,000 for the acquisition of a 49% equity interest in SyncHealth and the option to acquire the remaining ownership from PanOptic shareholders. Prior to March 31, 2019, $210,000 was paid with the remaining $40,000 paid in April 2019. Pursuant to the operating agreement, PanOptic owns 70% of SyncHealth and Alliance owns 30%; however, pursuant to the Letter Agreement, PanOptic will transfer to Alliance an additional 6% of SyncHealth’s membership units on May 1, 2019, an additional 6% on August 1, 2019 and an additional 7% on November 1, 2019 and at Alliance’s option, the 51% balance on January 31, 2020, upon transfer of Trxade Group, Inc. stock between 2,273,329 and 14,776,638 based on 2019 Gross Revenue Quotas.

 

For the three-months and six-months ended June 30, 2019, the Company recorded its equity share in the losses of SyncHealth amounting to $58,850 and $87,822, respectively.

 

NOTE 11 – SUBSEQUENT EVENTS

 

On July 10, Trxade Group, Inc. entered into a securities Purchase Agreement with a certain accredited investor with respect to the private placement of 2,000,000 share of its common stock at a purchase price of $0.50 per share, for gross proceeds of $1,000,000.

 

12
 

 

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

 

Forward-Looking Statements

 

This Quarterly Report on Form 10-Q (“Report”), including the “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” contains forward-looking statements 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. Therefore, actual results may differ materially and adversely from those expressed in any forward-looking statements. Factors that might cause or contribute to such differences include, but are not limited to, those discussed elsewhere in this Report, and in other reports the Company files with the Securities and Exchange Commission (“SEC”), including the Company’s S-1 Registration Statement, as amended and the Company’s most recent Annual Report on Form 10-K. The Company undertakes no obligation to revise or update publicly any forward-looking statements for any reason.

 

The following discussion is based upon our unaudited Consolidated Financial Statements included elsewhere in this report, which have been prepared in accordance with U.S. generally accepted accounting principles. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingencies. In the course of operating our business, we routinely make decisions as to the timing of the payment of invoices, the collection of receivables, the shipment of products, the fulfillment of orders, the purchase of supplies, and the building of inventory, among other matters. Each of these decisions has some impact on the financial results for any given period. In making these decisions, we consider various factors including contractual obligations, customer satisfaction, competition, internal and external financial targets and expectations, and financial planning objectives. On an on-going basis, we evaluate our estimates, including those related to sales returns, pricing credits, warranty costs, allowance for doubtful accounts, impairment of long-term assets, especially goodwill and intangible assets, contract manufacturer exposures for carrying and obsolete material charges, assumptions used in the valuation of stock-based compensation, and litigation. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions Factors that could cause or contribute to these differences include those discussed below and elsewhere in this Report, and in other reports we file with the SEC, specifically our most recent Annual Report on Form 10-K. All references to years relate to the calendar year ended December 31 of the particular year.

 

13
 

 

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:

 

  Overview. Discussion of our business and overall analysis of financial and other highlights affecting us, to provide context for the remainder of MD&A.
     
  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-months and six-months ended June 30, 2019 and 2018.
     
  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

 

We have designed and developed, and now own and operate business-to-business web-based marketplace focused on the US pharmaceutical industry. Our core service brings the nation’s independent pharmacies and accredited national suppliers of pharmaceuticals together to provide efficient and transparent buying and selling opportunities.

 

We began operations under Trxade Nevada in August of 2010 and spent over two years creating and enhancing our web-based services. Our services provide enhanced pricing transparency, purchasing capabilities and other value-added services on a single platform to focus on serving the nation’s approximately 24,000 independent pharmacies with an annual purchasing power of $96 billion. Our national supplier partners are able to fulfill orders on our platform immediately and provide the pharmacy 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 rapidly and now have over 8,500 registered pharmacy members purchasing on our platform.

 

Company Organization

 

Trxade Group, Inc. owns 100 percent of Trxade, Inc., and Integra Pharma Solutions, LLC (formerly Pinnacle Tek, Inc.), Alliance Pharma Solutions, LLC, and Community Specialty Pharmacy, LLC. The reverse subsidiary merger of Trxade, Inc. and Trxade Group, Inc. occurred in July 2013. INTEGRA was merged through a subsidiary with Trxade Group, Inc. in July 2013. We acquired 100 percent of Community Specialty Pharmacy, LLC, in October 2018. Alliance Pharma Solutions, LLC was formed in January 2018 and our 36 percent owned joint venture, SyncHealth MSO, LLC, was formed in January 2019. Trxade, is a web-based market platform that enables commerce among healthcare buyers and sellers of pharmaceuticals, accessories and services.

 

Liquidity and Capital Resources

 

Cash and Cash Equivalents

 

Cash and cash equivalents were $540,034 at June 30, 2019. We expect that our future available capital resources will consist primarily of cash generated from operations, remaining cash balances, borrowings, and any additional funds raised through sales of debt and/or equity.

 

14
 

 

Liquidity

 

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

 

   June 30, 2019   December 31, 2018 
         
Cash  $540,034   $869,557 
Current assets (excluding cash)   1,412,236    596,520 
Current liabilities (excluding short term debt)   945,163    538,867 
Short term debt   140,000    321,500 
Working Capital   867,107    605,710 

 

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

 

The decrease in cash was primarily due to investment in SyncHealth, LLC of $250,000. Cash decreased by $329,523.

 

Liquidity Outlook cash explanation.

 

Cash Requirements

 

Our primary objectives for 2019 are to continue the development of the Trxade Platform and increase our client base and operational revenue. Additional funds will be needed to continue to expand our platform and customer base and cover general and administrative expense. We expect to pursue raising capital to fund our operations and provide personnel to expand operations and required working capital. Through these efforts, management believes the Company will be able to obtain the liquidity necessary to fund company operations for the foreseeable future, however there is 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 when required, or at all.

 

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

 

Projected Expenses for 2019  Amount 
General and administrative (1)  $3,500,000 
Total  $3,500,000 

 

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

 

Since inception, we have funded our operations primarily through debt and equity capital raises and operational revenue. In 2018, common Stock was issued for $800,000 and we acquired new unsecured long-term debt of approximately $300,000. In July 2019 stock was issued for $1,000,000.

 

We expect to continue to seek additional outside funding in the future although no assurance can be given that we will be able to obtain financing on reasonable terms or revenues will continue. If we obtain additional financing by issuing equity securities, our existing stockholders’ ownership will be diluted. Obtaining commercial loans, assuming those loans would be available, will increase our liabilities and future cash commitments. We may be unable to maintain operations at a level sufficient for investors to obtain a return on their investments in our common stock.

 

We will need significantly more cash to implement our plan to operate a business-to-business web-based marketplace focused on the US pharmaceutical industry. Our core service is designed to bring the nation’s independent pharmacies and accredited national suppliers of pharmaceuticals together to provide efficient and transparent buying and selling opportunities.

 

Cash Flows

 

The following table summarizes our Consolidated Statements of Cash Flows for the six-months ended June 30, 2019 and 2018:

 

   Six-Months Ended 
   June 30, 2019   June 30, 2018 
Net Income  $183,210   $102,782 
Net Cash Provided by (used in) operations:          
Operating Activities   (79,689)   146,456 
Investing Activities   (250,000)   - 
Financing Activities   166    (122,464)
Net increase (decrease) in cash and cash equivalents  $(329,523)  $23,992 

 

15
 

 

Cash used in operations for the six-months ended June 30, 2019 was $79,689. This compared to $146,456 provided in operating activities for the six-months ended June 30, 2018. This decrease was due to inventory purchases and an increase in Accounts Receivables.

 

Investing activities in 2019 include the $250,000 investment in SyncHealth MSO, LLC.

 

Financing activities in 2018 included $122,464 payment of Notes.

 

Financing activities in 2019 included $166 proceeds from warrant exercise.

 

Results of Operations

 

The following selected consolidated financial data should be read in conjunction with the consolidated financial statements and the notes to these statements included in Item 8 of this report.

 

Six-Month Period Ended June 30, 2019 Compared to Six-Month Period Ended June 30, 2018

 

   Six-Months Ended 
   June 30, 2019   June 30, 2018 
         
Revenues  $3,428,935   $1,690,611 
Cost of Sales   1,118,977    - 
           
Gross Profit   2,309,958    1,690,611 
Operating Expenses:          
General and Administrative   1,905,504    1,472,365 
Warrants and Options Expense   99,990    88,072 
Total Operating Expense   2,005,494    1,560,437 
           
Share in Equity Losses in Investment   (87,822)   - 
Interest Expense   (33,432)   (27,392)
           
Income from Operations  $183,210   $102,782 

 

Substantially all of our revenues during the six-months ended June 30, 2018 was from Trxade platform revenue. Revenues increased in the six-months ended June 30, 2019 by $1,738,324 with the addition of Community Specialty Pharmacy, LLC, our partially owned accredited independent retail pharmacy.

 

General and administrative expenses increased for the six- months ended June 30, 2019 to $1,905,504 compared to $1,472,365 for the comparable period in 2018. There was an increase in rent and employee cash compensation directly as a result of the acquisition of Community Specialty Pharmacy, LLC.

 

Warrant and options expense in the 2019 and 2018 period represent compensation cost-related to the issuance of employee stock options.

 

Three Month Period Ended June 30, 2019 Compared to Three Month Period Ended June 30, 2018

 

   Three Months Ended 
   June 30, 2019   June 30, 2018 
         
Revenues  $1,916,414   $837,688 
Cost of Sales   753,138    - 
           
Gross Profit   1,163,276    837,688 
Operating Expenses:          
General and Administrative   966,560    755,626 
Warrants and Options Expense   64,011    50,616 
Total Operating Expense   1,030,571    806,242 
           
Share in Equity Losses in Investment   (58,850)     
Interest Expense   (15,874)   (10,933)
           
Income from Operations  $57,981   $20,513 

 

Substantially all of our revenues during the three months ended June 30, 2018 was from Trxade platform revenue. Revenues increased by $1,078,726 in the three months ended June 30, 2019 with the addition of Community Specialty Pharmacy, LLC.

 

General and administrative expenses increased for the three months ended June 30, 2019 to $966,560 compared to $755,164 for the comparable period in 2018. There was an increase in rent and employee cash compensation directly as a result of the acquisition of Community Specialty Pharmacy, LLC.

 

Warrant and options expense in the 2019 and 2018 period represent compensation cost-related to the issuance of employee stock options.

 

Off-Balance Sheet Arrangements

 

We had no outstanding off-balance sheet arrangements as of June 30, 2019.

 

16
 

 

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.

 

Revenue Recognition

 

In general, the Company accounts for revenue recognition in accordance with ASC 606, “Revenue from Contracts with Customers.”

 

Trxade, Inc. provides an online website service, a buying and selling marketplace for licensed Pharmaceutical Wholesalers to sell products and services to licensed Pharmacies. The Company charges Suppliers a transaction fee, a percentage of the purchase price of the Prescription Drugs and other products sold through its website service. The fulfillment of confirmed orders, including delivery and shipment of Prescription Drugs and other products, is the responsibility of the Supplier and not of the Company. The Company holds no inventory and assumes no responsibility for the shipment or delivery of any products or services from our website. The Company considers itself an agent for this revenue stream and as such, reports revenue as net. Step One: Identify the contract with the customer – Trxade, Inc.’s Terms and Use Agreement is acknowledged between the Wholesaler and Trxade, Inc. which outlines the terms and conditions. The collection is probable based on the credit evaluation of the Wholesaler. Step Two: Identify the performance obligations in the contract – The Company provides to the Supplier access to the online website, uploading of catalogs of products and Dashboard access to review status of inventory posted and processed orders. The Agreement requires the supplier to provide a catalog of pharmaceuticals for posting on the platform, deliver the pharmaceuticals and upon shipment remit the stated platform fee. Step Three: Determine the transaction price – The Fee Agreement outlines the fee based on the type of product, generic, brand or non-drug. There are no discounts for volume of transactions or early payment of invoices. Step Four: Allocate the transaction price – The Fee Agreement outlines 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 the day the order has been processed by the Supplier.

 

Integra Pharma Solutions, LLC is a licensed wholesaler and sells to licensed pharmacies brand, generic and non-drug products. The Company takes orders for product and 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 – The Company requires that an application and a credit card for payment is 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 the Company. 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.

 

Community Specialty Pharmacy, LLC is in the retail pharmacy business. The Company fills prescriptions for drugs written by a doctor and recognizes revenue at the time the patient confirms delivery of the prescription. Customer returns are not material. Step One: Identify the contract with the customer – The prescription is written by a doctor for a Customer and delivered to the Company. The prescription identifies the performance obligations in the contract. The Company fills the prescription and delivers to the Customer the drugs, fulfilling the contract. The collection is probable because there is confirmation that the customer has insurance for the reimbursement to the Company prior to filling of the prescription. Step Two: Identify the performance obligations in the contract – Each prescription is distinct to the Customer. Step Three: Determine the transaction price – The consideration is not variable. The transaction price is determined to be the price of prescription at the time of delivery which considers the expected reimbursements from third party payors (e.g., pharmacy benefit managers, insurance companies and government agencies). Step Four: Allocate the transaction price – The price of the prescription invoiced represents the expected amount of reimbursement from third party payors. 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 after the delivery of the prescription.

 

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

Not applicable.

 

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ITEM 4. CONTROLS AND PROCEDURES

 

Disclosure Controls and Procedures

 

As of the end of the period covered by this quarterly report on Form 10-Q, our principal executive officer and our principal accounting officer (the “Certifying Officers”), evaluated the effectiveness of our disclosure controls and procedures. Disclosure controls and procedures are controls and procedures designed to reasonably assure that information required to be disclosed in our reports filed under the Securities Exchange Act of 1934 (the “Exchange Act”), such as this quarterly report on Form 10-Q, is recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms. Disclosure controls and procedures are also designed to reasonably assure that such information is accumulated and communicated to our management, including the Certifying Officers, as appropriate to allow timely decisions regarding required disclosure. Based on these evaluations, the Certifying Officers have concluded, that, as of the end of the period covered by this quarterly report on Form 10-Q:

 

  (a) our disclosure controls and procedures were not effective to provide reasonable assurance that information required to be disclosed by us in the reports we file or submit under the Exchange Act was recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms; and
     
  (b) our disclosure controls and procedures were not effective to provide reasonable assurance that material information required to be disclosed by us in the reports we file or submit under the Exchange Act was accumulated and communicated to our management, including the Certifying Officers, as appropriate to allow timely decisions regarding required disclosure.

 

Changes in Internal Control over Financial Reporting

 

There has not been any change in our internal control over financial reporting that occurred during the three-months ended June 30, 2019 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

 

PART II. OTHER INFORMATION

 

ITEM 1. LEGAL PROCEEDINGS

 

None.

 

ITEM 1A. RISK FACTORS

 

No change in risk factors since the Company’s Annual Report on Form 10-K for the year ended December 31, 2018 filed with the SEC on March 22, 2019.

 

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

 

In April and May 2019, options to purchase 505,000 shares of Common Stock were approved by the Compensation Committee of the Board of Directors and issued to employees, contractors and board members under our 2014 Equity Incentive Plan. The options were granted with an exercise price ranging from $0.41 to $0.44 and a term of 10 years from the grant date. The options vest over a period ranging from four to five years.

 

On July 10, 2019 we entered into a securities Purchase Agreement with a certain accredited investor with respect to the private placement of 2,000,000 share of our common stock at a purchase price of $0.50 per share, for gross proceeds of $1,000,000.

 

The issuances and grants described above were exempt from registration pursuant to Rule 701 promulgated under Section 3(b) of the Securities Act as transactions by an issuer not involving any public offering pursuant to benefit plans and contracts relating to compensation as provided under Rule 701, or were exempt private placements under Section 4(2), Rule 506 of Regulation D and/or Regulation S of the Securities Act, since the foregoing issuances and grants did not involve a public offering, the recipients took the securities for investment and not resale, we took take appropriate measures to restrict transfer, and the recipients were (a) “accredited investors”; (b) had access to similar documentation and information as would be required in a Registration Statement under the Act; (c) were non-U.S. persons; and/or (d) were officers or directors of the Company.

 

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ITEM 3. DEFAULTS UPON SENIOR SECURITIES

 

None.

 

ITEM 4. MINE SAFETY DISCLOSURES

 

None.

 

ITEM 5. OTHER INFORMATION

 

ITEM 6. EXHIBITS

 

Exhibit No.   Description
31.A   Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.B   Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.A   Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.B   Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101   XBRL

 

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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 GROUP, INC.
     
  By: /s/ SUREN AJJARAPU
    Suren Ajjarapu
    Chief Executive Officer
     
    Date: July 26, 2019
     
  By: /s/ HOWARD DOSS
    Howard Doss
    Chief Financial Officer
     
    Date: July 26, 2019

 

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