Scienture Holdings, Inc. 10-K

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA TABLE OF CONTENTS TO FINANCIAL STATEMENTS Consolidated Financial Statements Table of Contents Report of Independent Registered Public Accounting Firm (Firm ID: 6866 ) 55 Report of the Independent Registered Public Accounting Firm (MaloneBailey, LLP, Houston, Texas, Firm ID: 00206 ) 57 Consolidated Balance Sheets 58 Consolidated Statements of Operations 59 Consolidated Statements of Changes in Stockholders’ Equity 60 Consolidated Statements of Cash Flows 61 Notes to Consolidated Financial Statements 62 54 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Stockholders of TRxADE HEALTH Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheet of TRxADE Health, Inc. (the Company) as of December 31, 2023, and the related consolidated statements of operations, stockholders’ equity, and cash flows for the year then ended, and the related notes (collectively referred to as the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023, and the results of its operations and its cash flows for the year ended then ended, in conformity with accounting principles generally accepted in the United States of America. Basis for Opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion. Emphasis of a matter – Going concern The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company has suffered recurring losses from operations and has a net capital deficiency that raises substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. Critical Audit Matters The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. Fair value of acquired intangible assets Description of the matter As discussed in Note 1 and Note 3 to the consolidated financial statements, on July 31, 2023, the Company acquired Superlatus, Inc. in a transaction accounted for as a business combination. As a result of the transaction, the Company recognized acquired technology associated with the generation of future income. The acquisition-date fair value of the acquired technology was $9.8 million. 55 We identified the evaluation of the acquisition-date fair value of the acquired technology as a critical audit matter. A high degree of subjective auditor judgment was required to evaluate the key assumptions within the discounted cash flows model used to estimate the acquisition-date fair value of the acquired technology, specifically the revenue growth rate, margin, and discount rate. There was limited observable market information related to these assumptions and the estimated acquisition-date fair value of the acquired technology was sensitive to minor changes in such assumptions. How We Addressed the Matter in our Audit The following are the primary procedures we performed to address this critical audit matter. ● We evaluated the Company’s revenue growth rate and margin assumptions by comparing them to the pre-acquisition budget and the Company’s historical financial results. ● We evaluated the discount rate used by comparing it to a discount rate that was developed using publicly available market data for comparable entities. ● We compared the revenue growth rate, margin, to those of comparable entities ● We validated the mathematical accuracy of the management’s calculations. Impairment of Goodwill Description of the Matter As reflected in the Company’s consolidated financial statements at December 31, 2023, the Company impaired all goodwill as of December 31, 2023. As disclosed in Notes 1 to the consolidated financial statements, goodwill is tested for impairment at least annually or more frequently if indicators of impairment require the performance of an interim impairment assessment. As a result of these assessments, management concluded that there was an impairment to goodwill for the year ended December 31, 2023, in the amount of $5.1 million. Auditing management’s impairment tests of goodwill is complex and highly judgmental due to the significant measurement uncertainty in determining the fair values of the reporting units. In particular, the fair value estimates of the reporting units were sensitive to changes in significant assumptions such as discount rates, revenue growth rates, operating margins, estimated spending on capital expenditures, terminal growth rates, and comparable company specific information. These assumptions are affected by current and expected future market or economic conditions. How We Addressed the Matter in our Audit Our audit procedures related to the selection of the discount rates used and forecasts of future net sales, operating margins, operating expenses, and other market and economic data of the reporting units, involved: ● Obtaining an understanding of the Company’s process and related controls to evaluate goodwill for impairment. ● Evaluating the reasonableness of managements forecasts of future net sales, operating margins, and operating expenses by comparing the forecasts to historical results, marketing plans relevant economic factors, and other comparable company and industry information. /s/ CM3 Advisory We have served as the Company’s auditor since 2023 San Diego, California April 22, 2024 56 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Shareholders and Board of Directors of TRxADE HEALTH, INC. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheet of TRxADE HEALTH, INC. (the “Company”) as of December 31, 2022, and the related statements of operations, stockholders’ equity, and cash flows for the year then ended, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022, and the results of its operations and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America. Going Concern Matter The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company has suffered recurring losses from operations and has a net capital deficiency that raises substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. Basis for Opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion. /s/ MaloneBailey, LLP www.malonebailey.com We have served as the Company’s auditor from 2013 to 2023. Houston, Texas March 27, 2023 57 TRxADE HEALTH, INC. Consolidated Balance Sheets December 31, 2023 and 2022 December 31, December 31, 2023 2022 Assets Current Assets Cash $ 151,908 $ 1,094,894 Accounts receivable, net 821,804 629,921 Inventory 968 65,523 Prepaid assets 107,774 104,461 Notes receivable 1,300,000 - Other receivables 370,608 - Current assets of discontinued operations - 198,324 Total Current Assets 2,753,062 2,093,123 Property, plant and equipment, net 277,009 65,214 Intangible assets and capitalized software, net 8,962,688 - Security deposits 10,531 49,029 Operating lease right-of-use assets 529,623 1,051,815 Noncurrent assets of discontinued operations - 450,845 Total Assets $ 12,532,913 $ 3,710,026 Liabilities and Shareholders’ Equity Current Liabilities Accounts payable 2,082,054 527,984 Accrued liabilities 400,987 271,230 Other current liabilities 70,310 67,517 Contingent funding liabilities 1,246,346 108,036 Lease liabilities – current portion 139,705 196,872 Notes payable – current portion 6,530,000 166,667 Warrant liability 736,953 588,533 Purchase price payable 350,000 - Current liabilities of discontinued operations - 219,952 Total Current liabilities 11,556,355 2,146,791 Long Term Liabilities Lease liabilities – net of current portion 409,205 887,035 Notes payable 25,000 333,333 Total Liabilities 11,990,560 3,367,159 Stockholders’ Equity Series A preferred stock, $ 0.00001 par value; 9,211,246 shares authorized; none issued and outstanding as of December 31, 2023 and December 31, 2022 - - Series B preferred stock, $ 0.00001 par value; 787,754 shares authorized; 15,759 outstanding as of December 31, 2023, and none as December 31, 2022 - - Series C preferred stock, $ 0.00001 par value; 1,000 shares authorized; 290 issued and outstanding as of December 31, 2023, and none as of December 31, 2022 - - Preferred stock value Common stock, $ 0.00001 par value; 100,000,000 shares authorized; 905,008 , and 626,247 shares issued and outstanding as of December 31, 2023 and December 31, 2022, respectively 9 6 Additional paid-in capital 33,788,284 20,482,666 Retained deficit ( 33,245,940 ) ( 19,719,536 ) Total TRxADE Health, Inc stockholders’ equity 542,353 763,136 Non-controlling interest in subsidiary - ( 420,269 ) Total stockholders’ equity 542,353 342,867 Total Liabilities and Stockholders’ Equity $ 12,532,913 $ 3,710,026 The accompanying notes are an integral part of the consolidated financial statements. 58 TRxADE HEALTH, INC. Consolidated Statements of Operations Years Ended December 31, 2023 and 2022 2023 2022 Years Ended December 31, 2023 2022 Revenues $ 8,272,214 $ 10,250,168 Cost of sales 5,673,957 4,730,897 Gross Profit 2,598,257 5,519,271 Operating Expenses: Loss on inventory investment - 875,250 Wage and salary expense 2,698,178 3,581,089 Professional fees 1,466,567 466,735 Accounting and legal expense 1,534,377 829,751 Technology expense 1,376,908 993,185 General and administrative 2,785,633 1,689,230 Total operating expenses 9,861,663 8,435,240 Operating Loss ( 7,263,406 ) ( 2,915,969 ) Nonoperating Income (Expense) Change in fair value of warrant liability ( 148,420 ) 825,544 Interest income 4,198 20,989 Goodwill impairment ( 5,129,115 ) - Gain on disposal of asset - 2,200 Other income 14,543 - Interest expense ( 1,198,346 ) ( 336,206 ) Total nonoperating income (expense) ( 6,457,140 ) 512,527 Net loss from continuing operations ( 13,720,546 ) ( 2,403,442 ) Net loss on discontinued operations ( 4,123,028 ) ( 1,506,426 ) Net Loss ( 17,843,574 ) ( 3,909,868 ) Net loss attributable to TRxADE Health, Inc. ( 17,843,574 ) ( 3,472,099 ) Net loss attributable to non-controlling interests - ( 437,769 ) Net loss per common share from continuing operations Basic $ ( 17.96 ) $ ( 3.48 ) Diluted $ ( 5.76 ) $ ( 3.47 ) Net loss per common share from discontinued operations Basic $ ( 5.40 ) $ ( 2.67 ) Diluted $ ( 1.73 ) $ ( 2.66 ) Net loss attributable to common stockholders Basic $ ( 23.35 ) $ ( 6.15 ) Diluted $ ( 7.49 ) $ ( 6.13 ) Weighted average common shares outstanding Basic 764,058 564,862 Diluted 2,381,443 566,609 The accompanying notes are an integral part of the consolidated financial statements. 59 TRxADE HEALTH, INC. Consolidated Statements of Changes in Stockholders’ Equity Years Ended December 31, 2023 and 2022 Series B Preferred Stock Series C Preferred Stock Common Stock Additional Non-Controlling Total Shares $ Amount Shares $ Amount Shares $ Amount Paid-in Capital Accumulated Deficit Interest in Subsidiary Stockholders’ Equity Balance at December 31, 2021 - $ - - $ - 544,430 $ 5 $ 20,017,605 $ ( 16,247,437 ) $ - $ 3,770,173 Capital Contributions - - - - - - - - 792,500 792,500 Capital Distribution - - - - - - - - ( 775,000 ) ( 775,000 ) Common stock issued for services - - - - 19,511 - 254,106 - - 254,106 Common stock issued for placement, net issuance costs - - - 61,334 1 130,917 - - 130,918 Warrants exercised for cash - - - - 972 - 875 - - 875 Options expense - - - - - - 79,163 - - 79,163 Net loss - - - - - - - ( 3,472,099 ) ( 437,769 ) ( 3,909,868 ) Balance at December 31, 2022 - $ - - $ - 626,247 $ 6 $ 20,482,666 $ ( 19,719,536 ) $ ( 420,269 ) $ 342,867 Balance - $ - 626,247 $ 6 $ 20,482,666 $ ( 19,719,536 ) $ ( 420,269 ) $ 342,867 Common stock issued for services - - - - 38,480 - 257,772 - - 257,772 Warrants exercised for cash - - - - 41,911 1 1,621 - - 1,622 Options expense - - - - - - 29,738 - - 29,738 Reverse split rounding adjustment - - - - 21,929 - - - - - Disposition of assets - - - - - - - 4,317,170 420,269 4,737,439 Shares issued pursuant to merger agreement 15,759 - - - 136,441 1 12,500,088 - - 12,500,089 Shares issued pursuant to securities purchase agreement - - 290 - 40,000 1 516,399 - - 516,400 Net loss - - - - - - - ( 17,843,574 ) - ( 17,843,574 ) Balance at December 31, 2023 15,759 $ - 290 $ - 905,008 $ 9 $ 33,788,284 $ ( 33,245,940 ) $ - $ 542,353 Balance 15,759 $ - 290 - 905,008 $ 9 $ 33,788,284 $ ( 33,245,940 ) $ - $ 542,353 The accompanying notes are an integral part of the consolidated financial statements. 60 TRxADE HEALTH, INC. Consolidated Statements of Cash Flows Years ended December 31, 2023 and 2022 2023 2022 Cash flows from operating activities: Net loss $ ( 13,720,546 ) $ ( 2,403,442 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation expense 19,375 13,486 Options expense 29,738 79,163 Common stock issued for services 257,772 254,106 Bad debt expense - ( 246,683 ) Loss on write-off of intangible asset - 792,500 Loss on inventory investment - 875,250 Goodwill impairment 5,129,115 - Loss on inventory investments - - Gain on sale of asset - ( 2,200 ) Amortization of right-of-use assets 215,665 181,218 Amortization of intangible assets 814,790 - Changes in operating assets and liabilities: Accounts receivable, net ( 293,784 ) 369,932 Prepaid assets and deposits 38,367 335,066 Inventory 4,232,947 ( 51,737 ) Other receivables ( 254,924 ) ( 875,250 ) Right-of-use assets 306,527 - Lease liability ( 534,997 ) ( 164,618 ) Accounts payable 1,607,625 199,833 Accrued liabilities 58,692 ( 211,694 ) Purchase price payable 350,000 - Current liabilities 2,794 67,517 Warrant liability 148,420 588,533 Net cash used in operating activities from continuing operations ( 1,592,424 ) ( 199,020 ) Net cash used in operating activities from discontinued operations ( 481,177 ) ( 1,365,648 ) Cash flows from investing activities: Funds acquired through acquisitions ( 344,454 ) - Proceeds from sale of fixed assets - 749 Investment in capitalized software - - Net cash (used in) investing activities from continuing operations ( 344,454 ) 749 Net cash provided by investing activities from discontinued operations 68,737 ( 428,594 ) Cash flows from financing activities: Proceeds from the issuance of debt 400,000 - Repayment of debt ( 150,000 ) - Repayment of contingent liability ( 1,043,107 ) ( 716,964 ) Proceeds from sale of future revenue 2,181,417 825,000 Proceeds from exercise of stock options - - Proceeds from exercise of warrants 1,622 875 Proceeds from securities purchase agreement 516,400 - Proceeds from issuance of common stock, net of issuance costs - 130,918 Net cash provided by (used in) financing activities from continuing operations 1,906,332 239,829 Net cash (used in) financing activities from discontinued operations ( 500,000 ) ( 275,000 ) Net decrease in cash ( 942,986 ) ( 2,027,684 ) Cash at beginning of the year 1,094,894 3,122,578 Cash at end of the period $ 151,908 $ 1,094,894 Supplemental disclosure of cash flow information Cash paid for interest, net $ 733,694 $ 336,206 Cash paid for income taxes $ - $ - Non-Cash Transactions Insurance premium financed $ 306,152 $ 220,354 Note issued as SOSRx contribution - $ 500,000 Not cancelled from SORx agreement termination $ 500,000 - Intangible asset contribution from non-controlling interest $ - $ 792,500 Disposition of assets, related party $ 492,030 - Issuance of note receivable $ 1,300,000 $ - The accompanying notes are an integral part of the consolidated financial statements. 61 TRxADE HEALTH, INC. Notes to Consolidated Financial Statements For the years ended December 31, 2023 and 2022 NOTE 1 – ORGANIZATION AND BASIS OF PRESENTATION Overview TRxADE HEALTH, INC. (“ we ”, “ our ”, “ Trxade ”, and the “ Company ”) owns as of December 31, 2023, 100 % of Trxade, Inc. and Integra Pharma Solutions, LLC, Bonum Health, LLC, Superlatus, Inc. and its wholly-owned subsidiaries, Sapientia Technologies, LLC (“Sapientia”), Superlatus Food Service Holding Company, Superlatus PD Holding Company, and The Urgent Company, Inc. On July 31, 2023, the Company completed a merger transaction that resulted in with Superlatus, Inc. becoming a wholly owned subsidiary of the Company (see “Merger”, below). On September 27, 2023, the Company acquired The Urgent Company, Inc. and its related subsidiaries (see Note 3). During the year ended December 31, 2023, Trxade, Inc., operated a web-based market platform that enables commerce among healthcare buyers and sellers of pharmaceuticals, accessories and services. Integra Pharma Solutions, LLC (“IPS”, d.b.a. Trxade Prime), is a licensed pharmaceutical wholesaler and sells brand, generic and non-drug products to customers. IPS customers include all healthcare markets including government organizations, hospitals, clinics and independent pharmacies nationwide. Community Specialty Pharmacy, LLC, (“CSP”) is an accredited independent retail pharmacy with a focus on a community-based model offering home delivery services to patients. Alliance Pharma Solutions, LLC (“APS”, d.b.a. DelivMeds) is currently being rebranded and the consumer-based app is still being developed. To date, the Company has not generated any revenue from this product. On January 20, 2023, the Company entered into Membership Interest Purchase Agreements to sell 100 % of the outstanding membership interests of the Company’s subsidiaries, CSP and APS. The Company will receive consideration in the amount of $ 125,000 for APS and $ 100,000 for CSP. The Company also agreed to enter into a Master Service Agreement to operate the businesses prior to closing. Additional amounts owed to the Company as a result of this Master Service Agreement totaled $ 1,075,000 as of the closing date of August 22, 2023 (see Note 3 and Note 7). Bonum Health, LLC (“Bonum Health”), was formed to hold certain telehealth assets acquired in October 2019. The “Bonum Health Hub” was launched in February 2020; however, the Company does not anticipate installations moving forward. The Bonum Health mobile application is 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. SOSRx, LLC (“SOSRx”) was formed on February 15, 2022. The Company entered into a relationship with Exchange Health, LLC (“Exchange Health”), a technology company providing an online platform for manufacturers and suppliers to sell and purchase pharmaceuticals. SOSRx, a Delaware limited liability company, was formed, which was owned 51 % by the Company and 49 % by Exchange Health. SOSRx did not generate material revenue and in February of 2023, the Company voluntarily withdrew from the joint venture agreement. As part of the voluntary withdrawal the Company has recorded a loss of $ 352,244 from disposal of assets, which is included in net loss on discontinued operations in the audited consolidated statement of operations in the amount of for the year ended December 31, 2023. Merger On July 14, 2023, the Company entered into an Amended and Restated Agreement and Plan of Merger (the “Merger Agreement”) with Superlatus, Inc., a U.S.-based holding company of food products and distribution capabilities (“Superlatus”) and Foods Merger Sub, Inc., a Delaware corporation and wholly owned subsidiary of the Company (“Merger Sub”). Superlatus is a diversified food technology company with distribution capabilities and systems to optimize food security and population health via innovative Consumer Packaged Goods (“CPG”) products, agritech, foodtech, plant-based proteins and alt-protein and includes wholly-owned subsidiary, Sapientia, Inc. (“Sapientia”), a food tech business. On July 31, 2023 (the “Closing Date”), the Company completed its acquisition of Superlatus in accordance with the terms and conditions of the Merger Agreement (the “Merger”), pursuant to which the Company acquired Superlatus by way of a merger of the Merger Sub with and into Superlatus, with Superlatus being a wholly owned subsidiary of the Company and the surviving entity in the Merger. Under the terms of the Merger Agreement, at the closing of the Merger (the “Closing”), shareholders of Superlatus received in aggregate 136,441 shares of common stock of the Company, representing 19.99 % of the then total issued and outstanding common stock of the Company after the consummation of the Merger and 306,855 shares of Company’s Series B Preferred Stock, par value $ 0.00001 per share (the “Series B Preferred Stock”), with a conversion ratio of 100 shares of Series B Preferred Stock to one share of common stock. At Closing, the value of the common stock was $ 7.30 per share, resulting in a total value of $ 225,000,169 . Upon consummation of the Merger, the Company continued to trade under the current ticker symbol “MEDS.” 62 As a condition and inducement to Superlatus’ willingness to enter into the Merger Agreement, on June 28, 2023, Suren Ajjarapu and Prashant Patel (the “Principal Stockholders”) entered into an agreement with TRxADE (the “Stock Swap Agreement”), pursuant to which, TRxADE was to transfer all of the shares or membership interest of the operating subsidiaries currently owned by TRxADE to Principal Stockholders, in exchange for Suran Ajjarapu to surrender 85,000 share of common stock of TRxADE and Prashant Patel to surrender 81,666 shares of the common stock of TRxADE (the “Stock Swap Transaction”). The closing of the Stock Swap Transaction was to take place simultaneously with the approval of TRxADE stockholders of the conversion of the Series B preferred stock into common stock. As of the date of this filing, TRxADE stockholders have not approved the conversion. In connection with the Merger, effective one (1) business day immediately prior to the Closing Date (the “MEDS Rights Record Date”), the Company issued to the shareholders of the Company as of the MEDS Rights Record Date, including the independent directors who are entitled to certain amount of common stock of the Company in connection with their 2023 annual compensation and regardless of whether the common stock has been issued or vest before the MEDS Rights Records Date (collectively, the “MEDS Rights Shareholders”) a non-transferrable right to receive one share of common stock of the Company at no cost (the “MEDS Rights”), with seven (7) MEDS Rights issued per share of common stock of the Company held as of the MEDS Rights Record Date, conditioned upon their execution of a Registration Rights Agreement. Such issuances will be made in reliance on the exemption from registration pursuant to Section 3(a)(9) or Section 4(a)(2) of the Securities Act, Regulation D under the Securities Act promulgated thereunder, and corresponding provisions of state securities or “blue sky” laws. The MEDS Rights are not actionable or transferable until registration; provided they become transferable one year after the date of the Merger if no registration has occurred. As of the date of this filing, no MEDS Rights shares have been issued. Not all of the closing conditions of the Merger Agreement were met. As a result, the Company entered into Amendment No. 1 to the Amended and Restated Agreement and Plan of Merger (the “Amendment”) on January 8, 2024. Under the terms of the Amendment, the merger consideration to the shareholders of Superlatus was adjusted to the aggregate of 136,441 shares of common stock of the Company, representing 19.99 % of the total issued and outstanding common stock of the Company after the consummation of the Merger and 15,759 shares of Company’s Series B Preferred Stock, par value $ 0.00001 per share (the “Series B Preferred Stock”), with a conversion ratio of 100 shares of Series B Preferred Stock to one share of common stock. At Closing, the value of the common stock was $ 7.30 per share, resulting in a total value of $ 12,500,089 . Additionally, the shareholders of Superlatus agreed to surrender back to the Company 291,096 shares of the Company’s Series B Preferred Stock. In March 2024 the Company divested of its interest in Superlatus and, among other things, the Stock Swap Transaction in not expected to occur. Basis of Presentation and Principles of Consolidation The Company’s consolidated financial statements include the accounts of TRxADE HEALTH, INC., Trxade, Inc., Integra Pharma Solutions, Inc., Bonum Health, LLC, Superlatus, Inc., Sapientia Technologies, LLC and The Urgent Company, Inc. The accompanying consolidated financial statements of TRxADE HEALTH, Inc. have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and the rules of the SEC. All significant intercompany accounts and transactions have been eliminated. Use of Estimates The preparation of condensed consolidated financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses in the reporting period. The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from its estimates. To the extent there are material differences between estimates and the actual results, future results of operations will be affected. Significant estimates for the years ended December 31, 2023 and 2022 include the valuation of intangible assets, including goodwill. 63 Fair value of financial instruments The carrying amounts for cash, accounts receivable, accounts payable, accrued liabilities, and other current liabilities approximate their fair value because of their short-term maturity. Stock Split Effective June 21, 2023, the Company executed a 1:15 reverse stock split for stockholders of record on that date . This was executed to comply with the Nasdaq Listing Rule 5550(a)(2) to have the price of the stock above $ 1.00 . Recently Issued Accounting Pronouncements In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments” (“ASU 2016-13”). ASU 2016-13 requires companies to measure credit losses utilizing a methodology that reflects expected credit losses and requires a consideration of a broader range of reasonable and supportable information to inform credit loss estimates. ASU 2016-13 is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The Company adopted ASU 2016-13 effective January 1, 2023. The Company determined that the update applied to trade receivables, but that there was no material impact to the consolidated financial statements from the adoption of ASU 2016-13. In August 2020, the FASB issued ASU 2020-06, “Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40)”. This ASU reduces the number of accounting models for convertible debt instruments and convertible preferred stock and amends the guidance for the derivatives scope exception for contracts in an entity’s own equity to reduce form-over-substance-based accounting conclusions. In addition, this ASU improves and amends the related earnings per share guidance. This standard is effective for us on January 1, 2022, including interim periods within those fiscal years. Adoption is either a modified retrospective method or a fully retrospective method of transition. The adoption of ASU 2020-06 did not have a material impact on the consolidated financial statements. Accounts Receivable, net On January 1, 2023, the Company adopted ASU 2016-13 “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments” and its related amendments using the prospective method. The new standard requires the use of a current expected credit loss impairment model to develop and recognize credit losses for financial instruments at amortized cost when the asset is first originated or acquired, and each subsequent reporting period. The Company’s receivables are from customers and are typically collected within 90 days. The Company determines the allowance based on known troubled accounts, historical experience, and other currently available evidence. The Company had an account receivable with a single customer, GSG PPE, LLC (“GSG”), 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 did not believe the amount to be collectible without legal actions, and therefore, recorded bad debt expense reflected on the consolidated statement of operations during the year ended December 31, 2021. The note was not paid pursuant to its terms and the Company had filed a suit to collect on the note and the personal guaranty securing the note. The Company settled the lawsuit in June of 2022. During the years ended December 31, 2023, and 2022, there was a bad debt recovery from the GSG lawsuit of $ 32,074 and $ 98,841 respectively. Other Receivables, net The Company’s other receivables balance is from one vendor. On May 20, 2022, effective as of May 18, 2022, Community Specialty Pharmacy, LLC (“CSP”) entered into an agreement to acquire COVID-19 testing kits from a third-party vendor for an aggregate of $ 1,200,000 , of which $ 875,000 was paid on May 23, 2022. The Company received the COVID-19 testing kits in July 2022. On August 18, 2022, the Company was informed by the vendor that the vendor had received a letter from the U.S. Food and Drug Administration (“FDA”) that the COVID-19 test kits were misbranded under Section 502(o) of the Federal Food, Drug, and Cosmetic Act (“FDC Act”) (21 USC 352(o)) and adulterated under Section 501(f) of the FDC Act (21 USC 351(f)). Furthermore, the vendor informed the Company that the letter from the FDA also stated that because of the FDA’s prohibition on the distribution of adulterated and/or misbranded devices applies to all parties along the distribution chain, the FDA was advising the vendor against furthering the distribution of the COVID-19 test kits in interstate commerce. The company wrote the amount off as a loss of inventory as of December 31, 2022. As of December 31, 2023, and December 31, 2022, the balance of this receivable was $ 0 . 64 On August 22, 2023, the Company completed the sale of CSP and APS (see Note 3). The net balance due to the Company from these entities, in excess of the Note Receivable (see Note 6), was $ 370,608 as of December 31, 2023. Acquisitions The Company accounts for acquisitions and investments in businesses as business combinations if the target meets the definition of a business and (a) the target is a variable interest entity (“VIE”) and the Company is the target’s primary beneficiary, and therefore the Company must consolidate its financial statements, or (b) the Company acquires more than 50% of the voting interest of the target and it was not previously consolidated. The Company records business combinations using the acquisition method of accounting, which requires all the assets acquired and liabilities assumed to be recorded at fair value as of the acquisition date. The excess of the purchase price over the estimated fair values of the net tangible and intangible assets acquired is recorded as goodwill. The application of the acquisition method of accounting for business combinations requires management to make significant estimates and assumptions in the determination of the fair value of assets acquired and liabilities assumed in order to properly allocate purchase price consideration between assets that are depreciated and amortized from goodwill. The fair value assigned to tangible and intangible assets acquired and liabilities assumed are based on management’s estimates and assumptions, as well as other information compiled by management, including valuations that utilize customary valuation procedures and techniques. Significant assumptions and estimates include, but are not limited to, the cash flows that an asset is expected to generate in the future, the appropriate weighted-average cost of capital, and the cost savings expected to be derived from acquiring an asset, if applicable. If the actual results differ from the estimates and judgments used in these estimates, the amounts recorded in the Company’s financial statements may be exposed to potential impairment of the intangible assets and goodwill. If the Company’s investment involves the acquisition of an asset or group of assets that does not meet the definition of a business, the transaction is accounted for as an asset acquisition. An asset acquisition is recorded at cost, which includes capitalizing transaction costs, and does not result in the recognition of goodwill. Intangible Assets and Goodwill The Company tests indefinite-lived intangible assets for impairment on an annual basis or whenever events or changes occur that would more-likely-than not reduce the fair value of the indefinite-lived intangible asset below its carrying value between annual impairment tests. Any indefinite-lived intangible asset assessment is performed at the Company level. The Company recognized a goodwill impairment loss of $ 5,129,115 for the year ended December 31, 2023. The goodwill resulted from the acquisition of Superlatus and was subsequently determined to be impaired based on the facts and circumstances surrounding the sale of Superlatus on March 5, 2024. See Note 20. 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 December 31, 2023, we had 218,729 outstanding warrants to purchase shares of common stock and 26,229 options to purchase shares of common stock. As part of the termination of the White Lion deal, White Lion was issued 50,000 shares of stock per the agreement on March 1, 2023. Armistice Capital executed its pre-funded warrants on January 4, 2023, and purchased 601,740 shares ( 40,116 shares after the effect of the 1:15 reverse stock split on June 21, 2023, see Note 13) of stock with a purchase price of $ 6.02 . 65 The following table sets forth the computation of basic and diluted loss per share: SCHEDULE OF BASIC AND DILUTIVE INCOME (LOSS) PER SHARE For the Years Ended December 31, 2023 2022 Numerator: Net loss from continuing operations $ ( 13,720,546 ) $ ( 2,403,442 ) Net loss attributable to noncontrolling interest - ( 437,769 ) Net loss from continuing operations available to common stockholders ( 13,720,546 ) ( 1,965,673 ) Net loss from discontinued operations ( 4,123,028 ) $ ( 1,506,426 ) Numerator for basic and diluted EPS - income available to common stockholders ( 17,843,574 ) $ ( 3,472,099 ) Denominator: Denominator for EPS – weighted average shares Basic 764,058 564,862 Diluted 2,381,443 566,609 Net loss per common share attributable to common stockholders Basic $ ( 23.35 ) $ ( 6.15 ) Diluted $ ( 7.49 ) $ ( 6.13 ) Net loss per common share from continuing operations Basic $ ( 17.96 ) $ ( 3.48 ) Diluted $ ( 5.76 ) $ ( 3.47 ) Net loss per common share from discontinued operations Basic $ ( 5.40 ) $ ( 2.67 ) Diluted $ ( 1.73 ) $ ( 2.66 ) Income taxes The Company’s provision for income taxes was $ 0 for the year ended December 31, 2023, and $ 0 for the year ended December 31, 2022, respectively. The income tax provisions for the twelve-month periods are based upon estimates of annual income (loss), annual permanent differences and statutory tax rates in the various jurisdictions in which the Company operates. For all periods presented, the Company utilized net operating loss carryforwards to offset the impact of any taxable income. The Company’s tax rate differs from the applicable statutory rates due primarily to the establishment of a valuation allowance, utilization of deferred and the effect of permanent differences and adjustments. NOTE 2 – GOING CONCERN The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates realization of assets and the satisfaction of liabilities in the normal course of business within one year after the date the consolidated financial statements are issued. In accordance with Financial Accounting Standards Board, or the FASB, Accounting Standards Update No. 2014-15, Presentation of Financial Statements - Going Concern (Subtopic 205-40), our management evaluates whether there are conditions or events, considered in aggregate, that raise substantial doubt about our ability to continue as a going concern within one year after the date that the financial statements are issued. As of December 31, 2023, the Company had an accumulated deficit of $ 33,245,940 . The Company has limited financial resources. As of December 31, 2023, the Company had a working capital deficit of $ 8,803,293 and a cash balance of $ 151,908 . The Company will need to raise additional capital or secure debt funding to support on-going operations. The sources of this capital are expected to be the sale of equity and debt, which may not be available on favorable terms, if at all, and may, if sold, cause significant dilution to existing stockholders. If the Company is unable to access additional capital moving forward, it may hurt the Company’s ability to grow and to generate future revenues, financial position, and liquidity. These factors raise substantial doubt about the ability of the Company to continue as a going concern. Unless Management is able to obtain additional financing, it is unlikely that the Company will be able to meet its funding requirements during the next 12 months. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. NOTE 3 – ACQUISITIONS AND DISPOSITIONS Acquisitions Superlatus, Inc. On July 31, 2023, the Company entered into the Merger Agreement (see Note 1) with Superlatus (“Seller”) whereby the Company acquired 100 % of the stock of the Seller (the “Acquisition”). Superlatus includes a wholly-owned subsidiary, Sapientia. Consideration for the Acquisition consisted of (i) 136,441 shares of the Company’s common stock at a fair value of $ 7.30 per share, representing 19.99 % of the total issued and outstanding share of the Company’s common stock at Closing, and (ii) 306,855 shares of the Company’s Series B Preferred Stock, a new class of the Company’s non-voting convertible preferred stock with a conversion ratio of 100 to one. The total fair value of the common stock and Series B Preferred Stock on the Closing Date was $ 225,000,169 (“Purchase Price”). On January 8, 2024, the Company entered into Amendment No. 1 to the Agreement and Plan of Merger (the “Amendment”). Under the terms of the Amendment, the merger consideration to the shareholders of Superlatus was adjusted to an aggregate of 136,441 shares of common stock of the Company, representing 19.99 % of the total issued and outstanding common stock of the Company after the consummation of the Merger and 15,759 shares of Company’s Series B Preferred Stock, par value $ 0.00001 per share, with a conversion ratio of 100 shares of Series B Preferred Stock to one share of common stock. The total fair value of the common stock and Series B Preferred Stock on the Closing Date was adjusted to $ 12,500,089 (“Amended Purchase Price”). Additionally, the shareholders of Superlatus agreed to surrender back to the Company 291,096 shares of the Company’s Series B Preferred Stock previously received before the Amendment. 66 The acquisition of Superlatus was accounted for as a business combination using the acquisition method pursuant to FASB ASC Topic 805. As the acquirer for accounting purposes, the Company had estimated the Purchase Price, assets acquired and liabilities assumed as of the acquisition date, with the excess of the Purchase Price over the fair value of net assets acquired recognized as goodwill. An independent valuation expert assisted the Company in determining these fair values. The Amended Purchase Price allocation as of the acquisition date is presented as follows: SCHEDULE OF PURCHASE PRICE ALLOCATION July 31, 2023 Purchase consideration: Common Stock, at fair value $ 996,019 Series B Preferred Stock, at fair value 11,504,070 Total purchase consideration $ 12,500,089 Purchase price allocation: Cash $ 5,546 Prepaid expenses 3,705 Inventory 122,792 Intangible assets, net 9,777,479 Goodwill 5,129,115 Assets acquired 15,038,637 Accounts payable and other current liabilities ( 283,548 ) Purchase price payable ( 350,000 ) Notes payable ( 1,905,000 ) Liabilities assumed ( 2,538,548 ) Net assets acquired $ 12,500,089 The Urgent Company, Inc. On September 27, 2023, the Company entered into an Asset Purchase Agreement (“APA”) with The Urgent Company, Inc. (“TUC”) and its wholly owned subsidiaries, pursuant to which, the Company was assigned certain inventory and property and equipment and assumed certain operating leases for consideration of $ 4,400,000 in promissory notes (“Purchase Price”, see Note 11). This acquisition is expected to enhance the Company’s production of sustainable food products and enable the expansion of market share. 67 The transaction was accounted for as an asset acquisition pursuant to FASB ASC Topic 805. As the acquirer for accounting purposes, the Company allocated the cost of the asset acquisition to the assets acquired and liabilities assumed as of the acquisition date based on their respective relative fair value as of the date of the transaction. The following summarizes the relative fair values of the assets acquired as of the acquisition date based on the allocation of the cost of the asset acquisition: SCHEDULE OF FAIR VALUES OF ASSETS ACQUIRED September 27, 2023 Purchase consideration: Promissory note $ 4,400,000 Total purchase consideration $ 4,400,000 Allocation of cost of assets acquired: Inventory $ 4,168,830 Property and equipment 231,170 Assets acquired 4,400,000 Net assets acquired $ 4,400,000 Dispositions and Divestitures SOSRx, LLC Effective on, February 1, 2023, the Company, Exchange Health and SOSRx, entered into a Voluntary Withdrawal and Release Agreement, which was replaced in its entirety, corrected, and became effective on February 4, 2023 (as replaced and corrected, the “Release Agreement”). As part of the Release Agreement, a note payable to Exchange Health was forgiven in the amount of $ 500,000 and $ 15,000 in accounts payable was waived. Effective February 4, 2023, the operations of SOSRx were discontinued and operations were shut down. As a result of this, the assets and liabilities of SOSRx have been reflected as assets and liabilities of discontinued operations in the Company’s consolidated balance sheets. As of December 31, 2023 and December 31, 2022 as follows: SCHEDULE OF FINANCIAL STATEMENTS OF DISCONTINUED OPERATIONS December 31, 2023 December 31, 2022 Cash $ - $ 22,474 Accounts receivable - 363 Total assets of discontinued operations $ - $ 22,837 Accounts payable $ - $ 46,500 Total liabilities of discontinued operations $ - $ 46,500 The terms of the Release Agreement qualify the transaction as a discontinued operation in accordance with U.S. GAAP. As a result, operating results and cash flows related to the SOSRx operations have been reflected as discontinued operations in the Company’s consolidated statements of operations, consolidated statements of cash flows and consolidated statements of shareholders’ equity. 68 Alliance Pharma Solutions, LLC and Community Specialty Pharmacy, LLC On August 22, 2023, the Company and Wood Sage, LCC (“Wood Sage”) entered into a Membership Interest Purchase Agreement, pursuant to which the Company sold 100 % of the membership interest in Alliance Pharma Solutions, LLC (“ASP MIPA”) for consideration of a $ 125,000 promissory note (“ASP Sale Price”) and a Membership Interest Purchase Agreement, pursuant to which the Company sold 100 % of the membership interest in Community Specialty Pharmacy, LLC (“CSP MIPA”) in exchange for a $ 100,000 promissory note (“CSP Sale Price”). The divestiture of APS and CSP represented an intended strategic shift in the Company’s operations and will allow the Company to become focused on food technology As a result, the results of APS and CSP were classified as discontinued operations in our condensed statements of operations and excluded from both continuing operations and segment results for the years ended December 31, 2023 and 2022. As part of recognizing the business as held for sale in accordance with U.S. GAAP, the Company was required to measure APS and CSP at the lower of its carrying amount or fair value less cost to sell. As a result of this analysis, during the year ended December 31, 2023, the Company recognized a non-cash, pre-tax loss on disposal of $ 3,300,225.42 . The loss is included in “Net loss from discontinued operations” in the consolidated statements of operations. The loss was determined by comparing the fair value of the consideration received for the sale of a 100% interest in APS and CSP with the net assets of APS and CSP, respectively, immediately prior to the transaction. As a result of the transactions, the following assets and liabilities of APS and CSP were transferred to Wood Sage as of August 22, 2023: SCHEDULE OF ASSETS AND LIABILITIES Alliance Pharma Solutions, LLC Community Specialty Pharmacy, LLC Cash $ 1,050 $ 61,988 Accounts receivable, net - 101,901 Inventory - 123,230 Prepaid assets - 525 Intangible assets and capitalized software, net 739,337 - Accounts payable ( 23,982 ) ( 231,876 ) Accrued liabilities - ( 10,182 ) Net assets sold $ 716,405 $ 45,586 Discontinued Operations The results of operations from discontinued operations for the years ended December 31, 2023 and 2022, have been reflected as discontinued operations in the consolidated statements of operations and consist of the following: SCHEDULE OF DISCONTINUED OPERATIONS 2023 2022 2023 2022 2023 2022 2023 2022 SOSRx APS CPS Total Years ended December 31, Years ended December 31, Years ended December 31, Years ended December 31, 2023 2022 2023 2022 2023 2022 2023 2022 Revenue $ - $ 22,623 $ - $ - $ 851,755 $ 1,175,474 $ 851,755 $ 1,198,097 Cost of sales - - - - 705,206 1,266,152 705,206 1,266,152 Gross Profit - 22,623 - - 146,549 ( 90,678 ) 146,549 ( 68,055 ) Operating Expenses Impairment of intangible asset 792,500 - - - 792,500 Wage and salary expense - 55,439 - - 456,297 304,947 456,297 360,386 Professional fees - - 3,125 46,787 20,246 6,120 23,371 52,907 Accounting and legal expense - - 7,773 104 63,000 500 70,773 604 Technology expense - 63,160 20,611 86,688 9,464 17,823 30,075 167,671 General and Administrative - 4,931 3,762 11,562 32,830 49,710 36,592 66,203 Total operating expense - 916,030 35,271 145,141 581,837 379,100 617,108 1,440,271 Operating income (loss) from discontinued operations - ( 893,407 ) ( 35,271 ) ( 145,141 ) ( 435,288 ) ( 469,778 ) ( 470,559 ) ( 1,508,326 ) Other income (expense) - Gain (loss) on asset sale - - - 1,900 - - - 1,900 Total other income (expense) - - - 1,900 - - - 1,900 Net income (loss) from discontinued operations $ - $ ( 893,407 ) $ ( 35,271 ) $ ( 143,241 ) $ ( 435,288 ) $ ( 469,778 ) $ ( 470,559 ) $ ( 1,506,426 ) 69 NOTE 4 - RELATED PARTY TRANSACTIONS On April 1, 2023 and July 1, 2023 the Company entered into a relationship with Scietech, LLC (“Scietech”) in an independent contractor agreement to consult on increasing sales on the IPS and Trxade Inc. platforms. The agreement was for an annual fee of $ 400,000 to be split equally between IPS and Trxade Inc. A 31 % investor in Scietech is the spouse of the interim CFO, Prashant Patel, which qualifies as a related party. The company was chosen because they were the most qualified to perform the desired qualifications. 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. In connection therewith, SOSRx was formed in February 2022, 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”). Exchange Health contributed $ 792,000 in software and contracts which was recorded as an intangible asset on the balance sheet of SOSRx. The intangible asset was determined to be impaired and was written off on December 31, 2022. At December 31, 2023, total related party debt was $ 0 . On and effective on, February 1, 2023, the Company, Exchange Health and SOSRx, entered into a Voluntary Withdrawal and Release Agreement, which was replaced in its entirety and corrected on February 4, 2023, and effective February 4, 2023 (as replaced and corrected, the “Release Agreement”). Pursuant to the Release Agreement, the Company voluntarily withdrew as a member of SOSRx pursuant to the terms of the Operating Agreement of SOSRx, which provided that the Company would withdraw from SOSRx if certain revenue targets were not met, which targets have not been met. Also pursuant to the Release Agreement, (a) the Company agreed to the termination of its interests in SOSRx and its withdrawal as a member thereof for no consideration (the “Withdrawal”); (b) the Promissory Note, and all of the Company’s obligations under such Promissory Note were terminated; and (c) the parties agreed that no Earn Out Payments will be due. The Release Agreement also (i) provides that all accumulated losses of SOSRx through December 20, 2022, will be allocated 51% to the Company and 49% to Exchange Health; (ii) provides for a total of approximately $15,000 in outstanding invoices owed by the Company to SOSRx to be waived; (iii) includes certain indemnification obligations of SOSRx and Exchange Health; (iv) requires SOSRx to pay certain pre-agreed outstanding invoices of SOSRx; (v) includes mutual releases of the Company and SOSRx and Exchange Health; and (vi) includes customary representations and warranties of the parties. NOTE 5 – REVENUE RECOGNITION The Company derives revenue from two primary sources—product revenue and service revenue. Product revenue consists of shipments of: ● Resale of pharmaceutical products to pharmacies; and ● Revenues for our products are recognized and invoiced when the product is shipped to the customer. Service revenue consists primarily of: ● Transaction fees from the facilitation of buyer generated purchase orders to suppliers, billed monthly; ● Data service fees associated with providing vendors of pharmaceutical products with data analysis of their catalogues and branding of their products or company to the Company’s registered buyers, billed monthly or as a one-time fee; and ● Software-as-a-Service (“SaaS”) fees for a platform for virtual healthcare provider visits, billed monthly. Revenues for the Company’s services that are billed monthly are recognized and invoiced when the at the beginning of the month. Revenues for one-time services are recognized at the point in time when services are rendered. Payment terms for products and services are generally 0 to 60 days and the Company has no contract assets or liabilities. The following table presents disaggregated revenue by major product and service categories during the years ended December 31, 2023, and 2022: SCHEDULE OF DISAGGREGATED REVENUE Years ended December 31, 2023 2022 Product revenues Pharmaceutical product resale $ 1,363,830 $ 4,754,067 Packaged food resale 487,021 - Total product revenue $ 1,850,851 $ 4,754,067 Service revenues Transaction fee income $ 6,200,334 $ 5,347,401 Data service fee income 201,825 88,413 SaaS fee income 19,204 60,287 Total service revenue $ 6,421,363 5,496,101 Total revenues $ 8,272,214 $ 10,250,168 70 NOTE 6 – INVENTORY Inventory value is determined using the weighted average cost method and is stated at the lower cost or net realizable value. As of December 31, 2023, and 2022, inventory was comprised of the following: SCHEDULE OF INVENTORY As of December 31, 2023 2022 Raw materials $ - $ 65,523 Finished goods 968 - Inventory $ 968 $ 65,523 NOTE 7 – NOTES RECEIVABLE On August 22, 2023, the Company received a Promissory Note (the “Wood Sage Note”) in the amount of $ 1,300,000 from Wood Sage, LLC and entered into the APS MIPA and CSP MIPA for the Company to sell APS and CSP and entered into a Master Service Agreement (“Wood Sage MSA”). The Wood Sage Note bears no interest and is due and payable within thirty days of a change in control, as defined by the Wood Sage Note, of the borrower. As of December 31, 2023, the outstanding balance of the Wood Sage Note was $ 1,300,000 . NOTE 8 – INTANGIBLE ASSETS As of December 31, 2023, intangible assets, net consisted of the following: SCHEDULE OF INTANGIBLE ASSETS NET Weighted Average Useful Life Accumulated (years) Cost Amortization Net Developed technology 5.0 $ 9,777,478 $ ( 814,790 ) $ 8,962,688 December 31, 2023 December 31, 2022 Amortization expense $ 814,790 $ - Total Amortization Expense $ 814,790 $ - NOTE 9 – OTHER CURRENT LIABILITIES As of December 31, 2023 and December 31, 2022, other current liabilities consisted of the following: SCHEDULE OF OTHER CURRENT LIABILITIES December 31, 2023 December 31, 2022 Insurance refunds payable $ 62,390 $ 62,390 Deferred revenue - 5,127 Other payables 7,920 - Other current liabilities $ 70,310 $ 67,517 71 NOTE 10 – CONTINGENT FUNDING LIABILITIES On December 13, 2023, the Company entered into a non-recourse funding agreement with a third-party for the purchase and sale of future receivables (the “Receivables Agreement”). Pursuant to the Receivables Agreement, the third party agreed to fund the Company $ 150,000 to purchase $ 214,500 of future receivables. Under the funding agreement, the third-party receives a priority interest in the receivables of Trxade Inc. The Company also paid $ 7,500 as a one-time origination fee in connection with the Receivables Agreement. The Receivables Agreement also allows for the third-party funder to file UCCs securing their interest in the receivables and includes customary events of default. As of December 31, 2023, the balance of the payable balance is $ 144,231 . On November 22, 2023, the Company entered into a non-recourse funding agreement with a third-party for the purchase and sale of future receivables (the “Receivables Agreement”). Pursuant to the Receivables Agreement, the third party agreed to fund the Company $ 275,000 to purchase $ 393,250 of future receivables. Under the funding agreement, the third-party receives a priority interest in the receivables of Trxade Inc. The Company also paid $ 13,750 as a one-time origination fee in connection with the Receivables Agreement. The Receivables Agreement also allows for the third-party funder to file UCCs securing their interest in the receivables and includes customary events of default. As of December 31, 2023, the balance of the payable balance is $ 222,115 . On October 25, 2023, the Company entered into a non-recourse funding agreement with a third-party for the purchase and sale of future receivables (the “Receivables Agreement”). Pursuant to the Receivables Agreement, the third party agreed to fund the Company $ 1,200,000 to purchase $ 1,728,000 of future receivables. Under the funding agreement, the third-party receives a priority interest in the receivables of Trxade Inc. The Company also paid $ 60,000 as a one-time origination fee in connection with the Receivables Agreement. The Receivables Agreement also allows for the third-party funder to file UCCs securing their interest in the receivables and includes customary events of default. As of December 31, 2023, the balance of the payable balance is $ 880,000 . On June 27, 2023, the Company entered into a non-recourse funding agreement with a third-party for the purchase and sale of future receivables (the “Receivables Agreement”). Pursuant to the Receivables Agreement, the third party agreed to fund the Company $ 1,250,000 to purchase $ 1,800,000 of future receivables. Under the funding agreement, the third-party receives a priority interest in the receivables of Trxade Inc. The Company also paid $ 62,500 as a one-time origination fee in connection with the Receivables Agreement. The Receivables Agreement also allows for the third-party funder to file UCCs securing their interest in the receivables and includes customary events of default. This agreement was fully paid off in October 2023. On March 14, 2023, the Company entered into a non-recourse funding agreement with a third-party for the purchase and sale of future receivables (the “Receivables Agreement”). Pursuant to the Receivables Agreement, the third party agreed to fund the Company $ 875,000 to purchase $ 1,224,000 of future receivables. Under the funding agreement, the third-party receives a priority interest in the receivables of Trxade Inc. The Company also paid $ 42,500 as a one-time origination fee in connection with the Receivables Agreement. The Receivables Agreement also allows for the third-party funder to file UCCs securing their interest in the receivables and includes customary events of default. This agreement was fully paid off in June 2023. On September 14, 2022, the Company entered into a non-recourse funding agreement with a third-party for the purchase and sale of future receivables (the “Receivables Agreement”). Pursuant to the Receivables Agreement, the third party agreed to fund the Company $ 275,000 to purchase $ 396,000 of future receivables. Under the funding agreement, the third-party receives a priority interest in the receivables of Trxade Inc. The Company also paid $ 15,000 as a one-time origination fee in connection with the Receivables Agreement. The Receivables Agreement also allows for the third-party funder to file UCCs securing their interest in the receivables and includes customary events of default. This agreement was fully paid off in January 2023. On June 27, 2022, the Company entered into a non-recourse funding agreement with a third-party funder for the purchase and sale of future receivables. Pursuant to the Receivables Agreement, the third party agreed to fund the Company $ 550,000 to purchase $ 792,000 of future receivables. Under the funding agreement, the third-party receives a priority interest in the receivables of Trxade Inc. The Company also paid $ 27,500 as a one-time origination fee in connection with the Receivables Agreement. The Receivables Agreement also allows for the third-party funder to file UCCs securing their interest in the receivables and includes customary events of default. This agreement was fully paid off in January 2023. 72 The Company’s relationship with the funding source meets the criteria in ASC 470-10-25 – Sales of Future Revenues or Various Other Measures of Income (“ASC 470”), which relates to cash received from a funding source in exchange for a specified percentage or amount of revenue or other measure of income of a particular product line, business segment, trademark, patent or contractual right for a defined period. Under this guidance, the Company recognized the fair value of its contingent obligation to the funding source, as of the acquisition date, as a current liability in its consolidated balance sheet. Under ASC 470, amounts recorded as debt are to be amortized under the interest method. The Company made an accounting policy election to utilize the prospective method when there is a change in the estimated future cash flows, whereby a new effective interest rate is determined based on the revised estimate of remaining cash flows. The new rate is the discount rate that equates the present value of the revised estimate of remaining cash flows with the carrying amount of the debt, and it will be used to recognize interest expense for the remaining period. Under this method, the effective interest rate is not constant, and any change in expected cash flows is recognized prospectively as an adjustment to the effective yield. As of December 31, 2023, and December 31, 2022, the total contingent funding liability was $ 1,246,346 and $ 108,036 , respectively, and the effective interest rate was approximately 31 % and 31 %, respectively. This rate represents the discount rate that equates the estimated future cash flows with the fair value of the debt and is used to compute the amount of interest to be recognized each period. Any future payments made to the funding source will decrease the contingent funding liability balance accordingly. NOTE 11 – NOTES PAYABLE On November 17, 2023, the Company issued promissory notes to Moku Foods, Inc. (the “Moku Foods November 2023 Note”) in the amount of $ 50,000 . The promissory note accrues interest at 11.5 % per annum, compounded monthly and is payable upon demand at any time after November 30, 2023. As of December 31, 2023, the balance of the Moku Foods October 2023 Note is $ 50,000 . The Company has accrued interest of $ 945 as of December 31, 2023. On October 16, 2023, the Company issued promissory notes to Moku Foods, Inc. (the “Moku Foods October 2023 Note”) in the amount of $ 150,000 . The promissory note accrues interest at 11.5 % per annum, compounded monthly and is payable upon demand at any time after October 31, 2023. As of December 31, 2023, the balance of the Moku Foods October 2023 Note is $ 150,000 . The Company has accrued interest of $ 4,300 as of December 31, 2023. On September 27, 2023, the Company issued promissory notes to Perfect Day, Inc. (the “Perfect Day Note”) in the amount of $ 4,400,000 as consideration for the TUC APA (see Note 3). The promissory notes do not accrue interest and are payable upon demand at any time after October 31, 2023. The entire aggregate, unpaid principal sum of the note is immediately due and payable upon the occurrence of a change in control, as defined in the agreement. On September 14, 2023, the Company issued a promissory note to Danam Health, Inc. (the “Danam Note”) in the amount of $ 300,000 . The Company received a deposit of $ 200,000 on September 14, 2023, and an additional deposit of $ 100,000 on October 13, 2023. The Danam Note accrues interest at 0 % per annum and is due and payable no later than 30 days after a change in control of borrower, as defined in the note agreement. As of December 31, 2023, the balance of the Danam Note is $ 50,000 . On June 16, 2023, the Company issued a secured debenture to Eat Well Investment Group, Inc. (the “Eat Well June 2023 Note”) in the amount of $ 1,150,000 for the purchase of Sapientia, a wholly-owned subsidiary of Superlatus. The Eat Well June 2023 Note is secured by 100 % of the membership interests in Sapientia. The Eat Well June 2023 Note began accruing interest at 12 % per annum, compounded monthly, as of October 31, 2023. The Eat Well June 2023 matured on December 31, 2023 . As of December 31, 2023, the balance of the Eat Well June 2023 Note is $ 1,150,000 . The Company has accrued interest of $ 23,063 as of December 31, 2023. As of the date of this filing, the parties are working on an amendment for an extension. 73 On February 8, 2023, Sapientia, a wholly-owned subsidiary of Superlatus, entered into a Loan Agreement with Eat Well Investment Group, Inc. (the “Eat Well February 2023 Note”) in the amount of $ 25,000 . The Eat Well February 2023 Note is unsecured, accrues interest at a rate of 1.87 % per annum, and matures February 7, 2025 . As of December 31, 2023, the balance of the Eat Well February 2023 Note is $ 25,000 . The Company has accrued interest of $ 418 as of December 31, 2023. On September 14, 2022, Sapientia entered into a Loan Agreement with Eat Well Investment Group, Inc. (the “Eat Well September 2022 Note”) in the amount of $ 50,000 . The Eat Well September 2022 Note is unsecured, accrues interest at a rate of 1.87 % per annum, and matures September 13, 2024 . As of December 31, 2023, the balance of the Eat Well September 2022 Note is $ 50,000 . The Company has accrued interest of $ 1,212 as of December 31, 2023. On July 26, 2022, Sapientia entered into a Loan Agreement with Eat Well Investment Group, Inc. (the “Eat Well July 26, 2022 Note”) in the amount of $ 35,000 . The Eat Well July 26, 2022 Note is unsecured, accrues interest at a rate of 1.87 % per annum, and matures July 25, 2024 . As of December 31, 2023, the balance of the Eat Well July 26, 2022 Note is $ 35,000 . The Company has accrued interest of $ 938 as of December 31, 2023. On July 12, 2022, Sapientia entered into a Loan Agreement with Eat Well Investment Group, Inc. (the “Eat Well July 12, 2022 Note”) in the amount of $ 25,000 . The Eat Well July 12, 2022 Note is unsecured, accrues interest at a rate of 1.87 % per annum, and matures July 11, 2024 . As of December 31, 2023, the balance of the Eat Well July 12, 2022 Note is $ 25,000 . The Company has accrued interest of $ 688 as of December 31, 2023. On March 15, 2022, Sapientia entered into a Loan Agreement with Eat Well Investment Group, Inc. (the “Eat Well March 2022 Note”) in the amount of $ 100,000 . The Eat Well March 2022 Note is unsecured, accrues interest at a rate of 1.87 % per annum, and matures March 14, 2024 . As of December 31, 2023, the balance of the Eat Well March 2022 Note is $ 100,000 . The Company has accrued interest of $ 3,361 as of December 31, 2023. On February 1, 2022, Sapientia entered into a Loan Agreement with Eat Well Investment Group, Inc. (the “Eat Well February 2022 Note”) in the amount of $ 100,000 . The Eat Well February 2022 Note is unsecured, accrues interest at a rate of 1.87 % per annum, and matures February 1, 2024 . As of December 31, 2023, the balance of the Eat Well February 2022 Note is $ 100,000 . The Company has accrued interest of $ 3,576 as of December 31, 2023. On January 20, 2022, Sapientia entered into a Loan Agreement with Eat Well Investment Group, Inc. (the “Eat Well January 2022 Note”) in the amount of $ 20,000 . The Eat Well January 2022 Note is unsecured, accrues interest at a rate of 1.87 % per annum, and matures January 20, 2024 . As of December 31, 2023, the balance of the Eat Well January 2022 Note is $ 20,000 . The Company has accrued interest of $ 728 as of December 31, 2023. On December 24, 2021, Sapientia entered into a Loan Agreement with Eat Well Investment Group, Inc. (the “Eat Well December 2021 Note”) in the amount of $ 100,000 . The Eat Well December 2021 Note is unsecured, accrues interest at a rate of 1.87 % per annum, and matured December 24, 2023 . As of December 31, 2023, the balance of the Eat Well December 2021 Note is $ 100,000 . The Company has accrued interest of $ 3,776 as of December 31, 2023. As of the date of this filing, the parties are working on an amendment for an extension. On November 10, 2021, Sapientia entered into a Loan Agreement with Eat Well Investment Group, Inc. (the “Eat Well November 2021 Note”) in the amount of $ 50,000 . The Eat Well November 2021 Note is unsecured, accrues interest at a rate of 1.87 % per annum, and matured November 10, 2023 . As of December 31, 2023, the balance of the Eat Well November 2021 Note is $ 50,000 . The Company has accrued interest of $ 2,001 as of December 31, 2023. As of the date of this filing, the parties are working on an amendment for an extension. On August 18, 2021, Sapientia entered into a Loan Agreement with Eat Well Investment Group, Inc. (the “Eat Well August 2021 Note”) in the amount of $ 250,000 . The Eat Well August 2021 Note is unsecured, accrues interest at a rate of 1.87 % per annum, and matured August 18, 2023 . As of December 31, the balance of the Eat Well August 2021 Note is $ 250,000 . The Company has accrued interest of $ 11,079 as of December 31, 2023. As of the date of this filing, the parties are working on an amendment for an extension. The following table summarizes notes payable balances as of December 31, 2023: SCHEDULE OF NOTES PAYABLE BALANCES Current Noncurrent Accrued Portion Portion Total Interest Current Portion Non current Portion Note Payable Total Accrued Interest Perfect Day Notes $ 4,400,000 $ - $ 4,400,000 $ - Danam Note 50,000 - 50,000 - Moku Foods November 2023 Note 50,000 - 50,000 945 Moku Foods October 2023 Note 150,000 - 150,000 4,300 Eat Well June 2023 Note 1,150,000 - 1,150,000 57,847 Eat Well February 2023 Note - 25,000 25,000 418 Eat Well September 2022 Note 50,000 - 50,000 1,212 Eat Well July 26, 2022 Note 35,000 - 35,000 938 Eat Well July 12, 2022 Note 25,000 - 25,000 688 Eat Well March 2022 Note 100,000 - 100,000 3,361 Eat Well February 2022 Note 100,000 - 100,000 3,576 Eat Well January 2022 Note 20,000 - 20,000 728 Eat Well December 2021 Note 100,000 - 100,000 3,776 Eat Well November 2021 Note 50,000 - 50,000 2,001 Eat Well August 2021 Note 250,000 - 250,000 11,079 $ 6,530,000 $ 25,000 $ 6,555,000 $ 90,869 74 NOTE 12 – INCOME TAXES The provision for income taxes on income from operations for fiscal 2023 and 2022 consists of the following: SCHEDULE OF PROVISION FOR INCOME TAXES 2023 2022 Federal: Current - - Deferred - - State Current - - Deferred - - Total - - Income (loss) before income taxes for the years ended December 31, 2023 and 2022 consisted of the following: SCHEDULE OF INCOME (LOSS) BEFORE INCOME TAXES For the year ended December 31, 2023 2022 US ( 17,843,574 ) ( 3,909,868 ) As a result of the full net valuation allowance position, the Company did not recognize any U.S. federal income tax expense or tax benefit on any components of continuing or discontinued operations. SCHEDULE OF DEFERRED TAX ASSETS AND LIABILITIES 2023 2022 Deferred Tax Assets Net operating Losses 5,800,214 4,030,755 Purchased Intangibles 151,877 - Lease Liability 127,896 - Total Deferred Tax Assets 6,079,987 4,030,755 Deferred Tax Liabilities Purchased Goodwill ( 15,534 ) - Right to Use Assets ( 127,896 ) - Total Deferred Tax Liabilities ( 143,430 ) - Valuation Allowance ( 5,936,557 ) ( 4,030,755 ) Net Deferred Taxes - - The Company has established a valuation allowance equal to the full amount of the deferred tax asset primarily due to uncertainty in the utilization of the net operating loss carry forwards. The estimated net operating loss carry forwards of approximately $ 24,893,624 will be available based on the new carryover rules in section 172(a) passed with the Tax Cuts and Jobs Acts. NOTE 13 – STOCKHOLDERS’ EQUITY Designation of Series C Preferred Stock Effective October 4, 2023, the Company filed a Certificate of Designation, Preferences, Rights and Limitations of the Series C Preferred Stock with the Secretary of the State of Delaware which designated 1,000 shares of the Company’s authorized and unissued preferred stock as convertible Series C Preferred Stock at a par value of $ 0.00001 per share. Hudson Global Ventures Stock Purchase Agreement On October 4, 2023, the Company entered into a Securities Purchase Agreement (“Agreement”, or “SPA”) with Hudson Global Ventures, LLC (“Hudson”). Under the terms of the Agreement, the Company agreed to sell, and Hudson agreed to purchase, Two Hundred Ninety ( 290 ) shares of Series C Preferred Stock (the “Purchased Shares”) at a price of $ 1,000 per share and a Warrant to purchase up to 41,193 shares of Common Stock. Additionally, pursuant to the Agreement, 40,000 shares of Common Stock were issued to Hudson upon closing for a commitment fee. The Company received $ 250,000 in exchange for the Purchased Shares, Common Stock, and Warrants, net of issuance costs. Designation of Series B Preferred Stock Effective June 26, 2023, the Company filed a Certificate of Designation, Preferences, Rights and Limitations of the Series B Preferred Stock with the Secretary of the State of Delaware which designated 787,754 shares of the Company’s authorized and unissued preferred stock as convertible Series B Preferred Stock at a par value of $ 0.00001 per share. 2023 1:15 Stock Split Effective June 21, 2023, the Company executed a 1:15 reverse stock split for stockholders of record on that date. This was executed to comply with the Nasdaq Listing Rule 5550(a)(2) to have the price of the stock above $ 1 . 2022 Equity Compensation Awards Effective September 1, 2022, the Board of Directors and Compensation Committee of the Company, with the approval of each of the following officers, agreed to reduce the annual cash compensation payable to Suren Ajjarapu, the Company’s Chief Executive Officer; Prashant Patel, the Company’s President and Chief Operating Officer and Janet Huffman, the Company’s former Chief Financial Officer, in an effort to conserve cash. In lieu of the reduced cash salary payable to each officer, the Board and Compensation Committee agreed to issue such officers shares of the Company’s common stock equal to the amount of reduced cash salary, divided by the closing sales price of the Company’s common stock on the NASDAQ Capital Market on August 31, 2022, the date approved by the Board of Directors. The total amount of shares of common stock issued on August 31, 2022, to the officers was 5,460 . 75 The shares of common stock issuable to the officers vested at the rate of 1/4th of such shares on each of September 30, 2022, October 31, 2022, November 30, 2022, and December 31, 2022, subject to each applicable Officer’s continued service to the Company on such dates and subject to the restricted stock award agreements entered into as evidence of such awards. Separately, certain employees of the Company agreed to reduce their cash salaries by an aggregate of $ 37,000 in consideration for an aggregate of 2,126 shares of the Company’s restricted common stock, with the same vesting terms as the officer shares discussed above. Effective on August 31, 2022, the Board of Directors approved the issuance of 3,635 shares of common stock of the Company to each independent member of the Board of Directors, for services rendered to the Company during fiscal 2022, which shares were valued at $ 63,250 , based on the closing sales price of the Company’s common stock on the date approved by the Board of Directors. The shares vested at the rate of 1/4th of such shares immediately on the grant date, and 1/4th of such shares on each of October 1, 2022, January 1, 2023, and April 1, 2023, subject to each applicable independent director’s continued service to the Company on such dates. All of the awards discussed above were issued under the Company’s Second Amended and Restated 2019 Equity Incentive Plan (the “Plan”) and all restricted stock awards discussed above were evidenced by Restricted Stock Grant Agreements. NOTE 14 – PREFUNDED AND PRIVATE PLACEMENT WARRANTS On October 4, 2022 the Company entered into a securities purchase agreement (the “Purchase Agreement”) with a certain institutional investor (the “Purchaser”) which provided for the sale and issuance by the Company of (i) the Company’s common stock (the “Common Stock”), (ii) pre-funded warrants (the “Pre-Funded Warrants”) and (iii) warrants (the “Private Placement Warrants” and, together with the Shares and the Pre-Funded Warrants, the “Securities”). The Private Placement Warrants were sold in a concurrent private placement (the “Private Placement”). Simultaneously with the closing of the stock placement, the investor pre-purchased 40,116 Private Warrants at a purchase price of $ 17.25 per warrant. The Pre-Funded Warrants are immediately exercisable into one share of common stock per warrant, have an exercise price of $ 0.00015 per share, and may be exercised at any time until all of the Pre-Funded Warrants are exercised in full. On January 4, 2023, the investor exercised the 40,116 warrants for a purchase price of $ 6.02 . The investor was issued the shares on this date. Each Private Warrant has an exercise price of $ 22.50 per share, will be exercisable following Stockholder Approval, which was obtained in December 2022, and will expire on the fifth anniversary of the date on which the Private Warrants become exercisable. The Private Warrants contain standard adjustments to the exercise price including for stock splits, stock dividend, rights offerings and pro rata distributions, and include full ratchet anti-dilutive rights in the event the Company issues shares of Common Stock or Common Stock equivalents within fifteen months of the initial exercise date, with a value less than the then exercise price of such Private Warrants, subject to certain customary exceptions, and further subject to a minimum exercise price of $ 3.48 per share. The Private Warrants also include certain rights upon ‘fundamental transactions’ as described in the Private Warrants, including allowing the holders thereof to require that the Company re-purchase such Private Warrants at the Black Scholes Value of such securities. NOTE 15 – WARRANTS During the year ended December 31, 2023, 41,193 warrants were granted, and none expired. During the year ended December 31, 2023, 40,116 prefunded warrants and 1,795 granted warrants to purchase shares of common stock were exercised for a total purchase price of $ 1,621 . See Note 13 for further description. The Company uses the Black-Scholes pricing model to estimate the fair value of stock-based awards on the date of the grant. There was no compensation cost related to the warrants for the years ended December 31, 2023, and 2022, respectively. 76 The following table summarizes the assumptions used to estimate the fair value of the outstanding warrants during the years ended December 31, 2023, and 2022. SUMMARY OF ASSUMPTIONS USED TO ESTIMATE FAIR VALUE OF WARRANTS GRANTED 2023 2022 Expected dividend yield 0 % 0 % Weighted-average expected volatility 165 % 86 % Weighted-average risk-free interest rate 3.9 % 4.3 % Warrants, measurement input 3.9 % 4.3 % Expected life of warrants 3.8 years 5 years The Company’s outstanding and exercisable warrants as of December 31, 2023 and 2022 are presented below: SCHEDULE OF OUTSTANDING AND EXERCISABLE WARRANTS Number Outstanding Weighted Average Exercise Price Contractual Life In Years Intrinsic Value Warrants outstanding as of December 31, 2021 2,969 $ 4.82 0.95 $ 11,135 Warrants granted 177,536 22.50 4.77 - Warrants forfeited, expired, cancelled ( 202 ) 3.90 - - Warrants exercised ( 972 ) 0.06 - - Warrants outstanding as of December 31, 2022 179,331 22.50 4.72 6,731 Warrants granted 41,193 7.20 4.76 - Warrants forfeited, expired, cancelled - - - - Warrants exercised ( 1,795 ) 0.90 - - Warrants outstanding as of December 31, 2023 218,729 19.62 3.95 $ - Warrants exercisable as of December 31, 2023 218,279 19.62 3.95 $ - NOTE 16 – 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 155,556 shares, and the Company’s Second Amended and Restated 2019 Equity Incentive Plan provides for automatic increases in the number of shares available under such plan (currently 133,333 shares) on April 1 st of each calendar year, beginning in 2021 and ending in 2029 (each a “Date of 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 as a result of the annual meeting shareholder vote increased the number of shares available to grant to employees under the 2019 incentive plan by 2 million. The administrator did not approve an increase in the number of shares covered under the plan as of April 1, 2022. For the year ended December 31, 2023, 9,053 options to purchase shares were granted, 140 options to purchase shares were forfeited and 2,393 options expired. For the year ended December 31, 2023, no options to purchase shares of common stock were exercised. 77 Total compensation cost related to stock options granted was $ 29,738 and $ 79,163 for the years ended December 31, 2023, and 2022, respectively. The following table represents stock option activity for the year ended December 31, 2023: SCHEDULE OF STOCK OPTION ACTIVITY Number Outstanding Weighted-Average Exercise Price Weighted-Average Contractual Life in Years Intrinsic Value Options outstanding as of December 31, 2021 27,398 $ 4.78 4.67 $ 368,417 Options exercisable as of December 31, 2021 20,146 4.88 4.38 257,186 Options granted - - - - Options forfeited ( 1,234 ) 87.37 4.91 - Options expired ( 6,456 ) 86.03 2.66 - Options exercised - - - - Options outstanding as of December 31, 2022 19,708 66.00 3.92 - Options exercisable as of December 31, 2022 17,167 66.30 3.89 - Options granted 9,053 6.08 4.25 - Options forfeited ( 140 ) 82.33 1.75 - Options expired ( 2,392 ) 89.89 0.06 - Options exercised - - - - Options outstanding as of December 31, 2023 26,229 $ 43.04 3.70 $ - Options exercisable as of December 31, 2023 16,141 $ 60.75 3.64 $ - NOTE 17 – CONTINGENCIES Studebaker Defense Group, LLC In July 2020, the Company’s wholly-owned subsidiary, IPS, entered into an agreement with Studebaker Defense Group, LLC (“Studebaker”) wherein IPS would pay Studebaker a down payment of $ 500,000 and Studebaker would deliver 180,000 boxes of nitrile gloves by August 14, 2020. IPS wired the $ 500,000 to Studebaker, but to date, Studebaker has not delivered the gloves or provided a refund of the deposit. In December 2020, the Company 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 and dismiss the complaint on jurisdictional grounds. The court granted Studebaker’s motion to set aside the default judgment but denied the motion to dismiss. At June 30, 2021, the $ 500,000 was recorded as Loss on Inventory Investment. The Company won this case but has not collected any settlement yet, another lawsuit was filed to collect. On April 13, 2023, a settlement was reached in the Studebaker and IPS legal case. The court found in favor of IPS and ordered Studebaker to pay $ 550,000 to IPS. The payments were to commence on May 1, 2023 and continue monthly in 17 installments until the full amount is paid in full but as of the filing date, no payment has been received by IPS. 78 Sandwave Group Dsn Bhd and Crecom Burj Group SDN BHD In August 2020, IPS entered into an agreement with Sandwave Group Dsn Bhd (“Sandwave”), wherein IPS would pay Sandwave a down payment of $ 581,250 and Sandwave’s supplier, Crecom Burj Group SDN BHD (“Crecom”), would deliver 150,000 boxes of nitrile gloves within 45 days. IPS wired the $ 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. IPS demanded return of its $ 581,250 and Crecom acknowledged that IPS was entitled to a refund. As of February 2021, Crecom had not returned any funds and IPS 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. On September 1, 2022 counsel for Crecom informed the court that Crecom had been wound up on August 23, 2022; under Section 471 of the Malaysian Companies Act 2016, the suit filed by IPS was stayed until leave of the court is obtained to proceed. Given this new information regarding Crecom the Company has decided at this time to stop its pursuit of this lawsuit until or unless additional information is obtained by counsel for IPS. At June 30, 2021, the $ 581,250 was recorded as Loss on Inventory Investment. GSG PPE, LLC On November 19, 2021, IPS 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 IPS executed a valid initial contract setting the terms of a business transaction. GSG failed to pay IPS approximately 75% of the amount owed to IPS. GSG acknowledged it owed the money and executed a promissory note in favor of IPS 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 IPS $ 630,000 . On September 30, 2021, the $ 630,000 was recorded as Bad Debt Expense. A settlement was entered into between the parties in June 2022, whereby GSG and Waxman agreed to pay $ 743,000 which included attorney fees and interest, which is required to be paid to the Company in monthly installments over 17 months. The Company received additional monthly installment payments as part of the agreement through January 2023. As of December 31, 2023, and through the date of this filing, the Company has not received the monthly installment payments due to the Company from GSG since January of 2023. NOTE 18 – LEASES The Company has two operating leases for corporate offices as of December 31, 2023. The following table outlines the details of the leases: SCHEDULE OF OPERATING LEASES Lease 1 Lease 2 Lease 3 Initial Lease Term January 2021 to December 2021 October 2018 to November 2023 October 2023 to September 2026 New Initial Lease Term January 2022 to December 2026 November 2023 to October 2028 - Initial Recognition of Right of use assets at January 1, 2019 $ 534,140 $ 313,301 - New Initial Recognition of Right of use Assets at December 31, 2021 $ 977,220 $ - - New Initial Recognition of Right of use Assets at December 31, 2023 351,581 Incremental Borrowing Rate 10 % 10 % 10 % 79 The Company entered into a new corporate office lease (Lease 1) in January 2022. At inception, the Company determined that the new lease required remeasurement of the lease liability resulting in the increase of the right-of-use asset and the associated lease liability by $ 977,220 . The Company and the Lessor agreed to terminate the lease and vacate the premises in November 2023. The termination resulted in the surrender of the Company’s security deposit of $ 38,500 . The related right-of-use assets of $ 642,887 and lease liabilities of $ 664,992 were removed from the balance sheet as of December 31, 2023. The Company entered into a lease agreement (Lease 2) for the period of October 2018 to November 2023. At inception, management had included the renewal period from November 2023 to November 2028 within the initial recognition of the related right of use assets and lease liabilities, as it was reasonably expected, at the time, that the renewal option would be exercised. The Company determined that the new lease required measurement and recognition of the lease liability and right-of-use assets of $ 313,301 . The lease is classified as an operating lease. No incentives were included in the lease. The Company entered into a new warehouse lease (Lease 3) October 2023. The Company determined that the new lease required measurement and recognition of the lease liability and right-of-use assets of $ 351,581 . The lease is classified as an operating lease. No incentives were included in the 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 lease liabilities recorded in the Consolidated Balance Sheet as of December 31, 2023. SCHEDULE OF FUTURE MINIMUM PAYMENTS FOR OPERATING LEASE LIABILITIES Future lease obligations 2024 187,935 2025 193,487 2026 163,146 2027 58,347 2028 48,612 Thereafter - Total minimum lease payments 651,527 Less: effect of discounting ( 102,617 ) Present value of future minimum lease payments 548,910 Less: current obligations under leases 139,705 Long-term lease obligations $ 409,205 Weighted Average Discount Rate 10 % Weighted Average Term Remaining 3.6 Years Short-Term Lease Expense Remaining $ 187,361 For the years ended December 31, 2023, and 2022, total lease expense was $ 385,977 and $ 344,525 , respectively. For the years ended December 31, 2023, and 2022, amortization of right-of-use assets was $ 215,665 and $ 181,218 , respectively. For the years ended December 31, 2023, and 2022, net operating lease liabilities settled was $ 195,475 and $ 164,618 , respectively. NOTE 19 – SEGMENT REPORTING 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. The Company classifies its business interests into reportable segments which are: ● Trxade, Inc. - Web based pharmaceutical marketplace platform – B2B sales 80 ● IPS - Integra Pharma, LLC - Licensed wholesaler of brand, generic and non-drug products – B2B sales ● Superlatus – holds Sapientia’s intellectual property for advanced food extrusion technology and The Urgent Company – Manufacturer of ice cream that is animal product-free, vegan, lactose-free, and made with plants – B2B sales ● Unallocated - Other – corporate overhead expense, discontinued operations and Bonum Health, LLC. SCHEDULE OF BUSINESS INTERESTS INTO REPORTABLE SEGMENTS Years Ended December 31, 2023 Trxade, Inc. Integra Superlatus Unallocated Total Revenue 6,402,159 1,363,830 487,021 19,204 8,272,214 Gross Profit 6,402,159 49,030 ( 3,872,136 ) 19,204 2,598,257 Segment Assets 1,375,109 220,634 9,663,310 1,273,860 12,532,913 Segment Profit/Loss 2,325,175 ( 668,625 ) ( 10,416,347 ) ( 9,083,777 ) ( 17,843,574 ) Cost of Sales - 1,314,800 4,359,157 - 5,673,957 Years Ended December 31, 2022 Trxade, Inc. Integra Superlatus Unallocated Total Revenue 5,435,814 4,754,067 - 60,287 10,250,168 Gross Profit 5,433,641 25,343 - 60,287 5,519,271 Segment Assets 1,877,881 445,264 - 1,386,881 3,710,026 Segment Profit (Loss) 1,924,355 ( 545,557 ) - ( 5,288,666 ) ( 3,909,868 ) Cost of Sales 2,173 4,728,724 - - 4,730,897 NOTE 20 – SUBSEQUENT EVENTS Asset Purchase Agreement On February 16, 2024, the Company, together with Trxade, Inc., a wholly owned subsidiary of the Company, and Micro Merchant Systems, Inc. (“MMS”) entered into an asset purchase agreement (the “APA”) under which MMS agreed to purchase for cash substantially all of the assets of Trxade, Inc. On February 16, 2024, the parties consummated the closing of the transactions contemplated by the APA. Trxade, Inc. operated a web-based market platform designed to enable trading among healthcare buyers and sellers of pharmaceuticals, accessories and services. The purchase price paid at closing was $ 22.5 million, subject to customary adjustments for cash, indebtedness, working capital and transaction expenses. Subject to the terms and conditions of the APA, if, during the period beginning on the closing date and ending on the four-month anniversary of the closing date, MMS receives $ 1.6 million or greater in certain collections from third parties resulting from any products or services sold, or provided, by the business assets and operations acquired from Trxade, Inc., Trxade, Inc. will be due an additional $ 7.5 million payment from MMS. Subscription Agreement On February 29, 2024, the Company’s wholly owned subsidiary Trxade, Inc. entered into a Subscription Agreement (the “Subscription Agreement”) with Lafayette Energy Corp., a Delaware corporation (“Lafayette”). Pursuant to the Subscription Agreement, Trxade, Inc. will, in two equal tranches, invest a total of up to $ 5.0 million in Lafayette in exchange for up to 2,000,000 shares of Lafayette’s newly created Series A Convertible Preferred Stock, with the second tranche becoming payable only upon Trxade, Inc.’s receipt of notice that Lafayette has successfully drilled its first oil and gas well and produced at least one hundred (100) barrels of oil. Mr. Michael Peterson is a director of the Company as well as the CEO of Lafayette and a member of Lafayette’s board of directors. This relationship was disclosed to the Company’s Board of Directors and the audit committee of the Board of Directors prior to, and at the time that the terms of the Subscription Agreement and the transaction effected thereby were approved by the Board of Directors as a whole and the members of the audit committee. Stock Purchase Agreement On March 5, 2024, the Company entered in a Stock Purchase Agreement (“SPA”) with Superlatus Foods Inc. (the “Buyer”). Pursuant to the SPA, the Company sold all of the issued and outstanding stock (the “Stock”) of Superlatus Inc., a Delaware corporation and wholly-owned subsidiary of the Company (“Superlatus”), to the Buyer. The purchase price for the Stock was $ 1.00 which was delivered to the Company at the closing, which occurred simultaneously with the execution of the SPA. As a result of the transaction Superlatus is no longer a subsidiary of the Company, and the rights and assets of Superlatus together with various liabilities and obligations that were specific to Superlatus became rights and obligations of Buyer. Special Cash Dividend On March 6, 2024, the Company announced the declaration of a special cash dividend of eight dollars ($ 8.00 ) per share of common stock, payable to stockholders of record as of March 18, 2024, with the dividend being paid on or about March 22, 2024. The special dividend was paid using a portion of the proceeds from the closing of the sale of the Company’s web-based market platform assets. 81 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None.