UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
| | QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
OR
| | TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT |
For the transition period from ______________to _______________.
Commission File Number
NEXTPLAT CORP
(Exact name of registrant as specified in its charter)
| | | |
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |
| | | |
| (Address of principal executive offices) | (Zip Code) |
(
Registrant’s telephone number, including area code
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| | | The | ||
| | | The |
Indicate by check whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer ☐ | Accelerated filer ☐ |
| | Smaller reporting company |
| Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act). Yes
Indicate the number of shares outstanding of each of the registrant’s classes of common stock as of the latest practicable date.
| Class | Outstanding at August 9, 2023 | |
| Common Stock, $0.0001 par value | |
FORM 10-Q
Item 1. Condensed Consolidated Financial Statements
The unaudited condensed consolidated financial statements of NextPlat Corp, (“NextPlat,” the “Company,” “we,” or “our”), for the three and six months ended June 30, 2023 and for comparable periods in the prior year are included below. The financial statements should be read in conjunction with the notes to financial statements that follow.
NEXTPLAT CORP AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
| June 30, 2023 | December 31, 2022 | |||||||
| (Unaudited) | (Audited) | |||||||
| ASSETS | ||||||||
| Current Assets | ||||||||
| Cash | $ | $ | ||||||
| Accounts receivable | ||||||||
| Inventory | ||||||||
| Unbilled revenue | ||||||||
| VAT receivable | ||||||||
| Prepaid expenses – current portion | ||||||||
| Total Current Assets | ||||||||
| Property and equipment, net | ||||||||
| Right of use assets, net | ||||||||
| Intangible assets, net | ||||||||
| Equity method investment | ||||||||
| Prepaid expenses – long term portion | ||||||||
| Total Other Assets | ||||||||
| Total Assets | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current Liabilities | ||||||||
| Accounts payable and accrued expenses | $ | $ | ||||||
| Contract liabilities | ||||||||
| Note payable Coronavirus loans– current portion | ||||||||
| Due to related party | ||||||||
| Operating lease liabilities - current | ||||||||
| Income taxes payable | ||||||||
| Liabilities from discontinued operations | ||||||||
| Total Current Liabilities | ||||||||
| Long Term Liabilities: | ||||||||
| Notes payable Coronavirus – long term | ||||||||
| Operating lease liabilities – long term | ||||||||
| Total Liabilities | ||||||||
| Commitments and Contingencies | ||||||||
| Stockholders’ Equity | ||||||||
| Preferred stock ($ par value; shares authorized) | ||||||||
| Common stock ($ par value; shares authorized, and shares issued and outstanding as of June 30, 2023 and December 31, 2022, respectively) | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Accumulated other comprehensive loss | ( | ) | ( | ) | ||||
| Total Stockholders’ Equity | ||||||||
| Total Liabilities and Stockholders’ Equity | $ | $ | ||||||
See accompanying notes to condensed consolidated financial statements.
NEXTPLAT CORP AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
| Three Months Ended |
Three Months Ended |
Six Months Ended |
Six Months Ended |
|||||||||||||
| June 30, 2023 |
June 30, 2022 |
June 30, 2023 |
June 30, 2022 |
|||||||||||||
| (Unaudited) |
(Unaudited) |
(Unaudited) |
(Unaudited) |
|||||||||||||
| Net sales |
$ | $ | $ | $ | ||||||||||||
| Cost of sales |
||||||||||||||||
| Gross profit |
||||||||||||||||
| Operating expenses: |
||||||||||||||||
| Selling, general and administrative |
||||||||||||||||
| Salaries, wages and payroll taxes |
||||||||||||||||
| Professional fees |
||||||||||||||||
| Depreciation and amortization |
||||||||||||||||
| Total operating expenses |
||||||||||||||||
| Loss before other (income) expense |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Other (income) expense: |
||||||||||||||||
| Interest expense |
||||||||||||||||
| Interest earned |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Other income |
( |
) | ( |
) | ||||||||||||
| Foreign currency exchange rate variance |
( |
) | ( |
) | ||||||||||||
| Total other (income) expense |
( |
) | ( |
) | ||||||||||||
| Loss before income taxes |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Income taxes |
( |
) | ( |
) | ||||||||||||
| Loss before equity method investment |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Equity in net loss of affiliate |
( |
) | ( |
) | ||||||||||||
| Net loss |
$ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||
| Comprehensive loss: |
||||||||||||||||
| Net loss |
$ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||
| Foreign currency translation adjustments |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Comprehensive loss |
$ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||
| NET LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS |
||||||||||||||||
| Weighted number of common shares outstanding – basic & diluted |
||||||||||||||||
| Basic and diluted net loss per share |
$ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||
See the accompanying notes to condensed consolidated financial statements.
NEXTPLAT CORP AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(Unaudited)
For the Three and Six Months Ended June 30, 2023
| Common Stock |
Additional |
|||||||||||||||||||||||
| $0.0001 Par Value |
Paid in |
Accumulated |
Comprehensive |
Stockholders’ |
||||||||||||||||||||
| Shares |
Amount |
Capital |
Deficit |
Income (Loss) |
Equity |
|||||||||||||||||||
| Balance, December 31, 2022 |
$ | $ | $ | ( |
) | $ | ( |
) | $ | |||||||||||||||
| Issuance of common stock related to restricted stock award |
||||||||||||||||||||||||
| Comprehensive loss |
- | ( |
) | ( |
) | |||||||||||||||||||
| Net Loss |
- | ( |
) | ( |
) | |||||||||||||||||||
| Balance, March 31, 2023 |
$ | $ | $ | ( |
) | $ | ( |
) | $ | |||||||||||||||
| Issuance of common stock related to April offering |
||||||||||||||||||||||||
| Issuance of common stock related to exercise of warrants |
||||||||||||||||||||||||
| Issuance of common stock related to restricted stock award |
||||||||||||||||||||||||
| Stock-based compensation in connection with options granted |
- | |||||||||||||||||||||||
| Comprehensive loss |
- | ( |
) | ( |
) | |||||||||||||||||||
| Net loss |
- | ( |
) | ( |
) | |||||||||||||||||||
| Balance, June 30, 2023 |
$ | $ | $ | ( |
) | $ | ( |
) | $ | |||||||||||||||
For the Three and Six Months Ended June 30, 2022
| Common Stock |
Additional |
|||||||||||||||||||||||
| $0.0001 Par Value |
Paid in |
Accumulated |
Comprehensive |
Stockholders’ |
||||||||||||||||||||
| Shares |
Amount |
Capital |
Deficit |
Income (Loss) |
Equity |
|||||||||||||||||||
| Balance, December 31, 2021 |
$ | $ | $ | ( |
) | $ | $ | |||||||||||||||||
| Issuance of common stock related to offering |
||||||||||||||||||||||||
| Issuance of common stock related to restricted stock award |
||||||||||||||||||||||||
| Comprehensive loss |
( |
) | ( |
) | ||||||||||||||||||||
| Net loss |
( |
) | ( |
) | ||||||||||||||||||||
| Balance, March 31, 2022 |
$ | $ | $ | ( |
) | $ | ( |
) | $ | |||||||||||||||
| Stock based compensation in relation to restricted stock award |
- | |||||||||||||||||||||||
| Comprehensive loss |
- | ( |
) | ( |
) | |||||||||||||||||||
| Net loss |
- | ( |
) | ( |
) | |||||||||||||||||||
| Balance, June 30, 2022 |
$ | $ | $ | ( |
) | $ | ( |
) | $ | |||||||||||||||
See accompanying notes to condensed consolidated financial statements.
NEXTPLAT CORP AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED
| June 30, 2023 |
June 30, 2022 |
|||||||
| (Unaudited) |
(Unaudited) |
|||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: |
||||||||
| Net loss |
$ | ( |
) | $ | ( |
) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: |
||||||||
| Depreciation expense |
||||||||
| Amortization of intangible asset |
||||||||
| Amortization of right of use assets |
||||||||
| Share of loss from equity method investment |
||||||||
| Stock-based compensation |
||||||||
| Change in operating assets and liabilities: |
||||||||
| Accounts receivable |
( |
) | ||||||
| Inventory |
( |
) | ( |
) | ||||
| Unbilled revenue |
( |
) | ( |
) | ||||
| Prepaid expense |
( |
) | ||||||
| Other current assets |
||||||||
| VAT receivable |
( |
) | ||||||
| Accounts payable and accrued expenses |
( |
) | ||||||
| Lease liabilities |
( |
) | ( |
) | ||||
| Income taxes payable |
( |
) | ||||||
| Contract liabilities |
( |
) | ||||||
| Liabilities from discontinued operations |
( |
) | ||||||
| Net cash used in operating activities |
( |
) | ( |
) | ||||
| CASH FLOWS FROM INVESTING ACTIVITIES: |
||||||||
| Purchase of property and equipment |
( |
) | ( |
) | ||||
| Capital contribution to equity method investee |
( |
) | ||||||
| Net cash used in investing activities |
( |
) | ( |
) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES: |
||||||||
| Proceeds from (repayments to) note payable, related party, net |
( |
) | ( |
) | ||||
| Proceeds from common stock offering |
||||||||
| Proceeds from exercise of warrants |
||||||||
| Repayments to note payable Coronavirus loans |
( |
) | ( |
) | ||||
| Net cash provided by financing activities |
||||||||
| Effect of exchange rate on cash |
( |
) | ( |
) | ||||
| Net (decrease) increase in cash |
||||||||
| Cash beginning of period |
||||||||
| Cash end of period |
$ | $ | ||||||
| SUPPLEMENTAL CASH FLOW INFORMATION |
||||||||
| Cash paid during the period for |
||||||||
| Interest |
$ | $ | ||||||
| Income tax |
$ | $ | ||||||
| Non-cash adjustments during the period for |
||||||||
| Recognition of operating lease liability |
$ | $ | ||||||
See the accompanying notes to condensed consolidated financial statements.
Unless the context requires otherwise, references to the “Company”, “we”, “us”, “our”, “our Company”, or “our business” refer to Nextplat Corp and its subsidiaries.
Note 1. Organization & Nature of Operations.
NextPlat Corp, a Nevada corporation (the “Company”, “NextPlat”, “we”), formerly Orbsat Corp was incorporated in 1997. The Company operates two main e-commerce websites as well as 25 third-party e-commerce storefronts on platforms such as Alibaba, Amazon and Walmart. These e-commerce venues form an effective global network serving thousands of consumers, enterprises, and governments. NextPlat has announced its intention to broaden its e-commerce platform and is implementing a comprehensive system upgrade to support this initiative. The Company has also begun the design and development of a next generation platform for digital assets built for Web3 (an internet service built using decentralized blockchains). This new platform (“NextPlat Digital”) is currently in the design and development phase and will enable the use of a range of digital assets, such as non-fungible tokens (“NFTs”), in e-commerce and in community-building activities. In addition, we provide a comprehensive array of Satellite Industry communication services and related equipment sales.
Our wholly-owned subsidiary, Global Telesat Communications Limited (“GTC”), was formed under the laws of England and Wales in 2008. On February 19, 2015, we entered into a share exchange agreement with GTC and all of the holders of the outstanding equity of GTC pursuant to which we acquired all of the outstanding equity in GTC.
Our wholly-owned subsidiary, Orbital Satcom Corp. (“Orbital Satcom”), a Nevada corporation, was formed on November 14, 2014.
On June 22, 2022, NextPlat B.V. (“NXPLBV”) was formed in Amsterdam, Netherlands, as a wholly owned subsidiary of NextPlat Corp. Presently, NXPLBV does not have any active operations.
Note 2. Basis of Presentation and Principles of Consolidation
The accompanying Condensed Consolidated Financial Statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”), consistent in all material respects with those applied in the 2022 Form 10-K, for interim financial information and in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, they do not include all information and footnotes normally included in annual consolidated financial statements and should be read in conjunction with the consolidated financial statements and notes thereto included in the 2022 Form 10-K. In the opinion of management, the Condensed Consolidated Financial Statements contain all adjustments (consisting principally of normal recurring accruals) necessary for a fair presentation of the condensed consolidated balance sheets, statements of comprehensive loss, statements of stockholders’ equity and statements of cash flows for such interim periods presented. Additionally, operating results for interim periods are not necessarily indicative of the results that can be expected for a full year.
The accompanying Unaudited Condensed Consolidated Financial Statements include the accounts of the Company and its wholly owned subsidiaries. Intercompany transactions and balances have been eliminated in consolidation. Certain 2022 financial information has been reclassified to conform to the 2023 presentation. Such reclassifications do not impact the Company’s previously reported financial position or net income (loss).
Use of Estimates
In preparing the Condensed Consolidated Financial Statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the statements of financial condition, and revenues and expenses for the years then ended. Actual results may differ significantly from those estimates. Significant estimates made by management include, but are not limited to, assumptions used to calculate stock-based compensation, and common stock and options issued for services, receivables, the useful lives of property and equipment, and intangible assets, the estimate of the fair value of the lease liability and related right of use assets and the estimates of the valuation allowance on deferred tax assets and corporate income taxes.
Note 3. Summary of Significant Accounting Policies
The significant accounting policies of the Company were described in Note 1. to the Audited Consolidated Financial Statements included in the Company’s Form 10-K for the fiscal year ended December 31, 2022. There have been no material changes to the Company’s significant accounting policies for the three and six months ended June 30, 2023.
Cash
The Company places its cash with high credit quality financial institutions. The Company’s account at this institution is insured by the Federal Deposit Insurance Corporation (“FDIC”) up to $
Foreign Currency Translation
The Company’s reporting currency is U.S. Dollars. The accounts of one of the Company’s subsidiaries, GTC, is maintained using the appropriate local currency, Great British Pound, as the functional currency. All assets and liabilities are translated into U.S. Dollars at balance sheet date, shareholders’ equity is translated at historical rates and revenue and expense accounts are translated at the average exchange rate for the year or the reporting period. The translation adjustments are reported as a separate component of stockholders’ equity, captioned as accumulated other comprehensive (loss) gain. Transaction gains and losses arising from exchange rate fluctuations on transactions denominated in a currency other than the functional currency are included in the condensed consolidated statements of comprehensive loss.
The relevant translation rates are as follows: for the six months ended June 30, 2023, closing rate at $
Unearned Revenue
Contract liabilities are shown separately in the condensed consolidated balance sheets as current liabilities. At June 30, 2023 and December 31, 2022, we had contract liabilities of approximately $
Recent Accounting Pronouncements
Accounting Pronouncements Recently Adopted
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”), which introduces an impairment model based on expected, rather than incurred, losses. Additionally, it requires expanded disclosures regarding (a) credit risk inherent in a portfolio and how management monitors the portfolio’s credit quality; (b) management’s estimate of expected credit losses; and (c) changes in estimates of expected credit losses that have taken place during the period. In November 2018, the FASB issued ASU 2018-19, “Codification Improvements to Topic 326, Financial Instruments – Credit Losses.” This ASU clarifies receivables from operating leases are accounted for using the lease guidance and not as financial instruments. In April 2019, the FASB issued ASU 2019-04, “Codification Improvements to Topic 326, Financial Instruments – Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments.” This ASU clarifies various scoping and other issues arising from ASU 2016-13. In March 2020, the FASB issued ASU 2020-03, “Codification Improvements to Financial Instruments.” This ASU improves the Codification and amends the interaction of Topic 842 and Topic 326. ASU 2016-13 and related amendments are effective for fiscal years beginning after December 15, 2022, with early adoption permitted. The Company adopted this guidance effective January 1, 2023 and the adoption had no material impact on our condensed consolidated financial statements and related disclosures. On an ongoing basis, the Company will contemplate forward-looking economic conditions in recording lifetime expected credit losses for the Company’s financial assets measured at cost, such as the Company’s trade receivables.
Other accounting standards that have been issued or proposed by FASB that do not require adoption until a future date are not expected to have a material impact on the condensed consolidated financial statements upon adoption. The Company does not discuss recent pronouncements that are not anticipated to have an impact on or are unrelated to its financial condition, results of operations, cash flows or disclosures.
Subsequent Events
The Company has evaluated subsequent events through August 11, 2023, the date the financial statements were available to be issued. See Note 19 for subsequent events require disclosure in the financial statements.
Note 4. Earnings (Loss) per Share
Net income (loss) per common share is calculated in accordance with Accounting Standards Codification (“ASC”) Topic 260: Earnings per Share (“ASC 260”). Basic income (loss) per share is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding during the period. The computation of diluted net loss per share does not include dilutive common stock equivalents in the weighted average shares outstanding as they would be anti-dilutive. In periods where the Company has a net loss, all dilutive securities are excluded.
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Net loss attributable to common shareholders | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Basic weighted average common shares outstanding | ||||||||||||||||
| Potentially dilutive common shares | ||||||||||||||||
| Diluted weighted average common shares outstanding | ||||||||||||||||
| Basic weighted average loss per common share | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Diluted weighted average loss per common share | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
Note 5. Inventory
At June 30, 2023 and December 31, 2022, inventory consisted of the following:
| June 30, 2023 | December 31, 2022 | |||||||
| (Unaudited) | (Audited) | |||||||
| Finished goods | $ | $ | ||||||
| Less reserve for obsolete inventory | ||||||||
| Total | $ | $ | ||||||
Note 6. VAT Receivable
On January 1, 2021, VAT rules relating to imports and exports between the UK and EU changed as a result of the UK’s departure from the EU. As of June 30, 2023 and December 31, 2022, the Company recorded a receivable in the amount of approximately and , respectively, for amounts available to reclaim against the tax liability from UK and EU countries.
Note 7. Prepaid Expenses
Prepaid expenses current and long term amounted to approximately and , respectively at June 30, 2023, as compared to and , respectively at December 31, 2022. Prepaid expenses include prepayments in cash for accounting fees, public company expenses, insurance, which are being amortized over the terms of their respective agreements, as well as cost associated with certain contract liabilities. The current portion consists of costs paid for future services which will occur within a year.
Note 8. Property and Equipment, net
Property and equipment, net consisted of the following:
| June 30, 2023 | December 31, 2022 | |||||||
| (Unaudited) | (Audited) | |||||||
| Office furniture and fixtures | $ | $ | ||||||
| Computer equipment | ||||||||
| Rental equipment | ||||||||
| Appliques | ||||||||
| Leasehold improvements | ||||||||
| Website development | ||||||||
| Property and equipment gross | ||||||||
| Less: accumulated depreciation | ( | ) | ( | ) | ||||
| Property and equipment, net | $ | $ | ||||||
Depreciation expense was approximately $
Note 9. Intangible Assets, net
Intangible assets, net consist of customer contracts purchased as part of the GTC acquisition in 2014.
Amortization of customer contracts is included in depreciation and amortization in the accompanying Condensed Consolidated Statements of Comprehensive Loss. For the six months ended June 30, 2023 and 2022, the Company recognized amortization expense of $
| 2023 (six months) | $ | |||
| 2024 | ||||
| Total | $ |
Note 10. Equity Method Investment
On May 5, 2023, NextPlat entered into a Securities Purchase Agreement (the “SPA”) with Progressive Care, pursuant to which the Company purchased
Simultaneous with the closing, Progressive Care entered into a Debt Conversion Agreement (the “DCA”) with NextPlat and the other holders (the “Holders”) of that certain Amended and Restated Secured Convertible Promissory Note, dated as of September 2, 2022, made by Progressive Care in the original face amount of approximately $
At the same time, Progressive Care and NextPlat entered into a First Amendment (the “Amendment”) to that certain Securities Purchase Agreement dated November 16, 2022 (the “Debenture Purchase Agreement”). Under the Debenture Purchase Agreement, Progressive Care agreed to issue, and NextPlat Corp agreed to purchase, from time to time during the -year term of the Debenture Purchase Agreement, up to an aggregate of $
The following summarizes the Company’s consolidated balance sheet description equity method investment as follows:
| Carrying Amount | ||||
| December 31, 2022, beginning balance | $ | |||
| Investment in Progressive Care Inc. and Subsidiaries | ||||
| Portion of loss from Progressive Care, Inc. and Subsidiaries | ( | ) | ||
| Depreciation expense due to cost basis difference (1) | ( | ) | ||
| Interest earned from convertible note receivable | ||||
| Interest earned from amortization of premium on convertible note receivable | ||||
| Elimination of intercompany interest earned | ( | ) | ||
| June 30, 2023, carrying amount | $ | |||
The following summarizes the Company’s consolidated statements of operations and comprehensive loss description equity in net loss of affiliate for the six months ended June 30, 2023 as follows:
| For the Six Month Ended June 30, 2023 | ||||
| Portion of loss from Progressive Care, Inc. and Subsidiaries | $ | ( | ) | |
| Depreciation expense due to cost basis difference (1) | ( | ) | ||
| Interest earned from convertible note receivable | ||||
| Interest earned from amortization of premium on convertible note receivable | ||||
| Elimination of intercompany interest earned | ( | ) | ||
| Equity in net loss of affiliate | $ | ( | ) | |
(1) NextPlat records depreciation expense on its estimated cost basis difference which is subject to change
Note 11. Accounts Payable and Accrued Expenses
Accounts payable and accrued expenses consisted of the following:
| June 30, 2023 | December 31, 2022 | |||||||
| (Unaudited) | (Audited) | |||||||
| Accounts payable | $ | $ | ||||||
| Rental deposits | ||||||||
| Customer deposits payable | ||||||||
| Accrued wages & payroll liabilities | ||||||||
| VAT liability & sales tax payable | ||||||||
| U.K. income tax payable | ||||||||
| Accrued legal fees | ||||||||
| Pre-merger accrued other liabilities | ||||||||
| Accrued interest | ||||||||
| Accrued other liabilities | ||||||||
| Total | $ | $ | ||||||
Note 12. Coronavirus Loan
On July 16, 2020 (the “Issue Date”), GTC, entered into a Coronavirus Interruption Loan Agreement (“Debenture”) by and among the Company and HSBC UK Bank PLC (the “Lender”) for an amount of or USD $
As of June 30, 2023, and December 31, 2022, the Company has recorded approximately $
Note 13. Stockholders’ Equity
Preferred Stock
We have authorized
Common Stock
We have authorized
Listing on the Nasdaq Capital Market
Our common stock and warrants have been trading on the Nasdaq Capital Market under the symbols “NXPL” and “NXPLW,” respectively, since January 21, 2022. Prior to January 21, 2022, our common stock and warrants were traded on the Nasdaq Capital Market under the symbols “OSAT” and “OSATW,” respectively.
April 2023 Private Placement of Common Stock
On April 5, 2023, the Company entered into a securities purchase agreement (the “Purchase Agreement”) with an accredited investor (the “Investor”) for the sale by the Company in a private placement of
Note 14. Stock-Based Compensation
For the six months ended June 30, 2023 and 2022, stock-based compensation expense recognized in selling, general and administrative expenses was approximately $
Note 15. Related Party Transactions
On February 1, 2023, the Company entered into a Management Services Agreement with Progressive Care Inc. (“Progressive Care”) to provide certain management and administrative services to Progressive Care for a $
On July 12, 2022, the Company hired Lauren Sturges Fernandez, the spouse of Mr. Fernandez, as Manager of Digital Assets. Mrs. Fernandez is an at-will employee with an annual salary of $
Note 16. Commitments and Contingencies
Litigation
On June 22, 2021, Thomas Seifert’s employment as the Company’s Chief Financial Officer was terminated for cause. Mr. Seifert asserts that the termination was not for cause and that he is owed all compensation payable under his employment agreement executed in June 2021. The Company’s position is that Mr. Seifert is not owed any additional consideration or compensation relating to his prior service with the Company or arising under any employment agreement. The Company believes it has adequate defenses to any such claims. The Company has determined to initiate litigation against Mr. Seifert asserting a number of claims including, but not limited to, rescission of the employment agreement, fraud in the inducement in connection with the execution of the employment agreement, and breach of the fiduciary duties of good faith and loyalty. The Company does not expect to seek substantial monetary relief in the litigation.
From time to time, the Company may become involved in litigation relating to claims arising out of our operations in the normal course of business. The Company is not currently involved in any pending legal proceeding or litigation, and, to the best of our knowledge, no governmental authority is contemplating any proceeding to which the Company is a party or to which any of the Company’s properties is subject, which would reasonably be likely to have a material adverse effect on the Company’s business, financial condition and operating results.
Note 17. Leases
The Company has entered into a number of lease arrangements under which the Company is the lessee. These leases are classified as operating leases. In addition, the Company has elected the short-term lease practical expedient in ASC Topic 842 related to real estate leases with terms of one year. The following is a summary of the Company’s lease arrangements.
Operating Lease Agreements
On December 2, 2021, the Company entered into a
For our facilities in Poole, England, we rent office and warehouse space of approximately
The Florida lease does not require any contingent rental payments, impose any financial restrictions, or contain any residual value guarantees. Variable expenses generally represent the Company’s share of the landlord’s operating expenses. The Company does not have any leases classified as financing leases.
The rate implicit to the Florida lease is not readily determinable, and we therefore use our incremental borrowing rate to determine the present value of the lease payments. The weighted average incremental borrowing rate used to determine the initial value of right of use (ROU) assets and lease liabilities for the six months ended June 30, 2023 and for the year ended December 31, 2022 was
We monitor for events or changes in circumstances that require a reassessment of one of our leases. When a reassessment results in the re-measurement of a lease liability, a corresponding adjustment is made to the carrying amount of the corresponding ROU asset unless doing so would reduce the carrying amount of the ROU asset to an amount less than zero. In that case, the amount of the adjustment that would result in a negative ROU asset balance is recorded in profit or loss.
Note 18. Concentrations
Customers:
Sales to customers through Amazon accounted for
Suppliers:
The following table sets forth information as to each supplier that accounted for 10% or more of the Company’s purchases for the six months ended June 30, 2023 and 2022 (unaudited).
| For the Six Months Ended June 30, 2023 | For the Six Months Ended June 30, 2022 | |||||||||||||||
| Iridium Satellite | $ | % | $ | % | ||||||||||||
| Globalstar Europe | $ | % | $ | % | ||||||||||||
| Garmin | $ | % | $ | % | ||||||||||||
| Network Innovations | $ | % | $ | % | ||||||||||||
| Cygnus Telecom | $ | % | $ | % | ||||||||||||
The following table sets forth information as to each supplier that accounted for 10% or more of the Company’s purchases for the three months ended June 30, 2023 and 2022 (unaudited).
| For the Three Months Ended June 30, 2023 | For the Three Months Ended June 30, 2022 | |||||||||||||||
| Globalstar Europe | $ | % | $ | 120,000 | 5.7 | % | ||||||||||
| Garmin | $ | % | $ | % | ||||||||||||
| Network Innovations | $ | % | $ | % | ||||||||||||
| Cygnus Telecom | $ | % | $ | % | ||||||||||||
Geographic:
The following table sets forth revenue as to each geographic location, for the six months ended June 30, 2023 and 2022 (unaudited):
| For the Six Months Ended June 30, 2023 | For the Six Months Ended June 30, 2022 | |||||||||||||||
| Europe | $ | % | $ | % | ||||||||||||
| North America | % | % | ||||||||||||||
| South America | % | % | ||||||||||||||
| Asia & Pacific | % | % | ||||||||||||||
| Africa | % | % | ||||||||||||||
| $ | 100.0 | % | $ | 100.0 | % | |||||||||||
The following table sets forth revenue as to each geographic location, for the three months ended June 30, 2023 and 2022 (unaudited):
| For the Three Months Ended June 30, 2023 | For the Three Months Ended June 30, 2022 | |||||||||||||||
| Europe | $ | % | $ | % | ||||||||||||
| North America | % | % | ||||||||||||||
| South America | % | % | ||||||||||||||
| Asia & Pacific | % | % | ||||||||||||||
| Africa | % | % | ||||||||||||||
| $ | 100.0 | % | $ | 100.0 | % | |||||||||||
Note 19. Subsequent Events
Change in Accounting Method - Equity Method Investment – Progressive Care, Inc.
On July 1, 2023, each of the Company, Charles M. Fernandez, and Rodney Barreto exercised common stock purchase warrants and were issued common stock shares from Progressive Care, the Company's equity method investee. The Company exercised common stock warrants on a cashless basis and received
On June 30, 2023, the Company entered into a voting agreement with Messrs. Fernandez and Barreto pursuant to which Messrs. Fernandez and Barreto agreed to vote all of their shares of Progressive Care common stock (whether owned directly or indirectly) in the same manner that the Company votes its shares of Progressive Care common stock at any annual or special shareholders meeting of the stockholders of Progressive Care, and whenever the holders of Progressive Care’s common stock act by written consent. The voting agreement has a perpetual term.
As a result of the common stock warrant purchases and the entry into the voting agreement, the Company concluded that there was a change in control of Progressive Care by NextPlat under the voting interest model in U.S. GAAP. As of July 1, 2023, NextPlat has the right to control more than
Note Receivable – Next Borough Capital Management, LLC
On July 7, 2023, the Company entered into an unsecured promissory note agreement with Next Borough Capital Management, LLC (“the Borrower”), whereby the Company loaned $
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following information should be read in conjunction with the Condensed Consolidated Financial Statements and the notes thereto contained elsewhere in this report. Statements made in this Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and elsewhere in this quarterly report on Form 10-Q that do not consist of historical facts, are “forward-looking statements.” Statements accompanied or qualified by, or containing words such as “may,” “will,” “should,” “believes,” “expects,” “intends,” “plans,” “projects,” “estimates,” “predicts,” “potential,” “outlook,” “forecast,” “anticipates,” “presume,” and “assume” constitute forward-looking statements, and as such, are not a guarantee of future performance. The statements involve factors, risks and uncertainties, the impact or occurrence of which can cause actual results to differ materially from the expected results described in such statements. Risks and uncertainties can include, among others, fluctuations in general business cycles and changing economic conditions; changing product demand and industry capacity; increased competition and pricing pressures; advances in technology that can reduce the demand for the Company’s products, as well as other factors, many or all of which may be beyond the Company’s control. Consequently, investors should not place undue reliance upon forward-looking statements as predictive of future results. The Company disclaims any obligation to update the forward-looking statements in this report.
You should consider the risks and difficulties frequently encountered by early-stage companies, particularly those engaged in new and rapidly evolving markets and technologies. Our limited operating history provides only a limited historical basis to assess the impact that critical accounting policies may have on our business and our financial performance.
We encourage you to review our periodic reports filed with the SEC and included in the SEC’s EDGAR database, including our Annual Report on Form 10-K for the year ended December 31, 2022, filed with the SEC on March 31, 2023, and our subsequent public filings with the SEC.
Overview
Leveraging the e-commerce experience of the Company’s management team and the Company’s existing e-commerce platforms, the Company has embarked upon the rollout of a state-of-the-art e-commerce platform to collaborate with businesses to optimize their ability to sell their goods online, domestically, and internationally, and enabling customers and partners to optimize their e-commerce presence and revenue, which we expect will become the focus of the Company’s business in the future. Historically, the business of NextPlat has been the provision of a comprehensive array of Satellite Industry communication services, and related equipment sales. The Company operates two main e-commerce websites as well as 25 third-party e-commerce storefronts such as Alibaba, Amazon and Walmart. These e-commerce venues form an effective global network serving thousands of consumers, enterprises, and governments. NextPlat has announced its intention to broaden its e-commerce platform and is implementing comprehensive systems upgrade to support this initiative. The Company has also begun the design and development of a next generation platform for digital assets built for Web3 (an internet service built using decentralized blockchains). This new platform (“NextPlat Digital”) is currently in the design and development phase and will enable the use of a range of digital assets, such as non-fungible tokens (“NFTs”), in e-commerce and in community-building activities.
NextPlat Digital, as currently planned, will be used by us to create both (a) public marketplaces, for us and third-parties, where anyone with a crypto wallet or credit card can buy an NFT from an authorized user, or, if authorized, sell their own NFTs, and (b) private market places that only allow a particular company or entity to sell their own NFTs within a branded market (such as for the promotion of a particular brand or product). We do not currently intend to undertake or participate in “initial coin offerings”, the minting of “coins” or the mining of cryptocurrencies.
With respect to the securities status of an NFT that we propose to post to our platform, we will follow an internally developed model that will permit us to make a risk-based assessment regarding the likelihood that a particular NFT could be deemed a “security” within the meaning of the U.S. federal and/or state securities laws in determining if and how an NFT can be posted on our platform. This process will involve employees trained to identify the indicia of a “security” who will also work with outside legal counsel experienced in crypto asset regulatory matters to make a determination with respect to each NFT, or category of NFT, proposed to be posted on our platform. These processes and procedures are risk-based assessments and are not a legal standard or binding on regulators or courts. In the event an NFT or other digital asset is deemed by us, pursuant to the above analysis, to possess a reasonable likelihood of being deemed a security, we will (a) comply with applicable laws and regulations by forming, acquiring or engaging a licensed broker-dealer authorized to act as an trading system for those digital assets, or (b) transact in such digital assets offshore in a way that complies with applicable laws and regulations; or (c) not transact in the subject NFT. We expect our risk assessment policies will continuously evolve to take into account developments in case law, applicable facts, developments in technology, and changes in applicable regulatory schemes.
E-commerce transaction volumes at the Company’s owned and operated websites in the UK and Unites States continued to grow throughout the second quarter setting monthly performance records. The Company also saw strong performance in several of its global marketplaces including in Asia where sales doubled from first quarter levels and in North America which increased approximately 44% from the first quarter driven by the addition of over 350 new product listings on the Company’s US e-commerce platforms.
Critical Accounting Policies and Estimates
There have been no material changes to our critical accounting policies and estimates from the information provided in Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operation included in our 2022 Form 10-K through the period ended June 30, 2023. However, beginning on July 1, 2023, the Company will have a change in accounting method for its investment in Progressive Care from the equity method to the consolidation method. This change is the result of certain common stock warrant exercises by the Company and Messrs, Fernandez and Barreto and the Company's entry into the voting agreement with Messrs. Fernandez and Barreto, which cumulatively result in the Company having control over approximately 53% of the issued and outstanding voting stock of Progressive Care.
Results of Operations for the Three and Six Months Ended June 30, 2023 compared to the Three and Six Months Ended June 30, 2022
Revenue. Sales for the three months ended June 30, 2023, consisted primarily of sales of satellite phones, tracking devices, accessories, and airtime plans. For the three months ended June 30, 2023, revenues generated were approximately $3.0 million compared to $2.9 million of revenues for the three months ended June 30, 2022, an increase in total revenues of approximately $0.1 million or 3.4%.
Total sales for Global Telesat Communications Ltd. were approximately $2.1 million for the three months ended June 30, 2023, as compared to $2.0 million for the three months ended June 30, 2022, an increase of approximately $0.1 million or 5.0%. The increase was mainly attributable to the favorable impact in the foreign exchange rates of approximately $0.1 million, and an increase in recurring revenues of approximately $0.4 million, which was offset by non-recurring sales due to outbreak of the war in Ukraine during the first half of 2022 of approximately $0.4 million.
Total sales for Orbital Satcom Corp. were flat at approximately $0.9 million for both the three months ended June 30, 2023, and June 30, 2022, respectively.
Sales for the six months ended June 30, 2023, consisted primarily of sales of satellite phones, tracking devices, accessories, and airtime plans. For the six months ended June 30, 2023, revenues generated were approximately $5.8 million compared to $6.4 million of revenues for the six months ended June 30, 2022, a decrease in total revenues of approximately $0.6 million or 9.4%.
Total sales for Global Telesat Communications Ltd. were approximately $4.2 million for the six months ended June 30, 2023, as compared to $4.5 million for the six months ended June 30, 2022, a decrease of approximately $0.3 million or 6.7%. The decrease was mainly attributable to the unfavorable change in the foreign exchange rates of approximately $0.1 million, and non-recurring sales due to the outbreak of the war in Ukraine during the first half of 2022 of approximately $1.0 million, which was offset by an increase in recurring sales of approximately $0.8 million.
Total sales for Orbital Satcom Corp. were approximately $1.6 million for the six months ended June 30, 2023, as compared to approximately $1.9 million for the six months ended June 30, 2022, a decrease of approximately $0.3 million or 15.8%. The decrease in revenues were mainly attributable to non-recurring revenues of approximately $0.3 million due to the outbreak of war in Ukraine during the first quarter of 2022.
Cost of Sales. During the three months ended June 30, 2023, cost of revenues decreased to approximately $2.1 million as compared to $2.3 million for the three months ended June 30, 2022, a decrease of approximately $0.2 million or 8.7%. Gross profit margins during the three months ended June 30, 2023, were 28.5% as compared to 19.8% for the comparable period in the prior year. This increase in gross margin was largely a result of supply chain stability, lowering cost prices, increased profitability on recurring revenue airtime sales, and a decrease in shipping charges.
During the six months ended June 30, 2023, cost of revenues decreased to approximately $4.4 million as compared to $5.1 million for the six months ended June 30, 2022, a decrease of approximately $0.7 million or 13.7%. Gross profit margins during the six months ended June 30, 2023, were 25.1% as compared to 21.2% for the comparable period in the prior year. This increase in gross margin was largely a result of cost price stability, an increase in higher margin recurring revenue and a decrease in shipping charges during the second quarter of 2023 compared to the same period in 2022.
Operating Expenses. Total operating expenses for the three months ended June 30, 2023, were approximately $4.2 million, an increase of approximately $2.1 million or 100.0%, from total operating expenses for the three months ended June 30, 2022, of approximately $2.1 million. Factors contributing to the increase are described below.
Total operating expenses for the six months ended June 30, 2023, were approximately $6.1 million, an increase of approximately $2.4 million or 64.9%, from total operating expenses for the six months ended June 30, 2022, of approximately $3.7 million. Factors contributing to the increase are described below.
Selling, general and administrative (“SG&A”) expenses were approximately $2.5 million and $1.2 million for the three months ended June 30, 2023 and 2022, respectively, an increase of approximately $1.3 million or 108.3%. The increase for the three months ended June 30, 2023, was mainly attributable to the increase in stock-based compensation of approximately $1.1 million and other operating expenses of approximately $0.3 million when compared to the same period in 2022.
Selling, general and administrative (“SG&A”) expenses were approximately $3.3 million and $1.7 million for the six months ended June 30, 2023 and 2022, respectively, an increase of approximately $1.6 million or 94.1%. The increase for the six months ended June 30, 2023, was mainly attributable to the increase in stock-based compensation of approximately $1.3 million and other operating expenses of approximately $0.3 million when compared to the same period in 2022.
Salaries, wages and payroll taxes were approximately $1.0 million and $0.7 million for the three months ended June 30, 2023 and 2022, respectively, an increase of approximately $0.3 million or 42.9%. Salaries, wages and payroll taxes were approximately $1.6 million and $1.3 million for the six months ended June 30, 2023 and 2022, respectively, an increase of approximately $0.3 million or 23.1%. The increase for the three and six months ended June 30, 2023, when compared to the same periods in 2022, was mainly attributable to executive bonus payments, salary increases, and severance payments.
Professional fees were approximately $0.5 million and $0.2 million for the three months ended June 30, 2023 and 2022, respectively, an increase of approximately $0.3 million or 150.0%. Professional fees were approximately $0.9 million and $0.5 million for the six months ended June 30, 2023 and 2022, respectively, an increase of approximately $0.4 million or 80.0%. The increase for the three and six months ended June 30, 2023, when compared to the same periods in 2022, was mainly attributable to legal fees associated with ongoing legal litigation, fees associated with the capital raise in April 2023, and the annual meeting held during the second quarter of 2023.
Depreciation and amortization expenses were approximately $0.2 million and $0.1 million for the three months ended June 30, 2023 and 2022, respectively, an increase of approximately $0.1 million or 50.0%. Depreciation and amortization expenses were approximately $0.3 million and $0.2 million for the six months ended June 30, 2023 and 2022, respectively, an increase of approximately $0.1 million or 55.7%. The increase for the three and six months ended June 30, 2023, when compared to the same periods in 2022, was primarily attributable to fixed assets additions offset by fully amortized assets.
We expect our expenses in each of these areas to continue to increase during fiscal 2023 and beyond as we expand our operations and begin generating additional revenues under our current business.
Total Other (Income) Expense. Our total other (income) expense was approximately ($0.5) and $0.1 during the three months ended June 30, 2023 and 2022, respectively, an overall favorable impact of approximately $0.6. Our total other (income) expense was approximately ($0.6) and $0.1 during the six months ended June 30, 2023 and 2022, respectively, an overall favorable impact of approximately $0.7. The favorable impact for the three and six months ended June 30, 2023, when compared to the same periods in 2022, was attributable to interest earned, management fees earned, write off of aged payables, and exchange rate variances.
Equity in Net Losses of Affiliate. We recorded a net loss in equity of affiliate of approximately $1.4 million for both the three and six months ended June 30, 2023, respectively. See Note 10 – Equity Method Investment in Progressive Care Inc. and Subsidiaries. For the three and six months ended June 30, 2022, there were no losses or income.
Net Loss. We recorded net loss of approximately $4.3 million and $1.7 million for the three months ended June 30, 2023 and 2022, respectively. We recorded net loss of approximately $5.5 million and $2.5 million for the six months ended June 30, 2023 and 2022, respectively. The increase in the net loss was a result of the factors described above.
Comprehensive Loss. We recorded comprehensive losses for foreign currency translation adjustments of approximately $12,000 and $5,000 for the three months ended June 30, 2023 and 2022, respectively. We recorded comprehensive losses for foreign currency translation adjustments of approximately $35,000 and $20,000 for the six months ended June 30, 2023 and 2022, respectively. The increase was primarily attributed to exchange rate variances.
Liquidity and Capital Resources
Liquidity is the ability of a company to generate funds to support its current and future operations, satisfy its obligations, and otherwise operate on an ongoing basis. As of June 30, 2023, we had a cash balance of approximately $20.6 million. Our working capital was approximately $22.4 million at June 30, 2023.
Our current assets at June 30, 2023 increased 14.2% from December 31, 2022 primarily because of cash received during capital raise in April 2023.
Our current liabilities at June 30, 2023 decreased approximately $0.3 million from December 31, 2022 primarily because of a decrease in accounts payable and accrued liabilities from payment to vendors and write off of aged payables.
As of the date of this report, the Company’s existing cash resources and existing borrowing availability are sufficient to support planned operations for the next 12 months. As a result, management believes that the existing financial resources are sufficient to continue operating activities for at least one year past the issuance date of the financial statements.
| For the Six Months Ended June 30, |
||||||||
| 2023 |
2022 |
|||||||
| Net change in cash from: |
||||||||
| Operating activities |
$ | (3,300,156 | ) | $ | (1,888,252 | ) | ||
| Investing activities |
(1,103,463 | ) | (395,245 | ) | ||||
| Financing activities |
6,153,305 | 5,539,317 | ||||||
| Effect of exchange rate on cash |
(35,248 | ) | (56,076 | ) | ||||
| Change in cash |
1,714,438 | 3,199,744 | ||||||
| Cash at end of period |
$ | 20,605,670 | $ | 20,467,722 | ||||
Cash Flow from Operating Activities
Net cash flows used by operating activities for the six months ended June 30, 2023 amounted to approximately $3.3 million and were primarily attributable to our net loss of approximately $5.5 million, adjusted for non-cash expenses including amortization expense of approximately $12,500 and depreciation of approximately $0.3 million, amortization of right of use assets of approximately $0.1 million, stock-based compensation of approximately $2.0 million, loss in equity method investment of approximately $1.4 million, and offset by the net change in operating assets and liabilities of approximately $1.7 million.
Net cash flows used by operating activities for the six months ended June 30, 2022 amounted to approximately $1.9 million and were primarily attributable to our net loss of approximately $2.5 million, total amortization expense of $12,500 and depreciation of approximately $0.2 million, stock based compensation of approximately $0.7 million and net change in assets and liabilities of approximately $0.3 million, primarily attributable to decrease in accounts receivable of approximately $5,000, an increase in inventory of approximately $0.4 million, an increase in unbilled revenue of approximately $20,000, a decrease in prepaid expense of approximately $40,000, a decrease in VAT receivable of approximately $32,000, a decrease in other current assets of approximately $46,000, a decrease in operating lease liabilities of approximately $7,000, an increase in accounts payable of approximately $22,000, a decrease in contract liabilities of approximately $10,000, and decrease in provision for income taxes of approximately $40,000.
Cash Flow from Investing Activities
Net cash flows used in investing activities were approximately $1.1 million and $0.4 million for six months ended June 30, 2023 and 2022, respectively. During the six months ended June 30, 2023 and 2022, we purchased property and equipment of approximately $0.1 million and $0.4 million, respectively. During the six months ended June 30, 2023, we had a capital contribution of approximately $1.0 million in our equity method investee.
Cash Flow from Financing Activities
Net cash flows provided by financing activities were approximately $6.2 million and $5.5 million for the six months ended June 30, 2023 and 2022, respectively. The cash provided by financing activities during the six months ended June 30, 2023 and 2022 was primarily attributable to proceeds from capital raises during those periods offset by payments on loans.
Recent Financing Activities
April 2023 Private Placement of Common Stock
On April 5, 2023, the Company entered into a securities purchase agreement (the “Purchase Agreement”) with an accredited investor (the “Investor”) for the sale by the Company in a private placement of 3,428,571 shares of the Company’s common stock, $0.0001 par value per share (the “Common Stock”). The offering price of the Common Stock was $1.75 per share, the closing price of the Common Stock on April 4, 2023. On April 11, 2023, the Private Placement closed. Upon the closing of the Private Placement, the Company received gross proceeds of approximately $6.0 million. The Company sold the Common Stock to the Investor in reliance on the exemption from registration afforded by Section 4(a)(2) of the Securities Act and Rule 506 of Regulation D promulgated under the Securities Act and corresponding provisions of state securities or “blue sky” laws.
Off-Balance Sheet Arrangements
We do not currently have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to our stockholders.
Our company has not entered into any transaction, agreement or other contractual arrangement with an entity unconsolidated with us under which we have
| ● |
an obligation under a guaranteed contract, although we do have obligations under certain sales arrangements including purchase obligations to vendors |
| ● |
a retained or contingent interest in assets transferred to the unconsolidated entity or similar arrangement that serves as credit, liquidity or market risk support to such entity for such assets, |
| ● |
any obligation, including a contingent obligation, under a contract that would be accounted for as a derivative instrument, or |
| ● |
any obligation, including a contingent obligation, arising out of a variable interest in an unconsolidated entity that is held by us and material to us where such entity provides financing, liquidity, market risk or credit risk support to, or engages in leasing, hedging or research and development services with us. |
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As a smaller reporting company, as defined in Rule 12b-2 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), we are not required to provide the information required by this Item.
ITEM 4. CONTROLS AND PROCEDURES
(a) Evaluation of disclosure controls and procedures. In accordance with Rule 13a-15(b) under the Securities Exchange Act of 1934, as amended (“Exchange Act”) we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), of the effectiveness and design of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act), as of the end of the period covered by this report. Based on such evaluation, our CEO and CFO have concluded that as of June 30, 2023, our disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and is accumulated and communicated to our management, including our CEO and CFO, as appropriate to allow timely decisions regarding required disclosure.
(b) Inherent Limitations on Controls. Management, including the CEO and CFO, does not expect that our disclosure controls and procedures will prevent or detect all errors and fraud. Any control system, no matter how well designed and operated, is based upon certain assumptions and can provide only reasonable, not absolute, assurance that its objectives will be met. Further, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within the Company have been detected. The design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs.
(c) Changes in internal controls over financial reporting. There has been no change in our internal control over financial reporting during our fiscal quarter ended June 30, 2023, that has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.
On June 22, 2021, Thomas Seifert’s employment as the Company’s Chief Financial Officer was terminated for cause. Mr. Seifert asserts that the termination was not for cause and that he is owed all compensation payable under his employment agreement executed in June 2021. The Company’s position is that Mr. Seifert is not owed any additional consideration or compensation relating to his prior service with the Company or arising under any employment agreement. The Company and Mr. Seifert are currently engaged in litigation over the matter of his employment and termination. The Company believes it has adequate defenses to Mr. Seifert’s claims and has advanced claims against Mr. Seifert including, but not limited to, breach of the employment agreement, breach of the fiduciary, fraud in the inducement in connection with the employment agreement, fraudulent misrepresentation, and constructive fraud. The Company does not expect to seek substantial monetary relief in the litigation. This dispute is pending before the District Court for the Southern District of Florida under Case No. 1:21-cv-22436-DPG.
From time to time, the Company may become involved in litigation relating to claims arising out of our operations in the normal course of business. The Company is not currently involved in any pending legal proceeding or litigation, and to the best of our knowledge, no governmental authority is contemplating any proceeding to which the Company is a party or to which any of the Company’s properties is subject, which would reasonably be likely to have a material adverse effect on the Company’s business, financial condition and operating results.
Item 1A. Risk Factors.
Investors should carefully consider the risks in the “Risk Factors” in Part 1: Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2022, filed with the SEC on March 31, 2023, and our other filings with the SEC. These risks are not the only ones facing the Company. Additional risks not currently known to us or that we currently believe are immaterial may also impair our business operations. Any of these risks could adversely affect our business, cash flows, financial condition, and results of operations. The trading price of our common stock could fluctuate due to any of these risks, and investors may lose all or part of their investment. In assessing these risks, investors should also refer to the other information contained or incorporated by reference in this Quarterly Report on Form 10-Q. There have been no material changes in our risk factors from those discussed in our Annual Report on Form 10-K for the year ended December 31, 2022.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFEFTY DISCLOSURES
Not applicable.
On June 29, 2023, the Company entered into a First Amendment to Employment Agreement with Cecile Munnik, the Company's Chief Financial Officer. Pursuant to this amendment, until June 30, 2024, Ms. Munnik must devote 30% of her business time to her duties to the Company and must devote the remaining 70% of her business time to her duties as the chief financial officer of Progressive Care. Thereafter, beginning on July 1, 2024, Ms. Munnik must devote all of her business time to her duties with the Company.
On June 30, 2023, the Company entered into a voting agreement with Messrs. Fernandez and Barreto pursuant to which Messrs. Fernandez and Barreto agreed to vote all of their shares of Progressive Care common stock (whether owned directly or indirectly) in the same manner that the Company votes its shares of Progressive Care common stock at any annual or special shareholders meeting of the stockholders of Progressive Care, and whenever the holders of Progressive Care’s common stock act by written consent. The voting agreement has a perpetual term.
On July 7, 2023, the Company entered into an unsecured promissory note agreement with Next Borough Capital Management, LLC (“the Borrower”), whereby the Company loaned $250,000 to the Borrower. The note bears interest at an annual rate of 7%. The outstanding principal balance of the note plus all accrued unpaid interest is due and payable on July 7, 2024, the Maturity Date.
Rule 10b5-1 Trading Arrangement
During the three months ended June 30, 2023, no director or officer of the Company adopted or terminated any “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K.
In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| Dated: August 11, 2023 |
NEXTPLAT CORP |
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| By: |
/s/ Charles M. Fernandez |
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| Charles M. Fernandez |
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| Chairman and Chief Executive Officer |
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| (Principal Executive Officer) |
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| /s/ Cecile Munnik |
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| Chief Financial Officer |
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| (Principal Financial Officer) |
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