TRxADE HEALTH, INC. — Form 10-Q Summary
Entity check: The supplied filing is for TRxADE HEALTH, INC. (ticker MEDS), formerly Trxade Group, Inc.; it does not identify Scienture Holdings, Inc. Verify that this is the intended filing before relying on the figures below.
Business context and reporting period
Unaudited results cover the quarter and six months ended June 30, 2021, with balance-sheet comparisons to December 31, 2020. The company operates a pharmaceutical marketplace, a pharmaceutical wholesaler, a specialty pharmacy, telehealth services and a digital health-passport business. Its name change to TRxADE HEALTH, INC. took effect June 1, 2021.
Financial performance and position
| Metric | Q2 2021 | Q2 2020 | Six months 2021 | Six months 2020 |
|---|---|---|---|---|
| Revenue | $1.90 million | $6.59 million | $4.95 million | $8.80 million |
| Gross profit | $0.84 million | $2.00 million | $2.22 million | $3.64 million |
| Gross margin | 44% | 30% | 45% | 41% |
| Net income (loss) | $(2.58) million | $(0.54) million | $(3.23) million | $(0.36) million |
| Basic and diluted loss per share | $(0.32) | $(0.07) | $(0.40) | $(0.05) |
| Operating cash flow | Not separately presented | Not separately presented | $(1.40) million | $(3.98) million |
- Q2 revenue fell 71.2% year over year; first-half revenue fell 43.7%. Management attributed the decline mainly to nonrecurring 2020 PPE sales and supply constraints affecting generic drugs on the marketplace.
- Gross margin improved, but gross profit dollars declined. The quarter included a $383,000 PPE inventory write-down within cost of sales.
- First-half operating expenses included a $1.23 million loss on inventory investments. General and administrative costs, excluding stock-based compensation, increased 37.7% year over year for the half, primarily due to development and marketing for Bonum Health and MedCheks and legal costs.
- At June 30, cash was $4.52 million, current assets $6.54 million, current liabilities $0.86 million, and working capital $5.68 million. Cash declined $1.40 million from year-end 2020. Total liabilities were $1.11 million; these included $225,000 of related-party notes and approximately $339,000 of lease liabilities.
- The $225,000 related-party note bears 10% simple annual interest and matures October 15, 2021. First-half financing cash flow was only $1,821; the prior-year period included proceeds from an equity offering.
Outlook, risks and unusual items
- Management said it believed available cash and expected operating cash generation could support operations for the foreseeable future, but gave no revenue or earnings guidance. It estimated operating expenses and working-capital requirements of approximately $9 million for July 2021 through June 2022 and acknowledged that additional financing may be needed and might not be available on favorable terms.
- The board approved an at-the-market offering of up to $9 million on July 18, 2021, then deferred it on July 22 and reactivated a previously approved share-repurchase program of up to $1 million. No shares had been repurchased as of the filing.
- Losses on inventory investments included $500,000 paid for nitrile gloves not delivered by Studebaker, $581,250 paid toward undelivered gloves involving Crecom, and $143,891 for Bonum Health Hubs the company no longer expected to install. Recovery of the deposits depends on pending litigation; management said collection timing and amounts were uncertain.
- A $630,000 receivable from one customer was more than 90 days overdue. The company reported additional collateral and considered it collectible, recording no allowance.
- Management described ongoing COVID-19-related pharmaceutical supply interruptions, staffing and outsourcing constraints, and uncertainty over demand for the health-passport product. It also warned that changing market conditions could lead to further inventory or asset write-downs.
- Disclosure controls and procedures were deemed ineffective at June 30, 2021. Management cited material weaknesses involving insufficient written accounting/reporting procedures and ineffective period-end financial close and reporting controls; remediation was in progress.
- The filing reports a pending Florida federal lawsuit related to alleged investments and securities claims; the company assessed the likelihood of a material loss as remote. The filing also states there were no outstanding off-balance-sheet arrangements.
Important facts for investors to verify
- Confirm the issuer: this document is TRxADE HEALTH, INC., not Scienture Holdings, Inc.
- Resolve the first-half cost-of-sales discrepancy: the financial statements show $2,726,787, while the MD&A comparison table shows $2,276,787. The former reconciles to reported revenue and gross profit.
- Check collection prospects and litigation status for the $1.08 million in glove deposits, and the collectibility and collateral supporting the $630,000 overdue receivable.
- Assess liquidity against the stated $9 million estimated expenses for the next 12 months, operating cash burn, the October 2021 related-party note maturity, and potential equity issuance or repurchases.
- Monitor progress on internal-control remediation, pharmaceutical supply availability, and adoption of Bonum Health and MedCheks products.