UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

[X](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, 20212022

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: 001-39199

TRXADE GROUP,TRxADE HEALTH, INC.

(Exact name of registrant as specified in its charter)

(800)261-0281

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

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

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

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes [X] ☒ 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.

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 [X] ☒

There were 8,125,362 8,181,041shares of the registrant’s common stock outstanding on April 22, 2021,May 6, 2022 and no shares of preferred stock outstanding.

TRxADE HEALTH, INC.

TRXADE GROUP, INC.

FORM 10-Q

For the Quarter Ended March 31, 20212022

TABLE OF CONTENTS

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q (“Report”), including this “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. In particular, as discussed in greater detail below, our financial condition and results could be materially adversely affected by the impacts and disruptions caused by the novel coronavirus (COVID-19) global pandemic and governmental responses thereto. Therefore, actual results may differ materially and adversely from those expressed in any forward-looking statements. Factors that might cause or contribute to such differencesThese factors include, but are not limited to, those discussed elsewhereto:

You should read the matters described and incorporated by reference in “Risk Factors” and the other cautionary statements made in this Report, including under “Risk Factors”, and incorporated by reference herein, as being applicable to all related forward-looking statements wherever they appear in other reportsthis Report. We cannot assure you that the Company files withforward-looking statements in this Report will prove to be accurate and therefore prospective investors are encouraged not to place undue reliance on forward-looking statements.

Forward-looking statements speak only as of the Securities and Exchange Commission (“SEC”), includingdate of this Report or the Company’s Annualdate of any document incorporated by reference in this Report, on Form 10-K foras applicable. Except to the year ended December 31, 2020, as filed with the SEC on March 29, 2021 (under the heading “Risk Factors” and in other parts of that report). The Company undertakes noextent required by applicable law or regulation, we do not undertake any obligation to revise or update publicly any forward-looking statements for any reason, except as otherwise required by law.to reflect events or circumstances after the date of this Report or to reflect the occurrence of unanticipated events.

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, and in 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.

Summary Risk Factors

We face risks and uncertainties related to our business, many of which are beyond our control. In particular, risks associated with our business include:

PART I: FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Trxade Group, Inc.TRxADE HEALTH, INC.

Consolidated Balance Sheets

March 31, 20212022, and December 31, 20202021

(unaudited)

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

Trxade Group, Inc.

TRxADE HEALTH, INC.

Consolidated Statements of Operations

For the Three Months Ended March 31, 20212022, and 20202021

(unaudited)

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

Trxade Group, Inc.

TRxADE HEALTH, INC.

Consolidated Statements of Changes in Stockholders’ Equity

For the Three Months Ended March 31, 20212022, and 20202021

(unaudited)

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

TRxADE HEALTH, INC.

Consolidated Statements of Cash Flows

For the Three months ended March 31, 2022, and 2021

(unaudited)

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

Trxade Group, Inc.

TRxADE HEALTH, INC.

Notes to Unaudited Consolidated Financial Statements of Cash Flows

For the Three months ended March 31, 20212022, and 20202021

(unaudited)

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

Trxade Group, Inc.

Notes to Unaudited Consolidated Financial Statements

For the Three months ended March 31, 2021 and 2020

NOTE 1 – ORGANIZATION AND BASIS OF PRESENTATION

Trxade Group, Inc.TRxADE HEALTH, INC. (“we”, “our”, “Trxade”, and the “Company”) owns 100%100% of Trxade, Inc., Integra Pharma Solutions, LLC, Community Specialty Pharmacy, LLC, Alliance Pharma Solutions, LLC, and Bonum Health, LLC. The merger of Trxade, Inc. and Trxade Group, Inc. occurred in May 2013. Community Specialty Pharmacy was acquired in October 2018. SOSRx was created in February 2022 between Exchange Health and Trxade Health. From January 2021 to December 2021 (from when it was dissolved) the Company also owned 100% of MedChecks, LLC.

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

Alliance Pharma Solutions, LLC (d.b.a. DelivMeds) invested in SyncHealth MSO, LLC, a managed services organization, in January 2019, which investment was divested in February 2020. DelivMeds is currently being rebranded and the consumer-based app is still being developed. To date we have not generated any revenue from this product.

Community Specialty Pharmacy, LLC, is an accredited independent retail pharmacy with a focus on specialty medications and a community-based model offering home delivery services to patients.

Alliance Pharma Solutions, LLC, has developed a same-day pharmaceutical delivery software – Delivmeds.com, and invested in SyncHealth MSO, LLC, a managed services organization during January 2019, which investment was divested in February 2020.

Bonum Health, LLC, was formed to hold certain telehealth assets acquired in October 2019. The “Bonum Health Hub” was launched in November 2019 and was expected to be operational in AprilFebruary 2020; however, due to the COVID-19 pandemic at present the Company does not anticipate installations moving forward, until laterand has taken a write off of the hubs purchased at June 30, 2021, in 2021 at the earliest. The hub is a Health Insurance Portability and Accountability Act (HIPPA)-compliant booth planned to be installed at select independent pharmacies, with technology that connects patients to board-certified medical care through the Bonum Health mobile app and website portal.Loss on Inventory Investments of $143,891. The Bonum Health mobile application is also available on a subscription basis, primarily as a stand-alone telehealth software application that can be licensed on a business-to-business (B2B) model to clients as an employment health benefit for the clients’ employees. In August 2020, Bonum

On February 15, 2022 the Company entered into a relationship with Exchange Health, LLC, launched a business-to-business (B2B)technology company providing an online platform called Bonum+, which bundles telehealth,for manufacturers and suppliers to sell and purchase pharmaceuticals (“Exchange Health”). SOSRx LLC, the created entity relating to the relationship, a COVID-19 risk assessment tool and a personal protective equipment (PPE) purchasing tool, through a secure mobile dashboard for corporate clients.

MedCheks, LLCDelaware limited liability company, was formed in January 2021February 2022, and is a patient-centered, digital, precision healthcare platform that lets patients consolidateowned 51% by the Company and control their health data via a digital Health Passport. The digital Health Passport allows users to share their health profile, tests and vaccinations simply and safely. Secured in a blockchain, the Health Passport includes health and vaccination status verification via a QR code (a two-dimensional machine-readable optical label), which is available for travel, entry into stadiums, concert venues, events, offices, industrial plants, warehouses, and other physical access points. MedCheks Health Passport stores all of a user’s health records securely in one place.49% by Exchange Health.

Basis of Presentation - The accompanying unaudited interim consolidated financial statements of Trxade Group,TRxADE HEALTH, 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 Annual Report on Form 10-K for the year ended December 31, 2020,2021, as filed with the Securities and Exchange Commission on March 29, 2021.28, 2022.

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, 20202021, as reported in the Company’s Annual Report on Form 10-K have been omitted.

Accounts Receivable – 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. During the three-months ended March 31, 2022, and 2021, bad debt expense was $1,317, and $0, respectively.

The Company had an Account Receivable with a single customer, GSG PPE, LLC, for the amount of $630,000 which was past due. The Company had obtained a Note Receivable which was due on September 30, 2021 and remained unpaid. The Company believes the amount may not be collectible without legal actions, and therefore, recorded bad debt expense. The note was not paid pursuant to its terms and the Company has filed suit to collect on the note and the personal guaranty securing the note. The Company believes it will prevail on the merits.

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, 2022, we had 29,951 outstanding warrants to purchase common stock and 410,964 options to purchase common stock.

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

SCHEDULE OF BASIC AND DILUTIVE INCOME (LOSS) PER SHARE

NOTE 2– SHORT TERM DEBT – RELATED PARTIES

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

At March 31, 2022, total related party debt was $500,000, which represented the Promissory Note.   At December 31, 2021 total related party debt was $0. The Promissory Note, which represents amounts currently due to Exchange Health, bears interest at the rate of the prime rate, plus 2% per annum (currently 5.25% per annum), with (i) one-third of the principal ($166,666.67) and interest payable after one year (on February 15, 2023) and (ii) the remaining two-thirds of principal payable quarterly over the next two years in eight equal installments of $41,666.67, together with any unpaid accrued interest thereupon, at the end of every full fiscal quarter, beginning, June 20, 2023. The Promissory Note may be prepaid by the Company, at its discretion, in whole or in part at any time, without premium or penalty.

In October 2018, in connection with the acquisition of Community Specialty Pharmacy, LLC, a $300,000$300,000 promissory note was issued to Nikul Panchal, a non-executive officer of the Company, accruing simple interest at the rate of 10% per annum, payable annually, and having a maturity date in of October 15, 2021.2021. In October 2019, $75,000$75,000 of the note was converted into 25,000 common shares at $3.00$3.00 per share, leaving $225,000$225,000 of principal owed under the promissory note. There was a loss recognized on thisthe conversion of $76,500.$76,500.

At March 31, 2021, and December 31, 2020, total related party debt was $225,000.$225,000.

NOTE 3 – STOCKHOLDERS’ EQUITY

20202021 Equity Compensation Awards

On April 14, 2020,15, 2021, the Board of Directors, with the recommendation of the Compensation Committee, approved the grant of (a) 5,000options to purchase an aggregate of 17,500 shares of restrictedour common stock to certain employees of the Company’s legal counsel; and (b) 12,500 shares of restricted common stockCompany, in consideration for services to Howard A. Doss, the Company’s Chief Financial Officer, which sharesbe rendered by such individuals through 2025. The options vest at the rate of ¼^thof such sharesoptions per year, on July 1the first, second, third and October 1, 2020fourth anniversaries of the grant date, subject to such option holders continuing to provide services to the Company on such dates, subject to the terms of the Company’s Second Amended and January 1Restated 2019 Equity Incentive Plan (the “Plan”) and April 1, 2021.the option agreements entered into evidence such grants. The sharesoptions were granted pursuant to, and are subject to, the Plan, and have a fair valueterm of $107,100five years from the grant date. The options have an exercise price of $4.76 per share, the closing price of the Company’s common stock on the date of the grant of such options.

In connection with and pursuant to the Company recognized stock-basedindependent director compensation expensepolicy previously adopted by the Board of $53,550 forDirectors, on April 15, 2021, the three months ended March 31, 2021.

Independent Director Compensation Plan

On April 14, 2020, thethen three independent members of the Board of Directors (Mr. Donald G. Fell, Dr. Pamela Tenaerts, and Mr. Michael L. Peterson), were each awarded 8,987 10,721 shares of restricted stock, valued at $55,000 ($5.13 per share) based on the closing sales price of the Company’s common stock on the Nasdaq Capital Market on the effective date of the grant, April 1, 2021, which vest at the rate of ¼^thof such shares on July 1 and October 1, 20202021 and January 1 and April 1, 2021.2022, subject to such persons continuing to provide services to the Company on such dates, subject to the terms of the Plan and the Restricted Stock Grant Agreements entered into as evidence of such awards. The shares have a fair value of $165,000$165,000 and the Company recognized stock-based compensation expense of $82,500$13,750 for the three months ended March 31, 2021.2022. Common Shares totaling 16,082 were cancelled on May 27, 2021, when the director services of Mr. Peterson and Dr. Tenaerts were terminated.

The Board of Directors of the Company, on May 27, 2021, confirmed the vesting of 2,680 shares of common stock previously issued to each of Michael L. Peterson and Dr. Pamela Tenaerts on July 1, 2021, which were subject to forfeiture subject to such persons continued service on the Board of Directors prior to the vesting date.

In connection with and pursuant to the independent director compensation policy previously adopted by the Board of Directors, on May 27, 2021, the Board of Directors awarded Charles L. Pope, and Christine L. Jennings, each independent members of the Board of Directors appointed to the Board of Directors on May 27, 2021, 10,912 shares of restricted stock each, valued at $41,250 each ($3.78 per share) based on the closing sales price of the Company’s common stock on the Nasdaq Capital Market on the effective date of the grant, May 27, 2021, which vest at the rate of 1/3rd of such shares on October 1, 2021 and January 1 and April 1, 2022, subject to such persons continuing to provide services to the Company on such dates. The Company recognized stock-based compensation expense of $18,333 for the three months ended March 31, 2022.

Employment Agreement with Suren Ajjarapu, Chief Executive Officer

In connection with our employment agreement with Mr. Suren Ajjarapu, our Chief Executive Officer, which was effective on April 14, 2020, we granted 49,020 restricted shares of common stock which vest upon the Company reaching certain performance metrics established by the Compensation Committee on the same date and further amended on May 5, 2020. The fair value of the shares at the grant date was determined to be $300,000. The modification of the performance conditions resulted in an incremental value to the shares of $72,062. The Compensation Committee subsequently determined that the performance conditions were met and the 49,020 bonus shares vested in full on December 31, 2020. There was 0 bonus granted in 2021. The bonus for 2022 has not been determined by the compensation committee as of this filing date.

Stock Repurchase Program

On May 27, 2021, the Board of Directors of the Company authorized and approved a share repurchase program for up to $1 million of the currently outstanding shares of the Company’s common stock. There was no time frame or expiration date for the repurchase program, and such program was to remain in place until a maximum of $1.0 million of the Company’s common stock had been repurchased or until such program was suspended or discontinued by the Board of Directors.

On July 18, 2021, our Board of Directors approved an “at-the-market” offering and paused the Stock Repurchase Program until the offering was complete.

On July 22, 2021, our Board of Directors delayed the “at-the-market” offering and reactivated the Stock Repurchase Program.

On August 5, 2021, our Board of Directors paused the Stock Repurchase Program until a planned “at-the-market” offering was complete, which “at-the-market” offering was terminated effective on December 5, 2021.

On December 10, 2021, the Board of Directors authorized and approved the resumption of the Company’s prior share repurchase program (as modified), as discussed above. The share repurchase program as approved by the Board of Directors on December 10, 2021, modified the prior repurchase program to allow for the repurchase of up to 100,000 of the currently outstanding shares of the Company’s common stock. There is no time frame for the repurchase program, and such program will remain in place until a maximum of 100,000 shares of the Company’s common stock have been repurchased or until such program is discontinued by the Board of Directors.

To date, 0 shares of common stock have been repurchased by the Company.

NOTE 4 – WARRANTS

For the three-month period ended March 31, 2021, no 2022, 0warrants were granted, and none NaNexpired. For the three-month period of ended March 31, 2022, warrants to purchase 14,584 shares of common stock were exercised, resulting in proceeds of $875. The Company delivered 14,584 shares of common stock.

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

TheThere was 0 compensation cost related to the warrants granted was $0 and $79,089 for the three months ended March 31, 2022 and 2021 and 2020, respectively.

The Company’s outstanding and exercisable warrants as of March 31, 20212022, are presented below:

SCHEDULE OF OUTSTANDING AND EXERCISABLE WARRANTS

NOTE 5 – OPTIONS

The Company maintains stock option plans under which certain employees are awarded option grants based on a combination of performance and tenure. The stock option plans provide for the grant of up to 2,333,333 shares, and the Company’s 2019Second Amended and Restated 2019 Equity Incentive Plan provides for automatic increases in the number of shares available under such plan (currently 2,000,000 shares) on April 1^st of each calendar year, beginning in 2021 and ending in 2029 (each a “Date“Date of Determination”Determination”), in each case subject to the approval and determination of the administrator of the plan (the Board of Directors or Compensation Committee) on or prior to the applicable Date of Determination, equal to the lesser of (A) ten percent (10%) of the total shares of common stock of the Company outstanding on the last day of the immediately preceding fiscal year and (B) such smaller number of shares as determined by the administrator. The administrator did not approve an increase in the number of shares covered under the plan as of April 1, 2021.

For the three-month period ended March 31, 2021,2022, 0 options to purchase 20,000 shares were granted, noneNaN were forfeited, and noneNaN expired. The options granted duringFor the three-month period vest over a four-year period, the exercise price was $6.55 per share and the options have a term of 5 years.

The Company uses the Black-Scholes 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 March 31, 2021:2022, 0 options to purchase shares of common stock were exercised.

Total compensation cost related to stock options granted was $75,738$32,783 and $61,997$75,738 for the three monthsthree-months ended March 31, 2022, and 2021, and 2020, respectively.

The following table represents stock option activity for the three-month period ended March 31, 2021:2022:

SCHEDULE OF STOCK OPTION ACTIVITY

NOTE 6 – OTHER RECEIVABLES

In July 2020, the Company’s wholly-owned subsidiary, Integra Pharma Solutions, Inc.LLC (“Integra”), entered into an agreement with Studebaker Defense Group, LLC (“Studebaker”) wherein Integra would pay Studebaker a down payment of $500,000$500,000 and Studebaker would deliver 180,000 boxes of nitrile gloves by August 14, 2020. Integra wired the $500,000$500,000 to Studebaker, but to date, Studebaker has not delivered the gloves or provided a refund of the deposit. In December 2020, we filed a complaint against Studebaker in Florida state court, Case No. 20-CA-010118 in the Circuit Court for the Thirteenth Judicial Circuit in Hillsborough County, for among other things, breach of contract. Studebaker did not answer the complaint, nor did counsel for Studebaker file an appearance. Accordingly, in February 2021 the Company filed for a default judgment; however, on March 22, 2021, counsel for Studebaker filed an appearance and shortly thereafter filed a motion to vacate the default judgment. A hearingjudgment and dismiss the complaint on ourjurisdictional grounds. The court granted Studebaker’s motion to set aside the default judgment but denied the motion to dismiss. Studebaker then filed an answer and affirmative defenses, and we filed a motion to strike their affirmative defenses. The court has not yet ruled, but the discovery phase of the litigation has commenced; the next step in the litigation after the pre-trial motions are resolved will be a motion for a default judgment has been set for April 27, 2021.summary judgment. The Company anticipates that irrespective of the outcome of such hearing on April 27, 2021, the Companybelieves it will prevail on the merits; and believes Studebaker hasmerits but cannot determine the ability to satisfy a judgment.timing of the judgment or the amount ultimately collected. At June 30, 2021, the $500,000 was recorded as Loss on Inventory Investment.

In August 2020, Integra, entered into an agreement with Sandwave Group Dsn Bhd (“Sandwave”), wherein Integra would pay Sandwave a down payment of $581,250$581,250 and Sandwave’s supplier, Crecom Burj Group SDN BHD (“Crecom”), would deliver 150,000 boxes of nitrile gloves within 45 days. Integra wired the $581,250$581,250 to Sandwave, which in turn wired the purchase price to Crecom, which Crecom accepted; however, to date, Crecom has not delivered the nitrile gloves. Integra demanded return of its $581,250$581,250 and Crecom has acknowledged that Integra is entitled to a refund, but to date Crecom has failed to return Integra’s money. In February 2021, Integra filed a complaint against Crecom in Malaysia: Case No. WA-22NCC-55-02/2021 in the High Court of Malaysia at Kuala Lumpur in the Federal Territory, Malaysia for the Malaysian equivalent of breach of contract. Crecom filed an appearance on March 1, 2021. In April 2021, an Application for Summary JudgementJudgment was filed with the court, and on May 25, 2021, the Court will extractextracted the sealed application, and a copy thereof will bewas served on Crecom’s attorneys and Crecom, will have two weeks to file14 days later, filed an Affidavit in Reply with the court to showalleging that there are issues to be tried and that this case must go to a full trial. We will be given 14 days thereafter to reply to that Affidavit in Reply (if there is a need to do so). In this case, we will request for a longer time to reply, given the distance involved (the court has taken note of this fact). Also at the May 25,On June 28, 2021, hearing, the court will give directions on the timelines fordirected both parties to file their written submissions/arguments in relation to the application for summary judgment Ifon or before July 12, 2021 and scheduled a hearing thereon for August 26, 2021. At the final hearing on October 18, 2021, the ruling for the summary judgment was denied and a trial date is entered against Crecom, the process of executing the judgment, and ultimately attempting to collect on the judgment, can take three to six months.pending. The Company believes that it will prevail in the lawsuit filed; and believes Crecom has the ability to satisfy a judgment, andbut the steps to enforce a judgment in Malaysia, if any, may be cumbersome, time consuming or costly. The Company cannot determine the timing of the judgment, nor the amount ultimately collected. At June 30, 2021, the $581,250 was recorded as Loss on Inventory Investment.

On November 19, 2021, Integra filed a complaint against GSG PPE, LLC (“GSG”) and Gary Waxman (“Waxman”), the owner, alleging three counts of breach of contract for a purchase agreement, a promissory note, and a personal guaranty. Collectively, the company alleges that GSG and Waxman have materially breached all three contracts. In late 2020, GSG and Integra executed a valid initial contract setting the terms of a business transaction. GSG failed to pay Integra approximately 75% of the amount owed to Integra. GSG acknowledged it owed the money and executed a promissory note in favor of Integra in the amount of $630,000 which matured on September 30, 2021. The note provides for attorney fees and interest in addition to the $630,000. Waxman’s personal guaranty confirmed that GSG owed Integra $630,000. Integra has propounded discovery and plans to file a motion for summary judgment on all three counts of breach of contract shortly after this filing. The Company believes that the facts of the case are favorable to Integra, but the outcome of the summary judgment hearing is unknown. On September 30, 2021, the $630,000 was recorded as Bad Debt Expense.

NOTE 7 – CONTINGENCIES

Jain, et al., v. Memantine, et al.

In January 2020, we became aware of a complaint filed by Jitendra Jain, Manish Arora, Scariy Kumaramangalam, Harsh Datta and Balvant Arora (collectively, plaintiffs), against our wholly-owned subsidiary, Trxade, Inc. and our Chief Executive Officer, Suren Ajjarapu as well as certain unrelated persons, Annapurna Gundlapalli, Gajan Mahendiran and Nexgen Memantine (collectively, defendants), in the Circuit Court of Madison County, Alabama (Case:47-CV-2019-902216.00). The complaint alleged causes of actions against the defendants including fraud in the inducement, relating to certain investments alleged to have been made by plaintiffs in Nexgen Memantine, breach of fiduciary duty, conversion and voidable transactions. The complaint related to certain investments alleged made by the plaintiffs in Nexgen Memantine and certain alleged fraudulent transfers of assets and funds alleged to have been taken by the defendants which are unrelated to the Company.

On May 14, 2021, Plaintiffs filed a second amended complaint against the defendants. The second amended complaint sought $425,000alleges causes of action against the defendants including securities fraud, breach of fiduciary duty, violation of the Florida RICO Act, and breach of contract. The operative complaint relates to certain investments alleged to have been made by the plaintiffs in Nexgen Memantine and certain alleged transfers of assets and funds alleged to have been taken by the defendants which are unrelated to the Company. The amended complaint seeks injunctive relief, $425,000 in compensatory damages, treble damages, punitive damages, and $1,275,000 in punitive damages. The Companyfees and Mr. Ajjarapu denied in their entirety the plaintiffs’ allegations and filedcosts.

In February 2022, a motion to dismiss the plaintiffs’ claims against the Company and Mr. Ajjarapu, which motion was granted in May 2020, due to the plaintiffs not being able to establish personal jurisdiction over the defendants, which motion was successfulsettlement as to Suren Ajjarapu, Annapurna Gundlapalli and Trxade Group has been reached and signed. This settlement involves no admission of liability and a full and complete release of all defendants. The Company and Mr. Ajjarapu further refute any connections foractions after a lump-sum payment of $225,000 is made. Because the purposecomplaint purports to be a derivative action, court approval was required, which approval was received on March 14, 2022. As a result of the suit tosettlement, the other named defendants. To the Company’s and Mr. Ajjarapu’s knowledge, the complaint had no merit whatsoever. The final date for the plaintiffs to appeal the ruling to dismiss thePlaintiff’s dismissed their lawsuit passed in August 2020, and there was no appeal. As such, the ruling is final.with prejudice.

However, in September 2020, the plaintiffs filed a similar complaint (alleging substantially similar facts) in the United States District Court for the Middle District of Florida, Tampa Division (Case 8:20-cv-02263), against the same defendants but adding Westminster Pharmaceuticals, LLC, our former wholly-owned subsidiary (“Westminster”), and raising claims for alleged fraud under Section 10(b) and Rule 10b-5 of the Exchange Act; joint and several liability under 15 U.S.C. Code 78t (against Trxade, Inc.); fraudulent transactions of securities under the Florida Securities Act (against all of the defendants except Trxade); and sale of unregistered securities under the Florida Securities Act (against all of the defendants except Trxade). The total amount of damages sought is unclear, but is thought to be in excess of $425,000. To the Company’s and Mr. Ajjarapu’s knowledge, the complaint has no merit whatsoever and each of the Company and Mr. Ajjarapu intend to defend themselves and oppose the relief sought in the complaint. The Company is not currently accused of any direct misconduct; instead, the Company is alleged to be liable for the acts of certain or all of the other defendants. The Company would likely only incur liability if some or all of the other defendants were found liable to plaintiffs and the Company is found to be jointly and severally liable for the actions of such other defendant or defendants. The lawsuit claims approximately $450,000 in damages; however, based on facts currently known, the Company assesses the likelihood of any material loss as remote.

NOTE 8 – LEASES

The Company elected the practical expedient under Accounting Standards Update (ASU) 2018-11 “Leases:“Leases: Targeted Improvements”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:

SCHEDULE OF OPERATING LEASES

The Company decided not to renew theentered into a new corporate office lease (Lease 1) on January 2021; however, the parties subsequently negotiated a one-year lease at the same location.1, 2022. The Company determined that the decision to not renew Lease 1 changed the correspondingentering into a new lease term which required remeasurement of the lease liability resulting in the reductionincrease of the right-of-use asset and the associated lease liability by $384,110.$977,220. The reassessment of the lease term did not change the existing classification and thenew lease is still classified as an operating lease.

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 March 31, 2021.2022.

SCHEDULE OF FUTURE MINIMUM PAYMENTS FOR OPERATING LEASE LIABILITIES

For the three months ended March 31, 20212022, and 2020,2021, amortization of Right of Use Assets was $31,678$54,328 and $23,635,$31,678, respectively.

For the three months ended March 31, 20212022, and 2020,2021, amortization of Lease Liability was $31,517$50,322 and $20,974,$31,517, respectively.

NOTE 9 – SEGMENT REPORTING

The Company classifies its business interests into reportable segments which are Trxade, Inc., Community Specialty Pharmacy, LLC, Integra Pharma, LLC and Other. Operating segments are defined as the components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision makers in deciding how to allocate resources and in assessing performance. The Company’s chief operating decision makers direct the allocation of resources to operating segments based on the profitability, cash flows, and growth opportunities of each respective segment.

SCHEDULE OF BUSINESS INTERESTS INTO REPORTABLE SEGMENTS