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Trxade Group Reports Record Second Quarter 2020 Financial Results

·13 min read

Q2 2020 Revenues Increase 244% to Record $6.6 Million; Continues Nationwide Platform Expansion

TAMPA, FL, July 27, 2020 (GLOBE NEWSWIRE) -- Trxade Group, Inc. (NASDAQ: MEDS), an integrated drug procurement, delivery and healthcare platform, has provided its financial results for the second quarter ended June 30, 2020.

Selected Financial Highlights

$ in millions

Q2
2020

Q2
2019

% Increase (Decrease)

Revenues

$6.6

$1.9

244%

Gross Profit

$2.0

$1.2

72%

Gross Margin

30.4%

60.7%

(50%)

Net Income (Loss)

$(0.5)

$0.1

(1,036%)

Adjusted EBITDA1

$0.5

$0.08

525%

1) Adjusted EBITDA is a non-GAAP financial measure and is described in relation to its most directly comparable GAAP measure under "Use of Non-GAAP Financial Information" below.

Second Quarter 2020 Financial Summary

  • Revenues for the second quarter of 2020 increased 244% to a record $6.6 million, compared to revenue of $1.9 million in the same quarter last year. Sequentially, this represents an increase of 199% when compared to revenues of $2.2 million in the first quarter of 2020. The increase in revenue was primarily due to a significant increase in personal protective equipment (PPE) sales by the Company’s Integra Pharma segment as a response to the COVID-19 pandemic.

  • Gross profit in the second quarter of 2020 increased 72% to $2.0 million, or 30.4% of revenues, compared to gross profit of $1.2 million, or 60.7% of revenues, in the same quarter last year. The increase in gross profit was at lower margins, which was primarily due to lower-margin sales of PPE, such as N95 masks and sanitizers.

  • Operating expenses in the second quarter of 2020 were $2.5 million compared to $1.0 million in the same quarter last year. This increase is primarily due to non-cash stock-based compensation expenses.

  • Net loss in the second quarter of 2020 was $(0.5) million, or $(0.07) per basic and diluted share outstanding, compared to net income of $0.1 million, or $0.01 per basic and diluted share outstanding, in the same quarter last year.

  • Adjusted EBITDA, a non-GAAP financial measure, increased 525% to $0.5 million, compared to $0.08 million in the same quarter last year.

  • Cash and cash equivalents were $4.2 million as of June 30, 2020, compared with $7.7 million as of March 31, 2020.

More information regarding the Company’s Q2 2020 results of operations can be found in the Quarterly Report on Form 10-Q which the Company plans to file July 27, 2020 with the Securities and Exchange Commission.

Management Commentary

“The second quarter financial results, which showcased a 244% increase in revenues to a record $6.6 million and 72% increase in gross profit to $2.0 million,” said Suren Ajjarapu, Chairman and Chief Executive Officer, who continued, “This growth was driven by Personal Protective Equipment sales, such as N95 masks and sanitizer products through our Integra Pharma unit.”

“Our affiliated service offerings also continue to expand, with Bonum Health proving to be a critical healthcare service to thousands of customers throughout the United States. To accelerate the growth of this telemedicine division, which we see a significant opportunity as more consumers look for innovative healthcare solutions, we recently appointed senior healthcare executive Ashton Maaraba as President of Bonum Health. As a seasoned leader, we look forward to leveraging his decades of relevant expertise to grow this segment.”

“As we move through the second half of 2020, we are better positioned than ever to execute upon our vision of continued growth of the platform, driven by new independent pharmacies, new suppliers and distributors,” concluded Mr. Ajjarapu.

Second Quarter 2020 and Subsequent Operational Highlights

  • Trxade continued to expand its platform nationwide, adding 325 new independent pharmacies in Q2 2020, bringing the total registered pharmacy members to over 11,725.

  • Appointed senior healthcare executive Ashton Maaraba as President of Bonum Health, the Company’s telemedicine subsidiary.

  • Supplied multiple employers with COVID-19 rapid test kits for employees and families, providing a diagnosis within 15 minutes at the point of care.

  • Engaged international investor relations specialists MZ Group to expand the Company’s comprehensive strategic investor relations and financial communications program across all key markets.

Conference Call and Webcast

Management will host a conference call today, July 27, 2020 at 5:00 p.m. EDT to discuss Trxade Group’s 2020 second quarter financial results. The call will conclude with a Q&A from participants. To participate, please use the following information:

Q2 2020 Conference Call and Webcast
Date: Monday, July 27, 2020
Time: 5:00 p.m. Eastern Daylight time
U.S. Dial-in: 1-877-425-9470
International Dial-in: 1-201-389-0878
Conference ID: 13707025
Webcast: http://public.viavid.com/index.php?id=140780

Please dial in at least 10 minutes before the start of the call to ensure timely participation.

A playback of the call will be available through August 27, 2020. To listen, call 1-844-512-2921 within the United States or 1-412-317-6671 when calling internationally. Please use the replay pin number 13707025. A webcast will also be available for 30 days on the IR section of the Trxade Group website or by clicking the webcast link above.

About Trxade Group, Inc.

Headquartered in Tampa, Florida, Trxade Group, Inc. (Nasdaq: MEDS) is an integrated drug procurement, delivery and healthcare platform that fosters price transparency, thereby improving profit margins for both buyers and sellers of pharmaceuticals. Trxade Group operates across all 50 states with the central mission of making healthcare services affordable and accessible. Founded in 2010, Trxade Group is comprised of four synergistic operating platforms; (1) the Trxade B2B trading platform with 11,725 registered pharmacies, (2) Integra Pharma Solutions, Trxade Group’s virtual wholesale division, (3) the Bonum Health platform offering affordable telehealth services; and (4) the DelivMeds app, which coordinates a nationwide distribution network through independent pharmacies or mail order delivery. For additional information, please visit us at www.trxade.com, www.delivmeds.com, and www.bonumhealth.com.

Use of Non-GAAP Financial Information

This earnings release discusses EBITDA and Adjusted EBITDA. These measurements are not recognized in accordance with generally accepted accounting principles (GAAP) and should not be viewed as an alternative to GAAP measures of performance. EBITDA represents net income before interest, taxes, depreciation and amortization. Adjusted EBITDA is defined as EBITDA before stock-based compensation expense and gain (loss) in equity investment. EBITDA and Adjusted EBITDA are presented because we believe they provide additional useful information to investors due to the various noncash items during the period. EBITDA and Adjusted EBITDA have limitations as analytical tools, and you should not consider them in isolation, or as a substitute for analysis of our operating results as reported under GAAP. Some of these limitations are: EBITDA and Adjusted EBITDA do not reflect cash expenditures, future requirements for capital expenditures, or contractual commitments; EBITDA and Adjusted EBITDA do not reflect changes in, or cash requirements for, working capital needs; and EBITDA and Adjusted EBITDA do not reflect the significant interest expense, or the cash requirements necessary to service interest or principal payments, on debt or cash income tax payments. Although depreciation and amortization are noncash charges, the assets being depreciated and amortized will often have to be replaced in the future, and EBITDA and Adjusted EBITDA do not reflect any cash requirements for such replacements. Additionally, other companies in our industry may calculate EBITDA and Adjusted EBITDA differently than Trxade Group, Inc. does, limiting its usefulness as a comparative measure. See also “Reconciliation of Net Income attributable to Trxade Group, Inc., to Earnings before Interest, Taxes, Depreciation and Amortization (EBITDA) and Adjusted EBITDA”, below.

Forward-Looking Statements

This press release may contain forward-looking statements, including information about management’s view of Trxade’s future expectations, plans and prospects, within the safe harbor provisions under The Private Securities Litigation Reform Act of 1995 (the “Act”). In particular, when used in the preceding discussion, the words “may,” “could,” “expect,” “intend,” “plan,” “seek,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “continue,” “likely,” “would” and variations of these terms and similar expressions, or the negative of these terms or similar expressions are intended to identify forward-looking statements within the meaning of the Act, and are subject to the safe harbor created by the Act. Any statements made in this news release other than those of historical fact, about an action, event or development, are forward-looking statements. These statements involve known and unknown risks, uncertainties and other factors, which may cause the results of Trxade, its divisions and concepts to be materially different than those expressed or implied in such statements. These risk factors and others are included from time to time in filings made by Trxade with the Securities and Exchange Commission, including, but not limited to, in the “Risk Factors” sections in its Form 10-Ks and Form 10-Qs and in its Form 8-Ks, which we have filed, and file from time to time, with the U.S. Securities and Exchange Commission. These reports are available at www.sec.gov. Other unknown or unpredictable factors also could have material adverse effects on Trxade’s future results and/or could cause our actual results and financial condition to differ materially from those indicated in the forward-looking statements. The forward-looking statements included in this press release are made only as of the date hereof. Trxade cannot guarantee future results, levels of activity, performance or achievements. Accordingly, you should not place undue reliance on these forward-looking statements. We undertake no obligation to update publicly any of these forward-looking statements to reflect actual results, new information or future events, changes in assumptions or changes in other factors affecting forward-looking statements, except to the extent required by applicable laws. If we update one or more forward-looking statements, no inference should be drawn that we will make additional updates with respect to those or other forward-looking statements.

Investor Relations:
Luke Zimmerman
Senior Vice President
MZ Group - MZ North America
(949) 259-4987
MEDS@mzgroup.us
www.mzgroup.us

Trxade Group, Inc.
Consolidated Balance Sheets
June 30, 2020 and December 31, 2019
(unaudited)

June 30, 2020

December 31, 2019

Assets

Current Assets

Cash

$

4,151,044

$

2,871,694

Accounts Receivable, net

3,544,381

792,050

Inventory

1,818,874

56,761

Prepaid Assets

300,067

82,452

Deposits for Inventory purchases

309,000

-

Total Current Assets

10,123,366

3,802,957

Property Plant and Equipment, Net

151,397

174,987

Other Assets

Deposits

21,636

21,636

Deferred Offering Costs

-

88,231

Right of use leased assets

709,911

757,710

Goodwill

725,973

725,973

Total Assets

$

11,732,283

$

5,571,494

Liabilities and Shareholders’ Equity

Current Liabilities

Accounts Payable

$

272,148

$

334,614

Accrued Liabilities

349,850

98,852

Current Portion Lease Liabilities

94,253

87,350

Customer Deposits

3,574

-

Total Current Liabilities

719,825

520,816

Long Term Liabilities

Notes Payable – Related Parties

225,000

225,000

Other Long-term Liabilities – Leases

636,081

685,461

Total Liabilities

1,580,906

1,431,277

Shareholders’ Equity

Series A Preferred Stock, $0.00001 par value; 10,000,000 shares authorized; none issued and outstanding as of June 30, 2020 and December 31, 2019, respectfully

-

-

Common Stock, $0.00001 par value; 100,000,000 shares authorized; 8,062,337 and 6,539,415 shares issued and outstanding, as of June 30, 2020 and December 31, 2019, respectively

81

65

Additional Paid-in Capital

18,909,083

12,535,655

Retained Deficit

(8,757,787

)

(8,395,503

)

Total Shareholders’ Equity

10,151,377

4,140,217

Trxade Group, Inc.
Consolidated Statements of Operations
For the Three and Six Months Ended June 30, 2020 and 2019

(unaudited)

Three months ended

Six months ended

2020

2019

2020

2019

Revenues

$

6,592,637

$

1,916,414

$

8,795,957

$

3,428,935

Cost of Sales

4,587,865

753,138

5,151,049

1,118,977

Gross Profit

2,004,772

1,163,276

3,644,908

2,309,958

Operating Expenses

General and Administrative

2,540,049

1,030,571

3,991,958

2,005,494

Operating (Loss) Income

(535,277

)

132,705

(347,050

)

304,464

Investment Loss

-

(58,850

)

-

(87,822

)

Interest Expense

(7,310

)

(15,874

)

(15,234

)

(33,432

)

Net (Loss) Income

$

(542,587

)

$

57,981

$

(362,284

)

$

183,210

Net (Loss) Income per Common Share – Basic:

$

(0.07

)

$

0.01

$

(0.05

)

$

0.03

Net (Loss) Income per Common Share – Diluted:

$

(0.07

)

$

0.01

$

(0.05

)

$

0.03

Weighted average Common Shares Outstanding - Basic

7,580,977

5,621,082

7,324,512

5,591,055

Weighted average Common Shares Outstanding - Diluted

7,580,977

6,058,977

7,324,512

6,058,959

Trxade Group, Inc.
Consolidated Statements of Cash Flows
For the Six months ended June 30, 2020 and 2019
(unaudited)

2020

2019

Operating Activities:

Net (Loss) Income

$

(362,284

)

$

183,210

Adjustments to reconcile net income to net cash used in operating activities:

Depreciation Expense

2,500

2,500

Options expense

245,903

99,990

Warrant Expense

100,383

-

Stock Grants

829,867

-

Bad Debt Expense

9,000

-

Share in Equity Losses in Investment

-

87,822

Amortization of right to use asset

47,799

43,939

Changes in operating assets and liabilities:

Accounts Receivable

(2,761,331

)

(279,852

)

Prepaid Assets and other Current Assets

(217,615

)

(70,119

)

Inventory

(1,762,113

)

(466,850

)

Deposits for Inventory purchases

(309,000

)

-

Lease Liability

(42,477

)

(36,276

)

Accounts Payable

(17,871

)

362,599

Customer Deposits

3,574

-

Accrued Liabilities and Other Liabilities

250,988

(6,652

)

Net Cash (used in) operating activities

(3,982,667

)

(79,689

)

Investing Activities:

Purchase of Fixed Assets

(23,505

)

-

Purchase of equity method investment

-

(250,000

)

Net Cash (used in) investing activities

(23,505

)

(250,000

)

Financing Activities:

Payment of Stock Issuance Costs

(732,355

)

-

Proceeds from exercise of Warrants

22,952

166

Proceeds from exercise of Stock Options

501

-

Proceeds from Issuance of Common Stock

5,994,424

-

Net Cash provided by financing activities

5,285,522

166

Net increase (decrease) in Cash

1,279,350

(335,628

)

Cash at Beginning of the Year

2,871,694

869,557

Cash at June 30, 2020 and 2019

$

4,151,044

$

533,929

Supplemental Cash Flow Information

Cash Paid for Interest

$

3,984

$

2,997

Cash Paid for Income Taxes

$

-

$

-

Non-Cash Transactions

Common Stock Issued for Conversion of Note and Accrued Interest

$

-

$

211,983

ROU assets and operating lease obligations recognized

$

-

$

847,441

Reconciliation of Net (Loss) Income attributable to Trxade Group, Inc., to Earnings before Interest, Taxes,
Depreciation and Amortization (EBITDA) and Adjusted EBITDA*

Three months ended

Six months ended

2020

2019

2020

2019

Net (Loss) Income attributable to Trxade Group, Inc.

$

(542,587

)

$

57,981

$

(362,284

)

$

183,210

Add (Deduct):

Interest (net)

7,310

15,874

15,234

33,432

Depreciation and Amortization

1,250

1,250

2,500

2,500

EBITDA

(534,027

)

75,105

(375,018

)

152,278

Add (Deduct):

Investment Loss

-

(58,850

)

-

(87,822

)

Stock-based Compensation

1,035,373

64,011

1,176,153

99,990

Adjusted EBITDA

$

501,346

$

80,266

$

801,135

$

164,446

* EBITDA and Adjusted EBITDA are non-GAAP financial measures. These measurements are not recognized in accordance with GAAP and should not be viewed as an alternative to GAAP measures of performance. See also “Use of Non-GAAP Financial Information”, above.