Business Context and Reporting Period
This Form 8-K Current Report was filed by Trxade Group, Inc. (the "Company") on October 23, 2019. The Company is an emerging growth company incorporated in Delaware. The filing primarily reports the entry into a Material Definitive Agreement and the completion of an asset acquisition on October 23, 2019.
Key Financial Metrics and Transaction Details
The filing details an asset acquisition rather than providing standard periodic financial statements (revenue, profit, cash flow). Key transaction metrics include:
- Acquisition Target: Assets and contracts of the "Tele Meds Platform" from Bonum Health, LLC (Florida) and Hardikkumar Patel.
- Consideration (Equity):
- Closing Shares: 250,000 shares of restricted common stock issued immediately.
- Milestone Shares: Up to 650,000 additional shares contingent on kiosk placement milestones.
- Total Potential Equity: 900,000 shares of restricted common stock.
- Consideration (Cash Obligation): The Company agreed to fund up to $600,000 for remote hub installation, marketing, and IT, subject to milestones.
- Assets Acquired: Telehealth service provider assets, intellectual property for Bonum Health Tele Medicine software, technology, and personal computers.
Material Changes and Milestones
The transaction represents a strategic expansion into telehealth services. The issuance of the Milestone Shares is tied to specific operational targets to be met within one year of the Closing Date:
- 240,000 shares upon placement of 40 in-store wellness kiosks.
- 205,000 shares upon placement of 70 in-store wellness kiosks.
- 205,000 shares upon placement of 100 in-store wellness kiosks.
Additionally, the Seller and Member are subject to a three-year non-compete agreement regarding the acquired assets.
Outlook, Risks, and Contingencies
Management Commentary and Agreements:
- Transition Services: The Seller agreed to provide installation, support, and maintenance services for up to 100 remote telemedicine kiosks for a period of up to one year.
- Registration Rights: The Seller received piggyback registration rights for the APA Shares.
- Corporate Governance: On October 24, 2019, the Board adopted new charters for the Audit Committee and Compensation Committee.
Risks and Contingencies:
- Financial Obligation: The $600,000 funding obligation is contingent on milestones; failure to meet milestones may alter cash outflows.
- Dilution: The potential issuance of up to 650,000 additional shares represents a significant contingent dilution to existing shareholders.
- Financial Reporting: Financial statements of the acquired business and pro forma financial information are not included in this filing and are due within 71 calendar days.
Investor Verification Checklist
- Verify the current share count of Trxade Group, Inc. to assess the dilution impact of the 250,000 closing shares and potential 650,000 milestone shares.
- Monitor the Company's progress in placing in-store wellness kiosks to determine if milestone shares will be triggered.
- Review the upcoming filing (due within 71 days) for the financial statements of the acquired Tele Meds Platform assets.
- Confirm the Company's liquidity position to ensure it can meet the potential $600,000 funding obligation for hub installation and marketing.
- Check for any subsequent filings regarding the status of the Transition Services Agreement and the Seller's compliance with the non-compete clause.